Warren Buffett’s MidAmerican Energy Holdings Co. agreed to spend as much as $2.5 billion to build two solar projects in California that are set to be the world’s largest photovoltaic development.
MidAmerican acquired the 579-megawatt Antelope Valley projects in Kern and Los Angeles counties from SunPower Corp., according to a statement today. MidAmerican will pay San Jose, California-based SunPower $2 billion to $2.5 billion for the projects and a three-year contract to build them. SunPower also will operate and maintain the projects under a multi-year agreement with MidAmerican.
Buffett has been increasing investment in wind and solar farms and last year formed a MidAmerican unit to support the projects it’s acquired, including the $2.4 billion 550-megawatt Topaz solar farm in California. Chief Financial Officer Patrick Goodman said in November the company favors bets on renewable energy amid high utility valuations. California is the biggest U.S. solar market.
“Customers, investors and banks see this as a stamp of approval on SunPower,” the solar company’s President and Chief Executive Officer Tom Werner said in an interview today. “It’s a huge deal for us, roughly the size of our company.”
Ingrid Ekstrom, a spokeswoman for SunPower, declined to specify how much of the total amount being spent is construction costs and how much is the purchase price. SunPower is 66 percent owned by France’s Total SA and has a market value of $732 million, according to data compiled by Bloomberg.
The sale gives panel-maker SunPower “a sizable captive demand channel for its modules which should help ensure the company maintains healthy factory utilization levels even if the oversupply conditions in the industry take longer than expected to be resolved,” Ben Kallo and Christopher M. Kovacs, analysts for Robert W. Baird & Co., said in a note today.
Construction of the Antelope Valley project is expected to begin this quarter, with completion by the end of 2015, SunPower said in a filing with the U.S. Securities and Exchange Commission.
“Together, the two combined projects will form the largest permitted solar photovoltaic power development in the world and will create an estimated 650 jobs during construction,” according to the statement. The projects will provide energy to Edison International under two long-term power-purchase contracts.
MidAmerican Renewables, a subsidiary of MidAmerican Energy, has more than 1,830 megawatts of assets, including wind power, geothermal, solar and hydro, according to today’s statement. MidAmerican is owned by Buffett’s Berkshire Hathaway Inc.
SunPower rose 9.1 percent to $6.13 at the close in New York. Berkshire, based in Omaha, Nebraska rose 4.1 percent to $139,610.