Citadel Capital, a leading private equity firm in the region, has reported strong fundraising in 2010 with $363.6 million in new assets under management (AUM), including $97 million in new principal investments.

Announcing this on Wednesday, Citadel Capital said it saw a sharp narrowing of execution risk as the total AUM rose 9.9 per cent to EGP23.2 billion ($4 billion) in the full year.

“As we have proven during past episodes of global and regional turbulence, we know when to take very calculated risks and when a more cautious approach is in order,” remarked Citadel Capital chairman and founder Ahmed Heikal.

"The firm’s focus in 2010 was on nurturing our existing investments as we worked to minimize execution risk across our 14-country, 15-industry footprint," Heikal stated.

"As a result, we began operations at seven greenfield projects while recording substantial new fundraising that accounted for upward of 27.5 per cent of all private equity funds raised for investment in the Mena last year," he said.

This emphasis will carry over into 2011 as we take steps to minimize the economic impact of the Egyptian Revolution on our platform investments while remaining watchful for unique investment opportunities in the medium term," he added.

In light of recent national and regional developments, the company said it has adopted a conservative position for 2011.

"Part of this process is the frank admission that two of our oil exploration platforms are under-performing. They sit on very substantial reserves, but ongoing technical challenges at NOPC / Rally in particular have so far stalled efforts to bring these reserves into production.

"Accordingly, we have decided this is an appropriate moment to take a conservative outlook on these two platforms, both of which will continue as operating companies," he added.

On a standalone basis, Citadel Capital accordingly reported a net loss of $51.5 million (EGP 298.3 million) for FY10 on revenues of $28.5 million (EGP 165.0 million) as a result of non-cash charges associated with write-downs taken as a result of a more conservative outlook.

“That said, the oil and gas investments we are writing down are held by a subsidiary two levels away from Citadel Capital SAE,” noted chief financial officer Ahmed El Shamy.

“Writing-down those investments from the lowest level makes the non-cash charges appear fully on the consolidated statements but not on the standalone financials," he added.

As a result, Citadel Capital reports a net loss of $241.7 million (EGP 1.4 billion) on a consolidated basis.

The portfolio net asset value (PNAV) of Citadel Capital’s principal investments declined 28.6 per cent from first half of 2010 to $857.8 million (EGP 5.0 billion) on the back of a full impairment on NOPC/Rally Energy, a 50 per cent impairment on National Petroleum Company and a broadly conservative outlook on the economy.

Management has also opted to refrain from providing guidance on the value of Citadel Capital’s asset management business (AMV) as a result of the current lack of visibility on the fundraising and exit climate. Analysts and fund managers may value this component of the business at their own discretion.

“PNAV is a snapshot based on a hypothetical exit today of each of these investments. Our emphasis in the period ahead is on the continued growth of each of our 102 platform and portfolio companies, including those on which we have increased our impairment," said Heikal.

The period ahead will be challenging, but it will also carry with it opportunities,” he added.

Citadel Capital is also pursuing regulatory approval for a $175 million (EGP 1 billion) rights issue at par value (EGP 5 / share), said the company chief.

“The current climate has prompted us to postpone plans to IPO one or more platform companies this year and has seen us implement cost-control measures at the Citadel Capital and platform / portfolio levels,” Heikal said.

"Obviously challenges remain. Against that backdrop, we have called the rights issue to secure additional liquidity to support our growth even as we see exits delayed by 12-18 months. Citadel Capital Partners would participate pro-rata in the rights issue, which has already been advanced on company's books," he added.-TradeArabia News Service