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Oil giant signals major diversification -- Shareholders prompt BP Amoco green power investment plan

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The world's second largest oil company, BP Amoco PLC, and other unnamed investors may invest as much as $100 million to buy 18.5% of GreenMountain.com, America's leading commercial seller of green electricity -- including wind power. BP Amoco, based in London, announced it was considering the investment on May 3. It said such a move would allow it to target the burgeoning market of industrial users of electricity who want to improve their green image and contribute to environmental causes, such as preventing global warming.

BP Amoco's primary interest in GreenMountain.com -- in the short-term at least -- appears to be in the electricity retailer's solar products rather than those based on other renewable energies such as wind power. Indeed, in the same May 3 announcement, BP Amoco said that if the investment goes ahead, it will have exclusive rights to market and promote GreenMountain.com's solar electricity to large industrial electricity customers.

GreenMountain, which hopes to go international, has also agreed to use BP Solarex products in any future solar plants that it builds to provide clean power to customers. The Vermont company will also have the exclusive right to market its green electricity sales packages to BP's US petrol stations, starting in California where its premium products are focused on wind power. The green power marketer currently services more than 100,000 homes in California, Pennsylvania and New Jersey, mostly using wind power.

Into new markets

GreenMountain.com says it would use the $100 million investment to move into newly deregulated markets, particularly Texas, the hottest market for wind today, Ohio, Connecticut and Massachusetts. The company is owned by conservative Texas businessman Sam Wyly.

Just last summer the electricity retailer had to cancel an Initial Public Offering (IPO), from which it hoped to raise as much as $600 million, because of a lack of response from investors. The company had lost $46 million in 1998 -- on revenues of only $1.5 million -- and $19.8 million in the first quarter of 1998, the last time it reported earnings to the Securities and Exchange Commission. Its revenues were about $30 million.

The BP Amoco investment will come in two instalments, $50 million now and another $50 million in a year if GreenMountain.com can meet specified performance targets. The first instalment will give BP Amoco an 18.5% investment. With the second instalment, the stake would rise to as much as 25%. GreenMountain.com is also planning to sell shares in an IPO in about a year's time that could raise more money for further expansion.

Shareholder power

BP Amoco's move follows an unexpectedly strong shareholder vote at the oil giant's recent annual general meeting in London. Despite opposition from the board, shareholders holding a 13% stake of the company -- including Greenpeace, which has bought itself a voice within the company -- called on the oil giant to invest far more money in renewables and to halt its controversial oil activities in the Arctic. Supporters of Greenpeace have been protesting the oil company's offshore oil project in Alaska, Northstar, by camping nearby in tents and huts powered by small wind turbines and solar panels. Wind chill readings have been as much as -40 degrees Celsius. At least nine Greenpeace supporters were arrested in April before the protest was wrapped up.

Environmental sceptics, who have accused BP Amoco of only investing in renewables to greenwash itself, point out that while the $100 million is significant, it is minuscule compared with the company's plans to spend up to $11 billion on gas in the next two years. BP Amoco reported first quarter profits of $2.7 billion, up more than 250% on the same period a year before, mostly because of higher crude oil prices.

Even so, the intention to invest in Greenmountain.com is another diversification step away from polluting forms of energy. BP Amoco had already earmarked $250 million on renewables over the next five years. It is already a leading manufacturer of solar panels through BP Solarex and a leading trader in wholesale natural gas. Following the shareholder rebellion, the oil company has also been rumoured to be approaching its major investors regarding a massive expansion of its renewables program -- even to the point where the company primarily deals in renewables by mid-century.

Boost expected

BP Amoco says it expects the marriage with GreenMountain.com to boost sales of its renewables and natural gas in America. "GreenMountain has built a powerful environmental brand by showing people their energy choices can and do make a difference," says Anne Quinn, group vice president of BP Amoco's Gas and Power business in the Americas. "We are greatly extending product availability and market presence by including large industrial customers and offering them a distinctive green choice to meet their energy needs," adds Quinn. "They will be able to buy greener, cleaner energy close to the same cost as electricity fuelled by other sources, thereby increasing the demand for renewable and environmentally responsible power."

Dennis Kelly of GreenMountain.com refers to BP Amoco as "the key leader within the energy community in addressing global warming." GreenMountain.com has been aggressively pursuing new markets. Wyly and several associates initially invested $30 million in the company in 1997 in exchange for a two-thirds stake. In January 1999, they gained complete control and renamed the company GreenMoutnain.com. Kelly, a former marketing executive at Coca-Cola Co, came in as chief executive. One of the company's eye-catching advertisements, running in Pennsylvania, depicts a smokestack with a giant finger jammed in the top. Others use anti-nuclear slogans.

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