Iraq invites firms to second oil bid meeting

Published: 27 July 2009 12:33 GMT, Author:Perry Williams, MEED

Iraq's Oil Ministry will hold a roadshow for its second oil licensing round in Istanbul on 25 August in an attempt to reverse the disappointing results of the first bid round held in June.

The ministry's Petroleum Contracts & Licensing Directorate says it has invited 45 qualified oil companies to attend the meeting.

The directorate is offering licences covering 10 oil and gas fields which have yet to be developed.

The fields include the highly prized Majnoon field in Basra Province and West Qurna phase 2, which holds about six billion barrels of oil.

The remaining fields include Halfaya, East Baghdad, Gharraf, Qavara, Najmah, Badrah and Merjan/Kifl/West Kifl.

Iraq is also offering an Eastern Block comprising the Gilabat, Khashm al-Ahmr, Nau Doman and Qumar fields.

The government previously said it will sign contracts by the end of 2009 and that the fields are capable of producing up to 2.5 million barrels a day (b/d) of oil by 2013.

In June's licensing round, Iraq's Oil Ministry awarded just one licence to an energy major as companies baulked at Baghdad's tough terms and conditions.

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• US could speed up Iraq pull-out (news.bbc.co.uk)
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Lebanon : Attractive investments in the Middle East

Many options

Although an economic slowdown in the region is expected in the wake of the global financial crisis, the region is expected to recover relatively quickly. It should present many investment opportunities this year. Let us look at some of the most attractive sectors.

SLOWED DOWN, BUT NOT OUT

The consensus of most experts is that the region will witness slower growth as a result of the financial crisis. JP Morgan has forecast that the MENA region will experience growth of 3.3 percent in 2009, as compared to 6.4 percent in 2008. Edward Gardner of the IMF said: The fundamental challenge will be in the extent of the depth of the economic slowdown, which we hope will be less burdensome in comparison with industrialized countries as well as other emerging markets." The crisis has shaken the confidence of investors and it has made it necessary to postpone many huge construction projects. Despite the negative effects, it appears that the region has fared relatively better than others in weathering the storm. The region has been able to transcend the crisis in comparison with the rest of the emerging markets," JP Morgan said. The region is still full of many investment opportunities, despite the repercussions of the international economic crisis," Gardner said.

INSURANCE SECTOR IS VERY PROMISING

The insurance sector is one of the most promising sectors. There is a high demand for insurance services in the region, driven by population growth on the one hand and the increasing awareness of the importance of insurance on the other hand. The sector is expected to grow by an annual rate of 25 percent to 30 percent in the next five years. The average of insurance premiums in the region per individual is not more than $25 per year, and this amount is low as compared to the levels that are found in advanced countries, which is more than $200 on the average. Samir Haja, the person in charge of the department of insurance expertise at PricewaterhouseCoopers, said: The financial crisis has only affected the insurance sector in the region in a slight and passing manner." The insurance sector, in particular life insurance, is expected to continue its growth in the region this year. Saudi Arabia, Qatar, and Bahrain are considered to be promising markets. For example, the health insurance sector in Saudi Arabia grew by 33 percent between 2006 and 2007, while life insurance grew by 50 percent. All of the Gulf countries are liberalizing their markets and granting new licenses, and they are promulgating more laws for compulsory insurance on vehicles and compulsory health insurance for workers. Standard & Poor's has estimated the rate of growth of the insurance sector in the region at 40 percent per year.

ISLAMIC BANKS ARE SAFE

Islamic banks have proved to be more resilient than traditional banks with respect to weathering the financial crisis. Saleh Al-Suheibani, director of the department of research and investment consultancy at Al-Rajihi Bank, said: Islamic banks are safe from any negative repercussions such as bankruptcy and liquidationÉbecause of good management, the increase in the volume of their assets, compliance with the Shariah, and the avoidance of toxic products." The region constitutes a fertile ground for the growth of this kind of bank, since 40 percent of Islamic banks are based in the Arab world, which is an indication of the demand for them. The assets of these banks are close to $520 billion, and the volume of their assets is expected to increase to $2 trillion by 2012. Islamic banks are growing by a rate that varies between 15 percent and 20 percent per year. The demand for Islamic services is no longer restricted to Muslims only. One of the positive effects of the crisis is that it has shed light on Islamic banking, especially since Islamic financing is based on a system of sharing profit and risk and it is linked to real investment in developmental projects," Al-Suheibani said.

BUY STOCKS, BUT WITH CARE

There are various investment opportunities in Arab stock exchanges, as share prices of companies in different sectors have reached tempting levels. However, caution is necessary. Abdul-Aziz Al-Dakhil, chairman of the board of directors of the Dakhil Financial Group, said: The year 2009 is a year of investment opportunities on Arab stock exchanges." The investor must of course always take oil prices into consideration: The investor must be prudent and keep his eyes on oil prices, because they are the fundamental pillar of the region's economies," Al-Dakhil said.

