German Investments

Great Sheikhs of Qatar

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Qatar is revealing itself to be a major investor in Europe.
  • Why it matters

    Why it matters

    The Qatar Investment Authority has targeted European businesses to increase its profits and presence but may now be turning to Asia.

  • Facts

    Facts

    • According to the Sovereign Wealth Fund Institute, the QIA is worth $256 billion.
    • In Germany, the fund holds shares in Siemens, Volkswagen and Hochtief, a construction firm.
    • QIA plans to invest $15 to $20 billion in Asia in the next five years.
  • Audio

    Audio

  • Pdf

For at least 15 years now, Qatar’s sovereign wealth fund, the Qatar Investment Authority, has been quietly taking over huge swathes of European business. Billions of riyals have flowed from the Arabian desert state to countries from Britain to Greece.

But despite sometimes overt displays of wealth (it is buying London’s Canary Wharf banking district for $4 billion), little is known about the QIA and its direct investment arm, Qatar Holding.

Many in Germany and beyond would be surprised to learn of the extent of Qatar’s interests in Europe’s largest economy, which now range from washing machines to luxury cars and construction. So what exactly is the QIA, who runs it and just how far does its influence extend in Germany?

Established in 2005, the sovereign wealth fund was tasked with investing the revenues from the country’s oil and gas business in a solid manner — and for the long term.

According to the Sovereign Wealth Fund Institute, the QIA is worth $256 billion. Since December 2014, it is back in the hands of a member of the Qatari ruling family, Sheik Abdullah bin Mohamed bin Saud Al Thani, after the year-long tenure of Ahmad Al Sayed, a private citizen.

The fund has something of a cowboy reputation because, in contrast to other sovereign wealth funds, it has taken on more debts in order to leverage its investments.

“The fund has a new management that seems to be more focused on returns, but the course is not yet absolutely clear,” was the word from another sovereign wealth fund.

The fund has something of a cowboy reputation because, in contrast to other sovereign wealth funds, it has taken on more debts in order to leverage its investments. The expectation is that it will not be easy to shake off this image.


Video: A quick guide to the Qatar Investment Authority.

 

The major part of the fund’s capital is invested outside of Qatar, mainly in Europe. In Germany, the fund holds shares in Hochtief, a construction firm, engineering giant Siemens and carmaker Volkswagen.

“All companies in which Qatar has a stake value this collaboration,” said Germany’s chancellor Angela Merkel at a meeting last summer with the Emir of Qatar.

The fund also has large interests in Britain. As well as the Canary Wharf purchase, its real estate portfolio includes the spectacular London skyscraper The Shard and the luxury department store Harrods. It is also engaged in the British bank Barclays, and a part owner of the Swiss bank Credit Suisse.

As interesting as Europe is for the sovereign wealth fund, the intention is to focus increasingly on Asia. QIA plans to invest $15 to $20 billion in the region in the next five years. A joint fund with China’s Citic Group worth $10 billion will help in this undertaking.

It will be hoping to use its experience in Germany as a platform. The Qataris acquired their stake in Hochtief in 2010 when Germany’s largest building company came calling for protection from a hostile takeover bid by the Spanish firm ACS.

 

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German Chancellor Angela Merkel with the late Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani. Source: Action Press

 

The Qataris took little convincing and bought a 9.1 percent share for around €400 million. The takeover ultimately did not work out, but the Qataris seemed contented nonetheless.

“We want to be a constructive mediator and create a win-win situation for everyone,” said Mr Al Sayed, who was head of Qatar Holding at the time.

In return, Qatar expects assistance and know-how from Hochtief for its gigantic infrastructure projects. Hochtief built Barwa Commercial Avenue, a gigantic shopping mall on the outskirts of the Qatari capital Doha, and its subsidiary Vicon is planning construction projects for various clients.

QIA now owns 11.1 percent of Hochtief, and since 2011, Abdulla Abdulaziz Turki Al Subaie, the managing director of Qatar Railways, has represented Qatar on its supervisory board. He is described as an “extremely active member” who works “quite effectively.”

As interesting as Europe is for the sovereign wealth fund, the intention is to focus increasingly on Asia.

A little less than three years ago, Qatar was revealed to be an investor in Siemens after its stake rose to the three percent notification threshold, valuing it at €2.4 billion ($2.7 billion).

The investor was welcome at the Munich-based firm as it does not have any anchoring shareholders to give it stability. The only other major shareholder is the Siemens family with a 6 percent stake.

Moreover, Siemens knew at the time that Qatar is not an aggressive stakeholder that pokes its nose into strategy. “This is a silent participation,” said a high-ranking manager.

In commercial terms, Arabia is quite important for Siemens. In 2014, the company was awarded a contract for six transformer stations in Qatar with a value of a quarter billion dollars.

Two years earlier, there was an order from the Qatar Foundation for a streetcar system in Doha. This was part of the preparations for the World Cup soccer competition being held in the country in 2022. Moreover, Siemens can look forward to orders for gas-fired power plants, subways and airport technology.

Meanwhile, over in Wolfsburg, central Germany, two Qataris sit on the supervisory board of the Volkswagen Group: Hussain Ali Al Abdulla, the vice-chairman of Qatar Holding, and Mr. Al Sayed, who although no longer head of the QIA is still a minister of state.

 

Qatar's Investment Power-01

 

They are there to watch over the QIA’s 17 percent ordinary stake in the company, which owns Porsche and Audi. Since 2009 it has become increasingly lucrative.

The German newspaper Der Spiegel recently calculated that up to now, Qatar has attained book profits of more than €8 billion from its investment in VW. That figure was based on a share price of €190. On Monday, VW shares were selling for more than €228 — another 20 percent higher.

The extent of Qatari investment in Germany is in contrast to German involvement in the desert state. A few years ago, it was mainly German firms such as Siemens, Hochtief and railways operator Deutsche Bahn that were supposed to build Qatar into a modern society.

The ardor has cooled somewhat in the meantime. Although German companies are still involved, others are doing so more successfully.

“We are being outstripped by the Koreans, Japanese, Chinese, Americans and partially by the French,” said one German industry representative in Doha. He knows why too. “The loud criticism from Germany about the [labor] conditions in the Gulf have been heard loud and clear in Qatar.”

To try to smooth the situation over, German vice chancellor Sigmar Gabriel is heading to the Persian Gulf later this month with a large trade delegation. He will be hoping the QIA isn’t yet spent up.

 

The authors are Handelsblatt correspondents or editors in Düsseldorf, Munich, London and Frankfurt, covering finance and markets. To contact the authors: hoepner@handelsblatt.com, schier@handelsblatt.com, schnell@handelsblatt.com, slodczyk@handelsblatt.com, weishaupt@handelsblatt.com

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