Credit Analysis Corporate Finance
Table of Contents: Mubadala Development
Rating Rationale 1
Ownership & Mandate
Management Strategy & Business Abu Dhabi, United Arab Emirates
Moody’s Related Research 6
Websites 6 Rating Rationale
Mubadala Development Company PJSC (Mubadala) was assigned long-term local
and foreign currency issuer ratings of Aa2 with a stable outlook in September
2008. Mubadala’s credit ratings are aligned with those of the Government of Abu
Dhabi (Aa2/stable) because Moody’s views it as a quasi-sovereign entity.
Analyst Contacts: Mubadala is fully owned and governed by the Government of Abu Dhabi.
Dubai International Financial
Centre 971.4.401.9536 The company was established in 2002 by an act of government (a decree of the
Emir) and is an important vehicle of public policy — its primary mandate being to
17 Tristan Cooper
Vice President/Senior Analyst
assist the diversification of Abu Dhabi’s economy through investment in domestic
industries. Mubadala’s primary source of funding has been regular capital
17 Philipp Lotter
injections from the Government, which are expected to continue. It has also been
Senior Vice President
granted a substantial amount of free land from the Government, which is gradually
London 44.20.7772.5454 being developed and valued. Although Mubadala does not have an explicit written
guarantee, the Government has verbally assured Moody’s that it stands fully
17 Pierre Cailleteau
Team Managing Director behind the company.
Group Managing Director
This Analysis provides an in-depth discussion
of credit rating(s) for Mubadala Development
Company PJSC and should be read in
conjunction with Moody’s most recent Credit
Opinion and rating information available on
Moody’s website. Click here to link.
2. Credit Analysis Moody’s Global Corporate Finance
Mubadala Development Company PJSC
Abu Dhabi sovereign-owned development company tasked with
building and diversifying the emirate’s domestic economy
Mubadala was established in 2002 by a decree of the Emir with the primary task of developing Abu Dhabi’s
economy from a largely hydrocarbon-based to a diversified economy. It is 100% owned by the Abu Dhabi
government (rated Aa2/stable), and the company can only be dissolved once it has completed its mandate to
develop the economy as per its Articles of Incorporation, at the end of a 50-year term, or by a decree of the
Despite having the legal status of a joint stock company, its function, control and strategic mission resemble
more those of an economic development agency, and accordingly Moody’s views Mubadala as a quasi-
Mubadala’s business lines span an array of different sectors and industries, all of which are central to the
Government’s economic development mandate. These include energy & petroleum, tourism, technology
(including aviation/aerospace and alternative energy sources), education & research & development,
healthcare, urban planning, transport & infrastructure and the environment.
With total assets in excess of USD 10 billion, Mubadala’s most prominent investments include: a 51% stake in
Dolphin Energy, which produces and transports natural gas via a pipeline from Qatar’s North Field to the
United Arab Emirates (UAE); a 50% stake in Emirates Aluminium Company (EMAL), which is currently
building the world’s largest aluminium smelter with an initial capacity of 700,000 tonnes per annum by 2010;
and Masdar (Abu Dhabi Future Energy Company), a large-scale development centred around renewable
energy that will include the world’s first carbon-neutral city. The company has also been granted substantial
plots of real estate in Abu Dhabi for future development.
In addition, Mubadala owns stakes in domestic companies such as Aldar Properties and DU, the UAE’s
second integrated telecommunications company, as well as a growing international investment portfolio that
includes stakes in Ferrari, AMD and Carlyle. In July 2008, Mubadala announced a substantial economic
framework agreement with General Electric (GE) of the US that will lead to large-scale co-operation between
the two companies. The agreement will complement Mubadala’s core development areas and attract
additional expertise and best practices to Abu Dhabi.
Ownership & Mandate
Abu Dhabi has established a number of government entities whose
ultimate tasks are the investment of the sovereign’s hydrocarbon
Mubadala is one of a group of government-owned entities whose primary task is to manage Abu Dhabi’s
substantial hydrocarbon wealth. Whilst some of these entities have overlapping mandates, others are more
Abu Dhabi Investment Authority (ADIA): ADIA is the first and foremost Abu Dhabi sovereign wealth
fund, investing the emirate’s substantial surplus revenues mainly into financial assets abroad, thus
providing capital diversification for the economy. Market estimates of assets under management range
from around USD250 billion to USD900 billion.
