ACWA Power Company (2082) Earnings Call Transcript & Summary

Hello, and welcome to the ACWA POWER Financial Results Conference Call for the year ended December 31, 2023. [Operator Instructions] I'll now hand it over to Ozgur Serin, Head of Investor Relations to begin. Please go ahead.

Thank you. Thank you very much. Good morning, good afternoon, and good evening, everyone. Thanks for participating in today's conference core, which is for the [Indiscernible] result having -- presenting to you the results of fiscal year 2023. As usual, I have with me Marco Arcelli, the CEO of ACWA POWER, and I also have Abdulhameed Al Muhaidib, the CFO of ACWA POWER. And together with them, we will be taking you through a presentation material, which is already prepared and following which we are intending to take your questions and intending to answer them in the call. The material in the financial results of ACWA POWER for the year 2023 is already uploaded onto our website as well as on our website, together with all the other management discussion and analysis sortings. So without further ado, let me pass the call to -- pass the presentation to Marco.

Thank you, Ozgur, and good morning and good afternoon, everybody, depending on where you are. I'm really, really proud of the team of ACWA POWER for some very solid results that were delivered in 2023. Next month marks 1 year since I took over. And every day, I'm really excited by the good news that I received from all over the world from the financial closings, from the inaugurations, from the new wins. And especially as you see on these slides, also the operational results, which are very important because as I remember, we're not just a growth company, but we have a large pipeline, a large portfolio of projects that we operate. In 2023, we achieved improvement on the lost time injury rate, as you can see, improvement on the availability of our power plants from 87% roughly to 91.9%, a remarkable achievement, given by the strong focus that we put on operation through our operating team of NOMANC and availability on the water side that is substantially in line with the previous year at a very high level that is in line with the industry best practices. If we can move to the next slide, on the portfolio. This year has been a remarkable year again. We have added roughly 20%, 25% of the portfolio, depending on whether you count on number of assets, assets under management, gigawatts of power, we added more than 10 gigawatt, renewable power in particular and water dissemination plan with 1.4 million cubic meter per day in addition. We still maintain a goal of Net Zero emission by 2050 and we are increasingly add in, as you see, renewable energy versus the conventional and flexible generation. I would like here to make a remark that we operate in the Gulf, which is a region that historically has burned oil to make electricity and it's going through one of the most ambitious decarbonization progress program in the world. Saudi Arabia, for instance, wants to be 50-50 renewables and combined cycles. That means that there will be a lot of combined cycles built. Similarly, it is in [indiscernible] in other countries. Similarly, it is in countries in the global south, where we operate, for instance, Bangladesh, for instance, South Africa for instance Uzbekistan. That is why we believe that the combined cycles in the regions of the world that experienced is very high economic growth of 6%, 7%, 8%. And where we still need to elevate the standard of leading on the population we believe the combined cycles remain viable, sustainable and mitigating technology compared to the status quo. So that is why investing in new combined cycles is something that we will continue to do, but we see the bulk of the growth for our company in renewable energy. Moving on to the business development since we talk about the new opportunities, we also had a record year in financial closes, 12 financial closes for SAR 59 billion, which is really a world record. We were discussing with Abdulhameed. This is 3, 4x what we used to do on the 4, 5 years ago. So it's a sign of really how the platform is really scaling up and able to deliver to an order of magnitude that is bigger than what it was in the past. Recently, in February, we signed a new financial closing at [indiscernible] Water Project in January, which we recently announced as a win last year. You see also in terms of wins that we maintained a healthy number of wins standards basically in the industry. which combined with the negotiated program, both in Saudi Arabia and outside gives us a very solid platform basically to justify. We move to the next slide, an increase of the expected equity commitments that we will have every year compared to what we had announced in the IPO guidance, which will help gradually to recover basically an improvement of results compared to what we have had historically. Already in 2023, this equity commitment reached SAR 5.8 billion, which compares with the SAR 3.8 billion to SAR 4.9 billion that was in the IPO guidance. So we are in now this transition where we are adding to the portfolio and this will translate into operational capacity and operational results as the capacity comes online in the coming years. Next, I would like just to remind you the key [ dealers, ] which we reinforce and reiterate to basically be a leader in the four technologies that we operate: Renewable power, which includes storage because storage is battery storage, most often in hybrid plants at our plants and also CSP considered as a storage. So we provide a solution that is not only sustainable, but