Lundin Energy AB

OTC:LNDNF

Earnings Call Transcript 2024-Q3

[Robert Eriksson, executive]

Good afternoon, and welcome to Orron Energy's Third Quarter 2024 Financial Results Presentation. Happy to have you all join us today.

And there will be a presentation by Orron Energy's CEO, Daniel Fitzgerald; and the CFO, Espen Hennie, which will be followed by a Q&A session, very important, and we hope that we get a lot of questions, as always, of course, and we'll make sure that they get answered. And to access the platform on which to ask your questions today, there is a link to the video feed on your screens. So that's the platform for asking questions.

And without further ado, I would like to hand the floor over to Daniel Fitzgerald.

[Daniel Fitzgerald, executive]

Thank you, Robert, and good afternoon to everyone and for taking the time to join us on a day where there's a lot going on in global media, not only U.S. politics, but also impact on the energy markets globally.

And so today, I'll start, like I usually do with a recap of the strategy from -- for Orron Energy, and this remains largely unchanged since we started the company a number of years ago. We're building a business that's going to be here with asset and project lifetimes for 20 or 50 years. And so we must take -- we absolutely must take stock of current market conditions as they sit, but we also must have one eye on the future and look towards the long-term markets and where long-term markets are going to be in the future.

And so Orron Energy today and continues to be focused on low-cost onshore power generation. We're looking at onshore wind, onshore solar and batteries. We're looking at onshore wind, onshore solar and batteries and looking at those technologies across the Nordics and across Europe. We see a lot of opportunities in those jurisdictions to create value.

We're just having a few technical issues at the movement, please bear with us. Again, please bear with us, while we have a few minor technical issues. We might have a sound issue here, so.

[Technical Difficulty]

Yes. I think, we'll swap over to this microphone because it seemed to work well when I was presenting. So there was sound from this microphone. So we'll hand over to.

[Technical Difficulty]

Across the U.S. politically, of course. And that has an impact both on U.S. markets, but also globally and towards some of the European and global energy markets as well. So thank you again for taking the time to join us today.

I'll start today as we usually do, looking at the strategy for Orron Energy and -- the strategy for us is largely unchanged since we started this company now over 2 years ago. We had a view at the time, focusing on onshore technologies, focusing on the lowest cost generation, looking at wind, solar and batteries, hydropower.

And I think we must always, with the company, take stock and have a look at where markets are at any point in time, but we must acknowledge that the company also is building a platform of assets and projects that have between a 20- and 50-year lifetime. And so we must always have one look on the longer term while we navigate through markets and some of the market challenges we see in the short term.

As we touched on, we are focused on the lowest cost technologies. We're active across 5 countries. We have producing assets in the Nordics, and we have a growth platform looking at greenfield projects across all countries, where we're focused on large scale across primarily the U.K. and Germany. And we see multiple opportunities to create value in all of those jurisdictions.

Since our inception, we've been very focused on M&A, and that continues today. We are still active on acquiring operating assets and some potential projects. But even more so now, we're focused on organic growth where I see a lot of opportunities to create value in the long-term. And so Orron Energy today, we have 370 megawatts of producing assets.

We're adding into that quarter-by-quarter, we're seeing attractive opportunities to acquire. We have around 40 gigawatts worth of project pipeline where we're going to see monetization of that coming in the next 6 to 12 months. And so with those 2 -- the combination of those 2 plus organic growth, I see a future where we have a lot of opportunity to create value.

Turning to our performance over the quarter and year-to-date now. We'll touch on a number of things during the course of the presentation, power generation, market conditions and the growth outlook. But looking at the highlights, we have produced in the first 9 months of this year, we've produced 620 gigawatt hours worth of power generation, and that was impacted both by weather conditions over the period, which we've announced earlier in the year, but also voluntary curtailments, which I'll touch on in the coming slides.

And because of that that drop year-to-date, we now expect to be around 900 gigawatt hours worth of production on the full year. We came out with guidance in the start of the year of around 1,000, and now looking at both weather and curtailment impacts, we're around 10% below that for the full year.

We've all seen where markets have been in Q3. We're going to explore the market conditions in a little while, but those market conditions obviously have an impact on our financials. And looking at our EBITDA year-to-date and within the quarter. Year-to-date, we've generated around EUR 9 million worth of EBITDA and an achieved price of EUR 35 per megawatt hour.

