Monthly Archives: December 2016

Special Report: When Will Berkshire Finally Hit it Big in Natural Gas?

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In November 2015, Berkshire Hathaway Energy’s Australian subsidiary, CalEnergy Resources, drilled a test well in Western Australia in what the company called modestly a “significant gas field.”

The test well heralded a potential profit gusher as it confirmed an enormous gas field that is four trillion cubic feet of gas-in-place “significant.”

First the Facts

Exploration permit EP 408 is located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields. These gas fields have long been known, and were first discovered in 1968 and 1971, respectively. The fields are located in ancient sandstone reservoirs nearly four kilometers underground.

The fields contain an estimated four trillion cubic feet gas-in-place, and Berkshire’s share currently stands at approximately 84%. Other partners include Which Range Energy.

Slow But Steady Progress

Peter Youngs, the Managing Director of CalEnergy Resources Group, which is owned by Berkshire Hathaway Energy, recently updated MazorsEdge on the progress on the development of the gas field.

“We have over 50 years of data from all of the prior activity on the field that we are assimilating and integrating with our well testing results,” Young states. “Parts of our recent well test were encouraging but it has also shown us that we have not yet answered all of the technical issues that might impinge on a commercialization decision and hence the detailed integration work.”

Young anticipates updating stakeholders on the current status of the work and CalEnergy’s next steps towards the end of the second quarter 2017.

So, will 2017 be the year that Berkshire finally gets to profit from the Whicher gas fields? Not likely at the current pace, but 2018 is not so far off.

© 2016 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.

Berkadia Completes $43 Million Sale for Arizona Multifamily Property

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Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has announced the recent sale of Coronado Villas, a 432-unit multifamily property in Tucson, Arizona. Senior Managing Director Art Wadlund and Associate Director Clint Wadlund of the Tucson office completed the $43 million sale at a price-per-unit of $99,537.

The seller was Prime Residential, based in San Francisco, and the buyer was Oregon-based Tokola Properties.

“Tokola Properties was looking to purchase a quality property in Arizona,” Art Wadlund said. “With apartment occupancy increasing and job growth accelerating in the Tucson area, the buyer recognized the opportunity Coronado Villas presented to be located within a growing multifamily market.”

Built in 1994, Coronado Villas is located at 9225 E. Tanque Verde Road and affords convenient access to Catalina Highway. The one-, two- and three-bedroom units feature a washer/dryer, double-sided wood burning fireplaces and vaulted ceilings in select units. Community amenities include a fitness center, three swimming pools and spas and a clubhouse. Saguaro National Park East is situated four miles from the property, and top employers in the area include Tucson Unified School District and the Arizona National Golf Club.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.
The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2016 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.

Low Oil Prices Spur More UTLX Permanent Layoffs

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Continued weakness in demand for shipping domestic crude oil has prompted Berkshire Hathaway’s Union Tank Car Co., more commonly referred to as UTLX, to announce major layoffs in Houston, Texas.

UTLX will cut a third of its staff from its facility in northeast Houston.

In a letter to the Texas Workforce Commission, the company stated that it will permanently cut 106 jobs commencing Jan. 20, 2017.

The move is no surprise, as in April 2016 UTLX announced that it would be cutting its tank car production by 50-percent.

At the time, the Berkshire Hathaway-owned company announced that it also planned to lay-off employees at its plant in Alexandria, Louisiana.

© 2016 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.

Howard G. Buffett to Step Down from Coca-Cola Board of Directors

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The Board of Directors of The Coca-Cola Company have announced that Howard G. Buffett, 61, will not stand for re-election to the Board at the Company’s Annual Meeting of Shareowners in April 2017.

The move comes as Coca-Cola Company announced that its Board of Directors has approved unanimously the recommendation of Chairman and Chief Executive Officer Muhtar Kent for changes to the company’s senior leadership structure. Under the new structure, company veteran James Quincey, President and Chief Operating Officer, will succeed Kent as CEO, effective May 1, 2017. Kent will continue as Chairman of the Board of Directors.

According to a statement issued by Coca-Cola, Buffett has chosen to retire from the Board to focus more time on his work as Chairman and CEO of the Howard G. Buffett Foundation, which focuses on advancing sustainable agricultural practices and conflict mitigation throughout the world.

“I’ve enjoyed my more than 17 years of combined service to the boards of Coca-Cola Enterprises and The Coca-Cola Company and have the utmost respect and admiration for the work the Company is doing to sustainably grow its business around the world,” Buffett said. “Under the long-time leadership of Chairman and CEO Muhtar Kent, joined recently by President and COO James Quincey, the Company has exciting plans for the future and is poised to deliver even greater value to its many stakeholders in the years to come.”

