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MEOG Commentary MEOG

ADNOC secures pipeline

divestment deal

ADNOC has concluded a deal to sell a stake in its gas pipeline
business to a group of international investors as it continues its

drive to generate income without losing control of state assets.

Uae ABu Dhabi National Oil Co. (ADNOC) has The deal is being financed through an $8bn
completed the next stage in its fruitful divest- bridging loan obtained from a banking syndi-
ment drive, reaching an agreement to transfer a cate consisting of 17 banks, sources told Reuters.
What: 49% stake in its gas pipeline business to a band These banks include Abu Dhabi Commercial
The international of international investors for $10.1bn. It is the Bank, BNP Paribas, Credit Agricole, Emirates
investors have acquired largest energy-sector deal to take place so far NBD, First Abu Dhabi Bank, HSBC, MuFG,
a 49% stake in ADNOC in 2020, a year which has seen investment col- Societe Generale and Standard Chartered.
Gas Pipeline Assets for a lapse as a result of the coronavirus (COVID-19)
tenure of 20 years, during pandemic. Divestment drive
which they will receive “Today’s landmark investment signals con- The sale will see more than $10bn go to ADNOC
tariff for sales gas and tinued strong interest in ADNOC’s low-risk, upfront, with the company will retaining its cus-
NGL flows. income-generating assets, and sets another tomary majority stake as well as responsibility
benchmark for large-scale energy infrastruc- for management and OPEX and CAPEX.
Why: ture investments in the uAE and the wider In return, the consortium will receive stable
As is customary, region,” ADNOC’s CEO, Sultan Al Jaber, said in cash flows with a low risk profile, ADNOC said.
ADNOC retains majority a statement. Like many producers, ADNOC is scrambling
control, while receiving The investors in question are uS’ Global to raise cash following a steep fall in revenues
immediate liquidity Infrastructure Partners and Brookfield Asset since the COVID-19 crisis began. But the com-
and bringing in an Management, Singapore’s sovereign wealth fund pany’s strategy is also to expand its midstream
experienced pipeline GIC, Canada’s Ontario Teachers’ Pension Plan and downstream businesses, and it needs invest-
operator in Italy’s Snam. Board, South Korea’s NH Investment & Securi- ment to do so.
ties and Italian pipeline operator Snam. The company also spun off its oil pipeline net-
What next: They will invest in ADNOC’s newly formed work last year, passing a 40% stake to uS inves-
The deal is likely to be subsidiary ADNOC Gas Pipeline Assets, which tors Blackrock and KKR for $4bn. GIC and the
replicated by saudi will lease rights to 38 pipelines stretching a total Abu Dhabi Retirement Pensions and Benefits
Aramco, which is of 982.8 km that deliver gas from the company’s Fund then took stakes of 6% and 3% respectively.
understood to be in fields to its customers in the uAE. Blackrock was reportedly intending to take part
negotiations to lease ADNOC will lease out its ownership interest in the gas pipeline deal but pulled out.
a stake in its pipeline in the assets to ADNOC Gas Pipeline Assets for Downstream, ADNOC also sold 20% and
assets. 20 years in exchange for a volume-based tariff 15% stakes in its refining division to Italy’s Eni
subject to a floor and a cap, the company said. and Austria’s OMV respectively, raising $5.8bn.
Tariffs will be charged on the sales gas and nat- That deal covered the 837,000 barrel per day
ural gas liquids (NGLs) that flow through the Ruwais refining complex, an ageing 85,000 bpd
pipelines. The subsidiary will distribute 100% of plant and a 1,900-km pipeline network.
its free cash to investors via quarterly dividends. Snam’s involvement in the deal will provide
“This innovative transaction structure allows expertise in pipeline management. Besides run-
ADNOC to tap new pools of global institutional ning Italy’s pipeline system, the company also
investment capital, whilst at the same time main- manages networks in Austria, Greece and France
taining full operating control over the assets, and is also a partner in the Trans-Adriatic Pipe-
including as part of the investment,” ADNOC line (TAP) that is expected to start pumping gas
said. to Southeast Europe later this year. This marks
The transaction valued ADNOC’s pipeline the firm’s first investment beyond Europe.
business at $20.7bn, making the 49% stake worth “We will work with ADNOC and the consor-
$10.1bn. The investors will pay this sum upfront tium partners by leveraging our industrial skills,
when the deal is closed after regulatory approval know-how and innovative solutions in natural
is secured, which Snam said was anticipated in gas infrastructure management, and provide our
July. ADNOC will hold the remaining 51%. contribution to the uAE’s energy system,” Snam

P4 www. NEWSBASE .com Week 26 01•July•2020