Investment vehicle defiantly upbeat about future despite disappointing 2011 results.
Mubadala Development Company reported heavy losses for 2011 yesterday with volatile market conditions having an impact on the value of its global investments.
Mubadala, the Abu Dhabi Government's investment vehicle, made a loss of Dh4.2 billion last year, against a loss of Dh338 million in 2010, the company said, citing "negative market fluctuations in the fair market value of its investments, as well as a reduction in the market value of certain real estate holdings".
Mubadala is a vital component of Abu Dhabi's strategy to diversify its economy away from a reliance on oil. It has investments in a wide range of sectors including aerospace, oil and gas, infrastructure, real estate, health care and renewable energy.
"While our financial investments' performance were impacted by the volatility in the global marketplace during 2011, we continue to maintain a long-term financial investment perspective," said Khaldoon Khalifa Al Mubarak, Mubadala's chief executive officer and managing director in an emailed statement.
Operating income declined 54 per cent to Dh1.2 billion, while revenue increased 77 per cent to Dh27.9 billion. Mubadala's total assets rose by 73 per cent to Dh177 billion, against Dh102 billion in 2010, mainly due to the consoldiation of the Advanced Technology Investment Company and an increase in assets across other business lines.
Mubadala has stakes in firms ranging from General Electric to the Carlyle Group and recently bought a $2 billion (Dh7.34 billion) stake in Brazil's EBX Group. However, it has been adversely affected by problems closer to home including helping recapitalise the National Central Cooling Company, known as Tabreed.
"Although the results do not look great for Mubadala, it must be remembered this is a special case of a sovereign wealth fund that looks at ‘riskier' investments," said Saeed Hirsh, an analyst at Capital Econ-omics in London.
"In contrast to say SAMA in Saudi — whose objectives are wealth preservation, hence focusing on fixed income — Mubadala's objectives are convoluted with those of the government and the overall health of Abu Dhabi's economic and financial stability. Accordingly, we would expect earnings volatility," he said.
"Moreover, since around 30 per cent of revenues come from oil and gas, Mubadala will always be affected by swings in energy markets. which in this case had a positive impact but will not always be the case. Of course, this does not bode well for diversification efforts."
Mubadala took part in a government rescue of real estate developer Aldar last year by subscribing to a $2.8 billion convertible bond issued by the developer in March 2011. The fund, with assets worth around $46 billion, converted a portion of the bond to equity in December. Full conversion could eventually raise Mubadala's stake to 60 per cent.
"Aldar is [in the process of] thinking through a consolidation of [Abu Dhabi's] real estate sector but throughout that process we are confident its future is with us," said Waleed Al Mokarrab, Mubadala's chief operations officer.
"We also invested $2 billion in EBX, which was our first significant deployment of 2012, and we are continually scanning for opportunities in sectors of interest to us," he added.
Despite the heavy losses incurred in 2011, Mubadala has already been active in the first few months of this year and expects to conduct further activity in the coming months. The company set a capital and investment expenditure of $16.3 billion for 2011 but said that amount is expected to be lower in the current year.