By Tom Cahill Bloomberg News
MONDAY, APRIL 17, 2006
The growing interest comes at a time when some of the biggest names in technology, including Bill Gates, chairman of Microsoft, are pouring money into companies that could help wean consumers from their dependence on oil. "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. 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 estimated. Diapason Commodities Management, a Swiss-based fund manager that oversees $4 billion, plans to raise $500 million for a biofuels fund that the company started this month. Shares of Pacific Ethanol, in which Gates's Cascade Investments plans to buy a stake this month, have soared 20- fold in the past two years, valuing the seller of corn-based fuel additives at $894 million. The Bloomberg World Energy-Alternative Sources index, which tracks Bonn-based SolarWorld and 14 other stocks, has jumped 33 percent in 2006 and reached a record earlier this month. Stock in Archer Daniels Midland of Decatur, Illinois, the world's largest ethanol maker, is up 49 percent so far this year. Green Plains Renewable Energy, a Las Vegas-based company that is building an ethanol plant in Shenandoah, Iowa, that will handle 50 million gallons per year, is up 37 percent since it started trading last month. And Xethanol, a New York-based ethanol company, has risen 162 percent this year, valuing the company at $175 million. New stock offerings are coming. VeraSun Energy, in Brookings, South Dakota, and Aventine Renewable Energy Holdings of Pekin, Illinois, both filed for initial 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 of Monsanto, the world's largest developer of genetically modified seeds, said in a recent 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. President George W. Bush in his State of the Union address on Jan. 31 said ethanol could become a practical alternative in six years. "Ethanol is a huge market," said Vinod Khosla, founder of Sun Microsystems, who is privately financing ethanol fuel research. "I think it can replace all of our petroleum needs, or at least a majority. That creates a big opportunity that's very susceptible to technology." Khosla Ventures plans to invest about 40 percent of its capital in alternative energy; Khosla declined to detail how much he is investing or the size of the fund. He also is co-chairman of a group that has proposed a 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," said Robert Metcalfe, the co-founder of 3Com of Marlborough, Massachusetts. "Now it's time for the entrepreneurs and scientists to give it a try." He is testing a system to convert smokestack emissions into power-plant fuels in his current role as general partner of Polaris Venture Partners in Waltham, Massachusetts. Polaris is dedicating part of its newest fund's $1 billion to clean-energy technology. The group, which has $3 billion under management, said April 11 that it made a $6.8 million investment in GreenFuel Technologies, which is developing ways to feed carbon dioxide emissions to algae that then can 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." PARIS As energy prices soar, investors are taking a closer look at the makers of alternative power sources like ethanol and windmills.The growing interest comes at a time when some of the biggest names in technology, including Bill Gates, chairman of Microsoft, are pouring money into companies that could help wean consumers from their dependence on oil."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. 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 estimated.Diapason Commodities Management, a Swiss-based fund manager that oversees $4 billion, plans to raise $500 million for a biofuels fund that the company started this month.Shares of Pacific Ethanol, in which Gates's Cascade Investments plans to buy a stake this month, have soared 20- fold in the past two years, valuing the seller of corn-based fuel additives at $894 million.The Bloomberg World Energy-Alternative Sources index, which tracks Bonn-based SolarWorld and 14 other stocks, has jumped 33 percent in 2006 and reached a record earlier this month.Stock in Archer Daniels Midland of Decatur, Illinois, the world's largest ethanol maker, is up 49 percent so far this year. Green Plains Renewable Energy, a Las Vegas-based company that is building an ethanol plant in Shenandoah, Iowa, that will handle 50 million gallons per year, is up 37 percent since it started trading last month. And Xethanol, a New York-based ethanol company, has risen 162 percent this year, valuing the company at $175 million.New stock offerings are coming. VeraSun Energy, in Brookings, South Dakota, and Aventine Renewable Energy Holdings of Pekin, Illinois, both filed for initial 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 of Monsanto, the world's largest developer of genetically modified seeds, said in a recent 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.President George W. Bush in his State of the Union address on Jan. 31 said ethanol could become a practical alternative in six years."Ethanol is a huge market," said Vinod Khosla, founder of Sun Microsystems, who is privately financing ethanol fuel research. "I think it can replace all of our petroleum needs, or at least a majority. That creates a big opportunity that's very susceptible to technology."Khosla Ventures plans to invest about 40 percent of its capital in alternative energy; Khosla declined to detail how much he is investing or the size of the fund. He also is co-chairman of a group that has proposed a 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," said Robert Metcalfe, the co-founder of 3Com of Marlborough, Massachusetts. "Now it's time for the entrepreneurs and scientists to give it a try." He is testing a system to convert smokestack emissions into power-plant fuels in his current role as general partner of Polaris Venture Partners in Waltham, Massachusetts.Polaris is dedicating part of its newest fund's $1 billion to clean-energy technology. The group, which has $3 billion under management, said April 11 that it made a $6.8 million investment in GreenFuel Technologies, which is developing ways to feed carbon dioxide emissions to algae that then can 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."
Investors are rushing to fund new ventures in renewable energy as Americans continue to see rising gasoline prices at the pump. The price for crude oil continues to rise to new record highs ($75 per barrel of crude oil on NYMEX as of Friday's close). According to the results of a survey reported by the San Francisco Gate, in the 1st Quarter of 2006 investments in the clean technology sector has increased by 13% to $3.36 Billion in the US. In addition to attracting venture capital, clean technology companies are receiving a buzz from high profile investors.

Bill Gates, Founder of Microsoft, announced last week that his venture group (Cascade Investments) initiated the purchase of 25.5% ownership in Pacific Ethanol Inc. Pacific Ethanol is an ethanol production company that plans to expand operations by opening a new facility in California. Gates is not alone in high profile investments into the clean energy market, Bob Metcalfe (Founder of 3COM and Inventor of Ethernet), who acts as the managing partner of  Polaris Ventures, announced the VC's first investment into the energy market. Polaris, which manages over $3 Billion in funds, invested $6.8 million into  GreenFuel Technologies Corporation of Cambridge, MA. GreenFuel Technologies is an emissions to biofuels company, that utilizes natural algae in their patented bioreactors to turn greenhouse gas emissions from power plants into rich bio fuel. Polaris's investment into GreenFuel was part of the company's $18 Million Series B financing round that also included a high profile venture capital investor: Draper Fisher Jurvetson. When asked about the new industry venture, Bob Metcalfe said, "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,...Now it's time for the entrepreneurs and scientists to give it a try." 

According to the International Energy Association, demand for renewable energy fuels will more than quadruple in the next decade. The current jump in oil prices is fueling investment into this relatively new market as investors view clean technology as an emerging opportunity rather than a public relations campaign. As gasoline prices continue to rise, alternative fuels become respectively cheaper and more attractive. In his latest State of the Union Address, President Bush outlined a plan to direct new investment into ethanol production and other clean technologies. According to a poll conducted by CBS News, Americans now see gas prices as one of their top three main concerns. With pressure coming from constituents, politicians are beginning to exert pressure on new spending on renewable technology to promote energy independence. Yet another front in this debate is that of environmental concern. With global warming on the rise, and many European governments eagerly searching for a Carbon Dioxide solution, the promise of reducing these emissions by 46% (as claimed by GreenFuel's bio reactor system) begins to resonate as a promising environmental and business opportunity.