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Dear, ladies and gentlemen, welcome to the analyst conference call of PNE AG. At our customer's request, this conference will be recorded. [Operator Instructions] I now hand you over to Markus Lesser, CEO, who will lead you through this conference. Please go ahead, sir.
Good morning, everybody, also from my side. Thank you for joining us today in this conference call on the results of the first 9 months of 2020. Before I start with the presentation, I would like to share with you an outline of the presentation and the procedure of today's call. As usual, I will start with an overview of the operational and strategic highlights of the first 9 months of 2020. After that, I will comment on our financial figures. I will conclude my presentation with our outlook for the remainder of the year. As always, we will then open the line for the sales side analysts only. All other participants will stay in listen-only mode, and it is our company's procedure for years. As usual, our slides then that I would use can be found on our Investor Relations website. Having said this, I would like to draw your attention to the operational highlights. The course of the first 9 months of the 2020 fiscal year was characterized by different developments. On the one hand, we made good progress operationally. On the other hand, the effects of the COVID-19 pandemic are increasingly noticeable. The operating performance in the first 9 months of 2020 was clearly marked by the expansion of our power generation portfolio as well as the progress with our business model expansion. In Germany, we have 74 megawatts under construction, where our 46 and 47 megawatts already intended for our own generation portfolio. We put 360.8 megawatts into operation or have it under construction. Remarkable 60.6 megawatts had been successful in the German tender, whereby 39 megawatts in October, we had another 21.6 megawatts another project we brought it through the tender. We have scale our Scale Up concept, where we are with the implementation fully on track, PV international markets, additional services, PPA services, we just got rotational orders for our additional PPAs we made for our customers and for us. We increased our PV pipeline. We expanded it to 476 megawatts within 1 year. In total, as a result of our Scale Up strategy, we doubled the projects we are working on since the beginning of 2019. Now we are working on over 300 projects in 12 countries. And looking to the financials, I would like to highlight that despite some negative impact from COVID-19, our 9-month results are still on target and consequently, we can again confirm our guidance for the full year 2020. I also want to highlight the strong performance on segment level. It shows also the productivity of our company. Before consolidation, all 3 segments showed growth compared to last year. As indicated on the previous slide, the results in the first 9 months were impacted by the investments we made in our own power generation portfolio. The investments in our portfolio are also reflected by eliminated or nonrealized earnings of EUR 19.8 million compared to EUR 4.9 million last year. If we look to the EUR 19.8 million and see that we have an EBIT of minus EUR 3.5 million, you see that the productivity is still high, but we work in our own portfolio. Then we had -- even it has minor effects on our business, I would like to give you an overview about changes in balance sheet of 2017. Following an examination by the German financial reporting enforcement panel FREP or EPR, it was necessary to make adjustments retrospectively. To the balance sheet, valuation of offshore projects developed in the North Sea. We -- every year, we wrote it in our overviews. This will not have any significant impact on the current fiscal year. Although there will be changes in some values carried forward in the balance sheet, such as inventories and equity. The arrow was corrected retrospectively, starting from January 1, 2017, in such a way that all 5 offshore projects and related other project inventories capitalized were written off at that date. As 3 offshore projects in Zone 4 had already been written off in fiscal year 2018, the retrospective correction mainly reflects the 2 remaining projects in Zone 3, which are named Atlantis II and III. The changes in the inventory position amount to EUR 15.1 million as of December 31, 2018. And with the addition of around EUR 1.5 million additional effects out of interest rates to EUR 16.6 million as of December 31, 2019. On the equity side, the changes amount to EUR 30.4 million as of December 31, 2018, and EUR 14.9 million as of December 31, 2019. Regarding the current fiscal year 2020, the impact on the results will be around EUR 1 billion. Irrespective of the correction of errors, we feel validated, in particular, by the senate order of the Federal Constitutional Court of August 2020 -- 22 -- 2020, in its assessment that part of the wind fields that are unconstitutional. With the implementation of the ruling of the Federal Constitutional Court by the legislator, we expect reimbursement for project planning services already provided, which will have a correspondingly positive effect on the group's figures in the future. So we look now to the main points, the equity, if you look to the equity impacted by the balance sheet adjustment, the equity ratio is still at approximately 35%, and gross cash position remains at a high level of EUR 90 million only as an overview. If you look on the next slide, we can see the expansion of our own generation portfolio is stepping forward, is in progress. So another 46.7 megawatt we see for the portfolio, 0.9 turnouts. 