Yeah. Good morning, everybody. I just got introduced, I am the CEO of NKT. Thanks that you take the time to listen to our update on the rights issue. I have here in the room with me our CFO, Line Andrea Fandrup, and also Michael Nass Nielsen, Head of Investor Relations and Treasury. Just going to overview on the roadmap of NKT and recent developments over the last years. If we look back between 2016 and 2017, there was one key milestone where NKT acquired ABB High-Voltage Cables. With this acquisition, they acquired also the technology of the DC cables, which is today key for the growth in the renewable market. Further, there are two acquisition on Photonics. Also in this year, 2016, 2017, we had a demerger of Nilfisk so that the company could focus on the power cables and Photonics.
There were some smaller divestment in certain areas. From 2017 to 2018, there were some challenging market conditions. Projects have been postponed and not awarded, and as a consequence, we have seen very low earnings in the year 2019. In 2018 then, second half, we were successful in getting awards of more than EUR 800 million on projects like Hornsea 2, Ostwind 2, Moray East and so on. During that time, 2017, 2018, we had also good growth on Photonics. 2019 and first year 2020, we could further increase order intake of EUR 750 million in 2019. Then with the German Corridor projects, which we are very successful of more than EUR 1.5 billion in second quarter 2020. As a consequence of these large orders, we did a capital increase in May of EUR 93 million to strengthen our financial position as a first step.
Today, we announced the second step. Also during this period, the management has changed. Line has joined, but also in my management team, there are several new team members. Today, in the second half of 2020, we have further increased order backlog to record high number of EUR 3.1 billion, which is highest ever. In Photonics, unfortunately, due to the COVID-19 situation and the market situation, we resume the strategic review. As a consequence of the high order intake and the need for capital for investing in factory expansion, we found prudent to strengthen our balance sheet. Going to the next slide, here the background. The key elements are really is the market is attractive, the outlook is good, the projects are becoming bigger. With this, also to certain extent, the cash flow is more volatile lumping.
Also of course, with large projects, the risk are going up, so it is prudent to have a stronger balance sheet. So that was one main reason. Further, in order to execute the large projects, the Corridor project, but also new orders which we expected, we need to invest in expansion the factory in Karlskrona and Cologne. That is what we will do with these proceeds, what we will get through this rights issue. We have, of course, unfortunately still the uncertainty over the COVID-19 in the market with the second wave, which has a big impact to the entire society. Whereas I have to say, we at NKT have limited impact, but Photonics have more severe impact due to COVID-19 as they deliver globally. Going to the next slide overview of NKT. NKT consists of two parts, NKT Cables, NKT Photonics.
The focus today is from NKT Cable as the rights issue is for strengthening NKT. NKT is, we are really in the phase here of the green transformation. With our product solution, we will contribute to the CO2 reduction, which I consider as one of the key challenges of this century, to limit the climate impact. You see also on the bottom, our revenues over the last 12 months, around EUR 1.1 billion in terms of local price and around EUR 50 million operational EBITDA. On the right you see Photonics, who is active in the high-end fiber-based photonic components and the inorganic growth and acquisition is the main key topic. Going to the next slide. The business in Cable consists out of three business line solutions, where we have the High Voltage Cable Solutions projects, offshore interconnectors, oil and gas is the majority of the revenues.
Then we have the application business with medium voltage and low voltage cable and building wires, and telecom is around 37%, and service and accessories, with the smallest portion, with around 12%. In Photonics, we have three segments: medical and life science, and aerospace and defense. Those are which are growing fastest, but as I say, are the smallest. Then we have the industrial segment of Photonics. Going to the next strategic initiatives. If you look at solution, key is obvious that we utilize the assets, what we have in Karlskrona and Cologne to the maximum extent to an optimum product mix, maintain a technology leadership, and improve execution and production. Solution, we grow and we, going forward also have started already to improve the margin.
Application is all about efficiency, aligning sales and operations for a portfolio, factory efficiency, and several other initiatives to improve the margin, where I think this year we have done the first step to improve from last year. Service and accessories, we grow in new markets, and we also have expand our portfolio and optimize our cost base. Photonics, the focus is on growth, which will come back. Actually, we turned back to organic growth of 3% in Q3, but we need to see that what will be the more normalized level after the COVID-19 is behind us. Growing is the goal and also here with the margin potential. If you look at the next slide, how NKT contributes to sustainability and the mega trends.
