MOSCOW/CAIRO/RIYADH: International Company for Power and Water Projects, better known as ACWA Power, reported SR21.9 million ($5.8 million) loss in its first quarter post-enlisting in the stock exchange.
Shocking may it seems for a company that was oversubscribed by 250 times in its initial public offering. However, the net loss seems to be driven by one-off transactions, the company’s financial statement revealed. In particular, it made share-based payments expenses worth SR280 million on Sept. 28, 2021.
If the effect of this transaction is removed, the company would have made a net profit of over SR250 million, according to Arab News calculations.
According to KPMG, one of the Big Four accounting organizations, share-based payments could be “a payment in equity instruments of the entity to the supplier (including employees) of goods or services to the entity.”
Hence, the company, which was oversubscribed by 250 times in its IPO, decided to reward its employees with an incentive plan consisting of shares and cash benefits following the successful enlisting of the company in Tadawul.
The package was simply titled the “Plan” and amounted to SR280 million. This is a non-recurring expense and is not related to the company’s actual performance in terms of fundamentals.
“As for the announced losses, they may have deviated from the expectations of many people, but there were several things that we expected and saw in the current results for the third quarter. These included the SR280 million that went as (…) grants for the company’s employees. These are all one-offs and will not be repeated. If we remove these one-offs, the numbers would be similar to our expectations to a great extent,” Ahmed Maher, associate director at EFG Hermes, told Al Arabiya Business.
The company said in an earlier report: “We assess at each reporting date whether there is an indication that a plant may be subject to partial or full impairment, using potential impairment indicators such as delay in contract extension; no off-take agreements for a long period following the expiry of current agreements.”
In addition, there was a corporate social responsibility item worth SR16.5 million which was recorded as a loss. This expense accounted for ACWA’s education and related infrastructure investments in several countries, including Saudi Arabia.
Nonetheless, its operating income before impairment loss and other expenses was reasonable as it stayed flat from a year ago after hitting SR1,660 million for the first nine months of 2021, mainly supported by ACWA Power’s operations and maintenance business that “generated higher operating income thanks to projects starting operations or operating their first full year in 2021, such as Al Dur IWPP and Hassyan IPP,” it said in a statement.
Three projects, namely, Sudair, Sirdarya, and Redstone, which completed their respective financial closes during the period, contributed to higher operating income, which was offset by the recognition of employee long-term incentive plan expense and lower share in net results of equity accounted investees, net of tax, mainly because of accelerated depreciation on two oil-fired assets.
“ACWA Power’s commitment to net-zero emissions by 2050 was exemplified by the entry into a sale agreement of one of the four oil-fired assets in its portfolio. This transaction is also a testament to the company’s commitment to remain at the forefront of energy transition both at home in Saudi Arabia and beyond,” it added.
Nevertheless, the company also experienced some challenges.
Its net financial charges went up considerably to SR293 million in this year’s third quarter compared to SR256.7 million in the same period last year.
ACWA also made less revenue this quarter compared to the same quarter last year, falling by SR73.1 million to stand at SR1,294 million. In particular, revenues of development and construction management services declined significantly to SR130.7 million, decreasing by over SR80 million.
Revenue on a sectoral basis
When looking at revenue on a sectoral basis, it was found that two of the company’s main operating segments, thermal and water desalination, and the renewables sector, experienced a drop in their sales.
The management of ACWA Power is still optimistic about the future of the company. ACWA Power Chief Executive Officer Paddy Padmanathan said in a statement: “Our results for the third quarter demonstrate that we are on track towards achieving our business and financial targets as set forth in our Prospectus for the fiscal year 2021. This also provides us with a solid basis for growth, which is our top priority following ACWA Power’s landmark listing on the Saudi Stock Exchange, which was oversubscribed by an overall factor of 250 times.”
“As a Saudi flag bearer and a national champion, the trust of our shareholders in our ability to be a force for the greater good for people not just here in the Kingdom but around the world is our greatest motivation and inspiration. We will live up to this trust through continued ingenuity and excellence in everything we do as we fulfill our mission to deliver power and water reliably and responsibly, at low cost to communities worldwide,” he added.
Looking at the future, the results should not be worrying for a company that is expected to be in a leading position to win more tenders in Saudi Arabia, where half of its electricity will be generated from renewable sources to meet its net-zero carbon goals before 2060.