Abu Dhabi wins $10bn FDI in gas pipeline deal

Abu Dhabi wins $10bn FDI in gas pipeline deal
Sultan Ahmed Al Jaber, UAE Minister of State and the Abu Dhabi National Oil Company (ADNOC) Group CEO at ADNOC’s headquarters in Abu Dhabi, UAE, December 10, 2019. (Reuters)
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Updated 24 June 2020

Abu Dhabi wins $10bn FDI in gas pipeline deal

Abu Dhabi wins $10bn FDI in gas pipeline deal
  • Major investment pact highlights appetite for regional energy assets despite fall in oil prices, experts say

DUBAI: Abu Dhabi, capital of the UAE, has pulled off a large foreign direct investment (FDI) deal with a transaction to sell a stake in its gas pipeline network to an international consortium of investors for $10.1 billion.

The deal, between the Abu Dhabi National Oil Corporation (ADNOC) and some of the most prominent global names in infrastructure investment, is the latest in a series of transactions that have seen ADNOC bring big foreign investors into its energy industry.

Sultan Al-Jaber, UAE minister of state and ADNOC CEO, said: “We are pleased to once again partner with some of the world’s leading global infrastructure and institutional investors in what marks the region’s largest energy infrastructure investment.”

He told Bloomberg TV: “Given the global economic climate, it is a great endorsement of ADNOC and the UAE’s world-class assets.”

The new investors comprise some of the biggest institutional players in infrastructure projects, led by US firm Global Infrastructure Partners, Singaporean sovereign wealth fund GIC, Canadian investor Brookfield Asset Management and the Ontario Teachers’ Pension Plan Board.

Investment experts said the deal, which values the pipeline network at $20.7 billion, highlighted the attraction of regional energy assets despite the fall in global oil prices since the outbreak of the coronavirus pandemic.

Tarek Fadlallah, CEO of Nomura Asset Management in the Middle East, told Arab News: “This shows there is still appetite for fossil-fuel related assets in the Middle East.”

Other investors in the gas pipeline network included NH Investment and Securities, the second-largest bank in South Korea, and Italian investment firm SNAM.

The foreign investors will acquire 49 percent of a new ADNOC subsidiary, which will have leasing rights to 38 gas pipelines spanning 982 km for a period of 20 years, in return for a volume-based tariff subject to upper and lower caps.

“The innovative transaction structure allows ADNOC to tap new pools of global institutional investment capital, while at the same time maintaining full operating control over the assets included as part of the investment,” a statement added.

Al-Jaber insisted that ADNOC’s focus would remain on cost control, despite the cash the new deal would throw up, in the middle of a volatile period for world energy markets.

“In today’s low-price environment, we must focus on the things we know we can control and that is, of course, our cost. We need to remain agile. We will continue to stay laser-focused on cost, efficiency, optimization and preserving our resources,” he said.

Adebayo Ogunlesi, chairman and managing partner of GIP, said: “ADNOC’s gas network is a core piece of midstream infrastructure in the UAE, and this transaction presents a unique opportunity to invest in an asset of this quality and importance, while also supporting ADNOC in its smart growth strategy.”

Some investors have backed away from fossil fuel-related assets in the global debate about climate change, but Ziad Hindo, chief investment officer of the Ontario Teachers’ Pension Plan Board, said: “This strategic transaction is attractive as it provides us with a stake in a high-quality infrastructure asset with stable long-term cash flows, which will help us deliver on our pension promise.”