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

Thank you for standing by, and welcome to the Qatar Electricity and WaterCo First Quarter Results Call. Please note, today's call is being recorded. I would like to hand over to Bobby Sarkar from QNBFS to begin the call. Bobby, over to you.

Thank you, Paulie. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Qatar Electricity and Water Company's First Quarter 2020 Results Conference Call. So on this call, we have Narayana Rao, who is the acting Finance Manager; Gojy Augustine, who's the Head of Management Accounts; and Abdulla Al-Janahi, who is the cost and budget controller. So we will conduct this conference with the management first reviewing the company's results followed by a Q&A. I would now like to turn the call over to Narayana. Narayana, please go ahead.

Thank you, Mr. Bobby. [Foreign Language], good afternoon to everybody. Now, as you know, QEWC had the Board meeting on 23 April 2024 that last Sunday -- sorry, not Sunday, Tuesday. And we declared our results. It's -- for outset, it looks like a big reduction in the profit compared to last year. We had only $318 million profit against $401 million last year, a reduction of around 21%, which is a huge year decrease actually. Actually, if you look into the details of the profit last year, we have got 2 one-time items, nonrecurring items. One is [indiscernible] from the scale up for, we sold our 49% ownership in her Siraj Energy to QatarEnergy, which resulted in $78 million profit. And other nonrecurring item last year is $26 million reversal for provisions which have been made in other areas. Totally, we had $104 million additional. If I deduct from that last year's profit comparable profit would have become $297 million. And this year, we are not having initiations with in place we can -- we have to compare $297 million against the $318 million. This is actually an increase of $21 million in the profit and 7% is the real increase in that respect. This year, revenue has gone up from $658 last 3 years to $687 million. This is mainly due to the increase in production, I can say, increase in production in the -- I mean the sent-out power & water. Sent-out power has gone up by 2% and sent out water has gone up by 4%. This is the major reason. And cost of sales has gone up by 1.87%. That is being $9 million only very small increase. It is normally increase in [indiscernible] and gas, etc., but there is not a major increase, actually. And the next, if we go to other income. Sorry, it was $137 million as per our presentation, $137 million this year and $196 million last year. Here, we have to see as an [indiscernible] $26 million reversal of provisions was there last year. That is one of the item, which is -- would have taken, included in last year's other income. First, from that interest has gone up by $17 million this year -- sorry, it come down by $17 million. Last year, it was $76 million. This year, it is $59 million. This is, without the item, resulted in -- I mean the reduction of the $17 million. This year's other income has come down because of that. Apart from that, the major -- other major item is dividend. Dividend last year, it was $91 million. This year, it is only $74 million. There are around $17 million reduction in sales. It is mainly because of IQ has declared a lower dividend historically, if we compare, it is a lower dividend. Last year, they declared a very good dividend. Totally because of that, we are down by around $60 million, $79 million in the other income. Next, finance cost -- sorry, general and administration expenses, if you look into it is there actually, there is no major increase, only $5 million increases there last year $61 million. This year, $66 million. This is normal increase only. And finance cost is concerned, we are having a big reduction, around $23 million reduction is there, which is almost 17%. Of course, we repaid a lot of short-term loans last year and quarter 1, we had around QAR 1.8 billion, in Qatar riyal terms. In U.S. dollar terms, it is [ $492 million ]. This full amount has been repaid during the course of last year from quarter 2 to quarter 4. Quarter 1, we cleared the $251.2 million, quarter 2, around $100 million, if I'm right, and quarter 3, $150 million, total of $501.2 million we repaid completely during the last year. With this, we had -- our cash balance has come down and deposits has come down, due to retail interest cost. Interest income has come down. Interest -- the expense also has come down. I would say the impact is there because of the balance sheet is concerned, it is -- we are comparing 31st December [indiscernible] 31st March, we will not see any implication. Interest income has come down by $23 million. And sorry, interest cost has come down by $23 million. And finance cost, which we are discussing about now, and the interest income also has come down by $17 million. This is about the finance cost. And the major item which we can see there is share of profit from joint ventures. Share of profit from joint ventures, in financials, it is stated as equity accounted investments because -- for both the associates and available -- sorry [indiscernible] to follow equity that together mentioned as equity accounted is, it is $144 million last year and -- sorry, $144 million this year and $152 million last year. Last year included actually $19 million for the discontinued operation of the CPC, that's a Nebras item. What our total increase is $2 million here, almost 9% increase is there. This is mainly because of some investments of the Nebras, especially in UMP in Bangladesh, which is commissioned during the Q1 and generated $18 million profit during the Q1 2024. And the [indiscernible] activity, we acquired in the -- I think, in the end of 2023. It is actually a U.K. project, where we made a profit of around $90 million. And of course, in QEWC, also we made some profit of around $9 million from all the [indiscernible] additional profit. And