The S&P/ASX 200 Index (ASX: XJO) share APA Group (ASX: APA) is one of the largest infrastructure businesses on the ASX, with a market capitalisation of approximately $10 billion. Buying businesses worth billions of dollars is not an issue for Warren Buffett's Berkshire Hathaway.
Warren Buffett has led Berkshire Hathaway for decades to become one of the largest and most diversified operating companies in the world. It is in sectors like insurance, railways, energy, manufacturing, retail, building and construction, food and beverage and so on.
Berkshire Hathaway likes to own businesses that have a solid long-term outlook, where it has a competitive advantage/economic moat and can generate good profit. Before considering whether Warren Buffett would want to invest in the ASX 200 share, let's remind ourselves what APA actually does.
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What the ASX 200 share's operations include
APA is a listed energy infrastructure business. The ASX 200 share owns and/or manages and operates a $27 billion portfolio of gas, electricity, solar and wind assets.
It delivers around half of the country's domestic gas through 15,000km of gas pipelines that it owns, operates and maintains.
APA doesn't just own pipelines, it also owns gas storage, gas processing and gas-powered energy generation assets.
The ASX 200 share also has renewable energy generation assets, including wind and solar assets.
The final type of asset that APA owns is electricity transmission – it connects Victoria with South Australia, Tasmania with Victoria and New South Wales with Queensland.
Both the Coalition and Labor have stated their intention that gas stay part of the Australian energy mix. Minister for Resources and Northern Australia Madeleine King said in 2024:
Ensuring Australia continues to have adequate access to reasonably priced gas will be key to delivering an 82 per cent renewable energy grid by 2030, and to achieve our commitment to net zero emissions by 2050.
The Strategy makes it clear that gas will remain an important source of energy through to 2050 and beyond, and its uses will change as we improve industrial energy efficiency, firm renewables, and reduce emissions.
But it is clear we will need continued exploration, investment and development in the sector to support the path to net zero for Australia and for our export partners, and to avoid a shortfall in gas supplies.
Would Warren Buffett invest in APA?
Energy infrastructure may not be a fast-growing industry, or capable of producing a huge return on capital (ROC), but Berkshire Hathaway does have a growing energy segment where it can invest large amounts of capital.
Berkshire Hathaway Energy is spread across a number of areas. As well as being the largest grid owner-operator in the West across six states, it is the owner of the largest interstate natural gas pipeline in the US (which spans 11 states), and various other transmission, gas and utility businesses. This shows Buffett likes gas and electricity transmission businesses.
Berkshire Hathaway Energy also owns grid businesses in northern England and in the Canadian province of Alberta, showing he doesn't mind going international.
I believe that Warren Buffett would find the ASX 200 share interesting, particularly because the APA share price has dropped 33% since August 2022, making it cheaper.
