ADNOC Gas will be the latest ADNOC entity to float and with a prominent presence on ADX. Image Credit: Shutterstock

Dubai: UAE's first IPO of the year has been announced, with ADNOC Gas set to offer more than 3 billion of its shares and list on Abu Dhabi Securities Exchange (ADX).

ADNOC intends to offer approximately 4 per cent of ADNOC Gas’ issued share capital in the offer as part of the UAE Retail Offering, to: (a) individuals and other investors in the UAE; (b) employees of ADNOC group companies residing in the UAE; and (c) UAE National retirees of ADNOC group companies residing in the UAE; and to qualified institutional and other investors.

ADNOC retains the right to amend the size of the offer. The IPO comes to market when the Abu Dhabi energy giant is committing significant investments to raise its upstream and downstream capabilities in gas.

The indicative price range per share will be published on the offer opening date. It will be 'determined through, and following, a bookbuilding process'.

The first tranche for individual investors will have a minimum guaranteed allocation of 2,500 shares per individual. The third tranche - for employees - will have a minimum guaranteed allocation of 5,000 shares.

ADNOC has multiple entities listed on ADX already, including ADNOC Distribution, ADNOC Drilling, and its JVs Borouge and Fertiglobe. The Borouge and Fertiglobe floats were heavily subscribed and had strong first-day starts on listing.

ADX, with a current market cap of Dh2.54 trillion, has in recent days been boosted by some extremely healthy 2022 numbers for its key constituents such as IHC, e&, Aldar and Multiply. 

  1. Dates set for ADNOC Gas IPO:
  2. The UAE retail offering subscription is expected to open on February 23 and close on March 1.
  3. The 'Qualified Investor Offering' subscription period will also open February 23 but close on March 2.
  4. The completion of the affer and admission is expected to take place no later than March 13 including the approval of the Admission from the SCA.

Khaled Al Zaabi, Acting Group CFO of ADNOC, said in statement: “We are very pleased to announce our intention to float a minority stake in ADNOC Gas, our world-class gas processing, operations and marketing company.

"Natural gas is central to the energy transition and as the UAE’s gas champion, ADNOC Gas is well-positioned to responsibly harness our significant natural gas resources, while driving efficiencies, delivering value, and reliably supplying this key fuel to meet the world’s growing energy needs.

“This is the fifth occasion where we are bringing an ADNOC company to the market in as many years, and we are delighted to once again offer international and local investors a highly compelling investment opportunity, allowing shareholders to partake in ADNOC and Abu Dhabi’s ongoing value creation journey.”

Dividend promise

ADNOC Gas targets dividends of $1.625 billion in the fourth quarter of 2023 as payout for the first-half of 2023. A further $1.625 billion will be paid in the second quarter of 2024 as second-half 2023 payment.

"Thereafter, ADNOC Gas expects to grow the annual target dividend amount from $3.25 billion by a growth rate of 5 per cent per annum on a dividend per share basis over the period 2024-27," the company said.

In a caveat, the entity said: "ADNOC Gas’ ability to pay dividends is dependent on a number of factors, among others, the availability of positive net income distributable reserves, capital expenditure plans and market conditions. There is no assurance that ADNOC Gas will pay dividends or, if a dividend is paid, what the amount of such dividend will be."

The IPO pipeline in the Gulf is starting to flow, with Oman's Abraj Energy Services lining up a $244 million offering. (The Saudi wealth fund PIF has joined as an anchor investor.)

Taqa's 5% stake
Abu Dhabi utility company Taqa now holds 5% of the issued share capital in ADNOC Gas. The shareholding was received from ADNOC for the 'long-standing strategic partnership between the two companies who are working closely to accelerate the energy transition in the UAE, in areas such as renewable energy and enabling other low carbon solutions'. As a result, 'additional gas is being freed up that can be used for local manufacturing and export'.

Share transfer

Prior to the IPO, ADNOC transferred 5 per cent in ADNOC GAs to the Abu Dhabi utility company Taqa. ADNOC is expected to own around 91 per cent of ADNOC Gas’ share capital post-IPO.

“ADNOC Gas is a vital component of the UAE’s energy system and is at the heart of the country’s goals of achieving gas self-sufficiency and becoming a gas net exporter," said Ahmed Mohamed Alebri, Acting CEO of ADNOC Gas.

The company has access to a total gas processing capacity of over 10 billion standard cubic feet per day and a liquid processing capacity of 29 million tonnes per year, 'underpinned by a competitive and reliable feedstock supply', the CEO added.

"With anticipated substantial and consistent revenues and resilient margins, we believe that ADNOC Gas is well positioned to benefit from robust long-term demand trends for global gas, whilst playing a critical role in driving decarbonization in line with the UAE’s Net-Zero strategy.”

Earnings visibility
The size of the ADNOC Gas IPO (subject to the price announcement) will likely make it one of the largest in the UAE and the region. It is a crown jewel divestiture from Abu Dhabi allowing investors access to its lucrative energy space. With a goal of increasing dividends indicatively by 5% every year through 2027, management is confident of earnings growth visibility. This should make it another cornerstone investment of any portfolio for institutional and retail investors alike.

- Sameer Lakhani, Managing Director of Global Capital Partners

Who's next off the ranks?

Now that ADNOC Gas has made its announcement, speculation as to who's next will intensify. Market watchers have been saying that an announcement from Dubai on its next government-owned enterprise going public is imminent.

In Saudi Arabia, more than 20 IPOs are expected to make a pitch for investor attention this year.