WHY BLACKSTONE IS BETTING $7 BILLION ON NATURAL GAS
Blackstone Group LP hasn’t fallen out of love with oil but it is making one of its biggest bets on the growth of natural gas production, reports The Wall Street Journal’s Ryan Dezember.
The New York private-equity firm has invested billions in oil but its most recent noteworthy deals have been aimed at natural gas. Blackstone has built a roughly $7 billion bet on natural gas by investing in drilling fields, pipelines and a gas export terminal.
The latest investment came last month, when it agreed to pay $1.57 billion for a 32.4% stake in the Rover Pipeline, a 710-mile tube being built across Ohio.
“We’re betting on which basins are going to be the winners,” said David Foley, who leads the firm’s energy investing. He’s put Blackstone’s money down in West Texas, Appalachia and Louisiana.
The firm says its wager is generally more dependent on production volumes increasing than on prices climbing.
“Natural gas investments have been popular in recent years among private-equity firms. Many investments count on prices rising to turn profits—and have been doomed by low prices,” the Journal reports.
MORE BORROWERS ARE DEFAULTING ON THEIR ‘GREEN ‘PACE LOANS
Loan defaults in a popular program meant to finance energy-saving home upgrades have increased substantially, despite lenders’ claims that few borrowers have missed payments, writes Kirsten Grind.
“PACE, a nationwide initiative designed to help people afford solar panels, energy-efficient air-conditioners and other “green” appliances. PACE loans are among the fastest-growing types of loans in the U.S.,” the Journal reports.
A Wall Street Journal analysis of tax data in 40 counties in California—by far the biggest market for PACE loans—shows that defaults have jumped over the last year.
The rise in defaults means some borrowers are at risk of losing their homes over relatively small loan amounts.
The average PACE loan is about $25,000. But unpaid balances get bigger quickly; they accrue additional interest at the rate of 18% annually.
But private lenders, including Renovate America Inc., Ygrene Energy Fund and Renew Financial Inc., say the overall default rate of less than 2% provided by the Journal’s analysis is in line with the rate for people who miss property-tax payments.
“Wall Street is hungry for bonds made from PACE loans. In July, asset managers and pension funds piled into a $205 million deal from the largest PACE lender, Renovate America. It was the company’s 11th securitization since its 2008 founding,” the Journal reports.
Oil prices nudged higher on Wednesday, in a small rebound from a three-week low hit during the previous session, helped by expectations of a decline on the week in U.S. stocks.
Brent crude, the global oil benchmark, rose 0.51% to $51.06 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.23% at $47.66 a barrel.