Ladies and gentlemen, welcome to the Q3 report of P&E Wind AG Conference Call. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Markus Lesser, CEO, who will lead you through this conference.
Please go ahead, sir.
Good morning. Short presentation about 9 months highlights. After the first 9 months, we have to face or we can face a very strong result. We sold projects right in the United States and in Sweden. We had on the other side, we could see that our project construction is fully on track.
So 94 megawatts are on the construction in Germany and France. And we could see that we have a situation that we could optimize the financing of our wind farm portfolio, which we have sold last year to AGE with 80% share. So this all leads to an EBIT to €23,700,000 As a consequence, the Board decided on Monday to increase the guideline from probably €50,000,000 to €70,000,000 to €23,000,000 The range is mainly driven by the sale of our French project Longyear. So going a little bit more into the detail. If you look to the onshore pipeline, we sold our U.
S. Wind farm Vivaldi with 80 megawatts. There's a potential extension possible of further 80 megawatts. We sold the projects right to Patent Energy, and we think that we can commission it in 2018. Additionally, we could sell the Swedish wind farm, Laksas Skogen, with 25.2 Megawatts.
We sold them to a German investment group. And we think in the Q1 of 2019, we can commissioning it. We're doing the construction management. If we look to the 94 megawatts in Germany and France, we are fully on track. We think that mainly the projects will be ready end of this year.
In France, especially, we see the 41 megawatts under construction and 32 megawatts are in the framework deal with John Lang and already so have been already sold. 43 Megawatts from the 53 months we are construction. We are doing the construction in Germany. We're doing it for our new wind farm portfolio of our 200 Megawatts Wind Farm Portfolio. And this is the 1st big projects or are the 1st big projects we are putting into this portfolio.
Offshore projects, as already mentioned in the half year report, we had been successful in the 10 of this quarter in 3. ATLASIS 1 were sold to Wattenfall. And we have furthermore milestone to expect with Borkum Rivcon II and Goldenfeld 34. We think this will be around NOK 24,000,000 in the next years. In July, we filed the complaint, the constitutional complaint together with 2 other developers.
And additionally, we saw afterwards that WPD is also has also filed a constitutional complaint, and this runs in the same direction. So we look what we can do together. If you look to the income statement, we have a real big profit contribution related to our 142 megawatts portfolio sale in the last year because we could refinance it. We optimized this project financing, and we received out of that an additional payment of €21,400,000 This was led by portfolio increase of the enterprise value to from EUR 330,000,000 to EUR 360,000,000 and by cost reduction. So additionally, EBIT effects had been had come up came up because of the revaluation of the 20% stake of where we are already owner of.
Looking on the next page. I think that we have a remarkable situation with a strong liquidity position of EUR 160 point EUR 162,600,000. This is a further increase from December last year, which gives us a real solid basis for all things we think we can announce next week for the our new strategy and for repayment of bonds. If we look to the net cash position, we are positive at €12,900,000 euros Having always in mind that we have with our project Fuchsdelt with 43,000,000 was already a project under construction and all other projects as well where we do a pre financing partly. Looking in general to our business, I can summarize, we built up our new portfolio, 2 100 megawatts.
We are still working closely on increasing our offshore wind power business in terms of supporting Rothenfahl and DONG and looking for also into other markets. We think we're in the moment, we are in a situation that we also look to improve our purchasing conditions in respect to wind, turbines and balance of plant. And we are still working on our high quality projects. We think this is a special situation of and a special background of P and E Wind. We increased the guidance.
As I mentioned already, due to the good numbers financial numbers we could see now. And again, we have 1 French project and fail, and we have to be careful that we don't come up with a sign to a potential buyer and where we don't suddenly have to say because of the guidance, we have to sell these projects for margins, which are not wouldn't be okay for us. So therefore, this is the range. This explains the range between €17,000,000 23,000,000 Thank you very much. Hello?
Thank you. Now we will begin our question and answer We received the first question of Arash Roshan Samir, Warburg Research. Your line is now open.
