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Wednesday, 31 March 2010

RBS CEO positive on Dubai plan



Dubai World's DBWLD.UL debt restructuring plan is a positive development and sends the right signal, the chief executive of Royal Bank of Scotland (RBS.L) told a local newspaper on Wednesday.

Stephen Hester's comments followed remarks by other major Dubai World creditors, who expressed support for Dubai's $9.5 billion (6.3 billion pound) support plan for the conglomerate.

"As one of the lenders to Dubai World, we view the recent debt restructuring offer as a positive development," Hester told Gulf News. "In the overall context of Dubai's global credit standing, the move has sent out the right signals."

UBS, Abu Dhabi Invest AD cancel $250 fund



UBS Global Asset Management and Abu Dhabi's Invest AD liquidated a $250 million fund targeting Middle East infrastructure due to weak investor appetite, people familiar with the matter said.

"It's not going ahead, there are no assets in the fund, the commitments made by investors are being returned," one person familiar with the matter told Zawya Dow Jones. "It's not a great fundraising environment for that kind of illiquid infrastructure fund. Now investors are looking for something more liquid."

Invest AD, formerly known as Abu Dhabi Investment Co., and UBS raised $250 million for the fund in a first close in April 2009. However, the people said the fund's timing was ill-judged and had it been launched before the economic downturn it may have succeeded.

Indonesia Bakrieland says debt talks with Dubai firm delayed



Indonesia's PT Bakrieland Development (ELTY.JK), the Bakrie Group's property arm, said on Wednesday that talks with a Dubai property firm over a $110 million strategic investment have been postponed again.

Bakrieland in 2008 agreed to sell a 30 percent stake in its subsidiary, PT Bakrie Swasakti Utama, to Dubai World's property arm, Limitless Holding, for $110 million but so far, the Dubai company has only paid $37 million.

At the time of the deal, which took place at the height of the global financial crisis, the Bakrie Group faced financial difficulties.

How Sheikh Ahmed championed transparency at ADIA



One of Sheikh Ahmed bin Zayed’s most visible accomplishments in 13 years as managing director of the Abu Dhabi Investment Authority (ADIA) was holding the fund’s management up to greater public scrutiny.

Sheikh Ahmed started as a stock analyst at the fund in 1991 and became its managing director in 1997, according to a BusinessWeek profile. When he took over, ADIA was largely closed off from public view, but people also paid little attention to it.

It was only in the middle of the past decade that politicians and investors began to recognise the power wielded by sovereign wealth funds, leading to a drive for more openness.

Dubai Opens Its Shariah Hedge Fund to Investors



Dubai is opening up its inaugural hedge fund to investors after an index-beating debut.

The Middle East emirate's first fund of funds, which was launched at the beginning of 2009, beat comparable indexes by posting a 41% return last year. The fund, up slightly more than 1% through March 28, is still outperforming benchmarks this year.

Fund operator Dubai Shariah Asset Management, or DSAM, sees this as proof that a hedge fund based on Islamic law, or shariah, can provide similar or better returns than conventional hedge funds.

