ACWA Power Company (2082) Earnings Call Transcript & Summary

Hello, and welcome to the ACWA Power earnings call, and thank you for standing by. My name is Bailey, and I'll be the coordinator today. [Operator Instructions] I would now like to pass the call over to our host, Ozgur Serin, Director of Investor Relations, to begin. Sir, please go ahead.

Thank you, Bailey, and good afternoon, good morning and good evening, everyone who -- wherever you're joining this call. And thank you very much for [indiscernible] this is ACWA Power company's earnings and results call for the 3 and 6 months ended 30 June 2023. My name is Ozgur most of you may already know me. I'm the Head of Investor Relations at ACWA Power and joining me on VR. And together with me, I have to Mr. Marco Arcelli, who is our CEO; and Mr. Abdulhameed Al Muhaidib, who is our CFO. All of them are joining from Italy for this call. Before we start with the call, we will have some prepared slides to review. And for that, I will shortly hand the word over to Marco and Abdulhameed. After that, we will have a Q&A session. And you've always known that in this presentation, we will be having some forward-looking statements. We will be using some statements for which we have a disclaimer at the beginning of the presentation as well as on the other materials. We've already announced our results on Tadawul last Thursday. So most of you are already in position of the numbers. But we have all our investor materials already posted on our website as well as in Tadawul form website. So without further ado, let me pass the word to Marco, and we will move on from there. Marco, it's over to you.

