Photon Energy NV

WSE:PEN

Earnings Call Transcript 2021-Q2

[Georg Hotar, executive]

Good morning. Welcome to the second quarter and first half 2021 financial results presentation of the Photon Energy Group. We'll be presenting to you -- I'll be presenting to you together with our CEO, Clemens Wohlmuth.

[Clemens Wohlmuth, executive]

Good morning.

[Georg Hotar, executive]

Good morning. Thank you very much for finding the time. And today, we will start off with a brief overview of our business model, particularly to those investors who are new to our call which after the CapEx increase, we believe there are some among you. We will also briefly touch on the strategic partnerships that are important for our further development. We'll talk briefly about strategy and outlook, and Clemens will run you through the financials, both for the second quarter and the first half of 2021. So on the business model, Photon Energy is a company that we established in 2008. We are a company headquartered in the Netherlands with activities in more than 10 countries. And we have grown our headcount to over 140 employees worldwide. We are -- our shares are publicly traded on the regulated market in Warsaw, the regulated market in the Czech Republic and Prague Stock Exchange and the open market of the Frankfurt Stock Exchange and linked to that also on some of the regional exchanges in Germany where we have also -- our corporate bond is traded on the Frankfurt Stock Exchange and the regional exchanges. One of the milestones that we implemented in the second quarter of this year is that we have completed the process of obtaining a sustainability rating in cooperation with the German certification company [ Emoch ], given our line of business or our 2 lines of business, energy and water. Of course, sustainability is at the core of what we do and getting this rating is a logical step. And of course, it's also very important in our communication with capital markets, but also will play a significant role in our further financing activities, both on the equity and the debt side. Just a few key points on our solar business line. So we have so far built over 110 megawatts, the majority of which for our proprietary portfolio, which currently stands at 89.3 megawatts after the commissioning of our 2 plants in Australia with a combined installed capacity of 14.6 megawatts-peak. In our order division, we take care of over 300 megawatts of power plants. That includes, of course, our proprietary portfolio, but also external customers and a key activity, more a bit later, is project development. So our project pipeline currently stands at almost 550 megawatts. And in terms of electricity production from our portfolio in 2020, we generated over 70 gigawatt hours at this year. With increased capacity, we will exceed the 100-gigawatt mark -- gigawatt hour mark materially. On the water business line, we have several activities where on the main management side, we currently manage around 600 hectares. We have so far for our water utility clients conclude projects with -- for over 3,500 meters of wells where we drilled new ones or we regenerated old ones. And then, of course, we have our patent-pending groundwater remediation technology, which we have already applied for various types of contaminants, but the most promising area is remediating PFAS contamination where we had a pilot project running in Australia. Again, more in that little bit later. So looking at our business model. On the solar side, from the very beginning of our activities, we've always focused on covering the entire life cycle of PV plants, looking at financially covering the entire value chain of PV projects/power plants. So at the beginning of everything is always project development, which in the markets where we operate we organize in-house. So we're always trying to develop projects from scratch ourselves, but we also cooperate with external developers with whom we typically team up at various stages of the project development, bringing to the rate to build stage and then takeover those projects to be built and added to our proprietary portfolio. We are also providing EPC solutions. This has been mainly concentrated in the Australian market in recent years where we have concluded several on grid, but also off-grid installations, which also include battery storage solutions. Our goal, that it's already happening this year, but particularly in the next several years, we want to be more involved in providing external EPC solutions to corporate clients in particular. In our technology business, we are leveraging our procurement process for the construction of our PV -- home PV plants and EPC business. And we sell key components, which is modules, inverters historically, but this year we've also been adding battery components and that will probably get further expanded. And we're also in the process of adding mounting structure, particularly structures particularly for rooftop installations. They are our client-based installation companies that typically serve customers that are below our focus. So as mentioned above, we typically start rushing kilowatts, particularly for rooftops. So most of our installation clients serve customers that are -- that require small installations than that. In this area, we're currently working on launching a B2B web shop, which we expect to launch at the beginning of the fourth quarter, which should further ultimate processes and then, of course, increase our business. It is a very important business line, not only because it makes money, but also it keeps us in constant contract and maybe the constant off-take as in customers of the component suppliers, which talking about modules are among the top 5 manufacturers in the world. So we are a more attractive customer for them as we are not on the bank specifically under the project, but on a constant basis. Then, of course, very important is investments on the back of our project development and our approach is that we only invest into power plants that we have did built ourselves. So we are very strongly focused on building power plants designed and built with the best available technology at the time. And as our investment horizon is essentially forever, we are trying to make sure that these power plants will operate smoothly for the 25 years to 30 years as expected. So our strategy is not to buy existing assets from other developers, but at the same time, unless we exit the market and geographic market, we also love selling existing power plants. This may become an option if our project development churns out more than our own financing capacity announce. So given the progress we are making, particularly in some of the Central European markets, it may become a feature, but the core is always to keep adding and growing our proprietary portfolio and generate the recurring revenue streams from operating PV assets. Last and definitely not least is operations and maintenance, which again is of utmost importance for us to ensure that our assets operate most efficiently and generate -- and meet or ideally exceed the forecast production to maximize uptime that we repair problems as quickly as possible, but again this is an area which we are leveraging to external customers. And with 12 years experience in this field, we see a lot of growth opportunities, particularly in the region of Central Eastern Europe, where in some of the markets that have recently started or are now restarting growth in the installed capacity, we are among the very few experienced O&M providers with a track record with our monitoring software. And again, the ability to really provide with in-house expertise, complete super services to ensure maximum performance of the assets owned by our customers. Moving on to our water business, which we have been developing over the last 4 years. We are involved in providing water treatment solutions for various types of settings, so for providing drinking water, but also to prepare water for technical use of corporate customers. The next area is wells and resources where our customers are primarily water utilities. And there again, a major, major focus is on wells, where can we providing services across the life cycle of foot wells from drilling new ones, regeneration after typically 25 to 40 years of