PRIVATE EQUITY IS A GROWTH SECTOR

The private equity sector is expected to grow, as it is one of the emerging sectors in the region. The sector's contribution to GDP does not exceed 0.3 percent, as compared to 3.5 percent in the United States and 1.7 percent in the United Kingdom. Private equity companies can invest in various sectors. According to Yorg Crisle, an independent consultant who specializes in the direct investment sector, the industrial, real estate, retail, IT, and education sectors are good targets for investment. In light of the presence of more than 100 million Arab students, the demand for quality private education, both academic and vocational, is growing in different countries of the region, especially in light of the inability of the official sector to meet competitive scientific criteria," he said.

TOURISM SECTOR IS A GOOD CHOICE

The tourism sector holds many opportunities for investment. With respect to hotel investment, the region lacks a sufficient number of businessmen's hotels and three-star and four-star hotels that offer quality service at competitive prices. The hotel apartment business should grow in the coming period. Maroun Al-Hashem, director of analysis at R Holding, said: The increase in foreign demand in the UAE on the one hand, and the continuing influx of pilgrims to Saudi Arabia, on the other hand, are among the principal incentives for increasing investments in these types of apartments." It has been estimated that the value of touristic investments in the region will reach around $4 trillion by 2020, while around 70 million tourists are expected to visit the region. Saudi Arabia is considered to be a prime candidate for growth in tourism. Returns from the tourism sector in Saudi Arabia are expected to increase from $34 billion in 2006 to more than $66 billion in 2016. Saudi spending on the tourism sector is expected to reach $16 billion in 2016. Rami Al-Thaqafi, first investment manager in private banking at National Emirates Dubai Bank, says: Riyadh for example is thirsting for five-star hotels, as a result of the shortage of supply." The sector of internal tourism and bilateral Arab tourism is expected to experience a noticeable boom, since it constitutes only 42 percent of the volume of Arab tourism. Bilateral tourism is expected to increase in the coming period, especially for five consecutive years, since Ramadan comes in the middle of the summer season and most of the Arabs, in particular those from the Gulf, prefer to spend the holiday period in an Arab country instead of in Europe," al-Thaqafi said.

BIG DEMAND FOR HEALTH SERVICES

The gap between supply and demand in the region is expanding constantly with respect to hospitals and luxury health resorts. Demand for health care services in the region will increase by 240 percent until 2025, according to a report by McKinsey and Company. The UAE and Saudi Arabia are registering the highest rates of demand. It is estimated that the region will need 162,000 beds in the above-mentioned period, while the volume of spending on the health care sector is estimated at around $20 billion in Saudi Arabia alone by 2016. In Jordan for example, 350,000 people visit the country annually for treatment purposes.

REAL ESTATE STILL BECKONS

The real estate sector is slowing down, but investment opportunities are still likely to grow. Hussein Sijwani, CEO of Damak Holding Company, said: The region is still full of rewarding real estate investment opportunities, especially since the population in the markets is relatively young." Among the promising markets are the UAE, Saudi Arabia, and Qatar. According to Sijwani, despite the slowdown in the UAE, it remains a booming market and it has much to give to investors from the Middle East and from outside of the Middle East. The demand for prime locations in Dubai will remain high, and it is likely that its real estate sector will continue to provide excellent investment opportunities over the long term," he said. Hani BaUthman, CEO of Ayyan Arabian Holding Company, said: The real estate sector in the Kingdom does not bear any debt. In addition, it has big investment opportunities in the residential sector, especially since the Kingdom has one of the lowest rates of citizen ownership of residences in the Gulf, as it varies between only 20 percent and 30 percent." The Saudi residential sector is expected to witness much growth. Saudi Arabia is the most promising country with respect to growth of the real estate sector in the next five years because of the development of the housing sector there, ÒBa Uthman said. For his part, the Qatari economic expert Saleh Al-Nabet, said: Qatar is first with respect to real estate investment in the next five years. Qatar's superiority is attributable to the existence of favorable economic conditions and big opportunities for expansion in the real estate sector, in addition to the fact that most of the projects are big and related to gas and petroleum and other governmental sectors that have credibility, which makes the Qatari real estate sector able to serve these sectors."

INFRASTRUCTURE IS A SOLID INVESTMENT

The region is continuing to develop infrastructure projects. There is no fear for these projects, because they constitute long-term investments, and the government realize their importance as a boost for the local economies," Al-Nabet said. Even if the rates of government spending in the region decreased, this spending would affect spending on non-vital projects, and not those projects that are related to infrastructure projects," he said. The transportation sector needs investments of tens of billions of dollars in all of the countries of the region, in the absence of railroad networks in particular. Studies estimate that the air and land and maritime transport sectors need more investments. Among the attractive sectors are public transportation, maritime taxis, and air taxis for businessmen.

