Third ArcLight fund gets off the ground

ArcLight Capital Partners has already amassed $629m in limited partner commitments. The Boston energy specialist is seeking as much as $2.25bn.

Boston-based ArcLight Capital Partners has closed on $629 million (€528 million) of a targeted $2.25 billion for its third fund, according to SEC documents. The firm is one of many energy specialists in the past year that have either raised capital or are in the process of doing so.

The new fund from ArcLight is a follow-up to the firm’s $1.6 billion second fund, closed in the summer of 2004. Fund II received a lot of buzz when it was in the market two years ago, and ArcLight easily exceeded its $1.25 billion target.

This latest fund, thanks to the success of its predecessor, will be just as popular. According to the California Public Employees’ Retirement System (CalPERS), ArcLight’s second fund is already posting an IRR of 15.1 percent and has returned 1.1x its invested capital.

The firm’s website describes that ArcLight invests opportunistically across the entire energy industry, with a focus on hard assets that produce significant cash flow. The firm, last year, inked deals to fund new wind generation projects with CPV Wind Ventures and invest alongside Peabody Energy to develop a coal gasification project in Illinois.

Past investors in ArcLight funds reportedly include John Hancock Mutual Life Insurance Co., the University of Texas Investment Management Company, CDP Capital, Adams Street Partners and others.

The energy niche has been one of the most popular areas for institutional capital in the past year. Carlyle/Riverstone, Tenaska, NGP, Lime Rock, Energy Investors Funds and others have all either closed new funds or engaged in raising new vehicles since the start of 2005.

ArcLight was founded in 2001 by Daniel Revers and Robb Turner.