Project finance fund hits the road

24 March 2006

Dubai International Capital (DIC) and HSBC have launched a $500 million fund to invest in infrastructure projects across the Middle East and North Africa (MENA) region. DIC and HSBC have each invested $50 million in the MENA Infrastructure Fund, which they will manage through a company currently under formation. The remaining investment is expected to come from subscribers mainly in the GCC.

The fund, which is in the deal origination phase, will target the utilities, energy and transport sectors through public-private partnerships. Minimum subscription is expected to be $10 million-20 million. The fund will close late in the second quarter and has an expected internal rate of return (IRR) of 15 per cent.

'The region is highly conducive to private investment in infrastructure,' said DIC chief executive officer (CEO) Sameer al-Ansari on 20 March. 'We do expect to see a strong drive toward privatisation and project finance. The asset class can handle more than $500 million but the fund is limited by what we can handle.'

Expenditure on infrastructure is expected to exceed $300,000 million in the next decade, said HSBC Bank Middle East CEO & deputy chairman David Hodgkinson. 'You make more return on your dollar in the Middle East than anywhere else. The fund will provide an opportunity to investors to get exposure to assets that are otherwise quite difficult to access.'

'Abu Dhabi and the rest of the UAE are core targets,' said Richard Cole, HSBC's chief executive of project and export finance. 'There's a lot of infrastructure beyond oil and gas required in Qatar, and Saudi Arabia is the largest regional market. Oman has a successful IPP [independent power project] programme and we don't rule out Egypt and Jordan.' The fund is HSBC's third infrastructure fund but its first in the region.

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