Scatec ASA

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Earnings Call Transcript 2021-Q4

[Raymond Carlsen, Chief Executive Officer]

Good morning. We're here to present the numbers and the updates for the last quarter in 2021. As usual, I will start, and then Mikkel will do the financial presentation, and I'll end up with a couple of slides of summary.We have had a very high development activity over the past quarter, and that continues into 2022. And as last quarter, the cash flow has been very robust. If you look at the numbers from fourth quarter 2020 to fourth quarter last year, you see that there is an increase from NOK 683 million to NOK [ 1,250 ] million. And the production power goes from -- goes up to 1,047 gigawatt hours. That's 2.5x up from the last quarter 2020. We have added a little bit more than 800 megawatts to our backlog, including projects in Brazil and South Africa. I'll get a bit back to that later on.We have also decided to move the large project we are having in India from backlog to the pipeline. I'll explain that a bit later as well. And I'm also happy to report that the Release concept that we've been developing over the past few years are really catching traction with several projects now in the construction phase. We have talked a bit about Power to X previously, and we're also seeing a large activity within the Power to X. And also on that point, I'll be going back to you with some updates.Now the Board has approved a dividend of NOK 2.54 per share, which if you add it all up with the number of shares, it's a little bit more than NOK 400 million that we paid out in dividends. If you look at 2021 as a whole, you'll see that the production increase is very high, as I mentioned on the previous slide too. We have grid-connected 320 megawatts of projects in solar.The pipeline has gone up from a little bit less than 10 gigawatts to almost 15 gigawatts. So although a lot of projects have not moved into construction, the development activity continues at a very high pace. And the projects that we see in the pipeline are maturing, meaning that they're moving closer to financial closure or closer to getting into backlog. And several of these projects, we expect to go into backlog during the year and start construction.Some projects, as we have informed you about previously, have been slightly delayed, and that's mainly due to longer-than-expected approval processes and also some cost inflation. All the projects that we are talking about today have taken into account the present pricing that we see in the market. And also, we see that the approval processes on several of these projects moves towards conclusion.ESG ratings are continuing to be good as should be expected. The pipeline that we are pursuing are basically in 4 market areas or at least, I should say, 6, sorry about that. And those are: in South Africa, we have been very successful there in the past, and we have also secured several projects that we are about to start construction once the financial closure is reached; Brazil, a key market for us, interesting market in the long run and also there, one project moving into backlog; India, although we have taken out the 900 megawatt project, the market there is very robust.There will be a change in the market in terms of where modules are being sourced from China to own production being built up in India. And we are a bit uncertain about how quickly that is moving and we've therefore decided to take this large project into the pipeline from the backlog; Vietnam also, in the long run, very interesting; Philippines, an important market for us with SN Power and the hydropower project. We are also there looking at offshore wind, but I will not be talking about that today, but it's an interesting market that we are pursuing big opportunities; in Egypt, after South Africa, this is probably our most important market. And some of the projects, especially within Power to X section are seen from our point of view, very interesting, and I'll spend a bit of time on that later in the presentation.If you look more at the backlog, Brazil, this is a project that we have been developing with Equinor. The customer there will be a couple of daughter companies of hydro. Hydro will also go in on the owner side. We have finalized the term sheets. We are now also finalizing the agreements. And we also hope to start construction during the spring of this year. South Africa, this is Round 5, we secured 273 megawatts. And I think it's interesting to point out that our 3 projects were the projects with the highest tariff out of all the projects on the solar section that was awarded. We have a lot of projects there under development, both solar and wind, for the next round that we expect to happen over the next couple of years. In fact, the government is talking about Round 6 already towards the end of this year, but we'll wait and see for that.India, as reported, we have taken that from backlog into pipeline. Of course, the pipeline is still not only consisting of this 900 megawatts, it's a lot of wind project, it's also a lot of solar projects and also hydropower projects that we are pursuing. In terms of South Africa, the RMIPP, that is the accelerated program for inclusion of new power to compensate for some of the problems we have had in the energy sector in South Africa, that is also moving forward. We expect financial closure to happen within the next few months and construction start to be in the spring of 2022, this year, of course. Tunisia, we had some delays on the accrual processes, but that is also progressing, although at a slower pace than what we anticipated a few months back. We expect the construction to start, as we have said before, also to start this year.Pakistan, demarcation, meaning that where the plant is going to be built and the boundaries of the plant, there has been some discussions there because in the area, there are some tribes that have certain interest that needs to be dealt with and compensated in order for us to make sure that we're not building on the wrong side. And of course, this is extremely important for us because this plant is going to be producing for the next 20 to 25 years.And now to Release. And you can see on the photo to the right here, these are containers. This is actually rapid deployment of solar plants. Inside each of these containers, there is a lot of modules already premounted but put together, so it fits into container. So once you open a container, you can erect these plants within weeks. Normally, we spend months erecting plants like this. So it's -- I think it's very interesting.And of course, now with the confirmation in Cameroon, 36 megawatts and the 20-megawatt battery system is -- I think it's a good proof of concept, although we have, of course, delivered some of these panels previously as well. So the project pipeline within Release continues to build, and I'm very hopeful that this will be, as it is looking at the moment, a very big