Friday SWFI News Roundup, July 18, 2014

Aquila Capital and APG Create Hydropower Investment JV

APG Asset Management and Hamburg-based Aquila Capital have created a partnership to invest €500 million toward European hydropower plants. The Dutch pension fund asset manager will contribute €250 million to the joint venture to make investments in operational plants and greenfield projects. Aquila Partners will provide the operational expertise of the hydropower infrastructure assets.

APG’s managing director of global real estate and infrastructure Patrick Kanters said: “APG puts a lot of effort in finding infrastructure investments with high-sustainability characteristics. Hydropower is the most efficient of all main energy sources and ticks the right boxes for us in terms of the risk-return profile and the high cash flow visibility, as well as its strong sustainability profile.”

Mubadala Petroleum Inks Deal with Somalia

Mubadala Petroleum, a sovereign wealth enterprise of Mubadala Development Co., has signed a cooperation agreement with the Ministry of Petroleum and Mineral Resources of the Federal Republic of Somalia. The end goal is to augment development in Somali petroleum.

Musabbeh Al Kaabi, Chief Growth Officer, Mubadala Petroleum, said in a statement: “This strategic agreement will draw upon the great experience of Abu Dhabi in developing a world-class environment for investment in the petroleum sector and enable Mubadala Petroleum to begin a long term relationship with the Ministry to support its upstream sector.”

Kenya’s National Social Security Fund to Receive Higher Contributions

Kenya’s US$ 1.35 billion National Social Security Fund is expecting higher inflows of money. Annual contributions would rise up to 12% of gross monthly earnings. The paid amount is split between employer and employee. In addition, the social security fund is looking to invest in more alternative asset classes like private equity.

ADIA Continues to Seek Australian Hotels

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Alberta’s Sovereign Wealth Inch Toward Cleantech Investments

Alberta’s public purse looks to venture capital to make the province’s heavy-weighted energy sector less costly and cleaner. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Whineray Appointed Chief Investment Officer of New Zealand Superannuation Fund

Photo Credit: New Zealand Superannuation Fund

Photo Credit: New Zealand Superannuation Fund

The New Zealand Superannuation Fund (NZSF) has selected a chief investment officer. Matt Whineray has been appointed to the role by the Guardians of New Zealand Superannuation. Reporting under CEO Adrian Orr, Whineray will manage a team of 35 and will oversee the hiring of external investment managers.

See New Zealand Superannuation Fund Key People

Before joining the superannuation fund in 2008 as a general manager in private markets, Whineray was head of financial sponsor coverage for non-Japan Asia at Credit Suisse in Hong Kong. Before that role, he was a managing director at First NZ Capital and a vice president at Credit Suisse First Boston.

Whineray has been behind several high-profile deals while at the New Zealand Superannuation Fund. In March, Whineray supported the superannuation fund’s US$ 250 million commitment with KKR to get exposure to North American energy markets. By promoting Whineray, the NZSF may take a greater appetite toward large, illiquid investments. In May, Neil Williams, previously general manager of public markets at the NZSF, left for a role as managing director of multi-asset and investment solutions at the Queensland Investment Corporation (QIC). Williams was integral in helping develop the reference portfolio at the NZSF.

Temasek Holdings Adds 3 to its Board

Singapore’s Temasek Holdings has added three new directors to its board, pushing up to 13 members. Robert Ng Chee Siong, Bobby Chin Yoke Choong and Peter Robert Voser will join the board. Robert Ng is the current chairman of Sino Group in Hong Kong and vice chairman of M+S Pte Ltd. Bobby Chin is a retired managing partner of KPMG Singapore. Peter Voser, who will join the board on January 1, 2015, is the former CEO of Royal Dutch Shell plc.

See Temasek’s Key Executives and Board Members

“I am very pleased to welcome each of them to our Board. They are all experienced business builders and corporate leaders in regional and international arenas, who will add depth and useful perspectives to our Board deliberations,” said Temasek Chairman Lim Boon Heng in a press release.

Other recent appointments to Temasek’s board include Robert Zoellick and Lucien Wong back in 2013.

Invest AD Renews Ties With Sberbank on Asset Management Cooperation

Invest AD, part of the Abu Dhabi Investment Council, and Sberbank Asset Management CJSC signed a Memorandum of Strategic Cooperation during the recent St. Petersburg International Economic Forum in Russia. This is a continuation of a strategic relationship in which they signed a similar document back in December 2012. OAO Sberbank is Russia’s largest lender and owns Sberbank Asset Management CJSC.

