Oil vets raise debut energy tech fund

With a former Perseus power pro at the helm, Natural Gas Partners has expanded into technology investing with a $94m first close on a debut tech investment fund.

Most just assume that alternative energy and oil and gas don’t mix; oil barons don’t typically couple up with the tree-hugger types. Natural Gas Partners wants to put to rest the assumption that the oil and gas and alternative energy can’t unite.

So when Irving, Texas-based Natural Gas, a stalwart in the oil and gas industry, announced the launch of its energy technology fund earlier this year, most onlookers did a double take. The new fund distinguishes itself by being among the few to apply a later stage mindset to energy technologies, and will invest in buyouts, growth financings and PIPEs.

The firm’s new fund, NGP Energy Technology Partners, LP, recently held a first close on $94.1 million, and is seeking as much as $150 million.

Most oil and gas are very receptive to ideas that resonate with what they see in the world.

Philip Deutch, NGP Energy Technology Partners

Venture firms have been pursuing energy technologies and alternative energy for a while, but relatively few buyout firms have yet to throw their hat in the ring. In the US, most of the recent buyout activity has been confined to the midstream oil assets and the utilities space. However, as companies in the alternative energy field continue to build their cases as actual businesses, as opposed to merely heartwarming ideas, buyout activity should soon follow.

Natural Gas Partners’ entrance into the space should signal that interest there is starting to gain steam. In March, Goldman Sachs announced the acquisition of Zilkha Renewable Energy, a Houston-based provider of wind-energy, and General Electric’s transformation into a green business, while not private equity related, serves as a bellwether that further change is likely ahead. What’s more, the limited partner community has already started putting money toward alternative energy programs, with such names as CalPERS and CalSTRS among the forefront of that initiative.

To run its new fund, Natural Gas hired Philip Deutch to serve as the managing partner. Deutch is coming from Perseus LLC, where he was a managing director. At Perseus, Deutch led investments in energy storage outfit Beacon Power and Proton Energy, a maker of proton exchange membrane electrochemical systems, among other companies.

Speaking to PEO, Deutch dismissed the idea that the alternative energy and oil and gas crowds can’t mingle, and in fact noted that there are synergies that can arise by having such a dual focus. “That’s something that was overblown in the past,” he said. “Most oil and gas investors are very receptive to ideas that resonate with what they see in the world. For instance, if they’re seeing [certain] costs rise, and there’s a technology that can reduce those costs, they’ll obviously be receptive to it.”

The new fund will write equity checks of between $5 million and $15 million per investment, and is looking to invest in new technologies in the oil and gas, electricity transmission, power quality, distributed generation and alternative energy areas, among others.

Thompson & Knight LLP is providing legal counsel for the fundraising, and no placement agent has been hired for the process.