Scatec Asa

Good morning, everyone, and welcome to our second quarter presentation. I'm truly excited to present strong financials, additional growth, and also excellent progress on our projects in construction. This means we continue to make significant progress on our strategic objectives, both in terms of growing our renewables portfolio and also in terms of strengthening our balance sheet. Let me start with the summary of the quarter and then I will hand over to Hans Jakob to take us through the financials. Our total proportionate revenues increased to 2.3 billion and our EBITDA to 1.1 billion. This represents an increased activity level across all our segments. Our projects under construction are progressing well with revenues close to one billion in the quarter. And we're still also recognizing gross margins at the high end of our guided range of 11.4%. I'm also very pleased with the development of the backlog that is now at all time high of 3.2 gigawatts. And this is after adding close to one gigawatt of solar and best in South Africa during the quarter. In Egypt, we reached financial close and first drawdown on our Obelisk project during the quarter. And further, we signed a PPA for 900 megawatt of onshore wind in the country. And finally, in terms of the balance sheet, we continue to focus on debt reductions. We repaid 300 million in the quarter. And we paid another 850 million after the quarter end. And with this, our now interest-bearing debt, gross debt on corporate level, is down to 6.8 billion, which is a significant reduction relative to where we were one year ago. Now, in terms of power production. We generated 940 gigawatt hours in the quarter. This is an increase of 10% if we adjust for divestments during the year. This is driven by good hydrology in the Philippines and also in Laos, and also positive contribution from the new project in operation in Botswana, the first phase of our Madinara solar cluster. Revenues based on this increased to just above 1.3 billion. This is obviously then driven by the increase in the generation, but it's also related to a one-time effect in the Philippines relative to the formal award of our higher tariff on our ancillary services contract. And then adjusted for divested assets. This is an increase of 48% relative to the same quarter last year. Now let's take a closer look at the Philippines. The Philippines delivered a strong quarter both in terms of power production and silvery services and also in terms of financial contribution. Power production reached 106 gigawatt hours, which is 67% higher than last year. This is due to strong hydrology with high water levels in the reservoirs coming into the quarter and also good water inflows during the quarter. And based on this, revenues reached 493 million in the quarter. The underlying net revenues doubled from last year to 262 million, with power sales increasing to 49 million and ancillary services increasing to 230 million. In addition, we are pleased to have received, as I just said, formal regulatory approval for a higher awarded rate on our ancillary services contract. And this has a retroactive effect of 231 million. And as you might remember, these contracts or this tender was executed back in 2023. And we have been then accumulating this since then. EBITDA, based on this, increased to 448 million, and this is also reflecting good OPEX controls in our operations in the Philippines. And importantly, batteries now play an important role in the market, specifically in terms of addressing the reserves market, and we are working to increase our portfolio of batteries in the country. We have two battery projects in construction, and we also have a number of mature battery projects in our pipeline. And in general, this quarter highlights the earnings potential of the flexible asset portfolio that we have in the Philippines as we have different technologies and several market segments to play in as we see varying opportunities across the market. Then in terms of construction, we currently have close to 2 gigawatts of solar and battery storage under construction in six different countries and at various stages. And since last reporting, we've had strong progress across the portfolio, and we have recognized close to one billion in revenues in the quarter. In South Africa, Grote Fonteyn is almost finalized, and we expect COD within the next couple of weeks. And in Tunisia, construction is progressing well, and also here we expect COD later this year. In Brazil, we reached financial close recently, and we expect also here COD in 2026, in the first half of 2026. And this is also the case for Botswana, the second phase of the Madenaria Cluster project, and also for our best projects in the Philippines. While in terms of Mogobe, our first battery project in South Africa, we expect this one to come into operation during the second half of 2026. Finally, the Obelisk project in Egypt will be built in two phases, which are expected to be finalized in the first and the second half of next year. And I'm very excited about the rapid progression here and proud of the team that is making this happen. And we will also show a short video of this a bit later in the presentation. I will now zoom out a bit and talk about the totality of our growth portfolio. And we continue to expand our near-term growth portfolio. In addition to the two gigawatts that we have under construction, we now also have an all-time high backlog of 3.2 gigawatts. And this is after adding another major solar project and a standalone best project in South Africa. These growth projects will more than double our installed capacity over the next two years to more than nine gigawatts relative to the 4.2 gigawatts that we currently have in operation. And in addition to this, we do have a large pipeline of 7.7 gigawatts of maturing quality projects. And these are across different technologies. Notably, this also includes the wind project in Egypt, where we just recently signed a PPA for 900 megawatts, which is a very mature project, but still in our pipeline. In addition to this, we also have significant early stage wind field development activities, and these projects that are not yet visible in the pipeline, they will move into the pipeline as they continue to mature. All in all, we believe that this portfolio of growth opportunities forms a solid basis for further growth in the years to come, not only until 2027, but also beyond 2027. We expect hybrid and pure battery projects to play an increasingly important role in the energy mix in our markets going forward. And this is driven by significant cost reductions and further innovations. And renewable can take a larger and larger part of the energy mix in the markets where we operate. At Skatec, we stand at the forefront of these developments with a solid track record and good experience in doing both battery projects and also combining battery and solar projects. As you see, the majority of our near-term growth is coming from South Africa and Egypt, so let me also briefly touch a bit more on these two countries. Firstly, South Africa, which has been a core market for Scaltech for many years. It continues also to be a market where we see significant growth opportunity going forward. We now have a total of 2.1 gigawatts of solar and 2 gigawatt hours of batteries in operation, in construction and in backlog. And in addition, we have also developed and realized the 258 megawatt round four project, which is close to Eppington. And this adds to our track record in the market. And this is a project that we divested in 2023. This summer, we announced an additional award of 846 megawatt solar in the REAP Round 7 as the authorities reallocated capacity from wind to solar in that auction. And this is our biggest award in South Africa to date. We were also awarded another sizable battery storage project, 123 megawatt, 492 megawatt hours, Haribas project. South Africa is a very attractive market for us based on our track record, our integrated and capitalized business model, and also the long-term very attractive growth perspective in the market. Here, we can have low net equity contributions based on the 51% ownership stake, based on 90% leverage of the project, and also based on a full EPC scope that we are realizing these projects with. And this enables us to capture value with a very low capital employed related to the project that we pursue here. Further, our corporate PPA platform, Lyra Energy, Targeting the private market is also progressing well and will further diversify our offtake structures in the country. And Lyra Energy also just received a trading license, which shows that this platform is also progressing very well. All in all, we believe we are well positioned to capture further attractive growth in the market. Now over to Egypt and our largest solar and battery storage project to date, the 1.1 gigawatt and 200 megawatt hours Oblisk project in Egypt. And here I'm incredibly impressed by the rapid mobilization of our team related to this project. Here we are really moving fast. In this video, we are showing both the massive scale of the plant and the significant progress our team has made during the last few months of construction activity. The first phase, the half of the solar capacity and all the batteries is expected to reach COD in first half of 2026, while the remaining, the second half of the PV capacity will be installed and reach COD in the second half of 2026. And the site is about 20 square kilometers. We now have over 1500 people working on site and have recorded over 1 million safe working hours. The safety of our people is top priority, obviously, not only here, but across our portfolio and across our sites globally. Pile ramming has reached 40% completion for the first phase, and construction activity is ramping up. On average, we expect to install 200,000 PV modules on a monthly basis going forward on this site. Substation works are on track, which obviously is crucial for us to ensure that we meet COD according to our schedule. So Obelisk will drive significant EPC revenues and margins in 2025 and also in 2026. And with that, I will hand over to Hans Jakob to take you through the financials.