success in areas where they need rapid deployment of power. And of course, now this concept is competing with diesel engine as in the past and even with a lower diesel price, this was very profitable for those customers that we have. The diesel prices that are 2x to 3x higher, of course, this makes even more sense.Egypt, we reported last year our agreement with Fertiglobe to install a 100-megawatt project of electrolyzer near the Suez Canal. And that is -- we are finalizing some of the agreements. We are into the final design stage of this project. The customer is Fertiglobe, the majority shareholder is OCI, one of the largest fertilizer urea producers in the world. And of course, as we see the importance of this project, here we are providing hydrogen into their ammonia plant and the customers at the other end could be shipowners or other fertilizer producers that need green ammonia. This is actually green ammonia. So this is -- it is although 100 megawatts for [indiscernible] doesn't sound all that much.It's a big project because the total production, as far as I'm informed, was less than 500 megawatts of electrolyzers last year. So of course, this is a market that goes like this. So this is a big project. In fact, it's one of the largest projects in the world for the time being. But of course, it will be dwarfed in the future by huge hydrogen project.Supporting this 100-megawatt green hydrogen project and the electrolyzers are renewable energy. That's why it's called green. It will be 170 megawatt of wind and 60 megawatts of solar that will power this facility in the future. When we were in Egypt visiting the top level there before Christmas, we also signed an agreement with the Suez Canal Economic Zone for green ammonia. This is a project that could be up to 1 million tonnes a year. So this is in the development stage now, and we're finalizing agreements with the Suez Canal Economic Zone.To the right here, you see that we also had the opportunity to meet with the President, President Sisi along with his Prime Minister, his Ministry of Energy, and we had a long discussion about the energy market worldwide, but in particular, the importance of the Suez Canal, the position of Egypt being a low-cost, efficient producer of renewable energy. And it's very clear to me when I listened to the President, that they know their position and they will address a lot of focus towards this area, thus the economic zone and the green ammonia opportunity that we're addressing. So with our position being the largest investor in Benban and the solar facility there with our portion, around 400 megawatts out of the 2,000 megawatts installed, we really are hoping to be able to support Egypt in their ambitions going forward.There are other things that I've talked about in the past, too. And that is what opportunities in addition to ammonia will low-cost power actually create. And the next bullet here is actually utilizing renewable power to desalinate water. Egypt, although it has the Nile, it has also a high demand for fresh water, and they can't take it from the Nile as much as in the past. So now they have to desalinate water. And by utilizing renewable energy to drive these plants, you can actually deliver a liter of water cheaper than in the past.This is also interesting. Actually, the lower cost of energy, which is not the case around the world today, if you hear what the people are talking. But renewable energy is fuel independent. It depends on the sun and wind. And that is why Power to X is extremely interesting for a lot of countries where fresh water is required. And with the climate changes, we see this is a big market, although I'm a bit sorry that it happens, but it happens.Why are we successful within this area? And that is Scatec's integrated business model. So when we talk to governments like this or to buyers, they know that when we give them an offer, it contains everything from production of renewable energy to financing, to construction, to operation and ownership for the next 20 to 25 years. And I think that business model, as you can see some elements over here, is a reason for our success. And you may say -- you may question, is this something that is valuable for the future? Yes, it is.Now we started with solar and we are applying this to wind, we are applying it to batteries, we will be applying it also to some other markets, particularly Power to X, where you finance these projects on a nonrecourse financing, meaning that 80% from the banks, the rest is equity from us and our partners. So project development is key. A lot of value is captured there. Remember, our pipeline is close to 15 gigawatts in this phase at different levels of maturity. Then, of course, at the same time, we're moving it to financing, finding optimal sources of financing.It could be some time grants or subsidized financing because we are in markets that is in desperate need for electricity, and there is a lot of funds out there. We structure this and some of these projects, I mean, you think they are a project now, this is an opportunity or a market that will grow quite tremendously. And some of these projects, they need up to 50 agreements to put in place to secure all the stakeholders at different stages in the lifetime of the project. So this is very complex.Construction, we have a very strong group of people that is versatile, global in their thinking and are used to handle complex projects in new environment. Keep in mind, we have delivered almost 30 projects across 4 continents. And adding new technologies here with some new competence will, of course, be required, but we think that we are well prepared to handle that. And then we operate the plants. For example, in South Africa, we control all our plants around the world in a central control room, optimizing the plants and helping the various locations to the best standards of operatorships. All the other plants, all the other technologies will have similar installations. Some will be connected to Cape Town, but we will also establish new centers of operational excellence around the world.So I believe that our strategic approach to these projects allows us to be, hopefully, very successful in a market that is going to grow tremendously. Now there are also some challenges. And I'm sure that you follow the news as much as we do. Ukraine is in a very difficult situation today. We have several plants in operation there. They are operating well. Our people are safe. But of course, we are monitoring the situation.We have a dedicated team that is a combination of people from Oslo and Kiev and the plants that are following the situation closely. And -- but of course, it's necessary for me to underpin that the main focus for us is, first of all, our personnel. But the plants are operating well today. The people are reporting that they are feeling safe and taken well care of. But of course, we are waiting for this to resolve.Then Mikkel, I think everybody is ready for your financial review.

