UAE Investment Vehicle XRG Helps Abu Dhabi Win Trump's Favor - Bloomberg
Even by Abu Dhabi’s standards, the recent rush of investment bankers is unprecedented. Wall Street giants from Goldman Sachs Group Inc. to Morgan Stanley are courting the hottest new player in town: An $80 billion spinoff from the state oil company that wants to double in size over the coming decade.
As US President Donald Trump arrives in the emirate next week, this little-known firm is already being seen as a key player in the deepening relationship between Abu Dhabi and Washington. XRG, as the entity is known, is looking to splash out billions to build up its portfolio and the US is a key focus. That dovetails neatly with the American president’s call for foreign investment.
Even before Trump took office, Abu Dhabi had started to shape XRG as an investment vehicle focused on energy deals and few other firms will have its financial firepower worldwide, people familiar with the matter said. Many of its investments will be in the US, where the United Arab Emirates is investing across sectors as it seeks concessions from Trump.
Winning Trump’s favor is crucial for the UAE, of which Abu Dhabi is the capital. The Gulf country is racing to become a tech powerhouse and needs access to advanced Nvidia Corp. chips that were restricted under the Biden administration.
The UAE has pledged to plow $1.4 trillion into the US over the next decade, including through an entity called MGX that’s helping bankroll Trump’s $100 billion AI venture. Energy will be a key prong of the Gulf nation’s investment plans in the US and XRG has begun quietly working to build its internal M&A team, people familiar with the matter said.
“It’s pretty clear that with XRG the timing is stupendous. They were developing the company strategy before, but it’s putting Abu Dhabi in the right business to be on the right side of the administration,’’ said Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at Houston’s Rice University. “For strategic purposes it has really helped.”
An XRG spokesperson said energy has been at the center of the growing UAE-US partnership for years and that growth is accelerating. The firm “is actively engaged with leading investment banks on high-quality opportunities—particularly in the US,” the spokesperson said.
XRG is the latest dealmaking behemoth in Abu Dhabi, which is already home to three sovereign wealth funds that control close to $1.7 trillion in assets.
Spun off from Abu Dhabi National Oil Co. to manage international dealmaking, the new firm is tasked with making acquisitions globally in areas from natural gas to low-carbon energy and chemicals.
Many of these acquisitions will be in the US, where the spinoff will make a big push to buy natural gas assets and invest in energy infrastructure — the kind of investment that appeals to Trump, who is trying to boost energy production at home as a way to limit prices. XRG is also looking into investment opportunities that support growth in AI and data infrastructure, other sectors that Trump is keen to build up.
Even so, there are potential challenges as the new firm will be a conglomeration of assets. Its strategy is still being fine-tuned internally, though there will be more clarity in the coming weeks to allow it to start deploying money, people familiar with the matter said.
Foreign investment deals are vital to Trump as US GDP slows. He’s been quick to cast them as political wins. And few nations are shelling out — or have the cash reserves to do so — more than the UAE.
Yet as entities like XRG invest in the US, the UAE has a string of additional policy goals.
After the country’s investment pledge, the US accelerated conversations about possibly easing restrictions on chip sales to Abu Dhabi although nothing has been decided, Bloomberg News reported this month. This week, Bloomberg reported that Trump is considering rescinding global semiconductor curbs and Washington could engage in direct negotiations with countries like the UAE.
The UAE is also likely to seek some exceptions on the 25% tariffs placed on aluminum exports to the US, according to some of the people. It also wants faster approvals for its US acquisitions, the people said. The White House National Security Council didn't respond to a request for comment.
As the Gulf country ramps up US investments, few people will be more consequential than Sultan Al Jaber, the CEO of Adnoc. An executive with long experience navigating the halls of power, he wears many hats, acting also as XRG’s executive chairman and the UAE minister for advanced technology.
He joined national security advisor Sheikh Tahnoon bin Zayed Al Nahyan on the recent trip to Washington where the $1.4 trillion investment pledge was announced.
While in the US, Al Jaber spoke at a prominent Houston conference, where he handed out rubber bracelets with the XRG logo and ended his speech with the slogan “Make Energy Great Again” — a seeming nod to Trump’s MAGA movement.
“Over the next few months and foreseeable future, you will be witnessing very serious, large, significant investments by XRG in the energy business here in the US,” he said at the time.
Al Jaber has a track record of getting things done. As head of the UN’s 2023 climate change conference in Dubai, he combined his skills of diplomacy with an ability to speak forcefully and drive dissenters into agreement.
These days, he displays great excitement about XRG, quickly pointing out that the name is derived from the word “exergy,” which is the maximum impact created by a unit of energy.
Investment banks, meanwhile, see a new source of fees in XRG as it sets off on its deal spree. The new entity is particularly vital to Wall Street as acquisitions stall globally due to market turmoil.
So crucial are XRG’s global plans to Abu Dhabi that international heavyweights have been placed atop its board. Key names include former BP Plc CEO Bernard Looney and Blackstone Inc. President Jon Gray.
Adnoc is considering hiring a high profile outsider with investment experience as CEO of the unit, people familiar with the matter said. As its executive chairman, Al Jaber is also seen wielding significant influence, the people said. “Adnoc and XRG are separate entities,’’ the spokesperson said, adding XRG functions with full autonomy and has its own leadership team for an agile approach.
Emirati officials emphasize that US energy investments, like XRG’s, are core to their own country’s economic growth and to diversify from crude. The UAE has been running budget surpluses in a sharp contrast with Saudi Arabia, where Goldman Sachs has projected the budget deficit could touch $67 billion this year. That makes Abu Dhabi vital to the US president’s economic agenda.
Adnoc’s already busy in the US, buying natural gas and other assets that will be folded into XRG. Covestro AG, the German chemicals maker Adnoc, bought for $13 billion last year will also be part of the new spinoff.
Still, transactions proposed to XRG are likely to face strong internal scrutiny on price and valuation, people familiar with the matter said, notwithstanding the imperative to court Trump with US investments.
Ultimately, Abu Dhabi wants “to be seen as serious players, not as the ones that are willing to pay any price for an asset,” said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security.
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