Categories
Commentary Warren Buffett

Commentary: Is there Money for Berkshire in an A-B InBev Merger with SABMiller?

(BRK.A), (BRK.B)

As soon as the news hit that a megamerger was in discussion between Anheuser-Busch InBev and SABMiller, my first thought was “Is there money to be made for Berkshire?”

There sure is.

A merger of Anheuser-Busch InBev and SABMiller would create a $275 billion company, and would need somewhere around $100 billion in financing to complete the deal.

With Anheuser-Busch InBev controlled by Brazilian private equity firm 3G Capital Management, it would be logical that such a mammoth deal could use at least some financing from Berkshire Hathaway.

The companies previously collaborated on 3G’s Burger King takeover of Tim Hortons, and 3G and Berkshire’s worked jointly to takeover A. J. Heinz, and later to merge it with Kraft Foods Group.

Berkshire and 3G clearly like working together because each provides half of a winning formula. Berkshire produces a lot of cash that needs to be put to work, and 3G is an acquirer of large-scale, high quality assets for which it provides management that aggressively wrings out savings that flow back to shareholders.

Any takeover by Anheuser-Busch InBev of SABMiller is sure to face antitrust issues, as the combined company would own 30% of the global beer market, but if it could get by regulators, here’s what to expect.

Preferred Stock Financing

For the past decade, Warren Buffett has especially used the issuance of preferred shares that pay Berkshire a fixed dividend in exchange for billions in financing.

Buffett’s love of preferred stock financing provided much needed cash to Goldman Sachs, Wrigley, and Bank of America during the Great Recession, and more recently helped 3G finance its Burger King/Tim Hortons merger and the A. J. Heinz and subsequent Kraft Heinz deals. In each deal, Berkshire ended up receiving juicy dividends that ranged from 6% in the case of Bank of America to 9% with Burger King/Tim Hortons.

Common Stock for Berkshire

An Anheuser-Busch InBev/SABMiller merger would likely give Berkshire a sizeable common stock position as well. For example, in providing financing for 3G’s Burger King takeover of Tim Hortons, Berkshire received warrants for 8,438,225 shares of the new combined company, Restaurant Brands International Inc., for a penny a share. The warrants came attached to 68,530,939 Class A 9.00% Cumulative Compounding Perpetual Preferred Shares, and gave Berkshire 4.18% of the outstanding Common Shares and 14.37% of the total number of votes attached to all outstanding voting shares of the Corporation.

Berkshire as the Linchpin

With 3G’s Burger King merger, Berkshire provided roughly 25% of the financing and was the linchpin that quickly brought other financing to the deal. When Warren Buffett wants in, others surely follow.

Look for Berkshire to take a portion of any Anheuser-Busch InBev and SABMiller deal if regulators ever allow it to happen.

© 2015 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

Dairy Queen Comes to Poland

(BRK.A), (BRK.B)

A blizzard in Poland won’t be a bad thing now that Dairy Queen has opened its first location.

Poland brings to 28 the number of countries outside the U.S. and Canada that have a Dairy Queen, and continues Berkshire Hathaway’s wholly-owned quick service restaurant brand’s expansion in emerging market.

The newly opened DQ® Treat store at Wola Park Mall in Warszawa will be joined by two additional locations before the end of the year, including a DQ Grill & Chill restaurant at the Wola Park Mall.

Just the Beginning

The three locations are just the beginning of a plan that will see Dairy Queen become a common sight in Poland. Expansion plans include 26 DQ Grill & Chill® restaurants and DQ Treat stores throughout the country over the next five years. The locations are being developed by franchisee Sparrow 4 Sp. Z.O.O.

“We believe there is an incredible growth opportunity in this region,” said John Gainor, CEO and President of International Dairy Queen, Inc. (IDQ). “Our partnership with Sparrow 4 Sp. Z.O.O. has allowed us to launch our brand in Poland. Their wealth of business experience and diverse portfolio across Europe is a huge asset to the Dairy Queen system as we continue to invest and build on our global brand equity.”

Expansion Into Eastern Europe

“Our strategy is to open franchises in emerging markets,” Dairy Queen’s president and CEO John Gainor says. “That’s why Poland is a logical choice. We are avoiding countries such as France where the competition is very well established.”

Poland is just the beginning in astern European, according Dairy Queen’s Jean Champagne, Chief Operations Officer — International Groups.

