Month: April 2016

Categories
BNSF

New Plastic Resin Packaging Facility to Benefit BNSF

(BRK.A), (BRK.B)

Projected skyrocketing demand for plastic resin has BNSF Railway, resin packaging firm Packwell Inc., and real estate developer Hillwood proposing to build a plastics export packaging facility in North Fort Worth.

The facility will be located at the AllianceTexas development, Hillwood’s18,000-acre master-planned, mixed-use community located in north Fort Worth.

AllianceTexas offers a variety of commercial real estate options, including new industrial, office and retail space, and is anchored by the multi-modal inland port known as the Alliance Global Logistics Hub.

According to the trade association, the American Chemistry Council, export demand for plastic resin will grow dramatically over the next four years, with the demand level of $6.5 billion in 2014 increasing three-fold to $21.5 billion by 2020.

The boom in U.S. resin production is due in part to cheap natural gas available in Texas.

“The advantage of a facility at AllianceTexas is that it offers superior rail connectivity, access to the largest array of ocean steamship lines, and we can deliver the facility to Packwell in time to support the rapidly increasing demand,” notes Hillwood President Mike Berry.

Packwell is already one of the largest resin bagging companies in North America with over 160 thousand square meters of warehouse facilities.

The new facility will allow bulk hopper cars of plastics resins to arrive by BNSF trains from Houston where they will be packaged for shipping. After packing the shipments will again be moved by BNSF to steamship lines that operate between the BNSF Alliance Intermodal terminal and Asia via West Coast ports in Los Angeles, Long Beach and Oakland, California.

© 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.

Categories
Minority Stock Positions Stock Portfolio

BYD Debuts Two New Pure-Electric Cars

(BRK.A), (BRK.B)

When the electricity goes out in your house, you don’t usually look to your car for emergency backup, but two new cars from BYD provide just that.

Chinese battery maker and electric vehicle manufacturer BYD Company Ltd. has added two new pure-electric Sedans to its lineup of EVs, and both cars are equipped to serve as emergency power sources, or even just power for non-emergency setting such as trips or parties.

Currently marketed solely in China, the Qin EV300, will come in four versions with prices ranging from 259,800 to 309,800 Chinese Yuan; and the e5, coming in three versions with prices ranging from 229,800 to 249,800 Chinese Yuan.

According to the company, it based the recent rollouts on a thorough assessment of what EV potential users value the most, and after finding out that range anxiety is still a major factor in purchase decisions, it provided both models with a 300km driving range, although a potential customer, upon testing the Qin EV300, managed to drive 349.5 km on a single charge.

The Qin EV300 is equipped with BYD’s high-efficiency, high-speed permanent magnet synchronous motor, with a maximum power of 160kW and maximum torque of 310Nm, accelerating from 0 to 100 km/h in 7.9 seconds, and features re-generative braking system. The model also features BYD’s signature Insta-Pure Technology, a function that purifies the air in the interior of the vehicle by quickly lowering PM2.5 values.

Emergency Power Supply

Both the Qin EV300 and the e5 are equipped with another of BYD’s signature features: the VtoL function, in which the vehicle serves as a massive mobile electricity supply to power appliances like cookers, refrigerators, power tools and many others, so that users can rely on the vehicle to plan outdoor activities that depend on electricity, or in case of emergencies like power cuts or blackouts.

While BYD has yet to market its cars in the U.S., preferring to focus more on its pure-electric buses in the territory, it has moved into the number one spot worldwide for electric vehicle sales.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares, and today owns roughly 9.1% of the company.

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

© 2016 David Mazor

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

Categories
BH Media

BH Media Group Among Newspapers Outraged By New Browser That Substitutes Advertising

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A new browser that substitutes online publishers’ ads with its own ads, thereby denying site owners of revenue, has drawn the ire of a consortium of newspaper publishers, including BH Media Group.

Brendan Eich, one of the founders of Mozilla, is launching Brave, a new Web browser that substitutes its own ads for those of content creators.

