Berkshire Hathaway says that ‘no utility company stretches further’

The energy subsidiary of conglomerate Berkshire Hathaway ((NYSE: BRK.A; BRK.B) is clearly a heavyweight in U.S. power generation, the company’s famous chairman and CEO Warren Buffett said in his annual letter to investors, which was released Feb. 28.

The 148-page document includes extensive discussion of Berkshire Hathaway Energy (BKE) (formerly MidAmerican), which Buffet has consolidated from the likes of PacifiCorp and MidAmerican Energy Holdings and NV Energy.

BHE’s utilities serve regulated retail customers in eleven states. “No utility company stretches further,” according to the document. “In addition, we are a leader in renewables: From a standing start ten years ago, BHE now accounts for 6% of the country’s wind generation capacity and 7% of its solar generation capacity.”

“When BHE completes certain renewables projects that are underway, the company’s renewables portfolio will have cost $15 billion. In addition, we have conventional projects in the works that will also cost many billions,” according to the document.

Beyond these businesses, BHE owns two large pipelines that deliver 8% of U.S. natural gas consumption; the recently purchased AltaLink electric transmission operation in Canada.

AltaLink serves 85% of Alberta’s population, Buffett said.

During his investors letter, Buffet noted that the railroad subsidiary in the United States, Burlington Northern Santa Fe (BNSF) “disappointed many of its customers” during 2015. “These shippers depend on us, and service failures can badly hurt their businesses,” Buffet said.

Buffett goes on to say that the company will spend $6bn on plant and equipment in 2015. “That sum is nearly 50% more than any other railroad has spent in a single year and is a truly extraordinary amount, whether compared to revenues, earnings or depreciation charges.”

“Though weather, which was particularly severe last year, will always cause railroads a variety of operating problems, our responsibility is to do whatever it takes to restore our service to industry-leading levels,” Buffett went on to say.

Rundown of some utility figures offered

The document offers a rundown of how Berkshire Hathaway’s regulated utilities and other energy companies did in the past year.

**PacifiCorp operates a regulated utility business in portions of several Western states, including Utah, Oregon and Wyoming.

Revenues in 2014 were $5.3bn, an increase of $100m (2%) compared to revenues in 2013. In 2014, revenues increased primarily due to higher rates, partially offset by lower retail customer load.

**MidAmerican Energy Co. (MEC) operates a regulated utility business primarily in Iowa and Illinois. Revenues in 2014 increased $365m (11%) to $3.8 bn.

In 2014, revenues from regulated natural gas increased $172m compared to 2013. The increase in regulated natural gas revenues was driven by higher per-unit natural gas costs, which are recovered from customers via adjustment clauses, and higher volumes attributable to colder weather in the first quarter of 2014.

**NV Energy was acquired on Dec. 19, 2013. In 2014, revenues and EBIT were $3.3bn and $549m, respectively.

In 2013, NV Energy’s results for the Dec. 19 through 31, 2013 period were included in other energy businesses and reflected one-time customer refunds, acquisition costs and other charges arising from the acquisition. NV Energy’s revenues and EBIT are normally higher in the second and third quarters due to higher electricity consumption in its service territories.

**Northern Powergrid’s revenues of $1.3bn in 2014 increased $258m (25%) as compared to 2013. EBIT were $527m in 2014, an increase of $165m (46%) compared to 2013. The increases in revenues and EBIT were due mainly to increased distribution revenues from increased rates and favorable regulatory provisions and the favorable impact of foreign currency translation.

Natural gas pipeline revenues increased $122m (13%) in 2014 compared to 2013. The increase reflected comparatively higher revenues from increased natural gas rates and volumes as a result of significantly colder weather conditions in the first quarter of 2014 in Northern Natural Gas Co.’s service territory and system rebalancing activities over the first half of 2014.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.