Forbes Middle East and Infrastructure Investing

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A friend and colleague recently moved to Dubai to help launch Forbes Middle East. She hired me at Forbes many years ago, and reached out to me to freelance. I have posted my first piece on ways to get invest in the infrastructure boom in the MENA (Middle East and North Africa) region in selected clips. It is in Arabic which is the first time a piece I submitted in English has been translated for publication into a different language.

One doesn’t often see pieces coming out of MENA that focus on investing. I believe this is one missing piece in understanding a region which mainly gets discussed in terms of oil or national security.

My piece focuses on the boom in infrastructure spending that regional government stimulus funds have encouraged. “Qatar, UAE, Egypt, Saudi Arabia and Kuwait are embarking on noteworthy infrastructure schemes, with Qatar set to experience the most significant growth.”

That means that publicly traded engineering, cable and pipe firms are solid investment opportunities. I discuss Egypt’s Orascum, ElSewedy Electric, Saudi Basic Industries and Abu Dhabi’s Drake and Scull International which are engaged in a diverse array of projects.

Definitely worth an investor’s look!

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A New York City Story: Governors Island

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In the life of a freelancer, occasionally an article will not get the green light. In this case, I wrote an overview of the ongoing redevelopment of Governors Island and I would like to share it. The island has a unique place in New York City history and it is a great rejuvenation story as well. So here it is:

THE PROJECT: Turning a former military base into a mini-city

THE BUDGET: Over $250 million

THE TIMELINE: 2005 – ongoing

Governor’s Island was a fishing camp for Native Americans before a Dutchman, Wouter Van Twiller, bought the property in 1637 for two ax heads, a string of beads, and a handful of nails for his own private use. As it passed between Dutch and British control, a British Lord also tried to build his own mansion on the island. Mostly though it has been a military base from 1800 through 1996 when the latest inhabitants, the U.S. Coast Guard left – meaning its 172 acres (nearly half the size of the National Mall in Washington DC) have been off limits to the public for two centuries.

Beginning in 1995 discussions began over what to do with this choice piece of real estate located in one of the world’s most densely populated cities. President Clinton gave 22 acres to the National Park Service in 2001; a year later President Bush’s administration agreed to sell the remaining 150 acres for a dollar to the city and state of New York with the stipulation that there be no permanent housing and limited commercial ventures, e.g., no gambling. The transfer was official in 2003.

The challenge: where to get the money to get everything on the island up and running. Maintaining the island, which includes a ferry service to get staff and visitors to the island, is $14 million a year. Add the upgrades needed to abandoned buildings, landscaping – a superb tear down opportunity albeit with limited funds and squabbling siblings: state and city governments could not agree on project priorities.

Finally this past April, New York City took over control of the island, creating the Trust for Governor’s Island. The Trust employs a four-part strategy to tackle the enormous amount of work to be done. The first is to increase the number of people coming to the island. Back in 2005 when the island opened for business, 8,000 people ventured into this newly discovered territory; this summer the Trust expects 400,000 according to spokesperson Ms. Elizabeth Rapuano. It helps that the U.K.’s popular Prince Harry has played polo on Governor’s Island for the past two years in a charity polo event. Read More »


Other Power Women – A View from Eurasia

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I was recently a reporter on the Forbes Power Women list; indeed I have been working on the list since its inception five or so years ago. This year, the list is a bit different; glammed up to be sure.

If I would be able to add to the list, I’d definitely look at some players from Eastern Europe and Central Asia making the list a more global. (in no particular order):

*Roza Otunbayeva – Kyrgyzstan’s parliamentary elections are scheduled for this weekend with over 3,000 candidates running for office. Otunbayeva has had a huge role in making this happen. Her interim government took over after the April ouster of former dictator, Kurmanbek Bakiyev. She removed restrictions on independent media and helped ratify a new constitution in June despite ethnic violence that erupted that month. She will lead the country as president until 2011. The mineral rich nation may offer an alternative to China’s dominance in rare earth metals; Otunbayeva will play a large role in developing mining and other economic policies.

