Abu Dhabi funds advance on JVs with Western investors

The strategic investment arm of the Abu Dhabi government, Mubadala Development, has built its stake in joint-venture partner General Electric (GE), bringing it closer to reaching its stated aim of being a top 10 shareholder in the US conglomerate, while the Abu Dhabi Investment Company (ADIC) and UBS Global Asset Management (UBS GAM) reached a first close of $US250 million for an infrastructure fund targeting the Middle East and North Africa (MENA) region.

The $US10 billion Mubadala increased its stake in GE to 65.8 million shares, reinforcing its commitment to a US$8 billion joint-venture struck with the US company before the financial crisis hit the Gulf states, reported United Arab Emirate (UAE) government-owned newspaper, The National.

With a 0.62 per cent stake, Mubadala was now the 17th largest shareholder in GE, the largest conglomerate in the US. In July 2008, it announced its intention to become one of the 10th largest shareholders in the company.

The joint-venture, a multi-billion dollar global business partnership, aims to supply commercial finance to companies in the Middle East and Africa. The UAE also hoped to draw on the company’s expertise in power, health care and
aeronautical engineering.

The partnership was one of Mubadala’s biggest capital expenditures since its 2004 inception, wrote Maurizio La Noce, chief executive officer of the company’s oil and gas division, in the organisation’s 2008 annual report, the first it has released.

The investment company aims to triple its assets in the next five years in its aim to be at the forefront of efforts to diversify the UAE economy away from oil.

Mubadala and GE have agreed to each pump US$4 billion in equity into the joint-venture. When the deal was signed, the US company said it would aim to supply financing to the region’s power plants, hospitals, roads and water treatment utilities.

It also committed to building a research centre in Masdar City, an initiative run by Mubadala to create an economic sector specialising in renewable energy and sustainability, which is aligned with Abu Dhabi”s aim to generate at least 7 per cent of its energy from renewable sources.

Meanwhile, ADIC-UBS GAM Infrastructure Investment announced a $US250 million first close of a fund targeting infrastructure developments in the MENA region.

The fund was launched in February 2008 and aims to reach a final close of US $600 million.

Targeted investments include power, water and health utilities, education facilities and transport networks. Citing independent research, ADIC and UBS GAM expect that US$400 billion in infrastructure developments are planned for the MENA region in the next decade.

To meet this demand, governments in the region have sidelined oil revenue surpluses for infrastructure development. But they are also turning to institutional investors to source capital, ADIC-UBS GAM Infrastructure Investment said in a statement.

The fund aims to allocate its capital in the next three years.

“Most of the investments will be in “greenfield” assets, but because we are talking about primarily government concessions or long-term contracts with solid partners, cash flows are predictable and the risks less than in pure private sector deals,” Vincent Gilles, chief investment officer of ADIC-UBS GAM Infrastructure Investment, said in a statement.

ADIC is owned by the Abu Dhabi Investment Council and acts as an investment arm of the Abu Dhabi government.