TELECOMMUNICATIONS SPUR DEVELOPMENT

Whereas the market for cellular services is witnessing saturation with rates of 188 percent in some markets, there is a big demand for broadband services on the part of both companies and individuals especially since rates of saturation are less than 40 percent. The recent downward trend in prices will increase demand in the future. Experts estimate the opportunities for growth in the cellular telephone sector at around ten percent per year. However opportunities for growth vary between 30 percent and 40 percent with respect to broadband services. The cooperation between cellular telephone companies and media companies is growing constantly. Big telecommunications companies are seeking to establish a successful reciprocal relationship with media content companies as a means of increasing their revenues. The size of the market is still modest, and it does not exceed some tens of millions of dollars. However, it is expected to grow rapidly so that its size will reach billions of dollars in a few years, especially after the recent expansions in providing broadband services to individual consumers. The telecommunications sector is considered to be a fundamental pillar for developing the economies in the region, and there is a pressing need to develop it in the coming period," Gardner said.

THINK ABOUT INVESTING IN THE ARAB REGION

The global financial crisis has made people think about investing in the region. Mirvat Talawi from the League of Arab States, who is general coordinator of the Arab economic summit that is expected to be held in Kuwait on January 20, 2009, said: The lesson of the crisis lies in the fact that it might make people think again about investing in the Arab world, and this is a strength for the region and a guarantee of its future for coming generations." According to her, governments in the region have a role to play in encouraging investments. She said: Countries must provide stable incentives and establish a court for settling disputes among businessmen on the one hand, and between businessmen and governments on the other hand, so that the owner of capital will be reassured that there exists an official agency that will examine his rights in the event that any unexpected dispute arises. It is also necessary to provide a suitable legislative environment as well as a good investment climate in order to attract this money."

Jody Jaffe, and Leila Rahbani.

Egypt attracts investments worth $3.9bn from the UAE

By Abdel Hai Mohamad on Wednesday, July 22, 2009

UAE investments in Egypt have risen to $3.9 billion (Dh14.3bn) at the end of April and they cover many sectors such as oil and gas, Abdel Rahman A Raouf, Minister Plenipotentiary for Economics and Commercial Affairs, has said.

"The number of UAE companies in Egypt went up to 440 and the UAE direct investments in the telecommunication sector account for 50 per cent of the total investments, while the investments in the finance sector form 20 per cent and the investments in transformational industries, tourism, real estate and construction sectors form the remaining 30 per cent," he said.

"Trade exchange between Egypt and the UAE increased threefold in 2007 and 2008, as it rose from $390 million in 2007 to $1.4bn in 2008. We noticed in 2008 and the beginning of 2009 there is a big increase in exports and imports between the two countries and this is a result of the development of political relations.

"Though the trade exchange between the two countries increased last year, this does not reflect the real potentials of the two countries in various economic fields. There are big opportunities to increase the volume of trade exchange."

On whether the UAE investments to Egypt will continue after international financial crisis, he said: "The UAE and Arab investments overseas were impacted due to the crisis. But this crisis proved that the investment in Arab countries, especially Egypt, is guaranteed and generates good profits.

"Egypt has drawn up a modern investment map according to geographical distribution and structure of projects. The map includes giant projects in industrial and agricultural fields.

"The Egyptian Government invited many UAE national investors to participate in the projects. We received a positive response and I expect the UAE Government and private investments in Egypt will rise over next few years.

"The Egyptian Government issued many legislations that encourage UAE investments, in particular, and foreign investments, in general. The past period witnessed the facilitation of procedures and quick completion of projects.

"Egypt is an attractive environment for the UAE and foreign investment and has huge consumer market, as its population tops 80 million people. There are other characteristics like low wages of labourers, availability of the majority of raw materials with low prices, presence of many ports on the Mediterranean and Red Sea and a rail network which is considered the world's second oldest rail network after Britain.

"Official statistics show foreign direct investments in Egypt rose from $354.6m in 2000 to $13.2bn in 2008. The FDI in oil sector totalled $4.1bn, while they arrived at $9.1bn in non-oil sectors."

Le projet SuperSmart Grid pourrait assurer l’approvisionnement énergétique de l’Europe

L’Union Européenne pourrait pérenniser son approvisionnement énergétique et limiter les effets du changement climatique à en croire une nouvelle étude.

