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Buffett’s MidAmerican Energy Buys Two Solar Projects from SunPower (SPWR, BRK.A)

SunPower Corp. (NASDAQ: SPWR) announced on Wednesday that it has sold two solar projects running in California to a firm controlled by Warren Buffet’s Berkshire Hathaway Inc. (NYSE: BRK.A). In lieu, SunPower would receive about $2.5 billion along with related contracts.

Shares of SunPower climbed more than 30% in early trading on Thursday. On Wednesday, the stock gained 9% to $6.13, its highest level since last eight months.

In its regulatory filing, SunPower said Berkshire utility MidAmerican Energy Holdings Co. will pay SunPower between $2.0 billion and $2.5 billion for the 579-megawatt (MW) Antelope Valley solar projects which include the fees for designing, installing and constructing solar energy sites.

SunPower boasts these projects as world’s largest photovoltaic power development project and construction on this venture is expected to be completed by the end of 2015.

While speaking to Reuters, SunPower’s Chief Executive Tom Werner said investments from Buffet owned utility firm indicate endorsement of these projects,. He added that anticipated cash flows from these projects will only make SunPower more creditworthy and bankable.

“If you are a bank you are looking at us a lot differently today than you did last week,” said the CEO while speaking to Reuters.

However, analysts at Raymond James remained skeptical on the Company, citing that projects are too costly in the backdrop of falling margins and lack of demand for solar energy.

“( A deal with Buffest owned utility) does not alter the fact that SunPower retains a markedly high-cost structure and razor-thin margins in the context of a massively oversupplied market,” said Marshall Adkins, an analyst at Raymond James.

For MidAmerican Energy Holdings Co, addition of these two new projects will further increase firm’s growing footprint in clean energy business.

Earlier in 2011, MidAmerican acquired 49 percent stake in a 290 MW solar power plant in Arizona from NRG Energy Inc. (NYSE: NRG) and purchased First Solar Inc.’s (NASDAQ: FSLR) 550 MW Topaz Solar Farm power plant in California.