Hello, and welcome to the Qatar Electricity & Water Company. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Bobby Sarkar to begin the conference. Bobby, over to you.
Thank you, operator. Hi. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Qatar Electricity & Water Company's first quarter 2023 results conference call. On this call, we have Narayan Rao, who is the Acting Finance Manager at QEWC, and Abdullah Al Janahi, who is the Cost and Budget Controller. We will conduct this conference with the management first reviewing the company's results, followed by a Q&A. I would like to turn the call over now to Narayan. Narayan, please go ahead.
Okay. Thank you, Mr. Bobby. Salam Alaikum, and good afternoon to everybody. QEWC, as you know, yesterday had its board meeting, and we announced our results afternoon yesterday. Under the chairmanship of His Excellency Saad bin Sherida Al-Kaabi, our Minister of State for Energy Affairs of Qatar, and the leadership of Mr. Mohammed Al-Hajri, QEWC performed very well in quarter one comparatively. Of course, last year, quarter one also, it is a very well performance. If compared to that, we have done almost similar performance, we can say. QEWC reported a revenue of QAR 658 million compared to QAR 564 million during the Q1 2022. It is around a 16% increase compared to last year. Operating profit of QAR 339 million versus QAR 332 million last year.
There also around 2% increase. Net profit attributable to QEWC shareholders, it is QAR 401 million versus QAR 389 million last year, a small increase of 3%. Of course, in our slides, if you have gone through, first we have given the board description on the Nebras. Nebras has become 100% subsidiary of QEWC in the Q3 2022. Before that, it is a joint venture with QEWC holding 60% of the shares. Due to that, in Q1 2023, as well as in the coming quarter, that is H1 2023, we are having this little comparison difficulty between this year and previous year, because this year's figures are 100% consolidated as per Nebras is concerned, whereas previous year's figures are with Nebras as a joint venture company, no line-by-line consolidation.
Totally, I will tell a few things about Nebras before going into the details. Nebras has got 22 generating assets located in various countries, I think around eight countries. It contains mix of solar, natural gas, coal, hydroelectric, et cetera. Equity adjusted capacity of Nebras is 1,800 MW. We are talking about commissioned projects, but now under construction and development stage, we have got around 800 MW projects. Out of these, around three companies we are including in 100% consolidation in Nebras books. Three companies involved are still more, but it is three major groups, including Ukraine, Brazil, and the one in Netherlands. We have got two main projects are in progress there. One is in Bangladesh, they call it Unique Meghnaghat Power, which is supposed to be commissioned in Q4 2023. It is a 584 MW project with Nebras holding 24%.
We have got one in Uzbekistan, which is known as Syrdarya II, with 1,600 MW, where Nebras is having 33.33%. That is 1/3 of the ownership. It is supposed to be commissioned in 2025 or beginning of 2026. Coming to QEWC has got, as a group, around 10,590 MW of the electricity and 543 MIGD of water in Qatar. It is excluding Nebras. Nebras, I told already. We have got a market capitalization of QAR 19.47 billion. Shareholding is QAR 1.1 billion. With this, we can come to P&L account, profit and loss account. Profit and loss account is concerned, our revenue has gone up, as I told already, by 16%. It is mainly due to some changes in our account recognition concept in the RAF B project, where earlier we used to recognize the account based on the sent-out water and power.
Now we are recognizing the committed offtake based on the IFRS requirements. Profit-wise, it has got not much impact. Only sales have gone up, and other side gas cost has gone up. Year-end, it is becoming zero. Differential impact is zero. Only recognition period is getting changed because there is a change in the recognition concept. It is only in the RAF B. At RAF B1, we are working under the new contract now, where energy billing will be more than the energy billing in earlier years. That is also contributed little to increase in the gas cost as well as the revenue. Now, revenue is concerned, it has gone up by QAR 93 million. This is around 16% as told earlier, but it includes around QAR 33 million from Nebras.
In this year, last year, as I told already, it is a joint venture concept, which we followed equity, a method of accounting we followed there. There is no revenue of Nebras included in the total revenue of QAR 565 million last year. After deducting it is QAR 625 million versus QAR 565 million, around only 11% decrease. It implies around QAR 61 million increase in the revenue, which is mainly due to the reasons already I explained. The cost of goods sold has also got a significant increase of around 26%. Here also, if I exclude Nebras, it is only 19% increase, QAR 430 million versus QAR 360 million. That is around QAR 70 million. Out of that major increase is due to gas. Reason for that already I explained while explaining this method of accounting and RAF B1 contract.
