Dubai: The Dubai Mercantile Exchange, the Middle East’s first energy futures and commodities exchange, went live yesterday with the Oman crude oil futures contract. Trading began at 2am yesterday at DME, a joint venture between Tatweer, a member of Dubai Holding, the New York Mercantile Exchange (Nymex) and the Oman Investment Fund (OIF). Preparations for the launch were in the works for the past three years. « It has been a challenging journey from the day we decided to set up the exchange to its launch. Today we have the international energy exchange up and running with a transparent price discovery mechanism that offers an effective risk management tool for the global energy trading community, » said DME Chairman Ahmad Sharaf during a teleconference yesterday. ——————————————————————————– ——————————————————————————– The first daily settlement price of the Oman contract, the Middle East’s first and only physically settled energy futures contract, was $64.09. This will be the first price used by Oman’s Ministry of Oil and Gas in calculating its official selling price. From now on, Oman’s pricing formula will be the average of the Oman crude oil futures contract’s daily settlement prices over each calendar month. The average set in June will determine the price of Oman’s August cargoes. In addition to the Oman crude oil futures contract DME yesterday launched two financially settled futures contracts, the Brent-Oman Spread Contract and the WTI-Oman Spread Contract. Membership The exchange currently has 60 members with 20 market makers. « We are not recognised by 14 leading overseas jurisdictions, » Sharaf said. « We are in the process of getting regulatory approvals from other major global jurisdictions. » Dubai recently adopted forward pricing of its crude oil based on the daily settlement price of the DME’s Oman contract. Oman made a similar commitment late last year abandoning its retroactive price discovery mechanism in favour of the new Oman futures prices traded on the DME. The DME’s sour crude contracts come as a challenge to the market where several attempts in the past to create a liquid sour contract failed. Traders expect the Dubai contracts will create viable hedging opportunities and price transparency. « The DME’s customers know that the contract’s deliverability provides true price convergence between the cash and physical markets. This is especially advantageous in Asia, which imports more than two thirds of its crude oil from the Middle East and has long sought greater price transparency and better risk management tools, » said Gary King, DME’s chief executive officer, in a statement. « Oman’s endorsement of the DME gives it a rare credibility that no other sour crude contracts in the past had managed to achieve. However, participation from bigger players like Saudi Arabia will be major factor in making it a liquid international exchange, » said a Dubai-based trader.
Abu Dhabi The UAE’s response to global warming begins at home. Last month the Abu Dhabi Future Energy Company (Masdar) launched a $5 billion initiative to establish the world’s first totally green city in Abu Dhabi. The development extending over six square kil-ometres plans to achieve zero carbon dioxide emissions and zero waste and includes plans to invest $350 million in solar energy generation. The new city is scheduled for completion by late 2009, and comes as part of a series of projects adopted by the emirate recently to curb the greenhouse gas effect on the climate. Abu Dhabi also plans a 100-megawatt solar power plant. Solar power is a growing global trend among environment-conscious investors. ——————————————————————————– ——————————————————————————– The plant will be expandable to 500 mega-watts, with a target to generate enough power for 500,000 households. A pilot project is being planned in Dubai as well with the announcement by Tecom, a subsidiary of Dubai Holding, that it will supply all its developments with clean solar energy. « We have chosen to invest heavily in alternative energy, despite the fact that the UAE is among the top producers of oil worldwide, and given the country’s ambitious economic development plans, » Masdar’s chief executive officer, Sultan Al Jaber, told Gulf News. The initiative also makes sense economically, says one expert. « Though it might seem paradoxical that Abu Dhabi adopts such an initiative, yet in the short term this can save substantial amounts of energy, while in the longer term, alternative sources, especially solar power, will present an important aspect in the world’s energy mix, » said Eckart Woertz, the economist at the Gulf Research Centre. « Capturing carbon dioxide will not only help to curb global warming, but will also provide an alternative to oil field injections of natural gas, » he added. Abu Dhabi accounts for more than 90 per cent of the UAE’s oil resources, and the country’s reserves, exceeding 100 billion barrels, rank third largest in the world. According to a recent report by the Intergovernmental Panel on Climate Change, the greenhouse effect on climate change in the Middle East region will result in an increase in the region’s temperature of 1-2 degrees Celsius by 2030. Impact The impact on the region’s ecological system, water resources and health could be catastrophic. The majority of greenhouse gas emissions has usually been blamed on the developed world, headed by the US, Europe, and Japan. However, a report published last month on the Science and Development Network website argues that developing countries account for 40 per cent of the total emissions worldwide. Even more dramatically, the report stipulates that emissions from developing economies made up 73 per cent of the global growth in emissions during the period from 2000 to 2004, largely due to the moving energy-intensive activities from the developed to the developing world. China and India are by far the largest contributors to such emissions growth, according to the website report, but the effect of the massive econ-omic development and diversification plans in the Gulf Cooperation Council (GCC) countries cannot be ruled out. « What we are trying to do is to set an example not only in the region, but worldwide, for other nations to follow, as environmental issues do have a global effect, » Al Jaber said. According to United Nations statistics, the UAE ranks 43rd among polluters.
