June 16, 2008
| last updated December 7, 2011 11:10 am
Into the fire | After plenty of ups and downs as an entrepreneur, Les Otten is betting big bucks his newest venture, Maine Energy Systems, will be a winner
Maine Energy Systems
Les Otten, Harry "Dutch" Dresser, William Strauss Founded:
May 2008 Employees:
Nine full-time Product:
Distributor of wood pellet boilers and wood pellets in Maine, New Hampshire, Vermont, New York and Massachusetts Startup costs:
Otten has committed up to $10 million of his own money, but will not say how much has been spent thus far Anticipated annual revenue:
Otten says annual revenue could reach $100 million in five to 10 years Contact:
Anatomy of an entrepreneur
1973 - Sherburne Corp. buys Sunday River ski resort in Newry and appoints Otten a former lift mechanic at Killington as director
1980 - Otten buys Sunday River for $132,000
1995 - Forms LBO Resort Enterprises and, later this year, American Skiing Company. Purchases Attitash Ski Resort in Barlett, N.H. The company in the next few years purchases half a dozen other resorts, from Killington to Heavenly Mountain Resort in Stateline, Nev.
Nov. 1997 - American Skiing raises $265 million in an initial public offering. Otten retains ownership of roughly half the company with stock valued at about $270 million.
Oct. 2000 - Otten tells reporters and industry analysts in a conference call that American Skiing is stretched too thin and pursued construction projects too quickly. ASC reports an annual loss of $52.5 million, after posting $32.3 million in losses the previous year. Shares hover around $1.88.
2001 - Otten resigns as CEO of American Skiing. The company's owners, Oak Hill Capital Partners of Texas, moves American Skiing headquarters from Newry to Utah.
March 2002 - Otten corrals investment banker John Henry and television executive Tom Werner to bid for the Boston Red Sox. They buy the team for $700 million.
2002 - Founds Sports Vision Technologies, which distributes the P3ProSwing golf swing analyzer and simulator
2003 - Opens Phoenix House restaurant in Bethel
2004 - Founds Sports Loyalty Systems, which allows fans to earn purchasing points for purchasing team merchandise
2005 - Founds Mall Networks, a loyalty shopping provider similar to Sports Loyalty Systems, and development firm Colony Developers
2006 - Founds construction company Colony Builders; Sports Loyalty Systems folds
2007 - In February, Otten resigns as director of the American Skiing board
June 2007 - Otten sells his share of the Boston Red Sox for an undisclosed amount
January 2008 - Otten agrees to chair Gov. John Baldacci's wood-to-energy task force
May 2008 - Otten launches Maine Energy Systems, a wood-pellet boiler distribution company
Sources: Les Otten, The Boston Globe, the Associated Press, the Park Record newspaper
Recently, Otten has spent as much time driving around Maine searching for silos to house wood pellets as he has crunching numbers above the bank drive-through. Earlier this day, Otten and three senior staff from his newest company, Maine Energy Systems, drove a hundred miles from Bethel to a wood pellet facility in Athens, Maine, only to find someone Otten or the facility's owner had the wrong date for their meeting.
Corralling pellets to burn in the boilers he's hoping to import this summer is Otten's obsession of late, and hitches like the morning mix-up make him cranky. At 59, near the age the father he calls his inspiration started over as a World War II refugee in New York City, Otten, too, stands on the edge of a new life. A blue-collar millionaire who's endless tenacity even critics admire, Otten is newly divorced (he ended his marriage of 35 years to former wife Christine in 2005); recently relieved of a heady co-ownership of one of the most popular sports teams in the country, the Boston Red Sox; and lately horror finding his Republican self aligned with a Democratic governor on the latest issue that keeps him up at night, global warming.
Nothing is better for a consummate entrepreneur like Otten than a widespread problem with a potentially lucrative solution, and Otten's solution to Maine's energy woes and the carbon emissions puzzle comes in a pellet the size of a multivitamin.