*Yulia Tymoshenko – Don’t dismiss the former (two-time) Ukrainian prime minister and one-time presidential candidate. Now leading the opposition, Yulia continues to be a thorn on the side of the current Yanokovych government insisting Ukraine maintain ties with the West.

*Dinara Kulibaeva – Daughter of Kazakhstan’s president for life, Nursultan Nazarbaev, is a billionaire through her holdings in Halyk bank and married to a potential future leader of Kazakhstan, Timur Kulibaev. Though nothing is certain because Nazarbaev keeps his succession close to his chest, clearly Dinara and Timur will remain among the nation’s future power elite.

*Mounissa Chodieva – Daughter of Kazakhstan billionaire, Patokh Chodiev, Mounissa has previously been dubbed by UK papers as Britain’s “first female oligarch.” She and her father, as well as other partners, minted money when Eurasian Natural Resources went public. As head of the company’s investor relations team, Mounissa is heavily invested in managing the company’s image and messaging. I worked with Mounissa several years ago when I wrote a profile of the company prior to IPO and can attest she will continue to be a mover and shaker.

Grazyna Kulczyk – One of Poland’s richest women is know for her support of the arts and for taking Poland up a notch in the contemporary art world. Since 2007, part of her collection has been shown in her redbrick shopping mall, the Stary Browar, a Prussian-era brewery. She also invested in a new conceptual hotel, Blow Up 5050 –  both a luxury hostelry and an electronic-art installation.

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Rich Lists

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This week the Forbes 400 Richest Americans list came out (which I worked on) amidst the backdrop of the glamorous Clinton Global Initiative. Meanwhile most Americans are doing poorly – recent data from the Federal Reserve states that U.S. household wealth fell by $1.5 trillion in the second quarter, indeed last year’s poverty rate was at a 15 year high. Unemployment is still worrisome, and most people I know are working much harder for much less. So why should we get excited about a rich list which applauds ridiculous accumulations of wealth?

There is substantial economic commentary behind the numbers. As editor Luisa Kroll notes in her intro, more than half of the leaders on the list increased their fortunes. That means money is being made, which means hope for the U.S. economy. As one former editor of the list used to say, if the people on the 400 make money, it trickles down and the rest of us make money. Tech is one area that remains hot and should be the focus of U.S. investment in education and R&D spending.

Another rich list that I recently worked on, Thailand’s 40 Richest, tells an even more interesting tale. The country faced political uproar in May that saw its stock exchange set on fire. Yet the economy rebounded well beyond where it was a year ago. Behind the surface political instability is a nation which finds balance in its long reigning monarch, King Bhumibol (who happens to be the world’s richest royal). Rising incomes are also boosting businesses. Both factors have led investors to pour money into the market. But whether King Bhumibol’s successor will have the same effect when the time comes is up in the air.

So then you can get into the celebrity and drama which is why Warren Buffet appears with Jay-Z on the Forbes 400 web page. Shakespeare would also have a field day:  fallen titans, divorce, mental illness. Have a read.

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Ukraine’s Gas Wells and Windmills

Ukraine is currently debating grain quotas and the jury is still out on the country’s new president but the energy sector is making waves.

Poland’s richest man, billionaire Jan Kulczyk, who bought into Ukraine’s natural gas production in June, has already started drilling. Kulczyk Oil Ventures launched the M-19 well at the Makiivka gas deposit in Donetsk region.

Earlier this summer, Kulczyk Oil Ventures, through its subsidiary, Loon Ukraine Holding, bought a 70% stake in of one of Ukraine’s largest private producers of natural gas, KUB-Gas, for $45 million. Kulczyk Oil Ventures, which went public in May on the Warsaw Stock Exchange (symbol: KOV); used part of the proceeds from the IPO to close deal in Ukraine.

In a press release, Tim Elliott, the President and Chief Executive Officer of Kulczyk Oil, stated. “We are pleased to be starting the drilling of our first well in Ukraine only a few months after closing our acquisition. The timely implementation of this first step in our plan to increase the production and reserves of KUB-Gas was made possible by the diligence and teamwork of the technical and operational teams of both KUB-Gas and Kulczyk Oil.”

