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

Hello, and welcome to the Qatar Electricity & Water Conference Call. Please note that this call is being recorded. I would now like to turn the call over to our moderator, Bobby. Please go ahead.

Thank you, Dustin. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Qatar Electricity & Water Company's Third Quarter and 9 Months 2025 Results Conference Call. So on this call, we have Shahzad Gill, who is the Chief Finance and Planning Officer; and then Dan Sabitov, who is the Corporate Planning, Performance and IR Manager. So as usual, we will conduct this conference with the management first reviewing the company's results followed by a Q&A. Please note that we will only accept questions in an audio format and not through the chat for this webinar. So I would like to now turn the call over to Shahzad. Shahzad, please go ahead.

Thank you very much, Bobby. Good afternoon, everyone. I welcome you to Qatar Electricity & Water Company's Quarter 3 2025 Financial Results Presentation. We shall start with the headlines first, and then we will get into details and comparisons with prior year. Let's start with Slide #4, please. So before we jump into the numbers, I want you to hold on to this thought that Q3 last year was an exceptional quarter. And thereafter, there was a pullback seen in Q4 2024. However, this year, the trend has been more consistent and even over the 3 quarters. So with this, we'll get into the numbers. Revenue for 9 months ending September 2025 is QAR 2.289 billion. This is a 1% increase compared to the same period last year. EBITDA is QAR 1.5 billion, which is lower than last year. Net profit, QAR 1.027 billion compared to QAR 1.189 billion in the same period last year. QEWC Group's gross power capacity is 20 gigawatts, out of which 4.2 gigawatt is renewables capacity. Gross capacity under construction is 6.1 gigawatt. In net ownership adjusted terms, QEWC has 8.5-gigawatt operational capacity, out of which 1 gigawatt is renewables and 2.9 gigawatts under construction. Gross water capacity is 541 MIGD, net is 392 MIGD. Net under construction water capacity is 61 MIGD. We'll move to Slide #5, please. So here, we have listed out some investment highlights. The fundamentals remain strong. Market share in power and water remains high within Qatar. Internationally, we have a well-diversified portfolio of renewable and thermal assets across multiple regions, where demand growth is strong, gas plays an important role as transition fuel and renewables are replacing old thermal power plants. We have long-term offtake contracts for our investments and corresponding long-term fuel supply agreements in place, lowering the fuel risk. Next slide, please. So here, we have dark blue left bar in each chart demonstrates total of sent-out water and power availability at the group level. Lighter blue middle bar represents assets that are fully consolidated. Hence, they have an impact on our revenue as well as on cost of sales. Lighter blue bars on the right represents investments that are equity accounted, thus impacting share of reserves line in the income statement flowing to the net income. Here, sent-out water -- sent-out power is stable, almost same as last year, while sent-out water is slightly lower compared to last year. Power availability is 1.2% higher, while water availability is 0.3% lower. These changes in the plant availability are mainly driven by planned outages. We'll move to the next slide, please. Key financial highlights here, and I will not go into the details on this slide, but we have the details for you available in the coming slides. For the 9 months ending September 2025, revenue is QAR 2.289 billion, as we mentioned earlier, EBITDA stands at QAR 1.5 billion and net income attributable to the owners, QAR 1.027 billion. With this, I shall hand over to Dan to go through the variance analysis in more detail. Dan, over to you.

