SMN Power Holding SAOG (SMNP) Earnings Call Transcript & Summary

[Foreign Language].

[Foreign Language]. So good morning, everyone. I hope everybody can see us and hear us clearly. We are joined here from SMN Power Holding by Mohammed Rawahi, the Chief Executive Officer; myself, Abdullah Naimi, the Chief Financial Officer; and Mitesh Patel, the Finance Manager.

[Foreign Language] [Interpreted] Good morning, everybody. We are very happy to meet you today in this event, where we can present the company's financial results for the year 2024, and to answer your questions and queries following that presentation. So we will start with the presentation by CFO.

So again, welcome, everybody. And the topic of the agenda for the first interactive session for 2025 is to give you a high-level overview of the financial results for the year ended 31st December 2024. Then after that, we will discuss with you some major events that took place in 2024, including the execution of new PPAs and WPA. 2024 is considered a historical and a key year for the company. So we will give you an overview of the major events that took place. Then after that, we'll also discuss with you the dividend distribution, either the distribution that had been already announced and the future plan. We will also then give you some future outlook about the company and its affiliates. [Foreign Language] So to start with the first topic, which is providing a quick overview of the financial results. As you know, the financial statements, the audited financial statements and the annual reports, which include Board of Directors' reports, management discussion and analysis have already been uploaded and disclosed to the market through Muscat Stock Exchange website. So a lot of materials have already been disclosed, but we will give just overview of the key financial results. So for 2024, the company generated an overall consolidated revenue of OMR 82.2 million compared to OMR 87.4 million for the same period in 2023. In terms of the gross profit, the company generated OMR 6.3 million in 2024 in comparison to OMR 18.0 million in 2023. And in terms of the profit after tax, the company generated OMR 4.5 million as a profit against a loss of OMR 26.3 million in 2023. And this is taking into consideration the impairment the company had to recognize impairments in the books in 2023, but we'd like you to confirm that for 2024, we have no such losses related to impairments that have been recognized in 2024. The financial statements also provide, in its notes, an overview of the key contracts the company has already signed with Nama Power and Water Procurement Company in addition to other major contracts. Most of these contracts have been now renewed as a result of the extension of the new power purchase agreements and the water purchase agreements for the company. The financial statements also provide a lot of detail on the accounting policies and related events and information for the group. [Foreign Language] Then moving on to the second topic in the interactive session today, which is just to give you an overview of the major events that took place in 2024. None of these events are new to you, all of these events have already been disclosed to the market. But just to give you a quick recap, in 2024, the company managed to sign and execute a new power purchase agreement for SMN Barka for almost 9 years and the same for Al Rusail for a period of 6 years. So a new PPA for Al Rusail Power Company in 2024 for a period of almost 6 years. For SMN Barka, the company also managed to enter into a new water purchase agreement for 9 years with Nama Power and Water Procurement Company. These are considered major and remarkable events and achievements for the company, ensuring the business continuity for the business for many years to come. Another major event that took place in 2024, which has also been disclosed to the market, is the refinancing of the outstanding debt for SMN Barka. As disclosed to the market, the company managed to refinance its outstanding debt for SMN Barka. And in the refinancing process, the management managed to remove many of the covenants and restrictions, especially around distribution of dividends, which relates to cash sweep, which means the company will be in a position to distribute dividends in the future, some of which have already been distributed, as disclosed to the market. So that's another major event that took place in 2024 in favor of the company and the business. Other events include, for example, the sale of GTs. The company managed to finalize the sale transaction with the right buyer for the sale of the 6 GTs at Al Rusail Power Company and the actual work is currently undergoing, and it's expected that 2025, the work will be completed. [Foreign Language] The third item to discuss with you today is to give you an overview of the dividend distribution of the company. We are delighted to confirm, and as also disclosed to the market, the company has made a good distribution, an exceptional distribution of OMR 0.73 from SMN Barka to SMN Power Holding. And as disclosed to the market as well, the distribution from SMN Power Holding to the investors will take place once we complete the audit. The audit is now completed, and this is now an agenda for the next AGM, which will take place on the 26th of March next week. Once this agenda item is approved, then the company will be in a position to distribute this distribution to the wider investors. So we would like to congratulate all the investors and also to thank them for their support for SMN and SMN team to make this achievement a reality. Al Rusail also managed to, as also has been disclosed to MSX, Al Rusail Power Company has also managed to distribute OMR 3 million to the holding company, which is roughly OMR 0.15 per share. And this will also be approved by the AGM, which will take place on the 25th of March next week. Again, this is a commitment that the company and the Board of Directors is delivering to the market and the investors that any excess cash will be distributed to the investors. It's another achievement for Al Rusail, because once Al Rusail has completed its debt in 2022, Al Rusail has been consistent in making distribution on an annual basis for 3 consecutive years for about the same amount. OMR 3 million have been distributed from Al Rusail since Al Rusail came out of the debt. [Foreign Language] The final topic we would like to discuss with you is just to give you an overview of the future outlook of SMN Power and its subsidiaries. In terms of the PPA and the business continuity, the company now is in a good position. We have long-term PPAs and WPA in place. These PPAs and WPA will expire around 2032, but the useful life of the assets can go for another minimum 6 years, if not more, beyond that. So we believe that the company is still in a very good position and a strong position for further extension after the terms of these PPAs in '32. So this company could get what we believe further extensions that could go up to '39, which is the end of useful life of the assets, which is 6 years after the PPA, or even further as the company is engaging in repair and maintenance of its assets and to maintain the useful life and reliability of its assets. Another point related to the dividend policy. The company is committed to its dividend policy, which is distributing any excess cash to its investors. So any excess cash will be distributed to its investors. The company is committed. The Board is committed to this policy provided, of course, we meet all the covenants related to the facilities agreement and all the commercial legal and audit requirements. And the company have been doing this for the same and now the company is in a position to do the same for SMN Barka, and that will continue in the future. I think these are the key items we wanted to share with you on the future outlook. We also would like to confirm that all regulatory and compliance matters have been complied with. The company has been very proactive and the company will continue to be proactive in disclosing all material information to its investors to help the investors make the right decision and to make them aware of the material information and events for the company. [Foreign Language] So that's the key points we wanted to maybe highlight to you, and we'll be happy to take any questions and queries.

