Government Fund Weekly News Roundup — Courtroom Dust-Ups and Asset Sell-Offs

June 17, 2016 by SWC Editors

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Australia Road
An Australian road.

In the news this week: Sovereign wealth funds target energy and transport infrastructure in emerging markets. The Kuwait Investment Authority and the Abu Dhabi Investment Council mull asset sales. And the Libyan Investment Authority and Abu Dhabi’s International Petroleum Investment Co. start legal proceedings in London. 

Highways to Sell: Infrastructure Deals Abound

The old adage is that you wait ages for a bus and then two come along at once. The same appears true of big sovereign wealth fund infrastructure deals.  

This week,  state-owned private equity fund the Russian Direct Investment Fund (RDIF) announced it will team up with several unnamed Middle-Eastern sovereign wealth funds to renovate a motorway running between Moscow and the port of Novorossiysk on the Black Sea. RDIF and its partners will work with the government-owned Russian Highways State Co. on the project, which will involve the construction of toll points along the route.

As RDIF and its Middle Eastern partners invest in a toll road in Russia, another sovereign wealth fund, the Abu Dhabi Investment Authority (ADIA)  may sell its stake in a company operating an Australian highway. ADIA is reportedly sounding out potential buyers for some of its shares in Melbourne-based toll road operator Transurban Group in a block trade. ADIA first invested in the company in 2011.

Energy Deals

Energy infrastructure assets in big emerging markets have attracted the attention of government funds this week. A consortium that includes two SWFs, the China Investment Corp. and Singapore’s GIC, is reportedly in the running for a Brazilian gas pipeline network currently owned by Brazil’s embattled state-run oil giant Petróleo Brasileiro (commonly known as Petrobras). 

Meanwhile, a consortium that includes Canadian pension plan Caisse de dépôt et placement du Québec and sovereign funds the Kuwait Investment Authority (KIA) and the State General Reserve Fund of the Sultanate of Oman have set up a Singapore-based holding company to buy power generation assets in India. These three funds will own 65 percent of the capital in the holding company, known as Resurgent Power.

A Sellers’ Market?

KIA is reportedly mulling a sale of its 4.82 percent stake in French nuclear power and renewable-energy conglomerate Areva. KIA — Areva’s second-largest shareholder after the French state, which holds about 87 percent of the company — paid €600 million ($676 million) for its stake. But the sovereign wealth fund may now sell following years of losses at Areva that have seen the company's share price plunge by approximately 90 percent since 2010. 

Meanwhile, the Abu Dhabi Investment Council (ADIC) has disposed of its 50 percent stake in Hamilton, Bermuda-based financial services company Ariel Reinsurance. ADIC co-owned Ariel alongside São Paulo-based investment bank BTG Pactual, which has been forced to sell assets  and raise more capital to restore investors' confidence since the November 2015 arrest of the bank's former CEO (and shareholder) André Esteves.

Two Separate Showdowns Begin in London’s Courts

While some visitors to the U.K.’s capital might want to take in Big Ben, Buckingham Palace and the London Eye, the only sights two SWFs wanted to take in this week were the inside of the city’s courtrooms. 

Libya’s sovereign wealth fund, the Libyan Investment Authority (LIA) is squaring off against New York-based investment banking giant Goldman Sachs Group in a trial that began at London’s High Court on Monday. In a lawsuit, LIA claims that the financial services powerhouse exploited a position of trust by persuading LIA to invest more than $1 billion in structured products that lost all their value in 2008 — a claim that  Goldman Sachs denies.

A stone’s throw from the High Court, at the London Court of International Arbitration, one of Abu Dhabi’s sovereign wealth funds, the International Petroleum Investment Co. (IPIC), has launched legal proceedings of its own. IPIC is pursuing Malaysia’s scandal-hit state-owned development fund 1Malaysia Development (1MDB) for an eye-watering $6.5 billion it says it is owed following a series of disputes with the fund. The latest conflict centers on 1MDB’s default on a scheduled payment to IPIC of $1.1 billion after the Abu Dhabi fund agreed to pay interest on two 1MDB bonds issued in 2012.

Lots of Help to Buy

Last week, QIA closed a deal to buy the 43-story Asia Square Tower 1 complex in Singapore for $2.45 billion. Located in the city-state’s Marina Bay business and financial district, the complex includes office and retail space. This week, QIA was reported to be in the early stages of negotiations with several banks to arrange a mega-mortgage worth $1.5 billion to $2 billion to finance the purchase.

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