UEA investment in Pakistan continues: After $5 B in food, $300 m in Auto now $400 m for KESC

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UEA based Aabraaj investment in Pakistan continues: After $5 B in food, $300 m in Auto, ! B in oil, now $400 m for KESC

The relationship between the Mekran coast of Pakistan and the residents of the UAE goes back at least 5000 years ago to the times of the Indus Valley Civilization (old name of the Pakistani Civilization). In recent times, there has been a huge movement of funds from the UAE to Pakistan. This is a mutually beneficial relationship. The UAE flush with Petro-Dollars was rebuffed from the US, and was looking for areas to invest in. Pakistan offers a safe investment and creates a mutually dependent economy for countries that are in the Gulf neighborhood. The UAE has the money, and Pakistan offers sophisticated manufacturing and resources are competitive rates.

While Eemar International has transformed the face of Karachi, Lahore and Islamabad with its Dubaisque architecture and futuristic looking skyscrapers and California style Home subdivisions, Abraj is permanently transforming Pakistani agriculture, auto-manufacturing and the energy sectors. Abraaj Capital is a Dubai-based investment firm specializing in the Middle East, North Africa, and South Asia, which is commonly referred to as the (MENASA) region.

“Pakistan is one of the most attractive emerging markets for private equity investment, yet has largely been overlooked by all of the global private equity majors. The opportunities for private equity involvement in firm consolidation, expansion capital, and government privatizations are superb.  We possess a robust deal pipeline currently and expect to close a number of high quality transactions such as MS Forgings over the coming months” added Moazzam Malik, Managing Director at BMA.

The UEA based Abraj group is in Pakistan for the long haul. After a recent $300 million invenstment in Pakistani sttel forging company Abraj has not diversified its portfolio and moving ahead with a $400 million investment in the energy sector in Pakistan.

“The automobile component industry in Pakistan represents one of the most attractive growth sectors in the economy” said Arif Naqvi, CEO and Vice Chairman at Abraaj Capital. “We believe that MS Forgings through its leadership position and existing export base is especially well-positioned to become one of the top players globally in this high-growth segment” added Naqvi.

Abraj’s acquisition of the forging company was based on developing and further improving the automobile parts part of the company’s business. This new acquisition will make KESC a profitable venture

Abraaj will also acquire a minority stake in Bosicor Pakistan Limited (BPL), equivalent to the shares acquired through a mandatory tender offer to be made to the other shareholders in BPL.

The investment will fund the establishment of a petrochemical plant and a refining unit that will provide the Bosicor Group with an initial aggregate refining capacity of 145,000 bpd and create an integrated platform that operates across the full value chain in the oil sector. Further investments in related infrastructure are planned over the next few years with a view to creating Pakistan’s first global-scale refining, petrochemicals and energy conglomerate.

The group’s subsidiary, BPL, currently operates the fifth-largest oil refinery in Pakistan, with a rated capacity of 30,000 barrels per day (bpd) and a market share of 12 percent. Established in 1995, BPL is listed on all three stock exchanges in the country. BPL is active in the production, marketing and sale of petroleum products.

UAE-based group to take over KESC By Shamim-ur-RahmanKARACHI, June 20: The Dubai-based Abraaj group of companies (http://www.abraaj.com/english/List.aspx?mid=37) is likely to announce on Monday a new CEO who would take over management of the Karachi Electric Supply Company from the Aljomaih group following finalisation of a deal through which the Saudi company offloaded 50 per cent of its 73 per cent shares and management in the utility, sources said on Friday.

The Dubai based Abraaj which is a leading regional financial and capital investments group, besides being involved in real estate business, has been engaged in the ‘due diligence’ process in the KESC from its seaside office in the metropolis.

The Dubai-based company has pledged to dole out 400 million dollars to the government, which to some extent relieved pressure on its budget-makers.

But the big question is why the new bosses of the KESC have agreed to take charge at a time when the company has suffered huge losses, borne out by the financial statement of the company for 2007-08.

During the period transmission and distribution losses were 30.80 per cent. According to the report, the KESC was to pay Rs 26 billion to the different providers.

Although no names have yet been disclosed, insiders were tip Mr Arif Naqvi to take over as the new KESC CEO. Mr Naqvi , as chief executive of Abraaj Capital, had earlier made efforts to bring in investments to the tune of one billion dollars to Pakistan by 2010. It had set up a Pakistan-focused 300 million dollar fund.

Meanwhile, KESC’s Executive Director Tanzeem Naqvi, who is also being mentioned among the probables for the top slot, claimed that under his watch, the company had been able to make a profit of Rs 4 billion in billing charges. M/S Aljomaih group of Saudi Arabia, the main partner in the consortium, which had purchased 73 per cent of the shares (9.611 billion shares) @ Rs 1.65 per share for a total amount of Rs 15.86 billion.

