Taqa board approves asset swap deal with ADPower to create utilities champion

The board has also recommended that shareholders approve the transaction at an April 29 general assembly meeting

Abu Dhabi National Energy Company swung to a first-quarter loss as revenue decreased and impairment losses climbed amid lcoronavirus pandemic. Ravindranath K / The National

The board of Abu Dhabi National Energy Company (Taqa) gave the nod to a sale and purchase agreement for its asset swap deal with Abu Dhabi Power Corporation (ADPower) that will create a regional utilities champion.

Taqa's board also approved the issuance of a mandatory convertible bond to ADPower for the planned deal, it said in a statement to the Abu Dhabi Securities Exchange, where its shares trade. The energy firm has also recommended its shareholders to approve the deal at the annual general assembly due to be held on April 29.

ADPower in February submitted an offer to transfer most of its water and electricity generation, transmission and distribution companies portfolio to Taqa. The assets, worth approximately Dh120 billion at the end of 2018, generated a cumulative net profit of Dh4.8bn, the two firms said in statement at the time.

Taqa, as part of the deal, will issue 106.3 billion shares to ADPower, which means that once the deal is executed, AD Power will own 98.6 per cent of Taqa's entire share capital, placing a value on Taqa of Dh4.16bn.

The combined entity will have total assets worth Dh200bn, with more than 85 per cent of its revenue coming from regulated and contracted businesses, the companies said.

The transaction will allow the joint entity to have a "strong platform for new projects locally and internationally," the company's chief executive, Jasim Thabet, told The National in an interview at the time.

Following the deal announcement, Moody's Investors Service placed all the ratings of Taqa under review for an upgrade.

“The review for upgrade reflects Moody's view that a successful transfer of the ADPower assets would reinforce the strategic importance of Taqa for the government of Abu Dhabi,” it said in a February 13 statement.

ADPower owns several power and utility subsidies in Abu Dhabi. The deal with Taqa is part of ongoing efforts in the UAE capital to consolidate assets. The emirate has already seen large-scale mergers in the banking and finance industry following the slide in oil prices in 2016.

The deal would make the new entity one of the top utility companies in the Europe, Middle East and Africa region and also make Taqa one of the largest-listed companies on the Abu Dhabi stock market.