The future fifth baron from the fabled banking clan is leading a $3 billion deal to create an Indonesian powerhouse that would be ideally positioned to profit off China's voracious appetite for coal
Even as representatives from 190 nations gather in Canc?n, Mexico, to have another go at hammering out a global treaty to curb greenhouse gas emissions, Nathaniel Rothschild dreams of becoming the world's largest coal producer. A member of the storied financial clan that helped bankroll Britain's war against Napoleonic France, the future fifth Baron Rothschild is leading a $3 billion deal to create an Indonesian coal powerhouse that would be ideally positioned to profit from China's voracious appetite for the fuel.
To get there, Rothschild is leveraging his name, hedge fund experience, and a network that reads like a who's who of the commodities world. He's friends with Ivan Glasenberg, head of the commodity trader Glencore International; advises Russian aluminum billionaire Oleg Deripaska; and is on the board of Barrick Gold (ABX), the largest gold miner. "There's no global coal company today," says Rothschild, 39. "There's not a Barrick Gold in coal. That's where the opportunity is."
Rothschild has been searching for a natural-resources acquisition since Vallar, the U.K. investment company he founded, raised $1.1 billion in an initial public offering in London in July. Potential deals with Polyus Gold, Russia's largest producer of the metal, and Moscow-based iron-ore miner Metalloinvest didn't pan out. Then in October, Rothschild traveled to Los Angeles to meet Nirwan Bakrie, a member of the family that controls Bumi Resources, Indonesia's largest coal producer. Things fell into place quickly. On Nov. 16, Rothschild announced a three-way merger that combines Vallar, 25 percent of Indonesian coal producer Bumi Resources, and 75 percent of Berau Coal Energy, another Indonesian miner. The Southeast Asian nation has displaced Australia as the world's biggest exporter of what is known as power-station coal. Prices for the fuel have shot up 40 percent this year, according to Morgan Stanley (MS), because of strong demand from China and India. Together the two countries burned more than half the world's supply of coal last year. "Indonesia is a sleeping giant," Rothschild says. "One scratches one's head to think why isn't there a mining champion out there already, and hopefully we are in the process of showcasing one in the years ahead."
Before setting up Vallar, Rothschild spent more than a decade at hedge fund firm Atticus Capital in New York. The firm generated almost $7 billion for investors before most of its funds were wound up last year. Rothschild says his work at Atticus immersed him in commodities, which became his "strongest suit." He also got to know some of the industry's most influential people. "He has an unparalleled range of contacts," says Peter Munk, Barrick's founder and chairman. "Certainly being a Rothschild does help, but opening a door, if you're an idiot, it's a single event. He has shown a talent."
Rothschild is the only son of British financier Lord Jacob Rothschild, the fourth Baron Rothschild, a former banker and modern art collector. Nathaniel attended Eton College, the English private school that counts 19 British prime ministers as former pupils, and is dating Princess Florence von Preussen, the great-great-granddaughter of the last German emperor, Kaiser Wilhelm II, according to the U.K. tabloid Daily Mail. After studying history at Oxford University, Rothschild decamped to New York (he owns homes in Manhattan and Paris), where he held a series of jobs in finance. That world was already familiar to him, says Rothschild, who as a youth frequently accompanied his father on business trips: "I was exposed at a very, very early age to a lot of these big Wall Street tycoons."
While at Atticus, Rothschild established his relationship with Deripaska. They first met in Paris in 2002 at a meeting where "the average age was considerably older than our average ages," he recalls. "We ended up going out and having dinner." Rothschild now chairs the board of EN+ Group, the holding company through which Deripaska controls assets including United Co. Rusal, the largest aluminum maker. "Ivan Glasenberg or Oleg Deripaska, they've come from nothing; they are not impressed by posh blokes," says Michael Rawlinson, a banker at Liberum Capital in London who met the British scion during a stint in New York in the 1990s. Rothschild has "the nerve to call up anyone, and what's interesting is he's taken seriously."
Rothschild's connections and deep pockets make him an attractive partner for Indonesia's Bakrie clan, which helms a palm-oil-to-property empire. "They just can't rely on Indonesian banks for borrowing. They must, must seek funding from outside Indonesia," says Jakarta-based Adrian Rusmana, a director at broker Sucorinvest Central Gani. "This alliance with Rothschild gives them access to European financiers, bankers, investors, and markets."
Rothschild on Nov. 16 outlined plans to boost annual coal production to 140 million metric tons by 2013, equal to all of South Africa's output last year. "They will control a large part of global seaborne-traded coal," says David Chang, a director at brokerage UOB Kay Hian Securities Indonesia. "This will give them some influence on coal supply and therefore coal prices."
The new company, Bumi PLC, will be the first major Indonesian business to list on the London Stock Exchange, where miners figure prominently among the top 20 companies on the benchmark index's market value. "To be able to do an IPO without having any assets, he has to be somebody," Indra Bakrie, who will be Bumi's chairman, says of Rothschild. "I wish I could do that."
The bottom line: Nathaniel Rothschild has parlayed his family and work connections into a $3 billion deal aimed at creating the world's biggest coal exporter.