PNE AG
XETRA:PNE3
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PNE AG
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Hello, ladies and gentlemen, and welcome to the PNE AG conference call regarding the H1 results 2023. [Operator Instructions] Let me now turn the floor over to Markus Lesser, the CEO of PNE.
Hello, and welcome, everyone, also from my side. Thank you for joining us today in this conference call on the results of the first half of the year 2023.Going on, 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 and financial highlights of the first 6 months. After that I will comment on all financial figures and operational achievements in more detail. I will conclude my presentation with our outlook for the remainder of the year. As always, we will then open the line for the sales side analysts only. All other participants will stay in listen only mode, as it's our company's procedures 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 had a dynamic start into the first half of the year. Our project pipeline again achieved record high level reaching 16.6 gigawatt/gigawatt peak. This represents an increase of 83%. We do this because we see lack of sites upcoming so we prepare ourselves for the future. We received building permits for 6 wind parks in Germany alone. And we were successful in all tenders in which we participated. We have sold, put into operation or have under construction projects of about 420 megawatt/megawatt peak by end of the June this year.Strategically of high importance, we grew our own wind power generation portfolio from 260 megawatt end of June 2022 to 346 megawatt as of June 30, 2023. As per end of June we have projects with the capacity of 183.1 megawatt under construction. These projects include projects with a capacity of 112.3 megawatt in Germany, 10.8 megawatt in France, and 60 megawatt in Sweden. In Sweden, we built a wind farm for a client that will keep [ on ] our service. In total, out of 183.1 megawatt capacity, we will manage around 66.6 as our service operations.Speaking about our Service, we are especially proud of our segment. I now manage -- it now manage capacity of about 2.7 gigawatt, representing an increase year-over-year of about 21%. There is an impressive performance behind the number. I will come back to the Service segment later.Before I will go into the financial performance, let me please spend a few words on some impact in sectors limiting our overall success. We have to recognize that there were crying crisis and post COVID-19 effects still have been leading to unstable supply chains and higher raw material prices, which was other than higher costs for wind turbines and modules.Additionally, we are facing a higher interest rate environment and must cope with higher lease for rented land. These are facts that we try to tackle with our new procurement strategy and that only can be offset by higher power prices partially.On Slide 4, we see -- looking at the financial, we are pleased that we grew our EBITDA by 3% to EUR 18.1 million, considering the hindering factors I just mentioned. This also explains to some degree -- while the EBITDA performance was letting the total output growth to 11% to EUR 116.7 million. However, the EBITDA performance is laying the ground for achieving our guidance for the remainder of the year to -- of EUR 30 million to EUR 40 million. If we adjust our EBITDA for our so-called hidden reserves, the operational profit came in at [ EUR 40.6 million ], significantly up from last half year's figures of EUR 23.5 million. This clearly underlines the strength of our business operations.Our results were impacted by a muted performance of the Power Generation segment, which benefited from the higher installed base on the one hand side. On the other hand, wind yields were damped and power prices came down over the course of the first 6 months in 2023. The more our service as well as our Project Development segment contributed strongly to our performance.All in all, we are satisfied with our earnings performance given all circumstances I mentioned before. Hence, our cash position came down by circa EUR 70 million compared to last half year to EUR 104.7 million. It is worth to say that our liquidity position, including credit lines, stood almost stable at EUR 165.5 million.Before I would share your -- share price performance, I'm pleased to say that PNE has been included in the TecDAX in July. This shows once again that our strategic development from a wind power project developer to a clean energy solutions provider is recognized by the equity markets.Next slide, please. Ladies and gentlemen, please follow me now to our share price performance on Chart 5. The main message here is that after the end of the speculation of share price performance normalized in recent months in line with major indices with whom we can be compared with. If we look on the renewable index RENIXX, we even slightly outperformed it.We look to Slide 6 to our own generation portfolio. We see that the target scale up 2.0 was to get -- is to get 1.5 gigawatt by 2027. And our target from scale up 1.0 was 500 megawatt. So in the moment, we have 346 megawatt of onshore wind project in operation and further approximately 123 megawatt in Germany and France intended for portfolio were under construction and approvals of approximately 151 megawatt received in Germany and France, which is a very good result and shows -- and it gives us the stability for the next growth and to the next