The move immediately drew the wrath of newspaper publishers belonging to the Newspaper Association of America, including Newsday, McClatchy Company, The Washington Post, Dow Jones & Company, Gannett Co., Tribune Publishing, The New York Times Co., and Berkshire Hathaway’s BH Media Group.

In a joint letter they accuse Eich of engaging in behavior that takes their creative content and sells advertising in a manner that “everyone else has recognized that it would be blatantly illegal for one company to hijack all the content on the Web for its own benefit.”

They also state, “Your plan to use our content to sell your advertising is indistinguishable from a plan to steal our content to publish on your own website.”

As newspapers struggle with declining print readership, they count on online advertising to continue to keep them viable. Newspapers have invested hundreds of millions in recent years to develop and manage their online platforms.

“We publish some of the most highly valued and widely read sites on the Web. Our sites and mobile applications provide news reporting, photojournalism, video content and feature writing that is researched, reported, edited, and produced at extraordinary cost. Our industry spends more than $5 billion per year on reporting in the United States alone. We distribute that reporting online for free or at highly subsidized rates, in no small part due to revenue from online ads.”

In response, Eich says that the “NAA sent a letter to Brave Software that is filled with false assertions.” And claims that the “NAA has fundamentally misunderstood Brave. Brave is the solution, not the enemy.”

It is unlikely that Eich’s letter will draw any converts, and the whole matter looks headed to court.

The NAA threatened potential legal actions to protect their rights.

“We reserve the right to seek all remedies for this infringement, including but not limited to statutory damages of up to $150,000 per work pursuant to 17 U.S.C. § 504.”

© 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.

Categories
Acquisitions Berkshire Hathaway Energy Commentary

Commentary: Is Westar Energy the Next Acquisition for Berkshire Hathaway?

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Kansas’s biggest utility, Westar Energy Inc., is looking for a buyer and Berkshire Hathaway Energy is rumored to be among the companies interested in the acquisition.

With a market cap of roughly $7 billion, Westar is in the same price range as NV Energy, which Berkshire acquired in December 2013 for $5.6 billion.

If Berkshire Hathaway Energy proves to be interested, it will reportedly face competing bids from Ameren Corporation, as well as an investor consortium that includes Borealis Infrastructure Management Inc. and the Canada Pension Plan Investment Board.

Based in St. Louis, Missouri, Ameren Corporation was created December 31, 1997 by the merger of Missouri’s Union Electric Company and the neighboring Central Illinois Public Service Company.

As for Berkshire Hathaway Energy, it has already partnered with Westar Energy on Prairie Wind Transmission, LLC, a 108-mile, 345-kilovolt high-capacity electrical transmission line in south-central Kansas that was completed in 2014.

Westar Energy would be a natural fit for both Berkshire Hathaway Energy and for Ameren.

Berkshire Hathaway’s MidAmerican Energy Company currently serves customers in a 10,600 square miles area composed of Iowa, Illinois, South Dakota and Nebraska.

Ameren’s service area in neighboring Missouri also fits well with Westar Energy, which provides power for approximately 687,000 customers in much of east and east-central Kansas.

© 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.

Categories
Acquisitions Commentary Minority Stock Positions Warren Buffett

Commentary: Will Berkshire Ever Seal the Deal on USG?

(BRK.A), (BRK.B)

If ever there was a company that looks like the perfect fit for Berkshire Hathaway it would have to be USG–the leading manufacturer of gypsum wallboard. After all, Berkshire already owns insulation manufacturer Johns Manville, Acme Brick, and presently has a 41.91% stake in USG.

USG and Berkshire

Berkshire played a key role in saving USG during the nadir of the Great Recession.

In 2008, with the housing market imploding and lending all but frozen, Berkshire came to USG’s rescue with $300 million of convertible notes that paid Berkshire 10-percent interest. At the time, the boost in confidence that USG received from Warren Buffett’s financing helped the company avoid bankruptcy. Boost investor confidence it certainly did, and the day of the transaction USG’s stock soared 22-percent to $6.89 a share.

