South Korea Pension and KKR Join Forces to Buy Chevron Pipeline Stake

(October 13, 2010) — US private equity firm Kohlberg Kravis Roberts & Co. has acquired oil giant Chevron’s 23.4% stake in Colonial Oil Pipeline Company with backing by the National Pension Service (NPS), South Korea’s biggest state fund and the fourth-largest in the world.

As the largest refined products pipeline in North America, the Georgia-based Colonial Pipeline owns and operates an 8,882 mile petroleum products pipeline system that runs from supply centers in the Gulf Coast to customers located along the Eastern seaboard of the US. According to AltAssets, Chevron was one of five shareholders of Colonial, and its stake is reportedly worth around $1 billion. “Colonial plays an important role in supplying the eastern US markets with a variety of fuels,” Marc Lipschultz, the global head of KKR’s Energy and Infrastructure business, said in a statement. “The pipeline is an attractive infrastructure asset with a history of stable earnings and a high quality customer base. It also has the benefit of having an experienced management team with a stellar operational track record.”

Jun Kwang-woo, Chairman and CEO of the roughly $270 billion NPS, said in a statement that the pension is undertaking the investment with KKR because it aligns with their efforts to both diversify investments around the world and to seek long-term, stable returns to match the long-term needs of thier beneficiaries. Since Dr. Jun took over his current position at NPS, the fund has been diversifying its investment portfolio — transitioning from bond-focused portfolios toward alternative and equity investments, particularly in infrastructure assets and real estate in North America and Europe. In 2009 and 2010, it purchased the headquarters of HSBC in Canary Wharf, London, for 1.5 trillion won, and a 12% stake in London’s second largest airport, Gatwick. Additionally, its portfolio includes a stake in a large French shopping mall and high profile buildings in Australia and Japan. NPS plans to boost its overseas investments to at least 20% of assets by 2015 from about 12% now.

“NPS is a sophisticated pension fund manager that has been expanding its global capabilities under CEO Jun’s outstanding leadership,” said KKR co-founder Henry Kravis. “We are excited to embark upon this new partnership and look forward to working together on other investments in the future,” he said.