20170516Compliance Filing.pdf

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Paclfic Powcr I
Rocky Mountaln Powcr
825 NE Multnomah. Suite 2000
Porttand, Oregon 97232
May 16,2017
VA OVERNIGHT DELIVERY
Idaho Public Utilities Commission
472West Washington
Boise, ID 83702-5983
Attention:Ms. Diane Hanian
Commission Secretary
Re: Idaho Docket No. PAC-E-05-08 Compliance Filing
To the Idaho Public Utilities Commission:
PacifiCorp submits the attachment in compliance with the Commission's Order in the above
referenced case issued on February 13,2006 and amended on March 14,2006. The Order
approved the Stipulation supporting the acquisition of PacifiCorp by MidAmerican Energy
Holdings Company.r
CommitmentI20 of the Stipulation provides that PacifiCorp will provide to the Commission, on
an informational basis, credit rating agency news releases and final reports regarding PacifiCorp
when such reports are known to PacifiCorp and are available to the public.
Therefore, in compliance with Commitment I20 of the Stipulation, please find the attached credit
rating agency report related to PacifiCorp.
Very truly yours,
Weems
Treasurer
Enclosure
I On April 30,2014, MidAmerican Energy Holdings Company changed its name to Berkshire Hathaway Energy
Company.
FitchRatings
U.S. Corporates
Spotlight Series
Berkshire Hathaway
Energy Company
May 2OL7
Ratings
Berkshire Hathaway Energy Gompany
Subsidiary of Berkshire Hathaway, lnc.
Special Report
Ratings
Long-Term IDR
Short-Term IDR
Senior Unsecured
IDR - lssuer Default Rating.
Rating Outlook
Long-Term IDR
F2
BBB+
BBB+
Stable
Key Rating Drivers
BHE Ownership: Berkshire Hathaway Energy Company's (BHE) affiliation with Berkshire
Hathaway, lnc. (BRK, AA-/Stable) is a key factor supporting BHE's 'BBB+' lssuer Default
Rating (lDR). BRK's ownership of BHE allows the subsidiary to retain capital gpically paid out
in the form of dividends by investor-owned utilities (lOU). This dynamic is a function of BRK's
strong credit profile, large cash position (approximately $86 billion as of Dec. 31, 2016) and
investment appetite.
Positive FCF Projections: Unlike most lOUs, BHE is able to retain earnings normally paid out
in the form of dividends to attract equity capital. As a result of this and predictable, strong cash
flow from its diversified mix of utility and utility-like assets, Fitch Ratings estimates that BHE will
be FCF positive during2017-2020. FCF in 2015 and 2016 was $1.1 billion and $966 million,
respectively. Total adjusted debt declined approximately $600 million to $38.8 billion as of
Dec. 31, 2016 from $39.4 billion at the end of 2014. Fitch pro,lects that FFO-adjusted leverage,
which peaked in 2013 at 5.9x, will approximate 5.0x in 2017-2020.
Future M&A Likely: BHE has been an active consolidator in the utility, power and gas sector,
acquiring high-quality, low-risk electric and gas utilig, electric transmission and natural gas
pipeline assets. The impact of future M&A activity on BHE's credit quality will be a tunction of
price, asset quality and funding choices. Debt-funded acquisitions and/or acquisition of high-
risk profile businesses could challenge credit quality. Large acquisitions in recent years include
Altalink, L.P. (ALP) in2014 and NV Energy, lnc. (NVE, BBB-/Positive) in 2013.
Diversified, Regulated Asset Base: BHE'S ratings are supported by its large, highquality
portfolio of utility and utility-like assets primarily located in the U.S., Canada and Great Britain.
BHE owns three large U.S.-based integrated electric utilities with generally constructive
regulation operating in the U.S. Rocky Mountain, Pacific Northwest, Midwest and Desert
Southwest regions. Fitch expects cash from BHE's diverse portfolio will amply cover future
parent-only obligations.
Gonsolidated Financial Metrics: The acceleration of BHE's M&A activity in 2013 and 2014
and an associated increase in parent-company leverage is estimated by Fitch to pressure
BHE's consolidated credit metrics. Fitch projects FFO fixed-charge coverage and adjusted
leverage ratios will be in the ranges of 3.9x-4.1x and 4.6x-4.8x, respectively, in 2017-2020.
Strong Parent-Only Cash Flow: Fitch estimates that the ratio of BHE parent-only debVtotal
sources will be in lhe 2.7x-3.2x range in 2017-2019. Parent-only BHE debt (composed of
senior notes and junior subordinated debentures) hit a peak of $1 1.7 billion in 2014, reflecting
funding of the NVE and ALP acquisitions. From the peak, BHE has reduced its outstanding
parent company debt by 28o/o to $8.4 billion as of Dec. 31, 2016. Absent further M&A activity,
Fitch estimates that BHE parent-only debt will continue to decline.
Related Research
Fitch Affirms Berkshire Hathaway
Energy Co & Subs (February 2017)
Ana
Philip
lysts
Smyth, CFA
[phone]'l
phf, ip.s.nylh@litfi ralings.corn
Kevin Beicke, CFA
[phone]
kevin.beii(e@t$ralings.cqn
www.fitchratings.com May 2,2017
Ratings
Related Criteria
Criteria for Reting Non-Financial
Corporates (March 2017)
Recovery Ratings and Notching Criteriafor Non-Financial Corporate lssuers
(November 2016)
Parenl and Subsidiary Rating Linkage
(August 2015)
Recovery Ratings and Notching Criteria
for Utilities (March 2016)
Rating U.S. Utilities, Power and Gas
Companies (Sector Credit Facbrs)
(March 2014)
Rating Sensitivities
Berkshire Hathaway Energy
Positive Rating Action: Relatively high consolidated leverage is a significant hurdle to positive
rating actions in the near-to-intermediate term. Nonetheless, improvement in FFO-adjusted
leverage to 3.6x-3.8x or better on a sustained basis could result in future rating upgrades.
Negative Rating Action: Deterioration of BHE's FFO-adjusted leverage to 5.0x-5.5x or worse
on a consistent basis would likely lead to a rating downgrade. Longer term, a change in
ownership structure and/or strategic direction at BRK that eliminated or diminished capital
retention and other benefits currently available to BHE would likely lead to a downgrade at the
utility holding company and pressure its subsidiaries' ratings as well. Large debt-funded M&A
transactions and/or acquisition of assets with more volatile cash flows and higher business risk
at BHE could trigger a rating downgrade at the utility holding company. Such higher-risk
businesses in the Utilities, Power & Gas sector would include certain higher-risk midstream and
merchant generation assets. Significant deterioration in the financial strength of BRK leading to
a rating downgrade would likely also trigger adverse rating actions at BHE. Poor operating and
financial performance or catastrophic outages at its operating subsidiaries could lead to a
downgrade at BHE.
NV Energy
Positive Rating Action: lmprovement in NVE's FFO and EBITDAR leverage to 5.0x and 3.75x
or better, respectively, on a long-term basis, along with continuation of a balanced
political/regulatory environment in Nevada, could lead to a one-notch upgrade for NVE and its
operating subsidiaries, Nevada Power Company (NPC) and Siena Pacific Power Company
(SPPC), within 18 months. Resolution of pending energy policy uncertainties in Nevada,
including retail customer choice, net energy metering, energy efficiency and higher renewable
portfolio standards (RPS), signalling continuation of a balanced regulatory compact, could lead
to future positive credit rating actions.
Negative Rating Action: An unexpected deterioration in the currently constructive regulatory
compact in Nevada or other factors pressuring FFO leverage to 6.0x or weaker for NVE could
lead to a future, adverse rating action for NVE, NPC and SPPC. The highly politicized debate in
Nevada regarding net metering and other critical energy policy issues is a source of concern
that could lead to future negative credit rating actions.
MidAmerican Energy Company / MidAmerican Funding LLC
Positive Rating Action: The utility's strong credit rating limits a positive rating action. However,
stable, sustained FFO-adjusted coverage and leverage ratios of 5.0x and 3.5x or better,
respectively, could result in a rating upgrade. Structural subordination of MidAmerican Funding
LLC (MF, BBB+/Stable) debt to MidAmerican Energy Co. (MEC, A-lStable) and current Fitch
notching criteria require an upgrade at the utility to accommodate an upgrade at MF.
Negative Rating Action: A significant deterioration in the regulatory compact in lowa, a
catastrophic plant outage, or other factors causing MEC's FFO leverage to weaken to 4.5x or
worse on a sustained basis would likely lead to a rating downgrade for both MEC and MF.
Berkshire Hathaway Energy Company
May 2,2017
2
a
PacifiCorp
Positive Rating Action: A positive rating action for PacifiCorp (PPW, A-/Stable) is unlikely in
the near-to-intermediate term given Fitch's current expectations. However, further improvement
in PPW's FFO coverage and leverage ratios to 5.0x and 3.5x, respectively, in concert with a
stable or improving business risk profile, could result in a rating upgrade.
Negative Rating Action: An unexpected, sustained weakening of FFO leverage due to
deterioration in PPW's regulatory oversight, meaningtully higher-than-expected capex, a
catastrophic plant outage, or other factors causing PPW's FFO leverage to weaken to 4.5x or
worse could lead to a rating downgrade.
Northern Natural Gas Company
Positive Rating Action: The pipelines' relatively high ratings challenge future positive rating
actions.
Negative Rating Action: Deterioration of Northern Natural Gas Company's (NNG, A/Stable)
FFO-adjusted leverage to 4.0x or weaker could result in a rating downgrade. NNG could be
downgraded due to recontracting risk, unexpected increases in operating costs, or catastrophic
pipeline related events leading to significant pressure on projected credit metrics.
What lnvestorc Wantto Know
ls Future M&A Activity Likely at BHE? What lmpact Would a Major
Acquisition Have on BHE's Ratings?
BHE has been an active consolidator in the Utilities, Power & Gas sector, acquiring high-quality,
low-risk electric and gas utility, electric transmission and natural gas pipeline assets. Large
BHE acquisitions in recent years include NVE in 2013 and ALP in 2014. The potential impact of
future M&A activity on BHE's credit quality will be driven by price, asset quality and funding
choices. Large, debtfunded acquisitions and/or acquisition of high-risk profile businesses are a
primary source of concern in Fitch's view that could challenge credit quality at BHE.
Central to Fitch's rating considerations in light of BHE's high leverage relative to its current
'BBB+' IDR is the locus of BHE's M&A activity. While BHE has primarily targeted utility and
utilityJike businesses, including interstate gas transmission, pursuit of far riskier assets across
the energy food chain cannot be ruled out and is a key credit concern. Among riskier asset
classes along the energy food chain, investment in nuclear or fossil-fuel merchant generation
appears unlikely. More likely, in Fitch's opinion, would be a large acquisition by BHE in the
midstream space at a price it deems attractive relative to long-term business fundamentals.
BHE has frequently been mentioned as a potential suitor for Oncor Electric Delivery Company,
which may soon be on the market again in the wake of regulatory opposition to NextEra's
proposed acquisition of the Dallas-Fort Worth-based transmission and distribution utility.
Management made a point of mentioning at its April 1,2017 fixed-income analyst day that it is
comfortable with ring-fence structures, which have been implemented across its major
operating subsidiaries. The recent rejection of the proposed merger of Westar Energy and
Great Plains Energy lnc. by the Kansas Corporation Commission could provide a future mid-
cap target for BHE should the link-up with Great Plains Energy fall through.
Structuring of past deals at BHE has been fairly aggressive in term of leverage, in Fitch's view,
and relied primarily on public debt issuance and hybrid securities issued to BRK with the latter
being repaid relatively quickly. ln the ALP merger, BHE financed the all-cash acquisition with
Berkshire Hathaway Energy Company
May 2,2017
3
Ratings
approximately $1.5 billion of senior notes and $1.5 billion of junior subordinated debentures.
Acquisition funding for NVE also relied on a large component of senior notes and subordinated
debentures.
The funding of the ALP and NVE acquisitions pushed junior subordinated debentures on BHE's
balance sheet at year-end 2014 to $3.8 billion and total parent-only debt to $1'l .7 billion. By the
end of 2016, BHE had repaid approximately $2.9 billion of its junior subordinated debt
outstanding, and total parent-only debt was reduced 28o/o to $8.4 billion. Fitch expects BHE to
completely repay the remaining hybrid securities balance of $944 million as of Dec. 31, 2016
by the end of 2017 - Based on Fitch estimates, BHE will be significantly FCF positive in 2017-
2020, and leverage is estimated to decline moderately through 2020. The timeline below
summarizes BHE's acquisition track record, which includes MEC in 1999, NNG and Kern River
Gas Transmission Co. (KRGT) in2002 and PPW in 2006, in addition to NVE and ALP.
Timeline - Berkshire Hathaway Energy Company
CalEnergy Co.
CalEnergy
acquires
MidAmerican
Energy Co.
MEHC acquired
by private
investment group
led by Berkshire
Hathaway, lnc.
Berkshire
Hathaway Energy
Company (BHE)
acquires
PacifiCorp
BHE acquires
NV Energy
1996 1999 2002 2012 2014
1971 1998 2000 2006 20't3CalEnergy acquires
Northern Electric
(U.K.-based retail
gas and electricity)
Reorganized as
MidAmerican
Energy Holdings
(MEHC)
MEHC acquires
Kern River and
Northern
National Gas
Pipelines
fulrdAmerican
Renewables formed
to oversee expansion
in unregulated
renewable generation
projects. Renamed
BHE Renewables
BHE acquires
AltaLink
ln 2008, BHE bid $4.7 billion for Constellation Energy Group (CEG), a utility holding company
with a relatively high business risk profile that included significant merchant nuclear generation
and energy marketing operations. BHE provided a $1 billion lifeline to CEG during a period of
extreme financial stress, which it tunded by issuing junior subordinated debt to BRK. CEG
ultimately rgected the proposed merger with BHE, opting instead to sell its nuclear generation
to the French power company Electricite de France. (CEG was ultimately acquired by Exelon
Corporation.) Rejection of the proposed merger by CEG resulted in a windfall for BHE. While
BHE may have lost out on its bid, it walked away from the transaction with after-tax proceeds of
approximately $725 million and unencumbered by exposure to merchant nuclear generation.
More than $400 million of the after-tax proceeds were used by BHE to reduce debt.
ln Fitch's estimation, BHE paid a full price for its respective $7 billion and $10 billion
acquisitions of ALP and NVE. More recently, BHE has been disciplined with regard to M&A,
sitting on the sidelines since closing the ALP acquisition in 2014, choosing not to pay up for
assets. Nonetheless, M&A is a central component of BHE's growth strategy in Fitch's view, and
the agency expects BHE's acquisitive streak will continue, driven by its ultimate parent's desire
to deploy capital in the sector.
Sour6e: Fitch Ratings.
Berkshire Hathaway Energy Company
May 2,2017
4
tchRatings
Could a Change in Leadership at BRK Result in Downgrades to BHE's
Credit Ratings?
Key man risk from the potential departure of BRK chairman Warren Buffett is a concern at BHE
and its corporate parent, BRK. The main risk to BHE's creditworthiness, in Fitch's opinion, is a
resulting change in strategy or, as is sometimes the case with a change in leadership at a large
conglomerate, the breakup of the company to maximize shareholder value. ln this scenario, the
substantial credit benefits from BHE's affiliation with BRK - including dividend retention, tax
efficiency and access to relatively inexpensive capital - may be obviated and could result in
future credit rating downgrades.
Would a Downgrade to BRK Result in a Downgrade at BHE?
Significant deterioration at BHE's corporate parent sufficient to result in adverse rating actions
is a low-probability event in Fitch's view, but one that cannot be ruled out entirely. lf material
weakness in BRK's business fundamentals became severe enough to obviate the capital
retention and other advantages provided to BHE, credit downgrades at the utility holding
company would likely be unavoidable.
Because of its affiliation with BRK, BHE is able to retain capital typically paid out in dividends
by publicly held lOUs. This dynamic is a function of BRK's strong credit profile, large cash
position ($86 billion as of Dec. 31, 2016) and investment appetite. The ability of BHE to retain
earnings is a key competitive advantage. As a result, Fitch projects that BHE, unlike the vast
majority of utilities, will be FCF positive in 2017-2020. A reversal of fortune at BRK sufficient to
trigger significant cash demands of BHE would be a significant adverse development for the
utility holding company and would likely pressure creditworthiness at its operating subsidiaries.
However, ring-fence provisions at ALP, MEC, NNG, NVE and PPW, in this hypothetical
scenario, would likely provide a measure of downside credit protection, in Fitch's estimation, as
BRK and BHE moved down the rating scale.
Do You Expect Trump Administration Policies to Have a Meaningful
Impact on BHE's Creditworthiness?
The impact of anticipated tax reform legislation is a source of uncertainty for BHE from a credit
perspective, in Fitch's view, based on initial Trump administration and House Republican draft
legislation. The potential loss of tax deductibility is the biggest concern for BHE in light of the
utility holding company's significant parent-level debt, which at year-end 2016 represented
approximately 22o/o of consolidated debt.
Fitch believes successful implementation of the Trump administration's pro-growth policies
would be generally constructive for credit quality from a utility industry perspective. Trump
administration initiatives to reverse the previous administration's strong support for carbon
emission reductions are likely to help some coal-heavy utilities and merchant generation
companies. However, Fitch believes the impact to BHE's U.S. operating utilities is likely to be
modest given low natural gas price prolections and strong state political support for a cleaner
energy mix.
