Aug 13, 2023 / NTS GMT
Stephen R. Thomas - Renaissance Services SAOG - CEO
Well, our guests here in Duqm were able to arrive and settle in. You have with you myself, Stephen Thomas, the CEO; and my colleague, Raashid Ali, the CFO.
Many of you are familiar with this quarterly format where we're always very pleased to welcome you. Usually most of you are online for our quarterly question-and-answer session.
Just to give a little bit of background and color before we start. We've told you and you've seen it again stated in our Chairman's statement for this quarter that this year, we expected to be a hiatus year, a bridge between particularly affected by events here in Duqm, where we're holding this meeting today. The bridge being, as we come to the end of the construction phase for Duqm Refinery, OQ8 and as the large occupancy numbers fall before the next set of new projects arrive. And I'm sure there'll be some questions around Duqm.
Last year, where we averaged 12,600 occupancy. At the moment, as we sit here, we're at just above 5,000, which we expect to be the bottom out. You know the business model. Those of you who are familiar with us that as the projects come, you get the high occupancy levels where we go up to 17,500, 18,000 occupancy. And then -- you then get the residual permanent occupants. And at the moment, that sort of bottoms out at around 5,000.
We're very pleased that we do have visibility of new projects coming down the line for '24, '25 and '26. We are in the process. We've been welcoming the first batch of those will be in the green steel space. The 3 projects coming in with Jindal Steel, Mitsui and Vale, we're in the signing MOU stage with them. They've had their visits here, et cetera, and seen the facilities. The next phase will be the Petchem project. That's a big one that will require 20,000 to build.
Then following that, in the subsequent years from '26 onwards, we see the green hydrogen project starting to emerge. So that visibility in '26 takes us above 24,000 in demand, which is higher than our capacity. It goes up to 40,000 from '27 onwards and so we manage the gap in between with the escalation of the green steel projects starting from the end of this year and through 2024. But that is about Duqm. So Duqm, of course, represents a tremendous growth opportunity from this low point at the moment.
What you can see from our numbers because Duqm has not contributed, there's been a small loss in the first half, which we expect to even out over the rest of the year to be above breakeven, but what you're seeing is significant performance in the rest of the business. In the PDO villages in the oil and gas fields, the permanent accommodation for contractors we've had lower occupancy than we anticipated in the first half of the year around 87%. We were 90% last year. We're anticipating 95%, that is coming in the second half of the year, just some delayed mobilizations, but they're performing extremely well even at the 87% occupancy mark.
And in the rest of our services business, you're seeing the effect of our successful round of bidding in the past year, where we've recalibrated a lot of the rates being able to bring in a lot of the cost escalations that came into the market, pre-COVID, during COVID and so on. And so you're seeing very positive performance from our pure services business. Of course, we've been diversifying our services as well. As you know, whilst we still own that single word of the business that we're in is in services. If you allow us those 2 words, we say services solutions and that has taken us into waste management services. It's into utilities as well. And this is where we start to look at our future as well.
In terms of what we're doing this year, there's a lot we've talked to you about Renaissance 2.0. We're putting in place the right resources so that we can drive our innovation and transformation programs for the future, ready to -- for succession and passing the baton on to a new generation of leadership, but also it's in what we're pursuing as a business for the future. And in this first half of the year, we've actually submitted bids for over OMR 400 million so north of $1 billion.
Now we've won just over OMR 10 million of those, and the lion's share of that remains to be rewarded -- awarded, sorry. And in that space, that includes a significant bid in the smart meter utilities side of our services. And we believe that we will be a serious contender in that opportunity. It is now going through the technical phase. It is down to 3 players, 2 players will be awarded and so we believe that when it comes to the commercial stage of that, we should be a serious contender.
That is a game changer award for us if it comes to pass. Interestingly enough, we have another $1 billion worth of tenders to pursue it in the second half of the year. One of those is in the PPP space, which we're involved in. Another is in the smart metering in the water capacity. One we are defending, which is one of our oil and gas projects, but we've got significant opportunity already bid for and about to be bid for in the course of this year.
So that starts to look at some of the future opportunity in the pure services space as well. That, by way of introduction, I know that I said less on Duqm because whilst we've got our MOUs lined up for the next batch of projects, I'm sure there'll be more questions on that. And whilst we welcome everyone, thank you for those joining online, we're also very happy for those who were able to make it here and welcome you to Renaissance Village Duqm. With that, I'll ask if there are any questions.
Questions and Answers:
Unidentified Analyst -This is [Meethika] from Yu Capital. So my question is, I just want to seek a clarification. You mentioned that there are 3 green steel projects coming up. and you're in the MOU stage. So does that mean it is already contracted for or, I mean, you'll be participating in the bids for it. And then you will understand the capacity that will be required. So how does it pan out from there? That's my question.
Stephen R. Thomas - Renaissance Services SAOG - CEO
Thank you very much. No. So there's no bid in the sense that SEZAD and OPAZ so the authorities for the zone have specified what the standard of accommodation should be that it actually should match United Nations international labor organization standard, the SEZAD standard, the standard of the government of Oman, all of which are as good as or better than those standards for the way particularly, they looked at how migrant workforces are looked after because the fact is that large numbers will be needed to build the infrastructure here.
So there is a requirement in order to attract the foreign direct investment and in order to attract international financing that the workforce is kept to that minimum standard of accommodation. Now we have, in our Usufruct agreement, we have -- so which is a 50-year agreement, we have 10 years exclusivity in terms of the permanent build. This does not mean that people are not able to provide accommodation if we're not able to provide it, but it must be provided at the standard.
If it is provided at the standard as a short-term build for the project and removed at the end of it, which is again the requirement, it cannot compete with our run rates, which is why this project is an enabler, not just for Duqm, but for Oman. It's -- we've seen so much bad press about workforce accommodation in the region. The government here is determined that, that is not the reputation that Oman wishes to see. And so in that sense, it's not a bid situation. It is that they are pointed out, this is where we would like your workforce to stay.
