Thomas White Global Investing
Global Players

Global Players

March 2009

T. Boone Pickens, Chairman, BP Capital Management

T. Boone Pickens

Image Credit: Robotclaw666 at Flickr under a Creative Commons license.

“I couldn’t believe this 80-year-old man was the only person in America with an energy plan.”

— T. Boone Pickens, WSJ’s ECO:nomics conference, March 2009

Renewable energy was all the rage when oil prices peaked last year. There were any number of researchers and entrepreneurs searching for commercially viable alternatives to hydrocarbon fuels, and enough financiers to back them up. Alarmed by the soaring energy bill, most national governments were actively considering various policy options to ensure their energy security. Even ideas and projects which were improbable and had limited probability of commercial success found enough supporters.

After crude oil prices have tumbled by more than $100 per barrel, renewable energy is suddenly an orphaned child. Most projects which were on the drawing board have been shelved and the few which were in the early implementation stages have stalled, as the global financial crisis has made it very difficult to raise funds.

T. Boone Pickens is one of the select few private businessmen who have not yet diluted their fervor for alternate energy even one bit. Since his big push during the election season last summer, Pickens once again entered the spotlight at the Wall Street Journal’s ECO: nomics Conference last week to push for the country’s energy independence.

Yet, Pickens is very different from the usual advocates for green energy solutions. Unlike most of them, Pickens is not an environmentalist. He is a billionaire who made most of his money from the oil business. Building one of the largest oil companies, he has made a series of bids to acquire some of its competitors. Over the last decade, Pickens has emerged as a financial investor through BP Capital, which runs hedge funds focused on the energy sector.

Pickens claims he is championing the alternate energy cause for only one reason; he wants the United States to reduce its dependence on imported oil. “We have no control over our energy destiny in this country unless we take control”, he says. True to his entrepreneurial spirit, Pickens came up with a plan to achieve that goal. He has been tirelessly espousing the Pickens Plan, first announced in July 2008, even spending his own money for media campaigns.

The plan calls for exploiting the vast, untapped wind energy potential in the Great Plains of America, to eventually generate 22% of the country’s energy needs. To efficiently distribute the energy from the wind farms, Pickens has included a new electrical grid. It will be impractical to convert America’s large automobile fleet to run on electricity, so Pickens advocates natural gas as the primary automobile fuel. As the U.S. has sufficient reserves of natural gas, import of liquid hydrocarbons can be substantially reduced. But conversion to natural gas is costly and will not happen without government support and adequate distribution infrastructure. Hence, Pickens wants all the heavy trucks and fleet vehicles to be converted first, with government support. Once a critical mass is achieved, gas distribution networks will develop and costs will come down, which will pull in passenger vehicles as well.

However, Pickens’ big plans for alternate energy development and energy independence for the country may not be all altruistic. One of his privately held firms has extensive interests in natural gas distribution, both in the U.S. and Canada, and will benefit if the government actively promotes natural gas as automobile fuel. Pickens has even grander business plans in renewable energy.

Even before announcing the plan, Pickens’ firm had lined up an ambitious wind energy project. The project, the world’s largest, boasts as many as 2,700 turbines spread over an area of 200,000 acres in Texas. The farm will generate 4,000 megawatts of electricity and will cost $1.5 billion. To the critics who balk at his plans, Pickens has a stock answer. “I’m 80 years old, and I’m worth $4 billion. I have plenty of money. I think it shows leadership that I’m putting my money into the wind business, and I’m willing to put my money where my mouth is.”

However, the global economic downturn and lower energy prices seem to have taken some wind out of Pickens’ sails. His firm announced last week that it is going ahead with the first phase of the wind farm project, but will delay the subsequent phases. As many as 120 of the nearly 200 land leases for the giant farm have not been renewed, although the order for around 600 wind turbines still stands. Now Pickens must complete the first phase by 2011 as scheduled, or the skeptics will have a field day.

Yet, even if his mega projects don’t take off smoothly, for whatever reasons, Pickens would have earned his place as a pioneer in the field of alternate energy. And the remarkable zeal shown by Pickens in promoting his cause should amaze and inspire many.





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