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Berkshire Hathaway Specialty Insurance Insurance

Berkshire Hathaway Specialty Insurance Enters Surety Market in Asia

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance Company (BHSI) is entering the surety market in Asia, and has appointed Andrew Ho as Vice President, Head of Surety, Asia. Ho will be based out of BHSI’s Singapore office.

“Our expansion into surety is indicative of our strategy to commit where our deep expertise and top-rated financial strength will create value for our customers,” said Marc Breuil, President of Asia, BHSI. “We are pleased to have Andrew leading our newest business segment, providing quality surety underwriting and responsive local service.”

BHSI is initially focusing its surety efforts in Asia on civil contractors, general builders, engineering firms, equipment manufacturers and suppliers, and fabrication firms.

“A strong surety offering is a welcome addition to the marketplace and rounds out our broad range of coverages for construction and commercial customers in Asia,” said Marcus Portbury, Senior Vice President and Regional Head of Third Party Lines, Asia, BHSI. “We look forward to working with Andrew and our BHSI colleagues worldwide to provide local and global surety solutions, tailored to individual needs.”

Andrew joins BHSI from Standard Chartered Bank where he was Director, Trade Programmes & Credit Insurance. Prior to that, Andrew worked for more than 17 years in surety and trade credit roles at QBE, including Regional Underwriting Manager – Credit & Surety, Client Accounts

© 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

Star Wars Ad Campaign Powers Up Duracell Before Shift to Berkshire Hathaway

(BRK.A), (BRK.B)

The force seems to be with Berkshire Hathaway as a major movie tie-in is likely to power up interest in Duracell batteries just as Berkshire takes over the world-leader in alkaline batteries from its previous owner, Procter & Gamble.

Berkshire agreed to acquire Duracell in November 2014 in a tax-free swap of stock and cash that traded Berkshire’s $4.7 billion stake in Procter & Gamble for the Duracell. The battery manufacturer will also be recapitalized by P&G with $1.7 billion in cash.

According to a Duracell official, the deal looks set to conclude in February 2016.

Just two months before the deal finalizes, Duracell has launched its Star Wars “Battle for Christmas Morning” movie tie-in with a big budget TV campaign that was shot on an all-new anamorphic camera lens and aspect ratio that were only used previously on the new Star Wars film.

A Movie Quality TV Spot

The TV spot debuted December 7th and is scheduled to run through December 31st.

Shot by directed by Star Wars fan and director of the Night at the Museum film series, Shawn Levy, the spot features a 14-year old boy and his 9-year old sister entering a limitless world of creativity once Duracell Quantum batteries are inserted into their new lightsaber toys.

The 60-second spot, which features appearances by original Star Wars characters, C-3PO and R2-D2, highlights the power and importance of imagination for the whole family.

“This ad is a whole story within a finite number of seconds; a boy gets a lightsaber on Christmas morning, he pops in his Duracell batteries to power up his toy and suddenly, within the real world, is this injection of make believe and imagination,” said Shawn Levy, director. “It’s really about the transformation from the real into the fantastical and how these little batteries provide the juice for this whole imagined universe and adventure.”

As a promotional partner of Star Wars: The Force Awakens, Duracell collaborated with many of the forces behind Star Wars, including Disney, Lucasfilm, Industrial Light & Magic (ILM) and Skywalker Sound to create an authentic Star Wars experience and bring this action story to life.

The TV spot received expert guidance from famed cinematographer, Daniel Mindel, who was the director of photography on the new Star Wars film, as well as the director of photography on the 2009 film Star Trek and the 2013 film Star Trek Into Darkness.

A Galaxy of Movie Tie-Ins

Star Wars movie tie-ins are ubiquitous as the highly anticipated film has been on manufacturers and retailers minds for the past few years. Disney, which purchased Lucasfilm in 2012, has tied the film to everything from a Darth Vader-black Dodge Viper from Fiat Chrysler to CoverGirl makeup; however, none would seem to be a better fit than Duracell as the power source for galaxy of Star Wars toys and games.

