(Bloomberg) — Apollo Global Management has struck a $1 billion deal with BP Plc to finance its stake in the Trans Adriatic natural gas pipeline.
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Apollo bought a non-controlling stake in a subsidiary called BP Pipelines TAP Limited, which owns the energy giant’s 20% stake in the pipeline, the companies said in a statement. The deal allows BP to retain its governance control over the entity as the controlling shareholder.
The Trans Adriatic Pipeline transports natural gas from the Caspian Sea to countries such as Greece and Italy. Europe is trying to shore up its energy security after a crisis in recent years, when it was cut off from most Russian pipeline gas supplies in the wake of the war in Ukraine.
The proceeds BP receives from the Apollo deal, which is expected to close in the fourth quarter, will contribute to the company’s divestment in 2024.
Private capital titans like Apollo are increasingly targeting investment opportunities with higher quality companies, outside of their typical range of leveraged deals. In Europe, Apollo has already done deals with Air France, Intel and Vonovia.
The deal also comes as oil prices threaten the majors’ ability to continue financing share buybacks, which have become crucial to attracting investors. While BP has paid down significant debt in recent years, its balance sheet is still weaker than its peers.
“BP’s debt is too high for this point in the cycle and that helps,” said Biraj Borkhataria, head of European energy research at RBC Europe Ltd. “If you can sell an asset, that helps, but you lose the associated income.”
BP needs oil prices of around $90 a barrel to sustain its oil purchases, he said, adding that more details on the deal’s value are needed to fully assess its impact.
(Updated throughout with additional details.)
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