ACWA Power’s Q1 profit lifted by ending some hedging instruments: CFO

Abdulhameed Al Muhaidi, CFO of ACWA Power

ACWA Power posted a 10% rise year-on-year (YoY) in Q1 2024 net profit on ending some hedging instruments, which recorded profits slightly higher than SAR 300 million despite the prolonged halt of one of the company’s projects in Morocco during the first quarter of the year.

This in turn increased impairments by SAR 146 million, CFO Abdulhameed Al Muhaidib told Argaam in an interview on the sidelines of the Hong Kong Capital Markets Forum 2024, expecting resumption of operations by year end.

The operational performance of power stations in terms of availability reached 89.8%, showing improvement compared to the first quarter of 2023. Water desalination stations continued to maintain historical availability levels of 94.5%.
 

ACWA Power's business model relies on development, investment, operation, and maintenance of stations, as well as improving the company's operational performance. The performance in the first quarter of business development was robust, he added.
 

The company's portfolio consists of 82 projects distributed across 13 countries, with 47% of projects operating, 38% under construction, and 15% in advanced stages of development. Currently, 60% of projects are in Saudi Arabia and 40% in the rest of the world.
 

Meanwhile, the utility aims to explore new opportunities in the Chinese market for water desalination and clean energy this year. The company has had a presence in China since 2009 through representative offices in Shanghai and Beijing, managing supply chain affairs, partner and contractor management, and suppliers.
 

China is considered a promising market for ACWA Power's business growth due to its large economy and focus on clean energy.
 

The company’s portfolio, including operational, under construction projects, and those in advanced stages of development, produces 55 gigawatts (GW) of power annually, including 24.5 GW of clean energy. Meanwhile, China implemented projects with a capacity of 216 GW in 2023 from solar energy. The company is studying the challenges, risks, and returns compared to other markets.
 

The CFO pointed out that the company has adopted new strategies in human resources management, with increased costs in management and competency development. Benefits have increased slightly, offset by increased financial returns, resulting in a slight financial impact during this quarter.
 

Any project award goes through a financial closure process, after which the project construction commences. The recent financial closure under the renewable energy portfolio has strengthened the focus on renewable energy, reflected in the percentage of renewable energy in our portfolio reaching 44.5%, Al Muhaidib added.
 

ACWA Power's investment approach aims to maintain ownership stakes and controlling rights ranging from 30-40% in each of its projects. Typically, these projects are not consolidated into the company's unified financial statements but appear within the company’s share in the results of equity investees.
 

The primary reason for the 6% revenue decrease is the prolonged halt of one of the company's projects in Morocco, while the company's reduced share in project development and management fees affected operating profits. Many projects were completed last year, putting an end to the administrative fees of projects under construction. Meanwhile, the company intends to re-balance administrative payments to enhance regular cash flows, Al Muhaidib concluded.