it's also flexible many times. Water Desalination, where we are already the largest player in the world, green hydrogen, where I believe that we are the largest player for export markets, both with the NEOM Green Hydrogen project with our partners and with the second project that we launched in Uzbekistan that will be converted into fertilizers locally and then the fertilizers will be exported. And then the flexible generation. So as I mentioned, the -- mostly the CCGTs, flue emissions compared to oil or coal or other technologies that are the alternatives today in the emerging markets. So four technologies in the four regions: KSA, Middle East and Africa, Central Asia and Southeast Asia and China. We have reflected this in a new organization that we launched just a few days ago, where basically, we're now going to work in a matrix where the business unit, business development, construction and operation with the metrics, with the four key geographies where we delivered. So this will enable us to build a stronger, more institutionalized platform to support an acceleration of our growth. We have largely promoted the people from within. And I think that, that gives us also a strong confidence of the development programs that we have put in place. I was recently, for instance, [indiscernible] where we launched the new program for our top 100 people to develop them to be the next leading executives in the company and other programs, including an accelerator for the CEOs and project directors of the operating companies, aim [indiscernible] development program to continue to build the pipeline also from the bottom. So I'm very happy with the progress we have done in this year, accelerating our internal focus on people that will be so important for the future. The last point is the supply chain and R&D. And I would really like to commend on the Innovation Day that we had in January at KAUST, which was attended by more than 300 to 400 people from around the globe basically from partners in technology, research institution. It's really positioning assets enabler of the energy transition worldwide, but also as a leader and a driver of this improvement. And on the supply chain, continuous improvement in the strategic sourcing and strategic partnership with our EPC contractors and key suppliers that will make us stronger in bidding and better equipped for the negotiated deals to retain a competitive edge. The news, if we move to the next slide, that we have compared with the last time that we spoke, is the formal announcement by Saudi Arabia on the [ step-up ] ambition in the renewable program where I remind you that we are responsible with PIF to deliver 70% together with Aramco. So it's a great way to contribute our skills as the developer and also bringing partners like Aramco, who are basically through us. having a way to recycle profits from oil and gas into renewables and transform Saudi Arabia into a powerhouse of low-carbon technology. So this means that of the 20 gigawatts or so that will be tendered every year, as announced by the Minister of Energy, roughly 14 gigawatts per year will be developed by us as a developer. Moving on to this, we have Central Asia. And actually, let me step back one point. The other point in Saudi Arabia is the announcement of the 7.2 gigawatts per year of combined cycles. You know that last year, we already won 3.6 together with SEC. And we will continue to tender on this, and we expect that we can have competitive results. So really, I think that this is a good opportunity going forward. Moving to Central Asia. We continue to build on the strong momentum there, both in Uzbekistan, Azerbaijan and we're continuing to develop the 1 gigawatt project in Kazakhstan. We are partnering with Masdar and SOCAR to develop 500 megawatts renewable projects in the [indiscernible] region of Azerbaijan, which shows that basically we are not only a developer, but also an enabler bringing different parties together into elevating and maturing the energy transition in these countries. And finally, China, where I was there already twice this year. And we see that the team is coming along with a lot of opportunities that we continue to advance. And I reiterate that we expect in the next few months to have positive announcements of potentially first investment in the country, as we had announced in the previous meetings with you. So to conclude my section and before introducing Abdulhameed to go through the details of the figures, I'm very happy with the first results of this first year, very solid results as Abdulhameed will go through in details but also of the increased opportunities that we see, both in Saudi Arabia that we continue to account for about 60% of all our future growth. The big momentum in Central Asia, the potential for the entry in China and the leadership position that we have in green hydrogen and the water expansion around the world. For funding this growth, we will continue to watch the ratios and optimize corporate debt-to-equity balance as Abdulhameed will go into more detail. So we see opportunities that are very much balanced with our ability to capture them. At the same time, I always remind you that our business model is very much predicated on new projects coming into the portfolio financial closes happening. And as you know, these might slip from 1 month before or after. So I always encourage it. Despite the good results that we continue to show, not to focus just on the single individual quarter, but focus on this trajectory that we have and that we have very solid for the future. Now Abdulhameed, I pass it to you.

