UAE's Adnoc Sheds Stake in Gas Grid for $10bn
The UAE's Adnoc has struck a deal to transfer a 49% interest in its gas pipeline system to a group of international investors for $10.1bn, the national oil company announced on June 23.
Adnoc has sought to expand its midstream and downstream businesses in recent years by forging partnerships with foreign firms to attract the necessary investment. In the short term, the company is also looking raise cash to shore up its financial position following the collapse in oil prices earlier this year.
The company said in a statement it had sold the 49% stake in a newly-formed subsidiary Adnoc Gas Pipeline Assets to the US' Global Infrastructure Partners and Brookfield Asset Management, Singapore's sovereign wealth fund GIC, Canada's Ontario Teachers' Pension Plan Board, South Korea's NH Investment & Securities and Italian grid operator Snam. Adnoc Gas Pipeline Assets will lease rights to 38 pipelines totalling 982.8 km in length that deliver gas from Adnoc's fields to its UAE customers.
The deal valued the pipeline business at $20.7bn, Adnoc said, making the 49% share worth $10.1bn – funds which the investors will pay upfront when the deal is closed after regulatory approvals. Snam said this was expected to happen in July. Adnoc will retain the remaining 51%.
"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," Adnoc said.
Under the deal, Adnoc will lease its ownership interest in the assets to Adnoc Gas Pipeline Assets for 20 years in return for a volume-based tariff subject to a floor and a cap, it said.
Adnoc CEO Sultan Al Jaber said the investment, which he described as the region's largest in energy infrastructure, unlocked significant value from the company's pipeline business and signalled "continued strong interest in Adnoc's low-risk, income-generating assets."
Last year the company also spun off its oil pipeline system, offloading a 40% stake in Adnoc Oil Pipelines to US investors Blackrock and KKR for $4bn. GIC and the Abu Dhabi Retirement Pensions and Benefits Fund subsequently acquired shares of 6% and 3% respectively.
Snam noted that this marked its first acquisition outside of Europe. Outside of Italy, the company manages pipelines in France, Austria and Greece, and is also a shareholder in the Trans-Adriatic Pipeline (TAP) due to start pumping Azeri gas to southeast Europe later this year.
Adnoc is not the only Middle Eastern producer using its infrastructure to draw in fresh capital. In neighbouring Saudi Arabia, Saudi Aramco is reportedly weighing up a sale of its pipeline unit in order to raise $10bn.