Scatec ASA

Good morning, everyone, and welcome to our third quarter presentation. Today, we are presenting another quarter with strong financials and also good progress on our strategic priorities.

We will also provide an update on our strategy and targets towards 2030. And then reflecting on our last 12 months, we have made significant progress on our strategic priorities, both in terms of growing our renewables portfolio and also in terms of strengthening our balance sheet.

And we expect this momentum to continue and at an even higher pace than what we have seen over the last 12 months. So let me start with the highlights of the quarter, and then Hans Jakob will take you through the financials.

And then I will come up -- come back with an update on our strategy and our targets towards 2030. So then in terms of the highlights of the quarter, our total proportionate revenues increased by 22% to nearly NOK 3 billion in the quarter.

And our EBITDA was NOK 1.1 billion, representing increased activity levels and especially in our D&C segment, where we have had very good progress. Our projects under construction are progressing well with revenues of NOK 1.8 billion in the D&C segment and a very strong margin of 11.4%.

And I'm also very pleased with the development of the backlog that it is now at an all-time high of 3.4 gigawatts after we have included a new project in Colombia, 130 megawatts after we have signed a PPA there and also included 80 megawatts of battery projects in the Philippines after these projects are progressing and getting closer to construction. And here, I would also like to highlight the progress that we are making on Release, our platform for leasing out solar and BESS equipment in Africa.

Here, we have started installing a new solar and battery system and lease contract with Eneo in Cameroon, and we have also signed 2 new lease contracts in Liberia and Sierra Leone. Then we also continue to strengthen our balance sheet, and we repaid NOK 953 million of corporate debt during the quarter.

With this, our net interest-bearing debt on corporate level is now down to NOK 4.3 billion. And finally, based on the strong progress on pipeline growth and corporate debt reductions, we are increasing our ambitions for our self-funded growth plan going forward, and we will talk more about this towards the end of the presentation.

So now let me talk about power production. We generated 1,202 gigawatt hours in the quarter, and this is an increase of 7% adjusting for the divestments during the year.

This is driven by good hydrology in the Philippines and also a new project coming into operation during the year in Botswana. Revenues came in at NOK 1.2 billion, and this also represents a small increase from the same quarter last year, adjusted for divested assets, and this is also driven by the increase in generation.

So now let's talk a bit also in terms of more details on the Philippines. The Philippines delivered a strong quarter, both in terms of power generation, in terms of ancillary services and also in terms of financial contribution.

Power production increased by 16% from last year to 354 gigawatt hours, and this is again based on strong hydrology. Contract volumes were also significantly up to about 150 gigawatt hours.

This is based on selling replacement power to other energy companies on shorter-term contracts. And these contracts are limited to the second half where we have very good hydrology and we are long on energy generation.

Prices in the Philippines have been down in the quarter, but based on our flexible generation portfolio and trading activities, we've been able to secure above-average market prices for the spot sales that we're doing in the Philippines. Revenues reached NOK 385 million in the quarter, and this is compared to NOK 432 million in the same quarter last year when we had a catch-up effect of NOK 60 million.

And underlying EBITDA increased to NOK 10 million by NOK 10 million to NOK 332 million, also reflecting good cost control in our venture in the Philippines. Then in terms of construction.

We currently have close to 2 gigawatts of solar and battery storage projects under construction in 6 different countries. And since last reporting, we have had very good progress across the portfolio, and we have recorded D&C revenues in the range of NOK 1.8 billion and also with a very strong gross margin of 11.4%.

The EBITDA for the D&C segment came in at NOK 135 million. In South Africa, Grootfontein is undergoing commissioning and testing as we speak and will come into operation shortly.

In Tunisia, construction is progressing well and also for these projects, we expect them to reach operation by the end of this year. We expect COD in the first half of 2026 for our projects in Brazil, in Botswana and also in the Philippines.

While when it comes to Mogobe, our first pure battery project in South Africa, we expect this to come into operation in the second half of next year. And then finally, the Obelisk project in Egypt.

This one is being built in 2 phases with these 2 different phases coming into operation in the first half and the second half of next year. I'm incredibly pleased with the progress that we are currently doing on construction across all these different projects in all of these different countries and very, very proud of the teams and seeing what the teams are able to do related to the construction progress.

