Mubadala, GE form $8 billion company

ABU DHABI - Mubadala Development Company (Mubadala) and General Electric (GE) have agreed to set up a $8 billion joint venture commercial finance company to explore investment opportunities in infrastructure, real estate, leasing, and finance sectors in Mena region, a joint announcement said yesterday.

Khaldoon Khalifa Al Mubarak, CEO and Managing Director of Mubadala Development Company, said Mubadala plans to buy GE’s shares from the market to become a long-term shareholder in a company which offers huge value and great future prospects.

He didn’t comment on what percentage of shares Mubadala intends to purchase. However, he expects Mubadala to become one of GE’s top ten institutional investors. "The new business initially will focus on investment opportunities generated through GE Capital’s existing origination and servicing capacity with targeted assets in excess of $40 billion,” said Jeff Immelt, Chairman and CEO of GE, in a conference call with the media from New York.

Al Mubarak termed the transaction as the biggest for his company.

Immelt said that over a period of 12-18 months, the target of $40 billion assets would be raised in the wake of huge opportunities in the Middle East.

Commercial finance: Al Mubarak said that over the next 12 months, the two companies would establish a joint venture global commercial financial services company on a 50: 50 per cent basis to be headquartered in Abu Dhabi. GE and Mubadala will each allocate $4 billion in equity over a three-year period. The JV will provide Mubadala with access to GE’s best-in-class commercial finance capabilities.

Clean energy R&D: Both companies also agreed to establish a clean energy technology centre to be located in Masdar City - the new carbon neutral, zero-waste city in Abu Dhabi.

The centre will be an extension of GE’s global research network and will house up to 100 technologists developing new sustainable energy, water and other environmental technologies.

GE will now have five research centres around the globe. GE will also establish an ecomagination centre in the Masdar facility.

Investment funds: GE also intends to commit up to $50 million to Masdar’s second Clean-Tech Fund, focused on multi-geography investments in the clean technology sector and companies that simultaneously reduce dependency on traditional energy sources and the environmental burden of energy production.

In addition, Mubadala intends to invest up to $200 million in GE Industrial Investment Partners - a new partnership of select global investors that will focus on providing growth capital to companies in the healthcare, energy, and transportation industries.

Aviation and oil & gas: GE and Abu Dhabi Aircraft Technologies (ADAT), Mubadala’s aviation maintenance, repair and overhaul (MRO) company, will explore expansion of their MRO capabilities to support the large and growing number of GE aircraft engines in service in the region.

GE will widen the scope of its joint venture with ADAT, called Gulf Turbine Services, to include field service and repair capability for the oil & gas industry in the UAE.

Corporate learning: Also housed in the Masdar facility will be a new corporate learning programme. GE will manage the curriculum, courses and instructors, which will come from its world-renowned 'Crotonville' executive education programme.

To a question on which project would be started first, Immelt said that learning centre would be the first to be launched by the first quarter of 2009.

“Other projects to be followed included a Clear Energy research and development centre, within the Masdar city, and recently announced expansion of MRO facilities at Abu Dhabi Airport Technologies,” said Jeff Immelt.

Implementation of the framework agreement is subject to negotiation of definitive documents and receipt of required regulatory approvals.

GE has been growing significantly in the Middle East. GE’s 2007 revenues in the region were over $5 billion - an increase of 50 per cent over 2006.

haseeb@khaleejtimes.com