Clean energy, environmental services focus of new firm

NewWorld Capital Group LLC, New York, set sail this month to make growth-capital and infrastructure investments in clean energy, environmental services, energy efficiency, waste management, and several related markets.

The five founding partners, most with private equity backgrounds, are Carter Bales, 71, the full-time chairman, who co-founded media buyout shop The Wicks Group of Companies in 1989 and helped lead the firm as a managing partner until scaling back his role in late 2006; Bradley Abelow, 51, formerly chief of staff to New Jersey governor Jon Corzine; Bill Hallisey, 48, formerly a managing director at distressed-debt investor GSC Group; Ali Iz, 56, formerly a venture partner and investor in advanced energy projects at CMEA Capital; and Everett Smith, 53, formerly a managing director at private equity firm New Energy Capital.

Lou Schick, 42, is a founding principal of firm. He previously made private equity investments in clean energy companies as a managing director at Ritchie Capital. Schick is one of four founders to have a background at General Electric, where he launched and managed a disruptive energy technology unit. Hallisey earlier in his career sourced and executed deals at GE Capital; Smith served as managing director and executive vice president of the GE Structured Finance Group, a unit responsible for energy and infrastructure investments. Iz was the business development leader for GE’s energy division.

The firm plans to invest about 60% of its capital taking minority and occasional majority stakes in fast-growing, well-managed North American companies generating $8 million to $15 million in EBITDA. Look for the firm to commit $20 million to $60 million of equity in each of 10 to 12 platforms, which could take the form of regional roll-ups in such markets as energy services. The firm plans to be hands-on in helping its companies grow.

At the time of exit, three or more years down the line, NewWorld Capital expects its charges to be generating $30 million to $40 million in EBITDA. The idea is to create companies big enough to catch the eye of a public company, say, or a buyout-backed company that needs to bulk up to become an IPO candidate.

The competitive dynamics in clean energy, environmental services and related markets lend themselves nicely to growth capital, according to Carter. The markets, large and growing rapidly, have yet to be overrun with competitors. That means companies can “grow without bumping heads,” Carter said, and grab market share without necessarily having to lower prices. Tailwinds should pick up in coming years as federal regulators set goals for generating power and energy from clean sources.

Meantime, competition from other private equity firms remains depressed. Venture firms just don’t have deep enough pockets to sustain companies in money-hungry markets like clean energy, said Carter. Mega-firms, by contrast, are too big to make going after these deals worthwhile for them. Carter estimates that firms such as Generation Investment Management LLP, Hudson Clean Energy Partners, MissionPoint Capital Partners and US Renewables Group LLC have accumulated only about $3 billion for the kinds of deals that would also appeal to NewWorld Capital. That should help the firm invest at favorable prices.

Along with growth-capital, NewWorld Capital expects to invest about 30% of its capital in six to 10 infrastructure projects, including ones that produce wind and solar power. The firm sees such deals, though leverageable, as providing a conservative anchor to its portfolio, given that they often involve multi-year contracts. The firm plans to devote another 10% of its capital to special situations.

NewWorld Capital had been in the works for about 14 months before getting off the ground on Oct. 1. The firm has enough startup capital to finance its early deals, which would then set the stage for the launch of a limited partnership with a target of $500 million perhaps a year down the road, said Carter.

Backers of NewWorld Capital include European private equity shop Ambienta Sgr, and partners at private equity shop General Atlantic LLC. These early investors, according to Carter, will be able to commit to the debut fund through a special limited partnership featuring more favorable economic terms, including a share of the carried interest. NewWorld Capital will also look to Ambienta, General Atlantic and Good Energies, among others, as co-investors in deals where it would like to invest more than $50 million to $60 million in equity. —David Toll