Good morning and welcome to Taaleri's Presentation of our Results for the first half of 2025. My name is Linda Tierala and I'm heading Investor Relations here at Taaleri. With me presenting today, we have Ilkka Laurila, our CEO, and our new CFO, Lauri Lipsanen. If you would like to ask a question during or after this webcast, you may do so in writing at any time through the webcast platform. Now it's my pleasure to hand over this presentation to Ilkka. Please go ahead.
Thank you, Linda. Good morning on my behalf as well. As usually, we will go through some of the highlights that have happened during the second quarter of 2025, and that is then followed by the result presentation of Lauri Lipsanen, our new CFO. Starting with the highlights of the second quarter. The second quarter was actually quite an eventful quarter in our context, even though all the activities have not been yet seen in the P&L. There are a lot of things that have happened during the second quarter. If we take a look at the headline highlights, the first one is that the continuing earnings, especially in the private asset management, grew quite significantly, 34.5%. That is mainly driven by retroactive management fees, but there's also other good positive development in there. If you take a look at the SolarWind III Fund, the fundraising activity continued quite strong during the second quarter. The total amount of the new fund raised, the new amount that was raised during the second quarter was EUR 64 million. The end result is such that at the moment, the total size of the fund is EUR 503 million, but it's still open for one bigger investor. Hopefully, we will see the end result during the second half of 2025. The third highlight is that the Taaleri strategic partnership with Keva progressed quite nicely during the second quarter, and they were able to make their first investments during the second quarter. There is a lot of activities in addition going on at the moment. In the bioindustry side, all the projects are still progressing quite nicely. The Joensuu Biocoal plant was able to ship the first test batches to customers, and the quality seems to be on a good level, so that we have a good possibility to progress in that ramp-up project as well. Garantia's Rytömaa started as Managing Director of Taaleri Bioindustry during the second quarter, and there have been some other key management people changes also during the second quarter, which we will also go through. Garantia market position has improved, so both the kind of the new sales is increasing, as well as the market share is increasing. However, that is not fully seen in the P&L numbers, and Lauri will open a bit the logic behind the P&L and the kind of the delays and why and how that is then seen, hopefully, in the later stage. Finally, we made a strategic decision to strengthen our distribution and sales capabilities, especially in Finland, but also internationally. We also discontinued our cooperation agreement with Aktia. We are still having, obviously, good dialogue with them. At this stage, we made a decision that for us, especially when considering Tier II and Tier III customers, it is strategically important that we are able to have an open dialogue with our potential investors as we are operating in such funds that are requiring quite deep expertise. Therefore, it's important to have a direct dialogue with the team and our own salespeople and sales team as well. Going forward, take a bit closer look at the SolarWind III Fund. Like I said, the total number is now EUR 503 million, out of which 56% is coming from international investors, which is obviously a great number. A lot of new investors are coming from different countries, European countries.
The size at the moment is 42% bigger than the previous vintage, which is also a good testimony to how our fund and our track record have been seen in the market. The fund has already invested 55% of its capacity, which is a good sign in that sense that they have a quite strong development portfolio in their hands. Therefore, the investment capacity is quite, even though it's quite high at the moment, they are able to deploy most likely the investments at a quite fast pace, which then leads to faster initiation of the next vintage. If you take a closer look at the market and how the transactions in the market have developed lately, I think we have all seen here in Finland quite positive news when it comes to real estate transaction market volume. It has increased quite significantly during the first half of the year. The volume has increased almost 1/3 compared to the previous year. On the left-hand side, you can actually see that the actual level where we are at the moment, even though the development is positive, and we have been able to benefit from the positive development both in our real estate funds as well as in our Garantia business, the actual volume is quite significantly below 2021 and 2022 levels. On the other hand, the other important factor that we follow quite closely is M&A transactions here in Finland. There, you could call that the picture is more, let's say, mixed. On the right-hand side, you can see that the actual number of the transactions here in Finland has increased.
If you take a look at the euro value of the transactions, you can have a different kind of statistics. The picture is somewhat mixed. As you can see, the actual level of the activity is still quite somewhat lower level than it used to be a few years ago in 2021 and 2022. All in all, in both of these kind of key transaction markets, which are crucial, obviously, for us, the first half-year development has been positive, even though the kind of the comparison period has been quite low. Like I said, there has been a lot of key management team members changes in our Taaleri's management team. Lauri will introduce himself later in the presentation. Marjatta Rytömaa started as Managing Director in our bioindustry business in May. Timo Teivaanmäki was appointed to Head of Institutional Sales and will start his duties later this year in October.
