Tag Archives: Berkshire Hathaway Energy

Stakeholders Continue to Line Up Behind Berkshire’s Oncor Bid

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Berkshire Hathaway Energy has announced that the Texas Cotton Ginners’ Association and CMC Steel have agreed to support its proposed acquisition of Oncor Electric Delivery Company LLC (Oncor). The growing number of commitments now includes 12 stakeholder groups, including several groups – like CMC Steel – that intervened during former proposed acquisitions of Oncor.

“As we work through the approval process, we’re encouraged that our meetings with stakeholders across Texas continue to confirm that the deal we are proposing is a good fit for Oncor’s customers and Texas,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “We truly appreciate the support we’re receiving from many groups, and we’re looking forward to closing the deal and welcoming Oncor to the Berkshire Hathaway Energy family.”

Berkshire Hathaway Energy will leverage its financial strength to benefit Oncor customers and Texas. The all-cash deal includes 47 regulatory commitments and ring-fencing that ensures Oncor will continue as a strong electric transmission and distribution company.

The influential Texas stakeholder groups that support Berkshire Hathaway Energy’s proposed acquisition of Oncor include: Public Utility Commission Staff; Cities Served by Oncor; Texas Industrial Energy Consumers; Office of Public Utility Counsel; TXU Energy; NRG Energy; the Texas Energy Association for Marketers (TEAM); the Alliance for Retail Markets (ARM); IBEW Local 69; Targa Pipeline Mid-Continent WestTex LLC/Targa Midstream Services LLC; Texas Cotton Ginners’ Association; and CMC Steel. TXU Energy and NRG Energy represent two of the largest retail electric providers in Texas, with TEAM and ARM representing dozens of Texas electric market participants. ARM participating members include Champion Energy Services, LLC; Direct Energy, L.P.; NRG Retail Companies; and TXU Energy Retail Company LLC.

© 2017 David Mazor

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

Commentary: Familiar Territory, Berkshire Wins if it Loses

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Warren Buffett and Berkshire Hathaway look to be on the verge of winning Oncor Electric Delivery Co., a Texas-sized prize it has been chasing for the last three years, as the utility struggled under bankruptcy proceedings.

Now, all that stands in its way is a last minute bid by Paul Singer and his hedge fund Elliot Management. The hedge fund is the largest creditor in Oncor’s parent company, Energy Future Holdings Corporation.

Singer scored a recent success when Elliot Management won a delay in finalizing Berkshire’s takeover while it puts together its own offer, reportedly a $9.3 billion bid that would top Berkshire’s $9 billion deal.

The delay moves the bankruptcy court date from August 10 to August 21.

In addition to winning approval from the bankruptcy judge, any deal put together by Berkshire Hathaway or Elliott Management has to pass muster with the Public Utility Commission of Texas (PUC), the agency that regulates the state’s electric and telecommunication utilities, and must rule that any approved acquisition is in the public interest.

The PUC has already rejected two prior takeover bids for Oncor, including last year’s bid from Hunt Consolidated Inc., and April’s bid from NextEra Energy Inc. The failed deals opened the door for Berkshire’s bid.

Berkshire, which entered the energy business in 1999, has built one of the largest utility holding companies, with $85 billion in assets and $17.4 billion in annual operation revenue, as of 2016.

Unlike many failed attempts at merging utilities, Berkshire has repeatedly acquired plum assets, including MidAmerican Energy, PacifiCorp, and NV Energy, and by allowing them to retain their earnings, made them stronger than they were before acquisition.

This is not something that escapes the PUC as it considers who should supply power to 10 million Texas residents, and a host of major manufacturers that need electricity at the lowest possible rates.

As Tony Bennett, president of the Association of Texas Manufacturers, pointed out in a recent editorial, Texas companies in the Oncor service area don’t have a choice of electricity suppliers, so whoever wins the bid has to be focussed on reliable service and low rates, not just the highest return for investors. This is where Berkshire Hathaway Energy excels.

Still, like so many deals that Buffett strikes, he wins even if he loses.

What’s a Hundred or Two Million Between Friends?

Termination fees are familiar territory for Buffett, who walked away with $175 million in 2008 when he refused to get in a bidding war for Constellation Energy. French energy company EDF doubled his offer, but a pile of cash that ran into the hundred millions suited him just fine for his three month pursuit of the Baltimore-based energy wholesaler.

This time, if the Oncor deal falls through, Berkshire will receive a $270 million termination fee.

Not a bad way to lose at all.

But, I wouldn’t bet on Berkshire losing this one.

© 2017 David Mazor

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

Oncor Plan Would Slash Rates for 54,000 Customers

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Oncor Energy, which Berkshire Hathaway is hoping to acquire through its subsidiary Berkshire Hathaway Energy, has announced that it reached a proposed settlement in its rate case, which was filed earlier this year.