At the end of the quarter, we still have NOK 4.1 billion of remaining contract value, and we continue to expect to be able to realize 10% to 12% gross margin related to these projects. So let me then zoom out a bit and comment on our total growth portfolio.

And growth continues to be supported by our integrated business model, limiting our net equity investments into our projects. This is enabling us to scale through a self-funded approach without overstretching our balance sheet.

On the left-hand side here, you will see our project portfolio in construction with estimated EPC revenues in total for the whole portfolio of about NOK 9 billion and with NOK 4.1 billion remaining contract value. Below, you will see our backlog, which includes awarded projects with secured offtake agreements.

This now represents close to NOK 17 billion in additional EPC revenues for our D&C segment. We target construction start for 2 of these projects in 2026, while the rest of the project is expected to come into construction through 2026.

Some projects have moved out in time, as you will probably recognize, but none of the projects have fallen out of the backlog, and we still aim to bring all of these projects into construction. As we have emphasized before, revenue recognition resembles an S-curve for our construction period for the projects.

And we aim to have positive working capital through how we are structuring our projects through the construction time lines for the projects. As you understand, we have a transformative period ahead of us.

We have a strong portfolio of secured projects, which will enable us to more than double our operating capacity over the next 2 to 3 years to more than 9 gigawatts. Now I will hand over to Hans Jakob to take you through the financials.

Thank you, Terje, and I'm pleased to say that we delivered strong results across the group. We have higher production and high D&C activity, and we had a very good quarter in the Philippines.

I'll walk you through the group financials and the performance of our operating segments and also cover the improvements in our capital structure. Starting with group level performance.

We delivered strong results in the quarter. Consolidated revenues was NOK 1.1 billion compared to NOK 3 billion last year, where we had sales gains from divestments in South Africa.

The EBITDA reached NOK 785 million. The results are impacted by an impairment in Mendubim of NOK 130 million due to new assessment of future curtailment levels and power prices.

To the right, you see the proportionate financials. Revenues increased by 22% to NOK 2.95 billion, while EBITDA ended at NOK 1.1 billion.

Adjusted for sales gains, we are in line with the same quarter last year. Now let me take you through the segments.

Starting with Power Production, which delivered another solid quarter. Revenues reached close to NOK 1.2 billion compared to NOK 1.8 billion in the same quarter last year, where we also had sales gains and a catch-up payment in the Philippines.

EBITDA was NOK 955 million. On a 12-month rolling basis, you can see a positive trend, which shows both underlying growth and strong contribution from divestments.

The slight downtick in the quarter are partly explained by the strong Q3 last year due to the divestments in South Africa. The last 12 months, we have delivered more than NOK 5.7 billion in revenues and NOK 4.8 billion in EBITDA.

Overall, we are very pleased with the generation from our operating assets. In our D&C segment, activity levels continue to increase.

Proportionate revenues were NOK 1.76 billion and the EBITDA of NOK 135 million, more than doubling quarter-on-quarter. The trend of the last 12 months confirm the long-term strength and scalability of our D&C business and gives a clear picture of the strong momentum that we are building.

D&C revenues in the last 12 months have reached NOK 4.5 billion with a steady increase over the last 5 quarters, and we aim to continue. Rolling EBITDA ended at NOK 261 million with strong contributions from high-margin projects and disciplined cost control.

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

At the end of the quarter, we had available liquidity of NOK 4.7 billion. Let me explain some of the main movements.

We received NOK 424 million in distributions from power plants, including proceeds from refinancing in the Philippines, had positive working capital movements of NOK 1.4 billion, mainly related to milestone payments for Obelisk, invested NOK 414 million net in growth projects, paid NOK 139 million in interest and NOK 943 million in debt repayments. The RCF is currently undrawn.

We continue to strengthen our capital structure. The net corporate debt was reduced to NOK 4.3 billion from NOK 5.6 billion in the second quarter.

The reduction was mainly driven by the change in cash and close to NOK 1 billion of corporate debt repayments. The reduction was mainly driven by the change in cash, as I said, and the NOK 1 billion of corporate debt reductions.