Thank you, Terje, and it's a privilege to say that we have delivered strong results, driven by the higher power production, the high DNC activity, and it's a strong quarter in the Philippines, also complemented by the ancillary services rates recognized, the retroactive effect. I'll take you through the group financials and the performance of the operating segments, and I'll also share the progress we are doing on strengthening our capital structure. Starting with group level performance. We delivered strong results in the quarter. The consolidated revenues were up by 12% to 1.3 billion. EBITDA reached 1 billion, up 10%. And to the right, you see the proportionate figures. Revenues increased by 51% to 2.3 billion. And the EBITDA grew by 19% to 1.1 billion. Now let me take you through the segments, starting with power production. So the power production segment delivered a strong quarter. Revenues reached 1.3 billion, up 26% from the same quarter last year. EBITDA was 1.1 billion, a 27% increase year on year. This is mainly driven by the strong performance in the Philippines and the retroactive effect. On a 12-month rolling basis, you can see positive development over the past quarters, which shows both the underlying growth and strong contribution from divestments. We have delivered more than 6.3 billion in revenues and 5.4 billion in EBITDA. Overall, we are very pleased with the value generated from our operating assets. In our development and construction segment, activity levels continue to increase. Proportionate revenues were 976 million and the EBITDA 49 million. Keep in mind that the second quarter last year we realized a contingency of 122 million from Kennard, positively impacting the EBITDA. The quarterly revenue shows variability depending on project facing, but the trend from the last 12 months confirms the long-term strength and scalability of our DNC business. It gives a clearer picture of the strong momentum we are building. Over the past year, DNC revenues have reached 3.4 billion, with a steady increase over the last four quarters, and we aim to continue. Rolling EBITDA ended at 139 million, with strong contribution from high-margin projects and disciplined cost control. The increasing trend reflects higher activity levels across several geographies, with Obelisk in Egypt at the forefront. With a strong backlog moving into construction, we expect DNC to remain a key engine of our continued profitable growth. At the end of the quarter, we had available liquidity of 4.4 billion. The reduction is mainly driven by the repayment of debt and interest partly offset by distributions from power plants. Let me explain some of the main movements. We received 327 million in distributions from power plants, invested net 119 million in growth projects, and paid 293 million of interest and 582 million in debt repayments. Additionally, we increased the RCF capacity by 50 million to 230 million dollars during the quarter and it is currently undrawn. We continue to strengthen our capital structure. Net corporate debt increased to 5.6 billion from 5.2 billion in the first quarter. The increase is mainly driven by the change in cash, while gross corporate debt was reduced by 600 million, including a 300 million repayment and favourable FX movements. The cash position and the net interest rate in debt will vary over time, dependent on cash movements. On project level, the net debt increased by 200 million to 13.6 billion. Project debt in operation was reduced by 600 million, and we drew 800 million of new debt for projects under construction. Now look at the progress on deleveraging. In Q3 last year, we set a clear strategy to rotate assets and reduce corporate debt, targeting to strengthen our capital structure towards 2027. I am pleased with our progress on reducing corporate debt. Step by step we are making repayments while ensuring we have strong liquidity position and headroom to advance growth initiatives. During the quarter, we repaid 300 million of vendor debt to Nordfund, while foreign exchange movements also reduced the gross corporate debt by another 300 million. We repaid 85 million dollars remaining under one of the term loans after reporting date, bringing our current corporate debt down to 6.8 billion. This happened after the quarter and also affects our liquidity position. We have now reduced the corporate debt by 26% since the strategy update in the third quarter last year. These reductions reflect our continued commitment to capital efficiency and balance sheet strength, and they position us well to finance growth without increasing corporate leverage. Let me share the outlook for 2025. For the full year, we estimate power production between 4000 and 4300 GWh, slightly reduced from last quarter, mainly due to curtailments in Brazil and Ukraine. It is worth mentioning that the impact on EBITDA is marginal, as majority of the curtailments are refundable. We keep our estimated full-year 2025 EBITDA unchanged with a range of 4,150 to 4,450. While FX has had a positive effect on our corporate debt, it also affects our EBITDA negatively. This effect is, however, offset by overperformance in the quarter, and we retain our full-year 2025 EBITDA estimate. For the third quarter, we expect a total power production between 11 and 1200 gigawatt hours and EBITDA in the Philippines between 280 and 380 million, based on normal hydrology and strong contributions from ancillary services. In our DNC segment, we currently have a remaining contract value of 6 billion and gross margin estimate of 10-12% on average across the portfolio of projects under construction. For corporate, we expect a fuller EBITDA of 115-125 million negative in line with the previous estimate. These estimates reflect strong base of operating assets, high construction activity, and a healthy cost control, a good start of the year, position as well for 2025 targets. And now I welcome you back, Terje, to provide the summary of the key points.

