Abu Dhabi fund doubles revenue in 2009

Abu Dhabi’s (AED88.5) $24 billion strategic investment arm, Mubadala Development, reaped nearly twice as much revenue from portfolio companies in 2009 than in the previous year.
Mubadala’s total income of $2.3 billion was driven by a substantial increase in revenue and a change in the net value of its assets, according to the company.

But this revenue was slightly exceeded by the $2.4 billion Mubadala received in funding from the Abu Dhabi Government, its primary shareholder. But this funding was one-third of what was provided to the company in 2008, which was $6.95 billion.

Mubadala executives seized this reduction in funding to illustrate how the company could operate on more commercial terms and was diversifying its funding sources, according to The National, an Abu Dhabi newspaper.

The company stated that “strong” dialogue with banks and fixed income investors, in addition to diversifying funding sources, enabled it to continue financing projects. Mubadala raised $1.85 billion through corporate bond program in the second half of 2009, in addition to a $1.3 billion bank loan among other fundraising initiatives.

But the executives did not expect Mubadala to be totally independent of government funding, adding that the company had asked for a larger sum of funding in 2010 than the $2.4 billion it was granted last year.

In addition to the increased revenue, the strategic investor’s total assets grew in value 75 per cent to $24 billion in 2009.

Mubadala has the dual aims of diversifying the emirate’s economy and earning financial returns. In 2009 it benefited from its majority ownership and operation of Dolphin Energy, a natural gas producer in Qatar, which delivered $760 million in revenue, but its fastest-growing sources of revenue were SR Technics, at $1.1 billion, and proceeds from UAE University, Zayed University and Paris-Sorbonne University Abu Dhabi, totalling $700 million.

In a statement, Mubadala managing director Khaldoon Khalifa Al Mubarak said the company’s focus in 2009 was to improve financial and operational discipline, transparency and governance.

The company listed the following highlights for the year: increasing its holding in SR Technics from 40 to 70 per cent; completion of the first stages of Paris-Sorbonne University Abu Dhabi and UAE University, and the downtown campus of New York University Abu Dhabi; selling plots of land in Sowwah Island, location of the new central business district and Abu Dhabi Stock Exchange; and the first commercial production of metal at Emirates aluminium in December 2009, part of an expected 700,000 tonnes in phase one.

Mubadala’s purpose of starting up companies means that initial years of losses should be followed by profits. An example of this could be seen in Emirates Aluminium, which lost $152 million in 2008 before this year’s positive return, according to The National.