• February 03, 2020
  • Abu Dhabi

TAQA set to be regional utilities champion following offer from ADPower

Combination would result in Top 10 EMEA integrated utilities leader and the 3rd largest company listed on UAE stock markets

The Board of Abu Dhabi Power Corporation PJSC (‘ADPower’), a Public Joint Stock Company that owns most of the water and electricity assets across the Emirate of Abu Dhabi, confirms that it has submitted an offer to the Board of Abu Dhabi National Energy Company PJSC (TAQA). The offer sets out the principal terms and conditions on which ADPower would transfer the majority of its water and electricity generation, transmission and distribution assets to TAQA.

The proposed transaction would create a new regional utilities champion that will accelerate the transformation of the water and electricity industry in the UAE. The new entity would be one of the largest utilities companies in the GCC and a top 10 integrated utilities player in the EMEA region by regulated assets. It is ADPower’s intention to maintain TAQA’s existing listing, making the combined group one of the largest listed companies on the Abu Dhabi Exchange (ADX), which marks the first time an integrated utilities company is made available on the UAE public market.

ADPower is proposing to transfer the majority of its water and electricity generation, transmission, and distribution companies, which together reported net income of AED 4.8 billion and total assets of approximately AED 120 billion as of the end of 2018. The transferred assets have a generation capacity of approximately 4.9 GW for electricity and approximately 58 million imperial gallons of water per day, operate approximately 80,000 km of electricity transmission and distribution network and approaching 20,000 km of water pipelines, serving over 1,000,000 customers.

In consideration for the asset transfer and the termination of the land leasing agreement between ADPower and TAQA, TAQA would issue to ADPower a convertible instrument, convertible into 106,367,950,000 ordinary shares in TAQA upon closing of the transaction. The offer implies an equity value of TAQA of AED 4,156 million. Post conversion, ADPower would own 98.60% of the entire issued share capital of TAQA.

With total assets of around AED 200 billion, the combined entity would benefit from highly predictable and secure cash flows, with more than 85% of its revenue coming from regulated and long-term contracted businesses. It would have a robust long-term capital structure with capacity to pay sustainable dividends to shareholders, as well as the ability to capture new growth opportunities in the UAE and internationally.

The combined entity would also play a key role in delivering the UAE Energy Strategy 2050, which lays out several strategic goals, including deriving 50% of the country’s total energy mix from clean sources and reducing the carbon footprint of power generation by 70%.

His Excellency Saif Mohamed Al Hajeri, Chairman of ADPower, commented on the announcement: “The proposed transaction is an integral part of Abu Dhabi’s overall strategy to optimise performance across the water and electricity sector and to further support the growth of the UAE capital markets. This will bring an integrated utilities company to the UAE public market for the first time and will provide investors with an opportunity to invest in high-quality and secure assets for long-term growth. The combined group will have the scale, financial strength, and ambition of a best-in-class international utilities player and will be uniquely positioned to create value for all stakeholders in the UAE and beyond, in full alignment with the Abu Dhabi economic vision.”

Jasim Husain Thabet, Chief Executive Officer and Managing Director of ADPower, said: “This transaction represents a major milestone for Abu Dhabi and the UAE water and electricity industry. It will create an integrated utilities leader that is well positioned to drive the transformation of the sector and optimise efficiencies across the value chain. The new entity will be robust and primed for further growth in the UAE and internationally. With that in mind, and on the basis that the transaction completes, it is our intention to increase the free float of the company through a follow-on public offering.”

Mr Thabet added: “We are also in the process of finalising three landmark projects in the UAE. This includes a new 2.4 GW Combined Cycle power plant in Fujairah and a 2 GW Solar Photovoltaic power project in Abu Dhabi, along with a 200 million imperial gallons per day project in Taweelah, Abu Dhabi that will be the world’s largest reverse osmosis desalination plant.”

If the board, and subsequently the shareholders of TAQA recommend the offer, then ADPower hopes to close this transaction during the second half of 2020, subject to the receipt of all required regulatory approvals.

Citigroup and Rothschild & Co are acting as financial advisors to ADPower, while Allen & Overy LLP are acting as its legal advisor.

