NGP prepares to hit the market for $4bn Fund X

The Texas-based firm wanted to raise a separate vehicle that would have targeted water resources, food and agriculture – areas affected by climate change – but lack of LP support caused NGP to roll the strategy into the main fund.

Natural Gas Partners has been talking to investors about launching its 10th fund, which will target about $4 billion in commitments and reserve a certain percentage of capital for global warming-related investments, several sources told PEI

The discussion around Fund X comes after the firm apparently scrapped plans to raise up to $4 billion for a vehicle called Adaptation Partners, which NGP launched in early 2010. That vehicle would have focused on investments on water resources and services and food and agriculture, two areas affected by major global changes, including population growth, climate change and economic development, the firm said on its web site.

NGP, formed in 1988, didn’t get a lot of support from potential investors for the vehicle, said one existing NGP limited partner. NGP decided to roll the strategy into Fund X, where it will account for 25 percent of the fund’s focus, according to the LP and another market source.

Fund IX is more than 50 percent invested, the LP said, and while the firm’s earlier funds had a lot of success, the newer fund has yet to prove itself. Fund IX collected $4 billion in 2008, beating its target of $3 billion. The ninth fund was generating about a negative 13 percent internal rate of return as of May 2010, according to performance data from the University of Texas Investment Management Company.

“They’re well-respected in the industry,” the LP said, while noting Fund X will hit the market at the “tail end” of a wave of energy fundraisings that found success in 2010, including EnCap Investments, which closed on its largest ever amount of $3.5 billion earlier this month, and Energy Investors Fund, which has collected at least $1 billion.

NGP declined to comment.

NGP manages about $7.3 billion in funds that invest in oil and gas production, mid-stream, oil field services and power companies. The firm is an affiliate of NGP Energy Capital Management, a $9.5 billion firm based in Irving, Texas that invests across the natural resources sector.