use, and in some cases also decommissioning. The next area is water resource management, which focuses on surface waters and like lakes and ponds. And there, we have a particular focus on providing solutions as a service to fight blue, green algae bloom which rise in temperatures during summer has become an issue globally and has negative impact on the use of surface waters for rational use, but it also poses challenges or rather is poisonous where water is used for as drinking water. So there our customers are water utilities, but there are the authorities or there are municipalities that are in charge of water partners. Our approach is we want to provide solutions. We've been trying to combine external technology or sometimes external components, but in order to be able to provide end-to-end solutions, we of course need to do some research and development. And one of the areas where which has gotten a lot of attention in -- on our R&D is remediation, where we have our own proprietary and now patent pending technology to remediate groundwater. We have done several projects in those 4 years for various types of canal contamination. But the big one was -- or the most promising is in the area of PFAS chemical contamination. The market that is most advanced in addressing the threat from PFAS chemicals is Australia. So the regulatory framework there is the most strict. And this is also the market where we have a pilot project at the moment. But we are in a situation where we have a technology that obviously works on various contaminants. And after having been informed by our colleagues in Australia some 2.5 years ago about the issue of PFAS and regulatory response, we conducted several hundreds of reactor tests, which proved that in the reactor setting we can break down PFAS chemicals and at the moment there is no technologies can break down these chemicals, which are very stable, don't degrade in nature, sometimes also referred to as the forever chemicals. And we so we've had very encouraging results. And last year, we signed an agreement with the Australian Department of Defense. And in one of the Air Force bases, Jervis Bay, we signed an agreement to decontaminate the entire land, but currently still in the pilot phase and we should inject the reactive material in the next couple of weeks and expect results within a few months from that onward. This is a highly visible project in the global remediation industry and we believe that those results will be positive and will open the doors for hopefully, the full project in Jervis Bay, but an additional project with the Department of Defense in Australia -- in Australian market where we have already identified several other project opportunities. But PFAS contamination is a global problem. The second most developed markets in terms of regulatory framework is North America, but also in Europe we see the EU Commission has also -- national regulatory department is waking up to this issue. And for example, the Netherlands and Denmark are at the moment the forefront. So those will be project opportunities in Europe over time. And of course, we are in working on some of them. To conclude this section, again just a quick overview of our footprint. So we're headquartered in Amsterdam, but most of our activities take place in the 4 [ issue-bred ] countries plus Romania. But for some of our services, we have customers all over Continental Europe. And as mentioned before, our current pipeline is almost 550 megawatts. More some of it in Australia and the rest spread across Hungary, Poland and Romania. And we also see some action now in the Czech market. And we also believe that this [ little ] market at some point will again become more attractive for solar investments. So our electricity production portfolio consists of 11 plants in the Czech Republic, where we have 15 megawatts of installed capacity. Those plants were built in 2009 and '10. We have 10.5 megawatts in Slovakia. Those plants opened in 2010 and '11. And over the last 3 years, we built 49.1 megawatts in Hungary and with 3 installations in Australia with a total of 14.7 megawatts. And in the area of O&M, we stand above 300 megawatts and that is -- that includes full-service O&M, but we're also providing specialized technical services for PV inverters across Europe. We have whole monitoring software and we're constantly trying to adapt to the needs of our customers, but I think new services and features. Just briefly at this -- on our strategic corporation, so that we have made a minority investment in [ NAFTA ], which is a Polish company that started out as a developer of software that can run and operate a virtual power plant. And on the back of the last financing round, have now -- are going to the direction of operating in the energy market. They've really gained access to become a player in the capacity market in Poland, which in the region is the most developed, but they're also working on energy trading licenses in Poland, but in close cooperation with us also in the process of entering the Hungarian and Romanian markets possibly and also the other 2 in the region where we operate. And our goal is to cooperate very closely in accessing the energy market and in that providing us also with balancing services for our growing portfolio across the region. So plus we are also cooperating on development of behind-the-meter solutions where we installed PV equipment on warehouses, factories or near them and provide a couple [ takers ] with electricity. And these plants are ultimately also grid connected and that's typically also an ex production, it goes to the grid, which needs to be handled by a licensed trader. So there are various levels of corporation. And this is a very, very important model investment, but also strategic partnership for the implementation of our business model. And the second investment that we've made initially in April 2020 and we also not participating in the following financing round is RayGen Technologies in Australia. And so this is -- as our business model is purely in the downstream side, this is our first foray and investment on the upstream side of the total solar value chain. What is -- what got us to do that is that the RayGen is the first company operating some development technologies in the areas of concentrated solar, have managed to combine concentrated solar as is steadily known with PV production. So what is new is that they have managed to develop a PV cell that can be placed in the receiver. That means in a place where the reflection from the mirror field is reflected. So it can be placed there. The cells we spent high temperatures, we're talking about 70 to 750.0 degrees Celsius. So that some line can be used twice. So it's used instantly to produce electricity through those cells, but as in traditional concentrated solar projects, the heat is also captured. And the other innovation is the thermal hydro storage system where the heat is channeled and concentrated in a hyper insulated hot water pool, whereas the electricity has been produced through the PV cells is used to run chillers that cool water in the second high ventilated pool. So the -- in the cold pool, the water temperature is around 5 degrees Celsius, whereas in the hot pool it's kept just above the boiling point in 1995. And then when electricity is needed from a difference an organic ranking cycle engine, which is essentially a low-pressure steam turbine, electricity is produced. And this system come around in an island setting. So for example, we provide electricity to a more location like a mine or, I don't know, the village, but it also works, of course, connected to the grid and can also provide grid support services on top of the electricity. This system is highly efficient and it allows to store energy for extended period of times. One of the limitations of batteries is that both technically, also financially, they still do not make sense whenever the production -- or the consumption of the supply needs to be shifted by more than 4 to 5 hours. Here, we can, with minimal losses, store to the energy even for weeks and months. But definitely in 24 hours, I think this is a very efficient solution. And what we do see more and more looking at the pricing curves, in Australia, but also other markets and also in Central Europe