The next phase of U.S. energy independence has arrived—in the form of infrastructure construction fueled by billions in private capital.
With the U.S. turning out near-record amounts of oil and natural gas, a frequent complaint among producers has been the lack of pipelines needed to send fuel to hungry markets, both domestic and abroad. Filling that demand are master limited partnerships (MLPs), publicly traded investment vehicles that combine debt and equity. MLPs are attracting billions in capital commitments from private equity giants like BlackRock and Blackstone.
In a study last month, the Interstate Natural Gas Association of America said North America's shale revolution will require a cumulative $30-billion-a-year in investment through 2035—a figure other energy watchers say actually may be conservative.
The once small and sleepy MLP market has soared in value. Its cumulative market capitalization of less than $50 billion in 2003 is now more than $450 billion, said Adam Karpf, a portfolio manager for MLP strategies at Atlantic Trust, which has $24 billion in assets under management.
Soaring shale production is feeding "rapid growth in the industry," Karpf said. "MLPs are better able to handle capital spending requirements for U.S. industry. It's no longer a sleepy industry."