Canadian pension fund makes $2.5bn bet on Dubai Ports

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

Caisse de dépôt et placement du Québec (CDPQ) is investing the sum in Jebel Ali Port, Jebel Ali Free Zone and the National Industries Park, three of DP World’s key domestic assets.

As part of the deal announced on Monday, CDPQ will take a roughly 22 per cent stake in a new joint venture with DP World.

Dubai’s emergence as a global business hub has its roots in trade, starting out as a small entrepôt in the early 20th century before expanding into an aviation, tourism and services hub. The Jebel Ali facilities account for almost a quarter of the emirate’s economy.

The economy of the city-state has emerged strongly out of the pandemic, attracting new residents and companies thanks to its success in controlling the virus while keeping its economy open. The war in Ukraine has triggered another surge of new Russian entrants seeking a financial haven.

The government, alongside the oil-rich capital of the United Arab Emirates, Abu Dhabi, is also opening state-owned companies up to foreign investment. Dubai has launched a series of privatisations, including a $6bn IPO of water and electricity provider Dewa, with plans to list another nine 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 businesses is expected to close in the second or third quarter of this year. Others will be able to take part in another $3bn investment, which is expected to close during the fourth quarter of the year.

DP World and CDPQ, the C$420bn (US$330bn) 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 enhance our assets and allow us to capture the significant growth potential of the wider region,” said Sultan Ahmed bin Sulayem, DP World’s group chief executive.

The transaction would allow DP World to cut its leverage to less than four times net debt to earnings before interest, tax, depreciation and amortisation, he added.

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

CDPQ, which manages some public pension plans as well as insurance plans, operates independently from the Canadian government.

Over the past few years, infrastructure has grown increasingly popular with global pension fund investors who are attracted to its more stable and predictable returns.

Since the end of 2016, CDPQ’s infrastructure portfolio has tripled in size, with net assets totalling C$45bn at the end of 2021. Its portfolio is focused on transportation, energy and social and telecommunications infrastructure.

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

With additional reporting by Josephine Cumbo in London

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