Berkshire Hathaway’s BHE Focuses on Natural Gas and Power Stations



Berkshire Hathaway’s acquisitions

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

Berkshire Hathaway’s energy division posted revenues of $5.1 billion in 3Q15 for its BHE subsidiary, compared to $4.9 billion during the same quarter last year. The increase was mainly due to an addition of electric transmission business in Canada during 4Q14.

BHE also 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.

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Power stations and natural gas

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.

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

What about oil extraction and refining?

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 & Company (KKR), Blackstone Group (BX), and other major players that make up part of the Utilities Select Sector SPDR ETF (XLU).

Now let’s look at Berkshire Hathaway’s recent performance in the manufacturing industry.


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