Aker Horizons ASA
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A warm welcome to all joining today's presentation of Aker Horizons' First Quarter 2024 Results. I'm Kristian Rokke, CEO of Aker Horizons. Joining me are Kristoffer Dahlberg, CFO of Aker Horizons; and Mary Quaney, CEO of Mainstream Renewable Power, who will present the company's main developments in the quarter. At the end, we'll open up for Q&A.
Starting with the summary of the main developments in the quarter. Aker Carbon Capture announced an agreement to form a joint venture with SLB. The transaction is expected to close in the second quarter. The new company will combine technology portfolios, expertise and operations platforms to bring carbon capture solutions to market faster and more economically. Mainstream Renewable Power continues to execute on its near-term pipeline. The company's Andes Renovables platform in Chile continues to deliver positive commercial margins despite market challenges. The construction of the Ckhúri 109-megawatt onshore wind project is set to resume this quarter.
In South Africa, Mainstream has a new 50-megawatt private PPA project that is expected to reach financial close this quarter. This follows last year's announced financial close reached on a 97-megawatt solar PV farm with a 20-year PPAs with construction having started. In Hydrogen segment, Aker Horizons' flagship Narvik Green Ammonia project is advancing, with the joint pre-FEED study now complete. The project submitted an application for over EUR 100 million in support from the EU Innovation Fund in the first quarter. Separately, Aker Horizons is exploring additional opportunities to leverage the Aker Narvik powered land sites for power-intensive industries in the Northern Norway. Among these opportunities with strong traction are data centers and battery material production.
Moving on to the most significant development in Aker Horizons' portfolio in the first quarter. On March 27, Aker Carbon Capture and, technology major, SLB announced an agreement to combine their respective carbon capture businesses. The transaction builds on the long-standing collaboration between the Aker Group and SLB, and we're very pleased to be further strengthening our collaboration with SLB. Following the transaction, SLB will own 80% of the combined business, and ACC will own 20%. At closing, SLB will pay NOK 4.12 billion in cash to ACC for the purchase of 80% of the shares in Aker Carbon Capture Holding AS, which holds the business of ACC.
In addition, ACC will attain NOK 400 million in cash, and ACC will be entitled to a performance-based payment of up to NOK 1.4 billion. The performance-based payments will be subject to the achievement of certain milestones, order intake and margin targets. This gives a total potential consideration of NOK 5.9 billion. We can think of no better partner than SLB to scale cost-effective solutions across the carbon capture value chain in support of customers reaching their decarbonization targets.
The International Energy Agency, CCUS, playing a critical role in the Net Zero transition, estimating that over 1 gigaton of CO2 per year will need to be captured by 2030, increasing to over 6 gigatons by 2050. This partnership will bring together complementary technology portfolios, leading process design expertise and established project delivery platform. By combining Aker Carbon Capture's commercial carbon capture product offering, and SLBs new technology developments and industrialization capability, it will create a vehicle for accelerating the introduction of early-stage technologies into the global market on a commercial proven platform.
After a challenging period for the energy transition, there are now positive signs in all of Aker Horizons' market segments. Recent data from the IEA shows strong growth in announcements of both CO2 capture and CO2 storage projects globally, increasing by 35% and 70%, respectively, in 2023. It's worth noting that storage announcements outstripped capture, bringing global storage capacity for 2030 to 620 million tonnes and capture capacity to 430 million tonnes, indicating good potential to add new capture projects. The positive development is boosted by incentives from the IRA in the U.S. and increased policy push in Europe, stimulating both capture and storage projects.
In the Renewables segment, global solar PV capacity additions in 2023 broke a new record, increasing by over 80% from 2022. The industry is poised for further growth, with announced polysilicon and module capacity well exceeding levels required to stay on track with the IEA's net zero emission scenario. China's rapid expansion of manufacturing resulted in a 50% reduction in the PV module cost since December 2022, further adding to the positive outlook for solar PV.
In the hydrogen space, we're seeing strong growth in announced electrolyzer manufacturing capacity significantly outpacing shipments, indicating a robust capacity to handle growth in hydrogen projects. Although still at low levels, investments in hydrogen projects is on the rise, with global installed capacity exceeding 1 gigawatt, marking a historic milestone, reaching about 1.3 gigawatts in 2023. This was underpinned by an uptick in annual additions of hydrogen projects, which increased to 600 megawatts in 2023.
