Risk management

TAQA is exposed to many risks associated with its financing and operations and utilises, where appropriate, risk-management tools to manage these risks in line with our stated policies.

Corporate debt portfolio

TAQA faces refinancing risks associated with the maturity of its corporate bonds and revolving bank loan facilities. TAQA manages these risks by spreading the maturity profile over a long time horizon; by taking a proactive approach to refinancing to avoid the need to raise debt under unfavourable market conditions; by diversifying its investor base to gain access to different pools of capital and by maintaining strong liquidity to fund any contingencies. In the short term, the risks associated with interest rate volatility are mitigated with almost all of TAQA’s non-project borrowings at year end being fixed-rated debt. 

Exposure to commodity price volatility

TAQA generally relies on the steady and predictable cash flows from the power and water assets to protect it from adverse change in prices. Although TAQA suspended the small commodity hedging programme in North America in 2012, it has continued to monitor the commodity market for opportunities to implement short-term risk mitigation measures. Early in 2014, TAQA took advantage of a strong North American natural gas market to enter into a number of forward pricing contracts to lock in approximately 70% of its 2014 gas production in Canada, net of royalties, to guarantee an average floor price of around US$ 4.00/MMbtu based on benchmark Henry Hub (HH) pricing point. These forward pricing contracts will allow TAQA to benefit from any upside on gas prices up to a range of about HH US$ 4.50/MMbtu to HH US$ 4.90/MMbtu. TAQA will also engage in limited hedging activities against its exposure to key currencies associated with its international operations. 

Operational risk

TAQA is exposed to risks associated with onshore and offshore oil and gas operations, power generation and water desalination. Therefore, the Company has adapted a strategy of procuring first-party and third-party insurances to protect against credible catastrophic events. It regularly reviews the adequacy of its insurance programme and benchmarks coverage against that of its industry peers. The company will also seek to retain appropriate levels of primary risk.