Ladies and gentlemen, welcome to the analyst conference call of PNE AG regarding the presentation of the half year results 2019. At our customer request, this conference is being recorded. As a reminder, all participants will be on a listen only mode. And afterwards, there will be a presentation there will be an opportunity to ask question and answer. May I now, I present you Mr.
Markus Lesser, CEO, who will lead you through the conference call. Sir, please go ahead.
Good morning. I would like to present you the results and the activities of the last half year of our company. To summarize it, I'm glad to say the company has been experiencing a very solid growth. The basis for these improved results were driven by growth in all areas of our businesses. In particular, it was driven by the success in project development and sales.
With around 289 megawatts And this half year, it was the highest volume of sales in onshore wind in the P and E group ever. Additionally, it must be said that this especially is related to the international projects like Malabagat in Sweden with 113 Megawatts and Jatna with 132 Megawatts, which, by the way, is the biggest project in Poland at the moment. Together with 41 megawatts in Germany, we are now having 332 megawatts under construction. Also, our wind farm portfolio, 2020 is growing. Now we are at a sum of around 95.7 Megawatts, whereby 24 0.4 Megawatts actually are under construction, and that despite delays in permitting process in Germany just In the area of services, we launched new products like, for example, a radar solution to minimize blinking lights during the night, which improves the acceptance of wind power.
This all led to the result that the EBIT tripled and the EBITDA doubles. And our gross cash position grows to EUR 140,000,000. Other activities in the first half year have been P and E paid a dividend of €0.04 per share. Doctor. Susane Sabreva had been appointed to the Supervisory Board.
Furthermore, our program scale up is on track. So the evolution to energy solution provider shows first results. Looking to the pipeline and our activities in project development, we could say that we completed projects in Germany and France, Ghetto Repowering and Schlenzer had been completed as well as La Pier, Project La Pier in France. We also sold projects in Sweden with Malabaggett and our project Laksasgaard in Sweden as well was completed. We sold Malabaget to Enlight Renewable Energy.
And in another big project we sold to Stadberg Convention, which is Jersna. You have to consider that Jersna and Barwice, the project in Poland, are the projects where we won the tender end of last year. So they are already sold and now under construction. Jasna is the biggest project in Poland, and we have to do a 70 kilometers overhaul line, and we negotiated all contracts and do the construction management for our customer as well as we do it in Malabagay. All these projects are also connected with an operational management contract.
So we extend our businesses in service to Poland and to Sweden, which is one target of our scale up program. We acquired projects in Panama, a project of around 3 52 megawatts. Early, we sold to Berg Wind. This was a project which was not permitted and which we don't count in our numbers just right now when we talk about 404 Megawatts, which we put in operation and started construction or in the sales numbers, it is not considered. Our own generation portfolio grows to 89 megawatts.
These are the Wind Farm portfolio projects in operations, together with Wilbib, which is our biogas biomass power plant. Looking to the project pipeline, we could see can see that the total number has increased to 4.952 Megawatts. And remarkable is that the megawatts in Phase 3 in Germany and France, which are our core markets, went up to from 139 megawatts to 4.88 megawatts. Looking into our wind farm portfolio 2020, we are still in plan. We have now a volume of 90 5.7 Megawatts of projects, which are in operation or under construction.
So 24.4 Megawatts are under construction Of these, the remaining projects are identified in our portfolio, in our portfolio pipeline and developed in different development stages. While we have to say in Germany, we have a shift of development and permitting issues. Nevertheless, we are still on track. The earnings accrual in the Wind Farm Portfolio 2020, which have not been realized yet. The new amount is €26,000,000 The power generation EBITDA grows to €6,000,000 Our program scale up is fully on track.
So to become an energy solution provider, we are fully consistent with our plan. We have developed the or we are at the development of the first project pipeline in the first market with Panama. The first projects, I have to say, are in development. We in Romania, France and Germany, we started just right now. We provided and provide additional services and expand consulting solutions.
For example, for a big German bank, we got an order for refinancing to prepare refinancing where we could which we wouldn't have gotten if we would have been only a project developer. So you see first actions and first orders we get in place. If you look to the financial results, the investments of international markets are paying off. I think this is a very good title, which really shows the investment of the past. Think about the times several years ago where everybody expecting investment in this international market and the results out of international markets and now we see that.
