Tuesday, December 4, 2007

Investment banks seek fees and returns from renewable energy sector (GS, LEH)

From Dow Jones:

Call it a tale of two turbines. In 2005, Goldman Sachs bought wind generation company Zilkha Renewable Energy, which was struggling in a tight competitive environment and required investments of at least $300m (€203m) to compete with rivals.

That same year, global investment bank Lehman Brothers agreed to advise and finance the $700m Cape Wind project, the US’s first offshore wind farm located near Nantucket Island and a landmark cause for many environmentalists.

This March, Goldman Sachs sold its investment – redubbed Horizon Wind Energy – to Portugal’s largest utility, EDP, for more than $2.1bn, making a profit of $900m. But Lehman Brothers’ project, despite early state-level approvals, has been stuck in bureaucratic purgatory from which it is unlikely to emerge soon.

The problem: Nantucket’s millionaire residents oppose the wind farm, which they claim would ruin their ocean views.

The contrast between the outcome of the Zilkha investment and the Cape Wind project illustrates the unpredictability of the clean technology sector....MORE including a table of the bank's proprietary investments and a clean version of this chart:

Graphic: Merrill Lynch renewable energy index