ADNOC makes $4bn in landmark pipeline infrastructure investment agreement with BlackRock and KKR

Transaction marks the first midstream infrastructure partnership by leading global institutional investors and a national oil company in the Middle East

Midstream, ADNOC, Kkr, Blackrock, Pipeline

The Abu Dhabi National Oil Company (ADNOC) has signed a multi-billion-dollar midstream pipeline infrastructure partnership with KKR and BlackRock. Through a newly formed entity, ADNOC Oil Pipelines, ADNOC will lease its interest in 18 pipelines for a 23-year period. ADNOC received upfront proceeds of $4bn from the transaction, which is expected to close in Q3 2019.

Funds managed by BlackRock and KKR will form a consortium which will hold a total 40% in ADNOC Oil Pipelines, with ADNOC holding the remaining 60%. ADNOC will continue to hold sovereignty over the pipelines and will operate them.

BlackRock is the world's largest asset manager,  KKR is a private equity firm. Their investment marks the first time that leading, global institutional investors have deployed capital into key midstream infrastructure assets of a national oil company in the Middle East. ADNOC noted that this followed a competitive selection process.

“We have created an innovative core midstream infrastructure platform alongside ADNOC and BlackRock that can be a catalyst for further foreign investment and broader economic transformation in the United Arab Emirates, said Henry Kravis, co-founder, co-chairman and co-CEO of KKR.

Aligning with the transaction, ADNOC noted in a press release that it is "laying the groundwork for additional infrastructure-related investment opportunities with institutional investors." ADNOC's 60% equity stake in ADNOC Oil Pipelines is held through ADNOC Group subsidiary ADNOC Infrastructure, which the company said in a press release would "become the key vehicle for a new and innovative ADNOC infrastructure investment platform."

“We are creating a range of attractive opportunities for global and regional institutional investors to partner and invest alongside ADNOC to enhance value from our sizeable infrastructure base, drawing on our expertise in structuring and packaging value-enhancing partnership programs that preserve Abu Dhabi’s ownership and control of its assets," said ADNOC Group CEO Dr. Sultan Al Jaber. "Most importantly, this transaction marks a milestone for ADNOC and Abu Dhabi as it paves the way for further significant foreign direct investment into the UAE.”

This is part of a wider trend at ADNOC, encouraging foreign investment into its resources; This transaction follows several other recent value creation initiatives including ADNOC’s debut capital markets transaction, the issuance of the Abu Dhabi Crude Oil Pipeline (ADCOP) bond, the IPO of ADNOC Distribution, the recent strategic equity and commercial partnerships between ADNOC Drilling and Baker Hughes as well as ADNOC Refining and Eni and OMV. Fitch Ratings also recently assigned ADNOC a standalone credit rating of AA+ and a Long-Term Issuer Default Rating of AA with a Stable Outlook. Both ratings are the highest currently assigned by Fitch for any oil and gas company, globally.

Both BlackRock and KKR spokespeople noted that this investment could lead to further partnerships and investments in the region.

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