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

Good day, and welcome to the Qatar Electricity & Water Company Q1 2020 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Bobby Sekar. Please go ahead, sir.

Thank you, Tracy. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I want to welcome everyone to Qatar Electricity & Water Company's first quarter 2022 Results Conference Call. So on this call, we have Narayana Rao, who is the acting Finance Manager at QEWC; and we have Gojy Augustine, who is the Head of Management accounts. So we will conduct this with management first reviewing the company's results followed by a Q&A. I would like to turn the call over now to Narayana. Narayana, please go ahead.

[Foreign Language] good morning, everybody. Good afternoon, sorry, good afternoon to everybody. Under the chairmanship of His Excellency Saad Bin Sherida Al-Kaabi, Minister of State for Energy Affairs and Managing Director, Mr. Mohammed Al-Hajri, the company for reasonably during the quarter 1, resulting in the -- I think 5% increase in the -- 3% increase in the profit. Revenue for the quarter is QAR 565 million as against the 601 million during the first quarter of 2021. And profit, as you know, has published in all newspapers, and our website as well as [indiscernible]. It is QAR 389 million, against the QAR 372 million for the first quarter for 2021. Our market share in the supply of electricity was 67% and desalinate was 72% during the quarter 1. As you know, we are the second largest utilities company in the field of power generation and water desalination in the main Arabian. With this very good electricity performance is just discussing about the other matters, which you have been given already in our presentation. I think you have the copy of that already. [indiscernible] water and power and other figures proportionately, we proportionately consolidate and subsidy companies also. It is around 5.59 terawatts against 5.44 terawatts, with this small increase and the sent-out water is from 98.9 million cubic meters against 110.4 million cubic meters during last year with the small decrease is there. Power plant availability is 97.3% against 95% during the last year for the same period and 98.7% versus 99.1% for water client availability. It is also almost same as last year, there was not much difference in the water or power supply assets. And now coming to the financial highlights. Compare it for -- very well with the asset -- already QAR 389 million profit, which is 5% increase during -- compared to last year. And it is mainly due to variation between the 2 years -- 2.5, 2 years, we can explain very simple logic as it is due to higher dividend income, mainly we have got QAR 76 million higher dividend income. And gave the profit at yesterday some small amount. I think it is a reasonable amount, you can see figures when we go to that slide, of course, some decreases there. Others are some increase in the interest income also there. All has contributed around QAR 17 million -- net QAR 17 million increase in the profit. I will go directly to some explanation from this. And revenue decrease is mainly due to lower water and power uptake during the year, mainly in [ rough indication ] and gross profit is down by 12%. It is due to same reasons as I explained for revenue, some gas cost of added up to put together around 12% reduction is there in gross profit. Earnings before interest, tax, depreciation and amortization, or EBITDA has come down -- has gone up by 15%. It is due to higher dividend income, higher interest in -- than the higher dividend income. I said JV companies has come down this very much due to around 30% replanned and unplanned outages are the reason. One of the Nebras plant has also had some unplanned outages, which resulted in this and other income has gone up by 110%, 80 to 168. As I told already is mainly because of the dividend income which is a significant increase. There are QAR 76 million. That mainly due to our investment in IQ Industries Qatar. And QAR 11 million has gone up in the interest income because of we have taken QAR 550 million loan from the Mizuho Bank as we explained in the last year-end call also, which is signed on the 5th of January and we kept that in deposits and all that due to these are all reasons. You can see our cash balance has gone up significantly due to this result. We have not paid to [indiscernible] will be done in quarter 2 obviously at most likely in early May, we are going to pay that once we comply with all the legal requirements in the outside country that is Australia and Tunisia. Because of that in, we have got a sufficient interest income. We have gone up almost QAR 11 million compared to last year. Net profit -- due to all this recent net profit has gone up by QAR 70 million, that is 5%. Coming to the balance sheet. We have got, as we mentioned in the -- our presentation, total assets gone up by 16%. Cash and balance has gone up by 49%, which is mainly due to the USD 550 million loan which is sitting in the cash now. We are going to pay in the next quarter or in this earning quarter. Available for the FFS security, available for FFS you mean it is securities which are in capacity that you bought, it has gone up by 18%. It is only the fair valuation is the reason. Actually, there is no purchase or sale during the period. Then going to total equity has gone up 9% which I will explain later and total debt has gone up by 35% despite QAR 50 million investment and net debt has gone up by 10% net debt -- total debt to finance cash. Cash is this QAR 550 million whatever we have taken, which is sitting in the cash. That is very -- net difference is very low, around QAR 200 million -- not even -- yes, around QAR 250 million, it has moved up this well. And now coming to a detailed explanation on the balance sheet, total noncurrent asset share has gone up by QAR 1.4 million. This is mainly because of the investment in joint interest and the associates have gone up by QAR 900 million, major -- mainly because valuation of the hedgers is the reason for that. And equity investments at a higher value through whatever the other comprehensive income on it has gone up by around 550 million. And this too is the main component, main reason for the increase in the total noncurrent assets, which has gone up almost by QAR 1.43 billion. And current assets, again, it has gone up by QAR 1.6 million. Here, reason for this is mainly the bank at cash balance. If you see our balance sheet, it is again because of our USD 550 million loan which has taken and not be to the [indiscernible]. Okay. In summarizing the total assets increase of 3 billion, it is around half came from the fair valuation of hedgers and the equity investments and the half -- close to half has come from the increase in cash balance minus some moment in debtors. Going to the credit side, equity and liabilities, let us look into the not current liabilities. First, there if you see, there is no major movement everything in -- same thing as in quarter 1 of 2021. Current liability is concerned, we have a big increase in the interest-bearing loans and bearings. This is the short term loan which we have taken from the Mizuho 550 million today to the [indiscernible] shares of this Nebras Power that is Qatar Holding. It will be paid to solve conditions which couldn't have -- is getting fulfilled, as I told already, is going to be -- most likely going to be in May -- early May. There is no movement in the noncurrent liabilities. It's almost the same. On the equity, we have got compared -- a movement of QAR 1 billion. It is again because of, as we explained in the noncurrent assets. Hedge reserve and fair value, hedge reserve is mainly due to joint venture campaigns, it is almost QAR 900 million. And the fair value is because of the investments listed in Qatar Exchange, where the same amount of movement you can see in the noncurrent assets also but QAR 101.5 billion increases there from here and retail earnings, you'll see around minus QAR 1.5 billion movement. It is mainly because of around QAR 900 million gone out as dividend, QAR 400 million came in at profit. 5.9 minus 5.4 is 0.5, QAR 5 billion payment movement is there, totally resulted in QAR 1 billion movement in the equity. QAR 1 billion movement in equity and QAR 2 billion moment in the current liabilities made it QAR 3 billion moment in total equity and liabilities. This is what I think I confined all the movements in the balance sheet in general. Totally company for -- even make up some reduction in the joint venture profit and for joint venture company profit will with the 5% increase in the net profit for the quarter compared to the same period in the year -- in the previous year. With this, I conclude my explanations and request operator to take over for question and answers.

