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Commentary Nebraska Furniture Mart

Commentary: Death of Retail? Grandscape Says Not So Fast

(BRK.A), (BRK.B)

“Retail is dead,” proclaims just about every financial headline these days, but Berkshire Hathaway continues to prove that wrong as it builds out Grandscape, a 400+ acre development featuring over 3 million square feet of retail, entertainment, dining, residential, office and attractions.

Anchored by Berkshire’s Nebraska Furniture Mart, which alone takes up 100 acres and has a 560,000 square foot retail showroom, Grandscape continues to use the bigger is better philosophy.

It’s a philosophy that’s attractive to other retailers that don’t want to simply bemoan the death of the bricks-and-mortar retail experience as a casualty of the internet.

The latest retailer to break ground at the development is SCHEELS, which is constructing a two-level, 331,000 square foot building that will be the largest All Sports Store in the world.

“After more than 10 years studying the Texas market, we found a great location to build our largest store yet,” said Steve D. Scheel, SCHEELS Chairman of the Board. “This one-of-a-kind retail adventure will attract sports enthusiasts, outdoor explorers and shoppers seeking a wide variety of fashion, footwear and homegoods. We are excited to bring our expertise and enthusiasm to Texas for the first time.”

In keeping with the trend to make shopping more experiential, SCHEELS will have a 65-foot, 16-car operating Ferris Wheel, a 16,000-gallon saltwater aquarium with more than 600 fish, and a wildlife mountain. Shoppers will get the chance to try out interactive arcade games and sports simulators.

Berkshire continues to believe in the retail experience, even as it is forced to evolve from the days of strip malls and malls with department stores as anchor tenants, and its $1.5 billion investment in Grandscape shows its putting its money where its mouth is.

© 2018 David Mazor

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

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Acquisitions NetJets

NetJets Subsidiary Acquires Cerretani Aviation Group

(BRK.A), (BRK.B)

QS Partners, the aircraft brokerage subsidiary of Berkshire Hathaway’s NetJets, has acquired aircraft brokers Cerretani Aviation Group of Boulder, Colorado.

QS Partners was launched in 2016 to meet what NetJets called “a growing need from our clients regarding whole-aircraft sales and trades and leveraging NetJets’ global network of resources…”

With the acquisition of Cerretani Aviation Group, the company will more than double its size.

In a release, Nick Cerretani and Paul Kirby said, “We are pleased to announce that Cerretani Aviation Group has merged with QS Partners, a leading aircraft sales company composed of individuals with whom we share a commitment to integrity, knowledge, and insightful service to our clients. While we will operate under the QS Partners brand, we will remain based in Boulder, Colorado, and will retain all of our current staff.

Our merger with QS Partners will enable us to significantly expand our industry reach and enhance transactional opportunities for our clients, whether buying or selling. At the same time, we are aware of the foundations of our success and will focus on providing our clients the personal attention and independent thinking they have come to expect from Cerretani Aviation Group.”

The Cerretani Aviation Group was founded in 2001 by Nick Cerretani, a former Executive VP at Flight Options, and Paul Kirby, co-founder of Kirby Ramsey Aviation.

© 2018 David Mazor

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

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Benjamin Moore

Benjamin Moore Awarded for its Supply Chain Academy at SCM World

(BRK.A), (BRK.B)

Berkshire Hathaway’s Benjamin Moore & Co., was awarded accolades in the fourth annual SCM World Power of Profession Awards.

SCM World, a Gartner community, recognized the company with its Talent Payback of the Year and Talent Breakthrough of the Year awards.

This recognition acknowledges the efforts by Benjamin Moore & Co. to transform and modernize its entire supply chain, increase employee retention and improve employee engagement. Benjamin Moore & Co. was selected out of six finalists within the Talent Breakthrough of the Year category.

“We are honored to be recognized by our peers at SCM World and to be among a remarkable list of companies awarded for its efforts in supply chain initiatives,” said Barry Chadwick, Benjamin Moore Executive Vice President Operations. “This recognition represents the efforts our employees put in every day to advance their knowledge and improve the Benjamin Moore & Co. customer experience.”

According to the company, Benjamin Moore & Co. has made significant efforts to transform and modernize its entire supply chain, including a transition to a world-class enterprise resource planning system and a successful Supply Chain Academy initiative that led to the promotion of 22% of its salaried employees and an 85% retention rate.

To date, nearly 336 Benjamin Moore & Co. employees have taken advantage of this program. Employee engagement results have increased 10% year-over-year and exceeded the Conference Executive Board Global High Performing Norm in every category.

The SCM World Power of Profession Awards identify, recognize and enable collective learning from the most impactful and innovative supply chain initiatives.

The awards are unique in that they are voted on by fellow supply chain professionals, providing a chance to share lessons and best practices, and shape the future of supply chain.

The winners were announced February 6th at an award ceremony, held as part of the SCM World Live Americas conference in Miami.

Other award winners included Pfizer, 3M, Land O’Lakes, Schneider Electric and P&G.

© 2018 David Mazor

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

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BNSF

BNSF’s $135 Million 2018 Capital Program for Montana

(BRK.A), (BRK.B)

BNSF Railway has announced that its 2018 capital expenditure program in Montana will be approximately $135 million.

This year’s plan in Montana remains focused on maintenance projects to ensure BNSF continues to operate a safe and reliable rail network. The largest component of this year’s capital plan in the state will be for replacing and upgrading rail, rail ties and ballast, which are the main components for the tracks on which BNSF trains operate.

