- Government-owned companies hiring banks to review options
- U.A.E. was first Gulf country to cut fuel subsidies in August
Abu Dhabi is reviewing its largest state-owned companies as the slump in crude oil pressures the emirate’s finances, four people with knowledge of the matter said.
Abu Dhabi National Energy Co. and International Petroleum Investment Co. are in talks with banks on options including strategic partnerships, share sales and asset disposals, the people said, asking not to be identified because talks are private. Mubadala Development Co., an investment fund, is considering further divestments after selling most of the assets in its joint venture with General Electric Co., according to the people.
Bank of America Corp., JPMorgan Chase & Co. and Credit Suisse Group AG are among banks pitching for mandates, while some government-related entities have already appointed advisers, according to the people. Mubadala, Abu Dhabi National Energy Co., known as Taqa, and IPIC own about $150 billion of assets, according to Bloomberg calculations. The banks declined to comment or weren’t available to comment, as were Taqa and IPIC.
“As a diversified and active investor, we’re always looking for new investment opportunities in challenging times, as well as monetizing assets, in line with our long-term strategic plan,” said Brian Lott, a spokesman for Mubadala.
Abu Dhabi, capital of the UUnited Arab Emirates and source of about 6 percent of the world’s proven oil reserves, is seeking to counter the erosion of its finances after crude prices halved in the past year. The U.A.E. is OPEC’s third-biggest oil producer and may post a fiscal budget deficit this year for the first time since 2009, according to the International Monetary Fund. Economic growth will probably slow to 3 percent this year from an estimate of 3.6 percent in January, the IMF said this month.
"It makes sense that Abu Dhabi’s GREs would review their asset portfolio, rationalise their spending and as important, diversify further their source of funding away from public money,” said Philippe Dauba-Pantanacce, senior Middle East, North Africa and Turkey economist at Standard Chartered Plc in London. "There is a re-assessment of public spending across the board in Abu Dhabi, amid the current oil price levels."
Mubadala’s joint venture with General Electric Co is laying off people and redeploying others after assets shrank to about $1 billion, a company spokesman said last week. That comes as the U.S. company exits most GE Capital businesses. Mubadala is also exploring the sale of U.A.E. consumer finance firm Dunia, people with knowledge of the matter said. Taqa is exploring a potential sale of its car fleet manager Massar Solutions PJSC that could raise at least $500 million, people familiar with the matter said in September.
Mubadala is the top shareholder in chipmaker Advanced Micro Devices Inc with an 18 percent stake, according to data compiled by Bloomberg. The fund, whose investment portfolio is valued at about $66 billion according to its website, is also a shareholder in U.S. private-equity firm Carlyle Group LP. Taqa, meanwhile, has hired investment and advisory firm Blackstone Group LP to review options for about $24 billion of its debt obligations, two people with knowledge of the matter said in June.
Abu Dhabi, in addition to the three state-owned companies, could also tap sovereign wealth fund the Abu Dhabi Investment Authority to help support its finances. ADIA ranks second behind Norway as the largest in the world at $773 billion, according to the Sovereign Wealth Fund institute. ADIA itself doesn’t disclose assets under management. The fund has been investing the emirate’s oil wealth since 1976 and withdrawals “have occurred infrequently and usually during periods of extreme or prolonged weakness in commodity prices,” according to its annual report.