Scatec ASA

OSE:SCATC

Earnings Call Transcript 2019-Q4

[Raymond Carlsen, Chief Executive Officer]

Good morning. I'm extremely happy to see you all here at our new offices at Skøyen in Oslo. And in case you have time after the presentation, you're free to join us up and take a look at our offices. It's quite a view from there. Fourth quarter 2019 and the end of the year 2019, it has been, I will say, maybe as usual an extremely busy year for us. And if you take a look at some of the highlights that I'd like to share with you, just looking at the last quarter, we reached 298 gigawatt hours in the quarter and 926 gigawatt hours, up almost 3x compared to the year before, for 2019 as a whole. And of course, the growth in the gigawatt hours will continue to increase as new plants are being connected. I'll be back with the comments about that a bit later. The earnings before [ interest ], tax, depreciation and amortization, reached NOK 434 million in the quarter and for the year, NOK 1.571 million, also a very good increase from the year before.We completed our last plant in Egypt, out of 6, in the quarter as well, bringing us up to 390 megawatts in operation. And as some of you might be aware, this is the largest bifacial plant in the world. And every morning, I take a look at the production from all our plants and in particular, Egypt. And I can see that the bifacial panels are performing according to expectations. In other words, they're picking up the indirect light that is being reflected from the desert into the panels and are producing more -- much more than only getting some from -- directly from the sun or the ray directly from the sun.The Board of Scatec Solar is proposing a dividend of NOK 1.05 for the year. If you look to the right there, you can see that it has been a tremendous growth. I mean plants have been added throughout the year. And you can see that the power production gigawatt hours, comparing it to the last quarter '18 and last quarter 2019, is up almost -- or a little bit less than 3x. So that's substantial, and you are aware that all these projects, when they are connected, they have a life ahead of them of minimum 20 years. A few important points to mention for last year. I mean, we doubled installed capacity, and we have also expanded the pipeline, both in terms of megawatts but also in terms of geographical reach. 609 megawatts were connected. Egypt, Malaysia, Ukraine and Mozambique, in total, 1.2 gigawatts in operation. And I guess, the best word, if I may call it, ESG, is something that on the industry, not only in Norway, but particularly in Europe, but maybe also globally has picked up on. I mean, this is something that we are doing on a regular basis. In fact, it's not some activity that we decided to do, and I'll share a bit about how we're doing that Scatec Solar on a couple of slides later.This is our portfolio in operation. And the whole portfolio is performing very well and sort of the main deviation from year-to-year, if you look at statistics, it should be plus/minus 4%. So compared to wind, I mean, that's pretty stable, too, but solar is much, much more stable in terms of production. And we see that -- we have seen that in our numbers, and we expect that also to happen in the future. Plants under construction. When they're all connected during the year, we will be reaching 1,900 megawatts in operation. Ukraine, [ you see ] it's winter there now. The final plans are being put together. South Africa. I was there in November. Looking at the plants there. Really nice, 3 plants next to each other, also coming together, fantastic solar conditions, almost 2,500 solar hours every year. So it's amazing compared to Norway, for example, were less than 1,000. Argentina also. I think, yesterday, Pål Helsing, Head of Solutions in our company, mounted the last panel. So we're pretty close to testing period there as well.And then our final small plant, but a very important plant in Malaysia, 47 megawatts, is also being tested or in testing situation as we speak. I think it's important to show this slide. I've shown it once or twice before, but it provides an insight into the diverse portfolio that Scatec Solar have -- had. We're now enjoying revenue streams from 5 -- or sorry, 10 different countries, more plants in several countries. You can see the split with regards to currency, most are dominated by euro and U.S. dollars, but also some important contributions are Malaysian ringgit and reais from Brazil. I don't remember exactly, but I know for sure that the ZAR is also adjusted by inflation and maybe some of the others as well. Now if you look to the right, the 1.9 gigawatts in total when they're all connected. They have an average lifespan of 20 years. So those will, when I connect it, [ stone-on-stone ] contribute to the increase in the loan cash flows and that will, as we move forward, be more and more dominant compared to sort of the very big fluctuations that we've seen in the numbers when the revenues from construction activities were substantial.Now a solar plant doesn't just stop producing electricity after 20 years -- after the contractual period. It has its life span up to 4 years -- 35 years. And then, of course, it enters into maybe a different contract, a new contract, and we see that a lot of the investors into the PV arena is also starting to take into account sort of in -- sort of the oil and gas expression, the tail end of production. The production happens on the way down. They will then enjoy either the market conditions or enter into new power purchase agreements with the market as they