Orrön Energy AB (publ)

Good afternoon, good morning and welcome to this Oren Energy first quarter 2024 financial results webcast. Coming from Stockholm, Sweden today and happy to have so many of you joining us. I would like to take this opportunity to remind you about the Q&A function. So you have a Q&A function at the bottom of your Zoom screens and there you can... and should type in your questions. And we'll have a Q&A session at the end of this presentation and make sure that all your questions gets answered. And presenters today will be Daniel Fitzgerald, Orin Energy's CEO, and Espen Henne, Orin Energy's CFO. And with that, I would like to hand over to Daniel Fitzgerald. Thank you.

Thank you, Robert. And it's a pleasure to be here today for the Q1 results. And we will start with Oron Energy. Oron Energy is a pure play renewables company. We're diversified across technologies and primarily in wind, solar and batteries. And we have organic growth platforms running across a full lifecycle of the business from early stage greenfield projects all the way through to repowering life extension operating assets. In 2024, we're going to produce around 1000 gigawatt hours of power generation from our primarily Nordic assets. And we have established a 40 gigawatt onshore pipeline of opportunities, which is going to provide the growth vehicle for this company into the future. And you can see on the right hand side that we're active across five of the countries. And I'll touch on a little bit later in the presentation the sale of our Lycanger asset, which was a non-core hydropower asset in Norway, and that sees us exiting from Norway at this point in time. I think important to focus a little bit on our corporate strategy, especially in markets like we're seeing today and like we've seen over the last two years. And our corporate strategy remains completely unchanged. There's two key parts to our strategy. The first is building a portfolio of cash generating assets. The second is focusing on the large scale and long term growth through greenfield project development. And I'm pleased to see that both of these sides of the business are performing really well in the first quarter of this year. On the operating side, we do have a portfolio that we've acquired from as early as 2022 all the way through to today. And we have a range of opportunities to grow that portfolio organically. And what we're seeing more and more is regulatory regimes are opening up a little bit more favorably for us to step into the life extension, the permit extensions that allows us to to extend the lifespan of assets. We're seeing technology coming in which allows us to increase the power generation from existing assets. And we're also putting new technology like batteries against existing grid connections. So that part of the business is performing really well. And on the greenfield side of the business, I'm pleased to share that we're continuing to make really good progress on that. We'll touch on it as we go through the presentation, but we're starting to secure land positions on our UK and German portfolio. We're starting to see projects come to fruition in the Nordics as well. And so the corporate strategy really does remain unchanged and focused on these two core areas where we see value. On the Leichhanger asset sale, we are a growth company. We are aiming to grow, but we will take advantage of market opportunities as they arise. And I think the Leichhanger sale is a perfect example of that. We managed to sell the Leichhanger asset in Q2. That transaction has now closed already. And we've sold the asset to Sognacraft and achieved €53 million in terms of enterprise value for the asset. This is a non-core asset for us. It represents less than 10% of our production on an annual basis. Yet the sales proceeds represents around 30% of our market capitalization and around 20% of our enterprise value as a company. So it really is disproportionately valued compared to where the share is valued today. And we're seeing that disproportionate value across the sector in many ways. We've said it for a number of times recently at the Capital Markets Day and I think you see it in the Ox2 transaction earlier this week where private buyers or strategic buyers of assets are putting a much higher value on companies and assets than the public markets are putting into the share price of companies. The Leichhanger sale is really key for us as well. It significantly strengthens the balance sheet of the company. It provides a lot more liquidity headroom and ample opportunities for us to go and grow the business. And we aim to recycle those proceeds into opportunities with a much higher rate of return. On the right-hand side of this page, you see the impact that Leichhanger has on our liquidity. And where we exited 2023 with around 100 million euros of liquidity headroom, We take in the proceeds of Laikanga. We will reduce our finance facility from 190 to 170 million euros. But at the same time, we significantly reduce our debt position from 90 to around 40 million euros if we take into account the proceeds. And that results in 130 million euros worth of financial firepower to go and grow the business. And in markets like we're seeing today, where we are seeing the undervaluation of companies, there's ample opportunities to go and grow and invest not only in our own opportunities in greenfield business, but also into the market. If we focus now on the first quarter results, we delivered our highest production ever in the first quarter of 274 gigawatt