Musandam Power Company SAOG (MSPW) Earnings Call Transcript & Summary

Welcome, everyone, to today's discussion session. It is the first discussion session in 2026. And in today's session, we'll be discussing mainly the financial results, and we will touch on the operational results as well and a bit of our internal audit and CSR activities. Is the screen visible to everyone. Can someone confirm?

From our side, yes, we can see the screen.

I can see it.

Sure. So as an executive summary, there was no recordable incident in 2025. And this is the record since October 2021, we had 0 incidents. Only 1 medical treatment case has been recorded in April this year. And in relation of plant reliability, we have achieved similar reliability to the previous years. Even though that the demand has increased this year, we kept the plant at higher reliability by 99.9% The target reliability is 98% as per the contracted reliability as per our power purchase agreement. The scheduled maintenance during -- throughout the year has recorded a 70% or 30% saving in terms of man hours. Financial results, the revenue is lower this year compared to the previous year. We'll come to this in detail, mainly because of lower fuel consumption or lower diesel consumption. That's because the fuel is a pass-through item in our financial statements. This is reflected also in the OpEx, operational expenses, but the overall operational expenses has reduced by 11%. This is a comparison with the business plan of 2025, by the way. So we have achieved OMR 110,000 excess on whatever we have targeted for 2025, which is around 5%. HSE in detail. As I explained in the first slide, 0 incidents so far. We had only 1 medical treatment case. In April 2025, the TRIR recorded 1.11 throughout the year. The targeted is 1.5. Also, the near misses were around 100 or [indiscernible] recorded 154, while the target is 60, it's a positive sign for us. And we have conducted throughout the year 2 HSE audits by [ Applus ] one in April and the other -- one in March and the other one in August 2025. Plant reliability, as we covered in the first slide, it is 99.9%. The targeted one is 99.25% and the contracted one is 98%. So -- and the scheduled maintenance, we have saved around 1,300 hours, which is 30% of the overall scheduled maintenance hours targeted, which reflects a big saving in terms of timing and man hours. The diesel or the fuel or the diesel dependency this year has recorded a noticeable improvement this year. We depend -- or the plant was dependent on diesel by 3%, whereby last year, it was 11%. And this is mainly because of the high availability of gas from our adjacent plant, Musandam Gas Plant, which is under OQEP company. That reflects positively in our performance and as well in our dependency on diesel. The demand this year has noticed an increase of around 8%, 7.6% to be precise, mainly because of the increase in demand throughout the year started from May 2025 till end of the year, the demand has shoot up by around 22%. So the average increase on demand during the year was 8%, around 7.6%. The total demand or power generation in the grid, Musandam grid, during the year was 99 megawatts. Out of it, 81 megawatt was delivered or generated by our plant, MIPP, Musandam Independent Power plant, which is located in [ Bukha ] in Musandam. 18 megawatt was generated by KPS, Khasab Power Station or [ Hasab ] Power Station, which is the backup plant for our plant here in [ Musandam. ] Financially, as we discussed in the first slide, as a comparison to the business plan of 2025, we have achieved 5% excess of the targeted net profit by around OMR 110,000, mainly because of savings we made in the indirect cost and in the other operational expenses. When you compare the results to the previous year, December 2024, you will notice a slight reduction of around OMR 30,000 which is -- which has no relation to our operation, main operation because the indication came out from our operations are all positives in terms of plant reliability, in terms of tariff indexation in terms of savings and the operational expenses. But the main reason for this slight reduction is the reversal of the accrual on the Board remuneration for the year 2024 because the company didn't pay the directors' remuneration in 2024, that was reflected positively in the year 2024 by reversing around OMR 126,000 in that particular year. We are expecting around 20% extra or increase compared to the business plan 2026 in comparison with the business plan 2025, mainly because of the tariff indexation, and we are expecting extra or even more saving when it comes about finance cost. This is the most interested, I believe slide in our today's presentation, which is the cash forecast for 2026. We are expecting to -- as we announced, as we disclosed on 9th February 2026 that we are planning as a company, as a management and Board to pay dividends twice this year in March as illustrated in this cash forecast and even in September. This is subject to the AGM or to the shareholders' approval in March -- on 8th March and subject to the financial health of the company at those times. So we have requested the Board to authorize -- we have requested -- we will request the shareholders to authorize the Board to approve the distribution of dividends in March and September. We evaluate the status of the company, whether it is financially capable to pay these dividends or not. We will -- and we will continue utilizing the working capital facility throughout the year. The CapEx throughout the year will be around OMR 1 million mainly because of fuel system modification and mountain remedial work. And also, we have -- in addition to those 2 things we are building a new warehouse there in the plant. In terms of internal audit, this was those areas being covered as planned during 2025. So basically, they have covered the entire company, all the departments and all the activities and the policies and procedures within the company. Overall observations throughout the year, around 178 observations out of which 89% being closed. CSR initiatives, we had 5 CSR initiatives, as shown on this slide. The first one, Oman Charitable organization. And the second one is procuring medical equipments for Bukha Hospital located in Musandam. Also, we have contributed to AI workshop, there in Musandam enhancing enhancement of Wilayat Bukha office also establishing a sustainable irrigation infrastructure there also in Musandam. Updates on the mountain defects rectification. The work is going in progress about it. We are fixing the cracks in the mountain. It is expected to be completed by August 2026. And the tanks cleaning has been completed in July 2025. The diesel fuel system modification, it's ongoing, and we are expecting it to be completed by April 2026. So this is in brief that present -- today's presentation. Any question?

