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Tue 14 Apr 2009 12:40 AM

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Gulf Finance House seeks $600mn for energy projects

Bahrain-based Islamic bank looking to finance Libyan and Kazakh projects.

Bahrain-based Islamic investment bank Gulf Finance House (GFH) is seeking $600 million for energy projects in Libya and Kazakhstan this year, a company executive said on Monday.The investment bank was unlikely to raise more than a total of $1 billion in funds in 2009, compared with $1.8 billion raised in the previous year, Nabeel Kazerooni, head of private equity, told the Reuters Islamic Banking and Finance Summit in Bahrain.

"In total for GFH last year we raised $1.8 billion. This year we are already in the market for $600 million, maybe - if we are lucky - this year (it will be) less than $1 billion," he said.

Of the $600 million sought, half was intended for GFH's Energy City Libya project, while the other half would go to its undertaking in Kazakhstan, Kazerooni said.

In April last year, the Kazakh government said GFH would build the economic infrastructure of a petroleum-related research and education area on the Caspian Sea coast worth $10 billion.

This was followed last November by GFH saying it would arrange financing for a $5 billion economic zone for energy companies operating in Libya.

The idea of these projects was to help oil majors operate in countries with major hydrocarbon wealth but perhaps lacking in the necessary infrastructure, Kazerooni said.

"All these international oil companies want to come but there is not accommodation for their staff, there is no proper office space, no proper warehousing, there is no proper infrastructure, so by offering this zone, you are providing a platform for those companies to come and settle and explore the resources," he said.

The money being raised is for the first phase of the Kazakh and Libyan projects, which will focus on putting in place basic infrastructure, Kazerooni said.

If more funds were raised in 2009 these would be channelled into sectors viewed as resilient by the bank, he said.

"This year if we are successful at closing deals, most likely it will be in the defensive sectors, such as healthcare, education, utilities and the like. It will not be real estate and real-estate related unless it's distressed," he said.

As risk appetite has taken a severe beating in the global financial downturn, deal sizes in private equity are decreasing, Kazerooni said.

"My focus is on the mid-market, what we call deal sizes from between $50 million to $150 million. This is where today it's easier to do deals (and) opportunities are more readily available compared to the mega-deals from a few years ago," he said.

The bank swung to a $10 million net loss for the fourth quarter on provisions it took on investments. (Reuters)

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