Founded in 2005, Riverstone Investment Group LLC (collectively with our affiliates, “we,” “our firm,” “the firm” or “Riverstone”) is an investment advisory services firm specializing in investment management for private equity funds. The sole owner of our firm is Riverstone Holdings LLC. Founders Pierre F. Lapeyre, Jr. and David M. Leuschen are the principal owners of and control Riverstone Holdings LLC indirectly through certain intermediate entities. Riverstone Investment Group LLC was formerly known as Riverstone Investment Services LLC. Our firm offers investment advisory services to private equity and credit funds (generally referred to in this brochure as our clients or our funds) sponsored by Riverstone Holdings LLC or its affiliates and, with respect to certain funds, jointly with our joint venture partner, The Carlyle Group. We specialize in buyout, growth capital and other equity and debt investments in the energy and power sectors, and our advice encompasses most segments of the energy and power industry globally, including the following:
• exploration of oil and gas as well as other natural energy sources,
• midstream energy activities such as transportation and distribution of products and logistics associated with managing supply and demand across geographic regions and over time,
• electric generation (i.e., the conversion of raw materials, primarily coal, natural gas and crude oil derivatives, into electricity),
• energy and power service, and
• renewable and alternative energy, including wind, biofuels, biomass, geothermal, hydroelectric, solar photovoltaic and solar thermal energy. We oversee and manage certain of our existing sponsored investment funds, other investment vehicles and their investments through joint ventures with entities owned by The Carlyle Group. Specifically, these jointly-sponsored investment funds are:
• Carlyle/Riverstone Global Energy and Power Fund II, L.P.;
• Carlyle/Riverstone Global Energy and Power Fund III, L.P.;
• Riverstone/Carlyle Global Energy and Power Fund IV, L.P.;
• Riverstone/Carlyle Renewable Energy and Alternative Energy Fund II, L.P.; and
• Other investment vehicles associated with the foregoing funds. Our percentage ownership of the joint ventures with The Carlyle Group varies from fund to fund. The investment management functions for our existing jointly-sponsored funds (other than anti-money laundering review) are shared between our firm and Carlyle Investment Management L.L.C., an SEC-registered investment adviser. We perform back office administration for all jointly-sponsored investment funds, while anti-money laundering functions for all of our existing jointly-sponsored investment funds are performed by The Carlyle Group, with a supervisory role played by us. Each of our existing jointly-sponsored investment funds has an investment committee composed of members of our firm and The Carlyle Group. The investment committee agrees on investment strategies and portfolio investments. Our firm’s and The Carlyle Group’s representation on the respective investment committees of our existing jointly-sponsored investment funds varies from fund to fund. We also independently oversee and manage the following funds:
• Riverstone Global Energy and Power Fund V, L.P., and its affiliated vehicles;
• Riverstone Global Energy and Power Fund VI, L.P., and its affiliated vehicles;
• Riverstone Non-ECI Partners, L.P., a fund that invests alongside Riverstone Global Energy and Power Fund VI, L.P. and Riverstone Energy Limited in non-ECI generating investments;
• Riverstone Credit Partners, L.P., and its affiliated vehicles;
• Riverstone Credit Partners II, L.P., and its affiliated vehicles;
• Riverstone Credit Partners III, L.P. (which is expected to launch shortly), and its affiliated vehicles;
• Riverstone Energy Limited, a registered close-ended collective investment scheme incorporated in Guernsey that is publicly traded on the London Stock Exchange;
• A Riverstone advised registered Mexican trust (identified as F/179432 with the ticker: RIVERCK15) that is publicly traded on the Mexican Stock Exchange (hereinafter referred to as “Riverstone Energy and Power CKD Trust”);
• A Riverstone advised registered Mexican trust (identified as F/18037-6 with the ticker: RSRENCK17) that is publicly traded on the Mexican Stock Exchange (hereinafter referred to as “Riverstone Renew CKD Trust”);
• Riverstone Power Partners, L.P. (which is expected to launch shortly), and its affiliated vehicles; and
• Riverstone Credit Opportunities Income Plc, and its affiliated vehicles. Our firm manages each fund in accordance with such fund’s investment strategy and restrictions as set forth in its offering documents. We and our funds focus on buyout, growth capital and other equity and debt investments in the energy and power sectors. In addition, certain of our professionals participate on investment committees in order to formulate investment strategies and render specialized investment advice. The amount of client assets that we manage on a discretionary basis, as of December 31, 2019, is $16,984,734,040. We do not manage any client assets on a non-discretionary basis. please register to get more info

The following provides a general description of the fees, compensation and expenses that our funds pay. Each fund’s limited partnership agreement or other governing documents describe such fees, compensation and expenses in much greater detail. Investors in the funds should refer to the relevant fund’s limited partnership agreement or other governing documents for an accurate description of the fund’s fees, compensation and expenses. Our firm or our affiliates typically receive compensation from our clients based on a percentage of assets we manage and performance-based compensation in the form of “carried interest” or a performance allocation. We assess a management fee on total and funded commitments (or in the case of Riverstone Energy Limited on net asset value) to our clients except certain co-investment vehicles. Currently, the fee ranges between 0.75% to 1.5% of the capital commitments (or net asset value) (or, depending on the current stage in the term of the applicable fund, total funded commitments) with respect to each of our clients. Our firm, or one of our affiliates, receives a carried interest or performance allocation as performance-based compensation from each of our clients except certain co-investment vehicles. Our carried interest currently ranges from 15% to 20%. The particular fees and compensation relevant to a private investment fund or other investment vehicle are disclosed to investors in the offering materials for the relevant fund or other investment vehicle. From time to time, we or our affiliates may enter into side letters or other written understandings with individual investors that have the effect of establishing rights under, or altering or supplementing, the terms of a particular fund’s partnership agreement or other relevant governing documents. The altered terms sometimes include but are not limited to fees, incurrence of expenses, transparency, transfer rights, excuse rights (which may increase the percentage interest of other investors in, and contribution obligations of other investors with respect to, such investments) or notice requirements. Our firm and our affiliates do not impose a uniform schedule of management fees or performance-based compensation for all funds. Our compensation is subject to waiver and reduction in our sole discretion. Our firm, our affiliates and certain of our professionals may invest in investment vehicles advised by us. Our principals and employees are not subject to management fees or carried interest on their direct or indirect investment in our funds. If our firm, our affiliates or our professionals are investing in an investment vehicle sponsored by us, any actual or potential fee waiver is disclosed to potential investors in the offering materials for the particular investment vehicle. Asset-Based Fees Our funds pay management fees as described below. Investors in our funds indirectly pay the management fees by way of capital contributions to the funds according to their capital commitments and/or their invested capital as described below. The following percentages represent an annual rate.
• Carlyle/Riverstone Global Energy and Power Fund II, L.P. o investors are no longer required to pay management fees with respect to this fund.
• Carlyle/Riverstone Global Energy and Power Fund III, L.P. o investors are no longer required to pay management fees with respect to this fund.
• Riverstone/Carlyle Global Energy and Power Fund IV, L.P. o during the commitment period, the investor’s management fee is a regressive rate structure based on the total amount invested in the client and parallel investment vehicles:  1.5% with respect to the first $5 billion of aggregate capital commitments;  1.0% with respect to the portion of capital commitments in excess of $5 billion; o after the commitment period, 0.75% of the investor’s funded commitment, reduced proportionately by the acquisition cost of investments that the client no longer holds and the amount of any permanent net writedowns associated with the portfolio of investments.
• Riverstone Global Energy and Power Fund V, L.P. o during the commitment period, 1.5% of the investor’s capital commitment; o after the commitment period, 1.0% of the investor’s funded commitment, reduced proportionately by the acquisition cost of investments that the client no longer holds and the amount of any permanent net writedowns associated with the portfolio of investments.
• Riverstone Global Energy and Power Fund VI, L.P. o during the commitment period, 1.5% of the investor’s capital commitment; o after the commitment period, 1.0% of the investor’s funded commitment, reduced proportionately by the acquisition cost of investments that the client no longer holds and the amount of any permanent net writedowns associated with the portfolio of investments.
• Riverstone Non-ECI Partners, L.P. o during the commitment period, 1.5% of the investor’s capital commitment; o after the commitment period, 1.0% of the investor’s funded commitment for investments, reduced proportionately by the acquisition cost of investments that the client no longer holds and the amount of any permanent net writedowns associated with the portfolio of investments.
• Riverstone Energy and Power CKD Trust o during the investment period, 1.5% of the maximum issuance amount as set forth in the prospectus; o after the investment period, 1.0% of the investor’s funded contributions for investments (including reinvestments), reduced proportionately by the acquisition cost of investments that the client no longer holds and the amount of any permanent net writedowns associated with the portfolio of investments.
• Riverstone Renew CKD Trust o during the investment period, 1.5% of the maximum issuance amount as set forth in the prospectus; o after the investment period, 1.0% of the investor’s funded contributions for investments (including reinvestments), reduced proportionately by the acquisition cost of investments that the client no longer holds and the amount of any permanent net writedowns associated with the portfolio of investments.
• Riverstone Credit Partners, L.P. o during the commitment period, 1.5% of “Capital Under Management”; “Capital Under Management” means the aggregate amount invested by the fund (without duplication, together with the outstanding principal amount of any borrowings to finance the purchase of investments in lieu of, in advance of or contemporaneous with receiving capital contributions) (other than with respect to amounts contributed by Riverstone and certain of its affiliates and associates (as further discussed in the partnership agreement)) in unrealized investments (and any entities formed to hold any co-investment, as permitted under the partnership agreement) to the extent then held by the fund at the determination date less aggregate net losses from permanent net writedowns as of such date. o after the commitment period, 1.0% of Capital Under Management.
• Riverstone Credit Partners II, L.P. o during the commitment period, 1.5% of Capital Under Management; o after the commitment period, 1.0% of Capital Under Management.
• Riverstone Credit Partners III, L.P. o during the commitment period, 1.5% of Capital Under Management; o after the commitment period, 1.0% of Capital Under Management.
• Riverstone/Carlyle Renewable Energy and Alternative Energy Fund II, L.P. o during the commitment period, 1.5% of the investor’s capital commitments; o after the commitment period, 1.0% of the investor’s funded amounts for investments that the client holds, reduced proportionately by the amount of any permanent net writedowns associated with the portfolio of investments.
• Riverstone Energy Limited o a management fee of 1.5% of the net asset value of the fund payable quarterly in arrears (but management fees will only be charged to the extent that cash proceeds from the sale of the fund’s shares have been invested or are committed to an investment).
• Riverstone Power Partners, L.P.

o during the commitment period, 1.5% of the investor’s capital commitments;

o after the commitment period, 1.0% of Capital Under Management.


