Author Topic: Berkshire Hathaway Energy  (Read 2970 times)

longinvestor

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Re: Berkshire Hathaway Energy
« Reply #10 on: June 28, 2019, 08:01:50 AM »
The slide deck clearly states “capital plan” and not projection. This is a regulatory filing only.

It’s up to each of us to read into it beyond what’s published but here’s my take on the very same table.

1. As early as the first months of the three year period 2019-2021, they had already revised the plan from “previous “ to the tune of +$1B on 15 B. Don’t know when “previous “was.
2. The plan is clearly front loaded even within the period. So as opposed to them spending less in year three, they want to spend it as fast as possible. Will there be another plan update before 2021? I don’t know but expect it.
3. Through this report they are clearly touting “look we’re investing, the competition is keeping the money” to the regulatory bodies. And touting how their rates are lower than the field.

No, there’s no projection at all but the bias is to deploy more and now!

« Last Edit: June 28, 2019, 09:28:09 AM by longinvestor »


longinvestor

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Re: Berkshire Hathaway Energy
« Reply #11 on: June 28, 2019, 08:36:33 AM »
This topic has me riled up so much that I can’t contain my finger twitching so here goes.

This year for the first time at the annual meeting that I recall, Buffett thanked Walter Scott for bringing BHE to the fold in 1999. In Cunningham ‘s book, there’s an episode describing Warren being pulled aside by Scott to talk about the energy business and handing him a report of sorts and a few days later MidAmerican was part of Berkshire Hathaway. I want to read that report. In an important way, BHE has paved the pathway for Berkshire beyond Buffett. To me it’s no surprise at all that Greg Abel is perched high up. The promise of 100 B or more into BHE is borne out in the regulatory filing we’re thrashing around.

If there’s any obstacle it’s regulatory in nature. The rest of the hurdles are “1 foot”.
« Last Edit: June 28, 2019, 08:44:28 AM by longinvestor »

Dynamic

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Re: Berkshire Hathaway Energy
« Reply #12 on: June 28, 2019, 09:36:08 AM »
I think actually (and hopefully it's not wishful thinking), you're probably right to point out that it's very likely that capex will not decline significantly and that these planned expenditures will be increased with additional capex as plans develop further.

I suspect the incentives haven't changed too drastically, despite a few of Trump's intentions to boost coal and rein in renewables incentives at the Federal level and all the 'newspeak' recently about 'freedom molecules' and so on is more about messaging to his supporters than policy changes being implemented widely.

Certainly the ROE allowances are amenable to incentivizing continued capex for companies as future-oriented as BHE

longinvestor

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Re: Berkshire Hathaway Energy
« Reply #13 on: June 28, 2019, 12:10:01 PM »
I think actually (and hopefully it's not wishful thinking), you're probably right to point out that it's very likely that capex will not decline significantly and that these planned expenditures will be increased with additional capex as plans develop further.

I suspect the incentives haven't changed too drastically, despite a few of Trump's intentions to boost coal and rein in renewables incentives at the Federal level and all the 'newspeak' recently about 'freedom molecules' and so on is more about messaging to his supporters than policy changes being implemented widely.

Certainly the ROE allowances are amenable to incentivizing continued capex for companies as future-oriented as BHE

I think so too, all this noise gets drowned out by economics of wind and solar energy; At 3.5 cents per kWh and the last hurdle of time shifting of power solved within this cost, any messaging for fossil fuels will be blown away by the wind:-)  We are talking about the grandmother of all commodities, the flow of electrons! I say that renewables get implemented furiously from here on.
« Last Edit: June 28, 2019, 01:35:54 PM by longinvestor »

Dynamic

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Re: Berkshire Hathaway Energy
« Reply #14 on: July 02, 2019, 12:55:50 PM »
I agree. I'm optimistic that the economic forces of such inexpensive power (and still declining rapidly in cost) will soon completely undermine any efforts by the fossil fuel lobby and climate change deniers funded by them to prevent the retirement of the most polluting and least efficient fossil fuel generation at first, and almost all of it eventually. I think there need to be a few incentives to encourage such large up-front capex at this point, which will create the demand that will further lower the cost, but it's pretty clear that the cost curve for wind is on a significant decline and for solar the decline is steep almost to the point of precipitous, such that it's now falling below wind on a direct price/kWh basis and is soon likely to be cheaper even when including the cost of storage typically required to time shift supply to meet evening demand. Low interest rate financing certainly helps to fund the capex, and in Berkshire's case, the tax treatment allows these technologies to provide returns above their hurdle rate, encouraging truly huge capital investment while sustaining low power bills for end users. I suspect there may be benefits to the likes of Google, Facebook, Microsoft and Amazon, locating many of their vast data centers close to renewable energy sources, not the least being in term of energy cost savings.

