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.

Good. Thank you, Johan. We're getting close to ending the call and opening up for questions. Looking just briefly to the market outlook. Next page, please. Thank you. So if we conclude Q4, we see continued strong profit development. We completed sales in Sweden, France and Spain. And we have completed the construction of six projects in Sweden and Finland. Please, next page, please. There's a bit going back and forth on the pages again. We are on the final page. One second. I'm still not on the page I want to be on, but let's then focus on there. Please focus 2024. Key for us now is to execute on the sales portfolio. As we said, we have about one gigawatt in current sales process. and launching significant more volume aimed for closing this year. Continue to progress on the development portfolio, especially offshore. We are working quite a lot now with our partner Inka and the grid company Elevio to plan for construction start of our first permitted project, which is about to move to late stage during the year. We are also expecting some decisions on the rest of the portfolio or next project in the offshore portfolio during the year. Good prospects there. We will also continue to focus our investments on core markets and core technologies. We have reached a scale where efficiency matters more than maybe in the very past. So we see good opportunities also to gain in 2024 and 2025 from some efficiency measures taken in the company currently. So with that, sorry for a bit of the confusing slides. I hope you are still with us all. We move into the Q&A. And welcome, Johan, back on stage. Henrik, we have questions. I have the new studio. Yeah, the studio is good, but tech is somewhat faulty. Do we have any questions? I don't see any questions.

Should we start with questions from the telephone line operator?

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Olaf Cederholm from ABG Sundal Collier. Please go ahead.

Hello everyone, Olof from ABG. Thanks for all the interesting comments, particularly I like the one on sort of that you have more than one gigawatt in sales processes now and you expect to add significantly more products to the sales pipeline during the year. Can you talk a little bit about about this in terms of how we should think about timing of project sales. Do you think this will be a back-end loaded year as 2023 was or more evenly spread or any other outcome? Thank you.

Okay. Hi, Olof. Thanks for a good question. We communicate good visibility on the one gigawatt in sales and on top of that, starting new processes with the aim to close more volume in 2024. With these projects and the macro situation we currently see, we feel confident about guiding towards an increased EBIT for 2024. Exact timing, as you know, we've continued to repeat that timing will be project dependent. But as you can also see, a lot of the projects that we've had in sales have been in sales and is moving towards close. But we don't say kind of exact quarters or profile of exactly when they will come in. But yeah, I think that's all we can call it.

Yeah, so if I'm grasping at straws, then first half, second half, not even quarters.

Yeah, we don't give specific guidance. I think it's back to... You've seen that we have 1000 gigawatts.

It's fine. I just tried. Working capital release was clearly good in the quarter. And where do you stand now? in terms of the level or is it a normalized level? What do you expect for 2024? Do you think there will be a release or a build-up of working capital for the year?

Good question and good that you raised that question because I intended actually to comment on that when we looked at the cash position but I was a bit confused with all the slides moving back and forth. So very strong performance right from the cash flow coming from the working capital release, most of that coming from the construction portfolio. And we could see that in terms of the range of normalized negative working capital, we were a bit on the high side, close to 15% if I exclude also the projects that we are currently constructing. So you would see some reversal of that during the year.

Thank you. That's it for me. I get back in the line. Thank you.

The next question comes from Johan Skoglund from DNB Markets. Please go ahead.

Good morning, Johan from D&B here. A couple of questions from my end, and then I'll get back in line as well. So on the more detailed sales guidance of the one gigawatt, are the solar projects, are these mainly project-right sales, or could we potentially also see some ready-to-build transactions? Happy to hear your thoughts on which you can give any guidance.

I think most of them will be ready to build, but volume wise, you also know about a quite significant project we have in Poland, which will not be ready to build. So there will be a mix of ready to build and completed projects.

Okay, good. Thank you. And one more question for me then. Also curious to hear your thoughts on the bio landscape. As long-term rates have fallen since the peak in October, have you noticed any shift in buyer behavior yet? Are more rate-sensitive buyers coming back to the table, or are financial rates still in the higher end of the range for them?

No, I think we have noted somewhat of a normalization and inflow of interest from that sector you hear referred to, the financially driven investors. So we see good and strong interest from the strategic and the industrials. But on top of that, clearly a revival of interest from financial investors.

