Good day, and welcome to the Q2 Report 2017 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Markus Lesser. Please go ahead.
Good morning. I would like to give you an overview about the 2017 first half-year highlights. When we see where we started, we can now say that we are with 94 MW, have a bigger amount of projects under construction in Germany and France. We have completed as scheduled our project, Altenbruch, so we can say our project implementation is fully on track. We had success in the offshore business. One big project, Atlantis I, was sold to Vattenfall, and Gode Wind 3 was one of four projects which was successful in the first tender for the offshore wind energy in Germany. What we could see in that time were the general meeting, and this annual general meeting showed that we could distribute a dividend of EUR 0.12 per share, and we could see that we had elected three new members for the advisory board.
We see high development activities, which are reflected in the financial figures, as well as we build up our portfolio. We have our total output at EUR 50 million and an EBIT at minus EUR 5 million, which is absolutely according our plan. We see that the group EBIT in the range of zero up to EUR 50 million group EBIT is expected. We still confirm our guidance. The positive earnings drivers we see in H2, we will show afterwards. You see on the next page, high development activities in H1. As I mentioned before, 94 MW under construction in Germany and France. This shows that the international business is really growing, especially France. We have a special momentum with 41 MW under construction.
32 MW is related to a framework deal with John Laing. On the other side, we see the good progress in Germany, where we have 53 MW under construction, which will be completed in 2017. 43 MW of this new wind farm portfolio we started this year will be a part of the new wind farm portfolio. The project rights of 74 MW were sold to project partners, eight MW were purchased from project partners. This shows that we have additional businesses with our project rights. Very successful, we see now that the U.S. wind farm Vivaldi was sold. This is a project with 80 MW, with a potential extension up to 300 MW. These project rights had been sold to Pattern Energy in July. It is not in these numbers just right now. The start of construction is planned for 2017 and the commissioning in 2018.
Still we're working on ongoing tenders and preparation for South Africa, Poland, Turkey, Italy, and Germany. We have still a strong portfolio, which we are working on of 4,850 megawatts. On the next foil to the offshore projects, we see that Atlantis I was sold to Vattenfall. We got a lower double-digit million payment in 2017, and we expect further payments in 2018. If Vattenfall is attending the next tender next year, what we think they will do. One of four projects, Gode Wind 3, was successful in the first tender. This is a clear improvement of the high quality of the PNE wind project. We have to see that we're still active as service provider for projects which are sold. We are consultants of Dong and Vattenfall and still following up the project.
We expect further milestones for Borkum Riffgrund 2 and Gode Wind 3 and 4, up to EUR 24 million. One point we discussed and showed the last time was a constitutional complaint about a project in zone three to six, which had been brought to the central model by the new WindSee-Gesetz. We see these local legal opinions conclude that parts of WindSee-Gesetz are unconstitutional, and we filed this complaint end of July. Next slide, we see the income statement. The income statement shows that the total output is around EUR 50 million versus EUR 61.1 million last year. The decrease mainly driven by lower sales from electricity generations, which is a delta of EUR 8.5 million, due to the sale of the wind farm portfolio in 2016. Generally, all financial data shows the activity in the build-out of the new wind farm portfolio.
The EBIT is at -EUR 5 million, but we can see that the fixed cost base clearly reduced. We see additionally that the earnings generated from wind farm portfolio, but eliminated within the scope of consolidation, amount to EUR 4.5 million in H1 of 2017. You also can see that the net income improved year-on-year basis. If you look to the next foil, property, plant, and equipment at around EUR 38.1 million, and you can see that inventory is now at EUR 106.3 million. We have still a very strong liquidity position to fund our future developments, and we can see that we have around EUR 122 million in cash and equivalents. We have a working capital line of EUR 10 million, and additionally, our project financing availability is at around EUR 42 million. With an equity ratio of 53%, we have still a strong balance sheet.
In this half year, as mentioned already, we distributed in June our dividend of EUR 4.21. The current liability at EUR 161.3 million, which are mainly related to the corporate bond, which is payable in May 2018. Net debt is at EUR 11 million, which is mainly driven due to the fact that we make the investment. We look to the outlook summary. We are building up our wind farm portfolio. The first 43 megawatts are under construction. We have 41 megawatts under construction in France. We continue to grow our international business. We just right now opened our office in Hamburg, where we have a team who support smart development in new markets. We are working in offshore wind power still on some projects. We are looking for new markets. Atlantis I expected to participate in the next tender, and we are expecting milestone payments.
We see ourselves well-prepared for upcoming challenges. Our balance sheet has a strong view, and we have a high cash position. We have a successful experience in tenders in the past. In U.K., for example, we had been successful two years ago. We focus on high-quality projects, which is also important for the manufacturers, where they give their best costs in tender procedures. We continuously optimize our cost and the LCOE in all phases of the value chain. Just right now, we are working on more than 100 points to reduce the cost of projects together with manufacturers. We see ourselves on track to achieve the positive EBIT for 2017, especially on odds associated with the sale of the 142.5-megawatt portfolio in 2016, expected to come up in 2003. We see there are lower double-digit million EUR sum due to the increase of the enterprise value.
