For the Energy Investors Funds Group (EIF Group), the future is so bright, they’ve got to wear shades.
EIF Group, a private equity fund manager that invests in the energy and electric power market and power plants, raised $250 million to close the United States Power Fund.
The fund, which closed in December 2003, brings the firm’s capital under management to $700 million.
EIF Group recently became independent when it held a management buyout, purchasing control from previous owner Dresdner Bank. The firm is based in Needham, Mass., and has offices in New York and San Francisco.
New institutional investors in the fund were pension funds, endowments and foundations, including several university endowments and medical foundations. Past limited partners include Allstate Insurance, John Hancock Mutual Life, the Michigan State Treasury and the New Hampshire Retirement System.
Herb Magid, a managing partner with EIF Group, says that this fund is notable for its increased appeal to more traditional private equity limited partners.
“This private equity infrastructure is something that’s now become more of an interest to a variety of traditional private equity investors and their consultants,” he said. “In the past we’ve had more strategic investors. Now we’re seeing more of the traditional private equity investors.”
EIF began raising the fund in 2002. Prior to that, the firm closed the Caribbean Basin Power Fund with $75 million in 1998. The firm raised its first in 1988 with $100 million.
Investment has picked up substantially for the firm over the past several years. While the $250 million fund closed in December, it has already committed $100 million and has a further $75 million of unspent capital. EIF expects the fund to be completely committed by the end of the year and plans to launch United States Power Fund II by Q3 2004.
EIF Group buys natural gas power plants and does not invest in nuclear energy. Its portfolio companies include Ashcogen, Berkshire Power, Masspower and NWP Services Corp. Its investments run the buyouts gamut, and the firm has done deals all over North America.
The next fund will be substantially larger, said John Buehler, EIF’s San Francisco-based managing partner. He sees the market in energy investment as “very promising,” and cites his firm’s focus as an example. He went on to say that the number of power plants and power assets on the market is at an all-time high.
“There has never been a time when we found so much on the marketplace and at good prices,” he said, adding that more than three-fourths of EIF Group’s deals are negotiated and not done in an auction.
Investors lit up industrial and energy private equity deals worth more than $7.5 billion in 2003, almost double 2002’s total deal flow of $4.5 billion, according to Thomson Venture Economics (publisher of Buyouts).
Buehler says that the energy market opportunities stretch far beyond the more traditional investments like the ones EIF makes. There are opportunities for smaller to mid-size venture capital type funds to get involved in the technology for clean power development from solar to new kinds of wind systems.
“Lots of those funds are organizing themselves now, and it will be a large market,” he says. “If we’re going to address all of our clean air and energy issues, it’s a good thing.”
Firm: Energy Investors Funds (EIF) Group
Fund Name: The United States Power Fund
Fund Size: $250M
Capital Under Management: $700M
Past Investments: Ashcogen, Berkshire Power, Masspower and NWP Services Corp.