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Governor wants Berkshire Hathaway to bid for PG&E

Oct. 27, 2019 4:14 PM ETPCGBy: Douglas W. House, SA News Editor171 Comments
  • California Governor Gavin Newsom thinks Warren Buffett's Berkshire Hathaway would be a fine owner of troubled natural gas and electricity provider Pacific Gas & Electric. Yesterday, he remarked, "If Berkshire is interested in buying [the company], now is the time to make an offer."
  • Mr. Newsom is, undoubtedly, hoping a white knight surfaces that can keep the lights on and wildfires at bay.

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Comments (171)

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Maybe the answer is to turn PCG over to the users and make it a cooperative electric company. That is what I have and I love it!! We get back "capital credits" in December based on our usage and the co-op's profits. However I think the cooperatives were initially set up by the government way back when to get companies to get electricity to the rural areas. And speaking of buried cable my lines in front of my house are buried and it's awesome!
cheefwiggums profile picture
As California goes, so goes the United States...and the world.
money$matters profile picture
Calivenzuela loves to extort people and companies who achieved success. They claim victory when they destroy business.
Nope and nope. I mean, whats in it for Berkshire except a lot of headaches and possibly horrible PR, and of course lawsuits and bankruptcy.
The problem is simple
1. Liability for property damage for past and current fires
2.There is a huge potential cost for clearing areas around power lines.
3.The cost of putting power lines underground is estimated to be $1m/ mile .
4. N. Cal already has the highest charges for electricity in the country . This includes a surcharge for past fires. To place an additional very large surcharge without stringent state restrictions on ROI just is not going to happen
5.PGE has NO friends in Sacramento.

Anyone who buys PGE knows about these problems and will not pay up. This means that the common stock is worth zero, the preferred stock is worth zero and there will be at least a haircut for current bond holders.
Kingkang80 profile picture
The only way Buffett could buy PCG if he thinks certain assets within PCG are attractive similar to a deal he was working on with AIG and LTCM that never transpired. If he doesn't buy the whole, he is always willing to buy the parts at a severe discounted price.
flufferty the gigabot profile picture
"Berkshire Hathaway would be a fine owner"

Correct, they'd be the owner of multi-billion dollars in fines, and not much else.

This mirrors Cuomo treatment of National Grid in NY, eventually you run out of bagholders (and nautral gas).
joesmith323 profile picture
When Buffett invested in GE etc during the financial crisis he was looking for a 20% or higher annual return.

To entice Buffett to invest, California would probably have to offer him a lot of protection from litigation and high projected returns.
joesmith323 profile picture
The other problem with Buffett investing is that Buffett likes companies that have existing competent management. He is not a turnaround artist.

There are other companies who, for a price, might be willing to try to fix PCG. BAM / BIP come to mind as people with the necessary skills.
flufferty the gigabot profile picture
It's uninvestable of course, and if the state assumes the contingent liabilities (past, present and future) they may as well just take it into public ownership. They can overbid for renewables just like PG&E were forced to do and give out free energy to people who vote in the correct undeplorable way, it's a match made in heaven.
Chancer profile picture
In Newsom's dreams.

Buffett would have to lose his mind to step into this mess that has politics all over it.

But maybe Buffett is willing to poor some money down a rat hole as a total loss to curry favor with Democrats.

But his shareholders would be really unhappy with a bad decision.

Hey Newsom, Buffett does have shareholders.
PG&E poured a lot of money down various "woke" rat holes to curry favor with the Democrats. And look what that got them -- they're still being painted as the epitome utterly evil, out of control capitalist excess by the very governor to whom they gave $200k. No return on THAT investment.

I'm sure the lesson is not lost on other CA businesses.
The collapse of PCG will be an interesting education for Gov Slickback and the Leftists that run CA. Think gas/ diesel prices are high now, just wait.
flufferty the gigabot profile picture
They will learn nothing from this believe me, nor will the voters, it will simply confirm their prejudices. Even if they're standing in the pitch dark they'd simply stamp their feet and curse "greedy capitalism!" and "big fossil" no doubt.