present themselves.I mentioned ESG. And I think for some, it's not easy to really understand. I mean, this is not a committee that is sort of sitting next to the management and is monitoring what's going on and is trying to stimulate us to do the right thing because the world is looking at us. This is now how it has been for -- with us for years. I mean, this is an integrated part of our operating model. So if you dive into the details of how we're running this company, you will see parts of the -- these elements and all the important aspects of ESG embedded into the way that we operate. And what happens on a continuous basis is that we focus on risk. I mean, everything we do is risk. When you focus on the risk and you're able to mitigate it, then you're taking a lot of the uncertainty out of the equation. So this is what the management, the company is focused on and also what the board is focused on. So that goes on the top line there all along until the plant is finished, shut down. And then when we discover or look at the new project, the first thing we do is to look at this opportunity and sort of test it, not only applying the financial model, but actually looking into it, "Who has developed the project? Are there any environmental issues that we need to take into? Are there any birds nesting in the area?" I remember in California, we had a plant there, an owl pair that sort of enjoy themselves. And we had to watch them for 12 months before we decide that, "It's okay, we can build a plant." [ Prairie wolves ] up in Utah. I mean, there are things that, that we have to take into account, and that becomes a part of the documentation. That is necessary for us, the banks, our co-investors to make a decision, and you have to tick them off. Then we went into -- yes. And then when you identify issues, it could be that it's a small village. It's next to the plant or it could be where the plant is going to be. We may have to move these people, we have to find them a new home. We may have to find them a new area to grow their rice paddies or whatever they're growing, and that takes time. If you know the IFC rules, then if you apply that to your business, you have to take all that into account. And sometimes, that is deciding why things are taking longer than anticipated. It's not just like we want to build our plant. We'll [indiscernible] it out, mount the panel, connect. No. Some of these things may actually define how long it takes to build a plant. And then, of course, we very early involved stakeholders. They have exactly the same interest as we have to have the right answers to these questions. This is co-shareholders. It could be the banks, it could be other partners. And throughout everything we do, we focus on health, safety and environment. And I mean also in my previous life, that was important when I work in the oil and gas business, and this should be important for every business. Why is that? Well, there is a direct link in between good numbers that you collect from health, safety and insurance -- not insurance, environment, and the quality of the projects that we deliver. And that is good.I mean our performance last year, we had an LTI of 1, I mean 1 in 1 million hours, which is extremely low. I don't think many companies in Norway is at that level. Our sick leave last year was at 0.2%, 0.3%, which is -- I don't think many companies in Norway has that or elsewhere. So I think the statistics shows that we are on the right track. It's not easy to keep it at that level.I'd also like to point out something extremely important here. That is decision gate 3. For us, that is when we make a decision to actually start investing. That is when the board gives the final approval and we move ahead. At that point, all the elements that needs to go into the documentation, to have a proper decision is presented to the Board and they make a decision to go ahead. An important point for us, but of course, and then you can see things move on. We continue our focus on ESG aspects and then it moves on. And I can tell you now. I mean some of these projects will enjoy huge investments over the next few years. And we have 35 right now, 35 sustainability products. It could be -- someone who could be building schools, building or digging out wells helping people to build a business, a sustainable business. South Africa, we're doing a lot of that.So it's more than just the bottom line. That's what I'm trying to tell you. And this is the way I think businesses are going to be managed in the future. They have to be. I can talk a about more about these things but maybe at a later stage.Now there are several institutions that have specialized and actually judging, analyzing and scoring how people are faring within this ESG area. And we just received a report a couple of weeks back. Sustainalytics is one of those institutions. They have been scrutinizing us, looking at corporate governance, human capital, business ethics and so forth. And they decided that going through all these factors that we are low-risk in terms of experiencing material financial impact from ESG factors. This is serious for some companies if they're not scoring properly. I mean the risk is high. It's worth actually studying that in detail to try and mitigate it.Now if you compare that to our peers, well, actually the global universe, they looked at 12,237 companies, 450 utilities. We came out as #1. For renewables, we also came out as #1. Maybe because we have been doing this as a part of our operating model for several years. And now over to the hard facts, Mikkel, the numbers.

