Thursday, October 25, 2012

Iowa Utility Giant MidAmerican Energy Holdings Co Generated Consistently Strong Earnings During the Obama Administration

Iowa doesn't have any large Utility companies whose common stocks trade.  The huge Des Moines-based MidAmerican Energy Holdings Co (MEHC) is wholly-owned by Berkshire Hathaway.

However, MEHC does file its separate financial statements with the SEC.

And so do two large Utility Company components of MEHC.....PacifiCorp and MidAmerican Energy Co.

PacifiCorp is based in Portland, OR and provides utility services in many Northwestern US States.

MidAmerican Energy Co. provides utility services in some Midwestern US States. 

So, just how did these Utility companies perform during the Obama Administration?

Well, just dandy.....just incredibly consistently stable earnings in all years.

In 2011, MEHC's total earnings were $1,352 mil, up 10% from the $1,225 mil of earnings in 2008.  MEHC's 2008 reported earnings were $1,871 mil, but this included a huge, clearly unusual $646 mil gain resulting from the termination of MEHC's merger agreement with Constellation Energy.  To make 2008 earnings more meaningful, I excluded it in deriving my above $1,225 mil.

Below here are the Audited After-tax Net Income of each of these three Utility Companies for each of the most recent five years.

2011 2010 2009 2008 2007

Net Net Net Net Net

City State Income Income Income Income Income

HQs HQs (Loss) (Loss) (Loss) (Loss) (Loss)

mil $s mil $s mil $s mil $s mil $s

PacifiCorp Portland OR 555 566 550 465 445
MidAmerican Energy Co Des Moines IA 319 357 350 343 325
Rest of MEHC
478 387 288 417 449
= MidAmerican Energy Holdings Co (MEHC) Des Moines IA 1,352 1,310 1,188 1,225 1,219

Annual Earnings Percentage Change
3% 10% -3% 0%

Three Year (2008-2011) Earnings Increase Under Obama





OK, so that's cool.  MEHC looks like a great Utility company.  So, how has this been reflected by the stock market?

Well, MEHC's stock isn't public, but its parent's common stock, that of Berkshire Hathaway, does trade.  Its common stock price has increased by a very healthy 44% during the Obama Administration.

And MEHC's Net Income comprised 13% of Berkshire Hathaway's Total Net Income in 2011.

But clearly the intrinsic value of MEHC has increased dramatically during the Obama Administration.

In an earlier post, I showed that the 56 Largest US Utility Corps had an average stock market price increase of an incredible 47% during the Obama Administration.

And the Largest US Utility Corps had their 2011 total earnings increase by 9% over 2008, thus during the Obama Administration.

MEHC's total earnings increased by 10% during the Obama Administration.

Thus, I see no reason why MEHC's intrinsic market value wouldn't have increased reasonably close to this 47% average for all of the largest US Utility Corps.

And yeah, the Obama Administration did play a key role in this very robust Utility Corps stock price increase.

With its wise actions to fix the broken US financial system, the Obama Administration substantially reduced the elevated risk which was in Utility Stocks after the 2008 financial collapse.  These actions resulted in increasing the stock prices of Utility Stocks.

Further, with the Obama Administration working closely with the Fed, interest rates were substantially reduced, thereby significantly benefiting Utility Corps, which have a very heavy debt load due to their substantial investments in Property, Plant and Equipment.  Thus, Utility Corps are now able to borrow at much cheaper interest rates.

All MEHC Utility Corp executives, all of their employees, their Boards of Directors, and the stockholders of Berkshire Hathaway have to all be very happy with the substantial intrinsic value increase of MEHC during the Obama Administration.  And there are MEHC employees in so many's not just Iowa, but also other Midwestern US States Ilinois, South Dakota, and Nebraska and also Northwestern US States, not just Oregon, but also Utah, Wyoming, Washington, Idaho, and California.

And these same citizens also must be very pleased with how the Obama Administration worked so hard and very effectively on so many fronts to fix the clearly broken US financial system and to also create a US economic environment that permitted companies to flat out flourish.  This highly successful effort created a robust US economic environment which was quite a change from what existed in the just horrible financial meltdown, near Depression year of 2008.

Iowa also has another large Utility Corp that files with the SEC.....Cedar Rapids-based Interstate Power and Light, which is a wholly-owned subsidiary of Madison,WI-based Alliant Energy.

Interstate Power and Light has experienced very stable annual earnings, which ranged between $139 mil and $153 mil in the most recent four years, and no doubt was a significant contributor to its parent Alliant Energy's 60% stock price increase during the Obama Administration, with its stock price advancing from $27.87 per share just before President Obama took office to $44.65 on Tuesday, October 23, 2012.