Some of the key figures. Kind of the overall picture of the key numbers is that if you compare this to the previous year development, you can actually see that all relevant key numbers developed positively during the second quarter. However, like already mentioned, it was partially explained by the retroactively recognized management fees related to closing of the SolarWind III fund. On the other hand, as we will see in the following slide, there was also a negative development in the Garantia business, which is more related to, let's put it that way, technical accounting treatments than the actual negative kind of actual numbers and the cash flow.
If we would go through some of the highlights of different segments. Starting with the renewable energy. As you can see, the operating profit increased from EUR 1.9 million- EUR 3.1 million, which is obviously driven by that retroactive management fees mainly. On the other hand, like I already mentioned, the EUR 503 million fund, which is the total number in commitments, that is actually the biggest infrastructure fund here in Finland, which is a great testimony of the performance and the track record of our renewable energy business. Maybe a bit more other type of news was that we were actually partly refinancing Taaleri Wind II and III Funds. With that, we are more freely able to optimize the actual timing of the exit in those funds, even though those funds are still active. We are active in the market with those funds and looking for the exit. Most likely, as we have said in our outlook, the actual exit most likely will happen only after 2025.
Moving more towards the other private asset management, maybe three things to highlight in that segment as well. Operating profit developed quite positively, as we had said in our outlook, that it will develop positively in this year from -0.7% to - 0.2 %. On the other hand, Taaleri Bioindustry Fund prepared to execute its sixth investment. Hopefully, we are able to have some news on that later this year. In real estate, positive development in that joint venture between Keva and Taaleri. They were able to rearrange the refinance agreements on certain funds, which is obviously a positive thing in this kind of environment, especially when it considers the real estate market. Moving forward to Garantia , like already mentioned, kind of the overall activity is developing positively, which can be seen that the new sales are increasing. Actually, the market share in that business is also increasing. However, the insurance service result is declining from EUR 3.5 million-EUR 2.4 million, which is driven by factors behind the combined annual ratio, as well as the kind of the changes in the portfolio, which Lauri will open then later during the presentation and the logic behind that. Total income from the investment operation increased from EUR 2.4 million-EUR 3.5 million, which actually combines those two items there on the right-hand side.
That part of the investment income, which is recognized in the P&L, was the EUR 2.8 million. The part of the investment portfolio result, which is recognized in the comprehensive income, was EUR 0.6 million. It's important actually to combine those two when kind of making or looking at the performance of the investment portfolio. When we take a bit deeper look on the investment portfolio, even though this is a static picture from the end of the first half of the year, it's worth noting that if you would compare the portfolio split between at the end of the last year and the current situation, the total amount of the debt instruments at fair value, if you combine those light gray areas and light blue areas, is now 70% when it used to be 76% at the end of the last year. On the other hand, equity proportion has increased from 18% to current 21%. We have increased our equity risk in our Garantia's investment portfolio during the first half of the year.
Our next segment is the investment. Revenue was actually negative, but that is only linked to one specific USD-related investment and one USD receivable. That's driving those numbers. No major other changes in that segment. If you take a look at our investment segments, investment portfolio at fair value, maybe worth noting is that the three biggest investments comprise more than 50% of the total investment portfolio. Out of these three, Truscott-Gilliland is that wind farm in Texas, out of which we own roughly 7%. Those two other investments, namely Fintoil and Turun Toriparkki, in both of those investments, actually the first half development has been quite positive in Fintoil, even though that is a quite cyclical business, obviously. They have been able to operate their facilities almost at full capacity during the second quarter. Obviously, it's a, like I said, it's a cyclical business. It increases the working capital, etc., etc. They have been able to gain new customers and therefore able to increase the capacity utilization between the order in the second quarter. On the other hand, Turun Toriparkki revenue is also increasing in there. Utilization rates are increasing. We have been able to pass through some of the price increases in that business as well. If you would take a look at the smaller investments, the development in those has been more varied, you could call. There has been some positive development, but also negative development in those. Out of the total investment portfolio, three biggest investments comprise more than half of the total portfolio.
