Sovereign Wealth Fund Institute

The R$1.17 trillion South Africa’s Public Investment Corporation (PIC) along with SunEdison, Chint Solar, and the Kurisani Youth Development Trust announced a deal for R$2.6 billion (US$ 314 million) in equity and long-term financing for two South African solar projects.

The two utility-scale projects will have a total power capacity of 58 megawatts. These are the first utility-scale solar projects in the Limpopo province. South African Utility Eskom will purchase the power through a 20-year purchase power agreement (PPA).

Two Solar Utilities

• Soutpan Solar Park – 28 Megawatts
• Witkop Solar Park – 30 Megawatts

“The Public Investment Corporation always seeks to invest in projects that aim to achieve the Government Employee Pension Fund’s dual objective of investing for financial return and for positive social, economic, and environmental results,” said Dr. Dan Matjila, the PIC’s Chief Investment Officer. “PIC is passionate about environmental sustainability and contributing towards cleaner energy and a greener economy, hence we saw value in this investment. Over and above that, PIC is pleased that this investment will contribute immensely to job creation, particularly in Limpopo. The project is expected to create 318 jobs during construction, and 55 jobs on an on-going basis, with 44 of those designated for historically disadvantaged individuals. This investment will stimulate much-needed economic activity, thus directly contributing to the country’s economic development agenda.”

Abu Dhabi’s International Petroleum Investment Co. (IPIC) plans to raise about $2.9 billion in bonds. IPIC is seeking to attract fixed income investors so that it can leverage and finance more energy investments and projects. IPIC continues to invest and buy into refinery, liquefied natural gas developments, and other assets in the hydrocarbon value chain.

This would be the largest Arab corporate debt sale in 2012; however, in October 2011, IPIC raised $3.75 billion from bond sales.

IPIC plans to sell $750 million in 3-year bonds and 2-part 1.65 billion in euro-denominated ($2.4 billion) debt maturing in 5.5 years and 10.5 years. The IPIC is owned by the Emirate of Abu Dhabi. Since 2012, the government of Abu Dhabi has made six equity contributions to IPIC totaling US$ 3.5 billion, the latest in 2008. To date, IPIC has not paid any dividends to the government.

The arrangers include: BofA Merrill Lynch, BNP Paribas, and the National Bank of Abu Dhabi P.J.S.C.

On August 28, 2012, the China Development Bank (CDB) deposited $4 billion along with the Venezuelan National Development Fund adding $2 billion to restock a China-Venezuela investment fund. China has a strategic energy interest in Latin America. The bilateral investment fund allocates money to infrastructure projects in Venezuela. Since 2007, China has lent more than $36 billion in capital toward infrastructure projects including railway transportation and housing. The country repays the loans to China with oil exports, sending nearly 640,000 barrels of oil a day to China.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The State Oil Fund of Azerbaijan (SOFAZ) will allocate AZN 2.149 billion for investment projects in 2013. Azerbaijan’s Finance Minister Samir Sharifov made the announcement at a recent parliamentary committee meeting on the state budget for 2012.

In September 30, 2012, SOFAZ had 1.35% allocated to equities and 1.86% allocated to gold, the rest was in fixed income and cash.

Finance Minister Bahk Jae Wan

The meetings are planned to occur two times year to discuss prospective investment projects. If a project has merit, the government of South Korea will allocate funds from its global infrastructure fund to be invested alongside the Qatar Investment Authority.

On October 20, 2012, Samsung Engineering Co., Ltd, the biggest engineering firm in Korea was awarded the Yanbu refinery expansion project from Luberef (Saudi Aramco Lubricating Oil Refining Company). It was a US$ 871 million deal. Luberef is a joint venture between Saudi Aramco (owns 70%) and Jadwa Industrial Investment Company (owns 30%).

The Libyan Investment Authority (LIA) expressed interest to invest in the Petit-Couronne oil refinery. The LIA has experience investing in oil refineries in continental Europe. Being the oldest refinery in France, it is currently facing liquidation, putting around 500 jobs at risk. In October 2012, the French commercial court in Rouen rejected two bids from Hong Kong-based Alanfandi Petroleum Group and Dubai-based NetOil.

