EIG Global Energy Partners recently announced the successful final close of its Global Project Fund V, (GPF V), with total commitments of $1.1 billion—nearly 50% higher than EIG’s $750 million target.  EIG also raised an additional $1.5 billion of commitments in the form of separately managed accounts that will invest alongside GPF V.  
GPF V is a continuation of EIG’s platform for energy and infrastructure direct lending. It invests across the full energy spectrum: upstream, midstream, power, renewable energy and related infrastructure on a global basis.

Rob Johnson
Rob Johnson

“We invest across these sectors with, on average, about one third allocation in upstream, one third midstream and one-third in the others—including power, renewables and infrastructure—but we have a lot of flexibility,” Rob Johnson, managing director at EIG and its global head of direct lending, told Hart Energy.

“This is not investing in distressed debt; our primary investment is in high quality companies that have financing needs,” he added. “The capital access problem in the industry is real and it is serious. I think we are still at the front end of the commercial banks’ problems and, for smaller, private companies especially, capital access is going to remain difficult.”

He noted bank replacement, development funding, acquisition financing and junior secured debt as key areas for private capital, as well as E&P companies that cannot access the high yield market or successfully complete an exchange offer to address debt maturities.

“As you can imagine, there was a lot of investor focus and concern in the market,” during the time of the capital raise. Market conditions have been very challenging since fundraising started in May 2019, yet these fundraising results have demonstrated that EIG’s investors have confidence it can withstand these downturns, he said.

Johnson said the firm generally looks for deals in the $50 million to $300 million range, with an ability to make much larger commitments with co-investment from its limited partners. Typical hold periods are three to eight years, depending on a company’s asset quality, balance sheet and other factors. If development drilling becomes more economic or the A&D market comes back, EIG can increase its capital commitment, he said.

“Our capital allows a company to focus and get through this period of time,” he said. “At the moment, there is opportunity in first-lien private debt that they can use to refinance their bank credit. Later the company can refinance our facility.”
“Pricing varies but interest rate is usually in the high single digits for first-lien structures and second-lien structures in the low double-digit range,’ he explained. 

Johnson cited a recently realized investment in a private independent, Felix Energy, with both upstream and midstream assets in the Permian Basin as a good case study.

Felix Energy wanted to add rigs and expand its midstream system in the Delaware Basin, but commercial banks couldn’t advance sufficient capital at the time, and the company didn’t want to draw further capital from its private equity sponsor.

EIG came in to provide junior debt behind the banks to fund the E&P’s intermediate-term growth capital needs, first for $200 million and later, for an additional $100 million. Ultimately, the investment helped to accelerate the company’s growth and to position it for a successful sale to WPX Energy Inc. in March.