Thank you, Hans-Jakob. To summarize, this has been a very strong quarter for Skatec. Firstly, we have delivered solid financial results with significant year-on-year growth in both revenues and EBITDA. And this is driven by strong power generation, strong results in the Philippines, and also increased activity across our DNC portfolio. Second, we are executing at scale with two gigawatts under construction and more than three gigawatts in backlog. The near-term growth is set to substantially increase our operating portfolio over the next two to three years. And finally, as Hans Jakob also pointed out, we are making solid progress on our capital structure. Through divestments and refinancing, we've reduced corporate debt, extended our maturity profiles, and also strengthened our financial flexibility significantly over the last year. So all of this reinforces the robustness of our platform and our strategy of self-funded profitable growth. And with that, we can move to Q&A.

Thank you, Tahir. Yes, we will start with questions here in the room, and then we will take questions from our online listeners. So just raise your hand, and Bravi will bring you the microphone. Any questions from the audience here?

Thank you. Can you give us an update on your asset sale progress or portfolio or efforts?

Yeah, as you know, we have already recognized 2.6 billion Norwegian kroners in proceeds from asset sales since we set out with our target to achieve 4 billion in proceeds in the period through 2027. And we have currently a number of processes ongoing, but obviously we will wait with saying something specific until contracts are signed.

