Berkshire Hathaway energy unit sells power assets in rare disposal

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Berkshire Hathaway on Tuesday took the rare step of offloading part of its utility business, selling nearly $2bn of power assets in Washington state after wildfires caused billions of dollars in damages.

The company’s PacifiCorp utility said it had agreed to sell wind farms, electrical transmission lines and a natural gas plant for $1.9bn to Oregon utility Portland General Electric, as executives at the Berkshire-owned business said the cash would help stabilise the broader unit’s finances.

Warren Buffett, Berkshire’s chair, two years ago used his annual letter to shareholders to warn that the $1.1tn company would “not knowingly throw good money after bad” as litigation over its role in wildfires in Oregon and California progressed.

“It will be many years until we know the final tally from [Berkshire Hathaway Energy’s] forest fire losses and can intelligently make decisions about the desirability of future investments in vulnerable western states,” he wrote at the time.

The sale marks a rare reversal by Berkshire and comes early in the tenure of Greg Abel as chief executive. At the start of this year, Buffett turned over day-to-day operations of the sprawling investment-to-industrials business to Abel, who rose through the ranks at Berkshire’s energy business and helped orchestrate its dealmaking in the sector.

Berkshire has long stuck to its investments even when the returns have diminished, and investors will be watching for signs that Abel is taking a different approach from his predecessor.

Buffett told investors that he and his business partner Charlie Munger were “very reluctant to sell sub-par businesses as long as we expect them to generate at least some cash”, according to an owner’s manual first circulated to shareholders in 1996.

The company is also considering offloading its stake in Kraft Heinz, after the packaged food company announced it planned to split into two businesses, a move Buffett opposed.

Berkshire’s energy business and its PacifiCorp unit have been the centre of intense scrutiny after wildfires in 2020 and 2022 burnt through hundreds of thousands of acres and led to multiple deaths. The division has been accused of failing to shut off power lines during storms.

Regulatory disclosures show PacifiCorp, which serves customers in six states, had paid $1.4bn in settlements related to wildfires through to last September, and put its probable losses tied to the catastrophes at $2.9bn. The company has said its liquidity has been “materially impacted by the wildfires”.

PacifiCorp pointed to “diverging” policies between the six states it operates in for its decision to sell the assets in Washington, saying in a statement that “these challenges have impacted the company’s financial stability, liquidity and credit ratings.”

It added: “The sale will be a critical step in strengthening PacifiCorp’s financial position and simplifying operations across its service area.”

The company will retain its hydroelectric power plant in Washington, which generates 578 megawatts.

Portland General Electric expects to take on 140,000 customers, who generate an annual rate base of $1.4bn. PGE said certain liabilities were excluded from the transaction, including those “associated with wildfires outside of Washington”.