Now in the first round of projects, we did have cases of people staying outside the fence of Duqm and not staying in compliant accommodation. And the authorities put a lot of effort into looking at that and making sure that it cannot happen again, not giving permission for new camps, making sure that people understand this is SEZAD standard, and this is where we wanted to stay. So the issue with MOUs is to get with the players who are coming. So I can give example. First 3 are in the green steel space, Jindal, Mitsui and Vale. So these are amounts to build 3,000, 3,000 and 9,000 just on the different scale and phases of the project.
Now what happens is the -- you have the lead, the company that is actually developing the project. They will then appoint their EPC contractors. We enter into MOUs with them as we did with the EPC contractors for the refinery project. And then what follows is the volume as the subcontractors who then get awarded. So you get the specifics will come later. But entering into understanding that this is where they wish people to stay. They need to know that we're not going to change our price mid-project. They want to know that we are committing to them that this standard will be available.
The price won't go other than normal. Any force majeure type issue that would affect the project anyway. And so that's -- we give them the guarantee that we'll have the space for them and will hold the price. They give us the guarantee that their people will stay with us. That's the way it works rather than a tender.
Unidentified Analyst -
Secondly, on the CapEx. So you mentioned that there is a requirement for around 24,000 beds by 2026. So is that the phasing that we should assume for the purpose of forecast that is the kind of CapEx that will be involved?
Stephen R. Thomas - Renaissance Services SAOG - CEO
So we have, at the moment, we describe our capacity here as 18,800. Now the reason it's described that way is because of the current demographic. Now the rooms, the shared accommodation can accommodate 2, 3, 4, 5, 6, et cetera. And so based on demand offtake, if we filled every bed into every room, the capacity here is actually just 24,000. So just short of that peak.
Now that's unlikely to happen because you need the demographic of demand to coincidentally match the full potential of beds. But what will happen in that instance is there will be a need for additional accommodation, and we will consider that. And that may be subject to competition if somebody wants to set up a camp. But the issue of setting up to the standard and being able to supply it, we've got the advantage of scale. Those of you who are here in person on this meeting, will be able to see the facilities and what we've got in terms of storage and everything to support larger numbers that are here at the moment.
So we again expect to be a serious contender for that. When the demand crosses up to 40,000 from the following year, then that's a different case in point again. There will either be demand for temporary solutions for those projects. What's interesting about this project. I'll just use the Vale example and the Vale team are down visiting our colleagues here last week, is they need 9,000 to build the project, but they need 3,500 to 4,000 to operate it afterwards. So this puts them in the category like the dry dock needed 5,000 or 6,000 to build, but need 3,000 to operate.
Now they've got the floating dock. We have 3,000 dry dock customers, valued customers staying with us at the moment. they're about to increase those numbers with the floating dock that's come in. But the residual for those kind of projects is high. For the petchem projects like petchem, the demand will be 20,000 during the construction phase, but it will fall back to about 1,000, 1,500 in terms of -- post the project, although it may create other jobs outside the fence as well.
So the business plan or the long-term plan is that each time a project finishes, your permanent demand goes up. So we should be, by the time we're at that 40,000 demand, there will be a different problem because our residual permanent people will already be up around 60% at that point. So we will have decisions to make as to whether we wish to compete for the delta that can't fit in here. But certainly, as the player already in place, already built at a competitive rate we should be able to attract at least fill ourselves and look at expanding beyond that. Not a permanent expansion, temporary expansion or a modular expansion.
Unidentified Analyst -
And just one last question. On the RSVD occupancy. So '23, we understand is this year, and it is a bit on the lower side, but what should -- what is your expectation for '24 and '25?
Stephen R. Thomas - Renaissance Services SAOG - CEO
So '24 and '25 in terms of current known demand, I'm only going in terms of those physically signed up. And at the moment, we've only got the lead players of those projects. So if I just take -- sorry, excuse me, if I just take what's signed up there, then you're looking at 7,500 going up 8,000, 9,000 after that. Where the numbers will come in behind that will be in the lower tier subcontractors, which we get once they issue their tenders, make the awards and we get the histograms for that.
So that will fill up between now and we see ourselves going up to 7,000 towards the end of this year. It tails off a little to 6,000 towards the end of the year. But that's known demand, signed up demand as distinct from others that we will flow through from that. So we can't give you an exact number right now, but we're expecting it to be north of that.
Sameer Kattiparambil - EFG Hermes Holding S.A.E., Research Division - Associate Director of Industrials and Materials
My name is Sameer from EFG Hermes. A couple of questions from my side. Because previously, we have seen various calendars to [come], like a noncompliant accommodations, then delays in project awards or building the projects. What could be the next challenge you are going to face? Especially like interest rates are on the higher side. So we used to get 5% interest. Now that has been increased to 7% or 8%. Some of these big projects, especially the global economy is getting skewed. So are you seeing any or challenges going forward from that scenario and how that could impact some of these numbers you mentioned like demand going to 20,000 plus?
Stephen R. Thomas - Renaissance Services SAOG - CEO
So thank you, Sameer. The challenge we had last time which was we broke the different types of accommodation into different categories for you last time, included some very seriously substandard accommodation. It also included some approved accommodation that didn't meet the standard. So that's difficult for us as well because when it's approved, the cost is not the same in terms of the backup, medical backup, recreation backup, basic sort of human dignity and human rights issues.
So what the authorities have done very well, I think, in the gap is taken steps to make sure that can't happen again. And the sort of lead players, if you look at petchem, OQ are making sure they have their own standard as well, which is slightly -- there are some specs in that, that are slightly higher, which we comply with here. And they do not want to see any substandard approved, nonapproved, et cetera.
