PNE AG
XETRA:PNE3
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PNE AG
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Good day, and welcome to the PNE AG Analyst Conference Financial Report Second Quarter 2022. Today's conference is being recorded. At this time, I would like to turn the conference over to Markus Lesser. Please go ahead.
Good morning, everyone. Also from my side, sorry about this small late call. Due to some technical reasons, we had some inconvenience here. Thank you for joining us today in this conference call on the results of the first half 2022. Before I start with the presentation, I would like to share with you an outline of the presentation and the procedure of today's call. As usual, I will start with an overview of the operational strategic highlights in the first half 2022. After that I will comment on our financial figures. I will conclude my presentation with our outlook for the remainder of the year. As always, we will then open the line for the sell-side analysts only. All other participants will stay in listen-only mode as it is our company's procedure for years. As usual, our slides that I will use can be found on our Investor Relations website.
Having said this, I would like to draw your attention to Slide 3. In operational terms, we made very good progress during the first half of 2022. We have sold 1 wind farm in France and have completed 2 wind farms in Germany and 1 in Poland. We had projects with a capacity of 246 megawatts under construction at the end of the first half year. The operating performance was clearly marked by our power generation segment. Driven by the higher installed base, the improved wind yields and the higher power prices, the total output in power generation increased significantly. This also shows that our strategy to build our own IDP portfolio is already paying off.
On the other hand, we see that the Ukraine war and COVID-19 effects lead to unstable supply chains and higher raw material prices, which result in higher costs for wind turbines and modules. This can be partly offset by higher power prices. We also made further progress regarding the expansion of our power generation portfolio. We were able to put 2 further wind farms in operation for our own portfolio at the end of H1. We had 261 megawatts in operation and around 124 megawatts under construction to our own portfolio.
I think very remarkable is that we could grow our project pipeline significantly. Our total pipeline increased by 2,582 megawatt/megawatt peak compared to H1 of last year, and by 1,854 megawatt/megawatt peak compared to the end of quarter 1 '22.
Now our pipeline of wind onshore and PV projects stands at more than 9 gigawatt/gigawatt peak. In addition to that, with the acquisition of KOLYA, which was finalized in July, our pipeline will grow by further 1.8 gigawatt peak, which will push our pipeline to a total of close to 11 gigawatt/gigawatt peak. So we see now that the investments in project development parallel to the investment in our own portfolio is paying off.
Looking at the financials, I would like to highlight that we could significantly improve all financials across the board compared to last year. Total output increased by 12% year-over-year to EUR 105.2 million and EBITDA increased by 31% year-over-year to EUR 17.5 million. The results were mainly driven by the strong performance of the power generation segment, which was impacted by the higher installed base, the improved wind yields, and the higher power prices.
In light of the strong performance, also our cash position and equity improved further. I also want to highlight that we were able to successfully place our new corporate bond with a volume of EUR 55 million and 5% in the market in June. This gives us good visibility for planning until 2027. As you know, we are working on Scale up 2.0, which we would like to publish in the next 3 to 4 months.
Ladies and gentlemen, I would like to highlight that PNE has been included in the XTRA in June. This is a real success for us. It's an honor for us, but also shows that the hard work we put in recent years paid off. PNE's market had crossed to EUR 1 billion mark in May, and just recently, our share price reached EUR 16 or a market cap of more than EUR 1.2 billion.
This is the performance, up 8% since the beginning of the year and 110% on year-on-year basis. We are, of course, very happy with that development. And we will not stop here as we want to continue to grow our business going forward. We'll come to the details. The expansion of our own generation portfolio continues. So if you put everything together, we're talking about 385 megawatts in operation or under construction. We have now 261.1 megawatt onshore wind projects in operation at end of H1. Think about that we have further 40 megawatts already permitted, which we got in the last recent weeks, which went not to the tender, and so if you add 385 plus 40 megawatts, then we talk about 420 megawatts we will have soon in operation or under construction.
Still now we have 123.7 megawatts for the portfolio under construction. This means approximately 268 gigawatt hours of green electricity produced in H1 2022, which means 173,000 tonnes of CO2 saved. The hidden reserves accumulated in portfolio to EUR 136.8 million in total. If you see, the pipeline, which is very remarkable, as I mentioned already, for the wind pipeline went to 6,647 megawatts, which is around about plus 1 gigawatt on a year-on-year basis additionally.
