ACWA Power Company (2082) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the ACWA Power Financial Results Conference Call for the 12-month period ended December 31, 2025. My name is Carla, and I will be your moderator today. [Operator Instructions] Please note that today's call is an investor call, and the team will not be taking any questions from the media. Media attendees are welcome to stay and listen. I will now hand you over to Ozgur Serin, Head of Investor Relations, to begin. Please go ahead when you're ready, Ozgur.

Thank you very much, Carla, and good morning, afternoon or evening, wherever you are joining from. It's a pleasure to be with you once again. Welcome to ACWA's Fiscal Year 2025 Earnings Call. We are reporting today under some kind of distress in the region, you are all aware of that. As a matter of fact, I'm joining the call from Dubai because I could not travel to Riyadh as usually I do. My name is Ozgur Serin. I'm the Head of Corporate Strategy and Investor Relations. Together with me today in Riyadh are Dr. Samir Serhan, our CEO; Marco Arcelli, now our former CEO; and Abdulhameed Al Muhaidib, our CFO. We will be your hosts today. Before we jump into the results, I'd like to use the opportunity to begin with the recent leadership change. Our Board of Directors, as you are all fully aware that has appointed a new CEO, and this is effective 1st of March, and it was heavily covered in the media. Marco Arcelli contract is expiring in April 2027. And as a sign of company's strong governance and succession planning processes, this transition has been decided between Marco and the Board to implement the planned succession process. In the meantime, Marco will continue to serve in an advisory capacity to ensure continuity and a smooth transition. Again, in the meantime, the company's long-term direction remains unchanged. If we may move to the next slide, please, I just would like to give you a brief introduction and biography of Dr. Samir, and I'm going to read this with your permission. Before his appointment as CEO, Dr. Serhan was ACWA's President of Saudi Arabia and Middle East, where he was responsible for several key markets, including Saudi Arabia, UAE, Kuwait, Bahrain, Oman, Jordan and Iraq. Previously, Dr. Serhan was Chief Operating Officer of the U.S.-based company, Air Products, where he had global responsibility for the company's operational business and project execution with P&L accountability for the Americas, Asia, Europe, Africa, the Middle East and India. He also led functions, including technology, global engineering, manufacturing and equipment at Air Products. Earlier in his career, Dr. Serhan was President, Hydrogen for Praxair. For 14 years prior, he worked for the Linde Group in leadership positions in the U.S. and Germany, culminating in his role as Managing Director of Linde Engineering. Dr. Serhan holds a PhD in engineering mechanics from Virginia Polytechnic Institute Penn State University, which is AKA Virginia Tech. Active in research, he has presented and published more than 40 papers at conferences and in scientific journals around the world. Before we jump into the results, I'd like to use the opportunity to begin -- yes, which you have already done this, sorry. Let me hand over to Marco now because we also -- before going into the call, we also wanted to give an opportunity to Marco and Dr. Samir to say a few words to us. Marco?

Thank you, Ozgur, and thank you to everyone joining us today. Before we turn to the numbers, I want to reflect briefly. When I came to Saudi Arabia, I arrived in the middle of something extraordinary, a country rewriting its own story at a speed and scale that few places on earth have ever attended. That energy is infectious, it gets into you. The ambition of this nation, the clarity of its vision, the sheer determination of the people around you, it changes how you think about what's possible. And to have led ACWA through this period, that has been a privilege indeed. But what stays with me the most are the people, the late-night problem-solving calls, the long-term relationship built on trust, the young engineers discovering their purpose in this industry; that human energy is what defines Aqua today. And that's the ACWA I will carry with me. We went through a start-up phase, a scale-up phase, and now we enter a new phase of maturity. And a leader's job is to know when the next charter needs a different hand on the wheel. And Dr. Samir Serhan is that person. I've worked alongside him since he joined us in mid-2025, and I've watched him earn the trust and respect of everything he's engaged with inside the company and outside. He understands this business at a molecular level, 3 decades of building, operating, scaling energy and water infrastructure across the world. The foundation we've set is strong. The team we have here is extraordinary and the person stepping in is ready. That matters more than anything I could say about myself, ACWA and what we have done. Samir, it's yours.

