Earnings call transcript: Abu Dhabi National Energy Q2 2025 sees revenue rise

Abu Dhabi National Energy Company PJSC, also known as TAQA, reported its Q2 2025 earnings, highlighting a 5% year-over-year increase in group revenues to 14.2 billion dirhams. Despite this growth, the company’s EBITDA fell by 15% to 5 billion dirhams, and net income decreased by 33% to 1.6 billion dirhams. The company’s stock remained unchanged at 3.12 dirhams, reflecting a stable investor sentiment amid mixed financial results. According to InvestingPro data, TAQA currently trades at an EV/EBITDA multiple of 10.05x, suggesting premium valuation levels compared to industry peers.

Key Takeaways

• Group revenues rose by 5% year-over-year to 14.2 billion dirhams.
• Net income fell by 33% to 1.6 billion dirhams.
• The company proposed an interim dividend of 75 fills per share.
• TAQA expanded its international presence with new projects and acquisitions.

Company Performance

TAQA demonstrated resilience in its revenue growth despite challenges in profitability, with InvestingPro data showing impressive revenue growth of 46.84% over the last twelve months. The company’s strategic initiatives, including international expansion and investment in renewable energy, underscore its commitment to long-term growth. The utilities business remained robust, though the oil and gas segment faced headwinds from decommissioning activities and lower oil prices. TAQA maintains a solid financial foundation with a moderate debt-to-equity ratio of 2.36x.

Financial Highlights

• Revenue: 14.2 billion dirhams, up 5% year-over-year
• EBITDA: 5 billion dirhams, down 15% year-over-year
• Net Income: 1.6 billion dirhams, down 33% year-over-year
• Capital Expenditure: 3 billion dirhams, up 28% year-over-year
• Free Cash Flow: 2.2 billion dirhams
• Interim Dividend: 75 fills per share

Outlook & Guidance

TAQA is focusing on enhancing its transmission and distribution assets and exploring opportunities in the U.S. market. The company aims to strengthen its position in gas-fired generation and renewable energy, with potential growth through Maastar Renewables. These initiatives align with TAQA’s strategy to be at the forefront of the energy transition. InvestingPro analysis reveals a "GREAT" overall financial health score of 3.07, supporting the company’s expansion plans. Subscribers to InvestingPro can access 12 additional key insights about TAQA’s market position and growth potential.

Executive Commentary

Steve Ridlington, CFO, emphasized the resilience of TAQA’s business model, stating, "Taka’s year to date performance demonstrates the resilience of our business model." He also highlighted the company’s expanding utilities footprint, noting, "We are steadily building broad utilities footprint both in our home markets abroad." Ridlington identified the U.S. as a "country of interest" for future expansion.

Risks and Challenges

• Fluctuating oil and gas prices could impact profitability.
• Increased capital expenditure may pressure cash flow in the short term.
• Global economic uncertainties could affect international operations.
• Regulatory changes in key markets may pose compliance challenges.
• Potential delays in project execution could affect growth targets.

Q&A

During the earnings call, analysts inquired about ongoing production levels, with TAQA confirming continued operations in the Netherlands and the UK. The company also addressed questions regarding potential mergers and acquisitions, indicating no immediate plans to disclose such opportunities. Additionally, an impairment related to the Xlinks investment was discussed as a specific and isolated event. For deeper insights into TAQA’s financial metrics and future prospects, including detailed valuation analysis and peer comparisons, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro.

Full transcript - Abu Dhabi National Energy Company PJSC (TAQA) Q2 2025:

Astrid Yahya, Head of Investor Relations, Taka: Hello, everyone. Welcome to Taka’s Q2 twenty twenty five Earnings Call. My name is Astrid Yahya, and I head Investor Relations at Taka. I am joined by our CFO, Steve Ridlington. Please note that this session is being recorded, and by participating in this meeting, you consent to the recording.

This presentation will follow our usual format. Steve and I will walk you through the operating highlights and financial performance for this period. We will then open the floor for a Q and A session. I will now hand over to Steve, who will take you through the key highlights for the quarter.

