Keppel Infrastructure Trust to invest US$250 million in Saudi Arabian oil company's pipeline deal

Picture of Saudi Aramco's Fadhili Gas Plant Project. Keppel Infrastructure Trust has agreed to invest US$250 million in the US$15.5 billion Aramco pipeline deal. PHOTO: AFP

SINGAPORE - The trustee-manager of Keppel Infrastructure Trust said on Tuesday (Feb 8) that it would invest US$250 million (S$336 million) alongside other investors in a deal to acquire stakes in Aramco Gas Pipelines Company, a unit with cash flows derived from the gas pipelines network of Saudi Arabian Oil Company (Aramco).

This will be an indirect minority and non-controlling stake in a special purpose vehicle. 

The other investors include BlackRock Real Assets and Hassana Investment Company, which is the investment arm of the Saudi Arabian general organisation for social insurance.

The consortium of the special purpose vehicle will acquire a 49 per cent stake in Aramco Gas Pipelines Company, which will lease usage rights in Aramco's gas pipeline network in Saudi Arabia for a 20-year period.

The trustee-manager, Keppel Infrastructure Fund Management, said in a filing on the Singapore Exchange on Tuesday: "The acquisition is expected to provide long term, predictable cash flows to Keppel Infrastructure Trust through investing into a strong and growing business that is underpinned by one of the world's largest reserves of natural gas."

It added that gas demand in Saudi Arabia is expected to grow at a compound annual growth rate of 3.7 per cent from 2021 to 2030, driven by domestic consumption.

This is also primarily due to an increase in demand from the power generation and the refining and industrial sectors, it said.

"Favourable governmental policies will also support the strong outlook for gas demand," it added.

Aramco is one of the largest listed companies globally, with a market capitalisation of approximately US$2 trillion as at Monday.

Mr Jopy Chiang, the trustee-manager's chief executive, said: "As the world pivots towards a more sustainable energy future, gas is expected to continue to play a key role in the global energy transition.

"The strategic addition of this gas pipeline business will allow Keppel Infrastructure Trust 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."

He added that the investment is in line with the trust's strategy of acquiring and investing in good quality infrastructure businesses that generate long-term stable cash flows with potential for growth.

After completing the acquisition, which is still subject to customary closing conditions and approvals, Keppel Infrastructure Trust's total assets under management will increase from $4.5 billion as at Dec 31 last year to approximately $4.6 billion.

The trustee-manager intends to fund the acquisition with internal sources of funds and existing debt facilities, including a two-year bridge facility taken up by Keppel Infrastructure Trust, it added.

"On the face of it, this is a good infrastructure investment, where it is easy to calculate and to predict an unsurprising and non-volatile rate of return," said Mr Christof Ruhl, a senior research scholar from the Centre on Global Energy Policy of Columbia University.

"Normally, you would say 10 per cent when you look at the rate of return, but in reality, it is usually somewhere at 6 per cent, but with inflation suddenly around the corner, real and nominal rates may become affected in unexpected ways."

He added: "This is part of a general strategy to increase foreign participation on the Saudi economy, to raise as much money as is possible for its modernisation projects."

Additional reporting by Luke Pachymuthu

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