I would like to invite to stage our new CFO, Lauri Lipsanen, who will go through some of the highlights of the result and balancing development.
Thank you, Ilkka. My name is Lauri Lipsanen. I started as CFO three months ago. My professional background is that I have two master's degrees, one from industrial engineering and one from finance. I have worked five years in consultancy and two years in pulp and paper industry, and the last 12 years as group CFO in private equity-owned companies, the last company before Taaleri being . About the result, Taaleri had a strong second quarter of the year. Revenue grew by 8.3% to EUR 12.9 million, mainly driven by the private asset management segment and strong investment result from Garantia . These were partially offset by adverse changes in EUR/USD exchange rates, as well as declined insurance service results of Garantia . As Ilkka said, private asset management segment revenue was driven by continuing earnings, mainly related to the SolarWind III -related retrospective fee bookings. This accounted for roughly 2/3 of the continuing earnings growth in private asset management and also impacted fee expense level in Q2. Garantia 's investment result was + EUR 2.8 million, whereas in Q1, the result was negative by EUR 0.6 million. In Q2 2024, the investment result of Garantia was + EUR 1.4 million.
As Ilkka mentioned, exchange rate fluctuations were related to one USD investment and one USD receivable, and these burdened Q2 results by EUR 1.2 million. Garantia 's insurance service result decreased from the comparison period due to increased insurance service expenses, mainly due to costs arising from onerous contracts and higher acquisition costs. As a result, operating profit was EUR 4.5 million. In summary, the group's continuing earnings, revenue, and operating profit all increased, and the operating profit margin was 34.8%. In contrast, in the previous quarter, operating profit was EUR 0.4 million, burdened by market turbulence-driven net investment result. Therefore, the first half of the year, the operating profit was EUR 4.9 million.
As evidenced from this slide, continuing earnings development has been fairly stable on a quarterly basis. However, both Taaleri's quarterly revenue and operating profit have been fluctuating, mostly driven by other than continuing earnings, which in this period under review mainly relates to the net investment operations. We look at respective figures in a rolling 12-month basis. We can see that the LTM growth in continuing earnings has been 1.5%, and other revenue than continuing earnings has been fluctuating on an LTM basis. Operating profit has remained strong at over 45%.
In private asset management, continuing earnings have increased by 12.5% on an LTM basis, and operating profit growth has been strong in this segment. What comes to Garantia's? Garantia's revenue has declined recently as both insurance service result and net income from investment operations have declined. Declined interest rates boosted the 2024 net income result at Garantia, whereas the recent decline in insurance service result has been driven by two matters. Insurance revenue has been declining on a rolling 12-month basis until it has started to rebound from Q2 2025 onwards. This explains the drop in Q1 2025 LTM insurance service result, whereas the decline in Q2 2025 LTM insurance service result largely relates to increased insurance service expenses, mainly relating to the onerous contracts and increased acquisition costs. What comes to actual claims, those have remained at a fairly low level and increased only by EUR 0.1 million in the first half of this year compared to the first half of the last year.
The decline in net income from investment operations has been the main driver behind the declined operating profit on a rolling 12-month basis. It should be noted that the part of Garantia's investment portfolio's fair value changes are visible only in the other comprehensive income reported below operating profit. As Ilkka mentioned, Garantia's share of residential mortgage guarantees in new housing loans in Finland has increased materially during 2025, which had had a slight positive impact on Garantia's insurance portfolio. You can see that the insurance portfolio has been, the amount of insurance portfolio has been declining on a rolling but started to rebound from Q2 2025 onwards. Compared to the rolling LTM insurance revenue, you can see that the rebound impact is rather immaterial. This is due to the fact that our insurance revenue is recognized with some delay.
On the right-hand side, we can see an illustrative example of how insurance revenue of a new residential mortgage guarantee group is recognized over the years. A TAMP rule is that recognized insurance revenue decreases over time, mostly driven by decreasing risk exposure. However, the recognized revenue is materially lower for the first year compared to the subsequent few years due to the fact that new residential mortgage guarantee contracts start more or less constantly throughout the year. Under IFRS 17, new insurance contracts are recognized based on the weighted average timing of each annual insurance cohort. Shortly about balance sheet, our equity ratio and liquidity have remained strong. Available total liquidity was EUR 46 million, including the unused revolving credit facility of EUR 30 million. The first dividend tranche of EUR 7 million was distributed in April, and the second dividend tranche will be paid in October. What comes to investments, non-strategic investments have declined by EUR 2.6 million during the first half of 2025, mostly because of the rest of Aktia's shares that have been sold in Q1 2025. Garantia 's investment portfolio increased slightly compared to year-end, despite Garantia Insurance Company's distributed dividend of EUR 7.5 million in the spring. This concludes my presentation. As a next step, Ilkka will present the outlook section. Thank you.