Steve Ridlington, CFO, Taka: Thank you, Arsjad, and welcome, everybody, to today’s call. Starting on Slide five, results overview. The second quarter of this year proved to be another strong stepping stone in our journey to reinforce our position as a leading utility player in furthering our local and global ambitions. Group revenues increased by 5% year on year to 14,200,000,000.0 nirubs, primarily driven by strong contribution from our transmission and distribution segment. EBITDA for the quarter was 5,000,000,000 dirhams, representing a 15% decline year on year, while net income stood at 1,600,000,000, down 33% year on year.

I’d like to take a moment here to unpack these headline figures, which mask the continued underlying strength of our business. Three key items impacted profitability in Q2 twenty twenty five. The largest impact was due to the timing of dividend from Admiral Gas. The dividend income was recorded in Q1 this year versus Q2 last year. This was followed by the oil and gas business where we are implementing a well articulated decommissioning process in our North Sea assets.

This naturally has led to an expected decline in production as well as a greater shift in mix towards gas compared to oil. Combined with a falling realized oil price, the business saw a decline in EBITDA and net income. Lastly, we have taken the impairments of our investments in X linked following the withdrawal of support by the UK government. Our core utility businesses, meanwhile, continue to perform in line with expectations. Excluding nonrecurring items, such as the ex lease impairments, the underlying financial performance of the utility businesses remained healthy.

We will expand on this further in the presentation. Capital expenditure rose significantly by 28% year on year to 3,000,000,000 dirhams as we continue to invest in expanding and upgrading our transmission distribution and generation assets. Despite the higher CapEx, free cash flow remained healthy at 2,200,000,000.0 dirhams. The lower year on year comparison is mainly attributable to working capital changes. Board has also proposed an interim dividend of 75 fills per share for q two twenty twenty five in line with our stated dividend policy.

The second quarter of the year also saw saw notable developments across our local international portfolios. Tack of Morocco signed MOUs for a very sizable plan to diversify into low carbon power, water generation, and transmission, with the total investment associated with these projects estimated at around €52,000,000,000. A new power purchase agreement was signed to extend Swaihab 1, one of our local power and water facilities, for fifteen years to provide flexible reserve power supply. We extended the reach of our transmission and distribution business outside The UAE through the strategic acquisition of Transmission International, a leading operator of offshore transmission assets in The UK. We’ve also completed the acquisition of an 875 megawatt power plant in Uzbekistan along with our partner, Babadala, where each company holds a 40% stake in the plant.

We’ll discuss these developments in more detail as we move through the presentation. Turning to Slide six, group revenue and EBITDA. Taking a look at financial performance for the quarter, group revenues benefited from a continued top line growth in the utilities business, with transmission and distribution leading the way. This was partially offset by a reduction in oil and gas revenues. Transmission and distribution revenues increased by 14% year on year, last reflecting higher bulk supply tariff pass through costs.

Generation revenues were broad broadly in line with the same period last year. Tucker Water Solutions posted a 6% year on year increase, underpinned by the regulated nature of the business. Lastly, as I explained earlier, the expected decline in production on the back of decommissioning activity combined with lower realized oil prices led to a decline in oil and gas revenues by 41% year on year. Moving to EBITDA, the following factors shaped our results. Group EBITDA declined by 15% year on year in Q2 twenty twenty five, primarily due to lower contributions from the timing of the adult gas dividend, oil and gas business and nonrecurring items across the business.

Transmission and distribution EBITDA declined by 5% year on year, mainly due to the impairments of our investments in the projects. Generation EBITDA was 3% lower year on year, reflecting reduced contributions from associates and joint ventures as well as a decrease in other income. Tanker Water Solutions EBITDA increased by 3% year on year. Oil and gas EBITDA fell by 34% year on year, driven by the expected decline in production from lower oil prices. Lastly, income from the Admiral gas dividend fell in the 2025, as I’ve already said.

Taking a step back, group group EBITDA declined 900,000,000.0 dirhams year on year in q two twenty twenty five. Timing of the Admiral Gas dividend accounted 300,000,000.0 of this. Oil and Gas contributed a further 300,000,000.0, and the inclusion of the impairments of X linked largely accounts for the remaining year on year decline in EBITDA. Accordingly, the underlying performance of our utility business remains strong. Turning to non operating P and L items on Slide seven.