is that the duck -- the so-called duck curve is becoming ever more visible that means that electricity prices are high in the morning and the evening and relatively low during the day as the share of renewable generating assets in the network grows. And that mostly from coming from solar. Solar on a sunny day produces most around mid-day. So historically, Poland is actually -- the Polish market now is a very good example where until 6 months ago, there was still a premium price during the day around mid-day. That premium has disappeared very, very slowly. We are moving into the direction where some of the Western European energy markets already are today that energy prices are actually lowest at the time. There's a lot of renewable energy enters the grid. Therefore, electricity in the morning, in the evening, ours is much more valuable. And in Australia, that is also very, very visible, sometimes they're actually in negative prices during the day at very high prices in the morning and evening. So this technology will allow to operate very efficiently in a situation where we produce during the day, store the energy and then supply when the prices are the highest. But the system is also capable of turning, if that's what's requested, the intermittent production from solar into 24 hours data baseload. So it provides at a very cost-competitive level energy when it is needed most and when it's most valuable. From now on, we have decided that all our project development in Australia will be for projects using the region technology, and we're also looking at other markets. And as the components become cheaper and actually, energy prices are growing and the duck curve is becoming more pronounced also in Central European region where we operate, we may also start developing projects for this technology in the next couple of years. Looking ahead, and go through our strategy. The cornerstone has always been and will continue being expanding our portfolio of power plants by developing those projects in-house with maximum control. So we're not dependent on buying projects that others have developed. They're often for technical solutions that we don't want to employ. And I think here, we're currently in a situation where, yes, particularly based on this -- on the change in the pricing structure, it is obvious that signal access tracking is the way to go because we are getting a -- from signal access tracking we're getting a, first of all, higher specific production, but significantly higher production in the morning and the evening hours and will evenly spread throughout the day. So as duck curve becomes more pronounced, our -- or the production profile from signal access tracking is going to be much more valuable. And we see that in some markets and actually, Poland is a prime example, pretty much all the development that's happening at this point in time is for fixed technology. So it's very difficult for us to actually go out and acquire projects. And this is why the focus at the moment is very much on developing in-house with the technical solution that we want to deploy going forward. And of course, we are developing all our projects also in the other markets on tracking technology. So this connection between development and then the implementation of the investment, having that all in an integrated process is definitely a key strategic advantage. As mentioned before, we want to develop our EPC activities going forward in those areas where the -- we can turn our expertise into adequate margins. EPC of traditional PV plants has, in many markets, become a commodity. And so it's rather difficult to generate margins that justify the risk that stemming from markets we have to provide. So we are trying to this business in those areas where we can we face smaller competition in less of a commodity. And of course, going forward, it's more and more hybrid installations, including storage, where we have our expertise, where we have very good references particularly from Australia. And that's the area where we want to want to grow. On the back of our own investments and the expansion of our portfolio, I think here we should repeat our very communicative strategic goal to expand our portfolio from the current 89 megawatts to 600 megawatts by the end of 2024. And so that would also drive, of course, our O&M business just on the back of our portfolio development. We of course, are working hard on making progress in winning external customers. But of course there was EPC customers in the majority of cases, we will provide with O&M services. And to conclude, and as I mentioned before, we are now investing also into our technology distribution business as we believe that with a very dynamically growing installation volumes in the markets where we operate as significant growth potentially in providing the technology that the installation companies require. In the water business, remediation is definitely the one area that where we have the highest potential to scale quickly. And that includes, of course, PFAS, which has a global application. But as I mentioned before, our technology works for various types of contaminants. And also there, we are chasing additional projects and essentially using the same technology. So there are of course protection there, of course also in the other segments, we believe that the -- and we see significant growth opportunities with respect to lake management with water resources and, of course, also the water treatment solutions. So to conclude, before I hand over to Clemens for the quarterly, just a quick overview of our project development activities. So as you can see, we have made some nice progress between the end of the first quarter and particularly mentioned against the end of last year in Poland. Also we've managed to add to the 67.5 at the end of Q1. And we currently stand at 93 megawatts. And we're putting a lot of resources behind our project development effort with a very capable and dedicated team to identify suitable land. We had a team of land seekers that goes out. And our team, of course, there was a very capable and handling all the permitting processes. So that number, we believe, will further grow materially until the end of this year. But of course, this is a long-term exercise. So we will just keep developing as long as there's a potential in the market with the final results, of course, being good capacity. It is a very competitive market, but we are finding -- we now have a system in place, who we believe that will be in to keep developing every quarter several dozens of megawatts. In Hungary, we are currently in a situation where we are mainly focusing on pushing among the project, development of the permitting of projects that we already have in the pipeline. So we have a very close to 100 megawatts. But also there, we believe that we'll be able to identify additional opportunities in the next couple of quarters. In Romania, which is a market that is now of particular interest and very attractive due to the high energy prices, we have what we believe to be already a very nice substantial pipeline of almost 200 megawatts. And again, now the focus is on getting as many of those projects ready to build next year. So there's several projects that will be -- will start construction as soon as weather permits after the winter. But we, of course, also trying to identify additional project opportunities. So those expect that number to grow in the next couple of quarters. And last but not least, we have Australia, where after the assets work with Canadian Solar, we ended up with Maryvale for a majority stake 65% stake in Maryvale. And -- which already has the construction permit, we're still working on the grid connection parameters and agreements. And there, at this point in time, obviously all options are open, ranging from further excludes the project. But also the potential sale to a -- to a third party. And here, I would like to just repeat again then from now on, all our project development in Australia will be based on RayGen Technology. And on that front, we believe that in the next couple of months, we will see also our first steps and the first couple of locations that will also be able to add to our project pipeline. So I will hand over to Clemens, first to run you through the financials.

