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Islamic Bank Raising Funds to Invest $10 Bln; Abraham Group to Advise on Energy Investments

11/13/06

DUBAI, (Reuters) - Dubai Islamic Bank will complete the collection of initial contributions next month for a set of Islamic funds that will invest $10 billion mainly in unlisted firms, fund officials said.

The bank and state-run Dubai World, owner of port operator DP World, will provide about 10 percent of the $5 billion to be raised from investors, fund officials said. That money will be used to finance about $10 billion in acquisitions.

Dubai World and Dubai Islamic said in April they would create seven funds to invest in closely held companies in industries including energy, telecommunications and financial services.

"The funds will make Dubai and the region a very significant player in the world economy," Spencer Abraham, a former U.S energy secretary, who is a chief adviser to the energy fund told Reuters from Qatar's capital Doha on Sunday.

The seven funds will comply with Islamic principles that ban investment in companies involved in alcohol, armaments and gambling or lending on interest.

A technology, media and telecommunications fund will invest in companies such as television and radio stations, and fixed-line telephone networks in deals worth as much as a total of $2 billion, another of the three investment advisers, Martin Pompadur, told Reuters by telephone from New York.

"The aim is to provide an alternative form of investment for the investor," Pompadur said on Saturday. Pompadur is also News Corp's executive vice-president of European operations. Investors will contribute up to $1 billion to the technology fund and as much as another $1 billion to an energy fund in December, Pompadur said.

Dubai Islamic and Dubai World will together contribute $500 million, said an official of Millennium Private Equity, as the manager of the funds will be known. Other investors will include companies and the investment agencies of Gulf Arab governments, the official said, declining to be identified.

Gulf Arab states are reaping a windfall from a tripling of oil prices since 2001. The United Arab Emirates, Kuwait, Qatar, Oman, Bahrain and Saudi Arabia are expected to post a combined budget surplus of $500 billion in the five years to 2010, according to state investment arm Dubai International Capital (DIC).

DIC has said it is planning to set up a Gulf fund of up to $15 billion to invest in the world's biggest listed companies.

In February, Bahrain-based Gulf One Investment bank announced plans to set up an infrastructure fund worth up to $10 billion to finance projects mostly in the Gulf Arab region.

The Millennium Private Equity funds will invest for about five years, and then either sell stakes privately or in flotations, Pompadur said. The technology fund has identified five companies in the Middle East and Africa in which it may invest, Pompadur said, declining to give details. The funds could also take over publicly listed companies, he said.

Abraham, U.S. energy secretary from 2001-2005, said the energy fund would invest in industries such as liquid natural gas, power generation, pipelines and oil refining. "The fund is well placed to put in a lot of investment in parts of the world such as the Middle East, Africa, and Asia, where (energy) demand growth is so high," he told Reuters.

Millennium Finance Corp, majority owned by Dubai Islamic Bank, will own the fund manager.