If we reflect back on the year, we achieved EUR 50 within the first quarter, EUR 30 within the second quarter, and now we've seen just shy of EUR 20 in the third quarter. So the third quarter, like it has been last year has had an impact on our financials given achieved pricing.

We maintain a significant amount of liquidity headroom as a company. So we have many opportunities to withstand market conditions like this and also to see opportunities to grow within market conditions like this. And so through the summer period in the third quarter, we've added around 33-gigawatt hours worth of power generation, and we see multiple opportunities going forward to acquire further assets, which are accretive to -- on a per share basis, looking at where we're acquiring these assets.

And so we will continue that journey. We started it with Slitevind when we acquired that company back in the summer of 2022 and the follow-on transactions to add material volumes into our company over time continues. And then on the growth front, we are on track to reach the ready-to-permit milestone on a number of projects, and we'll touch on that in the coming slides.

So then looking at market conditions, not only where we've been, but also looking forward towards next year and what that means. You can see on the chart on the bottom left, the electricity pricing and gas pricing in both Germany and the Nordics over the course of the last 2 years. And we see a number of things seasonally within these profiles irrespective of what's actually happened quarter-to-quarter.

We see a summer period and especially a Q3 over the last 2 years, where we have seen low pricing. And that's driven in this quarter by weak demand during that period. We've seen a range of interconnectors out of action across Finland and Sweden for various periods. We've also seen low gas pricing in that period. You can see that on the red curve a little bit.

And finally, we do see that some markets, primarily U.K. and Germany are significantly higher than where the Nordics have been in that period. And as we roll forward into Q4 and Q1, we're seeing futures pricing recovering significantly. Today, we're seeing SE4 pricing north of EUR 100 a megawatt hour. We've seen that for a number of days already in November. So we do see that pricing is picking up as we look forward into Q1 of next year already at north of EUR 50 a megawatt hour on the future system price. So we're coming back into a period in Q4, end of Q4 and Q1 next year that is a much stronger electricity price market.

We have also seen some periods through the summer and Q3 of negative pricing. And so what we will choose to do during those periods is curtail -- voluntarily curtail some of our production because it makes no sense for us to keep producing when electricity prices are negative.

So from hour-to-hour on a range of our assets, we have the ability to turn down production, and we bid actively in the market to turn down production when prices are below 0. And so that does have an impact on our production, but it's something we must do as it doesn't make sense to keep producing.

If we then look a little bit more towards the future, I think the prices we've seen in Q3, like we said in Q2, the average price is below the levelized cost of energy for any new power generation technology, be it the cheapest onshore wind, onshore solar or any of the more expensive technologies. And so that is unsustainable long-term. If this continues and persists long-term, we will see no more power generation coming on.

And if we couple that with the chart on the right-hand side of this, we still see on the latest IEA forecast that Europe is forecasting to grow around 40% in electricity demand over the next 10 to 12 years. So a lack of supply coming on mixed with an increase in demand has to impact pricing in the medium and longer term.

And if we then mix in the local political sphere, we've seen in the last week or so, the Swedish government have stopped all of the offshore wind or a majority of the offshore wind development in the Baltic Sea due to military concerns. If we look onshore at the approval rate of onshore wind in Sweden, it's next to nothing has been approved year-to-date. And even in Q3, we saw no new orders of wind turbines in Sweden.

So we're in a really difficult part of the market right now where we're seeing no new supply coming on and no massive amounts of supply in the short-term in the southern parts of Sweden, yet we still see low pricing persist. And I think, we need to see this evolve over the coming quarters to see where the markets -- the market sit in the long-term, but there's no doubt that if we take that much supply out of the market, coupled with the increase in demand, it has to impact prices over the medium and longer term.

If we look at our power generation, so on the left, you see -- left and right, you see the results of our power generation historically and also looking forward. So year-to-date, we've produced 620 gigawatt hours worth of production, where we've lost around 50 gigawatt hours due to low wind speeds, and you see that along all of our competitors and also on the wind maps that we see from various providers in the markets that we are below where the long-term average wind speeds have been, and that will impact our production.

If we look at the voluntary curtailment. Year-to-date, we've curtailed around 35-gigawatt hours' worth of production, and that's due to pricing points, which are uneconomic for us to produce. So we're just a bit over 10% below where we should be year-to-date, and that translates into around a 10% reduction from our base case forecast when we set that out in Capital Markets Day earlier this year.

