Taqa shows mettle with $400m deal

The Abu Dhabi Government-backed investment firm has bought 40 per cent of a new Omani aluminium smelter for US$400 million (Dh1.46bn) in its first leap beyond energy.

The company has bought Abu Dhabi Water and Electricity Authority's 40 per cent stake in Oman's Sohar Aluminium.
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Taqa, the Abu Dhabi Government-backed investment firm, has bought 40 per cent of a new Omani aluminium smelter for US$400 million (Dh1.46bn) in its first leap beyond energy. The stake in Sohar Aluminium was sold by Abu Dhabi Water and Electricity Authority (ADWEA), Taqa's founder and majority shareholder. Analysts say the price paid is a relative bargain and marks the second time this year the Abu Dhabi National Energy Company, as Taqa is officially known, has taken on an asset from its founder.

The deal also indicates that Taqa, a publicly traded firm, is again on an acquisitions drive after a six-month pause following the departure of Peter Barker-Homek, the former chief executive. Taqa had no presence in Oman or experience in producing metals before the deal. Energy-intensive aluminium production fits with the company's experience in owning power stations, said Abdulla al Nuaimi, the chief executive of Taqa.

Taqa owns power plants in the UAE, Morocco and the US that form a stable cash-flow counterweight to its volatile oil and gas holdings. "Our track record in power generation means that we are well placed to add value to such an energy-intensive business as aluminium," Mr al Nuaimi said in a statement. "This is a high-quality operation and is not only expected to increase Taqa's cash flow, but provides entry for us into the sultanate of Oman."

The move follows last week's announcement that the company would pay C$285m (Dh993.3m) to buy natural gas assets in the Canadian province of Alberta. That acquisition was seen as closely tying into the company's existing strategy, as the gas assets bordered other fields the company held in Canada. Aluminium prices fell 60 per cent in the depth of the economic downturn and have traded this week at a slightly recovered rate of just less than $2,000 a tonne on the London Metals Exchange. Prices peaked above $3,300 a tonne in July 2008.

But Taqa's investment in aluminium was reasonable given the likelihood of a global economic recovery, said Faisal Hasan, the head of research at Global Investment House in Kuwait. "Acquisition definitely makes sense in aluminium and metals, keeping in mind the economic recovery and the resultant potential of growth in their demand," Mr Hasan said. "Taqa has been good at acquiring companies in the last two years and it is now looking at the region."

Sohar, a joint venture involving Oman Oil Company, ADWEA and the global metals giant Rio Tinto, reached full output this year and has the capacity to produce 360,000 tonnes of metal a year. Amid the market slump, the company has put on hold a plan to double capacity, Tony Kinsman, the chief executive of Sohar, told Reuters in May. The smelter was built at a cost of $1.4bn, giving the 40 per cent stake a nominal value of $560m.

In May, ADWEA transferred to Taqa 90 per cent of its majority ownership stake in the Shuweihat 2 power plant being built near Ruwais. The share transfer gave Taqa a 54 per cent stake in the gas-fired plant. * additional reporting by Sarmad Khan cstanton@thenational.ae