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2| pfi | Middle East Report 2009 F1 financing

Racing to the chequered flag


n January 2009, the Abu Dhabi government unveiled their Economic Vision 2030 designed to shape the structure of the fast growing Emirate over the next 20 years. Despite worldwide economic gloom, gross domestic product is forecast to grow by 7% over the next five years and in particular, the plan calls for

a diversification away from traditional oil and petro- chemical related revenues, with oil planned to contribute only 50% to growth within the next 10 years. High levels of economic growth and the development of the plan have led to a robust investment programme in infra- structure, industry, real estate, finance and tourism, led by both government institutions and private equity houses, a far cry from the traditional petrochemical industry invest- ment that has been the bedrock of the country’s fortunes. Real estate and tourism projects alone had an estimated value of approximately US$200bn by the end of 2009, causing a surge in the construction sector that is currently still evident despite the downturn elsewhere in the Gulf.

The Formula 1 motor circuit financing Financing options have supported this growth through var- ious project, development and structured finance alter- natives available to developers and contractors. These bespoke products have been used on several high-profile projects in the last two years. Following the announcement by the Formula One Management that Abu Dhabi had secured the rights to hold a Formula 1 Grand Prix from 2009 to 2016, one of the most high-profile examples of innovative project finance is the development, by Aldar Properties PJSC, of the 5.6km Formula 1 motor racing cir- cuit on Yas Island, a 2,550 hectare natural island. The cost of project and connected development, designed to host the Abu Dhabi Grand Prix in 2009, is approximately US$ 1.4bn. Aldar awarded the construction project to Cebarco-WCT WLL, a joint venture between Cebarco Bahrain SPC of Bahrain and WCT Berhad of

The financing of Abu Dhabi’s ambitious Formula 1 rac- ing circuit will bring signifi- cant benefits to the Emirate’s rap- idly growing economy. By Jody Waugh, a senior asso- ciate in the banking and finance team at law firm Al Tamimi & Company.

Malaysia. Both these leading construction firms had sub- stantial experience of this type of project, having built the Formula 1 circuits in Bahrain and Malaysia respectively. AN F1 Grand Prix circuit is seen as a considerable status symbol as well as a huge boost to national profile and tourism, placing a country firmly on the world stage. His- torically, the championship tended to focus on the famous tracks from traditional European racing countries such France with the Monaco Grand Prix, the UK with Silverstone, Italy with Monza, and Germany with Hokkenheim, even the Americas and Japan were seen as relative newcomers. With the economic growth of China in the past decade as well as the consolidation of the economic development of other Far Eastern countries in the Pacific Rim, being award- ed a place on the circuit has gradually become an article of national pride, much like having a flag airline carrier was in the late 1950s.

Countries such as China and Malaysia have expended enor- mous efforts to be awarded a prestigious place in the Cham- pionship, closely followed by Bahrain, the first Middle Eastern country to join this exclusive club. Since losing "first place" in the region, the Abu Dhabi track has strived to be striking and impress the world both from a sporting and an architectural point of view.

The challenging 5.55km circuit will include a high- speed permanent race track for multiple racing use, as well as a non-permanent section that can be split in two, snaking through a 2,500 hectare tourism and leisure development comprising residential properties, mixed developments, and commercial spaces, including the first Ferrari Theme Park in the world. The permanent/non-per- manent design can be split into smaller tracks of 3.1km and 2.4km in length, which will operate simultaneous- ly as well providing the F1 race with all the drama of a street circuit such as the Monaco Grand Prix. This also allows the use of the permanent track for other motor- sports throughout the year.

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