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December 2014
Arab Petroleum Investments Corporation
(“APICORP”)
Key Highlights
2
Contents
Section 1 4OVERVIEW
Section 2 11FINANCIAL POSITION AND PERFORMANCE
Section 3 14ASSET PROFILE
Section 4 19FUNDING OVERVIEW
Section 5 22PEER GROUP ANALYSIS
Section 6 24KEY HIGHLIGHTS
3
OVERVIEW
Section 1
4
Introduction
Arab Petroleum Investments Corporation (APICORP) is a multilateral development bank established on
23 November 1975 under the terms of an agreement signed by the ten Member States of the Organization of Arab
Petroleum Exporting Countries (OAPEC)
APICORP’s mission is to contribute to the development and the
transformation of the Arab hydrocarbon and energy industries through equity
and debt financing, advisory and research.
Mission
Net Worth US$ 1.86 billion
Capital Adequacy Ratio 28.8%
Moody’s Rating Aa3
Key Highlights - 2014
APICORP is wholly owned by member states of the OAPEC
Algeria 5%
Bahrain 3%
Egypt 3%
Iraq 10%
Kuwait 17%
Libya 15%
Qatar 10%
Saudi Arabia 17%
Syria 3%
UAE 17%
Algeria Libya Egypt
Saudi Arabia UAE
Qatar
Bahrain
Kuwait
Iraq
Syria
5
Board of Directors
10 Board of Directors representing the 10 member states
Membership of the Board of Directors is by nomination of each member state
Algeria
Mr. Farid BakaMember, Audit & Compensation
Committee
Iraq
Nihad A. MoosaEngineer
Egypt
Sherin Ahmed MohamedEngineer
Saudi Arabia
Dr. Aabed A. Al-SaadounChairman of the Board
Chairman of Remuneration &
Nomination Committee
Libya
Mr. Khaled Amr Al-QunsulDeputy Chairman of the Board
Member of Remuneration &
Nomination Committee
Kuwait
Shaikh Talal Naser A. Al-SabahChairman of Audit & Risk Committee
Member of Remuneration &
Nomination Committee
Bahrain
Mr. Mahmood Hashim Al-
KoohejiMember of Remuneration &
Nomination Committee
Qatar
Mr. Mohamed Khalid Al-
GhanemMember of Audit & Risk Committee
United Arab Emirates
Dr. Matar Al-NeyadiDeputy Chairman of Audit & Risk
Committee
Syria
H.E. Eng. Suleiman Al-Abbas
6
Governance and Organizational Structure
Organizational Structure
Board Remuneration
& Nomination
Committee
Board of Directors
Chief Executive &
General Manager
Board Audit & Risk
Committee
CE&GM Office
PA’s
Advisors
Corporate Business
Strategy & PMO
Deputy Chief
Executive & General
Manager
Corp
Communication
& CSR
Operations IT Administration
Human
ResourcesFinance
InvestmentsCorporate
Finance
Treasury &
Capital
Markets
Energy
Research
Internal Audit
Manager
Governance
Group
Legal
Risk
Management
Compliance
Dr. Raed Al-Rayes
Deputy Chief Executive and General Manager
Mr. Bennie Burger
Head of Corporate Strategy & PMO, Acting Head of Investments
Mr. Nicolas Thévenot
Head of Corporate Finance
Mr. Hesham Farid
Head of Treasury & Capital Markets
Mr. Ayman Zeyada
Head of Financial Control
Mr. Ali Hassan Fadel
General Counsel & Board Secretary and Compliance Officer
Mr. Ajay Kumar Jha
Head of Risk Management
Mr. Mohammed Al-Mubarak
Head of Operations
Mr. Hamdi Said Bata
Head of Human Resources & Administration
Mr. Raed Sirhan
Head of Information Technology
7
Continued Progress Across All Core Business Lines
All three core business lines namely Investments, Corporate Finance and Treasury and Capital Markets recording
significant growth in 2014.
