Adnoc announces $20.7bn energy infrastructure deal

By Eudore R.Chand

ABU DHABI 24 June 2020: The Abu Dhabi National Oil Company (Adnoc), announced 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 will invest in select Adnoc gas pipeline assets valued at $20.7 billion. These include:

  • Global Infrastructure Partners
  • Brookfield Asset Management
  • Singapore’s sovereign wealth fund GIC
  • Ontario Teachers’ Pension Plan Board, Ontario Teachers
  • NH Investment & Securities and
  • Snam

In one of the largest global energy infrastructure transactions, the consortium will collectively acquire a 49 percent stake in Adnoc Gas Pipeline Assets LLC, a newly formed subsidiary of Adnoc with lease rights to 38 pipelines covering a total of 982.3 kilometres, with Adnoc holding the 51 percent majority stake.

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.

Dr. Sultan bin Ahmad Sultan Al Jaber, 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, income-generating 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.”

Largest transaction

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 percent 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.

World’s sixth-largest natural gas reserves

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 has a legacy of responsible oil and gas production and long-standing 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 percent by 2030, strengthening its position as one of the least carbon-intensive oil and gas companies in the world.

Dubai Gazette