Hello, and welcome to the Qatar Electricity and Water Conference Call. Please note that this call is being recorded. You will have the opportunity to ask questions to our speakers later on during the Q&A session. If you would like to ask a question by that time, please press star one on your telephone keypad. Thank you. Now, I would like to hand the call over to Bobby. You may begin.
Thank you, Angela. Hi. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Qatar Electricity and Water Company's fourth quarter and year-end 2024 results conference call. On this call, we have Shahzad Iqbal Gill, who is the Chief Finance and Planning Officer at QEWC. We have Dan Sabitov, who is the Corporate Planning, Performance, and IR Manager, and Gojy Augustine, who is the Budget, Reporting, and Control Manager. We will conduct this conference with management first reviewing the company's results, followed by a Q&A session. I would now like to turn the call over to Shahzad. Shahzad, please go ahead.
Thank you very much, Bobby. Good afternoon, everyone. I welcome you to Qatar Electricity and Water Company's Q4 2024 financial results presentation. We shall start with the headlines, and then we will go into the details and comparisons with prior year. Moving to slide four of the deck. Net profit for the year is QAR 1,416 million, which is 9% lower than last year. We will get into the details as we go along. The board has recommended a dividend distribution of QAR 0.53 per share for the second half of 2024. The company has already distributed an interim dividend of QAR 0.25 earlier in the year. This brings the total distribution for 2024 to QAR 0.78 per share. This is pending approval from the shareholders at the annual general assembly meeting scheduled for 26th of February 2025. We will move to slide five of the deck, where we have some performance highlights.
Revenue for the year is up 3% at QAR 2,999 million. EBITDA of the company is QAR 1,320 million, and net income for the year is QAR 1,416 million. QEWC group's gross power capacity is 20 GW, while net ownership adjusted capacity is 8.5 GW. Gross water capacity is 541 MIGD. Net is 392. Renewable operational capacity is 4.2 GW. Net, 1 GW. Under construction at the moment is 3.2 GW gross and 1.1 GW net. I will then move to slide seven, where we have an overview of the growth and expansion that is going on in the company. Within Qatar, QEWC is working on development of Facility E project, along with QatarEnergy and a consortium of international sponsors. This project will have power generation capacity of 2.4 GW and 110 MIGD of water production capacity. QEWC's share in this project is 55%.
Project is expected to achieve commercial operations in first half of 2029. Another project within Qatar is a Ras Peaking unit that QEWC is working on. This is going to be 100% owned by QEWC. This will be a 500 MW open cycle gas power plant. Some of the key project agreements for this project have been signed in Q4 2024. Construction is anticipated to begin in Q2 this year, and commercial operations expected in 2027. On the international front, Nebras has completed the process to acquire additional stakes in IPP1 and IPP4 power projects in Jordan. Nebras shareholding increased, as a consequence of this acquisition, from 24%- 50%. In Uzbekistan, under construction project, Syrdarya II, construction is making progress as planned. Expected completion for the construction and commercial operations is expected in third quarter of 2026.
Also in Uzbekistan, Nebras is in the process of developing 1.6 GW power project in Surkhandarya region. This is along with EDF, Siemens, and Stone City Energy, the other sponsors. Nebras shareholding in this project is 35%. Construction commenced in early 2024, and expected start of commercial operations will be in third quarter of 2027. In January 2024, Unique CCGT project in Bangladesh completed its commissioning. The commercial operation started in January 2024. Nebras Power slightly increased its shareholding in offshore U.K. wind power project. Also, we added 2.5 MW to our solar energy portfolio in Brazil. I will then move to the next slide on our deck with the operational highlights. Sent out power was 5.3% higher compared to last year, while sent out water was 1% lower.
Power plants availability was slightly lower than last year, driven by planned outages, while water plants availability was at the same level as last year. With this, I shall hand over to Dan to go through the variance analysis. Dan, over to you.
Thank you, Shahzad, and good afternoon, everyone. Today, I will first cover full-year financial performance of the company, followed by the results for quarter four. Turning to slide nine, revenue was QAR 2,999 million for the year, versus QAR 2,911 million for 2023, which represents 3% increase. This was largely driven by higher sent out power. EBITDA amounted to QAR 1,320 million in 2024, whereas EBITDA for prior year was QAR 1,337 million. 1% decrease explained by lower fuel savings at one of RAF units, which is driven by higher demand from the offtaker. Scheduled outages and maintenance costs. This was partially offset by higher revenues, as explained earlier. Net profit for the year was QAR 1,416 million versus QAR 1,551 million a year ago.
