Ladies and gentlemen, welcome to the PNE AG Full Year 2023 Conference Call. I am Mina, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Markus Lesser, CEO. Please go ahead.
Good morning, everyone, from my side. Thank you for joining us today in this conference call on the results of the fiscal year 2023. Going on, I would like to share with you an outline of the presentation and the procedures of today's call. As usual, I will start with an overview of the operational and financial highlights of the year. After that, I will comment on our financial figures and operational achievements in more detail. I will conclude my presentation with our outlook for 2024. As always, we will then open the line for the sell side and listen only. All other participants will stay in listen-only mode, as it is our company's procedures for years. As usual, our slides that I will use can be found on our investor relations website. Before I comment on business developments, I would like to address a personal matter.
As you know, I have decided to resign from my position as CEO with effect from the end of July 2024 for personal reasons. I did it on own wish, without being forced by the supervisory board. My health is okay because I got this question sometimes on the desk. It has nothing to do with the situation of the company, which is excellent. Having said this, I would like to draw your attention to slide 3. In operational terms, we had a very successful year and made good progress in all of our business segments. I want to point out that we did this while dealing with a challenging market environment with several external factors that slowed us down. The whole industry was and is characterized by numerous factors that led to delays in projects.
For example, delays in transport permits meant that some projects had to be postponed until 2024. The Ukraine and Middle East wars create uncertainty and keep supply chains volatile. Higher interest rates and further increases in material prices also put pressure on margins. In order to counter these challenges, we have acted with foresight and launched multiple activities to secure price quality. For example, we ordered 11 transformer stations and 700 kilometers of cable a year ago, which we are now receiving at a good price and at the right time. We were also able to secure KfW loans of around EUR 400 million at favorable conditions last year. This helped us and is still helping us at the moment to partially offset the negative effects, also helped by the higher tariffs.
We are still close in discussions with OEMs, municipalities, and politics, and we are pushing very hard to keep those negative effects down to a minimum, while we see now in the moment, release on the manufacturer side. In view of these market conditions, we are satisfied with the project progress achieved in 2023. Our project pipeline reached another new record high level, reaching 19.1 GWp. This represents an increase of 61%. We received building permits for nine wind farms in Germany alone, 162 MW in total, and we were successful in all tenders in which we participated. We have sold, put into operation, or had under construction projects of around 781 MW/MWp at the end of the year 2023. We continue to grow our own wind power generation portfolio from 290 MW end of 2022 to 370 MW as of December 31, 2023.
Due to this increase in production capacities, we were able to grow the power generation output by 36%. Construction activity is high despite the delays. As per end of December, we had projects with a capacity of 288 MW under construction, mostly intended for our own generation portfolio. We are especially pleased with the performance of our service segment. It now manages a capacity of around 2.9 GW, representing an increase year-over-year of about 16%. This is an impressive performance behind the number. I will come back to this to the service segment later. Slide 4.
Looking at the financial year 2023, the results were impacted by the ongoing investments in our generation portfolio and development pipeline, driven by a strong year-end business with PV project sales in Italy and Romania, and a strong quarter in terms of wind yields, as well as the commissioning of further wind farms before year-end. We were able to achieve our guidance. Total output grew by 10% to EUR 167.8 million, the highest number in PNE history. This is remarkable considering the hindering factors I just mentioned. EBITDA increased by 30% to EUR 39.9 million. With that, we achieved our full year guidance of EUR 30 million-EUR 40 million at the upper end. Due to the investments in our portfolio and the high construction activity, our cash position came down by circa EUR 31 million compared to end of last year to EUR 90.4 million.
It is worth to say that our liquidity position, including credit lines, increased to EUR 219 million. This shows that we are well positioned. Equity declined to EUR 200 million, mainly due to interest rate swap valuation effects. Next slide. Looking at our business over the last years, you can see that we have a strong growth on all KPIs and that we met all Scale up targets and sometimes significantly surpassed them. You can also see that our power generation portfolio now has reached a critical size in a positive manner. It means that the positive contribution from the portfolio will outweigh the negative effects on our P&L going forward. All this shows how resilient and robust our business model has become over the last years. It shows that we had the right strategy in place, have taken the right measures, and executed well.
