Denham to seek $2.5bn for sixth fund

Having collected $2bn for its fifth fund in 2008, Denham Capital is likely to launch Fund VI in the second quarter.

Denham Capital, the Boston-based energy firm that spun out of failed hedge fund Sowood Capital in 2007, is planning to come to market with its sixth energy- and commodities-focused fund, which will target $2.5 billion.

The fund will likely be launched sometime in the second quarter, according to a person with knowledge of the situation.

Denham raised $2 billion for its fifth fund, which closed in 2008. The firm targets investments in oil and gas, mining, timber and power industries, as well as carbon assets and energy-related infrastructure.

Fund V was producing a 1.26 return multiple and a 16.3 percent internal rate of return as of 30 September. Fund IV, a 2005 vintage that closed on $1.2 billion, was generating a 1.23x multiple and a 9.1 percent IRR.

Denham was formed in 2004 as Sowood’s in-house private equity energy unit and has found support from the likes of Harvard Management Company and Cascade Investment, Bill Gates’ private investment fund.

The firm will look to expand its limited partner base for Fund VI by targeting public and corporate pensions and LPs outside of the US, a source told PEI. Denham did not return a call for comment.

Denham has made numerous investments in the renewable energy sector in the past few years, including entering an $80 million transaction to acquire a majority stake in Australian biofuel company Plantation Energy in 2008. The firm also invested $145 million in Vulcan Power, which owns geothermal properties in California, Nevada, Oregon and Arizona.

Park Hill Group is working as placement agent for the fund.