Berkshire Hathaway’s acquisitions
Berkshire Hathaway (BRK-B) manages its energy businesses through BHE (Berkshire Hathaway Energy), in which it has an 89.9% stake.
BHE’s utility interests in the United States currently consist of PacifiCorp, MidAmerican Energy, and NV Energy, the latter having been acquired in December 2013.
Oil prices (USO) have been hovering around $40, after rising to $50 in the month of June. Berkshire has invested primarily in its Utilities, Pipelines, and Transmission businesses rather than in the Upstream Oil business. This has helped the company expand even in times of low oil prices.
Berkshire recently made an investment of $396 million in Kinder Morgan (KMI) at distressed pricing. The stock has risen by 21% over the past three months.
Kinder Morgan has been impacted by weakness in its Carbon Dioxide segment and depressed commodities prices. Berkshire Hathaway’s Energy division posted revenues of $4.3 billion in 2Q16 for its BHE subsidiary, as compared to $4.5 billion during the same quarter last year. The fall was mainly due to lower revenues from NV Energy, Northern Powergrid, and other energy businesses.
Power stations and natural gas
BHE also operates a diversified portfolio of independent power projects and the second-largest residential real estate brokerage company 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.
BHE’s earnings before taxes rose to $666 million in 2Q16, as compared to $649 million during the same quarter last year. Earnings for PacifiCorp rose due to lower energy and natural gas costs.
Berkshire competes with utility operators and asset managers such as Kohlberg Kravis Roberts & Company (KKR), Blackstone Group (BX), and other major players that make up part of the Utilities Select Sector SPDR ETF (XLU).
Now let’s take a closer look at Berkshire’s manufacturing business.