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A Singapore-based man Andy Chua has won the bid to have lunch with billionaire investor Warren Buffett. Buffett has been offering these lunches to support Glide, a social service organization that helps needy residents. Mr. Chua shelled out $2.2 million for the privilege of having lunch with the “Sage of Omaha.”
Over the years, many others have shelled out millions for the chance to have lunch with Buffett. The lunch of course offers a great opportunity to get insights on investing from perhaps the greatest investor in the world. This year’s winner of the lunch bid is likely to get some insights from Buffett on clean energy, an area the billionaire investor seems to very keen on at the moment.
Buffett Spending Big on Clean Energy
Buffett’s investment company Berkshire Hathaway Inc. ($BRK.A) is spending billions of dollars on the construction of wind and solar power plants. Speaking at the Edison Electric Institute’s annual convention in Las Vegas on Monday, Buffett said that Berkshire Hathaway has committed $15 billion to renewable energy already. More importantly, Buffett said that he is ready to invest another $15 billion in the sector.
The key question is why is Buffett is so keen on clean energy now. While one reason of course is increasing energy demand, his willingness to invest more money in the sector could stem from a recent Environmental Protection Agency (EPA) plan that is seeking a 30 percent reduction of carbon emissions from 2005 levels at coal-fired power plants by the year 2030.
EPA’s Plan
The EPA recently announced a rather controversial plan that aims to reduce the U.S.’s carbon emissions by 2030. The 645-page plan proposes that utilities cut carbon emissions at coal-fired power plants by 30 percent from 2005 levels by 2030.
The EPA’s plan would have a direct impact on coal consumption. According to FBR Capital Markets, the plan is likely to cut coal consumption in the power sector by 267 to 285 million tons between 2013 and 2030. Coal and natural gas are the two main sources of power generation in the U.S. In 2012, power generation from natural gas briefly matched that from coal, thanks mainly to the shale boom in the U.S. which pushed natural gas prices to record low levels.
The EPA’s plan is likely to force utilities to shift from coal to natural gas. Indeed, natural gas will be the biggest beneficiary of the move. However, the plan is also expected to boost interest in renewable energy. This is possibly one of the reasons why Buffett is looking to bet big on the industry.
Companies to Watch in the Renewable Energy Sector
SolarCity Corp. (SCTY) is one of the companies investors should keep an eye on, going forward. In the past year, shares of the San Mateo, California-based company have gained more than 45 percent, outperforming the broader market.
According to a survey conducted by SolarCity and Clean Edge in collaboration with NASDAQ earlier this year, 88 percent of the homeowners in the U.S. believe that renewable energy is important to America’s future. This is the reason why companies like SolarCity have been expanding. In May, SolarCity announced that it expanded its Massachusetts Operations to South Shore in order to meet increased solar demand.
Another company to watch in the clean energy sector is First Solar Inc. (FSLR) . In the past one year, the company’s shares have gained nearly 23 percent. For the first quarter of 2014, First Solar had reported net sales of $950 million, an increase of $182 million over the previous quarter. The company’s GAAP net income for the quarter was $1.10 per share, up from $0.64 per share reported in the previous quarter.