Hello everyone, and welcome to ACWA Power's financial results conference call for the six-month period ended June 30th, 2025. All participant lines are currently muted. After the prepared remarks, there'll be a question-and-answer session. If you would like to ask a question and have joined via Zoom, please use the raise hand button on your toolbar. Alternatively, you can submit a question in writing using the Q&A box also found on the toolbar. If you have joined us on the phone today, please dial star one on your telephone keypad to register a question. I will now hand you over to your host, Ozgur Serin, Head of Investor Relations at ACWA Power. Please go ahead, sir.
Thank you very much, Sam, and good morning, good afternoon, good evening, everyone, as usual, wherever you are joining the call from. Today we are together to talk about our first half 2025 financial results as well as giving you some insights with respect to our business development space from development until optimization. As usual, I have together with me. My name is Ozgur. I am the Head of Investor Relations, as Sam has mentioned. Together with me, I have Abdulhameed Al Muhaidib who is sitting next to me, who is the CFO, and we have Marco Arcelli, who is our CEO, joining remotely from one of his business trips. Just before we start, I just would like to remind all of us again two things. One, in this call, we may be referring and using some forward-looking statements.
Obviously, these are all under some disclaimers that are all included in our presented materials. The second one is everything we're going to be presenting today, as well as our financial results, including a detailed management discussion and analysis and an investor report, including Marco's letter to the shareholders and stakeholders is on our website available for your consumption. Without further ado, it is over to Marco.
Thank you, Ozgur, and I would like to welcome everybody to this call. Today is one of those days where we would like to stand tall and proud on behalf of all our colleagues at ACWA Power for the results that we achieved, not only in the first six months, which is what we're reporting, but more importantly, also a lot of the news that came up in July, in the last three weeks, which really are amazing by any measure. The first one is a reflection. It's now about two and a half years since I joined ACWA Power, and I reflect back, and we see that we doubled the size of the company in the last three years, and we're well on track to double again in the next five.
The first big achievement that you have seen on the news recently is the successful completion of the SAR 7.125 billion, so roughly $1.9 billion capital raise. It was subscribed more than 96%, which I think is a record, particularly in a choppy market and with a limited discount that we offered to the shareholders to limit the dilution, but also in the rump period that there was a subscription that was more than almost six times. A lot of that, the vast majority, almost 96%, 97% going to foreign investors. I think that this is really a vote of confidence for your company. The second big news is the Senegal project, the desalination project.
It might be relatively small by our size, but I think being the first desalination project that we signed outside of the Middle East is a strong evidence of our leadership in the industry that we want to carry forward and relaunch for the next decade to build this as one of the leading growth and revenue and profit generation for the company. The next point is the signing of these 15 GW PPA that we announced only about 10 days, one week ago, the so-called PIF 5 and PIF 6 in Saudi Arabia.
Altogether, this is probably the largest single block PPA signed in the world. I really would like to recognize the vision of the country, His Royal Highness, the Crown Prince, Mohammed bin Salman, for Vision 2030, one of the largest decarbonization programs in the world. The ability for ACWA Power to contribute so massively to it. The next point is another thing that we announced at a big event that we held in Riyadh with our partners, the launch of this initiative to build a bridge, an energy bridge, that is both green hydrogen, green ammonia, so green molecules for the hard-to-abate sectors, and power exports from the region to neighboring countries and to Europe, which I think could be a significant supporter of growth for your company in the next decade, particularly in the 2030s.
With this, I think that it's really something remarkable that together with the growth in profitability by about 60% in the period, is something that underscored the solid results and the bright future that we have ahead of us. If we can move to the next page. We have a highlight of our performance. On health and safety, it is regrettable that we had two fatalities this year. It is something where we are strengthening significantly our operation, our contracts, our oversight of our contractors. At the same time, I would like to couple it with a reflection that we are now reaching approximately 200 million hours worked on our sites. This means that the total overall safety performance of the company has improved significantly.
