NGP closes $4bn fund, opens in London

The energy-focussed US firm has surpassed the target for its ninth buyout fund by $1 billion and launched a London office to support its investment activities.

Natural Gas Partners has more than doubled the size of its previous fund with the close of Fund IX on $4 billion (€2.6 billion).

Closed at its hard-cap after six months in the market, the fund was initially targeting $3 billion.

“It took us 20 years and six months to raise this fund,” quipped NGP’s chief executive, Kenneth Hersh, who noted that the firm’s 20-year track record of 30 percent compounded returns helped attract commitments.

It took us 20 years and six months to raise this fund.

Kenneth Hersh

“We had virtually all of our existing partners return and a good host of new investors who were unable to get into prior vehicles,” Hersh told PEO.

The vehicle's limited partners include the City of Philadelphia Board of Pensions & Investment, the Los Angeles Fire & Police Pension System and the New Mexico Public Employees Retirement System.

Fund IX will continue the firm’s investment strategy of targeting mainly North American energy businesses, but the larger fund size will allow it to consider investments in other geographies, Hersh said.

That’s one of several reasons he said NGP today opened the doors of a London office, headed by Thomas Verhagen, who Hersh described as a Dutch-born oil service industry veteran.

The principal reason to have a London presence is proximity to other capital markets, Hersh said.

“My feeling is that for the private equity business, they don’t always run through the New York capital markets anymore,” he said.

He also said the location should help them expand their network base, resulting in greater global industry intelligence and deal flow, as well as enhance LP relations with the dozen or so non-US investors in its funds.

Fund IX has already made 10 investments. In October, NGP paired with energy industry veteran Paul Prager to acquire several generating stations and transmission projects from the city of Vernon, California in a $342 million deal.

“Given our current investment pace and strong deal flow, we are glad to have raised a fund that is of sufficient size to allow us to continue to do this over the next several years,” managing director Billy Quinn said in a statement.

The Texas-based firm’s eighth buyout vehicle closed on $1.3 billion in January 2006, along with a $250 million co-investment fund and a $148 million technology fund, the firm’s first.

NGP also has a publicly traded business development company, NGP Capital Resources Company, that provides senior debt and mezzanine capital to the energy industry; as well as a $1.4 billion fund, NGP Midstream and Resources, that invests in energy infrastructure and mineral businesses.