Abu Dhabi National Energy Company, or Taqa, has posted a sevenfold increase in first-quarter profit while announcing its first deal since appointing a new chief executive. The Government-controlled oil, gas and power company said net profit increased to Dh287 million (US$78.2m), from Dh40m a year earlier, because of higher energy prices. Revenues rose 14 per cent to Dh4.78 billion.
Carl Sheldon, the general manager of Taqa, which is 75 per cent owned by the Abu Dhabi Water and Electricity Authority (ADWEA), said: "We have seen a marked improvement in revenues and profit for the first quarter of 2010 as our upstream operations have benefited from the recovery in commodity prices." "At the same time, our power and water business has continued to deliver stable revenues and cash flow and has operated at a high level of technical ability."
Abdulla al Nuaimi, who was named chief executive just two weeks ago, said: "These are exciting times for Taqa. The involvement of ADWEA and the Abu Dhabi Government continues to give benefits. I'm confident we are well positioned for long-term sustainable growth." The new deal could help. Mr al Nuaimi, who led ADWEA's programme to privatise Abu Dhabi's power sector, said his previous employer would transfer 90 per cent of its shares in Ruwais Power Holding to Taqa.
That would give Taqa a 54 per cent stake in the $2bn Shuweihat 2 power and water project in Abu Dhabi. The 1,500 megawatt gas-fired plant is under construction and is expected to be in service by the end of next year. Contract details are under negotiation but are unlikely to be onerous to Taqa. It is possible the stake in Shuweihat 2 could be handed over in exchange for Taqa simply assuming its major shareholder's future funding commitment to the development's joint venture, the international partner of which is GDF Suez of France.
Taqa would not add anything new this year to a debt pile that stood at Dh63bn as of March 31, Mr Sheldon said. "We expect to be steadily deleveraging the company." Last year, ADWEA sold a 54 per cent state in Fujairah's biggest power and water development to Taqa for Dh1.11bn, or about 10 per cent of the project's Dh10.28bn construction cost. Analysts regarded that as a sweetheart deal aimed at increasing Taqa's assets and market capitalisation.
The new deal over Shuweihat 2 could do the same, while sending a message to Taqa's lenders that the Abu Dhabi Government stands firmly behind the heavily indebted company. International concerns about the creditworthiness of the UAE's Government-controlled corporate entities have increased as a result of Dubai's recent debt crisis. In March, Moody's Investors Service downgraded Taqa's corporate credit rating to "A3" from "Aa2" as part of a broader review of all Abu Dhabi Government-related issuers.
Taqa hoped to complete the refinancing of a C$1.3bn (Dh4.69bn) credit facility with Canadian banks within the next two weeks, Mr Sheldon said. Since his appointment as general manager last October, after the abrupt departure of the company's previous chief executive, Mr Sheldon has halted Taqa's previous acquisitions spree and established a new corporate focus on improving the integration and efficiency of the company's diverse operations.
Mr al Nuaimi said that strategy would continue. "We're going to go more for optimisation and integration," he said. Mr Sheldon said it was already yielding operational improvements. Taqa produced nearly 138,000 barrels of oil equivalent per day (boepd) in the first quarter, which was "near the top end" of its guidance for the period of between 126,000 and 138,000 boepd. He said he had been working closely with his new boss for the past six months, since the company established an executive committee of its board. Mr al Nuaimi chaired the committee.