Spanish grid and LNG operator Enagas takes stake in US pipeline owner Tallgrass Energy

Tuesday, 12 March 2019
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Enagas, the Spanish natural gas network and LNG terminal owner, has entered the US energy infrastructure market by investing in Tallgrass Energy, whose assets include 11,000 kilometres of transmission pipelines.

The Spanish company said the transaction is part of its strategy to invest in core business assets in growth markets on an international basis alongside strategic partners.

Enagas, which already has investments in LNG import terminals on the American continent, at Altamira in Mexico and Quintero in Chile, has entered into an agreement with the equity funds, Blackstone of the US and GIC of Singapore, to invest $590 million for a 10.93 percent indirect ownership interest in Tallgrass Energy.

Tallgrass, based in Leawood in the Midwest state of Kansas, has assets including the Rockies Express Pipeline, one of the largest US pipelines that is being transformed into the nation’s northernmost bi-directional natural gas gathering system.

Enagas explained that its investment is in the holding company that owns 100 percent of TGE’s general partner, as well as 43.91 percent of the economic interests in TGE .

The investment is structured so that Blackstone retains a majority stake, GIC has a minority shareholding, as does Enagas with 24.90 percent of the holding company.

Following the closing of the transaction, Enagas has agreed to acquire an additional 3.52 percent of the holding company for around $83M, subject to completion of certain conditions. The Spanish company has also agreed to future investments of up to $300M in TGE.

“As an industrial partner, Enagas will have a seat on the company's Board of Directors, contributing its know-how in operating and developing energy infrastructure,” said Enagas.

Enagas has four domestic LNG import terminals around Spain at Barcelona in the northeast, Cartagena in the southeast, Huelva in the southwest and Gijon in the northwest.

It also owns a 50 percent stake in the facility serving the northwest city of Bilbao.

Other investments held by Enagas include its stake in Trans Adriatic Pipeline, part of Europe’s Southern Gas Corridor.

It is also part of a European gas grid group that acquired control of the Greek natural gas transmission operator DESFA.

“Enagas embarked on its internationalisation in 2011 as a part of an ongoing strategy with two main objectives, maintaining the maximum efficiency and security in the operation of the Spanish gas system, and to continue expanding as a company,” it said.

“This international expansion also helps drive the business of other Spanish industrial companies related to the energy sector,” added Enagas.

“This acquisition allows Enagas to unlock the value of its vast experience in developing and operating gas infrastructure and strengthen its position as industry leader and expert,” stated the company.

Wallace Henderson, Senior Managing Director in Blackstone Infrastructure Partners, said he was delighted Enagas had joined the investment consortium.

“With extensive midstream operations around the world, they bring valuable perspectives to Tallgrass that will benefit our investment and we look forward to their contributions,” added Henderson.

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