Dividend income generated by direct equity investment portfolio reached
US$ 92.36mn, in 2014, 25.7%
higher than income generated in 2013
In line with APICORP’s aim to increase visibility of its Islamic finance
capabilities, the share of Islamic
finance assets grew to 29% of total
loan portfolio in 2014
Recognized by the Islamic Finance News for the Best dual Syndicated loan deal of 2014 citing APICORP’s
active management of financial obligations, stretching tenors, reducing borrowing costs and
diversifying investor base
APICORP’s portfolio of available for sale (AFS)
direct equity investments include seven
petrochemical companies, four oil and gas field
service companies, one LPG extraction company
and one petroleum products storage company in
six Arab countries.
Total book value of the AFS portfolio increased to
US$ 865.96 million at end 2014
In 2014, APICORP was involved in the acquisition
of National Petroleum Services (NPS), valued at
over US$ 500mn in 2014, this represents one of
the largest regional private equity transactions of
the year
APICORP also made its first equity investment in
the power sector through the signing of a co-
investment initiative with ACWA Power
Investments
Throughout 2014, the loan portfolio maintained its
high quality with an ‘AA’ internal rating, and an
average maturity well contained at 5 years
Total income generated by corporate finance
activities in 2014 amounted to US$ 58.74 million
Average loan balance in 2014 remained stable in
2014 at US$ 2.94 billion compared with US$ 3.06
billion the previous year, in line with its strategy to
re-balance the asset composition of the balance
sheet.
APICORP concluded 15 transactions in 2014
totaling over US$ 608 million and increased
support to key clients comprising top 10 energy
commodity players worldwide
Corporate Finance
Total income generated by treasury and
capital markets activities in 2014 amounted to
US$ 36.93 million
Total market value of investments in the
fixed income securities portfolio amounted to
US$ 1.12 billion and continued to remain focused
on strong credits with an average portfolio rating
of ‘A’.
Treasury and capital market assets increased to
US$ 2.16 billion from US$ 1.75 billion the
previous year
Concluded three shariah compliant medium term
transactions totaling US$ 1.2 billion in 2014 and
successfully refinanced SAR 2.5 billion Jan-15
maturing term finance with a SAR 3.0 billion 5-
year syndicated facility in Dec-14
Treasury and Capital Markets
Key Achievements of 2014
8
Strong Capital Adequacy
High Quality Asset Portfolio
Benefits from de facto preferred creditor status
Strong ability of shareholders to support
Rated Aa3, Stable Outlook Since September 2012
Reconfirmed in September 2014
Rating Agency Review of APICORP
APICORP’s ability to sustain past regional crisis and periods of low oil prices without serious difficulty underscores
its well-established track record”. “….The Corporation has never defaulted on any of its obligations”
APICORP’s shareholders have explicitly committed to support the institution on a “joint and several” basis.
Article 6 of the Articles of Agreement states: “The Member States undertake, jointly and severally, to support the
corporation, protect it and embrace its causes in every way that ensures the protection of its rights and interests
internationally and otherwise and undertake to facilitate all the activities related to its objectives and to adopt all
possible measures to that end.”
9
Forward Strategy
APICORP made significant progress in implementing its new five year strategy and is continuing to deliver superior results against the objectives set out below
Focus on hiring, developing and
retaining best talent
Policy & Procedure enhancement
Project
IT & MIS upgrade
Operational Efficiency-People, Process & System
Risk based Pricing for Lending business
Risk & Life cycle based return target for Investments
Strategic partnerships for enhancing performance
across asset classes and knowledge transfer
Leverage brand & Stakeholder network
Serve Development mandate with Commercial Focus
Alignment with Basel III & CBB guidelines
Enhancement of Governance Framework
Renewed Authority Matrix
Asset Classification and impairment provisioning policy
Maintain stable Risk profile
Strengthening Risk Framework
Corporate Finance Vs Investments Vs
Treasury asset mix based on Risk -
Return optimization and BCG
recommendation
Strengthen Trade finance desk
Improve share of Islamic finance
assets (29% of loan book in 2014)
Achieving Optimum Asset Composition
Enhancing Asset Diversification
Serve wider mandate in Energy sector. Energy intensive
industries. e.g. Power, Water
Sub Sector diversification
New Investment Guidelines for Treasury and
Investments
Strengthening Funding Profile
Lengthening the funding maturity through Medium &
Long term funding program
Improve Cost of Funding
Five-Year Strategy
10
FINANCIAL POSITION AND
PERFORMANCE
Section 2
11
Increasing Profitability Amidst Growing Asset Base
Continuous growth in profits leading to a growing asset portfolio while maintaining low leverage
Increasing Profitability coupled with Stable Efficiency Ratio(Gross Income US$ mn, Efficiency Ratio: Operating Expenses/ Gross Income)
Profitable Institution with a Healthy Balance Sheet
APICORP continues to remain profitable despite challenging
economic environment with gross income rising 4% to US$ 156mn
in 2014
Net income recorded at US$ 105mn as an investment provision of
US$ 13.48mn was built in 2014 on the back of uncertain geopolitical
outlook for the MENA region.
