Eolus Vind AB (publ)

A warm welcome to this presentation of Eolus results for the fourth quarter of 2024. Your presenters today will be myself, Per-Witt Thordesson, CEO, and Katarina Persson, CFO. Eolus is a leading pure-play developer shaping the future of renewable energy. We are positioned to take advantage of structural growth in renewable electricity demand resulting from the worldwide megatrends of electrification and decarbonization. We apply our asset light business model to create value efficiently in every step of developing our diversified portfolio of wind, solar and battery energy storage projects across six markets with a portfolio of 26 gigawatts. Major energy investors trust our 35 years of proven experience delivering and optimizing market leading energy assets. Sound financials give us the stability we need to take sensible risks in a cyclical sector. I will begin with a walkthrough of the Q4 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 the Q&A session. The fourth quarter of 2024 was our second best quarter so far in the EU's history. The full financial year 2024 was also our second best year to date with 851 million SEK in net sales and 155 million SEK in net profits. just coming up behind the record-breaking year that we had in 2023. The main driver was of course the 705 million SEK milestone payment received for Centennial Flats, a hybrid solar and battery project in Arizona that we have developed since 2019 and where we received a significant milestone when the project now progressed to construction stage. For me, these results really underline the fundamental strength of our diversified positioning across multiple technologies and markets. And even in the year when the market has slowed down in Europe for both onshore and offshore wind, we leverage on our solar and battery projects in the US to deliver fresh capital to recycle into new projects and a solid distribution of value to our shareholders. The board has decided to propose a 2.25 sec per share dividend for 2024. to be decided by the annual general meeting that will be held in May. And the dividend remains unchanged compared to last year. Turning to our portfolio, we now present it in a slightly different view this quarter to increase visibility about how our portfolio is split between markets and technologies. and to give a better visibility on what to expect from EUs over the coming years. During the quarter the portfolio size decreased by one percent, equaling 371 megawatt. In this slide, it's clear that our strong portfolio growth in the past strategy period from 2022 to 2024 means that our portfolio skews to the early development stage. uh we will focus a lot to to mature the the the portfolio bring them bring it through the development stage to to construction and transactions and still we have close to two gigawatt in the late development stage and uh roughly 0.5 gigawatts under construction with the good spread across technologies In a different cut, we see that the spread across markets and stages of development, Sweden and US have most of our late development projects and are also our largest markets with about 11 and six gigawatts respectively. We also have some good volume under development in Finland and Poland, while we're also progressing at good pace in Latvia and building up presence with one good wind project in Spain. I would like to highlight a few prioritized projects coming up in the short term. We have a solid pipeline over the 2025 to 2027 period. And the first transaction, the POM deal has already been signed. And I will get back to that shortly. The Swedish wind projects, Foglos, Boab and Dollebo are currently also under construction and with ongoing sales processes. Next upcoming projects are the Rockaseca battery project in Nevada, US. The Swedish wind project Ölme and the Latvian project Pineva. That is our first project in that country. These projects are in active commercialization phase and we are making good progress. We expect all these projects to be ready to reach start of construction during the second half of this year. And I should mention also that the Fogelås, Dollebo and Boa projects are in quite advanced stages already of construction. Our Finnish project Motomeki 2 is a good sized onshore wind project in Finland with the possibility to add solar PV, which will likely also reach ready to build status during the second half of 2025. And looking a little further ahead, some selected projects, Fageråsen and Sigelbohyttan are both Swedish wind projects that are estimated to reach ready-to-build status during 2026, while Malbäck, a very good Swedish wind project, will hopefully reach the late development stage during 2026 as well. I'm very excited about this lineup and I look forward to updating you on these projects and others as we make progress. Turning to the POM battery project, we reached an agreement regarding the sales of the project in the in beginning of January and this is EULUS fourth sales transaction in the US. We've been in the market since 2015 and now with a really proven track record that we can both do transactions and develop and sell projects within the different techniques of onshore wind, solar PV projects and battery energy storage projects. It's a 100 megawatt project with 400 megawatt hours, so four hours duration, standalone battery energy storage projects located outside of San Diego. The enterprise value that we have announced is in the range between 230 and 235.5 million US dollars. The reason for the range is that there is a base purchase price and that there are some potential earnouts that we can achieve. The construction is well advanced. All systems are delivered and we are planning to energize the facility shortly and to meet the requirements to close the deal with our customer during Q1. revenue recognition will start. After going through the portfolio and the status of our highlighted projects, I just want to remind you about the fundamentals of our business models. We develop projects through origination and development, increasing value and decreasing risk along the way. We strive to be asset light and sell projects with all rights, permits, plans and tenders secured near the final investment decision at ready to build status. And sometimes, like with POM, Fogloss, Dollebom, Boab, we deviate from this model and proceed through construction on our own balance sheet with our Before selling, since we think we can realize higher value by selling the assets during construction or as turnkey assets. If we sell at a financial investment decision, we normally manage construction on behalf of our customers who carry the major capex investments during construction. At commercial operations, we... start to offer our asset management services to the assets owner. And these are services mostly appreciated by financial investors that don't want to build up their own operation departments. So please keep this model in mind as you consider our upcoming milestones and future revenues. Next, I will go through our financial goals, starting with a review of the outcome of the 2022 to 2024 period. We are doing business plans for three years ahead, so we've come to an end of this strategy period. And that's why we are communicating also new financial targets in this report. We grow our portfolio significantly over the period by about 10 gigawatt in total. And we also achieved financially our two best years so far in 2023 and 2024. Nevertheless, we did not reach the target for sales volumes in megawatts. And due to our rebalancing and shift from volume and megawatts to focus on quality and euros, the board has decided to remove the future-looking megawatt sales goal in the new period. We did, however, achieve each of our three other goals, delivering a healthy average return on equity of 19%, consistent equity to asset ratio, about 30%, and dividends paid out in line with the goal each year. And for the 2025 to 2027 business plan period, we have a new target of achieving 1.4 billion SEK in total EBIT over the three years. We raise our return on equity target to 15% on average for the period. And our equity to assets ratio gold remains the same. And so that's our long term dividend gold. And we should always secure an efficient capital structure. So for instance, share buyback programs and other tools could also be used to achieve that and to balance our capital structure and make sure that it is efficient over time. achieve our new goals we will focus on priority prioritizing high quality projects and drive them through development successful sales and construction and this this is in in essence uh rebalancing of the strategy from from volume to to value i We'll now hand over to Katarina for a walkthrough of our financials.

