Tortoise Capital Plans Merger of Two Closed-End Funds and Strategic Review of Ecofin Sustainable and Social Impact Term Fund

Rhea-AI Summary

Tortoise Capital Advisors has announced plans to merge two of its closed-end funds, Tortoise Midstream Energy Fund (NYSE: NTG) and Tortoise Energy Infrastructure Corp. (NYSE: TYG), with TYG as the surviving entity. The combined assets of the funds totaled $914.4 million as of Aug. 31, 2024. Upon completion, TYG's board approved a 40% increase in distributions, to be paid monthly instead of quarterly.

Additionally, Tortoise Capital will conduct a strategic review of its Ecofin Sustainable and Social Impact Term Fund (NYSE: TEAF), which had total assets of $229.0 million as of Aug. 31, 2024. The company aims to address TEAF's disappointing performance and discount to NAV. These actions are part of Tortoise Capital's broader restructuring efforts, including the recent sale of its Ecofin Advisors and private credit businesses, to focus on traditional energy and power infrastructure investing.

Positive

• Merger of NTG and TYG will create a larger fund with combined assets of $914.4 million
• 40% increase in distributions for TYG shareholders post-merger
• Strategic review of TEAF aims to address performance issues and NAV discount
• Restructuring efforts focus on core competencies in energy and power infrastructure investing

Negative

• TEAF's performance has been disappointing, trading at a discount to NAV
• Potential integration challenges and costs associated with the NTG and TYG merger
• Divestment of Ecofin Advisors and private credit business may impact revenue diversification

Insights

Financial Analyst

This merger of NTG into TYG is a strategic move to create a more robust and efficient investment vehicle. The combined $914.4 million in assets should lead to economies of scale, potentially reducing operating costs and improving overall fund performance. The 40% increase in distributions and shift to monthly payments is likely to enhance TYG's attractiveness to income-seeking investors.

However, the strategic review of TEAF raises concerns. The fund's underperformance and persistent discount to NAV suggest structural issues that may be challenging to address. The planned evaluation of blending private and public investments in a closed-end fund structure indicates a potential shift in strategy, which could impact TEAF's risk-return profile.

Tortoise Capital's broader restructuring, including the sale of Ecofin Advisors and its private credit business, signals a significant shift towards traditional energy and power infrastructure. This focused approach could lead to improved expertise but also increases sector concentration risk.

Market Research Analyst

The merger and restructuring efforts by Tortoise Capital reflect broader trends in the asset management industry. There's a growing push for fund consolidation to achieve scale and efficiency, particularly in niche sectors like energy infrastructure. The shift from quarterly to monthly distributions aligns with investor preferences for more frequent income streams.

The strategic review of TEAF is noteworthy, as it highlights the challenges of blending private and public investments within a closed-end fund structure. This hybrid approach, while potentially offering diversification benefits, can lead to valuation discrepancies and liquidity mismatches that may contribute to persistent NAV discounts.

Tortoise's pivot to focus on traditional energy and power infrastructure is intriguing, given the global push towards renewable energy. This strategy could position them well to capitalize on the energy transition, particularly in areas where traditional infrastructure plays a important role in supporting renewable integration.

OVERLAND PARK, Kan., Sept. 5, 2024 /PRNewswire/ -- Tortoise Capital Advisors, L.L.C., a fund manager focused on traditional energy and power infrastructure investing, today announced plans to merge two of its closed-end funds.

The board of directors of each of Tortoise Midstream Energy Fund, Inc. (NYSE: NTG) and Tortoise Energy Infrastructure Corp. (NYSE: TYG) have approved the merger of NTG into TYG, with TYG as the surviving company. TYG invests in energy infrastructure companies and is positioned to benefit from growing energy demand and accelerated efforts to reduce global CO2 emissions from energy consumption. The combined assets of the two funds, including leverage, totaled $914.4 million as of Aug. 31, 2024. Tortoise Capital Advisors, the manager of NTG and TYG, would continue to manage the combined fund with the same investment team. Subject to and upon completion of the merger, the board of TYG also approved a 40% increase in distributions, which will be paid monthly versus quarterly.

In addition, Tortoise Capital intends to conduct a strategic review of the investment strategy of its closed-end fund Ecofin Sustainable and Social Impact Term Fund (NYSE: TEAF), including the impact of blending private and public investments in a closed-end fund. TEAF provides investors access to a combination of public and private investments in essential assets. TEAF had total assets, including leverage, of $229.0 million as of Aug. 31, 2024.

"As part of our product restructuring, we are evaluating our entire fund lineup and are making changes that are in the best interest of fund shareholders," said Tom Florence, CEO of Tortoise Capital Advisors. "We have been disappointed with TEAF's performance and its discount to NAV and aim to correct the issue." 