Abu Dhabi Investment Council (ADIC): Initially part of ADIA, ADIC is now a separate entity and, while
considerably smaller in size, fulfils a similar role to ADIA although it has a greater focus on investments
within the Middle East region than ADIA.
International Petroleum Investment Company (IPIC): This entity was established by ADIA and the
national oil company, ADNOC, in 1984 to invest in foreign oil and energy companies, focusing primarily on
downstream (refining & marketing) activities.
2 September 2008 Credit Analysis Moody’s Corporate Finance - Mubadala Development Company PJSC
3. Credit Analysis Moody’s Global Corporate Finance
Mubadala Development Company PJSC
Abu Dhabi National Energy Company (TAQA): TAQA owns the majority of Abu Dhabi’s domestic power
and water assets. In addition, it is building a multinational energy operating company via acquisitions
globally. Compared with the other government entities above, it acts as an operator rather than a pure
financial investor. Moody’s rates TAQA Aa2.
While the above entities are primarily involved with expanding internationally, diversifying Abu Dhabi’s
economy by acquiring assets outside of the country, Moody’s sees Mubadala’s core mandate to diversify Abu
Dhabi’s domestic economy into non-oil sectors, and thus it is largely focused domestically. It is also a more
active investor than the other entities, involving itself in the day-to-day management of many of the companies
in which it has invested, particularly the large domestic projects.
Mubadala’s core strategic rationale is to lead Abu Dhabi’s economic diversification and restructuring strategy
from a single-sector oil-based to a multi-sector globally integrated economy, and from a public sector-
dependent to a private sector-driven economy.
Whilst Mubadala owns stakes in some international companies (Ferrari, AMD, Carlyle), these are dwarfed by
its domestic activities, which include crucial long-term development projects such as EMAL (a project Moody’s
rates A3), Dolphin, Aldar (Abu Dhabi’s primary master plan real estate developer, rated A3 by Moody’s) and
Masdar City (the world’s first large-scale carbon-neutral city that is being built near the city of Abu Dhabi). Also,
most of Mubadala’s international investments (including the stake in GE it has committed to build as part of its
framework agreement) have a domestic economic angle, aimed at attracting businesses and best practices to
Unlike a sovereign wealth fund, Mubadala seeks government funding for its business plan and development
projects rather than simply being allocated funds to invest. It is therefore more of a development agency, albeit
run in accordance with commercial and competitive principles.
Moody’s views Mubadala as a quasi-sovereign entity
Given Mubadala’s development mandate, which often results in a longer-term view towards certain
investments, and it being fully embedded in and integrated with the Government’s economic policy, Moody’s
believes that any attempt to disaggregate Mubadala’s underlying corporate credit risk factors from its
sovereign risk factors (in line with Moody’s joint default analysis for government-related issuers) would be
artificial, as one is fully linked to the other. Accordingly, Moody’s views Mubadala as a quasi-sovereign issuer
whose ratings are directly aligned with the Aa2 sovereign credit ratings of the Abu Dhabi government.
Moody’s highlights the importance of long-term stability both in Mubadala’s ownership structure and in its
government mandate for its ratings, given the current early development nature of its business and financial
profiles, which rely substantially on government funding and oversight. Though not anticipated, any gradual
de-linkage of Mubadala from the Government would therefore result in a greater emphasis on stand-alone
credit features, which are currently considerably weaker than the Aa2 assigned rating, but would be expected
to change over the course of the years.
This is a different approach to that applied to TAQA, for example, whose baseline credit assessment of Ba1
can be distinctly separated from its Aa2 final rating, as an aggressive debt-financed acquisition strategy and
resulting high leverage impact its stand-alone credit quality. Whilst TAQA’s and Mubadala’s final ratings are
identical, the former benefits from the assumption that the Abu Dhabi government would step in and bail out
the company in the event of financial distress, whereas Mubadala’s ratings assume that it is effectively
indistinguishable from the Government itself.
Arguments that support this approach — in addition to Mubadala’s mandate — include the fact that the
company is fully owned and governed by the Government: Mubadala’s chairman is HH Sheikh Mohammed Bin
Zayed Al Nahyan, the Crown Prince of Abu Dhabi, and its Management Board including its CEO incorporate
members of Abu Dhabi’s Executive Council (the Emirate’s de facto cabinet of ministers).
