A different twist: window of opportunity opened thanks to venture capital investment.

While not a conventional management buyout, it was a window of opportunity that led to Connect Energy of Saskatoon opening its doors last September.

In the volatile world of energy buying, selling and trading, more than a few players have come and gone. Enron is probably the most notorious while some lower-profile debacles have claimed victims as well but, out of the ashes has emerged a new Saskatchewan company.

After a 19-year career at CEG Energy, a Canadian subsidiary of a large American company, Roger Magneson, who had served as president of the Saskatchewan-based unit for a decade, decided it was time to chart a new career path. He left CEG with an idea of finding an equity opportunity, a company he could acquire or get into--basically to become his own boss rather than work as an employee. Ironically, within a few months, his former employer became available when a rogue trader in the American parent firm lost billions and sunk the firm. The Bank of America had stepped in and seized everything, closing the business including its Canadian subsidiary, which was operating profitably at the time with more than 20,000 natural gas clients across the three Western provinces.

"It was a shame to see a perfectly good company go down the tubes," Magneson says of CEG's failure. "All the staff lost their jobs, clients lost their long-term contracts."

The development prompted him and Kelly Blanch, another former CEG employee, to fill the gap restoring the service to CEG's former customers and so Connect Energy was born.

"It was almost like it was meant to be. It was comfortable to get back into a business we had been doing for 20 years," he says in reflecting on the chain of events that resulted in the pair launching their own company.

Connect Energy, like CEG before it, provides long-term natural gas supply contracts principally to large users such as health districts and industrial consumers. Basically the company is an alternative to SaskEnergy in this province.

But, while Connect Energy and SaskEnergy compete for clients, Magneson has high praise for the provincial Crown corporation and the relationship his organization enjoys with the government-owned gas distributor.

SaskEnergy, he adds, did a good job of ensuring the customers left behind by the CEG demise continued to receive service and were helpful when Connect Energy was created, showing some flexibility on deadlines as the company founders scurried around to ink new contracts with clients and structure an arrangement with a major energy company to back supply contracts.

With that in hand, Connect Energy next needed capital to acquire inventory prior to the winter heating season so Magneson and Blanch looked to Golden Opportunities Fund in Saskatoon.

"We felt like we had run this business for someone else and there was demand for our service. We had the relationships. It just made a natural and comfortable next step," Magneson says of the decision to create Connect Energy and to secure Golden Opportunities as an equity partner.

Magneson and Blanch hold 82 per cent of the company while Golden Opportunities Fund, the province's largest labour-sponsored venture capital fund, owns the remaining 18 per cent. The fund also provided a $10-million debenture to Connect, giving the company the cash it needed to lay in natural gas inventories to get started, making it the largest deal in Golden Opportunities' history.

Magneson said he and Blanch opted to strike an arrangement with Golden Opportunities because it was a local venture capital firm and they already knew its principals. Timing was also critical because of the tight time frame to sign contracts with customers, secure inventory and get financial backing.

"We didn't have a lot of time to shop the deal around." But the venture capitalist proved a willing and motivated partner.

"They did it in a compressed time frame, working weekends and so on," Magneson recounts in describing Golden Opportunities' willingness to meet its new partners' restrictive timetable.

Once the company was up and running last September the marketplace was accepting of their value ... proposition, a development that Magneson says was gratifying as many of the former CEG clients followed the former employees to the new company.

Connect Energy buys and sells natural gas and, unlike SaskEnergy, does not have a network of pipelines. In fact, it uses the infrastructure owned and operated by SaskEnergy and its subsidiary TransGas to deliver gas to its customers.

"The way we differentiate ourselves from SaskEnergy is that we offer customers long-term prices, up to five years," he offers. "It provides heating costs that can be budgeted for years. It's good for those with tight operating budgets like school districts."

"All energy costs have risen. By locking in five-year price arrangements people can lock in savings."

Magneson says they don't guarantee price savings but notes that prices have tended to move upwards over time so a fixed rate contract generally delivers savings.

From a customer's perspective there isn't much difference in dealing with Connect Energy or SaskEnergy. The Crown corporation's network continues to deliver the gas to the user, sends out invoices and provides service. Connect Energy simply provides the commodity that is delivered through SaskEnergy's system.

At this point, Connect Energy is dealing only with institutional and commercial clients but Magneson says the company is looking at extending its offering to residential users in the future, similar to service available in other parts of Canada.

"We've expressed our interest to SaskEnergy and they're working on it," he reports. "We'll move when we're both ready."

Connect Energy presently has six employees, all former CEG staffers, working in the Saskatoon headquarters, a somewhat smaller operation than CEG ran in its heyday when it had a dozen and half employees in offices in Saskatoon, Alberta and B.C. At this point, Connect is operating only in Saskatchewan but will consider expansion into British Columbia before contemplating a return to Alberta.