Significant momentum for energy policy supporting a rapidly growing share of low- and non-
emitting energy resources exists at the state level, as witnessed by leap-frogging renewable
portfolio standards and initiatives to phase out coal generation. Low natural gas prices and
burgeoning shale reserves bode ill for a rebound in coal-fired generation output supporting a de
facto U.S. renewables and natural gas energy supply policy that appears to have widespread
grassroots support.
Berkshire Hathaway Energy Company
May 2,2017
5
Ratings
On the local political front, Fitch expects an active legislative session in Nevada with regard to
energy policy, including retail customer choice, net energy metering and a potential increase in
the state's RPS. lowa, a strong and early supporter of clean energy, continues to support
further development of clean energy initiatives, including energy efficiency, renewables and a
more flexible grid, taking a holistic, balanced approach to statewide energy policy, in Fitch's
view. ln 2016, Oregon enacted legislation phasing out coal generation.
ls Oregon Legislation Phasing out Coal a Significant Challenge to
PPW's or BHE'S Creditworthiness?
ln Fitch's view, Senate Bill (S.B.) 1547-8 enacted in March 2016 phasing out coal-fired
generation in Oregon by 2035 while sharply increasing Oregon's renewable standard is likely to
result in higher costs for the utility. However, Fitch believes the higher costs associated with
S.B. 1547-8 will be recovered from customers and the impacts of the legislation will be
manageable within PPW's current credit profile.
The law sets firm milestones for the elimination of coal-fired generation for the state's two
largest electric utilities, Portland General by 2035 and Pacific Power (which is a division of
PPW) by Jan. 1, 2030. S.B. 1547-8 also sets a significantly higher RPS, requiring that 35% of
retail load is sourced from qualifying renewables by 2030, 45o/o by 2035 and 50o/o by 2040.
Oregon's 2007 RPS required that 20% of retail customer power needs be met by qualifying
renewables, increasing lo 25o/o in 2025.
S.B. 1547-8 was the result of a collaborative process of stakeholders, including PPW and
environmental groups, and will help the state achieve its ambitious carbon reduction goal of
75% below 1990 levels by 2050. PPW estimates that the legislation will save consumers up to
$600 million compared with a proposed ballot initiative sponsored by Renew Oregon. \Mile
Oregon is PPW's secondlargest contributor to consolidated kilowatt-hour (kWh) sales ranked
by state, it represented approximately one{uarter of annual PPW sales, underscoring the
geographic diversity of the utility's operations. As indicated in the table below, Utah, Oregon
and Wyoming accounted lor 85o/o of total kWh sales during 201$-2016, with Washington,
ldaho and California accounting for the remaining 15%.
PacifiCorp Electric Sales by State
(GWh)
30,000
25,000
20,000
1 5,000
1 0,000
5,000
0
24,020
12,869
Utah Oregon
Source: Company reporls, Fitch Ratings.
3,982 3,510@w
9,1 89E 748 1y.
CaliforniaVwoming Washington ldaho
Berkshire Hathaway Energy Company
May 2,2017
6
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ls Exposure to Coa! Generation a Significant Risk at BHE's Other
U.S.-Based Electric Utilities?
NVE's in-house generation is primarily natural gas-fired. NVE shuttered coal-fired Reid
Gardner Unit 4 in the first quarter 2017 and expects to eliminate its interest in Navajo Units 1 , 2
and 3 in 2019, which are also coal-fired. The plant closures are in compliance with Nevada
Senate Bill (S.B.) 123, which mandated retirement of approximately 800 megawatts (MW) of
coal-fired generation. Under the Nevada Public Utility Commission-approved emissions
reduction and capacity replacement plan, Nevada Power will shutter 8121\A/ of coal-fired
generation by the end of2019.
Load requirements are primarily met through in-house gas generation and a significant
measure of primarily long-term purchased power contracts, as NVE's operating utilities are
short capacity. Approximately 71o/o of NVE's operating utilities' energy supply was provided by
in-house generation (64% natural gaslTo/o coal), with the remainder purchased primarily via
long-term renewable and nonrenewable contracts.
MEC, on the other hand, is a coal-heavy Midwestern utility, albeit one that has been able to
significantly mitigate environmental exposure, in Fitch's opinion. This has been achieved with
the support of a forward-looking, balanced lowa regulatory compact, large investment in wind
generation, installation of pollution-control equipment to comply with Environmental Protection
Agency rules and the retirement of certain coal units. At the end of 2016, MEC owned
approximately 4,000MW of wind capacity up from 1,300MW at the end of 2010 and, with
completion of its 2,000MW Wind Xl prolect, MEC's owned wind capacity is expected to
approximate 6,000fvlw in 2020. As a result of this aggressive commitrnent to renewables and
other factors, coal as a proportion of MEC's energy mix declined to 39% in 2016 from 58% in
2012, while wind output has grown to 35% of MEC's energy mix in 2016 from 19% in2012.
2016 MidAmerican Energy Co. Total
Energy Supplied by Energy Source
Nuclear
12o/o
2012 MidAmerican Energy Co. Total
Energy Supplied by Energy Source
Purchased Wind
35o/o
Natural Gas
Power
12o/o Nuclear
1 1o/o
Purchased
Power
10o/oNalural
Gas
2o/o
Source: Company reports, Fitch Ratings.Source: Company reports, Fitch Retings.
What Key Factors Support Fitch's Positive Rating Outlook for NVE?
The Positive Rating Outlook for NVE and its operating subsidiaries NPC and SPPC, reflect
solid credit metrics, affiliation with a stronger corporate parent since BHE's 2013 acquisition of
NVE and a credit supportive regulatory/legislative environment. Fitch estimates FFO-adjusted
leverage of less than 5.0x for NVE and its subsidiaries, supporting a one-notch upgrade for
NVE, NPC and SPPC. The upgrade would narrow the rating differential between BHE's 'BBB+'
IDR and NVE's IDR from two notches currently to one notch. The ratings and Positive Outlook
anticipate continuation of a supportive Nevada regulatory/legislative environment. Adverse
developments in Nevada's 20lT legislative session would likely restrain upward momentum for
NVE and its subsidiaries'credit ratings.
Wind
'190/o
Berkshire Hathaway Energy Company
May 2,2017
7
Ratings
ls Retail Customer Choice Likely to Be !mplemented in Nevada?
While it is not clear if full customer choice will ultimately be implemented in Nevada, strong
support for industry restructuring was clearly evident in the 2016 vote supporting the ballot
initiative. ln Nevada's 2016 election, a plurality of more than 70o/o voted in favor of retail
customer choice. The administration of Governor Brian Sandoval has formed a committee to
anticipate changes that would be required to implement full retail customer choice. Legislation
has also been proposed to form a separate legislative committee to review the issue and its
implications. The legislature will be required to enact laws to facilitate implementation of full
retail competition in Nevadaby 2023 should the initiative pass muster with voters in a second
vote to be held in 2018. Fitch believes the prospect of retail choice injects a significant measure
of uncertainty for NVE from a credit perspective with regard to ultimate implementation and
cost recovery issues, including potential stranded costs.
With executive order 2017-03, Governor Sandoval created a 22 voting member committee
headed by Lieutenant Governor Mark Hutchison to prepare for anticipated changes due to
adoption of customer choice for all retail customers. The mission of the governor's committee
on energy choice is to identify issues to be resolved and offer suggestions and proposals for
legislative, regulatory and executive actions to be taken to implement the ballot initiative. A
second vote is required to amend the Nevada constitution to implement choice for all retail
customers.
NVE management has a seat on the governor's committee as the state considers energy
restructuring and how competitive generation markets will be structured. Key issues to be
determined include recovery of potential stranded costs and the provision of standard offer
service. NVE is not interested in undertaking the role of provider of last resort in a restructured
Nevada power market.
Assembly Bill (A.8.) 452 proposes formation of a legislative committee to consider questions
raised by Question 3, the 2016 retail choice ballot initiative. The committee, in addition to
anticipating any issues, policies or requirements resulting ftom Question 3, would review the
work of the governor's committee on energy choice with an eye toward efficient implementation
of retail customer choice.
What Does Fitch Expect for Net Energy Metering and Other Legislative
lnitiatives in Nevada?
As anticipated, Nevada's 79th (2017) legislative session has been active in the area of energy
policy beyond retail customer choice, with several bills proposed. Sponsored by Democratic
Assemblyman Justin Watkins, A.B. 270 would roll back changes to Nevada's net energy
metered customer tariffs, rates and charges to those in effect prior to enactment of S.B. 374 in
2015. Consistent with S.B. 374, the Nevada Public Utilities Commission (PUCN) issued orders
modifying net metered (NM) tariffs in late 2015 and the first quarter 2016, significantly
increasing fixed charges and reducing prices paid by the utility to customer generators over a
12-year period. As a result of the commission changes to NM tariffs, solar installations in
Nevada evaporated along with jobs and installed roof-top solar systems turned more costly for
systems already installed by customer exporters. The resulting political backlash was strong.
The governor implemented personnel changes at the PUCN. The reconstituted PUCN issued
an order at NVE's request in September 2016 grandfathering existing distributed generation
systems for 20 years. ln addition, the governor reconvened the New Energy Task Force, which
submitted recommendations including reinstatement of NM. As proposed, A.8.270 includes no
celp on the number of NM systems that may be installed and mandates that distributed systems
subject to time-of-use rates be accorded the highest rates first for exports to the utility.
Berkshire Hathaway Energy Company
May 2,2017
8
Berkshire Hathaway Energy Gompany
Other legislative proposals include A.B. 206, which, if enacted as proposed, would increase
Nevada's RPS to 50% by 2030 and 80% by 2040. This compares with the 2015 RPS of 25o/o.
The bill is opposed by Wynn Resorts, Las Vegas Sands and the Nevada Resort Association.
NVE proposes maintaining the cunent RPS. Legislation has also been proposed to protect
retail buyers of roof-top systems from fraud.
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Company Overview, Segment Performance and Expectations
BHE is a large, diversified utility holding company operating in energy markets primarily in
North America and the U.K. that is 90% owned by BRK. Walter Scott, along with family
members, and related entities (9%) and Greg Abel (1%) account for the remaining 10%
ownership interest in BHE. The company's history extends back to the formation of CalEnergy
in 1971. From its roots in geothermal energy production, CalEnergyerpanded in unregulated
and regulated energy markeb in the U.S., Asia and the U.K., acquiring MidAmerican Eneryy
Company in 1998. The company was reorganized as MidAmerican Energy Holdings Company
(MEHC) and ultimately acquircd by an investor group led by Warren Buffet's BRK in 2000.
MEHC was renamed Berkshire Hathaway Energy Company in20'14.
BHE is BRK's investment vehicle in the utility power and gas sector. Aided by the significant
advantages provided through affiliation with BRK, BHE has grown rapidly through M&A and
reinvestment of retained eamings and cash flow fom its core utility and utilityJike businesses.
Advantages from afftliation with BRK include capital retention and significant tax efficiencies.
As a privately held company since 2000, BHE's M&A activity has focused on large,
monopolistic or quasi-monopolistic assets with regulated or relatively predictable cash flow that
provided essential services to customerc. ln 2002, BHE acquired two natural gas pipelines,
NNG and KRGT. The acguisition of PPW followed in 2006 and BHE acquired NVE in 2013 and
ALP, a Canadian transmission company, in 2014.
Berkshire Hathaway Energy Company
May 2,2017
I
FitchRatings
Assuming a 1.8x multiple of book value of shareholder's equity, BHE's market capitalization
would approximate $44 billion, among the largest investor-owned electric utilities, as indicated
in the bar graph below. Approximately 70o/o ol consolidated BHE 2016 EBITDA was provided
by its North American electric and gas utility and electric transmission operations. Northern
Powergrid Holdings Company (NPG, BBB+/Stable) and its two U.K.-based network operating
businesses accounted for go/o of consolidated 2016 BHE EBITDA. BHE's two natural gas
pipeline systems, NNG and KRGT, represented 9% of consolidated EBITDA. BHE Renewables
and Home Services contributed 8% and 4%, respectively, to 2016 BHE consolidated EBITDA.
Market Capitalization Comparison
($ Bil.)
70
60
50
40
30
20
10
0 I
NextEra Duke Southern Dominion Berkshire PG&E Exelon American Sempra EdisonEnergy, Energy Company Resources, Hathaway Corp. Corp. Electric Energy lnternationallnc. Corp. lnc. Energy Power
Sources: Bloomberg, Fitch Ratings analysis.
BHE's capital investment plan as presented at its 2017 fixed income investor conference on
March 31, 2017 is significantly higherthan the plan management presented at its 2016 fixed
income investor conference. BHE capex over the next three years is expected to increase
approximately $4.2 billion, or 45o/o from last year's projected $9.4 billion investment estimate.
The sharp increase in 2017-2019 planned capex is driven primarily by MEC's $3.6 billion Wind
Xl prolect, wind repowering at PPW and solar renewable energy development at BHE
Renewables, ofbet somewhat by lower growth investment at ALP. Moreover, Fitch believes
that BHE's recent capex estimates are likely to be exceeded based on PPW's recently filed
integrated resource plan (lRP), which includes incremental investment in wind renewables. The
IRP includes 1,100t\A/U of new-build wind capacity, 905MW of repowered wind generation and
a 140-mile transmission line in Wyoming to access the new-build \ /Y wind generation and
relieve congestion.
Macro Factors
Low interest rates and power and gas commodity prices are significantly positive factors
supporting integrated and transmission and distribution utility creditworthiness. Advances in
drilling technology have resulted in a surfeit of supply and a sharp, sustained decline in energy
prices. ln addition, the secular decline in interest rates, now in its fourth decade, has
confounded prognosticators' expectations for a meaningful reversal in recent years. While Fitch
believes secular lows are probably in the past, upward movement in interest rates and natural
gas and power prices are expected to be manageable. Fitch estimates that the U.S. 10-Year
Treasury yield will be 2.8o/o at the end of 2017, a 24-basis-point increase from the year-end
2016 U.S. Treasury yield and 2.23o/o re@ntly. Fitch expects natural gas prices to rebound from
recent cycle lows of under $2.00/MMBtu in 2016. However, the anticipated rebound off of
recent lows is expected to be moderate. Fitch's base case Henry Hub natural gas price
forecast is $2.75lMMBtu in 2017, $3.00/MMBtu in 2018 and 2019 and $3.25lMMBtu in the long
term. Based on Fitch's work with third-party consultant Wood Mackenzie, Henry Hub natural
gas prices are expected to remain under $4.00/MMBtu through 2026.
Berkshire Hathaway Energy Company
May 2,2017
10
t a
16
14
12
10
8
6
4
2
0
Henry Hub Daily NaturalGas Spot Price
(Dec. 31, 2003-April 13, 2017)
(MmBtu)
*.1eo$*o$o$psoW"ts.+$otog}sure*,ve6oap"u$x$"*pf "S*df "l"gDt.tof .tu*l'
MmBtu - Million British thermal units.
Source: Bloomberg.
Fitch believes the regulatory environment for utilities has improved meaningfully over the past
decade, despite the persistent declining trend in authorized return on equity (ROE). Declining
commodity costs since 2008 have provided meaningful headroom in rates to absorb higher
capex without undue rate increases to customer bills. There has been a notable increase in
adoption of periodic rate adjustment mechanisms that provide utilities with timely recovery of a
variety of operating costs outside of base rate proceedings, mitigating earnings attrition due to
rate lag.
Other key factors coloring the strategic outlook for BHE and its competitors in the sector
include a rapidly declining renewable energy cost curve, strong public policy support for retail
distributed generation and renewables, energy efficiency and sluggish growth in kWh sales.
Fitch expects total retail sales to grow between 0.0% and 0.5% annually, significantly below the
|o/o-2Yo growth rates witnessed in prior decades. Sluggish electricity demand growth is, in
Fitch's opinion, a function of tepid economic growth, energy efficiency initiatives, demand-side
management programs and, to a small extent, growing penetration by distributed generation.
lndustrial sales have struggled as a strong dollar and subdued global demand have affected
export-driven demand sectors, such as primary metals, chemicals and paper. Based on U.S.
Energy lnformation Administration (ElA) data, 2016 industrial sales were down 5%. Despite
sluggish sales trends, eamings rose approximalely 7o/o in 2016 and fourthquarter management
guidance suggests 2017 earnings growth of 5% over 2016 reflecling significant utility
infrastructure investment and rate base growth.
Projected capex is expected to bring upward pressure to bear on customer bills, along with the
gradual bottoming and expected moderate rise in natural gas and interest rates. While Fitch
believes headwinds presented by the bottoming of natural gas and interest rates are
manageable, a more significant acceleration in the rate of gain for natural gas prices, interest
rates and the general level of inflation than currently expected by Fitch cannot be ruled out and
could challenge sector creditworthiness. ln this scenario, recovery of rapidly accelerating costs
would bring upward pressure to bear on monthly customer bills and potential political
resistance to rate increases. Moreover, rising rates erode the industry's competitive position
vis-i-vis competing non-emitting technologies, including renewables, energy efficiency,
demand-side management and energy storage.
Against this backdrop, BHE management is committed to fighting bypass risk by implementing
strict cost controls and efficiencies to minimize O&M and upward pressure on rates.
Management has indicated that rate increases at PPW are not anticipated until the end of this
decade at the earliest, notwithstanding recent increases in capital investment projections. MEC
is not expected to file its next general rate case (GRC) until 2029. Changes in revenue
Berkshire Hathaway Energy Company
May 2,2017
11
requirement at NVE's operating utility subsidiaries, NPC and SPPC, in recent, regularly
scheduled triennial GRC filing have been flat to lower, and Fitch expects rates to continue in
that direction for the foreseeable future.
