DELIVERING LONG-TERM VALUE
ACWA Power Annual Report 2018
King Salman Prince Mohammed bin Salman bin Abdulaziz Al-Saud bin Abdulaziz Al-Saud The Custodian of the Crown Prince, Vice President Two Holy Mosques of the Council of Ministers and Minister of Defense
ACWA Power 1 Annual Report 2018 ACWA POWER IS A LEADING DEVELOPER, OWNER AND OPERATOR OF POWER GENERATION AND WATER DESALINATION PLANTS.
WE PROVIDE POWER AND WATER FOR COMMUNITIES ACROSS THE MIDDLE EAST AND NORTH AFRICA, SOUTHERN AFRICA, EUROPE AND SOUTHEAST ASIA, WITH A FOCUS ON DELIVERING SUSTAINABLE, LONG-TERM VALUE TO OUR STAKEHOLDERS.
SINCE THE COMPANY’S FOUNDING IN 2004, OUR PORTFOLIO HAS GROWN TO INCLUDE 50 ASSETS IN 11 COUNTRIES.
OUR MISSION: Reliably delivering electricity and desalinated water at low cost.
OUR VISION: To ensure the ingenuity and entrepreneurship of the private sector and make available electricity and desalinated water in a reliable manner to support social development and economic growth of nations.
OUR VALUES: SAFETY PEOPLE PERFORMANCE We put safety first! We are We treat our employees and We are committed to committed to protecting the partners with respect and excellence in our business well-being of our employees, professionalism, fostering and operations. We set and partners, plants and the a working environment achieve ambitious goals by communities in which we where people can contribute, constantly raising the bar of operate. We find sustainable innovate and excel. We work our performance. We hold solutions for our business together in collaborative and ourselves accountable for to protect the environment inclusive teams, showing taking ownership to achieve for generations to come. support for each other to superior results. We are achieve client, personal and bold, passionately taking Company goals. We embrace on challenges with speed integrity and transparency and agility, quickly adapting by practicing the highest to our environment in the professional and ethical relentless pursuit of growth standards towards our and great results. clients, communities and one another. WHO WE ARE
2 ACWA Power Annual Report 2018 CONTENTS STRATEGIC REPORT At a Glance 4 What We Do 6 Where We Operate 8 Chairman’s Statement 10 Leadership Statement 12 Market Overview 14 Business Model 16 Strategy 17 Our Assets 18 Strategy in Action 20 Operational Review 26
DIRECTORS’ REPORT Chairman’s Introduction to Governance 28 Board of Directors 30 Directors’ Report 32 References 40 Glossary IBC
ACWA Power 3 Annual Report 2018 AT A GLANCE
ACWA POWER USES FINANCIAL AND OPERATIONAL KEY PERFORMANCE INDICATORS (KPIs) TO TRACK PROGRESS AGAINST DELIVERY OF OUR STRATEGY. 2018 KPIs ILLUSTRATE A YEAR OF OPERATIONAL GROWTH AND CONTINUING FINANCIAL STRENGTH FOR THE GROUP.
FINANCIAL HIGHLIGHTS Operating Income (Before impairment Total Assets (‘000 SAR) and other expenses) (‘000 SAR) 1,980,385 36,248,902 2018 2018 1,980,385 36,248,902
2017 2017 1,432,620 32,661,185
2016 2016 1,173,082 25,054,079
Cash Flows from Projects (‘000 SAR) 1,369,471 2018 1,369,471
2017 1,882,830
2016 1,059,202 HIGHLIGHTS
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OPERATIONAL HIGHLIGHTS* Total Number of Assets Renewable Energy Portfolio by Project Cost 50 22.9% 2018 2018 50 22.9%
2017 2017 46 22.7%
2016 2016 31 15%
2018 GROSS CAPACITY Power 29.3 GW
Water 3.9M m3/day
* Figures include advanced development assets.
ACWA Power 5 Annual Report 2018 WHAT WE DO
THROUGH RESPONSIBLE OPERATION AND OWNERSHIP, WE DELIVER RELIABLE, SAFE, 50 Assets EFFICIENT AND COMPETITIVELY Across three continents PRICED POWER AND DESALINATED WATER TO 164.2 Bn SAR GROWING ECONOMIES. Combined gross investment value
Technology-neutral and fuel-agnostic, we serve client nations and communities according to their needs – through natural gas, oil-fired, coal, wind, PV and concentrated solar power electricity generation – while working to minimise our impact on the environment. We continue to grow our renewable assets in a lower- oil-price environment, as offtakers look to increase energy security through diversification, shareholders expect healthy returns and the global energy community seeks to reduce emissions.
102,587GWh Power delivered in 2018
READ MORE OPERATIONAL REVIEW PAGE 26 POWER
6 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT WATER
We provide a crucial supply of desalinated water in our home market of Saudi Arabia and other growing economies where water is scarce, removing salt from seawater to produce drinking water, primarily through a process of reverse-osmosis. The innovative technology we deploy is driving the future of desalination, moving it toward more efficient, sustainable production – particularly as we continue to leverage renewable power in our desalination plants.
742,287,103 m3 Water delivered in 2018
READ MORE OPERATIONAL REVIEW PAGE 26
ACWA Power 7 Annual Report 2018 WHERE WE OPERATE
OUR GLOBAL MARKET PRESENCE
We operate in our home market of Saudi Arabia and across diverse geographies in the Middle East, North Africa, Southern Africa, Turkey and Bulgaria, and Southeast Asia. We develop, own and operate projects where electricity demand is increasing, potable water is sorely needed and utility scale renewable projects are being integrated into the grid. 50 11 Assets Countries 3,500+ Employees
PROJECT TYPE Conventional Renewable Our offices
HOME MARKET
SAUDI ARABIA • Saudi Arabia is home to ACWA Power’s Marafiq IWPP, which remains the world’s largest power generation and water desalination combined plant in the world • In 2018, construction began on Sakaka PV IPP, the first utility-scale solar plant in ACWA Power’s home market • 2,220 MW of generation capacity was Saudi Arabia added in 2018 for a total of 12,205 MW of operational capacity
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INTERNATIONAL
JORDAN UNITED ARAB EMIRATES • ACWA Power operates both conventional • ACWA Power won one bid in the UAE in 2018 for and renewable energy plants in Jordan 205,000 m3/day of desalinated water (UAQ IWP) Jordan • In 2018, ACWA Power’s operational capacity • Construction also began for 950 MW NOOR Energy UAE in the country increased by 485 MW 1 IPP, which represents one of ACWA Power’s largest financial investments in a project OMAN • In 2018, ACWA Power generated BAHRAIN Oman 4,206,307 MWh and 32,839,858 m3 • Now in Advanced Development, ACWA Power’s first of water in Oman asset in Bahrain, Al Dur Phase II IWPP, will have capacity • 445 MW of generation capacity was of 227,000 m3/day of water and 1,500 MW of power added in Oman in 2018
EGYPT MOROCCO • ACWA Power was the lowest bidder • In 2018, 100 percent of the power for a 200 MW project in Egypt in 2018 generated by ACWA Power in Morocco • The expected total power capacity came from renewable sources, in the pipeline in Egypt is 2,620 MW including wind and CSP projects Morocco • ACWA Power’s NOORo II IPP CSP site came online in 2018 as part of the Egypt largest CSP operation in the world
TURKEY BULGARIA • As the market changed in 2018, • ACWA Power’s power production in ACWA Power reduced its stake in Bulgaria is entirely solar PV operations Bulgaria Turkey’s operations • 80,775 MWh of electricity was generated • In 2018, 3,570,585 MWh of electricity in 2018 was generated in Turkey Turkey
SOUTH AFRICA • ACWA Power’s current operation in the country, Bokpoort CSP IPP, is among the most efficient CSP plants in the world • Two other projects were under Advanced Development in South Africa in 2018, South Africa totaling 406 MW of power capacity
VIETNAM • ACWA Power’s capacity in Vietnam is expected to reach 1,241 MW with the coal-fired 1,200 MW Nam Dinh project in Advanced Development, and Vin Hao – a potential 41 MW PV Vietnam acquisition opportunity
ACWA Power 9 Annual Report 2018 CHAIRMAN’S STATEMENT
offer opportunities to create far-reaching GENERATING LONG-TERM and long-term value for our stakeholders. In 2018, we signed a Head of Terms with VALUE AND IMPACT FOR Saudi Aramco for the circa 43 billion SAR Jazan Economic City IGCC Gasification/Power plant. In addition, we began construction on Sakaka AND ACROSS GENERATIONS PV IPP, the first utility-scale renewable energy project under The Renewable Energy ACWA Power experienced a record year for operational growth Programme of Saudi Arabia. Scheduled to come online in 2019, this landmark solar PV in 2018, bringing nine plants online and more than doubling project will provide reliable renewable power our operating hours. These successes are attributed to the at low cost and will contribute to a more diverse and economical national energy mix. Group’s forward-looking business strategy, which aims to With customer demand for desalinated water create long-term value for our shareholders and communities on the rise, particularly in Saudi Arabia and the in our home market and abroad. United Arab Emirates, we are leveraging our innovations in reverse-osmosis technology to establish sector leadership and increase the prospects of making affordable potable Since ACWA Power’s founding 14 years water available to an increasingly thirsty ago in our home market of Saudi Arabia, world. Our greatest water investment to date we have continuously delivered on our in the Kingdom, Rabigh 3 IWP, was won in mission to reliably provide electricity and 2018. This project will provide 600,000 m3 desalinated water at low cost. As a leading of desalinated water daily, servicing the water global provider of power and water, with demand for Mekkah and Jeddah year-round. 32 operational projects in 2018, which mostly have a lifespan of 25 to 35 years, In addition to winning these two preeminent we recognise that our actions create projects in Saudi Arabia, two of our power impact for and across generations. assets in the Kingdom, namely Rabigh 2 IPP and Petro-Rabigh (Phase 2) IWSPP, became In alignment with the Saudi Vision 2030 fully operational. The two assets will goals and objectives, and reinforced by our contribute additional reliable capacity strategic commitment to be number one of 2,220 MW of power for Saudi Arabia in generating electricity and producing over the next 25 years. desalinated water in our home market, our recent investments in Saudi Arabia DELIVERING VALUE
