Mar 14 2012
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TAQA Full Year 2011 Results
Proposed dividend of AED 0.10 per share
14 March 2012, Abu Dhabi, UAE - Abu Dhabi National Energy Company PJSC (" TAQA " - ADX: TAQA ), the global integrated energy company, today reported its full year 2011 operational and financial results.
All amounts in AED million unless otherwise stated
(2) Includes gas storage plus certain other operating revenue relevant to the Oil & Gas business.
2011 was another year of strong operational performance for TAQA , with total revenues growing by 13%. There was growth in both the Power & Water and Oil & Gas divisions, from new generating capacity and higher production in the UK North Sea. However, while high oil prices buoyed performance, this was offset by weakening North American gas prices. The decline in total assets and net profit was principally due to the lower gas price environment in North America, which led to a one-off impairment following the annual revaluation of TAQA 's portfolio. The net impairment of AED 470 million reflected an impairment of AED 616 million, offset by a deferred tax benefit of AED 146 million.
In addition, increased taxes on oil and gas production in the UK North Sea led to a higher effective tax rate which depressed TAQA 's net result.
During the year, TAQA maintained a strong level of liquidity. In December, TAQA successfully issued US$1.5 billion in 5 and 10-year bonds at extremely attractive prices, taking advantage of strong market conditions to pre-finance maturities due in Q4 2012.
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 17 April 2012.
Carl Sheldon, Chief Executive Officer of TAQA , said:
"In 2011, we had a strong operational performance across our business, successfully growing both our Power & Water and Oil & Gas segments. During the year, we brought 3,500 MW of additional power production on line at Shuweihat 2 and Fujairah 2, and commenced construction on the project to increase the capacity of our power plant in Morocco.
"In Oil & Gas, we recovered from a difficult drilling season in Canada to maintain production levels. While weak North American gas prices have affected our performance, we are focusing our investment on liquid rich assets and monetising non-core acreage to mitigate this. In the UK North Sea, we grew production by 15% and added attractive acreage to our footprint, which, in line with our strategy, lies adjacent to our existing assets for cost effective development.
"Safety remains a core focus for TAQA and I am pleased that our recordable injury rate fell by 11% during the year and that our expansion project in Morocco recorded over 1 million man-hours without a single lost-time incident.
"In this 40th anniversary year of the UAE, TAQA remains committed to Abu Dhabi's vision and values, characterised by progressive development, investment and the pursuit of the highest global standards."
Stephen Kersley, Chief Financial Officer, said:
"Despite a strong operational performance, the impact of both the impairment in North America and increased taxes in the UK North Sea can be seen in our net financial result. We are committed to managing our portfolio of assets as effectively as possible to mitigate the effect of this, through tight cost control and judicious deployment of capital to those projects with the greatest return.
"Following a successful programme of debt refinancing and restructuring, TAQA is well placed for the future. The market's recognition of TAQA 's strengths can be seen in how efficiently this was achieved and the attractive pricing we secured during our US$1.5 billion bond refinancing. This has left us in a strong position with nearly AED 18 billion of available liquidity."
Financial summary: 2011 versus 2010
Total revenues for 2011 were AED 24.2 billion, 13% higher year-on-year, compared with total revenues of AED 21.4 billion in 2010.
Total Power & Water revenues (excluding supplemental fuel income but including net liquidated damages and other operating revenues) increased from AED 6.9 billion in 2010 to AED 7.4 billion in 2011. This 8% year-on-year increase was primarily due to the contribution from Fujairah 2, which was transferred to TAQA in the third quarter of 2010 and fully commissioned in January 2011, and Shuweihat 2 which began production in the second quarter 2011 and was fully commissioned in October 2011. These were partly offset by a decrease at Um Al Naar, where an amendment to the PWPA reduced capacity income from 7 December 2010.