[Mikkel Torud, Chief Financial Officer]

Thank you. So I will go a bit deeper into the numbers. And as always, starting with the proportionate financials, and we are reporting Q4 revenues now of NOK 1.3 billion and EBITDA of NOK 683 million and a cash flow to equity of NOK 234 million for the fourth quarter. The EBITDA increase year-on-year, as you see here with the addition of the SN Power assets, and that was completed a year ago now. The EBITDA decreased compared to the previous quarter, mainly driven by seasonal lower production. For the full year, revenues reached NOK 4.6 billion and EBITDA, NOK 2.7 billion and cash flow, NOK 1.3 billion across our segments.Looking then at the Power Production segments. We saw production up 2.5x compared to the same quarter last year, while it was down 2% from the previous quarter. Production reached slightly above 1 terawatt hour in the quarter, and that's compared to 400 gigawatt hours last year. Revenues of NOK 1.2 billion and EBITDA of NOK 763 million. Compared to the third quarter, EBITDA came down NOK 60 million. That is mainly because of seasonal lower production in Ukraine and the Czech Republic, but this was partly offset by higher production in South Africa and the Philippines. And production in the Philippines, that was in line with the 5-year average that we've seen for the fourth quarter. Again, for the full year, revenues of NOK 4.2 billion and EBITDA, NOK 2.9 billion.Services, a smaller segment, some seasonal variations and some nonrecurring costs affecting EBITDA. Revenues of NOK 66 million, NOK 11 million of EBITDA. And for the full year, NOK 260 million of revenues and NOK 75 million of EBITDA. The EBITDA margin have decreased, as you can see, from 2020 to 2021. It's really reflecting the fact that we build infrastructure and build our organization to optimize production further and also take on new capacity on the O&M side.Development & Construction revenues continues to be limited. We typically recognize development revenues as we start construction of new power plants and then construction revenues based on progress on site. And as Raymond have already touched upon, we've seen high activity on the project development side that's not seen in the financials in the segment. That is what we will harvest later. And we saw limited site construction activity as well, as we have guided on in the fourth quarter. That being said, we're also far into engineering, planning, procurement activities related to the most mature projects of our portfolio. And then we did an impairment of NOK 20 million related to a regular review of our pipeline. And that is a fairly moderate amount compared to the activity we have on the development side.Touching upon the balance sheet as well. Our financial position are broadly unchanged from the previous quarter. Consolidated assets, NOK 33 billion, up from NOK 27 billion a year ago. Proportionate net debts ended at NOK 15.3 billion. NOK 4.9 billion of that is sitting at the group level, while NOK 10 billion -- a bit more than NOK 10 billion is nonrecourse project finance at the project level. So it's important when you look at the debt structure, a majority of the debt is sitting at the project level on a nonrecourse basis. Group level book equity at NOK 11.2 billion.Looking at the cash movements for the quarter. Cash position have been stable. We generated and received NOK 346 million of distributions from the operating power plants. We invested NOK 83 million of project equity, and we spent and capitalized NOK 71 million related to project development. Now the Board has proposed to the annual general assembly to pay a dividend for 2021. We have a dividend policy of paying consistent and growing cash dividends, and it's based on the principle of paying a minimum of 25% of the free cash distributed to us from the producing power plants. And we received NOK 1.6 billion in 2021 from the operating power plants and 1/4 of that is NOK 400 million and