So that means our long-term 1,000-gigawatt hours' worth of production on a steady-state basis is dropped to around 900 is where we expect to end this year based on where we've performed year-to-date, looking at average conditions going into Q4 of this year.

And finally, a quick word on our growth projects. We continue to make really good progress on a range of projects. And this journey is now around 18 months old. We started in the end of the first quarter in 2023. And now we've seen the evolution of that where we've built a material portfolio across 4 countries, primarily 4 or 5 countries with the bulk of the growth being in U.K. and Germany.

Our first U.K. project and German projects, we're just about to secure the final elements of land in the U.K. for our first project. In the German side, we've got our final meetings with the local municipalities coming in the next couple of weeks. And by year-end, we should expect to see ready to permit on our first projects.

And it's important to note that not only will we see it on those, we have a suite of projects coming behind them. So we see a material number of U.K. projects and German projects still growing behind these ones. So we expect to start the first sales process towards the end of this year. And in the first half of next year, we hope to conclude that process, and we'll be able to come to market with the results of that.

But this organic growth pipeline is something that's been really important for us, and we're seeing that evolving in the Nordics. We're seeing that evolving really well in the U.K. and Germany, and we expect to see the first results of that process coming to market very shortly.

And so with that, I'll pass over to Espen for the financial results, and then we'll move into Q&A at the end.

[Espen Hennie, executive]

Thank you, Daniel. Good afternoon, everyone. I'll go through the financial performance for the quarter, also touch upon the outlook for the remainder of the year.

Starting with the financial highlights for Q3. Power generation, 164-gigawatt hours, as Dan already mentioned, some 20% below expectations with half of that being low wind speeds for the quarter and the other half being voluntary curtailment as a response to low prices during the quarter.

Important to keep in mind that the technical uptime, the technical performance and availability of our assets during the quarter was very high. So obviously, we have the full capacity to ramp up production significantly when wind speeds recover and we have a more attractive commercial environment as we do expect over the next couple of quarters, as we enter the winter season with higher prices and also typically higher wind speeds.

The achieved price was EUR 18 per megawatt hour for Q3 and the average system price for the quarter was EUR 20. We'll touch upon those details a bit more on a later slide. But actually, the average Nordic system price of EUR 20 during Q3 is the lowest quarterly average that we have seen since 2020. So you need to go 4 years back to have a similarly low-price quarter. And 2020 was quite special due to a number of factors, but also was an extremely both wet and mild year in the Nordics, depressing prices.

So definitely, what we think is an outlier in terms of pricing for Q3, achieved price of EUR 18, as mentioned. And if you take the volumes and the price together, that leads to revenues of EUR 3 million and an EBITDA when we exclude the noncash items of minus 4 for the quarter.

We exited the quarter with a net debt of EUR 56 million on a proportionate basis, which is a significant reduction compared to the EUR 92 million, which we had when we entered the year, which is mostly due to the Leikanger divestment, then mitigated by the investments and acquisitions that we've done year-to-date.

So we -- at the end of Q3, we had significant liquidity headroom and financial resilience with a very low gearing, especially compared to then our EUR 170 million RCF facility, which is available for us, and which will underpin and make sure that we can execute our strategy of both organic and inorganic growth as we go forward.

If we then look at our guidance for 2024 and how we have performed on these metrics year-to-date for the first 3 quarters. If you start with operating costs, we have a guidance of EUR 15 million to EUR 17 million for the full year, which we are on track to meet. We expect to end up very close to the midpoint of that range, and our actuals year-to-date are EUR 11 million.

Same with G&A expenses, same story there. We are on track to meet guidance. Full year guidance, EUR 9 million and year-to-date cost of EUR 7 million for the first 3 quarters.

Sudan legal costs, we are reiterating the guidance, which we put forward at the last quarterly report, which was a reduction of the original guidance from EUR 8 million to EUR 7 million. So we still expect EUR 7 million for 2024 and EUR 5 million has been expensed for the first 9 months. So they're also on track to reach our guidance.

CapEx, we made a change there. We have reduced our full year CapEx guidance. This is CapEx, excluding acquisitions. We have reduced that from EUR 14 million to EUR 11 million due to a combination of phasing and cost savings with savings making up the bulk of it, with a small portion being phased into 2025. So we have spent EUR 7 million, excluding acquisitions year-to-date, and we expect to end up close to the EUR 11 million mark when we end 2024.

