My father and I have a commitment to the energy business and to helping our country move towards sustainability and energy independence. Zilkha Biomass Energy is the third endeavor in our twenty-year partnership in energy. As in our previous two businesses, we are investing our time and capital towards the development and application of new technologies.

We started Zilkha Energy Company in the 1980s. We explored for hydrocarbons in the shallow waters of the Gulf of Mexico. We loved our business and were the largest acreage owners on the Gulf of Mexico shelf with over one and a half million acres under lease, and an enormous seismic database. We were one of the first companies to use 3D seismic for exploration, but as competitors followed and as our daily production of hydrocarbons rose, it became more and more difficult to replace reserves. We opted to sell our company in 1998, and we went into the wind energy business soon after.

In 2005, we sold our wind energy company, Zilkha Renewable Energy, to Goldman Sachs. We had become one of the largest wind developers in the United States, with over 250,000 acres under lease all the way from New York to California. We had also built several hundred megawatts of projects. Once again we loved our business, and we were very proud of the organization and portfolio which we had developed. But as the business grew, it required greater financial strength than we could bring to it. Individual projects, which had originally cost in the tens of millions of dollars, had become much larger and now ran to the hundreds of millions of dollars. Goldman Sachs, with its financial strength, financing expertise, and access to large sums of capital, was a more logical owner. I remain on the board of Horizon Wind Energy, as it is now called, and my father and I maintain an interest in the future of the new company.

We had not necessarily planned to re-enter the energy business, but when we were introduced to the Power Generating Inc. system—now the Zilkha Biomass Unit—we were immediately intrigued. By displacing hydrocarbons as an energy source, the system reduces our dependence on a depleting asset. Unlike hydrocarbons, our fuel source is infinite and constantly being replenished. Whereas conventional biomass units burn their fuel at atmospheric pressure, the Zilkha Biomass Unit generates lower emissions because a greater percentage of our fuel is consumed in our high-pressure combustion chamber. Even though biomass is considered CO2 neutral, we made a decision that we would nevertheless ensure that new trees were planted to compensate for all of our CO2 emissions.

Because our unit is small and used locally, we are on the cutting edge of the power generation trend towards distributed energy. The electricity transmission crisis in California in 2001 and the 2003 black-out in the Northeast illustrated the problems with our transmission grid. Coal, hydro, and wind energy are all dependent on transmission availability. In our new business, this constraint has been obviated. Each of our biomass units produces about three times the electricity per year of one wind turbine. But it does so locally, inside the fence, displacing electricity that was being bought at retail by our customers, so that the savings per unit of electricity are greater. By shifting electricity generation much closer to the consumer, we add stability to the grid. And by reducing the dependence of some medium-sized customers on the grid, we help everybody. 

By absorbing 100% of the capital costs for our unit, we are offering a service that until now was available only to very large electricity consumers. In the power business, size has traditionally mattered. We intend to change that! Previously only large power generation plants were considered economic for third-party ownership. Zilkha Biomass not only offers an alternative for customers who are middle-sized consumers of megawatts, but in addition provides a business option heretofore available only to really large power consumers. This is because we own the equipment ourselves, so our customer is able to free himself from the grid without any capital expenditures of his own.

Finally, we are encouraged that this is a business that has scalability. There are hundreds of facilities in the United States and abroad where installing our biomass unit makes sense, enabling our clients to substantially reduce their energy costs. Unlike our previous two energy ventures, however, this is a business that we hope to keep and grow for years to come. In the oil and gas business we were dealing with a depleting asset. Here we will have a steady cash flow. Projects will never explode in cost as they did in the wind business. At the most we might find a customer who requires ten megawatts of generation on a single property.

Making a profit is essential for a business to remain vital and exciting, but it is also wonderful when a business has a purpose beyond simple economic motive. The dangers of pollution and the evidence of climate change are by now undeniable. There is a pressing need for alternative energy sources if we are to avoid an ecological disaster. The electricity we provide is green, renewable, and cost competitive. With Zilkha Biomass Energy we can help address environmental concerns.

Michael Zilkha 
February 2006