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A Real Energy Boost

Hannah Stewart
A Real Energy Boost
According to Carl Sheldon chief executive of Abu Dhabi National Energy Company (TAQA) The energy industry is the most exciting industry in the world. While only assuming his position in October 2011, the 53-year old CEO has already demonstrated that he is the man for the job.

Undeterred by a challenging economic climate, the successful lawyer-turned-CEO has made a strong start to 2012 with dynamic financing strategies including the companys first ever issuance of Malaysian Ringgit-denominated Sukuk announced on 26th February. Generating around $215 million out of a $1.1 billion program, this 10-year Sukuk, raised with a profit rate of 4.65% signifies the creation of a new debt structure for Sheldons company and goes to show that the CEO is not alone in the belief he places in his companya fact supported by a RAM Ratings, the leading Malaysian provider of independent credit research and advisory services, who awarded TAQAs new facility a provisional credit rating of A11.

In line with the stature of this energy giant, the move makes TAQA the first non-financial institution in the MENA region to complete a Malaysian Ringgit Sukuk issuance, joining the likes of Abu Dhabi Commercial Bank and National Bank of Abu Dhabi who took the step in 2010 as well as Gulf Investment Corporation which made its Sukuk issuance in 2011.

Sheldons courageous leap, which according to Franklin Templeton Investments Ltd, drew remarkable turnout [sic], is not so unexpected. As a publically listed company on the Abu Dhabi Securities Exchange with strong government backing including a 51% stake held by Abu Dhabi Water and Electricity Authority and a 21% stake held by the governments Farm Owners Financial Support Fund, TAQA enjoys both long-term stability and credibility, making it a popular choice with investors.

Furthermore, despite a 27% decrease in net profits to approximately $202.5 million which Sheldon attributes to increased UK taxes on oil producing companies and weak gas prices in North America, TAQAs financial results for 2011 were strong. Included amongst the companys financial highlights for the year is a 13% growth in revenues to approximately $6.6 million and a market value of over $2 billion which demonstrate that the companys ranking of 25th place on the Forbes Middle East list of the Top 200 Companies in the GCC is not misplaced.

But why did Sheldon turn to Sukuk? The answer is simple: liquidity. As a growing company which already spans 13 markets worldwide, Sheldon is in need of cash to fund his ambitious projects from the North Sea, to the UAE, Morocco and beyond. We are in a strong financial position with nearly $4.9 billion of available liquidity Sheldon explains, in light of the successful issuance. However, he is quick to add the Ringgit Sukuk is only a small part of our overall financing ... we decided to proceed with this offering, due to the attractive pricing available in Malaysia and the overwhelming demand from investors. TAQAs newly acquired liquidity will also be used to pay off part of its outstanding debt which RAM Ratings attributes to earlier aggressive debt-funded acquisitions in the oil and gas segment. The size of the companys debt currently stands at $20 billion, $1.4 billion of which is due to be paid up by December 2012.

While the logic behind the Cambridge graduates decision to opt for the Sukuk route seems clear, his decision to turn to a Southeast Asian country over 3,000 miles away from his Abu Dhabi base may appear less so. Shedding light on the motivations behind Sheldons choice, Rafe Haneef, chief executive at HSBC Amanah explains that 2011 saw significant growth in Sukuk issuance out of Malaysia, with over 60% of total global Sukuk issuance coming from the country. This fact, along with the flexibility, high demand and low-cost financing which characterize the Malaysian market have proven to be strong attractions for TAQA amongst an increasing number of companies.

While the Malaysian Sukuk issuance might indicate that TAQA is keen to explore new territory, the companys focus is in fact shifting to opportunities closer to home, we look to build on our regional knowledge and develop opportunities in the MENA region explains Sheldon. To this end, the ambitious CEO has allocated $2 billion for 2012 as part of a 5-year, $10 billion capital program to expand its MENA portfolio and is already underway with the development of two new plants to help meet rising energy demand in Abu Dhabi. A project is also underway to increase the capacity of the Jorf Lasfar power plant in Morocco, which supplies approximately 40% of countrys demand for electricity. This regional outlook has forced Sheldon to re-evaluate his companys North American assets, particularly given the challenges presented by the North American market that account in part for the 1% decrease in TAQAs total assets for 2011 which totaled $31,220 million.

While balancing a reduction of non-core assets with expansion in the MENA region, Sheldon also intends to maximize the existing strengths that make TAQA the attractive investment prospect it is today. To this end he is pursuing acquisition of acreage in line with existing infrastructure, particularly in the North Sea basin. Building on its North Sea portfolio, in November 2011 TAQA announced a conditional acquisition of a 16.6% stake in the Cladhan oil discovery from Premier Oil PLC which is due to be completed shortly. This was followed on 30th January 2012 by two agreements, subject to approval, with a subsidiary of Fairfield Energy Limited to acquire a 50% working interest in UK North Sea licenses, and the completion in February of the acquisition of energy company Totals 81% share in Otter field in the UK. Though a world away from the shores of Malaysia, TAQAs activities in the North Sea have added to the companys attraction amongst discerning investors who recognize the potential that the Abu Dhabi-based company offers.

Looking to the future, Sheldon is unequivocal in his expectations, I want to see the company demonstrate its organizational maturity to deliver on its capital expenditure projects he explains, adding For a company of our youth it is imperative that we deliver the projects successfully, on time, on budget and, above all, safely. This is certainly a challenge for the energy company, but Sheldon has unwavering faith in the strength of his team; strength formed through strong ties of camaraderie developed through weekly company-hosted football matches. Sport is a great leveler in life, regardless if you are the CEO of a company or an intern, everyone is equal on the sports field and it is a great way to bond, he points out with a small measure of pride.

Though he only took up the head mantle late last year, TAQAs CEO is not new to the energy industry. Nor is he new to the company, serving as deputy general manger and general council in March 2008, before being promoted to general manager in October 2009. Sheldon was also involvement in a number of major power, oil and gas projects as a partner with Allen and Overy LLP. Combined, these facts leave the American national well-placed to guide the companys 2,800-strong multinational workforce as they embark on new ventures.

Though an unlikely partnership at first glance, the Malaysia-Abu Dhabi transaction in fact makes perfect sense. As a flexible and growing market with high demand, Malaysia can offer Sheldon the freedom and options that his vision requires. In turn, the Southeast Asian country can enjoy a safe, reliable and profitable investment in one of the MENA regions most stable enterprises.

In the space of just six months, Sheldon has proven that TAQAs status as not only a regional but global leader in the energy sector is not misplaced. The company has risen above unexpected UK taxes and weak North American oil prices. Sheldon has managed to achieve increased revenues, undisrupted operations, geographical expansion and the successful issuance of Malaysian Ringgit Sukuk, all pointing to good things to come. And Sheldon is determined to stick around to see his plans come to fruition. Abu Dhabi is a great place to live as there is something for everyone here, says the avid golfer and frequent visitor to Yas Links Beach Golf Club, Im excited to see many of the new developments being completed.
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