The rate case settlement also garnered wide support within the industry and among consumer groups.

Some 54,000 customers scattered across North, West and West Central Texas were suffering under sky-high electric rates from Sharyland Utilities, which has the highest power delivery rates in Texas.

Consumers waged a campaign to bring down those rates, which were hitting farmers and other large energy users particularly hard.

If approved by the Public Utility Commission of Texas, consumers could expect a 40 percent drop in electricity costs. The settlement would have Sharyland customers become Oncor customers.

In a statement, Berkshire Hathaway Energy commends Oncor’s efforts to achieve a balanced outcome for customers that helps keep rates among the lowest in Texas and preserves the company’s ability to invest in its system at reasonable cost.

“Berkshire Hathaway Energy’s ownership structure is a source of financial strength that uniquely positions us to provide the resources Oncor needs to fund the new equity requirement,” said Abel.

© 2017 David Mazor

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

Berkshire Hathaway’s Utilities Save Millions in Q2 Thanks to EIM

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A number of Berkshire Hathaway’s utilities, including PacifiCorp and NV Energy, has saved millions million so far this year through the western Energy Imbalance Market (EIM).

The California Independent System Operator (ISO) reported that the western Energy Imbalance Market produced benefits of $39.52 million in the second quarter of 2017. The benefits since the western regional market was launched in 2014 now total $213.24 million.

In 2014, Berkshire Hathaway Energy’s PacifiCorp agreed to become the first participant in a new Energy Imbalance Market (EIM) as a way to balance electricity in-flows and out-flows on a regional basis and bring millions of dollars in benefits to participating utilities.

During the most recent three-month period, PacifiCorp saw benefits of $8.81 million, and NV Energy total benefits in April and May were $4.62 million, while June benefits are still pending data verification.

The EIM began financially-binding operation on November 1, 2014, by optimizing resources across the ISO and PacifiCorp’s balancing authority areas (BAAs), which includes California, Oregon, Washington, Utah, Idaho and Wyoming.

The EIM improves the integration of renewable resources and increases reliability by sharing information between balancing authorities on electricity delivery conditions across the entire EIM region.

Portland General Electric plans to enter the EIM in October 2017, followed by Idaho Power and Canada’s Powerex in April 2018. The Balancing Authority of Northern California/Sacramento Municipal Utility District, Seattle City Light and Los Angeles Department of Water and Power will begin participating in April 2019. Salt River Project of Phoenix is slated to enter the market in April 2020.

The EIM’s state-of-art technology automatically optimizes the real-time grid to find low cost energy regardless of its location to serve consumers in California, Arizona, Oregon, Washington, Utah, Idaho, Wyoming and Nevada.

Excess renewable energy in one area can be used to serve demand in another seamlessly and effectively, avoiding turning off clean energy resources when not enough local demand exists to use it. Another benefit comes from reducing the amount of energy flexibility reserves utilities must carry to manage load and supply variability, as they can tap into resources outside of their service area to serve their load at less cost.

During Q2 2017, the western EIM helped improve use of renewable resources that is estimated to have reduced carbon emissions by 28,700 metric tons. These emission reductions were made possible by using 67,055 megawatt-hours of excess renewable energy that otherwise would have been turned off.

“The EIM had another strong quarter,” said ISO President and CEO Steve Berberich. “The western real-time market is a proven platform for utilities to find and use low-cost energy that produces substantial cost savings — and it will only get better with seven more utilities preparing to join the market by 2020.”

© 2017 David Mazor

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

Berkshire Supports Oncor’s Plan to Swap Assets with Sharyland

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Berkshire Hathaway has no problem with Oncor planned asset swap with Texas utility Sharyland.

Oncor announced that it had entered into an agreement with Sharyland to swap assets in a transaction valued at approximately $400 million.

Under the terms of the proposal, Sharyland will exchange their retail distribution assets and retail distribution operations for a set of Oncor’s transmission lines in West and Central Texas.

Sharyland and Sharyland Distribution & Transmission Services (SDTS) will transfer to Oncor their retail distribution assets and retail distribution operations located in their Stanton, Brady, and Celeste (SBC) service territories, as well as their McAllen service territory.

Oncor will transfer to SDTS transmission lines of similar value located in West and Central Texas, which Sharyland will operate on behalf of SDTS.

The proposed transaction also means that Sharyland’s approximately 54,000 retail distribution customers will become Oncor customers and, as a result, will see significantly reduced regulated retail delivery rates.

In a statement, Berkshire Hathaway Energy said applauds Oncor and the various stakeholders for developing solutions to ensure continued safe, reliable, and affordable service for customers.

“The problem-solving culture demonstrated by Oncor and its management team will be a great fit with Berkshire Hathaway Energy,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “The conditions of the agreements are examples of Oncor’s strong commitment to customers; that same commitment is reflected across Berkshire Hathaway Energy’s businesses.”

