Quantum Energy Closes Fund Near Target

Firm: Quantum Energy Capital

Fund: Quantum Energy Partners V

Target: $2.75 billion

Amount Raised: $2.5 billion

Placement Agent: Champlain Advisors

Legal Advisor: Weil Gotshal & Manges LLP

Quantum Energy Capital held the final closing for Quantum Energy Partners V in late September at $2.5 billion, within shouting distance of its $2.75 billion target.

The Houston-based shop launched fundraising in the spring of 2008 and held a first close of $2 billion in July of that year. Wil VanLoh, president and CEO, said in a prepared statement that this fund represented a 90 percent increase in size from the firm’s previous fund, which was raised in 2006.

“Clearly investors really like Quantum’s strategy, as we closed half a billion in commitments in ’09 despite the LP paralysis post-Lehman” said Terry Crikelair, managing partner of Champlain Advisors, which served as the firm’s placement agent.

Limited partners in the new fund include the Australia Post Superannuation Scheme; Canada Pension Plan Investment Board ($200 million); Maryland State Retirement and Pension System; Massachusetts Pension Reserve Investment Trust ($100 million); Nebraska Investment Council, ($20 million); and the New Mexico Public Employees Retirement Association ($35 million).

A source with knowledge of the situation told Buyouts that Quantum Energy has typically made general partner commitments to its funds of 5 percent to 10 percent, although the size of the GP pledge to the current fund is unclear.

Quantum Energy makes investments of $100 million to $400 million in well-defined segments or strategies in the energy industry. The firm takes either control and non-control positions in companies involved in exploration and production in the oil and gas sectors, with a secondary emphasis on the midstream, oil-field service, coal, power and alternative energy sectors.

Rather than targeting companies based on revenues at investment, Quantum Energy makes investments across the energy spectrum, including companies that have an acquisition or development strategy. Sometimes “we acquire assets or companies that are generating cash flow, [while] at other times we invest in companies that are building new energy assets and may not have any cash flow until those assets have been built or acquired,” VanLoh told Buyouts. The primary focus is North America, with an opportunistic carve-out for investments outside of North America.

Quantum Energy continues to be very active looking at new deals and teams to back, while the existing portfolio companies continue to seek acquisitions and new opportunities to invest capital. “We prefer to invest in fewer companies in each fund compared to other private equity funds,” said VanLoh. “This allows us to be much more involved with each investment and also minimizes overlap and conflicts amongst our companies.” VanLoh said he expects to invest the current fund over the next three to four years and exit investments within four to seven years after making them.

In July, the firm used Fund V to invest in Crump Energy Partners, which intends to acquire and develop oil and gas properties in the Permian Basin of Texas. The initial equity commitment from Quantum Energy Partners V was $100 million.

Founded in 1998, Quantum Energy has more than $5.7 billion in assets under management. Weil Gotshal & Manges LLP represented the firm in its most recent fund formation.