Strategic Focus Across Cycles

Beyond the depth of experience of Prudential Capital Energy Partner's leadership, its continuity as an investment team is one of the most important and distinct attributes offered to investors.  The senior leadership team has an extensive energy and financial background with collectively more than 165 years of direct investment experience, including more than 125 years with Prudential Capital Group.  The team has maintained a consistent strategy through economic and commodity cycles and produced favorable returns over a sustained period of time.

  

Focus on upstream and power

Depth of experience across energy spectrum, with both Power and Oil & Gas, enables Prudential Capital Energy Partners to maintain investment pace and credit discipline.  Prudential Capital Energy Partners specifically targets these two sectors due to the lower correlation between the two markets, offering enhanced investment diversification, as well as similar underwriting approaches that focus on discounted cash flow analysis, asset coverage levels, and structural enhancements to maintain sufficient downside protection while preserving participation in the upside.

 

target the underserved lower middle market 

Prudential Capital Energy Partners seeks to capitalize on partnering with experienced management teams that may have a relatively limited supply of capital. These types of management teams that characterize much of the middle market for energy typically offer more attractive return prospects that are often overlooked by larger private equity sponsors and infrastructure funds that seek volume. The Fund will have the flexibility to provide capital to smaller, single-investor companies as the sole capital provider. The amount of an investment by the Fund in any single venture is expected to range between $10 and $50 million. The team’s experience supports the view that investments in this size range offer a superior relationship of return versus risk.

 

direct origination

The team sources the majority of investments through direct calling efforts on management teams and building relationships over time, augmented by Prudential Capital Group’s proprietary North American deal network with national coverage of Power and Upstream Oil & Gas. The firm has an effective business development approach that provides unique sourcing channels for investment opportunities.  The direct sourcing of investment enables Prudential Capital Energy Partners to improve downside protection through tailored financial solutions, covenants, and proper risk mitigation when working face-to-face with management teams.

 

Manage risk with structured downside protection

Within each target sector, PCEP seeks to implement investment-level structural enhancements to achieve return protections, including long-term contracts or hedges, financial covenants, meaningful governance provisions, security in collateral, and preferred return and hurdle rate mechanisms. Each of these approaches is intended to reduce downside investment performance risk while preserving potential upside. Where appropriate, PCEP has the ability to structure investments that address all levels of capital required within the investment (“one-stop”) including senior floating and fixed rate debt, mezzanine, and junior capital. This approach often minimizes transaction execution risk in a manner that is attractive to management teams seeking capital.

 

focus on hard assets and cash flow

The team targets investments in tangible assets containing solid intrinsic value and cash flow generation coupled with visible potential for appreciation over time. These assets are not typically reliant upon an asset sale, recapitalization or other financing event for return realization, allowing the Fund to better manage the timing of exits as individual assets or as portfolios. 

 

value-oriented approach

Prudential Capital Energy Partners employs a value-oriented approach focusing on sectors within the energy industry that are relatively more insulated from business cycles of the broader economy. Transactions are generally structured with commensurate leverage based upon the stability of the cash flow profile, strong covenants and structural enhancements, and significant management incentives. The team pays close attention to buy-in valuation levels and free cash flow generation capabilities as well as an acceptable risk-reward sharing between the Fund’s investment and management’s capital at risk.