ACWA Power — Record results for FY23

Research: Industrials

ACWA Power — Record results for FY23

ACWA Power achieved record results for FY23 (year end 31 December 2023). Net profit attributed to equity shareholders stood at SAR1,662m, up 8% y-o-y, while operating income of SAR2,984m grew 14% y-o-y. ACWA added 10.7GW of power generation capacity to its portfolio throughout 2023, with 66% exclusively renewable energy. The company achieved a record 12 financial closes in FY23, with a total funding raise of approximately SAR60bn. It continues to progress its growth ambition of tripling its assets under management by 2030, sufficiently supported by long-term financing and funding facilities.

Written by

Harry Kilby

Analyst

Industrials

ACWA Power

Record results for FY23

Utilities

QuickView

22 March 2024

Price

SAR353

Market cap

SAR258bn

Share price graph

Share details

Code

2082

Listing

Tadāwul

Shares in issue

731.1m

Business description

ACWA Power is a leading developer, investor and operator of 81 assets across solar PV, wind farms, water desalination and green hydrogen in operation, construction and development. The company plays a key role in Saudi Arabia’s energy transition and operates in 12 countries across three continents. ACWA Power has a high-quality contracted portfolio with diversified cash flows, where it looks to extract returns across projects lifecycles combined with a large visible pipeline in high-growth markets.

Bull

Increasing demand for global renewable production provides large growth opportunity.

Aspiring to become market leader in renewables.

Global leader in water desalination and global top three position in green hydrogen.

Bear

Global challenges and uncertainties may result in delays to expected milestones in the short term.

Unstable quarterly financial results due to cyclical nature of project development.

Growth strategy dependent on entry into China.

Analysts

Harry Kilby

+44 (0)20 3077 5724

Andrew Keen

+44 (0)20 3077 5700

ACWA Power achieved record results for FY23 (year end 31 December 2023). Net profit attributed to equity shareholders stood at SAR1,662m, up 8% y-o-y, while operating income of SAR2,984m grew 14% y-o-y. ACWA added 10.7GW of power generation capacity to its portfolio throughout 2023, with 66% exclusively renewable energy. The company achieved a record 12 financial closes in FY23, with a total funding raise of approximately SAR60bn. It continues to progress its growth ambition of tripling its assets under management by 2030, sufficiently supported by long-term financing and funding facilities.

Funding growth

Capital recycling is a core element of ACWA’s business model. It enables improved returns as well as funding for growth. Due to ACWA’s increased growth pipeline, it expects to commit around $2bn per year between 2024 and 2030, having committed $1.5bn in 2023 (FY22: $1.2bn). However, parent operating cash flow was down 41% y-o-y due to higher cash inflows seen in FY22 as a result of greater amounts of capital recycling, refinancing and divestment proceeds from the Rabigh Arabian Water and Electricity Company and the Saudi Arabian Water and Electricity Company.

Renewables powering ahead

ACWA Power added 7.1GW of renewable capacity in FY23, taking renewables to 45% (50% target by 2030) of the total 55.1GW portfolio (30GW operational up from 25GW in FY22). In 2023 ACWA also signed 13 power purchase agreements, two water purchase agreements and one hydrogen purchase agreement, adding 10.7GW of power to its portfolio. ACWA’s growth ambitions in renewables will continue to unfold, with the company responsible for delivering the Saudi Kingdom’s Public Investment Fund programme, which accounts for 70% of Saudi Arabia’s total renewable installation by 2030 (13.7GW total capacity pipeline at end-2023 and 28.3GW remaining capacity to be tendered from 2024 onward, with the potential for additional capacity if Saudi renewable targets increase). It also scaled up its movement into green fuels in 2023, breaking ground on its second green hydrogen project in Uzbekistan.

Outlook

Over the past year ACWA’s shares have increased c 110%, fuelled by a large visible growth pipeline and ambitions of tripling its assets by 2030. Consensus forecasts for FY25e expect PBT and EPS to more than double from FY22, highlighting the company’s growth potential.

Consensus estimates

Year
end

Revenue
(SARm)

PBT
(SARm)

EPS
(SAR)

DPS
(SAR)

P/E
(x)

Yield
(%)

12/22

5,276

1,540

1.8

0.77

84.0

0.55

12/23

6,095

1,662

2.3

*0.45

112.0

0.18

12/24e

8,380

2,379

3.25

0.80

109.4

0.20

12/25e

9,401

3,134

4.29

0.74

82.3

0.20

Source: LSEG. Note: *Awarded one bonus share for every 500 shares owned.

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. Where Edison has used consensus estimates within this publication, we do not guarantee their accuracy or completeness.

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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