hours. And that's with Karsgrove now fully online for the full quarter. Karsgrove is one of our key assets in the SE4 price region in southern Sweden, which is one of the highest priced regions in Sweden. That's been online for the full first quarter. And we've seen high uptime and good performance from that asset. And so that contributed to the increase in production volumes. We achieved a price of 49 euros per megawatt hour for the quarter, resulting in around 6 million euros of EBITDA on a proportionate basis for the quarter. We ended Q1 with 91 million euros of net debt, and as I touched on with the Leichhanger transaction, which closed in early May in the second quarter, that net debt will come down significantly with the proceeds from Leichhanger. This strengthens the balance sheet, it gives us increased financial firepower, And finally, in Q1 as well, we made good improvements on our greenfield development pipeline and we continue to see that moving forwards in many fronts, both in the Nordics through some of the smaller scale opportunities and opportunities close to existing assets, but also in the UK and Germany where we've signed some exclusive and binding land agreements, which will continue to mature that portfolio going forwards. important to focus a little bit on where the markets were in q1 and i think on this chart you see the whole of 2023 and then the early part of 2024 as well as we've touched on in in prior results presentations you see the impact of storm hans on the green line really depressing the the pricing in q3 of last year and As we discussed in our Q4 results, the price has come up into the end of Q4 and into early Q1, and we're seeing pricing normalizing a little bit more around that 50 euros a megawatt hour as we achieved in Q1. But a couple of things still remain in the market pricing. We're seeing much higher volatility than we have seen statistically over a longer historical period of time. And that's still playing in the markets today. So although we're achieving a price of 50 euros a megawatt hour, we are seeing intraday and daily volatility increasing as we come into the early part of the year. And I think if we forecast or if we look at the futures and the forecast for power, we're looking at a lifespan of our assets of between 20 and 30 years before we move into repowering and life extension. And I think the markets are pricing in today a much lower price of energy than what we actually need to deliver the energy transition. And if we really want to build out all of the offshore wind And all of the technologies that are required to drive the energy transition, we're going to see a much higher structural price of energy in the long term. And you see that on the right hand side of the chart where against the German, UK and Nordic futures prices, you see the break even costs of all of the technologies. We remain strategically in the lowest cost technologies. We've taken that view and we'll continue to take that view. And I think challenges remain around the build out of the energy transition if we continue to see significantly lower prices than where we've been over the last one or two years. Our power generation outlook for 2024 is updated on the back of the LightHanger transaction, and you can see that on the right hand side at around 1000 gigawatt hours of power generation for the year. You can see where we are against the first half production with our Q1 number there at 274. And importantly, the phasing of our production between the winter months and the summer months changes slightly now that Laikanga is no longer in our asset base. And so we see 60% of our production will happen in Q4 and Q1 of the year, and 40% will happen in the summer months where typically wind speeds are a little bit lower than the winter months. We made good progress in Q1 on our greenfield pipeline, and this is a large scale early stage pipeline of opportunities. In Germany, we've signed binding land agreements now for 500 megawatts worth of solar and battery projects, and they're moving into the permitting processes as we speak. And so we expect that these projects will move towards a ready to permit and soon ready to build milestones over the coming 12 months. Also in the UK, we've secured exclusivity agreements on a range of land for some of our first projects. And similar to Germany, we expect within the next 12 months, we'll be seeing the fruits of some of the work we've been doing on this large-scale platform coming to the market. In the Nordics, we've now received building permits for 37 megawatts of batteries. Our first battery project, which is a small-scale project in the north of Sweden, that's in the construction phase, and we're expecting to bring that online at the end of Q3 of this year. And we touched on in our Q4 results a little bit the acquisition in Finland, and we've stepped into a portfolio of around 180 megawatts worth of wind. and some small battery projects across four projects in Finland. And we expect those to move into the permitting phase now through the course of the next six months, and then moving towards ready to build in 2026, 2027. So exciting to see that this portfolio continues to grow not only in the Nordics with a range of opportunities, but also across the larger scale platform in the UK and Germany. And we expect some of those projects to come to market in the next 12 months, which will really demonstrate the value in this part of our business. And with that, I think I'll pass over to Espen for the financial highlights for 2024 Q1.