So that means, especially if you see the total output, €85,600,000 in opposite to the last half year results, €38,200,000 sales €65,600,000 opposite to €28,400,000 The EBITDA, as said before, is around about nearly doubled from €8,700,000 to €18,500,000 EBIT tripled €12,900,000 instead of €4,100,000 According our announcements, we said in the past we would like to give you a better overview, and that's why we established the segment reporting, which shows in the segments Project Development, Services and Electricity Generation, the progress. Starting with the project development, you see that the EBIT growth EUR 12,100,000 to EUR 65,400,000, The project development output growth to €74,600,000 The services grew from to €7,800,000 This is a plus of €45,700,000 percentage, mainly driven by the new service offering and by our acquisitions. That immediately burdens our EBIT because of the restructuring costs and the cost of the acquired companies. Nevertheless, we are in a good shape. Electricity Generation grows by €8,300,000 it grows to €8,300,000 EBIT at €2,900,000 as well as growth.
And so therefore, in all these areas, as I mentioned in the beginning, we had good results and a good growth. If we look to the balance sheet, it's rock solid, we said, a rock solid balance sheet. We have some effects here in this balance sheet just right now. The total asset increased from €452,000,000 to €521,000,000 €900,000 which is partly driven by the first time application of IFRS 16, which is caused by the leases and the evaluation of the leases. This higher total number for total assets leads to a lower percentage of equity, whereby the equity stays nearly in the same amount and slightly improved as in the year before.
So this is the reason why the equity ratio is still solid, but it has been lowered from 48% to 42%. So the book value, if you see the equity is still at €270,400,000 The book value of means a book value of €2.92 per share. It's always remarkable that we have the liabilities debuts to banks at €89,400,000 This is and for the non current debt and for the current liabilities, we have €40,800,000 which nonrecourse financing and liabilities and therefore especially to consider. I'm very happy that the liquidity has increased to €140,000,000 coming from €129,000,000 I think it's a very good sign while increasing our portfolio and working on these projects, our liquidity is still growing and shows how solid this business is. What do you what do we want in the Q2?
Yes, we work on the projects which we have under construction, which is within 32 megawatts. We would like to get the permits out of the big project pipeline of 4 88 megawatts in Phase 3 in France and Germany, which also is one part to continue the build up of the wind pump portfolio 2020. We have some sales processes ongoing, for example, United States. And then, yes, we develop our further markets. And the 1st new market is always the first thing which we have to consider and this is Panama.
We are looking for new markets. Also, we now start the PV projects in international markets as well. So, there we see a good potential. Also, we're working on additional products for the market and services and intensify our international footprint. So in sum, we can say we can confirm our guidance of €25,000,000 to €30,000,000 in EBITDA and €15,000,000 to €20,000,000 in EBIT.
Thank you very much.
Can we ask the question
answers? We have one first question from Constant von Blumental from FirstEnergy Equity. Please go ahead.
Good morning, Marcus. This was a pretty strong EBIT in H2 and your H1 sorry, Q2 and your H1 EBIT amounted to €12,900,000 So you have already almost reached the lower end of your guidance. Do you feel that at the end of the year, it is more likely to be at the upper or at the lower end? Or to say it another way, is it a reasonable assumption that the second half, you will not have so large projects to sell. So we should rather expect a slightly lower H2 EBIT?
Yes. Thank you for the question. It is the results we did we got came from the sales, and we have now to do some works. That means we have to construct the projects and finalize our projects, and then we get another milestone. So therefore, these are results which I cannot say that we have to extend our guidance or something like this.
In the moment, we think it will be more on the higher level of the EBIT guidance that what we estimate And the rest is ongoing business. We have to depend on wind because of our portfolio relates our earnings, relates to wind performance and etcetera. So these are points which have to be considered. So therefore, we have always to consider a range. Just right now, we think it's on the high end.
All right. Thank you for that. We have seen a very, very weak market in the first half of the year with just 2 87 Megawatt installed and the Wind Association has reduced the overall installation for the year to 1.5 gigawatt. You, as far as I can see, had quite satisfactory H1 in Germany. And so you don't seem to be too much burdened by this very weak market.
Nevertheless, this is of course a general problem for all the companies. And we will see after the summer pause a meeting in Berlin with our Minister, Altmaier. And do you expect any regulatory improvements this year? Because this lack of approvals is, of course, a serious issue for the
whole sector? Yes. To be honest, also we have an impact on these delays. This is caused by a change in the permitting procedure, so everybody is hit by that. So but nevertheless, because of having a bigger pipeline, we always have something where we can say, okay, this project is not coming, then the next one is coming.
So therefore but nevertheless, also we have an impact on that, and we also push the politics to change the EG and especially the permitting procedures. And so from that point of view, we expect that the politics has to do we'll do something because just right now, there's a big, big pressure on the politics to do something in terms of the climatic change and to meet their own targets as well.
All right. Good luck for that. Could you tell me how many approvals in Germany you have at hand that have not yet been in the tender in megawatts?
