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Warren Buffett Continues with Largest Solar Power Project to Date

Last week, solar stocks lit up (pun intended) as the aftermath of Berkshire-owned MidAmerican Solar’s announcement to get a piece of the 579-megawatt Antelope Valley Solar Projects from SunPower Corp. (SWPR). MidAmerican paid the solar panel company more than $2 billion for the projects.

1357851079187.pngSPWR data by GuruFocus.com

The Antelope Valley Solar Projects will provide renewable energy to Southern California Edison, an initiative that SunPower developed over the last four years. Set to begin in the first quarter of 2013, the projects will install panels at the 3,230-acre site, which will track the sun daily, capturing energy by 25 percent. SunPower expects the projects to be completed by the end of 2015.

SunPower will serve as the engineering, procurement and construction contractor for the projects, as the company will work alongside MidAmerican. Currently MidAmerican has a portfolio of more than 1,830 megawatts of assets including wind, geothermal, solar and hydro assets, according to Bill Fehrman, MidAmerican president.

Just to get an idea of how big this project is, Community Outreach Manager, Tom Jackson, of solar and wind power Internet retailer GoGreenSolar.com, highlighted the 579-megawatt project in his blog.

One megawatt equals a million watts. Jackson said a solar panel used in residential applications might be around 230 watts. For the Antelope Valley Solar Projects, that would mean 2.5 million 230-watt solar panels.

Warren Buffett’s Berkshire Hathaway holds an 89.8 percent ownership interest in MidAmerican, as of last year’s third quarter.

In Buffett’s 2011 shareholder letter, he pointed out the important characteristics of both MidAmerican, and Berkshire’s other energy connect, Burlington Northern Santa Fe:

Both businesses have earning power that even under terrible business conditions amply covers their interest requirements. In a less than robust economy during 2011, for example, BNSF’s interest coverage was 9.5x. At MidAmerican, meanwhile, two key factors ensure its ability to service debt under all circumstances: The stability of earnings that is inherent in our exclusively offering an essential service and a diversity of earnings streams, which shield it from the actions of any single regulatory body.”

The energy sector represents 1.8 percent of Berkshire’s 38-stock portfolio which include National Oilwell Varco (NOV) and Phillips 66 (PSX).

While SunPower’s stock is up 0.25 percent today, more than a week after the announcement, the retreat of solar stocks back down to a slump suggest that investors may not completely be buying into the solar sector’s recovery just yet.

Trinity Solar Ltd. (TSL) is down 4.82 percent today, along with First Solar Inc. (FSLR), which is down 0.25 percent, Enphase Energy (ENPH) which is down 0.53 percent and Yingli Green Energy Holding Company (YGE), which is down 0.66 percent. Newly public SolarCity (SCTY) on the other hand, is up 1.47 percent today.

1357852189479.pngSCTY data by GuruFocus.com

To view more about Berkshire’s holdings, visit Warren Buffett’s portfolio. Also check out his undervalued stocks, top growth companies and high yield stocks. Don’t forget to sign up for a GuruFocus Premium Membership today to get a 15% discount!

About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

Visit Dianne Tordillo's Website


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