We are well prepared for what is going to come in the future. Next slide. If you look to the expansion of our own generation portfolio, then we see that we still are well in plan. Looking to the Scale up 1.0 target, we had a target of 500 MW, which we significantly surpassed by 30% to 651 MW. So we are well on the way to meet our targets in 2027 of 1.15 GW, GWp. Interesting to know is as well that we have an increase of 36.5% compared to the fiscal year 2022 into 695 GWh of production. And this is done by 370 MW of onshore wind projects in operation, which we had at the end of the fiscal year 2023.
The highest number we have ever under production for our IPP portfolios, all-time high, are the 281 MW 281 MW in Germany and in France, which are intended to put in our portfolio, which are now under construction at the end of fiscal year 2023. Looking to the project pipeline, we made a big step forward. You have always to consider that the areas for the project side are rarely. Therefore, it's absolutely necessary to secure them on early stage and in a and we do greenfield. Therefore, it is absolutely necessary to do it when you have the chance to do it and increase your portfolio. That's what we did. Our total pipeline grew to 19.1 GW, which is an increase of 7.2 GW.
That means, in wind in wind onshore, +1.6 GW; in PV, +3.1 GWp; and in offshore, we're working on 2.5 GW, which is a big increase of 61% on a year-on-year basis. Basis for our IPP production and portfolio is the wind project pipeline, especially in Germany and in France, where we have 697 MW in permitting phase. Have a look to the phase 3 projects, 499 MW. This is a new high, 499 MW in permitting status at the end of the year. And I can tell you that we have just right now a higher number. That means that we are on good path to increase significantly our IPP portfolio with these kinds of projects, which are now in the last phase of the permitting status.
We increased the portfolio and with 10 wind farms in Germany, 270 MW under construction, and 1 project in France, 11 MW under construction. We have the projects for our IPP portfolio already defined. We got, we finalized the project in Hultema with 60 MW. And this was sold in 2020 and is now ready. The pipeline in PV increased dramatically high, 3.1 MWp. And, we see also on the sales side that we have, now the success out of these PV activities. You see, in Italy, we sold 12 PV projects. And in Romania, 5 PV projects to TotalEnergies and another project with 61.1 MWp. These are all PV projects. And see that we make the first that we get the first income out of these PV activities.
Looking to the P&L, we can see that the investment in our development pipeline and the investment in our IPP portfolio impacted P&L heavily as well as the swap effects. We have a total output which grew by 10% to EUR 267.8 million. As I said, the all-time high. EBITDA increased by 30%. The operating performance and earnings are driven by and you see this overview, results from power generation which increased, the project sales, yeah, and certainly is the strong performance of service business and the internal sales related to the buildup of own generation portfolio. Personnel expenses increased. Yeah, we have higher salaries. So the very well trained people are still seldom in this branch and are needed.
So we have to pay higher salaries and we increased our numbers of employees due to the fact that we have a higher amount of developed projects and a higher amount of project development. Interesting is the situation about the swaps. I know since the whole time all the time we sit together and always I explain the swap situation, which affect us that heavily. So the financial result comparison year-on-year are usually distorted by the valuation of the interest rate swaps and loan liabilities. This time, we have a negative impact from valuation of -EUR 32 million. This is a big, big effect related to IFRS issues and it says nothing for me. It has nothing to do with the usual operative business, but it's always affect our net income. We have an the total output growth in all segments.
If you look to the segments, the project development output increased by 3%. The EBITDA decreased to EUR 17.9 million due to project delays. We had to face that the projects had been postponed. So it's a bad thing and a good thing. The bad thing is that we couldn't manage to get the payments last year. But the good thing is that the projects are postponed and not gone. So and one example is that Siemens said that they want to make a technical review on the SG170, which is still ongoing, which led us to change machines in some projects, which cost us 9-12 months. Nevertheless, this project will come and they will come in 2024 and start their construction. The construction will be started in 2024. The services output grew to EUR 30.8 million plus 21%. EBITDA plus 7%.
