SMN Power Holding SAOG ($SMNP)

Okay. So first of all, I would like to welcome all participants in this interactive session with investors to discuss the financial statements -- the audited financial statements for the year ended 31st of December 2025 for SMN Power Holding SAOG. So first of all, we would like to provide a very quick overview of the business in 2025. As you all know, we have 2 subsidiaries in the business, 2 product companies. We have Al Rusail Power Company for power generation in Muscat based on Al Rusail Industrial Area in Muscat. And we have Barka Power Plant and also Barka water desalination plants, both located in Barka. 2025, operationally, it was a good year for the company. The company achieved good solid results operationally in terms of maintaining a high -- keeping the high standard of HSE as measured by no lost days or accidents during the 2025. So that was one of the remarkable achievements in 2025, keeping the same HSE, Health, Safety, Environment, standards up in 2025 for both plants. At Al Rusail, as you know, the company has sold GT1 to GT6. The dismantling project has already started. The dismantling project is ongoing, and it is expected to be fully completed by quarter 2, 2026 due to the complexity of this project. But we are delighted to confirm that the project is going well. HSE matters are kept to the highest level possible. And we don't foresee any issues completing this project, hopefully, within the next quarter. So that's for Al Rusail Power Company. For SMN Barka. For the power plant, again, power plant operationally has achieved a good result in 2025 in terms of availability as measured by the forced outages and also the maintenance program during the planned outage, planned outage allowance in 2025. And similarly, for the water plant, the company worked very closely with the key stakeholders, including our operation and maintenance company to ensure that [ reliability ] is kept as high as possible. Of course, like any other plant, there are issues and challenges that we had to deal with in 2025, and these have been addressed and dealt with our operator and also with the authorities that we are working with. In terms of finance, the company has already disclosed our financial statements, the audited financial statements for 2025 on MSX portal. And just to give you a very quick overview of the results, the company has recorded a total revenue, a consolidated level of OMR 74.3 million against OMR 82.2 million for the same period in 2024. The key reason for the variance in revenue mainly due to the lower capacity fees because in 2025, we have new PPAs and WPA in place. So we have new power purchase agreements and water purchase agreements, and these come with different and more competitive tariffs. There was also a variable component to this variance, which mainly relate to the dispatch. The load factor was different in 2025 versus 2024. And similarly, for the direct cost, the company recorded OMR 70 million against OMR 76 million in direct costs in 2024, and that's mainly again because of the changes in the dispatch in the load factor. The G&A, the company recorded a saving and this saving of about OMR 0.5 million, mainly related to tender-related costs that was incurred in 2024, which was part of the renewal of the extension in PPAs and WPA. There was also a finance cost reduction in 2025 of about OMR 0.14 million, and this is mainly because of the lower interest cost because of the rescheduled repayment of the outstanding commercial debt. There is also a decrease, a reduction in our finance costs and other income of about OMR 2 million. Again, this is mainly because of some nonrecurring items, including the sale of GTs, GT1 to GT6 and Al Rusail Power Company, which took place in 2024. In addition to the settlement -- the claim settlement relating to Steam Turbine #2 for SMN Barka, which is in the region of OMR 0.5 million. So all in all, the company recorded OMR 1.5 million in net profit against OMR 4.5 million in 2024. In terms of the dividend distribution and as disclosed to the market, the holding company has received a total dividend distribution of OMR 5 million from the subsidiaries. And according to the requirements of the commercial companies law, the accounts will need to be audited before we can distribute these OMR 5 million to our wider investors. Now that we have audited accounts available and we have audited retained earnings, so now we can comply with this requirement. And as recommended by the Board in the last Board meeting, as disclosed to the market, OMR 5 million will be distributed to our shareholders subject to the AGM approval on 30th of March. The plan is to distribute this dividend within the next 5 working days after the AGM in accordance with the rules of Muscat [ Securities Exchange ] and Financial Service Authority. In terms of future dividend distribution and future outlook, as again disclosed to the market, we disclosed our dividend distribution policy on MSX. The company will continue to pay dividends to its shareholders on a yearly basis. And this is taking into consideration the obligation of the company, including application and covenants under the financing agreements. Any other obligations and liabilities on the company and any CapEx planned to ensure that the operation and maintenance of the plants are maintained in accordance with the PPAs and WPA. So that's basically in a nutshell, the financial statements summary, including variances between 2025 and 2024, dividend distribution in 2025 and future dividend distribution plan and also a general outlook of the business. We will continue working very closely with our operators and also with the authorities, including our offtaker, Oman Power and Water Procurement Company and also with the regulator, APCR (sic) [ APSR ] to ensure that any issues impacting our operations are addressed in a timely manner and resolved as soon as possible to ensure efficient and smooth operation. We're also doing a lot of the work internally to ensure that efficiency is maintained, both at head office and at our plants. CapEx are optimized as much as possible so that our actual results are outperforming the target as much as possible. So I'll leave the floor now to our investors for any questions.