Thank you, Marco and good afternoon. [Foreign Language] Good to be back on this earnings call for the year-end and first one, I would like to really congratulate all the stakeholders, investors, partners of [ ACWA ] for the great results that we have announced this morning, the market. I would like to really build up on the momentum that Marco has shared achievement of 2023, and this is from there on how we reached the numbers that we have reached on 2023. So just on the first element, which was 12 financings that Marco has share. Actually, there was a very good structuring of, let's say, [indiscernible] close SAR 60 billion as in the various countries that we are operating in. the landmark transactions remain the new green hydrogen 1 was achieved early March of last year. We have been also able to close a big projects around of PIF, which is [indiscernible] from PIF. This was very close to the end of the year, and along with a terrific entry, which is the [indiscernible], this is the fifth -- [indiscernible] for the 240 megawatts project. There are actually just yesterday, and we have also announced today in the market, we have achieved the financial cost of [indiscernible], the first water project in Dubai and also the first full green dependent water center, we have in our portfolio. Moving to the next slide. So we take to talk about more of the units that have been completed, and that is also a significant milestone for us as these projects whenever kicks into operation, it will start contributing to both our investment and operational pockets as we can to show you later on. So excellent also achievement more than 11 units has achieved IPO [indiscernible] during the course of 2023. We had a couple of units on the renewables. We had the exact group to that also have achieved Unit 2 operation. Then also, we have a couple of the water projects, [indiscernible], which is almost a full operation except just a small part as we are expecting completed by 2024. So there which is marking our not or the first big project of [indiscernible] that we have in Saudi Arabia, I've also achieved 2 different cases of operation during the course of 2024. And finally, I think [indiscernible], a huge plant that has achieved full [indiscernible] operation, which is the 2.4 gigawatt during the course of 2023. Taking this too into consideration. I'm looking at specifically the balance sheet [indiscernible] or also on a bottom line kind of view [indiscernible] 8% increase, that's a SAR 1.6 million bigger that we have achieved and then 2023. That is also, I think, if you reflect also on the increase. It's not only a decrease on the bottom line, but also if you remove the last one-off kind of divestment gain that we had last year, that we would see also close to 27% increase on the bottom line. From an operating income point of view, it's up 14% increase. So that's getting us close to the SAR 3 billion of operating income. OCF, operating cash flow is 2.4%. We will go through it in a different site and go through the details, building up on the momentum that has discussed earlier since the financial [indiscernible] mean that we are putting more equity into new projects. Thus, our equity commitment has increased down 50% to SAR 5.7 billion over the year. Also, we have the [indiscernible] test, which will also go to the detail of goods of 53%. Our net debt to OCF has reached 5.5x which is fairly [indiscernible] it has decreased on 2023 is fairly below the big part that we have for the guidance that we have shared earlier around 6% to 6.5%. So perhaps we'll start with operating capital, but I think it comes to through the buildup and comparing it with 2022 figure. You have seen that a couple of these projects that came into operation, which is the new unit has contributed around SAR 200 million to our new operating income, whereas the [indiscernible] of supply and improvement on the availability of the existing project has improved significantly and give us around SAR 400 million extra providing income compared to the previous year. Development and closing these projects have also contributed around SAR 100 million extra compared to last year. when comparing, let's say, the other side of the operating income, last year, we did report an LD and assurance recovery had around SAR 150 million higher than what we have recalled this year. And then also we had a higher overall corporate and G&A cost [indiscernible] million. Moving to the net income. Specifically, we had this let's say, benefit of the higher operating income, that is around SAR 370 million, which we just showed you the breakdown of it. Then we had comparing, to last year, a lower [indiscernible] that's [indiscernible] assets that we have there and also the wind assets. So a lot [indiscernible] and that is around SAR 180 million compared to last year. On