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Blackstone closes debut energy fund

David Foley-led Blackstone Energy Partners' first fund was a key part of the New Jersey Division of Investment’s innovative separate account partnership closed last year.

Keeping to its uber-successful track record of raising funds in a tough environment, The Blackstone Group has closed its debut energy fund on more than $2.5 billion, the firm announced in a statement Wednesday.

The fund held a first closing in August 2011 on about $750 million and had come to market targeting $3 billion, according to public documents from the New Jersey Division of Investment. Blackstone has already committed more than $965 million from the fund in six deals and “is actively evaluating a sizeable and diverse backlog of proprietary investment opportunities”, the firm said.

Blackstone Energy Partners has a broad mandate for investments in various strategies like power, alternative energies and natural resources. Capital from the fund was used last year for an investment in Germany’s first wind farm financed by the private sector.

David Foley

Blackstone’s energy-related professionals have a long track record of investments, but the firm chose to raise a separate fund to be able to take full advantage of the large amounts of energy-related opportunities, a market source told Private Equity International in a prior interview.

Blackstone Energy Partners is led by David Foley and Prakash Melwani, both senior managing directors in private equity. Melwani is chief investment officer at Blackstone. Other key executives on the fund include managing directors Martin Brand and Sean Klimczak and principal Angelo Acconcia.

The firm is charging New Jersey a 1 percent management fee on committed capital and a 1.5 percent fee on invested capital, according to New Jersey documents. It’s not clear if that management fee is universal for every LP.

The fund also has a six-year investment period, longer than the typical five-year period, and a GP commitment of 2.5 percent, the documents said.

The fund was a feature of an innovative partnership sealed last year between Blackstone and New Jersey’s state pension system. New Jersey committed to three funds – the energy fund, Blackstone’s sixth flagship buyout vehicle and a fund managed by the firm’s debt affiliate GSO Capital Partners. The partnership also included a commitment from New Jersey of about $1.5 billion for separate accounts with flexible investment mandates.

Blackstone closed the largest fund raised in recent history earlier this year with more than $16 billion, a marketing effort that took more than two years.  The firm has also reportedly raised more than $13 billion for its seventh real estate fund, which is about to hold a final close.