Most importantly, Mubadala is directly financed by the Government, which has provided substantial equity
injections for all of the company’s major investment projects. Mubadala’s annual business plan is directly
3 September 2008 Credit Analysis Moody’s Corporate Finance - Mubadala Development Company PJSC
4. Credit Analysis Moody’s Global Corporate Finance
Mubadala Development Company PJSC
funded by the Government, and any substantial investments beyond the business plan have been
government-approved and financed, often also government-initiated.
Management Strategy & Business Description
Mubadala’s investment strategy is measured in financial terms
While Mubadala’s scope of activities is shaped by its development role and by the Government’s economic
objectives, it operates on sound commercial principles and does not regard itself as a social welfare agency.
All investments need to demonstrate an attractive financial return in addition to a material impact on the
Government’s economic diversification in order to be approved by its Board (essentially the Government).
Accordingly, investments are made to combine financial and social returns. This long-term horizon, that
commonly accompanies Mubadala’s investments, differentiates it from other, private investors.
Over the past years since inception, Mubadala’s primary investment focus has been on developing a core
foundation for its investment portfolio. Relative ownership stakes and mechanisms to execute these
investments are influenced by the degree of involvement from Mubadala they require. Passive investments
tend to be financial in nature, with small stakes in companies that offer strategic advantages to Abu Dhabi or a
broader agenda to promote Abu Dhabi as a business and tourism destination. Its 5% stake in Ferrari falls
within this category.
Conversely, Mubadala will take material and majority stakes in undertakings that require its execution
expertise, or that would benefit from strong government backing. Such investments include Dolphin, Masdar
All investments, as well as policies and guidelines, are approved by the Investment Committee. They are
executed on the basis of an annual budget, which is approved by the Board. The approved budget is
considered an authorisation to commit Mubadala’s funds, which have to date been primarily provided by the
Government. Any material investments outside the budget require additional approvals.
Figure 1: Mubadala Business Units, Core Holdings and Partnerships
Mubadala Development Co.
Real Estate &
Services Infrastructure Healthcare
Al Taif Technical Sowwah Square, John UAE University, Sorbonne Cleveland Clinic A.D.,
Services, Abu Dhabi Buck International, University, Zayed Imperial College London
Terminals, E-Ships, Poltrona Frau Emirates, University, Military Diabetes Cnt., A.D. Knee
Leaseplan Emirates, ADFC, Al Sowwah College, NYU, New & Sports Medicine Cnt.,
Agility Abu Dhabi, Abu Infrastructure, Capitala, Military Hospital, New Molecular Imaging Cnt.,
Dhabi Finance (Mortgage Mina Zayed Waterfront, Tawam Hospital Ntl. Ref. Laboratory,
Finance JV), Dunia Zayed Sports City Sports City Med. &
Finance Community Diagnostic Cnt., Airport
Energy & Aerospace &
Dolphin, EMAL, Tabreed, Abu Dhabi Aircraft Clean Technology Fund, Ferrari, Leaseplan Corp.,
ADSB, Block 53, SKH En Technologies, Horizon, MIST Development, Related Companies, The
Nouss, Tanqia, Barka, Al Piaggio, SR Technics, Masdar Research Carlyle Group, AMD,
Rusail Independent Power, Injazat, YahSat, Canartel, Network, Thin Film Aldar
Guinea Alumina Refinery DU, Nigeria Telecom Manufacturing, Masdar
Project, Pearl Energy (Etisalat Nigeria) City
4 September 2008 Credit Analysis Moody’s Corporate Finance - Mubadala Development Company PJSC
5. Credit Analysis Moody’s Global Corporate Finance
Mubadala Development Company PJSC
Future investments are likely to continue to focus on Mubadala’s core industries. Indeed, Mubadala is currently
ranked as the region’s largest indigenous energy company by upstream value, according to a recent Wood
Mackenzie report, due to its stake in Dolphin Energy, as well as exploration blocks in the Middle East and
Southeast Asia. In addition to large projects, Moody’s expects Mubadala to continue to acquire financial stakes
in international companies, such as its recent acquisition of stakes in AMD and The Carlyle Group. Most of
these investments are also likely to have a longer-term strategic motivation for Abu Dhabi, such as Mubadala’s
investment in Ferrari, which is also building a Ferrari-themed leisure park on Yas Island.
