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Mubadala Development Company

Mubadala is an Arabic word which means exchange. Mubadala Development Company was established in October 2002 with its main objective being a public joint stock company. During this time, Sheikh Khalifa bin Zayed Al Nahyan issued a decree for official establishment of the company as government-owned disambiguation firm of the United Arab Emirates. This was considered as one of the major advances made by the Sheikh, whose major aim was to form an organization that was greatly recognized so that its growth could be boosted economically.

Thus, the company became a state owned entity by the Abu Dhabi government in United Arab Emirates (UAE) . The funds obtained from the Abu Dhabi government were utilized in putting up business links between Mubadala and potential industrial sectors which were important in initiating a business deal. In addition, the funds were used in form of a loan to back-up business that had been put in place within the region. . The relations between Mubadala and other industrial companies was a critical factor towards the formation of an established business network.

The criteria for selecting business partners highly relied on the chances that arose and this varied from international to national partners. This required identification

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and development of a business opportunity so that it could suit the demand of other arising partners. During the initial period of establishment, Mubadala could employ less than 50 employees. However, by the year 2008 the company had grown by 800% in terms of employee capacity. Since the Abu Dhabi government was a sole shareholder in the business, Mubadala obtained funding in form of equity capital.

With time, the company sought its financial assistance through equity and financing through appealing or debts. Much development in terms of economy and industry was taking place and there were plans underway for Abu Dhabi and Dubai. However, as this went on, Mubadala realized that a good proportion of natural gas was being utilized by consumers in the United Arab Emirates. Even though the UAE had a rich source of gas and oil, it required gas for export, maintenance of reservoir pressure and favor growth in industrial production. This lead to a conclusion that a reliable gas source for import was of need to the UAE nationals.

A natural gas pipeline transport plan of approximately 400km was laid up to convey natural gas from Qatar to Abu Dhabi power plants. Mubadala’s first project referred to as Dolphin energy was the operating company in charge of the natural gas project. The project was 51% owned by Mubadala with the remaining shares getting divided equally between Total and Enron, but were later bought by Occidental. Returns were anticipated to cover up for all the expenses incurred during the whole project, despite the fact that Dolphin was complex in terms technology and expensive.

There was much pressure from the nationals, about Mubadala having to transport natural gas to an energy rich nation; however this was overcame by the company’s executives . In 2007, Mubadala fulfilled one its business dreams by confirming that there was gas flowing into the UAE. This achievement gave honor and pride to Dolphin, grading it high in terms of business plans and strategies; and influenced more other persons outside UAE to get into partnership with Mubadala and Abu Dhabi.

Out of the 1000 jobs that Dolphin created, 900 were held in Qatar, 150 in Abu Dhabi; out of which UAE nationals took 100 positions in leadership. Dolphin earned a name for Mubadala in international investors, hence introducing it into the financial society outside the United Arab Emirates. As evidenced, in 2004, out of financing with the local, regional and international banks, Dolphin was able to raise $1. 36 billion within four years; that in part would support the dolphin project.

This was the first time Mubadala had sought for funding internationally: meaning that there had to be effectiveness in production out of the already existing projects, lessen risks by involving the financiers in its projects, and to involve other parties that were not necessarily in partnership with the company. The international banking community in turn supported Mubadala based on how committed it was towards meeting its returns. This added more credit to the company to business firms abroad, such that by 2007, it had established corporate relationship with over sixty regional and international investment banks .

Since Mubadala had established trust in its partners, the international banking community gave it the mandate to transact business on behalf of the government of Abu Dhabi. As a result Mubadala was able to transact $2billion with twenty one international banks. The Dolphin was then dealt away with, because Mubadala was investing in firms that were already successful. From 2004, “Mubadala was a development organization with a definitive and sustainable plan”, observes Mubadala’s executive director of the of the properties Development unit, Ossama Khoreibi .