Yes, Abbas, you can go ahead.

Good morning, Abdullah. Thank you very much for the presentation, and congratulations on the PPA and WPA renewal and a fantastic year. So I have a few questions. I'm sure everyone will benefit from these. So now you have around OMR 24 million cash on your balance sheet, and there's another other current financial asset of close to OMR 3.18 million. Is the OMR 3.18 million part of your DRSA, which cannot be paid, or this entire OMR 27 million is distributable? That's my first question.

Everything is distributable, Abbas.

Okay. So there's no obligation, nothing for you to sort of hold on to this? Okay. Now out of the OMR 27 million, you've already announced OMR 0.75 (sic) [ OMR 0.73 ], okay, which is around OMR 15 million, a little less than that. And then there is another OMR 3 million that you've announced that will go from Rusail to the parent, okay? And at some point, the parent, after an audit completion, will pay. So you've already accounted, from the OMR 27 million, approximately OMR 17 million to OMR 18 million. That still leaves another OMR 9 million to OMR 10 million. Now do you have the retail earnings for this to be paid? And when this money will be paid from SMN point of view? Because that's another OMR 0.45 to OMR 0.50 on a per share basis.

Absolutely correct, Abbas. Thanks for bringing this up. So we completely align with you that the cash balance is on the higher side, around roughly OMR 28 million, out of which approximately OMR 18 million is what we are -- like OMR 15 million will be going from holding and OMR 3 million going from Rusail. So almost OMR 18 million is something which is in the administrative process as of now for distribution. The remaining amount, of course, has to be considered as a working capital movement. So if you look at the movement of the current assets and the current liabilities and the taxations portion, this is just like a timing gap between the payments and the receivables, which will knock out the remaining cash balance. So there is, I think, roughly around 2 million odd amount, which will be surplus left, which is for the routine purposes for the company across the entire group that is maintained.

So 2 million is surplus left after paying taxes and debt. Is that what you mean?

Yes -- just slightly below OMR 2 million, but yes, your understanding is correct.

Okay. This is what I'm thinking at, okay? Now when I look at your current portion of liabilities on your balance sheet, you've got debt of OMR 4.7 million. Your interest on the remaining portion of debt on an annual basis is close to OMR 2 million. And I get the same OMR 6.5 million to OMR 6.6 million if I pay down your debt until the end of the PPA, which is 2032 June. So my first question is, is this OMR 6.5 million in debt principal plus interest payment? Is my number correct, OMR 6.5 million?

