Tabreed 06 Prospectus - London Stock Exchange

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RISK FACTORS Prospective investors should consider carefully the risks set forth below and the other information contained in this Prospectus prior to making any investment decision with respect to the Certificates. Each of the risks highlighted below could have a material adverse effect on the business, operations, financial condition or prospects of the Issuer and Tabreed, which, in turn, could have a material adverse effect on the amounts which investors will receive in respect of the Certificates. In addition, each of the risks highlighted below could adversely affect the trading price of the Certificates or the rights of investors under the Certificates and, as a result, investors could lose some or all of their investment. Prospective investors should note that the risks described below are not the only risks that the Issuer and/or Tabreed faces. The Issuer and Tabreed have described only those risks relating to their operations that they consider to be material. There may be additional risks that they currently consider not to be material or of which they are not currently aware, and any of these risks could have the effects set forth above. Risk Factors relating to Tabreed Customer Concentration of Tabreed Tabreed’s customer base is concentrated in one major customer, the UAE armed forces, which currently accounts for approximately 84.4 per cent. of Tabreed’s district cooling revenues. Although the UAE armed forces is an entity of the investment grade rated UAE government, Tabreed remains exposed to the risk of any future change in government policy on the use of district cooling systems in military installations. Tabreed’s reliance on one major customer is expected to remain the same over the medium term, as its future projects now under consideration are mainly for the UAE armed forces. Contracts with the UAE Armed Forces As mentioned above, much of Tabreed’s district cooling revenue is derived from a master contract with the UAE armed forces. If the UAE armed forces were to be in breach of this master contract or were to take possession of a cooling plant sited on its land, it may in practice prove very difficult for Tabreed to gain full compensation for its losses before the UAE courts, especially in light of the sovereign status of the UAE armed forces and the factors described below relating to title to a cooling plant which is or becomes affixed to land in the UAE. Furthermore, Tabreed’s master contract with the UAE armed forces provides for (i) the right for the UAE armed forces to acquire the applicable plant at any time during the life of the master contract, and (ii) for the contract to be terminable by the UAE armed forces at any time when it is considered in the ‘‘public interest’’ to do so in the sole opinion of the UAE armed forces. It is unclear in such circumstances whether the amount payable to Tabreed would amount to full or adequate compensation for the loss of the master contract and, to the extent applicable, the plant itself. Tabreed’s master contract with the UAE armed forces also contains a provision which purports to require Tabreed to take responsibility for all damage to the property of the UAE armed forces, or any third party which takes place at the site of the plant, irrespective of whether the damage is occasioned by or in relation to the operation of the plant. It is uncertain whether or not a UAE court would interpret this as imposing strict liability on Tabreed for such incidents. No Fixed Contracts with Utilities Suppliers Tabreed does not have, nor will it be entering into for the foreseeable future, any fixed contract with utilities suppliers except gas suppliers. As a result, changes in regulations and operations of the utilities suppliers could all have a significant impact on profitability given the scale of consumption by Tabreed of such utilities. Corporate Disclosure and Accounting Standards The reporting, accounting and financial practices applicable to UAE companies differ in certain material respects from those applicable to similar companies in the United States and the United Kingdom. There is less publicly available information regarding securities of listed UAE companies, such as Tabreed, than is regularly published by public companies in the United States, the United Kingdom and certain other more developed markets. However, Tabreed follows IFRS accounting standards. 18
Legionnaire’s Disease Tabreed is a user of wet cooling towers. In the past, such cooling towers have been a source of legionnella bacteria which can cause Legionnaire’s disease. Whilst Tabreed mitigates this risk through rigorous chemical control of the cooling water and insurance cover, an outbreak of Legionnaire’s disease would impact the operations of the relevant plant which in turn would have an adverse effect on cash flows relating to that plant. Whilst Legionnaire’s disease has been encountered at other cooling plants in other parts of the world such as North America, no plants operated by Tabreed have been affected to date. Interest Rate Risk Most of Tabreed’s financings are floating rate exposures with the total amount of floating rate exposure as at 31 December 2005 being AED676,000,000 out of a total exposure of AED1,071,000,000. Whilst Tabreed has entered into a range of hedging instruments to mitigate this risk, significant fluctuations in interest rates could adversely impact Tabreed’s ability to service its obligations under its financings. Risk Factors relating to the Issuer Dependancy on Tabreed The Issuer is a newly established exempted limited company incorporated on 7 June 2006 and has no operating history. The Issuer will not engage in any business activity other than the issuance of the Certificates, the acquisition