$1.5 bil. to help Westmont firm make green turbines

Sun-Times news wires
November 16, 2007

EMISSIONS | Will reuse energy from smokestacks

Recycled Energy Development, a Westmont company backed by $1.5 billion from an elite private-equity firm, said Thursday it will build turbines that reuse energy vented from smokestacks, cutting power bills and greenhouse-gas emissions.

The projects will be managed by Tom and Sean Casten, a father-and-son team who run Recycled Energy Development.

The projects will be funded by private-equity firm Denham Capital Management LP of Boston. Harvard University earlier disclosed it is an investor in Denham, and a knowledgeable source said Bill Gates' Cascade Investment LLC also is a Denham backer.

Green investing is accelerating as fuel costs soar and lawmakers mandate more use of renewable energy. A California law signed in September requires energy-intensive businesses to cut discharges of greenhouse gases -- those that contribute to global warming -- by 25 percent over 14 years.

Denham will invest $500 million in cash and borrow as much as $1 billion to fund the Castens' projects over the next few years, participants in the deal said.

The full amount would surpass the $1.1 billion that private and venture capitalists invested all of last year in energy efficiency, according to a June report by the United Nations Environment Programme. Last year's $1.1 billion was a 54 percent jump from 2005, according to the report.

''I just think its time has come,'' said Riaz Siddiqi, a senior managing director at Denham, referring to the venture. ''The real exciting feature is reducing the carbon footprint of U.S. industry, profitably.''

Denham, started by former Harvard endowment managers, has a portfolio of $2.3 billion in energy and commodities investments.

Tom and Sean Casten have led 250 power projects since 1977, installing systems at companies including General Motors Corp., Eastman Kodak Co. and the steelmaker ArcelorMittal.

Most industrial processes waste heat. Coke ovens and glass furnaces vent hot exhausts that can be used for power. The simultaneous production of heat and power, also known as cogeneration, has been used at Harvard and other colleges.

''The business case is that it is less capital, less operating cost, less fuel and less pollution to recycle waste energy than to follow the silly path we're on,'' Tom Casten, 65, said in an interview.

Cogeneration hasn't caught on widely among U.S. companies, partly because of the up-front expense. There wasn't as much incentive when energy costs were lower. Big utilities have resisted because of the potential for lost revenue.

Denham and the Castens will jointly own a new holding company that manages the projects. The fund will put up capital to install the new equipment in return for long-term power supply contracts.

Tom Casten estimated installation costs for a metals plant at $35 million to $60 million. That's $1,200 a kilowatt hour, half the cost for new coal plants, he said.

Tom Casten formed Recycled Energy after last year's sale of his previous company, Primary Energy Ventures LLC, to Canada's EPCOR Power LP.

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