L’étude montre également comment une « SuperSmart Grid » (un réseau de distribution de l’électricité « super intelligent ») pourrait faciliter la production décentralisée d’électricité et son transport à longue distance. À terme, cette grille de distribution d’électricité pourrait permettre le développement d’un système d’énergie renouvelable d’ici 2050. Cette étude s’inscrit dans le cadre de CIRCE, un projet financé à hauteur de 10 millions d’euros au titre du sixième programme-cadre (6e PCRD) de l’UE. Le projet CIRCE devrait s’achever en 2011 ; il a pour objectif le développement d’une évaluation des impacts du changement climatique dans la région méditerranéenne.

La production des énergies renouvelables n’est pas régulière, ce qui pose des problèmes dans le contexte d’un réseau de distribution d’électricité. Par ailleurs, le système de distribution actuel en Europe doit être remodelé car il ne peut pas répondre à la demande croissante d’énergie.

Les chercheurs travaillant dans le cadre de CIRCE proposent de développer un réseau de distribution étendu afin que l’électricité générée à partir de sources renouvelables soit transportée sur de longues distances. D’autre part, décentraliser la production d’électricité renouvelable au niveau d’installations distribuées et de petite envergure serait une option viable pour surmonter les problèmes actuels.

Ainsi, en associant ces deux options, on obtiendrait une grille super intelligente (SSG, de l’anglais SuperSmart Grid). La SSG pourrait transporter l’électricité sur une vaste zone et relier des installations plus petites de génération distribuée. D’après les partenaires de CIRCE, une SSG efficace pourrait également compenser toute fluctuation possible sur une vaste zone.

Pour que l’Europe réalise ses objectifs visant à réduire les émissions de gaz à effet de serre de 60 à 80% (par rapport aux niveaux pré-industriels et d’ici 2050), un système d’électricité renouvelable à 100% est nécessaire, déclarent les chercheurs. Ils font remarquer que ce système doit être conforme à la politique qui restreint la hausse de la température moyenne mondiale à moins de 2 degrés Celsius.

L’énergie renouvelable importée de pays non Européens pourrait contribuer à assurer la réalisation de l’objectif de l’Europe (garantir que 20% de toute l’énergie utilisée proviennent de sources d’énergie renouvelables dans les 12 années à venir). En gardant cet objectif à l’esprit, des installations telles que des centrales héliothermiques dans les déserts d’Afrique du Nord pourraient offrir toute l’énergie renouvelable dont l’Europe a besoin. D’après les experts, les conditions dans ces régions sont beaucoup plus propices à la production d’énergie solaire.

Les chercheurs ajoutent également que les technologies de courant continu à haute tension (HVDC, de l’anglais high-voltage direct-current) permettent de transporter l’électricité sur de longues distances et avec peu de pertes ; les lignes de courant alternatif (AC), quant à elles, nécessitent une isolation accrue et sont plus difficiles à gérer.

L’intégration du marché de l’énergie en Europe pourrait rendre ce système plus fiable et proposer aux consommateurs une électricité moins chère. Selon les chercheurs, l’électricité renouvelable importée d’Afrique du Nord renforcerait la sécurisation de l’approvisionnement en énergie en diversifiant l’ensemble des sources.

Ils ajoutent que le commerce de l’énergie sur le marché mondial garantit un approvisionnement plus stable d’énergie importée.

Parmi les autres avantages qu’assurerait une SSG, citons de grandes économies d’échelle et de faibles coûts de fonctionnement. Cependant, les investissements initiaux pour des installations d’énergie renouvelable seraient importants. Par exemple, la construction d’une centrale héliothermique en Afrique du Nord coûterait trois fois plus qu’une centrale à combustible fossile traditionnelle en Europe, déclarent les chercheurs.

Références :

Pincas Jawetz, "North Africa - Middle East - Europe Renewable Energy Cooperation - an Elixir for the Future". Sustainable Development Media Think Tank. "TREC… is the brainchild of the German Association for the Club of Rome and the Hamburg Climate Protection Foundation… TREC actually was a paper for an Arab Thought Forum held in Amman 2003, in anticipation of the June International Conference on Renewable Energies 2004 in Bonn."

Ashley Seager, "How mirrors can light up the world". The Guardian.

TREC. "Club of Rome: German Politicians claim "Clean Power from the Deserts". Solarserver forum.

Rolf Hug "Solar power from the desert rather than desert in Germany: renewable energy in a trans-European context". Solarserver forum.

Robin McKie "How Africa's desert sun can bring Europe power". The Observer.

"AQUA-CSP: Concentrating Solar Power for Seawater Desalination." DLR ITT, funded by BMU.
Gerhard Knies and Franz Trieb (2006). "Sun cheaper than Oil". franzalt.com Sun Page.

Sigmar Gabriel, BMU minister (19 April 2007). "Innovative Policy and financing instruments for a sustainable energy policy in the European neighbourhood policy" (html). eu2007.de, the website of Germany's January-June 2007 European Presidency.

