Berkshire Hathaway Energy

[ValueMaven]

https://www.streetinsider.com/PRNewswire/Dominion+Energy+Announces+Sale+of+Remaining+Interest+in+Cove+Point/21892316.html

 

$3.5B BHE investment ... 

[gfp]

Nice!  I hadn't seen that.  "funded with cash on hand including cash realized from the liquidation of certain investments."  LOL - that's a new line!   Sorry BYD, we would rather have the cash for LNG...

https://www.brkenergy.com/news/article/brknews_covepoint_07102023

[UK]

https://www.bloomberg.com/news/articles/2023-07-18/buffett-unit-s-potential-wildfire-liability-stokes-industry-fear

[james22]

Any chance BRK is interested in Endeavor Energy?

[gfp]

35 minutes ago, james22 said:

Any chance BRK is interested in Endeavor Energy?

 

Highly doubt it unless it somehow came through OXY.  Even that would be hard to believe.

[james22]

Occidental + CrownRock + Endeavor = $80B?

 

That'd put some cash to work.

 

 

[Parsad]

https://finance.yahoo.com/news/worlds-largest-ree-lithium-discovered-160012987.html

 

Cheers!

[bargainman]

Everyone's been talking about that Cali Li find.  Good to see BRK get some of it...

[gfp]

I had missed this updated BRK-Energy presentation from November and found it interesting.  Good detail on what PacifiCorp plans to do to deal with wildfire risk and some good updates on BHE capital expenditures for the next couple years on slide 13 -

 

"

Berkshire Hathaway Energy and its subsidiaries will spend approximately $31.4 billion from 2023-2025 for growth and operating capital expenditures, which primarily consist of new renewable generation project expansions, new electric battery and pumped hydro storage projects, and electric transmission and distribution capital expenditures"

2023 EEI Presentation vFinal.pdf

[yesman182]

1 hour ago, gfp said:

I had missed this updated BRK-Energy presentation from November and found it interesting.  Good detail on what PacifiCorp plans to do to deal with wildfire risk and some good updates on BHE capital expenditures for the next couple years on slide 13 -

 

"

Berkshire Hathaway Energy and its subsidiaries will spend approximately $31.4 billion from 2023-2025 for growth and operating capital expenditures, which primarily consist of new renewable generation project expansions, new electric battery and pumped hydro storage projects, and electric transmission and distribution capital expenditures"

2023 EEI Presentation vFinal.pdf 5.23 MB · 4 downloads

As always thanks for sharing. 31.4billion is a lot more than I would have thought. Do you think a 8% annual return on this investment is a reasonable estimate? 

[gfp]

No clue if this New Mexico utility would be of interest to BHE, but their deal has just fallen apart and they are contiguous with BHE's western territories.

 

https://www.prnewswire.com/news-releases/pnm-resources-announces-avangrid-termination-of-merger-agreement-schedules-financial-update-302024318.html

 

https://www.pnmresources.com/~/media/Files/P/PNM-Resources/events-and-presentations/2023/2023 EEI Presentation.pdf

[KPO]

2 hours ago, gfp said:

No clue if this New Mexico utility would be of interest to BHE, but their deal has just fallen apart and they are contiguous with BHE's western territories.

 

https://www.prnewswire.com/news-releases/pnm-resources-announces-avangrid-termination-of-merger-agreement-schedules-financial-update-302024318.html

 

https://www.pnmresources.com/~/media/Files/P/PNM-Resources/events-and-presentations/2023/2023 EEI Presentation.pdf

Thanks for sharing. The press release wording suggests they believe the ~$2.15 per share breakup fee is coming their way. This could become an interesting purchase. 

[gfp]

 

I was traumatized by the fire, "PacifiCorp's Fire"

 

"

The latest verdict on behalf of nine victims includes damages for both economic losses and emotional distress. The company had already been found liable in the previous trial for failing to heed weather warnings and shut off electricity in its service areas ahead of a wind storm that toppled power lines. 

"

 

“Each of them in this trial told you about the enduring trauma they had suffered because of PacifiCorp’s fires,” the attorney, Nicholas Rosinia, said Monday. “This is an extraordinary case full of extraordinary stories of survival and of bravery and of life-altering loss.”

 

https://www.bloomberg.com/news/articles/2024-01-23/berkshire-fire-tab-grows-62-million-after-more-victims-testify?srnd=premium

Edited January 23 by gfp

[RadMan24]

4 hours ago, gfp said:

 

I was traumatized by the fire, "PacifiCorp's Fire"

 

"

The latest verdict on behalf of nine victims includes damages for both economic losses and emotional distress. The company had already been found liable in the previous trial for failing to heed weather warnings and shut off electricity in its service areas ahead of a wind storm that toppled power lines. 

