Oil & Gas Innovation Summer 2020 Digital | Page 24
NEWS - MENA
ADNOC Announces $20.7 Billion Energy
Infrastructure Deal
The Abu Dhabi National Oil Company (ADNOC) announced today
that it has entered into an agreement with some of the world’s leading
infrastructure investors and operators, sovereign wealth and pension
funds. A consortium of investors comprising Global Infrastructure
Partners (GIP), Brookfield Asset Management, Singapore’s sovereign
wealth fund GIC, Ontario Teachers’ Pension Plan Board (Ontario
Teachers’), NH Investment & Securities and Snam (the Consortium),
will invest in select ADNOC gas pipeline assets valued at $20.7 billion.
In one of the largest global energy infrastructure transactions, the
Consortium will collectively acquire a 49% stake in ADNOC Gas
Pipeline Assets LLC (henceforth referred to as “ADNOC Gas Pipelines”),
a newly formed subsidiary of ADNOC with lease rights to 38 pipelines
covering a total of 982.3 kilometers, with ADNOC holding the 51%
majority stake. The innovative transaction structure allows ADNOC to
tap new pools of global institutional investment capital, whilst at the
same time maintaining full operating control over the assets included
as part of the investment.
Under the terms of the agreement, ADNOC will lease its ownership
interest in the assets to ADNOC Gas Pipelines for 20 years in return for
a volume-based tariff subject to a floor and a cap. The transaction will
result in upfront proceeds of over $10 billion to ADNOC and is subject
to customary closing conditions and regulatory approvals.
The gas pipeline network connects ADNOC’s upstream assets to local
UAE off-takers. Ownership of the pipelines, management of pipeline
operations, and all responsibility for associated operational and capital
expenditures will remain with ADNOC. For ADNOC’s partners, this
transaction represents a unique opportunity to invest in quality energy
infrastructure assets with a low-risk profile that generate stable cash
flows.
Commenting on the transaction, His Excellency Dr. Sultan Al
Jaber, UAE Minister of State and ADNOC Group 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. This milestone transaction
demonstrates the trust and confidence placed in ADNOC by the
global investment community and unlocks significant value from our
pipeline portfolio, following last year’s groundbreaking oil pipeline
infrastructure investment partnership. Today’s landmark investment
signals continued strong interest in ADNOC’s low-risk, incomegenerating
assets, and sets another benchmark for large-scale energy
infrastructure investments in the UAE and the wider region. It solidifies
ADNOC’s position as an attractive partner and reinforces the UAE’s
track record as the region’s go-to foreign direct investment destination,
even during the current unprecedented circumstances.”
Adebayo Ogunlesi, Chairman and Managing Partner of GIP
commented: “We are delighted to be entering into this strategic
partnership with ADNOC, one of the world’s leading energy companies.
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
their smart growth strategy. This transaction underscores GIP’s strategy
of investing in high quality infrastructure assets and developing long
term strategic partnerships with industry leaders.”
“We are pleased to invest in this strategic pipeline system, which
serves as the critical link between UAE low-cost natural gas supply and
robust in-country demand,” said Bruce Flatt, CEO, Brookfield Asset
Management. “This transaction aligns with our strategy of investing in
high quality, essential assets generating stable and predictable cash flows
in a sector we know well. ADNOC has established itself as one of the
world’s leading natural gas producers, with an exemplary operational
record. We look forward to partnering with them in support of this
critical asset and sector.”
“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, which will help us deliver on our pension
promise,” said Ziad Hindo, Chief Investment Officer, Ontario Teachers’.
“This new partnership with ADNOC and a group of world-class
institutional and infrastructure investors expands our global presence
and provides further geographic diversification to our portfolio.”
“Investing into ADNOC’s gas infrastructure and supporting Abu
Dhabi’s energy initiatives reinforces our investment diversification
strategy and demonstrates Korea’s growing presence in the global
infrastructure space. I am confident this milestone transaction can
become a stepping-stone to broaden Korean investments in the region,”
remarked Young-Chae Jeong, Chairman & CEO of NH Investment &
Securities.
Snam CEO, Marco Alverà, said: “With this strategic transaction, we
strengthen our international footprint by entering a country and
a region that are key to our sector. Our aim is to promote further
cooperation opportunities, particularly in the energy transition. We
will work with ADNOC and the Consortium partners by leveraging
our industrial skills, know-how and innovative solutions in natural gas
infrastructure management and provide our contribution to the UAE’s
energy system. This transaction was carried out remotely over the past
months, testifying the resilience of our company and its willingness to
continue its growth path.”
This agreement is the largest transaction since ADNOC announced the
expansion of its partnership and investment model in 2017, which aims
to unlock value for ADNOC. Since then, ADNOC has entered the debt
capital markets for the first time, issuing a $3 billion bond backed by the
Abu Dhabi Crude Oil Pipeline; partially floated ADNOC Distribution,
the first-ever IPO of an ADNOC Group company; and entered into
several strategic partnerships in its drilling, refining, fertilizer and
trading businesses, amongst others. These transactions and today’s
landmark announcement are part of ADNOC’s ongoing delivery of its
value creation strategy.
This milestone agreement reinforces ADNOC’s focus and role as a
catalyst for responsible and sustained investment and value creation for
Abu Dhabi and the UAE in this challenging period. The partnership
unlocks significant capital that can be deployed into strategic initiatives
to support ADNOC’s smart growth strategy.
The strategic joint venture will see ADNOC pay ADNOC Gas Pipelines
a volume-based tariff for the use of pipelines that transport sales gas
and natural gas liquids (NGL) from ADNOC’s upstream assets to Abu
Dhabi’s key outlets and terminals. The tariff will be charged on the total
volumes transported through the pipelines, together with liquefied
natural gas (LNG) flows, subject to a volume cap. The new subsidiary
will distribute 100% of free cash to the investors in the form of quarterly
dividends.
Bank of America Securities, First Abu Dhabi Bank and Mizuho
Securities acted as financial advisors to ADNOC while Moelis &
Company acted as an independent financial advisor to ADNOC.
ADNOC’s Gas Strategy
The UAE holds the world’s sixth-largest natural gas reserves. ADNOC’s
gas strategy aims to meet in-country gas demand and support the UAE
in achieving gas self-sufficiency. Dynamics for the UAE gas market are
attractive, driven largely by domestic utilities and growing industrial
production, in addition to the demand created by ADNOC’s own
upstream and downstream activities.
ADNOC’s Sustainability Strategy
ADNOC has a legacy of responsible oil and gas production and longstanding
commitment to environmental stewardship. Earlier this year, it
announced a comprehensive set of sustainability goals, which included
plans to decrease its greenhouse gas (GHG) emissions intensity by 25%
by 2030, strengthening its position as one of the least carbon-intensive
oil and gas companies in the world. •
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