Taqa sells bonds worth $750m to lower borrowing costs

The Abu Dhabi energy company moves to refinance with losses widening as oil and gas prices collapse

Abu Dhabi National Energy Company, known as Taqa, has sold a total of US$750 million in bonds to help lower borrowing costs at the firm, which is reeling from collapsing energy prices.

In a further sign of healthy investor demand for emerging market bonds, Taqa said it sold $250m notes that mature on June 22, 2021 with a coupon of 3.625 per cent and $500m of bonds maturing on June 22, 2026 with a coupon of 4.375 per cent.

The 10-year bonds have a yield of 3.8 per cent and the five-year bonds have a 3.05 per cent yield, according to a Taqa spokesman.

The funds will lower borrowing costs and “will be used for general corporate purposes and refinancing existing bonds”, said the company.

Taqa refinanced $1 billion of its nearly $20bn debt earlier in the summer with a successful bond offering.

The company has been struggling since the collapse first of natural gas prices and then oil prices, which severely reduced the value of its overseas portfolio of oil and gas assets that it accumulated since its inception 11 years ago.

Its heavy indebtedness has limited its options and it has sharply cut capital investment and operating costs over the past couple of years to try to manage its balance sheet.

Despite significant cost reductions, Taqa in August reported a widening loss in the second quarter driven by lower realised oil and gas prices from its North American and European assets.

Revenue fell to Dh4.03bn in the quarter from Dh4.7bn a year earlier as it reported a net loss of Dh588m – a 40 per cent increase on the loss reported a year earlier.

Adwea, Taqa’s largest shareholder, has a stake of 52.3 per cent and to­ge­ther with other Abu Dhabi government entities, owns just over 75 per cent of the company, with the rest listed publicly and held by UAE shareholders.

The sale comes at a good time for Taqa as global investors show greater appetite for emerging market bonds denominated in US dollars.

The Bloomberg US Dollar Emerging Market Sovereign Bond Index has gained about 15 per cent this year as global investors hunt for yield.

Taqa joins a raft of other ­government-related entities and governments themselves in the region who have been selling bonds at an elevated pace.

Deficits in countries across the region have also widened over the past year as the steep drop in oil prices empties coffers and forces governments to dip into sovereign wealth funds and borrow more money so they can keep spending on infrastructure and social services.

The UAE accounted for $14.4bn of international bonds issued in the second quarter, Qatar $9bn and Oman $5bn, according to a report from the Bank for International Settlements.

Indosuez Wealth Management, the global wealth management brand of the French bank Crédit Agricole, said this week that the Arabian Gulf bond market was likely to continue to experience an uptick in issuances amid stagnant oil prices.

“The large supply of GCC sovereign and quasi-sovereign bonds have provided investors with a stable option during this high-risk period caused by liquidity shortfalls perpetuated by the prolonged period of low oil prices,” said Christiane Nasr, the director and senior investment adviser at Indosuez Wealth Management.

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