ArcLight launches third fund in three years

ArcLight Capital Partners could well be the fastest mover in the energy investment world.

The Boston-based firm is raising its fourth energy-focused buyout fund after having just closed its third fund last year, according to a limited partner. A first close on the new fund, targeted at $2.5 billion, is expected this month.

Calls to the firm were not returned by press time.

The firm is raising the fourth fund without having made much in the way of distributions from the third. ArcLight has made 13 investments from its $2.1 billion third fund, and yet has no realizations from the vehicle, which closed in April 2006, according to the firm’s website. The firm made 25 investments from fund II (a $1.6 billion fund closed in 2004), two of which have been realized.

The California Public Employees’ Retirement System, an investor in both previous funds, reported investment multiples of 1.1x for fund II and 0.9x for fund III, as of Sept. 30, 2006.

Other limited partners in ArcLight funds have included CDP Capital-Americas, John Hancock Life Insurance Co., Stanford University, University of Texas Investment Management Co. and WestLB.

ArcLight prefers to buy single-asset deals, buying power plants and coal mines, for example. Recent ArcLight deals include the $480 million agreement to acquire 1,855 megawatts of gas-fired power generation assets in Georgia from Progress Energy. In November, ArcLight completed its acquisition of MYR Group Inc., a provider of electric transmission and distribution, from FirstEnergy Corp. —Ari Nathanson