ACWA Power Company (2082) Earnings Call Transcript & Summary

Thank you, Ozgur. Thank you also, Marco, for joining us despite that time zone difference and also being involved. So I would like to take it actually from where Marco has left it. I think that this quarter was a very exciting quarter for us within the performance purely because of the financially good results, but really what we have achieved when it comes to our business model. I would like to remind you on our business model, where we focus on the development, investment, operation and optimizing of each and every single plant we have during this quarter, and we have done several great achievement and some of them Marco has already touched upon. So we had 2 projects financed, dry financial close. One of them is the second largest into our history. And also, it is the first large-scale hydrogen project we will touch upon. We had also 4 different units in 3 projects that have achieved commercial operation, which is a fairly good progress when it comes to the technologies that we have added; we have added 2 units of CSP and also 1 unit of water and again, 1 unit of PV projects into the -- our operations fleet. When it comes to the PPA, during my experience with our performance in the last 15, 14 years, this is the fastest PPA that we have achieved in our history, 3 projects in Uzbekistan for 1.4 gigawatts of power capacity. In addition to that, there is another 1.5 megawatt hours of storage capacity that we are adding to this. And this is purely to stabilize and give also an extension of grid capacity to Uzbekistan on the short term. With that, and this has translated also to a solid contribution to the operating profit and the net profit that we will touch upon also in the next few slides. When it comes to operations, it was also another good quarter. Last year, if you recall, on the power side, we had some challenges in a few projects. I think we have fixed most of them, and we'll also touch upon it, where we have the challenges there from 82% of availability in last quarter. A similar quarter of last year, we had around 89%, significant improvement. On the water side, also an upgrade from 93% to 96% of availability we have witnessed during this quarter. Whatever we have reported in terms of net profit is adjusted net profit, there is no adjustment for this quarter. Also, interestingly, we have done the second tranche of Sukuk during the quarter. We had launched earlier if you recall SAR 5 billion program. We have completed the second phase, which is SAR 1.8 billion. With that, we are bit closer to the SAR 5 billion what we have almost -- we have completed the program, and we not are continuing with the same program. What we have achieved through this project is actually a very, very competitive pricing below 1% margin on this specific issuance. That has been a significant, let's say, a tracker for the market for the last 5 years when it comes to the corporate issuance. So very well structured, very well priced, oversubscription of 2.24 that we have achieved. And with that, I will go through the financial closes and I will go specifically to the projects. What has been achieved in the first quarter of this year is to 2 FCs, one is the Ar Rass project, which is 700 megawatt PV project. We have achieved the financial close and this is a project that has total cost around SAR 1.7 billion. And the project is part of the National Renewable Energy program, which used to be called REPDO in the past. Also, we have achieved another dry financial close, which also have been announced separately. It is the NEOM Green Hydrogen which is SAR 32 billion. And this is the largest Green Hydrogen project as a utility scale project finance in the world. Today, this project has achieved around 74% of nonrecourse debt that has been raised together by ACWA Power and NEOM and Air Products. A quick reminder of what we have achieved during the last quarter of last year, which is the 3 financial closes, Bash Wind, Dzhankeldy Wind in Uzbekistan and [ Shuaibah 3 and IWP ]. From financial closes to projects being moved from construction or execution to operation. So this quarter, we had 300 megawatts of CSP plants becoming operational, and this is significantly important for us. Why? Because the CSP project is difficult and complex when it comes to execution. And once we move these projects from execution to operation, the risk profile will change a bit and also give us a comfort when taking this project to the COD and being accepted by [ draft checker ] -- these are Phase 2 has also achieved in February, the second phase or the second group of commercial operations is around 1.5 gigawatts of capacity. This has been delayed from October to February, but finally, we have achieved this in the quarter of 2023. We have also achieved a 600,000 cubic meter per day of desal capacity in Jubail 3A, another water project that we have in Saudi Arabia. If you compare Q1 of last year to Q1 of this year, you will see significant plants coming into operation, including to what I have mentioned. There has been also several projects we communicated earlier like Shuaa Energy 3, we had around 300 megawatts additional [indiscernible] water projects in UAE and Al Dur in Bahrain, full capacity came online together with [ COVID-19 ]. Moving to the next slide, where we translate both the projects that have achieved financial close and the project that has achieved operations -- into the operating income. You will see here a progress of SAR 140 million coming purely because of the existing project that has come online. If you compare Q1 of last year to Q1 of this year, you will recall that -- and last year, we had problem and challenges in a few projects like rather [indiscernible] Noor 2 and Noor 3. Three of these projects came into operation and proven stability in their operation, with the exception of Noor 3, while it's coming back and forth into operation, we are still facing the challenge in Noor 3. So