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

Thank you for standing by, and welcome to the Qatar Electricity & Water's second quarter financial results call. Please note, today's call is being recorded. I would like to hand over to Shahan Keushgerian from QNBFS to begin the call. Shahan, over to you.

Thank you very much. Hello, everyone. I want to welcome you to Qatar Electricity & Water's Second Quarter and First Half 2024 Financial Results Conference Call. So on this call from management, we have Shahzad Iqbal, Chief Finance and Planning Officer; and Gojy Augustine, Head of Budget Reporting and Control. So as usual, we will conduct this call with, first, management reviewing the company's results, followed by a Q&A session. I will turn the call over now to Shahzad. Please go ahead.

Thank you very much, Shahan. [Foreign Language] Good morning, good afternoon, everyone. I welcome you to Qatar Electricity & Water Company's quarter 2 first half results call. Let me go through the introduction first. You might be hearing me for the first time. I'm Shahzad Gill. I'm the newly appointed Chief Finance and Planning Officer of QEWC Group. I've been part of the group for the last 7 years in a different role. I was working as Nebras Power's CFO in my last role. I've been associated with power and water generation for the large part of my career. As you might be aware through our announcement recently, that QEWC and Nebras have gone through an integration in July. As part of the integration, Nebras' personnel, systems and processes have been moved to QEWC. This integration ensures operational synergies, harmonizing internal systems and processes across the group. This will also foster a bigger and better knowledge base within the group. We believe this will set up the group for the challenges of today and also to take advantage of the opportunities that are in the market internationally and locally. You can refer to more information about this on our website. I'm very excited to embark on this journey on this new chapter with the organization. Present with me today is Gojy Augustine. I will take you through the operational and financial highlights, while Gojy will go through the details and results of the quarter and first half of the year, along with the comparison. So with this, allow me to dive into the numbers. As a snapshot for first half of the year 2024, the revenue posted or booked by QEWC is QAR 1.4 billion, which is 4% up from last year same period. When you go to EBITDA, it stands at QAR 670 million. This is lower than previous year by 12%, and we will get into the details of that. Also net income, QAR 680 million net profit, 12% lower than previous year same period, mostly driven by nonrecurring items. But we will dive deeper into that. Just a snapshot of our operating capacity before we get into the numbers. Our total power capacity stands at 20 gigawatt gross basis today, out of which renewable capacity is 4.3 gigawatt gross, and water capacity stands at 541 MIGD. Whereas we also have under construction projects and the capacity for those under construction projects is 3.2 gigawatts. With this, I will move to operational performance for first half of the year. Sent-out power is 6.4% higher and sent-out water is 2.2% higher compared to the previous year. Sent-out power was 14.2 million megawatt hours compared to 13.3 million last year. Sent-out water, 228 million cubic meters compared to 223 million last year. The plant availability, slightly lower by 1%, stands at 94.6% compared to last year same period, 95.6%. And water availability stands at 99%, slightly higher than last year, 98.6%. Now getting to the quarter results, Q2 results. Revenue has been slightly higher at QAR 473 million compared to same period last year, QAR 721 million. EBITDA, QAR 350 million this year for quarter 2. And for the same period last year, it was QAR 332 million. I'm going through this, but as I said, we'll get deeper into the numbers later in the presentation. Net profit, QAR 361 million compared to QAR 368 million last year for Q2. Earnings per share stand at the same level, QAR 0.33 this year versus Q2 last year, QAR 0.33. I've already taken you through the revenue, EBITDA and net profit for the year-to-date. What I want to mention here is earnings per share for first half of the year, year-to-date is QAR 0.62 versus last year first half, QAR 0.70. And with this, I'll hand it over to Gojy, who can take you through the details of the numbers. Gojy, over to you, please.