Mubadala is expected to grow substantially over the coming years, in
line with the growth of Abu Dhabi’s non-oil economy
Moody’s expects Mubadala to accelerate its growth over the coming years from its current asset base in
excess of USD10 billion, both from ongoing projects such as EMAL, Masdar and Abu Dhabi Aircraft
Technologies (which has just entered into a major agreement with EADS, the maker of Airbus, for a range of
services, maintenance and component production), and from new acquisitions and ventures, many of which
will stem from its new co-operation agreement with GE.
Mubadala and GE have entered into a two-part business arrangement, including business co-operation and
financial services. In particular:
Mubadala will become one of GE’s top 10 institutional shareholders by gradually acquiring shares on the
The holding may also include a USD200 million investment in GE Industrial Investment Partners.
GE will invest in a global R&D centre in Masdar City, focusing on clean-energy technology.
It will also build a corporate learning centre in Abu Dhabi modelled as a sister campus to the Crotonville
campus in the US.
GE will co-operate with Abu Dhabi Aircraft Technologies to explore expansion of maintenance, repair and
overhaul opportunities, including the further development of Gulf Turbine Services.
GE will also commit to a USD50 million investment in Masdar’s second Clean-Tech Fund.
Both parties will work to establish a 50/50-owned, Abu Dhabi-based commercial finance business.
Over time, this entity will transition to a stand-alone, non-recourse operation with total assets potentially
exceeding USD40 billion.
Over the coming three years, GE and Mubadala each expect to invest USD4 billion of equity into this
Moody’s regards Mubadala’s framework agreement with GE as a good example of its strategy of attracting
and committing best-in-class partners to Abu Dhabi and thus expanding its non-oil sectors.
Despite Mubadala’s substantial portfolio (see Figure 1), Moody’s understands that a significant proportion of its
current revenues are generated from only a handful of investments (most notably Dolphin), given the long-term
horizon of its undertakings. As a growing number of these projects come to fruition, Mubadala’s revenues will
more appropriately match the diversity of its portfolio.
5 September 2008 Credit Analysis Moody’s Corporate Finance - Mubadala Development Company PJSC
6. Credit Analysis Moody’s Global Corporate Finance
Mubadala Development Company PJSC
Any debt raised by Mubadala will be treated as quasi-sovereign debt
and Moody’s will fully consolidate this into its sovereign debt metrics
Since inception, Mubadala has received substantial equity injections from the Government, and indeed its
annual budget is fully supported and funded by the Government. Nonetheless, several of its large-scale
projects, including EMAL and Dolphin, have been financed by non-recourse project finance debt. Given
Mubadala’s significant operational involvement in such projects and their strategic importance to Abu Dhabi,
Moody’s takes the view that there is a high likelihood that Mubadala (in representation of the Government)
would provide financial support in the unlikely event of financial distress. Indeed Moody’s recent assignment of
A3 ratings to EMAL assumes that “the likelihood of the Government [via Mubadala] providing financial support
to [EMAL], if needed, is very high”.
Although Moody’s believes that Mubadala will continue to be partially funded directly by the Government, it
may consider accessing capital markets in addition to bilateral banking relationships in support of a more
optimal funding mix. Mubadala’s rating assignment is also a substantial step towards greater public
transparency and accountability. We will treat any such debt as quasi-sovereign liabilities that will be fully
considered in our assessment of the Government’s credit ratings. Nonetheless, we expect any debt issuance
at Mubadala to be in moderation and reflective of its evolving business profile, thus adding limited strain on its
nascent cash flows, whilst larger investments continue to show a significant level of direct government funding.
Mubadala produces audited IFRS financial statements, to which Moody’s has obtained confidential access.
Moody’s Related Research
Government of Abu Dhabi, August 2007 (104194)
Abu Dhabi National Energy Company (TAQA), March 2008 (108182)
Aldar Properties PJSC, April 2008 (108706)
Emirates Aluminium Company (EMAL) Pre-Sale Report, March 2008 (107839)
To access any of these reports, click on the entry above. Note that these references are current as of the date of publication
of this report and that more recent reports may be available. All research may not be available to all clients.
Mubadala Corporate website:
Government of Abu Dhabi website:
Moody’s Middle East Limited:
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6 September 2008 Credit Analysis Moody’s Corporate Finance - Mubadala Development Company PJSC