Abu Dhabi is continuing its policy of diversifying revenue streams by building up a substantial portfolio of overseas investments. The International Petroleum Investment Company (IPIC) and the Abu Dhabi National Energy Company (TAQA) are announcing a raft of investments.
According to some local sources, IPIC is set to invest up to $5 billion in a greenfield oil refinery in Pakistan, in a free zone area near Karachi. The proposed refinery is designed to process up to 300,000 barrels per day (bpd). IPIC already has interests in Pakistan with a number of investments including a 40% joint stake in the Pak-Arab Refinery Company with OMV Aktiengesellschaft (OMV) of Austria. Pak-Arab Refinery Company operates a refinery in Multan processing up to 100,000 bpd.
IPIC’s also maintains a 20% share of OMV, the Austrian oil and gas group. This stake is estimated to be worth almost $500 million. IPIC, which was established in 1984 is a 100% government owned company, with an estimated $8 billion investment portfolio including energy related companies in Austria, Spain, South Korea, Egypt, Denmark and Pakistan.
It seems likely that the company will launch an IPO when market conditions become more favorable. Earlier in 2006, Mohammed al-Khaily, the managing director of IPIC, told local reporters that it was part of the companies strategy to off-load between $544.53 million and $816.83 million through an initial public offering (IPO), however, market conditions were not conducive to this. He went on to say that the IPO, would have also offered investors good returns. “Now we have to wait for the market to improve and then the board will take a decision,” he said.
TAQA paves the way
However, one energy investment company that has already launched an IPO is TAQA. In the summer of 2005, the Abu Dhabi National Energy Company made an IPO of $163.37 million making public a 26% stake in the company. The government, in the form of the Abu Dhabi Water and Electricity Authority (ADWEA), owns a 74% share in the company.
In 2006, TAQA raised its capital in a bid to make several investments in Asia and Europe. Speaking to local press at the annual Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), the CEO of TAQA, Peter Barker-Homek, said the company recently raised $3.5 billion on the back of a very successful bond issuance, which provides a strong basis to continue the development of business on a global basis.
It would appear that TAQA is building up a substantial international investment portfolio. The company already has more than $8.7 billion of assets in power, water and energy plants worldwide. Referring to the bond offering, Barker-Homek said: “With hundreds of billions of dollars needed over the next decade to fully develop the world’s energy infrastructure, TAQA sees enormous demand for its offering.” The company is also seeking other ways of raising capital to support its investment program. According to Barker-Homek, the company is looking to raise a total of $9.5 billion through a potential combination of banks, Islamic bonds (sukuks) and euro medium term note (EMTN). Barker-Homek said that at least $1.6 billion will be used for refinancing existing subsidiaries and the rest will go towards further acquisitions.
The company, which also has a 1% stake in the Russian oil and gas giant Rosneft and a majority share in all the power and water plants in Abu Dhabi, is in the process of making several other overseas investments. Last week, the company announced an investment in the Indian energy market.
International appeal
TAQA is entering a joint venture with India’s Infrastructure Leasing and Financial Services (IL & FS) to provide up to $1 billion of investment for power projects in the country. This would add up to 7,000 Mega Watts (MW) of power to India’s electricity output where demand outstrips supply by up to 10%. The power plants will be built over the next three to five years as part of India’s plan to invest $283 billion by 2012 to add 100,000 MW of power.
TAQA has also recently announced the acquisition of BP’s Dutch gas exploration and production assets for $694 million. This includes the onshore and offshore facilities of the company including the Piek Gas installation at Alkmaar. The net production of operations was 1.8 million cubic meters a day in 2005. This acquisition is seen as the first strategic move into the European market by TAQA. Barker-Homek said that it plans to invest substantially in its Dutch assets to triple their value and number of employees over a two to four year period. He concluded: “We will look at opportunities that BP brings as well as other potential acquisitions across Europe and the Middle East.”
