Brookfield signs biggest energy infrastructure contract of 2020
A consortium of six investors, including Brookfield Asset Management (NYSE: BAM), accepted a massive agreement on energy infrastructure. The group will invest $ 10.1 billion in a pipeline company in the United Arab Emirates. It is the largest investment ever in energy infrastructure in the region and the largest such deal in 2020.
The Brookfield consortium will pay $ 10.1 billion for a 49% stake in a newly formed subsidiary of Abu Dhabi National Oil Company (ADNOC), valuing assets at $ 20.7 billion. ADNOC will retain the other 51% stake in the business, known as ADNOC Gas Pipeline Assets. This subsidiary will hold the rental rights for 38 gas pipelines that support ADNOC’s operations. The national oil company will manage pipeline operations and remain responsible for capital expenditures.
Brookfield joined the group of successful bidders this spring. The company added its extensive infrastructure experience and financial firepower to the consortium, given the large war treasures of its private equity funds and access to funding.
Meanwhile, the draw for investors like Brookfield is the stable cash flow these pipelines generate. ADNOC will lease its ownership of the pipeline assets to ADNOC Gas Pipelines for 20 years in exchange for a volume-based rate. The deal will provide the subsidiary with stable cash flow, which it intends to distribute to its owners through quarterly dividends. This structure makes it an attractive investment for Brookfield’s institutional clients, such as pension funds, who favor stable returns.
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