The International Petroleum Investment Company, an Abu Dhabi Government-controlled conglomerate, yesterday reported US$1.35 billion of profit for last year, a decline of 67.5 per cent from 2009.
The drop in profit was due mainly to huge one-time gains made in 2009 on an investment in Barclays, the British banking giant.
Ipic had thrown the bank a lifeline in the worst stretch of the financial crisis and made $2.2bn (Dh8.08bn) when it exited. Rising expenses last year also contributed to the decline in profits.
Last year "was a year of inward focus after 2009's heightened acquisition activity", Sheikh Mansour bin Zayed, the chairman of Ipic, said in a letter accompanying the financial statements.
The company was cautiously optimistic this year, Sheikh Mansour said, bearing in mind the global economic recovery was "still somewhat tentative" and "reliant on unsustainable stimulus spending plans, which will have to be withdrawn at some point".
Rising oil prices last year and the first part of this year were a mixed blessing, he said. While they helped companies that extract and sell oil, petrochemicals operations that had to buy oil on the open market were facing higher costs, which "could reduce refining margins".
Ipic, formed 27 years ago, is the Abu Dhabi Government's main global energy investment vehicle. It has large stakes in businesses including Borealis, a petrochemical company based in Austria, Nova Chemicals of Canada and Cosmo Oil of Japan.
After decades of gradual growth it began making major acquisitions in 2009, buying 70 per cent of Ferrostaal, a German industrial services company, 100 per cent of Nova Chemicals and almost all of Aabar Investments, a large holding company in Abu Dhabi.
Its assets are now worth about $47.9bn, according to its financial statements. Ipic said yesterday that many of its acquisitions were performing well, with Nova turning in strong profits, Borealis paying dividends and Aabar building up its assets.
But the company has encountered challenges recently with some of its businesses, including Ferrostaal. Ipic is in arbitration in Germany with MAN, the truck maker that sold it the Ferrostaal stake two years ago.
Prosecutors in Munich are investigating Ferrostaal over allegations of bribery in contracts signed before Ipic became a shareholder, and Ipic is trying to block a provision of the Ferrostaal deal requiring it to buy MAN's remaining 30 per cent stake.
Ipic said it "continues to work closely with all parties to try to bring a resolution to this matter as soon as possible" and that "we continue to pursue a settlement with the other shareholder of Ferrostaal".
While profits declined last year, Ipic's revenue rose by 55 per cent to $15.4bn. Operating profit of $1.6bn was also higher than in 2009.
Ipic released its financial statements as part of disclosures to international investors holding its bonds. It has received about $3.5bn of equity contributions from the Abu Dhabi Government in its history, the company said, but had in recent years relied increasingly on raising money on global markets to fund acquisitions and investments.
Last June, it said, the Government lent it $500m to fulfil its obligations to the Qatar and Abu Dhabi Investment Company, a joint venture between the two governments. The Abu Dhabi Government is putting a further $500m into the joint fund.
For the future, Sheikh Mansour said Ipic had identified upstream energy production, utilities and services as areas for new investment, and would "continuously look to undertake critical national security infrastructure projects related to the domestic hydrocarbon industry on behalf of the Government".
Ipic is behind a number of energy projects in the UAE, including a pipeline that will bypass the Strait of Hormuz and deliver crude oil overland to Fujairah - a project worth $910.7m, according to Ipic's statements.
The company expects to commission the pipeline this year and is building a refinery to handle up to 200,000 barrels of oil a day.
Ipic's financial statements also show that it took over a 31.8 per cent stake in Virgin Galactic, Sir Richard Branson's commercial spaceflight venture, from Aabar.
It also took on a 45 per cent stake in the Dead Sea Resort, originally a joint venture between Aabar and a Jordanian company, and two thirds of Abag, another joint venture involving Aabar and Berndorf of Austria.