(Adds analyst comment, background)
By Stanley Carvalho
ABU DHABI, April 4 Abu Dhabi's state utility
tightened its grip on loss-making Abu Dhabi National Energy
Company (Taqa) by boosting its stake to 74 percent,
days after it granted land that could potentially wipe out the
energy company's losses.
It is not the first time cash-rich Abu Dhabi has stepped in
to rescue a state-linked company. In 2011, it bailed out
struggling developer Aldar Properties.
Like some other energy companies, Taqa has been reeling from
losses resulting from low commodity prices.
The oil explorer and power supplier on Tuesday said Abu
Dhabi Water & Electricity Authority (Adwea) had raised its stake
to 74 percent from 52.38 percent.
Adwea bought a 21.67 percent stake in Taqa held by the Fund
for the Support of Farm Owners, a spokesman for Taqa said.
The move came after Adwea transferred land to Taqa valued at
18.7 billion dirhams ($5.1 billion) after Taqa reported a
full-year 2016 loss of 18.55 billion dirhams.
At the date of transfer, Taqa recorded the fair value of
leasehold land at 18.7 billion dirhams, under property plant and
equipment, with a corresponding amount recorded as an equity
contribution from Adwea, Taqa's financial statements showed.
Taqa's board has issued a resolution to transfer equity
contributions worth 18.7 billion dirhams to accumulated losses,
subject to shareholder approval at its annual general meeting.
"It is clearly a rescue from the government. The grant of
land valued at 18.7 billion dirhams can be used to write off the
losses," said Wadah al Taha, member of the National Advisory
Board for Chartered Institute for Securities & Investment, UAE.
"Now that Adwea is the majority and dominant shareholder, it
could perhaps consider delisting Taqa or possibly seek capital
raising through a rights issue," he said.
Taqa's shares soared about 26 percent on Sunday and Monday
hopes the support from Abu Dhabi could help the company turn a
corner after it reported a big loss in its last financial year.
On Tuesday, its shares were down 7 percent on profit taking.
(Additional reporting by Celine Aswad; editing by David Clarke)