discontinued operation, $19 million, it was last the profit on the CPC. This year, it is not there. Taking net impact of all this, we made an additional profit of $12 million during the year, and the share of profit from the equity accounted investees, as I explained the joint ventures companies and associated companies. This is about balance sheet. In effect, the net profit is concerning. We had a 21% down as I explained. And in reality, it is 7% increase. That's what I explained already. Major factors as the $78 million from the sale of a Siraj Energy, as I explained already, and $26 million from the [indiscernible] to [indiscernible], explained already. And dividend income reduction by $17 million is one more major item affected the net profit. Now going to -- if we go to balance sheet, this time, it is not much movement like last year. And if you -- balance sheet first item on non-current assets, we can see a small reduction -- reduction of around $200 million. This is mainly because of one item, if you go to the details, we have got this equity accounted investee, around $8.8 billion is there as of 31st March 2024 and the $8.3 billion was there as of 1st December 2023. It implies almost $0.5 billion, that's $500 million increase there. It is mainly because of investments in Nebras. We can go to note in the financials, where it has been explained properly. Out of that, to summarize that it is only 2 items in effect because profit and dividend, almost a mitigating. Net impact is almost 0. Profit and minus dividend decline from all this contained invested. So only major items are the investments in the [indiscernible] projects around $0.3 billion, $268 million something is net -- $286 million, $286 million, sorry, around $0.3 billion. And the increase in hedges of this company is around $0.2 billion. Net impact is around $0.5 billion on the equity accounted investees. That's also mainly due to this investment by the [indiscernible] projects investment by Nebras. That's what I explained already. And it is the, in companies, if you want to write I already mentioned that, JS Valtic and Stockyard, Australia and Surkhandarya project in Uzbekistan. These are the major projects where we invested. Other items are some small reduction in fixed assets because of depreciation and land loans around 100 million. That's a small differences, not much movement there. Current assets are concerned, it is 4.3% versus 5.2%, and 0.8% reduction as well. It is mainly because of cash and bank balances. So you can see that a major reduction of $1.1 billion. You can see that. I can say it is due to 2 reasons. One is the dividend payment of $900 million by QEWC. And the investment by Nebras, as I explained already around $300 million. These are the major reasons. Of course, other differences are due to normal operations. And receivables has gone up by $150 million. This, of course, other negative side. The net of this almost becomes $800 million, which is the reduction in the current assets. Equity is concerned. It is -- you can see a small reduction there, 3.44%, $15 million to $14.7 million. It is small amount, actually, $15.2 million last year, now $14.7 million. Movement, of course, statement of equity is attached in the account. To summarize it, the major items are $9 million, as I told, $9 billion is the payment of dividend which has to be taken out from there. And around $300 million profit, $318 million, as you can see. That is to be a it is almost the -- if we make that adjustment to retainer mix. The retailer mix was $9.2 million last year, now at $8.6 million to $9.3 million -- rounding up, $9.3 million, now $8.6 million. This explains almost the movement. It's a $9.3 million opening balance, closing balance $8.6 million. I will point 1 other adjustments. You can see Statement of Equity has been explained properly there. Other differences only hedge and the foreign currency movements is inflation resolution. If you take it is around $200 million, it explains the difference of $0.5 billion in the equity. Noncurrent liabilities are concerned, movement is very minimal, only 1.2%. It is a normal repayment of the loan installments. Nothing else, you cannot see any movement there. Current liability is concerned, it is almost the same. There are very minimal movement. I think no estimation required there, only 1.8% movement. With this, I think I explained the most operating here, only if you see our market capitalization, it is now $17.93 billion, $16.3 billion into $1.1 billion, it is $17.93 billion. And our credit rating, of course, is stable with Moody's and the company is definitely performing well, and there is -- there is no -- any significant factors, which is to be informed to shareholders. We disclosed whatever important needed to be disclosed in the financial very much there. Nebras, of course, I explained already additional investments. Even though I just explained, we just disclosed really the accounts 2 items I explored, you will find in the accounts in I think those numbers or something. In March, Nebras acquired 35% equity shares in Surkhandarya project in Uzbekistan with 1.590 megawatt productivities actually. Effective shareholding is 75% -- sorry, 35% into 75%. The effective shareholding is 26.25%. The project has a long-term PPA and project finance agreement in place. The power plant is under construction with the notice to proceed issued in March 2024. We will be expected in 2027. Other partners include ETF [indiscernible] in energy and local developer. And the other one is JS Baltic holding that -- we had already 43.3% shareholding, but it has been increased to 83.3% in the end Q1 2024. Yes, that's what it's 83.33%. And it is, mainly, it is handling the IPP 19, the IPP 4, which is 381 and 250 megawatts projects in Jordan. With this, you conclude my explanation to the financials. Inquiries, questions, you are welcome to ask. We will take [indiscernible] myself and Gojy and Abdulla Al-Janahis. Thank you very much.

