The Heat Is Online

Carlyle Investment Move Follows on Heels of Bush Speech

Carlyle eyes renewable energy, predicts IPOs
Reuters News Service, Feb. 22, 2006

 

FRANKFURT (Reuters) - The Carlyle Group is set to boost its investment in the renewable energy sector as demand from U.S. state entities is rising, the firm's founder and managing director, David Rubenstein, said on Wednesday.

 

"We intend to be much more active in the wind, power, solar energy, biomass and geothermal areas," Rubenstein said.

 

"We think it's an extremely attractive area in which to invest, particularly because many states in the U.S. now require that utilities buy a certain percentage of their energy from solar, biomass, geothermal or wind power sources," he told Reuters at a private equity conference in Frankfurt where he also predicted that some buyout firms would go public within the next several years.

 

To meet the energy demand, Carlyle, one of the world's largest private equity firms, is raising a fund that will invest in renewable energy infrastructure, sources familiar with the matter said.

Carlyle declined to comment on the fund. Rubenstein did, however, say the firm was set to launch a hedge fund within the next several weeks after announcing the move last year.

 

Soaring oil prices have prompted state and federal governments to explore alternative sources.

 

U.S. President George Bush in his State of the Union address outlined details of a federal initiative to provide a 22 percent increase in clean-energy research. The U.S. government's 2007 budget includes $44 million for wind energy research, a $5 million increase from the year before.

 

Investing in the current cycle of renewable energy interest has not taken off, with only a handful of firms actively pursuing opportunities.

J.P. Morgan Partners, the private equity arm of investment bank J.P. Morgan and rival bank Goldman Sachs are among companies investing in the projects.

 

CREDIT

 

Rubenstein was speaking at the annual Super Return conference in Germany, where private equity firms came under attack last year from a leading local politician, who branded them "locusts" who buy up companies and cut jobs.

 

Rubenstein said that charge was unfounded and encouraged German pension funds to invest in private equity funds.

 

"German political leaders and business leaders should encourage more German private equity firms to get started -- don't wait for the Americans to show up but support and encourage Germans to start their own funds and to do the same kind of things that the Americans are doing," Rubenstein said.

 

"They should also take a look at the facts about what is actually happening in the German economy as opposed to criticizing private equity people," Rubenstein said.

 

"We don't deserve all the credit for the German economy, clearly, but I think private equity people deserve some credit for trying to help get the German economy into the 21st century."

 

IPOS ON THE HORIZON

 

The buyout pioneer also predicted some private equity firms would look to go public within the next five years.

 

"Private equity firms are being besieged by investment banks all the time to go public," he said, although he stressed that Carlyle would not be seeking a listing.

 

Others may be bought by an investment bank, he said.

He also warned that the current ripe conditions for buyouts -- huge funds, mountains of cheap debt, low interest rates and strong economic growth -- might not last forever.

 

"Right now we're operating as if the music's not going to stop playing and the music is going to stop. I am more concerned about this than any other issue," Rubenstein said.

 

He also cautioned about the rush of private equity funds to do ever-larger club style deals, where up to five or six firms get together to buy assets, piling on billions of dollars in debt as part of the process.

"It might be easy to buy into these ... when things are going good. I worry these deals don't look so smart when economies turn down," Rubenstein said.

 

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