OX2 AB (publ)

Good morning, everyone, and welcome to this presentation of Ox2's fourth quarter report. I'm Henrik Wikström, head of investor relations. We will today start with a presentation, as we normally do, with our CEO, Paul Stormoen, and CFO Johan Rydmark. We think this will take maybe 30, 40 minutes. Then we will open up for a Q&A, and then in the end, we will also answer the written questions. So please, Paul, go ahead.

Excellent, thank you Henrik. Welcome everyone and thanks for listening in to the Q4 report. Next slide please. Next slide. Next slide. Today's highlights will be mainly focused around three main messages. We have delivered a strong 2023 with more than one billion SEK of operating income, fueled by the wind power business in Sweden, Finland and Poland. Also, we see good traction in the portfolio and entered 2024 with a strong sales pipeline amounting to more than one gigawatts. And we are shortly releasing more projects to sales with the aim to close those in 2024 as well. On the back of that, we see strong interest for the projects. We see good valuations and margin opportunities. And this is why we are also then guiding for an expected growth in operating income during 2024. Next slide, please. Looking back to 2023, we had strong growth on the development portfolio with some 5.3 gigawatts, also then counting the sales that we did from the portfolio of close to 4 gigawatts. We did this addition in four technologies, onshore, offshore, solar and storage. And we see good progress in development among the permitted projects as well. So you can see that we will look to the mid and late stage portfolio being solid going into 2024. The sales came from all major technologies. We are yet to sell our first battery project. But besides that, we have delivered strong sales in onshore wind, also strong sales in offshore wind. And the solar PV portfolio is starting to fuel the business as well. We have seen that we have been able to capitalize across various phases of development. You remember the offshore projects have been monetized in an earlier phase, even pre-early phase, meaning that we have been able to capitalize on projects even before they have entered the portfolio. We have also sold projects at ready to build stage where OX2 does not take the construction forward as we've demonstrated in Q4 in Spain and France for solar PV. And we have sold our core product, which is the operating wind farm in Poland and Sweden. And we have even in Italy sold projects on a forward sale note where we have an agreed customer, but OX2 builds the project on our own books. So there's been a wide variety of sales contributing to the strong results. The market footprint continued to expand and we highlight here our expansion to Australia, a market we see long-term very strong potential in. In addition to that, we see expectations on sales completed in 2024 already from that pipeline. The financials Johan will dive into in detail, but we delivered an operating income in line with our guidance slightly above one billion SEK. And the earnings were, as I said, driven by core technologies in core markets. Looking to the backdrop of the market, we came into the year with some question marks on both supply chain, financing cost and yield. And throughout the year these question marks have been more and more cleared out and we end the year with more clarity on the long term viability and profitability of the industry. On top of that we have good and solid political agreement on top level with COP 28 concluding with a tripling of the installed capacity over time, meaning that we will need to double the global installation rates annually already from 2024. Looking to the next slide, please. We present OX2 as a leading developer in Europe and Australia. We are working to power the great shift which will contribute to strong GDP growth in our regions. The technologies we work with is onshore, offshore wind, solar and battery storage. We have also venture investments in different type of power to X developments, but they are not contributing near term, but more as a long term viability for renewable penetration to the electricity systems. We have been operating in the European market since 20 years back. The company was established in 2004. We have focused since 2011 on being a pure play developer, meaning we do not own operating assets, but recycle the value of the project into the pipeline growth instead. To date, we have built about 3.9 gigawatts in construction or having delivered completed constructions to our customers, which is more than any other participant in the European wind space. Looking to the last 12 months, we book now 7.8, which is a slight increase in net sales. We continue to track above our operating margin targets, but coming in at around 13%. And to date, 12.6 gigawatts sold. The return on capital employed is one of our differentiating