Star Tribune, Minneapolis, Neal St. Anthony column: Neal St. Anthony: We can thank Enron -- and a smart guy from Omaha -- for U.S. Energy Services

Oct 17, 2009 (Star Tribune - McClatchy-Tribune Information Services via COMTEX) -- ENRNQ | Quote | Chart | News | PowerRating -- According to Inc. magazine, U.S. Energy Services in Plymouth is one of America's fastest-growing companies and energy conglomerates.

U.S. Energy boasts five-year revenue growth of 700 percent as revenue mushroomed to $439 million. But that's a bit misleading since more than $400 million of that is brokered energy purchases for customers -- pass-through revenue that U.S. Energy doesn't keep.

The important part is that the 75-person energy-management company, with net revenue of $21 million after deducting the cost of energy, saves more than $100 million annually for 800 Midwest and other commercial-industrial customers for whom it negotiates about $1.5 billion a year in fuel contracts.

CEO Bill Bathe, a plain-talking pipeline engineer out of Nebraska, talks about the fun and challenge of growing a business out of the energy-cost savings provided for hard-pressed school districts, as well as the University of Minnesota, Fairview Health Services, Medtronic, 120 Midwest ethanol plants and others.

This is an innovation-based, electronic-markets rooted outfit that focuses on helping the fuel-poor Midwest cut energy bills that can approach a third of operating expenses through negotiated purchases, hedging, flexible sources, usage evaluation and integration with utility-based energy-conservation programs.

"We've been growing our core revenue about 12 percent a year," Bathe said. "This year we'll probably be flat because energy prices are low. And we're also making the investments now to develop a larger, more diversified customer base and a broader service portfolio that will spur our future growth."

We can thank Enron for U.S. Energy Services, which should be a 100-person firm by the end of next year.

Bathe was a gas-marketing vice president at Omaha-based InterNorth in 1986 when the company acquired Houston Natural Gas, the predecessor to Ken Lay's Enron.

Bathe, an Omaha kid, was reassured to hear Lay, who died a few years ago before facing criminal charges over Enron's failure, tell InterNorth's executives after he took over the consolidated company in 1987 that headquarters and operations would remain in Omaha. A few weeks later, as a member of a corporate-integration team, Bathe learned from Houston-based lieutenants that the real plan was to move everything that mattered to Houston.

Bathe and several colleagues decided to move to Minneapolis. Bathe had worked for three years on InterNorth pipeline projects.

"My wife and I always wanted to move back," Bathe said. "And Enron gave me the opportunity."

Bathe started a natural gas brokerage. But there wasn't much profit selling natural gas to utilities.

"In 1993, we were trying to change the business to what today is U.S. Energy Services, and I kept reading about folks I had worked with [at Enron] who were making millions of dollars," Bathe recalled. "I was making no pay. I'd scratch my head and say, 'Some people are just a lot smarter than me.'"

Not for long. In 1993, federal deregulation allowed industrial and commercial customers to buy from sources other than the local utility.

Bathe knew all the suppliers. He started to represent a brick factory here, an ethanol plant there and a hospital in the next county that were increasingly upset over volatile energy prices.

Helping customers

"That was our innovative thought that worked," Bathe said. "It was more fun to have a bias toward our customers. We knew energy and pipelines and utilities, and we would represent our ethanol plant or another customer and play off one utility against another."

This fall, U.S. Energy expects to close on the energy-management services unit of Integrys Energy Services, the Wisconsin-based public utility company.

It's also started a carbon-management business in anticipation of new federal rules and plans of big energy users to document and cut carbon dioxide emissions.

U.S. Energy, which operates regional offices in Kansas City, Omaha and Louisville, says its biggest competitors are those companies large enough to operate their own energy-management, procurement and trading businesses. That's the likes of Cargill, ADM and other industrial giants.

Most smaller companies lack the knowledge, pricing power, data management and other clout to negotiate better deals.

"It's easier to be a broker," Bathe said. "Making money as a client's agent is a long-term deal. We've had some luck. Minnesota is a leader in energy management and conservation."

And Minnesota is home to a growing energy-management innovator started by a guy who had the smarts to walk away from Ken Lay.

Neal St. Anthony --612-673-7144 --nstanthony@startribune.com

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