Thank you very much, Daniel. Good afternoon, everyone. We'll go through the financial performance for Q1, also touch upon the financial outlook for the full year, especially with focus on the impact from the Lake Hanger divestment, which Daniel already mentioned. To sum up the quarter, Q1 was a quarter with underlying good performance across the asset base. Obviously, the big news with most impact for the company is the like-hunger divestment, which we announced after Q1 end, which has now closed. It closed early May. We think that transaction was done at a very accretive price for the benefit of the company shareholders and provides us with a lot of optionality and financial flexibility as we move forward. You'll see more of that as we go through the slides. Just some of the financial highlights for Q1. We had a power generation of 274 gigawatt hours at an achieved price of just shy of 50 euros per megawatt hour on average, generating revenues of 14 million euros and an EBITDA, if we exclude non-cash items, of 6 million euros during Q1. When we ended the first quarter, we had a proportionate net debt position of 91 million euros, which is a small reduction compared to what we had at year end 23. And as we have announced earlier, early January, we increased our debt facility from 150 to 190 million euros to exercise a portion of our accordion option in that facility. And then after quarter end, we we sold like we announced then in April for an enterprise value of approximately 53 million euros and consequently also reduce the debt facility. Then on the back of that significant increase in liquidity, we reduce the debt facility from 190 to 170. So net, we have an improvement or an increase in liquidity headroom for the company in the order of 30 million euros as we have proceeds of around 30 million euros against the reduction of debt facility of 20. Meaning that as of today, if you take the Q1 reported net debt and adjust for the lacquering sale, we have north of 130 million euros of liquidity headroom, which of course provides us, as I said, with a lot of optionality so we can pursue both organic and inorganic growth opportunities as they arise. If we then move to our guidance, and just to sum up, Q1, we did deliver in line with our guidance on all parameters, as you can see on the slide here. If we start with operating expense, €4 million during the quarter against the fuller guidance of €15 to €17 million. As you might have seen in our quarterly report, we are reiterating our full-year guidance of 2015 to 2017, also post the Laikanger sale, where we see we have a reduction in OPEX on the back of the Laikanger divestment. At the same time, we see some increase in grid tariff costs in Sweden offsetting each other. We're sticking to the 15 to 17 million euro guidance for 2024, and Q1 was very much in line with that plan. G&A expense, 2 million euros for the quarter, and we are repeating our 9 million euro full year guidance. meaning that you should expect a small uptick in the coming quarters to reach the guidance level. For Sudan, legal costs in line with our €8 million full air guidance with €2 million for the quarter, and we expect that run rate also for the coming quarters. Capital expenditure 2 million euros in Q1 against the full air guidance of 14. We expect that based on the current project plans and activity set that the most of our capex will be back-end loaded in 24. So you should expect second half of this year to be higher than first half. but also with a modest increase from Q1 to Q2. But all, as Dan touched upon, when it comes to our greenfield portfolio and the progress of that, all is going according to plan and schedule. This phasing of cost is according to what we initially were foreseeing when we put forward our CMD guidance. Then a quick look at our key financial metrics for the quarter, comparing it to the same quarter last year and also the preceding quarter. If we start with revenue on the left-hand side of the slide, you can see we had revenues in Q1 of €13.5 million, which is quite similar to what we had in the same quarter last year, on the back of lower prices, but then helped by a full quarter contribution now from CarScrew, which we had now in Q1. It's the first quarter with with full contribution from that asset, which you can see that despite significantly lower prices, we are around the same revenue level and compared to the preceding quarter is a very significant improvement on the back of both higher volumes and also stronger pricing in Q1 compared to Q4 23. You see the same pattern in EBITDA, a bit down from the same quarter last year on the back of lower price, but also