Keppel Infrastructure Trust (KIT) entered a deal to invest US$250 million in a minority stake in Aramco Gas Pipelines, which generates cash flows from the gas pipelines network of Saudi Arabian Oil (Aramco), the trust said Tuesday.
Under the deal, KIT will invest alongside BlackRock Real Assets and Hassana Investment Co. for an indirect minority and non-controlling stake in a special purpose vehicle (SPV) which will acquire a 49 percent stake in Aramco Gas Pipelines for US$15.5 billion, the trust said in a filing to SGX.
One of Largest Energy Infrastructure Deals
KIT said the stake sale was one of the largest energy infrastructure deals globally, with the purchase price arrived at after a highly competitive global auction.
Aramco will retain the other 51 percent of Aramco Gas Pipelines, the filing said; Aramco Gas Pipelines’ expected asset book value at completion is US$31.6 billion, or around S$42.7 billion, the filing said.
Aramco Gas Pipelines will lease usage rights in Aramco’s gas pipeline network in Saudi Arabia for a 20-year period and will grant back to Aramco the exclusive right to use, transport through, operate and maintain the gas pipeline network for the 20-year period in exchange for a quarterly volume-based tariff, backed by a minimum volume commitment, the filing said.
Aramco will retain the legal title to and sole operational control of the pipeline assets, the filing said.
Jopy Chiang, CEO of KIT’s manager, said gas is expected to play a key role in the global energy transition to more sustainable energy.
“The strategic addition of this gas pipeline business will allow KIT to diversify its income base geographically, as well as provide greater stability in the long term by replenishing the portfolio through the addition of another resilient business,” Chiang said in the statement.
“Given the strong fundamentals and the partnership with a top-tier counterparty with a world-class operational record, the investment in Aramco Gas Pipelines Company is in line with the KIT’s strategy of acquiring and investing in good quality infrastructure businesses that generate long-term stable cash flows with potential for growth,” he added.
Saudi Arabia’s gas demand is expected to increase at a compound annual growth rate (CAGR) of 3.7 percent over 2021 to 2030, primary on-demand from the power generation and refining and industrial sectors, the filing said, citing a 2020 Aramco bond prospectus.
Boosting Assets Under Management
KIT said it expected to fund the deal with internal sources and existing debt facilities, including a two-year bridge facility. After the deal is completed, the trust would consider different funding options to repay the loan, which could include equity or debt capital issuances, the filing said.
The deal is expected to boost KIT’s total assets under management to around S$4.6 billion from S$4.5 billion as of end-December, the filing said.
Hassana Investment is the investment arm of the General Organization for Social Insurance of the Kingdom of Saudi Arabia.