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Lubrizol

Lubrizol Opens CPVC Compounding Plant in Dahej, India

(BRK.A), (BRK.B)

The Lubrizol Corporation, a wholly-owned subsidiary of Berkshire Hathaway, has announces the official opening of a chlorinated polyvinyl chloride (CPVC) compounding plant in Dahej, India.

According to the company, the opening represents the culmination of Lubrizol’s latest industry leading investments in its global expansion of the company’s FlowGuard®, BlazeMaster® and Corzan® compound manufacturing sites.

These most recent investments, which were announced in 2013, total more than $200 million (INR1300 CR) and also include the 2015 opening of a resin manufacturing facility as part of a joint investment in Rayong, Thailand, as well as an expansion of the company’s manufacturing facility in Louisville, Kentucky.

Strategically located in the Gujarat Industrial Development Corporation (GIDC), which is one of the largest chemical parks in India, Lubrizol is the first major global producer of CPVC to establish operations in India.

With capacity to produce approximately 55,000 metric tons of compounds annually, the more than $50 million U.S. investment (INR 325 CR) in this plant further solidifies Lubrizol’s commitment to the Indian market.

Lubrizol touts the site’s prime location positions the company to serve not only the growing Indian market, but to also support the emerging growth of its FlowGuard®, BlazeMaster® and Corzan® businesses in South Asia, the Middle East and East Africa.

“Our recent expansion efforts, combined with our existing operations, positions Lubrizol to continue to be a strong market leader for many years to come,” stated Eric Schnur, president of Lubrizol Advanced Materials. “We are pleased to have an unmatched global footprint that provides our partners with reliable, high quality compounds to enable them to achieve their overall growth objectives.”

“With construction projects in non-metro cities expected to continue to increase in India, and with the central government of India aiming to build more smart cities, the demand for trustworthy piping systems is expected to rise,” said Manoj Dhar, head of TempRite® Engineered Polymers in South Asia.

“Lubrizol is dedicated to providing our customers with the highest quality piping products through our insistence of using only the best raw materials, and our new India compounding plant will use the industry’s most advanced compounding technology used in our FlowGuard, BlazeMaster and Corzan products developed in the U.S. and employed in our manufacturing sites around the globe.”

About Lubrizol

Based in Wickliffe, Ohio, Lubrizol owns and operates manufacturing facilities in 17 countries, as well as sales and technical offices around the world. Founded in 1928, Lubrizol has approximately 9,000 employees worldwide. It sells its specialty chemical products in over 100 countries.

© 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

Berkshire Ups Phillips 66 Stake with Major Purchase

BRK.A), (BRK.B)

Berkshire Hathaway continues to be high on refiner Phillips 66 (PSX), which has been mostly immune to the downward pressure on oil prices. The demand for refined products, including gasoline, diesel and aviation fuel remains strong.

Berkshire added 2.54 million shares of Phillips 66 worth roughly $198 million stock in ten transactions on January 27 – 29, 2016. Prices of the shares ranged from a low of $76.462 to a high of $79.2699 per share. For the entire month of January, Berkshire bought a total of 10.81 million shares.

In August 2015, Berkshire revealed that it owned more than ten-percent of Phillips 66, and the new purchases ups its stake to 72,293,310 shares. The new purchases bring Berkshire’s stake in the refiner to roughly 13.7-percent.

About Phillips 66

Phillips 66 was spun-off of ConocoPhillips in May 2012, and in addition to its refining and petrochemical business, the company also transports crude oil, refined products, natural gas and natural gas liquids (NGL). It gathers, processes and markets natural gas and NGL to power businesses, heat homes and provide feedstock to the petrochemical industry.

The company’s 52-week share price high was $94.12, and it currently pays an annual dividend of 56 cents, yielding 2.85%.

Despite the weakness in the energy market, Phillips 66 had a profit of $1.31 per share, which exceeded analyst forecasts.