Thank you, Ozgur, and welcome to everybody. I'm really, really, really proud of introducing this presentation today with Abdulhameed, who will go through the exceptional results that we achieved in the first 6 months. It's a wing of introduction. I would like to start with the strong base where we are today, where, as everybody knows, we are one of the largest renewable energy companies and companies involving the energy transitions in the work. But I think what I'm most proud of, and I would like to reiterate it is that today, we are the largest private company in desalination as it was also recognized by the Global Water Intelligence recently. And we are the first mover in large-scale green hydrogen projects where we are already well underway in construction of the NEOM green hydrogen project together with our partners, Air Products and NEOM. And I was visiting the site last week. I was really, really impressed by the progress of the site. And really, this remarkable first project in the industry that is earmarking all the production basically for exports, mainly into Europe but potentially other markets. And we're ready to break ground in a few weeks with the second project in Uzbekistan that will start with a smaller scale, potentially also to be expanded to a large scale for exports into Europe. The other thing that I'm really excited about is the strong progress in the carbonization of our portfolio where we had committed to a 50-50 balance between the renewals and the nonrenewable power gen in our portfolio. Well, so far of the 50 gigawatt or more than 50 gigawatt that we already have in our portfolio, over 46% is renewables today with a remarkable 65% CAGR over the past 10 years, which is really something that is a feast and an achievement that I have really seen in the industry. We consider ourselves one of the big neighbors, if we can move to the next slide in the energy transition for many reasons. But one of this is the ability to our ingenuity and the work that we do with our suppliers through an open innovation concept, basically where we bring the whole ecosystem to reduce the cost of the way that we do things. And through basically the continuous improvement in the design of the projects that we have to have been able to reduce solar PV costs and tariff by over 80% over the past decade and desalination cost of 50% or more, which actually is a result of our ability to really reduce what we can really control, which is the specific power consumption that is the number of kilowatt hours that you need to produce 1 cubic meter of water. Here, the reduction has been well above 80%, something really, really amazing in the industry. The last point that I think is really something that not always goes very well noticed is how we're good at converting high carbon emitting assets and how we've been able or are able to shift from thermal to solar reverse osmosis like we're doing in the SWEC project basically that will offset 22 million barrels of heavy fuel oil from the production of electricity, basically to desalinate the water and removing 9.5 million tons of CO2 per year, all by agreeing with the offtaker in the Emirates, basically to convert the husk and coal plant to natural gas, which will achieve basically over 30 million tons of CO2 reduction by 2030. I think that these stands are really evidence of our ability to make a better world for future generation. If we move to the next slide, the next is really on the ongoing operations. So coming from the vision basically to the actual operations. I'm really pleased with the safety results of the first 6 months where we achieved only 1 lost time injury accidents, which brought down the lost time injury rate basically 60% from last year. I'm very pleased with that result. Although here, certainly, we should never stop. We should never become complacent, and we should always, always keep an eye on everything that we do, not only for our own people, but also for the people of our contractors, partners, subcontractors service side. The second is, and as I know, a matter that has been a great focus for analysts in the past is our performance of the plants that we operate. And particularly with availability in our power, water and renewable energy where you see that we've been able through our reliability of supply, focus and task force to increase significantly compared with the past year. I'm pleased with the results. This is again an area where you can never feel complacent. You are never there. When you get there, there is no there, there. You need to continue to focus. You need to continue to maintain a high standard because that's what our customers rely on ACWA Power for. Moving to the next slide. The third, I think, big remarkable achievement is the total shareholder return that we have achieved over the past few years. Over 200% since the IPO and 10% year-to-date. Of course, markets fluctuates, as markets do. What we can do is really to do our best and to demonstrate that we're one of the best companies that you can invest in, and that we can support these strong and reliable results for our investors. So we want to reiterate our guidance that we gave during the IPO of our potential for the future. I'm really comfortable that this is something that we can achieve in the years to come. Next slide. As I mentioned in my first remark last quarter, as I just -- I was starting to get into the company, I think the first few months in the company, for me were fast, basically spending time to familiarize with all the operations that it you seen also my LinkedIn profile, we really move into a lot of the countries and a lot of the plants where we operate because they really want to see firsthand meet the people, meet the customer, see our operation and see really where we're doing good, where we can do better so that we can always focus on delivering the best results for you. And I'm pleased that based on that, we were able to finalize the new strategy that is an evolution building all the strength of this great company that was approved by the Board of Directors on the 21st of June. With [indiscernible] Abdulhameed, we will be pleased to present and invite you to meeting in November, basically where we will focus specifically on the new strategy and the evolution that we're going to do and some of the new targets and some of the new areas of focus that we intend to maintain. But I think that they're summarized here basically in a nutshell to -- I think where we have seen the potential to more than triple our assets under management by 2030 and be one of the top 3 players in the world in desalination. Well, we are today the #1. So we intend to keep that position. We're the first mover in green fuels, green hydrogen green ammonia, we want to keep the position, and we want to reinforce that we will be one of the strongest players in renewable energy transition. All of this, we can only do it to keep a strong focus on our people and making sure that we remain the best employer in the industry in every country where we operate. We will do this by maintaining a strong focus on our ESG and CSR ratings, so reiterating our commitment basically to decarbonize. Moving to the next slide. This starts basically with our commitment to Saudi Arabia and the transition in this country. Really, one of the reasons I continue to repeat that I move to ACWA Power, and I move to Saudi is to be part of Vision 2030. And one of the anchors of Vision 2030 is the decarbonization of the country. We're going to move from about 100% [ costs ] a couple of years ago to 50-50 renewables and gas fired by 2030, which is, in my opinion, probably one of the biggest and boldest decarbonization programs in the world. I'm really proud and I'm pleased to be one of the key enablers on this. And here, we have summarized the progress already today. Of the 27-gigawatt interim target for 2024, 22 gigawatts have been already identified. On deals, we're already progressing very fast on 40 gigawatts that we have already taken in our responsibility from the PIF pipeline, where we also won over 1 gigawatt of projects in the Minister of Energy tender process in the country. So I'm really confident that this process, by the way, this is predicated on the initial target. But of course, the economy and the industry will grow more than the expected growth rate that we had a few years ago. We're still committed to delivering at least 70% of that, which is a big potential and bigger potential upside for ACWA Power. Besides these in Saudi Arabia, if we can move to the next slide. We have an immediate pipeline that is very strong, over 20 active bids, 20 potential bids and 11 advanced development projects basically where we are working hard to achieve financial close in the next few months. I'm really impressed by the amount of work, ingenuity of our business development team. And I'm sure that out of this, we will be able to report some good progress in the upcoming weeks when we do our period updates. Moving to the next slide, which is actually my last day -- last slide before I hand over to Abdulhameed, I want to simply reiterate that year-to-date, we have already achieved almost 3x the equity in new wins and new projects awarded to ACWA Power compared to 6 months 2022. And I think that we are well in line, if not above the initial IPO guidance that was given to the market. So I'm really confident that we can achieve at least that. And I believe that in the next few months, we can even exceed that and be able to deliver more than that in the future. I will hand over to Abdulhameed to cover more specifically these results of the first [ few ] 6 months.