• Riverstone Credit Opportunities Income Plc o investors are not required to pay management fees with respect to this fund. Occasionally, we provide investors in our funds or third parties (including third parties whose participation might add value to the investment in terms of consummating, operating or exiting the investment) the opportunity to participate in investment vehicles sponsored by us that will invest in certain of our portfolio companies alongside our funds. Such investment vehicles typically are required to invest and dispose of their investment in the applicable portfolio companies at the same time and on the same terms as the applicable fund making the investment. Investors in such investment vehicles are generally not subject to any management fees or performance-based compensation, but in certain cases have been subject and may in the future be subject to such fees or other fees as set forth in the relevant governing documents. Performance-Based Compensation After returning all capital contributions to investors and subject to any writedowns associated with our clients’ investment portfolios, our funds generally (but not certain coinvestment vehicles) will distribute to our firm or our affiliates a certain percentage of the profits of each realized investment, which is commonly referred to as “carried interest.” Please see below for the applicable carried interest with respect to each client.
• Carlyle/Riverstone Global Energy and Power Fund II, L.P. o distributes 20% of realized gains to our affiliate only after investors receive a 9% compound, cumulative annual preferred return on capital contributions.
• Carlyle/Riverstone Global Energy and Power Fund III, L.P. o distributes 20% of realized gains to our affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone/Carlyle Global Energy and Power Fund IV, L.P. o distributes 20% of realized gains to our affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Global Energy and Power Fund V, L.P. o distributes 20% of realized gains to our affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Global Energy and Power Fund VI, L.P. o distributes 20% of realized gains to our affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Non-ECI Partners, L.P. o distributes 20% of realized gains to our affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Energy and Power CKD Trust o the investors in the trust bear a carried interest that equals 20% of realized gains to an affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Renew CKD Trust o the investors in the trust bear a carried interest that equals 20% of realized gains to an affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Credit Partners, L.P. o distributes 15% of realized gains to our affiliate only after investors receive a 6% compound, cumulative annual preferred return on capital contributions.
• Riverstone Credit Partners II, L.P. o distributes 15% of realized gains to our affiliate only after investors receive a 6% compound, cumulative annual preferred return on capital contributions.
• Riverstone Credit Partners III, L.P. o distributes 15% of realized gains to our affiliate only after investors receive a 6% compound, cumulative annual preferred return on capital contributions.
• Riverstone/Carlyle Renewable Energy and Alternative Energy Fund II, L.P. o distributes 20% of realized gains to our affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Energy Limited o generally a performance allocation, calculated and payable at the underlying holding subsidiary level, equal to 20% of the realized gains (if any) on the sale of any underlying asset of the fund. In some cases, Riverstone may elect to get paid a performance allocation on unrealized gains to the extent a underlying asset of the fund has been held for seven years or longer (subject to certain conditions).
• Riverstone Power Partners, L.P. o distributes 20% of realized gains to our affiliate only after investors receive an 8% compound, cumulative annual preferred return on capital contributions.
• Riverstone Credit Opportunities Income Plc o distributes to our affiliate (i) 20% of cash distributions in excess of a 4% yield on the aggregate proceeds of all issues of ordinary shares of the company, and (ii) 10% of cash distributions in excess of 8% (each subject to a cap). Each year, we charge management fees quarterly in advance of each quarter, except Riverstone Energy Limited, which pays fees in arrears. Investors in our funds pay these fees to our clients pursuant to capital calls made by our clients (or based on net asset value in the case of Riverstone Energy Limited). We also receive performance-based compensation or carried interest from our clients, except certain co-investment vehicles. We generally receive a carried interest from our clients when distributions occur to investors in such clients under the circumstances described above. As a result, we do not receive carried interest on a regularly scheduled basis. In connection with our advisory services, clients bear all of their own expenses (ordinary and extraordinary). The enumerated lists below are detailed but do not include every possible expense a client may incur. The expense arrangements summarized below are set out in the offering materials and governing documents for each sponsored investment fund. We may offset some of the investment–related expenses listed below against the management fees.
Organizational Expenses
Our clients pay for expenses related to their organization, including:
• legal expenses,
• accounting expenses,
• filing expenses and fees incurred in connection with organizing and establishing the fund client and its affiliates, and
• expenses incurred in connection with marketing and offering of interests in the fund and its affiliates (including travel expenses (which in some cases includes reimbursement of private air charters (e.g., NetJets) and privately-owned aircraft expenses, as well as business and first class travel) (“Travel Expenses”), and printing costs or other similar amounts, incurred in connection with the offering of interests in our fund client and its affiliates). Our clients generally have a cap on the expenses listed above, and our affiliates, typically the general partner of a fund, bear expenses in excess of these caps either directly or through a management fee offset (to the extent there are management fees available to offset such expenses).
Operational Expenses
Our clients also pay for expenses related to their operation, such as:
• fees, costs and expenses directly related to the purchase, holding and sale of the fund’s investments,
• expenses of any administrators, custodians (including fees, costs and expenses of any depositary), counsel, accountants and other professionals (including the audit and certification fees and costs of printing and distributing reports to the fund’s investors) and any other out-of-pocket expenses incurred in connection with the administration of a fund or otherwise with fund accounting, tax and legal advice (including with respect to actual or potential litigation, if any) and information technology, in each case whether performed by staff of the firm and its affiliates, or by third parties,
• all out-of-pocket fees, costs and expenses, if any, incurred in developing, negotiating, structuring, acquiring, trading, settling, monitoring, holding and disposing of actual investments, directly or through one or more intermediate vehicles, including without limitation any financing, legal, accounting, advisory and consulting expenses in connection therewith (including Travel Expenses, meal, communication, certain entertainment and selected research subscription expenses) (to the extent not subject to any reimbursement of such costs and expenses by entities in which a fund invests or other third parties),
• any insurance, indemnity or litigation or extraordinary expense or liability,
• brokerage commissions, custodial expenses, other bank service fees and other investment costs, fees and expenses actually incurred in connection with actual investments,
• principal and interest on and fees and expenses arising out of all borrowings made by a fund, including, but not limited to, the arranging thereof,
• certain structuring expenses, such as blocker expenses,
• out-of-pocket expenses of the fund’s investor advisory committee,
• expenses of any offices established for tax or other regulatory purposes for the fund’s investments,
• certain taxes,
• any fees or other governmental charges levied against the fund, and
• expenses for transactions not completed, including amounts payable to third parties and all fees and expenses of lenders, investment banks and other financing sources in connection with arranging financing for transactions that are not consummated, and any deposits or draw-down payments that are forfeited in connection with unconsummated transactions. We allocate the expenses among the applicable clients and the applicable investments of each client in a fair and reasonable manner. In certain cases potential co-investors will not bear the broken-deal expenses that a Riverstone main fund incurs in pursuit of an investment. These cases are typically syndicated co-investments where a Riverstone main fund is actively seeking to make an investment and the investment is later abandoned prior to the time that co-investors have committed to make an investment along-side the fund. In these cases the entire broken-deal expenses will be borne by the applicable main fund and no broken-deal expenses will be allocated to any potential co-investors. In certain cases friends and family co-investment vehicles that invest alongside the main Riverstone funds in all portfolio companies do not share in broken-deal expenses of the main funds. This occurs in cases where Riverstone initially pays broken-deal expenses but does not seek reimbursement of such expenses from the applicable main fund. In such cases, the next drawdown for management fees is subject to offset for other fees received by Riverstone, but the offset amount is itself decreased by broken-deal expenses for which no drawdown notice was issued. As the internal friends/family co-investment vehicles are not subject to management fees, by terms of the main fund’s partnership agreements the internal co-investment vehicles are not apportioned broken-deal expenses in such cases. From time to time, certain of our funds have and in the future may recruit a management team to pursue a new “platform” opportunity expected to lead to the formation of a future portfolio company. In other cases, the fund have and in the future may form a new portfolio company and recruit a management team to build the portfolio company through acquisitions and organic growth. In both cases, the fund will bear the expenses of the management team or portfolio company, as the case may be, including any overhead expenses, diligence expenses or other related expenses in connection backing the management team or the build out of the platform company. Such expenses may be borne directly by the applicable fund as partnership expenses or indirectly as the fund will bear the start-up and ongoing expenses of the newly formed platform portfolio company. None of these expenses will offset any fund management fees.
Investment-Related Expenses
In addition, our clients may incur expenses in connection with an investment, such as:
• break-up fees,
• organizational fees,
• set-up fees,
• monitoring fees,
• directors’ fees,
• investment banking fees,
• underwriting fees, and
• syndication fees. We allocate the expenses among the applicable clients and the applicable investments of each client in a fair and reasonable manner. Because we render advice to private equity and credit funds, and investments are made on a negotiated basis, opportunities for trade executions are rare. In these circumstances, our clients will pay brokerage fees. Please see Item 12 for further details. Our funds pay their asset-based management fees in advance, except Riverstone Energy Limited, which pays fees in arrears. Should our management services be terminated prior to the complete rendering of services for the period, we would refund to the relevant clients an amount of their management fees pro-rated from the date of our termination to the end of the period to which the advance fee covered. The relevant clients would then refund such amount to their investors based on the amount of management fees paid by them. From time to time, our affiliates may cause our funds to make distributions to them in amounts sufficient to permit the payment of the tax obligations of our affiliates and their direct and indirect owners in respect of allocations of income related to their carried interest. These advances will reduce any amounts of carried interest that we and our affiliates later receive until these advances are restored to the fund. In the event that aggregate carried interest distributions (including any such prior advances) are greater than the actual amount of carried interest to which our affiliates are entitled upon a final distribution by a fund client (determined on an after-tax basis in accordance with the applicable fund agreement), we and our affiliates must repay any outstanding balances to the fund through a “clawback” mechanism, except in the case of Riverstone Energy Limited and any other vehicle which does not have a “clawback” provision. Neither our firm nor any of our principals, affiliates or employees receives any transaction- based compensation for the sale of securities of our funds to investors in those funds. We may receive certain fees in connection with the portfolio investments of our funds. Please see Item 11 for a discussion of those arrangements. please register to get more info

Our firm or our affiliates generally receive performance-based compensation in the form of carried interest or performance allocations from each of our clients, except with respect to certain co-investment vehicles. The firm does not believe that this arrangement creates a conflict of interest since the co-investment vehicles are generally intended to invest alongside a fund on substantially the same terms and in accordance with the terms of the applicable fund governing documents. Please see Item 5 for a detailed explanation of our performance-based compensation. The existence of the carried interest or performance allocation may create an incentive for our firm or our affiliates to make riskier or more speculative investments on behalf of our clients than would be the case in the absence of these arrangements, although our commitment of capital to our funds should reduce this incentive. Furthermore, when allocating investments, the firm or our affiliates may have incentives to favor clients with higher potential for carried interest over clients with lower potential for carried interest. As described in more detail below, we have adopted allocation policies designed to treat all clients fairly and equitably in accordance with the applicable governing documents. please register to get more info

All of our clients are private equity and credit funds. Our clients rely on certain exceptions from the definition of “investment company” in the Investment Company Act of 1940, as amended; accordingly, none of our funds is registered as an investment company under that Act. Investors participating in our private equity and credit funds may include individuals, certain banks or thrifts institutions, sovereign wealth funds, pension and profit sharing plans, trusts, estates, endowments, charitable organizations or other corporate or business entities (which may include entities that are owned, directly or indirectly, by principals or other employees of Riverstone or its affiliates). Riverstone has also entered into, and may in the future enter into separately managed accounts with clients. In some cases private equity professionals from other firms or other services professionals may also be investors in our fund. Our firm determines in its sole discretion any requirements for entering into an investment advisory contract with a fund or otherwise opening or maintaining an account, including whether a private fund is large enough to implement its desired investment program. Typically, the funds require minimum investment amounts ranging from $5 million to $10 million, but such amounts have been and in the future will be reduced with the prior agreement of Riverstone, subject to applicable legal requirements. Fund interests are offered and sold generally to investors that are (i) “accredited investors” as defined under Regulation D of the Securities Act of 1933, as amended and (ii) “qualified clients” as defined under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) or other “knowledgeable employees” of Riverstone. please register to get more info

