Apollo Global Management last week announced a joint venture with New Fortress Energy to create a platform that provides infrastructure for the delivery, storage and regasification of liquefied natural gas (LNG). With a total enterprise value of $2 billion, the JV is underpinned by long-term contracts, benefiting from NFE’s LNG downstream operations and development activities, as well as Apollo’s investment and maritime experience, according to the companies, both of which are based in New York. Apollo funds own 80 percent of the JV, and NFE owns 20 percent.
PE Hub caught up with Apollo partner Brad Fierstein to learn more about the deal, which is coming at a time when countries around the world are scrambling to secure LNG.
LNG, which releases fewer emissions than oil and coal, has emerged as a preferred source of power for many countries, stakeholders and consumers. But supplies have been hit by the Ukraine war. Supporting infrastructure is important, argues Fierstein.
“We believe LNG is a critical enabler for energy transition, decarbonization, energy security and reliability for global economies,” said Fierstein. “For us to invest behind the critical assets that facilitate its use, we think it’s an attractive investment opportunity and a key part of our sustainable investing thesis.”
Apollo and NFE have built a good relationship over the years, laying the ground for this multi-billion-dollar deal, according to Fierstein. The JV was attractive even before Russia’s invasion of Ukraine, but the current situation has made it more compelling, he explained.
The JV consists of 11 vessels, among them six Floating Storage and Regasification Units (FSRU). These are ships that intake LNG delivered from carriers, store it, re-gasify it and inject it into pipelines. There are also two LNG Carriers and three Floating Storage Units (FSUs). NFE will receive approximately $1.1 billion in proceeds for the vesssels, after accounting for its share of the JV and paydown of existing debt.
The joint venture is focused on owning and operating vessels that enable the import of LNG to markets, including the Caribbean, Latin America, Europe and Asia, serving customers such as state-owned utility companies and other energy companies.
“For a lot of these buyers of LNG, they are both saving money from alternatives like diesel or coal in many cases, and they’re also decarbonizing at the same time,” Fierstein said.
The JV is already scaled, said Fierstein, and the firm will be looking for other ways to grow the platform further, including opportunities that support energy transition and bolster energy security globally.
There is growing concern among stakeholders that tight energy supplies will force countries to pause their plans to decarbonize their grids and restart coal-powered plants to fill in the gaps.
When asked what role private equity plays in energy transition, Fierstein said that PE has the “ability to deploy capital quickly to make decisive moves in terms of strategy and initiatives for a company without the same restrictions or hurdles as with public companies.” This, he said, will make PE key in energy security.
“I think that allows private equity to drive change in companies and see positive results,” he said. “At Apollo, the mandate from our investors and for our sustainable investing platform is to find ways to drive positive change in companies everywhere, but even more so in the energy space.”