Monthly Archives: July 2015

BNSFL Acquires Transportation Technology Services

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BNSF Railways, through its wholly owned BNSF Logistics (BNSFL), has acquired engineering and logistics company Transportation Technology Services (TTS). The move expands BNSFL’s capability in wind turbine shipping, which has been growing rapidly with the explosive growth of wind-generated power throughout the Midwest and Texas.

About TTS

Founded in 2001, TTS provides engineering design, distribution and wind and project cargo logistics services to railcar builders, manufacturers, shippers, railroads, and energy companies, among others.

TTS manages a fleet of more than 2,000 leased railcars and is responsible for over 9,000 dimensional shipments per year. 1,200 of the railcars are equipped with patented fixtures designed to handle wind turbine components including blades, tower sections and nacelles, TTS is a significant addition to the more than 9,700 rail shipments BNSF Logistics currently manages.

TTS will become the U.S. Rail, Project Cargo and Engineering Services division for BNSFL. The combined unit will have extensive capacity, hundreds of years of combined practical experience and strong relationships and credibility with the major players in Wind Energy, Power Generation, Oil & Gas, Heavy Machinery and the EPC and Manufacturing communities.

“TTS’s engineering and design capabilities, extensive wind fixtures, and rail transload locations coupled with their talent, and market expertise in industrial products are a perfect fit for our broader expansion into the industrial products sector that handles freight of all sizes. When combined with our existing multi-modal and transload capabilities, BNSFL becomes a leader in North America in multi-modal capacity and ability for the Industrial Products sector,” commented Ray Greer, BNSFL’s President. “The innovation and value we will be able to bring to our customers just increased significantly,” he added.

The company is based in Southlake, Texas, which is between Fort Worth and Dallas.

About BNSFL

BNSFL operates over 40 offices throughout North America, with over 120 FCPA certified Global Service Providers (GSPs) for import and export of general and project cargoes throughout the world.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BH Media Launches Midwest Agricultural News Website

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Berkshire Hathaway’s wholly-owned BH Media Group has launched a new website called agNET.net that focusses on agricultural news for the Midwest.

The website is a product of the Farm and Ranch family of publications. The focus of the website is agricultural news that directly impacts farmers, and has everything from reports on Federal legislation, USDA rule making, and international trade agreements, to farming tips such as “Tips and Tricks for Avoiding and Removing Ticks.”

News and information for the site is culled from BH Media’s publications throughout the Midwest, and additional news comes from wire services, including the Associated Press.

Robert Pore, who writes for BH Media’s The Grand Island Independent in Grand Island, Nebraska, is the site’s editor.

While agNET.net has a full-range of banner advertising and classified advertising, BH Media has also launched a sister site called agstuff.com, which focuses on the sale of agricultural equipment.

Playing to BH Media’s Strengths

BH Media owns 71 newspapers and other titles located in 10 states, and all of the newspapers are regional or community papers. With agNET.net, BH Media is showing that its focus on rural communities gives it new ways to reach often overlooked consumers, and the ability to create targeted online platforms to monetize that readership.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire’s NV Energy Benefits From Plunging Solar Prices

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Berkshire Hathaway’s NV Energy, which powers customers in the state of Nevada, has contracted to buy electricity from First Solar’s soon to be built Playa Solar 2 at the astoundingly low rate of only 3.87 cents a kilowatt-hour.

The rate, a 20-year fixed-rate contract, was submitted to Nevada’s Public Utilities Commission on July 1, 2015.

First Solar is a leader in photovoltaic power with over 10 gigawatts (GW) installed worldwide, and has been aggressively building solar farms, some of which have been purchased by Berkshire Hathaway Energy.

First Solar built the 550 megawatt Topaz Solar Farm, which is now powering 160,000 average California homes, and is owned by BHE Renewables.

Berkshire Leads in Renewables

Berkshire Hathaway Energy’s BHE Renewables has over 1,884 megawatts of power generation derived from solar, wind, hydro and geothermal sources. 1,271 megawatts of that capacity come from solar.

Plunging Solar and Wind Prices

In just the last four years, solar and wind power have gone from promising but expensive power sources to power sources that meet or beat fossil fuel power generation prices that come from coal and oil.

The drop in solar electricity generation costs has been so dramatic that it has outpaced even the experts’ estimates. The U.S. Department of Energy (DOE) noted that “2020 price projections are approximately one-half of what same analysts projected 5-10 years ago.”

