Abu Dhabi National Energy Company PJSC (“TAQA”, the “Group” or the “Company”), one of the largest listed integrated utilities in Europe, the Middle East and Africa, reported its earnings for the period ending 31 December 2023. TAQA delivered a solid financial performance driven by strong and stable returns from its long-term contracted utilities business whilst it has remained focused on delivering its growth strategy.
Financial highlights
- Group revenues were AED 51.7 billion, an increase of 3% versus the prior-year period as higher pass-through bulk supply tariffs and improved allowances under the Regulatory Control 2 (RC2) regime within the Transmission and Distribution segment offset a decline in Oil & Gas revenue.
- Adjusted EBITDA was AED 19.6 billion, down 6%. This fall was led by a decline in the contribution from the Oil & Gas segment on the back of lower realised oil and gas prices and reduced production.
- Net income (TAQA share) was AED 16.7 billion, an increase of AED 8.6 billion, mainly driven by a one-off gain of AED 10.8 billion recognised on the acquisition of a 5% shareholding in ADNOC Gas, in part offset by a one-off AED 1.1 billion deferred tax liability associated with the introduction of UAE corporate income tax from 1 January 2024. Net income excluding these one-off items was AED 7 billion, 13% lower than the prior period, mainly due to a lower contribution from the Oil & Gas business.
- Capital expenditure was AED 5.1 billion, 34% higher than the prior year driven by strong project execution in the Transmission & Distribution business.
- Free cash flow generation was AED 13.9 billion, consistent with the previous year.
- Gross debt was AED 61.2 billion, marginally lower than the amount outstanding at the end of 2022.
Operational highlights
- Transmission network availability for power and water was 98.4%, marginally lower compared to 98.6% in 2022.
- Generation global commercial availability was 97.9%, marginally lower compared to 98.1% in the prior year.
- Oil & Gas average production volumes from continuing operations decreased to 107.8 thousand barrels of oil equivalent per day (mboe/d), a decrease of 7% compared to 2022. This decrease is mainly due to the natural decline in production of late-life UK assets.
Strategic highlights
- Upgraded 2030 targets reflect stronger growth ambitions: TAQA announced significantly higher targets for 2030 to reflect 1) stronger growth ambitions and 2) integration of Masdar in its portfolio. The gross power capacity target has been tripled to reach 150 GW by 2030, of which 100 GW is renewable capacity through Masdar, while targets have also been introduced for net power capacity of 50 GW by 2030 and water generation capacity of 1,300 MIGD by 2030. Renewable energy is expected to constitute over 65% of the generation mix by 2030 versus 45% as at the end of 2023.
- AED 75 billion spend planned to achieve 2030 targets: TAQA envisions a total spend of AED 75 billion by 2030 to achieve its ambitious expansion programme. This is comprised of an AED 40 billion expenditure on UAE-based transmission and distribution networks, in line with the expenditure announced in the company’s 2021 corporate strategy. The remaining AED 35 billion is allocated for the Generation business, with 55% of this total expected to be invested in Masdar.
- Continued portfolio expansion: Aligned with its longer-term growth strategy, TAQA continued building its portfolio in 2023 via organic and inorganic means. This included continued expansion of the company’s desalination capacity (Mirfa 2 development underway, with the project set to become UAE’s third largest RO plant upon completion) and entry into the attractive UAE operations and maintenance (O&M) segment within Generation. The company also received a 5% stake in ADNOC Gas in recognition of the value created by the long-standing, close working relationship between TAQA and ADNOC.
- SWS Holding to add new capabilities: Introducing wastewater networks and treatment business to TAQA’s portfolio, the planned AED 1.7 billion acquisition of SWS Holding enhances TAQA’s position as Abu Dhabi’s fully integrated utility. Set for completion in 2024, the transaction will enhance TAQA’s regulated asset base by more than 20%. The transaction remains subject to obtaining regulatory and relevant third-party approvals.
