April 1- Energy Capital Partners raised a$ 1.2 billion fund that it used to buy a 50% stake in U.S. renewable power and storage development Terra-Gen from another of its funds, the private equity firm Reuters told on Thursday.
The deal paid investors in the Terra-Gen fund, after the buyout firm invested in Energy Capital Partners III in 2015. It also allows ECP to continue earning fees for managing the stake in the new fund.
For Terra-Gen, the fund provides capital to support new projects, something that ECP III would not have been able to do as its cash was already fully deployed.
Fund 3 did n't have the capital to keep up with all their growth, so this raises new capital and also makes money for the original investors, said ECP founder Doug Kimmelman in an interview.
Dubbed continuation funds, these capital pools have become increasingly popular in the last few months as private equity firms use them to keep investing in companies that they believe will grow further while also allowing investors to cash out of their fund investments.
Kimmelman said that about 20% of investors signed the continuation fund ECP III. He added that the branches of Blackstone Group Inc and Hamilton Lane Inc as well as Partners Group Holding and Goldman Sachs Group were among the new investors who joined the company.
Originally sold to Sydney-based First Sentier Investors half its stake in 2015 to Terra-Gen for an undisclosed amount, ECP acquired all its shares last year.
Kimmelman said last year that the continuation fund bought its 50% stake at the same$ 1.2 billion valuation as the Australian asset manager. Investors in ECP III are likely to make a good profit, but Kimmelman declined to say how much. The continuation fund aims to achieve a high teenagers return, he added.
While ECP III had until 2024 to unload its remaining position, the continuation fund gives Terra-Gen extra time and money to complete a slew of projects coming online in the next couple of years, which is a more valuable exit for ECP, Kimmelman said.
The projects include the Edwards Sanborn solar and storage scheme in California, which is said as the world's largest project combining these two elements.
Kimmelman is unlikely to hold the Terra-Gen stake for the whole life of the continuation fund, which has an initial five-year horizon, said ECP.
Terra-Gen was founded in 2007 by one of the largest renewable energy developers in the United States, operating more than 1,600 megawatts of wind, solar and geothermal facilities in states including California, Colorado and Texas. Where do I find myself?