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In the course of 2018, through our In 2018, we continued to leverage the point of outcompeting fossil fuel – and investments at home and internationally, benefits of our distinct business model to strengthened our ability to deliver reliability, we have reinforced our solid foundation for deliver long-term value for our customers affordability, and long-term returns. long-term, sustainable growth and value and shareholders. Our build-own-operate creation. We not only won five new projects model enables us to – A) maintain control We continued to grow our investments in our home market and stronghold markets and manage efficiencies over the life cycle in the local communities, and in 2018, we – our international markets with multiple of our assets; B) deliver stable returns for deployed a total of 13 million SAR into various assets – but continued to accelerate project the 20 to 35 years for each asset; and C) CSR programmes in our operating countries. completion rates; our dynamic and agile offer sustainable tariffs that provide cost Ranging from cost-saving tariffs and local job team delivered a record-breaking operational competitive pricing for our customers as creation, to health, well-being and technical year with nine plants coming online across well as long-term shareholder returns. As training initiatives tailored to local livelihood, Morocco, Oman, Jordan and Saudi Arabia, a testament to our sovereign shareholder’s these programs have become essential and overall operating hours doubling. strong confidence in us and our business elements for generating lasting economic model, total PIF investments grew to value in these communities. We will continue All the while, safety remained our number represent 24.98 percent direct equity to strengthen our investments in these one priority. Our lost-time incident (LTI) rate interest in 2018. communities to deliver best-in-class service remained below that which is defined by and create long-lasting value for all our international standards despite the additional We anchor our capable, forward-looking stakeholders. expected challenges as a result of the approach to doing business in a robust risk increase in operations and operating hours. management and mitigation strategy. We The achievements of 2018 are reflective of Having said that, it is with great sorrow, that strive to minimise risk through portfolio the invaluable contributions of our Board we acknowledge the loss of Mr. Bi, Mr. Hu diversification and leading corporate members and management team, and, and Mr. Amit Kumar due to accidents on site. governance. Our portfolio diversification in particular, the dedication and efforts of Though they were not directly employed by takes multiple forms, including developing our global family of employees. I would like us, they certainly were considered members stronghold positions in targeted countries, to thank each of them for bringing ACWA of the ACWA Power family, and will firmly contracting with multiple off-takers, employing Power to new levels of excellence and remain in our memory. a range of technologies to best capture innovation. We also thank our shareholders, opportunities, remaining fuel-agnostic customers, host governments and their In our continuous search for excellence to best meet the needs of our clients, people we bring our services to, and our in delivering on our commitment to safety, and cultivating a diverse pool of suppliers. suppliers and financial partners, whose our people and our performance, we Through our governance mechanisms, our trust in our abilities and valued relationships implemented new leading-practice internal management and Board guide and uphold are irreplaceable. standards and systems, and launched a new our corporate values in delivering sustainable Human Capital strategy, including leadership value for our stakeholders with transparency, I look forward to our continued collaboration development and educational programmes. integrity and the highest ethical standards. on growth and long-term value creation On the HSSE side, we instituted new health, in 2019. safety, security and environment policies Our focus on long-term value creation and and key performance indicators across impact for and across generations begets our global operations to better measure benefits for a wide circle of our stakeholders. and manage our performance. We also By delivering reliable, affordable power and remain committed, along with our O&M water across 11 countries, we provide the Mohammad A. Abunayyan arm, NOMAC, to sharing HSSE standards, basis for socio-economic well-being in Chairman performance and reliability best-practices communities on three continents. Our new developed in our world-class facilities. technologies and innovative financing models have yielded new plant efficiencies, driven the cost competitiveness of renewables – to the
HIGHLIGHTS 13 Mn SAR
• Nine plants came online – more than any other single year spent on CSR programmes • Won Rabigh 3 IWP in KSA, which will service the water demand in 2018 for Mekkah and Jeddah year-round
• PIF shareholding represents nearly 25 percent equity interest
ACWA Power 11 Annual Report 2018 LEADERSHIP STATEMENT
2018 has been a significant year for long- GENERATING LONG-TERM VALUE term value creation at ACWA Power. We met or surpassed our expectations in a range AND DEMONSTRATING ROBUST of strategic areas, including considerable investment in our home market and further growth in our stronghold markets, through OPERATIONAL PERFORMANCE new business development and a number of projects coming online. As part of a targeted With firm commitments from governments of growing business stabilisation effort, we successfully restructured the only merchant asset in our markets to expand their power generation and water portfolio and isolated our business from the production capacity, we masterfully blended our business underlying economic and currency volatility prevailing in the market. model that focuses on minimising costs with our ingenuity We are pleased with the scale of projects we and entrepreneurship to deliver another year of positive won in 2018. We added 2.0 GW to our now operational growth and lasting community impact. 29.3 GW gross power portfolio, within which our operational or online capacity grew by 28 percent to 16.9 GW. Portfolio growth in water has been no less significant; we added 1.1 million m3/day from new water projects, growing our portfolio by 36 percent over last year, reaching 3.9 million m3/day production capacity. Notably, in our home market, we not only signed a 43 billion SAR Head of Terms with Saudi Aramco to participate in the Jazan Economic City gasification development as a partner and operator of the associated power plant, but also won the opportunity to develop the largest independent water-desalination plant, Rabigh 3 IWP.
Operationally, we brought nine plants online in multiple markets – more than double that of any single previous year – and greatly increased the economic impact we generate in these regions. In Morocco, NOORo II CSP IPP and Khalladi Wind IPP entered into operations in April and July, respectively, and in October we brought NOORo III CSP IPP and NOOR PV1 IPP online; in Oman and STRATEGIC GROWTH
12 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
Jordan, two natural gas and one PV plant Egypt to the UAE, respective governments To ensure sustained value creation for all moved to operations – Salalah 2 IPP, Zarqa IPP, have all announced challenging investment our stakeholders, we will continue to balance and Mafraq PV IPP; and in our home market of and energy-mix targets for 2030 and beyond. integration of new opportunities with our Saudi Arabia, we completed Rabigh 2 IPP and current successful operations. We thank Petro Rabigh (Phase 2) IWSPP, natural gas and Our strategic, forward-looking investments our Board of Directors for your wise counsel heavy fuel oil plants, respectively. and finance models are aligned with our core and tireless support; our employees for your business strengths as well as long-term market incalculable contributions to excellence; ACWA Power’s investments continue to be opportunities. For instance, PIF now has a and our shareholders, customers, host fuel-agnostic and technology-neutral. We direct 24.98 percent equity interest in ACWA governments and suppliers for your invaluable provide energy sources that best fit the needs Power. In addition, our maiden corporate partnerships and patronage. Together, we of the economies we serve in order to deliver bond, the 814 million USD (3.1 billion SAR) reached new levels of collaboration and optimal support to our customers for their 144a-Reg S Bond (ACWA 39), is holding its performance in 2018. We look forward to continued growth. Yet within our portfolio, trading ground with yield-to-maturity well seizing the opportunities of 2019 with you. we recognise the growing demand for above the market, reflecting investors’ strong renewables and water desalination, and confidence in the underlying portfolio’s robust continue to employ innovative and leading- performance and strong cash flow coverage practice technologies in the areas of solar, of the debt servicing obligation. wind, water and other carbon-neutral sources. In 2018, our renewable portfolio grew by 2.7 While providing long-term returns for investors billion SAR to reach 37.6 billion SAR, including throughout the life of their investment, our Paddy Padmanathan 2.1 billion SAR in under construction projects business model also translates into wider President & CEO in Egypt, Jordan and Saudi Arabia, and economic benefits for both the countries 19.2 billion SAR in advanced development and the communities in which we operate. projects in South Africa and the UAE. We also Wherever we invest, we set a remarkable demonstrated our commitment to growing minimum quota of 40 percent local our water portfolio through adding new water employment in all our project sites, which desalination assets in the UAE, Saudi Arabia provides jobs and technical training for local Thamer Al Sharhan and Bahrain at an aggregate project cost of communities for approximately 25 to 30 years Managing Director 4.5 billion SAR. per asset. In addition, our low tariffs deliver significant cost savings for countries for the In sum, we see an abundance of opportunity, duration of our operations that ultimately For references see page 40. both in our home market and abroad. In benefit the local communities. Saudi Arabia, we are well positioned to lead in rapidly-growing renewables and desalination As our operating plants supply reliable power markets, where, spurred by Vision 2030, Saudi and water to tens of millions of people around Arabia is expected to invest 5.7 billion SAR in the world, we provide the basic commodities renewable energy over the next 10 years 1, needed for communities to thrive. In 2018, and add another 300 billion SAR investment we delivered 102,587 GWh of electricity and in desalination by 2025 2. In our stronghold 742,287,103 m3 of desalinated water across markets, investment in renewables is also nine countries. projected to rise; from Morocco to Oman and
HIGHLIGHTS Power
• Delivered 102,587 GWh of electricity • Produced 742,287,103 m3 of desalinated water 7.5% • Renewable portfolio growth of 2.7 billion SAR (Grew from 27.3 GW to 29.3 GW)
Water 36% (Grew from 2.8M m3/day to 3.9M m3/day)
ACWA Power 13 Annual Report 2018 MARKET OVERVIEW
ADDRESSING THE GROWING DEMAND FOR POWER AND WATER IN OUR STRONGHOLD REGIONS ACWA Power’s strategic investments in its current operating regions – the Middle East, North Africa, Southern Africa, Southeast Asia and Europe – address the growing demand for reliable power and desalinated water in countries with increasing populations, evolving infrastructure and rising GDP.
THE MIDDLE EAST NORTH AFRICA As one of the most water-stressed regions In 2018, ACWA Power solidified its position in the world, the Middle East is faced with the in Morocco, making Morocco a stronghold challenge of maintaining a consistent supply market for ACWA Power in renewable power of fresh water 1. Additionally, with electricity generation. demand across the region expected to triple by 2050, provision of reliable power will Morocco has set a national objective to TS continue to present both challenges and increase the share of renewables in its market opportunities 2,3. generating capacity to 42 percent by 2020 and to 52 percent by 2030 8,9. By 2040, energy generation demand is expected to reach 888 TWh in the Total electricity demand in North Africa is Middle East 4. projected to increase to 980 TWh by 2030 10.
