Stay, and thank you for standing by. Welcome to the Greencoat Renewables PLC 2025 Half-Year Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Bertrand Gautier, Investment Manager. Please go ahead.
Good morning to everyone. I'm here with Paul to go through our H1 2025 results. H1 has been a busy period. We made good progress on multiple fronts. Three areas specifically we would like to cover today. If you look on page three, one, the key highlights for H1, underpinning our operational and financial performance. Two, our capital allocation strategy, review what we've delivered, and how this has strengthened our capital structure. Three, which Paul will take us through, looking forward to what we see as a very compelling market with an accelerating need for investment into energy transition assets. In particular, one segment we would like to highlight is the convergence of AI data center and wind power, and how this could benefit the business both in terms of growth and value-acquisitive opportunities, specifically given our market-leading position in Ireland. Turning to page or slide four, please.
Starting with cash, the business generated EUR 69 million of free cash flow over the period. This was in a European context where wind speed reached close to historical lows, resulting in generation to be - 15% for the semester. However, the dividend cover was 1.8x, evidencing the resilience of the business model. Second aspect of our capital recycling strategy, we completed our second disposal, which closed in July. This is a post-semester event. Over the last 12 months, in excess of EUR 100 million of capital has been recycled, at premium to NAV across two transactions in two geographies. The third remained in progress, which is a minority sale we have for one of our wind farms, the exclusivity in Spain. This, in our view, demonstrates, among others, the quality of the NAV of the business.
Switching to NAVs, NAV stands at EUR 1.01 per share, underpinned by a levered equity return at portfolio level of 8.4% on a NAV basis. This is equivalent to circa 12% on the current share price. With a rebasing of the European base rates, converting and normalizing, we see those premiums as quite attractive spreads. From a debt perspective, quite active, we refinance and pay down some of the EUR 275 million term loans coming due in October at attractive terms, which we fix at the total cost of debt of 3.9%. The cost of debt for the entire debt structure is around sub 3% at present, which is quite cost-effective. The contracted revenue mix remains one of our strong USPs for the business. 76% of our revenue are contracted to 2029.
We'll talk about the PTA, but this is a direct result from our active reconstructed revenue strategy with over 600 GWh per annum, which corresponds to a serial of our merchant volume being reconstructed over the period. Finally, looking forward, we wanted to bring to your attention specific areas where we believe Greencoat Renewables is uniquely positioned to potentially extract value, capitalizing on convergence of data center and wind power, particularly in Ireland. Turning to page five, this contextualizes the financial performance of the business in cash terms. This slide shows us how the business has consistently delivered on these fundamentals since IPO. You can notice on the tables that the total cash generated was EUR 850 million, which for 45% of it serviced the dividends, the residual being reinvesting into the business.
To benchmark the cash generation year on year, given that the pyramid has evolved, we are looking at KPI being the dividend cover on the right column. You can notice that the company has well performed and overperformed its initial cash cover, which was sold or targeted to be 1.5x-1 .6x set at IPO. Furthermore, the company is able to capture upside when merchant prices are elevated, which crystallized in 2022 and 2023 specifically. Now, we're fair to notice that those levels of elevated pricing are normalizing down and we are reaching a cruising altitude. Moving on slide six, this talks about the outlook. We've been laser-focused, as we discussed in the past, on managing the business tightly in the context of a challenging equity capital market. Needless to say, that this remains and remains our priority through a disciplined capital allocation strategy that we've covered.
In parallel, we are also looking at the future and how the business could capitalize on it. We see three positive dynamics. One, the underlying European renewable market remains very strong. This is the largest and fastest growing segment by far in infrastructure investing. Interestingly, we don't see any material negatives coming from the policy changes taking place in the U.S. The need for institutional capital in Europe remains critical as those assets are getting built. With this comes an increase for the returns of investments can deliver, which is required so that we can attract institutional capital in scale in the space. Two, the convergence of digital and power is gaining momentum. Why does it matter for GRP ? This creates demand for electricity, but so does EV or electric heating.