[Mikkel Tørud, Chief Financial Officer]

Thanks. So let me start by just reflecting a bit on our historical development on the financials. And I think this is a quite nice graph that we put together here. We IPO-ed in 2014. And to the left of this graph, you can see -- sorry, I need to put my mic. Hold on. Better now? Yes. Sorry.So I'm saying that this is a graph showing the historic developments of the company since the IPO over the last 6 years. And on the graph to the left, you see installed capacity and development of power production. And last year, we produced close to 1.6 terawatt hours, of which 60% was our share of this production. And on the right, you can see the development of revenues and EBITDA on a proportionate basis. And again, we've seen a fourfold increase of EBITDA over this time period and reported now close to NOK 1.6 billion of EBITDA last year.So then moving into our segments, starting with the power production segments. Raymond already talked about the increased power production, and we report now NOK 379 million of revenues and an EBITDA of NOK 309 million. And again, it's a doubling year-on-year on the EBITDA levels here. And if you look at the last 12 months, revenues passed NOK 1.2 billion and EBITDA reached close to NOK 1 billion. And of course, we will, as we expect, increase power production and the revenues here as we connect the new plants that we're completing these days.On the O&M side, we also see growth, of course, at a more moderate level and the absolute numbers here are smaller than in power production. EBITDA of NOK 11 million in the quarter and revenues were NOK 34 million. And you see here a picture of our monitoring center from Cape Town. We now have a 24/7 monitoring of performance of our plants from this center, and we analyze data from the plants, of course, to optimize performance and availability further and also to learn and build this into our new power plants.When we look at then O&M for the whole year, revenues reached NOK 115 million and EBITDA, NOK 45 million, up about 30% year-on-year. Now in development and construction, activities continued to stay high. We reached revenues of NOK 1.2 billion and EBITDA of NOK 132 million. We've recorded revenues now in Malaysia, in Egypt, South Africa, Ukraine and Argentina in this segment. And the accumulated progress across these projects was 78% at the end of last year. We continue to develop a wide range of projects. We've added 360 megawatts to the backlog while we also reclassified 158 megawatts from backlog to pipeline in the quarter related to the projects we have, some of the projects in Vietnam and a smaller one in Honduras. Also worth mentioning that we capitalize development expenses for projects reaching a certain level of maturity. And we have historically had very limited impairments of these projects, right? so these balance sheet values. In 2019, we impaired about NOK 23 million and we impaired NOK 10 million now in Q4, and that's compared to, yes, NOK 20 million-or-so in 2018. If we look at this segment as a whole for 2019, you can see revenues close to NOK 5 billion and EBITDA, NOK 589 million.Moving on to our financial position. We've invested a lot in 2019. The total consolidated assets stood at NOK 21.7 billion, up NOK 6.5 billion from the end of last year. This is, again, on a consolidated basis. Our share of these investments are roughly 60%. And if you look at the consolidated cash in the group, it was NOK 2.8 billion, of which NOK 758 million was free cash at the group level. When we look at the proportionate net debt, it ended at NOK 7.3 billion, up from NOK 6.1 billion in Q3 as we drew down more debt at the project level.Again, group book equity increased slightly to about NOK 5 billion, and the equity to capitalization ratio stood unchanged at 87% at the end of the quarter. Then movements of cash in the quarter. We received NOK 66 million of distributions from the operating power plants, and we invested NOK 66 million -- sorry, we invested NOK 187 million of equity in the quarter, mainly in Argentina, Ukraine and South Africa. And you can see a fairly large reversal of working capital related to our construction projects in this quarter, and we will continue to see some fluctuations on the working capital side also going forward. And this is -- it relates to how we structure our projects where we basically have a negative working capital during construction. So we have a fairly front-end loaded working capital and then that's reversed towards the end of the projects. So this will continue to fluctuate as we move into construction of new projects as well. And obviously, we'll expect to see growing distributions from the existing power plants as we connect new plants now also this year.Also included a summary of the same picture. Now looking at this as 2019 as a whole. You can see we received NOK 240 million of distributions from the operating power plants. And we generated NOK 471 million of cash from D&C during the year. And we invested close to NOK 870 million of equity. And you can also see the capital increase that we did as well as the working capital movement, and we had a similar positive movement on the working capital side in 2018.Lastly, a bit on the guidance. The remaining contract value for the construction portfolio is about NOK 700 million and it remains to be recognized as revenue. Power production, we guide here on plants in operation at the end of 2019, but this will increase as we reconnect more plants in the first half of this year, but we will hear only guide on the volumes, on the plants currently in production.Now in 2020, the revenues and margins from asset management services and O&M services will be reported together in a new services segment. We see that the asset managements part of our business have grown quite significantly, and we believe it makes sense for us to report this together with O&M. It has, until now, been part of the power production revenues and margins. And we will provide you with restated figures for these segments prior to Q1 reporting as well as provide you then with some guidance for the year, so you get a better handle of that slightly changed segment definition.Okay. Raymond?

