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 will be recorded. As a reminder, all participants will be on a listen-only mode. Afterwards there will be an opportunity to ask question and answer. May 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 this 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 MW in this half year, it was the highest volume of sales in onshore wind in the PNE Group ever. Additionally, it must be said that this especially is related to the international projects like Målarbergets in Sweden with 113 MW and Jasna with 132 MW, which by the way, is the biggest project in Poland in the moment. Together with 41 MW in Germany, we are now having 332 MW under construction.
Our wind farm portfolio 2020 is growing. Now we are at a sum of around 95.7 MW, whereby 24.4 MW actually are under construction. That despite delays in permitting process in Germany just right now. 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 triples and the EBITDA doubles. Our gross cash position grows to EUR 140 million. Other activities in the first half year have been PNE paid a dividend of EUR 0.04 per share. Dr. Susanna Zapreva had been appointed to the supervisory board. 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, Gerdau Repowering and Schlenzer had been completed, as well as La Pierre, project La Pierre in France. We also sold projects in Sweden with Målarbergets and our project Laxåskogen in Sweden as well was completed. We sold Målarbergets to Enlight Renewable Energy, and another big project we sold to Stadtwerke München, which is Jasna. You have to consider that Jasna and Barwice, the project in Poland, are the projects where we won the tender end of last year. They are already sold and now under construction. Jasna is the biggest project in Poland, and we have to do a 70 km overhaul line, and we negotiated all contracts and do the construction management for our customer, as well as we do it in Målarbergets .
All these projects are also connected with an operational management contract. We extend our business in service to Poland and to Sweden as well, which is one target of our scale-up program. We acquired projects in Panama, projects around 352 MW. Burley, 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 MW, which we put in operation and started construction or in the sales numbers, it is not considered. Our own generation portfolio grows to 89 MW. These are the wind farm portfolio projects in operations together with Lörsch, which is our biogas, biomass power plant. Looking to the project pipeline, we can see that the total number has increased to 4,952 MW.
Remarkable is that the MW in phase three in Germany and France, which are our core markets, went up from 139 MW to 488 MW. Looking to our wind farm portfolio 2020, we are still in plan. We have now a volume of 95.7 MW of projects which are operational or under construction. 24.4 MW are under construction of these. The remaining projects are identified in our portfolio, in our project pipeline, and in different development stages. We have to say, in Germany, we have a shift of development and permitting issues. Nevertheless, we are still on track. The earnings accrued in the wind farm portfolio 2020, which have not been realized yet, your amount is EUR 26 million. The power generation EBITDA grows to EUR 6 million. Our program scale-up is fully on track.
To become an energy solution provider, we are fully consistent with our plan. We have the development of the first project pipeline in the first market with Panama. The first projects, I have to say, are in development. In Romania, France, and Germany, we started just right now. We provided and provide additional services and expand converting solutions. For example, for a big German bank, we got an order to prepare refinancing, which we wouldn't have gotten if we would have been only a project developer. 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 market, now we see that. That means, especially if you see the total output, EUR 85.6 million in opposite to the last half year result, EUR 38.2 million sales, EUR 65.6 million opposite to EUR 28.4 million. The EBITDA, as said before, go around about nearly doubled from EUR 8.7 to EUR 18.5 million. EBIT tripled EUR 12.9 instead of EUR 4.1 million. According our announcement, we said in the past we would like to give you a better overview, and that's why we established a 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 grows to EUR 12.1 million, plus 65.4%. The Project Development output grows to EUR 74.6 million. The Services grew to EUR 7.8 million.
This is a plus of 45.7%, mainly driven by the new service offering and by our acquisitions. That immediately burdens our EBIT because of the restructuring cost and the cost of the acquired companies. Nevertheless, we are in a good shape. Electricity generation grows to EUR 8.3 million. The EBIT at EUR 2.9 million as further grows. Therefore, in all these areas, as I mentioned in the beginning, we had a good result and a good growth. If you 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 EUR 452 million to EUR 521.9 million, 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 lead to a lower percentage of equity, whereby the equity stays nearly in the same amount or has slightly improved as in the year before. That is the reason why the equity ratio is still solid, but it has been lowered from 48% to 42%. The book value, if you see the equity is still at EUR 270.4 million. The book value of EUR 2.92 per share. It's always remarkable that we have the liabilities, people to banks at EUR 89.4 million. For the non-current debt and for the current debt liabilities, we have EUR 40.8 million, which, non-recourse financing and liabilities and therefore, especially to consider. I'm very happy that the liquidity has increased to EUR 140 million coming from EUR 129 million.
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 we want in the second quarter? Yeah, we work on the projects which we have under construction, which is within 32 MW. We would like to get the permits out of the big project pipeline of 488 MW in phase three in France and Germany, which also is one part to continue the buildup of the wind farm portfolio 2020. We have to save some sales processes ongoing, for example, U.S. Yeah, we develop our further markets. The first new market is always the first thing which we have to consider, and this is Panama. We're looking for new markets. Also, we now start the PV projects in international markets as well.
