Tag Archives: Berkshire Hathaway Energy

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

(BRK.A), (BRK.B)

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.

Berkshire Sets Sights on Alamo 6 Solar Farm

(BRK.A), (BRK.B)

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.

Money Flowing Into Solar Development to Benefit Berkshire Hathaway

(BRK.A), (BRK.B)

Money is flowing into the solar development and construction sector, and this could benefit Berkshire Hathaway’s portfolio of utilities.

The money speeds the construction of utility-scale solar power projects that utilities then purchase to replace antiquated fossil-fuel powered generation plants.

One example is Origis Energy, a Miami based international solar development and construction firm with a photovoltaic portfolio of over 600 megawatts, and Baltisse, the European private investment firm of Mr. Filip Balcaen.

Baltisse has committed to provide up to a total of $100 million in growth capital for Origis. The capital comes as private investment money is ramping up investment in the U.S. solar market.

The funding empowers Origis to strengthen its offerings to utilities and large scale corporate energy buyers seeking solar as a clean energy alternative for their power generation needs.

Origis has already developed more than 100 projects worldwide totaling 600+ megawatts to date of solar capacity for utilities, including Berkshire Hathaway’s Pacific Corp.

“The strength of our balance sheet as an independent power producer in the U.S. is a critical consideration for utility and corporate procurement executives,” said Guy Vanderhaegen, Chief Executive Officer of Origis Energy. “We have crossed major milestones in our work for leading utilities in the U.S. This investment and the board guidance of Filip Balcaen makes Origis an even stronger partner to fulfill the solar objectives of large scale energy users in the U.S.”

Berkshire Hathaway Energy has been busy buying up renewable energy projects, including two portfolios of projects developed by Geronimo Energy, LLC. that were acquired 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.

Balancing Authority of Northern California and Sacramento Municipal Utility District Want In On Western Energy Imbalance Market

(BRK.A), (BRK.B)

The California Independent System Operator (ISO) has announced that the Balancing Authority of Northern California (BANC) and Sacramento Municipal Utility District (SMUD) intend to join the ISO’s western Energy Imbalance Market (EIM).

The EIM is a real-time, wholesale power market managed by the ISO that enables participating utilities to buy low cost energy available across eight western states, including California, Oregon, Washington, Utah, Idaho, Wyoming, Nevada and Arizona. The efficiencies created by pooling resources across a wide geographic area provide cost savings and environmental benefits.

Berkshire Hathaway’s Oregon-based PacifiCorp was the first utility to join the EIM, beginning in November 2014, and Berkshire’s NV Energy of Las Vegas, entered the market in December 2015. Both have already achieved tens of millions in cost savings and environmental benefits.

After completing a study on the benefits of joining the EIM, BANC – a joint powers agency whose members include the Modesto Irrigation District, the City of Redding, the City of Roseville, SMUD, the City of Shasta Lake and Trinity Public Utilities District – announced their intent to begin negotiations with the ISO on behalf of their members. SMUD, the nation’s sixth largest municipal utility, has elected to be the first BANC member to participate.

“We are extremely pleased to see a major regional public power utility, like SMUD, step forward to engage in the EIM,” said Steve Berberich, ISO president and CEO. “We are confident we can create an agreement that provides efficiencies and savings to SMUD and other BANC members.”

The EIM uses state-of-the-art software to automatically analyze western grid needs and find low-cost generation to meet demand every five minutes. Participating utilities also can access low-cost renewable energy across state lines in real-time to offset power generated from local fossil-fueled plants.

The cost and environmental benefits produced by the EIM to date have been significant. Since it began operation in November 2014, the western EIM has realized more than $88 million in cost benefits and reduced carbon emissions by more than 126,000 metric tons by using excess renewable energy in place of fossil-fueled generation resources.

BANC, SMUD and the ISO will begin crafting an agreement that will recognize BANC’s unique circumstances as a public power entity and enable them to phase-in their EIM participation while continuing to meet their existing power supply arrangements.

Current EIM participants include Portland-based PacifiCorp, NV Energy of Las Vegas, Arizona Public Service, and Puget Sound Energy of Washington. Portland General Electric and Idaho Power have agreed to participate beginning in 2017 and 2018, respectively.

Last week, Mexican grid operator El Centro Nacional de Control de Energía (CENACE) announced that it is exploring participation in the EIM.

© 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.

