Fundraising

Lime Rock closes Fund V on $1.4bn

The energy-focussed private equity firm has nearly doubled the size of its previous fund in a three month period that involved ‘very little proactive marketing’.

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US private equity firm Lime Rock Partners has raised $1.4 billion (€913 million) in commitments for its fifth energy fund, largely from returning investors.

“We really did very little proactive marketing with investors,” managing director Jonathan Farber told PEO. “We have a great group of limited partners.”

Our sector continues to be characterised by a surpluss of capital.

Jonathan Farber

Lime Rock sent out its private placement memorandum in February. Roughly 91 percent of the fund’s 78 limited partners, most of which are US endowments and public pensions, are returning investors.

LPs from Fund IV, which closed on $750 million in October 2006, included The Pennsylvania State Employees’ Retirement System, the University of Michigan and the Colorado Public Employees’ Retirement System.

“We put our last fund to work a little bit faster than expected,” Farber said. He expects a two- to four-year window will be needed to deploy this fund, which will similarly target growth-oriented oil and gas investments as well as energy services deals both in the US and abroad.

“Our sector continues to be characterised by a surplus of capital and while that does make it easier to raise money, it does make it harder to find and structure good deals,” Farber said.

Energy-focussed private equity firms like Lime Rock have in recent years raised increasingly large funds, including funds offered by Riverstone Holdings, First Reserve Corporation, EnCap Investments, NGP Energy Capital Management, ArcLight Capital Partners and LS Power Group.

Lime Rock Partners V will likely make one or two alternative energy investments, and in fact is evaluating a wind energy-related deal at present, but the firm does not yet feel the sector’s activity merits a dedicated fund, Farber said.

He also noted that the firm’s aversion toward heavily levering its portfolio companies is advantageous given current credit market turbulence.

“We want the companies to be focussed on growth and in a distressed environment to be pretty aggressively making acquisitions” as opposed to worrying about refinancing covenants, he said.

Ten-year old Lime Rock is based in Westport, Connecticut and also has offices in Houston, Texas and Aberdeen, Scotland. To date it has invested $1 billion in 47 portfolio companies.