• 08 May 2013
  • Global

TAQA Q1 2013 Results

Abu Dhabi, United Arab Emirates – TAQA, the global energy company based in Abu Dhabi, today reported its Q1 2013 operational and financial results.Q1 2012Q1 2013% +/-Total assets116,151121,108▲4Total revenues5,7435,422▼6         Power & Water (1)1,8981,851▼2Construction revenue0517-         Oil & Gas (2)2,8862,396▼17Fuel revenue959658▼31Cost of sales (3)3,4723,515▲1Construction costs0381-EBITDA3,4492,702▼28Profit Before Tax1,405445▼70Net profit After Minority Interests534106▼80Basic earnings per share (AED)0.0880.017▼81Net Debt/EBITDA (times)5.57.1-Net debt to capital (%)78.4*79.2-All amounts in AED million unless otherwise stated(1) Excludes fuel revenue and construction revenues. Also includes certain other operating revenue relevant to the Power & Water business.(2) Includes gas storage plus certain other operating revenue relevant to the Oil & Gas business.(3) Excluding construction costs(*) As at 31 December 2012SummaryRevenues were down 6%, largely due to a shut-in of Cormorant Alpha in January 2013 during a major inspection, repair and maintenance programme. Stronger North American gas prices were offset by weaker North American oil and liquids prices.Profitability was consequently impacted, although in the comparable period in 2012 profitability was supported by the proceeds of disposals, making direct comparison difficult.Power & Water faced operational challenges, due to a number of forced outages at TAQA’s domestic and international plants. TAQA’s organic growth projects are proceeding well, with Jorf Lasfar over 80% complete and Takoradi having broken ground. TAQA also progressing detailed negotiations to enter the Turkish energy market, following an agreement between the Turkish and UAE Governments.Notwithstanding the shut-in of Cormorant Alpha, which is still on-going, TAQA made good progress in other areas of the North Sea, including making a discovery at the Darwin field and, post-period, securing government approval for its plans at the Cladhan field. A strong performance in the Netherlands also positively boosted TAQA’s performance. TAQA commenced operations at its Atrush block in the Kurdistan region of Iraq and is currently drilling its third well.TAQA reinforced its strong financial position with robust available liquidity of AED 21.8 billion and, post period, Standard & Poor’s announced that it was raising TAQA’s A rating to a positive outlook.CommentCarl Sheldon, Chief Executive Officer of TAQA, said:“I can take some positives from what was a challenging quarter. Our major construction and development projects in Morocco, Ghana, the Netherlands and Iraq are all progressing very well and will start generating significant revenues in the next two to three years. Stronger natural gas prices in North America position us well to take advantage of our large land position and prospects in Western Canada. Similarly, new developments and discoveries in our North Sea business promise to extend the life of these assets. The halting of production on the Cormorant Alpha platform was the right thing to do to ensure the safety and integrity of this critical piece of North Sea infrastructure.Stephen Kersley, Chief Financial Officer, said:“We started the year in a very strong financial position having renewed our corporate credit facilities and secured all bond maturities for the year at unprecedented rates. The outlook remains strong with increased liquidity and an enhanced debt maturity profile. Although our financial performance has been affected by operational outages, our cash flows remain extremely strong and we are well placed to benefit as those operational issues are resolved. I am also delighted that the strength of our cash flows have been recognised by Standard & Poor’s, which recently raised our A rating to a positive outlook. ”Financial summary: Q1 2013 versus Q1 2012Revenues and costsTotal revenues for Q1 2013 were AED 5.4 billion, 6% lower year-on-year, compared with total revenues of AED 5.7 billion in Q1 2012. Cost of sales, excluding construction expenses, were AED 3.5 billion in Q1 2013, an increase of 1% over the prior year period.Power & WaterPower & Water revenues, excluding supplemental fuel and construction revenues, were flat at AED 1.9 billion. Construction and Finance revenues from the Jorf Lasfar and Takoradi 2 expansion projects of AED 517 million were offset by construction costs of AED 381 million, leaving a profit margin of AED 136 million.Supplemental fuel income decreased 31% year-on-year to AED 658 million.Operating expenses for Power & Water (which excludes fuel costs and construction costs) rose 15% year on year to AED 468 million in Q1 2013, due