GE unit seeks power, natural gas and oil projects: CEO

NEW YORK (Reuters) - At a time when electricity prices are low and credit is tight, power companies looking to build new capacity may be able to find a partner in GE Energy Financial Services, which has $21 billion in assets already invested in the energy sector.

The chief executive of the unit of U.S. multinational conglomerate General Electric Co told Reuters that the Stamford, Connecticut-based company had 30 years of energy sector experience, a goal to build power, oil and natural gas projects.

"We are always looking to add value to the things we are involved in, not simply be a source of capital. We want to be a value-added source of capital," Alex Urquhart, GE Energy Financial Services president and chief executive officer, said in an interview.

In California, one of the fastest growing power markets in the United States, GE Energy Financial recently announced the financing of two natural gas-fired power plants - privately-held Competitive Power Ventures' 800-megawatt Sentinel and Calpine's 619-MW Russell City - for a combined $1.65 billion.

This could be good news for power plant developers struggling to secure financing in an environment of tight credit and power prices lowered by recession-related cuts in electric demand and an oversupplied natural gas market.

GE Energy Financial has an equity stake in both Sentinel and Russell City in California, but Urquhart said, the company is providing more than capital.

"We are also providing the discipline and the expertise and stick-with-it-ness that allowed us to get both projects to this stage. And, we see ourselves doing more of that," he said.

GE Energy Financial has a 25 percent equity stake in Russell City. Calpine owns 75 percent. The companies have not disclosed the total cost of the project, but on Monday announced the closing of about $850 million in debt financing.

He warned, however, "This is a more risky part of the investment cycle, because not every investment is successful. But the rewards make sense and we can add value."

Russell City has been under development since 2001. GE Energy Financial got involved in 2006 and helped Calpine resolve issues that had been slowing progress.

For example, Urquhart said, the companies had to renegotiate Russell City's power purchase contract with local electric company PG&E, extend environmental reviews and complete work on transmission and pipeline issues, all while keeping costs under control.

Both Russell City and Sentinel are expected to begin service in the summer of 2013.

"Having the experience of seen it, been there, we have ideas on how to solve problems when they arise," Urquhart said, citing a discipline to match funding with schedules and project milestones to bring everything together.

"And we worked hand in hand with Calpine to do it," he added.

CONTRACT IS KEY

Having a power purchase contract is the most important thing for an energy developer to have to attract financing, Urquhart said.

"Having a power contract is huge. Some projects are so strong they can be built without a power contract. But with the price levels we are at today, most projects need a power contract. It takes you a long way," said Urquhart.

While many developers may have great ideas, they do not always have capital to finish a project, the executive said.

"They have the local knowledge and can put pieces of a project together ... But they don't have the capital to see all the issues all the way through," he said.

"What makes us different is we have been at this for 30 years," Urquhart said.

In those 30 years, GE Energy Financial has been involved in all stages of a project from development and permitting to construction and operating the finished plant, Urquhart said.

Some companies with older power plants, especially coal-fired facilities, are retiring them because of current or expected environmental issues.

Urquhart said the key to overcoming that uncertainty connected with potential environmental legislation is diversity of supply, which GE Energy Financial has.

The company has invested in renewable wind, solar, hydro and geothermal power projects, as well as natural gas and coal-fired power projects and the oil and gas sector.

"We combine our industry knowledge with our investment dollars to bring a lot of value to developers, who have projects that exceed their own wherewithal, to get a project to the finish line," Urquhart said.

(Additional reporting by Eileen O'Grady in Houston; Editing by Carole Vaporean)