Thank you, Shahzad. So I'll try to complete the review within the next 10 minutes so that we'll have sufficient time for the question-and-answer session. So first, as usual, we will look into QEWC performance for Q2 2024 in comparison with Q2 2023. You will see that the revenue has gone up by 3%, which is mainly due to increasing sent-out power and water. The operating expenses also increased, mainly gas costs also increased in line with the increase in sent-out power and water. So the gross profit is QAR 234 million against QAR 229 million during the last year. So that is a 2% increase. The EBITDA shows 5% increase. It's mainly due to higher one-off items in Q2 2024 when compared to Q2 2023. So there had been a significant drop in share of profit from JVs and associates. This is mainly driven by some of Nebras' JVs and associates, mainly some planned outages at Paiton power plant Indonesia, seasonal lower generation in U.K. wind portfolio and some ForEx losses in Bangladesh project. This U.K. wind project as well as Bangladesh project were not part of QEWC's profit and loss statement during Q2 2023. This is because U.K. wind portfolio project was acquired by Nebras during December [ 2024 ] and Bangladesh project was commissioned in Q1 2024. Okay. Now interest and other income is higher, mainly due to a one-off item approximately around QAR 50 million, which is a compensation received by one of the sponsors of an international project. And interest income -- it is partially offset by lower interest income in 2024, which is mainly due to availability of lower cash balance. This is, as you all may remember, QEWC has repaid all the short-term loans and Nebras also made some new investments during this year. So the interest income is comparatively lower when compared to last year. So the net profit is QAR 361 million against the QAR 368 million during the last year, a 2% drop. I think I already explained the reasons for this. So coming to the H1 2024 performance in comparison with H1 2023. The revenue has increased by 4% and gross profit also increased by 6%. This is mainly due to higher sent-out power and water, and we already explained regarding this. The sent-out power was 6% and water was 2% higher when compared to last year. So the drop in -- there has been a significant drop in EBITDA, interest -- I mean, net profit and other income. So the main reasons behind this are inclusion of some one-off items in 2023 H1, mainly the profit on sale of Siraj Energy, QAR 77 million; reversal of provisions no longer recurred, QAR 26 million; and Brazil EPC early settlement of QAR 26 million. All these were included in H1 2023 financial profit and loss statement. And also, the dividend income in 2023 was around QAR 18 million higher than what was received in 2024. This is partially offset by the onetime compensation of around QAR 50 million, which has been explained previously. So the net profit is QAR 680 million against QAR 769 million, which is 12% lower when compared to last year. So coming to the statement of financial position. The total assets of the company remains almost same as last year. Cash and cash equivalents, there is a 22% drop. This is mainly due to payment of dividends of QAR 946 million during this year and approximately QAR 300 million new investments done by Nebras in various projects during H1 2024. The available for sale investments, 4% increase is there. It is due to -- only due to the change in the market value of shares. Total equity. Although the company made a QAR 680 million profit during the first half year, the equity remains almost same as last year. This is mainly due to payment of dividends and movements in the [ hedge itself ]. The total debt dropped by around QAR 100 million. This is mainly due to repayment of project loan installments by QEWC. Net debt, there is -- net debt increased by 24%. This is due to a drop in cash balance. The reason for the drop in cash balance has already been explained. With this, we will conclude our presentation. Now the floor is open for questions. Over to Shahan.

Okay. We can go to Q&A now, please.

[Operator Instructions] Your first question is from the line of Mark Krombas from TFI.

I noticed today you made an announcement that you're going to have a Board meeting and a general assembly, an EGM to approve interim dividends on the 15th. And I just wondered if you've formally announced the dividend for this period or not or if you're planning to pay one. Could you clarify, please?

Yes. So we are indeed planning to pay one. We have not announced the dividend yet, but soon you will see an announcement on that.

Can I ask, because all the other Qatar energy companies have announced this in conjunction with their results. Do you know why you haven't been able to do that? Or I mean -- and what the proposed dividend might be?

Yes. The reason was, as you heard, that we were going through the transition and some documents are being changed, some commercial registrations and all those. And we didn't know like the timing, how much time will it take. But now we know that we can do that. So we will announce the dividend soon.

I mean, is half of last year's dividend an approximate value that is something we -- as a ballpark range that we should consider?

Gojy?

Yes. This is something to be discerned by the Board. So at this point, it is difficult to answer this question.

Okay. And the second question is about sort of proposed potential tax payments for OECD and all those companies in Qatar that have a turnover of over EUR 750 million and have international subsidiaries. Your company is really on the cusp, very, very close to EUR 750 million but just under in terms of sales and revenues. Have you sought tax advice on whether or not you would be eligible to pay this tax? And is there any plans in place to potentially keep the sales below that figure to avoid it? Could you talk about that, please?

Yes. We have sought advice. We have engaged one of the Big Four, okay? And at the moment, I -- because it's still in the draft form, the analysis is being prepared, therefore I'm not able to share. But there are ways that we can avoid paying this tax. At a very high level analysis, we have been above the threshold of 15% in all the international jurisdictions in any case. So if there's any issue, it's going to be in Qatar, but there are ways to evolve.

[Operator Instructions] And your next question comes from the line of Seki Mutukwa from Ashmore. And your next question is from the line of [ Nikhil Phutane ] from CBFS.

Well, you have mentioned certain things in terms of drop in JV, especially because your plant outages in Asia has been seasonally lower along with projects especially in U.K. and Bangladesh. So I wanted to understand now, do we see further provisions likely to happen especially in Bangladesh given the situation is currently there, which we will be talking about likely in terms of increase in provisions in the third quarter, fourth quarter of this year?

So let me ask you about -- your question is Bangladesh, specifically about FX losses? Or...

Yes. I'm talking about the Bangladesh project in which you have mentioned, there has been a share in drop on that because of ForEx process and other things. So I wanted to understand what is the current situation regarding that. How much -- yes.

Yes. So there, the ForEx losses, as you can imagine, is due to the currency movement. Political situation there is at the moment volatile. However, the plant is available and operational. So we don't see as of now any issues in the operating of the plant. And if your question is about the impairment, it's not -- we are still far away from that.