The DOE is projecting a decline in solar PV system module prices for utility scale installations from its $4 in 2010 to less than $2 by 2016. Utility-scale PV is defined as ground-mounted systems that are greater than ≥5 megawatts.

Buffett Believes in Renewables

Speaking at the Edison Electric Institute’s annual convention in Las Vegas in 2014, Warren Buffett trumpeted Berkshire’s commitment to renewable energy.

“We’ve poured billions and billions and billions of dollars in retained earnings, and several billion of additional equity, Buffett said. “And we’re going to keep doing that as far as the eye can see.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: Forest River Learns a Painful Lesson

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Unlike the world of automobile manufacturing, which has for decades been ruled by giant corporations such as Ford, GM, and Toyota, the world of RV manufacturing still is a relatively small business (at least as compared to automobile manufacturers), and has yet to adjust to the increased scrutiny all types of specialty vehicles receive in regards to reporting safety defects.

Not that major automobile manufacturers have done all that well lately, with Toyota having received the largest criminal penalty ever for a car manufacturer when in 2014 it was fined $1.2 Billion for concealing safety defects.

Putting the Hammer Down

In a move that underscores the seriousness of this reporting duty, Berkshire Hathaway’s Forest River, Inc., which manufactures RVs, shuttle buses and other recreational vehicles, has been fined $5 million, plus $30 million in deferred penalties by the National Highway Traffic Safety Administration (NHTSA).

According to the NHTSA, both RV maker Forest River Inc., and Spartan Motors Inc., which manufactures custom chassis for Class A motorhomes and specialty vehicles, have “each acknowledged failure to launch timely safety defect recalls as required by the Motor Vehicle Safety Act, and to report critical data such as technical service bulletins and Early Warning Report data.”

“Safety is a critical shared responsibility, and when manufacturers fail to meet their responsibility, the Department will enforce the law,” U.S. Transportation Secretary Anthony Foxx said on July 9, 2015. “Today’s action sends a message to these manufacturers and to others that withholding critical safety information is not an option.”

Also, according to the NHSTA, Forest River, “acknowledged it failed to report early warning data and failed to launch two safety recalls in a timely fashion. Forest River agreed as part of a consent order to pay a $35 million civil penalty, including a $5 million cash penalty and a $30 million deferred amount.”

$30 Million in Deferred Penalty

NHSTA is requiring the $30 million deferred penalty to insure compliance. Forest River is “also is required to retain an independent monitor to conduct periodic audits of the company’s safety practices. Failure to resolve any issues discovered in those audits will result in deferred portions of the civil penalty coming due — $3 million for a first violation, $7 million for a second and $20 million for a third. Forest River also is required to hire an in-house consultant to assist in meeting requirements of the consent order.”

As for Spartan Motors, the company “acknowledged that it failed to report service bulletins to NHTSA as required by law and that Spartan did not launch three previously-initiated safety recalls in a timely manner. Under a consent order, between NHTSA and Spartan, Spartan is required to launch recalls to remedy three additional safety defects that NHTSA identified in previously undisclosed service bulletins. Spartan also will pay a total civil penalty of $9 million, including a $1 million cash penalty. The company commits to spending $3 million on compliance with requirements of the consent order; the remaining $5 million will come due immediately if Spartan fails to comply with the consent order.”

The consent order requires Spartan to “undergo a third-party audit of its reporting practices; develop new written reporting procedures; and engage in an education and outreach campaign aimed at increasing awareness of reporting requirements in the medium and heavy-duty vehicle industry.”

“These companies face not just financial penalties, but increased oversight designed to ensure these safety lapses are not repeated,” said NHTSA Administrator Mark Rosekind. “NHTSA will continue to use its enforcement authority in innovative ways to protect public safety.”

Forest River has pointed fingers at its software vendor for its reporting troubles but the message from the NHSTA has been we don’t care.

As for its safety defects, Forest River announced a recall on July 6,2015, of 1,497 model year 2016 travel trailers citing concerns that a wheel might detach from the vehicle.

An Even Bigger Hammer in the Wings

Specialty vehicle manufacturers would be wise to spend money now to improve their systems and culture of compliance, as the Department of Transportation is seeking enhanced safety enforcement, including greatly raising the power of the department’s safety authority by increasing the statutory cap on NHTSA civil penalties from $35 million to $300 million.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Special Report: BYD, Berkshire’s Tesla

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While Tesla has grabbed major headlines the past few years, China’s BYD Company Limited has grown from just 20 employees in 1995 to over 190,000 today, and in the process become the world’s largest rechargeable battery supplier.

