Arab Lender Plans Sukuk to Tap $700 Billion in Energy Works

  • Apicorp issuance is part of $3-billion sukuk program
  • Lender plans $1 billion of equity investments by 2018

Arab Petroleum Investment Corp. plans to issue $1 billion in sukuk next year to finance energy projects in the Middle East and North Africa on expectations of higher oil prices and the region’s need for $700 billion in energy investments, according to Chairman Aabed al-Saadoun.

The issuance is part of a $3-billion sukuk program over four to five years, al-Saadoun said in an interview in Manama, Bahrain. The multilateral lender, known as Apicorp, has issued $500 million in sukuk this year and plans to issue $1.5 billion after 2016, he said. In addition, Apicorp targets at least $1 billion in energy equity investments by 2018, al-Saadoun said.

The energy-finance lender, based in Dammam, Saudi Arabia, may issue its remaining $1.5 billion sukuk in 2017, “if the market conditions are good,” or over an extended period, he said. Al-Saadoun is also the undersecretary for corporate affairs at the Saudi oil ministry.

‘Invest Strongly’

“Apicorp plans to have a slice of the $700 billion in needed investments in the region, either through direct investments or lending,” he said. “We don’t have a set target that we want to have out of that number, but we are committed to invest strongly in these projects.”

Oil prices have tumbled since the middle of last year amid surging output from North America, Russia and members of the Organization of Petroleum Exporting Countries. Al-Saadoun said the price slump won’t affect Apicorp’s investment outlook. Apicorp is owned by the Organization of Arab Petroleum Exporting Countries, with Saudi Arabia, Kuwait and the United Arab Emirates each holding 17 percent, according to its website.

Benchmark Brent crude dropped 46 percent in the last 12 months and fell as much as $1.09 on Monday in London, before gaining 72 cents to trade at $45.38 a barrel at 12:39 p.m. local time.

“We see that the current situation with oil prices will not continue and is not sustainable -- that’s a given,” al-Saadoun said. “It may take months to see oil prices improving again as we are nearing the end of this low price cycle.”

The lender is seeking to diversify investments and take on more renewable energy projects after investing mainly in petrochemicals until last year. It has set up two new funds, one focusing on transportation and shipping. The other, which it operates with Saudi-based ACWA Power, concentrates on renewable energy, he said.

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