Dubai Mubadala Development Company is close to securing a financing deal for extension work at one of its landmark projects amid growing demand for debt issued by Abu Dhabi.
The state-backed investment fund hopes to secure a financing package by mid-2012 for a new $4.5 billion (Dh16.5 billion) construction phase at Emirates Aluminum (Emal) that will almost double the smelter's production capacity.
However, there has been no final decision on the structure of the deal with Mubadala considering various options for the second phase of the extension, which is expected to boost production capacity to 1.3 million metric tonnes of the metal per year.
"Financing options are being considered for phase two; the first phase is up and running. Phase Two has been approved by the board, which will actually double capacity [at the plant]; it is a hugely exciting project," said Matthew Hurn, the executive director of Mubadala's group treasury unit.
"Emal is a great asset and phase one was very successful. We continue to receive financial support from the shareholder and we have cash coming in from our operations; we look to see what we can raise from external capital markets to balance the budget.
"Is it the bank market, is it the capital markets? There are various bits inbetween them as well. It would be nice to see something by the mid-year," he added.
Mubadala has already tapped the bond markets this year with debt linked to Abu Dhabi Government related entities receiving huge interest from institutional investors.
Earlier this month, Dolphin Energy, a regional gas production and pipeline company, received strong demand for a new 10-year bond, the first benchmark-size conventional issued this year from a Gulf Arab company. Dolphin, majority-owned by Mubadala, is rated AA by Standard & Poor's to reflect the expected level of government support for the company.
Last year, the International Petroleum Investment Company received more than four times the bids that were needed for its $3.75 billion issue,
"Abu Dhabi credit is actually very strong. I think investors are very keen to find credit from this part of the world because the yields are still very attractive and there is a lot of opportunities out there," said Hurn.
"There is demand for good quality product out there. In terms of Dolphin, when the initial bond went out the order book was well subscribed and that meant we could actually go back and re-tap it, which we did in a very controlled way as we had regular dialogue with the capital markets," he added.
Hurn says Mubadala is mindful of the gloomy economic backdrop but says it will not act as a distraction towards the company's end goal. Mubadala has nine business units operating across a range of sectors including healthcare, aerospace, energy and real estate. In December, it converted Dh2.1 billion worth of bonds into shares in Aldar, taking its total stake in the company to 49 per cent.
"I think Aldar is an important part of the government development company; it is a nation builder and I have always been confident in Aldar's long-term future as it now has the perfect capital base," said Hurn.
"Right now the biggest part of our portfolio is oil and gas as that is where came from as a company. But it changes all the time. For example, aerospace has become more significant with the inception of Sanad and Strata," he added.
Cementing ties: Wootton in town
The Lord Mayor of the City of London attended an event in Dubai yesterday as part of an effort to impart British expertise to UAE employees.
Alderman David Wootton, who is ambassador for UK financial and professional services, said his visit was extremely timely and that British institutions stood ready to help the UAE.
The event, hosted by the Dubai International Financial Centre and UK Trade and Investment, was staged by three of the UK's leading professional bodies — the Institute of Chartered Accountants and Wales, the Association of Corporate Treasurers and the Chartered Institute for Securities and Investment.
"Talented young people are the lifeblood of any financial centre and from the City's perspective we believe that sharing skills and experiences to grow both financial sectors is central to our relationship with the UAE," Wootton said.