[Clemens Wohlmuth, executive]

Thank you very much, Georg. Once again, good morning. Hello from my side as well. I will now guide you quickly through the quarterly and half year figures. Before I do that, I want to recap with you just briefly what happened over the last 6, respectively, 3 months, the key highlights. As you might know when you have followed us already throughout the year, at the end of Q1, we commissioned and finalized our very interesting hybrid project in Australia for Lord Howe Island. We've installed PV and battery solution. We have done -- Georg mentioned already, in Australia for our large scale projects, we did a swap of project rights with Canadian Solar, our co-development partner and decided to basically increase our share in the Maryvale project, which we as mentioned, we'll continue developing now. We have increased our share in RayGen Resources in this technology company in Australia as well, which is also visible then late in our investments on the asset side and cash flow. Very important to mention that in Q2, at the end of Q2, we have placed our -- some of our treasury shares on the market and raised equity in the amount of EUR 7.7 million. I will also go a little in more detail in that when we look on the figures. And in line with that we got our first sustainability rating from AEMO is -- the mark very good. And last but not least, a couple of days ago, we finally connected our up to day or up to now largest installation 2 power plants in Australia in Leeton with 14.6 megawatts of combined capacity. We are very proud of that not only because of the size of the power plant, but also at the end of the day, we could get it now commissioned in these difficult times in Australia with all the COVID lockdown they are facing right now. Down here, you can see a picture of this power plant. With this in mind, the key parameters that influence our financials. You can see in the first half here, we could grow our electricity generation, which is for us the most important, as we mentioned, in recurring revenue streams here. We are generating by 28.6%. We could grow that number compared to the first half year of 2020. That growth comes mainly from the addition in the installed base. As you might have seen in Q1, weather conditions in Q1 were not that favorable. So -- however, we could still compensate this by the increase of the capacity that we had in the last 12 months, which was coming from Hungary, mainly with 14.1 megawatt in these electricity generation, Australia, the new power plants are not yet included since they have been commissioned only in August. Therefore, the generation will be seen in the second half of the year. Our proprietary portfolio, as Georg mentioned, is at the moment, at 89.3 megawatts as of today. With these additions in Australia, our O&M business also has grown by these additions now. Otherwise, we are staying at 309-megawatt under management right now. And we have added, that's also very important to mention in this first half year now, to our project development pipeline 187 megawatts, which we continue to develop and hopefully will add to our -- then in the next step investment add to our proprietary portfolio. Keeping those numbers in mind, how does this affect our financials? If I start with the income statement. In Q2, we could grow our revenues to EUR 9.855 million compared to EUR 8.88 million in last year. So this is a material growth of 11% year-to-year. The main of that comes from electricity generation, which is now accounting for almost EUR 6.9 million compared to EUR 5.9 million a year ago. The other revenues were pretty much the same. As you might know, in Q1, we had a -- we were lacking behind in other revenues compared to last year, mainly due to lower EPC business. We have compensated that now. Still we have a little different revenue mix. So we have more technology sales now in Q2 compared to last year, which compensated for some of the EPC that is missing compared to last year. That going into the EBITDA leads us to a little lower EBITDA than last year with EUR 3.898 million in Q2 compared to EUR 4.15 million in Q2 last year. This is mainly reflected by this additional cost we have invested in the project development pipeline, as mentioned before, 187 megawatts plus, unfortunately, as we also have communicated to you that the Australian project, the delay in the connection of the leading project is -- we are missing some of the revenues there. This is basically should or could have produced in the first half year, almost or should have more than EUR 0.5 million, which we're missing on the revenue side here. However, we still have the -- basically all the costs we had already or almost all the cost for that we had already. So this is the effect on the EBITDA. Going down to EBIT, we generated EUR 968,000 compared to EUR 1.7 million last year, mainly influenced by the lower EBITDA and higher depreciation due to the additional power plants we have connected in Hungary throughout this period, which leads us then to a net result of minus EUR 870,000 or EUR 69,000 compared to EUR 969,000 or a little lower loss than in the comparable quarter last year. That is mainly due to -- that we still have a little higher interest cost in the comparing periods due to the higher project financing comparing the periods on the one side. On the other side, we have a positive effect on the revaluation of derivatives and we also have a less tax -- income tax in the comparable period. For us, very important, and this is -- I cannot mention often enough is actually the total comprehensive income. As you know, because of our integrated business model we are having from the development to the investment to the construction and investment into our electricity generating assets, the other comprehensive income is very relevant in our company, the revaluation of assets. We have on the bottom line, a profit of EUR 505,000 that was influenced in this Q2 mainly due to the investment in RayGen, the second financing round, where we have basically the valuation of the asset could be increased due to the higher placement. Price of the shares that the company could achieve. And on the other side, we also had finally positive or again, positive effects from the foreign currency translation differences. So the Hungarian, Poland and the Czech ground, as you might have seen, have developed quite positively compared to the euro. So some of the losses we have shown in Q1 of last year, which put us quite under pressure, have been compensated now so that year-to-date, we even could get from a loss of EUR 3.1 million total comprehensive income to a positive total comprehensive income of EUR 2.3 million. This is about the income statement. That brings me directly then to the balance sheet. The positive total comprehensive income is one of the contributors to our equity. But first, looking at the balance sheet on the asset side, we could grow our assets by the base further by about 11.5%, EUR 277 million. That's mainly increase in fixed assets coming from the investment integration, but also further development, which we did on the one side, plus also our liquid assets have grown significantly from EUR 14.3 million to EUR 23.4 million coming from the positive result on the one side, but more from the additional placement of the treasury shares, which I mentioned before, in the amount which we could sell for EUR 7.7 million.

