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Buffett Says Energy Future to Probably Seek Bankruptcy

Berkshire Chairman Warren Buffett
Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said Berkshire sold its Energy Future debt for $259 million last year. Photographer: Scott Eells/Bloomberg

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said Energy Future Holdings Corp. will “almost certainly” file for bankruptcy this year unless natural gas prices soar.

Berkshire suffered a pretax loss of $873 million on its $2 billion Energy Future debt investment and exited the holding last year, Buffett, 83, said in his annual letter to shareholders today. The billionaire said making the wager without first consulting Vice Chairman Charles Munger, 90, was “a big mistake.”

“Next time I’ll call Charlie,” Buffett wrote.

Energy Future was purchased in 2007 in the largest leveraged buyout in history, and ran into trouble as natural gas prices tumbled. The company is Texas’s largest electricity provider. Buffett had warned earlier that Omaha, Nebraska-based Berkshire was at risk of losses on its bet.

“Most of you have never heard of Energy Future Holdings,” Buffett said in today’s letter. “Consider yourselves lucky. I certainly wish I hadn’t.”

Buffett said Berkshire sold its Energy Future debt for $259 million last year. Berkshire received $837 million in cash interest while owning the bonds, he said in the letter.

Allan Koenig, a spokesman for Dallas-based Energy Future, declined to comment on the company’s financial prospects or Buffett’s investing decisions.

“We are extremely proud of our operational record,” Koenig said in an e-mail. Energy Future has shown “stellar performance through a range of challenging market conditions.”

Energy Future was meeting with lenders to discuss loans that would fund the company through bankruptcy, two people familiar with the talks said last month.

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