Thank you, Marco. The results we will go through today are a direct reflection of the company you have helped shape and the platform you have build. I'm thrilled to be here at ACWA. ACWA sits at the intersection of everything that matters in a global infrastructure, energy security, water scarcity, decarbonization at pace. I spent 30 years in the industry. I have developed and built world-scale [ bench ]. I have restructured complex organizations. I have navigated downturns and expansion cycles. I want to emphasize the growth alone is not an objective. As I step in, we will sharpen our focus on a strict selectivity on our market pursuits, operational transformation, solid project execution and ensuring every year of growth contributes directly to our bottom line profitability. Solid project execution means safety first, front-end alignment, proactive risk management, transparent project controls, rigorous change control and operational readiness focus. This is ACWA next chapter. Given the ongoing geopolitical situation and the ongoing threats in the Middle East, our first priority is the safety and well-being of our people across all locations. ACWA has taken several precautions to protect our people and our assets to ensure the well-being of our employees and business continuing. We're working closely with our partners in every country, including government authorities, offtakers and security officials. We're implementing necessary steps to ensure the safety of our people, our networks and our water and energy assets. Our global safety and security teams are monitoring the situation closely. We have even initiated around-the-clock command center to do so. And with that, I would like to go back to Ozgur to go through the details behind the results. Thank you.

Thank you, Dr. Samir, and thank you, Marco, very much. Now here we go with the results. But before I hand over the word to Marco, let me do my usual reminders that there is a disclaimer with respect to the material and remarks we will use during this call, particularly on the forward-looking statements. And all materials, including our comprehensive investor report as well as the usual management discussion and analysis report are on our and Tadawul websites and as well as the financial statements and this call material. Now without further ado, let's go into the results call. Marco, it's over to you.

Thank you, Ozgur. So let me start by telling you the overarching theme of this 2025. It has been a year of acceleration, scale and maturation like never before in our history. And I think that today, ACWA is doing something that no one else in the world is doing. We achieved very strong financial results with an operating income that increased about 20%. We closed more than SAR 69 billion, almost SAR 70 billion of project financing, and we reinforced the balance sheet with SAR 7.1 billion rights issue that if you remember, was 96% subscribed with the ramp-up being 6x oversubscribed and a significant inflow from foreign investors. By the way, we also closed the first private debt placement on a refinancing in Saudi Arabia with private insurance companies from the U.S. So we're really expanding the pool of capital that is available to ACWA to fuel this massive growth. And this growth in 2025 was equivalent to about the sum of '23 and '24 together that altogether is equivalent to the previous 18 years in the history of the company. So you see really this acceleration. We have proven what we had told you 3 years ago that we were going to grow massively to reach this $250 billion of assets under management by 2030. This year alone, we added 25 gigawatt of capacity in power generation and 2.1 million cubic meter of water desalination per day. That includes the acquisition of the Engie assets. There is a great complement in Kuwait, where we won also the tender for Az-Zour 2 and 3 that was signed early this year, and we reinforced our position in Bahrain. Key milestone included also region strategic priorities. So water desalination, where we're the #1 player in the world, we control 1/4 of the global capacity, and we want to expand beyond the region that, as you know, is the core of the industry worldwide. So we signed the first agreements in Azerbaijan and Senegal outside of GCC. We brought the first green hydrogen or green ammonia plant into operation in Uzbekistan, and we did that in less than 2.5 years from concept to commercial operation. We became the largest investor in electricity in Africa, and we confirm to be the #1 in Central Asia as well. We added 13 gigawatts and more of capacity and 1.7 million cubic meters per day of desalination to operations. That is 3 to 4x what we used to do up until 2021, 2022. So we tripled the speed of execution. We, as I mentioned, brought into operation the first ammonia plant, and we are well on track of delivering also the big NEOM Green Hydrogen Plant that is now 90% complete, and we started commission. We achieved 28 between ICOD and PCOD predominantly on time, increasing our execution clarity and track record. In operation, we have very good operational availability in renewables, in water. We are at a world benchmark level there in the top quartile. And we made promising progress with the CSP and the CCGT that, as you know, from previous calls and previous announcements, we've had some shortfalls that we had to recover in Noor Energy 1 in Morocco, in Oman and in Uzbekistan. Overall, over the last 3 years, we reduced forced outages by 50%. We reduced LTIR by 50% in the last 3 years. And although we had tragic fatalities this year, I am confident that the company is much stronger and better positioned now to address also this in the future. We also improved reliability. So the number of trips in our projects decreased by 35% in power, by almost 20% in water. So not only less outages, but less trips that make it more reliable in the market for the grids. And that is increasingly something that is very important for all the grid operators, transmission system operators to be reliable on our plants. And succession is the last point. I'm very glad that we were able to secure this succession so smoothly with Dr. Samir, and you will see with the number of appointments that we will make from internal pipeline. If we move to the next slide, that reflects in the scale, reach and delivery where you can see that we're well on track to deliver the 2030 targets of Strategy 2.0. I think that the only one where it's still kind of moving and we continue to monitor closely the market is green hydrogen, where, as you know, regulatory uncertainty drives what the offtakers will want to commit to. So what I want to reinforce and reassure is that we will not do new green hydrogen projects unless they are fully contracted, and we're working eagerly to achieve that. We now, more or less, doubled the size of the company since 3 years ago, and we're now on track to double again to the 250 million milestone by 2030. And as Dr. Samir mentioned, we're going to increasingly do so, focusing on the profitability because we have the ability to be selective in this growth. But with the equity commitment reaching now $2.5 billion roughly on average every year compared to $1.1 billion at the time of the IPO, I think that we have delivered on our commitment to really being able to scale up to this level. Moving on to the next slide, you can see also the operational improvement that underlines and underpins the ability to deliver strong recurring financial. Power availability in renewables is higher than what we achieved before. The same for water desalination. As I mentioned, on the overall power with the shortcomings that we had in bringing online the Sirdarya project in Uzbekistan and the outage that we had on 2 plants in Oman, we're shortly below what we achieved in 2024, but the team are already working hardly on achieving these numbers and improving them for the next year. Overall, as I mentioned, it's a 50% improvement despite this setback, both in outages and the LTIR. So I think that it's a company that you should be proud of and that I'm sure that under the leadership of Dr. Samir, we'll be able to ensure better continuity and better track record also in the future. With this, I would like to pass to our CFO, Abdulhameed, to comment the financial performance.

