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Taqa, ADPower to create new Dh200 billion utility giant in Abu Dhabi

Waheed Abbas/Dubai
Filed on February 4, 2020 | Last updated on February 4, 2020 at 06.50 am
taqa, adpower, Dh200 billion, utility, giant, abu dhabi, mena

The merger of the two entities will create one of the largest utility companies in the Mena region.

A new giant utility firm is likely to be formed in the UAE as Abu Dhabi National Energy Co. (Taqa) and Abu Dhabi Power Corp. (ADPower), a public joint stock company that owns most of the water and electricity assets across Abu Dhabi, are considering the merger of assets.

Under the asset swap deal, ADPower will take control of Taqa if both the companies agreed to the deal. The merger of the two entities will create one of the largest utility company in the Mena region and one of the biggest listed on the Abu Dhabi bourse.

With total assets of around Dh200 billion, the combined entity would benefit from highly predictable and secure cash flows, with more than 85 per cent of its revenue coming from regulated and long-term contracted businesses.

ADPower has proposed to transfer certain assets to Taqa in exchange for 106,367,950,000 shares in Taqa and the termination of the land lease agreement between the two UAE giants.

This implies an exchange ratio of 17.53423833 new ordinary shares in Taqa issued for every existing share.

When applied to ADPower's valuation of the contributed assets, the offer implies an equity value of Taqa of Dh4.156 billion. Post transaction completion, ADPower will own 98.60 per cent of the entire issued share capital of Taqa.

"According to the offer received from ADPower, this would include most of ADPower's water and electricity generation, transmission and distribution assets," Taqa said in a statement sent to Abu Dhabi Securities Exchange.

"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," said Saif Mohamed Al Hajeri, chairman of ADPower.

Jasim Husain Thabet, CEO and managing director of ADPower, said on the basis that the transaction completes, it is their intention to increase the free float of the company through a follow-on public offering.

"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," Thabet added.

Dr. Ryan Lemand, senior executive officer of ADS Investment Solutions (ADSI), said this is part of a region-wide trend for government-related entities to inject their assets into public markets.

"The transaction will give equity investors greater access to key utilities in Abu Dhabi. It serves to deepen the pool of listed assets on the Abu Dhabi Securities Exchange, and the next step could be to increase the free float of various listed companies, including Taqa. These kinds of transactions can be a catalyst for a virtuous circle in liquidity. As regional markets deepen, they will shine brighter on the radar screens of international investors, leading to greater investment flows," Lemand added.

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

The offer is subject to approval of Abu Dhabi Department of Energy (DoE), the Securities and Commodities Authority (SCA) and Taqa shareholders. Should an agreement be reached between the two parties, it is envisaged that the terms of the proposed transaction will be finalized during H1 2020.

A Taqa general assembly meeting would consider approving the transaction during H2 2020.

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