Thank you. Thank you, Marco, and good afternoon, everyone. So just before we start with the numbers, I would like to quickly give you an update on what's happening with the business. So from the last time we made until today in terms of progress for projects that benefit as key and the project that has been completed when it comes to the construction and the project execution and as well as projects that has been awarded by giving that kind of update to give you update on how this [indiscernible] So just quickly on the financial results, a quick update on what has happened. Good progress as we expected in the first half of the year. [Foreign Language] we have achieved 4 different financial closes, Shuaibah 1 & 2 in Saudi, which combined has become one of the largest -- or the largest actually PV project and the range in 2.6 gigawatts of power capacity the lowest ever tariff that has been paid during the last few years. Also, we have achieved the financial close for 2 other projects, one in Egypt, which is Kom Ombo. Kom Ombo is the second PV project we have after Ben Ban in Egypt. And also, we have started our first project of -- or let's say, the second project of wind, which is close to 100-megawatt. This is around SAR 0.4 billion of project size. So with that, we have done all this year, and we are progressing very well in others that's going to be completed. Moving to the next slide. We are giving you here a quick update on what project has been completed from project execution to commercial operations. And this is a very important in this slide we have not only call it to give you a flavor that projects move from development to invest and operate kind of contribution. But also, as I have mentioned earlier, this period is a typical period for us to maximize our project completion for the simple fact that a lot of these projects have been hit with COVID. And by having this project hit with COVID some of these projects has been impacted by a cost overruns or delays in execution. It has impacted our budget -- budgeting because for the simple reason of delay in this project. So the more we get this project into operation and the more comfortable we will be on the way that we are managing our portfolio. As mentioned earlier, also, it is a very good progress to this project. Our debt fully comfortable by the mid of 2024 when all these projects that has been hit by COVID will be completed. So here, a quick update on starting with Dubai. So we have 2 big projects, Shuaa Energy 3 and Noor Energy 1. Shuaa Energy 3 has completed 3 units combining -- combined now we have 900 megawatts in operation. We are expecting that plant COD certificate to be end of the year, but we are now passing 900 the hydro generation. Noor Energy, we have already 300, the most complex unit, the central tower has been completed and operational to date. We have also [indiscernible] they also in operation. We get a few days ago, unfortunately better hedge by transform their helps back to a bit the operation of CT1. It will also impact the PIF CT2 delivery day. Around 2% of the solar field has been impacted. We are working together with the EPC contractor on the recovery plan for that. When it comes to Jazan, another big milestone is achieving the second asset delivery. That's the biggest to around 3 gigawatts of power capacity, another 700-plus of megawatts will be coming as a final unit for Jazan. Umm Al Quwain and [indiscernible] both have completely delivered their operational process. And we'll almost completely with only 76,000 kilowatt -- sorry, 76,000 meter cubic per day of quarter does remain. This is another target that we are very closely monetary, and we are hoping that we will deliver the full plant before the end of the year. Moving to the next slide, we will show you how that deep impacted our financial figures. So this is -- as you can see, in terms of operating income, steady growth around SAR 1.2 billion of operating income, slightly less than 6% increase. We don't have any adjustments for another quarter, so both Q1 and Q2 has no adjustments. And then we have around SAR 684 million of adjusted -- our net income for the 6 months. This is around 26% increase from the same period of last year. Parent operating cash flow has been significant dropped when compared it to 3 to 6 months, but around 40% drop when compared to the last 12 months -- compared to the last 12 months of same -- similar period. And this as we go -- we have a specific slides on to the details of that. But in POCF [indiscernible] it's mainly related to that, big refinancing happening in [indiscernible]. I hope we can give you will and apologies for the [indiscernible]. This brings us to a parent net debt of around SAR 12.4 billion. Net debt to POCF is around 5 months. We'll also have other slide where we go through that detail of that [indiscernible] Maybe we'll go to the next slide. Yes. So here, we will go through a quick comparison or what the -- how does the 6 months of the year has been evolved if you compare it to the same period of last year. So again, the around SAR 200 million contribution from existing projects. This is mainly, if you recall, similar update of last year, we have that updated you and that of course business projects. So 2 projects in Morocco and 2 projects in Saudi has been impacted with a longer outlook than we expected. All these projects have been come to a best operation, one of them not fully but this has contributed around SAR 200 million of operational contribution for this period. We have around SAR 80 million contribution from projects which was just get updated or became -- came online and the unit or a full plant. When comparing the negative impact, we have a reduced -- reduction of around SAR 114 million. This is mainly for projects that has completed the construction period. So the -- automatically, the fee related to the development and construction management has been completed, and that is the impact of that. You will continue to see that kind of trend for a while, and this is very simple. During COVID the speed of our financial close projects or net -- let's say projects that has achieved net NTP (sic) [ LNTP ] has been reduced. So that's a natural trend you will see due to the COVID, which will take time to recover fully. And then you will see the development and construction management fees will be coming back us closely. Other income that we have seen last year, it was that SAR 66 million, mainly related to some of the -- this recovery from an EPC contractor. This brings us to around SAR 1.2 billion of operating income. If you move to the next slide, we'll show you how the net income has been impacted. So I would exclude the SAR 70 million upside related to the operating income that we just explained it, then you have around SAR 219 million lower the cash and tax income. If you recall, also similar period of last year, we had a negative impact. That was also we spent quality time discussing the impact of the deferred tax losses last year to Morocco -- in Morocco, this year we have it actually as a positive impact due to the -- mainly due to the appreciation of the Moroccan Dirham as against U.S. dollar. We have another around SAR 40 million income mainly related to higher income on the deposits, as interest rate has been increasing, then a few, see the SAR 155 million negative is mainly related to 2 things. One is that we have to Sukuk sizing has been increased since we have the Sukuk second tranche on the second -- on February of 2022. And also, there has been a continuous increase in the interest rate, which was mainly impacted our unhedged position during the course of the 6 months. And then there is a small impact of around SAR 22 million. This brings us million SAR 684 million net profit for the first 6 months of the year. Here we would like to show you that impact of that breakdown on a slightly different structure. And the main objective here is to demonstrate to you the different revenue streams that is coming as per our business model. So here, you will see in the first one, SAR 181 million related mainly to the development and construction management fees, then you will have around 537, which is our share net income so that will be the best part well the first part will be the development part. And then on the O&M cost, you will see that SAR 301 million. It's also including both projects under operation and the project that came online. And finally, other income will be around SAR 337 million. That is also including that deposit part. Then this brings us to, let's say, a net income or adjusted net income before all the expense are 1.3, take out around -- all the corporate and hedge -- held holding company's expenses that's around SAR 700 million and to bring that to the adjusted net income of SAR 682 million. This is if we compare to the previous year, its [indiscernible] Bringing us to the net operating cash flow. This time, we have simplified the slide a bit. We have also distributed both cash inflow and outflow in 2 different bucket, so we can have a clear visibility on the breakdown. We tried to also simplify the notes to make sure that you can easily follow the bid. So if I will focus in few items here, capital recycling definitely is the biggest one. So last year, the same period, we have bulk refinancing and divestment of cap at that period. Does that mean that we are not planning for any capital recycling for the full period. Of course, capital recycling and cost optimization is definitely a part of our business model. We are working on this target, and we always every have set target for the completed before the year-end. So that is one part of the main differences. You have also a positive difference in the finance expense, mainly related to upward estimate. If you recall, by the end of last year, we were able to buy back SAR 400 million of half of ACWA39 bond, which has also had a positive impact when it comes to the financing expense. Aside from that, we have talked about already that the cash and tax impact in the previous slide. And more or less, the rest is around 10 or less percent impact when it comes to the POC. So last 12 months is around SAR 2.4 billion. And then we are also working in couple of other initiatives. There is slightly delays on some of the connection. And that is also a timing impact that has been shown when you see only the 6 months of 2023, that we are also hoping to improve that before the end of this year. So here, we are showing you expanding from the POCF, the full cash of the company. So aside from POCF, we have, as mentioned earlier, included the SAR 2.4 billion in the second in terms of Sukuk. And then you have, together with the operating cash flows of SAR 4.2 million, this brings the total cash at around SAR 7.2 million. Then how did you use the cash? This was a question that was raised in some of the meetings earlier. So we have specifically updated and upgraded this slide to answer this specific question. So out of the SAR 7.2 billion of cash, we have actually utilized SAR 3.1 million, 85% was mainly injection in the new projects and investments and around 6% paid for financial charges and Sukuk and others, then there was around 9%, mainly advances to projects that have not yet achieved the financial close. So this is bringing a healthy picture of the real use of the cash, 85% and the remaining SAR 4 billion in the company. Finally, we'll just quickly highlight the net debt to POCF slide. So again, a quick refresher out of the SAR 27 million liability we have in our balance sheet. We would like to diversify it between what is on recourse stock ACWA Power or and what is monthly cost. So you can see in the first light blue color, we have around SAR 17 billion related to non-recourse debt on our balance sheet -- getting consolidated in our balance sheet. And then we have a few issuance, mainly the SAR 4.5 billion Sukuk, which has a recourse of ACWA Power and another SAR 4.3 million, which is lending or guaranteeing a lending of a project company will recourse to ACWA Power together with PIF loan. So that thing around total of, let's say, SAR 9 billion. Adding to that, if you look at our contingency, there is a SAR 6.6 billion of our contingency that is related to funding facilities. And this could be that the equity standby and -- mainly equity [indiscernible] With that, SAR 16.4 billion of free cost debt we have, we just not take out the cash. We just highlighted earlier in the SAR 4 billion. This brings our net debt to around SAR 12.4 billion. Taking that net debt to our POCF will bring us around 5 multiple or 5x today. This is -- if you recall also last year, we talked about what is the ratio with and without RAWEC. So with RAWEC, it was a very low multiple of 2.1 multiple, then if you just exclude -- RAWEC of last year. It will be around the same number we have to be 5 or 4.95 monthly. Again, our comfort zone will be made as Marco has highlighted with our growth strategy, we always want to be lower than 6 to 7 multiple. There is a 1 year or so that could go higher due to the growth, but we are always controlling that number to make sure that we can deliver on our commitment, both in that debt center as well as the [indiscernible] partners. So this is the last slide. I will hand it over to Marco to quickly take you through it, and then we'll open it up for Q&A.

