Asian and Middle Eastern LPs power Energy Capital’s latest fundraise

Investors from Asia and the Middle East want more access to the North American energy sector at a time when some local investors are pulling back, according to Doug Kimmelman, head of Energy Capital Partners.

Kimmelman, who founded Energy Capital in 2005, said around 60 percent of institutional investors that committed to his firm’s recent vehicle, Energy Capital Partners Fund IV, were Asian and Middle Eastern sovereign wealth and pension funds. Around a third of investors were from the US, a sharp decline from 80 percent participation in previous fundraises, he said.

“A lot of countries around the world are new to alternatives, so they’ve got a lot of catching up to do,” Kimmelman told Infrastructure Investor.

At the same time, Kimmelman said more US LPs are saying “energy has been bad for us. It’s been one of our weaker performers. We don’t need more of it.” He also added that investment committees are increasing pressure to “shy away” from fossil fuels.

After setting a $6 billion target for ECP IV, and later lowering it to $5 billion, Energy Capital closed the fundraise in January on $3.3 billion. However, the firm collected an additional $3.5 billion in commitments for co-investments and separately managed accounts over two-and-a-half years of fundraising.

Kimmelman said Energy Capital launched the fund thinking most commitments would go to the blind pool. But because cheque sizes from Asian and Middle Eastern investors were so large, the firm gave more options. “A lot of our investors wanted customised solutions,” he explained.

Energy Capital has invested $1.4 billion of equity from its latest capital raise, including in its August 2017 acquisition of Calpine Corporation, a US-listed gas-fired power generator based in Houston. Energy Capital led a group of investors that included Canada Pension Plan Investment Board, in the deal, which was valued at $17 billion.

Energy Capital manages around $20 billion in assets across four target sectors, with 15 percent invested in midstream; 25 percent in environmental infrastructure, such as battery recycling or coal plant cleanup; 25 percent in renewables; and 35 percent in gas-fired power generation. The firm targets mid-teen gross returns.