Investment in renewables consistent with UAE energy strategy: Mubadala CEO

Khaldoon Khalifa Al-Mubarak, group CEO and managing director of Abu Dhabi’s Mubadala Investment Company.
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Updated 13 February 2020

Investment in renewables consistent with UAE energy strategy: Mubadala CEO

  • Khaldoon Khalifa Al-Mubarak discussed company’s investment philosophy at Abu Dhabi forum
  • Investments significantly increased in medical tech and life sciences in addition to renewables

ABU DHABI: Mubadala’s early investment in renewables was a contradiction given the UAE’s major role in the global oil industry, but it was consistent with the country’s energy-sector strategy.

Khaldoon Khalifa Al-Mubarak, group CEO and managing director of Abu Dhabi’s Mubadala Investment Company, made this observation during Tuesday’s opening session of the Milken Institute’s 2020 Middle East and Africa Summit in Abu Dhabi.

Since its establishment, Mubadala had been envisioned as a model investment institution and the ideal example of a responsible investor, he said.

“Many thought (the investment in renewable energy) was a strange decision then, but it was a very consistent strategy of the UAE government,” he said.

Further proof of the UAE’s commitment to renewable energy and its development, according to Al-Mubarak, came when it ratified in 2009 an agreement to host the International Renewable Energy Agency (IRENA).

IRENA, whose membership includes 160 states and the EU, is an intergovernmental organization that facilitates cooperation and promotes the use of renewable energy.

“The UAE has over 80 percent of the solar capacity of the entire GCC, and we have invested in renewable energy in 25 countries,” Al-Mubarak said, adding that “we have done it profitably and responsibly.”




Khaldoon Khalifa Al-Mubarak, group CEO and managing director of Abu Dhabi’s Mubadala Investment Company. (Milken Institute)

And Al-Mubarak said the UAE’s first nuclear-power plant was ready for launch any time soon.

“We are ready in the (coming) weeks to fuel the first unit of Barakah, one of the UAE’s most complicated infrastructure projects and the fastest nuclear development,” he said.

The Barakah plant will add 5.6 gigawatts (GW) of capacity to the national grid, or about 25 percent of the UAE’s total requirements, when fully operational.

Building the Barakah plant was a long-term sustainability decision, taken at a time when countries were moving away from nuclear energy, Al-Mubarak said.

The UAE intends to spend about AED 600 billion (SR612.66 billion) by 2050 to meet its clean energy needs.

Aside from renewables, Mubadala has significantly increased its investments in medical technology and life sciences, Al-Mubarak said.

“It is clearly happening in Europe, in China. We are investing in a space that is possible, in solving global problems,” he said.

One of these investments, Mubarak said, is the new oncology center at Abu Dhabi’s Cleveland Clinic, which will be operational in 12 to 18 months and would address the rising cancer rates in the UAE.

“There are 5,000 cancer new cases every year, he said.
 


Oil-rich wealth funds seen shedding up to $225 billion in stocks

Updated 30 March 2020

Oil-rich wealth funds seen shedding up to $225 billion in stocks

  • Risking more losses is not an option for some funds from oil-producing nations

LONDON: Sovereign wealth funds from oil-producing countries mainly in the Middle East and Africa are on course to dump up to $225 billion in equities, a senior banker estimates, as plummeting oil prices and the coronavirus pandemic hit state finances.

The rapid spread of the virus has ravaged the global economy, sending markets into a tailspin and costing both oil and non-oil based sovereign wealth funds around $1 trillion in equity losses, according to JPMorgan strategist Nikolaos Panigirtzoglou.

His estimates are based on data from sovereign wealth funds and figures from the Sovereign Wealth Fund Institute, a research group.

Sticking with equity investments and risking more losses is not an option for some funds from oil-producing nations. Their governments are facing a financial double-whammy — falling revenues due to the spiraling oil price and rocketing spending as administrations rush out emergency budgets.

Around $100-$150 billion in stocks have likely been offloaded by oil-producer sovereign wealth funds, excluding Norway’s fund, in recent weeks, Panigirtzoglou said, and a further $50-$75 billion will likely be sold in the coming months.

“It makes sense for sovereign funds to frontload their selling, as you don’t want to be selling your assets at a later stage when it is more likely to have distressed valuations,” he said.

Most oil-based funds are required to keep substantial cash-buffers in place in case a collapse in oil prices triggers a request from the government for funding.

A source at an oil-based sovereign fund said it had been gradually raising its liquidity position since oil prices began drifting lower from their most recent peak above $70 a barrel in October 2018.

In addition to the cash reserves, additional liquidity was typically drawn firstly from short-term money market instruments like treasury bills and then from passively invested equity as a last resort, the source said.

It’s generally a similar trend for other funds.

“Our investor flows broadly show more resilience than market pricing would suggest,” said Elliot Hentov, head of policy research at State Street Global Advisers. “There has been a shift toward cash since the crisis started, but it’s not a panic move but rather gradual.”

The sovereign fund source said the fund had made adjustments to its actively managed equity investments due to the market rout, both to stem losses and position for the recovery, when it comes.

Exactly how much sovereign wealth funds invest and with whom remain undisclosed. Many don’t even report the value of the assets they manage.

On Thursday, the Norwegian sovereign wealth fund said it had lost $124 billion so far this year as equity markets sunk but its outgoing CEO Yngve Slyngstad said it would, at some point, start buying stocks to get its portfolio back to its target equity allocation of 70 percent from 65 percent currently.

Slyngstad also said that any fiscal spending by the government this year would be financed by selling bonds in its portfolio.