We have here on number one, the large project offshore wind is a mega trend interconnectors, where we are very active on the technology side. We have been successful with the German Corridor projects, the first site on a 525 kV DC. A land interconnector, which is a milestone, a new area. Then we have on the other side here also the trend to more electrical cars. Then you have the chargers and obvious you need to have cable to this charging station in order to charge the cars. With growing volume on cables, power cables, also the demand for service and accessories will go up. In Photonics, we have a fast-growing or expected fast-growing business in the fiber optic laser technology. Organization. We have a new organization.
I just mentioned before Line has joined, but also in my management team, I have some new colleagues there, and we are now committed to work further to deliver on our promises and to our sustainability targets. The good part is the company is supported by global initiatives from the European Commission. There will be huge investments in renewable energy to reduce the greenhouse emission by around 55% in 2030 and then 100% in 2050. This will trigger huge investments on offshore wind sites. You can see on the slide here from 2022, from 25 GW to 2030, 228 GW, that's nine times. Then again, 4.5 times to around 1,000 GW. That's massive expansion of offshore wind, which is in the pipeline.
We have also investment in renovation of existing buildings, meaning also potentially putting solar panels on the roof, heat pumps to get rid of oil heating and electrical chargers. So there is also a trend, and this needs to increase also from 1% to around 3% in order to meet the climate target goals of the European Commission. So good momentum here to support the business. If you go to the next slide, you see here how the backlog has developed. As I mentioned earlier, we have increased the backlog to EUR 3.1 billion roughly. This is 4.9 x the revenues of solution over 12 months, which is a massive increase as you can see compared to previous quarters. Then you see also the quarterly revenues on solution, which is expected to go up going forward.
Key orders received this year were Attica-Crete, the land cable and AC technology. Shetland, the interconnector in Scotland from the main island to Shetland. BorWin5 wind farm, and then SuedOstLink and SuedLink as a part of the German Corridor projects. So some nice orders. Looking on the next slide, on the low voltage, medium voltage cables, there will be investment also in, again, the buildings, the upgrade of buildings to improve the efficiency. There's a trend in the urbanization. More and more people live in urban areas, and all this needs to get electrified using mainly cables, also from acceptance point of view. Then the further the electricity grid with all the changes in the renewable needs to get upgraded, as it will be not changed only on the transmission level, but also on the sub-transmission and the medium voltage level.
Last but not least, also the equipment in the grid, aged equipment needs to get replaced. As example, we have just recently replaced the Öresund cable from 1973 by a new cable as it has reached its end of the lifetime. The other megatrend is the electrical vehicles, where it's more and more coming and there's a lot of million charging points planned until 2025. This also needs a lot of cabling in the cities in order to be able to charge the cars. With this, I would like to hand over to the financial highlights to Line.
Yeah. Thank you very much, Alex. The next seven slides or so is a little bit of looking at the historical performance of NKT and the different business lines as well as NKT Photonics. Then we look ahead into how our outlook looks for, and how it ties into what Alex just touched upon with the nice developments and megatrends around us. So if you look at the first financial slide, 16, the overall group performance, the combination of both NKT Photonics and the cables you have here. So if you start looking at the revenue development, it is obvious if you look at the small rings in the red and the blue above the stacks, that from 2017 and ahead, NKT Photonics until this year has had a very nice growth, actually. That also panned out to some margin that were very nice in those years.
Then unfortunately, as other companies, NKT Photonics is impacted by the COVID-19 this year. Therefore, we see the growth decline on the revenue side of things. Then when you look at the cables part, we had some nice growth coming into 2017 on the revenue, and 2018 and 2019 that had a flat and a shortfall due to the lack of orders. We simply won orders period of time. That panned out also into the earnings at the lower end of the graph here, where you see the negative effect of the fewer projects and the lack of utilization in the factories. What we've seen now in 2020, and if you look at the last 12 months, it is an upward trend, especially on the cables.