If we then look at the key financial metrics for this quarter, comparing it to the same quarter last year and also the quarters in between. If we start with revenues, EUR 2.9 million, as mentioned, EUR 1 million in revenues for Q3, which is a quite significant reduction from the previous quarter, which sat at EUR 5.6 million. That is driven then by lower volumes and a lower price. You can see it in the top right corner of the slide here.

But importantly, when we move to EBITDA, you can see that, that reduction in revenues is also mitigated to a very large extent by lower costs. So we saw significantly lower operating costs, legal costs and G&A in this quarter compared to the previous quarter, leading then to an EBITDA, excluding noncash items for Q3, very similar to the previous quarter.

And also if you compare to the same quarter last year, there we had slightly higher revenues, but also then seen lower costs, most notably the legal costs, which have come down significantly compared to a year ago, meaning which results in a very similar EBITDA, excluding noncash items for Q3 this year compared to Q3 last year, and a bit of the same pattern if you move -- if you look at CFFO, excluding working capital with a slight reduction this quarter compared to the previous quarter.

I guess the key takeaway from this slide is also, as Dan mentioned earlier, most of our revenues and cash flow generation is expected to occur during the fourth quarter and first quarter every year, so the winter quarters, which you can see very clearly on the chart here. So we very much look forward to the next couple of quarters where we do expect an uptick both in power prices and volumes, as these quarters also typically have higher wind speeds than the summer quarters. And in addition to that, also typically significantly higher electricity prices. We get sort of a double impact and definitely something we also do expect for the next couple of quarters ahead of us.

Then a bit more details on our achieved price for Q3. I already mentioned the average system price, which was, as I said, the lowest since 2020, EUR 20 per megawatt hour for the quarter in the Nordic region. We are obviously happy to see that our portfolio, the preferable situation or preferable geographical locations of our assets and led to a premium compared to the average system price, which we also do expect going forward with more -- many of our assets being situated south of Sweden and Finland.

So the average spot price for our assets came in at EUR 26 per megawatt hour for during Q3. Then we had a positive impact from the sale of [ GOs ] and hedges, which added another EUR 2 per megawatt hour on top of that. Then we deduct the capture price discount to come down to our achieved price for the quarter of EUR 18. We did see -- we saw an elevated capture price discount for Q3, so EUR 10 here on the chart, driven by very, very high volatility during the quarter, and the highest we've seen since inception of the company.

And we do expect this to be an outlier, and we expect the trend for the short to medium term or for the coming quarters, especially medium term and long-term, we do expect to trend a lot closer to what we view as a more fundamental normalized capture price discount. And we do expect adaptions both on the supply side in the short term and in the medium term also on the demand side, which should reduce this capture price discount significantly going forward.

Then a look at our cash flow for the quarter, our consolidated cash flow and liquidity position. We entered the quarter with a proportionate net debt of EUR 46 million. Our CFFO during the quarter, excluding working capital, was minus EUR 4.6 million as we looked -- as you saw on an earlier slide. We had a small negative impact from working capital build during the quarter of EUR 0.4 million. And then cash flow from investing activities of EUR 4.6 million in total. So that's the sum of our CapEx and also acquisitions.

Please note that we do expect some of the acquisitions that we have announced in our report today. So some of the acquisitions that make up the 33-gigawatt hours of additional power generation volumes that we have acquired year-to-date. Some of those transactions will close during Q4. So we expect an outflow of cash in the order of EUR 5 million during Q4 to close the remaining transactions that weren't closed at the end of this quarter or end of Q3.

And then some small other impacts. During Q3, leading to a closing net debt position at the end of Q3 of EUR 56 million on a proportionate basis. And if you then move to the chart on the right hand of the slide, you can see the very, very robust liquidity position that the company is in.

Cash of EUR 40 million on a proportionate basis at the end of Q3 and more than EUR 100 million of undrawn capacity on our RCF, leading then to a total liquidity available to the company of EUR 116 million, which obviously provides a lot of resilience and optionality and robustness, which we think is crucial in the current market environment.

Then lastly, an update on our cash flow outlook for 2024. We have now taken opportunity to update this based on actuals year-to-date. So we have 3 quarters of actuals, and we are assuming an achieved price of EUR 30, EUR 40 and EUR 50 per megawatt hour for Q4, which is the basis for these projections that you see on the slide here.