Yes. So as a summary, I think here is highlighting the priorities we have set for ourselves. Of course, we mentioned safety. The improvement is clear compared to last year, a sign of the strong commitment of the management. But I think here, we need to maintain the good momentum and we did not drop the guard because it's really something that is the starting point of everything that we do. The second one we mentioned is regarding the supply. As we mentioned, it's not just good to win the project to build the project and bring them online, but then we need to make sure that our customers can really reliably benefit from them, particularly in water, particularly in the countries where we operate because it's so really important for us. The third is really to make sure that we focus on the finalizing the financial closes and the ICOD and PCOD that we have on our projects. We are on track on delivering on the projects that we have earmarked for our plan for this year. And I'm really pleased with what we have done today. Of course, we cannot forget growth. This is a company that really is going to change the world, and we really want to bring it to these new highs. So we need to really make sure that we maintain the momentum. So far this year, we signed 4 PPAs. We signed on hydrogen agreement in Uzbekistan, 1 project where I said that in the next few weeks, we're going to get ground and 3 PPAs in Saudi Arabia in the PIF pipeline that we discussed before. And then we continue to decarbonize our portfolio and make sure that we lead the energy transition globally. I think as ACWA continues to repeat basically for every dollar that we invest ourselves, we mobilize $10 to $12 of capital from lenders, from partners. So we really pride ourselves as being one of the big enablers of the change that we want to see in the world. And I think that this is today already epitomized by this growth of renewables in our portfolio to 46% in the total. So with this, I think we summarize all the big achievement and the great story of ACWA Power. And I turn it to you, Ozgur, to lead the Q&A.

