Buffett's MidAmerican Bullish on China
Aug 3 5:59am ET
By Charlie Zhu
HONG KONG (Reuters) - MidAmerican Energy Holdings, controlled by billionaire investor Warren Buffett, says it is eager to invest in China but will not enter the market until Beijing unveils a detailed policy to liberalize its fast-growing power sector.
"The Chinese market probably is the one that most intrigues us as a longer term and very significant place to locate," MidAmerican chairman and chief executive officer David Sokol, 43, told Reuters in an interview on Friday.
But "it's critical to understand the government's intention toward the regulatory process before we invest," he said.
Sokol said he was in Hong Kong partly to gather information about China's power industry and expected reforms. MidAmerican is 76 percent-owned by Buffett's Berkshire Hathaway Inc. .
China is widely expected to announce a broad policy this year to gradually liberalize the power industry. A lack of clear information on the country's electricity market and uncertainty about the extent of the reforms have been deterring foreign investors.
Beijing is expected to call for the break up of the massive State Power Corp by separating its grid and generation assets, which would be divided into regional groups and sold.
The reforms would also call for more electricity to be sold through tenders, increasing competition among power producers.
"We typically try to invest once those rules are better laid out and more fully known," Sokol said.
BUFFETT BOOSTING ENERGY INVESTMENT
Sokol quoted Buffett as saying Berkshire plans to invest US$10-15 billion through MidAmerican in the global energy sector in the next few years.
He did not disclose how much of the money would be spent in Asia, but he said South Korea and Thailand were places "certainly we'll be investing in over time" in addition to China.
MidAmerican, formerly a New York-listed firm providing electricity and natural gas to about three million customers, has about US$1.6 billion, or 15 percent of its overall asset base, invested in power, natural gas and infrastructure projects in Australia and the Philippines, Sokol said.
MidAmerican's units include CalEnergy Generation, MidAmerican Energy Co and London-listed Northern Electric and Gas .
It has total generating capacity of about 10,000 megawatts, including projects that are nearing completion, 40 percent of which are coal-fired.
MidAmerican was acquired and privatized by Berkshire Hathaway for US$1.25 billion last year. It was Berkshire's first investment in the energy sector, Sokol said.
The company has been eyeing China for a long time, he said.
"China is serious about liberalizing its energy, utilities world" and that will bring some good investment opportunities, he said.
But he added he did not expect radical power reforms, saying China has realized that "moving too quickly in the sector can be dangerous" after studying the California power crisis.
"It will be less radical. But something will be done. They will take more steps rather than radical change," he said.
"You'll begin seeing independently operated run transmission companies and distribution companies."
Sokol said his company would prefer direct investment in China's power industry rather than buying into overseas-listed shares of Chinese power companies because it can bring expertise both in development and operations.
China expects its economy to expand by more than seven percent a year in the next decade and officials forecast power demand will grow five to six percent annually for at least the next few years. |