NV Energy Agrees to Price Reduction for Northern Nevada Electric and Gas Customers

(BRK.A), (BRK.B)

Berkshire Hathaway’s utility, NV Energy, has reached a settlement agreement with the Regulatory Operations Staff of the Public Utilities Commission of Nevada, Bureau of Consumer Protection, Northern Nevada Industrial Electric Users, Northern Nevada Utility Customers, a coalition of local governmental entities, Nevadans for Clean Affordable Reliable Energy and Vote Solar, to lower prices for customers in northern Nevada starting January 1, 2017.

The agreement follows the June 2016 filing of NV Energy’s required triennial general rate case and is subject to Public Utilities Commission of Nevada (PUCN) approval. The amount of money needed from customers to fund the company’s core electric operations will be reduced by $2.93 million or 0.44 percent, and by $2.40 million or 2.16 percent for its natural gas operations.

“I sincerely appreciate the willingness of all parties to reach a compromise that allows us to reduce prices for our customers and would like to highlight efforts of the Bureau of Consumer Protection and PUCN Regulatory Operations Staff,” said Paul Caudill, president and CEO of NV Energy. “This result is also due to the hard work of my colleagues at NV Energy, who have embraced the challenge of improving operations and our focus on customers, all while reducing our costs to serve.”

PUCN is expected to vote on the agreement later in the year. If the agreement is accepted, new general rates will become effective on January 1, 2017 and remain in place for three years.

NV Energy’s northern operations revenue requirement will be lower at the end of 2019 than they were in 2008, providing more than a decade of stability and predictability.

“As we negotiated the agreement, it became clear to us that our goal – that all customers be treated fairly and to obtain certainty – aligned with the goals of the Regulatory Operations Staff, the Bureau of Consumer Protection, and the other parties,” said Shawn Elicegui, senior vice president of regulatory and strategic planning for NV Energy. “This settlement provides certainty that our customers will enjoy fair and reasonable rates for the foreseeable future.”

Residential customers’ monthly bills are on average lower today than they were in 2008. A report issued last month from the Energy Information Administration in the U.S. Department of Energy showed that Nevada now is also the lowest of all the Intermountain West states for residential and commercial customers.

“As we look toward our mandated rate filing for southern Nevada customers in 2017, we are targeting a very similar result,” said Caudill.

The PUCN will still review separately two other areas of the original general rate case filing. These include the appropriate value of excess energy credits provided to private rooftop solar customers and approval of new optional time of use rates. A decision on the general rate case proceeding in its entirety is expected in December.

© 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.

CENACE Considers Joining Western Energy Imbalance Market

(BRK.A), (BRK.B)

Berkshire Hathaway Energy may soon be joined by Mexico grid operator CENACE in the western Energy Imbalance Market. CENACE has decided to explore EIM participation for Baja California Norte FOLSOM, California.

CENACE, a public agency, controls Mexico’s electric system and manages the wholesale electricity market as it transitions to a fully competitive market. The grid operator dispatched 68,044 megawatts of electricity in 2015 using more than 33,000 miles of high-voltage power transmission lines. Mexico energy policies mandate a renewables portfolio goal, including hydroelectricity, of 25 percent in 2018, 30 percent in 2021, and 35 percent by 2024.

As the western Energy Imbalance Market continues to yield proven benefits, the California Independent System Operator (ISO) and El Centro Nacional de Control de Energía (CENACE) announced that the Mexican electric system operator has agreed to explore participation of its Baja California Norte grid in the real-time market. CENACE and the ISO will begin a benefits assessment as well as enter into a cooperation agreement to support CENACE’s market implementation as directed by the clean energy memorandum of understanding between the Ministry of Energy of the United Mexican States and the State of California.

The MOU was signed by the Mexican Secretary General of Energy Pedro J. Coldwell and California Governor Edmund G. Brown Jr. in July 2014. The Baja California Norte region has two California grid connections — Otay Mesa and Imperial Valley (both also known as Path 45), but it is not connected to Baja California Sur or the Mexico mainland grid.

“CENACE’s Baja California Norte participation in the western EIM will enable it to benefit from the savings that a large geographic region can offer,” said Steve Berberich, ISO President and CEO. “Like our current EIM participants, we recognize that a successful energy future relies on regional collaboration to best plan and optimize resources, especially renewable power. We welcome CENACE’s interest and agreement to explore participating in the western EIM.”

CENACE General Director Eduardo Meraz agreed that participation in the western real-time market and the benefits realized so far by other participants is worthy of serious consideration. “Mexico has had a long, productive relationship with the ISO as we coordinate the management of our interconnected electricity grids,” Meraz said. “It is only logical for CENACE to carefully consider Baja California Norte’s participation in the western EIM, with its promises of lower-cost electricity and increased renewable integration.”

