Dubai venture owes Leighton Dh3bn

Habtoor Leighton Group owes A$807 million to Leighton Group, the Australian company which is a minority shareholder in the Dubai-based contractor.

Habtoor Leighton Group is involved in some important Dubai projects, including the Dubai Pearl, which is still under construction. Pawan Singh / The National

Habtoor Leighton Group (HLG) owes A$807 million (Dh3.06 billion) to Leighton Group, the Australian company which is a minority shareholder in the Dubai-based contractor.

A financial announcement by the Australian groupshowed a total exposure of A$1.1bn to HLG, including A$298m in carrying value of the 45 per cent stake Leighton holds in HLG, as well as its loans.

Formed in 2007, HLG's asset and contract values declined during the global financial crisis. The balance of shares is held equally by Khalaf Al Habtoor, the chairman of the Al Habtoor conglomerate, and Riad Sadik, the HLG chairman.

The Australian company wrote down the value of its investment in LHG by A$82m, comprising A$62m in operating losses and $20m of loan impairment.

Despite these charges, Leighton reported a return to profits of A$450m as loss-making projects in Australia were completed and handed over.

A spokesman for HLG in Dubai said that plans for an initial public offering were still on track.

"We said we are going to be IPO ready by 2016. We want to have all the attributes of a listed company so that if we want to go to market from then we are ready. We want to get to the point where we are successful and sustainable," he said.

A spokeswoman for Al Habtoor declined to comment because the company held only a minority interest in HLG.

Al Habtoor recently called off plans for an IPO on Dubai markets citing a lack of opportunity to successfully invest the proceeds. The group said it might reconsider those plans next year.

HLG would not have been included in the flotation because it is a minority interest investment. HLG's focus has moved away from Dubai, and the group still sees most potential in other parts of the Arabian Gulf.

"We see significant potential for infrastructure projects in Abu Dhabi, Qatar, Saudi Arabia and Iraq. Dubai is important, but the levels of opportunity are more significant elsewhere," the spokesman said.

HLG still has involvement in some important Dubai projects, however, including the Dubai Pearl development and the Habtoor Palace project.

The Dubai Pearl faces a delay of two years from its original completion date of this year, Zawya Dow Jones reported yesterday.

Hamish Tyrwhitt, Leighton's chief executive, said that the management of the group's exposure to HLG was a ''work in progress''.

"While the operating environment in the near-term continues to be a challenge, through our investment in HLG we have a platform in the Middle East which presents us with medium to long-term opportunities," he said.