(Bloomberg) — Apollo Global Management has struck a $1 billion deal with BP Plc to fund its stake in the Trans Adriatic natural gas pipeline.
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Apollo bought a non-controlling interest in a subsidiary called BP Pipelines TAP Limited, which holds the energy major’s 20% stake in the pipeline, the companies said in a statement. The deal lets BP maintain its governance control over the entity as the controlling shareholder.
The Trans Adriatic Pipeline transports natural gas from the Caspian Sea to countries such as Greece and Italy. Europe is seeking to bolster its energy security following a crisis in recent years, after being cut off from most Russian pipeline gas supplies in the wake of the war in Ukraine.
Proceeds that BP will receive from the deal with Apollo, which is expected to close in the fourth quarter, will contribute to the firm’s 2024 divestment.
Private capital titans such as Apollo are increasingly targeting investment opportunities with higher-grade businesses, beyond their typical stable of leveraged deals. In Europe, Apollo has already done transactions with Air France, Intel and Vonovia.
The deal also comes as oil prices threaten majors’ ability to continue funding share buybacks that have become crucial to attract investors. While BP has paid down significant amounts of debt in recent years, its balance sheet is still weaker than its peers.
“BP’s debt is too high for this point in the cycle and this helps,” said Biraj Borkhataria, head of European energy research at RBC Europe Ltd. “If you can sell an asset it helps but you lose the earnings associated.”
BP needs an oil price of about $90 per barrel to maintain its buyback, he said, adding that more detail about the deal’s valuation would be required to fully evaluate its impact.
(Updates with additional details throughout.)
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