Abu Dhabi National Energy Company, known as Taqa, reported a deep loss in the first quarter on revenues that were down by 24 per cent, with lower oil and gas prices the main culprit.
The company said revenue fell to about Dh3.9 billion in the first three months of this year, from Dh5.1bn in the same period last year.
The loss attributable to shareholders of the parent company was Dh608 million for the period, compared to a profit of Dh256m a year earlier.
In its operating units, the electricity and water units held up fairly well: revenue for the first quarter was Dh2.1bn, down slightly from Dh2.2bn last year.
Taqa is the near-monopoly provider of water and electricity in the emirate of Abu Dhabi and its largest shareholder is Abu Dhabi Water and Electricity Authority (Adwea), whose stake is 52.38 per cent. Adwea together with other Abu Dhabi government entities own just over 75 per cent of the company.
Revenue for the oil and gas segment was down 46 per cent at slightly more than Dh1bn.
The company has been in retrenchment mode since before the oil price began to crash in 2014 and in recent quarters has been focusing on cutting costs and managing a large debt load.
“Our cost transformation programme continued to deliver outstanding results in the first quarter with savings of Dh1bn while delivering one of our best operational performances in our history,” said Edward LaFehr, Taqa’s chief operating officer.
The savings have come from reducing operating and general expenditures, which has included a large cut in staff. Also, they have come at the expense of capital spending.
The company said savings in the quarter consisted of an 18 per cent, or Dh293m, reduction in cash costs, plus a 72 per cent, or Dh701m, reduction in capital expenditure.
Capital expenditure this year is expected to be below Dh1.8bn, 42 per cent lower than last year, Taqa said.
Power and water volumes were up 7 per cent in the quarter at 17,022 GW/hours, with oil and gas production down only 3 per cent, at 153,700 barrels of oil equivalent per day, despite the steep capital spending cuts.
However, executives have warned that the continued strain on capital expenditure eventually will hit physical production at some point.
Two weeks ago, Standard & Poor’s, the debt rating agency, lowered Taqa’s “stand-alone credit profile” rating – a component of its overall rating – for the first time in four years, reflecting the tough conditions facing the company, as well as its debt load.
S&P confirmed that Taqa’s headline long-term debt rating would remain at A because of strong support from its government shareholders.
But the rating agency said that Taqa “remains under pressure from declining oil and gas prices, which have reduced cash flow debt coverage”.
The ratings agency noted that Taqa has required considerable financial support from its government owners.
This has included not only debt relief but, as S&P says, “a put arrangement with the company, giving Taqa an option to sell most of its oil and gas assets at book value”.
This refers to a deal Taqa had in place last year with “a related entity” (not disclosed by the company) to avoid recognising US$3.4bn in loss of value of its oil and gas assets in North America, Europe and the Kurdish region of Iraq, in the Atrush block.
Grant Gillon, Taqa’s chief finance officer, confirmed yesterday that the put arrangement had risen last year as assets from Europe and Iraq were included.
Asked by analysts about reports that the put arrangement might result in the sale of those underlying assets, Mr Gillon said: “We haven’t said anything more about the structure of the deal underlying that. Or any more about the terms and conditions.”
The deal means the related party has agreed to pay Taqa what it paid for those assets rather than what they would be worth on the open market.
Taqa still carries a huge debt load, which stood at Dh64bn at the end of the first quarter, down from Dh67bn at the end of last year.
Taqa executives will soon go to the market to refinance a portion of that debt -- $800m that matures next year.
Mr Gillon said: “There has been a very positive response from the bank market, bond market and private placement market so we have a number of options in front of us.”
amaculey@thenational.ae
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