HanHong Private Equity, a Tianjin-registered private equity firm, has invested $75 million in oil and gas assets in the Central Asian and Caspian regions, owned by Tethys Petroleum, according to a statement from the seller.
The firm is investing through its subsidiary SinoHan Oil and Gas Investment and will take a 50 percent stake in the unit, called Tethys Kazakhstan SPRL. The deal also includes two “bonus payouts” of up to $30 million, dependent on the company’s profits during 2013 and 2014 – incentivising the business to perform during HanHong’s holding period.
Upon exit, Tethy’s will also receive a share of the returns if they exceed a certain amount pre-agreed in the sale.
That is one of the upsides that SinoHan can bring to this deal – its connections with Chinese contractors, with Chinese oil companies and assist with the actual development work and also potentially taking production out of Central Asia and into China.
Alex Cull, partner, Norton Rose Fulbright Asia
“HanHong Private Equity is dedicated to investment in natural resources around the world. Central Asia, especially Kazakhstan, is one of our focus areas. This investment marks the first major oil & gas investment by HanHong in Kazakhstan and we are most excited to form a partnership with Tethys Petroleum for its strong track record and excellent expertise in Central Asia,” Andrew Macintosh, chief executive of HanHong, said in the statement.
HanHong is a good fit for Tethys as Chinese private equity firms increasingly look to help Central Asian oil and gas companies develop and expand across the Asian region.
“In terms of Chinese private equity funds, Central Asia is a popular investment destination – there is a fair amount of attention going to the west of China. It is a region where they can make a difference,” Alex Cull, partner at Norton Rose Fulbright Asia, told Private Equity International. Norton Rose acted as an advisor on the deal.
“SinoHan can bring its connections with Chinese contractors and Chinese oil companies that can assist with the actual development work. It can also potentially take production out of Central Asia and into China.”
Moreover, Cull adds that investment in the oil and gas sector in general in Asia has picked up.
“Bank [loans have] been harder to get, so a number of companies need to look at alternative sources of funding and that happens to coincide at the same time with a number of private equity, superannuation and pension funds that have got a build-up of funds and there is a build-up of dry powder looking to be invested somewhere.”
HanHong Private Equity Management was founded in August 2009 and registered in Tianjin, China, according to the statement. The firm is made up of investment professionals from China, the US, Australia and the UK and has over $1 billion in assets under management.