Kayne Anderson Wraps Latest Energy Fund At $820M

Firm: Kayne Anderson Capital Advisors LP

Fund: Kayne Anderson Energy Fund V

Amount Raised: $820 million

Kayne Anderson Capital Advisors recently closed on its fifth energy private equity fund, securing capital commitments of $820 million.

While the original target when the shop launched the fundraising effort last summer was closer to $1.6 billion, Danny Weingest, co-managing partner of the firm’s energy investments group, said Kayne Anderson was “very pleased” with the amount raised considering the dismal market conditions, and noted that the pool has a 20 percent recycling provision.

“This is a great time to have dry powder to put to work,” Weingest said.

Limited partners in Kayne Anderson Energy Fund V include the University of Michigan, New Mexico Public Employees Retirement Association, and San Diego County Employees Retirement Association. Roughly two-thirds of the LPs in the fund, which officially wrapped in late May, were re-ups.

The size of the fund is just a slight step-back from the firm’s previous energy vehicle, Kayne Anderson Energy Fund IV, which closed in late 2006 at $950 million.

Kayne Anderson held a single interim close for Fund V in November 2008. Weingest estimated that close included roughly 75 percent of the total amount raised. The first deal for the fund could come shortly as Kayne Anderson expects to close on an investment commitment with an undisclosed private oil and gas company based in Denver by the end of the month.

The firm, which has offices in Houston, Los Angeles and New York, began investing in the energy sector through private investments in the early 1990s. It raised $112.5 million for its first energy fund in 1998 and the size of all its subsequent funds rose appreciably before the pullback with Fund V.

Kayne Anderson is a diversified alternative investor. In addition to its energy activities, the firm operates hedge funds, provides mezzanine financing, and makes both growth capital and real estate private equity investments. The firm’s KA Fund Advisors LLC unit manages three publicly-traded investment companies.

For its energy funds, the firm primarily invests in private companies. Its target investment size ranges from $25 million to $150 million. For larger deals, it considers co-investments. The core of the firm’s energy investment strategy is the in-house technical expertise it offers portfolio companies. For example, Kayne Anderson has its own reservoir engineers that allow it to work directly with the portfolio companies to evaluate properties, negating the need for third-party consultants.

In its press release, Kayne Anderson said Fund V would invest in early- to mid-stage North American oil and gas companies. It targets companies with strong management teams, and typically seeks significant representation on the boards of its portfolio companies.

The most recent addition to Kayne Anderson’s energy portfolio is Plymouth Exploration, a Tulsa, Okla.-based oil and gas exploration company. According to published reports, Kayne Anderson formed the company in March 2009 with a management team led by Ted Kronfeld and provided $50 million in equity capital for the platform, which will acquire and develop properties in Kansas, Oklahoma, and Texas.

Weingest’s counterpart as co-managing partner for Kayne Anderson’s energy investments group is Bob Sinnott.