OPEC+ faces challenge from rivals’ rising output, says IEA

A fracking rig in the Permian Basin oil field in Texas. The IEA estimates non-OPEC supply growth will surge to 2.3 million barrels per day next year. (AFP)
Updated 15 November 2019

OPEC+ faces challenge from rivals’ rising output, says IEA

  • Sluggish refinery activity in the first three quarters has caused crude oil demand to fall for first time in a decade

LONDON: OPEC and its allies face stiffening competition in 2020, the International Energy Agency said on Friday, adding urgency to the oil producer group’s policy meeting next month.

“The OPEC+ countries face a major challenge in 2020 as demand for their crude is expected to fall sharply,” the Paris-based agency said in a monthly report.

The IEA estimated non-OPEC supply growth would surge to
2.3 million barrels per day (bpd) next year compared with 1.8 million bpd in 2019, citing production from the US, Brazil, Norway and Guyana.

“The hefty supply cushion that is likely to build up during the first half of next year will offer cold comfort to OPEC+ ministers gathering in Vienna at the start of next month,” it added.

While US supply rose by 145,000 bpd in October, the IEA said, a slowdown in activity that started earlier this year looks set to continue as companies prioritize capital discipline.

Demand for crude oil from OPEC in 2020 will be 28.9 million bpd, the IEA forecast, 1 million bpd below the exporter club’s current production.

The recovery by Saudi Arabia from attacks on the country’s oil infrastructure contributed 1.4 million bpd to the global oil supply increase in October of 1.5 million bpd.

Saudi state oil company Aramco, the world’s most profitable firm, starts a share sale on Nov. 17 in an initial public offering that may raise between $20 billion and
$40 billion.

It was the IEA’s last monthly report before the Dec. 5-6 talks among OPEC states and partners led by Russia on whether to maintain supply curbs aimed at buoying prices and balancing the market.

The agency kept its assessments for growth in global oil demand in 2019 and 2020 at 1 million bpd and 1.2 million bpd respectively, but said its outlook might slightly underestimate the impact of tariffs from the US-China trade war.

The IEA said that if some or all tariffs were lifted in coming months, “world economic growth and oil demand growth would both rise significantly,” though the rebound may not be immediate.

Sluggish refinery activity in the first three quarters has caused crude oil demand to fall in 2019 for the first time since 2009, the IEA said, but refining is set to rebound sharply in the fourth quarter and in 2020.


Bahrain’s Investcorp targets larger North American deals

Updated 06 May 2021

Bahrain’s Investcorp targets larger North American deals

  • Investcorp is the region's largest private equity and alternative asset manager
  • Investcorp plan to increase assets under management to $50 billion

RIYADH: Investcorp Holdings BSC is targeting larger private equity deals in North America as it seeks to boost assets under management to $50 billion, Bloomberg reported.

The biggest private equity and alternative asset manager in the Middle East sees buyouts in that region representing one of its best avenues to growth, David Tayeh, head of North America private equity, said in an interview.

The firm is also looking at more co-investments as a way of participating in bigger deals, he said.

“We want to grow our capacity to invest and broaden the top of the funnel of investments that we can look at from a size perspective,” said Tayeh. “At the moment there are deals that we really like that we don’t pursue because they’re outside our size range.”

Investcorp, which counts Abu Dhabi sovereign wealth fund Mubadala Development Co. as a major investor, outlined a plan to double its assets under management from about $25 billion in 2018 within seven years. It is targeting a combination of acquisitions and boosting its existing private equity, real estate and alternative investments units.

