GIP: We worry less about the terminal value of gas assets

The energy transition and potential stranded gas and midstream assets are not a dealbreaker for Global Infrastructure Partners’ midstream energy investments, chairman Adebayo Ogunlesi said on stage at affiliate title Infrastructure Investor‘s Berlin Summit.

GIP committed $245 million last month to Easton Energy, a Texas pipeline company for natural gas and petrochemicals. Ogunlesi was asked whether the firm was concerned that this may be a stranded asset when GIP wants to exit, given the energy transition. Ogunlesi said: “What we try to do when investing in midstream is we put much less value on the terminal value of the asset than we used to.

“When you start seeing more and more investors exiting fossil fuels, you have to worry about that. But if you assume there’s no terminal value, is this still an investable asset? If the answer is ‘yes’, because of long-term contracts or because you think gas will continue to be a transition fuel for the long-term, then you can still invest in it.”

Asked if GIP planned to repurpose the Easton Energy pipelines for carbon capture or other more sustainable uses, Ogunlesi said: “One of the things we’re looking at with our US midstream assets is, ‘Can we use these assets to transport carbon for storage in underground facilities?’”

Ogunlesi said GIP’s investment team meets with the ESG team to see if every deal meets the firm’s ESG criteria. “We’ve turned down investments if we don’t think they meet our ESG criteria, even though they’re very good investments.” Ogunlesi was not asked for details of these ESG criteria. The firm’s ESG team has grown from two to eight people “in the past couple of years”, Ogunlesi added.

GIP manages assets worth $79 billion, including $10 billion in renewable energy, Ogunlesi said. It also seeks to invest in battery storage, electric vehicle charging facilities, hydrogen, renewable biofuels and carbon capture.