Orrön Energy AB (publ)

Good afternoon, and welcome to Oron Energy's webcast for Q3 results. Joining me today, we have our CEO, Daniel Fitzgerald, and CFO Espen Henne, who will run through the report and latest developments in Oron Energy. We will finish with a Q&A at the end of the presentation, so feel free to send across as many questions as you have, and we will collect and go through them at the end. And with that, I would like to hand over to Daniel. Thank you, Jenny.

And welcome to our Q3 results presentation, where I'll be joined by Espen to run through the financials after we give an update of how we've performed during the quarter and where we are pointing as a company. And I think we've largely delivered in line with our strategy during the quarter. We have seen further headwinds on the production side, both with volumes and pricing, but pleased to share that we do have our first project sales in the Greenfield portfolio. We're on track with a range of those developments. And as we look forward into the markets into next year, we start to see increasing futures pricing and increasing performance across the assets, which should lead to higher revenues and higher cash flow for the business as we move forward into Q4. and into next year. As a quick recap, Orin Energy is the renewable vehicle within the Lundin group of companies and the Lundin family being a very long-term value-focused shareholder, still standing behind the strategy and supporting our growth in this sector. We have 380 megawatts of operating capacity. And in a normal year, that should generate around 1,000 gigawatt hours of production. And that gives us a long-term recurring cash flow into the company. asset base and some of our greenfield projects we have the opportunity to add organic growth we can extend lifetimes of assets we're looking at co-location of both demand and batteries we're looking at opportunities to to then increase production out of the existing asset bases and and user grid connections and facilities and infrastructure that we have in a more accretive fashion so that's active across all of our countries of operation And combined with that, we have greenfield projects which are running across five countries, and we're starting to see the first monetization out of that platform, which is really exciting to see and gives us a lot of strength as we move into later this year and early next year. And as we have done all along, we remain fully funded, fully financed. So we have a debt facility with sufficient headroom to move into significant M&A and transformational M&A. And in markets such as these, there's many opportunities that are starting to come to the fore that we will consider and look at. So we don't need to touch the equity side of the equation. I do know that the share prices can perform a little bit better than what we've seen in the last quarters. But this side of our balance sheet gives us ample flexibility to go and grow into the future without needing to touch the equity side of the equation. If we look then at the first nine months of this year, we've produced around 600 gigawatt hours year to date, and that's been impacted somewhat by both weather, where we have seen and continue to see some lower wind speeds, not only within Oron Energy, but also within our peer group and any of the producers across the Nordics. We do see a weather pattern over the last quarters that has been less favorable than we expect. We also had an impact in our production from price curtailment, and I'll touch on that a little bit more in the following slide. When we look at the revenues in EBITDA for the company, we've generated revenues of 23 million euros, leading to an EBITDA of negative four year to date. And Espen will touch a little bit more on the detailed numbers for Q3. And important to note in this, we have seen weak pricing this year. We're seeing futures pricing increasing as we move into next year. We've had Sudan costs, which is more than the negative amount on the EBITDA here. So excluding Sudan, we would be in positive territory on a proportionate basis. And then also as we look into Q4 and Q1, these seasonally are our strongest quarters. So we expect an uplift not only on volumes but also on price as we move into the winter months of the year. Those market conditions have been improving since the summer of this year, and it feels like we're out of the bottom of the trough in terms of pricing. So we have hedged some of the volumes in the second half of 2025. We continue that hedging program into 2026 at around, an average of around 58 euros a megawatt hour baseload pricing. And that gives us a bit more certainty on the revenue side of the business and allows us still with the unhedged volumes to profit from market improvement while protecting ourselves against the downside scenario, which we have seen both in 2024 and 2023, certainly in the weaker months and quarters of the year. very pleased to share in in our greenfield platform that in july we sold our first project and that was a 76 megawatt agri pv project for a total of 4 million euro consideration now half of that's been paid up front we have a profit of 1.1 million euros which is flowing through our profit loss uh this quarter and any of the the future contingent payments that we receive on this have no cost associated so we'll see those coming straight through the the profit and loss at the headline