[Raymond Carlsen, Chief Executive Officer]

Thank you, Mikkel. We have grown the pipeline -- backlog and pipeline by a couple of hundred megawatts since we last reported to you all. It's a substantial pipeline. And within the pipeline, there are some -- also some very big projects on all continents. I mean, I'm talking about substantial projects. They are moving in the right direction. But as you may appreciate, complex projects require a bit more time every once in a while. But I mean to say -- I mean, as you see elsewhere, the market is extremely hot at the moment. And we see in the developing world or the emerging markets -- the emerging world, that governments look to renewables as the quickest source of getting access to electricity. This is good news. Normally, when they were looking for addition -- additional plants to have more electricity into the grid, it took up to 5, 6, 7, 10 years. So that situation is changing to the better, which is I think is extremely good. We have decided to focus on a couple of countries that I've seen interest, quite a lot of people, and we have talked about that before, and I'd like to give you an update, the first one being Vietnam. Vietnam is a country that is actually enjoying the highest -- one of the highest growth in their GDP in the world. They are between 7% and 8%. And you all know that we'll be able to support such a growth, the access to electricity, an increase in electricity will have to increase even further, so you talk about 7%, 10%, up to 15%. They're close to 100 million people. Some people call it the new small China, meaning that job creation is absolutely essential. I was there several times last year, and I was very impressed with the government and their interest in actually growing the company in a marine in a very open way for investors.Now we have seen this before. When things move a bit fast, and they actually installed 4,000 megawatts in 2 years of renewable in Vietnam, they are overtaken by the sheer size and the impact on -- of these renewables, and that made them last year hold a bit. "Stop, what's going on? Do we need to relook at the policies? Can the grid handle all this new electricity that is not as a sort of a gas power plant or a higher power plant?" It's a bit -- has a bit more variations to it. So they have looked at the scheme now, what they will do for the future, and -- but they have not come out yet with what they want to do. Renew auctions is a swell alternative, but it could be also direct negotiations in combination with auctions. We don't really know the answer.For us, Vietnam remains on top of our list. We are increasing the number of people in our offices in Ho Chi Minh City. We are developing -- continue to developing one of the largest floating solar plants in the world. In fact, if it becomes the size that we believe, more than 1,000 megawatts, then it'll be the largest floating facility in the world. Of course, those projects aren't really good candidates for auctions. I mean, they are special, they need special attention and special solutions. So for us, Vietnam is extremely important, and it fits extremely well with the business model that we have proven as a successful business model in other markets. Just to remind you, Vietnam wasn't the only country in the world that stopped for a bit to figure out how they're going to best put their new policies into action. South Africa did the same. They actually did it twice. Egypt stopped also, "What's going on? The price is coming down, what do we need to do?" They looked around, gathered information, and they actually contacted company like ours to access the type of experience that we have collected from many different markets. They took that along with other information and adjusted their policies, and then they went ahead. Egypt became our biggest market. By the way, South Africa, which is on our next slide, is our home market. I mean, Norway is our home market, we don't have a market in Norway. But South Africa, we are the largest operator of PV plants in Africa, and we are the largest operator of the PV plants in South Africa.There has been some assumptions saying that the performance of Eskom has a direct impact on the ability to pay the bills for plants in operation. That is wrong. It's a pass-through. The government guarantees for the payments that goes to companies like us and other IPPs.Now what's happening in South Africa? Well, the growth isn't very high. They need growth. They need