Warren Buffett Continues with Largest Solar Power Project to Date

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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.

SPWR 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 interestcoverage 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.

SCTY 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 GuruFocus: GuruFocus.com tracks the stocks picks and portfolio holdings of the world's best investors. This value investing site offers stock screeners and valuation tools. And publishes daily articles tracking the latest moves of the world's best investors. GuruFocus also provides promising stock ideas in 3 monthly newsletters sent to Premium Members .

 




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Basics , Investing Ideas

Referenced Stocks: ENPH , NOV , PSX , SCTY , TSL

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