Thank you, Marco, and Abdulhameed, very much appreciated. Bailey, it's over to you for managing the Q&A, please.

[Operator Instruction] Our first question comes from Anna Antonova.

Yes. Can you hear me well?

Yes.

Okay. Good. Anna Antonova here from JPMorgan. I have a couple of questions and for simplicity, I will ask them just one by one. So my first question is on Slide 18, I see that your investments in H1 are roughly SAR 2.7 billion. And with your current project pipeline that you outlined in the beginning of the presentation, can we expect this to be kind of the new normal run rate of investments for ACWA? That's the first question.

Good to hear from you. Thank you for your question. I thought you were saying you would like to ask all your questions, so you will ask them together or you want to expand one by...

I would like to ask them one by one. So we -- I ask one question you answer and then we move to the next, if that's okay because then I'll have to maybe repeat myself or something. So just for -- for the ease of...

So as highlighted also by Marco and [indiscernible] in the opening speech and also on that new strategy. So definitely, the target that has been expected during the IPO is not our same target of this year. With the Strategy 2.0, which will be detailed during the November session, we are starting to invest much more than one is that. And what you have seen in the 6 months is the weakness, you can witness that it's already happening. So you have the full pipeline also being demonstrated. We do expect significant growth when it comes to the equity investment view. And definitely, it will be much higher than what was expected at the IPO time. So the $1.3 billion paid leave of equity investment is not the current target. We are going above that.

Understood. And maybe I understand we are still -- there is still some room to go into the year-end. But generally speaking, do you expect to stay in your comfort zone, as you mentioned, on the net debt to POCF ratio by this year-end, roughly?

Yes. So this is another topic we are maintaining. We are looking at that very carefully, and we would like to maintain that average, which is around 6 or less than 6 multiples and not only this year only in a continuously period. And as we mentioned that during the next 5 years or so, that's the target 6 to 7 and lower. And we will -- we have specific tools to utilize as and when required to maintain that level of net debt to POCF.

Understood. And my last technical question before I have a more strategic one for Marcus. Can we expect any tax effects from Morocco to continue accepting your effective tax rate in the second half of this year? Or can we expect that there will be finally tax expenses manifesting on the group P&L in the second half?

Yes. That is definitely a very technical question, and not only technical but also it depends on so many different verticals, right? So one of the net vertical will be at the currency exchange between the Moroccan Dirham and the U.S. dollar and also the Moroccan Dirham and the euro. And difficult to predict a number it's correlated with so many other verticals. As you have witnessed 1% change on that will have a significant impact definitely is something that we are not comfortably reporting every quarter. However, we are just following the standard, something that could definitely improve this situation, if there is any changes on the structuring of the ownership of our Moroccan portfolio, which is something we don't see today, but if it's happened in the future, it will definitely improve. This is something that we continue to monitor. We're trying to talk to the tax expert and trying to find a solution on how can we, let's say, have a less impact in our financials. And we are standing today, unfortunately, it will be continuously impacting some depending on the fluctuation of the currency and other variables would be a positive or negative impact every quarter.

Understood. And my final question, maybe to Marco is you mentioned NEOM in the beginning of the presentation. It's obviously a very big and large scale project. Can you maybe shed some more light on how is it going? You mentioned that you've seen it progressing right now. So are you on track for commissioning it in 2026? And then following up on that is, can you maybe comment how it is aligned with your smaller project in Uzbekistan? Like, are there any lessons learned from one that can be applied to another? Or how does ACWA think about these 2 projects within the time frame over the next couple of years? That would be much appreciated.