ACWA Power’s home market of Saudi Arabia continues to present new opportunities, as the country prioritises the privatisation of energy assets and has set a goal to generate 60 GW of renewable energy as part of its Vision 2030 5. As the largest water desalination market in the world, Saudi Arabia is also expected to invest another 300 Bn SAR in desalination projects by 2025 6.
The opportunities in Saudi Arabia are mirrored in ACWA Power’s other stronghold markets in the Middle East, including Oman, the UAE and Jordan. Further renewable energy deployment across the region has been predicted at 100 GW by 2035 7. OUR MARKE
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SOUTHERN AFRICA SOUTHEAST ASIA EUROPE Due to population growth and industrial A 70 percent increase in installed power In recent years, Turkey has liberalised its development, South Africa’s demand for generation capacity is required to meet electricity markets in order to attract private desalinated water is projected to grow Southeast Asia’s growing energy demand, investments. ACWA Power held 1.09 percent by 32 percent by 2030 and electricity which is projected to reach 1,997 TWh of the nation’s 87 GW capacity 16,17. demand is expected to increase to by 2040 13,14. 570 TWh by 2030 11,12. In alignment with the European Union’s In Vietnam, where ACWA Power’s Nam targets for diversified, renewable energy, ACWA Power is considering future Dinh IPP is in advanced development, the Bulgaria has set a goal to source at least investments to provide water and power rising demand for energy requires that the 20 percent of its energy from renewable in the fast-growing markets of Botswana electricity sector grow at rates of between sources by 2020 and at least 27 percent and Namibia. 10.3 percent and 11.3 percent before 2020 by 2030 18. and between 8 percent and 8.5 percent between the years of 2021-2030 15. For references see page 40.
ACWA Power 15 Annual Report 2018 BUSINESS MODEL
CREATING MARKET-LEADING VALUE THROUGH COMPREHENSIVE ASSET MANAGEMENT
By exercising control over our projects from start to finish, we are able to manage partnerships, efficiencies, costs and long-term return on investment.
We establish this control by being both owner and operator of our global assets, a rare combination within the IPP/IWP model. We also manage our stake throughout a project’s life cycle to generate stable, long-term returns and ensure service quality and reliability.
ACWA POWER
DEVELOPS POWER AND WATER OWNS AND OPERATES THOSE DESALINATION PROJECTS SAME PROJECTS FOR THE LONG TERM
THIS COMBINATION ENABLES US TO:
PROTECT OUR MANAGE THE GENERATE STABLE, INVESTMENTS OPERATIONS LONG-TERM RETURNS OF OUR ASSETS
A WINNING MODEL
We have developed economies of scale to manage costs throughout our value chain. We also structure financing to drive down all costs. Our work volume balances the market-leading savings we pass on to client nations and their utility customers, benefitting all stakeholders. ACWA POWER’S 2018 WIN RATE: 63%*
* This figure is reflective of bids submitted in 2018 which were awarded to us or in which we were lowest bidder.
16 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT STRATEGY
EXTENDING VALUE CREATION
Designed to produce significant growth, increased market share, service quality and stakeholder value, our business strategy led to positive trends across key indicators, positioning the Company for sustained long-term value creation.
OUR BUSINESS STRATEGY
OUR GOAL IS TO BECOME ONE OF THE LARGEST IWPP PLAYERS IN THE MIDDLE EAST, ASIA AND AFRICA REGIONS, CREATING SUSTAINABLE VALUE FOR ALL OUR STAKEHOLDERS.
STRATEGIC PILLAR #1 STRATEGIC PILLAR #2 STRATEGIC PILLAR #3 #1 IN OUR DEVELOP MULTI-TECHNOLOGY HOME MARKET STRONGHOLD AND OWN OPERATOR Be the largest private IWPP player in our COUNTRIES Create a stable risk-versus-return balance home market of Saudi Arabia and the by remaining technology agnostic, “go-to” partner for all government Identify and develop stronghold countries, adopting and leveraging new technologies electricity and water projects by where we can grow to be a significant and suppliers, and maintaining a majority participating in all bids and remaining local player with multiple assets, share of operations to ensure maximum open for expansions and extensions strong presence and sustainable control and learning. whenever possible. long-term relationships. READ MORE PAGE 24 READ MORE PAGE 20 READ MORE PAGE 22
OUR STRATEGY IS UNDERPINNED BY OUR FOUNDING PRINCIPLES
An overall balanced asset portfolio
Strict adherence to our socially responsible business model
The financial strength and flexibility to fund high growth
ACWA Power 17 Annual Report 2018 OUR ASSETS
ACWA Power Contracted power Project cost effective share (MW)/water PCOD Contract duration Project name (Mn SAR) (%) (000’ m3/day) (actual/expected) (years) Project type Saudi Arabia Shuaibah IWPP 9,188 30.00 990/880 Q1 2010 20 Shuaibah Expansion IWP 874 30.00 0/150 Q4 2009 20 Petro-Rabigh IWSPP** 4,466 74.00 360/134 Q2 2008 25 Bowarege IWP 371 64.85 0/50 Q3 2008 N/A Marafiq IWPP 12,596 20.00 2,744/800 Q4 2010 20 Shuqaiq IWPP 6,866 32.00 850/212 Q2 2011 20 Rabigh IPP 9,398 40.00 1,204/0 Q2 2013 20 Qurayyah IPP 10,189 17.50 3,927/0 Q1 2015 20 Rabigh 2 IPP 5,847 50.00 2,060/0 Q1 2018 20 Petro-Rabigh (Phase 2) IWSPP 3,689 74.00 160/54 Q1 2018 25 Shuaibah Expansion II IWP* 1,176 100.00 0/250 Q2 2019 25 Sakaka PV IPP* 1,133 69.99 300/0 Q2 2020 35 TOTAL 65,792 12,505/2,530 The United Arab Emirates Shuaa Energy PV IPP 1,222 49.00 200/0 Q1 2017 25 Hassyan IPP* 12,140 26.95 2,400/0 Q1 2023 25 TOTAL 13,362 2,600/0 Oman Operational when acquired, Barka 1 IWPP 1,556 41.91 427/91 acquisition Q3 2010 18.7 Barka 1 Expansion IWP 204 41.91 0/45 Q2 2014 8.2 Barka 1 Phase II Expansion IWP 298 41.91 0/57 Q1 2016 6 Operational when acquired, Salalah 2 IPP – Existing 629 27.00 273/0 acquisition Q2 2015 15 Salalah 2 IPP – Greenfield 1,687 27.00 445/0 Q1 2018 15 Ibri IPP* 3,626 44.90 1,509/0 Q2 2019 15 Sohar 3 IPP* 3,589 44.90 1,710/0 Q1 2019 15 Salalah IWP* 600 50.10 0/114 Q4 2020 20 TOTAL 12,189 4,365/307 South Africa Bokpoort CSP IPP 1,939 40.00 50/0 Q1 2016 20 Jordan Operational when acquired, CEGCO Assets 3,885 40.93 962/0 acquisition Q3 2011 15 Zarqa IPP 1,819 60.00 485/0 Q3 2018 25 Mafraq PV IPP 265 100.00 50/0 Q4 2018 20 Risha PV IPP* 254 100.00 50/0 Q3 2019 20 TOTAL 6,223 1,547/0 Morocco NOORo I CSP IPP 3,153 73.13 160/0 Q1 2016 25 Khalladi Wind IPP 655 75.00 120/0 Q2 2018 20 NOORo II CSP IPP 4,125 75.00 200/0 Q2 2018 25 NOORo III CSP IPP 3,233 75.00 150/0 Q4 2018 25 NOOR Ouarzazate IV PV1 IPP 293 75.00 55/0 Q3 2018 20 NOOR Laayoune PV1 IPP 379 75.00 65/0 Q3 2018 20 NOOR Boujdour PV1 IPP 116 75.00 15/0 Q3 2018 20 TOTAL*** 11,953 765/0 Bulgaria Operational when acquired, Karadzhalovo PV IPP 1,020 42.00 50/0 acquisition Q2 2012 20 Egypt Ben Ban 1* 281 64.34 50/0 Q2 2019 25 Alcom Energy (Ben Ban 2)* 300 64.34 50/0 Q2 2019 25 TK for Solar (Ben Ban 3)* 113 35.39 20/0 Q2 2019 25 TOTAL 694 120/0 Turkey Kirikkale CCGT IPP 3,488 69.60 950/0 Q3 2017 Merchant market TOTAL 16,660 22,952/2,838
* Asset under construction. PROJECT TYPE ** The legal formalities related to the change in Petro Rabigh IWSPP shareholding Conventional were completed in Q1 2019. *** Project costs may not equal total due to rounding. Renewable
Salalah 2 IPP-Greenfield and Salalah 2 IPP-Existing are considered one asset. CEGCO includes five assets of which two are renewable (wind) assets.
18 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
Projects under advanced development Fuel source by project MW ACWA Power Contracted power Project cost effective share (MW)/water Project Project name (Mn SAR) (%) (000’ m3/day) type
Redstone CSP IPP, South Africa 2,959 35.00 100/0 4% PV 5% CSP Khanyisa IPP, South Africa 3,866 40.00 306/0 Nam Dinh 1 IPP, Vietnam 8,250 45.00 1,200/0 0.4% Wind Dairut IPP, Egypt 8,250 40.00 2,300/0 13% Coal NOOR Energy 1 IPP, UAE 16,211 24.99 950/0 UAQ IWP, UAE 1,058 65.00 0/205 Al Dur Phase II IWPP, Bahrain 4,125 60.00 1,500/227 63% Natural Gas Rabigh 3 IWP, Saudi Arabia 2,813 70.00 0/600 15% Oil TOTAL 47,531 6,356/1,032
ACWA Power 19 Annual Report 2018 STRATEGY IN ACTION
#1 IN OUR HOME MARKET
A LANDMARK SOLAR INVESTMENT IN SAUDI ARABIA: SAKAKA PV IPP
As the largest IWPP player in the Kingdom, ACWA Power is dedicated to meeting Saudi Arabia’s water and electricity demand, and to advancing the adoption of renewable energy in support of Vision 2030. In 2018, ACWA Power invested in the growth and diversification of the Saudi Arabian economy by contributing over 65 Bn SAR to the GDP, with its portfolio of 12,505 MW of power and 2,530,000 m3/day of water capacity in the Kingdom.