Thank you. Thank you. Good afternoon, wishing you all best remaining of the month. So I'll take you quickly through the financials, and then we'll pick up a few questions from the audience to go through it. So, as mentioned by both Sam and Marco, excellent operating year when it comes to operating income. We have delivered a 20% growth compared to last year. When it comes to the overall net income, was around 5.4% higher than last year, and we'll go through the details on the logics and the reasons behind that, along with a very strong operating income of POCF, which is around SAR 3.2 billion, 13.5% increase from last year. And this year, this POCF has been delivered without any capital recycling or capital gain cash coming in. So that's definitely a very strong and solid POC that we have delivered. And we have maintained our net debt to POCF on check. We have delivered now almost 5 years of less than 6.5% of net debt to POCF despite the fact that we were giving signals that it could go above that. But thanks to our capital raise of the SAR 7.1 billion, we've been able to boost and strengthen our balance sheet, and we were able to pay off some of the existing debt from our existing cash flow based on which we have delivered a very strong reduction on the net debt to POCF this year. So all the track record for the last 5 years and since the IPO, there is a double-digit increase in CAGR of operating income, net income and current operating cash flow. Moving to the details, so we'll start off on the development side, as highlighted by Marco specifically on the financial record year, SAR 70 billion project has been closed during 2025. This is definitely the best year in our history when it comes to the number of financial closes. We were able to have more than 23 gigawatts of new capacity with around 300,000 -- sorry, 300,000 meter [ cube ] per day of water and additional 3,000 tonnes of green hydrogen. When it comes to capacity that we brought online with this 28 [ ICODs ] has driven, it means that almost every month, we are delivering 1 or 2 units during the course of 2025. That is significant. And you can see it also on the chart from 3.1 gigawatt that we used to deliver on a yearly basis to operation. Last year, we have delivered 8.2 gigawatt of power capacity. Definitely, there has been high records, and I will start with the highest ever been presented operating income of 3.6 billion. A lot of new capacity that came online that we talked about earlier, I will go through the details later on. But a bit of details I would like to share with you with the total investment amount that we have delivered last year. So if you look at the 76 gigawatts, I think there is three messages that I would like to share with you here. One is that when it comes to our business model and the way that we have explained multiple times in the previous years, I think we have a clear demonstration in the 2025 financials. We have said every time, for each ACWA Power delivered, its equal $10 of projects. And you can see in this chart specifically that in the $76 billion basically that has been delivered of projects last year, ACWA Power equity was around 10% of that. And then we had our partners' equity, which is around 14%, and the remaining 76% was all on an nonrecourse basis outside our balance sheet. Deep diving to the details and looking at what last year used to be a big challenge, which is the liquidity in the Saudi market, we can show you that actually we have realized only 50% of all the debt has been raised in the Saudi market, whereas we have used more than 20% on the regional and 30% international. We have also tapped into a bit different liquidity pools including ECAs, [ PIFs ] and project bonds that has been capturing almost 1/4 of our liquidity pool last year. This is definitely a landmark movement for a couple of reasons. One is that it's just a demonstration that refinancing is always achievable and new liquidities can be formed within a short span of time that we have delivered. Project bond, which is now 2% of our portfolio, I suspect that within the coming years, it will be a big part of our refinancing initiatives. So that's definitely a big liquidity that will come to our pool of operational assets that will free up the liquidity for our growth and fuel the future of ACWA Power. So with that, I will also move to the next slide to talk specifically more about the plant that came online. Now building up to the largest number, which is the operating income, the 3.5 billion. If you just quickly reflect on how does that build come from 2024 numbers, you will see that we have definitely did a great job on the development side. So as mentioned earlier, the financial closures have delivered a very strong revenue, which is around 672 million higher than last year and also some of the construction and management service fees that you collect or we collect during the construction horizon and not only specifically for the first year of development. The second contributor mainly comes from the asset itself. So this is mainly on the assets came into operation, along with the existing and big settlements that we have closed related to insurance, EPC settlements that I also have the breakdown later on to talk about it. There is also a small comparison of lower development costs and provisions and write-off compared to last year. On the negative, there was a big gain recognized last year or last year, the 2024 related to the divestment of Bash & Dzhankeldy that was not recognized in any divestment in 2025. So that's the SAR 402 million. And then also there was another gain that was in 2024 related to the restructuring of ACWA Guc, which is our project in Kirikkale, that is not also visible of nothing similar in 2025. So you can see that there is a good boost from the recurring, less dependence on the one-offs, but still we have one-offs that we are trying to shy away from as we move through our journey. The next slide, we talk