The state-owned Emirates General Petroleum Corporation (Emarat) has accumulated debt of almost Dh2 billion (US$544.51 million) and will need to raise additional capital as part of an overall restructuring programme, the company's chairman said yesterday.
Obaid Humaid al Tayer, Emarat's chairman and the Minister of State for Financial Affairs, appeared yesterday before the Federal National Council (FNC), the UAE's consultative body, to argue for an amendment that would allow the company to borrow money equal to 50 per cent of its equity.
Previously, the legislation that created Emarat allowed the company to borrow up to 25 per cent of its equity. The FNC passed the amendment, which now needs presidential approval.
Some FNC members argued that the Council should reject the amendment, and that the company should be liquidated.
"I hope the Council rejects this law completely," said Yousef al Neaimi, a member from Ras al Khaimah. "This is a bankrupt company, and it is mired in debt."
Emarat buys much of its petrol on the international market and sustains large losses when it sells to UAE consumers at lower, regulated prices. Retailers came under extreme pressure in 2008 as international petrol prices rose to record levels. They are coming under renewed pressures as the price of crude has again risen in recent months.
Mr al Tayer told the FNC that he could have circumvented the legislature by waiting until the Council's term ends next month before asking directly for support from the Government.
He argued the company's losses were temporary because of market conditions and unstable oil prices, and he expected it to turn profit in the future. Several members said a flagship national company should not be allowed to fail.
Mr al Tayer said Emarat was studying ways to reduce its costs and raise additional funding.