Five years later, in December 2013, Berkshire exchanged $243.8 million of the convertible notes for common stock, and with additional purchases, its stake in USG now makes it the company’s single largest shareholder.

USG is a solid earner with a Price/Book of 2.16, a P/E of only 3.73, and EPS of $6.72. The stock currently pays no dividend and USG has stated they have no plans to do so. USG does carry a substantial amount of debt, which as of December 31, 2014, totaled $2.209 billion.

Wallboard Numbers Are Up

So, is now the time for Berkshire to fully bring USG into the Berkshire family of companies? Demand for gypsum wallboard is up. According to the Gypsum Association, a not-for-profit trade association, roughly 21.8 billion square feet of gypsum board were shipped in 2014. This was an increase of approximately 4% from 20.9 billion square feet in 2013. USG’s share of the gypsum board market in the U.S was approximately 26% in 2014, basically unchanged from 2013.

The Chinese Drywall Scandal

As an American manufacturer, USG has been a beneficiary of the Chinese drywall scandal that came to a head in 2009. Imported wallboard from China that had high sulfur content brought reports of fumes that created upper respiratory problems, and the market for wallboard from China was hit hard. Thousands of homes in Florida and other states needed to have their wallboard ripped out and replaced.

About USG

In 1902, 30 independent gypsum rock and plaster manufacturing companies merged to form the United States Gypsum Company. Over more than a century, USG has been issued 1,100 patents for its products. In addition to wallboard, the company is a leading manufacturer of acoustical panel and specialty ceiling systems. The company has 34 manufacturing plants in the U.S., and has roughly 9,000 employees in more than 30 countries.

USG’s a true market leader with a 26% market share of the U.S. gypsum wallboard market. It is followed by National Gypsum at 21%, and Georgia-Pacific at 16%. It has an even more commanding 50% share of the joint compounds market.

Time to Pull the Trigger?

The Chicago-based company has seen its ups and downs, including three bankruptcies. The last bankruptcy was in July 25, 2001 under Chapter 11 in order to deal with a mountain of asbestos litigation costs related to asbestos containing joint compounds. The establishment of the The United States Gypsum Asbestos Personal Injury Settlement Trust put the company’s asbestos woes in the rear-view mirror, and its stock price reflects it.

Also on the upside is the extensive cost cutting the company has done over the past decade. USG has closed high-cost manufacturing plants, and used salaried workforce reductions and other cost reductions to trim an additional $22 million to $28 million annually. In all, its cost reductions have totaled $500 million.

With a market cap of just over $3.66 billion ($1.46 billion of which is already owned by Berkshire), USG is a great fit for Berkshire if it wants to gobble up the whole thing. USG would fit nicely into the Marmon Group of companies, which include a host of companies that supply the construction industry.

So, will Berkshire pull the trigger? A two billion dollar deal is not a big one for Berkshire these days, and with new housing starts hitting a nine-year high, and slowly heading back towards the historical levels of 1.5 million starts a year, USG looks like a solid company worth adding to the Berkshire portfolio.

© 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.

Categories
Insurance

Insurers Among Those Weighing in on FEMA’s Proposed Disaster Deductible

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With global climate change increasing the intensity and frequency of natural disasters, the Federal Emergency Management Agency (FEMA) is looking for ways to decrease the amount of money the federal government is paying out annually in disaster relief aid.

While many people see global climate change costs as a looming future problem, the reality is that disaster relief costs have already been escalating for the federal government for more than a decade.

The rise in disaster declarations has been dramatic. Between 2001 and 2014, there were an average of 132 disaster declarations annually, compared to 40 per year from 1984 to 1994

In response, one of the things FEMA developing is a proposed “Disaster Deductible,” which would change how the federal government supports states following disasters. The goal is to “incentivize mitigation strategies and promote risk-informed decision-making to build resilience, including to catastrophic events; reduce the costs of future events for both states and the federal government; and facilitate state and local government planning and budgeting for enhanced disaster response and recovery capability through greater transparency.”

