Q2 2026 Sharqiyah Desalination Company SAOG Earnings Call

August 17, 2026

[Company Representative] (Sharqiyah Desalination): The Sharqiyah Desalination Company H1 discussion session on 17 August 2026. The meeting and its contents are being recorded and shall be shared internally and externally. Agenda content for today is company overview, operational highlights, business continuity, financial information, internal control, and corporate governance. The company overview started with few key dates. The initial project was awarded on 7 January 2006. The company incorporated on 14 January 2006. The WPA initial was signed on 17 January 2006. The financial close of the project was on 15 May 2007. The commercial date of initial project was 8 October 2009. The company listed on Muscat Securities Market or Muscat Stock Exchange on 30 June 2013. The increase of capital and distribution of bonus share was on 16 December 2014. The commercial operation date confirmed by Oman Power and Water Procurement Company was 7 February 2017. The commercial operation date of solar farm was 16 April 2023.

[Company Representative] (Sharqiyah Desalination): The Sharqiyah Desalination Company H1 discussion session on 17 August, 2026. The meeting and its contents are being recorded and shall be shared internally and externally. Agenda content for today is company overview, operational highlights, business continuity, financial information, internal control, and corporate governance. The company overview started with few key dates. The initial project was awarded on 7 January, 2006. The company incorporated on 14 January, 2006. The WPA initial was signed on 17 January 2006.

Speaker #1: The Sharqiyah Desalination Q1 half discussion session on 17 August 2026—the meeting and its contents are being recorded and can be shared internally and externally.

Speaker #1: The agenda for today includes: company overview, operational highlights, business continuity, financial information, internal control, and corporate governance. The company overview will begin with a few key dates.

Speaker #1: The initial project was awarded on January 7, 2006. The company was incorporated on January 14, 2006. The initial WPA was signed on January 17, 2006.

Speaker #1: The financial close of the project was on 15 May 2007. The commercial date of the initial project was 8 October 2009. The company was listed on the Muscat Securities Market, or Muscat Stock Exchange, on 30 June 2013.

[Company Representative] (Sharqiyah Desalination): The financial close of the project was on 15 May, 2007. The commercial date of initial project was 8 October, 2009. The company listed on Muscat Securities Market or Muscat Stock Exchange on 30 June, 2013. The increase of capital and distribution of bonus share was on 16 December, 2014. The commercial operation date confirmed by Oman Power and Water Procurement Company was 7 February, 2017. The commercial operation date of solar farm was 16 April 2023.

Speaker #1: The increase of capital and distribution of bonus shares was on 16 December 2014. The commercial operation date confirmed by OPWP was 7 February 2017.

Speaker #1: The commercial operation date of the solar farm was 16 April 2023. Details of pre-IPO and post-IPO: the post-IPO shareholders are Ulya Middle East with 35.75%, Middle East Investment with 29.25%, the public holding 20.53% of the share capital, and the pension fund holding 14.47%.

[Company Representative] (Sharqiyah Desalination): Detail of pre-IPO and post-IPO. The post-IPO shareholders are Utico Middle East, 35.75%. Middle East Investment is 29.25%. Public is holding 20.53% of the share capital, and Pension Fund is holding 14.47%. The local activities. The company is committed to full compliance with all aspects of the Omani regulations. This includes, but not limited to, the Royal Decree related to the employment Omanization and to allocate a proportion of the award contract Omani contents. There is a capital investment, maximum capital, local investment procurement, maximize the procurement of the local goods and services with quality and price compliance constraints. Human resources identify, recruit, train, and develop the local talent. Local development maximize the impact of local communities through a wide range of action. Our commitment to the local contents strengthen the Oman economy, create sustainability opportunities, and drive long-term value for our stakeholder and communities.

Speaker #1: The local activities: the company is fully committed to full compliance with all aspects of the Omani regulations. This includes, but is not limited to, the royal decree related to employment, Omanization, and allocating a proportion of the awarded contract to Omani content.

Speaker #1: There is the capital invested, maximum capital, local investment, procurement—maximize the procurement of local goods and services with quality and price compliance constraints.

Speaker #1: Human resources identify, recruit, train, and develop local talent. Local development maximizes the impact on local communities through a wide range of actions. Our commitment to local content strengthens Oman's economy, creates sustainable opportunities, and drives long-term value for our stakeholders and communities.

Speaker #1: The message of our CSR manager: the corporate social responsibility extends beyond the regulatory compliance. It reflects the company's genuine commitment to the to creating the lasting values of the communities in which it operates.

