The Abu Dhabi National Energy Company (TAQA) has posted a fall in profits of 88%, to US$24.5 million, in the third quarter, compared to the same period last year. IHS Global Insight Middle East energy analyst Samuel Ciszuk offers his expert opinion.
The company’s performance was affected by much lower commodity prices, with gas prices in particular hitting its performance hard, according to new general manager, Carl Sheldon. The state-owned Abu Dhabi outfit has been building itself into an integrated energy company on the back of its role as a kind of Abu Dhabi sovereign wealth fund (SWF).
The company is seen to be part of the emirate’s drive to industrialise its economy and build up international companies able to take advantage of the emirate’s energy-industry know-how and financial strength.
TAQA will now look towards shifting its focus from acquisitions to developing its portfolio of companies and assets, at least for some time, according to Sheldon, after five years of “rapid growth by acquisition”. “Following a period where we have grown to a $25 billion company in a short time, we have now got to reap the return on opportunities that will allow us to grow the business without relying on major acquisitions”, he was quoted by Platts as saying.
The strategy might be a surprise, given that many other energy industry executives of companies with significant war chests have signalled that asset prices are interesting and that a wave of acquisitions following the steadily rising prices of much of the past decade is upon us, but it reflects TAQA’s increased reliance on gas sales as it has acquired significant gas assets in recent years—some expensively and/or still under development.
With global gas prices looking as though they might stay depressed for some time, the company will see limited opportunity to take on more assets and large medium-term needs for its capital to fill emerging holes in its own portfolio.
Samuel Ciszuk is the Middle East energy analyst at IHS Global Insight.
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