Tunis: Tunisia’s Energy Ministry awarded Qatar-state owned Qatar Petroleum Company a $2 billion refinery deal, ministry and company officials said yesterday. « We are happy today to sign the agreement with Tunisia to construct a refinery whose capacity is about 150,000 barrels per day », Abdullah Hamad Attiyah, Qatar’s vice prime minister and minister of Industry, said at the ceremony to sign the agreement in Tunis. The Qatari company, in partnership with British Petrofac, was selected by the Tunisian ministry to build, own, manage and run the refinery for at least 30 years. The planned plant will be located in the coastal town of Skhira. Capacity Tunisia only has a refinery in the northern city of Bizerte with a capacity of 30,000 barrels per day. It wants to expand its refining potential to satisfy an economy that has been growing by an average of 5 percent over the past decade. Source : El watan
Dubai: Dubai is planning to build one of the world’s largest power and desalination complexes, a multibillion dollar plant that would produce nearly as much power as New York City’s total generating capacity. The new plant would be capable of producing 9,000 megawatts of electricity and 600 million gallons a day of desalinated water, Dow Jones Newswires reported yesterday, citing people familiar with the project. Dubai’s planned mega-complex will sit next to Dubai World Central, intended to be the world’s largest airport, and the giant Jebel Ali port and free zone – where most of the emirate’s power generation capacity of about 5,000 megawatts is presently located. The completion date of the new plant has not been announced. State-run utility Dubai Electricity and Water Authority, or Dewa, invited international engineering companies to bid by June 10 for an initial contract to advise on the plant’s construction. Dewa awarded contracts in March worth $1.7 billion to South Korea’s Doosan Heavy Industries and Construction and Italy’s Fisia Italimpianti to build a new 1,330-megawatt power and 70-million gallon-a-day water desalination plant in Jebel Ali. Dow Jones reported that the new complex could cost between $12 billion and $15 billion to build. The need for power and water is pushing up demand for natural gas used to fire power plants. In June, the UAE will begin importing gas from Qatar through a pipeline. In April, Dubai and Iran signed a memorandum of understanding that could see Iran supply Dubai with electricity via a 180-kilometre underwater cable. ON THE RISE Energy and waterdemand going up Dubai is one of the world’s fastest-growing cities and among its most ravenous per-capita consumers of electricity and water. Energy and water demand in Dubai are rising at rates of 11 per cent to 18 per cent a year, according to industry estimates, while the emirate’s economy and population of 1.5 million continue to expand. Source : Gulkfnews
Dubai: Emirates Bank yesterday said the Dh292 million facility for Emirates Float Glass (EFG) has been successfully closed, and oversubscribed. Emirates Bank is the mandated lead arranger, and bookrunner for the transaction. Participating banks are Abu Dhabi Commercial Bank, Lloyds Bank and Commercial Bank of Dubai as lead arrangers and Union National Bank as co-arranger. The facility will partly fund the cost of Dh692 million for setting up EFG’s manufacturing facility in Abu Dhabi. « This project complements the long term vision and business mission of Dubai Investments, » Khalid Kalban, chairman of EFG said in a statement. The plant will have a capacity of 600 metric tonnes per day to manufacture clear, tinted and pyrolytic glass for architectural purposes; and clear and tinted glass for automotive purposes. EFG has a current paid up equity capital of Dh185 million being held 53 per cent by Dubai Investment Industries (a subsidiary of Dubai Investments), and 47 per cent by high networth, well-reputed individuals and corporates. Source: El watan
