NIG Prospectus - London Stock Exchange

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Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Combined National Industries for Energy KSCC intends to concentrate on power generationthrough independent power plants and independent water power plants, together with water(mainly desalination) and wastewater and other utility related projects such as district cooling.Combined National Industries for Energy KSCC hopes to capitalise on the investmentopportunities in the water sector and the power generation sector. In particular, NIG expects thedemand for electricity to grow over the next ten years and accordingly expects governments toinvest in increasing their electricity generation capacity.Oil and Gas ServicesProclad is a specialised engineering, designing, manufacturing and project management companyand has provided services to multinational and regional operators and contractors in the oil, gasand power generation industries through its facilities located in Europe, the Middle East and theFar East for over 30 years. NIG acquired a 100 per cent. stake in Proclad when it acquired BI Groupin 1996.Proclad provides the oil, gas and power generation industries with the concept of turnkey withservices offered from the level of oil or gas wells up to the storage tanks’, including the processeswhich take place in between. Proclad’s principal activity is therefore the manufacture and supplyof clad pipe, bends, elbows, flanges and all associated clad piping products.Proclad’s strategy lies in providing cost effective and competitive services to the oil and gasindustry. Proclad believes its competitive advantage lies in the fact that it provides an integratedcorrosion resistant solution, by offering a total packaged supply of pipes.Within the Proclad group, there are six UK based companies, a company based in the UAE and acompany based in China. It also has two companies established in Singapore where it can havebetter access to international markets. Proclad is also in the process of building a factory in JebalAli, in the UAE.STRATEGIC AND FINANCIAL INVESTMENTSThe composition of NIG’s investments as at 31 December 2006, 2005 and 2004 was as follows:200611112005111120041111(KD million)Investments in joint-ventures (1) ................................................ 285 253 762Investments in associated companies .................................... 125,912 120,911 62,628Available-for-sale investments.................................................. 426,399 368,451 125,048Investments at fair value through statement of income ........ 456,165 386,741 222,825Murabaha and wakala investments (2) ...................................... 57,608 – –Investment properties (3) .......................................................... 267 2,267 2,556Notes:(1) This represents a joint venture in Mexico with the specialist engineering group in the UK, which manufactures gasmetres.(2) These investments pay a return of between 6 and 8.5 per cent. per annum and mature during 2007.(3) This represents properties in the UK.NIG classifies its investments as strategic investments and financial investments. Strategicinvestments are usually investments made in one of the industries of the operating businessesand in which NIG will take active involvement, for example by having a representative on the boardof directors of such company. In comparison, NIG will have limited or no involvement in theoperation of its financial investments. Such investments are usually in funds or debt and otherfinancial market products. Strategic investments may be accounted for as associates (where NIGhas significant influence but not control) or certain available for sale investment securities.78
Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Financial investments may be accounted for as available for sale investments or as investments atfair value through the statement of income. Investments at fair value through the statement ofincome are initially recognised at cost, being the fair value of the consideration given excludingtransaction costs. These investments are either “held for trading” or designated as investmentsat fair value through the statement of income when acquired. Held for trading investments areacquired principally for the purpose of selling or repurchasing them in the near term or are a partof a portfolio of identified financial instruments that are managed together and for which there isevidence of a recent actual pattern of short term profit taking. After initial recognition, investmentsat fair value through statement of income are re-measured at fair value and changes in fair valueare recognised in the consolidated statement of income.Available for sale investments are those investments that are designated as available for sale orare not classified as another type of investment. NIG’s policy is that unrealised changes in the fairvalue of available for sale investments are booked in shareholders’ equity as cumulative changesin fair value until realised, when the realised gain (or loss) is booked in the profit and loss account.Strategic InvestmentsNIG’s principal strategic investments are:Kuwait Cement Company (KCC)In 1968 NIG acquired a 22 per cent. stake in KCC, a company listed on the KSE, and the largestcement company in Kuwait. KCC’s production plant was commissioned in 1972 with an initialgrinding capacity of approximately 300,000 tonnes per annum, which has since increased to 2million tonnes per annum. KCC has embarked on a reverse integration project to produce clinkerwith a production capacity equivalent to 1.8 million tonnes per annum at a cost of US$142 million,which is now operational. The objective of the clinker is to harness the natural resources availablefor clinker production in Kuwait and reduce dependency on raw material imports.Mabanee Company SAK (Mabanee)In 1994, NIG acquired 100 per cent. of Mabanee’s shares from the Kuwait Investment Authoritywith a view to participating in the construction and contract management sector. Pursuant to theacquisition, Mabanee’s capital was increased to KD 30 million. In 2005, NIG sold 51.5 per cent. ofits holding through a rights issue and new management was put in place to steer Mabaneetowards more value added activities in real estate development.In 2004 and 2005, NIG sold 36.6 per cent. of the shares in Mabanee, leaving it with a holding of17 per cent. The aggregate profit realised on the sale was approximately KD 73 million.Kuwait Rocks Company (KRC)In 1996, NIG acquired 38 per cent. of KRC, which is one of the leading Kuwaiti companies dealingin the import and sale of gravel and rocks. KRC has been successful in marketing Gabro gravel androcks in Kuwait, and has concluded several long term contracts to supply governmental projects,particularly those related to building roads.Industrial Bank of Kuwait (IBK)In 1973, NIG acquired a 4.5 per cent. stake in the Industrial Bank of Kuwait (IBK). IBK wasestablished in 1973 with the primary goal of promoting industrial development in Kuwait byinitiating projects and investments in promising sectors, financing new and existing projects inKuwait and the Gulf region (especially where Kuwaiti interests are involved) and bringing newtechnology to Kuwait.79
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NIG Prospectus - London Stock Exchange

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