Yes. So for now, I went to visit our solar field, I went to visit our wind farm. I went to be the site of where we're actually going to put the electrolyzers. I'm pleased with the progress that we're seeing. So for now, we, of course, maintain the schedule that we had announced before. For the other projects, I think that this is an emerging industry. And I think that it's really interesting to see the different forms that project may take in different countries. So Neon is, of course, a project that is earmarked fully for export I think that we're looking also a project that start with local demand and then have the potential or also adjacent capacity that can be exported. Since I joined, I already visited, for instance, Egypt, where we're making progress on our project there. I visited Indonesia where we signed 2 agreements basically to develop greenfield projects in green ammonia basically. Both have benefited on a little bit of local demand, but most importantly, of exports targeting also the Asian market. We're following other markets as well. So I think that here, what we see is that we have a strong base in Saudi Arabia that in our view is probably the most competitive country in the world to produce green fuels, but we also believe that it's important to maintain projects in many different geographies and jurisdictions, one because the Asia market might be looking really at projects in the Far East and like what LNG had in the past. And second, for European demand and potentially for demand basically for local production in all these countries, I think it's very important to provide final users or final customers in countries, basically final governments, if you want in European countries, the ability basically to differentiate the supply. And we can provide a one-stop shop with suppliers from different parts of the world.

Interesting.

Thank you, Anna. Maybe just to add one point on the lending that you have specifically asked and if you recall Anna that one of the things that we kept saying we did our first half in hybrid, which is the NEOM green hydrogen project is that we took it on a lower than our physical, let's say, comfort zone when it comes to the change. And that is one of the learnings that we have capitalized on this project that we have improved our returns on the green hydro project as well. So it was a better return for us and going back to the same level that we had in the past 4 years.

Understood. Marco, maybe final question from our side. Given that you have had kind of a fresh look with a fresh pair of eyes on ACWA. What do you think is the biggest strategic challenge for ACWA in the next 5 to 10 years? And then on the other hand, what's the biggest strategic opportunity?

Yes. Well, I think what we are all seeing and what we have seen in the past is basically a lot of competition in the market as the world is moving to green. So that means that we need to continuously sharpen our pencils and become and maintain the competitive -- competitiveness that we have seen in the past. So that is, at the same time, the biggest challenge that we're focusing on, but also, at the same time, one of the big opportunities because of what we were able to achieve in the past. I think that on this specifically, but we will discuss more in detail in November. I really believe that our strong relationship with core suppliers along the value chain is very important. We have some strategic relationship both with EPC and suppliers. And I think that one of the important things is that I have seen really with fresh eyes, you see -- as you say, is the ability basically for ourselves to lead the open innovations in our operations. So it's not that we develop our own specific manufacturing that is always a limited factor, I think, because either you are able to allocate a lot of money to that specific technology, you will always at some point far behind. But if you're able to work with the best suppliers in the world with the best EPCs in the world that really focus on what the final customers' needs and what is taken is needed basically to achieve the lowest cost or the lowest static that you can deliver for your customers, that's how you create value all together. And what I have seen is that we work very closely with the Chinese companies, Japanese companies, European companies, American companies, I really have rarely seen something this deep and this structure in the industry so far.

The next question today comes from the line of Oliver Connor from Citigroup.

Congratulations on a strong set of results. Two from me. The first one, I appreciate you probably flesh this out in more detail in November in terms of your sort of medium-term earnings trajectory and where we are versus IPO. But my sense is that you've made a lot of progress in terms of bringing assets online this year and also reestablishing the availability to a level that you'd like. And so is it fair to say sort of looking into the second half of this year, you're expecting to see a sort of further acceleration in growth in earnings, particularly from the sort of net income line of those new assets coming through? And the second question, more generally looking back at sort of Slide 8 on the progress within the Kingdom. It looks like the PIF pipeline is very strong. I'm just curious to know if there's an update sort of on the auction side of things in terms of how that's developing. I know there's been sort of 4, 5 brands that have been positioned in the Kingdom. Is there an update on sort of how that auction process will go into 2024 or later this year?

Thank you, Oliver. Thank you, Oliver, for your question. So just to give a quick update on how things are progressing from assets on operation. So we have briefly given an update during the presentation. But as we have seen more or less, yes, we are progressing very well. Some of it is a bit sensitive kind of season. So we usually don't have any planned-on outages in summer because it is the peak of the demand from the client side, right. Having said that, we also get impacted sometimes here and there, and they had mentioned, for example, only one of them already in Dubai that has happened a few weeks ago, so -- or last week. So it is difficult to predict how does the full summer would look like. But yes, in an absolute term of sales progress as that, we should be in the second half better than the first half when it comes to operating assets. And also when it comes to contribution from the assets that have been in operation. So this is a nutshell. Usually -- when usually when we have a serious or sever impact on any plant cause that would materially impact on the numbers, we will announce that also in the [indiscernible]. But [Foreign Language] so far, asides or progressing, there is small outages here and there, but nothing significant on impact that would create such a negative effect for the year.