"

 

“Each of them in this trial told you about the enduring trauma they had suffered because of PacifiCorp’s fires,” the attorney, Nicholas Rosinia, said Monday. “This is an extraordinary case full of extraordinary stories of survival and of bravery and of life-altering loss.”

 

https://www.bloomberg.com/news/articles/2024-01-23/berkshire-fire-tab-grows-62-million-after-more-victims-testify?srnd=premium

The problem is two fold : Unaffordable housing has pushed people into fire areas. Two: People have suppressed fire for decades. Those two factors create these uncharacteristic damaging events. Not climate change.

[Cigarbutt]

On 1/23/2024 at 10:14 PM, RadMan24 said:

The problem is two fold : Unaffordable housing has pushed people into fire areas. Two: People have suppressed fire for decades. Those two factors create these uncharacteristic damaging events. Not climate change.

When dealing with the rainy snow in my drive way yesterday during another atypical day in my (northern) environment, my neighbor said (or something like that): "Everything should be made as simple as possible, but not simpler".

There may be more than two factors (relevant and significant) involved here?

-----

The following is derived from a cigar butt situation experienced a few years ago with Pacific Gas and Electric (PCG) when it reached the vicinity of bankruptcy (i'm no 'expert' here but there was a fair amount of time spent on the 'research' so further technical discussion and/or reference to specific data/analysis possible if warranted in this (to be ongoing?) online 'public' discussion).

-----

People being "pushed" (because of unaffordable housing) to the wildland-urban interface is an issue but (opinion) more importantly people being 'pulled' into those areas is more significant because of: 1-the relative quality of life searched, 2-the financial shield experienced (from poor policies, misalignment of incentives and moral hazard) from the true cost of exposure from losses versus the cost of property taxes and property insurance premiums. Losses are basically mutualized at the federal level.

It's basic math. For a number of years the number of acres burned has been on the rise as well as the aggregate home values at risk at the wildland-urban interface.

As far as the 'causes' of the gradual rise in acres burned, excessive fire suppression has likely contributed but climate variables (the use of "climate change" terminology is avoided in order to suppress the potential contamination of critical thinking) have likely contributed significantly and have the potential to contribute more. At a basic level, wildfires (and associated societal damages) have to be linked to temperature changes (no?) and the level of temperature, well The Times They Are a-Changin'.

-----

All that to say that, if the legal strategy for PacifiCorp implies to suggest that "climate change" does not exist, in this day and age, it may mean higher 'punitive' damages. Contrary to property insurers who can adapt and slowly adjust premiums over time to reflect rising costs, electric utilities with transmission capacity are exposed to stochastic-like losses (transmission infrastructure is one the the three main causes of wildfires, with human actions and lightning being the other two significant triggers) and should become leaders in helping to define ways to prevent such losses (involving their own infrastructure and perhaps also by collaborating with rulers/regulators). Of course present contemporary legal costs are painful but should eventually become integrated in the the general costs of doing business. Longer term thinking required? Confidence in institutions required?

-----

All i know, as a simple individual these days, is that my (and my household) alpine ski season is getting more bizarre every year (not in a downhill straight line but down and for a while now).

[longterminvestor]

Housing Developers do the same for the risk of Flooding.  Low laying areas are relatively cheap land, get local officials to change law/building code/ask for variance, and build homes at/below grade to save money and the Federal Government picks up the tab for following years of flood claims.  

[RadMan24]

11 hours ago, Cigarbutt said:

When dealing with the rainy snow in my drive way yesterday during another atypical day in my (northern) environment, my neighbor said (or something like that): "Everything should be made as simple as possible, but not simpler".

There may be more than two factors (relevant and significant) involved here?

-----

The following is derived from a cigar butt situation experienced a few years ago with Pacific Gas and Electric (PCG) when it reached the vicinity of bankruptcy (i'm no 'expert' here but there was a fair amount of time spent on the 'research' so further technical discussion and/or reference to specific data/analysis possible if warranted in this (to be ongoing?) online 'public' discussion).

-----

People being "pushed" (because of unaffordable housing) to the wildland-urban interface is an issue but (opinion) more importantly people being 'pulled' into those areas is more significant because of: 1-the relative quality of life searched, 2-the financial shield experienced (from poor policies, misalignment of incentives and moral hazard) from the true cost of exposure from losses versus the cost of property taxes and property insurance premiums. Losses are basically mutualized at the federal level.

It's basic math. For a number of years the number of acres burned has been on the rise as well as the aggregate home values at risk at the wildland-urban interface.

As far as the 'causes' of the gradual rise in acres burned, excessive fire suppression has likely contributed but climate variables (the use of "climate change" terminology is avoided in order to suppress the potential contamination of critical thinking) have likely contributed significantly and have the potential to contribute more. At a basic level, wildfires (and associated societal damages) have to be linked to temperature changes (no?) and the level of temperature, well The Times They Are a-Changin'.