I'm sorry, Abbas, I cannot trace your OMR 6.5 million portion.

Your current portion of debt is OMR 4.7 million, which is something you expect to pay in the next 1 year, in your balance sheet?

Yes, correct.

That's correct.

And then I'm calculating your interest cost at around OMR 2 million. So that's OMR 6.5 million. In total debt plus interest. And if I do a debt amortization schedule, where I say that the 2024 end debt will be repaid over the term of your PPA, which is ending in 2032 June, I still get a similar number, which is OMR 6.5 million. So my question is OMR 6.5 million is your annual commitment to banks. Is that fair?

Yes, yes. Broadly speaking, yes, you're right.

Okay. That's my first question. Second question is on a tax basis, which is cash taxes, I am estimating you to pay between OMR 1.5 million to OMR 2 million. Is that fair?

Broadly speaking, yes. I mean, I cannot commit on the actuality, but yes, numbers...

For this year, for example, you have OMR 1.5 million in your current tax liability, which is something you're expected to pay this year?

Yes. I mean the range seems to be fair.

Okay. So that's OMR 8 million. Now you have something called current -- in the liability, there is another called current provision of OMR 750,000. Can you tell me what that is?

Sure. So for OMR 750,000, as you are aware, we have done market disclosure back in somewhere end of November or December with regards to Steam Turbine 2 outage, where we have highlighted that the impact to the company is going to be OMR 0.5 million. However, when we say that an impact to the company is OMR 0.5 million, this event is an insurable event. But from an accounting perspective, there are some time lines to how the insurance companies move. So this is sort of an expense which we believe to be recovered back from insurance companies in '25. So this will technically go away.

Okay. So you're not supposed to pay this. This OMR 750,000 is not going to go to your O&M guide as a payment and then you will receive it back from insurance company.

Yes. It's just the process of cash flow movement, but not a P&L impact.

Got it. Clear. So then I'm looking at a total commitment of OMR 8 million, which is OMR 6.5 million in debt terms, debt plus interest, and OMR 1.5 million in tax terms. Now against this, as per your terms of the PPA/WPA, you make a certain EBITDA. Now if I look at the 2 full quarters that I have the numbers for on the new terms, I have the third quarter of '24 and I have the fourth quarter of '24. And for all power companies in Oman, there's a seasonality. You make more tariff in the summer months and less in the winter months. So naturally, you make a loss in the winter months and a profit in the summer months. So the number I have for the second half of 2024 is close to OMR 6 million in CFO. Is it as simple as me multiplying 6 x 2 and saying that you can generate, on the base of the new PPA, new WPA that you have, you can generate OMR 12 million, you'll pay OMR 8 million, and that's left for OMR 4 million on an ongoing basis for distribution. So what I'm trying to get at is, on an ongoing basis, how much money can be distributed to shareholders after you take off these dividends that you've already announced to the market? That's my question.

So Abbas, I can see your approach. Your approach is right. You're trying to determine the EBITDA, okay? And that's what you need, I think, as an analyst, you need the EBITDA to determine, okay, if the company is making this EBITDA, the company's policy is to distribute all excess cash, then this is the level of the dividend we should expect. Now we can help you with numbers as per the financial statements, Abbas. We can answer the queries as much as we can. But difficult for us, Abbas, to give you exactly how much EBITDA we can expect, Abbas. We can make the balance sheet available as per the law for you. We can disclose as much information as possible to keep you aware of any events, any information you need to be aware of. And we leave that to you, Abbas, to do the analysis. You are the guys that are the experts, the analysts. But for us, difficult to get this level of detail.

Okay. I appreciate that, Abdullah. Okay, then if you answer my question, from the third and fourth quarter, because those were the full 2 quarters that you had the benefit of the new terms of the WPA and PPA. Is it fair for me to annualize both quarters where there is a winter quarter and a summer quarter and then come at a number, or there is more seasonality also? I mean, every winter quarter is not similar and every summer quarter is not similar on an EBITDA basis. Does it make sense?

My view, Abbas, I think you will need another 2 quarters to have a better picture. Yes. You will need 2 more quarters, Abbas.

Okay. So that's how much you'll say on the topic?

Yes.

Okay. That's fine. Now if I have to circle back to our earlier discussion, and you guys have done a commendable job in releasing all this cash to shareholders and it's much appreciated. What's the update on the trapped cash and the turbine sale cash. Is that part of the OMR 3 million that you announced recently that Rusail is going to give back to the parent company? Does that take care of the trapped cash on the turbine sale cash or there's more coming from Rusail?

