ACWA Power’s Q1 Profit Surge: Renewable Growth and Strategic Investments Drive 40% Jump

ACWA Power, a leading global developer of energy and water infrastructure, reported a robust 40.12% year-on-year (YoY) increase in net profit to SAR 427.2 million for the first quarter of 2025. This marks a significant acceleration in performance compared to prior quarters and underscores the company’s strategic focus on renewable energy, operational efficiency, and global expansion.

Key Drivers of Growth

The profit surge reflects ACWA Power’s successful execution of its long-term strategy, centered on renewable energy projects and cost optimization. Here are the key factors fueling this growth:

1. Renewable Energy Projects Deliver Momentum

ACWA Power’s renewable portfolio has been a critical driver of growth. In the first half of 2024 alone, the company added 10.5 GW of renewable power capacity, including:
- 5.5 GW of photovoltaic solar projects in Saudi Arabia (part of the fourth Public Investment Fund-ACWA Power round).
- 5 GW of wind energy in Uzbekistan’s Aral Wind project, which includes battery energy storage systems (BESS).

These projects, supported by the Saudi Vision 2030 initiative and global demand for clean energy, are now contributing to revenue streams. The company’s plan to raise SAR 7.13 billion by 2030 to triple its assets under management further solidifies its position as a leader in the renewable sector.

2. Operational Efficiency and Cost Control

ACWA Power has prioritized cost optimization, which contributed to a 35.46% YoY rise in net profit in H1 2024. This includes:
- Higher gross profit margins due to economies of scale from new projects.
- Equity-accounted investees’ profits, which grew alongside strategic partnerships in markets like Central Asia and the GCC.

3. Strategic Capital Allocation

The company’s aggressive capital expenditure (CAPEX) strategy—projected to hit SAR 13.2 billion in 2025, a 63% YoY increase—reflects confidence in future revenue streams. While this raises debt levels, the focus on high-margin renewable projects positions ACWA Power to capitalize on the global energy transition.

Financial Performance in Context

• Net Profit Trends:
• Q1 2025’s SAR 427.2 million compares to SAR 291.2 million in Q1 2024 (a 47% jump).

• Q2 2024 already showed strong momentum with a 52.17% YoY rise in net profit to SAR 630.6 million, highlighting consistent quarterly improvements.

• Revenue Growth:

• While revenue increased only 2.58% YoY in H1 2024, the profit surge suggests a shift toward higher-margin activities.
• Full-year 2025 revenue is projected to reach SAR 9.4 billion, up 38% YoY, driven by new project commissions.

Challenges and Risks

Despite the positive trends, ACWA Power faces hurdles:
- Debt and Liquidity:
- Net debt rose to SAR 36.8 billion in Q1 2025, up 27.6% YoY, due to high CAPEX.
- The Debt/EBITDA ratio climbed to 6.95x, exceeding historical averages, which could deter risk-averse investors.

• Revenue Volatility:

• While profit growth is strong, revenue remains constrained by project timelines. For example, the AlRass1 Solar Plant, announced in 2023, may not fully contribute to 2025 earnings until later stages of construction.

• External Factors:

• Fluctuating oil prices and geopolitical tensions (e.g., Israel-Gaza conflict) could impact regional stability, though ACWA’s renewables focus mitigates reliance on fossil fuels.

Investment Outlook

ACWA Power’s Q1 results signal a compelling investment case, particularly for those focused on the energy transition. Key takeaways include:
- Valuation:
- The company’s EBITDA margin is projected to reach 56.3% in 2025, up from 55.4% in 2024, reflecting operational strength.
- Free cash flow (FCF) is expected to grow 12% YoY to SAR 3.2 billion, despite high CAPEX, indicating robust cash generation.

• Dividend Potential:

• Dividends per share are forecast to rise 130% YoY to SAR 0.71 in 2025, rewarding shareholders while retaining capital for growth.

• Long-Term Growth:

• With 50% ownership by Saudi’s Public Investment Fund, ACWA Power benefits from institutional backing for large-scale projects, such as the Jubail Najim cogeneration plant.
• Its global footprint—spanning 13 countries and 50 projects—buffers against regional risks.

Conclusion

ACWA Power’s Q1 2025 results affirm its position as a leader in renewable energy, with profit growth outpacing revenue due to strategic investments and operational discipline. While rising debt and CAPEX pose near-term risks, the company’s alignment with Saudi Vision 2030 and its diversified portfolio position it to capitalize on the global shift to clean energy.

Investors should monitor execution of high-priority projects like the Aral Wind and AlRass1 Solar Plant, as well as debt management. With SAR 30.12 book value per share and a projected 34% net income growth in 2025, ACWA Power remains a compelling play on the energy transition, offering both growth and dividend appeal.