Aligned with the objectives of Vision 2030 and the Saudi National Renewable Energy Programme, ACWA Power is building the 300 MW first utility-scale solar plant in the Kingdom of Saudi Arabia – Sakaka PV. power to be generated by Sakaka PV This unprecedented endeavour has created 900 jobs in the Kingdom and will contribute over 450 Mn SAR to the country’s GDP 1. The Sakaka PV project will also build capacity for the future of renewables within the country, and the project’s world-record- 45,000 breaking tariff is set to transform the photovoltaic (PV) solar energy sector homes will be powered across the globe, making renewable solar power more accessible and affordable.
ACWA Power holds a 69.99 percent controlling stake in the newly established Sakaka Solar Energy Company (SSEC). SSEC has signed a 25-year Power Purchase Agreement with ACWA Power.
SAKAKA PV WILL PROVIDE: • 300 MW of renewable energy 2 • Power for more than 45,000 households in the Kingdom 3 • More than 430,000 tonnes of carbon dioxide offsets/year 4
For references see page 40.
20 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT IN ACTION IN STRATEGY
ACWA Power 21 Annual Report 2018 STRATEGY IN ACTION CONTINUED STRATEGY STRATEGY IN ACTION
22 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
#2 DEVELOP STRONGHOLD COUNTRIES
MEETING GROWING DEMAND IN ACWA POWER’S NEWEST STRONGHOLD MARKET: DUBAI, THE UAE
ACWA Power maintains a balanced portfolio by developing diversified stronghold markets and building sustainable long- term relationships within the communities in which it operates. ACWA Power’s current investments in its stronghold markets of Morocco, Oman, Jordan, Egypt and the UAE total 27 assets.
In 2018, with Noor Energy 1 IPP (formerly known as Dewa CSP IPP) now in advanced development, Dubai has become a new 950 MW stronghold market for ACWA Power.
power capacity of Noor Reflective of trends in other stronghold Energy 1 IPP countries, population and electricity demand are growing in the United Arab Emirates, which presents an opportunity for ACWA Power to become a significant local player with multiple assets in the country.
270,000 • Annual population growth rate: 1.4 percent 1 • Annual electricity demand growth rate: 5 homes will be powered through to 6 percent 2 clean energy As a long-term investor, ACWA Power took steps in 2018 to build sustainable relationships in the Dubai community by creating a multitude of jobs at its newest asset, NOOR Energy 1 IPP.
ACWA Power’s investment of 16,211 Mn SAR is its single-largest investment in any project – a testament to the Company’s confidence in concentrated solar power (CSP) technology and its commitment to helping the UAE reach its renewable energy goals and growing electricity demand.
IN THE UAE, ONE OF ACWA POWER’S NEWEST STRONGHOLD MARKETS, NOOR ENERGY 1 IPP WILL PROVIDE: • 950 MW of power capacity through a combination of CSP and PV • Clean energy for more than 270,000 residences in Dubai • 1.4 Mn tonnes of carbon emissions avoided per year
For references see page 40.
ACWA Power 23 Annual Report 2018 STRATEGY IN ACTION CONTINUED
#3 MULTI-TECHNOLOGY AND OWN OPERATOR
LEADING TECHNOLOGY HARNESSED IN LARGEST WATER ASSET: RABIGH 3 IWP ACWA Power’s position as technology-neutral offers flexibility to leverage promising new technologies and suppliers. Additionally, the Company’s commitment to maintaining the majority-share of its operational assets allows for maximum control, which helps maximise efficiency and generate stable returns over the long term.
In December 2018, ACWA Power won the bid to develop Rabigh 3 IWP, which will be Saudi Arabia’s largest independent water 600,000 desalination plant. Rabigh 3 IWP will utilise state-of-the-art reverse osmosis technology, 3 m /day of desalinated water which consumes less power per m3 of water than any other available technology.
As part of its build-own-operate model, ACWA Power is developing the plant and will hold 70 percent share of the 5.7 Mn operational asset. By leveraging innovative new technologies people will be provided to create efficiencies and increase output, with water Rabigh 3 IWP will contribute greatly to servicing the water needs of 5.7 Mn people living in the Mecca and Jeddah region, including during peak demand periods such as the Holy Month of Ramadan and Hajj Seasons.
RABIGH 3 WILL PROVIDE THE REGION WITH: • 600,000 m3/day of desalinated water • Water for more than 5.7 Mn people in the Mekkah and Jeddah regions 1,2
For references see page 40.
24 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT IN ACTION IN STRATEGY
ACWA Power 25 Annual Report 2018 OPERATIONAL REVIEW
A YEAR OF ACCOMPLISHMENTS
JAN FEB MAR APR MAY JUN In Operation: In Advanced In Operation: Rabigh 2 IPP Development: NOORo II CSP IPP NOOR Energy 1 IPP Bid Awarded: In Operation: Salalah IWP Salalah – Greenfield expansion In Advanced Development: Umm Al Quwain IWP
BIDS WON PROJECTS IN ADVANCED DEVELOPMENT In 2018, ACWA Power won a number of bids for new projects, In 2018, ACWA Power signed contracts for five major projects, continuing to strengthen its foothold, both in its home market moving them into the Advanced Development stage. of Saudi Arabia and its target markets. Three important water projects moved into Advanced Development In August, ACWA Power signed Head of Terms with Saudi Aramco in 2018: Rabigh 3 IWP in Saudi Arabia, the largest independent for Saudi Arabia’s Jazan Economic City IGCC Gasification/Power reverse-osmosis water desalination plant in the world, expected plant, an approximately 43 Bn SAR, 25-year project. to produce 600,000 m3 per day, Al Dur Phase II IWPP in Bahrain and Umm Al Quwain IWP in the United Arab Emirates. In Vietnam, ACWA Power entered a joint development agreement for Vin Hao PV, a solar PV plant with a capacity of 41 MW – the first In Egypt, ACWA Power signed a 25-year build-own-operate PPA renewable energy project developed by ACWA Power in the nation. in November for Dairut IPP, a combined cycle gas turbine plant also capable of firing alternative liquid fuels. ACWA Power also was the lowest bidder for Askar PV, a solar PV plant in Bahrain with a total capacity of 160 MW, and Kom Ombo PV, In one of its newest stronghold markets, Dubai, ACWA Power signed a 260 MW solar plant in Egypt, both of which were subsequently the contract for NOOR Energy 1 IPP, a first-of-its-kind technology awarded to the Company in 2019. mix of the world’s tallest CSP tower, three parabolic trough CSP stations and 250 MW of PV panels, yielding a total capacity of In addition to contributing to the renewable energy share of these 950 MW. The 16,210 Bn SAR NOOR Energy 1 project – one of countries, Vin Hao PV, Askar PV and Kom Ombo PV represent ACWA Power’s largest investments to date – will help the UAE strategic wins for ACWA Power as it continues to grow its new reach its goal of a 50 percent clean energy mix by 2050. markets of Vietnam, Bahrain and Egypt.
An additional five projects, won in 2018, were also signed into contract and thus moved into Advanced Development during the same year.
26 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
JUL AUG SEP OCT NOV DEC Under Construction: Under Construction: In Operation: In Advanced In Advanced In Advanced Hassyan IPP Ben Ban PV IPP Zarqa IPP Development: Development: Development: In Operation: Lowest Bidder: Al Dur Phase II IWPP Dairut IPP Rabigh 3 IWP Khalladi Wind IPP Kom Ombo PV In Operation: Under Construction: Lowest Bidder: Bid Awarded: Head of NOORo III CSP IPP Sakaka PV IPP Askar PV Vin Hao PV Terms Signed: In Operation: Under Construction: In Operation: Jazan Economic NOOR PV1 IPP Salalah IWP Mafraq PV IPP City IGCC – three assets
PROJECTS UNDER CONSTRUCTION PROJECTS IN OPERATION In November 2018, ACWA Power broke ground on Sakaka PV IPP, ACWA Power moved nine projects into operation in 2018. the first utility-scale solar plant in the Kingdom of Saudi Arabia. Commercial operation of the 300 MW PV solar plant is scheduled In Morocco, ACWA Power began operation of Khalladi Wind IPP, for Q4 2020. The first renewable energy project under the King which has a 120 MW of capacity. Additionally, NOOR PV1 IPP, Salman Renewable Energy Initiative, Sakaka PV IPP will supply consisting of three PV assets, NOORo II CSP IPP and NOORo III 45,000 households with power in Al Jouf, while offsetting over CSP IPP, all of which, in total, have a power capacity of 485 MW, 430,000 tonnes of carbon dioxide a year. came online in 2018.
ACWA Power also began construction on the Ben Ban PV IPP project One of ACWA Power’s investments in its home market of Saudi Arabia in Egypt – three solar assets slated for commercial operation in 2019. also came online in 2018: the natural gas Rabigh 2 plant, a 2,060 MW Ben Ban PV IPP will contribute to the country’s renewable energy combined cycle power plant. target of 20 percent by 2022. In Jordan, two of ACWA Power’s natural gas and solar assets began In Oman, Salalah IWP, a reverse-osmosis water desalination plant operating in 2018: Zarqa IPP, a 485 MW combined cycled natural that ACWA Power will build, own and operate, was won in April and gas plant, and the 50 MW Mafraq PV IPP project, which is the first moved to construction later in the year, and in the UAE, the Hassyan utility-scale solar plant in Jordan. IPP plant entered the construction phase and is scheduled to be operational by Q1 2023. In Oman, Salalah 2 IPP – Greenfield, a 445 MW expansion of Salalah 2 IPP – Existing, a natural gas project, was completed . ahead of schedule and moved into operation in March 2018.
9 ACWA Power moved nine projects into operation in 2018
ACWA Power 27 Annual Report 2018 CHAIRMAN’S INTRODUCTION TO GOVERNANCE
GOVERNANCE AND LEADERSHIP
Sound corporate governance is the foundation on which ACWA Power is built and operates. Applying leading practice, we distribute the various rights and responsibilities among the Group’s diverse participants, including the Board of Directors, management team and staff, to protect the interests of, and deliver value to, our shareholders and other stakeholders.
