Apollo spots LNG as ‘energy transition enabler’ with $2bn deal

The US-based group has formed a joint venture with New Fortress Energy supplying LNG to countries historically ‘below the radar’ of energy companies.

Apollo has agreed to a joint venture with New Fortress Energy that will see the US fund manager take a majority stake in an infrastructure platform serving the liquified natural gas market with an enterprise value of $2 billion.

Apollo will have an 80 percent stake in the joint venture, with the portfolio consisting of six storage and regasification units, two LNG carriers and three floating storage units. The pair said in a statement that the joint venture will create a “global marine infrastructure platform”, although Brad Fierstein, partner at Apollo, told Infrastructure Investor “it is not a shipping business”.

“The vessels are under long-term contracts to support specific terminals which have long-term gas supply agreements with third parties,” he said. As part of the deal, NFE has agreed to charter 10 of the 11 vessels from the platform for up to 20 years from either upon close of the deal or upon expiration of the vessels’ existing third-party charter agreements.

The assets serve the Caribbean and Latin America in particular, shipping to countries such as Jamaica, Brazil and Mexico, although it also exports to Asia and Europe. The LNG sector in general has been receiving more interest in recent months following Russia’s invasion of Ukraine and the US pledge to boost exports to Europe.

“Some of these markets have been below the radar of larger energy companies, historically, due to scale,” Fierstein added. “LNG is not a new technology, but what is new is the availability of LNG with so much new liquefaction capacity coming online and it’s hard to put that genie back in the bottle in terms of availability and competitiveness of LNG as a global fuel.”

He explained that Apollo sees the LNG sector as a broader part of its sustainable investment platform, which it created earlier this year with the goal of investing $100 billion in energy transition assets over the next decade, bringing capital from its infrastructure, credit, private equity, other real assets, natural resources and impact businesses.

“LNG is a critical enabler for the energy transition and the types of power it displaces,” Fierstein said. “It has lower carbon emissions than oil or coal, is more affordable and it is necessary to balance the intermittent nature of renewables to help countries transition. It’s serving markets that don’t really have alternatives.”

While Apollo and NFE’s statement said the investment came from “funds managed by Apollo”, Fierstein declined to comment on which funds specifically committed to the deal. Apollo is currently deploying its second $2.5 billion infrastructure fund, ahead of what it is believed to be a planned launch later this year of a new vehicle set to target about $4 billion.

Apollo and NFE have worked together previously on LNG deals, albeit through funds from its credit business. In January 2020, NFE secured an $800 million loan from the group which it said at the time will help build LNG terminals and infrastructure around the world.