Depreciation, depletion and amortization was broadly unchanged from the same period last year. Net finance costs rose by 11% year on year on the back of a 9% increase in net debt compared to the 2024. Note we utilized our cash balance for bond repayments earlier this year as well as for ongoing CapEx. This translates into a 17% year on year decline in interest income. Tax expense decreased by 54% year on year, primarily due to lower profits, the phasing of tax loss utilization in the oil and gas business.

Turning to liquidity and debt profile. We continue to benefit from ample liquidity, controlled leverage, and an attractive cost of debt, providing a solid foundation for future growth. Total debt decreased by 4% from 64,100,000,000.0 dirhams at the 2024 to 61,700,000,000.0 at the June 2025. This mainly reflects the repayment of bonds worth $750,000,000 during the quarter. The average debt maturity was ten point four years, up slightly from ten point three years at December 2024, primarily reflecting the repayment of bonds as mentioned above.

Liquidity levels were also impacted by the bond repayments and higher capital expenditure, standing at 20,000,000,000 dirhams at the end of the quarter. Average interest rates remain unchanged at 4.8% across the portfolio, with fixed rate debt accounting for most of our debt. Debt leverage increased slightly to 2.7 times, reflecting the decline in EBITDA this year. This continues to provide a significant headroom for additional funding to support growth but maintain whilst maintaining a standalone investment grade rating. Turning to dividend policy.

In line with our declared policy, the board has proposed a fixed dividend of 0.75 fills per share for q two twenty twenty five. Variable payout for the oil and gas business will be determined as a discretionary percentage of net income to be decided at the twenty twenty six Annual General Assembly. Moreover, following the completion of our current three year dividend policy this year, the board will consider a new dividend policy for 2026 to 2029 for discussion at next year’s annual general assembly. I’ll now pass over to Azjab, who will lead us through the overall segment segmentation performance.

Astrid Yahya, Head of Investor Relations, Taka: Thank you, Steve. As Steve mentioned earlier, our core utilities business remains strong, and the underlying performance of the transmission and distribution business is a reflection of this. Network availability improved marginally 98.9% in Q2 twenty twenty five, up from 98.6% in the same period last year. Capital expenditure increased significantly, driven by the timing and phasing of project execution, sector upgrades and the continued rollout of key special projects. The regulated asset base grew to ZAR 77,900,000,000.0, supported by healthy CapEx levels.

Notably, the strategic acquisition of Transmission Investment marks our first expansion of the transmission and distribution business outside The UAE. Transmission Investment is one of the largest players in UK’s offshore electricity transmission market, where it develops and operates, but does not own 11 transmission lines bringing electricity from The UK’s significant and growing offshore wind assets to the mainland. Transmission investment is also a prominent player in the country’s interconnector sector. As mentioned earlier, the 14% revenue growth was primarily driven by higher BST pass through costs. Moreover, EBITDA was affected by the impairment of our investment in X linked project.

Adjusting for this nonrecurring item, EBITDA recorded marginal growth in Q2 twenty twenty five. Moving to generation, the portfolio saw notable expansion both locally and internationally. From an operational standpoint, commercial availability increased to 98.6%, supported by higher fleet availability. The 49% surge in CapEx was mainly driven by the development of the Al Dafra OCGT project. Stephen highlighted earlier the significant growth plan Staka Morocco has announced.

The MOU signed by the company entail 2.7 gigawatts of gas and renewable capacity, including a 400 megawatt CCGT plant acquisition. Additional transmission infrastructure and five forty and over five forty MIGD of desalination capacity are planned. The fifteen year extension of Shoja will enable EVEC to maintain security of supply and system stability, while continuing the transition to net zero in part through the introduction of more solar plants. With regards to Uzbekistan, the acquisition of the eight seventy five megawatt gas fired CCGET plant by Dhaka along with Mubadala supports investments into the privatization of Uzbekistan’s power sector. This follows a strategic partnership between the governments of Uzbekistan and UAE.

On the financial side, revenues increased by 2% year on year for generation, remaining broadly in line with comparative year. EBITDA, on the other hand, was impacted by two factors: firstly, lower contribution from associates and JVs and secondly, a decline in other income. Moving to the Takao Water Solutions. Our immediate works to our infrastructure following the exceptional weather events last year have progressed well. This has translated into improved commercial availability, which stood at 94.8% in Q2 twenty twenty four and ninety three point seven percent in Q1 twenty twenty five.