The total PV pipeline tripled from 794-megawatt peak to 2,408 megawatt peak. So if you consider the acquisition of KOLYA, we talk now about a PV pipeline of 4.2 megawatt -- gigawatt peak, which means that we now have a pipeline of around about 11 gigawatt/gigawatt peak in July. If we look on the next page, you see that we have the growth, as I mentioned already, of the pipeline and of the development pipeline, and you see already about 1.1 gigawatts are in the permitting phase, and in the markets -- our core markets in France and Germany, we have now 793 megawatts in permitting phase, which is a further increase in comparison to the other years before.
In Germany, we have 8 wind farms under construction in the first half year, mainly for own generation portfolio, and we got new approvals of 66 megawatts, whereby, as I mentioned already, 40 megawatts are waiting for tender and plant starting of construction this year.
The increase of the further pipeline is all related to Poland and South Africa. And as you may know, we are now investing also in South Africa furthermore, having in mind that it will become a strategic market also for hydrogen business. The project pipeline of PV continues further and this has, as I said, already tripled. And you can see PV pipeline at 1.8 megawatt peak alone through KOLYA, but without them, even then we had a 1.6 gigawatt peak, which we added through our own development -- 1 gigawatt peak is for our own development for KOLYA and 800 megawatt peak roundabout is the development for third parties.
The financial figures clearly improved on a year-on-year basis. The EBITDA up to 31.4%, driven by power generation, mainly the total output up to 12.1% on a year-on-year basis. The strong increase in power generation overcompensated the decrease in power development, and we have to consider that we have a lot of projects we expect in terms of permitting end of year and starting off construction end of year as well as we have sales processes to expect at the end of the year in Romania, in France, in South Africa, in Panama and United States.
So therefore, we are waiting for this sales perspective. So from that point of view, we are absolutely in plan in terms of the project development.
[Technical Difficulty]
This is your lead operator. The speaker has just disconnected his line. I will reconnect him. Please allow me a moment here.
Am I still in the conference?
Markus is back on the line.
Okay. This is Markus Lesser speaking again. Sorry for these problems that are caused by technical problems from our provider. I'm sorry for that. Nevertheless, I think I stopped at the moment when I talked about the financial swap issues and I would like to say it again. The financial results positively impacted by the valuation of interest rate swaps, plus EUR 15.5 million, and subsequent measurement of liabilities to credit institutions due to the sharp rise in interest rates in the recent months. This is according to IFRS and you see these results in the EBT and in the net income.
If you look to the balance sheet, we see an increasing balance sheet. And in this respect, we see a liquidity on a -- we have a very high cash position. And with EUR 160 million and the equity ratio still high, even with the increased balance sheet, we have the liabilities, which are on a high level. And so we have the current liabilities, which we have to repay back on a corporate bond. We have to repay EUR 17.9 million related to the bond of 2018 to 2023.
Maybe 1 step back, page before -- so the project development output decreased in opposite to the last year, but it's still on a high level of EUR 71.4 million. Due to the fact that we invested in our own portfolio and pipeline and the projects targeted for sales targeted for H2, as I mentioned already, EBITDA is minus EUR 8 million, but we think this will be changed a very high amount in the last quarter.
The service output grows to EUR 11.4 million, but due to the fact that we expand our business in foreign countries, we had to invest in new personnel, 90 people we added to our team. So therefore, we slightly decreased our EBITDA at a slightly decreased EBITDA of EUR 3.1 million.
Electricity generation output strongly increased. As I said already, improved wind yields, higher installed base and higher power prices altogether lead to this. Nevertheless, we have to consider that now in the summertime we have a very low wind offer due to the weather situation.
We look to the outlook for the last quarter for the fiscal year 2022. I can say we confirm the guidance. I know there have been some rumors that we have to increase our guidance. Nevertheless, we are in sales process, we are in the process of permitting and tender processes. So when we get more grip on that, then we will have a look and that's what we do steadily. And if there is something coming up, you will be the first to get it on the desk.
