PhillyDeals: After the fall: Clean energy as a Wall Street darling

In a world in which SUV factories, derivatives-trading floors, and home-loan offices are idled, and the economy they inflated is broken, some Wall Street investment bankers are seeking new lives as alternative-energy deal-makers.

Meet Jeffrey A. McDermott.

He grabbed his M.B.A. at UCLA and headed off to build his fortune. It was 1984, and a lucky time to start.

He joined Drexel Burnham Lambert, home of Michael Milken's manic junk-bond shop. Moved to Smith Barney, to work the global merger boom. Rose to head the heavy-industry deal team at Citigroup Inc. then moved up to global head of investment banking at UBS AG, where his gang collected $4.5 billion in fees in 2006, the last fat year of the

Reagan-Bush-Clinton-Bush financial bubble.

Investment bankers buy, sell, and finance companies, playing Monopoly with many people's lives, and collect fat fees when each deal goes through.

"I always wanted to build a business," McDermott told me last week, the day he launched one, in a brutal financial climate.

His new firm, Greentech Capital Advisors L.L.C., based in New York and staffed by refugees from Wall Street giants, wants to be the firm that connects capitalists, engineers, and big-tech firms to fund and exploit the new solar, wind, biofuel, "clean coal," and other emerging power technologies - the rare growth industries in a now fallow investment landscape.

He checked out of UBS in March 2007, right before the crash. He joined a distressed-companies fund.

But mostly, he says, he went around trying to figure out what would replace the collapsing financial industry he'd grown up with. And how to profit from it.

"In February of '08, I'm talking to my 14-year-old son about what does he want to do," said McDermott. "He said, 'I want to work on Wall Street; it's been good to our family.'

"I told him, 'I don't think Wall Street is going to be that for your generation.' "

What's next? asked the boy. "Climate change," said his dad. "Sustainability. It's not the global companies that will address it, though ultimately they will. It's the new companies. There'll be a lot of chaos, and dynamic change, and growth. Study science. Grow with it.

"And I thought, 'Maybe that's good for me, too.' "

McDermott says he spent the next year polling experts. "I talked to 150 private-equity guys and CEOs, and all the guys who run the power group or the tech group" at the big investment banks, and the heads of the little renewable-energy teams that banks were starting to build.

"I'd say, 'If I was to build from a white piece of paper, what do I need to win?'

"They needed people who had detailed knowledge. Deep sector expertise. Comprehensive information on debt, tax, equity finance. What's going on in Washington, and at the state public-utility commissions. What's going on with competing technologies. Natural gas and wind and coal and nuclear. What the price of carbon might be."

The venture capital system isn't prepared to back this next wave, he said. "These companies will need to raise a lot more than $40 [million] or $50 million. They're going to end up part of Siemens and PGE and Exelon. Who's getting them ready? I could see an unmet need. We went into stealth mode hiring people."

They include:

Robert A. Schultz, an ex-fund service boss at Morgan Stanley, to head operations. Financier Timothy F. Vincent from Goldman Sachs Group Inc. Michael J. Molnar, Goldman's lead coal and alternative-energy stock analyst. Craig J. Wellen, senior utility deal- maker at Citigroup. R. Andrew de Pass, founder of Citi's "Sustainable Development" group. And Richard L. Kauffman, chief executive at one of the new specialty-investment firms, Good Energies Inc.

Sounds like a gimmick, I told McDermott. I reminded him how, around the time he quit UBS, Citigroup put on a show in Lower Manhattan where its top investment banker, the since-departed Michael Klein, pledged $50 billion for new "green" energy projects. Most of the money turned out to represent an extrapolation of the bank's existing commitments to construction, development, and cost-cutting projects.

McDermott laughed. "Those guys are slick," he said. He contends he waited to announce Greentech until he had a couple of engagement letters signed. Jobs in hand. One to sell a company. One to raise money.

Always a demand for that.