employment, new jobs. For that, electricity is extremely important. What they've experienced over the past few years and even more now over the past few months is that they have insufficient electricity. Why is that? Well, they have been doing maintenance on some of the large plants, and they have some operational issues, meaning that they've had brownouts and blackouts. So this has become so severe in South Africa that President Ramaphosa decided that we need to accelerate the deployment of new megawatts into the system. And they publicized 3 to 4 weeks ago that they would like to have 3,000 to 4,000 megawatts, on a 100% basis, added to the capacity to the country as soon as possible, meaning from 6 to 18 months from now. Renewables will be a part of that solution. They also, in parallel, which they've been working on for a long time, they've been working on Round 5. There's been 4 rounds before, the projects where we are building now were awarded in Round 4. Now are we ready to participate there? Yes, we are. Release, for example, is an excellent candidate for rapid deployment. This is sales production that we do in Southern Spain, and we can ship it out in a matter of weeks. So this is what we're going to propose when we reply to request from the government by end of this month.In addition to that, we have almost 1,000 megawatts of sites ready to construct. So that will also be something that we will offer to the authorities as a rapid deployment and installation of new megawatts. So if you ask me, South Africa is our home market. It's extremely interesting for us, and we are ready to actually help the government have access to electricity on a short-term basis. Now for us, I think we are where we need to be. We are extremely happy about being in the emerging markets. Our business model is something that is very well received both by co-investors, by banks and by the buyers of electricity.The long-term cash flows will dominate our numbers in the future and for many years to come. 1.9 will be connected during the year and additional plans will be added to that as we go on. ESG, I talked enough about that. You understand how it fits into our operating model. Market. Everywhere, it's moving very rapidly. It's -- in fact, I mean if you think about the environment, it should move even quicker. So we are reiterating what we shared with you on our Capital Markets Day. 4,500 megawatts in operation or in the construction line the next year. So that means that there has to be some very big projects, and there are in our pipeline. And from there on, 1.5 or 1,500 megawatts will be added as we move into the future beyond 2021.Thank you very much, and both Mikkel and I are open for questions.

[Raymond Carlsen, Chief Executive Officer]

Yes?

[Unknown Analyst]

I have a difficult question.

[Raymond Carlsen, Chief Executive Officer]

Yes?

[Unknown Analyst]

Corruption. These are confused with weak institutions. My question is, how do you make sure that your organization works in a way that you're not getting into the situation the Icelandic fish company came into recently. I mean, this is a matter of organizational culture in your firm, of course, and this is difficult. The other question is, dividend policy, which is that's very important. But I wonder why do you pay dividends when your growth is so high and you go to the market to issue new shares, why do you do this at the same time? So I guess it's more a question, what is your dividend policy in general? How do you think about to do this?

[Raymond Carlsen, Chief Executive Officer]

You can answer the last one first.

[Mikkel Tørud, Chief Financial Officer]

I can answer the last one first. So we defined the dividend policy when we went public in 2014. And the idea behind that is obviously that we are a utility and we wanted to signal from the outset a commitment to long-term yield. And of course, for a certain group of investors. Dividends are important. And obviously, we -- the growth component of the value creation is dominating the yield, obviously, at the moment, and I think that's -- and the policy is that we pay 50% of what we receive of distributions from operating power plants. That's the policy. It's a fairly moderate amount at the moment. Of course, this will grow as we connect new plants, and there's also a bit of a lag here. We need to operate the plants for a year before we are able to pay -- receive distributions from the operating power plants. So that's the policy and the rationale.