Returning to Aker Carbon Capture. Here are some of the company's highlights in the quarter. The company saw a continued high activity and demand for test campaigns, pre-FEED, FEED and studies. Looking more closely at the North American market, ACC was awarded a first mobile test unit campaign in the pulp and paper industry. The company also established a strategic alliance with CO280 and signed an MOU agreement with CO280 and Microsoft targeting large-scale carbon removal, as was announced earlier this month.
For ongoing major projects, the company reported continued progress. At the Twence waste energy plant in the Netherlands, the system is in hot commissioning. At the Brevik cement plant in Norway, the second heavy lift campaign was completed ahead of schedule. For Ørsted's Kalundborg hub with wood chip fire and straw-fired power stations, the groundwork was initiated on both sites. ACC's backlog remained strong at NOK 2.3 billion.
Now let's take a look at the market developments for Aker Carbon Capture in the past quarter. ACC's newly signed test campaign in the U.S. signifies a milestone for the company's expansion into the North American market. ACC was awarded this test campaign by CO280 and a leading pulp and paper company for an undisclosed site on the Gulf Coast, enabling the full-scale implementation of multiple Just Catch 400 modular capture facilities.
In March, ACC established an alliance with CO280, which provides the company with access into both the pulp and paper and the carbon dioxide removal market. North America's pulp and paper industry represents a carbon removal opportunity of up to 130 million tonnes per year. After the end of the quarter, ACC signed an MOU agreement with Microsoft and CO280 to explore opportunities for scaling the physical and digital value chain of carbon removal in the U.S. and Canada. Together, the 3 companies have the know-how and resources to develop this market by creating a model to deploy carbon capture projects quickly to meet global net zero targets.
In the quarter, ACC also strengthened its foothold across Europe with a test campaign, a pre-FEED and studies in Norway, Sweden and a number of other undisclosed sites in Northern Europe. The test campaign at WACKER’'s silicon production at the Holla plant in Norway will provide valuable learnings for the implementation of ACC's carbon capture technology in a new industry. The pre-FEED and all the recent studies awarded are based on ACC's standardized and modular Just Catch. We see clear signs of strong interest for the product range, further supporting the positive momentum we are witnessing in the CCUS market.
With that, I'll hand it over to Mary to present the developments in Mainstream.
Thank you, Kristian. Before taking you through Mainstream's first quarter developments, I would like to say that we are delighted to welcome Julie Berg as our new Chief Financial Officer, effective from the second quarter, joining us from our sister company, Aker Carbon Capture.
And so then, starting with the key highlights for the period. In Chile, our 1-gigawatt Andes Renovables platform continues to demonstrate resilience by delivering a positive commercial margin again this quarter despite market challenges. Construction activities for the Ckhúri wind farm in Chile are set to resume in Q2, marking progress in our commitment to the Andes platform post conclusion of its restructuring last year. Construction has also commenced for our corporate PPA project in South Africa, reflecting our commitment to positioning Mainstream as a leading provider of sustainable energy solutions in the region.
Additionally, we anticipate reaching financial close for another private PPA project in South Africa in the coming months, a 50-megawatt solar farm, as we further leverage our South African market expertise. Progress continues in the Philippines with the Camarines Sur project on track to commence preliminary construction works together with our local partners AboitizPower. While our Mareld offshore wind farm in Sweden, another partnership project with this time with Hexicon, is in the final review stage.
Lastly, on this slide, the ongoing organizational review and related cost base reductions are beginning to yield positive results, positioning us for enhanced operational efficiency and sustainable growth. These milestones highlight our commitment to driving renewable energy transformation across our markets and technologies while navigating the complexities of the global energy landscape as we continue to believe that the long-term fundamentals for renewables remain attractive.