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Abu Dhabi National Hotels first quarter profit more than doubles

Updated 06 May 2021

Abu Dhabi National Hotels first quarter profit more than doubles

DUBAI: Abu Dhabi National Hotels Company reported a more than doubling of net profit year over year in the first quarter as its financing costs fell.
First-quarter net profit was 40.7 million dirhams ($11.1 million), up from 16 million dirhams in the year earlier period, ADNH said in a filing to the Abu Dhabi Securities Exchange.
Revenue fell to 224.7 million dirhams from 344.3 million dirhams, while costs dropped to 201.8 million dirhams from 294.1 million dirhams.
While financing costs fell to 9.5 million dirhams from 19 million dirhams, the big difference from a year ago was the 41.9 million dirhams settlement of a legal claim in Q1 2020 that was not repeated in 2021.
The legal claim related to construction of one of its hotels. The total settlement amount was 200 million dirhams against available accrual of 158 million dirhams, resulting in a loss of 42 million dirhams, ADNH said.
Profit from joint ventures, including ADNH Compass Middle East, was 44.3 million dirhams, up from 39.6 million dirhams a year earlier.
The company, which owns 12 hotels in the UAE, including two Radissons, a Sheraton, a Park Hyatt and a Ritz Carlton, ended the quarter with 89.5 million dirhams less cash or equivalents at 264.9 million dirhams.


Dubai’s SHUAA sells 20% stake in Mirfa International Power and Water Company to Japanese investor

Updated 06 May 2021

Dubai’s SHUAA sells 20% stake in Mirfa International Power and Water Company to Japanese investor

  • MIPCO operates a power and desalination plant in Abu Dhabi
  • SHUAA invested in MIPCO in 2015

RIYADH: SHUAA Capital has sold its 20 percent equity stake in Mirfa International Power and Water Company (MIPCO), to Japan’s Sojitz Corporation (Sojitz).
MIPCO was established in 2014 under the Department of Energy’s privatization program.
The company developed and operates a power generation and seawater desalination plant in the Al Dhafra region of Abu Dhabi, with a 1600MW net power capacity and a 52.5 MIGD net water capacity. SHUAA did not disclose the purchase price.
“In addition to acquiring shares in the project which has successfully achieved commercial operation, this transaction is also important for us from the perspective of establishing a business relationship with SHUAA which has a large presence in the financial sector in the Middle East,” said Masakazu Hashimoto, COO of Sojitz’s infrastructure and health care unit.
“Sojitz is aiming to continue and further expand its business in the Middle East,” he added.
Having originally invested in MIPCO in 2015 to support the development phase of the project, this divestment is in line with the group’s planned exit strategy, it said in a stock exchange filing.
MIPCO’s shareholders also include the Abu Dhabi National Energy Group (TAQA) and Engie, the French low carbon energy and services group, both of which will remain shareholders (with 60 percent and 20 percent stakes respectively).
Sojitz is a multinational trading and investment group, listed on the Tokyo Stock Exchange, with assets of about $21 billion across a number of sectors.
SHUAA has appointed Standard Chartered Bank as financial adviser on the transaction and Linklaters as legal adviser.


Air Seychelles sets final terms in Etihad debt row

Updated 06 May 2021

Air Seychelles sets final terms in Etihad debt row

  • Etihad sold its stake in Air Seychelles to the government for one dollar last month

