Qatar Electricity & Water Company Q.P.S.C. (QEWS.QA) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Qatar Electricity and Water Conference Call. Please note that this call is being recorded. [Operator Instructions] I'd now like to hand the call over to Bobby Sarkar, the QNB moderator. You may now go ahead, please.

Okay. Thank you, Eli. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Qatar Electricity and Water Company's Second Quarter and First Half 2025 Results Conference Call. So on this call, we have Shahzad Gill, who is the Chief Finance and Planning Officer; and Dan Sabitov, who is the Corporate Planning Performance and IR Manager. So we will conduct this conference with management first reviewing the company's results followed by a Q&A. Please note that we will only accept questions in an audio format for this webinar. I would like to now turn the call over to Shahzad. Shahzad, please go ahead.

Thank you very much, Bobby. Hello, everyone. Good afternoon. I welcome you to Qatar Electricity and Water Company's Half Year 2025 financial results presentation. We shall start with the headlines, and then we will get into the details and comparisons with prior year. This time, we have made some improvements to the presentation to make it easier for you to analyze. We will keep making improvements in the coming quarters as well. Let's start with Slide #4, please. So revenue for the half year 2025 is QAR 1.445 billion, which is 2% increase compared to the same period last year. EBITDA is QAR 972 million, which is slightly lower than last year. Net profit attributable to the equity holders is QAR 18 million lower, around 2.6% from last year. We'll get into the details later. So QEWC groups cross our capacity at the moment is 20 gigawatts, out of which 4.2 gigawatt is renewables capacity. Gross capacity under construction is 6.1 gigawatts. In net ownership adjusted terms, we have 8.5 gigawatt operational, out of which 1 gigawatt is renewables capacity and 2.9 gigawatts under construction. Gross water capacity is 541 MIGD. Net terms is 392 MIGD. Net under construction water capacity is 61 MIGD. Next slide, please. Here on this slide, I will not go into too much detail, but this slide lists out investment highlights. The fundamentals are still strong for the company. Market share in power and water remains high within Qatar. Internationally, we have a well-diversified portfolio of renewable and thermal assets across 10 countries. We have long-term offtake contracts for our investments and long-term fuel supply agreements in place. Next slide, please. We have changed the format a little bit on this slide. I will take you through the changes. The left bar in each case is total of sent out water, power or availability. That is at the group level. This bar is what we have always reported in the past. We have now added some more breakup for better context. Lighter blue middle bar represents assets that are fully consolidated. Hence, you would see the impact on revenue as well as on cost of sales. Lighter blue bars on the right represent investments that are equity accounted, thus impacting share of results line in the income statement flowing to the net income. Now to the operational performance in H1 2025, we have sent out power, which is stable compared to last year figures, while sent out water is slightly lower compared to last year. Power availability is 2.1% higher while water availability is 0.7% lower. Changes in plant availability are mainly due to planned outages. Next slide, please. Here, a snapshot of key highlights, key financial highlights for 2025. Revenue of QAR 1.445 billion, as I mentioned earlier higher than last year. EBITDA for the period is slightly lower. Net income attributable to equity holders for the period is QAR 662 million. This is around 2.5% lower than last year. Now I will hand it over to Dan to go through the variance analysis in detail.

