Cloudberry Clean Energy ASA

OSE:CLOUD

Earnings Call Transcript

[Anders Lenborg, executive]

Hi, everyone, and welcome to Cloudberry Clean Energy's Fourth Quarter 2024 Presentation. My name is Anders Lenborg, and I'm joined by our CFO, Ole-Kristofer Bragnes, and we will go through a presentation. And please use the Q&A button to post your questions and we will, after the presentation, try to answer as many as possible. But before we get there, I will take you through the highlights and an introduction to Cloudberry before Ole-Kristofer takes you through the key financials, and we will also finish with some comments on the market and price curve going forward.

So the highlights for last quarter. I think the main highlights is connected to our increase in production. We have managed to increase our production portfolio with more than 160 GWh in production in Denmark, but we have also increased our development portfolio, our backlog with exclusive projects, both in Norway, but also in Sweden with 200 MW and also in Denmark, where we have now a development team and an asset management team in place and interesting portfolio of wind and solar and storage projects.

Here on the right-hand side, you can see our increase in production over the last years and also the increase of installed capacity. Ole-Kristofer will take you through the numbers more in detail afterwards. But before we get there, let me give you a short introduction to Cloudberry. We have built a renewable platform, independent power producer in the Nordics. We have focused on the Nordic markets. And we have also built a platform where we can take the projects from early phase greenfield projects to brownfield production asset and also manage our assets. So we are following the full life cycle of our renewable projects.

We have focused on proven technologies. So in our energy mix, we have hydropower, wind power, and we have also now solar and storage projects. And this project portfolio, where we do have over 30 exclusive projects, we are working on getting them into permitting phase and ready to build and also to have a large production portfolio. So over the last years, we have managed to build a production portfolio of more than 1 TWh, more than 1,000 GWh that's currently giving the company long-term cash flow.

And we have focused on certain price areas in the Nordic. We have focused on the 7 price areas where you have interconnectors. So historically, we have focused on where we saw the demand coming and also where we had the interconnector connecting them to the continent and the U.K. Over the last years, we have also started to focus more on where we see the new industries coming, where we see the demand from the data centers. We see the new demand from Power-to-X projects, storage battery facilities and so forth. So we will continue doing more of this.

And I think the key takeaway from this slide is the flexibility. We have a flexibility now to focus on where we see the best returns. It could be wind, it could be solar, storage in different countries and different price areas. So the flexibility is something that we're going to continue to focus on also in the future. So getting a bit more into the details. This is the production portfolio. This is the assets that we have in production. We have had a great access to new projects, and we have been able to move the project into production.

And with this production portfolio, we have also managed to diversify it on different technologies. So we have a very stable production profile throughout the year. So wind is producing better in the winter, hydro producing better in the summer and now also adding battery and storage projects, hybrid projects, we will even have a more stable production profile throughout the year. So this is the production portfolio.

At the same time, as we have built this, we have also built a development portfolio. So here, you see our backlog and permitted projects. And this is our bank where we can take new projects, move them forward and get them into production or as you see here on the right-hand side, we have managed also to divest or sell some of our assets to finance new projects. So over the 3 last years, we have realized more than NOK 500 million in gains from internal developed projects.

And this, you will also see going forward that we will focus on recycling and building a portfolio where we can see both that we will keep some of the projects, but we will also divest or sell some of the projects.

Here is some examples on how we build more value. So I touched upon the Danish expansion. Important here is to also see how we use both our cash and our share to secure new production and new development assets. And in this case, we are also using the share and on 50% premium printing shares to finance the transaction.

Also on the hydro side, we see that we create a lot of value when we develop the hydropower plants and then sell them at 2x book value when they are up and running. [indiscernible] is our very interesting large project in Denmark, where we will have a hybrid project where we will both have solar. We are working on the wind permitting as we speak and also a BESS project, making this a great mix, and we have also managed to increase the project from 175 MW to 232 MW.

Holmen being one of the largest grid landowners in Sweden, we have touched upon before, a super interesting cooperation with the large forest owner in Sweden. Dingelsundet is a project that we will come back to. It's a battery storage project in SE3, where we have a grid connection of 100 MW, and we have now developed a battery project together with the Utility of Oslo. Going forward, I think our strategy is working. You will see more of the same.

