Blackstone Energy Fund Said to Raise Up to $2.5 Billion

Blackstone Group LP (BX), the world’s biggest private-equity firm, plans a final close for its debut energy fund at the end of the month with $2.2 billion to $2.5 billion, according to two people with knowledge of the fund.

The firm began marketing Blackstone Energy Partners LP last year with a limit of $3 billion. The fund received permission from investors to extend fundraising through Aug. 31 from June 30, said the people, who asked not to be named because the information is private.

Peter Rose, a spokesman for New York-based Blackstone, declined to comment.

Private-equity energy funds brought in $30.3 billion last year, a decline of 19 percent, according to Preqin Ltd., a London-based research firm. Increasing competition for investors hasn’t stopped Blackstone, along with firms including Kayne Anderson Capital Advisors LP, Riverstone Holdings LLC and First Reserve Corp., from seeking capital for deals in the industry.

Kayne Anderson, based in Los Angeles, has raised more than $1.1 billion for a fund that will invest in private gas and oil companies, according to two people familiar with the situation. Kayne Anderson Energy Fund VI LP, which is seeking $1.6 billion, held a second close in July. The firm’s prior fund fell short of its $820 million goal in 2009. It’s currently generating more than its targeted 20 percent to 30 percent gross internal rate of return, said one of the people.

First Reserve

Greg Davis, a senior vice president at Kayne Anderson, declined to comment.

First Reserve is seeking $6 billion for its next energy and natural-resources fund, according to a private-placement memorandum viewed by Bloomberg. Riverstone Holdings is nearing the $5 billion mark for its latest fund, which is seeking $6 billion, according to a person familiar with matter. Officials for the firms declined to comment.

The new Blackstone energy fund will invest in energy and natural resource-related deals globally, according to a private- placement memorandum viewed by Bloomberg. It will target industries including oil and gas exploration and production, midstream, energy services and equipment, petroleum refining, power generation and renewable, metals, minerals and timber.

The company decided to raise a dedicated energy fund to take advantage of “extraordinary” investment opportunities in energy and natural resources without overexposing its flagship fund, according to marketing documents. Energy investments generally will be split between Blackstone Energy Partners and Blackstone Capital Partners VI LP.

Blackstone has been investing in energy and natural resources since 1997. Senior managing director David Foley is chief executive officer of Blackstone Energy Partners. Foley has worked with Prakash Melwani, the chief investment officer, for more than eight years. Both men worked on investments in Kosmos Energy Ltd. (KOS), Foundation Coal Holdings Inc. and Texas Genco.

To contact the reporter on this story: Sabrina Willmer in New York at swillmer2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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