Market Overview

Buffett Enters Solar Energy, Brings Midas' Touch to First Solar

MidAmerican Energy Holdings, owned by famed investor Warren Buffet, announced yesterday that it was acquiring Topaz Solar Farm from First Solar, Inc. (NASDAQ: FSLR). MidAmerican will pay $2 billion for the solar farm, one of the two largest of such constructions in the world, according to Reuter.

This is the first foray into solar energy for the Oracle of Omaha, and it comes at a time when the industry has been occupying headlines following significantly depressed prices for solar panels. The significantly lower prices—to the tune of 44%, according to Business Week—forced Solyndra, Inc. into bankruptcy and into the limelight along with the US Government, which provided half a billion dollars in loan guarantees for the company.

Mr. Buffet will not have to put up with none of that it appears. Depressed prices do not apply to the deal, as Topaz had contracts covering prices signed three years ago, when the industry was still booming. Also, Business Weeksays that since the project broke ground last month, it is in time to qualify for government subsidies that are set to expire soon.

Warren Buffet's investment celebrity is washing over First Solar and brings a newly invigorated confidence that the company will be able to sell other solar projects, even ones with rates not as favorable as these, says Paul Clegg, an analyst with Mizuho Securities USA, who spoke to Business Week. “I don't doubt they will find buyers for more of their projects,” he said.

Topaz had become a troublesome project for First Solar after the company took backlash from environmental groups and lost a $1.9 billion federal loan guarantee (similar to the one received by Solyndra), according to USA Today. The company failed to meet conditions form the Department of Energy before the loan guarantee program expired on September 30. The project had gotten the company in hot waters with stakeholders as well, as it seemed that the development of such power plants distracted from the company's core solar panel business plan. Buffet's involvement may have provided a much-needed vindication of First Solar's overall bet.

The sale boosted First Solar shares higher approaching $52 yesterday before settling down to a $47.99 close. The company is currently trading down 3.08 percent at $46.54 per share.

Posted-In: Solyndra Warren BuffettNews Movers & Shakers Legal M&A Tech General Best of Benzinga

 

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