So this was the first full year that we managed to look at the cash flows. And what I noticed is you guys generated close to OMR 11 million CFO (sic) [ CF ]. Now when I look at your balance sheet, you've got a tax liability of OMR 900,000. You've got a debt repayment of OMR 4.8 million. And then you've got interest cost of approximately, I think, 6%, if I look at your outstanding debt of OMR 30 million or OMR 35 million. So then if I put this all together, you're effectively left with OMR 3 million in operating sort of cash flow that's available after meeting your tax, debt and interest obligations. Then what -- where it gets interesting for me is you're sitting on some cash on the balance sheet of around OMR 14 million. So then if I just put this all together, and obviously, my tone of questioning has remained the same, and you said that let the numbers come and now this is the first full year that we have access to your cash flows. Am I right to assume that OMR 0.015 is effectively what the company can generate on an ongoing basis after meeting all your obligations? And then part of the cash that's sitting on the balance sheet can further be used to augment this dividend maybe by another OMR 0.05 to OMR 0.01 on an annual basis?

Abbas, first of all, thank you very much for doing this -- the calculation to estimate the future dividends payout. As you know, it will be very difficult to give a precise number for a number of reasons. There's a CapEx, for example, planned for the plants. So we have a CapEx that we need to spend over the next couple of years, maybe 7.5 years remaining on the term of the PPA. So that is also need to be taken into consideration. But I think more or less, you are not too far from the projection. You're not too far from the projection.

So what's the CapEx size that you're looking at?

That's difficult to comment on Abbas.

Okay. Another question is the balance sheet cash, how should I look at the balance sheet cash? Because the operating cash is straightforward to me, right? I put this all together. And I was looking at these numbers even before I remember on the call, which I mentioned that OMR 0.015 is what you can generate. If you take away all the one-offs, the onetime cash release, the turbine sales. Where I'm a little confused about and I need some guidance from you is the cash that's sitting on the balance sheet. How should I look at this cash? Is there an element of restricted cash or this cash is available for distribution? Can you just tell me about the cash that's sitting on your balance sheet right now?

Okay. Now first of all, about there's no restriction on the cash. So we don't have any cash sweep. Cash sweep, for example, has been eliminated from the financing agreement. So there's no restriction on the cash, okay? That's number one. Number two, the way you can look at this is if you take the cash plus maybe receivables and then you minus out trade -- maybe trade payables, tax due to brokers and asset retirement obligations, okay? So that will give you maybe rough estimates of the cash that's left over in the company. Then, of course, we have to take into consideration CapEx planned for the plants. But I think you -- as I said, Abbas, I will not able to give a precise detail on the future dividend payout level, but you are moving in the right direction. And I think your estimate is not too far from what is the projection. I mean your estimate is around OMR 0.015 per share, isn't it?

OMR 0.015, Abdullah, is on an ongoing basis, but then that's just -- that's OMR 11 million minus OMR 8 million and OMR 8 million is the debt plus finance cost plus tax liability. I'm just wondering, can this OMR 0.015 go to OMR 0.025 based on the sort of cash that you're sitting on, on your balance sheet. And that's what I was asking for guidance. Now you said part of this -- yes, yes, that's the cash -- that's the guidance I wanted from you actually.

Yes, yes. So I mean, at a high level, Abbas, you calculate. You are moving in the right direction and the estimates of the future dividends. I would be -- it will be very difficult, as you know, to give precise numbers. It will be roughly along the same lines. But you have to take into consideration the following Abbas. But we have, as I said, future CapEx that need to be taken into consideration. We also have asset retirement obligation as well at the end of the contract, which also need to be taken into consideration. We have our targets when it comes to operational performance, which includes forced outages, fuel margin, et cetera. So we work very closely with the operator to optimize these, and therefore, we can optimize and maximize our dividend distribution hand payout. But it might be challenging to reach OMR 0.025 level in the near future, OMR 0.025 per share in the near future. But your calculation is not far from our projection as well.

Okay. This asset retirement obligation, that's a noncash expense, right?

That's a noncash expense. But you also...

But you're building -- and you can't distribute that cash you're saying basically.

Exactly. Exactly. Exactly.

