December 22, 2017
Interviewed by: Privcap
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A ‘Renewal of Interest’ in Energy Private Equity

A veteran fundraiser describes renewed interest from LPs in oil and gas private equity funds. However, these investors want to be “closer to the assets” in innovative fund structures. Also discussed: the maturing renewable energy market.

A veteran fundraiser describes renewed interest from LPs in oil and gas private equity funds. However, these investors want to be “closer to the assets” in innovative fund structures. Also discussed: the maturing renewable energy market.

A “Renewal of Interest” in Energy Private Equity

Peter Martenson, Eaton Partners:

We’re seeing for energy investing a resurgence of interest. There was a pause that happens with the oil prices staying down and not having a V-shaped recovery, as probably many people expected. That gave a number of the institutional investors a pause, as they assessed where the curve was going and how they should address it. Now that I think there’s a level of comfort, what we’re seeing is people pressing into, continuing to invest into oil and gas. [They are] continuing to invest into the energy space, into funds in the strategies in particular that will take advantage of the current and forward-looking environment, where maybe oil prices stay lower than had been historically expected (below $100 a barrel) and how to take advantage of it.

What kinds of innovative formats are LPs being offered to get invested in oil and gas assets?

Martenson: What we’re seeing is that LPs are really interested in getting closer to assets. That can be everything from that single asset that you have out there—a portfolio company. What they’ll want to do is co-invest and/or go in directly with a strong management team. We’re also seeing people wanting to go into a package of assets. It is not necessarily a regular way co-mingled fund, but maybe a club structure to a separately managed account that is more tailored for their needs. It may be the length of hold that they want. It may be the types of assets that they want, to being able to hold it on their books.

The renewable strategy has really come into its own. It’s really an outcome of the fact that the assets there are now mature. You have wind farms that are already developed that can be sold just like a naturalgas power plant.

You have solar fields out there that are large and can be an infrastructure fund. We’re seeing that the opportunity now is of an institutional investment scale, and institutional investors are finding it compelling, because the return profile is on the scale and par with what they’re doing in your classic energy.

Martenson: People are complimenting their portfolios with renewable and that’s how they view it—as not necessarily directly tied to oil and gas prices, but as a hedge or a compliment to that exposure that they have already.

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