The movie industry is anticipating that Star Wars: The Force Awakens will smash opening day and opening week box office records around the globe when it hits movie theater screens on December 18. The jumbo box office numbers are guaranteed as there are already over $50 million in presold tickets for opening weekend. The big question is will it enjoy a run at the biggest movie of all-time, a record that currently belongs to Avatar, which hit theaters in 2009 and took in $2.788 billion in theaters world-wide

For Berkshire, hopefully it will launch a great sales year as all the Star Wars toys need a constant supply of batteries. While Berkshire likes to own companies for the long term, it never hurts to start a marriage with an interstellar honeymoon.

© 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
Johns Manville

Johns Manville Building Second TPO Production Line at Alabama Plant

(BRK.A), (BRK.B)

With new construction starts continuing to slowly grow, Berkshire Hathaway’s Johns Manville, a manufacturer and marketer of building and specialty products, is adding a second production line at the company’s Scottsboro, Alabama, manufacturing facility.

The new line will increase production capacity for the company’s TPO (thermoplastic polyolefin), a roofing membrane that is used by commercial roofing contractors, consultants and building owners.

The new TPO production line will bring Johns Manville’s total investment in commercial roofing over the past eight years to approximately $200 million.

In October 2008, Johns Manville opened the state-of-the-art TPO facility in Scottsboro. The company furthered its investment in single ply in 2012 with the opening of an EPDM (ethylene propylene diene monomer) manufacturing plant in Milan, Ohio.

To meet recent demand for Johns Manville TPO, the company began a capacity expansion project in March 2015 at the Scottsboro plant. Construction was completed in May, and now work will begin to construct the second production line.

“The plant expansion was a huge success and made our Scottsboro facility what is, in our view, the most productive and efficient TPO facility in the United States, enabling us to meet our customers’ needs for the foreseeable future,” said Jennifer Ford-Smith, Johns Manville’s Director of Marketing and Single Ply. “This new line will give Johns Manville the ability to supply our customers with even more TPO than was previously available.”

About Johns Manville

Acquired by Berkshire Hathaway in 2001, Johns Manville has annual sales of approximately $2.6 billion, and employs approximately 7,000 people. The company has 44 manufacturing facilities in North America, Europe and China.

© 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 Stock Portfolio

BYD Moves into First Place in Worldwide EV Sales

(BRK.A), (BRK.B)

The headlights flashing to pass you on the autobahn just might be coming from an EV built by BYD Company Ltd.

Chinese auto and battery-maker BYD Company Ltd has zoomed into the number one position as the world’s top selling EV manufacturer.

Nissan, Mitsubishi, Tesla, Volkswagen and BMW rounded out the top five, in that order.

BYD Co Ltd, which Berkshire Hathaway holds a minority stake in of nearly 10%, sold 6,099 pure electric cars in October 2015, which was almost double the 3,115 sold by second-place Nissan.

The Winner Month After Month

BYD’s first-place finish in October was the sixth consecutive month since May that it has led worldwide EV sales figures. The company has an eleven-percent market share of the total EV market.

BYD’s success is due to the popularity of its Qin sedan and Tang SUV. The company will introduce two new models, the SUVs Song and Yuan, in 2016.

BYD’s rise to the top is dramatic, as it was only ranked seventh in 2014, and it’s sure to continue to grow, as the company has yet to retail its EV cars in the United States.

In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares, and today owns roughly 10% 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
Berkshire Hathaway Energy

NV Energy Begins Saving Millions

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Another one of Berkshire Hathaway’s utilities has begun saving millions through participation in an energy imbalance market.

NV Energy, which serves 2.4 million customers in Nevada, commenced participation in the western Energy Imbalance Market (EIM) on December 1, 2015.

“We welcome NV Energy’s entry into the western EIM,” said Steve Berberich, ISO President and CEO. “The real-time energy market is already generating significant cost savings, and NV Energy’s participation is expected to add to those benefits while incorporating more clean energy into the grid.”

In its first 12 months of operation, the real-time market has already produced more than $33 million in cost savings for Berkshire Hathaway’s PacifiCorp, the first EIM participant, and the ISO. Those savings are projected to increase as more utilities join the EIM.

NV Energy President and CEO Paul Caudill said his company’s participation in the EIM aligns with NV Energy’s longstanding commitment to seek opportunities that provide greater value to customers and support renewable energy.