ACWA Power has 50 assets across 11 countries, with the opportunity to make an impact across generations in each community in which we operate. The strong and transparent framework by which we structure and conduct our business helps ensure that we are meeting the needs of our stakeholders while creating lasting value for our shareholders.
28 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
CODE OF CONDUCT LEADERSHIP OF THE COMPANY “Serving as the ethical AND BUSINESS ETHICS The Board of Directors has 11 members, Serving as the ethical roadmap for the Group, comprising shareholder representatives roadmap for the Group, its its Directors and its employees, the Code and a selection of experienced independent Directors and its employees, of Conduct and Business Ethics catalogues members who are industry experts. The ACWA Power’s values, ethics and business management team leads, supervises and the Code of Conduct and principles. The code contains the Company’s controls the Company, with oversight and anti-bribery and anti-corruption policies and guidance from the Directors and the Board Business Ethics catalogues describes the reporting process for non- Committees. The Directors bring with them ACWA Power’s values, ethics adherence to the code. Internal audit, risk deep and wide-ranging experience of management and internal control processes corporate governance, operations and and business principles.” are also defined and continue to meet maintenance, finance, business development progressive governance standards. and institution building. The management team’s academic and professional qualifications CORPORATE GOVERNANCE STRUCTURE in the fields of administration, management, ACWA Power’s corporate governance finance and engineering complement their structure consists of a Board of Directors leadership skills. and five functional Board Committees, each responsible for reviewing the Company’s The Executive Management Committee, operations within their particular areas ExCom, distinct from the Board Executive of expertise and then presenting their Committee, consists of the President & findings and suggestions to the wider Chief Executive Officer (CEO), Managing Board of Directors. Director, Chief Investment Officer (CIO), Chief Financial Officer (CFO), Chief Strategy Those functional Board Committees are: Officer (CSO), Chief Technology Officer and Board Executive Committee; Board Audit the VP of Human Resources. Committee; Risk & Compliance Committee; Nomination and Remuneration Committee; Eight Board meetings were held during 2018 and Conflict Of Interest & Related Party as well as one Board strategy meeting to Transaction Committee. guide the Company’s business progress and review strategies for operational expansion The roles and responsibilities of each of through new projects across ACWA Power’s these Committees is expanded upon in the targeted geographies. These meetings Directors’ Report. The Company Board, its were convened with the issuance of proper advisors, its functional committees, Company notices, the agenda and relevant working management and employees, shareholders papers. The Chairman presided at all and direct stakeholders are guided by the meetings, and the meeting minutes were Company’s Corporate Governance Guidelines appropriately recorded, circulated and and Procedures and Code of Ethics. approved. The Board of Directors approved the audited financial statements of the Company on 24 April 2018.
Mohammad Abunayyan Chairman
ACWA Power 29 Annual Report 2018 BOARD OF DIRECTORS E Executive Committee A Audit Committee N Nomination and Remuneration
Committee
Mr. Mohammad Mr. Sulaiman Mr. Rasheed H.E. Mr. Ahmed Mr. Tariq Mr. Ibrahim Dr. Mohsen Abunayyan Al Muhaidib Al Rasheed Al Rajhi Almutlaq Alromaih Khalil
Chairman of the Member of the Member of the Member of the Member of the Member of the Member of the Board of Directors Board of Directors Board of Directors Board of Directors Board of Directors Board of Directors Board of Directors
BIOGRAPHY With more than Mr. Al Muhaidib is With over 29 years H.E. Mr. Al Rajhi is Mr. Almutlaq is the Mr. Alromaih is the Dr. Khalil is the 37 years of experience the Chairman of of experience, the Chairman of Vice-Chairman and Chief Executive Officer Founder of MAKVEST, in the commercial Al Muhaidib Group Mr. Al Rasheed has the Council of Saudi Managing Director of Saudi Arabian which provides and industrial sectors, and a number of a strong track record Chambers, Riyadh of Almutlaq Group; Investments Company financial advisory Mr. Abunayyan serves companies including in management, Chamber of a closed joint stock (‘Sanabil Investments’). services to companies as Chairman of ACWA Savola Group and information Commerce & Industry company with He was appointed as focusing on emerging Power, Vision Invest, RAFAL Real Estate technology, and Vice President diversified holdings a member of ACWA markets. Previously, he Dussur and numerous Development. accounting and of the Federation of in industrial Power’s Board of held various executive local and regional finance. He is a the GCC Chambers. manufacturing, Directors in 2013. positions with IFC companies. He is member of the In addition, H.E. chairs real estate, utilities Prior to joining Sanabil and the World Bank, widely recognised Board of Directors and/or is a member and financial sector. Investments in 2009, including Director as one of the most of Vision International of the Board of He is the Chairman of Mr. Alromaih was of IFC’s Central Asia, respected leaders Investment Company Directors of eminent Almutlaq Real Estate appointed, by a royal Middle East and North in the water and and is an active local and regional Investment Company decree, as the Vice Africa and joint World energy sectors. member of several companies, across and sits on boards Chairman of the Bank/IFC Director of Under his leadership, reputable organisations several sectors, of various companies Capital Market the Global Information ACWA Power has in KSA and the GCC, including but not operating in the Authority in 2004. and Communication grown into a leading including the Saudi limited to financial petrochemical, He served as Assistant Technologies private sector energy Organization for services, petrochemical financial and industrial Secretary General of Department. and water provider, Certified Public and philanthropy. sectors. Mr. Almutlaq the Public Investment Dr. Khalil also served achieving significant Accountants (SOCPA), was appointed as a Fund from 1985 as a Business Professor milestones since Saudi Economy member of ACWA until 2004. at the American his inception of Association and Power’s Board of University of Beirut, the Company. the Family Business Directors and board advisor to various Council of the committees in 2008. governments and Gulf Cooperation major corporations, Council. Currently, in addition to working Mr. Al-Rasheed serves with McKinsey & Co. as Chairman, Managing Director and/or is a member of the Board of Directors of more than 8 regional companies.
APPOINTED 22 June 2008 22 June 2008 22 June 2008 22 June 2008– 29 November 2008 2 January 2013 23 February 2015 June 2018 MEMBERSHIP STATUS Non-Executive Non-Executive Non-Executive Non-Executive Independent Non-Executive Independent EXTERNAL APPOINTMENTS Mr. Abunayyan chairs Mr. Al Muhaidib sits Mr. Al Rasheed is a H.E. Mr. Al Rajhi chairs Mr. Almutlaq sits on Mr. Alromaih chairs Dr. Khalil is a member and/or is a member of on the Board of member of several the Council of Saudi the Board of Directors and/or is a member of of the Board of the Board of Directors Directors of Saudi organisations in KSA Chambers, Riyadh of several companies, the Board of Directors Directors for many of several world- British Bank (SABB), and GCC including Chamber of including Middle East of several local companies and funds leading organisations, Almarai Company, Saudi Organization Commerce & Industry, Paper Company, and international at different stages in addition to holding Vision Invest, Prince for Certified Public Trio Mada International Riyadh Cables Group companies, including of growth. a number of Salman Centre for Accountants (SOCPA), Plastic Company, of Companies, Qassim National Commercial prestigious honorary Disability Research Saudi Economy MATTEX Company, Cement, Watani Bank of Saudi Arabia. and leadership and Prince Fahad Association and AEP Company and Wealth Management positions focused Bin Salman Charity the Family Business numerous other Company, Almutlaq on transforming Association for Renal Council of the Gulf companies, including Real Estate Investment and diversifying Failure Patients Care. Cooperation Council. Vice Chairman of Company, Himmah the economy of Al Rajhi Holding Capital and Daikin Saudi Arabia. Company. His Saudi Arabia. Excellency holds numerous seats on government and socially responsible funds and committees. COMMITTEES
E A N C E C C E E
30 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
R Risk & Compliance Committee C Conflict Of Interest & Related Indicates Committee Chairman Party Transaction Committee
Mr. David H.E. Mr. Mr. Federico Dr. Ibrahim Mr. Omar Mr. Raid Crane Mohammed Tauber S. Al Rajhi AlMidani Ismail Al Nahas Member of the Member of the Member of the Member of the Member of the Member of the Board of Directors Board of Directors Board of Directors Board of Directors Board of Directors Board of Directors
Mr. Crane was His Excellency is Mr. Tauber has over Dr. Al Rajhi is the Mr. AlMidani is the Chief Mr. Ismail is the appointed as a the Governor of 29 years of experience Chairman of Arabian Executive Officer of Director of Direct member of the Board the Public Pension in investment banking, Cement Company, Vision Invest, a leading Local Holdings within of Directors of ACWA Agency, as per royal financial services, real a public joint stock Saudi Development & the Public Investment Power and board decree no. A/236 estate and corporate company, and other Investment Holding Fund. He has extensive committees in 2016. dated 16/11/1437H. restructuring. He reputable companies Company with active experience in business Prior to joining ACWA He has more than currently serves in Saudi Arabia. In investments in the development, Power, Mr. Crane 32 years of experience as the CEO of addition, he sits on Power & Water, operations and served as President in the banking sector Gemstone Real the Board of Directors Industrial Gases, District strategy, including and CEO of NRG where under his Estate Development of several local Cooling, Waste Water but not limited to Energy and NRG Yield, leadership, Alinma Company. Prior to this, companies including Treatment, Logistics change management the largest non-utility Bank saw significant he was the President Al Rajhi Holding Group, and Environmental and organisational power company in the growth and expansion of Tameer Holding a closed joint stock Solutions Sectors. turnovers and USA. He was also CEO as a leading financial Investment and Vice company with Mr. AlMidani has served transformations. and Executive Director institution. Currently, President of Business diversified investments in multiple roles within Mr. Ismail has held of International Power H.E. chairs and/or Development of including, but not Vision Invest over the various executive and Senior Vice is as a member of the Al Rajhi Holding and limited to, financial past 9 years, including management President of Global Board of Directors on Managing Director services, real estate, as Chief Executive positions, including Power at Lehman numerous esteemed of Citigroup. industrial, contracting Officer of Beatona, General Manager Brothers, where organisations. H.E and infrastructure. a Vision Invest of Mawarid Food Co., he was responsible received his BSc. Dr. Al Rajhi received Subsidiary specialised CEO of Saudi Tadawi for the Global in Accounting from his Master of Science in Environmental Health Care Group Power business in King Saudi University in Management from Treatment and Founder/ emerging markets. in KSA and an the United States Infrastructure, Waste Managing Partner of Executive Program and a Ph.D. from Management and House of Retail LLC. from Michigan Ross the United Kingdom. Recycling. Mr. AlMidani He received his BSc. in business school is a member of the Finance from the USA in the USA. Young Presidents and an MBA from the Organization and prestigious London holds a Bachelors of Business School, Commerce Degree United Kingdom. (Finance) with Honours from the John Molson School of Business in Montreal, Canada.