about specifically the net income and the adjusted net income. So building up from what we had, the 611 increase in the operating income, there is a small gain or difference increase in the higher financial and other income, including the lower NCI. And then looking at a big drop, which is item #3, it's related to two main things. One is that we have taken an additional impairment charges related to NOOR III, and we are also building up a new tank in NOOR III project, which is immediately impacting our P&L as it is less capitalized. Along with in the previous 2024 numbers, we had a reversal of impairment that is not existing in this year, based on which cumulatively, it's around SAR 500 million less in 2025. We have also a higher zakat and tax charges, including deferred tax impact as well, around SAR 100 million. So that brings us to SAR 1.8 billion. If you take the adjustment of both items impairments, which is around 250 million [ solely on ] NOOR III, and there was a [ tabulation ] of one project in Africa, which we believe that is an [ unrecurring ] instance because this is the first time in our 22 years experience that we had a project being terminated because of a couple of days delay in the [ launch ] date, based on which we are adjusting for that. And this is another $92 million adjustment. And we are relating to the $2.1 million net income or adjusted net income. The next slide with the building blocks, it will give us a better link to our operating model. So you look at it here through the development, best operate and optimize, and you will see the same numbers at the bottom. I will not go through the details that I have actually explained earlier, but just to highlight a few things, you can see immediately that item of bucket A, which is the developed bucket, significant improvement and big development business increase in 2025. The second bucket, which is the invest, did not do well, I would say. You can see that it has not moved the needle in a year-on-year progress. And this is mainly driven by two things. One is that in 2024 number, we have 100% share of holding; whereas from 2025, we have 70%. So we have lost 30% of our strategic assets. That is contributing around SAR 130 million. So that's one part. The second part is NOOR III, which is mainly the building up of the tank. This is another hit of SAR 120 million. So I suspect that is one-off. And hopefully, you will not have that recurring in the future years. So this is where we have the second bucket. For the third bucket, [indiscernible] continue to improve. You can see there is an increase of 130 million. You have also the other operating income mainly coming from the higher service income, and that is associated with the volume of the business. The capital gain, I would say we took a break in 2025. So you don't see that big gain of cash allocated. However, this is something that we continue to operate in and we continue. We have identified a couple of opportunities for recycling in 2026, we are expecting to execute on this as well. This brings us to the last item, which is mainly the cost. And you can see that there is a higher cost mainly due to the hedging income recognition and the termination that I have highlighted earlier on the project -- sorry, the South African project that we have. We move to the next slide on the POCF. So POCF, I will talk about the buckets related to the increase on year-on-year. So you can see that the cash inflow, there is a SAR 1.4 billion coming up from the distribution of mainly the project company and there is another 2.7 which is higher -- SAR 2.7 billion is related to the development business, construction and management service income that came into a record of development. And there is a gain of around SAR [ 466 ] million related to refinancing mainly. This brings the total cash to around SAR 4.6 billion. And if you take out all the costs related to the operating costs, G&A the financial charges, zakat and tax, you would reach a POCF of around SAR 3.26 [ billion ]. Moving to the sources, and not to repeat what I have mentioned earlier, so quickly, we have SAR 3.2 billion of POCF. We had in the beginning of the year around SAR 2.9 billion, and we did a drawdown of around SAR 700 million. SAR 7.1 billion is the capital increase. You had a total cash position of around SAR 14 billion. We have consumed SAR 7.5 billion to reach to a closing balance of SAR 6.3 billion. Looking at the details, it's very clear on the chart on the right side that most of the funds are actually going for investment. So 82% of all the spending of the cash was investing in projects, whereas around 16% is mainly financial charges for the school and existing facilities that we have. And there is a small 2% related to the share buyback that we had for our [ exit port ]. On the final slide I have is related to the leverage. So quickly on the net debt to POCF, let's talk about the leverage first. As we usually do, you look at the full balance sheet. And if you look at the full balance, which is around SAR [ 51 ] billion, and you take the recourse funded facilities only, which is primarily all the basically project company debt that is recourse to ACWA Power, Sukuk and PIF loan; this is cumulatively SAR 10 billion. And then we add anything off balance sheet, but we have corporate guarantees from ACWA Power and this is a financial application. This is the SAR 15 billion. So in total, our leverage is around SAR 23 billion. We subtract the cash position that we had towards the end of the year. This is around SAR 6.3 billion, and we reached a net leverage of SAR 16.7 billion. And what we have presented earlier, which is POCF, we are reaching 5.2 multiple or 5.2x net debt to ratio, for those who are joining us for the first time. And theoretically, this means that if we continue to have the same POCF , we can pay all the debt in 5.2 years. We'll pause here. I think this is the end of our presentation, and we'll open it up for Q&A.

