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Five Point Infrastructure is looking to cash in by selling Northwind Midstream, a natural gas operator in the Permian Basin, potentially fetching a cool $2 billion.

What does this mean?

In today's energy-hungry environment, infrastructure assets are capturing the attention of both traditional companies and investment firms. Northwind Midstream, nestled in New Mexico's resource-rich Delaware Basin, is crucial for processing natural gas by removing impurities like hydrogen sulfide and carbon dioxide. Piper Sandler is steering the sale, which is still in its early stages, and it illustrates a trend among private equity firms divesting from energy assets underpinning the US shale boom. While public pipeline operators look to grow beyond debt reduction, these assets present a strategic opportunity. However, potential buyers should brace themselves: the final sale terms might not align with expectations in this high-stakes game.

The sale of Northwind Midstream comes as investment firms pursue assets with steady returns and reliable cash flows, qualities inherent to energy infrastructure like pipelines. The Permian Basin operator is attractive for its services and its ability to secure reliable income through transportation fees. Publicly-listed firms, recovering from financial challenges, are particularly interested, aiming to benefit from consistent energy demands.

The bigger picture: The infrastructure exchange.

This move showcases private equity's evolving strategies amid shifting energy markets. Armed with significant capital, investment firms view infrastructure commitments as sustainable plays in a sector balancing between traditional resources and green transitions. The outcome of Northwind's sale could indicate broader transactional trends, reshaping the global valuation and exchange of energy assets.