Eolus Vind AB (publ)

Welcome all to the presentation of Eolus Q1 report for 2024. Eolus is a developer of the renewable energy projects. We're active in seven countries. We've been in the business since 1990, so for more than three decades. We're growing rapidly. We're investing heavily in both project portfolio and in organization and people. We have more or less doubled both headcount and the project portfolio over the last 18 months. and sell renewable projects that we then construct on behalf of our customers. We also do technical and commercial asset management on behalf of our customers and have been entrusted by almost one gigawatt of operating assets to handle on their behalf. This is how the project portfolio has grown over the last four quarters and how it is split between technology and markets. You can see on the pie chart to the left that the offshore wind now amounts to 11 gigawatts and is the the largest technology in terms of megawatts followed by onshore wind and solar PV projects. But we also have a 10% share that is energy storage projects, mainly battery storage projects. Going forward we expect a lot of hybrid projects with combinations of these different technologies. We're active in Sweden, Finland, the Baltics, Poland, US and a small project in Spain. Sweden, US and Finland are the dominant markets where we're active. Turning to the Q1. The first quarter of the year was focused on the sales process and intensive work with department testing and commissioning of the remaining turbines in the 260 megawatt wind project Storhällsjön in Sweden. We did not complete any new sales transaction during the quarter and that is the main reason why we have a negative result for the quarter. EOL's earnings will vary between quarters and over the financial years mainly due to when we complete sales processes and how revenue recognition for ongoing construction projects are being recognized over time. We also have lower construction activities normally during the winter months. That's also a reason why we have a lower degree of completion during this quarter than what we had during the summer half of the year. We had a net sales of 44 million SEK for the quarter with a net profit of minus 32. That means an earnings per share of minus 1.30 SEK. The board has proposed a dividend of 2.25 SEK per share. which is a 50% increase compared to last year. The annual general meeting will be held tomorrow. The board has also proposed a share back program due to The business is well consolidated with a strong balance sheet. We have an equity to asset ratio of 54%. The project pipeline grow by almost 1.3 gigawatts during the quarter. That is mainly due to that we added a Swedish offshore project AURUM that qualified into the project portfolio. Meaning that we now have 28 gigawatts of projects in the portfolio in total. Main activity during the quarter was the investment decision and construction start of the three Swedish wind projects Foglås, Boab and Dollebo totaling 88 megawatts in the attractive price area 3 in southern Sweden. We started construction In the quarter we have entered into turbine supply agreement with Vestas and expect commercial operation to start for all three projects during the autumn of 2025. The turbines in the Foglås project are the tallest turbines we have constructed so far with a total tip height of almost 250 meters. It's a project with very good wind conditions located close to the lake of Vättern that will harvest very good wind resources in that location. We expect to complete the sales process during Q3. Besides the Storsjälsjön project we also have the American battery energy storage project POM under construction. It's a 100 megawatt standalone battery project in the San Diego area. It's the third standalone battery project that Eolus has developed and sold or constructed in the US. So we have gained a lot of experience from being in the market for quite some years now and we have a pipeline that is maturing very well I would say. For the POM project battery systems will be delivered by the end of June and we expect the significant contributions to the result for the coming quarters. COD means commercial operation is planned to around the year end 2024 and 2025. For this project we have entered into what's called a tolling agreement. It's a long-term 10-year agreement with an operator who pays more or less fixed amount per month and per kilowatt. fixed income for the investor which makes it really attractive as a cash yield investment for many partners. We expect to complete the project sales during the summer. Turning to Storsjösjön which is a 260 megawatt 42 turbine project in Sweden in the area of the Sundsvall. There all turbines are erected since before year end. All turbines have started producing electricity and 32 out of 42 turbines have passed the test run. But the project is not yet completed due to technical problems that the supplier of the turbines are facing. We expect those problems to be sorted out and that We can complete the project after the summer in Q3 and our assessment is that the delay will not have any significant