So dynamic market environment provides opportunities. But nevertheless, we have to consider the higher prices. So there are a lot of different things that are ongoing. On the 1 hand, higher power prices, on the other hand, higher prices for wind turbines and cable works. We do a lot to secure delivery times, and we already order transformer and cables for several projects in advance. We also look that we get interest rate secured KV loans -- KW loans, we secured for us for the next 2 years. So therefore, we do a lot to get clear conditions for us solved.
We have a high volume for the core markets in Germany and France of 793 megawatts wind onshore, which offers a real high potential, and we are waiting, as I mentioned before, we are in progress of the sales procedures with United States, milestone payments for Poland, South Africa tender, Romanian 60 megawatt peak project PV, Panama. So there's a lot ongoing and we are in a good mood that we get these sales process done in a proper way.
But please have in mind that related to the milestones, we have to expect not all payments directly. So again, guidance, we confirm for the EBITDA, EUR 20 million to EUR 30 million. And I'm open to hear your questions.
[Operator Instructions] We'll take our first question. Jan Bauer from Warburg Research.
Good morning. I hope you can hear me. I've got 2 or 3 questions. First thing is about the guidance. So if I simply calculate with the power prices that are indicated for the second half of the year, like using futures prices, so the EBITDA contribution of the power generation segment should be clearly surpassing your expectations you had when you made the guidance in H1.
Could you elaborate a little bit on why you didn't raise the guidance or at least narrow it down to whatever, EUR 25 million to EUR 30 million, or increase it at the other end, because in my understanding, the EBITDA contribution of the power generation segment should be a few millions higher if you assume power prices up to EUR 500 per megawatt hour in December.
Yes, it is like that, it's always a guidance for the whole year and not for the half year. So it is really clear that we have some sales process to finalize. And on the other side, if you consider that we have around about 100 -- about 120 megawatts under construction, we do the calculation internally that partly when the projects are finalized, we get payments or we take payments. And third of all, we have to consider that further projects, as I mentioned, 40 megawatts of permits we got just right now, but they are not in construction and the payments are related to construction, starting off construction and finalizing the project. So therefore, we expect some of this payment in the future, but it depends on tender, it depends on several issues we have to consider in this time and always in front of this.
So on the other side, we have the sales processes, and we are in the sales processes. And as it is usual, only when you have some accountability, you can talk about a process and the project which is ready. And then we can consider it. So COD for the project and starting of construction are the main points. And on the other side, the sales processes, and we have to get some harder reasons to grow with our guidance, for example. So that's what we are waiting for. And again, we are going according to plan. There's nothing where we see a disturbance.
All right. Second question would be in the USA final dividend administration, perhaps the mighty infrastructure package. Do you see any impact there already in terms of that you are in a, whatever, more or less advanced sales process for projects, it's easier to get customer on, or stuff like that?
Yes. First of all, it is a very good improvement -- can you hear me? Sorry.
I can still hear you.
Yes. Okay. So this is a very good improvement. On the other side, we have to see what the states will do out of that. First of all, we see that we have, not anymore, wade through taxes to support renewables. We see increasing energy prices. And on the other side we have to see what is the outcome in detail. We wait for that. And what we see that runs in the right direction.
All right. Perfect. You talked about Scale up 2.0. Can you shed a little bit light on it. Will it be primarily that you will expand your in-house portfolio by above 500 megawatts?
Exactly that we are looking at. What we are going to do, do we go more to hydrogen business, in which amount, and do we invest more in our own portfolio and all these questions, and exactly that's what we are working on. And I think then you will get some answers on this. And until, we would like to give you an outlook until 2027, then.
Perfect. And 1 last question. You talked about that you try to preorder some parts that are short in the market like inverters and stuff. Do you put this on your own balance sheet in terms that your working capital goes up because you hold it on your own balance sheet? Or how do you do it?
Yes. Yes, it costs us liquidity, cash, yes, that's usual. On the other side, we think it is important to secure costs and secure delivery times. And therefore, we ordered already 5 transformer stations and cable work for several 100 kilometers. We have framed agreements and we intend to order higher amounts. On the other side, we are working very closely together with the wind turbine manufacturers how we can get focused on our projects.
We'll take our next question. Karsten Blumenthal from First Berlin Equity Research.
Markus, this is Karsten from First Berlin. Recently, you bought 51% stake of KOLYA, the Spanish PV developer. And this is a significant addition to your PV pipeline. It is 1.8 gigawatt and roughly 800 megawatts are developed for third parties. Could you elaborate on that? Who are the third parties? And how are you compensated for developing it? Will you in the future also do third-party development business there? And how should that evolve?
