In about 10 years, Mubadala has gone from nothing to having assets of AED195bn by the end of the first half of 2012, up from AED177bn at the end of 2011. It has found that profitability is a more difficult task than snapping up overseas assets with the governments’ oil cash.
It has not been without difficulties though. The firm has had to help sort out the companies it has invested in. In 2011, Mubadala was part of the Abu Dhabi government bailout of property developer Aldar. Mubadala has a 35 per cent stake in the firm, which has received two bailouts totalling $10bn. Tabreed, a district cooling firm linked to Mubadala, also needed restructuring and state support in the wake of the financial crisis.
Chief operating officer Waleed al-Muhairi admitted in January that the company had “taken some gambles and I think have been proven wrong in some of the businesses that we have done”. The company now plans to move out of the real estate sector. At the end of 2011, it sold John Buck International, a facilities management company, as part of this strategy. Signs that the Abu Dhabi real estate sector could start to improve may help that plan move forward.
The company may also be called on to prop up AMD. As the chipmaker’s largest shareholder, and a strategic partner for its Globalfoundries business, Mubadala will be keen to help as the firm struggles with dwindling cash reserves.
Unlike other investment arms of the Abu Dhabi government, Mubadala’s strategic focus can be accused of being so broad that it lacks clarity. The company will also need to make sure that the huge international investments it is making actually result in knowledge transfer back to Abu Dhabi.
Lower impairment charges and higher revenues helped Mubadala swing back into profit in the first half of 2012, but generating the kind of stable and sustainable returns that the government wants could still be some way off.