10 December 2015– 16 June 2016 16 June 2016 18 June 2018 18 June 2018 9 July 2018 June 2018
Non-Executive Independent Non-Executive Non-Executive Non-Executive Non-Executive
Mr. Crane served as a His Excellency is the In addition to leading Dr. Al Rajhi is the Mr. AlMidani sits on Mr. Ismail sits on the member of the Board Chairman of ASMA Gemstone, Mr. Tauber Chairman of Arabian the Board of Directors Board of Directors of of Directors of ACWA Capital, Al Raidah, sits on the Board of Cement Company, of several Saudi several companies, Power, Vision Invest Raza, SPIMACO Directors of AEP Tibah Airports Companies, including including Credit Suisse (formerly known as ADDWAEIH and Investment and Development Co Saudi Tabreed, Qudra of Saudi Arabia. ‘ACWA Holding’) and Taawuniyah Real Basil Trust. and Tibah Airports Energy, Miahona and ACWA Guc. Estate Investment. operation Co. Etihad International In addition, he is a In addition, he sits on ESCO. member of the Board the Board of Directors of Directors and of Al Rajhi Holding Committees of SABIC, Group. STC, Riyad Bank, National Centre of Privatization and the General Organization for Social Insurance.
E R E E E N
ACWA Power 31 Annual Report 2018 ACWA POWER BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL YEAR 2018
Dear Esteemed ACWA Power Stakeholders,
The ACWA Power Board of Directors are pleased to present the Annual Report and audited financial data relevant to ACWA Power – (‘ACWA Power’ and/or ‘The Company’) for the year ending on the 31st December 2018 (referred as the current year).
GENERAL The International Company for Water and Power Projects (‘the Company’) is a Saudi joint stock company established pursuant to a ministerial resolution numbered 215 dated 2 Rajab 1429H (corresponding to 5th July 2008) and registered in Riyadh, the Kingdom of Saudi Arabia under commercial registration number 1010253392 dated 10 Rajab 1429H (corresponding to 13th July 2008). The Company and its project companies, collectively ‘the Group’, are engaged in: (i) the development, acquisition, leasing, operation and maintenance of power generation, steam production and desalinated water production plants; (ii) the sale of electricity and desalinated water; and (iii) other related or auxiliary businesses activities.
FINANCIAL RESULTS In 2018, ACWA Power experienced stable growth in its operating income before impairment and other expenses, achieving another year of double-digit growth. This is a testament to the Group’s resiliency and ability to deliver on its sustainable growth strategy to deliver high-quality, efficient power and water at low cost, while contributing to the communities in which ACWA Power operates. For the year 2018, the Group achieved an Operating Income before impairment and other expenses 1 of 1,980 Mn SAR (2017: 1,433 Mn SAR) and a net loss of 774 Mn SAR (2017: Net Income 920 Mn SAR).
KEY ACCOMPLISHMENTS IN YEAR ENDED 2018 In 2018, ACWA Power’s power generation portfolio capacity reached 29.3 GW and its water capacity reached 3.9 Mn m3/day of desalinated water inclusive of assets under construction. In addition to this, ACWA Power has under advance development power generation capacity of 6.4 GW and water generation capacity of 1 Mn m3/day of desalinated water. The asset portfolio of 50 projects includes 32 operational assets, 10 projects under construction and eight projects in advanced development phase. As of 31st December 2018, ACWA Power’s asset portfolio comprises 18 renewable assets 2.
The Group brought nine projects into operation in 2018 – more than any other single year of operations and grew its operational power portfolio by 28 percent. The Company continued to grow its portfolio through new business development in 2018 and grew the water portfolio by 36 percent and the power portfolio by 7.5 percent.
KEY HIGHLIGHTS INCLUDE: • Awarded contract for Rabigh 3 IWP, the then largest independent reverse-osmosis water desalination plant in the world (600,000 m3/day). • Began construction on the first utility-scale solar plant in Saudi Arabia, Sakaka PV IPP (300 MW). • Awarded contract for NOOR Energy 1 (950 MW), a novel technology mix that includes the world’s tallest CSP tower, three parabolic trough CSP stations, and PV panels. • Commercial operation of NOORo II CSP, the largest CSP plant in the world. • Signed a Head of Terms for a 43 Bn SAR, 25-year joint venture with Saudi Aramco and Air Products for the Jazan Economic City IGCC Gasification/Power Plant in which ACWA Power would be a 25 percent shareholder. • The 814 MUSD 144a-Reg S Bond “ACWA 39”, ACWA Power’s maiden Corporate bond, was trading at YTM of 6.45 percent (59 bps pa increase YoY), holding ground against the benchmark Barclays GCC index, which saw its YTM widen by 92 bps in 2018.
BOARD OF DIRECTORS The Board of Directors held a total of nine meetings during 2018 to guide the Company’s business progress and review strategies for operational expansion through new projects across ACWA Power’s targeted geographies.
The Company held an Extra Ordinary General Assembly Meetings (EGM) on 26 June 2018, and two Ordinary General Assemblies on 09 August 2018 and 06 December 2018, respectively. The agendas were as follows:
EXTRAORDINARY GENERAL ASSEMBLY AGENDA (26 JUNE 2018): 1. Vote on the auditor’s report for the fiscal year ending as of 31/12/2017; 2. Vote on the Board of Directors’ report for the fiscal year ending as of 31/12/2017; 3. Vote on the financial statements of the Company for the fiscal year ending as of 31/12/2017; 4. Vote on discharging the Board members for the fiscal year ending as of 31/12/2017; 5. Vote on appointing Ernst & Young as the Company’s external auditors for the fiscal year 2018, in line with the endorsement of the Audit Committee, for the proposed fees amounting to 557,500 SAR (for statutory and special purpose zakat financial statements); 6. Voting on the remuneration of the members of the Board of Directors as stated in the Board Report;
1 Discontinued operations were classified as a separate line item. 2 Including projects in advanced development.
32 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
7. Voting on the remuneration of the Board Audit Committee members; 8. Vote on distributing interim and final dividends to shareholders in an amount of 126.7 Mn SAR and 82.1 Mn SAR, respectively, amounting to a total of 208.8 Mn SAR for the fiscal year ending as of 31/12/2017; 9. Affirmative vote on delegating the Board of Directors to distribute interim dividends for 2018; 10. Vote on accepting the proposed amendments to the bylaws; 11. Affirmative vote on the pre-emption right stated in article 14 of the Company’s bylaws; 12. Affirmative vote on increasing the Company’s capital from 5,476,037,210 SAR to 6,457,628,780 SAR divided to 645,762,878 shares with share value 10 SAR, provided that the total shares value to be paid in cash, which means that the new shares in the Company shall be fully paid. The capital increase was for the subscription of the Public Investments Fund to 98,159,157 shares; 13. Affirmative vote on increasing the Company’s Board composition to 11 members instead of 10 with the additional one member to represent the Public Investment Fund; 14. Affirmative vote on appointing a new Board member, representing the Public Investment Fund; and 15. Affirmative vote on appointing two new Board members in place of the two resigning members – Eng. Ahmed Al Rajhi and Mr. David Crane, respectively.
9 AUGUST 2018: 1. Voting on appointing Mr. Raid bin Abdullah Ismail as a Board of Director, representing the Public Investment Fund. 2. Voting on paying 22,250,000 Saudi Riyals (twenty-two millions and two hundred and fifty Saudi Riyal) to the Arabian Company for Power and Water Development (ACWA Holding) in exchange for ACWA Holding to approve to change its trade name, so as not to include “ACWA” or the following words “Arabian Company for Water and Power” whatever the order is, and no partner or company affiliated to the Company is entitled to use this trade name or these words mentioned above for their interest. The approval was required because some Board members (i.e. – Mr. Mohammad Abunayyan, Mr. Rasheed Al Rasheed, Mr. Sulaiman Al Muhaidib and Mr. Omar Almidani) are representing ACWA Holding and some members also hold equity shares in the Company. 3. Vote on all business and contracts in force, which is deemed as a conflict of interest as well as approving upcoming business and contracts between the Company and British Saudi Bank and Riyadh Bank, respectively, given that Mr. Sulaiman Al Muhaidib is a board member of the former and Mr. Mohammed Talal Al-Nahas of the latter bank. All upcoming business and contract shall be competitive and comply with market conditions, at the present time. Please see table below.
TABLE 1: DISCLOSURE OF CONFLICT OF INTERESTS
Bank Transaction SABB SABB is providing Total amounts o/s non-funded Project name Obligor Guarantor Currency Insurance date as of 30 June 2018 facilities to ACWA Rabigh IWSPP ACWA Power ACWA Power SAR 4,308,131 Power to support Projects International 28 June 2010 our obligation as – Revolving Rabigh IWSPP ACWA Power ACWA Power SARfacility 60,490,429 shareholder in Projects International various projects; these are mainly Shuaqaiq IWPP ACWA Power ACWA Power SAR 21 Sep 2011 92,862,000 Debt Service Projects International – Revolving Reserve Account facility stand by letter of Qurayyah IPP ACWA Power ACWA Power SAR 14,182,396 credit (DSRALC), Projects International 30 Sep 2014 Liability Account – Revolving Qurayyah IPP ACWA Power ACWA Power SAR 28,387,763 stand by letter of facility Projects International credit (LRALC). Riyad Bank Riyad Bank approved the below new facilities, amounting to 1,137.50 Mn SAR. These facilities have not been utilised nor has the Company entered into any facility documentation. 1. Equity Bride Loan amounting to 170 Mn USD (637.5 Mn SAR eq) for Rabigh 3 IWP projects. This was approved by the Board Executive Committee (BEC) as part of the project’s required approval. 2. General bonding and SBLC line amounting to 500 Mn SAR. BEC and Board approval will be sought once the documentation is finalised.
