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Tenaska Affiliate Prospecting for Domestic Midstream Assets

With an experienced team in place and more than $2 billion at its disposal, Tenaska Capital Management LLC (TCM) has plans to acquire and develop U.S. midstream natural gas assets. High on its priority list: emerging shale basins.

The Tenaska Inc. affiliate will use portfolio company Voyager Midstream LLC to manage the new midstream gas properties, which are to include existing and greenfield gathering systems, pipelines, processing plants and storage facilities. Voyager, based in Houston, was formed last August by TCM, which manages the $2.4 billion private equity fund TPF II LP.

"We continue to see a number of attractive investment opportunities with a wide range of potential partners in the midstream natural gas sector, particularly as the U.S. increasingly demands clean domestic energy sources," said TCM Senior Managing Director Alan Levande. "Our model, which combines TCM's investment expertise with the expanded capabilities of the Voyager team, makes us well suited to the current environment."

As a midstream company, Voyager will give TCM two investment avenues, Levande said.

"One aspect is gas storage, and the other aspect is more on the pipeline, processing and gathering area," he said. "On the gas storage side, that would include new greenfield storage facilities. On the gathering and processing side, it would be a combination of greenfield development, acquisitions of existing systems and then investment..."

TCM currently is negotiating on two gas storage transactions, one in California and one in the Midwest, but there won't be any details about the projects until the transactions are completed, Levande said. TCM also is contemplating a number of other opportunities, he said.

"We are very firm believers in the long-term future of natural gas as a major fuel source in the United States," said Levande. "It's abundant, it's cheap right now, and we think it will continue to stay that way. When we look into our crystal ball, we think natural gas will become more and more important for electric generation plants, and that will result in the development of new midstream activity.

"Unconventional shale plays like the Haynesville, the Marcellus and the like, those opportunities are reasonably new plays for natural gas and they will require tremendous investment dollars in midstream assets."

Voyager initially plans to plant its footprint in the Midcontinent, where abundant opportunities are emerging.

"We think the supply and demand situation for storage is very regional," said Levande. "The Gulf Coast is in an overbuild situation. That's less so in other regions in the country, and it's why we'll focus away from the Gulf Coast." The "key area of focus," he said, will be the Midcontinent, including the Marcellus Shale. "We're also looking at other unconventional shale plays, a secondary area would be the Haynesville."

Staffing the Voyager unit is under way. Four people will be focused on gas storage, and two will be looking at opportunities for the gas gathering and processing business.

"We expect to build up the organization as the deals mature," said Levande. "We will need to add people with construction and operating expertise...and continue to grow the organization."

Fritz Brinkman has come aboard the Voyager team to focus on transportation, gathering, treating and processing opportunities. Brinkman, who has 40 years of experience in the midstream sector, founded Excel Resources, a gathering and marketing company. Brinkman also was involved in the acquisition of Regency Gas Services by Hicks, Muse (see NGI, Dec. 6, 2004).

In addition, Brinkman helped acquire Dominion Midstream with Centre Partners, which he subsequently expanded under the name Nexus Gas Partners. Brinkman last year sold Nexus to Regency Energy Partners (see NGI, March 3, 2008).

Mike Latchem, who has 12 years of experience in acquisitions and grassroots development of gas gathering, processing and transmission transactions, also has joined the Voyager team. He previously was vice president of business development for Crosstex Energy Services.

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