Warburg Pincus Exceeds Expectations with its Energy Focused Private Equity Fund


October 28, 2014

We’ve mentioned before that Warburg Pincus is focused on the energy sector, but Monday’s news about its newest fund exceeded expectations and confirmed that the energy sector is a lucrative market for private equity. The company announced it has raised $4 billion for its first energy-focused private equity fund.


Warburg Pincus had hinted earlier that it hoped to fundraise $3 billion, thus Monday’s news exceeded this expectation by one billion. According to Reuters’ reports, the company’s main focus is to fund firms in the energy exploration and production sector. Warburg Pincus will mostly focus on North America, but will also look into investing in Africa, Europe and Latin America.


The New York-based company has currently over $39 billion in assets under management and it operates in more than 120 companies around the globe. Although it is focused on the energy sector, Warburg Pincus has plenty of investments in a variety of other sectors as well.


Market Watch also pointed out the company’s long history in the energy sector. Warburg Pincus has invested over $9.5 billion in more than 50 energy-focused companies during the 25 years it has been in the private equity business. The company has been very successful in the field, as it “has helped build energy companies with combined enterprise values of more than $70 billion” on an aggregate basis.


Some of its previous investments in the sector include companies such as Antero Resources and Kosmos Energy. Under Warburg Pincus, Antero Resources listed on the stock market and at the time, was the largest IPO of an independent energy exploration and production company.


Furthermore, the New York Times reported that the current $4 billion fund is a companion for the current $11.2 billion private equity fund the company is investing from. The investors in the new fund are mainly existing investors from previous fundraising rounds. The fund saw investments from public and private pensions funds, foundations and insurance companies among others.


Joseph P. Landy, the co-chief executive of Warburg Pincus, was quoted by the New York Times stating, “this successful fund-raise reflects our strong track record and experience in energy investing globally as well as significant investor demand for the energy sector”.


Indeed, as we’ve reported earlier, there is a huge boom in investing in the US shale gas boom. Big investment companies such as KKR, Blackstone Group and EnCap Investments have been focused on benefitting from the energy boom, mainly created by the needs of the emerging markets.


For example, Bloomberg reported that EnCap is currently looking to raise $5 billion with its 10th private equity fund and Blackstone Group is looking to close its own $4 billion energy sector fund in the coming days.


The energy sector is proving to be a lucrative sector for private equity companies during these difficult times. Prices for leveraged buyouts are expensive, but energy sector deals allow private equity companies to “put a lot of money to work at lower valuations by providing capital to seasoned management teams to acquire and develop assets”, according to Reuters.

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