The deductible would establish a predetermined level of state disaster funding before FEMA begin to provide additional assistance through the Public Assistance program following a disaster declaration.

FEMA has been seeking public comments on all aspects of this concept, and a group known as SmarterSafer, which is a diverse coalition of environmental organizations, taxpayer advocates, insurance interests, and mitigation and housing groups, have crafted a set of recommendations.

Among their comments are:

Goals for deductible– SmarterSafer urges FEMA to ensure that the goal of the deductible is reduced long term impact of disasters, reduced risk of loss from disasters, and decreased future disaster costs. While shifting some costs from the federal government to localities can help ensure states and localities have ‘skin in the game,’ and that alone provides some incentives to take actions to reduce risk, cost-shifting alone should not be the goal. SmarterSafer believes that the disaster deductible should act to incentivize mitigation and incentivize non-federal spending on preparation or resiliency. This will reduce long-term costs and losses from disasters.

Where should FEMA focus incentives– Incentives should focus on better planning and preparedness as well as increased resiliency from natural disasters. This could include many activities; however, we believe FEMA should encourage actions that will help communities in the long-term—reducing risk, damage, and the cost of response. FEMA should ensure that any activities that get credit are proven to be effective in reducing risk in the long-term. This includes better building codes and enforcement of such codes, protecting environmental buffers to storms and preserving or creating green space in risky areas, policies and investments in mitigation activities (community and individual), as well as better planning for disasters. We also believe that states and localities should be encouraged to look at reducing the financial costs of disasters, including purchasing insurance for infrastructure and public buildings. FEMA has asked whether recipients should be encouraged to set aside funding for disaster response and recovery. While it is important that states and localities be prepared for disasters, SmarterSafer does not believe rainy day funds are an efficient use of funds. However, the uses of state and local funds on planning and mitigation activities are proven to be efficient and should be encouraged.

What activities should get credit– There will be many activities that should qualify for credit under a disaster deductible; however, we believe FEMA should give the most credit to those activities that reduce risk in the long-term. Nature based approaches to mitigation, including land use decisions that lessen risk, are critical. In addition, communities should get credit for adopting freeboard standards, enforcing better building codes, insurance of infrastructure, increasing the penetration of insurance, buyouts of risky properties, adopting and utilizing the most up to date mapping/risk identification. Further, credits should not be permanent. Annual or other periodic reviews should be undertaken to ensure that the credits being given continue to be appropriate and associated with continued long-term risk reduction. As an example, if credits were given for construction of a levee to protect an existing community, those credits should be reduced if the community’s catastrophic risk rises due to increased construction behind the levee.

Additional Credits for Low-Income Communities

SmarterSafer also notes that not all communities have the same resources to recover from natural disasters, and that this disparity should be accounted for in any planned deductible.

“As FEMA looks to adopt a disaster deductible, it is important that the agency keep in mind equity issues and the different abilities and resources that communities have to take actions to reduce risk. We urge FEMA to consider giving additional credit for activities taken in lower-income areas that face disproportionate risk due to socioeconomic factors and for activities that help protect low-income households from disasters.”

© 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.

Categories
BNSF

BNSF Furloughs Reach Great Recession Levels

(BRK.A), (BRK.B)

Nationwide unemployment in the U.S. is only five-percent, and the country has come a long way from the Great Recession, but the same can’t be said for BNSF Railway, which is laying off employees due to cratering coal and oil volumes.

BNSF is furloughing roughly ten-percent of its workforce, according to Chairman Matthew Rose, who spoke at the Montana Energy conference in Billings, Montana.

While the U.S. economy added some 215,000 jobs In March 2016, BNSF’s planned layoffs stand at roughly 4,600 personnel, some ten-percent of its workforce.

Lines of idled BNSF locomotives that are in storage on tracks in rail yards near Oklahoma City and Wichita, Kansas, are a visual reminder that 2016 car loads are down dramatically from 2015 levels.