to an unplanned outage at Jorf Lasfar and higher costs at Taweelah in the UAE. Depreciation, Depletion and Amortisation (“DD&A”) expenses for Power & Water rose 2% to AED 455 million in Q1 2013, compared with AED 447 million in Q1 2012.Oil & GasTotal Oil & Gas revenues (including gas storage and other income) were down 17% at AED 2.4 billion for Q1 2013, due to lower production in the UK North Sea, offset by higher production in the Netherlands and stronger gas prices in North America.Oil & Gas expenses rose from AED 812 million in Q1 2012 to AED 1.0 billion in Q1 2013, principally due to higher repair and maintenance costs in the UK. Oil & Gas Depreciation, Depletion and Amortisation (DD&A) expense increased by 2% to AED 907 million in Q1 2013, reflecting a higher DD&A rate in North America, due to future development costs, an amendment of reserves in the North Sea, offset by the impact of lower production in the North Sea.Finance costsFinance costs decreased by 1% to AED 1.3 billion in Q1 2012 to AED 1.2 billion in Q1 2013. The decrease was due to refinancing of debt at more favourable rates, partially offset by a small increase due to financing at Jorf Lasfar and Takoradi.ProfitabilityProfit Before Tax was AED 445 million in Q1 2013, 68% lower year-on-year than AED 1.4 billion in 2012, due to lower revenues from Oil & Gas, principally due to lower production in the UK North Sea.Income tax expense was AED 220 million for Q1 2013, compared to AED 724 million in Q1 2012.  This consists of AED 321 million of income tax expense and AED 101 million of deferred income tax income. The effective tax rate decreased slightly to 49% from 52% in the prior year, reflecting lower production in the UK North Sea. Profit for the period (after minority interests) was AED 106 million, a decrease of 80% compared to AED 534 million in 2012. The decline was principally driven by lower operating profit during the quarter and also reflects the disposals that were made in Q1 2012 which inflated the comparable period in the prior year.Basic and diluted earnings per share attributable to equity holders of TAQA were AED 0.017, compared to AED 0.088 in the prior year period.FinancingTotal debt of AED 80.3 billion in Q1 2013 increased from AED 79.5 billion in the same period in 2012, following new bond issuance in anticipation of bond maturities in 2013.Consolidated cash on hand, as at 31 March 2013, was AED 3.9 billion, a slight increase from AED 3.8 billion in 2012. As of 31 March 2013, TAQA had unused credit lines of AED 17.9 billion, compared to AED 14.7 billion at the 31 March 2012, and total available liquidity of AED 21.8 billion, compared to AED 19.9 billion. Operational ReviewPower & WaterKey Performance IndicatorsQ1 2012Q1 2013% +/-Total revenues in AED million(excl. supplemental fuel revenue & construction revenue)1,8981,851▼2% of overall revenues(excl. supplemental fuel revenue & construction revenue)4044▲4Total generation capacity (MW)Global15,40715,407-Domestic12,49412,494-International2,9132,913-Total power production (GWh)Global14,17213,608▼4Domestic9,07510,243▲13International5,0973,365▼44Technical availability of power generation business (%)Global91.383.7▼8Domestic90.884.2▼6International93.480.1▼13Water desalination capacity (MIGD)Total887887-Total water desalination (MIG)Total54,11457,652▲7TAQA produced 13,608 Gigawatt hours (GWh) of electricity and 57,652 Million Imperial Gallons (MIG) of water in Q1 2013, compared to 14,172 GWh and 54,114 MIG of water during the same period in 2012, generating revenues of AED 1.9 billion, excluding construction and fuel revenues. The 2% decrease in revenues compared to the same period last year, reflects forced outages at Shuweihat 1, Jorf Lasfar and Red Oak. EBITDA fell by 3% to AED 1.4 billion and net income to AED 436 million.Technical availability across the fleet was 83.7%, a decrease of 8% over the same period in 2012.  Domestic TAQA’s domestic portfolio of assets generated 10,243 GWh of electricity and 57,652 MIG of water during the quarter. Domestic availability was 84.9%, reflecting the forced outage at Shuweihat 1. Nonetheless, five of TAQA’s eight domestic plants had an Equivalent Forced Outage Rate (EFOR) lower than 1%, reflecting the modernity of the fleet.Supplemental fuel revenues decreased as a result of less demand for back-up fuel at TAQA’s UAE domestic assets.InternationalTAQA’s international power portfolio, which comprises of assets in Morocco, Ghana, India, Saudi Arabia, Oman and the United States, generated 3,365 GWh of power during the period. International technical availability was 80.1%, a decrease of 14% in comparison to the same period last year. This was due to a transformer