[Company Representative] (Sharqiyah Desalination): The message of our CSR manager. The corporate social responsibility extends beyond the regulatory compliance. It reflects the company's genuine commitment to creating the lasting values of the communities in which it operates. We remain dedicated to supporting the sustainable social, economic, environmental development through the impactful initiatives through alliance with the objective of Oman Vision 2040. In 2026, the company continued to adopt the best practices in sustainability, environmental stewardship, and corporate citizenship. Through this strategic CSR and community program, we enhance the impact of the social responsibility efforts, which remains a key pillar to our long-term growth and sustainable development. The main initiatives taken in the H1 of 2026 was school bag distribution, orphans support initiatives, lower income support, blood bank, and Ramadan Iftar program. Under that, the company have complete empowerment program.

Speaker #1: We remain dedicated to supporting the sustainable social, economic, and environmental development through impactful initiatives aligned with the objective of Vision 2040.

Speaker #1: In 2026, the company continued to adopt the best practices in sustainability, environmental stewardship, and corporate citizenship. Through this strategic CSR and community program, we enhanced the impact of our social responsibility efforts, which remain a key pillar of our long-term growth and sustainable development.

Speaker #1: The main initiatives taken in the first half of 2026 were school bag distribution, orphan support initiatives, lower income support, blood bank, and the Ramadan Iftar program.

Speaker #1: Under that, the company have come keen in powering program, with program is aimed to empower, develop, and train young people to qualify and integrate into the labor market.

[Company Representative] (Sharqiyah Desalination): This program is aimed to empower, develop, and train young people to qualify and integrate into the labor market. It enhance the self-confidence to serve as a support for the job seekers being priority for the government to focus its national policies. Complete programs in the H1 of 2026 were electricians and mechanicals, seven health and safety, two administrative and procurement, four operations and laboratory was five. The operational highlights and business continuity. In H1 of 2026, the plant produced 13.5 million cubic meter of drinking water and average of 56% plant load, 98% availability rate. Water quality was maintained 100% compliance rate through the strict maintenance protocol. The plant achieved average specific energy consumption at 3.19, indicating the effort optimize the energy usage.

Speaker #1: It enhances the self-confidence to serve as a support for the job seekers being prioritized, priority for the government to focus its national policies. The key programs in the first half of 2026 were electricians and mechanicals, 7; health and safety, 2; administrative and procurement, 4; operators and laboratory, 5.

Speaker #1: The operational highlights and business continuity: in first half of 2026, the plan produced 13.5 million cubic meter of drinking water and average of 56% plant load 98% availability rate water quality was maintained 100% compliance rate through the strict maintenance protocol.

Speaker #1: The plant achieved average specific energy consumption at 3.19, indicating the effort optimized the energy usage. Overall, the plant's exceptional performance was maintained, and the practices and collaboration contributed to the success as a reliable provider of high-quality drinking water in the Sharqiyah regions.

[Company Representative] (Sharqiyah Desalination): Overall, the plant's exceptional performance maintained and the practices and collaboration contributed to the success and reliable provider of high quality drinking water in the Sharqiyah region. The outlook for 2026 is SDC is dedicated to fulfilling its commitment to Oman Power and Water Procurement Company and the people of Sharqiyah by ensuring a reliable supply of drinking water to meet the region's increasing demand. In addition, the company is proactively reviewing its energy optimization strategy with a focus on enhancing the sustainability. Over the next decade, the forward-thinking approach reflects SDC's commitment to both environmental stewardship and social responsibility, ensuring that it continues to support the community while minimizing the ecological impact. Furthermore, SDC is aimed to be an employer of choice in the Sharqiyah region, demonstrating its commitment to the local community. It is important to acknowledge the support and the community of shareholders, partners, and employees in SDC efforts.

Speaker #1: The outlook for 2026 is SDC is dedicated to fulfilling its commitment to OPWP and the people of Sharqiyah by ensuring a reliable supply of drinking water to meet the region's increasing demand.

Speaker #1: In addition, the company is proactively reviewing its energy optimization strategy with a focus on enhancing the sustainability over the next decade. The forward drinking forward thinking approach reflects SDC is commitment to both environmental stewardship and the social responsibility ensuring that it continue to support the community community while minimizing the ecological impacts.

[Company Representative] (Sharqiyah Desalination): Over the next decade, the forward-thinking approach reflects SDC's commitment to both environmental stewardship and social responsibility, ensuring that it continues to support the community while minimizing the ecological impact. Furthermore, SDC is aimed to be an employer of choice in the Sharqiyah region, demonstrating its commitment to the local community. It is important to acknowledge the support and the community of shareholders, partners, and employees in SDC efforts.

Speaker #1: Furthermore, SDC is aimed to be an employer of choice in the Sharqiyah region, demonstrated by its commitment to the local community. It is important to acknowledge the support and the community of Sur shareholders, partners, and employees in SDC's efforts. Collaboration and cooperation are the keys to achieving long-term success, and it is engaging and encouraging to see SDC recognizing and appreciating the support it received.