Despite restrictions of no off-loading of shares before three years, Aljomaih secretly sold out 25 per cent of shares @ Rs. 4.50 to Mr Naser Al-Marri of Kuwait and appointed him as vice chairman.

Thus the Saudi investor siphoned back Rs 10.81 billion, whereas approximately Rs 22 billion were outstanding at the time of privatisation to be recovered by the new owners.

According to sources the new deal, details of which are not known, the Dubai-based investor had promised to make 400 million dollars investment in the problem -ridden utility. But the new investors have not pledged investment in generation and transmission sector of the utility, lack of which is the cause of the power outages.

It may be pointed out that before privatization the government had resorted to reduction of face value of share from Rs 10.0 to Rs. 3.50 thereby reducing the total paid up capital of 13.167 billion shares from Rs. 131.67 billion to Rs. 46.08 billion only and waiver of Rs. 92 billion debts.

After the disastrous experience with M/s Siemens as Operations and Management Contractors; new contract was placed on ABB for setting up 220 MW Power Station at KTPS. The funds (US $ 500 Million) had been arranged by M/S Aljomaih through a loan from IFC under sovereign guarantee of Government of Pakistan and by pledging KESC’s assets and property which also negates the claims that the Company had been privatized for the purpose of investment by the rich owners.

The KESC, after its 2 and half year of its privatization, has only shown decline in its performance, and practically driven the company to a direction where it was feared to be sliding rapidly in the black hole. The present management added to its difficulties by killing KESC financially. Presently there is not a single asset of KESC which has not been mortgaged. Even large Industrial customer’s accounts are mortgaged to the generating company to whom the payments of such customers are directly being debited.

It may be pointed out that Abraaj group does not have any experience of managing a power supply utility. This could lead to yet another nightmare which the people of this city endured when Siemens were the management contractors. Insiders said Abraaj buy out is supported by elements supportive of a leading Sindh-based political party.

Meanwhile the KESC suffered a shortage of 350 MW which had forced the utility to persist with outages which in many areas extended up 9 hours at a stretch. Defence Phase V extension was the e the worst hit where there was no electricity for more than nine hours. Residents alleged the KESC

Abraaj Capital inaugurates its US$ 300 Million Abraaj BMA Pakistan Buyout Fund L.P. by acquiring an 80% stake in MS Forgings Ltd.

• MS Forgings is Pakistan’s leading steel forging house, catering primarily to the booming automotive industry
• Abraaj Capital looking to further target strategic domestic and international automobile component acquisitions

Lahore, November 25, 2006: Abraaj Capital has acquired a controlling interest in MS Forgings, Pakistan’s largest steel forging house, specializing in steel components for the automotive industry domestically and abroad. The acquisition of the 80% stake in MS Forgings marks the first investment by the Abraaj BMA Pakistan Buyout Fund L.P. which was announced earlier in the year and had its first closing on June 2006.

Founded in 1974, MS Forgings has evolved into the leading supplier of steel forged components for the domestic automotive industry. The automotive industry has seen tremendous growth over the past five years with the market for locally assembled vehicles growing at over 30% per annum.  Analysts expect current growth levels to continue largely on the back of the macroeconomic growth in the Pakistan economy and the continued proliferation of automobile financing.   

By identifying the global outsourcing trend in the automotive parts industry early on, MS Forgings has focused on high quality production in-line with international standards and has developed a unique export capability.  Roughly 50% of revenues are from exports to major automotive markets such as the Europe and the US.

Going forward, MS Forgings is looking to further leverage this trend and is considering strategic acquisitions within Pakistan as well as in established markets such as Europe and the US as a means to widen its customer base and to capture additional market share internationally.      

“The automobile component industry in Pakistan represents one of the most attractive growth sectors in the economy” said Arif Naqvi, CEO and Vice Chairman at Abraaj Capital. “We believe that MS Forgings through its leadership position and existing export base is especially well-positioned to become one of the top players globally in this high-growth segment” added Naqvi.

“One of the key mandates of our Fund is to create globally competitive businesses through the numerous consolidation opportunities available in fragmented industries in Pakistan. MS Forgings is the ideal platform on which to help consolidate the automobile component industry” said Tom Speechley, Executive Director at Abraaj Capital.   

“We are extremely excited about this partnership with Abraaj” said Shahid Khan, CEO at MS Forgings.  “Their regional experience with businesses within Pakistan and the Middle East will add enormous value to the existing base at MS Forgings and help take us to the next level of growth”. 