There we see a good potential. Also, we're working on additional products for the market and services and intensify our international footprint. In sum, we can say we can confirm our guidance of EUR 25 million-EUR 30 million in EBITDA and EUR 15 million-EUR 20 million in EBIT. Thank you very much.
Can we have the question and answers?
Sure. Ladies and gentlemen, if you wish to ask a question, you may press zero one on your telephone keypad. We have one such question from Karsten von Blumenthal from First Berlin Equity. Please go ahead.
Good morning, Markus. This was a pretty strong EBIT in H2 and your H1, sorry, Q2 and your H1 EBIT amounted to EUR 12.9 million. 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? 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. The results 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. 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's what we estimate, and the rest is ongoing business. We have to depend on wind because our portfolio relates our earnings relates to wind performance, and et cetera. These are points which have to be considered. Therefore, we have always to consider a range. Just right now, we think it's on the higher end.
All right. Thank you for that. We have seen a very weak market in the first half of the year with just 287 MW installed and the wind association has reduced the overall installation for the year to 1.5 GW. You, as far as I can see, had quite a satisfactory H1 in Germany. 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. We will see after the summer pause, a meeting in Berlin with our Minister Altmaier. Do you expect any regulatory improvements this year? Because this lack of approvals is, of course, a serious issue for the whole sector.
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. Nevertheless, because of having a bigger pipeline, we always have something where we can say, okay, if this project is not coming, then the next one is coming. Nevertheless, also we have an impact on that, and we also push the politics to change the EEG and especially the permitting procedures. From that point of view, we expect that the politics will do something, because just right now, there's a 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 megawatt?
We won just right now, at the moment, 28.7 MW we've brought successfully in tender. The other projects, as I mentioned, 260.2 MW, it's around all of them, with exception of this 28.7 MW, are in permitting procedure, 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 -EUR 4.8 million. That was much higher than last quarter. Is that a one-off? I mean, part of the effect is, of course, the IFRS 16, but that's just half a million. Could you explain this rather high interest expenses in Q2?
It's related to swaps. That is the main reason due to the fact that this is considered.
That means that is a one-off. We won't see this probably again in the next quarters.
Exactly.
You certainly have seen that the German government has supported 20 so-called real laboratories for CO2 poor gases, especially hydrogen, for the next two years, and PNE also has plans regarding power to gas and hydrogen. Do you see that PNE directly or indirectly benefits from these plans?
Yes, in any case, we think this is a good step forward. Having in mind that two and a half years, three years ago, when we stepped in with our strategy, hydrogen was a very weak issue and nobody discussed about this. Now that the government is working and is giving EUR 100 million subsidies to support this whole issue, I think this is a good progress and shows how the dynamics grows in this particular area. Therefore, we are still working on offshore solutions, and we are prepared to invest if there is something where we can get know-how out or get results out, yeah. It must be economically feasible.
All right. One last question from my side. According to the Bundesnetzagentur, the plans for installation in Northern Germany are to be kept further, so only 786 MW versus 902 MW previously. Furthermore, Lower Saxony as a whole is to be declared a so-called grid extension territory, so Netzausbaugebiet. Given that Lower Saxony is kind of your natural home market, do you think this will negatively impact your project development in that area?
I think when I look to our projects, we see projects in the near future, and if they are still on this lower level in this permitting situation, we don't see effects for us. Nevertheless, there is a big pressure against this regulation. 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 have a few question regarding your pipeline. 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, as you can imagine, 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. We are just right now in discussions whereby we have on the Greenfield area, we have some projects in the pipeline. In Sweden, it's nearly the same. Just right now we're working on several projects, in Sweden as well. One project is far advanced, so we think the story goes on.
All right. Thank you. Regarding your Panama pipeline, so you expect first projects to be sold in 2020. Do you have any updates for us on those projects, whether they're in a advanced development stage, or don't you have any insights on that?
Yeah. We have one project in the further development stage, and for us, it's an issue just right now. We try to figure out where can give us the best pricing for PPA. We are in the last stages to take over the project, in the right manner. 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. Yeah, we are working especially on these things, and so we are on plan.
Okay. Thank you. Regarding your France project, 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? 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 one to two years usually, where you have to wait for, or where you usually get a lawsuit is filed. It's nearly 90% of all French projects get this lawsuit against this wind farm. We see the first projects coming up maybe in 2021, but I don't see that all projects are ready in 2021.
Okay. You don't expect to put some France projects into your 2020 portfolio.
Just right now, we don't see it. Yes.
Okay.
To be honest, some of these projects 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. Nevertheless, maybe someday we put some French project in. Just right now, we cannot confirm that.
Okay. You mentioned milestone payments from your project sales as soon as they are finished. You expect milestone payments on your onshore project this year?
