Scatec ASA

Good morning, everyone, and welcome to our second quarter presentation. I'm truly excited to present strong financials, additional growth and also excellent progress on our projects in construction.

This means we continue to make significant progress on our strategic objectives, both in terms of growing our renewables portfolio and also in terms of strengthening our balance sheet. Let me start with a summary of the quarter, and then I will hand over to Hans Jakob to take us through the financials.

On total -- our total proportionate revenues increased to NOK 2.3 billion and our EBITDA to NOK 1.1 billion. This represents an increased activity level across all our segments.

Our projects under construction are progressing well with revenues close to NOK 1 billion in the quarter, and we're still also recognizing gross margins at the high end of our guided range of 11.4%. I'm also very pleased with the development of the backlog that is now at all-time high of 3.2 gigawatts.

And this is after adding close to 1 gigawatt of solar and BESS in South Africa during the quarter. In Egypt, we reached financial close and first drawdown on our Obelisk project during the quarter.

And further, we signed a PPA for 900 megawatts of onshore wind in the country. And finally, in terms of the balance sheet, we continue to focus on debt reductions.

We repaid NOK 300 million in the quarter, and we repaid another NOK 850 million after the quarter end. And with this, our now interest- bearing debt, gross debt on corporate level is down to NOK 6.8 billion, which is a significant reduction relative to where we were 1 year ago.

Now in terms of power production. We generated 940 gigawatt hours in the quarter.

This is an increase of 10%, if we adjust for divestments during the year. This is driven by good hydrology in the Philippines and also in Laos and also positive contribution from the new project in operation in Botswana, the first phase of our Mmadinare solar cluster.

Revenues based on this increased to just above NOK 1.3 billion. This is obviously then driven by the increase in the generation, but it's also related to a onetime effect in the Philippines relative to the formal award of our higher tariff on our ancillary services contract.

And then adjusted for divested assets, this is an increase of 48% relative to the same quarter last year. Now let's take a closer look at the Philippines.

The Philippines delivered a strong quarter, both in terms of power production, ancillary services and also in terms of financial contribution. Power production reached 106 gigawatt hours, which is 67% higher than last year.

This is due to strong hydrology with high water levels in the reservoirs coming into the quarter and also good water inflows during the quarter. And based on this, revenues reached NOK 493 million in the quarter.

The underlying net revenues doubled from last year to NOK 262 million, with power sales increasing to NOK 49 million and ancillary services increasing to NOK 230 million. In addition, we are pleased to have received, as I just said, formal regulatory approval for a higher awarded rate on our ancillary services contract.

And this has a retroactive effect of NOK 231 million. And as you might remember, these contracts or this tender was executed back in 2023, and we have been then accumulating this since then.

EBITDA based on this increased to NOK 448 million, and this is also reflecting good OpEx controls in our operations in the Philippines. And importantly, batteries now play an important role in the market, specifically in terms of addressing the reserves market, and we are working to increase our portfolio of batteries in the country.

We have 2 battery projects in construction, and we also have a number of mature battery projects in our pipeline. And in general, this quarter highlights the earnings potential of the flexible asset portfolio that we have in the Philippines, as we have different technologies and several market segments to play in as we see varying opportunities across the market.

Then in terms of construction. We currently have close to 2 gigawatts of solar and battery storage under construction in 6 different countries and at various stages.

And since last reporting, we've had strong progress across the portfolio, and we have recognized close to NOK 1 billion in revenues in the quarter. In South Africa, Grootfontein is almost finalized, and we expect COD within the next couple of weeks.

And in Tunisia, construction is progressing well. And also here, we expect COD later this year.

In Brazil, we reached financial close recently, and we expect also here COD in 2026 -- in the first half of 2026. And this is also the case for Botswana, the second phase of the Mmadinare cluster project and also for our BESS projects in the Philippines.

While in terms of Mogobe, our first battery project in South Africa, we expect this one to come into operation during the second half of 2026. Finally, the Obelisk project in Egypt will be built in 2 phases, which are expected to be finalized in the first and the second half of next year.

And I'm very excited about the rapid progression here and proud of the team that is making this happen, and we will also show a short video of this a bit later in the presentation. I will now zoom out a bit and talk about the totality of our growth portfolio.

And we continue to expand our near-term growth portfolio. In addition to the 2 gigawatts that we have under construction, we now also have an all-time high backlog of 3.2 gigawatts.

And this is after adding another major solar project and a stand-alone BESS project in South Africa. These growth projects will more than double our installed capacity over the next 2 years to more than 9 gigawatts relative to the 4.2 gigawatts that we currently have in operation.

And in addition to this, we do have a large pipeline of 7.7 gigawatts of maturing quality projects, and these are across different technologies. Notably, this also includes the wind project in Egypt, where we just recently signed a PPA for 900 megawatts, which is a very mature project, but still in our pipeline.

