The Abu Dhabi investment fund Ipic has said that it lost US$2.7 billion last year because of writedowns, low prices for resources and difficult market conditions.
In a news release , Ipic said that, given “downwards pressure in the commodity, currency and equity markets”, its $3.3bn net profit for the year before the writedowns are factored in was “admirable”. The company also said that it reduced its debt load to $27.5bn from $29.9bn.
Still, last year’s loss represents a sharp reversal from the fund’s 2014 profit of $1.5bn and its 2013 profit of $2.2bn, and is largely the consequence of the writedowns, which reduced the value of group assets to $58bn from $66bn.
“IPIC remains in a strong position because of an investment portfolio that is diversified throughout the hydrocarbon value chain, as well as prudent financial management,” said Suhail Al Mazrouei, the Minister of Energy and the managing director of Ipic, in the release.
“We believe IPIC is well positioned as a strong complement to Mubadala as global energy demand gradually resumes its upward trend.”
On Wednesday, Ipic and Mubadala said they will merge. The combined group would be worth $127bn based on yesterday’s $8bn reduction in the value of Ipic’s group assets.
Together, Ipic and Mubadala would have a worldwide portfolio of investments ranging from energy and aluminium to microchips and renewables. Their merger is part of Abu Dhabi’s effort to diversify its economy beyond oil.
Garbis Iradian, the chief economist for the region at the Institute of International Finance, has estimated that cost savings from the merger should work out to about 20 per cent.
Meanwhile, Ipic is in a dispute with the Malaysian state fund 1Malaysia Development Bhd (1MDB) over bond guarantees.
In 2014, Ipic guaranteed $3.5bn of 1MDB bonds but claims that it has not received payment for the guarantee or other monies and interest owed.
In a filing with the London Stock Exchange, Ipic said that it had to make good on its guarantee with an interest payment of more than $52 million.
The May filing put the amount owed at just over $1.2bn plus accrued interest.
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