Venture capital shifts to energy

BYLINE: Dave Anderton Deseret Morning News

High-tech and Internet businesses typically capture the majority of Utah's venture capital funds, but a Heber City-based company intent on building a wind farm in the state secured $3.6 million in venture capital money in this year's first quarter, according to the MoneyTree survey.

Wasatch Wind said it will use the investment for working capital and to continue the development of new wind towers across the state and in Canada, according to Tracy Livingston, the company's chief executive officer.

The company is developing an 18.9-megawatt wind farm near the mouth of Spanish Fork Canyon that is anticipated to be operational by the end of this year. Livingston said it took 18 months to find a venture capital firm willing to invest in his wind company.

DFJ Element LP, a Pennsylvania-based venture capital fund formed to invest in clean technology companies, funded the deal.

Livingston said that when it comes to investing in renewable energy, venture capital firms are just beginning to scratch the surface.

"We've identified enough sites in Utah alone for over 1,000 megawatts of wind energy," Livingston said. "Utah just passed the renewable energy tax credit, which is a good positive indication that the tide is turning to more renewables and less on future coal plants."

Joe Strain, a manager at PricewaterhouseCoopers' Salt Lake office, said the Wasatch Wind deal is unique.

"I haven't seen any wind deals in the state or even in the region," Strain said. "We have had a couple of energy companies recently get money, but for a wind company this is the first that I've seen."

Ed Stafford, associate professor of marketing at Utah State University, said venture capital money nationally is starting to flow into clean energy sources.

Venture capital investments in energy-tech startups rose 262 percent to $2.4 billion in 2006, according to research firm Clean Edge. These investments, primarily in transportation and fuels, distributed energy, energy intelligence and power reliability, eclipsed the previous high-water mark set in 2000 for energy-tech investing by more than $1 billion.

"Wind is the most cost-competitive, and it's ready to go," Stafford said, "whereas some other types of renewable energy are still not quite cost effective yet."

While a venture capital wind investment may be a first for Utah, overall venture capital funding for the state fell to $25 million in the first quarter, its lowest level in three years, the report noted.

Investments in the first quarter were down from $28 million in the previous quarter and sharply down from $61 million in the first quarter of 2006.

A total of six Utah companies received funding in the first quarter, down from nine companies a year earlier in the same period.

Nationally, $7.1 billion in venture capital deals were reported in the first quarter, an 11 percent increase from the $6.3 billion invested by venture capitalists at the same time last year, according to an Associated Press article.

The fast start indicates "this will be a breakout year for U.S. venture capital," said Darrell Pinto, Thomson Financial's director of global private equity performance.

The MoneyTree survey is produced by Thomson Financial, PricewaterhouseCoopers and the National Venture Capital Association. E-mail: danderton@desnews.com