In addition to EBITDA change, the variance was driven by one-off items such as sale of Seraj Energy and reversal of provisions in 2023. Lower interest income on deposits. This was partially offset by lower finance costs in 2024 following repayments of short-term loans during 2023. As a result, the company reports earnings per share in the amount of QAR 1.29, comparing to EPS of QAR 1.41 last year. We will skip slide 10 as we already covered those drivers. As you can see on slide 11, share profit from our joint ventures and associates increased by QAR 8 million in comparison to last year results, which is mostly driven by startup commercial operations of SunPower plant in Bangladesh, additional share in two gas power plants in Jordan, and construction revenue and finance income for Syrdarya II plant in Uzbekistan following concessioning company.
This was partially offset by other drivers in other businesses. Interest and other income decreased from QAR 595 million to QAR 469 million this year. Decrease is explained by lower interest income on deposits from lower cash available given JSE repaid all short-term loans in 2023. As for other income, decrease mainly driven by one-off items including reversal provisions an EPC settlement in 2023. Net profit was QAR 1,416 million, which was 9% lower compared to 2023. In addition to the drivers previously explained, net profit variance was impacted by sale of Seraj Energy in 2023 and higher income tax expense this year. A high-level comparison of financial results for Q4 is presented on slide 12. I will give a more detailed overview in the next two slides. Turning to slide 13.
Revenue is in line with previous year. Higher sent out power was offset by revenue indexation true-up recorded in the fourth quarter of 2023 by one of subsidiaries in Qatar. Lower gross profit is explained by the reversal of fuel cost in one of RAF units in Q4, 2023. Revenue indexation, as described earlier, and higher maintenance costs. EBITDA variance is due to the same drivers. Now turning to slide 14. Decrease in share profit from JVs and associates are mainly driven by lower financial results recorded by our assets in Qatar. From true-up of maintenance costs for prior periods, reversal of provisions in Q4, 2023 and higher O&M costs. Other drivers include outages and higher operating costs in Paiton Energy and catch-up adjustment for 2023 and lower generation in Stockyard Hill Wind Farm in Australia.
Lower interest and other income is largely due to lower interest on deposits and reversal of provisions in Q4 last year. Lower net profit driven by the items just explained. Now moving to financial position on slide 15. The total assets of the company stand at QAR 22.7 billion, with 2% decrease compared to previous year. 25% decrease in cash is mainly due to payment of dividends for 2023 and interim dividends for 2024. Increase in value available for sale investments driven by change in the market price of shares. Turning to slide 16. Total equity of the company increased by nearly 3% and reached QAR 15.6 billion. Net profit was partially offset by dividends declared and paid this year. Total debt decreased by QAR 800 million and amounted to approximately QAR 6 billion by end of 2024.
Decrease was driven by repayments of the project loans and term loans at Nebras Power. A minor decrease in net position reported for the year. With that, we will open up for questions. Over to you, Angela.
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. Your first question comes from the line of Mark Ghorampass with The First Investor. Your line is now open.
Hello. Thanks for doing the call, gentlemen. I think I have, sorry, a difficult question because this is the second year in a row that Qatar Electricity and Water Company has cut their dividend by 9%. Yet, you sit on over QAR 2.1 billion worth of investments. The shortfall of the dividend that you have cut is around QAR 180 million each year. Your payout ratio still remains low at 60%. I am just asking why the board has chosen to do this and not to liquidate some of those investments, and why the company's priority is more to the investments than to distributing dividends to shareholders.
Hi, Mark. Thank you for the difficult question. Just taking you back to last year before I get into the details. The company did liquidate some of the investment to pay off the debt. As we go along, we will keep doing this analysis, and when it will make sense, we will liquidate more to either pay off debt or to fund growth. Please bear in mind that the company is in a growth phase at the moment through its international investments and within Qatar. This is, I would say, in a long time that two projects, two power projects, are happening within Qatar at the same time or being developed. Also internationally, there is a pipeline of projects that we are looking at through Nebras umbrella.