In addition to this, we also have significant early-stage greenfield development activities. And these projects, that are not yet visible in the pipeline, they will move into the pipeline as they continue to mature.

All in all, we believe that this portfolio of growth opportunities forms a solid basis for further growth in the years to come, not only until 2027, but also beyond 2027. We expect hybrid and pure battery projects to play an increasingly important role in the energy mix in our markets going forward, and this is driven by significant cost reductions and further innovations and renewable can take a larger and larger part of the energy mix in the markets where we operate.

And Scatec, we stand at the forefront of these developments with a solid track record and good experience in doing both battery projects and also combining battery and solar projects. As you see, the majority of our near-term growth is coming from South Africa and Egypt.

So let me also briefly touch a bit more on these 2 countries. Firstly, South Africa, which has been a core market for Scatec for many years.

It continues also to be a market where we see significant growth opportunity going forward. We now have a total of 2.1 gigawatts of solar and 2 gigawatt hours of batteries in operation, in construction and in backlog.

And in addition, we have also realized -- developed and realized the 258- megawatt round 4 project, which is close to Upington. And this adds to our track record in the market, and this is a project that we divested in 2023.

This summer, we announced an additional award of 846 megawatt solar in the REIPPPP, Round 7, as the authorities reallocated capacity from wind to solar in that auction. And this is our biggest award in South Africa to date.

We were also awarded another sizable battery storage project, 123 megawatt, 492 megawatt hours, Haru BESS project. South Africa is a very attractive market for us based on our track record, our integrated and capital-light business model and also the long-term very attractive growth perspective in the market.

Here, we can have low net equity contributions based on a 51% ownership stake, based on 90% leverage of the project and also based on a full EPC scope that we are realizing these projects with. And this enables us to capture value with a very low capital employed related to the projects that we pursue here.

Further, our corporate PPA platform, Lyra Energy, targeting the private market is also progressing well and will further diversify our offtake structures in the country. And Lyra Energy also just received a trading license, which shows that this platform is also progressing very well.

All in all, we believe we are well positioned to capture further attractive growth in the market. Now over to Egypt and our largest solar and battery storage project to date, the 1.1 gigawatt and 200-megawatt hours, Obelisk project in Egypt.

And here, I'm incredibly impressed by the rapid mobilization of our team related to this project. Here, we are really moving fast.

In this video, we are showing both the massive scale of the plant and the significant progress our team has made during the last few months of construction activity. The first phase, the half of the solar capacity and all the batteries is expected to reach COD in the first half of 2026, by the remaining the second half of the PV capacity will be installed and reached COD in the second half of 2026.

And the site is about 20 square kilometers. We now have over 1,500 people working on site and have recorded over 1 million safe working hours.

The safety of our people is top priority, obviously, not only here but across our portfolio and across our sites globally. [indiscernible] has reached 40% completion for the first phase and construction activity is ramping up.

On average, we expect to install 200,000 PV modules on a monthly basis going forward on this site. Substation works are on track, which obviously is crucial for us to ensure that we meet COD according to our schedule.

So Obelisk will drive significant EPC revenues and margins in 2025 and also in 2026. And with that, I will hand over to Hans Jakob to take you through the financials.

Thank you, Terje, and it's a privilege to say that we have delivered strong results driven by the higher power production, the high D&C activity, and it's a strong quarter in the Philippines, also complemented by the ancillary services rates, recognized the retroactive effect. I'll take you through the group financials and the performance of the operating segments, and I'll also share the progress we are doing on strengthening our capital structure.

Starting with group level performance, we delivered strong results in the quarter. The consolidated revenues were up by 12% to NOK 1.3 billion.

EBITDA reached NOK 1 billion, up 10%. And to the right, you see the proportionate figures.

Revenues increased by 51% to NOK 2.3 billion, and the EBITDA grew by 19% to NOK 1.1 billion. Now let me take you through the segments, starting with Power Production.

The Power Production segment delivered a strong quarter. Revenues reached NOK 1.3 billion, up 26% from the same quarter last year.

EBITDA was NOK 1.1 billion, a 27% increase year- on-year. This is mainly driven by the strong performance in the Philippines and the retroactive effect.

On a 12-month rolling basis, you can see positive development over the past quarters, which shows both the underlying growth and strong contribution from divestments. We have delivered more than NOK 6.3 billion in revenues and NOK 5.4 billion in EBITDA.

Overall, we are very pleased with the value generated from our operating assets. In our Development & Construction segment, activity levels continue to increase.

Proportionate revenues were NOK 976 million and the EBITDA, NOK 49 million. Keep in mind that the second quarter last year, we realized a contingency of NOK 122 million from Kenhardt, positively impacting the EBITDA.