now we have some higher operating cost as we also have higher volumes with Karskruv in the mix, but a very significant uptick from the EBITDA we generated in Q4 23. Again, you can see the same in CFFO. If you focus on CFFO excluding working capital, as it's a bit cleaner and less and less volatile from quarter to quarter we had 3.9 million euros in q1 almost a four-fold increase from from the preceding quarter and just to note that the same quarter last year was very much impacted by the dividends received from ijvs so if you strip that out you can see the same change between q123 and q124 in cffo as we as we see in ebitda Then I look at our achieved price during Q1. The average Nordic system price during the quarter was 58 euros per megawatt hour, whereas our portfolio had an average regional spot price of 61, which then represents the geographical mix of our portfolio, which is quite favorable, where we have a high share of our volumes in what has historically been high-priced regions. which you can see the result of here in Q1, so €3 per MWh on average higher than the average system price. On top of that, we had a positive impact from some hedges that we have in our portfolio, €1 on average on our achieved price, and we achieved €2 for the guarantees of origin, which we sell in the spot market. If when you then compare that to the average achieved price of 49, you can see that we had a capture price discount of 50 euros per megawatt hour, which represents 25% capture price discount. Clearly a very positive development. So it's significantly smaller capture price discount. than what we saw in the second half of 2023, where we had a very elevated capture price discount of north of 30%. We have seen a normalization so far into 2024, and we still expect that our portfolio, on average or long-term, we expect to see a capture price discount around 20%. That was what we guided upon at our CMD, and we're still of the same view. Obviously, it's volatile. We will have quarters where you see a lower capture price discount, and we also have quarters with higher, but over time, over long term, we expect around 20% for our portfolio. Then if you move to the underlying cash flow generation of our assets, and as we have said before, we think this metric is a highly relevant and important metric to follow to track the underlying cash flow and financial performance and potential of our assets. For Q1, we had the revenues of 13.9 million euros if you include other income. operating cost of €4 million, as we touched upon already. And then G&A, if we strip out the non-cash items, €4 million, and that includes €2 million of legal costs. So then EBITDA, after excluding non-cash items, €5.9 million. And against that, we had interest expense of 1.7, which is our interest costs related to our external debt and capex, which is predominantly allocated towards our greenfield portfolio. So that's investments into future cash flow and future value creation. of 1.9 million euros during Q1. So you can see all in all for the quarter, we covered all our costs, we covered all our expenditure investments into organic growth, and then had a positive operating cash flow after interest and after all capex of 2.3 million euros. If we then look at our proportionate net debt, how that has developed over the quarter, and also comparing it with our outstanding debt facilities to get the total view of the liquidity of the company, you can see on the left-hand side, we started the year with a proportionate net debt of 92 million euros. uh we had a cffo excluding working capital of 3.9 and a negative impact from changes to working capital of just shy of 1 million euro and the mentioned investments into organic growth of 1.9 predominantly progressing our greenfield portfolio a 1.9 million euros means that the total reduction in proportion of that debt over a quarter of 1 million euro and resulting in a ending quarter net debt level of 91. If you then move to the right hand side of the of the slide, You can see they had a total cash position at the end of Q1 of €22 million, including the cash balances we had in our joint ventures. And then an undrawn portion of our RCF facility of €82 million, leading them to more than €100 million of total liquidity. But of course, it's important to note that when you take into account the impact from the light-hanging sail, that adds another €30 million on top of this. As we said, we have proceeds of around €50 million against a €20 million reduction in our debt facility. So at the end of Q1, adjusting for a light-hanging sail, more than €130 million liquidity headroom for the company. And then a quick look at our full