Business
Advice From The Man Who Manages More Money Than Anyone On Earth
October 22, 2021
December 7, 2021
Saudi Aramco (2222.SE) has handed both Larry Fink and Mohammed bin Salman a win. The BlackRock (BLK.N) chief executive is part of a group that on Monday announced it was paying $15.5 billion for 49% of a 20-year lease over the oil giant’s gas pipeline network, ultimately controlled by Saudi Arabia’s crown prince. Both leaders gain more than they lose.
The transaction looks identical to last year’s sale by Abu Dhabi National Oil Company of a minority stake in a lease over its gas transmission network to Global Infrastructure Partners and chums. The ADNOC deal implied a $20.7 billion value for 982 kilometres of pipelines. Aramco’s larger 5,000-kilometre network is valued at $31.6 billion. In both cases the state owner retains a majority stake and pays an undisclosed annual tariff to the gas network. Meanwhile, minority investors borrow 80% of the amount they’re putting up, juicing annualised returns on their equity comfortably beyond 10%.
The calculus for Fink is similarly nuanced. It’s only three years since Saudi agents murdered Jamal Khashoggi in an operation U.S. intelligence agencies say MbS approved. And investing alongside the world’s biggest oil company is potentially perilous for Fink, whose annual letters have implored investors to take climate change seriously.
The buyers, which are likely to be joined by other international investors, will buy 49% of the newly formed Aramco Gas Pipelines Company, which will lease the rights to cash flows from Aramco’s 5,000-kilometre gas network for 20 years. The state-controlled Saudi oil giant will retain the other 51%.
BlackRock Chairman and Chief Executive Larry Fink said in a statement that responsibly managed natural gas infrastructure had a meaningful role to play in the energy transition.
