Infrastructure investor Abu Dhabi National Energy Company PJSC rated 'A+/A-1'; outlook stable

The outlook is stable. TAQA invests in infrastructure assets in a variety of sectors -mainly power generation and water desalination, but also oil, gas, and metals--both in the United Arab Emirates and globally.

The rating reflects TAQA's key position in the economy of the Emirate of Abu Dhabi, with majority stakes in critical power and water desalination assets; as well as its importance to the sovereign as a vehicle for global investment and public policy. The key credit challenge is TAQA's very limited track record (the entity was incorporated in 2005).

"In addition, the planned global diversification of its investment portfolio will likely increase overall portfolio risk, and dilute the importance of the existing Abu Dhabi based assets within the portfolio to some degree," said Standard & Poor's credit analyst Jonathan Manley.

We have factored implicit sovereign support for TAQA into the rating--although it provides no formal guarantees. State support for the company is based on its 74% ownership by government or government-related entities, and TAQA's majority stakes in assets that provide about 85% of Abu Dhabi's power generation and 90% of its water desalination capacity. TAQA is also an important, and highly visible, overseas-investment vehicle for the Emirate. The company's partial ownership by the Farmers' Fund (a fund established to replace farming subsidies over the long term), and its role in providing a steady dividend stream to the fund, further increase TAQA's public-policy role.

"TAQA's corporate governance arrangements, financial strategy, and risk appetite are still developing, and we will only be able to assess these fully when the company has completed its ramp-up phase and executed further investments," said Mr. Manley.

Standard & Poor's expects TAQA to retain control of its strategic power and water assets, and that there will be no major changes in its ownership.

"We also expect the company to execute its business plan according to plan, and fulfil its financial forecasts in light of significant near-term infrastructure investments and portfolio diversification," added Mr. Manley.