Eolus Vind AB (publ)

A warm welcome to this presentation of EOLU's results for the first quarter 2025. Your presenters today will be myself, David Torsson, CEO, and Katarina Persson, CFO. Aeolus is a leading pure play developer shaping the future of renewable energy. We're positioned to take advantage of the structural growth in the renewable electricity demand resulting from worldwide electrification and decarbonization. We apply our core asset light business model to create value efficiently in every step of developing our diversified portfolio of onshore and offshore wind, solar and battery energy storage projects across six markets and a portfolio of 25 gigawatts. Major energy investors trust our 35 years of proven experience executing and optimizing market leading energy assets. I will begin with a walkthrough of the Q1 highlights and give an update on our portfolio, including some news on external reporting. Katarina will follow with a close look at the financials and I will then conclude the presentation with our view on the near-term outlook before we move to Q&A. We achieved 164 million SEK operating profit, mostly due to the sale of our 100 megawatt best project in home, California, where we have so far recognized 75% of the expected profits based on the construction completion method. So we have still 25% remaining from that project. Together with our partner Hydro Regn, we also formally handed over the Swedish onshore wind project Storskillsjön to our customers Meag and Hydro. It's a project of 42 wind turbines in the municipalities of Sundsvall and Timbo. and thereby transferring 260 megawatts from our development portfolio to our asset management portfolio. So for the first time EURUS now manage more than one gigawatt of assets on behalf of our customers. The first quarter 2025 was a strong start for us in a turbulent context. So if we look at what we call value realization, our Value realization was strong with 275 million SEK collected from the sale of the home and where we expect an additional payment in the range between 25 to 30 and a half million US dollars by commercial operation. The final payment amount depends on certain performance conditions and the project was divested at 75% degree of completion and the remaining 25% is then expected to be completed with revenue recognition during Q2. And I know that some may have expected 100% revenue recognition already in Q1. The transaction meant that all liabilities and assets connected to the project left our balance sheet. substantially reducing our net debt and working capital and increasing the equity to asset ratio and our order backlog. As part of the transaction and completion of the project, we acquired all future guarantees of origin from the project at the fixed price. We have then resolved those rights at a good margin. where we expect 100 million SEK of revenues and 100 million SEK of the cash flow over the coming 10 years. So that means roughly 2.5 million SEK expected in revenues and also in cash flow without any costs for each quarter during the coming 10 years. If we turn to the strategic review of the offshore wind, That came to an end during the first quarter. We have concluded that there is currently little commercial viability in offshore wind in the Swedish and Finnish markets. We have therefore taken measures to reduce staffing and to minimize product development expenditures going forward. There is no question that offshore wind is needed to achieve the ambitious plans of national politicians and to reach climate goals. electrification of the energy-intensive industry and the market needs to return. But that would require more certainty in electricity demand growth and credible policy support. Of course, Uncertainty has rocked the macro environment for all sectors due to the trade policy changes and renewable energy is not an exception. But EURES has little direct exposure to tariffs because our suppliers have a large degree of local or regional manufacturing. And those suppliers do import components and materials from abroad and tariffs will likely affect their pricing. We work to ensure that the risk of the tariff driven price changes are isolated and managed in our contracts with both suppliers and customers. And we need to be able to pass on such risks further down the value chain. We also announced a potential bond issue after the quarter closed due to the subsequent macroeconomic turbulence. The bond market activity decreased across the board during April. We see positive trends in the market and we continue to monitor the market and the alternatives together with our financial advisor DNB. Because of the increase in the short-term uncertainty, the board decided to propose that the payment of dividend for 2024 to be divided into two installments with the 0.75 sec paid out in May and 1.25 sec paid out in November. And the purpose of this change was to expand our headroom for maneuver in the short term if conditions would have become worse than expected in beginning of April. Our progress in the value creation pipeline was steady in the first quarter. We have almost 1.5 gigawatt of value in mature projects that we aim to realize over the coming three years. Fogloss, Dollebo and Boab construction proceeded according to plan. installation of the turbines are ongoing in all the three projects. And we have made substantial progress on securing a PPA for the projects. A PPA would lock in long-term revenues and strengthen the commercial attractiveness of the projects. And imperil negotiations with potential project buyers are ongoing. Our Latvian project Pinova is attracting interest and negotiations with the potential customers are ongoing and we're also seeking a PPA in parallel for that project. Fageråsen, which is one of our larger projects in Sweden, is a joint venture with the local partner Dalarvind. We are in the transaction market with that project and we are seeing solid commercial interest and are making progress with potential buyers there. Mabek, a Swedish onshore wind project with a potential hybrid component achieved an unimportant value creating milestone with a positive environmental permit decision in first instance during the quarter. And this is an extremely good project from a wind resource perspective. We continue to develop our investor communications to increase transparency and understanding of our business. And close watchers may have already picked up on the latest change to project portfolio reporting. We have now split the phase early development into early and mid development. So the structure aligns better with how we track value creation internally. And a project in mid-phase is of course worth more than it is in early phase. And the update can be seen on this slide, where you can see that we have 20.2 gigawatt in early phase, 3.3 gigawatt in mid-phase and 1.8 in late phases. And note also here that Poland and US, two key markets, make up an increasingly larger share of our mid-phase portfolio. And this is in line with our growth positioning and long-term view of market development. Another piece of news in our communication is that we are making available more granular project portfolio data. You can now find an Excel spreadsheet comprising the full development portfolio in megawatts, split across price area, technology and maturity. And this data will be updated and shared quarterly. I'll wrap up this section with a look at the progress toward our financial goals for 2025 to 2027. Our first quarter of the business plan puts us slightly ahead of our EBIT target. Return on equity for the quarter is at 17%, so we're above the 15% target. And our equity to asset ratio is substantially above the 30% target and is at 61%. I'll now hand over to our CFO, Catharina Persson, for a walkthrough of the quarter's financial figures. Okay.

