ARTICLE #21 – 3rd DECEMBER, 2017
Kuwait and Spain, an Investment History Lesson
According to Forbes, there are currently 84 sovereign wealth funds in the world with 20 more in the making, and close to $6 trillion of wealth between them. “This is twice the size of the hedge fund industry. We are talking about a massive phenomenon”, says Javier Santiso, Professor of Economics at the ESADE Business School.
Since January 2014, more than €4.6 billion has been pumped into Spain. Before that, between 2009 and 2014 sovereign wealth funds put an extraordinary €40 billion of investment into Spain. For a while now, Spanish assets have been an ideal destination for worldwide investors as the continuous economic recovery of Spain has been attracting many sovereign wealth funds.
The relationship between Kuwait and Spain is going back to the early 1980s when Kuwait for the first time started investing in the Spanish economy. After a long break of investment, 25 years later, Kuwait Investment Office comes back to Spain, just when Spain starts to be better equipped with stronger regulations.
In 2015, Spanish energy group Gas Natural teams up with sovereign wealth fund from Kuwait to develop its international business. Through investing $550 million, KIA (Kuwait Investment Authority) acquires 25% of Global Power Generation (GPG), subsidiary of the Gas Natural.
The transaction is to boost Gas Natural or GPG power generation business at an international level and participating in new markets. Why would Kuwait want to invest so heavily in Spain?
Thanks to this transaction, the Spanish company will be able to speed up the development of its expansion plans for international power generation. Gas Natural currently operates in Mexico, Costa Rica, Puerto Rico, Dominican Republic, Panama and Kenya. They are planning to further expand in Latin America as well as start its operations in Asia.
KIA is estimated to hold in excess of US$300 billion of assets, and is reportedly of the largest Sovereign Wealth Funds in the World.