Arise AB (publ)

Now I will hand the conference over to the speakers. CEO Per-Erik Eriksson and CFO Marcus Larsson, please go ahead.

Thank you very much. I will start with a brief introduction of Arise, starting with our three business segments. We have to the left the development business. We have currently some 9,500 megawatts in our pipeline, closing the gap to 10,000 megawatts, which is our financial targets to reach this year. We have since inception divested some 1,620 megawatts. So that's the development business, our production business, IPP business. We have at the moment 172 megawatts in home production corresponding to an annual production budgeted near production of some 430 gigawatt hours per year. And the third leg is our solutions business or services business. We have currently some 2,350 megawatts under management. and currently 105 megawatts under construction for second project. We think we have a quite robust and complimentary business model. With that said, we can flip to the next slide. This shows our current focus areas biography and also shows how Arise developed during the last five years. If you start to the left in 2021, we mainly had operations in Sweden and only focusing on wind. And now we have operations in six different geographies covering wind, solar and BESS. If you start with Sweden, which still is the center of gravity for a rise, we cover all technologies, wind, solar, PV. We have, as mentioned, our own production assets. We are an equity developer. We do asset management and construction management. UK, we started up operations in UK in 2022. We cover all technologies, mainly focusing on development. So we do wind, solar, and best. Finland, the same scope, acquired Pojanvoima in 2023. We cover all technologies focusing on development and we also have quite material asset management operations in Finland as well. Norway and Ukraine, we are focusing on development, greenfield development, only wind, quite low DEV expand in Ukraine and Norway, I can mention. And the last, the latest geography in Arise is Germany, focusing on pests and acting as a developer in Germany. And Germany, I will mention more in the next slide. We are continuing our diversification journey. This will show two good examples that demonstrates that we are a fast-moving organization rapidly capitalizing on our know-how. The first example is the market entry into Germany. actually we started up last year to do a market analyze second half of 24 concluding that that we see your business opportunities in best in germany and now we have three employees by end of third quarter we have our fast growing pipeline and we did the first acquisition of product rights free projects in total 120 And on top of that, we do a greenfield development in Germany and we can see quite good growth already. We have quite ambitious targets to do the first transactions already next year. Another good example is data center development. We see quite clear synergies and a quite natural evolution of our development business to move into data centers as well. key features are a bit the same, require land, data center require land, access to land, access to grid and fiber infrastructure and of course a permit in the end of the day and all this is within our normal scope. First project is already in early stage stage in Finland. We have secured land. We have a good understanding of grid capacity and also fiber infrastructure that it's available. We have an estimated capacity of some 400 megawatts, which is large-scale, and I learned it's defined as a hyperscale data center. If we manage to do this or to take this to transaction, we believe that we could see a quite significant profit potential in this. With that, I hand over to Marcus.

Thank you, Per-Erik. We released the Q3 numbers this morning and net sales for the quarter decreased to 88 million SEK. This is a decrease that in all aspects derives from a lower revenue recognition within the development segment, which trickles down to EBITDA and EBIT, which came in at 22 and minus 1 million SEK, respectively. This was also affected by the extraordinary cost in July of approximately minus 15 million SEK, which is related to the acceleration of the Kjell Wallen project. This results in a profit after tax of minus 9 million SEK or minus 0.18 SEK per share. On the other hand, very strong operating cash flow during the quarter of 322 million SEK. Majority obviously driven by the earn out in Kölvallen and cash flow after investments amounted to 251 million SEK. Our own production generated 64 gigawatt hours with an average income of 434 SEK per megawatt hour. If we look into our segments, development posted 25 million SEK in EBITDA, mostly driven by the Kjell Wallen earn-out, which I mentioned just on the previous slide. Earn-out contributed to EBITDA by 3 million euros. At the same time, there has been no revenue recognition in project Fasikan due to some uncertainties in the project costs for Fasikan. Also, we don't expect to make any further revenue recognition in Q4 either. Late-stage portfolio increased by approximately 500 MW, mostly driven by the projects just mentioned in Germany and Finland. Production posted 18 million SEK EBITDA, saw a slight decrease in both production and the realized prices. In addition, the grid that we now own between Fasikan and the connection point to the regional grid was commissioned in Q3, and this had a positive EBITDA impact of approximately 3 million SEK in this quarter. Solutions back on track to 3 million SEK in EBITDA due to the full quarter effect from the Sjölvallen OMA, which came into force in June. So this is the first quarter where we had the full effect. And in addition, we announced the assignment with EIP and Fortum of 350 megawatts, which will be in force as of this month in November and contribute going forward. The portfolio, as I mentioned, increased by 500 megawatts, largely due to the German-based and the Finnish data center. I think overall we're seeing very strong progress in advancing all the late-stage projects. In the UK, for instance, we submitted several late-stage projects into Gate 2 of the grid reform process, which is very, very positive. And overall, I would say that we are well on track and pretty confident that with this portfolio we'll meet the 10 gigawatt financial target that we have by year end. That I'll hand back over to you, Per-Erik.