“This move is strategic. We are entering the Eastern European market at a time when Western brands are being embraced by a consumer base that is well informed on the importance of global brands,” Champagne said. “We look forward to working with a strong franchise partner in Poland. We see this as a launching pad for other contiguous countries in the region.”

The DQ system has more than 6,600 locations worldwide, 1,495 of which are outside the U.S. and Canada , and this summer opened locations in Kuwait and the United Arab Emirates.

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

© 2015 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

BHSI Adds Construction Insurance to Australia Underwriting

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance Company (BHSI) has begun providing comprehensive insurance and services for the construction industry in Australia, and has named a team of executives to oversee key areas of its construction insurance business.

Berkshire Hathaway’s Boston-based BHSI first entered the Australia market in April 2015, when it began providing all lines of General Business in Australia, and established operations in Sydney.

With its just announced coverage, BHSI is offering construction property, casualty, project professional indemnity, and project cargo insurance for construction classes in Australia and pairing coverage with in-house construction claims and engineering expertise.

“We are pleased to offer the Australian construction industry a multi-line insurance solution, backed by the deep expertise and financial strength of BHSI. Our team is rich in construction insurance experience and ready to provide sound, creative capacity and meaningful risk engineering to this important sector,” said Chris Colahan, President, Australasia Region, BHSI.

BHSI’s Construction Team

Cameron Holmes, Construction Manager. Cameron comes to BHSI with 15 years of construction and engineering experience. He was most recently National Underwriting Manager, Engineering, at IAG in Sydney. Prior to that, he was Underwriting Manager, Engineering, at Munich Re in London. He was Engineering and Property Underwriter at Munich Re in Sydney and, before that, Civil Engineer & Project Manager at Sinclair Knight Merz in Sydney. He holds a bachelor’s degree in Civil Engineering from the University of Sydney, a Graduate Certificate of Insurance from Deakin University, and an MBA and a Graduate Diploma of Financial Management from the University of New England.

Rob McNab, Underwriting Manager, Construction. Rob comes to BHSI with over a decade of experience focused on construction and engineering on both the underwriting and brokerage sides of the business. He was most recently Southern Region Manager, Construction & Engineering at CGU Insurance. He was also Major Projects Executive, Construction & Specialty Risks, Australasia, at Willis Australasia. He began his career as an Engineering Underwriter at QBE Insurance Australia Limited in Melbourne. He holds a Diploma of Financial Services from the Australian & New Zealand Institute of Insurance & Finance.

Mark Thompson, Senior Underwriter, Casualty. Mark comes to BHSI with 14 years of insurance industry experience with the last 5 years focusing on the construction industry. He was most recently Senior Casualty Underwriter at AIG in Sydney. Prior to that he was a Senior Account Executive at Marsh Australia and started his career as a Claims Adjuster at Aon UK. He holds a bachelor’s degree in Financial Services from Sheffield Hallam University, an Executive Certificate in Insurance from the University of Technology, Sydney, and is a Fellow of the Australian & New Zealand Institute of Insurance and Finance.

Patrick Whyte, Risk Engineering Manager. Patrick brings to BHSI 25 years of loss control and risk engineering experience. He was most recently Senior Risk Engineer at Allianz Global Corporate & Specialty in Sydney. Before that, he was Principal Consultant at the Australian Consulting Network Pty Ltd and Managing Principal at Marsh (Australia) Pty Ltd. He holds a bachelor’s degree in Chemical Engineering from the University of New South Wales and a master’s degree in Business Administration from the Australian Graduate School of Management.

David Cook, Claims Manager. David comes to BHSI from Suncorp Group, where he has spent the past seven years rising through the ranks to the role of Senior Claims Specialist, handling global, corporate, and major loss claims in Brisbane and more recently in Melbourne. He holds a Diploma in Financial Services from the Australian & New Zealand Institute of Insurance and Finance.

These new team members build on BHSI’s existing capabilities in Project Professional Liability, led by Matthew Clarke and Marine Project Cargo, led by Dimitry Zilberud.

All of these newly appointed executives are based in BHSI’s office in Sydney, except for Rob McNab who will be based in BHSI’s Melbourne office.

© 2015 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

BYD Scores Massive Bus Order from Washington State

(BRK.A), (BRK.B)

In what it is touting as “America’s Largest Electric Bus Order,” BYD Co. Ltd., the Chinese battery and vehicle-maker that is 10% owned by Berkshire Hathaway, has scored a massive order from the state of Washington.