So I feel that challenge, whilst we must always be vigilant to it, has significantly diminished based on the bad experience that we had has turned into a much stronger set of enforcement, if you like, from the authorities going forward. The issue on increased cost, increased inflation, et cetera, and how that affects projects. What we're hearing so the current dialogue we're having is with the green steel projects, 3 of them. We are hearing from them that they're not anticipating to stop the project. They're pressing ahead with those. The medium-term one is with petchem. Again, the investors are both on the Omani side, on the Saudi side are still saying, no, they're going full steam ahead with the feed project, et cetera.
And remember that, that is a project of national importance. The refinery is a fabulous project. Those of you who are on the right side of the plane this morning, I hope you were looking out of the window as we went over. You can see it coming to a close now. For the 230,000 barrels of oil that will go into that refinery that comes out in potentially 6 different products. And unless you have the downstream industries, to add value to that product, it makes the refinery nonviable in a globally competitive world.
So the national importance of -- we understand COVID came and the oil price crash came, and that meant it was logical for the government to pause and wait to reconfigure petchem. But it is an absolutely essential project for the whole Duqm project for the industrialization of Duqm, et cetera, and for the viability of the tremendous investment the government has already put in so far.
So whilst you're right -- your question is right to always look out for what will those challenges be. Could there be further delays? Is there anything of that nature? The news from those driving those projects is, no, they're all driving ahead with them. Generally, we often see a delay between what said and what comes to pass. But the desire is to get those projects off the ground as fast as possible.
Sameer Kattiparambil - EFG Hermes Holding S.A.E., Research Division - Associate Director of Industrials and Materials
And that's very clear, Steve. Just one follow-up question, which I asked you previously on Saudi plan. You mentioned about going out to Saudi. Is there any update on that?
Stephen R. Thomas - Renaissance Services SAOG - CEO
Yes, there is. I meant to mention it in the opening remarks. So we are currently registering the entity in Saudi. That's taken slightly longer than we intended it to, but it's about to happen. We've decided to go with initially 100% ownership. We were looking at potential partners, et cetera. There are fantastic potential partners in Saudi Arabia, but we're prequalified for NEOM in our own right. We're assured that being -- as long as we have the registered entity on the ground there, we've already identified a new colleague, Saudi National to go in as the first boots on the ground in Saudi.
And as luck would have it, not that we rely on luck as an organization, but the phase 2 of NEOM awards of the 215,000, that tender has not come out. We actually heard from Deloitte to actually run the process for them, just sent out to people like ourselves and other prequalified tenders that there will be another slight delay. They think it should come out by the end of this year, but that suits us because we'll then have our presence on the ground.
Now registering and putting one colleague on the ground is just the start. And we're coming up to our strategy session for next year and beyond. Without a doubt, we can see a path in Oman just on the current opportunities that we're pursuing in Oman. If you take a base level, this has been now at a base level with Duqm not contributing where you see -- I'm just -- I'm not giving forward-looking here, but you see our half year results, if you were to double it and say, fine, we've got a platform of OMR 10 million bottom line. We can see a path within 2 years from the Oman contributing that, that would go up 1.5x to OMR 25 million.
If we are successful on conservatively on the issues we have in play at the moment. But that is not the scale of our ambition. And therefore, to meet the scale of our ambition, we have got to be more successful in how we grow abroad. So what we do, particularly in the Kingdom of Saudi Arabia, which offers significant opportunity, particularly in the UAE, where we have still that small base that we have established there in Qatar to another degree where we've established our credentials with what we did for the FIFA World Cup. These are 3 markets that we're very serious about. But to drive that, we need to put additional infrastructure into the growth plan.
Now it's what comes first, the chicken or the egg. We don't want to miss out on the opportunities. At the same time, we don't want to dilute performance here. So as new performance come in, and we are cautiously optimistic. We're not arrogant that we should be successful in a number of these opportunities we've bid for already this year. We anticipate without having put our plan together that, that will include additional business development, marketing and bidding resource going on the ground into those markets, whilst we support and we react to opportunities from our existing bandwidth here that is not going to be enough to crack those markets to the degree that we wish to.
So they're very much a part of our future plan, Sameer. And more on that when we put our full plan together for next year because we expect to be telling you what those resources might look like.
Sameer Kattiparambil - EFG Hermes Holding S.A.E., Research Division - Associate Director of Industrials and Materials
That's clear. And thank you for this trip to Duqm. We really appreciate it.
Stephen R. Thomas - Renaissance Services SAOG - CEO
You're very welcome. And that's not to make those friends who are joining us online jealous, but we'll get to you down another time.
Unidentified Analyst -
I'm Abhishek from National Bank of Oman. I have 3 questions. First of all, thank you for arranging this trip. Very good. I have stayed here so I know, all memories have come back.
First 3 questions. What I understand that you have been talking about temporary accommodation which the other companies operating at the SEZAD have built here. But I've also learned there are several companies, which are making their own PACs out here and not utilizing the PAC which Renaissance has made or the exclusivity what you have got. So what is the concern what you see in the future where there could be more potential company like that which they make the own PACs for the employees? Or you're doing something on that?
Secondly, 3 queries. So second question is that as a lender, we feel that the company has a long-term contract. It gets a clear visibility on the cash flows and the sustainability of the competition. Has the company been doing something for the long-term contracts on the current which you have or the potential which you're going to seek in future? And okay, these are the 2 questions, yes.
Stephen R. Thomas - Renaissance Services SAOG - CEO
Okay. So the first one on people building and Abhishek, you've got the lingo, the jargon of PACs of permanent accommodation for contractors is how that translates. So what is possible here in Duqm? If you are putting in a project, a refinery, a petchem, a steel project. It is possible to have your own accommodation, but it must match the standard. That's what went wrong the last time. Permissions were given and the standard was not met. That has serious repercussions when the international financing community come in to look at how migrant workforces, in particular, are being housed.