[Company Representative] (Sharqiyah Desalination): Collaborations and cooperations are the key achieving long-term success, and it is encouraging to see SDC recognizing and appreciating the support it receives. Overall, SDC commitment to meeting water demand, prioritizing sustainability and being responsible employer is commendable. By staying dedicated to these goals, SDC is continuing to contribute positively to the Sharqiyah region and its community. The company paid cash dividend of 15 baisa amounting Rial Omani 1.4 million for the year ended 2025, 15% of the share capital to the shareholders listed on Muscat Clearing and Depository on 17 March 2026. Here is the financial highlights for H1, first half of the year. The revenue was at OMR 5.4 million compared to OMR 5.5 million for the same period last year, 1 January to 30 June 2026. Reduced by 2.3%, OMR 130K. This is mainly due to a direct result of decrease in the finance income.

Speaker #1: Overall, SDC's commitment to meeting water demand, prioritizing sustainability, and being a responsive, responsible employer is commendable. By staying dedicated to these goals, SDC will continue to contribute positively to the Sharqiyah region and its community.

Speaker #1: The company paid a cash dividend of 15%, amounting to OMR 1.4 million, for the year ended 2025, which is 15% of the share capital, to the shareholders listed on Muscat Capital Market (MCD) on 17th March 2026.

Speaker #1: Here are the financial highlights for F1 for the first half of the year. The revenue was at $5.4 million compared to $5.5 million for the same period last year, from 1st January to 30th June 2026.

Speaker #1: Decreased by 2.3%, 130k OMR. This is mainly due to a direct result of a decrease in the finance income, P&L impact only, linked with the reductions of the outstanding finance lease balance as per the finance lease models.

[Company Representative] (Sharqiyah Desalination): P&L impact only linked with the reductions of the outstanding finance lease balance as per the finance lease models, offset by high revenue from water output and electricity revenue. Cost of sales decreased by OMR 3K, mainly due to lower capacity, cost tariff index and lower depreciation. G&A expenses, general and administrative expenses are little higher by OMR 11K in link with the higher professional fee and the membership fee. The finance charges finance cost is lower by OMR 150K due to loan repayment. Here is the cash flow highlights. The company is ending balance on 30 June is OMR 958K. Successfully paid the dividend for year end 2025. Loan repayment in June was OMR 1.7 million. Finance cost was paid OMR 976K. Income tax paid OMR 284. Our DFCR is at 1.32, whereas the required threshold is 1.05.

Speaker #1: Offset by high revenue from water output and electricity revenue. Cost of sales decreased by 3,000 OMR, mainly due to a lower capacity cost tariff index and lower depreciation.

Speaker #1: G&A expenses, the general and administrative expenses, are a little higher by 11,000 OMR, mainly linked to higher professional fees and membership fees. The finance charges, or finance costs, are lower by 115,000 OMR due to loan repayment.

Speaker #1: Here are the cash flow highlights. The company’s ending balance as at 30th June is OMR 958K. We successfully paid the dividend for year end 2025. Loan repayment in June was OMR 1.7 million. Finance cost paid was OMR 976K. Income tax paid was OMR 284K. Our DSCR is at 1.32, whereas the required threshold is 1.05.

Speaker #1: The upcoming payments are $1.9 million for the loan repayment, and the interest payment will be $860,000. Internal control and corporate governance: the management of the company believes in a strong internal control system overseen by the internal auditor, in compliance with regulations prescribed by the Financial Services Authority and the International Professional Practices Framework.

[Company Representative] (Sharqiyah Desalination): The upcoming payments are OMR 1.9 million for the loan repayment and the interest payment will be OMR 860K. Internal control and the corporate governance. The management of the company believe in strong internal control system overseen by the internal auditor in compliance with regulations prescribed by the Financial Services Authority and the International Professional Practices Framework. The company has in place high standards of corporate governance, which is compliant with the Code of Corporate Governance implemented by the Financial Services Authority. This is all about our presentation. Anybody have any questions, please? Yes, Mona. You raised your hand. Please go ahead.

Speaker #1: The company has in place high standards of corporate governance, which are compliant with the Code of Corporate Governance by the Financial Services Authority. This is all about our presentation.

Speaker #1: Does anybody have any questions, please? Yes, Mona, you raised your hand. Please go ahead.

Speaker #2: Yes, good morning. Thank you for your presentation and for your call. I have some questions. May I continue?

[Analyst]: Yes, good morning. Thank you for your presentation and for your call. I have some questions. Can I continue?

Speaker #1: Yes please.

[Company Representative] (Sharqiyah Desalination): Yes, please.