Deserts Set to Bloom With Solar For Europe, "Desertec Forum".


Desertec (2008-07-16). "Economic and cultural aspects of Desertec Project".

Emaar Properties PJSC - SWOT Analysis

Overview

Emaar Properties PJSC SWOT Analysis

Emaar Properties PJSC is a leading Dubai-based real estate developer with a strong presence in the Middle Eastern region and expanding operations in other emerging markets, including North Africa, Asia and interests in multiple segments.

The company is well positioned to take advantage of the real estate boom, catering to European and American expatriates, though, the present crisis in the global financial markets may contribute to a decline in property prices in the Dubai market.

Strengths

• Government backing

• Business Model

• Foreign Expansion & Diversification

• Strong Regional Partnerships

Detailed

Government backing

The United Arab Emirates (UAE) Government holds a 32% stake in Emaar, and also extensive access to land required for developing properties, with less than stringent regulations than would otherwise be faced in developed economies. In addition, the UAE Government has showed the willingness and ability to support businesses in the face of economic crises, as is evident currently. The government has provided $ 6800 million to UAE banks to tide over the present liquidity crunch. Such help lines can be tapped upon as and when Emaar is in need of backing. This will help the company to stay adequately capitalized and finance operations and expand markets.

Business Model

Emaar has created a successful business model. The company has expertise in creating master-planned communities to international markets. The company has focused on creating a lifestyle living and not just offering a property. The innovative offering of self-contained communities that integrated schools, parks, landscaped grounds and retail centers into master-planned golf, equestrian and marina themed lifestyles has proved a winning combination. Each project has a mix of apartments, condominiums, and villas. It also offers land plots as an investment option to clients. The innovative concept is backed by timely deliveries of high quality properties. Emaar has delivered more than 22,000 properties till 2008 in the U.A.E. It also has the support of the Dubai government that has a 32% holding in the company. Most of the land bank totaling 22.26 million square meters in Dubai is a result of the strategic joint venture with Bawadi LLC. Emaar also has partnerships with established developers like Arabtec, Nasa Multiplex, Samsung, and Al Futtaim Carillion.

Emaar plans to replicate the same model outside the domestic market through the Vision 2010 document. To fulfill Vision 2010, the company has reorganized its corporate office. It has also attempted to leverage on global management expertise by creating an international talent pool and a data-bank of best practices. Some of the experienced managers from the U.S. have been moved to head other subsidiaries. Richard Rodriguez has become the CEO, Emaar Dubai and Bill Ratazzi CEO, Emaar MGF. The company has also introduced MBO, KPI system and Enterprise Risk Management in 2007. Emaar intends to spin off subsidiaries and associate companies to replicate the Dubai business model with emphasis on local tastes and culture.

Foreign Expansion & Diversification

Emaar International was launched in 2004 in a strategic move to diversify markets and reduce the risk of depending on a single market Dubai. Emaar International has entered into various markets through its subsidiaries to sustain future growth and create alternative revenues streams. Most of the subsidiaries have partnerships with the local government or private players to understand the market better. The company has a land bank of 22.26 million square meters in the U.A.E that increased by 76% to 162 million square feet through partnership with Bawadi LLC. The international land bank includes almost 500 million square meters across India, Saudi Arabia, Morocco, Pakistan, Syria, Turkey, Egypt, Jordan, Libya, Algeria, Tunisia, Canada, USA & Indonesia.

The company has entered into the developed foreign markets through acquisitions. In June 2006 Emaar acquired John Laing Homes, the second largest privately held homebuilder in the US. It helped the company become a significant real estate developer in residential homebuilding. It also acquired Hamptons International, the UK-based Real Estate agents.

The company has also focused on a diversification strategy. It has taken steps to diversify its business lines and develop new competencies in hospitality & leisure, malls, education, healthcare and financial services. Emaar entered into education sector through the acquisition of Raffles Campus, a Singapore based educational establishment. It has entered the hotels and resorts sector through Georgio Armani brand. The company has a agreement with Turner International for project coordination. Turner is responsible for completing the construction of sales centers and ‘Street of Dreams’ model homes for Morocco, Saudi Arabia, Egypt, India and Pakistan. The foreign expansion and diversification strategy has created synergies and helped the company gain execution capabilities and competencies in design through John Laing Homes, project management through Turner International and distribution/sales through Hamptons.

