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tABU DHABI NATIONAL ENERGY COMPANY PJSC (TAQA)
MANAGEMENT’S DISCUSSION AND ANALYSIS
1. Health, Safety and Environment
2. Summary of Results
3. Results of Operations by Business Line
4. Capital Structure and Liquidity
5. Capital Expenditure
This document should be read in conjunction with TAQA’s consolidated financial statements for the period ended 31 March 2023.
Within the MD&A we use the terms “the Group”, “we”, and “our” to refer to TAQA.
1. Health, Safety and Environment (HSE)
Period ended 31 March
T&D Generation (1) Oil & Gas Group Total
HSE Overview 2023 2022 2023 2022 2023 2022 2023 2022
Fatalities Number - - - - - - - -
Recordable injury rate
(incident/1 million hrs) 0.11 0.21 0.00 0.00 2.55 0.76(3) 0.65 0.37
(RIR)(2)
Lost time injury
Number 1 - - - 2 2 3 2
(LTI)
Reportable spills Number - - - - 6 5 6 5
Reportable spills Volume (litres) - - - - 3,037 1,339 3,037 1,339
1) Refers to TAQA operated assets only.
2) RIR includes all recordable injuries (e.g., fatalities, lost time injury, restricted work injury and medical treatment injury)
3) Q1-2022 RIR was updated based on a revised manhour calculation.
“Safe” is our first value. We put safety above all else and HSE is a fundamental part of TAQA’s business.
A strict set of HSE rules, guidelines, and reporting tools ensure a high level of professionalism and
adherence to regulations is enforced wherever we operate. All members of our workforce are
empowered with the responsibility and authority to stop unsafe work.
Group RIR of 0.65 for Q1 2023 is higher than the Group RIR of 0.37 for the same period in 2022. The
number of LTIs also increased from 2 to 3.
6 reportable spills were reported in Q1 2023 compared to 5 in Q1 2022, comprising 3,037 litres versus
1,339 litres, respectively. The number of spills remains below the three-year average. The increase in
volume can be attributed to a 2000L methanol spill in Canada, due to a defective filter housing.
Eight of the nine recordable injuries reported in Q1 2023 occurred in the Oil & Gas business segment,
of which five occurred in Canada. TAQA Canada have revised their annual HSE improvement plan to
address learnings from the incidents and the business segment remained focused on delivering the
2023 Five Point Action Plan commitments, documented in the TAQA annual report, to drive
improvements in contractor management, leadership engagement, management of short service
workers, HSE culture, and control of work.
Other corporate initiatives include behavioral based safety and leadership programs, introduction of
new global standards within the HSE management system, increased focus on reporting of safety
observations, enhanced quality of HSE incident investigations and effective learnings, and
strengthening of TAQA’s process safety framework.
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POWERING A THRIVING FUTURE2. Summary of Results
Three months ended
31-Mar 31-Mar
(AED million, except where indicated) 2023 2022
Transmission network availability % 98.1 98.0
T&D Regulated Asset Value (RAV) 1 75,417 76,161
Commercial Availability – Generation2 % 98.8 97.3
Oil & Gas Production3 mboe/d 119.9 126.9
Gross Revenues 13,139 12,413
Adjusted EBITDA4 5,311 5,613
Net Income5 11,572 1,971
1) Q1-2022 RAV was updated based on a revised calculation
2) Represents weighted average for all power producing assets based on plant capacity.
3) Includes working interest production from North America and Europe, and entitlement volumes from Iraq.
4) Adjusted EBITDA is defined as IFRS earnings before finance costs, net foreign exchange gain/loss, interest income, income tax,
depreciation, depletion and amortization and other income.
5) Net income above is share attributable to common shareholders of TAQA.
Operational highlights:
• Transmission network availability for power and water of 98.1%, compared to 98.0%,
marginally higher versus the prior-year period.
• Generation global commercial availability of 98.8%, compared to 97.3% in the prior year,
with the UAE plants in particular contributing to the increase.
