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Marmon Group UTLX

New Tank Car Standards Means New Facility and Employees for UTLX

(BRK.A), (BRK.B)




Berkshire Hathaway’s wholly-owned tank car manufacturer UTLX is opening a new facility in Marion, Ohio, and will be adding 200 new employees over the next three years. The expansion will double the number of employees it has in Marion.

The move comes as new federal safety standards have created unprecedented demand for new and retrofitted tank cars.

Retrofitting the Existing Fleet

Under the Enhanced Standards for New and Existing Tank Cars for use in an HHFT— Existing tank cars must be retrofitted in accordance with the DOT-prescribed retrofit design or performance standard for use in an HHFT.

An HHFT is defined as a train carrying 20 or more tank carloads of flammable liquids (including crude oil and ethanol).

The need for replacement and retrofitted tank cars impacts shippers that ship by rail, including shippers of LPG, oil producers and refiners, and ethanol producers that own their own tank cars or lease them from leasing companies, and Berkshire’s BNSF Railway’s own fleet of tank cars.

Retrofitting existing tank cars is an important bridge to safer shipping of flammable liquids, as the current backlog of new tank car orders sits at a record 52,000 units. 

The new facility is be able to rewrap 60 tank cars a week when it reaches full capacity.

 A Bundle of Tax Credits and Grants

The Ohio Tax Credit Authority granted a 55-percent, 5-year tax credit to UTLX for the creation of $8,272,000 in new annual payroll, provided that the company maintains operations at the facility for 11 years.

The company will also receive a $75,000 grant from the Ohio Rail Development Commission to cover the cost of on-site rail improvements.

Greg Cieslak, president of UTLX, noted, “We have a quick need to expand into a second facility due to the industry’s changing landscape, and found the Columbus Region to be a strategic location to grow. The area offers access to the right workforce and real estate to fit our needs, and the Midwest location and rail infrastructure are convenient to our customers.”

Higher Paying Job Opportunities

The new employees will earn between $15 to $21 per hour plus benefits. The jobs include welders and fabricators, tank car repairers, rail car switchmen, material handlers, and general labor and helpers with general welding knowledge.

UTLX is looking to the Tri-Rivers Career Center’s workforce development program to provide training for the new employees.

© 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 Commentary Marmon Group

Commentary: Is Now the Time for Berkshire to Pull the Trigger on USG?

(BRK.A), (BRK.B)




With demand for housing finally outstripping supply in a number of markets, the need for drywall and other construction supplies looks finally to be reviving from the lingering doldrums of the Great Recession.

Building permits for new houses rose a stellar 30-percent in June 2015, as compared to the same time period in 2014.

The rise in new housing starts, which are up 26-percent year-to-year, is certainly welcome news for Berkshire Hathaway’s Johns Manville, which makes insulation and roofing products, and it’s good news for many of Berkshire’s Marmon Group companies that manufacture materials used in both commercial and residential construction.

The revival in new housing is also great news for USG Corporation (formerly known as United States Gypsum Corporation), which is North America’s leading manufacturer of drywall and related building products.

About USG

In 1902, 30 independent gypsum rock and plaster manufacturing companies merged to form the United States Gypsum Company.  Over more than a century, USG has been issued 1,100 patents for its products. In addition to drywall, the company is a leading manufacturer of acoustical panel and specialty ceiling systems. The company has 34 manufacturing plants in the U.S., and has roughly 9,000 employees in more than 30 countries.

USG and Berkshire

Berkshire played a key role in saving USG during the nadir of the Great Recession.

In 2008, with the housing market imploding and lending all but frozen, Berkshire came to USG’s rescue with $300 million of convertible notes that paid Berkshire 10-percent interest.

At the time, the boost in confidence the company received from Warren Buffett’s financing helped the company avoid bankruptcy. The day of transaction the stock soared 22-percent to $6.89 a share.

Today, the stock is hovering around $29 per share.

Berkshire has not only profited from the healthy interest payments, but the stock’s appreciation as well.

In December 2013, Berkshire exchanged $243.8 million of the convertible notes for common stock, and with additional purchases its stake in USG now sits at just under 40-percent.

