Abu Dhabi National Energy Company (Taqa), which has amassed Dh59 billion (US$16.06bn) in debt, is seeking to build a stronger balance sheet. The Abu Dhabi Government-controlled company has set a five-year target of shrinking its debt-to-capital ratio to 70 per cent from 81 per cent, said Carl Sheldon, the general manager of Taqa.
If equity stayed constant, that would mean more than halving the company's debt by 2015. Mr Sheldon, who became the company's top manager last October, said the target was realistic. "Our business is very cash positive and our five-year plan, even with a totally funded capital [spending] plan, shaves debt down to 70 per cent," he said. "You have to deliver the performance and squeeze the business hard for net income."
Such hard-nosed talk was seldom heard from Mr Sheldon's predecessor, Peter Barker-Homek, a mergers and acquisitions specialist who went on a three-year shopping spree to build up a $25bn portfolio of international oil, gas and electricity assets spread across four continents. The acquisitions were mostly debt-financed. Early last year, Taqa's debt reached 88 per cent of capital. In October, the company announced a "restructuring" of its senior management team. Mr Sheldon, a lawyer who was then Mr Barker-Homek's deputy, was handed the helm as his former boss was shown the door.
Mr Sheldon is steering Taqa on a different course; one he hopes will keep the company off the financial rocks. "Our focus is very much within the operations in our existing portfolio," he said. Those include oil and gas production, one of the new businesses the former UAE electrical power utility entered when it set out to become an international energy company. Taqa's oil and gas business suffered last year and the company was forced to book Dh228 million of "impairment charges". It posted a profit for the year of just Dh183m on Dh16.94bn revenue.
But Mr Sheldon planned to retain the oil and gas operations, along with Taqa's other new business of "midstream" gas services such as gas processing and storage. In the short-term, he will try to make the parts work more smoothly together, not necessarily through physical connection. More often this will involve "understanding how commodities markets work", so the company can capture arbitrage opportunities.
Physical connections will be key in north-western Europe, where the company has North Sea oil and gas production, the beginnings of a network of offshore and onshore gas pipelines, and gas storage facilities. Anchoring Taqa's growth aspirations in continental Europe is its lead position in the Bergermeer project to establish a huge gas trading and storage hub in the Netherlands. By the time Bergermeer is completed, in 2013 or 2014, Taqa's European pipeline system will be connected to Norwegian and Russian supplies, and to coastal facilities for importing liquefied natural gas. That should stimulate further gas infrastructure development around the pipelines.
"Our idea is to have a centre of excellence for oil in Aberdeen and for gas in the Netherlands," Mr Sheldon added. Although he will not sell any of Taqa's assets for the moment, a longer-term strategic change will be to draw the company's regional focus closer to home. "We think the MENA region is core for us, and we certainly see future growth there. It's a place where we have a significant contribution to make," Mr Sheldon said.
Long term, he hopes to expand Taqa's portfolio of renewable energy assets and considers the EU-backed Desertec Industrial Initiative to export power to Europe from solar and wind projects in the Sahara and Arabian deserts as an interesting opportunity. @Email:firstname.lastname@example.org