French Industry Minister Arnaud Montebourg said in a RTL radio interview that he received a non-binding letter from Libya “demanding to examine this issue from the Libyan sovereign fund, which is a petroleum-producing country that has decided to resume economic and political relations with France.”

Created in 1929, the Petit-Couronne refinery was owned by Shell and sold in 2008 to Petroplus, a Swiss company. In 2011, Petroplus attempted to restructure operations at the refinery, but decided to sell the asset after filing for bankrupt protection in January.

Mr. Montebourg further stated, “we don’t want the liquidation of this refinery. I’m going to ask the commercial court today to delay its judgment, to take the time necessary to allow our Libyan friends to invest in this refinery.”

The Sovereign Wealth Fund Institute concluded their Asia summit Tuesday afternoon in Singapore. Representatives from Angola’s new sovereign wealth fund called the Fundo Soberano de Angola (FSDEA) attended the summit. Mr José Filomeno de Sousa dos Santos, a member of the fund’s board, keynoted a session introducing Angola’s sovereign wealth fund to sovereign wealth peers, long-term public investors, government officials, and major firms in the investment industry.

“We are honored to have Mr José Filomeno de Sousa dos Santos speak at our summit in Singapore and share stories about social and economic developments occurring in Angola today,” said Michael Maduell, President of the Sovereign Wealth Fund Institute. “The government of Angola is passionately determined to invest, stimulate and create opportunities for the citizens of their country. Angola has allocated a substantial portion of money and future oil revenue to move forward an agenda of strategic development.”

Angola’s new sovereign wealth fund debuts with US$ 5 billion dollars. Nigeria’s sovereign wealth funds have started with US$ 1 billion.

Executives of the Fundo Soberano de Angola are keen on complying with the Santiago Principles and scoring high on the Linaburg-Maduell Transparency Index (LMTI), a global transparency system for sovereign funds.

The FSDEA will balance financial and social return objectives. One major area of focus is the hotel industry, in which financial returns look attractive for the African continent and at the same time can have an aggregate demand impact in the construction, tourism, and real estate sectors. In the past years, a small number of sovereign funds have invested African hotels. Social investments will be guided by the fund’s social charter which will initially focus on income generation, energy and education investments.

In December 2007, Angola reached a historic high of 23.2% GDP growth.

Over a period of time, the FSDEA will grow by a portion of collected oil revenue and financial returns on investments. Angola is a major sub-Saharan oil producer, pumping out around 1.8 million barrels of crude oil a day. Above 95% of its export earnings are accounted by the oil industry. The fund will receive inflows equivalent to the prevailing value of 100,000 oil barrels per day. Initially the FSDEA was planned to launch in 2009, but was delayed by effects from the North-Atlantic financial crisis of 2007.

KazMunaiGaz National Co., a state-owned oil and gas producer paid 142 billion tenge (US$ 947 million) in 2011 dividends to Samruk-Kazyna, the sole shareholder. Samruk-Kazyna is a sovereign wealth fund of Kazakhstan. KazMunaiGaz’s 484 million ordinary shares are owned by Samruk-Kazyna.

2010 dividends paid amounted to 45.8 billion tenge.

The government of Russia is planning to re-organize their wealth funds, management of foreign debt and other investment entities into a state-owned investment agency. The new Russian Federal Financial Agency (FFA) also known as Rosfinagentstvo plans to invest excess commodity revenue in a wide range of assets. There are plans to transfer the sovereign fund assets from the Russian Ministry of Finance to the new agency. The agency may take on an investment strategy similar to Norway’s Government Pension Fund Global.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Libya’s National Oil Corporation (NOC) from its website stated that it expects to generate $54.9 billion in revenue from oil and natural gas this year. Revenue would be derived from exports and taxes on oil companies operating in Libya.

The NOC was founded on November 12, 1970 when it replaced the Libyan Petroleum Corporation.

Libya is looking to attract international investment to further develop their oil & gas industry.

