Volatile markets create investment openings.
Jay Radtke is the vice president of Mason Wells, a private equity firm based in Milwaukee. Email Radtke at firstname.lastname@example.org.
As fossil fuel prices continue increasing and alternative energy gathers momentum, the energy and utility industries can expect to see continued interest from private-equity firms. Over the last five years, record levels of private-equity investments have been used to buy power plants, as well as other utility assets and energy product manufacturing facilities. These once-overlooked industries suddenly are hotspots for private-equity investment.
One of the most notable private-equity transactions of 2007 was the TXU buyout. A private equity consortium led by Kohlberg Kravis Roberts & Co., Texas Pacific Group and Goldman Sachs completed its purchase of the Dallas-based investor-owned utility company for $32 billion in October, marking the largest private buyout in U.S. corporate history.
Other notable deals in 2007 include Wayzata Investment Partners’ purchase of two Northern California power plants from NRG Energy; First Reserve’s leveraged buyout of the British Abbot Group; and Tenaska Power Fund’s acquisition, along with an affiliate of Warburg Pincus, of three Dominion Resources electric generation stations in Ohio, Pennsylvania and West Virginia.
The U.S. energy and utility industries both possess attractive investment characteristics: long-term secular growth, continual need for capital, and recent regulatory reform.