Armed With Billions, GE Shops For Alternative-energy Deals

Images of giant wind turbines and solar panels flashed across the screen as Kevin P. Walsh of General Electric Financial Services spoke about the growing list of alternative energy investments by the blue chip financial and industrial firm.

Walsh wrapped up his talk by displaying his email address in large type with the promise to sift through proposals from the crowd of more than 100 venture capitalists, startups and Wall Streeters watching closely.

Walsh's appearance left no doubt that GE (GE) continues to sift for fresh deals in the growing alternative space as it competes against other conglomerates, private equity firms, hedge funds and venture capitalists.

All told, Walsh expects to grow GE Energy Financial Services investments in renewable energy to $3 billion by end of 2008, from $1.8 billion by the end of 2006.

"We've got a lot of things we're chasing and we feel the goal is achievable," said Walsh, managing director of Renewable Energy, a unit created less than one year ago within GE Energy Financial Services. "We're seeing activity in wind, in the U.S. and elsewhere. We're pursuing a hydroelectric project in Canada. We're looking at solar projects -- solar photo voltaic and solar thermal."

GE plans to take a close look at biofuels such as ethanol in the wake of IPOs from Aventine Renewable (AVR) , Verasun Energy (VSE) and US Bioenergy (USBE) .

"We're looking at the whole space -- we have no investment in ethanol," he said. "We're intrigued by cellulostic ethanol and looking at a couple of bio diesel deals. We think there's some opportunities there. It's not a big space now but we hope to be a player."

Walsh took the reins of the 20-person alternative energy investment team when it was formed last April at GE.

Previously heading up investment efforts in the wider energy sector, Walsh said GE took note of growth in the green business investment business amid the company's overall Ecomagination push.

"The alternative energy unit is a natural extension of what we were doing," he said. "We had identified renewable as a growth area."

With the 2005 hurricane season, the success of Al Gore's documentary "An Inconvenient Truth" and concerns rising about global warming and energy security for the U.S., GE has been staking a position as a leader in the space from the industrial sector.

The movement has attracted other Fortune 500 companies including BP (BP) , Wal-Mart (WMT) and Bank of America (BAC) , which took the lead among financial firms with a $20 billion green investing push, including an environmentally friendly credit card that allows consumers to put aside money to offset greenhouse gas emissions.

A step in the right direction

Glenn Prickett, senior vice president, of Arlington, Va.-based non-profit Conservation International, said GE's green push amounts to good business.

After investing in the firms, GE will benefit as their businesses grow for an eventual exit in the form of a unit sale, initial public offering, or other transaction.

"In general, we're impressed they're trying to seize opportunities in cleaning up the environment," Prickett said. "For GE, the key point is they see a growth opportunity. In the long run it's good for the environment."

Walsh has been hard at work closing deals, the largest of which was a $270 million in investment in asset management firm Babcock & Brown's Wind Portfolio, announced last month. GE got a 70% share of the Class A equity with a unit of Wachovia (WB) also taking part.

The portfolio includes six wind farms in California, Illinois, New Mexico and Pennsylvania, with enough power for 100,000 homes, reducing greenhouse gas emissions by 700,000 tons of carbon dioxide a year.

GE also invested in Theolia, a Paris-based wind energy firm, with the option to retain up to a 22% stake in the firm.

In a major alliance announced in January, GE and AES Corp. (AES) set plans to create a partnership to develop greenhouse gas emission reduction projects in the United States.

Walsh said a final joint venture agreement between the two companies is expected by the end of March and that more details of the pact will be revealed after that.

GE sees more opportunities ahead as the U.S. Congress mulls a greenhouse gas reduction program in the form of carbon emission trading units.

"We think a national approach to greenhouse gas emissions is preferred, but if that's not embraced, we hope there will be a compliance market at the regional level," he said. "We're optimistic there's a robust voluntary market."

With all the attention in the sector, Walsh admits that wind energy deals remain competitive and that more players in the overall alternative energy space translates to a scarcity of investments, at times.

"There's more money than there was," Walsh said. "We don't just bring money, we bring expertise and knowledge and eventually an application GE can use it its own business...We tend to attract attention."