construction wave in the next year. And this year, all of these projects will be started this year.In reserves, accumulated in a portfolio of EUR 194.6 million. This is opposite to EUR 136.8 million in the year before. And in the moment, in the first half year, we produced 325 gigawatt hours of green energy. This is an increase of 21.3% compared to the last year in June. We saved with that 245 kilotons CO2.Additionally, as I mentioned before, we increased this project pipeline. It is a very strong growth in between the years when you see that we now have a pipeline of 16,590 megawatt/ megawatt peak. This is an increase of 7,535 megawatt/megawatt peak in 1 year. You have to -- if you divide it in the technologies, then we see the wind onshore pipeline grew up to 8,650 -- 8,622 megawatt, which is a plus of 1,975 megawatt. And the PV pipeline jumped to 5,468 megawatt, which is an increase of 3,060 megawatt peak.And the first time we included wind offshore projects into the pipeline with 2.5 gigawatt, whereby 2,000 megawatt are in Vietnam and 500 megawatt in Latvia. In any case, we see that this is the basis for the next year's growth and shows -- as I've mentioned before, due to the lack of sites we expect also in the future, it shows a very good growth potential. If you see the project pipeline around -- we increased our pipeline in wind onshore to 8,622 megawatt which is close to 2 gigawatts on a year-on-year basis.Additionally, interesting is here that we see that our -- that we still have a high level of projects in the permitting phase in Germany and France in our core market with around 760 megawatt. This number is increasing despite the fact that we already have now projects under construction and will have -- and we are in construction preparation.So in Germany, it's a growth to 2,300 megawatt, and we have 6 wind farms under construction, mainly for their own generation portfolio and wind farm Mansbach completed in the first half year of '23. So we also received approval of 5 wind farms in the last half year, so that is around 124 megawatt. In France, we got approvals of 2 wind farms, 26.4 megawattss, one project is under construction with 11 megawatts.If you look to the PV pipeline, there is a very strong growth. We could take additional markets on board and 3 gigawatt peak on a year-on-year basis additionally. And we could make a first sale in Romania, with a second sale, I have to say, with 5 photovoltaic projects, combines around about 208 megawatt peak to total energies.If you look to the P&L, we have positive development in all areas. The total output grew by almost 11% to EUR 116.7 million. Last year, we had been at EUR 15.2 million. The EBITDA is up by 3% to EUR 18.1 million. And if you look to the results, we have to face that the operating performance in the project development have showed a strong profit contribution. The results of the Power Generation are a little bit down due to the fact that we had low wind yields in this time. We are round about minus 10% in the wind yield this year.The Services growth, we see with a volume of more than 21%. Impact of the financial result comparison is distorted by a valuation of the interest rate swaps. In the past, we had the advantage out of it. Now we have a disadvantage out of it, and this impacts all the time on the financial results. Consequently, we -- the net income turned into negative terrain with minus EUR 14.2 million.If you look more in the detail of the segments. Again, all segments have been positive. Project Development, plus 34.6% to EUR 96.1 million. The EBITDA turned positive in the last year with minus 8%, EUR 8 million, and now we have EUR 9.6 million positive. Services, very good development, grew to EUR 14.7 million, down about 28.9%, driven by a strong order entry. It shows that we made the right investments and have the right -- strong service products. The EBITDA is up to 4.6%, which means plus 48.4% and Power Generation plus 4.2%. And again, lower power prices, lower wind supply is despite the larger installed base is the reason for this minus EBITDA opposite to the last year of EUR 28.3 million.If you look to the balance sheet with -- we have still equity ratio of 22%. We are -- the liquidity is still high on EUR 104.7 million, even having in mind that we have a high equity needs in terms of project development. A bigger project pipeline needs more money as well as more investment in the project, need more money. So therefore, we are still on a high level, which is good. And current debt is increased. The corporate bonds still EUR 55 million, 5%. The liability to banks are mainly non-recourse round about EUR 411.3 million and EUR 40 million in the current liabilities as well as on recourse.Ladies and gentlemen, this leads me to the outlook. We are satisfied with our results so far. In the first half year of 2023, the foundation for achieving our ambitious targets for the remainder of the fiscal year has been late. We confirm to expect the full year 2023 for group EBITDA at a range of EUR 30 million to EUR 40 million. This guidance is supported by the market. Environment has become more challenging as risks related to still unstable supply chains and rising material and equipment costs have become obvious.But the market provides opportunities such as power prices as well as bigger machines as well as future other technologies like hydrogen and the big need of green energy. Our continuing portfolio built up 308 megawatt under construction for own generation