Both of these entities will seek to cooperate in asset management in the regions of Russia, CIS and the Middle East. Legal support and the sharing of market research enables the two organizations greater transparency when investing. Invest AD had worked with Sberbank as far back as 2009, when Invest AD joined Sberbank and invested in Mountain Carousel ski resort near Sochi, in the Krasnaya Polyana region.

David Sanders, chief investment officer of Invest AD, commented in a press release: “Invest AD has a long history of investing in the Middle East & Africa and in providing quality investment opportunities to clients. We are confident that our deepening partnership with Sberbank Asset Management will allow Russian investors excellent access to investment opportunities in the Middle East & Africa and allow Invest AD and Sberbank Asset Management to collaborate on innovative investment products.”

How Sovereign Wealth Funds Can Save Tesla and Profit

The automobile business is a capital and labor intensive undertaking, requiring a healthy mixture of bonds, convertible debt and equity. A large sovereign wealth fund could benefit from a private investment in public equity (PIPE) transaction into Tesla, if there were favorable investment terms in return for a large current or potential equity stake. The investment would have to be lower the cost of capital of what Tesla CEO Elon Musk would invest himself. In addition, a strategic funding arrangement could be put in place to have funding milestones, thus securing a line of patient capital. State-owned enterprises have a history of investing in automakers. Aabar Investments PJSC direct investment into Daimler netted a profit.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

PE Firm Energy and Minerals Seeks to Raise Hard Cap For Fund III

Houston-based The Energy and Minerals Group, LP is raising more than US$ 3 billion for its third fund, Energy & Minerals Group Fund III, L.P. Founded in 2006, the natural resource focused private equity firm has a US$ 2.5 billion fund target and a US$ 4 billion hard cap. The fund will target investments in minerals and metals, primarily in North America, Australia and South Africa. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Growing Research: ADIA Hires Former BP Chief Economist

The Abu Dhabi Investment Authority (ADIA) has hired its first global head of research. To be based in Abu Dhabi, Christof Rühl will join ADIA in July and create a new global research function nested in ADIA’s evaluation and follow-up division. This division will inform ADIA executives with proprietary macroeconomic and fundamental research. Furthermore, Rühl will seek to enhance ADIA’s relationships with research entities and institutions. He will report to Khaleefa Al Qamzi, the director of evaluation and follow-up division.

Rühl will be joining ADIA from BP. At BP, he was group chief economist and vice president since 2005 – being on the economics team. At BP, his team produced the famous annual Statistical Review of World Energy and Global Energy Outlook.

Before BP, he was chief economist in Russia and Brazil for the World Bank. Before the World Bank, he was a principal economist for the European Bank for Reconstruction and Development (EBRD).

Rühl holds a Masters in Economics from the University of Bremen in Germany.

Why Mexico May Scrap Its Mega Oil Hedging Scheme

The Mexican government has undertaken ambitious energy reform. Approved by Mexican President Enrique Peña Nieto in December 2013, the energy plan permits private investment to flow into Mexico’s historically guarded oil and gas industry. One major reason for the law change is that Mexico’s oil production has slid by around 25% since a peak in 2004.

The deal is attractive for energy traders on Wall Street looking to expand commodity revenue.

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Russian Direct Investment Fund Builds Investment Ties with Bahrain

Looking South, Russia is continually building economic ties with the GCC. The RDIF has inked agreements with a number of countries in the region including government entities in the United Arab Emirates. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

$11 Billion at Stake as External Managers Line Up for Libya

The US$ 66 billion Libyan Investment Authority (LIA) is looking to allocate US$ 11 billion to external fund managers, nearly 17% of total assets. Behind this, is the LIA pressing suits against Societe Generale and Goldman Sachs in London. Fund management companies are analyzing the potential risks of doing business in Libya. However, to be realistic, there will be no shortage of money managers wanting to manage assets and charge fees over an US$ 11 billion pool of money.

What Types of External Managers Will Receive Allocations?

The LIA will seek fund managers with low fees and transparent investment processes. The majority of the allocations will go to fixed income and public equity managers. Smart beta strategies and passive investing are likely mandates the LIA will take out. The LIA are also seeking consultants to assist in the implementation.

