Spills and scandal behind him, can the former chief of BP redeem himself as a private equity player setting up a new alternative-energy company?
John Browne, who resigned as chief executive officer of the world's second-largest oil company, BP (BP), in May, is already plotting a comeback in private equity. Browne, who left after losing an ugly battle with tabloid newspaper the Daily Mail over revelations about his private life, has been mum since his hiring on Aug. 24 by New York-based energy investment group Riverstone Holdings as European managing partner and managing director. Now BusinessWeek has learned details of his plans.
Browne was an early advocate of the need to address global warming. But his green credentials and BP's "Beyond Petroleum" logo were undermined when the company suffered a series of high profile oil spills in Alaska in 2006 and a catastrophic refinery explosion in Texas in 2005. At Riverstone, an independent private equity firm, Browne will get a chance to redeem himself.
The former BP chief executive will be involved in an effort to create a new alternative energy company, working with a Riverstone renewable energy fund that seeks to raise some $4 billion. The fund will finance and acquire promising alternative-energy businesses, as well as pilot projects in new technologies. The plan, eventually, is to create an alternatives "major," as a source close to Browne puts it, by taking this company public.
Browne's Name a Big Draw
Browne may turn out to be well suited to private equity. While he relished the prestige that the BP position brought—including membership, as Lord Browne of Madingley, in the House of Lords—he resented the intrusions into his private life. He was also known to complain that his pay was low compared to that of U.S. CEOs in similar positions. Browne, who was an outstanding physics student at Cambridge University, is a whiz with numbers and a relentless cost-cutter. When he served on the board of Goldman Sachs (GS) it was said that the firm's accountants feared he would catch them in errors.
Browne initially preferred to confine his energies to renewables, but Riverstone's co-founders David Leuschen and Pierre Lapeyre Jr.—both former Goldman Sachs energy bankers—also wanted him to participate as a partner in a $6 billion fund targeting conventional energy projects such as refineries and oil and gas exploration. The partners, whose funds all have been joint ventures with the larger Carlyle Group, think that Browne's name will be a big draw for U.S. and European pension funds.
In fact, word is they believe they may be able to raise as much as $16 billion in the two vehicles. The ambitious size of these funds shows the appetite that investors from both the West and the oil producing countries are showing for energy investment opportunities. "Massive amounts of capital are moving into this sector, and world-class management is needed," says J. Robinson West, chairman of PFC Energy, Washington-based consultants. West adds, "John Browne and his team bring those contacts and skills."
No Longer the Boss
Along with Browne, Riverstone has hired another well-regarded former BP executive, Ralph Alexander, who was instrumental in landing BP's $8 billion Russian joint venture, TNK-BP, in 2003. Around BP, where Browne still has admirers, the expectation is that he will tap other former and, perhaps, current BP executives. "John knows energy," says one BP higher-up. "He is going to make an impact."
One big question is whether Browne, who was accustomed to being the boss of a massive organization while at BP, will be able to work in Riverstone's structure, where Leuschen and Lapeyre call the shots. He is now working from a new London office with only a handful of people. Riverstone was legally unable to comment because the enterprise is in the fund-raising stage. Browne did not return calls.