NOK 2.54 per share. That is the proposal.The EU taxonomy, we've talked about also in the past. We expect to be compliant with the taxonomy. It is important for us and our investors, we know that. The regulation there is, of course, being discussed as we speak. But we see solar assets being taxonomy-compliant from the outset, while hydropower and wind, we have done a bit more work on. But we see the threshold for greenhouse gas emissions being met. And also we're compliant with the Do No Significant Harm principle. The last step of this, for us, is to do a climate risk assessment for these assets in 2022, and we expect that to be completed later this year, and hence, we will be compliant with the taxonomy.Now, I also wanted to use this opportunity to remind everyone about our integrated business model and how cost inflation is impacting us. it's also an important topic for our investors and us, of course. And first of all, for new investments, we are defining cost of equity based on leverage currency and country risk for each new project. And on that basis, all new projects needs to pass this hurdle rate, this cost of equity that we defined, with a wide margin for us to make investment decisions. And we, on that basis, are guiding on a 12% to 16% return on equity, looking at this from a project company perspective and not including any development or construction margins. Now if you add the margins from Development & Construction and Services and also refinancing, as we do, as we've done in Philippines and looking at -- in other markets as well, the total equity return is above 18% and in projects -- other several projects also above that. So it's just important for us to clarify how you should see these different components of value together and that the 12% to 16% is the pure equity investment return and then we have the other margins coming on top of that.And then when it comes to cost inflation, the operating assets have tariffs and long-term contracts that have inflation adjustments done annually for a majority part of our portfolio. So that's the operating assets. On new projects, new investments, we need to look at 2 different categories. We need to look at the project backlog. That's where we have secured the offtake agreement, the tariff is set, but we have not placed orders. That's where we can see some impact of cost inflation, obviously. While for project pipeline for new investment opportunities, the tariffs have not been set yet, and we're not expecting cost inflation to have an impact on those as we see the market rebalancing on the basis of the prevailing cost level basically.Now we're obviously assessing the expected margin from the most mature projects in our pipeline and the backlog constantly. And how we -- the way we see things today is that we expect to see a D&C margin in the lower end of the 10% to 12% range for our projects in the backlog. So it has an impact, but it's not a massive impact. And it's also then important to keep in mind that this margin is an important contributor to the funding of the equity that we'll invest in these assets. So that's a reminder here of the business -- the integrated business model and how this is adding value to us as a developer.Now to 2022 guidance. We continue to guide on Power Production, we will produce somewhere between 3.9 terawatt hours and 4.3 terawatt hours in 2022, but we're also now guiding on EBITDA for the year, NOK 2.7 billion to NOK 3 billion. And that is broadly in line with what we generated in '21. And as we highlight here as well, we see the Philippines being an important asset in this portfolio. We expect production to be below the 5-year average for Q1, and that is based on hydrology -- normal hydrology variations, but that is also impacting, of course, the full year guidance. On the Services and Corporate segments, we expect smaller changes from 2021.So I will leave the word back to you, Raymond.

[Raymond Carlsen, Chief Executive Officer]