Yes. Yes, we see KOLYA as a strategic investment. And we took over an operating business. It already was their business model to also do consultant to third parties. In future, we don't want to have this business. This is not our core business. Our core business is to invest in our own project pipeline and to see how we can increase that. And we are very happy to have these people on board who have a good track record and huge knowledge from the Spanish market.
We see Spain as a strategic market due to the fact that we see the options we have in the energy market, but as well, as the politics are outlined very heavily, that they want to invest in hydrogen business as well, so that the need for green energy will increase. So it's mainly driven to PV business just right now, but we look for other opportunities as well. So we would see.
And related to the prices, yes, we sold KOLYA for 1 digit million amount with all milestones and which are related to further improvements. And on the other side, mainly, the contribution for the consultant business is related to the former owners.
So that means for this third-party business, you do the development or you do only consulting? And when the project is done, then you get a fee? Or how can I...
Exactly, the last point, yes, we develop, and when it is ready, we get a fee.
And ready is ready to build or...
Exactly.
Okay. The government passed the Easter package in Germany. I would like to get to know what your view is on this package for your business in Germany?
Yes. I think they made some good efforts in this package due to the fact that they really made some requirements related to areas and how areas for wind turbines and PV parts and PV modules and plants can be secured and will be developed. We see that now in a lot of regions the leaders are working on that heavily to increase the areas for this kind of business for renewable energies. So therefore, this is a very positive way. The targets are high. I see there are a lot of investments which have to take place to meet these targets. And I think and hope that everybody now knows that the permitting procedures should be shortened, so that we can deliver on this target.
All right. Thanks for that. You have currently roughly 124 megawatts under construction. Seen from today, do you plan to complete this 124 megawatts before the end of the year? Or how many megawatts should go online this year of these construction activities?
We don't think that we can finalize our project this year. It is not planned just right now. I think in the amount of roughly between 80 and 90 megawatts will be finalized this year round about.
[Operator Instructions] We'll take our next question. Peter Rothenaicher from Baader Bank.
Could you please comment a little bit on the pricing development you are seeing in your electricity generation segment. So we are hearing about exploding electricity prices. To what extent do you expect to benefit from this in the second half of the year? To what extent your prices are fixed via PPA agreements? Yes, can you comment on this, please?
Yes. First of all, to your last question, we made a mixture and looked that we can get long-lasting contracts. On the other side, the prices short-term are very high. We think it is important that we secure it for a longer frame. So you can say around about 60% of our megawatts are now secured in tariffs for 2023 and round about 40% to 50% in 2024. So therefore, it is a situation where we think it is a good mixture of getting advantage from the actual situation in the energy price market, and additionally, to secure high prices for a longer run. So in this respect, we see still high prices also this year. Nevertheless, you know, this is a volatile market in the moment. And from that point of view, we see different prognosis, but nevertheless, I think this year will be still high.
And how we see it in the longer run, we will see. There are different expectations, as I mentioned before. From that point of view, it is the best to secure higher prices for longer run as we think.
In a wider view, we are very happy that we can build on this stable business. Nevertheless, we see just right now, in the last 3 months, that we have low wind yield to consider. So therefore, it is not like that, that we can say it is always at 100%, we are much lower, whereby in the first month of this year, we had a higher wind yield situation. So we had been at 100%. So we will see what the last recent months will bring us. If you look out of the window here in Germany, you will see quite a sunny area, but not very windy. And so we will see what we will get.
Okay. With that, could you perhaps agree that with the agreement you have taken by securing high prices, the average price for electricity you will benefit from in 2023 is even higher than in 2022?
No, it's like usual. If you go to the spot market prices, they are higher. If you secure it for 2 or 3 years, the price, because it's an average price of out of the expectations in the next years, and they expect in the next years lower prices, as we have just right now, in the prognosis. But nobody knows at the moment.
[Operator Instructions] There are no further questions at this time. Mr. Markus Lesser, I would like to turn the conference back to you for any additional or closing remarks.
Yes. Again, sorry for the technical problems we had. Thank you for the interest in PNE AG, and I wish you a very good day.