A gas distribution system is now operational at Yas Island.
A gas distribution system is now operational at Yas Island.

Business

Developers keep capital's gas network plan alight

Property companies are pressing ahead with the development of gas networks in outlying parts of Abu Dhabi.

Tamsin Carlisle

March 22, 2010

Property companies are pressing ahead with the development of gas networks in outlying parts of Abu Dhabi even though the Government has yet to give the green light to a comprehensive plan for the rest of the city. It is four years since the local gas distribution company Q Energy completed a critical preliminary stage of the project known as a "front-end engineering and design study".

Since then, as it has waited for a decision from the Government, one new Abu Dhabi community has acquired a gas supply. "Yas Island now has natural gas flowing," Jim Lloyd, the head of project management at Q Energy, told the City Gas MENA conference in Abu Dhabi yesterday. He was referring to the island north-west of Abu Dhabi that was recently developed with a marina and a cluster of luxury hotels and residential complexes around the Formula One track.

Gas distribution systems would also be built for Reem and Sadiyaat islands, which are under development as part of the expanding municipality of Abu Dhabi, Mr Lloyd said. "The developers of the islands have moved the gas plan forward because they want to use natural gas within their communities," he said on the sidelines of the conference. "The islands are the low-hanging fruit." Q Energy is a gas distribution partnership between the Abu Dhabi property developer and infrastructure company Al Qudra Holding and Lootah BC Gas, a gas utility joint venture between Dubai's Lootah Group and the Canadian pipeline company Terasen.

However, it was Aldar, not Al Qudra, that developed Yas Island. Three other Abu Dhabi property companies, Tamouh Investments, Sorouh and Al Reem Investments, will develop Reem Island. The Abu Dhabi Government-owned Tourism Development and Investment Company is the master developer for Sadiyaat Island. As well as developing the first island community in Abu Dhabi to use natural gas to supply energy for cooking and hot water, Aldar is also heading the first residential project on the Abu Dhabi mainland to include a gas distribution network.

The 28km Yas Island pipeline system would be extended to Aldar's Raha Beach development, said Gamal el Gebely, the group business development manager of the Abu Dhabi contractor Al Fanar Gas Services. tcarlisle@thenational.ae

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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