So you see the larger order intake, and you see the execution of the orders already on hand, which is giving a 19% growth for NKT Cables alone. You also see the earnings here, increasing with that high utilization. If you flip to the next slide, going in a little bit in on the segment that Alex also touched upon. So it is, as you know, a varying business in terms of contribution of revenue, and associated operational EBITDA. For the Solutions business, which is the major part of the cables, there is a clear strong link between the revenue part and the contribution into the EBITDA. What you see on the Applications business here, the orange, is the large top line and then the lower margin business, that corresponds to the lower end of our EBITDA levels.
Both Services and Accessories and NKT Photonics here has a good margin with the revenue generated there. But that's kind of how the development on the mix flows. If you go to the next slide, the following ones will be more of a deep dive into each of the business lines and NKT Photonics here, and a bit on the history. Furthest to the left, you have the High Voltage order backlog in market prices. Here you see the nice uptake that Alex touched upon fully. When you then go to the middle one, the revenue, that is in standard metal prices. Here you see exactly the development of the revenue shortage in 2018 and the shortcoming in 2019. But where you also see the pickup here very nicely with 35%, due to the High Voltage orders that is supporting the green transformation across Europe.
Going to the operational EBITDA, you then see the margins of the projects we had in 2018 and the shortcoming 2019, of course, impacting the overall levels compared to 2017. You also see that there is a pickup in 2020 related to the projects we won, the better utilization and execution of these. This is, as you will see later in the outlooks, also what we expect to continue ahead, and we have our close attention to that. Going to the next one. A bit on applications here. Applications of around EUR 400 million on revenue. Growing into 2018, a shortfall in 2019, and then you see the growth here in 2020, which I would say is despite COVID. Actually, our spring turned out favorable in terms of not a material impact from COVID.
Now we are at the end of the year and more businesses are impacted by COVID, so we are kind of waiting in this second round to see what kind of market developments will come from this. If you then look at the operational EBITDA with the same time horizon, we were at a 5.8% EBITDA margin in 2017. Then due to market circumstances, we fell very short and I would also say in 2019, and some of you were probably here at that point in time, complexities around our organization and how we run our plans and combined with some external factors made us come to a very low. What we are seeing now is a good improvement and strong improvement of product mix and how we execute on the business here. This is the uptake we are seeing and expecting to come with it also.
If you turn to the services and accessories, which is the smaller business line within NKT, but which has a very nice growth story attached to it. Of course, the accessories also ties in very strongly to the High Voltage Cable Solutions order backlog. So we do expect a good growth momentum to continue here. In the services, it is very dependent on the different services, the needs, any repair jobs needed. But over the years, it has been a growth story. We expect to see the growth momentum continue. When you then look at the operational EBITDA, it is a margin that is in the higher end of it within the business lines. Over the years here, you see a slight decline, I would say. Some of this relates to, of course, some fluctuations of how each of the quarters roll out.
But right now also some investment in warehouses and factories because we are planning for growth and preparing ourselves for that. We could continue to see good margins coming out of this business. If you turn to slide 21, the NKT Photonics. Here you see what we already touched upon, the good growth story, the COVID impact in 2020, and then associated with the growth from 2017 to 2019, a very nice margin pickup. This year is very different and you do see the decline in revenue and even also the cost structure of NKT Photonics taking us to a low. We are through with NKT Photonics investing for the expected growth to come on the flip side of COVID-19. But of course, also to balance this out over the short time horizon. Turning to the next slide.
It's looking into how our capital structures at the end of September look when you looked at our Q3 announcement and how the two big activities here actually impact the balance. If you look at the gross debt level, what you see here is the revolving credit facility that in September closed at EUR 125 million. Due to the interest-bearing receivable, which was a full link into a cash collateral that we were guaranteeing towards the financing partners we have, we had EUR 126 million there. After the balance sheet date, this was removed, and therefore it now is a part of our RCF, the revolving credit facility, goes into a zero on the adjusted September announcement.
