DENVER — Investor Louis Bacon has been a vocal opponent of Xcel Energy's plan to build a major transmission line across portions of his Trinchera Ranch in southern Colorado.
Yet financial disclosure forms show that Bacon's hedge fund, Moore Capital Management, owns Xcel stock valued at nearly $56 million.
As a result, Bacon's $16 billion fund stands to benefit from profits Xcel could make from operating the power line.
In a Denver Post guest editorial written by Bacon and published Feb. 27, he said the transmission line is an "unnecessary white elephant project (that) will generate hundreds of millions in profits for Xcel's owners while sticking ratepayers with the bill."
Bacon has been fighting a long-running battle with Xcel, its partner Tri-State Generation and Transmission, and the Colorado Public Utilities Commission in an attempt to get the line routed away from Bacon's 171,400-acre Trinchera Ranch.
Barring legal and regulatory challenges by Bacon, the 21-month fight ended last month when the PUC ruled that the proposed $180 million power line from the San Luis Valley across La Veta Pass and the Trinchera Ranch can be built.
Xcel and Tri-State have said the line will improve reliability of electric service in southern Colorado and will enhance the delivery of renewable energy generated from the San Luis Valley to Front Range customers.
Moore Capital Management's investment in Xcel gives it a 0.48 percent ownership stake in the utility.
Xcel's 483 million shares give the company a market value of $11.55 billion.
The share purchase suggests a notable irony: a critic of a company's project owns stock in the company and could be a financial beneficiary of the same project he has publicly criticized.
Bacon, in a statement issued Thursday to The Denver Post, said the investment in Xcel is "putting my money where my mouth is.
"While investigating Xcel's nationwide business model, it became clear that in a low-return environment where they basically act as the regulator, Xcel charges a double-digit rate of return on capital investments like transmission lines," he said. "Because of their superior guaranteed return, with essentially no risk, they are an attractive investment and are now my funds' largest utility position.
"Regardless of whether the southern Colorado transmission line is built, their business model is unlikely to change and is set up to deliver superior returns over time."
A spokesman for Bacon said he could offer no further elaboration on how Bacon weighed the negatives of his battle with Xcel against the perceived financial benefits of investing in the stock.
Filings with the U.S. Securities and Exchange Commission show that during the fourth quarter of 2010, New York-based Moore Capital bought 2.335 million shares of Xcel Energy, Colorado's largest utility.
At Xcel's closing price Thursday of $23.93, the shares are worth $55.88 million.
In addition to realizing potential gains if the stock price rises, Moore Capital will receive quarterly dividends of 25 cents per share, worth $583,750.
Financial analysts said the investment in Xcel by Bacon's fund could be generated by a variety of factors: simply a belief that it's a good investment, a hedging mechanism to benefit from transmission-line profits if the project devalues Bacon's ranch, or an attempt to gain power over Xcel as a shareholder.
"Mr. Bacon is no fool with his money," said energy analyst William Yeatman of the free-market-oriented Competitive Enterprise Institute. "Xcel's 10-year (profit) horizon is great, thanks in large part to the suite of expensive energy policies collectively known as the new-energy economy."
Finance professor Sanjai Bhagat of the University of Colorado's Leeds School of Business said he couldn't speculate why Moore Capital bought the shares, but it is unlikely a ploy to influence corporate management.
Moore's ownership of less than one-half of 1 percent of Xcel does not signal much power to exert over Xcel management, Bhagat said.
"For that amount, maybe you can get a telephone call returned or a meeting with management," he said, "but not much more than that."