of the Trust Assets as described herein, acting in the capacity as Trustee and other activities incidental or related to the foregoing as required under the Transaction Documents. The Issuer’s only material assets, which will be held on trust for the Certificateholders, are currently the Trust Assets, including the obligation of Tabreed to make rental payments under the Lease Agreement and to make other payments under the Purchase Undertaking and the Istisna’a Agreement, to the Issuer in its capacity as Trustee. Therefore, the Issuer is subject to all the risks to which Tabreed is subject, to the extent that such risks could limit Tabreed’s ability to satisfy in full and on a timely basis its obligations under the Lease Agreement, the Purchase Undertaking and the Istisna’a Agreement. See ‘‘Risk Factors relating to Tabreed’’ above for a further description of certain of these risks. The ability of the Issuer to pay amounts due on the Certificates will primarily be dependent upon receipt by the Issuer from Tabreed of all amounts due under the Istisna’a Agreement, the Lease Agreement and the Purchase Undertaking and, to the extent that a Dissolution Event occurs prior to the first Periodic Dissolution Date, the receipt of the Purchase Price from the Counterparty on the first Periodic Distribution Date (which in aggregate may not be sufficient to meet all claims under the Certificates and the Transaction Documents). In the event that the Issuer is unable, on any Periodic Distribution Date, to pay the relevant Periodic Distribution Amount in full, or following a Dissolution Event, to pay the Dissolution Distribution Amount in full for failure of Tabreed to pay the Exercise Price, the Issuer shall be entitled to sell the Assets to third parties, liquidate the Authorised Investments and to the extent that the Dissolution Event occurs prior to the first Periodic Distribution Date, sell the Commodities to the Counterparty on the first Periodic Distribution Date. The resulting amount may still not be sufficient to pay to the Certificateholders the full Dissolution Distribution Amount. The Issuer will not have any other funds available to meet its obligations under the Certificates. In particular, where the Dissolution Event occurs prior to the first Periodic Distribution Date, the Purchase Price under the Undertaking to Purchase (Commodities) will only be received by the Issuer on the first Periodic Distribution Date and, therefore, Certificateholders may experience a delay in receiving any amounts in connection therewith. Limited Recourse Obligations The Certificates will represent entitlement solely to the Trust Assets. Accordingly, recourse in respect of the Certificates is limited to the Trust Assets and the proceeds of the Trust Assets are the sole source of payments on the Certificates. The Certificateholders will have no recourse to any assets of the Issuer, the Trustee, the Agents, the Managers or any of their affiliates in respect of any shortfall in the expected amounts from the Trust Assets. 19
Page 1 and 2: TABREED 06 FINANCING CORPORATION (i
Page 3 and 4: Table of Contents Page STRUCTURE DI
Page 5 and 6: above, the Dissolution Distribution
Page 7 and 8: OVERVIEW OF THE OFFERING This follo
Page 9 and 10: ‘‘Margin’’ means 1.25 per c
Page 11 and 12: Redemption for Tax Reasons accordan
Page 13 and 14: Lease Agreement Date. The balance s
Page 15 and 16: (d) fourth, only if such payment is
Page 17: Governing Law The Declaration of Tr
Page 21 and 22: Enforcement of Liabilities Ultimate
Page 23 and 24: TERMS AND CONDITIONS OF THE CERTIFI
Page 25 and 26: 3 Status - Limited Recourse 3.1 Sta
Page 27 and 28: 4.3 Late Payment Amounts Received I
Page 29 and 30: (i) the amount of any liability in
Page 31 and 32: (d) if LIBOR cannot be determined i
Page 33 and 34: 8.6 Agents act solely as agents of
Page 35 and 36: ‘‘Total Loss Event’’ means
Page 37 and 38: 13.2 The Trustee shall not be bound
Page 39 and 40: 19 Governing Law and Submission to
Page 41 and 42: transferred into the names of holde
Page 43 and 44: Issuer. Unless otherwise agreed, th
Page 45 and 46: Under the Lease Agreement, if Tabre
Page 47 and 48: USE OF PROCEEDS The proceeds of the
Page 49 and 50: * Manufacturing: Tabreed, in conjun
Page 51 and 52: * High barriers to entry. District
Page 53 and 54: Detailed customer profile of plants
Page 55 and 56: Contractual Overview Contracts for
Page 57 and 58: Servicing Ian Banham and Associates
Page 59 and 60: Tabreed Bahrain is setting up its f
Page 61 and 62: Plants Expected Commissioning Date
Page 63 and 64: * Dany Safi, Chief Executive Office
Page 65 and 66: Marketing district cooling services
Page 67 and 68: TABREED 06 FINANCING CORPORATION In
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TAXATION The following is a general
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THE UNITED ARAB EMIRATES The UAE is
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The growth of Dubai began in the ea
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Saudi Arabia Any investor in the Ki
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GENERAL INFORMATION 1. It is expect
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FINANCIAL INFORMATION AED Interim C
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ERNST &YOUNG P.O. Box 136 11th Floo
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NATIONAL CENTRAL COOLING COMPANY (P
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ERNST &YOUNG P.O. Box 136 11th Floo
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National Central Cooling Company PJ
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Registered/Head Office of the Issue
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Tabreed 06 Prospectus - London Stock Exchange

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