South Korean pension fund in race to buy US pipeline stake

Following its acquisition of a stake in Gatwick airport, South Korea’s National Pension Service is now looking to acquire Chevron’s 23.44% stake in US pipeline operator Colonial Pipeline in a deal estimated at $845m.

South Korea’s National Pension Service, one of the world’s largest pension funds with $270 billion of assets, has confirmed that it is seeking to acquire a stake in pipeline operator Colonial Pipeline from US energy giant Chevron.

Colonial: sale
may net Chevron
over $800m

Chevron is looking to divest its 23.44 percent stake in Colonial Pipeline, which operates close to 9,000 kilometres of oil pipelines running from Texas to New York, with local media reports suggesting the South Korean pension offered to pay around $845 million for the asset.

“We are in talks to acquire the stake,” the pension said in a statement, adding that it was part of its diversification strategy.”

Korea is interested in an oil pipeline operator because of the stable returns such an investment can offer.

“We are interested in US and European infrastructure, which is linked to inflation and boast stable cash flow,” an investment director told the Financial Times.

However, the pension denied earlier reports in the South Korean press that placed it as the preferred bidder to purchase the asset. A spokesman from Chevron confirmed the sale was ongoing, but declined to identify which companies were bidding for the asset. “We believe there is significant market interest in this asset,” the spokesman said.

Colonial Pipeline’s largest shareholder is Koch Capital Investments Company (28 percent). Other shareholders include ConocoPhillips (16.55 percent), Shell (16.12 percent) and Industry Funds Management (15.8 percent).

The South Korean pension fund, which earlier this year acquired a 12 percent stake in London’s Gatwick airport for £100 million (€122 million; $154 million), has indicated that it is looking to quadruple its international investments.

Presently, only about a tenth of its $270 billion portfolio is invested overseas. The fund had also said that it plans to increase investments in infrastructure, real estate and private equity funds to 6.4 percent this year from 4.5 percent at the end of last November. Over 70 percent of the fund is still invested in fixed income holdings, most of them in South Korea.

The pension first came to the attention of the UK’s financial community last year, when it bought HSBC’s Canary Wharf headquarters for £773 million.