So right now that number is close to OMR 1.8 million. So effectively, whatever the cash flow is minus OMR 1.8 million, that's not distributable.

Yes, exactly.

And also, if I look at your receivables, now receivables last year was OMR 5.7 million and this time, OMR 6.9 million. Now what's the average level of receivables in this business based on what you see, what you -- how you understand the business. Inventory is more or less in line, OMR 1.8 million. I mean that's money stuck in working capital effectively. So what's the receivables sort of that we should look at? And even your payable is more or less consistent with last year?

That's right. Yes, that's right. It's actually -- the receivables we expect is something between OMR 5 million to OMR 6 million, Abbas, give or take. As you know, the payables were around the same -- about the same percentage.

So there's OMR 1 million that can be further sort of released from the receivable, right? Because right now, your receivable is close to OMR 7 million at the end of the year. So effectively, we've got OMR 1 million extra stuck in receivables. That's one thing.

Yes. That's right. Yes.

Okay. And the cash -- and the working capital is where we are a bit blind in terms of the size of the work. This is LTE -- I mean this is the LTE CapEx that you're talking about, sorry, not working capital, but the CapEx that you spoke about. And is this the LTE CapEx that you're speaking about?

No, that's the normal annual CapEx, Abbas.

Annual CapEx. Okay. Okay.

Yes, annual CapEx. Yes.

Okay. But there's no one big chunky CapEx that you expect till the end of the PPA.

No, no. This is just a normal CapEx that we are required to estimate at the beginning of the PPA. And as I said, we're working very closely also with our operator and other vendors to optimize it as soon as possible -- as much as possible. So any optimization there will flow to our shareholders as dividends. That's why it's difficult to give a precise number. In addition to this, our operational performance also has a big role to play, our forced outages. We have estimates, but we also work very closely with the operator to make sure we optimize the performance, we beat the targets. And again, any surplus, any optimization will flow to the shareholders by way of dividend.

Understood. Can I ask you because these companies tend to be treated as perpetuities, but they are not. Market tends to be like, okay, 6% yield is growth, 7% yield is good. And that's somehow my sort of problem with the market in that sense is these companies are not perpetuities. They have a finite life. Now the question is, now you've got this extension. And today, we heard the news about [ Sawadi, Batinah ] and Phoenix getting an extension as well. Now post your 2032, what do you see is the life of your plant? I mean -- and if you had to peer into -- peek into the future, do you think it's -- there is a spot market somewhere around the line or it will again be a PPA kind of structure?

Yes, yes. Now again, Abbas, this is our own view. We believe PPA's model will continue. That's our view, okay? The spot market is there. There has been a lot of effort also to operationalize the spot market. But PPA's model has been the most practical model that has been implemented and continue to be implemented. So our view, Abbas, that by end of this PPA, the PPA will get extended, 100% contracted capacity rather than spot mark. That's our view. And as you know, we have a good CapEx to spend on the plants. We have competent operator to ensure that the plant's integrity is maintained as much as possible. So we believe we will be able to meet the useful life of the assets with no problem. We already have an evidence from our sister company at Al Rusail, these GTs lived for more than 40 years, generating revenues and cash flow for the business. And our GTs are only 16 years old. So we believe there is another at least 20 years left on these GTs, given the maintenance, the CapEx we are spending and the competency of the operator. So we believe by end of the PPA, we believe extension will continue. That's our view. That's a disclaimer, Abbas, that's our view. Maybe not everybody would agree with it, but that's our view.

No, no, of course. I understand. And I think that's my view as well that you'll get some sort of extension. The only question is the last time, obviously, the capacity charges were dropped, it was more in function of your debt obligations came down, obviously. With that, your capacity charge came down. Now if you exclude the debt component from this, right, because eventually, like I said, as market participants, we need to price this not as a perpetuity, but as some sort of company with a finite life, but with X cash flows that are going to come in every year as investors and try to make sense of the stock price that's on the market, right? I mean that's the job basically. So my question is, come 2032 because now from here till 2032, we are quite comfortable in terms of the cash flows the company can generate and what sort of dividend you can pay us. We're talking between OMR 0.015 to OMR 0.020 effectively. We'll find out as next year comes. This year, we know what the dividend is. So my question is, come 2032 do you see -- what kind of conversation do you see with OPWP? And what basis will they have for you to be like, okay, give me a lower capacity charge than right now? Because your debt is effectively paid for in the first PPA. Forget if you still have debt or not, but the point is they compensated you for the debt capacity charge. Now effectively, the current capacity charge includes no debt capacity charge. Then I'm just trying to appreciate this business a little more, what kind of conversation that you guys have on the technical aspects of capacity charge come 2032?