In managing our funds, we employ methods of analysis and investment strategies suitable for each fund’s investment objective as summarized below. More detailed descriptions of each fund’s investment methods of analysis and investment strategies are included in the fund’s offering documents and governing documents. There can be no assurance that Riverstone will achieve the investment objectives of a fund and loss of investment capital is possible. Investment Strategies We employ various investment strategies, including investing in energy and power companies as well as renewable energy companies. Our firm, on behalf of our clients, invests in companies with a broad range of enterprise values, as either controlling or strategic minority positions. In minority investments, we seek on behalf of our clients to negotiate varying degrees of control over certain key areas of corporate governance, including capital spending, external financing and major corporate transactions, as well as controls over exits. With respect to our buyout and growth capital funds, our clients’ investments may include buyouts of non-core assets or operating subsidiaries of large corporations, build-up and consolidation plays, growth capital investments, and strategic industry partnerships. With respect to our Credit Funds (as defined below), our client’s investments will primarily be in primary and secondary investments in the debt securities of small to mid-sized companies. We source investments worldwide. We vary the investment programs within the energy and power sectors according to our clients’ needs. Among all of our buyout and growth capital fund clients we may engage in any combination of the following:
• investing in the energy and power sectors, such as: o investing in restructuring of energy and power companies, o investing in renewable energy companies, o investing in utility companies, and o investing in oil and natural gas companies,
• investing in equity and equity-related securities,
• investing in debt securities, including, among others: o debt instruments made in connection with an investment in equity or equity-related securities, o debt investments with a view to a restructuring in which we anticipate that our client will receive an equity interest, o debt investments intended to facilitate consummation of an equity investment, and o debt investments that are equity-related investments,
• investing in non-U.S. securities,
• investing in emerging markets,
• investing in small capitalization companies,
• royalty interests or mineral production payments,
• borrowing/leveraging, including short-term bridge loans (on an unsecured basis),
• hedging equity, credit, currency, commodity price and/or interest rate exposure, and
• investing in or with other partnerships and entities. Most of the above strategies involve medium to long-term investment in equity or debt securities with some investment in swaps, commodities and property interests. From time to time, we may need to make short-term investments on behalf of clients for cash management purposes that may include investments in bank depository products, commercial paper and government securities. Other investments may take the form of privately negotiated investment instruments including unregistered equity and debt from both foreign and domestic issuers. The above strategies are generally applicable to the firm’s Credit Funds as well, except its investment activities will be focused on debt securities of North American companies, as described further below, and will generally not include investments in equity securities. In particular, the Credit Funds’ investments may include investing in individual debt securities of companies trading at distressed levels but that we believe are fundamentally sound, providing senior secured financing alternatives to small and mid-sized energy companies and acquiring existing loans from banks on an opportunistic basis. We describe material risks relevant to our investment strategies below.
Methods of Analysis
With respect to each of our clients, we use our extensive industry expertise and relationships with key players in the industry to thoroughly evaluate and investigate the fundamentals of our investment prospects. We also have significant experience in conducting due diligence, valuation and all other aspects of deal execution, including financial and legal structuring, accounting and compensation design. We draw upon our extensive network of relationships with industry-focused professional advisory firms to assist with due diligence in other areas such as regulatory risk, contractual liabilities, accounting, tax, employee benefits, environmental, engineering and insurance. Our firm, on behalf of a client, will generally only make an investment in a company after a comprehensive review of:
• a target company’s management team,
• industry dynamics,
• competitors and competing technologies,
• the quality of a company’s assets, products and services,
• the company’s competitive position and strategy,
• financial statements,
• off-balance sheet and contingent liabilities,
• debt capacity and financing needs,
• equity and debt market perspectives,
• environmental, political and regulatory risks, and
• economic risk, exit alternatives and return potential. We analyze and evaluate investment opportunities using conventional financial measures, regardless of the sector or the development stage of the portfolio company. We work with the management teams of target companies to analyze past and present results, create a thorough operating plan and assess the organizational and capital resources necessary to improve the target company’s performance as well as exit alternatives. Our approach to portfolio monitoring and development requires a close working relationship with senior management of our clients’ portfolio companies, a clear blueprint for portfolio companies’ growth and an incentive plan to ensure the organization’s commitment to success. Working together with management, we expect to create value through:
• carefully reviewing capital investments,
• redirecting capital spending and operating priorities as necessary,
• optimizing asset portfolios through acquisitions and divestitures,
• adopting cost management efforts,
• adding appropriate personnel, or
• completing value-creating acquisitions. Despite our thorough research and analysis, investing in any security involves a risk of loss that any clients and investors in our clients must be prepared to bear. While the following is a detailed explanation of some of the significant risks associated with the investment strategies we employ, it does not describe all of the risks that may potentially be faced by any fund. Prior to making any investment in a fund, investors should review the applicable fund’s private placement memorandum or other offering document for additional information regarding risks and conflicts of interest specific to such fund. Certain general risks associated with an investment in any fund we advise include:
• Investment Judgment and Market Risk. The success of our investment programs depends, in large part, on correctly evaluating the future price movements of potential investments. We cannot guarantee that we will be able to accurately predict these price movements and that our investment programs will be successful.
• Highly Competitive Market for Investment Opportunities. The activity of identifying, completing and realizing attractive private equity investments is highly competitive and involves a high degree of uncertainty. The availability of investment opportunities generally will be subject to market conditions. Our clients compete for investments with other private equity investors, as well as companies, public equity markets, individuals, financial institutions and other investors. Furthermore, over the past several years, an ever-increasing number of private equity funds have been formed, including in the energy and power sector (and many such existing funds have grown in size), resulting in an unprecedented amount of capital available for private equity investment. Additional funds with similar objectives may be formed in the future by other unrelated parties. It is possible that competition for appropriate investment opportunities may increase, thus reducing the number of investment opportunities available to our clients and adversely affecting the terms upon which investments can be made. There is no assurance that we will be able to locate, consummate and exit investments that satisfy our clients’ rate of return objectives or realize upon their values, or that our clients will be able to invest fully their committed capital.
• Financial Markets and Regulatory Change. The instability pervading global financial markets has heightened the risks associated with the investment activities and operations of investment funds, including those resulting from a reduction in the availability of credit and the increased cost of short-term credit, a decrease in market liquidity and an increased risk of bankruptcy of third parties with which we work. Market disruptions over the recent years and the increase in capital being allocated to investment funds and other alternative investment vehicles have led to increased scrutiny and regulation over the investment fund and asset management industry. In addition, the laws and regulations affecting business continue to evolve unpredictably. Laws and regulations applicable to our clients, especially those involving taxation, investment and trade, can change quickly and unpredictably in a manner adverse to our clients’ interests.
• Risk of Limited Number of Investments. We anticipate that our clients may participate in a limited number of investments. As a consequence, the aggregate return of our clients may be substantially adversely affected by the unfavorable performance of even a single investment.
• Investments Longer than Term. We, on behalf of a fund, may make investments that may not be advantageously disposed of prior to the date the fund will be dissolved, either by expiration of our client’s term or otherwise.
• Uncertainty of Financial Projections. Our firm or our affiliates will generally establish the capital structure of portfolio companies on the basis of financial projections for these portfolio companies. Projected operating results will normally be based primarily on management judgments. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed. There can be no assurance that the projected results will be obtained, and actual results may vary significantly from the projections. General economic, political and market conditions, which are not predictable, can have a material adverse impact on the reliability of such projections.
• European Union Alternative Investment Fund Managers Directive. The Directive 2011/61/EU of the European Parliament and of the Council of June 8, 2011 on Alternative Investment Fund Managers, together with EU Commission Delegated Regulation (EU) No. 231/2013 of December 19, 2012, supplementary Directive 2011/61/EU of the European Parliament and of the Council, and the national laws transposing Directive 2011/61/EU in any European Economic Area (“EEA”) member state (each an “EEA Member State”) in which the funds are marketed (the “AIFMD”) imposes requirements on AIFMs (as defined in the AIFMD) that market AIFs (as defined in the AIFMD) to professional investors who are domiciled or have a registered office within the EEA. For these purposes a fund is a non-EEA AIF and the firm is a non-EEA AIFM. The AIFMD allows member states to permit the marketing of non- EEA AIFs by non-EEA AIFMs in accordance with local laws, provided that local laws meet the requirements of Article 42 of the AIFMD. There is no requirement for member states to operate or maintain a national private placement regime and, if they do, the member state is free to impose stricter rules than the minimum requirements of Article 42 of the AIFMD. Where national private placement is permitted, the AIFM must comply with Article 22 (requirements relating to an annual report), Article 23 (prescriptive pre-investment and periodic disclosure to investors), Article 24 (relating to periodic reporting to regulators) and Articles 26 to 30 if applicable (the provisions relating to the acquisition and control of non-listed companies and issuers, including the asset-stripping rules). In addition to these minimum requirements, some jurisdictions require a non-EEA AIFM to comply with substantially all of the AIFMD or certain additional compliance requirements, such as the appointment of a depositary. Given that national private placement regimes are, by definition, a matter of national law, a non-EEA AIFM must comply with different regulatory requirements i n different member states, both in respect of the initial process for seeking to market in that member state and with respect to ongoing compliance. Since the firm, as a non-EEA entity, is not currently eligible for authorisation and therefore cannot have t he benefit of a marketing “passport”, it is required to comply with the national private placement regimes and other applicable rules of those EEA member states that allow private placement and in which interests in a fund are marketed and sold. Where the firm has marketed a fund in a member state in compliance with the national private placement regime and that marketing has resulted in investors in that member state investing in such fund, our ongoing compliance with the laws of that member state will continue at least until all of such investors dispose of their interests in such fund. Compliance with these requirements may therefore result in significant additional costs over the life of the funds and may reduce returns to investors. The rules, regulations and guidance related to the marketing of interests to investors domiciled or having their registered office in the EEA remain uncertain. Each of the firm and/or our affiliates and agents has endeavoured to comply with these uncertain and evolving rules as interpreted as of the date of this brochure, but there is not absolute certainty as to their successful compliance. In the event that the firm or any any of our affiliates or agents is found to have breached the provisions of the AIFMD (inadvertently or otherwise), our firm and/or our affiliates (and/or a fund indirectly) may face regulatory sanctions as a result of its non-compliance. Such activities and sanctions may impact the enforceability of any subscriptions received from EEA Investors (including potential rescission rights with respect to such i nvestors), result in significant costs and ultimately materially and adversely affect such fund, its financial condition, liquidity, reputation and operations. Certain EEA member states have announced their intention to abolish their national private placement regimes in the near future. The abolition of such regimes may further limit the territories in which a fund may seek investors. In the future, the firm (or an associate) may be compelled to seek, or it may determine that it should seek, authorisation as an AIFM in an EEA member state (should that option become available) and/or under a similar regime elsewhere. This would entail compliance with all requirements of the AIFMD (and/or with similar requirements of a similar regime). In such circumstance, the AIFM of such fund would become subject to additional requirements, such as rules relating to remuneration, minimum regulatory capital requirements, restrictions on the use of leverage, restrictions on investment in securitisation positions, requirements in relation to liquidity and risk management, asset-stripping prohibitions, valuation of assets, etc. Such requirements could adversely affect the fund, among other things by increasing the regulatory burden and costs of operating and managing the fund and its investments. They could also have indirect ramifications. Any required changes to compensation structures and practices, for example, could make it harder for the AIFM and its affiliates to recruit and retain key personnel.
• Withdrawal of the United Kingdom from the European Union. The United Kingdom and the European Union agreed the text of a withdrawal agreement on October 17, 2019 to enable the United Kingdom to leave the European Union on January 31, 2020 with an implementation period lasting until at least December 31, 2020. This agreement was subsequently ratified by the United Kingdom government on January 23, 2020 and the European Parliament on January 29, 2020, and the United Kingdom formally left the European Union on January 31, 2020. During the implementation period, European Union law continues to apply in the United Kingdom and the United Kingdom maintains its European Union single market access rights (including passport rights) and European Union customs union membership. The United Kingdom government has stated its intention that the implementation period will last only until December 31, 2020. Even though a withdrawal agreement has been ratified and an implementation period has been secured, United Kingdom regulated firms and other United Kingdom businesses could still be adversely affected by the terms ultimately agreed for a future trading relationship with the European Union. A tariff or non-tariff barrier, customs checks, the inability to provide cross-border services, changes in withholding tax, restrictions on movements of employees, restrictions on the transfer of personal data, etc., all have the potential to materially impair the profitability of a business, require it to adapt, or even relocate. In the event that the implementation period expires without any agreement being made for a future trading relationship between the United Kingdom and the European Union, the United Kingdom will become a third country vis-à-vis the European Union. As a third country, the United Kingdom will cease to have access to the single market and will no longer be a member of the European Union customs union. The cross-border trade in goods between the United Kingdom and European Union member states will, in such circumstances, depend on any multilateral trade agreements to which both the European Union and the United Kingdom are parties (such as those administered by the World Trade Organization) and the provision of services by United Kingdom firms will be generally restricted to those that could be provided by firms established in any third country. Without assurance as to whether any future trading relationship between the United Kingdom and the European Union will be agreed, and as to the terms of any such relationship, many businesses may be unable to postpone executing their contingency plans. Contingency planning for some businesses involves re-establishing the business in another member state, moving personnel and, if applicable, seeking authorization from the local regulator – all of which are costly and disruptive. Although it is probable that any adverse effects of the United Kingdom’s withdrawal from the EU will principally affect the United Kingdom (and those having an economic interest in, or connected to, the United Kingdom), given the size and global significance of the United Kingdom’s economy, unpredictability about the terms of its withdrawal and its future legal, political and/or economic relationships with Europe is likely to be an ongoing source of instability, produce significant currency fluctuations, and/or have other adverse effects on international markets, international trade agreements and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise). The withdrawal of the United Kingdom from the European Union could therefore adversely affect the funds and their respective portfolio companies. In addition, although it seems less likely now than at the time of Britain’s referendum, the withdrawal of the United Kingdom from the EU could have a further destabilizing effect if any other member states were to consider withdrawing from the European Union, presenting similar and/or additional potential risks and consequences to the funds and their respective portfolio companies. The terms ultimately agreed for a future trading relationship between the United Kingdom and the European Union may also affect the eligibility of our funds for certain United Kingdom investors if such investors become subject to restrictions on their ability to invest in vehicles established outside the United Kingdom and/or managed by a manager situated outside the United Kingdom. As a consequence, United Kingdom investors may be forced to sell or otherwise dispose of interests in our funds. Furthermore, investment in our funds may become less attractive for certain United Kingdom investors, for example as a result of increased capital charges or capital requirements or different quota allocations for investors. The following is a description of some important risks associated with the investment strategies that we employ. The following explanation of certain risks is not exhaustive, but rather highlights the significant risks involved in our investment strategies. We do not use every strategy listed below when managing each fund’s assets, but rather we use various combinations of strategies that depend on each fund’s circumstances and investment goals.
• Investments in Oil and Natural Gas. Our firm, on behalf of our clients, may invest in oil and natural gas companies. The following is a description of some of the risks associated with this type of investment. o Volatility of Oil and Natural Gas Prices; Recent Energy Price Trends. The performance of certain investments of our clients is substantially dependent upon prevailing prices of oil and natural gas. Historically, the markets for oil and natural gas have been volatile, and these markets are likely to continue to be volatile in the future. Prices for oil and natural gas are subject to wide fluctuation in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty, speculation and a variety of additional factors that are beyond our control. These factors include:  the level of consumer product demand,  the refining capacity of oil purchasers,  weather conditions,  domestic and foreign governmental regulations,  the price and availability of alternative fuels,  political conditions in the Middle East and other oil producing regions,  actions of the Organization of Petroleum Exporting Countries,  the foreign supply of oil and natural gas,  the price of foreign imports, and  overall economic conditions. o Drilling, Exploration and Development Risks. Our firm, on behalf of our clients, may invest in businesses that engage in oil and gas exploration and development, a speculative business involving a high degree of risk. Oil and gas drilling may involve unprofitable efforts, not only from dry holes, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Acquiring, developing and exploring for oil and natural gas involves many risks. These risks include:  encountering unexpected or irregular formations or pressures,  premature declines of reservoirs,  blow-outs,  equipment failures and other accidents in completing wells and otherwise,  cratering,  sour gas releases,  uncontrollable flows of oil,  natural gas or well fluids,  adverse weather conditions  issues related to compliance with environmental regulations;  title problems, and  pollution, fires, spills and other environmental risks. In addition, in making these investments, we must rely on estimates of oil and gas reserves. The process of estimating oil and gas reserves is complex, requiring significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. As a result, these estimates are inherently imprecise. o Midstream Capacity Constraints and Interruptions. Certain portfolio companies may rely on various midstream facilities and systems, including facilities and systems operated by third parties. Regardless of who operates the midstream systems, a portfolio company’s business may be interrupted or shut-in from time to time due to loss of access to plants, pipelines or gathering systems. Such access could be lost due to a number of factors, including, but not limited to, weather conditions, accidents, field labor issues or strikes. Such interruptions or constraints could negatively impact a portfolio company’s profitability, and thus investment returns to a client fund. o Regulatory Risks and Approvals. The power generation industry is subject to comprehensive United States and non-U.S. federal, state and local laws and regulations. Present, as well as future, statutes and regulations could cause additional expenditures, restrictions and delays that could materially and adversely affect the portfolio companies and the prospects of the funds. Other power assets may be taxed or need to purchase offsets under proposed environmental legislation in the United States and existing or proposed environmental legislation in other parts of the world, which could affect economic viability. The funds may invest in portfolio companies believed to have obtained all material governmental approvals required as of the date thereof to acquire and operate their facilities. In addition, a fund may be required to obtain the consent or approval of applicable regulatory authorities in order to acquire or hold certain ownership positions in portfolio companies. A portfolio company could be materially and adversely affected as a result of statutory or regulatory changes or judicial or administrative interpretations of existing laws and regulations that impose more comprehensive or stringent requirements on such company. Moreover, additional regulatory approvals, including without limitation, renewals, extensions, transfers, assignments, reissuances or similar actions, may become applicable in the future due to a change in laws and regulations, a change in the companies’ customers or affiliates or for other reasons. There can be no assurance that a portfolio company will be able to: (i) obtain all required regulatory approvals that it does not currently have or that it may be required to have in the future; (ii) obtain any necessary modifications to existing regulatory approvals; or (iii) maintain required regulatory approvals. Delay in obtaining or failure to obtain and maintain in full force and effect any regulatory approvals, or amendments thereto, or delay or failure to satisfy any regulatory conditions or other applicable requirements could prevent operation of a facility or sales to or from third parties or could result in additional costs to a portfolio company. In connection with the regulatory approval, licensing or review processes for any portfolio company, disclosures and other undertakings may be required from or in respect of the existing or prospective owners of such portfolio company, potentially including a fund and, in turn, the investors. Regulatory changes in a jurisdiction where a portfolio investment is located may make the continued operation of the portfolio investment infeasible or economically disadvantageous and any expenditures made to date by such portfolio investment may be wholly or partially written off. The locations of the portfolio investments may also be subject to government exercise of eminent domain power or similar events. Any of these changes could significantly increase the regulatory- related compliance and other expenses incurred by the portfolio investments and could significantly reduce or entirely eliminate any potential revenues generated by one or more of the portfolio investments, which could materially and adversely affect returns to a fund. o Risks Relating to Hydraulic Fracturing Activities. Several of our portfolio companies engage in hydraulic fracturing, which is a practice in the oil and natural gas industry that involves the injection of water, sand and chemicals under pressure into rock formations to fracture the surrounding rock and stimulate the production of hydrocarbons, particularly natural gas, from tight formations. The hydraulic fracturing process is typically regulated by state oil and gas commissions, but there has been increasing scrutiny and regulatory initiatives and proposed initiatives at the federal, state and local level to ban or regulate hydraulic fracturing and to study the environmental impacts of hydraulic fracturing and the need for further regulation of the practice. For example, debate exists over whether certain of the chemical constituents in hydraulic fracturing fluids may contaminate drinking water supplies, with some members of the United States Congress and others proposing to revisit the exemption of hydraulic fracturing from the permitting requirements of the United States Safe Drinking Water Act (the “SDWA”). Eliminating this exemption could establish an additional level of regulation and permitting at the federal level that could lead to operational delays or increased operating costs for those portfolio companies and could result in additional regulatory burdens that could make it more difficult to perform hydraulic fracturing and increase a portfolio company’s costs of compliance and doing business. Even in the absence of new legislation, the United States Environment and Protection Agency (the “EPA”) recently asserted the authority to regulate hydraulic fracturing involving the use of diesel additives under the SDWA’s Underground Injection Control Program. Scrutiny of hydraulic fracturing activities continues in other ways, with the EPA having commenced a multi-year study of the potential environmental impacts of hydraulic fracturing on drinking water, the initial results of which were made available in December 2012. Hydraulic fracturing operations require the use of water and the disposal or recycling of water that has been used in operations. The United States Clean Water Act (the “CWA”) restricts the discharge of produced waters and other pollutants into waters of the United States and requires permits before any pollutants may be discharged. The CWA and comparable state laws and regulations in the United States provide for penalties for unauthorized discharges of pollutants including produced water, oil, and other hazardous substances. Compliance with and future revisions to requirements and permits governing the use, discharge, and recycling of water used for hydraulic fracturing may increase a portfolio company’s costs and cause delays, interruptions or terminations of its operations which cannot be predicted. Further, at the state level, some states have adopted, and other states are considering adopting, regulations that could restrict hydraulic fracturing in certain circumstances or otherwise require the public disclosure of chemicals used in the hydraulic fracturing process. If these or any other new laws or regulations that significantly restrict hydraulic fracturing are adopted, such laws or regulations could make it more difficult or costly for, or even prohibit, our portfolio companies to perform fracturing to stimulate production from tight formations as well as make it easier for third parties opposed to the hydraulic fracturing process to initiate legal proceedings based on allegations that specific chemicals used in the fracturing process could adversely affect groundwater. Such developments could materially adversely affect our portfolio companies’ revenues and results of operations and result in the potential for adverse judgments against our portfolio companies. In addition, if hydraulic fracturing is regulated at the federal level, our portfolio companies’ fracturing activities could become subject to additional permitting and financial assurance requirements, more stringent construction specifications, increased monitoring, reporting and recordkeeping obligations, plugging and abandonment requirements, and attendant permitting delays and potential increases in costs. Restrictions on hydraulic fracturing could also reduce the amount of, or prevent our portfolio companies from accessing, oil and natural gas that our portfolio companies are ultimately able to produce from their reserves. o Oil Shale Exploration and Extraction. Our clients may, at times, invest in portfolio companies that engage in oil shale exploration and extraction. Exploration and development operations in oil shale extraction are subject to environmental regulations (further discussed below, see Environmental Matters), which could result in additional costs and operational delays. Future changes in environmental regulation, if any, could negatively affect the operations of portfolio companies involved in oil shale exploration and extraction. In addition, portfolio companies involved in oil shale exploration and extraction incur substantial expenditures to acquire oil shale properties, establish reserves through drilling and analysis, develop processes to extract oil, and develop the processing facilities and infrastructure at a site chosen for oil shale production. Portfolio companies cannot be sure they will acquire or discover sufficient quantities or adequate quality of oil from oil shale or that they will be able to obtain enough funds required for development on a timely basis. Significantly, oil shale exploration, development and operating activities are inherently hazardous. Any liabilities that a portfolio company engaged in oil shale exploration and extraction might incur may exceed any insurance policy limits, and it is possible that certain of their liabilities and hazards may be uninsurable. Finally, if a portfolio company’s exploration and extraction properties experience any title defects, the portfolio company may be required to compensate other parties or reduce its interest in the affected property. Also, the investigation and resolution of title issues would divert the company’s focus away from ongoing exploration and development programs. o Offshore Operations. Certain companies in which our clients invest conduct offshore operations. Their operations and financial results could be significantly impacted by conditions in some of these areas, such as the Gulf of Mexico. As a result of this activity, they are vulnerable to the risks associated with operating offshore, such as:  repatriation,  transparency issues,  hurricanes and other adverse weather conditions,  oil field service costs,  availability of oil fields,  terrorist attacks,  remediation and other costs resulting from oil spills,  lack of infrastructure, and  failure of equipment or facilities.
