Berkshire Hathaway 2008 Annual Report Download - page 90

Management’s Discussion (Continued)
Foreign Currency Risk (Continued)
Berkshire’s net assets subject to translation are primarily in the insurance and utilities and energy businesses, and to a
lesser extent in the manufacturing and services businesses. The translation impact is somewhat offset by transaction gains or
losses on net reinsurance liabilities denominated in foreign currencies of certain U.S. subsidiaries as well as the equity index put
option liabilities of U.S. subsidiaries relating to contracts that would be settled in foreign currencies.
Commodity Price Risk
Berkshire, through its ownership of MidAmerican, is subject to commodity price risk. Exposures include variations in the
price of wholesale electricity that is purchased and sold, fuel costs to generate electricity and natural gas supply for regulated
retail gas customers. Electricity and natural gas prices are subject to wide price swings as demand responds to, among many
other items, changing weather, limited storage, transmission and transportation constraints, and lack of alternative supplies from
other areas. To mitigate a portion of the risk, MidAmerican uses derivative instruments, including forwards, futures, options,
swaps and other over-the-counter agreements, to effectively secure future supply or sell future production at fixed prices. The
settled cost of these contracts is generally recovered from customers in regulated rates. Accordingly, gains and losses associated
with interim price movements on such contracts are recorded as regulatory assets or liabilities. Financial results may be
negatively impacted if the costs of wholesale electricity, fuel or natural gas are higher than what is permitted to be recovered in
rates. MidAmerican also uses futures, options and swap agreements to economically hedge gas and electric commodity prices
for physical delivery to non-regulated customers. MidAmerican does not engage in a material amount of proprietary trading
activities.
The table that follows summarizes Berkshire’s commodity price risk on energy derivative contracts of MidAmerican as of
December 31, 2008 and 2007 and shows the effects of a hypothetical 10% increase and a 10% decrease in forward market prices
by the expected volumes for these contracts as of that date. The selected hypothetical change does not reflect what could be
considered the best or worst case scenarios. Dollars are in millions.
Fair Value
net assets
(liabilities) Hypothetical Price Change
Estimated Fair Value after
Hypothetical Change in
Price
December 31, 2008 ..................................... $(528) 10% increase $(474)
10% decrease (582)
December 31, 2007 ..................................... $(263) 10% increase $(208)
10% decrease (318)
FORWARD-LOOKING STATEMENTS
Investors are cautioned that certain statements contained in this document, as well as some statements in periodic press
releases and some oral statements of Berkshire officials during presentations about Berkshire, are “forward-looking” statements
within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include
statements that are predictive in nature, that depend upon or refer to future events or conditions, that include words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or similar expressions. In addition, any statements
concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or
prospects, and possible future Berkshire actions, which may be provided by management are also forward-looking statements as
defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are
subject to risks, uncertainties, and assumptions about Berkshire, economic and market factors and the industries in which
Berkshire does business, among other things. These statements are not guaranties of future performance and Berkshire has no
specific intention to update these statements.
Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a
number of factors. The principal important risk factors that could cause Berkshire’s actual performance and future events and
actions to differ materially from such forward-looking statements, include, but are not limited to, changes in market prices of
Berkshire’s investments in fixed maturity and equity securities, losses realized from derivative contracts, the occurrence of one or
more catastrophic events, such as an earthquake, hurricane or an act of terrorism that causes losses insured by Berkshire’s insurance
subsidiaries, changes in insurance laws or regulations, changes in Federal income tax laws, and changes in general economic and
market factors that affect the prices of securities or the industries in which Berkshire and its affiliates do business.
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