Supplemental fuel income decreased 11% year-on-year due to lower use of alternative fuel supplies at TAQA 's domestic power plants, in particular at Um Al Naar and Taweelah A1. This was offset by an increase at both Fujairah 2 and Shuweihat 2 as they were commissioned. Fuel is charged to the plants at cost, so a decline in revenues does not impact TAQA 's profitability.
Total Oil & Gas revenues (including gas storage and other income) increased from AED 9.2 billion in 2010 to AED 12.0 billion for 2011. This 30% increase versus the same period last year, was driven by stronger crude oil prices and higher production in the UK North Sea, offset by weaker North American gas prices. Within this, other operating revenue of AED 887 million in 2011, was higher mainly due to trade sales in the Netherlands and higher processing income and sulphur sales in North America.
Cost of sales increased by 10% from AED 14.3 billion to AED 15.7 billion. Fuel expenses were AED 4.2 billion in 2011 compared with AED 4.8 billion in 2010 due to reduced capacity at Um Al Naar, which was partly offset by an increase at Fujairah 1 and other UAE plants. At TAQA 's international fleet, an unplanned outage at Takoradi reduced the fuel cost by AED 501 million, although this was offset by a AED 381 million increase at other plants - mainly in Morocco due to higher coal prices.
Operating expenses for Power & Water (which excludes fuel costs) increased from AED 1.8 billion for 2010 to AED 2.0 billion in 2011, due to the commissioning of Fujairah 2 and Shuweihat 2. Oil & Gas expenses rose from AED 3.4 billion in 2010 to AED 3.5 billion in 2011 due to higher gas costs at in the Netherlands for trade sales and higher power, fuel and lease costs in North America. These were mitigated by a AED 450 million reduction in the UK due to crude inventory movements.
Depreciation, Depletion and Amortisation ("DD&A") expenses for Power & Water were AED 1.6 billion in 2011 compared with AED 1.2 billion in 2010, principally due to Fujairah 2 and Shuweihat 2. For Oil & Gas, the DD&A expense rose to AED 3.7 billion in 2011 from AED 3.2 billion in 2010, due to higher production at in the UK and higher DD&A rates in North America and the UK, combined with an increase in abandonment liabilities in the Netherlands.
Finance costs increased from AED 4.0 billion in 2010 to AED 4.6 billion in 2011, largely due to the addition of the project financing related to the acquisition of Fujairah 2 and Shuweihat 2.
Profit Before Tax was AED 4.1 billion in 2011, 36% higher year-on-year than AED 3.0 billion in 2010, due to higher revenues as a result of the oil price, higher production in the UK North Sea, plus the positive impact of derivatives associated with Red Oak plant in the US.
Due to the tax increase in the UK North Sea, TAQA 's effective tax rate rose to 62% in 2011, compared with 38% in 2010. The tax expense of AED 2.5 billion for 2011 compares with AED 1.2 billion in 2010, and also reflects higher earnings from the UK.
Net Profit After Minority Interests decreased 27% year-on-year, totalling AED 744 billion for 2011, versus AED 1.0 billion for 2010.
TAQA 's Net Debt/Capital ratio was 78% at the end of the period and Net Debt/EBITDA improved to 5.0 times for 2011, versus 6.6 times for 2010.
Total debt of AED 73.9 billion was reduced from AED 76.8 billion following a buy-back of bonds worth AED 2.2 billion and repayment of the revolving credit facility.
In April 2011, TAQA successfully extended the maturity of its CDN$1 billion revolving credit facility in Canada to 2014.
On 2 October 2011, TAQA announced it had established a 3.5 billion Malaysian Ringgit programme ($1.1 billion) as it continues to diversify its financing options. Post-period, on 5 March 2012, TAQA issued MYR650m under this programme. This was up scaled from MYR500m due to strong demand and achieved attractive pricing at a profit rate of 4.65%.In December 2011, TAQA raised US$1.5 billion in five and ten-year bonds in the international bond market at very low rates. A portion of the proceeds were used to buy back US$589 million of notes due in October 2012.
