Blackstone, GSO lead $500m investment in energy infrastructure platform

Kayne Anderson Energy Funds is also part of the consortium that has made an all-equity purchase of oil pipeline specialist Crestwood Midstream Partners.

The Blackstone Group, its affiliate GSO Capital Partners and Kayne Anderson Energy Funds have committed $500 million (€321 million) in equity to energy investment platform Crestwood Midstream Partners, marking the first transaction in which Blackstone and GSO have publicly co-invested in a deal.

Houston, Texas-based Crestwood will use the fresh capital base to build a diversified portfolio of midstream investments in natural gas, natural gas liquids, crude oil and refined products. The company specialises in constructing and acquiring midstream oil pipelines.

Crestwood is headed by energy industry veteran Bob Phillips, former chief operating officer of midstream energy services giant EPD and current director of Pride International, a major offshore drilling contractor. Phillips also sits on Kayne Anderson’s advisory board.

Blackstone contributed $275 million in equity, while Kayne Anderson and GSO contributed $150 million and $75 million, respectively.

“We have been closely following the developments in the midstream sector and believe the Crestwood management team possesses a deep understanding of the sector and has the credibility and relationships to build a world-class midstream business,” David Foley, Blackstone senior managing director, said in a statement.

Blackstone is no stranger to startup energy ventures, and has been highly active in the sector despite a marked volume drop in its general buyout activity. The all-equity nature of the transaction deal also signals a growing trend within private equity of more equity-intensive deal making.

Blackstone’s current energy development platforms include Kosmos Energy, seeded with $300 million in 2004 to undertake international oil and gas exploration projects, and Sithe Energy, which manages a portfolio of several power plant projects.

In related news, Blackstone earlier this week filed to register more than 818,000 common shares potentially issuable to employees and “selected other persons” in exchange for the same number of Blackstone partnership units issued during the firm’s public debut in June of last year.

The exchange will not have any effect on the total number of Blackstone outstanding diluted stock, according to a statement from Blackstone.