Parent-Subsidiary Rating Dynamics
Fitch utilizes its corporate rating methodology criteria in determining ratings linkage between
BHE and its subsidiaries. BHE debt is non-recourse to BRK, and BRK provides no guarantees
to BHE. Yet, substantial benefits accrue to BHE (as articulated above) as a result of its
affiliation with BRK that support the utility holding company's 'BBB+' lDR. Most important in
Fitch's analysis is BHE's ability to retain capital that would otherwise be paid to investors as
dividends to attract equity capital if structured as a publicly held, investor-owned utility. ln
addition, the parent-subsidiary relationship with BRK provides an efficient conduit for
monetization of tax benefits, a meaningful advantage in BHE's wind and other renewable
resource investments. Finally, BHE also benefits from access to relatively low-cost capital in
certain instances.
Fitch also considers covenanted restrictions as well as state jurisdictional capital requirement
and other limitations on cash distributions to BHE from its operating subsidiaries. Special
purpose entities (SPE) and ring-fence provisions are in place at PPW, NVE, MF, NNG, ALP
and NPG. The SPE structure limits legal and operational ties between BHE and its operating
utility and gas pipeline subsidiaries. ln the case of a weaker parenUstronger subsidiary
relationship, Fitch's general rating guideline is for a subsidiary to be rated a maximum two
notches above its corporate parent if weak linkage is established.
Rating linkage between BHE and its operating subsidiaries is relatively weak due to the
creation of SPEs and ring-fencing provisions. These measures limit financial and operational
ties between BHE and its operating subsidiaries. BHE's operating utilities are self-funding and
distribute cash to support BHE's funding needs.
Berkshire Hathaway Energy Company
May 2,2017
12
Berkshire Hathaway. lnc.
DR - AA-lStable
Berkshire Hathaway Energy Cornpany
IDR - BBB+/Stable
Tctal Adlusted Debt
4.69 3
AltaLink, L.P
MidAmerican
Energy Company
IDR - BBB+lsiable
Tolal Adl!sted
4 4?,2Debt
7 411
BHE U.S.
Transm iss ion
Nonhern
Powergrid
(Yorkshire) plc
IDR - A_i
Stable
N o rthe rn
Powergrid
( Northeast)
Ltd.
DR A1
Slab e
Nevada Power
Company dba NV
Energy
DR - BBBlStab e
Tolal AdJLrstedDebt 3 1 /0
Sierra Pacific
Power Company
dba NV Energy
IDR - BBB+/Stable
iota AdlLrstedDebt 1 .201
NV Energy, lnc.
DR - BBB lstable
Tolai Adlusted
Debt
Northern
Powergrid
Holdings
Company
IDR -BBB+i Stable
Kern River
Funding Corp.
Total Adlusted
Debt 237
Northern Natural
Gas CompanyIDR Ai Slable
Total AdJUSted
Deilt
PacifiCorp
IDR - A /Stabe
Total Ad]trste.l
Debt
MidAmerican
Funding LLCIDR BBB+i Stable
Totai Adlusted
Debt 1 139
HomeServices
of America. lnc.
Organizational Structure - Berkshire Hathaway Energy Gompany
($ Mil., As of Dec. 31, 2016)
IDR - lssuer Default Rating.
Source: Company reports, Fitch Ratings.
PacifiCorp
Acquired by BHE in March 2006, PPW provides integrated electric utility service to 1.8 million
retail customers in six western U.S. states. Through its Rocky Mountain Power division, PPW
serves customers in parts of Utah, lAfioming and ldaho. lts Pacific Power division oversees its
western service territory operations serving customers in parts of Oregon, Washington and
California. Combined, Utah, Oregon and Wyoming accounted for 85% of PPW's total retail
electricity sales in 201+2016.
Regulatory outcomes across PPW's multistate service territory have been and are epected to
remain balanced from a credit perspective, with the exception of Washington. Various riders
are in place to facilitate recovery of certain costs outside of GRC proceedings, including fuel
adjustment clauses that mitigate commodity price exposure in all of PPW's regulatory
jurisdictions. GRC filings have slowed, reflecting management focus on rate stability and lower
capex. No GRCs are currently pending across PP\A/'s six-state service tenitory.
PPW's retail electric rates are competitive regionally, based on weighted average rates. Pacific
Power's and Rocky Mountain Power's weighted average retail rates are $0.095/kWh and
$0.082/kVVh, respectlvely, which compare with Pacific and Mountain regional average rates of
$0.145/kwh and $0.095/kWh, respectively, based on Edison Electric lnstitute data. While year-
over-year capex projections have risen meaningfully, Fitch believes PPW will be able to offset
Berkshire Hathaway Energy Company
May 2,2O17
13
itchRatings
costs associated with wind and transmission investment via cost reductions, keeping rates flat
through 2019.
ln September 2016, the Washington Utilities and Transportation Commission (WUTC)
authorized a $14 million, two-step rate increase. The rate increase is composed of a $6 million
(1.7%) first-step rate increase effective October 2016 and an $8 million (2.3%) second-step
rate increase effective September 2017. The rate increases are based on a 9.5% authorized
ROE, the same level authorized in PPW's last GRC. ln Fitch's opinion, the outcome in this rate
proceeding is more balanced from a PPW creditworthiness point of view than previous orders
issued by the WUTC in 2015 and 2013. PPW filed its most recent rate case with the WUTC in
November 2015, initially requesting a $20 million two-step rate increase. The company
requested a first-step increase of $1 0 million effective May 1 , 2016 and a second-step increase
of $10.3 million effective May 1, 2017. The WUTC orders in the proceeding adopted PPW's
proposed depreciation acceleration program and a decoupling mechanism. The new
depreciation schedule is designed to recover all capital costs of the Bridger plant by 2025 and
Colstrip Unit 4 by 2032. The WUTC-approved a decoupling mechanism is effective for five
years and includes triggering thresholds and caps in the interest of rate stability. The
commission also denied PPW a return on emission control equipment installed at Jim Bridger
Units 3 and 4.
ln Fitch's opinion, rulings by the WUTC in GRCs issued March 2015 and December 2013 were
unfavorable from a credit point of view. The WUTC orders disallowed costs related to
purchased power from qualifying facilities located outside the state of Washington and
authorized a below-industry-average ROE of 9.5%. PPW subsequently filed a petition for
judicial review of certain findings in the WUTC's December 2013 order. ln April 2016, the
Washington Court of Appeals affirmed the WUTC order, deferring to the commission's
discretion in ratemaking and concluding that the commission did not abuse that discretion.
Washington is a relatively small slice of PPW's operations, representing approximately 7% of
consolidated 2016 k\ /h sales. Regulatory outcomes across the remainder of PPW's service
territory have been and are expected to continue to be balanced.
ln addition to Oregon legislation mandating increased renewable generation and phase-out of
coal generation by 2035 discussed in the lilhat lnvestors Want to Know section above, Utah
Governor Gary Herbert signed S.B. 115 on March 30,2016. Enactment of S.B. 'l 15 is a
constructive development, in Fitch's opinion, which includes, among other things, authorization
of recovery of 100% of net power costs outside of GRC proceedings. The law also requires the
Utah Public Service Commission to establish a fund through a change in accounting for energy
efficiency programs as a reserve for coal plant exposure. ln addition, S.B. 115 establishes and
funds a pilot for investment in electric vehicle infrastructure and clean coal research.
PPW's 2017 IRP proposes the addition of 1,100MW of new wind generation in Wyoming that
will connect to a new 140-mile 500 kilovolt transmission line from a substation near Medicine
Bow, WY to the Jim Bridger power plant. The transmission line will provide access to the new
wind generation and relieve congestion. The IRP also includes 905$IW of repowered wind
generation and calls for retirement of 3,650MW of coal-fired generation by 2036. The wind
projects incorporate federal production tax credit (PTC) benefits and are expected to be
completed by 2020.
Berkshire Hathaway Energy Company
May 2,2017
14
PPW's most recent capex plan (summarized in the bar chart below) includes new wind
development of 240MW at an estimated cost of $377 million and repowering of 805MW at an
estimated cost of $917 million. PPW's current capital investment plan is 37% higher than the
prior capex plan and totals $3.5 billion during 2017-2019, compared with $2.5 billion in the
prior plan. lf adopted, the IRP is likely to push capex meaningfully higher in 2018 and 2019.
PacifiCorp Capex Projections
($ Mil.)
2,000
1,500
1,OOO 850 7Bo
2017 Current 20'17 PriorPlan Plan
500
0
r Currenl
985
2018 Currenl
r Prior
2018 Prior
Plan
1,620
2019 Current
Plan
2019 Prior
PlanPlan
Source: Company reports, Fitch Ratings.
MidAmerican Energy
MEC provides utility service to approximately 1.5 million electric and natural gas customers in
lowa, lllinois, South Dakota and Nebraska. Retail customers in lowa accounted for 91% of
electricity sales and 760/o of natural gas sales. As discussed above, MEC is a relatively coal-
heavy integrated electric utility generator that, with the support of regulators, has been
diversifying its generation base to include significant amounts of wind generating capacity.
MEC has invested on a cumulative basis $7 billion in wind generation through the end of 2016.
ln 2016, MEC's total wind generation as a percentage of the utility's lowa retail electricity sales
was 55%. With completion of MEC's Wind Xl project, MEC is expected to produce energy from
installed wind capacity sufficient to meet 89% of its lowa retail load in 2020 and its cumulative
investment in wind generation is expected to grow to $10.2 billion by year-end 201 9.
Efforts by MEC to migrate to a cleaner energy mix to address exposure to environmental
regulations include its large wind investment program, installation of pollution control
equipment on its existing coal fleet and coal plant retirements. Supported by federal PTCs, the
ability to efficiently monetize tax shields via its affiliation with BHE/BRK and a balanced lowa
regulatory compact, MEC is the largest owner of wind generation among U.S. utilities, with
more than 4.000t\n / of installed capacity as of Dec. 31, 2016. ln addition, MEC has installed
pollution control equipment to meet federal emissions restrictions and retired coal-fired Neal
Units '1 and 2 in 2016. The utility's wind development strategy is consistent with lowa energy
policy, and MEC has been able to develop this important clean energy asset base while
maintaining very competitive electricity rates. Based on EIA data, MEC's average rate in 2016
was $0.071/kWh, compared with the $0.08/kwh lowa state average rate and the national
average rate of $0.103/kWh. Unsurprisingly, the favorable environmental attributes of MEC's
wind investment and well-below-industry-average rate has attracted data centers and other
industrial businesses to the utility's service territory. As a result, MEC's retail load has grown at
rates above the industry average. Weather-normalized MEC retail load rose 2.6%, 1.8% and
2.9o/o per annum in 2014, 2015 and 2016, respectively, and is expected to increase 2.5o/o in
2017 and1.3o/oin2018.
Berkshire Hathaway Energy Company
May 2,2017
15
Ratings
The regulatory regime in lowa is credit-supportive in Fitch's view. Historical ROEs authorized
by the lowa Utilities Board (lUB) tend to be above-industry-average and investor-owned utilities
operating in the state are generally provided a reasonable opportunity to earn their authorized
return, in Fitch's opinion. lowa law permits the IUB to establish ratemaking principles for
prospective capital projects. The IUB has approved ratemaking principles for a series of MEC
wind projects stretching back several years, with a weighted average ROE of 11.5o/o. ln
addition, the IUB has authorized cost recovery mechanisms for major recurring expenses
outside of GRC proceedings including: fuel and purchase power, transmission, energy
efficiency and expiring federal tax credits.
ln 2015, the IUB approved ratemaking principles related to the construction of 552MW of
additional wind generation related to the utility's Wind X project. Wind X entered commercial
operation in the fourth quarter of 2016 and was completed on schedule and under the IUB-
approved investment cost cap of $888 million. lnstalled wind capacity has grown to more than
4,000[IW at year-end 2016 from 1,284MW in 2010, more than a threefold increase.
Wind Xl is a 2,000MW wind-powered generating project that commenced construction in 2016
and is expected to be completed by the end of 2019 for an estimated maximum cost of
$3.6 billion. The IUB issued an order in August 2016 approving ratemaking principles for the
planned construction of MEC's 2,000MW Wind Xl project. The ratemaking principles establish
a cost cap of $3.6 billion, including allowance for funds used during construction (AFUDC), and
a fixed rate of ROE of 11o/o ovil the proposed 40-year useful lives of those facilities in any
future lowa rate proceeding. The cost cap ensures that as long as total costs are below the cap,
the investment will be deemed prudent in any future lowa rate proceeding.
The IUB-approved Wind Xl ratemaking principles modified the revenue-sharing mechanism
cunently in effect for MEC. The revised sharing mechanism will be effective in 2018 and
triggered each year by actual equity returns if they are above the weighted average ROE (as
determined by the 'A' rated average utility bond yield plus 400 basis points) for MEC calculated
annually. Pursuant to the change in revenue-sharing, MEC will share 100% of the revenue in
exc€ss of this trigger with customers. Such revenue sharing will reduce the coal and nuclear
generation rate base, which is intended to mitigate future base rate increases. Currently, the
revenue sharing mechanism trigger is an 11% ROE, with 80% of MEC net income over the
1 1 % ROE used to reduce rate base and 20% retained by the company up to a 14% ROE. Over
14o/o, all earnings are used to reduce rate base.
MEC's current capital investment plan includes Wind Xl, which explains the sharp increase
(approximately $3.7 billion) in its 2017-2019 current capital investment plan versus the prior
plan, as illustrated in the bar chart below.
MidAmerican Energy Co. Gapex Projections
($ Mil.)
2,000
1,500
1,000
500
1,691
2017 Current
Plan
n
2017 Pno(
Plan
! Cunent
1,709
2018 Current
Plan
r Prior
1,ilg
20 19 Prior
Plan
Source: Company reporls, Fitch Ratings.
2018 Prior
Plan
2019 Current
Plan
16Berkshire Hathaway Energy Company
May 2,2017
aa
NV Energy
Through its operating subsidiaries, NPC and SPPC, NVE provides integrated electric and
natural gas distribution services to approximately '1.4 million customers in portions of the state
of Nevada, including greater Las Vegas, Reno and northern Nevada. The direction of energy
policy in Nevada is the subject of robust debate currently and is a source of uncertainty for
NVE and its operating subsidiaries from a credit perspective. Fitch views efforts to implement
customer choice by 2023 and reinstitute interclass residential subsidies for NM customers to be
paid for by non-NM customers as a sourc€ of intermediate- to long-term uncertainty for NVE's
creditworthiness.
The current legislative session includes several energy-related bills, including formation of a
legislative committee to consider implementation of retail customer choice by 2023 should
voters support the initiative in a second vote in 2018. Other proposed legislation would roll back
commission changes to NM tarif6 implemented by the Nevada commission in 2016, and
another would expand the state renewable standard to 80% by 2O4O.
ln 2016, the PUCN issued an order establishing separate rate classes for customers with
installed distributed renewable generation. The PUCN order also established new rates for
existing and prospective NM customers. Tariff changes include higher basic service and lower
volumetric charges that are revenue neutral to the utility. ln addition, the commission order
reduced the credit for customer exports to NVE from the full retail rate to the actual value of
excess generation based on the utility's avoided cost, phasing in the lower NM customer
credits over 12 years. S.8.374 enacted in June 2015 directed the PUCN to review NM rates
and identify and eliminate unreasonable shifts in costs from NM customers to non-NM
customers by year-end 2015. As a result of the NM tariff changes, distributed solar installations
ground to a halt, eliciting a sharp political backlash evidenced by the raft of legislative
proposals being considered in the current session and the Sandoval administration's reaction.
lf NM tarifb are rolled back to their pre-S.B. 374 status as proposed by A.B. 270, higher power
supply costs paid by NVE for exports from customergenerators to the grid would be recovered
via fuel adjustment clauses. However, lost revenue associated with lower volume would be
absorbed by the utility - absent implementation of full revenue decoupling mechanisms -until completion of a subsequent GRC filing. As more customers opt to self{enerate, the
cross-subsidization of NM customers by non-NM customers will grow, pushing rates for non-
NM customers higher and thereby incentivizing more of them to selfgenerate. This gives rise
to an unsustainable cycle of a growing NM customer base subsidized by rising rates for the
utility's remaining customers. A.B. 270 as proposed contains no cap on the number of
customers permitted to selfgenerate.
The regulatory compact for NVE's operating utilities is credit supportive, in Fitch's opinion. NPC
and SPPC are required by Nevada statute to file GRCs every three years. Test years are
historic and adjusted for known and measurable changes. The PUCN is required to issue a
decision within 210 days from the GRC filing date. Adjustrnent clauses have been authorized
by the commission for the recovery of purchased power and fuel costs, as well as energy
efficiency and conservation program expenses. Twenty-year integrated resource plans are filed
every three years and are subject to PUCN review with regard to ultimate inclusion in base
rates. Customer choice for large commercial and industrial customers has been in effect since
2002, following enactrnent of enabling legislation, subject to PUCN approval and payment of
exit fees to hold remaining customers harmless.
SPPC's last triennial GRC was filed with the PUCN in June 2016. ln December 2016, the
commission approved a settlement that reduces the utility's electric rates $2.9 million (0.4%)
Berkshire Hathaway Energy Company
May 2,2017
17
FitchRatings :i.
and gas rates $2.4 million (2.2%) based on 9.6% and 9.5% authorized ROE for the electric and
gas operations, respectively. Fitch expects NPC to file its triennial rate case in the second
quarter of 2017. Changes in revenue requirements in recent years have been modest,
reflecting the companies' manageable capital investment program and focus on cost control
and rate stability to combat bypass risk.