“Maintaining a safe and reliable network is one way BNSF works to keep Montana’s economy moving. Freight rail connects Montana’s farmers and lumber producers with the major U.S. markets, and with exports facilities ready to move their products overseas. Rail is also a vital component of getting the people of Montana the consumer products they need,” said Jon Gabriel, general manager of operations, Montana Division.

Over the past five years, BNSF has invested approximately $850 million to expand and maintain its network in Montana.

This year, the maintenance program in Montana includes approximately 820 miles of track surfacing and/or undercutting work as well as the replacement of nearly 60 miles of rail and about 200,000 ties. Multiple projects are scheduled on our Kootenai River Subdivision, which runs between Sandpoint, Idaho and Whitefish.

BNSF will signalize various sidings on the subdivision between Sandpoint and Whitefish to enable Centralized Traffic Control (CTC) and make improvements to the Flathead Tunnel, the 7-mile long railroad tunnel in northwest Montana.

The 2018 planned capital investments in the state are part of BNSF’s $3.3 billion network-wide capital expenditure program announced last month.

The investments include $2.4 billion to replace and maintain core network and related assets, approximately $500 million on expansion and efficiency projects and $100 million for continued implementation of Positive Train Control (PTC).

BNSF is the only Class I freight railroad to have completed the installation of PTC on all its federally mandated subdivisions and is currently running hundreds of trains daily with PTC as it tests revenue service across its mandated territory.

Another element of its capital plan will be $300 million for freight cars and other equipment acquisitions.

© 2018 David Mazor

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

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Minority Stock Positions Stock Portfolio Warren Buffett

Phillips 66 and Berkshire Hathaway in Share Repurchase Agreement

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Phillips 66 has agreed to repurchase 35 million shares of Phillips 66 common stock from a wholly-owned subsidiary of Berkshire Hathaway for $93.725 per share. This $3.3 billion repurchase is expected to close on Feb. 14, 2018.

The shares had been purchased at an average price of $78.31 a share, and Berkshire’s return on its investment, excluding dividends, was roughly 20%. Currently, Phillips 66 is paying an annual dividend of 2.99%.

“We are excited to have this opportunity to return capital to our shareholders in such a meaningful way,” said Greg Garland, Chairman and CEO of Phillips 66. “This transaction benefits all of our shareholders, as it is immediately accretive to earnings per share and positive for valuation. While this highlights our dedication to shareholder distributions, our strategy remains unchanged. We are committed to running our assets safely and reliably, growing our Midstream and Chemicals businesses, enhancing our Refining and Marketing returns, and rewarding our shareholders through a secure, competitive and growing dividend along with continued share repurchases.”

This is hardly the end of Berkshire’s investment in Phillips 66.

“Phillips 66 is a great company with a diversified downstream portfolio and a strong management team,” commented Warren Buffett. “This transaction was solely motivated by our desire to eliminate the regulatory requirements that come with ownership levels above 10 percent. We remain one of Phillips 66’s largest shareholders and plan to continue to hold the stock for the long term.”

At closing of this transaction, Phillips 66 will have 466.5 million shares outstanding of which Berkshire will have an equity ownership interest in 45.7 million shares.

2018 David Mazor

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

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Berkshire Hathaway Energy Commentary

Commentary: Berkshire Gives Up on Enormous Australian Gas Field

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The defining characteristic of any mirage is that the closer you think you are to it, the further away it seems to get.

Sadly, in what is sure to be a major disappointment for Berkshire Hathaway, after years of work its CalEnergy subsidiary is planning to decommission two exploration wells which have been used to test the potential for natural gas production in the Whicher Range, south of Busselton.

The gas field had been estimated to contain four trillion cubic feet of gas-in-place.

The problem has always been how to get it.

CalEnergy is the sole titleholder and operator of the exploration permit EP 408 located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The test wells, WR1 and WR4, will be sealed with concrete and the well heads removed.

The land immediately around the well locations will be rehabilitated in line with conditions to be set out by the Department of Mines, Industry Regulation and Safety.

In 2016, Peter Youngs, the Managing Director of CalEnergy Resources Group, discussed with MazorsEdge the progress on the development of the gas field, noting that “the field represents a large in place gas resource, its characteristics are challenging and there is much work still remaining to move this resource to a commercially developable status.”

Unfortunately, those obstacles proved to be too much to surmount.

© 2018 David Mazor

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

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Minority Stock Positions Stock Portfolio

BYD Receives Prestigious Energy Storage Award

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German energy consultancy EuPD Research has awarded new energy technology company BYD with the “Top Brand PV Seal 2018” for energy storage manufacturers, the first for a Chinese company.

The honor was determined after German PV installers rated BYD highly across a range of categories including brand satisfaction, loyalty, quality and distribution strength.
BYD, headquartered in the Chinese innovation hub of Shenzhen, has won numerous international accolades for its advancement in the energy storage sector.

Last November, pv magazine named BYD as the winner of its global innovation award because of the company’s breakthrough technology in its residential and commercial battery energy storage system the B-Box (high voltage).

In the same year, two BYD energy storage products were jointly nominated at the ees (Electrical Energy Storage) awards, an unprecedented achievement for a company since the award began in 2014.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.8 billion.

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

© 2018 David Mazor

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

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Kraft Heinz

Kirksville Kraft Heinz Plant Doubles Employees

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

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

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

© 2018 David Mazor

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

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Berkshire Hathaway Specialty Insurance Insurance

Berkshire Hathaway Specialty Insurance Opens Office in Dubai

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

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

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

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

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

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

2018 David Mazor

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

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Berkshire Hathaway Energy

Berkshire in Top Three in Wind Energy Production

(BRK.A), (BRK.B)

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

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

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

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

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

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

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

© 2018 David Mazor

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