Yes, good morning. Thanks for taking my question. I have a couple and I will ask them 1 by 1, if you don't mind. The first one on the U. S.
Market and also on your U. S. Projects, you were obviously able to sell Vivaldi in Q3. And I was wondering if you could quantify the amount of milestone payments, which are still outstanding from the sale of the project. And also if we should expect the 1st milestone payment from the sale to come through in Q4, would you expect the construction of the wind farm, for instance?
So that will be my first question please.
Yes. So with the sale of Vivaldi, we already got our first payment. And we expect further payments with the progress of the project. So specialty or furthermore that we have NDAs in place and in the contracts and have to be in the contracts, we have to the situation that we have agreed that we don't tell much about the pricing. But I can tell that I would say roundabout the half will come later next year.
Understood. And would the construction start already trigger a milestone payment? Because as far as I know, construction is scheduled to start this year. And so I was wondering if that would already be a reason to trigger milestone payment?
No, it's not under construction when the project is ready.
Okay. The commissioning. Okay.
Commissioning, yes.
Okay. And then you also said during the call that the buyer of Patan Energy has secured an option regarding an expansion of the project. And I was wondering, do you expect a decision regarding the expansion to be made already this year? Or is this just a process which could take a couple more months?
This will take a couple more months. This is a decision which will be depend on the PTC situation, but they have to speed up in any case. So that's why I think this is something for the next year middle of next year where the decision will be filed.
Okay, great. That already leads me to my next question. I was wondering if you could share with us your general view on the prospects of the U. S. Wind market, especially in light of recent reports that the production tax credit could be cut by 30%.
I mean, do you believe this will have an impact on your project pipeline in the U. S? Is this going to diminish the potential of your pipeline? Or if you could just share a little bit what your view is regarding this?
Yes. I think it's something what was triggered by the Trump government. And the Congress is just right now looking at it and is as far what we can hear is coming up with a separate opinion about this. We see a general point. We see that a lot of countries, which are Republicans and Republican governments are investing in wind energy.
So therefore, there will be a strong defense to come up with this PTC change. And additionally, it is something where already contracts have been made. So a lot of people and companies ordered wind turbines in to get the PTC, the 100% PTC advantage. So these contracts are in place. So I think this is not nothing what they can do backwards.
So therefore, I'm we will see what is going on, but I'm positive.
Understood. Thanks. And then my next question will be on your 2017 guidance or your new 2017 guidance. Obviously, you state that the actual EBIT result depends on the successful sale of a French wind farm. I was wondering is this the 9 megawatts wind farm you have currently under contract?
Exactly. There's 9 megawatt wind farm. This wind farm will be ready and commissioned this year and is for sale.
Are you already in negotiations with potential buyers?
Yes. Yes. We are very far advanced. But as like usual, we don't want to come into a situation that you suddenly have to make the deal whether the margins are high or low. That's why we say let's talk about the range and then nobody is under pressure and let's do the deal in the time frame the dealer needs.
Makes perfect sense. And then the next question will be on the German onshore market. I was wondering if you have decided if you're going to participate in the 3rd onshore wind tender or if you are going to skip that and if you will presumably then participate next year in the first rounds?
Yes. We will participate pay it in the year's rounds. This year around, this is nothing where we expect high numbers and high tariffs. So therefore, we think next year, this will make much more sense because then the competitors are lower. And we have not that big amount of megawatts in the tenders, whereby the first tenders will be highly competitive.
But nevertheless, to in the moment, we have burger win parks, which have advantages, and we can cover this.
Have I understood you correctly that you are actually expecting bidding rates to go slightly up next year with the change in your auctions model?
Yes.
Okay, perfect.
In the middle run, yes.
Yes. Okay. And then maybe one question on the offshore space. You have obviously filed a constitutional complaint at the end of July regarding the sudden regulatory change. And I was wondering when do you expect an initial decision by the German Federal Constitution Court?
Is this something you would expect in the next couple of months? Or is this something which will take longer in your view?