That brings us to an equity ratio or to a total equity of EUR 51.6 million at the moment, so a growth of 28.7%, which gives an equity ratio, the adjusted equity ratio for bondholders right now at 32% and a full equity ratio of 29%. So we are, at the moment, very strong on that side. And as we mentioned, we are working with an equity ratio somewhere between 25% and 30% in this corridor. We are optimizing our financing structure. So right now, we have a very sound equity for that. Long-term liabilities increased as well by 10% to EUR 114.6 million. That's mainly due to the drawdowns we had in Hungary for the remaining projects we had connected and refinanced already in Q1. This is the balance sheet from a cash flow point of view, when we look at the half year 2021 compared to the 2020 figures, the operating cash flow is negative with EUR 1.6 million that is not because of the operating business as such, but mainly due to changes in the working capital structure. So we have seasonal in Q2 higher receivables from the electricity generation. We have reduced over-proportional compared to last year, our liabilities so that from this point of view, we had a negative operating cash flow from a, let's say, operating result as such. And we had -- from a net operating loss, still the effect of the operating cash flow which is really positive. The investment cash flow in the same period is -- was growing from EUR 5.9 to EUR 7.7 million. That's mainly related to the investment in region and the final works in Australia for the project, plus some of the activated project development activities in Europe that we did plus also bigger part here is shown is that the -- some of our liquidity invested or diversified in investment in gold to hedge basically, respectively, secure potential inflation coming. So that's on the investment cash flow. The financing cash flow, we have a very strong positive amount of EUR 15.4 million. That relates to on the one side, the drawdown on the Hungarian project in the first half year that you mentioned before, plus the share placement of EUR 7.7 million, which I mentioned already, which had a very strong effect there covered by interest payments and the regular repayment on our project financing. This is basically our financial numbers for the second half and year and the second quarter -- or sorry, first half year and the second quarter of 2021. And I think now I can see there is a few questions coming. Well, I think I hand over to Georg.

