GE Energy Financial Services added to its growing U.S. energy infrastructure Tuesday with the $603 million purchase of an interest in Regency Energy Partners LP, which owns 4,000 miles of natural gas gathering pipe systems in Texas, Louisiana, Oklahoma and Kansas, as well as a 320-mile intrastate gas pipeline in Louisiana. The GE unit purchased the stake from HM Capital Partners LLC.

Regency owns about 175,000 horsepower of compression in the states its pipes serve, and it has 13 processing and treating plants. It has a combined throughput of 1.2 Bcf/d.

“This acquisition enables us to become even more competitive in our constant pursuit of organic growth, particularly in critical energy infrastructure such as midstream,” said GE Energy Financial Services CEO Alex Urquhart. “Regency offers attractive economics, an efficient capital source and an experienced, performance-driven management team.”

In the transaction, GE Energy Financial Services acquired 91% of Regency’s general partner and 16.7 million subordinated units from HM Capital, the Dallas-based private equity firm that helped take Regency public in February 2006. In addition, the GE unit acquired 1.1 million subordinated units from members of Regency’s management. After this transaction, Regency’s management owns the balance of the general partner and continues to own 1.2 million subordinated units. In all, GE Energy Financial Services now owns about 37% of the outstanding limited partner units. Affiliates of HM Capital elected to retain more than eight million of the common limited partner units, making it the second largest investor in Regency.

Dan Castagnola, a managing director at GE Energy Financial Services in Houston, said the acquisition offers Regency and its investors “our strong balance sheet and the potential to add midstream assets we currently own or will acquire. For GE, we gain a solid platform for expansion because of Regency’s significant pipeline of organic growth projects and record of adding high-quality assets.”

GE Energy Financial Services now has investments in 20,000 miles of gas pipelines in North America. In addition, the GE unit has invested in SourceGas, a local gas distribution company in Colorado, Nebraska, Wyoming and Hermosillo, Mexico, as well as a gas gathering system in Kansas and an underground gas storage facility along the Gulf Coast.

Goldman, Sachs & Co. and Vinson & Elkins LLP advised GE Energy Financial Services, and Lehman Brothers and Hughes & Luce LLP advised HM Capital.

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