One of Mubadala’s greatest challenges was insufficient human resources, for the projects were getting sensitive and technical for a small inexperienced staff to handle; the leaders had to see that the structure of the company went in hand with the strategy. Mubadala had greatly diversified by 2007 as a company, but with an extra ordinary range that was hard for the employees to be proficient in. Mubadala’s major objective is to ‘develop and manage an extensive and economically diverse portfolio of commercial initiatives’.

This is done in two ways: either independently or in partnership with organizations that are leading internationally. The strategy for Mubadala is to establish itself on well planned capital that lasts for a substantial amount of time and is able to regenerate reasonable amounts of finances. Its effects are felt locally and abroad, through the services that it offers in its various sectors. Mubadala’s projects are based on investment and development, managed by two groups each with a designated role. The groups include: the operations group, and the finance and corporate affairs group.

The operations group that is responsible for investigating business ideas, choosing investment opportunities, going through all that has been acquired, putting up and utilization of business plans; composes of approximately 200 professionals. It is made up of six units under the organization of the industrial sector namely: Energy and industry, acquisitions, aerospace and technology, infrastructure and services, healthcare, and real estate and hospitality. The Finance and corporate affairs group offers financial analysis and advice to the company, and gives necessary details pertaining to financial details.

With time the finance and corporate affairs group developed into a group that worked on its own, keeping records for the company and engaging in any other activity that enabled smooth running of the company. The group is presently constituted of: administration, human resources, planning and development, project and corporate finance, communication units, legal and management in information systems. The government represented by a board of directors composing of seven members, approves the projects put forward by the operations group and provides financial aid towards project implementation .

2. 0 EMAL – A Project of Mubadala Abu Dhabi has an abundance of energy resources, amongst them being aluminum. Mubadala decided to invest in the industry due to a number of reasons such as: there is need to boost industrialization in Abu Dhabi, aluminum smelting is a major energy yielding industry in the world therefore has the potential to provide the best investment opportunity, and finally, there had been only two streams of attempts to industrialize that had been witnessed since 1960s; implicating that there was a vast opportunity to explore in the metal smelting industry .

Based on utilization, aluminum has many functions: it rates second after iron on its extent of use worldwide. Aluminum industry would enhance the economy of the UAE by giving value in the investment over a long period of time hence creating more benefits. Aluminum is valued for resistance to corrosion; light weight, pure aluminum and its alloys are used in many industries amongst them being transport, aerospace and construction. Aluminum is recyclable without losing its desirable quality as may happen to other metals.

Even though advances in technology in plastics some areas have taken over the utilization of aluminum, its unique properties still stand out . Emirates Aluminum (EMAL) is coined from the names Mubadala and DUBAL, that came into partnership to construct a hi-tech aluminum smelter in the Emirate of Abu Dhabi; DUBAL was an aluminum producer based in Dubai. The joining of DUBAL and Mubadala was in 2007 under the president of the UAE, HH Sheikh Khalifa Bin Zayed Al Nahyan, through decree number 7 of 2007.

EMAL with its locations in Taweelah, has a plan of production of 1. 4 million ton per annum aluminum smelter which will be put up in two equal phases: phase 1, will produce 720,000 ton per annum, the highest aluminum smelter ever constructed and the most booming industrial project in the UAE, beside the other energy producing industries; this is to be completed in 2010 and phase 2, is to be catered after perfection of phase 1. Transport was facilitated by construction of a new port to facilitate delivery of raw materials .

EMAL international is an affiliate company that is put to handle aluminum project besides that in the UAE, which include a bauxite mine and alumina refinery in Guinea, and a 720, 000 ton per annum smelter in Algeria. With EMAL and EMAL international in place, Mubadala is putting an investment of close to $20 billion in the aluminum industry. Abu Dhabi has an objective of becoming the top producer in the aluminum sector yielding 10% of the world’s total amount within a span of a week; with EMAL, the Algerian, and Saudi smelters adding over 3.