Staff Report Dubai: Al Yah Satellite Communications Company (Yahsat), a wholly-owned subsidiary of Mubadala Development Company, has selected a consortium of EADS Astrium, Thales and Alenia Space as the preferred bidder to build a Dh5 billion dual satellite communications system, the company said in an e-mailed statement. Yahsat was incorporated earlier this year and is mandated to fulfil the satellite communication requirements of government and commercial customers in the Middle East, Africa, Southern Europe and South East Asia. Yahsat will develop, procure, own and operate a hybrid (Government and commercial) communication satellite system, and will strategically fill the current gaps in the existing satellite market. ——————————————————————————– ——————————————————————————– YahSat will focus on providing solutions for internet trunking via satellite, corporate data networks and backhauling services to telecom operators, in addition to broadcasting services. « This is a tremendously exciting time to be in the satellite communications industry. We are seeing a boom in satellite demand and Yahsat is perfectly positioned to take advantage of the wealth of opportunities in our region, » said Waleed Al Mokarrab Al Muhairi, COO of Mubadala and Chairman of Yahsat. « Thanks to the long-term vision of the Abu Dhabi government, we see Yahsat as equipped to become a leading player in the regional satellite market, » he said. The global commercial satellite industry generated over $80 billion in revenue in 2005 alone, with the highest revenue growth being registered in the Middle East and Africa region. « The resources and the technology that we are putting behind Yahsat will enable us to take a leading position in this competitive sector, » added Waleed Al Mokarrab. Main focus Yahsat will now focus on completing the negotiations with the designated consortium with a view to finalising the contract as soon as possible to commence the manufacturing phase. Mubadala Development Company is an investment and development vehicle established and wholly owned by the Government of the Emirate of Abu Dhabi. Its mission is to invest in commercially viable, strat-egic, industrial and commercial partnerships.
Staff Report Dubai: Real estate firm Deyaar’s Dh3.178 billion initial public offering (IPO), the largest public issue so far, has been oversubscribed more than 14 times, an e-mailed statement said. The issue, which closed on May 16, attracted over 85,000 subscribers, collecting over Dh45 billion. Shuaa Capital is the lead manager, financial advisor and sole book-runner for Deyaar’s IPO. The preliminary subscription data, subject to final audited figures, indicates that the issue is more than 14 times oversubscribed, with noticeable strong retail and institutional demand. Ministry stake ——————————————————————————– ——————————————————————————– The Ministry of Finance and Industry has decided to subscribe to five per cent of the total number of shares on offer, the maximum percentage permitted under the law. The Ministry will be allocated the full percentage prior to the allocation of shares among the remaining subscribers. « The demand reflects the potential of the real estate sector and the investors’ immense confidence in the company’s ability to deliver exceptional value, » Zack Shahin, chief executive of Deyaar, said in a statement. Rody Yared, Head of Syndicate at Shuaa Capital, said, « The strong demand for the issue, from both retail and institutional investors seems to indicate a reversal in market sentiment. » Refunds and allocations to subscribers in the UAE will commence on May 30, and June 4 for investors who subscribed in the GCC. Profits rise manifold in three years Deyaar has grown phenomenally, with net profits rising from Dh5 million in 2003 to Dh73 million in 2004, Dh141 million in 2005 and Dh412 million in 2006. A wholly owned subsidiary of Dubai Islamic Bank, Deyaar is one of the region’s leading real estate players, with over 17 residential and commercial projects. The company also leads the property management segment.