Because of being refinanced, we see additional earn-out payments expected. We still see our guidance and confirm our guidance of an EBIT between zero and EUR 1.50 million. Thank you very much. If there are any questions, go ahead with the QA session.
Thank you. If you would like to ask a question, please press the star or asterisk key followed by the digit one. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will now take our first question from Karsten von Blumenthal from First Berlin Equity Research. Please go ahead.
Karsten von Blumenthal from First Berlin. Good morning, Markus. I am happy to hear that you will receive a low double-digit million EUR payment for the 2016 portfolio. I did not exactly understand why you get this bonus payment. I would like to know whether it goes completely into EBIT or do we have to deduct any costs with it? That would be my first question.
We had a contractual agreement that if there are positive effects because of refinancing, we get a share of that. Due to the increase of the enterprise value, we could get this additional payment. We see that a lower double-digit EUR million sum, this is purely EBIT.
Perfect. That is great. Regarding your new portfolio, you say 43 megawatt of the projects under current construction will go to the new portfolio. May I guess that the Kührstedt, Alfstedt project, which is a 43 megawatt project, will be completely in that new portfolio?
You're exactly right.
Okay. Seems to be a very good and great project. I think that is good for your long-term position in generating power. You also mentioned that regarding your portfolio, you have an EBT generated, but due to the group elimination not shown of EUR 4.5 million. That is quite high a figure compared to last year with the old portfolio where you had only EUR 2.5 million. Is that project in Kührstedt so far advanced that you already would have booked such a high EBT of EUR 4.5 million for it? Could you elaborate on that?
You can see that the projects in the portfolio in the past, in the beginning, had a higher eliminated EBIT. In the last round, shortly before they are commissioned, they have a lower rate. That means in the beginning, you have a higher rate due to the fact that we have project development contracts, where we can get the payment.
Understood. Okay, perfect. Very good. Question regarding regulation in North Rhine-Westphalia. We have a new government and they would like to introduce new distance rules, which is certainly detrimental for wind power. Do you have projects in North Rhine-Westphalia which are affected, and how do you view this development?
We see it as a not positive development, but nevertheless, we have no projects which are affected because we mainly concentrated us on Hessen and other projects and some projects in the forest where we have these distances. Therefore we are not affected in the moment.
All right, good to hear. You did not take part in the second German tender round. Do you prepare to take part in the third round in November, and could you roughly give us a guess with how many megawatt?
We just think about what we do in the next step. We expect lower tariffs and in the next year, in the first round, we expect a little bit higher tariffs. Therefore, we're just right now in the calculation and we're waiting for some permissions. Whenever we see that these permissions are there, we can take them on board for the next tender, but we are not sure. It's always a calculation issue.
All right. Thank you very much for taking my questions.
Again, as a reminder to ask a question today, please press star one. We will now take our next question from Holger Steffen from SMC Research. Please go ahead.
Good morning, Holger Steffen speaking. I have some additional questions to our general business development. Maybe my first question to Great Britain. Do you see any improvements in the U.K. project development? When do you expect your first milestone payments from Brookfield at the moment?
Good morning, first of all. We see improvement in that what Brookfield is doing. We just a couple of weeks ago, we could see that the next project got a permission. It was Larbrax. We see that they are working on this project, and for us, in our schedule, we see payments not this year and not next year, but the year after.
Okay. Thank you. Maybe additional question to Atlantis I. You've mentioned that you want to participate in the tender in next year. In this year, projects mostly with zero bid were awarded. Do you expect to participate with Atlantis with a zero bid in the next year, or is it not possible?
First of all, it's not anymore our project. We sold it to Vattenfall because we are pretty sure that Vattenfall is one of the big players in the market, in the offshore business, and that they have that strategy to be successful in the next tender. That's what we think. I think for everybody, it was a surprise what happened this year tender. The next year tender, everybody will be clear-focused. In this respect, we expect that Vattenfall will join the tender, and I think they will do something so that they are successful. Even if they are not successful, we have a possibility that in further development steps, we can get an additional milestone payment or earn-out, I have to say, which reflects the increasing value of the project.
Due to the fact that the German law afterwards in the give an advantage to the offshore projects, even if they are not successful in the tender. In any case, we're expecting the payments.
We are strong believers in that Vattenfall is successful in the tender next.
Okay. Let us switch to Turkey. In your report, you've mentioned an intensive competition in the first local auctions. How do you assess the chances to realize your huge pipeline?