Meanwhile, startup, UkrWindEnergo, just announced it is partnering with New Power Technologies to jointly develop, own and operate a 400 megawatt wind power park in Sovetskiy District, Autonomous Republic of Crimea, Ukraine. In August, Ukrainian President, Viktor Yanukovych, stated he was focused on bringing such projects to Crimea.

Ukraine’s wind potential, according to The Institute of Energy, Dnepropetrovsk State University, is estimated at about 140,000 wind turbines with up to 10 kWh each in annual capacity. Currently, the Ukrainian Wind Energy Association says the total capacity of wind power plants set up in the country is 1,200 kWt.


Feeling War

Yesterday’s New York Times Week in Review Article: “The War – A Trillion Can Be Cheap” made a very insightful point about the fact that since we do not feel the war, we are divorced from it. Meanwhile it is draining our collective coffers at a startling rate.

Meanwhile I am currently reading, “The Balkan Trilogy,” by Olivia Manning which chronicles the lives of Harriet and Guy Pringle as they live through World War II, first in Romania, then escaping to Greece (which is where I am in the book). The semi-autobiographical tale makes you feel the privation wrought by war – the lack of food (as the Greeks fight the Italians all the best food goes to the soldiers, what is left is intestines), the lack of comforts like a coat for winter (Harriet, having had to flee Romania when the Nazis occcupied the country fled without her one winter coat, and wonders as the Greek winter sets in if she will have the money to buy another.)

How lucky are we today to not feel war as the NYT points out  – to have the choice of meals and closets full of clothes. We should not forgot the toll previous wars wrought, and should be more thoughtful about staying on our current course.


Ukraine Econ Upturn As its Billionaires Start to Raise Cash

Ukraine’s youngest billionaire, Kostyantin Zhevago, who almost lost his iron ore producer, Ferrexpo, when markets crashed two years ago, is back raising cash. According to Millenium CapitalFerrexpo completed its road-show July 16 planning to place Eurobonds worth $500 million. The company plans to ramp up production by 50% over the next five years, and has the iron ore reserves to do so. ADDENDUM: It appears the Eurobond issue has been postponed.

This follows on the heels of fellow billionaire, Rinat Akhmetov, and the announcement that his steelmaker Metinvest raised $700 million via syndicated loan.

Ukraine has had success recently, negotiating a new $14.9 billion loan program with the IMF. As a result, Fitch upgraded Ukraine’s sovereign bonds stating “The IMF agreement improves the sovereign’s financing flexibility and will unlock additional funds from other international financial institutions.”

There is still a long-way to go — Ukraine’s real GDP fell 15.1% in 2009, according to Fitch, marking the second-worst economic performance after Latvia of the over 100 sovereigns rated by the agency — but billionaire confidence appears to be back up.


Gold Tussle: Russia vs. Kazakhstan

Plans by the owners of Russia’s top gold producer, Polyus Gold, including Russian billionaires, Mikhail Prokhorov and Suleiman Kerimov, may be thwarted in their efforts to buy Kazakh gold miner KazakhGold Group.

The Kazakh government this week annulled a merger of the two evoking the 2007 Subsoil Law which allows the government to annul any contract involving the use of subsoil resources in the country if it is of national strategic importance the government. The government is reportedly concerned over a low deal price.

If the deal were to go ahead, the merged company – to be called Polyus Gold International Limited – is expected to become one the world’s leading gold mining companies, whose shares will trade on the London Stock Exchange as a single company. (Polyus Gold plans to delist its ADRs from the LSE.)

Event timeline:

*December 2008, Polyus Gold announced first offer for stake in KazakhGold; estimated above $700 million

*April 2009, negotiations announced to adjust offer. In a statement KazakhGold wrote, the “Company’s production levels and working capital levels have deteriorated substantially more rapidly than previously anticipated and KazakhGold requires a funding commitment, in order to continue to operate as a going concern in its current form. Due to these wholly exceptional circumstances, the terms of the Proposed Partial Offer as announced on 29 December 2008 are no longer valid, however, KazakhGold and Polyus Gold remain in active negotiations to agree revised terms in respect of the Proposed Partial Offer.”

The price was adjusted down about 60%.