By Ahmed A. Elewa, Staff Reporter Abu Dhabi: The UAE markets closed on a mixed note yesterday, with Dubai’s benchmark index falling by 0.34 per cent to 4,156.38 and Abu Dhabi’s general index advancing by 0.68 per cent to 3,347.27. In Dubai, the marginal decline was attributed to profit booking, while some analysts blame the fading investor’s interest in Emaar Properties due to the delay in revealing the details related to the company’s partnership with Dubai Holding. Alternatives « The low volumes indicate the lack of interest due to the lack of transparency, accordingly many investors switched to alternative blue chips, » commented Rami Sidani, senior associate partner in Shuaa Capital, who forecasts that Emaar will trade in a tight range of price movement up to the time when it announces the details of the deal. ——————————————————————————– ——————————————————————————– Dubai Islamic Bank continued its strong performance, though it was unchanged by the close at Dh9.03, yet with initial estimates of ten times over-subscription for its real estate arm, Deyaar, initial public offering of Dh3.17 billion, many analysts are expecting the rally to continue. « This outcome means that more than Dh30 billion was directed to the new issue indicating strong interest in IPOs on the one hand, and the abundance of liquidity on the other, » Sidani explained. The official outcome of the IPO is still to be announced. In Abu Dhabi, the market continued its uninterrupted gains, maintaining the strong rally on the real estate and energy shares, in addition to the excellent performance of the banking sector. Interest « Foreign interest is still fuelling the market rally, while etisalat’s intention to open up for foreign investment can further boost the flow of foreign funds to the market, » Sidani said. etisalat, which is expected to be relieved from 40 to 60 per cent of the royalty fees it pays to the government soon, did not change to close at Dh18.05, while many analysts observe the current price level below the fair value, and hence forecast further growth. « Many companies are still undervalued in Abu Dhabi, and the growing demand is a healthy indication that the market is heading towards strong gains, » Sidani said.
Financial Times Consolation prize or prize capture? Microsoft’s $6 billion acquisition of online advertising company Aquantive last week was a secondary target, but may prove to be a source of primary growth in the future. The software giant turned its attention to Aquantive after it lost out to Google in a bid for Aquantive’s rival, DoubleClick. Google will pay $3.1 billion in that deal, almost half as much as Microsoft is paying. This is the parsimonious Redmond company’s biggest ever buy – costing more than four times its previous record, the $1.45 billion paid for Danish software company Navision in 2002. ——————————————————————————– ——————————————————————————– But cash-rich Microsoft can easily afford the 85 per cent premium it has paid and the acquisition had become a strategic imperative – the online ad business is expected to be worth $40 billion in 2007 and is growing at 20 per cent a year, a rate that makes its core software business seem becalmed. « We have walked away from some transactions over the last few years because we have considered they haven’t been strategically important enough to pay a premium for, » said Chris Liddell, chief financial officer, on Friday. The Seattle company is key in that it provides a complete advertising solution for Microsoft’s ambitions to sell and profit from advertising beyond its own network of websites. It also enables it to stay in touch with market leader Google. « Google has significantly more advantages than Microsoft, » says Shahid Khan, a partner at Interactive Broadband Consulting. « If you go back, it started selling, using its own ad-serving technology, then it built a sales force and started selling on other people’s websites, and then expanded to print and radio. Now DoubleClick gives it even more technology, better integration with ad agencies and publishers and the best platform overall. » Microsoft has been way behind, admitting as much in making anti-trust complaints that Google combined with DoubleClick will have 80 per cent market share for serving online ads. It only recently developed its own ad-serving technology and, apart from a partnership with the Facebook social networking site, has confined its business to its own network of sites such as MSN and Windows Live. « We are new in the advertising business but we have made a lot of investment, » says Yusuf Mehdi, Microsoft’s chief advertising strategist. « We have the biggest audience for an ad network – half a billion users visiting our properties every month. To this point, we have really not run advertising for other companies except Facebook . . . now we will. » Mehdi says Aquantive has bigger revenues and profits than DoubleClick and offers the best ad tools. Prime target Tim Vanderhook, chief executive of the SpecificMedia online ad network, agrees Aquantive’s Atlas tool for advertisers is a superior product offering. « Microsoft has paid up to catch up. I was really surprised that DoubleClick was the initial prime target, it’s only an ad-serving technology, it doesn’t have a division that buys or sells online media [like Aquantive], » he says. In seeking a more complete solution through Aquantive, Microsoft is following Google in trying to build a broad platform that can serve as a one-stop shop for advertisers trying to reach specific audiences across a range of media. Shahid Khan cites Microsoft’s earlier acquisition of Massive, which serves in-game advertising, and Google’s moves to sell TV advertising. He believes mobile advertising networks will be the next acquisition targets as the big players spread their offerings to advertising on cellphones. Financial times