• Oil & Gas average production volumes decreased to 119.9 thousand barrels of oil equivalent
per day (boepd), a decrease of 5.5% on 2022. This decrease is mainly due to the natural decline
in production and decommissioning activity associated with the Group’s late-life UK assets.
Financial highlights:
• Group revenues of AED 13.1 billion, 6% higher than the prior-year period, primarily due to
higher pass-through bulk supply tariffs and transmission use of system within the Transmission
and Distribution segment.
• Adjusted EBITDA was AED 5.3 billion, down 5%.
• Net income (TAQA-share) was AED 11.6 billion, an increase of AED 9.6 billion, mainly driven
by a one-off gain recognised on the acquisition of a 5% shareholding in ADNOC Gas, in part
offset by a one-off AED 1.2 billion UAE deferred tax liability associated with the introduction of
UAE corporate income tax from 1 January 2024. Net income excluding these one-off items was
AED 1.9 billion, overall in line with the prior year.
• Capital expenditure was AED 1.1 billion, 26% higher than prior year.
• Free cash flow generation was AED 4.3 billion, 31% higher compared to the previous year,
despite the higher capital expenditure.
• Gross debt was AED 59.8 billion, down from AED 61.7 billion at the end of 2022, further
improving the Group’s credit metrics.
Strategic highlights:
• Mirfa 2 RO Plant: TAQA and Engie signed a Water Purchase Agreement with EWEC for a 120
MIGD reverse osmosis (RO) plant in Abu Dhabi with financial close expected to follow shortly.
• Taweelah B IWPP: TAQA announced that it has acquired an additional 10% stake in the
Taweelah B Independent Power and Water Plant (IWPP) in Abu Dhabi and a 25% stake in the
plant’s operations and maintenance (O&M) company.
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POWERING A THRIVING FUTURE• GHG Emissions reductions in 2022: TAQA published its third sustainability report which
outlined the companies 8% reduction in GHG emissions in 2022, putting the company firmly on
track for its 2030 targets.
• New dividend policy proposed for 2023-2025: In view of the strategic decision to retain the
O&G business, at the AGA held in March, TAQA’s shareholders approved an updated dividend
policy for 2023 to 2025 based on a combination of fixed and variable dividend. Under the new
structure, fixed dividends will be 3.25 fils/share in 2023, 3.50 fils/share in 2024 and 3.75
fils/share in 2025, paid quarterly. The variable dividend component will be paid annually and
be based on a discretionary percentage of annual net profit from the O&G business.
• Five percent stake in ADNOC Gas: TAQA has had a long-standing strategic partnership with
ADNOC, which continues to be solidified with recent transactions, such as the joint
shareholding (along with Mubadala) of Masdar and the USD 3.8 billion project to decarbonize
ADNOC’s offshore operations. In recognition of this ongoing relationship, TAQA received from
ADNOC a 5% holding of the total issued share capital of ADNOC Gas, with no consideration
paid for this stake. ADNOC Gas was listed on the Abu Dhabi Securities Exchange during Q1
2023 and represents a significant financial asset for TAQA. Furthermore, TAQA’s net income
is set to benefit from dividends from ADNOC Gas. Based on ADNOC Gas’ announced dividend
policy, TAQA is expected to receive dividends worth AED 298 million in 2023, rising to AED
611 million by 2024.
• Expansion into EV infrastructure with ADNOC Distribution: TAQA and ADNOC Distribution
has agreed to work together to establish a mobility joint venture, E2Go, to build and operate
electric vehicle charging infrastructure in Abu Dhabi.
