Warren Buffett goes electric

Famed investor Warren Buffett has boosted his stake in cleantech, with a subsidiary of his Berkshire Hathaway (NYSE: BRK.A) investment group making a deal to acquire 10 percent of BYD (HK: 1211), a Shenzhen, China-based manufacturer of rechargeable batteries, hybrid vehicles and full electric cars.

MidAmerican Energy Holdings, a Des Moines, Iowa, unit of Berkshire Hathaway, said it will pay $230 million for 225 million shares of BYD, sending shares of Hong Kong-listed BYD soaring by as much as 70 percent.

The Chinese company, which also makes parts for cellphones and laptops, as well as car molds and car parts, saw its shares eventually settle down with a gain of 42 percent, closing at HK$11.90.

The deal is more than just an investment for Buffett — his MidAmerican Energy company, which generates and distributes electricity and natural gas, sees opportunities for collaboration.

"From MidAmerican's point of view, of course they see the technology, the battery technology possessed by BYD, to be very attractive," Sandra Mak, spokeswoman for MidAmerican, told the Cleantech Group.

"And they see that technology to be the quintessential piece that is required to, No. 1, take the development or R&D of electric vehicles from the current, lukewarm state to really a very practical and usable state."

BYD makes and distributes medium-size gasoline, hybrid and electric vehicles, and earlier this month made a deal for its electric cars to be sold in Israel. Clal Industries and Investments, part of Israel's IDB Development will import the electric cars, with BYD's vehicles expected to make it to showrooms in Israel by 2010.

That puts it up against the well-funded Palo Alto, Calif.-based Project Better Place (see Electric cars are coming to Israel). Project Better Place announced in January that it was teaming up with the Renault-Nissan Alliance to launch an electric car and charging network in Israel.

Project Better Place and Renault-Nissan have since gone on to make a similar deal in Denmark, and Renault-Nissan has announced plans on its own to sell electric cars in Portugal and Tennessee.

BYD has said its cars could travel 300 kilometers on a single charge, with a full charge needing nine hours using its lithium-ion batteries, although the company has said its batteries could be charged to 80 percent capacity in 15 minutes.

Headed up by Chuan-fu Wang, BYD could be a step closer to getting its cars into the U.S. market with this latest deal.

"According to President Wang, they have always had North America on their plan, but with MidAmerican's investment now, they probably will be expediting the prospect," said Mak.

BYD has said it plans to start selling its first electric car in China next year, and to start selling its hybrids in the U.S. and Europe by 2010.

Mak said MidAmerican's collaboration with BYD could go beyond electric cars and involve utitlity-scale applications.

"The second area that they would probably be looking to collaborate with to mutual benefit is also to use batteries not just in electric vehicles but also as storage for energy."

MidAmerican generates the bulk of its electricity with coal and natural
gas, but also has holdings in geothermal, wind and biomass. It has 673 megawatts of wind power in operation in Iowa, with more than 500 MW in the pipeline.

Mak said, "When you have the energy produced, that may not be the time that you want to consume the energy."

"A technology and the wherewithal to be able to store that energy will be very, very valuable. And this is what the battery currently being developed by BYD potentially can do for the world."

MidAmerican is expected to be a long-term investor in BYD, with David Sokol, chairman of MidAmerican, to take a seat on BYD's board as a non-executive director.

Warren Buffett, born in Omaha, Neb., is often referred to as the Oracle of Omaha and is the richest man on the planet according to Forbes. His investments include insurance; utilities and energy — through MidAmerican; manufacturing, service and retailing; and finance.

His investment in BYD is subject to approval from mainland China authorities and BYD shareholders.