The Chinese Drywall Scandal

As an American manufacturer, USG has been a beneficiary of the Chinese drywall scandal that came to a head in 2009. Imported drywall from China that had high sulfur content brought reports of fumes that created upper respiratory problems, and the market for drywall from China was hit hard. Thousands of homes in Florida and other states had their drywall ripped out and replaced.

Time to Pull the Trigger?

The Chicago-based company has seen its ups and downs, including three bankruptcies.

The last bankruptcy was in July 25, 2001 under Chapter 11 in order to deal with a mountain of asbestos litigation costs related to asbestos containing joint compounds.

The establishment of the The United States Gypsum Asbestos Personal Injury Settlement Trust put the company’s asbestos woes in the rear-view mirror, and its stock price reflects it. With the growing strength in the new housing market, its roughly $29 share price looks poised to move past the 5-year high of $35.33 that it hit in February 2014.

With a Market Cap of just over $4.2 billion ($1.5 billion of which is already owned by Berkshire), USG is a great fit for Berkshire if it wants to gobble up the whole thing, or if it just wants to continue its incremental takeover by moving to over 50-percent ownership.

USG would fit nicely into the Marmon Group of companies, which include a host of companies that supply the construction industry.

Berkshire might want to consider a tender offer for the company’s outstanding stock, because it just looks to get more expensive from here, as the housing market finally has put the drywall business back in high demand.

All it takes is a little cash, which is something Berkshire’s got a lot of.

© 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
Duracell

Berkshire Wins EU Approval for Duracell Acquisition

(BRK.A), (BRK.B)




Berkshire Hathaway has gained approval from the European Commission for its acquisition of battery-maker Duracell from Procter & Gamble.

In a statement released by the Commission:

“The Commission concluded that the proposed acquisition would not raise competition concerns given the absence of horizontal overlaps and the existence of numerous competitors in the vertically related market where the parties are active. The transaction was examined under the normal merger review procedure.”

About Duracell

With Duracell’s $2 billion in annual revenue, Berkshire is acquiring the market leader in batteries for the home and workplace. The company has highly recognizable brands that consumers in home and work settings are willing to pay more for than private label store brands. According to the company, Duracell’s CopperTop® and Quantum® command the highest average percent of spend among battery brands with 33% and 16%, respectively.

Combined, the two product lines account for close to 50% of the market.

For a look at what type of company Berkshire is getting 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
Berkshire Hathaway Energy

Berkshire’s PURPA Dreams Evaporate

(BRK.A), (BRK.B)




Berkshire Hathaway’s effort to change the Public Utility Regulatory Policies Act (PURPA) in order to loosen the regulations on power purchases from small generating facilities has met a dead end.

The changes Berkshire has been aggressively lobbying for have been dropped from the U.S. Senate’s energy bill.

Berkshire Makes Its Case

Last week, Berkshire Hathaway Energy Legislative and Regulatory Affairs Vice President Jonathan Weisgall testified before the Senate Energy and Natural Resources Committee pushing a rule change to make electric utilities in California’s new Energy Imbalance Market that are in noncompetitive markets exempt from having to purchase power from small generation assets known as Qualified Facilities (QFs).

Weisgall‘s prepared statement noted that “In many instances, the power produced by QFs is not needed to replace baseload generation or meet decreasing levels of demand.”

He also noted that “Growth of electricity demand has slowed in each decade since the 1950s. Since PURPA’s enactment, electricity markets have developed to allow utilities to purchase replacement power rather than build baseload plants. BHE’s PacifiCorp utility is experiencing a significant increase in PURPA contract requests, despite the fact that its long-range resource plan shows no need for additional generation resources until 2028. It currently has requests for 3,641 MW of new PURPA contracts, in addition to the 1,732 MW of PURPA contracts that are already executed. The number of PURPA contracts may soon equal PacifiCorp’s average retail load. For example, the 5,373 MW of existing and proposed PURPA contracts at their nameplate capacity would be equal to 79% of PacifiCorp’s average retail load and 108% of PacifiCorp’s minimum retail load.”