the challenge specifically related to the [indiscernible] where we have identified the crack in Noor 3 and we are still in the process of bringing that into full operation. There is another SAR 34 million that has been purely due to the new assets that came into operation. And then as these projects move from construction to operating, there is, let's say, a natural reduction on the development and construction management services from this project as there is less project now under construction. So that's the SAR 49 million negative that you have seen. And to put the comparison into, let's say, Q1 of last year to Q1 of last year to Q1 if this year and to reality, you will notice that there is an LG that has predated last year, which is SAR 66 million on one of the projects in Morocco, that has not been reflected in this quarter. And this is where you see the SAR 33 million difference on Q-to-Q difference. So this brings us to SAR 559 million operating income. Moving to the net income of the full quarter. So this is where the SAR 270 million is built up from last year of SAR 152 million. Adding to that, the SAR 37 million, which we just explained, the higher operating income. And there is also a small addition of SAR 20 million related mainly to income related to the gain on deposits and other derivatives as well. And the additional SAR 125 million, that is mainly related to lower Zakat and tax when you compare Q1 of last year to Q1 of this year. And if you look into the details of that, it's mainly due to the deferred tax balances. So there has been an appreciation in the Moroccan Dirham, which has reflected into credit when it comes to the positioning of the deferred tax. If you recall, same quarter last year, there was a deferred tax expense of SAR 60 million, whereas it is a positive in this quarter, and that is mainly the [indiscernible]. Outlook for the year. We have a few projects that we are expecting to bring them to a wet financial close. The first one is NEOM Green Hydrogen with the financial close, this project will move from LNTP stage to full notice to proceed. And also Kom Ombo is another project that we are also expecting to get to the full wet financial close very soon. This is a PV project. The dry financial closes that we are expecting in the coming months, a few of them, mainly in Saudi when it comes to Shuaibah 1 & 2. There is also another small PV project, which is Layla IPP and also, we have another water project that has been recently awarded to us, Rabigh 4 IWP, we are expecting also the financial close during this year. In terms of additional PPAs, we are also looking at the next round of PIF and we do expect that we achieved PPA signing during the course of the year. There is a very heavy and active pipeline that we are looking at, more than 20 projects over the 15-plus countries that we are operating in. So if you add them all together, 22 gigawatt power and around 1.5 million cubic meter/day of desal water. We are looking at these projects, different levels of advanced to early development phase where we're expecting some of them to realize during the course of the next 12 months. Mainly a strong positioning on Saudi Arabia and Uzbekistan, but also extended to a few bits in other countries, including [ MEA ] and UAE. On the divestment, we have subsequent to the close of Q1, we have completely closed the divestment of Vin Hao, which is our project -- small PV project we have in Vietnam. And also, we are in the final stages of partially divesting our stake in Shuaa Energy 3, which is expected in the next quarter to be completed. So just to summarize before we open it for Q&A, how we are reforming against what is our priorities during the 2023. So first, in safety, we have been on track when it comes to the LTI rate. We had unfortunate one LTI event during the course of the year in one of our assets. When it comes to the reliability of supply, it is ongoing progress. This is a big campaign that we are working, that's going to take a long time actually to be completed and realized on our availabilities. Having said that, we did have availabilities for Q1 as compared to the last quarter. We had been able to achieve several of our projects that were under construction into operation. And this is important, again, during -- because most of these projects have been impacted during COVID-19. So taking them from execution risk and bringing them to the operation is very important and very relevant for our stability. Two financial closes 1.8 gigawatts of color and 600,000 cubic meter /day of desal water has been added. The 3 PPAs have been signed, which is in line with our, let's say, priorities to add capacity to this year. And again, we would look forward to add more PPAs mainly in Saudi Arabia and also in the jurisdictions that have [indiscernible] earlier. In our journey for decarbonization, we have added all the capacities on renewable. And when it comes to the other projects as they we have been added, it is all high efficient and most of them had additional capacity or additional power coming from the PV project that has been at [ the shores ] . This is in a nutshell our Q1 results. Happy to take questions on -- from the audience.

Thank you very much. [Operator Instructions]

So it looks like there are no questions. Do you see anything on the written platform?

I can confirm there's been no questions submitted.

Okay. All right. Then, in this case, everyone, anyway, I mean, if you end up -- happen to have any further questions, you know how to reach to us. So I think we can close the call unless anyone of you want to use the last chance to ask a question, if recalled. So I guess, we can close it. Thank you very much for your participation and listening to us. As repeated once again, any questions, please get back to us either through IRs, e-mail accounts or individual accounts; all of you have those details. Thank you very much, and have a wonderful day, if anybody is left, wherever you are.