Taqa shares rose in Abu Dhabi trading yesterday, despite a decline in net profit last year, as the company proposed a dividend of 10 fils.
Despite appearances, this might be more than just short-term thinking from investors out for a quick buck.
Net earning for the firm also known as Abu Dhabi National Energy Company declined by 27 per cent last year from 2010, and the company posted a loss in the fourth quarter on write-downs related to the drop in natural-gas prices in North America, where the Abu Dhabi-owned investor holds upstream assets. The one-off charges of Dh470 million reduced Taqa's net profit to Dh744m. The charges are a consequence of tumbling prices of natural gas in the US and Canada, markets that are amply supplied by shale gas drawn from hard-to-access rock formations by new production techniques.
The charge will affect profit this year, when Taqa's energy assets are expected to continue to benefit from high oil prices. While gas prices in the US have fallen, oil prices have soared, driving up revenuein Taqa's oil and gas division by 30 per cent to Dh12 billion last year. Few expect a significant drop this year in oil prices, which have continued to rise since the beginning of the year. Although Taqa Bratani, the company's UK subsidiary, was hit by a tax surcharge on oil earnings, Europe's crude prices rose even faster than the US benchmark price.
Taqa is undeterred by its decline in net profit, and will continue to invest at the same levels this year as last, with spending of between $2bn and $2.2bn envisaged, according to Carl Sheldon, the company's chief executive. Investments will range across the oil and gas and power generation spectrum.
Lucrative oil assets are expected to be complemented by additional power generation capacity that yields a predictable, steady return.
Apart from growing existing power plants, Taqa is also poised to win the contract to build and operate Dubai's first power plant operated as a public-private partnership after submitting the lowest bid late last year.