Private Credit Flowing for Texas Firms’ Green Energy Transition

The private credit market presents an opportunity for energy companies looking to fund their transition into green energy, according to Texas finance lawyers.

“We’ve worked in traditional conventional energy for decades on the private credit side and a lot of those firms are now very focused on energy transition, largely because of the opportunities that have been enabled through the IRA,” said Brian Moss, part of a team of eight finance partners who decamped from Vinson & Elkins to Paul Hastings in Houston and Dallas.

“In speaking to our clients, they are seeing a high degree of capital demand in the energy transition space and believe that private credit will play a large role within that space both currently and in the near term future,” Moss said.

The Inflation Reduction Act, or IRA, allotted credits to areas that promote domestic energy transition, such as electric vehicles, solar panels, wind turbines and other clean alternatives.

Private credit may be particularly useful in situations where traditional banks provide capital at the asset level, but private credit funds step in if there’s a need for an additional slug of capital that is higher risk, said Moss. Total private credit assets are expected to balloon to $2.2 trillion by 2027, according to London-based investment data company Preqin Ltd.

Energy-focused private credit funds have cropped up to fill this need, including asset manager Blackstone Inc.'s $7.1 billion energy transition credit fund, which was announced in August last year. Other asset managers, and even conventional banks, are investing into building out their own offerings.

Brian Moss

“We have multiple clients who are actively raising new funds, specifically focused on energy transition,” said Moss. “The pipeline in terms of deal flow activity and opportunities from the feedback we’ve received from clients remains very high.”

Private credit deals are not subject to the same regulatory oversight as banks. They often are able to provide flexible terms, deferred interest payments and upfront pricing.

Moss, Erec Winandy, Christopher Dewar, Guy Gribov, Bailey Pham, James Longhofer, Rafael Alvarado, and Alex Cross moved to Paul Hastings as partners to advise banks, private credit funds, private equity funds, and borrowers, Bloomberg Law first reported last month.

Their clients include JPMorgan, Wells Fargo, Bank of America, Citibank, Apollo, Goldman Sachs and others. “This is the first professional move I’ve made in my career and seven of the eight of us are in a similar boat,” said Winandy, who was at V&E almost 24 years.

Paul Hastings has focused on bolstering its finance practice under chair Frank Lopez and managing partner Sherrese Smith, who took on their roles at the end of 2022.

In February, it added a three-partner finance group in Houston from Akin Gump, including David Elder, Christopher Centrich, and Patrick Hurley. Last year it hired a three-partner group from firm Cahill Gordon & Reindel and a four-partner team from Latham & Watkins in London in 2022.

The Vinson & Elkins team poach is an investment in Texas, home of the lucrative energy deals market that overtook other industries in deal activity last year.