Energy Investors Funds Group (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. And it has its sights set on raising another fund before the end of the year.
The U.S. Power Fund, which closed in December 2003, brings the firm’s capital under management to $700 million.
New institutional investors in the fund were pension funds and endowments and foundations, including several university endowments and medical foundations. Past limited partners include Allstate Insurance, John Hancock Mutual Life, Michigan State Treasury and New Hampshire Retirement System.
Managing Partner Herb Magid says that the latest 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 says. “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.
EIF recently became independent when it held a management buyout, purchasing control from previous owner Dresdner Bank.
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 in the works to be committed. EIF expects the fund to be committed by the end of the year and plans to launch United States Power Fund II by Q3.
EIF buys natural gas power plants. The firm 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, says 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.
“There has never been a time when we found so much on the marketplace and at good prices,” he says.
Investors lit up industrial and energy private equity deals with 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 VCJ).
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.”
Location: Based in Needham, Mass., with offices in New York and San Francisco.
Fund Name: United States Power Fund
Total Capital Under Management: $700M
Focus: Energy sector buyout deals, some venture capital investment.
Investments: Ashcogen, Berkshire Power, Masspower, Rio Volcan, NWP Services Corp.
LPs: Allstate Insurance, John Hancock Mutual Life, Michigan State Treasury, New Hampshire Retirement System and United of Omaha Life Insurance Co.
Managing Partners: John Buehler, Terence Darby and Herb Magid.