impact on EURUSD margin from the project since we are covered by late delivery liquidated damages from the supplier and also from receiving the operating net from the electricity generation from the project. During the quarter we've also handed in the permit application for the Blekinge offshore project. A thousand megawatts offshore project in the southeast of Sweden. close to shore in shallow waters with a low cost of energy per megawatt hour produced. So it's in an attractive price area where we see the highest electricity prices in Sweden and with a huge need for a lot more power for the coming decades. The project is a redesigned project based on the former project that was rejected in 2016. Since then the project has been updated. The project area is significantly reduced, concerned from the armed forces that were expressed in the previous project process have been addressed as much as possible. The technical development of the turbines has led to that we can with this layout we can reduce the number of turbines with almost 90 percent compared to the initial layout that we did for 10-12 years ago. There's a lot of local support from local industry and from local politicians for this project and that is also demonstrated for instance in the way that the surrounding municipalities have agreed to to offer to the Navy an enlargement of the naval practice area, which is more than three times the size of the project area. We have also agreed with our former partner Simply Blue Group that EURES takes over the full ownership of the joint venture SeaSapphire that held a number of offshore wind projects with the floating technology. Their ownership stake has been transferred to Eolus in exchange for a future profit sharing mechanism. Our view on these projects with floating technology is that they are long-term projects. They have higher cost of energy than our near offshore projects. So we will develop this project at the pace that is in line with the technical development for floating offshore technology. This is an overview of the offshore portfolio that we have, where we have added the Aurum project in the north of Sweden, outside the municipality of Åbytvoss. So total portfolio now amounts to 11 gigawatts including products in Sweden, Finland and Latvia. For four of the projects we have submitted the permit applications and three of them are waiting for decision from the Swedish government and one is handed by the environmental court in Sweden. I would like to take the opportunity to highlight some of the upcoming mature projects starting with our P-NAVA project in Latvia. It's a 158 megawatt onshore wind project. When it will be constructed it will be the largest wind project in Latvia. We have received all the major permits. We have secured the grid connection and we expect construction to start in early 2025. commercial operation plan for 2027. We will initiate the sales process during the autumn. It's a project in farmland landscape. It will be built with tall hub heights and with large rotors with a high really high capacity factor so it's a really interesting project and a sizable project for a small country like Latvia. The Fog Awesome project is an example of one of our partnerships in total it's a 238 megawatt onshore wind project in Sweden in the municipality of Malung Sälen. It's developed jointly with our regional partner Dalarvind. Eolus holds 49% of the project and Dalarvind 51%. Here we expect construction to start during 2025 also with a commercial operation plan for 2027. Local partners intend to own part of the project, which is very good to increase local acceptance and local engagement for the project. We expect to do the sales transaction during 2025. I would also like to mention our next battery energy storage project in the US, which would be our third standalone battery project in the US. It's called Roca Secca. It's a 126 megawatt, 504 megawatt hour battery storage project. Designed for four hours duration. It's located in Nevada but just on the border to California. With a potential to be utilized to support the Californian power markets. We've secured the grid interconnection at attractive terms and conditions and we have been granted right-of-ways from the Bureau of Land Management that is administrating all federal land in the US. So we are performing final design and working with to obtain construction permits now. We expect to have this project in operation during 2026. During the quarter we launched long-term sustainability strategy targeting 2020-2040 for Eolus. The strategy includes three ambitious targets. When it comes to climate, the target is to have net zero greenhouse gas emissions from Eolus operations and our value chain by 2040. When it comes to biodiversity our target is to have a net positive impact by 2030. When it comes to community engagement we want to be the preferred renewable energy actor in local communities during 2030. You can read more about the strategy in our annual and sustainability report and of course also on our website. With that I want to hand over to Katarina to take over regarding the financial figures.