BP Begins Big Push to Revive Iraq's Oil




BP PLC Tuesday awarded $500 million in contracts to drill wells in Iraq's giant Rumaila oil field, the first step in a mammoth initiative by foreign oil companies to revive the country's energy industry.
Associated Press
Iraqi workers are seen at the Rumaila oil refinery in December of 2009.
If successful, the effort at Rumaila and several other fields near Basra could be one of the largest expansions of crude-oil production ever achieved anywhere. Increased Iraq production could be the difference between a well-supplied global market with oil steadily trading below today's $82 a barrel and a tight oil market with triple-digit prices, struggling to meet rising Asian demand.
"It could change the map of oil," says Paolo Scaroni, chief executive of Italy's Eni SpA, which is preparing to begin work on the giant Zubair field.
Any surge in Iraqi oil production must still overcome tremendous obstacles, including fractious politics and security concerns. Iraq oil production was forecast to rebound quickly after the U.S.-led invasion in 2003. But it took six years to get back to 2.5 million barrels a day, the level Iraq was producing in 2001.
The new drilling contracts are the beginning of a long effort by a dozen of the world's largest oil companies to revive Iraq's decrepit oil infrastructure and turn it into a rival of Saudi Arabia for world's biggest crude exporter, industry officials say.
[IRAQOIL]
Iraq sits atop the world's third-largest supply of oil, after Saudi Arabia and Iran. But two decades of war, sanctions and neglect have left it in disrepair. Oil fields are in desperate need of investment. New wells need to be drilled. Massive amounts of water need to be pumped underground to restore pressure and revitalize reservoirs.
Iraqi officials say they plan to add 10 million barrels a day of oil production capacity by 2017. Most observers say that is too optimistic. However, they say that adding three to four million barrels is possible. Even that lower number would be a historic feat, lagging only Saudi Arabia's massive expansion in the 1970s.
Iraq has an estimated 115 billion barrels of crude-oil reserves. At current prices, that is valued at $9.5 trillion.
Numerous political and security concerns remain before this oil can be extracted. Ayad Allawi's Iraqiya bloc, which won the most seats in the recent parliamentary election, said it would like to review oil contracts signed with foreign companies. That raised concerns there could be further delays in starting work.
However, as the nation's leading parties engage in negotiations to form a new coalition government, there has been no talk thus far of renegotiating the oil contracts.
"The security situation will continue to be a challenge for some period of time," ExxonMobil Corp. Chairman and Chief Executive Rex Tillerson said earlier this month. "I think we're all hopeful that once the postelection forming of the new government moves forward and begins to reach its conclusion that some of that will subside."
The bottom line is that the lure of working in Iraq—with its plentiful oil—is too great for most big oil companies to ignore. "It makes commercial sense for us to increase production as quickly as we can," said Toby Odone, a BP spokesman.
BP and the South Oil Co. let contracts to drill 49 wells to Weatherford International Ltd.; a partnership between Schlumberger Ltd. and the state-run Iraqi Drilling Co.; and China's Daqing Oil Field Company Ltd., said Abdul Mahdy al-Ameedi, a senior official in the oil ministry. He said BP plans to increase production at Rumaila from 1.07 million barrels a day to 1.23 million barrels within 12 months.
These contracts are the first of what is expected to be a wave of oil-field-service related work let by BP, Exxon, Royal Dutch Shell PLC, Eni, Lukoil OAO and China National Petroleum Corp. over the next few months. The companies have been awarded contracts to increase production at separate fields.
Energy analysts at Sanford C. Bernstein recently wrote that developing seven major Iraq fields, including Rumaila and Zubair, would require $102 billion in investment. But they said they were "skeptical" all of the plans would be carried out.
The development of so many enormous projects—most clustered within 50 miles of each other—will create an enormous demand for workers, engineers and drilling rigs. It will also require the construction of a giant infrastructure build out, including roads, ports, oil export facilities and water plants.
Raising oil production so quickly in such a small area may prove too demanding. Recently, it took Saudi Arabia nearly five years to increase its crude oil production capacity by two million barrels a day—without overriding concerns about political stability or security, notes energy consultants IHS CERA. A new analysis by the consultants say Iraq's plan to increase production is "extraordinarily ambitious" and predicted an increase of just less than two million barrels of oil a day by 2015. "It will be incredibly complicated to pull this off," says Matt Simmons, a Houston investment banker.
Nonetheless, even a few million barrels a day of crude oil production capacity could have an enormous impact. The growth of Iraqi oil production and exports will play a "decisive role in shaping global oil markets," says Fatih Birol, chief economist of the Paris-based International Energy Agency, a watchdog for industrialized nations.
Without the boost in Iraqi production, Mr. Birol worries that global oil production over the next five years will have trouble pumping out enough barrels to match expected demand from China, India and the Middle East. Tight supplies amid growing Chinese demand sent oil prices soaring close to $150 a barrel in 2008.

Zain & Bharti SIGN $10.7B Deal



The adage “A picture is worth a thousand words” applies perfectly to the Zain deal signature picture above. Many people doubted the deal would go through even though there was a legitimate buyer, credit was available, and Zain desperately wanted to sell. Doubters had their reasons as Zain has failed to close several announced deals in the past. Moreover, Bharti had their share of failed takeover attempts as they recently failed to close the MTN Africa deal on two occassions. The picture above sets the record straight: Mr. Naser Al-Kharafi signing the Zain Africa sale with Mr. Sunil Bharti Mittal next to him and  Mr. Assad Al-Banwan, Chairman of Zain, appearing too.