Similarly, APICORP’s total assets reached US$ 5.88bn as on
31 December 2014, 4% higher than US$ 5.67bn on 31 December
2013
Simultaneously, total liabilities also increased marginally to US$
4.02bn in 2014 from US$ 3.86bn in 2013, however equity reached
US$ 1.86bn in 2014 from US$ 1.80bn in 2013
4,119 4,312 4,629
5,078 5,675 5,884
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2009 2010 2011 2012 2013 2014
3,117 3,1713,411
3,768 3,868 4,025
1,002 1,141 1,219 1,309
1,807 1,859
0
1,000
2,000
3,000
4,000
5,000
2009 2010 2011 2012 2013 2014
Liabilities Equity
Total Assets (US$ mn) Total Liabilities and Equity (US$ mn)
82
119
159
131
150 156
58
95105 109 112
105
27%
21%23%
22%
26% 26%
10%
15%
20%
25%
30%
35%
0
20
40
60
80
100
120
140
160
180
2009 2010 2011 2012 2013 2014
Gross Income Net Income Efficiency Ratio
12
Track Record of Strong Shareholders Support
In addition to the six capital increases, shareholders’ decision not to receive dividends for 6 years from 2008-2010
& 2012-2014 suggest strong shareholders support. Capital Adequacy Ratio at 28.8% is significantly higher than the
Basel III requirement of 13%
Capital Adequacy Ratio (%)Issued & Paid-Up Capital Growth (US$ mn)
360 400460
550
750
1,000
0
200
400
600
800
1,000
1,200
1980 1981 1996 2010 2011 2014
Shareholders’ Equity (US$ mn) Shareholders’ Deposits (US$ mn)
370
222 103 104 105 106
1,000
0
200
400
600
800
1,000
1,200
2009 2010 2011 2012 2013 2014 ApprovedAmount
25.7%
29.2%
28.4%
27.2%
28.7% 28.8%
23.0%
24.0%
25.0%
26.0%
27.0%
28.0%
29.0%
30.0%
2009 2010 2011 2012 2013 2014
1,0021,141 1,219
1,309
1,807 1,859
0
500
1,000
1,500
2,000
2009 2010 2011 2012 2013 2014
Authorized Capital Subscribed Capital Issued and Fully Paid Callable Capital
2,400 1,500 1,000 500
APICORP’s Capital Structure - 2014 (US$ mn)
13
ASSET PROFILE
Section 3
14
Distribution of Group’s Assets
Despite APICORP’s growing asset base, focus on GCC states and the petroleum industry is maintained
Asset Class BreakdownFocus on GCC Region and the Petroleum Industry Maintained
Majority of APICORP’s assets are in syndicated and direct loans
followed by available for sale securities and direct equity investments
at 46%, 20% and 15% respectively of total assets as of end 2014
APICORP’s net cash position remained strong with total cash holding
of US$ 982 million recorded at end 2014
APICORP’s majority assets (86%) are based out of the GCC region,
with 36% of total assets based out of the Kingdom of Saudi Arabia
itself.
86% of APICORP’s Assets are Based out of the GCC Region(Geographical Distribution of Assets - 2014)
67% of APICORP’s Assets Lie with the Petroleum Industry(Industry Distribution of Assets - 2014)
12% 11% 14% 16% 10% 17%
64%59%
61% 57%52%
46%
8%8%
7% 6%15% 15%
15% 21% 17% 19% 21% 20%
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013 2014
Cash Loans Equity AFS Securities PP&E Other Assets
36%
21%
29%
5%
3%2%
1%3%KSA (36%)
Qatar (21%)
Other GCC (29%)
Egypt and North Africa (5%)
Europe (3%)
Asia pacific (2%)
United States (1%)
Other North Africa (3%)
10%
9%
4%
1%
26%
2%6%
8%
17%
1%
16%
Refineries
Oilfield production development services
Floating production, storage and offloading Facilities
Liquefied natural gas (LNG) plants
Petroleum and petrochemicals
Maritime transportation
Power generation
Other petroleum
Banks and financial institutions
Other industries
Governments and public sector
15
Focus on GCC States Across All Asset Classes
Represents 46% of total assets (2014)
Directed towards large corporates and real
projects backed by strong sponsors and/ or
governments.
