Monthly Archives: February 2018

Warren Buffett Steps Down from Kraft Heinz Board of Directors

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The Kraft Heinz Company has announced that Warren Buffett will retire from the Company’s Board of Directors following the end of his term at the upcoming Kraft Heinz 2018 Annual Meeting of Stockholders.

Mr. Buffett decided to retire from the Board as he decreases his travel commitments. The Company also announced that the Board of Directors intends to nominate Alexandre Van Damme to stand for election at the 2018 Annual Meeting to fill Mr. Buffett’s vacancy.

“It has been an honor to work with Warren for the past five years,” said Alex Behring, Chairman of the Board of Directors. “His many invaluable contributions to Kraft Heinz will have a lasting impact on the Company for years to come. The Board of Directors looks forward to his continued partnership as Chairman of our largest shareholder, Berkshire Hathaway. We are thrilled to add Alexandre’s expertise and perspective to Kraft Heinz, and believe that his executive experience and leadership will be extremely valuable to the Board, our leadership and company as a whole.”

© 2018 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.

Warren Buffett’s Annual Letter to Shareholders to be Released Saturday

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Tomorrow is the big day for Warren Buffett’s annual letter to shareholders.

Berkshire Hathaway’s 2017 Annual Report to the shareholders will be posted on the Internet on Saturday, February 24, 2018, at approximately 8:00 a.m. eastern time where it can be accessed at www.berkshirehathaway.com.

The Annual Report will include Warren Buffett’s annual letter to shareholders as well as information about Berkshire’s financial position and results of operations.

Concurrent with the posting of the Annual Report, Berkshire will also issue an earnings release.

© 2018 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.

Rocky Mountain Power to Construct Four New Wind Farms

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Berkshire Hathaway’s Rocky Mountain Power has chosen four new wind projects to fulfill its planned expansion of the amount of wind energy serving customers by 2020.

The four projects will expand Rocky Mountain Power’s owned and contracted wind power by more than 60%, and add enough new wind energy to power approximately 450,000 average homes.

The bids were selected following a request for proposal (RFP) issued in September 2017. The RFP establishes a competitive bidding process for the company to select the most cost-effective new wind projects.

The four selected projects are:

  • A 400-MW wind project in Converse County, Wyoming, which will be built by NextEra Energy Resources, LLC, with half of the project owned by PacifiCorp, and half of the project owned and delivered by NextEra under a Power Purchase Agreement.
  • A 161-MW wind project in Uinta County, Wyoming, which will be built by Invenergy, LLC, and owned and operated by PacifiCorp.
  • A 500-MW wind project in Carbon and Albany Counties, Wyoming, which will be built, owned and operated by PacifiCorp.
  • A 250-MW wind project in Carbon County, Wyoming, which will be built, owned and operated by PacifiCorp.

“The new wind projects are part of the company’s Energy Vision 2020 initiative, which will significantly expand the company’s Wyoming wind fleet and benefit the state and local economies,” said Cindy A. Crane, Rocky Mountain Power President and CEO. “The project also includes a 140-mile segment of the Gateway West high-voltage transmission line in Wyoming to connect the new wind energy to Rocky Mountain Power’s grid.”

The cost of the four new wind projects is estimated at approximately $1.5 billion, which is significantly less on a per-megawatt basis than when the new wind and transmission plan was first announced last April. The per-megawatt reduction in project costs helps make the Energy Vision 2020 initiative lower cost compared to other resource alternatives, such as energy market purchases, to meet forecasted customer energy needs.

The projects are also expected to:

  • Create between 1,100 and 1,600 construction jobs in Wyoming and more than 200 full-time positions;
  • Add approximately $120 million in tax revenue from construction; and
  • Bring significant post-construction annual tax revenues starting at approximately $11 million in 2021 and growing to $14 million annually by 2024.

© 2018 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: Death of Retail? Grandscape Says Not So Fast

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“Retail is dead,” proclaims just about every financial headline these days, but Berkshire Hathaway continues to prove that wrong as it builds out Grandscape, a 400+ acre development featuring over 3 million square feet of retail, entertainment, dining, residential, office and attractions.

Anchored by Berkshire’s Nebraska Furniture Mart, which alone takes up 100 acres and has a 560,000 square foot retail showroom, Grandscape continues to use the bigger is better philosophy.

It’s a philosophy that’s attractive to other retailers that don’t want to simply bemoan the death of the bricks-and-mortar retail experience as a casualty of the internet.

The latest retailer to break ground at the development is SCHEELS, which is constructing a two-level, 331,000 square foot building that will be the largest All Sports Store in the world.

