The prospects for power-related leveraged buyouts received a big boost late last month as ArcLight Capital Partners LLC closed out its inaugural fund with $950 million. The new vehicle is focused on buyouts throughout the entire power market value chain, and already has invested or committed over $400 million in 14 different deals.
Boston-based ArcLight Capital launched fund-raising a year ago with a core commitment from John Hancock Life Insurance Co., which had previously employed ArcLight Capital managing partner Daniel Revers. Other limited partners included WestLB AG, Stanford University and CDP Capital-Americas. Lehman Brothers acted as placement agent.
“The reason the fund was launched was to capitalize on a power sector that historically has not seen much private investment,” Revers said.
ArcLight Capital is willing to take either majority or minority stakes in deals, but is particularly averse to auctions. Of the 14 companies already in the new fund’s portfolio, only three came via auction. “A lot of us here have been in this business for a long time, and know where to look for good deals,” Revers said.
Listed in the ArcLight Capital portfolio are such companies as Epsilon Power Holdings, Fort Point Power, DG Power, Javelin Energy and Trout Coal Holdings. The firm is also a partner in WHP Acquisition LLP, a joint venture with Aquila Inc. developed to acquire Western Hub Properties and its underlying Lodi Gas Storage Facility from JPMorgan Partners and Haddington Partners for $220 million. That deal was originally announced in August of 2001, but ArcLight is still working on the deal. “We have some people out there today,” Revers said.
ArcLight is fully staffed with 16 employees in its Boston headquarters and another five people in its New York office. In addition to the ArcLight Energy Partners Fund I, the firm also operates ArcLight Financial LLC, which conducts financial advisory business with respect to transactions in the power industry.