Energy Investors Funds (EIF) is set to hit its target of $1.75 billion for its fourth fund focused on power investments in the US, according to a person with knowledge of the situation.
The firm is expected to close EIF United State Power Fund IV in October, the person said.
Fund IV held a first close in June of last year, and had collected about $1 billion by last autumn. The firm is led by managing partners John Buehler, Terence Darby and Herbert Magid. Atlantic-Pacific Capital is working as placement agent on the fundraising.
Limited partners have been attracted to the fund’s “significant current yield component”, a source told Private Equity International in a prior interview. The current yield helps investors build a hedge against inflation, the source said.
The US power fund generally invests in power plants that have power purchase agreements with utilities at a fixed price to generate power. Once the contract is locked in, the power plant is paid whether it’s generating power or not, the source said.
“The utility continues to pay you the fixed cost just for you to be available,” the source said. “It’s a nice current income component that a lot of LPs have been attracted to in this environment.”
The fund follows a niche strategy, focusing on a sub-sector of the energy investment universe, which may well prove advantageous to energy-focused firms going forward. Generalist, global energy funds have raised billions of dollars in the past two years, and with several billion-dollar level funds in the market this year, LPs may start to get “fatigue” from committing to large funds, moving more toward smaller, niche energy vehicles, according to a market source.
Funds in the market this year include Denham Capital, which is targeting $2.5 billion; ArcLight Energy Partners, targeting $2 billion and reportedly Riverstone Holdings is coming to market with a $6 billion fund, the first vehicle it would be raising without being partnered with The Carlyle Group.
Also, several funds have closed in the past few years, including Energy Capital Partners, which raised $4.3 billion last year.