Buffett Energy Unit Sees Tax Benefits Double to $1.8 Billion

  • Cash tax benefit from parent climbed from $764 million in 2014
  • Berkshire Energy cites `tax appetite' at Buffett's company

Berkshire Hathaway Energy Co. said tax benefits doubled last year on ties to the parent company led by billionaire Warren Buffett.

Cash tax benefits from the parent climbed to $1.8 billion in 2015 from $764 million a year earlier, the energy unit at Buffett’s Berkshire Hathaway Inc. said in a slideshow for a presentation to bond investors Thursday.

The energy business, led by Chief Executive Officer Greg Abel, cited the “tax appetite” of Berkshire Hathaway in a list of advantages it enjoys because of the companies’ ties. Abel’s operation, which included the slides in a regulatory filing Wednesday, also highlighted access to capital from Buffett’s company, which had a cash pile of more than $70 billion as of Dec. 31.

Under Buffett, the energy unit has expanded into one of the largest utility businesses in the world. Its operations include transmission lines in Alberta, gas pipelines that stretch from the Great Lakes to Texas, and companies that keep the lights on in Iowa and Nevada.

Buffett has said the business offers a reliable way to put billions of dollars to work each year. Unlike many rivals, Berkshire Hathaway Energy doesn’t pay a dividend, so profits are reinvested back into its utilities or used for acquisitions. The billionaire has also celebrated the tax advantages from the unit, which is a major investor in renewable energy.

‘Major Advantage’

“Certain tax credits that are available to our utilities are currently realizable only because we generate huge amounts of taxable income at other Berkshire operations,” Buffett wrote in a letter to investors last year. “That gives Berkshire Hathaway Energy a major advantage over most public-utility companies in developing wind and solar projects.”

While Buffett has publicly supported taxes on wealthy individuals and criticized businesses for complaining about corporate rates, he has long pursued strategies to limit payments made by Berkshire. For instance, he has handed stock in Procter & Gamble Co., Phillips 66 and Graham Holdings Co. back to those companies in exchange for operating businesses and cash. Under Internal Revenue Service Rules, that can avoid capital gains taxes that would be incurred if he sold the shares on the open market.

The energy business is among the largest at Berkshire and taps the bond markets frequently to help fund investments in infrastructure. The operation’s long-term debt isn’t guaranteed by the parent company.

The Sierra Pacific Power segment anticipates $400 million in debt financing next quarter, according to the slideshow. AltaLink expects debt financing of as much as C$550 million ($430 million) around the middle of this year.

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