Speaker #2: Okay. So, as you said, in the income statement I noticed the revenue has been, and the finance income has been, lower on a year-over-year basis, which you mentioned is due to the amortization of the finance lease receivable.

[Analyst]: Okay. As you said, in the income statement, I noticed the revenue and the finance income has been lower on a year-over-year basis, which you mentioned is due to the amortization of finance lease receivables. As a result, I can see the net income also has been compressing. How rapidly will the earnings compression erode the remaining retained earnings?

Speaker #2: So, as a result, I can see the net income has also been compressing. How rapidly will the earnings compression erode the remaining retained earnings?

Speaker #1: See the revenue, which is going down—this is as per the finance lease models. Because when the project was started at that time, this model was initiated based on IFRS 16, and our finance income is getting reduced over the period of years. This is as per the model because this is the reducing balance method, and this will continue to reduce over the years and years.

[Company Representative] (Sharqiyah Desalination): See, the revenue which is going down, this is as per the finance lease models, because when the project was started at that time, this model was initiated based on IFRS 16. Our finance income is getting reduced over the period of years. This is as per the model because this is the reducing balance method and this will continue to reduce over the year and years. That is why if you see the revenue breakup, our revenue from Oman Power and Water Procurement Company, which is cash revenue, which is higher by 50K. This amortization is just a P&L impact. It is not having actual impact on our financials or cash.

Speaker #1: That's why, if you see the revenue breakup, our revenue from OPWP—which is cash revenue—is higher by 50,000. This amortization is just a P&L impact; it's not having any actual impact on our financials.

Speaker #1: For cash.

Speaker #2: But when I look at the retained earnings, the retained earnings buffer gets reduced because the earnings are compressed over the years.

[Analyst]: But when I look at the retained earnings, the retained earnings buffer, it gets reduced because the earnings is compression over the years.

Speaker #1: Okay, so what's your concern on this?

[Company Representative] (Sharqiyah Desalination): So what is your concern on that?

Speaker #2: How rapidly is this going to happen over the years?

[Analyst]: How rapidly is this going to happen over the years?

Speaker #1: As you can see, it's already in a declining motion. So, if you look at the next period, what's the decline? How much can we sustain the retained earnings for tomorrow?

[Company Representative] (Sharqiyah Desalination): How rapidly? You can see it is already in a declining motion. So if you see how much we can sustain the retain in the next. No, retained earnings will continue till the end of the project.

Speaker #1: Retained earnings will continue till the end of the project, okay. But the point is, this is just our revenue reduction. As far as the cash is concerned, there is no cash impact and cash is not reducing over the years.

[Analyst]: Okay.

[Company Representative] (Sharqiyah Desalination): But the point is, this is just a revenue reduction, but as far as the cash is concerned, there is no cash impact, and cash is not reducing over the years.

Speaker #2: Okay. Then.

[Analyst]: Okay.

Speaker #1: If you see our cash in the next slide, we have successfully paid our loan and we have successfully paid the dividend, which is continuing from the last, I would like to say, five years almost. Now, we are paying a sustainable dividend, which is 1.4 million, and we are continuously paying our loan repayment.

[Company Representative] (Sharqiyah Desalination): If you see our cash in the next slide, we have successfully paid our loan, and we have successfully paid the dividend, which is continued from last, I would like to say five years almost now. We are paying sustainable dividend, which is OMR 1.4 million, and we are continuously paying our loan repayment. We are paying our finance charges. So that is not a challenge for the company so far, even this is reducing our finance income. If you see the IFRS 16 treatment, this will be very clear for you guys that this is based on the model and which is reducing the balance method. So that's why this finance income is getting reduced. And this is not a major amount of reduction in our revenue. This is just a 2.3%. And we can sustain the retained earnings for foreseeable future, so you don't need to worry about that.

Speaker #1: We are paying our finance charges, so that is not a challenge for the company so far, even though this is reducing our finance income.

Speaker #1: If you see the IFRS 16 treatment, this will be very clear for you guys that this is based on the model, which is the reducing balance method.

[Company Representative] (Sharqiyah Desalination): If you see the IFRS 16 treatment, this will be very clear for you guys that this is based on the model and which is reducing the balance method. So that's why this finance income is getting reduced. And this is not a major amount of reduction in our revenue. This is just a 2.3%. And we can sustain the retained earnings for foreseeable future, so you don't need to worry about that.

Speaker #1: So that's why this finance income is getting reduced, and this is not a major amount of reduction in our revenue. This is just 2.3%.

Speaker #1: We can sustain the retained earnings for possible future use as well, so you don't need to worry about that.