BYD has won a contract from the Washington State Department of Transportation (WSDOT) for up to 800 heavy duty buses from all different propulsion types that includes 12 different categories for all-electric buses.

The company won contracts in 10 of the 12 available vehicle categories of WSDOT’s RFP, and says it has the ability to deliver any of their buses within six months.

The contract includes buses from 30 – 60 feet in length for both highway and transit applications, as well as long-range and shorter range on-route charging configurations.

BYD is the only company world-wide that manufactures 7 different all-electric buses capable of long range as well as in-route charging configurations.

The company notes that its buses can drive for more than 155 miles even in heavy city traffic on a single charge, and BYD will also supply wireless on route charging as an option approved by WSDOT.

The buses use BYD’s Iron-Phosphate battery which has a 12-year-battery warranty, and use the company’s proprietary in-wheel hub motors and regenerative braking system.

Single RFP Process Speeds Procurement

The single WSDOT RFP speeds procurement, and the buses will serve public transportation systems in the states of Washington and Oregon without their having to go through a separate RFP.

Any transit agency or public institution in the states of Washington and Oregon is now able to procure electric buses using the RFP.

“Our staff has spent the past few years researching every electric bus on the market,” said WSDOT’s David Chenaur, Capital Programs Manager, “and after rigorous evaluations of each manufacturer and their products we believe we have given our transit authorities the very best electric buses in each vehicle category to build their fleet with.”

BYD’s subsidiary BYD Motors will build the buses at its plant in Lancaster, California.

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

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

© 2015 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 Insurance

Berkshire Completes PLICO Acquisition

(BRK.A), (BRK.B)

Berkshire Hathaway’s MedPro Group (MedPro) has announced the completion of its acquisition of Oklahoma City-based PLICO, which serves approximately 2,200 healthcare providers in Oklahoma, and is the largest healthcare liability insurer in Oklahoma.

The company notes that the transaction process – from signing to closing – took less than 60 days, and that the PLICO and MedPro teams have already begun working cohesively to serve Oklahoma healthcare providers.

PLICO’s principal operations will remain in Oklahoma City. Carl Hook, M.D., will remain as CEO while also serving as Chair of PLICO’s Advisory Board, and long-time PLICO executive Sherry Hayworth will serve as President.

Founded in 1979, PLICO is the largest healthcare liability insurer in Oklahoma, and has annualized gross written premiums of about $30 million, and had a statutory surplus of over $60 million at year-end of 2014.

The “bolt-on” acquisition is only the second acquisition for MedPro since Berkshire Hathaway acquired it a decade ago.

PLICO is not currently rated by leading insurance rater, A.M. Best, but is expected to apply for financial strength ratings and be positioned to offer additional products and services.

Prior to the PLICO acquisition, Berkshire’s MedPro had $874 million in annual premiums and more than 140,000 customers.

© 2015 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

Federal Judge Allows Tribe’s Lawsuit to Proceed Against BNSF

(BRK.A), (BRK.B)

BNSF Railway’s oil trains that service two refineries in the state of Washington could be in jeopardy now that a federal judge has upheld a Native American tribe’s right to sue the railroad for violating the terms of a Right-of-Way easement granted to allow the railroad to cross the reservation.

The Easement Agreement enables BNSF to bring Bakken crude oil to the Tesoro refinery in Anacortes, Washington by crossing a portion of the Swinomish Indian Reservation located on Fidalgo Island in Skagit County, Washington.

Under the terms of the 1991 Easement Agreement, BNSF is allowed to run one 25-car train per day in each direction. The tribe sued in April 2015 contending that BNSF was running as many as six 100-car “unit trains” per week.

U.S. District Judge Robert Lasnik on Friday, September 11, ruled that BNSF’s request to have the lawsuit dismissed or stayed was denied. The ruling opens the way for the tribe to press its lawsuit.

Contentious History of Rail

Train travel across the tribe’s land has a long contentious history, with the original track having been laid in the late 1800s without consent from the Swinomish or the U.S government. The tracks cross the northern edge of the reservation, and the Swinomish, as the present day political successor-in-interest to certain of the tribes and bands that signed the 1855 Treaty of Point Elliott, first sued the railroad in 1976, alleging a century of trespassing on tribal land. The resulting settlement led to the 1991 Easement Agreement that allowed only the 25-car train limit without the Tribe’s permission.