It's also clear from many parts of the world, including Norway with it's sparse population and the UK with its large coastline for offshore wind despite its high population density, that a low carbon, high reliability grid is not the problem it is often painted as by the fossil fuel lobby. As a UK resident able to choose my supplier (but paying for the network services indirectly through their billing), my cheapest suppliers (I switch most years) have nearly always been 100% renewable for electricity, with only natural gas (methane) for heating and cooking being fossil based. (There are suppliers working on bringing green methane gas to market too). I believe it's the case that the offshore wind industry has employed a lot of former oil and gas workers whose skills are transferable to that sector after oil prices plummeted, though many helicopter pilots who used to serve Norwegian and British oil and gas rigs are no longer employed in that sector.

I suspect that by switching from fuel costs paid to various oil exporting nations to capex and maintenance costs, the costs to build and maintain green energy facilities over time will continue to boost local employment rather than paying oil workers and well owners in other countries. If the costs of renewables continue to get lower, it's likely than maintenance expense per kWh will remain similar, but the capex savings will reach the consumers by way of lower utility bills, and will presumably also boost their spending on goods and services, at least some of which are likely to be spent locally.

I think there's a virtuous circle that will probably increase the rate of uptake, and it's not looking like a promising time for new investments into coal technology, though gas peaker plants may have a place for a little while longer, until battery supply completely supplants those with superior response time for frequency stabilisation and peak shaving and at lower cost too. The huge automotive demand for batteries is also an important driver for rapid cost and energy density improvements in battery storage and possibly even power inverters.

John Hjorth

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Re: Berkshire Hathaway Energy
« Reply #15 on: July 08, 2019, 02:44:09 PM »
https://finance.yahoo.com/news/nevada-utility-announces-three-major-175634324.html

Utility scale solar with battery storage. 3.5 cents per KWH to produce.

I did a search before creating a topic with this title. After all this is where most capital is going to go. As a shareholder my eyes are on this. At the annual meeting there was a question from Greg Warren, I think about the slowdown in the pace of capital projects @ BHE. I had spent a good amount of time at the BHE booth and they were buoyant about this and other topics. Watch BHE.

Thank you for starting this topic, longinvestor,

Actually, it's a bit weird, that we haven't really discussed this Berkshire investment in depth earlier. I have started tinkering with numbers for it, to calculate - over the ownership period - how much it has actually contributed to Berkshire group equity. I'm a bit lazy at the moment - I think it's vacation mode that's setting in - so it'll take some time before I post something about it here in this topic - what I already can say is that the numbers, compared to the initial investment - are no less than mind-boggling.

- - - o 0 o - - -

With regard to capital allocation, we have to remember :

1. The "Constellation case" [2008] [No, not CSU.TO, but Constellation Energy!] - It ended up as a no-go [,if one can call "Consists of a breakup fee of USD 175 million and and profit on our investment of USD 917 million" a "no-go"],
2. The "Oncor case" [2017], &
3. Among Danes, there is a saying [in Danish here] : "Alle gode gange tre!". That translates word-by-word to : "All good times three!", meaning : "Third time may the time of luck!". Also in this industry, in future, there will be players, who confuse trading with speculation, and/or who will eventually end with screwing up their balance sheet.

I would not be surprised later to observe, that the next large Berkshire acquisition would be related to BHE.
”In the race of excellence … there is no finish line.”
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longinvestor

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Re: Berkshire Hathaway Energy
« Reply #16 on: July 16, 2019, 06:05:00 PM »
https://buffett.cnbc.com/video/2019/05/06/afternoon-session---2019-berkshire-hathaway-annual-meeting.html

Since the topic was discussed earlier here, I was able to locate the relevant portion from the agm where Greg Warren asked about the “declining“ capital investment in 2021. Starting at the 49 minute marker. It is clear that he had read the same presentation by BHE that we have also. Greg Abel confirms what we concluded here; that only the committed capital plan was disclosed. He goes on to say that there are phase II and III of capital deployment especially in the Pacificorp sub. They are not approved by the regulators yet.

But all of them, Warren Buffett, Charlie Munger and Greg Abel reinforce the pedal to the floor bias @BHE

longinvestor

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Re: Berkshire Hathaway Energy
« Reply #17 on: July 17, 2019, 04:47:22 AM »
Buffett has often repeated “stay rich versus get rich” with utilities. I did a two column spreadsheet, one with a 10% earning rate for 100 years and the other with a 10% rate but with a recession every 7 years where I assumed a 10% loss during those years. The difference is astronomical in 2119 AD. Especially with a larger starting earning. Any upside because of tax shelters etc. will be huge 100 years from now.

No wonder they like it so much.