amount so this does really return a good performance in terms of invested capital and now we're starting to see multiple projects that are going to hit key milestones over the coming six to 12 months and we we expect this recurring revenue to continue in our business as we as we look forward If I look in a bit more detail at power generation, we've got a slide here which looks at the power generation by quarter over the last three years. And you can see there where seasonally we produce more and less. And so there's no surprise that Q3 is a weak quarter seasonally against where we normally perform on an average basis. Now, even saying that, we have been impacted by weather in the quarter. We have seen lower wind speeds, and we expect now to be around 850 to 900 gigawatt hours as a full year 2025 performance in terms of production. if you look quarter by quarter looking back through the um the years we're not a long way away from where we have been last year and q3 is lower than where we expect and the two elements driving our weather and price curtailment And if I look at our forecast for this year around that 900 level, we've curtailed around 100 gigawatt hours this year based on low pricing. So that would have put us up into a record year had we not curtailed. And that's a factor driven by the lower pricing. so as we move into q4 we expect volumes to increase we expect prices to increase and as prices increase we're going to see less of the price curtailment so not only do we see seasonal volumes improving but with price we also see additional volumes coming to fruition And I'm really pleased by what our team have been able to achieve in terms of making our assets more and more flexible. MLK is really leading on this through ancillary services and price dependent bidding with some management around the balancing costs. We've seen between one, one and a half million euros of additional revenues coming across our portfolio. either additional revenues or decreased costs just by adding this flexibility to our portfolio. And that really gives us some levers to play with as prices either move low or high on the balancing markets. As the volatility improves, we now have many more tools to play with. And as we go forwards, we expect CastGroove to receive the validation from SVK to allow us to participate more fully into those markets. And we're continuing that rollout across the rest of the fleet. So as of today, we have 80% of our portfolio active in the price-dependent bidding. We have 20% of our portfolio, which is MLK today, active on ancillary services, and Castgroove is just awaiting final approval from SVK to then provide those services as well. So that gives us a good platform into next year. And then as prices pick up through the next year, we expect to see higher revenues, higher volumes, and returning back to a normal production year for MLK. or on energy. And adding into that normal production year is hopefully some more recurring revenues from the Greenfield platform. And this platform really is delivering as expected. We have a multi gigawatt pipeline of opportunities across five countries. I'd say the most important UK and Germany at this stage. that are close to recurring revenues and material recurring revenues, with the Nordic pipeline being a little bit longer dated and some projects that we'll likely invest in ourselves. And France is still growing as a region. But UK and Germany are really driving that greenfield pipeline forwards. We see governments in both of these countries very supportive with high ambitions. We see high investor appetite for projects. And we still see electricity pricing and support schemes that really drive us to deliver a good developer premium out of these projects. So those two countries definitely are where a bulk of our focus is. And short term, we should see those recurring revenues coming. Our projects are developing as per plan. As we touched on, we've seen the first project sale in Germany. We have a second project that ready to permit and a range of projects that are coming later this year and early into next year. And we're looking at multiple ways to monetize this platform. I'd say the market is moving more and more towards portfolio sales. and a broader discussion around multiple opportunities rather than individual project sales. And so we'll investigate both of those options as we move forward and share with the market more information as we see the results from that. In the UK, we have been waiting for a while on the NISO grid reform. We now have a secure timeline where NISO have committed to confirm both the outcome of the reform, what that means for every single project and to offer up the new grid connection agreement. So that process is going to start communicating back with uh project developers as of the end of this year and so through the early part of next year we expect to hear more of the results from that and we'll be able to move the uk into that sales process as a sense today we have eight projects which is between seven and eight gigawatts worth of opportunities across solar co-located batteries and co-located data centers within that that group so we need to see the outcome from niso we need to see the detailed results And then we'll be able to communicate more with the market as we move into the new year. And with that, I'll pass over to Espen to focus on the financials and the Q3 numbers.