© 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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Charlie Munger Warren Buffett

Berkshire to Live-Stream 2016 Annual Meeting

(BRK.A), (BRK.B)

Until now, if you wanted to hear Warren Buffett and Charlie Munger answer questions at the Berkshire Hathaway annual meeting you had to make the pilgrimage to Omaha, Nebraska.

Over 40,000 people from all over the world did just that last year and when they got there they heard Buffett and Munger take 5 hours of shareholder and financial reporter questions. Their answers, which contain insight, humor and wisdom, have never been allowed to be audio or video recorded.

Now, Berkshire Hathaway is letting the rest of the world in on the action. The 2016 Berkshire Hathaway annual meeting, which will be held at the CenturyLink Center on April 30, 2016, will be live-streamed over the internet.

Will the move keep people from travelling to Omaha for Berkshire’s event-filled weekend? Unlikely, as hearing Warren Buffett and Charlie Munger in person is always a treat.

And, besides, you can always get your year’s supply of See’s Candies.

© 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 Specialty Insurance Insurance

Berkshire Hathaway Specialty Insurance Debuts Executive & Professional Lines in the U.S.

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance (BHSI) has expanded its Executive & Professional Lines appetite to private companies in the U.S., launching the Executive First Private Company Portfolio.

BHSI is initially targeting private companies with revenue in excess of $15 million.

The portfolio offers Directors & Officers Liability, Employment Practices Liability (EPL), Fiduciary Liability, Employed Lawyers Liability and Commercial Crime Insurance in one clearly written form, crafted expressly for the exposures of privately held businesses.

“Our Private Company Portfolio provides substantive coverage and value in a contemporary and comprehensive form, backed by BHSI’s financial strength,” said Dan Fortin, Head of Executive & Professional Lines, BHSI. “The new form is the first step in our long-term strategy of providing simple, concise management liability solutions for private companies. A similar solution, tailored for nonprofit risks, is coming soon.”

The Executive First Private Company Portfolio is available with shared or separate coverage limits of up to $50 million. Customers purchasing the EPL coverage part will benefit from BHSI’s EPL First, which provides access to an on-line repository of HR training and compliance resources and attorney-client privileged “help line” services from an employment attorney. Both services are provided by Littler Mendelson, the world’s largest employment and labor law firm.

“We look forward to expanding into the private company sector and building lasting relationships with our insureds and brokers,” said Maura Verrone, Head of Private Company and Non-Profit Organizations, Executive & Professional Lines, BHSI. “The relationships developed by our underwriting specialists will be strengthened by the knowledge, experience and accessibility of our in-house claims and legal resources. Our customers can expect a collaborative approach through the entire process from underwriting to claims handling.”

© 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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BNSF

BNSF Cuts Capital Spending as Year Starts with Weak Freight-Hauling Numbers

(BRK.A), (BRK.B)

It’s early, but BNSF Railway is off to a weak start in 2016 with total shipping slipping 3.2% from the same period in 2015.

The weak start is industry-wide, as combined railroad freight volumes for all U.S. railroads are down 2.5 percent from 2014.

BNSF is not waiting for further poor results to trim its costs, and has already announced a 26% cutback in capital spending.

As of the week ending January 16, 2016, BNSF’s coal shipments were down a whopping 28.19%, petroleum shipments were down 22.21%, and the shipment of metal ore was down 32.29%.

Also down 11.66% was the shipment of sand and gravel, which are used in fracking.

On the positive side, shipments of containers were up a solid 13.34 %, and shipments of grain and chemicals were up 8.6% and 8%, respectively.

Last year’s record $6 billion in capital spending will be cut 26% to $4.3 billion for 2016, which represents the first reduction in spending in six years.

Heavy spending in 2015 helped resolve shipping bottlenecks that outraged grain producers when their shipments experienced extensive delays in 2014. The investment included 82 miles of new double track on the northern tier.

“Each year, our capital plan works to balance our near term need to regularly maintain a vast network that is always in motion with the longer term demand outlook of our customers,”said Carl Ice, BNSF president and chief executive officer. “While our customers’ demand outlook has softened in a number of sectors, regular maintenance of our network continues to drive the majority of our annual investments and helps ensure we continuously operate a safe and reliable network.”

