Welcome to today's presentation where we have the pleasure to present MPC Energy Solutions. To hold us through today's presentation and answer questions in the end, we are joined by CFO Stefan Meichsner. Today's event, of course, your Q3 result and the EGM proposal that is a proposal about delisting and going to the smaller NOTC exchange. That will be today's presentation. As always, there is a box down below this presentation. Do feel free to ask a lot of questions during the presentation, but we will take the Q&A in the end. But for now, I will hand the call over to you, Stefan.
Thank you, Michael, and good morning to everyone joining today. Before I begin, just a quick note of our disclaimer regarding forward-looking statements. Please take heed of whatever projection concerns may change and needs to be taken with some consideration of that. To the agenda, I will walk you through the highlights of the past few months today and also look at the year-to-date results. I will provide an update on the remaining assets that we have and then walk you through the resolutions we are proposing for the upcoming Extraordinary General Meeting, which we convene for December. As always, Michael said it, happy to answer any questions you or Michael might have at the end of the presentation. With regards to the highlights, of course, first and foremost stands that we made substantial progress on our divestment activities.
We sold three projects during the third quarter at the end of July and early August. We reported that we would sell projects in Guatemala and El Salvador, which we commonly refer to as Project Merlin, and we also sold our remaining operating asset in Colombia called Los Girasoles for total cash proceeds of nearly $32 million. This excludes an amount of $2.2 million, which is currently still sitting in an escrow account until certain disputes and milestones are being resolved. What did we do with the money? We successfully returned capital to the shareholders as we promised and underlining the commitment that we made and also our ability to meet these commitments and objectives. $29.4 million were returned in total to shareholders as part of a share capital reduction, which we executed in early September of 2026.
Operationally, revenue and project EBITDA already exceeded the full year targets which we originally had. This is mainly driven by the fact that the projects that we sold remained part of our portfolio for longer than expected. Of course, then they contributed more revenue and EBITDA to the overall numbers, and this basically leads to us lifting the guidance for the remainder of the year. Overall, we are now targeting $8.3 million in revenues. Before that, it was just $7.5 million, and also the EBITDA is supposed to come close to $6 million compared to $5.5 million, which we guided earlier. Overhead cost reduction continues to be lower than in the comparable period last year. We are now down 60%. We are still targeting up to 25% by year-end. During Q3, we had a number of non-recurring costs. We further reduced our headcount, which came with severance payments.
We also had some non-recurring legal costs. The fourth quarter should be lighter on spending, so that overall, we should be able to exceed what we have delivered so far this year. This is not really a highlight for Q3. It came in after the reporting date, but we collected an additional earn-out payment of around $142,000 in connection with a project that we sold last year. The total earn-out related to the project that we have now collected is a little over half a million dollars, which we did not plan for, so this is a nice add-on to all the other activities that we've had. With that, let's take a look at the financial results.
Just looking at the one remaining project that we have, which is our solar plant, Los Santos, and the other projects, because they delivered results only for certain periods of time until the date on which they were sold, are here shown in a combined manner. Overall, Los Santos in Mexico, the only solar plant that we still own and have remaining, the project is meeting expectations with regards to the energy output. We are seeing revenues trending slightly below our plan, and the project was also impacted by non-recurring costs that weigh on the margins. This was mainly triggered by legal expenses in connection with us assessing the regulatory changes and the impact on the project that Mexico implemented during this year, and also with regards to some claims against previous suppliers and an appeal which we are launching against the fine issued by the local grid authority.
The margin is 68% compared to 76% last year. We were certainly aiming for higher, but we do not see that this is improving substantially towards year-end. Overall, all things considered, with an overall portfolio margin of over 70%, and as I said, a lifted guidance for the rest of the year, I think we're looking at a solid result, and the operating results are actually not as important as our progress on the divestments and the fact that we finally returned cash to shareholders. On the overhead side, as I said, you can see here the long-term trend year-over-year from 2023 all the way to 2026. Costs have come down significantly together with our efforts to become profitable and ultimately also prepare for the divestments of our portfolio.