The difference is mightily driven by the investments in KRITIS. So the critical infrastructure regulation forced us to invest in in software and people. So this is what we can see here. And we will be affected this year as well in service areas due to this fact. So the power generation output increased by +7%. Why only 7%? Because the installed base is higher now, but and we have a good wind yield. But the situation was that the prices for the power, the power prices went down. So the larger installed base and the proof wind yields are all more compensating these lower power prices. EBITDA increased to EUR 60.3 million, +4%. So in the balance sheet, we waited for this is EUR 1.1 billion now. It's so exceeded the 1 billion EUR mark.
The cash position went down due to the fact because of the development of project pipeline and the construction issues and the construction of wind farms. The equity went as well because of this down. The non-current debt is increasing. Liabilities to banks, mainly non-recourse and liabilities from leasing contracts, the usual thing. The more projects we have in IPP, the more increasing numbers do we have. But again, non-recourse. The current liability you have the same, EUR 53 million non-recourse and liabilities from leasing contracts, EUR 7.5 million. And I think this is the specialty. Ladies and gentlemen, this leads me to the outlook. In the last conference call in November, I said that we are starting to see a light in the end of the tunnel with regard to the issues we were seeing in the market.
I can say today that these positive signs were confirmed. Our countermeasures have taken effect and our resilient business model is helping to cushion the impact. For our guidance for the full year 2024 for the group EBITDA in the range of EUR 40-50 million, we confirm EUR 30-50 million. We are planning to sell projects in international markets in wind as well in PV. So in U.S., U.K., Romania, we will continue to build up our IPP portfolio. If it runs according to our plan, this is somewhere between 100-120 MW to be completed this year, which we would result in close to 500 MW in operation by the end of the year. We can also confirm our Scale-up targets we want to achieve by 2027.
With the work we have done in the past years, the foundations of achieving our ambitious targets have been laid. We are still very positive that they will be achieved. So, ladies and gentlemen, before I conclude my presentation, I would like to say something about the United States business because this was one bigger thing. This U.S. activities are part of the planning with a lower single-digit million EUR amount of EBITDA. It is not related only to the sale. If we don't sell, we think that we can get it, this EBITDA with sold projects because we will work furthermore on the project development. So, we are now in the sales path, as you know, end of December. One customer stepped away when we were in the last moment of sale.
So now we have one where we have an LOI and the negotiations are ongoing. Ladies and gentlemen, this concludes my presentation. Thank you for your attention. We are now open for questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handset when asking their questions. Anyone who has a question may press star and one at this time. The first question is from the line of Holger Steffen with SMC Research. Please go ahead.
First, I have one question about your segment development.
Despite higher revenues, the EBITDA of the service segment was weak in the final quarter, only around EUR 150,000. Can you give us some information about this development?
Yeah. Hello, first of all. Yeah, it is one thing that we have to make investments in the software of CRITIS and in people in CRITIS. And this was one step, or one reason why it came to this point. So we expect in total for CRITIS for the critical infrastructure, you know, we have this law in place that we have to secure the critical infrastructure by measurements in our software and everything what has to do with the connection to the wind farms. We are now expecting costs of EUR 1-2 million about this related to these issues. And the first costs took place in December.
Okay. But we will see a normalization in 2024 to former margins?
Yes, we will be affected this year again from this or as well from this CRITIS only partly. This sum went into the services segment last year. So we will be affected by this and by this amount or the year.
Okay. Okay. When we or when we see the strong expansion of your own portfolio, the EBITDA outlook for 2024 seems to be careful. What must happen that you may exceed your guidance?
Yeah, like usual in the business, we have you know, it's it's it's always the same. We have sales activities. The sales activities therefore are in most of the sales activities in UK, Romania, Panama, we are in negotiations. And there's always a chance that the prices can be higher as we expect. That is one hand.
Certainly, I think this is a situation that we have to manage costs in a special manner. This is really mainly driven by the increase of developed projects, which give us a real advantage for the future, but as well for the high activities, as you mentioned, in the construction. And I hope we see the first projects upcoming now where we have a where for example we have now one project gotten earlier as expected. Was not planned this year. So it's another 10 megawatts. So we get additional megawatts in and get additional amounts and get it out of this range. So therefore, I think we are on the EUR 40 million-EUR 50 million range, but I think there are always opportunities to exceed it.
