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.