Energy & Environment

Soros, others set to cash in on Natural Gas Act payday

Billionaire investor George Soros, a generous contributor to the Democratic Party, owns a significant stake in Westport Innovations, the Vancouver-based natural gas engine company. Soros owns a 6.6 percent position in Westport, which is poised to benefit from federal subsidies now under consideration on Capitol Hill.

George Soros and other top contributors to Democrats are one step closer to making millions of dollars off their natural gas investments, thanks to tax breaks and subsidies included in the Natural Gas Act which was filed March 5 as an amendment to the highway bill.

Capitol Hill sources report that a ruling by Senate Majority Leader Harry Reid (D-Nev.) will allow the Natural Gas Act to be included in Senate Res. 1813, “Moving Ahead for Progress in the 21st Century America Fast Forward Financing Innovation Act of 2011,” commonly referred to as the highway bill. The highway bill was debated by the Senate Tuesday.  Sen. Robert Menendez (D-N.J.), who filed the Senate’s version of the Nat Gas Act in November, told us he added it to the highway bill last night.

Chief among the beneficiaries of the Natural Gas Act is Soros Fund Management, which according to federal filings, owns 6.6 percent of Westport Innovations, a Vancouver, British Columbia-based natural gas engine distributor and manufacturer.  The fund’s position is worth more than $135 million at today’s stock market price.  Westport, with three partner factories in China, is a global leader in fuel systems and conversion kits.

Known on Capitol Hill as the “Nat Gas Act,” the proposal will extend federal tax credits for the purchase and operation of natural gas-powered vehicles; provide subsidies for the manufacture of natural gas engines, the establishment of a national system of privately held natural gas storage facilities and refueling stations. The legislation would also facilitate the migration of government-owned vehicle fleets to natural gas use.

The largest individual shareholder in Westport is Kevin G. Douglas, whose 2,990.431 shares are worth more than $125 million. With his wife Michelle, the couple own, directly and indirectly, 17 percent of Westport, according to the couple’s filings with the Securities  and Exchange Commission.

“We are thrilled to have President Obama encouraging the use of natural gas in transportation,” David Demers, Westport’s founder and CEO said in an April 1, 2011 statement published after President Obama introduced his National Clean Fleets Partnership, a forerunner  proposal to the Senate’s Nat Gas Act. The proposal contained the same subsidies that appear in the Nat Gas Act.  “Westport is strategically positioned to support the president’s initiatives,” Demers said.

Douglas and his wife Michelle M. contributed more than $130,000 to President Barack Obama and Democrats, according to Federal Election Commission records.

As of Feb. 9, Douglas and his wife also own an 8.9 percent position in Fuel Systems Solutions, a Santa Ana, Calif.-based company specializing in production of natural gas fuel and engine systems, according to federal filings.

“Westport and Fuel systems do not compete directly because the companies each focus on two different parts of the market for natural gas vehicles,” said Robert D. Brown, a stock analyst at Minneapolis-based Craig-Hallum Capital. Brown follows both companies.

While Westport offers both light-duty and heavy-duty engine systems, Fuel Systems focuses more on light-duty systems, said Brown. Heavy-duty natural gas engines compete with diesel engines and light-duty competes with gasoline.

The analyst said the failure to pass the subsidies in the Nat Gas Act language would significantly hurt Westport’s financial health and stock price. But, passage of the proposals made in the Nat Gas Act would accelerate the development of the market for natural gas vehicles.

Both Westport and Fuel Systems have entered partnerships with General Motors, itself a beneficiary of government funding,  in the past 10 months, the analyst said.

Westport’s June 28 agreement is to develop natural gas engine technology and Fuel Systems announced Oct. 26 it will supply General Motors Corp. 1,200 compressed natural gas fuel systems, the automaker’s largest order, he said. He estimated the order to be worth $12 million.

Brown said he estimates that Fuel Systems’ partnership with GM could eventually exceed $50 million in revenue for Fuel Systems.

GM announced March 5 that in 2013 it will sell bi-fuel Chevrolet Silverado and GMC Sierra pickup trucks capable of running on gasoline or natural gas.

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