Good morning and a warm welcome to all of you, both you over the web and those who are present here today to Taaleri's third quarter presentation. My name is Peter Ramsay. I'm the CEO of Taaleri. We had a strong quarter, and it was exceptionally good, and it was quite broad-based actually. The highlights for the quarter was that the continuing earnings increased and operating profit more than tripled. Our Bioindustry fund number 1, which is, well, first of its kind and a forerunner in Europe, had a second close, and I'm very happy to say that it went over EUR 100 million at this stage. Our real estate business had an active quarter, both the Aktia special investment funds as well as our Taaleri Housing Fund number 8 and our Rental Home Fund made several transactions.
On the renewable energy side, we continued preparing the launch of our SolarWind III fund, which we actually launched yesterday. We continued to advance the projects within our SolarWind II fund, which are going into both preparation and construction. Finally, we continued to build out our project development portfolio in preparation for SolarWind III. Finally, Garantia had an extremely good quarter in the form of a combined ratio of 29%, and the net income rose by 14% within the Garantia insurance business and reached EUR 4.4 million. Partly also helped by the fact that their investment incomes gave back a little bit of lost ground from the previous quarter.
Looking at the numbers for the third quarter, our continuing earnings rose 14.2% to EUR 10.5 million compared to the corresponding quarter last year. Our private asset management segment, which is our private equity business, the continuing earnings rose 2.1% there to EUR 5.3 million. What we call our strategic investments, which is Garantia, rose by 13.7% to EUR 4.4 million. We booked performance fees of EUR 6.5 million during the quarter. They were related to Ficolo, a data center that we finalized the sale of in July. The net income from our investments that we booked were EUR 9.9 million compared to EUR 3.1 million the corresponding quarter the year before.
All in all, our income doubled to EUR 26.9 million, and our operating profit rose to EUR 18.5 million, which gives us an operating margin of 68.6%. Our assets under management grew by roughly 11% to EUR 2.5 billion, and for the quarter, we booked earnings per share of EUR 0.43. Now, looking at our rolling 12-month income and operating profit, and I think why we want to look at the 12 months is that we have a very long-tailed business. The private equity business is very long tail, and our insurance guarantee business is also very long tail. 12 months rolling is much more representative of what we do as we can see that each quarter can be quite volatile.
If you look at the left-hand side, we have the dark blue pillars, that's our continuing earnings. Typically, if there's a level shift here, if we launch a sizable new fund or if we exit a sizable fund. That's fairly stable. Then we can see the other than continuing earnings in the light blue pillar, and that's our investment income and the performance fees that we then book over our profit and loss account. For the last 12 months, we can see that our continuing earnings are at roughly EUR 41 million and the investment and performance fees, EUR 34.5 million.
Then on the right-hand side, we can see our operating profit margin, which stands at 46.4% for the last twelve months and totals EUR 34.9 million. Here we see our various income sources, and this shows the third quarter, but perhaps I'll just move over to the rolling twelve months. As you can see, it adds up to our operating profit of EUR 18.5 million. If we look at it in a slightly more detailed manner over the twelve months rolling period, and we start in the lower left-hand corner, we have the continuing earnings, which stands as about EUR 14 million, then we have our net performance fees, EUR 15 million, and then we have the insurance business, the net income, i.e.
Premiums written stands at EUR 18 million, and then we have the net investment operations, i.e. that's our both the Garantia's portfolio and then our own investment activities. Fairly evenly distributed these various pillars. As previously noted, we have our operating profit, which stands at EUR 34.9 million. If we move over to our business units, our private asset management business and with the renewables, we can see here that we have had. Well, first and foremost, of course, we launched the SolarWind III fund. I'll come back to that later. During the quarter, the SolarWind II fund was really in the epicenter here, and they had continued to advance the projects that they're involved in and the construction of them.
Mainly in Spain, Lithuania, Finland, and Croatia. We also added three new projects to our project development portfolio, and this is sort of in advance for our coming SolarWind III fund. We're building the pipeline for that. We also refinanced a Serbian wind farm called Čibuk. This wind farm is part of our SolarWind I fund. All in all, if we look at the earnings, continuing earnings increased by 3.8% to EUR 3.7 million, and the total income rose by 26% to EUR 4.5 million, mainly driven by currency effects as we also have dollar-based investments here. The operating profit was EUR 1.5 million, which is about 33% as an operating margin.
