The Abu Dhabi National Oil Company, ADNOC, announced today that it has entered into a follow-on pipeline infrastructure investment agreement with the Abu Dhabi Retirement Pensions and Benefits Fund, ADRPBF.
ADRPBF will invest AED1.1 billion (US$300 million), following BlackRock and KKR who in February of this year signed the initial investment agreement to invest AED14.7 billion (US$4 billion) into the midstream pipeline assets.
To mark the occasion, a signing ceremony was held today at ADNOC Headquarters with Dr. Sultan bin Ahmad Sultan Al Jaber, Minister of State and ADNOC Group CEO and Riyad Al Mubarak, ADRPBF Chairman.
This follow-on investment agreement will see ADRPBF acquire a 3% stake in a newly formed entity, ADNOC Oil Pipelines – Sole Proprietorship LLC (‘ADNOC Oil Pipelines’), with BlackRock and KKR together holding 40% and ADNOC the remaining 57%. ADNOC Oil Pipelines leases ADNOC’s interest in 18 pipelines, transporting stabilised crude oil and condensate across ADNOC’s offshore and onshore upstream concessions, for a 23-year period. The entity receives a tariff payable by ADNOC, for its share of volume of crude and condensate that flows through the pipelines, backed by minimum volume commitments. Sovereignty over the pipelines and management of pipeline operations remain with ADNOC.
The innovative leasing investment structure with the three investors marks the first time that leading, global and domestic institutional investors have deployed long term equity capital into key midstream infrastructure assets of a national oil company in the UAE. Securing an additional high-caliber investment partner such as ADRPBF further highlights the attractiveness and long term value creation potential of these unique energy assets to the global institutional investment community. In addition to meeting ADRPBF’s infrastructure investment policies and long term return targets, the transaction marks another important milestone in the Fund’s strategy to deploy capital in attractive infrastructure assets. It also underlines ADNOC’s role as a primary catalyst in attracting investment into the UAE.
Commenting on the transaction, Dr. Al Jaber said, "We are delighted that Abu Dhabi Retirement Pensions and Benefits Fund have joined BlackRock and KKR in this pioneering infrastructure investment. Abu Dhabi Retirement Pensions and Benefits Fund is a trusted custodian and investor of our citizen’s savings and long term prosperity. By partnering with the Fund, ADNOC will play an important role in ensuring the financial wellbeing of the UAE’s people."
"This follow-on investment will generate solid, long term value and returns to Abu Dhabi Retirement Pensions and Benefits Fund stakeholders. The addition of the Abu Dhabi Pensions Fund adds further validation of our wise leadership’s guidance to create and enhance value across our business by forming long term, mutually beneficial strategic partnerships. In addition, it demonstrates ADNOC’s progressive and smart approach to unlocking value from its portfolio of assets while retaining control over their ownership and operation."
Commenting on the transaction, Al Mubarak said, "The Abu Dhabi Pensions Fund is pleased to invest in ADNOC’s landmark transaction which is aimed at optimising ADNOC’s assets and capital, and delivering sustained value to both ADNOC and the UAE. This transaction is an extension of our keen effort to create a solid base of investments in the UAE through partnerships with major local companies such as ADNOC."
"With the ease of procedure and continuous support in terms of economic legislations, the UAE is an attractive investment environment. Moreover, this investment will guarantee the diversification of our investments, which will in turn serve our long term priority of continuous prosperity and financial security of UAE citizens. The Fund’s investment portfolio is allocated to investments in the local market based on long term and low-risk investment returns."
Over the last two years, ADNOC has significantly expanded its strategic partnership and co-investment model and created new investment opportunities across all areas of its value chain, while, at the same time, more proactively managing its portfolio of assets and capital. This transaction continues this strategy and follows on from several other recent value creation initiatives, including ADNOC’s debut capital markets transaction, the issuance of the Abu Dhabi Crude Oil Pipeline (ADCOP) bond, the IPO of ADNOC Distribution, the recent strategic equity and commercial partnerships between ADNOC Drilling and Baker Hughes as well as ADNOC Refining and Eni and OMV. Fitch Ratings also recently assigned ADNOC a standalone credit rating of AA+ and a Long-Term Issuer Default Rating of AA with a Stable Outlook. Both ratings are the highest currently assigned by Fitch to any oil and gas company, globally.
The transaction is expected to close in Q4 2019, subject to customary closing conditions and all regulatory approvals. The collection of 18 pipelines being leased by ADNOC Oil Pipelines has a total length of over 750km, and a total aggregate capacity of approximately 13,000 Mbblpd (gross). These assets represent key midstream infrastructure for Abu Dhabi’s energy ecosystem, allowing for the vast majority of Abu Dhabi’s crude oil production to be transported from ADNOC’s onshore and offshore upstream assets, to Abu Dhabi’s key take-away outlets and terminals for conversion to other high-value products, or on to global energy markets. The pipelines have underlying long term minimum volume commitments and are supported by stable crude oil production from ADNOC Onshore and ADNOC Offshore – the leading onshore and offshore operating companies in ADNOC with global IOCs as JV partners, each with an average remaining concession life of over 35 years.
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