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Carlyle Group Acquires $424 Million Stake in NGP Energy

Carlyle Group LP, the Washington-based private-equity firm that went public this year, acquired a 47.5 percent revenue interest in energy investor NGP Energy Capital Management for $424 million as it builds its natural-resources business.

Carlyle will purchase an additional 7.5 percent revenue stake when Irving, Texas-based NGP begins investing its 11th flagship fund, Glenn Youngkin, Carlyle’s chief operating officer, said in a telephone interview. The deal doesn’t include carried interest on current NGP funds, or the share of profits to which a fund manager is entitled, though Carlyle will receive 7.5 percent of so-called carry starting with the 11th fund.

Carlyle, the second-biggest manager of alternative assets such as private equity, real estate and hedge funds, is expanding investments in energy and infrastructure as buyout firms diversify. Riverstone Holdings LLC, the New York-based firm that partnered with Carlyle starting in 2000, is raising money without Carlyle for the first time as it seeks $6 billion for a new energy fund. NGP, which manages $12.1 billion in assets, closed its 10th fund in July with $3.6 billion.

“Energy, and particularly carbon-related energy, is the single most attractive global area in which to invest today,” David Rubenstein, Carlyle’s co-chief executive officer, said in a conference call today with investors and analysts. “There is a revolution going on in the U.S. and a need for energy around the world as economies in the emerging markets grow.”

D’Aniello Committee

Carlyle will have representation on NGP’s investment committee, said Youngkin. Carlyle plans to form an internal natural-resources committee led by Chairman Daniel D’Aniello, consisting of the heads of its energy mezzanine group and infrastructure and power business, as well as members of NGP and Vermillion Asset Management LLC, the commodities hedge-fund manager it acquired in October.

NGP’s funds have produced 31 percent in gross returns since the firm was founded in 1988, according to a presentation posted on Carlyle’s website. Carlyle’s fourth energy fund, a $6 billion pool it raised with Riverstone in 2007, had a gross internal rate of return of 24 percent as of Sept. 30.

“They are a spectacular fit with us,” Youngkin said of NGP. “They’re primarily North American-focused and they’re investing right into the teeth of the big exploration and production developments over the last five to eight years -- shale, tight oil, all the big trends.”

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