30/06/2015 - 05:58

Buffett’s local fare has Asian fusion flavour

30/06/2015 - 05:58


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The Oracle of Omaha may not be a new investor in Australia, but it is a good sign.

TOE IN: Warren Buffett’s Berkshire Hathaway has been active in WA since at least 2011, via CalEnergy Resources. Photo:iStockphoto

The Oracle of Omaha may not be a new investor in Australia, but it is a good sign.

News of Warren Buffett’s ‘arrival’ on the Australian investment scene caused much excitement across the nation this month, even though headlines on this matter missed the mark by several years.

While Mr Buffett’s Berkshire Hathaway may not have directly invested in Australian stocks as it did recently when it struck a complex scrip-and-revenue deal with insurer IAG, its subsidiary, CalEnergy Resources, has been active in Western Australia since at least 2011 and its managing director Peter Youngs is based in Perth.

CalEnergy is owned by Berkshire Hathaway Energy, which, in turn, is 90 per cent owned by Mr Buffett’s giant conglomerate headquartered in the US state of Nebraska.

Perth is home to the CalEnergy managing director’s office, its Australian business unit and its subsurface team – a tiny and distantly located part of the Berkshire Hathaway empire, so maybe that’s why everyone seemed to forget about it.

The company also has offices in the UK and Poland.

We last wrote about the company’s activities here in 2011 (businessnews.com.au/article/CalEnergy-targets-SW) when it bought into the Whicher Range field near Margaret River, hoping to bring some of the US experience and technology to unlocking the gas that had eluded several other high-profile attempts at extraction.

Last I heard they were still trying.

It is also has a substantial interest in the Pryderi prospect located on the south-east fringe of the Browse basin. Its interest there is shared with listed resources group IPB Petroleum.

While it appears that CalEnergy is yet to strike it big in Australia, the venture makes sense if you look at it through the prism of 2011 and earlier. Resources in Australia were booming back then due to demand from the region at sky-high prices. As a proxy to investment directly in Asia, Western Australian gas was an obvious choice.

Similarly, the investment in IAG is a more considered extension of the same approach.

Not only is IAG big in Australia where wealth, be it from mining or property investment, has a huge Asian link, the insurer has been taking a gradual and incremental approach to expansion in the region. The company has built a footprint across South-East Asia, India and China.

It’s not known whether companies need a direct exposure to Asia to attract the interest of the managers of $2.3 billion or so that Mr Buffett’s Australian investment team will have to allocate.

But his track record of looking at big brands and the management behind them means there are limited ways to spend money in Australia, given our lack of scale, let alone major companies with a direct Asian component.

More likely, I figure, this is just a play on the overall market and its indirect connection to Asia. Mr Buffett presumably sees Australians continuing to benefit from growth in the region – from China’s maturing appetites, new growth in the Asean nations, India’s more robust performance and a slowly reviving Japanese economy. All need raw materials, more sophisticated products and, in many cases, services Australian firms can offer – including a conduit to Berkshire Hathaway’s billions.

Taxi talk

FOLLOWING my piece last week encouraging Swan Taxis to be mindful of the public as it influences the outcome of industry reviews, I received word from a source within the sector that I’d got it wrong in highlighting consumers as the primary customer of the dispatch service.

In fact, the source said Swan’s primary customers were not the travelling public but the plate holders, be they lessees or owners, who provide it with its income. The travelling public certainly doesn’t.

“A significant improvement could be achieved by making plate holders contractually responsible to the regulator for the provision of a competent service by competent drivers,” the source said.

“Such a contract must require plate holders to take responsibility for the selection, training and standard of service delivery of its drivers, thereby relieving the government of its whipping boy status.”

While I may have misunderstood my role as a consumer, and that of the rest of the public, this does open the door to a sensible regulatory approach to the sector.

Impose much tougher standards on any taxi driver or the equivalent in terms of training, behaviour and safety, making the driver’s employer responsible – be that Uber, Swan or a plate owner.

Adding cost in the form of risk and workload to plate owners will most likely have the added benefit of forcing down the value of licence plates which, to date, provide an income for nothing.


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