Five Point's $2B Pipeline Sale: A Beacon in the Geopolitical Storm

The energy infrastructure sector is at a crossroads. As geopolitical tensions roil global trade and investors demand resilience, Five Point Infrastructure’s decision to divest its Northwind Midstream pipelines—valued at $2 billion—signals a seismic shift in capital allocation. This sale is not just a corporate move; it’s a harbinger of a broader trend: investors are fleeing legacy assets exposed to trade wars and reallocating capital toward geopolitically insulated, fee-based infrastructure. For investors, the message is clear: pivot now to companies with tariff-proof assets or exposure to regulated energy logistics.

The Geopolitical Tsunami Hitting Energy Pipelines

Rising trade tensions, particularly between the U.S., China, and India, are reshaping the economics of energy infrastructure. Consider the U.S.-India tariff dispute, which has triggered a 25% tariff on Indian steel imports—a critical material for pipelines. Meanwhile, China’s retaliatory tariffs on U.S. goods, coupled with its dominance in global steel production (43 million metric tons annually), have created a double-edged sword for energy projects.

• Cost Inflation: U.S. tariffs on imported steel have raised pipeline construction costs by 9–11%, per industry estimates.
• Supply Chain Chaos: As China redirects steel exports to India, global prices remain volatile, squeezing margins for projects reliant on imported materials.

Five Point’s decision to offload Northwind—despite its $700M in secured financing and 400 MMcf/d capacity expansion—reflects the reality that shale-era pipelines are no longer safe bets. These assets face twin threats: rising costs from trade wars and regulatory scrutiny over carbon sequestration compliance.

Why Five Point’s Move is a Masterstroke

Five Point isn’t just selling a pipeline—it’s future-proofing its portfolio. The company is reallocating capital to three resilient sectors:
1. Regulated, Fee-Based Infrastructure: Assets like water management systems or toll roads, which offer stable cash flows insulated from commodity price swings.
2. Green Logistics: Companies handling hydrogen or carbon capture, which benefit from ESG mandates and decarbonization policies.
3. Geopolitically Strategic Assets: Ports or cross-border energy hubs that thrive in trade conflicts (e.g., India’s growing role as a U.S. manufacturing hub).

The Northwind sale also aligns with a sector-wide reallocation trend:
- 2025 YTD Data: Over $30 billion in energy pipeline divestitures, driven by firms like Energy Transfer and Plains All American.
- Investor Shift: Funds are pouring into regulated utilities (+18% YTD) and ESG infrastructure, while shale-focused midstream stocks lag.

Where to Invest: Tariff-Proof Assets

The Five Point playbook offers a roadmap for investors:
1. Regulated Monopolies:
- Company: Kinder Morgan (KMI): Its Trans Mountain Pipeline expansion, a Canadian government-backed project, offers stable tolls regardless of trade wars.
- Why: Regulated assets like this are shielded from geopolitical swings and benefit from long-term contracts.

1. ESG-Driven Logistics:
2. Company: NextEra Energy (NEE): Dominates renewable energy transmission and hydrogen infrastructure, two sectors insulated from steel tariff volatility.

3. Why: ESG-focused projects attract institutional capital even as trade conflicts rage.

4. Geopolitical Arbitrage Plays:

5. Company: Brookfield Infrastructure (BIP): Owns ports and rail systems in Asia-Pacific, key to U.S.-India trade diversification.
6. Why: These assets profit from geopolitical shifts as supply chains reorient.

The Write-Off for Legacy Pipelines

The writing is on the wall: trade wars are killing the shale-era pipeline model. Five Point’s exit from Northwind—despite its operational success—shows that even well-run assets can’t survive rising costs and regulatory headwinds. Investors clinging to these stocks risk being left with stranded assets as capital floods toward safer havens.

Act Now: The Divestiture Wave is Coming

The $2B Northwind sale isn’t an outlier—it’s the start of a mass reallocation. With geopolitical risks set to intensify (China’s rare earth export bans, U.S. de-minimis tariff hikes), the window to position in resilient assets is narrowing.

Recommendation:
- Sell: Midstream pipelines exposed to trade-sensitive materials (e.g., sour gas infrastructure reliant on imported steel).
- Buy: Regulated utilities, green logistics firms, and infrastructure with geopolitical “moats.”

Five Point’s move isn’t just about Northwind—it’s a clarion call to abandon the past and embrace the future of energy infrastructure. The geopolitical storm is here. Stay dry, or drown.