CEO Peter Barker-Homek on TAQA's acquisitions and its efforts to become a global energy company.
It's 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. These have seen it grow from being a domestic power generator in the United Arab Emirates, to a global energy company, operating in 10 countries.
This has left chief executive Peter Barker-Homek feeling 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 couldn't have done much harm either.
Business is good, we’ve had a fantastic 12 months, we’ve had remarkable success in identifying acquisitions that we’ve been able to appraise, negotiate and complete.
"Business is good, we've had a fantastic 12 months," said Barker-Homek. "We've had remarkable success in identifying acquisitions that we've been able to appraise, negotiate and complete.
"We've also joined five disparate corporate cultures together into one entity called TAQA. We're founded on a meritocracy, with very high industry standards and we're 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."
TAQA has a strategy aimed at building an upstream exploration and production (E&P) company, with the emphasis on production. It has also been actively investing in oil and gas at a midstream level, in areas such as LNG regasification and storage, and downstream in power generation. Barker-Homek describes it as a multi-utility strategy, comparing TAQA's portfolio to the likes of RWE and Eon.
"Those companies have heritage power and gas distribution networks, which we don't, but they do play across the value chain," said Barker-Homek. "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 is an easier business model than having 10000 sales representatives 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.
"Shareholders are getting growth and income; bond holders are getting security of debt service," said 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 what Barker-Homek describes as ‘unconventional plays'. He offers the example of TAQA's Canadian investment in coal bed methane reserves.
"The technology is there to develop this and it has an interesting profile relative to conventional gas," he said. "Coal-bed methane actually increases in production over the life of the reserve."
Although the company has quickly acquired a big asset base, growth targets are still ambitious. Barker-Homek would like to see it 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 that is necessary if TAQA is to benefit from economies of scale. 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 offering employees limited career paths.
"You really want to create a dynamic workforce, multi-cultural and multi-regional," he said. "By expanding out and establishing frontiers in Canada and Europe, we can acquire people and skills and they can work in local 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. We really have what I think is a unique business model, we are a US $16 billion start-up and have the opportunity to really pick the best of all practices and incorporate them into the way TAQA does business."
The big jump in company value, in excess of US $40 billion, will come through acquisition and will be determined by opportunity. "If we don't meet that target it's because we've been a prudent investor," said Barker-Homek. "If we do meet the target, it's because opportunities have manifested themselves and gone through the various screens."
One such screening process is whether or not the enterprise in question will add to TAQA's talent pool. With 2000 employees on the books, TAQA is targeting 7000 by 2012. The company is literally buying up talent, with Barker-Homek pointing out that all of TAQA's acquisitions to date have come with people, many of whom have been retained: TAQA's employee attrition rate in acquisitions is below 5%.
Aiming for output
TAQA's output targets are not rigid, but Barker-Homek has some figures in mind. He would like to see oil production capacity of more than 100000 barrels per day (bpd) in 12 months, a billion barrels of proven plus probable reserves, and 10000 MW of power output growing to 16000 MW over 2-3 years.
Barker-Homek is clear on his top three priorities for the coming months. First is to continue the integration process, clearly establishing a ‘TAQA way of doing business within TAQA'. Second is to continue the growth, because he feels the company needs to be larger to justify its geographic footprint. Beyond that comes another layer to the integration process, one where economies of scale start to contribute in establishing best practice.
In August, TAQA reported total group assets of AED 56 billion and second quarter earnings of AED 1.8 billion. If TAQA continues to grow and can cope with the challenges of expansion, shareholders and bond holders alike will expect to see these numbers increase.