Warren Buffett, who bought about $2 billion in bonds issued by power company Energy Future Holdings Corp., said the investment is at risk of losing all its value after natural gas prices fell, Bloomberg reported.
Buffett's Berkshire Hathaway Inc. wrote down the debt by $390 million last year, following a $1 billion impairment in 2010, the billionaire said in his annual letter to shareholders posted Feb. 25 on the company's website. The market value of the investment was $878 million at the end of December, he said.
"If gas prices remain at present levels, we will likely face a further loss, perhaps in an amount that will virtually wipe out our current carrying value," wrote Buffett, Berkshire's chairman and CEO. "Conversely, a substantial increase in gas prices might allow us to recoup some, or even all, of our writedown."
Buffett, 81, invested in the bonds in 2007 after Energy Future, then called TXU Corp., was bought by KKR & Co. and TPG Capital. The private-equity firms wagered that gas prices would rise, pushing up the price for wholesale electricity. Instead, gas prices plummeted amid an expansion of drilling in the United States, putting pressure on power providers that operate in unregulated markets where states don't ensure that utilities make a certain level of
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Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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