Thank you. I also have a question on the Philippines. Because you're providing guidance on a quarterly basis on the Philippines on EBITDA contribution for the upcoming quarter. And you have, at least during the first half, beaten that guidance very significantly, both in Q1 and Q2. So I was wondering, is it that difficult to have visibility on the EBITDA contribution in the Philippines for you as well? Is it that difficult?

I think what has surprised us positively, and you can recognize that, is the earnings potential of the battery systems that we have in the Philippines. I mean, at the end, the battery systems are, I mean, currently they are 26 megawatts. And so it's relatively limited in sort of in relation to what we have on the hydropower side, but still earnings potential with good prices in the reserves market has been a positive surprise also to us. And that is obviously something that we will take into consideration when we provide guidance and outlook and estimates going forward.

And a final question for me, with that in mind, what kind of payback times do you have for the battery investments when they are performing as well as they're doing in the Philippines?

I'm not going to give you a number of years or months, but it's short. Are you talking weeks?

Any more questions from the audience here? No? Then we will move over to the questions, the online questions. We have one question from Jørgen Lande, Danske Bank. Good morning. Related to the curtailments in Ukraine and Brazil, can you provide some more color on why this has emerged now, and is this a one-off for the second half of 2025, or a more persistent feature going forward?

Yes, as you will have seen from the guidance, we are keeping the financial outlook intact, and we are reducing the gigawatt hours outlook related to the curtailment situation. And this is due to the fact that the curtailment situation is not new, but we see that it is probably continuing longer than what we had expected. But also, as Hans-Jakob said, this is curtailment that we are mostly compensated for.

One question from Sindre Efterstad related to Groot Fontein. You already mentioned it, Taije, but it's about when do we expect COD for Groot Fontein?

Yes, as we indicated, we are expecting COD within the next few weeks. Previously, we have indicated that it will come in first half. It's a bit delayed relative to that. The delays are not due to poor performance on our side.

We have one more question about asset sales. I think we have been through that. Then one from, two questions from Vegard Nygaard. Given that Skatek has a significant pipeline and several large projects in Egypt, how do you assess the geographic concentration risk? Is there a point where you would set a limit on how much exposure you want to have in a country?

First of all, I'm amazed by this video, and I think it's fantastic to see the industrial progress we're making in this country. I think we can be proud about the legacy around Ben Ban and being a significant operator with a high level of confidence in the country. And we see, as Terry also alluded to, new opportunities lately, the 900 megawatt wind added to our pipeline. Is this a problem? If it is, it is a luxury problem. We will look closely at ownership stakes in these projects. And of course, we have approached divestments or reducing ownership stakes in other geographies. And I think it's better to talk about real transactions, as Thalia said, than speculating. But I think we can be very pleased with the development in Egypt overall. And just to cure the curiosity in the third quarter, we will also give a strategy update, including covering Egypt.

Second question from Vegard. Could you give an update on the form-down process for the Obelisk project? Will there be a separate market announcement once an agreement is reached?

Yeah, the farm down of the Oblis project is progressing well. And yes, there will be announcements when we sign contracts on that.

advanced discussions ongoing.

Thank you. We have one from Another one on divestments. I'm not sure if you want to give some more color, but could you please provide some color on the remaining investments you are targeting? Are you aiming to conclude the last divestment in 2025?

Yeah, I think as we just said, we will not give specific updates on individual investments or exactly when they're going to happen. You will see the announcements and our target of 4 billion by the end of 2027 stands firm.

One question from Anis Skaya from Odoo BOF. Could you give us an update on capex levels in solar and storage? Are you seeing increase in model prices after the very strong decrease?

There has been on module prices, there has been some fluctuations, but there are no significant changes we've seen over the last three to six months. And I think we gave an update on what we had seen over the last couple of years, a couple of quarters ago, where we've seen significant reductions on the module prices. On battery prices, we continue to see price decreases on batteries.

One more question. Thomas Ness from Sparbank EN. Should we expect quick rotation of assets built in non-core markets, such as the Botswana project and the Romania project? A lot on asset rotation today.

Yeah, this will depend on a number of different elements. I think, first of all, some of the smaller markets today can grow into larger markets. And then it might make sense to build a larger portfolio. So we will assess every asset individually. But clearly, markets will not continue to see a significant growth potential going forward. in those markets over time, we will look to divest the assets.

We have so far no more questions. Maybe just wait. Sometimes there is a time lag, but otherwise we will just end the presentation now.

Okay. Thank you very much. Thank you. Thank you.