The Fund will concentrate its investment efforts primarily on the acquisition and/or development of midstream energy assets – pipelines, gathering & processing systems, natural gas storage projects, etc… Based upon the team’s extensive operating experiences, the Fund is well-positioned to either buy or build assets. The Principals believe this is a key differentiator of Haddington versus other private equity funds because Haddington is not forced to buy assets during periods when acquisition multiples are too high.
Haddington believes that the midstream industry dynamics will change dramatically over the next 10 years and that those changes will generate attractive investment opportunities. A key driver of these changes is the fact that U.S. production has been declining and that new supplies will be needed to keep pace with increasing demand. As new supplies are brought to the U.S. market, new infrastructure will be needed to “re-align” the new supply sources with the current energy grid. These trends will require midstream assets that are central to the Haddington investment focus - natural gas storage, pipelines and gathering and processing systems.
The Fund’s investment objective is to generate returns of 20-25% (net of management fees and the general partner’s carried interest) to its limited partners. Such net returns would require the Fund to realize returns on its portfolio company investments in excess of this range. There can be no assurance that any particular rate of return can be achieved.
The Fund intends to make investments of $20-$50 million each and will generally pursue transactions with an enterprise value of up to $150 million. The Principals anticipate using leverage within each portfolio company of approximately 50%-70% of the value of the portfolio company assets. The Fund intends to acquire controlling interests in portfolio companies where the Principals believe that value can be increased by improving operations and, where appropriate, undertaking follow-on acquisitions. The Fund also may make non-control investments and investments in development stage companies when attractive, risk-adjusted returns appear achievable, but the Fund expects such instances to be limited. The Principals expect to source the Fund’s investments on a proprietary basis using their extensive network of energy and financial institution relationships. The Fund will not pursue direct ownership of oil and gas reserves, companies that primarily market or trade commodities, or investments where increasing commodity prices are the key factor to investment success.
