TPG Buys MIRATECH From BP Energy Partners

Buyout fund manager TPG acquired Miratech, a supplier of noise- and emission-reduction equipment, investing through its Rise Climate impact strategy in a bet that demand for such products from rapidly expanding data centers will boost the business.

The firm bought Tulsa, Okla.-based Miratech from BP Energy Partners, a private-equity manager in Dallas that backs midsize providers of products and services used to reduce carbon emissions in energy-intensive industries. The Rise Climate investment aims to benefit from the use of Miratech products with backup power generators used by data centers.

Miratech’s products include catalysts, filters, silencers and exhaust systems for natural gas-fired turbines, diesel engines and fuel pipelines as well construction, mining and marine equipment, among other areas. BP Energy acquired the business, which now has around 500 employees, in 2022.

A proliferation of data centers—warehouse-size buildings filled with power-hungry computers and servers—to house artificial-intelligence systems is driving up electricity demand at a pace not seen in decades. Operators of the facilities generally favor renewable-energy sources but still need backup power, often from on-site diesel generators, to prevent servers from shutting down when the wind dies or the sun sets, according to industry analysts.

Top executives at Blackstone, the New York-based asset manager, have said they expect around $2 trillion in generative AI-related investments worldwide over the next five years. Blackstone is one of a number of private-equity firms, including TPG, that in recent years has committed billions to data center development as part of that trend.

Ensuring power availability for datacenters with minimal emissions and noise can feed the need for Miratech’s products as the industry expands, said Marc Mezvinsky, a TPG partner who focuses on climate- and technology-related deals. 

“When you look at key industries that require 24-hour clean and reliable power, data centers are going to be very high on that list for decades to come,” he said. “If you are a data center operator and you’ve spent billions on equipment, the power can’t simply go out. You need on-demand backup power.”

Tougher environmental rules also serve to bolster Miratech by giving datacenter operators more reasons to use its products, said Alex Szewczyk, a managing partner and co-founder at BP Energy. Like other midmarket firms, BP Energy typically helps businesses expand and attract large investors.

After acquiring Powertherm Maxim, a provider of engine accessories in Houston, last year, Miratech now needs more capital to expand its product lines and geographic reach, Szewczyk said. Products in development include a system to suppress methane emissions, one of the main targets of the new rules, according to TPG. 

“We ended up doing an acquisition to scale the business and then we were fortunate enough to get some wind at our back through the growth in datacenter development,” Szewczyk said of Miratech. Breakthroughs in generative AI in late 2022 sparked a surge in demand for systems to support further development and deployment of the technology.

Leaders of the Rise Climate strategy see opportunities to back providers of “derivative” products and services that while unrelated to customers’ core businesses remain important to their operations, Mezvinsky said.

An earlier investment in the same vein backed testing and inspection company AmSpec Parent, Mezvinsky said. TPG acquired the business last year from private-equity peer Olympus Partners. AmSpec’s labs help determine whether products such as biofuels, crude oil, ethanol, gasoline and hydrogen meet industry standards.

“When you’re building a data center, you need assets like chips. That’s why companies like Nvidia and others, which are at the epicenter of the sector, have a steep demand curve,” Mezvinsky said of the core hardware and its suppliers.

“But what are the additional items that are required for data centers? It’s not just the chips. It’s also the services around the chips,” he added.

It will take some time for the market to fully appreciate the value of products and services that help reduce carbon emissions, just as it took decades to recognize that computer programs “affect all aspects of life,” Mezvinsky said. 

“If you are a company like AmSpec and Miratech, you are not only, to a degree, supporting the existing infrastructure but you’re also supporting the energy-transition infrastructure,” he said. “They are not solely industrial-services companies. They are climate companies as well.”

Such companies often don’t see themselves that way even as they realize that the shift to clean energy is a big demand driver for their businesses, Mezvinsky said.

“They often don’t start with that mindset,” he said. “When we engage them and say, ‘This is why we believe you are a climate company,’ oftentimes the lightbulb turns on.”

Write to Luis Garcia at luis.garcia@wsj.com