the other side, we have seen a continuous high interest margins and with rates of the new [indiscernible], we have seen around SAR 100 million in the, let's say, that showed in the previous call. We also had SAR 100 million of other costs, mainly related to the share of NCI and also no cost compared to last year. Primary and again, just repairing to the [indiscernible] had not writte. That is around SAR 227 million higher as you compare 2022 to 2040. So overall, this is up when you compare to 2022 because with that 2023 SAR 1.6 billion figure. And this [indiscernible] up on the business model as we saw in the breakdown in a different way. And this is -- if you look at the net income and how we would build from that, let's say, the 4 pillars of our business model, which is developed and optimized you will see fairly good breakdown between the various components. So on the development side, you have -- you can see around the [indiscernible]. So we have around SAR 140 million in [indiscernible] the development side. Contribution from projects and the investment side, this has also get close to SAR 300 million increase to around 1 billion whereas no much continue to term better. So you have seen that we have close to SAR 600 million contribution from [indiscernible] and also other operating income and other corporate income together combined has increased around [ SAR 120 million]. This is mainly from better cash management and also higher contribution from the services that are all white various product companies. Man, I would say, component that has been on the reduction side is the capital recycling where we had last year the whole the year before, we had a specific [indiscernible] divestment, where we didn't have any compared 2023. So this brings us to around SAR 1.6 billion again in net income, and we don't have any adjustment policies. Now we'll talk about specifically the [indiscernible]. So the current operating cash flow for this year fully comparison with last year, we would see almost a 30% reduction on the cash inflow whether if you take the break [indiscernible] inflow, you will see that distribution and development fees, other contribution, all of them has been extremely positive as compared to last year. This is in the rates were to almost 50% increase compared to last year. The negative increase on the cash or was mainly in the covering -- and this is again, if you compare it to 2022. In 2022, we had a big refinancing related to [indiscernible] and also the venue, which both of them together has contributed significantly on the [indiscernible]. So looking at the cash outflow, this is mainly related to the increase in G&A and also the tax on a payment basis that you have seen increased compared to 2022. So this will bring us to around SAR 2.4 billion of current operating cash. Building up on the cash position. So taking the 2.4 [indiscernible] we have raised last February around SAR 2.4 billion which is the Sukuk tranche 2. And with that, we had also higher operating balance of around SAR 4 billion. So the total cash that we had on our around SAR 9 billion. If you look at what that money has been expensed during the course of 2023, almost 75% was spent on investments. So that through cash injection direct into a couple of opportunities for [indiscernible] used as a bridging tool some of our investments, which we had paid during the first of 2023. Then we had a mainly finance charges to Sukuk and other components of the facilities that we have in our books. And we have also paid a dividend during 2023 for the payment of 2022. So all of that together, if you take it out, we closed the balance with around SAR 4.7 billion in cash. Now, I would like also to give you a bit of bank how we built up the 5.5x, which is the net debt to BCF for the year 2023. So looking at it from specifically in the balance sheet, balance has around SAR 28.4 billion [indiscernible], let's say, liabilities. A few builds up and break it down between [indiscernible] Again, the focus on the reports would be about 10.3%. The rest, which is around SAR 18.1 billion on its is in our balance sheet, but as [indiscernible] coming in our pay due to the consolidation. So that's SAR 10.3 billion, which is the very close debt in our balance sheet. If we take also a build it up from the off-balance is contingency. It's around SAR 7.8 billion. And together, we have around SAR 18.2 billion [indiscernible] both in fleet and on balance. Taking back let's say, the cash that we had in our books, which we just showed you around SAR 4.7 billion, it will bring up the net debt to around SAR 15.5 billion. So that is the that we have on the books. And if you take the POCs that we have presented earlier, then you will see that the net debt to be around 5.5x as a comparison basis from 2022 to 2023, you will see a significant