Senator Cantwell Objects

Berkshire laid out a proposed amendment to PURPA Section 210 16 U.S. Code § 824a–3 – Cogeneration and small power production, but the objections of Sen. Maria Cantwell (D-WA), who laid out her concerns that it could adversely impact the energy market in the Pacific Northwest, effectively killed the amendment.

© 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

No Oncor for Berkshire Hathaway

(BRK.A), (BRK.B)




Forget Berkshire Hathaway as the next owner of Energy Future Holdings’ power distribution subsidiary Oncor.

Back in September 2014, Berkshire Hathaway Energy and several other energy companies, including NextEra Energy and Hunt Consolidated, signed confidentiality agreements for the purpose of exploring the acquisition of Oncor, which was up for auction due to the April 2014 bankruptcy of electric utility Energy Future Holdings. The company went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

A Texas-Sized Asset

Oncor is a quite a prize. The company is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. The company has the largest distribution and transmission system in Texas; with approximately 119,000 miles of lines and more than 3 million meters across the state.

The End of the Waiting Game

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

U.S. Bankruptcy Judge Christopher Sontchi has agreed to a plan by Hunt Consolidated that will see the company take ownership with Oncor’s current management remaining in place.

One that Got Away

Back in June 2014, Warren Buffett proclaimed he was ready to put at least $15 billion into energy generation and transmission assets, and Oncor, with a value of roughly $17.5 billion looked like a good fit.

Transmission lines have been high on Berkshire Hathaway Energy’s wish list of late. In April 2014, the company made a $2.9 billion purchase of Canadian company AltaLink from SNC-Lavalin Group Inc.

Berkshire Hathaway Energy currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

Unfortunately, when it comes to Oncor, this one got away.

© 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
Marmon Group

Owl Wire Rehabs Manufacturing Plant

(BRK.A), (BRK.B)




Owl Wire and Cable, a unit of Berkshire Hathaway’s Chicago-based Marmon Group, is set for a $1 million rehab of its Madison Street manufacturing plant in Rome, New York. The work will include a new roof, and repairs to walls, floors and columns.

Owl Wire and Cable produces a wide range of sizes and classes of wire and cable. The company employs about 45 people.

The building was previously owned by Rome Cable, which filed for bankruptcy in 2003.

About Owl Wire

Owl Wire and Cable was founded in 1954, and is a manufacturer of un-insulated copper wire and cable for a variety of end uses, including:

  • Electrical and electronic wire and cable for energy-related markets servicing the oil, gas, nuclear, and wind energy markets.
  • Low and medium voltage cables are provided to the appliance, building, mining, and industrial markets.
  • Varied specialty cables utilized in aeronautical, high temperature, and marine markets.
  • Transit, aerospace, defense, communication and other industrial applications. Uses include industrial power and instrumentation; aerial and underground utility distribution; and environments where exposure to harsh elements is anticipated.

The company has three facilities totaling more than 350,000 square feet of manufacturing space.

Corporate Headquarters and manufacturing are located in Canastota, New York, with manufacturing facilities also located in Rome and Boonville, New York.

Berkshire and Marmon

In 2007, Berkshire Hathaway acquired 60% of the Marmon Group for $4.5 billion from the Pritzker Family of Chicago. At the time, Marmon was made up of 125 manufacturing and service businesses that all operated independently within diverse business sectors.

Berkshire has gradually increased its stake in Marmon even as Marmon has grown, and in 2013 it bought the remaining 20% share owned by the Pritzker Family.

Today, Marmon Group has 160 independent manufacturing and service businesses and employs 17,000 people worldwide.

© 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 Marmon Group Special Report

Special Report: What is Berkshire Getting With Duracell?

(BRK.A), (BRK.B)




On July 29, 2015, leading battery maker Duracell, which has been a unit of Procter & Gamble, will become wholly owned by Berkshire Hathaway.

The deal will bring Berkshire both a top consumer brand and a mountain of tax-free cash.

