Abu Dhabi’s Taqa denies merger talks as shares near all-time low

Follows reports this week that Abu Dhabi might merge its national energy company into another state-owned business to make the firm’s debts more manageable.

Taqa production location the Bergermeer gas storage in the Alkmaar region north of Amsterdam. Courtesy Eric de Vries / TAQA

The energy company Taqa denied reports that it was considering a merger with another Abu Dhabi government entity as its shares traded near an all-time low.

The stock fell 5.4 per cent to 70 fils following the news. In a statement to the Abu Dhabi Securities Exchange, the company said: “Taqa confirms it is not engaged in merger discussions with any government or other entity.” It was referring to a CNBC Arabiya news report.

Officially known as Abu Dhabi National Energy Company, Taqa has long-standing problems related to oil and gas assets it bought in North America several years ago.

They have contributed to the company’s declining equity and asset base and a rising debt load. Taqa is already majority owned by Abu Dhabi government entities – 52.4 per cent by Abu Dhabi Water and Electricity Company, and 21.7 per cent by The Financial Support Fund of the Farmers of Abu Dhabi.

Taqa has about 100,000 individual Emirati shareholders whose equity in the firm have halved in value since spring last year.

Taqa has suspended dividend payments as it struggles to control costs in the wake of the collapse of oil and gas prices.

The rumour that Taqa was addressing originated in a Reuters report this week that quoted anonymous sources as saying that Taqa might merge with a government entity.

That followed a Bloomberg report that Taqa had hired Blackstone, an American investment and advisory firm. Neither Taqa nor Blackstone would comment.

Last year, Taqa was said to have hired management consultancy McKinsey & Company and Australia’s Macquarie Bank for advice on revamping its balance sheet. Moody’s Investors Service on Thursday issued a detailed report explaining its downgrade last month of Taqa’s “baseline credit assessment” to b2 from ba2, indicating “high risk”. It is the credit rating that would apply if Taqa did not have implied government backing.

Moody’s said Taqa had received strong government support – including debt write-offs and underwriting losses on its assets – but the Abu Dhabi Debt Management Office was pressuring indebted government-related entities to reduce their debts.

Taqa and International Petroleum Investment Company account for two-thirds of the emirate’s US$77.3 billion in debts incurred by government-related debt issuers, said Moody’s.

Taqa shares hit an all-time low of 63 fils last week.

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