The International Petroleum Investment Company, an Abu Dhabi Government-controlled conglomerate, yesterday reported US$1.35 billion of profit for last year, a decline of 67.5 per cent from 2009.
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The drop in profit was due mainly to huge one-time gains made in 2009 on an investment in Barclays, the British banking giant.
Ipic had thrown the bank a lifeline in the worst stretch of the financial crisis and made $2.2bn (Dh8.08bn) when it exited. Rising expenses last year also contributed to the decline in profits.
Last year "was a year of inward focus after 2009's heightened acquisition activity", Sheikh Mansour bin Zayed, the chairman of Ipic, said in a letter accompanying the financial statements.
The company was cautiously optimistic this year, Sheikh Mansour said, bearing in mind the global economic recovery was "still somewhat tentative" and "reliant on unsustainable stimulus spending plans, which will have to be withdrawn at some point".
Rising oil prices last year and the first part of this year were a mixed blessing, he said. While they helped companies that extract and sell oil, petrochemicals operations that had to buy oil on the open market were facing higher costs, which "could reduce refining margins".
Ipic, formed 27 years ago, is the Abu Dhabi Government's main global energy investment vehicle. It has large stakes in businesses including Borealis, a petrochemical company based in Austria, Nova Chemicals of Canada and Cosmo Oil of Japan.
After decades of gradual growth it began making major acquisitions in 2009, buying 70 per cent of Ferrostaal, a German industrial services company, 100 per cent of Nova Chemicals and almost all of Aabar Investments, a large holding company in Abu Dhabi.
Its assets are now worth about $47.9bn, according to its financial statements. Ipic said yesterday that many of its acquisitions were performing well, with Nova turning in strong profits, Borealis paying dividends and Aabar building up its assets.
But the company has encountered challenges recently with some of its businesses, including Ferrostaal. Ipic is in arbitration in Germany with MAN, the truck maker that sold it the Ferrostaal stake two years ago.
Prosecutors in Munich are investigating Ferrostaal over allegations of bribery in contracts signed before Ipic became a shareholder, and Ipic is trying to block a provision of the Ferrostaal deal requiring it to buy MAN's remaining 30 per cent stake.
Ipic said it "continues to work closely with all parties to try to bring a resolution to this matter as soon as possible" and that "we continue to pursue a settlement with the other shareholder of Ferrostaal".
While profits declined last year, Ipic's revenue rose by 55 per cent to $15.4bn. Operating profit of $1.6bn was also higher than in 2009.
Ipic released its financial statements as part of disclosures to international investors holding its bonds. It has received about $3.5bn of equity contributions from the Abu Dhabi Government in its history, the company said, but had in recent years relied increasingly on raising money on global markets to fund acquisitions and investments.
Last June, it said, the Government lent it $500m to fulfil its obligations to the Qatar and Abu Dhabi Investment Company, a joint venture between the two governments. The Abu Dhabi Government is putting a further $500m into the joint fund.
For the future, Sheikh Mansour said Ipic had identified upstream energy production, utilities and services as areas for new investment, and would "continuously look to undertake critical national security infrastructure projects related to the domestic hydrocarbon industry on behalf of the Government".
Ipic is behind a number of energy projects in the UAE, including a pipeline that will bypass the Strait of Hormuz and deliver crude oil overland to Fujairah - a project worth $910.7m, according to Ipic's statements.
The company expects to commission the pipeline this year and is building a refinery to handle up to 200,000 barrels of oil a day.
Ipic's financial statements also show that it took over a 31.8 per cent stake in Virgin Galactic, Sir Richard Branson's commercial spaceflight venture, from Aabar.
It also took on a 45 per cent stake in the Dead Sea Resort, originally a joint venture between Aabar and a Jordanian company, and two thirds of Abag, another joint venture involving Aabar and Berndorf of Austria.
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Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Paatal Lok season two
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Rating: 4.5/5
The specs
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Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
KILLING OF QASSEM SULEIMANI
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NBA Finals so far
(Toronto lead 3-1 in best-of-seven series_
Game 1 Raptors 118 Warriors 109
Game 2 Raptors 104 Warriors 109
Game 3 Warriors 109 Raptors 123
Game 4 Warriors 92 Raptors 105
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