Energy assets are of increasing importance to Asian sovereign investors. There is Asian demand for liquefied natural gas. The China Investment Corporation (CIC), Blackstone Group LP, Government of Singapore Investment Corporation (GIC), and the Louisiana Teachers Retirement System invested a total of US$ 1.5 billion in Cheniere Energy Partners’ export liquefied natural gas (LNG) plant. The CIC and GIC each invested around US$ 500 million in the deal. By partnering with a state public investor and a private equity firm, sovereign funds can lower political risk in a deal. The China Investment Corporation has been an early investor in the Blackstone Group before it had its initial public offering. The relationship has allowed the CIC to access unique investment opportunities due to Blackstone’s reach and influence.

Cheniere Energy Partners is launching the first LNG export terminal in the continental United States.

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The U.S. state of North Dakota gathered around US$ 1.7 billion in oil tax revenue in the past fiscal year. The energy-producing state has beaten their original forecast February 2011 and is on track to collect between US$ 3.5 billion and US$ 4 billion in the entire 2011 to 2013 biennium.

The February 2011 forecast predicted North Dakota would collect $2.041 billion in oil extraction and gross production taxes during the entire 2011 to 2013 biennium. Increases in oil production played a major role in the growth of tax revenues. To analyze a striking comparison, in the entire 2001 to 2003 biennium, North Dakota collected only US$ 119.5 million in oil tax revenue. Oil firms pay a 6.5% extraction tax and a 5% gross production tax to the state of North Dakota. The North Dakota Legacy Fund is one of the beneficiaries from oil extraction tax revenue. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Jakaya Kikwete

The proposed Tanzanian sovereign fund will be funded by future earnings derived from large gas deposits in the southern region of the country, along the Indian Ocean coast. In June 2012, gas reserve estimates tripled by offshore exploration discoveries by ExxonMobil, Statoil, BG Group, and Ophir Energy.

Tanzania is transforming into an energy hub in the region due to natural gas discoveries.

In September, the government of Tanzania signed a US$ 1.2 billion loan agreement with China for the construction of a pipeline. The Tanzanian government expects the completion of the 532 kilometer gas pipeline project that will connect the south to Dar es Salaam.

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Nigeria’s sovereign wealth funds have been a contentious political issue for the country. The direction of natural resource revenue has pitted the Nigerian Governors Forum against the Nigerian federal government. Nigeria is sub-Saharan Africa’s largest crude oil exporter. The one billion dollar authority plans to start operations in the coming months. The Nigerian Sovereign Investment Authority (NISA) is still recruiting the fund’s management team.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

According to the press release, “CNOOC Limited (SEHK: 00883, NYSE: CEO) and Nexen Inc. (TSX: NXY, NYSE: NXY) announced today that they have entered into a definitive agreement under which CNOOC Limited will acquire all of the outstanding common shares of Nexen for US$27.50 per share in cash.

The purchase price represents a premium of 61% to the closing price of Nexen’s common shares on the NYSE on July 20, 2012, and a premium of 66% to Nexen’s 20 trading-day volume-weighted average share price. Total cash consideration of approximately US$15.1 billion will be paid for Nexen’s common and preferred shares, and Nexen’s current debt of approximately US$4.3 billion will remain outstanding. The transaction, which will be completed by way of a plan of arrangement, is expected to close in the fourth quarter of 2012.

The acquisition of Nexen expands CNOOC Limited’s overseas businesses and resource base in order to deliver long-term, sustainable growth. Nexen will complement CNOOC Limited’s large offshore production footprint in China and extends CNOOC Limited’s global presence with a high-quality asset base in many of the world’s most significant producing regions – including Western Canada, the U.K. North Sea, the Gulf of Mexico and offshore Nigeria – focused on conventional oil and gas, oil sands and shale gas. In addition, Nexen management’s current mandate will be expanded to include all of CNOOC Limited’s North American and Caribbean assets.

Nexen had average production of 207 mboe/d (after royalties) in Q2 2012. In accordance with SEC rules, Nexen had 900 mmboe of proved reserves and 1,122 mmboe of probable reserves as of December 31, 2011. In addition, as of December 31, 2011, Nexen had best estimate contingent resources of 5.6 billion boe in accordance with Canadian National Instrument 51-101, predominantly in the Canadian oil sands.

The transaction will be funded by CNOOC Limited’s existing cash resources and external financing.