Moving over to our other private equity businesses, I'd say that we're especially happy over the EUR 100 million sort of threshold that we reached in our bio-industry fund. You have to remember, it's a first-time fund. The team has done a great job in sort of promoting this and helping investors to understand what they do. I'd also say that Aktia sales team has done an equally great job in making this possible. Particularly proud we are of the fact that the Finnish Climate Fund increased their investment from EUR 10 million to EUR 15 million, and they are really a great anchor investor to have in this fund.
In the real estate business, as said earlier, we did several acquisitions in the third quarter, both in this Aktia special investment fund that we manage for them and our Taaleri Housing Fund VIII did a sizable transaction of EUR 85 million during the quarter. That was three different residential projects. The Taaleri Rental Home Fund acquired two properties during the quarter. Continuing earnings within this segment was EUR 1.6 million. That's an increase of 27%. We booked Ficolo performance fee within this segment, EUR 6.5 million. The 1.6 plus 6.5, we had an income of EUR 8.1 million. The EBIT within the other private asset management, i.e. the operating profit stands at EUR 5.5 million for the quarter.
The assets under management are now at EUR 1.1 million here. Here we have the same chart with this rolling 12-month, but this is for the private asset management business. As you can see, the dark blue pillar on the left-hand side, it's fairly even. As previously said, you know, if there's a sizable new fund that we raise or exit, then mainly that impacts the dark blue pillar. Then, of course, the light blue one shows the performance fees, which now stand at EUR 19.4 million for the last 12 months. Here we have a list of all the private equity funds that we manage. Without going sort of through each and one of them, I'd concentrate on the right-hand side.
There's a pillar that shows how the various funds from what business units they come. Renewable energy is 55% of our assets under management today. Real estate is 32%. The bio industry coming from basically zero is slowly but surely making itself seen here with 6%. Then we have these other old legacy funds. They are now 7% of our assets under management. Moving over to our strategic investments, which in our case is Garantia, our credit insurance business. They had extraordinarily good combined ratio of 29%. I think that's a new record for them. Net income was EUR 4.4 million. That's an increase of 13.5%. Premiums from the underwriting rose by 15% to EUR 4.6 million.
The investment income, it was positive, EUR 1.1 million. They had a really tough second quarter. You know, rates rose and in particular spreads widened. Now, their portfolio, the duration is quite short. It's under 3%. It's, should I say, a very defensive portfolio. What really hit them in the second quarter, which didn't impact that much, was that they had a lot of investment-grade bonds and the spreads actually didn't widen in the third quarter in the bonds that they held. Over 90% is fixed income in this portfolio. That was really the background. It's been a tough investment environment, of course, but in this case, we at least managed to sort of hold back any losses.
The gross insurance exposure rose by 6.1% to EUR 1.8 billion. It's split so that consumers, i.e. mainly mortgages, is 70% and then 30% is corporate. The solvency ratio is very high. It's 246%, and you can compare that to the level they had at the end of last year, which was around 220%. Now, I'd just say one other thing of the returns for the investment portfolio. You can see here in the right-hand side, it says 0%, and that is that some of these investments that they have are booked over the P&L and some directly against equity. This is the total sort of gross return on investments that was zero for the quarter. Okay.
Moving over to what we deem as other activities. For us, it's mainly non-strategic investments. Within this segment, we had continuing earnings of EUR 0.7 million, and then we had an investment income of EUR 7.5 million, and that comes from Ficolo, the data center that we sold and recognized the profit in the third quarter. We only did small disposals during the third quarter here. If we look at the table on the right-hand side, we can see that the last day of September, our non-strategic investments book value was EUR 30 million. That is an increase from year-end, which was EUR 23.7 million, and there are really two main reasons for that. One is that we took part in a rights issue at Fellow Bank.
That was EUR 2.5 million for us. We also reclassified assets for EUR 8.2 million to the non-strategic segment. There's some currency gains actually also. For practical reasons, one can say that, yes, we have been selling it down, although the sort of balance sheet value of this has increased. All in all, the other group operating profit was EUR 6.6 million. Now I'll hand over to our CFO, Minna Smedsten. She'll tell you about our results in more detail and the balance sheet. Go ahead, Minna.
Thank you. Thank you, Peter. My name is Minna Smedsten, and I'm the CFO of Taaleri. I thought that we'd compare the business units a little bit to each other, then we take a look at our key financial figures, our quarterly development, and also a few words about our balance sheet. Let's start with the business units. When you take a look at our businesses and start from the left and top row, half of our continuing earnings come from private asset management, where renewable energy contributes 70% of the continuing earnings. When we reach the return targets and investors' expectations, we can receive performance fees.