The demand for electricity, interestingly, in Europe this year has increased 1.4%- 1.7%, which is a pivot of profitability in spite of sluggish GDP growth. The why is important in the context of GRP is that green power is a critical building block to unlock green data center. We see tech companies now considering access to green power as strategic and willingness to ascribe a premium value to those green electrons so they can unlock bigger value set in their own businesses. We see the interest rate in Europe normalizing. We still see a divergence between U.K. and EU-based rates, but it's interesting to note that we should remind ourselves that GRP is 100% EU business.
With a spread between U.K. and EU rates at its highest over the last 10 years, we don't believe that at this stage a listed market is a good candidate to start yet. Moving on to slide eight. Some of the metrics we talked about, this corresponds to the cash P&L comparing H1 2024 to 2025. You can pick up that the net cash generation stands at EUR 64.9 million, resilient gross dividend cover of 1.8x or 1.7x on a net basis. You have probably noticed that there was a EUR 60 million year-on-year decline in net cash generation over the period. This is even in the split between lower wind, mainly Ireland and Germany, the impact of lower power price in continental Europe. There was a non-recurring revenue received in H1 2024 in relation to historical due payment for procurement compensation in Germany. The EBITDA margin stands at 56% in 2025.
Since last October, we have seen some upside in capture power price in Ireland. This is not included in our reporting number. As you might recall, as a matter of policy, we are awaiting the end of the recent year, which is taking place in September, to do so. We expect to see some upside crystallizing. Slide nine shows generation output versus budget by geography, with Germany and Ireland contributing to circa 80% of the shortfall, mostly driven by low wind speed. I think it's worth noticing that there is a certain level of uncorrelation market to market when you compare the variance in percentage column country by country, the number column number five. Those metrics didn't take into account the P50 rebasing. If you would have, the Swedish generation would have shown a positive variance.
On slide 10, we see here the balance sheet of the business at June 2025. Here, asset disposal EUR 156 million is therefore still showing in the fair value of investments. Borrowing stands at EUR 1.3 billion. If we would have pro forma for tier disposal, which we will start in July ahead, gearing will be at 51.8%. Now, worth noting that if the NAV wouldn't have been revised downwards, gearing would have been reaching a sub 50% at 49.7%. Slide 11. This shows the illustrated five-year net dividend cover, which you can see year on year, against or based on what we expect the revised down power price. We are averaging 1.5x over the period. Sensitivities indicating that we remain quite robust in terms of well-covered dividends, even if the power price were to deflate on an academic case quite aggressively.
This generates EUR 200 million of excess cash, which is available to the business for reinvestment. It's worth noting that if you were to compare to the same table published end of 2024, EUR 60 million, EUR 55 million of cash generation over the five upcoming years had been reduced given the change of pyramid with the tier disposal. The pie charts illustrate the contracted mix, which remained well on target with 76% of revenue contracted to 2029. On slide 12, what is allowing us to manage proactively the five-year revenue contracted target on a rolling basis? One of the key levers we have available to us on a commercial basis is corporate PPA, a strategy we are indicating we were actively pursuing two years ago. You can see some positive progress and delivery against this, seven corporate PPAs.
Interestingly, this would have been, or this would have represented over 25%- 30% of our merchant volumes should have not contracted for the period. Quite a long average duration, eight years, and a split of different stakeholders ranging from an industrial company in Germany to data center players in Ireland. Coming back to the thematics, which we'll cover a bit later on. Interestingly, those corporate PPAs were able to be struck at value-acquisitive terms. Slide 13. Here we have the NAV bridge, an update versus the quarterly NAV statements we previously released. NAV went down 9%, which is split between the reset of the P50. We completed the program we started last year. 45% of the portfolio has been reevaluated in H1, 6% down on the 45% of this portfolio, outside the set of the portfolio. Total was 3%.
The total revision was around 4.5% volume down if you take the entire program revision. Power price decrease, mostly reflecting what we've observed in the power price mid-term curve on the continent, which contributed another EUR 0.055 down. Slide 15. This shows you our recap, capital allocation strategy, how it converted into sources and uses of cash for the business. On the right, on the left-hand side blue bar, you can see the sources of capital for the business, which totaled EUR 514 million, of which cash generation EUR 217 million. Disposal of assets, EUR 188 million, this doesn't take into account the non-contingent payments we will receive for the tier disposal of EUR17 million and rolled down of debt of EUR 109 million. On the green side of the chart, this shows you the allocation of the capital with a focus on delivering with EUR 141 million of debt repayment.