failure and boiler leak at Jorf Lasfar, a rotor failure at Red Oak and a boiler failure at Neyveli.In Morocco, the 700 megawatt (MW) expansion project at Jorf Lasfar continued to progress and was 80% complete at the end of the period. The expansion will bring the gross capacity of the Jorf Lasfar plant to 2,056 MW. The commissioning of the two expansion units is planned for the end of 2013 and early 2014..In Ghana, the expansion of Takoradi 2 has broken ground and is continuing on time and on budget. The expansion will increase the plant’s output from 220 MW by 50 per cent to approximately 340 MW without requiring extra fuel or producing additional emissions. The expansion is scheduled for commissioning in the fourth quarter of 2014.In January, TAQA acquired an interest in the developer of the 100 MW Sorang hydroelectric plant in the northern Indian state of Himachal Pradesh in a joint venture with Indian infrastructure company Jyoti Structures Ltd. The plant is expected to begin operations in 2013.Also in January, the Republic of Turkey and the United Arab Emirates signed an Intergovernmental Agreement for the development of power plants and associated mines in the Afsin-Elbistan region of Turkey. The agreement marked the start of exclusive negotiations between TAQA, Turkey’s Electricity Generation Co. Inc. (EÜAŞ) and the Turkish Government for the project, with a combined power generation capacity of up to 7,000 MW.Oil & GasTAQA’s Oil & Gas business comprises a portfolio of assets across North America, the UK North Sea, the Netherlands and Kurdistan region of Iraq.Key Performance IndicatorsQ1 2012Q1 2013% +/-Total revenues in AED million 2,8862,396▼17% of overall revenues(excl. supplemental fuel income) 6056▼4Total production(mboe/day)Global134.2126.9▼5North America86.388.7▲3UK41.028.8▼30Netherlands6.99.4▲36Average net realized price of crude oil sold(US$ per barrel)North America84.7473.85▼13UK117.74113.56▼4Netherlands113.07102.02▼10Average net realized price of natural gas sold(US$ per thousand feet)North America2.573.38▲32UK10.4712.29▲17Netherlands10.6910.59▼1Total Oil & Gas revenues, including gas storage and other operating revenues, were AED 2.4 billion for Q1 2013, a decrease of 17% on last year. This was driven primarily by lower production in the UK North Sea, due to the shut-in of Cormorant Alpha in January 2013, following a hydrocarbon release in one of the concrete legs of the platform. There was a subsequent release in March within the same platform leg. While no hydrocarbons have entered the environment, Cormorant Alpha production of between 8,000 to 10,000 barrels a day continues to be shut-in.While North American gas prices have risen significantly during the period, up 32% year on year to US$3.38 per thousand cubic feet (mcf), liquids and oil prices have fallen, impacting performance. In addition, TAQA divested a portfolio of non-core North American acreage in Q1 2012, slightly skewing the year on year comparative figures.Operating expenses were AED 992 million in Q1 2013 compared with AED 812 million in Q1 2012, an increase of 22% due to expenditures related to subsea repairs in the UK North Sea, higher fuel costs and higher lifting and processing expenses.Total average global daily production for Q1 2013 decreased to 126.9 thousand barrels of oil equivalent per day (mboed), compared with 134.2 mboed in the same period last year, a fall of 5%, due to the unplanned shut downs in the UK North Sea, the disposal of non-core acreage and the shut-in of uneconomic production in North America.North AmericaIn North America, an average of 88.7 mboed was produced during Q1 2013, an increase of 3% year on year. Revenues increased by AED 62m to AED 1 billion, due to higher production and higher gas prices offset by lower realised prices for oil and liquids. Due to a supply imbalance, there was a significant discount during the period between Western Canadian Select (WCS) and West Texas Intermediate (WTI) prices.UK Production volumes in the UK North Sea averaged 28.8 mboed during the first quarter of 2013, a 30% decrease compared to the same period last year, largely due to the unplanned shutdowns at Cormorant Alpha and the consequent impact on production.In February 2013, TAQA announced that it had discovered two oil columns during the Darwin drilling programme, which commenced in November 2012. The Darwin acreage is located next to the TAQA-operated Cormorant South, North Cormorant and Pelican fields in the Northern North Sea approximately 130 km northeast of the Shetland Islands.NetherlandsProduction in the Netherlands increased to 9.4 mboed, 36% higher than the same period last year. This was mainly due to the acceleration