The Arab Petroleum Investments Corporation (APICORP): At the Heart of the Arab Oil-Producing World

The Arab Petroleum Investments Corporation (APICORP) is a multilateral development financial institution whose shareholders are the 10 Arab oil exporting countries.

APICORP is energy-focused, with a mandate to support the sustainable development of the industry in member countries.

The institution’s initial goal, to be a trusted financial partner for the Arab energy sector, would seem to be successful; its balance sheet for 2020 grew by 7.5 percent to reach $7.89bn.

But APICORP has more than goals; it also has a mission: to develop the sector through creative, value-adding solutions, provided on a commercial basis to facilitate value maximisation.

Its offering includes equity investment, debt financing, financial advisory and energy research services. APICORP’s 2020-2024 strategy is its roadmap to the future, with an aim to bolster its position via a sustainable and innovation-driven approach.

The strategy has five strategic priorities:

• To thrive as a multilateral development financial institution in the transitioning energy world
• To lead the financing of energy players
• To diversify and deepen its client base
• To shape the energy landscape in the Arab world
• To build agile and efficient external and internal ecosystems.

Designed with an in-built capacity to evolve, the strategy will be constantly reviewed to ensure that the organisation remains in lockstep with market needs, and maximise its potential to be a catalyst for impact and sustainability in the region’s relevant sectors.

APICORP’s lines of business include:

Corporate Banking

An innovative array of funded and unfunded, conventional and Islamic, financing solutions to support the energy industry in the MENA region and beyond. It serves as a catalyst for trade growth across the region with international partners.

Investments

APICORP’s own capital is invested to acquire direct equity stakes along with its strategic partners in greenfield and brownfield projects, with strong management teams and solid growth potential in diversified energy sub-sectors across multiple geographies.

Strategy, Energy Economics, and Sustainability

It provides analysis, insights and advisory services on the regional and global energy sectors to internal and external stakeholders, as well as guidance to strategic partners. This positions APICORP as a world-class thought-leader on energy investment, finance and sustainability. It leads APICORP’s corporate strategy design and implementation.

Portfolio Management

This oversees APICORP’s portfolio, cutting across investments and corporate banking with a dynamic, hands-on approach in managing loans and investment portfolios post-disbursement, while driving exit strategies and optimising portfolio performance.

Treasury & Capital Markets

APICORP’s liquidity is proactively managed, with a diversified fixed-income portfolio and a robust funding profile in order to ensure the corporation’s growth, resilience, and sustainability.

APICORP’s diverse financing and equity portfolio spans sectors and geographies to provide it with flexibility and advantage to maximise value for member countries while serving the broader energy spectrum.

APICORP’s track record illustrates its ability to identify and access opportunities. With a strategic network of partners and relationships, the Arab Petroleum Investments Corporation has the insight and risk mitigation expertise to safely and successfully pursue energy development in the MENA region.

While APICORP’s member countries and the wider MENA region remain the primary focus, the corporation is expanding geographically to support the development of regional energy. It is growing operations into key markets in Europe, Asia and North America and creating value for its regional partners by supporting their own international expansion plans. Investing in global firms offers strong potential for technological transfer back to the region.

APICORP has shareholders in Saudi Arabia, Kuwait, UAE, Libya, Iraq, Qatar, Algeria, Bahrain, Egypt and Syria.

Financial Results

The corporation posted a three percent year-on-year (y-o-y) rise in net income, despite the fallout from the pandemic – from $112m in 2019 to $115m in 2020.

The key drivers include six percent y-o-y growth in APICORP’s corporate banking portfolio, to reach $3.9bn, as well as 13 percent y-o-y growth in the treasury and capital markets portfolio: $46m in capital gains, a 488 percent increase.

The balance sheet increased from $7.34bn to $7.89bn in 2020, a 7.5 percent y-o-y uptick, higher than the five percent CAGR recorded over the previous five years. Key financial and risk metrics also continued steady improvement, and the corporation recorded its highest-ever liquidity ratio of 349 percent, and increased its capital adequacy ratio to 31 percent (+one percent y-o-y), as well as reducing its leverage level from 2.5x in June 2020 to 2.23x in December 2020.

The robust financial and risk metrics enabled APICORP to retain its Aa2 rating, with a stable outlook from Moody’s. The corporation earned its inaugural AA rating, with a stable outlook, from Fitch. APICORP is the only regional financial institution in MENA to hold two AA ratings.

The year also witnessed a landmark: the corporation increased its authorised capital from $2.4bn to $20bn, subscribed capital from $2bn to $10bn, paid-up capital from $1bn to $1.5bn, and callable capital from $1bn to $8.5bn.

Business Line Highlights

Corporate Banking
APICORP increased its corporate banking assets by six percent y-o-y in 2020 to reach $3.9bn, booking $1.6bn in drawdowns over the year. Six of the 11 project finance commitments in 2020 were in green energy or within the category of sustainable utility projects, and all were part of the $500m counter-cyclical package the corporation launched in April to help the MENA energy sector mitigate the impact of the pandemic and oil price volatility. The gross NPL ratio, meanwhile, remained low, at just 0.59 percent.

Investments
Although the 2020 crisis affected the revenues of some investee companies, it also opened opportunities for APICORP to pursue quality investments in high-potential, well-run companies and like-minded investors seeking to maximise long-term value-creation and impact. The corporation made its first equity stake in a wind energy company, while progressing on a number of exits from current investments to optimise the balance sheet as well as capitalise on the positive long-term growth prospects of its equity portfolio.

Treasury & Capital Markets
By following a more proactive approach to managing the assets and liabilities of APICORP, Treasury and Capital Markets was able to optimise the risk-adjusted returns the liquid portfolio (including $ 46m in capital gains), and bolster its strong funding profile.

On the funding front, the Arab Petroleum Investments Corporation increased its medium-term financing by 26 percent y-o-y while decreasing short-term financing by 12 percent as a safeguard against prolonged market volatility. The year saw the corporation raising its profile as a debt issuer in the sovereign, supranational and agency (SSA) space through the $750m benchmark bond issuance in June, which achieved the lowest-ever yield and spread in the corporation’s history, and attracted high-quality SSA investors from across the globe. More than 50 percent of the order book came from central banks and official institutions. The success of the transaction was further cemented with the $250m tap in October that brought the total issuance to $1bn.

Financials for the year ended December 31, 2020:

• Net income increased to $115m
• Balance sheet grew by 7.5 percent to $7.89bn
• Corporate Banking and Treasury & Capital Markets portfolios up six percent and 13 percent, respectively
• Improvement in key financial and risk metrics, including highest-ever liquidity ratio (349 percent) and capital adequacy (31 percent).