The Ontario Teachers’ Pension Plan is joining a consortium of other institutional investors to invest in certain gas pipeline assets of the Abu Dhabi National Oil Co.
The assets are valued at $20.7 billion and the other investors include Global Infrastructure Partners, Brookfield Asset Management Inc., Singapore’s sovereign wealth fund, NH Investment & Securities Co Ltd. and Snam, an Italian energy infrastructure firm. Collectively the consortium is acquiring a 49 per cent stake in the assets, which takes the form of a newly created subsidiary of the oil company, ADNOC Gas Pipeline Assets.
As part of the deal, the parent company will lease its ownership interest to ADNOC Gas Pipeline Assets for 20 years in exchange for a volume-based tariff subject to a floor and a cap, noted a press release. The new subsidiary will distribute 100 per cent of free cash to the investors in the form of quarterly dividends. The deal will result in upfront proceeds of $10 billion to the parent company, subject to customary regulatory approvals.
“This strategic transaction is attractive to Ontario Teachers’ as it provides us with a stake in a high-quality infrastructure asset with stable long-term cash flows, which will help us deliver on our pension promise,” said Ziad Hindo, chief investment officer at the Ontario Teachers’, in the release. “This new partnership with ADNOC and a group of world-class institutional and infrastructure investors expands our global presence and provides further geographic diversification to our portfolio.”
In response to news of the investment, advocacy group Shift Action for Pension Wealth and Planet Health stated that investments in fossil fuel infrastructure are risky given the worsening climate crisis. “Ensuring the growth of pensions in the long-term requires ending investments that lock-in fossil fuels and redeploying massive pools of finance into climate solutions like renewable energy and clean technology,” said a release from the group. “OTPP has made only modest progress in aligning its portfolio with a safe climate and it continues to invest in climate breakdown.”