Very good. Thank you. That was all from me now.

Thanks. The next question comes from Oskar Lindström from Danske Bank. Please go ahead.

Yes, good morning. Three sets of questions from me. I'll start off and swing a little bit of your guidance here for 2024 when you say you expect an increase. Could you say anything at this stage about the sort of magnitude of this increase that you're that you're seeing I mean your financial target is for which is over a period up to 2027 is for previous growth of at least 25%. per year on average you know is that something that we should use as a reference and also I was wondering on this topic if you have any do you include further monetization from the offshore wind project in your in your guidance for 2024 so that's my first question thanks Oscar always as always relevant question and

For sure. I understand why you asked that question. If we would give more guidance, we would have written that in the report as well. So looking at 24, we're positive for 24. We have a strong sales pipeline going into 24. I mentioned also the significant investments that we've done over the last couple of years, and we see that flatten out and that we will also get more parts of the gross profit starting to contribute to the operating income line, which gives us good comfort that we're back on growth track and also then traction on the financial targets.

All right. Thank you. It was worth a try. Second, I'd like to come back to this, where you talked about the demand for renewable energy projects, and you talked about a revival among financial buyers as long-term interest rates had started to come down. You also mentioned these sort of longer sales cycles that you had in 2023. Are sales coming quicker now what you've seen in so far in 2024 or is it still sort of that type of market that you had last year now during the first quarter of this year?

I can start and you can whip in. So on the demand side, this is driven quite a bit by the macro effects as well. So electricity, because you saw last year that there was demand and interest, but to some extent they were not competitive based on the generic long-term price forecasts that has come up during the year, which makes us more positive about the competitiveness of the financial investors. We've seen that fundraising picked up in Q4. and especially centered around very large investors. they are also looking for quite large tickets. So I think that is what we will see in 24-25, quite large tickets coming into the sector, which is also then probably allowing for still quite lengthy sales processes because the projects in themselves that we will bring to close will be large investments. So I do not expect the transaction speed per se to move significantly faster. But demand is there. We see that stores are getting more aligned and we're very happy about that we conserved some of the value from last year's pipeline into this year's market. So All in all, good visibility and strong traction.

And these higher long-term electricity price expectations, what order of magnitude are we talking about in terms of higher price expectations?

I think it's mainly the tail of the forecast. You remember that these are 40-year forecasts we are working with, and the tail is to a large extent driven by the marginal cost of new production. So what we saw was that the analysts during the year absorbed the new climate for CapEx and that was shifted into a kind of a more of an understanding that There will be a higher cost, but still in all regions, the Nordics, where most of the value and volume near term is coming from, this is a very, very competitive electricity price we can offer to industrial users. So compared to Europe or even other geographies, we have very strong fundamentals here. So it's a bit of an uplift on the tail of these forecasts, exact magnitude. It's a difference between markets, but still it's not insignificant. Sorry.

All right. Thanks. And just a final question for me. You talked a little bit about the mix change that you've seen in your business during 2023 compared to previous years. both in terms of technologies, geographies, and monetization models. Should we expect this to continue during 24, 25? And is this something that should increase operating margins, return on capital employed? How should we do that development?

No, we have a much broader product mix, right? And that you saw also Paul talked about the different technologies, the different markets where we sold projects. So that's a fact. And I think that's a very good fact that we have that flexibility and we can cater for where we see most value, which differs. For example, in France, if we're seeing that there's a quite small PV project that we're delivering, we're not seeing that market is giving us the kind of returns to also start the EPC and the construction and delivering the operational solar farm. More value in terms of resource allocation also if we take that into account to them selling the permit envelope. So I think that's very good that we have that. I also mentioned that we now also have capabilities to start the construction. We did a forward sale in Italy with good returns. So that is obviously playing into the product mix and that mix will continue in 24 I mentioned a bit also in terms of the megawatts that we currently have in sales process most of that being onshore wind and solar and if you compare to the mix that we saw then in 23 and 22 the bulk of the volume there was from from offshore so that will obviously play into both in terms of the top line, how that will develop given that an operational onshore wind megawatt is far bigger in absolute terms, but could be less so in gross margin percentages from when we sell a project permit. So I think that's important to keep in mind when you also look at the financial outlook both in terms of sales and gross margin. And we also write in the report in terms of the offshore portfolio we for example see that the next milestone payment for the permitted project in Sweden on offshore we expect to get that next milestone payment during this year.

