Abu Dhabi’s TAQA In Talks for Potential Takeover of Naturgy

Possible Acquisition Could Be Largest Deal by Sovereign Wealth Fund

by Victor Adetimilehin

Abu Dhabi’s state-owned utility company, TAQA, is in discussions with major shareholders of Spanish energy firm Naturgy about a potential takeover bid. The move, if successful, could be the biggest deal ever by a sovereign wealth fund, according to industry tracker Global SWF.

Naturgy, Spain’s leading gas supplier, has a current market value of $22 billion. A successful takeover would give TAQA access to Naturgy’s existing contracts with Algeria for natural gas supplies, along with a long-term agreement to import liquefied natural gas (LNG) from Russia.

TAQA Targets Key Naturgy Investors

TAQA is currently engaged in talks with private equity firms CVC and GIP, both of which hold significant stakes in Naturgy. Each firm owns over 20% of Naturgy’s shares, with a combined value of approximately $9 billion. Sources familiar with the situation suggest both CVC and GIP are inclined to sell their holdings to TAQA.

Discussions are also underway with Criteria Caixa, the largest shareholder in Naturgy, owning 26.7% of the company’s stock. However, TAQA has emphasized that a deal is not guaranteed and the terms remain to be negotiated. The company has also clarified it hasn’t directly approached Naturgy itself.

Spanish Government Holds Approval Power

Spanish regulations require a mandatory public offer if a buyer seeks to acquire more than 30% of a publicly traded company like Naturgy. Additionally, any deal would need the green light from the Spanish government.

Spain and Abu Dhabi share a strong relationship, solidified two years ago with a strategic partnership agreement. Commenting on the potential deal, Spain’s Economy Minister Carlos Cuerpo stated the government would assess the situation if and when a concrete proposal emerges.

Natural gas sales accounted for 57% of Naturgy’s core earnings in 2023. However, the company is actively expanding its renewable energy operations, reaching a capacity of 6.5 gigawatts by the end of last year.

Spain’s geographical location positions it as a key European hub for LNG. The country boasts the largest number of import terminals within the European Union and sits at a crossroads connecting North Africa, the United States, and Europe.

TAQA, with operations in over 10 countries, is primarily owned by Abu Dhabi’s sovereign wealth fund, ADQ. Gas currently makes up more than half of TAQA’s production mix.

The coming weeks will be crucial in determining whether TAQA’s talks with Naturgy’s shareholders materialize into a formal takeover bid. The Spanish government’s position and the final terms of any deal will also be closely watched. This potential acquisition is a reminder of the growing interest of sovereign wealth funds in the global energy sector.

Source: Reuters

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