The final transaction implies an enterprise value of $10.7B with $9 billion equity and $1.7 billion assumed debt by Bharti. Payment will be in cash with $8.3 billion paid upon closing and US$0.7 billion  paid after one year. Mr Asaad Al-Banwan commented on the transaction by stating: “This transaction crystallises the significant value we have created for our shareholders over the last 5 years.” Mr. Nabil Bin Salamah, CEO of Zain, shared his vision of Zain after the Africa sale by asserting: “The transaction allows Zain to focus on its highly cash generative operations in the Middle East and to substantially improve its balance sheet. We are excited about the growth prospects of the Middle East and we believe Zain is well positioned to capture this opportunity.” Mr. Sunil Bharti Mittal, Chairman and Managing Director, Bharti Airtel declared: “This agreement is a landmark for global telecom industry and game changer for Bharti Airtel. With this acquisition, Bharti Airtel will be transformed into a truly global telecom company with operations across 18 countries fulfilling our vision of building a world-class multinational.” This specific part reminded me of Saad Al-Barak’s (Zain’s previous CEO)  thoughts of Zain’s prospects when Zain initially bought Celtel Africa.

So, now what? It is imperative to acknowledge that yesterday’s Zain is a completely different animal from the one we have today. With this sale, Zain has transformed from a growth company to a value company. This entails various things such as a lower assigned multiple (EV/EBITDA) and lower stock appreciation. On the other hand, you would be owning a more stable company with a lower beta for its dividends. Anywanys, I want to hear what you guys think of this deal and what it means for Zain, shareholders of Zain, banks, and Kuwait.

Banker contends sands of time will heal Dubai



KARL MOORE: This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am speaking to Dr. Henry Azzam, who is the CEO forDeutsche Bank in the Middle East and North Africa. We are here in Dubai at the Dubai [International] Financial Centre. Good afternoon.
HENRY AZZAM: Good afternoon.
KM: The world has been absolutely agog with Dubai over the last few months. When is Dubai going to turn around? Is it going to come around in the next few years?
HA: Dubai is like those other countries where you have a sovereign debtissue; they have a sizable debt outstanding that they need to work out. They have started the process of restructuring their debt, estimated at around $22-billion [U.S.], in the next few years. The process has started. I would imagine that they should come to an agreement with their banks in the coming few weeks. Once that is settled, then it becomes easier for Dubai to tap the market again, especially if they do get a government guarantee for the new loans and/or if Abu Dhabi gives them more support.

ADCB's CEO says Dubai World debt plan very positive



Abu Dhabi Commercial Bank ADCB.AD, one of the region's most exposed lenders to indebted Dubai World [DBWLD.UL], said on Tuesday Dubai's $9.5 billion rescue plan for the conglomerate is "extremely positive".

FINANCIALS

"The offer demonstrates the support of the Dubai government, it is extremely positive," chief executive Ala'a Eraiqat told reporters on the sidelines of the bank's annual general meeting.

HSBC (HSBA.L), also one of the largest creditors to Dubai World, said earlier on Tuesday it backed the Dubai World restructuring plan, and that it expected positive results soon.END

Tea Trumps Towers as Dubai Maps Way Back to Future as Trade Hub



At Unilever’s Lipton Tea factory near Dubai’s main port, rows of machines convert leaves from Kenya and India into a million tea bags an hour destined for breakfast tables from South Africa to Canada.

“By bringing in tea here, we are close to the market, so we blend it fast, pack it fast,” said Sanjiv Mehta, Unilever’s chairman for North Africa and Middle East, in an interview at the factory, the world’s second-biggest. “And because of the logistics here being very efficient, we’re able to quickly move it to the consumer markets.”

Dubai is spending $13 billion on building a new international airport and expanding existing air and shipping terminals. The ruling Al Maktoum family is focusing on the emirate’s traditional strength as a trade hub, after borrowing $109 billion to build record skyscrapers and man-made islands led to the world’s worst property crash last year.