Weather-normalized retail load at NPC was essentially flat in 20'16 and is expected to decline
3.1o/o in 2017. The decline in 2017 reflects departure of two large industrial customers (MGM
Resorts lntemational and Wynn Las Vegas) to alternative power suppliers. Non-residential load
growth drives an expected rebound in higher weather-normalized retail sales of 1.4o/o in 2018.
At SPPC, weather-normalized retail load rose 1.8o/o in 2016, driven by manufacturing and
residential customer growth. Weather-normalized load is expected to rise 0.4% in 2017 and
3.8% in 2018, reflecting increasing data center and manufacturing load growth.
Fitch expects NVE's projected 2017-2018 capex will remain low relative to historic peaks and
consistent with management's strategic commitment to customer rate stability. NVE capex is
expected to decline to $386 million in 2018 and $376 million in 2019 from $457 million in 2017.
Capex over the forecast period is expected to be limited to investment in grid resources to
maintain the system and accommodate customer growth. Fitch expects NVE will not
contemplate, nor would the PUCN approve, incremental new-build generation until there is
greater clarity with regard to retail customer choice.
NV Energy, lnc. Capex Projections
($ Mil.)
500
400
300
200
100
0
I Current r Prior
2017 Currenl
Plan
457
2017 Piot
Plan
2018 Current
Plan
2018 Prior
Plan
376
2019 Current
Plan
2019 Prior
Plan
386 386
Source: Company reporls, Fitch Ratings.
Berkshire Hathaway Energy Company
May 2,2017
1B
Ratings
Energy lmbalance Market
PPW and NVE have participated in the California lndependent System Operator's (CAISO)
Energy lmbalance Market (ElM) since 2014 and 2015, respectively. The EIM is expected to
reduce NVE's and PPW's costs to serve customers, providing benefits through more efficient
dispatch from a larger, more diverse pool of resources, more effective integration of renewable
resources and enhanced reliability through greater situational awareness and responsiveness.
PPW is considering the feasibility, costs and benefits of joining CAISO as a participating
transmission owner and has completed a comprehensive benefits study. The results of the
study, showing net benefits to constituents, were released in October 2015, along with an
extension of the nonbinding memorandum of understanding originally entered into by PPW in
April 2015. The results of the study supports further analysis. California S.B. 350 authorizes the
Califomia legislature to consider making changes to current laws that would create an
independent governance structure for a regional independent system operator in the state's
2017 legislative session. Regulatory approvals would be required if PPW decides to become a
participating transmission owner in CAISO. ln that scenario, PPW would participate in the day-
ahead market operated by the CAISO and the unified planning and operation of PPW's
transmission network.
BHE Pipelines
NNG owns and operates a 14,700-mile interstate natural gas transmission pipeline system.
NNG transports natural gas to city gates in the Upper Midwest for heating and electric
generation, and its business has not seen significant competitive effects from new pipelines.
NNG's pipeline operations provide essential natural gas supply under long-term contracts to
utilities in the Upper Midwest. NNG's reticulated system is difficult to replicate economically,
providing protection against competitive inroads. ln addition, shale plays have flattened basis
spreads, discouraging greenfield-pipeline development. Concern regarding shipper
recontracting risk at NNG is mitigated by the pipeline's low-cost and strong market position in
the primary markets it serves in the Upper Midwest. ln 2016, NNG completed approximately
1.2 billion cubic feet per day of contract renewals, wrlh a 2o/o increase in rates. As indicated in
the table below, the Field Area, which Fitch believes is more vulnerable to competitive pressure
from shale resource development, accounted lor 10o/o of 2016 NNG revenue. Market Area
(77o/o) and Storage (1 1%) accounted for 88% of 2016 revenue.
Northern Natural Gas Operating Revenue
2016 2015 2014
(g Mil., As of oec. 31) (%) (%) (%)
MarketArea Transportation 492 77 474 72 457 63
Field Area Transportation 64 10 84 12 100 14
Total Tramportaoon 556 87 558 85 557 77
Storage 69 11 62 9 61 8
Total Tremportation and SbrageRovenue 625 98 620 94 618 96
Gas, Liquids and Othersales 11 2 36 6 106 4
Total Operating Rovenue 636 100 65G 100 724 100
Source: Berkshire Hathaway Energy Company 1 0-K.
Berkshire Hathaway Energy Company
May 2,2017
'19
Ratings
NNG is the largest interstate natural gas pipeline system in the U.S. based on pipeline miles
and is composed of 6,300 miles of mainline transmission pipelines and 8,400 miles of branch
and lateral pipelines. The system reaches from Texas to Michigan's Upper Peninsula and is
composed of two operationally integrated systems. lts traditional end-use distribution market
area in the northern part of its system is referred to as the Market Area and includes points in
lowa, Nebraska, Minnesota, Wisconsin, South Dakota, Michigan and lllinois. lts southern
system, referred to as the Field Area, includes points in Kansas, Texas, Oklahoma and New
Mexico. NNG's Market Area has a design capacity of 5.8 billion cubic feet (Bcf) per day and
Field Area delivery is 1.7 Bcf per day. NNG's pipeline system also has five natural gas storage
facilities with a total firm capacity of more than 73 Bcf and 2.0 Bcf per day of peak day delivery
capability. NNG has access to five traditional supply regions and direct access to non-
traditional (tight sands and shale) supply regions. Average annual deliveries during 2014-2016
were 1,005 Bcf.
Kern River Funding Corp. (KRF) is a financing vehicle for the long-term debt obligations of
KRGT, which unconditionally guarantees KRF debt. KRF redeemed its 4.893% notes due 2018
earlier this year. As a result, there is no debt outstanding at KRF, and no debt is expected to be
issued by the company consistent with its Federal Energy Regulatory Commission (FERC)
rates. KRGT owns and operates a 1,700-mile interstate natural gas transmission pipeline
system. The pipeline delivers natural gas from the Rocky Mountain basin to makets in Utah,
Nevada, California and Arizona. KRGT serves growing areas in Salt Lake City, southern
Nevada and Southern California. Design capacity is 2.2 million dekatherms per day of natural
gas. Approximately 91 % of capacity is under long-term contracts maturing 20'18-2033, with a
weighted average contract life of eight years. The FERC approved an uncontested settlement
earlier this year that allows KRF to establish an alternate, lower set of period 2 rates for
shippers versus current rates. Ninety-four percent of period 1 shipper contracts expiring in
2016-2017 elected to extend their contracts at period 2 rates.
BHE Transmission / AltaLink, L.P.
BHE Transmission accounted for approximately 7% of BHE's consolidated EBITDA and is
composed of BHE's wholly owned Canadian transmission utility ALP and BHE's U.S.
transmission projects. BHE develops, owns and operates transmission assets and is pursuing
investment opportunities in the U.S. and Canada.
ALP plays a key role in the Province of Albe(a's energy infrastructure and the achievement of
the province's energy policy goals. The provincial economy has been hit hard by declining
energy prices and economic activity. Alberta's unemployment rate stood at 8.1% in
December 2016 compared with the 7.0o/o Canadian average. While signs of improvement in the
local economy are emerging, supported by job gains in four of the five last months, the sluggish
economy has delayed oil and gas grid connections offset by renewable energy connection
requests. The soft economy underscores the need for rate stability, and capex is expected to
normalize at relatively low levels. Capex at ALP is expected to approximate C$600 million and
C$300 million, respectively, in2017 and 2018 compared with a recent peak of C$1.8 billion in
2014. ln the long term, growth is expected to be driven by Alberta's Climate Leadership Plan,
which eliminates coal generation in Alberta by 2030, replacing it with a one-third/two-thirds mix
of wind/gas generation.
ALP operates solely in the Alberta transmission market, where it provides access to wholesale
markets to power generators, utilities, retailers and industrial users. The utility is not subject to
commodity or volumetric risk. Counterparty credit risk is significantly reduced by exclusive
billings to the Alberta Electric System Operator (AESO), a financially robust off-taker. The
Berkshire Hathaway Energy Company
May 2,2017
20
FitchRatings
Alberta electricity market was restructured under the Electric Utilities Act in the mid-1990s.
Power generation was deregulated and the regulated transmission and distribution businesses
separated from competitive businesses (i.e. generation and retail supply). ALP purchased the
transmission assets of TransAlta Corporation in 2002 and was the first investor-owned
transmission company in Canada. ALP is regulated by the Alberta Utilities Commission (AUC),
which under the Electric Utilities Act is charged with providing ALP with a reasonable
opportunity to recover prudently incurred and forecasted costs and a fair return on investment.
Rates are established based on a forecasted test year on a cost-of-service basis. Once
approved, revenue is paid to ALP by the AESO in monthly installments.
Transmission project requirements are determined by the AESO and assigned to transmission
facility owners, including ALP. Projects assigned by the AESO are approved by the AUC before
construction. ALP files general tariff applications (GTA) biannually and generic cost-of-capital
(GCOC) proceedings are bifurcated from GTAs. ln ALP's 2016 GCOC proceeding, the AUC
authorized an8.3o/o ROEfor2016and8.5%for2017and anequityratioof 37o/otor 2016and
2017. The AUC-authorized ROE and equity ratios for 2016 and 2017 are an improvement to
ROE and equity ratio authorizations of 8.3% and 36%, respectively, in 201F2015.
ln the U.S., BHE owns a 50% interest in Electric Transmission Texas, LLC (ETT) along with
subsidiaries of American Electric Power Co. (AEP). ETT owns and operates transmission
assets in ERCOT and is regulated by the Public Utility Commission of Texas. As of
Dec. 30, 2016, ETT had a total of $2.7 billion of projects in service and expects to complete an
additional $300 million of prolects through 2020. BHE Transmission also owns a 25% interest
in Prairie Wind Transmission, LLC, a joint venture with AEP and Westar Energy. Prairie Wind is
a 108-mile, 345kv transmission line that cost $158 million and was placed in service in
November 2014.
Northern Powergrid Holdings Company
NPG, through the group's two network operating businesses (DNOs), Northern Powergrid
(Northeast) Limited and Northern Powergrid (Yorkshire) plc, serves 3.9 million end users in
northern England and accounted for approximately 9% of BHE's consolidated 2016 EBITDA.
NPG is in the middle of an eight-year regulatory price control period and appears to be off to a
solid start. Total expenditures for the 2015/2016 regulatory year are al 97% of allowances and
outputs 14o/o ahead of target, positioning NPG to effectively deliver on its commitments over
the eight-year price control. The current electricity price control became effective April 1, 2015
and is expected to continue through March 31, 2023. The new ED1 price control is stricter and
more difficult to outperform than the previous DPCRS. Allowed return on regulatory equity, cost
of debt and total expenditure are lower than DPCRS. Final determinations for the current price
control were published November 2014 by the office of gas and electric markets and appealed
by NPG. The appeal authority allowed part of NPG's appeal, awarding GBP30 million in
additional expenditure allowances. Projected capex in BHE's current plan for NPG of
GPB1.2 billion is GBP196 million higher than the prior plan, reflecting growth in the DNOs'
smart meter rental business.
NPG's DNOs operate in an area covering 10,000 miles from North Northumberland through
Tyne and Wear, County Durham and Yorkshire to North Lincolnshire. Suppliers purchase
electricity from generators and sell the electricig to customers using NPG's distribution network
to transport power from the supplier to end user. Under the U.K. regulatory regime, variations
in demand from end users have no effect on the total revenue that NPG's DNOs are permitted
to recover in a price control period.
Berkshire Hathaway Energy Company
May 2,2017
21
aI a
BHE Renewables, LLC
BHE Renewables' strategy is focused on direct ownership of utilig-scale wind and solar assets
with long-term off-take agreements and tax equity investment in hedged or contracted utility-
scale wind pQects. BHE Renewables' portfolio of net owned capacity as of Jan. 31,2017
totaled 4,082MW and was composed of 36% solar, 28% wind, 24o/o natural gas, 8%
geothermal and 4% hydroelectric. Sixty-nine percent of the company's off-take contracts
mature after 2029,7% during 2020-2029 and 24% in 2017-2019. ln January 2017, BHE
Renewables acquired the 11OMW Alamo 6 solar project in Texas for $385 million and plans to
spend approximately $218 million constructing community solar gardens in Minnesota. BHE
Renewables is pursuing an interconnection agreement for a 50MW battery storage facility at its
Solar Star site to be bid into the California energy storage market.
Berkshire Hathaway Energy and Subsidiaries - CreditSummary
BHE's ratings reflect the favorable impact of BRK's 90% ownership of BHE by BRK. Ownership
of BHE by BRK affords the former with the ability to retain capital typically paid out in the form
of dividends by publicly held investor-owned utilities. This dynamic is a function of BRK's strong
credit profile, large cash position and investment appetite. As a result, Fitch estimates that BHE
will be FCF positive and that consolidated debt will decline 2016-2020. Through affiliation with
BRK, BHE is able to monetize tax benefits and fund strategic growth opportunities more
efficiently than it could as an independent, publicly held company.
M&A activig and the associated increase in BHE parent-company leverage following the
acquisitions of NVE and ALP pressured BHE's consolidated credit metrics in 2014. Fitch
prolects BHE funds FFO coverage and leverage ratios will be in the ranges of 3.9x-4.1x and
4.6x-4. 8x, respectively, during 2017 -2020.
PPW's ratings and Stable Outlook reflect the utility's strong credit metrics, balanced
jurisdictional regulatory environment, relatively low business risk profile and retail rates that are
well below the industry average. Fitch forecasts FFO fixed-charge coverage and FFO-adjusted
leverage will approximate 4.9x and 3.7x or better, respectively, consistent with target medians
with the 'A-' lDR. The utility's multistate service territory and diversified regulatory environment
support the ratings and Stable Outlook. The vast majority of PPW regulatory decisions across
PPW's six-state service territory have been and are expected to continue to be balanced from
a credit perspective. Various riders are in place to facilitate recovery of certain costs outside of
GRCs, including fuel adjustment clauses that mitigate commodity price exposure in all of
PPW's regulatory jurisdictions. Washington regulation remains challenging with some evidence
of improvement, in Fitch's view, based on a reasonable outcome in PPW's most recent rate
case.
Slowing PPW service territory load growth trends are driven primarily, in Fitch's view, by energy
efficiency gains and are a source of some uncertainty, along with the impact of environmental
rules and regulations on PPW's coal-fired generation. Fitch believes these dynamics, along
with the recent upsizing in PPW's capex program are manageable within the regulatory
compact and unlikely to meaningfully weaken PPW's creditworthiness in the near-to-
intermediate term.
MF is an intermediate holding company owned by BHE. MF in turn owns MEC and is
dependent on distributions from the utility to meet its ongoing obligations. MF and MEC's
ratings and their respective Stable Outlooks reflect the utility's relatively low business risk
profile, solid FFO metrics, a cleaner fuel mix in recent years and a credit-supportive regulatory
environment in lowa. The IUB issued an order in August 2016 approving ratemaking principles
Berkshire Hathaway Energy Company
May 2,2017
22
ffi-
r=. FitchRatin':,gs
forWind Xl that include a cost cap of $3.6billion, including AFUDC, and a fixed 11.0% ROE
over the proposed 40-year useful lives of those facilities in any future lowa rate proceeding. As
long as total costs are below the cap, the investment is expected to be deemed prudent in any
future lowa rate proceeding. Additionally, the Wind Xl ratemaking principles modify the revenue
sharing mechanism currently in effect at MEC. ln its last GRC, the IUB authorized a
$266 million rate increase phase-in over several years. The final $45 million rate increase was
effective Jan. '1, 2016. ln addition, the IUB authorized energy and transmission cost adjustment
mechanisms and a mechanism to recover expiring production tax benefits in rates. MEC has
significantly diversified its fuel mix via meaningful new-build wind generation while maintaining
rates that that are competitive regionally and compared with the national average.
Fitch estimates that MF and MEC's financial metrics will remain consistent with current rating
levels based on Fitch's target medians and peer comparisons. The utility's FFO fixed-charge
coverage and FFO-adjusted leverage ratios are expected to remain strong, in the ranges of
5.7x-€.9x and 3.2x-3.5x, respectively, during 2017-2020. Similarly, MF's FFO fixed-charge
coverage and FFO-adjusted leverage ratios are estimated at 5.3x{.2x and 3.4x-3.7x,
respectively, during 20 1 7 -2020.
The ratings affirmation and Positive Outlooks for NVE, NPC and SPPC reflect solid credit
metrics that are consistent with 'BBB' target medians. The ratings and outlooks also consider
the balanced Nevada regulatory compact, manageable leverage, improving regional economic
conditions and modest sales growth. Fitch expects resolution of the Outlooks will tum on
regulatory/legislative developments in 2017. An active legislative session is expected in
Nevada in 2017 with regard to energy policy, and Fitch anticipates NPC will file a GRC later in
2017, as well. Constructive outcomes on these fronts could result in a one-notch upgrade for
NVE, NPC and SPPC. The regulatory compact for NVE's operating utilities is credit supportive,
in Fitch's opinion. NVE's adjusted debVoperating EBITDAR, based on Fitch' projections,
improves to 3.6x in 2020 from 3.9x in 2017, and FFO-adjusted leverage is estimated in a range
oI 4.2x4.6x in 2017-2020, levels consistent with mid-BBB' credit ratings. NVE's solid credit
metrics, affiliation with BHE and a continued supportive regulatory/political construct in Nevada
could result in a credit rating upgrade within 12-18 months.
ln December 2016, the PUCN issued an order adopting the settlement filed by SPPC in its
October 2016 GRC. The filed settlement did not resolve rate design issues associated with net
metering. ln addition to adopting the settlement's proposed $2.9 million electric and $2.4 million
gas rate decreases, the commission authorized net metering using full retail requirement rates
for up to 6MW of capacity, noting that its decision was case-specific and not precedent-setting.