increase on the net debt to POCF, which is from 2.1x to 5.5x However, there is a great part of last year that has been dropped, which was related to the low financing divestment. If you put that back around 6.4x, so on a comparison basis, it would be actually a drop of around [indiscernible]. However, we always like to present the full picture, and then we can also show you the comparison. Again, we are still below the guideline that we've given is just around 6.5x of net debt to POCF. Maybe we move to the next slide. Can you move to the next slide. I think though we have -- so the finance side is the distribution related to the shareholders that we have announced today. So overall, end, I know we have -- in the last 2 years, we have been able to distribute SAR 1.2 billion between 2021 and 2022. And this year distribution was a bit unique, I must say. This year has been a distribution of our end of a hybrid solution between a typical dividend distribution, together with ownership, that we have announced in the market today morning. The way that we have actually looked at this is different to it as we are trying to achieve a couple of things. First, after looking at the 300-plus vessels that we have made during the course of 2023, we have seen that a big interest and the big focus both investor is about the growth of [indiscernible]. And that growth momentum was very much keen for them and liking the funding capacity. It was very much keen for most of the investors to see the company redeploy the cash of the growth that we have seen in the next 6 to 7 years of our -- and fusion that with the guideline that we have did earlier during the course of 2021. We also would like to maintain our, let's say, guidelines when we said that we would like to distribute a dividend during the course of 2020 and around 6% to 9% increase for the next 2 years. So basing on two of these components together, we decided to split the distribution of this year between a normal cash distribution with the bonus share together will give you a kind of growth on the distribution. That is more than the guideline that we are giving to the 6% to 9% increase on an annual basis. That is basically the way that we have seen the distribution. And this is, of course, subject to the general assembly approval that will come up on a date that will be announced in the course of the next few months. Looking at the final slide, I would like to take you to is actually how we are resetting against the 3-year performance that we have against the IPO guidance that we gave. So the first point is the business growth, I think [Foreign Language], we have been able to grow in terms of equity commitments and tenants capacity and tell assets under operation much better than what we have given as the guideline, and this is something that has been [indiscernible] in the course of the last few years. Operating income, we were expecting it to double the number in 2022. I think if you look at our numbers today, we are around 23% lower than what we have given the guidance -- this is -- again, has a different factor that has pad into the last 3 years of operating income. The first really related to the carbonate, which has delayed a lot of the projects under construction, some of them delayed by 6 months, others have been great for 1 year. also have crated and slated the pricing of many of these projects to be completed. And then we also had another stats related to Russia-Ukraine world that really drove [indiscernible] that financial cost impact on product that we have in Central Asia. The increase on [indiscernible] has really impacted also the finance cost, whether it is a cop -- and together with that, we still have actually improved our operating income significantly in the last 3 years, however, 23% lower than what we have expected that in 2020 guideline. And the commitment again is a positive momentum, as I mentioned earlier, net debt to this year, we gave a guideline long-term of 5 to 6x. We have maintained that even with the high cost that we have seen in 2023, thanks to the strong unit operating cash flow that has been contributed. Distribution is the 6.6% to 9% annual growth on distribution. This is a [indiscernible] highlighted in the previous slide. I have to continue with that. And this concludes also the guideline that we have given in terms of distribution during the course of 2022, we will also come back to the market, perhaps with the new guidelines. [indiscernible] of decarbonization for our portfolio, we are very much close to the, let's say, the third pillar of having 6% of our portfolio of our installed capacity on the new bus -- and we are also on for the target for 2023 to reduce 50% of our carbon emissions of our sole capacity. This is all from my side. I think you will leave it now to Ozgur for the Q&A questions. Thank you.

