Last week, the Wall Street Journal reported that private equity firm EIG Global Energy Partners is leading a group of investors acquiring $12.4 billion stake in Saudi Aramco’s oil pipelines.[i]
EIG’s recent investments in fossil fuels have performed poorly, based on the performance of its recent EIG Energy Funds.
|As of||S&P 500 PME (2Q20)|
|EIG Energy Fund XVII||2018||0.99x||-1.60%||2Q20||5.24%|
|EIG Energy Fund XVI||2013||1.15x||4.31%||4Q20||11.81%|
|EIG Energy Fund XV||2010||1.05x||1.23%||4Q20||12.10%|
|EIG Energy Fund XIV||2007||0.88x||-4.77%||4Q20||7.85%|
(Source, Minnesota State Board of Investments, Pitchbook)
As of 2020, two of EIG’s last four Energy Funds had lost money, with its 2007 EIG Energy Fund XIV generating a -4.77% annualized return (IRR).[ii]
EIG’s last four Energy Funds all underperformed buyout funds from the same years as well as the S&P 500 index and MSCI All Country World Index.[iii]
EIG’s investment in the Saudi Aramco oil pipelines would support the government of Saudi Crown Prince Mohammed bin Salman. The Saudi oil company is mulling asset disposals as a way of maintaining its $75 billion of annual dividend payments, almost all of which go to the Saudi government.[iv]
In February, the US Government released an intelligence report stating that Crown Prince Mohammed bin Salman approved the assassination of the Washington Post journalist Jamal Khashoggi in 2018. The Saudi Arabian government has also faced growing outrage over its role in the humanitarian catastrophe in Yemen.
In February, the Private Equity Stakeholder Project, the Sierra Club, Greenpeace, and a number of other climate justice organizations sent a letter to EIG calling on the firm to develop a plan with clear benchmarks to shift to a pollution-free energy portfolio; plan for a just transition for workers and communities impacted by current fossil fuel holdings; and disclose all political spending and whether it aligns with a 1.5 degree scenario as in the Paris Agreement.
Despite multiple attempts at follow up, EIG has not responded.
[i] “Aramco Strikes $12.4 Billion Oil Pipeline Deal with EIG-Led Group,” Wall Street Journal, Apr 9, 2021.
[iii] Pitchbook benchmarks as of Q2, 2020.