APICORP invests in Kuwait for attractive financial returns

Dr. Ahmed Ali Attiga, CEO of Arab Petroleum Investment Corp (APICORP) speaks to Pipeline Magazine’s Nadia Saleem about the company’s recent investment in Kuwait

APICORP, a multilateral development financial institution, announced in November, its first equity investment in Kuwait with the acquisition of a 24 per cent equity stake in Al Khorayef United Holding and GC-16 JV (AKUH), a Kuwait-based oil and gas services and facilities management company.

The investment will see APICORP partnering with Al Khorayef Petroleum Company and United Oil Projects Kuwait, which also own stakes in AKUH.

Why did APICORP decide to take an equity stake now instead of the usual project finance?

APICORP enjoys a unique position as the region’s only energy-focused multilateral development financial institution. Established in 1975 by the 10 oil-producing Arab countries, our mandate is to enable the sustainable development of the region’s energy industry through corporate banking and direct investment solutions that emphasise partner and industry growth, economic impact and value creation. 

Why did you pick Kuwait? What opportunities do you see in Al Khorayef United Holding?

Kuwait is a founding shareholder of APICORP.  It is one of the region’s key oil and gas producers, with ambitious plans to further increase its production capacity over the next two decades. This provides macro-level support for specialised oil field services businesses such as Al Khorayef United Holdings, which is a market leader in providing artificial lifting solutions through electric submersible pumps (ESP) and has strong credentials in oil and gas infrastructure assets.

This track record and high-growth potential, along with the added benefit that it enables us to partner with the Saudi-based Alkhorayef Group through their Al Khorayef Petroluem subsidiary, as well as with United Oil Projects in Kuwait, were the main factors behind taking the equity stake.

What are your plans for the company going forward? 

We look forward to further build on the success of the business and support the existing management team in a constructive and consultative manner to capture future growth opportunities. Specifically, our contribution will focus on ensuring that the business has an optimal capital structure, has ready access to growth capital, enhancing corporate governance, robust internal processes and empowering the management teams. We also envisage that it will also create attractive high value employment opportunities for Kuwaiti professionals.

What do you expect from this investment in terms of returns?

We believe that well-managed quality businesses with growth potential, operating in attractive markets with robust energy sector like Kuwait, should deliver attractive financial and development returns, as well as further business opportunities, in the longer term. But beyond the financial returns, we also strongly consider the potential future development impact of any investment and are excited by the potential and the new partnerships we have forged through it.

This investment is also an important milestone for APICORP as it is our first direct equity investment in Kuwait. We are hoping that our investment would also encourage other institutional investors to consider foreign direct investment to support the growth and development of the Kuwaiti economy.

Are you looking at other potential energy investments in the region?

Of course, we are always exploring energy investment opportunities across the MENA region’s entire energy value chain. Our approach is – and will remain – focused on forging partnerships with like-minded institutions to deliver positive impact, unlock value and contribute to the sustainable development of the region’s broader energy spectrum.

With growing concerns about slowing oil demand, what counter-measures are you taking when it comes to energy investments?

As an energy-focused multilateral development financial institution our strategy is underpinned by a robust investment and ESG framework guided by five building blocks, aligned with the evolving corporate strategies of the sector we operate in:

1. Optimise value creation out of hydrocarbons
2. Pursue production and utilisation efficiencies
3. Support investments in low-cost low-carbon assets
4. Support penetration of Renewables with associated technical and institutional needs 5. Encourage a circular economy and a more prominent role for the consumer.

The wide range of oil demand forecasts and the ensuing uncertainty are not helpful for energy investments. However, regardless of the trajectory, there is a clear missing link: targeted instruments with optimal risk/returns to accelerate transition in the various emitting sectors while considering the interests of the various stakeholders involved. Governments can guide the energy mix and ensuing investments through policy mechanisms and mandates, but only institutional investors can help absorb market, political or technology risks.