Buffett joined The Coca-Cola Company’s Board of Directors in December 2010 and has served as a member of the Public Issues and Diversity Review Committee since 2011. From 1993-2004 he served as a director on the Board of Coca-Cola Enterprises, Inc., which at the time was the largest bottler of Coca-Cola beverages in North America and Western Europe.

In addition to his role with the Howard G. Buffett Foundation, Buffett serves as President of Buffett Farms, a commercial farming operation in Nebraska, and, since 1993, has served as a director of Berkshire Hathaway Inc. From 1995 to January 2016, Buffett also served as a director of Lindsay Corporation.

© 2016 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 Sets Sights on Alamo 6 Solar Farm

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While some have questioned whether the new Trump administration will change any of Berkshire Hathaway’s renewable energy plans, it doesn’t seem to be affecting their acquisition strategy.

Berkshire Hathaway Energy is reportedly looking to purchase the Alamo 6 solar farm from San Antonio, Texas-based solar developer OCI Solar Power.

OCI Solar Power has filed for state approval of the sale.

The 110-megawatt solar project will supply power to CPS Energy under an already signed agreement.

While Berkshire, has not released a statement, Berkshire’s purchase price is said to be $385 million.

OCI Solar Power is a subsidiary of OCI Company, a Korean chemical and renewable energy company.

Working with Utility-Scale Developers

Berkshire has a strategy of purchasing solar projects from outside developers, including the 579 megawatt Solar Star Projects (formerly Antelope Valley Solar Projects), which are two co-located solar installations in Kern and Los Angeles Counties in California that were purchased from SunPower in 2013. And Berkshire acquired two solar projects from Geronimo Energy in 2015 and 2016.

© 2016 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.

McLane Company Awarded 29 More Stores by Mirabito

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Berkshire Hathaway’s McLane Company, Inc., a leading supply chain services company providing grocery and foodservice supply chain solutions throughout the U.S., has been awarded services for 29 Xtra Mart c-store locations recently acquired by Binghamton, New York-based Mirabito Holdings Inc.

As part of the multi-year agreement, McLane will begin servicing the 29 Xtra Mart locations in central New York and Northeast Pennsylvania starting January 1, 2017.

With the addition of the 29 Xtra Mart locations, which will be rebranded as Mirabito c-stores, McLane now handles all of Mirabito’s c-store locations in the eastern region, bringing the total to more than 100 stores.

“Mirabito has had a long standing relationship with McLane Company and have trusted the support of the company’s senior leadership team for over 20 years,” said President and Chief Executive Officer Joe Mirabito. “Their commitment to our future is invaluable and we look forward to a long and successful relationship.”

“McLane Company has been servicing our current stores for 20 years and we are excited that McLane will be servicing our newest addition to the Mirabito Family. McLane has been a critical part of our success and growth. Their commitment to our business, professionalism, customer service, and ability to adapt and develop technology applications aligns with our future growth plans and superior customer shopping experience,” added Chief Operating Officer Rich Mirabito.

A customer of McLane since 1997, Mirabito has stated the supply chain’s strategic leadership, operating excellence, and tech solution offerings as contributors to its growing footprint in the eastern region over the years.

Specifically, through its participation in McLane’s Center for Category Innovation and inclusion of the supply chain’s foodservice solution, McLane Kitchen, Mirabito plans to roll out newly remodeled stores and introduce specialty, fresh and frozen items and equipment starting in 2017.

“Mirabito is a well-respected and a long-time customer of McLane, so it’s an honor they have chosen us to provide services for the acquired Xtra Mart business,” said Tony Frankenberger, president at McLane. “Our portfolio of services will enable Mirabito to provide a wider variety of foodservice offerings and upgraded footprint experience to its rapidly growing customer base.”

© 2016 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.

BYD to Supply Pure Electric Vehicles to Iran

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Chinese renewable energy technology leader BYD Company has become the first company to supply pure electric vehicles to Iran.

BYD’s strategic partnership with the country’s largest private passenger car manufacturer Kerman khodro will also see the Shenzhen-based company export other leading technological products to Iran including hybrid vehicles, electric commercial vehicles and rechargeable batteries.

“Our partnership with Karmania is an important step in expanding our Middle East operations,” said AD Huang, General Manager of BYD’s Middle East and Africa Auto Sales Division. “Iran’s new energy vehicle market has vast potential because the government of Iran has the foresight of sustainable development. We endeavor to use our excellent technology to provide quality products and service to the people of Iran.”

“We are very positive about the future of new energy vehicles in Iran because of BYD’s mature technology, the scale of its production and operational success,” said Karmania CEO Pooya Salari Sharif. Karmania is a subsidiary of Kerman that specially for BYD.

BYD’s commercial initiatives in the Middle East and Africa presently include energy storage, new energy vehicles and solar power generation.

