Haddington in €510m German gas storage deal

The energy infrastructure-focused fund has agreed to acquire a natural gas company that is developing storage facilities in salt caverns in northwest Germany.

A private equity fund managed by Haddington Ventures has agreed to acquire Continental Gas Storage Deutschland for an estimated investment of €510 million over the next seven years. 

Continental Gas Storage Deutschland (CGS) is developing an underground facility in Northwest Germany that will convert nine salt caverns into gas storage terminals, according to a statement. The area is “set to become the EU’s largest gas trading market area,” according to CGS’ website. 

The investment will mark the first European deal for the Haddington Energy Partners IV Fund, which is set to close in late 2011 or early 2012, according to Haddington managing director J. Chris Jones.  Jones said that the target size of the fund is $250 million, with a hard cap of $350 million.

Haddington’s third fund closed in May 2006 with total commitments of $182 million.  Its active investments include gas and electricity storage businesses in Ohio, Louisiana, Texas and Utah.

Haddington will invest €310 million for initial acquisition, financing and construction costs of the CGS project, which will require an additional €200 million in future years, according to a statement.

The project is subject to further due diligence, with final close expected in the middle of this year. Jones said the storage was not yet completely contracted, though CGS is not limited to contracts with public utilities.   

“CGS is going to offer storage services to all the players in the European gas markets,” Jones said.

Jones added that Haddington was not immediately looking at future European investment because the CGS investment would require several years of work.

“I think it will keep our full attention for that period,” Jones said.

Construction is expected to be completed in 2018, with the nine caverns going on-line in 2019. 

Houston, Texas-based Haddington Ventures invests in the midstream energy sector, which encompasses businesses that gather, store, transport and process oil, natural gas and other fossil fuels and products from their production sources to end users such as electric utilities.