KKR, South Korean pension team up in US pipeline deal

The private equity firm and South Korea's $270bn National Pension Service have acquired the 23.44% stake in Colonial Pipeline being sold by energy giant Chevron. KKR indicated Colonial might be a good fit for its infrastructure portfolio.

Kohlberg Kravis Roberts has acquired a 23.44 percent in pipeline operator Colonial Pipeline alongside South Korea’s $270 billion National Pension Service, the private equity firm said in a statement.

The transaction closed on 8 October, KKR said.

KKR did not disclose a price for the stake, which had been in the market for several months. In August, when the South Korea National Pension Service confirmed it was looking to buy the stake, local media reports pegged the purchase price at $845 million.

In 2007, when Australian investor Industry Funds Management purchased a 15.8 percent stake in Colonial, it paid $641 million, according to an old press release.

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Colonial operates a 5,500-mile system of pipes that transport refined petroleum products through 12 states, from the Gulf Coast up to New Jersey. On average, Colonial delivers 100 million gallons of gasoline, kerosene, diesel fuel, home heating oil and aviation fuels to customers on the US’ Eastern Seaboard, according to a statement from Chevron.

“The pipeline is an attractive infrastructure asset with a history of stable earnings,” Marc Lipschultz, KKR’s global head of energy and infrastructure, said in a statement.

The private equity firm disclosed plans in 2008 to begin investing in infrastructure and has since been building a team to invest in the asset class.

KKR’s partner in the deal, the Korea National Pension Service, has been increasingly active direct investor. In February, the pension bought a 12 percent stake in London’s Gatwick Airport from Global Infrastructure Partners. Jun Kwang-woo, the Korean pension’s chairman, told the Financial Times in an interview at the time that the investment would cost it a little under £100 million (€114 million; $159 million).  

Kwang-woo said in a statement that the pension was investing in Colonial because  “it fits well with our efforts to both diversify our investments around the world and to seek long-term, stable returns to match the long-term needs of our beneficiaries”.

The Korea National Pension Service is the fourth largest public pension in the world, according to the statement. The pension has invested in multiple KKR-managed private equity funds.

Chevron said the sale was part of the company’s “ongoing efforts to align its portfolio of assets with its strategies”. It first indicated it might sell the stake in March.