Hello. Hello. Hi.

[ Hi, Shao ]

Hello, sir. Am I audible?

Yes, you are audible.

I just had a couple of questions now on the dividend, on the cash balance that you mentioned. It was close to OMR 470,000, if I'm not wrong. That is the residual cash that the company will be left with, which is available to be paid to the shareholders, subject to the approval of everything. So that translates to close to roughly 6.5 baisa to 7 baisa per share. Now my question is that how sustainable this number is going forward? Do you think that there is an increase or decrease expected in this number? Or do you think that until the expiry of the current PPA, which expires in, I believe, January 2032, this number is the number that should remain there.

To be more clear, the [ Shao ]. Am I pronouncing your name rightly, Shao? We met before, right? We met...

Yes, yes sir. Yes, yes, yes. We did. We did.

Yes, very valid question, very valid question. We are expecting -- we are pushing it to go with the same pattern until the expiration of the PPA, power purchase agreement. We are doing our level best to pay the same level -- to distribute the same level of dividends. But as you stated, clearly, that we are having cash constrained these days because of the lower free cash flow, as we stated. But we are trying to manage our liquidity throughout the year. For 2026, this is the plan. We'll see how it goes. And we are optimistic and positive that at least for 2026, we will secure these dividend payments.

And by these, you mean the dividend payments that were there in the previous years, you had a very specific set of dividend payments, very certain 13.8 baisa every year for the last, I think, 3 to 4 years, I mean, to 13.8% every 6 months. So when you say the same dividends, do you mean the dividend that was distributed last year or the cash that you showed in the presentation today?

It is similar to last year OMR 971,000 semiannually, which is comprised of 13.8 baisa per share. In aggregate, it is 27.6 baisa. This is the aggregated amount of 27.6 baisa per share. We are planning to pay in 2026. And this is in line with whatever we have paid since the IPO, only in 2022 September, we paid more because we had much cash in that year. Profit-wise, we have no doubt that the company will generate even higher profits in the coming years. But the only constraint we are having is the availability of cash. And as I stated before, we are managing the liquidity in the optimum way. So we can pay our loan, pay our commitments. And at the same time, distributing their promised dividends to the shareholders, continue in the same pattern. So yes, you're right, it is 27.6 baisa on aggregate for 2026, in line with the previous years except 2022 September it was higher.

Right. Makes sense. Another question from my end, if you allow. You had mentioned previously in the earlier briefing that there's a cash impact of the tax payments that obviously was deferred previously and now you guys have to pay it, which I believe is impacting your cash balance, the constraint that you have because otherwise, the PPA agreements are very stable throughout the term. So how is that going, how much impact do you think -- do you guys have any certainty on the impact on cash that these tax payments are going to make? And if so, if the impact is more than what you guys are estimating, would you still be able to continue the 27.6 baisa dividend until the end of current PPA, number two. And third question, I'll just go on with this because I'll let the floor for others to ask. My third question is when -- how soon do you expect these PPA terms to be renegotiated because '32 is the expiry, right? So should we be expecting a couple of years before, so maybe in 2030 or somewhere if you can give us a time line for the renegotiation of this PPA?

