OX2 AB (publ)

Thank you and welcome everyone to this Q2 2023 report from Ox2. Today we will tell you about a quarter with high activity level, more projects permitted and in sales process than ever before and in more geographies and in more technologies than ever before. And also about a strong customer demand. And we will also touch upon the underlying market, which is giving us somewhat more complex sales processes, but in all a good and solid base for further growth and also reiteration of our targets for both the year and the five-year period ahead. with that we kick off and you can flip directly to page number i'm presenting today together with me is you one and the agenda will be divided by me starting with highlights and portfolio updates uh you one will take you through a financial review and we aim to end with Market and Outlook in some 30 minutes and then have good and ample time for Q&A. And we will make sure to have all questions responded to when we're done. So we kick it off. Next page, please. You can see that Ox2 is increasing its total portfolio this quarter up to 45 gigawatts by including also Australia in the portfolio. We have good coverage across Europe now. And the technologies we work with, you recognize as onshore and offshore wind, solar and energy storage. The portfolio in development is fairly stable at 32 gigawatts from last quarter. But the total portfolio is up somewhat when we also include projects on the construction, the TCM and the sold megawatts with milestone payments to come. Brief of the sales and at a record 8.2 billion SEC last 12 months. That is a doubling compared to the LTM figures two years ago when we first listed. We remain at the strong 11.7 operating margin last 12 months. Return on capital employed also above the 25% targets. And to date we have about 11.1 gigawatt of sold projects from OX2, where as of close to four gigawatt has been taken to construction. Next page, please. If we double click a bit on the second quarter that just ended, the development portfolio stops at about 32.5 gigawatts. We have seen quite a lot of activity. in the portfolio, whereas the Galena project on the west coast of Sweden was approved by the Swedish government. We have acquired a 1.2 gigawatt portfolio in Finland, onshore wind, and we have also completed and integrated the operations of Esco Pacific of some 1.4 gigawatt in Australia. We completed sales of about three gigawatts. Majority of that is the offshore wind projects, three sites of the west coast of Finland, done on similar terms to what we did in Sweden last year. Inka Investments being the off-taker. And we also completed our first sale in Italy, which is for those of you who are initiated in the business, a very big milestone. First construction start marks the start of a very active period for OX2 in a country. And this time it was Italy, Europe's third largest electricity market. And we did so at a very profitable and valuable structure, slightly different structure than what we've done in the last couple of quarters, but not a completely new structure. We will double click a bit on that later on. It is, as you know, not booked in the quarter, but it is contracted and agreed upon. Construction had good progress. We're now managing about 1.2 gigawatt of projects in construction, we will take you through those as well. No handovers during the period and no significant events either in that portfolio. Or technical and commercial management continue to grow. 4.6 gigawatt of asset on the management currently, mainly driven by including the 500 megawatts of solar projects that came with the ESCO acquisition. So as you can see here, very active quarter from an Ox2 perspective, and also there's been a lot of activity in the underlying market. Next page, please. This is a page we have on our quarterly webcasts demonstrating the the different stages, early, mid and late stage and the technology splits. And as you can see, the late stage is growing from 2.1 to 2.4 gigawatts, fairly stable mid stage and some growth as well in early stage. The construction portfolio also fairly stable, but bit more growth in the TCM technical commercial management phase. I can also reiterate that the mid-stage two to five years to sail. When you look at the solar sites, they are slightly faster moving through these different phases than onshore wind. And all that we are capitalizing already in early and mid-stage on our offshore projects with the business model that we have, where we sell off projects or we divest part of the portfolio in an earlier stage. So it's the onshore wind that is typically going all the way through late stage before sold, according to these phases, but somewhat of a difference between the technologies that I think it's important for you to be aware of. Moving on, next page, please. The development portfolio is moving on a quarterly basis. We sold three gigawatt and took then three gigawatt out of the portfolio. And we also had then downward reduction based on that we got parts of the Galatea Galena project offshore of the West coast in Sweden permitted. And we then took out the remaining part as this was not permitted. We've added about 400 megawatt of greenfield. And on top of that, we have through acquisitions, I mentioned ESCO. I mentioned a project in Finland of 1.2 standing for most of these 3.1 gigawatts. So although large volumes have gone out of the portfolio, also large volumes have been included. And to the right, you see the split between the markets. I think in this fairly volatile macro sentiment, we benefit from having a strong portfolio diversified over markets with different underlying drivers. And this is continuing to increase. So Sweden now being