Abu Dhabi National Energy Company PJSC (TAQA), a publicly listed company on the Abu Dhabi Securities Exchange (ADX: TAQA), today reported its Fourth Quarter and Full Year 2010 financial results.
The positive commodity pricing environment combined with increased power production delivered a 27% year-on-year increase in revenues. Cost of sales benefitted by AED 416 million from the reversal of a previous oil and gas asset impairment resulting from a successful oil and gas drilling programme in North America.
TAQA recorded EBITDA of AED 10.4 billion and Net Profit After Tax of AED 1.0 billion. Earnings per Share was AED 0.17 for the full year.
As a result of this positive performance and given its confidence in TAQA’s position, the Board of Directors is proposing a dividend of AED 0.10 per share, subject to approval at the Annual General Meeting on 19 April 2011.
H.E. Abdulla Saif Al-Nuaimi, Chief Executive Officer and Managing Director of TAQA, said: “2010 was an excellent year for TAQA -- not only did we record strong financial and operational performance, but we also made significant headway in realigning the business to a more focussed strategy which targets long-term value.
“We have added high-quality, earnings-accretive assets to our global footprint over the course of the year. Alongside these additions, we have conducted a strategic review of our international portfolio and have identified and prioritised the best opportunities for value creation. Furthermore, we have taken steps to improve our organisational structure by strengthening our headquarters in Abu Dhabi. The net result is an organisation which offers real organic growth potential.
“The continued support of the Emirate of Abu Dhabi, our pipeline of organic projects and a strong financial position fill me with confidence for 2011 and beyond.”
Carl Sheldon, General Manager of TAQA, said: “TAQA’s operational performance is evident in our financial results for the year. Overall, oil and gas production finished the year at the high end of our original guidance, while revenues were simultaneously boosted by better oil and gas pricing. The consistent reliability of our high-performing power and water facilities has once again provided a stable backbone to TAQA’s overall results. Combined with discipline in operational expenditures and the success of our drilling programs in North America and the UK North Sea, our operational efficiency has enabled us to deliver strong EBITDA and Net Profit.”
Profit & Loss
Total revenues for 2010 were AED 21.4 billion, 27% higher year-on-year, compared with total revenues of AED 16.9 billion in 2009. Fourth quarter revenues were AED 6.3 billion, an increase of 44% compared to the fourth quarter of 2009.
Total Oil & Gas revenues increased from AED 7.3 billion to AED 9.3 billion for the full year. This was primarily driven by an increase in realized commodity prices throughout 2010.
Total Power & Water revenues, excluding supplemental fuel income, increased from AED 6.2 billion in 2009 to AED 6.8 billion in 2010. This includes net liquidated damages resulting from the delay in the completion of Fujairah 2 and reflects the first full year of revenues from the expansion at Taweelah A1, which was completed during 2009.
Cost of sales increased 12% from AED 12.7 billion to AED 14.3 billion. Within this, operational expenses, excluding fuel expenses, increased at a slower rate than revenues and assets. The success of our drilling programme in North America resulted in a reversal of previous impairment provisions made in 2009.
Net Profit After Tax for the year totalled AED 1.0 billion, reflecting improved operational performance, reversal of the 2009 impairment provision, liquidated damages received from the delay in commissioning the Fujairah 2 plant and investment income from Sohar Aluminium.
During 2010, TAQA implemented three risk management programs with the objectives of reducing earnings volatility resulting from exposure to global commodity pricing, reducing overall interest costs and better aligning liabilities in currency terms to the underlying cash flows of the business.
Prudent financial management remains a key priority for TAQA’s management. TAQA’s Net Debt/Capital ratio decreased to 80%, and Net Debt/EBITDA reduced to 6.9 times for FY 2010, despite the additional debt added to TAQA’s balance sheet during 2010 related to the transfer from ADWEA of the high-quality, cash-generating plants Fujairah 2 and Shuweihat 2.
During the year, TAQA completed two successful refinancings: a CDN$1.0 billion facility in May, relating to our Canadian business; plus a US$3.0 billion revolving credit facility in December. Both were over-subscribed.
In December 2010, TAQA was awarded an ‘A Stable’ credit rating from Standard & Poors, complementing its existing A3 rating from Moody's Investor Services.
Power & Water
TAQA has grown to become the sixth-largest global independent power producer. Its Power & Water business performance continues to generate steady, stable cash flows, with a top-quartile performance for technical availability of power.
TAQA produced 68,189 GWh of electricity and 165,402 MIG of water during 2010. This, combined with net liquidated damages received in relation to Fujairah 2, generated total revenues of AED 6.8 billion.
