Koch bros. invest in utilities seeking coal subsidies

Source: Benjamin Storrow, E&E News reporter • Posted: Thursday, June 14, 2018

Koch Industries Inc. acquired 20,052 shares in FirstEnergy Corp. during the first three months of 2018, filings with the Securities and Exchange Commission show.

The acquisition of a $682,000 stake in the embattled Ohio utility was part of a wider Koch foray into the utility space over the latter half of 2017 and the beginning of 2018, the filings show. Koch Industries purchased a stake in at least 16 utilities during that time.

While the purchases tended toward vertically integrated utilities like DTE Energy Co., Southern Co. and Xcel Energy Inc., they also included independent power producers in Exelon Corp. and Vistra Energy Corp., as well as takeover candidates like Vectren Corp. and El Paso Electric.

“It sounds to me they are making an investment in the sector for some reason,” said Paul Patterson, a utilities analyst at Glenrock Associates LLC, noting that there didn’t appear to be any pattern to the buys. “It’s a smattering of utilities with different profiles.”

A weekend report in The Markets Daily about Koch’s FirstEnergy buy raised eyebrows in Washington, D.C.

FirstEnergy’s power plant division recently filed for bankruptcy protection, and the company has been outspoken in its support of a federal bailout for coal and nuclear units.

David and Charles Koch, meanwhile, are major conservative political donors who boast close ties with White House officials. Charles Koch is the CEO of Koch Industries.

However, the Koch brothers’ political allies have criticized a DOE proposal to aid coal and nuclear plants. Americans for Prosperity, a conservative think tank financed by the brothers, issued a statement blasting the plan after it was leaked to Bloomberg News earlier this month.

“When government protects favored industries with subsidies and mandates, it perpetuates the two-tiered society that benefits special interests at the expense of the less fortunate,” AFP policy manager Mary Kate Hopkins said. “To think this new wave of subsidies is going to make up for past mistakes propping up uncompetitive industries is misguided and would negatively impact consumers and business with higher energy rates.”

Koch Industries did not respond for a request for comment.

The company’s investment moves come at a time of consolidation in the utility sector. CenterPoint Energy announced plans in April to acquire Indiana-based Vectren in April for $6 billion (Energywire, April 24).

Koch Industries purchased a $381,000 stake in CenterPoint in the fourth quarter of 2017 and increased its position to $1.3 million in the first quarter of 2018. It also acquired 7,715 Vectren shares worth $493,000 during the first three months of 2018.

FirstEnergy, for its part, has been moving away from its competitive power business. Executives at the Akron, Ohio-based utility have repeatedly said they intend to transition fully into the transmission and distribution business where utilities operate as regulated monopolies. Koch did not appear to own any shares in FirstEnergy during 2017.

A $90.1 million position in Vistra appeared to be the largest Koch stake among the 16 power companies identified by E&E News. The total value of Koch Industries’ investment in utilities was roughly $99.7 million in the first quarter of this year.

Vistra completed a nearly $2 billion merger with Dynegy Inc., a coal-heavy independent power producer, in April (Energywire, April 16). Vistra announced plans last year to close 4,000 megawatts of coal capacity in Texas (Energywire, Nov. 7, 2017).