Barka Water and Power Company SAOG (BWPC) Earnings Call Transcript & Summary

[Foreign Language] Adnan, please provide on the financials.

Thank you, Salim, and good morning, all. From the financial performance of the company for Q2 2025 as compared to Q2 2024, overall performance is significantly better, and the company had reported net profit after tax of OMR 0.3 million as compared to loss of OMR 0.5 million in the comparative period. Overall, these are not apple-to-apple comparison. In 2024, the company results were majorly dependent on the operations of our RO plants, and power plant was only get commissioned on June 6, 2024. Subsequently, as Salim previously explained, our RO plant, our WPS for our plants got expired on September 29, 2024, and our power plant got commissioned. As well as in November, our MSFE plant got commissioned. So H1 2025 results are represented by the operations of power plant and MSFE as compared to last comparative, which was majorly based on the RO plant operations. So that's why our revenues, our gross profit has been increased, and our gross margin remains at 13% as compared to 7% of the comparative period. The other costs, definitely, we did the refinancing, as you are aware in last October 2024 that resulted in our higher finance cost because we did a refinancing and debt distribution to our shareholders. So the lump sum, the overall, our performance was quite better as compared to the last comparative period. Yes. Salim, back to you. Thanks.

[Foreign Language] Maybe I'll go back in English. We just completed a high-level overview of the prior quarter performance. If there any questions related to the company presentation with regard to operational, financial or outlook, we're very happy to respond.

Adnan, are you seeing anybody raising hands for that?

Not yet, Salim. No queries here. Yes, [ Shahur ] from [ Bijan Capital ].

So I just wanted to ask, is there any update on the RO plant? I know you're -- I remember in the last call you guys mentioned that you'll be waiting for the first quarter and if there is any update. If not, then you'll go ahead to scrap the plant. Is there any update on that front? Are you guys planning to scrap it? Or are you waiting still?

Yes. With regard to the RO plants, as you recall, I just indicated that both contracts ended in September 2024. We have been in dialogue with relevant authorities, whether there is any future possibility of utilization. So far, we have not received any official confirmation. We are in the process of obtaining request -- or we have submitted a request to delist the capacities, and that will be like a year after the expiration of the prior contracts. In the event of approval, we will -- in the case that there is no future outlook, we will proceed with the sale of both assets.

Right. And is there any expected gain that you guys expect from the sale of these assets? I know that you guys have recently impaired the value of these plants. So is there any gain post impairment?

There is -- yes, go ahead, Adnan.

Yes. Thanks, Salim. So on this -- when we did the impairment on year-end, right, so we kept the residual value being realizable in our impairment testing. So that is still sitting in our of books. So in case, if we will not receive any positive response from the offtaker of the regulator and we go ahead with the disposal, then upfront, we are not expecting any gain or loss. But definitely, when this exercise will start, it will be a long exercise. And it will -- it might take a year. So at that time, we will know better how the situation will be. But right now, from the number's perspective, from our book's perspective, we are not expecting any gain or loss.

By the way also, from the sale process, we'll have to return the location, the release area to original sale. So that is already will be covered under this. So as Adnan indicated, we're not expecting any gain. But however, as well, all liabilities with respect to returning the plot areas to real estate will be covered under the sale process.

Right. I have another question if you guys allow. So your total debt on the -- because you mentioned in the previous call that the servicing is scheduled in a way that a portion of your debt is to be repaid in the next 3 years based on your MSFE plant there agreement. And then another portion of it is to be repaid over the term of our PPA. Could you give us any idea of what percentage of the total debt is to be repaid principersonal in the next 3 years? And my other question will be after this -- after the next 3 years, obviously, your debt repayment, your debt servicing number would come down significantly, as expected, right? So there will be additional free cash flow available for distribution once this 3-year debt repayment is done?

Shahur, as you rightly mentioned, so how our debt service was scheduled, it was based on our free cash flow. So in the first 3 years because we will have MSFE as well as power, both plants have operating cash flows. So our free cash flows are higher as well as our debt service. Once MSFE will be out, it will result in lower debt service, as you mentioned, but also definitely lower free cash flows because MSFE cash will be out. So that is scheduled based on the free cash flow, which we are expecting over the term. So yes, Shahur, that will be lower, free cash flow will also be lower after 3 years. Hope I answered your question.

Yes, yes. It's clear. I just have -- if you could give us an idea of the numbers. So I'm looking at your balance sheet, your current payable within 1 year is OMR 5 million. So I was expecting with the principal repayment during the next 12 months was for OMR 5 million. Then you are out of our total debt of close to OMR 24 million. The OMR 5 million is paid over the next 3 years, I'm assuming, this would remain constant. So you will be left with close to OMR 10 million of debt, which will be repaid from '28 to the end of PPA. Is that correct, sir?

Okay. So that's not that straight perfect calculation. So our MSFE as you're aware, it 3 years contract, which we already disclosed. That it is going to be expired in September 2027. And after that, definitely, the subsequent debt will be rescheduled based on revised cash flows after the MSFE expires. So yes, on year-to-year basis, it will work like this based on the borrowed capitals.

Okay. So please correct me if I'm wrong, but if I'm seeing OMR 5 million in your current debt repayment over the next 12 years, am I correct in estimating that OMR 5 million is the amount of the debt servicing or principal repayment that you'll be paying in the next 12 years, out of total OMR 24 million debt?

Yes. 24 months, if you go in our financials, so you will find the current portion of the debt. So that current portion is absenting what we are going to repay in the next 12 months, yes.

Yes. And that's OMR 5 million, if I'm not wrong.

That's right. Yes, that's right.

Okay. So this is for the current year, and I'm assuming that, as you mentioned, as we discussed earlier that the initial portion of the total debt is to be repaid over the next 3 years until the MSFE expired. So this OMR 5 million you are saying is expected to continue until 2027.

We have -- it depends on how company has after this free cash flow. I cannot disclose exactly the numbers or have pictured the numbers. But yes, conceptually, you are right. And what we have already explained to the market before also that in initial 3 years, when we have both contracts, the cash flows are high as well as debt service. And subsequently, cash flows will be lower as well as the debt service.

All right. And your MSFE plants, obviously, the agreement is for 3 years, but it has an option of extension up to February 2033, right? So do you expect this extension to -- I mean, it's too soon right now to comment on this, but would you have an idea if this will be extended because there is an option for extension.

This is at the discretion of the offtaker as this -- the MSFE was contracted in very late stage based on emergency needs. So this is purely on the result of offtaker in terms of the water department future needs and then their expectation in terms of emergency level fluctuations. That's why -- but it is already pre-agreed in terms of contractual terms are already been set between the company and the offtaker. So it's a matter of just triggering the extension. Nothing else.

Thanks, everyone. Any other member has any queries?

So with that, I think we conclude the session. Thank you all for attending, and we will see you in the third quarter. [Foreign Language]

Thank you. Thank you, all.