Oaktree, GFI nail $1bn for follow-up energy fund

Oaktree Capital Management and GFI Energy Ventures has closed a second joint fund, OCM/GFI Power Opportunities Fund II, LP, corralling a total of $1.02 billion for the vehicle. The close more than doubles the inaugural fund, which took in $454 million in 1999.

According to Lawrence Gilson, the chairman and founding principle of Los Angeles-based GFI Energy Ventures, the enthusiasm surrounding the fundraising was driven by a number of factors, most notably the group’s past performance and the niche the fund has carved in energy. “It’s always a combination of things,” Gilson told PEO. “I think people were reassured by the performance of our last fund, and this sector has attracted more than average interest recently.”

Gilson noted that OCM/GFI focuses primarily on the downstream portion of the energy space, with a central thesis being to “minimize the correlation of [its portfolio] companies’ performance and commodity prices.”

“I think some [limited partners] saw it as a lower risk opportunity to participate in the utility sector,” Gilson added.

The firm originally began marketing the fund at the end of last year, setting a $750 million target on the vehicle, with a $1 billion ceiling. The fund had a $3 million minimum investment, according to regulatory filings with the Securities and Exchange Commission, and no placement agent was used in the fundraising. Debevoise & Plimpton LLC provided legal counsel.

The fund held a prior close on $736 million by May of this year, according to SEC documents, and held its final close in June.

GFI Energy Ventures manages the due diligence, company oversight and exit aspects of the fund, while Oaktree, also based in Los Angeles, assists GFI in the fundraising and investment selection. The fund focuses on the power conversion, energy measurement, transmission and distribution and information service niches within the energy space, and the GFI Web site identifies that it targets companies with enterprise values ranging from $50 million to $500 million, and revenues of at least $50 million. The fund primarily invests in North American businesses, but reportedly will also look to Europe as well.

Among the fund’s LPS are the University of Texas Investment Management Co. (UTIMCO) and Pennsylvania’s State Employees’ Retirement System (PennSERS). Gilson would not comment on other investors participating in the OCM/GFI fund.

While GFI and Oaktree have only combined on two funds, the pairing has been investing together for the past 10 years, Gilson said. One of the first transactions from the team was the 1996 acquisition of British Columbia-based Power Measurement, a maker of power metering and energy management products. OCM/GFI sold Power Measurement earlier this year to France-based Schneider Electric, realizing a roughly fourfold return on capital.

Mot recently, in April, OCM/GFI acquired an 87 percent stake in independent transmission company Trans-Elect, and in March, the group made an equity investment in Cannon Technologies, a supplier of automation services for the electric utility space.