Tabreed buys 80% stake in Emaar cooling assets and looks at new opportunities

Chief executive Bader Al Lamki says company has appetite for more deals

Tabreed's sustainable cooling plant on Yas Island. The company bought a majority stake in Emaar's Downtown Dubai district cooling assets. Victor Besa / The National

Dubai’s Tabreed bought a majority stake in Emaar Properties’ Downtown Dubai district cooling business for Dh2.48 billion on Monday and said it is looking at new opportunities in its core markets to boost growth.

"Our appetite remains for new transactions. As long as it makes commercial sense and provides value the shareholders expect from us, we will definitely be pursuing including acquisitions as well as greenfield projects," chief executive Bader Al Lamki told The National in an interview.

Tabreed, in which France's Engie and Abu Dhabi's Mubadala Investment Company hold stakes, currently operates in the UAE, Saudi Arabia, Bahrain, Qatar and Oman.

It provides district cooling to developments such as the Dubai Metro and Ferrari World in the UAE; Bahrain's financial centre and the Jabal Omar Development in Saudi Arabia.

"Geographies of priority are Gulf states, North Africa and [the] Indian sub-continent and if opportunities arise beyond these markets, we will be mindful and we will be open and look at them on a case-by-case basis," he said.

The company is well placed to ride out the current economic downturn in the wake of the coronavirus pandemic and is looking at long-term growth, Mr Al Lamki said.

“Our business is quite stable ... we continued to manage our operations and adjusted to the current situation. The business is not interrupted," he said.

"We are taking whatever actions are required in our liquidity and we are very much in a position to navigate this period with minimum impact.”

The transaction with Emaar Properties will result in Tabreed controlling 80 per cent of the district cooling scheme serving Downtown Dubai, one of the biggest in the world, while Emaar will retain the remaining stake as part of a long-term partnership with Tabreed, the companies said in a joint statement to the Dubai Financial Market, where their shares trade.

The deal is being financed through a corporate loan secured from HSBC and other banks.

"As new opportunities come our way, we will be assessing our financing solutions; some can be through equity, some can be a mix of equity and debt and others could be fully financed. We have flexibility and look at case by case," Mr Al Lamki said.

Downtown Dubai is the flagship project of Emaar Properties, the biggest-listed developer in the UAE. The master development is home to the iconic Burj Khalifa – the world’s tallest building, the Dubai Mall and other residential, commercial and hospitality developments.

The long-term concession will exclusively provide up to 235,000 refrigeration tons of cooling to the development.

The utility scheme currently provides 150,000 RT of contracted capacity through a network that distributes chilled water produced through three interconnected district cooling plants. A fourth plant is currently under construction.

After the transaction, Tabreed's total capacity increases by 12.6 per cent to 1,338,602 RT from 83 plants.

"This is … a truly transformational transaction for the company, accelerating our growth trajectory and consolidating our position in Dubai," Khaled Al Qubaisi, chairman of Tabreed, said.

"This acquisition in the world's largest district cooling market is a further testament to our financial strength and leading market position."

After the deal was announced, Moody's Investors Service affirmed the Baa3 long-term issuer rating of Tabreed and also its Baa3 instrument rating on the company's senior unsecured sukuk certificates.

"The acquisition materially improves Tabreed's position in Dubai, the world's largest district cooling market and contributes to improve Tabreed's operating diversity," the ratings agency said.

"With it, Tabreed becomes the second-largest district cooling player in Dubai, with an estimated 18 per cent market share."

Tabreed is well placed to take advantage of growth opportunities and expects its enhanced presence within Dubai will help it achieve its long-term objectives, Mr Al Qubaisi said.

The deal is Tabreed's second acquisition this year. In January, the company bought cooling plants in Masdar City and said it will explore the development of large-scale cooling plants in Sharjah through a venture with environmental management company Bee'ah.

Tabreed is also consolidating a number of service offerings to set up a new entity, Tabreed Energy Services, offering consultancy services, as well as operation and maintenance services for cooling plants.