Warburg Pincus completes $2.45bn energy deal

Warburg Pincus has finalised its acquisition of Dynegy’s Midstream Services subsidiary, buying the company in a $2.45 billion (€2.04 billion) deal through its Houston-based Targa Resources energy platform.

Warburg Pincus launched its Targa Resources Platform in 2003.

The transaction had to make it through some weather-related hoops before reaching completion. The deal was inked in the beginning of August, but damage to two of Dynegy’s natural gas processing plants, the result of Hurricane Katrina which hit Louisiana at the end of that month, could have served to quash the deal.

However, even as the damage sustained had the potential to unravel the sale, Hurricane Katrina also served to underscore how important infrastructure is to the energy sector.

Warburg Pincus launched Targa in April 2003, teaming with former Tejas Gas Corp. president Rene Joyce, who serves as the CEO of Targa. The company made its first acquisition in 2004, buying a group of pipelines and gas plants from ConocoPhillips for an undisclosed price. Last December, the company also acquired a 40 percent stake in pipeline outfit Bridgeline Holdings from Enron Corp., which it sold in August to Chevron, the majority owner of the pipeline.

When Targa initially announced the acquisition of the Dynegy assets, Joyce cited the importance of the deal to Targa’s development, calling it a “significant milestone”, for the platform. “The combined company, with a significantly expanded asset base in Texas, Louisiana and New Mexico, will be one of the top service providers across all segments of the NGL value chain and a leading pure-play midstream energy company,” he said.

The sale gives Targa Dynegy’s natural gas gathering and processing assets, as well as the company’s natural gas liquids fractionation, terminalling, storage, transportation, distribution and marketing assets. The company will operate under the Targa name and will also be based in Houston.

The midstream space has been attracting private equity dollars for the past couple of years. Hicks Muse Tate & Furst, Charlesbank Capital Partners, The Carlyle Group and Madison Dearborn are just a few of the firms that have made deals in the sector since 2003.

Alongside the acquisition, Targa also announced the appointment of James Whalen as the company’s new president of finance and administration. Whalen has previously served as an outside director on the Targa Resources board and had worked with Joyce at Tejas as CFO.