At a small, round table in his office, under a photo of his son B.J. pitching for the Middlebury College baseball team and a florescent light in the drop ceiling lined with fly carcasses, Otten pours wood pellets into a teacup and describes how he no longer "feels guilty" taking a shower because his hot water is heated by this amount of pellets, which are cheaper to buy and cleaner to burn than oil. Otten's angular face softens when he handles the pellets. He grins, suddenly infused with what he would call "the charge" that gets him excited, then obsessed, then invested, literally, in his next venture. This one is to convert households in Maine, New Hampshire, Vermont, New York and Massachusetts from oil to wood pellet heating using an imported European boiler that Maine Energy Systems, which Otten owns with minority partners Harry "Dutch" Dresser and Bill Strauss, has an exclusive deal to sell in the northeastern United States. Otten will not only sell the boilers, but also manage the wood pellet distribution, shipping tons of the pellets from plants in Maine, New Hampshire and Canada to silos around the state and then directly to customer's homes. If it works, Maine Energy Systems could be Otten's next multimillion dollar empire and perhaps his greatest entrepreneurial achievement. If it fails should the price of oil plummet or a savvier competitor emerge Otten may be looking at yet another expensive misstep in an professional life already distinguished by dizzying highs and gut-wrenching lows.
Pellet by pellet
Otten's wood pellet boiler idea, by many estimates, has merit: Crude oil is now hovering at around $125 per barrel and Maine is feeling the oil crunch acutely, since 80% of Maine's homes and apartments are heated by oil a higher rate of oil heating than in any other state in the country. The amount the average Maine homeowner spends on heating has more than doubled since 2001, and the pain to the pocketbook it's caused here is one of the reasons Otten intends to focus on converting the Maine market first. In five to 10 years, Otten says he hopes to convert 10% of oil-burning Maine households about 44,000 homes to wood pellet boilers. He calculates this conversion will create more than 1,500 jobs in Maine and save homeowners $78 million a year in heating bills if oil prices stay at current levels.
His boilers are state-of-the art, computer-enhanced models from the German appliance maker Bosch. Otten's company plans to pull up to the house when pellets are low, pump pellets from a truck through a tube and directly into a pellet bin in the customer's basement, all without hassle to the customer. According to Rocky Gaslin, owner of Rocky's Stove Shoppe in Augusta and one of only a handful of wood pellet boiler merchants in Maine, Otten would be the first in the state to deliver wood pellets in bulk.
At about $12,500 including installation, Otten's boilers are a pricey alternative to American-manufactured counterparts like Pennsylvania-based Harman Stove Company's wood pellet boiler, which costs between $7,000 and $8,000, including installation, and wood stoves, which at their most expensive cost just shy of $4,000 installed and are by far the most popular wood-fueled option at Gaslin's shop. But Otten says his Bosch boilers make up for the extra cost in efficiency and ease of use.
Chris Recchia, executive director of the Biomass Energy Resource Center, a sustainable energy consulting company in Montpelier, Vt., thinks Otten's strategy to import European techniques and technology may be just what the market needs. "I think he's got the right vision, which is homeowners are going to need an alternative and they're going to need one quickly," says Recchia, who is unaffiliated with Otten. "In Europe they have been [heating with wood pellet boilers] for about 10 years, so the fact that Les is trying to reach out and say it's important that we bring this technology here, that's a very important thing."
To help the planet and, Otten says, "of course" to help Maine Energy Systems he accepted an invitation earlier this year from Gov. John Baldacci to chair Maine's Wood-to-Energy Task Force, a panel of private and public officials charged with analyzing forest-based energy alternatives.
But Otten has been accused of using that position to further his business rather than making sure the panel gives all forest-based energy options their due. Nick Bennett, staff scientist at the Natural Resources Council of Maine, has attended two task force meetings since late April after a colleague told him the discussion had strayed from its original purpose of examining all wood-based alternative energies to a debate between pulp and paper industry officials and Otten over whether there is enough wood in the state to support a mass conversion to wood pellet boilers. Bennett was dismayed at what he found. "Basically, people are screaming at each other," he says. "I just don't think there's any serious discussion going on at this point."
However, Otten bristles at any suggestion he or anyone else is using the task force improperly. He points out that the task force cannot create policy, says he has never talked about his business with the panel, and contends that "everyone in the room has a pecuniary interest in what the task force decides." The panel has considered all viable wood-to-energy options fairly, Otten says, and if wood pellets emerge as the best option, why's that so wrong?
"Somebody ended up being in front of it and it might as well be the guy who's passionate about it and spending his own money," he says.
Ups and downs
Otten thrives on the kind of friction that would make a weaker man flinch, and it's this love of a good challenge that has garnered him millions and likewise caused millions to bleed from his bank account. Born in New York City in 1949 to Albert and Mildred Ottenheimer, Leslie B. Otten grew up idolizing his father, a successful Jewish businessman who fled Nazi Germany and rebuilt a life in his mid-50s in the United States. He was an only child, growing up in New Jersey and later upstate New York, who preferred sports and skiing to school. Otten graduated from Ithaca College with a degree in business in 1971 and took a job as a lift mechanic at Killington ski resort in Vermont. Two years later, Killington's parent company, Sherburne Corp., acquired Sunday River in Newry and Otten was selected to run the new resort.
