UPDATE 2-Carlyle raises first energy fund after Riverstone

Tue Nov 27, 2012 12:43pm EST

* New fund to lend to energy projects and companies

* Targets 15-18 percent gross internal rate of return

By Greg Roumeliotis

NEW YORK, Nov 27 (Reuters) - Carlyle Group LP has raised $1.38 billion for a fund lending to energy projects and companies, almost double its initial target, in its first energy-focused fundraising effort following the end of its collaboration with Riverstone Holdings LLC.

Vast reserves of natural gas and oil unlocked from underground shale deposits are driving an energy renaissance in the United States as companies scramble to raise money for projects.

Since 2000, Washington, D.C.-based Carlyle and New York-based Riverstone have launched six funds together, focused on buyouts in the energy and power sectors, accumulating about $15 billion in assets under management in total. But the two private equity firms decided to go it alone in 2011.

Carlyle, which manages assets totaling $157.4 billion in a wide range of alternative asset classes including buyouts, real estate and hedge funds, said on Tuesday its new $1.38 billion Carlyle Energy Mezzanine Opportunities Fund had exceeded its initial $750 million fundraising target.

"We are delighted with the faith investors have shown in us and in our strategy," David Albert, Carlyle's co-head of the energy credit investment team, who was previously global head of project and structured finance at Morgan Stanley, said in a statement.

The Carlyle Energy Mezzanine Opportunities Fund has made six investments so far, including a rescue of Sunoco Inc's Philadelphia refinery last July. It is targeting a 15 percent to 18 percent gross internal rate of return for investments in the United States and Canada, according to Portfolio Advisors LLC, an alternative investment advisory firm.

Carlyle is still considering its options for its first energy buyout fund following the end of its collaboration with Riverstone, although it has been making private equity investments in the sector through its general buyout funds, its infrastructure fund and its middle-market funds.

The oil and gas sector has attracted some of the largest leveraged buyouts of the last 12 months, including the $7.2 billion acquisition of Samson Investment Co by a consortium led by KKR & Co LP, and El Paso's $7.15 billion divestment of assets to an Apollo Global Management LLC -led group.

Most diversified private equity firms now boast dedicated energy funds. KKR said in June it had raised a $1.25 billion natural resources fund, in addition to $350 million of capital outside the fund for such investments. Blackstone Group LP said in September it had raised just over $2.5 billion for an energy-focused private equity fund.

Apollo had raised $915 million by the end of September for its first natural resources fund and the firm said on Nov. 9 it expected fundraising to be completed in the fourth quarter.

Historically, private equity investments in energy have outperformed the general U.S. stock market, as well as pure commodity returns strategies such as following the Goldman Sachs Commodity Index and hedge funds investing in commodities, David Foley, CEO of Blackstone Energy Partners, told a private equity conference in Boston in June.

Carlyle's participation in energy investments has brought it headaches in its recently announced takeover of Los Angeles-based asset manager TCW. EIG Global Energy Partners LLC, a rival energy-focused private equity firm that was spun off by TCW in 2011, is seeking to block the deal in court on the basis that Carlyle competes with EIG for energy investments and would have access to sensitive EIG data following its takeover of TCW.

Carlyle raised $9.4 billion from investors for its funds during the first nine months of 2012, 40 percent more than it raised in the whole of 2011. Its latest North American buyout fund, Carlyle Partners VI, has attracted $3.7 billion in commitments and is on track to reach its $10 billion fundraising target on schedule, the firm said on Nov. 8.

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