But as well as usual, it's there are always opportunity or always issues maybe too, that there that this will not be let that why we are between EUR 40 million and EUR 50 million. You know, we are always careful. But now we are again, we are on the on the upper side of our last guidance from last year. From therefore, we always meet our guidances. That's that's important.
Okay. Fine. One question about Germany. In Germany, PV project with a planned capacity of 119 MW reached stage three in the final quarter of 2023, 2023. What will happen with these projects? Will you sell them in 2024 or will you add a part to your own portfolio?
We have not decided yet what we do if we put it in the portfolio or not.
So this is something when we have the final permission on the desk and have every requirement on the desk, then we will decide on that.
Okay. My last question, you have mentioned the effects of swaps. And in your report, you have written that you have changed the accounting of these swaps beginning with last October. Now they are accounted as hedge instruments. What will be the probable effect on your financial results in 2024?
To be honest, we would like to lower the effects on swaps we have all the time. You know, every quarter, we talk about the high influence of our results due to the swap effects. If we hedge them, we want to lower these effects. In how much and how big this effect will be, I can't tell you in the moment.
We are just working on this. Yeah.
Okay.
I think it's a complicated question.
Okay. Thank you very much for taking my questions.
Yeah. Thank you.
The next question is from Guido Hoymann with Metzler. Please go ahead.
Yeah. Good morning, gentlemen. Yeah, one by one maybe if possible. So the first question would be, how long is your existing own production portfolio hedged by tariffs or PPAs or the other way around? Are there old wind parks or solar parks included which run out of subsidies soon? I'm asking that to see or to understand how much you are exposed to the decline in the electricity prices we have seen recently. That would be the first one.
Yeah. So yeah, what we did in the past was, that we tried to fix fix, a lot of projects, with, with a PPA and PPA prices.
58% of our total energy production is related to and is connected with PPAs. We get additional fees out of PPAs. And especially for projects which are out of the EEG, we made it happen. Sure. You can imagine that with every year, so it's 58% we are now have under contract in 2024 for 2024. And this will be lowered, I think, around about 35% in 2025, and then it's lowered in 2026. So that this is the status now. We are steadily working on this to still work on PPAs and get PPAs. If you look to the projects which are out of EEG, that not that much in total, it had been 60 MW, as far as now. And now we step out of Papenrode.
In general, in January, we stopped all machines and we now deconstructed in Papenrode, which had been around 22 MW, I think, where we just right now started the construction of Papenrode and the new projects. So therefore, we lower steadily these kind of projects because they are always planned as repowering projects. But we have in all of these cases, we have PPAs of all projects which are out of EEG. And usually, the price is higher as we have in EEG prices just right now.
But so that means, you know, if 60 MW are already, let's say, beyond subsidization, that means that the other 300 MW are still part of the EEG scheme or so. Yeah. And yeah.
Yeah. Exactly. Exactly.
The new ones you're building, they will be, of course, also subsidized then for another 20 years, right? So you always.
Yeah. Exactly. Exactly. So this is, we get you have always to consider that with the new machines, we have higher megawatt hours per year, higher production per megawatt. Yeah. So it is much higher than the old one. And the 60 megawatts also 10 megawatts of old projects of the small machines are bringing much less megawatts than if you have the 10 megawatts with the new machines. So it's a real difference. So that's why we heavily increase our gigawatt hours. Yeah. Even if we are not that much megawatts, if you in the relation, you don't get, you maybe get 10% more megawatt, but 36% more gigawatt hours.
Okay. Understood.
The next question would be, what prices can you achieve these days for PPAs? You know, are they close to the forward prices? You know, so if somebody wants to get a three-year PPA, he's looking at the forward price and then paying a certain percentage above that level or, is every contract different? You know, so how do you perceive that, you know, the negotiations these days? So is there a premium you can achieve, if you're when you're selling a PPA?
Yeah. The good times are gone in this respect that, the high prices from last winter are not anymore available. So, they're coming closer to the EEG prices, with the PPA prices, but they still have an advantage.
So there are enough companies in the market and still increasing numbers of PPA projects and companies in the markets who wants to secure for 5-10 years their energy prices from green energy. So this is a tendency which is upcoming, and we see a much higher market on this. Not anymore with these high prices of EUR 0.12 per kWh or like that, but still an advantage, in opposite to EEG.
