PNE AG
XETRA:PNE3
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PNE AG
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Good morning, everyone. Also from my side. Thank you for joining us today in this conference call on the first 9 months of financial year of 2019. Before I start with the presentation, I would like to share you an outline of the presentation and the procedure of today's call. I will start with an overview of the operational and strategic highlights of the first 9 months, followed by depth analysis of the 9 months figures. After that, I will comment on our outlook for the remainder of the year before I will conclude my presentation with a brief update on the process of the ongoing voluntary public takeover offer by Morgan Stanley Infrastructure Partners for PNE AG. 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 in our company 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 start with Page 3 where we have the highlights of the 9 months, the first 9 months in this year. And we see this is mainly driven by the sale of international projects and we see with 404 megawatts, which have been put into operation or started construction. We are on a very high level. If you see 2018 with 130 megawatts, it's a very high level, mainly driven by the international projects. The biggest one is Jasna with 132 megawatts in Poland and Malarberget in Sweden with 113 megawatts in -- where we are working in the construction right now. And you see in the third quarter, the results, we didn't expect very good results because we are ongoing construction in these projects. Just right now, we have 331.7 megawatts under construction. And additionally, we sold one project where we would like an operation project, Papenrode, with 20.3 (sic) [ 22.3 ] megawatts. We acquired these projects due to the fact that we would like to make repowering in the next 3 to 4 years. In Germany, we have been successful in tender with 37.5 megawatts, which is in these times where the permitting procedures are in delay in Germany all over the market. You have heard it already that we are on a very low level. In terms of emissions, whereby it is very clear that it is often not a no go, it's a delay. So we don't see any big impact on our pipeline in this country. Our wind portfolio we'll work on as well. So 90.57 megawatts are in operation or under construction. Still, we are working on our scale up projects and which is -- where we talk about implementation of all the things we pointed out in our strategy approach until 2023. In Germany, we expand our PV business. Just right now, we have an early stage, 170 megawatts in Germany, around about, and 170 megawatts in Romania. We would like to expand this business in other countries as well like United States and Italy and France. In Service businesses, we internationalized our business and strengthened with new projects and acquisitions of our business. So therefore, this altogether leads to the financial results we see on Page 4, which is the total output, which had been increased to EUR 98.7 million, which is 71% in opposite to last year and the result of plus 81% of the EBITDA and plus 166% on EBIT, which is clearly improved results -- which are really improved results. The EBIT is at EUR 9.9 million. We are still a high level of a gross cash position, which is EUR 143.1 million, which still supports all activities we wanted to achieve. This all leads to a point that I would like to say in the beginning, we still confirm the guidance of the fiscal year 2019, which we said -- which is an EBITDA from EUR 25 million to EUR 30 million and an EBIT, EUR 15 million to EUR 20 million. If we look more into the details of the pipeline in onshore, we see that a lot of activities happened in the international businesses in France. We finished a project in Sweden. The project had been sold, Malarberget, which is, by the way, one of the biggest projects sold in this year in the Nordic countries. Another project had been completed. So in Poland, this project, Jasna, with 132 megawatts is 1 -- is the project -- is the biggest project in Poland. We are just right now working on with 70 kilometers of high-voltage line, and the substation. So this shows what we can deliver. As well, we work on a project in Barwice in Poland. In Panama, we stepped in. We acquired a pipeline, 5 projects. And in the United States, we sold 1 project, Burleigh, which was mainly driven by the good connection we sold, and this was a pure sale of project development in the mid stage. Remarkable is that we have an own power generation portfolio now at the level of 111.3 megawatts. It includes the wind farm portfolio projects, as I mentioned before, 95 points -- 95 megawatts in operation, other wind farms and this wind power project, Papenrode; and our biomass project, Silbitz. And our pipeline is still at a level of 5 gigawatts. And if you look to the numbers of Phase 3, which shows that we are -- in which projects we are in a procedure of for -- permitting procedure, we see that we have in Germany, 302 megawatts; and in France, 232 megawatts, which is a high level of 534 megawatts in these countries. And we hope that in Germany, in the short run, we get permissions out of this 302 megawatts. In the wind farm portfolio 2020, this continues, as I said, already 95.7 megawatts. The portfolio consist 70.13 (sic) [ 71.3 ] megawatt are in operation. Here, we have to understand now Neuenwalde and Kittlitz projects of around 24.4 megawatts are under construction and will be ready end of November or in November, beginning of December. So we are in the last stage of construction. Nevertheless, we have to say, as I said before, delays in Germany and permitting process can lead to delays. We would like to announce this on an early stage. Additionally, we see that the delivery of wind turbines in Germany haven't -- can lead to