Why the authority and the government wish this standard that you'll see as you go around today to be applied, it's not a luxurious standard. It is utilitarian. It is much -- it's a kind of standard that attracts far more Omani colleagues into the workforces in these remote locations because it is attractive to them. And when you come to the lower-tier shared accommodation, it allows people to live to that minimum United Nations international labor organization standard to live with dignity with proper medical, recreational and other backup so that there is a lifestyle, good connections home, all of those very important things.
So what will be done is if someone wishes to put their own accommodation in, it will not be the accommodation we saw first time around when people ignored the standard. It will be -- some of the authorities do not have the bandwidth to monitor all these things. Authorities like our friends in the Royal Oman police want everyone to stay in one place where they feel they know that they are looked after and secure, et cetera. And important for the security of the region.
So the authorities are making sure that if there is alternative accommodation, that it will meet the standard. And one of the problems is with your building for a project is you need to put in a temporary facility and the only land actually applied long term for workforce accommodation is in this strip here. It's not in the lands next to the project. So there's an absolute requirement that the project, the camps are removed. You'll see the camps I've referred to starting to demobilize now because the authorities are requiring them to move.
Now there is one alternative, and it's an important one because people can, if they wish, stay in apartments or villas built by the local community in say village in Duqm and actually, that is something that we have no objection to.
It's great if there's some of the excess capacity going into the local community, that may be sufficient to take up the delta when we get to that 24,000, et cetera. But again, the authorities are stepping in here. That is fine if you want to put your supervisors and your senior people into shared accommodation in flats and apartments. It is not fine, if you're cramming 100 people into a 4-bedroom apartment and actually causing concerns for the community living around those villas and apartments.
So those are the alternatives, Abhishek. And this time, we feel because we went through this learning with the authorities. They were 100% with us. There was no one disagreed that as to what the standard should be. But it's less easy to enforce once the cat is out of the bag and has moved.
So the focus now is making sure that, that doesn't happen in the first place. So I hope that answers that piece of the question, Abhishek.
Raashid Ali - Renaissance Services SAOG - CFO
Also, Abhishek, what is core and noncore. At the moment, the projects coming in is building compliant accommodation core to their business. The answer is probably no. Is it core to us? Yes, this is what we do and this is what we are here providing services and an experience to each and every customer who lives in our permanent or temporary accommodations.
Stephen R. Thomas - Renaissance Services SAOG - CEO
You'll have to remind me your second question.
Unidentified Analyst -
Okay. My second question was regarding that from a lender perspective, when we see here a small -- short term contract or long-term contract. So it gives a clear visibility on the cash flow and the sustainability of the PACs which you're investing in, what we have also invested as the lender. So do you see that the company has currently the ongoing long contracts? Or there could be potential where you're going to have long-term contracts or you're in discussion like this that yes, it will not be for a shorter tenor, we want for -- because you guys are also investing in the premises. So what is the company's perspective in that?
Raashid Ali - Renaissance Services SAOG - CFO
So the contract period varies. There's not one size that fits all. So there could be a 3-year contract and certain contracts that we recently bid may extend up to 15 years. I think given our track record of renewing our contracts, et cetera, which you've seen on the current order book, I can tell you with a lot more confidence that we can forecast our revenues with a lot more reliability and certainty into at least a period of 3 to 4 years.
So that visibility we have, of course, given client confidentiality. We can't speak to you about specific contracts, but to give you that comfort that we have I'll repeat it a lot more certainty and reliability on forecasting and estimating our revenues into the near future.
Stephen R. Thomas - Renaissance Services SAOG - CEO
And Abhishek, some of the actual opportunities that we're looking at are really changing the profile of our backlog. As Raashid said, we're seeing an average now 3 to 4 years. That will include 2-year contracts, 1-year contracts. 3 years on the sort of cyclical tendering basis, 3 years about the norm. But we are focused on moving clients into the IFM space and in that space, the norm is 5, 7-year contracts. That means you can have real KPIs around Omanization around involving local -- developing local SMEs into the supply chain and so on. You can have innovation and automation targets, et cetera, all of which is taking, instead of just a single subject of catering or maintenance or landscaping or pest control or whatever the contract might be you're actually taking everything that's noncore for the client and helping them drive higher standards at lower costs through innovation, automation and so on.
Interestingly, some of the major bids I've referred to, and again, Raashid is absolutely right. We're not able to give names here, but one significantly sized bid is for 8 years, plus 2, plus 5. So it has a 10-year horizon and a 15-year horizon. That will change the profile of our backlog significantly. We have others, there's a PPP project that we're partnering in -- this is -- you've seen the government's PPP programs and there's one out for 42 schools.
We are partnering with an investor who is interested in the PROPCO and actually in the CapEx for the property. Our greatest interest, of course, is in the OpEx, which is 25 years. So if successful, and there are other notable competitors in that opportunity as well, who we fully respect. But if our bid were to be successful with our partners, we will form an SPV for the OpEx with those partners, and we'd have it for 25 years.
These are things that are changing the longevity of our contract profiles. And these are live opportunities. This is something that is actually going in on the 11th of September as things stand. So thank you for the question.
Unidentified Analyst -
Good afternoon this is Shaheen from United Securities. Steve, in your Chairman's report, you had mentioned that there is a temporary lull in the major projects at SEZAD. What would be the key reasons for this lull? And do you expect the outlook to improve for the second half?
Stephen R. Thomas - Renaissance Services SAOG - CEO
Yes. So it is actually around the things that we've been discussing. It's the end of the OQ8, the Duqm refinery project as the construction comes to an end. And normally, the model, if you look at Jebel Ali, you look at Jubail, Yanbu, et cetera, the model normally is one project ending begets the next because those driving the projects and then the nation are looking to get the benefit of the mobilized EPC contractor workforce into the competitive tension of the bid, because of COVID and the oil price crash at the start of 2020, of course, oil prices come back up since then. There is a hiatus because the planned petchem project is now back in the feed stage. And so for that reason, we don't have a major project starting at the moment.
