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

[Foreign Language] Adnan please go ahead with the financial performance.

Thank you. Thank you, Salim, and good morning, all. With respect to financial performance of the company, overall 2025 operations were quite different from 2024. So in 2024, our RO plants operations works for 9 months and they got ceased operations in September -- after September 2024. Further, we commissioned our power plant in June 2024 and the MSFE plant in November 2024. As compared in 2025, accordingly, the power plant and MSFE plant works for the full year and the RO plants had no operation in '25. This resulted in higher revenue as well as the higher gross profit of the company. So company reported gross profit of OMR 5.1 million as compared to OMR 4.5 million for the last year. However, on the net profit side, we are reporting net profit of OMR 1.3 million as compared to last year, OMR 2.7 million. So the reduction in net profit are basically led by 2, 3 things. The one is in last year, we had impairment reversals in 2024, and those resulted in higher depreciation for 2025 and onwards. Number second, in 2024, we had refinancing in which company borrowed loan to fund its CapEx and also to distribute dividends, et cetera. That resulted in higher finance costs in 2025. So overall, we are reporting net profit of OMR 1.3 million. That's all our net assets per share stands at OMR 0.172 per share as at 31st December 2025. Thank you, Salim. Back to you.

[Foreign Language] Now I conclude the presentation, and we'll be very happy to welcome your questions regarding the company performance and what has been presented. Yes [ Sahur ] please go ahead.

I hope I'm audible. I have a couple of questions.

You're clear, go ahead.

So I'll start with the dividend distribution. You guys have already announced OMR 0.0096 for 2026 and for 2027. And from what I have -- the time working, including starting from the EBITDA and then your debt obligations, your debt servicing after accounting for tax, you guys are left with a similar amount of cash flows. So my question is, is this dividend sustainable till the end of the current PPA, which is, I believe, 2033? Or are there any major changes expected in this current dividend policy?

Thanks for the questions. With respect to dividend, definitely, being management, we try to maximize the value for our shareholders. That's what our objective is. I cannot comment on the future dividend as it is because our PPA is not straight. So we have 9 years of power plant definitely, but MSFE is 3 years, 3 years and 3 years, which is extendable based on off-taker discretion. So the future years cash flows and dividends are highly dependent how our MSFE will extend it or not extend it. And accordingly, we will be announcing our dividends. So -- but rest assured, we'll definitely always work to maximize our values and dividends to the shareholders, as you have seen in the last 2 years also. And [Foreign Language] hope for the best.

Perfect. Very clear, sir. And yes, I do have the knowledge of this structure of your PPE. Now my next question is your debt. Your total debt is -- my understanding is the debt is to be repaid over the life of the PPA. But since your PPAs are structured differently, is there any comment on your debt side that you have to pay up more if your MSFE because your MSFE, as you mentioned, is 3 plus 2. So are there any conditions on the debt side that you have accelerated payments initially and then this might be restructured if you get the additional 3 year, 3 years extension? Or is it just a simple payment terms over 2033?

No, sure. So as I explained, so our debts are also structured in a way that start when we have MSFE plus power, debt repayments are high. And subsequently, those will be lower if there will be only power and no MSF. So our debt repayments are structured accordingly as per our cash flows.

Okay. Right. It makes sense. My next question is your plant's commercial operation date was 2003, if I'm not wrong, with a life of 40 years. So the remaining life of your plant is until 2043. Is that correct?

No, it's 35 years. So our plant life will be till 2038.

2038, right? So you guys have another -- you have a window, a small window for another PPP here?

Right.

Perfect. Now my next question is, as you mentioned that you have already impaired your RO plants. Are there -- and we have seen a small impairment this year as well of close to OMR 480,000. Are there any more impairments expected in this year 2026 and maybe onwards? Or are the RO plants fully impaired now 100%?

So RO plants were already impaired in 2024 fully, right? So all impairment was taken in '24 when our contracts were ceased. In this year, there is no impairment. However, there is an ECL expected credit loss, which we have booked on our outstanding receivables. That is as per requirement of IFRS 9. So -- but that's totally separate. On the impairment side, RO plants are completely impaired and no more impairment are expected on those in coming years.

Great. That helps. My last couple of questions is, you mentioned that your load factor is now 28.7%. Could you just give us a color of the industry, how the total demand is going? And have you seen an increase in load factors in the recent years and the total capacity available in the market, especially for MIS versus the demand that is evolving and expected to go in the next 5 or 10 years?

I will take that one, Adnan. The load factor, particularly for our plant has been slightly on the increase. However, on annual average, still within the expected 30%. Particularly in the winter period, we have seen a bit of an increase due to majority of plants are taking major maintenance during the winter period. What we are observing is the cyclical nature of the plant in terms of the addition of the renewables where we start -- the plant is being started a lot more in the evening times and less in the morning times, which is in line with the MIS grid setup at this stage. And so far, what we have seen based on the forecasting from the dispatch center is in line with what we have estimated earlier.

Right, sir. So on the peak capacity -- on the peak demand days, would you say that the MIA system is oversupplied or they have excess capacity? Or would you say that there is just enough capacity to meet the demand in the peak season?

That is more for outside our company focus. This is more relevant to the grid operator. In our case, for us as a plant, one of the plant generating plants into the grid, we have seen the fluctuation in the sequence, start-up sequence, but we have always been within the average load on average. There are periods where we have been operated 100% even in the winter time, but then it goes down back normal and this is what we're seeing as a result of, as I mentioned, the renewable increase, the renewable contribution increase and our plant given that sort of the size and setup is more frequently utilized to offset that fluctuation. However, the grid itself, that is more for OETC to address.

Yes. No, I understand, sir. And my last question is regarding your current PPA. We have obviously seen that you -- in the earlier PPA and Firstly, I would like to congratulate you guys because you guys have the best -- one of the best disclosures in your financial statements where you segregate and you gave us separate numbers for capacity charge for both power and water. So studying those numbers, back in 2020 and 2021, your capacity charges were higher, significantly higher than what they are today. So what I'm trying to understand is that is this a norm wherein the -- under the renewal of the PPA, the authority is compelled to reduce the capacity charge by 35% to 40%, which is the case with your company. And this is just the power. This is excluding the water because for water, we know that the RO plants have not been granted the renewal. But just for power, your capacity charges have gone down by close to 40% between 35% to 40%. So is this the norm? Or is it something specific with your company and it is -- it is not something that is normal and should be expected from other renewals as well?

I think this is quite normal. Typically, the grid is operated on economic merits and with the introduction of more recent plants were more efficient. So the bulk supply and for the grid on average, each contract, whether renewed or new has to be within the band of that bulk supply tariffs. So this is quite obviously common in the industry across the world where with time lapse, you have more efficient plants and the existing plants have to match the efficiency in terms of the overall cost of the grid. So it's quite common and this is well understood.

Any other query from any participant? If not, then Salim sir, we can close the session.

Okay. Thank you, everyone, and hope to see you in the next quarter [Foreign Language]. Thank you.

Thank you. Thank you all. Have a nice day.