later delivery times. And in this moment for me, it is an issue because manufacturers now deliver to foreign countries and sharpened the level of delivery in Germany. So this is where we enter the negotiation. The earnings accrued in the wind farm portfolio amount to approximately EUR 28 million now and has increased. The power generation is at EUR 8.1 million. It's a little bit lower than in the 9 months. Numbers of last year mainly driven by 1 sale project of Gerdau-Schwienau. At that time, it was a onetime effect. So wouldn't -- we have to consider what we have been in the last year that brought EUR 5 million for this. We have -- we are still on track with scale up. We said we would like to have the first project pipeline in development. And this year, we stepped into Panama, and we are first to market, the first project in the -- first project in development. We are in much more projects in development in PV. We said we provide additional services. We acquired companies. We -- 5 additional service and presenting now to the market and expansion of offshore development we are working on in the United States and in other countries right now to expand our business. Looking to the numbers, the operating results improved to -- in the yearly comparison. As I said before, international project sales in Poland, milestone payments and results from the power generation. [ These ] are the main drivers for this. Remarkable is that the financial results, we see the last point, financial result burdened by higher interest expenses through the valuation of interest rate swaps, EUR 6.2 million. And it's always to -- we have always to consider as soon as the projects related to the swaps are sold, the swaps will not longer be consolidated and a corresponding positive contribution to earnings will result. If we look to the business segments and project development, an increase of plus 70% round about; and EBITDA, plus 82%. In services, we have an increase of the output. Nevertheless, the increase in EBITDA, EBITDA is mainly driven by the restructuring costs of the acquired companies. Electricity generation decreases to EUR 12 million despite an increase of own generation portfolio. And this is what I explained before, it's mainly driven by 1 sale before. That's also impacted the EBITDA. And this year, in the summertime, we have wind here. So take into consideration the high liquidity. If you look to the balance sheet, we are in a good position, mainly an issue which relates to the buildup of the portfolio. We have an equity change also mainly driven by the IFRS 16 consideration. Mainly, you see the noncurrent debt has increased and the liabilities, mainly driven by liabilities to banks related to nonrecourse financing. As I said before, it will build up a portfolio, it is mainly the debt for the project financing. That's usual to increase the balance some. And additionally, the increase -- some of the balance sheet is, again, outcome out of the IFRS 16 change. Looking into the future. In the next quarter, as I said before, we would like -- we work further on the construction of the bigger projects. We -- these kind of projects, either delivery time or construction time, sometimes about 1 year because they are so big. We see that the project pipeline in Germany is -- was 534 megawatts in Phase 3. And we hope that we get in the next couple of weeks some of these permissions on our desk. When you see Germany, we hope that we get in the next couple of week, 2 projects, [indiscernible] which in a total of 26.1 megawatts, which we would like to go within the next tender. But this depends on -- that we don't get a further delay in permission. We continue on -- build up our wind farm portfolio. We are still in sales processes and projects, say, in other countries. And we -- after we've broken off Panama projects and the PV projects, where we would like to go more internationally, we think we can go very fast into the next step of these early stage projects. Additional services. We work very heavily on this to present some of them to the markets, these services and some consulting solutions as well. Again, we confirm the outlook of the financial year 2019 with an EBITDA of EUR 25 million to EUR 30 million and EBIT of EUR 15 million to EUR 20 million. Ladies and gentlemen, that brings me to the end of my presentation with the update on the process of the ongoing voluntary public takeover by Morgan Stanley Infrastructure Partners, short MSIP, for PNE AG. As you know, on October 10, MSIP announced its intention to make a public takeover of PNE AG at a price of EUR 4 per share in cash. Following intensive talks, we, the board of management of PNE, with approval of the Supervisory Board signed an investment agreement with Photon Management as the bidder. Photon is indirectly fully owned by MSIP. The offer price, correspondent to an approximate 31% premium in relation to the unaffected share price on 26 August 2019 of [ EUR 3.05 ]. The price before the publication of the ad hoc statement concerning the first confirmation of tax of PNE within MSIP. The offer values PNE with an equity value of approximately EUR 300 million. The offer will provide for a minimum acceptance threshold of 50% plus 1 share and further customary offer conditions. The acceptance threshold does not include the treasury shares of PNE. Over the course of our talks, we have gotten to know MSIP as a highly professional and long-term partner. Their strong support for our long-term business model and, in particularly, for our strategy, Scale Up, as well as for employees and existing business units have convinced us. In the investment agreement, MSIP expressed a strong commitment to this strategy and supported also in financial terms. Together with us, the Board of management, MSIP wants to continue to implement and even accelerate this strategy. Not least, we welcome the