Investors prove tough audience for Taqa

Energy company in second-quarter profit jump, stock rises 1 fil

Investors barely reacted yesterday after the Abu Dhabi National Energy Company (Taqa) announced a 26 per cent jump in second-quarter profits, sending the stock up just 1 fil to close at Dh1.22. But they might do well to heed assurances that the company will stick to the disciplined financial strategy its new managers promised this year.

In June, after Taqa closed the second of two acquisitions that month, it might have seemed it was returning to its old spendthrift ways. The deals were unexpected because Abdulla al Nuaimi, who in April was appointed the chief executive of Taqa, had advocated a period of consolidation to allow the company to digest about US$24 billion (Dh88.08bn) of international oil, gas and electricity assets it had acquired in the previous three years.

Better integration among operations spanning four continents and energy businesses as diverse as oil and gas production, gas storage and power generation was meant to improve profitability, paving the way for "organic growth" and debt repayment. Mr al Nuaimi said yesterday "optimisation and organic growth" were still "cornerstones" of his strategy, but he was not going to pass up bargains that made sense for the company.

Carl Sheldon, the general manager of Taqa, said the recent C$285 million (Dh1.01bn) acquisition of Canadian natural gas properties would help the company to reduce its average cost for pumping gas in the northern country. That would allow it to eke out profits from a regional business hurt by low prices. Mr Sheldon also plans to sell Canadian oil and gas assets producing 8,100 barrels a day by the end of this year. Most of Taqa's output from Canada is gas.

The second acquisition, the US$400m (Dh1.46bn) purchase of an Omani aluminium refining project from Taqa's major shareholder, the state-owned Abu Dhabi Electricity and Water Authority, was a sweetheart deal hinging on cheap electricity output from a power plant integrated into the project. Taqa is well qualified to run a power plant, as that was its original business. That the company was able to jump on these deals shows that it retains financial flexibility and the Abu Dhabi Government's trust.