Thank you, Lauri. Finally, the outlook for year 2025. We made a slight update to our outlook considering the private asset management and renewable business in there. We are now saying that the exits from the Taaleri Wind II and Taaleri Wind III Funds are likely to take place after 2025. That's the only update in our outlook. We are still saying that in renewable energy, obviously, the result of this year is dependent on how the timing of the certain fundraising activities, performance fees, and the exits are coming. In other private asset management, we are expecting positive profitability development compared to the previous period.
On the Garantia's side, like I said, they had an extremely strong comparison period, especially in the investment operations. Therefore, we are expecting a slight decrease in there, as well as in the operating activity as well. That actually concludes the presentation part of the second quarter. Now we have time for the Q&A.
Thank you both. As a reminder, if you would like to ask a question, you may do so through the chat box in the webcast platform. For those of you present here in the studio, you may ask questions over the microphone here. There's a question here from Sauli Vilén from Inderes. Sauli, please go ahead.
Yes, good afternoon, Sauli from Inderes. About the sale of Taaleri Wind II and III, can you explain why it takes so long? I mean, it's a fairly simple asset and you have a long, long track record about it. Is it about the market situation, fluctuation in interest rates, etc., or what is behind the fairly long process?
I think there are two key drivers on that. The first one is that the overall transaction market activity, which has been quite slow lately, as we all have recognized during the last few years. The second one is related to the electricity market development here in Finland. In actuality, the future price forecast prices for the electricity prices are moving, have been lately moving towards negative prices. That has also had an impact, obviously, for the interest from the buyer side.
We all know that here in Finland, we are expecting a lot of activity coming through different kinds of investment activities, be it in those data center investments or whatever related to hydrogen and everything and new industrial facilities. Those have not yet realized in that matter that would have a significant impact on the price forecast of electricity prices. That has also had an impact on those exit processes.
Are you still comfortable with the carrier you have booked from those?
Obviously, at this stage, because those are not, we have not made changes on those.
Okay. About the SolarWind development portfolio, are you building a similar development portfolio as we speak? What you did before the SolarWind III? I'm already looking at the SolarWind IV now.
They are developing the development portfolio continuously, kind of project by project going forward. That is actually quite, actually significant, kind of will have a significant impact for the next vintage, in that sense that there's a lot of those kinds of projects that they are able to move to the next fund. That will enable, obviously, the faster development, both on the SolarWind III, but then on the other hand, on the SolarWind IV as well.
Basically, the SolarWind III fund can sell the rest of the development portfolio?
Most likely so.
Okay. Okay, that makes sense. Then about the Garantia's dividend, is the rest of the seven, you now pay the 7.5%, are you paying the 7.5% like in autumn when you pay the dividend out from the parent company?
Yeah, that was the decision by the board.
On your Texas wind farm project, you were also planning to exit that at some stage. I think at some point you also said that it can be during 2025 or so. Has the current political situation in the U.S. affected the exit market of that kind of an asset?
Well, yes and no. Obviously, there's a lot of turbulence in that market as we all may be can may be recognize, while on the other hand, actually it has a huge positive impact for the existing facilities because there is now certain regulation which has an impact for the new investments, it then increases demand for the existing operating activities. Therefore, it's a bit mixed situation, and we all recognize the balance in that market, but it might end positively, let's put it that way.
And what about the timing of the possible exit there?
It is the asset itself. It is on that stage, but the same applies as it applies to other exit markets and exit situations that you need a seller and buyer, and you need a kind of, the market is slow, as we all know, the transaction market. That's it. That's not the Finnish issue. It's a global issue, as we know.
Okay. About the guarantee, why do you think that your market share has been increasing on the Finnish market?
Internally, we are able to measure it such a way that if you take a look, we know how much mortgage loan has been granted here in Finland. That's the available data, and we can see our own data. Through those two kind of KPIs, we can see that we have had a positive development in there.
