Kuwait Markaz to launch US$171 million energy fund

Markaz Energy Fund to focus on Kuwait, but will also serve wider GCC region and beyond.

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By  Mark Johnson Published  January 10, 2005

Kuwait Financial Centre (Markaz) is to launch the Markaz Energy Fund, a KD 50 million (US$171 million) private equity fund focused on the energy sector of the GCC and neighbouring countries. The fund will focus mainly on Kuwait because of the unique and promising investment opportunities stemming from huge growth potential in that market. Markaz, which is currently sponsoring and participating in the third Major New Projects Opportunities conference in Qatar, has submitted the fund for approval to the Ministry of Commerce and Industry and the Central Bank of Kuwait, and plans to commence the placement process once all regulatory approvals are obtained. Manaf Al Hajeri, general manager of Markaz, said: “Markaz Energy Fund has been established to capitalise on the structural changes in the oil and gas industry of the Arab region”. He added, “The region will be required to invest approximately US$800 billion over the next 25 years in the upstream and downstream segments of the energy sector to sustain and grow its production capacity. Multinationals are expected to play a larger role in contributing the necessary technical and financial resources to the energy sector; which is expected to lead to strong demand for local/regional contractors, subcontractors, and service companies”. Global energy demand is expected to grow by 1.7% per annum over the next 25 years, driven by the rapidly growing economies of Asia. Arab states’ share of world production of crude oil is expected to increase from 26% to 43% by 2030; and their share of world production of natural gas is expected to rise from 9% to 13% by 2030. Kuwait, the main target market of the fund, is likely to emerge as a main beneficiary of the structural change in the regional energy sector. Markaz believes that Kuwait’s political stability, its strategic geographic location between the major oil production centres of Saudi Arabia, Iran and Iraq, and its existing contracting and manufacturing capabilities will enable it to gain a leading role in the development of the sector. This is evidenced by KPC's initiative to double its production capacity over the next 15 years, and expand its refining and downstream processing capabilities through the participation of the private sector. The Markaz Energy Fund will invest in contracting, existing operating companies and service companies that have the vision, but need the capital to acquire equipment, technology and expertise to benefit from such change. The fund will also enter into strategic alliances with companies to enhance the fund's access to transactions and create synergy with the fund's portfolio of companies. The Markaz Energy Fund will play an active role in becoming a primary conduit for financial investor to have access to one of the most vibrant and growing sectors in the Region; a sector in which companies and investment opportunities were limited in the past, according to a Markaz press statement. Markaz has appointed experts from the regional oil companies as technical advisors who will be instrumental generating and evaluating potential investment opportunities for the Fund. Markaz, one of the largest investment companies in Kuwait, was established in 1974 and is listed on the Kuwait Stock Exchange. It currently manages over US$ 2.5 billion through its various funds investing in money market instruments, private equities, local and international listed equities and real estate. It has one of the leading investment banking operations in Kuwait, and has recently lead several bond and equity issues in 2004 including Kuwait Gulf Link Port International, HumanSoft, Kuwait Privatisation Projects Companies, and Amar among others.

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