Adnoc closes $4bn pipeline deal with BlackRock and KKR

The private equity companies invested through their global infrastructure funds

The Abu Dhabi National Oil Company (ADNOC) announced, today, it has safely completed the first co-loading of Liquefied Petroleum Gas (LPG) and Propylene onto the same vessel, which was docked in Ruwais, the United Arab Emirates (UAE). Courtsey: ADNOC
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Abu Dhabi National Oil Company completed its $4 billion (Dh14,69bn) deal with BlackRock and KKR, who will in exchange have a 40 per cent stake in its pipeline infrastructure.

The infrastructure financed by a group of international banks through private equity companies was oversubscribed during syndication, Adnoc said on Thursday.

"The successful closing of this pioneering transaction and the oversubscribed financing is a clear vote of confidence by the global investment and finance community in both the UAE and Adnoc as an attractive investment destination," said Adnoc finance and investment group director Ahmed Al Zaabi.

"It also highlights the quality of Adnoc's midstream pipeline assets and our innovative approach to structuring value-creating investment opportunities for our partners and investors,” he added.

In February, BlackRock, the world’s largest asset manager as well as KKR paid $4bn upfront through a special purpose vehicle to invest in 18 of Adnoc's pipelines, totalling 750 kilometres in length with 13 million barrels per day of capacity . The infrastructure will be leased for 23 years to the companies through a newly formed entity Adnoc Oil Pipelines, in which the private equity companies will hold a 40 per cent stake, with Adnoc remaining the majority stakeholder.

The agreement marked the first time that leading international financial institutions were able to make investments related to the company's midstream assets following a competitive selection process by Adnoc.

The Abu Dhabi Retirement Pensions and Benefits Fund has also contributed $300m to the vehicle, with the financial closure for that deal expected in the next quarter. As part of the agreement, Adnoc will retain sovereignty and management of the pipelines, which transport stabilised crude and condensate from its onshore and offshore fields to export and refining facilities.

Adnoc Oil Pipelines will receive a tariff from the state-owned company for how much crude and condensate it transports.  Minimum volume commitments have been put in place.

KKR made its first direct investment in the region through its $7.4bn Global Infrastructure Investors Fund with this deal. The New York company has been acquiring pipeline assets in North and Central America, including in the Gulf of Mexico, DJ Basin, Mexico's Bay of Campeche, British Colombia and Alberta Montney regions in Canada

BlackRock has almost $6 trillion in assets under management invested through its third Global Energy & Power Infrastructure Fund.

Adnoc's financial advisers on the deal included Bank of America Merrill Lynch and JP Morgan, while Moelis & Company acted as an independent financial adviser.

Ahead of the pipeline transaction, Fitch rated Adnoc as a highly creditworthy oil and gas company globally.

The ratings agency assigned the group a standalone credit rating of AA+, the highest given to companies in the energy sector, "high upstream output, significant reserves and strong profitability”.