© 2017 David Mazor

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

Bankruptcy Court Adopts Berkshire’s Timeline for Oncor Deal

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The U.S. Bankruptcy Court adopted key hearing dates for future bankruptcy proceedings related to Berkshire Hathaway Energy’s offer to purchase Energy Future Holdings Corp. (EFH) and, ultimately, Oncor Electric Delivery Company LLC.

“We are pleased with the Bankruptcy Court’s decision, which maintains the timelines set forth in our merger agreement,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “Our offer is a simple, straightforward deal that is beneficial to Oncor’s customers. Once the necessary approvals are received, we’re looking forward to Oncor joining the many Berkshire Hathaway businesses that are helping to grow the economy in Texas.”

As a member of Warren Buffett’s Berkshire Hathaway Inc. family of businesses, Oncor would receive the financial support to continue investing capital in critical infrastructure that will make the Texas energy grid even stronger and more reliable.

Establishing the bankruptcy court schedule was an important part of the acquisition process. Berkshire Hathaway Energy will continue working with stakeholders in Texas to garner additional support for its bid for Oncor.

So far, 10 major stakeholder and consumer groups have endorsed the deal and its 47 regulatory commitments that benefit the stakeholders in Texas.

© 2017 David Mazor

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

Stakeholders Continue to Line Up for Berkshire’s Oncor Bid

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Berkshire Hathaway continues to line up supporters for its Oncor Electric Delivery Company bid, including from a host of key stakeholders.

The International Brotherhood of Electrical Workers Local 69 and Targa Pipeline Mid-Continent WestTex LLC/Targa Midstream Services LLC are the latest stakeholders to have expressed support for Berkshire’s proposed acquisition of Oncor.

“Support from the IBEW and Targa along with the endorsements we’ve received from other Texas business, community and consumer groups reinforces that our proposal is good for both Oncor’s customers and for Texas,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “We appreciate the continued and growing support as we work through the transaction process; collectively, these efforts help move the proposal forward to benefit Oncor’s customers, creditors and key stakeholders.”

The announcement brings the total number of influential Texas stakeholder groups that support Berkshire Hathaway Energy’s proposed acquisition of Oncor to 10, including: Public Utility Commission Staff; Cities Served by Oncor; Texas Industrial Energy Consumers; Office of Public Utility Counsel; TXU Energy; NRG Energy; the Texas Energy Association for Marketers (TEAM); the Alliance for Retail Markets (ARM); IBEW Local 69; and Targa Pipeline Mid-Continent WestTex LLC/Targa Midstream Services LLC. TXU Energy and NRG Energy represent two of the largest retail electric providers in Texas, with TEAM and ARM representing dozens of Texas electric market participants. ARM participating members include Champion Energy Services, LLC; Direct Energy, L.P.; NRG Retail Companies; and TXU Energy Retail Company LLC.

© 2017 David Mazor

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

Berkshire Lines Up Support for Oncor Deal

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Berkshire Hathaway Energy has announced the support of new Texas stakeholder groups for its proposed acquisition of Oncor Electric Delivery Company.

The announcement adds to an influential list of Texas business, community and consumer groups that have endorsed Berkshire Hathaway Energy’s bid for Oncor.
TXU Energy, NRG Energy, the Texas Energy Association for Marketers (TEAM) and the Alliance for Retail Markets (ARM) have signed a growing list of regulatory commitments proposed by Berkshire Hathaway Energy and agreed to support approval of the transaction as proposed.

“Today’s announcement illustrates the growing support for Berkshire Hathaway Energy’s proposed acquisition of Oncor,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “Ours is a different kind of proposal. It’s one that hasn’t been seen before, and we want Texans to know that we will be a stable, long-term partner.”

In addition to the 44 regulatory commitments previously proposed by Berkshire Hathaway Energy, the company today also announced the addition of three more commitments that support the successful competitive energy market in Texas.

“Berkshire Hathaway Energy has worked tirelessly to put together a widely supported deal for Oncor customers, one that supports growing the Texas economy,” said Bob Shapard, Oncor CEO.

TXU Energy and NRG Energy represent two of the largest retail electric providers in Texas, with TEAM and ARM representing dozens of Texas electric market participants.

ARM participating members include Champion Energy Services, LLC; Direct Energy, L.P.; NRG Retail Companies; and TXU Energy Retail Company LLC.

Berkshire believes that having the support of these entities further distinguishes this transaction from those that have been previously proposed and demonstrates a growing momentum that provides the largest infrastructure company in Texas with the backing and financial resources of Berkshire Hathaway Inc.

“We will continue working with the state of Texas and other interested parties to provide long-term value for Texans. Once all necessary approvals are received, we look forward to Oncor joining the Berkshire Hathaway Energy family of companies,” said Abel.

