Category: Berkshire Hathaway Energy

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It may seem like a longshot, but ominous storm clouds forming over the planned acquisition of Hawaiian Electric Company by NextEra Energy may mean an opportunity for Berkshire Hathaway Energy if the deal falls through.

Key to NextEra’s purchase of the Honolulu-based utility is the approval of the Public Utility Commission, and that commission just had a major change in leadership.

Governor David Ige, who has opposed the merger, and has openly questioned NextEra Energy’s commitment to Hawaii’s goal of 100% renewable energy, just appointed a new PUC Commissioner.

On July 1, Thomas G. Gorak was sworn as a Commissioner to the Hawaii Public Utilities Commission after being appointed to the Commission by Governor Ige on June 29.

Berkshire’s Proven Commitment to Renewable Energy

Berkshire Hathaway not only believes in renewable energy, it already has one of the largest renewable energy portfolios in the world. Its subsidiary BHE Renewables encompasses BHE Solar, BHE Wind, BHE Geothermal, BHE Hydro as well as renewable project development and commercial management. BHE Renewables owns solar, wind, geothermal and hydroelectric projects in eight states that produce energy for both the wholesale market and for customers under long-term power agreements.

The company already has 3,877 megawatts of renewable energy capacity, including one of the world’s largest solar farms, the 579 MW Solar Star project in southern California.

Another example of Berkshire’s commitment to renewable energy is in Iowa, where it is aggressively working towards producing 100% of the state’s energy needs through wind power.

In April, Berkshire’s MidAmerican Energy Company announced plans for a $3.6 billion, 2,000 megawatt wind farm in Iowa that will feature 1,000 wind turbines.

Does Berkshire Have an Interest in Hawaiian Electric?

Berkshire already owns BHE Hydro’s Wailuku run-of-river 10 megawatt hydro project in Hawaii. The hydroelectric project consists of a massive 60-inch pipeline located 2,000 feet above sea level that carries water nearly three miles, transporting it from the Wailuku River diversion all the way to the powerhouse.

In addition, Berkshire recently registered MidAmerican Energy Services LLC as a new business in Hawaii.

It could just be possible that Warren Buffett will be saying “aloha” in Hawaii.

© 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.

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After looking all but out, Berkshire Hathaway Energy is back in the running for Oncor Electric Delivery Company, a regulated electric transmission and distribution service provider that serves 10 million customers across Texas.

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.

The End of a Long Waiting Game

After originally pushing back the auction of Oncor from November 2014 to March 2015, it looked like no auction would ever happen. Instead, the creditors in the holding companies Energy Future Intermediate Holdings and Energy Future Holdings were expected to take ownership of Oncor.

Then, in September 2015, U.S. Bankruptcy Judge Christopher Sontchi agreed to a plan by Hunt Consolidated that would have allowed the company to take ownership with Oncor’s current management remaining in place. When this deal fell apart over the terms set by the Public Utility Commission of Texas, Oncor came back into play.

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 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 insurance float to work for a high return with very low risk.

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.

It’s money that like the electricity keeps flowing day and night.

The Key Bidders for Oncor

NextEra Energy Inc. has already made an offer to acquire Oncor and is reportedly the closest of any of the seven interested companies, which includes BHE and Edison International.

The acquisition of Oncor would be 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.

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Plunging coal shipping volumes have sent BNSF Railway’s shipping volumes to numbers not seen since the 2007 Great Recession, and Berkshire’s own energy companies are partly responsible as they aggressively drop coal generation for cleaner forms of energy.

The numbers are stark. BNSF Railway’s year-to-date coal shipments are down 35.45% from 2015 levels.

Berkshire’s NV Energy plans to eliminate all of its coal-fired generation fleet in Nevada and will eliminate our coal resources in Southern Nevada by 2017 and in Northern Nevada by 2025.

Here Comes the Sun

The company cites the less than 4 cents a kilowatt-hour for large-scale solar contracts as the reason for the rapid pace.

NV Energy notes that it is creating a less carbon-intense energy supply for its customers, and is achieving that goal without raising the prices that its customers pay.

© 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.

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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 deal is pending the project’s anticipated approval by the Iowa Utilities Board, and when completed would mean that 85% of the state’s power comes from wind generation.

MidAmerican’s eventual goal is to be the first utility to provide its customers with 100% renewable energy generation.

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.

Headquartered in Denmark, Vestas has already installed 55,000 wind turbines in more than 70 countries across six continents. The company has four manufacturing plants in Colorado.

© 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.

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Berkshire Hathaway’s NV Energy has been issued an order from the Federal Energy Regulatory Commission to redo its rates, including issuing revised rates that go back retroactively to Jan. 9, 2015.

The new rates will bring consumers refunds as FERC found that NV Energy, and Berkshire’s other utility PacifiCorp, were not allowed to sell electricity at market rates.

“…we find that the additional information supplied by the Berkshire MBR Sellers has failed to rebut the presumption of market power in the PACE, PACW, Idaho Power, and NorthWestern balancing authority areas. In the absence of reliable delivered price test (DPT) analyses rebutting the presumption of market power, we find that continuation of the Berkshire MBR Sellers’ market-based rate authority in these four balancing authority areas is not just and reasonable.”

FERC went on to order new rate plans.

“Therefore, we herein revoke the Berkshire MBR Sellers’ market-based rate authority in the PACE, PACW, Idaho Power, and NorthWestern balancing authority areas. Accordingly, the Berkshire MBR Sellers are directed to file revised market-based rate tariffs further limiting sales at market-based rates to areas outside of the PACE, PACW, Idaho Power, and NorthWestern balancing authority areas within 30 days of the date of this order.”

The order comes as Berkshire has been reaping millions in benefits from the recently formed western Energy Imbalance Market.