As he sat oozing with confidence, Bahrain’s Crown Prince Shaikh Salman Bin Hamad Al Khalifa had one clear message for the people sitting around the long table in Gulf Air’s meeting room: « Gulf Air will succeed under Bahrain’s sole ownership. It will not be easy, but it will be possible. » This statement and others by the Crown Prince, who was born 19 years after Gulf Air launched its first flight in the region, were meant as a first pragmatic move to bring the situation in Bahrain under steady control following a frenetic week of wild speculation, anxious concern and poignant appeals. Last month, Gulf Air’s newly-appointed president and chief executive officer Andre Dose told reporters that the Bahrain-based airliner, which was till then equally co-owned by Manama and Muscat, needed a serious restructuring to halt the nearly $1 million a day hemorrhage. « Since 2003, Gulf Air has constantly increased its losses, » said Dose as he painted a bleak picture of the situation. « Losses in 2006 were 130 million Bahraini dinars [$345 million] versus a budgeted profit of 26 million dinars. Accumulated losses and costs amounted to 254 million dinars [$675 million]. Currently operational losses are in excess of half a million dinars [$1 million] per day, » he said. It was the first time that someone spelled out so candidly the plight of Gulf Air, the aviation icon founded in 1950, and was for years equally owned by the governments of Bahrain, Oman, Qatar and Abu Dhabi. Qatar withdrew in 2002 and Abu Dhabi in 2005. Oman said this month that it ceased to be a shareholder, leaving Bahrain as the only owner. Adopting a new approach that sharply contrasted with previous ones, Dose explained why the company needed 310 million dinars ($825 million) and how it would work on securing the amount. Restructuring costs included network transition, the closure of some routes and the reduction of aircraft. Such fateful measures would help save or bring in 120 million dinars ($319 million). Investment costs, including fleet improvement, lounge investments and new facilities would amount to 190 million dinars ($505 million). Punctuality According to Dose closing the profitability gap of 156 million dinars ($414 million) can be achieved by reducing costs by 66 million dinars (fleet, personnel, fuel, commissions, other) and generating additional revenues of 90 million dinars through sales and network improvements. Another major source of problems at Gulf Air, according to Dose, is punctuality, which failed to match internal or industry standards. « Too many flights are cancelled, creating a negative domino effect on the rest of the fleet, and delay problems are often not communicated openly to passengers, » he said. « Customer service in case of problems, such as cancelled flights, is often inadequate. » Yet another serious problem plaguing the company, according to the new management, was that its organisation was too complex, with unclear, overlapping responsibilities and little cross-divisional teamwork. Overhead costs were high due to the complex and oversized organisational structure. But the new managerial team expressed confidence that it could successfully tackle the situation by focusing on four key performance indicators: safety, punctuality, profitability and customer service. « Progress will be monitored on a daily basis through the key performance indicators, and funds have already been put aside to reward progress. » The restructuring plan has been dubbed as the « Getting Well » programme. The first initiative is to implement a simpler and customer focused organisation, where all operations are concentrated in four division and responsibilities for each division and department are clearly defined. As for the fleet, it will be reduced from 34 to 28 as the Boeing 767s and Airbus A340s will be phased out and all planes will be Airbus. Meanwhile, realistic flight plan tables that reflect effective flight time will be implemented. The new plan will add connections to major destinations and, once Gulf Air is stable, will establish new connections to important economic centres. Gulf Air says that it has identified 11 major areas of restructuring, and that it had the ability to address them within two years. The restructuring programme seems to be running on a clear timetable. The new organisation to stabilise operations and improve productivity has already been implemented. May will be witnessing action to improve fleet management, punctuality, reduce the cost structure, downsize staff, improve customer service on the ground as well as the decommissioning of the 767s. Next month, the company will start the review and monitoring by independent safety experts, while the remodelled and customer-friendlier network will be operational in July. Improvements on ground (lounges) and in the air (cabins) and having an all-Airbus fleet will also start in July. Although Gulf Air was exceptionally open and honest in presenting the bitter reality, and despite the seemingly plausible plan announced by the management, several people in Bahrain remained edgy. The news that about 1,500 staff would be sacked as part