• Investments in the Utility Industry. Our firm, on behalf of our clients, may make certain investments in electric utility industries both in the United States and abroad. o Effects of Ongoing Changes in the Utility Industry. In many regions, including the United States, the electric utility industry is experiencing increasing competitive pressures, primarily in wholesale markets, as a result of consumer demand, technological advances, greater availability of natural gas and other factors. In response, for example, the Federal Energy Regulatory Commission (the “FERC”) has implemented regulatory changes to increase access to the nationwide transmission grid by utility and non-utility purchasers and sellers of electricity; similar actions are being taken or contemplated by regulators in other countries. A number of countries or regions, including many states within the United States, are considering or have implemented methods to introduce and promote retail competition. To the extent competitive pressures increase and the pricing and sale of electricity assume more characteristics of a commodity business, the economics of independent power generation projects into which a client may invest may come under increasing pressure. Changes in regulation may result in consolidation among domestic utilities and the disaggregation of many vertically integrated utilities into separate generation, transmission and distribution businesses. As a result, additional significant competitors could become active in the independent power industry. In addition, independent power producers may find it increasingly difficult to negotiate long-term power sales agreements with solvent utilities, which may affect the profitability and financial stability of independent power projects. We cannot give any assurance that:  the existing regulations applicable to electric utility portfolio companies will not be revised or reinterpreted;  new laws and regulations will not be adopted or become applicable to electric utility companies;  the technology and equipment selected by the companies to comply with current and future regulatory requirements will meet these requirements;  the companies’ business and financial conditions will not be materially and adversely affected by future changes in, or reinterpretation of, laws and regulations (including the possible loss of exemptions from laws and regulations) or any failure to comply with current and future laws and regulations; or  regulatory agencies or other third parties will not bring enforcement actions in which they disagree with regulatory decisions made by other regulatory agencies. Pursuant to certain federal statues, the FERC has jurisdiction over the transmission and wholesale sale of electricity in interstate commerce and over the transportation, storage and certain sales of natural gas in interstate commerce, including the rates, charges and other terms and conditions for such services, respectively. Failure to comply with applicable FERC regulations could result in the prevention of operation of a FERC-jurisdictional facility or prevent the sale of such a facility to a third party, as well as the loss of certain rate authority, refund liability, penalties and other unnamed remedies, all of which could result in additional costs to a portfolio company and could adversely affect a fund’s investment results. o Changes in Environmental Laws and Regulations. Certain companies in which our clients invest are subject to a number of environmental laws and regulations that are currently in effect, including those related to the handling, disposal, and treatment of hazardous materials. Changes in compliance requirements or the interpretation by governmental authorities of existing requirements may impose additional costs, all of which could have an adverse impact on these companies. o Regulation of Greenhouse Gases. In particular, both in the United States and globally, emissions of greenhouse gases (“GHGs”) are increasingly regarded as linked to global climate change; this may lead to more stringent regulation of GHGs in the future. Increased public concern and mounting political pressure may result in more international, United States federal or United States regional requirements to reduce or mitigate the effects of GHGs. The EPA has promulgated several rules to address GHG emissions, and has recently proposed additional rules to address GHGs from new and existing coal-fired power plants; such regulations and proposed regulations have been, and many continue to be, the subject of litigation. A number of state and regional efforts have emerged that are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs that typically require major sources of GHG emissions, such as electric power plants, to acquire and surrender emission allowances in return for emitting those GHGs. Any such future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, a portfolio company’s equipment and operations could require it to incur costs to reduce emissions of GHGs associated with its operations. Substantial limitations on GHG emissions could also adversely affect demand for the oil and natural gas. Changes in the regulation of GHGs could impact an investment or make future investments undesirable. o Operational Risk. The utility industry is subject to various operational risks, including:  incidents relating to property damages,  equipment failures, and  personal injuries. These incidents may expose utility companies to potential claims beyond the scope of their insurance coverage. o Weather Conditions. Weather conditions directly influence the demand for electricity. Significant fluctuations in temperatures could have a material impact on energy sales for any given period. Milder temperatures reduce demand for electricity and have a corresponding effect on utility companies’ revenues. In addition, severe storms, such as hurricanes and ice storms, could cause damage to a utility company’s facilities that may require additional costs to repair and have a material adverse impact on the company’s results of operations, cash flows or financial position. o Disruption of Supplies. Disruption in the delivery of fuel could limit utility companies’ ability to operate their facilities. In addition, the supply markets for coal, natural gas and uranium are subject to price fluctuations, availability restrictions and counterparty default. It is not possible to predict the ultimate cost or availability of these commodities. Any of these costs could have a material adverse effect on the companies’ financial results.
• Start-Up, Venture Capital and Technology-Related Investments. Our firm, on behalf of our clients, may invest in portfolio companies that: o are at a conceptual or early stage of development or that may have little or no operating history; o may offer services or products that are not yet developed or ready to be marketed or that have no established market; o may be operating at a loss or have significant fluctuations in operating results; o may be engaged in a rapidly changing business; and o may need substantial additional capital to set up infrastructure, hire management and personnel, develop product prototypes, support expansion or achieve or maintain a competitive position. Such companies face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing and service capabilities and a larger number of qualified managerial and technical personnel. Our firm, on behalf of our clients, may invest a significant portion of its assets in the securities of smaller, less-established companies. Investments in these companies may involve greater risks than are generally associated with investments in more established companies. To the extent there is any public market for the securities held by our client, these securities may be subject to more abrupt and erratic market price movements than those of larger, more-established companies. Less established companies tend to have lower capitalizations and fewer resources, and, therefore, often are more vulnerable to financial failure. Such companies also may have shorter operating histories on which to judge future performance and will have negative cash flow. We cannot give any assurance that any losses will be offset by gains (if any) realized on a client’s other assets. Our firm, on behalf of our clients, may also make significant investments in companies in rapidly changing high-technology fields. The technology industry is characterized by rapid change, evidenced by rapidly changing market conditions and participants, new competing products and improvements in existing products. Accordingly, energy technology companies may face special risks of product obsolescence. There can be no assurance that products sold by portfolio companies will not be rendered obsolete or adversely affected by competing products or that portfolio companies will not be adversely affected by other challenges inherent in the sector.
• Investments in Renewable Energy. o Uncertainty of Renewable Energy Market. The market for renewable energy products is emerging and rapidly evolving. If renewable energy technology proves unsuitable for widespread commercial deployment, if a certain renewable energy technology is ultimately surpassed by other technologies or if the demand for renewable energy products fails to develop sufficiently, our clients’ investments in renewable energy may be adversely affected. In particular, certain of our clients’ renewable energy projects may be structured to seek or incorporate renewable energy tax credits, the terms of which may change or which may be discontinued altogether. While certain renewable energy projects currently enjoy support from certain governments and regulatory agencies, there is no assurance that such support will continue in the future and any reduction or elimination of governmental support may have an adverse effect on the development and construction of such projects. o Competition from Fossil Fuels and Other Non-Renewable Energy Resources. The performance of certain investments of a client will be substantially dependent upon prevailing prices of oil and natural gas. If energy derived from fossil fuels becomes more expensive, the value of renewable energy and renewable energy technology increases as well. Conversely, if new methods of extraction or new sources of non- renewable energy are found, or if the cost of producing energy from these non- renewable sources decreases significantly for other reasons, the attractiveness of renewable energy sources would likely decrease. The market for oil and other non-renewable energy sources remains volatile, and is likely to continue to be volatile in the future. Oil prices are subject to wide fluctuation in response to relatively minor changes in the supply of and demand for oil, market uncertainty and a variety of additional factors that are beyond our control. These factors include:  the level of consumer product demand,  production levels,  investment in exploration,  the refining capacity of oil purchasers,  weather conditions,  energy efficiency of the consumer market,  domestic and foreign governmental regulations,  the price and availability of alternative fuels,  political conditions in the Middle East, Africa, South America, Russia and other oil producing regions,  actions of the Organization of Petroleum Exporting Countries,  the foreign supply of oil and natural gas,  the price of foreign imports, and  overall economic conditions. Continuing technological progress in pollution control equipment for non- renewable energy generation plants may make it feasible for utilities to continue to operate those plants under newly mandated clean air regulations. Non- renewable energy sources, such as fossil fuels, remain relatively abundant in the United States and elsewhere, and continued use of such energy sources in electric generation facilities will also apply pressure to the value of wind and solar power. o Weather and Climatological Risks. Certain renewable energy companies may be particularly sensitive to weather and climate conditions. For example, portfolio companies specializing in hydroelectric power may be subject to variations in precipitation and the flow of the watersheds upon which their power plants are situated. An extended drought in a region where a portfolio company operates could reduce the operating effectiveness of the portfolio company and its assets. Likewise, companies focused on wind and solar energy also are subject to variations in weather patterns. o High Capital Costs for Certain Renewable Energy Investments. Renewable energy projects typically involve relatively high levels of capital investment. These up- front expenditures involve a certain degree of risk. For example, geothermal power projects are characterized by high capital investment for exploration, drilling wells (including exploration wells which may not result in useful production) and installation of plants. Accordingly, geothermal exploration runs the risk of not finding a useable heat resource after expending effort on early reconnaissance and surface exploration equipment. A client may not achieve a return on investment in other renewable energy companies with similar high capital costs also as quickly as with cheaper fossil fuel power plants. o Challenges from Natural Resource Activists. Renewable energy projects will be subject to siting requirements that are similar in many respects to those applicable to fossil fuels plants. Although a renewable energy plant is not likely to face the level of environmental or security issues that conventional fossil fuels and nuclear plants face, natural resource activists may challenge proposals to site a renewable energy plant in many favorable locations based on alleged disturbances to natural habitats for wildlife and adverse aesthetic impacts. In addition to the above risks that relate to the energy and power sectors, there are some important risks associated with Riverstone Credit Partners, L.P., Riverstone Credit Partners II, L.P. and Riverstone Credit Partners III, L.P. (collectively, the “Credit Funds”) and the primary and secondary debt investments that the Credit Funds have made and intend to continue to make.
• Different Strategy. The size and type of investments to be made by the Credit Funds differ from prior Riverstone equity investments or funds, which have substantially different investment strategies and objectives than that of the Credit Funds and were managed by different investment professionals than those involved with the Credit Funds. Certain investment professionals who participate in providing investment advice to the Credit Funds have limited experience of working together at Riverstone or elsewhere individually or as a group in the context of managing a debt investment fund. The transactional advisory experience of the Credit Funds’ professionals prior to joining Riverstone is not fully relevant to the principal transactions they will pursue for the Credit Funds. Accordingly, investors should draw no conclusions from the prior experience of the investment professionals or the performance of any other Riverstone investments or fund and should not expect to achieve similar returns.
• Nature of investment in Senior Loans. The assets of the Credit Funds will likely include first lien senior secured debt, but may also include selected second lien senior secured debt, which involves a higher degree of risk of a loss of capital. The factors affecting an issuer’s first and second lien leveraged loans, and its overall capital structure, are complex. Some first lien loans may not necessarily have priority over all other unsecured debt of an issuer. For example, some first lien loans may permit other secured obligations (such as overdrafts, swaps or other derivatives made available by members of the syndicate to the company). The imposition of prior liens on the Credit Funds’ collateral would adversely affect the priority of the liens and claims held by the Credit Funds and could adversely affect the Credit Funds’ recovery on their leveraged loans. Any secured debt is secured only to the extent of its lien and only to the extent of underlying assets or incremental proceeds on already secured assets. Moreover, underlying assets are subject to credit, liquidity, and interest rate risk. Although the amount and characteristics of the underlying assets selected as collateral may allow the Credit Funds to withstand certain assumed deficiencies in payments occasioned by the borrower’s default, if any deficiencies exceed such assumed levels or if underlying assets are sold it is possible that the proceeds of such sale or disposition will not be equal to the amount of principal and interest owing to the applicable Credit Fund in respect to its investment. Senior secured credit facilities are generally syndicated to a number of different financial market participants. The documentation governing the facilities typically requires either a majority consent or, in certain cases, unanimous approval for certain actions in respect of the credit, such as waivers, amendments, or the exercise of remedies. In addition, voting to accept or reject the terms of a restructuring of a credit pursuant to a Chapter 11 plan of reorganization is done on a class basis. As a result of these voting regimes, the Credit Funds may not have the ability to control any decision in respect of any amendment, waiver, exercise of remedies, restructuring or reorganization of debts owed to the Credit Funds. Senior secured loans are also subject to other risks, including (i) the possible invalidation of a debt or lien as a “fraudulent conveyance”, (ii) the recovery as a “preference” of liens perfected or payments made on account of a debt in the 90 days before a bankruptcy filing, (iii) equitable subordination claims by other creditors, (iv) so-called “lender liability” claims by the issuer of the obligations and (v) environmental liabilities that may arise with respect to collateral securing the obligations. Loans may become non-performing for a variety of reasons. Adverse credit events with respect to any portfolio company, such as missed or delayed payment of interest and/or principal, bankruptcy, receivership, or distressed exchange, can significantly diminish the value of the applicable Credit Fund’s investment in any such company. Recent decisions in bankruptcy cases have held that a secondary loan market participant can be denied a recovery from the debtor in a bankruptcy if a prior holder of the loans either received and does not return a preference or fraudulent conveyance or engaged in conduct that would qualify for equitable subordination. The Credit Funds’ investments may be subject to early redemption features, refinancing options, pre-payment options or similar provisions which, in each case, could result in the issuer repaying the principal on an obligation held by the applicable Credit Fund earlier than expected. In addition, depending on fluctuations of the equity markets, warrants and other equity securities may become worthless. To the extent a Credit Fund holds subordinated debt securities, such debt may be unsecured and structurally or contractually subordinated to substantial amounts of senior indebtedness, all or a significant portion of which may be secured. Such debt investments may not be protected by financial covenants or limitations upon additional indebtedness. Certain of the Credit Funds’ senior loans may be unsecured or be senior subordinated notes. As a consequence, the Credit Funds’ ability to achieve their investment objective may be affected.
• Credit Risk. One of the fundamental risks associated with the Credit Funds’ investments is credit risk, which is the risk that an issuer will be unable to make principal and interest payments on its outstanding debt obligations when due. A Credit Fund’s returns would be adversely impacted if an issuer of debt in which the Credit Fund invests becomes unable to make such payments when due. Although a Credit Fund may make investments that the general partner believes are secured by specific collateral the value of which may initially exceed the principal amount of such investments or the Credit Fund’s fair value of such investments, there can be no assurance that the liquidation of any such collateral would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal payments with respect to such investment, or that such collateral could be readily liquidated. The Credit Funds may also invest in leveraged loans, high yield securities and other unsecured investments, each of which involves a higher degree of risk than senior secured loans. Furthermore, a Credit Fund’s right to payment and its security interest, if any, may be subordinated to the payment rights and security interests of the senior lender. Certain of these investments may have an interest-only payment schedule, with the principal amount remaining outstanding and at risk until the maturity of the investment. In addition, certain instruments may provide for payments-in-kind, which have a similar effect of deferring current cash payments. In such cases, a portfolio company’s ability to repay the principal of an investment may be dependent upon a liquidity event or the long-term success of the portfolio company, the occurrence of which is uncertain. With respect to a Credit Fund’s investments in any number of credit products, if the borrower or issuer breaches any of the covenants or restrictions under the indenture governing notes or the credit agreement that governs loans of such issuer or borrower, it could result in a default under the applicable indebtedness as well as the indebtedness held by the Credit Fund. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. This could result in an impairment or loss of the applicable Credit Fund’s investment or result in a pre-payment (in whole or in part) of the Credit Fund’s investment. As it relates to all of the foregoing risks and related considerations discussed above, it should also be noted that the Credit Funds are expected to also invest in high yield bonds and other unsecured investments, each of which involves a higher degree of risk than senior secured loans.
• Sub-investment Grade and Unrated Debt Obligations. The Credit Funds’ investment strategy is focused on investing in instruments that may include first lien loans and notes, second lien loans and notes, senior unsecured and senior subordinated notes and capital leases, each of which may be sub-investment grade debt obligations. Investments in the sub-investment grade categories are subject to greater risk of loss of principal and interest than higher-rated instruments and may be considered to be predominantly speculative with respect to the obligor’s capacity to pay interest and repay principal. Such investments may also be considered to be subject to greater risk than those with higher ratings in the case of deterioration of general economic conditions. Because investors generally perceive that there are greater risks associated with non-investment grade instruments, the yields and prices of such instruments may fluctuate more than those that are higher-rated. The market for non-investment grade instruments may be smaller and less active than those that are higher-rated, which may adversely affect the prices at which these investments can be sold and result in losses to the Credit Funds, which, in turn, could have a material adverse effect on the performance of the Credit Funds. In addition, the Credit Funds may invest in debt investments which may be unrated by a recognized credit rating agency, which may be subject to greater risk of loss of principal and interest than higher-rated debt obligations or debt obligations which rank behind other outstanding investments of the obligor, all or a significant portion of which, may be secured on substantially all of that obligor’s assets. The Credit Funds may also invest in debt investments which are not protected by financial covenants or limitations on additional indebtedness. In addition, evaluating credit risk for debt investments involves uncertainty because credit rating agencies throughout the world have different standards, making comparison across countries difficult. Any of these factors could have a material adverse effect on the performance of the Credit Funds.
• High Yield Debt. The Credit Funds may invest in debt securities that may be classified as “higher-yielding” (and, therefore, higher-risk) debt securities. In most cases, such debt will be rated below “investment grade” or will be unrated and will face both ongoing uncertainties and exposure to adverse business, financial or economic conditions and the issuer’s failure to make timely interest and principal payments. The market for high yield securities has experienced periods of volatility and reduced liquidity. High yield securities may or may not be subordinated to certain other outstanding securities and obligations of the issuer, which may be secured by substantially all of the issuer’s assets. High yield securities may also not be protected by financial covenants or limitations on additional indebtedness. The market values of certain of these debt securities may reflect individual corporate developments. General economic recession or a major decline in the demand for products and services in the industry in which the borrower operates would likely have a materially adverse impact on the value of such securities or could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default of such securities. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of these high yield debt securities.
• Capital Structure Arbitrage. In certain circumstances the execution of a distressed investing strategy involves the ability of the general partner to identify and exploit the relationships between movements in different instruments within an issuer’s or borrower’s capital structure (e.g., senior bank debt, second liens, debt instruments and other obligations, convertible and non-convertible senior and subordinated debt, preferred equity and common stock). Identification and exploitation of these opportunities involve uncertainty. In the event that the perceived pricing inefficiencies underlying the investments of an issuer held by a Credit Fund were to fail to materialize as expected by the general partner, the Credit Fund could incur a loss.
• Nature of Junior, Subordinated and/or Unsecured investments. Each Credit Fund’s strategy may entail acquiring investments that are junior, subordinated and/or unsecured instruments. If the portfolio company in question does not successfully reorganize, the applicable Credit Fund wil please register to get more info