Thank you, Daniel. And good afternoon, everyone. Kicking off with some of the financial highlights for the quarter. Reported power generation came in at 135 gigawatt hours. This was, as Dan mentioned, negatively impacted by low wind speeds during the quarter, in addition also to our voluntary curtailment as a response to periods of low prices, which also, as Dan said, has saved us material amounts of costs without losing any significant revenue. So that's very valuable flexibility to have. In addition to the reported figures, we also have 10 gigawatt hours of compensated volumes. These are volumes which we receive compensation related to either ancillary services or related to operational downtime, which is covered under our availability warranties. The achieved price for the quarter was €31 per MWh. And I'll go through that in a bit more detail on one of the later slides. We had revenues of €2 million from our initial project sale in Germany, which was announced in July. And when we add that to our revenues from power generation, total revenues for the quarter came to €6 million. And EBITDA, excluding non-cash and G&A items for the quarter, came in at minus 2 million euros. And we ended the quarter with a net debt position of 83 million euros, which leaves the company in a very strong financial position, supported by a significant liquidity headroom under our 170 million euro facility. Taking a look at our full year guidance, we are delivering in line with our plans and are therefore also reiterating our outlook for the expenditure items shown on this slide. We have seen lower balancing costs compared to the previous quarter, uh partly driven by the measures that we have taken to mitigate this this is of course you know very positive and encouraging but it's also important to remember that these costs still remain at elevated levels compared to recent history so there's still potential for some cost reductions going into next year or beyond if we start to see a trend back toward more normalized levels for this item Next, let's look at some key financial metrics for the third quarter, comparing to the previous quarters, going back to the same quarter last year. Revenues from power generation were down compared with the preceding quarter. This is due to lower volumes. However, they are significantly stronger than the corresponding quarter last year, driven by a significantly stronger achieved price compared to Q3 in 2024. And on top of the revenues from power generation, as mentioned earlier, we also had €2 million from our first Greenfield project sale, which is then the upfront payment of the project sale with the potential €2 million contingent payment at a later stage, which we expect the conclusion on that contingent payment during 2026. That brings total revenues to 6.1 million, 400,000 higher than in the previous quarter. We can also see an improvement in EBITDA and CFFO compared with both the previous quarter and the same quarter last year. And the quarter on quarter variance is mainly explained by lower OPEX, driven by the lower balancing costs that we see in this quarter compared to the very elevated and high levels in Q2. Let's now look at some of the details on our achieved price for the third quarter and also the year to date period. The Nordic system price averaged 36 euros per megawatt hour in the third quarter, while the average production weighted spot price for our portfolio was 45 euros. Ancillary service income and sale of GOOs added one euro per megawatt hour to our achieved price, while hedging reduced it by five euros. And the fact that our hedges ended up out of the money means that prices turned out quite a lot higher than expected, which of course is very beneficial for the company to our revenues and cash flow. The capture price discount was just over 20% in the quarter, leading to a quarterly achieved price of €31 per MWh for Q3. And for the year to date, the average Nordic system price has been similar to Q3 at €36, while the average production-weighted spot price for our portfolio has been 43 euros, a fairly significant premium, which is explained by the favourable geographic location of our power-producing assets. Ancillary service income and the sale of GOOs contributed positively by €2 per MWh, and hedges had a negative impact of €1 before deducting the capture price discount, which has been 21% year-to-date. And this results in an average achieved price for a nine-month period of €35 per MWh, which is very much in line with the system price for the same period. Moving then on to the quarterly reported cash flow and our liquidity position. CFFO excluding working capital was minus 3.6 million euros, with a negative working capital impact of 0.8 million during the quarter. Cash flow from investing activities totaled negative 0.2 million euros, and this consisted of 2.3 million in capital expenditures, which is mainly investments into our greenfield projects. And this was almost fully offset by proceeds of 1.7 million euros from the announced project sale. So please keep in mind, we have 1.1 million reflected in our P&L, but on a cash basis, the proceeds were 1.7 million euros, with the difference then being book values. Then along with other minor invested related cash flows, we had a total cash flow leading to an ending proportionate net debt position of 83 million euros at the end of Q3. And this translates to just under 90 million of liquidity headroom, combining our cash balance with the 70 million of undrawn capacity under our revolving credit facility. Summing up then with an updated cash flow outlook for 2025, This reflects the actuals for the first nine months of the year, and we are applying achieved prices in the range of 35 to 45 euros per megawatt hour for the fourth quarter. This represents the likely range of outcomes based on current future prices and also takes into account the base load power price hedges we have entered into with the details shown on the slide. Starting with revenues, we expect these to end up between 32 and 35 million euros, with a corresponding EBITDA excluding Sudan legal costs in the range of 4 to 7 million. The EBITDA breakeven prices is expected to be around 33 euros per megawatt hour for the year. Including the Sudan legal costs, which we do expect to be significantly lower next year, EBITDA is projected to end up between minus 3 million and break even. Looking at free cash flow before CapEx, we expect to end up between break even and plus 2 million, excluding the legal costs, which we believe demonstrates resilience given the weak wind conditions and soft pricing that we have experienced throughout the year. including legal costs the same range moves to between minus seven and minus five million finally here we are also showing the base load power prices base load power price hedges that we've entered into for next year and the approach as also dan i commented on it's very much the same as for our 2025 hedges we lock in prices for a modest share of our power generation volumes when we consider the market conditions sufficiently attractive This provides strong downside protection against lower power prices, but it also allows us to benefit if market conditions improve, since the majority of our volumes will remain merchant. So with that, I'll hand it back to Dan.