The ISO uses state-of-the-art technology to automatically match lower cost energy supply from across the West with demand every five minutes. This flexibility enables ISO grid operators to more efficiently use wind and solar resources from a wide geographic area where power output can change rapidly depending on wind speeds and cloud cover. The resource optimization occurs across the entire EIM footprint giving utilities new access to low cost generation. The cost and environmental benefits produced by the EIM to date have been positive.

Since it began operation with Berkshire Hathaway’s Oregon-based PacifiCorp in November 2014, the western EIM has realized more than $88 million in cost benefits. The real-time energy market also saved over 126,000 metric tons of carbon emissions by using excess renewable energy to offset fossil fuel generation that would have been needed to meet regional demand that otherwise would have been turned off to protect grid reliability.

The EIM currently operates in eight western U.S. states, including California, Oregon, Washington, Utah, Idaho, Wyoming, Arizona and Nevada.

Another Berkshire Hathaway utility, NV Energy of Las Vegas, entered the market in December 2015, while Arizona Public Service, based in Phoenix, and Puget Sound Energy of Washington began EIM participation on October 1.

Portland General Electric in Oregon is scheduled to enter in October 2017 followed by Idaho Power in April 2018.

© 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.

MidAmerican Energy Places First Order With Vestas for Wind Turbines

(BRK.A), (BRK.B)

Denmark-based Vestas has received a firm and unconditional order from MidAmerican Energy Company for 214 MW of Production Tax Credit (PTC) qualifying V110-2.0 MW turbine components.

Vestas, the only global energy company dedicated exclusively to wind energy, will supply up to 1,000 V110-2.0 MW wind turbines for MidAmerican Energy’s new Iowa 2 GW Wind XI farm.

The turbines will be installed between 2016 and 2019, and Vestas will also receive a five-year Active Output Management 4000 service agreement that includes extension options for up to 10 years.

“Wind energy helps us keep prices stable and more affordable for customers. It provides jobs for Iowans and other economic benefits for our customers, communities and the state. Wind energy also contributes to a cleaner environment for everyone,” said Bill Fehrman, president and CEO, MidAmerican Energy. “We are proud to expand wind generation in Iowa. And, our customers appreciate that we’re doing it without asking for an increase in rates to pay for it.”

“With this order, MidAmerican positions itself to secure the full value of the PTC for the Wind XI project, and takes the next step in delivering low-cost, domestic wind energy to its customers. As the only state to generate more than 30 percent of its energy from wind, Iowa leads the country in delivering wind energy’s economic and environmental benefits to its communities, and it’s an honor to be a part of the largest wind project in the state’s history.” said Chris Brown, President of Vestas’ sales and service division in the United States and Canada.

© 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.

Commentary: NV Energy Fights the Battle of Nevada

(BRK.A), (BRK.B)

Berkshire Hathaway’s NV Energy has been in a fight on several fronts. On one side it has rooftop solar companies, such as Solar City, trying to pitch consumers to generate their own electricity. On the other side are major casinos that are looking to dump NV Energy because they say their rates are too high.

Both MGM Resorts and Wynn Resorts are paying tens of millions to exit the NV Energy power grid on October 1.

Faced with these challenges, NV Energy is doing the smartest thing it can. It is working to cut the cost of generating electricity in order to make it the most attractive option for residential and commercial customers alike.

A proposed 100-megawatt solar project in Boulder City, Nevada, will do just that. When it comes on-line in 2018, it will produce electricity at only four cents per kilowatt-hour, which is one of the lowest costs in the United States.

The new solar energy project is the result of a Request for Proposals that was issued earlier this year. With the oversight of an independent evaluator, NV Energy signed a 25-year power purchase agreement with Techren Solar LLC to build a 100-megawatt high-efficiency single-axis solar photovoltaic project in Eldorado Valley. The project is in the development phase and, subject to regulatory approval, is expected to be operational in the fourth quarter of 2018.

NV Energy’s Senior Vice President of Energy Supply Kevin Geraghty noted that the selection criteria for the new solar project was primarily based on the best value to NV Energy customers, but also factored in economic and job benefits to Nevada.

“At an average cost of energy for the life of the project at approximately four cents per kilowatt-hour, this is one of the lowest-cost solar projects in the nation. And, we are very pleased with the fact that Techren has already signed a work-site agreement with local unions 357 and 396 of the International Brotherhood of Electrical Workers,” Geraghty said.

This is not the first low-cost solar deal for NV Energy. In 2015 it agreed to a 20-year fixed-rate contract for First Solar’s soon to be built 100 MW Playa Solar 2 at the low rate of only 3.87 cents a kilowatt-hour.