Yes. Thank you very much for [indiscernible]. Actually, I think we can open the dashboard of the questions. So if you may kindly lead us through.

[Operator Instructions] We do have an audio question from Zoom from [indiscernible] of Oryon Saudi Investment Company.

Maybe we can move on to the next question, and then we can take it later.

Of course, we have a question from the telephone lines, question from Ricardo Rezende from Morgan Stanley.

I guess two follow-ups on something that Marco mentioned during the presentation. The first one, so about a week after you had your Capital Markets Day, Prince Abdul Aziz was talking about some increased targets for the Saudi Renewables program. And during the Capital Markets Day, you were very optimistic with the potential in China. So how do you do your balance is on potentially having even more deployment in your home market and also all of this opportunity in China? And the second one is on -- when you mentioned that there's still going to be some growth in combined cycle, even though the bulk of the growth is coming from renewables. Would you be able to just give us some color on the economics that you're seeing for combined cycle versus the economics that you're seeing for renewables?

Yes. So of course, we retain a role as a national champion in renewables. And so we take the program of renewables in Saudi Arabia as the pillar of everything that we do. So in our targets that we have communicated before to the market, that we were considering, if you remember, various scenarios. And I think that what we have been covering today is that we are kind of like on the high side of the various scenarios that we are considering, but most of that was already included in our preparation. And that's also, by the way, one of the reasons why it is not catching us by surprise, but the machine was already working to step up and be able to deliver all this. So there's a continuous rebalancing basically of the opportunities that we follow. And I think that the more that we find in different geographies and that basically we get on a negotiated basis or by winning the tenders, the more for the rest of the portfolio, it builds for us optionality then to focus on the higher margin or strategic areas where we want to play. The second about the CCGT economics. So far, we have looked and we are building one project in Uzbekistan and we now won two projects here in Saudi Arabia. What we see is that this projects can deliver at the level or actually probably even a little better than renewables, mostly is because of the complexity of the project. And so you will see probably a little less competition, let me say, and a little more focused on, let me say, the bringing together solutions that you can have for these projects.

[indiscernible] also has been asking the economics. Comparative economics of CCGT projects versus renewable [indiscernible].

We have a question from [indiscernible] Saudi Investment Company.

And congratulations on the results. I have a couple of questions regarding your leverage. Since your leverage has reached to around 5.5x. So what is the plan is? How do you see that -- how it will go -- how do you see the leverage ratio going forward in the next coming 3 to 5 years?

Thank you. So look, I think -- sorry, you have another question?

No.

So during the IPO time also, we have looked at the net debt to POCF, we give our guidance around a high [indiscernible] 6 to 7,8. Whereas today, we are -- with the growth that we have seen, we've been able to manage 2023 with 5.5x, which we believe is fairly acceptable for us over the, let's say, longterm. So if I look at it today and look at the funding strategy that we have in mind with the gross assets coming up and almost close to SAR 1.8 billion of equity commitments coming up in the next 6 years. Definitely, we will see a growth also on the leverage side. Now as a guideline, we are trying to also balance our growth and utilize the difference of funding to ensure that our ratios remain in check on that is with [indiscernible] also the time with investors. Today, we believe that on an average basis over the lot, it should not go above [indiscernible]. However, we also believe that on a short-term basis, that sometimes it will go above that on a short-term basis where we have to be better. And perhaps talking about this specifically, we do believe that the growth will need to use different source of funding. So we will not rely on only [indiscernible] to ensure the growth is maintained. We will try to maximize our debt issuance to ensure that we are creating more value for investors. But ultimately, over the next 6 years, we will end up requiring high equity rate to make sure that we will be delivering the growth that we are trying to achieve and to replace the capacity by 2030.

But do you think that this high leverage -- I mean when you look at the optimal capital structure, do you think that the 5.5 or 6x in the short term? Because this is my question, my question was like this you have already reached 5.5x leverage as compared to the long-term target of 6x. Although in short term, our target is still 7x, but as an investor, the investor -- because there is more concerns from the -- investors are looking for more clarity on this leverage because this was one of the key concerns for investors. So do you see -- do you think that this capital structure is optimal for the company to generate enough amount of returns for the investors?

Yes. So I'm not sure you reference [indiscernible] coming somewhere. But look, as I mentioned, long term, we believe it's going to be in the range of 6x. We will depending on the timing of different tools that we'll be using, it will -- might go slightly upper than that. However, from a company that is looking at dipping the capacity in the next 6 years for a company that is today, deploying around close to SAR 2 billion in our pipeline. That is fairly comfortably focused on a more than countries like Saudi. Also 50% of the pipeline coming from here. We are very, very comfortable actually with growing and investing our growth with the ratios that have came with the 6 to 6.5x over the next 6 years. We will, of course, as I mentioned earlier, maintain that position [indiscernible] and reduce it ultimately. But that is, I believe, the kind that we are giving to the investors at IPO side, and we are remaining [indiscernible] guidelines. We are not expecting that review as a mission. The pipeline is very healthy. The next 6 years full of opportunities. We would try to [indiscernible] the shareholder value from that earning.

Okay. It was much clear. And my last question is about, as you said -- and we know there is a huge pipeline for ACWA. So in terms of execution risk, if you apply the probability that what is the probability that the ACWA will be able to achieve the goal by 2030? And the second question is regarding, do you see that ACWA will become the sole power generator in KSA?

