Eolus Aktiebolag (publ)

A warm welcome to this presentation of Eolus results for the third quarter of 2024. Your presenters today will be myself, Per Vitalsson, CEO, and Katarina Persson, CFO. Eolus is a leading pure play developer in the business of shaping the future of renewable energy. Leveraging more than 30 years of experience, we work across seven markets, developing a 26 gigawatt portfolio of onshore and offshore wind, solar and battery energy storage projects for major energy investors. We also manage close to one gigawatt of assets on behalf of our customers. I will begin with a walkthrough of the Q3 highlights and give an update on our portfolio. Katarina will follow with a closer look at the financials. I will then conclude the presentation with our view on the near-term outlook before we move to Q&A session. So starting with Q3 highlights, we had regarding sales, we had no new sales transactions during Q3, which explains a little more than half of the negative operating results for the quarter. We made a steady progress towards sales for the projects Folklås, Boab and Dollabo, the onshore projects in Sweden, as well as the POM battery energy project in the US. And we anticipate to close sales processes for these projects in Q1 2025. We also have proceeded to commercialization for the two now ready to build onshore wind projects, Ölme in Sweden and Pineva in Latvia. Turning to construction, after the end of the quarter, the owner of the US Centennial Flats, PVN Best project, which we sold in 2022, decided to proceed to construction. and this triggered a milestone payment of 64.7 million dollars to Eolus that we have received in our bank accounts and with this really large payment we anticipate a positive effect of 50 equal to 51 million dollar on the q4 operating result So, of course, thereby we anticipate that the full year 2024 will be quite okay for us. Construction of our Swedish onshore wind project Storsjösjön is close to completion. while Fogelås, Boab and Dollebo are progressing according to plan. We've also updated our order backlog, which is the future remaining revenues to be recognized for sold projects. And it grow by slightly more than 100 million SEK to 832 million SEK during the quarter. And that was due to that we now can estimate the final revenues that we will receive from the Centennial Flat project. When it comes to the project portfolio, our total portfolio size decreased from about 28 to 26 gigawatts as a result of negative permit decisions from the Swedish government regarding the Akona and Skidbladner offshore wind projects after the quarter. We are pausing the development of those projects now, and we have taken a full write-down amounting to 40 million SEK for the two projects in the third quarter. The Swedish government's blanket rejection of applications in the Southern Baltic Sea shows the uncertainties surrounding offshore wind in the Nordics. And I would like to stress that Aeolus has a balanced portfolio of mixed technologies. The near-term uncertainties around offshore wind triggers more focus on offshore wind, which is the technology that without doubt can meet and does meet grid parity and can produce the cheapest fossil-free electricity. I'd now like to dive into updates for three of the projects mentioned so far, Centennial Flats, POM and the three Swedish projects, Foglås, Dollebo and Boab. Starting with the Centennial Flats project, it's a project of 767 megawatt, a combination of solar PV of 500 megawatt and 267 megawatt battery energy storage. We sold the project at development stage after securing grid connection and permits in 2022. And we are getting paid by milestone achievements Total capex for this huge project is estimated to be around 1.2 billion US dollars that our customer is going to invest in this project. So it's a really, really large project. and the the decision by our customer to proceed to construction in q4 triggered this milestone payment uh to to euros of 64.7 million us dollars as already mentioned um and with this uh um expected uh profiting positive impact on profits in Q4 of 51 million US dollars. I just want to highlight again the size of this number. It equals slightly more than 20 sec per share. With this milestone reached and our customers declaring notice to proceed to construction, we also now can update our forecast for the total revenues from the project to be 116.9 million dollars, of which we've already now, including Q4, have collected 110 million. So we expect to receive the remaining 6.9 million dollars at the start of operations expected to occur in 2026. Staying in the US, we have the POM project under construction. It's a 100 megawatt project with 400 megawatt hours of energy. It's a standalone battery energy storage system. The construction is ongoing. The battery systems are delivered to and installed on site as we speak. during the journey with this this project we found out that we could create