Thank you. We will now open for Q&A. [Operator Instructions] And your first question comes from the line of Mark Combis from TFI.

I have a question about other income. It's broken down into 2 parts: the dividend income you've discussed and then miscellaneous income. And last year, you had $147 million in miscellaneous income. And also you had $23 million in secundment income. Could you talk about what the source of that miscellaneous income is? And what's the outlook for this year?

Okay. Just to give me a minute and I'll explain. Last year, of course, we had so many items there in Miscellaneous income, mainly we had $247 million working...

But even in 2022, you had high miscellaneous income, $77 million.

Yes. That of course mainly dividend included the... And... Yes.

I'm just trying to understand how much we can count on this year in your estimate.

Sorry, that miscellaneous income is the reversal of provisions out of that $26 million is a reversal of provisions. And so for this year, we are not expecting any reversal of provisions.

So what was the there was $3 million that you've done so far this quarter. That was also a reversal of provisions?

No, no. That is the secondment, think.

Yes. Because before, you had a separate item of secondment.

No, we assort of provision during the 2024 actually.

So to summarize, you're not expecting any miscellaneous income in 2024. And you're expecting some secondment income, which do you know how much? What is the secondment income from, the source of it?

It is... Actually, we are -- some expert employees have been seconded to our joint venture companies from where we are getting some secondment income.

Is that like a fee income, which you can predict or...

It is actually it is nothing, but it is arch are billing to them based on some contract tender into.

So it's one-off in nature?

Yes, it will be that throughout the year. Yes. It's not onetime. Secondment income will be there throughout the year. If I'm right, last year, I'll say it is around $7 million. And this year, it is around $7 million.

Last year, secondmment was $22 million. And miscellaneous income was -- last year, secondment income was $22 million, and miscellaneous income was $147 million.

No, you are telling for the year or for the quarter?

Yes, for the year. I'm asking you your outlook for the year for the secondment income and miscellaneous income.

Yes. This is 18 to... Yes, $32 million is, right? Yes, that's right. It will be in the same level. Other incomes are -- that's a onetime income slide, what you say, dividend and all those things, we already discussed dividends, some reductions last year -- and other $78 million, I think it is not included that, mainly dividend. And of course, interest income also in the presentation is included that interest also last year's -- compared to last year, it has been reduced for this year by $17 million. Yes, other income. But in the financials, it has been taken separate...

[Operator Instructions] And your next question comes from the line of Seki Mutukwa from Ashmar.

Two questions, please. The first one being, can you remind me of the electricity capacity expected to be commissioned in calendar year 2024. However, whether it's net or however you'd like to disclose that? And then secondly, on a 3-year basis, so 2024, all the way to including '27, which year would you expect to have the highest increase in sort of capacity from projects being commissioned, please?

About the electricity capacity to be commissioned I won't expect anything during the year 2024, right, Gojy?

No, Nebras is having the Bangladesh project.

Yes, but that is commissioned already, right?

Yes, 2024.