All right. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Ollie Jeffrey from Deutsche Bank. Please go ahead.

Hi. Two questions for me, please. I'm going to come back to some of the things you've spoken about already. The first one is, I'm just coming back to the sales process. One point of clarification, did you in your comments say that you were aiming to sell more than you did last year? Last year, I think we used 1.3 gigawatts. Do you think you're looking to sell more than that this year? And then also, can you give any more commentary about how much of the additional 1.5 gigawatts that was in the late stage that you might be able to bring through to the sales process? And then the second question is just around return. So I know you're mentioning that longer term price forecasts have gone up, but obviously that's counted against short term price forecasts falling quite materially over the last three months. So what comfort can you give, particularly within your core geography and then in the Nordics and the turnkey projects and onshore winds, what comfort can you give that you're still seeing good demand at a level that will allow you to earn decent returns on short-term keys projects in Scandinavia, given that short-term move, sorry, the move down in the short-term for power price forecasts offset by long-term increases. So how do you see that balancing out for customer demand and returns?

So there was a lot of questions and my memory is short, but I'll try to to remember here. So starting off on the volume or the sales, I read in that you talk about volume there in terms of megawatts. And that's a bit back to my comment also to Oscar's question in terms of Yeah, megawatts, it's very different in terms of the impact from different megawatts, how that is driving our top line. In 23, just like in 24, actually it wasn't 1.3, it was 1.3 gigawatt only in the fourth quarter. It was a little bit more than 4.4 gigawatt all in all in 24. The bulk of that was offshore volume. A little bit more than 300 was onshore wind and PV. What I commented on when I, on the planning assumptions and the crystal ball for 24 is that we currently have of onshore volumes in wind and PV a bit more than one gigawatt. So that's a quite different product mix going into 24 compared to the outcome of 23. in terms of the profitability we saw good profitability and good value creation from the development activities where we're also capitalizing on the more early stage development just like we saw then in the quarter from the offshore portfolio with close to 200 million of contribution on the gross profit level from the offshore portfolio but we also in 2023 with also increased capex levels on sort of the core product in the Nordic saw very good profitability. And some of those sort of multiples, if you look at the EV per megawatt in euros that we got for our onshore wind projects, you could see very good levels there north of 2 million euro per megawatt. And that we continue to see also in the current sales discussions that we're entertaining.

Thank you. That's helpful on pricing. And just to go back to sort of finalize, to confirm on the sales process for this year, the one gigawatt that's currently in the sales process, would you expect to sell all of that this year and hopefully a bit more with more megawatts coming into the sales process? Or can you not give that level of transparency yet?

We see good value and obviously, and I admitted that even that I mean, the sales processes and sales cycles have taken a bit longer, but the one gigawatt that we currently have under construction or in sales, we have a gigawatt under construction as well, by the way. But that is well progressed.

And on top of that, the new projects we sell, take to sales, we also have an ambition to to reach financial close during the year on parts or all of those.

OK, that is actually quite helpful clarification. Thank you.

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Yes, we have time for a few written questions and one relates to capital employed that came down to 25% this year. What trend should we expect going forward? Will it differ a lot on a yearly basis?

It will differ on quarterly fluctuations. You will continue to see that. If you look at the development in 2023, I mentioned we've done significant investments, two billion in project acquisitions, if I include also the platform acquisition in Australia. The return of these investments, so that's something tying up quite a lot more capital into the business, is still to come. We foresee that we will conclude the first sales from Australia in the year, and obviously that will then start generating returns. I also mentioned in terms of the operating income development, the gross profit growing at 20% last year, but with the significant investments that we've done, both in 23 and earlier years, in 23, we've more than doubled sort of the DEVX and personnel expenses if we go back two years. there's still this time lag, and that gives us good comfort that we will continue to deliver very strong returns on capital that we deploy in the business.

