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Buffet purchase underscores nuclear's profitability September 23, 2008

Posted by cleanidahoenergy in Greenfield nuclear development, nuclear industry, Warren Buffet.
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Less than a year after getting out of the nuclear business, Warren Buffet is back into it in a big way. Buffet’s Mid-American Energy is purchasing Constellation Energy for $4.7 billion and obtaining ownership in UniStar.

In December 2007, Mid-American pulled out of a prospective nuclear power plant site in Payette, Idaho, after conducting preliminary site analysis. The cries of joy from anti-nukes were loud, proclaiming it’s proof that nuclear isn’t profitable (although I have a hard time imagining these people applauding a profitable nuclear plant). We maintained that nuclear is plenty profitable – some plants generate $3 million a day in profit – but has a longer-term horizon that Buffet is comfortable with. We also maintained that nuke plant development requires a team with considerable industry experience, something that Buffet lacked.

Our analysis has proven correct. Buffet knows nuclear is very profitable and he wants in on the start of the renaissance. What better way than purchasing a turnkey company that has a track record of good management and profitability? Some 60% of Constellation’s 8,700 megawatts of generation capacity comes from nukes and the company plans to build more.

Clearly, Buffet wants even more nuclear with purchase of Constellation and UniStar. He knows a winner when he sees one he is also a significant stockholder in NRG, which is building nukes in Texas. It wouldn’t surprise me if Buffet returned to Idaho with a nuclear proposal in the not-too-distant future – possibly after we have begun building our plant.

“Warren Buffet is a wise businessman and currently is investing in a number of businesses,” said Scott Robertson, regional manager of Areva NP Inc. “That he decided to invest in Constellation, a utility with a strong nuclear focus, demonstrates the value of this sector and also is encouraging for the EPR” (Evolutionary Production Reactor, third generation advanced design).

Wall Street Journal reporter Keith Johnson blogged that Buffet’s embrace of nuclear power could mean that either MidAmerican expects costs for fossil fuels to increase, improving nuclears competitive position, or Buffett expects Washington to sow the seeds of the long-awaited nuclear revival. Either way, its good news for us, for investors and for the nation.

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