To bring it down to the debt structure on page 16, quite an active number of actions, which look one is that we refinanced the term loan coming due in October 2025 up to EUR 75 million. On quite interesting and attractive terms, the fixed rate was 3.9% on this range, which is well below the 4.7% we consider to be a normalized assumption going forward. Gearing at 51.8% at present, I'm sorry, pro forma the tier disposal, and the law is expecting to come due and further accelerate the gearing. The weighted average cost of debt currently is mostly 95% fixed, is 2.9%. The next term loan coming due payment is April 2027. In addition to this, we have also extended the current revolving credit facility, of which EUR 219 million would be undrawn, and this has been extended to February 2028.
Let me hand it over to Paul to talk about the market and some looking forward consideration.
Thank you, Bertrand, and good morning, everybody. I'd like to spend a couple of minutes maybe going through how we're seeing the market at the moment, some of the activities we've been busy with in the first half of the year, and how we're seeing the outlook for M&A, both in Ireland and Europe. I'll spend a bit more time touching also on the emerging AI data center market dynamics in Ireland, not just from a PPA perspective, but the broader infrastructure opportunity and potential avenues that we'll create for infrastructure investments, both in Ireland and Europe in time. If I start on slide 18, it was actually quite a busy period for the business. We successfully delivered the disposal of six Irish assets, or five assets, and 50% of one of our larger assets as well for EUR RI156 million. That was an important deal for us.
In particular, the deal shape where we took assets that were older, that were coming to the end of their first period of refit, so they were going to have to recontract their cash flows and move into the next phase of kind of life in terms of as more of a merchant asset. It was important to show the long-term value of these assets and that there are buyers there for that. We were pleased to deliver this. We delivered it at a 4% premium to NAV, our last reported NAV. In particular, the partner that we sold down to today has a lot of capability and experience in essentially unlocking repowering opportunities and to look at also ways under which you can hybridize or build additional technology on those sites.
We think it shows from the assets that we own on a long-term basis that there remains a lot of embedded value in the market. There are people who are prepared to pay a premium for those sites. At the same time, from our business strategy perspective, it allows us to rebalance the business to remaining highly contracted business, which has mostly contracted cash flows in front of it. We have previously delivered on the sale of Kokkoneva in the end of Q4 2024. We reported also that we would intend to sell down a portion of the Andella wind farm in the second half of this year.
When you bring those all together, it will deliver us north of EUR 200 billion, EUR 230 b illion of proceeds, which are being used to essentially delever the business and to also demonstrate our ability to recycle capital and sell assets at a premium to NAV. We continue to look at emerging opportunities for the business. In particular, the partnership we have with Future Energy Ireland, which is a standalone Irish developer, and where we entered into a framework agreement with them about 18 months ago or so, essentially to become the long-term owner of the assets that they're developing. We're starting to see that pipeline mature very quickly. We have exclusivity over that pipeline, and we'd expect to see new assets start to enter construction from 2026 onwards.
The benefit of that is it comes, and those projects will come with 15 year-1 7 year Power Purchase Agreements or government contracts, which will provide an access to the business to recontract and to create long-term cash flows that will run well into 2040 and beyond. That's something that is providing good flexibility to the business as it considers future growth opportunities. When you turn to slide 19, we stepped back and looked at some of the bigger markets under which we're investing into today, and we have been investing into since IPO. What you see is each of the markets continues to be in a strong growth mode. In the case of Ireland, they continue to run regular auctions for supporting wind, solar, and there's an emerging hybridization opportunity with solar and storage as well.
We expect to have one of the first new offshore wind auctions to happen also this year. Ireland will continue to be a market that will require significant investment into renewable and ancillary infrastructure. Likewise, France and Germany continue to run government-based auctions and have significant commitments in terms of their level of renewable electricity that they want to bring into the market, both in terms of existing new assets. In Germany's case, there's a particular focus towards repowering older wind projects today. Both of those markets have repriced, essentially taking into account the fact that the returns investors are looking for are materially higher than what we saw in the lower interest rate environment. This also reflects the fact that construction costs today in Europe are materially higher than they were pre-2021 era.
