Just curious as to why the rate of capital deployment goes down?
He may just be basing it on BHE's own projections. Of course, their future plans don't reflect projects that aren't confirmed or opportunities that haven't come up yet. But as of earlier this year, they expected capital expenditures to decline. It probably won't actually happen. Projects are included in the projections as they are committed to.
https://www.sec.gov/Archives/edgar/data/71180/000108131619000007/ic2019.htm
(several mentions but slide 22 shows it fairly clearly)
Yes, their own projections are for a degree of reduction from an admittedly huge rate of capex and I remember seeing something like slide 22 somewhere in the last few months.
I'm not sure of the reasons, but I'd imagine slightly reduced cost of capex (meaning they need to spend less to get the same improvements would have some impact, though it looks to be modest) and reduced tax benefits (perhaps influenced by Trump's policies with regard to CO
2 reduction in comparison with Obama's and the expiry of certain schemes put in place some years ago).
That slide set is interesting, and I don't think that's the place I originally read about their projections of decline in capex.
It's fascinating to see such a huge discrepancy between Net Income Attributable to BHE and Cash Flows from Operations on various slides, with cash flow being consistently far higher since 2001 and also being around 4.5x interest expense.
The information on how tax rate reductions are being passed on to customers is also interesting. The settlements on rate reductions seem to be around 3-4% mostly, so as expected BHE will not retain the full benefit of the tax cuts and will share it with customers via rate reductions. Also interesting is certain jurisdictions having ROE limits above which a certain fraction of additional profits are shared with customers (some places it's 50%, some it's 90% that goes to customers).
I note that MAE has implemented a 1MW power / 4MWh energy storage (thus 4 hours' supply at full power) battery using Lithium Iron Phosphate tech (sounds like BYD's favoured cell chemistry but not necessarily only theirs) with inverter/transformer in 2018 for $3m as a pilot project mostly used for energy balancing purposes. That's about $750 per kWh all in for a trial site (compare capacity to 40 Tesla Model S/X 100 kWh batteries or 625 first gen Tesla Powerwalls. I imagine the cells would be somewhere in the $150-$300 per kWh range, and the other costs would be for inverter/transformer and the costs of developing and installing the site and designing/running the project.
It's also interesting to see MAE's asset profile versus its power profile. First, coal, gas and nuclear have declined substantially in 18-19 years. The Wind generation and other assets are now 87% thanks to huge investment but their power contribution is 59% (on a net MW owned in operation and under-construction basis). Coal 12% and Gas 1% have a much smaller asset base, but can supply 24% and 13% of peak power capacity (with Nuclear and Other providing 4%). But of course, they also consume fuel over their lifetime, which wind doesn't, although it does consume maintenance costs and a few consumables. This is a major shift and should pay off very nicely for MAE and BHE as a whole in the long term as a reward for the enormous capital infusion (funded by retained earnings and relatively cheap debt that is non-recourse to Berkshire Hathaway Inc).
Let's hope that regulators and technical innovations allow plenty of scope for more profitable capex in BHE in the future.