factors and is what has given us the ability to grow and invest significant into the pipeline you see to the middle of this page. where we now end the year at 47 gigawatt in total pipeline and the 34 gigawatt development portfolio distributed along the technologies you see on the screen. We have presence in strong markets, the Nordics being mainly driven by expectations on demand increasing over the coming 20 years. This is driven in turn by the relative competitiveness of the European or the Nordic market for industrial use. Sorry, moderator, but someone is flipping the slides here. Thank you. Next page, please. OK, I just lost the pages here, but I will put my backup pages. Sorry. Sorry for this. I'm on page six for those of you who follow the presentation online. On the other markets, we are looking more to decarbonize existing electricity mix. So looking to Poland and Australia, these are markets with close to 80% fossil fuel in the mix, and they all have ambitions to go to net zero over time, and as Australia has noted, they want to switch to 80% renewables already by 2030. So different demand drivers behind our geographical footprint, which is a very strong driver for future growth in Ox2 as well. Next page, please. Looking to Q4, we see additions to the pipeline. We see completed sales of 1.3 gigawatts. We did complete 374 megawatts, six projects in construction in Sweden and Poland, and they contributed as well to the earnings and profitability. and have now moved to the operational team, which is the management portfolio standing close to five gigawatts by now. Next page, please. The portfolio, if you double click more on the late than mid stage, you see here that we are growing the late stage as well. And as I indicated in the opening, we are about to take even more volume than sorry, the pages are still flipping. Thank you. So the 2.5 gigawatts include both the one gigawatt in sales, but on top of that, we're moving even more volume to sales processes now in short term with the aim to have more volume closed in 2024. Next page, please. So looking at the waterfall as we do on a quarterly basis, we took out 1.3 gigawatts And we made some changes during the year or during the quarter also to the existing portfolio, mostly early stage projects that we have stopped developing or changed size of the developments. Then we have added about 1.2 gigawatts greenfield. Some has come from the offshore portfolio. And as some of you may have noticed, we entered a one gigawatt cooperation with Stora Enso. And out of those one gigawatt portfolio under development, we have actually by Q4 only added about 90 megawatts. So there's a lot more to come from the Greenfield additions as well in 24. The acquisition was at about 300 megawatts last quarter, but we're keeping up acquisition pace throughout the year as well. Next page, please. Here's some of the projects that we want to highlight for the quarter. We have the offshore sales. We completed our third sell-down of offshore portfolio, this time with Inka investments as well. Three offshore projects got an upfront payment of about 200 million and milestone payments in line with previous deals we have made with Inka. We have also completed, as I mentioned, the Stora Enso development agreement, 92 megawatt out of 1000 added to the portfolio, highlighting the stringency we have when talking about the early stage portfolio. You remember that they do include a lot of criteria to be allowed into the portfolio. So we work diligently with investments and qualifications of projects in the portfolio. On top of that, I want to highlight once again the efforts and the progress made by the construction team throughout the year. We completed several projects also during the last quarter. There have been some delays during the year on Polish projects coming from grid delays, but they were finally resolved and completed during the quarter. So in total 374 megawatt completed as communicated. Next page, please. So we add a bit more information this quarter to the different projects we have in sales. We have an energy storage project in southern Sweden to sales. We work with a quite substantial portfolio in Finland, which has good traction. We have solar PV mainly in Poland, France and Spain. There's just a little project left in Spain. sales and then we have good traction of our Romanian wind farm of significant volume for 24. On top of that we as I said in the beginning expect Australia to complete their first sales all solar and energy storage with a combined volume of about 300 megawatts. Next page please. We also Yeah, we communicate the construction portfolio. We have about 700 megawatt to be completed. No, sorry, 150 in 24 and another 700 in 25. So not that much volume to be completed construction-wise in the year we have just started. But we are still at one megawatt in construction. Moving on. Next page, please.