No, no. As you know -- thank you for this question. I should have mentioned this in my dividend distribution point. So basically, for the sale, we just have OMR 3 million, but this comes from 3 sources, to be completely transparent. So part of this comes from operation, part of this comes from the sale of GTs. And we managed to successfully reverse a good part of the cash trap, almost, I think, 50% or slightly more than 50%. So we managed to reverse almost 50% or so of the cash trap. Now we still have another cash trap, which is less than what was original. And we are discussing this with the auditors to see other ways to release it. But we managed to release a good portion of it already, which is part of the distribution.

How much of it is left in terms of Omani rial amount to be released?

It should be slightly under OMR 2 million. I won't be able to give you the precise number.

Under OMR 2 million is still left to be released as cash?

Yes.

And of course, I mean, it looks like finding a way will be more challenging, because you've already done it, right? The issue is the retained earnings, right, of Rusail effectively, that your retained earnings...

Exactly. The issue was retained earnings. So we managed within the rules, within the IFRS to work with auditors to find a solution to this. So we managed to find a solution to deal with a good part of the tax trap. Now there are other venues we are also considering, Abbas, to release another part of the cash trap in the coming maybe quarters. So we are working on it. There are a few areas that we're still considering with the auditors, but please bear with us.

Sure. So the second question naturally is that Rusail has -- obviously, the retained earnings are pretty much running close to 0, and that's obviously given your commitment that you want to give out all free cash to shareholders. Now Rusail is generating some operating cash flow. Do you see a scenario where the operating cash flow that you generate from Rusail is going to be more than the net profit, so which means you'll never be able to distribute 100% of your cash flows, or that scenario is not built into your model?

I'm sorry, I didn't get your point, but...

Let me elaborate further. If your retained earnings are 0, the one way to distribute without doing an effective capital reduction in company now is to give all your retained earnings away. Now the only source of retained earnings for you is a new profit that you generate, okay? That's going to come in from the new contract that you have. Now the question is, the profit that you generate, is it more than the cash flow that you generate at Rusail level? I'm only [indiscernible] Rusail will come to Barka. The profit that you generate from Rusail level is going to flow to your bottom line and your equity, but is your cash more or less than this? Because if cash is more than this, again, there is trapped cash issue.

No. Thank you so much for bringing this up, Abbas. And we are delighted that going forward, the net profit and the cash flows are aligned. So no more further trapping of cash would happen. Of course, we are committed to help on reducing whatever portion we have, and we are working hard on that. But no more further increase of cash would be occurring at Rusail, definitely.

Are you able to comment on what sort of profitability Rusail is generating, or that's not something that is for public consumption?

That's difficult, Abbas, please.

Okay. So now if I have to circle back on your dividend streams for investors, right, there is this OMR 0.75 (sic) [ OMR 0.73 ], that's coming in now, in the next couple of weeks. Then there is a OMR 3 million, which is OMR 0.15 approximately, which you've already given from Rusail to parent. And at some point in this year, we expect it to come from parent to shareholders. After these 2 distributions, OMR 0.75 (sic) [ OMR 0.73 ] plus OMR 0.15, which is OMR 0.90 (sic) [ OMR 0.88 ], what will distribution look like? And I don't mean in per share terms. I mean, will it just be operational, whatever operational cash flows you generate, and after meeting your debt and tax obligation, all of that will come to shareholders. Is that the only nature? Or are there any other one-offs available to shareholders as distribution?

Yes. I mean, Abbas, as of now, what we can only say is that going forward, we expect the dividend to be distributed from the cash generated from the operations, okay? Now, there are areas, Abbas, we're also looking at. So that areas could maybe throw some additional distribution in addition to the operation. But generally speaking, as we speak now, our expectation is that from now on, the distribution will come from the cash generated from operations. But there are, as I said, areas we are also considering where this can be maximized.

Could you talk about those other areas...

Abbas, just a minute. Just to get the facts corrected, it's not OMR 0.75, it's OMR 0.73, because it's for the broader market, and we don't want to confuse the investors.

No, no. Absolutely. Thank you. Yes. Because I was taking the 200 million share count, and I know your share count. Okay, it's fair enough. I understand.

It's OMR 0.73, to be precise.