about one third of the portfolio only is, in our opinion, a strong capacity of OX2 And you also see that there is more diversity in terms of technology splits. So we have both onshore, offshore and solar representing fairly equal parts of the volume, which is also a strength. Energy storage is growing. We are not including yet all of our ambitions in hydrogen, but you are aware that we are working quite a bit. in hydrogen as well. So we'll come back to that once those becomes a bit more mature. Next page, please. Looking at some of the projects we can highlight from the quarter, Finland has been an important market for us. It's a very yeah for predictable markets we have to date still not lost any permit aqua permit processes in Finland so we see good visibility in the portfolio and we had some good examples from first half as well when we had significant permits granted ahead of schedule and this gives us also more confidence into growing the onshore portfolio, this time by a partnership with local developer Thule Alfa with some 1.2 gigawatts of onshore wind. When it comes to offshore wind, we have a good working relationship with Inka Investments. We ran a competitive process and they were the most competitive party to that sales structure. We presented earlier in the quarter, it closed end of the quarter after having gone through the competition approval in Europe. And we got similar payment milestones to what we had, slightly lower because of the Finnish electricity market being a bit lower than the Swedish SE4. But in all in all, a very similar structure, which makes up a good foundation for further partnerships with Inca investment. As I mentioned, Italy is also a very important market in Europe, the third largest electricity market set for significant growth, significant ambitions and good both wind and solar conditions. We're growing our team and we're growing our portfolio there. And then it's very rewarding to now see that we can come to construction start. We did this on a forward sale structure, meaning that the project underlying contracts is very similar to a construction that we typically do, but it stays on OX2's books until the project has been taken into full operation. and then handed over to our customer Glenmont Partners in this case, meaning that it will be booked in 2024 and none of the margins will be coming through our P&L until then. We acquired those project rights in 2022 and we were able now to reach construction start less than 12 months later than That showing we can, in fairly complex market conditions, still reach project start or construction start with good valuations. And we attracted a lot of potential buyers through that sales process. Value was in line with what we expected and we were able to achieve a strong margin expectation on this structure as well. This will be booked in 24 when the project is ready and good to go. Next page, please. And this is a new page we don't typically have. But now we're moving into the second half of the year. We have said that most of our projects will be sold second half of the year. And we with this want to just demonstrate that we have a very good visibility. We have more permitted projects and in sales processes than ever before. Good underlying attention and demand from these projects and a very diversified portfolio when it comes to both geographies, but also technologies. So Sweden attracting a lot of interest from an SA3 project that we have in sales. We have several projects on onshore wind in Finland and you know these are our core markets with good track record of reaching good values same with Poland where we both have wind and solar in sales processes in France we are just finalizing the realization phase of our first projects It's a new market for us. We've been there quite a while and the portfolio has matured and ready to be sold now. The same goes with Spain, where we also are divesting our first project rights right now. In Romania, we have worked a while with some significant project rights that are now being matured. The underlying market is attracting a lot of interest. Return requirements are slightly higher, which is positive that this market can give higher yields than some of the more classical European markets. And we are progressing very well with both the financing structures and the PPA structures for the Romanian markets. Then we have the first project in Australia already ready to be sold. We're also expecting, as we said in relation to the acquisition, that Australia will contribute positively already in 2024. So we see good traction on that portfolio overall and first project is already in the market. So in all good visibility on the year we're reiterating that second half will be an important part of the year and will contribute with the absolute majority of the revenue and margin and we see good visibility and by this we try to demonstrate a bit more insight for the market into what projects, what markets we are working on. Looking at the next page, we have about 1.2 gigawatts on the construction, including the first project in Italy. Some of you may have seen that Siemens Gamesa have reported some issues with their latest platform. We have three projects using that platform and we expect a slight delay on two of them. So we have been cautious and expect to move Ninimeki and Riiberget in Finland, respectively Sweden to 2025 from 2024. But as we have seen over the last two years where several projects has been prone to be a bit delayed, this has had no or little impact on our financial situation. So the contracts are solid. We do not see that we have any outstanding risk on this delay. So with that, next page handed over to Johan for a financial review.