Thank you, Mikkel. Although we have had a slight reduction in our growth or I should rather say a reduction in the increase of growth last year, we see that the growth is picking up not only with the backlog projects that they have been through for 2022, but also the pipeline that will mature and move into backlog and also construction. We have, as you've seen from Mikkel's number, a robust production or cash flow generation from operating plants and the sources that was covered by Mikkel, of course, the most important one is Power Production and you have Services and you have Development & Construction. And that is an extremely important source of cash as well. And both in Brazil and South Africa, these projects are large projects, they will move into -- as we expect into construction during the spring of this year. So you should expect EBITDA contribution from these projects in the next few quarters and into 2023.The construction level, in general this year, is going to be very high. I mean not only because activity last year was low, in general, it's going to be very high. And that will continue into 2023. We see growth in all markets. We see particular growth in Power to X. There are some very big projects that I hope to report back to you within the next few months that we are pursuing. It's a bit too early to be exact about them right now. But it's -- with -- sort of, how should I put it, it's very interesting to observe, as I mentioned before, that the lower cost of energy will actually produce new markets where our business model fits very well.That -- when that is being said, we have an organization that has been very active during last year, although as everybody else, we have been suffering a bit from COVID, but that has not stopped our ability to develop projects. A lot of the meetings happens on Teams. In fact, some of the people that we have secured projects from companies, we haven't met in person. So it's an interesting observation. I think in some of our markets, you need to meet people physically to sort of bond. But of course, that will happen more in the future. But during the past few years, we have had a strong growth in the market in spite of the situation that we've been in.We have a great talent pool in this company. We have people from 50 different nationalities. And we see that our ability to operate efficiently in the market is actually linked to the insight and experience that these people have. And that's very comforting for a company that right now doesn't have a home market. So our total market is outside of Norway, and we're very happy about the position that we have.That concludes Mikkel and my presentation for Q4 2021. Of course, we are looking forward to see you in the next quarter. But before that, let's take a few questions from the audience. Andreas?

[Andreas Austrell, VP Investor Relations]

Yes. And we have received a couple of questions. I can start with Jorgen Bruaset from Nordea. Since the SNP acquisition asset in Philippines have given us, looking outside in, some headache. Looking back, how happy are you with adding these type of assets to your portfolio when we see the level of volatility and variation versus the rest of your portfolio?

[Mikkel Torud, Chief Financial Officer]

I can start. I mean hydropower is by nature more volatile than solar. And we knew that, of course. And I think that is -- when it comes to the -- that investment, that is a long-term investment. We need to look at the performance of these assets over the next 40, 50 years, obviously. And there are seasonal variations and we've spoken about that. And we -- I think we need to be prepared for some more volatility on those assets. But overall, they are generating very good and healthy cash flow, and we're happy with the investment.

[Raymond Carlsen, Chief Executive Officer]

I just want to repeat something I've said in the past. I mean, as Mikkel says, this is a very good investment. But I think it's also important to understand the strategic position that hydropower has. I mean, it's been described as a floating battery, I mean, with those that have reservoirs. IEA, in August last year, confirmed that in order to meet the 1.5 degree Celsius target, hydropower is going to be a key part of that success. And that is why we see a tremendous growth as well. Yes, there will be volatility, but there will also be other opportunities where you will be utilizing more renewable energy by enjoying the stable production and the variable production that can match those variations taking that from hydropower. So for us, this is an important strategic move and something that is going to really benefit our business model going into the future.

[Andreas Austrell, VP Investor Relations]

Another question from Jorgen. If you were to extrapolate the current market situation regarding raw material prices and value chains, what would be the impact to your NOK 100 billion CapEx plan for 2025?

[Raymond Carlsen, Chief Executive Officer]

I think Mikkel answered that very well. Our backlog now, where we have not started construction, has had a slight impact on the margins, but it's above 10% within sort of the range that we've been guiding on. All new projects have taken into account the price situation, prices of turbines, prices of solar modules. So -- and that's reflected. I think that has also been reported by others that are in the same industry as us. So we expect this -- the market to absorb cost variations. When that is said, you also see that the prices are coming down. We expect that, for example, module prices will be moving not exactly back to where they were, but on the way down in the -- starting in the second quarter this year, but even further into third and fourth quarter. We also see reports, I mean, we're getting the same reports as some of you that logistics cost, shipping cost is also stabilizing and is expected to come down.

[Andreas Austrell, VP Investor Relations]

Yes, some questions from Eivind Garvik from Carnegie. You state that all backlog projects are expected to start construction in 2022. What is the main drivers behind this confidence?

[Mikkel Torud, Chief Financial Officer]

Well, again, I mean, we understand, of course, that questions are being raised about our confidence on these timelines based on the history and the recent history, right? But obviously, we need to use our best judgment and when we guide the market on timelines. So this is obviously based on the specific assessment of where we are on each of those projects. And we haven't gone into the details of the permitting process or approval processes, for instance, in South Africa or in Brazil or in other markets today. But we -- based on what we see today, we are confident that, that is the timeline we will see.

[Andreas Austrell, VP Investor Relations]

Another one from Eivind. Are you considering divesting some capacity to recycle capital, but also crystallize value for shareholders?

[Mikkel Torud, Chief Financial Officer]

Now we have discussed that topic in the past. And we continue, I would say, to monitor the market and to assess whether that is a path to pursue when it comes to divestment or divestments of assets or farm downs. We have no specific plans today to do that. But obviously, we are monitoring the market, and that could be a potential to look into that going forward.

