TAQA Reports First Half Net Profit Of AED 278 Million, An Increase Of 148%, And Reduced Debt By AED 1.6 Billion

Abu Dhabi National Energy Company PJSC (TAQA), a leading global energy company with operations in 11 countries, has reported a net profit of AED 278 million for the first half of 2018, a rise of 148 percent from a year earlier.

TAQA’s oil and gas business is benefiting from higher commodity prices, while its power and water business has also seen improved performance in the last year. The company has also reduced finance costs by reducing debt and successfully issuing a $1.75B bond on favourable terms.

In the first half of 2018, TAQA recorded a 3 percent year-on-year rise in revenues to AED 8.6 billion, while EBITDA increased by 2 percent to AED 4.8 billion.  

The company reduced its total debt by AED 1.6 billion during the first half, and the cash interest paid on its debt decreased by AED 157 million in the first half, compared to a year earlier.

Commenting on the results, Saeed Mubarak Al Hajeri, the Chairman, said: “TAQA’s performance has continued to improve this year due to prudent financial management and major achievements by our teams in enhancing operational efficiencies across both the oil and gas business, and the power and water business. The company is well positioned for growth, and we intend to deploy our deep international expertise on new initiatives, with a focus on power, where we expect strong demand in the coming years, especially in the Middle East and North Africa region.

“The two-year transformation programme has concluded and we are making steady progress as a business, as witnessed with the increases we’re seeing on net income and the efforts made on debt reduction.”

Saeed Hamad Al Dhaheri, Acting COO at TAQA added: “The sustainable efficiencies that we have driven through the business have allowed our operations in Europe to benefit fully from the higher oil price environment, while we are also delivering healthy returns from our power and water business. The company’s strategy is to continue to optimize our assets. That means deploying our expertise to extend the life of our oil and gas assets in Europe, and harnessing unconventional technologies and allocating greater capital to the production of liquids in North America.”

TAQA’s power and water business, which includes assets in the UAE, Oman, India, Morocco, Ghana and the United States, continues to deliver steady income. The company has enhanced efficiency across its operations. In particular, the international operations have improved substantially from 85.2% in the first six months of 2017 compared to the current 93.4% in 2018, mostly driven by the performance of the plant in Ghana. This reliability of power supply has had a major positive impact on local communities and businesses.

The oil and gas business in Europe is benefiting from higher oil prices which has more than offset the natural decline in production, and TAQA continues work to extend the lifespan of its assets. The company has successfully carried out its “Eider Bypass Project” to keep key platforms in operation and optimise cash flows.

This year, TAQA has continued to strengthen its balance sheet. The company’s completion of a $1.75B dual-tranche bond issue in April, which was 4.7 times subscribed, was key to reducing long-term financing costs.

During the first half, the company generated free cash flow of AED 3.4 billion.  Total liquidity remains strong at AED 14.6 billion, including AED 4.0 billion in cash and cash equivalents and AED 10.6 billion of undrawn credit facilities.

Financial highlights for the periods ending 30 June:

• Following TAQA’s return to full year profitability in 2017, the Group has continued to generate positive net income with AED 168 million being recorded in Q2 2018, compared to AED 35 million for the same period last year. The results are mainly due to improved stability in oil and liquids prices.
• Net Income for H1 2018 was AED 278 million versus AED 112 million in the first half of 2017, a 148% increase, this has been a result of the items noted above for the Q2 discrete quarter results.
• Quarterly Revenues of AED 4.3 billion demonstrate benefits of higher oil prices in the quarter more than offsetting declines in hydrocarbon production as well as the lower North American gas price environment relative to Q2 2017.
• H1 2018 revenues topped AED 8.6 billion, a marginal improvement versus H1 2017 AED 8.4 billion. Again, this increase has been driven by the higher oil and liquids prices which has more than offset the lower volumes as well as increased fuel revenue in Morocco.
• H1 2018 consolidated EBITDA was AED 4.8 billion, a marginal improvement versus H1 2017 (AED 4.7 billion).
• Lower free cash flow in Q2 2018 of AED 1.8 billion relative to the same period in 2017 (AED 2.1 billion) is in line with increased capital investment spending which has brought on new production to offset natural decline.
• Total liquidity remains strong at AED 14.6 billion including AED 4.0 billion in cash and cash equivalents, and AED 10.6 billion of undrawn credit facilities. 
• Across the six month period the Group have been able to reduce its total debt by AED 1.6 billion and have witnessed a reduction in interest paid of AED 157 million compared to the same period last year.

Operational Highlights:

Power & Water

• Technical Availability across the fleet was 92.5% for the First Half (H1) of 2018, compared to 90.0% for the same period of 2017. UAE asset improved from 91% in H1 2017, to 92.3% in 2018. Additionally, International operations’ availability improved substantially from 85.2% in the first six months of 2017, compared to the current 93.4% in 2018, mostly driven by better performances in Ghana.
• Global power generation was 42,662 GWh in H1 2018, compared to 42,030 GWh generated globally in H1 2017. International operations showed a decisive improvement in both availability and generation versus the first half of 2017, while UAE power generation remains relatively stable with 29,265 GWh in H1 2018, compared to 30,091 GWh in H1 2017. UAE Water desalination was 117,642 million imperial gallons (MIG) in H1 2018, versus 120,643 MIG for the same period of 2017, continuing to supply the majority of Abu Dhabi’s requirements.

Oil & Gas

• The Group’s average daily production for the second quarter of 2018 was 117,389 boe/d versus 129,993 boe/d in Q2 2017. Year-to-date the average production is 120,600 boe/d compared to 131,086 boe/d H1 2017. TAQA’s increased capital investment spending in Q4 2017 and Q1 2018 has brought on new production to offset natural decline. Production in North America remained broadly consistent compared to the same period last year, however, the impacts of natural decline and unplanned outages in the North Sea has resulted in lower production from our European operations. Partially offsetting this lower production was our volumes from the Atrush block in Kurdistan which only commenced operations in July 2017.