[ Shao], always, your questions are welcome. And you have very strong memory [Foreign Language] . By remembering whatever we have said earlier in our discussion sessions, and I believe during the [indiscernible] Capital Day. Yes, it is impacting us, but we are expecting to -- that the impact will start from 2027. We are having a positive size, which is somehow within the controls of the management, improving the fuel delta, the efficiency in fuel if that be realized this year and next year, then [Foreign Language] we are hoping that it will offset this impact somehow. So this is one of the key highlights. So it is within the management hands now to manage this efficiency within the fuel consumption. Regarding negotiation of the PPA terms, the management has started already, preparing internally proposals, different proposals to OPWP and we are planning to meet with them this year. And we'll see how it goes. So we started already. We preempted that. And we are hoping that we reach on a conclusion with the OPWP by this year or next year.

Yes, Rashid, please.

Thank you, Abdulhameed for the information, very informative meeting. And I would like to thank my colleagues who actually asked most of the questions I really had in line was more precise than I. If you would allow me, I have 2 -- 3 questions, if that's okay, Abdulhameed.

[Foreign Language]

Is there a chance that you guys looking into financing or refinancing your debt, your loans? Are you guys exploring this option? I don't know, in light of maybe lower rates and all is there a plan? That's one. And the other one is on growth. I would like to understand your plans from now through [ '23 ] If you have any plans for growth? And how would that could impact your profit?

Rashid, your questions are quite valid and quite valuable from our side. So thank you for raising these 2 questions. The first -- answering the first question, we have done this exercise maybe twice in the previous years. And to be honest, the interest rate in our term loan, it's quite competitive. It is 5.25% from Bank Muscat and it is much lower than the market. Regarding the short-term borrowing, it's 4.25% short-term loan, still very competitive. We have approached -- including Bank Muscat. We have renegotiated with Bank Muscat and other banks. They couldn't offer us lower than that. So we are doing this practice regularly, Rashid. Regarding your second question about the future growth of the company, it is linked to the extension of the power purchase agreement. As we answered before to [ Shao ], we are studying different proposals to the government to NPWP. So we are hoping the best for the company. And I hope that whatever proposal we are aiming to will be accepted by the government. So we are working on that, Rashid, and we are positive about it.

So just as a follow-up Abdulhameed, does this sound like there is something on the buy that could make the shareholders happier about the dividends. Is that something that you can confirm, Abdulhameed?

Rashid, as we said that in 2026, at least 2026, we will try our level best to secure those 2 dividend payments in March and September. We'll try our level best to manage the cash within the company despite the constraints we are having. This is one. For the coming years, there is no promises as such for now, but we are working on it internally, and we are -- we will start meeting with the regulators by this year, interacting with them. And once things are finalized and materialized, will be disclosed to the public and to the investors at the right time. But we are working on that. And we are -- since we are the only power producer there in Musandam, Rashid so the chances are very high that we'll get it at least renewed.

No, I'm actually capitalizing on that one only. I mean you are the only one in Musandam, okay. So I guess, obviously, there will be no kind of strong competitor there unless things change dramatically with renewables and all that things. I don't think so. That's not the notion in the near term, I guess. So I think that's put you in a very good position, Abdulhameed. I don't know if you get my question about the growth. I mean, growth is not only about expanding your current contract or securing an extension, but is there any other works that you guys are working on in terms of growth, not only on the current contract?

Yes, Rashid. Now I got your question clearly. As per our Articles of Association, we are limited to certain -- one activity mainly, which is producing electricity within the governance of Musandam for the time being. We tried previously to explore different potentials. And -- but for the time being and considering the resources we are having within our hands, our main focus now is to renew the PPA and maybe expand it if that will occur or will happen. And then we look to another aspect, which is growing the business with the different activities.

Abdulhameed, I do have a question, but I will leave it later just to give people the space. I might come back later.

Any questions from the guests?

I do have one if there is a space. A question more operationally, I have seen your numbers quite amazing reliability, the efficiency, all the things. Do you envision any operational risk related that might impact your reliability? Is there some major turnaround that you might think might impact the efficiency, reliability of the availability as well of the plant? Is that something that worry you?