“After more than 10 years studying the Texas market, we found a great location to build our largest store yet,” said Steve D. Scheel, SCHEELS Chairman of the Board. “This one-of-a-kind retail adventure will attract sports enthusiasts, outdoor explorers and shoppers seeking a wide variety of fashion, footwear and homegoods. We are excited to bring our expertise and enthusiasm to Texas for the first time.”

In keeping with the trend to make shopping more experiential, SCHEELS will have a 65-foot, 16-car operating Ferris Wheel, a 16,000-gallon saltwater aquarium with more than 600 fish, and a wildlife mountain. Shoppers will get the chance to try out interactive arcade games and sports simulators.

Berkshire continues to believe in the retail experience, even as it is forced to evolve from the days of strip malls and malls with department stores as anchor tenants, and its $1.5 billion investment in Grandscape shows its putting its money where its mouth is.

© 2018 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.

NetJets Subsidiary Acquires Cerretani Aviation Group

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QS Partners, the aircraft brokerage subsidiary of Berkshire Hathaway’s NetJets, has acquired aircraft brokers Cerretani Aviation Group of Boulder, Colorado.

QS Partners was launched in 2016 to meet what NetJets called “a growing need from our clients regarding whole-aircraft sales and trades and leveraging NetJets’ global network of resources…”

With the acquisition of Cerretani Aviation Group, the company will more than double its size.

In a release, Nick Cerretani and Paul Kirby said, “We are pleased to announce that Cerretani Aviation Group has merged with QS Partners, a leading aircraft sales company composed of individuals with whom we share a commitment to integrity, knowledge, and insightful service to our clients. While we will operate under the QS Partners brand, we will remain based in Boulder, Colorado, and will retain all of our current staff.

Our merger with QS Partners will enable us to significantly expand our industry reach and enhance transactional opportunities for our clients, whether buying or selling. At the same time, we are aware of the foundations of our success and will focus on providing our clients the personal attention and independent thinking they have come to expect from Cerretani Aviation Group.”

The Cerretani Aviation Group was founded in 2001 by Nick Cerretani, a former Executive VP at Flight Options, and Paul Kirby, co-founder of Kirby Ramsey Aviation.

© 2018 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.

Benjamin Moore Awarded for its Supply Chain Academy at SCM World

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Berkshire Hathaway’s Benjamin Moore & Co., was awarded accolades in the fourth annual SCM World Power of Profession Awards.

SCM World, a Gartner community, recognized the company with its Talent Payback of the Year and Talent Breakthrough of the Year awards.

This recognition acknowledges the efforts by Benjamin Moore & Co. to transform and modernize its entire supply chain, increase employee retention and improve employee engagement. Benjamin Moore & Co. was selected out of six finalists within the Talent Breakthrough of the Year category.

“We are honored to be recognized by our peers at SCM World and to be among a remarkable list of companies awarded for its efforts in supply chain initiatives,” said Barry Chadwick, Benjamin Moore Executive Vice President Operations. “This recognition represents the efforts our employees put in every day to advance their knowledge and improve the Benjamin Moore & Co. customer experience.”

According to the company, Benjamin Moore & Co. has made significant efforts to transform and modernize its entire supply chain, including a transition to a world-class enterprise resource planning system and a successful Supply Chain Academy initiative that led to the promotion of 22% of its salaried employees and an 85% retention rate.

To date, nearly 336 Benjamin Moore & Co. employees have taken advantage of this program. Employee engagement results have increased 10% year-over-year and exceeded the Conference Executive Board Global High Performing Norm in every category.

The SCM World Power of Profession Awards identify, recognize and enable collective learning from the most impactful and innovative supply chain initiatives.

The awards are unique in that they are voted on by fellow supply chain professionals, providing a chance to share lessons and best practices, and shape the future of supply chain.

The winners were announced February 6th at an award ceremony, held as part of the SCM World Live Americas conference in Miami.

Other award winners included Pfizer, 3M, Land O’Lakes, Schneider Electric and P&G.

© 2018 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’s $135 Million 2018 Capital Program for Montana

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BNSF Railway has announced that its 2018 capital expenditure program in Montana will be approximately $135 million.

This year’s plan in Montana remains focused on maintenance projects to ensure BNSF continues to operate a safe and reliable rail network. The largest component of this year’s capital plan in the state will be for replacing and upgrading rail, rail ties and ballast, which are the main components for the tracks on which BNSF trains operate.

“Maintaining a safe and reliable network is one way BNSF works to keep Montana’s economy moving. Freight rail connects Montana’s farmers and lumber producers with the major U.S. markets, and with exports facilities ready to move their products overseas. Rail is also a vital component of getting the people of Montana the consumer products they need,” said Jon Gabriel, general manager of operations, Montana Division.

