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28 March 2024

Abu Dhabi mulls state-backed merger for Taqa

Taqa's Shuweihat plant in the UAE (Photo courtesy Taqa website)

Published
By Reuters

Abu Dhabi may merge its national energy company into another state-owned business to make the company's crippling debts more manageable and try to turn around its performance, sources familiar with the matter told Reuters.

Founded in 2005 and the only listed quasi-sovereign company in the Gulf emirate, Abu Dhabi National Energy Company  (Taqa) went on an expansion drive to create an energy giant to rival international oil majors such as Exxon and BP.

After plunging to a fourth-quarter loss of Dh3.6 billion ($980 million), Taqa said it would slash capital spending by 39 per cent this year and make Dh1.5 billion of cost savings over the next two years. It is also conducting a review of its assets ahead of potential sales.

Now, Blackstone has been hired to advise on ways to tackle its debt pile, according to the source, with total liabilities reaching some Dh104.8 billion ($28.5 billion), according to its first-quarter financial statement.

Sources told Reuters last week that Taqa was raising a $3 billion five-year loan aimed at consolidating multiple debts into a single, cheaper facility.

Taking a first step to improve its debt situation could open the way to a merger with another state-owned company.

"It is the biggest stumbling block so by reducing the debt, Abu Dhabi can do whatever it wants and fold it into any other entity," said the source, adding merger considerations were still at any early stage.

Should a merger happen, shareholders owning the 27.8 per cent of Taqa not controlled by the government will hope it follows the smooth path of Aldar Properties' share-swap merger with Sorouh Real Estate in 2013 -- and not Aabar Investments' takeover by International Petroleum Investment Company in 2010, which faced a backlash from minority shareholders after the initial offer was regarded as too low.

Monopoly utility Abu Dhabi Water and Electricity Authority (Adwea) or Mubadala Petroleum, an arm of one of the emirate's main investment funds, are the likely merger candidates, according to three Abu Dhabi-based sources.

Adwea already owns 53.4 per cent of Taqa on behalf of the government and would be a good fit with Taqa's power generation assets in the United Arab Emirates. Mubadala's energy focus would also ensure synergies, the sources said.

Taqa declined to comment. A spokesman for Mubadala dismissed merger talk as rumours. ADWEA could not be reached for comment.