Today, we have an LTIR that is about 1/3 of what it was in the first 17 years of the company, and 1/2 of what it was in the last four or five years. The journey is still riddled with a lot of complexity to reach really zero harm to all the people who work at our sites. At the same time, I see progress, I see improvements, and I see a company that is more than ever determined to make sure that we not only achieve the best result within the company, but together with our partner, we contribute to improve performance in the countries where we operate. In power and water availability, you see a slight decrease in power, but a big increase in water availability at our plant.
The power availability is circumscribed to three or four specific situations that were highlighted already in the past, particularly in Morocco, in Oman, and one plant in Saudi Arabia. It is something where we're working on, it's under control, and we're determined to improve the performance in the months to come. If we move to the next slide, you will see a highlight, a snapshot of what the portfolio looks like today. We have reached about $117 billion of investments. You remember that our target to 2030 is $250 billion. We come from roughly $60 billion three years ago. It tells you really how the speed is high. We have accelerated today. By the way, that is why some of the questions are always, when is the growth going to translate in profitability?
If I reflect only about 40% or less of the portfolio is really today under operation. We have today as much capacity under construction as the first 17 years combined of the company. Remember that the company is only 20, 21 years old. This is a massive acceleration that we're going through, and that will reflect in important and positive profitability in the months and years to come. If we move to the next slide, you see the pipeline going ahead. That gives us a positive view about the future. We have a number of opportunities that we will be hopefully announcing in the next few months, in water, in power. I'm here on a business trip to further advance the negotiation on some of the future deals. I think that with this is really a very strong semester that we report to you.
I would like to pass you to Abdulhameed to continue with the financials. Thank you.
Thank you very much, Marco. Everyone. Good afternoon. It's a great pleasure to be here with you today. As mentioned by Marco, the first half of the year was just fantastic for us. It has been a great journey. Some of it actually we've been sharing with you in this presentation. You have been hearing about the progress in the different announcement, but some of others that has not yet been announced. I'm sure you will see and reflect on this achievement towards the end of the year. A great start of the year. A great moment to reflect on the mid-year performance.
Alhamdulillah, the successful capital raise that we will highlight in the next slide in more details was definitely a great achievement for the shareholders, for the board, and the management, and it is going to boost our growth journey to achieve 2030 target. We have been able to balance up and increase our operating income with a great increase by around 60%. This is an important achievement compared to the first period of last year. Net income has dropped for less than 2%, but adjusted net income, eliminating the non-recurring and non-usual one-offs has been increased by almost 60%. When it comes to financial closes, we have created a bit of discipline in the reporting as well. In the past, we used to focus a lot on dry financial close, meaning whenever we sign the financial document.
We have now tried to enhance the reporting further by reporting when actually these are considered ready to be utilized and drawn down, which is we call it wet financial close. That's where the number looks small, which is only SAR 2.4 billion of wet financial closes. In reality, we have a huge pipeline of financial close that has been already signed, dry financial close, but we have not yet announced it waiting for the close in the CPs. We're going to announce them in the next few months. Assets coming to operation has increased by 3.3 GW. We'll go in details in later slide, including another 600,000 m³ of water desal. Of course, the journey of the last one year has included a capital raise of $1.9 billion or SAR 7.1 billion. It has been a record when it comes to positioning strategy.
It was almost the first transaction that associated in the Saudi market that was associated capital raise with a growth beyond the capacity of the company. In the past, most of the capital raise that has happened in the Saudi market was associated mainly with either specific transaction, for example, an acquisition or a share swap and other elements, or for a company that is going through a difficult financial position. They cannot raise any more debt, they go to the market for a commitment to build up the company, basically. This was a successful transition into the market dynamics when it comes to educating the market, especially locally, for this capital raise. We had a strong boost thanks to our shareholders by committing upfront 77% basically underwriting the transaction.