The ratings and Stable Outlook for NNG reflect the pipeline's strong business position and
relatively low business risk profile. NNG's natural gas transportation system is an essential
source of contracted supply to its Upper Midwest utility customer base. Counterparty credit risk
is ameliorated by the pipeline's diverse group of primarily highly rated off-takers with multiyear
contracts. NNG's ratings also consider the pipeline operator's constructive regulatory compact
and its consistent ability to earn a reasonable ROE, typically in the low double digits. Fitch
projects NNG FFO coverage and leverage of 6.4x-8.0x and 2.4x-3.0x, respectively, in 2017-
2020, levels consistent with NNG's 'A' lDR. Recontracting risk and more stringent rules
regarding pipeline integrity and related issues are potential sources of concern for NNG. Fitch
believes these concerns are manageable within NNG's current rating category given its
competitive market position and ongoing infrastructure investment.
Berkshire Hathaway Energy Company
May 2,2017
23
Financial Overview
Liquidity and Debt Structure
Fitch believes BHE's liquidity position is solid and likely to strengthen over the forccast period,
given its strong projected2017-2021FCF profile. As of Dec. 31,2016, Fitch calculates total
BHE consolidated liquidity of $4.7 billion as summarized in the table below. Consolidated BHE
liquidity is composed of approximately $4 billion of remaining borrowing capacity under BHE
parent and subsidiary credit facilities and cash and cash equivalents ol $721 million as of
Dec. 31, 2016. BHE and its operating subsidiaries have credit facilities with total undrawn
borrowing capacity of $6.4 billion. BHE debt maturities, in Fitch's Mew, are manageable in
2017-2021. Scheduled debt maturities at BHE and its operating subsidiaries total $9 billion
during 2017-2021 , ranging from a low of $823 million in 2021 to a high of $3.5 billion in 2018.
Liquidity Summary
(s Mit.) {z3rn5 rz3ln6
Toild Cash and Cash Equirralcnb 1,'108.0 721.0
Scheduled Debt Maturities
($ Mir.) l?3lr{6
Doc.31,2017 1,006.0
Doc.31,2018 3,544.0
Drc.3'1,2019 2,099.0
Oec.31,2020 1,552.0D€c.31,2021 823.0
ThorBaftsr 27,271.0
Tot l D.bttLtur{d.! 30,205.0
Sourcs: Company filings, Fitdr Ratings
Less: Not Rcadily Availablc Caih
and Carh Equivalont!
Fitch-Defi ned Rsadily Availablo
Cash and Cash Equivalents
Aveilability Undcr CommitEd
Lines of Crldft
To,trt Uquldlty
Source: Companyfilings, Fibh Ratin$.
0.0
(0.0)
1,108.0
5,032.0
6,{t10.0
0.0
(0.0)
721.0
4,019.0
1,74i,.0
Berkshire Hathaway Energy Company
May 2,2017
24
Appendix A: Peer Group Financials
Peer Group Historical Financials - Berkshire Hathaway Energy Company
(s Mit.)
Duke Energy American Electric
Corporatlon PorverGompany, lnc,
2ttvla ,t2131n4
Dominion
Rosourcaa, lnc.
,t2l3,lit6
Berkshire Hathaway
Enorgy Company
12t31t1G
Stabment Type
lssuer Default Rating
Outlook
Profrtability (%,
Operating EBITDAR Margin
Operating EBITDA Margin
Operating EBIT Margin
FFO Margin
FCF Margin
Retum on Capital Emdoyed (ROCE)
Gro$ Leverage (x)
Total Adjusbd DebUOp. EBITDAR
FFO Adjusted Leverage
FCF/Total Adjusted Debt (%)
Total Debt with Equity Crediuop. EBITDA
Total Secured DebUOp. EBITDA
Total Adi. DebU(CFO Before Lease Expense - Maint. Capex)
Net Leverage (x)
Total Adjusted N6t DebUOp. EBITDAR
FFo-Adjusted Net Leverage
Total Net DebV(CFO - Capex)
Coverage (x)
Op. EBITDARI(lnterst Paid + Lease Expense)
Op. EBITDA,/Interest Paid
FFO Fixed-Charge Coverage
FFO lnterest Coverage
CFO/Capex
DebtSummary
Total Debtwith Equity Credit
Total Adjusted Debt with Equity Credit
LeaslEquivalent Debt
Other Off-Balance.Sheet D6bt
lnterost (Paid)
lmplied Cost of Debt (o/o)
Cash FlowSummary
Funds frcm Op6ration6 (FFO)
Change in Working Capital (Fitch-Defined)
Cash Flowfrom Operatiorc (CFO)
Non-Operating/Non-Recuning Cash Flow
Capex
Common Dividends (Paid)
FCF
Acquisitions and Divestitures
Net Debt Proceeds
Net Equity Proceeds
Other lnv$ting and Financing Cash Flow
Total Change in Cash and Equivalents
Continued on next page.
Source: Company reporB, Fitch Ratings.
Oilginal
BBB+
Rating Outook
Negative
41.6
40.5
23.4
28.2
(16.s)
4.6
5.5
6.2
(35.3)
50,382
52,3',t8
1.936
(1,794)
3.9
6,409
383
6,792
(8,208)
(2,332)
(3,748)
(4,778)
5,868
731
1,462
(465)
Original Original
BBB BBB+
Rating Outook Rating Outook
Stabla StaUe
6.2
6.3
(17.3)
34,136
34,968
832
(1,169)
3.7
4,212
(85)
4,127
Original
BBB+
Rating Outook
Stable
37,513
38,761
1,248
(1,854)
4.8
5,865
191
6,056
40.2
39.3
24.4
33.7
5.5
5.4
5.5
5.0
2.5
5.5
34.5
6.3
5.4
(1 0.s)
6.2
(1 8.s)
5.5
6.2
(7.2)
5.5
5.2
(44.6)
33.0
31.6
21.3
26.1
(10.6)
6.3
4.1
4.2
(7.8)
4.0
0.1
(61 6)
4.1
4.1
(u.2)
47.5
46.7
30.9
35.9
(31.4)
6.4
5.4
4.9
38.1
4.6
5.1
4.1
4.6
0.8
4.8
5.8
4.8
5.8
0.9
4.4
4.7
4.3
4.6
0.7
3.5
3.7
3.9
4.1
1.2
19,998
21,798
1,800
(88s)
4.5
4,175
27
4,202
(4,781)
(1,121)
(1,700)
(236)
1,606
34
331
35
(6,08s)
(1,727)
(3,68s)
(4,421)
4,858
3,'124
(222)
(346)
(s,0?
966
(66)
,u?
(662)
(387)
Berkshire Hathaway Energy Company
May 2,2017
25
Peer Group Historical Financials - Berkshire Hathaway Energy Gompany (Continued)
Duke Energy Am.rlcin Eloctrtc
Corporation PowerCompany, lnc.
Domlnion
Relourcer, lnc.
1A$n6
Bed(shi,D Hdh.way
Energy Company
Llquldlty
Readily Availabl€ Cash end Equivdents
Availability undor Committed Crcdit Lines
Not Readily Availablc Cash ard Equivalonts
Wod(lng C.plt l
N€t Working Capitd (FitctFD€fi ned)
Trad6 AccounB Receivable (Days)
lnwnbry Tumo\€r (Oays)
Trade Accounb Payable (Days)
Capital lrbnsity (%)
lncome Statomont
Revgnuo
Rewnu€ Growth (%)
Opcratng EBITDAR
Opsrating EBITDAR Aftor Oividends to Associates and Minoritieg
Opcratine EBITDA
Operating EBITDA After Dividends to A$ociates and Minorities
Oporating EBIT
Itbcellanoou!
Total Dobuoapitalization (%)
Total Equity/Cepitalization (%)
Rctum on Equity (ROE) (%)
lnbr€st Received
Prrhr€d DMd.nds (Pekl)
Conv€rtsd b USD ftom tis Following:
Spot FX Rabs Usod p€r Statsm€nt
AW. FX Rat$ Used pcr Statement
Source: Company roports, Fitch Ratings.
5,863
2,285
42.4
186.6
158.6
36.1
55.1
44.9
5.2
2'.1
USD
1.000
1.000
2.,743
(3 1)
9,454
9,448
9,212
9,206
5,332
(80)
43.7
61.6
107.6
29.9
15,997
(0.2)
5,279
5,279
5,054
s,054
3,411
211
2,460
USD
1.000
1.000
1,249
47.4
192.4
126.3
51.8
't1,737
0.5
5,580
5,580
5,476
5,476
3,827
2,260
67.0
33.0
14.5
USD
1.000
1.000
255
36.7
78.2
1'.11.4
29.2
17,422
(2.6)
6,998
6,998
8,842
6,842
4,25'l
721
4,019
60.5
39.5
10.4
't20
USD
1.000
1.000
281392
53.4
46.6
3.5
16
Berkshire Hathaway Energy Company
May 2,20'17
26
Peer Group Historical Financials - PacifiCorp
(3 Mit.)
Public Servlce Southem Callfiomia
Company of Color.do Duke Energy Ohlo, lnc. Edlron Company
12t31t16 lugn6 12131t16
Paclflcorp
12t31t13
Statement Type
l$uer Dofault Rating
Outook
Proft.blllty (%l
Opcrating EBITDAR MaEin
Operating EBITDA Maryin
Operating EBIT Maoin
FFO Margin
FCF Margin
Retum on Capital Employed (ROCE)
Gro!! Lovorago (r)
Total Adju3bd DebUOp. EBITDAR
FFGAdjusted Leverage
FCF/TotalAdjGtsd D6bt
Total Debt with Equig CrediuOp. EBITDA
Total Sccursd DsbUOp. EBITDA
Total Adj. DobU(CFO Before Lease Expense - Maint. Capex)
N.t Lever.go (x)
Totd Adjust8d Nrt DcbUOp. EBITDAR
FFGAdjusted Net Leverag€
Totd N6t D8bU(CFO - Capox)
Coverage (x)
Op. EBITDAR(lnErsgt Paid + Loesc Expense)
Op. EBITDA,/Intar$t Paid
FFO Fixed Charye Covcrage
FFO lnterBt Coverage
CFO/Cepox
Dobt Summary
Total D€Uwith Equity Credit
Total Adjueted Debt with Equity Credit
LeaslEqui\ralBnt Debt
O(her Off-Balance-Sheet Oebt
lntrr$t (Paid)
lmplied Coat of Debt (o/o)
Cr3h FlowSummary
Funds from Op€rations (FFO)
Change in Working Capital (Fitch-Defined)
Ca3h Flil from Opsrations (CFO)
Non-Operating/Non-Recuring Cash Flow
Capex
Common DMdondE (Paid)
FCF
Acquisilions and DivBtiturss
N6t Dobt Procc.ds
Net Equity Proceeds
Odtcr lnvcaffng and Financing Cach Flow
Total Change in Cash and Equivalents
Lhuldity
Roadily Ar/ailable Cash and Equi\ralo.rts
Availability Under Commitbd CBdit Lines
Not Rsadily A\railablc Cash and Equi\ralcntE
WD - \ fithdrawn. Continuad on next pagp.
Source: Company r€ports, Fitch Ratings.
Original
A-
Rating Outook Siaug
33.4
33.0
22.0
28.7
o.0)
6.6
Original
30.E
29.9
17.7
22.7
(3.e)
5.3
3.4
3.7
(37.71
1,935
2,063
128
(e4)
5.2
Original
A-
36.9
36.4
16.7
27.8
(7.e)
4.8
2.9
3.2
(110.8)
12,2i24
12,768
544
39
1,890
Oririnal
A-
12.5
42.2
27.4
u.2
(4.0)
6.7
3.4
3.4
(2.8)
3.3
t.2
11.0
WD
Rating Outook Stable Raling Outook Stable
7.2
7.8
7.2
7.8
1.0
3.4
3.4
11.0
5.6
5.8
5.5
5.7
1.7
2.9
3.2
(7.3)
2.8
(304.0)
3.4
3.8
(3.7)
3.3
0.0
(s8.e)
3.3
3.3
(6.3)
3.3
3.2
66.4
3.3
3.3
u.2
(s64)
4.3
3,287
236
3,523
(3,633)
(824',.?
502
169
276
13
112
(17)
425
(,176)
(25)0l
201
(128)
(1)
6.9
7.6
5.3
5.8
1.0
5.4
6.2
5.0
5.6
0.9
4,385
4,513
128
(172)
1,163
3
1,166
(380)
5.24.0
(210)
182
33
5
't7
588
6
568
7,351
7,471
120
1,7n
(20s)
1,568
(87s)
(1,114)
(337)
(285)
230
39
18
2
(s03)
13
409
27Berkshire Hathaway Energy Company
May 2,2017
Peer Group Historical Financials - PacifiCorp (Continued)
($ Mit.)
Publlc Servlco Southem Callfornh
GompanyofGolorrdo DukoEnoqyOhlo,lnc. EdllonCornpany
12t31t18 12t31113 12tt1t,t6
PacmGorp
12t3il16
Wo*lng Cipltirl
N.t Wofi ino CapiH (FibtFDcfi n€d)
Trad€ Accounts Receivable (Days)
lnwnbry Tumor,.r (Day8)
Trade Accounts Payable (Days)
Capital lntlndty (%)
lncome Strtemont
Ra\renuo
Revenue Growth (%)
Operating EBITOAR
Operatng EBITDAR After Dividends to Associates
and Minoritieg
Op.ratng EBITDA
Operating EBITDA After Dividends to Associatas
and Minoriti€g
Oporatng EBIT
MLcdlaneouc
Total Dcbucapitalization (%)
Total Equity/Capitalization (0/6)
R€tum on Equity (ROE) (%)
lnbrest Rscsived
Pr€fiEr€d Divi&ndt (Paid)
Converted b USD tom the Following:
Spot FX R8bs Urctl per Strtomont
AW. FX Ratgs Used per StatBment
Source: Company roport3, Fitch Ratings.
118
55.1
45.0
105.9
27.5
4,M8
(2.8)
1,353
1,353
1,337
1,337
89.1
(205)
37.6
83.9
211.3
24.5
39.2
60.8
7,8
5
USD
1.@0
't.000
(82)
33.0
19.3
108.4
30.7
518
51.1
92.3
85.0
17.4
5,20'l
(0.6)
2,211
2,211
2,1fi
2,196
't,426
45.4
54.6
8.8
2
USD
1.000
1.000
11,830
3.0
1,370
4,370
4,302
4,302
2,217
s0.0
59.2
10.4
3
(123)
USD
1.000
1.000
49.9
50.1
,o.a
USD
1.000
1.000
1,944
2.0
598
598
552
582
345
Berkshire Hathaway Energy Company
May 2,2017
28
Peer Group Historical Financials - MidAmerican Funding LLC
CenterPoint Enetgy llidAmerican
Houston Eleciric, LLG Bhck Hlll! Corp. Unlon Elecfilc Co. Fundlng LLC($Mit.\ 12t31t18 12t31t18 12131t16 12t31t16
Stabmcnt Typ6 Original Odginal Orhinal Origind
lssuorDefaultRating BBB+ BBB+ BBB+ BBB+
Orrtook Rating Ou0ook Stable Rating Outook Stauo Rating Ou0ook Stabls Rating Oufook Siable
Proftablltty (%)
Opsrating EBITDAR Margin
Operating EBITDA Mangin
Opcrating EBIT Margin
FFO Margin
FCF Margin
Return on Capital Employed (ROCE)
Groa! Lovorage (x)
Total Adjugted DebUOp. EBITDAR
FFGAdlusted Leverage
FCF/Total Adjusbd Doil (%)
Total Debt with Equity Crediuop. EBITDA
Total Securod D6bUOp. EBITDA
Total Adj. DebU(CFO Before Lease Expens€ - Maint. Capex)
ilot Levorege (x)
Total Adiusted Not DoH/Op. EBITDAR
FFcAdjusted Not Leverage
Total Net D6bU(CFO - Capcx)
Coverage (x)
Op. EBITDAR(lnbr€8t Pakl + Leesc Be6nse)
Op. EBITDA/Intereet Paid
FFO Fixsd4h.rgc Cwerage
FFO lnFlest Coverage
CFO/Capox
DebtSummery
Tobl Dabt with Equity Crcdit
Total Adlusted Debt with Equity Credit
Loaae-Equival€nt Debt
Other Ofr-Balance-Sheet Debt
lntrr$t (Paid)
lmplisd Cost of Debt (%)
Carh Flow Summary
Funds From Opcra$ons (FFO)
Change in Wo*ing Capital (Fitch-Defin6d)
Cash Flow fmm Opcralions (CFO)
Non-Oporating/Norr.Recuning Cash Flow
Capcx
Common Dividends (Paid)
FCF
Acquisitions and Oiwstitures
N6t Debt Procc€da
N6t Equity Proceeds
Othsr ln\r€3ting and Financing Cash Flow
Total Change in Cash and Equivalsnts
Continued q, next pag,o.
Sourca: Company rBports, Fibh Ratings.