16%, as I said, year-over-year, and eyeing up to 25% by year-end, which is a little bit less than we originally anticipated, but of course, the non-recurring costs I referred to earlier were not planned. I still think that 25% reduction would be a substantial improvement, and especially looking at next year, provided that the shareholders approve the proposed delisting, we will be looking at a much, much lower overall cost base for 2027, but I will get to that. On the balance sheet side, as you can imagine, when you sell so many projects, the total assets shrunk substantially. I think we had over $123 million in the last quarter, now down to roughly $40 million, with an equity book value of $12.6 million, which relates to an equity ratio of 32%.
The only project finance debt that is now left is the one related to the Los Santos project in Mexico, and the cash is mainly on holding level. Part of it is restricted, but we're looking at a very solid, very easy to understand balance sheet now as we continue to unwind our positions. The free cash position itself was mainly driven, of course, by the divestment activities that we undertook during the third quarter and subsequently by the share capital reduction that we made. The $2 million reported here for the end of September that we had as a free cash position remains unchanged today. I will speak about the different cash buckets that we're looking at in a moment. For now, let me just say that our year-end cash prediction is slightly lower compared to what we shared during the webcast in July.
The uncertainty inherent to that projection remains unchanged. We're looking at different cash buckets, and we just need to see how quickly and if these can be released in our favor. But with $2 million and very few commitments and a much lower overhead base, we're looking at a comfortable outlook for the coming months. Which brings me to what we have left. I will address the cash buckets in a moment. For now, let me just say we have the project Los Santos in Mexico, and we have our stake in the U.S. microgrid developer Enernet Global. We cannot really report any progress. As of today, we cannot reliably predict when we will be able to sell these assets and especially at what price. But the current information, based on everything we know, suggests that it will certainly take more than six months to sell the remaining assets.
It is also likely or probable that we will have to record impairments on the current carrying values by year end. There's still a lot of moving parts in Mexico, which we need to deal with. With regards to Enernet, the company recently changed the focus of its business. The outlook is still being assessed, so everything is relatively difficult to reliably estimate what value we might ultimately be able to return from the investment, if any. This is why really a grain of caution here. We're looking at it. This is not easily resolved. Should the shareholders vote in favor of a delisting from the stock exchange, and should that delisting application be approved, I think it's very likely that both Los Santos and the stake in Enernet will remain part of the asset base at that time. It's different with the cash positions.
As we're looking at clearly defined deadlines now for each of them, I classify here three cash buckets. I already mentioned the free cash reserve of $2 million. Other than overhead expenses, which we intend to bring down further with the proposed delisting, we have no pending commitments at this time. So, the $2 million sit there, and we will use it with our normal usual cost discipline to last as long as possible. Then we have $2.9 million, which we classify as restricted cash. These are minimum cash requirements we agreed to put aside for a certain period of time in case the buyer of projects makes claims against us, which we have to serve. If no claims are being made, then this position, the $2.9 million, will be released step by step over the next 9-14 months. Here it says 12-18.
It is actually now a much shorter time period. The first release could be expected then in July of next year, and the second release in December of next year for a total of $2.6 million. A substantial portion of this $2.9 million restricted cash bucket is what we currently expect to be released over the next year in 2027. Then there is the escrow account that was set up in connection with Project Merlin, $2.2 million. Two matters need to be resolved here to release those funds either in full or partially in our favor or in favor of the buyer. The first matter is scheduled to be decided by the end of November. A third-party expert has been engaged to resolve a purchase price dispute. The timeline for that resolution is end of November, so we should have clarity here in the coming weeks.
