Adia buys stake in British gas utility SGN

The stake in SGN is part of a strategy for the sovereign wealth fund to invest in infrastructure with steady earnings.

The Abu Dhabi Investment Authority has bought a stake in SGN, a UK gas distribution ­company, as part of its strategy to invest some of its vast assets in infrastructure with steady earnings.

Adia paid £621 million (Dh2.77 billion) for a 16.7 per cent stake in SGN, formerly known as Scotia Gas Networks, from SSE, the second-largest energy supplier in the UK.

SGN distributes natural gas to about 6 million homes and businesses in Scotland and the south of England, and operates one of the oldest biomethane fac­ilities in the country.

The energy supplier SSE reduces its stake to 33.3 per cent from 50 per cent, with the remaining shares of SGN owned by Canadian public sector pension funds.

Adia ranks as the world’s third-largest sovereign wealth fund, behind Norway’s ­general fund and China Investment Corp, with estimated assets of US$792 billion, according to the Sovereign Wealth Fund Institute.

Adia declined to comment and typically reveals little about its investments.

In July, it reported that its 20- and 30-year returns last year dropped to 6.5 and 7.5 per cent, respectively, compared with 7.4 and 8.4 per cent for the previous year, which it put down to the fact that exceptionally high returns during the early part of those periods had dropped out of the calculation.

In its annual report, Adia gave a broad idea of the investment criteria for its infrastructure team, with the core focus on utilities and transport and energy infrastructure.

“The primary strategy is to acquire direct minority equity stakes alongside proven financial and strategic partners, with an emphasis on developed markets,” Adia said in its review, and the SGN stake fits that bill.

While Adia’s managing dir­ector indicated that the fund would pull back from investing in some of the more volatile emerging markets, he reiterated its commitment to China and India. In infrastructure, for example, Adia also bought an “anchor stake” earlier this year in Mahanagar Gas, which is developing gas supply systems in Mumbai.

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