Dhofar Generating Company SAOG (DGEN) Earnings Call Transcript & Summary

[Foreign Language] Good evening, everyone, and welcome to Dhofar Generating Company business discussion session. Today, myself, Amer Al Mashani, the CEO of the company; along with our finance team, Sajjad Imam, Ghulam Abbas and Esmaeel are present in this session. During the session, we are going to present the unaudited financial statement for 2025 -- 31st December 2025, along with our generated performance. After that, we'll open the floor for the Q&A session end of our discussion. So now I'll hand over to my colleague, Esmaeel, to present the business performance and our operational performance. Esmaeel, you can go ahead.

Thank you, Amer. So I'll be covering the financial update for the period, and then we will go to the business performance. And finally, to the question and answer. So in the financial performance, revenue is OMR 65.3 million for the period, and which is higher than the last year by OMR 5.8 million. And this is mainly due to the higher load factor. As you can see, the gross profit and net profit after tax is lower than the last year, and this is mainly due to the higher operation expenses, including the major maintenance of 273-megawatt plant and the heat rate inefficiencies. On the analysis, also, I would say that all capacity payments are recovered on time. And on the business performance, the availability for the 273 megawatts is 99.6% for the year of 2025 and 99.5% for the year 2024. The load factor, as you can see, it is 34.9% for the year of 2025 and 24.1% for the year of 2024. For the 445 megawatt, the availability is 98.8% for the year of 2025, and 99.5% for the year of 2024. The load factor for the -- the load factor is 61.7% for the year of 2025 and 57.6% for the year of 2024. On the business performance highlight, [Foreign Language], we achieved 10 years without lost time incident. Robust, productive and preventive maintenance procedure performed to ensure high reliability of the assets. The company has met its obligation to the lender by timely debt service of OMR 13.3 million. Now before we go to the question and answer, there is a disclaimer. I would read it -- I would like to read it for you. This presentation contains statements and comments relating to Dhofar Generating Company, and its businesses, financial position and other matters. This presentation, its contents and discussion held in relation to this presentation do not constitute and should not be considered to constitute be constructed as an offer, invitation or recommendation in respect of the company's securities. All statements and comments, other than statements of historical facts, should be considered as forward-looking statements and such statement, comments, projections, estimates and expectations should not be taken to imply any indication, assurance or guarantee of future performance. The financial information included in this presentation is of public knowledge that is disclosed on the MSX website, and it is for information purpose only. So now we can go for the question and answer, if there are any.

Thank you, Esmaeel. So now we open the floor to the Q&A session. Anyone who has any questions, please feel free to ask. We'll be waiting for about 10 minutes for any questions. Audience, please. We are just waiting for any question and answers if someone has. So yes. Perhaps maybe we'll do the question and answer 5 minutes or 2 to 3 minutes, something like that. Yes, Shaoor. Go ahead.

I believe I'm audible. Apologies for joining late. I just have a question regarding the outlook of the sector overall, the power sector in Oman. What is the current -- because the numbers are obviously a little bit delayed. So it's a better opportunity to ask the management that are here. What currently is the sector's demand and supply dynamics? Are we -- in terms of our peak demands, does the industry have overcapacity? Or are we still -- are you still running on undercapacity and more projects are needed to come in? Just a brief overview of the sector's dynamics, please.

Right. Shaoor so -- yes, Amer. Okay, I'll go first. So Shaoor, I mean, we can give you a brief outlook on the Dhofar region. So as you know, Dhofar has only 2 plants that are operating. Sembcorp was recently renewed the contract for another 9 years or 10 years, I believe. And then our contract is still 7 years. There is -- the remaining term is there for the remaining 7 years. So in terms of the outlook in Dhofar, these 2 plants are there. Then obviously, there is an interconnection that is going to happen somewhere in 2027. So overall, in terms of the Dhofar region, I think the capacity and the demand, it is pretty much sort of balanced out. Yes.

Yes, just to elaborate a bit further basically. So right now, the Dhofar grid capacity is around 1.2 gigawatt, which as Ghulam mentioned, and we have 2 plants, Sembcorp and ourselves, we are around 770. And while Sembcorp is around 400 to 500, if I remember correctly on that. The demand overall in the region has been increasing over the last 3 years. If we talk about that, there, we have seen some industrial setups coming in, mainly around -- plus some commercial setups as well, including crypto mining and these data centers. So that has propped up the demand apart from the organic growth in the residential and the commercial side, which is also growing in the range of 5% to 7% overall. So this has increased the overall demand in the region. We have, apart from -- so that has necessitated the requirement for -- in terms of ensuring this increase in demand, I believe the authorities have been working on interconnecting the MIS with the Dhofar power system, which is expected to finished by end of the year or early Q1 in '27. So that would resolve the upcoming demand shortage effect, if any, that would come because of only 2 plants being available. Apart from that, what we are aware is that there is certain -- there are certain small projects happening in the region, mainly captive for wind. And so mainly in the oilfield areas. So those capacity are mainly captive capacities. Definitely, they must be having connectivity to the grid. So that's the overall happening. Demand is increasing. We can see that from our load factor as well. There have been no new projects announced as yet within the region itself. I believe the strategy is to meet the demand through the connectivity with the MIS, where we have seen upcoming new projects, and that would serve the purpose for that.

Perfect. And what about the -- as you've touched upon the contribution from renewables. We have seen that the sector had been aggressively investing in renewables. And obviously, we all know the limitations of those energy sources. But do you see a huge influx of renewables coming in the system very soon? And if so, what would be the impact on the existing power producers?

Definitely. So how things are working is, I mean, the country has a vision to -- in 2040 of having 30% electricity under -- through renewables in the energy mix. So up to by 2030, I believe, yes. And based on that, we have seen solar as being the primary source for renewables that the government has been announcing. We have seen certain sort of announcements during various events as well, which were published in the newspapers that there would be another 6 gigawatt of solar plants coming in, in '29, '30, and '31. So definitely, the focus is there. The vision is there. And whatever, I mean, whatever we understand from the market is that whatever new capacity is being introduced to the grid, it is on the premise that the existing would continue. So that's the understanding. So for the existing power producers, the things would continue as is. They would remain in the system to provide great stability and sector secured supply security, while additional supply would come in definitely based on the demand, and most of that would be renewable. Recently, what we have seen is the government did announce 2 nonrenewable that the CCGT power plants in Misfah and Duqm for 2.4 gigawatts. And that shows that they want to ensure the security of supply while maintaining the vision for renewable energy mix as well of 30%.

Right. Okay. And as you mentioned that you guys are the only 2, you and Sembcorp. You are the only 2 power producers in the Dhofar region. And Sembcorp is a little bit smaller than you guys in terms of net contracted capacity. So this goes without question that whenever your PPA is expiring, I think, in 2032, if I'm not wrong, the renewal will -- is almost insured based on the criticality of your plant?

Definitely. One is that. And definitely, I mean, the region, demand is increasing as well. So therefore, to ensure the security of supply within the region itself, definitely, the government would have that planning to continue with the existing power plants in the regions, mainly in the Dhofar where there are only 2 power plants available.