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Engine No. 1, the hedge fund that bested ExxonMobil in a fight over its approach to climate change, is teaming up with the supermajor’s rival Chevron to build fossil fuel plants to meet soaring artificial intelligence-driven power demand.
The former activist investor said on Tuesday it was forming a joint venture with Chevron and agreed to a partnership with energy company GE Vernova to develop natural gas power plants under a fast-track timeline.
The venture comes four years after Engine No. 1 launched one of Wall Street’s most audacious proxy wars against Exxon, arguing that the oil major faced an “existential business risk” by pinning its future to fossil fuels.
At the time the hedge fund claimed Exxon had not adequately considered that oil and gas demand could decline, saying the producer lacked a “credible plan to protect value in an energy transition”.
Although it held only 0.2 per cent of Exxon’s shares, Engine No. 1 won three seats on its board in a victory that sent shockwaves across corporate America and became the emblematic victory of the environmental, social and governance movement.
Chris James, Engine No. 1’s founder and chief investment officer, said the investment with Chevron was consistent with its previous Exxon campaign.
“This is not a pivot. The Exxon campaign was focused on governance and capital allocation as a way to create value for shareholders. It was not about ideology or fossil fuels or renewables,” James told the Financial Times.
“This partnership with Chevron and GE is about allocating capital in an economy that is undergoing a re-industrialisation and needs dramatically more power . . . This will lead to value creation for shareholders.”
The companies plan to co-locate power plants with data centres and deliver up to four gigawatts of electricity — enough to power up to 3.5mn homes — by 2027.
The investment, which analysts estimate at up to $8bn, is part of a race by energy companies to capitalise on surging power demand forecasts linked to the rollout of AI data centres.
“This is the beginning of these AI wars,” James said, referring to the race between China and the US to harness a technology its boosters believe will transform the global economy.
“We all know that China has an enormous amount of power available. But if we are really going to do a digital re-industrialisation of the US we’re going to need to make these investments at scale,” James said.
Engine No. 1’s decision comes as Wall Street and large businesses across the US beat a steady retreat from ESG and other progressive programmes that have drawn fire from President Donald Trump and Republicans.
James, a hedge fund industry veteran who made a fortune as a technology and biotech investor, has taken Engine Number 1 in a different direction since the Exxon campaign. In 2023 he announced the hedge fund would put $780mn into the base metals business of Brazilian miner Vale and told the FT that he never considered himself an activist investor.
“I consider myself an investor and activism is a tool of last resort, not a strategy,” he said.
The investors said they expected the gas plants to be designed with the flexibility to integrate carbon capture and storage — a technology that has yet to achieve full commercial and technical feasibility.
The gas plant joint venture also marks a strategic shift for Chevron, which is entering the electricity business a few months after Exxon also declared plans to build gas power plants to fuel AI data centres.
The announcement on Tuesday came a day after tech stocks slumped on news that China had developed a cheaper AI model that could need far less power than Silicon Valley’s energy-intensive AI systems.
“We still see the growth in electricity demand being significant, just in the rest of this decade, not to mention past it,” said Jeff Gustavson, president of Chevron New Energies.
“AI will be the big driver, but there are other drivers: reshoring of US manufacturing and just overall electrification in the pursuit of a lower carbon energy future.”
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https://www.ft.com/content/ac6fb239-b957-4408-a66c-33c917836e04