Neither our firm nor any management person has been involved in any investment-related criminal or civil actions in a domestic, foreign or military court. Neither our firm nor any management person has been subject to an administrative proceeding before the SEC, any other federal regulatory agency, any foreign financial regulatory authority or any self-regulatory organization. In 2008, the Office of the Attorney General of the State of New York commenced an investigation into the use of placement agents by a number of private equity and hedge funds in connection with investments by New York State Common Retirement Fund (“NYSCRF”). Our firm and its principals cooperated voluntarily with the Attorney General’s investigation. On June 11, 2009, our firm resolved the Attorney General’s investigation. According to the agreement between our firm and the Attorney General, we agreed to make a payment of $30 million to New York State as restitution for the benefit of NYSCRF, and we agreed to adopt the Attorney General’s Public Pension Fund Reform Code of Conduct. On December 9, 2009, David M. Leuschen, a Founder of our firm, reached a resolution with the Attorney General. According to the supplemental agreement between Mr. Leuschen and the Attorney General, Mr. Leuschen and our firm agreed to make a $20 million payment as restitution for the benefit of NYSCRF. The SEC also conducted an investigation into the use of placement agents in connection with investments by NYSCRF. The SEC filed a civil complaint against certain individuals and entities, in which the SEC alleged violations of federal securities laws in connection with investments by NYSCRF. Neither Riverstone nor any of its employees has been named as a defendant in any action by the SEC. The SEC requested that our firm and Mr. Leuschen voluntarily provide certain information. Our firm and Mr. Leuschen cooperated with the SEC. In August 2011, the staff of the SEC’s New York Regional Office informed Riverstone and Mr. Leuschen in writing that no action would be taken with respect to Riverstone or Mr. Leuschen in connection with matters covered by the SEC’s investigation. please register to get more info