Thanks and hello everyone. Then we turn to the financial slides for the first quarter 2024 and I can start commenting again on the delays in Storfallskön and that handover to Hydro Regen and Meagre did not take place despite the hard work. Therefore, we just have a minor contribution of 3% of degree of completion in the quarter. The investment decision for Fogelås, Boab and Dollebo and start of constructions is on our own books and impacting both balance sheet and cash flow until the sales process is completed. And the same goes for the US battery storage project POM that is also under construction and the sales process is ongoing. We start with the net sales for the quarter was 44 million SEK and that's about 230 million SEK lower in comparison with the same period last year. And the net sales are low for the quarter. Most of the net sales is referring to revenues for the product handed over to customer before year end. Skalberg, Utterberg, Tjernes and Rosenskog. We received the final payment for the construction during the first quarter this year, and the payment was higher than estimated at year end, which contributed to net sales also in first quarter this year. We have also in parallel reduced reservations for expected cost. Overall, the products were on time and within budget after very well performed construction. There are two main reasons to fluctuations in both net sales and profit between quarters. One of the reasons is that we normally see lower activities in constructions during winter months in the Nordics since weather conditions limit the possible timing of construction activities. The other reason relates to the sales transaction. We don't do transactions every quarter since transactions are a large complex and therefore not always possible to predict and steer the timing of them. First quarter this year the technical problems with the turbine manufacturer in Storfallfön is the cause to the delays in completion and handover. Revenue recognition from Storfallfön based on the degree on completion for the quarter is included in the net sales which we present. In Storfallfön has a completion in total of 82%. We are focused to getting the project completed and expect the handover to take place after summer. And our assumptions are still that we have enough reservations in our budget for Storfallskön to secure that Aeolus margin will not be materially affected negatively by the delay. If we look at the expenses for Elvis Group, it's 15 million SEK higher compared to the same period last year. But in comparison with last quarter, 2023, the expenses are in the same range. And the higher expenses are following the business plan for expansion during 2022 to 2024. We had a negative operating profit for the quarter of 29 million SEK compared to negative 12 million SEK the comparing quarter last year. And for the first quarter this year, the operating profit has been affected negatively by 12 million SEK referring to market valuation of currency hedges. And the market valuation as of first quarter last year contributed with a positive amount of 21 million SEK. So excluding the market valuation, the operating profit was minus 17 million SEK for first quarter this year compared to minus 33 million SEK first quarter last year. Net from financial items for the quarter was close to zero as the amount also was last year. The net is mainly referring to interest for cash positions and interest cost for loans. The items have also been impacted by revaluation of positions in other currencies than SEK. Net profit for the period was minus 32 million SEK and has decreased by 17 million compared to same quarter 2023. Once again the market valuation of currency futures has impacted the result with minus 12 million SEK. Then we have the balance sheet. Total fixed assets amounts to 316 million SEK. The amount has increased compared to end quarter last year and that's due to the land agreement in the U.S. battery storage project POM and future payments according to conditions in the agreement. When we go to work in progress and product under development that was 1,373,000,000 and advanced payments to suppliers amounts to 306,000,000 SEK. And during the quarter, investments in the ongoing construction of POM have been made. Also, newly started constructions of Frågelås Boa Dollebro in Sweden have impacted the balance sheet item. Also, other investments in the project portfolio during the quarter has also contributed to increased work in progress compared to first quarter last year. We had cash of 725 million SEK end of March compared to 476 million SEK end of March 2023. If we go to the other side of the balance sheet, we have total equity of 1,601,000,000 SEK, where our equity of 70 million is related to minority stakeholders. Interest bearing liabilities 836 million SEK compared to 421 same period last year. The previous mentioned land lease agreement for POM is included in the long-term liabilities with 234 million SEK. When the project is sold the liabilities referring to the lease agreement will be removed. Total equity and liabilities amount to 2,958,000,000 SEK. Next slide we have the key figures for the quarter. Net sales for first quarter is divided into product development and the asset management. To start with product development, we had net sales of 36 million with an operating profit of minus 31 million SEK. And net sales for the asset management services is 8 million and operating profit of 2 million SEK. Earnings per share for the quarter is minus 1.36, but on 12-month rolling earnings per share, that is 22.31 SEK. Cash flow from operating activities during the quarter was plus 20 million SEK compared to minus 236 million SEK same quarter last year. And the main reason for the positive cash flow for the operating activities in comparison to first quarter last year is the received final payment for the wind farms handed over year end 2023. Equity per share about 61 SEK compared to 39 SEK end of March last year. Equity per share has been increasing significantly the last three quarters 2023 due to high profit. Due to capital tied up in products we had net debt of 112 million SEK. For the financial year 2023 the proposed dividend is 2.25 SEK per share and that's a total of 56 million SEK. The decision regarding the dividend will be made at the annual general meeting tomorrow in Hässleholm. I can also mention that the proposed dividend is 50% higher than last year. We have full-time employees at quarter end, 146 compared to 100 the year before. We will see a lower activity during 2024 compared to 2023 when it comes to recruitments. We have an order backlog of about 660 million SEK. It is lower compared to end March last year. and we expect the increase to increase the order backlog when the ongoing sale selling process are completed and we have asset management assignments of 939 million sec and signed agreements for coming 268 megawatt and still full fund is 260 megawatt out of that amount Equity to asset ratio of 54% and we have a solid platform that gives us flexibility and possibility to capture business opportunities that come our way. Return of equity after tax is 44% for 12 months rolling and that includes period of 1st of April 2023 until end of March 2024. And also worth mentioning that Aeolus net profit on rolling 12 months is 556 million SEK. The next slide shows projects under construction. And we have 456 megawatt under construction in March. Projects Dofell firm had a degree on completion of 3% during the first quarter and in total 82. and the remaining degree of completion will be accounted for during 2024. Fogelås, Boab and Dollebo have been included since start of constructions have taken place. And as you can see POM, Fogelås, Boab and Dollebo are not fulfilling the requirements for percentage of completion method as the product has not been sold yet. revenue recognition will start when agreements with customers are signed and when predefined construction milestones are achieved. Then I hand over to Per for the summary.

