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Carlyle Targets $7B for Energy Investments

Carlyle Group plans to raise $7 billion for energy funds over the next two years, with more than half -- $4 billion -- targeting North America, executives said during an investor presentation in New York City.

Most of the North American fund, about 80%, would target exploration and production companies, said Carlyle Operating Executive Ken Hersh, who manages the Energy & Power unit. Hersh cited the International Energy Agency's 2012 World Energy Outlook (WEO) that indicated global energy output would grow at a rate of 18% between 2011 and 2020. The 2013 WEO was published on Tuesday (see Daily GPI, Nov. 13).

Carlyle announced the fund plan at its first investor day presentation on Monday; it became a public company in 2012. The Washington, DC-based group earlier this year identified energy as the most attractive global investment as demand rises and because of abundant new resources discovered in unconventional plays and deepwater.

Drilling technologies pioneered in the United States, such as improved hydraulic fracturing processes, will lead to at least $1 trillion of new U.S. investments by 2020, Hersh noted.

Unconventional drilling "has transformed the paradigm around natural resources from one of scarcity to a world of abundance," he said. "The challenge is now about capital discipline and investing, because the industry needs to invest more than its free cash flow."

Fundraising already is underway for two $1.5 billion vehicles: one for mid-market private equity energy transactions outside of North America and another for transactions in North America. The new fund, once completed by 2015, may consider investing as much as $500 million each in individual transactions, with smaller investments targeting equity for up to $150 million, Hersch said.

Last year, Carlyle acquired Cogentrix Energy LLC from Goldman Sachs Group Inc., which develops, operates and manages independent power plants in North America. Carlyle since 2005 also has been an investor in U.S. deepwater explorer Cobalt International Energy LP. Vantage Energy LLC, Stallion Oilfield Services and Philadelphia Energy Services also are in the U.S. energy portfolio.

Carlyle manages $185 billion across 122 funds and 81 sub funds that also invest in real estate, credit assets and hedge funds.

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