ArcLight said to seek $4 bn for energy fund as deals surge


ArcLight said to seek $4 bn for energy fund as deals surge


BOSTON, Massachusetts (Bloomberg) -- ArcLight Capital Partners LLC is seeking $4 billion for a private-equity fund to take advantage of rising demand for infrastructure to support the shale boom.

The firm’s sixth fund will focus on North American investments in pipelines, storage, terminals, electric transmission and production of oil and natural gas, said two people with knowledge of the matter, who asked not to be named because the information is private. The amount sought is more than the $3.3 billion raised by ArcLight’s last fund in 2011.

Heidi Milne, a spokeswoman at Boston-based ArcLight, declined to comment on the fundraising plans.

A surge in exploration and production of North American shale formations is creating a demand for infrastructure to support the transport and storage of crude and natural gas, spurring private-equity firms to target a collective $39 billion, according to data compiled by Bloomberg. Mergers and acquisitions of North American energy companies rose to about $215 billion in the past 12 months, the most since at least 2002. Richard Kinder, chairman of Houston-based Kinder Morgan Inc., is signaling that he may target pipeline competitors for takeovers after a consolidation freed up billions of dollars.

ArcLight committed $400 million in July to Republic Midstream LLC, a new venture that will build and operate a crude-oil gathering system in the Eagle Ford Shale in South Texas. This year it formed AL Warwick Holdings LLC, which develops oil and gas leasehold interests at Eagle Ford.

Fund Returns

ArcLight-backed Enable Midstream Partners LP, which operates natural gas and crude oil infrastructure assets, went public in an April stock sale that raised $575 million.

The firm’s 2011 fund was producing a 17% net internal rate of return and a multiple of 1.2 times invested capital as of June 30, according to one of the people. A 2007 pool was generating a 13% net IRR and 1.4 multiple.

Founded in 2001 by Daniel Revers and Robb Turner, ArcLight has invested more than $11 billion in 84 deals, according to the firm’s website.

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