5 million by 2012, which is attainable. The aluminum project meets the standards of operation that Mubadala runs on. Such as leveraging the energy stock in Abu Dhabi, offering technologically advanced jobs to the locals; and at the same time opening a greater diversity of aluminum related projects for investment by companies that are not government based. In DUBAL for instance, a greater percentage of employees were from the UAE; similarly, EMAL seems to offer good working opportunities to a number of nationals.

Quick growth of the aluminum sector is being observed in Abu Dhabi’s neighbors; Bahrain for instance that has a work force of 3000, 90% of who are Bahraini nationals. Besides adding energy value to the energy store in Abu Dhabi, Many quality jobs are being created by the Dubai aluminum; the increased growing demand prompts production of the metal in millions of ton that will be sold at higher prices. Therefore all the funds used in investment can be recovered over a short period of time .

Mubadala’s plan is to play a lesser role but catalyze activities within the aluminum related industries and still ensure that the sector is large enough to create more employment opportunities. The local industries are allocated 50% shares in the smelter industry. Mubadala’s next project is development of aerospace and automobile industries . Therefore production of a large amount of aluminum is beneficial towards putting up the industry since it requires the metal as a raw material. A gas power plant which produces energy amounting to 2,000MW is planned for so as to maintain a constant and reliable energy supply.

The smelter will apply a high level of technology through utilization of the DUBAL’s UAE developed cell technology; this will utilize the amount of energy used in smelting, save funds fueled towards production, and increase the amount of metal yield; 756 reduction cells will be located in two places. Products of the iron smelter will include primary aluminum extrusion billets, sheet ingots, and different shapes and sizes of ingots of unalloyed aluminum of high quality. This will be supplied to the packaging, technology, electronic and construction industries in addition to the aerospace and automotive industries.

Environmental standards set by the Abu Dhabi Environmental Agency had to be adhered to. Under EMAL’s plan, environmental conservation is be a priority: to control suffocation of marine flora and fauna by heat through employment of the best gas turbines and cooling towers to industrial water before discharging into the sea. Sulphur-dioxide scrubbers will be put in chimneys to avoid emission of poisonous gases to the atmosphere that would create air pollution. This plan is budgeted to cost USD200 million which will be a contract to Alstorm to supply its centers for gas treatment.

Alstorm has the best technology applied in reduction of sulphur- dioxide and fluoride emission into the air. Italian cooling tower technology (SPIG) will be used to make the water used during the production process suitable to the delicate marine life- up to one degree Celsius temperature range, which is within the required range that allows a maximum increase of plus 5. SPIG applies a technologically advanced system of water cooling that applies seismic design vibration control and reduction in energy consumption, hence reduces the effects of the cooling turbines on the environment.

3. 0 Conclusion The environmental responsibility seem as a challenge due to the high cost of materials that are vested towards it , however EMAL takes this as a strength ; the environmental conservation plan is strategic, long term and beneficial. The investment in the project goes in hand with Mubadala’s strategy of creating job opportunities, creating more areas of investment, advancing Abu Dhabi technologically, and financing business through returns . Bibliography: Abdelal Rawi & Tarsis Irina, ( 2009): Mubadala: forging Development in Abu Dhabi.

Retrieved 29th January from: http://www. 2shared. com/file/4749219/29699f4d/Mubadala_Forging_Development_in_Abu_Dhabi. html Fitsal Teri, (2008): Standard Chartered: Middle East and Africa: the Guide to Working Capital Management. ISBN 9889932652, 9789889932657, PPP Company Ltd. Mubadala Website. Retrieved 29th January from: www. Mubadala. ae Peck C. Malcolm, (1986): The United Arab Emirates: A Venture in Unity. ISBN 0865311889, 9780865311886, Taylor & Francis. Rehman A. Aamir, (2008): Dubai & Co. : Global Strategies for Doing Business in the Gulf

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