And please note that we have excluded the gain, EUR 11 million gain from the Leikanger divestment that's not included in these figures. So here, we're looking at the underlying cash flow generation for 2024 prior to the Leikanger exclusion -- Leikanger divestment, apologies. And we are also assuming a power generation of 900 gigawatt hours.

So if you extrapolate this into next year and few year and forward, you should expect power generation that corresponds with our 1,000 gigawatt hour technical capacity as a long-term average as opposed to the 900 gigawatt hours that we'd expect for this year, which we know has been impacted by low wind speeds and also some curtailment.

Also very important to note, we have not included any revenue potential or cash flow from our greenfield activities or project sales, which we do expect to occur during 2025. So that will be an addition to what you see here. And obviously, when we get to our CMD, we will provide more details and outlook for '25, cash flow outlook. But just keep that in mind when you're sort of extrapolating this for future years.

So if you look at 2024, as I said, based on a range of achieved price from EUR 30 to EUR 50 during Q4, we do expect revenues to end up between EUR 30 million and EUR 36 million for the full year. And we expect an EBITDA, excluding Sudan legal costs or before any legal costs ranging from EUR 5 million to EUR 11 million for the year. And if we include the legal costs, we expect EBITDA ranging from minus EUR 2 million to EUR 4 million for 2024.

The distinction here with and without legal costs, we think is crucial and very important to remember because as Dan mentioned, we have assets in our current portfolio. We have more than 20 years of remaining lifetime of cash flow generation in our portfolio. And the new projects we're looking into typically have a lifetime between 20 and 50 years, whereas the Sudan legal case, we -- the cost of the Sudan legal case are only expected to -- we expected to have exposure to those in the current shape and form until very early 2026. So it's only next year where we expect a significant cost related to the Sudan legal case as we had this year.

And then as I said, when we're done with that -- when that case concludes, which is expected to conclude early 2026, we still have more than 20 years of cash flow generation in our current portfolio before we look into repowering and life extension. So that's why we think EBITDA and free cash flow without legal costs is definitely more relevant to look at than when including those costs.

If we then move to free cash flow pre-CapEx, so deducting then interest costs, which is expected to come in at EUR 5 million for '24. We don't expect to be in a cash paying position for '24. And as you might recall from our CMD, we have EUR 0.5 billion of tax shield. So we do not expect to be in a cash taxpaying position in the medium term.

And so the free cash flow pre-CapEx then for '24 between EUR 0 million and EUR 6 million when we exclude legal costs and between minus EUR 7 million and minus EUR 1 million when including those costs. So I think it's important also to compare this to the -- our total available liquidity of more than EUR 115 million. So if you take even the low case for Q4, resulting in minus EUR 7 million of free cash flow pre-CapEx.

And you also add then our current CapEx guidance for '24, which of EUR 11 million, that means a total net build during the year of EUR 18 million. And comparing that to total available liquidity of $116 million, obviously means that we have a lot of optionality when it comes to both organic and inorganic growth, and we can withstand long periods of time with low prices to make sure that we also can benefit from the high prices in more favorable market environment, which we do expect to occur soon.

So with that, I'll hand the word back to Dan for some concluding remarks.

[Daniel Fitzgerald, executive]

Thank you, Espen. And just before we move into Q&A, I think the final concluding remarks for me are very similar to where we've been in the last few quarters. We are building a company that's got a long-term outlook. We will have market conditions like we've seen in Q3, and we have to be ready to withstand those like Espen touched on such that we can profit in the long-term.

We have long-term cash flow from both generating assets and the greenfield portfolio once we start to monetize that. We have significant liquidity headroom and significant financial resilience to continue to invest during periods such as these. Organic growth is going to be a key driver in our portfolio going forward, and those platforms have been built over the last 2 years, giving us exposure to both greenfield operating assets, projects and repowering opportunities across multiple jurisdictions.

And our large-scale projects, I think that's an important part that we've been building for the last 18 months to 2 years. We will start to see the impact of those coming into the early part of next year.

And so with that, I'll pass over to Robert to move through some of the Q&A.

[Robert Eriksson, executive]

Thank you very much, Daniel. Thank you, Espen. My microphone should work now. Otherwise, someone will tell me that I will get the new microphone, and I do apologize for that little technical mishap, but I'm happy that it works now.

