KKR buys into Adnoc’s gas pipeline network

KKR returns to Adnoc’s pipeline: KKR nabbed a minority stake in Adnoc’s gas pipeline network — Adnoc Gas Pipeline Assets — for an undisclosed amount, as the New York-based private equity firm looks to deepen its regional footprint, according to a press release. The investment, made through KKR’s managed accounts, plugs into Abu Dhabi’s strategy of courting global capital for core infrastructure without ceding control.

Adnoc Gas Pipeline Assets links the company’s upstream production to local off-takers in the UAE, operating 38 pipelines and two export terminals across the country, CNBC reported. While KKR is buying into the financial structure, pipeline ownership and operational management remain within Adnoc, allowing the state oil firm to retain control over critical national infrastructure.

A familiar playbook: The move echoes KKR’s 2019 investment in Adnoc’s oil pipeline business, which marked the first-ever foreign investment in Adnoc’s midstream network. The transaction was unwound last year when KKR and BlackRock sold their combined 40% stake to Lunate.

The playbook of leveraging pipelines to raise capital without ceding control via lease and leaseback arrangements has been gaining momentum regionally, with the Kuwaiti government currently exploring a plan involving leasing 13 pipelines for a 25-year period to help Kuwait Petroleum Corporation (KPC) raise USD 5-7 bn from the move. Earlier in 2021, Saudi’s Aramco also signed a landmark USD 15.5 bn lease and leaseback with a consortium led by BlackRock — which recently took up a minority stake in the Saudi Bahrain Pipeline Company from Bahrain’s Bapco Energies.

IN CONTEXT- This is KKR’s second acquisition in the UAE this year after buying into Dubai’s Gulf DataHub in January. The private equity giant has been building a larger Middle East franchise, naming former CIA director and former-US general David Petraeus as chairman of its Middle East unit in April. The firm has been active beyond pipelines as well, acquiring commercial aircraft from Etihad Airways in 2020.

KKR’s venture plays into a broader Gulf effort to monetize midstream assets. BlackRock struck a USD 11 bn leaseback with Aramco’s Jafurah gas network earlier this year, while Kuwait Petroleum is considering a similar move to help fund a USD 65 bn investment plan, Bloomberg reports.

IN OTHER M&A NEWS-

Fertiglobe completes Wengfu Australia acquisition: Adnoc-owned urea and ammonia producer and exporter Fertiglobe closed its acquisition of Wengfu Australia’s distribution assets, it said in an ADX disclosure (pdf). The takeover was financed through short-term facilities to be repaid within four months. The company said the agreement will have minimal impact on leverage and no effect on dividend capacity.

Looking ahead: Fertiglobe expects the assets to add around USD 23 mn in annual EBITDA by 2030. The agreement — executed through newly created Fertiglobe Australia — adds eight warehouses across five ports handling 700-800k tons of fertilizer annually, with capacity to scale up to 1.1 mn tons.

REFRESHER- Fertiglobe announced the transaction in May, agreeing to pay net asset values plus an USD 8 mn premium. The acquisition diversifies its portfolio into non-nitrogen fertilizers and expands its Asia-Pacific footprint.