Yes. We asked that. And we got a range from 6 months to 2 years.
To 2 years, okay.
So therefore, I'm not sure what we at which time frame they will discuss this and
Okay. And then from an accounting point of view, as long as there is no decision by the court, are you going to be forced to impair anything? Or is this going to remain on your books? And what is the accounting point of view there?
This remains on our books because it's clear. Our we have 2 studies who really show an expert opinion to really show that there is no reason for doing this in this way that the law require it. So this is not according to law, and therefore, there is no reason to change anything.
Understood. And maybe the final one is on the UK and in particular on your former Salacci project in Scotland. Is there anything in terms of an update you can share with us? Is there are you still working on that project to get it through? Or is this something you are no longer following anymore?
Yes. We're working on that, but we have to face all the time that the U. K. Environment for the wind and the renewable industries is not that positive. So and so therefore, we also have to understand that at a special moment, we have always to decide if we spend money or not, yes?
So just right now, we're working on this. And we are on an ongoing path and but it might come to that point that we say, no, we don't see the market, we stop it anymore.
Okay. But wouldn't that project be already profitable from an economic point of view without subsidies? Or is I would assume that the wind conditions are quite good in Scotland?
Yes, exactly, exactly. That is like usual, you need in the PPA. And this has to be covered in a good form. But then the project has to be on a level of development that this is mark that we can trade this energy, yes. So that is the situation.
We have to come to this situation and to this level of development.
Okay, understood. Many thanks, Mr. Lesser. And yes,
have a
good day, bye bye.
Thank you.
The next question is from Carsten Blum. Your line is now open.
Good morning, Markus. First of all, my compliments. That was a pretty strong result, higher than I expected. You obviously got more from your last year's portfolio sale as an extra milestone payment than I expected. It is very, very helpful.
You have a very strong balance sheet. I would like to ask a question regarding your 200 plus European portfolio you are developing. You said that currently 43 megawatts are under construction. Is already any project already commissioned? Or are they all under construction?
They are all under construction.
And regarding your permits for next year, how many permits do you have on hand to take part in tenders next year in Germany? Or how is your situation in France? I see that you have in Germany in Phase 3, 88 Megawatts and in France, 82 Megawatts. So can we expect quite some megawatt of these two countries to come into either the tender or even into construction next year?
Yes. We have the situation that we have in France in excellent pipeline. We have already you see it in Phase 3. We have a lot of projects now in a situation that they got the permission. So from our point of view, we can start with some of them to construct them.
So it is step by step. We see now that the international business is increasing. It's a big step for us that we see more and more that the investments of the last recent years now are going paying back their debt to this investment and that we get a good result and a real helpful pipeline out of United States, France and other countries. So just right now, so therefore, we have projects in the loop to construct for construction next year in France. And we are working on changes and improvements of projects in Germany.
So just right now, we are not in a hurry because the tender this year or tenders this year had been not very had to be not very had to have a high level of tariffs, which is then when we avoided to go into the tender. And next year, we will be ready with the next projects.
All right. One following up question. You already mentioned that your international onshore business is gathering pace. I think that is one of the main differences compared to the years before. This year, you sold project rights in the U.
S, you sold projects right in Sweden. And what I would like to know is how do you see next year where in the onshore business do you see further possible deals? My guess would be the U. S. And but I was a bit surprised that you already sold something in Sweden.
I think that was a very good success. Perhaps you could elaborate on your international onshore pipeline where you see business opportunities in next year?
Yes. We work very hard in the United States on the project Chilocco, 200 Megawatts. We got the building permission. We have now everything in place that we can go ahead with the sale of the project rights. So therefore, this is something we have to see as one next international project.
We additionally, friends have already talked about this. We have a strong pipeline, an increasing pipeline. We see, on the other hand, so next year, we'll come up with, I think, minimum 4 projects where we start the construction. We have South Africa. We'll wait.