The second one has a deadline of end of December. If by then we have not delivered on the timeline, sorry, on the deliverable it relates to, then we will forego the opportunity to collect the funds assigned to it. But the team is, of course, working hard on it. I cannot really go into details because these are ongoing processes, and I do not want to intervene or give the impression that we are overly optimistic or overly pessimistic. Whenever we have an update, we will immediately share this with our shareholders, of course, with the market if there is anything to report. Of course, quite honestly, we want it to be quicker, especially on resolving the first one, the dispute. But at the same time, we have also gotten used to the delays a little bit.
I believe as long as we ultimately decide this in our favor, or let us say third parties decide this in our favor, the waiting time is certainly worth it. We are doing our best and our part to make this happen for MPC Energy Solutions and, of course, also for our shareholders. Speaking about our shareholders, the upcoming Extraordinary General Meeting. So we convened the meeting for the December 8. The record date is the November 10. So, whoever is a shareholder at that time, a registered shareholder at that date is allowed to participate in the vote, and the proxy voting is already open with the notification. So, people who already know they will own shares on the record date or want to vote thereafter can do so by submitting the voting form.
I do encourage everyone who has the ability to actually vote, the more the better, because these are important votes and we want to make sure that we have a broad-based support for this, or a broad-based rejection, depending on how the shareholders lean. Resolution number one, the proposal is to submit a delisting application to Oslo Børs asking for shares to be removed from trading from Euronext Growth. So, delisting the shares from public trading. One of the reasons behind this, looking at the stock itself, the trading activity has been very limited. Analyst coverage is very limited. We have absolutely no intention to tap into the equity or debt capital markets in the future. So, let us say the normal benefits from a public listing do no longer apply to us as a company.
The main effect, of course, is that it is relatively expensive compared to our size and remaining asset base to remain listed. I believe my projection is that we can save at least $500,000 a year in 2027 if we are no longer publicly listed. Since we are looking at only around $1 million in total spending we plan for next year, a little over $1 million, we are talking about cutting our costs in half. I think this is in the best benefit of the shareholders. It is in the best benefit of the company, certainly. This is why we are recommending to do this. What is important to note is that the delisting is not a done deal.
First, the shareholders have to vote in favor of it, in favor of submitting the delisting application, then Euronext Oslo has to approve the application itself. They can do this with or without conditions, or they can also reject it altogether. I mean, they will weigh this on a case-by-case basis as far as I am aware. So, we are seeking approval from the shareholders, then we will take the next step. Should the delisting application be approved and should we ultimately be able to delist, we intend to register the shares on the so-called Norwegian over-the-counter trading system. It is not a public trading system, but it still allows trades to be shared, sorry, shares to be traded through registered brokers, which can be contacted in certain forms. We would share that at the time.
This market is used to or known to be less liquid than Euronext Growth, and also executions take longer. But it is certainly still advantageous compared to just being a private company where shareholders would have to somehow contact themselves without a broker in the middle to buy and sell shares. If we ultimately register an NOTC for however long, if we want to then remove the shares later on, it will also require an additional shareholder approval. So overall, it is in the shareholders' hands whether they want us to register in the first place and later deregister from NOTC. If we delist but the shareholders do not approve a registration on NOTC, then that is also a possibility. I certainly think in terms of providing a way to trade, providing liquidity, it certainly makes sense, and this is why we are recommending it.
Once we are, we still have to comply with disclosure requirements, so main corporate events, annual reports, this kind of stuff will still be published and be available to all the shareholders. But we will certainly comply with any regulations and requirements we have here. Last but not least, the corporate structure also depending on the fact that we actually delist, we would like to turn the corporate form from a Dutch NV into a BV, so let us say a normal private limited liability company. This comes with a much leaner governance structure, less administrative burden. In particular, the current two-board structure that we have with a supervisory board and a management board would be replaced by removing the supervisory board and having a one-board structure controlled by the shareholders through the general meeting.
