PE firms are investing large amounts in European energy companies as impacts of Russia’s invasion of Ukraine diminish the supply of much-needed resources, such as oil and natural gas, in the region.
PitchBook data shows total deal value for the sector standing at €27.2 billion (about $26.6 billion) so far in 2022, resulting from 86 closed deals. While last year’s total was slightly higher at €29.8 billion, it was spread among 158 deals.
The €4.9 billion offer last month by US-based EIG of 25% for Spanish oil and gas company Repsol reflects continued appetite for fossil fuels among PE firms. The deal comes despite a growing demand for ESG assets among investors.
A source of encouragement for PE firms looking at energy companies may be this year’s successful €6.9 billion IPO of Vår Energi in February. The company, one of the largest independent producers of oil and gas in Norway, was previously backed by Eni and PE firm HitecVision. It was one of the few IPOs to occur in a market impacted by negative investor sentiment and a decidedly risk-off attitude.
The Carlyle Group is also mulling over the idea to sell its Africa-focused oil and gas company, Assala Energy, the Financial Times reported. In an environment where energy is becoming scarce, the firm may think now is a good time to get the best return out of an asset that just two years ago was struggling. Its profits had dipped by 85% during the height of the COVID-19 pandemic, when demand for energy had dropped off.
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