Thanks Katarina and to summarize we have the started construction of the Fogelåsbo up in Dollebo onshore wind projects in Sweden and we expect sales to be completed in Q3. The sales process for the POM use battery project is ongoing and estimated to be completed during the summer. Completion of Storholmsjön project is delayed due to the technical problems by the turbine supplier. and we expect final completion after the summer and we don't expect any significant effect on EURUS margin from this delay. Our offshore projects are developing well and in Q1 we handed in the permit application for Blekinge offshore so we have four projects where we have added in applications in Sweden where of three of them are now on the Swedish government's table for decision. We are planning for the next batch of projects to reach ready to build and transactions and among them as presented We have onshore wind projects in Sweden and the Baltics as well as another standalone battery project in the US. For the full overview of the late stage projects you can find that at our webpage. Conclusion is that there is a strong interest for investment in renewable energy in both Europe and the US. The mega trends of sustainability, electrification and geopolitical concerns creates a large demand for projects in all our markets to come.

so thank you all for listening in and we open up for questions if you wish to ask a question please dial pound key five on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key six on your telephone keypad The next question comes from Olof Cederholm from ABG Sundal Collier. Please go ahead.

Excuse me. Hello, Per and Katarina. A couple of questions from my side. Firstly, we've seen, obviously, the bid for Ox2, where EQT wants to change the business model for Ox2 to become an asset owner. What are your thoughts about that and your business model? Is that something that you think might evolve over time? And if not, what are the key reasons for not changing the business model when such a big competitor is doing it? And of course, if you have any discussions on consolidation, what are your thoughts there? I'll start with that.

Thanks Olof. Of course the EQT bid on OX2 is an interesting data point. It definitely shows that there are investors looking at the sectors and valuing projects and pipelines in a different way than the stock market currently does. In our current business plan we are a pure play developer. All energy projects are extremely capital intense and in theory the large volumes of energy assets should therefore be owned by the ones having the lowest cost of capital. And a pure plate developer strategy also makes it possible for us to focus on project development and to run the most projects in parallel. But we should always do what creates most value for EURUS and for its shareholders. So we could in theory of course hold on to assets as well but it's not in our current strategy.

All right thank you for that. Then I have a question on the buyback program. Obviously it's not decided yet but what is the intention with it? you can buy back around up to 10% of the company once this decision is made. Is that your intention to have a fairly high level of buybacks or what are your thoughts on that?

The proposal from the board is based on the good financial strength that the EU is having. We have a target to have an equity to asset ratio of exceeding 30%. we are steadily beyond 50%. So the increased dividend and the share back program is a possibility to transfer value to the shareholders and the share buyback program should also be seen as a possibility for us to control that at times which is suitable for our investments in projects or sales transactions etc. And of course the shares bought back from the stock market could be either cancelled by future annual general meeting reducing the number of shares outstanding or they could be used for payments in future acquisitions.

All right excellent and My last question is on the general environment out there. Some of your sales processes have been ongoing for a while. Are you seeing that the delays in decision or the time it takes for customers to come to decisions, is that improving or worsening compared to how it was six months ago? What are your thoughts on project pricing?

We definitely see longer transaction processes. We see a higher share of utilities. They definitely have significantly longer timelines for the transactions. I would say it's more or less the same as six months ago but we can definitely see that timelines have been longer than expected.