Strong Regional Partnerships

Emaar has a strong reputation and established partnerships with local governments and major local players in every country it has forayed in the real estate development segment. The main area of initial focus was the Middle East, North Africa and Indian subcontinent where the company has entered into partnerships with leading players in these markets. In 2008, Emaar Misr, Emaar’s Egyptian subsidiary signed a memorandum of understanding with Abu Dhabi Municipality to develop the 2.2 million sq m Sheikh Khalifa Bin Zayed Residential City in Cairo. Emaar also entered into a joint venture agreement with Prince Meshal Bin AbdulAziz Al Saud, chairman of Saudi Arabia’s Bayah Council, and owner of Al-Shoala Group of Establishment, to develop a 31 million sq m master-planned community, Rawabi Rumah, located near Riyadh.

Turner International (ME) has also commenced project coordination for the Emaar Group, completing the construction of sales centers and ‘"Street of Dreams’ model homes for Morocco, Saudi Arabia, Egypt, India and Pakistan. Emaar operates in India through Emaar MGF. Emaar MGF Land Private Limited is a joint venture company formed by Emaar Properties PJSC and MGF Developments Limited of India. Emaar expanded into Indonesia through Emaar Indonesia. In March 2008, Emaar signed a joint venture agreement with The Bali Tourism Development Corporation (BTDC) for developing tourist destinations. Emaar, along with a number of regional and Jordanian investors formed The Dead Sea Company to undertake projects in Jordan while in Pakistan Emaar Pakistan has a tie-up with the Haji Rafiq Defense Housing Authority. Emaar Properties has a joint venture with ONA Group to create large scale residential and golfing development projects throughout Morocco. Emaar Morocco has also signed a MoU with King Mohammed VI, King of Morocco, to undertake development projects.

Similarly, Emaar Properties and Invest Group Overseas (IGO), the offshore investment and property development company, has a joint venture in Syria, In Turkey, the Tuscan Valley project is a joint venture between Emaar Properties and Atasay, turkey’s largest gold jewellery exporter.

These partnerships could help the company have an integrated approach to customer service and property development. It also complements the Vision 2010 for Emaar that is a two-pronged strategy of geographical expansion and business segmentation. With the globally integrated company as a model, Emaar also created the Emaar Design Centre, based in Newport Beach, California to aid the company’s core competencies in conceptualization, master-planning, development, landscaping and interior design.

Weaknesses

• Overexposure to Dubai

• Operations and Funding Strategy

• Labor problems and Quality issues

Detailed

Overexposure to Dubai

Emaar has forayed into international markets, to reduce its dependence on Dubai. In terms of value, domestic sales have reduced to AED 13,926,334,000 in 2008 from 14,278,224,000 in 2007. But in terms of percentage, domestic revenues accounted for 79.91% of total revenues in 2007 and increased to 86.96% in 2008. As a result, despite entering into foreign markets, Emaar has not been able to reduce its exposure to the Dubai market. In March 2009, Standard & Poor's (S&P) downgraded Emaar's long-term corporate credit rating to BBB+ from A-. (BBB is a medium credit rating, and the lowest score a company can be given and still deemed to be ‘investment grade'.) The downgrade was done due to the weaknesses in the Dubai real estate market and uncertainty over the depth and duration of the downturn. The agency also pointed out that the rating was higher primarily because of the implicit support of the Dubai government.

Operations and Funding Strategy

The funding strategy of Emaar focuses on limiting the funding by the parent company to financing land acquisitions and initial infrastructure related construction. The parent company funding is restricted to 8 percent of the costs. Additional funds are raised at the project level through pre-sales, project based debt financing and IPO/Strategic sales. Emaar could have difficulty to raise cash as a result of the downgrade. Besides, it will have to pay higher interest rates than previously on new debt. Besides, higher interest rates on debts due to downgrade could make it difficult for the company to manage current projects in turn leading to imbalance of operations. There has been a decline in operating margins, operating costs (% of sales) return on equity, return on capital employed and return on assets. The operating margin has declined from 30.42% in 2004 to 13.61% in 2008 with a compound annual growth rate of -18.21%. The return on equity has steadily declined from 20.99% in 2004 to 8.48% in 2008 with a compound annual growth rate of -20.27%. The return on assets has a CAGR of -20.81% for the period 2004-2008. In addition, the operating costs have increased from 69.57% in 2004 to 86.38% in 2008, a CAGR of 5.56%.

The company has a substantial land bank across the world. With the global downturn the value of most of the assets has come down substantially followed by slow down in construction. The company has begun to focus on completing existing projects and putting on hold the new projects. This could have an impact on returns.

Labor problems and Quality issues

Emaar’ flagship project ‘The Burj Dubai’ is a leading mixed use property constructed in the heart of Dubai. With more than $ four billion spent on the project, the company has attracted a lot of attention on the attendant works and has been plagued by labor issues. The structure has been built predominantly with the help of migrant labor. Many labor groups and non profit organizations have accused the company of paying low wages and harsh treatment, and this has resulted in laborers resorting to industrial action, and also damaging property and disrupting work. These tarnish the image of the company and extended industrial action has the potential to delay the completion of projects.