[Georg Hotar, executive]

Yes. Maybe just to conclude before we address your questions and thank you very much for that. I think what is very important to mention is that in the last couple of months, we have seen I would say across Europe, but of course, many concerned and focused on the region and the markets where we operate. We have seen a significant increase in electricity prices. I think the very large degree that's driven by that increase in the price of CO2 certificates. And but we believe there are some additional underlying trends that will sustain the growth of electricity prices seems that there will be an increase in demand coming from transportation over time. At the same time, exist -- some of the existing production capacities will disappear. I mean clearly, I think you're interesting to see what really happens when the German switch of the nuclear power plants. But we see, of course, over the next couple of years, there will be a reduction in coal-fired power plants across the region. We also see that the frequency of them getting off-line for maintenance is also increasing. It's also partially affect nuclear power plants in Central Eastern Europe. And clearly, also the money printing that's happening will further fuel inflationary pressures. And therefore, I would say, looking at the last 12 months, the value of the projects we developed has gone up tremendously. So when we correct -- so our approach going forward will copy of the approaches taking without 2 com plants in Australia. And it is the base case is we want to sell electricity into the market ideally on a merchant basis. That means we want to avoid having to sign long-term PPA agreements to get project financing, but we'll try to stay as close to the market price as possible by actively managing that. So we're not talking about merchant necessarily forever. But of course, there is a lot of space between signing up for a 10-year PPA and merchant forever approach. So the future is definitely more proactively managing our revenue streams by signing shorter-term PPAs for passes the production, sometimes even inter year and there from the low point of energy prices during the first lockdown in April 2020, when we saw energy prices of EUR 15, EUR 20, EUR 25 per megawatt hour. We've now come to a point where in Hungary and Romania, intraday, we have prices of EUR 140, EUR 150 and you think even EUR 200. Of course, that's maybe not going to be the average price which we'll be selling in the next couple of years. But definitely, the average is a lot higher.

We -- where we're developing projects today is -- we don't have a fee in tariffs that we can work with. We analyze projects on the basis of levelized cost of energy. That leads to be discount, the future energy production at the weighted average cost of capital. And of course, bear in mind the existing in the upfront investment and operating costs, which are very low. And basically our LCOE spend somewhere between EUR 45 without balancing costs, more like 50 million, including financing costs in Romania based on higher production to something like EUR 60 in Poland. But that already includes basically a cost of capital 6% in case of Romania we use 7%. So I think that is a level just increases our project return and then at cousins higher leverage and also our equity return. So with the levels that we are seeing today, sticking to Poland at the moment, the forward price for big time electricity for all of 2022 is at, I think today it was at 404. So we're talking about EUR 85, which is well above our internal LCOE already providing a 6% project return. And therefore, on that mid-level, we are somewhere -- the project return already in the region of 10%. If you look at the prices in Romania and also Hungary, even above that level. So it's a little bit like this project development, the value of those projects. It's probably Poland quite comparable to a mining company and when you value the gold or whatever resource it is in the ground. And the shift in our -- this is why, particularly today, our project development is tremendously important. That gives us control and it will allow us to create a lot of value by turning these projects into connected assets. And we are of the strong opinion that particularly today where inflation is becoming a much bigger topic again. And some people think will go away in 6 months. I will -- we'll probably take a different view. We believe that PV plants are actually one of the best inflation hedges that exists. In particular, if we can -- if you remain exposed to the price development. And as heading into the market, we also like to minimize our credit risk. Therefore, this is of utmost important and this is why we are investing a lot of time and resources. The downside of this is obviously that there's a delay between when we deploy capital into the project development, but also the construction and when those power plants start generating electricity and therefore, revenues and EBITDA and of course, the EBITDA margin on this the connected PV plant are 90% plus. As I think seen is now in Australia, where we technically completed the power plants in December last year or in January. But for various local reasons, the commissioning industry simply takes a long time. And Hungary, we complete the power plant. 3 days later, the diesel comes and our powerline is connected. So we don't expect these delays in Central Europe. But nevertheless, there's always a delay between the capital deployment, which, of course, we need to finance somehow, so we have -- we incurred the costs upfront and the benefit that comes later. But we'll see a significant acceleration towards our goal of 600 megawatts by year-end 2024 in 2022 and that will then also lift us significantly at the top line at the EBITDA level, but it also feeds through to the bottom line. So the operating leverage that we have in our business at this point in time is very significant. And as we turn that ever-growing pipeline and tier interconnected power plants, there will be a significant positive shift throughout our P&L going forward. So I think that's something that was important to say.

