Energy Capital Powers Up Maiden Fund

Firm: Energy Capital Partners

Fund: Energy Capital Partners I LP

Amount Raised: $2.25B

Target: $1.5B

Placement Agent: Atlantic-Pacific Capital Inc.

Legal Counsel: Latham & Watkins LLP

After a 15-month fundraising, Energy Capital Partners has closed its inaugural investment vehicle, Energy Capital Partners I LP, at $2.25 billion. The final tally came in well above the initial target of $1.5 billion. The new pool of capital will be put to work investing in North American energy infrastructure assets.

The close of Fund I adds to the boatloads of capital already raised this year by energy-focused buyout firms. First Reserve Corp. raised $7.8 billion for its First Reserve Fund XI; EnCap Investments took in $1.5 billion for EnCap Energy Capital Fund VI; and Lime Rock Capital closed on $750 million for Lime Rock Partners IV LP.

Backing the Energy Capital fund is a cross-section of the limited partner community that includes about 150 investors. Among them are The British Columbia Investment Management Corp. and The Indiana Public Employees’ Retirement Fund. About 25% of the investors in Fund I are located outside of the U.S.

“This was very much a targeted marketing strategy for us,” Energy Capital Senior Partner Doug Kimmelman tells Buyouts. “Our goal is to create a sustainable, long-term firm, and having a diversified investor base will serve us well into the future.”

Atlantic-Pacific Capital Inc. served as placement agent for the fund and Latham & Watkins LLP provided legal counsel during its formation. According to a Form D filed with the SEC on Feb. 13, 2006, the investment vehicle required a minimum commitment of $100,000.

Three of the firm’s partners—Kimmelman, Pete Labbat and Tom Lane—came from Goldman Sachs, where they researched opportunities and invested in pipelines, gas and electric utilities, and merchant energy companies.

In keeping with that tradition, Energy Capital intends to acquire traditional power generation, renewable power generation, power transmission and midstream gas assets. The market for such assets, says Kimmelman, is ripe for the picking. “The largest market share of the largest owner of power generation operations in the U.S. is only about five percent of the aggregate,” Kimmelman observes. “It’s a very fragmented market. And typically in fragmented markets there’s a high turnover of assets.”

Short Hills N.J.-based Energy Capital also intends to provide capital to build new power generation plants, says Kimmelman, adding that the average power plant in the U.S. is 40 years old.

The new investment vehicle is earmarked for between 10 and 12 transactions, which translates into an average of about $185 million to $225 million of equity per deal, Kimmelman says. The firm has closed one investment using equity from the fund. On Nov. 1, Energy Capital acquired the competitive power generation business of Northeast Utilities for $1.34 billion. The business consists of 14 hydro-power generation facilities and one coal-fired power generation facility located in Connecticut and Massachusetts. —A.N.