Monthly Archives: February 2018

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.

Kirksville Kraft Heinz Plant Doubles Employees

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Kraft Heinz’s plant in Kirksville, Missouri has doubled its workforce to 900 employees. The move comes after the plant was expanded from previously 188,000 square feet to 450,000 square feet.

Of the 900 employees, some 860 are regular employees and the remaining 40 are temporary employees hired through an employment service.

The plant is the sole Kraft Heinz bologna producer in North America, and also produces square cut ham, cotto salami, round white turkey.

© 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.

Berkshire Hathaway Specialty Insurance Opens Office in Dubai

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Berkshire Hathaway Specialty Insurance Company has received its insurance license from the Dubai Financial Services Authority and established an office in the Dubai International Financial Centre (DIFC), while naming Alessandro Cerase as its Senior Executive Officer (SEO) and Neeraj Yadvendu as deputy SEO and Head of Third Party Lines for the Middle East.

In addition, Alessandro will be leading First Party Lines for BHSI’s broader Asia Middle East region, which includes BHSI’s other regional hubs of Hong Kong and Singapore as well as its operations in Malaysia and Macau.

“We are excited to expand BHSI’s footprint in this region which will service those markets in the Middle East and beyond who seek (re)insurance support in the DIFC. The strategic location of Dubai as well as the stability and efficiency of the DIFC make it an ideal hub for BHSI to support economic growth in the region. Our operation in the DIFC will bring BHSI’s financial strength, and underwriting and claims excellence to the region.” said Marc Breuil, President of Asia Middle East, BHSI. “We are excited to be able to serve customers and brokers in the region under the experienced leadership of Alessandro and Neeraj.”

BHSI will provide a suite of specialty and commercial (re)insurance products to its network of brokers and ceding companies with a focus on construction, energy, property, marine, casualty and executive and professional lines.

Alessandro comes to BHSI with 20 years of global experience spanning both the engineering and underwriting sides of the insurance business. He was most recently Global Head of Energy and Engineered Risk at AIG. He holds a master’s degree in Chemical Engineering from Universita’ degli Studi di Roma.

Neeraj joins BHSI after two decades in the insurance industry, most recently as Regional Head of Casualty and Financial Lines at AXA Asia. He received his master’s degree in Business Administration from India’s University of Pune, and his bachelor’s degree from City College, Calcutta University.

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.

Berkshire in Top Three in Wind Energy Production

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Xcel Energy, Berkshire Hathaway Energy and Alliant Energy are the top three US utilities with “wind capacity currently under construction or in advanced development,” according to the American Wind Energy Association.

Wind is playing an ever-increasing role in the US energy market.

Some 7,017 MW of new wind capacity was added in 2017, which boosted the US’s total to 89,077 MW.

Wind power has passed hydroelectric as the number one renewable energy source.

Wind energy generation is also a growing employer nationwide. At the end of 2016, the US topped 100,000 Americans employed in the wind energy industry.

According to the according to the American Wind Energy Association, “wind energy delivered over 30% of the electricity produced in Iowa and South Dakota in 2016. Kansas, Oklahoma, and North Dakota generated over 20% of their electricity from wind, while 20 states now produce more than 5% of their electricity from wind energy.”

Berkshire Hathaway is also playing a key role in the financing of wind-power projects. The recently announced 300-MW Tahoka Wind project, which will be constructed in Lynn County, Texas, has long-term tax equity from BHE Renewables, LLC, a Berkshire Hathaway Energy Company.

© 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 ADL Pure Electric Buses Continue to Conquer London

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On Saturday, February 3, a fleet of BYD ADL pure electric buses took over operation of a fourth London bus route.

Route 153, operated by Go-Ahead London on behalf of Transport for London (TfL), runs an intensive service from before 05.00 to after 23.00 six days a week (with a slightly later start on Sundays). The Route spans many of the City of London’s most congested streets between its termini at Finsbury Park in the north to Moorgate in the heart of the financial district.

The new fleet consists of 11 of the 10.8m BYD ADL Enviro200EV single deckers, similar to others operated by Go-Ahead and now a familiar sight on London roads. The well proven zero emission vehicles entered service successfully and operate from the Northumberland Park Garage in Tottenham, north London. The new buses marked the transfer of the route to Go-Ahead from CT Plus. BYD has supplied the depot with its own-designed and manufactured charging points.

The other three ADL BYD serviced London routes, all with Go-Ahead, are the 521 and 507 from Waterloo and the 360 from Camberwell. Other routes and operators will receive fleets of BYD ADL electric buses in the coming months following tender wins by the partnership.