What that's seeing is it's seeing higher PPA prices and higher government strike price contracts, which is supporting the basis of new investments into the market. Finally, Spain, which obviously had a significant grid challenge this year when they suffered the blackout probably in early to mid-spring. I guess that has essentially given people the visibility that there will need to be significant grid investments and significant storage investments. Alongside that, the commitment remains to move to a very much renewable-based system with the intention of Spain to be up to 80% renewables by 2030. We think what we will see across all of these markets is greater integration of both storage technologies alongside renewable energy generation, and that those opportunities will create significant opportunity for business like ours to make more complex investments.
When you turn to slide 20, we bring this back together and you see, I guess, two key messages. On the left-hand side of slide 20, you see the significant growth in electricity demand that we expect to see in Europe between now and the mid-2030s, underpinned by electric heating, electrification of industries, data centers, EVs, and even green hydrogen still remaining an opportunity set in some markets. All of that is essentially underpinning the requirement for significant investments into European renewable energy, and we expect to see over EUR 4 trillion capital required between now and 2050. As you see in the different boxes below, that's primarily offshore wind, solar, onshore wind, and then the growing opportunity in battery storage as well.
As we touched upon, we've seen the repricing for capital in the space already with the returns and cash yields investors require increasing and providing that new opportunity set for investors. In addition to that, we're seeing, I guess, the market rebasing the risk-free rates, and we think that provides an opportunity in the future for people to benefit from yield compression. Finally, on slide 21, you can see, I guess, the divergence between what's happened in U.K. gilt rates and European rates. We think that's important for a business like ours, which is listed and is only invested into European assets.
In a market where the pricing of assets is typically delivered more in the private market context than the public market context, it essentially supports the valuation underpinning our assets that we have lower benchmark rates in Europe, lower inflation expectations, and today the Greencoat Renewables Equity Risk Premium stands at over 800 basis points. We think that provides an attractive entry point for investors, though, and those that are underpinned by the NAV that we have today. Turning to the AI opportunity, we put two slides in on slide 23 I'll start with, which really shows the growth that we expect to see in terms of global electricity and the use of energy demand into data centers.
In Ireland, we've seen this sector emerge much more rapidly than other European countries where today we're seeing over 22%, 23% of electricity already being used in the data center space, and that's expected to grow to 30% to 33% in the next 10 years. This is putting significant constraints on the grid, and it's requiring data centers to essentially become much more integrated with how the grid operates, providing much services back to the grid, such as flexibility, storage, and an ability to operate on an island-like basis at times when the grid is constrained and doesn't have access to renewable power. The framework in which that grid system is operating is allowing us to have visibility in Ireland today as to how we expect this to happen in Europe.
As we turn perhaps to slide 24, we provide an illustrative example as to what we see the market looking for today in the Irish context. What you see on slide 24 essentially is that for every 100 MW of data center demand that gets built out, we would expect to see over 200 MW- 300 MW of renewables being required to power that. In addition, each of these data centers will require significant backup support, including gas, UPS, and also batteries. It will become a much more integrated, holistic solution under which the power demand that is and the power management system behind the meter will be fundamental to allow data centers to operate in each of the markets. We can see in Ireland that with a t
2 GW capacity for new data centers, this will potentially require up to EUR 35 billion of new investment.
It's likely that the data center opportunity will be very much linked to where we see new capacity coming on stream, in particular, the emerging offshore wind opportunity in Ireland and the fact that these will be located towards the southeast of the country. This provides for Greencoat Renewables not just an opportunity to sell renewable power from our existing assets or to underpin new renewable energy investments by having the ability to sell them power, but also our deep expertise in Ireland allows us to better understand this opportunity and see whether new business models may emerge, providing opportunity for Greencoat Renewables to play an enhanced role in this data center opportunity. If I turn to slide 26 just to summarize where the business sits today, just starting, I guess, with the operational strategic progress.