[Raymond Carlsen, Chief Executive Officer]

Yes. On a operating level, I'm not sure if you mentioned that. Some of the investors say that it's -- you are in difficult countries, sort of perceived difficult countries, and it's very good to see that you're actually bringing the dividends home, right? This is proof because if you want the dividend, you're going to watch out. What about that country? Did you get the dividend part? No, sorry, it's stuck there. Well, you can find out from the numbers and our dividend policy. That's -- was part of the thinking.Now to corruption. I remember many years ago, I was in a different company, and we were almost acquired, and I said, "You are in Angola and you are in Nigeria. By definition, you are guilty until proven innocent in terms of corruption." You have to prove that you did nothing wrong. Now world has moved on and this company has, of course, has never been in a situation where we have been -- how should I put it? We have been exposed to situations, but very, very seldomly. We train 100% our people, 100%, both with regards to reporting, how to tackle situations when that -- if that arises. And this is -- goes along with all of our partners as well. They have the same interest. We will not financed -- get our projects financed if there's anything wrong. We also carry out due diligence on all the people that have anything to do with the project. So if there is a developer that have a land developed for installation of solar plants, we need to look at their background. Do they have political actions? Have they been involved in anything that is -- that we cannot accept. And I'm telling you, we have said no to projects, not many because very few projects have that in that-in-the-money contracts where we have said, "No, we're not going ahead because the situation isn't good." So very -- I mean, we don't really experience people that are approaching us to say, "Okay, you want to -- I can help you if you help me a bit." That doesn't happen, which is, I think, is very good. They know that talking to Scatec Solar, they will not get it any other ways they will not get it any other way, but by actually having professionally and adhering to international laws and rules. Thank you.

[Unknown Analyst]

A question on D&C. Will the activity level in 2020 be higher or lower than in 2019 in D&C?

[Raymond Carlsen, Chief Executive Officer]

The activity level on D&C, as you have seen in the past, varies. In 2018 and particularly in 2019, we had an extremely high level. We don't think the level is going to be at the same this year as it was last year. But then again, a year after, maybe beat the record from last year. So expect it to vary. I would love for it to be like this, but the electricity production is going to be more like this in the future.

[Mikkel Tørud, Chief Financial Officer]

And maybe to add to that, Raymond, as well. I mean, activity level will be high in the development and construction but not necessarily reflected in the revenue recognition. That's also important part. We are doing a lot. There's a very high activity on developing new projects, and of course that will then be in the end reflected also in the revenues, just to be clear on that.

[Raymond Carlsen, Chief Executive Officer]

Yes, for example, we have a large group of the people in the construction segment now involved in designing this floating facility and elsewhere, but the floating facility will be located in Vietnam. It doesn't show up, as you say, in the revenues, but hopefully it will in the future.

[Unknown Analyst]

I'm sorry, can I ask another difficult question?

[Raymond Carlsen, Chief Executive Officer]

Yes, yes.

[Unknown Analyst]

I'm financially concerned with your margin plan and whether these margins can survive. You told me now that your gross margin at the moment is about 15%. And this is what it boils down to in the future, right? How could you protect them? You told us in September how you tried to [indiscernible] with your project in a way that we provide more than just your panels. You do [indiscernible]. But if I -- do you -- if you see 5 years ahead, 400 competitors around you. Would there be a margin of 15% 5 years from now?

