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US: deals in the pipeline

“The funds raising more quickly tend to have an energy slant – a hot private equity sector right now,” Kelly DePonte, a partner at San Francisco-based placement agent Probitas Partners told Infrastructure Investor earlier this year.

And the US – thanks largely to the shale boom – is the home of energy infrastructure investment right now. Towards the end of March, a survey from ICF International found that the US and Canada need to spend some $30 billion annually – or $641 billion between now and 2035 – on midstream infrastructure relating to crude oil, natural gas and natural gas liquids (NGL).

Pipelines are at the heart of the opportunity. “Pipelines make the shale revolution possible – whether it’s shale gas, tight oil or NGLs,” said Don Santa, president of the INGAA Foundation, the Washington DC organisation that co-sponsored the study along with America’s Natural Gas Alliance. “Without pipelines, Americans cannot benefit from these bountiful US resources.”

Private equity and infrastructure investors have been quick off the mark in seeking to exploit the opportunity. A few examples of deals in the space so far this year have included: Energy Investors Funds’ acquisition of Starfish Pipeline, a company providing natural gas processing and pipeline transportation services; QEP Midstream Partners’ purchase of a 40 percent stake in natural gas specialist Green River Processing; and a $300 million investment in Oryx Midstream Services by a consortium of private equity firms.

Meanwhile, the slow-burning public-private partnership (P3) market in the US is now showing genuine signs of gaining traction with an increasing number of states introducing enabling legislation and getting P3 programmes under way. While this is not yet a “hot” market, it could become one in the coming years. Moreover, unlike midstream infrastructure, where US-based fund managers enjoy something of a monopoly, the P3 space stands to attract plenty of foreign capital and expertise given the reservoir of experience in other countries that may be tapped into.