sorry for the delay um thank you and hi everyone joining the call today our net sales for q1 amounted to 1 billion 975 million sec yielding an operating profit of 164 million sec and earnings per share of 3.60 sec at the close of the quarter our equity asset ratio stood at 61 percent And all key figures are significantly above the first quarter 2024. And I will now go into why that can be the case. As a pure play developer, our revenues derive mainly from large project sales. This means key reporting figures can be lumpy and vary widely between reporting periods. EBIT will rise considerably in the quarter of divestment and construction management revenue recognition, especially for a product that has started construction like POM. We capitalize product cost on our balance sheet under products under development, products under construction and advance payment to suppliers. And product topics for equipment and construction services increase working capital significantly when we build on our own books. Working capital will then significantly reverse when we divest the product with a high capitalized CAPEX like POM. Our net debt position is similarly affected. It increases with product cash outflow and use of construction credits in products that are under construction, and then decreases as the product construction credit is either amortized using sales proceeds or transferred to a new owner when the product is divested, like POM. This slide shows change in operating profit compared to Q4 2024. This is mostly a story of impact of POM with a large increase in revenue and a corresponding large increase in cost as capitalized costs are recognized on the income statement. Also, the completion of Storfallfond has contributed to the revenue. Other external costs decreased somewhat, while costs for employees increased due to one-off redundancy costs as we right-sized the Swedish and Finnish organization. Operating profit amounted to 164 million SEK for the quarter. And also note the effect of late-stage product sales like POM on our margin. And a product that is sold before construction start could yield the same operating profit, but with significantly lower revenue and capitalized cost affecting the income statement. Opening cash balance for the quarter was 356 million SEK, and closing cash balance was 200 million. Positive contribution, mainly from home payment, but also recurring asset management fees. There was also a substantially negative cash flow contribution under change to working capital from payments related to ongoing constructions of the onshore products, Vogelos, Dollebo and Boab. And the remaining POM revenue of 25% is expected to be progressively recognized until completion and has been added to the order backlog, which amounted to 750 million SEK in total at close of the quarter. Negative cash flow resulting from transfer of product debt financing for POM to the buyer and the cash flow effect is equivalent to full amortization recorded under financing activities. Looking at the balance sheet, we opened the quarter with total assets amounting to 4,562,000,000 SEK and ended at 2,841,000,000 SEK and that is a net reduction of about 1.7 billion. The change had a large effect on net debt, which decreased by about 1.4 billion SEK, and on our equity to asset ratio, which increased by 23 percentage points to 61%. The change is a result of the POM transaction, which transferred the project assets and debt financing from Aeolis to the buyer. We had a substantial increase in advance payments to suppliers and mainly equipment for Fogelås, Dollebo and Boarp. Account receivables increased with invoices issued for Storskjellskön And prepaid expenses and accrued income increased by 121 million SEK and is referring to the percentage of completion for POM. And cash decreased due to construction CAPEX in Fogelås, Dolleby and Boab, but also due to investments in other projects under development and other expenses. And finally, looking at projects under construction, POM has now been added at 75% degree of completion, while Storskjölsjön due to the handover has been removed from the list. And the remaining 25% of revenue for POM is expected to be recognized in Q2. And with that said, I'm handing it back to Per for comment on the near-term outlook. And thank you.

