10-Q: Berkshire Hathaway Energy Reports Second Quarter 2024 Financial Results

Berkshire Hathaway Energy Company reports a net income of $993 million for the second quarter of 2024, but adjusted earnings on common shares decreased by 17% compared to the same period in 2023.

Summary

• Berkshire Hathaway Energy Company (BHE) reported a net income of $993 million for the second quarter of 2024, compared to $1.205 billion in the second quarter of 2023.
• Net income attributable to BHE shareholders was $954 million for the second quarter of 2024, compared to $1.075 billion in the second quarter of 2023.
• Adjusted earnings on common shares for the second quarter of 2024 were $697 million, a decrease of 17% compared to $835 million in the second quarter of 2023.
• For the first six months of 2024, BHE reported a net income of $1.682 billion, compared to $2.308 billion for the same period in 2023.
• Adjusted earnings on common shares for the first six months of 2024 were $1.458 billion, an increase of 15% compared to $1.270 billion for the same period in 2023.
• The decrease in earnings on common shares for the second quarter and first six months of 2024 compared to 2023 was primarily due to wildfire loss accruals, net of expected insurance recoveries, which were $202 million higher for the second quarter of 2024 and $157 million lower for the first six months of 2024.
• Electric retail customer volumes increased 3.2% for the first six months of 2024 compared to 2023, primarily due to higher customer usage and an increase in the average number of customers, partially offset by the unfavorable impact of weather.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there are positive aspects like increased electric retail customer volumes, the overall tone is weighed down by decreased earnings and significant wildfire-related expenses.

Positives

• Electric retail customer volumes increased 3.2% for the first six months of 2024 compared to 2023, primarily due to higher customer usage and an increase in the average number of customers.
• BHE Pipeline Group's earnings increased $47 million for the second quarter and $177 million for the first six months of 2024 compared to 2023, primarily due to the acquisition of an additional 50% limited partner interest in Cove Point on September 1, 2023, and higher margin on gas sales from system balancing activities and higher transportation revenue at Northern Natural Gas for the first six months.
• Northern Powergrid's earnings increased $53 million for the second quarter and $128 million for the first six months of 2024 compared to 2023, primarily due to higher distribution revenue and lower income tax expense from charges recognized in 2023 related to the Energy Profits Levy income tax and a group relief tax claim recognized in 2024.

Negatives

• BHE's net income for Q2 2024 was $993 million, down from $1.205 billion in Q2 2023.
• Adjusted earnings on common shares for Q2 2024 decreased by 17% to $697 million.
• Net income for the first six months of 2024 was $1.682 billion, compared to $2.308 billion in the first six months of 2023.
• Adjusted earnings on common shares for the first six months of 2024 increased by 15% to $1.458 billion.
• Wildfire loss accruals, net of expected insurance recoveries, were $202 million higher for the second quarter of 2024 and $157 million lower for the first six months of 2024.
• BHE Renewables' earnings decreased $68 million for the second quarter and $46 million for the first six months of 2024 compared to 2023, primarily due to lower earnings from the wind tax equity investment portfolio and gains on the extinguishment of debt recognized in the second quarter of 2023.

Risks

• The outcomes of legal or other actions and the effects of amounts to be paid to complainants as a result of settlements or final legal determinations associated with the Wildfires, which could have a material adverse effect on PacifiCorp's financial condition and could limit PacifiCorp's ability to access capital on terms commensurate with historical transactions or at all and could impact PacifiCorp's liquidity, cash flows and capital expenditure plans.
• The respective Registrant's ability to reduce wildfire threats and improve safety, including the ability to comply with the targets and metrics set forth in its wildfire mitigation plans; to retain or contract for the workforce necessary to execute its wildfire mitigation plans; the effectiveness of its system hardening; ability to achieve vegetation management targets; and the cost of these programs and the timing and outcome of any proceeding to recover such costs through rates.
• The ability to economically obtain insurance coverage, or any insurance coverage at all, sufficient to cover losses arising from catastrophic events, such as wildfires.

Future Outlook

Each Registrant undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Industry Context

The announcement reflects the ongoing challenges and opportunities within the energy industry, particularly concerning renewable energy investments, regulatory impacts, and the increasing costs associated with wildfire mitigation.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• However, it does mention the impact of regulatory rate reviews, which are common in the utility industry.
• The document also discusses the impact of weather conditions on customer growth and usage, which is a common factor affecting utility companies.

Legal Proceedings

• As of June 30, 2024, amounts sought in outstanding complaints and demands filed in Oregon and in certain demands made in California totaled approximately $3 billion, excluding any doubling or trebling of damages included in the complaints and the mass complaints described below that seek $43 billion.
• In January 2024, the Multnomah County Circuit Court Oregon entered a limited judgment and money award for the June 2023 James verdict. The limited judgment awards $92 million of damages based on the amounts awarded by the jury, as well as doubling of the economic damages and offsetting of any insurance proceeds received by plaintiffs.
• In January 2024, the jury for the first James damages phase trial awarded nine plaintiffs $62 million of damages, including $6 million of economic damages and $56 million of noneconomic damages.
• In March 2024, the jury for the second James damages phase trial awarded ten plaintiffs $42 million of damages, including $12 million of doubled economic damages, $23 million of noneconomic damages and $7 million of punitive damages using the 0.25 multiplier determined by the jury for the June 2023 James verdict.
• In March 2024, settlement was reached with five commercial timber plaintiffs in the James consolidated cases, and the jury trial scheduled for April 2024 was cancelled.
• In April, May and July 2024, four separate mass complaints against PacifiCorp naming 1,443 individual class members were filed in Multnomah County Circuit Court Oregon referencing James as the lead case.
• In April 2024, HomeServices agreed to terms with the plaintiffs to settle all claims asserted against HomeServices, HSF Affiliates, LLC and BHH Affiliates, LLC in the Burnett case as part of a proposed nationwide class settlement. The final settlement agreement, which includes scheduled payments over the next four years aggregating $250 million, has yet to be filed with the court and is ultimately subject to court approval.

Stakeholder Impact

• The outcomes of legal or other actions and the effects of amounts to be paid to complainants as a result of settlements or final legal determinations associated with the Wildfires, which could have a material adverse effect on PacifiCorp's financial condition and could limit PacifiCorp's ability to access capital on terms commensurate with historical transactions or at all and could impact PacifiCorp's liquidity, cash flows and capital expenditure plans.
• The respective Registrant's ability to reduce wildfire threats and improve safety, including the ability to comply with the targets and metrics set forth in its wildfire mitigation plans; to retain or contract for the workforce necessary to execute its wildfire mitigation plans; the effectiveness of its system hardening; ability to achieve vegetation management targets; and the cost of these programs and the timing and outcome of any proceeding to recover such costs through rates.

Next Steps

• PacifiCorp is actively cooperating with the U.S. and Oregon Departments of Justice on resolving alleged claims through alternative dispute resolution.
• PacifiCorp is pursuing review of the WPSC decision in federal and state courts in Wyoming.
• The EPA is expected to take final action on Iowa's SIP by the end of 2024.

Key Dates

Keywords

Berkshire Hathaway Energy, financial results, net income, earnings, wildfires, PacifiCorp, MidAmerican Energy, NV Energy, Northern Powergrid, BHE Pipeline Group, BHE Transmission, BHE Renewables, HomeServices, energy industry, utilities