As outlined in our previous update, our direct and indirect exposure to the Middle East remains limited. With energy price volatility now more persistent, the key question is how sustained oil and gas disruption transmits through portfolio companies. Our updated assessment points to three clear takeaways:
- Near-term challenges are limited, targeted, and marginal
Only a small number of portfolio companies may face modest near‑term pressure, primarily from higher fuel or freight costs or short‑term operational delays. In these cases, impacts are mitigated through pricing pass‑throughs, contractual protections, or operational flexibility, leaving underlying investment theses intact.
- Select infrastructure assets stand to benefit from tighter gas markets
Several infrastructure assets are positioned to benefit from tighter natural gas markets and higher flows, particularly where revenues are supported by long‑term contracts, take‑or‑pay structures, or essential‑service characteristics linked to energy security.
- Structural demand and reinforced themes
Recent geopolitical developments further reinforce our core investment themes, including energy security, efficiency, diversification10, and infrastructure resilience. The current environment strengthens the medium‑term opportunity set and potential upside across select private equity and infrastructure strategies.
Near-term challenges: limited, targeted, and largely mitigated
The main challenges for companies operating in today’s environment stem from the potential for softer discretionary sentiment, higher freight/fuel costs, and short-term operational delays. We believe these factors are likely transitory rather than structural. None of our private equity direct portfolio companies are heavy industry or high-energy-demand companies, and only eight out of our 65 private equity direct portfolio companies may face some mild negative consequences should elevated energy prices persist. In these cases, impacts are mitigated by pricing pass throughs, contractual protections, or timing effects, and do not alter underlying investment theses.
Rosen, a pipeline inspection and integrity services company with a single-digit EBITDA margin exposure in the Middle East, illustrates this dynamic. Regional instability has led to the postponement of some Gulf inspection runs in the near term, with the potential for activity to be recovered later. Additionally, higher oil and gas prices may mean that pipeline operators in other regions will want to maximize throughput at these elevated prices and so may be less inclined to conduct inspection runs, potentially leading to minor delays in currently scheduled inspection runs.
Importantly, once these short-term disruptions abate, deferred inspections work must be completed, and heightened focus on infrastructure integrity following the conflict may create incremental inspection demand in affected regions.
Other private equity direct portfolio companies facing near term cost pressure have mitigating factors either in place or available to them, such as pricing mechanisms and contractual pass throughs that allow for higher input costs to be absorbed without material margin erosion. Exposure to the Iran war can be linked to higher cost of manufacturing inputs such as energy or feedstock inputs.
For instance, DiversiTech, a manufacturer and supplier of HVAC components, has the ability to pass on extreme price increases in plastic resin costs to customer when required, as demonstrated during the inflationary and tariff periods of recent years.
Other companies, such as Rovensa, a developer, manufacturer, and supplier of biological inputs for Agriculture, have by nature a very minimal exposure to energy prices, c. 1% of cost of goods sold in the case of Rovensa, with the company also largely shielded from this small exposure thanks to several fixed price contracts.
Beyond manufacturing, higher oil prices present upward cost pressure via freight and transportation. United States Infrastructure Corporation (USIC), a provider of outsourced "utility locate" services for sub-surface infrastructure, illustrates how mitigation measures limit the impact of sustained oil price increases. While USIC operates a large national fleet, the majority of its fuel costs are hedged, and a portion of realized higher fuel costs can be passed through via contract pricing or fuel-related surcharges.
In Infrastructure, more than 85% of our direct investments have the ability to pass-through inflation, either contractually or via regulated tariffs. One of the few companies that might have some indirect exposure is EOLO, an Italian last mile broadband connectivity provider that may face secondary effects from rising energy prices, which put pressure on operating expenditures since digital infrastructure assets require electricity to operate. Higher inflation, as a consequence of higher oil prices, could make the customer base in the consumer segment more sensitive to price increases. This might trigger higher churn in the retail customer base. We are mindful of these impacts and are taking steps to increase the proportion of wholesale, B2B subscribers, that have contracted pricing and firm capacity offtakes.