offered attractive premium for our shareholders. Consequently, and subject to a thorough assessment of the final offer documents, we support the offer by MSIP. Ladies and gentlemen, please allow me some remarks regarding the sequences over the last months. Neither the board of management nor the supervisory board actively invited offers to shareholders. MSIP has made an offer to the shareholders of PNE. Prior to this offer, MSIP approached us concerning a potential offer to our shareholders. Safeguarding the interest of both the company and, in particular, of the shareholders and further stakeholders, the Board of Management and the Supervisory Board entered into a dialogue with MSIP in order to negotiate for [ investors ] take over as possible -- takeover offer response. By doing so, folks, the Board of Management and the Supervisory Board met their duties towards the company. The shareholders of PNE and further stakeholder to the fullest extent. On the 26th 2019, PNE confirmed talks with MSIP about a potential takeover in an ad hoc release. We also ask for external support in this process from experts specialized in takeover situations. Within this frame, the Board of Management and the Supervisory Board set up an orderly process, which included confidential talks with further potential prospective investors. Furthermore, the Board of Management tested the interest in a takeover bid among private equity companies, companies that were named in press articles following the ad hoc release. Overall, these talks did not result in offers competing with the offer by MSIP. Subject to this final statement in accordance with Section 27 Takeover by the Board of Management and the Supervisory Board, on the offer document, we consider the offered purchase price of EUR 4 per PNE share to our best knowledge as adequate. We have to stress that the initial indication by MSIP was EUR 3.50. Only throughout the talks with PNE, the possible offer price range was increased to EUR 3.52, EUR 3.80 at the time. After providing further value-adding information to investor, the offer was most recently increased to EUR 4 per PNE share. Furthermore, we based our preliminary consideration of the adequately of the price on the already conducted, but not yet finalized analysis regarding the preparation of the fairness opinion performed by our external adviser. We will provide our final assessment of the adequacy of the offer price after a careful review of the offer document in our statement in accordance with Section 27 Takeover. Where are we now in the takeover process? Meanwhile, the offer document of MSIP has been cleared with the authorities and made public on the bidder's website, www.photon-offer.com. All information, in particular, on the technical aspects, tendering shares can be found there. According to the rules, quoting again Section 27 Takeover Act, we and the Supervisory Board will submit our final statement by mid-November following the current careful review of the offer document. Until then, I will not comment on the offer beyond my remarks that I just shared with you. I hope you understand. Ladies and gentlemen, this concludes my presentation. Thanks for your attention. We are now open for questions.
And we've received the first question. It is from Laura Lopez of Baader Bank.
I have a couple of questions. From the around 41 megawatt of projects, which are under construction but have not been sold yet, do you expect this to happen in the fourth quarter? Would this be the trigger for PNE to accomplish the guidance in the year? Or do you see any more drivers in the fourth quarter? And the second question would be on the service business. So when we look at it year-over-year, the margins have actually deteriorated. And what is the reason for this? Were the -- are the recent acquisitions loss-making and that's having make a negative dilution effect on the margin or it's actually just higher investments for your internationalization strategy? I will ask 2 other afterwards.
So first of all, we have just right now 3 projects under construction, Kittlitz, Neuenwalde, which are the projects where we think they will be ready very, very soon. And these projects for the project portfolio. And then we have 1 bigger project with 16.8 megawatts, Wölsickendorf, where we started already our construction. And where we think we will be ready at the end -- until end of the year. And this project will be 1 bigger -- will affect certainly the guidance because we have 1 bigger EBIT to expect from this project. Related to the service, yes, we have to flip some internal calculations and internal personnel. And we are just right now to get these things started in service so that we have financed very strong service group. That means also that the head count and the changes related to this is one -- the overhead costs and all this stuff is now -- it has to be sorted. We started with this in February, as you remember. And on the other side, there are some effects on this. On the other side, we have higher investments and exactly what you said before in taking all of our companies, restructuring costs and the depreciation. But the restructuring costs are mainly driven by this. This is not a big issue. We think that the numbers will increase in the future.
Okay. Very good. And then maybe actually just 1 more. You mentioned -- can you maybe explain again that what you mentioned about also some risks or some issues with wind turbine manufacturers with the delivery times? Can you explain that again? Is that something that they are delivering more to the international market? And recently, there were several announcements in Germany or by the government, I think, around September, positive announcements. But have you seen any slight progress in the approval process? Or everything is exactly the same? And do you expect this to improve in the near future?