portfolio. And you remember, we had a target of 500 megawatts in scale up for, I would say, 1.0. And if you put everything together, we are -- now at the moment, we have round about 112 megawatts under construction in Germany and 11 megawatt in France. And in total, we have 308 megawatt under construction or in construction preparation.If you add this to our 346 megawatt, then we have come close to 653 megawatt, we will have under construction or in operation in a very soon time, so at minimum of year-end. And this is what we have to face now, which is very high, above about our target of 500 megawatt, which we then certainly are going to meet. So we have a [indiscernible] project pipeline, which is the basis for the future business.And ladies and gentlemen, before I conclude my presentation, let me please allow 2 further remarks on the strategic side. First, we invested in artificial intelligence-related technology by acquiring a 51% stake of the British digital company, Bitbloom Limited. Bitbloom is a renowned provider of data analytics and monitoring software and services with a proven track record. The products of Bitbloom will support our ambition to provide optimal and innovative services and have already been extensively proven to increase the performance and yield across our own wind portfolio.Second, the strategic review process concerning our U.S. activities was concluded. We now have started the structured sales process of the activities. To remind you, we believe that an exit from our U.S. business at the current market stage with a reasonable price level for our activities could free up resources, which we put steer into our business expansion in Germany and other markets abroad.Ladies and gentlemen, this concludes my presentation. Thank you for your attention. We are now open for questions.
[Operator Instructions] And first up is Holger Steffen from SMC Research.
In your report, you've mentioned that you want to achieve the biggest part of your project development revenues in the second half. If you can give us some more details, which projects are ready to be sold now?
Mr. Steffen, yes, we are having several sales processes in place, in sometimes difficult markets. But nevertheless, we think about projects in -- PV project in Romania, around 40 megawatts. We think about project -- bigger project in Panama. We look for projects in Poland, pipeline in Italy. If we could get something out of this in this moment because we see that there is a good pricing situation.
You've mentioned Italy. We saw a big step forward in your PV pipeline in Italy in the second quarter. What are the main drivers of this successful development? And then I think we will see a sale of PV project in Italy. Is that correct?
Yes. So first of all, yes, we hired a team last year, a very good team, we think, and invested in Italy due to the fact that we see that the -- especially on the photovoltaic side, there will be a big need for photovoltaic projects in the future and the prices rose. So from that point of view, we invested and now we have the first results on first projects which are in early stage. And we have still projects where we worked on in the past. And this -- part of this projects we would like to sell. And we look to the market if we can get something out of it on early stage. If not, then we keep them and we sell them on a later stage. But at the moment, the prices are good and take a contribution from the sites. High price level would be our target.
And in Poland, I think you will sell maybe some wind projects. We see there are a big improvement in your pipeline too in the second quarter. Maybe you can give us some further information about these new projects?
So we would like to sell projects which are PV projects due to the fact we have prepared projects according to the last rules in Poland, and we have to face that the regulations have been changed. So we have to reshape and redesign the project. So that -- there is a delay from our side of view and that what we can deliver ready projects. Nevertheless, this is something what everybody in the market got on a desk. So therefore, we are not alone.Nevertheless, there is still a high value of these projects. And therefore, we are talking about reshaping and redesigning of the projects with a little time. Nevertheless, we are now working on PV projects as well, and we see good development there.
You have mentioned the tail process of your U.S. business. Maybe you can give us a timetable for the next steps?
Yes, I hope that we can finalize the sale. It depends on several factors, but I would be -- I would see something in the next 2 months.
My last question. You have significantly improved your material cost ratio, especially in the second quarter. Can you give us some details, how you manage this regarding rising turbine prices?
Yes, we have to see what is in this material factor. So there are several things in. So a material factor, this means also how are the development of the project in each area and what do we put in discussions also with [ Deloitte ]. So I can't give you the details about this, but nevertheless, because there are several projects which are -- partially or completely take into consideration. And this depends on criteria, which are different projects. So therefore, I can't give you any information in detail. If you need any information in detail, Mr. Klowat will -- we have to connect with Mr. Klowat.
The next question is Karsten Von Blumenthal from First Berlin.
