Avenue Capital Group Announces Major $2.2 Billion Asset Sale to Partners Group

Avenue Capital Group's Strategic Sale of Energy Transition Assets

In a landmark deal, Avenue Capital Group, a leading investment firm, has announced the sale of its energy transition portfolio to Partners Group for a staggering $2.2 billion. This transaction marks a significant strategic shift for Avenue, especially concerning their investment approach in California's power sector.

Avenue Capital, known for its opportunistic investments, has been a key player in the energy transition landscape, particularly through its Avenue Golden Continuation Fund, L.P. The fund's assets, managed by Middle River Power, include 11 essential natural gas-fired power plants in California, comprising nine simple-cycle peaking facilities and two combined-cycle gas turbine plants. Under the leadership of Middle River, which Avenue established in 2016, these assets have been developed with a focus on sustainability and energy transition.

Middle River has pioneered a remarkable strategy that integrates battery energy storage systems (BESS) at its gas-fired power plants, transforming them into Hybrid Energy Centers. These centers utilize surplus renewable energy from the grid to charge their BESS, enabling stored energy to be dispatched when demand spikes. This innovative approach not only enhances reliability but also significantly reduces the carbon footprint associated with traditional peaking plants.

Craig Hart, Senior Portfolio Manager for Avenue Golden Fund, expressed the firm’s satisfaction with their collaboration with Middle River. He emphasized that over the last nine years, they have successfully transitioned the business from a collection of thermal assets to a robust energy transition initiative, set for continued growth. "We wish the Middle River team continued success with Partners Group; we look forward to refining our existing and future investments in the evolving U.S. power markets," he stated.

This transaction comes on the heels of California's ambitious climate goals, which underscore the importance of a reliable natural gas-fired generating fleet. Marc Lasry, Co-Founder and CEO of Avenue Capital Group, echoed Hart's sentiments, calling the realization of their Avenue Golden Fund investment a significant achievement for the Avenue Energy team and a positive outcome for fund investors. "We entered California with the belief that a well-regarded fleet of gas-fired power plants was crucial for reaching the state’s carbon objectives," Lasry noted.

Avenue Capital’s commitment to sustainability aligns well with emerging energy trends, and this sale positions both the firm and Middle River for future opportunities amidst an evolving energy landscape. The financial advisory for Avenue was provided by Guggenheim Securities and Morgan Stanley, with Latham & Watkins serving as legal counsel.

With assets under management exceeding $11 billion, Avenue Capital Group continues to leverage its global presence, operating from key financial hubs like New York, Dublin, and London. The firm remains focused on capitalizing on special situations and is poised for continued success in the dynamic financial landscape.

As the energy sector evolves, this deal not only highlights the transition towards renewable energy but also emphasizes the critical role of reliable natural gas capabilities in meeting energy demands. Avenue Capital is set to continue its pivotal role in this vital sector, ensuring that investments support the ongoing energy transition while providing robustness and reliability in power generation systems.