So our focus, as we wait for and the next ones coming are the green steel projects. The focus includes looking at some of the smaller contractors, the ones who are not necessarily are natural customer seeing if we can give them a bespoke solution during this hiatus, et cetera. But that's actually the reason for the lull and why the Chairman described it that way in his report.
Unidentified Analyst -
Okay. I would just pick on the point which Sameer brought up about your expansion into the other markets? What are the kind of opportunities do you see in this market, the kind of services that you expect to bring to these markets?
Stephen R. Thomas - Renaissance Services SAOG - CEO
Well, it's a great question because in the pure services play, there are a lot of good players already in those markets. It's like when somebody comes in to do pure services in Oman, they find themselves confronted by Renaissance and the other players who are already here and well established. So you need to have that USP, what is that thing that is slightly different going into those markets. And so the way I would describe our USP, one of them is around this kind of project. The knowledge of how to put together something that meets the high standard at an affordable rate because when nations are putting projects of national importance in place. They don't want them -- they want them to be globally competitive. And so they need this standard to attract the financing but they want it to be affordable.
Now interestingly, why the Kingdom of Saudi Arabia is of such interest to us is because they are specifying on projects like NEOM. They are putting this out as UN ILO minimum standard. And there are not many people who can go and say, well, we've done this for 17,000 because there, they've got 215,000 people, they're going to be split over 15 different sites, some 10,000, some 5,000. It's right in our capability spot. The 5,000 are similar to our PDO PACs. The 10,000 are similar to here is slightly smaller, but still in scale. And bringing that knowledge, skill and experience, we believe we can be competitive in that market.
Now how do we get into the pure services when there are already people in that space? Interestingly, if you look at our total service package, we are unique in one respect. And I just said it earlier, we -- if you describe us in one word, we're services. If you give us 2 words, we say services solutions. And where do they fit? They sit in the IFM space. So IFM, you're competing with the [Sercos], the [Carillions], et cetera. These are the people who then outsourced to multiple soft services, hard services, everything that's noncore to the client. And we do that.
So we've got one list of competitors in the IFM space. Now what we also do is we provide -- we self-perform a large number of the soft services and the hard services. So you don't get the margins on margins. That's a sell to the client. Now at the same time, we're not averse to outsourcing. We do waste management. We self-perform the largest amount of it in some of our PDO locations, we outsource to local community contractors because that's a key KPI for that client. And so we have that flexibility of either self-performing or where it is right, whether you want to develop local SMEs or local communities, et cetera, we can provide that as well.
If you come to the pure soft services side, we've got another list of competitors. You come to the hard FM side where we are still growing, whilst we've got some very important projects like BP, like Al Mouj where we have our own projects and the infrastructure that we maintain here. But that is an area where we have a growth opportunity even in our home market. But again, it's another list of competitors. You come to the utilities services that we've moved into a completely different list of competitors. You come to the waste management. And there are other opportunities in terms of waste treatment and so on, recycling, et cetera, all opportunities to come in this market, and it's another list of competitors altogether.
So there's very few that actually span the full scope. So where we do have an opportunity to be different when we go into those markets, is that holistic comprehensive offering as in the rest of the world, there is a significant movement to IFM, which is looking for people who do everything, but that is noncore to that client. So that's where we feel that we can compete.
We actually see our competition is slightly different because I can list them from the waste management, Averda, Veolia and all the others over here on the catering side, Sodexo and Compass and all those, et cetera. All great companies, by the way. But we see our competition slightly different. We see our competition as those employers who still feel it's okay to house their migrant workforce in extremely poor conditions.
We want to talk with them. We want to show them the value on their safety performance, their downtime for sickness, their attrition rates, their ability to attract money, et cetera, that this is a very efficient way of doing business and compare it to the cost like there. So we see our competition is slightly different, and that's one of our entry points in that sense. And the other is about getting clients to move the dial. There is this thing about we must go out to market on single services for a cyclical basis, 2 to 3 years. We've got to test the market. Where there's actually a model that shows if you engage long-term IFM, your costs do this and your standards do that and your desired goals are also matters KPIs.
So that's our competition is getting those messages out and it's relevant in those markets as well. We've seen some of the bad press that some of those markets have had around migrant workforce care. So yes, that's the answer to your question.
Unidentified Analyst -
Steve, one more question, if I may. Oman is positioning itself very differently in terms of hydrogen exporter for the future? Do you have your ears to the ground, do you really see any kind of projects coming in? And if they do, how would you maximize the opportunity here?
Stephen R. Thomas - Renaissance Services SAOG - CEO
So we'll read about hydrogen, and we understand that there are some sort of proof of concept still to be absolutely set in stone to make sure that those projects happen. But in terms of -- it's not just what we read and we see, his Excellency, the Minister of Energy & Minerals has been pushing these projects, what you see OQ doing, the level of investment going in. And the green hydrogen projects, there are others coming here, BP looking at it for Duqm as well.
We've got a list of 5 of them. They're real projects, they're real teams of people. So there's investment going in on the ground to actually develop these projects. So whilst I understand that some of the technologies, some of the proof of concepts have to come, we are convinced by the seriousness of the teams that are being put together to look at these projects for Duqm. A large wave of land has been put aside here.
Some of the issues is how far away some of those things will be which may need the satellite units, et cetera, from here. But what are we doing that is we're engaged with this, although this is not likely to come into reality for us till '25, '26 -- 2025 and 2026. We're engaged with those players. They have visited here the OQ green hydrogen team have been down. The lady, the CEO Najla is very, very committed, very much aware. We're being asked about being sure that we will have capacity for them at that time because of our residual permanent occupancy coming up at that time. And so we're engaged with them saying, we'll be here for you and we are also open to satellite units for their far flung operations.
