Spain’s Enagás said on July 10 that it would sell its 30.2% stake in Colorado-based Tallgrass Energy for $1.1 billion to Blackstone Infrastructure Partners.

Enagás said the deal allows it to focus on decarbonization efforts, though it will take an “accounting loss” of €360 million (US$389 million).

Blackstone and Enagás were part of a consortium that purchased interests in Tallgrass about five years ago. Blackstone purchased a controlling stake in Tallgrass in 2019 and took the infrastructure company private.

Though Enagás is selling at a significantly lower price than the $1.64 billion paid in 2019, the deal still makes sense because it allows Enagás to bring in capital and focus on its priorities, said Hinds Howard, an analyst with CBRE Investment Management.

“The stock reacted positively because it clears the overhang and gets cash in the door,” Howard said in an email.

Despite the accounting loss, Enagás stock traded higher in the U.S., jumping $0.41, to $7.20 per share from $6.83 as trading opened on July 10.

Howard said that the sale showed midstream stocks were stable overall.

“The transaction as a market for broader midstream valuation is fine and does not seem to indicate midstream stocks are overvalued,” he said.

At 1,679 miles, Tallgrass Energies' Rockies Express Pipeline is one of the longest natural gas lines in the U.S.
Tallgrass Energies' assets include the Rockies Express Pipeline, which is one of the longest natural gas lines in the U.S. at 1,679 miles. (Source: Rextag)

In its release, Enagás described the sale as part of an “asset rotation process” that the company announced in 2022. The company created the plan to focus on decarbonization and supply security in Spain and the rest of Europe.

Selling its Tallgrass stake allows Enagás to take a stronger financial position to fund green hydrogen projects. The company has also sold stakes in the GNL Quintero terminal in Chile and some natural gas infrastructure assets in Mexico.

The company plans to transition from operating a natural gas grid to taking a leading role in the Spanish government’s plans to develop green hydrogen production infrastructure.

In February 2023, the company presented plants for a $521.5 million renewable hydrogen plant in northern Spain.

Spain owns a 5% stake in Enagás, according to a Reuters report. On July 9, the government announced it had approved $865.5 million in subsidies for green hydrogen projects.

The Tallgrass transaction is expected to close at the end of July.

Comments