Technical availability at TAQA’s domestic power utilities was 94.3%, with its international portfolio recording 91.3%. An average technical availability of 93.5% across the global asset base, underlines the high quality of the assets and their operational efficiency.
Fuel revenues were AED 5.3 billion in 2010, compared to AED 3.4 billion in 2009 due to higher use of back up fuel in 2010 in the domestic subsidiaries and higher power generation at Red Oak. There was a corresponding increase in fuel costs recorded for the same reason.
In August, TAQA received a 54% interest in Fujairah 2, a 2,000 MW and 130 MIGD power and water facility from ADWEA. Fujairah 2 has been in operation since January 2011.
In December, ADWEA transferred to TAQA a 54% interest in the Shuweihat 2 power and water plant, adding 1,500 MW and 100 MIGD to TAQA’s portfolio once construction is complete at the end of 2011.
In December, TAQA’s Jorf Lasfar Energy Company in Morocco completed the tender for the Engineering, Procurement and Construction contract for its 700 MW expansion project. The contract was awarded to the preferred qualified bidder, Mitsui Daewoo.
In May, TAQA signed a Memorandum of Understanding in Ghana with the Volta River Authority for the expansion of the Takoradi plant, which is expected to add 110 MW of efficient, combined-cycle electricity generation, extending the plant capacity to 330 MW.
In June, TAQA acquired a 40% equity stake from ADWEA in the Sohar Aluminium Company in Oman, which includes a 1,000 MW captive power plant. The effective date of ownership was 1 January, 2010. This high quality operation contributed significantly to net income in 2010 and provides an entry point for TAQA into the Sultanate of Oman.
In the USA, TAQA transitioned its partnership for TAQA Gen-X to Morgan Stanley, one of the world’s leading commodity traders.
Oil & Gas
TAQA’s Oil & Gas business comprises strong, well-resourced centers of excellence supporting a portfolio of assets with viable growth potential.
Total Oil & Gas full year revenues, including gas storage and other operating revenues, totalled AED 9.3 billion, an increase of AED 2.0 billion compared to AED 7.3 billion in 2009. This 27% increase was driven primarily by the increase in crude oil and natural gas prices in 2010.
Total global production for 2010 was 134.6 mboe/day with a reserve replacement ratio of 176%.
Production levels in North America remained strong at 90.3 mboe/day in the fourth quarter and 88.6 mboe/day for 2010.
TAQA acquired interests in West Central Alberta during the second half of 2010 adding 6.1 mboe/day of liquid rich gas in addition to the strategic Bearberry gas processing facility.
TAQA also launched the development of a large oil project in the Central Alberta Cardium field with early results exceeding expectations.
Production volumes in the UK North Sea were 36.1 mboe/day in the fourth quarter and averaged 37.3 mboe/day for the full year of 2010.
During the year, TAQA completed the North Cormorant and mobile drilling campaigns in the UK North Sea, adding nearly 14,000 boe/day in new production plus the Falcon field discovery, which is expected to come on-stream during 2011.
In September, TAQA celebrated its first anniversary as Duty Holder of Cormorant Alpha, North Cormorant, Tern and Eider. It also successfully completed four planned shutdowns in the UK North Sea totalling 60,000 man-hours on time, on budget and with no health or safety incidents.
Also in September, TAQA acquired an 81% stake in production licenses for two blocks in the Otter Field Development Area, adding approximately 6,000 boe/day at completion.
Production levels increased in the Netherlands to 8.7 mboe/day, an increase of 29% year-on-year, which is largely attributed to the restarting of production at the Rijn oil field following a three-year re-commissioning programme.
TAQA increased its equity in the flagship Bergermeer Gas Storage project from 36% to 60% in August. During 2010 the project progressed through to the final permitting stage and is expected to start construction in 2011.
Commodity pricing environment
TAQA’s Oil & Gas business benefitted from a positive pricing environment during 2010.
WTI oil price averaged $85.21/bbl for Q4 2010 and $79.40/bbl throughout the year up from an average of $61.65/bbl for 2009. Prices for Brent crude increased to an average of $88.01/bbl in Q4 2010 and $83.48/bbl for the year up from $75.54/bbl in Q4 2009 and $73.59 bbl on average in 2009. Henry Hub gas prices for the quarter averaged $3.79/mmbtu, down from $4.37/mmbtu for Q4 2009. For the full year Henry Hub gas prices averaged $4.37/mmbtu, compared with $3.94/mmbtu in 2009.
For a full list of corporate updates during 2010, please refer to TAQA’s preliminary results at: http://www.taqa.ae/en/news385.html .
Post-period corporate developments
In January 2011, TAQA announced the disposal of Marubeni TAQA Caribbean assets in line with our strategy to focus on developing TAQA’s power & water footprint in the greater MENA region.