[Operator Instructions] And our first question is an audio question from Zoom from Giuseppe Villari.

Giuseppe from Morgan Stanley here. The first one, a bit of an obvious one, but what's the impact you're seeing currently from the geopolitical tensions? Are you seeing any impact to one of your plants or to your workforce? Is there some like commentary that you can give whatsoever? And then secondly, you mentioned capital recycling for this year. Could you give the market a little bit more color on that? That will be helpful as well.

Okay. In regard to the conflict, as I mentioned earlier, we really have around the clock 24-hour command center, basically with the 3 ships we're taking, and we're really monitoring the situation with our employees, with our assets all around the world. And again, everything is under control. I mean we're in very good shape. And again, we're keeping an eye on what's really developing, which is -- it changes by the day. And from operating assets, all is going well also, we have many projects under construction. We have around $47 billion worth of project under construction, everything also under control, the shipments. So so far, so good.

I can add a bit more there, and then I will talk about the capital recycling. So also just to keep highlighting the way that how we build up the insurance program for our projects, so for all the assets under operation, we just did the big renewal of last year, and there is a specific coverage related to -- political-wise, including wars. And for the marine cargo for the projects under construction, we also have that covered. But there is, of course, triggers for termination or renegotiating if we want to keep that basically coverage. Depending on the situation of the project, we might decide to delay the shipment or renew the program at a higher premium. So that's something that we are also looking at. In relation to the project under construction, we don't have similar coverage, but we keep monitoring and see how things develop. So far, there is no impact specifically in any of that. I think that's the key, yes. When it comes to the capital raise, I highlighted that for two reasons. One is that to demonstrate that the POCF increase is not only delivered higher year-on-year, but also if you exclude -- if you look at 2025, we delivered that without any capital gain. We did some divestment, but it was mainly through EBL replacement. So there was no capital gain for us. When it comes to 2026 and beyond, definitely, there is a plan for capital recycling for the following reasons. As we said earlier, any asset that we own more than 30% to 40%, it is a position that we would like to partially divest and recycle and reach to the optimum level of 30% to 40% ownership in the project. So that will be a priority for us. And second is that we have actually -- as we highlighted in the previous calls, we are shying away from single asset divestment to bring the portfolio divestments. And we also mentioned that it might take time. And indeed, we are seeing that taking time for our first plant divestment. So that's both points. To answer the question, yes, recycling remains a core business for ACWA Power.

And our next question comes from the phone lines. The question comes from Prateek Bhatnagar with Jefferies.