Speaker #2: Okay. My next question is on the dividends. The company has been paying a stable dividend of 15 baiza per share, which is sustained by the lease principal collection rather than the earnings.

[Analyst]: Okay. My next question is on the dividends. So company-

[Company Representative] (Sharqiyah Desalination): Yes

[Analyst]: has been paying a stable dividend of 15 baisa per share, which is sustained by the lease principle collection rather than the earnings. I just want to understand, is this dividend payment fixed to 15 baisa, or would it be lower going forward?

Speaker #2: So I just want to understand, is this fixed? Is this dividend payment fixed at 15, or would it be lower going forward?

Speaker #1: No, it depends purely on the company's profits, the management, the shareholders, and the board of directors' decision, and at the same time, it is based on the cash flow.

[Company Representative] (Sharqiyah Desalination): No, it's depend upon purely on the company profits and the management and the board of directors' decision, and at the same time, based on the cash flow. We cannot say that this 15 baisa or 15% will continue. Maybe it go up or maybe it can be reduced. It's totally depend upon the decision of the board of directors.

Speaker #1: So, we cannot say that this 15 or 15% will continue—maybe it will go up, or maybe it can be reduced. It totally depends upon the decision of the Board of Directors.

Speaker #2: Okay. Thank you.

[Analyst]: Okay. Thank you.

Speaker #1: You are welcome. Does anybody else have any questions? Yes.

[Company Representative] (Sharqiyah Desalination): Thank you. You are welcome. Anybody else? Any questions?

Speaker #3: Hello. Good morning everyone. Thank you for the presentation and the answers. So far. But my question you know following up with what Mana was asking wanted to check as per the model do you expect the company to report losses during the project period or will it just be very minimal profits as per the model?

[Analyst]: Hello. Good morning, everyone. Thank you for the presentation and the answers so far. My question, following up with what Mona was asking. I wanted to check, as per the model, do you expect the company to report losses during the project period or will it just be very minimal profit as per the model?

Speaker #1: See the model that was published, and I think you can get it very easily from the initial stage when this project was started. So far, the company is in profit, and the company is giving a reliable dividend, which is 15 baiza per share.

[Company Representative] (Sharqiyah Desalination): See, the model that was published, I think you can get it very easily from the initial when this project was started. So far, the company is into profit and the company is giving the reliable dividend, which is 15 baisa per share. We hope that company will continue with the profits and this will continue to pay the regular dividends. The second thing is, this is a desalination plant, and strategically, our location is in Sur. So we hope that company will continue with the profits. As you know, this is the world. We cannot predict anything right away. The company definitely will do our best to make the profit over the years and to make the dividend to its shareholders.

Speaker #1: And we hope that company will continue with the profits and this will this will continue to pay the regular dividends. And the second thing is this is a desalination plant and strategically our location is in Sur so we hope that company will continue with the profits but you know this is the this is the word we cannot predict anything right away that the company company definitely will do our best to give the to make the profit over the years and to make the dividend to its shareholders.

Speaker #3: So my question is about the model. So you know you said there will be a declining finance income. So now the company's profit is somewhere is likely to be this year you might end up with somewhere around 400,000.

[Analyst]: Sir, my question is about the model. You said there will be a declining of finance income. Now the company's profit is likely to be this year, you might end up with somewhere around 400,000. Do you expect during until 2036, does the model show that there will be a net losses for the company, assuming things are going as per the model?

Speaker #3: So, do you expect that through 2036, the model shows there will be net losses for the company, assuming things are going as per the model?

Speaker #1: See, the losses may be—at the end of the project, there could be a possibility of losses as well, because this is a project which is using the declining balance method. But this is only the, I would like to say, the P&L impact of this one.

[Company Representative] (Sharqiyah Desalination): See, the losses may be at the end of the project. There could be a possibility of the losses as well because this is a project which is having a declining balance method. This is only the, I would like to say, the P&L impact of this one. There is no cash impact. As far as the shareholders are concerned, we are committed to do our best to pay the maximum dividend to the shareholders.

Speaker #1: There is no cash impact and as far as the shareholders are concerned we are committed to pay our our best to do our best to pay the maximum dividend to the shareholders.

Speaker #3: Okay, I agree with your point. But you know, my question is primarily on the P&L side. So, should we look at an increasing profitability possibility sometime in the future, or should we not? Is that what you mean to say? Or will management of the company also hope that the company will increase profits? Definitely, the company will do our best, management will do our best, the Board of Directors will do our best so that the company will increase its profits, and we will be distributing a good dividend again.

[Analyst]: Okay. I agree your point. My question is primarily on the P&L side. Should we look at an increasing profitability possibility sometime in the future? We should not. That's what you mean to say.