We are very well positioned in the Nordics. We have a network. We have all the contacts. We will put the profitability over growth. We will do recycling to finance new projects. So you will see more of that coming. But it's super important for us to stay fully financed and to have a solid balance sheet to do the things that we do. We have a 90% merchant exposure. So this is important for us to have cash and to have the ability to also draw more on the facility that we have with the banks. On the right-hand side here, you see a little more in detail where we focus and what kind of technology we're focusing on in the different areas.

On the ESG side, we have had no incidents over the last quarter, and we have also managed to increase our avoided emissions with new projects coming into production. So I think with that introduction, I will give the word to Ole-Kristofer, and he will take you through the numbers in detail. Thank you.

[Ole-Kristofer Bragnes, executive]

Thank you so much, Anders. My name is Ole-Kristofer Bragnes. I'm the CFO of Cloudberry and happy to take you through the financial results of this quarter and the financial history of Cloudberry up to date. So starting out here, we see the development of our balance sheet. Cloudberry listed in 2020. And as you see in the portfolio development, like Anders said, with the production increasing, you've also see our balance sheet increasing accretively from 2020 up until we report now in '24.

So we raised approximately above NOK 300 million in equity -- NOK 3 billion in equity over this period at increasing prices and doing accretive expansions and also now raising almost above NOK 500 million at NOK 17 per share of the 50% premium to finance our new expansion. So we have grown this accretively, but also, of course, having focus on capital discipline. So you see our assets have grown in relation to debt. We've been strongly financed. We're able to stay merchant for -- in our power price over this period of time. And we also see that in the numbers it has developed in the P&L.

Looking at our '24 financials, zooming in on our balance sheet. We see we have growth in our assets and equity. We are happy to report an equity ratio of 68%, having a strong balance sheet as we progress into '25 with a strong cash position of almost NOK 900 million in consolidated or above NOK 900 million when you take into our associated companies in our proportionate cash position.

Our debt is still conservative in relation to our total asset size, and we have continuously hedged our debt exposure throughout -- as we have grown it. So we have 80% of our proportionate interest-bearing debt fixed at long-term agreements at an all-in rate of below 4%, which we are very happy to see. As Anders mentioned, we have the debt facility in place of NOK 2.2 billion with the local savings bank, where we have a great relationship, and we have almost NOK 600 million or approximately NOK 600 million of available in the debt facility that we can draw on, and we will draw some of the transaction that we have just done, but we'll see this on the next slide here, where we jump into -- sorry, where we jump into the liquidity and commitments overview for -- so we start out with slightly north of NOK 900 million in cash.

We have our CapEx that we have commitments on of the remaining CapEx amounts of Sundby and Munkhyttan, which are the 2 wind farms that we have now completed. And of course, the net liquidity effect from the Skovgaard acquisition, which Anders touched upon, the 160 GWh increase in production in Denmark and also Norway in addition to increasing our development capabilities and asset management. That is predominantly financed through an equity raise, but also through a small portion in the cash balance.

We also have financed Kvemma, 100% in equity. So we'll draw the debt on that, about approximately 50% of our CapEx. And that leaves up with north of NOK 800 million of liquidity, which we'll use to be able to grow our platform. As mentioned, we still have available room in our debt facility, and we'll draw approximately NOK 400 million of the NOK 500 million we have available after drawn the debt from that. We have an accordion in place of around NOK 300 million, which will -- which we can increase the debt facility with, and we also have a very strong relationship with the banks in order to investigate how we should think about the facility or if we should increase that further.

Moving into the P&L side, we see the same story as we've done on the balance sheet. Starting in 2020 up until '24, we have significantly increased our production volumes, which is one of the main drivers for our profitability, selling the power, mostly at merchant exposure. At the same time, we've also done accretive capital recycling, which is a very important driver for the profitability in Cloudberry and of course, something that you will see us continue doing. We have in '22, we did the internal sale of [ Holm ] showing the value creation of the development segment, where you see the difference in the consolidated portion of EBITDA being explained by that.

In '23, we did an external sale of the hydro assets, which was yielded significant results. And now in '24, we have the internal sale of Sundby and Munkhyttan, which we'll touch upon here in a second, showcasing the value in our development segment, but also done an accretive sale on the hydro side where we did an asset swap selling in northern price regions and increasing our hydro exposure in the southern regions while also increasing our liquidity and showcasing the asset values. So all in all, great growth in profitability for time of listing up until today.