The other thing that of course impacts here is the rights issue of our expected of the gross proceeds of EUR 175 expected, which will impact, of course, our cash position and our equity. By an adjusted 30th September 2020, you will see these flows. If you look at the gross debt maturity profile, the orange stacks are the adjusted 30th of September numbers that do correspond to both the rights issue and the cash collateral effects. If you look at the longer-term debt, it is the mortgage loans coming in here. After the factor, we will have unused facilities of full revolving credit facility, which stands at EUR 300 million, and EUR 177 million in cash. To the next slide of the presentation, which is the financial outlook we also touched upon to a large degree in our Q3 announcement.
Just recapping here what it is we see and expect. We specified the 2020 guidance to the upper end of our guidance on the revenue and operational EBITDA. On the 2021, we are early guiding, I would say, here a higher revenue than this year, so a growth coming into 2021, and also a good improvement in performance on operational EBITDA to EUR 80 million -EUR 110 million. The underlying assumptions of 2021 when you guide in the early stage is for us that we assume that we won't have a material impact from COVID-19 in our businesses. We will have satisfactory execution across all businesses. We will have additional awards impacting our 2020 financial and the High Voltage, and our applications business will continue to improve profitability and the satisfactory portfolio repairs in our services business line.
On the medium-term ambitions, the 10% compound CAGR growth rate over the period and associate operational EBITDA margin of approximately 10% - 14%. The underlying assumption of this is also the COVID, no material impact. It is an optimal utilization of our factories and installation assets as well as a continued successful awards of High Voltage orders. A project execution that is good and strong, and an application that continues to improve profitability as well as services and accessories keeping the growth momentum. That will take us into the medium-term ambition level. If you flip to the next slide, similar NKT Photonics, keeping the outlook from October as stated, and not at this point guiding on 2021 or medium-term.
For this business, we would like to see it coming out of the COVID in a more stable business or markets. Then we expect to see that the revenue will pick up again in terms of growth rates and associated profitability. On this next slide, the capital structure target. Just to recap what we came out with also on the Q3 announcement, a change in our expected leverage ratio target, which the rights issue, of course, is a large contribution to. It is going to a 1x leverage ratio target where we before was a 1.5x.
We do, as Alex also said, aim for this level, certainly to have a stronger balance sheet to support also the transformation of the company into a larger project-driven business with a portfolio of projects that has a significant size and also a certain complexity to it and a span of time that is longer than we have seen historically. If you turn to the next one, the next two slides are more on the exact rights issue. What is the offering structure? There is, of course, much more to find on that also on our website. What we expect from the rights issue to be seen is, of course, approximately EUR 176 million in gross proceeds. A right issue in the subscription ratio of 1:3 , which means that for all existing shareholders, they will receive one subscription right per share.
Three subscription rights can be converted into one share in this right issue. On our investor side, we can say that some of our largest existing Nordic and international shareholders have expressed their support directly to us on the rights issue and taken their share of this. Coming back again to the use of proceeds, strengthen the financial foundation, securing NKT comes into this new level of more scale, more different project portfolio, and having a sustainable capital structure this period in time. The last slide before the Q&A is a little bit on the timing here. Today is the publication of the prospectus, and from Monday the rights trading period commence. It will close at 4th of December. At the 10th of December, we will know the outcome of the offering in this. With that, I will turn over to the operator for Q&A.
Thank you very much. Ladies and gentlemen, as a reminder, if you wish to ask a question, you will need to press star one on your telephone keypad and wait for your name to be announced. Again, that is star one for any questions. Our first for today is from Artem Tokarenko from Credit Suisse. Please go ahead.
Good morning. Thank you very much for taking my questions. I have three, please. Firstly, could you talk a little bit about why you've decided to increase the size of the equity raise from initially planned 20% to 33% now, and does it imply any incremental investment needs?
Yeah. In May, when we did the first ABB of a little bit more than EUR 90 million, we had one project awarded, that was the SuedOstLink. Afterwards, we were successful in the SuedLink with more than EUR 1 billion, followed by Shetland and BorWin5. So we were extremely successful, and so that has resulted in that investment has to a certain extent increased compared to the original plan, what we had.
Okay, thank you very much. But just to double-check on this comment basically relates to the EUR 150 million of expansionary CapEx , which you already disclosed this summer.