The company has some 16,000 R&D engineers.

In 2015, BYD jumped to number one in worldwide EV sales thanks to the popularity of its Qin sedan and Tang SUV, beating Nissan, Tesla, Volkswagen and Toyota.

The growth directly benefits Berkshire Hathaway. In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares for $230 million, and now owns roughly 9.1% of the company.

Today Berkshire’s stake in BYD is worth roughly $1.77 billion.

Like Tesla, BYD is both an automaker and a battery maker. The company purchased Xi’an Tsinchuan Auto Co., Ltd. in 2003 and has aggressively pursued both the auto and bus businesses.

BYD sold 437,725 autos in 2014 in China alone, and became the first Chinese company to successfully enter the Japanese bus market. Its sales goals for 2015 were 15,000 electric cars and 6,000 electric buses, and in 2016, the company plans to enter the electric truck market.

Unlike Tesla, BYD manufactures both gasoline-powered and electric cars, including traditional fuel cars, dual mode electric cars, and electric-only cars and buses. BYD has jumped into the EV market with a broad range of vehicle types, including the bus, coach, taxi, private car, urban logistics truck, sanitation truck and construction truck (concrete mixer); and 4 specific off-road vehicles for use in the warehouse, airports, ports and mining.

Pure Electric Buses

It is in the bus market that BYD is making rapid progress. BYD’s zero-emission pure electric buses have already been deployed in Brazil, China, Columbia, England, India, Malaysia and Thailand.

Air pollution and carbon emissions are the key drivers of the move to pure electric buses. In China, diesel buses make up just 10% of the vehicles on the road but contribute over 30% of city air pollution and GHG emissions.

In April 2016, BYD achieved its 10,000 pure electric bus milestone, an achievement six years in the making.

BYD’s C9, is a two-axle, 40′ coach with the seating capacity to carry 47 people at highway speeds for over 190 miles. The buses use an iron-phosphate battery that after 10,000 charge cycles will still retains 70% of its capacity.

Its largest bus, the K10A, is a 15-meter bus that seats 95 passengers, and is now in service in São Paulo, Brazil.

London saw its first pure electric zero emission double decker bus debut in October 2015, and a fleet of 51 single-deckers debuting in the fall of 2016.

As BYD looks to pure electric bus sales across Europe, it has announced a €20 million investment in a bus assembly plant in the northern Hungarian city of Komárom. The Hungarian plant will begin production in the first quarter of 2017, and will have its own R&D center and battery test facility.

In the U.S. market, BYD has primarily focused on bus sales,becoming the dominant player in the electric bus market. It built a massive 450,000 sq. ft. assembly plant in Lancaster, California.

BYD’s e-buses operate in transit agencies, universities and airports across North America, with more than 40 customers including LA Metro, Los Angeles Department of Transportation, Stanford University, UCLA, UC San Francisco, UC Irvine, Anaheim Resort Transportation, Long Beach Transit, Denver Regional Transportation District, City of Albuquerque, SolTrans, SunLine Transit, Link Transit, COMO Connect, Antelope Valley Transit Authority, and many others.

In the spring of 2015, it also announced a pilot program with Uber in Chicago that uses BYDs E6 sedan. The car is a cross between a sedan and SUV, and currently gets roughly 186 miles (300 km) of driving range per charge. The 2016 E6 will reportedly get a range increase to 250 miles (400 km).

BYD’s biggest breakthrough in the U.S. market came in September 2015, when it won a contract with the Washington State Department of Transportation (WSDOT) for up to 800 heavy duty buses from all different propulsion types that includes 12 different categories for all-electric buses. The buses will serve public transportation systems in the states of Washington and Oregon.

The Explosive Growth of Pure Electric Vehicles in China

In China, it took ten years to go from zero electric vehicles to the current 1%, but it may take only another five years to reach 10%.

And, even more amazing is that sales of new energy vehicles in China are projected to hit a whopping 30% by 2025.

BYD notes that the production and sales of new energy vehicles exceeded 300,000 units in China in 2015, representing a three-fold growth year-on-year, and accounting for a 1.3% share of overall vehicle sales.

Strength Around the Globe

While Tesla has struggled in China, laying off 30-percent of its workforce in March 2015, and has its goal of manufacturing in China still on the drawing board, BYD is already a major player. BYD not only has a factory in Shenzhen, but has captured half of the electric car market. Its home field advantage has it selling over 6,000 of its popular stylish QINs per month.