We have -- I'm happy to say that we have got quite a few questions. So let's kick that off right away. And actually, quite a few of the questions are around the exciting greenfield projects. So let's start with that.

There's been quite some talk from the company about looking to monetize some of the company's greenfield projects. Are there any more detailed updates on this? How is the progress so far? And any expectations on time lines for this?

[Daniel Fitzgerald, executive]

Yes. I think we covered it quite well in the presentation. If I look first at the U.K., we have 3 things to be able to get to ready to build on a project. We need the land secured, we need the grid secured and we need the permits in place. To get to the ready-to-permit stage is just the step where we have land and grid and all the pre-permitting work done.

And so in the U.K., our first project, which is around 1-gigawatt worth of solar with 0.5 gigawatt of battery capacity. We've signed up a good portion of the land. We have 100% of the land we need under exclusivity. We have most of that or a good portion of that under long-term option agreements, and we have all of the grid secured for that project. All the pre-permitting work is done. And so we expect once we secure the final land positions, we expect to move into the market, and we're well on track with that process of getting ready.

In Germany, we need to secure lands. We've got access to grid on a couple of projects. We're in the final stages of the local public consultations where we've seen good support for the projects. And as soon as we finalize those meetings with the local municipalities, we get a formal ready-to-permit milestone from the local community. And as soon as we reach that, we will look to move into the sales process. So on a range of projects, we're close to seeing them hit the market, and we can update once we have some results from that process.

[Robert Eriksson, executive]

Thank you, Daniel. And a question slightly linked to that is, why would you not diversify current assets and instead invest in producing assets in the U.K., Germany, France because prices are much higher there and margins are better?

[Daniel Fitzgerald, executive]

Yes. I think part of that comment is right. The prices are much higher in Germany and the U.K. And I think we'd love to be in a place where we had a producing portfolio there. But when we look at operating assets in Germany, I'd say the expected IRR to acquire a suite of operating assets in Germany is low to mid-single-digit IRRs. And unfortunately, that's too low for us to create value compared to our cost of capital.

So -- if I could acquire German assets on the same price multiples as we're able to acquire in the Nordics, then we would move forward, but it's just not possible to do that in today's market. And the acquisitions we're making in the Nordics are still into the double-digit rates of return on close to where the futures pricing is. So we still see opportunities to grow accretively in the Nordics. We're still active in a range of other markets.

But I think certainly in market conditions like this, we must look to ensure that the cash generation of the portfolio and the seeds that we've planted and the growth that we've invested in, we need to see that coming to market, and we'll see that coming in the coming months.

[Robert Eriksson, executive]

Thank you. And there is a question around price hedging. You did not have any price hedging during the second and third quarter this year and the prices were very low then. So these quarters might always be loss-making. Are you looking into price hedging?

[Daniel Fitzgerald, executive]

I think hedging is an ongoing discussion, and we've discussed it at most of our quarterly results since inception.

If you look at the price hedging that we could undertake, the Q2 and Q3 markets are priced quite low, and we wouldn't have seen massive gains from the hedging impacts that we had in place because the capture price discount and the achieved price is still something we take on irrespective of where we hedge the volumes.

So hedging is a -- it's a difficult conversation to find the right point to time the market. We don't need to hedge from a balance sheet perspective, and we expect to make an outsized return in the Q4 and Q1, which is also not priced into the hedging opportunities.

So I think hedging is something we're constantly look at -- looking at when we see opportunities to hedge at prices higher than where we expect them to be, then we'll move into that at the right opportune points.

[Robert Eriksson, executive]

The next question is whether it would be possible for you to add some more color on the new acquisitions that you have done so far this year. What are the valuation multiples, for example, that you have paid for this?

[Daniel Fitzgerald, executive]

Yes. I think the acquisitions we have made are very similar to what we've been doing over time. There's a big opportunity in consolidation in this market and where we have ownership in assets where we don't quite own 100% of the asset, it makes sense for us as the strongest financial player and industrial player in those assets to acquire more of those portfolios.

So we have been moving and picking up additional shares in operating wind farms. Multiple-wise, I think if we look at new build opportunities, looking at current CapEx, it probably costs around EUR 2 million per megawatt installed capacity to build a new wind farm today.

We're acquiring in the EUR 0.6 million to EUR 0.7 million per megawatt installed capacity, and that's for some of the kind of mid-stage assets. And if we adjust for operating lifetime, that probably lifts it to around 1.2, 1.3 on some of these assets.