So this is a very positive trend, where we on project level, have increased the net debt from -- by NOK 2.3 billion to NOK 15.9 billion as we continue to grow. The debt for projects under construction had a net increase of NOK 2.5 billion, mainly related to Obelisk.

And finally, I'll take you through the outlook before I give the floor back to Terje. So the outlook for 2025 with a full year perspective, where we estimate the power production between 4,100 and 4,200 gigawatt hours.

Our estimated full year EBITDA midpoint is increased by NOK 50 million to NOK 435 billion. This is driven by an estimated strong performance in the Philippines in the fourth quarter.

For the fourth quarter, we expect the total power production between 1,000 and 1,100 gigawatt hours and the EBITDA in the Philippines of NOK 280 million to NOK 380 million based on normal hydrology, strong contributions from ancillary services. And in the D&C segment, we have remaining contract value of NOK 4.1 billion and a gross margin estimate of 10% to 12% on average across the portfolio for projects under construction.

For corporate, we expect a full year EBITDA of NOK 115 million to NOK 125 million negative, which is in line with the previous estimate. These estimates reflect a strong base for operating assets, high construction activity and a healthy cost control.

And by that, Terje, please take us through the strategy update.

Thank you, Hans Jakob. So it has become a bit of a tradition during our third quarter presentation to also give a strategy update.

And this time, we will increase also the time perspective until 2030. And to be clear, we are increasing our growth rate.

We continue to be self-funded, and we will continue to take down the corporate debt levels. These are the main pillars of also how we are going to drive our strategy going forward.

And we are on a steady course to provide profitable growth from an all-time high construction program, while our financial flexibility will continue to improve going forward. So let me start by taking stock of our progress on the strategy communicated last year.

We have made good progress on all key priorities, and I'm pleased to say that we are ahead of plan. Regarding growth, we have already secured projects in construction and backlog that will take us beyond the target of NOK 750 million in equity investments annually.

On divestments, we have secured NOK 2.6 billion in proceeds, and we have allocated more than 75% of these proceeds to bring down our debt on corporate level. And our corporate interest-bearing debt is now at NOK 6.7 billion, which is a significant reduction of the NOK 9.2 billion that we had last year.

So all in all, we are on track to reach our 2027 targets communicated last year and well positioned to capture future attractive growth going forward. And then in terms of the industry, we continue to see a very positive development when it comes to the renewables industry going forward, and this is really supporting our growth ambitions.

Solar panel, wind turbines and battery prices continue to come down, and they are now again at all-time low levels. And especially the reduction on battery prices is really a game changer for the industry and a game changer in the markets where we are operating.

This increases the usability and significantly also increases the market size and opportunity space for us as a renewable energy players. And this is a development I think it would have been difficult to foresee only a few years ago in terms of how rapidly this is developing.

And we can now deliver dispatchable renewables at competitive prices in most of the markets where we are operating. And further, with batteries, in addition, we can also provide ancillary services, frequency regulation and also load shifting to the grid.

So it's also increasing the services that we can provide in these markets. So this makes renewables the most attractive source of energy in the markets where we operate and not only as intermittent power, but also as dispatchable and baseload power.

So this development will continue to fuel the growth of renewables going forward in our markets. Bloomberg estimates that investments in renewables will exceed $100 trillion annually in relevant markets in the years to come.

And that will exceed -- and this means that it will exceed $500 trillion in the period from now until 2030 in our emerging markets. And this assumes a deployment of 2,500 gigawatts of renewables in this period.

So this is massive in terms of deployment. And Scatec, we have a strong track record, and we are well positioned to compete in this space.

And the key for us going forward is really to identify the good opportunities and be able to identify opportunities where we are able to capture attractive value. So in summary, our strategic progress over the last years, coupled with the development of the renewables industry represents a strong basis for increasing our growth ambitions going forward.

And then based on this, we, as I have already said, increased our growth targets towards 2030, while we will continue to deleverage. We target to invest on average at least NOK 1 billion annually in equity in new projects in this period, and we will continue to focus on selected markets where we see renewables fundamentally making sense and where we see that we have a strong position and we will also continue to build on our multi-technology skills where we're able to deploy hybrid projects.

