SAN FRANCISCO – In a move to generate increased returns for its shareholders, and to take an early look at promising energy technologies, PG&E Corp. recently launched Pacific Venture Capital LLC as its venture capital arm, said Bryant Tong, president and chief executive officer of Pacific Venture Capital and senior vice-president of PG&E Corp., an energy-based holding company whose subsidiaries include Pacific Gas and Electric Co.
Pacific Venture Capital has received a $100 million commitment from its parent company to fund its first year of operations. The VC unit will back energy companies, energy-related companies and businesses developing delivery services, Tong said. It will also invest in telecommunications companies, he added.
“We are going to be a pseudo-R&D group for the corporation and its business,” Tong said. “This gives us a bird’s eye view of new technology in the industry and it will show us ways we can be a better energy company by using some of these technologies. In order to stay competitive and be competitive, we need to add revenue sources and we hope to become involved with some fast growing companies that can help us grow at a greater rate,” he added.
Pacific Venture Capital’s telecom plays will look to leverage the telecom industry experience of Peter Darbee, PG&E Corp.’s chief financial officer. “Peter was chief financial officer of Pacific Bell and has a lot of experience in the telecom area, so his connections give us a great start in this arena,” Tong said. He noted Pacific Venture Capital’s telecom deals are more geared towards providing PG&E Corp. shareholders a superior financial return than towards the VC’s other goal of getting a preview of new energy related technologies.
Tong expects Pacific Venture Capital to back between 10 and 20 deals in its first year with an average deal size between $3 million and $7 million. Approximately 75% of the vehicle’s capital will go towards energy-related deals, while the remaining 25% will back telecom companies. The vehicle will invest nationwide and does not have a specific stage focus, though he said it would likely avoid seed-stage companies.
Pacific Venture Capital may invest up to $500 million over the next five years, though Tong said that PG&E Corp. has not committed any capital beyond the initial $100 million. “We will evaluate allocations on a yearly basis,” he added. Tong did not anticipate opening the vehicle to outside investors at any time in the near future. He declined to reveal the vehicle’s carried interest structure. Its management fee will be around 2%, he added.
Tong said he is currently in the process of putting together Pacific’s investment team. He expected to select a group of five to seven investment professionals over the next few months.