Shares of Suntech Power Holdings (News - Alert) were up 29.2 percent, to $0.62, as New York’s equity markets closed on Tuesday afternoon, April 9th. The stock rallied behind rumors from Asia that MidAmerican Energy Holdings—a unit of U.S. über-investor Warren Buffett's conglomerate Berkshire Hathaway—had shown interest in the cash-strapped company.
The specific source of the news was not divulged. However, the story first ran in the Hong Kong Economic Times—and then was picked up by Bloomberg (News - Alert) when Suntech’s stock price suddenly started climbing again following a precipitous drop last month.
Suntech made big industry news when the former solar industry stalwart—a worldwide production leader in 2011—defaulted on US$541 million of bonds on March 16 and did not contest a bankruptcy petition from eight of its Chinese lenders. Although the Wuxi, China-based manufacturer of photovoltaic solar panels said it intended to continue production during the debt restructuring period, Suntech’s American depositary receipts immediately tumbled 66 percent on the intelligence, representing a 72 percent drop from the beginning of 1Q2013.
A number of other Chinese solar stocks also jumped following the news. LDK was up 23.4 percent; Yingli, 21.1 percent; and JA Solar, 19.5 percent. Trina Solar, which separately had announced that it would return to profitability during the second half of the year, also saw its share price rise 14.6 percent, to $4.40.
But several analysts were stumped by MidAmerican’s unanticipated move. Known as a shrewd and skillful investor, Buffet has rarely placed a bet on a company in freefall—let alone, a company outside the United States.
Indeed, speaking to Bloomberg, James Kelleher, a director at Argus Research in New York, surmised, “If Buffett were to buy Suntech, he would be entering a company with big debt and a market where solar product prices are still low. Suntech doesn’t have any of the advantages of Buffett’s other previous acquisitions. China would be reluctant to do debt restructuring for Suntech should Buffett take over.”
This marks the fourth time within the past year that Buffett has splurged on solar energy. Back in January, he agreed to acquire and build two projects in California from Silicon Valley-based PV solar manufacturer SunPower Corporation for a price tag (News - Alert) between $2 billion and $2.5 billion. Together, theAntelope Valley Solar Projects will constitute the largest permitted solar photovoltaic power development in the world. They are expected to generate a cumulative 579 megawatts (MW) of grid-tied energy, which will be sold directly to Southern California Edison (News - Alert). No mystery there.
MidAmerican Solar's projects also include the 550-megawatt Topaz Solar Farms in San Luis Obispo County, California, and a 49 percent ownership interest in the 290-megawatt Agua Caliente solar project in Yuma County, Arizona.
Edited by Ashley Caputo