Carlyle raises $2.8bn for energy mezzanine fund

The US firm has raised twice as much for the two-year old vehicle as it did for its predecessor, launched in 2010.

Carlyle Group has raised $2.8 billion for its second energy investment mezzanine fund, double the commitments of the firm's previous vehicle.

Launched in 2014, the Carlyle Energy Mezzanine Opportunities Fund II (CEMOF II) has received total commitments that beat its original target of $2.5 billion, with a roster of LPs that includes Michigan and Texas public pension funds, according to Infrastructure Investor data. The global alternative asset manager said the fund targets investments of between $50 million and $500 million in power generation, renewable energy and oil and gas companies or projects in the US and Canada.

According to documents from the Pennsylvania Public School Employees' Retirement System, which committed $250 million to the fund, CEMOF II will typically put capital in first lien debt. Those investments will be secured by hard energy assets, like power plants and pipelines.

The fund is aiming for a gross IRR of 15 percent to 18 percent, and investments will have two- to six-year maturities and an average hold period of three years.

“The second fund enables us to undertake larger transactions and fill a market need by providing investment capital to energy companies challenged to obtain capital from traditional sources,” said David Albert, managing director and co-head of the energy mezzanine team.

Rahul Culas, who holds the same titles as Albert, said that his team of more than 20 investment professionals in New York and Houston have made 15 investments across multiple energy sub-sectors to date.

The group's first energy mezzanine vehicle, launched in 2010, had a total of $1.38 billion in capital commitments at final close and began investing in mid-2011. Carlyle Energy Mezzanine Opportunities Fund has produced a 20.4 percent net IRR, as of September 2014. That fund started with a $750 million target. Overall, Carlyle has a total of $34 billion in credit assets under management.