Buffett uses BNSF to bet on coal
(John Kemp is a Reuters columnist. The views expressed are his own)
Warren Buffett’s acquisition of the remaining 77.4 percent of Burlington Northern Santa Fe (BNSF) railroad his Berkshire Hathaway does not already own looks like a strategic bet that America’s future energy needs will be met, in large part, through a massive expansion in coal-fired power generation coupled with carbon capture and storage (CCS).
Coal is the most important item moved on BNSF’s railroads. It accounted for almost half the tonnage moved by BNSF in the first nine months of the 2009 (214 billion revenue ton miles out of a total of 444 billion) and a quarter of the company’s revenues ($2.7 billion out of a total of $10.4 billion).
BNSF’s track and rights of way are perfectly positioned to benefit from a massive expansion of the country’s coal-fired output in the next 20 years, coupled with CCS technology to curb the carbon-dioxide emissions.
BNSF controls the crucial rails linking the massive domestic reserves of the Powder River Basin, the Northern Great Plains, the Western Interior Basin and the Illinois Basin east to the main industrial centres of the Midwest and west to the major electricity demand centres in southern California.
* http://pubs.usgs.gov/of/1996/of96-092/Comp/main.gif * http://www.eia.doe.gov/cneaf/coal/reserves/chapter1.html#fig1 * http://www.bnsf.com/tools/reference/division_maps/?menu=5&submenu=0 * http://graphics.thomsonreuters.com/109/US_ENRGY1009.gif
Clean energy investment needs greener light
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –
Investors in clean energy are like motorists stuck at broken traffic lights. The public policy light is green but the price and credit lights are deep red.
Investment in wind, wave and solar power should be booming after the European Union last year adopted an ambitious goal to draw 20 percent of its energy from renewable sources by 2020 to help fight global warming, and U.S. President Barack Obama made green power a central plank of his government’s policy.
But the credit crunch, economic recession, the spectacular fall in oil prices since last July and a record low European carbon price have cooled investors’ ardour.
Consultants New Energy Finance forecast zero investment growth in climate-related companies this year, after a spectacular growth rate of 60 percent in 2006-7.
“The commercial lending market is holding back and until that can be addressed, it’s going to be a major constraint,” says Christopher Knowles of the European Investment Bank’s energy and environment department.
Yet to achieve the EU’s 2020 target, investment decisions need to be taken soon on long-term projects to build a smart electricity grid, giant offshore wind farms and networks to bring renewable energy to Europe’s industrial heartland.
When Warren was talking about the collapse of the market we all should have been buying, however I’m going to have to say that history will say that this purchase should have been an interim sell indicator.
Warren, despite his historic success, has become emotional about the market. He is becoming less of a student of the market and more of a teacher and anyone who thinks they can ‘teach the market’ is about to learn a lesson. No matter how you are, the market is bigger.
Warren’s ‘All in’ on the recovery is a bad bet.
The macro trade has been to fade Warren.
I think his recent purchase by Berkshire is a good indicator that the market is overbought and investors should raise cash.
In short, Sell.