Near-term beneficiaries: natural gas and power infrastructure
At the same time, several portfolio companies are positioned to benefit from tighter LNG markets and higher natural gas and power prices, particularly where revenues are supported by long‑term contracts, volume exposure, or essential‑service characteristics.
Esentia, a large natural gas pipeline system that transports gas from Waha, Texas in the Permian Basin to central Mexico, operates under long-term, take-or-pay contracts. The war in Iran does not directly affect Esentia, as its revenues come from long-term transportation agreements that are largely shielded from commodity price fluctuations. However, indirectly, higher oil prices could support increased U.S. and Permian oil production, boosting associated gas production and benefiting Esentia through increased throughput volumes.
Over the longer-term, disruptions in global LNG markets also underscore the importance of diversified supply. Mexico – and Esentia – can benefit from access to low-cost Waha gas and short shipping routes to Asia, supporting potential growth in Mexico’s West Coast LNG projects serving APAC demand.
In Europe, Biogeen, a German biomethane and biogas platform, stands out as a potential short-term beneficiary. Surging European gas prices driven by Hormuz disruption and supply uncertainty directly increase the competitiveness and market value of Biogeen's domestically produced biomethane and bio-LNG, strengthening its pricing power and accelerating local customer demand.
Longer-term, the conflict is likely to further reinforce the EU's push to reduce dependence on imported fossil gas, creating a stronger policy and subsidy environment for the kind of locally sourced, grid-injectable renewable gas that Biogeen produces.
Similarly, Hanseatic Energy Hub (HEH), an LNG import and regasification terminal in Germany, should see increased value of secure European import capacity that it provides. In this environment, long-term LNG offtake contracts become more attractive to European buyers, strengthening the commercial position of existing anchor agreements while creating an opportunity to attract additional customers.
Budderfly, a U.S. provider of energy efficiency-as-a-service to commercial customers, also illustrate indirect upside. Its revenues stem from the savings generated from the installation of energy efficiency upgrades at customer sites. Therefore, the company’s revenues are tied to U.S. electric utility rates. The direct impact of higher global oil prices on U.S. electric utility rates is fairly small, because oil is no longer a significant fuel for power generation in the U.S. However, the indirect impact comes through natural gas prices. Natural gas usually sets the marginal price of electricity, so wholesale electricity prices tend to track natural gas very closely.
Therefore, if the Iran war causes global LNG disruptions, higher exports of LNG from the U.S., and tighter domestic natural gas supply, all leading to higher natural gas prices, then this could ultimately push up U.S. electric utility bills, which is a positive for Budderfly as it increases Budderfly’s revenues from existing installations and amplifies the already-high consumer demand for energy savings.
Longer-term implications: core investment theses reinforced
Beyond near-term effects, the current disruption reinforces several of our core private markets investment themes. Energy security and diversification gain importance as transit-route and supply-region risk rises. Efficiency, transparency, and substitution become more economically compelling in an environment of higher and more volatile energy prices. Critical infrastructure resilience and integrity also move higher on corporate and policy agendas.
Techem, a leading sub-metering company, provides energy consumption transparency and digital metering to customers across Europe. Techem actively supports the energy transition, enabling consumers to monitor and reduce usage, lower costs, and improve efficiency – a need clearly highlighted by this month’s price surges.
PremiStar, a leading aftermarket commercial HVAC services company which provides mission critical maintenance, repair, and replacement, operates in a segment where HVAC can represent more than half of a building's energy expenditure. The value proposition of improving the efficient operation of HVAC systems increases in importance in the environment of high and/or volatile energy prices.
In infrastructure, Middle River Power (MRP), a U.S. independent power producer with more than 2GWs of gas-fired generation and battery storage, has a high level of near-term gross margin contracted (over 90%). This reduces exposure to near-term market price volatility, while the company can still participate on the upside. Geopolitical instability in the Middle East increases the long-term appeal of U.S. LNG exports, which could drive domestic natural gas prices higher. In California, where gas-fired plants set the marginal power price, higher gas prices typically translate into higher electricity prices. Assuming demand remains stable, this dynamic could increase MRP’s energy margins. Sustained higher power prices could also improve battery storage economics and support further development opportunities for MRP.