Unidentified Analyst -
This is (inaudible) Omar Capital. Just one -- 2 questions. For the next year, what is the policy for the dividend payout? And the second question. How has the inflation will affect your business margin?
Stephen R. Thomas - Renaissance Services SAOG - CEO
So in terms of dividend, we have a very straightforward policy. But we've been able to follow. We've suffered for a couple of years when we had a very important piece of our business that we divested Topaz was very capital intensive. Because our policy is to return cash to our shareholders whenever we do not have a better viable investment opportunity for that cash. And whenever we don't have an opportunity to bring down also very -- a lot of bankers in the room, we're very happy with our lending profile as well. But at the same time, when interest rates go up, when debt becomes more expensive, then we want less debt on our balance sheet, et cetera. But we have really established over the last few years, this consistent record of at least doing that 20 basis dividend.
And of course, I cannot commit to that in this room here today at the end of the half year results. But I can say that our Board has that commitment. They want to be seen as a regular and consistent payer of dividends. So for us, part of our planning in the year, and Raashid leads on this, is to make sure that we have got sufficient cash for our Board to have that option.
For it to go higher than that, it would be a situation where we're awash with cash, and we don't have a better, more viable alternative was actually coming down the track. We can see lots of opportunities. I've described the Saudi one already. So no need to repeat that, where we will want to be deploying some of that cash into growth, but we do want some of it to be dividend. On inflation, I'll maybe hand over to the expert.
Raashid Ali - Renaissance Services SAOG - CFO
So at the moment, the inflation compared to last year is significantly lower, which is also helping us deliver our plans. As you can see across the board, since Duqm is not contributing. We continue to build on that. We continue to build on our cost saving initiatives. I know I told the entire community here in the Q1 call that our breakeven for Duqm, has come down to 5,000. And I'm happy to inform you that it's down to 4,000 occupancy now, and we continue to look at how we can become more efficient in running our operations.
Will we stop only in Duqm? No. Duqm is our home ground. So we test and try everything here, and then we take it to all the other operations across the company. So you will continue to see a much healthier profitability margin as we move forward, and we can take and so to say, implement all our cost saving and rationalization initiatives that have started here across our businesses, whether it's our contract services business or whether it's PD OpEx, also some of it will be passed on to our customers to arrive at a win-win kind of situation. So that is where we are.
Stephen R. Thomas - Renaissance Services SAOG - CEO
And to add to that, we have a track record over time, of course, when inflation comes hard and fast, there will always be a short-term impact. We have a real track record of mitigating that impact. So it's some of our other initiatives. So whether it's in our in-country value initiatives where we're really driving up and helping the capability of local supply chain where you're shortening the supply chain on various issues, then that's driving down cost as well as investing here.
In terms of where we have to import naturally on some of the food stuffs et cetera that were not produced in Oman, our buying power continues to rise. Obviously, we have this lull here in Duqm, but as the projects start coming in next year and so on, those numbers will go up, irrespective of our success in some of the other opportunities we've described. So we have constantly growing buying power, and that serves to mitigate on the inflation side.
Raashid Ali - Renaissance Services SAOG - CFO
Also we're very closely keeping an eye on our inventories, if you see our balance sheet, the value of inventory has moved down by OMR 2 million. So we've freed up that working capital to keep our inventories really, really tight and the amount we have invested in inventories remain at an optimal level. So when I say cost-saving initiatives, it's just across the board. So starting -- meaning even if you see our inventory values, you'll realize how minutely they're being monitored to make sure that we just carried the right amount of inventory.
Stephen R. Thomas - Renaissance Services SAOG - CEO
Yes. there's also behaviors of companies. I mean, we've done an awful lot of work on receivables and collection. We know that there is an issue. There is an issue in the market on prompt payment. But our reputation and our supply chain is for prompt payment. That also makes you a very attractive customer and that has served to keep prices down.
So when going gets tough, you end up with people queuing for to do business with people who pay them properly and so on. So there's a range of issues and initiatives. There's the operational excellence team. I've actually said about how the costs have come down, and this is such good news to bring a bit of breakeven down to 4,000 occupancy here was not envisaged as we came into this year. So we're really thrilled with what the team have done on that.
Unidentified Analyst -
This is Joyce from United Securities. See, we talked about Duqm, but can you talk -- give us some outlook about what's happening with the PDO PAC as well as from the contract services. Contract services, let's talk about the pure service. And Steve, you mentioned in your opening remarks about the contracts, which we have picked. So if we can throw some color, more color on that, that would be much appreciated.
You mentioned that the PDO PAC occupancy has been lower during the quarter. So what are the reasons and you expect -- you're expecting that in the second half, this is going to go up to 87% or so. So where are we going to see that? And also on the interim plan or the accommodation transition plan of PDO, when is it going to get on stream? And also, if you can possibly talk about something on Manazil. What do you understand from that? When is it going to come in? Then that also would be much appreciated.
Stephen R. Thomas - Renaissance Services SAOG - CEO
Sure. Thank you, Joyce. So on the PDO PAC, there's a couple of things. So I've described that we've actually only achieved 87% occupancy, whereas we were at 90% last year, and we're expecting 95 actually. This year, 95 is we regard as full. You need that 5% delta for ship changes and other such things. So why hasn't that happened? The reason it's gone off the boil from the 90 is the end of some projects in PDO. So whilst we remain at -- they're very high occupancies in some of the places Fahud and so on. at Qarn Alam that's traditionally full has come down to 80. Bahja is down at 60, so this projects that have ended and taken numbers out.
Now why did we anticipate the 95% was projects coming in and there's significant increase in head count for the new PDO ODC. This is off plot delivery contracts for those who are interested in the jargon. And those were supposed to be, and I'm not judging, I'm sure there's very good reason. I'm not -- we don't -- we have a very valuable ultimate client in PDO, but our actual customers in the PACs are the contractor community.