On the national level, BNSF’s numbers are a barometer that confirms that U.S. economic growth is slowing. The Federal Reserve’s letter on January 27 noted that “net exports have been soft and inventory investment slowed.”

With weakness in coal and oil shipments, BNSF has been laying off railroad workers in Minnesota and North Dakota. Roughly 100 employees have been affected.

© 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 Energy Commentary

Commentary: Berkshire Hathaway’s Compromise on Nevada Solar Panel Fees is Just Round One

(BRK.A), (BRK.B)

Berkshire Hathaway has become a world-leader in renewable energy power generation based on its huge and varied solar and wind farms, but it has been on the other side of the renewable energy fence as it comes to rooftop solar panels purchased by consumers.

At issue is who pays for the electric transmission grid when solar panel owners pay little or nothing for power, and sell back their excess power to utilities through the grid.

Ground zero is Nevada, where Berkshire Hathaway Energy’s lobbying produced a host of new fees for existing solar panel owners, and a prohibitive cost structure that caused rooftop solar supplier SolarCity to announce that it would lay-off 2,000 workers and leave the state.

The fees caused an uproar from solar panel owners that watched their expensive capital intensive investments, which had been promoted as bringing many years of savings, lose all economic benefit.

Now, Berkshire is backing off at least a bit.

On February 1, Berkshire’s utility NV Energy will submit a proposal to the State of Nevada Public Utilities Commission proposing to grandfather in the existing 30,000 solar panel owners to the old rate structure for a period of up to twenty years. The move may quell homeowner anger, but it still doesn’t address the viability of the home solar panel industry.

According to reports, Berkshire’s proposed rate changes still do not make new rooftop solar panels viable in terms of cost savings for the homeowner.

Nevada Governor Brian Sandoval has supported NV Energy’s position that additional fees are necessary in order to not leave non-rooftop solar panel homes with the burden for paying for both the transmission grid and the retirement costs of decommissioning old fossil fuel plants, which are primarily highly polluting coal-fired plants.

While it’s probably not a winning long-term strategy for energy producers, such as Berkshire Hathaway Energy, to rely on legislation and rate structures that make home solar panel ownership uneconomical, they are right that they do need to find a way for solar panel owners to pay a share of the maintenance of the transmission grid. However, they must do this without killing what has become a clean power source for hundreds of thousands of consumers.

The Importance of the Transmission Grid

Sometimes lost in the debate is that even rooftop solar panel owners benefit from the grid. The grid supplies power to solar-panel owners at night, on cloudy days, and maintains fleets of repair trucks that not only do regular maintenance, but also respond quickly to natural disasters. The robust ability that utilities have to restore the grid after natural disasters should not be taken lightly, as their collaboration across large geographic areas often means that crews quickly come from hundreds or thousands of miles away to help restore service after hurricanes, blizzards, and other disasters.

For utilities, rooftop solar either represents competition for their centrally generated energy model, or a growing replacement for antiquated power sources.

As a replacement for other power sources, it’s unreasonable to expect utilities to buy back power at retail rates. That’s like asking a clothing store to buy clothes from you at retail and sell it at retail.

The real battle needs to be fought in the marketplace, where the true cost of cleaner forms of energy generation will determine the winners and losers. The cost of solar panels for both residential and utility scale generation has dropped dramatically, and as it continues to drop, it will determine which part of the economic model is most cost effective for consumers.

Another factor that should not be forgotten is that utilities have to cover the cost of retiring old fossil fuel burning plants. These costs must be shared by everyone, as everyone benefitted from the power they produced. Those costs cannot be left for just the consumers that are relying solely on the grid for their electricity needs.

In the end, both sides need a deal where both can prosper. After all, there are many customers that will never have solar panels and will continue to rely on utilities due to their location, cost, or the amount of time they will be living in a given home or apartment. And utilities will not only be needed to provide power to homes, but also factories, hospitals, schools, street lights, and a host of other settings that can’t afford to be left with a disproportionate share of the cost of the transmission grid.