[Company Representative] (Sharqiyah Desalination): We are a management of the company. We also hope that company will increase the profits. Definitely, management will do our best, board of directors will do our best that company will increase their profits, and we will be distributing a good dividend again.

Speaker #3: So how is it possible, sir? When you are saying there is a declining finance income, how is it possible that the company can make profits or increase profits in the future years? Is there any additional income or any additional adjustments that you are expected to do on the P&L?

[Analyst]: How is it possible, sir, when you are saying there is a declining of finance income, how is it possible that the company make profits or increase the profits in the future years? Is there any additional income or any additional adjustments that you are expected to do on the P&L?

Speaker #1: That's again depend upon futures because this is only this is only the reducing when we are saying the P&L impact only that means that doesn't mean that we don't have the cash or like we we have initiated our solar project in 2023 and we are getting profit out of that.

[Company Representative] (Sharqiyah Desalination): That again depend upon futures, because this is only the reducing. When we are saying the P&L impact only, that doesn't mean that we don't have the cash. We have initiated our solar project in 2023, and we are getting profit out of that. Similarly, that will be added back to our profit. As of now, our load is just 56%, and we are expecting our load of the water output will increase. Definitely, we will be having a good profit out of it. We can hope that the company will make a good profit in the coming years, and company will distribute the good dividend.

Speaker #1: So, similarly, that will be added back to our profit, and as of now, our load is just 56%. We are expecting that our load of the water output will increase.

Speaker #1: And definitely, we will be having a good profit out of it. So that's—we can hope that the company will make a good profit in the coming years, and the company will distribute a good dividend.

Speaker #3: No, my point is—see, you have right now, last year it was 500,000, half a million OMR. This year, it's coming down again, and over the last seven years, if you look at it, the company's profit has continuously come down from 1.9 million to—it has reached almost half a million right now.

[Analyst]: No, my point is, see, you have right now, last year was OMR 500,000, half a million riyals. This year it is coming down again. Over the last seven years, if you look at it, the company's profit has continuously coming down from OMR 1.9 million. It has reached almost half a million right now. I understand that this is as per the model. My question is based on the model, assuming 100% plant availability, 100% load factor, and normal operating expenses, other things, everything remains the same. Does the model envisage an increase in profits beyond half a million riyals? My question is primarily on the model. What does your model say?

[Company Representative] (Sharqiyah Desalination): See, as per the model, as we have shown that the model is on the reducing balance method, and definitely at the end of the project, somewhere company will be in losses. This is no doubt as per the model. There are losses also the part of the model.

[Analyst]: Okay.

[Company Representative] (Sharqiyah Desalination): I think mainly your concern is at the end of the project, what is going to happen, that whether company will sustain their profits or it will be in losses. Definitely at some stage or point, the company may go into the losses because of this reducing balance method, as the reduction of the revenue is not much like 10% or 20% or something like that. No doubt that this is a reducing balance method, and at the end of the project, it may go into the loss.

[Analyst]: So if I am assuming the normal scenario, half a million is the maximum profit per year that we should be expecting or we should be estimating for the company. Is that a correct statement?

[Company Representative] (Sharqiyah Desalination): See, the profit is half a million, or it may go up or it may go down. It depends upon all the circumstances within the country.

[Analyst]: What are the scenarios where it can go up beyond, it can cross half a million Rial Omani per year over the next 10 years? What scenarios?

[Company Representative] (Sharqiyah Desalination): See, as per every over the next 10 years, this may be possible that company will stable at half a million, but the company is having the reducing balance method. That is why it will not be 100% that company will produce half a million profit or company will give more than that. See, being the management of the company, we are doing our best. We initiated the new solar to get the maximum profit, and to get the maximum cash from the client and to make the maximum dividend to the shareholder. The concern, if you see our revenue from Oman Power and Water Procurement Company is showing higher compared to last year.

[Analyst]: Yes.

[Company Representative] (Sharqiyah Desalination): But this is a model in such a way, all the desalination models are in such a way that they are into reducing balance method. And there will be, at the end of the project, there may be losses. But till that time, the company will be having a sufficient cash and company will pay the regular dividend.

[Analyst]: Sir, I am not disputing the cash part. My question is the next part of my question, but before that, you just said that there is an increase in revenue from OPWP. That increase in revenue, how much of that is contributed by the increase in capacity charge? Or is it-

[Company Representative] (Sharqiyah Desalination): See, the point is-

[Analyst]: Primarily due to the energy.

[Company Representative] (Sharqiyah Desalination): That your concern is at the end of the project, company may go into the losses or no. That is your main concern, which I understood from your discussion.

