Funds managed by Blackstone have entered into a $3.5 billion agreement to form a joint venture with EQT Corporation. This strategic collaboration aims to enable the U.S. natural gas producer to alleviate its debt while responding to an expected surge in energy demand from AI and data centers.

The partnership will provide Blackstone with investments in gas pipelines in the Mid-Atlantic region, an area poised to see significant power demand growth in the coming years due to increased data center activity. EQT plans to utilize the proceeds from this deal to pay off a term loan and credit facility, as well as to repurchase and redeem its bonds.

This investment comes at a time when utilities are preparing for the largest rise in power consumption seen in generations, largely spurred by the needs of artificial intelligence and data centers. A substantial portion of this power is anticipated to be sourced from natural gas.

EQT, based in Pittsburgh, has experienced a drop in earnings this year, a consequence of lower gas prices following an unseasonably warm winter that drastically reduced fuel demand. Consequently, the company, along with others in the sector, has had to scale back its production operations.

As of September 30, EQT reported a net debt of $13.7 billion, which increased after its acquisition of Equitrans Midstream Corporation, the owner of the Mountain Valley Pipeline, for approximately $5.5 billion in stock earlier this year. The new partnership with Blackstone is expected to enable EQT to decrease its net debt to roughly $9 billion, potentially helping it maintain its investment-grade credit status, currently rated at three B minus by Moody’s, just above junk status.

The joint venture will manage key assets, including the 300-mile Mountain Valley Pipeline, which began operations this year, transporting gas from the Marcellus shale formation into Virginia, a vital market for data centers. It will also encompass the Hammerhead Pipeline, which runs from Pennsylvania into West Virginia.

Current trends show private credit managers, including Blackstone, are looking to diversify their investments beyond traditional buyouts into investment-grade credit and infrastructure, recognizing the need for funding in these areas as competition for financial deals intensifies in other sectors.

As of the third quarter, Blackstone had accrued over $80 billion in assets under management in its infrastructure and asset-based credit segment, with private investment-grade credit growing more than 40% year-over-year to surpass $90 billion.

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