As gross profit is concerned, there is no movement at all in there. It is only 0.49%, QAR 204 million versus QAR 205 million. It is, of course, automatically explained based on the explanations given already. Now, let us move to, let me make this over, share of profit on investment before that. Of course, we disclose the EBITDA, earnings before interest, tax, depreciation, and amortization. Which is showing 11% increase, QAR 421 million versus QAR 379 million, which is mainly due to consolidation of Nebras and recognition of profit on sale of Siraj Energy shares to QatarEnergy. We had 49% ownership of Siraj Energy until now. Now in this quarter, we transferred everything to the QatarEnergy.
T he agreement has been entered in Q4 2022, in October 2022. But real sale after completion of all the requirements, lenders' requirements and getting it approved in AGM and all those things, it is completed in Q1 2023 only. Because of that's one of the reasons for the increase in EBITDA and this thing, we realized actually QAR 78 million by this sale during this quarter, which is also a part of the profit earned during the quarter.
Now, coming to the gross profit, already I explained revenue, [uncertain], then share of profit from joint venture companies. Joint venture companies, we have got QAR 132 million profit, as shown in our presentation. But if you're looking to the accounts, here it is QAR 113 million. One minute, I will go there. QAR 112 million versus, yeah, QAR 113 million or QAR 112 million or something like that way it is mentioned there. Rounding of differences will be there. It is whatever, QAR 113 million versus QAR 92 million. I'll go to P&L. One minute. Because my presentation, it is clubbed all things. Here it is. Yeah, QAR 120 million. Other income, share of results from equity accounted investors, net of tax is QAR 113 million. QAR 113 million versus QAR 92 million last year.
Here it has been taken, and we have got, we are finding the profit from discontinued operation net of tax, QAR 19 million below or after the next few lines, which is explained in the note number 25, where you get full details why it has come. It is mainly because of the operation discontinued in 2022. That operation discontinued by Nebras in 2022, in the case of CPC, where some assets which has been realized now, based on that we have recognized this QAR 19 million profit during the quarter. QAR 19 million. It has been clubbed here with the share of the profit from joint venture companies in our presentation. That's why QAR 120 million plus this QAR 19 million has become QAR 132 million.
We are comparing it with QAR 92 million of the last year. Whatever. Here also, as I told, Siraj Energy, which we sold now, there is no profit from that. Last year, $5 million profit is there. Nebras also last year included in joint venture company. That's also included in the QAR 92 million. And we have got this year some profit from the associated and joint venture companies of the Nebras, which is clubbed here. Whereas last year it is equity-based accounting. It is not by line-by-line consolidation. If I exclude all these items, it becomes QAR 75 million versus QAR 117 million. Just I compare local joint venture companies. Which is around QAR 42 million difference. It is because of the major maintenance activities carried out by the joint venture companies during the quarter one 2023, that is during this quarter.
Going to the other income, which is showing QAR 274 million versus QAR 168 million. Here also in our presentation, we clubbed a few items, whereas in the published financials, it has been shown in the different lines, mainly interest income, QAR 76 million versus QAR 25 million. It has been clubbed here. Whereas in the financials, it has been shown separately. I think, gain on disposal of the asset held for sale, that is QAR 78 million, which I showed already, due to the sale of the 49% ownership in the Siraj Energy. These two items are the major items which are taken separately. Other income, here it is shown as QAR 120 million in the accounts versus QAR 143 million.
Yeah, interest, previous year it is QAR 25 million plus QAR 143 million, QAR 168 million I have taken. QAR 25 million is the interest income previous year. This year, interest income has gone up by QAR 25 million- QAR 76 million, mainly because of the increase in the LIBOR and SOFR rates. Of course, other income, recent decrease in the other income from QAR 143 million- QAR 120 million, it is mainly due to the decrease in the dividends received. Last year, we received a very good dividend from Industries Qatar. This year, it is not there. Because of that, of course, it has come down. I won't mean that it is not there. The net impact is our dividend income has come down QAR 45 million.
With this interest income, I think I explained why interest income has gone up by 38%. QAR 78 million is the major reason, and interest income increase by QAR 25 million- QAR 76 million, and gain on disposal of Siraj Energy shares, QAR 78 million. Those are the major reasons. Even in midst of QAR 45 million reduction in the dividend income, our other income has gone up by 38%. Now, going to the other income, financial cost. We have not included here any slide, but the financial cost is concerned, it has gone up very much during the year. Even if I exclude Nebras, it has, QAR 75 million versus QAR 32 million, around 140% it has gone up. Here, major reason is the LIBOR and SOFR increase.