I have two. The first one is on the project pipeline, specifically in Saudi. So if you look at the advanced projects pipeline, there is no project from Saudi. Could you help us understand the growth you are seeing in Saudi, given all the announcements, the pullback from the giga projects? So that's number one, on the projects in Saudi. The second one is on the -- recently, you have announced the power purchase agreement you have done in Turkey. Could you give some color that how is it different from the early ACWA book project which you implemented in Turkey? What are the fundamental changes why you believe that the recent project will be successful?

Sorry, at the beginning of the first question, you said that, you mentioned that the KSA development is what? Because we lost you.

So the project pipeline, the advanced project pipeline, there is no project from Saudi. So if you could give some color, what kind of projects you are seeing, the pipeline you're seeing from Saudi in terms of power generation?

Okay. So when it comes to the pipeline in Saudi, actually, we see it as a rich pipeline. I don't really understand why you have highlighted there is no pipeline for 2026. So first, if you look at ACWA Power mandate, we have 70% of the renewable program in Saudi under execution, we have delivered up to PIF last year. And you have seen we have signed the largest renewable program, which is 15 gigawatt of last year. We are indeed working today with the offtake and relevant stakeholders to deliver on the next PIF potentially PIF 7 and 8. So that's definitely one. We are now in the final process of closing a second expansion to the CCGT plant. We are also waiting results for IWP projects in Saudi. And we are looking forward as well for the results for the. So overall, there is actually a very rich pipeline of growth in Saudi Arabia in 2026, and I also expect the same to continue in 2027. Given the recent geopolitical volatility, how sustainable this pipeline are concerned, we have to wait and see. I think that's definitely -- there could be delays a few months here and there. But we are uncertain, and we are working as business as usual. For the PPA in Turkey, we have indeed signed. So the program is quite bigger, too big at this time with the heads of [ taps ]. So once we sign the PPA, we'll announce it in the Saudi Exchange. We are reflecting on the recent [ value ] we had in the previous project in Turkey. So we are making sure that first there is a PPA, which is a power purchase agreement, which did not exist in the Kirikkale project. So that's the first principle to proceed with the project in Turkey. The second is that we are structuring the tariff of the payment aligned with the financing of the project, whether it is euro or any other currency, we'll have to make sure that there is a natural hedge to avoid the risk of that we had in earlier. So if you look at the previous project of ACWA Power, we had a fuel risk, we had a merchant risk and we had a currency risk. And with this structure that we are planning, we are trying to avoid these big three risks. And if we eliminate these big three risks, we are comfortable to proceed with the projects in Turkey.

And our next question is a written question from [indiscernible]. How should we think of development and construction revenue in 2026? Since the last 2 years, this revenue stream was pretty strong. Should we expect it to be as strong as 2026?

Yes. Thank you. So I will link it really to a few things. One is that what we are planning to do in the next 5 years. So we have highlighted last -- since 2023 that we are planning to invest between 2 billion to 2.5 billion of equity for the next few years. By considering that, it means that we are remaining -- planning to invest and develop projects on the same. So the commitment from our side is there. And we are ready with a strong balance sheet after the capital to deliver these projects. How does the market? So far, we are seeing a very rich pipeline for developing projects. And we believe that we'll continue to deliver on these numbers in 2026 and 2027. Yes, there will be years of slightly lower numbers, there will be years of slightly higher numbers, there will be years of that. Development is not going to be an immediate hit if there is development because some of these services is extended to the full execution period, and that's specifically to the develop. So with these in mind, I think you can run your sensitivity first on how the different offtakers deliver these projects as the pipeline. Second is that how we will be able to close some of these projects on time and some of them could be delayed. So based on these two scenarios, you can see a bit of movement in the development phase.

[Operator Instructions] And our next question comes from [indiscernible]. A few from my side. First question, can you please share the latest renewable pipeline details awarded by pending contract signing and bids deals in pipeline? The second question is what's the renewable and conventional capacity that KSA plans to tender out in current year and 2027? The third question, could you again explain how we plan on mitigating project execution risk due to ongoing global conflicts? Thank you and best wishes.

