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Edited Transcript of TAQA.AD earnings conference call or presentation 7-Nov-19 10:30am GMT

Q3 2019 Abu Dhabi National Energy Company PJSC Earnings Call

Abu Dhabi Nov 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Abu Dhabi National Energy Company PJSC earnings conference call or presentation Thursday, November 7, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Mohammed Al Ahbabi

Abu Dhabi National Energy Company PJSC - Acting CFO

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to TAQA's results call for the third quarter of 2019. We are pleased you are joining us today. My name is Denise, and I am your operator. (Operator Instructions) This call is being recorded. (Operator Instructions)

We will refer to the slides that are available on TAQA's website, www.taqaglobal.com, in the Investors section. (Operator Instructions)

I would also like to draw everyone's attention to the disclaimer on the next page of the presentation, in particular to the section on forward-looking statements.

I'm joined today by Mohammed Al Ahbabi, who is TAQA's Chief Financial Officer. Please turn to Slide 3, and let me now hand over to Mr. Al Ahbabi.

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Mohammed Al Ahbabi, Abu Dhabi National Energy Company PJSC - Acting CFO [2]

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Welcome, and thank you for joining this call. We are pleased to deliver continuous stable financial and operational performance for the 9 months of 2019. The group saw an increase in our overall production volumes and our technical availability for the 9-month period. Despite operational improvement, the financial results were marginally lower than last year, reflecting the decrease in commodity and energy prices. As a result, revenue were AED 13.1 billion, a 3% reduction. Similarly, 2019 EBITDA reduced by 5% to AED 7.0 billion.

I'm also pleased to report the continued profit of AED 198 million in the 9 months of 2019. We continue to make progress on deleveraging the business, with debt now reduced by over AED 3 billion since the beginning of the year and continued strong liquidity.

Turning to Slide 4. Our Power & Water business continues to provide us with stable operational and financial performance, with revenues of AED 8.7 billion and EBITDA of AED 5.1 billion, relatively in line with last year.

Technical availability across the fleet averaged 94.5% for the 9-month period, up slightly from 94.3%. Strong performance by the UAE fleet set lower availability in our international business, which was due to an extended period of maintenance at our plant in Ghana.

Gross power production and water desalination volumes remained constant with the volumes last year.

Please turn to Slide 5. We will now look at the commodities price environment, where our production is split in 40% oil and 60% gas. Around 89% of the group natural gas is produced in Western Canada. Most of this gas is sold into the local market based on AECO prices which has been very volatile in average and average around USD 1.15 per million BTU of -- for 2019. The majority of TAQA oil production is linked to Brent which is averaged approximately USD 65 per barrel. The market weaken was due to reduced global oil demand, including weaker Chinese economic growth, alongside increase in nonoperating non-OPEC supply.

Moving to Slide 6. Revenues from Oil & Gas for the period was AED 4.4 billion, 9% lower than 2018, mainly due to lower realized prices. Oil & Gas EBITDA reduced by 5% to AED 2 billion, reflecting the weaker year-to-date revenue generated. Average production for the 9 months of 2019 was around 123,000 barrels per day, representing a 1% increase compared to last year. This was mainly driven by strong production gains in Atrush, where our entitlement production more than doubled to approximately 6,300 barrels per day due to new wells coming online and successful plant debottlenecking efforts. This made up for the slight reduction in European production, mainly due to rig delays impacting new wells coming online. North American output remained broadly constant compared to the same period for the last year, averaging 78,400 barrels per day.

On to Slide 7. TAQA has maintained its capital discipline and continued to focus investment toward core operations. The group's overall capital investment increased to AED 1.2 billion in the first 9 months of 2019, remaining relatively flat with 2018 9-month CapEx spend.

In our Power & Water business, CapEx was focused on regular maintenance work, mainly across our UAE fleet. Oil & Gas CapEx was mainly focused on developing drilling to sustain production level and also including the AED 116 million acquisition of additional 7.5% working interest in Atrush Block.

Turning to Slide 8, which contains more details of our financial performance. Revenues and EBITDA were weaker mainly due to a weaker price environment for Oil & Gas production. TAQA net income fell to AED 198 million during the period. This was driven by variable MTM revaluation of our U.S.-based power asset, following a significant energy price reduction in addition to a new carbon emission regulation. This was offset by FX gain and lower tax charges due to lower taxable income in the period.

Free cash flow reduced to AED 5 billion, mainly due to our lower operating cash flow and increased capital investment to protect and sustain the value of our assets.

Moving on to Slide 9, we will look at our liquidity and key ratios. TAQA liquidity position remained robust at AED 11.2 billion. This is lower than the same period last year, and reflects the repayment of USD 500 million bond in September. In October, TAQA issued a new USD 500 million, 30 years bond. This was met with a high investor demand and an order book that was 8x oversubscribed. This helped us achieve an attractive interest rate of just over 4% versus 6.4% on loans repaid, reflecting investor confidence in TAQA.

We continue to deliver on our objective of deleveraging, with total debt being reduced by AED 3 billion in the first 9 months of the year. At the end of September 2019, our total debt stands at AED 63.3 billion.

In conclusion, our results reflect the continued stable operation and financial performance despite challenging environment in which we operate. We have once again demonstrated the resilience of our business model, and we continue to make steady progress on deleveraging. At the end of 9-month 2019, TAQA stands well positioned to implement its growth strategy, which will focus on maximizing value and efficiency from our existing asset base.

Thank you very much for your attention, and we will now begin the question-and-answer session. Operator, please, go ahead.

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Operator [3]

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(Operator Instructions) There are no further questions in today's call. Dear speaker, the floor is yours for final remarks.

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Mohammed Al Ahbabi, Abu Dhabi National Energy Company PJSC - Acting CFO [4]

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Thank you very much.

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Operator [5]

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Thank you, Mr. Mohammed Al Ahbabi, for your time, and thank you to all the participants for your time and questions. The conference call has now ended.