Mubadala Development Company goes from strength to strength. The Abu Dhabi state-owned fund entered into agreements last month in Africa and Europe that total billions of dollars of investment.
In its biggest deal, Mubadala signed an agreement with Dubai Aluminium (Dubal) and Algerian state-owned energy company Sonatrech to build a $5 billion aluminium smelter in the north African country. The smelter is expected to produce 700,000 tonnes of aluminium a year, largely for export.
Mubadala also completed the financing of two independent water and power projects in Oman. On March 14, the company completed a limited-recourse financing of the Barka 2 Independent Water and Power project. It also concluded the acquisition of the Al Rusail Power Company. Mubadala co-financed the transactions with Suez Energy and Oman’s National Trading Company. The three investors financed the deals via an $800 million syndicated loan led by HSBC and Sumitomo Mitsui.
The Abu Dhabi company is also in negotiations with Dubal, BHP Billiton and Canada’s Global Alumina Corporation to form a venture to operate Global Alumina’s refinery project in Guinea.
In Italy, Mubadala is seeking joint ventures with Finmeccanica in a range of aerospace and defence projects. These include the production of high-tech trainer aircraft.
Strategic value
Mubadala’s chief executive says these ventures will prove as beneficial to Abu Dhabi as to the countries in which they are investing. “Mubadala does deals that have strategic value,” says Khaldoon Khalifa Al Mubarak. “We always look at how an investment creates value for Abu Dhabi.”
Moreover, these deals are indicative of Mubadala’s growing reach, not just from a geographic or industry perspective but also in terms of the type of investment it is now getting involved in. Al Mubarak cites the example of Dolphin Energy, a company in which Mubadala owns 51%. Dolphin’s gas project is the biggest cross-border energy initiative in the Gulf and is expected to support power generation, water desalination and industry in the UAE and Oman. Mubadala helped to structure and finance the venture and it also brought in outside investors, including France’s Total and Occidental Petroleum of the US. The Abu Dhabi outfit is also involved in all aspects of the project, including helping to develop operations, processing the gas and then delivering it.
Get hands dirty
One thing the company does not believe itself to be is a private equity player. “We don’t feel we play in the private equity space,” says Waleed Ahmed Al Mokarrab Al Muhairi, chief operating officer at Mubadala. “We invest on behalf of our one shareholder within a very narrow business mandate. We get our hands dirty and create value.”
Its investments range from energy providers, property and infrastructure to health clinics, helicopter schools and satellite communications projects.
“Everything we do is commercially driven,” says Al Mubarak. So far the company has yet to make a big exit from one of its investments, although Al Mubarak is bullish about Mubadala’s prospects. Although he declines to provide concrete numbers, he says the investment vehicle has posted triple-digit growth each year since its inception in 2002 in terms of total assets, profitability and paid-up capital.
One of the company’s biggest challenges is finding talented people. Mubadala has about 200 professionals including business developers, engineers, project finance experts, lawyers, commodity experts as well as financiers, on its pay roll. Al Mubarak says the company will move to bigger premises in the summer to accommodate its growing numbers, although even its new home might not be big enough. “Our new office space was designed to be filled over 10 years,” he says. “However, at this rate [of growth] it will be filled within four years.”
