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

The National Pension Service, the fourth-largest pension in the world, has partnered with US private equity firm Kohlberg Kravis Roberts & Co. to acquire oil giant Chevron’s 23.4% stake in Colonial Oil Pipeline Company.

(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.

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To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

The law firm has agreed to a five-year ban from appearing before all New York public pension funds and will comply with the attorney general’s reform code of conduct.

(October 13, 2010) — As part of a $550,000 settlement with Attorney General Andrew Cuomo in the state’s ongoing pay-to-play investigation, the law firm Manatt Phelps & Phillips has agreed to a five-year ban from appearing before public pension funds in New York state, including the $124.8 billion New York Common Retirement Fund, the third-largest in the US.

Manatt stated that it would agree to a complete ban on appearing before any public pension – including all state, local and municipal funds – within the state of New York during a five-year period. The firm additionally agreed to cooperate with Cuomo’s ongoing investigation into pay-to-play, abiding by a new code of conduct, which, among other things, bans the use of placement agents to solicit investments from public pension funds and prohibits investments within two years of any campaign contribution from the investment firm to the Comptroller or other elected trustee.

Cuomo’s office revealed that Manatt secured meetings on behalf of firms seeking investments from public pension funds in New York, California, and elsewhere from 2003 to 2008. In 2003, for example, Manatt and a California-based lobbyist Platinum Advisors helped to place a $25 million investment by CalPERS in Levine Leichtman Capital Partners. Both received $187,500 in fees from 2004 through 2006. And from January 2004 to May 2005, certain Manatt partners introduced or sought to introduce additional alternative investment firms to various institutional investors.

“Neither Manatt, nor any of the Manatt partners who made the introductions, were licensed placement agents or securities brokers under state and federal law,” Cuomo said in a news release. Additionally, he stated the law firm made and attempted to make introductions to the New York Common Retirement Fund, $103 billion New York City pension funds, and the $77.6 billion New York State Teachers Retirement System.”

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“We commend Attorney General Cuomo for investigating the placement process for pension fund investments and we embrace his new Reform Code of Conduct,” Manatt Phelps & Phillips said in a statement included in Cuomo’s announcement. “The firm is pleased to put this matter behind us.”

To date, Cuomo’s investigation has recovered more than $139 million for the state and has already resulted in seven guilty pleas, Cuomo’s office revealed. Last week, Alan Hevesi, former State Comptroller, pleaded guilty in New York State Supreme Court to accepting nearly $1 million in gifts in exchange for approving $250 million in investments for the New York State Common Retirement Fund between 2003 and 2006.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742