First Reserve, Petrofac partner in energy infra JV

The energy-focused PE firm and Petrofac will form PetroFirst Infrastructure Partners to acquire several existing assets from Petrofac and invest in new projects.

Connecticut-based fund manager First Reserve has signed a $1.25 billion agreement with Petrofac, a services provider to the oil and gas industry, to launch a new midstream joint venture, PetroFirst Infrastructure Partners, the two companies said in a joint statement.

The new venture will deploy capital to purchase a number of existing assets from Petrofac’s integrated energy services (IES) division as well as to acquire new energy infrastructure projects built and/or operated by Petrofac.

The first transaction under the agreement will see First Reserve buying 80 percent of three of Petrofac’s deployed and contracted floating production facilities for an initial consideration of approximately $450 million that will be funded through a combination of debt and equity. Petrofac will retain the remaining 20 percent of the assets through its holding company Petrofac FPSO Holding, a spokesperson for First Reserve told Infrastructure Investor.

Petrofac’s holding company will also retain a put option, which may require Petrofac to repurchase one or more of the facilities or their holding companies for an agreed aggregate consideration ranging from $39 million to $105 million at the end of their deployment or at certain other key junctures, according to the statement.

The transaction, subject to certain conditions, is expected to close by the end of the third quarter of 2014.

Of the $1.25 billion in equity both sides have agreed to commit to the joint venture, about $1.07 billion will remain after this first transaction for investments in future projects.

PetroFirst is a portfolio company, wholly owned by First Reserve Energy Infrastructure Fund I (FREIF I), which closed in May 2011 on $1.23 billion.

Earlier this month, the energy-focused private equity firm reached a final close on its second energy infrastructure fund on its hard cap of $2.5 billion. Launched in October 2013, First Reserve Energy Infrastructure Fund II (FREIF II) will – like its predecessor – focus on contracted power, including conventional generation and renewable power; contracted midstream, including pipelines, storage and liquefied natural gas (LNG) facilities; contracted energy assets, such as floating storage facilities and large-scale equipment; and regulated transmission and distribution.

To date, First Reserve has raised more than $26 billion since its inception in 1983. The firm has completed more than 475 transactions, including platform investments and add-on acquisitions, across six continents.

Petrofac, which is listed on the London Stock Exchange, designs, builds, operates, maintains and manages oil and gas facilities; trains personnel; and develops and co-invests in upstream and infrastructure projects. It has seven operational centres in the UK, India and Malaysia and 24 offices worldwide.