How ADNOC drew a Korean investor to the Middle East

A Global Infrastructure Partners-led consortium’s $10.1 billion purchase of a 49 percent stake in 38 gas pipelines in the UAE easily stands as 2020’s largest infrastructure deal to date.

The six-member consortium for the Abu Dhabi National Oil Company’s gas pipeline assets included the likes of Canada’s Brookfield Asset Management and the Ontario Teachers’ Pension Plan, Singapore sovereign wealth fund GIC, Italian natural gas company Snam and, somewhat unusually, South Korea’s NH Investments and Securities.

“The Middle East is not a preferred region for Korean investors,” admits Soocheol Lee, head of project financing at NH Investment & Securities. “However, we decided on the investment based on ADNOC’s high credibility, it being a core asset for the UAE, its openness to foreign investors and the fact we were co-investing with big global names.”

NH Investment & Securities agreed to invest about $1.3 billion in the asset, which it plans to offload to other Korean investors as part of its usual sell-down strategy. The overall deal values the pipeline assets at $20.7 billion. Servicing the sixth-largest natural gas reserves in the world, ADNOC’S pipelines span almost 1,000 km, mostly connecting offshore drilling fields to onshore refineries and liquefied natural gas facilities in the UAE.

The ADNOC deal caps an active period for NH Investment & Securities. Last year, together with Korea’s Hanwha Investment & Securities, the firm acquired a combined 2.85 percent stake in London’s Gatwick Airport for £200 million ($263.6 million; €222.4 million). The seller was a GIP-led consortium. It also underwrote $275 million in an LNG power generation facility being developed in Ohio by US power producer Caithness Energy and Apex Power Group. The facility is expected to commence operations in 2022.

At a time when covid-19 is leading several Korean investors to pause investment activity, especially overseas, Lee says NH Investment & Securities plans to decrease investment in sectors that are sensitive to market conditions. Instead, it will increase exposure to sectors with relatively stable cash flows and high-quality counterparties.

“We plan to review PPP projects with stable cashflows and data centre deals, which have gotten positive effects during covid-19,” he says. “We will expand investment in other high-quality assets that can bring stable, long-term cashflows.”

As such, Lee is keen to establish new partnerships: “We have secured a number of domestic investors and have huge capability for progressing deals. If our need for global GPs and their need for Korean institutional investors meet, we can create firm partnerships.”