By Tom Arnold
UPDATE 1: National Central Cooling Company agrees finance with First Gulf Bank - statement.
Abu Dhabi-based National Central Cooling Company (Tabreed) said on Sunday it would use a AED750m ($204m) loan from First Gulf Bank (FGB) to fund the company’s major capital expenditure programme planned this year.
The funding would be used by the utility company to finance projects such as the Dubai Metro, Yas Island and its joint venture projects with Abu Dhabi developers Aldar Properties and Sorouh Real Estate, it said in a release.
Tabreed had earlier made the announcement in a statement to the Dubai Financial Market (DFM).
Nine district cooling plants were expected to be completed by the company in the next three months, adding an additional 229,000 tons of capacity to the ten district cooling plants already finished over the last 12 months, it said in a press release.
The financing deal follows the company in March closing a AED368m Islamic financing facility from Abu Dhabi Commercial Bank (ADCB) in the form of a ijara loan, or lease-to-own structure.
This financing was used for the full-repayment of Tabreed's five-year $100m sukuk, launched in 2005.
“Since financing is the cornerstone of a utility company's business plan, we are pleased to have the support from the region's financial markets,” said CEO Sujit Parhar.
Tabreed’s ability to secure regional financing amid the current condition of the financial market was testament to the company’s robust expansion plans and the increasing importance of district cooling for regional growth and infrastraucture investment ambitions, said CFO Steve Ridlington.
“Whilst our business model requires significant upfront expenditure it also offers long-term, stable and sustainable returns,” he added.
"Whilst our business model requires significant upfront expenditure it also offers long-term, stable and sustainable returns"......... Thanks for that nugget of wisdom Steve.......... However, the reality of the situation is somewhat different. Anybody living in an area of the UAE where they are forced to accept district cooling as means to air-condition their living quarters will confirm just how expensive it is!!! Being a JBR resident, it is staggering that I have to pay the district cooling company directly and then cough up again and pay them more money through my service charges. This is a service that I use for 4-5 months of every year. Other than that, the a/c remains off and the window open. Theheavy investment cost for the district cooling companies is just reflected in the charges made to users - most of the apartments are empty anyway. Is this the most cost effective solution for a/c on a mass scale?? In time, I think that district cooling will turn out to be one of the most highly priced and ineffective ways of providing services to tenants......... another big white elephant!!