I will say that we have good visibility on short-term growth, and we have the ability and we will continue to stay disciplined relative to our investment hurdles. We will also continue to deleverage our corporate balance sheet, and we aim to bring down our corporate debt to about NOK 4 billion by 2030.

And this will obviously increase our interest expenses and the burden on our balance sheet -- from our balance sheet significantly in this period. Finally, we stay committed to optimize our portfolio to become even more capital efficient, and we target to realize another NOK 3.4 billion in divestment proceeds in the period, and we will continue to optimize investment structures so that we can also capture value in an efficient way and use our capital in a very efficient way.

So then in terms of growth, our targets are backed by, as I've said, very good short-term visibility and a strong pipeline. We currently have 2 gigawatts under construction.

And in addition, we have a backlog of 3.4 gigawatts after we have added a project in Colombia and also battery projects in the Philippines, as I mentioned previously. So these backlog projects are expected to start construction over the next year.

And altogether with these projects, we will be able to more than double our capacity in operation to more than 9 gigawatts. Further, we have a large pipeline of 7.6 gigawatts of maturing quality projects.

And in addition, we also have a significant portfolio of early stage and greenfield opportunities that we are developing over time and that will also move into the pipeline as these ones are maturing. And we have not talked so much recently about the opportunities that we are working on because our main focus has been on conversion, conversion from pipeline to backlog and from backlog to construction.

But we have more than 10 gigawatts of also opportunity projects that have not yet been included in pipeline that we continue to work on. And to be clear, we will continue to focus on the markets where renewables fundamentally are competitive and where we see good opportunities to build scale over time.

And these markets are characterized by attractive solar and wind resources, obviously, a growing economy with sizable and growing energy demand and clear energy targets with stable and supportive regulatory environments for renewables. And our main regions are highlighted here on the map, and these are markets with some of the world's best solar irradiation and wind resources.

And we will continue focusing the main portion of our growth capital on existing markets, existing countries where we do already have strong positions. However, we also see value in having a diversified portfolio across different markets with strong potential for renewables, and we will invest in solid projects where the fundamentals are strong and where we see outlook for long-term growth and building scale over time.

So let me then address some of these markets and also shed some light on the opportunities to grow beyond what we have currently communicated as pipeline. So Egypt provides favorable conditions with its strategy to promote industrial decarbonization, energy security and to achieve 42% renewable energy in the generation mix by 2030.

And here, we continue to have discussions on new projects to support the government in reaching these targets. South Africa is offering attractive public tender rounds, which we have been successful in for many years.

And in addition, we do see a growing market for private offtake, and we are positioning ourselves here in the C&I segment through our Lyra platform, where we are developing this together with our partners, Stanlib and Standard Bank. And in South Africa, we are developing a broad greenfield portfolio of new projects that are not yet included in our pipeline to make sure that we are well positioned for opportunities also in the future.

The Philippines has a target of 35% electricity generation from renewable energy by 2030 and 50% by 2040. And today, they are only at 22%.

Together with our partner, Aboitiz, we develop a multi-technology pipeline to also address this market opportunity going forward. Then let me also mention Tunisia and Romania.

These are examples of relatively new growth countries for us with a very large potential. Here, we are more early stage.

We are building our development teams, and we are developing pipelines for capturing opportunities here on a long-term perspective. And all of these are examples.

Our pipeline includes only projects that are at least 50% likely to reach financial close and move into construction. But obviously, and to illustrate that here, we do have a significant volume of opportunities, which is coming behind this pipeline and will move into pipeline as they mature.

Then let me talk a bit about also our multi-technology approach. As I've said, we see that battery technology and the development within batteries is really a game changer for the industry, and Scatec is at the forefront of the development here.

So let me share some examples. First, in South Africa, we have Kenhardt, soon to be 2 years in operation, and this project is already showcasing how renewables can provide dispatchable and baseload power in a competitive manner with other technologies.

Second, also in South Africa, we have 2 battery storage projects that is enabling Eskom to unlock grid capacity at constrained points in the grid. Both were awarded in tenders and the first one, Mogobe is already in construction.

Third, we have the Philippines, where we have battery storage projects providing ancillary services to enhance grid stability. Here, we have 24 megawatts already in operation.