The draft amendments to the articles of association that would be required here are on our websites, including footnotes and explanations, so shareholders before voting can really look at the details and say, "I'm comfortable with it," or "I'm not comfortable with it." Like the NOTC registration, this change of the articles of association will, A, only be executed if the delisting resolution is actually passed, and it's not necessary even if we delist. So really, we're giving shareholders the flexibility here. Everything depends on whether they want us to delist or not, and whether that delisting is approved or not. The rest is, let's say, optional. Certainly recommended, but we're leaving this up to the shareholders naturally. I just want to say once again, I encourage everybody to vote, and of course, to vote in favor of the resolutions, but we can deal with it either way.
Michael, with that, prepared remarks are done, and I'm happy to look at the Qs that are coming in. Thank you.
Perfect. Let's start with the first one, Stefan. Is any further distribution to shareholders on the table in the short to medium term, or will remaining cash be held to fund the runoff? I know you can't say anything too certain, but is there any plan if some of the cash in escrows comes in?
Yeah, so if we have excess cash available in the future at any time, either from, for example, collecting the escrow funds or the restricted cash being released, or selling the other assets, of course, we want to return the cash to shareholders. This is the purpose that we have. The objective is not changing. I cannot commit to any amount. I cannot commit to any timing based on everything that I said before. But the objective remains in place regardless of whether we're publicly listed or not. Our goal is to collect as much cash as we can, spend as little as we can in between, and then distribute as much as we can over time or at the end. That is clearly the goal. Yeah.
And maybe you do not want to answer me on this one, but you have $2 million now. You feel comfortable in that running the administrative. Is that an amount we should expect always for you to have for the running? So if you send out a message, you collect the escrow account, and we are still on $2 million and so on, could that be an indication, or is more than $2 million needed for you to, you might say, be sure to run your company until everything is settled? Maybe you do not want to answer that, but.
No, of course.
Just for some kind of an idea on what you need always to have on your account looking into the future. And if we get more messages about something being solved, then we could start calculating ourself with what could be distributed.
No, I certainly want to help with that. So, I would say our monthly spending at the moment, including everything and everything that ties into the public listing, is around $150,000 per month, plus or minus, right? So with the $2 million, we can certainly make it until the end of 2027. If we actually delist, we will save a lot of money, and then, of course, the funds that we currently have stretch out. So, I would say with the $2 million, we are certainly comfortable through the next, let us say, 14 months. And if we actually delist, the buffer that we would need will go down. This is what I can say about it. So, I feel quite comfortable here. I am confident regarding the restricted cash, of course, that it will be released in our favor over time. That is a good buffer to have.
Whenever that happens, I believe that cash should be distributed right away, unless anything unforeseen happens. This is how I'm approaching this.
Check. I think you answered the next one. Should we expect write-downs of the full year 2026 results, and roughly what carrying value at the risk? I think you alluded a little bit to that there is a risk there.
Let me first say that we have made no final decision, but I think it is probable for the mere fact that our stake in the U.S. microgrid developer, we have received no interest in our stake as of today. We really don't have a lot of good visibility on the new short-term, mid-term expected results because the company is still evaluating that itself. Knowing the discussions we had historically with our auditors, I think it's likely that they will recommend, or we will say, "Look, let's just take out the book value, just put it to zero, and then let's collect whatever comes next as an upside." For Mexico, the case is certainly more complex. I believe there will be an impairment at the end of the year, but the extent depends on what happens between now and then.
We are very actively working on finding the right path for the project, and I can say more about that if that is of interest. Regardless of what we impair, I don't want to say it's just an accounting treatment, but at the end of the day, it is. The investments have been done many years ago, and now we're just trying to get as much out of it as possible, maximizing realizable value, and then turning that cash into distribution for shareholders. I think that is more important that we deliver on that than what we currently have in the books. If we can bring it down and impair it down to what we believe is realistic for the next 12 months, then I think that also provides greater transparency and visibility.
But I would just have to ask for some patience until year-end so that we can properly figure this out.
