KPMG Professional Services Company

Roshn Front, Airport Road

P.O. Box 92876

Riyadh 11663

Kingdom of Saudi Arabia

Commercial Registration No 1010425494

Headquarters in Riyadh

شركة كي بي إم جي للاستشارات المهنية مساهمة مهنية

واجهة روشن، طريق المطار

صندوق بريد ٩٢٨٧٦

الرياض ١١٦٦٣

المملكة العربية السعودية

سجل تجاري رقم ١٠١٠٤٢٥٤٩٤

المركز الرئيسي في الرياض

Independent Auditor’s Report

To the Shareholders of ACWA Power Company (A Saudi Joint Stock Company)

Opinion

We have audited the consolidated financial statements of ACWA Power Company (“A Saudi Joint Stock Company”) and its subsidiaries (“the Group”), which comprise the consolidated statement of financial position as at 31 December 2024, the consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, comprising material accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2024, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS as issued by the International Accounting Standards Board that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by the Saudi Organization for Chartered and Professional Accountants (SOCPA).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards), that is endorsed in the Kingdom of Saudi Arabia that are relevant to our audit of the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with the Code’s requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.



KPMG Professional Services Company, a professional closed joint stock company registered in the Kingdom of Saudi Arabia with a paid‑up capital of SAR100,000,000 and a non‑partner member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

شركة كي بي إم جي للاستشارات المهنية مساهمة مهنية، شركة مساهمة مهنية مقفلة مسجلة في المملكة العربية السعودية، رأس مالها (١٠٠,٠٠٠,٠٠٠) ريال سعودي مدفوع بالكامل، وهي عضو غير شريك في الشبكة العالمية لشركات كي بي إم جي المستقلة والتابعة لـ كي بي إم جي العالمية المحدودة، شركة انجليزية خاصة محدودة بالضمان



Control assessment and reassessment on acquisition / divestment of investee companies
See Note 3 to the consolidated financial statements for the accounting policy relating to basis of consolidation, note 4 for estimates, assumptions and judgments relating to control assessment on acquisition and divestment of investee companies and notes 5,7,15 and 34 for disclosures related to acquisition and divestment carried out during the year.
THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

During the year, the Group executed multiple transactions involving acquisition, divestment and changes in shareholding arrangements in the investee companies (investee). These transactions resulted in the group entering into new shareholders arrangements and revisions to the terms of the existing shareholder agreements.

These transactions trigger an assessment and reassessment of whether the Group controls/ jointly controls the investee.

The determination of control/ joint control is primarily determined by the purpose and design of the investee, rights and obligations of various parties, including the special rights with shareholders and reserved matters requiring unanimous approvals.

Assessment of above factors involves significant judgments. Due to the high degree of judgments required and the pervasive accounting impact of these assessments, the control assessment and reassessment on acquisition/ divestment of investee has been identified as a key audit matter.

We performed the following procedures:

  • Obtained detailed control assessment (assessment of control or joint control, as applicable) prepared by management for all significant acquisition and divestment transactions
  • Obtained and analysed the corresponding underlying documents including the sale and purchase agreements, shareholder agreements, and governing documents of the investee
  • Understood the business of the investee and other factors relevant for the control assessment such as terms of the sale and purchase agreements, condition precedents for acquisitions and divestments, purpose and design of investee, relevant activities that significantly affect the investee’s returns (relevant activities), and the decision‑making process of the investee
  • Inspected the governance structure of the investee, including shareholding structure, composition of the board of directors, representations in board of directors and voting process. We also evaluated the special rights with shareholders and reserve matters requiring unanimous approval and evaluated their impact on the assessment of decisions related to relevant activities
  • Evaluated management’s conclusions against the criteria set out in IFRS 10 and IFRS 11, in determining whether and if the Group has control or joint control over the investee
  • Assessed the appropriateness of management’s judgements pertaining to control assessment.
Impairment of Property, Plant and Equipment and Equity Accounted Investees
Refer to note 3 in the consolidated financial statements for material accounting policies, note 4 for estimates, assumptions and judgments relating to impairment of non‑financial assets, note 5 for property, plant and equipment and note 7 for investment in equity accounted investees.
THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

As at 31 December 2024, the carrying value of the property, plant and equipment and investment in Equity Accounted Investees (EAI) included in the consolidated statement of financial position amounted to SAR 12,039 million and SAR 18,920 million respectively.

Property, plant and equipment mainly comprise of plants operated by the Group under operating lease arrangements. Further, results of EAI primarily depend on the performance of the plants held by EAI. Any changes in technology, market expected returns or regulatory changes may impact the recoverable amount of these plants and consequently impact the Group’s valuation of these plants either capitalised as property, plant and equipment or forming part of the net assets of EAIs.

