The UAE-based national cooling company, Tabreed will be utilizing the $500 million Sukuk for future growth, its CEO Bader Al Lamki explained to local media, as the company refused to repay its existing liabilities.
In an interview given to a regional media, Al Lamki stated that the amount raised from Sukuk issuance is for the future expansion of the company. “The board has given us the approval to raise to $1 billion but at this stage, we have raised $500 million and we think that is sufficient for the next phase of growth we have in mind,” he added.
Last month, the cooling company raised $500 million through the issuance of seven-year, US dollar-denominated Islamic bonds, paying a 2.5 percent coupon. The order came from more than 140 local and global investors and was oversubscribed almost five times at its initial offer size of $400 million.
Tabreed currently operates 83 district cooling plants, delivering more than 1.35 million refrigeration tons of cooling to districts in the UAE, Saudi Arabia, Bahrain, Oman and Qatar, with one plant under construction in India.
The company which has French utility Engie and sovereign wealth fund Mubadala Investment Company as its major stakeholders had paid $675 million to Emaar Properties to acquire 80 percent share in the world’s biggest district cooling scheme in Downtown Dubai, but it was funded by a syndicated loan arranged by HSBC.
As per the financial service company EFG Hermes’ analysts, the Sukuk issuance is a sign that the company is setting up to tackle the upcoming expansion opportunities and it may be looking at other targets in the UAE or the rest of the GCC.
“The investment objective is two-fold. One is to strengthen our standing in the countries that we operate within already to seek further growth from these geographies. The other is looking at further markets where it makes sense on an opportunistic basis.”
Tabreed is focusing on countries with high-density populations which gives immense opportunities like Egypt, India and Saudi Arabia. Recently, the company has started its operations in Mumbai and Egypt.
According to Al Lamki, the Egyptian market is in perfect condition to explore investment opportunities. The country has the foundation for starting a business like increasing population, new mega-projects under development including the New Cairo City and others.
In the third quarter, the Abu Dhabi- based cooling company has shown a 13 percent increase in net profit with a 20 percent revenue growth and even after offering reasonable fares in the pandemic as many people worked from home due to movement restrictions.
“Demand from homes surged, our commitment was to ensure that we provide them with a service of the highest quality in a way that is not interrupted. The understanding that we have is that we have a longstanding partnership with them,” Al Lamki stated.
Al Lamki further added that we believe Tabreed does not face any collection issues post a massive capacity acquisition and weak operating environment for many of its clients during the COVID-19 pandemic.