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POWERING A THRIVING FUTURE3. Results of Operations by Business Line
Period ended 31 March
Group Consolidated
T&D Generation Oil & Gas1 Corp. & Elimination Group Total
I ncome Statement
(AED millions) 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
Total revenues 7,499 6,451 3,141 2,887 2,499 3,075 - - 13,139 12,413
Operating expenses (5,047) (4,183) (1,440) (1,238) (914) (1,119) 10 1 (7,391) (6,539)
G&A expenses (315) (267) (57) (66) (51) (51) (96) (24) (519) (408)
Share of results of - - 78 149 - - 4 (2) 82 147
associates & joint
ventures
Adjusted EBITDA 2,137 2,001 1,722 1,732 1,534 1,905 (82) (25) 5,311 5,613
Depreciation, (971) (1,017) (1,116) (1,155) (236) (219) 7 9 (2,316) (2,382)
depletion, and
amortization (DD&A)
Finance costs - - (418) (444) (104) (111) (171) (188) (693) (743)
Other gains / (losses) 66 9 60 (28) 63 18 10,697 15 10,886 14
Tax (expense) / credit (1,030) - (226) (125) (519) (502) 89 18 (1,686) (609)
Net profit (loss) 202 993 22 (20) 738 1,091 10,540 (171) 11,502 1,893
Non-controlling - - (70) (78) - - - - (70) (78)
interest
Net profit (TAQA 202 993 92 58 738 1,091 10,540 (171) 11,572 1,971
share)
As at
Group Consolidated
T&D Generation Oil & Gas 1 Corp. & Elimination Group Total
Balance Sheet
31-Mar 31-Dec 31-Mar 31-Dec 31-Mar 31-Dec 31-Mar 31-Dec 31-Mar 31-Dec
(AED millions) 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
Property, plant & 82,600 82,147 29,763 30,508 4,998 4,880 - 4 117,361 117,539
equipment
Operating financial - - 9,079 9,170 - - - - 9,079 9,170
assets
Investment in and 797 797 5,946 5,366 - - 356 352 7,099 6,515
loans to associates &
joint ventures
Intangible assets 4,755 4,755 11,618 11,927 41 26 - - 16,414 16,708
Deferred tax assets - - 63 63 6,431 6,554 100 98 6,594 6,678
Financial assets at fair - - - - - - 11,513 - 11,513 -
value through other
comprehensive
income
Other assets 4,890 4,851 10,102 9,959 2,769 2,478 4,895 7,573 22,656 24,733
Total Assets 93,042 92,613 66,571 66,930 14,239 13,938 16,864 8,027 190,716 181,508
Total Liabilities 19,860 17,114 42,136 42,647 16,418 16,723 26,441 27,283 104,855 103,767
Total Equity 73,182 75,499 24,435 24,283 (2,179) (2,785) (9,577) (19,256) 85,861 77,741
1) Pesentation of comparative balances were restated due to classification of Netherlands Upstream business as no longer held
for sale as at 31 March 2023
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POWERING A THRIVING FUTURETransmission & Distribution Business
The Transmission & Distribution (T&D) business contributed a net profit of AED 202 million, a period-
on-period decrease of AED 791 million. The lower margin is primarily due to the recognition of deferred
tax liabilities recognised on the enactment of UAE corporation tax partly offset by higher transmission
use of system (TUOS) charges and a lower depreciation expense due to useful life revisions following
a detailed technical asset review.
Revenue experienced a quarter-on-quarter increase of AED 1,048 million to AED 7,499 million, primarily
reflecting higher revenues of AED 875 million in pass-through bulk supply tariffs (BST) and AED 126
million in TUOS. Higher pass-through BST was also the main contributor of the AED 864 million
increase in operating costs to AED 5,047 million for the quarter. In addition, G&A expenses of AED 315
million were AED 48 million higher reflecting investment in digital transformation initiatives to improve
operational efficiency.
Tax expense increased by AED 1,030 million on the initial recognition of deferred tax liabilities, in
respect of Purchase Price Allocation (PPA) adjustments carried on the Group’s statement of financial
position, due to the enactment of corporation tax in the UAE.
The increase in property, plant and equipment is attributable to AED 753 million assets received by
Transco as a grant and AED 671 million net additions which was partly offset by depreciation charges
of AED 971 million for the quarter.
Generation Business
The Generation business contributed a net income of AED 92 million, an increase of AED 34 million
when compared to prior period results. The bottom-line improvement is a combination of higher gross
margins generated by our domestic fleet, favorable foreign exchange movements and lower tax charges
offsetting the impact of a lower share of profits from our Sohar Aluminium investment.