First of all, congratulations to your reappointment. I'm very happy to hear that. I still have a couple of questions. My first one is regarding this EUR 2.5 million cost reimbursement from BSH. This is obviously booked in Q2. And in the report, you said that PNE expects even more money from this offshore wind reimbursement for costs you had earlier on projects. Could you tell me how much more you expect in coming months and years?
Yes, we had cost at that time, and we talk about EUR 2 million. So we talk -- at that time, I think it was in total EUR 18 million. So -- and we require this cost back. They say, yes, we only need -- so the Ministry of Economics, they say, yes, you get your damage back,. but the value of the studies are now in this moment at that level of EUR 4.5 million. Take it or leave it. So we say, but we had the cost in the past -- And if we wouldn't have taken -- made this -- through these studies, you never would have known that this area is possible to develop. So these are the discussions. And in the moment, we say, please, yes, we take the EUR 4.5 million. But nevertheless, we are open to go into deeper research and into a courtyard again.
That means in addition to the EUR 2.5 million you have received in Q2, you may receive a further EUR 2 million and you may litigate the German state for more, if that is up to you, on your decision, right?
Yes.
Regarding your electricity generation, you said, of course, lower wind and lower prices. But if I just look into your Q2 figures, I think they were quite good. What is amazing is the EBITDA, which is basically 100% in Q2. And I think this is due to a one-off effect that is mentioned in your report. There is a revaluation of provisions for the levy on extraordinary profits of EUR 3.1 million. And could you confirm that this is booked in Q2 in the electricity generation segment and that this is the explanation for the very high EBITDA in Q2?
Yes, it was due to the fact that we have had to expect -- Because of the energy price break we had to expect a volume of -- so according to our calculation, it could have maybe that there is -- that we have to pay. That was depending on a wording and explanation from the Ministry. So this explanation we could get in the 2 months ago. So therefore, we booked it into this volume when we saw that we don't need this to pay.
So basically in Q1, you said that you have to pay EUR 3.1 million. Now this is kind of reversal of this EUR 3.1 million or is…?
[indiscernible] [ stay along ].
Well, that explains the excellent result. But even without it, it was a good result. Could you give us a rough idea by how much the average selling price in Q2 fell compared to Q1? So what did you roughly earn per megawatt hour in Q2 for your wind power?
Yes, it depends on -- because we have a wide variety of different ways of selling our energy. As you know, minimum 50% we have already PPAs, long-lasting and short-lasting PPAs made before the energy prices increase, and on the top of it, so we have different figures. Additionally, we have the EEG tariff and the tariff of cutting EEG is depending on the quality of the project itself. So therefore, I can't tell you a value, and an average value will not help you. And so this is difficult.
And if I calculate it right, it is roughly 10% less than in Q1. Is that an approximation of the [ price ]?
Yes, that could be in the rough figure. So -- but no guarantee on it.
I have seen that you have added the 2 offshore wind projects into your pipeline, that is the Vietnam and the Latvia project. So my question is, why have you done this now in Q2 and not in Q1? What has changed that you now say this is so good that we put it into our pipeline?
Yes, we could -- in Latvia, we could see that there is a development ongoing. That need is higher. We -- when we went to the diligence, this was one part, and we took it over and look deeper into environment, with politics and so on. And we could see it as a big need, and we made our budget. And then when we spend money on a special amount, it should be aware to the shareholders we thought, and that was the point of giving you the information and put it into our supervised projects so that you have a full picture as well. So, in Vietnam, with our -- in the first quarter, we could make our MOU with the government of this [indiscernible] and the Binh Dinh region. And so we put it in the second quarter into in this overview.
If I look into your own plant portfolio, in the H2 report -- H1 report, you say you have 346 megawatts. When I look into your corporate news of 24 April, when you reported that you had put Mansbach wind farm into operation, the portfolio size given there was 349.5 megawatt. So no, I wonder what happened in between that you have lost 3.5 megawatt in your portfolio? Or is there a wrong number somewhere because these numbers do not fit together?
Yes. So we had a change in types in some projects in -- order we had to change of, I think, around about 2.4 megawatts when you add all megawatts in a business type. So it was a slight change of time. And additionally, we added 1.6 gigawatt [indiscernible], which was a [ repowering ] issue. So there are some projects up and down. And in total, it was this difference.
So the current number after reducing Papenrode by 2.4 megawatts is now 346 megawatt?