Hello, everyone. We can move on to the next slide, please. Right. And as you said, Paul, there is a lot of things happening across Ox2, and it's hard to sort of describe all of those things when only looking at historical numbers, but I'll do my best. But also reflecting a bit on the two years now as a listed company, I think we've been able to put ourselves in a very good position for the time to come in terms of the expansion that we have undertaken. And that has been part of the historical numbers now being established in 11 markets with a good portfolio in all of these markets. Also markets with a bit of a different dynamics to them if we look on individual basis, which I think is good. Now also when there are different market conditions but the one common denominator that there is a strong underlying demand for our product more need for electricity and we have competitive technologies that we're working with in these markets I think a very solid position and positive outlook for the time to come which is also reflected in our financial targets but if we zoom in and look on this quarter Q2, obviously from a financial perspective, a quarter very much characterized by the offshore activities. Once again, with the transaction that we did in Finland now, the form down strategy that we have for early stage development, I think good proof of us being able to create good value also in early stage development. And then also the permit that we got from the Swedish government, Oxtu being the first company ever to receive a permit if we disregard state-owned Swedish companies. So I think that is also really a quality stamp and a good stamp for us when it comes to our offshore activities going forward. Megawatts sold, the bulk then coming from the farm down in Finland and then a small part with the first transaction that we did in Italy and really completing that full cycle of now also having a project under construction is important for us and I think this we've learned a lot and will bring a lot of new good opportunities for us with the remaining part of the Italian portfolio that we have. Looking at the gross profit coming in in line with Q2 last year, and when we look at operating income, quite a big decrease there, but very much based on the strategy that we have in terms of the expansion that we are undertaking, significant efforts and resources going into our offshore development, growing our overall development expense, where offshore is the main part of that, with more than 50% if we compare to Q2 last year and also now, when we have completed the Australian acquisition, quite a big increase in personal expenses growing with 40% on a quarter-over-quarter basis when we compare to Q2. LTM figures, the longer trends, I think a bit more. reflective of the underlying performance that we see in the business. The megawatts sold obviously very much characterized by the two offshore transactions that we've done during the last 12 months and the gross profit growth of some 600 million over the last year and operating income and margin coming in a bit above our financial target of 10%. Return on capital employed, a key measure for us, and as we also now are deploying more capital in our project portfolio, this is of high importance for us to continue to be diligent here and make sure that we have a good asset turnover. I think the transaction that we did now in Italy is a good proof of that. It's a project that we acquired about 12 months ago and now also being able to complete the sale of that transaction. And return on capital employed a bit above our financial target of 25%. Moving on to the next slide, please. No surprises here. For those of you who attend our earnings calls, volatility continue to be a theme on a quarterly basis. the big net sales growth this quarter very much being driven by the activities in the construction portfolio and if we look at the operating income and compare that to Q2 last year we had two very profitable projects in Poland that we sold which really drove up the operating margin last Q2. This will continue to be also the theme for for the remaining part of the year. We're not zooming in on individual quarters, but rather working to maximize value over time for our projects. Moving on to the next slide, please. A bit longer time series in terms of the growth that we're seeing. Net sales, when we compare to where we ended last year at 22, the bulk of this growth is coming from the construction sales, where we went into this year with a bigger portfolio based on the growth that we've seen in project sales earlier. And if we compare a bit back to 21, 2020, then the sales growth very much driven by combination of the increase in project sales, the construction portfolio as a result of that, as well as a growing asset management business. Looking at the profit development, gross margin standing at 27%. I think this is also, and we tend to get a lot of questions on this, and I think that's fair. With the increases that we as well are experiencing in terms of the input variables that we have going into our projects, we're still able to come out with good profitability on the projects that we do bring to sales. Moving on to the next slide, please. Solid financial position. This is a good position to be in, especially when markets are a bit more turbulent in some places. And acting from a solid financial position is also something that caters for us to be flexible and cater for different customer needs. I think, again, the transaction that we did in Italy was a good is a good example of that where we could see that the value that we got from Glenmont by also offering to take on the financing of this project still bearing in mind our return on capital employed that we want to see it really was value maximizing for us Also, when we look at investments in project portfolio in the quarter, obviously a big portfolio in our core market, Finland, the transaction that we did. But here, I think there will be more opportunities for us to come and a good position to act from. In terms of net working capital and the significant decrease in cash flow in the quarter, hopefully that didn't come as a surprise to anyone. We spent quite a lot of time on that in our Q1 report explaining that the negative working capital that we had in the construction portfolio standing at some minus 30%. end of Q1 was a bit unusual. And this is a normalization now that we're seeing coming out or ending this quarter at minus 10%. So more in the middle of the range that where we typically tend to be between zero and minus 20%. The other significant cash outflow was the acquisition of Esco Pacific that we paid by our own cash means. Moving on to the next slide, please. Project acquisitions. It is a good mix that we're seeing now also, including the Australian acquisition in these figures, 5.3 gigawatt that we have acquired during the last 12 months. It's a good division across markets and technologies, and I think this is also tying a bit back to what Paul said in terms of what we have ongoing in terms of sales, this is very much a result of this diversification strategy that we've had with the 11 markets that we're now operating from with a good portfolio in all these markets. So Italy was sort of first out of the newer markets, but there is definitely more to come based on also these acquisitions that we've done during the last couple of years in terms of investments a bit above the 800 million that we've guided in terms of where we see acquisition pace being for the coming years and if we move on to the next slide I'm touching a bit upon this also in the planning assumptions in the report where we see that 2023 Most likely with the opportunities that we see, we will continue to be around the LTM pace that we're seeing now, a bit above 800 million. And we will continue to do the investments needed in order to bring our portfolio and develop the different technologies in our different markets to make those investments also during the remaining part of the year. And in terms of the sales processes and outlook there, we're acting from a very good position. We have a lot of different projects out in the market. There is a strong demand for projects. And I think our product being able to cater for different customer needs, really having the smorgasbord in terms of offtake, in terms of doing permit sales, in terms of doing EPC, in terms of doing construction on our own books and handling the financing is a very good product portfolio to be able to offer in our different markets. So promising outlook.

Handing it back to you, Palle. If we jump to the next slide then, thank you, Johan.