We went through the journey, Alhamdulillah, during the initial subscription period, we have covered more than 96%. When we went to the second round, which is usually the rump offering, we have almost 6x our subscription. That oversubscription has been an average of almost SAR 10 higher than the offer price, reflecting that not only we have reached this with the tight or the tightest, let's say, discount, but also institutional investors were willing to even pay more for this rump offering. We have seen today the Tadawul exchange that the participation of the international investors has increased significantly. Today it's considered 4.27% of the total. If you focus only on the free float, it's around 14.5% in a record time of almost three and a half years since the IPO.
When it comes to financial closes, it was important to close two legacy projects that has been started for a period of time in Uzbekistan, both Tashkent Riverside project and Uzbekistan Green Hydrogen project. They both have achieved first financial close, collecting SAR 2.4 billion. The project of Tashkent has already achieved actually COD for the 400 MW, but now we are completing the remaining part of the project, which is the battery storage. When it comes, of course, to the remaining of the period of last year, we put the numbers for your easy reference. We do believe that in the next six months it will be a heavy period for financial closes. As I mentioned earlier, for the projects that has been achieved dry FC, we are taking them to the wet. We brought a couple of assets into operation for this quarter.
If you recall, last quarter we have highlighted the two projects, Bash and Dzhankeldy in Uzbekistan, which achieved COD ahead of schedule. We have also had 2 GW from Al Shuaibah 2, we have added into that a few others during this quarter, including the Uzbekistan Green Hydrogen, Redstone CSP project, and Shuaibah 3 IWP, which is another 600,000 m³/ day. We subsequently also announced project. Saad?
Saad.
Saad, yes, to the market, but we have not included here because it's related to the quarter three of this year. Financially, as mentioned earlier, around 60% improvement in the operating income. We'll go through the details. Net income has slightly dropped compared to the same period of last year, which reached almost SAR 900 million. Adjusted net income, we'll go also through that details, mainly taking out a few of the one-offs, has actually increased by SAR 1.1 billion, which is almost 60% increase. Parent operating cash flow has also a record increase of almost 50% to reach SAR 828 million. Putting all that into perspective and taking the net debt to POCF, there is a slight increase in the net debt to POCF to 6.94x.
This goes very smoothly with the story that has been shared also with the investors, that part of the capital increase is mainly to support us to maintain a solid balance sheet. We are trying to avoid reaching that almost the 7x by deploying now additional cash into our operation and maintaining the ratios in check. We will start with the operating income. You can see both sides of the business has contributed positively when it comes to the business development and also the contribution from operations. Business development, as you have seen towards the end of last year, we have been able to secure a lot of project contracts. These projects moved to operation, and then we started to obtain some procurements and construction management service fees that has pushed up our operating income.
The second part related to contribution from operation, as we have highlighted earlier, that some of the assets do get into force outages, and these force outages, most of the time, is either covered through EPC contractor warranty periods or warranty bonds or the insurance coverage. We've been able to secure a very solid recovery from both sources during the quarter two, based on which this contribution from operation has decreased by around SAR 580 million. We took out basically SAR 400 million related to similar or d ivestment that has been done in the same period of last year, which is related to the Bash and Dzhankeldy of 2024. Moving to the net income. The first part is mainly coming from the operating income, which we have highlighted the difference.
For the second item, which is mainly related to, if you recall, a one-off pre-hedge terminations that we have accounted for back in the first half of 2024. That has gained net of other pre-hedge termination and hedge termination around SAR 430 million. That's the second item in the comparison slide. You have, of course, the financial charges. We've been actively raising basically equity bridge loans in the last period. To inject it into some of the new projects. Some of them you have seen, and some of them actually they are still not yet signing the PPA, but we have confidence in the project based on which we have injected some of the funds in the form of limited notice to proceed, and all that has accounted for higher financial cost during this period.