[Georg Hotar, executive]

And so as to your questions, so we'll take it through logically. So the first question is whether for the manageable see trend for the U.S. market over the longer term, we have both solid storage and water remediation becomes a significant. We have a tremendous high level of respect with respect to the U.S. market, it's -- we did have some discussions in the past. It is a completely different environment and a very risky environment. We've also seen over the years that there were several European solar companies that have tried to enter or entered the U.S. market and the vast majority they got bloody nose, in some cases even killed them. So solar is at least the way we are doing it, it means we is an integrated project getting involved in project development, which always is very local, requires a high level of knowledge of the permitting processes. And at the end of -- and it's tremendously competitive. So I think in the -- what I would call the bread and butter business, this is definitely not something that drinks very highly on our expansion list. With respect to remediation and in particular in relation to PFAS, as I mentioned before, after Australia, North America. And of course, in particular, the U.S. is a massive market there's a massive need. And that's definitely a direction we are looking at. I think we can say so much that we have already been approached on the back of the PR that is -- it's running the pilot project with the Australian Department of Defense. The U.S. Department of Defense has a much bigger issue. It's about 800 air force bases -- U.S. Air Force bases that have, in some cases, unbelievably high contamination level of PFAS and Pentagon. In 2020 actually it created a $2.1 billion budget to start looking for solutions for this problem. So it is something taken very seriously. However, we want to wait for the results and the progress with our Australian project. That possibly also some additional projects maybe from other non-governmental customers. But clearly, the U.S. is very interesting. So -- and with this specific solution that we have and once we have the validation on this pilot project, it is definitely something we will look at very seriously. We have had some discussions, but we will wait for that for the results. So in that respect, so if U.S. or North America, then definitely in that area. The second question is so we can quantify the financial impact of the commissioning of the Australian projects, where the bottom line will be positive in Q3 and Q4 and what the results in H1 was have been without Australia? Maybe I can as mentioned before, to start from the bottom. It's not a question about what the results would be out Australia, more like how much you would have expected additional revenues there. So the plan would have been about EUR 500,000 to EUR 600,000 in the first half year would have been generated already. The capacity of the power plant is about some 29-gigawatt hours per year that we can generate.

So it's quite significant, depending on the -- as you know, we go merchant in that project. So we sell electricity and the certificates, the green certificates, the large-scale certificates we generate there on the market. Expected revenue annual is somewhere, given the current market environment at about EUR 1.5 million or a little less EUR 1.3 million to EUR 1.5 million that it can generate. So that's the impact we are we are -- we will see in the future from that as a positive addition to our portfolio and in our income statement. When you look about the result as such, here again, to emphasize the bottom line, which is, for us, total comprehensive income is positive in the company.