What is also clear, is that Berkshire’s proposal is just the next round in a battle over who pays for the electric grid, and how much.

© 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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NetJets

NetJets Adds Wide-Cabin Jets

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NetJet flyers have more room to spread-out as NetJets adds more wide-cabin jets to its fleet with the purchase of seven Bombardier Challenger 650 business jets.

The first of the Challenger 650s was put into service in mid-December.

Bombardier Challenger 650 boasts class-leading width, and has a maximum range of 4,000 NM, with a maximum altitude of 4,000 feet.

The Challenger 650 has a cabin width centerline of 7 feet 2 inches, a cabin width floorline of 5 feet 1 inch, and a cabin height of 6 feet 1 inch.

Bombardier also claims that the jet has the lowest-in-class direct operating costs.

© 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 15-Meter Pure Electric Bus in Brazil

(BRK.A), (BRK.B)

Electric bus manufacturer BYD Co. Ltd, which makes pure electric buses in sizes big and small, has debuted its biggest one yet, a 15-meter bus now in service in São Paulo, Brazil.

The bus, model K10A, is a public transit bus designed for urban settings, and has its batteries stored in the floor of the vehicle.

In addition to the K10A, BYD makes a wide range of pure electric transit buses, including the K7 (8 meters), the K9 (12 meters) and the K11 (18 meters).

According to BYD, the K10A carries up to 95 passengers, has five doors and also relies on the proprietary technology of the BYD Iron-Phosphate Battery, a fire-safe, long-cycle and extended lifetime battery which is totally clean and recyclable. The battery pack enables the K10A to achieve a driving range of around 265 km on a single charge, making the bus capable of covering most of the public transportation routes in Brazil.

The batteries feature a 6,000-cycle lifespan and guarantee of over 15 years of operation. Just like the other BYD buses in Brazil, the K10A features regenerative braking and highly efficient in-wheel motors, making it possible for the bus floor to be lower, greatly simplifying maintenance and significantly reducing operational costs.

São Paulo already has a BYD K9 bus run by Ambiental transport operators.

Berkshire and BYD

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

At the time, Warren Buffett said: “”We are thrilled to be partners with BYD and the people of China. Mr. Wang Chuanfu has an extraordinary managerial record, and we welcome the opportunity to work with him.”

The move has certainly worked out well for Berkshire, as BYD’s electric buses have been hot sellers not only in China, but around the world.

In September 2015, BYD scored a massive order in the U. S. from the state of Washington. BYD won a contract from the Washington State Department of Transportation (WSDOT) for up to 800 pure electric buses.

BYD’s electric car business is booming as well, and it is now the number one seller of electric cars worldwide with 11% of the market share.

Berkshire’s stake in BYD is worth roughly $12.3 billion.

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.

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Berkadia

Berkadia Facilitates Sale of $87.5 Million Multifamily Property in Orange County, California

(BRK.A), (BRK.B)

Berkadia has announced the recent sale of Artisan Apartments, a 275-unit multifamily property located at 15555 Huntington Village Lane in Huntington Beach, Calif. Senior Directors Shane Shafer and Peter Hauser of the Irvine office negotiated the sale, which closed at $87.5 million on December 10, 2015.

The seller was Kennedy Wilson and the buyer was Domino Realty Management Company, Inc., both based in Beverly Hills. The sale price reflects a per-unit price of $318,181. Additionally, Managing Director Allan Freedman of Berkadia’s Los Angeles office assisted with the assumable financing.

“Quality of life, the strong job market and healthy apartment operations continue to support robust investment activity in the Orange County multifamily market,” said Keith Misner, head of investment sales. “Activity is brisk in the area, so Berkadia’s regional team of investment advisors and mortgage bankers collaborated quickly to execute this deal on time for both the buyer and the seller.”