Today’s announcement brings the total number of influential Texas stakeholder groups that support Berkshire Hathaway Energy’s proposed acquisition of Oncor to eight, including: Cities Served by Oncor, Texas Industrial Energy Consumers, Office of Public Utility Counsel, and Public Utility Commission Staff.

© 2017 David Mazor

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

Commentary: Berkshire’s Patience Rewarded in Oncor

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With news that Berkshire Hathaway is acquiring Texas utility Oncor, Warren Buffett has once again shown that he is in the market for big acquisitions that produce solid, dependable revenue.

The all-cash consideration for reorganized EFH is $9 billion implying an equity value of approximately $11.25 billion for 100% of Oncor and is subject to closing conditions, including the receipt of required state, federal and bankruptcy court approvals. The transaction is currently expected to be completed in the fourth quarter of 2017.

Buffett has certainly been patient in pursuing this Texas-sized prize, and if successful, would mean he was able to acquire one of the biggest power-transmission companies in the United States.

Back in September 2014, Berkshire Hathaway Energy and several other energy companies, including NextEra Energy and Hunt Consolidated, signed confidentiality agreements for the purpose of exploring the acquisition of Oncor, which was up for auction due to the April 2014 bankruptcy of electric utility Energy Future Holdings.

Energy Future Holdings went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

Bankruptcy Drama

Over the past two years, while Oncor went through the bankruptcy process, it repeatedly looked like Berkshire was on the losing end in the pursuit of the utility. It was too bad, as it was the perfect fit for Berkshire, as it continues to build it energy company portfolio.

However, the proposed deal comes because the Public Utility Commission of Texas (PUCT) ended up rejecting NextEra Energy’s deal to buy Oncor, opening the door once again for an offer from Berkshire.

A Texas-Sized Energy Asset

Oncor is a quite a prize. The company is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. The company has the largest distribution and transmission system in Texas; with approximately 122,000 miles of lines and serving approximately 10 million Texans across the state.

Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas – when we invest in Texas, we invest big!” said Warren Buffett, chairman of Berkshire Hathaway. “Oncor is a great company with similar values and outstanding assets.”

Greg Abel, Berkshire Hathaway Energy chairman, president and CEO, said, “This partnership combines the strengths of two companies that share a common goal of providing exceptional customer service and a commitment to invest in critical infrastructure that will make the Texas energy grid even stronger and more reliable.”

“By joining forces with Berkshire Hathaway Energy, we will gain access to additional operational and financial resources as we continue to position Oncor to support the evolving energy needs of our state,” said Bob Shapard, CEO of Oncor. “Being part of Berkshire Hathaway Energy is a great outcome for Oncor. Oncor will remain a locally managed Texas company headquartered in Dallas, committed to the communities we serve, and our customers will continue to receive the safe and reliable service they have come to expect from our dedicated team of employees.”

Effective upon closing of the transaction, Bob Shapard will assume the role of executive chairman of the Oncor Board, and Allen Nye will assume the role of CEO of Oncor. “We are excited to begin the regulatory approval process as this transaction has significant support across our key stakeholders,” Nye said. “The stakeholders are eager to obtain a great outcome for Texas.”

“We are pleased to be working with Texas and stakeholders to ensure Oncor continues to be a strong electric transmission and distribution company. Oncor is an exceptional company with great employees and an excellent management team,” said Abel.

Energy Transmission is Great ROE

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 will be a perfect fit for Berkshire Hathaway Energy, and with $935 million in operating revenues and $73 million in net income in the quarter ending March 31, Oncor will put a portion of Berkshire’s over $90 billion in cash to good use.

Growing Berkshire’s Energy Business

Berkshire Hathaway Energy currently has over $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

Energy sector businesses made up 9.5 percent of Berkshire Hathaway’s earnings in 2016.

Now, it looks like Buffett’s patience has been rewarded, and Oncor will help Berkshire pass the $100 billion in energy assets mark.

© 2017 David Mazor

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

Rocky Mountain Power to Build 140-mile, 500-kV Transmission Line

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Berkshire Hathaway’s Rocky Mountain Power, a unit of PacifiCorp, will build a new 140-mile, 500-kV transmission line running from the new Aeolus substation to the new Anticline substation; a 16-mile, 230-kV transmission line from the company’s existing Shirley Basin substation to the new Aeolus substation; rebuild four miles of 230-kV transmission line between Aeolus and the existing Freezeout substation; to rebuild 14 miles of an existing 230-kV transmission line between the Freezeout substation and the Standpipe substation.

Rocky Mountain Power, which serves nearly 1.1 million customers in Idaho, Utah and Wyoming, will file request for approval of the project on June 30 with the Utah Public Service Commission.

The company’s application will include a request for approval to procure or build new Wyoming wind resources with a total capacity of 860 MW.

© 2017 David Mazor

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