Of course, this is there in every company. All the companies you will, you can observe this increase during the year. Net profit, in general, I can say it is due to the various reasons, of course. Major reason is higher finance costs. It reduced our net profit. Lower dividend of QAR 45 million, it has reduced our income. The increase in income is mainly profit on sale of 49% ownership of Siraj Energy. That QAR 78 million has been added here. Of course, in Nebras also, last year we had a big loss in quarter one because of various reasons. I think mainly the discontinued operation, as I explained already, last year we had a loss there. This year, it is adding something in the net impact, and we made around a QAR 40 million difference in the profit compared to last year.
JV companies, already I told, because of the major maintenance, some reduction of around QAR 42 million are there, which is, of course, one-time event. Next quarter, it will not be there. Due to all these impacts, QAR 389 million net profit of last year has become QAR 401 million net profit during the current year. I think with this, I have given the major explanation for all the P&L items. On balance sheet items, I will explain you something before closing my speech. Balance sheet is, I think slides are there in the total assets that actually we mentioned that total. I will just explain non-current assets, balance sheet-wise, what was shown in the balance sheet. In general, I will give you some explanation in two minutes, three minutes.
If you see in the balance sheet, non-current assets come down by QAR 600 million. This is mainly due to investment in JV associates. That is due to the negative movement in IFRS hedge valuations and JV profit minus dividend, whatever. Mainly due to the negative movement in the IFRS hedge. We have got also, if you see equity investment at fair value, it has come down by around QAR 345 million. That is mainly because of we sold around QAR 216 million worth of shares during the year, and fair value adjustment of QAR 129 million is there. Total, it is QAR 349 million. Other assets have gone up by QAR 400 million. It is because of some Nebras transactions.
Current assets are concerned, it has come down by 25%. That is mainly becau se of repayment of the $55 0 million. This is QAR 2 billion equivalent loan to Mizuho in the, on January 5th, 2023. Loan balance also accordingly has come down. Of course, we have got paid a good dividend, also QAR 1 billion plus. Of course, we received a sale proceeds of QAR 300 million plus by sale of shares. Net of all that things, its cash balance has come down by QAR 2.2 billion, which is the reason for the decrease in the current assets by QAR 2.3 billion. When equity is concerned, we have got hedge reserve has come down by QAR 3.2 million already. The reason I explained in non-current assets and the fair value equities investment fair value has come down QAR 129 million, as explained already.
Retained earnings has come down by QAR 500 million. It is mainly because of the dividend payment of QAR 1 billion plus and profits are around QAR 400 million. Sale of shares, that is listed shares, resulted in the QAR 100 million profit, which has taken directly into the equity, that is retained earnings. Non-current liabilities and current liabilities, I will explain together because there is not much movement. Totally, that reduction of around QAR 2 billion is there. It is purely due to the repayment of loan of $ 550 million or QAR 2 billion assets made already. I think with this, I explained all major things in the balance sheet as well as P&L. We welcome any queries which we will try to address if possible, from our side to the extent possible. Yeah.
Hi, operator, we can open up to questions.
Yeah.
All right. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Seki Mutukwa of Ashmore. Your line is open.
Hi there. Thanks. Hope you can hear me. A couple of questions, please. Narayan, could you repeat what you said was the cost of goods sold from Nebras? I think I jotted down QAR 37 million, but I may have been wrong. The second question is just where we are today in terms of a blended cost of borrowing and any comments you can make about the outlook for that, whether you fixed a lot of it or you are still expecting an increase in that. Then finally, a request I have made before, it is just about operational KPIs for Nebras. If even on an annual basis or however you see fit to maybe just publish a bit of what is going on there, albeit there are a number of equity-associated investments they make too.
But it would just be interesting to see how those ops are going. Thank you.
Okay. Your first question not clear to me. Nebras, you are telling first question.
Yeah, sorry. It was just what the costs, the COGS from Nebras was. I think I jotted down QAR 33 million in revenue from Nebras in the first quarter, but I wasn't sure what you said the impact on cost of sales was, please.
Okay. Cost of the sales, as I think I told there, it is QAR 33 million revenue. Okay, QAR 24 million cost of sales.
Thank you.
QAR 24 million. But all other things, it is added. This year also, first quarter is not good for Nebras in general. Around QAR 10 million plus profit added from the Nebras. Last year, it is a loss of QAR 30 million plus. Yeah. That's what. Second question, blended cost of borrowing. Actually, as you know now, the trend is that interests were going up very much during the since third quarter of 2022. Now it is almost getting normal, and we are expecting, of course, some decrease in the later part of the year. Given that, as for our budget versus actuals are concerned, we are in place. But last year versus this year will be impact will be there in Q1 and Q2 especially. Of course, to some extent in Q3 also may be there. Other side, we have repaid $550 million loan.