We have 56 megawatts in construction, and we have 80 megawatts that we have now moved into backlog, and we are also developing more projects together with Aboitiz supporting this going forward. And finally, we also have Egypt where we are constructing the hybrid Obelisk and Obelisk is building on the learnings and experience that we gained in Kenhardt.

And here, we are adding battery capacity to enable delivering more energy during the peak hours in the evening so that it more fits with the needs of the grid in Egypt. So these are examples, and it's just the beginning as we expect this development and our track record to unlock significant new opportunities going forward.

So let me then also, before I move on, emphasize that we will continue even in light of all of this growth to stay disciplined with regards to our investment hurdles as we pursue these new projects going forward. We have strict investment criteria, and we will only move forward with projects that are meeting these hurdles and our guardrails.

Our equity return hurdle continues to be 1.2x cost of equity for our projects. And our cost of equity is adjusted for the market and the country that we are in and is specific for the projects that we realize, and we are adjusting it amongst other for factors like country risk, FX risk and also offtaker risk.

And as an indication, the average equity IRR from our power production and services for projects under construction and backlog is in the range of 15%. And obviously, we also do construction for most of our projects.

And then we also get a significant uplift from both development fees and construction margins, increasing average equity IRRs to around 30% on a net equity basis. And on top of this, when projects are in operation, we will continue to seek ways of optimizing the value through, for instance, refinancing and also farming down equity in some of these projects.

So then -- we also then move to the second strategic priority. We will continue to deleverage and we target to bring the corporate debt level down to NOK 4 billion by 2030.

And we have already made good progress since last year, and we are reducing the debt. We have reduced the debt by about NOK 2.5 billion to NOK 6.7 billion during the year.

And already now, we start seeing the results of our efforts to strengthen the capital structure. The run rate of corporate interest expenses has significantly reduced, and this will reduce the burden on our corporate -- of the corporate debt on our free cash flows going forward, and this is important for us.

And further, the credit margin on our bonds, they have also been vastly reduced over the last 2 years. We issued our last bond at a credit margin of 350 basis points, and this one is now trading at an implied margin close to 250 basis points.

And this is -- and here, we have seen a significant improvement of our credit margins and debt costs only over the last couple of years. So strengthening the balance sheet and improving our financial flexibility will continue to remain a key priority for us going forward.

And then finally, in terms of financial flexibility, we target NOK 3.4 billion in additional divestments by 2030. We have shown good progress already in this area.

So this is on top of the NOK 2.6 billion that we have already realized. And thus, in the period from our strategy update last year and to 2030, we target to realize in total in the range of NOK 6 billion in divestment proceeds.

So we stay focused on capital recycling to fund further growth and also debt repayments. So let me then summarize.

Q3 was a very strong quarter for us. We had good financial results, but most importantly, we have seen very good progress on our growth activities, both in terms of construction progress, but also in terms of increasing our backlog.

And finally, during the quarter, obviously, we have also seen very good progress on reducing the corporate debt levels. Then we are also seeing a continued very positive development of the industry.

Component prices are at all-time low, and we continue to see new opportunities being emerged and delivered in terms of the very good ability of renewables now to compete with all other sources of energy generation. Renewables in our markets is now the most cost-efficient source of energy, not only on an intermittent basis, but also as dispatchable or baseload power.

And then based on these 2 very positive developments, we're very comfortable with increasing our growth rates. We are upping our growth rate to have a target to invest NOK 1 billion in new equity annually in the period until 2030 at the same time as we will bring down debt and continue to grow on a self-funded basis.

Thank you very much for your attention. And I think we will now open up for Q&A.

Daniel from ABG. So one question on the backlog and the new growth targets.

So based on the backlog you now have, how much of the new growth targets in the period towards 2030 would you say is already covered by that from your view? So that is my first question.

Well, I mean we are talking about NOK 1 billion in equity investments annually. And obviously, we are indicating a growth target and the backlog is represented in terms of gigawatts and megawatts, not in terms of money.

But I do believe that we have a significant portion of that growth target already in our backlog. I'm not going to come out with a precise percentage.

But as I said towards the end there, we are quite comfortable with the backlog that we are having, and we believe that we are now in a position where we can really be disciplined in terms of the hurdle rates and making sure that we only do investments that are meeting our hurdle rates.

Okay. Good.