So we're still acquiring at a significant discount to where it costs to build new capacity today. And with that, we're able to see the double-digit rates of return on a similar price deck.

[Robert Eriksson, executive]

So we'll get one more question here about the greenfield in the U.K. Everyone is interested in that. That's good.

So do you have an expected price? Or is it too early to say on -- if you look on a per gigawatt basis for a sale in the U.K. And there's also a wish that you would communicate the ready-to-permit point as it's an important milestone for shareholders?

[Daniel Fitzgerald, executive]

I think valuation, the -- as you can see from any of the last 2 years, the valuation in markets is extremely volatile, whether it's interest rate expectations, CapEx pricing or underlying electricity price. I think it's a little bit difficult to communicate a value today, but it's multiples on what we've invested in the projects to date, and its material for us. So I think we need to go to market before we can bring anything in terms of value forward.

[Robert Eriksson, executive]

There are quite a few questions around the low energy prices and our ability to generate cash and be profitable. So how would you tackle a situation where you would face low energy prices quite a long time into the future and keep the company cash generation and be profitable?

[Daniel Fitzgerald, executive]

I think it's an important question, and it comes back to the fundamental market slide that we presented at the start and what our view is on long-term energy prices. And I think EUR 30 a megawatt hour is completely unsustainable long-term. There is no technology that breaks even. We'll see no new supply coming on.

And so I personally don't believe a long-term EUR 30 a megawatt hour price deck. And I think more like EUR 50 a megawatt hour, if we look at any of the market forecasters and those third parties who are providing long-term forecasts, it's more in that order of magnitude for the Nordics.

Now as Espen touched on, we have some short-term costs in terms of the Sudan trial, which will disappear in the coming year or 2. And then secondly, we have a range of costs that are linked to growth. And so in a EUR 30 a megawatt hour long-term price environment, the growth opportunities aren't the same as in a 50.

So -- this company, again, Espen touched on it around EUR 25 a megawatt hour is our EBITDA breakeven long-term, should we not have the Sudan case. And I think there's some savings in that should we need to on the G&A and other side. So long-term, if we believe EUR 30, it's a simple company that focuses on the cash-generating assets. But it's not my belief. It's not the market's belief and it's not sustainable to be there long-term. And at EUR 50 a megawatt hour, this is a fantastic business delivering growth and long-term cash flow.

Now we have -- as we touched on, we have sufficient liquidity to withstand many, many quarters and years of pricing such as this and still invest in the growth. So the future CapEx is something we can turn up or down as we see fit. We've squeezed a little bit towards the end of this year, and we look to open up again as markets pick up in the new year.

[Robert Eriksson, executive]

Thank you, Daniel. Divesting of more production assets like you did with Leikanger, is that something you're actively working on and considering going forward?

[Daniel Fitzgerald, executive]

I think all of the assets in the portfolio are for sale at the right price. So we're not actively looking at it today. However, we are plugged into the market in terms of valuations and should an opportunity like Hanger turn up where there's significant value and the ability for us to recycle that capital into more accretive projects, and we wouldn't hesitate to do it.

That said, we need a certain scale and size as a company. So you shouldn't expect us to liquidate more assets. However, if the price is right, we will move on it.

[Robert Eriksson, executive]

And then we have a question that's coming back a few times here, and it's about the share buybacks. Is that a potential for the future that you would do share buybacks?

[Daniel Fitzgerald, executive]

Yes. So it's -- share buybacks remains one of the opportunities we have for our allocation of capital. We have all of the approvals in place. And should the Board and management believe we should move forward, then we'll look to act on the share buybacks.

At current share price around EUR 7 a megawatt hour -- sorry, around SEK 7 per share, we're significantly undervalued compared to where all of the analysts are looking at the value of just a producing asset base, and where we see market values for the assets. So it's very much a conversation that's alive.

[Robert Eriksson, executive]

And we have a question here that might be best for Espen.

You've previously guided an average cost per megawatt hour of roughly EUR 13 to EUR 15. But in the past 4 quarters, it's averaged north of EUR 18 per megawatt hour. Is it fair to say that, that is a more realistic run rate consumption -- assumption?