On the operational side in Chile, the commercial margin for the Andes portfolio continued to remain positive despite an increase in curtailments, as improved hydrology performance and lower international fuel prices delivered a better market backdrop. The tower incident at the Alena wind farm, which I reported last quarter, is estimated to have a negative EUR 2 million impact on the margin, impacting the Q1 EUR 14 million reported. As a reminder, of the 18 turbines at the Alena wind farm, 17 have now fully returned to service, with a replacement turbine planned to be in service in H2 this year. OpEx-wise, Andes ranges from 10 million to 15 million per quarter, with Q1 towards the lower end of this range.
Looking forward to Q2, we are now starting to enter the autumn winter months in Chile, and we would expect curtailments may be reduced somewhat due to lower solar radiation. The high system costs we saw in late 2022 and early 2023, which were driven by fuel costs, have now lowered as hydrology has improved, combined with a normalization of international fuel prices. However, these system costs remain elevated, driven by the rapid growth in PMGD, which are smaller scale installations, mainly solar, that have a stable power price and are not subject to curtailment. In Q2, we will resume construction of our Ckhúri wind farm in Northern Chile following ongoing and constructive engagement with Chile's National Monuments Commission.
We will start with work on the overhead lines, and construction at the wind farm site itself is expected to resume in H2. Ckhúri's COD target remains on track for next year with the termination of its DISCO PPA in 2023. This provides the project interesting PPA optionality going forward. On the regulation side, the new bill, which is anticipated to provide necessary reforms to help stabilize the current market distortions is expected to be approved later this year. With Chile's tariff stabilization mechanism now moving into law, the energy transition law is expected to get more focus as it was declared under extreme urgency, meaning the bill must now be shared with the appropriate chamber.
And now moving to key portfolio updates for onshore and offshore projects. In South Africa, construction has commenced for our 97-megawatt solar farm. And as you can see from the picture on the right-hand side of the slide, this project reached financial close in November last year and is backed by a corporate PPA with Sasol and Air Liquide. In addition to this, we anticipate reaching financial close for another project with a private power purchase agreement structured under flexible renewable energy supply agreements. This agreement underscores the ongoing opportunities we see for our over 10-gigawatt pipeline in South Africa's growing PPA market.
In the Philippines, our 50-megawatt onshore wind project in partnership with AboitizPower is poised to commence preliminary construction works in the upcoming months. This project is backed by a 20-year offtake contract through the Philippines' Green Energy Auction program. Separately, we continue to progress our early development activities in onshore wind in the Philippines and expect to secure additional certificates this year to grow our pipeline in this attractive market.
Moving to offshore wind and starting in Norway, where it has been confirmed that Utsira Nord's application has been disappointingly delayed to 2025, pending consultation with the EFTA Surveillance Authority this year. More positively, however, in Sweden, progress continues with our Mareld offshore wind farm, a 2.5 gigawatt floating project, which is a 50-50 joint venture with Hexicon. Currently in the final review stage with the County Administration and Geological Survey of Sweden, this project is now awaiting government recommendation, which is a key milestone in the development of the project.
And now I'd like to give you some context on the Australian market, which stands at a pivotal juncture in its journey towards decarbonization and Mainstream's role in that. Australia's energy mix is currently dominated by coal and natural gas; however, given the government's supportive renewable policy and targets, forecasts indicate a rapid shift towards renewables in the coming years, underscoring the immense potential for decarbonization within Australia's energy sector.
Aligned with this transition, the Australian government has set an ambitious energy policy target. The target aims to elevate renewable energy's share from 32% today to an impressive 82% by 2030. This translates into the deployment of 4 gigawatts of wind and solar each year. Hence, this strategic initiative not only underscores Australia's commitment to combating climate change, but also prevents a compelling opportunity for sustainable growth and development. These government targets are underpinned with compelling market fundamentals and supportive policies. Australia is an established OECD market with strong credit ratings from the leading agencies.
Moreover, its 2030 renewable energy target is supported by both state level initiatives and a federal capacity investment scheme. And in particular, the recently announced federal level capacity investment scheme will underwrite 23 gigawatt of offtake. Importantly, the government is implementing a strategic plan to accelerate the phaseout of coal-fired power stations by 2040, coupled with significant investment in transmission upgrades, both of which demonstrate the country's commitment to the renewable energy transition. In Australia, Mainstream is pursuing both an onshore and offshore strategy given the country's wealth of renewable energy resources combined.
