Al LORO con el amigo BILL
Gates, Khosla, Shaw Bet on Clean Energy, Ethanol as Oil Surges
April 17 (Bloomberg) -- Microsoft Corp. Chairman Bill Gates plans to invest $84 million in ethanol, and fellow computer pioneers are following that strategy in anticipation that technology will help wean America from its oil addiction.
Gates's Cascade Investments this month intends to buy a stake in Pacific Ethanol Inc. of Fresno, California, which says it will become the largest seller of corn-based fuel additives on the U.S. West Coast. Vinod Khosla, founder of Santa Clara, California-based Sun Microsystems Inc., the world's fourth- largest maker of computer servers for networks, is financing ethanol fuel research.
Robert Metcalfe, the co-founder of 3Com Corp. of Marlborough, Massachusetts, who helped invent Ethernet, the protocol for connecting computers, is testing a system to convert smokestack emissions into power-plant fuels.
``We're finally at a point where some of the alternate energy sources that are more environmentally friendly are worth taking a look at,'' said David Shaw, whose D.E. Shaw hedge fund manages about $20 billion and is planning to increase its stake in windmills. ``We're interested in cleaning up the environment at the same time as we make money for investors.''
Record oil prices are accelerating the push for new forms of energy. Demand for fuels made from corn, sugar and soybeans will quadruple in the next three decades, a period when oil use will increase by less than 60 percent, the International Energy Agency estimates.
Diapason Commodities Management SA, a Swiss-based fund manager that oversees $4 billion, plans to raise $500 million for a biofuels fund the company started this month. The firm was set up in 2003 by James Rogers, who co-founded the Quantum hedge fund with George Soros in 1970.
Ethanol Plants
Shares of Pacific Ethanol have soared 20-fold in the past two years, valuing the company at $894 million. The Bloomberg World Energy-Alternative Sources Index, which tracks Bonn-based SolarWorld AG and 14 other stocks, has jumped 33 percent in 2006 and reached a record on April 5. Stock in Archer Daniels Midland Co. of Decatur, Illinois, the world's biggest ethanol maker, is up 49 percent so far this year.
Green Plains Renewable Energy Inc., a Las Vegas-based company building a 50 million-gallon per year plant in Shenandoah, Iowa, is up 37 percent since it started trading on March 15. Xethanol Corp., a New York-based ethanol company has risen 162 percent this year, valuing the company at $175 million.
MGP Ingredients Inc., an Atchison, Kansas-based maker of wheat proteins and starches, is up 92 percent. The company's net income tripled to $7.43 for the six months ended Dec. 31, 2005, on a 22 percent increase in sales of distillery products, including ethanol, according to SEC filings.
IPOs
New stock offerings are coming. VeraSun Energy Corp., in Brookings, South Dakota, and Aventine Renewable Energy Holdings Inc. of Pekin, Illinois, both filed for initial share offerings last month. The average U.S. ethanol price has almost doubled to $2.44 a gallon in the past year. Wholesale gasoline prices have gained 39 percent.
``It's great when you can put that crop into your gas tank,'' Hugh Grant, chief executive officer of Monsanto Co., the world's biggest developer of genetically modified seeds, said in an April 11 interview. ``With $70 oil, bio-ethanol is here to stay.''
Crude prices in New York this year have averaged about $64 a barrel, up 26 percent from last year. After reaching $69.60 a barrel on April 12, prices are just shy of last year's post- hurricane record $70.85 set Aug. 30. U.S. President George W. Bush in his Jan. 31 State of the Union address said ethanol could become a practical alternative within six years.
`Huge Market'
``Ethanol is a huge market,'' Khosla said in an interview. ``I think it can replace all of our petroleum needs, or at least a majority. That creates a very creates a big opportunity that's very susceptible to technology.''
Khosla Ventures, backed by his own money, plans to invest about 40 percent of its capital in alternative energy. He declined to detail how much he's investing or the size of his fund. Khosla is co-chairing a proposed ballot initiative in California that would tax oil extraction and use some of the proceeds for alternate energy.
``Energy has got to be one of the top five problems the world faces, and it's been frustrating to watch activists and politicians fail to solve the problem,'' Metcalfe, who is now a general partner of Polaris Venture Partners in Waltham, Massachusetts, said in an interview. ``Now it's time for the entrepreneurs and scientists to give it a try.''
