x Abu Dhabi, UAEFriday 19 January 2018

Taqa sells Marubeni Taqa Caribbean

Abu Dhabi National Energy Company refocuses on its Middle East energy production strategy.

One of Marubeni Taqa Caribbean's investments is the Curacao Utilities company. Above, Curacao harbour.
One of Marubeni Taqa Caribbean's investments is the Curacao Utilities company. Above, Curacao harbour.

Abu Dhabi National Energy Company, known as Taqa, has sold its Caribbean power assets as it seeks to refocus its energy production and pay off debt.

Taqa said it had sold a 50 per cent stake in a joint venture, Marubeni Taqa Caribbean, for an undisclosed sum. The company had invested in a number of energy assets, including hydroelectric dams and electricity transmission facilities in Jamaica, and Trinidad and Tobago.

The venture was formed with Marubeni Corporation, a Japanese conglomerate, in a deal worth US$320 million (Dh1.175 billion) in 2009.

"The decision to withdraw was taken as part of Taqa's strategy to focus its power and water business development within its existing footprint, with a stronger focus on the greater MENA region," the company said.

"In our power and water business, we want to start focusing on the greater MENA region," said Tanis Thacker, the head of media and investor relations for Taqa. "Having these assets in the Caribbean really didn't fit the bill."

The sale represents a change of tack for a company that built a vast portfolio of energy assets overseas in recent years, including in Canada, the US, the North Sea, Ghana and India.

But the acquisitions left Taqa with a Dh72.1bn debt, with redemptions rising next year and peaking at Dh18bn the following year, according to data from Bloomberg.

Asset sales in non-core areas of the company are part of efforts to pay down those debts, analysts said.

Samuel Ciszuk, an energy analyst at IHS Global Insight, said the sale had been expected by the market for some time after the end of Peter Barker-Homek's tenure as the chief executive in 2009.

"They put as one of their main strategic priorities to pay down their debt, which was the result of a very quick expansion of the company by acquisitions.

"Caribbean power generation is clearly a bit of an outlier," he added.

He said that despite the company's stated intention to focus on the Middle East, divesting from its other markets would be less expected.

"They've built up a very strong footprint in the North Sea," Mr Ciszuk said. "If they had left that and diversified from that, it would be a huge move, freeing up a lot of money. But that would require a strategic overhaul of the company and I'd be surprised if they did that right now.

"The North Sea is still pretty much seen as the core. It's a good cash cow for the company."

Taqa has recently renewed interest in that area, having restarted production at the Rijn oilfield in the North Sea, after a 12-year break. Elsewhere in the same region, Taqa bought Total's stake in production licences for two blocks in the Otter oilfield.

Standard & Poor's, the credit rating agency, recently upgraded its long-term rating for Taqa to "A" with a "stable" outlook.

However, the company's stand-alone credit profile was a much lower "B plus", based on its highly leveraged financial profile, the S&P analyst Karim Nassif wrote in a report. He added, however, that the company's overall rating was higher because "the likelihood of timely and sufficient government support from the … Abu Dhabi [Government] for Taqa, if needed, is extremely high".