We more than doubled the capital that the investors had put into data center, and that was the reason why we were able to record our performance fee of EUR 6.5 million from the other private asset management business. The investment income in renewable energy, that is, as Peter pointed out, a change from the foreign currency. Now, moving to right and a few comments also about Garantia and group other. Garantia's continuing earnings grew 14% to EUR 4.4 million and corresponded 42% of the group's income with an excellent profit of 80%.
The other half of that data center exit income came from the investment that the group had put in, and thereby we recorded the investment income in group other, and that you can see on the third row. The operating profit for all business units were excellent. The operating profit was 56% for private asset management and 80% both for strategic investments and group other, and therefore 69% for the whole group, totaling EUR 18.5 million. Now moving forward, a few words about our quarterly development. The continuing earnings grew 14% to EUR 10.5 million. We recorded performance fee that we didn't record last year, and our investment income actually tripled to EUR 10 million. Our total income doubled from last quarter to EUR 27 million.
When you then take a closer look at our costs, cost side, you can see that our fee expenses rose, and that is mainly due to the data center exit, so we had small expenses related to that. Our personnel expenses grew basically due to the better performance that we had. Other admin costs were flat compared to last year, and our cost-income ratio was actually 32% for the quarter and 57% for the whole year. A few words also about our key financial figures and now, basically about the figures on the bottom. You can see that our continuing earnings were flat to last year, but our income increased 14% from the start of the year to EUR 46 million, and our operating profit increased 25% to EUR 20 million.
We also saw a nice growth of 11% in our assets under management from the beginning of the year. Now, let's take a deeper look at our balance sheet. Taaleri has a strong balance sheet, and we have investments in different forms. Our total assets were EUR 288 million, and our equity was EUR 195 million, giving an equity ratio of 68%. We have made strategic investments to beef up our private asset management, and we have invested basically EUR 90 million in renewable energy, and the market value in bioindustry was EUR 89 million. Garantia, they have a conservative investment portfolio. As Peter pointed out, it totaled EUR 146 million, and 88% was invested in fixed income instruments.
Now I give back to Peter.
Thank you, Minna. Thank you. As a summary, I'd say that we had a great quarter in a somewhat difficult market. We're not gonna lay on our laurels. I'd say that it's perhaps better to look ahead. What are we gonna do this quarter? I told you about the SolarWind III, the launch of the new fund, which is kind of, you know, it feels great to launch it. We need more renewable energy for the right reason in the world. That's a great thing.
SolarWind II will of course continue to advance, and basically they're at the end of their sort of investment period, but then they continue to work on the projects that they have at hand because they have to, of course, eventually erect the windmills and the solar panels to get them operational. Then we will continue to increase the project development portfolio as well. The bioindustry team now at this stage, they will start also the investment activities in the Bioindustry I fund, and then we have this, the torrefied biomass plant in Joensuu, and we're advancing that so that it goes ahead. Also our associated company, Fintoil, has started its production. It's now operational. I was actually there together with our board and management team visiting the site.
It's quite something extraordinary. It's a tall building, 44 meters high, and a lot of pipes, right, left, and center. It's great to see it's operational, and now it's sort of in a ramp-up phase. I think within the real estate business and Garantia, it's really business as usual as such. Therefore, I guess we have a Q&A session coming up, and I will hand over to Siri Markula, our Head of IR. Go ahead, Siri. Minna, we need you on the stage as well if there are any tricky questions on the finances.
Thank you, Peter and Minna. We have some time for questions now, and you can ask those also over the webcast platform. Let's start with some questions from the floor here.
Thank you, Minna. Thank you, Peter. Daniel Lepistö from Danske Bank. I guess my first question is about Garantia, and operationally it was once again excellent, but it is clear that the economy is heading towards more difficult times. I guess my question is that does this new sort of changing market sentiment impact your timelines regarding the sort of Nordic plans for Garantia or expanding into the operations to other Nordic countries? Is there any threat of, you know, postponing any timelines here?
No, not really. I mean, we're exploring the opportunity and, of course, you know, we always have to be humble to the market and the opportunities that they eventually present. No, it doesn't, you know, from a sort of strategic point of view, it doesn't change the ambition there. On the timing, again, you know, we will tell you when something materializes.