Thank you, Katarina. Our focus is on advancing sales for Fogelås, Dollebo, Boa, Pinova and Fageråsen. Home construction completion and the final collection of The final milestone payments expected to range between 25 and 30 million US dollars expected in Q2. We're looking to close pay as produced PPA for Fogelås, Dalbo and Boa. and line up key supplier contracts in late stage projects. We have also significantly, during the last quarters, advanced our next Latvian project, Valpana. So we're performing a lot of design optimization for that project in line with the environmental permits that we have received. And we're looking to optimize the financing structure for business plan 2025 to 2027, including a potential bond issue. And of course, we keep a close eye to and evaluate and mitigate the value chain tariff exposure. And finally, before proceeding to Q&A, I wanted to mention that we will once again distribute a very short survey via email to the participants of today's call. And the purpose is to improve our investor communications. We are very grateful for your input last quarter and hope that you can recognize some of the changes already made in response to your feedback. Thank you for listening and we will now proceed to Q&A.

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 Dafina Shehu from ABG Sundal Collier. Please go ahead.

Hi, thank you for taking my question. My first question is, you mentioned that it was expected receive a stone payment for the poem project in the range of USD 25 to 30 million. Is this payment part of the project margin or does it relate to reimburse project costs?

It will be high margin on that since we have already been reimbursed for all the project costs that we've had.

Thank you. And you reported an order backlog of 750 million SEK. What is the expected timeline for converting this backlog into revenue and what are the key projects contributing to this?

Home is the key project, of course, of the order backlog.

Yes, thank you. And my last question is, in your report you mentioned strong demand for PPAs for ALS projects. What is your view on the current PPA market dynamics and how is ALS ensuring attractive PPA terms for its projects?

We see definitely a trend for request for PPAs and mainly has produced PPAs from the investor side. On the sell side for PPAs, it's mainly the data centers and both cloud service centers and the AI driven data centers that provide those kinds of PPAs. And we have a long, long history of securing PPAs. We've done for the last 10 years, PPAs with both Google for six or seven wind projects with Amazon, for instance, on both sides of the Atlantic. And the pay as produced PPA is a PPA where we don't take any risk in volume, but we get fixed price per megawatt hour as produced.

Yes, thank you.

That was all for me.

No more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Hello everyone, this is Harald Kevalle Gökman, IR manager at Eolus. I will now go through some of the written questions and in some cases also collect them together to make sure we cover all incoming questions. I'll start with one on the Stor Själsjön transaction. The sellers used an option to acquire the guarantees of origin. I believe it was that exercise that option. And the impact for Eolus is that roughly 100 million SEK in EBIT that was expected to be recognized today now comes evenly distributed over the next 10 years as a 2.5 million SEK cash flow and EBIT each quarter. So an opportunity to clear up transactions.