`Infinite' Market
Polaris is dedicating part of its newest fund's $1 billion to clean-energy technology. The group, which has $3 billion under management, on April 11 said it made a $6.8 million investment in GreenFuel Technologies Corp., which is developing ways to feed carbon dioxide emissions to algae that can then be converted into fuels. The investment is Polaris's first in clean fuels.
``The markets for the products are huge,'' said Metcalfe, who led the Xerox research team that invented Ethernet, a personal computer networking standard, in 1973. ``If you can get it right it's really a market that's infinite. We're hopeful.''
Mixed Success
Investors have been trying to find alternates to coal, oil and natural gas for years without much luck.
In the past 30 years, $27.4 billion has been spent on renewable research and development budgets, according to the International Energy Agency in Paris. So far, renewable energy accounts for just 5.5 percent of all primary fuel used by the IEA's 26-member nations, with hydropower accounting for 2 percent, combustibles such as ethanol 2.9 percent and wind 0.6 percent.
Oil and gas companies will spend an estimated $238 billion on exploration and production this year alone, up 15 percent from 2005, according to a Lehman Brothers survey of 325 companies. The American Petroleum Industry said its members have sunk $1.2 billion into non-hydrocarbon technology in the five years from 2000 to 2005, or about 8 percent of the total spent in the U.S.
Among alternate energy stocks that have soared and later tumbled: AstroPower Inc. of Newark, Delaware, a maker of electric solar-panel systems for homes and businesses that traded as high as $36 in May 2001 and filed for bankruptcy court protection in February 2004. Plug Power Inc., a Latham, New York-based maker of fuel cells, trades at $5.76, a fraction of its May 2001 high of $35.40.
Buffett and Coal
Not all of Gates's colleagues are piling into new energy sources. Microsoft co-founder Paul Allen has been investing in natural gas terminals. Gates's friend and bridge-playing partner Warren Buffett has been buying utilities and pipelines.
Allen's Vulcan Capital and its partner Plains All American Pipeline LP in August 2005 paid about $250 million for underground natural gas storage units in Michigan and planned in Louisiana. Vulcan owns 54 percent of the general partner that controls Plains, which operates 14,000 miles of oil pipelines than handle more than 2.4 million barrels of oil a day.
Buffett's Berkshire Hathaway Inc. bought Des Moines, Iowa- based utility MidAmerican Energy Co. for $9.14 billion in Oct. 1999 and has spent $2.7 billion adding 17,526 of natural gas pipelines in the U.S. MidAmerican's larger investments have been in gas pipelines, natural-gas fired power plants and utilities, such as Portland, Oregon-based utility PacifiCorp for $5.1 billion last month. Its biggest power plants burn coal.
MidAmerican runs two Iowa wind projects with capacity of 360.5 megawatts, or enough to power more than 100,000 homes, and 10 geothermal-steam powered plants in California's Imperial Valley. It also has regulatory approval to build a 185-megawatt geothermal plant, the largest in the U.S., according to its Web site.
Bad Bet
Buffett may hope for better luck than he had with his earliest venture in alternate energy.
He spent about $1 million for control of Beatrice, Nebraska-based Dempster Mill Manufacturing in 1961, his largest investment at that point. Dempster bled cash until it hired a new manager, Harry Bottle, who cut costs and started selling specialty windmill parts, saving the investment, Buffett recounted at Berkshire Hathaway's 2002 meeting.
Debbie Bosanek, a spokeswoman for Berkshire Hathaway in Omaha, Nebraska, didn't return calls. Michael Larson, chief investment officer for Kirkland, Washington-based Cascade Investment, didn't return a message left at his office.
James Clark, the founder of web-browser Netscape Communications Corp. and Silicon Graphics Inc., said the U.S. government, not venture capitalists, should be spending more to develop new energy sources. He said the U.S. should spend half of the estimated $70 billion spent annually fighting in Iraq.
``Give me $35 billion and 10 years,'' Clark said in a March 21 interview at Stanford University in Palo Alto, California, where he used to be an associate professor. ``I will guarantee that we have some viable alternatives. That seems a small expenditure to guarantee a future source of energy.''
To contact the reporter on this story:
Tom Cahill in Paris tcahill@bloomberg.net
