Consortium to invest $10bn in 49% of UAE Gas Pipeline Assets

The Abu Dhabi National Oil Company (ADNOC) has entered into an agreement with a consortium of investors comprising Global Infrastructure Partners (GIP), Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities and Snam (the Consortium). The Consortium will invest in select ADNOC gas pipeline assets valued at US$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 US$10.1 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 generates stable cash flows.

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.