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Management’s Discussion (Continued)<br />
Foreign Currency Risk (Continued)<br />
impact is somewhat offset by transaction gains or losses on net reinsurance liabilities of certain U.S. subsidiaries that are<br />
denominated in foreign currencies as well as the equity index put option liabilities of U.S. subsidiaries relating to contracts that<br />
would be settled in foreign currencies.<br />
Commodity Price Risk<br />
Our subsidiaries use commodities in various ways in manufacturing and providing services. As such, we are subject to<br />
price risks related to various commodities. In most instances, we attempt to manage these risks through the pricing of our<br />
products and services to customers. To the extent that we are unable to sustain price increases in response to commodity price<br />
increases, our operating results will likely be adversely affected. We utilize derivative contracts to a limited degree in managing<br />
commodity price risks, most notably at MidAmerican. MidAmerican’s exposures to commodities include variations in the price<br />
of fuel required to generate electricity, wholesale electricity that is purchased and sold and natural gas supply for customers.<br />
Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable<br />
items, weather, market liquidity, generating facility availability, customer usage, storage and transmission and transportation<br />
constraints. To mitigate a portion of the risk, MidAmerican uses derivative instruments, including forwards, futures, options,<br />
swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. The settled<br />
cost of these contracts is generally recovered from customers in regulated rates. Financial results would be negatively impacted<br />
if the costs of wholesale electricity, fuel or natural gas are higher than what is permitted to be recovered in rates. MidAmerican<br />
also uses futures, options and swap agreements to economically hedge gas and electric commodity prices for physical delivery<br />
to non-regulated customers. The table that follows summarizes our commodity price risk on energy derivative contracts of<br />
MidAmerican as of December 31, 2013 and 2012 and shows the effects of a hypothetical 10% increase and a 10% decrease in<br />
forward market prices by the expected volumes for these contracts as of each date. The selected hypothetical change does not<br />
reflect what could be considered the best or worst case scenarios. Dollars are in millions.<br />
Fair Value<br />
Net Assets<br />
(Liabilities)<br />
Hypothetical Price Change<br />
Estimated Fair Value after<br />
Hypothetical Change in<br />
Price<br />
December 31, 2013 .................................... $(140) 10% increase $ (72)<br />
10% decrease (208)<br />
December 31, 2012 .................................... $(235) 10% increase $(187)<br />
10% decrease (285)<br />
FORWARD-LOOKING STATEMENTS<br />
Investors are cautioned that certain statements contained in this document as well as some statements in periodic press<br />
releases and some oral statements of Berkshire officials during presentations about Berkshire or its subsidiaries are “forwardlooking”<br />
statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking<br />
statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which<br />
include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” or similar expressions. In addition,<br />
any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business<br />
strategies or prospects and possible future Berkshire actions, which may be provided by management, are also forward-looking<br />
statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future<br />
events and are subject to risks, uncertainties and assumptions about Berkshire and its subsidiaries, economic and market factors<br />
and the industries in which we do business, among other things. These statements are not guaranties of future performance and<br />
we have no specific intention to update these statements.<br />
Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a<br />
number of factors. The principal important risk factors that could cause our actual performance and future events and actions to<br />
differ materially from such forward-looking statements include, but are not limited to, changes in market prices of our<br />
investments in fixed maturity and equity securities, losses realized from derivative contracts, the occurrence of one or more<br />
catastrophic events, such as an earthquake, hurricane or act of terrorism that causes losses insured by our insurance subsidiaries,<br />
changes in laws or regulations affecting our insurance, railroad, utilities and energy and finance subsidiaries, changes in federal<br />
income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries in<br />
which we do business.<br />
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