Then I have a second question. I think you said last quarter that you are in advanced talks on potential deals.

So I don't know if you have any new comments on that this quarter versus last quarter.

Maybe you can check my outlook and see where I'm traveling, but no -- joke to the side. I think that still holds.

As Terje said before, doing 1 to 2 of these per year is time consuming and it's a lengthy process. So we are a bit cautious on coloring more, but advanced talks is fairly accurate.

And maybe a last one on Mendubim. Can you maybe add some color there in terms of lowered assumptions?

Yes. On Mendubim, we have new reports on the markets that we have procured.

And in these reports, we see that the expected curtailment levels are going to expand further into the future than what we had seen before. But we now also see that there are very concrete initiatives in Brazil in terms of improving the grid and making sure that the curtailment levels will come down over time.

But the impairment is based on seeing that curtailment will last a bit longer than what we had anticipated before based on new external reports.

I usually have a lot of questions, but today, everything was pretty clear. So that's good.

Could you just touch a bit upon the Philippines, ancillary services, you continue to say that you get a strong contribution there. And you also mentioned that new projects with dispatchable renewable energy will open up opportunities for doing ancillary services also in other markets.

Yes. Could you just elaborate a bit on that opportunity?

Yes. I think in the Philippines, you see what is being contributed by ancillary services.

And I don't think we'll start dissecting what's coming from batteries and what's coming from the hydropower plants. But clearly, the ancillary services volumes and prices in the Philippines has been very attractive over the last year, also with the opening up of the ancillary service market so that you both have contracted revenues and you have also more they had spot-related revenue.

So it gives a very good platform on the revenue levels in the Philippines. And we do see that this is a market that is going to increase going forward with further additions of renewables, intermittent renewables in the market.

So we believe that it's going to be an opportunity that's going to be there for some time that can be captured from also new volumes being brought into the market also from our side. In the other markets, I think we -- in most of the other markets that are more regulated than the Philippines, I think we will see to an increasing degree that the batteries will come as part of a hybrid project, where the project will offer a number of different services to the grid and to the grid operator, not only providing electricity, but also providing regulating power, and that is being part of sort of what you are selling in, in new projects going forward in these markets.

But -- so the situation will obviously be slightly different in regulated markets relative to deregulated markets. And then I think we also see in many of the markets where we are, the emergence of capacity or storage auctions and tenders and that this is becoming more and more an integrated part of how the regulators are thinking about developing the grids going forward, not only strengthening the grid, but also providing storage batteries to manage their regulating power and unlock grid points.

In terms of the expected returns on projects that are combined solar and battery, do you see kind of terms improving as in terms of when you just had solar stand-alone, say, 1.5 years when you started as CEO?

Yes. I'm not going to give you sort of a straight answer on that question.

I think we will -- on all our projects, we will continue to make sure that we meet our investment criteria, investment hurdles. Obviously, in markets where you are more exposed to different types of risks, we will seek to get a higher return than in the markets where sort of everything is contracted.

And in terms of -- you booked a lot of contingencies at Kenhardt because, of course, yes, you have those to be released? And you won't comment on contingencies coming, but could you say when the contingencies would come if there are any on the projects that you are now?

Well, I mean, in principle, contingencies will be released as you are comfortable with the risk of schedule and quality and everything on the construction coming down. So I mean, naturally, contingencies are more likely to be released towards the end of the project and then the project has been finished than during the construction of the project.

If you talk about EPC-related contingencies, obviously, which I think you are.

I have a couple of questions. Firstly, on the impairment in Brazil, what was the hurdle rate used in the impairment testing?

Well, I don't think we have talked loudly about it. I'd rather rephrase saying based on the external report on long-term assumptions, it was difficult for us to defend the value.

So we thought we were more better off long term also doing this impairment now, basically. And I could segue into compensating measures and so on, but your direct question, we're not answering that specifically.

But we have done an extensive review of all our assets, and we did an impairment in Mendubim particularly.

Okay. And -- but will we find it in the annual report?

A comment on...

Hurdle rates for impairment testing being a CDU?

I can't recall us going into that level of detail, but Andreas and I can check it off and basically -- and back to you.

Okay. And how much of the asset was impaired?

