#27 | Jason Downie & Edward Herring: Institutional Capital Left Energy. We Stayed.

Energy fell from 7 or 8 percent of the S&P to under 2 percent. Institutional capital vacated the sector and left a shortage behind.More on Jason Downie and Edward Herring and this episode: thedealtablepodcast.com/episodes/jason-downie-edward-herringJason Downie and Edward Herring have spent twelve years investing into that gap. They are co-founders and managing partners of Tailwater Capital, one of the most active private equity firms in US energy and environmental infrastructure, running three strategies: a flagship fund that is mostly institutional, a non-operated program targeting a minimum 15 percent cash-on-cash yield, and a royalties vehicle funded largely by family offices.Their case is that AI and data centers changed the demand picture permanently, because that infrastructure has to run at 99.9999 percent reliability and renewables alone cannot deliver it. Family offices walked deliberately into the void that ESG mandates created, and the returns followed the scarcity of capital rather than the scarcity of hydrocarbons.They are specific about where the bottlenecks actually sit across upstream, midstream and power, why they avoid subsidies and hyper-leverage, what nuclear realistically contributes and when, and why five of the deals in their fifth fund are repeat relationships. There is also a good stretch on partnership mechanics, including the no yelling rule.Jason Downie and Edward Herring are the co-founders and managing partners of Tailwater Capital, a Dallas private equity firm focused on energy and environmental infrastructure. Founded in 2013, the firm runs flagship, non-operated and royalties strategies across the energy value chain.KEY MOMENTS00:00 AI, data centers, and reliable power04:08 Why institutional capital left energy05:32 The shale revolution, explained08:25 Capital scarcity and higher returns18:45 Target returns and risk discipline28:06 Family offices against institutions31:43 Policy risk, and avoiding subsidies39:27 Nuclear power, regulation, and reality45:24 Where the bottlenecks actually are52:58 "No yelling" and the rules they run onNewsletter: thedealtablepodcast.com/connectLane Carrick on selling a business, The Optima Advantage: amzn.to/48nLElWFollow The Deal Table: YouTube, LinkedIn, Instagram, Facebook, TikTok, XThe Deal Table is hosted by Ryan Harper and Lane Carrick, filmed in Dallas, and produced by Harper Belmont Media.Sponsored by Capital Southwest and Vela Wood.