Similar to total assets, majority loans are in
the GCC region with focus on the
petroleum sector
Investment SecuritiesLoan Portfolio Direct Equities Investment
Represents 20% of total assets
Average rating for the fixed income portfolio
is A, mainly comprised of fixed and floating
rate securities
GCC exposure is the maximum at 84%
followed by Europe at 8% and US at 8%
Total investment in direct equity reached
US$ 866 million in 2014, representing 15%
of total assets
Dividend income generated by the portfolio
increased 25.7% to US$ 92.36 million in
2014 from US$ 73.37 million in 2013
Breakdown by Security Type (31 December 2014)Breakdown by Sector (31 December 2014) Breakdown by Security Type (31 December 2014)
16%
8%
24%
2%
21%
11%
18%
Oilfield production developmentservicesFloating production, storage andoffloading FacilitiesPetroleum and petrochemicals
Maritime transportation
Refineries
Power generation
Other petroleum
72%
20%
3%5%
Fixed-rate bonds
Floating-rate bonds
Structured notes
Funds & Equities 89%
11%
Unlisted Equities
Listed Equities
Breakdown by Geography (31 December 2014)Breakdown by Geography (31 December 2014) Breakdown by Geography (31 December 2014)
41%
27%
22%
5%1% 4% KSA
Qatar
Other GCC
Egypt and North Africa
Europe
Asia Pac.
22%
13%
49%
8%8%
KSA
Qatar
Other GCC
Europe
US
70%
18%
12%
KSA
Egypt and N. Africa
UAE
16
APICORP’s Asset Portfolio
APICORP’S
Direct Equity Investments
Paid-up capital: LD 60 million
APICORP Share: 20%
Drilling and related operations in the Arab world.
Arab Drilling and Workover
Company (ADWOC), Libya
www.adwoc.com
Paid-up capital: TD 30 million
APICORP Share: 20%
Storage and handling of petroleumproducts at La Skhira terminal.
Paid-up capital: LD 35 million
APICORP Share: 16.67%
Providing seismic services for the oiland gas industry in the Arab world.
Paid-up capital: SR 1,025 million
APICORP Share: 10%
Production and marketing of MTBEand Poly Propylene (PP).
Arab Company for Detergent
Chemicals (ARADET), Iraq
www.aradetco.com
Tankage Mediterranee
(TANKMED), Tunisia
www.tankmed.com
Arab Geophysical Exploration
Services Company (AGESCO),
Libya
www.agesco-ly.com
Saudi European Petrochemical
Company (IBN ZAHR), Saudi
Arabia
www.sabic.com
Paid-up capital: SR 8,510 million
APICORP Share: 3.45%
Production and marketing of aromatics, PTA and polyester fibers.
The Arabian Industrial Fibers
Company (IBN RUSHD), Saudi
Arabia
www.sabic.com
Paid-up capital: SR 5,625 million
APICORP Share: 1.32%
Production and marketing of polyethylene, ethylene glycol, polypropylene and other by-products.
Paid-up capital: US$ 215 million
APICORP Share: 17%
Production and marketing of methanol.
Paid-up capital: LE 1,992 million
APICORP Share: 3.03%
Production and marketing ofammonia and urea.
Alexandria Fiber Company
(AFCO), Egypt
www.adityabirla.com
Yanbu National Petrochemical
Company (YANSAB), Saudi
Arabia
www.yansab.com.sa
Egyptian Methanex Methanol
Company (EMethanex), Egypt
www.methanex.com
Misr Oil Processing Company
(MOPCO)*, Egypt
www.mopco-eg.com
Paid-up capital: SR 2 billion
APICORP Share: 5.86%
Energy and related sectors (drilling,geophysical, oil field services, seamless pipe manufacturing, industrial gases, etc.)
