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Natural gas storage doesn't sound like a hot area for dealmaking. But given the turnout at a conference in Houston earlier in the week, it's becoming of greater interest. Why? More of the country's power plants are being fueled by clean-burning natural gas rather than dirty coal or oil. Consequently, electricity producers need places to store the stuff between the drill bit and the power plant. Add to that future supplies of liquefied natural gas coming from overseas, and the U.S. may have a storage shortage on its hands. If there aren't enough places to store natural gas, then those who do have storage can charge high prices. No wonder private equity is interested in the sector. Wednesday's panel — which included Joe Wise from Haddington Ventures, Andrew Makk of Energy Capital Partners (formed by former Goldman, Sachs & Co. investment banker Doug Kimmelman) and In Seon Hwang of Warburg Pincus — said they were all looking for investments. Existing storage facilities to invest in are hard to come by; those in the early stages of development are more prolific. The private equity panel all seemed to agree that good locations, experienced management teams and possibilities for growth were what they were looking for. But the assets have also gotten pricey — 7 to 9 times Ebitda on average, 10 times or more for contracted facilities. "Buyers have a fear of heights," said Lou Talerico, a vice president in investment banking at Goldman Sachs who spoke on another panel on acquisition and divestiture opportunities. The weaker dollar may help entice overseas buyers, and master limited partnerships don't mind paying a premium if they get cash flow for their unit holders in return. Joe Gatto, a managing director at Merrill Lynch & Co., thinks major oil companies like Chevron Corp. will continue to shed these less-than-exciting assets, but "we don't see a lot shaking loose," he said. — Claire Poole CategoriesPrivate capital video
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