Rockland Closes Debut Energy Fund

Firm: Rockland Capital

Fund: Rockland Power Partners LP

Target: $350 million

Amount Raised: $300 million

Placement Agent: BerchWood Partners

Legal Adviser: Bingham McCutchen LLP

Rockland Capital has closed its freshman institutional fund to new investors at the end of September with $300 million. The seven-member investment team targets North American power plants, including those that need restructuring due to financial or operational distress.

The fund could still grow bigger. Limited partners that already have committed to Rockland Power Partners LP will be allowed to scale up their pledges until the end of the year, said Douglas Jarrett, a partner at BerchWood Partners, a New York-based placement agency, who helped raise the fund. It’s very likely the total will reach $320 million, Jarrett said. The fund, launched in mid-2008, had a target of $350 million. By mid-2009, the group had closed on about $100 million.

This is Houston-based Rockland Capital’s first formal fund, but the firm has been investing since 2003 via a “pledge fund,” in which capital was raised on a deal-by-deal basis from other private equity firms and rich people. The firm has already exited four of its six pledge fund deals, including Midlands Co-Generation Venture, a gas-fired cogeneration plant, selling it to EQT Infrastructure and Fortistar in 2009.

More than 40 percent of the capital raised so far for the new Rockland Power Partners fund has come from endowments and foundations, including a university endowment based in North Carolina. Other backers include a large real asset fund of funds.

In the fundraising, “what was critical for us is that we had a strategy that fit a lot of investors’ desires right now,” said Scott Harlan, a partner at Rockland Capital. “It’s investing in the small and mid-market. It’s an infrastructure-like investment with an active management component and a focus on restructuring. Plus, a lot of us have been working together since 1998,” he said.

The shop charges the standard 2/20 fee structure. “We did not have to give economic concessions,” Harlan said. “A few investors asked for that, but we held our ground.” However, the agreement is LP-friendly, with backers having a little more control than they would have had three years ago, Harlan said, if the firm had been forming a fund then. For example, investors have more say in when the investment period ends, and there’s a fairly tight key-man provision, he added.

The sweet spot for the firm is control-stake deals of $30 million to $50 million, but it can do larger deals with co-investors. Over the five-year investment period, the team intends to do eight to 10 transactions.