Thank you, Marcos. Market development, looking on power markets. We have during the quarter seen increasing forward prices driven by a normalized hydrological balance in the Nordics. We still see some surplus in the North, but also deficit in the South of the Nordics. Fuel prices continued rather stable, and by saying fuel prices, I mean gas and coal. European forward price is sideways in general. Looking to the bottom left you can see the graph and then in the bottom you can see I'm a bit colorblind but the blue line is system price and the gray is SE3 and the orange one is SE4 prices and on top you have the German prices representing the continental European prices and you can see the second half of this year that the Nordic prices have started to move upwards, very much driven by the hydrology in this case. Looking at spot prices, you see the graph to the upper left. You can see that the prices, this is showing system price, the blue, grey is SC3 and orange one is SC4. You can see prices picking up. This is the monthly average prices picking up second half this year. And we should also mention that the balancing market here is still volatile but somewhat calmer over the quarter. So I would say that the amplitude in the swings in the balancing market has become smaller. Continental European prices as said quite stable driven by gas prices. We had during summer a continuous injection in gas storages that held up the prices. There are still a lot of macroeconomic uncertainty and still low energy consumption especially on the industrial side. We still see the gap, the quite big gap or even huge gap between Nordics and continental Europe that it remains. And as we see it, if we have a bit colder winter than normal, if we see industrial consumption picking up again, that this could be an arrival of the upside in the Nordics. So we see some upside or hope for some upside in Nordic power. With that said, we take the next slide. ending 2025, we have less than two months left of this year. To start with, we have some ongoing transactions that we already mentioned, solar and best projects in the UK, development portfolio and the best project, a large-scale BEST project in Finland. Those transactions are ongoing in a structured manner where we have advisors having a structured process. And we have a target to reach 400 megawatts by the end of this year. 400 megawatts in total, 24 and 25, that target remains. We think we have a good traction in the sales processes, but obviously we have a quite challenging time perspective here, only less than two months left. If we fail in closing the transactions this year, in worst case, it's likely that we have a good start of 26. But as said, the target we have is to close this year. Our strategy with diversification continues and is expected to contribute going forward and contribute in terms of transactions. We are very happy to conclude that we have the means both for organic growth as well as selective acquisitions. We have a solid cash position and also cost efficient access to a 40 million euro facility on top of that. So we think we have a very strong financial position in general. We have also a strong track record and excellent in-house resources. All key resources are in-house and I would especially mention that we have built up the organization in M&A, so we have quite strong M&A team now. All in all, we are well positioned to catch opportunities in soft markets.

so i think that's it and then we leave the floor for for questions if you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key 6 on your telephone keypad the next question comes from caleb solomon from seb please go ahead

Hi, guys. Thank you. Just a few questions for me. First, on the pause revenue recognition for FOSICAN, what kind of cost uncertainties are we talking about? Can you give some more color on that? And also, is any part of it related to delays in the construction timeline? And are you expecting to recognize revenue again in Q1?

Hello, thank you for your questions. In terms of, if I recall correctly, the first question related to the type of cost overruns or uncertainties, and it's mostly related to the turbine supplier, where we expect to see some cost increases. The second question in terms of timing. Timing does not impact the earn out in fast account. It's just kind of actual cost versus the construction budget.

And are you expecting to recognize revenue again in Q1?

No, I wouldn't expect to recognize any further revenue until full takeover, potentially then when it's finally settled.

