Canadian pension fund makes $2.5 billion bet on Dubai ports

One of Canada’s largest pension funds will inject $2.5 billion into Dubai port operator DP World, marking the first foreign direct investment in the state-owned logistics giant in the emirate of Dubai. Gulf.

Caisse de Depot et Placement du Quebec (CDPQ) is investing the sum in Jebel Ali Port, Jebel Ali Free Zone and National Industries Park, three of DP World’s major inland assets.

As part of the $5 billion deal announced on Monday, the CDPQ is also raising $2.5 billion in debt in a move that will see it take a roughly 22% stake in a new joint venture. with DPWorld.

Dubai’s emergence as a global business hub has its roots in commerce, beginning as a small warehouse in the early 20th century before developing into a hub for aviation, tourism and services. Jebel Ali facilities represent nearly a quarter of the emirate’s economy.

The city-state’s economy has emerged strongly from the coronavirus pandemic, attracting new residents and businesses thanks to its success in controlling the virus while keeping its economy open. The war in Ukraine has triggered a new wave of new Russian entrants seeking financial refuge.

The government, alongside the oil-rich capital of the United Arab Emirates, Abu Dhabi, is also opening up state-owned companies to foreign investment. Dubai has launched a series of privatizations, including a $6 billion IPO of water and electricity supplier Dewa, with plans to list nine other state-owned assets, including a road toll operator , a media and technology business park and another utility.

This first co-investment in DP World’s domestic business is expected to close in the second or third quarter of this year. Others will be able to participate in another $3 billion investment, which is expected to close in the fourth quarter of the year.

DP World and CDPQ, the C$420 billion (US$330 billion) investment manager, have already co-invested in global assets spanning four continents and 18 terminals, including a container port and logistics park in Indonesia.

“We believe this new partnership will strengthen our strengths and enable us to capture the significant growth potential of the wider region,” said Sultan Ahmed bin Sulayem, Group Managing Director of DP World.

The transaction would allow DP World to reduce its leverage to less than four times net debt relative to earnings before interest, taxes, depreciation and amortization, he added.

Emmanuel Jaclot, head of infrastructure at CDPQ, said Dubai’s assets would “play a pivotal role in the evolution of the global economy”.

The Caisse, which manages certain public pension plans as well as insurance plans, operates independently of the Canadian government.

In recent years, infrastructure has become increasingly popular with global pension fund investors who are attracted by its more stable and predictable returns.

Since the end of 2016, la Caisse’s infrastructure portfolio has tripled in size, with net assets totaling C$45 billion at the end of 2021. Its portfolio is focused on transport, energy and social infrastructure and telecommunications.

The deal would provide CDPQ with “exposure to new, fast-growing markets and trade routes in Africa and South Asia,” Mr. Jaclot said.

With additional reporting by Josephine Cumbo in London

Dolores W. Simon