Two Ares funds back US midstream and solar companies

The asset manager invested in a midstream joint venture from its private equity group and a solar developer from its energy and infrastructure strategy.

Los Angeles-based Ares Management made two investments this week in companies targeting different ends of the US energy spectrum.

Through two different funds, the asset manager launched a partnership to build oil and gas midstream infrastructure in West Texas while also acquiring a majority stake in a US solar developer. Ares did not disclose transaction prices for either deal.

The firm declined to comment for this story.

A source confirmed to Infrastructure Investor that Ares’ private equity group used the $7.85 billion Ares Corporate Opportunities Fund V to invest in Salt Creek Midstream, a joint venture launched with energy services company ARM Energy Holdings.

Salt Creek will build midstream assets in the oil- and gas-rich Delaware Basin in West Texas, according to a statement. The company has secured 250,000 acres in the region from energy producers to develop cryogenic processing facilities used to cool natural gas to liquid form, as well as gathering pipelines and compression and treatment facilities. Salt Creek is expected to have 260 million cubic feet of processing capacity by the end of this year, the statement said.

As part of the deal, Deutsche Bank provided a $350 million term loan facility to the JV.

Ares has been an active investor in North American midstream and production companies. Its private equity group managed 63 US power and energy assets as at 31 December 2017, according to a year-end earnings document published in February. One of its most recent midstream investments was made last September when Ares backed a 650-mile natural gas pipeline that is in development in the Texas and Gulf Coast region.

In a separate deal, Ares’ power and energy infrastructure group, Ares EIF, acquired a majority stake in US solar developer Conti Solar. The developer’s parent company, The Conti Group, will retain a minority interest.

Conti Solar has developed and operates solar and energy storage projects with capacity totalling more than 500MW throughout the US and “select international markets”, according to a statement.

Conti Solar could not be reached for comment.

Last November, Ares EIF divested four coal-fired power plants after closing its fifth fund on $800 million, short of its $2 billion target, and posting returns in June 2017 showing its fourth EIF fund was not meeting return targets.

The 2017 earnings documents do not provide return information for previous EIF funds, or for Fund V because that vehicle is less than two years old. The documents show EIF V had invested $313 million as at the end of last year.