Abu Dhabi back to bond markets despite rebound in oil

Abu Dhabi back to bond markets despite rebound in oil
Abu Dhabi is returning to international bond markets. (Reuters)
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Updated 25 May 2021

Abu Dhabi back to bond markets despite rebound in oil

Abu Dhabi back to bond markets despite rebound in oil
  • Brent crude, trading at over $68 on Tuesday, has more than tripled since oil’s crash last year

DUBAI: Abu Dhabi plans to sell US dollar bonds on Tuesday in its first foray in the international debt markets this year, raising cash for state coffers despite a recent rebound in oil prices.
The oil-rich emirate gave initial guidance of 70-75 basis points over US Treasuries for seven-year US dollar-denominated bonds expected to price later in the day. It did not say how much it intended to raise.
The UAE was hit hard by the COVID-19 pandemic and last year’s crash in oil prices, but a rebound in global crude demand as economies re-open has reduced the urgency to borrow for budget purposes.
“I’m hearing that the issue size is around $2 billion only,” said Zeina Rizk, executive fixed income director at Arqaam Capital, adding some of the funds might end up boosting foreign currency reserves.
Citi, First Abu Dhabi Bank, HSBC, JPMorgan and Standard Chartered are joint lead managers and joint bookrunners for the deal, according to a document from one of the banks, seen by Reuters.
“This is more of an updating-the-curve kind of issuance. They didn’t have a seven-year paper and hence the curve was being interpolated,” another fund manager said.
Brent crude, trading at over $68 on Tuesday, has more than tripled since oil’s crash last year, when Brent fell below $20 a barrel.
Abu Dhabi is expected to post a budget deficit of around 43 billion dirhams ($11.7 billion) in 2021 against 37.2 billion dirhams last year, the preliminary prospectus for the new bond offering, reviewed by Reuters, showed.
The budget, however, is based on an oil price assumption of about $46 per barrel versus roughly $50 per barrel last year.
“This deficit is expected to be funded principally by borrowings,” the prospectus said.
Abu Dhabi has become a relatively frequent issuer of US dollar-denominated debt in recent years, and tapped the market three times last year for a total of $15 billion.
At the end of 2020, it had $40 billion in outstanding bonds and $3.9 billion in outstanding loans. Outstanding bonds and loans totaled $29.4 billion at the end of 2019, the prospectus showed.


Global interest in clean hydrogen surges as Mideast works to boost supply

Global interest in clean hydrogen surges as Mideast works to boost supply
Updated 3 min 30 sec ago

Global interest in clean hydrogen surges as Mideast works to boost supply

Global interest in clean hydrogen surges as Mideast works to boost supply
  • Hydrogen could account for 25 percent of global energy consumption by 2050

DUBAI: Interest in clean hydrogen is rising across the globe, as countries explore ways to decarbonize, a new World Energy Council report showed.

Hydrogen could account for between 6 percent and 25 percent of global energy consumption by 2050, according to the publication titled Hydrogen on the Horizon: ready, almost set, go?.

Different regions play a role in the current hydrogen energy transition, the report said, with countries in the Middle East and North Africa focusing on the supply side.

Saudi Arabia, in July, unveiled plans for a $5 billion green hydrogen facility – the world’s largest such project at the time. Other Middle East countries, including the UAE, Oman and Egypt have also announced major projects to exploit the expected demand.

An earlier report by Dii Desert Energy and Roland Berger said the Gulf region alone could create a $200 billion green hydrogen industry by 2050.

The region also benefits from its strategic geographic location being between the European and Asian markets, which the World Energy Council report described as demand-focused markets.

Different countries also have different ideas of how to utilize clean hydrogen, the report said.

Asia shows a greater focus on hydrogen as a liquid fuel in the form of ammonia, and as a fuel for shipping and road transport, while Europe wants to use hydrogen to decarbonize hard-to-abate sectors such as heavy industries and mass transportation.

“How countries want to produce and consume clean energy, and their immediate national priorities, will shape large-scale hydrogen development and end-user uptake,” Angela Wilkinson, Secretary General and CEO of the World Energy Council said.

