A consortium of six investors, including Brookfield Asset Management (NYSE:BAM), has agreed to a massive energy infrastructure deal. The group will invest $10.1 billion into a natural gas pipeline business in the United Arab Emirates. It's the biggest-ever energy infrastructure investment in the region and the largest such deal of 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 the assets at $20.7 billion. ADNOC will retain the other 51% stake in the business, known as ADNOC Gas Pipeline Assets. That subsidiary will hold the lease rights to 38 gas pipelines that support ADNOC's operations. The national oil company will manage the pipeline operations as well as remain responsible for capital spending.
Brookfield joined the group of winning bidders this spring. The company added its extensive infrastructure experience and financial firepower to the consortium, given the large war chests of its private equity funds and access to financing.
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 tariff. The deal will provide the subsidiary with steady cash flow, all of which it intends to distribute to its owners via quarterly dividends. That structure makes it an attractive investment for Brookfield's institutional clients, like pension funds, which favor stable returns.