BNSF’s total carloads for coal are down 32.86% year-to-date through March 28, 2016, for petroleum they are down 26.25%, and metallic ores carloads are down 33.44%.

Total carloads including intermodal freight are down 6.07% year-to-date from the same period in 2015.

Grain Shippers Benefit

BNSF has cut its price for shipping grain by $100 a carload. BNSF also cut the rates $75 per carload for shipping pulse crops, such as peas and lentils.

For BNSF, a tough year keeps getting tougher.

© 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.

Categories
Dairy Queen

Jordan the Latest Country for Dairy Queen’s Middle-East Expansion

(BRK.A), (BRK.B)

The first Dairy Queen restaurant has opened in Jordan, making it the latest Middle-East country for the popular quick-service franchisor.

The DQ Grill & Chill restaurant is located at Abdoun Circle in Amman, Jordan, and is the first of ten planned location being developed by the Nafal brothers, who run SKM Franchise Co. Ltd.

According to Dairy Queen, the DQ Grill & Chill restaurants in Jordan will feature the brand’s signature GrillBurgers, chicken strip baskets, chicken sandwiches and a variety of salads and other sandwiches along with the full menu of world-famous DQ treats, all of which will mirror the menu found in other countries in the region. The DQ Treat stores will feature the soft-serve products that have made the Dairy Queen system an icon in the industry, such as the signature Blizzard Treat which “is served upside down or it is free,” soft-serve cones with the curl on top, sundaes, Moolatté frozen coffee flavored beverages, DQ Cakes and other delicious treats.


Dairy Queen Focusing on Emerging Markets

“Our strategy is to open franchises in emerging markets,” Dairy Queen’s President and CEO John Gainor said at the 2015 Berkshire Hathaway annual meeting.

Middle East expansion has been at the top of Dairy Queen’s list over the last couple of years. Its list of countries already includes locations in Bahrain, Brunei, Egypt, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, with Jordan in the works.

“We believe the DQ brand will be very well received in Jordan as we continue to grow our DQ fan base around the world,” said John Gainor, CEO and President of International Dairy Queen, Inc. (IDQ). “As we expand our footprint internationally, we rely on strong franchise partners like SKM Franchise Co. Ltd. to uphold our values and brand promise to a larger and more diverse customer base. Working with a knowledgeable, experienced partner with a strong team on the ground allows us the best opportunity for success in our new markets.”

The Nafal brothers have more than 20 years of retail development experience. In 2005, they opened El Rancho Supermercado, which grew into a chain of 13 supermarkets in Texas. They own La Bodega, a food distribution company based in the state as well.

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

© 2016 David Mazor

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

Categories
BNSF

Judge Hands BNSF Major Setback Over the Southern California International Gateway Project

(BRK.A), (BRK.B)

A California superior court judge has put a halt to BNSF’s planned 153-acre intermodal rail facility, the Southern California International Gateway, siding with citizens’ groups suing over environmental concerns.

Judge Barry Good of the Contra Costa Superior Court sided with the Natural Resources Defense Council, which is the lead plaintiff in the lawsuit.

The environmental group filed the lawsuit in June 2015 in Los Angeles Superior Court on behalf of Harbor residents living near the proposed development that would be built on Port of Los Angeles property.

The Plaintiffs contend the proposed Southern California International Gateway rail yard project violates the California Environmental Quality Act and the state and federal Civil Rights Acts.

Specifically, they assert that the facility will increase cancer rates, chances of children developing asthma, and add to chronic air pollution plaguing the region.

BNSF officials were quick to respond to the ruling. “Upon initial review, we are disappointed, because the decision appears to delay a nationally and regionally significant transportation infrastructure.”

Gateway to the Nation

Some 40-percent of imported goods sold across the country are shipped through the ports of Los Angeles and Long Beach.

The intermodal rail facility would be near the ports of Los Angeles and Long Beach. The ports are located approximately 25 miles south of downtown Los Angeles. The port complex is composed of approximately 80 miles of waterfront, and 7,500 acres of land and water, with approximately 500 commercial berths.

