Investors give $1bn to natural gas infra fund

In yet another sign of the popularity of the natural gas sector, Tortoise Capital Advisors, a Kansas-based investment manager, priced the largest-ever public offering for one of its infrastructure funds when the Tortoise MLP Fund was offered to investors.

Tortoise Capital Advisors, a Kansas-based investment manager, has raised over $1 billion for a New York Stock exchange-listed fund that will invest in natural gas infrastructure investments.

The initial public offering, priced yesterday at $25 per share, is yet another sign of the keen interest investors are showing in the US’ natural gas sector. It also marks the firm’s largest-ever public share offering across its now six closed-end listed funds.

Tortoise isn’t alone in tapping the public markets for the natural gas sector. Chesapeake Midstream Partners, a Global Infrastructure Partners-backed natural gas joint venture, is also offering shares this week, expected to price between $19 to $21 per share and raise $425 million.

Tortoise said it will use the proceeds from the offering to buy stock in master limited partnerships, or MLPs, in the natural gas sector. MLPs are a type of company that doesn't pay corporate income taxes, passing on its dividend payments to investors who then pay tax on an individual level.

MLPs are very common in the natural gas pipeline sector, where owners of such infrastructure can expect predictable earnings that support stable quarterly dividends for investors. Kinder Morgan, one of the largest pipeline transportation and storage companies in the US, is an MLP.

The Tortoise MLP Fund would be able to invest in companies such as Kinder Morgan. It marks the firm’s sixth listed fund, after the Tortoise Power and Energy Infrastructure Fund, which raised $137 million in an initial public offering a year ago.

The Tortoise MLP Fund’s public offering was led by Morgan Stanley, Citi, Bank of America Merrill Lynch, UBS and Wells Fargo Securities. Senior co-managers included Stifel Nicolaus Weisel, Barclays Capital, Oppenheimer and RBC Capital Markets.

Husch Blackwell Sanders served as Tortoise’s legal advisor on the offering.