Media Coverage

US Renewables Group Closes Initial $80M for Alternative Energy Projects Top

Dow Jones VentureWire

Rizal Tupaz

October 6, 2005

Investors seem bullish on alternative energy, and with good reason. The price of oil hovers around $65 a barrel and there is talk of global warming contributing to the strength of recent hurricanes.

It comes as no surprise then that a Los Angeles-based investment company recently closed $80 million as part of its plan to raise $250 million in total financing for a new energy fund.

US Renewables Group, formed to acquire, develop and operate renewable energy and clean fuel assets, received investments from Rustic Canyon Partners, which contributed $6 million, high-net worth individuals and trusts, said Chief Executive Jim McDermott.

Founded in 2003 to invest in renewable energy operating assets, US Renewables Group focuses on stationary power generation - such as landfill methane, waste-to-gas, biomass and geothermal - and clean fuels, including biodiesel, ethanol and coal-to-liquid.

Typical investments will fall in the $10 million to $20 million range. McDermott expects to invest in about 20 to 25 projects and is looking to complete the goal of $250 million in capital later this year.

"We're very focused on providing equity capital to the sector to make it possible to build out renewable energy assets," said McDermott. The firm also says it aims to address an energy market opportunity that traditional private equity or venture capital investors currently don't address.

Renewable energy financings typically involve not only project equity, but also senior and subordinated debt structures, regulatory compliance, fuel supply and power purchase agreements.

The CEO noted that investments in renewable energy projects differs from the typical venture capital investment. "It's a fixed asset," McDermott said, requiring much more operational management than a software company, for example. "In many respects, the venture guys are backing people who know how to evaluate the value of a renewable energy asset," he added.

Tom Unterman, managing partner at Rustic Canyon Partners and member of the US Renewables Group advisory board, was not available for comment, but in a prepared statement said: "We are reaching an inflection point in the renewable energy market. Fuel costs are rising, environmental concerns around traditional fossil-fuel methods of energy production are increasing and renewable energy is gaining use through renewable energy portfolio standards. Clearly, investments in renewable energy are providing the potential for large future returns."

Though environmental responsibility is a consideration, "our primary focus is to make returns for our investors," McDermott said, but the firm does have the opportunity to serve a greater progressive need in light of the "the adoption of all the renewable portfolio standards and rising fuel prices." Renewable energy portfolio standards, which are now effective in 21 states, require that a certain percentage of energy generation come from renewable sources.

US Renewables Group already owns and operates two landfill methane facilities in Los Angeles and is building another facility in San Antonio, Texas. In addition, the firm is negotiating to acquire an additional 100 mega-watts of biomass power and more than 300 million gallons of annual ethanol capacity.

McDermott has been a software and energy entrepreneur and investor. He founded Stamps.com Inc., an online portal for stamps and other postal services, and has invested in Practice Technologies Inc., a provider of tools for the legal profession, and MagnaDrive LLC, a supplier of torque transfer technology for motors.

He started his career as a public power banker with Credit Suisse's Municipal Finance Group, where he worked with Southern California Public Power Authority, Los Angeles Department of Water and Power and other West Coast municipal utilities. As a private equity investor, McDermott has worked for Allen & Company Inc., Prudential's Private Capital Group and Rusheen Capital Partners LLC.

Earlier this year, another alternative energy investment vehicle, New Energy Capital Corp., was funded with $30 million from California State Teachers' Retirement System and VantagePoint Venture Partners. New Energy Capital, which is structured similarly to US Renewable Group, acquires, builds and operates renewable energy and distributed generation projects in North America.

Media Contacts:

Steven Gottlieb
ZENO Group
Tel: (877) 526-0450
steven.gottlieb@zenogroup.com