Thank you, Per, and hi, all. Pam mentioned the fourth quarter was our second strongest to date with a significant increase in net sales and operating profit yielding earnings per share at 1267 SEC and closing out the year with 38% equity to asset ratio. Net sales were 729 million SEK and that is higher compared to Q4 last year when we had net sales of 155 million SEK. During the quarter, ELUS received a milestone payment of 64.7 million US dollars for the solar and battery storage products Centennial Flat in US. And the milestone has contributed with 564 million SEK to the operating profit in the quarter. We had an operating profit for the quarter of 437 million SEK compared to 99 million SEK comparing quarter last year. And the main reason for the increased operating profit is the milestone payment received for Centennial Flat. Expenses for Aeolus Group are 17 million SEK higher compared to the same period last year and a result of the expansion for business plan 2022 to 2024. Net from financial items for the quarter was minus 4 million SEK compared to minus 5 million SEK for the quarter last year. Except for received and paid interest, the items have been impacted by re-evaluation of positions and loans in other currencies than SEK. Net profit for the period was 315 million SEK compared to 71 million SEK same quarter 2023. And the difference in net result compared to the quarter last year is mainly explained by the milestone payment. And tax related to the milestone has been reported in the quarter. The fourth quarter 2024 was particularly strong, but it is important to remember that our earnings vary widely between reporting periods, which is evident in this slide. This is due to our developer business model, where revenues mostly derive from very large product transactions. Additionally, for a project that is divested before or under started construction, we recognize revenue for the construction management based on degree of completion. In 2021 and 2022, we had progressive revenue recognition based on degree of completion for several concurrent and divested projects, as you can see. This quarter we are presenting the balance sheet more graphically. This is to underline the size of project POM in relation to our balance sheet. And if you look at the green sections of the bars on both asset and liability sides of 2024, you will see the volume which is referring to POM and will be removed of our books once POM transaction is closed. That's expected to happen in Q1. Total fixed assets amount to 320 million SEK and out of those 220 million are due to specific land lease agreements for POM and referring to future payments according to conditions in the agreements. And when POM is handed over, fixed assets will be reduced with the same amount. And on the debt side, non-current liabilities also includes the 220 million SEG referring to future payments for the land lease agreements and will also be reduced when handing over the product. In order to clarify the item work in progress and projects under development, we have now divided them into project under construction and projects under development. And comparing figures have been changed. And projects in the portfolio are continuously under evaluation based on possibilities of realization, market situation, grid connections and permitting. And in this fourth quarter, we took write downs of projects amounting to 62 million SEK. Investments in other projects in the project portfolio during the quarter has also contributed to increased project under development compared to the fourth quarter last year. We had cash of 356 million SEK end of December 2024, and that's to be compared to 575 million SEK end December 2023. And the lower cash amount is due to financing of the ongoing constructions and investments in product portfolio and overall financing the running business. Total assets amount to approximately 4.5 billion SEK, of which approximately 1.1 billion SEK in the projects under construction relates to POM. We have total equity of 1.1 billion SEK, and when it comes to interest-bearing liabilities, that amounts to nearly 2.4 billion SEK, comparing to 692 million SEK in December 2023. And that is increase in interest bearing liabilities, that's referring to loans to finance constructions. Regarding cash flow, I can point out that net cash flow from operations amounted to 422 million SEK compared to 82 million SEK last year. And cash flow from operating activities was net minus 257 million SEK due to minus 679 million SEK in adjustments of working capital as we invested proceeds into projects. Cash flow from investing activities increased with 184 million SEK. And that gives us the cash flow for the year of minus 73 million SEK compared to 403, also negative amount for Q4 2023. And cash equivalents end of the year amounted to 356 million SEK. And regarding projects under construction, 456 megawatt was under construction end December 2024. So far with degree of completion of total 94% and the remaining revenue recognition that is 6% is expected to be accounted for in Q1 2025. And we still estimate that the delays will not have negative impact on Aeolus margin. And the rest of the ongoing constructions, Boab, Dollebo and Fogelås in Sweden are on budget and time plan. And the recognition of revenue reported as net sales for these projects will start once the projects are divested. And I'll hand it back to Per now for a comment on the outlook.

