Energy-focused ArcLight Capital Partners is going through dry powder like it’s going out of style.
The Boston-based private equity firm – founded less than five years ago to focus on the energy sector – is raising capital for its third investment vehicle, according to a regulatory filing with the Securities and Exchange Commission.
The firm is looking to raise upwards of $2.25 billion for ArcLight Energy Partners Fund III LP, and the firm has already has secured about $630 million from 34 accredited investors, according to the regulatory filing.
If ArcLight closes Fund III on target, it will represent a substantial increase over its previous two funds. ArcLight’s second fund of $1.6 billion closed in July 2004. Its inaugural fund, which announced its final close in October 2002, raised $950 million.
When it comes to targeting acquisitions, ArcLight has a broad mandate, scooping up assets throughout the energy spectrum, including production (such as the actual extraction of oil and natural gas), midstream (the processing and transportation of fossil fuels and hydro-carbons), and power generation (including power plants run on coal, hydro, wind and other renewable sources of energy).
Most of fund I’s deals included equity investments of between $30 million and $60 million, while Fund II targeted transactions that could accommodate between $50 million and $100 million of equity.
Of the 19 investments made with equity from Fund I, 10 have already been realized, according to ArcLight’s website. Fund II, which also has a total of 19 disclosed investments, has two exits under its belt.
With Fund III’s significantly higher target, it is safe to assume that ArcLight will increase its equity investments again. Calls placed to the firm were not returned. But in a previous interview, ArcLight Managing Director Robb Turner said the firm has differentiated itself by mostly avoiding the big corporate buyouts that are the bread-and-butter of large buyout shops, such as Texas Pacific Group. “We will do corporate buyouts, but we’d prefer to do single-asset deals like power plants or coal mines,” Turner said. “Firms like TPG don’t generally do that because they are set up for much larger transactions.”
The regulatory filing did not disclose LPs in ArcLight’s third fund, but investors in previous ArcLight funds included the California Public Employees’ Retirement System, CDP Capital-Americas, John Hancock Life Insurance Co., WestLB, Stanford University and the University of Texas Investment Management Co.