Transmission Assets
Abu Dhabi Transmission & Despatch Company PJSC (TRANSCO);

TRANSCO is responsible for the planning, construction and operation of the transmission network used to transmit water and electricity from power and water generators to the distribution networks operated by ADDC and AADC and, where required, to other Emirates in the United Arab Emirates. These encompass a total of approximately 9,000 km of electrical transmission network and over 3,500 km of water pipelines.

TRANSCO has entered into transmission and use of system (TUoS) agreements with ADDC and AADC for the usage of the transmission network. TRANSCO is regulated and licensed by the Department of Energy (the DoE).

TRANSCO also owns the Load Despatch Centre (LDC), which determines the despatch of electricity across the grid. This activity will not form part of the Proposed Assets and will be transferred to EWEC.

Distribution Assets
Abu Dhabi Transmission & Despatch Company PJSC (TRANSCO);
Al Ain Distribution Company PJSC (AADC);

ADDC is the sole distributor of water and electricity in Abu Dhabi and the surrounding areas and AADC is the sole distributor of water and electricity in Al Ain city and its surrounding areas. ADDC owns and operates over 42,000 km of electricity network and approaching 10,000 km of water pipelines, serving over 700,000 customers. AADC owns and operates over 27,000 km of electricity network and approaching 5,000 km of water pipelines, serving approximately 250,000 customers.

ADDC and AADC have each entered into bulk supply tariff (BST) agreements with EWEC for the purchase of water and electricity and Transmission Use of System (TUoS) agreements with TRANSCO in respect of transmission from the relevant generation companies.

ADDC and AADC are both regulated and licensed by the DoE.

Generation Assets
Butinah Power Holding Company PJSC, which holds ADPower’s interest in the Shuweihat S3 project (BPHC);

BPHC is a wholly owned subsidiary of ADPower and holds a 60% stake in Shuweihat Asia Power Company (SAPCO). The remaining 40% of SAPCO is held by Sumitomo Corporation of Japan and Korea Electric Power Corporation. SAPCO operates a gas-fired power plant with a 1,647 MW capacity.

Al Mirfa Power Company PJSC, which holds ADPower’s interest in the Al Ain and Madinat Zayed generation assets (AMPC);

AMPC is a wholly owned subsidiary of ADPower. AMPC operates assets at two locations, Al Ain Power Station, the only power generation station in the Al Ain area with a capacity of 253 MW, and Madinat Zayed power plant, which is a diesel generator station at Madinat Zayed with a current installed capacity of 107MW. The two plants have been running on stand-by mode and supply power only in case of shortage from other generators

a 75% stake in Al Mirfa Power Holding Company PJSC, which holds the Mirfa project (MPHC);

ADPower has a 75% stake in MPHC, with the remainder owned by AD Power Limited (a subsidiary of Abu Dhabi Financial Group). MPHC holds an 80% stake in Mirfa International Power and Water Company (MIPCO). The remaining 20% of MIPCO is held by M Power Holding Ltd, a subsidiary of Engie SA. MIPCO operates a water and power plant with a total capacity of 1,702 MW power generation and 53 MIGD water desalination.

Sweihan Energy Holding Company PJSC, which holds ADPower’s interest in the Sweihan PV project (SEHC);

SEHC is a wholly owned subsidiary of ADPower. SEHC has a 60% stake in Sweihan PV Power Company PJSC (SPVPC), with the remainder owned by a consortium of Marubeni and JinkoSolar. SPVPC owns and operates a 1,177 MW photovoltaic plant near Sweihan in the Emirate of Abu Dhabi.

a 10% stake in eight IWPP holding companies in the UAE

The remaining 90% stake is currently held by TAQA. The total power generation capacity of these plants is 12,938 MW, and total desalination capacity is 858 (MIGD).

a 33.34% stake in Taweelah RO Holding Company LLC (TROHC)

ADPower has a 33.34% stake in TROHC, with the remainder owned by MDC Power Holding Company LLC (a subsidiary of Mubadala). TROHC holds a 60% stake in Taweelah RO Desalination Company LLC (TRODC). The remaining 40% of TRODC is held by ACWA Power Taweelah Project Holding Company. TRODC owns a reverse osmosis plant providing 200 MIGD of water capacity in Abu Dhabi.