Paid-up capital: US$ 370 million
APICORP Share: 28.33%
Well Services and Intervention,Wireline Logging, Testing, Drillingand Work-over activities.
The Egyptian Bahraini Gas
Derivative Company
(EBGDCO)**, Egypt
www.danagas.com
The Industrialization & Energy
Services Company (TAQA),
Saudi Arabia
www.taqa.com.sa
National Petroleum Services
(NPS)
www.npsintl.com
Paid-up capital: US$ 25 million
APICORP Share: 20%
Recovery and marketing of propaneand butane.
Paid-up capital: ID 36 million
APICORP Share: 32%
Production and marketing of linearalkyl benzene (LAB) and byproducts.
Paid-up capital: US$ 48.3 million
APICORP Share: 10%
Production and marketing of acrylicfibers.
AS AT 31 DECEMBER 2014
* Mopco 1 and 2 (expansion projects) works are progressing which were stopped for 28 months. Expected to be commissioned by H1 2015.
** The project is still not passing the commercial test/operations. (pre-test operations done on August 07, 2012).
17
Conservative Risk Management
The Board of Directors have overall responsibility for the establishment and oversight of the Corporation’s risk management framework.
Board Level Audit & Risk Committee
Management Level Risk & ALCO Committee
Risk Governance
Liquidity RiskCredit Risk Operational Risk
Currency RiskInterest Rate Risk
Policy & Exposure Limits for all Business
Internal Rating Model
Risk Based Pricing Framework
Independent Risk Review & Approval process
Majority loans are backed by Government or
Government owned entities ( 74%)
Overall Weighted Average Asset Rating of “AA”
Stable NPL history with adequate provision
coverage (2.54% in 2014)
Basel III Liquidity framework based on LCR,
NSFR , Maturity Mismatch, Funding
Concentration and Level of un encumbered
assets
Liquidity stress testing under scenarios covering
both normal and more severe market conditions
Standby Shareholders’ Line of Credit of USD 1
BN
Operational Risk Framework e.g. Incident
Management System, Loss database, Root
cause analysis
Independent Internal Audit
Disaster Recovery Process
Assets and Liabilities are positioned on floating basis largely linked to
LIBOR+ Margin
Group’s exposure to interest rate fluctuations on certain financial assets and
liabilities are hedged by entering into interest rate swap agreements
The Group’s exposures in currencies other than US Dollars is hedged by entering
into forward contracts
Key Developments of 2014
Established Asset Classification and
impairment provisioning policy
Liquidity risk policy in line with Basel
guidelines developed for approval by
Board
Operational risk management practice
developed
18
FUNDING OVERVIEW
Section 4
19
Access to Diverse Funding Sources
Amount Signing Date Tenor Status
US$ 300 mn Jul-97 5 yrs Matured
US$ 200 mn Jul-00 5 yrs Matured
US$ 300 mn Jul-02 5 yrs Matured
US$ 250 mn Apr-05 5 yrs Matured
US$ 400 mn May-07 5 yrs Matured
SAR 2.5 bn (US$ 667 mn) Jan-12 3 yrs Outstanding
SAR 500 mn(US$ 133 mn) Jun-12 5 yrs Outstanding
SAR 440 mn(US$ 117 mn) Jul-12 5 yrs Outstanding
SAR 1.0 bn (US$ 267 mn) Mar-14 5 yrs Outstanding
US$ 150 mn Dec 14 3 yrs Outstanding
SAR 3.0bn (US$ 800 mn) Dec 14 5 yrs Outstanding
Issue Type Amount Signing Date Tenor Status
Floating Rate Notes SAR 2 bn (US$ 535 mn) 25-Oct-10 5 yrs callable 3 yrs Outstanding
APICORP’s Debt Capital Market Financing
Accessed different pools of funding including term loans, deposits, repo activities, debt capital markets in
addition to strong shareholder support and is successfully diversifying its funding sources.