Okay. All right. Thank you. And the last two, did I get you right when you said that you expect a single-digit EUR million amount for the US business? And is it?
A single is a double million on a low end, a double million effect on EBITDA.
Okay. Low, so a low double-digit number. Yeah. Exactly. Okay.
And this is part of your guidance?
This is part of our guidance. But, we think if we don't sell it in this amount, then we still have an advantage to the progress of the projects we just have in development. And if we make a pure sale of them, we can get this, this, amount as well. But nevertheless, this is we would like to sell and step out of this business. This is our target.
Okay. Okay. And the last one is, you know, how do you see your position in relation to the turbine and component manufacturers, these days? Can they impose higher prices on you? You know, because I think there is sort of an oligopoly. You mentioned the problems Siemens still has with its onshore turbines.
So, so do you feel like, yeah, they can push through higher prices or, yeah, how do you perceive the situation here?
I think they are. Let me say it other way around. We had an increase in prices, and we had two effects which happened. One effect was that the logistic costs and other costs went down. So, there, and the prices still stick on this higher level. But secondly, we have now new machines on a new level, for example, of 170-meter rotor diameter or above 6 MW, however you call it. And they are more efficient. So for us, it is an advantage now to get these more efficient machines per produced kWh. We have a lower cost.
On the other side, they have still the situation that the prices of logistics are not anymore there in this amount, for example, and other prices are lower. So therefore, I see an increase of the margins in the for the manufacturers. That would be my personal issue. But it's not my business. It's not only my estimation. I can only tell what I think, but they should call how they see their business.
Yeah. Yeah. No, Edwards was rather, you know, concerned about your margins. But you perceive the situation to be still, let's say, net net, bottom line, unchanged. You get more efficient machines, pay maybe a higher price, but bottom line, yeah.
Yeah. It's always more a matter of the quality of the project depending on stops because of birds, effects or other issues. Yeah. Yeah. And there will be a wider variety.
Okay. Okay. All right. Thank you then for answering my questions. Very clear. And, yeah, all the best. Thank you.
Thank you.
We now have a question from the line of Karsten von Blumenthal with First Berlin Equity Research. Please go ahead.
Good morning, Markus. This is Karsten.
Good morning.
Good morning. First of all, I would like to know, do you intend to participate in the remaining three German tenders, with onshore wind projects? And how many megawatt do you intend to put into the tenders? Because the Federal Grid Agency has significantly increased the tender volume of the last three tenders in this year, the remaining three tenders. So I think chances are good to get high prices there. So could you give us a figure what you intend to put into the tenders this year?
Yeah. So, just like uncertain, we went already with three projects to do the last tender, which was an amount of roundabout 26 MW. And we got a building permission for the project Lütau, which is the next project for 28.5 MW, where we intend to go into the next tender in May.
And beyond that, still yeah.
We have our we have our regular base. You know, this year, we will get a lot of projects permitted according to our plan. So and, you see, the production is increasing. Last year, we had a permit of permits of 162 MW. This year, we expect certainly a little bit more. So the first 50 52 MW are already there. So 54. Sorry.
Okay. And we have the first quarter. So so therefore, we will see.
So as soon as you have received the permits, you will try to take part in the remaining tenders?
Absolutely. Absolutely. The next tender is always our target to get it. So we have been three days too late for our permission from Lütau thanks to the permission authorities. So now we have to go to the next tender.
All right. Thanks for that. You mentioned that there is a 6.6 MW project under construction for an external investor. Is that a project you want to sell this year and to complete this year? So can we expect this to reach your P&L?
Yeah. This is already completed. And I think that we are in a final stage of that the customer takes it over. Yeah. So okay.
So that's basically done?
Yeah. It's done.
And so okay.
And then we will, of course, see it in your P&L. Okay. That means that is something for the second quarter, probably.
Yeah. Maybe yeah. Yeah. Exactly.
Okay. You have a very large amount of wind plants under construction currently for your own plant portfolio, 281 MW. Is it fair to say that it is very likely or guaranteed that by the end of 2025, all these projects will be connected to the grid and operating?