CapEx decreased compared to the prior year, reflecting higher investments required last year in response to the weather event. On the financial front, Thakka Water Solutions saw revenues increase by 6% year on year, reflecting the regulated nature of the business. EBITDA, on the other hand, increased by 3%. The slower growth in EBITDA compared to top line is attributable to elevated expenses related to the remedial efforts. Moving to Oil and Gas.

This business continues to be driven by the impact of ongoing decommissioning activity and commodity price volatility. Production declined by 11% year over year in Q2 twenty twenty five, mainly due to the cessation of production at four UK assets in late twenty twenty four as The UK business transitions to safe and efficient decommissioning. CapEx remained broadly unchanged with spending focused on drilling and completions activity in North America. Revenues fell by 41% year on year, reflecting both lower realized oil prices and reduced production volumes. The average realized oil price from continuing operations decreased 8% year over year from $71.04 per barrel in Q2 twenty twenty four to $65.57 per barrel in Q2 twenty twenty five.

On the other hand, average realized gas price increased by 8% to $2.56 per MMBtu. EBITDA was down 34% year on year, impacted by the combined effects of the decline in production and to a lesser extent, lower oil prices. Looking at the 2025 as a whole, overall profitability was affected by the oil and gas business and non recurring items. Revenue for the 2025 grew by 5% year on year, driven by continued strength in the Utilities business, particularly T and T. EBITDA declined by 11% year on year, reflecting lower contributions from the Oil and Gas segment and the impact of non recurring items across the business.

Net profit attributable to Takashev was also affected by higher in addition to the above mentioned factors, the net profit was affected by higher net finance costs. Free cash flow for H1 twenty twenty five was 62% higher compared to the prior year, reflecting favorable working capital movements. I’ll now hand back to Steve for his concluding remarks, after which we will open the floor to Q and A.

Steve Ridlington, CFO, Taka: Thank you, Astrid. Tafka’s year to date performance demonstrates the resilience of our business model, our ability to deliver on our strategic objectives. Q2 saw us make significant strides in strategic growth. Be it within The UAE or externally, investment strengthened our portfolio, extending our global reach and reaffirmed Taka’s positioning at the heart of the energy transition. Taka Morocco’s ambitious growth plans are a testament to the latter.

Capital expenditure in our utilities business is ramping up, driven by the expansion and upgrade of transmission and distribution and generation assets. On the financial side, we repaid $750,000,000 in bonds entirely from our operating cash, demonstrating the strength of our balance sheet. Overall, we are steadily building broad utilities footprint both in our home markets abroad, positioning TACA for sustainable long term growth. Thank you.

Astrid Yahya, Head of Investor Relations, Taka: Thanks, Steve. So please feel free to raise your hand on Zoom, and we’ll open up the call for for you for your questions. JB, could you please introduce yourself and and ask your question?

Jean Pierre, Analyst, Kepler Cheuvreux: Yes. Hi. Good afternoon. Can you hear me?

Astrid Yahya, Head of Investor Relations, Taka: Yes. Yes. We can.

Jean Pierre, Analyst, Kepler Cheuvreux: Okay. Jean Pierre from Kepler Cheuvreux. Just a couple of quick questions to clarify your your production in the oil and gas business. In The Netherlands, you recently form and its associated assets. Could you clarify whether you still own any producing oil and gas assets in that country following that transaction?

And if possible, the production of the remaining assets? And in the same vein, in The UK, what’s the average production after you’ve stopped production from your from four assets?

Steve Ridlington, CFO, Taka: K. Thank you, JB. Well, first of all, on on The Netherlands, yes, we do still have production there, mainly gas. It’s around 3,000 barrels a day. Yeah.

A thou 3,000 barrels a day equivalent. The the Porthos project, which you mentioned, was is a is a is a project to inject gas into into a gas field that was discontinued its operations some time ago. So, yes, we still have ongoing production. In The UK, production sits at about I think it’s about 15,000 barrels a day. As Jack can confirm that figure afterwards, but it’s around that figure.

