Partners takes slice of Morgan Stanley’s Spanish gas firm

The Swiss private markets investor has acquired a stake in Madrileña Red de Gas, the Spanish gas distribution company that was bought by Morgan Stanley Infrastructure Partners and Galp Energia in an €800m deal last year.

Partners Group, the Swiss private markets investment manager, has acquired a stake in Madrileña Red de Gas (MRG), the Spanish natural gas distribution company part-owned by Morgan Stanley Infrastructure Partners. Neither the size of the stake nor the amount paid have been disclosed due to confidentiality agreements.

MRG operates a regulated natural gas distribution network with a presence in 40 municipalities in the Madrid region. Around 800,000 households are connected to its network, amounting to 48 percent of the natural gas distribution activity in the region.

In a press release, Partners Group said the company is in an “attractive sector with a captive customer base” and “good growth potential” given that Spain demonstrates low gas penetration compared with other European countries. It added that Spanish gas distribution is regulated by the Ministry of Industry, Tourism and Trade and the National Energy Commission and renumeration is based on regulatory calculations with “inflation being passed through in the formula, offering distinct downside protection”.

Michael Barben, partner and head of private infrastrucure at Partners Group, said in the press release: “The concentration of the asset base in a single highly urbanised region and the young network age should allow for superior margins, limited capex requirements and a high cash generation”.

MRG was acquired in April last year from Spanish utility Gas Natural by US fund manager Morgan Stanley Infrastructure Partners and Portuguese utility Galp Energia in a deal worth around €800 million. At this point MRG comprised 500,000 connection points, but in February this year it acquired a further 300,000 connection points from Gas Natural for €450 million, bringing the total to 800,000. This made MRG the second-largest gas company in Madrid and third-largest in Spain.

Partners Group closed its latest infrastructure vehicle on its hard cap of €500 million in March this year, at which point it already had 17 investments in its portfolio. Partners targets the asset class via direct investments, secondary market acquisitions and primary investments in third-party infrastructure funds.

Earlier this week, Partners Group released a report lauding infrastructure investments – especially “yielding, brownfield infrastructure assets with inflation-linked revenues in Europe, North America and Australia” – against what it described as a “stagflation-type scenario” in parts of the advanced world.