A joint venture agreement and purchase and sale agreement were signed on 19 December 2011 by Light Year TMK. The initial equity injected by each party is JPY 21.22 billion (US$272.9 million). GLP will act as the asset manager of the acquired properties. This joint venture is the first collaboration between GLP and CIC.

The portfolio of 15 properties to be acquired will have a Gross Floor Area (“GFA”) of 770,989 sqm with more than 90 per cent of the GFA located within the Greater Tokyo and Osaka areas. The current occupancy of the properties is 98.3 per cent with a weighted average lease expiry of 5.6 years. The portfolio comprises modern facilities with a weighted average building age of only 6.9 years.

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Funding

The joint venture has entered into an agreement with a group of domestic Japanese banks for debt financing of JPY 81 billion (US$1.0 billion). GLP will fund its equity commitment of US$272.9 million from internal capital. No new equity needs to be issued to fund this transaction given GLP has US$1.7 billion of cash on its balance sheet as at September 30, 2011.”

Read more: Press Release

Lou Jiwei

Jin Liqun

In recent weeks, the China Investment Corporation (CIC) has been in the news headlines for its economic view on Europe and current investment activity in the region. It is well known over the past three decades, more importantly this last decade; China has accumulated vast foreign reserves. Created in 2007, the CIC was tasked to manage a portion of China’s financial resources.

Europe is in the midst of troubling economic times. The Chinese government has been supportive of Europe, but the real question is what will be their level of involvement in the European sovereign debt crisis? If China were to increase investment into Europe via sovereign bonds or other non-firm investments, then it must be convinced that Europe has changed.

The people in China are cognizant in where China invests and are keen for the Government of China to be a responsible commercial investor.

Europe is known for its welfare state mentality, but the world is rapidly changing and to pay for the welfare state, economies must grow by a certain percentage. Taxing and budget cuts are only short-term fixes, structural labor changes are a necessity. According to Jin Liqun, supervising chairman of the China Investment Corporation (CIC), some countries in Europe have “an incentive system totally out of whack.”[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

CIC International (Hong Kong) will take a market-based approach under the principle of measured progress and professional commitment, in accordance with well-defined investment and risk management strategies guided by its clear mandate.

The primary business of CIC International (Hong Kong) covers equity investment and bond investment on the public market, non public market investment and economic research.

Mr. Fan Kungsheng is appointed as President of CIC International (Hong Kong).”

Source: China Investment Corporation Press Release

Giulio Tremonti

Like other Southern European nations, Italy is suffering from severe sovereign debt issues. The Italian Ministry of Finance met with the China Investment Corporation to discuss possible scenarios. Recently, investors wanted greater returns and drove up the bond auction. Italy is trying to lower soaring interest rates and introduce austerity measures. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

GDF SUEZ and China Investment Corporation (“CIC”) have signed a Memorandum of Understanding (“MoU”) for cooperation across multiple businesses and regions, in particular in Asia Pacific. GDF SUEZ and CIC will cooperate on a non-exclusive basis to help accelerate their respective strategies by exploring areas of cooperation and co-investment opportunities. The MoU will be deployed across GDF SUEZ Group’s businesses (gas, power, water and waste, and energy efficiency services) and sets up the framework for cooperation in three areas:

(i) joint investment opportunities in existing and new energy-related projects in Asia Pacific;

(ii) financing cooperation in new projects in Asia Pacific;

and (iii) commercial sponsorship and support to GDF SUEZ in Asia Pacific region, including China, by CIC’s affiliates.

The MoU will be administered through a Steering Committee chaired by the two groups’ respective CEOs.

As the first milestone of this cooperation, CIC is in advanced exclusive talks with GDF SUEZ regarding a €2.3 billion minority investment in the Exploration & Production division of GDF SUEZ (“GDF SUEZ E&P”) (excluding the 22.5% equity stake in E.F. Oil and Gas Limited (“EFOG”)). CIC will own 30% of GDF SUEZ E&P, following a capital increase and a financial restructuring of GDF SUEZ E&P reducing its net financial debt to €0.7 billion.

The minority investment of CIC will reinforce GDF SUEZ E&P’s capital structure and will contribute to accelerate the development of this important activity for GDF SUEZ by providing the appropriate financial flexibility. Initiated in the 1990s via acquisitions followed by strong organic development, GDF SUEZ E&P has 2P reserves of 815 mmboe at the end of 2010, an annual production of 51 mmboe in 2010 and a significant portfolio of contingent resources and exploration prospects. With more than 1,500 employees in 13 countries, it generated €2.2 billion of revenues and €1.4 billion of EBITDA in 2010. The transaction values GDF SUEZ E&P (excluding EFOG) at c. €8.1 billion in enterprise value.

As part of the transaction, CIC would also acquire from GDF SUEZ a 10% stake in the train 1 of the Atlantic LNG liquefaction plant located in Trinidad and Tobago as well as production payments associated with trains 2, 3 and 4 for an amount of €0.6 billion.

The potential acquisition by CIC of a 30% stake in GDF SUEZ E&P and of its 10% stake in the LNG Atlantic liquefaction plant is part of GDF SUEZ’s portfolio optimization program of €10 billion, announced at the 2010 annual results presentation and would result in net cash proceeds of €2.9 billion. The transaction will be subject to condition precedents being satisfied and will be presented for consultation to GDF SUEZ’s employee representative bodies. The transaction could be finalized by the end of 2011. The GDF SUEZ Board of Directors views the cooperation with CIC and the transaction as having a strong strategic interest for GDF SUEZ.”

Read more: GDF SUEZ Press Release