Our onshore wind pipeline is progressing well, with 1.5 gigawatts of projects moving to lease stage, with first milestones on this expected during the year and a number of other projects in early stage development. And so to conclude, in the short to medium term, Mainstream remains focused on our portfolio of priority projects, which offer the greatest near-term value creation potential, evidenced with the clear progress in projects across Chile, South Africa, the Philippines, Sweden, and Australia as well as the strongest opportunity to deliver more consistent capital recycling. Looking forward, we believe Mainstream will continue to successfully navigate the current challenges being experienced across the sector and in doing so, position itself for growth in the medium term.
And with that, I hand you to Kristoffer.
Thank you, Mary. Starting with some highlights from Aker Horizons' asset development. For the Narvik Green Ammonia, which we are developing together with Statkraft, it has been another eventful quarter. The pre-FEED study has been completed, and we are targeting decision gate 2 during the second half of this year, which will be the milestone kicking off the defined phase of the project and taking us towards an FID. The project team has, as mentioned by Kristian, also submitted the application to the EU Innovation Fund for support for the project.
On the Condor side, all the hardware and equipment is installed for the first 230-megawatt grid capacity, with final testing of the system underway prior to final connecting to the grid. We continue to mature dialogues with potential users of our industrial sites in the Narvik region. And during the quarter, we signed an MOU with an accomplished industrial player to assess battery material production in 2 of our sites. The main priority for asset development going forward is to focus on the Norwegian projects in the portfolio, which is where we see the most value creation opportunities in the short run.
Moving to Narvik, our large-scale green ammonia project in Northern Norway. During the quarter, the pre-FEED study was completed, giving further certainty on CapEx and execution strategy and also working as a basis for the zoning application, which was recently submitted to local authorities. Together with the Statkraft team, we are working to mature the project to DG2 with commencement of FEED. We also issued invitation to tender for FEED and EPC to several short-listed suppliers, and we see underlying strong interest in the supplier market for this project. Responses are expected to be received prior to the summer.
At the Condor site, as previously communicated, the civil and electrical works have been completed for a 230-megawatt grid connection, with final testing of the system underway prior to final connection to the grid. The site is suitable for both our large-scale ammonia plant and other power-intensive industries and dialogues with parties for other industrial initiatives at the site to continue. We are experiencing continued strong interest in our sites in the Narvik area from power-intensive industries, and we'll continue to work on establishing this as an attractive business for Aker Horizons.
Offtake dialogues are maturing according to plan, and we see continued interest for green ammonia. Aker and Statkraft are actively engaging with several large industrial off-takers that are looking to secure green ammonia supply to Continental Europe. We are currently working towards signing term sheets with key offtake partners prior to moving into the next phase of the project. The project team has, as mentioned, also submitted the application to the EU Innovation Fund for support for the project. Results for this is expected towards the end of the year. And if successful, we expect the award to be substantial and over EUR 100 million.
At Rjukan, as previously communicated, we are working to secure both offtake and an equity partner into the project. The project has secured land and long-term PPA at favorable conditions. Last quarter, we signed an MOU with an industrial gas player and during this quarter, we have matured these discussions further. We will revert to the market with more information in due course, but our target to start the FEED phase during first half of this year remains. Last year, we were awarded NOK 85 million in funding from Innovation Norway. Additionally, we are looking at alternative funding to further support the business case. And we believe the Rjukan project is well positioned for the upcoming second round of Maritime Hydrogen Clusters from Enova.
Infrastructure in form of land with grid connection is key to realize power intensive projects and utilize abundant renewable baseload power in Northern Norway. Aker Narvik is our vehicle to develop powered land, a joint venture with Nordkraft, where we hold an 80% share. Our sites in Northern Norway are strategically located close to the 420-kilowatt central line and are at various stages of zoning for power-intensive industries. And Aker Horizons is well positioned to capitalize on the growth here. Our site at Kvandal is already level and connected to the grid with 230-megawatt capacity and ready to build. And during the quarter, we signed an MOU with an industrial player to assess battery material production in 2 of our sites. We also see increased interest from the data center industry, as Norway and our plots have many qualities suited for this industry.