Or what was the gross value of the asset prior to the impairment?

[indiscernible].

25% of the gross assets. Okay.

Thank you. And my second question is, it seems to me that you probably had some headwind on currency in the third quarter because of the strengthening of the NOK against a lot of these currencies that you have assets in.

Did that have any material impact on the results from power production in the third quarter?

No is the short answer.

Because it's hedged and everything is.

Yes. Nothing significant -- commented on it.

Okay. And my last question is when will we see Scatec do projects only relying on, say, market or spot prices?

I appreciate that you might do long-term contracts, but are we there that you will pursue projects, which is basically selling into a well-functioning market without any sort of subsidies and initiate that kind of projects?

Well, I mean, we are already doing it in the Philippines, I mean, with our battery projects in the Philippines. So we are doing it.

The -- and this obviously is very much linked to the overall model on how we realize the projects. If you do something which is very much based on merchant or you have shorter-term contracts or you don't have contracts for 100%, then your leverage in the project will go down and you have to carry more of sort of the CapEx through the equity that you inject into the project.

So I mean, it depends also on how we want to realize projects and how we think about being capital efficient in the way we move forward. In the Philippines, we can still get project financing on a merchant basis based on the large portfolio that we already have there.

So there, we have a very, very good advantage from that point of view. But I think -- I mean, as we move into other markets where more of the offtake is related to corporate PPAs, maybe some contracts for differences, other type of structures, you will maybe see that a portion of the project might be exposed to more merchants, like, for instance, we already have in Mendubim, where about 60% to 65% of the project is selling on a contract to Alunorte, while the rest is being sold into the market on short to medium-term contracts.

So I think it's not sort of -- it's not black or white. We want to see it as a transition in most of the markets where we are.

But you still have a preference for longer-term coverage because of the leverage you will be able to obtain.

Yes. And I think it's incredibly important.

I mean things are changing now with the technology of the industry where you can combine and you can provide more baseload, you can provide merit, you can also provide some flexibility based on renewables in hybrid structures. But obviously, we are not going to take on a type of risk that we don't feel that we can manage, right?

You will never go in and sell a pure solar project into a merchant market because you know there might be low prices during the day if there's over implementation of solar and then you want to be stuck there having to take low prices. So you need to sort of put yourself and your projects into a position where you control the risk and you have the flexibility you need if you're going to be taking merchant risk.

A quick follow-up on kind of those merchant projects because looking from the outside on the eastern parts of Europe, say, Romania, for instance, if you're allowed to connect the Chinese battery to the grid, it looks like a completely no-brainer. In terms of kind of the payback times you see on average day ahead prices.

I mean the spread is multiple, multiple times of what you need to break even. Number one, do you see the possibility of getting those grid connections for stand-alone battery projects in the eastern parts of Europe?

And number two, do they accept Chinese equipment, full turnkey projects?

Well, I think on the first one, yes, we do see those opportunities in certain markets in Europe and also certain other markets. Obviously, it's about sort of -- it's about timing.

It's about when you can get the grid connection and then you can get the project installed in terms of limitations on Chinese equipment. It is not about Europe itself in terms of there is a limitation or not, but it's more about what financing institutions are you working together with and what will those financing institutions accept to fund in terms of Chinese equipment.

But I don't see, in general, a limitation of bringing Chinese equipment into Europe.

Work with Chinese financing institutions on SPD level?

You could, but I think we see -- we probably see other more attractive financing alternatives and working with the Chinese, which is mainly vendor financing, which we don't think is that interesting.

So we should not be surprised if we see stand-alone battery projects in the Eastern parts of Europe?

No, I don't think you should be surprised.

Well, I mean, our scope has been expanded in the sense that we now look towards 2030. But in terms of what we are considering for divestments, farm-downs and capital recycling, the scope is still the same.

And we will continue to look at divestments in markets where we don't see continued attractive growth opportunities. But we will also look at farm-downs, recycling capital in some of our larger markets where we may think it makes sense to recycle the capital and invest into new opportunities.

So that still remains the same.

It's covered in the report, and we specifically say that we have no grounds to speculate. We have done the impairment assessment of all assets, and it's only Mendubim.

This is also partly due to contract structures, counterparties and geographical location.

Thank you.