significantly higher value by taking it through construction our ourself and delivering a more de-risked asset to to our our customers uh it's it's a um It's a project with a capex of roughly equivalent to 2 billion SEK. So in August, we managed to negotiate and sign a separate project finance agreement with the US bank of 175 million US dollars. So the project is fully financed until start of operation. And this even includes a term loan also as an option for our customers to take over if they want to. uh katarina will will come back to how this affects our our balance sheet but the important message is that the project is fully financed on until start of operation and we have provided the owner's equity that is is needed to to take it to to opera operations The sales processes has advanced during Q3 and we expect to announce the sale in the coming months. And commercial operation is planned for Q5 2025. And then turning to the three wind projects in the south of Sweden, Fogelås Boab and Dollebo, with total capacity of 88 megawatt. Construction is ongoing and is progressing. uh according to um to timescale time plan and the and the bed and budget uh commercial operation is is planned for to q4 2025 uh the fog loss project in the municipality of you on the western side of the lake vetten is includes the the tallest turbines constructed by by eolus so far and has excellent wind wind resources And the projects are all located in the south of Sweden, in price area three, where we have significantly higher power prices than in the northern of Sweden. We communicate in the report that the market is slower in the Nordics and that we now expect the sales processes to be completed in q1 2025 and thereby i hand over to to katarina to to walk you through the financial update thank you and hi all

These are the summary numbers for the quarter, but let me proceed with more figures on the next slide. Here you have the income statement. Aeolus net sales were 24 million SEK and that is lower compared to Q3 last year when we had net sales of 127 million SEK. Revenue recognition from Stu Skjolfsson based on the degree of completion for Q3 is included in the net sales with 9%. And in total, the degree of completion is 94, and the remaining 6% is expected to be accounted for in Q4 this year. And the rest of the ongoing constructions, Boa, Dollebo and Fogelås in Sweden and POM in US are on budget and time plan. And once these projects are divested, we will start to recognize revenue by percentage completion reported as net sales. And also a reminder that products that are not yet divested, like those mentioned previously, do not contribute to net sales via progressive revenue recognition during their construction. At the time of divestment, however, construction costs incurred up until that point are reimbursed and recognized as net sales in line with IFRS 16. Further information about EULU's revenue model can be found on page 12 in the Q3 report. And after end, the Swedish government denied permits for the offshore wind projects, which included Akrona and Skidbarnar, as Per also informed about. And full write-down of the two projects amounting to 40 million SEK impact the operating profit for the quarter three. And note that the write downs affect cost for goods and product development in the profit and loss statement, but it will not affect cash flow. Expenses for ALUS Group are 20 million SEK higher compared to the same period last year and the result of the expansion for business plan 2022 to 2024. And going forward, we will see lower growth compared to 2023 when it comes to recruitment and expenses. We had an operating profit for the quarter of negative 94 million SEK compared to positive 159 million SEK comparing quarter last year. And the main reason for the negative operating profit is that there were no divestments during the quarter and the right done for the offshore wind projects. Net from financial items for the quarter was plus 6 million SEK compared to negative 25 million SEK third quarter last year. We have a higher interest cost than quarter because of the financing of the ongoing constructions and the items have also been impacted by re-evaluation of positions and also loans in other currencies than SEK. Net loss for the period was minus 79 million SEK compared to positive 94 million SEK in quarter 2023. And once again, the differences in net result compared to comparing quarter last year is mainly explained by the divest that's not completed yet and the write down of the offshore projects. If we go to items in the balance sheet, we had total fixed assets amounted to 306 million SEK and 200 million of those are due to specific land lease agreements in the US Battery Storage Product POM and referring to future payments according to the conditions in the agreement. And just to highlight, when POM is sold and handed over, fixed assets will be reduced by approximately 200 million SEK. And if we go to work in