[Andreas Austrell, VP Investor Relations]

Okay. I have a couple of questions from Manuel Palomo from BNP Paribas. Could you please provide some additional detail about why the 900-megawatt project in India has been put out of backlog and back to pipeline? What will be needed for the project to go back to backlog?

[Raymond Carlsen, Chief Executive Officer]

Yes. The main reason that we have done that is the realization that -- realization or confirmation that import duty was not going to be lifted for some of the products that was in that category. And there is a gap in between the price level that we have seen from China and the expected price level in India for modules.We expect that over time, the Indian production lines for modules will approach the same cost level as what you have in China, but that needs to be confirmed and to be -- in order to be prudent, and not to be sort of moving ahead without knowing that, we have decided to put that project back into the pipeline and not call it backlog anymore over the time being.

[Andreas Austrell, VP Investor Relations]

Okay. I have a couple more from Manuel. Could you please provide with more detail about the quarterly committed production volumes in your Philippines contracts?

[Mikkel Torud, Chief Financial Officer]

Yes. I mean we're not going into the details of the specific. I assume he's referring to the sales commitments on the contracts in the Philippines. But we're obviously monitoring that. And again, the sale of electricity is there also done on a profile based on the expected production through the seasons in the Philippines. So we are comfortable with that profile and those commitments versus what we expect to produce.

[Andreas Austrell, VP Investor Relations]

And a follow-up from Manuel on that. Is your assumption that the production in the Philippines will normalize from the second quarter?

[Mikkel Torud, Chief Financial Officer]

Well, again, hydropower is about hydrology, and hydrology is, by definition, more volatile. The standard deviations of production on hydropower is higher than what we see in solar. So we can only plan based on P50 estimates of production. And around that, there is, of course, an outcome. And we are not able to predict weather patterns for the second quarter today.

[Andreas Austrell, VP Investor Relations]

And what about hedging policy? Could you please explain in deeper detail your hedging policy for the assets that have been awarded PPAs, but are yet to begin construction or are under construction?

[Mikkel Torud, Chief Financial Officer]

Again, I assume he's referring to hedging of costs and related to the construction of those plants. And as we referred to today, for solar, which is now the most mature projects we have, we are basically not committing or hedging and it's not possible to hedge, I would claim, at least when it comes to solar panels or some of the key components that goes into solar power plants in the future. So we are basically looking to commit and secure those contracts for delivery of components as we start construction of those plants.

[Raymond Carlsen, Chief Executive Officer]

And of course, we monitor the price levels. I mean we have predictions of pricing towards the end of the year, but it's not necessarily always predictions hit the development in the market. The prediction, as I mentioned now, on the solar side, it looks like the cost is going down. But for the time being, it's the current pricing that is in the financial models.

[Andreas Austrell, VP Investor Relations]

There's another one from [ Mikhail Schneier ] from Ecofin Invest. Are IRR on projects going down due to equipment cost inflation or PPA prices are adjusting up? Will you include escalators, inflation adjustment in contracts going forward?

[Mikkel Torud, Chief Financial Officer]

Yes. So, that's -- I mean, we expect to see and have started to see that the market adapts to a new cost level when it comes to new contracts. And I'm again referring mostly to solar, which are the most mature part of our pipeline. The question is, of course, whether you will enter into contracts where you have an adjustment mechanism reflecting the cost. I think that remains to be seen. There is, obviously, cost inflation adjustment mechanisms in the tariff, in the 20-year tariff or the 20-year contracts, but that is not -- that is to reflect the general inflation over that time period, but not the cost inflation for the CapEx that goes into the project. So that's 2 different things.

[Andreas Austrell, VP Investor Relations]

I have one from Magnus Solheim, Fearnley. Can you give some details on the lower production in Ukraine and Czech Republic during the quarter? Was this quarter a one-off? Or should we expect lower production going forward?

[Mikkel Torud, Chief Financial Officer]

Well, if you look at the map, we are in the Northern Hemisphere. So winter is affecting both Ukraine and the Czech Republic. And if you look back at the historic quarterly results, you will find the answer. We have a seasonally lower production in the fourth quarter and the first quarter in Ukraine and in Czech Republic, and most of the production there is during the summer months. So second and third quarter.Okay, I think maybe we should wrap it up there, and we can take further questions, of course, offline as well.

[Raymond Carlsen, Chief Executive Officer]

Thank you.