TPG Putting $300 Million Into Copano Energy

Sponsor: TPG Capital

Target: Copano Energy

Price: $300 million

TPG Capital is investing $300 million in Copano Energy LLC, money that the company will use to fund shale gas production projects.

TPG is making the investment through a purchase of convertible preferred equity priced at $29.05 per unit, convertible into common units on a one-for-one basis after July 21, 2013, the Houston natural gas company said in announcing the deal on July 21. Copano said it intends to use proceeds to fund its Eagle Ford Shale expansion strategy and other initiatives in Texas and Oklahoma.

Advances in drilling technology in the past decade have enabled energy companies to tap reservoirs of natural gas that are trapped in the brittle shale rocks that once were too expensive to exploit. Eagle Ford, like other shale gas fields such as the Marcellus in Pennsylvania, New York and other states, and the Haynesville in Louisiana, have attracted billions of dollars in investments in recent months.

Last month, India’s Reliance Industries said it would spend $1.36 billion to buy a minority stake in U.S. company Pioneer Natural Resources Eagle Ford developments.

TPG, one of the largest private equity firms in the world, has been an active investor in energy. It was one of the investors involved in the $44 billion deal that took power company TXU Corp, now Energy Future Holdings Corp, private in October 2007. It was also part of a consortium that in 2004 bought Texas Genco, then the second-biggest power generating company in the state, for $3.7 billion. The consortium sold Texas Genco to NRG Energy Inc for about $5.8 billion in February 2006.

TPG invested $500 million in November to buy a majority stake in Houston-based natural gas handling services company Valerus Compression Services.

Bank of America Merrill Lynch acted as exclusive placement agent to Copano, the firm said. Morgan Stanley advised Copano.

— Megan Davies and Matt Daily are Reuters correspondents in New York.