*July 2009: Polyus Gold, through its indirect wholly-owned subsidiary, Jenington International Inc. (“Jenington”), made a recommended partial offer to acquire 50.1% of the issued and to be issued share capital of KazakhGold. The Partial Offer was declared unconditional on 14 August 2009.

*June 25, 2010:  KazakhGold Group Limited (“KazakhGold”); its wholly-owned subsidiary, KAZAKHALTYN MMC JSC (“Kazakhaltyn”); and Jenington International Inc., a wholly-owned subsidiary of OJSC Polyus Gold (“Jenington”); commenced proceedings in the High Court of Justice (Chancery Division) in London against five members of the Assaubayev family who were former directors of KazakhGold; Gold Lion Holdings Limited (“Gold Lion”) and Hawkinson Capital Inc., (“Hawkinson”). Gold Lion was, prior to completion of the Partial Offer by Jenington to acquire 50.1% of the issued share capital of KazakhGold in August 2009, the principal shareholder of KazakhGold. The defendants include Kanat Assaubayev, who was Executive Chairman of KazakhGold until the completion of the Partial Offer, and Aidar Assaubayev, the former Executive Vice Chairman, who continued as a director until his appointment was terminated on 17 June 2010.

*June 30, 2010, KazakhGold and Polyus Gold, which owns 50.1% in KazakhGold via its subsidiary Jenington International Inc, announced a reverse merger, under which KazakhGold would acquire its parent company Polyus Gold. Under the scheme, one share of Polyus Gold will equal 9.26 Global Depositary Receipts of KazakhGold, and one American Depositary Receipt of Polyus Gold will equal 4.885 GDRs of its subsidiary.



Ukrainian billionaires behind Privat Group Take on Russian Billionaire Makhmudov

Ukrainian billionaires, Henadiy Boholyubov and Ihor Kolomoyskyy, via Mantara Holding, a company close to the their jointly-owned Privat Group, may be in for a fight over Ukrainian locomotive-maker, Luhanskteplovoz, with Russian billionaire, Iskander Makhmudov.

Mantara Holding filed a lawsuit with the State Property Fund of Ukraine (SPF) to cancel the sale of Luhanskteplovoz to Transmashholding, Russia’s largest maker of locomotives and rail equipment, which is owned in part by Makhmudov.

According to Millenium Capital analysts, Privat “seems to be determined to embark on the protracted litigation proceedings to void the privatization sale results.” Mantara Holding is reportedly willing to pay as much as UAH 600mn (about $77 million) for Lukanskteplovoz compared to the UAH 410mn (about $52 million) paid by Transmashholding. In fact, Transmashholding bid only slightly above the original asking price of UAH 400 million when the tender was held in mid-June for a 76.001% stake in the Ukrainian rail-maker.

In Boholybov and Kolomoyskyy’s corner: Serhiy Tihipko, the Deputy Prime Minister for Economic Affairs, who stepped in this week to express concern over the transparency of the Luhanskteplovoz sale. According to Millenium, this may up their chances of taking back the asset from Russian interests.

Yet another round in Ukraine vs. Russia.


Luxe travel not set to recover until next year

Global Markets recently interviewed Mark Tamis, COO of Setai Hotels and Resorts, about his expectations for the global travel industry and how Setai, a luxury concept targeting “the world’s most coveted and affluent consumers,” stays on top. An excerpt of the conversation follows:

Global Markets: Let’s talk about the past several years in travel.

Tamis: “Challenging would be an understatement. We felt it coming two years ago but never understood the full magnitute in the decline of travel. The very top of the market was severely affected. At that end, people don’t have to travel or if they travel they can choose scaled down accomodations; so the higher up you are in a category the more affects you will feel.”

Global Markets: Are we seeing a recovery?

Tamis: “Knock on wood we’ve seen the bottom. We’re fairly conservative. 2010 is more about stabilization. 2011 is more of a recovery, 2012 a strong recovery. But it won’t be til 2013 that we see the same numbers in travel that we saw in 2007/2008.”

“For example, Miami is such a Northeast travel market. As Wall Street recovered and confidence returned, we started to see an uptick in the first two quarters of the year. We’re also getting the European and Latin American travellers.” [Setai Group operates The Setai in South Beach, one of the world’s most exclusive hotels] Read More »