Energy Capital forms midstream infra developer(2)

Energy Capital Partners, an energy-focused private equity firm founded by three Goldman Sachs alumni, has formed a platform company to invest in North American gas infrastructure.

The company, Summit Midstream Partners, will focus on acquiring and developing a portfolio of midstream energy infrastructure assets across North American oil and gas production basins and import centers, Energy Capital Partners said in a statement.

Midstream
sector: still
attractive to
investors

The company recently completed its seed acquisition: a 75 percent stake in DFW Midstream Services, a developer of gas gathering pipelines in Texas’ Barnett Shale. To date, the firm has developed approximately 25 miles of gas gathering pipelines and plans to build approximately 60 more miles of gas gathering lines in the next year.

Summit did not disclose financials for the DFW deal. The seller, Energy Future Holdings, a Texas utility that was taken private in a $45 billion transaction in 2007, will own the remaining 25 percent of DFW, according to the press release.  An investor group including Kohlberg Kravis Roberts, TPG and Goldman Sachs Capital Partners acquired the company in the largest-ever buyout deal to close.

The midstream energy sector includes the storage, marketing and transportation of crude oil, natural gas and their related output. In recent months, numerous infrastructure investors – including Global Infrastructure Partners, Alinda Capital and Conduit Capital – have committed capital to this sector by investing in natural gas pipelines, which carry gas between upstream businesses such as production centers and downstream businesses such as refineries and petrochemical plants.

Summit will invest in natural gas gathering pipelines, treating, compression, and processing facilities, large-diameter intrastate and interstate pipelines and crude oil, refined product and natural gas liquids pipelines and storage terminals, according to its website.

Summit is wholly owned by Energy Capital Partners, which worked with Steve Newby, a former energy investor at ING Investment Management, to found the firm. It is the firm's second midstream energy investment after Cardinal Gas Storage, a joint venture with Martin Resource Management that builds and maintains natural gas storage facilities across North America. Energy Capital Partners invested in Cardinal Gas Storage in May 2008.

Energy Capital Partners is currently raising its second energy fund, Energy Capital Partners II, which is targeting $3.5 billion. The fund recently gained a $40 million commitment from the Indiana Public Employees’ Retirement Fund.

The firm was founded by Doug Kimmelman, Scott Helm and Thomas Lane, all Goldman Sachs alumni, in 2005.