In 1980, he scraped together about $132,000 to buy Sunday River and immediately began transforming the failing resort into one of the best in the country while rapidly acquiring other resorts like Maine's Sugarloaf and Heavenly Mountain on the border between Nevada and California. By 1997, when Otten raised $265 million in an initial public offering of American Skiing Company, his majority share was valued at $270 million.
And then, in an epic stroke of bad luck, a string of warm winters dried up revenue at a number of American Skiing resorts. Burdened by debt from its rapid expansion, American Skiing was never able to recover. By 2001 Otten had resigned as company CEO, his stock all but worthless, his company bought out from under him by an investment firm.
In February 2007, Otten left American Skiing's board amid rumors he was preparing an offer to buy back the company's Maine holdings as American Skiing sold its resorts. Otten reportedly did bid on the properties, but the owners of American Skiing opted to sell Sunday River and Sugarloaf to Boyne USA Resorts for $77 million in August of that year.
Otten's very public failure still sparks heated ski industry debates about whether he's a visionary or a hack. "I'm not sure there's a more controversial person in the ski industry than Les," says Rick Khal, editor of Ski Area Management magazine in Woodbury, Conn. Khal covered Otten extensively during Otten's years as head of American Skiing. "I hate to say that he failed in a spectacular way and that's why people remember him, but there is an element of that," he says. "He really tried to do something big and different and for a while it looked like he could pull it off and then it came crashing down."
Khal has read about Otten's wood pellet idea in national media and says it's just another example of Otten's greatest strength and his greatest weakness his ambition.
"What you're seeing once again is Les's ability to see the big picture and see the full potential of what he could have in his hands," says Khal. "But is he crazy like a fox or just crazy? It's not always easy to tell at this point."
The social experiment
In the years since the American Skiing meltdown, Otten has launched six businesses, all but one of which, the fan merchandise company Sports Loyalty Systems, he says are still operating and profitable. (For more on Otten's entrepreneurial history, see "Anatomy of an entrepreneur," below.) He famously was a minority partner of the Boston Red Sox from 2002 until 2007, when he sold his share. Though Otten has never revealed how much he made on the Sox sale, other than to say he would never need to work another day in his life if he chose to, The Boston Globe reported he was rumored to own a one percent stake in a team worth $1.5 billion at the time of his departure. (Otten says his share was "substantially more" than one percent.)
Whatever his net worth today, Otten says he's not afraid to invest some of his wealth in his startups, like the $10 million Otten says he's willing to contribute to Maine Energy Systems, even though he doesn't expect to turn a profit on the operation for two or three years.
Why commit that much money to an effort he readily admits might not work? "If you have the opportunity to do the work and you don't, you are robbing society of what's rightfully theirs," Otten says. "If you think you can do something, you should do it. Can you profit along the way? Well, yeah, capitalism isn't a dirty word."
Since Maine Energy System's May 9 launch, Otten says he's received 150 reservations for boilers, which he expects to begin importing in June. The rate of reservations has far exceeded the company's original goal of 200 deposits by the beginning of next winter. Once the company is rolling in five to 10 years, Otten hopes to sell 10,000 water boilers a year, and he calculates revenue from those sales in addition to pellet distribution could net Maine Energy Systems $100 million annually, though he says it's impossible to predict to what extent consumers will latch onto his idea.
After years in the bruising fast lane, Otten doesn't appear to be tiring. On his office windowsill he displays a crystal "Turnaround Entrepreneur of the Year" award given to him by Inc. magazine during Sunday River's heyday in the late 1980s, and it's clear he hopes Maine Energy Systems will not only be lucrative, but also be a notable and positive part of his entrepreneurial legacy. It is, after all, what he calls his grand "social experiment" the kind that could rewrite history, that could change the state of Maine, that could once and for all convince everyone what Otten's capable of.
"Who do I look at for my model? No one," Otten says. "At the end of the day, that's the real definition of the entrepreneur."
The office of Les Otten, one of Maine's most admired and reviled entrepreneurs, is hardly the place you'd expect the next grand idea to be percolated. Located above a Norway Savings Bank drive-through in Bethel, Otten's office is one of several white-walled, bland boxes opening into a common space with dingy tan carpeting, a few worn cubicle dividers and a 20-something, jean-clad employee of Otten's whose full name on a recent afternoon the entrepreneur couldn't quite recall.