I think as Bertrand touched upon, we were really pleased with the NAV accretion disposals that we made. We believe that the cash generated in the first half of the year was very robust in a more challenging wind environment, and there's a constant focus on strategic initiatives, strengthening alignment, improving liquidity. We've touched upon the structural positives for the renewable infrastructure sector, AI and electrification driving demand for electricity, the accelerated build-out of renewable energy, and a commitment from the EU to basically deliver on the targets that have been set.
Finally, from our business perspective, we see a broadening opportunity set allowing us to expand potentially our investment universe due to the convergence of digital and power, the fact that returns have re-rated really well in this asset class, and the fact that we are a specialist player in this sector with a proven track record of delivering value across the renewable asset class. We will hand back at this stage and see other questions. I'm happy to take that from anyone on the call. Thank you.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A roster. We will now go to our first question. One moment, please. Your first question comes from a line of Connor Finn from Barclays. Please go ahead.
Morning, guys. Can you comment on the repowering and hybridization potential in the portfolio? How do the returns compare to new assets, say, in your Future Energy Ireland pipeline?
Thanks, Connor. I can pick that up. I think what we're seeing, particularly in Ireland to begin with, is we're seeing a fact that having access to grid and having permanent grid connection provides strong flexibility to the business overall. Clearly, today, in many of the wind projects that we generate, we own, we're only using the grid 30%- 40% of the time when the wind generates. That provides potential to both add storage, add solar, or in some cases, look, can we add data center as well? We don't expect data centers perhaps to be always co-located besides where we have our existing wind farms. In terms of returns, the opportunity from a return perspective is enhanced because you're not having to pay for the grid connection and the development costs on the sites are lower.
We would expect to deliver higher than expected project returns on any projects that we look at. We are considering a number of these opportunities today across our portfolio, particularly in Ireland. In terms of how it compares to the returns in Future Energy Ireland, I would expect that the type of asset that FutureEnergy Ireland is generating is a newer asset, our newer assets, with long-term contracted cash flows and essentially able to deliver us premium-type returns. We will always be comparing and contrasting the risk of redeveloping our own sites or taking the development risk on our own sites to deliver these repowering opportunities and comparing that against the fact that Future Energy Ireland projects will be delivered by the existing developer.
Okay, thank you.
Thank you. We will now take the next question. The question comes from the line of Joe Pepper from RBC. Please go ahead.
Morning. Thanks a lot for the presentation. Just two from me, please. First one is just looking at slide 11. I think the dividend coverage is relatively stable through to 2027 before increasing quite significantly in 2028 and then 2029. I assume inflation linkage is obviously helping here, but bar that, what are the key drivers behind this increase in later years? I suppose how contracted in nature are those drivers? The second one is also staying on slide 11. You mentioned the future that the dividend cover assumes 60% of excess cash flows are reinvested in Irish renewable assets. Obviously, I appreciate these are only modeling assumptions, but is that roughly how you're thinking about reinvestment as it stands, i.e. a 60/40 split between reinvestment and degearing, with Ireland being the most attractive market you see currently? Thanks.
Hi, Joe. On slide 11, there is an uptick effectively in the discover. This is driven by, for part of it, by your recovery, as you can pick up in the appendix of the power price in Sweden, which contributes. I mean, Sweden is currently operating in an environment where electricity prices are uneconomical, i.e. sub EUR 10, EUR 15 per MWh. There is a number of actions being structurally in train, like building the grid, which is being built. This will normalize back power price to EUR 30, EUR 40 per MWh, which is driving part. In other words, if Sweden continues to operate at this level, currently no zero renewable capacity get built.
Not only do you have the sticks in relation to the grid, which is depressed, and B, you have industrial demand, data center, the green steel plant taking place as we speak, which will rebalance the equilibrium of supply and demand. This is one aspect. This is a static view of the world. As you can see, when we get to 2028, 2029, we are not factoring reconstructed in our assumption of what is the current tariff contract coming to an end. We will in practice, as we've done in the last two years, but this is not something which has been a factor in those metrics.
Thank you. Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. We will now go to the next question. Your next question comes from the line of Iain Scouller f rom Stifel. Please go ahead.