We become the sole? I would love to. It's not a question to ask me, however. We participate in the tender. I think that we have been successfully growing in the market. Today, we supply 20% to 30% of the market in the four countries where we operate, Saudi Arabia, Oman, Bahrain and the Emirates. So we've been very successful. But again, you have to follow what the regulator reaching is, which today it is what it is. In terms of delivering the growth, of course, we rolled out the strategy. It's a strategy that 1 year on, we still believe we're still believing. We don't see a context that is different from what we had before. We continue to monitor it. Particularly, I think green hydrogen is an emerging industry. And so of course, we are developing as much as possible everywhere we can and when it makes sense without becoming to, let me say, lean on too many things. We are focusing on getting upticks. We're focusing on developing the projects. But you know the industry developing. So that is something that we are doing, but there is let me say, an industry growth rate behind it. Renewables on the other hand, I think that if you think of what we do is a very small fraction of everything that is going on, particularly in China, and our mission China compared to the total market. So that's why I say that is why we don't give a guidance, say, frankly 2020, how much you are going to be in one country or one specific technology because these will be depending on the context and the actual growth rates and the regulatory context in each geography. But on the overall macro, we are very confident that we can achieve that.

Our next question comes from Oliver Connor of Citigroup. Please meet yourself locally and proceed with your question.

First one just on the earnings trajectory. So you mentioned, obviously, this year was slightly down on the IPO target of double 2020. How should we think about the phasing of earnings growth, '24, '25 relative to that 2020 baseline? And then the second question, just coming back to the sort of leverage point and potential of the equity raise. How do you think about order of magnitude of that and sort of staging of those equity raises if there are multiple equity raises? And I guess I asked because obviously the equity performance has been very, very strong. So interested to know how you think about potentially bringing forward the equity raise, given the strength of valuation?

Thank you very much. Excellent question. Look, on the first question on the guidelines. Since IPO, we have not given any guideline for the last few years that we have shared during the IPO award show. Having said that, I do believe that most probably this is a pool to start looking at this again and us analyzing what we can offer to the investor community to praline for the future. So today, I don't -- we don't have anything to share with you as the guideline for the future. However, we take your comments seriously, and we will explore how can we during the course of 2021, the guidance for the next 3 years or so. So this is something that we are previously taking in talk. In terms of -- so this is related to the your first question, then the second question was related to TA's equity rate. So what we reflect on the funding strategy and we deployed around -- or we have to mobilize or, let's say, on average, SAR 1.8 billion, SAR 1.9 billion on a yearly basis. And we put this in our cash flow, there is a funding gap definitely. And that funding gap would require us to go to the market for our categories. In terms of timing that and put it into a perspective of the project, it's -- I would say it's a moving but depends because many parameters. If you look at our balance sheet during the course of the 2024 and the pipeline of the project we have so far been able to secure the commitment that we would like to deliver on 2024. There is no need for cash ratios stand on check what we shared with you today and whatever we are saying with lender. However, I don't see it as a long-term position to be more closer to that -- we will come to the market describing that capital rate, when is it acquired, how much is decided and the period very close to that, and we'll have [indiscernible] then we'll also share the details during the [indiscernible] that we should report for that.

[indiscernible] an interest rate impact on the valuation of the line was not the can repeat it kindly. Please.

They were my two questions. I mean we're happy to hear the answer on that, if you do have one because I would be interested.

Okay. So the what I collected for was asking the interest rate environment impact on the valuations going forward.

Yes. I will talk about the impact on the company we talk about maybe it. So we are as a company, we have a kind of a hedging strategy and above mandates to go and maintain our books with around 70% ending position. So overall, we try always to maintaining as well as adding position within the balance sheet or whatever cost and also net cost, but ultimately has an impact on our [indiscernible] we had a solid ratio higher than 80% of its position overall. We have seen resilience of base fee in the last 2 years of it, and then as a minimum compete to a lot of companies that we have here. And go forward, I will use capabilities in [indiscernible] we maximize our hedging position close to 100%. And then later on, before its position will be unlocked at different times on a [indiscernible]. So that is from a corporate at point of view or action. On this project that we are closing last year, we closed [indiscernible] the high [indiscernible] has been already [indiscernible] in the and you can see the top of the say, the TV projects in the past were they are close to [indiscernible] went out. But ultimately, when we got the exposed cap, was closer to SAR 1.6 billion, 7%. So this means that the high -- the high finance cost has been renewed in this tariff. -- and peas been already within the estate. And as we go for we continue to reach not only in the position that it's related to the project finance but also to equity bridge loans for the construction period. Going forward, I think we will have -- or we already have a hedging committee where we -- on a monthly basis, [indiscernible] position and the cycle cultural some positions on the other scope and the ABL on the financing of the project. And some of that, sometimes we do actually with very financing opportunities that allows for some projects. I think overall, this is the hedging criteria that we have followed.