progress and projects under development, that was nearly 3 billion SEK, and advance payments to suppliers, nearly 200 million SEK. Approximately 1.9 billion SEK of these items refer to investments in the ongoing construction of POM, Fågelås, Boap and Ollebo. Until divestment constructions are on EULUS books and impact both balance sheet and cash flow, an EULUS balance sheet will shrink substantially with divestments of these products. And once again, regarding the construction of home, that project is fully financed by separate credit facility. And other investments in project portfolio during the quarter has also contributed to increased work in progress compared to third quarter last year. And if we go to the cash position, we had 425 million SEK in September this year compared to 980 million SEK in September 2023. And the lower cash amount, that's due to financing of the ongoing construction and investments in the project portfolio and also financing of the running business. And if we add, we have total assets amount to approximately 4 billion SEK. And when it comes to total equity, that was 1.4 billion SEK. And also highlight the interest bearing liabilities, nearly 2.1 billion SEK compared to 680 million SEK in September last year. And the increased interest bearing liabilities is referring to loans to finance constructions. And also total equity and liabilities amount to approximately 4 billion SEK. We have some key figures and net sales for the third quarter are divided into product development and asset management. And net sales for product development was 16 million with an operating profit of minus 97 million SEK. And when it comes to asset management, the net sale was 8 million and operating profit of 3 million SEK. and earnings per share for the quarter was minus 3.16 SEC. And regarding cash flow from operating activities during quarter was minus 1 billion 42 million SEK compared to minus 369 million comparing quarter last year. And the main reason for the negative cash flow from the operating activities, it's once again the ongoing constructions and investments in the portfolio. Equity per share, that's about 52 SEK compared to 59 SEK in September last year. We had a net debt of 1 billion, 450 million SEK, and that's due to the capital tied up in the projects. Full-time employees and quarter were 140 compared to 115 the year before. And if we compare it to Q2 this year, the number is in line with that. We have an order backlog of about 830 million SEK, and that is higher compared to September last year. And also that we have end quarter asset management assignments of 967 megawatt and also signed agreement of coming 268 megawatt. And equity to asset ratio is 35%, which is lower than Q2. And the tied up capital in ongoing constructions and the increased liabilities lowers the equity asset ratio number. Return of equity after tax that is negative due to negative result. And this slide, you have the projects under construction and the degree of completion. And in total, 456 megawatt were under construction end September this year. And as mentioned at the top, projects had a degree of completion of 9% during the third quarter and in total 94. And the remaining will be accounted for during 2024. And with that, I'll hand back to Per now for comment on the outlook.

Thanks, Katarina, to give you some color on what we're focusing on in Q4 and beyond. The softness in the Nordic market continued in Q3. while activities in the in the us remains very very strong we are confident about our state power over these these cycles while we capitalize on opportunities in in europe and our rather unique exposure to to the to the us market Of course, the election in the US brings some uncertainties also to that market, but we've been in the US since 2015 with a good track record of doing doing projects and deals. We were also there during the last Trump administration and did some good deals during that time as well. And the underlying need for the transition of the US energy system is so fundamental And we are mainly also focused on the southwestern states of California, Nevada, Arizona, with projects with possibilities to feed into the Californian grid. And California is among the states that has the highest ambitions for renewable We will work intensely on advancing the sales of POM, Fogloss, Dollebo and Boart. as well as the newly initiated Ölme and Pineva projects that we expect to close in the next year. So the pipeline for 2025 is shaping up well, I would say. And I look forward to presenting our business plans and updated financial goals for 2025 to 2027 together with the Q4 report. And finally, before proceeding to Q&A, I want to mention that we have recruited an IR manager. So we welcome Harald Cavalli Björkman to our team, who will be your first point of contact for share related questions. So please feel free to reach out to him at any time. So thank you for for listening. I will now proceed to Q&A.