Getting Greener

SAN FRANCISCO (05/05/2000) - For all those Internet entrepreneurs wondering whether there's life after a failed IPO, the answer, apparently, is yes.

After canceling its offering last year amid bad publicity and unfavorable market conditions,, a provider of clean energy to consumers, has received a commitment from BP Amoco and unnamed private investors of up to $100 million in funding. GreenMountain, based in South Burlington, Vt., planned to raise as much as $600 million last year in what at the time would have been the largest Internet IPO.

Never mind that the company had only 72,000 customers in two states at the time and that it reported a loss of $46 million in 1998 on revenues of $1.5 million. Hoping to tap what it expected to be a huge competitive market for electricity in the wake of deregulation, Vermont electric utility Green Mountain Power started after launching Green Mountain Energy, the company's socially and environmentally responsible subsidiary.

Soon afterward, both the value of the company and its bona fides as provider of environmentally friendly energy were called into question. In 1997, Dallas multimillionaire Sam Wyly, along with several of his associates, pumped $30 million into Green Mountain Energy in exchange for a 67 percent stake. By January 1999, Wyly and his associates had taken complete control of the company, renaming it and announcing plans for an IPO.

The new name suggested that the company was a dot-com, but less than 10 percent of its customers had signed up via the Internet. Bad publicity dogged the company's efforts. Wyly reportedly received huge compensation packages from companies he controlled, and in some cases, committees that reportedly included Wyly and his brother granted the cash and stock options. In 1998, one of Wyly's businesses made the California Public Employees' Retirement Fund's list of the most poorly managed companies, while Public Citizen, a nonprofit watchdog group, charged that a GreenMountain deal with PacifiCorp, a large Oregon utility, would result in more, not less, pollution.

BP Amoco will now market GreenMountain's brand of cleaner and renewable electricity to its large business customers. The oil company's service stations in markets served by that GreenMountain will hawk GreenMountain's cleaner electricity products. GreenMountain also will use solar panels manufactured by a BP Amoco unit for future solar energy projects.

The funding will come in two installments: $50 million now and another $50 million in 12 months if GreenMountain can meet specified targets for revenues, cost of customer acquisitions and number of customers. The first $50 million will give BP Amoco an 18.9 percent stake in GreenMountain, and if the conditions are met for the second $50 million, that stake will rise to 25 percent. GreenMountain, which now has about 106,000 customers in the deregulated states of California, New Jersey and Pennsylvania, plans to use the cash to expand into other states adopting deregulation, including Connecticut, Massachusetts, Texas and Ohio.

BP Amoco has been under fire from environmental groups for leading the push to open up the Arctic to oil exploration, so it would appear that the oil giant is now aligning itself with a green company to improve its image. In exchange, GreenMountain will be able to ramp up its efforts to resell energy, including BP's natural gas. "If we could shut down all coal-burning plants and sell only natural gas, that would be great," says GreenMountain CEO Dennis Kelly. "A new natural gas plant produces about 1 percent of the pollution of an old coal-burning plant."

Two environmentalists who are on GreenMountain's board of advisers have given the BP Amoco deal the thumbs-up sign. "GreenMountain needs more capital to expand the market for renewable energy," says Ralph Cavanagh of the Natural Resources Defense Council. "Is it objectionable that the capital comes from a company like BP? I don't think so, unless it undercuts GreenMountain's commitment to cleaner energy. But there's no reason to assume that it will."

Lew Milford of the Clean Energy Group says fears that GreenMountain would buy electricity created with fossil fuels from BP and then sell it as clean energy are unfounded.

"There are rules being put in place around the country by state regulators that will ensure the energy is clean," he says. "I think the safeguards are there to ensure there's no hanky-panky." Both Milford and Cavanagh are aware of the controversies that have surrounded Wyly and his companies, but they say the chairman isn't involved in GreenMountain's day-to-day activities. They insist that the company's commitment to clean energy is beyond reproach, and both say they see Wyly as a businessman who believes, like BP, that deregulation will bring huge opportunities to make money selling clean energy. Kelly says the company's revenues in 1999 were about $30 million and that GreenMountain is now on track "to double that every year for the next few years."

As for an IPO, Wyly apparently hasn't given up on the idea, and Kelly says it's in the best interests of the company's shareholders. Only now, with funding from BP and other investors, the company has the luxury of choosing the best time to make a stock offering. Wyly has said an IPO could come as early as next year.

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