- Favourable changes in regulatory framework: Governing returns for the T&D business, Regulatory Control 2 (RC2) came into place for the 2023-2026 period. The revised framework brings a number of favourable changes relative to RC1, including an upward revision to real WACC (4.9% vs. 4.6% previously), higher OPEX and CAPEX allowances and provision for UAE corporate income tax adjustment via OPEX allowance.
- Highly successful inaugural green bond: TAQA completed a highly successful USD 1.5 billion (AED 5.5 billion) dual tranche bond offering in 2023, which was almost 10 times oversubscribed. The issuance included TAQA’s inaugural green bond under its newly established Green Finance Framework. The Green Finance Framework, in turn, was awarded a SQS2 (very good) sustainability score by Moody’s.
- Enhancing role as partner for reducing carbon emissions: TAQA continues to be the partner of choice for companies seeking to reduce carbon emissions. As part of this process, ADNOC and TAQA announced a USD 2.2 billion (AED 8.1 billion) project for sustainable water supply to ADNOC’s onshore operations. The centralised seawater treatment facility will replace the current deep aquifer saline water systems across ADNOC’s onshore operations, enhancing energy efficiency by up to 30%. TAQA also acquired a stake in Xlinks, which aims to develop the world’s longest HVDC subsea cable between Morocco and UK. Upon completion, the project will supply 8% of UK’s electricity needs from renewable energy sources in Morocco.
- Continued progress on ESG front: TAQA managed to further reduce its Scope 1&2 GHG emissions by 13% YoY in 2023 (19% compared to base year of 2019), while GHG intensity based on revenue declined 16% YoY in 2023. Progress on this front has continued to translate into stronger ESG ratings for the company. Moreover, TAQA was ranked the number 1 Sustainability Leader in the Energy & Utilities sector as part of Forbes’ Middle East Sustainability Leaders list.
H.E. Mohamed Hassan Alsuwaidi, TAQA’s Chairman, commented: “TAQA’s strategic positioning across its markets, particularly in Abu Dhabi as a fully integrated local utilities champion, remains key to our robust results. Our achievements in 2023 serve as a foundation for further growth, which will include organic and inorganic expansion as well as substantial investment into power and water capacity and UAE-based transmission and distribution networks over the coming years. The significant upward revision of our production targets is testament to our confidence in being able to deliver on our ambitions and strategic goals for 2030 and beyond.”
Jasim Husain Thabet, TAQA’s Group Chief Executive Officer and Managing Director, commented: “In 2023, TAQA remained unwavering in its commitment to creating long-term shareholder value, navigating a challenging global economic backdrop, mitigating challenges in the oil and gas market with a robust performance across our utilities business, including in Transmission & Distribution and Generation.
Focused on delivering our growth agenda, our capital expenditure increased significantly during the year, paving the way for the Company’s AED 75 billion 2030 investment pipeline as we expand our power and water capacity and UAE-based transmission and distribution networks. During the year, we announced a series of notable projects including Mirfa 2 Reverse Osmosis IWP with Engie, an investment into Xlinks First Limited, a strategic partnership with the government of Uzbekistan to explore strategic opportunities for investment in the country’s power sector, and an AED 8.1 billion (USD 2.2 billion) project with ADNOC for sustainable water supply to ADNOC’s onshore operations – which was followed by financial close.”
He added: “Moreover, I am proud of our continued recognition as a low carbon power and water champion through the progress achieved on our ESG initiatives, with multiple agencies upgrading TAQA’s ESG rating. Our commitment to sustainability was reiterated with TAQA’s inaugural green bond issuance in 2023. The USD 1 billion (AED 3.67 billion) bond was issued under our Green Finance Framework which was awarded SQS2 (Very Good), sustainability score by Moody’s, highlighting our efforts and ambitions towards financing green energy.”
Upon approval of the financial results, TAQA’s Board of Directors also proposed a final cash dividend of 2.0 fils/share (approx. AED 2.2 billion), including variable dividend of 0.7 fils/share (approx. AED 0.8 billion). This will be the fourth and final dividend payment planned for the financial year of 2023 bringing total dividends for the year to 3.95 fils/share (approx. AED 4.4 billion).