Thank you, Shahzad, and good afternoon, everyone. We are on Slide 8. Revenue was already explained by Shahzad. Gross profit amounted to QAR 452 million in the first half of 2025 comparing to QAR 459 million for the same period of previous year. The variance is mainly due to higher fuel costs and O&M expenses. EBITDA was QAR 972 million for the first half of the year, whereas EBITDA for the first half of the previous year was QAR 1,009 million. The decrease was explained by 2 one-off items. First one is income recognized last year from onetime consideration from one of the international investors following sale of the stake. And second one is lower final dividend received from available for sale investments in this year due to interim dividends received in 2024. Turning to Slide 9. Share of profit from our joint ventures and associates increased by 16% in comparison to the results for the same period of last year. Increase is coming mostly from construction and finance income from Surkhandarya plant in Uzbekistan following service concession accounting treatment. Interest and other income decreased from QAR 279 million to QAR 185 million in the first half of 2025. Decrease is driven by one-off items previously explained, coupled with lower interest on deposits. Net profit was QAR 662 million compared to QAR 680 million reported last year. The decrease reflects impact from one-off items and other drivers as explained before, along with several tax impacts, including Pillar 2 and deferred tax adjustments. A high-level comparison of financial results for the second quarter is presented on Slide 10. I'll cover quarter results in more details on the next 2 slides. So turning to Slide 11. Post revenue and gross profit for the second quarter of 2025 are higher compared to the previous year figures. This was primarily driven by increased sent out power and water, coupled with higher availability at one of our stations. EBITDA is in line with 2024 results. Higher gross profit and share profit from investees was offset by a decrease in other income, which we will cover shortly. Now turning to Slide 12. Decrease in share profit from JVs and associates, mainly driven by income on construction and finance income from Surkhandarya plant, as we explained. Lower other income is largely due to income recognized last year from onetime consideration received from one of international investments, as previously explained as well. Net profit for the second quarter is 4% higher compared to second quarter of 2024, increased largely driven by higher gross profit, higher share of profit from investees and lower finance costs, partially offset by one-off decrease in other income and several tax impacts, including Pillar 2 and deferred tax adjustments. Now moving to financial position on Slide 13. Total assets of the company stand at QAR 23.4 billion with nearly a 3% increase comparing to previous year-end, which mainly due to drawdown from the corporate credit facility. 7% increase in cash and cash equivalents is largely driven by cash generated from operations over the 6 months and the debt drawdown, partially offset by payment of final dividend for 2024 and capital expenditures on Facility E and Peaker Unit. Increase in value of available for sale investments driven by the change in the market prices. Turning to Slide 14. Total equity of the company increased by 1% and amounted to QAR 15.7 billion, increase largely driven by net profit generated for the first half of the year, partially offset by payment of final 2024 dividends in Q1 2025. Both total debt and net debt increased versus end of 2024 due to debt drawdown as previously explained. So with that, we'll open up for questions. Over to you, Eli.

[Operator Instructions] There are no pending questions on the conference line. I will now hand over to Bobby for final remarks.

Eli, guys, if we can wait for a couple of questions. I can start with asking a question or 2 of my own. Could you give us a sense of your income from your joint venture and associates, that's been pretty variable, volatile quarterly basis, it's roughly QAR 211 million for this quarter. Where do you see that if you can -- on a run rate basis? And what do you think that's going to be going forward, like, let's say, for this year?

I think if we take the average over the last year and this year, yes, there's a little volatile, but over the year, it will even out.

I'm sorry, could you repeat that? That wasn't very clear.

Yes. I think taking average between the quarters for the last year and this year will give a good estimate.

Okay. All right. Okay. Eli, do we have any questions from the outside line?

Yes, we do have a question from Zohaib Pervez of Al Rayan.

Could you tell us -- could you give us an amount as to how much is the onetime consideration that is included in this miscellaneous income? And my other question is on the dividends. So we saw a slight decline in the dividends. And this, I presume is from lower profitability. So should we assume that the payout ratio, which has remained stable is what the -- is what the -- what QEWC looks at while paying out dividends? Should we think that the payout ratio should remain stable going forward? For historical purposes from the start of the year?

Yes, absolutely. Thank you very much for your questions. On the first question, we would prefer not to disclose the exact amount, but I can tell you it is a significant amount. And on the second one, yes, you can expect a similar payout ratio going forward. This year has been full of growth investments. And we had cash requirements to fund those investments, but we still maintain or hope to maintain even to the end of the year, the payout ratio.

Sounds good. A couple of more questions. Your debt levels have increased from last year and from the start of this year, if I'm not wrong. But your interest cost has remained stable. In fact, it's lower, much lower. So is it because you have renegotiated your contracts? Or it's because the debt was taken at the end of the quarter and probably you'll see more interest costs coming in the next quarters?