Sorry. Sorry, Bailey, I guess there was another question from Oliver with respective how we see the MoE pipeline in KSA is shaping up for 2024? Do we have any color as to how it will shape up for 2024?

The Ministry of Energy pipeline.

Energy pipeline? Exactly the tendering process. However, if we have any ideas or any completion about how it will be bought in 2024?

No. So I think we highlighted in the chart that about 22 gigawatts have been identified 4 teams are working on. We -- it is one of my big goals basically to work with PIF and the Minister of Energy basically to get the longest visibility possible. I think for the benefit of everybody in the supply chain to be able to work together and deliver the best planning basically for all the program. I think that these enhance visibility is one of the measures also to attract more localization into Saudi Arabia to basically also on the supply chain to be able to serve locally basically all these needs. So it is certainly one of the discussions that I intend to pursue. But I think that if I compare Saudi Arabia with other countries, already ready serves and provides good visibility compared to the predictability of other countries.

Yes. Maybe now -- yes. Okay. Maybe Oliver [indiscernible] one thing I can add to that one, I guess, as you likely mentioned as well, if you look at -- if you remember the first -- the starting of the year, we only had 1,500 under our belts, which was on list there. So the point I'm making is Saudi Arabia is definitely and very recently accelerating the deployment of the program -- it's very visible from the numbers. And we have an understanding that it's going to continue in 2020. We're still not in a position to give further details. But yes, just to support what Marco was saying. So far, we don't have any flags to raise with respect to the project to the deployment of the country's hands.

Next, we have a written question, and the written question comes from ratan [indiscernible], and they ask, given new regulations, which allow market makers to participate and potentially boost liquidity, can you give some clarity on whether ACWA plans to have market makers for its stock?

Yes. Thank you for the question. So we did give a couple of initiatives by few companies listed into Tadawul. One is related to having a specific financial institution to be market makers other related to share split. So this all is interesting definitely tools to be witnessed, assessed, reviewed, and we are looking at it all from our equity strategy. We are already working with the financial advisers and also our IR team, led by Ozgur on analyzing all the different tools available and definitely increasing liquidity of the share is an important target for us. And we will be assessing all the tools available and whatever tool that we believe as a management and then also submitted to our Board and approved as a direction, we definitely announce it pointed out on the right time.

Our next question comes from the line of [ Ana Cuitina ] from T. Rowe Price.

Presentation. I wonder if you could please give an update on your financing strategy. Wonder if you have any ambition like Mazda in UAE, who recently issued like the hold carbon? Is it something you are looking to do in the future? And a typical question with regards to your APMI One bond issued by ACWA Power Management company. You -- last November, I think you repaid half, you turned if half of it. Is it something you might do in the future? And maybe third question is, what is your strategy with respect to your oil-fired portfolio where you still have some stakes, would you -- we've seen that you have been gradually divesting it? Is it something you contemplate in the near future to completely get out of your oil-fired portfolio?

Okay. So maybe I will start with the funding strategy, and then I can highlight about our strategy towards the heavy crude oil assets, right, that you have just referred to. So look, when it comes to the funding strategy, if you take one step back and look, how does that impact our -- not really the winning list, but it's mainly -- it's the driver for our competitiveness. So definitely, our funding strategy will be hand-in-hand aligned with our competitiveness and our ability to grow in these new countries and new projects. Every single sense that we work on optimizing does create value. And that is not formulated to that, say, EPC price on and price -- other costs, but also a big part of it is related to the financing. So when it comes to our funding strategy, we always look at the most optimal solution that allows us to finance our growth without significantly impacting or even creating value for our competitiveness for future projects. So with that, in mind, definitely, we are looking at different tools and different sets for funding -- to fund our growth. So we did, as you rightly mentioned last year, utilize an opportunity and paid by around $400 million is 50% of our ACWA39. If you ask me today, I don't see a value to do anything right now, but different circumstances will definitely figure -- we figure and different actions. So as we are starting today, that is a demand as it is. We are looking at different positions. You have seen our cash position today. I don't give an immediate issuance at the corporate level. Maybe by the beginning of next year, we will be required to pitch for the market against. We are able to [indiscernible] bridge our growth with equity provisions for a few projects. And this is ultimately having the objective of optimizing et cetera, and delivering a more competitive, let's say, water and power to the end users. With that, we are also exploring to various options for next year, whether it is a green bond, whether it is a perpetual bond, whether it is convertible bond. All these options are put in the table. We are discussing with the various financial institutions to look at what will be the best position for ACWA Power to utilize for next year. Keeping in mind a few things, including what we have committed to you, which is the net debt to POCF. So definitely different tools will have different impact to our net debt to POCF. And this is what also we have in mind when we look at these different tools. When it comes to your second question related to the heavy crude oil assets, I believe of course today have done something that a lot of companies were not able to do or at least they talk about it, but they never implemented. And reality today, out of the 4 assets that we have, we have been able to take 2 out. One was a very another way when we convert the Shuaibah IWPP from heavy crude oil assets to be decommissioned within the next few years and already secured a water purchase agreement on the same as a replacement for that asset. This is definitely a move from heavy crude oil assets to an asset that will be partially from the grid and also other part also could be from the renewable. So, [indiscernible] as mentioned earlier, it's completely exit since last year. We have today another 2 assets, mainly [ Rabigh ] and RAWEC, which is something that we are still in a continuous discussion with the offtaker, definitely to do a solution within the next few months or the next upcoming period. We are comfortable with the position giving that. The government of Saudi Arabia already have a plan to go 50% renewable and 50% gas by 2050. So the goal is common. We are not working in a different goal when it comes to the government of the offtaker and the user. We are having a common cold, and we will definitely utilize and capitalize on the Shuaibah experience to build something similar for other products. With that, then we have also another asset of [indiscernible] design, which is a completely different asset driven is actually a gasification assets and metal power generation assets.