The final question, then.

There is one on cue as well, moderator. Maybe you can let William in.

The next question comes from Willem Mackey from Kepler Tuvriax. Please go ahead.

Good morning. It's Kepler Shiver tied up with Swedbank. William Mackey. Good morning, Paul Yeohan. Thanks for the time. I just wanted to follow up on the return on capital employed. You mentioned in your opening statements the importance that you attach to the metric when you're thinking about building the portfolio. Can you just provide a little more color about how you think about the return on capital employed in your process as you look at the projects going forward? What sort of thresholds do you set? And when we think about the opportunity set that you face, which sort of opportunities offer you the richest returns compared to some where you're looking at volume rather than return overall?

Yes, I think that's correct. With the platform that we now have established across Europe as well as Australia different technologies different geographies and different also short term outlooks in these markets. That's internally when we look at sort of in the budget process for 24 how we prioritize where we sort of gear up where we're doing a bit less. That's very much in that decision-making where that KPI is playing a role.

Excuse me for my ignorance, but do you have a set sort of target mid-term level for return on capital employed similar to the target to grow the net income?

Yeah, absolutely. I mean, we want all our markets and all our products technologies to contribute and deliver in line with our financial targets, which is 25%. Super.

Thank you. The second question comes to Australia. You mentioned that you've been building the pipeline and invested significantly. When you look at the year ahead and you think about the sell downs, I mean, how should the needle change? What sort of level of contribution are you hoping for? And midterm, you mentioned this very rapid transition from fossil to renewable, 80% by 2030. It's a stunning target. To what extent did the team on the ground think that they can participate to grow the business?

Yeah, if I start off in terms of the profit contributions, We did a significant investment in Australia. And here again, it's important to remember a bit the accounting dynamics. This portfolio that we acquired is also when we acquire project rights or when we acquire a portfolio like we did in Australia. That is something that is part of our balance sheet, our inventory. So the the gross margin on a project that we have acquired in late stage is typically less than if it's a project that we have done in Greenfield and where we've expensed all the development during the development phase. So the first projects coming out of the Australian portfolio will of course have this kind of dynamics. But where we see also the long-term value creation from Australia is like we said in connection with the acquisition on the onshore wind side. and expanding the product as such.

And if I can comment on the second phase of the question then, rapid growth, how can we contribute? Well, first of all, we have a team on the ground which has developed about, well, they've been the top developer within the solar space in Australia for years, having already taken about 800 megawatts to completion. um we have a late stage portfolio aimed for closing this year as you once said with those financial metrics but even more coming in 25 and we also see i think australian government and authorities being a bit of a role model when it comes to market intervention last year was not a very active market for the renewable space in australia negative pricing observed, and the market is now being adjusted to account for that. So they are really navigating the market and macro movements in order to reach these 80% by 2030. It's a high set target, but they're at least moving towards it.

Thank you. The last question is a detailed one that you may pass on. Clearly, the results demonstrate the growing strength of your overall business model, and you explain that very well. But coming back to the detail of the construction portfolio, you mentioned supply chain problems. We know that you've had problems or there have been problems with your technology providers or OEMs. How is that situation with your OEM developing, one of your partners, and how will it affect the financial performance this year? Does it push some results into 2025? Thank you.

Good question. And we did already in the Q2 call push these projects where as soon as we got the information that there will be delays, these delays have now been more confirmed. Turbines are in the factory, etc. So we feel confident that we will live up to these next year delivery and completion timelines that we already set six, eight months ago. So no further concern, rather kind of clarification achieved on those three projects where you have, I think you're referring to a specific OEM.

Yeah. And when you look at your, when you're building projects now, obviously there's less OEMs that you wrap into your project specifications. Does that change the pricing dynamics? Is it harder to optimize the capital cost of the equipment because there are less players in the market?

I think competition is always welcomed. I think I can just stay with that comment.

Thank you very much, Paul.

All right, bye. Yeah, I think we're a couple of minutes over time. Thanks, everyone, for staying with us for this morning. And please return to us with questions or the IR email if you have any. Otherwise, wish you a good rest of the week.