Business Achievement: Finance


Gold MedalMidAmerican Renewables (Des Moines, IA), the renewable energy arm of Warren Buffet's MidAmerican Energy Holdings Co., for its sale of bonds (at 5.75% with maturity in 2039) to finance $850 million of the $2.4 billion, 550 MW Topaz Solar Project to be located on Southern California's Carrisa Plains. "We can make this sort of investment because MidAmerican retains all of its earnings, unlike other utilities that generally pay out most of what they earn," said Buffet in his February 2012 annual shareholder letter. "Many more wind and solar projects will almost certainly follow."

The Topaz Solar Project will utilize solar panels provided by First Solar, which is also building the project as well as MidAmerican's 290 MW Agua Caliente project in Arizona. Travis Lowder, an energy analyst with the National Renewable Energy Laboratory (NREL) wrote in March 2012 that the MidAmerican bond issue has "some encouragingly replicable elements … including: the PPA with a large, creditworthy off-taker; the guarantees and cushions in the EPC contract; the revenue backing from reputable banks (i.e. Royal Bank of Scotland, Barclays, and Citi)."

"Furthermore, solar projects are reportedly making returns of ~15% (Topaz is expected to be even higher at 16.3%), and this is starting to pique investor interest in solar-backed financial products. As the renewables industry matures and as investors come to better understand the risks and returns of this asset class, we may see more capital market plays for wind and solar projects in the future. And what better firm to blaze this trail than one with Buffet's Midas touch? While there will certainly be a learning curve for both investors and project sponsors in this space, MidAmerican has set the bar pretty far up the slope."