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Wednesday, 14 April 2010

Dubai Shares Gain as Arabtec Ends Stake Sale, Buoying Builders

Dubai stocks rose for a third time this week after Arabtec Holding Co. cancelled plans to sell a stake to a government-controlled company, boosting investor confidence in the United Arab Emirates’ construction industry.

Arabtec, the country’s biggest construction company, soared to the highest level in almost two weeks. Dubai-based construction companies Drake & Scull International PJSC and Deyaar Development advanced the most in almost a week. The Dubai Financial Market General Index rose 0.1 percent to close at 1,824.27. The gauge advanced as much as 1 percent earlier today. The Bahrain All Share Index gained 0.5 percent.

Aabar Investments PJSC of Abu Dhabi, the largest shareholder in Daimler AG, offered to buy 70 percent of Arabtec through the purchase of mandatory convertible bonds in January. The developer said Feb. 28 it agreed with Aabar to extend the due diligence process for an Arabtec stake sale to April 16.

Abu Dhabi Fund Names Sheikh Hamed Al Nahyan as Chief

The Abu Dhabi Investment Authority, one of the world’s largest sovereign wealth funds, appointed Sheikh Hamed bin Zayed al Nahyan as its managing director, succeeding the late Sheikh Ahmed bin Zayed al Nahyan.

Sheikh Hamed currently heads the Abu Dhabi Crown Prince’s Court and is chairman of the Higher Corporation of Specialized Economy Zones. He is the half brother of Sheikh Khalifa bin Zayed al Nahyan, president of the United Arab Emirates, and a brother of his predecessor Sheikh Ahmed.

Sheikh Khalifa issued a decree appointing Sheikh Hamed to the position, state-run WAM news agency reported today.

Arabtec dumps Abu Dhabi on Nakheel payment hopes

The UAE’s largest construction company Arabtec announced that it has abandoned plans to sell a 70 per cent stake to an Abu Dhabi sovereign wealth fund, a move originally seen as an emergency bailout in view of late payments in the wake of the Dubai real estate crash last year.

Arabtec shares jumped on the news that investors took as a sign that the company is now financially secure. There was no immediate statement from the company but analysts said the group’s prospects had improved markedly since the Dubai World debt rescheduling proposal that includes the resumption of payments to contractors.

‘The story BCG offered me $16,000 not to tell’

Construction halts in Dubai; image courtesy of The Guardian
I’ve just been reading the musings of Keith Yost, a disillusioned former Boston Consulting Group insider. In a series of four explosive articles published by MIT’s The Tech, Yost has  lifted the lid on the reasons for Blingopolis’s economic failure, as well as exposing much of what’s wrong with early 21st century capitalism.
Even though he had zero commercial experience, Yost was hired by BCG as a Dubai-based management consultant, on a $200,000 per year package, in June 2009. He was supposed to be advising Dubai-based clients on improving their business performance. However he suggests the whole thing bore more resemblance to an elaborate charade orchestrated by the greedy and complacent on the unwary and unneedy than a business transaction between consenting adults.
For me, the classic line from the articles (in part four), is: “[The Emiratis] run their businesses much in the same way a teenager would buy clothes with a swoosh on them — they aren’t trying to generate profits so much as they are adopting a lifestyle brand.”
The articles say as much about why Blingopolis’s economic experiment  was doomed to fail as they do about the ethical values of western consultancies. I take my hat off to Yost for resisting the company’s attempts to buy his silence with a $16,000 bung.

DEWA to pay over 8 pct for 5-yr bond

State-owned utility Dubai Electricity and Water Authority (DEWA) could pay 8.5 percent for its five-year bond, bankers on the deal said on Wednesday, the high price reflecting how investors perceive the emirate's credit risk.

Dubai's only utility will wrap up its investor roadshows in Boston on Wednesday, after meetings in the Middle East, Asia and Europe earlier in April, as a result of which more details of the issue have emerged.

The five-year issue will be a 144a transaction, open to U.S. institutional investors, and is expected to price this week. Bankers say the utility will settle at raising about $1 billion.

UPDATE 1-UAE's Arabtec, Aabar call off acquisition deal | Markets | Reuters

UPDATE 1-UAE's Arabtec, Aabar call off acquisition deal | Markets | Reuters

Dubai-based contractor Arabtec ARTC.DU and Abu Dhabi's Aabar Investments AABAR.AD have called off a $1.7 billion deal to sell a 70-percent stake in Arabtec to Aabar, the two companies said in a statement.

No reason was given for the cancellation of the deal, first announced in January.

"The parties have agreed that they will continue to work together in good faith towards future cooperation and forming a strategic partnership in Abu Dhabi in the future," the firms said in statements on Wednesday to the Dubai and Abu Dhabi bourses.

Kampac embarks on €1B reverse merger listing

Kampac Oil, a Dubai-based conglomerate, has embarked on a €1 billion reverse merger listing to fund the expansion of its explorations and refining operations in Africa, the company said on Tuesday.

Kampac ME FZCO, which has been publicly listed on the Frankfurt Stock Exchange (FSE) under the name Kampac International PLC, started trading from Monday at €2.5 per share.

Simultaneously, Kampac has signed a €200 million equity line of credit facility with GEM Global Yield Fund Limited, a US-based $3.4 billion alternative investment group, to finance the expansion and development of its oil and gas related projects across emerging markets.

Dragon Oil profits fall by a third

Dragon Oil, the Turkmenistan-focused oil producer controlled by the Dubai Government, posted a 30 per cent drop in profit last year despite selling 40 per cent more crude.

Net profit declined to US$259 million (Dh951.3m) from $369m in 2008. Dragon’s revenue also fell, sliding 12 per cent to $623.5m from $706.1m. The company attributed that to “a lower average realised price” for its crude.

Even so, analysts said the company performed well last year compared with most other small oil producers. The value of its assets increased as Dragon built production infrastructure such as oil platforms while maintaining a balance sheet with no long-term debt.

Oil Prices May Curb Recovery, Agency Warns

The International Energy Agency warned that rising oil prices, which have been flirting with 18-month highs recently, could squeeze economic recovery in the U.S. and other industrialized nations.
The Paris-based agency said Tuesday there was plenty of oil around to sate increasing demand, but it said that higher crude prices could "stall [rich nations'] economic recovery or render it more 'oil-less' than we currently envisage."
U.S. oil prices have eased off the $87 a barrel level hit last week but are still above the $70-to-$80 range that has persisted for many months and gave a semblance of stability to global energy markets. U.S. oil prices, which have risen largely on economic optimism, traded Tuesday midday on Nymex at $83.10, down $1.24, a barrel.

Dubai debt crisis upshot: Exports boom

The cost of doing business in Dubai has come down considerably in the aftermath of last year’s debt crisis, according to a senior government official from the emirate.

This is prompting an increasing number of international companies to flock to Dubai, according to Farid Karmostaji, from the Dubai Export Development Corporation.

These are the companies from across the world that always wanted a presence in Dubai to do business in the Middle East and North Africa (MENA) region but could not enter the emirate due to constraints like high costs.

DIC says to continue Almatis debt revamp efforts

Private equity fund Dubai International Capital (DIC) [DUBAHP.UL] said it would continue to seek a refinancing of the debt of German aluminium firm Almatis [ALMTI.UL] despite an adverse Dutch court decision.

"The decision by the Enterprise Chamber of the Amsterdam Court of Appeal not to grant an injunction does not affect DIC's ability or intention to pursue a refinancing of Almatis," DIC said in a statement.

The court denied a DIC petition asking for more time for a refinancing plan, media reports said.