NV Energy entry into the real-time market in December 2015 produced significant benefits because their participation increases transfer capability between the participants. Interregional transfers enabled in EIM allows each balancing area to take advantage of lower cost resources in other areas.

According to the California Independent System Operator (ISO), total benefits realized in the 2015 fourth quarter were $12.29 million, which increases the total benefit since the November 2014 EIM launch to $45.7 million.

Besides the benefits produced by interregional transfers, savings were also realized by avoiding having to reduce renewable resources’ output in the ISO control area during times of oversupply.

The total avoided energy reduction for Q4 was 17,573 megawatt hours, which greatly outpaced the avoided reductions of 828 megawatt-hours in Q3.

Avoiding the renewables output reductions in Q4 displaced an estimated 7,521 metric tons of carbon emissions.

About the Energy Imbalance Market

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. The only real-time energy market in the Western U.S., advanced ISO market systems automatically balance supply and demand for electricity every fifteen minutes, dispatching the least-cost resources every five minutes.

© 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.

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In mid-November 2015, Berkshire Hathaway Energy’s Australian subsidiary, CalEnergy Resources, drilled a test well in Western Australia for what could be what the company is calling modestly a “significant gas field.”

How Significant?

Four trillion cubic feet of gas-in-place significant.

Exploration permit EP 408 is located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The gas fields were first discovered in 1968 and 1971, respectively, and 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.

Peter Youngs, the Managing Director of CalEnergy Resources Group, recently 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.”

As for the test well, Youngs said “we are encouraged by the flow rates, as seen during the test, but that the critical commercial assessment (of the flow rates) is subject to a period of substantial subsurface data integration work (which is ongoing).

“We are in the process of recovering down hole pressure gauges from an offset well, whose data will be an integral part of that subsurface data integration. We expect this work to continue over the coming months.”

As to when the gas field could start to produce meaningful amounts of natural gas, it still looks to be over a year away.

“We are working on the potential next steps in field commercialization.” Young says, “but it is unlikely that we will return to operational activity prior to end 2017 at the earliest.”

To read more about this natural gas field, read the MazorsEdge Special Report: Is Berkshire Hathaway About to Strike it Rich in Natural Gas?

© 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.

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Pacific Gas and Electric Company (PG&E) has formed a strategic alliance with TransCanyon, LLC (TransCanyon), a joint venture between subsidiaries of Berkshire Hathaway Energy and Pinnacle West Capital Corporation, to jointly pursue competitive transmission opportunities solicited by the California Independent System Operator Corporation (CAISO), the operator for the majority of California’s transmission grid.

“The competitive transmission landscape is going to be one of the fundamental strategies to help energy companies like ours drive the most effective transmission projects as we continue to build the power grid of the future. We believe our partnership with TransCanyon will provide a competitive advantage for future projects,” said Gregg Lemler, Vice President, Electric Transmission Operations at PG&E.

The strategic alliance will focus on CAISO competitive transmission projects that will benefit California customers.

“This alliance brings forth the best in both our teams in terms of knowledge of the Western transmission system and our collective experience in the competitive transmission markets,” said Jason Smith, President of TransCanyon. “Our alliance builds on these capabilities and reflects the commitment of PG&E and TransCanyon to provide safe, reliable, affordable and clean energy for all CAISO electric customers.”

The alliance will pursue competitive transmission projects that will be subject to approval by the CAISO and ultimately funded by consumers of electricity on the entire CAISO controlled grid, including PG&E’s customers.

“We want to ensure that PG&E customers are getting the best deal on transmission projects. We believe this alliance will strengthen our collective competitive capabilities to provide better value projects for our customers,” said Lemler.

In 2013, when competition was first introduced to the California transmission market, PG&E, in a joint bid with BHE U.S. Transmission, was selected by CAISO to jointly build, own and operate a transmission line project located in California’s Central Valley region.

In 2014, TransCanyon was formed as an independent developer of electric transmission infrastructure with a focus on the Western United States. It is a joint venture equally held by BHE U.S. Transmission and Bright Canyon Energy. BHE U.S. Transmission is a subsidiary of Berkshire Hathaway Energy, an energy holding company based in Des Moines, Iowa. Bright Canyon Energy is a subsidiary of Pinnacle West Capital Corporation (NYSE: PNW), an energy holding company based in Phoenix, Arizona.

In 2015, PG&E was also selected by the CAISO to build, own and operate two new electric substations in California’s Central Valley and the South Bay.

Each of PG&E’s winning bids were selected in separate competitive solicitations over other qualified bidders. The CAISO approved these projects as part of its annual Transmission Planning Process, and all of the projects will be subject to future approval from the California Public Utilities Commission.

© 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.

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Berkshire Hathaway, which is already one of the world-leaders in utility-scale solar and wind power electricity generation, has announced plans for a $3.6 billion, 2,000 megawatt wind farm in Iowa.

The plant, which will feature 1,000 wind turbines, will be owned by MidAmerican Energy Company, a unit of Berkshire Hathaway Energy.

The announcement comes as MidAmerican puts the finishing touches on its just constructed 51 turbine, 119.6 megawatt wind farm located east of the town of Macksburg.

When the Wind XI wind farm is completed, MidAmerican will generate 85 percent of its energy in Iowa from wind.

“We have a dream to deliver 100 percent renewable energy to our customers,” MidAmerican CEO Bill Fehrman said. “For customers, the benefits are clear: clean energy produced right here in Iowa using an abundant natural resource,” Fehrman added. “Unlike coal or natural gas, renewable energy has no fuel costs associated with it. Harnessing the wind is free.”

The Wind XI wind farm will be built utilizing federal 10-year tax incentives, which will enable its construction without the costs being passed on the ratepayers.

© 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.