Metito takes on new capital ahead of 2012 IPO
- From: Vol 11, Issue 7 (July 2010)
- Category: General
- Region: Middle East
- Country: Israel
- Related Companies: International Finance Corporation and Metito
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A $40 million cash injection from international investors will help Metito Utilities to broaden its project portfolio. It will also act as a bridge to a planned IPO for Metito Holdings in 2012.
Emirates-based plant developer Metito Utilities has taken on $40 million in new preference share capital in order to fund near-term growth ahead of a partial IPO for the parent company in 2012.
The International Finance Corporation (IFC) – which has a minority equity stake in Metito Holdings and already acts as a debt provider to Metito Utilities – will inject $20 million of fresh capital, while a mezzanine fund run by NBK Capital in Kuwait and New York-based Greenwich Street Capital will subscribe for a similar amount.
“The pref share gives us the ability to continue the rapid growth that Metito Utilities has been experiencing, and to invest into developing, building and acquiring more water and wastewater projects,” said Rami Ghandour, executive director of Metito Utilities.
“This transaction is effectively designed to be a bridge to IPO; as we continue to grow Metito Utilities, there’s a continual need for further investment.”
The five-year instrument will carry a fixed dividend component, and comes with conversion rights on expiry which equate to 12% of Metito Utilities’ common equity. Should an IPO take place as planned prior to the maturity of the new securities, they will become convertible into stock of Metito Holdings – the most likely entity to be listed – at a conversion ratio to be determined nearer the time.
The potential exists to issue another $20 million of preference shares ahead of the IPO, though this depends on the ongoing needs of the business.
A compound annual growth rate in excess of 100% at the Metito Utilities level between 2006 and 2009 helped the group to generate just under $400 million of revenues in 2009.
Although plans for a stockmarket flotation are still at a relatively early stage, Ghandour’s vision for Metito Utilities – which functions as the owner-operator of water and wastewater treatment plants within the Metito group – means that access to the public capital markets will be vital in order to provide the necessary funds to invest in future projects.
Banks have not yet been chosen to manage the issue, although Bank of America Merrill Lynch may already have a foot in the door, having overseen the latest funding exercise.
While an IPO would give 60% owner Gulf Capital the opportunity to liquidate at least part of its stake in Metito Holdings, “the driving force for us would be to fund the expansion of Metito Utilities, which is investing heavily into assets,” Ghandour explained. “In addition to developing grassroots BOT or TOT-type projects, we’re also interested in acquisition opportunities where the acquisition is predominantly asset-based,” he added.
Ghandour sees the MENA region and China as key areas for the deployment of the new mezzanine funds, although the wider Asian market also holds appeal.
“We have our existing business in Indonesia, and we are interested in complementing that with other regional geographies, for example Thailand,” he told GWI. “India is the next large market for us – we really see it as a market that is quite key in terms of where things go from here.”
Within MENA, Metito Utilities is interested in pursuing the crop of wastewater BOTs that are currently on offer in Egypt, while Metito Berlinwasser, the joint venture which the group formed with Berlinwasser International in 2008, is also eyeing management contracts in Oman, Saudi Arabia and Bahrain.
“Management contracts are very much on the agenda,” says Ghandour. “As the various government entities across the [MENA] region have started looking at how they engage the private sector more, we’ve seen the importance of becoming a full utility service provider, and that’s really where our partnership with BWI was conceived.”