3.5
3.7
3.5
3.7
0.7
5.9
6.8
5.9
6.7
1.6
5.0
5.1
7.4
7.5
0.9
6.6
6.5
o.3)
o.o
5.7
(22.4)
6.5
6.5
(20.4)
2.7
3.3
(10.6)
2.7
5.0
(18.s)
2.3
2.9
(15.e)
3,340
3,420
80
(13e)
5.3
38.2
38.1
20.8
25.5
(10.8)
5.9
33.6
33.0
21.0
24.1
(16.0)
6.5
379
(67)
312
(47s)
(88)
(251)
(1,1 1s)
623
't22
192
(427)
39.0
38.0
21.1
33.3
2.1
5.8
39.9
39.7
21.5
50.7
(s.2)
3.7
4.6
3.1
(s.1)
4.6
4.5
(20.0)
4.6
3.1
(1s.5)
1,335
58
1,393
2.9
2.9
1.8
2.8
2.8
8.8
2.9
2.9
8.8
7.1
7.4
5.9
5.0
0.8
2,614
2,622
I
(132)
5.1
658
61
7't9
(862)
(135)
(278)
4,757
4,789
32
(204)
4.3
(1,636)
(213)
'132
23
(88)
(302)
374
283
77
3,777
4,049
272
(1e8)
5.'t
'1,172
(6)
1,166
c/38)
(3ss)
73
(117)
44
(1ee)
(1ee)
Berkshire Hathaway Energy Company
May 2,2017
29
Peer Group Historical Financials - MidAmerican Funding LLC
Conb.Point En.ryy
Hourton Electric, LLG Bhck Hill! Corp.
,12t3,U16(s Mit_)
Unlon Elec'Uic Co.
12t71t16
lridAmerican
Funding LLC
12tt1t16
Liquldlty
Readily Avalable Cash and Equivalonts
Availability Under Committed CEdit Lines
Not Rcadily A\/eilable Carh and Equivabnts
Worklng Ceplt l
Not Wo*ir,rg Capital (FitctFD€fi nod)
Trade Accounts Rscsivable (Days)
lnwnbry Tumovrr(DaF)
Trade Accounts Payable (Days)
Capital lntcnrity (%)
lncomo Strtrmont
Rownuc
Revenue Growth (%)
Operating EBITDAR
Operating EBITDAR After Dividends to Associates and Minorities
Op.ratng EBITDA
Operating EBITDA After DMdends to A$ociabs and Minorities
Oporaling EBIT
tllcellaneoua
Total Dobdcapitalization (96)
Total Equity/Capitalization (0/6)
R€tIm m Equity (ROE) (%)
lnt3lest Receivod
Pr0hn€d DMdond3 (Paid)
Convert€d b USD from th6 Following:
Spot FX R.bs Usod pcr Sbbmont
Avg. FX Rate3 Used per StatEmont
Source: Company r€porB, Fitch Ratings.
t5
506
11
617
2
u1
296
159
61.2
55.3
44.7
13.0
USD
1.000
1.000
(40)
61.0
78.3
1 11.9
30,2
0
1,000
149
36.6
136.8
178.7
20.9
3,523
(2.4)
1,373
1,373
1,339
1,339
745
59
39.8
123.5
141.3
62.2
2,631
(23.1)
1,049
1,049
1,045
1,045
566
.13.9
56.1
8.7
USD
1.0(X)
1.000
1,573
20.5
529
519
519
509
330
33.4
2,577
9.7
984
984
983
983
5i]8
65.8
u.2
4.5
,|
USD
1.000
1.000
48.5
52.5
8.8
28
(3)
USD
1.000
1.000
Berkshire Hathaway Energy Company
May 2,2017
30
Peer Group Historical Financials - NV Energy, lnc.
($ Mil.)
Southwe!ilem Publlc tonongahela
SeMce Cornpeny PorerCo.
9130r{6 9,|!0n6
lndlana liichigen
PowerCo.
9/30r{6
NV Energy, lnc.
9,:}0rr6
Stebmsnt Typo
lssuer Default Rating
Orrtook
Prolttabllity (%)
Op6ratn0 EBITDAR Margin
Operating EBITDA Maqin
Oporating EBIT Margin
FFO Mergin
FCF Margin
Retum on Capital Employed (ROCE)
Gro3s Leverrge (x)
Tobl Ad,ustcd DcbUOp. EBITDAR
FFGAdjusted Loverage
FCF/Tdd Adjuabd Dabt (%)
Total Debtrvith Equity CrediUOp. EBITDA
To0al S€cund D,cbUOp. EBITDA
Total Adi. Oebu(CFO Bsfors L€ase Exp€nss - Maint. Capex)
l{et Lev.rago (x}
Total Adjustod Not Dcbt Op. EBITDAR
FFGAdjusted N€t Lsverage
Totil N6t hbU(CFO - Capox)
Cowrrge (x)
Op. EBITDAR/0nbrest PaU + L6asc E)eem€)
Op. EBITDA,/Interest Paid
FFO Fixrd4hargB Co,rragc
FFO lnErest Covorage
CFO/Capox
Dobt Summary
Total Dobt with Equity Credit
Total Adlusted Debt with Equity Credit
Loas$.EquivalGnt Dobt
Other Off-Balanc€-Sheet Debt
lntcrr3t (Paid)
lmplied Cost of Debt (%)
C.!h Flow Summrry
Funds from Oprations (FFO)
Change in Working Capital (Fitch-Defined)
CaBh Flow from Operations (CFO)
Non-Operating/NoFRecuning Ca3h Flow
Capex
Common Dividen& (Paid)
FCF
AcquEitiom and Divestitur6s
Nct Dcbt Prccoods
Net Equity Procoods
O0ler lnwsling and Fin.ncing Ca3h Flil
Total Change in Cash and Equivalents
Continued on next page.
Source: Company reports, Fitch Ratings.
Origiml OdginelBBB BBB.
Rding Ouuook Stablc Ratng Oufook Stablo
Original Original
BBB- BBB-
Rating Outoot SbUs Raling Ou{ook Positw
3.6
3.5
(8.4)
26.2
25.8
16.5
22.5
(15.s)
5.4
4.0
4.0
(14.7\
4.0
2.3
(10.0)
't,850
1,898
46
(67)
3.9
403
(58)
345
0
(s{1)
(83)
(ztel
0
n7
196
10
2U
2..2
21.6
14.2
23.0
(1.1)
6.2
1.1
3.2
(1.2)
.t-0
13.0
40.0
39.3
25.3
33.3
3.3
6.7
4.1
3.2
13.3
3.9
3.6
2.1
3.9
9.0
3.6
3.4
8.4
31.9
27.9
19.0
33.2
0.3
5.0
4.2
3.3
0.2
3.6
0.0
13.3
4.2
3.3
16.6
3.8
6.4
4.9
8.4
1.2
6.4
5.9
6.5
7.0
0.6
1.3
4.8
5.5
6.1
1.5
4.1
4.4
1.5
4.7
1.8
1,359
1,455
96
(72\
5.3
367
(41)
326
(224)
(120)
(1E)
2,177
2,881
704
(s4)
4.6
4,533
4,693
160
(5sl)
(400)
100
0
(271\
(180)
(28s)
5.7
998
93
1,091
711
(s2)
659
0
(s28)
(124)
7
(167)
/165
0
(304)
1
16
2
0
(e)
Berkshire Hathaway Energy Company
May 2,2017
31
Peer Group Historical Financials - NV Energy, lnc. (Continued)
SouthYu$tern Public
Sorvice Company
9/30/16
Monongahela
Powcr co.
9/30n6
lndlana Mlchigan
PorerCo,
9/30/16
NV Energy, lnc.
Liquidity
R€adily Availau€ Cash and Equi\ralents
Availability under Committed Credit Lines
Nc,t Rsadily Availaue Calh and Equival€ntg
207
395
,|
361
10
2*:357
650
Worklng Capltal
Net Working Capital (Fibh-D€fi ned)
Trade Accounts Receivable (Oays)
lnventory Tumo/er (DaW)
Trade Accounts Payable (Days)
Capital lntemity (%)
5
44.1
14.5
65.7
30.1
123
4't.4
45.1
49.5
14.1
44
16.5
106.0
't04.4
24.7
192
50.4
34.3
72.4
19.7
lncome Statement
Revenue
R6venu6 Growth (o/o)
Operating EBITDAR
Operating EBITDAR After Dividends to Associatos and Minorities
Opgrating EBITDA
Operating EBITDA After Dividends to Associates and MinoritieE
Oporating EBIT
1,795
(1.4)
470
470
463
463
296
1,594
4.0
354
354
u4
u4
26
2,'.t40
(4.0)
682
682
597
597
4m
2,996
(1 0.7)
1,197
't,197
1,177
1,177
758
Mlscellaneous
Total Deb{/Capitalization (%)
Total Equity/Capitalization (%o)
Retum on Equity (ROE) (%)
lnterest Received
PBf6ned Dividends (Paid)
Converted to USD from the Following:
Spot FX Ratgs Used per statement
Avg. FX Rates Used per Statement
Source: Company Eports, Fitch Ratings.
49.5
50.5
7.6
0
0
USD
1.000
1.000
53.6
46.4
5.0
50.4
49.6
10.5
19
0
USD
1.000
1.000
53.1
46.9
8.5
,*
1.000
1.000
USD
1.000
1.000
Berkshire Hathaway Energy Company
May 2,2017
32
Appendix B: Financial Summaries
Annual Historical Financials - Berkshire Hathaway Energy Gompany
Annual
(8 Mit.) 12131112 12131113 l2lt1l14 12131115 12tt1t18
Profitability (%)
Oporating EBITOAR Marsin 35.8 35.7 36.1 38.7 40,2
Operating EBITDA Margin 34.8 34.8 35.2 37.8 39.3
Operating EBIT Margin 22.2 22.4 23.4 24.2 24.4
FFO Margin 36.2 33.1 36.5 35.4 33.7
FCF Margin 8.2 2.9 (8.1) 6.2 5.5
Retum on Capital Employed (ROCE) 5.6 5.0 5.8 5.7 5.4
GrGs Leverage (x)
To&l Adjusbd DcbUOp. EBITDAR
FFcAdjusted Leverage
FCF/Total Adjusbd Oebt (%)
Total Debt with Equity CrediuOp. EBITDA
Total Secured Debt/Op. EBITOA
Total Adj. DebU(CFO Before Lease Expense - Maint. Capex)
ilet Loverrga (x)
Total Adjusbd Ne{ DebUOp. EBITDAR
FFGAdjusted Net Leverage
Totel N6t D6bu(cFo - capex)
Coverage (x)
Op. EBITDAR(lnbr$t Paid + Lsase Expensc)
Op. EB|TDA,/lnterest Paid
FFO Fixe4Charge CqrsragB
FFO lnterest Coverage
CFO/Capex
Debt Summary
Total DeHwi$ Equity Credit
Total AdjusEd Debt with Equity Credit
LeeseEquivalsnt Dsbt
Other Off-Balance-Sheet Debt
lnErest (Paid)
lmplied Cost of Debt (%)
Cash FlowSummary
Funds from OFrations (FFO)
Change in Working Capital (FitclFoefined)
Caeh Flowfiom Op€rations (CFO)
Non-Operating/Non Recuning Cash Flow
Capex
Common Dividends (Paid)
FCF
Acquisiliom and Divestitures
Net Oebt Proceeds
Net Equity Proceeds
O$er lil,Gsting and Financing Cash Flou,
Total Change in Cash and Equivalents
Lhuldity
Readily Available Cash and Equivalents
Availability Under CommitEd Credit Lines
Not R€adily A\railaHe Cash and Equit/alenlg
Continued @ next page.
Source: Company rsporG, Fitch Ratings.
3.8
4.',|
4.5
4.9
1.1
3.6
3.8
4.3
4.6
1.2
3.5
3.7
3.9
4.1
1.2
6.3
4.9
(3.6)
6.3
(31.2)
6.2
4.8
(n.71
5.5
4.2
1.2
5.4
21.3
5.3
4.1
2i2.1
21,684
22,580
896
(1,046)
1,177
150
4,327
(3,380)
%7
(s41)
534
(450)
Tt6
1,539
7.1
5.9
't.'l
7.0
66.4
6.8
5.7
E2.2
30,947
31,891
9rl4
(1,073)
4,178
491
4,669
(.f,307)
362
(s,s36)
5,079
1,000
(so6)
399
1,175
3,268
38,197
39,365
1.168
(1,s85)
6,316
(1,1 70)
5,'t48
(6,sss)
(1,40e)
(2,956)
3,790
37,474
38,762
't,288
(1,7O4)
4.5
5.4
4.9
38.1
37,513
38,761
1,248
(1,8s4)
(682)
(387)
4,019
5.
4.7
2.9
5.5
2.3
30.6
5.4
4.6
32.9
5.5
5.0
2.5
5.5
34.5
3.6
3.8
4.8
5.0
1.3
3.6
3.9
4.e
5.0
0.8
4A4.44.05.0
6,331
649
6,980
0
(5,875)
0
1,105
(144)
(146)
(36)
(288)
491
5,865
191
u'01
(5,0?
966
(66)
(625)
721
;
(5s8)
617
4,598
490
1,108
5,032
0
Berkshire Hathaway Energy Company
May 2,2017
33
Annual Historica! Financials - Berkshire Hathaway Energy Company (Continued)
($ Mit.)12t1t1t12 l?31t,3 12tt1t11 12t31t15 12t31t18
Worklng C.pttrl
Nct Working Capital (Fikfi -I)dncd)
Trado Accounb Rec8ivable (DaF)
lnwnbry Tumo\r6r (Day!)
Trade Accounk Payable (Days)
Capibl lntcmity (%)
lncomo Strtrment
Rownu6
Revenue Growth (70)
Operating EBITDAR
Operating EBITDAR Aft6r Dividonds to Associates and Minorities
Opcratng EBITDA
Opereting EBITOA After Dividsn& to A$ociabs and Minorities
Oponting EBIT
Mllcollaneou!
Totel Dsbuc.pitelization (%)
Total Equity/Capihlization (%)
Retrm on Equity (ROE) (%)
lntarest Received
PlcEmd Dividonds (Pakt)
Sourca: Company GporE, Fitch Ratings.
115
43.6
79.5
29-3
1 1,548
4,1U
4,134
4,022
4,022
2,567
57.9
42.5
_
(3s)
51.1
82.0
v.1
12,635
9.4
4,513
4,513
4,395
4,395
2,835
62.2
37.8
":
(403)
38.7
52.6
37.E
65.0
35.0*:
17,32{l
37.1
6,249
6,249
6,'l03
6,103
4,046
(2)
36.4
53.4
't12.4
32.9
17,880
3.2
6,9't7
6,917
6,756
6,756
4,328
255
36.7
78.2
1',t1.4
29.2
60.5
39.5
'10..1
120
17,422
(2.6)
6,998
6,998
4,842
6,842
4,251
42.4
37.6
't0.6
0
0
Berkshire Hathaway Energy Company
May 2,20'17
34
Annual Historica! Financials - PacifiCorp
Annual
(s Mit.) 12t31t12 1u31nt 1U71t14 12t31t16 1431t16
Prcftablllty (%)
Opentiry EBITDAR Margin 34.3 38.0 38.9 4O.4 42.5
Operaling EBITDA Maqin u.o 37.7 38.6 40.1 42.2
Oporatim EBIT MaEin 20.9 24.8 21.8 25.6 27.1
FFO Margin 29.8 29.5 30.'l 3'1.7 U.2
FCF Margin 1.6 (0.3) (4.2) (2.5) (4.0)
Retum on Capitel Employed (ROCE) 5.1 6.2 6.3 6.3 6.7
Gros! Lovorage (x)
Total Adjust€d DsbUOp. EBITDAR
FFcAdiusted Levsrage
FCF/Tdal Adjusbd Dcbt (%)
Total Debt with Equity Crediuop. EBITDA
Total Scq.rnd Debt/Op. EBITDA
Total Adi. DebU(CFO Before Leas€ Expense - Maint. Capex)
Net Leverage (x)
Total Adjwted Nst DcbUOp. EBITDAR
FFO.Adjusted Nst Leverage
Totel Net DebU(CFO - Capcx)
Coverago (r)
Op. EBITDAR/(lnbr!3t Paid + L6aso Exp€Ne)
Op. EBITDA,/Interest Paid
FFO Fircd€haEo Cov.rage
FFO lnterest Coverage
CFO/Capcx
Debt Summary
Total O€bt wih Equity Crcdit
Total Adjustod Debt with Equily Gredit
bas€-Equivalont Dcbt
Ofi er Ofi-Balance-Sheet D6bt
lnbl€st (Paid)
lmplied Cost of D€bt (0/6)
Carh FlowSummary
Funds from Opcratona (FFO)
Change in Working Capital (FitctFDefined)
Cash Flow frcrn Op€rations (CFO)
Non-Operating/Non-Recuring Cash Flow
Capcx
Common DiMdends (Paid)
FCF
Acqubitions and Divestitures
Net Dsbt Procc€d3
Net Equity Proc€ods
Ofior lnw3ting and Financing Cash Flow
Totrel Chang€ in Cash and Equivalents
Liquidity
Readily Availabls Cash and Equivalgnts
Availability Und6r Committed Crsdit Lin6s
Not Rradily A\railable Cash and Equivalcnts
Conlinued on next page.
Source: Company rsports, Fitch Ratings.
