Morgan Stanley backs US natural gas business

The $4bn infrastructure fund managed by investment bank Morgan Stanley has acquired a 40% economic stake and a 50% voting stake in Southern Star Central Gas Pipeline, a natural gas transmission and storage business in Midwest US, marking the firm’s second natural gas investment in the last two months.

Morgan Stanley Infrastructure Partners has made its second natural gas infrastructure investment in two months.

The $4 billion fund acquired 40 percent of Southern Star Central Gas Pipeline, a natural gas pipeline and storage business in the Midwest region of the US. The fund also acquired a 50 percent voting interest in the company, according to a statement.

The terms of the transaction were not disclosed.

Southern Star owns about 6,000 miles of pipelines that provide natural gas transmission to markets in Kansas, Oklahoma, Nebraska and Missouri, according to its website. The company also provides natural gas storages services.

In December 2009, a consortium comprising Morgan Stanley Infrastructure Partners and Portuguese energy group Galp Energia acquired a gas distribution network in Madrid for €800 million, debt-free. That transaction is expected to close in the first half of 2010.

Other infrastructure funds have also been busy backing natural gas investments recently. In November 2009, American Infrastructure MLP Funds, a California-based fund manager, backed American Midstream Partners, a pipeline operator in Louisiana, Mississippi, Alabama, in a $150 million deal.

In July, Global Infrastructure Partners, the manager of a $5.64 billion infrastructure fund, formed a joint venture with natural gas transporter El Paso Corporation to build a 675-mile natural gas pipeline in the Western US – the Ruby Pipeline – in a $700 million deal.

Their deals followed Alinda Capital's $1.1 billion pipeline deal in Louisiana and Conduit Capital's $1.4 billion pipeline deal in Peru, announced in March 2009 and October 2008, respectively.