All right. I guess the second question is about, again, referring to the difficult market sentiment here. Do you see any potential headwinds for your sort of relatively new bio-industry segment, be it making these investments now or fundraising in the future? Maybe comparing this to the renewable segment, which is quite sort of market-tested concept already.
Yeah, it's a good question. Of course, you know, looking at the opportunity set and what they see out in the market, I would say that there's an ample amount of situations that could be interesting for them. I think, you know, turning the tables and more looking at the sort of opportunity set, it looks that there's even more available. Of course, you know, they have return targets, so each and every project will be evaluated in a normal manner so that they eventually hit their return targets. As such, I don't really see.
Maybe if you even turn it, you know, that you have a fund around that can do these investments might be sort of something that the market really needs because maybe other financing will be tougher. In that sense we don't know that. The only thing we know is that there's a ample amount of situations that are being presented to us, and of course, those are the ones, that's the raw material for the business.
Okay, thanks. That's all from me.
More questions from the floor?
Yes, thanks. Joni Sandvall from Nordea. Maybe I could ask something about the new SolarWind III, about the timeline. You're now saying that you are expecting the first close to happen early 2023. So what is the target size for the first close?
I think honestly, if you ask me what, you know, eventually what is important is sort of the size of the fund. We're saying we're gonna at least double the former vehicle. Some of these due diligence processes do tend to take time. When we look at, you know, when do we do the first close, if something material seems to be drawn out, we might do the close earlier, and then it might be smaller. Then again, if some people advance, their due diligence is quicker. I'd, you know, just stick to what we're looking as a sort of final size rather than look at each and every close because then I'll sort of anchor something that isn't perhaps very relevant.
Okay. What about demand for the fund? I think you have been doing soft launch for good time now. How the investor sentiment has been for the fund?
Yeah, I think it's very timely. I mean, we all know this geopolitical situation, so that should sort of support this. I think what's really important in our case is that we built this development portfolio, so we sort of know what's on the menu, which is very important, because there's sort of the demand for every project has increased since the war in Ukraine. First and foremost, it's the track record of the former funds that will then eventually constitute the success. We do see demand, but we really want to see that materialize in real sort of commitments eventually. It should be good.
Actually, Energia is hosting a seminar now in Spain, as we are speaking, so there we already have some potential investors in place.
Okay, thanks. Maybe last one from me. You have said that you have refinanced the Čibuk. What kind of financial impacts this have for the funds?
That's in SolarWind fund. Normally these do have. I mean, maybe Minna, you have more detail on that. Of course, normally, you know, there's a reason for why we refinance, and it should be financially positive.
If you're asking if do we see the same impact that we did for SolarWind II, no, we don't see that impact. It's one project in the SolarWind fund.
Okay. Thanks. That's all.
Sorry about that. Sauli Vilén from Inderes. A couple of questions about more of a housekeeping types. You said that you sold some minor assets from your investment group's investment portfolio. Can you tell us what did you sell?
Well, they are really small. I mean, there are some holdings that actually are listed that we've just disposed some shares. It's nothing material. We tend to inform when it is material, so in this case it doesn't really rock the boat in any direction.
Originally you have said that well, not you, but your predecessors, and you, Taaleri, has in its strategy that you are planning to divest all of the holdings or at least majority of them during the strategy period. Considering the situation in the financial markets at the moment, do you still see this as a realistic timetable for the divestments or?
Well, my take is really you don't wanna force any sale. You know, we don't have to do that. We have a fairly strong balance sheet as we speak. Yes, it is our ambition, and then there are some, you know, things that are sort of time-dependent. Let's put it this way. When sort of the cash comes in, it has to do with a project or something else that then eventually has to be completed. Some of these sales that we have done in the recent years has maybe also been a testament to the fact that if you sort of take care of your asset, and in a good manner, and then you don't force the sale, then the outcome is actually the best.
I still believe that's the case.
About the renewable energy. There was six more people on the payroll at the end of the quarter versus Q2. That's kind of large increase considering that previously you have said that the team is, like, fully in place, et cetera. Is that like a temporary thing or is-
Yeah. Well, what happened was that, you know, there were some people who left, so we had a drop. Before the recruitments came, they were split between two quarters. I don't know. I think the net addition this year is two.
Yeah, something like that.
Yeah, it's 5% is sort of the net addition.
It was the summer vacation more than anything else.
Unfortunately it looks a bit weird. I'm glad that you are nimble and you find these specific details out of there. I'm sorry, we should probably put an asterisk there.