of the restructuring plan triggered a wave of concerns that prompted trade unionists and Members of Parliament to start building up pressure to ensure that Bahraini families would not be affected. Workforce Claims of generous compensation packages failed to allay growing concerns, and the inability of the new management to provide exact figures of the total number of workers who would be sacked during the restructuring has not helped either. During his visit to Gulf Air headquarters in the vicinity of the airport, one week after Bahrain announced that it had become the sole owner of the iconic company, Shaikh Salman brought much-needed clarity to the information needed to paint a fuller picture of what lies ahead for the thousands of its staff. He first sought to calm down growing concerns that hundreds of Bahrainis would lose their jobs. « I don’t want any Bahraini to pay the price of wrong policies, » he said. However, he clearly resented self-complacency, reminding everyone that performance was the magic word. « I am sure that the officials will look into this matter and try to set up measures so everyone is clear on the requirements of working and being promoted in this company. I have requested this from the company’s board of directors. Regardless of the employees’ nationality, we should not discriminate between one nationality and another. But we can distinguish between a good and a bad performance. » About 60 nationalities are on the payroll of the company which employs about 6,000 people, with non-Bahrainis making up 70 per cent of the total force. Competition For Shaikh Salman, the company is regarded by GCC nationals as the most salient symbol of the Gulf unity, which has reached this deplorable stage mainly because of its faulty decision-making process and its inability to compete with other airliners. But the crown prince, who, almost single-handedly succeeded in bringing Formula One to the Middle East and building an award-winning race track in the middle of the desert, believes that there must be a new policy on the role of Gulf Air. « Now that Bahrain has complete ownership of the company, previous shortcomings in terms of decision-making, policies, or balancing four centres in a small environment, should no longer apply. We must realise one thing: Bahrain’s economy will not grow without an airline … The question we should be asking is what type of company it is going to be. Currently we are supporting Gulf Air based on its requirements so it does not affect the economy, [and ensure that] not many jobs are lost by Bahrainis and a smooth restructuring process is carried out, » he added. « We will try our best to ensure that the company’s philosophy is in line with Bahrain’s economy and this requires time, a year or two, until the picture is clear. » For Shaikh Salman, the historic ownership by Bahrain of the airline leaves no room for emotions. He resisted calls to change its name to Bahrain Air or Royal Bahrain as was suggested by some Bahrainis enthralled by Bahrain’s becoming the sole owner. « We will preserve the name and will not change it. It is a powerful icon of tradition and heritage and we are keen on preserving it, » he said. Now that Bahrain owned the airline outright, the infusion of confidence-boosting measures and the amelioration of lacklustre performance seem to be almost as significant as the injection of cash to meet the new economic costs. « What we must do is define our own niche. We are providing a service that no one else can because we are the national carrier for Bahrain, » Shaikh Salman said. « Am I worried? No! Am I stimulated by the challenge? Yes! » Losses Since 2003, Gulf Air constantly increased its losses. Losses of 2006: 130 million Bahraini dinars ($345 million), versus budgeted profit of 26 million dinars Accumulated losses and costs amount to 254 million dinars ($675 million) Currently operational losses are in excess of 0.5 million dinars ($1 million) per day To reach profitability again, restructuring and investments are needed Total costs of the « Getting Well » programme amount to 310 million dinars ($825 million) Passengers Gulf Air served 7.1 millionpassengers in 2006 (-4%) Seat Load Factor (SLT) in 2006 was 72.1% (+0.4%) The network includes loss making destinations Aircraft utilisation is low due to an inefficient network Current network causes longconnection times for passengers The History The company was established on March 24, 1950 and started operations on July 5, 1950 under the name of Gulf Aviation. It initially provided regional services between Bahrain, Doha and Dhahran and contract work for oil exploration companies. British Overseas Airways Corporation (BOAC) was a major initial shareholder until the governments of Abu Dhabi, Bahrain, Oman and Qatar purchased BOAC’s shares in 1973. Gulf Aviation became the national carrier of the four states and was renamed Gulf Air when the Foundation Treaty was concluded on January 1, 1974. The government of Qatar withdrew from the airline in December 2002. On September 13, 2005, Abu Dhabi also withdrew from Gulf Air. Oman withdrew in May 2007 leaving Bahrain as the sole owner of Gulf Air. Contribution to Bahrain’s national economy Direct impact: $246m annually Indirect impact: $153m annually Total: $400m annually Gulf Air employs: 5,917 people directly Helps to create 3,600 jobs indirectly Total: More than 8,000 additional jobs in local market Gulf Air accounts for 70% of Bahrain International Airport’s traffic Source: Gulf Air