Revenues were AED 254 million higher than the comparable quarter, totaling AED 3,141 million for Q1
2023. The increase is mainly attributable to higher pass-through fuel contributing an additional AED
235 million revenue in Morocco, which is also reflected as an increase in fuel cost in operating
expenses, and higher commercial availability of our domestic fleet which generated AED 151 million
higher revenue. These increases were partially offset by reductions associated with fuel supply
constraints to our India assets and the end of our Red Oak project tolling agreement in the USA in the
third quarter of 2022, decreasing revenue by AED 44 million and AED 39 million, respectively.
Overall operating expenses increased by AED 202 million to AED 1,440 million, mainly attributable to
higher coal prices impacting our Morocco assets by AED 296 million, partially offset by the absence of
AED 49 million costs associated with the end of the Red Oak tolling agreement and AED 34 million
lower spend on our India assets due to fuel supply constraints.
TAQA’s share of results of associates was AED 78 million which is AED 71 million lower than the
comparable quarter. Lower aluminium prices decreased the quarterly returns associated with the
Group’s investment in Sohar Aluminium by AED 103 million which was offset by AED 31 million higher
returns from our investment in Masdar.
Other gains / (losses) improved by AED 88 million primarily attributable to favourable foreign exchange
movements.
Overall tax expense increased by AED 101 million on the initial recognition of AED 168 million deferred
tax liabilities, in respect of Purchase Price Allocation (PPA) adjustments carried on the Group’s
statement of financial position, due to the enactment of corporation tax in the UAE, offset by a lower
current tax charge on lower profitability from our international fleet and the cessation of Red Oak.
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POWERING A THRIVING FUTUREOil & Gas Business
The Oil & Gas business generated net income of AED 738 million in the first quarter of 2023, a decrease
of AED 353 million versus the comparative period, primarily reflecting lower commodity prices and
production volumes.
Revenue for the quarter was AED 2,499 million, an AED 576 million reduction, due to a less favorable
commodity price environment combined the natural decline in production and decommissioning activity
associated with our late-life UK assets.. The average realised oil price declined to $73.95/bbl in 2023
compared to $91.30/bbl in the first quarter of 2022. Similarly, average realised gas prices decreased to
$6.08/mmbtu from $8.79/mmbtu. Average production decreased to 119.9 mboe/d from 126.9 mboe/d.
Operating expenses of AED 914 million were 18% lower than the comparable period primarily reflecting
a reduction in overlift and the volume of credits required for compliance with emission trading schemes
within our European business.
Corporate
Other gains / (losses) was higher in the first quarter of 2023 due to the recognition of an AED 10,784
million gain resulting from the acquisition of a 5% holding of the total issued share capital of ADNOC
Gas plc. The shareholding was received from ADNOC for no consideration in recognition of the long-
standing strategic partnership between the two companies who are working closely to accelerate the
energy transition in the UAE, in areas such as renewable energy and enabling other low carbon
solutions. The AED 10,784 million gain reflects the market value of the stock at the closing price of the
first day’s trading.
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POWERING A THRIVING FUTUREA@A
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4. C a pital Str u ctu re and Liquidity
As at
Group Consolidated Position 31-Mat 31-Dec
(AED million) 2023 2022
Total assets 190,716 181,508
Total equ ity 85,861 77,741
Total debt 59,771 61,705
Net debt-to-capital ratio 1 38% 40%
Unused portion of credit facilities 10,791 13,545
Net cash and cash equivalents 7,913 10,123
Total Available Liquidity 18,704 23,668
1) ‘Net debt’ divided by ‘Total equity’ plus ‘Net debt’ where ‘Net debt’ is ‘Total debt’ less
‘Net cash and cash equivalents’
Capital Structure
TAQA S Capital structure is comprised of 38% debt based on the consolidated statement of financial
position values as at 31 March 2023 and includes fair value adjustments.