Over the past five years, BNSF has invested approximately $850 million to expand and maintain its network in Montana.

This year, the maintenance program in Montana includes approximately 820 miles of track surfacing and/or undercutting work as well as the replacement of nearly 60 miles of rail and about 200,000 ties. Multiple projects are scheduled on our Kootenai River Subdivision, which runs between Sandpoint, Idaho and Whitefish.

BNSF will signalize various sidings on the subdivision between Sandpoint and Whitefish to enable Centralized Traffic Control (CTC) and make improvements to the Flathead Tunnel, the 7-mile long railroad tunnel in northwest Montana.

The 2018 planned capital investments in the state are part of BNSF’s $3.3 billion network-wide capital expenditure program announced last month.

The investments include $2.4 billion to replace and maintain core network and related assets, approximately $500 million on expansion and efficiency projects and $100 million for continued implementation of Positive Train Control (PTC).

BNSF is the only Class I freight railroad to have completed the installation of PTC on all its federally mandated subdivisions and is currently running hundreds of trains daily with PTC as it tests revenue service across its mandated territory.

Another element of its capital plan will be $300 million for freight cars and other equipment acquisitions.

© 2018 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.

Phillips 66 and Berkshire Hathaway in Share Repurchase Agreement

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Phillips 66 has agreed to repurchase 35 million shares of Phillips 66 common stock from a wholly-owned subsidiary of Berkshire Hathaway for $93.725 per share. This $3.3 billion repurchase is expected to close on Feb. 14, 2018.

The shares had been purchased at an average price of $78.31 a share, and Berkshire’s return on its investment, excluding dividends, was roughly 20%. Currently, Phillips 66 is paying an annual dividend of 2.99%.

“We are excited to have this opportunity to return capital to our shareholders in such a meaningful way,” said Greg Garland, Chairman and CEO of Phillips 66. “This transaction benefits all of our shareholders, as it is immediately accretive to earnings per share and positive for valuation. While this highlights our dedication to shareholder distributions, our strategy remains unchanged. We are committed to running our assets safely and reliably, growing our Midstream and Chemicals businesses, enhancing our Refining and Marketing returns, and rewarding our shareholders through a secure, competitive and growing dividend along with continued share repurchases.”

This is hardly the end of Berkshire’s investment in Phillips 66.

“Phillips 66 is a great company with a diversified downstream portfolio and a strong management team,” commented Warren Buffett. “This transaction was solely motivated by our desire to eliminate the regulatory requirements that come with ownership levels above 10 percent. We remain one of Phillips 66’s largest shareholders and plan to continue to hold the stock for the long term.”

At closing of this transaction, Phillips 66 will have 466.5 million shares outstanding of which Berkshire will have an equity ownership interest in 45.7 million shares.

2018 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: Berkshire Gives Up on Enormous Australian Gas Field

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The defining characteristic of any mirage is that the closer you think you are to it, the further away it seems to get.

Sadly, in what is sure to be a major disappointment for Berkshire Hathaway, after years of work its CalEnergy subsidiary is planning to decommission two exploration wells which have been used to test the potential for natural gas production in the Whicher Range, south of Busselton.

The gas field had been estimated to contain four trillion cubic feet of gas-in-place.

The problem has always been how to get it.

CalEnergy is the sole titleholder and operator of the exploration permit EP 408 located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The test wells, WR1 and WR4, will be sealed with concrete and the well heads removed.

The land immediately around the well locations will be rehabilitated in line with conditions to be set out by the Department of Mines, Industry Regulation and Safety.

In 2016, Peter Youngs, the Managing Director of CalEnergy Resources Group, discussed with MazorsEdge the progress on the development of the gas field, noting that “the field represents a large in place gas resource, its characteristics are challenging and there is much work still remaining to move this resource to a commercially developable status.”

Unfortunately, those obstacles proved to be too much to surmount.

© 2018 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 Receives Prestigious Energy Storage Award

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German energy consultancy EuPD Research has awarded new energy technology company BYD with the “Top Brand PV Seal 2018” for energy storage manufacturers, the first for a Chinese company.

The honor was determined after German PV installers rated BYD highly across a range of categories including brand satisfaction, loyalty, quality and distribution strength.
BYD, headquartered in the Chinese innovation hub of Shenzhen, has won numerous international accolades for its advancement in the energy storage sector.

Last November, pv magazine named BYD as the winner of its global innovation award because of the company’s breakthrough technology in its residential and commercial battery energy storage system the B-Box (high voltage).

In the same year, two BYD energy storage products were jointly nominated at the ees (Electrical Energy Storage) awards, an unprecedented achievement for a company since the award began in 2014.

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 $1.8 billion.

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

© 2018 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.