The Tribe contend in its lawsuit that “BNSF never notified the Tribe that it intended to exceed the limitation of one train of 25 cars or less, nor did it request permission from the Tribe before it began to do so.”

A Deal is a Deal

“A deal is a deal,” said Swinomish Chairman Brian Cladoosby. “Our signatures were on the agreement with BNSF, so were theirs, and so was the United States. But despite all that, BNSF began running its Bakken oil trains across the Reservation without asking, and without even telling us. This was exactly what they did for decades starting in the 1800s.”

“We told BNSF to stop, again and again,” said Cladoosby. “We also told BNSF: convince us why we should allow these oil trains to cross the Reservation. And we listened for two years, even while the trains kept rolling. But experiences across the country have now shown us all the dangers of Bakken Crude. It’s unacceptable for BNSF to put our people and our way of life at risk without regard to the agreement we established in good faith.”

Under the terms of the Easement Agreement, the Tribe agreed not to “arbitrarily withhold permission” for BNSF’s request to increase the number of trains or cars.

Arbitrary or Not?

The Tribe contends that its refusal to grant permission is not arbitrary and is “Based on the demonstrated hazards of shipping Bakken Crude by rail, paired with the proximity of the Right-of-Way to the Tribe’s critical economic and environmental resources and facilities — and the substantial numbers of people who use those resources and facilities on a daily basis — the Tribe is justifiably and gravely concerned with BNSF’s shipment of Bakken Crude across the Right-of-Way in a manner and in quantities at odds with the explicit terms of the Easement Agreement.”

The Swinomish are concerned that trains carrying Bakken crude oil run over bridges spanning the Tribe’s fishing grounds in the Swinomish Channel and Padilla Bay. They also noted that the track runs across the “heart of the Tribe’s economic development enterprises,” which includes the Tribe’s Swinomish Casino and Lodge, a Chevron station and convenience store, and an RV Park, as well as a Tribal waste treatment plant.

The Tribe noted that these enterprises are the “primary financial source for funding of the Tribe’s essential governmental functions and programs.”

The 1991 Easement Agreement granted the Right-of-Way for an initial 40-year term, along with two 20-year option periods. The current agreement will expire no later than 2071.

The tribe is seeking a “permanent injunction prohibiting BNSF from (1) running more than one train of twenty-five cars or less in each direction over the Right-of-Way per day and (2) shipping Bakken Crude across the Reservation.”

The Swinomish are also seeking monetary damages for the prior trespasses and breach of contract in an amount to be determined at trial.

© 2015 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 Battles Congress Over Positive Train Control

(BRK.A), (BRK.B)

BNSF Railway knows they can do the hard jobs, they can even do very hard jobs, but they are contending that a looming safety deadline can’t be met because they can’t do the impossible.

With the deadline for installing Positive Train Control (PTC) less than four months away, BNSF Railway and other Class 1 railroads are pressing the U.S. Congress to push back the December 31, 2015 deadline.

Warren Buffett has stated that the cost of installing Positive Train Control will run BNSF $200-$300 million a year.

PTC is a communication-based/processor-based train control technology designed to automatically stop a train in order to prevent accidents.

In a September 9, 2015, letter from Carl R. Ice, BNSF’s President & CEO, to U.S. Senator John Thule, the Chairman of the Committee on Commerce, Science and Transportation, BNSF laid out its case for pushing back the deadline.

“BNSF has invested over $1.5 billion in the testing, development, purchase, and installation of PTC components out of an estimated total exceeding $2 billion. PTC will be deployed on roughly half of our system; these lines host 80 percent of BNSF’s freight density. We expect to have a significant portion of the necessary PTC system implemented on the network by the current December 31, 2015, deadline, but after that date we still require ongoing installation and extensive testing, as discussed below.

PTC deployment is an unprecedented technical and operational challenge that requires the entire U.S. railroad network to develop, test and implement this new safety system, and avoid impacts to network capacity and fluidity as we do. Despite our strong commitment to this technology, BNSF has faced significant technical, regulatory and operational obstacles to meeting the PTC implementation deadline imposed by the RSIA and will not meet the RSIA deadline for deployment. As a result, BNSF believes that Congress must move the PTC deadline in order to achieve successful PTC implementation and to avoid potential significant and unnecessary congestion and shipper service impacts.”