ACWA Power 33 Annual Report 2018 ACWA POWER BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL YEAR 2018 CONTINUED
BOARD OF DIRECTORS CONTINUED 6 DECEMBER 2018: 1. To vote to waive the legal requirement of a “21 days” notice period to inform the shareholder prior to convening the general assembly meeting, in accordance with article (91) of the Companies’ Law and article (36) of the Company’s articles of association; 2. To vote in according with article (71) of the Companies’ Law on the following related party transactions: a. Sale transaction of related parties containing sale from ACWA Power Company or a subsidiary of ACWA Power through indirect ownership of 30.4 percent in ACWA GUC ELEKTRIK ISLETME ve YONETIM SANAYI ve TICARET A.S., a Turkish project company owner of Kirikkale gas plant (Project Company) to some shareholders of ACWA Power (or to one of their affiliates) “Purchasing Partners.” The representatives of shareholders in the Board of Directors stated the existence of direct or indirect interest, as a result of sale of shares in the project company for five American dollars to the Purchasing Partners in addition to a joint venture agreement and any other agreements required to execute the transaction with the related parties and the right to compensation and warranty for the following shareholders: • Vision International Investment Company (formerly known as the Arabian Company for Power and Water Development) • Al Rajhi Holding Group Company • Al Mutlaq Group Company • Future Industrial Investments Company 3 • Al Toukhi Commercial Group Company 3 (“Transaction with the Related Parties”)
b. The following members of the Board of Directors of ACWA Power have direct or indirect conflict of interests as a result of the transaction, dealings with the related parties: • Mr. Mohammad Abunayyan • Mr. Sulaiman Al Muhaidib • Mr. Rasheed Al Rasheed • Mr. Omar Almidani • Dr. Ibrahim Al Rajhi • Mr. Federico Tauber • Mr. Tariq Almutlaq
ACWA POWER BOARD MEETING SCHEDULE FOR YEAR 2018 The table below lists members of the Board of Directors and their respective attendance for the year 2018:
API Board Meeting (2018) – Attendance 29 Jan 1 Mar 24 Apr 29 May 9 Jul 9 Sep 13 Nov 12 Dec 13 Dec Board of Directors name Designation/Position RUH RUH RUH RUH RUH RUH RUH RUH RUH Mohammad Abunayyan Chairman Sulaiman Al Muhaidib Board Director Ahmed S. Al Rajhi Board Director N/A N/A N/A N/A N/A Rasheed Al Rasheed Board Director Tariq Almutlaq Board Director Ibrahim Alromaih Board Director Mohsen Khalil Board Director David Crane Board Director N/A N/A N/A N/A N/A Federico Tauber Board Director Mohammed Al Nahas Board Director Ibrahim Al Rajhi Board Director N/A N/A N/A N/A Omar Almidani Board Director N/A N/A N/A N/A Raid Ismail Board Director N/A N/A N/A N/A
Legend: () Present; () Apology; (N/A) Not a Board member at that time or has resigned.
Note: The Board appointed Ms. Hager Al-Twegieri as the new Board Secretary on 9 September 2018.
3 Future Industrial Investments Company and Al Toukhi Commercial Group Company elected to not participate in the deconsolidation of Kirikkale and notified the Company the day of the General Assembly Meeting.
34 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
A. BOARD AUDIT COMMITTEE The members of the Board Audit Committee (BAC) have the required knowledge and experience in accounting, risk management and commercial laws that enable them to perform their duties.
During the year, the BAC reviewed key internal audit findings across operational, risks, financial and compliance matters. The Company’s Internal Audit function also presented its report and findings on internal control system. The BAC ensures that the financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by Saudi Arabia, by utilising the IFRS practices in preparation of 2018 financial statements.
Through self-assessment, the BAC evaluates its performance on an annual basis, reviews its compliance status under the Committee’s charter, and confirms that it fulfils its duties and responsibilities.
The Committee is chaired by an independent member.
The table below lists the Board Audit Committee members and their respective attendance for the year 2018:
BAC Meeting (2018) – Attendance 20 Mar 5 Jul 5 Sep 6 Dec Name Designation/Position DXB RUH RUH Oman – Site Mr. Harold Manasa Chairman Mr. Rasheed Al Rasheed Member Mr. Abdulrahman Al Khelaifi Member Dr. Ammr Kurdi Member N/A N/A Mr. Khalid Al Rabiah Member N/A N/A N/A
Legend: () Present; () Apology; (N/A) Not a Committee member at that time.
B. BOARD RISK & COMPLIANCE COMMITTEE The Board Risk & Compliance Committee (BRCC) supports the Board in the execution of its fiduciary responsibility in overseeing and reviewing (i) management’s identification and evaluation of the Company’s principal strategic, financial, operational, business and compliance risks, including the Company’s risk management framework and the policies, procedures, and practices employed to manage risks; and (ii) the Company’s Compliance programme.
The Committee supports the Board in monitoring the Company’s risk environment and provides direction to mitigate risks that may adversely affect the Company’s ability to achieve its objectives.
The Committee is chaired by an independent member.
The table below lists the Board Risk and Compliance Committee members and their respective attendance for the year 2018:
BRCC Meeting (2018) – Attendance 22 Mar 2 Aug 4 Oct 10 Dec Name Designation/Position DXB RUH DXB RUH Dr. Khalid Al Faddagh Chairman H.E. Mohammed Al Nahas Member Dr. Ammr Kurdi Member Mr. Mohamed El Roubi Member Mr. Harold Manasa Member
Legend: () Present; () Apology; (N/A) Not a Committee member at that time.
ACWA Power 35 Annual Report 2018 ACWA POWER BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL YEAR 2018 CONTINUED
C. BOARD EXECUTIVE COMMITTEE The Board Executive Committee (BEC) is a standing Committee of the Board with delegated responsibilities by the Company’s Board of Directors. The BEC consists of seven members who are appointed by the Board and all of whom are members of the Board of Directors, as of the end of December 2018. The Board Executive Committee held 16 meetings during the year 2018.
The primary purpose of the BEC is to review and approve new investment opportunities, in line with the delegated authority stipulated in the Committee’s charter. Accordingly, the management regularly engage with the Committee to share insights and analysis on potential new investments. In addition, the Committee has a responsibility to review and endorse studies or plans that have a significant impact on the operations of the Company including, but not limited to, five-year business plans, operating plans and capital expenditure programmes, for Board approval. Overall, the Board Executive Committee is responsible to provide direction, guidelines and approvals for investments in projects, strategic business plans and all associated decisions. In line with the powers delegated to the Committee, the BEC, also reviews the Company budget and oversees the development of projects.
The table below lists the Board Executive Committee members and their respective attendance for the year 2018:
BEC Meeting (2018) – Attendance Designation/ Name Position 14 Jan 12 Feb 14 Mar 28 Mar 15 Apr 24 Apr 24 May 28 Jun 4 Jul 8 Jul 29 Jul 9 Sep 22 Oct 6 Nov 26 Nov 29 Nov Mr. Mohammad Abunayyan Chairman Mr. Tariq Almutlaq Member Mr. Ibrahim Alromaih Member Dr. Mohsen Khalil Member Mr. David Crane Member N/A N/A N/A N/A N/A N/A Mr. Federico Tauber Member Mr. Omar Almidani Member N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Mr. Raid Ismail Member N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Legend: () Present; () Apology; (N/A) Not a Committee member at that time or has resigned.
36 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
D. CONFLICT OF INTEREST & RELATED PARTY TRANSACTION COMMITTEE The Conflict of Interest & Related Party Transaction Committee’s primary purpose is to review and approve related party transactions and conflicts of interest, as provided for under the Company’s bylaw and the Corporate Governance Regulations issued by the Capital Market Authority and as set out in the Board-approved Related Party Transactions and Conflicts of Interest Policy (‘the RPTCI Policy’).
The Committee is constituted by the Board and functions in line with its Board-approved Committee charter, which complies with the Company’s Code of Corporate Governance policy. The Committee supports the Board in reviewing and approving matters and transactions that involve related party transactions, with its direct shareholders, and potential conflicts of interests within the Company. This includes the review of materially significant related party transaction disclosures contained in the Annual Report or in the Company’s financial statements. Any approval or rejection given by the Conflict of Interest & Related Party Transaction Committee is considered as an approval or rejection by the Board of Directors 4.
The Conflict of Interest & Related Party Transaction Committee met five times in 2018. The Committee consists of three members, with the Chairman of the Committee being an independent Board member.
The table below lists the Conflict of Interest & Related Party Transaction Committee members and their respective attendance for the year 2018:
RPTC Meeting (2018) – Attendance 27 Feb 15 Apr 5 Aug 1 Oct 6 Nov Name Designation/Position RUH RUH RUH RUH RUH Dr. Mohsen Khalil Chairman Mr. Tariq Almutlaq Member Mr. Ibrahim Alromaih Member
Legend: () Present.
E. THE NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee (NRC) performs its duties in line with its Board-approved committee Charter, which complies with the Code of Corporate Governance Policy. The NRC assists the Board in reviewing and endorsing all Board directorship and Committee membership appointments, related policies and allowances of the Board member and Executive Management.
The Nomination and Remuneration Committee met four times in year 2018. The Committee consists of five members, with the Chairman of the Committee being an independent Board member.
The table below lists all the Nomination and Remuneration Committee members and their attendance at 2018 meetings:
NRC Meeting (2018) – Attendance 20 Mar 21 May 18 Sep 28 Nov Board of Directors name Designation/Position DXB RUH DXB DXB Mr. Tariq Almutlaq Chairman Dr. Fahad Al Zahrani Member Mr. John Leggate Member Mr. Guy Richelle Member Mr. Raid Ismail Member N/A N/A
Legend: () Present; () Apology; (N/A) not a Committee member at that time.
4 Please refer to Table 1 on page 33 for a list of disclosed conflicts of interest. In addition, the deconsolidation of Kirikkale as a related party transaction (refer to agenda item #2 from the GAM held on 06 December 2018).
ACWA Power 37 Annual Report 2018 ACWA POWER BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL YEAR 2018 CONTINUED
ALLOWANCES OF BOARD OF DIRECTORS Each member of the Board is entitled to an annual allowance and attendance fee for each meeting attended during a given year. The Board of Directors received a fee of 4,340,000 SAR as remuneration for their services and attendance, which excludes the Board’s expense of 302,749 SAR, for the period of 1st January 2018 to 31st December 2018.
