US Renewables Group closes second fund on $475m

US Renewables Group has held a final close on its second private equity fund at $475 million (€348 million). The fund will continue USRG’s strategy of investing in renewable power generation, clean fuels and related logistics.
 
The fund is nearly five times larger than USRG’s previous fund, which closed on $100 million in 2005, underlining investor appetite for the alternative fuel sector.
 
When fundraising for Fund II began last September, the firm was targeting $250 million. All of Fund I’s LPs returned for the new fund, and USRG was also able to attract some new high-profile backers, including the California State Teachers’ Retirement System and the California Public Employees’ Retirement System.
 
Managing partner Jim McDermott attributed the increase in size between the first and second funds to growth in the renewable energy sector, not only in the number of deals available but also the size of the deals.
 
“There are more things to do, and generally the cheques are larger too,” McDermott said. “There’s just a lot more capital that can go into the sector.”
 
Several converging factors have fueled growth, McDermott said, including the structural increase in fuel prices and government mandates with new fuel standards and credit programs. Consequently, many of the LPs who were in “wait-and-see mode” for USRG’s debut fund are now ready to allocate more resources to the maturing sector, he said.
 
Although USRG’s core strategy has not changed, Fund II will have several new components. A portion of the fund will be earmarked for “enabling technologies”, which McDermott described as reliable and mature but still waiting to be commercialised. The fund will also have an international allocation, whereas its predecessor only invested in US companies. Finally, the new fund will look for opportunities in to invest in infrastructure. Growth in the sector is currently outpacing physical capacity, creating bottlenecks in production and opportunities for development.
 
Credit Suisse was financial advisor and placement agent for the new fund.
 
USGR has already made three investments from the new fund, which held its first close last December. The firm invested in two plants, Tracy Biomass in California and Niagara Biomass in New York, as well as US Biodiesel Group, a platform company through which the firm will acquire biodiesel assets.
 
USGR is one of many firms currently investing funds in environmentally conscious technology. California-based Technology Partners yesterday closed a $300 million fund, half of which is earmarked for cleantech. Earlier this month Sir Richard Branson’s Virgin Group launched a $400 million fundraising for renewable energy and energy efficiency opportunities.