Johan, are you ready? Yes, I'm ready. Thank you, Paul. Let's see how it goes with the slides here. We can move on to the next slide where we have some more numbers finally. So just reiterating what Paul said in terms of the fourth quarter as well as the full year 23. Thank you. Solid performance in the quarter as well as for the full year. I'll try to give some more insight to what is behind the numbers, what's been driving the numbers. But we can conclude that it's been a solid performance, both operationally and also financially. And it's been most parts of the business that has been part of providing this good delivery. If I then try to also highlight a few things from the last year both in terms of what has driven our financial performance in the year but also what has driven the footprint that we go into 24 with and also what will impact the financial development in 24 and onwards I would start by highlighting the solid delivery from our EPC organization the engineering procurement and construction within 23 delivered nine projects evenly divided between Sweden, Finland and Poland, more than 500 megawatts to both existing and new customers of ours. These projects have been procured and constructed during the last two, three years under quite difficult circumstances, especially if we look at the supply chain and logistic challenges that we've had during this time period. But now when we've handed over these projects and closed the accounts on them, we can conclude that they've all delivered in accordance or better than our expectations. Again, confirming the solid delivery capabilities that we have to deliver operational assets. Another key achievement I would highlight, and that would be more on sort of the positioning for the future profitable growth that we see, that would be the achievements within the development organization where we've not only been able to progress the overall development portfolio, standing now at close to 34 gigawatts, we've been able to mature that portfolio as well, as Paul mentioned, as well as also show good profit generation from the development activities, both from the projects that we've sold with the operational wrap as well as showing good value creation from the more early stage development activities most prominently here the two offshore transactions that we did during last year if we then transition and look at fourth quarter more specifically a little bit more than 1.3 gigawatt sold Obviously, the bulk of those megawatts being the offshore transaction that we did in Sweden. And in addition to that, then two sales, both the first in these markets in France and Spain. Quite significant reduction in terms of megawatts compared to Q4 of 2022. And the main reason for that was that in Q4 last year, we finally concluded the very large offshore partnership that we did in Sweden last year. On the gross profit development, just like we had in Q4 2022, when we had sizable sales volume coming from permit rights, we post strong gross margin of 43%. The key drivers in the quarter in addition then to the new offshore transaction being the solid delivery from the construction portfolio that Paul mentioned, where we also handed over then six projects to our customers. Operating income coming in at 332 million. It could look like a quite significant drop and it is. But that's back to the big quarterly swings that we have. It's a solid delivery as you can see both from the gross margin as well as the operating margin. In addition to the slight decrease then in terms of headline sales, mainly driven by less volume sold, we have continued to invest significantly all through 2023. So you could see that in the DEVX and OPEX, which is also then impacting the operating income reported in the fourth quarter. If we move on and conclude the full year LTM sales, the 2023 sales, that is a little bit more than 4.4 gigawatt sold. Obviously, the bulk of this being the two offshore transactions that we did in 23, one in Sweden, one in Finland. In addition to those volumes, we sold a little bit more than 300 megawatts of onshore wind and solar at good profitable levels. And that you can also see when you look at the full year gross margins coming in at 32%. And you can see our gross profit growing close to 20%. Operating income, so why are we not getting that gross profit growth with us to the operating income level? Well, that's back to what I said in terms of the growth investments that we're consciously undertaking and that is putting us also in a good position for future growth. Return on capital employed in 23, 25% in line with our financial targets. We, as part of the capital markets day that we had last year, we also shed some more light into the different products that we have and how that is also impacting the return in our business. But we also said that we have now expanded our portfolio in terms of what we can allow ourselves to do. We are in a strong financial position. Paul mentioned the two projects that we're currently constructing in our own books. And we see good value creation from having that flexibility. still very much then seeing that we can get a solid return. Because in the end, I think it's the return on the capital that we deploy in the business which matters. And that's really also the key decision criteria for how we prioritize within Ox2. If we move on to the next slide, trying to keep track of time here as well. This is a slide I keep coming back to every quarter to remind myself and hopefully the ones of you listening in on this call. OX2 have a big quarterly swings. We continue to have that. You could see that in the fourth quarter of 23 as well. Both if you look at the quarter on quarter development in 23 as well as if you go back to the last quarter of 2022. So it's hard to judge and see the underlying long-term development in Ox2 if you zoom in and look at individual quarters. With the investments that we've done, significantly increasing the platform and the capabilities that we now have across many more markets, we're also carrying a larger fixed cost base. And we can see, depending on the timing of new project sales, depending on the timing of delivery and progress in the construction portfolio in quarters when we're not having new sales, operating income level could come in in negative figures. And I think if we move on to the next slide, looking at the more longer trends, that's more important to understand when trying to see how the underlying performance within Ox2 is. If we then look at the sales for the year, 3% growth compared to 22. If we can go