The sovereign wealth fund is going under a major restructuring plan, post-Gaddafi. According to LIA Chairman Abdulmagid Breish, more than 50% of LIA’s current assets are in 550 companies that the SWF currently owns.

See Libyan Investment Authority profile

3 Separate Funds

The LIA is planning to set up three funds with different purposes. This is similar to how several of Africa’s sovereign wealth funds have been setup. There is usually a fiscal stabilization fund, savings fund and a strategic development focused-fund.

Fund Names:

    Budget Stabilization Fund (Fiscal Stabilization)
    Future Generation Fund (Savings)
    Local Development Fund (Strategic Development Domestic)

Singapore’s Temasek Takes Sub-Saharan Africa Energy Bet

Singapore’s Temasek Holdings is moving into the sub-Saharan African natural resource market. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Singapore’s GIC Invests Around $63 Million in Intelligent Energy

Singapore’s GIC Private Limited invested around US$ 63 million in Loughborough-based Intelligent Energy Holdings plc, an international power technology company. The Singaporean sovereign wealth fund will own a new issue of 15,129,468 ordinary shares, representing 10% of the company. Intelligent Energy develops fuel cell power systems for a number of markets such as consumer electronics, automotive and stationary power markets. Intelligent Energy is founded on Loughborough University research.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

New Zealand Superannuation Commits Up to $250 Million in KKR Energy Investments

natural gas processing site during sunset

The New Zealand Superannuation Fund (NZSF) is committing up to US$ 250 million toward North American oil and gas opportunities with private equity firm KKR. The mandate will target upstream oil and natural gas production, midstream infrastructure (pipelines), downstream facilities and service companies to the energy sector. KKR is a buyout firm managed by Henry Kravis and George Roberts.

The Asian sovereign funds, CIC and KIC, have backed away from their Canadian shale investments.

Where is the money going?

Here’s Why Singapore’s GIC is Expanding Investments in Brazil

brasilDespite headwinds of a presidential election, higher inflation, and the possibility of deep budget cuts and increased taxes, institutional investors like sovereign wealth funds and pensions are betting on Brazil’s long-term economic viability. For Latin America, sovereign funds are not terrified by short-term volatility. Pensions and sovereign wealth funds center on consumer-oriented companies, counting on middle class expansion. According to World Bank data, in 2005, the poverty headcount ratio in Brazil was 30.8%. In 2009, the ratio lowered to 21.4%. Attractive sectors for public pensions and sovereign funds in Brazil run from, infrastructure, real estate, telecommunications and consumer goods like food.

Lim emphasized opportunities in the larger emerging market countries, advocating the proliferation of supply-side trends.

Being Selective – National Champions

Public asset owners can be selective in their investments, picking national champions in emerging markets. For example, recently Singapore’s GIC Private Limited boosted its stake in BRF to 4.4% from 3.8%, a São Paulo-based food processor. BRF, also known as Brasil Foods, was created by the merger of Perdigão and Sadia and is the world’s 10th biggest food company. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

New Zealand Superannuation Fund Invests Additional $50 Million into Bloom Energy

The New Zealand Superannuation Fund (NZSF) boosted its stake in Sunnyvale-based Bloom Energy, investing an additional US$ 50 million. In May 2013, the NZSF invested US$ 50 million into the fuel cell power generating company.

Bloom Energy is the maker of the “Bloom Box”, a solid oxide fuel cell server. These servers provide electricity without the use of an electric grid. Bloom’s products are fueled by natural gas.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

How West Virginia Learned the Cold Truth about Resource Abundance and Wealth

West Virginia - Jeff Kessler (D) - State Senator

West Virginia – Jeff Kessler (D) – State Senator

Having long been rattled by the booms and busts of the mining industry, the state of West Virginia learned a hard lesson about the importance of saving after years of seeing wealth flow out of state, leaving once resource rich areas in poverty. In anticipation of a shale gas boom from drilling the Marcellus Formation, the West Virginia State Senate proposed and passed a bill to establish a Future Fund to house oil and natural gas tax revenues.

Senate Bill 461 originally called for establishment of a Future Fund to pool 25 percent of oil and gas severance tax revenue in excess of US$ 175 million. With revenues forecasted to hit US$ 176 million in fiscal year 2015-2016, state legislators chose the US$ 175 million benchmark to allow the government more oil and gas proceeds to aid in balancing the state budget. The bill, proposed by WV Senate president Jeff Kessler (D), reached the floor of the state House of Delegates after passing the House Judiciary Committee on March 3rd and the House Finance Committee on March 5th.

