Brookfield, Teachers ante up to purchase slice of Abu Dhabi pipeline group
TORONTO Two large Canadian institutional investors, Brookfield Asset Management and the Ontario Teachers’ Pension Plan, are part of a consortium paying US$10.1 billion for a 49 per cent stake in a pipeline subsidiary of the Abu Dhabi National Oil Company in the largest infrastructure deal in the world this year.
The newly created subsidiary will have lease rights to 38 pipelines covering a total of 982.3 km for 20 years, in return for a volume-based tariff. ADNOC will hold the remaining 51 per cent of the subsidiary, and will be responsible for management of pipeline operations and for all associated operational and capital expenditures.
“This strategic transaction is attractive to Ontario Teachers’ as it provides us with a stake in a high-quality infrastructure asset with stable long-term cash flows,” said Ziad Hindo, chief investment officer at Teachers.
“This new partnership with ADNOC and a group of worldclass institutional and infrastructure investors expands our global presence and provides further geographic diversification to our portfolio,” he added.
Bruce Flatt, chief executive of Brookfield, said the pipeline system was an attractive investment for the Toronto-based asset manager because it provides a “critical link” between the United Arab Emirates’ low-cost natural gas supply and “robust in-country” demand. He added that ADNOC has established an exemplary operational record.
The investing consortium includes Global Infrastructure Partners (GIP), Singapore’s sovereign wealth fund GIC, NH Investment & Securities, and Italian energy infrastructure operator Snam SPA.
There were additional investors interested in the assets, according to media reports, but some, such as an Australian fund manager, dropped out earlier in the process, Bloomberg News reported in April.
Dr. Sultan Al Jaber, the Minister of State for the UAE and chief executive of ADNOC Group, said in a statement that Tuesday’s transaction unlocks significant value from the pipeline portfolio.
He called it was a “milestone” transaction and said it demonstrates trust and confidence placed in Abu Dhabi’s national oil company by the global investment community. “Today’s landmark investment signals continued strong interest in ADNOC’S lowrisk, income-generating assets, and sets another benchmark for large-scale energy infrastructure investments in the UAE and the wider region,” he said, adding that it “reinforces the UAE’S track record as the region’s go-to foreign direct investment destination, even during the current unprecedented circumstances.”
Such large deals stand out on a mergers and acquisitions landscape where activity has been lacklustre due to the COVID-19 pandemic and economic lockdowns around the world to try to contain the rapidly spreading novel coronavirus.
One player in the consortium investing in the UAE pipeline assets — the Ontario Teachers’ Pension Plan — drew criticism from a group called Shift Action for Pension Wealth and Planet Health.
“OTPP is putting the hardearned retirement savings of thousands of working and retired teachers at risk by investing in a massive piece of fossil fuel infrastructure in the midst of a worsening climate crisis and a volatile disruption to global energy markets,” the group said in a statement.
Shift Action, a climate group, added that the teachers’ pension plan excludes investments in tobacco companies, guns and arms manufacturers, and weapons producers from its portfolio, but “has not yet disclosed exclusions on investments in fossil fuels.”