According to a statement by BYD, Iran is just one of several Middle Eastern countries responding to climate change concerns through various environmentally friendly policies such as tax breaks for new energy vehicles. These initiatives also assist nations in reducing their dependence on fossil fuel.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.77 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2016 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.

Lubrizol Launches Lubricant Market Advocacy Website

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The Lubrizol Corporation’s Lubrizol Additives business segment has launched a new, all-encompassing industry insight website, LubrizolAdditives360.com.

The website serves as a convenient single source for content that covers the entire lubricant market and reinforces Lubrizol’s role as a market leader in the industry.

The new site incorporates all the information and insights customers have come to rely on from Lubrizol’s previous industry insight websites, DriveLineNEWS.com, FluidLineFlash.com, GF-¬6.com, HDDEO.com, MCEO.com and PCEO.com. Content on the site is arranged in a format that aligns with the following specific business focus areas and the correlating opportunities in the marketplace:

• Passenger (including passenger car and motorcycle)
• Commercial (including on-road and off-road vehicles)

Key features of LubrizolAdditives360.com include:

• announcements on the latest engine oil specifications;
• information on advancements in passenger vehicle technology;
• reports on new trends in automotive gear manufacturing;
• intelligence on driveline and engine oil lubricants and fuels; and
• insight into innovative solutions for off-highway vehicles.

“Lubrizol Additives has always taken great pride in being a market leader and an advocate for the use of higher performing lubricants,” said Mike McCabe, director, Lubrizol Additives global marketing. “We are confident that this new industry insight website will provide valuable content for our customers and continue to drive the industry forward in a positive direction.”

© 2016 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.

Fruit of the Loom Names Melissa Burgess-Taylor New Chairman & CEO

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Berkshire Hathaway’s Fruit of the Loom has announced the appointment of Melissa Burgess-Taylor as the company’s new Chairman and Chief Executive Officer.

Ms. Burgess-Taylor is currently the Senior Vice President of Brand Management and Sales for Fruit of the Loom and Vanity Fair Brands. She has been with the company more than 17 years focusing on the interests of Fruit of the Loom employees and customers while delivering meaningful results.

Warren Buffett, Chairman and CEO of Berkshire Hathaway, addressed the Fruit of the Loom leadership team today following the unexpected passing of Rick Medlin last week.

“Rick lived and breathed Fruit of the Loom, and he was an inspirational leader to everyone associated with the company. He will be greatly missed. His contributions were significant and his legacy will continue through the success of Fruit of the Loom and the employees.” Mr. Buffett continued, “I am excited to have Melissa take on this important role as CEO. Already an accomplished Fruit of the Loom leader, she is passionate, smart, and cares deeply about Fruit of the Loom customers and employees. She understands the importance of building a great brand, and she’ll add tremendous value to Fruit of the Loom going forward.”

“I’ve been fortunate to be a member of the Fruit of the Loom family and this great company for many years. We have succeeded due to our people, our strong brands and the powerful relationships we have with our customers,” stated Ms. Burgess-Taylor. “I am grateful for Mr. Medlin’s strong leadership and mentorship, and I am deeply committed to continuing to move us forward.”

Ms. Burgess-Taylor has held various leadership roles within the organization. In her current role, she leads Marketing, Merchandising, Sales, Brand Communications and Creative Services for Fruit of the Loom, Vanity Fair, Lily of France, Vassarette and Curvation brands. Prior to joining Fruit of the Loom, Ms. Burgess-Taylor held roles with Hanes Brands and Mercantile Department Stores. She received a Bachelor of Science degree in marketing with a minor in textiles and clothing from Western Kentucky University in Bowling Green, Ky., and currently resides in Bowling Green with her husband and two children.

© 2016 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.

San Diego County to Double the Number of Dairy Queens

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Good news for ice cream lovers! California’s San Diego County will double the number of Dairy Queens over the next five years.

Dairy Queen plans to open two new Dairy Queens per year with the first one to open by the end of 2017. All of the locations will be “DQ Grill & Chill” restaurants.

Dairy Queen has a long history in the San Diego area, with its 12260 Woodside Avenue location in Lakeside going all the way back to 1958.

The challenge is finding suitable locations due to the high cost of real estate in the area.

A Grill & Chill outlet ranges in size from 1,886 – 2,612 sq ft and requires a lot size of 20,952 – 29,670 sq ft.

Major California Expansion

Dairy Queen is also planning to triple its northern California locations, adding another 200 locations to its existing 98 locations, as Dairy Queen hasn’t been a common sight in the Bay area, with only 12 locations currently open.

In all, Dairy Queen, which has moved from a summer treats business to a year-round food and ice cream business model, plans to add 400 locations in California.

For more information read a Mazor’sEdge special report on Dairy Queen.

© 2016 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.