back to the more long-term trends, quarterly fluctuations we've concluded. So the next slide, please. So I'm on slide 16. Net sales growth of 2%, key drivers there being the core markets or the biggest markets for us is Sweden contributing with 40%, Finland 30% and Poland 27%. If we look at the profit development, I partly covered that. I think on the initial slide, solid delivery in terms of gross margin development. as well as the operating income. And as I said, the operating income slight decrease year on year, fully driven by the growth in our investments in the platform. One thing worth remembering when looking at our top line and profit development is also what I talked a bit about the type of products that we're selling if we look at 22 and 23 and compare that to what we sold in 2020 and 2021 it's a much broader product mix that we are now having and depending on if we're selling a product with the operational wrap if we're selling more the permit rights if we're bringing in the partner on an early stage development that is obviously having a quite big impact in terms of how the top line develops in absolute terms as well as the gross margin and some part of the gross margin increase that we've seen over the last couple of years has been relating to the change in product mix where we have sold more project rights. So I think the moderator, the slides are a bit all over the place, but I'll try to continue here looking at our solid financial position on slide 17, ending the year end cash balance at 2.9 billion in cash, significant cash flow contribution from our working capital development in the quarter. mainly coming from the construction portfolio. And here, just like with the quarterly earnings, we see big swings also in the working capital in individual quarters. Here we had a big reduction from accounts receivable from customers. We also continue in the quarter, but what Paul talked about, the significant investments that we're doing also in project acquisitions. little bit more than 300 million in the quarter if we move on and look at the next slide that's slide 18 a bit more on the theme of project acquisitions very happy to conclude the year looking at five gigawatt of added projects both them from the platform acquisition in Australia I think that's if we look at the long-term value creation where I am most satisfied and see most prospects as well for the longer term. But in addition to that, significant volumes being added across geographies and across technologies. And that's what's part of the one billion that you can see on the right hand side there. In addition to that, close to 900 million was invested in the Australian acquisition. Right, moving on to the next slide. Concluding 2023 and how does 2023 play out when we look at our financial targets? Happy to conclude that we're making good progress and delivering on our financial targets. If we look at the operating income side, as I mentioned, significant investments going into 2023, reminding everyone that there is a time lag in terms of when you start developing a project, when you acquire a project and when that is turned into sales. And that's also what's behind the slight decrease in operating income in 23. As Paul also started off this earnings call with when we look into 2024 with the platform that we have going into 2024, we see positive development in 2024 and foreseen operating income growth in 2024. Significant volume sold over the last couple of years. and also in 2024 from what we see there will be quite a different product mix when we look at the volumes that we currently have in sales processes as well as the significant permitted megawatts that we have that we will now start marketing as well. Most of these megawatts are within onshore wind and PV, whereas most of the volumes in 22 and 23 were relating to offshore transactions that we did. Operating margin will continue to fluctuate quite a bit. 23, we came in at 13% despite the significant investments that we did. And this is also how we use this financial target. It's more to balance the magnitude of growth investments that we're doing, keeping track and also making sure that we deliver on the short-term profitability. Return on capital employed, for those of you listening in on these earnings calls, you know that this is my favourite key metrics. This is very much how we go about prioritising investments between market and between technologies. And I talked a bit about also the flexibility that we now have to do more with our projects where I see good value creation and yeah. We can move on to I think my final slide and the most difficult slide in terms of trying to predict the future looking into the crystal ball. I like to stick to the facts and when we look at what are the facts then well it is a fact that we have well progressed Sales process is ongoing, currently a little bit more than one gigawatt. We have a lot of additional permitted projects that we will be bringing to the market. We see strong interest from our customers. We also have a broad portfolio in terms of how we can package our products and cater them for where we see best returns and best profits. What this also causes and admittedly there has been a longer sales cycle for some of our projects and this will also continue to cause quarterly fluctuations. We now have a solid platform in place in terms of the markets where we want to be in Europe. We've invested significantly into these platforms which have impacted our short-term profitability just like we saw in in 23. We now see that we are in a phase where we for sure will in some areas continue to need to ramp up investments, but the magnitude of these investments will be less if we compare to the type of growth that we've had going into the organizational capabilities as well as the development expenditure. So you will see this flatten out and the consequence of this will be that you will see a larger part of the gross profit also flow through to the operating income in 2024 and onwards. On the investment side, around the one billion mark that we had also in 23, this will also fluctuate a bit depending on when project acquisitions are completed. We continue to see good prospects out there. We continue to be in a solid financial position. And as we also write in the report, the board is not proposing any dividend for 2024, but rather see good value from reinvesting the cash flow that is being generated into further growth. A positive outlook for 24 based on the position that we entered 24 with. Yeah. And with that, I hand it back to you, Paul.