Item number four is mainly related to the adjustments for the Noor 3 impairment. When it comes to item number five, it's combination of both the higher share of NCI and also in relation to other costs that has been incurred during the period. This is a slide that we like to present in a half-year basis, and this is to show you how you mirror our business model with the net income slide. Our business model is depending on four important components: develop, invest, operate, and optimize. Here you can see basically the contribution of each building blocks of these four business units. The first one, which is A, it's mainly coming from the development. The B and C are coming from the invest and operational part. You have the D and E, is mainly from the optimization part of the business model.
Here you can see that there is a good balance coming up from the different sources of the operating model. We will also expect the same kind of contribution to continue towards the end of the year as well. Finally, towards the last line here, you can see the slight increase on operating costs. That is mainly because of the hedge or the Mark to Market (MTM) loss losses that we had and the hedge that we terminated related to projects in Africa . We've been able to use 80% of our cash in investment, so that's a good indicator when it comes to our focus on the growth. Slightly less than 20% has been used mainly for the financial charges and the Sukuk and other instruments in the company. This is a build-up to the cash position of the company.
You can see the POCF that we have highlighted earlier, around SAR 800 million. If you add up the cash from the beginning of the period and subtract the investment and the financial charges, you will end up at a cash position of SAR 2.5 billion. Of course, this is towards the end of June 2025. Just today, actually, we have collected SAR 7 billion related to the capital raise. When it comes to net debt to POCF, we take you through this slide. On the balance sheet, you can see that there is a state of both recourse and non-recourse debt. I will start with SAR 30 billion or SAR 30.1 billion.
You can see that only SAR 10.5 billion of that is the recourse debt in the form of EBL or a loan or a Sukuk that has a specific recourse to ACWA Power as a financial obligation to pay. Then we add around SAR 13.6 billion, which is commitments that is sitting on the contingent liability, which is off the balance sheet. If you add the 13.6 billion with the 10.5 billion, you will end up with a total leverage on the balance sheet of around SAR 24.2 billion. Taking out the cash that we just highlighted, which is SAR 2.5 billion, you'll end up with a net liability or net balance leverage of around SAR 21.6 billion.
If you divide that by the POCF, you will get a 6.9x multiple for the net debt to POCF, which was the number highlighted for the period as of June 2025. Of course, you will see it gradually reduce because of the cash coming up reaching today. Also given that we are foreseeing a big investment coming up in the next few months also, that will have to have its own reflection and impact before we record the year-end net debt to, of course, POCF. The final slide we would like to share with you is the overall trend. Focusing in the bottom of the slide, as I highlighted a couple of times earlier also that we are in a business that is difficult to create a reasonable picture if you do a quarter-by-quarter comparison.
I think more fair for such a business to focus on the year-to-year progress. With that, you can see, Alhamdulillah, that a very solid increase in the last four years when it comes to the operating income, more than 20% CAGR. When it comes to the operating or the stable net income, it is around 18.8% CAGR. This is, of course, first half only. During the full year, we can also show you the year view progress. I will pause here, and we will open the floor for Q&A. Thank you.
Thank you. If you would like to ask a question and have joined via Zoom, please use the raise hand button on the toolbar. Alternatively, you can submit a question in writing using the Q&A box also found on the toolbar. If you have joined us on the phone today, please dial star followed by one on your telephone keypad to register a question. Again, to ask a question, please use the raise hand button if you have joined via Zoom. Alternatively, type your question into the Q&A box. If you have joined us on the phone, please press star followed by one on your telephone keypad. We have a question on the telephone line from Giuseppe Villari of Morgan Stanley. Giuseppe, your line is now open. Please go ahead.
Hello. Thank you for your presentation, for taking our questions. We have a couple, if we may. First one is about financial closes in the second half. You mentioned already, but if you could give us a little bit more color about the pace of financial closes, that would be really helpful. Secondly, in terms of tendering in Saudi, we are seeing this very large PPA for 15 GW. In terms of the government targets, should we expect similar size of tendering in the next years? Thank you.