Yeah and no. We have some projects where we are in the situation that we have the delivery of the machines to expect in 2025, but they finalized the construction in the beginning of 2026.
So, in total, I think all these projects will be ready according to our plan, should be ready, according to our plan, beginning of 2026 in the first quarter or something like this. Yeah. If everything runs right.
Okay. For how many megawatt can you say from now that it is very likely that they will reach operation before the end of 2025?
This number I numbers I have not on my desk in the moment, but we can send it to you. We will look at it.
Okay. Perfect. Then one last question to your power production segment. You had a very strong result this year given that last year, sorry, given that pricing came down. Do you expect the power production segment to top last year's result given that pricing will be not as favorable as last year? Or what is your expectations?
So what do you think is the most likely event? I mean, it depends on the pricing of the rest of the year, but have you a feeling for the segment?
Yeah. We now in the stage that the first projects are finalized. This quarter will be finalized or finalized this quarter. So that means we get we are now in a higher amount than 370 MW. We are close to 400 MW now, close, which are constructed or ready now or in operation. Let me say it like that. So and additionally, this 400 megawatt, we now the projects are we have some fast-running projects, where we still can we finalize can finalize the project this year.
As I mentioned before, it's roundabout maybe 120 MW in a good case that we finalize the construction of 120 MW and put it in operation this year.
Yeah.
Hopefully, we have not too much problems related to the transport in Germany and transportation permission. That's why I'm always a little bit careful. But it is always a matter of months. Yeah. So this is, but nevertheless, this is the plan. So we're in the first quarter, and I think the first quarter, we finalized already. So we are still in plan.
All right. Markus, I thank you very much for taking my questions. I may say that I regret very much that you leave PNE. And, thank you for all the years of good cooperation and wish you all the best.
Thank you. But maybe you see we hear us one time.
That is the next quarter discussion. So then maybe you can repeat it again, and I will be surprised. I'm delighted. I'm delighted.
That's great. Bye.
We now have a question from the line of Jan Bauer with Warburg Research. Please go ahead.
Hello, Markus. And thank you for taking my question. Hello. I have two questions left. First of all, regarding your service segment, which you were quite strong in 2023, do you expect this development to continue in the next years?
Yeah. Yeah. I think maybe we have this time this year, a little bit lower expectations due to the fact that we have to invest in CRITIS and others in personal and around this. And but again, this is an investment in a in a very positive manner because not everybody can deliver this CRITIS requirement.
So therefore, this will give us a better position opposite to our competition. From there, from that point of view, it's a good investment for the future.
Okay. In the past, you acquired a few smaller service companies. Do you have any further targets on your bucket list, or will the majority of growth come from your company?
No. We are focusing all the time on the situation or focusing on the issue that we say we don't want to do blue-collar work. And we invested last year in a 51% of Bitbloom, which is an artificial intelligence company and has a product, which now where we see the first really good results in meeting issues related to predictive maintenance and optimization of our wind farms. So this is something where we would like to go.
We invest in these kind of companies where we get a better knowledge, but better knowledge will be paid in future. This is the idea.
Okay. Last question, regarding your balance sheet. If you just assume that you sustain your growth path, the balance sheet might look pretty stretched in a few years, in particular as you're not able to unlock your hidden reserves. Do you have anything like a funding strategy, or just really a little bit of light on what options you have in the current market situation?
Yeah. I think we are successful. We have a lot of options. And from this point of view, you have always to consider that we have an amount of above EUR 200 million as hidden reserves. Yeah.
If we would have sold it, that was the minimum price we would have gotten from the market. So there is a real value behind this. And from that point of view, I think, there is always issues and we discuss on a regular basis if or, what we could do in terms of strengthen our financial needs. But nevertheless, this is not an issue where we have any special case now. This is, on a regular basis discussed. And when we have a finalization or we have a need on this, then we will come back to the market.
Okay. Thank you. And, see you for the last time in the Q1 call.
Yeah. Thank you. See you. Bye.
Okay. Ladies and gentlemen, that was the last question. I would like now to turn the conference back over to Markus Lesser for any closing remarks. Yeah.
Thank you very much for your interest. We hear us again. See you and have a good day.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.