0.9 is under construction. Turnouts will be in construction very soon in the next couple of weeks. So therefore, we increased our own portfolio. We have still a well filed filled project pipeline with onshore on a very high level. So 5.241 megawatts -- 5,241 megawatts we have, as a total pipeline in the moment. And if you see, I already mentioned it 6 projects under construction, 74 megawatts. And it's, for us, a good news, this time in October, we got another about 4 projects with around 40 megawatts permitted. So that means that we have, in Germany -- in German projects, I have to say, in Germany, we have above 100 megawatts permitted this year until October, I have to say. We have, in Sweden, still a construction management for 130 megawatts ongoing in Poland. We finalized the construction of [indiscernible] 142-megawatt project and construction management of Jasna, 132 megawatts, one of the biggest projects in Poland is ongoing. Remarkable is that we have in Germany, in Phase 3, which is the permitting the application status, 420 megawatts. We have 74 megawatts under construction. Together with the 130 megawatts we have already in our pipeline, you see that is -- that we have more than enough to meet our target of 500 megawatts in 2023. So we are still on the road to make it happen. The PPA projects in 1 year, we could increase our pipeline from 0 to 476 megawatts. So therefore, mainly in Germany, Romania, United States, we're still looking for further countries like Italy, Poland and South Africa. And we think that we can increase our pipeline furthermore in the next couple of months. So the 9 months results, as I mentioned before, we have a total output, which shows around EUR 90.7 million, which still shows an effect -- which shows the productivity, the high productivity of our company despite the effects of COVID-19. The EBITDA and EBIT is lower and EBIT is lower -- on a lower side due to the fact that we invested in our own portfolio. We got milestone payments of projects that had already been sold in 2018 in France, Poland and Sweden. And the first result out of the expansion of our own power generation portfolio is reflected by the nonrealized earnings of EUR 19.8 million. We internationalized the service business and the power generation increases. So as well that we work on as a general contractor and additional services, all these led to the result.One other point, which shows the steadily increase of all segments they show a high productivity. We have a growth in all business segments. If you see the project development, the output increases from EUR 85 million, plus 5%. The EBITDA increases to EUR 13.4 million, plus 26%, and the services rose to EUR 14.6 million, which is a plus of 26%. The EBITDA increases to EUR 12.4 million. These services have been impacted by the investments due to the fact that we invested in international expansion. And due to the fact that we couldn't do some trainings in one of our -- part of our business so due to the COVID-19 restrictions. And the electricity generation increased to EUR 17.7 million, 48% EBITDA increase to EUR 13.4 million. This is all before consolidation, but it gives a real feeling about the strong productivity despite the effects of corona. The balance sheet is still in a -- is very solid. We have a cash position, which is still on a high level of EUR 90 million. We have, as I said before, the acquisition ratio is still solid at 35%. The current debt liabilities to banks EUR 132.8 million, and non-current debt and current debt is EUR 49 million in liabilities to banks. These are related mainly to nonrecourse financing of our projects, and that's remarkable. If you look to our Scale Up concept, the implementation is ongoing. We expand our -- we invest in our own generation power portfolio. The first power purchase agreement, we agreed in Sweden for a customer. So we could deliver on this point as well. So therefore, we are still on track. Ladies and gentlemen, this leads me to the outlook. As mentioned before, we confirm our guidance for the fiscal year 2020. In spite of the increase in effect of the COVID-19 pandemic. Please note that achieving the guidance is based on successful project sales in the remainder of the year. Various sales processes are ongoing. However, due to the effects of COVID-19, the development of international electricity prices is difficult to assess for wind farm investors at present, which can have a negative end effect on sales transaction. I said it always, margin is the most important thing when we negotiated, we don't want to make a bad business. Nonetheless, we are still positive that we can achieve our target on this year. Ladies and gentlemen, we have well field pipeline. We have 74 megawatts under construction. We got another 40 megawatts we are -- we can add to our 46 megawatts, we can add to our portfolio, and we can increase it. Just right now, we're working on a lot of projects in Germany and France, especially where we have very close for permitting or where we have permitted projects. We have the largest volume ever in permitting phase in core markets in Germany and France with 681 megawatts, which is a great potential for the future. Yes. And we invest furthermore in our own generation and our Scale Up concept and follow our strategy. We released 2017 and which shows good results. Ladies and gentlemen, this concludes my presentation. Thanks for your attention. We are now open for questions.
