Keeping the Lights on in Africa: The Next Opportunity?
Africa offers interesting investment opportunities for energy companies, the chief executive of Abu Dhabi National Energy (TAQA) told CNBC, while the Middle East is no riskier than Europe.
The company operates in Morocco and Ghana, and Carl Sheldon, who has been heading TAQA as CEO since 2011, said growing populations with rising expectations presented attractive potential for long-term investors.
"In that bundle of expectations is the expectation of reliable utilities. So lights on all the time and plenty of water fit to drink. Now that's an opportunity for investor an like TAQA, you can bring that kind of long term capital and the skill set needed to make that kind of investments."
He shrugged off talk of increasing political risks in the Middle East, saying it existed around the world and could easily be exacerbated by changes in tax laws and regulations, as was currently the case in a "difficult" Europe.
Having the government as a majority shareholder gives Abu Dhabi National Energy key advantages in its pursuit of a more diversified, global energy portfolio, Sheldon told CNBC's "Access: Middle East."
"Our ability to trade as a government-related entity of the Emirate is probably the single and most valuable asset in doing business in the rest of the world," he said.
In November, credit ratings agency Standard & Poor's described TAQA as a "key entity in the economy of the Emirate of Abu Dhabi" and "its importance as a vehicle of global investments and public policy" supported an "A" rating despite its "highly leveraged" risk profile.
The government relationship, which is manifested in a 72.5 percent stake, also provides another layer of possible defense in some of the riskier markets it operates in. In Iraq, Sheldon even saw demand for investments coming specifically from countries of the Gulf Cooperation Council (GCC), a trend that has helped when competing with Western oil majors.
"There's an appetite to see GCC investors in Iraq, generally. I think there's a political interest in the Gulf in general to see prosperity and stability in Iraq. So to that extend, our activities there support our objectives," he said.
Founded in 2005, TAQA operates in sectors ranging from power generation and water desalination to oil and gas exploration. The Abu Dhabi Securities Exchange-listed company caught the attention of many observers around the world following the purchase of several high-profile stakes, most recently a range of North Sea assets from BP in 2012, and the Bergermeer underground natural gas storage facility in the Netherlands in 2008.
TAQA also bought a majority position in the Atrush exploration block in the Kurdistan region of Iraq. Experts see the country as one of the few remaining onshore frontiers for oil and gas companies.
On Saturday, Iraq's oil minister revealed plans to spend $130 billion over the next five years to boost production capacity to 9 million barrels per day (bpd). On the same day, Royal Dutch Shell announced it marked more than $1 billion this year to develop one of the major oilfields there.
A decade after the first U.S. warplanes entered Iraq, the political stage remains fragile. And while the Kurdish government is still at loggerheads with the South over how to allocate interests in the oil industry, Sheldon was upbeat about future prospects.
"There's some sort of rapprochement that will be reached between the North and the South. But we accept that likely to be an unpredictable process and will take some time," Sheldon said.
Last week, TAQA announced its full-year results for 2012, reporting a 15 percent growth in revenues amounting to $7.57 billion. But net profits fell by 13 percent in the same period due to "one-off items and a challenging price environment in North America."
This week on "Access: Middle East": An exclusive interview with Carl Sheldon, the CEO of Abu Dhabi National Energy. Tune in to get the details on the firm's expansion strategy, industry trends and the implications of U.S. energy independence for the region.
Correction: An earlier version of this story incorrectly said revenue at TAQA in 2012 amounted to $6.59 billion. The correct figure is $7.57 billion.