While Berkshire had announced that Duracell would become part of its Marmon Group of companies, a Marmon spokesman assured me that it will be an independent company that will report directly to Berkshire management.

What Kind of Company is Duracell?

Berkshire is acquiring the market leader in batteries for the home and workplace. In fact, despite P&G having planned to sell-off the unit, Duracell’s market share has grown from 48% in 2012 to 56% in 2014.

The company has highly recognizable brands that consumers in home and work settings are willing to pay more for than private label store brands. According to the company, Duracell’s CopperTop® and Quantum® command the highest average percent of spend among battery brands with 33% and 16%, respectively.

Combined, the two product lines account for close to 50% of the market.

Duracell’s growth has come at the expense of competitors Energizer and Rayovac.

Energizer has seen its market share shrink from 40% in 2012 to 36% in 2014, and Rayovac, which is a much smaller player, has seen its market share drop from 8% in 2012 to just 5% in 2014.

The total alkaline battery market in the U.S. alone is roughly $2.2 billion a year, with Duracell just over $858 million in alkaline batteries sales a year, or roughly 43% of the market.

Of the away-from-home market, healthcare/medical uses $70 million worth of batteries annually, followed closely by manufacturing, which consumes approximately $61 million worth of batteries annually.

A Changing Market

Offices and other workplaces use batteries more than ever. For decades, flashlights where the primary drivers of battery usage in away-from-home settings, but that has changed greatly in just the past few years. According to a report by Kline & Company, wireless devices, including computer mice and keyboards, topped the list in 2014 in the demand for batteries. Wireless mice were the number one use for batteries followed by clocks and remote controls. The traditional flashlight has fallen to number seven, just above smoke alarms.

A Growing Market

At the time of the announcement of Berkshire’s acquisition of Duracell, many analysts downplayed the battery market’s potential for growth. I believe that view is short-sighted, as the away-from-home battery market has not only grown 2% from 2012 to 2014, but Duracell’s share of that market has continued to grow. Batteries are more relevant than ever with the number of wireless devices proliferating.

A Proven Name, A Trusted Brand

Warren Buffett loves quality brands, be they Coca-Cola, Heinz, or Kraft. He knows that consumer brand loyalty is essential for retaining market share in commodity businesses. In Duracell, Berkshire’s getting the most trusted name in batteries.

The 2015 BrandSpark Most Trusted Awards winners for Consumer Packaged Goods brands, which were voted by more than 80,000 American consumers, chose Duracell as the most trusted battery brand.

But Wait, There’s More!

Berkshire’s not only acquiring the market leader for batteries, it’s also receiving a Mount Everest-sized bundle of tax-free cash.

Berkshire’s $4.7 billion stake in Procter & Gamble came from an original investment in Gillette of only $600 million. In cashing out its position, Berkshire not only gets control of Duracell, but Duracell has been recapitalized by P&G with $1.7 billion in cash. This allows Berkshire a transfer of cash that is three times its original investment in Gillette, and the entire $4.7 billion transaction incurs no capital gains taxes.

For Berkshire, Duracell shines brightly indeed.

© 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 BNSF

BNSFL Acquires Transportation Technology Services

(BRK.A), (BRK.B)




BNSF Railways, through its wholly owned BNSF Logistics (BNSFL), has acquired engineering and logistics company Transportation Technology Services (TTS). The move expands BNSFL’s capability in wind turbine shipping, which has been growing rapidly with the explosive growth of wind-generated power throughout the Midwest and Texas.

About TTS

Founded in 2001, TTS provides engineering design, distribution and wind and project cargo logistics services to railcar builders, manufacturers, shippers, railroads, and energy companies, among others.

TTS manages a fleet of more than 2,000 leased railcars and is responsible for over 9,000 dimensional shipments per year. 1,200 of the railcars are equipped with patented fixtures designed to handle wind turbine components including blades, tower sections and nacelles, TTS is a significant addition to the more than 9,700 rail shipments BNSF Logistics currently manages.