The Ports include: automobile, container, omni, lumber, and cruise ship terminals; liquid and dry bulk terminals; and extensive transportation infrastructure for cargo movement by truck and rail.

Environmental Hazard or Asset?

While environmental groups, the City of Long Beach, and the local school district decry the project, BNSF claims the project will actually bring environmental benefits, as it will be cleaning up an existing truck yard and investing over $100 million in green technology.

The Port of LA’s draft environmental review found that SCIG will have a positive impact on traffic, both locally and regionally, by eliminating millions of truck trips from the 710, reducing congestion near the ports and along the 710 corridor.

NRDC attorneys and scientists have suggested several solutions to reduce the anticipated pollution associated with the project:

1.) Utilization of cleaner Tier 3 and Tier 4 locomotives instead of older, more polluting locomotives;

2.) Expand on-dock rail to eliminate the need for thousands of additional short-haul truck trips;

3.) Use zero-emission container movement systems.

© 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.

Categories
Berkshire Hathaway Energy

FERC Issues Positive Order to Grid Assurance

(BRK.A), (BRK.B)

The need for quick recovery of the transmission grid after a disaster is often beyond the capabilities of a single utility. After a blizzard, earthquakes, flood, hurricane, or tornado there are often thousands of utility poles and transformers that need to be repaired, and miles of downed wire that needs to be restrung. And, these days, utilities also face new threats from cyberattacks that can be potentially just as devastating.

Affiliates of Berkshire Hathaway Energy, as well as affiliates of American Electric Power, Duke Energy, Edison International, Eversource Energy, Great Plains Energy, and Southern Company are pursuing the development of Grid Assurance, a limited liability company, that will offer subscribers cost-effective solutions for enhancing transmission grid resiliency.

Recovery of the transmission grid can be hampered by long lead times required to build and deliver critical replacement equipment including large transformers, circuit breakers and other specialized electrical equipment. Grid Assurance will give subscribers economical access to critical equipment faster than traditionally possible.

The Federal Energy Regulatory Commission (FERC) issued a positive order March 25 to Grid Assurance that provides regulatory clarity supporting transmission-owning entities participating in and subscribing to Grid Assurance as a way to strengthen transmission grid resiliency. Grid Assurance had requested determinations on several issues from FERC in December 2015.

The eight electric utilities and energy companies first announced Grid Assurance on June 10, 2015 as a limited liability company that expects to offer subscribers cost-effective solutions for enhancing transmission grid resiliency and protecting customers from prolonged transmission outages.

FERC initially recognized the benefits of Grid Assurance in an Aug. 7, 2015 order. The Grid Assurance consortium subsequently developed a Subscription Agreement and has received clarity from FERC in a declaratory order that enables broader transmission owner participation.

In the March 25 order, the FERC confirmed:

• the prudence of subscriber decisions to contract with Grid Assurance for sparing service and the prudence of purchasing spare equipment from Grid Assurance following a qualifying event;

• the availability of single-issue ratemaking to recover costs of purchasing sparing service and spare equipment from Grid Assurance; and

• that affiliate rules are waived for Grid Assurance, subject to certain conditions including submission of an annual information report from Grid Assurance that contains audited financial statements, information about the sparing service fee formula and information about sparing sales including cost and sale price. The annual information reporting requirement will begin a year from the start of sparing operations.

Grid Assurance continues to evaluate the order and will seek additional clarification from FERC, if necessary. Grid Assurance expects to begin marketing this service to transmission owners in the second quarter with subscriber acceptance, warehouse specification and inventory identification occurring over the next 18 months.

Grid Assurance plans to own and maintain critical, long lead-time equipment at secure, strategically located warehouses and offer logistics support to facilitate the expedited movement of equipment to the affected sites following qualifying events.

Qualifying events can include physical attacks, cyberattacks, electromagnetic pulses, catastrophic events, solar storms, earthquakes and severe weather events.

Grid Assurance services are intended to complement transmission owners’ existing programs as well as established industry initiatives.

© 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.