APICORP’s Term Loan Financing
20
Maturity Profile for Assets and Liabilities
Maturity Profile of Assets and Liabilities – 2014
Loans and liabilities maturities overview
Given the nature of APICORP’s MDB’s mandate and business focus,
over 70% of the assets have a long maturity
APICORP’s unique access to term funding, low leverage and solid net
worth position is effectively reducing the maturity gaps. In 2014,
APICORP successfully raised SAR 3.0bn Club Murabaha term
facility, for the repayment of SAR 2.5bn maturities due in January
2015 which reduced the maturity mismatch significantly
Moreover, short-term mismatch between maturities of assets and
liabilities has substantially reduced as majority deposits from banks are
routinely rolled over on maturity
Assets and Liabilities Maturities – 2015 (US$ mn)
895 808
1,726
2,528
1,728
914
1,456
1,859
0
500
1,000
1,500
2,000
2,500
3,000
Up to 3 months 3 months to 1 year 1 to 5 years 5 years and over
Th
ou
san
ds
Assets Liabilities
2014 (US$ mn) Up to 3 months 3 months to 1 year 1 year to 5 years 5 years and above Total
Total Assets 812.5 924.2 2,108.5 2,038.7 5,884.0
Total Liabilities and Equity (1,970.9) (1,282.9) (755.9) (1,874.3)
Maturity Gap (1,158.4) (358.7) 1,352.6 164.4 -
Cumulative Maturity Gap (1,158.4) (1,517.0) (164.4) - -
Maturity Profile of Assets and Liabilities – 31st January 2015
2015 (US$ mn) Up to 3 months 3 months to 1 year 1 year to 5 years 5 years and above Total
Total Assets 894.6 808.2 1,725.8 2,528.1 5,956.7
Total Liabilities and Equity (1,727.7) (913.8) (1,456.5) (1,858.7)
Maturity Gap (833.1) (105.6) 269.3 669.4 -
Cumulative Maturity Gap (833.1) (938.7) (669.4) - -
21
PEER GROUP ANALYSIS
Section 5
22
APICORP in Perspective
APICORP offers significant value versus similarly rated supranational peers. These include return on average
assets coupled with high liquidity levels
2013
Central
American
Bank for
Economic
Integration
(CABEI)
“A1”
Corporacion
Andina de
Fomento
(CAF)
“Aa3”
APICORP
“Aa3”
Council of
Europe
Development
Bank
(CEB)
“Aa1”
North
America
Development
Bank
(NADB)
“Aa1”
Caribbean
Development
Bank
(CDB)
“Aa1”
Nordic
Investment
Bank
(NIB)
“Aaa”
Islamic
Development
Bank
(IsDB)
“Aaa”
Weighted Median Shareholders Rating Ba1 Ba2 Aa3 – – Baa1 – –
Total Assets
(US$ million)7,537 27,418 5,675 33,767 1,578 1,315 26,182 20,565
Return on Average Assets
(%)1.57 0.79 2.00 0.5 0.5 0.20 0.9 1.4
Usable Equity / Gross Loans Outstanding
+ Equity Operations*
(%)
42.0 42.9 46.9 19.3 51.7 71.8 – –
Gross NPLs / Gross Loans Outstanding **
(%)0.6 0.0 2.3 0.0 0.7 0.5 0.2 1.0
ST Debt + CMLTD/ Liquid Assets***
(%) 63.8 69.3 10.0 49.3 0.0 44.1 67.0 47.9
Total Debt/ Discounted Callable Capital ****
(%)546.8 1,910.2 360.9 488.6 40.9 87.1 329.7 121.7
Aaa CreditsAa3 Credits
Source: Moody’s Investor Service; Audited Financial Statements of the respective multilateral development bank
* Usable Equity is shareholder’s equity and excludes callable capital
** Non Performing Loans
*** Short term debt and current maturing long term debt
**** Callable capital pledge by members rated Baa3 or higher, discounted by Moody’s 30-year expected loss rates associated with ratings
23
KEY HIGHLIGHTS
Section 6
24
Key Highlights
De facto Preferred Creditor
Status amidst Strong Ability
of Shareholders to Support
100% Sovereign Owned
Multilateral Development
Bank
Consistently Delivering
Superior Financial ResultsSolid Capitalization as well
as High Liquidity
Highly Rated Institution with
Stable Outlook
High Grade Asset Portfolio
Coupled with Extremely Low
Leverage
Explicit Shareholder
Commitment on a “joint and
several” basis
Strong Capital Adequacy
with Issued and paid up
capital of US$ 1,000 million
and US$ 500 million callable
capital