Looking then at just the Q4 results, there's a few items here to note. The first one is, of course, we have a strong growth in profitability quarter-on-quarter on the back of the value creation in the project segment, but also power-related revenues increasing. You'll see that very clear in the proportionate key figures where you also see the NOK 113 million in gain from the internal sale of Munkhyttan and Sundby at third-party valuation when we -- when these assets are completed, we're then realizing the development gain, which is approximately slightly above NOK 2 million per MW or then the NOK 130 million in gain.

And that's the main explanation for the difference between proportionate figure and consolidated figures where this has been eliminated. And we've spent more time on that in the Q4 '23 results, but looking at the consolidated key figures on the left-hand side here, the increase from the negative EBITDA to the positive SEK 58 million is mainly explained by the actions that happened in Q4 '23, where we wrote down all our offshore activities. We stopped that and that predominantly in the Stenkalles project that's -- and also a noncash deferred tax expense in Odal, which relates to the implementation of the resource rent tax.

So that's the reason why that's in the negatives and explains some of the difference and the jump from Q4 '22 to Q4 '24 and also explains the drop in revenue from the same period of time in Q4 '23 that relates to the impairment, but more on that in the Q4 '23 report if of interest.

Moving on in our segment financials -- Moving on to the segment financials. We start out with the project segment. You can read more about all the segment reporting in our report, but just to highlight some of the actions here. The main one in the project segment is, of course, driving the project forward in order to realize the value created in them, and you'll only see them in the financials when we do either an internal and external sales. We talked about this in the previous quarters.

And now for this quarter, we showcased this through the internal sale of Munkhyttan and Sundby. Yes, this is an internal sale, but we have engaged a third-party valuation expert on this, and that's the enterprise value we sell these at yielding a gain of NOK 130 million or NOK 2 million per MW for this quarter. And relating back to the slide Anders has shown, this is not the first time we've done this. We have highlighted over NOK 500 million in gain in the project segment. But of course, when there's no realizations there, you'll see only the cost and development expenditures going forward. But this will be lumpy by nature and the clear value drivers there are progressing the project forward and moving them either towards permit or permit to COD or either in internal or external sale as they produce.

We have also, over the quarter, increased our Nees Hede project, a clear value driver, but also increased the backlog and have now increased it from last Q3 '24 with 200 megawatts of new project in SE3. And it clearly shows our growing brand presence in the region, especially in SE3, but now also in Denmark, where we will have a strong presence with a partnership with Skovgaard.

The Asset Management segment, again, touching upon the synergies we'll see through acquiring the technically oriented asset management team from Skovgaard. These are clearly compatible to the team we have here in Norway, and we'll be excited to see how that progress in the future. Our Corporate segment, just good to note there that -- we have a flat development of Q4 '23 to Q4 '24, but the Q4 '24 or this quarter's financial is affected by one-off expense of a negative NOK 6 million in transaction costs. So eliminating that one will see more of a flat cost base in relation to Q3 '24.

Jumping into the commercial segment, which we didn't touch upon on the last one. This is where we have our power sales or any value creation that's done in producing assets. Starting out on the right-hand side here on the LTM figures. We talked about this in the previous quarters, but just to highlight it again, we have -- we did a sale of hydro assets in both '23 and '24, albeit the '23 one was a larger transaction in terms of nominal terms. So that was NOK 258 million, again, 2x the book value of the assets we sold compared to the gain now we had in Q2 '24 of NOK 109 million, but 2.3x book value of the assets sold.

Eliminating this will have a -- we have a growth in year-on-year in our commercial segment. Diving in just into the quarter, we have increased our production from 157 GWh to 213 GWh. That is predominantly through our wind increasing with Odal now ramping up in production. We're happy to see that we have 30 turbines that has passed returned to service at year-end and production will continue to undergo our ramp-up as we -- throughout '25 as final repairs and inspection have been completed.

And we do over the quarter, realized net power price of NOK 0.59 per kWh, slightly lower than what we had last year, but this is, of course, driven by the macro environment at this quarter. And when we compare this to the Nordic system price, which is a theoretical average of the power price in the Nordic region of NOK 0.36 per kWh. So this clearly showcase our favorable portfolio composition where we are located in the southern price areas, as Anders talked about in the beginning of his presentation, close to the interconnectors. Yes, and the drop in revenue and EBITDA quarter-on-quarter is then, of course, explained by the lower realized prices, but then again, increased production volumes.

And I'll leave the word there to you, Anders, to follow up with market summary and closing remarks.