Okay. So if you look at this slide, we are showing you the breakdown of the projects in the different sectors, which is power, water and green hydrogen. And then there is the AD, the AD is the advanced development project. So these are the projects that been awarded to ACWA Power it comes to basically our physical award, but we have not yet achieved financial [ course ]. So this is considered the first step on our development pipeline. The second step is related to the pipeline, is the projects that are in early development, which is not presented here. And there is definitely a big pipeline that we are looking at. I just highlighted what is there in KSA. I also highlighted basically which is there in [ third Q ], which is the 5 gigawatt, meaning that there is 2 plus 3 between advanced development and early development. We are looking at several projects in Africa and Egypt specifically. We are waiting results for 2 projects in Morocco [indiscernible] 2 and 3. There is a project of Senegal Water that we are looking at, and there is a potential renewable project as well there. We just recently opened our offices in Malaysia -- sorry, in Philippines. And we have an office in Malaysia, and that's also looking at development there along with Indonesia. So Southeast Asia remaining a big part of upcoming development that we are expecting a decent pipeline coming from there. And finally, China, now we have scaled up big time last year, and there is a potential big pipeline coming up from the China projects. Perhaps on the annual report that is attached to the financials, there is more detail that you can refer to as well there.

When it comes to the project execution, we're currently working with our EPC contractor partners and also suppliers really monitoring the situation and adjust as we go. It's very dynamic. But the majority of our projects in the area are really in Saudi Arabia, they're all performing well. Basically, we really have no negative impact. We have also a project in Kuwait that we just started and one also in the Emirates. Again, we're still going ahead with these, no changes really, and we're trying to manage as the situation develops around this. So -- but so far, it's been going very well.

Maybe the last question related to question -- can you explain again how the mitigation risk for the ongoing global conflict? So I talked about the insurance, I don't need to repeat that. But on the structuring of the contract, it's important to highlight that our -- almost 90% of our projects are based on an EPC lump sum turnkey solution. So really, the execution risk falls under the responsibility of the EPC contractor. And this is definitely is built in the overall EPC price that they have shared. There is [ force majeure ] event that can be escalated by the EPC contractor to our project companies, which is mirroring the same clauses from us and the project companies to the offtakers. So we expect and we have seen during our COVID-19 experience that the relevant offtakers can give us a relief and time extension when it comes to the execution of the projects, depending on how far this geopolitical conflict extend and how much impact it happened when it comes to the lockup period. So the structuring of the contract is fairly solid to protect us, and we have to work hand in hand with the EPC contractor to deliver the project safely and with a win-win positioning for us along with the EPC contractor.

Abdulhameed, I just would like to add one more thing because Omar has asked another question, whereby she was asking for KSA's plans for the existing current tenders for the current year. Omar, I think this topic is widely covered in the press anyway. So Saudi Arabia is pretty transparent with respect to their renewable energy transformation targets. Round by round, it's only hitting the news as soon as the government is ready to do that. But what I would like to highlight there is, obviously, you remember, we just -- last year, we have closed 15 gigawatts of PIF pipeline, which was a record capacity that was PPA in one city. And obviously, again, you know that as soon as we announced one round of PIF, we already started negotiating for the next round. So this round is now being obviously discussed between us and the Ministry of Energy and PIF. So that is on one side. But in the long term, again, the second point is 2030 renewable target of Saudi Arabia has not changed. It is still sitting at 130 gigawatts that was announced. It reflects to our numbers because of the AC/DC conversion as 103 gigawatts. You all know about this from your discussions with us. This has not changed despite several rounds of budget recalibration. And I think this is another testament to Saudi Arabia's the government's seriousness of transforming the energy mix in Saudi.

Okay. Is there a question to repeat the risks of Turkey? Correct. Yes. So basically, I have highlighted the risk, which is the fuel risk that we used to have in Kirikkale project. We are not having it obviously because it's a renewable project. There is a currency risk where we raised dollar funding to fund Turkish lira merchant project, which is, again, we are trying to mitigate by raising the funding with the same offtake funding that potentially could be a EuroLink. The third risk is that merchant risk in Turkey that is existing in the market that we are trying to mitigate it with the power purchase agreement fixed from day 1. So with these three, our upcoming projects are adjusted for these three main risks that we have seen in the past.

But the contract will be in euros.

Yes. So if it's in euro, I mean, we will have [indiscernible].

And our next question comes from [indiscernible].

This is from [indiscernible] from HSBC. I joined the call a bit late, so apologies if this was already discussed, but just to understand better the numbers in Q4, I understand that there have been quite a few financial causes. And is my understanding correct that the 2025 results capture the associated project fees or we might see some of them spilling over and showing up in first half of 2026? This is my first question. And secondly, on China, you mentioned a strong pipeline of projects there. I have just learned recently and forgive my ignorance if I'm missing something, but I've learned that as of mid last year, I think Chinese government stopped approving the feed-in tariffs for the new solar projects. Has that changed the outlook for investments at all in China for you?

