Interview: Frank Perez Head of Global Power, TAQA
Frank Perez, Head of Global Power at TAQA, discusses the company’s strategy, portfolio and its place in Abu Dhabi business
In 2005 the Abu Dhabi National Energy Company was founded when its IPO was issued on the Abu Dhabi Stock Exchange, for the first time allowing investors to own shares in the previously state-owned assets of the Abu Dhabi Water and Electricity Authority.
Now an integrated global energy business, TAQA is 75 per cent owned by the Abu Dhabi government, boasts assets of more than $29 billion across 10 countries and is heavily involved in power generation, water, desalination, oil and gas exploration and production, pipelines and gas storage.
Headquartered in Abu Dhabi, TAQA’s recent financial statements make encouraging reading.
Its Q1 revenues, at $1.49 billion, are 15 per cent higher year on year and Q2 revenues tell a similar story. Total revenues for the second quarter of 2011 were $1.93bn, up 38 per cent year on year compared to $1.38bn in Q2 2010.
Of this, power and water revenues - excluding supplemental fuel income - were responsible for $517.2m, up from $435.5m in 2010. This represents a 17 per cent year-on-year increase over 2010, which is largely down to the Fujairah 2 power and desalination plant, transferred to TAQA in the third quarter of 2010 and fully commissioned in January 2011.
“Our strategy of late has been to focus on organic growth and to build from the footprint we have, not only here but within the greater MENA region,” says Frank Perez, head of global power at TAQA. “We then also looked at our platform and rationalised anything that didn’t quite fit the global power and water strategy.”
As a result the company sold its 50 per cent stake in the US-based Marubeni TAQA Caribbean joint venture earlier this year, exiting the $320m conglomerate citing a desire for stronger focus on the greater MENA region and organic growth as part of a long-term plan to increase scale.
“The real focus has been to build an organisation, the headquarters of a global power and water group, here in Abu Dhabi. We’ve effectively succeeded in executing our strategy to build our capability here in Abu Dhabi, and to grow our power and water group in this part of the region.”
TAQA’s global platform currently includes around 16,000 megawatts of electricity, and 800m gallons of water produced per day. “We have a large base that’s growing at a fairly large rate,” says Perez, “We’ve got the relationships that come from being an Abu Dhabi entity, and we have a very positive relationship as an investor in power and water, and an operator.”
Perez is keen to stress that the company’s role as an operator, in addition to an investor, is important.
“We’re not like many other vehicles, we’re an operator of what we invest in,” he says. “TAQA is an energy champion for Abu Dhabi, and within that global power and water is an entity that has the scale, breadth and team organisation to not only invest but to also operate projects.
Operating and creating projects, executing those projects and operating them safely is important, and we run very efficiently creating high availability and safe and reliable operation. All that takes expertise, and we’re still building an organisation and skillsets to deliver that capability long term.”
Currently the sixth largest IPP in the world by gross capacity, the availability of TAQA’s fleet is a source of pride for the company.
“We have a good track record with our fleet, which is sizeable and primarily MENA based. Here and internationally, our fleet operates at about 93 per cent; so 93 per cent of the time, all our plants are available to supply energy to the market,” says Perez.
TAQA’s expansion in the power and water sector in recent years has been rapid and comprehensive. With plants in the UAE, Middle East, North Africa, Asia, India and North America, the company is responsible for supplying power and water to millions of people worldwide. The relationships the company has fostered with trusted partners is one of the reasons Perez cites as a driving force behind the firm’s development.
“We have great partners – we’re blessed with a good fleet here in Abu Dhabi and great partners, with the likes of Marubeni, International Power, GDF Suez and Mitsui,” he says. “Those relationships become very critical when you’re trying to grow outside of your sphere, and we have partnered with them successfully in other markets.”
“I think we are also fitting the strategy of what Abu Dhabi is looking for in companies,” he says, ”both in terms of growth rate and also in job creation.
With our partners we employ approximately 1,700 people, and if you add headquarters, TAQA is a very large employer. That doesn’t count the secondary effects of creating jobs; it’s a big economic engine creating knowledge and a workforce with critical expertise to invest, manage and operate plants.”
So with a strategy focusing on organic growth in territories the company already has a presence in, what’s next for TAQA?
“When you look at the markets we’re in and targeting, first-tier markets are where we are,” says Perez.
“In the UAE there’s a whole set of opportunities to expand as we’ve just brought F2 and S2 online. In Morocco we own a 1,300 megawatt coal-fired power plant that supplies close to 50 per cent of the country’s power, so it’s critical and important.
The government recognised that the country would need additional power by 2013 and 2014, so we have executed with them an expansion project to add 700 megawatts of generation; two more units.”
Having awarded the project to Mitsui Daewoo, construction has begun and TAQA is currently working on the project finance. “It’s crucial that we get power in that window – it’s a big commitment by TAQA and Abu Dhabi to get the project done,” says Perez.
In Ghana, TAQA operates in the region of 90 per cent of the country’s thermal generation, running the country’s most reliable power plant. Currently in the process of converting it to combined cycle, and at an advanced stage of the expansion, the company hopes to bring the project to financial close by
the end of this year.
“We also have a 250 megawatt lignite plant in Tamil Nadu in India, which is a very low cost fuel,” says Perez. We’re working towards expanding that and doubling the capacity to a total of 500 megawatts, which will be very competitive power – the fuel is inexpensive.”