The Threat of Suspending Service

BNSF also laid out the consequences of not pushing back the deadline.

“BNSF has serious questions whether it should operate on subdivisions that have not been equipped with PTC in knowing violation of the federal law that mandated PTC as of January 1, 2016. Enormous congestion could result from efforts to re-route traffic that moves on the PTC lines, which are maintained to handle the most density, to lines on which PTC is not required. These are generally low-density territories where we do not have crews and maintenance resources positioned for those volumes. We have analyzed what train operations could continue if operations are halted on mandated subdivisions without PTC installed and believe that operations across our entire network will likely be compromised by congestion and effectively shut down. BNSF would do whatever is reasonably possible to mitigate this impact, but the consequences for the economy and for our company would be substantial.

Furthermore, if we knowingly operate in violation of the law on mandated portions of the network without PTC and FRA engaged in enforcement against BNSF, it’s unclear what kind of operational choices, and related network impacts, BNSF would face in order to minimize its exposure to enforcement and liability risk.

If Congress does not act to move the deadline and BNSF operations are out of compliance with the PTC statute and regulations, BNSF could be left with few acceptable options. You may be assured that we have, and will continue, to update Congress and our customers on whatever actions we believe we are compelled to take in that circumstance. We are developing potential communications to our customers and passenger rail tenants in the event that no extension is enacted by the end of October, as these stakeholders may need to make preparations or alternative plans well before the current December 31, 2015, deadline.”

The Coming of Positive Train Control

Over the last several years, the Federal Railroad Administration has been reviewing PTC plans from 41 railroads, covering both passenger and freight railroads. The FRA approved 24 plans without conditions. Additional plans were approved provisionally, and two were denied without prejudice.

The Rail Safety Improvement Act of 2008 (RSIA) mandated that Positive Train Control (PTC) be implemented by the Nation’s railroads by December 31, 2015. Railroads requiring PTC are the Class I railroad main lines, which are the rail lines that transport 5 million or more gross tons annually.

As detailed by the Federal Railroad Administration, “PTC refers to communication-based/processor-based train control technology that provides a system capable of reliably and functionally preventing train-to-train collisions, overspeed derailments, incursions into established work zone limits, and the movement of a train through a main line switch in the improper position. PTC systems are required, as applicable, to perform other additional specified functions. PTC systems vary widely in complexity and sophistication based on the level of automation and functionality they implement, the system architecture used, the wayside system upon which they are based (e.g., non-signaled, block signal, cab signal, etc.), and the degree of train control they are capable of assuming.”

BNSF’s approved PTC systems include ETMS (Electronic Train Management System), which is a GPS- and communications-based system.

(This article has been updated since it was first published.)

© 2015 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 Duracell

Duracell Makes Push to Expand Asia Sales

(BRK.A), (BRK.B)

Battery-maker Duracell is making a push to expand its market penetration across Asia.

Duracell is the world-wide leader in alkaline batteries and will become a wholly-owned subsidiary of Berkshire Hathaway in early 2016.

Duracell has hired DKSH to help with the effort. Based in Zurich, Switzerland, the company is a Market Expansion Services Group that focuses on Asia.

DKSH’s goal is to drive growth of Duracell across retail and online channels in mainland China and Taiwan, and in Southeast Asia including Thailand and Singapore. DKSH’s services include field marketing, sales, distribution, logistics, and credit and collection services.

For Duracell, DKSH, through its joint venture DKSH Smollan Field Marketing, will provide a range of shopper engagement and activation services in Singapore, Taiwan and Thailand.

DKSH Smollan Field Marketing (DSFM) is jointly owned by DKSH and the Smollan Group of South Africa – a leading provider of Point of Purchase Services.

DKSH’s services include sourcing, research and analysis, marketing, sales, distribution and logistics to after-sales services. The company operates in 35 countries and has 720 locations in in Asia Pacific, and 30 in Europe and the Americas.

For more info on Duracell read this Special Report.

© 2015 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 Lubrizol

Lubrizol Acquires Particle Sciences

(BRK.A), (BRK.B)

Berkshire Hathaway’s wholly-owned Lubrizol Corporation has acquired Particle Sciences, a contract drug development and manufacturing organization with a comprehensive suite of services for the formulation, analysis and production of complex drug delivery solutions.

