Blackstone to Wrap Up Second Energy Fund by Year's End

Alternative asset manager Blackstone Group LP (BX) is blazing through the fundraising for its second energy-focused private equity fund and is expected to hold a final close by the end of the year above its $4 billion goal, said people familiar with the effort.

The New York firm plans to hold a first closing on a "substantial" amount for Blackstone Energy Partners II LP in a matter of weeks, two of these people said. The initial closing would enable Blackstone to begin writing equity checks for deals using the new fund.

Blackstone has seen more demand for subscription to the fund than it has room to accommodate, two of the people said.

"Blackstone Energy Partners LP is a blowout, so Fund II has been highly sought after by existing investors," said one backer of the firm, referring to a predecessor fund that closed in 2012 with $2.5 billion. "When you think of Blackstone, you don't think of the kind of exclusivity that you have with a venture fund. But that's what's happening here," the backer added.

Still relatively early in its investment life cycle, Blackstone's first energy fund has shown strong initial returns. As of March 31, that fund had returned about $8.1 million to the Public Employee Retirement System of Idaho on the pension system's $30 million commitment, representing nearly a 41.1% net internal rate of return, according to data posted on the pension fund's website.

Meanwhile, Blackstone is also raising a new flagship buyout fund seeking some $16 billion.

When it comes to energy deals, Blackstone historically has invested from both its energy fund and its buyout funds, which come under the Blackstone Capital Partners moniker.

The firm's energy team, led by Senior Managing Director David I. Foley, buys energy and natural resource assets globally. In August, Black Rhino, a Blackstone-backed energy company, said it would team up with African industrial conglomerate Dangote Industries Ltd. to jointly invest up to $5 billion over the next five years in energy infrastructure projects across sub-Saharan Africa.

In July, Blackstone Energy made its first move in Southeast Asia, investing up to $800 million to fund Tamarind Energy, a new Malaysian oil and gas exploration-and-production company. In May, the firm formed Global Water Development Partners, which aims to build desalination plants and wastewater-treatment facilities in emerging markets.

Blackstone has also dabbled in U.S. bankruptcy courts for purchases, winning a court-supervised auction in August to buy Optim Energy LLC's Twin Oaks power plant in Texas for $126 million.

--Dawn Lim contributed to the article.

Write to Shasha Dai at [e-mail]; Alec Macfarlane at [e-mail]; and Laura Kreutzer at [e-mail]

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