BYD is also having an easier time in emerging markets. It is opening a factory in Brazil by the end of 2015, and is using its strength in pure electric buses as its way to enter the market. What’s more, it beat all U.S. car manufacturers to the Cuba market. In July 2015, the company inked a deal with the Cuban government for the purchase of 719 vehicles to be the first fleet of tourist rental cars. The cars will be traditional fuel vehicles but will give BYD a major foothold in the country, and they are already planning to introduce electric vehicles, and move beyond tourist car rentals to government official vehicles and the nascent private car market.

In September 2015, BYD had its first substantial sale in Africa, signing a deal to sell 10,000 vehicles to Sudan’s state-run company GIAD Motor Co Ltd.

The 7+4 Strategy in Australia

BYD’s comprehensive “7+4” electrification strategy in the Australia region aims at electrification of all forms of ground transportation: urban bus, coach, taxi, passenger car, urban logistics trucks, construction trucks, and urban sanitation trucks (7), as well as vehicles for warehousing, mining, airports and ports (4).

In 2016, the BYD e6 taxi got the green light to access the Australian market becoming the first Chinese made electric vehicle to be certified by the Australian Design Rules (ADRs), the country’s stringent technical standards for emissions, vehicle safety and theft resistance.

The company was already in the Australian market with its pure electric buses in a shuttle service tested for Sidney Airport between December 2014 and May 2015, and it has also sold its pure electric forklifts in Sydney and Melbourne.

A Willing Partner

BYD’s technology makes it an excellent partner with other manufacturers, as cities around the world race to meet ambitious climate change and pollution goals.

In July 2015, BYD signed a deal worth $29.6 million deal with British bus manufacturer Alexander Dennis Limited (ADL) to build 51 single-deck zero-emission buses for London. The buses utilize BYD’s chassis and electric drivetrain with the bodies supplied by ADL. The first 51 buses went into service in September 2016, following a three-year trial that proved the buses could consistently run a 16-hour shift without a recharge. The partnership helps London move towards its goal of having all single-deck buses totally emission-free by 2020.

“Our deep experience of not only battery technology but the critical battery management systems and driveline components necessary to deliver unequaled range and reliability are matched to ADL’s strong track record in building low weight, attractive and durable buses,” said Isbrand Ho, managing director of BYD Europe.

Innovative Mass Transit Solutions

While Elon Musk touts the future prospects of hyperloops in dealing with future transportation needs, Chinese competitor BYD Co. LTD. is looking towards an existing mass transit technology, the monorail, as part of its answer to urban congestion issues. In October 2016, the company debuted its “SkyRail” monorail system in Shenzhen, China.

With a capacity of between 10,000 to 30,000 passengers an hour (each way) and a high speed of up to 80km/h, SkyRail is part of BYD’s focus on the development of layered rail transport that meshes with metro and bus systems. BYD refers to “three-dimensional green traffic” as part of its green mobility platform.

Dramatic Cost Savings Compared to Subways

The electric monorail is a kind of traffic network which interconnects multiple transit backbones in the city at one sixth of the cost of a subway system.

According to BYD, the total market for monorails just in China is in the range of 3 trillion yuan ($450 billion).

BYD’s 4.4 kilometer monorail line at its Shenzhen Headquarters alleviates the traffic problems of 50,000 factory and management employees.

The first commercial sale of BYD’s SkyRail will be to S. Korea.

BYD’s B-Boxes and Vehicle Emergency Power Supply

Like Tesla, BYD has jumped into the home power storage business. The battery maker’s B-Boxes consist of fire-safe, long-cycle Iron-Phosphate rechargeable batteries that perform the same function as the Tesla PowerWall Battery. BYD’s B-Boxes are already on sale in many European countries including Germany, UK, Italy, Spain, as well as in Australia and Africa.

In a move that puts it ahead of Tesla, BYD’s Qin EV300 and e5 cars are equipped with BYD’s signature VtoL function, in which the vehicle serves as a massive mobile electricity supply to power appliances like cookers, refrigerators, power tools and many others, so that users can rely on the vehicle to plan outdoor activities that depend on electricity, or in case of emergencies like power cuts or blackouts.

Berkshire’s BYD Investment

Despite Berkshire Hathaway’s reputation for avoiding high-tech investments, its stake in BYD, like its more recent stake in eVolution Networks, shows Berkshire is not going to be left out of companies on the cutting edge of technology.

