Adnoc, which has its headquarters in Abu Dhabi, already has proven an eager partner for infrastructure funds.
Photo: christopher pike/ReutersDUBAI—Global Infrastructure Partners, Brookfield Asset Management and other private-equity firms invested $10 billion Tuesday in gas pipelines operated by the United Arab Emirates’ national oil company, a deal that marries yield-hungry funds with a country battered by low oil prices and the coronavirus pandemic.
The consortium will acquire a 49% stake in a new company with lease rights to 38 pipelines for 20 years, covering roughly 600 miles across the U.A.E., Abu Dhabi National Oil Co., or Adnoc, said. The oil firm will hold the remaining 51% majority stake and pay a tariff to the owners based on the amount of gas moving through the lines.
Infrastructure funds such as New York-based GIP, Canada’s Brookfield, Blackstone Group Inc. and BlackRock Inc. have all raised multibillion-dollar pools of capital over the past year—focused on buying railroads, natural-gas pipelines, renewable power and data centers. Investors have been attracted to the infrastructure sector’s reputation for safe, steady returns in a low-interest-rate world, though yields tend to be lower than riskier private equity.
But the record amount of capital raised prompted concerns about whether these funds can all put their cash to work, causing them to cast a wide net across the globe for assets.
Low oil prices and the pandemic are throwing up opportunities, as governments and companies try to raise cash.
The U.A.E. government has been eager to sell assets and raise funds since an oil-price crash rippled across the region in 2016. Low oil prices have continued to pummel oil-producing Gulf states this year, causing revenues to collapse.
The pandemic, with the resultant impact on travel, also has hammered the U.A.E. economy, dependent on the aviation and tourism sectors for growth outside of oil. The International Monetary Fund forecasts the U.A.E. economy will contract 3.5% this year.
The consortium investing in the U.A.E. also includes Singapore’s sovereign-wealth fund GIC, the Ontario Teachers’ Pension Plan Board, Korea’s NH Investment & Securities and Italy’s Snam SpA.
Adnoc already has proven an eager partner for infrastructure funds. The oil companylast year signed a $4 billion midstream pipeline infrastructure deal with U.S. firms KKR & Co. and BlackRock for a 40% stake in Adnoc’s 18 pipelines over a 23-year lease period.
Unlike neighboring Saudi Arabia, which last year sold a stake in its national oil company Aramco in a listing that failed to attract significant international investors, the U.A.E. has raised cash from Adnoc by selling minority stakes in subsidiaries and listing only parts of its business, such as a fuel distribution arm. Saudi Arabia listed nearly 2% of Aramco in December, raising $29.4 billion.
The U.A.E., which holds the world’s sixth-largest natural gas reserves and sizable oil fields, has indicated it won’t sell shares in the Adnoc parent company.
Brookfield has made investments in China, India, Brazil and Mexico via a roughly $20 billion fund it closed earlier this year. GIP in October raised a $22 billion war chest. The funds are benefiting from a glut of cash from investors seeking to supercharge returns amid prolonged low interest rates.
In total, firms raised $97.5 billion for infrastructure in 2019, up nearly 70% from 2015, leaving the sector with dry powder of $212 billion at the end of last year, according to data provider Preqin.
Write to Rory Jones at rory.jones@wsj.com
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