Certain affiliates of Riverstone Investment Group serve as general partners or management companies of the various Riverstone sponsored funds. All Riverstone investment advisory affiliated entities are registered investment advisers in accordance with SEC guidance under the Advisers Act, pursuant to Riverstone Investment Group’s registration with the SEC. These affiliated entities operate as a single advisory business together with Riverstone Investment Group and share common owners, officers, members and employees. All of these affiliated entities are under common control and subject to Riverstone Investment Group’s code of ethics and Advisers Act compliance program pursuant to the requirements of the Advisers Act. Relationships with Pooled Investment Vehicles Our firm or our affiliates, along with our joint venture partners, sponsor, manage and serve as general partners of the following funds, as well as certain investment vehicles formed to invest alongside these funds:
• Carlyle/Riverstone Global Energy and Power Fund II, L.P.,
• Carlyle/Riverstone Global Energy and Power Fund III, L.P.,
• Riverstone/Carlyle Global Energy and Power Fund IV, L.P.,
• Riverstone Global Energy and Power Fund V, L.P.,
• Riverstone Global Energy and Power Fund VI, L.P.,
• Riverstone Non-ECI Partners, L.P.,
• Riverstone Energy and Power CKD Trust,
• Riverstone Renew CKD Trust,
• Riverstone Credit Partners, L.P.,
• Riverstone Credit Partners II, L.P.,
• Riverstone Credit Partners III, L.P.,
• Riverstone/Carlyle Renewable Energy and Alternative Energy Fund II, L.P.,
• Riverstone Energy Limited,
• Riverstone Power Partners, L.P., and
• Riverstone Credit Opportunities Income Plc. Please see Items 4, 8 and 11 for a description of the conflicts of interest that may arise in these relationships and how we manage them. Relationships with Investment Advisers We are affiliated with the following investment advisers, which are relying advisers:
• Riverstone Europe LLP (registered with the Financial Conduct Authority in the United Kingdom)
• Riverstone International Limited (an exempted company limited by shares incorporated in the Cayman Islands)
• Riverstone CKD Management Company, S. de R.L. de C.V. (a Mexican trustor and investment manager)
• Riverstone CKD II Management Company, S. de R.L. de C.V. (a Mexican trustor and investment manager) Our firm and our joint venture partner, The Carlyle Group, form partnerships or limited liability companies that serve as the general partners to certain of our funds. Our firm and our joint venture partner also provide investment management services to those jointly- sponsored funds pursuant to investment management agreements. Our firm forms partnerships or limited liability companies that serve as the general partners to our other funds that are not jointly-sponsored with The Carlyle Group and provides investment management services to those other funds pursuant to investment management agreements. These relationships and related management or other fees are further disclosed in the private offering materials of each fund client. See Items 4, 5, 8 and 11 for a discussion of the conflicts of interests that arise as a result of these relationships (including, the performance-based compensation that our firm or our affiliates may receive and certain trade allocation issues). In addition, the firm is affiliated with Riverstone Capital Services LLC, a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Riverstone Capital Services LLC acts as a placement agent to certain Riverstone sponsored private funds. Furthermore, certain investment funds hold passive minority interests (the “Minority Investors”) indirectly in Riverstone Holdings LLC and certain of its affiliates that entitle the Minority Investors to portions of the management fees, carried interest and other compensation earned by the firm. The Minority Investors are sponsored by a financial services firm that, from time to time, provides, directly and indirectly through various affiliates, investment banking, brokerage, financing, advisory and other services on an arm’s length basis to the firm, its funds and the portfolio companies. None of the Minority Investors, the financial services firm or their affiliates has authority over or is involved in the firm’s day-to-day business operations or investment decisions, although the Minority Investors have certain minority protection consent rights. Accordingly, the firm does not expect any material conflicts of interest to arise as a result of any business arrangements between the firm, its funds and/or the portfolio companies, on the one hand, and the financial services firm and its affiliates, on the other hand. please register to get more info