[Operator Instructions] The first question is from Holger Steffen of SMC Research.
Mr. Lesser, thank you very much for your detailed report. I have some questions concerning the last development. First question about your change in inventory in Q3, although you built several wind farms in Germany, you added only EUR 1.7 million to your inventory work in progress. Maybe you could give me an explanation for this figure because I would have expected a higher figure there.
So please have a look. Maybe you have other questions as well. I'll have a look on this parallelly.
Okay. I will start with the next question. You've mentioned the positive decision about the wind and idea of [indiscernible] When do you expect reimbursement? And how much money do you expect? Can you give us maybe a hint about those figures?
No, it is absolutely open. We got the decision from the court that until mid-end of June of next year, we have to come together with the Minister of Economics who will release the law has to come to a conclusion with us. And so we are waiting for a suggestion how they want to -- how they want to give the damages, we had, back.
Okay. Some questions about your pipeline, the growth of your PV pipeline is very strong. Will we see a similar dynamic in the next quarter? And when do you expect to sell the first projects or start building of the project?
Yes. So we -- we have just right now a lot of projects in front of us where we are working, but where we have no access to. So we're working on this, and we see a strong increase in the couple -- in the next couple of months in front of us. So I can't tell you how much and which amount we will have then. So this is not -- this depends on how we step forward. And in a moment, we are on a year-end, and a lot of people are in the negotiation with COVID-19, it's not that easy. But nevertheless, on the other side, we are happy that we made this progress, and we will step forward in this speed as before.
And do you expect to sell maybe the first project in next year?
Yes, I hope so. I hope so. I hope so. So I'm -- so we think that should happen, yes, in any case. So we see PV as an additional market. And now in these countries where we are working on, we see in future in Poland and in South Africa, as I mentioned, in Italy, as well future markets. So we will be investing in this area and we see a good development around this.
Okay. Fine.
So then to your question, because of the inventories, change inventory. So inventories were EUR 101.5 million, yes? So the -- we have the EUR 19.8 million, not realized earnings or eliminated earnings, yes? They will not be part of the inventory. So that's why it is not in inventory.
But the building process is...
Yes. There will be -- you will see them in the fourth quarter, nothing for yet now. So I haven't had it in that amount considered because it's always a question when you're factoring it.
Okay. Then I will wait for Q4. Coming back to your pipeline, only one question to your wind energy pipeline. In last time, we saw little progress in your French pipeline. Maybe you can give us an update about this market.
Yes. Just right now, we -- it's -- we have some permissions in the moment where we are working around -- it's always in France that you need to have another 1 to 2 years to get -- you get sued all the time due to natural heritage issues or from the municipality. So just right now, we have to wait for dispositions. On the other side, we replan some projects in -- to have a better performance in future tenders. So -- but we are still in plan. And I think next year, we will have to -- we can say that we have a finalized permission on all these projects we have in front of us. Some -- not all in Phase 3, but some of them, in any case.
Okay. Okay. Fine. Okay. Maybe somewhat to your guidance. You've said the conditions are not perfect for the sale of projects at the moment. In your report, you've mentioned possible negative effects, especially for sales in Sweden, Panama, Romania and the USA. So which projects have the highest probability for a sale in the next week? Or will you say mainly German projects to meet your guidance?
