Did Solar Just Get Warren Buffett’s Seal of Approval?
If there was ever an omen that could move the solar power industry, it would be the purchase of the world’s largest permitted solar photovoltaic power development. It would be even better if that project was in the United States, and belonged to an American solar company. It would be even better if the purchase was made by one of the world’s most respected investment funds.
Well, it’s a good day for solar bulls because that’s pretty much exactly what happened when MidAmerican Energy Holdings, a holding company controlled by Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB), agreed to purchase the 579-megawatt Antelope Valley Solar Projects from SunPower Corp. (NASDAQ:SPWR) for between $2 and $2.5 billion.
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As usually happens when Buffett blesses a company — at least, the market interprets a business decision that way — its stock price exploded. Shares of SunPower surged over 40 percent on heavy volume as the news spread and investors bid up the company’s equity. The American solar products and services company now has a market cap over $1 billion, about a third of its domestic rival, First Solar (NASDAQ:FSLR).
The purchase is an endorsement for an industry that has taken a lot of beatings over the past few year. Economic headwinds have not been kind to solar manufacturers and related service companies. Hundreds have gone out of business as demand shrank and supply grew into damaging overcapacity. The industry consolidated and many experts predict that further consolidation will be necessary before a full-scale recovery.
But the end of 2012 brought with it a solar-stock rally. First Solar is up over 45 percent in the last three months, with a 10 percent pop on January 3, thanks to Buffett’s seal of approval. The Guggenheim Solar ETF (NYSE:TAN) also enjoyed a 10 percent intra-day pop after a flat three-month period.
Chinese solar companies traded on U.S. exchanges are also enjoying a New Year boost. Shares of Yingli Green Energy Holding (NYSE:YGE) and Suntech Power Holdings jumped over 18 percent, also on heavy volume. Even SolarCity (NASDAQ:SCTY), a recent IPO, is enjoying a boost. SolarCity designs and installs solar-energy installations, but doesn’t manufacture any of the panels. Shares were up 3.8 percent in afternoon trading.
Given the market’s reaction, it almost looks like people were just waiting for a reason run with some of these investments. But this is by no mean’s MidAmerican Renewable’s first megawatt asset, as its name might betray. The holding company owns more than 1,830 megawatts worth of renewable assets, including wind, hydro, and geothermal.
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