It now goes to the Governor Earl Ray Tomblin to sign.

The House Finance Committee axed the US$ 175 million milestone, calling instead for the future fund to reap 3 percent of all gas, oil, coal, sandstone and limestone severance tax revenues which would have been deposited in the state’s general fund. Moreover, the committee amended the bill to freeze funding of the investment pool during times of financial stress if the state needs additional funds or has to slash spending. Finally, it capped the amount lawmakers can draw from the fund in a given year at the average interest income of the preceding five budget cycles.

A proposed constitutional amendment accompanies the bill, barring legislators from tapping the fund until 2020 and setting limits on where interest and investment income can be spent. If this joint resolution is passed by voters in November, spending of fund interest and income will be restricted to five general areas:

  • Workforce development and education enhancement
  • Infrastructure projects
  • Economic development and diversification
  • Tax relief measures for state citizens and businesses
  • Cultural and historical improvements/preservation

Passes in WV House and Senate

The House of Delegates amended Senate Bill 46. Both the Senate and House have approved the changes to the Future Fund bill. It now goes to the Governor Earl Ray Tomblin to sign.

NatGas Revenues to Flow into PNG Sovereign Wealth Fund

PNG Treasurer Don Polye

PNG Treasurer Don Polye

Liquefied Natural Gas (LNG) will drive growth in Papua New Guinea (PNG) this year with the ExxonMobil-led PNG-LNG Project on track to begin exporting in the second half of 2014. The PNG Sovereign Wealth Fund will be the sole beneficiary of the government’s natural resource windfall, PNG Treasury Minister Don Polye has reportedly declared.

The US$ 19 billion PNG-LNG project has gas production and processing facilities spread throughout the Hela, Southern Highlands and Western provinces.

“All proceeds of LNG will go directly into the SWF and I mean 100% of it,” Polye said, according to Post-Courier. “The first sale of the LNG will begin this year and the projected growth of the economy will be roughly approximately valued around K52 billion (US$20 billion) when the first proceeds of the sales of LNG start coming in.”

In November 2010, the PNG government wrote provisions for a sovereign wealth fund into its 2011 budget. The sovereign fund is intended to rein in the effects of historically volatile mineral and petroleum revenues on the economy and government budget as well as to provide for long-run economic development and social programs. According to Post-Courier, Minister Polye said the sovereign wealth fund will be finalized in May at the next parliament session. As for the sovereign fund’s asset allocation policy, Polye is eyeing international markets.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Update on Vitol and ADIC Bid for Shell’s Australian Downstream Assets

Rotterdam-based Vitol SA and the Abu Dhabi Investment Council seem to have won the bid for Shell’s Geelong oil refinery and local service station network in Australia. The transaction amount is A$ 2.4 billion. The investor group beat out the consortium consisting of Glencore Xstrata and Macquarie Group.

Shell Australia listed the Geelong refinery for sale back in April 2012.

European Investment Bank Signs Loan Agreement to Finance El Shabab Plant

On February 6, 2014, the European Investment Bank (EIB) signed a loan agreement in the amount of €205 million (US$ 279.6 million) to finance the El Shabab power plant project in Egypt. The project will be co-financed by the European Bank for Reconstruction and Development (EBRD) and the Saudi Fund for Development (SFD). Funds will be used to convert an open-cycle power plant to a combined-cycle gas plant. The conversion is expected to increase efficiency and output by 50%.

EIB Vice-President Philippe de Fontaine Vive took part in the signing ceremony. “Our aim is to support the new Egypt’s social and economic transition by financing projects encouraging growth and employment,” he said at the event. “We aim to contribute to the improvement of the daily life of the Egyptian people and to the building of a future for the younger generation.”

The EIB has approved €1 billion (US$ 1.36 billion) in loans for projects in Egypt in the last two years, and has signed €637 million (US$ 868.7 million) “so far in key economic and social sectors.”

Also present at the signing ceremony was Mr. Nidal E. Assar, Deputy Governor of the Central Bank of Egypt.

According to the EIB’s website, in 2012 it lent out €52 billion (US$ 71 billion), €7 billion of which was lent out for projects outside the European Union.