x Abu Dhabi, UAEThursday 18 January 2018

Global equity recovery helps Ipic post 6.7% profit rise in first half

Net income rose to Dh3.2 billion from Dh3bn in the same period the previous year, the Abu Dhabi-owned overseas energy investment holding company said.

International Petroleum Investment Company (Ipic), the Abu Dhabi-owned overseas energy investment holding company, said its profit in the first half of this year increased 6.7 per cent mainly thanks to a recovery in global equity markets.

Net income rose to Dh3.2 billion from Dh3bn in the same period the previous year, Ipic said yesterday. Revenue decreased to Dh95.7bn from Dh96.7bn, as a result of which operating income fell to Dh5.2bn from Dh6.2bn.

“Ipic’s results once again demonstrate the strength of our portfolio, and our ability to create value to its shareholder, the Government of Abu Dhabi,” said Khadem Al Qubaisi, Ipic’s managing director.

“Ipic continues to seek investment opportunities while prudently managing its balance sheet, as demonstrated by the recent repayment of Dh7.34bn of debt in September 2013.”

The company’s assets stood at Dh233.1bn at the end of June compared with Dh239.3bn at the end of December last year, mostly because of an unwinding of derivative positions. Total borrowings declined by Dh8.7bn to Dh126.3bn and liabilities, reduced in part by the maturity of the derivatives, fell to Dh174.8bn from Dh182.1bn, it said.

Global markets have rallied this year amid signs of economic improvement and the continuation of monetary stimulus by the United States Federal Reserve. The MSCI World Index, a benchmark measure of developed world equities, rose 7.1 per cent in the first half of this year compared to a 4.5 per cent gain in the same period the previous year.

Ipic, created in 1984, owns a stake in 18 companies around the world, including refining companies in Japan and chemical makers in North America and Europe such as OMV Aktiengesellschaft of Austria and Cepsa of Spain.

The company has been relying more on issuing bonds to raise money over bank loans to finance activities as governments in the Arabian Gulf seek to create yield curves, diversify sources of funding and become more integrated with global financial markets.

“Ipic’s first half 2013 results remained steady and in line with our expectations,” said Amol Shitole, a Bangalore-based credit analyst at SJ Seymour Services.

“Ipic would face sizeable capital expenditure in the coming years related to construction of new refineries. These expenses should be funded by new bond or bank loan issuances. We expect the leverage level of the company to remain on the higher side in the medium term,” Mr Shitole added.

Cepsa said last month that it had struck a C$2.3bn (Dh8.08bn) deal to acquire Houston-based Coastal Energy, which owns oil and gas assets in Thailand and Malaysia.

Ipic’s Spanish oil unit said it entered into a definitive agreement to acquire 100 per cent of Coastal’s shares at C$19 each. As part of the acquisition, Cepsa will assume C$51 million worth of net debt.

Coastal’s acquisition is part of Cepsa’s strategy to expand its exploration and petrochemicals business in South East Asia, North Africa and South America.

Ipic, which has a credit rating of Aa3/AA/AA by Moody’s, S&P and Fitch respectively, is also building a US$4.5bn fuel-processing plant in Fujairah and spending $3bn on another similar plant in Oman.

Ipic said it had received a preliminary payment of $2bn from the Abu Dhabi Government for UAE’s Abu Dhabi to Fujairah oil pipeline and used the money to repay debt. The details of the sale to the state-owned oil company Adnoc, including total price, are still being negotiated.

Adnoc’s payments to Ipic would mark the final steps in bringing online one of the emirate’s most ambitious infrastructure projects.

The 380-kilometre Abu Dhabi Crude Oil Pipeline snaking through the desert and mountains from the heart of oil production at Habshan to a port in Fujairah will allow all of the emirate’s onshore production to bypass the Strait of Hormuz, a narrow waterway that Iran has in the past threatened to block.

An added benefit is a flood of investment that has come to Fujairah’s oil storage, refining and petrochemicals in expectation of the crude volumes.