Weak gas prices hit Taqa profits

Abu Dhabi Abu Dhabi National Energy Company, also known as Taqa, reported a drop of 27 per cent in its net profit after minority interests from Dh1,019 million in 2010 to Dh744 million in 2011. Total assets were also down by 1 per cent to Dh114,693 million from Dh116,059 million in 2010. "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," Taqa said in its annual financial report. "The weak North American gas prices affected our performance," CEO Carl Sheldon said on a conference call. The company is investing in production and may sell some land or assets to boost results, he said. Increased taxes on oil and gas production in the UK North Sea have also led to a higher effective tax rate which depressed the company's net result, the report said. "Production in North America was flat year-on-year at 88.1 million barrels of oil equivalent per day. This was primarily due to the cold weather issues experienced early in the year, where a prolonged break-up period hampered drilling," it said. Total revenues were up 13 per cent from Dh21,401 million to Dh24,187 million, mainly coming from growth in the Power and Water and Oil and Gas divisions. Oil and gas revenues increased 30 per cent over 2010 due to stronger crude oil prices and higher production in the UK North Sea. The company is proposing a dividend of 10 fils per share, subject to approval at its annual general meeting which will take place in April. Taqa owns stakes in businesses that generate power or produce oil and natural gas in the Middle East, North America, the North Sea and India. Last year, it started two new power plants in the UAE and bought a stake in Western Zagros Resources Ltd, a Canadian company with operations in the Kurdistan region of Iraq. "We're bullish on Kurdistan," Sheldon said, referring to the company's 20 per cent stake in WesternZagros. "We have the appetite for that risk," he said of future investment in Iraq, adding that Taqa would also look for opportunities in the country's power sector. "I think that investment in Kurdistan, or Iraq in general, is still very risky," said Said Hirsh, an analyst at Capital Economics. "While it is true that Kurdistan appears more stable compared to other parts of Iraq, I think there is a high governance, security and overall contractual risk." "In the long term, assuming that Iraq becomes more stable, Taqa could perform very well there since the country has the potential for rapid growth, given its poor historic performance. However, I would be concerned by the high levels of corruption and the potential for future changes in government. The returns for Taqa will have to be very high to compensate for that level of risk," he added. The company plans to invest about $2 billion a year in long-term projects. Taqa is bidding to build and operate a gas-fired power plant in Dubai along with the emirate's utility. Taqa's bid contained the lowest price for power among the offers presented, Sheldon said, adding that the Dubai utility is still reviewing proposals. Taqa's bid involved commitments from lenders to finance a portion of the investment that will be involved should the company win, he said. From gulfnews