Abu Dhabi National Energy Company (Taqa) has reported a net loss of Dh19 billion ($5.2 billion) for the financial year 2016 as it wrote down the value of oil assets after prices slumped.
Announcing the results, Taqa said it booked a post-tax impairment of Dh16.9 billion, primarily related to its oil and gas assets, in response to the lower commodity price environment. This contributed to a pre-impairment net loss of Dh2.1 billion.
The impairment is a one-time non-cash charge, and has no impact on the company's ability to meet its obligations, including its ongoing debt service obligations, the Emirati firm stated.
A leading global energy company headquartered in Abu Dhabi with operations in 11 countries worldwide, Taqa said in 2016 it had completed a two-year transformation programme which delivered cumulative savings of Dh 13.2 billion, including a capital expenditure reduction of Dh8.6 billion from 2014 to 2016.
Additionally, the company has delivered a 25 percent reduction in global headcount with over 1,000 positions reduced across its global operations.
Taqa has also completed the transformation of its balance sheet. This was achieved through several measures, including the utilisation of certain land areas on which Taqa's UAE power and water plants are located.
According to Taqa, the privatisation of Abu Dhabi's power and water assets has unlocked significant long-term value which has been utilised by the company through signing a land lease agreement valued at Dh18.7 billion as of December 31, 2016.
The valuation of the land lease rights was undertaken by two international, independent valuation experts. A previous agreement with a related party regarding Taqa's oil and gas assets is no longer in effect.
Taqa’s 2016 full-year results highlighted the operational efficiency gains and financial savings achieved through the transformation programme, most notably through record power generation of 93,246 gigawatt hours (GWh), limited oil and gas production decline despite 70 pere cent reduction in oil and gas capex, significant reduction in energy unit operating costs, down 33 percent compared to 2014, and successful refinancing of Dh6.4 billion in maturing bonds at lower rates, said the company in its statement.
Taqa also completed the transformation of its balance sheet. This was achieved through several measures, including the utilisation of certain land areas on which Taqa’s UAE power and water plants are located.
On the results, Saeed Mubarak Al Hajeri, the chairman of the board of directors, said: "The successful delivery of the Transformation Programme has significantly reshaped the business, making Taqa a more efficient and focused organisation."
"In addition, the recent additional support now provides Taqa with the solid foundation to capitalise on future opportunities and achieve greater success. The land lease also avoids any share recapitalisation or dilution of the existing shareholders, and provides a greater opportunity for Taqa shareholders to realise long-term value from their investment," he noted.
According to him, the privatisation of Abu Dhabi’s power and water assets has unlocked significant long-term value which has been utilised by Taqa through signing a land lease agreement valued at Dh18.7 billion as of December 31, 2016.
The UAE operations produced 66,652 GWh of electricity and 257,169 million imperial gallons of desalinated water, continuing to deliver the vast majority of water and electricity requirements of Abu Dhabi, he explained.
"While challenging macroeconomic conditions in the oil and gas industry continue to impact performance, the completion of a two-year business Transformation Programme initiated to combat lower commodity prices, generating Dh13.2 billion in cost savings while maintaining safe and reliable operations, is a clear demonstration of our commitment to delivering sustainable efficiencies," stated Al Hajeri.
Mohammed Al Ahbabi, the acting chief financial officer, said: "We have aggressively reduced our capital expenditure and cash costs, in our efforts to achieve cash flow neutrality despite low commodity prices."
"We are pleased that external markets recognised these efforts as we successfully raised Dh6.4 billion to refinance maturing bonds at competitive rates despite challenging industry conditions. We continue to maintain our strong rating and liquidity position with the long-term objective being to deleverage the company," noted Al Ahbabi.
"The net impact of the equity contribution and the impairment taken in relation to our Oil & Gas assets, is major step in that process," he added.
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