Mubadala Development is preparing a major investment in semiconductors this year as part of a Dh60 billion (US$16.33bn) spending push.
Funding for Globalfoundries, the chip-making unit of the Advanced Technology Investment Company (Atic) - a previously independent government company that Mubadala took over in January - is poised to be among the top priorities as spending almost quadruples this year, according to a preliminary bond prospectus.
The Globalfoundries unit was formed in 2008 when Atic acquired the chip-making business of Advanced Micro Devices (AMD), the main competitor of Intel. Mubadala, a strategic investment company owned by the Abu Dhabi Government, also became one of AMD's largest shareholders as Abu Dhabi positioned itself as a new chip manufacturing hub.
"[Mubadala] intends to invest significant amounts in Globalfoundries with a view to building scale and achieving profitability," the prospectus says. "This investment will require significant funding in 2011 and future years, much of which is expected to be provided by [Mubadala]."
In terms of assets, the transfer of Atic to Mubadala was the largest transaction in Mubadala's history, the documents reveal. Adding Atic's assets of Dh38.86bn at the end of last year, its total assets increased by 38 per cent to more than Dh140bn.
Atic lost Dh1.9bn last year, the prospectus shows, but Mubadala plans to continue to invest with the aim of developing it into a profitable global force in the high-tech industry. Semiconductor manufacturing has emerged in the past two years as a major focus of Abu Dhabi's drive to diversify its economy away from hydrocarbons, an effort in which Mubadala is playing a central role.
Mubadala also plans to make significant investments between this year and 2015 in Mubadala GE Capital, an $8bn commercial finance joint venture with General Electric, and the Masdar project, a carbon-neutral city and renewable energy research centre near Abu Dhabi International Airport, according to the prospectus. Other areas of focus will be property developments, partnerships to build universities in the emirate and oil and gas projects.
"[Mubadala] currently anticipates that its capital and investment expenditure for 2011 is likely to be in the region of Dh60bn, substantially higher than the Dh16.4bn average for the past three years," the documents say.
Mubadala declined to comment. But Waleed al Muhairi, its chief operating officer, told The National last month that the company had ample resources to make new investments this year.
"We do look at these opportunities, but we also have to keep in mind our mandate, so to the extent that that meets our dual bottom line and will help us in meeting our socioeconomic returns, our diversification ambitions and so forth, we will make these investments," he said. "We do receive a lot of investment opportunities and we do review them all."
Mubadala recently announced profits for last year of about Dh1.1bn. If Atic's losses last year were factored in, the prospectus says the company would have instead posted a loss of about Dh782 million.
While Mubadala said it was moving towards making Globalfoundries profitable, it warned investors there was "no assurance" the business would turn around.
"In both 2009 and 2010, Globalfoundries was loss-making and no assurance is given that Globalfoundries will be profitable in 2011 or subsequent years," the prospectus says.
Globalfoundries comprises both AMD's former chip-making business and other acquisitions made by Atic, including a semiconductor manufacturing company based in Singapore. Globalfoundries is leasing space in the coin-shaped HQ building on the outskirts of Abu Dhabi, joining Atic as a tenant.
Mubadala's spending this year will come from up to Dh37.8bn in approved government grants, the prospectus says, plus borrowings from investors and other sources of funds.
The prospectus is a presentation to investors before what executives have said could be a benchmark bond sale this year. The information in it is not final.