The Group’s external sources of funding include corporate bonds and the Group’s revolving credit
facility (RCF). These funds have historically been used to fund investment, acquisition and growth within
the group. The Ge neration subsidiaries are generally funded by project debt, either in the form of limited
or non-recourse bank loans or project bonds.
The Group ntinues to monitor the total debt position and refinancing options available to ensure the
debt mix and cost of debt is at an optimal level. Please refer to the Maturity Profile section below for
updates on recent debt issuances.
Interest rates for the Group’s project debt, bonds and loans are largely fixed, either contractually or
through nterest rate hedging arrangements. The main exception is TAQA’s RCF , which attracts floating
market rates and therefore exposed to Secured Overnight Fi nancing Rate (SOFR) borrowing rates.
As our medium and long-term bonds and loans mature, we may be required to refinance the debt at
market rates or utilise other available liquidity. Accordingly, TAQA is partially exposed to nterest rate
risk in both the medium and long term
At 31 March 2023, after taking into account the effect of interest rate swaps, approximately 93% the
Group’s borrowings are at a fixed rate of interest (December 2022: 98%).
The Group s overall cost of debt averaged at 4.68% during the period ended 31 March 2023 (December
2022: 4.59%).
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POWERING A THRIVING FUTURELiquidity
The Group’s total available liquidity on 31 March 2023 was AED 18.7 billion, a decrease of AED 5.0
billion from the end of 2022. Total available liquidity was made up of AED 10.8 billion available credit
facilities and AED 7.9 billion net cash and cash equivalents.
Available credit facilities mainly comprise of the undrawn portion of the Group’s AED 12.9 billion (US
$3.5 billion) multicurrency revolving credit facility (RCF) with a syndicate of 20 banks.
As of 31 March 2023, 11% (AED 6.7 billion) of the Group’s total debt is classified as current (31
December 2022: 18%, AED 11.2 billion), based on the carrying value of borrowings. The current portion
of debt includes AED 4.0 billion classified as current liabilities due to a breach of loan covenants within
Fujairah Asia Power Company PJSC (FAPCO). This covenant breach was a result of a delay in the
restructuring of the international shareholder interests in FAPCO. The international shareholder is in
the process of rectifying the default. Discussions with the lenders are ongoing and the breach of
covenants is not expected to cause the lenders to request for the immediate repayment of the loan
facility.
Maturity Profile
The Group’s financial liabilities repayment schedule as at 31 March 2023, based on contractual
undiscounted payments, is as follows:
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RCF Corporate - Bonds/Other Subsidiaries - Bonds Subsidiaries - Bank Loans
As of 31 March 2023, the Group total debt was AED 59.8 billion (31 December 2022: AED 61.7 billion),
a net reduction of AED 1.9 billion. The net reduction includes the Group’s full repayment of its AED 3.6
billion bond, which matured in January 2023, AED 1.1 billion of scheduled project debt repayments in
our domestic and international assets and the utilisation of AED 2.8 billion of the Group’s revolving
credit facility.
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POWERING A THRIVING FUTURE5. Capital Expenditure
Period ended 31 March
(AED million) T&D Generation O&G Corporate Group Total
2023 657 35 401 - 1,093
2022 560 46 254 8 868
Capital Expenditure refers to additions to Property, Plant and Equipment, excluding right of use assets.
The Group’s total capital expenditure for the first quarter of 2023 was AED 1,093 million, a 26% increase
versus the comparative period.
Transmission & Distribution capital expenditure for the quarter was AED 657 million, a 17% increase
versus the prior period mainly driven by the timing and phasing of project execution throughout the
sector.
Oil & Gas capital expenditure was 58% higher on a period-on-period basis, increasing to AED 401
million, primarily driven by drilling, completion and tie-in costs on our North American assets.
Jasim Husain Thabet Stephen Ridlington
Group Chief Executive Officer & Managing Director Chief Financial Officer
12 May 2023
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POWERING A THRIVING FUTURE

Sentiment: neutral