Today's Edition
ABU DHABI (ALETIHAD)
Abu Dhabi National Energy Company PJSC (TAQA), one of the largest listed integrated utilities in Europe, the Middle East and Africa, reported its earnings for the period ending December 31, 2023. The company delivered a solid financial performance driven by strong and stable returns from its long-term contracted utilities business and remained dedicated to its growth strategy.
Financial Highlights
Group revenues were Dh 51.7 billion, an increase of 3% versus the prior-year period as higher pass-through bulk supply tariffs and improved allowances under the Regulatory Control 2 (RC2) regime within the Transmission and Distribution segment offset a decline in Oil & Gas revenue.
Adjusted EBITDA was Dh 19.6 billion, down 6%. This fall was led by a decline in the contribution from the Oil & Gas segment on the back of lower realised oil and gas prices and reduced production.
Net income (TAQA share) was Dh16.7 billion, an increase of Dh 8.6 billion, mainly driven by a one-off gain of Dh 10.8 billion recognised on the acquisition of a 5% shareholding in ADNOC Gas, in part offset by a one-off Dh 1.1 billion deferred tax liability associated with the introduction of UAE corporate income tax from January 1, 2024. Net income excluding these one-off items was Dh 7 billion, 13% lower than the prior period, mainly due to a lower contribution from the Oil & Gas business.
Capital expenditure was Dh 5.1 billion, 34% higher than the prior year driven by strong project execution in the Transmission & Distribution business.
Free cash flow generation was Dh 13.9 billion, consistent with the previous year. Additionally, gross debt was Dh 61.2 billion, marginally lower than the amount outstanding at the end of 2022.
Operational highlights
Transmission network availability for power and water was 98.4%, marginally lower compared to 98.6% in 2022.
Generation global commercial availability was 97.9%, marginally lower compared to 98.1% in the prior year.
Oil & Gas average production volumes from continuing operations decreased to 107.8 thousand barrels of oil equivalent per day (mboe/d), a decrease of 7% compared to 2022, mainly due to the natural decline in production of late-life UK assets.
Strategic highlights
TAQA announced significantly higher targets for 2030 to reflect stronger growth ambitions and integration of Masdar in its portfolio. The gross power capacity target was tripled to reach 150 GW by 2030, of which 100 GW is renewable capacity through Masdar, while targets have also been introduced for net power capacity of 50 GW by 2030 and water generation capacity of 1,300 MIGD by 2030. Renewable energy is expected to constitute over 65% of the generation mix by 2030 versus 45% as at the end of 2023.
The company envisions a total spend of Dh 75 billion by 2030 to achieve its expansion programme, comprising of a Dh 40 billion expenditure on UAE-based transmission and distribution networks. The remaining Dh 35 billion is allocated for the Generation business, with 55% of this total expected to be invested in Masdar.
TAQA continued to build its portfolio in 2023 via organic and inorganic means including continued expansion of the company’s desalination capacity (Mirfa 2 development underway, with the project set to become UAE’s third largest RO plant upon completion) and entry into the attractive UAE operations and maintenance (O&M) segment within Generation. The company also received a 5% stake in ADNOC Gas in recognition of the value created by the long-standing, close working relationship between TAQA and ADNOC.
Introducing wastewater networks and treatment business to TAQA’s portfolio, the planned Dh 1.7 billion acquisition of SWS Holding enhances TAQA’s position as Abu Dhabi’s fully integrated utility. Set for completion in 2024, the transaction will enhance TAQA’s regulated asset base by more than 20%, subject to obtaining the necessary approvals.
Governing returns for the T&D business, Regulatory Control 2 (RC2) came into place for the 2023-2026 period. The revised framework brings several favourable changes relative to RC1, including an upward revision to real WACC (4.9% vs. 4.6% previously), higher OPEX and CAPEX allowances and provision for UAE corporate income tax adjustment via OPEX allowance.
The company completed a Dh 5.5 billion dual-tranche bond offering in 2023, which was almost 10 times oversubscribed. The issuance included TAQA’s inaugural green bond under its newly established Green Finance Framework. The Green Finance Framework, in turn, was awarded a SQS2 (very good) sustainability score by Moody’s.
As a partner of choice to reduce carbon emissions, ADNOC and TAQA announced a Dh 8.1 billion project for sustainable water supply to ADNOC’s onshore operations. The centralised seawater treatment facility will replace the current deep aquifer saline water systems across ADNOC’s onshore operations, enhancing energy efficiency by up to 30%. TAQA also acquired a stake in Xlinks, which aims to develop the world’s longest HVDC subsea cable between Morocco and UK. Upon completion, the project will supply 8% of UK’s electricity needs from renewable energy sources in Morocco.
The company managed to further reduce its Scope 1&2 GHG emissions by 13% YoY in 2023 (19% compared to base year of 2019), while GHG intensity based on revenue declined 16% YoY in 2023. Progress on this front has continued to translate into stronger ESG ratings for the company. Moreover, TAQA was ranked the number 1 Sustainability Leader in the Energy & Utilities sector as part of Forbes’ Middle East Sustainability Leaders list.
Comments from Decision-makers
H.E. Mohamed Hassan Alsuwaidi, TAQA’s Chairman, commented: “Our achievements in 2023 serve as a foundation for further growth, which will include organic and inorganic expansion as well as substantial investment into power and water capacity and UAE-based transmission and distribution networks over the coming years.” He explained that the upward revision of targets is a show of confidence in their ability to deliver goals for 2030 and beyond.
Jasim Husain Thabet, Chief Executive Officer and Managing Director, said: “In 2023, TAQA remained unwavering in its commitment to creating long-term shareholder value, navigating a challenging global economic backdrop, mitigating challenges in the oil and gas market with a robust performance across our utilities business, including in Transmission & Distribution and Generation.
“Moreover, I am proud of our continued recognition as a low carbon power and water champion through the progress achieved on our ESG initiatives, with multiple agencies upgrading TAQA’s ESG rating,” he added.
Upon approval of the financial results, TAQA’s Board of Directors also proposed a final cash dividend of 2.0 fils/share (approx. Dh 2.2 billion), including a variable dividend of 0.7 fils/share (approx. Dh 0.8 billion). This will be the fourth and final dividend payment planned for the financial year of 2023 bringing total dividends for the year to 3.95 fils/share (approx. Dh 4.4 billion).