Now for whatever good reason, those projects were expected to be awarded in the first quarter so that we would need our expansion of the PACs to be ready for the start of the Third Quarter, but there'd be some numbers coming into existing capacity. Now as it happened, the ODC contracts were awarded in July. So that meant that there was no prospect of them coming in, in the earlier part of the year and no prospect of them coming in at the start of this second half of the year.
However, there is full prospect of them coming in during the year. And we have -- we're back to the MOUs and commitments, et cetera, from those awarded the ODC projects. We've gotten lined up to come in and we are expecting OpEx to be full. By full, I mean, 95%.
Now the second thing that happened that was slightly different to plan is PDO was slightly later than originally envisaged because they wanted us to do this temporary expansion of the PACs. This will add another 1,864 beds. Remember, we've got just over 8,000, 7,500 occupancy normally with that. And so that -- we are to plan from the time that they're awarded, but they awarded it slightly late. But we will be ready for the ODC contractors moving in. So the new -- why the PACs are a bit off the board, they're actually performing really well at that lower-than-planned occupancy. But for them to get up to that higher level needs these couple of things to finish. We're just finishing off the expansion of those 1,864 beds, and we're expecting them to start moving in during this quarter and be there for the last quarter.
That brings us to the point about Manazil. For those of you who've been following us for a while, excuse me, if I bore you with the same story again, but the roughly, if you take out the hoists and rigs and the mobile crews in the oil fields, there are about 30,000 people staying at any one time in the PDO concession area. 15,000 of those stay in the PACs. Over half of those stay with us because we have that volume of the PACs. And the great news is that Manazil 2.0, let's give them that. We've gone Renaissance 2.0, let's call it Manazil 2.0, has absolutely confirmed that the PACs are to be there as a minimum to the end of the current concession period till 2044.
So whilst we don't count this in our backlog because it's not a sort of a contract backlog. We are now assured that our PACs are there till 2044. Hence, we're actually doing quite a big reinvestment in the PACs this year. We're spending about OMR 1.8 million, but this is on sustainability projects or things that will put in better greener lighting, greener ACs, et cetera, solar and so on, that will drive down our costs but also prolong the life of those. And part of what we offer as an organization is that life cycle care of the facilities that we look after. And that's why the PACs have stood the test of time and are recognized as fit for purpose to be there till 2044.
So Manazil that had looked at alternatives of replacing some of the PACs, all the PACs, whatever and a whole new footprint, we'll look at that delta of the 15,000 who are either currently, a smaller number of them currently in the actual PDO-owned camps but have reached an age that some of them need replacing. Some of them don't, some of them just need some upgrading, but the Manazil 2.0 will be a combination of upgrading or rebuilding new PDO camps and the balance of that 15,000 delta who currently live in temporary accommodation, either because it's a field hard wheel, for example, it doesn't have a PAC, only has TACs temporary accommodation for contractors, or it's those who live outside the PACs in areas where there are PACs.
PDOs made that decision that other than the mobile, everyone will be required to stay in a path. Why they have accepted that the temporary expansions will be in modular buildings. So the 1,864 beds we're adding is because at least it brings people out of TACs and puts them in an environment where they get that care. Where they get the standard of Worker Welfare around good nutritious food, good night sleep, good connections home, good medical backup, good recreation and a lifestyle and dignity that is not what they're finding in the alternative TAC accommodation.
So Manazil time-wise, they're talking about spending another couple of years developing. There may be some initial smaller awards because time won't wait for some of the requirements, but the rest should be coming out in around that 3 years' time with a view that 2 years to build -- 2 to 3 years built by the end of this 5 year because we've been given a 5-year commitment for the expansion that we've done that Manazil should come online dovetail with the end of that period.
You asked also about other contracts. I don't want to go into specific clients, et cetera, but you can see by the results. Essentially, over OMR 6 million of the drop in revenues is to do with the change from 12,600. So now we're at 5,000 here, it's come straight out of the top and bottom line of Duqm. And yet, you said it's a transitional. You can see that we -- if we were to mirror the first half performance in the second performance, we come close to match what we did last year.
We are doing our best to make sure that we beat what we did last year, et cetera, that's being delivered without a contribution from Duqm. So -- and I've already described it's not coming from the PACs because the PACs are slightly behind where we wanted them to be. Where is it coming from? It's coming from our services business. And that's where we're trying to get that to move from these sort of 3-year -- of course, we've got a track record of not having reduced our actual top line of services. So we do keep winning and renewing but trying to move some of that into longer-term contracts as well in the work we're doing at the moment. So actually, very good news coming out of the pure services side.
Unidentified Analyst -
Okay. On the pure services you said you're bidding for almost OMR 400 million worth of contracts and only OMR 10 million is being awarded. So what's the nature of these biddings that we have already done and when should we expect some kind of a result coming in? And what's the tenure of these contracts, OMR 400 million? And total, it's a very big number compared to Renaissance OMR 120 million. So I just wanted to know what's the tenure or possible tenure of these contracts? And what's the margin that we will be looking at?
Stephen R. Thomas - Renaissance Services SAOG - CEO
I want to be careful because the contracts that are bid and obviously, still out for competition, and I don't want to do anything that could in any way blunt our competitive edge. But of the OMR 10 million that's been awarded, there's also one in Qatar that we didn't win. They decided not to go forward with that and they extended the current contractor. So that's awarded in that sense. So that includes things that we didn't win. But the largest piece of it is in the utility space. And that's down to 3 left in the race. It's going to be awarded to 2 players. It's in 4 zones. All I know in terms of the information that is public knowledge from the way they measure is, where we exist with our current operation for -- in that space.
Our team is delivering high 90 percentile KPIs. That has a value -- that has a real value to the client because this is about them getting paid. And our competitors don't come near that. So whilst we hope to be competitive in our pricing, we've also looked -- we've got Tata Power actually partnering with us in terms of technical solution and the training solution for that. If we are slightly expensive on the actual bid, we're hoping that our track record of performance has a value that needs to be factored in, does get factored in there.