[Raymond Carlsen, Chief Executive Officer]

I remember in 2014 people said, "You're not going to make 15% in the future." If you think 5 or 3 years down the road, you're not going to make it. Well, I say, "Okay, I mean, that's your view." I mean, it could be true that there is some pressure on margins. There has always been pressure on margins. I mean -- and it's so easy to deliver projects without focusing on the margins. But I mean we focus on cost all the time. We are the largest procurer of panels among many of our peers. We buy thousands of megawatts of panels. Can you imagine how many hundred thousands of panels that is? So we have negotiating power that is actually helping us to protect the margin. We are trying to work, which is nothing that stops. You never finish. How to optimize your operating model, make more -- people more efficient, have partners that know what they're doing. So there is always pressure on margins. Now if we only do the same thing, like we have done in the past. I think the margins would go -- could go down a bit. I mean, in theory, I'm talking about in theory now. But what happens as well is that new opportunities with a higher margin will add to what we're doing now. Batteries being one, grid connection being another one, providing energy to stabilize the grid is a fourth one. So there are many different things. I mean nothing is sort of stagnant. It moves on. And this industry, I mean, I've said this many times before. 3, 4 years ago, I would have never guessed where we are today. Let's talk in 4 to 5 years and we'll compare the thinking behind your question to where we are. So I think there are numerous opportunities, for example, release. I mean, much higher and better numbers than what we're seeing at the moment. But I mean it's a completely different concept.

[Mikkel Tørud, Chief Financial Officer]

Okay. It seems like we -- sorry, there's a question from the web maybe?

[Unknown Executive]

So a question from Kepler Cheuvreux. Could you please comment on the progress in Bangladesh?

[Raymond Carlsen, Chief Executive Officer]

I can comment on the progress on many projects. So we don't really do that in detail. But I mean since it's being mentioned, Bangladesh is moving ahead. There, we have had the situation, the one that I was touching on under ESG, where there were a group of families living in an area that we wanted to be added to our plant and the -- sort of more panels. Because we discovered through detailed analysis, that's an area that we thought at first was dry, was actually in a flooding conditions. For those of you who know Bangladesh, knows that there's a lot of people there and a lot of water. And we're not designing for floating in Bangladesh. It should be on dry land. So that has an issue. And of course, then that it determines the speed of how we can implement, start construction. But financing, together with some of the development banks. I mean that's all in preparation. Construction, design, everything is being worked on at the moment. You want to add anything or...

[Mikkel Tørud, Chief Financial Officer]

No, I think we mandated lenders to this project and it's a full throttle on the structuring. So it's moving forward. But of course, some of the activities takes a bit of time.

[Unknown Executive]

And then there's a question about the insurance of the plants, especially within floating PV?

[Raymond Carlsen, Chief Executive Officer]

Yes. I mean we have insurance coverage. Maybe you're a better candidate to answer this, Mikkel. But I mean we have insurance coverage. During construction, during operation, that covers, I guess, most of the things that can go wrong. In terms of floating, I mean, you have to tailor the insurance to whatever challenges or whatever you think is of uncertainty and see if you get insurance for it. Normally, you can get the insurance for everything. So I mean what's the difference between a floating solar plant and an FPSO? I mean you get insurance from the FPSO too, don't you? So this will be -- I mean we will continue to have the same type of insurance on a floating plant as we have on a fixed plant. That's -- I mean do you want to add anything to it?

[Mikkel Tørud, Chief Financial Officer]

No. And then one last from the webcast. How is the competition now in the market compared to earlier?

[Raymond Carlsen, Chief Executive Officer]

How is the competition in the market now compared to earlier? I don't think it has changed all that much. We see that some of the oil companies -- I saw an article in Financial Times this morning, a large oil company in Portugal is spending EUR 2.2 billion to buy into the solar business. I think that's good news. I mean they have a lot of cash, but I think they need companies like ours to help them be successful. But I think the market develops, new opportunities. There's a big volume out there. What is also very positive is that the efficiency of the panels is increasing, the cost of the panels is coming down. So electricity will continue to become cheaper as we move into the future. And on top of that, you will see the batteries. That's all good news. We're not now competing with the traditional providers of electricity: Diesel and gas turbines. And I mean renewable beats all of them.

[Mikkel Tørud, Chief Financial Officer]

Okay. Then I think we're through. So thanks again for coming to Skøyen today. So hope to see you again here next time.

[Raymond Carlsen, Chief Executive Officer]

So those of you wants to have a cup of coffee on the top floors, I mean, feel free to join us up -- upstairs.