Taqa to buy SWS Holding for $463 million

Deal creates a vertically integrated player with strong capabilities in delivering high-quality water treatment solutions

A Taqa display at the World Future Energy Summit at Adnec in Abu Dhabi. Victor Besa / The National

Abu Dhabi National Energy Company, better known as Taqa, has entered into definitive agreement to acquire Sustainable Water Solutions Holding Company (SWS Holding) for Dh1.7 billion ($463 million).

The deal increases Taqa's regulated asset base by more than 20 per cent, with the company's expansion into the wastewater network and treatment business expected to boost its position as Abu Dhabi’s fully integrated utility, while also strengthening its ability to support the UAE’s net-zero ambitions.

SWS Holding was founded this year with the aim of delivering sustainable water solutions.

The company took ownership of Abu Dhabi Sustainable Water Solutions Company (ADSWS), formerly known as Abu Dhabi Sewerage Services Company, the main entity behind all wastewater collection, treatment and reuse in Abu Dhabi.

Under the terms of the agreement, Taqa will acquire all outstanding shares of SWS Holding for Dh1.7 billion, with 50 per cent of the consideration to be paid upon completion and the remaining 50 per cent to be paid a year after completion, Taqa said on Wednesday in a regulatory filing to the Abu Dhabi Securities Exchange, where its shares are traded.

Taqa will make an additional payment in 2024 linked to net profit generated during 2023. The transaction is expected to be completed this year, subject to regulatory and relevant third-party approvals.

“The strategic acquisition of SWS Holding is an important step in Taqa’s accelerated delivery of its growth agenda,” said Jasim Thabet, chief executive and managing director of Taqa Group.

“Two years ago, we set out our growth ambitions in a 2030 strategy … this transaction is a logical extension of our regulated asset base into wastewater networks and treatment, which, in Abu Dhabi, is subject to the same structure of regulation and the same principles as our existing power and water transmission and distribution business.

“The new business will provide a substantial boost to our regulated asset base and associated stable long-term earnings.

“The efficient management of water will play a key role in enabling the UAE to reduce greenhouse gas emissions.

“By bringing the management of recycled water, together with Taqa’s water desalination activity and our recycled water network, we can do even more to support the net-zero target by 2050.”

Taqa reported an almost sixfold jump in its first-quarter profit this year, boosted by its purchase of a 5 per cent stake in Adnoc Gas.

Net income attributable to shareholders for the three months to the end of March jumped to Dh11.57 billion, compared with the same period a year earlier, while revenue grew by about 6 per cent in the first quarter to Dh13.14 billion, supported by higher bulk supply tariffs and transmission charges.

SWS Holding will add about Dh16 billion to Taqa’s existing regulated asset value of about Dh75 billion, boosting its cash flow and long-term earnings, the company said.

The transaction is expected to generate significant synergies which will create value for Taqa and its shareholders.

Taqa is 90.03 per cent owned by the Abu Dhabi Power Corporation while Multiply Group holds a 7.3 per cent stake.

ADSWS will operate under and benefit from the same regulatory controls set by the Abu Dhabi Department of Energy that govern Taqa’s existing UAE transmission and distribution businesses.

ADSWS has a network of sewer pipelines that extend for more than 12,000km and a sewage treatment capacity of about 1.3 million cubic metres per day from its 37 wholly owned treatment plants and through a 60 per cent ownership in two companies owning four sewage treatment plants in Abu Dhabi under the build, own, operate and transfer model.

“The prospect of becoming part of Taqa as a national champion with great sustainability aspirations is compelling and will allow us to leverage our combined strengths, fostering increased collaboration and delivering improved services in sustainable water management,” said Ahmed Al Shamsi, SWS Holding’s chief executive and managing director.