“We are delighted to make another significant step in the electrification of London’s bus routes and to be in the vanguard of the transformation. At Go-Ahead we have developed considerable practical knowledge of electric bus operation, gained over six years, and are well positioned to contribute further to the improvement of the capital’s air quality”, said Richard Harrington, Go-Ahead Group’s Engineering Director.

“The smooth switch on of our electric buses to operate another intensive London route is a testament to the strength of our overall offering – not just the proven and reliable buses themselves but of the back up and support of our partners in planning and installing the necessary equipment to make electric bus operation successful from day one”, said Frank Thorpe, UK Country Manager for BYD UK, speaking on behalf of the ADL BYD partnership.

BYD sold over 14,000 electric buses globally in 2017 and, in partnership with ADL, single deck market leader in the UK, its fleets in London, Liverpool and Nottingham have already accumulated well over a million miles of emissions free operation on UK roads.

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.

QuickChek Re-Ups with McLane Company for the Long Haul

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Berkshire Hathaway’s McLane Company, Inc., a leading supply chain services company providing grocery and foodservice supply chain solutions, has renewed its service agreement with QuickChek Corporation.

The extended agreement, which continues a 28-year relationship, was developed to stimulate a partnership for long-term growth and will include a complete supply chain solution for grocery, beverages, candy, snacks, health and beauty care, general merchandise, cigarettes and other tobacco products to QuickChek’s 154 fresh convenience market locations throughout New Jersey, New York’s Hudson Valley and Long Island.

During the renewed agreement, QuickChek plans to test the Premium Order Management Suite Reclamation application that streamlines the reclamation process by identifying the items that can be returned for credit and sends a detailed report of scanned reclamations digitally.

Named the 2016 National Convenience Store Chain of the Year, QuickChek already takes advantage of various value-added solutions offered by McLane. These include the McLane Link customer portal that allows customers to access key information such as order activity and operational metric data from their computer or tablet and McLane’s Center for Category Innovation that combines the knowledge of McLane experienced category managers and supplier partners with McLane’s extensive data warehouse to provide customers with objective sales data down to the zip code level. The resulting market insights determine the best product mix scenarios and key selling opportunities for the stores.

“McLane and QuickChek share many of the same core values including an unwavering dedication to our customers. We are honored they chose to extend the relationship with a service agreement that promotes long-term growth. We look forward to growing together in the years to come,” said Vito Maurici, senior VP of sales of McLane Grocery.

“We look forward to continuing our relationship and utilizing McLane’s goods and services as we strive for new ways to redefine fresh convenience in meeting the needs of today’s on-the-go, fast-casual shopper,” said QuickChek CEO Dean Durling, whose family-owned company is a market leader in food services with an exceptional fresh coffee and fresh food program offering restaurant-quality food at value prices and a wide array of grocery items.

© 2018 David Mazor

Velocity Transport Joins Blockchain in Transport Alliance

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Velocity Freight Transport, Inc. has joined the Blockchain in Transport Alliance (BiTA), a forum for the development of blockchain standards and education for the freight industry.

As one of the first freight brokerage companies to join BiTA, Velocity will work closely with the organization to set new standards for the use of blockchain technology in the transportation space.

With this announcement, Velocity Transport joins a consortium of 250-plus companies that have joined BiTA within the last six months and have a vested interest in the development of blockchain technology.

McLane Company Inc., a Berkshire Hathaway-owned supply chain services company, recently launched Velocity Transport as a freight brokerage company dedicated to providing significant value to both shippers and carriers.

Velocity Transport entered the marketplace to offer comprehensive freight solutions and deliver an unparalleled level of service to both shippers and carriers. Velocity’s decision to join BiTA reinforces the leadership team’s dedication to providing significant value to their clients and leading the freight brokerage industry into a new era of cutting-edge technology and thinking.

“We believe blockchain provides great value in solving industry pain points, but there needs to be clarity and standards around its use and BiTA intends to provide that through education and promotion of the technology,” said Chris Burruss, president of BiTA. “Velocity adds a crucial voice to BiTA, and their perspective will help BiTA and its membership build the world’s first transportation industry-specific blockchain standards.”

By engaging the brightest minds from the most influential leaders in transportation, finance and technology, BiTA is focused on providing educational resources and open forums to those in the industry interested in leading the evolution of the trucking industry through the efficiencies offered in blockchain technology.

“By becoming a member of BiTA, Velocity is connecting with a group of like-minded companies that want to drive innovation and advocate for the adoption of blockchain applications in the freight industry,” said John Lower, vice president of Velocity Transport. “We are very excited about the great potential of blockchain technology and are proud to join the team that will set the standards for its use going forward.”

Other Berkshire Hathaway companies that have joined BITA include BNSF Railway.

© 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.