The National Central Cooling Company (Tabreed) is in discussions with strategic investors for long-term capital support to run the show. The Middle East's largest district cooling firm is exploring several options for new capital, including private placement, public offering, etc.

Tabreed yesterday revealed that it was seeking Dh1.3 billion of short-term financing from Mubadala, an Abu Dhabi state investment company that holds 16.7 per cent stake, as part of a recapitalisation programme after it reported a Dh1.118bn annual loss, amounting to almost 100 per cent of Dh1.213bn capital of the company.

The recapitalisation is expected to be completed this year. However, the size of funds to be raised is subject to the confirmation of restructuring plan.

Sujit S Parhar, CEO of Tabreed, told Emirates Business: "The value depends on the outcome of the recapitalisation programme. Tabreed will deploy these funds towards fully funding on-going and committed projects and servicing existing operational obligations.

"The financing facility provided by Mubadala is not a bailout. Tabreed has received a short-term bridge loan of Dh1.3bn from Mubadala to provide funding, while Tabreed completes the recapitalisation programme through to the end of 2010."

The company said the loss in the financial year that ended in December 2009 resulted from financing costs, the results of associated companies, a non-cash impairment charge and other issues. Tabreed made a profit of Dh73 million in 2008.

"The total revenues in 2009 were Dh742m – a slight increase over 2008," Tabreed said in its unaudited full-year results for 2009. "The gross profit was Dh291 – also an increase over 2008. However, after finance costs, results of associated companies, a non-cash impairment charge and other items, Tabreed recorded a loss of Dh1.118bn for the year. This compares with a profit of Dh73m in 2008."

"Raising funds in the present market conditions is a big challenge for the company," said Wadah Al Taha, senior financial analyst. "With the Central Bank increasing interest rate, the cost of funds exceeds seven per cent. This cost, when compared to expected returns, seems to be not feasible. Borrowed money will have severe impact on the margins."

Chairman Khadem Al Qubaisi said: "Tabreed's board requested a strategic review to understand the challenges facing the company's finances and business model. Such a review was essential in the wake of the economic downturn."

As part of the recapitalisation programme, this senior-debt financing will be available until the end of 2010 and may be converted to long-term capital.

The board also agreed that the recapitalisation plan should be submitted to shareholders to achieve a stable long-term financial profile and capital structure.

The company's board intends to call for an extraordinary general assembly of the shareholders by mid-April to vote on resolutions authorising it to conclude a recapitalisation of the company. The EGM will seek shareholders' vote to conclude the recapitalisation of the company through a number of options – a capital reduction, the issuance of new capital-raising instruments and arrangements with creditors, banks and sukuk holders.

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