New Investment Fund Raises $2.25 Billion To Hunt Power Sector

The Wall Street Journal
December 4, 2006

A new private-equity fund has raised $2.25 billion to scout for investments amid big changes in the nation's electricity grid.

Energy Capital Partners represents one of the largest first-time investment funds, taking in cash from 150 investors, including pension funds, university endowments and wealthy individuals.

The fund is founded chiefly by a group of former Goldman Sachs Group Inc. utility-sector bankers and investors, including Doug Kimmelman, Energy Capital Partners' senior partner.
Private-equity funds have moved aggressively into power and utility investments in the last few years, picking off assets largely sold by public companies that were in fiscal distress earlier in the decade. Those investments proved largely profitable for the buyout groups because of higher electricity-generation prices.

In an interview, Mr. Kimmelman said the group will focus its investing in power generation, renewable energy and the electricity-transmission grid. Each sector is ripe for investing, Mr. Kimmelman said, because of broader shifts in the nation's utility infrastructure.

"It's become very clear that we've got large capital needs in the power and utility world," Mr. Kimmelman said. "The infrastructure has become very aged and fragmented."

This past year has been benign in terms of conditions that could lead to utility blackouts, Mr. Kimmelman said. But he warned that "the industry is on the edge" and that severe weather, nuclear-plant outages or below-average hydropower production could force "some significant blackouts" during 2007.

"More dollars need to be spent in the generation-and-transmission side of business," he added.
Energy Capital Partners has already closed on its first investment, a $1.34 billion purchase of hydropower and coal-fired power plants in Connecticut and Massachusetts from Northeast Utilities. Mr. Kimmelman said the firm put in about $400 million in cash and took on debt to pay the remainder.