We are in discussion with the manufacturers. There's a big tender, which had been won by Siemens, for example. Even before this tender, we had been in very deep discussions, what we can do with several manufacturers in this tender and in other tenders. We see a lot of possibilities to be successful. It is always a matter of quality of projects, which we have, and secondly, the pricing of the machines. There we see that we have competitive projects. We can see that, I think we get competitive pricing.
Okay. When do you expect that you can realize the first project in Turkey?
We will see what the tender now will bring us in the negotiations with the manufacturers. I have a better view. I think, again, it's nothing for 2017. It's something for the tender after, 2018. That's the next step where we will reflect on.
Okay. Do you see any political impact to the market?
To the Turkish market?
Yeah.
Yeah. We see that the willingness to improve the wind power business is very strong. Just right now, we're talking about 4,000 megawatts, 3,000 megawatts for one tender and the next tender for 1,000 megawatts. 4,000 megawatts. They see that they have a big need of energy. Therefore, the willingness is very high. Therefore, we think it's still a market.
Okay. I may come to the U.S. market. You have a big success with the Montana project, which you have sold to Pattern Energy. You have mentioned the option to enlarge the project to, if I understand it correct, 300 MW. What's a proper timetable for the realization of this option?
This is an option we can see in 2019, we expect this. Just right now, we haven't calculated it any plans. It's an option. It's like usual, possibility, opportunity to get it.
Okay. You still work on the Chilocco project. Did you make any progress to sign a PPA?
Yeah, in the Chilocco project, we are now far advanced. We have now everything together to go ahead with the next step. We got some permissions. You need several permissions in this respect. In this moment, we're having a PPA in the final negotiation. From our point of view, we are on track. The next step is that we going ahead in negotiations with an investor.
I'm looking for possible projects which could be sold in 2017, in the last few months of this year. The Chilocco project could be a candidate to sell in this year?
Yes.
Okay. You prepare several projects for your own portfolio. What could I expect? What do you want to sell direct in Germany and France?
Look, we have projects under construction in France. Some of them we have sold already, but we expect further payments. One project, [Longip], is a project which is prepared to be sold, which is a very competitive project. We see further projects, which are in France coming up. In this moment, I think together with the situation that we get additional financial bonus payments for earn-out on the project portfolio refinancing, we think there is a lot we have to expect until the year-end.
Okay. My last question to your financing. In 2018, you plan to repay your bonds. In addition, you execute huge investments in your portfolio. What are the further plans for the financing of your portfolio build-up? Maybe, do you want to place a new bond in the next year?
We are in deep negotiations around it. I can say only the target is that we lower our interest rates and cut them by half. That's our target, and how we handle it, we will come up in the next upcoming weeks, and we will give you there a new overview where we are then.
Perfect. Thank you very much for answering my questions.
We will now take our next question from Arash Roshan Zamir from Warburg Research. Please go ahead.
Yes, good morning. Thanks for taking my question. I really only have one question, that's with respect to your guidance. I'd like to understand your thinking, because obviously you have confirmed your guidance this morning, at the same time, you have created some very positive news flow with respect to the successful sale of the Vivaldi project in the U.S., and also with respect to the expected one-off payment in Q3 from the successful sale of the wind farm portfolio last year. There seems to be some positive profits coming up in Q3. However, you haven't barely changed your guidance in terms of narrowing, for instance, the guidance range to the upper end or something like that. I'd like to understand, really, is this because of a lack of confidence and with respect to what you're going to sell in the second half of this year?
really what is the underlying reason for that? Thank you.
to be very clear on this, I think we have this range. We brought it up. We confirmed the guidance. There is nothing special behind it is always like usual, when we have the things in our hand, then we will come up with new information, not before. That's what we would like to handle, how we would like it to handle. That's all. We are very positive. As you mentioned, we see good projects coming up and good deals coming up, and therefore we are positive. Nevertheless, when it is in, we can come up with good news.
Maybe just a quick follow-up. In addition to the Chilocco project in the U.S., is there anything else which you have currently on the radar with respect to selling it in the course of this fiscal year?
not yet. We are preparing other projects in the United States. As you can see, Vivaldi was the first one of a series which have an advantage because of the PTC rules. These projects could get PTC advantages. With Chilocco, we have another project which is on this track and has this opportunity. We have other projects in development, which can get these advantages as well. This is nothing what I would like to show now, and it's nothing for this year.
Maybe with respect to other markets, so not the U.S., but maybe even in Germany or other European markets, are you there maybe close to the finish line with respect to selling certain projects?
There are always, in several markets, opportunities and interest in projects. That's usual business. As well as we have project development, where we sell project development and not ready projects. Therefore, this is usual business, and if there is an opportunity which is strong enough for us, then we are going to sell projects in other countries as well.
Okay. Understood. Thank you very much.
Thank you.
As there are no further questions in the queue, that will conclude today's question and answer session. I'm going to now turn the call back to your host for any additional or closing remarks.
Thank you.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.