Thank you, Shahzad, and good afternoon, everyone. We are on Slide 8. This year, revenue increased by 1% comparing to 9 months of 2024. This was largely driven by higher capacity and output charges, which was partially offset by lower lease revenue at one of subsidiaries in Qatar. Gross profit amounted to QAR 711 million in 2025 comparing to QAR 716 million for the same period of the previous year. The minor variance is mainly due to higher fuel costs and O&M expenses. EBITDA was QAR 1,516 million for 9 months of 2025, whereas EBITDA for the same period of the previous year was QAR 1,660 million. The decrease is largely driven by one-off items and lower share of profits from joint ventures and associates as explained on the next slide. Turning to Slide 9. Share of profit from our joint venture and associates was QAR 556 million in 2025 compared to QAR 605 million in 2024. Decrease is mainly driven by onetime income from reimbursement of fuel costs during commissioning of power plant in Bangladesh reported in 2024, lower earnings from Ras Girtas plant in Qatar from lease revenue and outages and weaker market prices for Moorabool Wind Farm in Australia. Interest and other income decreased from QAR 389 million to QAR 276 million for the 9 months of 2025. Variance is driven by lower interest income on deposits and one-off items such as income recognized last year from one-time consideration received from one of the international investments following sale of their stake and lower final dividends received from available-for-sale investments this year due to interim dividends in 2024. Year-to-date net profit was QAR 1,027 million compared to QAR 1,189 million reported last year. The decrease reflects the impact from one-off items as just explained, higher FX gain recorded in 2024 and several tax impacts, including Pillar 2, partially offset by lower interest expense. Key financial highlights for the third quarter are available on Slide 10. And our quarter results in more details will be covered in the next 2 slides. Now turning to Slide 11. Both revenue and gross profit for the third quarter of 2025 are higher compared to previous year figures. This was primarily driven by higher capacity and output charges. EBITDA amounted to QAR 544 million versus QAR 651 million reported last year. The decrease is largely due to lower share of profits from JVs and associates, which is explained on the next slide. Now moving to Slide 12. Decrease in share of profits from joint ventures and associates mainly driven by timing of planned outages and higher interest expense at Paiton Energy, FX gain booked in Q3 2024 by the UNMP plant in Bangladesh, unfavorable impact from the change in functional currency from Uzbekistani Som to euro at Surkhandarya project in Uzbekistan. Lower market prices impacting Moorabool wind farm in Australia and reimbursement under business interruption insurance at UHP plant in Q3 2024. Lower interest and other income is mainly attributable to lower interest income on deposits. Net profit for the third quarter was QAR 365 million as compared to QAR 509 million last year, decrease largely driven by higher FX gain reported last year, reduced results of equity accounted investees as just explained, and lower interest income on deposits. It was partially offset by lower interest expense and income tax expense booked in Q3 2024. Now turning to financial position on Slide 13. Total assets of the group stand at QAR 23.3 billion with nearly 3% increase comparing to previous year-end, which was mainly due to drawdown from the corporate credit facility. 8% decrease in cash is largely driven by capital expenditures on Facility E and Peaker Unit, partially offset by cash generated from operations. Increase in value of available-for-sale investments are driven by the change in the market price of shares. Moving to Slide 14. Total equity of the group decreased by 1% and amounted to QAR 15.5 billion, decrease largely driven by dividend payments made by the company and change in the fair value of interest swaps in JVs and associates, partially offset by year-end -- year-to-date net profit. Increase in total debt versus end of 2024, explained by drawdown from the corporate credit facility. And net debt is higher compared to 2024 figure by nearly QAR 800 million, mainly due to capital expenditures, as explained before, partially offset by other drivers. With that, we'll open up for questions. Over to you, Dustin.

[Operator Instructions] And our first question comes from the line of [indiscernible] from EFG Hermes.

I just wanted to ask about the increase in interest expense reported this quarter. I just wanted to ask about the reason behind it. Is it maybe related to Nebras Power?

So the increase is coming from the facility drawdown at QEWC level. This is to fund the CapEx growth that we have mentioned in our presentation.

[Operator Instructions] And there are no further questions. I will now turn the call back over to our moderator, Bobby, for closing remarks.

Yes. Okay. If there are no further questions, we can -- actually, I can -- I probably -- I can ask a quick question, and we can wait if we get something from outside. Can you just talk a little bit about your sent-out power performance? I do see that -- it's not been as strong as -- sorry, sent-out water performance, it's not been as strong as your -- the power performance. Is there something going on in that market that we need to know about?

Bobby, thank you very much for your question. Nothing major that we are aware of in the market. It's just the demand from year-to-year or quarter-to-quarter that's changing. There are many factors that impact the demand. But as we -- as it stands, we are dependent upon the instructions given to us by Kahramaa.

Okay. And just a second question. In terms of your future growth, your Facility F, et cetera, can you please provide an update?

So right now, we are working with Facility E, as you know, as you are aware. Facility F is in the peripheries and in the talks at the moment, but nothing concrete has been done on that. There are no agreements signed. So we will keep you posted as something tangible happens. But for now, there's nothing to report on that.

Okay. And then I guess the third and final question for me is that how can we -- how should we think about this tax or the tax rate? I see that it keeps hopping around a bit. So in terms of modeling going forward, what should we do with the taxes, et cetera? Because like it was very significant in the second quarter. It's pretty nominal in the third quarter. So how should we look at this going forward?

Yes, Bobby, mostly we have impact of the Pillar 2. So for 2025, the QAR 13 million reflects the income tax in Qatar. So we expect for the 2025 in the range between QAR 20 million to QAR 25 million...

For the whole year?