Yes. There is no business without risk. As long as we are profitable, definitely, there will be a risk behind any business. We are trying to eliminate the risk surrounding our business as much as we can. As we stated in our presentation, Rashid, that we have done some mitigation measures. One of them is cleaning the tanks, which caused the blackout in 2023, if you remember, in August 2023. There were metallic particles, blocked the feeder pump, the fuel system feeder pump. This is why we have cleaned the tanks, which extended the life of the tanks for more than 40 years. Plus we are modifying currently the fuel system based on the design provided by the OEM and validated by an engineering consultant. And these 2 mitigation measures are being accepted by the regulators OP -- NPWP and APSR. So we -- as I said, we are trying to eliminate the risk as much as we can. And if you have seen our plant, we are very close to huge mountain. We had already protection measures in place. And even on top of that, we are reevaluated the status of that mountain, and we found some cracks, some movements within the mountain itself. So we are also putting more mitigation measures, protection measures within the mountain. That will cost us around OMR 300,000 to OMR 400,000. So we are trying to eliminate the risk as much as we can, Rashid. And also, we are having insurance policies in place for operational risk business interruption, cybersecurity, third-party liability, name them. So that's also a way of transferring the risk. So. yes, Rashid, I hope I answered your questions. Any questions from the guests? As we are saying every time that please don't limit your interactions with the management in these 2 discussion sessions. You can approach us whenever you feel so. If you have any ambiguity, you need more clarity in any point or you need to follow up and whatever we have stated before, you are welcome to approach us through calls, e-mails, even visiting us in our office located in or our current -- or our plant even located in Musandam. So everyone is welcome, don't restrict your interaction with these 2 discussion sessions.

Sir, I have a couple of questions. Previously, you have mentioned that the company will aims to return its entire debt 5 years after the current PPA expires in 2032? So is it maintaining the same position like are you remain on track to repay that debt by 2037, I guess? And second, I see that you have raised some short-term debt, I guess, it is because some liquidity issues which you are facing currently. So OMR 3 million was outstanding as at FY '25 end. So are you -- like is there a possibility to raise more? Or will you be repaying this short-term debt this year? So that are my 2 questions as of now.

Thank you very much, [ Kamran ] . Thank you very much. I'll start with your second question. Yes, the short-term borrowings or the working capital facility we utilized during 2025. We'll pay them at the beginning of this year, but we'll keep utilizing it to fund our operations. Yes, we are having liquidity, not issues, but a bit constraints to be more precise in my description. Constraints, limiting our capability to pay some commitments. And we are positive, optimistic about managing this liquidity at the optimum level, whereby will enable us to pay dividends twice this year. And regarding your first question, [ Kamran ], can you just remind me, sorry about my short memory?

Yes. I just wanted to know that -- so does the company remain on track to repay its entire debt by 2030?

Yes. Yes, it's the same because it's a set facility agreements by 2032 we will have a balloon payment of around 30% of the total loan. And that's still standing. That's still valid. As you know, we don't have a cash sweep like other power generators in our facilities agreement. This is why we're still paying dividends to the shareholders, and this is one -- was one of the strongest selling point during our IPO that we don't have a cash sweep. This is why we will have -- we'll end up having a balloon payment by the end of the power purchase agreement, and we are hoping to extend it for another 5 years or extending the power purchase agreement, so will enable us to repay the loan until 2037.

May I have one question more, if I may. So just we would like to understand why -- what is the cause of this constraint liquidity because what I understand is that your project is mostly fixed in terms of tariffs and costs are passed through plus there is a capacity charge. And the repayments -- loan repayments are also reset. So what was the reason for this? Is it as you stated -- someone because of tax are there any other thing because the counterparty also is OPWP is times of like receivables. So I just wanted to understand this.

Yes, [ Kamran ]. Yes, raised in his previous question. it is our previous query that, yes, it is because of tax mainly, which will be impacting us by 2027.This is one of the main reasons. Second reason is the acceleration of indexation and the tariff in revenue. It's not within the similar piece in the OpEx. So this is creating some shortfall in cash, minor one, but manageable. We try to -- we negotiated the O&M agreement twice, one in 2022 and one recently in June 2025, and we managed to reduce the fees twice. Still, this is why we are positive that we'll be able to overcome this liquidity constraint in 2026 and on. If there is no further question from the guests today, allow us to end up the session. So by that, we are ending the first discussion session in 2026, hoping to meet you in the AGM -- coming AGM to be on 8th March. And the next discussion session, which will be end of July or beginning of August 2026. And again, I'm emphasizing on the point that don't restrict your interactions within these 2 discussion sessions. You are welcome to visit us in our office and our plant or you can approach us through calls or e-mails. So thank you, everyone. Thank you, and have a good day.

As long there's no further clarification from the audience. I think we can we can close. Thank you very much. Thank you, everyone [Foreign Language].

[Foreign Language] Thank you very much.