Berkshire Hathaway Energy

BNSF is the largest of our “Powerhouse Five,” a group that also includes Berkshire Hathaway Energy, Marmon, Lubrizol and IMC. Combined, these companies — our five most profitable non-insurance businesses — earned $13.1 billion in 2015, an increase of $650 million over 2014. Of the five, only Berkshire Hathaway Energy, then earning $393 million, was owned by us in 2003. Subsequently, we purchased three of the other four on an all-cash basis. In acquiring BNSF, however, we paid about 70% of the cost in cash and, for the remainder, issued Berkshire shares that increased the number outstanding by 6.1%. In other words, the $12.7 billion gain in annual earnings delivered Berkshire by the five companies over the twelve-year span has been accompanied by only minor dilution. That satisfies our goal of not simply increasing earnings, but making sure we also increase per-share results.

WARREN BUFFETT: Yeah. I can tell you — and I may write about this next year in the report, though — that Burlington Northern has the best safety record among the big railroads. And Berkshire Hathaway Energy, it’s extraordinary, their safety record, in terms of utilities. And every new utility we purchase at Berkshire Hathaway Energy, we’ve brought — the safety statistics, they’ve gotten far better after Greg Abel has taken over. WARREN BUFFETT: And one thing that has helped in this respect, is that wind and solar are — the development of wind and solar at present — are dependent on tax credits. In other words, the federal government has made a decision that the market system would not produce solar or wind under today’s economics, but it has an interest, as a society, in developing it. So they have established a credit — I think it’s one-point — electric is 1.9 cents a kilowatt — for ten years. And because Berkshire Hathaway Energy is part of the consolidated tax return of Berkshire Hathaway Incorporated, it has been able to invest far more money than it would make sense to invest on a stand-alone basis. Among electric utilities in the United States, there’s really no one situated as well as MidAmerican Energy is, because it’s part of this consolidated tax return, to really put its foot to the floor, in terms of developing wind and solar.

Which suggests that we return to the performance of our non-insurance businesses. Our two towering redwoods in this grove are BNSF and Berkshire Hathaway Energy (90.9% owned). Combined, they earned $9.3 billion before tax last year, up 6% from 2017. You can read more about these businesses on pages K-5 — K-10 and pages K-40 — K-45.

Our second and third most valuable assets — it’s pretty much a toss-up at this point — are Berkshire’s 100% ownership of BNSF, America’s largest railroad measured by freight volume, and our 5.4% ownership of Apple. And in the fourth spot is our 91% ownership of Berkshire Hathaway Energy (“BHE”). What we have here is a very unusual utility business, whose annual earnings have grown from $122 million to $3.4 billion during our 21 years of ownership.

And Warren touched on it. At Berkshire Hathaway Energy, post the Fed action, we actually issued $4 billion of securities that was associated with debts or obligations we had maturing — some short-term obligations we wanted to clearly lengthen out. WARREN BUFFETT: Yeah. Berkshire is almost certain to generate cash. I mean nothing’s 100 percent certain but — and we’re, as Greg mentioned, at Berkshire Hathaway Energy we had some short-term financing.

And I don’t think they’ve read the reports of Berkshire Hathaway Energy. And I don’t think they know. You know, if I talk about what we’re doing in high voltage transmission, we’re doing more than any company in the country. The president talked about what the government’s going to do, and how important it is, and, you know. We have a record in that’s, overall, is incredibly good. But we have a group of organizations, just generally, and they’re nice people. But they want us to answer a bunch of questionnaires their way, so they want us to go to Dairy Queen and Borsheims, and all those people, and have them fill out reports that show a bunch of figures. But the reports that count are the reports that Greg gets on Berkshire Hathaway Energy and the railroad (BNSF). You talk about three of our companies, and you’ve covered 95% of it. And it’s asinine, frankly, in my view. Now, we do some other asinine things, because we’re required to do them. And they’d hand me something, and I know the answer to it already, and it doesn’t make any difference. I mean they’ve got the money they need. So, we don’t do things just because we’ve got a department of this or a department of that. And we don’t want to set up a lot of departments like that. And what’s important is what we’re doing in the — well, primarily at Berkshire Hathaway Energy and the railroad. I mean that’s — and I’ll let Greg tell you about that in just one second. But the —

At Berkshire’s annual gathering on May 6, 2023, I presented the first quarter’s results which had been released early that morning. I followed with a short summary of the outlook for the full year: (1) most of our non-insurance businesses faced lower earnings in 2023; (2) that decline would be cushioned by decent results at our two largest non-insurance businesses, BNSF and Berkshire Hathaway Energy (“BHE”) which, combined, had accounted for more than 30% of operating earnings in 2022; (3) our investment income was certain to materially grow because the huge U.S. Treasury bill position held by Berkshire had finally begun to pay us far more than the pittance we had been receiving and (4) insurance would likely do well, both because its underwriting earnings are not correlated to earnings elsewhere in the economy and, beyond that, property-casualty insurance prices had strengthened.

WARREN BUFFETT: Yeah, well, Greg I think, is the best to answer that because since we bought a company called MidAmerican but now called Berkshire Hathaway Energy. But he has been talking about it yearly, preparing reports hoping that we can help solve a number of the problems. And we probably spent more money than any utility, I would guess, in the United States. But the reality is it is state by state with some exceptions. So, as a result, when you think of Berkshire Hathaway Energy, we own three U.S. utilities there. And they all participate in multiple states. But they’re developing plans state by state and then trying to integrate them across the various states.

(in $ millions) 2024 2023 Insurance-underwriting $9,020 $5,428 Insurance-investment income 13,670 9,567 BNSF 5,031 5,087 Berkshire Hathaway Energy 3,730 2,331 Other controlled businesses 13,072 13,362 Non-controlled businesses* 1,519 1,750 Other** 1,395 (175) Operating earnings $47,437 $37,350

He asks, “In his 2024 annual letter to shareholders, Chairman Buffett noted the severe earnings disappointment experienced at Berkshire Hathaway Energy last year and expressed concern about earnings and asset values in the utility industry. The state utility regulator will be legally bound to prioritize public purchases of power and facilities that could include assets owned by Berkshire Hathaway Energy’s PacifiCorp utility, Rocky Mountain Power.