Consolidated cash on hand as at 31 December 2011 was AED 3.8 billion, compared with AED 5.5 billion at the end of 2010. TAQA had unused credit lines of AED 14.0 billion at the end of 2011, compared to AED 8.3 billion at the end of 2010, and total available liquidity of AED 17.9 billion compared to AED 13.8 billion for 2010.
Power & Water
TAQA 's Power & Water business performance continues to generate steady, stable cash flows, with a top-quartile performance for technical availability.
TAQA produced 67,390 GWh of electricity and 220,530 MIG of water during 2011, generating total revenues of AED 7.4 billion for the year. The 8% increase in revenues compared to the same period last year, reflects the contribution from Fujairah 2, operational from January 2011 and Shuweihat 2 which had partial production from May 2011 and was fully operational in October 2011. Global technical availability was 92.4% for 2011.
TAQA 's domestic portfolio of assets generated 48,087 GWh of electricity and 220,530 MIG of water during 2011, reflecting the additional capacity of Fujairah 2 and Shuweihat 2. Domestic availability was 93.0%.
Supplemental fuel revenues decreased from the peaks recorded over the past 12 months as a result of less demand for back-up fuel at TAQA 's UAE domestic assets.
Fujiarah 2, a 2,000 MW and 130 MIGD plant in Fujairah, was completed in July 2011 - it is the second largest combined power and water plant in the world. In October, Shuweihat 2 in Abu Dhabi was completed, adding 1,500 MW of power generation and 100 MIGD of water desalination capacity.
TAQA 's international power portfolio, which comprises of assets in Morocco, Ghana, India, Saudi Arabia and the United States, generated 19,303 GWh of power during the year. International technical availability was 90.3%, higher than the same period last year, despite an outage at Takoradi in Ghana resulting from a generator rotor ground fault. The issue was fixed within three months, half the typical time, and the plant was fully back in service by early October.
In Morocco, construction began on the expansion of the Jorf Lasfar plant, which is proceeding within budget and on schedule. Commissioning and takeover of units 5 and 6 is planned for the end of 2013 and early 2014, respectively. By 31 December 2011, over 1 million man-hours had been spent on the project without a single lost time incident.
In India, TAQA signed a Memorandum of Understanding in June with Jyoti Structures Limited (Jyoti) to explore ways to collaborate in the power sector in India. Initially, TAQA and Jyoti will pursue the expansion of TAQA 's existing 250 MW power plant at Neyveli, which is expected to double in capacity through the construction of an additional 250 MW plant.
Oil & Gas
TAQA 's Oil & Gas business comprises strong, well-resourced centres of excellence supporting a portfolio of assets with viable growth potential across North America, the UK North Sea and the Netherlands.
Total Oil & Gas revenues, including gas storage and other operating revenues, were AED 12.0 billion for 2011, an increase of 30% compared to 2010. This uplift was driven primarily by the increase in realised crude oil prices and higher production in the UK North Sea, offset by lower North American gas prices. Other operating revenues were boosted by gas sales in the Netherlands and higher processing income and sulphur sales in North America.
Total average global daily production for 2011 increased to 139.1 mboe/day, compared with 134.6 mboe/day in 2010, within guidance for 2011.
In October, TAQA made a strategic investment of US$46.6m for a 19.9% stake in WesternZagros, an exploration company with operations in the Kurdistan region of Iraq.
Production in North America was flat year-on-year at 88.1 mboe/day. This was primarily due to the cold weather issues experienced early in the year, where a prolonged break-up period hampered drilling. However, through swift reallocation of capital to projects in less affected areas much of this shortfall was made up.
Production volumes in the UK North Sea averaged 42.9 mboe/day during the year, a 15% increase compared to the same period last year and at the top of production guidance for the year, due to two key additions:
- In July, TAQA announced first oil from its new field development in the UK North Sea, the Falcon field, following a record appraisal and development phase of just under two years.