“I am very pleased with the hard work many of my colleagues at NV Energy have done in the past year,” said Caudill. “I am also confident this work will be good for Nevada, as all resulting cost benefits will flow directly to our customers.” With the addition of NV Energy, the EIM expands into Nevada.

The ISO and NV Energy prepared for the utility to join the market for nearly a year, including extensive testing of operations and interfacing in the last two months. The ISO’s state-of-the-art software analyzes western grid needs every five minutes and automatically finds the lowest-cost generation to meet demand.

Millions in Annual Savings

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

Berkshire’s PacifiCorp Already Saving Millions

In 2014, when Berkshire Hathaway Energy’s PacifiCorp agreed to become the first participant in the new Energy Imbalance Market, 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.

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.

A 2013 study by the National Renewable Energy Laboratory found that an EIM with participation of all western states could cut electricity production costs by $1.3 billion a year.

© 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.

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Berkadia

Berkadia Originates $14 Million in Financing for Multifamily Property in Seattle

(BRK.A), (BRK.B)

Berkadia has arranged $14 million in financing for Latitude Queen Anne, a multifamily property located in Seattle.

Senior Managing Director Mitch Thurston and Senior Director Andy Ahlers of the San Francisco office secured the loan through Berkadia’s Fannie Mae program.

The full-term loan includes 10 years of interest-only debt service payments.

Latitude Queen Anne is 95 percent occupied and consists of 76 loft, one- and two-bedroom units. Community amenities include a rooftop with grilling and al fresco eating areas, resident lounge with a coffee and tea bar, fitness center and dog run with a pet station. Located at 500 Third Ave. W., the property is approximately two miles northwest of downtown Seattle.

“Seattle’s economy is strong, and the region’s multifamily market and lending activity is following suit,” Mitch Thurston said. “Berkadia’s strong West Coast presence allowed us to leverage our regional expertise to secure an attractive loan, which enabled the borrower to capitalize on favorable market trends.”

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.

© 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.

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NetJets

NetJets Paying Cancellation Fees as Profits Grounded

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No one likes cancellation fees when they fly, and for Berkshire Hathaway’s NetJets Inc. it’s when they don’t fly, or more specifically when they don’t buy that they incur fees.

NetJets is ponying up cancellation fees as it cuts orders for aircraft purchases and grapples with slumping earnings even as revenues grow.

Columbus, Ohio-based NetJets has run into turbulence this past quarter with its earnings down a whopping 37-percent. Earnings for the first nine months of the year were down a less dramatic but still meaningful 7-percent.

“In 2015, NetJets incurred increased non-fuel flight operation costs and increased general and administrative expenses, including fees to cancel certain aircraft purchases,” Berkshire Hathaway said in its most recent quarterly financial report.

Total revenues were up 5-percent but the company reported that the revenue growth was “partially offset by lower flight operations revenues, which were primarily due to lower fuel cost recoveries.”

Back in 2012, NetJets announced the largest private jet purchase in history, with a total of 425 aircraft scheduled to be added to its worldwide fleet. At the time, it valued the total purchase from Bombardier and Cessna at $9.6 billion.

Now, it looks like some of those orders will go unfilled.

Berkshire Hathaway purchased NetJets, the leader in fractional jet ownership, in 1998 for $725 million.

© 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.

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Lubrizol

Lubrizol Building 66,000 Square-Foot Building in Texas

(BRK.A), (BRK.B)

Berkshire Hathaway’s wholly-owned specialty chemical company, Lubrizol Specialty Products Inc., is planning to build a 66,000 square-foot building in Bryan, Texas.

Under the terms of the Chapter 380 agreement that was approved earlier this month by the Bryan city council, Lubrizol will receive 100 percent tax abatements in year one, 70 percent in year two, and the tax abatements would then decrease by 10 percent each year, ending at 10 percent in year eight.

Lubrizol will also be reimbursed an amount not to exceed $75,000 for development costs including site plans, platting and permit fees for the new facility. The reimbursement is eligible upon upon the issuance of a Certificate of Occupancy for the facility.

In exchange for the abatements, Lubrizol agrees to construct the 66,000 square-foot building, a minimum of $25 million in real property while maintaining a minimum increase in Brazos Central Appraisal District value of $20 million.

