Wednesday, May 25, 2005 - Buffett Returns to the Deals Table With a Big Bet on Energy Sector

A few days ago, Buffett could find nothing worth buying. Yesterday, he paid 9 Billion for a utility. Furthermore, he said he may be buying in this area for the next 20 years. Buffett negotiates just like any of us who are trying to buy a car. Until the deal is finally made, we can't find a car at an acceptable price.

DUK recently purchased Cincinnati Energy. Consolidation is coming hard to a utility near you! Buy the stocks before they are taken over!

There has been much talk about requiring utilities to offer time of day pricing. Under this plan, consumers might charge storage batteries or convert water to hydrogen at night. The lower price per kilowatt should pay for the batteries in a few years and new fuel cells need hydrogen to operate. Power companies are more efficient when they run full tilt 24 hours per day. Lower priced fuel alternatives can be used. Expensive gas or diesel generators can start up and shut down quickly to meet peak demand but this adds to our energy imports versus using cheap coal that is available.

The reason energy companies have not built new refineries is that they understand the changes coming. GM has worked on fuel cell powered cars for the past 10 years. GM has built and sold hundreds of buses that operate off fuel cells. The technology is getting close to economic large scale production. Big chemical companies have begun using hydrogen to fuel their operations.

The next step in the process is to convert all cars to 42 volt electrical systems. Trucks and SUVs have been converted. The larger batteries will pave the way for the use of hybrid featured cars. Full use of fuel cells will not happen until a distribution system is built. Buffett is going to be involved in the generation of the power. His energy group may also be involved in the manufacturing of hydrogen. A major shift in our use of energy is in the works.