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Buffett Already Investing in Another Solar Plant – Here He is Discussing Energy/Oil Depletion

December 17, 2011 | About:
CanadianValue

CanadianValue

212 followers
For the second time just this month Berkshire subsidiary MidAmerican Energy is investing capital in solar energy. I would love to understand the full economics of these investments for Berkshire when the associated tax credits and incentives are all factored in. For a company with billions in taxable income like Berkshire this might be a no-brainer.

Here are the details on this deal:

Warren Buffett’s MidAmerican Energy Holdings agreed to buy a 49 percent stake in NRG Energy Inc. (NRG)’s $1.8 billion Agua Caliente solar project, the billionaire’s second investment in solar this month.

The 290-megawatt power plant is being built in Arizona by First Solar Inc. (FSLR), which expects to complete the installation of its panels by 2014, Princeton, New Jersey-based NRG said today in a statement. Terms of MidAmerican’s purchase weren’t disclosed.

Buffett’s foray into solar shows that utility-scale power plants offer good returns with little downside risk, said Paul Clegg, an analyst at Mizuho Securities USA in New York. Power from the plant, which won a $967 million loan guarantee from the U.S. Energy Department this year, will be sold to a PG&E Corp. utility under a 25-year contract at undisclosed prices.

Link to the entire article:

http://www.bloomberg.com/news/2011-12-16/berkshire-invests-in-1-8-billion-nrg-project-as-buffett-adds-to-solar-bet.html

Here are details on the original solar deal :

Warren Buffett’s MidAmerican Energy Holdings utility agreed to buy the $2 billion Topaz project in southern California, branching into solar power after the industry was battered by stock markets around the world.

The Topaz Solar Farm will be one of the world’s largest photovoltaic power plants and is being developed by the seller, First Solar Inc. (FSLR) of Tempe, Arizona, according to a joint statement today. Terms weren’t disclosed. The project’s 550- megawatt capacity is equal to about half a new nuclear reactor.

Buffett’s Iowa-based utility, which entered clean energy by buying U.S. wind farms and a stake in Chinese electric-car producer BYD Co., struck today’s deal after First Solar failed to get a U.S. government loan guarantee for the project that will use its thin-film panels. The purchase may make it easier for the solar company to sell additional projects.

“Selling Topaz to the smart financial guys at MidAmerican relieves uncertainty about some of their other projects,” Paul Clegg, an analyst at Mizuho Securities USA Inc. in New York who has a “buy” rating on First Solar, said today in an interview. “I don’t doubt they will find buyers for more of their projects.”

Tax benefits may have helped attract the billionaire, said Gerard Reid, an analyst at Jefferies International Ltd., a London-based unit of the New York investment bank Jefferies Group Inc. “The reason for the move from wind to solar is very simple,” he said in an interview. “Tax credits for wind in the U.S. expire at the end of next year, while solar ones run till 2015.”

Link to entire article:

http://www.bloomberg.com/news/2011-12-07/berkshire-s-midamerican-energy-to-buy-topaz-solar-farm.html

I’ve got a lot of my portfolio invested in oil related companies. I’ve always tried to keep an eye on Buffett’s comments with respect to energy. I believe he does adhere to the concept of peak oil, but that he is fairly optimistic that the world will figure out a substitute sooner than many of us expect.

Here are videos of Buffett talking about oil depletion and oil prices:






About the author:

CanadianValue
http://valueinvestorcanada.blogspot.com/

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