Berkshire Hathaway 2009 Annual Report Download - page 90

Management’s Discussion (Continued)
Foreign Currency Risk (Continued)
Our net assets subject to translation are primarily in our insurance and utilities and energy businesses, and to a lesser extent
in our 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
Through our ownership of MidAmerican, we are 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 agreements, to effectively secure future supply or sell future production generally 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 our commodity price risk on energy derivative contracts of MidAmerican as of
December 31, 2009 and 2008 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, 2009 .................................... $(438) 10% increase $(398)
10% decrease (478)
December 31, 2008 .................................... $(528) 10% increase $(474)
10% decrease (582)
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 our officials during presentations about us, 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 us, economic and market factors and the industries in which we do business, among other
things. These statements are not guaranties of future performance and we have 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 our 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 our
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 our 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 we do business.
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