Targa Resources’ $1.1 Billion of Development Joint Ventures with Stonepeak Infrastructure Partners

Vinson & Elkins advised Targa Resources Corp. in connection with development joint ventures with investment vehicles affiliated with Stonepeak Infrastructure Partners.

Targa Resources Corp. (NYSE:TRGP) has entered into development joint ventures with investment vehicles affiliated with Stonepeak Infrastructure Partners.

The DevCo JVs own Targa’s 25% interest in the Gulf Coast Express Pipeline, a 20% interest in the Grand Prix Pipeline, and a 100% interest in Targa’s next fractionation train. Targa controls the management, day-to-day construction and operation of the Grand Prix Pipeline and the Company’s next fractionation train in Mont Belvieu.

Stonepeak owns an 80% interest in the development joint venture entities that hold the GCX Interest and Targa’s next fractionation train, and a 95% interest in the development joint venture entity that holds the Grand Prix Interest, with Targa retaining the remaining interests. The DevCo JVs currently have approximately $220 million of assets. Stonepeak committed an aggregate of approximately $960 million of capital (including contingency), including an initial contribution of approximately $190 million that will be distributed to Targa to reimburse the Company for capital spent to date. Targa committed to fund approximately $150 million related to its share of the DevCo JVs’ future capital costs.

The DevCo JVs significantly reduce Targa’s equity funding needs for 2018 and 2019, and proceeds from Stonepeak’s initial contribution will be used to reduce Targa’s current debt.

Under the terms of the DevCo JV agreements, Targa has an option to acquire all or part (in $100 million increments) of Stonepeak’s interests for a four-year period beginning on the earlier of the date that all three projects have commenced commercial operations or January 1, 2020. The purchase price payable for such partial or full interests is based on a predetermined fixed return or multiple on invested capital, including distributions received by Stonepeak from the DevCo JVs. Targa will control the management of the DevCo JVs unless and until Targa declines to exercise its option to acquire Stonepeak’s interests. There will be no dilution associated with the DevCo JVs for Targa’s existing shareholders during the construction period, and if Targa elects to exercise its option to acquire all or part of the DevCo JV interests, significant upside associated with the three included DevCo JV projects will be for the benefit of Targa and its shareholders.

Targa Resources Corp. is a leading provider of midstream services and is one of the largest independent midstream energy companies in North America. Targa owns, operates, acquires, and develops a diversified portfolio of complementary midstream energy assets. The Company is primarily engaged in the business of: gathering, compressing, treating, processing, and selling natural gas; storing, fractionating, treating, transporting, and selling NGLs and NGL products, including services to LPG exporters; gathering, storing, and terminaling crude oil; storing, terminaling, and selling refined petroleum products.

Stonepeak is an independent infrastructure investment manager focusing on the midstream energy, power, renewables & utilities, transportation, water and communications sectors. The firm has offices in New York City and Houston and currently manages $13.5 billion of capital on behalf of its partners.

V&E advised Targa Resources Corp. with a team including partner Chris Collins (Picture), senior associate Benji Barron and associate Brittany Smith. Also advising were partners Jim Meyer, Darin Schultz and Neil Imus and associate Brian Russell.

 

Involved fees earner: Christopher Collins – Vinson & Elkins LLP; Benjamin Barron – Vinson & Elkins LLP; Brittany Smith – Vinson & Elkins LLP; James Meyer – Vinson & Elkins LLP; Brian Russell – Vinson & Elkins LLP; Darin Schultz – Vinson & Elkins LLP; Neil Imus – Vinson & Elkins LLP;

Law Firms: Vinson & Elkins LLP;

Clients: Targa Resources Corp.;

 

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Author: Ambrogio Visconti