“The Abraaj BMA Pakistan Fund is the largest private equity fund ever to target investments in the country,” added Farrukh Khan, CEO of BMA, one of the leading investment firms in the country and along with Abraaj Capital, a shareholder in the domestic investment manager to the Fund. “While there are clearly multiple opportunities for consolidation across Pakistan, the fund is focused on quality transactions like MS Forgings where we can build on strong, existing assets, and add value for both partner companies and shareholders.”

“Pakistan is one of the most attractive emerging markets for private equity investment, yet has largely been overlooked by all of the global private equity majors. The opportunities for private equity involvement in firm consolidation, expansion capital, and government privatizations are superb.  We possess a robust deal pipeline currently and expect to close a number of high quality transactions such as MS Forgings over the coming months” added Moazzam Malik, Managing Director at BMA.

Dubai-based private equity firm Abraaj Capital said it is looking at investing in agriculture in Pakistan, but declined to comment on a report in the UK’s Financial Times (FT) that it had bought farmland for the UAE. 

The FT reported on Monday that Abraaj, whose Chief Executive Arif Naqvi is a Pakistani national, is working with the UAE government on agribusiness investments in Pakistan to increase food security and damp domestic inflation.

The UAE government in Abu Dhabi has been holding talks with Islamabad about a framework for investment in its agricultural sector as it seeks to secure cheaper, long-term supplies of staples such as wheat and rice, the FT reported.

“No comment on that article, but it is a sector we are looking at,” Abraaj Managing Director Mustafa Abdelwadood told newswire Reuters on Monday.

In March, Abraaj said it bought into Pakistani energy firm Bosicor to tap growing demand for petroleum products in the world’s sixth most-populous nation.
(Reuters)

The UAE is planning to buy farms in Pakistan in a bid to reduce the impact of export bans and spiralling food prices, it was reported on Monday.

According to the Emirates Society of Consumer Protection, talks with the Pakistani government were underway as it considers alternative sources of food to the country, UAE daily The National reported on Tuesday.

“We believe that if we get products directly from the farms, it will encourage market competition,” an official said, adding that similar plans in other countries were also under study.

A Pakistani government official said the UAE was considering buying “large land holdings” and importing food items at 20-25% less cost.

“The talks [have been] going on between Pakistan government and UAE’s Ministry of Economy for some four months, however no concrete decision is made yet,” the official told The National.

The UAE’s 4.5 million population relies heavily on imported food, spending $3.5 to $4 billion annually on imports.

A string of retailers have agreed in recent weeks to fix the price of basic food items at 2007 levels as the Ministry of Economy attempts to rein in inflation.

Soaring food prices are a main driver of inflation across the world’s biggest oil-exporting region, where most states, including the UAE, peg their currencies to the ailing dollar, which raises import costs.

Foreign Investment: Abraaj Capital acquires 40% stake in Bosicor

KARACHI: A Dubai-based investment firm Abraaj Capital has acquired 40 percent stake in the holding company of Bosicor Group, positioned to become one of Pakistan’s leading integrated oil companies.

As per official announcement, the acquisition was made through $2 billion Infrastructure and Growth Capital Fund. The equity firm will obtain 40 percent shareholding in Bosicor’s two companies: Bosicor Oil Pakistan Limited and Bosicor Chemical Pakistan Limited.

Abraaj will also acquire a minority stake in Bosicor Pakistan Limited (BPL), equivalent to the shares acquired through a mandatory tender offer to be made to the other shareholders in BPL.

The investment will fund the establishment of a petrochemical plant and a refining unit that will provide the Bosicor Group with an initial aggregate refining capacity of 145,000 bpd and create an integrated platform that operates across the full value chain in the oil sector. Further investments in related infrastructure are planned over the next few years with a view to creating Pakistan’s first global-scale refining, petrochemicals and energy conglomerate.

The group’s subsidiary, BPL, currently operates the fifth-largest oil refinery in Pakistan, with a rated capacity of 30,000 barrels per day (bpd) and a market share of 12 percent. Established in 1995, BPL is listed on all three stock exchanges in the country. BPL is active in the production, marketing and sale of petroleum products.

With demand from transportation, power and manufacturing sectors are increasing due to thriving economic activity in Pakistan, including annual GDP growth of up to 8 percent, the country’s total demand for petroleum products is forecast to rise at a five-year compound annual growth rate of 5 percent until at least 2010. Pakistan currently imports over 50 percent of its high-speed diesel requirement and almost 100 percent of petrochemical products. staff report

UEA investment in Pakistan continues: After $5 B in food, $300 m in Auto now $400 m for KESC

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