Yes, yes. And even the OMR 3 million is not OMR 0.15, it will be something different, I think, a little less than that.

Broadly speaking, yes, in terms, we can say, but because sometimes it gets interpreted in the wrong way. So just getting the facts corrected.

Sorry, coming back to you, Abdullah, because I've looked at the sector for a while, other than -- I mean, you've already released whatever cash you could, retained earnings. So what other sources could be potentially -- without giving us, obviously, the numbers what it could be, but what other sources are you looking at other than your operational cash?

Abbas, as of now, the main source will be, of course, operations. But I mean, we believe having long-term PPAs, our operations now is stable. So that will at least ensure that the shareholders will receive a stable stream of dividends. Now difficult to comment on level of dividend, amounts of dividends, but the key source will be operations. Other sources we also consider -- there are other sources we are considering, but I cannot really comment on them now. But you can take it, Abbas, that from now on, the main source will be from operations. But at least we're now stable. We have long-term PPAs. Refinancing has been done with favorable terms, which will ensure at least a stable and constant stream of dividends.

Okay. And this OMR 3 million that you've announced from Rusail to the parent is -- I mean, I just wanted to confirm, is that going to be -- hopefully, the audit will be over and it will be paid to shareholders this year?

We have 2 options, Abbas. We are looking at either this year, maybe sometime quarter 3 or 4, or quarter 1 the following FY, quarter 1 2025-2026. It depends on the level of dividends from the other subsidiaries. Then we will determine should we go for an audit, because audit is expensive and also extensive process. So sometimes from costing and from time perspective, we do one audit at the year-end and distribute all dividends similar to the process we did this year. So please bear with us. We are considering either this year, okay, depending on the level of dividends, or worst-case scenario, we do it with the annual audit next year, this time next year.

Okay. Clear. Okay. That's helpful. So this year, we get OMR 0.73. And then based on this year's cash flows and, obviously, this OMR 3 million that you've already announced, you could be looking at a distribution sometime in March next year. And obviously, the magnitude of that does...

Yes.

Okay. And the next 2 quarters will...

But you can think about the company's dividend policy is to distribute any excess cash.

Correct. The million-dollar question is how much is that excess cash that you're generating? I have my own estimates. And I'm thinking that you can generate between OMR 0.15, OMR 0.20 on an ongoing basis. But then, of course, there's no way for me to know until I get the first quarter and second quarter financials, because that way I can...

I think we need 2 more quarters, Abbas.

That will make 4 quarters, correct?

Exactly. Exactly.

Okay. All the best to you guys. You've done a fantastic job with your distributions and, obviously, the stock price has reflected that. And I'll wait for my turn in case I have any more questions. I'm sure other people would want to ask you something.

Yes. And Abbas, just one more information you might find useful. The dividend policy in addition to distributing excess cash, of course, subject to covenants and legal requirements, the plan is semiannual distribution of dividends as well.

This is for Barka.

Got it. Understood. That's helpful.

I think, Abbas, you made the job easy for everybody. I think you asked all the questions.

Maybe people can still ask you about the new level of dividends.

If there are any other questions, we're happy to take any other questions. [Foreign Language]. Yes, Joice.

Thank you very much for the answers so far. Very insightful. One question that I have is on your cash taxation. So now that most of your assets have been depreciated from the tax point of view, what's the base that you will take your taxation on? Is it EBITDA or is it EBIT or net profit, EBT?

Joice, for taxation purpose, of course, we have a very detailed law available in Oman. Practically, for depreciation perspective, they have their own concept of running the depreciation on assets. We have not fully depreciated it, because it has a separate mechanism and it will keep flowing accordingly, but yes, on a diminishing profiling. But it goes based on EBITDA and then we have to do the deductions again for depreciation allowed under income tax laws.

Just what I noticed is last year, you have paid almost OMR 3.2 million on 2023 profits. So I was just curious as to why are you paying so high tax. Could you throw some light on that?

Yes. So we paid OMR 3.2 million, which is basically coming from 2 factors. Factor number one being, last year under the old contract, of course, it goes without saying that the tariffs were on the higher side. So the taxation is correspondingly on the higher side. And secondly, a small tax dispute that we had in the previous years, which resulted into payment of OMR 250,000. So broadly aligning together to OMR 3.2 million. But now we are happy to say that all our tax disputes have been concluded in full, and we do not have anything at this given point of time, which is at a dispute stage on taxation. Going forward, it would be a straightforward operational driven income and getting tax based on the computation under the income tax laws of Oman.

