Nebras Energy Q.P.S.C. (QEWS) Earnings Call Transcript & Summary

Please go ahead.

Hi. Good afternoon, ladies and gentlemen. This is Mehmet Aksoy from QNB Financial Services. I would like to welcome everyone to Qatar Electricity and Water Company's Second Quarter 2021 Financial Results Conference Call. On this call from QEWS, we have Mr. Narayana Rao, who is Acting [ Finance Manager ]; Mr. Gojy Augustine, Head of Management Accounts; and Mr. Abdulla Al-Janahi, Cost and Budget Controller. We will conduct this conference call, first, with brief comments on the presentation; followed by the Q&A. I will now hand the call over to Mr. Narayana Rao to get us started. Narayana Rao, please go ahead.

Yes. Good afternoon, ladies and gentlemen. I am Narayana Rao, Acting Finance Manager for Qatar Electricity and Water Company. As you know, our results have been published yesterday evening and, of course, in today's newspaper and in our website [indiscernible] website you can view all the details. It is a good half year actually. We made around QAR 785 million profit during the half year against QAR 661 million net profit during the first half year of 2020, that is last year, with an increase of 19%. And even our revenue [ has been fallen by a ] small amount actually due to some lower water offtake than -- from QEWC's fully owned plants, our net operating profit has gone up by [ 12% ], QAR 558 million, this year against QAR 495 million in first half year of last year -- first half of last year. Net cash flow from operations has gone up by 18%. It is -- it actually indicates that -- good collection during the period. Of course, we can see some increase in the other income, which is mainly due to some reversal of around 33 million inventory provisions. We estimate -- we found that it's higher provisions even made [ in excess in earlier years ]. Our share of profits from JV [indiscernible] 12%. It is mainly due to scheduled -- lower scheduled outages and lower operating expenses. If you look into our assets. Our net worth of the company has gone up by QAR 600 million compared to position as of 31st December 2020. It is mainly due to good performance in the market. Our equity investments have gone up by QAR 250 million, not because of any sale or purchase, just for the enhancement of the value due to good performance of the in -- performance in the market. And the other one is fair value of the hedging reserve. Hedge reserves, if you see, they have gone up by around 350 million, adding up to around 700 million. And around 150 million drop in the loans because of repayment. Of course, we repaid during the year USD 125 million -- during the quarter USD 125.6 million to SMBC, but we have taken equal amount from the [ bank of China ]. In effect, there is no repayment of any short-term loans, but long-term loans, we repaid to the extent of 150 million. In effect, due to all other [indiscernible] movements, total -- what you say -- our equity and liabilities have come down by QAR 600 million. Equivalent value, we can just compare in the asset side mainly because of JV investments [ and fair values ], which is reflected here also. Same thing is reflected there in the investment values -- QEWC is concerned, it is a small value, around 350 million gone up there. And the equity investments, QAR 250 million, as I told earlier, here it is reflecting in equity side, under the fair value. And other side, it is in investments it has gone up by QAR 250 million. And the financial lease receivable has come down around QAR 100 million. [ That makes up with this ] QAR 600 million in asset side. [ This is what mainly you ] want to inform about company, your company actually performing well. And as you know, 2 quarters [ also ], we did very good performance even during this tough -- these COVID-19 problems. I think I gave the small introduction. And you can go through our presentations if you need more informations. Now I think it will be opened for the question-and-answers.

[Operator Instructions] We now have our first question from [ Mostafa Amer from Al Rayan Investments ].

Could you shed some more light on the reversal in the inventory provision that you just mentioned with 33 million. What was that about? And we see that the water supplied has reduced from earlier. Could you shed some light on that as well? So yes, those are the 2 questions.

First part of the question. That is reversal of inventory. It is actually we had 2 things. One is our inventory level has come down because of the good management of the inventory. Second thing, we had a provision which is more than sufficient. It is very much more than the water sufficient for that level of inventory. It is provided for [ probably 10 other inventories of the earlier years]. It was not a justifiable amount. That is why, the reversal of, [ well, maybe a minus 7.5 million ], whatever, provided during the half year, around 33 million has taken as other income during the half year. Probably we are already in the process of [indiscernible] best process for making the inventory provision, and still some higher inventory provisions are there. That's what our auditors are feeling. We are making a study on that. Probably, by the year-end, we will be coming to the conclusion how much is exactly required and how much the excess is there [ over a year ], whatever we provided [ earlier ]. That's a management decision and which is, what, in the agreement with auditors based on their evaluation also. Proper evaluation has yet to come. And definitely some...

There can be a chance of an increased reversal as well going forward.

No, no. There is no -- you mean additional reversal may be there going forward. I cannot say until our study is getting completed. It will take some time. And our -- internally, our technical people are evaluating the thing. And it will definitely -- by the year-end -- our target is, by the year-end, we should arrive at a decision, yes.

All right, okay. So we'll see the total impact in the full year results.

Yes, yes. That's right, yes. And the second part, Gojy, would you please, second part of the question?

The [indiscernible] the water supplied. What was that reduction?

Yes. Actually it is...

[indiscernible]

Yes, yes. Actually [indiscernible]...

[indiscernible]

Are you listening to me? Actually I'm...

Yes, yes.

Okay, all right, okay. Sorry. Actually there have been -- the main -- actually the water supply in Qatar, when compared to the previous year, there is no significant growth. Actually the drop is mainly on the QEWC owned due to the additional water [ capacity utilization ] from UHP Expansion project, [ 51.44 ] [indiscernible]. The water offtake from QEWC's fully owned plants came down. That is the main reason. It happens actually when there is reliability run and acceptance test. The -- any new plant has to run at 100% load. So that is -- so Kahramaa was depending on facilitating the facility acceptance test and reliability run during this time. And because of that, Kahramaa took more water from Umm Al Houl Power expansion project, and that resulted in lower water dispatch from QEWC's fully owned plants.

Yes.

We now move on to our next question, which comes from [indiscernible] from [indiscernible].

My question is with regards to the volume uptake in the coming period. So as per the data available, the population in Qatar has reduced quite a bit in the month of June. And should we expect lower offtakes in terms of in -- lower offtakes in terms of, say, water or power going ahead? Because the -- I believe the residential demand could take a hit because of this population degrowth. So are you expecting any reductions in the offtakes?

Gojy, you will take it, or...

Yes. Actually, as far as QEWC is concerned, we are [ guaranteed ] by capacity charges and, I mean, committed offtake agreements for all our plants. So even if there is a reduction in demand, it will not affect QEWC financially, but on the demand side, even if there is a temporary reduction in -- I mean, population, in Qatar in July or July or -- actually maybe due to holidays and also -- but we expect that it will go up definitely in the run-up to the World Cup 2022. I think I answered your questions [indiscernible].

Yes, very much. Just to follow up on this: So in terms of you mentioned that you have guaranteed offtake from Kahramaa. So are these subject to revisions over a period of time? Or are -- like these are all long term.

All are long term. our -- almost all our contracts with Kahramaa is for 25 years. And there is no...

And we -- and [ definitely ] there are no -- yes, please go ahead.