Berkshire Hathaway Energy

[Spekulatius]

I am surprised that WEB isn’t more interested in pipelines, since the FERC regulation is often more favorable than utility regulation. He did indeed buy some pipeline assets in 2001 or so post the IPP crash from Williams and I believe one from Dynegy (which bought it from Enron shortly before and then they got into trouble themselves). I believe he laid around 8x EBITDA for utility like assets, which was cheap. Now we have pretty decent pipeline companies valued at 10x EBITDA (maybe a bit less even) when interest rates are much much lower. Might be a time for them to at least start looking.

 

[Cigarbutt]

I am surprised that WEB isn’t more interested in pipelines, since the FERC regulation is often more favorable than utility regulation. He did indeed buy some pipeline assets in 2001 or so post the IPP crash from Williams and I believe one from Dynegy (which bought it from Enron shortly before and then they got into trouble themselves). I believe he laid around 8x EBITDA for utility like assets, which was cheap. Now we have pretty decent pipeline companies valued at 10x EBITDA (maybe a bit less even) when interest rates are much much lower. Might be a time for them to at least start looking.

I would say the interest is there and the finger may be on the trigger.

 

Just look at the stake in Phillips 66. It's an integrated and diversified company but pipelines are part of its core operations and, in 2014, which is yesterday in a way, Mr. Buffett (I don't think that one came from the lieutenants) bought the Philips Specialty Products unit from the parent. The now integrated chemical sub is not a pipeline asset per se but the move constitutes a significant vote of confidence for pipelines in general, an investment posture confirmed by public endorsement of key but controversial pipeline projects.

 

Also look at the ownership in Suncor Energy. Suncor is also diversified and integrated, and pipeline operations may not be the primary driver of future returns but a bet on Suncor is, in a way, a vote that the pipeline approval process will move forward, somehow.

 

Pipeline assets are very interesting but my investing style may prevent me from making easy money like you. :)

[Guest longinvestor]

https://kiwaradio.com/local-news/midamerican-installs-electric-vehicle-fast-charging-station-at-sheldon-fareway-store/

 

MidAmerican has started installing fast charging stations across Iowa. Stated goal of a station every 50 miles. It is awesome on top of the 100% wind power. In the long run, as evs reach critical mass, this should help not needing to shut down turbines. This is all incremental load!

[DooDiligence]

https://kiwaradio.com/local-news/midamerican-installs-electric-vehicle-fast-charging-station-at-sheldon-fareway-store/

 

MidAmerican has started installing fast charging stations across Iowa. Stated goal of a station every 50 miles. It is awesome on top of the 100% wind power. In the long run, as evs reach critical mass, this should help not needing to shut down turbines. This is all incremental load!

 

I searched to find out how much it costs for a charge & couldn't find anything.

 

www.midamericanenergy.com/electric-vehicle-fast-charging-network

 

www.midamericanenergy.com/nr-electric-fast-charging-sites

[Guest longinvestor]

https://kiwaradio.com/local-news/midamerican-installs-electric-vehicle-fast-charging-station-at-sheldon-fareway-store/

 

MidAmerican has started installing fast charging stations across Iowa. Stated goal of a station every 50 miles. It is awesome on top of the 100% wind power. In the long run, as evs reach critical mass, this should help not needing to shut down turbines. This is all incremental load!

 

I searched to find out how much it costs for a charge & couldn't find anything.

 

www.midamericanenergy.com/electric-vehicle-fast-charging-network

 

www.midamericanenergy.com/nr-electric-fast-charging-sites

 

The model is for the business hosting the charging stations to set the price. MidAmerican will likely charge the host market rates for power. (my guess).

 

So on the production side, they pay farmers/land lords a rent to host the turbines and the access road(I hear it is $20k/year). On the consumption side, it's the same model. There's built in incentives on both ends. And for MidAmerican all they are doing is to drive as much consumption of the energy produced as possible. It's all fixed cost.

[Guest longinvestor]

 

Wonder if we’ll see Berkshire Hathaway energy buy this concrete energy storage technology? From what I have gathered they have/are using molten salt and batteries in their Solar installations in the West.

 

 

[CorpRaider]

Has anyone ever asked them about fiber to the premises as being a potential growth area in the future for BHE (and utes as a whole).  It seems like this covid thing has really highlighted, for me at least, that high speed internet is basically an essential utility. 

 

Seems like as they build out "smart" grids with all the way fiber to the meters they could just tack on fiber service to the home for almost zero marginal cost.  Seems like utes already have the rights of way and cable management, equipment, workforce expertise, etc to dominate this segment.  Though I know I've seen some SE regional utilities who built this stuff out some in the internet bubble and then sold it off/took a loss, but maybe they were just very early.

[scorpioncapital]

Is it known yet if it's better to get your solar power from your utility using their high volume arrays or to build your own solar solution on your house , buy the hardware and never pay a monthly recurring utility bill again ? Which way is it going to go ?

[rb]

At this point you're not gonna be able to get the kind of stable, reliable energy in volume from your own setup like you get from your utility company. I think it's likely that you never will.

[gfp]

At this point you're not gonna be able to get the kind of stable, reliable energy in volume from your own setup like you get from your utility company. I think it's likely that you never will.