Tortoise Capital intends to complete the merger of NTG into TYG during the fourth quarter of 2024, subject to requisite fund shareholder and regulatory approvals.

Last month, Tortoise Capital announced plans to merge three of its closed-end funds into a newly formed actively managed exchange-traded fund (ETF), Tortoise Power and Energy Infrastructure ETF. In July the company announced a strategic restructuring including the sale of its Ecofin Advisors Limited business and its private credit business to focus on traditional energy and power infrastructure investing. The sale of the private credit business to 503 Capital Partners, LLC was completed on July 31, 2024 and the sale of Ecofin Advisors Limited is expected to close on Sept. 30, 2024.

About Tortoise Capital
With approximately $8 billion in assets under management as of July 31, 2024, Tortoise Capital's record of investment experience and research dates back more than 20 years. As an early investor in midstream energy, Tortoise Capital believes it is well-positioned to be at the forefront of the global energy evolution that is under way. Based in Overland Park, Kansas, Tortoise Capital Advisors, L.L.C. is an SEC-registered fund manager that invests primarily in publicly traded companies in the energy and power infrastructure sectors—from production to transportation to distribution. For more information about Tortoise Capital, visit www.TortoiseAdvisors.com.

Cautionary Statement Regarding Forward-Looking Statements
This press release contains certain statements that may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included herein are "forward-looking statements." Although the funds and Tortoise Capital Advisors believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the fund's reports that are filed with the Securities and Exchange Commission (SEC). You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required by law, the funds and Tortoise Capital Advisors do not assume a duty to update this forward-looking statement.

IMPORTANT INFORMATION
In connection with the proposed merger discussed in this press release, NTG and TYG expect to file with the SEC solicitation materials in the form of a joint proxy statement/prospectus that will be included in a registration statement on Form N-14. After the registration statement is filed with the SEC, it may be amended or withdrawn, and the joint proxy statement/prospectus will not be distributed to fund shareholders unless and until the registration statement is declared effective by the SEC. Investors are urged to read the joint proxy statement/prospectus and any other relevant documents when they become available because they will contain important information about the proposed merger. Once filed, copies of the joint proxy statement/prospectus and other materials will be available free of charge on the SEC's website at www.sec.gov.

This press release is for informational purposes only and is not a solicitation of a proxy from any fund shareholder and does not constitute an offer of any securities for sale. No offer of securities will be made except pursuant to a prospectus meeting the requirements of Section 10 of the Securities Act of 1933. However, Tortoise Capital Advisors, NTG, TYG and certain of their respective directors, officers and affiliates may be deemed under the rules of the SEC to be participants in the solicitation of proxies from fund shareholders in connection with the proposed merger discussed in this press release. Information about the directors and officers of NTG and TYG may be found in their annual reports previously filed with the SEC.

Tortoise Capital Advisors, L.L.C. is the investment adviser to Tortoise Energy Infrastructure Corp. (TYG), Tortoise Midstream Energy Fund, Inc. (NTG), and Ecofin Sustainable and Social Impact Term Fund (TEAF) with Ecofin Advisors Limited as TEAF's sub-adviser.

The annual and semi-annual reports of NTG, TYG and TEAF and other regulatory filings with the SEC are accessible at www.sec.gov and at https://cef.tortoiseadvisors.com/. The information contained on the funds' website is not a part of this press release.

Media Contacts:
Margaret Kirch Cohen/Richard Chimberg
Newton Park PR
+1 847-507-2229
+1 617-312-4281
margaret@newtonparkpr.com
rich@newtonparkpr.com

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SOURCE Tortoise Capital

FAQ

What is the planned merger between Tortoise Midstream Energy Fund (NTG) and Tortoise Energy Infrastructure Corp (TYG)?

Tortoise Capital Advisors plans to merge NTG into TYG, with TYG as the surviving entity. The combined assets of the two funds totaled $914.4 million as of August 31, 2024. The merger is expected to be completed in Q4 2024, subject to shareholder and regulatory approvals.

How will the merger affect distributions for TYG shareholders?

Upon completion of the merger, the board of TYG has approved a 40% increase in distributions, which will be paid monthly instead of quarterly.

What strategic review is planned for the Ecofin Sustainable and Social Impact Term Fund (TEAF)?

Tortoise Capital intends to conduct a strategic review of TEAF's investment strategy, including the impact of blending private and public investments in a closed-end fund. This review aims to address TEAF's disappointing performance and its discount to NAV.

What other restructuring efforts has Tortoise Capital Advisors undertaken recently?

Tortoise Capital has announced plans to merge three closed-end funds into a new ETF, sold its private credit business to 503 Capital Partners, , and is in the process of selling Ecofin Advisors These actions are part of a strategic restructuring to focus on traditional energy and power infrastructure investing.