Riverstone wins race to harness Lord Browne?s renewable energies

The oil industry veteran who saw the need to move Beyond Petroleum has been given a licence to throw private equity into greener fuels, at energy specialist Riverstone.

Lord Browne?s early exit from BP-Amoco in May, at the age of 58, left one of the energy industry?s best known figures unexpectedly seeking new work. He has now found it at private equity group Riverstone Holdings, of whose European unit he will become managing partner from 1 September. He will also become one of eight managing directors of the New York-based firm.

Browne has resigned his post as non-executive chairman of another private equity fund, Apax Partners, in preparation for the new role. He was recruited by Riverstone co-founder David Leuschen, who got to know the former BP chief executive in the 1990s when working for investment bank Goldman Sachs, of which Browne was a non-executive director. Apax, expressing regret at Browne?s departure after eight years on its advisory board ? which he has chaired for the past year ? noted that it has no operations in the sector to which Browne, who spent 41 years with BP (the last 12 as CEO), has devoted most of his professional energy.

Riverstone specialises in energy industry deals, financed and managed in partnership with the larger and more diversified Carlyle Group. While other funds are often accused of cutting investment and other ?costs? so as to raise cashflow and exit quickly at a profit, Riverstone describes its strategy as ?to align its capital with experienced managers who possess the strength of character and the foresight to navigate the cycles of the energy market.? Most of its 41 investments to date are in various stages of the fossil fuel supply chain; among the largest, Houston-based Cobalt International ? in which Goldman Sachs Capital Partners also has a stake ? is a $500m start-up engaged in deepwater exploration in the Gulf of Mexico and other locations.

But Leuschen was especially keen to enlist Browne, who rebranded BP as ?beyond petroleum?, for ?identifying new opportunities in the alternative and renewable energy markets.? So far, its moves in this direction have been mainly focused on biofuel. It has recently announced commitments to Ensus Group?s development of the UK?s first commercial-scale bio-ethanol plant - intended to be the first in a network supplying alternatives to petroleum for road transport ? and to Dominion Energy?s combined bio-ethanol and bio-diesel plant in Alberta, Canada, where it also owns underground gas storage units.

Browne appears naturally suited to private equity?s pursuit of higher returns for higher risk, having taken heavy bets at BP on the synergies with Amoco, Arco and Castrol, and the accessibility of returns on its Russian acquisitions and joint ventures. But while it remains small compared with BP, whose market capitalisation was raised above $100bn by Browne?s acquisitions, Riverstone can boast equally wide diversification in terms of activities, having targeted relatively non-cyclical, cash-generating areas such as oil transportation and distribution as well as the more volatile and investment-hungry exploration, servicing and new technology development. If its formula keeps working, Browne will find biofuel and other renewable routes easier to go down with his new employer than the oil and gas-based monolith he used to run.

By: Alan Shipman

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