TTS will become the U.S. Rail, Project Cargo and Engineering Services division for BNSFL. The combined unit will have extensive capacity, hundreds of years of combined practical experience and strong relationships and credibility with the major players in Wind Energy, Power Generation, Oil & Gas, Heavy Machinery and the EPC and Manufacturing communities.

“TTS’s engineering and design capabilities, extensive wind fixtures, and rail transload locations coupled with their talent, and market expertise in industrial products are a perfect fit for our broader expansion into the industrial products sector that handles freight of all sizes. When combined with our existing multi-modal and transload capabilities, BNSFL becomes a leader in North America in multi-modal capacity and ability for the Industrial Products sector,” commented Ray Greer, BNSFL’s President. “The innovation and value we will be able to bring to our customers just increased significantly,” he added.

The company is based in Southlake, Texas, which is between Fort Worth and Dallas.

About BNSFL

BNSFL operates over 40 offices throughout North America, with over 120 FCPA certified Global Service Providers (GSPs) for import and export of general and project cargoes throughout the world.

© 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
BH Media

BH Media Launches Midwest Agricultural News Website

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Berkshire Hathaway’s wholly-owned BH Media Group has launched a new website called agNET.net that focusses on agricultural news for the Midwest.

The website is a product of the Farm and Ranch family of publications. The focus of the website is agricultural news that directly impacts farmers, and has everything from reports on Federal legislation, USDA rule making, and international trade agreements, to farming tips such as “Tips and Tricks for Avoiding and Removing Ticks.”

News and information for the site is culled from BH Media’s publications throughout the Midwest, and additional news comes from wire services, including the Associated Press.

Robert Pore, who writes for BH Media’s The Grand Island Independent in Grand Island, Nebraska, is the site’s editor.

While agNET.net has a full-range of banner advertising and classified advertising, BH Media has also launched a sister site called agstuff.com, which focuses on the sale of agricultural equipment.

Playing to BH Media’s Strengths

BH Media owns 71 newspapers and other titles located in 10 states, and all of the newspapers are regional or community papers. With agNET.net, BH Media is showing that its focus on rural communities gives it new ways to reach often overlooked consumers, and the ability to create targeted online platforms to monetize that readership.

© 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

Berkshire’s NV Energy Benefits From Plunging Solar Prices

(BRK.A), (BRK.B)




Berkshire Hathaway’s NV Energy, which powers customers in the state of Nevada, has contracted to buy electricity from First Solar’s soon to be built Playa Solar 2 at the astoundingly low rate of only 3.87 cents a kilowatt-hour.

The rate, a 20-year fixed-rate contract, was submitted to Nevada’s Public Utilities Commission on July 1, 2015.

First Solar is a leader in photovoltaic power with over 10 gigawatts (GW) installed worldwide, and has been aggressively building solar farms, some of which have been purchased by Berkshire Hathaway Energy.

First Solar built the 550 megawatt Topaz Solar Farm, which is now powering 160,000 average California homes, and is owned by BHE Renewables.

Berkshire Leads in Renewables

Berkshire Hathaway Energy’s BHE Renewables has over 1,884 megawatts of power generation derived from solar, wind, hydro and geothermal sources. 1,271 megawatts of that capacity come from solar.

Plunging Solar and Wind Prices

In just the last four years, solar and wind power have gone from promising but expensive power sources to power sources that meet or beat fossil fuel power generation prices that come from coal and oil.

The drop in solar electricity generation costs has been so dramatic that it has outpaced even the experts’ estimates. The U.S. Department of Energy (DOE) noted that “2020 price projections are approximately one-half of what same analysts projected 5-10 years ago.”

The DOE is projecting a decline in solar PV system module prices for utility scale installations from its $4 in 2010 to less than $2 by 2016. Utility-scale PV is defined as ground-mounted systems that are greater than ≥5 megawatts.

Buffett Believes in Renewables

Speaking at the Edison Electric Institute’s annual convention in Las Vegas in 2014, Warren Buffett trumpeted Berkshire’s commitment to renewable energy.

“We’ve poured billions and billions and billions of dollars in retained earnings, and several billion of additional equity, Buffett said. “And we’re going to keep doing that as far as the eye can see.”

© 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.