Committees Annual allowance & allowance Attendance attendance fees Total Expenses Board of Director name Role (SAR) (SAR) (SAR) (SAR) (SAR) Mr. Mohammad Abunayyan Chairman 200,000 27,000 248,000 475,000 5,180 Mr. Sulaiman Al Muhaidib Member 200,000 24,000 0 224,000 0 Mr. Ahmed S. Al Rajhi Member 100,000 9,000 0 109,000 0 Mr. Rasheed Al Rasheed Member 200,000 27,000 150,000 377,000 4,702 Mr. Tariq Almutlaq Member 200,000 27,000 356,500 583,500 21,159 Mr. Ibrahim Alromaih Member 200,000 27,000 310,000 537,000 0 Dr. Mohsen Khalil Member 200,000 27,000 310,000 537,000 113,455 Mr. David Crane Member 100,000 12,000 115,000 227,000 85,844 Mr. Federico Tauber Member 200,000 24,000 232,500 456,500 29,542 Mr. Mohammed Al Nahas Member 200,000 24,000 62,000 286,000 37,512 Dr. Ibrahim S. Al Rajhi Member 100,000 15,000 0 115,000 0 Mr. Omar Almidani Member 100,000 15,000 93,000 208,000 0 Mr. Raid Ismail Member 100,000 12,000 93,000 205,000 5,355 TOTAL 2,100,000 270,000 1,970,000 4,340,000 302,749
BOARD DECLARATION FOR 2018: As per the CG regulations requirement for the Company to make a declaration regarding non-applicable or non-existing matters, the Board undertakes the following:
Number Declaration/Confirmation 1. The Board, through self-assessment, annually evaluates its performance, reviews the status on compliance of its obligations under the Charter and confirms that it fulfilled its duties and responsibilities. 2. There were no penalties or precautionary attachments imposed on the Company by any supervisory, regulatory or judicial body. 3. To the knowledge of the Audit Committee there were no critical or major observations found during the 2018 audits that can impair the effectiveness of the Company’s internal control systems. 4. There was no conflict between the Audit Committee recommendations and the Board’s resolutions. 5. The Company’s books and records comply with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as endorsed by the Saudi Organization for Certified Public Accountants (SOCPA). 6. There are no interest in any class of voting shares for anyone who has notified the Company with these interests and any change in these rights during the last fiscal year. 7. There is no interest, contractual documents and subscription rights of senior executives and their relatives in the shares or debt instruments of the Company or its affiliates, and any change in this interest or right during the last fiscal year. 8. There are no treasury shares held by the Company for any purpose and accordingly no disclosure is required of details of treasury shares used by the Company. 9. There are no debt instruments issued to ACWA Power and its subsidiaries except as already disclosed in audited financial statements of the Group. 10. There is no class and number of any convertible debt instruments, contractual securities, pre-emptive right or similar rights issued or granted by the Company during the fiscal year except as already disclosed in audited financial statements of the Group. 11. There are no conversion or subscription rights under any convertible debt instruments, contractual-based securities, warrants or similar rights issued or granted by the Company except as already disclosed in audited financial statements of the Group.
38 ACWA Power Annual Report 2018 STRATEGIC REPORT DIRECTORS’ REPORT
Number Declaration/Confirmation 12. There is no redemption, purchase or cancellation by the Company of any redeemable debt instruments and the value of such securities outstanding, whether listed securities purchased by the Company and those purchased by its affiliates. 13. The Board confirms that: A) The Company’s accounting records were properly prepared. B) ACWA Power’s internal control systems and procedures were properly developed and effectively executed. C) There are no doubts about the Company’s ability to continue its business activities. 14. There is no arrangement or agreement under which a shareholder of the issuer has waived any rights to dividends. 15. The Company confirms that it does not apply any programmes for granting stock options or part of the dividends to the employees, or any pension programmes, and there are no special funds for these programmes. 16. There were no recommendations by the Audit Committee that conflicted with the Board of Directors’ decisions. The Board did not reject recommendations regarding the appointment of the Company’s external auditor, the dismissal, the determination of its fees, the performance evaluation or the appointment of the internal auditor during the year.
ACKNOWLEDGEMENT The Board of Directors would like to express their gratitude to the Custodian of the Two Holy Mosques, King Salman Bin Abdulaziz Al Saud (may Allah protect him); His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Vice President of the Council of Ministers and Minister of Defense, Minister of Interior; His Royal Highness Deputy Crown Prince, the Second Prime Minister; and H.E. the Minister of Finance.
The Board of Directors also graciously thanks H.E. the Minister of Environment, Water & Agriculture and H.E. the Minister of Energy, Industry & Mineral Resources, for their continued support of the privatised electricity and water sectors.
The Directors’ appreciation extends to all government officials and relevant authorities for their continued cooperation with the Company. We also would like to acknowledge our management and employees for their dedication to ACWA Power, and for their commitment to ensuring ACWA Power remains an industry leader in the electricity and water sectors in Saudi Arabia and across all our target geographic regions.
Yours Sincerely,
Mohammad Abunayyan Chairman of ACWA Power
ACWA Power 39 Annual Report 2018 REFERENCES
LEADERSHIP STATEMENT (PAGES 12 AND 13)
1 https://gulfnews.com/business/energy/saudi-arabia-plans-151b-investment-in-renewable-energy-1.61742719 2 https://www.albawaba.com/business/saudi-arabia-desalination-plants-red-sea-coast-1077706
MARKET OVERVIEW (PAGES 14 AND 15)
1 https://www.wri.org/blog/2015/08/ranking-world-s-most-water-stressed-countries-2040 2 http://webcache.googleusercontent.com/search?q=cache:SQykfvDJ8-wJ:www.worldwaterforum8.org/en/file/2847/download%3Ftoke n%3DbFOTtfhS+&cd=1&hl=en&ct=clnk&gl=us 3 https://www.dnvgl.com/news/middle-east-electricity-demand-will-triple-by-2050-powered-by-rapid-growth-of-wind-and-solar- energy-136544 4 https://www.iea.org/weo2017/ 5 http://www.tradearabia.com/news/OGN_349668.html 6 https://www.albawaba.com/business/saudi-arabia-desalination-plants-red-sea-coast-1077706 7 https://www.thenational.ae/business/energy/middle-east-renewable-energy-targets-require-as-much-as-40bn-capital-investment-says- ge-1.699558 8 https://www.iea.org/countries/Morocco 9 https://www.export.gov/article?id=Morocco-Energy 10 https://www.irena.org/documentdownloads/Publications/IRENA_Africa_Power_Sector_synethesis_2015.pdf 11 http://awsassets.wwf.org.za/downloads/wwf009_waterfactsandfutures_report_web__lowres_.pdf 12 https://www.sadc.int/themes/infrastructure/en/electricity-generation/ 13 https://www.iea.org/southeastasia/ 14 https://www.iea.org/southeastasia/ 15 https://vietnamnews.vn/economy/463521/viet-nam-to-face-power-shortage-by-2030.html#GtIKSJhc56uF4hMc.97 16 https://www.enerji.gov.tr/en-US/Pages/Electricity 17 http://www.mfa.gov.tr/turkeys-energy-strategy.en.mfa 18 https://ec.europa.eu/energy/sites/ener/files/documents/directive_renewable_factsheet.pdf
STRATEGY IN ACTION: #1 IN THE HOME MARKET (PAGES 20 AND 21)
1 https://ksa-climate.com/making-a-difference/nrep/ 2 https://ksa-climate.com/making-a-difference/nrep/ 3 https://ksa-climate.com/making-a-difference/nrep/ 4 https://ksa-climate.com/making-a-difference/nrep/
STRATEGY IN ACTION: #2 DEVELOP STRONGHOLD MARKETS (PAGES 22 AND 23)
1 https://www.cia.gov/library/publications/the-world-factbook/geos/print_ae.html 2 https://www.khaleejtimes.com/business/energy/more-power-to-the-uae
STRATEGY IN ACTION: #3 MULTI-TECHNOLOGY & OWN OPERATOR (PAGES 24 AND 25)
1 http://worldpopulationreview.com/world-cities/mecca-population/ 2 http://worldpopulationreview.com/world-cities/jeddah-population/
40 ACWA Power Annual Report 2018 GLOSSARY
CCGT Combined Cycle Gas Turbine KSA Kingdom of Saudi Arabia
CEGCO Central Electricity kWh Kilowatt hour Generating Company LTI Lost Time Incident CEMP Construction Environmental Management Plan MED Multiple-Effect Distillation
COD Commercial Operation Date MIGD Million Imperial Gallons per Day
CSP Concentrated Solar Power MSF Multi-Stage Flash
EHS Environment, Health and Safety MW Megawatt
EMP Environmental Management Plan MWp Megawatt Peak
EPC Engineering, Procurement, NOMAC First National Operation & Construction Maintenance Company
ESIA Environmental and Social NTP Notice to Proceed Impact Assessment OEM Original Equipment Manufacturer GAMEP General Authority for Meteorology and Offtaker Contracted buyer of power Environment Protection and/or water
GCC Gulf Cooperation Council OHSAS Occupational Health and Safety Assessment Scheme GHG Greenhouse Gas OTS Owner’s Technical Specification GRI Global Reporting Initiative O&M Operations and Maintenance GW Gigawatt PCOD Project Commercial HIWPT Higher Institute for Water Operation Date and Power Technologies PPA Power Purchase Agreement HSSE Health, Safety, Security and Environmental PPP Public Private Partnership
IFC The International Finance ProjectCo Project Company Corporation, member PV Photovoltaic of the World Bank PWPA Power and/or Water Purchase IPP Independent Power Producer Agreement (P(w)PA) ISO International Organisation ROCE Return on Capital Employed for Standardisation SMEs Small and Medium Enterprises IWP Independent Water Producer SPV Special Purpose Vehicle IWPP Independent Water and Power Producer UAE United Arab Emirates IWSPP Independent Water Steam WB World Bank Power Producer WPA Water Purchase Agreement
YoY Year on Year Printed on Neenah WW Green Conservation Smooth, which is an FSC-recognised paper, produced from well-managed forests, and recycled wood or fibre.
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