Tabreed unveils major expansion

Tabreed posts a nine per cent rise in second quarter profits after completing its recapitalisation programme.

Sujit Parhar, the chief executive of Tabreed, says the strategy of 'focusing on the core business of chilled water is paying off'.

Tabreed will complete 10 district cooling plants in the second half of the year, helping to boost revenue as the firm moves business to a more sustainable footing.

The utility company, based in Abu Dhabi, yesterday posted a 9 per cent rise in second-quarter profits after the completion of its recapitalisation programme reduced its finance costs by Dh25 million (US$6.8m).

Net profits rose to Dh43.8m, up from Dh40.25m in the same period last year.

"Our strategy of developing the business for the longer term by focusing on the core business of chilled water is paying off," said Sujit Parhar, the chief executive of the company.

The company is charting a more sustainable growth path after becoming mired in debt from exposure to a weakening property market during the global downturn.

The new plants, which include eight for the Dubai Metro Green Line and two for the UAE's military, will provide a total capacity of 30,600 refrigerated tonnes. It completed two expansions of existing plants, amounting to 10,000 refrigerated tonnes in the second quarter.

"Today when we sign a contract with customers we ensure we build just in time so there's no speculative building. That's the difference we've made in the business model about how we deliver plants," said Mr Parhar,

The company did not need to raise fresh debt and aimed to become self-financing after next year, he said.

During the past quarter, Tabreed completed a recapitalisation programme involving refinancing Dh2.63 billion of debt and receiving Dh3.1bn of long-term capital from Mubadala Development in return for Mubadala holding an increased stake in Tabreed.

Tabreed repaid a Dh735m sukuk last month. Mubadala Development is a strategic investment company owned by the Abu Dhabi Government.

Tabreed's refocusing on its core business has been boosted by growing demand for chilled water. Chilled water revenue for the first half of the year was Dh425.6m, a 29 per cent rise from the same period last year.

The chilled water segment contributed more than 90 per cent of total earnings before interest, taxes, depreciation and amortisation in the first half of the year.

Efficiency gains in its utility operations have also bolstered Tabreed's bottom line. As a result, operations profit more than doubled in the first half of the year from the same period last year.

Tabreed firm operates 49 plants in the UAE, and has joint ventures in plants in Qatar, Bahrain and Oman. It recently signed a joint venture in Saudi Arabia and will build two plants there.

But the company's core business remains in the Emirates and it expects further opportunities linked to Abu Dhabi's Economic Vision 2030.

"If you look at the growth of Abu Dhabi they aim to provide 3 million tonnes of cooling. We have provided just 550,000 tonnes so we have to grow six more times to get there," said Mr Parhar.

Tabreed also plans to expand its research and development opportunities within the district cooling sector.

Mubadala now holds a 26.1 per cent stake in Tabreed. The share includes a 14.8 per cent stake held directly by Mubadala and a further 11.29 per cent stake through General Investments, its subsidiary.