Some officials may have some self-awareness, but they'd be ignored, much like the soon to be eviscerated holdings in PG&E for CalPERS and CalSTRS.

Not a whole lot of position to eviscerate. But, it is a few more tens of millions those funds are in the hole.
flufferty the gigabot profile picture
@Leo Plotkin , yes, it's limited, clearly the mangers aren't that stupid, which also explains why they're not bidding for this junk. It's amazing the politicians are seeking benevolent private capital, namely other peoples' pension accounts, yet they won't accept this level of risk for in their public funds. Do as I say, not as I do.

"But, it is a few more tens of millions those funds are in the hole."

It's only tax payers money, there's plenty more of where that came from.
And gavin newsom drops back. He has time in the pocket. He steps up, and throws a hail mary pass in the direction of Warren Buffet...
Too funny. He's way too smart to take on the current and future liabilities in a litigious left wing state.
flufferty the gigabot profile picture
Indeed, Newsom needs to cast his net wider, he needs to find a new bagholder that is both rich AND stupid, a veritable unicorn. Softbank maybe?

I do like his style though, "you better bid soon, those lawsuits and claims are only piling up! This insurer of last resort will be gone soon!". That probably works for used cars, but not beat up social and environmental programs pretending to be a utility.
THAT would be the last (dumbest) thing Warren Buffett would do. Sure he could buy it cheap BUT the liability that goes with it? Forget it. If Berkshire bought this liability claims would at least triple.This Company alone would Bankrupt Warren.
djunh1 profile picture
love how the shareholders/ state want a bailout. Predictable.

Maybe the fed can help with some several billion dollars worth of loan guarantees.

Here is a novel idea in 2019 - let the business fail. Wipe out the shareholders.
Andrew Williams profile picture
There is plenty of capital sloshing around the world looking for a home. Simply offer a reasonable rate of return and attracting capital is not a challenge. Does Newsome think Berkshire Hathaway is a charity?
Your two sentences make no sense. If there is plenty of capital, you should not need to offer a reasonable rate of return. There are negative interest rates in a large part of the world. Offer "reasonable rates of return" sounds like backroom deals and corruption between people in power and people with money that promise to exchange a little of it for the other at the expense of the rest of the society.
That's exactly how progressives view all businesses. As current or future charities that "owe" the communities they operate in. Profitable or not doesn't matter, they owe and owe big because capital "didn't build this."
joesmith323 profile picture
"you should not need to offer a reasonable rate of return."

California could finance it by getting the union pension funds to buy the bonds and shares at low or zero yield. :-)
Buy a company so you can get sued into oblivion every year. I wouldn't take it for free. With the current laws, liabilities tower over assets.
flufferty the gigabot profile picture
It's like a casino where the house never wins (aka a Trump casino).
ikswo123 profile picture
This is an easy cleanup if the culture changes to one of total responsibility. Very familiar with CA utilities, at this point I'd guess the following prescription would work:
- Clawback the millions of political graft donations over the years
- Change hiring practices to the most technically qualified and remove the 20+% deadwood in all ranks, both management and union.
- Zero out shareholders, 50% to bondholders. New financing through California GO bonds
- Review board of directors to see if any concerns were raised, else bring charges or sue.
- increase power bills by 50% until everything is fixed, probably about 10 years.

This mess has been a slow train wreck for decades. It reflects the culture it is in.

This is an agency problem. A little shared pain will bring miraculous change.
People don't like pain. They'll vote for anyone promising a painless and green train wreck.
I’ll buy for $1 per share
flufferty the gigabot profile picture
You've over paid by $50.
Someone has to pay for this mess, so why not Berkshire... LOL
The assets of PG&E aren't the problem. The problem is the people they serve and that is not going to change. Nobody wants in on Cali.
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