Thanks, Katarina. And just to finish off by underlining what we are focusing on in the near term, we had the close of the POM best sale expected in Q1 with 230 to 235 million US dollar enterprise value and this will lead to a significant reduction of the balance sheet also. And as Katarina mentioned, we're looking to complete the Stor Sjölksjön wind project with an agreement with both our customers and the turbine supplier. And there is a final construction revenue recognition with 6% remaining. That will also trigger the start of the asset management services that we will provide to our customers for these 42 wind turbines. We have the ongoing sales process for Fogloss, Boab and Dollebo. and the Pneva project in Latvia that is progressing well, where we started up the sales process. And that is the same for the Ölme onshore wind project in Sweden, and for the Rokkasekia BESS project of 125 megawatts. So finally, before proceeding to Q&A, I want to mention that we will distribute a very short survey via email to the participants of today's call. And the purpose is to improve our investor communications. And your feedback is very valuable. And we hope that you are able to take a few short minutes to respond. So thank you all for listening in. And we will now proceed to the Q&A session.

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 Lara from Motadi. Please go ahead.

Hi, Lara here from ABG. As you know, the offshore wind industry has been facing some headwinds recently, both in Sweden and, as you mentioned in your report, in the US. So I just wanted to ask you a bit about your long-term view on offshore wind projects for Euless, given the recent events.

Yes. Thanks, Lara, for the question. Our long-term view is that a lot of offshore wind will be needed in most markets to face the challenges and to meet the electrification targets. and in near term it is a needed support for for the project both political support and some risk risk sharing uh we we don't have any offshore projects in the in the in the us portfolio at the uh at all um and in in the uh the When it comes to our Swedish projects, we develop them at a slower pace to preserve values in the projects and to have control over the timing.

Yes, thank you, very clear. And my second one is on your onshore projects, Fågelås, Boalp and Dollebom. You mentioned that the expected COD is in the second half of the year, but when can we actually expect them to be divested?

We are in the sales process in some quite advanced negotiations, but it's definitely a slower market currently, but we definitely expect to sell them before COD.