Yeah, this we disclosed when we had the press release about the SuedLink. We said approximately EUR 150 million, and afterwards, we got Shetland and BorWin5. So this is approximately number. And so we were not so specific here.
Okay. Thank you very much. My second question is around your debt. Could you maybe give some comments on whether you expect any early redemptions of debt on the back of this? What is your plan with the hybrid bonds, which is up for the first call in 2022?
Thank you for the question here on the debt. So far, what we are going out with now is an assumption base that we are lowering our debt with this rights issue to get to also the targeted leverage ratio. The hybrid is up in 2022, as you say, and we will, at that point, consider whether to continue or refine it in a different manner. NKT is coming through a large transformation now and over 2021. We will also allow ourselves the time to decide on that.
Okay, thank you. My last question is around the project pipeline. At Q3 conference call, you mentioned that there are a couple of projects for you to win later this year. We have obviously seen Prysmian announcing one of the big projects in the markets. Does this change your outlook for this year in any way? As a follow-up to this question, I think the submarine cables market has been around EUR 3 billion-EUR 4 billion this year. Considering all the projects you track, how do you see the market in terms of the size for the next year?
It does not change our outlook. We were very successful, and we cannot win everything. There are still other projects out where we have chances, and we tender this project and follow up on those. For next year, there is a lot of projects in the market, and the question will, the timing remains as planned. There is a whole list of offshore wind, but potentially also interconnectors, if they materialize on time, and on DC technology, but also some on three-phase AC. The market outlook looks good also for next year.
Thank you very much.
As a reminder, ladies and gentlemen, it is star one if you have questions. The next is from Kristian Johansen from Danske Bank. Please go ahead.
Yes. Thank you. A bit along the line of the increased size of the equity issue compared to what you communicated in May. I do fully understand that this reflects your very successful order flow over the summer specifically. If we look ahead and look at the pretty substantial order pipeline, which you have also highlighted, the capital structure you will have post this rights issue, to what level of further projects will that be sufficient? I am obviously specifically looking for the scenario where you again win quite a lot of large orders. Can this capital structure capture that scenario as well? Can you elaborate a bit on how you see the planning versus the pipeline for the next coming years?
As we see it now, yes, the equity raise here will support fully our investments in Karlskrona and in Cologne for the extensions we need to supply the orders we have won. If you ask me on the specifics about our project pipeline in general, there is a lot of different scenarios in that is not, at this point, any choice of further expansions. This game is about utilization and execution and getting the right wins at the right time, and getting that whole, you can call it a puzzle, to be optimal for us in how we run our capacity. At this point in time, that is how we plan and work very actively, secure a good pipeline, a good execution, and high utilization.
Okay. That's fine. That was all from me. Thank you.
Okay. There are currently no further questions waiting, so I will hand back to the speakers for any further remarks. Oh, apologies.
Yeah.
There is actually. Sorry, sir. We have had some follow-up questions from Artem. Please go ahead.
Thank you for taking my follow-up. Just if I may, on Photonics business, does the big equity raise kind of gives you a higher flexibility around the disposal? And maybe, do you expect any change in your plans with regards to that business on the back of this?
Photonics, right now, what we are doing is that on the strategic review, we postpone that. We need a bit of more market stabilization to have a good conversation and assessment of this. So in the rights issue as such, it is not changing any in that regard. Eventually, the Photonics business and strategic review is dependent on the business and how that is performing and how the market looks in general.
Okay. Thank you very much. And my last question may be on the discount of the rights issue. Could you maybe talk a little bit about the third process of specialty discount?
Michael.
Yeah. I will take that, Artem. Michael here. When we looked at how to price this, we obviously looked at a similar transaction in the markets. And the discount that you see to the TERP is what we believe is to some extent market conform. So we believe that when we have looked at what we have seen in the past in rights issue, well, then you have seen a discount at a similar level. So I think that has kind of been the assessments and analysis that we have done before deciding on the exact structure of this offering.
Understood. Thank you very much for your comment. Thank you.
Okay.
Any further questions?
No further questions, sir.
Okay. Then I would like to close this session, and thank you for your time to participate in this information about the rights issue, and wish everybody a good day. Thank you very much. Bye.