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    • Member Info
      • Native Language:
      • Russian
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      • Russian Federation
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    • Join Date: Aug 2010
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    #1

    basis point adder

    Hi,

    I would like to know what happened to Warren Buffet's firm in this sentence. It someone approved a 200 basis point adder, for a 12.9% rate of return on a $6 billion project.

    "* Warren Buffet’s Gateway West: FERC approved a 200 basis point adder, for a 12.9% rate of return on a $6 billion project, including recovery of costs if the thing never gets completed. You do the math what that means for Mr. Buffett, and the added costs households and businesses will pay. With massive, guaranteed profits from a monopoly business, no wonder Buffet supports Obama’s proposed surtax on millionaires".

    Source: http://www.energyvox.org/2012/03/30/...buffetts-coal/

    From what I read, a basis point adder is 0.01% of something. (Source http://www.investopedia.com/terms/b/basispoint.asp) Therefore WB's company succeeded in getting a 2% increment. But in what? They increased his rate of return with 2% or what? Does the 12.9 already include the accretion?

    Thank you.

    • Member Info
      • Native Language:
      • American English
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      • United States
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      • United States

    • Join Date: Apr 2009
    • Posts: 12,310
    #2

    Re: basis point adder

    FERC is a gov't regulatory agency. I don't know what the "200 basis point adder" is on exactly, but Buffet ends up with a 12.9% guaranteed profit.

    • Member Info
      • Native Language:
      • Chinese
      • Home Country:
      • Malaysia
      • Current Location:
      • Switzerland

    • Join Date: Oct 2014
    • Posts: 12
    #3

    Re: basis point adder

    Hi Cynthia,

    If you read the article carefully, the approved basic point is referred to the Transmission Rate Reform incentives by FERC.
    Hope that helps.
    Not a teacher.
    Last edited by Louiesaha; 11-Oct-2014 at 02:04.

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