Yes. Again, Abbas, this is again a prediction down the line in the future. But yes -- But we have already did our level best to try and be as competitive as possible when it comes to tariff negotiation. So we believe any further extension the tariff might not be far away from the existing tariff because our existing tariff is one of the most competitive tariff anyway in the market anyway. So we believe if there are any further discounts, there would be maybe some discount taking into consideration the payment of the outstanding debt, but we believe it will not be significantly discounted from the existing tariff, which is very competitive already and maybe one of the best competitive tariff in the market.

So here's my question. Once your debt has been repaid, okay? Then isn't tariff per kilowatt hour just a function of cost of equity? And why should that be different for an SMN versus a Sembcorp versus, I don't know, a third company when they are all working at a PPA with the government of Oman. So where is that element of difference in sort of tariff per kilowatt hour? What would make one plant get more than the other? I mean what really competitive bargaining that you have that puts you at an advantage or at a disadvantage versus OPWP? This is just for me to try to understand how this works.

Yes, yes. Of course, Abbas, it's a function of also demand and supply. As you know, Oman. This is more a strategy. Oman has net zero target in 2050 and all thermal plants, what I understand will be needed to help Oman reach that target through other means, including renewables. So we believe demand will be there for these plants, okay, in the near future. That's number one. And number two, you are right, capacity is a function of both return on dividend for shareholders and repayment of debt to lenders. So if you have no debt, then that's something will impact the negotiation with the offtaker. Now we believe still it's a function of demand, function of negotiation. There will be maybe some reduction in the tariff because of repayment of the debt, but our tariff Is already very competitive, and that's why we believe the tariff will not drop significantly with the existing tariff. We believe there will be some sort of extension. We also believe that it will be a PPA model again, okay? But again, that's our view, Abbas.

Clear. And the last question I have is when you spoke about some benefit potentially flowing to shareholders even from this year where you're a little more efficient. Can you elaborate on that point? Because see my understanding was that you get paid a capacity charge for 100% availability during summers and 85% availability during winters. Other than that, everything is a pass-through. So when you speak about some possible benefits to shareholders based on how you operate the plant, it's a bit lost on me. So can you just elaborate on that point?

Sure. Sure. So very simply, very simply, Abbas, government will pay you for your availability. So if you're 100% available, you will get remunerated 100% of the capacity. But if you are only 99% available because of forced outages event, okay, you will get remunerated for only 99% of your capacity. Are we clear up to there?

Yes, yes. I got this part. Okay.

So what we normally do, we'll have targets with the operator. For example, our forced outage for the year, for example, should not exceed 1%. And then we work very closely with the operator to make sure that we beat that 1%, okay? And if we do manage to beat the target, then that means that the actual revenue will be better than our target and budget and then our estimated dividend distribution will be better. So our...

But it's not material. It's not material because it's you're talking 99% or 100%. right?

Yes. But it can't be, Abbas, because of the seasonality now, the seasonality factor. There's a seasonality factor applied in the winter different from the seasonality factor applied in the summer. So if you have issues with availability, it could have an impact in your cash flow and revenue. And it can be a serious impact sometimes. But historically, the company has been performing very well when it comes to availability. Our availability has been excellent, very close to the full capacity. But that's -- there's a lot of work behind that. We work very closely with the operator. We have a planned CapEx. We work with reputable vendors, including the original equipment manufacturers. There's a time line also to make sure that winter allowance is fully utilized to make sure that we avoid any outages outside the allowance in the winter. So there's a lot of work done behind the scene with operators, with vendors to make sure we optimize our operational performance, and therefore, minimize any detection from our capacity, which ultimately flow to our shareholders. Our policy, any excess cash above obligation, above the CapEx should flow in full to our shareholders.

Got it. Perfect. Thank you for very patiently answering my questions. Always a pleasure speaking to you, and I always learn something when I speak to you. Thank you. Thank you for that.

Thank you. You make this interactive session very exciting by the way, Abbas. So thank you for your questions Thank you. If there are any other questions, please let us know. [Foreign Language]. So I would like to just mention that this session, of course, will be recorded. The recording will be available on Muscat Stock Exchange later today for your reference. And as always, we are always happy to receive any comments, questions from our investors. So there's no need to wait for these interactive sessions. Please feel free to contact us any time you need any help or you have any questions. There are no more questions, then I would like to thank all the participants in this call for their time to join us and for their questions, and we hope you found this very useful. [Foreign Language]. Thank you all, and have a good day.