Closer to home, TAQA has a partnership in Saudi Arabia with the Zamil group, the cogeneration plant that feeds the Kingdom’s petrochemical facility. “We are looking at expanding there, because they need to expand. It’s a small business at the moment but we’re looking to grow in Saudi as it’s a big market,” says Perez.
TAQA is also hoping to expand the size of its operations at Oman’s Sohar Aluminum smelter, in which it has a 40 per cent equity stake. Currently running a 1,000 megawatt combined cycle captive power plant, the Sohar Aluminum Company produces 360,000 tonnes of aluminum a year, and Perez says TAQA’s aspirations are to double the facility’s generation capacity.
“Obviously our next targets are markets we want to go deeper into, in which we currently don’t have a significant footprint,” says Perez. That includes Saudi, Iraq, Oman, Turkey and beyond, and as an Abu Dhabi entity we think that our passport and our relationships with host governments help us gain trust and look for opportunities.”
“As a region goes through turmoil like it has been, we hope it will create opportunities where we can feel comfortable stepping in and delivering projects in different countries. The outlook is fairly positive; there’s high growth rate in the region and some instability, but overall it creates opportunity. We might have the risk appetite to do things and move projects on that others aren’t as comfortable with.”
“That goes hand-in-hand with building our corporate team,” he adds. “We’re still active in looking for good, sharp people that we can bring on board. We’re quite entrepreneurial, we have a good management team and it’s still a very good market. I’m very pleased with where we are as TAQA; we’re well recognised and well regarded as a trusted, reliable partner.”
“We’re basically about executing,” Perez summarises. “We just want to execute what we say we’re going to do. That’s what we’re doing in Morocco, what we’re going to do in Ghana and what we’ll try to do at Sohar and in India. And once we get those projects going, then we’ve got a pipeline of other projects and newer markets, both greenfield and acquisition, to look at.”
In 2008 a strategic partnership with European renewable energy firm Theolia investigated the possibility of constructing a 300 megawatt wind farm in Morocco ultimately failed to result in a tangible project, but TAQA’s renewable operations in the North African country are far from mooted.
The company is still measuring wind on certain properties in Morocco with a view to construct its own project; one of three potential forays into the renewable sector for TAQA.
The company has been prequalified along with three other bidders for the 125 megawatt solar project in Morocco, as part of a consortium with Abengoa Solar and Mitsui, with the project winners expected to be announced in the fourth quarter of this year. TAQA is also in the running for the development, construction and operation of a 150 megawatt wind power plant in Morocco.
However, despite an increasing interest, focus and perhaps confidence in a developing renewables market, Perez also realises that thermal generation, at the heart of TAQA’s operation, will remain the company’s bread and butter for now.
“Right now, our core business is thermal,” he says. “We’ve got a good source of fuel, it’s clean, it’s very, very efficient and it’s reliable. Wind and solar are more variable, but the technology will perfect itself over time so we certainly want to invest and participate; renewables will be a percentage of our mix, but our major volumes will probably be traditional power.
Most markets have high growth rates, but you need to depend on the basic tools which typically for TAQA are thermal based.”
The firm’s recent inauguration of the F2 power plant in Fujairah is a prime example – at 2,000 megawatts and with the ability to desalinate 130 million gallons of water a day, the plant is one of the biggest of its type in the world.
“It’s worth noting that the UAE fleet is state-of-the-art technology, and tends to be around 55 to 58 per cent efficient, compared to the 30 or 33 per cent efficiency of a coal plant. The fleet is highly efficient at converting gas into power, and it’s also extremely clean – one of the cleanest in the world.”
Perez is also confident that the gradual development of the GCC interconnection grid is a positive step for the region.
“It’s important, because it does two things. Within the UAE it has interconnected all the emirates, and makes sure that power gets delivered to all the different corners of the UAE, and it also allows sharing with Oman and into Saudi and Qatar. We can help each other as needed – long term it’s a very positive thing.”
TAQA in MENA
In 2010 TAQA acquired an equity stake in Oman’s Sohar Aluminum Company, which produces 360,000 tonnes of aluminum a year. It also owns and operates a 1,000MW combined-cycle captive power plant, which TAQA is looking to expand.
TAQA’s headquarters are in Abu Dhabi, and it is the majority owner in the facilities that provide 98 per cent of the water and electricity needs of the Emirate. The company recently inaugurated the S2 and F2 power plants in the country, the
latter of which is one of the most efficient and environmentally friendly in the world.
The Jubail Cogeneration Plant is a 250MW plant that began operating in 2005. Its output is provided to the SADAF
petrochemical plant, and TAQA is working on plans to double its generating capacity.
TAQA currently operates a 250MW lignite-fuelled power plant in the Tamil Nadu district, and is looking to double its output.
Currently awaiting bid results on several renewable projects in the country, including wind and solar, TAQA also operates a 1,300MW coal-fired plant which provides almost 50 per cent of Morocco’s power.
MEET FRANK PEREZ
Frank Perez joined TAQA in 2009 and has over 25 years’ experience in the power and utility sector. Prior to joining TAQA, he was General Manager of PS EG Americas Latin America Electric and Gas Utilities portfolio, Chief Political and Regulatory Officer for PS EGGlobal, CEO and President of a subsidiary of DPL Inc.
(the parent company of Dayton Power & Light) and Corporate Officer of DPL Inc. Frank also worked for ABB’s power business.
Frank is a founding partner of a global energy investment advisory firm, and was
previously a Board member of several international electric and gas utility and power companies.
Frank is an US national and holds a Bachelor of Science in Civil Engineering from Tulane University.