Energy Capital launches midstream platform

The Goldman spin-out's Summit Midstream Partners has bought a 75% stake in a Texas gas gathering pipeline developer from KKR-, TPG- and Goldman-backed Energy Future Holdings.

Energy Capital Partners, an energy-focused private equity firm founded by three Goldman Sachs alumni, has established a platform company to invest in North American gas infrastructure.

The company, Summit Midstream Partners, will focus on acquiring and developing a portfolio of midstream energy infrastructure assets across North American oil and gas production basins and import centers, Energy Capital Partners said in a statement.

The company recently completed its seed acquisition: a 75 percent stake in DFW Midstream Services, a developer of gas gathering pipelines in Texas’ Barnett Shale. To date, the firm has developed approximately 25 miles of gas gathering pipelines and plans to build approximately 60 more miles of gas gathering lines in the next year.

Summit did not disclose financials for the DFW deal. The seller, Energy Future Holdings, a Texas utility that was taken private by Kohlberg Kravis Roberts, TPG and Goldman Sachs in a $45 billion transaction in 2007 – the largest LBO on record – will own the remaining 25 percent of DFW, according to the press release. 

The midstream energy sector includes the storage, marketing and transportation of crude oil, natural gas and their related output. In recent months, numerous infrastructure investors – including Global Infrastructure Partners, Alinda Capital and Conduit Capital – have committed capital to this sector by investing in natural gas pipelines, which carry gas between upstream businesses such as production centers and downstream businesses such as refineries and petrochemical plants.

Summit will invest in natural gas gathering pipelines, treating, compression, and processing facilities, large-diameter intrastate and interstate pipelines and crude oil, refined product and natural gas liquids pipelines and storage terminals, according to its website.

Summit is wholly owned by Energy Capital Partners, which worked with Steve Newby, a former energy investor at ING Investment Management, to found the firm.

Energy Capital Partners is currently raising its second energy fund, Energy Capital Partners II, which is targeting $3.5 billion. The fund recently gained a $40 million commitment from the Indiana Public Employees’ Retirement Fund.

The firm was founded by Doug Kimmelman, Scott Helm and Thomas Lane, all Goldman Sachs alumni, in 2005.