It is important to identify user priorities to “better understand hydrogen’s real potential,” she said.

Jeroen van Hoof, global energy, utilities, and resources leader at PwC said this decade is crucial to develop hydrogen projects – including infrastructure to produce, import, distribute and use hydrogen at a large scale.

“If we do this successfully over the next few years, it can pave the way for hydrogen demand to grow exponentially beyond 2030,” he added.

But the report identified several challenges in this global endeavor, including concerns on the cost of low-carbon hydrogen, which is still more expensive than other energy sources.

The report said countries need to collaborate to create a global value chain and unlock the potential of hydrogen for the global economy.


Global markets regulators team up to keep watch on SPACs

Global markets regulators team up to keep watch on SPACs
Updated 27 July 2021

Global markets regulators team up to keep watch on SPACs

Global markets regulators team up to keep watch on SPACs
  • SPACS may raise regulatory concerns, said the International Organization of Securities Commissions

LONDON: Global securities markets regulators said on Tuesday they have begun monitoring special purpose acquisition companies, or SPACs, due to potential regulatory concerns.
SPACs are shell companies that list themselves on the stock market and use the proceeds to buy other companies.
It is a form of investment that soared last year on Wall Street, gathered steam in Europe this year and is now spreading into emerging markets.
“While SPACs may offer alternative sources of funding and provide opportunities for investors, they may also raise regulatory concerns,” the International Organization of Securities Commissions (IOSCO) said in a statement.
IOSCO, whose members include the US Securities & Exchange Commission (SEC), the Financial Conduct Authority in Britain and regulators in the European Union, Asia, Latin America and Africa, said its new SPAC network met for the first time on Monday to share information.
“I am pleased that so many members of IOSCO have joined the SPACs network to exchange experiences on non-traditional IPOs via SPACs and discuss emerging issues related to investor protection and fair, orderly and efficient markets,” said Jean-Paul Servais, chairman of Belgium’s markets watchdog and Vice-Chair of IOSCO’s board.
The markets watchdogs which are members of IOSCO have the power to take action to protect investors in their jurisdictions.


Saudi Arabia suspends desalination and power plant privatization amid strategy review

Saudi Arabia suspends desalination and power plant privatization amid strategy review
Updated 27 July 2021

Saudi Arabia suspends desalination and power plant privatization amid strategy review

Saudi Arabia suspends desalination and power plant privatization amid strategy review
  • New strategy for Saline Water Conversion Corporation to be announced soon

RIYADH: Saudi Arabia has suspended the privatization of Ras Al Khair Desalination and Power Plant as it reviews its strategy.
This decision was made to capitalize on knowledge and capacity built in the Kingdom as a result of many years of experience in the areas of water desalination, new technologies, R&D and supply chains, the Privatization Supervisory Committee for the Environment, Water and Agriculture said in a statement on Monday.
A new engagement strategy and plan for the Saline Water Conversion Corporation (SWCC) assets such as Ras Al Khair plant will be announced shortly.
“It is either that the outcome was not aligned with the government spending efficiency goals or it’s not a top priority for the time being, as there is price control on water services in the country that doesn’t allow room for enough profits to the private operators, that the government may need to offer significant subsidies to make the PPP project attractive to the private sector, ” Razeen Capital CEO Mohamed Alsuwayed told Arab News.
The Privatization Committee said it will continue to engage investors in future PPP and privatization transactions in the water sector, and new greenfield investment opportunities will be launched in due course.
Saline Water Conversion Corporation (SWCC) invited seven pre-qualified companies and strategic alliances to submit their bids (RFP) to participate in the Ras Al-Khair desalination and power plant’s privatization process, last January.
SWCC said in a statement that the winning consortium will own 60 percent of the project company, and will handle management, operation, and maintenance works. For now, SWCC will continue to manage it, according to the statement.