You would have seen in 2024 that Nebras has been quite active, and we expect the same for 2025 and years beyond. Coming back to your question. Yes, there is short-term investments on the balance sheet held for sale, which we will use as we go along, primarily to fund growth or to pay off debt at the right time.
Yeah. So I just want to voice as a shareholder, and I think I speak for the majority of shareholders, is that for us, our priority is much greater on the dividends that we receive. In our opinion, it would be much better if instead of retaining those investments, you would use those and sell them partially in order to stabilize a dividend at a higher payout ratio and not to have it cut. That's my perspective. You're a utility stock. One of the main attributable factors to it is the dividend that you receive. Anyway, that's my sixpence worth . Sorry for any controversy, but that's my opinion.
No, thank you very much, Mark. I appreciate your direct opinion. Yeah.
Your next question comes from the line of Seki Mutukwa with Ashmore. Your line is now open.
Hi. Thanks. Hope you can hear me. Two questions, please. The first one is just on slide seven about the peaking power station. Is that a net addition of 500 MW, or is it replacing anything else, in terms of existing capacity? Just to understand that plant in particular. The second question, is there any indication you can give us on CapEx for 2025? I think including what your contribution is to the JVs, or perhaps if you can't give us the number, maybe an indication of when you think you will see peak CapEx over the next few years as you invest for growth. Thanks.
Thank you very much, Seki. For the first question, 500 MW peaking unit. This is going to be an addition. This is not replacing any capacity in the portfolio. On the CapEx side. Sorry. 145. No, this is only for the peaking unit. Seki , can I clarify, your question is related to peaking unit CapEx or your question is more broader?
It was broader for the group. Like how much you'll spend in 2025. If you can't give an exact number, just maybe getting a sense of when you forecast a peak in terms of what you pay consolidated, plus also what you need to contribute to Joint Ventures.
Yeah.
Yeah. Seki Mutukwa. Hi, this is Dan. We will not provide a specific guidance on 2025, but given Facility E and the peaker, we do expect a peak in the growth in the next three years.
Sorry, peak CapEx, just to be clear. Over the next few years, it will be at elevate?
Yes, higher growth CapEx in the next three years.
Okay.
Your next question comes from the line of Abhinav Sinha with Lesha Bank. Your line is now open.
Hi. Actually, my question was on the gross profit, and I see that you mentioned that it was due to a reversal of fuel costs in 4Q, which is why the gross profit declined. How should we think about a normalized gross margin? Of course, these one-off things will keep on coming, but would it be fair to assume that 33%-34% as your gross margin at a normalized level? Thank you.
Yeah. If you take average for two years, this will be the normalized to avoid the variation among the quarters.
Okay. Thank you.
Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Mark Adeeb with CI Capital. Your line is now open.
Hi. Thank you so much for the call. I just have one question, if I may. Can you please provide more details on the changes regarding the joint venture income? Because third quarter, it was exceptionally higher than previous years' quarters, and again, fourth quarter was exceptionally lower. Can you please just shed more light on this?
Yes, indeed. If we look at the Q4, the share profits are much lower compared to previous quarter. It is a combination of drivers, including timing of outages as well as one-off items. Broadly speaking, half of it is one-off items, and the rest is high maintenance costs and outages impact.
Okay. Going forward, in terms of third and fourth quarter, what would be a normal level of JV income contribution?
You can see on the full year basis it is around QAR 680 million, right, almost for both years. If you take averages, it could be a good point to start.
I am sorry. I am not sure if my line is breaking, but I did not hear that.
Yeah. The full year share profit was QAR 680 million, which is close to 2023.
All right. Thank you.
Your next question comes from the line of Abdullah Massar with Individual. Your line is now open.
Thank you, gentlemen. I would like to ask the gentleman, for the purposes of Pillar Two and the global minimum tax, what is the outlook for the income tax expense for 2025? Are we expecting an ETR of 15%, or are we still in the realm of 1%- 2%? That is my first question. The second is more of a comment, and it is in relation to Mark from The First Investor, and I think I agree with him. But in terms of selling partial stakes of the business, I do not think that is a good idea. I think, and please chip in if you think that the reserves of cash available should be put into work of paying out more debt, and especially those with higher interest rates.