On your loan side, could you please tell us what's the currency that you have taken the loan in? Is it still USD and OMR components are there? Or is it purely OMR?

It's purely USD, full.

Pure USD. And what's the hedging portion? And what's the hedging policy as well as of now?

75% is currently...

That's correct. 75% is the policy.

And are you planning to keep it the same throughout the tenure of the loan?

To be very honest, looking at the environment now, like we're not planning to go beyond 75%. The interest rates are on the higher side. If interest rates curve go down substantially, we might explore it at a later stage. But as of now, 75% meets our policy as well as the lenders' requirement under the facilities agreement. So no plan to extend it at these rates.

Okay. And when is the last repayment of -- when will the loan get completely repaid?

June '32.

So that will fall in line with the PPA/WPA agreement as well?

A bit early. So our PPA would be roughly expiring in March '33 -- early March '33, 9 months. So almost like 8 to 9 months will be there post last repayment.

That's part of the refinancing, that's all debt to be repaid over the life of the new term unlike the previous term. So that's one of the terms negotiated with the banks.

And what's the repayment structure? When I look at the financials, I'm seeing it's kind of the principal repayment portion is not on an increasing basis, but rather it looks stable during the period. Is that right? Or did I miss something there?

No, you're absolutely right. Because our revenue is also contractual and it's pretty straightforward, it's straight line -- not straight line, straight line is not the correct word, but broadly on a flat line payment profile.

Yes, probably around OMR 4.7 million, OMR 4.8 million on...

Yes. Of course, like over a period of time, the interest and portion and slight amortization gap will come up. But broadly, your understanding is correct. That's in the same range.

So if we look at it, basically, the total debt service component will decline over the period?

Yes.

And see, you have now close to around OMR 2.5 billion capacity charge coming from Rusail and probably around OMR 1.25 million -- 50% of that will go to O&M. And this OMR 1.2 million probably is coming as EBITDA. Is there anything else -- any other cost component that could be built in into this structure?

Broadly speaking, that is finance cost and some CapEx that we might be doing it over the period, but purely from maintaining the asset. And as Abdullah mentioned during the start of the call that although this 9 years extension is reaching up until early '33, but our useful life is far beyond that, and we are very optimistic that our plant can be serviceable going forward as well. So some sort of repairs, maintenance and some sort of CapEx might be required to maintain the serviceable portion of the asset in good shape. So that might hit gradually, but of course we are not planning to do it one shot across coming years. It would be phased out in a linear way, so that overall, we're still trying to maintain the consistency perspective, both in terms of numbers and from the distributable money.

Sir, is this included in your O&M agreement, or this will be out of scope of the current O&M agreement?

CapEx would be at our end. O&M would be taking care of the operations.

Okay. And my earlier question was on Rusail Power Plant. But you earlier mentioned there could be some financial service component. But as my understanding goes, Rusail Power Plant doesn't have any assets -- assets means the net book value of assets is 0, and it doesn't have any debt. What are the other financial expenses that you are expecting?

See, for Rusail, technically, there's no financial expenses as such, because it's a debt-free company. And also, it's no longer into the finance lease accounting. So eventually, the financing cost as such is nothing but the provision for the site restoration that we do, which forms part of our financing cost. But that's not something which is a financing cost. It's just the cost pertaining to the plant for dismantling the asset. So these are all accounting finance costs rather than cash finance costs.

Okay. So if I look at the consolidated numbers, probably we are talking about OMR 20 million in capacity charges and around OMR 7 million -- OMR 6.5 million, OMR 7 million in O&M expenses, which essentially we are looking at an annual EBITDA of around OMR 14 million. Is my calculation correct? Are we broadly in line? Or am I too much away from the current calculations?

I think what you've done now is you've taken the numbers as is appearing in the FS, Joice, correct?

Yes.

So here, there's only one thing is that, of course, your concept of ascertaining is right. I'm not challenging that. But we need to be conscious here that the numbers that are appearing on the FS are having both the old contract revenues as well as the new contract revenues. So the profiling of that has to be slightly adjusted in terms of the calculation that you're doing.

And Joice, as we said earlier as well to Abbas, I think maybe 1 or 2 more quarters will give a better picture as well on this.