-----

All that to say that, if the legal strategy for PacifiCorp implies to suggest that "climate change" does not exist, in this day and age, it may mean higher 'punitive' damages. Contrary to property insurers who can adapt and slowly adjust premiums over time to reflect rising costs, electric utilities with transmission capacity are exposed to stochastic-like losses (transmission infrastructure is one the the three main causes of wildfires, with human actions and lightning being the other two significant triggers) and should become leaders in helping to define ways to prevent such losses (involving their own infrastructure and perhaps also by collaborating with rulers/regulators). Of course present contemporary legal costs are painful but should eventually become integrated in the the general costs of doing business. Longer term thinking required? Confidence in institutions required?

-----

All i know, as a simple individual these days, is that my (and my household) alpine ski season is getting more bizarre every year (not in a downhill straight line but down and for a while now).

The IPCC provides no strong link between wildfires in the US and climate change. And as you mention, the luxury of lifestyle in the suburban forests -- because of the fire suppression -- has hidden these risks. Wildfires are a form of weather. If you want the climate impact, you have to look back over 30 year periods, at least. Perhaps a third point of which I've left out is that most, if not the vast majority of wild fires, are human ignition. 

 

Edit: To your point - the less talk about "climate change science" and more talk about mitigating risks associated with extreme weather events given the expansion of the human population and its impact on the environmnet the more likely we are to limit the impacts of climate change over time. 

Edited January 26 by RadMan24
further context

[RadMan24]

9 hours ago, longterminvestor said:

Housing Developers do the same for the risk of Flooding.  Low laying areas are relatively cheap land, get local officials to change law/building code/ask for variance, and build homes at/below grade to save money and the Federal Government picks up the tab for following years of flood claims.  

Exactly, and very good point raised here that often isn't talk about. If we really want to limit damage to climate change, the government should refuse to pick up the tab for flood insurance in flood areas. Nevertheless, this situation is dire in Pakistan and the Himalyas, an epic flood plane. But so is Austin, Texas. And that money would be better spent on covering low income familities energy bills during heat extremes in the US, which is the primary risk factor of climate change -- extended heat waves (not neccessairly in temperature, but perhaps in duration). 

[longterminvestor]

42 minutes ago, RadMan24 said:

Exactly, and very good point raised here that often isn't talk about. If we really want to limit damage to climate change, the government should refuse to pick up the tab for flood insurance in flood areas. Nevertheless, this situation is dire in Pakistan and the Himalyas, an epic flood plane. But so is Austin, Texas. And that money would be better spent on covering low income familities energy bills during heat extremes in the US, which is the primary risk factor of climate change -- extended heat waves (not neccessairly in temperature, but perhaps in duration). 

Sorry RadMan24, the Federal Government is the only entity with the balance sheet willing to pick up the flood risk in the US.  And banks will not provide a mortgage on a home in a flood zone without flood insurance.  Some private carriers have started to write private flood however the overwhelming majority of flood is underwritten by the US federal government - National Flood Insurance Program (NFIP).  NFIP total premium is roughly $3.5B.  Losses from large events Hurricane Sandy in 2012,  August 2016 Louisiana flood, and 2017 Hurricanes Harvey, Maria, and Irma added up to roughly $24B in claims.  Its a tough business.  

[Cigarbutt]

12 hours ago, RadMan24 said:

The IPCC provides no strong link between wildfires in the US and climate change....

 

..more talk about mitigating risks associated with extreme weather events 

Thanks for the healthy response!

----) away from BHE for a minute

The IPCC is an interesting organization and a very reasonable source of input for rational discussions. i would submit however that your above statement is a slight misrepresentation of their conclusions.

Overall, they conclude with "medium confidence" about certain aspects and we can argue about what medium confidence means but (opinion) it doesn't mean what you mean.

Here's their latest summary for North America:

With these multi-variable dynamic situations mixed with potential tribal feelings, it's sometimes hard to 'connect':

I learned about the above quote not because of the movie but because of the Guns N' Roses song Civil War which i often play during my typical winter training 'rides' in the basement but it's actually raining outside this AM (this is slowly becoming the norm around my latitude so maybe soon i can train outside all year long so climate ch**ge may not be all that bad?).

-----) Back to BHE

Although irritating and maybe enough, as an analogy, to consider leaving some states for insurers when regulators refuse to allow 'deserved' rate changes, there are 'things' that BHE can do (for example):

Global Strategies for Utility Wildfire Mitigation (ca.gov)

Edited January 26 by Cigarbutt
minor spelling mistakes

[RadMan24]

14 hours ago, Cigarbutt said:

Thanks for the healthy response!