Good morning. I've got a couple. Firstly, on dividend cover, I think going back to February the full year, I think the guidance for 2025 was about 1.7. I think the July trading statements said 1.4, but today we assume we're down to about 1.3. I mean, why have we had the move, particularly between July and now, has it been lower generation over July and August? If we're assuming 1.3 for the year and we're already 1.7 for each one, I think that's implying the second half is somewhere around about sort of 0.9-1 .0. If you just clarify on that. The second point is on cash. I think the interim report is talking about EUR 141 million of cash, which includes EUR 89 million of unrestricted cash, which is readily available to use. The implication is there's about EUR 50 million which is restricted.
Can you just sort of give us a bit of clarity as to what that restriction actually is?
Yes. I am. On the restriction of cash, this is cash that we don't have direct control of. In other words, cash which is sitting in assets which are under GV agreement, under which we have a specific dividend upstreaming policy, which can be quarterly or every six months. It's not like we have full flexibility, 100% flexibility to upstream the cash whenever we command to do so. It's not to be read as long-term unrestricted. It's cash which is following a certain pattern to be distributed or upstreamed back to us. You should, again, it's a liquidity, very, very immediate liquidity point. In relation to the dividend cover, what you infer for H2, in terms of dividend cover approaching 1x, you're correct. The H2 is typically 45% of cash generated. We have seen slight degradation in July, August.
What we have not factored into the H2 numbers, or actually the 2025 numbers, is some upside we will capture in relation to a power price upside in Ireland, whereby we have a merchant price very likely to exceed the refit level. This is something we wait for the refit year to be completed, which is terminating, sending in at September. Again, to remember ourselves, this is one option whereby the business is able to capture the delta between actual pricing in Ireland versus refit volume.
What sort of magnitude could that be potentially then, that addition?
I think single digit in your million.
Okay. Thanks very much.
Thank you. Your next question comes from the line of Benny Belange from P Securities. Please go ahead.
Hi, good morning, guys. I just want to say congrats on your results and the completion of your disposal. I've just got a few questions, one or two. The first one being around grid flexibility services in Sweden. Could you just shed some color into what exactly it is that you're doing there and if there are other further opportunities in other regions in Europe given the current curtailment issues? Around debt, I just want a confirmation that there are no further drawdowns that you see on the debt level in H2 of 2025. Thanks.
I could take the first one. Thanks, Benny, for that. Yeah, look, I think in terms of grid services, we've seen firstly in Ireland where renewable assets have increasingly played a bigger role in providing grid flexibility. That's both power up and power down into the grid itself and being paid quite attractive long-term service rates for that. We've brought that expertise and we brought that to Sweden. I've worked with the regulator and the grid operators there to start to provide similar types of services. Fast frequency response, et cetera, type services and more secondary and tertiary connections. We do believe in time that renewable power, wind farms, and solar farms can continue to secure greater revenues from providing these services.
In addition, we think in time that by having access to our own grid connections that we have, as these services mature, we can also start to hybridize some of our sites and have the benefit of having more firm connections and firm power to provide that. We are bringing that expertise from the Irish market, have now brought it to Sweden, and we expect it will continue into other markets as well over time. Bertrand, I might leave you to answer the second question.
If I hear you correctly, the question was, is there any debt refinancing coming due in 2025? The answer is no. The next term loan debt which will trigger refinancing is April 2027. We have refinanced fully the 2025 October maturities, and we have extended the revolving credit facility to Q1 2028 with EUR 290 million of vendor owned capacity.
All right. Thanks, Paul and Bertrand . Bertrand, I just wanted to clarify, so there are no further drawdowns on the current debt level is what I was.
No, correct. There is no further sales forward, i.e., acquisition we have committed in the past, which would have triggered a drawdown.
All right. Okay. Thanks, guys.
Thank you. There are currently no further questions. I will hand the call back to Paul O'Donnell for closing remarks.
Just to thank everybody for their support. We look forward to meeting those of you on the road that we will. Please get in touch with either myself, Bertrand Gautier, or John Musk if you've had any follow-on questions. We'd be delighted to help you. Thanks a million.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.