Lower oil prices drag on Ipic earnings

International Petroleum Investment Company (Ipic), an Abu Dhabi government-owned energy holding company, yesterday said last year’s earnings fell by 29 per cent, mainly on lower oil prices.

Ipic, which owns or holds stakes in nearly two dozen domestic and international companies, said that revenues for last year fell by 3 per cent to Dh188 billion, with lower oil prices partially offset by revenue from new acquisitions.

Earnings were down to Dh5.6bn, compared to Dh7.9bn a year earlier, and would have been lower had it not been for foreign exchange gains.

Ipic’s managing director, the UAE’s oil minister Suhail Al Mazrouei, said via a statement accompanying the results: “Especially in a year of falling oil prices and difficult economic conditions, Ipic’s balanced portfolio helped navigate and surpass the market”.

The company valued total assets at Dh243.5bn, down from Dh251.2bn at the end of 2013.

Mr Al Mazrouei emphasised that Ipic paid down Dh13bn of debt last year as part of its balance sheet restructuring, making the total outstanding at the end of last year just under Dh110bn, versus total equity of just under Dh60bn.

The government is keen to keep a lid on debt associated with “government-related entities” (GRIs), including Ipic and Taqa (also known as Abu Dhabi National Energy Company).

As Moody’s Investors Service pointed out recently: “Abu Dhabi has very low central government debt of 2.7 per cent of 2013 GDP [but] contingent debt related to Abu Dhabi GRIs amounted to $77.3bn, or 29.8 per cent of GDP, which is among the highest indebted public sectors, globally, as a share of GDP”, adding that Taqa and Ipic represent more than two-thirds of the GRI debt.

Moody’s recently downgraded its “baseline credit assessment” for Taqa to Ba3, making it “high risk”, although it maintains an A3 official rating on Taqa’s debt because of the implied government backing.

The Moody’s analyst Rehan Akbar said yesterday: “We do not have a baseline credit assessment for Ipic but the Aa2 rating is aligned with that of the government of Abu Dhabi (Aa2 stable) given the intrinsic linkages between the two and we fully expect the government to stand behind Ipic’s financial obligations.”

Ipic, whose holdings include 100 per cent of Spain’s Cepsa, an integrated oil company, as well as a 24.9 per cent stake in Vienna-based OMV, has been shifting its strategy in a low oil price environment. It also owns all or part of companies operating a pipeline bringing crude from Abu Dhabi to neighbouring emirate Fujairah, building a refinery at the port there and a liquefied natural gas plant.

Khadem Al Qubaisi, former Ipic managing director, told The Wall Street Journal in March that the company would focus more on upstream investments, less on refining and marketing, and would be “restructuring and optimising” its holdings in Cepsa and OMV.


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Anthony McAuley

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