Yes. The investor in the project valued the guarantees of origin at a very low value. way below the market price. When we sold the project a couple of years ago, we agreed on an option for Eolus to buy the future guarantees of origin from the project for a fixed price. and that option we have exercised and we have in our turn sold that future or entered into an agreement with a buyer of the guarantees of origin so all that is produced from the wind project during the first 10 years we will sell to this buyer also at a fixed price per guarantee. And yes, we expect to have revenues which equals EBIT since we don't have any costs associated with it. of 2.5 million SEK per quarter and over the 10 years that amounts to 100 million SEK. At EURUSD we haven't in our forecast accounted for that this would be a profit recorded in the first quarter, but that we would uh record it as we deliver the the guarantees of origin in the in the future but this is of course a very good deal for us and it also means a stable stable cash flow for for the voters to come or and the 10 years to come and we have also in this we've made a sales agreement so selling the next 10 years but what we have bought is the right to the guarantees from the project as long as the project is in operation which is estimated to be 35 years.

A question on buyback of shares. You previously talked about potential buyback of shares and the milestone payment from Centennial Flats. Your decision to split up the dividend payment makes it look unlikely that you will do a share buyback. Is that the correct interpretation?

The board... The EU currently has an unused mandate from the last year's annual general meeting to do share buybacks to just the capital structure. The reason for that it hasn't been used is that we have deployed significant capital in first the POM project and now currently in the Boat, Dolebo and Fogelås projects. And of course the The sales of those projects will, of course, free up a lot of cash. So the board is seeking the same mandate for the coming year. And in our financial targets and in our dividend policy, it also states that share buyback can be used as an alternative for dividends.

Thank you. Next question from Oskar Rönnob at Kepler Sjödrön. What kind of working capital release can we expect for this year, i.e. cash inflow?

It's mainly, of course, from the sales of the projects. Currently, we have invested like 800 million SEK in the Boab, the Dolabo and Fogelås projects. So it's more higher than 50%. So a substantial amount. will be of course released from the sales of those projects and of course also from sales of Pinava and the Falderåsen project. But of course, we will also at the same time have to continue to invest in the late stage pipeline to secure value from those projects and make them commercially attractive.

Thank you. A question from Pamela. Given that the US is a large part of your development portfolio, what is your view of the recommended adjustments to the IRA credits as announced on May 12th by the Ways and Means Committee and the outlook for your growth in the US market?

it might be too early to do the analysis of the proposals to put forward the other day. But of course, in general, it's good if the rules and regulations is being clear, so it's more or less uncertainty in the market. In general we think it was a proposal that was better than expected. Best of course is if there is a bipartisan agreement between the Democrats and the Republicans about it, just as it would be in Sweden regarding energy policy. In the US, offshore wind has come to a complete halt, but I want to emphasize that EURES is not involved in any offshore activities in the US. There has also been a The presidential order signed a policy leasing out federal land to wind projects. We have some such projects in early phases, but of course then we have to adapt and prioritize projects on privately owned land and state-owned land. And also we're focusing a lot on solar PV projects in California, Nevada, Arizona, and best projects and combinations of them. And they are especially the battery energy storage projects are the ones that are least affected. So we have a positive view still on the American market and the needs and demands are huge for the decades to come.

Thanks. We have received two questions that are similar regarding the bond. So I'll collect them into one from Marcus and Sande. Why do you want to add long-term debt through the bond to the capital structure?

We see that it fits good in the capital structure we want to realize the business plan for 2025. So on top, we have equity, of course, with a return requirement of at least 15%. We see that we can use the bond proceeds for investments in our project pipeline, mainly in the later stage if we are not able or if it's not the commercially best decision to sell early or at ready to build stage. And in addition to this we are negotiating more flexible construction facilities. So it is all about to be able and be in a good position to realize the value of all the investments we have done in the growing pipeline during the recent years.

We have another question from Sande. What are the remaining steps to begin construction on the Nevada BEST project?

That would be for for the next project in line, Rokkasekja, I guess, since the POM project is constructed and is under energization as we speak. So we have the grid connection secured. It has been fully permitted with all the main permitted all the main permits, so procurement of the battery energy system and Code construction agreement, MPC agreement and tolling agreement that is like kind of a PPA. Those are the main activities that is needed to both make the project sellable at the market and also bankable for non-recourse project finance and we're active in all those processes.

Thank you Per. That was the last of the written questions we have received. We may have time for one or two more if there are any others so please go ahead and write in if you have any further questions. I believe we are done. So thank you.

Thank you all for listening in and wish you all a nice day. Thank you. Bye.

Thank you.