The quarterly revenue shows variability depending on project phasing, but the trend from the last 12 months confirms the long-term strength and scalability of our D&C business. It gives a clearer picture of the strong momentum we are building.

Over the past year, D&C revenues have reached NOK 3.4 billion with a steady increase over the last 4 quarters, and we aim to continue. Rolling EBITDA ended at NOK 139 million, with strong contribution from high-margin projects and disciplined cost control.

The increasing trend reflects higher activity levels across several geographies with Obelisk in Egypt at the forefront. With a strong backlog moving into construction, we expect D&C to remain a key engine of our continued profitable growth.

At the end of the quarter, we had available liquidity of NOK 4.4 billion. The reduction is mainly driven by the repayment of debt and interest, partly offset by distributions from power plants.

Let me explain some of the main movements. We received NOK 327 million in distributions from power plants, invested net NOK 119 million in growth projects and paid NOK 293 million of interest and NOK 582 million in debt repayments.

Additionally, we increased the RCF capacity by $50 million to $230 million during the quarter, and it is currently undrawn. We continue to strengthen our capital structure.

Net corporate debt increased to NOK 5.6 billion from NOK 5.2 billion in the first quarter. The increase is mainly driven by the change in cash, while gross corporate debt was reduced by NOK 600 million, including a NOK 300 million repayment and favorable FX movements.

The cash position and the net interest-bearing debt will vary over time, dependent on cash movements. On project level, the net debt increased by NOK 200 million to NOK 13.6 billion.

Project debt in operation was reduced by NOK 600 million, and we drew NOK 800 million of new debt for projects under construction. Now look at the progress on deleveraging.

In Q3 last year, we set a clear strategy to rotate assets and reduce corporate debt, targeting to strengthen our capital structure towards 2027. I am pleased with our progress on reducing corporate debt.

Step by step, we are making repayments, while ensuring we have strong liquidity position and headroom to advance growth initiatives. During the quarter, we repaid NOK 300 million of vendor debt to Norfund, while foreign exchange movements also reduced the gross corporate debt by another NOK 300 million.

We repaid $85 million remaining under one of the term loans after reporting date, bringing our current corporate debt down to NOK 6.8 billion. This happened after the quarter and also affects our liquidity position.

We have now reduced the corporate debt by 26% since the strategy update in the third quarter last year. These reductions reflect our continued commitment to capital efficiency and balance sheet strength, and they position us well to finance growth without increasing corporate leverage.

Let me share the outlook for 2025. For the full year, we estimate power production between 4,000 and 4,300 gigawatt hours, slightly reduced from last quarter, mainly due to curtailments in Brazil and Ukraine.

It is worth mentioning that the impact on EBITDA is marginal, as majority of the curtailments are refundable. We keep our estimated full year 2025 EBITDA unchanged with a range of NOK 4,150 million to NOK 4,450 million.

While FX has had a positive effect on our corporate debt, it also affects our EBITDA negatively. This effect is, however, offset by overperformance in the quarter, and we retain our full year 2025 EBITDA estimate.

For the third quarter, we expect a total power production between 1,100 and 1,200 gigawatt hours and EBITDA in the Philippines between NOK 280 million and NOK 380 million based on normal hydrology and strong contributions from ancillary services. In our D&C segment, we currently have a remaining contract value of NOK 6 billion and gross margin estimate of 10% to 12% on average across the portfolio of projects under construction.

For corporate, we expect a full year EBITDA of NOK 115 million to NOK 125 million negative, in line with previous estimates. These estimates reflect strong base of operating assets, high construction activity and a healthy cost control, a good start of the year, position us well for 2025 targets.

And now I welcome you back, Terje, to provide the summary of the key points.

Thank you, Hans Jakob. To summarize, this has been a very strong quarter for Scatec.

Firstly, we have delivered solid financial results with significant year-on-year growth in both revenues and EBITDA, and this is driven by strong power generation, strong results in the Philippines and also increased activity across our D&C portfolio. Second, we are executing at scale with 2 gigawatts under construction and more than 3 gigawatts in backlog.

The near-term growth is set to substantially increase our operating portfolio over the next 2 to 3 years. And finally, as Hans Jakob also pointed out, we are making solid progress on our capital structure.

Through divestments and refinancing, we've reduced corporate debt, extended our maturity profiles and also strengthened our financial flexibility significantly over the last year. So all of this reinforces the robustness of our platform and our strategy of self-funded profitable growth.

And with that, we can move to Q&A.

Thank you, Terje. Yes, we will start with questions here in the room, and then we will take questions from our online listeners [Operator Instructions].

Any questions from the audience here?

Thank you. Can you give us an update on your asset sale progress or portfolio or efforts or -- yes.

Yes. We -- as you know, we have already recognized NOK 2.6 billion in proceeds from asset sales since we set out with our target to achieve NOK 4 billion in proceeds in the period through 2027.