So thank you. Maybe for the first question, we covered a bit earlier before you joined. But just to reflect on our first-half guidance, definitely, we cannot give a full visibility on what is the expectation on the development because simply it's linked to so many different variables. So some projects, we are getting very close to the financial close, but also certain CPs linked to the different stakeholders. So whenever we reach them, we are achieving the financial close and we can also expect the construction service fees to be kicks in. For some of the development projects, we have actually been awarded, but we are waiting for the PPA or the [ agreement ] the to be signed. So on an overall basis, from a year perspective, we are expecting a solid year when it comes to development. On the first half, I think we'll have to wait and see, especially with the recent development of the market dynamic and the geopolitical challenges. For China, we had delivered around 500...

Let me take China because I understand what you are talking about. So June 1 changed the rules of the market. The feed-in tariff had expired already before. And there was a big question on receivables on feed-in tariff, but those are not our projects. Our projects are already in the next phase where basically the price is set in the market. So there is not an explicit subsidy. What happened on 1st of June is that they made the further step in the liberalization of the market about the price-setting mechanism, which was anticipated. So actually, we had already taken into account the potential curtailment and price-setting mechanism because we need to look at 20, 25 years ahead. And we know that there are models like [ Plex ] and so on to define basically the demand supply in the different areas and calculating your own vision of prices. So this is already embedded when we take the investment decision. But of course, what the impact was in the market that there was an acceleration in the first half of the growth and the second half was a bit slower. And that's why in the second half, you have not seen a lot of activity also by [indiscernible] in terms of new projects. Now we brought at the end of the year a number of projects for approval in our Investment Committee. And so throughout the year, you will see progress on those.

And one more question, if I may, on the M&A side. I think you've seen -- I've seen that you have made -- have completed quite a few deals in the region. Do you -- are you interested to continue to acquire assets in the region in the Middle East? And is there a pipeline of assets being offered at the moment?

Yes. So if you look at -- basically our acquisition is complementing to our business model. So when we say that we are targeting 2 billion to 2.5 billion of equity investments per year, this is including both greenfield and brownfield. You have seen that we completed the acquisition successfully for the assets in Kuwait and Bahrain. And definitely, you will see we closed towards the end of December. So there was no impact in 2025. You saw also that we have announced the acquisition of 30% or 32% of PIF shares on [indiscernible]. So now were are waiting for the clearance on the completion of the CPs to go ahead with that. So that's definitely another acquisition that we are waiting results on. And we definitely are open for greenfield opportunities in multiple locations, including Africa, Southeast Asia and China. And the KSA market is quite less active because we have been quite understanding the market well, and we have seen that we are capturing most of the greenfield and most of the existing assets. The GCC, there is -- we are very selective. I think we have satisfied our desire with the latest acquisition of the portfolio of ENGIE. We don't see anything that is materially coming up, especially that most of the countries in the GCC, we have almost hit the limit when it comes to single developer targets capacity.

[Operator Instructions] And our next question is a written question from Abdullah with MAIG. Should we expect a dividend distribution this year? If not, what factors need to be met for management to consider one? Thank you and best wishes.

Yes. Thank you. So at the IPO time, we have announced our 3 years dividend policy or let's say, 3 years dividend plan, which has been executed successfully. And we have delivered on that, actually quite higher than what we have expected or what we have shared with investors when it comes to the dividend distribution. Last year, we decided not to distribute any dividends at the level of the Board, and it was basically a year of focus for the capital [ risk ]. And this was something that delivered very well last year. Today, we are actually working with the management, the Board to design what can be the dividend plan for the upcoming period, which is from 2026 to 2030. We have yet to share this with the Board and with the shareholder later on for endorsements. So today, we don't have anything handy to be sharing it with you. However, from your side, you should be expecting that we will deploy most of the cash for reinvesting in our pipeline given the strong pipeline -- visible pipeline that we have in front of us. So the guidance definitely is to go big in investing, and we can discuss once the Board approves the dividend plan for the upcoming period, and we will share it with you.

[Operator Instructions] And as we have no further questions in the queue, I will hand back over to the management team for any final comments.

Thank you, Carla. Thank you very much, everyone, for your participation and joining us today. It was a very good call, at least as far as I can see it from here. And thanks for your active questions. If you have any further questions and you know the protocol, you can just reach out to us at IR or you can use our e-mail addresses, and we will be more than happy to answer them as quickly as we always do. And with this, I would like to close the call, and I would like to thank Marco, Abdulhameed and Dr. Samir, as well as everybody who has worked for the preparation and answering all these questions and for you, of course, for your joining us today. Thank you very much. This concludes the call.