Xenel was founded in 1973 by the descendants of one of the oldest trading houses in the Middle East, the house of Alireza, which can trace its first ledger back to 1867. Its corporate lineage was started by Zainal bin Alireza, who arrived in Jeddah in the 1840s.

Xenel Industries was formed by the sons of Sheikh Ahmed Alireza, positioned at the centre of a group of companies active in energy, industry, construction, infrastructure development, healthcare, industrial services, information and communications technology, logistics, real estate and global investing.

Structure

Xenel’s structure involves a series of joint ventures, which has enabled it to build up experience in a variety of fields. It is a decentralised company model in which each enterprise must succeed on a standalone basis. The Xenel Industries base company in Jeddah mainly exists to provide financing capabilities and oversee its diverse shareholding interests.

Xenel remains a private company, and its hierarchical structure has prevented any move to go public, as a small but increasing number of Saudi family firms have. However, through the standalone structure, individual affiliates have gone public. Saudi Cable Company (SCC), in which Xenel is the largest single shareholder, is listed on the Saudi stock exchange (Tadawul).

Operations

As a diversified conglomerate, Xenel has developed an extensive footprint by building on its foundations as a prime contractor to the Saudi government. Through 40 subsidiaries, it operates a portfolio comprising industry, petrochemicals, infrastructure, construction, real estate, transport and logistics, healthcare, technology and, more recently, carbon-based finance (see box right).

The company established its credentials in service provision in areas such as airport maintenance and healthcare, before beginning a targeted assault on sectors in which it could best take advantage of Saudi Arabia’s natural advantage in cheap energy feedstock, extending its reach into industrial areas.

SCC produces conductors and cable products, and has developed a downstream business working on turnkey projects, from design and installation to testing and commissioning. Now it is among the world’s top 10 cable manufacturers, positioning itself strat-egically for the massive expansion of regional electricity networks.

Xenel, working with UK developer International Power, led the first privately owned greenfield power plant in East Asia: the Hubco project in Pakistan. It is also active in the petrochemicals sector. Xenel affiliate National Petrochemical Company will this year start producing 400,000 tonnes a year (t/y) of propylene and 400,000 t/y of polypropylene from Yanbu.

Ambitions

Xenel will continue to leverage its wide range of activities as a platform for further geographic and sectoral expansion. The company prefers to move into projects early to capture the full value of business opportunities.

Having gained a broad array of skills and expertise across a range of areas working in the public sector, it attempts to transfer these into new areas in the private sector. For example, its healthcare experience built up over decades will now be deployed in one of the Middle East’s fastest-growing sectors, with clinics opening up in Egypt, Qatar and Oman. Xenel’s healthcare subsidiary, Magrabi Hospitals & Centers, is building new medical facilities in Qassim, Kuwait and Bahrain, while there are plans for hospitals in Yemen and Sudan.

The ability to see beyond national boundaries has been a distinctive feature of the firm from the outset and it will aggressively pursue new growth opportunities in the Middle East and beyond. Xenel’s track record in getting an independent power project operational in Pakistan has imbued the company with confidence, and it will attempt a similar scheme in Iran, although rising costs look set to ensure its demise.

Xenel is looking to take advantage of Saudi Arabia’s position as a major trading hub, partnering with Malaysia’s MMC Corporation to build a new container terminal at Jeddah Islamic port, costing $447m, with a handling capacity of 1.5 million t/y and a shipyard of 18-metres depth.

It is now developing alliances in the construction sector, including in the US, where it is developing a 400-acre plot in Orlando, Florida. Another first is the Xenel-Balderrie project in carbon-based finance (see box right).

MEED assessment

Xenel’s widening base of activities poses a risk that the company is spreading itself too thin, but its corporate structure, which allows its affiliates operational independence using credible partners, mitigates against this risk. It takes a long-term view on projects, but using its diverse array of relationships, it can quickly activate key strategic projects. The model of developing management expertise in one area then transferring that skill set to other sectors has served it well, and will continue to do so.

Its preference for coming in early and taking control of the boardroom should ensure its own interests are well served. For the same reason, it is unlikely to opt for going public, yet will allow its affiliates to do so, as four already have. However, the company maintains that having to report to shareholders on a quarterly basis would deflect it from the pursuit of long-term strategic goals.

Xenel’s business acumen is attuned to seizing opportunities. The group has timed its entry into the petrochemicals market well, hitting an upswing in prices ahead of an anticipated downturn from late 2009. It will also remain on the lookout for acquisitions.

But there are risks in carrying such a varied portfolio: it may lose focus on some of the more marginal businesses, and there must be limits for the central company’s ability to keep control of such diverse interests.