Thank you very much. My final one, I just wanted to ask a bit about . It's quite similar project to PoEM. Are you planning on constructing the project for the customer similarly to PoEM, or what's the plan?

We prefer to stick to the asset-light model of selling the project rights and potentially construct on behalf of the investor and have the construction financed by by the investor. So we must see a clear upside when it comes to profitability to take on that construction risk.

Okay, great. That was all from my end. Thank you very much.

Thanks. The next question comes from Urian Roden from Carnegie Investment Bank. Please go ahead.

Yes. Hello, everyone. I'll continue with what I said. I know it's very hard to have a very strong view on the political landscape. But in your view, is there anything that is indicating that it could be harder today relative to what they expected, let's say, three months ago? Or do you really think that the sales process should be as smooth as you expected before?

Of course, the geopolitical risk has increased across the globe. I would say, if we take it more generally to start with, we have still a positive view on the American market and our portfolio. there and we see a large interest for for both this this project the rocket second project and and others as well and the interest from from banks and investors to to participate in the in the projects and and This is also a purely grid project since it's a standalone battery project. so uh we sometimes hear the the the president doing speeches against renewables and especially wind and certainly about offshore offshore wind what has happened is that the There's been a pause in leasing out federal land to renewable projects, but that does not affect a project like Råkasäcka. And also, we have a lot of projects on... privately owned land and also land that is owned by the different states.

Okay, thank you. Some of my questions have been answered. But if you look at P&AVA, how do you view the market for Ulmuga projects in the Baltic states right now?

relative to, let's say, Sweden? There are small countries, the Baltic states, with quite low consumption, both PNV and our upcoming next project, Valpena. but they are a large project compared to the size of the countries which affects what the investors that can invest in those countries and there's definitely a higher risk compensation needed to invest in those countries. There is also, on the other hand, they have decoupled from the Russian electricity system, also now physically. And there is strong incentives to connect the grid and the market through Finland, the Baltic States and to Poland.

Okay, thank you very much.

Thanks.

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.

Thanks for those questions. We'll now turn to the written questions in the chat. um and uh harley bjorkman investor relations manager will will read the the questions and we'll try to answer them as good as we as we can and there are several questions and if we cannot answer all of them in this call we will get back to you with the in in writing thank you pat um hello everyone

First of all, there are a couple of written questions that have come in that I'll summarize in one. So have you considered launching a share buyback program during 2025? And what is the board's view on buybacks compared to dividends or keeping money in the company?

Yes, there is an existing mandate for the board to launch a share buyback program. that hasn't been used so far during the year. It's of course up to the board, but I would say it's reasonable to think that the board will ask the general meeting for a similar mandate for this year as well. We have the dividend policy saying that distribution should be first-hand through dividends and that in the range of 20-50% of profits. That means also then that we are willing to invest 50-80% in growth and in in projects if it makes sense in a way that it supports our return on equity targets. And so it's of course always a balance. And the reason for the current share buyback mandate not being used is I would say mainly related to the to the capital deployed into the construction projects and the currently quite high net debt position that will shift a lot when the POM transaction has been completed. Thank you, Per.

One more question now on relating to POM. Can you please provide more details? This is asked by Jakob Danielsson. Can you please provide more details on what kind of requirements that remain to be fulfilled before you can close the POM deal?

It's to reach a certain level on the construction. of the project and then it's related to more No normal closing conditions. It's quite a lot of detailed regulatory approvals for the incoming investor that needs to come in place and also for the tax equity. investor to have all conditions met.

Thank you. One question from Axel Lindberg. Does it make sense to build wind power in SC2 and SC1 at all going forward? It seems like the profitability must be much, much better in the Baltics or SC3 or SC4 for that matter.

Yes, we currently have significantly lower power prices in the north of Sweden in price areas SE1 and SE2. It's all dependent on how the consumption will grow, when the large industrial electrification projects will be carried out. And therefore focused a lot on in the recent years in project development in the south of Sweden and the other markets that were mentioned. For projects in SC1 and SC2 currently, I would say that they must be combined then with an offtake agreement for electricity long term, probably by bilateral agreements with a large electricity consumer.

Thank you. I believe we've covered all the written questions at this point. So handing it back to you.

Thanks a lot for listening in and wish you all a nice day.