Okay. Maybe I will start with the first question, then Marco, I will hand it over for you for the trend the following years. If you take the history of ACWA Power and link it with the PPA signing that we have announced, you will fairly predict and estimate that most of the PPAs signed that has not yet achieved financial close, we will be targeting them to achieve within the next six months, which is 2025. If I give you probabilities, I will say that at least whatever PPA we have signed, 60%-70% we will target to achieve their financial close within 2025. I have definitely better, basically, performance for assets that has been signed in Saudi Arabia.
I think given the market, usually in the Saudi market you have to close it with commercial lenders, and these commercial lenders are slightly faster compared to projects that we signed, for example, in Egypt and Uzbekistan where you involve development banks. You can see even today when we announced both Riverside and the Green Hydrogen of Uzbekistan, this project has been actually having a PPA signed for quite some period of time, some of them more than one year and a half, and we just achieved the financial close. Look at the PPA signed, split between commercial banks markets and development banks markets. You can give a fairly estimate that the commercial banks usually close within this year, whereas the development banks will take quite a longer period. Marco, maybe you want to answer the second question.
Yeah. On the second question, what I would like to say is that, in the recent announcement by the Ministry of Energy, basically, the Saudi program of decarbonization translates into about 20 GW per year of renewables. 7 0%of that is under the bilateral PIF program that ACWA Power is delivering is about 14 GW per year. That is in line what we recently signed. Of course, all these will be periodically adjusted based on the expected or calculated growth in demand that the minister will see in the market.
Okay, perfect. That's very clear. Thank you.
Thank you. As a further reminder, if you would like to ask a question today and are joined via Zoom, please use the raise hand icon found on your toolbar or submit a question in writing using the Q&A box also on the toolbar. If you have dialed into the call today, please press star followed by one. We have two questions from Anna Antonova of JP Morgan. The first written question says, "Good afternoon. Where do you see group net debt, POCF ratio evolving from here versus the roughly 7x reported in half one 2025? Given the large amount of investment expected over the next 18 months, is it reasonable to expect this ratio to stay around the current levels?"
Maybe I will start with the question on the green hydrogen in Uzbekistan, which is a project that basically is under commissioning phase. The production of green hydrogen has started. It's not yet fully commercial, and it will be completed in the next few weeks.
Anna, I think, definitely a valid question. When it comes to I was highlighting first that the current net debt to POCF as well highlighted, does that include the $2 billion that has been just raised for the capital raise. Reflecting on the growth and the speed of the growth, definitely, we believe that our net debt to POCF will stay high for the next 18 months, if the growth continues on the same way that is being done. What we are trying to do to keep our ratio on check is that we are doing the following things. The first one is that, we are trying to scale up our capital recycling strategy.
In the past, you have seen that we have been able to divest in a single asset transaction, which is something that is not feasible in the future given the size of the company. Now we have already started and initiated the first cluster divestment. We expect the result of that to come in 2026. It's a significant transaction, and it definitely will be smoother than doing a single asset. It is actually a bundle of couple of assets at one time. The second one is that we are also looking for going for the debt capital market next year with an option that is not a normal bond. We might approach the market for either a hybrid, perpetual or other terms of bond that will allow us also to raise capital while maintaining our ratios below.
As you are aware, some of these instruments are considered only 50% debt, or some of them also could be less depending on the ratios, et cetera. That's definitely another work stream that we are working on. Third of course, trying to improve our current operating cash flow, and this is something that we are doing in couple of fronts. As well, unlike the greenfield assets, we are trying to also look at targeted transactions for acquisition. One of them has been already announced, which is the Engie portfolio in Bahrain and Kuwait. That will immediately improve your current operating cash flow. That will help you in your net debt to POCF. Taking these three together, we are trying to maximize the effort to reduce our net debt to POCF while we continue with this growth target that we are trying to achieve.