About the other funds, like the legacy funds. I think in Q2 they were EUR 200 million. Now they are EUR 261 million. I at least haven't seen that you would have raised any new capital to those funds. Why the uptick on the AUM there?
Maybe Minna knows better than I.
Did it actually rise or
Yeah. At least on your presentation it says 261, and the Q2 says 200.
Okay.
Um.
That's a really good question. I don't have an answer to you. I'll have to get back to that. Or we will get back to that.
Yeah.
Sorry.
Hey, okay. Great. Thanks. Finally about the bond. You have the EUR 50 million bond out. Obviously, previously it hadn't made sense to buy it out. Now, when the interest rates have skyrocketed and you obviously have the cash, would it make sense to buy it out? Obviously, it's still. I think it runs like 12 more months, give or take.
Yeah, it was October 24, I think, at the end.
Oh, 2024. Yeah.
Yeah.
Would it make sense to?
Well, now it's fixed at 5%, so.
Okay. Okay. All from me. Thanks.
Yeah, Joni Sandvall from Nordea. Maybe one more additional to renewable energy. Can you give any comments on impact from now higher interest rates and on the other hand also increasing costs on building side, and when we put on the other side the probably higher PPA contracts and also spot prices. How does this play out net-net?
Yeah. I mean, there are quite a number of moving things when you do the sort of financial modeling here. Yeah, interest rates are one. That's for sure. PPAs are another. Of course with this volatility in the market, maybe the willingness to do long-term PPAs hasn't increased because you're kind of, you know, what's your view on where the price is gonna be? That is one thing. Of course, the way we see it, actually the high prices do sort of more than compensate for that. Then the question about the procurement chain, that's of course something that, when we then do the construction phase and finance them. At that stage, you basically sort of, you try to lock them in.
Still our view is that if we look at our net IRR targets in the project that we're now doing, there hasn't really been a change in those. It's more a function. There are a lot of moving parts, but eventually you have to get them sort of aligned, so that you get the right numbers. As such, I think sort of the net IRRs in this sector haven't really changed that much. Maybe a little bit higher, more as a function of, you know, as you have base rate coming up, but no huge change. It's really balancing out each other right now. These are long, long-tailed things. Then from the moment that you get your permit then to build, that's. I don't know.
Minna knows that better, but it's 1.5-2 years max.
Mm-hmm.
You have sort of already your sort of place in the chain from your counterparties.
Okay, thanks.
Yeah. One more from my side. The co-investments in the SolarWind III. In SolarWind II, you did, like, one co-investment fund, and it was roughly 20% of the size of the fund.
Yeah.
How we should look at the co-investment AUM on this part?
Yeah, this is more that as we're moving more sort of to tier one type clients. There, it's very typical that you offer co-investments. There's no fee on the co-investments. Investors come into the fund as they require co-investments, so then they get more capacity. You invest in the fund, and as a fund investor, you are then allowed to do co-investments. Some of these projects that we do, they are very sizable. Actually, from a fund perspective, we get better diversification as we have co-investors because we can still process on our own with a bigger project, and it doesn't jeopardize the whole fund's sort of diversification. It's not tilted too much somewhere.
This is very normal within the private equity space that when you sort of have tier one clients, a prerequisite to have them as investors is that they also get co-investments. Now, for us, it's really also a mitigating thing because then we have people who carry on their own balance sheet part of those bigger investments. Actually that's a very good way for us to sort of not only attract investors, but also then to mitigate risk.
Are you planning to do, like, similar, like, Wind Fund V or something like that? Like, like, I think it was more of the retail side back-
Yeah.
back then. Do you see any idea of doing that kind of things? Obviously you get fees from those then.
Yes, we get fees. That would be sort of a top-up fund to this. But that's not in the cards now. That would be later down the road when we see how the portfolio builds.
Okay. Yeah.
Yeah, if we
Aktia would naturally do their feeder fund.
Yeah
we would access.
Yeah, obviously.
Yeah.
Like, there is not any requirements of the fund which would then allow you to do that kind of things?
Not that I know now, but that is a need that only arises down the road.
Mm
If so needed. Then again, if we have tier one investors that want co-investments, sort of, you know, we have that venue already. We'll see that. I think the important thing is, you know, SolarWind III as a fund, they have the pipeline. We get it up and running and sort of raise it to the size we want it to be, and then we just execute that. That's really the core essence of that business right now.
Okay, thanks.
Thank you. Any more questions? No. There are no questions from the webcast, so I think that's all.
Okay. Well, thank you very much.
Thank you.
for your attention.