Saudi, Qatar Add District Cooling Assets to Gulf Deals Pipeline

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(Bloomberg) — Two district cooling transactions linked to sovereign wealth funds in Saudi Arabia and Qatar are advancing, signaling continued investor appetite for Middle Eastern infrastructure assets despite geopolitical tensions.

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King Abdullah Financial District, which the kingdom’s Public Investment Fund took over in 2018, is in talks to sell its district cooling business, according to people familiar with the matter. The Riyadh financial hub is seeking about $500 million for the facilities, the people said, asking not to be identified because the information is private.

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The asset has attracted interest from potential bidders, including Saudi Tabreed District Cooling Co., which is backed by the kingdom’s $1 trillion wealth fund, and United Arab Emirates-based Tabreed, the people said.

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Over in Qatar, two entities in which the country’s $580 billion wealth fund owns stakes, either directly or through subsidiaries, are weighing a merger, according to people familiar with the matter. A deal between Qatar Cool and Marafeq could create one of the country’s largest district cooling companies and eventually pave the way for a listing, the people said.

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The wealth fund has explored setting up a new entity to house domestic assets worth tens of billions of dollars and develop them into global champions, Bloomberg News previously reported.

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Standard Chartered Plc is advising on the Saudi and Qatari transactions, the people said. Both processes are ongoing, though there is no guarantee either will materialize.

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PIF, QIA and Standard Chartered declined to comment. Representatives for KAFD, Qatar Cool, Marafeq and Saudi Tabreed did not respond to requests for comment.

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The potential twin deals underscore regional dealmaking resilience despite a conflict that has disrupted travel and tourism, choked exports through the Strait of Hormuz, raised import costs and strained supply chains.

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Even as the US and Iran prepare for 60 days of talks aimed at ending the war for good, Saudi Aramco executives are pressing ahead with divestments spanning energy facilities and real estate in a push to raise as much as $35 billion.

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In Kuwait, which had been hit by Iranian projectiles this month, private equity firms including BlackRock Inc.’s Global Infrastructure Partners and Brookfield Asset Management Ltd. are vying for a stake in a $7.5 billion pipeline network.

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Meanwhile in Qatar, whose economy is projected to be among the hardest hit in the Gulf, the wealth fund has continued to pursue global deals and retains a strong pipeline.

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District cooling has become a cornerstone of air-conditioning infrastructure in the Gulf, where summer temperatures routinely exceed 43C (110F). The system distributes chilled water from centralized plants through a network of pipes to cool everything from residential compounds to high-rise office towers. 

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The sector has already drawn international private equity interest. Last year, CVC Capital Partners and Tabreed agreed to acquire PAL Cooling Holding from Abu Dhabi-based Multiply Group, in a deal that valued the company’s equity at 3.8 billion dirhams ($1.03 billion). Standard Chartered also advised the seller on that transaction.

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—With assistance from Omar El Chmouri.

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