So we have generated a positive contribution to the company, to the equity in total comprehensive income. We clearly see that going forward also for Q3 and Q4, considering the expected development in our forecast. However, we are not making concrete forward-looking statements. So sorry for not being more concrete here, which is a company policy. I think what we can say is, of course, given that the majority of our revenues are from energy generation. And despite this latest addition in Australia, and vast majority of our production capacity is in Europe and it's seasonal. Q2, Q3 are the strongest, and then Q4 and Q1 rather weaker. So that will remain in place. Yes. So we expect, as mentioned, what we lost, but we are missing in the first half in Australia, we expect to add in the second half year now roughly. And as Georg said, Q3 is going to be traditionally very strong. If you look in our history and compare the quarter-by-quarter, electricity generation roughly is 35% in Q3 and Q2 each and about 15% in Q4 and Q1, Australia will be a little the other way around. So Q4 will be strong in Australia in Q3. Since the summer starting, it's about this. And then maybe also one question regarding the cash flow, about if we expect the operating cash flow in the second half year will be positive. Generally, also to -- well the quick answer is, yes. We expect that, generally, our operating cash flow and you also, if you look into our history over the last couple of years, the operating cash flow of the company is positive. As mentioned in -- now in the half year figures for '21. The operating cash flow shows negative only from the changes in the working capital. So by basically seasonal in Q2, especially increase of receivables, which is from electricity generation, which naturally always gets paid. And on the other side, we have extraordinary high repayments of liabilities of payables compared to other periods in the past, which also had a negative impact on the operating cash flow as such, the operating result. If you look in the EBITDA or basically roughly coming from EBITDA, more or less, is clearly a strongly positive. Okay. Maybe so we skip the question, which is whether commissioning of first capacities in Romania in 2021 is still feasible. The way it looks now is we will have projects that will be ready to build by the end of the third quarter, Q4 but the way it stands now, and it is mainly linked to the procurement. So I think it's not just also worth adding. What we do see is not only increase in the prices of certain components, mainly to the increase in prices of the raw materials. So this is the mounting structures and transformers, which use a lot of metals, steel and copper. Those prices have gone up. But what has also happened is that the lead times have become significantly longer. And it's also -- it's a very unusual situation in the sense that when we get price offers, a couple of hours or 1 or 2 days maximum.

And so this increase in lead times is leading us to most likely postponing the construction of those projects that will be ready from a regulatory or operating point of view. So there will be some pent up. So we expect it to be in credit pent up. That will start out the construction of several projects in Romania, in particular, once weather permits after the winter, we are probably talking early March. So at the moment, most likely that forever we have ready, we'll get pushed into the first quarter next year.

And this is mainly a result -- the result of these procurement issues. We are going to build at least 2 power plants, maybe a third one should do in Hungary for the end of the year that procurement has been done. But we will probably over the next couple of weeks, have some for those certain strategic, let's call it, strategic procurement steps for next year given the volume of projects that we want to execute next year. And clearly, Romania will be out for next year and again, I guess that this will be the most active market for us next year. Or construction for our portfolio. So the next question is that you're already able to take advantage of increased electricity prices and some of the electricity generated in Hungary about METAR prices. Well, the issue is that -- I mean, it would be largely those METAR, however, is a contract difference with such as the Hungarian government. So the METAR price at the moment in euros with somewhere around EUR 95 that the bidding is on a monthly basis. So now there have been days where we've been able to sell. And my urge is that this month, we will be across -- on average across the, we would actually have generated more than the EUR 95 in the market. And simply as contract for differences go, that excess will have to send to the Hungarian government. So the answer is, unfortunately, no. However, as I said, we -- the 2 projects that we will still build at least this year in Hungary and then also we will follow next year will all be based on only based on market prices. So probably building off our balance sheet, at least the first couple of megawatts and then refinance. And we'll connect them, start selling, and then we'll see how we deal with the financing. Once the projects we're building this year actually won the auction. The first auction that we have a price of around EUR 70. Which is, of course, below the market price. On the other hand, it's highly bankable. So we'll stick to that METAR arrangement. This is also a contract for difference, just like the old metals or the system that we place with the auctions in Poland. So that project will be running on a EUR 70 METAR. And it makes sense because of the high level of Makati. Here, I would like to point out that yesterday because the results of the latest, I think I was talking third auction in Hungary where the winning bids on the large projects. So the project that we will realize is 1 megawatt AC. But I would give it the prices for the larger projects up to 20 megawatts, and the winning bids were below EUR 50 per megawatt hour. Given where the market is today, from our point of view, it makes no sense. It's -- I think it's going to be great for the Hungarian market, at government because they'll be basically getting on this access. But we -- and I think the last couple of months have been validated our approach. We believe it makes no sense to develop projects and submit them to the options, both in Hungary and Poland. And the marketplace approach is the way to go. And we also believe that the banks that finance PV projects are also slow, starting to recognize the validity of that approach. The first step for them moving to the finance projects that have -- I projects more easily did have longer-term PPAs, but we also see kind of the first science that they'll also be getting more or interested in projects that have which was the full merchant approach, at least something that's very close to it. And currently, we are working on financing models where we think that [ the moderator's ] banks on force and but at the same time, making sure that we can capture as much as the outside for current levels and what we believe will be a positive market price trajectory in the medium to long term. If there are any more questions? Time is we're already in overtime. So we would like to thank you for staying. Thank you very much for your attention and for your interest. Of course, our IR department is always reachable with additional questions that you may have. And of course, we're looking forward to providing some positive news in the next 3 months until our next presentation. And of course, we also hope that next time, we'll be able to report a lot of progress and positive numbers. So thank you very much, and we wish you a nice rest of the day. Thank you very much. Goodbye.