Tabreed explores growth opportunities in markets beyond GCC

Cooling firm's annual profits rise 9%

<p>Tabreed&#39;s first quarter profit increases 3 per cent&nbsp;Jumana El Heloueh / Reuters</p>

The National Central Cooling Company (Tabreed) is looking at growth opportunities in the Middle East beyond its Arabian Gulf footprint, its chief financial officer said on Wednesday, on the back of a 9 per cent rise in profits for 2017.

The Dubai-listed firm, which reported net income of Dh400.1 million on Wednesday, is on the lookout for acquisition opportunities  in the five Gulf markets in which it currently operates, CFO Stephen Ridlington told The National.

“We are the only district cooling company [in the region] which has international operations. We are already international and we want to be more international,” he said. “We are attuned and happy to go into new markets. We think of this as a new phase for us in which we [can] capture some new geographies.”

Tabreed’s renewed expansion drive comes following a strategic investment from France’s Engie, which aims to use the acquisition to aid its expansion in the wider Middle East region and beyond.

Such a move also comes with the backing of Abu Dhabi’s Mubadala Investment Company, Tabreed’s largest shareholder, said Mr Ridlington.

“We are going to draw on the support of Engie and Mubadala to try and crystalise growth,” he said. “It’s a major step up for Tabreed and it’s an exciting one.”

Engie acquired a 40 per cent shareholding in the utility provider last year from Mubadala for Dh2.85billion, adding to a portfolio of 71 plants across the Arabian Gulf. The Abu Dhabi investment company retains a 42 per cent in Tabreed.

Mr Ridlington declined to specify the target markets in the wider Middle Eastern region, but ruled out expansion into Asia and the Far East.  

The company plans to stick to its core business and is largely interested in building its own plants in new markets in which district cooling services remain a new concept, instead of acquiring existing assets, he said.

Tabreed’s key UAE cooling projects include the Sheikh Zayed Grand Mosque and Yas Island in Abu Dhabi, alongside the Dubai Metro and Dubai Parks and Resorts. Its international footprints include the Jabal Omar development in Makkah. The company has more than Dh1bn in cash and committed bank financings and plans to fund its growth ambitions through a combination on equity and bank lending, Mr Ridlington said.

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“I think it’s a little bit of both. We tend to finance the new projects with project financing. However, if you look at our balance sheet, there is plenty of fire power,” he said.

The company, he said, has Dh400m in cash and Dh700m of committed long term bank lines that are available,
meaning it does not have immediate plan to tap the bond market.

Tabreed reported group revenues of Dh1.4bn for 2017, a 9 per cent rise on the previous year, while the company's profit from core chilled water operations rose 10 per cent over the period, according to a regulatory filing on the Dubai stock exchange.  

“Given that strong performance that has been there over recent times, we are hoping that it going to continue in the future. We will continue to see growth around the levels we have seen in the recent past. It’s going to come from across the region,” said Mr Ridlington, without giving specific guidance for the year ahead. The company has maintained an annual capital expenditure of Dh200 million in the past few years. Mr Ridlington said the recent trend is a “reasonable guide for future annual spend”.

Tabreed also said that its total capacity last year reached 1.09 refrigerated tonnes. It added 43,900 of refrigerated tonnes of new customer connections in the last 12-month period with 24,300 refrigerated tonnes of capacity coming on stream in the UAE, 3,000 in Bahrain and 16,600 across its operations in the other GCC markets.