Yes, I understand that, Abdullah and Mitesh. But when I look at your capacity charge, the total OMR 18 million for Barka and OMR 2.5 million for the Rusail Power, and when I look at your O&M expenses, that could come in probably around OMR 6.6 million, which you have already contracted. So I was just looking at this as the expenses. And probably some administration expenses also might come in. Other than that, are there any other expenses that will come out of the capacity charge portion?

Broadly, I mean, you've covered everything, Joice.

Yes.

I have a follow-up, if you will allow me unless someone else is waiting. I'm happy to give them the floor.

Yes, Abbas.

So tell me, this current tax liability that you've calculated of OMR 1.5 million, okay? How have you calculated that?

I didn't get your question, Abbas. This is as per the law in Oman, but...

The reason what I'm thinking is if I take OMR 1.5 million and divide it -- and assume this is 15%, okay? So that gives me an EBITDA of OMR 10 million, because if your taxation that you're supposed to pay is on EBITDA, like you said, and the tax statement depreciation is different, then the financial statement depreciation. And eventually, for taxes, you have to look at the tax statement depreciation. That's important to us as analysts. Effectively, OMR 1.5 million is on an EBITDA of OMR 10 million. Is that...

No, no.

Am I missing something?

Yes. So what you've done is you've basically -- income for taxation. You have determined the income for taxation by reverse calculating the amount and the percentage of tax. But that's income chargeable to tax. Now income chargeable to tax is also deducted by the depreciation. So you are fully eliminating the depreciation portion.

And you're saying there's a small depreciation portion, correct, yes.

No, no. I'm saying the amount is different, but -- I'm not saying that it is a small or a big number. I'm saying the amount is different from what...

Because the way I was looking at it is the OMR 10 million is what is there, and then there is a depreciation amount, which is in this tax statement from a cash flow point of view that will be added to that. So you're looking in that ballpark. I mean I'm trying to...

Yes, yes, I get your point, but all I would like to say is that, of course, taxation, that's coming up.

Yes. None of us have access to the tax records, yes.

Exactly. The only thing that I can help you is that on the depreciation numbers under taxation are slightly lower than what is appearing on the accounting perspective. But beyond that, I'll leave the assessment to your end.

Sure. Abdullah, you commented that these plants have useful life, well, at least according to you and in the industry, even beyond the PPA term. Now from what I understand is that Rusail plant is an old technology, right? It's open cycle instead of combined cycle. So even for the Rusail, which is, I think, about 185 megawatts, you still think that there's an opportunity for that to be contracted beyond -- because my argument is this that if it worth, OPWP would have anyways given you a 9-year contract and not a 6-year contract. So the base assumption can be that whatever cash flows you make from Rusail will go away after 2030. Because why did they not give a 9-year contract. But from what you know of the industry, and you are more of an industry expert than I am, you think this technology can last beyond the current 6-year expansion? Or you feel like Rusail plant will be retired and Barka then has a useful life beyond the current PPA end term?

Yes, Abbas, for Rusail, the trend was as follows: once the company came out of the previous PPA in March 2022, okay, so the government entered into short-term extensions of Rusail. Although they were short in time, they were very frequent. So they did a short term, maybe, I think, 9 months and then 2 years or so, then 3 months and then 6 months -- 6 years. So we believe this trend might continue, okay? Maybe the fact that there's only 2 GTs, the age of these GTs matter. That's why the government go for short term, but frequent extension. So our assessment, our analysis, again, nobody can predict the future with certainty, of course. We believe technology is fine for Rusail, location is critical for Rusail. Rusail is providing very important support to the grid in Muscat, being the only plant in Muscat. We believe the company will have a good chance for further extension.

Okay. And can you talk a little bit about what reliability are you seeing in Rusail versus Barka? Is there a difference? Because clearly, there has to be a difference, right, in terms of efficiency, reliability. So can you just give us some operational metrics in terms of how these plants are doing?

Yes. Operationally, Abbas, the metrics is already -- I mean, if you would go by our Board of Directors report, which is published, the numbers are out there mentioned on our operational performance. But broadly, to capture your point here, both the plants are quite efficient, both the plants are quite reliable. And I'm talking about Barka and Rusail both as a company. So in terms of plants, we have become 3 plants now, because Barka Power, Barka Water, as well as Rusail Power, all the 3 plants are quite well in terms of operational performance and reliability, of course. With regards to like the exact percentage, those numbers, I'm just away from it, but it's available in our Board of Directors' report. They are almost close to like 98%, 99%.