year cash flow outlook. This is the same format as we presented at our CMD in February, but we're here now updating to reflect the lack of divestment. We are still applying the same achieved prices from 30 to 70 euros per megawatt hour, which we still see as a very reasonable range of realistic outcomes given current market pricing and futures. And on the back of that and our power generation outlook of 1,000 gigawatt hours now, excluding Laikanger, we will then have revenues between 30 and 70 million euros for the year, for the full year. Then moving from the revenue to the EBITDA, excluding the Sudan legal costs. And we want to stress again the importance of focusing on our EBITDA and cash flow generation, excluding the legal costs. our portfolio have a remaining technical lifetime of more than 20 years. And that's before you add repowering and before you add life extension. So, you know, 20 more that that more than 20 years, that's a minimum. And it will in reality be a lot more. And you compare that to legal costs, which will be in the current shape and form in 24 and 25 only. So two years of remaining legal costs in sort of current shape and form. and more than 20 years of remaining lifetime before you add the potential from life extension and repowering. So that's why the EBITDA excluding the legal cost is what is representative for the value of our portfolio. And you can see on the price ranges that we put forward here, we expect that to be between 6 and 44 million euros for 2024. with a EBITDA breakeven level of €24, meaning that we only need a cheap price of €24 per megawatt hour to be breakeven on EBITDA before you add the temporary legal costs. Moving then from that EBITDA before legal cost to the the reported EBITDA prior to non-cash items. So then you deduct the 8 million euros of expected legal costs for a year, and that results in a range going from minus 2 to 36 million euros for 2024 on that 30 to 70 euros per megawatt hour achieved price, and a corresponding break even of 32 euros per megawatt hour. If you then look at the full, the all-in free cash flow, free capex for 2024, where we then adjust for expected net finance expense of €6 million. That's a lower figure than what we put forward at our CMD to reflect a lower debt level following the Laikanger divestment. We also had in our original guidance payable tax of €1 million. That's also now removed because all that payable tax was related to the Laikanger asset. So now going forward, we don't foresee any significant payable tax for the company, since LightGang is not part of the power generation mix anymore. So all-in free cash flow pre-CAPEX going from minus 8 to 30 million euros on that 30 to 70 range. So I think it's a couple of things worth focusing on here. And first of all, you can see at the midpoint of that range at 50 euros, you can see that we are we will then fund almost entirely the entire all of the organic cash flow that we have for this year or 14 million euros. And even in the low case, you can see the low case of minus eight million euros for 2024. If you compare that to the more than 130 million euros of liquidity for the company, You can see that we have a lot of flexibility and resilience to fund all our current plans and also to pursue other organic and inorganic growth opportunities as they arise. And then in the high case, you can see that we are expecting them to fund our current capex for 24 multiple times. um also please keep in mind i mentioned the the payable tax earlier which we previously had in our guidance but now it's not relevant anymore as as we have a divested like on it and we have very significant tax shields for our remaining portfolio in total 500 million euros of tax shields split between Finland and Sweden, meaning that we will generate 500 million euros of EBITDA on average before we enter into any material taxpaying positions for the company. That is very valuable to us and means that you should expect to see a high conversion of EBITDA into cash flows for the coming years. And then, of course, on top of this, here you see the cash flow outlook from our power generating assets, so sort of our call it bread and butter business. But on top of that, there is obviously a lot of value represented through our greenfield portfolio, which we expect to see sort of the first results from during next year at the latest. And we are progressing these projects to be in position to to make the first divestments from that portfolio. which obviously is not reflected through this day-to-day cash flows as you see on the slide here. With that, I would like to hand the word over to Daniel for some concluding remarks.