We have we won just right now, at the moment, 28.7 Megawatts we brought successful in tender. The other projects, as I mentioned, 260.2 Megawatts, It's around all of them, yes, with exception of this 28.7 megawatts are in permitting procedures, where we also file the application to the authorities.
All right. When I look into your Q2 figures, what's striking is very high interest expenses of minus €4,800,000 that was much higher than last quarter. Is that one off in? I mean, the part of the effect is, of course, the IFRS 16, but that's €500,000 So could you explain this rather high interest expenses in Q2?
It's related to swaps, and that is the main reason due to the fact that this is considered.
So that means that it's a one off. We won't see this probably not again in the next quarters?
Exactly.
Okay. You certainly have seen that the German government has supported 20 so called real laboratories for CO2 poor gases, especially hydrogen for the next 2 years. And P and E also has plans regarding power to gas and hydrogen. Do you see that P and E directly or indirectly benefits from these plans?
Yes. In any case, we think this is a good step forward. Having in mind that 2 years 2.5 years, 3 years ago, when we stepped in with our strategy, hydrogen was a very weak issue, and nobody discussed about this. And now the government is working and is giving 100,000,000 subsidiaries to support this whole issue, I think, is a good progress and shows how the dynamics grows in this particular area. And so therefore, we are still working on offshore solutions, and we are prepared to invest if there is something where we can get now out or get results out, yes.
So it must be economically feasible.
All right. One last question from my side. According to the Bundest Netzagen tour, the plans for installation in Northern Germany are to kept further. So only 786 megawatt versus 902 megawatt previously. And furthermore, Lower Saxony as a whole is to be declared so called grid extension territory, so netsausbaugebied.
Your project development in that area?
So, I think when I look to our projects, we see projects in the near future. And if they are still on this low level in this permitting situation, we don't see effects for us. But nevertheless, we will also there is a big pressure against this regulation. So therefore, I don't think that this will stay.
All right. Thank you very much for taking my questions.
Thank you.
Thank you. We have another question from Mr. Jan Bauer from Warburg Research. Sir, please go ahead.
Hey, this is Jan from Warburg Research. Just a few questions regarding your pipeline. So you somehow sold off your pipeline in Poland and Sweden. Do you see any more projects coming up from the Sweden side?
Yes. In both countries, we are as you can imagine, if you for example, Poland, if you have 20% market share of all projects there, around about close to 20%, then we are a natural partner for a lot of project developers. So, we are just right now are in discussions whereby we have on the greenfield area, we have some projects in the pipeline. In Sweden, it's nearly the same. So just right now, we're working on several projects in Sweden as well.
One project is far advanced. So we think we the story goes on.
All right. Regarding your Panama projects, whether they are in a advanced development stage or don't you have any insights on that?
Yes, we have one project in the further development stage. And for us, it's an issue. Just right now, we try to figure out how where can give us the best pricing for PPA. We are in the last stages to take over the projects in the right manner. So we have to do something to create the quality we would like to have and where we think we get the best margin out of the market.
So, yes, we are working on it, especially on these things, and so we are in plan.
Okay. Regarding your France project, so you shift a lot of projects from Stage 2 or 1 to Stage 3. When do you expect those projects to come down in your sales? So is it could it be this year or do you more expect it to be in 2020?
No. In France, you have longer times after the permission, which means 1 to 2 years usually where you have to wait or where you usually get a lawsuit is filed. So it's nearly 90% of all French projects get this lawsuit against this wind farm. And so we see the first projects coming up maybe in 2021, but I don't see that all projects are ready in 2021.
Okay. So you don't expect to put some France projects into your 2020 portfolio?
Just right now, we don't see it, yes. So to be honest, some of these projects have been we don't need. And on the other side, we have the German project. So it makes sense to have a pure German project pipeline just right now. But nevertheless, maybe someday we put some branch project and just right now we don't cannot confirm that.
Okay. And you mentioned milestone payments from your project sales as soon as they are finished. So you get some you expect milestone payments on your onshore project this year?
I'd summarize this to milestone payment. In general, we have several contracts. Let me for example, Sweden and Poland, yes, we have a construction management contract, and afterwards, we have the service contract. So the management the construction management contract is finalized, and we will get paid for that when the construction is finished. So that's what I summarized with milestone payments.
So it's not really milestone payments, it's a part, it's something like that.
Okay. Thank you. Regarding your service business, so we don't you don't have that high or that long reported history on services. So regarding consulting and other services than O and M, can you give us some light on how high your margins are in this business or what do you expect to have on like EBIT margin on this business?
Yes. Our target according to our strategy 2023, we said our target is a volume of 20 5% of our increased number, and this was a number around 40 €5,000,000 we said and out of €40,000,000 around €45,000,000 And we said onefour of 25 percent of this EBIT, which we expect 2023 should come out of services. So this is what we like to have in the future. So that's why we have to really speed up here, but we do. And just right now, the EBIT is like it is in the moment because we have to invest in the companies.
