Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (A:US), 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.
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. Energy Future didn’t immediately respond today to an e-mailed request for comment.
To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net
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