Chilled water revenue more than doubles and recapitalization program progresses

National Central Cooling Company PJSC (‘Tabreed’), the Abu Dhabi-based utility company, released its first quarter 2010 consolidated financial results today.  For the three months ending 31st March 2010, total revenue was AED 184.6 million – broadly similar to the corresponding period in 2009. However, net profits more than doubled over the same period in 2009, from AED 21.7 million in 2009 to AED 43.8 million in 2010. Excluding minority interests, Tabreed’s share of profits was AED 40.4 million compared to AED 10.8 million in the previous year.

Financial Highlights – First Quarter Ending 31 March 2010:

• Total revenue was AED 184.6 million compared to AED 189.7 million in the same period in 2009
• Gross profit increased 11 per cent to AED 88.9 million compared to AED 80.2 million in 2009
• Net profit doubled for the first quarter to AED 43.8 million compared to AED 21.7 million in the same period in 2009, in part reflecting certain non-cash finance gains associated with the Company’s 2008 Convertible Sukuk
• However, excluding these non-cash finance gains, underlying net profits increased 15 per cent off the back of strong growth in the Company’s core chilled water business
• Chilled water revenue for the period was AED 117.1 million, a 91 per cent increase over the same period in 2009, as new plants and customers came on line. Profits more than doubled to AED 22.8 million and margins improved from 18 per cent to 20 per cent.
• Basic and diluted earnings per share attributable to ordinary equity holders of the parent increased from AED 0.01 in 2009 to AED 0.02 in 2010

Sujit S. Parhar, Tabreed CEO said:
“The first quarter 2010 results demonstrate the significant progress we have achieved to date in reengineering the business and implementing corporate governance and process controls.   We have a strong core business of chilled water and a steady pipeline of new plants coming on stream. We will continue to focus on improving operations and actively managing facilities.  We acknowledge the challenges facing the business in the year ahead and those associated with our recapitalization process, but we are confident in the long-term prospects for the Company.”

Steve Ridlington, Tabreed CFO added:
“In addition to operational improvements, we have also taken steps to implement a more rigorous financial discipline and focus on efficiency for our business, both of which are evident in the results announced today.  Our efforts have translated into the best first quarter results in the Company’s history.”

First Quarter 2010 Highlights:
During the first quarter 2010, Tabreed added four new plants to its portfolio, adding 27,000 TR of capacity and bringing Tabreed’s total installed cooling capacity to 422,100 TR across 40 plants.

Chilled Water
Tabreed’s core business of chilled water recorded sales of AED 117.1 million, an increase of 91 per cent over the same period last year as a result of three new plants coming online in 2009 and four new plants coming online in the first quarter of 2010. Profits more than doubled – up 109 per cent to AED 22.8 million. Margins for the chilled water business improved from 18 per cent to 20 per cent reflecting efficiency improvements during the first quarter.

Contracting
The Company’s contracting segment recorded sales of AED 36.1 million, an increase of 37 per cent over the same period last year. Profits for the segment were AED 15.6 million. Tabreed’s wholly owned subsidiary, Gulf Energy Systems (GES), was the biggest contributor to the strong results, particularly reflecting GES commissioning the chilled water network on Al Reem Island and signing AED 60 million of new orders for the Sowwah Island network project.

Manufacturing
Tabreed’s manufacturing segment reported sales of AED 15.6 million, a significant decline from AED 81.4 million for the first quarter 2009, due to a significantly reduced order book. During the quarter Emirates Pre-insulated Piping Industries was awarded three new projects, valued at approximately AED 25 million, which are expected to be completed by the second quarter of 2010. Profits for the manufacturing segment were AED 0.7 million

Services
Tabreed’s services segment, which is involved in the design and supervision of building electrical and mechanical works, reported sales of AED 15.9 million – down 23 per cent over the same period in 2009, reflecting reduced order books from the slowdown in the economy. Profits for the segment were AED 5.5 million – unchanged over the same quarter in 2009.

As of 31st March 2010, Tabreed’s total installed cooling capacity is 422,100 tons across 40 district cooling plants. The Company expects nine  further plants to come on stream in the remainder of 2010.

Update on Recapitalization Program:
On 8th March 2010 Tabreed announced its unaudited full-year 2009 results and its intention to submit for Tabreed shareholders’ approval a recapitalization program designed to allow the Company to achieve a stable long-term financial profile and capital structure.  Since that announcement there have been positive discussions with Tabreed’s main stakeholders.  Shareholders will decide on providing the Board the authority to move forward with a recapitalization program at the April 28th EGA.  If no quorum is present on April 28th, the EGA will be convened on May 30th.

Following a review of alternatives with respect to the annual distribution on its convertible Ijara 08 Sukuk, Tabreed intends to defer making this payment on May 19th.  Deferring the annual distribution is consistent with the objectives of the recapitalization proposal that will be decided upon by Tabreed’s shareholders and reflects the subordinated and equity-like nature of the 08 Sukuk.  Mubadala Development Company and ACWA Holdings, who together represent a majority of 08 Sukuk holders, have expressed their support for Tabreed’s decision.  Tabreed intends to propose amendments to the terms of the 08 Sukuk in due course in connection with its broader recapitalization program that Tabreed is targeting for completion in Q4 2010.

Khaled Al Qubaisi, Tabreed’s Managing Director, said:
“While we are very pleased with the first quarter results, which reflect the hard work of the management team under the direction and supervision of the Board, we recognize that there are challenges that face the business in the year ahead.  We are confident, however, that the improvements in the Company and the way its business activities are conducted provide a strong platform to achieve the Company’s objectives of improving performance, increasing profitability and maximizing returns.   The initial discussions we have had with key stakeholders in respect of the recapitalization of the Company is positive and encouraging. The support from major 08 Sukuk holders for the Company’s decision to defer the May 19th payment is a strong endorsement of the steps being taken to complete the recapitalization process.”