I summarized this to milestone payment. In general, we have several contracts. For example, Sweden and Poland, yeah. We have a construction management contract, for example, and afterwards we have a service contract. The construction management contract is finalized, and we will get paid for that when the construction is finished. Yeah. That's what I summarize with milestone payments, yeah. It's not really milestone payments, it's a part, it's something like that.
Okay. Thank you. Regarding your service business, so you don't have that long reported history on services. Regarding consulting and other services than O&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?
Yeah. According our strategy 2023, we said our target is a volume of 25% of our increased number, and this was a number around EUR 45 million, around EUR 45 million. We said one fourth or 25% of this EBIT, which we expect 2023, should come out of services. This is what we like to have in the future. That's why we have to really speed up here. We do. Yeah.
Okay.
Just right now, the EBIT is like it is in the moment because we have to invest in the companies, yeah. This is in personnel, in companies, and that's what we relied to the services for itself, yeah. In some, we will have, at a special moment, much better result, but just right now, they have to pay their investments out of this segment, yeah.
Okay. Regarding your O&M business, can you give us a figure at what level your, I call it, volume under service currently stands?
Yeah, we are at around about 1,500 MW, which we have in operational management. We extended our services by financial services, so, support civilian wind power plants or other plants. Also, we do the management of the trading of energy, like PPAs, also for us, also for third parties. This is the business. We do the construction management for third parties, and that is slowly but steadily, we launch these products into the market. This is the package now where we file products in the moment and launch it into the market.
Regarding your capacity under service, now you have something around 1,500 MW. You expect the 200 MW portfolio to be added to these services?
Yes.
Yes? Okay.
You can imagine, and we would like to have Jasna and Målarbergets , T hese two projects we would like to add as well, because there we have contracts right now.
Yeah.
When they start operation, we start them servicing.
Okay. You should reach somewhere around 2,000 MW under service, as soon as those projects are finished. Do you have any?
Exactly.
Yeah. Do you have any intent to increase your targets on O&M management, because currently you talk around about 2,200 MW under management?
Yeah
in 2023. I would say this is likely to be reached in the next two years.
Yeah. We just right now finished the contracts. Yeah. To be honest, let them finish. Let us go on the road, and then let's talk about your targets. We have to support the people. We have to train the people. We have to make additional efforts to get acquisitions. Therefore, this is a complete package. Just right now, yes, we can increase the target at one day. Let's finalize this at first. Yeah.
Okay. Thank you. Regarding your PV projects, you have already some insights at what point we can expect the first PV projects to be sold?
Yeah, we have it in our plan. Next year, we would like to finalize the development of the first project, and then the sale should be close, nearby. Yeah. Next year.
Okay. What size do you expect for this first PV project?
We have a first project close to the Dutch border in Western Germany, which is around 10 MW.
Okay. Thank you. Thank you for taking my questions. I'm finished so far. Yeah. Thanks.
Thank you.
Thank you, sir. We have another question from Madam Laura Lopez from Baader Bank. Ma'am, please go ahead.
Good morning, my first time on the call. I have a couple of questions. You signed the first PPA contract in the second quarter. Can you maybe give us a little bit of details how this will work, and how long is this PPA contract for? Is the level similar to the previous EEG submission that the wind farm had? Secondly, the tax credits are expiring soon in the U.S., how do you see the industry adapting to these changes, and what are the impacts that you expect for 2020 and onwards? Market dynamics changing now potentially in the U.S. I will do another one. Maybe these two first.
Okay. Related to the PPA we did with LichtBlick. 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, Papenrode. We took over this wind farm, which is around 21 MW, with machines which are now for 17 years in operation. We said, okay, for 20 years in operation, and we said for the next three years, we need a contract for PPA because we want to prepare them for repowering. We need it for the permitting phase, it was not clear how we can repower it in the last detail. We have to get this under control, which is usual work. For that, we need time, and therefore, we need the best pricing for our energy.
We had to go to the energy market because the EEG subsidy is not anymore paid for this. Had not been anymore paid for this. 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. Even if Papenrode, if this is now only in operation, we make earnings. If we go for repowering, we make earnings. Therefore, it's a win-win situation for us with these conditions we negotiated in the PPA. Just right now, it's limited to three years because then we would like to repower.
Repower. Okay.
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. 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. There is a big increasing market in the moment, which leads to lower energy pricing. The energy pricing goes very dramatic down, and there is no security in that just right now in some areas. Depending on the area, so California has other rules than Oklahoma, for example, and that means.
Yeah
We have to differentiate. In general, this is the picture. We see after next year that the numbers of constructed projects will go down. Just right now, 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 constructed projects. With the pressure on the margins for all participants.
Thank you, madam. We have no further questions. Ladies and gentlemen, I would like to remind you that if you wish to ask a question, you may press zero one on your telephone keypad. Ladies and gentlemen, if you wish to ask a question, you may press zero one on your telephone keypad. We have no other questions, sir.
Yeah, 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.