----) away from BHE for a minute

The IPCC is an interesting organization and a very reasonable source of input for rational discussions. i would submit however that your above statement is a slight misrepresentation of their conclusions.

Overall, they conclude with "medium confidence" about certain aspects and we can argue about what medium confidence means but (opinion) it doesn't mean what you mean.

Here's their latest summary for North America:

With these multi-variable dynamic situations mixed with potential tribal feelings, it's sometimes hard to 'connect':

I learned about the above quote not because of the movie but because of the Guns N' Roses song Civil War which i often play during my typical winter training 'rides' in the basement but it's actually raining outside this AM (this is slowly becoming the norm around my latitude so maybe soon i can train outside all year long so climate ch**ge may not be all that bad?).

-----) Back to BHE

Although irritating and maybe enough, as an analogy, to consider leaving some states for insurers when regulators refuse to allow 'deserved' rate changes, there are 'things' that BHE can do (for example):

Global Strategies for Utility Wildfire Mitigation (ca.gov)

Yup, medium confidence is basically 50/50, inconclusive (behind likely, very likely and virtually certain). But, they had to put that and its a great alarm bell, there are long-term charts available it goes in waves, but hard to model out human ignition impacting natural rates (warming dries out, but atmopshere also holds more moisture, so its tough to know how it will unfold). And in some respects, i think at this point, we should just assume that climate change will be the leading rallying cry on wildfires for California on driving action.  At least it has started to address some fire suppression and mitigating impacts. We truly need this across all states -- there'll be a far higher populice supporting mitigation and hardening of protections against such events, which would be a benefit to utilities and insurers in the long run. 

 

 

And the realities of the world aspect:

[John Hjorth]

@RadMan24 & @Cigarbutt,

 

How do you gents use and what do you mean by , and what does the term 'wildfire supression' mean in this actual context? [I'm not sure I understand it correctly.]

[RadMan24]

10 hours ago, John Hjorth said:

@RadMan24 & @Cigarbutt,

 

How do you gents use and what do you mean by , and what does the term 'wildfire supression' mean in this actual context? [I'm not sure I understand it correctly.]

Keeping fires out of the forest -- letting dead trees and brush accumulate that - when ignitied - burns more foroscisuly and hotter than otherwise had natural fires been allowed over the past say 50+ years.

 

So if Pacificorp's utility line falls down due to high wind, for example, and ignites a fire, in a fire suppressed area, ugly results can occur.

[John Hjorth]

13 minutes ago, RadMan24 said:

Keeping fires out of the forest -- letting dead trees and brush accumulate that - when ignitied - burns more foroscisuly and hotter than otherwise had natural fires been allowed over the past say 50+ years.

 

So if Pacificorp's utility line falls down due to high wind, for example, and ignites a fire, in a fire suppressed area, ugly results can occur.

 

Thanks, @RadMan24,

 

That's not so hard to do something about. Danish style solution is, - and has been for now about two decades, I think,  to dig - all powerlines - into the ground, smashing more than one flie in one slap : Not only [reverse?] fire protection, but also storm protection and frost protection [think Texas not so long ago].

Edited January 27 by John Hjorth

[Cigarbutt]

10 hours ago, John Hjorth said:

 

Thanks, @RadMan24,

That's not so hard...underground

There is a school of thought (moderate evidence (including in the western usa area) with medium confidence...) that suggests that relatively heavy suppressive efforts (fire fighting etc) around wildfires from the last decades may have prevented nature's work and may have caused a build-up of 'fuel', potentially explaining (at least some) higher acreages burned more recently etc. This is why some groups are advocating for prescribed burns done under control (happening in Oregon).

-----

sidenote:

This notion of human interference with nature is, at least when applied in a positive way on a net basis, one the foundations behind human progress. If interested, this is the idea of entropy vs human progress described by Pinker in Enlightenment. This is also why it's been felt that it's possible for humans to interfere with the 'natural' laws of the economy and introduce some kind of Great Moderation... But progress is not always linear or (at least temporarily) in the right direction?

-----

This part of the post is derived mostly from work done some time ago based on the 'reorganization' of PG&E, a California-based investor-owned electric utility. (In one the PCG threads from the time, i had suggested that PG&E could have been acquired at an opportunistic time by BRK as wildfire costs had been priced in and more; that was before Oregon fires got into the picture with real and non-vicarious income statement effect at the parent).

Underground lines are costly, especially under certain geographical circumstances. For example, in the case of PG&E after their fire-related financial pressures, it's being proposed that some specific increase in rates be linked to underground lines. This will be a slow process (now much less than 10% of their transmission lines) and they seem to focus in high risk areas. It's been estimated that only involving the cost of underground lines across the board, the typical California client would see its electric utility bill double. An option to look into but IMHO not a cheap panacea.