All right and pricing any changes there in the last months?

There are some updates from the power price forecasting companies where the long-term trends have come out negatively. There are ups and downs with the new reports coming each quarter. different in different markets. Very bullish in the US in the markets we are active in. A bit more negative in some of the Nordic markets. On pricing we see that of course the last year's CapEx increases and cost inflation have affected the situation. We see now that both interest rates are stabilizing and hopefully also starting to decrease again to normal levels and we see our impression at least is that also The COPX prices is flattening out. When it comes to solar panels, prices have dropped significantly during the last year. Okay, excellent.

That's all for me. Thank you.

Thanks, Olof. The next question comes from Ojan Roden from Carnegie. Please go ahead.

Yes, good morning, everyone. I'm jumping on to Ola's question there. If you would try to kind of guide us, which determining factor would you view as the most important ones in order to trigger a more fast transaction willingness into the market, in your view? Is it low rates, stabilization of power prices, Or what would you determine as the biggest external factor driving up the transaction willingness from your customers?

It's a mix. Of course, interest rates have a great impact on such capital-intensive investments. But also the risk premium for investment in this asset class is important to decrease as much as possible. that can be done by for instance entering into long-term off-take agreements like PPAs. And also reduction of permitting issues that can be seem to be minor but that are in the late phase of the of the of the projects so for instance implementation of the EU renewable directive in Sweden for instance would mean a lot with the one-stop shop for regarding permitting authorities and focusing on shorter lead times for processing permits and grid decisions would definitely be beneficial for us, for the power market and for the attractiveness of the entire energy intense industry.

Okay, thank you very much. So you're raising the stakes a little bit, indicating that you will be able to sell the POM project during the summer. Which factors would you say are the most important ones when it comes to this transaction so we can understand the risk of kind of delays or not being as successful as we all hope for?

Yes, yes. It's a very short lead time now until the project will be in operation. Battery systems will be delivered to the site end of June or beginning of July. Compared to a wind project it's a very short construction time. And of course that reduces the risk for the incoming investors a lot since the project is so advanced and also with this 10-year offtake agreement in place.

Okay, thank you very much. And the final question was Is the supplier agreeing on your view that there is regarding delays or is there a potential dispute there over whose fault it is?

Of course parties don't agree to everything in a delayed project but in our view the contract is solid. Therefore we would say like we do that we don't expect any significant impact on our margin from the project. that we are well protected.

Okay, thank you very much.

Thank you, Jan.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Okay, we've received a couple of questions in the chat. We'll try to answer the ones that we can do. I will try to come back with answers to the more detailed questions. We have a question regarding who is the supplier of the best battery energy systems for our projects. It has not been disclosed for the POM project. For our previous project it was Canadian Solar. But in the US, Tesla, Canadian Solar and BYD are the big suppliers of systems. Next question is about the ongoing offshore strategic review that we announced last summer. That is based on the fact that our projects are maturing quite well. As we said, we have four projects where we have submitted permitting applications. Three on the Swedish government's table and one in the environmental court. It's important for EULUS to balance our exposure to different markets and different technologies and we want to ensure that all projects have the best potential to get not only permitted but also realized. So we are in discussions with a number of interested partners about them partnering up with us to contribute to the success of the projects. I hope that we can come to conclusion during the second half of 2024. There is a question if EURUS is considering to enter new markets. Yes, we are screening, we are evaluating potential new markets. What we mainly are looking for is sizable markets with high dependency of the fossil based power production and a low degree of self-supply because that would indicate a real long-term demand for renewables. But also focus is important we have only for instance scratch the surface I would say in the US and they're moving into new states in the US is almost like entering a new country in Europe I would say because power markets and regulations are so different. We will definitely see a continued expansion in the US in the coming years. Among the current markets I would also like to highlight the Polish market, which of course fulfills all the criteria I mentioned. It's a market where we can do a lot more in the coming years. We also have a question about the Centennial Flats project that is the large solar and battery project in Arizona that we have developed and sold and where we will get paid by milestones. We have so far received roughly 40 percent of the expected revenues. The next milestone will be when the investor takes a financial investment decision and will give us a significant part of the remaining revenues. We expect that to happen during the first half of 2025. I think I'll stop there. There are a few more questions in the chat but we will try to get back to you with the answers to them as well. Thank you all for listening in.