So we have several projects in front of us. There's a project in Sweden, project in United States, Chilocco and projects in Romania and a project in Germany of 5.5 megawatts. So these are the good projects. We have in front of us and we hope that we get -- or we are still in negotiation. And as I mentioned before, it's always an issue in countries where you have to rely on the market development and the energy price development of these markets. So we see that there is -- that the prognosis of the energy prices is going a little bit down, and everybody is waiting -- have an idea about the energy prices in future due to the fact that COVID-19 can influence the market. So -- and because of that, it is clear that some investors are careful and waiting until they have a finalized prognosis. So -- and this is what we see just right now. This makes the things a little bit more difficult, but we see there is no showstopper. It's only a question of margins, and we would like to have the best margins. And so therefore, we are fighting for that.
The next question is from Karsten Von Blumenthal of First Berlin Equity Research.
Markus, my first question is regarding your own plant portfolio. I thought you might add operating wind farms this year, but now I think that it's rather unlikely. And I would like to know what will happen to Kleinbullesheim and [cap state]. I thought that these wind farms might get into operation this year, but now I can't read anything about them. So perhaps you could give us an update regarding this topic.
So just right now, we have -- good morning, first of all. So nevertheless, we see -- we have ongoing projects under construction. One of this is Kleinbullesheim for sure. And we have -- you have to see that we have an opposite to the years before. We have now always to wait until we are sure that nobody sued us. So therefore, we have well-suited project out of natural heritage issues or something else. So that -- and additionally, we have delivery times, which have been extended from -- so therefore, these are 2 points and sort of all the permission terms, which had been -- which have changed. So this all leads to a change in the timing of these kind of projects. And that's what I mentioned all the time that there is a shift. We calculated a shift of 3 months in -- for -- due to the fact of COVID-19. But we have to add the other point as well. And so this is the shift we have to consider in our projects just right now. So and -- but nevertheless, we are -- when a project is under construction, we have -- the chances are very high that we can finalize between 1 year, usually.
Okay. That means both projects will probably get into operation next year. And that this year, you will not add wind farm, operating wind farm to your own plant portfolio.
We have 2 projects, which is launched and then further these 2 projects -- this is in total 21 megawatts, which we would like to analyze this year. So in Kleinbullesheim, we'll -- according plan, in -- we'll start its operation in January and February next year.
Okay. Good. And then I read that you won 2 solar parks in the German tender. And you didn't highlight this. I think that is a very good success. And perhaps you could elaborate on these awards in the German solar tender.
Yes. It's -- yes, we thought about it. We should bring it but we have to see that I would -- that we suddenly heard after we got the permission and after, we had a successful tender of 19 megawatts in PV in Germany, which was really good success. Afterwards, we heard that there is a constraint due to the fact that somebody in the government want to change it into a natural heritage zone. So therefore, we didn't want to highlight it to come not up with any expectations we cannot fulfill.
All right. Understood. I didn't know that.
Yes. It's -- sometimes it runs not like you think. Everybody relied on the spatial plan, but something may happen, which are not in our hands.
Okay. Understood. I saw when I just look into the Q3 figures, not the 9 months, but Q3. In the service segment, you had a very strong quarter. You had very high sales, and you had a very strong EBIT margin. So that looks really, really good. Perhaps you could elaborate on that. What went so well in Q3 in the service business?
Yes. We had -- we could finalize and effectuate some of the constructions. For example, Poland, in Germany. In Germany, we could get some -- could make some builds around this. So this is why this increased.
Okay. Understood. And I saw that year-on-year, you had a significant increase in employees. And you explained that this is due to the expansion of your businesses. Could you roughly say in which areas these employees are active? Is it a lot of service? Or where do they work?
Yes. So it's mainly, I would say, 3 different areas. One of them is services, which is where you need a lot of manpower, usually. This is operational management. When you go to Poland, to Sweden, this whole expansion, this downfall we need in France. In Italy, we want to increase it, then we have the additional PV business where we want to do services. So we have to prepare ourselves for this as well. So this is where we have to invest in people. On the other side, we have PV business. If you see that we invest in, you can't take only wind people. You need PV people pure -- know-how out of the pure PV business, that's what we want to increase in these countries with their networks. So that's why we increased the people around PV in the countries like France, Poland, Italy. So this is the other reason. And the third one is that we look for -- and look for new technologies, and that's what we can do there. So to see the PPA business, for example, we now have the first result of negotiating PPAs for our customers. So you see the first returns are coming out of this investment and that we had to invest in know-how as well and people in manpower as well.
