Financing the Green Revolution

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Read the Greater Richmond Partnership's other newsletters:

Catalyst: tracking innovation in Richmond, VA's advanced materials/specialty chemicals sector

BioSynthesis: tracking innovation in Richmond, VA's life sciences sector

Logistics: tracking innovation in Richmond, VA's supply chain sector

Feature Article

Financing the Green Revolution

Ewing Bemiss, a small Richmond investment banker, has developed a big national reputation by raising hundreds of millions of dollars for alternate-energy deals.

by Peter Galuszka

Ewing Bemiss & Co., a 20-person investment bank in downtown Richmond, is proof that you don’t have to be big to make a difference. Seemingly out of nowhere, the firm has vaulted onto the national scene as a leading player in the financing of green energy projects. With the closing of two multi-hundred million dollar energy deals early this year, the company is muscling into the top ranks of Richmond-based deal makers as well.

Located on the 16th floor of an office building overlooking the James River, Ewing Bemiss is one of several small firms that quietly handles mergers, acquisitions and private-equity financings for the mid-cap market. Other regional players that offer discretion as well as expertise include Harris Williams & Co., Matrix Capital Markets Group and a host of smaller firms. Over its 16-year history, Ewing Bemiss has developed niche specialties in health care, transportation and logistics, business services and manufacturing. But rarely did its deals exceed $100 million in size.

One of those specialties was alternate energy, long a backwater compared to oil, gas and coal. The fees from financing biomass power plants and municipal waste-to-gas projects were too small to interest the investment banking giants in New York. But partners Mary Bacon and Henry Berling diligently tended the field, building a reputation as people who knew the industry and could get deals done. Then, seemingly overnight, oil prices exploded, the Global Warming controversy gained critical mass, regulators began demanding renewable fuels in utility portfolios, and billions of dollars started flowing into the sector. The deals are flowing into Ewing Bemiss like never before.

A love of Richmond brought the top partners together. A. Hugh Ewing III had worked at Wheat First Butcher Singer and Gallagher & Co. before co-founding the company in 1992. Four years later, he was joined by Samuel M. Bemiss III, who had worked in investment banking in Boston and New York. Besides being alumni of the Darden School of Business at the University of Virginia, both men were Richmonders who wanted to stay close to home.

“We have a national practice but we want to stay here,” says Bacon, who grew up in Norfolk, earned an MBA from the College of William & Mary and joined the firm in 1994. “We all like Richmond as a place to live and we travel all over.”

Ewing Bemiss started out as what was known in the 1990s as a “boutique” investment bank. Over time, it developed expertise in a number of industry verticals, raising private capital and handling mergers & acquisition work. The firm has worked in 35 states and overseas.

Among other transactions, the firm managed the sale of Old Dominion Peanut Corporation, a Norfolk firm which makes peanut brittle and other peanut candies, to The Virginia Food Group., Inc. It also helped sell AMF Bakery, which fabricates cooking equipment the length of football fields for mass baking. Other interests involve buying and selling firms that offer home care or pharmaceutical supplies, supply chains, and heavy steel equipment.

Each of these fields involves developing specialized expertise. “They have credibility in the marketplace,” says Michael J. Schewel, the head of the mergers and acquisitions practice at Richmond’s McGuireWoods law firm who served as the state Secretary of Commerce and Trade during the Warner administration. A specialist himself in alternate energy, Schewel worked with Ewing Bemiss on an alternate energy project in Michigan that closed this winter. “They understand nuances and their clients like them," he says. "They are very devoted, very available and they work very hard.”

Ewing Bemiss' alternate-energy business has hit a gusher. Currently, the company is involved in the sale of a large landfill gas plant in the Midwest, the sale of two wood biomass projects in the Northeast, and the sale of a portfolio of 23 hydroelectric plants in the Northeast. In March, the firm announced that it had helped find capital for a $450 million geothermal plant in central Oregon developed by the Newberry Geothermal Project, owned primarily by Davenport Power. The project, a first for Ewing Bemiss, will generate electricity from steam and hot water heated underground by volcanoes.

Bacon, who with Berling heads the energy practice, says that her firm’s expertise in renewable energy financing came up by happenstance in the mid-1990s. The firm took on a project to turn wood waste to steam in North Carolina. Other industry players there were stunned to learn how valuable the assets of the project were, and offered their businesses for sale.

Over time, Ewing Bemiss went up the learning curve in such projects. “We paid our dues,” Bacon says. “The area was too fragmented and too niche for New York investors to pay much attention to it.” The big investment houses, such as Merrill Lynch, seem more concerned with monster fossil-fuel facilities like giant coal-fired plants. One secret to Ewing Bemiss’ success in energy is “that they are willing to pay up to get scale,” says Schewel.

A strong area of activity is landfill gas. Ewing Bemiss finds financing for projects that tap methane gas generated naturally by organic waste inside landfills. Tapping that gas creates a revenue stream and solves a big environmental problem. Methane that escapes into the atmosphere at the landfill site is 21 times more powerful than carbon dioxide in causing global warming, Bacon says. But capturing and cleaning the methane, which can be sold as natural gas, puts money in the pocket for the project owner and investors. The methane can be used in on-site power generation or piped out and sold as a mid-heat value fuel.

Landfill-methane deals will become more important as the idea of creating carbon credits to slow global warming catches on. The credits can be bought and sold and used for tax credits. Europe is farther along in creating such markets but the concept is evolving in the U.S.

Ewing Bemiss also hopes to do more deals in wind and solar energy. The limitation on that market has been high cost compared to fossil fuels. Both technologies remain unprofitable without federal tax credits. But if their production costs come down, the payback should become more attractive.

Ewing Bemiss does work in the Greater Richmond area but business takes Bacon primarily to other states. She is juggling projects in Maine, Texas, Michigan and Oregon, to name a few. Air travel was a problem until discount carriers Air Tran and JetBlue arrived in Richmond several years ago and broke U.S. Airways' stranglehold on fares from Richmond. “We used to have to drive to Newport News or Dulles, but not any more,” she says.

Richmond has developed into a major player in the mid-cap marketplace. A client can fly into town and meet with a number of investment bankers, not just Ewing Bemiss but Harris Williams, BB&T Capital Markets or Matrix Capital. “People can call on all of us," says Bacon. "It’s unusual to have a group of intermediaries in one place.”

-- April 22, 2008