Energy Capital Raises $4.34 Billion for New Fund as Prices Lure Investors

Energy Capital Partners raised $4.34 billion for its second private-equity fund, as rising energy prices attract investors.

Energy Capital Partners II will focus primarily on power generation, electric transmission and gas pipelines, the Short Hills, New Jersey-based firm said in a statement today. Energy Capital’s first fund, raised in 2006, was $2.25 billion.

Private-equity firms worldwide are seeking to raise $21.4 billion for funds targeting oil and gas deals, researcher Preqin Ltd. said last month, as recovering industrial demand lifts energy prices. Blackstone Group LP, the world’s biggest buyout company, last week agreed to buy Dynegy Inc. for more than $540 million, while KKR & Co., the investment company run by Henry Kravis and George Roberts, got a fourfold return on its investment in East Resources Inc., which agreed this year to sell a majority stake to Royal Dutch Shell Plc.

“Investors appreciate the capital needs in these sectors,” Douglas Kimmelman, Energy Capital’s senior partner, said in an interview. “There’s a large opportunity to buy or build and own these assets.”

Energy Capital’s new fund, which exceeded its target of $3.5 billion, acquired three power plants in New England and invested in a gas pipeline being built in Texas, electrical lines in Southern California and a construction and maintenance company, according to its statement.

Energy Capital is raising money as buyout managers seek to persuade investors to keep their money in existing funds or to put cash into new partnerships after the global credit crisis crippled deal-making and cut the value of some assets. The firm has about 400 so-called limited partners in the new fund, including pensions, sovereign wealth funds and university endowments.

Energy Capital has about 40 employees in Short Hills and San Diego. Kirkland & Ellis and Park Hill Group advised Energy Capital on the new fund.