 

Yeah at this point the utility scale solar+battery installations are going to have huge cost/scale benefits.  It also greatly depends on how policies on net-metering evolve in the future.  Many utilities have already tightened the terms on net metering.  My local utility, Entergy New Orleans, gives us a ridiculously good arrangement - which doesn't seem good for them and I would be surprised if it lasts.  We have over 14kW of solar on our roof - enough to power our entire house including central air conditioning.  We do not have batteries.  We are able to sell our excess power back into the grid at the retail price.  This is such a bad deal for Entergy.  Basically we have the worlds most efficient battery.  For free.  And our utility, which shouldn't be in the business of buying power at their retail rate is doing just that.  We give them excess power all day long (especially in the summer) - then use the credits at night and in the winter months.  It results in just about net zero power bill, but we still pay them for a basic service hookup and our natural gas usage. 

[kab60]

gfp, that was the way it used to work in Denmark as well. Fantastic deal (espescially since 80 pct of retail price here is taxes). So enjoy it while it lasts. :)

[plato1976]

I can see more and more residential and companies are shifting to install solar panels to supply electricity for themselves. Many of them gain "energy independence"

Won't this impact traditional utility business ?

Not sure if there is a quantification of this impact

 

[Guest longinvestor]

https://www.ferc.gov/news-events/news/ferc-modernizes-purpa-rules-ensure-compliance-reflect-todays-markets

 

PURPA, the 1978 deregulation of Utilities is the reason Walter Scott invested In MidAmerican. And Buffett bought into it in 1999. PURPA’s intent was to bring in market forces in place of monopolies. But as with all regs, there’re loopholes and much gaming has gone on. https://www.jdsupra.com/legalnews/ferc-revisions-to-purpa-rules-create-35558/ describes the gaming.

 

BHE is playing nice in eyes of regulators, mainly by holding ratepayer rates in check relative to peers.

 

An interesting tidbit I picked up is that private power (approx 40 entities) accounts for 72% of energy. Much consolidation to come. The rest comes from the balkanized coops, state power etc. The lowest cost producer stands to win. It may take 100 years but BHE will be there.

[alpha]

 

Right now Texans are burning their furniture to keep warm and demanding heads roll at ERCOT and related Government positions.

 

I wonder if there will be opportunity for a utility company with a solid reputation operational track record when the dust settles from this  :D

[RadMan24]

 

Right now Texans are burning their furniture to keep warm and demanding heads roll at ERCOT and related Government positions.

 

I wonder if there will be opportunity for a utility company with a solid reputation operational track record when the dust settles from this  :D

 

Depends. What do you know about Texas infrastructure? Aren't Texan homes made to cool down at night to evade the high heat of the summer? Same with roads? Sure natural gas pipes and other critical parts can address potential freezing problems in the future, but the sparse landscape of Texas makes brining outside electricity an hassle. From the outside, this seems like a perfect storm. I'm sure lots will be learned for such extreme events in the future.

[ValueMaven]

I've always said BHE should have handled the ONCOR transaction better then it did.  Hopefully it was a learning lesson for Able and team.  Would have been awesome assets inside of BHE...huge, regulated assets in need of massive capital build-out w/very stable rate basis. 

[ValueMaven]

Very interesting article on BHE ... well written and to the point

 

https://www.barrons.com/articles/why-berkshire-hathaway-energy-is-one-of-warren-buffetts-4-jewels-51614704142?mod=hp_columnists

[Xerxes]

Thanks

The article makes no mention of upcoming disruption of utilities - ie. Chamath's view that the utilities are about to be turned "upside down", whatever that means !

 

[TREVNI]

Very interesting article on BHE ... well written and to the point

 

https://www.barrons.com/articles/why-berkshire-hathaway-energy-is-one-of-warren-buffetts-4-jewels-51614704142?mod=hp_columnists

 

Thanks for sharing. The Barron's article references BRK purchases of shares from Scott. Here is the history through 2019.

[Xerxes]

Is it mostly all Scott and some (~1%) Greg Abdel as per Barrons'

Did David Sokol sold all of his when he left BRK back in 2011 ?

[gfp]

Is it mostly all Scott and some (~1%) Greg Abdel as per Barrons'

Did David Sokol sold all of his when he left BRK back in 2011 ?

 

Berkshire basically facilitated the transfer of Sokol's stock to Abel by financing Abel's purchase of stock.  That's how Abel was able to afford a block of stock currently worth over $500 million.  Abel's BHE shares are convertible into BRK.B shares and that is what I ultimately expect to happen once Greg is CEO of Berkshire.

[thepupil]

While I think the $53B number might be "fair", Berkshire Energy would probably be one of the most desirable ESG/GARP utility "stories" out there and would probably trade 2.0x+ book, $70-$75$80B+ (forgot that BE's 10-K is out and shows $43B of equity). This doesn't really matter because Berkshire won't sell/spin/whatever.

 

2.0x book for Berkshire Energy ($72B $86B) and 90% UNP ($120B) are my lazy shorthand "market comps" for those two. Not what I'd like to pay for them, but how I think about them in terms of the overall portfolio and marking everything "to market". It makes the AAPL position, for example, seem a bit less intimidating / daunting in its size if you know that BNSF is almost as big and that he's trimmed/trimming a little.

 

 

 

[valueinvesting101]

Another buyback of 180K shares for $126 million in 2020. Valuations at $53.35 billion. From latest AR for 2020.

[ValueMaven]

what better alignment could shareholders ask for from Greg?!  I mean $500M worth of BHE or BRKB exposure.  remarkable

[TREVNI]

what better alignment could shareholders ask for from Greg?!  I mean $500M worth of BHE or BRKB exposure.  remarkable

 

In my perfect world, Greg takes over and tells the board he's not worth as much as WB and asks for a $99,000 salary. he would really endear himself to shareholders if he did that, in my view. He's already rich multiple times over.