Early-stage middle-market investments in private North American oil and gas companies
Private Energy Income
Cohesive team of professionals focused on the execution of the Kayne’s Private Energy Income Funds platform.
Highlights
“First mover” recognizing the shift in the market dynamics.
Evaluated nearly 120 deals worth ~$45 billion since 2015.
Executed on seven sizeable acquisitions totaling nearly $5 billion in total transaction value.
Domestic natural gas production is at its highest level in history, oil production is at a 28-year high and estimates of domestic economic recoverable reserves have doubled in the past decade.
Advances in technology, primarily horizontal drilling and modern fracking techniques, have reversed decades-long trends and dramatically increased the industry’s ability to generate an economic return.
Led by senior management from the successful Kayne Anderson energy funds, the Kayne Private Energy Income Fund platform was launched in 2014 to take advantage of the attractive industry dynamics for large, long-life upstream oil and gas assets located onshore North America.
Strategy
Targeted assets are more developed than those targeted by traditional private equity with remaining low-risk development opportunities.
Focused on building large, scalable E&P companies across North America via sizable acquisitions ($500+ million).
Mature, lower-risk, longer-life assets.
Current public investor sentiment around corporate returns and capital discipline provides a unique opportunity to acquire high-quality assets from public E&P companies as they continue to rationalize their portfolios.
Targeted assets are cash-flow positive, provide distributions to investors and offer flexibility to accelerate development, pay additional distributions or repay debt.
Large legacy fields with hundreds of producing wells, established decline rates and significant remaining development upside.
Latest Investments
Focused on backing management teams to acquire and develop large, legacy, producing assets with shallow decline rates and a significant number of low-risk, development upside opportunities.
Our Funds
Energy Fund I
$112,500,000
Realized
August 1998
Energy Fund II
$240,000,000
Realized
December 2002
Energy Fund III
$550,000,000
Realized
November 2004
Energy Fund IV
$950,000,000
Realized
November 2006
Energy Fund V
$820,000,000
Fully Invested
103% Distributed
May 2009
Energy Fund VI
$1,600,000,000
88% Invested
100% Distributed
December 2012
Energy Fund VII
$2,051,450,000
83% Invested
40% Distributed
September 2016
Currently fundraising Energy Fund VIII
*As of November 2018. % distributed represents total distributions / total contributed capital. The target IRR set forth herein is provided as an indicator as to how KAEF VIII will be managed and is not intended to be viewed as an indicator of likely performance returns to investors. The target return is based on estimates and assumptions that potential investments will yield a return equal to or greater than the General Partner’s return targets, however, there can be no assurance that KAEF VIII’s return objectives will be realized or that the General Partner will be successful in finding investment opportunities that meet these anticipated return parameters. (1) One remaining investment.
Kayne Private Energy Income Funds ESG Policy
The Kayne Private Energy Income Funds platform understands the importance of engaging portfolio companies on relevant ESG issues to evaluate current and future potential for risks and opportunities across its portfolio.
KPEIF has implemented incremental ESG standards, supplement all to the firm’s core principles, to guide investment decisions and ensure portfolio companies operate in accordance with such standards.
These standards are established and evaluated by Kayne’sExecutive Committee and Director of ESG.
KPEIF ESG Procedures
KPEIF ESG Procedures
- Investment Committees are required to consider, evaluate and document ESG risk factors prior to approving (i) equity commitments or (ii) asset acquisitions.
- KPEIF engages third-party consultants to track relevant ESG metrics and assess performance across the portfolio.
- KPEIF endeavors to adopt reasonably requested ESG changes by the Funds’ Advisory Board and hosts an annual summit of portfolio company executives to discuss ESG-related topics.
Portfolio Company Management Performance Measures
- Portfolio companies are required to establish, implement and assess relevant ESG operating policies and standards.
- Board meeting presentations must include ESG-related metrics, updates, and community initiatives.
- Companies develop and adhere to an Environmental, Health & Safety (“EHS”) Manual.
- The Board considers ESG performance as a meaningful component of each team’s incentive compensation.
- KPEIF requires each portfolio company to complete an annual ESG due diligence questionnaire, which KPEIF updates as necessary to reflect changing material ESG risks.
KPEIF hosts an annual summit of portfolio company executives to discuss ESG-related topics
Along with portfolio company executives, KPEIF invites external and internal ESG experts, as well as members of the investment team to discuss ESG best practices, trends and challenges.
GRESB Infrastructure Fund Assessment
The GRESB Infrastructure Fund Assessment provides a basis for systematic reporting, objective scoring and peer benchmarking of ESG management and performance of infrastructure funds.
Terra, a KPEIF portfolio company, participated in 2018 and scored a 52, above the average score of 44.
Terra and Oak Ridge are participating in the 2019 survey.
GRESB is one of many, new ESG assessments and was originally tailored for real estate and infrastructure rather than oil and gas.
With Kayne’s Director of ESG, KPEIF continues to evaluate ESG assessments that better fit the Fund’s portfolio companies KPEIF’s goal is to document and communicate the Fund’s ESG performance to investors.
KPEIF ESG Timeline
Apr 2018
KPEIF hosts Inaugural CEO/ESG Conference in Houston, TX
(Terra becomes first KPEIF participant in 2018 GRESB survey)
Sep 2018
KPEIF expands annual ESG Due Diligence Questionnaire with portfolio companies to include increased Cyber Security focus
Jan 2019
Kayne expects to become a signatory to Principles of Responsible Investment (“PRI”) in 2019
May 2019
Kayne hires Mike Lombardo as Director of ESG
Mike previously spent 13 years at Calvert Research and Management where he led ESG research and was a member of the UN PRI`s Cyber Security Advisory Committee
Beyond
KPEIF hosts 2nd Annual ESG Conference in Houston, TX
(Terra and Oak Ridge participate in 2019 GRESB survey)
Recent ESG Developments
- Kayne Anderson submitted an application to become a signatory PRI
- As a signatory, we are committing to integrate ESG into our investment analysis and decision-making, to engage portfolio companies on ESG risks and to report annually on our ESG progress
- Becoming a signatory part of the evolution of the firm`s existing commitment to incorporate ESG risks
- The decision to become a signatory reflects our belief in the materiality of ESG risks and our desire to meet investor expectations
KPEIF is committed to incorporating ESG issues throughout our investment process; the decision to become a PRI signatory reflects our belief in the materiality of ESG risks and our desire to meet investor expectations