- Also in July, TAQA acquired an initial 31% interest in the Otter field from Total and took over as operator of the field. Otter is tied back subsea to the TAQA operated Eider platform. The acquisition of Total 's remaining 50% stake in Otter was completed in Q1 2012, taking TAQA 's stake to 81%.
On 15 November 2011 TAQA announced the conditional acquisition for a consideration of $54.8 million including an allocation for tax allowances of a 16.6% interest in the North Sea Cladhan oil discovery from Premier Oil plc (Premier), which Premier was expected to own following completion of its proposed acquisition of Encore Oil plc. Since 1 January 2012, Premier has completed the acquisition of Encore, and completion of the Cladhan asset acquisition by TAQA is expected shortly. The blocks are located 18 kilometres southwest of the TAQA -operated Tern platform.
Production in the Netherlands averaged 8.1 mboe/day, a 7% decrease compared to the same period last year, but slightly ahead of management guidance for the year. Our Peak Gas Installation facility performed well, maintaining its track record of 100% availability.
In respect of the Bergermeer Gas Storage project, following the Dutch Parliament approval of the project in Q2 2011, the Council of State suspended the final permits pending a review of the appeals. TAQA expects a final ruling on the appeals in early 2012.
TAQA continues with the preparatory activities for the project, and some 10TWh made available in the first open season has been forward sold, in anticipation of final approval of the project.
Commodity price environment
During the quarter, the oil price continued to have a favourable impact on TAQA 's financial results, although this was offset by weaker North American gas prices.
The WTI oil price averaged $95.01/bbl for 2011 compared with $79.40/bbl in 2010. Prices for Brent crude increased to an average of $109.22/bbl in 2011 versus $86.16/bbl in 2010.
NYMEX gas prices for 2011 averaged $3.98/mmbtu, versus $4.37/mmbtu for 2010.
Post-period corporate developments
In January 2012, Dr Saif Al Sayari was appointed Executive Officer Energy Solutions, responsible for developing the company's alternative and technology-driven energy solutions.
Also, in January 2012, TAQA divested non-core land holdings and operating assets in North America for a total of AED 1,835 million.
On 30 January 2012, TAQA entered into two farm in agreements with a subsidiary of Fairfield Energy Limited to acquire a 50% working interest in UK North Sea licences P184, P474 and P1634 which includes the Darwin oil discovery and related exploration acreage, adjacent to the North Cormorant and Pelican fields. The transactions are subject to government and certain third party approvals and are expected to complete in the coming months.
In March 2012, TAQA completed a MYR 650m issuance within its MYR 3.5 billion Sukuk programme at a profit rate of 4.65%, with a fully swapped rate to US$ of 5.3%.
Abu Dhabi National Energy Company ( TAQA ) is a global energy company majority owned by the Abu Dhabi Government and listed on the Abu Dhabi Securities Exchange. Main activities include oil and gas, power generation and water desalination across four continents.
TAQA is one the largest independent power producers in the world and the majority owner of the facilities that provide 98 per cent of the water and electricity requirements in the Emirate of Abu Dhabi. TAQA 's power plants are located in the United Arab Emirates, Morocco, Oman, Saudi Arabia, Ghana, India, and the United States.
With operations in Canada, the United Kingdom, the Netherlands and the United States, TAQA 's oil and gas business includes exploration and production, gas storage and pipeline transportation.
Its entrepreneurial culture, along with a commitment to people, safety and the environment, has created strong foundations for the long-term sustainable growth of its business.
Follow TAQA on Twitter: www.twitter.com/taqaglobal
For further information:
TAQA Investor Relations, Abu Dhabi
Tanis Thacker, Head of Investor Relations
+971 2 691 4933
Mohammed Mubaideen, Investor Relations Manager
+971 2 691 4964
© Press Release 2012
© Copyright Zawya. All Rights Reserved.
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