It is expected that the tender will come up now after 2 years waiting. So therefore, we are positive to get a positive result out of this tender. And in Sweden, we have further projects already developed, and we think there is a possibility to start further sale. And yes, that gives you maybe a short overview about the next upcoming projects and project sales.
Perfect. That helps a lot. One following up regarding your offshore wind farm pipeline. Do you Next year,
we are Next year, we are having a situation that Wachtenberg will we think will participate on the tender next year. And if they are successful, we would get an additional earn out.
Perfect. Thanks a lot for taking my questions, Markus.
Thank you.
The next question is from Holger Stebbens, FMC Research. Your line is now open.
Good morning. Mr. Lesser, I have some additional questions. Maybe the first to the development in the U. S.
If I understand it correct, you said that Chilocco is now ready for sale. That means that you have got the PPA now?
Yes. We have a situation that we have a PPA, a kind of PPA in our eyes, yes. So there are several solutions possible. You can get a PPA. You can get an insurance solution.
You can on the other hand, you can have a customer who really has already a need for this energy. So these are the different solutions. And so we will see what we will get in during the sales process as well, but we have the options in hand.
Okay. Thank you, Alain. I understand. Maybe an additional question to Great Britain. You have mentioned the difficult conditions there.
How do you see the possibility to get first milestones from Brookfield? And what's your actual estimation? Which amount of milestones you can get until the end of the contract?
Yes. So
Brookfield is working on the projects. We saw this year that 2 projects got a permission, but this didn't lead to any milestone payments. So but they're working in good progress on the projects. So nevertheless, the circumstances of the British market is very special. And in the moment, there is a situation that you need PPAs.
Otherwise, you get another tariff. So therefore, it's a special situation. In the moment, we don't expect any payments next year. That's what I can say. But nevertheless, further milestone payments are expected in the further future.
But I cannot tell you now in which amount because there are variety of projects, which are in the permission phase or shortly before the permission phase.
Okay. Thank you. May I switch to another market? You've mentioned your strong pipeline in France. Maybe you could help us and give us an idea which share of your French pipeline can you probably realize without participation at the coming auctions?
In France, we have several projects which have already a permission in place and which are related to the old system where we don't need a tender and don't go to a tender.
Maybe a percentage of your pipeline.
You can say, as far as I see, just right now, it is everything what is related to Phase 3.
Okay.
Yes. So that means and on the other hand, you have to see that in France, the tender is not so competitive as in Germany. So we have a volume of 500 megawatts, I think, 6 times a year. That is an idea 4 to 6 times a year. And this comes to a conclusion that just right now, we have 1400 megawatts per year under construction or commissioned.
So therefore, I think the competitiveness of the standard is not that high. Okay.
Good. In your half year report, I've seen that you founded several companies for the Middle East. Can you say something about coming projects in this region?
Yes. It's something what we would like to announce next week as well. On 15th, we would like to give you an overview about our strategy in the next years. And in any case, I can say that it is remarkable that the biggest growths are in countries, which are in Middle East, in Africa or Latin America. So that's we have to face.
Okay. No problem. I can wait until next week. My last question is Regarding this possibility, what are the key parameters to improve the chances for Atlantis 1 and Godavint 4? Have you any further possibilities besides the price?
Yes. 1st of all, the competitiveness of projects in itself. So go to wind 4 is very close to the landscape. And that means we have goldwind 1, 2 and 3, so Dong has it. And so it makes sense to make a Golden 4 as well because then it's the mix calculation, and I think that makes really sense for them.
So that can offer a good pricing. So secondly, related to Atlantis 1, this is the case this is really in the decision of Wattenfall if they think they are so competitive. In any case, even if they will fail to the tender, we will get the milestones payments very later, but we get something. So but nevertheless, it's a situation where we are on the back seat, not in the driver seat. We are Watenfell has to file their competitive offer.
Okay. Thank you very much for answering my questions.
At the moment, there are no further questions. There are no further questions, Mr. Lesser. I would like to hand back to you.
Yes. So there are no further questions. Thank you very much for joining us. I wish you a good day. Bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.