Canadian pension fund bets $2.5 billion 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 Gulf emirate’s state logistics giant.

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

As part of the transaction announced Monday, CDPQ will take an approximately 22 percent stake in a new joint venture with DP World.

Dubai’s rise as a global business hub has its roots in commerce, beginning as a small trading center in the early 20th century before evolving into an aviation, tourism and service hub. Jebel Ali’s facilities account for nearly a quarter of the emirate’s economy.

The city-state’s economy has emerged strong from the pandemic, attracting new residents and businesses thanks to its success in fighting the virus while also keeping its economy afloat. The war in Ukraine has triggered another wave of new Russian entrants looking for a financial haven.

In addition to the oil-rich capital of the United Arab Emirates, Abu Dhabi, the government is also opening up state-owned companies to foreign investment. Dubai has launched a series of privatizations, including a £6bn IPO of water and electricity utility Dewa.

This first co-investment in DP World’s domestic operations is expected to close in the second or third quarter of this year. Others may participate in another $3 billion investment that is expected to close in the fourth quarter of the year.

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

“We believe this new partnership will strengthen our assets and allow us to capitalize on the significant growth potential across the region,” said Sultan Ahmed bin Sulayem, Group Chief Executive of DP World.

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

Emmanuel Jaclot, CDPQ’s infrastructure manager, said the Dubai facilities would “play a pivotal role in the development of the global economy”.

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

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

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

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

With additional reporting from Josephine Cumbo in London

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