Growth strategy

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It has been a big year for Abu Dhabi National Energy Company (TAQA). Founded in 2005, the company is already worth US$16 billion by assets, thanks to an aggressive period of acquisition which has seen it grow from a domestic power generator in the United Arab Emirates to a global energy company, operating in 10 countries.

Chief executive Peter Barker-Homek is feeling understandably buoyant about his company's progress and excited about the future. A nomination for the ‘CEO of the Year' award in the Platts 2007 Global Energy Awards can't have done any harm either. "Business is good - we've had a fantastic 12 months," he says. "We've had remarkable success in identifying acquisitions. We've been able to appraise, negotiate and complete on them.

"We've also joined five disparate corporate cultures together into one entity called TAQA, founded on a meritocracy, with very high industry standards and integrating the best of the different cultures into a TAQA way of doing things. That hasn't been easy. We've got people working around the clock to knit us together, but it has all been very exciting. The heartbeat of the company is very optimistic, employees are upbeat about being part of TAQA."

TAQA has a strategy aimed at building an upstream exploration and production (E&P) company, with the emphasis on production. It has been actively investing in oil and gas at a midstream level, and downstream in power generation. Barker-Homek describes it as a multi-utility strategy, comparing TAQA's activity to the likes of RWE and E.On. "Those companies have heritage power and gas distribution networks, which we don't, but they do play across the value chain.

"We have big assets and sophisticated employees, selling into either a contracted market, in the case of classically structured power generation, or deep markets for oil and gas.

"For a young company, putting the investment into the asset, with a smaller number of employees to manage it and our customer relationship literally being the market, is an easier business model than having 10000 sales reps or 50 different products, or fragmentation in the types of product and services we offer. We are a bricks and mortar business; we sell oil, gas and kilowatts."

The acquisitions have naturally been part of this strategy, balancing the volatility of the upstream business with the steady, more predicable returns of the mid and downstream businesses.

"Share holders are getting growth and income; bond holders are getting security of debt service," says Barker-Homek. "We're trying to give a bit to everyone."

The company is looking for balance across its portfolio and isn't afraid to try some ‘unconventional plays' such as coal-bed methane reserves in Canada.

"The technology is there to develop this and it has an interesting profile relative to conventional gas," says Barker-Homek. "Coal-bed methane actually increases in production over the life of the reserve, giving our gas production a nice portfolio effect."

But though the company has quickly acquired a big asset base, growth targets are still ambitious. Barker-Homek would like to see TAQA hit US$20 billion in the next 12 months and then somewhere between US$40-60 billion by 2012. It's a steep growth trajectory, but one Barker-Homek feels is necessary if TAQA is to benefit from economies of scale over its broad geographic footprint.

There would be other benefits too: the opportunity to gather best practices from the acquisition targets and the ability to offer employees a chance to grow. Without growth, Barker-Homek feels TAQA would run the risk of having limited career paths.

"You really want to create a dynamic workforce, multi-cultural and multi-regional," he says. "By expanding out and establishing frontiers in Canada and Europe we can acquire people and skills and they can work in local markets or other markets.

"The thing about TAQA is because we have started out life as a multi-national corporation, we don't have a dominant embedded culture, other than a corporate culture. We really have what I think is a unique business model: we are a US$16 billion start-up and have the opportunity to pick the best of all practices and incorporate them into the way TAQA does business."

TAQA's output targets are not rigid, but in 12 months it would like to have 10000 MW of power output, growing to 16000 MW over 2-3 years. There is also talk of adding to the company's talent pool. With 2000 employees on the books now, TAQA is targeting 7000 by 2012.

The jump in company value to over US$40 billion will come through further acquisitions and will be determined by opportunity. "If we don't meet that target its because we've been a prudent investor," says Barker-Homek. "If we do meet the target it's because opportunities have manifested themselves and gone through the various screens."

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