How Did Berkshire Hathaway Energy Grow?



Expanded business

Berkshire Hathaway (BRK-B) posted revenues of $5.1 billion in 3Q15 for its subsidiary Berkshire Hathaway Energy, or BHE, as compared to $4.9 billion in the prior year’s quarter. The increase was mainly due to an addition of electric transmission business in Canada during 4Q14. BHE acquired AltaLink in December 2014. AltaLink operates a regulated electricity transmission-only business in Canada. BHE sets up the price after including the return on capital on top of operating costs subject to regulatory approvals.

Berkshire Hathaway manages its energy businesses through BHE, where it owns an 89.9% stake. BHE’s utility interests in the United States currently consist of PacifiCorp, MidAmerican Energy, and NV Energy, the latter being acquired in December 2013.

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BHE also operates a diversified portfolio of independent power projects, and the second-largest residential real estate brokerage firm and franchise network in the United States. It also owns two domestic regulated interstate natural gas pipeline companies. Outside the United States, BHE operates two regulated electricity distribution businesses in the United Kingdom known as Northern Powergrid.

Higher operating income

Earnings before taxes for BHE rose to $1.2 billion in 3Q15 as compared to $1.1 billion in the prior year’s quarter. The division’s net earnings stood at $786 million in 3Q15 as compared to $697 million in 3Q14. Earnings for PacifiCorp and MidAmerican Energy rose due to lower energy and natural gas costs.

Berkshire Hathaway has less exposure to refining and oil extraction in its portfolio. As a result, the company hasn’t seen too much of an impact on its earnings stemming from falling oil prices (USO) in 2015.

Berkshire competes with utility operators and asset managers like KKR (KKR), Blackstone (BX), and other major players forming part of the Utilities Select Sector SPDR ETF (XLU).


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