Photo of Asma Al Suwaidi and Kofi Aduku, Mubadala Investment Company.
Playing its part in funding Abu Dhabi’s strategic vision, Mubadala Investment Company structured and implemented an innovative supply chain finance that not only ensured project suppliers and contractors were protected but also generated so far some US$60m of value for itself.
Asma Al Suwaidi
Senior Associate – Financial Risk Management
Abu Dhabi, UAE
Mubadala is a pioneering global investor, deploying capital with integrity and ingenuity to accelerate economic growth for the long-term benefit of Abu Dhabi. As Abu Dhabi’s leading strategic investment company, Mubadala is active in 13 sectors and more than 30 countries around the world, creating lasting value for its shareholder, the Government of Abu Dhabi.
Supply chain financing as a value creation catalyst
Mubadala Investment Company approved an equity-funded investment to establish a new cutting-edge locally based platform that forms part of Abu Dhabi’s strategic vision. The nature of the investment and its deployment presented several challenges that the Treasury and Investor Relations team had to overcome.
Firstly, the funding allocated for the project required a significant cash investment upfront and over the next five years. Secondly, due to the nature of the suppliers and contractors involved, there were several additional complications such as foreign exchange and sector specific considerations.
Finally, the deal structure had to be supported by a number of parties including banks, the commercial team, internal and external auditors, legal, as well as IT and finance, adding to the overall complexity of the deal financing.
Working with its banking partner in UAE, the Treasury and Investor Relations team successfully structured and implemented an innovative supply chain finance (SCF) solution that delays the capex equity funding required for the underlying project while ensuring that the suppliers/contractors are only positively impacted by this delay.
This arrangement meant that the original capital allocated for the project could be invested to generate returns that more than compensated for the cost of the SCF. The delay in equity deployment also meant that at some point over the life of the project once it is operational and starts to generate revenues, it will become partially self-funded, thereby requiring less than the expected equity from the parent. Applying this solution has created significant value for Mubadala.
In addition, the complex foreign exchange dynamics of this project required an appropriate risk mitigation strategy which the team established from the outset.