4.1
3.7
24.4
3.4
3.4
11.0
4.3
4.4
4.7
4.8
1.2
4.9
5.1
4.8
5.0
1.5
5.2
5.3
5.0
5.2
1.5
5.4
5.5
5.2
5.4
1.9
5.6
5.8
5.5
5.7
't.7
4.2
3.8
1.1
4.1
4.0
23.9
6,881
6,993
1'.t2
(380)
1,455
'170
1,625
(1,346)
(200)
79
3.6
3.7
(0.2)
3.5
3.4
14.O
1,517u
1,551
(1,065)
(500)
(14)
15
(40)
12
(27)
53
t:
3.5
3.6
(3.1)
3.5
3.4
13.9
1,580
(10)
1,570
(16)
(30)
7,167
7,247
120
(37e)
1,660
74
1,7U
0
(e16)
(es0)
(132)
0
124
0
(3)
(1 1)
't2
1,020
0
3.4
3.4
(2.8)
3.3
3.2
1 1.0
7,351
7,471
120
(380)
'1,777
(20e)
1,568
(e03)
(87s)
(2',t0)
17,:
3.5
3.5
(1.8)
3.4
3.4
8.7
3.4
3.5
8.7
5.25.3
7,071
7,202
128
(37e)
5.4
6,878
7,006
128
(s7s)
5.55.5
3.5
3.6
14.0
3.6
3.6
14.0
1;
33
5
207(41
(s)
33
80
'1
(r,066)
(725)
(21)
23,:
Berkshire Hathaway Energy Company
May 2,2017
35
Annual
($Mit.\ 12i31112 1A$n3 1431n4 lA3,nB 12t31t16
Working Cepital
Networking Capital (Fitch-Ddned) 380 381 408 45 518
TradeAccounts Receivable (Days) 50.2 49.6 4a.7 51.6 51.1
lnvontory Tumowr (DaF) 94.0 86.1 76.2 83.0 92.3
Trade Accounts Payable (Days) 92.4 85.0
Capltal lntBnsity (%) n.6 20.7 20.3 17.5 17.4
Annual Historical Financials - PacifiGorp (Continued)
lncome Statement
Re\renue
Re\renue Growth (o/o)
Operating EBITOAR
Operating EBITDAR After DiMdends to A$ociates and Minorities
Operating EBITDA
Operating EBITDA After Dividends to Associates and Minorities
Op€rating EBIT
4,882
1,675
,675
,661
,661
,021
47.5
52.8
7.0
5,147
5.4
1,955
1,955
1,939
1,939
1,2U
rt6.9
53.1
8.8
5,252
2.0
2,042
2,042
2,026
2,026
1,300
47.7
52.3
9.0
5,232
(0.4)
2,112
2,112
2,097
2,097
1,340
48.9
51.2
9.3
0
0
5,20',1
(0.6)
2,211
2,21'l
2,196
2,196
1,426
43.9
50.1
10.3
iilscellanooua
Total DebUCapitalization (%)
Total Equity/Capitalization (70)
Rehrm on Equity (ROE) (%)
lntgrest Received
Pre.hr€d Dividends (Paid)
Source: Gompany Bports, Fitch Ratings.
(2)(2',)
Berkshire Hathaway Energy Company
May 2,2017
36
Annual Historical Financials - MidAmerican Funding LLC
Annuel
($Mit.\ 12tt1t12 12/31n3 1u31nt t2/31n5 nnlt$
Profit blllty (%)
OpGratng EBITDAR Margin 23.6 22.4 20.7 25.8 39.9
Operating EBITDA Margin 23.4 22.3 20.6 25.7 39.7
Op€rating EBIT Ma0in 11.4 10.5 11.2 13.8 21.5
FFO Margin 27.2 25.8 2A.1 32.8 50.7
FCF Marsin 18.9 (8.9) (18.8) (3.2) (s.2)
Retum on Capital Employsd (ROCE) 3.4 3.1 3.3 3.4 3.7
Grocr Levenge (r)
Tohl Adjult€d DrbUOp. EBITDAR
FFGAdjusted Leverage
FCF/Total Adjuebd Dobt (0/6)
Total Debt with Equity CrediUOp. EBITDA
Total S€cuEd Dcbt/Op. EBITDA
Total Adj. D6bU(CFO Before L€aso Expense - Maint. Capex)
Net Leverrge (x)
Total Mjusted Not Dcbt/Op. EBITDAR
FFGAdjusted Net Lwerage
Tobl Net &bU(CFO - Capoo
Covor.g. (x)
Op. EBITDAR (lnbrld Paid + Lcase Epensc)
Op. EBITDA/Interost Paid
FFO Fixrd-Chargc Ccn erago
FFO lnbr€3tCoverago
CFO/Capex
Debt Summary
Total Dobtwith Equity Crdit
Total Adjustod Debt with Equity Credit
Lees&Equivalrnt OoU
Other Of-Balance-Shoet Dobt
lnbr€it (Paid)
Implied Co3t of Dcbt (0/6)
Calh FlowSummary
Funds frofi1 Opcrations (FFO)
Change in Working Capital (Fitch-Defined)
Cash Flowfrom Operations (CFO)
Non-Oporating/Non-Recuning Cash Flow
Capax
Common Dividon& (Paid)
FCF
Acquisitions and Divs3tituros
Net Dsbt Prococds
Net Equity Procseds
O0lcr ln\osling and Financing Ca:h Flow
Total Change in Cash and Equivalentg
Llquldlty
Roedily A\ailablr Ca3h and Equivalcnts
Availability Under Committed Cr€dil Linss
Not Rredily A\ailau€ Cash and Equivalent3
Continued on next page.
Source: Company r€ports, FitEh Ralings.
4.3
4.4
5.9
6.1
0.7
5.0
5.1
7.4
7.5
0.9
5.'l
3.7
15.8
5.0
6.3
5.3
3.8
(7.5)
5.3
(13.6)
194
4',14
5.9
3.7
(15.4)
5.9
4,567
4,599
32
(1e7)
4.6
(1,526)
5.
3.6
(2.3)
5.4
(44.6)
5.3
3.5
(1.n
4.
3.1
(5.1)
4.6
4.5
(20.0)
4.6
3.1
(1e.s)
1,335
58
1,393
(1,636)
1.8
3.3
5.7
(6.6)
5.9
3.6
(8.4)
3.9
3.9
6.3
6.4
0.5
5.0
3.6
(12.5)
1.1
4.6
6.1
6.3
2.0
1.2
4-3
6.3
6.4
0.9
3,843
3,891
48
(167)
4.4
884
376
1,260
(645)
615
1,121
214
1,335
0
(1,446)
0
(111)
0
176
0
8
73
4,012
4,060
48
('t74\
4.4
882
(161)
721
(1,026)
,r?
.t60
(28)
7
(160)
4,757
4,789
32
(204)
4.3
1,7fi
4,76A
32
(206)
4.4
1,056
(236)
820
,?
6
353
354
340
(706)
il2
0
(164)
30
360
2
132
23
(88)
15
506
1Gt
275
0
Berkshire Hathaway Energy Company
May 2,2017
37
Annual Historical Financials - MidAmerican Funding LLC (Continued)
Annuel
($ Mir.)lugn2 ,12t31t,13 12t31t11 12t31t15 12t31t13
Woddng Capltrl
NetWotkine Capital (FitstFDGltncd)
Trade Accounts Receivable (Deys)
lnwnbry Tumorer (DaF)
Trade Accounts Payable (DaF)
Cafital lnbmity (%)
lncomo Stabment
RoYlnua
Rswnue Growth (%)
Opemting EBITDAR
Operating EBITDAR Aftcr DiMd€n& to Associates and Minoriti€s
Op.rating EBITDA
Operating EBITDA AnEr Oividonds to Assodabs and Minorities
Opcratino EBIT
lrltcellanoou!
Total t).buoaftdtalization (%)
Total Equity/Capitalization (o/o)
R€tum on Equity (ROE) (%)
lnter$t Received
Prlfsmd DMdcn& (Paid)
Source: Company rrports, FiEh Ratings.
10
47.0
51.9
19.9
17.1
53.3
7.9
157
49.'l
ot.u
30.1
48.2
53.8
7.3
54
42.4
31.7
40.6
(21)
36.9
51.3
92.0
12.3
&.2
53.8
8.3
0
0
59
39.8
123.5
'141.3
a2.2
43.9
56.1
-
3,120
(e.1)
E84
884
880
880
473
3,762
10.2
NE
778
n4
774
123
3,413
5.1
766
766
760
760
357
3,,N
767
767
761
761
369
2,631
(23.1)
1,049
1,049
1,045
1,045
566
47.4
52.8
-
Berkshire Hathaway Energy Company
May 2,2017
38
Annual Historical Financials - MidAmerican Energy Company
($ Mit.)12t31t12 12131t13 12t31t11 12tt1t16 12t3.r18
Profit bltlty (%)
Op€rali.E EBITDAR Maryin
Operatino EBITDA Margin
Operaliry EBIT Margin
FFO Margin
FCF Ma.gin
Retum on Capital Employed (ROCE)
Gtos! Lovor.go (x)
Total Adjult€d DebUOp. EBITDAR
FFGAdjusted Leverage
FCF/Total Adjusbd Dobt (%)
Total Debt with Equity Crediuop. EBITDA
Total Sscund Debt/Op. EBITDA
Totral Adi. DobU(CFO Before Lease Expenso - Maint. Capex)
Net Leverago (x)
Tobl Adjultod Net DcbUOp. EBITDAR
FFGAdjustod Net Leverage
Total Not Dcbt(CFO - Capex)
Coverago (x)
Op. EBITDAR(lnbrest Paid + Loa3r E)eonse)
Op. EBITDA,/Inter€st Paid
FFO Fixsd{haeo Coveragc
FFO lntercst Coverage
CFO/Capex
Debt Summary
Total Osbtwith Equity Crudit
Total Adlusted Debt with Equity Credit
Leeso-Equivalcnt Dcbt
Other Ofi-Balance-Sh€et D6bt
lntsr€st (Peid)
lmpli€d Cost of Oebt (%)
Calh Flow Summary
Fund3 from Operation3 (FFO)
Change in Working Capital (FitchDefined)
Cash Flil fnom Op€refron! (CFO)
Non-Operating/Non-Recuning Cash Flow
Capex
Common DiMdonds (Paid)
FCF
Acquisitiom and Divostiluros
Net Debt Proca€d3
Net Equity Proce€ds
oth€r ln\,!3ting and Finandng Cash Flow
Total Change in Cash and Equivalents
Llquldlty
Readily Availabl! Cash and Equivalsntg
Availability Under Committed Credit Lin6s
Not Readily Availablr Cash and Equivalant3
Continued on next page.
Source: Company nports, Fitch Ratings.
5.2
5.3
7.0
7.3
2.0
4.9
5.0
6.7
6.9
0.7
1.7
4.8
7.'.|
7.2
0.9
4.9
3.3
(2.2)
4.9
(47.3)
4.8
3.2
(43.e)
5.3
3.5
(17.0)
5.3
(5.s)
5.3
3.5
(s.8)
4.4
4.4
6.6
6.8
0.5
4.3
3.2
19.0
4.3
5.2
3.9
2.8
4.6
23.7
23.5
11.1
27.8
19.4
3.8
3,272
3,320
la
(143)
900
376
1,276
(64s)
(1)
630
22.5
22.3
10.5
26.4
(12.2)
3.4
1.7
3.4
(11.6)
4.7
(12.6)
4.5
3.2
(1 1.s)
3,552
3,600
4
(151)
4.4
809
(1e4)
735
1U
410
20.8
20.7
r 1.3
26.8
(18.8)
3.7
25.9
25.8
13.E
33.3
(2.8)
3.7
4,271
4,303
32
(183)
103
410
0
39.9
39.8
21.5
51.2
(E.s)
4.0
4.2
2.9
(1 8.8)
1,100
4,432
32
(181)
4.2
1,345
58
1,403
(1,636)
4.2
2.9
(5.3)
4.2
4.2
(1s.4)
5.7
5.8
8.3
8.4
0.9
4.14.4
4,'t06
4,138
32
(174)
4.5
1,003
(180)
823
(3)
(165)
1,'t 35
216
1,351
0
(1,446)
0
(e5)
0
173
0
(1)
74
(1,026)
(12s)
(416)
277
(28)
7
(160)
n,u?
o03)
i
,r?
123
21
(8e)
14
,r?
o
353
'1 29
360
Berkshire Hathaway Energy Company
May 2,2017
39
Annual Historical Financials - MidAmerican Energy Company (Continued)
Annual
($ Mir.)lAgtn 12t31tlt 12t31t11 12t31t15 12t31t16
Wortlng Capltal
NEt Wo*ing Capitil (FitclFD3find)
Trade Accounts Rsceivable (Days)
lnvcntory Tumo!,6r (DaF)
Trade AccounE Payable (Days)
Capital lnbn3ity (%)
lncomo Strtoment
R6venuo
Revenue Growth (%)
Opcratng EBITDAR
Operating EBITDAR Aftsr Divid€nds to A$ociat$ and Minorities
Opsratine EBITDA
Operating EBITDA AfEr Dividends to Associat8 and Minorities
Op€ratng EBIT
tLcell.neou!
To0al Dcbuoapitdization (%)
Total Equity/Capitalization (%)
Rrtum on Equity (ROE) (%)
lnter€st R€ceived
PrGbrld Dividcnda (Paid)
Source: Company rsporE, Fibh Ratings.
19
46.8
51.9
19.9
3,242
768
768
782
762
370
160
48.7
45.5
ilo.t
3,403
5.0
765
765
759
759
356
58
42.3
31.9
40.8
49.1
50.9
9.8
(17)
36.6
51.6
92.3
42.4
u
39.6
124.2
't42.5
82.3
{t.6
52.8
9.8
(1)
.lE.0
52.0
9.1
(1)
47.8
52.4
9.8
0
0
2,625
(23.0)
1,048
1,048
1,044
1,U4
565
46.0
54.0
10.5
3,407
(8.e)
882
882
878
878
471
740
9.9
777
777
773
773
122
3,
Berkshire Hathaway Energy Company
May 2,2017
40
Annual Historical Financials - Northern Natural Gas Company
Annual LTIII
9r30/r6(s Mit.)12t31t12 12t3111t 12131t11 1213il15
Profitabillty (%l
Op€rating EBITDAR Maryin
Operating EBITDA Margin
Operating EBIT MaEin
FFO Margin
FCF Margin
Retum on Capital Employed (ROCE)
57.1
56.4
45.5
47.4
't3.8
10.4
57.0
56.3
45.4
51.6
7.3
9.6
48.3
47.8
38.1
45.3
(17.0)
9.6
56.7
56.1
45.4
59.0
't 1.0
10.0
60.3
59.7
48.1
64.6
4.9
9.8
Gross Leverage (xf
Totd Adjustad DebUOp. EBITDAR
FFO-Adjusted Leverage
FCF/Total Adjusbd Debt (%)
Total Debt with Equity CrediUOp. EBITDA
Total SecuEd DebUOp. EBITDA
Total Adj. Debt{CFO Before Lease Expense - Maint. Capex)
2.7
2.7
8.9
2.7
4.4
2.5
2.5
4.0
6.1
6.5
6.0
6.4
3.0
899
909
10
(51)
5.5
277
27
304
(102)
(121)
81
0
(s0)
(s)
22
2.7
2.6
4.8
2.7
7.'.|
2.7
2.5
(13.2)
2.6
2.2
1.9
8.7
2.2
5.3
2.2
1.8
3.7
2.1
4.',|
Net Loverago (x)
TotalAdjusbd Net Debtrop. EBITDAR
FFGAdjusted Net Leverage
Total Net DebU(CFO - Capex)
2.3
2.2
6.3
15.0
2.5
2.4
14.7
2.1
1.9
5.0
1.9
1.6
3.5
Coverage (x)
Op. EBITDAFy(lnbrsst Paid + Lease Expense)
Op. EBlTDAJlnterest Paid
FFO Fixed4harge Coverage
FFO lnterest Coverage
CFO/Capex
7.0
7.6
7.4
8.0
1.9
7.3
7.9
7.8
8.5
1.2
8.5
9.2
9.8
10.7
1.7
9.1
9.9
'to.7
11.7
2.0
Debt Summary
Total Debt with Equity Credit
Total Adjusted Debt with Equity Credit
Leas+Equivalcnt Dobt
Other Ofi-Balance-Sheet Debt
lntotBst (Paid)
lmplied Cost of Debt (o/o)
899
905
6
(44)
4.9
306
(41)
255
1112)
(80)
43
_
(3)
40
,:
899
931
32
(44)
4.9
328
(31)
297
(23e)
(181)(?
55
(8)
(76)
795
827
32
(40)
4.7
387
(25)
362
(210)
(80)
72
(80)
(1;
(1e)
795
827
32
(38)
4.8
408
(23)
385
(18e)
(165)
31
0
(4)
27
Cash FlowSummary
Funds flom Operations (FFO)
Change in Working Capital (Fitch-Defined)
Cash Flowfrom Operations (CFO)
Non-Operating/Non-Recuning Cash Flow
Capex
Common Dividends (Paid)
FCF
Acquisitions and Divestitures
Nct Debt Proceeds
Net Equity Proceeds
other lnvesting and Financing Cash Flow
Total Change in Cash and Equivalents
Liquidlty
R6adily Available Cash and Equivalents
Availability Under Committed Credit Lines
Not Reedily Available Cash and Equivalentg
Continued on next page.
Source: Company reports, Fitch Ratings.
