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By David Sheppard and Jeanine Prezioso
January 13, 2012 8:21 PM EST
Sempra, the commodity trading powerhouse that boasted a decade-long profit streak before it was sold four years ago, is being reborn.
David Messer, who over two decades built the multibillion-dollar Sempra trading operation, is back in the game as CEO of Freepoint Commodities. The firm is re-hiring dozens of former Sempra employees and opening offices worldwide, pushing into oil and coal markets in the hope of capitalizing on the regulatory and salary travails facing Wall Street.
"What you need to understand is it's really not a launch but a restart," Messer told Reuters in New York on Friday.
"The senior management of our company, by and large, have all worked together for at least 10 years. We've built up this kind of enterprise before and we know what it looks like in the end state."
Launched less than 12 months ago with private equity backing from the $10 billion Stone Point Capital fund, Connecticut-based Freepoint is already expanding its physical commodity merchant model from North American power and gas trading into European crude oil, refined products like diesel, and possibly coal.
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Since launching its North American operations in March 2011, the firm has opened offices in London and is set to start in Asia in the coming months. It has already recruited nearly 130 employees worldwide, who will ship tankers of oil, fill natural gas pipelines and trade around physical assets.
Almost two-thirds of those employees previously worked for Sempra during its enviable 44-straight profitable quarters starting in the mid-1990s, before the firm launched a joint venture with one-time British banking giant RBS in 2008.
THE RBS YEAR
That relationship proved to be short-lived, however, with Messer and his senior management leaving the firm within 12-months as RBS was bailed out by the UK government at the peak of the financial crisis.
Messer eventually saw the firm he'd built largely sold-off to JP Morgan in early 2010, allowing the U.S. bank to grow a business that now rivals Wall Street's other commodity titans, Goldman Sachs and Morgan Stanley.
Having once joined forces with the banking world, Messer now hopes to bring traders back. While many commodity players jumped ship to investment banks in the second half of the last decade, the reverse move has been gathering pace as banks face tighter regulations, including restrictions on trading for the firm's own book, and more scrutiny of pay packages.
"To be a privately owned merchant in this environment is an advantage," Messer said.
"We're nimble, we can operate in an entrepreneurial fashion, we don't have layers of management and we're not heavily regulated. We can offer people an environment that is attractive to seasoned professionals."
The bank will start trading residual fuel oil on the U.S. Gulf Coast in February and is eyeing export opportunities in the U.S. diesel market, Messer said, adding the firm also saw opportunities in coal and oil in London.
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