Mr. Wang Yilin, Chairman of CNOOC Limited said, “The acquisition reflects our strong belief in Nexen’s rich and diverse portfolio of assets and world-class management and employees. This is an exciting opportunity for us to build on our existing joint venture relationship with Nexen in Canada, and to acquire a leading international platform in the process. We strongly believe that this acquisition will create long-term value for CNOOC Limited’s shareholders.”

Commenting on the acquisition, Mr. Barry Jackson, Chairman of the Board of Nexen, said, ‘This transaction delivers significant and immediate value to Nexen shareholders. The Nexen Board is unanimous in its view that the transaction is in the best interest of Nexen and recommends shareholders vote in favor of the transaction.’”

Read more: Nexen Press Release

Mubadala Petroleum which is owned by the Mubadala Development Company with Tap Energy plans to develop an oil field in the Northern Gulf of Thailand. Mubadala Petroleum owns a 60% operating interest in the exploration field through its Pearl affiliates. Tap Oil Limited also owns a major stake in the concession through its subsidiary Tap Energy (Thailand) Pty Ltd.

In a July press release, Tap’s Managing Director & CEO, Troy Hayden said:
“The announcement of FID on Manora is a milestone event in Tap’s development. Manora is expected to generate significant future cashflow and will remain as a key focus for Tap over the development phase. The drilling program at G1/48 provides exploration upside, with the potential to further consolidate our position in Thailand.”

The Manora offshore field was discovered in 2009. Production in the Manora field could start as soon as early 2014. Peak production could amount to 15,000 barrels per day after four to five months of initial operations. The project is estimated to cost around US$ 246 million.

Exploration Area – Concession Partners

• Pearl Oil (Amata) Limited (Operator) – 40%
• Pearl Energy (G1) Limited – 20%
• Northern Gulf Petroleum Pte Ltd – 10%
• Tap Energy (Thailand) Pty Ltd – 30%

Tap Energy has a controlling interest in Northern Gulf Petroleum.

Blackstar InvestCo LLC which is 60% owned by Daimler North America Corporation and 40% owned by Aabar Blackstar Holdings GmbH which in turn is ultimately owned by Aabar Investments moved 3.245 million Tesla shares to Aabar Investments. This is around 40% of its stake that was shifted which was in connection with the redemption by Blackstar of all of Aabar’s membership interest in Blackstar. Aabar Investments, owned by Abu Dhabi’s IPIC, is a major Daimler investor. Blackstar InvestCo LLC remains number three owner of Tesla Motors with Elon Musk and Fidelity Investments taking the top slots.

Daimler AG has been an investor in Tesla Motors to help keep the company going after a difficult time in 2008. Tesla Motors recently inked a deal to supply components for a new electric Mercedes-Benz model.

Public investors are bidding for developed European energy infrastructure. Reliable cash flows coupled with stable regulatory environments are some key factors when deciding infrastructure investments in Europe. Core infrastructure is in high demand. Tank terminals can provide robust operational cash flows with the majority of revenues coming from fixed rental fees rather than throughput. Tank terminals have a high barrier to entry due to environmental and business regulations, land constraints, and long-term customer relationships.

The ASX-listed Challenger Infrastructure Fund sold its controlling stake in LBC Terminal Group to a consortium of pension funds. The deal amount was US$ 277.8 million for a 66.2% stake.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The Canada Pension Plan Investment Board (CPPIB) invested $200 million in Seven Generations Energy Ltd. Founded in 2008, Seven Generations Energy Ltd. is a private oil and gas company focused on resource plays in North America, including shale gas, tight gas, tight oil and oil sands. The firm is in the beginning stages of developing the Kakwa River project.

ARC Financial Corp is an investor in Seven Generations Energy Ltd.

High quality core infrastructure in developed markets is in high demand for institutional investors. Macquarie Group Ltd and a group of investors agreed to pay €3.2 billion ($4.07 billion) to E.ON AG for a network of natural-gas pipelines in Germany. The consortium will receive a stake in Germany’s largest gas-transmission grid called Open Grid Europe (OGE). The consortium includes the Macquarie European Infrastructure Fund IV, Abu Dhabi Investment Authority (Infinity Investments), British Columbia Investment Management Corporation, and a fund of German reinsurer Munich Re (MEAG).
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