Mubadala Development, the Government's strategic investment arm, made Dh8.6 billion (US$2.3bn) in profits last year as revenues nearly doubled and the value of its investments surged, while its need for Government financing dwindled. Mubadala's energy and aviation subsidiaries contributed heavily to the profits, as did income from property developments and sales. A Dh3bn gain on stock in Advanced Micro Devices (AMD), the US microchip maker, and General Electric, the US conglomerate, also buoyed the results.
The profits followed Dh19.8bn of losses in 2008, when financial markets played havoc on Mubadala's investments. "In 2009, we focused on instilling financial and operational discipline across the company and we implemented a number of policies and procedures that match and enable our growth," said Khaldoon al Mubarak, Mubadala's chief executive. "This strategy, coupled with our entrepreneurial spirit, the commitment of our shareholder and a solid pipeline of projects, puts us in a strong position to leverage opportunities in 2010."
In addition to owning almost 20 per cent of AMD, Mubadala has significant stakes in Aldar, the Abu Dhabi-based developer, du, the local telecommunications company, General Electric and the Carlyle Group, a large private equity firm. It is also one of Abu Dhabi's largest developers, with more than 421 million square feet of land under its control and numerous projects under construction, including the Sowwah Island financial district and Zayed Sports City.
Mubadala is a central element of Abu Dhabi's long-term strategy of diversifying its economy by investing in non-hydrocarbon-based businesses, developing an extensive physical infrastructure and seeding the growth of industry. In addition to its property and financial holdings, Mubadala is a major investor in Emirates Aluminium, a venture that started producing metal in December, and has made numerous investments in the education and health care sectors.
Mubadala's Dh13.1bn in revenues for 2009 - nearly double the Dh6.6bn in revenues for the previous year - came from a more diverse base of businesses than in the past, a fact executives said was evidence that the company was coming of age. SR Technics, an aircraft servicing company that Mubadala increased its stake in to 70 per cent last year, contributed Dh4bn to that total, while revenue from construction of three university campuses - for UAE University, Zayed University and the Sorbonne University campus on Saadiyat Island - contributed Dh2.6bn. Dolphin Energy, a natural gas subsidiary that in 2008 accounted for the vast majority of Mubadala's revenues, added Dh2.8bn to the total in 2009.
Alongside its strong revenues, Mubadala's profits received a boost from a rise in AMD's share price. AMD, which has a wide-ranging partnership with Mubadala and the Advanced Technology Investment Company (ATIC), saw its stock price rise by 348 per cent last year. That left Mubadala with an investment worth about Dh5bn at the end of the year. As investment values and revenues rose, Mubadala was less reliant on financing from the Government last year than in previous years. The Government's contribution to Mubadala last year was Dh8.86bn, the company said, with Dh8.75bn in cash and the remainder in assets. That figure was below the Dh20bn Mubadala had estimated it would get from the Government.
Mubadala executives said additional Government financing was not needed because of a borrowing programme under which it raised $1.85bn through the sale of debt securities last year. The company, which had its credit ratings reduced earlier this month by Moody's Investors Service after a review of support assumptions for government-owned companies, expects to raise more money this year through the same channels. It can also tap a facility it recently set up to borrow dollars from banks outside the US.
The reduction of Mubadala's rating to "Aa3" - still one of the agency's highest marks - is not expected to significantly affect Mubadala's financing plans this year as it goes ahead with major property projects and investments. Taking into account Government contributions and funds from its borrowing programme, Mubadala said it had Dh11.8bn in "cash and cash equivalents" at the end of last year. As asset values rose and money flowed into its coffers, total assets appreciated to Dh88.5bn, a 75 per cent rise from the year before.
The release of Mubadala's second-ever annual financial statements came as part of the company's transparency initiative. The statements are also required for companies that want to borrow money from international investors, which Mubadala began to do last year. Mubadala had originally reported Dh11.76bn of losses for 2008, but the losses rose to Dh19.8bn under new accounting rules that factor changes in the value of investments into profits. Under the accounting rules in place when its 2008 statements were released, Mubadala would have reported Dh4.6bn in profits for last year.