NAIROBI: State-owned Air Seychelles will not pay more than $20 million to holders of bonds worth $72 million, a government official told Reuters, even though creditors have threatened to wind the African airline up if they are not paid in full.
The standoff is the latest twist in broader efforts by creditors to recover $1.2 billion owed by Abu Dhabi’s Etihad Airways and airlines it partly owned when the debt was issued in 2015 and 2016, such as Air Seychelles.
At the time, Etihad owned 40 percent of Air Seychelles and it was in a consortium along with the Gulf airline and other carriers that borrowed the money through special purpose vehicle EA Partners.
When the COVID-19 pandemic struck last year, Air Seychelles said it was struggling to honor its portion of the debt worth $71.5 million and it has been engaged in restructuring talks with a steering committee of creditors since July.
A senior government official from the Indian Ocean archipelago told Reuters it would not be able to offer bondholders more than $20 million to settle the debt.
“The $20 million which has been offered represents the upper limit with regards to the funding that Air Seychelles and/or the government of Seychelles can get approval for and successfully raise on the international market for settlement of the bond,” Patrick Payet, secretary of state for finance, said.
A committee of EA Partners creditors asked Air Seychelles last month to repay its debt, according to an EA Partners regulatory filing.
“Should Air Seychelles not comply ... the creditor will apply to the Supreme Court of Seychelles for an order that Air Seychelles be wound up,” the filing last month said.
The committee told Reuters this week it had rejected the $20 million offer but had not yet filed a winding-up petition to give the government a “grace period” to finalize a separate settlement with Etihad.
Etihad sold its stake in Air Seychelles to the government for one dollar last month and agreed to give it a 79 percent discount on the money it still owed the Gulf carrier, which is also about $72 million, Seychelles News Agency reported.
Creditors said it was unacceptable for Seychelles to offer financial investors a similar discount to the one it had received from Etihad, as the airline was a strategic shareholder.
Payet said that should creditors not accept the $20 million offer, the airline would have to consider other options, including insolvency and liquidation proceedings.
“It is the bondholders’ right to pursue legal options,” he said. “However, all our forecasts show in such an eventuality, the bondholders will recover significantly less than the $20 million currently on offer and it will take considerably longer to receive anything.”


Saudi property market shows signs of post-virus recovery

Updated 06 May 2021

Saudi property market shows signs of post-virus recovery

  • Resdiential mortgage growth supports sector
  • Retail stable despite upheaval across industry

RIYADH: Saudi Arabia’s real estate market has shown the first signs of a post-pandemic recovery, according to a report from broker Knight Frank.
It said that the outlook for the Kingdom’s real estate market was improving, supported by growth in residential mortgages.
Faisal Durrani, head of Middle East Research at Knight Frank, said: “Like other global economies, the pandemic has driven a widespread economic slowdown across the Kingdom. However, improved business confidence during the closing months of 2020, underpinned by economic reforms linked to Vision 2030 and the rapid response to COVID-19, has helped to drive a turnaround in performance in all main segments of the real estate market.”
In the grade A office market, rents experienced fragmented performance in the Kingdom’s three main centers, with rents in Riyadh increasing marginally by 0.5 percent to SR1,465 ($390.67) per square meter during the first quarter, while in Jeddah rents fell 2.8 percent to SR1,008 per square meter.
In Dammam, grade A office rents declined 4.3 percent to just over SR900 per square meter in the first three months of 2021.
The recent decision to exempt real estate transactions from a 15 percent value-added tax (VAT) charge has helped to boost activity in the residential market.
“The overall improvement in business confidence and market sentiment has led to a surge in residential mortgage loans, which rose by 38 percent in the 12 months to the end of February. That has, in turn, materialized in the form of a marked increase in residential transactions across the country, with Riyadh and Jeddah experiencing a 25 percent and 34 percent increase in deal numbers over the last 12 months,” Durrani said.
Despite the COVID-19 pandemic and retailers moving online, average vacancy rates in malls have remained stable. The market-wide vacancy rate in Riyadh increased by 1 percentage point in Q1 2021 to 16 percent.
Saudi Arabia has the world’s largest hotel construction pipeline, and the country’s supply is expected to increase by 61.1 percent over the next three years, the highest rate among the most 50 populated countries in the world, according to a report by hospitality data firm STR.
Durrani said: “The hospitality market has been somewhat of a bright spot. Despite continued weakness in Riyadh, Jeddah and the Dammam metropolitan area, these areas have experienced strong growth in both average daily room (ADR) rates, as well as revenue per available room.”
The resumption of the Umrah pilgrimage has underpinned performance in Jeddah’s hospitality market, where in the year to March 2021, ADRs grew by 18.7 percent, while occupancy decreased marginally by 2.2 percent.
Over this period, revenue per available room grew by 16.2 percent.