Retiring Higher Cost, High Polluting Coal-Fired Plants

The other part of the battle is getting rid of higher cost, legacy coal-fired plants. The plants not only cost a lot to run, but put NV Energy on the wrong side of green consumers.

Also in its August 15 filing, NV Energy proposed an earlier retirement date for the remaining 257-megawatt coal-fired unit at the Reid Gardner Generating Station. The proposal asks to move the original December 31, 2017, retirement date to February 28, 2017.

NV Energy already retired the first three generating units at Reid Gardner at the end of 2014, and is also exiting its participation in Arizona’s coal-fired Navajo Generating Station by the end of 2019.

Lots of Sunshine

With Nevada having an average of 294 sunny days a year, it’s one the most attractive states for rooftop solar, but that also makes it one of the best states for large-scale solar farms.

The good news for NV Energy, and all of Berkshire Hathaway Energy, is the cost of large-scale solar power generation has dropped far more rapidly than analysts had predicted.

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.

NV Energy is betting that it can retain customers by aggressively lowering the cost of power generation with low-cost, long-term agreements, and by closing its legacy coal-fired generating plants. Its planned 100-megawatt Techren Solar project will bring NV Energy’s total renewable energy portfolio to more than 1,900 megawatts–enough energy to serve more than a million average homes.

It’s the right plan for NV Energy in the battle for the Nevada consumer.

© 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.

MidAmerican Energy Gets Go-Ahead for Mega Wind Farm

(BRK.A), (BRK.B)

Berkshire Hathaway’s MidAmerican Energy has received the go-ahead from Iowa regulators for its $3.6 billion Wind XI wind farm.

In a joint news conference on April 14, 2016, held with Iowa Gov. Terry Branstad, the company first announced plans to invest $3.6 billion to install additional wind turbines in Iowa by year-end 2019.

Now that it has been approved by the Iowa Utilities Board, Wind XI will within three years become the largest economic development project in Iowa’s history.

When the 2,000-megawatt Wind XI project is completed, Hathaway’s MidAmerican Energy’s annual renewable energy generation is expected to reach a level that’s equivalent to approximately 85% of Iowa’s retail customers’ annual use.

In a release issued by the IUB:

“Today’s order states that MidAmerican has satisfied the two conditions in Iowa Code and is therefore eligible for advance ratemaking principles. The ratemaking principles associated with Wind XI, as agreed to by the parties, are reasonable. The Settlement as a whole will reduce MidAmerican’s reliance on fossil-fueled generation and position MidAmerican to meet ongoing and future environmental mandates in a manner that is more likely to benefit its ratepayers.

The Settlement’s benefits to retail customers will help ensure that MidAmerican’s current and future customers continue to enjoy adequate service and facilities at just and reasonable rates. In the settlement agreement, the ratemaking principles approved set the cost cap for Wind XI Iowa project at $1.792 million per MW including allowance for funds used during construction (AFUDC). For the return on equity (ROE), the settlement agreement provides an allowed return on the common equity portion of Wind XI that will be included in Iowa electric rate base at 11.00 percent.

MidAmerican filed their Wind XI request for advanced ratemaking principles with the Board on April 14, 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.

No Oncor for Berkshire Hathaway Energy

(BRK.A), (BRK.B)

NextEra Energy is the winner in the bidding for Oncor Electric Delivery Company, a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. NextEra Energy will pay $18.4 billion in cash and stock.

Berkshire Hathaway Energy was one of the other bidders considered to be in the lead for the prized energy distribution asset.

Oncor has been in and out of auction ever since the April 2014 bankruptcy of its biggest shareholder, Energy Future Holdings. The company went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

A Texas-Sized Asset

Oncor is a quite a prize. The company has the largest distribution and transmission system in Texas; with approximately 119,000 miles of lines and more than 3 million meters across the state.

Energy Transmission is Great ROE

Back in June 2014, Warren Buffett proclaimed he was ready to put at least $15 billion into energy generation and transmission assets, and at that time Oncor, with a value of roughly $17.5 billion looked like a good fit.

Transmission lines have been high on Berkshire Hathaway Energy’s wish list of late because they are a great way to put Berkshire’s huge insurance float to work for a high return with very low risk.

The AltaLink Example

In April 2014, BHE made a $2.9 billion purchase of Canadian company AltaLink from SNC-Lavalin Group Inc. The acquisition got the company the transmission lines for Calgary, Alberta, and gives it an 8.75-percent after-tax return on equity, with consumers picking up 100-percent of the tab for any new transmission lines.

Like AltaLink, the acquisition of Oncor would have been a perfect fit for Berkshire Hathaway Energy, which currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

© 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.