Why do you think that is? Why has it been increasing?
I think there's a couple of things that are driving it. The first one is that we had, actually, the first time in the history of Garantia , a quite extensive marketing campaign at the end of last year. We see positive development since that. That's the first one. I think that not all mortgage loan customers in Finland yet recognize the opportunity that is linked to that kind of service and product. Our plan is to continue that activity going forward, to increase the recognition of the services and products that Garantia is providing. That's the first thing. The second thing is that we have made some updates to the product, which makes it easier for our customers to utilize, meaning banks in this case. Therefore, it has been more attractive for them as well. Technical changes, but important to them as well.
Finally, about the tax rate, it was really high in Q2. There is probably some technical explanation behind that.
Yes, maybe. I don't know if you would like to answer on that one.
Yeah, if you look at the comprehensive income statement, one of the drivers there were related to different tax liabilities. Those are related to, for instance, other comprehensive income.
Okay, that's cool. Okay, thanks.
Great, thank you. We have a couple more questions from the floor. Please go ahead.
Hi, it's Patrick from Nordea. Just going back to the exits in the wind fund, maybe could you give any indication on when these could materialize based on the discussions you're having now? I know you mentioned electricity prices, the transaction market, but what do you kind of need to see for this to kind of materialize?
Like I said, we have different avenues we are kind of investigating continuously. Like we have said, it is likely, not necessarily, but it is likely that it will happen only after this year. Saying more than that would be more guessing than having an estimate. It would be nice to give you an exact timing, but unfortunately, given the kind of exit market situation that is evident today, it is quite difficult.
Thank you.
Yeah, thanks, Joni Sandvall from Nordea also. Maybe one question on the bioindustry market as a whole. How would you describe the interest on that market?
Sorry, which market?
Bioindustry side, how the market or investor interest on that side has developed, let's say, during the past year?
That's a good question because I think we are all receiving quite mixed signals on that area. On the other hand, there has been this wave of, I don't know if you want to call it new conservatism, where everything that is related to kind of the green transition is maybe not so fashionable that it used to be a few years ago. When we are discussing with our own customers and investors in our funds, their view is actually quite different than you could see from the media. Based on our discussions with the investors, they see it quite positively. They are kind of giving quite positive signals and asking that when are the next opportunities coming. It's kind of a soft commitment towards that direction that there is a demand for that kind of services and products also in the future.
Even though the media and the picture and the news and the headlines are somewhat more negative and mixed, the actual discussions with the investors have been quite positive.
Okay, thanks. That's all from me.
Please go ahead.
Yes, Sauli from Inderes. About the Garantia's claims, you had a slight bump in the claims ratio in Q2. If I understood correctly, some of it came actually from the mortgages, which is, if that's the case, I think it's like super rare in Finland to have actually risk realizing in the mortgage books. Do you see this as a one-time thing or should we expect claims ratio to be elevated for a prolonged period of time as long as the employment rate is high and the Finnish economy is struggling?
Yeah, maybe Lauri, you can open the logic behind it.
Yeah, when it comes to claims ratio, there are other items as well, such as those onerous contracts. Those onerous contracts were the main driver behind the increased claims ratio. As I explained, when you look at the first half of the year compared to last year, those have increased, claims have increased only by EUR 0.5 million.
Okay, that's clear. Thanks.
Great, thank you. We have a couple of questions online as well. The first one is related to the fundraising of SolarWind III. You now left the fund open still for the remainder of the year. How much more can we expect into that fund?
As I said, the number today is that EUR 503 million. Obviously, we keep it open only for one significant investor, but the total increase would be less than 10%. That gives some kind of magnitude of the potential still before the final closing.
Okay, thank you. There is a question related to this lag that you already mentioned between these new mortgage guarantees of Garantia and the insurance income. When can we expect that these improved sales of Garantia are actually visible in the results?
Yeah, if we think the Garantia's sales development, the main drivers are the changes in Garantia's insurance portfolio and pricing tariffs, of course. As explained in that one example slide, there are some delays with the new contracts and what comes to insurance revenue recognition under IFRS 17. The main driver is how the Garantia's insurance portfolio is developing.
All right, thank you. There are no more questions online. Are there more questions from the floor at this stage? If there are no more questions, we'll conclude the webcast. Thank you and have a good day.
Thank you.
Thanks.