Headquartered in Bethlehem, Pennsylvania, Particle Sciences specializes in drug eluting device product development as well as sterile and particulate drug products.

This acquisition further expands Lubrizol LifeSciences’ pharmaceutical development capabilities, providing full service drug delivery solutions to the market across a variety of dosage forms.

Founded in 1991, the company is headed Mark Mitchnick, Dr. Mitchnick holds over 20 patents related to drug delivery, diagnostics and physiologic monitoring.

“With the addition of Particle Sciences and the recent acquisition of Vesta, we are now able to offer customers a complete solution that is one of the most comprehensive in the industry,” stated Deb Langer, vice president and general manager, Lubrizol LifeSciences. The combination of Lubrizol’s polymer expertise, Vesta’s quality medical manufacturing and Particle Sciences’ drug formulation development allows LifeSciences to provide end-to-end solutions in the drug delivery market.

Among its recent developments, in April, the company received a patent for its Surface Arrayed Therapeutics™ Drug Delivery Platform, a technology that has utility in applications ranging from oncology to vaccines. 

“Particle Sciences and Lubrizol LifeSciences have worked together for several years providing various elements of an end-to-end solution from polymer supply through formulation and commercial manufacturing,” said Mark Mitchnick, chief executive officer, Particle Sciences. “With this transaction, Lubrizol LifeSciences acquires Particle Sciences’ extensive formulation, analytic and production assets for drug eluting devices, particulate, sterile and other complex drug products established over the last 10 years. We expect that coordinating all of this under one company will greatly benefit our customers.”

Particle Sciences will now be part of Lubrizol Advanced Materials but will retain its company name.

Financial terms of the transaction were not disclosed.

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 7,500 employees worldwide. It sells its specialty chemical products in over 100 countries.

Berkshire Hathaway acquired Lubrizol in 2011 for $9 billion in cash.

© 2015 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

NV Energy to Save Millions Through Energy Imbalance Market

(BRK.A), (BRK.B)

Berkshire Hathaway Energy’s NV Energy, which serves the Nevada market, will save millions a year when it enters the new Energy Imbalance Market (EIM) that debuted earlier this year.

The utility company is expected to enter the EIM on Nov. 1, 2015.

Millions in Projected Savings

NV Energy will save millions annually, with its attributed share of gross benefits estimated to range from $6 million to $10 million in 2017, and from $8 million to $12 million by 2022.

The Savings Are Real

In 2014, when Berkshire Hathaway Energy’s PacifiCorp agreed to become the first participant in the new EIM, it was touted as a way to balance electricity in-flows and out-flows on a regional basis that would bring millions of dollars in benefits to participating utilities.

The predicted benefits for PacifiCorp have proven to be true, and the California Independent Service Operator (CAISO) has been able to quantify the benefits from the April, May, and June 2015 to be $10.18 million. Annual benefits will be around $30 million.

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.

In its July report, CAISO said that it, “continues to prove EIM’s ability to select the lowest cost resource across the PacifiCorp and ISO balancing authority areas to serve demand and measures benefits within the following categories, which were described in an earlier study conducted by Energy + Environmental Economics (E3)1 for PacifiCorp and the ISO.”

The report noted:

• More efficient dispatch, both inter- and intra-regional, in the Fifteen-Minute Market (FMM) and Real-Time Dispatch (RTD) by automating dispatch every fifteen minutes and every five minutes within PacifiCorp’s two BAAs and between the PacifiCorp and California ISO BAAs.

• Reduced renewable energy curtailment by allowing BAAs to export or reduce imports of renewable generation when it would otherwise need to be economically curtailed.

• Reduced flexibility reserves needed in PacifiCorp BAAs, which saves cost by aggregating the load, wind, and solar variability and forecast errors of the combined EIM footprint. This report introduces the flexibility reserve benefits for PacifiCorp but defers measurement of reduced flexibility reserve benefits for the ISO to future reports due to the need to develop additional measurement techniques.

By allowing Balancing Authorities to pool load and wind and solar resources, an EIM lowers total flexibility reserve requirements and reduce curtailment of wind and solar generation for the region as a whole, lowering costs for customers. An EIM may also help to improve compliance with Federal Energy Regulatory Commission (FERC) Order 764, which emphasizes 15‐ minute scheduling over interties but may not be implemented on an optimized basis due to the difficulty of bilateral trading on such short time intervals.

© 2015 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.