Personal Trading
Our firm has established a code of ethics (“Code of Ethics”) that sets forth standards of ethical conduct for our professionals. This code addresses standards of treating clients ethically, potential conflicts of interest and personal trading by our firm and our affiliates and professionals. In addition, we have established policies and procedures that address, among other things, potential conflicts of interest that might arise in the management of the funds that we sponsor. Our policies prohibit our employees from purchasing or selling, directly or indirectly, any security while in possession of material, non-public information regarding the security, whether or not this information was obtained in the course of employment. Our employees also may not discuss material, non-public information with anyone outside of our firm and our affiliates. Our firm generally prohibits our employees from trading in equity or debt securities in companies in the energy or power sectors, except that (1) employees may trade in energy- or power-related mutual funds and (2) employees may trade in energy exchange- traded funds (“ETFs”), commodity interests, royalty trusts and publicly-traded securities also owned by Riverstone, only after receiving pre-clearance from our chief compliance officer or his/her designee. In addition, prior to investing in shares of initial public offerings or private placements, an employee must first pre-clear the trade with our chief compliance officer or his/her designee.

Our employees are not permitted to take for their own advantage an opportunity that rightfully belongs to our firm, our affiliates or our funds, are prohibited from using corporate property, information or position for personal gain, and may not compete directly or indirectly with our firm, our affiliates or our funds.

Our employees and control persons must certify annually that they have read and agree to comply in all respects with our Code of Ethics and that they have disclosed or reported all personal securities transactions, holdings and accounts required to be disclosed or reported by our Code of Ethics. Additionally, our Code of Ethics provides for a range of sanctions, as deemed appropriate by our senior management, should anyone violate the Code of Ethics. These sanctions include, but are not limited to, a warning, fines, disgorgement, suspension, or termination of employment. The paragraphs above only represent a summary of key provisions in our Code of Ethics. We will provide a copy of our entire Code of Ethics to any prospective client, any client or any investor in our funds upon request. Under certain circumstances, we may recommend to clients, or buy or sell for client accounts, securities in which we or our affiliates have a material financial interest. Because our affiliates or our joint-venture partners are the general partners of our funds, we have a material interest that could create conflicts that must be managed. Since our funds may be subject to different management fee and performance allocation structures and we may receive a carried interest from one fund sooner than from another fund, there may be a conflict of interest on how we allocate portfolio investments between various funds. We have instituted a number of allocation policies in order to mitigate those conflicts. Generally, when a core private investment fund which we advise has invested or committed 75% of its committed capital, we may establish a new core private investment fund with a similar investment strategy. In general, the new core private investment fund may co-invest with the existing fund going forward until the existing fund has invested or committed 90% of its committed capital (for investments, management fees and expenses), after which point the new fund may make investments without being required to share them with the existing fund. To the extent that an investment opportunity is appropriate for both the existing fund and the new fund, we expect that both funds should invest on the same terms and conditions, with allocations made between the funds on a basis that the investment committee of each of the funds determines in good faith to be fair and reasonable. In certain cases, the organizational and charter documents of a fund may require the investor advisory committee to approve fund allocations between various funds. In the absence of this requirement, we will seek to allocate investments and investment opportunities on a fair and reasonable basis and may, in our sole discretion, further seek the approval of a fund’s investor advisory committee. Additionally, for other investment vehicles sponsored by us to invest alongside our funds in specific portfolio companies, the allocation of the investment opportunity to such vehicles is sometimes dictated by the investment limitations of the corresponding fund. In circumstances where an entire investment could be made by the applicable fund, we may still allocate a portion of such investment to one or more other investment vehicles if we believe in our good faith judgment that the full investment would unreasonably limit or otherwise affect the diversification of the applicable fund or that a particular strategic co- investor would add value to the investment in terms of consummating, operating or exiting the investment. In some cases, a fund may invest alongside one or more other funds or entities not controlled by Riverstone, as members of a consortium.

In addition, the firm may structure an investment to permit another fund focused on credit investments to participate in one or more debt tranches of the capital structure of a portfolio company of an equity fund (either together with, or separate from, participation alongside the portfolio investment made by the equity fund). The firm may face conflicts of interests arising from the different interests held by different firm clients in the underlying portfolio company (e.g., with respect to the terms of high yield securities or other debt or other instruments, the enforcement of covenants, the terms of recapitalizations and the resolution of workouts or bankruptcies). It is possible that in a bankruptcy proceeding one fund’s interests may be adversely affected by virtue of the involvement and actions of another fund relating to its investment. In the unlikely event that we cause one fund to purchase an investment from another fund (known as a cross trade), there may be a conflict of interest in how we allocate that trade and the terms of that trade. If we intend to engage in any cross trade, the investment committees of both relevant funds will review their respective fund’s charter and organizational documents to determine if there are any prohibitions or restrictions on cross trades, and the nature of those restrictions. In addition, the investor advisory committee of each fund must approve the cross trade prior to its execution. Our firm or our affiliates will document the reason for the decision to effect a cross trade, including the price and any potential transaction-cost savings. In any case, neither our firm nor any affiliate may charge any commissions to either fund. In addition, our funds may buy from or sell to our firm or affiliates. This could potentially create a conflict of interest between our firm and a fund because we have an incentive to negotiate more favorable terms for us or our affiliates at the expense of our client. As a result, we are subject to client notice and consent obligations in connection with the operation of the private investment funds for which we act as investment manager if those transactions are deemed to be “principal transactions.” We have established policies and procedures that address these principal transactions and the funds’ investment guidelines, limited partnership agreements and charter documents typically establish the terms of any principal transactions or restrict principal transactions. To the extent that a fund may engage in principal transactions with our firm or our affiliate, our client receives disclosure of the potential for principal transactions and the process for approving them. Most importantly, we establish an investor advisory committee for each fund to review and resolve conflicts of interest, including with respect to principal transactions, that we bring to it in our discretion or as required by the fund’s applicable governing documents. If we intend for a client to engage in a principal transaction, we will notify the client’s investor advisory committee of the transaction and must obtain written approval from the investor advisory committee or the requisite percentage of limited partners before we proceed with the principal transaction. We also review the client’s organizational documents to determine the procedures to be followed to approve principal transactions. In the absence of required consent, we will not proceed with the transaction. Our firm, together with our affiliates, has the obligation to invest certain amounts in or alongside our funds on generally the same terms and conditions as the funds or their investors (except with respect to fees and carried interest payable to our firm), as part of our negotiated sponsor commitment. In certain of our funds, our firm and our affiliates have an option to invest up to an additional 10% in the aggregate of any investment made by such funds, which additional amount has been negotiated with investors in these funds. Our principals, employees or senior advisors invest in other private equity investment vehicles (including single investor-co-investments) managed by other advisers. In some cases, our firm, its affiliates or the funds may purchase portfolio companies that are owned by such other investment vehicles, which may indirectly benefit any principals, employees or senior advisors. Certain advisors and other service providers, or their affiliates (including any accountants, administrators, lenders, brokers, attorneys, consultants, investment or commercial banking firms and certain other advisors and agents) to a fund, the firm or their portfolio companies may also provide goods or services to or have business, personal, political, financial or other relationships with the firm (including sponsoring the Minority Investors). Such advisors and service providers may be investors in a fund, affiliates of a general partner and/or sources of investment opportunities and co-investors or counterparties therewith. These relationships may influence a general partner in deciding whether to select or recommend such a service provider to perform services for a fund or a portfolio company (the cost of which will generally be borne directly or indirectly by a fund or such portfolio company, as applicable). Notwithstanding the foregoing, investment transactions for a fund that require the use of a service provider will generally be allocated to service providers on the basis of best execution, the evaluation of which includes, among other considerations, such service provider’s provision of certain investment-related services and research that the general partner believes to be of benefit to a fund. In certain circumstances, advisors and service providers, or their affiliates, may charge different rates or have different arrangements for services provided to the firm and its affiliates as compared to services provided to a fund and its portfolio companies, which will result in more favorable rates or arrangements than those payable by a fund or such portfolio companies. The funds’ portfolio companies may be counterparties or participants in agreements, transactions or other arrangements with portfolio companies of other investment funds managed by the firm or its affiliates that, although the firm determines to be consistent with the requirements of such funds’ governing agreements, may not have otherwise been entered into but for the affiliation with the firm, and which may involve fees and/or servicing payments to the firm’s affiliated entities which are not subject to the management fee offset provisions described in the applicable fund governing documents. In addition, as a result of the funds’ controlling interests in portfolio companies, the firm typically has the right to appoint board members to such portfolio companies, or to influence their appointment. Serving on a portfolio company board may give rise to conflicts to the extent that a firm employee’s (or consultant’s) fiduciary duties to a portfolio company as a director may conflict with the interests of the firm clients that are invested in such portfolio companies. please register to get more info

