2011: Is nuclear power worth the potential catastrophic risk?

AUDIENCE MEMBER: Good afternoon, Mr. Buffett and Mr. Munger. I’m John Gorrie (PH) from Iowa City, Iowa, where I’m a happy customer of MidAmerican Energy.

Around 2004, Mr. Buffett, you told us of a great attention you had given to limiting Berkshire’s exposure to mega-catastrophes so that one could not break Berkshire.

Today, MidAmerican Energy is seeking approval to build a nuclear power plant in eastern Iowa. At the same time, another utility company, Tokyo Electric and Power, faces claims that Merrill Lynch has estimated as exceeding 12 trillion yen, or $140 billion, to compensate residences and businesses that have been displaced and farmers that cannot produce.

Do you believe that the bond-like return that MidAmerican Energy might receive from a nuclear power plant can justify the mega-catastrophe risk that it would pose to Berkshire?

WARREN BUFFETT: Yeah, I don’t think it does pose — I don’t know the details of it, and Greg Abel can speak to it better than I can, but I don’t think there’s anything like the exposure that you refer to.

I think nuclear power is an important part of the world’s equation, really, in dealing with its problems on — it’s very long term because you’re not going to change the installed base in any hurry.

And as you know, France has a very high percentage of nuclear power. And, actually, 20 percent of the electricity generated in the United States comes from nuclear power.

I probably am getting some of mine from — we have — at Fort Calhoun, we have a nuclear facility — not we, but Omaha Public Power District has a nuclear facility I’ve actually been in.

But I think nuclear power is important, and I think it’s safe. I think that — I know — I don’t think nuclear power is going to go any place in the United States for a while — maybe quite a while — because of the reaction to what happened in Tokyo — with Tokyo Electric Power.

But that doesn’t change my view as to the advisability of continuing to develop nuclear power, not only in the United States, but around the world.

I think some people misinterpreted what I said when I was interviewed, when I said that I thought it would have a major setback in its development, just because of the popular reaction to what happened in Japan.

But that does not change my view that nuclear power is important for the future of this country and the world.

Charlie? (Applause)

CHARLIE MUNGER: Yeah, we can’t be so risk averse that things that have a very tiny chance of making a big dent in one subsidiary are unendurable for us. We have to have a certain reasonable amount of courage in operating this company.

WARREN BUFFETT: We have pipelines — we have gas pipe — you can dream of all kinds of worst-case situations.

We have to carry toxic materials. We’re required by law to carry those on the railroad, and, you know, you can picture the wrong place, the wrong time, the wrong everything. But we are not bearing any risks, in my view, ever, that threaten the enterprise.

I mean, that is one thing I think about all the time. I regard myself as the Chief Risk Officer of Berkshire, and that is not something to be delegated to a committee, in my view, at all.

So I think about — whether I think about derivative positions, whether I think about leverage, whether I’m thinking about nuclear power plants or anything, I mean, we are not doing anything that I know of that — pressing my imagination as far as I can — threatens me losing a night’s sleep over Berkshire’s well-being.

CHARLIE MUNGER: And I think you’d also count on any new nuclear plant built in Iowa will be a hell of a lot safer than the ones we already have. We are learning as we go along here. (Applause)

WARREN BUFFETT: Yeah. Obviously, more people — more people have lost their lives, by far, in coal mine accidents, you know, than ever in the United States — have suffered no losses from anything involving nuclear — with it producing 20 percent of the electricity used by 309 million people.

CHARLIE MUNGER: And if a tsunami gets to Iowa, it will a hell of a tsunami. (Laughter)

WARREN BUFFETT: Yeah. And our railroad won’t do so well, either. (Laughter)