Target: 14 hydroelectric power plants
Buyer: Energy Investors Funds
Funds: United States Power Fund II (USPF II) and USPF
II Institutional Fund
Seller: Northbrook Energy
Legal counsel: Buyer: Thelen Reid & Priest; Seller:
Ungaretti & Harris
Dedicated energy investor Energy Investors Funds has been busy buying a variety of energy assets with its relatively new fund. Its latest acquisition involves 14 hydroelectric power plants scattered across the United States that it bought from units of Northbrook Energy.
Energy Investors Funds (EIF) announced that United States Power Fund II (USPF II) and USPF II Institutional Fund made the purchase from Chicago-based Northbrook Energy. The all-equity acquisition was approved by the U.S. Department of Energy in mid-April. EIF did not disclose any financial details of the transaction. The plants will continue to be managed by a subsidiary of Northbrook.
EIF said it was attracted to the deal by the consistent operating history of the 14 plants and said that it favors local utility deals that have predictable cash flows. EIF also said it likes renewable plays and has taken to hydroelectric assets because of the relative dearth of newly built facilities becoming available. The deal was negotiated outside of any auction process and precipitated by a long-term relationship that EIF has with Northbrook.
EIF purchased the Glen Park Hydroelectric Project from Northbrook Energy last August. The Glen Park Hydroelectric Project is based in Watertown, N.Y. and provides hydroelectricity in upstate New York. Terence Darby, a managing director with EIF, said in a company statement that the 14 Northbrook hydroelectric plants are geographically diverse and serve as a nice compliment to the Glen Park project. The plants are located in California, Illinois, Michigan, North Carolina, South Carolina and Virginia.
This building up of hydroelectric portfolio assets is key to its exit plans, explained EIF Vice President Mark Voccola. “With each of our power funds, a key strategic element of our acquisition and exit strategies is to compile strong and diversified portfolios of power assets,” he wrote in an email to Buyouts. “We acquired a diversified portfolio of hydro assets which we can combine with our earlier acquired Glen Park hydro asset, thus affording us the opportunity to break out the hydro portfolio from the larger portfolio upon exit if doing so will optimize the price/return from the hydro portfolio.”
USPF II, the fund used for the investment, can commit a maximum of $150 million in an investment, or up to $300 million including matching co-investments from LPs. The fund is restricted almost entirely to the United States, with 5% of the fund mandated for Canadian companies that do business in the United States.
When USPF II closed, Managing Partner John Buehler told Buyouts that one area of investment that has opened up in recent years is the private energy transmission sector. Buehler said that investments in the space could comprise as much as a third of the USPF II.
Renewable energy is playing a significant role in EIF’s current fund. EIF recently acquired Burney Forest Products, which operates a biomass processing plant near Redding, Calif. EIF also acquired Austin, Texas-based wind farm operator Tierra Energy late last year.
Energy Investors also used USPF II to purchase the Neptune Regional Transmission System, which will allow Long Island consumers to import cheaper power from Pennsylvania via an underwater cable. Energy Investors also purchased a New York-based transmission project that the firm declined to name.
EIF was also recently awarded a contract by Pacific Gas & Electric Co. to build two power plants in California. USPF II will own and operate the two centers, which are scheduled to be built next year. EIF normally invests in pre-existing assets.
Energy Investors Funds, which has offices in the Boston area, New York and San Francisco, was founded in 1987 and manages six private equity funds. —M.S.