[Analyst]: No, that is one of my question. That's not my concern. My concern is different. Just to look at the company's model. That's the reason why I asked the question. Because every year, I'm seeing the company's profitability is coming down. But at the same time, this is as per the model. I totally understand that. When you say-

[Company Representative] (Sharqiyah Desalination): This as per the model, if you understand that this is as per the model, and model is showing that this is a reducing balance method. In future, there will be a possibility of the losses as well, because this is a reducing balance method.

[Analyst]: Okay.

[Company Representative] (Sharqiyah Desalination): But you should focus on the other side, where the shareholders, what they are getting on. From last five years, they are getting the regular dividends, which is the main shareholder's model. Being an investor, if you are investing anything into Sharqiyah Desalination, and you see the trend of last five years, you can imagine that even there is a reducing balance method based on our model, which is desalination model and which is very common in this region. The profits will go down whether the company is paying dividend regularly or not. This is one scenario.

[Analyst]: Correct.

[Company Representative] (Sharqiyah Desalination): The second thing is the company is paying the dividend at the same with the constant dividend or company is reducing their dividend, or company is paying high dividend. Even our profits are less, but we have retained earning in the past. We are paying from our retained earning plus profit of the current year. We will continue the same practices in the coming years as well.

[Analyst]: Yeah. That is my major concern.

[Company Representative] (Nama Holding): Yes. Regarding the dividends.

[Company Representative] (Sharqiyah Desalination): Yes. Regarding the dividends.

[Analyst]: The dividends. I was looking at your retained earnings. Your retained earnings is only OMR 1 million.

[Company Representative] (Nama Holding): Yeah.

[Company Representative] (Sharqiyah Desalination): Yeah.

[Company Representative] (Nama Holding): Over the last five years, you paid almost OMR 1.5 million as the dividend per year.

[Analyst]: Over the last five years, you paid almost OMR 1.5 million as the dividend per year.

[Company Representative] (Nama Holding): Correct.

[Company Representative] (Sharqiyah Desalination): Correct.

[Company Representative] (Nama Holding): You have 1 million.

[Analyst]: You have 1 million.

[Company Representative] (Nama Holding): Yeah.

[Company Representative] (Sharqiyah Desalination): Yeah.

[Company Representative] (Nama Holding): Your second half profit is probably somewhere around 200,000. 1.2 million will be your retained earnings.

[Analyst]: Your second half profit is probably somewhere around 200,000. 1.2 million will be your retained earnings.

[Company Representative] (Nama Holding): Correct.

[Company Representative] (Sharqiyah Desalination): Correct.

[Analyst]: Yeah, but at the same time, you will be generating sufficient cash flows to pay the dividends.

[Company Representative] (Nama Holding): Right.

[Company Representative] (Sharqiyah Desalination): Right.

[Analyst]: You will be allowed only to pay to the maximum of retained earnings available for us as dividends. Will you be able to continue with this 15% dividend in 2026 and beyond? Especially-

[Company Representative] (Nama Holding): Yes

[Company Representative] (Sharqiyah Desalination): Yes

[Company Representative] (Nama Holding): given that your retained earnings replenishment is not keeping up pace with the amount of dividend that is going out of the company.

[Analyst]: given that your retained earnings replenishment is not keeping up pace with the amount of dividend that is going out of the company.

[Company Representative] (Nama Holding): Well, that's the point for 2027, how we will distribute the dividend for 2026. We are only halfway there. Let's wait until Q3 and Q4 results as well. Then we see how we are able to maintain the 15% trend. I would say right now, as of now, it's too early to ask that question. But let's see.

[Company Representative] (Sharqiyah Desalination): Well, that's the point for 2027, how we will distribute the dividend for 2026. We are only halfway there. Let's wait until Q3 and Q4 results as well. Then we see how we are able to maintain the 15% trend. I would say right now, as of now, it's too early to ask that question. But let's see.

[Analyst]: Sir, I don't think it's too early to ask this question because right now your retained earnings and your full year. That's the reason why I asked about the earnings.

[Analyst]: Sir, I don't think it's too early to ask this question because right now your retained earnings and your full year. That's the reason why I asked about the earnings. Do you have the earnings capacity to support the dividend? That was my question. You have the cash flows because there will be a lot of trapped cash within the company if you are not able to maintain your higher profitability rate. If your net profit is not growing at the same rate as your dividends are paid or cash flows are generated, you will accumulate the cash within the company, and you will not be allowed to pay a dividend because dividends are coming from retained earnings. Dividends are not coming from the cash flow.

[Analyst]: Do you have the earnings capacity to support the dividend? That was my question. You have the cash flows because there will be a lot of trapped cash within the company if you are not able to maintain your higher profitability rate.

[Analyst]: If your net profit is not growing at the same rate as your dividends are paid or cash flows are generated, you will accumulate the cash within the company, and you will not be allowed to pay a dividend because dividends are coming from retained earnings. Dividends are not coming from the cash flow.