Given that interest cost will some extent come down. Otherwise, that QAR 2 billion we used to pay a good interest there. That is not there during this year. Other side, we have got a good interest income also. Net, I can explain now in the year about finance cost. I have not explained much there, but finance cost excluding Nebras, we had QAR 75 million versus QAR 32 million. That is 140% increase during the first quarter compared to last year's first quarter. But interest income, we had QAR 36 million versus QAR 25 million last year. If I deduct that, it is QAR 39 million versus QAR 6 million only. That is around QAR 32 million increase on net finance cost during the year. That's what the status in the Q1.
But given the increase in LIBOR and SOFR rates, compared to that our performance is good. It is not bad. QAR 32 million only increase when we are having such a significant loan. I think it is not bad, actually. Total debt is around QAR 9 billion now. With so much increase in the SOFR and LIBOR rates, we incurred only QAR 32 million extra expense. The third question is about Nebras investments. Of course, general disclosure is there in this year's financials. Of course, year-end financials detailed disclosure is there on Nebras. Quarter one also, we have given the extent possible, whatever we can disclose, and we'll try to improve it in the later periods. I think I replied all your queries. Hello? Hello?
It's me, the operator.
Yeah. Hello?
Okay. Yes.
Yeah.
It is me, the operator. We have Seki Mutukwa from Ashmore.
Yes. My questions are answered. Thank you.
You are welcome. Yeah.
At this time, your next question comes from the line of [uncertain] .
Hello. Thanks. Thank you for my question. Could you please repeat your comment on Nebras? You said that [uncertain] million of revenues, QAR 23 million of COGS, and you said something like last year, the Nebras performance were better.
No, last year is not better, this year better.
Okay. If we compare the revenue Nebras year-on-year, what would be the growth?
Okay. You are talking specifically about Nebras. Of course, Nebras is concerned. This year we are having the 100% ownership, as I mentioned earlier itself. Last year it is 100% from the third quarter. We are expecting minimum around average QAR 200 million- QAR 250 million performance in the year. Roughly I can say that. Of course, again, it depends on the new projects which we are going to get during the year. They are working on so many projects actually in various countries. If something, even few projects yet to start, as I mentioned, two projects which I named already, which are under the construction stage, which are going to commission one of them in October 2023, other one is in 2025 and 2026. So many things definitely getting added in the future quarters.
All depends on where we stand on all those projects where we are working on them already now. I can roughly say around QAR 200 million- QAR 250 million definitely we will make during the year.
Thanks.
Yeah.
I have another question, if I may.
Yeah.
I noticed that you have a seasonality in quarter one. What is the reason of the seasonality?
Apologies, I have not followed your query.
I am saying that you usually have a weaker first quarter compared [crosstalk].
Yeah, okay.
So, what is the reason for this seasonality?
Yeah. Okay. That's a good question. Normally, as you know, ours is a seasonal business. In first quarter and fourth quarter, normally performance is little weaker, and second quarter and third quarter it was good because of demand for electricity and water are more in second and fourth quarter, given there seems to be summer, more hot season in Qatar. Just saying [crosstalk].
Okay, but [crosstalk].
Yeah.
Okay. You run on a take-or-pay agreement with Kahramaa? Maybe I understand wrong, but what I understand that whatever you produce, Kahramaa will pay for it, right?
Yeah. See, this is going by the contracts. Even we have got different type of PWPA and RPPA or PWA with Kahramaa. For each of the projects, namely RAF B1, RAF B2 , RAF A1 , RAF A2 , RAF A3 , and all those things. It depends on the billing methodology varies. Take-or-pay is there in RAF B, and RAF A1 has got separate type of equation. But at the end of the day, we are getting for whatever we produce. But the way of paying and determining the revenue all differs from the project to project. But definitely if the production are more, on an average we are getting the more payment, and in the season where supply is more definitely, net impact is the revenue will go up, and profit will also go up. Yeah. Clubbing all mixed together.
It goes by the mix from which project which they have taken. Yeah.
Okay. Understood. Anyway, okay. Thank you.
Yeah. You are welcome. Yeah.
Again, if you would like to ask a question, press star then the number one on your telephone keypad. There are no further questions at this time. I would like to turn the call back over to Bobby Sarkar.
Thank you.
Thank you, operator. If there are no further questions, we can end the call for now today. I want to thank Narayan, and I want to thank Abdullah for taking the time to talk to investors, and we'll pick this up next quarter. Thank you so much.
Thank you. Thank you all. Thank you for attending the call. Thank you for Bobby for arranging the call.
Thank you.
Thank you for everybody. Thank you, operator, also.
This now concludes today's conference. You may now disconnect.