So the tenure of that is what I referred to earlier on. It's 8 years initially, 2 years 8 plus 2, and then there's a plus 5 option if that goes well. So it's 8 to 15 years. You need to understand that the first year in particular, will be actually sort of setting up the solution. So it will just be me to reading during that period. So it won't carry the same weight. But we are hoping that we would be seriously competitive in at least half of that. And this would be a game-changing number in terms of backlog as well as -- it is -- once it gets past that first year, it is obviously a profitable enterprise as we've proved.
Remember, we won one of the areas in Muscat first. The next time it came out, they gave us the full 3 areas, et cetera. We're hoping to build on that track record. This is the next opportunity. And interestingly enough, the equivalent tenders coming out in water. That's part of the $1 billion we're expecting to bid in the second half of this year.
So that's the main one, Joyce, and I don't want to say more than that on it.
Unidentified Analyst -
I understand that. So this OMR 400 million, is it including the PPP project or PPP project is another $1 billion project?
Stephen R. Thomas - Renaissance Services SAOG - CEO
PPP projects is different one. So that's 42 schools that will take care of 40,000 students. That again is being bid shortly. The -- just as we expect the results of the utility tender to be during this year. We would expect the results of this PPP project to either come towards the end of the year or early next year. It will then need to be built. The schools will need to be built. They will then have a 25-year tenure. So if we're successful, that's all part of our efforts to take this constant rebidding out of our lives, it will always be part of our lives, I guess it makes it exciting in some ways. But the less we have to do, the better and the greater visibility and sustainability that you see, although I must again draw your attention to our track record in sustaining and growing our pure services business all the time. Right.
Unidentified Analyst -
I think we are out of time. So maybe one more question.
Stephen R. Thomas - Renaissance Services SAOG - CEO
If Joyce wants to make it.
Unidentified Analyst -
I have a few more questions. Some of them was basic housekeeping questions. Can you give us a revenue split between the Duqm and the PDO PACs and the services segment?
Raashid Ali - Renaissance Services SAOG - CFO
So as I mentioned last time, we don't give segmental information due to client confidentiality. But just for you to work it out, Duqm's revenue is OMR 7 million. Now you can work it out. I can't give any further.
Stephen R. Thomas - Renaissance Services SAOG - CEO
And then you could also work out because as you said that we've lost OMR 6 million to OMR 7 million top line that came from Duqm as well. So now you see the contribution Duqm can make when it starts refilling. So we have the opportunities that are coming with the tendering we've described. As said, we actually see a path to a OMR 25 million bottom line if all the stars and planets line up as we think they might.
Then within that is Duqm because you saw before when we sort of gone up to the higher occupancies, we were delivering an OMR 8 million bottom line for the company, including plus a OMR 4 million management fee going into us as the operator. And we have OMR 4.4 million of that aid comes to us as the partner. So it is a significant contributor when it is flying and tremendous work done by the team to make sure it is not a detractor from performance at this, what we believe is the bottom out low point of a high [HS] year and that with the projects we see coming down the line, the people who have signed up with us, we see that this is a short-term issue and that we'll start to see the benefits as it grows from the end of this year.
Unidentified Analyst -
One governance-related question, Steve. This is regarding your announcement last month at the end of June. That your early CFO, there was an agreement that you've reached with the earlier CFO, because she had done something which is bad to the company. So the question is why did she -- why did the company reached an agreement with the CFO when you understood that there was something bad, which is done by the -- deliberately done by the earlier CFO. And following that, we have seen that long-serving Board of Directors getting retired, you've mentioned that they retired but they are getting out of the company. So I was just trying to connect the dots and if you can throw some more light on that, then that would be much appreciated.
Stephen R. Thomas - Renaissance Services SAOG - CEO
Sure. I'll say what I can say on that. The first most important thing to understand, if you look at the original announcement, we explained that our former colleague had left for his personal reasons and he's been replaced by an interim CFO, and then now we have a permanent replacement has come. Those announcements have followed. And indeed, that announcement was absolutely correct and true because we had entered into a settlement agreement with him. And we wanted to make sure that there was nothing that should be of concern that within anyway impinge on the balance sheet or the numbers that has been established by independent forensic audit.
So we're very happy to be able to tell you that. There were issues that were addressed in the settlement agreement. Our former colleague, decided, although he signed that certain agreement that he wanted to make a labor case against it, which he did. And of course, that is in his right to do so. That happened, the court found in our favor and dismissed the claim, we made an announcement about that as well, dismissed the claim and required that he honor or that both parties honor the terms of the settlement agreement. Now that has been, what's the word? Appealed, that's the word I'm looking, that has been appealed, which of course, we must go through that process as well. And therefore, I don't want to comment further. But there's nothing for you to worry about in the announcement.
There's nothing when we talk about issues between us. We've come to a settlement around those issues. They do not affect. There's no hole in the numbers at all. And I think that's the important thing for this community here. On the point about Board members, of course, there are many people who are clearly closer to the end of their career than the start of their career. And that has happened with some of our really valued board members over a long period of time. So our former Chairman of the Audit Committee, for example, has retired. And this is natural and normal.
There's no connection at all between that and the -- any case that we have with any former employee. And it's actually also part of 2.0, bringing in younger blood, both at the Board level in the management level. We're looking at greater diversity. We've got some wonderful female colleagues at different levels of the organization. We want to make sure not on quota, on merit and they earn it on merit that we have more in the senior positions and in the Board. You'll see more of that as we pass the baton on to a new generation.
No connection with any dispute that we have with any former employee. We actually have very few disputes with former people. We have people who leave and they remain friends for life.
Raashid Ali - Renaissance Services SAOG - CFO
Any further