Yeah. But on the decline as you as you as you could well see.

Jean Pierre, Analyst, Kepler Cheuvreux: Okay. Thanks very much.

Astrid Yahya, Head of Investor Relations, Taka: Again, if you have any questions, please feel free to raise your hands, and we’ll open up the mic to you. Luke, if you could please introduce yourself and ask your questions.

Luke, Analyst, Barclays: Hi, thanks for the presentation. This is Luke from Barclays. I just wanted to quickly touch on M and A, whether there’s any inorganic opportunities that you’re currently evaluating. I also recall seeing a piece a few months back, Safety Out Taco was actively looking opportunities in The U. S.

Sales on drink. Yeah. If looking at that market, what sort of assets you would potentially, yeah, consider acquiring? Thank you.

Steve Ridlington, CFO, Taka: Yeah. Thanks for the question, Luke. We we don’t we don’t comment on m and a opportunities until they are firm and need to be disclosed because we don’t want to, you know, induce unnecessary speculation. So there’s not really very much I can say about that. Certainly, The US is a country of interest, though, to your second question.

And and the areas that we are typically looking to grow our business are we’ve published targets for generate gigawatt capacity increases are in conventional gas fired generation and through Maastar Renewables. And you saw Maastar make a number of acquisitions last year. So those are the kind of business segments that we’re looking at, and certainly, The US is a country of interest.

Luke, Analyst, Barclays: Great. Thanks a lot.

Astrid Yahya, Head of Investor Relations, Taka: Thank you. Again, if you have any questions, please be free to raise your hand. JP, again, please go ahead.

Jean Pierre, Analyst, Kepler Cheuvreux: Yeah. Just two other quick questions. You’ve announced an impairment on one of your investments, namely Xlinks. I wonder whether you had other potential investments within your portfolio where there there could be similar impairments. And and the second one is about your share of results of j joint venture and associates in the generation business.

So that includes Mazda. It’s been relatively soft in the last two quarters. I wonder whether you could elaborate on the reason of this relatively soft contribution and and whether there is a chance it could pick up in the future in coming quarters. Thank you.

Steve Ridlington, CFO, Taka: Sure. First of all, and again, thanks for those additional questions, JV. Impairments, X linked is a very specific type of investment. It was an early stage, relatively small investment in a in a project that hasn’t got approval to proceed, and we thought it was of interest. And so we we we invested in that.

As it didn’t go go ahead, we it’s clearly sensible to to to impair it. But we haven’t really done any other investments of that relatively early stage speculative type, if you like. So I’m not anticipating any any further impairments along those lines. Now, of course, we always do at the end of the year or will do at

Astrid Yahya, Head of Investor Relations, Taka: the end

Steve Ridlington, CFO, Taka: of this year our usual impairment test with the auditors, but but I’m not expecting anything to come out of that. But that’s something we always do at the year end anyway as any other company does. In in terms of associates and joint ventures in generation, the the main two companies in this in this in this elements are our aluminum plants in in Oman and and, of course, our investments in Mazda. And and what what what I would say there is that the the the the solar project is a a mature producing asset, and and and, obviously, its performance moves up and down with commodity prices very much by the oil and gas business. So whether that will be stronger or or less strong in future quarters will depend on pricing in that business.

And Mazda is it’s it’s a company that is making significant investments as you have seen and has a has a big growth potential, which will, over time, lead to growing net income and stronger performance. But it’s still at a relatively early early stage, and and and therefore, quarterly quarterly performance is is a little difficult to predict. But I would think over over the longer term, we would expect that business to to improve its performance and and make a bigger contribution to TACA’s overall net income.

Jean Pierre, Analyst, Kepler Cheuvreux: Thanks very much.

Astrid Yahya, Head of Investor Relations, Taka: Thank you, JP, again. Again, if you have any questions, please please raise your hand, and we’ll open up the mic to you. Again, if anyone has any questions, please feel free to raise your hand. Alright. Looks like we’re done with the q and a as well.

Thank you everyone for joining. I want us on the call. Looking forward to speaking to you before the next call and having you join us again in the next call. Thank you very much.

Steve Ridlington, CFO, Taka: Thank

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