[Anders Lenborg, executive]

Thank you, Ole-Kristofer, and thank you for taking us through the numbers. Just a short comment on the market and power price curves. As you know, we don't use any internal resources on the power price. We have 2 different power price curves that we use in our work here in Cloudberry. One of them you see here, it's the value Nordic system price estimate. And as Ole-Kristofer just mentioned, we have delivered above the system price due to the composition of our portfolio of producing assets that is spot exposed, but we have also a small 10%-ish with PPAs in the mix.

So we will continue to look for offtake agreements on attractive levels and maybe increase the fixed price a little bit up over the year if we see the prices are on a level that we think it's accretive for us. But here, we have delivered last quarter above -- 60% above the system price, which we are very happy with. And that is also the part of the historic picture on Cloudberry that we are delivering power prices above the system price.

So to sum it up, we are perfectly positioned for the renewable energy transition. We have a fully developed platform where we can take projects from early phase into production with proven technology. We have a network, and we have a lot of exciting opportunities where we see that we have positioned us in the right price areas when it comes to the new industry, when it comes to data centers and increased demand for renewable power. And we also see that the power price and other price initiatives are going to contribute to a positive development also in the future.

So with that, I'm saying thank you for following us under the presentation. And we will now try to answer some of the questions that have been coming in during the presentation.

[Ole-Kristofer Bragnes, executive]

Yes. I can start. There's just a few more technical questions, I guess. The first one is related to the purchase price for Odin and how that relates to our first acquisition. When we talk about the new -- if we talk about the acquisition we've just done, that has been conducted as we told in the press release. The valuation there has been done by third-party specialists as well. So in nominal terms, the purchase price is lower than when we acquired it the last time and the valuation that has been done now is based upon the discount rates and power price curves and so forth. But nominal terms, a lower rate.

We're also getting some questions about the discount rate from the Sundby and Munkhyttan. I can't unfortunately talk about what the rates they have done as this is done by a third party, but it is based on their best knowledge in relation to comparable transactions but also what they see in the market and risk-free rates and so forth at the relevant market. So calculated through a typical CAPM WACC model. Those were the 2 more technical questions I had. Did you have one for you as well, Anders?

[Anders Lenborg, executive]

Thank you, Ole-Kristofer. Just one more question that I would like to address. The question is concerning the Odal Wind Farm. And yes, we have a great dialogue with Siemens Gamesa on the guarantee work. So it is continuing now after the winter break. We will continue to work on getting all the turbines in production before the summer. It will be according to Siemens Gamesa, 33 out of 34 will be ready to service during February. And it will take some more months to get the last turbine in production. We also have a dialogue on the guarantee issues and repair issues with Siemens Gamesa.

And as you remember, we have already received the compensation last year, summer 2024. So we will soon, I hope to be able to give you an update on the total situation, both on the repair and the guarantee issues and the continued cooperation with Siemens Gamesa. But it's work in progress, and I think we will get back to this in more detail next quarter. One more...

[Ole-Kristofer Bragnes, executive]

Just one more question that I received. And that relates to why -- or if you can give some more color on why Skovgaard paid NOK 17 per share and why that's such a big premium?

And that kind of goes back to the beginning of this transaction and how the relationship with Skovgaard had developed. We initially acquired the Odin assets from Skovgaard, but we know them for many years back and talked about how we should think of more of a combined IPP. So we started out there, but we started just acquiring 80% of its producing assets. And after that, we see that the culture aligned very well with Skovgaard. We see that we think very similar about the energy transition and how that moves forward.

So the discussion started up again that we should combine all our, call it, producing power assets into Cloudberry and he is focused more towards Power-to-X. But the foundation of that discussion was based upon that his assets shouldn't be valued anything else than what we are -- how -- or we would have to value his assets the same way we would value our assets, and that doesn't relate to the share price at present. You see that through the transaction multiples and where assets are currently being sold as we saw just this summer of our hydro assets.

So we started mapping out that discussion that his assets should be valued the same as ours. And in the end, we ended up hiring an external auditor who did the valuation on both sides on the same funding principles. And through negotiation that ended up with NOK 17 per share on Cloudberry side and the values that we reported for the acquisition on Skovgaard side. So that was -- just a short answer, that was the basis for discussion that we need to value our producing assets the same way.

And for that, I don't think we'll have any more questions. So thank you, everyone, for participating, and we'll talk soon.