Yes. I mean, Abbas, the Board of Directors support and also management discussion and analysis provide a lot of technical details. So if you look at these details, for example, the company -- both companies recorded very good [ HEC ] records, really good [ HEC ] records. We disclosed the number of megawatts and cubic meters delivered through the year. But even the information that has not been disclosed, we also would like to share that the company even operationally in terms of forced outages, et cetera, are doing very well, I would say. I'm talking about Rusail in particular, doing very well.

Excellent. And these kind of breakdowns in gas turbine that happened now, that was caught in a major maintenance or it's just the nature of the industry, sometimes things break down, these are machines. So there's nothing more to that than just, I mean, age of the pant?

Abbas, something like this always keeps happening, because we are like running the plant on a high load. I mean, just to give another backdrop to the technical information. The plant has been performing very well and there was a lot of dispatches or a lot of -- the requirement of power to be generated from Barka region has increased in the last couple of years. So of course, the plants are working quite extensively. And they are meant to work extensively. There's no doubt on that part. Something like this eventually comes up sometimes. And those type of contingencies are always built in, in our financial models and the business numbers, that these things might come up. And as I said, this event which is appearing on the financial statements now, we discussed I think on the balance sheet side, you can see some OMR 750,000 being coming as a provision. But those are all insurable events and it's just a matter of time that insurance claim gets settled and it comes back to us. So to a certain extent, yes, there is a cash impact that comes out to us, but it's not something that is frequent every year. And to a certain extent, it is largely covered as a contingency event in any business development that we do or in terms of sizing of the forecast that we do.

Correct. So I understand the insurance will take care of the repair cost, but the loss of profit, the loss of cash flow is something that obviously, the company has to bear, right, logically speaking? And I understand these breakdowns...

There are 2 things that insurance companies will take care of, both in terms of the capacity loss as well as the repair cost. Both things will be covered by insurance.

Okay. So even loss of profit in that sense or loss of cash.

Technically, if I were to say, because repairs and maintenance is something that is to be spent and incurred, and this is purely from an accounting perspective, so not going into much detail, but that is something to be -- like that's the reason why it is separately coming out. But for the loss of capacity or loss of revenue that happened is already incorporated or embedded in the revenue numbers. That is already downsized to that extent. However, it's just like we'll be going and claiming the money back from insurance companies, and it will be settled somewhere in 2025. So when you look at the overall impact, both from the revenue loss as well as the repairs, maintenance loss, put together, on a net basis, we anticipate that this is a OMR 0.5 million net impact, both from P&L and cash. Keeping aside the timing difference and the other portion, on a flatline basis, it could be a OMR 0.5 million event.

Okay. Thank you.

I think we have a comment. So Mr. Khalid -- there's a comment from Mr. Khalid. How is the increase in renewable power affecting the maintenance requirements due to frequent shutdown during the daytime? Thank you. Welcome, Mr. Khalid. Just to update on this side, there are some shutdowns that happened -- or not shutdowns basically, but the cycling of the plant that happens during the day, peak, non-peak timing. However, like this is again part of the process where the cycling is reduced during the summer period because the peak demand is too high in the summer period and the power dispatches are on the higher side. In the winter, yes, there are some more cycling to the plant done. However, winter is also allotted for maintenance activities for routine preventive maintenance and the corrective maintenance that we do at plant. So broadly speaking, yes, it does impact us in terms of cycling, but that doesn't have any corresponding impact on revenues, because for us, the dispatch of power and the other things are pass-through in nature. So as a nature of SMN, our revenue or our bottom lines are more from a capacity charge perspective.

If there are any other questions, please feel free to ask. [Foreign Language].

Nothing major expected as of now, Mr. Abdullah. However, the routine maintenance and the routine activities will still keep going, but major inspection is not expected to happen this year. [Foreign Language] If there's no other questions, we can just wait for a minute.

[Foreign Language] If there are any other questions, please feel free to ask. Happy to answer any questions. Okay. Of course, please feel free to come and ask any time. You don't have to wait for the interactive session. We are always available to answer any questions, any queries any time by any of the investors. [Foreign Language] So I would like to take this opportunity to thank you very much for your time. We hope that you find this interactive session useful. Wishing you Ramadan Mubarak and Eid Mubarak in advance to you and your family. All the best. [Foreign Language] Thank you all.

Thank you, everyone.

[Foreign Language] Thank you. Bye-bye.