In addition, Lubrizol must hire at least 24 new employees with an increased payroll of $1.5 million.

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.

© 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
Kraft Heinz

New York State Commits Tens of Millions to Keep Kraft Heinz Plants

(BRK.A), (BRK.B)

Twenty million dollars is a lot of cheddar, as the old saying goes, but it’s also a lot of cottage cheese and sour cream too.

Kraft Heinz has been busy closing plants and laying off employees, as a part of its rigorous cost cutting, but in upstate New York it is promising to keep plants open and is about to add hundreds of employees.

Under an agreement spearheaded by U.S. Senator Charles Schumer and Governor Andrew Cuomo, $20 million in state funds have been committed to keep open Kraft Heinz’s plants in Walton, Avon and Lowville.

Kraft-Heinz was initially planning to close the Avon facility and layoff all 405 employees, and the agreement also reversed the planned closure of the Walton facility.

Saving jobs, Adding Jobs

An agreement was reached between New York State and Kraft-Heinz to save three of their facilities in Upstate New York, including the Walton facility in Delaware County that was initially slated for closure, as well as add additional jobs in Lowville.

Senator Schumer said this agreement will preserve a significant employment base throughout Upstate New York for years to come.

In addition, the agreement paved the way for a matching capital investment from both Kraft-Heinz and New York State that will allow for future investment in the company’s technology, facilities and operations.

The Kraft-Heinz Walton facility, which produces cottage cheese and sour cream, employs a total of 141 people in Delaware County. Kraft-Heinz was planning to close the Walton facility and layoff all 141 employees. The agreement reached between Kraft-Heinz, Senator Schumer and Governor Cuomo will save the Walton plant and all 141 jobs for at least the next 5 years, ensuring that there are no layoffs or reductions at the facility.

Additionally, in an effort to help save the 393 jobs at the Campbell facility in Steuben County, Schumer and Cuomo secured a commitment from Kraft-Heinz to delay the closure and continue to operate the facility for at least the next 12 to 24 months, and to work with state, federal and local officials to help find a strategic buyer for the facility that would keep the plant open and retain the 393 jobs.

The company has also agreed to offer any employees leaving the Campbell facility first choice for the new positions at the Avon and Lowville plants.

Lastly, the Lowville Kraft-Heinz facility in Lewis County will retain all of its existing 340 employees and will add scores of additional jobs at the Lowell facility over the next five years.

A $50 million Investment

In return for the state funds, Kraft Heinz will invest $20 million over that same amount of time as a part of this deal. If after those five years, Kraft-Heinz has not decreased their aggregate employment in New York State, and has invested at least $25 million in its Upstate operations, New York State will then invest an additional $5 million, bringing the combined matching total investment to at least $50 million in Upstate New York.

© 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.

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BNSF

BNSF’s Proposed Intermodal Facility Awaits Court Ruling

(BRK.A), (BRK.B)

The fate of BNSF Railway’s proposed near-dock intermodal rail facility, known as the Southern California International Gateway Project (SCIG), is hanging in the balance until a California judge rules on civil rights and environmental issues.

The Natural Resources Defense Council filed a lawsuit in June in Los Angeles Superior Court on behalf of Harbor residents living near the proposed development that would be built on Port of Los Angeles property.

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

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

Last week, Contra Costa County Superior Court Judge Barry Goode heard arguments and set Jan. 28, 2016 as the date to hear additional arguments involving CEQA’s fair-hearing provision.

He is expected to rule by February whether the project can move forward.

Gateway to the Nation

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

The intermodal rail facility would be near the ports of Los Angeles and Long Beach. The Ports are located approximately 25 miles south of downtown Los Angeles. The port complex is composed of approximately 80 miles of waterfront and 7,500 acres of land and water, with approximately 500 commercial berths. The Ports include: automobile, container, omni, lumber, and cruise ship terminals; liquid and dry bulk terminals; and extensive transportation infrastructure for cargo movement by truck and rail.

Environmental Hazard or Asset?

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

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

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

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

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

3.) Use zero-emission container movement systems.

Whatever the case, it won’t be resolved until Judge Goode’s ruling, and even that may be just the first round of a protracted legal battle.

© 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.