It seems like only yesterday that oil stocks were deader than yesterday’s newspaper, and alternative energy projects were dismissed as a pipe dream of aging hippies.
Now, everybody is interested in oil and energy. Oil is selling for more than $30 a barrel and looking ambitious. Meanwhile, summer power outages and reductions threaten enterprises all over the western United States.
For many investors, the staying power of this year’s oil price surge has been an eyebrow-raiser. Even professional money managers confess to perhaps having their senses dulled by nearly a decade of falling commodity prices rather than rising ones.
“I got into some oil stocks and energy situations earlier this year,” said Ken Funsten, founder of Marina del Rey-based Funsten Asset Management Co., a junk bond and hedge shop. “I made money, but I got out, and it looks like I got out too early,” he said.
Even the big oil stocks are benefiting: Westwood-based Occidental Petroleum Corp. was trading in the $23-a-share range last week, near it 52-week high and up roughly 50 percent from its 52-week low. Likewise for Unocal Corp., trading in the $23-a-share range up more than 40 percent from its 52-week low.
And, of course last week this column discussed how shares of Chatsworth-based Capstone Turbine Corp., a maker of microturbines (which can be used by factories to backstop faltering utility power), went from its $16-a-share June IPO to more than $90 in recent trading.
It’s not like utilities are suffering: Goldman Sachs analyst Jonathon Raleigh last week released a report recommending Edison International Inc., the parent of Southern California Edison, despite the price of Edison stock already being up 70 percent, year to date.
In the catbird seat with all the renewed interest in energy is Allan Marks, veteran energy project lawyer with Milbank, Tweed, Hadley & McCloy in downtown Los Angeles. He has just finished representing lead lender Deutsche Bank, and the Industrial Bank of Japan, among others, in a 10-year, $2.5 billion credit package extended to Petrobas, the Brazilian national oil company. The Brazilian firm will drill in the Campos basin, off Rio de Janeiro, with the funds.
Marks said he is finding a lot more work in energy, including alternative sources of power. Recently, he worked on a U.S.-owned plant in Australia, which will convert natural gas to petroleum-like liquids and waxes.
“The plant will produce a liquid substitute for fuel oil,” said Marks. “Many power plants use fuel oil, and this natural gas conversion plant can produce a cheaper substitute.”
The company may go public, if the technology proves out. Similar plants are being built in the Caribbean, to service fuel oil users on the Gulf Coast, said Marks. There has also been some action in wind power plants of late, though that may have been driven by tax credits set to expire soon.
“The financing (for alternative energy projects) seems to have suddenly become a lot easier,” Marks said, alluding to higher energy prices as the driving force.
Buying a Car Online
When it comes to Internet startups, one usually thinks of venture capitalists such as Idealab in Pasadena, West Los Angeles-based Redpoint Partners (Brad Jones’ shop) or James Montgomery’s Digital Coast Partners in Santa Monica.
But Greenlight.com, the business-to-consumer auto-retailing Web service recently in the news over its alliance with online giant Amazon.com, was actually incubated in part by Freeman Spogli & Co., the long-established leveraged buyout shop in West Los Angeles known for its work in retailing.
Cupertino-based Greenlight.com, which paid a reported $80 million-plus to be associated with Amazon.com, is a click-to-bricks retailer. Shoppers can buy a car through the Greenlight Web site (which is hyper-linked to Amazon.com’s site), then receive the car and have it serviced at a new car dealership owned by Ashbury Automotive Inc. That’s the Freeman Spogli link it owns Ashbury Automotive.
In a recent interview, Brad Freeman said his finance shop was not becoming another Web-VC outfit. But several of his year-2000 investments such as WebVision Inc., a Web service firm; Miadora Inc., an online jewelry retailer; MVP.com, the Internet sporting goods seller; and PartAmerica.com, a cyber-auto parts retailer have a Web angle.
$32 Million Song
Century City-based fund Alcatel Ventures revealed that it led a $32 million second-round of investing in Silicon Valley-based Mockingbird Networks Inc., a company developing hardware allowing voice communications over the Internet.
The cash infusion will let Mockingbird ramp up production and marketing of its voice-enabling switches. The managing partner of Alcatel is Steve Y. Kim, perhaps best known as founder of Xylan Inc., the computer networking company in Calabasas.
French telecom giant Alcatel bought Xylan for $2 billion in March 1999 (with Kim getting about $600 million of that), and is a major investor in the $120 million Alcatel fund. However, the fund is managed independently by Kim and his partners. They are busy, having invested in 22 companies since forming in August of last year.
Quick Takes
The Los Angeles Society of Financial Analysts will hold its first annual growth stock conference on Sept. 23, featuring three local public companies City of Commerce-based 99 Cents Only Stores Inc., the alternative fuel company Cerritos-based IMPCO Technologies Inc., and Irvine-based Quest Software Inc, a maker of software to enable e-business…
Albert F. Myers, treasurer at Century City-based Northrop Grumman Corp., will speak to the Financial Executives Institute on Sept. 21 at the Jonathan Club on the future of the defense industry. Defense contracting is going to involve increasing amounts of smart electronics, said Myers, and Northrop, though considered a plane-maker, is actually well-positioned for that transition.
By the way, the Los Angeles chapter of the Financial Executives Institute just elected a new president, Richard G. Jackson, who is also president of the Los Angeles-based Pedus Service security company…
Have calculator, will travel: Kevin Shultz, the itinerant investment banker late of Prudential Securities, EBI Securities, and WestPark Capital Inc., has alighted anew at The Seidler Cos. in downtown Los Angeles.
Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].