Considering that interest rates at the moment are at high levels, I would expect that we should see more payments of debt. I would like to ask a follow-up question, but I will stop here.
Yeah. Thank you very much, Abdullah . So let me get to Pillar Two first. So the company falls in because of our revenue. As a group revenue, is above QAR 3 billion . We do fall into Pillar Two jurisdiction. So we have been working on this analysis for quite some time. In all the other jurisdictions around the globe where we operate, we are fine. Our effective tax rate is either 15% or higher. Within Qatar, however, there is an impact, and we will start booking the accruals in Q1 2025 for this impact. The impact, however, is not going to be too big. At the same time, I can assure you that we are working on various paths to minimize or eliminate this impact. So that was Pillar Two.
In terms of you mentioned partial sale of stakes in the investments. That is not what I said earlier. There might be some confusion there. What I alluded to was a partial sale of the investments in Qatari stocks that we have. So that was what we used. We liquidated and paid off debt in 2023, Q4. We continuously keep on doing this analysis internally. When it will make sense, we will pay off debt, or we will fund the growth with this.
Yeah, it is clear. I think I was referring to Mark Ghorampass, who spoke earlier from The First Investor, who actually mentioned this partial sale of the assets, and I think I disagree with him totally about it. Not to say that you actually made that comment, but he did that. I agree with you. I think the company has so much investments in terms of stock, and I think that these investments, as you said, we will look into the future on how the company will sell these investments and turn it into cash and pay the debt that has huge amounts of interest payments that are very costly. So, no, I appreciate your feedback on this. Thank you.
Thank you.
Your next question comes from the line of Anastasios Bilgilmakis with Apos Investment. Your line is now open.
Yes. Thank you. Thank you for taking my question. Basically, I want to understand a little bit the future regarding the operations outside of Qatar. Now, if we look at the operations, they still remain extremely uneconomical for us, very highly dilutive. We have a capital of Qatar versus outside QAR 1.6 to QAR 1, and a profit before tax of QAR 6 to QAR 1. So effectively, the operational charges in Qatar are a very large burden on returns and large burden on our operations. Can you please give an outlook of whether there is, at some point, a point where they become economical, like they cover their cost of capital? Or if not, do you expect to stop further CapEx, given their contribution is dilutive to our returns? Thank you very much.
I want to understand, your question is more of Qatari expansion that is going on or international-
No, not the Qatari. The Qatari expansion is fine, and Qatar remains highly profitable. My concern is that we have a multibillion equity commitment outside of Qatar that is very dilutive to the returns of the group overall. The question is, whether you expect this to become economical and cover its cost of capital at some point, or whether you expect to reduce further CapEx outside of Qatar in light of the fact that the returns are not adequate.
Yeah. I wouldn't put it in a way that you mentioned, because there is a lot of activity going on outside of Qatar under the Nebras umbrella. Two of the major projects that we have invested in, where all the equity has already gone in, are under construction, and those are expected to start operations in 2026. Is it 2026?
2026 and 2027.
And 2027. That's when you will start to see the income and cash coming through from those projects. These are huge projects, 1.6 GW each. Also, as I mentioned earlier, we are looking at other greenfield investments and M&A activity internationally. The short answer to your question is yes, it will improve.
Okay. Thank you. Do you expect to commit further capital internationally or at the moment, no more?
Internationally, Nebras has been generating its own capital and reinvesting that capital. From Qatar, we do not expect, at the moment, to inject anything further outside of Qatar, unless there are transformational deals or opportunity that might come up. But at the moment, there is nothing like that on the horizon. There are, as I said earlier, pipeline projects under Nebras with a similar ticket size that Nebras has already done investments in the past five to six years, and those will be funded through Nebras on cash flows that come through as dividend.
Thank you. Thank you very much.
There are no further questions. I will now turn the call back over to Bobby for any remarks.
Okay. Thank you, Angela. If there are no further questions, we can end the call for today. I want to thank Shahzad and Dan for taking the time to go over the presentation and answer our questions, and we will pick this up next quarter. Thank you very much.
Okay. Thank you, Bobby.
Yeah.
Thank you all. Bye.
That concludes today's conference call. Thank you all for joining. You may now disconnect.