(This article contains updated information from when it was first published.)

© 2015-2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Acquires Healthcare Liability Insurer PLICO, Inc.

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Berkshire Hathaway has agreed to acquire healthcare liability insurer PLICO, Inc.

The deal between Berkshire Hathaway’s MedPro Group (MedPro) and the Oklahoma State Medical Association (OSMA) will see Berkshire take over the Oklahoma City-based PLICO, which serves approximately 2200 healthcare providers in Oklahoma, and is the largest healthcare liability insurer in Oklahoma.

Founded in 1979, PLICO has annualized gross written premiums of about $30 million, and had a statutory surplus of over $60 million at year-end of 2014.

The “bolt-on” acquisition is only the second acquisition for MedPro since Berkshire Hathaway acquired it a decade ago.

“Joining Berkshire Hathaway’s MedPro Group emboldens PLICO’s expansion efforts by providing additional opportunities not available to us before,” said Carl Hook, M.D., President and CEO of PLICO. “MedPro shares our commitment to always put the insured first, and this transaction will give PLICO the unquestioned financial strength and additional product options to better serve local healthcare providers and entities without sacrificing our reputation for high-quality customer service and relational focus. Both PLICO and MedPro insureds will benefit greatly from our collaboration, which leverages the best combination of national resources with local expertise and service.”

PLICO is not currently rated by leading insurance rater, A.M. Best, but is expected to apply for financial strength ratings and be positioned to offer additional products and services.

Prior to the PLICO acquisition, Berkshire’s MedPro had $874 million in annual premiums and more than 140,000 customers.

Another Bolt-On Acquisition

Berkshire Hathaway has a two-track approach to acquisitions. One track is major acquisitions, such as the purchase of BNSF Railway, Heinz, and Van Tuyl Group, among others, which are multibillion dollar acquisitions that usually become new stand-alone companies under the Berkshire Hathaway umbrella. The other track is what Berkshire labels “bolt-on” acquisitions that add additional companies to Berkshire’s existing companies. While most of these bolt-on acquisitions are small, at least in relative terms of adding to a $360 billion company, they add up, and Berkshire does over $3 billion in total bolt-on acquisitions a year in the aggregate. These acquisitions, which have in recent years included companies such as Beveridge dispenser-maker Cornelius (added to the Marmon Group) and Meadowbrook Meat Company (added to McLane Company), as just two examples, continuously add significant market-share and new capabilities to Berkshire’s companies.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire’s Hidden Ownership of Kraft Heinz Shares

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Berkshire Hathaway has come out of the Kraft Heinz merger as its biggest single shareholder with 325,442,152 shares of common stock and 80,000 shares of 9% cumulative compounding preferred stock, Series A.

Berkshire’s partner in the acquisition, 3G Capital, is the second largest shareholder with 293,536,058 shares of common stock.

Combined, Berkshire and 3G own 51% of the new consumer food giant.

Berkshire’s Additional Hidden Ownership

As they say in the TV ads, “But wait there’s more!”

Berkshire Hathaway has an additional ownership stake in Kraft Heinz through the pension fund of its subsidiary, Benjamin Moore & Co.

Benjamin Moore’s retirement plan owns 192,666 shares of common stock in its own right.

As usual with all things Berkshire Hathaway, it’s good to keep in mind that the conglomerate is like a series of nested dolls, and in its companies, or sometimes even in its companies within its companies, there are often hidden treasures.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

New Vs. Old Oil Tank Cars, Surcharge or Discount?

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Union Pacific Corp has followed BNSF’s Railway in having a higher price for hauling older DOT-111 tank cars. Union Pacific is charging $1,200 per DOT-111 tank car, and BNSF began adding $1,000 per tank car in January.

BNSF’s price change brought an immediate lawsuit from the American Fuel & Petrochemical Manufacturers (AFPM), the trade group of the U.S.’s petroleum refiners.

Surcharge or Discount?

BNSF is disputing that they are adding a surcharge. They are calling the price change a new rate for older tank cars with a discount for tank cars that meet the new DOT-117 standards.

As common carriers, Union Pacific and BNSF can’t refuse to haul DOT-111 tank cars. The big question is whether they can have different rates for different tank cars.