The next question is from Jan Bauer of Warburg Research.
So I don't think there's that much left. I just read that you announced that you had some very successful PPA consultings for, I think, external customers. So could you give us a feeling for how much of sales, I think, in the service segment that will make for this year or even in the next years when you expand that kind of business?
Yes. These contracts are starting usually when you deliver, yes? You get the part, the share of the delivering turnover or you get the first payment of this. So it's nothing for this year. And the next year, we maybe get the first payments, and it is -- it will be in -- with the start, it's around maybe EUR 1 million in the future. We hope that we get it done in this direction in the first year, next year. So then we will see.
Okay. Great. Do you think about expanding this business more over in the next year? So I think there are already other consultants in the market like Luxembourg Pixel Park that are doing consulting services on that kind of negotiations.
Yes, you see we have a big advantage. We have -- first of all, we have 1,700 megawatts, which we -- where we do the management for our customers. Secondly, we have our own wind portfolio, third of all -- where we can negotiate the contracts. And third of all, you have to see that the PPA management -- and we have to -- together with the tender management, so it's always one of the big know-how you need in the future to be successful to get the best price out because it's always wind, tariff and financial conditions, which is really something where you have to negotiate very strong besides the usual stuff like wind turbines onshore. But this is absolutely important that we have it in-house. And if we do -- if we can get additional business out of it, it's absolutely positive for us.
Okay. Perfect. Regarding your pipeline and the development of the in-house portfolio. So your PV pipeline is just picking up a little bit. So do you think about adding PV to your in-house portfolio in the future?
For the in-house portfolio, we shouldn't deny -- we cannot deny it. So maybe in the future, we put PV projects in as well. In the moment, we haven't made any decision on that.
Okay. I heard that some of the turbine manufacturers just going into the market with a little bit longer deliverance times, especially Nordics. So do you think you will see any issues on the time line or the completion of projects due to deliverance issues?
Yes. So you can say all wind manufacturers have extended delivery times from about 1 to 2 to 3 months, yes, for the total delivery time. So this affects us as well. But nevertheless, that means that we have to speak like we do it usually very carefully in advance of the project with the wind turbine manufacturers, to be very clear and open and then have an earlier starting date. So that's what we do. But we are affected, yes, sure, but it is in our planning.
Okay. One question regarding your guidance. So you said like you have some Swedish projects, the Chilocco project in the U.S., some Romanian project and this German project that are possibly up for sale. So I was just wondering, you still have one project, I think, in Poland, that should also be eligible for sale. And as far as I know, so the Polish market is picking up a little bit. So why don't you mention that when you think about profitable projects?
Yes, it's a matter of price. So we are achieving to construct these -- both projects in Poland, [indiscernible]. And to sell them turnkey, which gives us a much better price.
Okay. So you will construct those projects on your own and then sell them completely constructed?
Yes. Maybe we get a sales event during construction or before, we will see -- we will start negotiation in front of the construction time. But nevertheless, we think that we can get better prices when we finalize that and make a turnkey and sell it then. So it's something for next year or beginning of the year after.
Okay. But this isn't some kind of a change in your strategy. So as far as I reckoned, you should sell all projects outside of Germany in an earlier development stage or in development phase and do only turnkey projects in Germany.
Yes, that's right. This is a difference in this special situation due to the fact that we have circumstances in the moment, which leveraged the results in a special way. So usually, we would do only construction management. Yes, that's right. So turnkey light, like we do it in France. In this special situation, we decided to start construction due to the fact that a tariff -- the tariffs start at a special timing, and we have to get this timing done. And if we do it in our hand -- if we have it in our own hands then we know that we get the right timing done, and we are not -- we have not to rely on any customer. And because of this, we can finalize it and get the best price out of this. That's the reason, only for these projects in the moment. We don't want to extend this for further projects. But it's all I go with. If you can get a better price, much better price then you have to decide maybe for another way.