Thank you, Espen. And before we go into Q&A, a few concluding remarks as we normally do. So I think our assets generate long term cash flows. We have to look at this business with a 20 and 30 year lens and note that the market conditions will be different during those periods. We're going to see highs like we've seen in 2022 and lows like we've seen in the last one or two years. But our asset base will will continue to produce for a very long period of time. And with the organic growth and opportunities to extend lifespans and to improve production and add other technologies, it gives us a really good platform that we can use over the longer time horizon to really generate strong revenues. We're financially resilient with significant headroom under our finance facility that allows us to move in terms of growth, investing into greenfield projects, new business and new opportunities. And I'm really pleased to see that our greenfield pipeline is starting to deliver revenues as of this quarter. And we expect that to continue as we move into the coming year. As we see markets improve, we've taken opportunities on hedging. We're starting to see some more M&A that's coming to market now as we're seeing the pricing improve. And with the firepower that we have on the balance sheet, we can move in that sector as well. So I remain optimistic as I look forward. We're positioned in some really good markets with pricing coming back, volumes coming back, and look forward to certainly Q4, Q1, and into 2026 as we see stronger performance. So with that, I think we move over to Q&A, and I'll invite Espen to come and join me back up here again.

Yes, thank you very much. We already have a lot of good questions, so if you have a question and you haven't submitted yet, I suggest strongly that you do so as soon as possible. So let's start with the market. It's currently a quite challenging market environment. Will you keep investing in new wind farms in Sweden given this, or do you have any other plans?

Yeah, I think it is an interesting time in the market. When we have troughs like this, it is a good time to build a business. So in the Nordics, if I look at greenfield projects, it's quite difficult to sanction greenfield projects today, given where the pricing sits. And we haven't seen much of that supply coming on. And over a longer period of time, we will see the impact of that supply. Sweden has turned off some of the offshore wind. They've rejected the permits for a whole range of offshore wind. And we're not seeing that growth in the onshore domain. So I think it's challenging to sanction, but that'll come back in the future. So we continue to have that exposure through greenfield projects. And on the flip side, we're seeing at this point in the market some really interesting opportunities on the producing asset side that gives us the ability to scale up our production. So I think it's an interesting time in the market, but it is challenging for new projects for sure.

So speaking of M&A, what kind of opportunities are you seeing in the market right now?

I think players in the market are really being rewarded for flexibility. So what we're seeing in terms of the really high premiums in the market, those with flexible power generation or the ability to move their volumes and managing balancing costs, some of the frequency services, there's a strong return on that. So for batteries, ancillary services, et cetera, we see good returns. Data centers are the hot topic in the market today for any players with a data center opportunity, and we're looking at a range of those broadly across our portfolio. I'd say more on the traditional front, I think producing assets in today's market where we do see that the low pricing now is a is a good time where we're seeing sellers ambitions are coming down to match where the market is at the moment so that's that's a bit more interesting for us but unfortunately nothing to share until we've we've got there on on an investment or a transaction and we'll come back to the market when the time is right

And when it comes to strategic partnerships or mergers with other energy companies, is this something that you're considering or looking into?

I think we're always open to the discussions. I think with the share price where it is, we're not willing to dilute significantly for a non-accretive transaction on a per share basis. So we have to be mindful of that. And we also have the Sudan case, which both Espen and I touched on. The Sudan case comes to an end at the end of next year with the judgment. We see costs coming down significantly. We will see the hopefully see the full resolution of the Sudan case at the end of next year. And that opens the door for more material M&A, I think.

And speaking of share price, given the current share price level, are you considering buybacks?