Where indicators of impairment are identified, management performs an impairment assessment on the recoverable amount of property, plant and equipment and investment in EAIs at both Group and investee level, in case of EAIs.

The recoverable amounts were mostly determined based on value‑in‑use calculations using discounted cash flows models. The models were based on most recent financial plan and included projection periods over the term of the relevant agreements with the off taker or the remaining economic useful life of an asset.

We identified impairment of property, plant and equipment and investment in EAIs as a key audit matter as the determination of recoverable amount involves significant judgements and assumptions by management, which include:

  • Estimating cash flows that the Cash Generating Unit (CGU) is expected to generate including assessment of underlying assumptions with respect to useful life, production volumes and capacity variations etc.; and
  • Determination of the pre‑tax discount rates to use for discounting these cash flows.

We performed the following procedures:

  • Obtained an understanding of the management’s process for identifying impairment indicators and performing impairment assessment on non‑financial assets where impairment indicators exists
  • Performed risk assessment procedures, including and not limited to inquiries with management and internal audit, inspected minutes of meetings, and the financial performance of the assets to identify and assess the plant and investee company level for impairment indicators
  • For the assets where the impairment indicators were identified, we performed the following procedures:
    • Obtained and evaluated the impairment assessment performed by management for each CGU;
    • Assessed and tested the reasonableness of assumptions used by management in the impairment assessment;
    • Evaluated consistency of assumptions used by management for different CGU where indicators for impairment were identified;
    • Discussed with management and inspected the underlying evidence based on which impairment assessments were prepared;
    • Engaged KPMG valuation specialists to consider the appropriateness of the discount rate used in the impairment assessment calculations; and
    • Tested the accuracy of the impairment assessment model calculation.
  • Assessed the adequacy of Group`s disclosures in the consolidated financial statements.
Valuation of derivative financial instruments and hedge effectiveness
See Note 3 to the consolidated financial statements for the accounting policy relating to derivative financial instruments and note 22 for the related disclosure.
THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT

As at 31 December 2024, the fair value of derivative assets and liabilities held by the Group amounted to SAR 1,355 million and SAR 182 million respectively.

The Group entered into various derivative transactions, including interest rate swap, forward foreign exchange contracts and options. The swaps, forward and option derivative contracts are over the counter derivatives that are not traded in active markets and hence, the valuation of these contracts is subjective as it takes into account a number of assumptions which involve management judgement.

An inappropriate valuation of derivatives could have a material impact on the consolidated financial statements and the related hedge accounting.

Application of hedge accounting requires robust documentation and compliance with hedge effectiveness requirements and parameters.

We considered this as a key audit matter as there is complexity and subjectivity involved in determining the valuation of the derivatives as well as testing of hedge effectiveness.

We performed the following procedures:

  • Obtained an understanding about the Group’s valuation process with respect to its derivatives and accounting for hedge relationships.
  • For a selected sample of derivatives, we performed the following procedures:
    • Obtained counter party bank confirmation for valuation of derivatives and compared with the valuation of derivatives reflected in the financial statements;
    • Involved KPMG specialists to perform independent valuation of the derivatives and compared the result with the valuation used by management and evaluated any variances noted; and
    • Tested the accuracy of the particulars of derivatives selected for independent valuation by KPMG specialist by tracing the details to the relevant derivative agreements.
  • Inspected hedge documentation for a sample of hedge arrangements and performed the following procedures:
    • Involved KPMG specialists to evaluate the hedge effectiveness assessment performed by the Group; and
    • Considered the appropriateness of hedge accounting and assessed whether the accounting is in line with the requirements of the relevant accounting and reporting standards.
  • Considered the adequacy of the disclosures in the financial statements relating to the valuation basis and inputs used in the fair value measurement.

Other Information

Management is responsible for the other information. The other information comprises the information included in the annual report but does not include the consolidated financial statements and our auditor’s report thereon. The annual report is expected to be made available to us after the date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the annual report, when made available to us, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by SOCPA, the applicable requirements of the Regulations for Companies and Company’s By‑laws and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, the Board of directors, are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. ‘Reasonable assurance’ is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, then we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming express an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit of ACWA Power Company (“A Saudi Joint Stock Company”) and its subsidiaries (“the Group”).

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.


KPMG Professional Services

Dr. Abdullah Hamad Al Fozan

License No 348

Riyadh on 25 February 2025

Corresponding to: Sha’ban 26, 1446