Yes. Okay. But it's some kind of, let's say, a one-off event. So it's...
Exactly.
Special circumstances. Okay. Perfect. Just regarding your guidance. So just in case you won't be able to sell projects outside of Germany, so would you also think about selling one of the larger German projects currently under construction?
In the moment, we are free to decide which projects we want to put in our pipeline or not. I can tell you with 100 megawatts we have already permitted this year, we have good stock for further construction. So -- and we will certainly sell some of these projects. If you look to our pipeline, we have 420 megawatts in our pipeline in Germany, plus another 74 megawatts under construction. So there is enough space to sell projects to the markets of Germany as well and to build up the portfolio.
Okay. One last question regarding your U.S. pipeline. So from my understanding, the election of Joe Biden for next President or hope for that he will be the next President, should be that a positive for the development of renewables in the U.S. Do you think about so that the Chilocco sales process might be picking up a little bit more in speed due to the new President elect or that you will increase your pipeline of U.S. projects due to the fact that, let's say, the outlook for renewables in the U.S. have just improved?
Yes. We saw in the past that in the recent 3 years, we got -- 3 or 4 years, we got a lot of things bureaucracy and stop us in the projects. It started with a tax change and we had a lower tax advantage potential. Secondly, we had a situation that grid connections extensions couldn't be done in a proper way because the government stopped it all the time or a delayed it. It was a not a good situation, and we think that this will change with Biden from that. We will see what will happen and when it will happen. First of all, it's positive, yes.
The next question is from Peter Rothenaicher of Baader Bank.
Mr. Lesser, one question regarding your strategic outlook with regard to photovoltaic, where you have as you expanded your -- the project pipeline quite nicely. If I have a horizon of around 3 to 5 years, how big could photovoltaic could become in your business? So if I compare it with the project volume you have in your onshore wind business.
Yes. I can only say that we want to increase this business, but we want to increase in the countries where we have already the network and where it makes sense for us. The margins in PV are a little bit lower, but the time when you finish a project is faster, whereby you have a higher or lower rate of success in projects. So therefore, this is a mixture profile. But we see also that you need this PV pipelines in a lot of reason due to the fact that you need hybrid solutions for decentralized energy. So therefore, it's a strategic issue as well. If you see -- if you look to the amount, so I can tell you that I would like to be at the end of the next year around 1 gigawatt with this pipeline. So -- and the further, that's our target. It's very challenging, what we would like to get it done. So -- and then we will see the next upcoming years, and we see how this will impact our business and how we can make good progress. But PV business is also -- is always a business of -- you need a higher volume to get the best prices from the module market.
Yes. And with regard to your offshore wind business, I have heard about initiatives of the EU to bring forward this medium of energy generation. What are your expectations? Do you see here some support from this? And how strong could this bring forward your offshore business?
Yes. First of all, there's a real huge amount you're talking about above 300 gigawatts in the European market, that is really huge. And we are already in a lot of markets, some of them that it makes sense to invest in further activities in offshore, some of them not, but we are still looking for potential. And the question is always when, when. In 2015, 300 gigawatts may mean that they start in 2040 with these activities, yes. So from our point of view, that's where we are also investing very heavily in the government that they have to start with a bigger amount as only 5 additional gigawatts in Germany. So they have to do much more. So there where we are insisting and we are -- we have our team here, which is prepared to work in several countries.
Last question is on your service business. So you mentioned you are still affected by COVID-19 headwinds, in particular, regarding training. Do we expect here some relief for the fourth quarter? Or can we expect here only the bigger support again in 2021?
You speak about the training for itself or in general?
In general, where you generate part of your service revenues and then earnings trainings.
Yes. So yes, we have a company taken over. It was 1.5 years ago, 2 years ago, MEB, it was called. And this company is doing these trainings. We are investing in companies where we have special know-how, and this is -- they're doing certification in machines and as well as training for third parties. And in the moment, they do the trainings as well, even we have this locked down light, I would say. So in a moment, we are not affected.
[Operator Instructions] If there are no further questions, I hand back to the speaker.
Yes. Thank you very much for the interest and the good questions, and I wish you a very good day. Bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.