[Company Representative] (Nama Holding): Correct. Look, we understand your concern. How much dividend is to be declared and how much levy is to be declared is ultimately the decision of the board of directors, which will be ultimately presented to the shareholders and the AGM for the approval. That's the reason why I know your concern is there. If it will be the same value or reduced value or higher value, how we manage it will be ultimately the board of directors' decision, which will be presented to the shareholders and the AGM for approval. That's the reason why we are already halfway there. We are looking at the same earning like you are looking at it. And like my colleague said, we are always working in the best interest of the shareholders, and we will try our best to continue that.

[Company Representative] (Sharqiyah Desalination): Correct. Look, we understand your concern. How much dividend is to be declared and how much levy is to be declared is ultimately the decision of the board of directors, which will be ultimately presented to the shareholders and the AGM for the approval. That's the reason why I know your concern is there. If it will be the same value or reduced value or higher value, how we manage it will be ultimately the board of directors' decision, which will be presented to the shareholders and the AGM for approval. That's the reason why we are already halfway there. We are looking at the same earning like you are looking at it. And like my colleague said, we are always working in the best interest of the shareholders, and we will try our best to continue that.

[Analyst]: I just wanted to pick your brain on what are the options. As a management, you will be giving it to the board of directors, and ultimately it is a decision of the board of directors. But the advice should come from the management, isn't it? Just wanted to know your thoughts on how are you planning to reward the shareholders in terms of cash distribution from the company. Will you be considering a capital reduction or are there any other options in front of you, which you will be able to distribute the excess cash flow to the shareholders? I am not talking about the excess retained earnings, but the excess cash flow.

[Company Representative] (Nama Holding): All these things will be. As of now, we do not have any concrete decision, and we say out something, we do not want to create a speculative situation right now for the market. We will be looking at the ways that we can support that, and hopefully, and surely that will be available to the market when we decide that. As of now, that would be our point of view for now.

[Company Representative] (Sharqiyah Desalination): All these things will be. As of now, we do not have any concrete decision, and we say out something, we do not want to create a speculative situation right now for the market. We will be looking at the ways that we can support that, and hopefully, and surely that will be available to the market when we decide that. As of now, that would be our point of view for now.

[Analyst]: Okay. Fair point. Thanks. That is my only.

[Company Representative] (Nama Holding): Thanks so much. Okay. Thank you. Yes, Omar. Yes, Mr. Tawan, please.

[Company Representative] (Sharqiyah Desalination): Thanks so much. Okay. Thank you. Yes, Omar. Yes, Mr. Tawan, please.

[Analyst]: Yes, sir. Faris. I would ask, what is the expectation regarding the renewal of the Water Purchase Agreement after 2029?

[Company Representative] (Nama Holding): That I would like to say it is too early to say anything because the project is till 2036. So almost we have 10 years. Till now, we will see by the end of the project that whether we will continue, whether we will discontinue, and this is purely will be decision later on. This is too early to say anything about the renewal of the contract.

[Company Representative] (Sharqiyah Desalination): That I would like to say it is too early to say anything because the project is till 2036. So almost we have 10 years. Till now, we will see by the end of the project that whether we will continue, whether we will discontinue, and this is purely will be decision later on. This is too early to say anything about the renewal of the contract.

[Analyst]: Okay, it is clear. Regarding the water plant, can the plant technically operate beyond the current Water Purchase Agreement, and for how many years after the expiry date?

[Company Representative] (Nama Holding): See, dear, as we mentioned that the project is still continued till the end of 2036 or March 2036. So we have till now 10 years from now on. It is too early to say whether we will continue, we will not continue. Again, the same thing, my dear friend.

[Company Representative] (Sharqiyah Desalination): See, dear, as we mentioned that the project is still continued till the end of 2036 or March 2036. So we have till now 10 years from now on. It is too early to say whether we will continue, we will not continue. Again, the same thing, my dear friend.

[Analyst]: Okay, so you say it depends on the project now.

[Company Representative] (Nama Holding): Purely decision will be taken by the end of the project, not 10 years before.

[Company Representative] (Sharqiyah Desalination): Purely decision will be taken by the end of the project, not 10 years before.

[Analyst]: Okay. It's clear now. Thank you very much.

[Company Representative] (Nama Holding): Thank you. Anybody, any other question? Thank you. Thank you for joining us. Thanks, everybody.

[Company Representative] (Sharqiyah Desalination): Thank you. Anybody, any other question? Thank you. Thank you for joining us.

[Company Representative] (Sharqiyah Desalination): Thanks, everybody.

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Q2 2026 Sharqiyah Desalination Company SAOG Earnings Call

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