And we have currently a number of processes ongoing. But obviously, we will wait with saying something specific until contracts are signed.

I also have a question on the Philippines because you're providing guidance on a quarterly basis on the Philippines on EBITDA contribution for the upcoming quarter. And you have, at least during the first half, beaten that guidance very significantly, both in Q1 and Q2.

So I was wondering, is it that difficult to have visibility on the EBITDA contribution in the Philippines for you as well? Is it that difficult?

I think what has surprised us positively, and we can recognize that is the earnings potential of the battery systems that we have in the Philippines. I mean, at the end, the battery systems are -- I mean, currently, they are 26 megawatts.

And so it's relatively limited in -- sort of in relation to what we have on the hydropower side, but still the earnings potential with good prices in the reserves market has been a positive surprise also to us. So that's -- and that is obviously something that we will take into consideration when we provide guidance and outlook and estimates going forward.

And a final question for me. Can you -- with that in mind, what kind of payback times are you -- do you have for the battery investments when they are performing as well as they're doing in the Philippines?

I'm not going to give you a number of years or months, but it's short.

Thank you, Andreas. Any more questions from the audience here?

No? Then we will move over to the questions -- the online questions.

We have one question from Jørgen Lande, Danske Bank. Related to the curtailments in Ukraine and Brazil, can you provide some more color on why this has emerged now?

And is this a one-off for the second half of 2025 or a more persistent feature going forward?

Yes. As you will have seen from the guidance, we are keeping the financial outlook intact, and we are reducing the gigawatt hours outlook related to the curtailment situation.

And this is due to the fact that the curtailment situation is not new, but we see that it is probably continuing longer than what we had expected. But also, as Hans Jakob said, this is curtailment that we are mostly compensated for.

One question from [indiscernible] related to Grootfontein. You have already mentioned it, Terje, but it's about when do we expect COD for Grootfontein?

Yes. As we indicated, we are expecting COD within the next few weeks.

Previously, we have indicated that it will come in first half. It's a bit delayed relative to that.

The delays are not due to poor performance on our side.

We have one more question about asset sales. I think we have been through that.

Then one from -- 2 questions from Vegard Nygaard. Given that Scatec has a significant pipeline in several large projects in Egypt, how do you assess the geographic concentration risk?

Is there a point where you would set a limit on how much exposure you want to have in a country?

Do you want to take it?

Yes, I can take it. First of all, I'm amazed by this video.

I think it's fantastic to see the industrial progress we are making in this country. I think we can be proud about the legacy around Benban and being a significant operator with a high level of confidence in the country.

And we see, as Terje also alluded to, new opportunities lately, the 900-megawatt wind added to our pipeline. Is this a problem?

If it is, it is a luxury problem. We will look closely at ownership stakes in these projects.

And of course, we have approached divestments or reducing ownership stakes in other geographies and I think it's better to talk about real transactions, as Terje said, than speculating. But I think we can be very pleased with the development in Egypt overall.

And just to cure the curiosity in the third quarter, we will also give a strategy update, including covering Egypt.

Second question from Vegard. Could you give an update on the farm-down process for the Obelisk project?

Will there be a separate market announcement once an agreement is reached?

Yes. The farm-down of the Obelisk project is progressing well.

And yes, there will be announcements when we sign contracts on that.

Advanced discussions ongoing.

Thank you. We have one from Andreas Nibe Nygard, Nordea.

Another one on divestments, I'm not sure if you want to give some more color, but could you please provide some color on the remaining divestments you are targeting? Are you aiming to conclude the last divestment in 2025?

Yes. I think as we just said, we will not give specific updates on individual investments or exactly when they're going to happen.

You will see the announcements and our target of NOK 4 billion by the end of 2027 stands firm.

One question from Anis Zgaya from ODDO BHF. Could you give us an update on CapEx levels in solar and storage?

Are you seeing increase in module prices after the very strong decrease?

There has been -- on module prices, there has been some fluctuations, but there are no significant changes we've seen over the last 3 to 6 months. And I think we gave an update on what we had seen over the last couple of years, a couple of quarters ago, where we've seen significant reductions on the module prices.

On battery prices, we continue to see price decreases on batteries.

One more question. Thomas Ness from Sparebanken.

Should we expect quick rotation of assets built in noncore markets, such as the Botswana project and the Romania project? A lot on asset rotation today.

Yes. This will depend on a number of different elements.

I think, first of all, some of the smaller markets today can grow into larger markets, and then it might make sense to build a larger portfolio. So we will assess every asset individually.

But clearly, markets where we will not continue to see a significant growth potential going forward, in those markets over time, we will look to divest the assets.

We have so far no more questions. So we maybe just wait.

Sometimes there is a time lag, but otherwise, we will just end the presentation now.

Okay. Thank you very much.

Thank you.

Thank you.

Thank you.