So this is in personal, in companies, and that's what we relate to the services for itself, yes? So in some, we will have, at a special moment, much better results, but just right now, they have to pay their investments out of this segment, yes?
Okay. And regarding your O and M business, can you give us a figure at what level your, I call it, volume under service currently stands?
Yes, we are at roundabout we are about 1500 megawatts, which we have in operational management, And we extended our services by financial services, so support civilian power wind power plants or other plants. And also, we do the management of the trading of energy like PPAs also for us, also for 3rd parties. So there are solutions in. So this is the business we do the construction management for 3rd parties, and it is slowly but steadily we launched this product into the market. And so this is the package we now where we file products in the moment and launch it into the market.
And regarding your capacity under service, so now you have something around 1500 megawatts. So you expect the 200 megawatt portfolio to be added to these services or yes? Okay.
As you can imagine, and we would like to have Jasna and Malabagette, these projects we would like to add as well because there we have contracts just right now. So when they start operation, we started them servicing.
Okay. So you should reach somewhere around 2,000 megawatts under service as soon as those projects are finished. Do you have
any intent? Yes.
So do you have any intent to increase your targets on O and M Management because currently you talk about 2,200 megawatts under management in 2023. So I would say this is likely to be reached in the next 2 years.
Yes. So we just right now finished the contract here. And to be honest, let them finish, let us go on the road, and then let's talk about new targets. We have to support the people. We have to train the people.
We have to make additional efforts to get acquisitions. So therefore, this is a complete package. So just right now, yes, we can increase the target at one day, But let's finalize this at first, yes.
Okay. Regarding your PV projects, you have already some insights at what point we can expect the first PV projects to be sold?
Yes, we have it in our plan. Next year, we would like to finalize the development of the first project, and then the sales should be close nearby, yes, so next year. Okay. What size do you expect
for this first PV project?
We have the first project close to the Dutch border in Western Germany, which is around 10 megawatts.
Okay. So thank you. Thank you for taking my questions. I finished so far, yes.
Thanks. Thank you.
Thank you, sir. We have another question from Madame Lora Lopez from Baader Bank. Ma'am, please go ahead.
Good morning. So my first time on the call. I have a couple of questions. You signed the first PPA contract in the Q2. So can you maybe give us a little bit of details how this will work and how long is this PPA contract for?
And is the level similar to the previous EEG subversion that the wind farm had? Secondly, the tax credits are expiring soon in the U. S. So how do you see the industry adapting to these changes? And what are the impacts that you expect for 2020 and onwards, so market dynamics changing now potentially in the U.
S? And then I will do another one, maybe these 2 first.
Okay. Related to the PPA, we did with Lischblig. This was one of the first PPAs in Germany, maybe the first. We got a big market attendance because of that. This was related to our wind farm or is related to our wind farm, Pappen Roader.
We took over this wind farm, which is around 21 megawatts with machines which are now for 17 years in operation. And we said, okay, for 20 years in operation. And we said for the next 3 years, we need a contract for PPA because we want to prepare them for repowering. We need it for the permitting phase, and so it was not clear how we can repower it in the last detail. So we have to get this under control, which is the usual work.
For that, we need time, and therefore, we need the best pricing for our energy. And we had to go to the energy market because the EEG subsidiary is not anywhere paid for this. So had not paid for this. So this is the situation, which showed very good results and which gives us the big support in the market that others would like to do it as well in this manner. So even if Pappen Road, if this is now only in operation, we make earnings.
So if we go for repowering, we make earnings. So therefore, it's a win win situation for us with these conditions we negotiated in the PPA. So just right now, it's limited to 3 years because then we would like to repower. So related to the United States, United States is a very special figure just right now. Just right now, gas and coal power plant are still working.
They should have shut down. Trump and others in some countries, they don't want to do this. So on the other side, you have the wind farms, which are increasing because of the PTC of 100%. They just right now have to catch this PTC 100 until the next year. So there is a big increasing market in the moment, which leads to lower energy pricing.
So the energy pricing goes very, very dramatic down. There is no security in that just right now in some areas. So depending on the area, so California has other rules than Oklahoma, for example, and that means we have to differentiate. But in general, this is the picture. So we will see we see there's after this after the next year that the numbers of constructed projects will go down.
And just right now, that's a little bit and we see because this will be the top of it, but we will still be on a high level in the United States in terms of constructive projects, but with the pressure on the margins for all participants.
Thank you, madam. We have further questions. We have no other questions, sir.
Yes, then thank you very much and have a good day.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.