Marco, you have anything to add?

No, I think this was perfect.

I hope I answered your question on that.

Our final question today comes from the line of Fawaz Aldossarry from SAB Invest.

Gentlemen. First of all, I'd like to congratulate you on the outstanding results. And I have one main question regarding the -- mainly the assets in Saudi Arabia. So some other -- we've seen other players such as [ SEC ] and Marafiq implement the RAB model. Does ACWA Power plan on doing the same thing regarding to the assets in Saudi or is it -- does that model doesn't benefit you? Or where do you stand? If you can please shed some light regarding that matter?

Apologies Fawaz, I think I missed your word. So what is the model you talked about, that's SEC and Marafiq is doing?

RAB model is the regulated asset-based model?

Can you shed some light on what is the cost of that model is about?

So basically, it's a minimum required revenue generated by these companies, by the utility's companies mainly. It's mainly related to electricity.

Okay. So our assets, we are all with an uptake kind of agreement with different users or ultimate offtakers. And there is a specific availability required on these assets based on which we would being paid on a take or petite of concept. We will have to dig more to this RAB kind of model that you have mentioned about and see how is it relevant to ACWA Power and its business model. To be honest, this is the first time I heard about it. So allow us to go through it. And then if you share with us or our IR team, Ozgur and the team more detail. What we will do is that we'll come back to you specifically on this model.

Absolutely.

Yes, I think what your mention is the change in regulation actually because we are in the IPP space. So you be the tariff and you paid basically more on the production you make or sometimes it's really reflecting the capacity you installed. What you're referring to is more a regulated asset base, which is different type of model that is mainly used for transmission distribution. Yes, it could be used to what we do. But in reality, it doesn't really apply when you have a [ B or BOT ]. Effectively, at the end, it should be more or less the same. So what your guarantee is more cost recovery where in our model is more or less to us. But I think what you're contemplating is more a general change in the regulatory model, which we don't see really in the countries where we operate right now.

Yes, absolutely. That's why I specifically asked regarding Saudi because it doesn't apply in each and every other country. And thank you so much for that. That was my first question. Regarding the second question, can you shed some light regarding the dividend payout ratio moving on forward?

Yes. So as you have seen, Fawaz, we have a distributed last month in July, the SAR 606 million related to the period of 2022. So what we have specifically mentioned in our IPO perspective is that we are expecting for the next 3 years, which is 2021, 2022 -- sorry, 2022, '23 and also '24, that we will be growing our dividend payout as an amount from 6% to 9%. So if you average that up to down 7.5%. So we have continued to deliver that for the first 2 years already, and we are also working and maintaining the target for another year, which is the 2024. Post that, we, of course, have to go to our Board in terms of a direction when it comes to the distribution or financing our cost. Definitely, as you have seen, we have a busy pipeline coming up with a lot of investments that our equity investment area will increase significantly higher than what we are expecting at the IPO time. So with that, we will definitely utilize most of our cash for actually growth rather than distribution. Having said that, we also expect the investors' needs for distribution, and we are maintaining that kind of a pull on a yearly basis, as highlighted at plan accordingly on the IPO.

There are no additional questions waiting at this time, so I'd like to pass it back to Ozgur for any closing remarks.

Thank you, Bailey, and thank you, everyone, for your time and great questions. Marco, and Abdulhameed for -- thanks for your time as well. If you have any further questions or follow-up questions or anything you all know how to reach us. So please reach out to us, and we'll get back to you. By that, I think I'm closing the call, and I wish everyone a very good day or a very good night. Wherever you all are. Thank you very much.

Ladies and gentlemen, this concludes today's webinar. Thank you all for joining. You may now disconnect your lines.