[Operator Instructions] We will now take our first question from [indiscernible] from TB Financial Group.

We just wanted to know certain exposures that we have got through Nebras, especially in Ukraine, you have mentioned around QAR 76 million exposure as part of goodwill. Can we know what is the total investment in this particular exposure? Second, we also want to know about in terms of your recently purchased 24% stake in Meghnaghat Power Limited in Bangladesh. What has been the revenues and profitability for 2021 for this particular company? Third, in terms of your Nebras joint venture, you mentioned your JV has come down income. We wanted to have an idea -- color on this, how much has been the share of Nebras in this particular JV. Let's just say for first quarter 2022 versus the first quarter of 2021. And in case, as you mentioned in the first week of May, when you are going to be having your full 100% stake in Nebras, will the company make a line-by-line accounting and what could be the likely impact of this?

Last part of the question, now once we take over fully after complying with all conditions precedent everything, Nebras will continue to be a company which is 100% subsidiary of QEWC. There was no other -- we are not looking in any other type of arrangement, and we will be having the full control on that this side. And other part about Nebras, payment will be done just after fulfilling all the things. And the other question is what about the Nebras portion, right? Nebras is concerned, of course, we are not -- of course, Nebras performance in the quarter 1 is not at all good because of some Indonesian plant, some adjustments are in old, this is one thing because we are going to close it. And other side, Ukraine, you ask Ukraine is concerned, still, we are studying what is the impact. I think the total assets of Ukraine maybe around QAR 300 million to QAR 400 million in that region. As per our understanding, there is no harm has been happened to the plant and everything is functioning properly and government is giving some conditions for loan repayments also that's what we understood. And even the billing is also done everything properly for the recent months, everything going smoothly as of now. But only thing we have to look into the payment issues are there later. We have to wait and see how it happens and further developments also everything are settle now.

Just want to add on two things, which I think so I had mentioned in terms of Meghnaghat Power Limited Bangladesh, which you have recently purchased. How was the -- can you give a color on your revenues and profitability for that particular project?

Gojy, you have got the details from that?

No, actually, this is -- yeah, it's 24% share Nebras is going to have there -- have the 22%. It is still in the construction stage and the commissioning will happen only in 2023, not in 2021 or 2022. It will happen -- it was originally planned and commissioning was expected in 2022, but there is a delay due to COVID and all other things. So the full commissioning will happen only in 2023. So we do not have a revenue forecast currently with us for this Bangladesh project.

Okay. And sir, I mean, as far as your Nebras accounting is concerned, still got to be a line-by-line accounting, right, the same accounting standard, which you have been following, which is conducted...