Bill Gates getting into energy.
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Bill Gates's personal investment vehicle, Cascade Investments LLC, is moving deeper into the electricity-generation and trading business, people familiar with the matter said.
Cascade is expected to announce today a new joint venture with utility-and-energy company PNM Resources Inc. of Albuquerque, N.M., these people said. The venture will make Cascade and PNM 50-50 partners in a new company, though its name has yet to be determined, these people added.
The company will seek to make investments in wholesale and retail electricity sales, electricity generation and some energy trading. Over time, PNM is expected to begin contributing its existing nonregulated energy assets into the vehicle, potentially splitting PNM into two entities -- the regulated utility and the unregulated joint venture with Cascade.
Since its founding in 1995, Cascade has been an active and diverse investor, having made bets on such things ranging from railways and pharmaceutical firms to asset managers. Most recently, it acquired a stake in an ethanol-fuel producer, which has attracted attention amid rising gasoline process.
The PNM businesses are in an equally hot area of investment. Private-equity buyers are scouring the market for electricity-generating plants, hoping to capture some of the profits created by the high fuel costs necessary to run them, which the generators can then pass along to customers. There is also a growing sentiment that the U.S. needs to develop a new generation of power plants amid a weakening electricity grid.
Big public utilities have approached these problems through mergers, hoping to wring out overlapping costs and create companies that can build new power plants together. But the state regulatory environment has proved combative, resulting in the recent scuttling of the Exelon Corp. purchase of Public Service Enterprise Group Inc. and FPL Group Inc.'s proposed merger with Constellation Energy Group Inc.
That could leave open opportunity for the likes of small players such as PNM, which will be using Cascade's capital to move into a host of the unregulated markets. The arrangement helps PNM make investments without adding additional debt to its $2.5 billion debt load. The company has a $1.9 billion market capitalization and derives about 35% of its sales from unregulated entities.
Cascade already holds nearly a 10% stake in PNM, which it originally acquired in 2001 and which makes Cascade one of PNM's largest shareholders. |
