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Tue 7 Jul 2009 10:59 PM

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UAE's Taqa eyes Iraq power as part of $1.5bn spend

CEO sees up to $250m being spent in Iraq initially, more later as security improves.

UAE's Taqa eyes Iraq power as part of $1.5bn spend
TAQA PLANS: Acquisition targets include Iraqi power plants. (Getty Images)

Abu Dhabi National Energy Co plans to spend $1.5 billion on acquisitions in the next six to nine months, and investment targets include Iraq's power sector, Taqa's chief executive said on Tuesday.Taqa is 75 percent owned by the government of Abu Dhabi and is one of the vehicles the emirate uses to invest oil money. Abu Dhabi holds most of the oil reserves and wealth in the UAE.

The company would make a small initial investment of under $250 million in Iraq in the next few months, and would spend more later as security improved, Taqa Chief Executive Peter Barker-Homek said.

Taqa may also pursue opportunities in Iraqi gas and pipelines, he added.

"The initial investment will be small but will grow... we will probably go after gas before we go after oil," he said.

"We are looking at power plants around the country. There is a lot of kit in Iraq that just needs a confident operator and that's what we are planning to do this year."

Years of war and sanctions have hobbled Iraq's infrastructure and delayed projects including the expansion of power plants and developing the oil industry.

Iraqis say the country's faltering electricity system is one of their main sources of frustration. Many parts of Iraq have just a few hours of electricity per day. The design capacity of the country's power plants is 11,000 megawatts but they are running at about half that level.

Iraq opened up its biggest oil fields to international oil firms last week, but only secured one contract of the six on offer.

The UAE government's close ties to Iraq would help alleviate the risks of investing and working there, he said.

Taqa was targeting expansion in North America, Europe, the Arabian peninsula and in Africa, Barker-Homek said. It already has assets in oil, gas and power in 14 countries.

The company has spent $1.5 billion so far this year, Barker-Homek said.

The global economic downturn and financial crisis should have given rise to more opportunities to buy assets, but deals have failed because sellers have kept prices higher than what Taqa believes they should have been, he said.

"People are still being very sticky about pricing, not changing them from 2008 levels, that's why I would say that there were a lot of failed deals this year," he said.

This year would be hard for Taqa, but the company would still provide stakeholders a return on their investments, he said.

Returns should improve next year, he added.

"I think that 2010 will be a very solid year for us, as the world recovers we will be able to make more marginal profits on the investments made this year," said Barker-Homek.

A fall in the price of commodities and energy services with the global economic downturn had helped Taqa cut costs, he added.

Taqa aims to transform itself into an integrated international energy company after starting out in 2005 as an Abu Dhabi utility.

It plans to almost triple assets to $60 billion by the end of 2012 from around $23 billion it held late last year. (Reuters)

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