Okay, and on the impairment test, I noticed that the impairment test you carried out in the quarter showed an excess value of 40 million euros, which is quite a bit below the 70 million last year. So can you give a bit of color on what factors explain that, given that the discount rate seems unchanged?

Yeah, in all material aspects, that's related to price curves. Yeah, some effect also from a lower FX, lower Euro to SEC, but 80-90% or so is related to the price curves.

Because you usually say a 1% change in discount rate is about 10 million euros on the... Yeah. impact on the excess value so what kind of movements have we seen in price curves is it one two five ten percent like how much?

Hard to quantify in terms of percent given that it's you know 50 years of data points or 30 or 50 whatever it is yeah but I would say it's maybe more much more conservative on the front, in the short term, which has some impact, of course, in addition to overall lower curves.

Okay, and just the last follow up on that. Can you sort of break out how much of the book value is attributable to the producing assets right now? Or can you just remind us?

Sorry, can you take that again?

production just just below 1.5 billion I would say okay thank you and on the price contracts that you disclosed this quarter can you remind us how much of that is any of that new or is it same one you signed last quarter and then kind of as a follow-up to that are you expecting to secure anything for the rest of 26 as well

I mean we have a short term perspective when it comes to hatching trying to basically to be we are monitoring the market on a daily base and try to catch opportunities in the market I won't say we are speculative but we have some target levels where we do some hatches so I would say if we see a bit prices continue to pick up, we will do more price hatches. And we have some target levels already now that we're working on. So I believe we will do more price hatches during winter, yes.

And there were some summer down during Q3. Yes.

Okay, thank you. And just lastly on the volume targets, they imply you're going to sell another 235 megawatts in Q4 since you're reiterating them. And then you sort of said ongoing sales processes exceed that volume. So my first question is, I mean, I appreciate it's hard to give an exact answer, but sort of how confident are you in that figure? And second, can you give some more color on what the mix could potentially be, both in terms of technology and maturity of those projects? Is it mostly ready to permit or ready to build?

Yeah, starting with the last question. When it comes to the best projects we have under transaction in Finland, that is ready to build. We have all the permits in place. We have a great connection agreement in place. So that's just set to start construction works basically when everything is arranged with financing, et cetera. So that when it comes to the UK portfolio, it's a bit different story. That's a development portfolio, meaning that if we manage to do that transaction, we expect to have an upfront payment and then it will be milestone payments. That was the last question. What did you say earlier? What we expect? How confident? How confident? Yeah, that's a tricky question. Definitely, I am confident that we will be managed to do this within, let's say, half a year. If we manage to do it within two months, question mark, but... We believe in that. It's doable, but it's challenging. And that's the current timetable. Yeah. So obviously we're working hard, like I almost said hell, but we are working hard to do that. And we have ongoing, we have people engaged trying to do everything they can to manage that. But it's a challenge. And of course, The market environment has been quite soft for a while, but we see good traction at the moment and we definitely believe that transactions will happen.

Okay, and just one last follow-up, and then I'll leave you to it. Because you said it was ready to build, but it was a battery project in Finland, and in the UK portfolio, it's sort of more ready to permit and followed my milestone payment. Is it fair to say that the sort of average blend pricing-wise is well below 1 million per megawatt, maybe somewhere closer to a half?

Yeah, of course, it's difficult to say since it's a bit of moving targets, but in that range, I don't think that's totally out of range.

Okay, thank you for taking my questions.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Maybe I could take some of the written questions, a bit ad hoc. One of the questions is how much the 120 megawatt battery rights were acquired for, and I would say ballpark below 100,000 euros in total. Another question is if we intend to utilize the remaining 27 million second authorized share buybacks. Not really a A resolution for management, that's obviously a board matter. Do we have the financial means to do more buybacks if that's the case? Yes, but again, it's a question for the board. Let me see. I think that's basically what's relevant to answer on the written questions. I think we have another one on the line. Yeah, okay. That's it. If we don't have other questions on the line,

Okay, thank you. Then perhaps it's time to sum up. So some last comments from my side. Arise continued to perform well. Of course, the bottom line results could be better. But on the other hand, we deliver an extremely strong cash flow that has created a very solid financial position. We have the means to continue our journey to grow and look forward to end 2025. So thank you very much for attending.