Moving to the financials. Our net asset value consists mainly of our 43.3% ownership in Aker Carbon Capture, 58.4% in Mainstream, 100% in Aker Horizons Asset Development, cash of NOK 3.2 billion and liabilities of NOK 6.4 billion. In the quarter, net asset values decreased from NOK 10.8 billion in Q4 to NOK 8.7 billion at the end of Q1. This decrease was driven primarily by a decrease in the share price of Aker Carbon Capture in the quarter. The ACC shares are reflected at closing share price as of 27th of March before the announcement of the JV with SLB, where ACC will receive NOK 9.19 per share in cash in addition to performance-based payments of up to NOK 1.4 billion in total.
The next slide shows Aker Horizons' parent and holding company's key financials for the first quarter. The EBITDA was negative NOK 25 million in Q1, reflecting general overhead and projects in Aker Horizons. The net profit was negative NOK 2.1 billion, reflecting also the share price development of Aker Carbon Capture and net other financial items, mainly interest income and costs. Cash flow from operating activities consists of running costs and interest received and paid and amounted to negative NOK 60 million in the quarter. Investing cash flows consist of investments in our green projects, Narvik and in asset development. The net cash flow for the quarter was negative NOK 122 million, and the cash balance was reduced from NOK 3.3 billion to NOK 3.2 billion.
Our external financing and commitments are shown here, including the maturities. The EUR 500 million RCF remains undrawn and available to us until May 2025. We also have an option for a further 1-year extension. As previously communicated, we have also included the share of Mainstream's $220 million corporate facility, which is pro rata backed by Aker Horizons in the overview.
This brings us to available liquidity. The RCF of EUR 500 million was, as mentioned, undrawn at quarter end. And with a cash position of NOK 3.2 billion and the RCF undrawn, that sums up to a total available liquidity of NOK 9 billion. This is up from Q4 at NOK 8.9 billion, reflecting reduced cash position by NOK 122 million in the quarter, countered by a weakening of the Norwegian kroner versus the euro, which the RCF is denominated in. The net interest-bearing debt position was up from NOK 3 billion at Q4 to NOK 3.2 billion at Q1 '24, reflecting operating costs, interest paid and also accrued and investments in our green projects.
Summing up, Aker Horizons has gross asset values of NOK 8.7 billion, net interest-bearing debt of NOK 3.2 billion and available liquidity of NOK 9 billion. The loan-to-value RCF covenant is defined as net senior debt over gross asset values and stood at negative 6% at Q2, giving significant headroom to our covenant at 50%. That brings us to the end of our presentation, and we'll now open up for Q&A.
Thank you, Kristoffer. This is Marianne Stigset. I'm Head of Communications and External Affairs at Aker Horizons, and I will lead you through the Q&A segment of this presentation. Just a reminder, you can submit your questions through the webcast question function or by e-mail to ir@akerhorizons.com. The first question in is regarding Aker Carbon Capture. What do you intend to ask Aker Carbon Capture to deal with the cash proceed from the SLB transaction? Kristian, I'll direct this question to you.
Sure. Thank you for the question. The first order of business is closing of the transaction, which is expected to be by the end of the second quarter. In parallel, the Board of ACC has initiated a process to update the strategy of ACC going forward in light of the SLB transaction, and we'll revert to the market with an updated strategy once the work is complete.
Thank you, Kristian. The next question, we have a few questions, I'll bundle them together. It's a couple of questions around our NAV and how we can strengthen the market's confidence in the values we report. Kristoffer, would you like to take that question?
Yes. Thank you, Marianne. So our NAV as of first quarter in '24 is determined by applying the market value of ACC and book value of other assets and liabilities. The valuation and testing of book value is used as a standard methodology and process, and all underlying projects have been assigned a relevant development stage and probability based on consistent methodology. On how to strengthen market confidence, we need to demonstrate the underlying values over time like we recently did in the ACC-SLB transaction and have done historically on several of our holdings.
Thank you, Kristoffer. Those were all the questions we have for now. And so with that, we wish you all a good day, and look forward to welcoming you again to our Q2 2024 results on July 16. Thank you very much.