Energy Investors closes $1.4bn fund(2)

The San Francisco-based private equity firm has closed its seventh, energy-focused fund with $1.35 billion in commitments – nearly double the size of its previous fund.

The first private equity firm to focus solely on the US energy industry, Energy Investors Funds, has closed its seventh fund on $1.35 billion (€993 million) – surpassing its $1 billion target.

Commitments for United States Power Fund III came from 43 investors in the US, Canada, Europe and Australia. Its mix of institutional, limited partners include ABP Investments, Contra Costa County Employees Retirement Association, Howard Hughes Medical Institute, John Hancock Life Insurance Company, Mayo Clinic, New York Life Investment Management and the University of Toronto Endowment Fund and Pension Plan.

Energy Investors used a Sydney-based placement agent, Principle Advisory Services, only with regard to its Australia LPs, said John Buehler, Energy Investors Funds managing partner.

The 20-year old private equity firm raised the fund’s capital with relative ease – it took the fund to market in January – in part because “there are more people proving the marketplace”, Buehler said.

“There’s more market acceptance of [the energy sector] as a private equity vehicle” as a greater number of firms launch power-focused funds, he said. As a result, investors’ allocations toward the sector have increased.

“The size and capital-intensity of the market place has ratcheted up a bit,” Buehler said. Though the firm’s latest fund is significantly larger than its last, which closed in 2005 on $750 million, Buehler says it will still focus on its mid-market niche.

“The size of our fund, while large, is half the size of four or five of the most recent power-dedicated private equity funds that have closed,” he said.

US Power Fund III will continue the firm’s strategy of acquiring US power and energy generation and transmission assets with long-term off-take contracts. 

“Our investment philosophy is as relevant today as any time in our history due to the rising energy costs and increased demand for electricity, which calls for the construction of efficient, low-emission power assets,” Herb Magid, Energy Investors Funds managing partner, said in a statement. “We will continue to invest across the spectrum of power assets, including assets that are in the development stage as well as facilities that are under construction or already in operation to create a portfolio of geographically and technologically diversified assets.”
 
Roughly half of the fund’s capital will be allocated toward projects in development and construction stage, with the balance going to operating projects, Buehler said.
 
The fund has already made an investment in the Green Line development project.
 
Bingham McCutchen served as legal advisor.
 
Energy Investors Funds currently manages six private equity funds from its offices in Boston, New York, and San Francisco. These funds have made more than 90 diversified investments with a combined underlying asset value exceeding $5 billion.