Because we render advice to private equity funds, and investments are made on a negotiated basis, opportunities for trade executions are rare. On those rare occasions that our firm executes trades on behalf of its clients, our professionals must demonstrate compliance with broker selection, recordkeeping and other requirements related to trading, including “best execution.” Our firm seeks the most advantageous terms for fund trades. While trade price is often a significant quantitative factor in determining best execution, it is not the sole determinative factor. When placing orders with brokers for execution, we also evaluate qualitative execution factors, such as:
• available prices and rates of commissions or other compensation to brokers,
• efficiency of execution, bearing in mind the size of the order and characteristics of the security (for example, liquid vs. illiquid),
• financial responsibility of the broker-dealer, and
• the ability of the broker-dealer to execute block trades. When selecting brokers for underwriting transactions, we consider a different set of factors, such as:


• expertise in a particular industry,


• potential network for selling securities,


• past success with public offerings, and


• potential underwriting discount. Research and Other Soft Dollar Benefits. We may receive unsolicited research from brokers, dealers, and banks through which we execute portfolio trades. In circumstances in which we use such research, the quality and ability to receive research may factor into the selection of brokers, dealers and banks executing portfolio trades. We do not have any agreements in place that would require that we give any specified amount of brokerage to any broker-dealer. Referrals in Selecting or Recommending Broker-Dealers. We do not receive referrals for clients from any broker-dealers. In limited circumstances, we may use a broker where a division or affiliate of the broker may have referred or may refer investors to our clients. We may be deemed to have a potential conflict of interest in receiving referrals in that we may have an incentive to select those brokers. In order to mitigate such a conflict, we focus on the criteria set forth above when selecting brokers. Directed Brokerage. As our clients are all private investment funds managed by us, we select all broker-dealers and do not permit our clients to direct brokerage. Aggregation of Trades – Policies and Procedures. Because we render advice to private equity funds, and investments are made on a negotiated basis, opportunities for trade aggregation are rare with respect to different funds. However, in addition to the limited partnerships that serve as the core private investment funds advised by our firm, we have and in the future may create parallel and alternative investment vehicles, as well as feeder funds that invest directly or indirectly in the core fund or parallel and alternative vehicles, to the extent these structures are consistent with applicable law and the core fund’s organizational documents. Generally, a parallel investment vehicle will invest and divest proportionally in the same investments, and on virtually the same terms and conditions and at the same time, as the core private investment fund, subject to any limitations in the parallel investment vehicle’s organizational documents. We have and in the future may establish alternative investment vehicles for tax reasons to permit certain investors to make investments outside of the core private investment fund, which investments generally will function as if made by the core fund on a substantially equivalent economic basis. Results of Aggregating Trades Ultimately, clients can benefit when we aggregate trades because we get volume discounts on execution costs. On the other hand, situations may occur where one client could be disadvantaged because:
• the average price received for an aggregate order may be worse than what a client would have received had it traded a smaller quantity of shares on its own, or
• the investment activities we conduct for other clients may result in, among other things, multiple clients needing to dispose of commonly held securities or other common investment positions at the same time. When we do not aggregate trades, our clients pay higher execution costs than they would have had we aggregated the trades. please register to get more info

Our firm’s professionals serve on the investment committees for the private investment funds for which we act as adviser, and they routinely monitor their portfolio investments. Their reviews focus on operations, financial performance and strategic direction of each portfolio company owned by the funds. The investment committee as a whole performs comprehensive reviews quarterly, and a subset of the investment committee monitors each portfolio investment more frequently to ensure compliance with its stated objective. In addition, the investment committee reviews the valuations of funds’ investments that are non-marketable securities. Investors in our funds receive written financial reports, including information relevant to each investor’s fund investment and a description of the fund’s investments, on a quarterly basis. Investors in our clients also receive audited financial statements of the funds in which they are invested, valuations of all the fund’s investments and tax information necessary for the completion of U.S. tax returns on an annual basis. In addition to the information provided to all of our funds’ investors, we have and in the future may arrange to provide certain investors of our clients with additional information or more frequent reports that other investors will not receive. please register to get more info

Our firm may, at times, receive an economic benefit from non-clients for providing advisory services to our funds. For instance, when we conduct certain private equity- related transactions on behalf of our clients, we might receive fees from portfolio companies in which our clients are invested. From these relationships, we may receive:
• transaction fees (e.g., advisory fees we charge to any portfolio company and organizational or success fees we receive in connection with any fund investment),
• monitoring fees,
• investment banking, underwriting, and/or syndication fees,
• break-up fees, and/or
• directors’ fees (including in-kind compensation). We apply a portion of those fees we receive in these cases to reduce the management fees payable by the applicable client and its investors. The operating agreements of each of our funds set out the terms of these arrangements, which may vary from fund to fund. There will not be any offset applied to the co-investment vehicles, whether or not they pay any management fees. Our affiliated broker-dealer, Riverstone Capital Services LLC, acts as placement agent to certain of our private funds. We also engage third party placement agents or “finders” to solicit investors for certain of our funds. Certain of our affiliates have also entered into placement or “finders” arrangements for soliciting investors, including with certain affiliates of The Carlyle Group, our joint venture partner, with respect to our jointly- sponsored funds. Our funds disclose in their offering documents that they may enter into these arrangements. In addition, certain of our clients may require investors to acknowledge any fee payments relating to solicitation arrangements. please register to get more info

Due to our access to funds and authority to deduct fees and other expenses from a client’s account and services by our affiliates as general partners of our funds, we are deemed under Rule 206(4)-2 of the Advisers Act to have custody of our clients’ funds. We utilize the services of a bank or other qualified custodian (as defined under Rule 206(4)- 2) to hold all funds and securities of any of our clients, to the extent required by the Advisers Act and SEC guidance. We also ensure that the qualified custodian maintains these funds in accounts that contain only clients’ funds and securities, under our name as agent or trustee for the clients. While Rule 206(4)-2 generally requires an investment adviser to ensure that a qualified custodian sends account statements to clients at least quarterly, we are not subject to this requirement because all private equity funds managed by us are subject to audit at least annually by an independent auditor that is registered with, and subject to regular inspection by, the Public Company Accounting Oversight Board. In these cases, we distribute audited financial statements to all limited partners of our funds within 120 days of the end of the fiscal year of the fund. please register to get more info

Our firm accepts discretionary authority to manage our clients’ securities accounts. Despite this broad authority, we are committed to adhering to the investment strategy and program set forth in each of our fund’s private offering materials and/or investment management agreement. These documents cover matters such as the types and amounts of securities of which a client’s portfolio will consist, portfolio allocation limitations and the degree of risk assumed by a client’s portfolio. Before accepting the discretionary authority inherent in managing our funds, we carefully review the investment strategies and investment programs set out in our funds’ offering documents. Investment advice is provided directly to each fund and not individually to the limited partners of any fund. please register to get more info

Proxy Voting Policies and Procedures We have implemented proxy voting policies and procedures in accordance with securities laws and our fiduciary obligations to our clients. We strive to vote client proxies in a manner consistent with each client’s best interests. Our firm votes proxies in accordance with guidelines in effect from time to time. We generally expect to vote proxies in accordance with the recommendations of company management. Generally, we will cast proxy votes in favor of proposals that:
• maintain or strengthen the shared interests of shareholders and management,
• increase shareholder value,
• maintain or increase shareholder influence over the issuer’s board of directors and management,
• maintain or enhance the independence of the board of directors, and
• maintain or increase the rights of shareholders. We will generally cast proxy votes against proposals having the opposite effect of those items listed above, particularly where we believe that a proposal will have a dilutive effect on the value of the underlying security. In addition, we will vote against a proposal or recommendation of management if we determine that such a vote is in the best interests of our client. Prior to voting, we will determine whether an actual or potential conflict of interest with our firm or any other interested person exists in connection with the proposal(s). If an actual or potential conflict is found to exist, we will engage a reputable non-interested party to independently review our vote recommendation and to confirm that our vote recommendation is in the best interest of the client under the circumstances. If the independent non-interested party determines that our vote recommendation is not in the best interest of a client under the circumstances, then we will vote in the manner suggested by the independent non-interested party. It is always possible that, after appropriate analysis, we may decide that declining to cast a vote at all is in the best interest of our client. In limited situations, we may not have the authority to vote on certain clients’ securities. In these cases, clients may contact us, at any time, with questions about a particular proxy solicitation. The guidelines included in the proxy voting policy and procedures are subject to change as Riverstone periodically reassesses those policies and procedures to reflect developments in proxy voting and the best interests of its clients. Riverstone’s proxy voting policies and procedures set forth guidelines for voting proxies with respect to private companies, public companies and also for certain types of proposals. A copy of the proxy voting policy and procedures is provided to each fund and delivered to each investor upon investment in a fund. A copy is also available upon request. We provide information regarding any proxies actually voted by us to any client and any investor of a fund upon the request of the client or the investor. please register to get more info

We do not believe any financial condition exists that is reasonably likely to impair our ability to meet contractual commitments to our clients. Our firm has never been the subject of a bankruptcy petition. please register to get more info