The Arab Petroleum Investments Corporation (APICORP) is looking to push further downstream in its investment approach as it aims to grow 7-10% a year, CEO Ahmad Bin Hamad Al-Nuaimi told Platts on Wednesday.
Al-Nuaimi said that, over the next five years, "[the company's] vision is to become a major financial player and to have more presence in the energy sector in the Arab world."
He added that the Saudi Arabia- and Bahrain-based company is interested in participating in the Persian Gulf region's move into areas such as specialty chemicals.
"We want to get involved in projects that are valued added," he said, adding that it would continue to take an interest oil and gas projects as well.
APICORP is a financing company that funds energy, oil and gas and petrochemical projects. It was set up in 1975 by the then 10 member states of OPEC.
To help fulfill those ambitions, the company has benefited from two recent financings. On May 31, its owners agreed to increase its capital to $1.5 billion from $550 million, the fourth capital increase in its history, in effect giving it the green light for considerable expansion. Also, the company raised Saudi Arabia Riyals 2 billion ($533 million) through a debut bond issue in October last year after receiving an A1 credit rating from Moody's Investor Services in June 2010.
"We are very pleased with the performance of this bond issue," said Al-Nuaimi. "And we are studying the prospect of doing future ones, which could be through conventional or Islamic bond structures."
He said much would depend on market conditions before proceeding. The company can finance projects, through debt or equity or both.
It has financed a number of petrochemical complexes. It helped fund three petrochemical projects in Saudi Arabia and four in Egypt.
Al-Nuaimi said APICORP has ambitions to underwrite entire projects, in the $100 million to $200 million range, and then sell them down to other investors at profit, while retaining maybe 20% of the project.
"These would probably be storage tanks or pipeline projects," he said.
In effect, APICORP behaves very much like an investment bank. It can act as an adviser and arranger of project finance loans as well as carry out capital market and treasury functions.
"We have Chinese walls between the various functions and the decision in terms of loans and equity finance is decided by separate committees," said Al-Nuaimi.
The company may well be helping to fill a gap left in the Gulf project finance market after many of the big international banks withdrew following the financial crisis. Though some have made a comeback, Al-Nuaimi said local players are becoming increasingly active and finance is not as plentiful as it once was.
At one point in 2007, Al-Nuaimi said project financing spreads over the London InterBank Offered Rate--an internationally recognized benchmark interest rate--shrunk to just 20 basis points.
"Now for a good project it would be around 180 basis points over LIBOR," said Al-Nuaimi, illustrating the increased profitability for financing petrochemical projects in the Gulf.