Yes. Related to the wind turbines, we have the situation that the manufacturers have a huge American market just right now where they have to deliver related to the PTC tax issues and now the big projects are -- has to be delivered. And secondly, they lowered their delivery contingent for Germany. So therefore, with [ Symbion, ] which is not anymore in the market, we see that there is a further step of lower delivery from wind turbines in Germany. So therefore, that is where now customers like to get wind turbines from other manufacturers, which are not [ trained ]. So this is something where -- which lead to delays in delivery times. We are still in discussions and negotiations with manufacturers to secure them.So related to approval situation in Germany, politics is very clear that there is a structural problem in terms of permissions, mainly driven by changes in the law. So that leads to 1 year longer times for studies, and this is now usually a onetime effect in this respect. But nevertheless, they want to change something in terms of permission -- permitting structure that should lead to lower -- slower -- longer -- shorter times for permissions. And that these longer terms will not occur anymore. So we will see what is the outcome. Nevertheless, again, we have no projects in our pipeline where we've seen no-gos. These projects, this is always a matter of time. It's not a matter of go or not go.
The next question is from Karsten Von Blumenthal of First Berlin Equity Research.
Markus, this is Karsten from First Berlin. Markus, you mentioned that the interest rate swaps resulted in a negative interest and similar expenses figure. And you said that this will be reversed when the project is completed. So do you expect a positive effect this year already? Or will we see this next year?
No. This is mainly related to the project financing of our portfolio. And when we sell projects, we then have no effect anymore. Yes. So -- and when we expect to sell them, then the reverse may happen or will happen. And just right now, there is no effect to expect this year.
Understood. It is referring to your 2020 portfolio so we can...
Exactly. Mainly driven by this. Because you want to secure the interest rate.
Of course.
Because a long time, everybody thought the interest rates will increase. And now the interest rates went down. And so it's a balanced effect. And this is what we have to consider, which is when you sell the project, you have still the interest rates of your financing. So there is no change to expect.
Yes. Perfect. Understood. Then you mentioned that you bought assets of the Papenrode project, 22.3 megawatt. And so this is an old wind farm, which you would like to repower in coming years. And the current capacity is 22.3 megawatt. And any idea what the repowered capacity could be? Is that roughly the same or could it be higher?
Yes. First of all, it's not an old project. It's the best age, I would say. So -- and secondly -- so secondly, we do a lot of measurements to improve the output of the already existing wind farm. So even if we stick with this project, we will be on the positive side. And if we do a repowering, if we do repowering, then we think about it as a range of megawatts we could take out of this. But that depends on the permission structure. I will not say just right now how much megawatt it could be because it depends all the time on the actual wind turbine in this year and that year when we would like to repower it.
Okay. But for the time being, this project will then add to your electricity generation?
Exactly. Exactly.
Okay. Good. Then you mentioned your solar business and that your pipeline consists of roughly 170 megawatt in Germany and 170 megawatt in Romania. When do you think the first projects will be constructed out of that portfolio? .
Yes. We are in early stage in this kind of project. And -- but we think -- we hope that in the next year, the first project, we can get something out. But nevertheless, the year after we see a bigger amount of megawatts coming out of the PV business.
All right. Last question from my side. Your 2020 wind farm portfolio now has a capacity of 75.7 megawatts. And for additional projects, you need approval which, as we well know, is currently a very tedious and frustrating procedure. So from now, looking into the future, it looks to be rather challenging to achieve something like 200 megawatts at the end of 2020. So what do you think could be a realistic total capacity for the portfolio at the end of 2020?
Yes. Just right now, we -- that's why I came up with this point in this moment because we are 1 year and 3 months for the end of next year. And the next projects we see, 26 megawatts we would like to get in the next tender, which depends on debt that we get the next week. So this is -- so -- and we think we are still on the path that we think we come close to 200. But to say how much it is, I can't say. It depends all the time. We have 302 megawatts just right now in permission status. And a lot of them are -- should have been permitted. So -- and depending on -- then we have always the procedure for the tendering. So therefore, I can't say just right now which will come up, but I think that is -- you're absolutely right. I don't see the 200 megawatts really. This is very challenging. It becomes very challenging just right now.Due to delays in the permitting process and the delivery times of wind turbines, it's [ reinitiated ]. You are absolutely right. But I will come up with our prognosis in December. And then I will have a much better future.