Papenrode, this was for the future projects. And we had one [indiscernible] as -- and this is the -- for the IPP portfolio, it is due to the fact that we put in Papenrode 2 projects. So, this is a repowering project, Papenrode. And we put 2 machines out of the wind farm because we now want to take and rebuild this wind farm with bigger machines, and we had to take them out due to the fact that we need to make the roads and the preparation for the new project. So 2 machines had been eliminated here.
Last question is regarding your Service segment. That was a very good EBITDA. You reached despite lower external sales, but you have quite high internal sales. So is the strong EBITDA simply because for your internal sales, you also calculate in EBITDA, and that's why it is up, although external sales is down?
Yes, there's something in -- but you have to consider that we always come up with market prices because we are offering our services also for third-parties. So there's always a benchmark with the market prices. So -- and that means, if we would have taken it from and purchase these services from the market, we would have paid the complete sum, but we wouldn't have gotten the margin. So this is -- so there is an avoidance of cost in total for the company, yes.
So basically to -- I have to calculate both external and internal sales to -- and relate it to the EBITDA to get the proper margin?
Yes. Maybe that is the case. Maybe we should discuss this in detail out of this format here.
[Operator Instructions] And the next question comes from Guido Hoymann from Metzler.
Yes. The question might have asked, I was caught in another call. So sorry, apologies for that in case. And so, do you have any news on the sale of the U.S. business and share with us?
Yes. We are now in the sales process, and we got nonbinding offers. And now we talk about the next step and about prices and conditions, SPAs and due diligence questions. So this is where we are.
So still some time to go, obviously.
I said in 2 months, I would like to see a result.
And the second one would be on -- I think you sold some project rights in Romania recently. And here, it's rather -- let's say, rather structural question. I think you built this up this pipeline very fast from 100 megawatts, I think, in 2021 to 600 this year. But one might say that you're outselling even faster building it up. And so the question is --?
Yes. We think it is a good -- Romania market has a good momentum. And to participate from this momentum, it makes sense to sell projects even on earlier stage with the condition to finalize these projects, yes, to get further milestones afterwards when they are ready. But with a good contribution and EBITDA good sale in the first -- for the first rate. So this is still our strategy there. So that means sometimes we build it up fast. And on the other side, the sales are fast. And yes, in a moment, we see a big interest in these kind of projects.
Then maybe on the growth of your pipeline. Actually, we are seeing and hearing now all over the place that approvals and permits are accelerating. At the same time, the growth of your pipeline was quite, let's say, moderate. Anything to share on that?
So I'm -- to be honest, I'm really happy that we have around 760 megawatts at the end of half year in Germany and France in the permitting procedure. So this is the biggest volume ever. And so therefore, I'm convinced, and I'm sure that we get a good output. Make it really simple, take 350 megawatts round about, plus the 760 megawatts, mainly, let's say, 700 megawatts or something like this, then we are above 1,000 megawatts, which we can take out of our wind projects in the next couple of years. So I'm not sure if this is the full volume or if we get less projects. But nevertheless, it gives you a feeling that we are on a good path to reach our target of 1.5 gigawatt in 2027.
Maybe last question on the -- on your IPP portfolio and the prices per megawatt you have assumed. I'm actually asking this discussion most of my companies and the -- because many are building up IPP portfolios and have quite ambitious targets normally by the end of the decade or so, earnings targets. And when you look at the forward prices for electricity, they are actually coming pretty much down, or have come down pretty much. We're talking about [ 70 ], [ 80 ] here in Germany, maybe in 3, 4 years' time. Do you give us any indication with which prices you have been making your business plan, your targets?
Yes. So we take always from minimum 2 providers of an energy power curve -- or energy, the power curve. That is what we look at, and it would be -- we take the middle and then the average of the base case, and that's what we take for our calculation.
[Indiscernible].
But nevertheless, I'm not sure if the prices are not too low. I think if that is what we see as a target. So you can -- the providers of the power price curves into 2 ways. And one are very, very depending on the -- and looking to the targets of the politics. And the other ones has their own ideas. So -- and makes it -- they make it all the time, but the -- a little bit more than one less, and then you see differences in pricing. So we will see what is upcoming and I'm pretty sure that the prices in some areas too low, I would say. It's my opinion, but I'm not the expert. But I see the need of green energy. If the big hydrogen projects coming up, the big changes in the production. So therefore...
[Operator Instructions] There are no further questions. With this I hand it back to Markus Lesser.
Yes. So thank you for your interest and hope to hear and see you soon. Bye.