Residents of one residential project developed by Emaar have accused the company of using inferior parts and equipment breakdowns. Some of these have suggested to have been occurred repeatedly. Instances such as this could lead to question marks over the quality of the company’ projects and make potential customers rethink their purchases with Emaar.

Opportunities

• Consolidate Position in Domestic Market

• International Expansion and Diversification of Revenue

Detailed

Consolidate Position in Domestic Market

The company has enough scope to increase its presence in Dubai. The company has 16.8 million square meters of land available for planned construction activities ad an additional 6.5 million square meters of land bank in Dubai through the JV with Bawadi. Emaar has already completed the construction of key assets in Dubai, namely, The Dubai Mall and Dubai Marina Mall with a gross leasable area exceeding 3.9 million square feet. In 2007, Emaar Hospitality Group opened three hotels in Downtown Burj Dubai: Al Manzil, Qamardeen and The Palace, The Old Town. Emaar Hospitality Group will open an additional four hotels in Dubai: Burj Lake Hotel, Dubai Mall Hotel, Dubai Marina Hotel and the Armani Hotel in Burj Dubai. Emaar also began operations of the Emaar Raffles International School in Singapore followed by the Raffles International School in Dubai Umm Suqeim in September 2007. The establishment of the University of the Arts is another strategic step taken by Emaar as there is growing demand for local arts education of international standards in the MENA region and Indian Subcontinent.

International Expansion and Diversification of Revenue

Emaar’ mission is to become a one-stop, global solution provider for lifestyle. In keeping with this strategy, Emaar has made investments in to such areas as education, malls, hospitals, mortgage financing and hotels and resorts. To achieve this, the company has made outright acquisitions and partnered with existing companies to enter new markets to expand operations and product and services offerings. This expansion, by moving away from the construction sector, will seek to insulate the company from any sectoral crises. As part of the company’ growth plans, Emaar has expanded in to various emerging international markets that have high growth potential. The focus of these plans are countries whose expected Compounded Average Growth Rate of GDP per capita for the past three years to be 12%. These countries include India, Indonesia, Turkey, Morocco and others. With the emerging middle class, Emaar has a vast market for the company’ varied products and services.

In 2008, the domestic segment accounted for AED 13,926,334,000 (86.96%) and the international segment 2,088,799,000 (13.04%). The company has enough scope to expand outside the domestic market. According to IMF – World Economic Database (October 2007), the GDP/Capita for countries in which Emaar has a presence is CAGR of 12.0% while it is CAGR 7.4% for Western Europe and CAGR 3.8% for U.S. for the period 2005-2008. Emaar estimates that by 2010 60-70% of revenues would come from international operations and it could generate 15% of net profit from Hotels and Malls. The company also plans to expand into Education and Healthcare in the MENA and Indian subcontinent regions. As on 31 December 2008, the principal segments into which the company operates were property investment and development, property management services, education, healthcare, hospitality, retail and investment in providers of financial services. The systematic expansion and diversification of revenues is highlighted by the following.

• Education – Emaar will offer premium quality education and an integrated curriculum throughout the MENA region and India.

• Healthcare – Emaar plans to establish a number of premium-quality hospitals and healthcare centers throughout the Middle East region.

• Hotels – Emaar has signed an exclusive partnership with Giorgio Armani SPA to create an international portfolio of luxury, exquisitely-furnished hotels.

• Retail – Emaar is aggressively expanding into the emerging markets of the Middle East & North Africa and the Indian subcontinent.

• Financial Services – Emaar has a significant holding in Amlak, a major Islamic financing company in Dubai.

Threats

• Economic Protectionism

• Global Economic Downturn

Detailed

Economic Protectionism

Many countries have regulations regarding foreign investments in certain sectors, infrastructure, being one of them. Domestic lobbies in the United States have succeeded in derailing investments citing real or perceived national security concerns. One such example was the case involving Dubai Ports World in the United States. Such restrictions could altogether delay or deny Emaar the ability to successfully execute growth plans.

Global Economic Downturn

Dubai has been the focus of expatriates from the United States and Western Europe, and they have been the main driving factors behind the rise of Dubai. It is worth mentioning that expatriates comprise of 80% of the population. Widespread job losses and the freeze in the credit markets may not provide the capital required investing in the Dubai property market, and this may adversely impact the company’ sales.