The next follow-up question from Anna Antonova says, "Thank you. What is the current status of NEOM Green Hydrogen Project, please?"
We usually don't report project by project progress. I can tell you, the NEOM Green Hydrogen is around 85% progress when it comes to construction. They are still envisioning shipments in 2027 for their first order. Yeah, I think this is the progress. I don't know, Marco, if you would like to add anything specifically in NEOM Green Hydrogen.
No, I think that's correct. We also made a reference recently. By the end of 2026, it will start to produce the hydrogen. That means that in 2027, the production will be available for commercial activity by Air Products .
Yeah. Just, Anna, for your information, Air Products had their earnings call actually a few hours ago. We were exactly on the same day. If you go to their website, you will see. Although they haven't spoken a lot about NEOM, but they have made their earnings call today as well.
Okay. Any follow-up question?
Thank you. We next have a question from Ambereene Jiwani from Ajeej Capital saying, "Thank you. One, can you share a timeline of project completions by year with capacity additions and percentage share? Two, what is the fair value of your completed assets? Would you be able to divest them to generate liquidity without a loss?
The first question is in relation to unit-by-unit COD. We do the following. Whenever we sign a project when it comes to financial close or the PPA signing, we announce them on Tadawul with the expected target operation date. Having said that, all these projects, including the ones in different projects to different cycles, they get impacted by delays. You have projects that they go from one to three months, sometimes even beyond that to six months of delay of construction. It's difficult to continue announcing them project by project and the time that has been delayed. Specifically, that these projects also does not project by project have a material impact on ACWA Power in a group basis. Yet if there is a group of assets that have been delayed, then they have an impact. We try to look at for materiality.
As we continue to grow, the impact of one project today does not really have a material impact on the projects, on the company. Any project that has a severe impact to our net income will be announced. Take an example of Noor 3, when it basically had a forced outage last year for more than a year. That specific delay has a material impact to our net income. We have disclosed that in the market. That's the way that we usually report them. On our annual report, we usually put a list of the number of the project.
Yes.
The investment size. We also put the financial close date. You can basically look at all this kind of breakdown without specific COD date. You can estimate based on the technology and the size of the project.
I think one big one we have also publicly spoken about this is the PIF pipeline in Saudi Arabia. All of you know that by 2030, Saudi Arabia has target to achieve in respect to renewable energy targets. You know 70% of this is together with us. Today, we are sitting at around 34GW, 30 GW- 32 GW. By 2030, this is going to come around 70GW- 75 GW. The Saudi Arabia government's ambitions is to actually have, if not all of it, but most of it operational, without too much delay beyond 2030. I think this could also help you to have an estimate of when the current under-construction projects of ACWA Power will come into operations in the upcoming two, three, four years.
Yes. For the next question, I will not link the divestment strategy to the operational assets. We've been fairly active in the divestments or the capital recycling for both assets under construction and assets under operation. For example, in the last three divestments, if you look at them, two related to assets under construction, which is Bash and one was related to assets under operation, which was Rawec. The fair value of these assets is actually there in the investor's report. We have highlighted that we have around 100 assets equal to $117 billion. The total value of the assets under operation is around $55 billion. The total value of the assets under construction and partially operation is $26 billion. The total value of the assets under advanced development is around $25 billion.
Thank you. As a final call for questions today, if you would like to ask a question and have joined via Zoom, please use the raise hand button or type your question into the Q&A box. If you have joined us on the phone today, please press star followed by one on your telephone keypad. We'll just take a brief pause here for any final questions. There are no further questions, so I'd like to hand back to the management team for any closing remarks.
Thank you, Sam, and thank you, Marco, Abdulhameed . Thank you everyone for joining us and listening to us and for your questions. This is the end of the call. If you have any further follow-up questions or any other new questions, you know how to reach to us. I just wish everyone have a good day or have a good night wherever they are. Thank you so much.
Thank you.
This concludes today's call. Thank you for joining.