Our next question comes from Anna Antonova of JPMorgan.

A quick question from our side. Can you please comment on how the new project is currently progressing? Do you see any changes to the budget or the time line for the startup of it? So any color would be much appreciated.

So I think the question was about new project timeline. So Neogen the project has a chip plant lower last year. So fairly in an early stage of execution. We have seen a good progress over the last [indiscernible] when it comes to construction. We had the first wind place arriving to [ Noor ] consortium ongoing there as per the last construction deposit, we have to give the project has some delays, but ultimately did not have a delay on the commercial operation days. So this is definitely a significant project, and we are paying [indiscernible], and that's only because it's a first of a kind utility-scale green hydrogen project, but also -- it is the [indiscernible] of one of the top three projects that we have under portfolio. So we'll keep on [indiscernible]. Nothing's happening. Nothing will come up this year or the year. I think the plan for the start of the commercial [indiscernible] remain as it is targeted today, but there is today some data that we have seen in the early execution order.

SDo I understand correctly that it should come online roughly in the end 2026 as per your earlier guidance. Is that correct?

I believe the end of 2026, beginning of 2027.

We have a few tax questions. Are your new projects mostly associate level investments or consolidated? Trying to understand why profit from equity associates have not grown much in FY'23?

Okay. So -- if you look at the portfolio that we have, most of the asset is indeed equity accounted. We have only a few projects that are consolidated for example, [indiscernible] portfolio and some other portfolio that we own more than 50% of the shareholders. Of course, the big towns are the audited financials. On these projects that have been added during 2023. These projects he's not yet come to a full operation so they can contribute. And some of the contribution is actually in other lines that you can see for example. If the project we did achieve the finest all the development fees and construction management fees will be shown in a different fact. So you will have see their contribution as really the post coming to operation. Now on specifically the question you had, I think if you go to 7 on the financials, you will see the breakdown and the adjustment that we have. And then you can realize that some of the projects like no energy and others, you have, let's say, a typical or the accounting lease has been impacting negatively, and this is mainly due to the delay in the project and the cost of run back to which there has been a negative impact to that. So some projects has actually had a positive impact, but others had a negative impact to which the net drop has been seen as you have seen in the.

[Operator Instructions] Our next written question asks the results show around SAR 4.52 billion revenue represented by thermal and water desalination in 2023 or around 74% of the total. Is it possible to give a number or a rough indication of what portion of this is represented by water specifically.

Look, while I think maybe the last will be the 50%. But also, and I would like to emphasize more on that the portfolio is a backdown between customer listed assets and equity accounted. So looking at that view to and then breaking down between the pretechnology, to understand the growth on the technology will not be the reset full answer that we're looking for. That's why in the presentation, we always try to break it down to the project capacity-wise. So there is -- or the investors can have the full visibility on the growth specifically to the technologies and to the jurisdictions that we are operating in. And then at the [indiscernible], we are trying to give you a breakdown of the 4, let's say, [indiscernible] we have not break it down because also it's going to be difficult to break it on that. We have a lot of assets that as they are integrated [indiscernible] I'm not sure that is why you're looking for that specifically, but this is going to be very healthy for us to reach the ultimate number for [indiscernible].

I mean, actually, this is why we have 1 of the reasons to disclose is executives there you can see a much more detailed revenue split, for example, by project. But even in itself, it is going to be fully represented because we have a lot of eliminations during the consolidation process. And that's exactly why one of the key KPIs is not revenues. It is extremely difficult. Obviously, internally, we have messaged or monitoring that one. But so far, we have not been disclosing more than disclosing of the [indiscernible] but I guess, if you're looking for revenue for [indiscernible] purposes, disclosure is that's the place to look at it.

At this time, we currently have no further questions. And I'll hand back to management for any further remarks.

Do you have any [indiscernible] thank you, everyone, for listening to us and joining us today. If you have any further questions, you know how to reach us. And thank you very much for your time.

Thank you for joining today's webinar. You may now disconnect your lines.