Buffett’s MidAmerican Plans $700 Million Solar Bond Deal

Warren Buffett’s MidAmerican Energy Holdings Co. may complete a $700 million bond offering this month to finance its $2.74 billion Antelope Valley solar farm in Southern California.

The company plans to issue Series A senior secured notes due in 2035, Elizabeth Fogerty, a Fitch Ratings spokeswoman, said today by e-mail. Barclays Plc, Citigroup Inc. and Royal Bank of Scotland Group Plc are leading the offering, according to data compiled by Bloomberg.

This will be Buffett’s second utility-scale solar farm financed through a bond offering, as mainstream investors become more comfortable backing renewable-energy projects.

“Our understanding is bankers are looking to close the deal this month,” Trevor D’Olier-Lees, a director of the infrastructure and renewables group at Standard & Poor’s Ratings Services, said today by e-mail.

The project uses a “proven technology” and its strengths include “a solar resource that is fairly well characterized,” S&P said in a report yesterday. S&P and Fitch both rate the bonds BBB-, the lowest investment grade. The venture is also known as Solar Star Funding LLC.

The deal would bring clean-energy issuance this year to more than $2 billion, “putting 2013 on track to be the biggest year on record for renewables bond offerings,” Joseph Salvatore, an analyst with Bloomberg New Energy Finance, said in an e-mail today. Based on pricing for “comparatively rated” projects, he expects the notes to price “in mid to upper 5 percent range.”

Construction Schedule

MidAmerican, based in Des Moines, Iowa, and the state’s largest utility, acquired the 579-megawatt Antelope Valley project in Los Angeles and Kern counties in January. It announced that SunPower Corp. had begun construction about three months later and Edison International’s Southern California Edison utility will buy the electricity for 20 years.

Construction is expected to be completed by October 2015, and the unit of Buffett’s Berkshire Hathaway Inc. may issue an additional $575 million in notes next year, according to the S&P report.

The project is “ahead of schedule and on budget,” S&P said. Edison’s power contract, approved last year by the California Public Utilities Commission, contains “well-above-market prices.”

MidAmerican has pledged to provide sufficient equity to fully fund the project if it doesn’t complete the offering next year, according to a Fitch report.

Topaz Bonds

MidAmerican in February 2012 issued $850 million in 5.75 percent bonds due in September 2039 to help fund the 550-megawatt Topaz solar farm in Southern California it bought from First Solar. In April it issued $250 million in 4.875 percent bonds for the project, also due September 2039. Topaz is expected to cost $2.4 billion.

The company is the third-largest U.S. owner of photovoltaic assets, according to data compiled by Bloomberg New Energy Finance. NextEra Energy Inc. is the biggest, followed by First Solar Inc.

Robert Julavits, a spokesman for Citigroup, declined to comment on when the offering would be complete.