Emirates Business reported that 24/7 reported that external funding for energy projects in the Arab region has been hit by the current unrest sweeping many Arab countries although a large part of those projects need to be financed through loans.
The Dammam based Arab Petroleum Investment Corporation said that internal financing for energy ventures in the Middle East and North Africa is expected to be around 57% in the next few years while the remaining 43% could be sourced from equity capital markets bonds and sukuk and bank loans.
Apicorp an affiliate of the 10 member Organization of Arab Petroleum Exporting Countries said that external funding has so far been limited to almost only bank loans and this means that ratio can be taken to constitute a leverage ratio of 43:57. This is a moderate leverage but still higher than the world's average of nearly 40:60 for all groups of enterprises.
Apicorp's figures showed annual demand for loans in the energy sector would be in the range of USD 41 billion to USD 53 billion between 2011 and 2015 depending on the rate at which shelved or postponed projects will be brought back for financing.
It said that our analysis of most recent trends and patterns in external financing of MENA energy investment which comes predominantly in the form of loans, points to collapsing loan demand in countries impacted by the turmoil and lower supply and higher cost in those not yet seriously affected.
Should these trends take hold, the investment recovery anticipated in our latest 2011 to 2015 review could be jeopardized indeed, a significant financing gap which is likely to be part of a broader contraction in the region's loan market, seems certain to occur. Such a gap could only be closed if the countercyclical credit policies adopted in the aftermath of the 2008global financial crisis are extended. But in a time of many new pressing demands on public funds, such support may not be readily forthcoming.
The report showed that in 2010, MENA external financing, predominantly in the form of loans, reached USD 101 billion for all industry groups representing a mere three per cent of the corresponding USD 3,412 billion global external financing.
(Sourced from Emirates Business 24/7)