The last question is from Holger Steffen of S&P Research (sic) [ SMC Research ].
Holger Steffen speaking. I have -- first, I have an additional question about the development of the Wind Farm portfolio. Regarding the delays, is it possible that you will shift the sales process to the year 2021? Or you will sell a smaller portfolio next year? Is this preferred?
Yes. In any case, as I said before, it's always an issue of delay, and these 2 options are there. And I would like to come back to you on the next quarterly message, and we'll give you an outlook on this. Just right now, we're still in good hope that we get some permissions. We don't know how much, but you see the potential of 300 megawatts. This is huge. And we hope that some of these projects will come. And then we'll know much more at the end of the year where we are.
Okay. In summertime, you planned to possibly -- possible to add some [ whole ] projects to the Wind Farm Portfolio. Is this still an option?
Sorry. What did you say? Some projects...
[ Whole ] projects for the Wind Farm Portfolio.
No, no, no. We are working with our own portfolio and with our own projects and project is the thing which I'm -- it may be that we sell the projects, even when they are under construction as we did in the last time in projects. And it might happen that we can negotiate it with projects, which has permissions or in the tender, were part of certain project pipeline as well. So this is -- we sought already projects packaged in France, where we have had only project rights. And after permission, then we get our milestones. And so you can make this combination. This is possible. So therefore, I'm -- it depends all on that, what we think when the permission will occur, when we'll get it. And then we can make our plan. Just right now, we are in a -- with hope, but we see that this target is very challenging. In any case, to get it constructed 200 megawatts, this is not really what we see.
Okay. In your report for the first 9 months, you gave us only a few information about the development of your pipeline in France. Maybe can you give us an outlook when the next projects in France could be ready for sale?
For sale, yes. We already sold project in France. And this year, we got our milestone payments to Laperrière which was 1 project in France. And further projects are -- we have the packages where we get milestones payment. When we get the next project in France, this depends, again, on the permission process, where we have usually, usually 1 year to extend because around about 90% of the projects in France will be sued and in the front of court. And usually, if you made a proper work, you get right until you can go ahead with the construction. So -- but just right now, I can't give you the number in that because out of this 230 megawatts, there are some projects where we think they will come up in a short time. And then, just right now, we would like to have a portfolio, for example, for German projects, and we don't intend in a moment that we put French project in that. But that is exactly the issue. What we would like to discuss when we have more overview about the permission status in these countries.
Okay. The U.S. Project, Chilocco, should be ready for sale this year. Maybe could you give us an update about the process?
Yes. Chilocco, we have the situation that we restructured the project. Even if this is now 166 megawatts, it is a higher output to expect there to lower the [ OCE ] and being competitive with the prices on the energy market there. So we hired a new adviser for sales. And we are just in the process. Again, I have to say, for sale. Additionally, there's some issues around the grid connection to consider this as well, grid connection there where the local utility is working on extension of the transformer stations and such issues will affect the sales status as well. But this is something, which is just right now in consideration and discussion.
Okay. So you can say if you will manage to sell the project this year?
I'm not sure if we'll get it sold this year. But nevertheless, that changes nothing on the guidance.
Okay. And in your report, you've mentioned 4 projects, which were successful in a German tender this year. I think I found 5 projects: [indiscernible], Schlenzer, Neuenwalde, [ Burgdorf ] and [ Liebstadt ]. Can you explain my mistake?
Schlenzer, I have not here on my list. I think Schlenzer was in last year, but I'm not sure to be honest. On my list, Schlenzer was at the end of last year, but I'm not sure to be honest.
Okay. Okay. Can you give us some...
So the rest is fine. The rest is fine.
Okay. Can you give us some more details about the project [ Liebstadt ] in Germany, which we are successful in September, I think.
This is [ Liebstadt ] 8.8 megawatts. This is a project where we have -- where we still have to -- yes. We're working just right now on this project to start construction exactly. And next year, it would -- it will be a part of the portfolio in the future. And so next year, we will start construction.
I didn't understand the megawatt figure.
8.8 megawatts for [ Liebstadt ].
Okay. And my last question, perhaps some information about client [indiscernible] which won tender in February. I didn't saw an update to this project.
Yes. This project is a project which has some difficulties in permitting requirements. So we have to solve some of these issues. And there, we are working heavily on, but we think this is a project for next year as well. But we would like to step through here.
Thank you. At the moment, there are no further questions. So I would hand back to you.
Yes. So thank you very much to attend this call. And I wish you a good day.