I think buybacks are always a discussion that is in every meeting we have with the board and with most investors as well. I think it's a very attractive point to be buying back our own shares. There's also a very, very important growth element that we need to take into account where we need to deploy capital accretively on a per share basis. And our company is still too small. We need to be much bigger in size to really diversify the revenue streams and improve the cash flow. So there's a range of competing priorities for that capital allocation. Share buybacks is absolutely one of them. And again, should the conditions be right, then we'd come to the market with that announcement.

And going back to the challenging market, how do you plan to make a profit?

Yeah, I think we're burdened today by the costs in the Sudan case, that's for sure. And if I were to remove the Sudan case costs from our financials, we'd be back to positive EBITDA. I think it's challenging for a lot of operators to make a good return at current market conditions. And so I think we need to be a little bit patient with the price coming back, with Sudan going away, and then with some scale up of the company, I think there's a fantastic pathway to profitability. When I look at the Greenfield platform, that's already profitable on a project by project basis based on our first sale. So when we see the recurring revenues coming out of that and the business getting more self-funding, I think we'll see much more return coming out. Espen, I don't know if you had anything.

no for support all of that and i think um key thing and yeah like you mentioned only one project sale we expect multiple of those going forward temporarily a temporary situation now with high costs and also the fact that power prices are below break-evens for new projects so i think you know the sum of that means that we can have a quite constructive view on future only both market pricing and also earnings potential for the company you know in the medium to long term

And great to see a lower capture price discount. Is this the level you expect moving forward?

Yeah, I think capture price discount obviously can fluctuate widely quarter to quarter, hard to precisely forecast it over a short timeframe. I think our expectation is that we will be within the 20 to 25 percentage range. We have been 21% year to date, so slightly lower than sort of what we have seen earlier. partly due to also you know also depends on the volume of curtailments voluntary curtailments but between the 20 to 25 percent within that range is our sort of I think is a very prudent estimate and assumption going forward we also have a few questions on the development side so congratulations on the first project sale is the price per megawatt what we should expect in future sales and can you give us some flavor on the current pipeline

Yeah, I think in terms of the multiples, what we saw in our first German project sale is largely what we're seeing across the portfolio, whether it's UK or Germany. Today in the Nordics, there's less appetite, so I'd say it's a lower premium or more difficult, but certainly UK and Germany are around that level. As we look forwards, though, I think the market is changing. People are valuing more project portfolios, which spread the risk. We're starting to see buyers looking at forward sales of projects with cost coverage or standalone complete exit project sales. So it really depends on the structure as to what that looks like going forwards, but I'd say it remains very, very attractive for us as a developer premium. When I look at the broader portfolio, we're only just getting started. We have already three to four gigawatts in Germany, some of those very early stage, some of them coming towards later stage. We have a range of battery opportunities where we have favorable grid positions for those. In the UK, we've submitted our first eight gigawatts into this reform process, and there's another massive pipeline behind that waiting for certainty around the process, and then we'll move through the land acquisition and development process so for me this is a again it's a 10 year business 10 20 year business where we expect to see the returning recurring revenues coming now we'll start to mature that business even further and and start to carry some projects longer as we move forward and do you think it's realistic to that we will have a first sale from the uk greenfield portfolio in 2026 I'm very hopeful that we get there. We were hoping to be there already in 2025 and we didn't quite get there because of this grid reform process. So I can't control what the energy system operator is going to do going forwards, but they have committed to a tight timeline for giving us the confirmed grid offers. And once we receive those, then we'll be able to move forward on the project sales. And the market's still very strong in the UK. So I'm very, very optimistic that we'll see something out of the UK in 2026. And given the size of the projects, this is very, very material for the company.

Good. I think we covered all of the questions. I don't see any further incoming questions or any concluding remarks from your end.

I think a challenging Q3 for us, if we're completely honest, we have seen lower volumes, lower pricing, but very, very... enthused about us about looking forward into 2026 we're seeing stronger market pricing for energy we're seeing hedging coming in at favorable levels we're seeing projects hitting key milestones and very optimistic about what the the coming six to 12 months looks like so we look forward to sharing more information early in the new year with our q4 results

Great. Well, thank you very much. Have a lovely afternoon, everyone, and feel free to reach out in case you have any questions.

Thank you.