Taqa extends rally on speculation Abu Dhabi may help after loss

DUBAI (Bloomberg) -- Shares in Abu Dhabi National Energy Co. soared for a second day amid investor speculation the government will step in after the oil company known as Taqa reported a record $5.2-billion loss.

The stock climbed 9.6% to 0.57 dirham, closing at the highest since Nov. 13, after adding 13% on Sunday. Trading volumes exceeded 15 million shares on both days, compared with a 30-day average of 1.1 million.

“There is a lot of speculation in the market now that the government of Abu Dhabi might step in somehow, and that’s driving the surge," said Wada Al Taha, a Dubai-based advisory board member for the United Arab Emirates at the Chartered Institute for Securities & Investment. “The local government is certainly watching them closely, and wouldn’t be surprising to see an announcement in the short-term."

A spokesman for Taqa, whose biggest shareholder is government-owned Abu Dhabi Water & Electricity Co., said it doesn’t comment on market speculation. The spokesman pointed to a land-lease agreement valued at 18.7 billion dirhams ($5.1 billion) that the company signed, saying it had been “well received” by investors as it provides “a greater opportunity for Taqa shareholders to realize long-term value from their investment."

Taqa reported a loss of 19 billion dirhams amid one-time impairments for 2016. That compares with a loss of 1.8 billion dirhams in the year-earlier period.

Aside from signing the land-lease agreement with its biggest shareholder, Taqa’s management is implementing a two-year transformation program that saved 13.2 billion dirhams, including a capital expenditure cut of 8.6 billion dirhams and a 25% reduction in global headcount or more than 1,000 positions.

“There is a restructuring plan in place,” said Ali Adou, a money manager at The National Investor in Abu Dhabi. “And obviously there is a strong government backing. The main issue with the company is high levels of debt on the balance sheet."