of Groet-Oost production near Alkmaar and a strong performance from the P15 and P18 and offshore partner-operated fields, as well as higher well rates at L11-A08.IraqTAQA commenced operations at its Atrush block in the Kurdistan region of Iraq and is currently drilling its third well, Atrush 3.Energy SolutionsDuring the period, TAQA Energy Solutions agreed to buy a 50% interest in the 205.5 MW Lakefield wind project located in the Midwestern United States from a subsidiary of France-based utility Electricite de France SA (EDF). TAQA also commenced a pilot project for roof-top solar air-conditioning in the UAE with Chromasun Inc. the California-based solar panel manufacturer.In February TAQA began qualifying companies for participating in the engineering, procurement and construction (EPC) contract tender for the UAE’s first waste-to-energy plant. The waste-to-energy power plant will receive approximately 1,000,000 tonnes of municipal solid waste a year and convert it into 100 megawatts of alternative power, enough energy to power more than 20,000 households in Abu Dhabi. The plant is expected to begin operations in 2016/17.Commodity price environment Following the decline witnessed in Q4 2012, oil prices remained relatively stable during Q1 2013 with Brent averaging $112.89/bbl and WTI averaging $94.30/bbl. Whilst marginally lower than the comparable period in 2012, the oil price continues to be supported by Asian demand which has offset the continued weak economic environment in Europe and North America.Encouragingly, Q1 2013 continued to witness the trend for improving natural gas prices in North America. NYMEX spot gas prices averaged $3.49/mmbtu in Q1 2013 compared to $2.50/mmbtu. This stabilisation and recovery in the gas price has been driven by a more controlled supply environment coupled with strong demand, the result of a prolonged winter.Post-period corporate developments TAQA extended its agreement with The Center for Waste Management – Abu Dhabi, to study and develop a waste-to-energy demonstration facility at Abu Dhabi’s Dalma Island. In April 2013, TAQA received UK Government approval for its Cladhan field development. The initial phase of development will consist of two producer wells and one injection well. Cladhan is expected to produce over 17 mboed initially, with first oil expected Q1 2015. The production will be tied back to TAQA’s Tern Alpha platform which lies 17.5km northeast of the Cladhan field.On the 30 April 2013, Standard & Poor’s announced that it was raising TAQA’s A rating to a ”positive” outlook.- ENDS -For further information:TAQA Investor Relations, Abu DhabiTanis Thacker, Head of Investor Relations
+971 2 691 4933Mohammed Mubaideen, Investor Relations Manager
+971 2 691 4964
firstname.surname@taqa.comTAQA Media Relations, Abu DhabiTaryam Al Subaihi
Head of External Relations
Tel +971 2 691 4803
Mob + 97156 219 5195Allan Virtanen
Head of Media
Tel +971 2 691 4894
Mob +971 56 685 2717
Allan.Virtanen@taqa.com About TAQAEstablished in 2005, TAQA is a diversified international energy group headquartered in Abu Dhabi, the capital of the United Arab Emirates, and listed on the Abu Dhabi Securities Exchange (ADX: TAQA). TAQA’s business is made up of three operating divisions spread across the entire energy value chain: power generation & water desalination; oil and gas exploration & production; and emerging & alternative energy technologies.Power & Water: TAQA is one the largest independent power producers in the world and the majority owner of the facilities that provide 98% of the water and electricity requirements in Abu Dhabi. TAQA’s power plants are located in the UAE, Morocco, Oman, Saudi Arabia, Ghana, India, and USA.Oil & Gas: with operations in Canada, UK, the Netherlands, USA and Iraq, TAQA’s oil and gas business includes exploration and production, underground gas storage and pipeline transportation.Emerging & alternative energy technologies: TAQA Energy Solutions is dedicated to alternative and technology-driven energy initiatives for long-term efficient energy production and generation. TAQA’s vision is to deliver ‘Energy for Growth’: growth within the business; social and economic progress in the communities where TAQA operates; and increased value for our shareholders.Over the past 40 years the UAE and Abu Dhabi have pursued a vision embodied by progressive development, investment and the highest global standards. TAQA is proud to align its strategy both domestically and globally to Abu Dhabi’s economic vision 2030, working towards sustainable economic development. For more information about TAQA visit: www.taqa.com or Twitter: @TAQAGLOBAL

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