ArcLight Capital Partners has significantly expanded its portfolio of energy infrastructure assets with the acquisition of a 25% equity interest in the Gulf Coast Express Pipeline (GCX). The $865 million deal, finalized with an affiliate of Phillips 66, positions ArcLight alongside Kinder Morgan, Inc. (KMI), which retains the majority ownership and will continue to operate the pipeline through a subsidiary. This strategic acquisition underscores ArcLight's confidence in the continued growth of natural gas demand, particularly in response to the burgeoning artificial intelligence and data center sectors.

The GCX pipeline is a vital artery in the US energy landscape, stretching 500 miles and boasting a capacity of approximately 2 billion cubic feet of natural gas per day. Its significance lies in its role as a critical conduit for transporting residue gas from the prolific Permian Basin to key market centers along the US Gulf Coast. These destinations include rapidly expanding regions like South Texas, which is witnessing a surge in liquefied natural gas (LNG) export activity. The pipeline's operations are underpinned by long-term, committed contracts with a diverse and high-quality group of shippers, ensuring a stable and predictable revenue stream.

ArcLight's investment in GCX aligns with its extensive experience in owning, operating, and controlling energy infrastructure. Since 2001, the firm has amassed a substantial portfolio encompassing over 47,000 miles of electric and gas transmission assets, establishing itself as one of the largest private owners of natural gas-related transmission infrastructure. This deep understanding of the midstream sector, coupled with its long-standing partnership with Kinder Morgan, positions ArcLight to capitalize on the evolving dynamics of the energy market.

Dan Revers, Founder of ArcLight, highlighted the strategic rationale behind the acquisition. "As the US seeks to meet the rapidly growing power demand needs associated with AI and data center infrastructure, we believe more natural gas-related infrastructure, both power and midstream assets, will be needed to meet this objective," Revers explained. He emphasized ArcLight's extensive history of investing in critical gas infrastructure and its commitment to being a value-added partner, noting that the GCX acquisition expands their strategic alliance with Kinder Morgan.

Lucius Taylor, Partner at ArcLight, further elaborated on the investment's potential. "We believe GCX represents a critical-path, strategic natural gas infrastructure asset with opportunities for growth," Taylor stated. He pointed to GCX's status as one of the largest and lowest-cost transmission assets in the region, asserting that it is "well-positioned to capitalize on the dual tailwinds of growing Permian production and long-term LNG, power, and industrial demand growth." This assessment reflects ArcLight's belief that GCX is not only a valuable asset today but also offers significant potential for future expansion and revenue generation.

The acquisition was facilitated by Barclays Capital Inc., which served as financial advisor to ArcLight, and Latham & Watkins LLP, which provided legal counsel. The successful completion of this transaction solidifies ArcLight's position as a key player in the midstream energy sector and reinforces its commitment to investing in critical infrastructure that supports the nation's growing energy needs. The GCX pipeline, now jointly owned by Kinder Morgan and ArcLight, is poised to play a crucial role in delivering natural gas to meet the increasing demand from both domestic and international markets.