[Espen Hennie, executive]

So a couple of things there. I think if you look at our full year guidance of OpEx, which we put forward at our CMD earlier this year, that was EUR 15 million to EUR 17 million per -- EUR 15 million to EUR 17 million based on 1,000 gigawatt hours of power generation. So that equates to EUR 15 to EUR 17 per megawatt hour.

And year-to-date, we are slightly above the high end of that range, and that is -- that's due to lower volumes, meaning that, that figure has been slightly inflated during 2024 because we have certain costs that are fixed and not linked directly to volumes. So when our volumes are slightly lower than expectations, our unit OpEx might be higher for that period.

But longer term, we still think our latest guidance, which should put forward, the EUR 15 to EUR 17 per megawatt hour is where we see the business. And also, that's also what's part of that EUR 25 per megawatt hour EBITDA breakeven that Dan referred to earlier.

[Robert Eriksson, executive]

Thank you, Espen. And we have a few questions around the share price and the discount to NAV. So is the 50% approximately discount to NAV in the company's market cap something that makes management and/or Board stressed?

[Daniel Fitzgerald, executive]

I think stressed is maybe the wrong point. None of us are happy about it. I think we need to work to bring the valuation of the company closer to its NAV.

I think market conditions are challenging at the moment. I think there's a number of triggers coming in the coming quarters. We'll see electricity prices in a different place through Q4, Q1 for sure. We'll see the outcome of the Sudan case, and I mentioned that in my CEO letter or CEO comments in the report that we're now a year in.

There's -- if anything, my view on the case has strengthened over the last year, and we expect nothing but a full acquittal. So Sudan is going to drop out and then some news from the greenfield portfolio will make a material difference as well.

So I see over the coming 12 to 18 months, we're going to see multiple triggers that move the value of the company for sure. We're not stressed about the discount to valuation. I think all the right things are happening in the company. We're building the core of a business with a view on long-term value creation.

I think in the start-up phase or the early phase of any company, we need to go and demonstrate our ability to deliver, and I think that's coming over the coming quarters.

[Robert Eriksson, executive]

Thank you, Daniel. And we have a question about our largest shareholder, the Lundin Family. Are they still heavily active in Orron?

[Daniel Fitzgerald, executive]

Absolutely. I think we meet with the family very, very regularly, and they have full support of where we are. And things like the discount to NAV, that discussion is alive, the triggers that are coming in the company, the family are fully supportive of where we're going and how we're running the business. So I'd say, if anything, they're as keen as our shareholders to see the value of the company pick up and they are behind the strategy to go and do so.

[Robert Eriksson, executive]

Then we have the last question, if we don't get any more, and that's about the new Swedish price model in the market. How do you see that affecting results and affecting Orron?

[Espen Hennie, executive]

I think in short; we don't expect any dramatic effects. And I think also that's what we have seen since it came into play. I mean all of the expectations leading up to that new model being put into effect was that there was -- the expectations on prices were quite modest. And that's also what we have seen, I guess the consensus was around slightly positive effect in the northern area, slightly negative in the more southern areas in Sweden, but on average, a low impact, which has been, as I said, supported by the actuals so far. So we don't expect any significant impact on our revenues and cash flow going forward.

On the contrary, of course, we are very positive towards every changes that can make the grid more efficient, which we think is very important for the energy transition and for future demand growth of electricity in Sweden, which is expected to grow quite rapidly. And this new price model is one important step during that transition and to support and incentivize more electricity demand going forward.

[Robert Eriksson, executive]

Actually, Espen, you're lucky. Another question came up here. So can you give some color on what to expect in terms of noncash cost items on an annual basis?

[Espen Hennie, executive]

Yes. Good question, and we disclosed it in our report what the figure is. It is EUR 2.5 million year-to-date, so for the first 3 quarters of 2024. I think for the current quarter -- or sorry, next quarter, Q4, I think you should expect the same run rate and also a very similar run rate when we move into 2025. And I just want to remind you again that these are purely noncash, and we'll never lead to any cash outflow from the company.

[Robert Eriksson, executive]

Thank you, Espen, and thank you, Daniel. And that actually concludes the Q&A session.

And again, thank you to all our shareholders, analysts and others who have joined this call, and we're looking forward to update you as we progress on multiple fronts, and we'll certainly be back for Capital Markets Day and the year-end report with new well-working microphones, I hope.

So for that, thank you very much for joining.

[Daniel Fitzgerald, executive]

Thank you.

[Robert Eriksson, executive]

Thank you. Bye-bye.