Wind Energy Stock Investing

Warren Buffett's $5.4 Billion Wind Energy Play

By
Monday, March 7th, 2011

Money will always flow toward opportunity,
and there is an abundance of that in America.”

These are the words Warren Buffett wrote in his most recent report to shareholders of Berkshire Hathaway.

Buffett told investors that in 2010, Berkshire Hathaway ponied up more than $5 billion on property and equipment in the United States, and taunted shareholders about his hunt for more major acquisitions: “Our elephant gun has been reloaded, and my trigger finger is itchy.”

The question is, Where's the target?

Domestic energy profits

I'm not saying I agree with everything Buffett says or does.

I don't buy for a second that unemployment will fall to 7 percent by 2012, as he has predicted.

And I still can't wrap my head around his suggestion that we should be more concerned about cotton prices than oil prices...

But let's face it; the guy didn't become the third richest man in the world because he's wrong most of the time.

So when he says he's on the hunt for more acquisitions, I'm not writing it off.

In fact, after reading that shareholder report, I decided to revisit MidAmerican Energy Holdings, which Buffett owns through Berkshire Hathaway.

I figure, if he's so gung-ho on America, there can be no way that his sights won't be set on more domestic energy production.

Continued unrest in the Middle East, 37 state-based renewable energy standards in place, the insanely high cost of “clean coal” — which will ultimately prove to be nothing more than a massive payday for Senators from coal-heavy states...

All of this will continue to provide momentum to domestic alternatives, and in some cases, nuclear.

But it's the former that I think Buffett is primarily focused on.

A $5.4 billion wind play

In his latest shareholder letter, Buffett wrote:

MidAmerican will have 2,909 megawatts of wind generation in operation by the end of 2011, more than any other regulated electric utility in the country. The total amount that MidAmerican has invested or committed to wind is a staggering $5.4 billion. 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.

Buffett's got a pretty good thing going right now with his wind energy investments.

But for non-billionaires looking to profit from the domestic growth of wind energy, things can be a bit more difficult.

You see, last year was a brutal one for wind energy investors, as some of the biggest wind energy stocks on the planet — like Gamesa (MCE: GAM), (PK:GCTAF) and Vestas (CO: VWS), (PK: VWDRY) — fell off a massive cliff.

And while GE (NYSE: GE) and Siemens (NYSE:SI) represent some of the biggest wind turbine players in the sector, these are not pure plays on wind...

Now much like solar, China's also starting to take over the wind turbine game, with companies like Sinovel (SHA:601558) and Xinjiang Goldwind Science (SHE:002202) gobbling up serious market share. The latter just landed a 106 megawatt deal with Chicago's Commonwealth Edison.

But of course, these don't trade domestically.

However, there is one domestic wind energy stock that's poised for major growth this year...

The best wind energy stock for 2011

There's no doubt in my mind that for 2011, your best bet on wind energy will be with a small wind farm developer called Western Wind Energy Corporation (TSX-V:WND).

Currently, the company has more than $300 million of fully-financed projects in the construction phase. This is in addition to its wind operations that are already operational and generating revenue.

The company also announced last week it signed a 20-year, 30 megawatt power purchase agreement with the Puerto Rico Electric Power Authority for a new solar project.

That's right — they're also developing solar projects...

Though it's Western Wind's wind energy portfolio that's going to launch it into major player status this year.

You can read their latest power point here. I think this could easily be one of the biggest alternative energy blockbusters of the year.

Jeff
Editor, Energy and Capital


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