Energy Investors closes on $750m

Energy Investors Funds has closed its latest fund, corralling $750 million (€635 million) in commitments for its United States Power Fund II, LP. The firm exceeded its stated target by $250 million, as enthusiasm for energy helped drive investor interest.

John Buehler, managing partner, Energy Investors Funds

The California Public Employees’ Retirement System (CalPERS) was among the larger investors in the fund, committing $50 million to the vehicle. CalPERS was joined by other limited partners such as Howard Hughes Medical Institute, John Hancock Life Insurance Co., Kauffman Foundation, MIT, and the University of North Carolina. Of the total commitments to the fund, returning investors represented roughly 85 percent.

As a specialist in the power industry, San Francisco-based Energy Investors Funds has increasingly seen its domain encroached upon. Higher energy costs and a surge in demand has lured the non-specialists into the power market, and generalist groups such as Kohlberg Kravis Roberts, Texas Pacific Group, Blackstone Group and others have either acquired electric companies or pursued deals in the sector.

Further, recent legislation has only made the power space more appealing to private equity groups. The Energy Policies Act, for instance, has loosened regulations on the buying and selling of utility assets, which only further opens the window for buyout groups.

Despite the private equity encroachment, Energy Investors Funds maintained that it is not feeling a pinch. The group, thanks to its bottom-up approach to building companies, does not typically run across other private equity firms competing for its deals.

“Our investment strategy hasn’t changed one iota,” EIF managing partner John Buehler told PEO. “We don’t tend to do these auction deals that we’re seeing the [generalists] participating in. We’ll start from the bottom and build from there. We’ll buy two or three assets at a time, but typically the [other] private equity firms will buy portfolios of around 15 different projects. Ours is an asset accumulation strategy.”

The new fund is the largest to date from Energy Investors Funds. The firm was founded in 1987, and at the time was the only group that dedicated itself exclusively to the power and electric utility market.

Initially, the firm only invested its own capital. The latest EIF fund, however, represents the firm’s sixth institutional vehicle.

With the new fund, EIF can now make equity commitments as large as $300 million, with co-investors. The firm has already made three investments out of the fund, including deals for Glen Park Hydroelectric Project, Neptune Regional Transmission System and an investment in an unnamed New York-based transmission project.

The firm did not use a placement agent in the US, but did tap Principle Advisory Services Pty Ltd for its Australian fundraising efforts. Bingham McCutchen served as legal counsel.