83 47 2A 104
Berkshire Hathaway Energy Company
May 2,2017
4',l'
Annual Historical Financials - Northern Natura! Gas Company (Continued)
Annual LTII
9r30fl6(0 Mit.)12t31t12 12t31t13 12111t11 12t31t16
YUorklng Capltel
Nrt Worting Capital (Fibh-Dofi n6d)
Trado Accoun$ Rccoivable (Daye)
lnvcnbry Tumo,rr (Days)
Tradc Accounb Payable (Days)
C.pital lnbndty (%)
(e)
45.5
365.0
I
50.5
2*.1
23.9
(18)
41.8
87.9
5
40.6
252.7
299.5
32.0
(33)
21.9
579.7
880.3
29.9
lncome Statarnant
Rar6nuc
R6\rsnuc Grovvtr (%)
OporatinC EBITOAR
Operating EBITDAR After DMdends to Associatos and Minorfi€s
Opcratng EBITDA
Oporating EBITDA Afbr DMdends to Assocaates and Minoriti€3
Oprrating EBIT
1*
585
334
334
3[t0
330
ffi
593
't.4
338
338
33t
334
269
33.0
724
22.1
350
350
:x6
346
n8
656
(s.4)
372
372
368
368
298
6i,2
(3.7)
381
381
3n
377
304
irllcollanoou!
Total Dcbuoapitalizaton (%)
Total Equity/Capitalization (%)
Rrtum on Equity (ROE) (%)
lnterr3t Rscoived
Prlbn d Oividonds (Paid)
Source: Company r€ports, Fibh Ratings.
41.',|
58.9
10.5
39.8
60.2
11.1
40.3
59.7
11.3
38.1
63.9
11.3
,|
35.7
64.3
11.5
2
Berkshire Hathaway Energy Company
May 2,2017
42
Annual Historical Financials - NV Energy, lnc.
Grc* Leverage (x)
Toilal Adjurbd Dcbt/Op. EBITDAR
FFGAdjusted Lsvcrage
FCF/Totd Adjll3bd Osbt (%)
Total D6bt with Equity Cr€diUOp- EBITDA
Totrl S€cuEd D.bUOp. EBITDA
Total Ad!. Debt(CFO Before Lease Expens€ - Maint. Capsx)
}{et Lewng. (x)
TotalAdjulEd Nd Dcbt/Op. EBITDAR
FFGAdjustsd Net Leverage
Totel Nct DObU(CFO - Capex)
Covorrgo (x)
Op. EBITDAR(lnblrst Paid + Lease Expenso)
Op. EBITDA/IntErost Paid
FFO Fixcd4hargc Cwcragc
FFO lnt€rsst Co\rorage
CFO/Capcx
DebtSunrmrry
Toiel D.Hwiur Equity Crcdit
Total Adjusbd Debt wi$ Equity Credit
Lre..-Equivahnt Dabt
Ofi cr Olf-Belance-Shoet Deb(
Intrllat (Paid)
lmplied Co3t of Dobt (0/6)
1.4
4.3
4.4
4.3
3.6
13.1
4.0
3.2
12.5
4.0
0.4
7.7
Annual
'1,262
(68)
1.194
Lil
3.9
3.6
2.1
3.9
90
4,533
4,693
160
(26e)
5.7
998
93
1,091
(ss1)
(400)
($Mit.\ 12tt1t12 12t31t13 12131n1 1A31n5 9HU16
Prcfitablllty f[)
Op€ratino EBITDAR Mangin 3S.6 35.6 34.2 38.6 40.0
Opsrating EBITDA Margin 39.0 35.1 33.7 36.0 39.3
Opcntit€ EBIT M.rgin 26.4 21.A 22.0 23.8 25.3
FFO Margin 29.9 25.1 31.4 37.7 33.3
FCF Margin 7.8 4.9 2.3 18.6 3.3
Retum on Capital Employod (ROCE) 7.2 5.7 6.2 7.'l 6.7
5.'l
5.1
2.7
5.1
15.8
1.7
3.9
1.4
4.7
13.1
4.8
4.8
15.5
3.3
3.4
3.3
3.4
1.9
5,287
5,373
86
(304)
5.9
742
(47)
695
(372)
(178)
145
't4
(235)
63
2
(1 1)
287
744
4.1
4.0
12.8
1.1
3.7
12.7
3.5
2.8
6.7
3.6
3.7
4.3
4.5
1.7
4.2
4.4
5.3
5.6
2.1
4.1
4.4
rt.5
4.7
1.E
3.6
3.4
8.4
3.6
3.8
3.7
3.9
1.8
5,026
5,168
142
(306)
6.0
890
(15)
'1
5,091
5,199
108
(2B.zt
5.6
1,017
(81)
936
(557)
(30s)
74
(203)
105
(1)
(2s)
82
650
4,800
4,960
'160
(n2t
5.5
Ca.h FlowSummrry
Fundr from Opcration! (FFO)
Change in Working Capital (FitchDefined)
Cash Flilhom Opcratiom (CFO)
Non-Operating/Non-Rscuning Cash Flow
Capcx
Common Dividends (Paitl)
FCF
AcquEitiom and Divestiturss
Net Dcbt Prccecdr
Net Equity Procosdg
Officr lnvr3tino and Finandng Cash Flow
Total Change in Cash and Equivalent3
Llquldlty
Roadily A\railablc Caah and Equivden8
Availability Undsr Committed Credit Lines
Not Rcedily Availablc Carh and Equivalonts
Continuod on next page.
Source: Company roportB, Fitch Ratings.
(4ee)
(1sl)
225
(140)
(18)
85
152
(5r4
62
9
(43)
4
372
634
650
100
0(ni
(e)
(180)
357
650
238
?41
Berkshire Hathaway Energy Company
May 2,2017
43
Annual Historical Financials - NV Energy, lnc. (Continued)
Annual LIT
($Mil.\ 12131112 12tt1n3 lAgA1 1281t16 9t3U16
Wortlng Crpltel
Nrtworking Capital (Fbh-DGfrn.d) 51 32 63 98 152
Trade Account! R€csivablo (Days) 45.7 47.2 39.3 39.5 50.4
lnwnbry TumorEr (Days) 41.3 35.3 30.9 28.2 34.3
Trad6 Accounts Payabl6 (Days) 63.9 72.4
Capr'tel lnbnsity (%) 16.8 12.4 17.2 17.1 19.7
lncomr St tamont
Rrwnuo
RevBnue Growth (%)
Operatng EBITDAR
Operating EBITDAR Afbr DiMdonds to Associate3 and Minorities
Op.rating EBITDA
Oporating EBITDA Aftar Dividonds to Associabs and Minorities
Opor.tm EBIT
iilrcellrneour
Tobl Dobt C.pitelizaton (%)
Total Equity/Capitalizalion (%)
R.tum on Equity (ROE) (%)
lnErgst Received
Prsi.rrud Dividcndr (Paid)
Source: Company r€porb, Fibh Ratings.
1,181
1,181
1,163
1,163
7E5
2,979 2,961
(0.6)
1,055
1,055
1,039
1,039
639
3,241
9.5
1,1 10
1,1 10
1,092
1,092
713
3,351
3.4
1,2%
1,228
1,206
1,206
796
54.0
45.0
8.8
2,996
(10.6)
1,197
1,197
1,177
1,177
758
53.1
r+6.9
8.5
5E.6
41.4
:
59.3
40.7
4.5
57.7
42.3
7.5
Berkshire Hathaway Energy Company
May 2,2017
44
Annual Historical Financials - Nevada Power Company dba NV Energy
Annual
Profitability (%)
Operafng EBITDAR MaEin
Operating EBITDA Margin
Operating EBIT Margin
FFO Margin
FCF Margin
Retum on Capital Employed (ROCE)
Gror. Lever.ge (x)
Total Adiust€d D€bt/Op. EBITDAR
FFGAdiusted Leverage
FCF/Totd Adju3H Drbt (%)
Total Debt with Equity CrediUOp. EBITDA
To€l Socursd t)6bYop. EBITDA
Tohl Adj. DebU(CFO Before Lease Expense - Maint. Capex)
Nst Leverage (x)
Total Adjustcd Net DobUOp. EBITDAR
FFGAdjusted Net Leverage
Tohl Net DeH(CFO - Capo()
Coverago (x)
Op. EBITDAF/(lntarost Paid + Loase Expens€)
Op. EBITDA,/lnterest Paid
FFO Fixcd€harge Coverage
FFO lnterBst Coverage
CFO/Capcx
DobtSummary
Total Dcbt Yvith Equity Crcdit
Total Adjusted Debt with Equity Credit
Lease-Equivalent D6bt
Other Off-Balance-She€t Debt
lntel€st (Paid)
lmplied Cost of Debt (o/o)
Cath FlowSummary
Funde ftorn Operelions (FFO)
Change in Working Capital (Fitch-Defined)
Cash Flow from Operatons (CFO)
Non-Op6rating/Non-R6cuning Cash FIow
Cap6x
Common Dividends (Paid)
FCF
Acquisitions and Divestitures
Nst Debt Proc€€ds
Net Equity Proceeds
Olher lnvesting ard Financing Cash Flow
Total Change in Cash and Equivalents
Liquidlty
R6adily Available Cesh and Equi\ralenk
Availability Under Committed Credit Lines
Not ReadilyA\/eilable Cesh and Equivelenb
Conlinuad on next page.
Source: Company reports, Fitch Ratings.
11.1
40.6
28.0
31.9
10.7
7.6
38.3
37.9
25.5
40.3
23.3
7.4
3.9
3.7
6.8
3.8
3.7
8.0
4.4
3.6
1.8
4_4
4.1
12.O
3.6
3.5
7.6
4.1
3.4
11.4
3.2
3"3
3.3
3.4
2.1
3.8
3.9
4.7
4.8
1.7
4.6
4.8
5.8
6.1
2.8
3,337
3,397
60
(217)
6.4
3,576
3,641
65
(208)
5.8
799
(ss)
7U
(410)
(230)
64
(e)
;
94
220
o1
3,285
3,373
88
(1s0)
5.5
/[:}.0
42.4
27.8
31.8
(1.6)
7.1
3.5
3.7
(1.0)
3.5
3.5
7.1
3,066
3,170
104
(18s)
662
109
771
(335)
(46s)
(33)
(224)
5.0
4.8
2.8
5.0
5.0
12.5
4.8
4.6
12.3
34.5
34.0
20.8
25.3
4.9
5.3
3,577
3,618
41
(217)
6.3
35.3
34.9
23.1
v.2
2.7
6.5
3.7
2.9
16.6
3.6
3.6
5.8
3.1
2.4
4.4
3.9
4.0
4.0
4.2
2.1
?.2
3.4
6.4
4.5
4.8
4.3
4.6
2.5
5.8
536
400
0
529
19
548
(267)
(178)
103
14
Q2s)
37
(7s)
128
'1
684
18
702
(288)
(184)
230
(138)
;
135
201
or:
969
(77)
892
0
(320)
(13)
559
9
(262)
0
10
316 (257)
279o:
Berkshire Hathaway Energy Company
May 2,2O17
45
Annual Historical Financials - Nevada Power Gompany dba NV Energy (Continued)
Annual
($ Mil.)12t31t12 12t31t13 12t31t14 12t31t15 ,t2t31t16
Worklng Capital
Net Working Capitd (Fitch-D€ft nrd)
Trade Accounts Receivable (Days)
lnvenbry Tumovur (Days)
Trade Accounts Payable (Days)
Capital lntensity (%)
(3)
42.4
35.0
13.4
2.'.t45
881
881
871
871
601
(s6)
39.6
31.9
12.8
2,092
(2 5)
721
721
7',t2
712
435
29
38.0
29.9
17.5
2,337
11.7
825
825
815
815
541
47
40.3
26.9
72.1
13.3
(14)
42.6
u.7
88.9
16.1
lncome Statemont
R€wnua
Revenue Growth (0/6)
Opcraiino EBITDAR
Operating EBITDAR After Dividends to Associates and Minorities
Operating EBITDA
Operatlng EBITDA After Dividends to Associates and Minorities
Op6ratin0 EBIT
2,402
2.8
921
921
9't0
910
613
2,08:l
(13.3)
896
896
883
883
580
lllrcellanoou!
Total Deb,YGapitulizetion (%)
Total Equity/Capitalization (7o)
Retum on Equlty (ROE) (%)
lnterest Recoived
Pr€fened DMd6n& (Paid)
Source: Company reports, Fitch Ratings.
53.3
46.7
'j
55.3
44.7
'j
55.3
44.7
7.5
50.9
49.1
9.1
0
0
s0.8
49.2
'l
Berkshire Hathau/ay Energy Company
May 2,2017
46
Annual Historical Financials - Sierra Pacific Power Company dba NV Energy
Annual
12t31t12 1431t13 12B1na 12t3il15 12t31t16($ Mit.)
Proftabllity (%)
Opcrating EBITDAR Margin
Operating EBITDA Margin
Operaling EBIT Margin
FFO Margin
FCF Margin
Retum on Capital Employed (ROCE)
Gror. L.verage (x)
Totil Adjustcd Debt/Op. EBITDAR
FFGAdjGted Leverage
FCF/Totd Adjucbd Debt (%)
Total Debt with Equity CrodiUop. EBITDA
To0el S.curd D,sbtlCp. EBITDA
Total Adj. OoU/(CFO Before Loa3e Exp.nse - Maint. Capex)
Net Lev.r.ge (x)
Tot lAdjGt d Nst DsbUOp. EBITDAR
FFcAdjusted Net Leverage
Totel Nct D6bY(CFO - Capsx)
Co\,or.ge (x)
Op. EBITDAFy(lnbrBt Paid + L€alc Expons€)
Op. EBITDA,/Interest Paid
FFO Fixed4harge Cotrora€E
FFO lnterBt Coverage
CFO/Capax
DebtSurwn.ry
Tot.l Ocbtwith EquivCrcdit
Total Adjusted Debt with Equity Crsdit
Lcas.-Equivalent Debt
Oth6r Off-Balancc.Sheet Debt
lnb]!3t (Paid)
lmpliod Cost of Debt (0/6)
C..h Flowsummrry
Fun& frcrn Opcralions (FFO)
Chango in Working Capital (Fitch-Defin€d)
Carh Flowfrom Operations (CFO)
Non-Opsrating/Non-Recuning Cash Flow
Capcx
Common Dividends (Paid)
FCF
Acquisitions and Divestitures
Nst Dcbt Proc.odg
Not Equity Prcceeds
Othcr lnv!3ling and Financing Ca3h Flow
Total Change in Cash and Equivalents
Llquldfty
Rradily Available CaBh and Equi\Elcnb
Availability Under Committed Cr€dit Linss
Not Rradily A\railable Ca3h and Equivelenb
Continued on next page.
Source: Company reports, Fitch Ratings.
4.3
4.6
4.7
5.1
1.3
5.7
6.3
5.5
6.1
1.3
36.1
35.4
22.4
28.3
(4.1)
6.5
4.0
3.9
(2.8)
4.0
3.1
(1s1.0)
3.8
3.7
(rs.s)
1,179
1,208
29
(66)
5.6
31.1
30.8
18.4
28.4
(0.e)
4.7
32.O
31.3
19.7
27.8
G.r)
5.7
32.1
31.4
19.4
32.6
8.E
6.2
4.5
4.9
5.5
6.1
1.1
4.3
3.7
16.4
4.3
3.9
(4.4)
4.2
1.2
22.2
4.2
3.8
23.6
4.8
4.0
(0.7)
4.6
4.6
't6.5
1,200
1,241
41
(61)
5.'l
251
(s)
2rc
(1s6)
(1 0s)
(s5)
;
I
(4s)
22
250
4.1
3.3
6.7
4.0
a.0
't2.9
3.8
3.0
12.2
37.4
36.7
2..2
29.4
(0.2)
6.0
4.0
4.1
(0.2)
3.9
3.9
2',t.8
3.8
3.9
22.4
4.2
4.5
4.3
4.6
0.9
4.0
4.2
4.6
4.9
1.1
242
(16)
26
(1sa
(27)I
,1
18
6
67
244
238
(3s)
197
(211\
(20)
(34)
?
12
6
61
244
1,200
1,221
21
(62)
5_2
1,202
1,247
45
(61)
5.1
309
33y2
0
(252)
(7)
83
0
(1)
0
2
84
106
250
0
't,153
1,201
48
(47)
4.0
239
4
243
(1s4)
(51)I
(?
(s1)
55
170
Berkshire Hathaway Energy Company
May 2,2017
47
Annual Historical Financials - Sierra Pacific Power Company dba NV Energy (Continued)
Annual
13 Mit r 12t31t13 12t31t11 12tt1t16 12t31t16
Worldng Crpltrl
Nctwo*ing Capitd (FiEtFDOltn d)
Trad6 Accounb Recaivablo (Days)
ln\6nbry TumoEr (Dey!)
Trade Accounts Payable (Days)
Capital lnbmity(%)
lncomo St t ment
Rewnuo
Rewnue Growth (%)
Opcratine EBTTDAR
Operating EBITDAR Afbr Dividends to Associat$ and Minorities
Op€rating EBITDA
Operating EBITDA Aftor Dividcnds to A$ocietos and Minodtiss
Opcratng EBIT
ililcettanoou!
To&l Dcbt/Cepltalization (%)
Total Equiv/Capitalization (%)
Rctum m Equity (ROE) (%)
lnErest Rocaived
PI€frrrud Divi&nds (Paid)
Sourcc: Company reportB, Fitch Ratings.
812
(14.3)
304
3(X
298
298
180
947
4.8
304
304
297
297
1U
21.7
904
6.0
289
289
283
283
174
18.4
853
2.3
268
268
263
263
tlt()
834
301
301
295
295
't87
24
54.3
68.5
25.3
s3.2
48.8
8.1
14
66.8
45.1
51.2
45.8
'l
13
51.3
33.4
I
47.8
31.'l
101.2
%.6
s2.8
47.2
7.7
0
0
(8)
52.6
51.3
166.5
23.9
51.0
49.0
7.6
54.6
45.4,:
Berkshire Hathaway Energy Company
May 2,2017
48
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Berkshire Hathaway Energy Company
May 2,2017
49
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