Taqa extends rally on speculation Abu Dhabi may help after loss

04/04/2017 05:35 AST

Shares in Abu Dhabi National Energy Co. soared for a second day amid investor speculation the government will step in after the oil company known as Taqa reported a record $5.2 billion (Dh19.1 billion) loss.

The stock climbed 9.6 per cent to 0.57 dirham, closing at the highest since November 13, after adding 13 per cent on Sunday. Trading volumes exceeding 15 million shares on both days, compared with a 30-day average of 1.1 million.

"There is a lot of speculation in the market now that the government of Abu Dhabi might step in somehow, and that's driving the surge," said Wada Al Taha, a Dubai-based advisory board member for the UAE at the Chartered Institute for Securities & Investment. "The local government is certainly watching them closely, and wouldn't be surprising to see an announcement in the short-term."

A spokesman for Taqa, whose biggest shareholder is government-owned Abu Dhabi Water & Electricity Co, said it doesn't comment on market speculation. The spokesman pointed to a land-lease agreement valued at Dh18.7 billion ($5.1 billion) that the company signed, saying it had been "well received" by investors as it provides "a greater opportunity for Taqa shareholders to realise long-term value from their investment."

Taqa reported a loss of Dh19 billion amid one-time impairments for 2016. That compares with a loss of Dh1.8 billion in the year-earlier period.

Aside from signing the land-lease agreement with its biggest shareholder, Taqa's management is implementing a two-year transformation program that saved Dh13.2 billion, including a capital expenditure cut of Dh8.6 billion and a 25 per cent reduction in global headcount or more than 1,000 positions.

"There is a restructuring plan in place," said Ali Adou, a money manager at The National Investor in Abu Dhabi. "And obviously there is a strong government backing. The main issue with the company is high levels of debt on the balance sheet."

Gulfnews