“Kennedy Wilson purchased the property in June of 2012. During their time as owners, they added value to the asset through interior and exterior renovations and, as the submarket improved, was able to realize a substantial return through this sale,” said Shafer.

“Domino Realty purchased the property as a long-term hold in anticipation of the property’s appreciation and to take advantage of current cash flow and tax benefits. It also is conveniently located near additional Domino Realty-owned assets within Orange County, creating strong management economies between properties,” said Shafer.

Domino Realty plans to continue renovations to the property’s interiors, while adding additional common area amenities in order to meet renter demand and fuel strong future rental growth.

Built in 1977, Artisan’s unique layout combines three different designs: urban mid-rise units over podium parking, two-story, garden-style apartments and two-story townhouse style apartments. The 275-unit property features one- and two-bedroom floor plans. Unit amenities include fully equipped kitchens with granite countertops and stainless steel appliances, gas fireplaces, walk-in closets, cable access and balconies or patios. Community amenities include two heated swimming pools, laundry facilities, tennis courts, a fitness center, barbeques, and gated community access. The property was 97 percent occupied at the time of sale.

“Rarely does an apartment asset of this size sell in the coastal sub-market of Huntington Beach,” Hauser added. “Due to its locale, quality condition and unique unit designs, Artisan was a highly attractive investment opportunity that generated a lot of buyer interest.”

The Artisan, located near the 405 and 22 freeways and adjacent to the newly renovated Bella Terra Mall. The property is also within six miles of popular beaches and 11 miles from Disneyland. Top employers in the area include Fountain Valley Regional Hospital, StorCase Technologies Inc., IBM, Zodiac Aerospace and Hyundai corporate headquarters.

Orange County area vacancy rose 40 basis points to 4.2 percent by the end of 2015. The average asking rent increased 4.4 percent year-over-year to an average of $1,955 per month.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA. The company was among the top Freddie Mac and Fannie Mae multifamily lenders for 2013.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 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 Specialty Insurance Insurance

Berkshire Hathaway Specialty Insurance Expands Australia Team, Adds New Indemnity Policies

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance Company (BHSI) has unveiled four new executive and professional lines policies in Australia. The company also named Sami Jaghbir as Senior Underwriting Manager, Executive & Professional Lines, in Brisbane, and Richard Johnson as Senior Underwriting Manager, Executive & Professional Lines, in Melbourne.

The newly launched policies are:

• Executive First Directors & Officers Liability Insurance;
• Professional First Financial Planners Professional Indemnity Insurance;
• Professional First Asset Manager Liability Insurance; and
• Professional First Civil Liability Insurance

“We are pleased to introduce the first of our primary executive and professional lines policies in Australia, while rounding out our geographic footprint with experienced underwriting professionals now in Sydney, Melbourne and Brisbane,” said Cameron McLisky, Head of Executive and Professional Lines, Australasia.

“Our executive and professional lines team looks forward to providing tailored D&O, Financial Institutions and Professional Indemnity solutions with the security of our financial strength and long term commitment to the Australian marketplace.”

Sami Jaghbir joins BHSI after five years at Vero, where he held various positions, most recently as Underwriting Manager NSW/ACT, Professional & Financial Lines. Before Vero, he was Senior Account Executive, Financial & Professional Lines, at Marsh. Earlier in his career, he held positions at Promina, Citibank and Pfizer. A member of the Australian Professional Indemnity Group, Sami holds a Bachelor of Science degree from The University of Queensland; a Diploma of Financial Services, Broking, from the Australia & New Zealand Institute of Insurance & Finance (ANZIIF); and is currently completing a Masters in Commerce, Insurance, Accounting, Commercial Law from Deakin University.

Richard Johnson joined BHSI in October after 18 months at Catlin Australia, where he was Financial Lines Manager for Melbourne. Prior to Catlin, he held a number of underwriting and portfolio management roles with AIG in London and Australia, including Commercial D&O/Crime Underwriting Manager for AIG Europe. Richard received a Bachelor of Commerce degree from the University of Otago.

© 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.