Taqa losses widen in second quarter despite steep spending cuts

Abu Dhabi National Energy Company, known as Taqa, has reported a widening loss in the second quarter on revenues that were down by 14 per cent, driven by lower realised oil and gas prices on its North American and European assets. Taqa also warned on Wednesday that it faces a growing liability for the decommissioning […]

Abu Dhabi National Energy Company, known as Taqa, has reported a widening loss in the second quarter on revenues that were down by 14 per cent, driven by lower realised oil and gas prices on its North American and European assets.

Taqa also warned on Wednesday that it faces a growing liability for the decommissioning of some UK North Sea assets that will require further support from its parent, Abu Dhabi Water and Electricity Authority (Adwea), which already has swallowed the bulk of its losses.

Taqa’s pre-tax loss for the second quarter more than doubled to Dh626 million from a Dh306m loss for last year’s second quarter, while the pre-tax loss in the first half of the year widened to Dh1.47 billion from Dh580m.

The loss attributable to equity holders of the parent was reported at Dh588m for the quarter, a 40 per cent increase from the loss in last year’s second quarter, with the first half loss at just under Dh 1.2bn versus Dh 165m for last year’s first half.

Revenue fell to Dh4.035bn in the quarter versus Dh4.707bn a year earlier.

The company emphasised its operational performance and cost-cutting, with Saeed Al Dhaheri, acting chief operating officer since Edward LaFehr resigned in June, saying: “Despite achieving significant costs reductions, including a 73 per cent cut in capex, we safely maintained oil and gas volumes and increased power production above our previous record highs.”

The company’s accounts noted that had it not secured refinancing in June of a US$1bn bond, its liabilities at the end of June would have exceeded assets by Dh2.5bn.

Taqa also noted that it may have financing obligations to decommission assets in the North Sea, where it operates the Brent system, that might require it to lean on its parent company further to provide letters of credit or collateral in excess of $1bn.

Taqa’s losses would have been much wider if it didn’t have in place a deal for a so far unnamed “related entity” to buy much of its overseas oil and gas assets at well above market rates. In the first quarter, this deal meant that Taqa was able to avoid recognising $3.4bn in loss of value of its oil and gas assets in North America, Europe and the Kurdish region of Iraq, in the Atrush block.

Taqa’s largest shareholder, Adwea, has a stake of 52.3 per cent and to­ge­ther with other Abu Dhabi government entities, owns just over 75 per cent of the company, with the rest listed publicly and held by UAE shareholders.

Taqa’s thinly traded shares were down two fils at Dh0.54 in early trading on Wednesday.

Mr Al Dhaheri also said: “The highly successful $1bn bond refinancing reduced our annual corporate interest payments by AED 70m.”

The cost cutting programme over 18 months has resulted in a reduction in spending of Dh2bn annually. Capital spending was down Dh1.3bn, or 73 per cent, in the first half of this year, though oil and gas output was down just 2 per cent in the period at just over 147,000 barrels per day equivalent.

amcauley@thenational.ae

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Source: Business

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