Kuwait loosens COVID restrictions for vaccinated, allows some direct flights

Kuwait loosens COVID restrictions for vaccinated, allows some direct flights
Updated 27 July 2021

Kuwait loosens COVID restrictions for vaccinated, allows some direct flights

Kuwait loosens COVID restrictions for vaccinated, allows some direct flights
  • 8 pm commercial curfew to end today
  • Unvaccinated only allowed to food markets, pharmacies, co-ops

KUWAIT CITY: The Kuwaiti cabinet cancelled its decision to close commercial activities at 8 pm, starting Tuesday, the state news agency KUNA reported on Monday.
All activities will be allowed except for large gatherings, such as conferences, weddings, and social events, starting from Sept. 1. Special activities for children will also be allowed.
Kuwait will allow only those who are vaccinated to take part in all activities, while the unvaccinated will be only allowed to pharmacies, consumer cooperative societies, and food and catering marketing outlets, starting from Aug. 1, the cabinet added.
Kuwait will also allow direct flights to Morocco and Maldives starting Aug. 1, the cabinet said in a statement.


Gulf rebound set as Saudi Arabia, UAE seen topping 4% growth in 2022 - Reuters poll

Gulf rebound set as Saudi Arabia, UAE seen topping 4% growth in 2022 - Reuters poll
Updated 27 July 2021

Gulf rebound set as Saudi Arabia, UAE seen topping 4% growth in 2022 - Reuters poll

Gulf rebound set as Saudi Arabia, UAE seen topping 4% growth in 2022 - Reuters poll
  • Saudi 2022 growth seen at 4.3 percent, 2023 at 3.3 percent
  • UAE expected to grow 4.2 percent next year and 3.4 percent in 2023

RIYADH: The six economies in the Gulf Cooperation Council (GCC) are set to rebound and grow 2 percent to nearly 3 percent this year while the region’s two largest economies, Saudi Arabia and the UAE, are forecast to grow over 4 percent next year, a quarterly Reuters survey showed.
That outlook follows steep declines last year following an oil price crash and the impact of the COVID-19 pandemic, while analysts expected Saudi Arabia, the UAE and Kuwait to benefit from an OPEC+ deal to boost oil production.
“Our core assumption was that a longer-term deal would be secured, and we raise our 2022 forecasts on the back of the baseline adjustments, which will enable the UAE, Kuwait and Saudi Arabia to raise oil output and their global market share from May 2022,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Medians in the July 5-26 poll pegged Saudi Arabia’s growth at 2.3 percent this year, down slightly from a forecast of 2.4 percent in a similar poll three months ago.
In 2022, the Middle East’s largest economy and world’s largest oil exporter’s gross domestic product was seen growing 4.3 percent, an upward revision of 100 basis points (bps). Growth for 2023 was revised up 30 bps to 3.3 percent.
The UAE was expected to grow 2.3 percent this year, unchanged, and 4.2 percent next year and 3.4 percent in 2023, revised up 60 bps and 10 bps respectively.
Expectations for Kuwait’s 2021 GDP growth were lifted 60 bps to 2.4 percent, while growth next year was boosted 110 bps to 4.6 percent. Growth was seen 10 bps higher in 2023 at 3.0 percent.
Qatar’s 2021 growth forecast was scaled back 30 bps to 2.5 percent. The expectation for growth next year was unchanged at 3.6 percent and down 40 bps to 2.7 percent for 2023.
Oman was revised up 20 bps to 2.1 percent expected growth this year, up 10 bps to 3.3 percent next year and down 20 bps in 2023 to 2.2 percent. Bahrain’s outlook was unchanged for this year and next at 2.9 percent, while 2023 growth was seen 30 bps lower at 2.4 percent.
At least half of the GCC’s state revenues come from hydrocarbons, and diversification away from that will “likely take many years to achieve,” with fiscal diversification likely to follow with additional lag, Moody’s said in a report last month.
“The announced plans to boost hydrocarbon production capacity and government commitments to zero or very low taxes make it unlikely that this reliance will diminish significantly in the coming years, even with some progress in economic diversification, which we expect.”