Emaar recorded an inventory write down AED 0.919 billion (US$ 0.250 billion) relating to real estate inventory in J L Homes, US in the fourth quarter of 2008. The lower revenue of AED 3.495 billion (US$ 0.952 billion) and operating profit of AED 0.924 billion (US$ 0.252 billion) for the fourth-quarter (October to December) 2008 (prior to considering the impact of inventory write down) has resulted in lower overall results for the year 2008. Annual net operating profits of AED 5.578 billion (US$ 1.519 billion) that was 15 per cent lower than the net operating profits of AED 6.575 billion (US$ 1.790 billion) in 2007. This is primarily due to slowing down of the real estate market in the U.S. and Dubai resulting from the current state of the global financial climate. Further, higher pre-operating expenses in Hotels/Malls and higher marketing costs will off-set profitability generated by international revenue.

306 hôtels d'une valeur de $140 milliards en construction dans le Golfe Persique

Les pays du golfe Persique sont en train de construire 306 nouveaux hôtels pour une capacité d'acceuil de 108.600 chambres à plus de 140 milliards de dollars en investissement, selon une étude présentée lors de l'"Hôtel Show" de Dubaï, la manifestation dédiée au secteur de l' hôtellerie, qui a pris fin le 26 Mai dernier.


L'étude, menée par Proleads pose la question sur un éventuel excès de l'offre, une fois que les nouveaux hôtels seront opérationnels sur le marché, étant donné le ralentissement dans le secteur du tourisme en raison de crise économique mondiale. Le rapport note que les niveaux de l'emploi dans le secteur de l'hôtellerie sont restées relativement stables dans toute la région du Golfe depuis 2003, mais elle montre que le ralentissement économique a eu un impact négatif sur la région. Cependant, tout en reconnaissant que 2009 sera une année difficile, elle prévoit que les niveaux de l'emploi atteindront le flux de 2008 d'ici la fin de 2010, puis devront s'accélérer vers 2013.

Rademeyer a déclaré: «Compte tenu de l'augmentation projetée de la demande à partir de 2013, avec une moyenne d'achèvement de la période de 2 à 2 ans, 108.600 chambres devraient être prêtes d'ici à 2011. Toutefois, pour répondre à la demande croissante, la région devra construire plus d'hôtels en 2010 pour veiller à ce qu'ils soient prêts à temps et répondre à la demande. Par conséquent, l'étude indique que la construction dans le secteur de l'hébergement continuera sans relâche.

L'étude a également abordé la dynamique de la liquidité financière des hôtels. Le ralentissement économique a apporté beaucoup plus de liquidités pour la construction d'hôtels de l'intérieur. Cette année devrait voir les flux de trésorerie du secteur de l'hôtellerie baisser à moins de 20 milliards de dollars. Cependant, l'industrie prévoit de restaurer ces flux de trésorerie à la fin de 2010 voire une croissance de cette capacité d'ici 2011.

Rademeyer a conclu: «L'étude indique que malgré la conjoncture, la construction de nouveaux hôtels restera inchangée.

Gama Enerji Secures Nearly $1 Bln For Water Pipeline Proj-IHA

8 juillet 2009

ISTANBUL (Dow Jones)--

Turkish firm Gama Enerji AS said Wednesday it has secured around $1 billion to build a 325 kilometer water pipeline in Jordan, the Ihlas News Agency, or IHA, reports.

In a press statement the company said U.S. investment firm OPIC, the European Investment Bank and French investment firm Proparco will provide $445 million for the project, while Jordanian Water Ministry will provide $300 million.

It noted that it will provide $190 million from its own capital for the project.

Gama Enerji is a joint venture between Gama Holding and GE Energy Financial Services.

TURKISH GSM TURKCELL TO SUBMIT BID FOR LIBYAN SERVICES

ISTANBUL, July 14;

A Turkish GSM operator will submit bids for Libyan communication services, a company statement said on Monday.

Turkey's Turkcell GSM operator will join a licence tender for landline and mobile telecommunication services in Libya.

The company decided on July 10 to submit bids for the tenders. Turkcell defined Libya, with a population of almost seven million, as a stable macro-economic medium with US$15,000 of high income per capita, and a good opportunity for entering the North African market.

GSM-based mobile communication started in Turkey when Turkcell started its operations in February 1994. Turkcell signed a 25-year GSM license contract on April 27, 1998 with the Ministry of Transportation of Turkey. Since then, it has continuously increased the variety of its services based on mobile audio and data communication, its quality levels and as a result, number of subscribers.

As of December 31, 2008, Turkcell has made US$7.7 billion worth of investment in Turkey. Again as of December 31, 2008, with its 37 million subscribers, Turkcell is not only the leading operator in Turkey, but is also the third biggest GSM operator in Europe in terms of number of subscribers. Turkcell's shares have been traded on Istanbul Stock Exchange (IMKB) and New York Stock Exchange (NYSE) since July 11, 2000 and it is the first and only Turkish company ever to be listed on NYSE.

Mega-Desalination Plant in Middle East Also Electricty Generator

Mega-Desalination Plant in Middle East Also Electricty Generator

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