Yeah. Perfect. Actually, there is under Los Santos, what are the scenarios if contract restructuring with offtakers and financing fails on Los Santos? Other scenarios, I guess that is what you do, run scenarios when you estimate the needed impairment. Can you talk a little bit about these scenarios and what can be done there?
Yeah. So, the regulatory changes basically give us two options. They say, "You can participate in the new regime that we have structured, or you can stay in the old one as you are now." We have, for now, decided not to migrate to the new regime for the simple fact that there was no commercially viable way for us to do this without risking the project itself. I am not saying that this cannot change. We still have time to indicate interest and to evaluate this, but until that time, we have a project with existing offtake agreements and with existing debt financing. These may have to be adjusted to reflect the new realities because ultimately, power is becoming, or electricity is becoming more expensive for the offtakers, and they will certainly seek to relieve themselves of that a little bit.
We are ready to do that work with our partners. At the same time, we are taking legal steps to defend the project against the negative impact. That will take time. It is an uphill battle, but it is something that we have to do. I think it is just that whichever way we lean, whether we restructure the project as it is or whether we ultimately decide to migrate and thereby restructure it, if I were a buyer, I would certainly want to see how the project performs under the new regulatory regime or the old one, but with the higher transmission costs for the next, let us say, few months, six months, that it can still generate enough cash to pay off its debt, and maybe also some visibility on the legal actions that we are taking, whether that can have any success.
If the existing contracts are actually adjusted, the valuation impact is central. But as you can hear from what I am saying, it is still a little bit vague. It is a complex issue. We are really working on it with great effort and diligence. But I also believe, ultimately, that shareholders probably agree that we should not sell under unfavorable conditions for any price. That is not ideal. I think there is also value here that we can realize given time. As I also no longer see, or I never saw an immediate need to sell the project at a specific date. We can resolve the issues first, and then we will see what happens. But quite frankly, the project was always in a situation where it was just making enough cash to pay off its debt. The higher transmission costs do not improve this, certainly.
I think at the end of the day, all parties have to come together and just find a new path forward, and we are working on that. Whenever we have a clear decision, a clear update, something to report, we will share that information. At the moment, it is just too many moving parts.
I think by this, you already answered the last question I have on my paper, that you are still seeing interest, you are still in negotiations, but I guess buyers have stepped back, or what do you call it in English? Tried to bid very low to test your willingness to take this battle. Is that a correct understanding of the situation? You are still in negotiations, you still have buyers out there, but you are stepping back, not to avoid them taking advantage of your situation.
Yeah. Quite frankly, the interest of buyers has been very, very muted because of all this regulatory uncertainty. Even now with the new regulations, the question is, what will projects ultimately do? What we have realized is that potential buyers do not necessarily want to make the decision themselves. They just want to see the decision and then evaluate what that means.
Yeah.
The indication that we have received, it does not really say anything. I think we need to do our homework, and then interested buyers will come and offer whatever. If that matches our models, great. If not, then we will just wait. The project still has a permit that is good for 10 years plus, and we will not sell for any price unless our shareholders tell us, "We do not give a sh- anymore." Sorry. I do not think they will. I do not think they will. Yeah.
Could the debt restructuring also be a part of these negotiations? I do not know whether you want to be that detailed.
I think if there is a commercial change on the offtake side, the financing side has to match that.
Yeah
because there is otherwise no flexibility. Everybody has to come together and make it work. As long as that is not happening or not being demanded, we will just work with the contracts that we have. That is the good thing. The contracts are not gone. We can work as we have it, but I do believe, by experience and what I would do on the other side, that there will be some discussions going forward, certainly.
Perfect. I will let you off the hook by this question. Thank you, Stefan, for taking us through the results and the EGM and the thoughts about this one, and a little bit overview on what is in cash and what is in assets. Thank you, Stefan, for doing that, and thank you for the audience listening in.
Thank you, Michael. Take care.