Replacing the Entire Fleet

The pricing difference will go away in a few years as DOT-111s are phased out. Under the Enhanced Standards for New and Existing Tank Cars for use in an HHFT—New tank cars constructed after October 1, 2015, are required to meet the new DOT Specification 117 design or performance criteria. The standards will require replacing the entire fleet of DOT-111 tank cars for Packing Group I, which covers most crude shipped by rail, within three years and all non-jacketed CPC-1232s, in the same service, within approximately five years.

The total new DOT 117/TC-117 tank cars that will ultimately be hitting the rails will be around 160,000 units.

Millions of Dollars a Day

Currently, both Union Pacific and BNSF are collecting over $100,000 additional per oil train, and with the number of trains they run, it amounts to millions of dollars a day. The cost to the refiners is roughly an additional $1.20 per barrel of oil, and eventually a court will decide whether the railroads have to give it back.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BNSF Grain Shipments Improve from 2014 Levels

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With Bakken crude oil shipments putting carload pressures on BNSF the past few years, grain producers were left griping about shipping delays and premium per car prices.

“We had a lot of grain on the ground about 18 months ago,” Tom Tunnell, the president and CEO of the Kansas Grain and Feed Association, noted in Midwest Producer. “The cost to get rail cars was extremely high, way above normal. The premiums were in the thousands of dollars per car range, but all that’s gone away. We’re back down into a more normal range.”

A Winter of Discontent

Back in the winter of 2014, grain shipments were running weeks late with the shipping time from the Midwest grain belt to the Pacific Northwest running a whopping 22 days. The delays added substantial costs to grain producers, as they paid ocean-going freight ships between $30,000-$50,000 per day to sit in port waiting for the delayed grain.

So far for 2015 BNSF grain shipments are up a solid 10.7% year-to-date over the same period in 2014. Shipments increased from 219,747 carloads in 2014 to 243,268 carloads in 2015.

“We have substantially better Ag shuttle turns per month as compared to last year,” a BNSF official said in May. “Last year we were below 2 turns per month, and now we are over 2.5 turns per month.”

The increase comes despite crude oil shipments only having minor 1.41% decrease in carloads. Despite the collapse in worldwide oil prices, oil train shipping still moved 245,356 tank cars of petroleum, as compared to 248,868 tank cars for the same period in 2014.

Adding Capacity

BNSF is working hard to eliminate grain shipping bottlenecks, including adding 900 new cover-hopper grain cars as part of the 7,800 rail cars it is purchasing in 2015. BNSF’s $6 billion in capital improvements in 2015 is a record for any railroad, and also includes 300 new locomotives.

The most critical time for grain shipments is August through October, and hopefully BNSF will be ready to meet the demand with increased capacity and fewer delays.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: If You Can’t Beat ‘Em, Join ‘Em?

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Berkshire Hathaway’s Nevada Energy is in a battle for the energy consumer that could be the bellwether for utility industry. With consumers pushing legislators to expand the percentage of “net metering” that Nevada Energy must purchase, Berkshire Hathaway Energy is stuck on the side of trying to hold down consumer demand for rooftop solar so its non-solar consumers don’t see their rates rise as the utility passes on legacy costs from closing outdated coal-fired plants.

Rooftop Solar an Unstoppable Force

In Nevada, 108 companies installed 339 megawatts of solar power in 2014. Even in markets without Las Vegas’s 294 sunny days per year, the cost of rooftop solar is dropping so quickly that Bloomberg News is predicting that there will be “a 17-fold increase in installations.” They note that “By 2040, rooftop solar will be cheaper than electricity from the grid in every major economy.”

While the cost of utility scale solar is also dropping as witnessed by Berkshire’s 1,271 megawatts of solar capacity and growing. (It’s Topaz Solar Farm, a photovoltaic power station in San Luis Obispo County, California, alone is already generating 579 megawatts of power.) The question is whether Berkshire should stand on the sidelines while more and more consumers put solar panels on their roofs.

If You Can’t Beat ‘Em, Join ‘Em

Nevada’s the perfect opportunity for BHE to test adding rooftop solar installation and leasing to its portfolio. The company’s got deeper pockets than the numerous but small players in the market. Other utilities are already testing rooftop solar. Georgia Power rather than fighting rooftop solar companies is joining them in the installation business through a new subsidiary.

Another Key Advantage

Berkshire Hathaway Energy already has a number of unregulated businesses, including its Berkshire Hathaway Home Services real estate empire. Rooftop solar offers another unregulated business opportunity.

So, as the saying goes, “If you can’t beat ‘em, join em.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.