Earnings Call: Q3 2018

Oct 19, 2018

It's already October, and we've just finished the Q3 of 2018, and I have a cold. So I'm in desperate need for some more sun. Actually, just to spend a minute on this first page, this is the last plant that we put into operation in Honduras. It's actually, it's a beautiful aerial photo. So I'll talk a bit more about that plant a bit later in the presentation. To the highlights. As in last quarter, also this quarter, Q3 has been extremely busy on the execution side. Building at 3 continents is, of course, a challenge in itself, but it's under control. If you look at the revenues, €1,259,000,000 and an EBITDA of SEK 257 1,000,000,000 out of that. A large portion comes from the development and construction activity that turned over NOK1.08 billion with a contribution of EBITDA of SEK 130,000,000 The 35 Megawatt Loss Project was actually finished on the last date day of October, which was the plan, the revised plan, I should say, because it should have been finished long time ago, but you know that we had a few delays caused by some issues that was resolved. We are, of course, working extremely hard on converting the pipeline into backlog, and I'm sure that you're going to measure us on that every quarter. And last night, we publicized an added backlog of 121 megawatt in Ukraine. I have a separate slide on that a bit later. And of course, what counts at the end of the day apart from producing clean energy, is to make sure that the cash that is being generated from cellular electricity finds its way back to the accounts here in Norway. So, so far this year, that's almost SEK 190,000,000. You also noticed that we sent out a press release of an increased stake in our existing plants, taking over a portion of the neutral investment in those plants in South Africa. And there are a few reasons for that. Number 1, we wanted to retain our position being in operational control, not that we would have lost operational control, but we felt that the shareholding structure would benefit from an increased shareholding. Secondly, it was strategically important for us because, as you know, South Africa, along with a few other markets down the road, is our home market. And we have right now 258 Megawatts under construction. So that will in total bring us up to almost, well, 4 60 megawatts. So it's a big operation. And in light of that, we decide to increase or take a stake from Nordstrom. In terms of the investment criteria or sort of the hurdle rate that we looked at, it meets our investment criteria, for your information. This is Honduras. And it's a beautiful site. It's close it's on the Mediterranean not the Mediterranean, the Pacific side, a bit further away of the country, 35 megawatts. We are in partnership here as well as in Akofria with Nordstrom. It's going to we started a few weeks ago on its journey, producing energy for the next 20 years. And I mean, I've shared with you before that we had a few challenges there, and not every location that we're at is straightforward. And the key is, of course, to make sure that you build a relationship with a local community that is sustainable. And I think that the success of this plant at the end of the day is greatly contributed to our social programs. And for your information, only 2 weeks ago, we invited 30 doctors to the area. We had 500 patients sorry, 5,000 patients coming in for everything, checking ultrasound or pregnancy or broken legs, cold like my own, and it was a great success. And of course, this program will continue throughout the lifetime of the plant. It doesn't mean that it's going to stop producing after 20 years, but we will continue to interface with the community as a responsible social operator. The other plants that we have under construction now East Malaysia, these are 3 plants, a little bit shy of 200 megawatts. The one that you see here is Guren. It was it's actually it's producing electricity and it's earning revenues as I speak. It's in its initial operational phase and that will be replaced by commercial operation date in a couple of weeks from now. We have 2 more plants that are approaching the same maturity level. That is Michang on the East Coast and Gurun, a little bit north of Melaka. I was there 2 weeks ago and great progress. These projects have been a bit delayed compared to what we have shared with you previously. Our experience is, and maybe that should have been put into our plans when we communicated this last, is that when you're entering into a testing phase the first time in the country with a utility that haven't done it before, it takes a bit longer. And it's not only our eager to finish the plant that decides when it's going to finish. We need to tango with utility. And it's not like turning on the light switch when you are connecting a solar plant to the grid. Solar plant produces electricity at different levels throughout the day. Also, you may have clouds and the grid, the one where you actually distribute the energy, needs to accept those electrons in a manner that is controlled. And to be able to simulate that, we need to think about all these transient conditions that the plant and the grid are going to dance at different levels to make sure that the performance will be satisfactory. This is what we've been doing over the past few weeks on Vodun, and we passed the tests well. In Mozambique, this is for those of you that scored high on geography, it's a bit north of northwest or I should say rather northeast of South Africa and the plant is centrally to the west in Mozambique. It's in the rural area. Of course, also there, we have tribes that we have to interface with, which has been a success so far. And as you can see, we are progressing well. Brazil, yes, it wasn't the only hydro that enjoyed the rain there, we did too, which actually put us back a month compared to our original schedule. We managed to catch up. And I think during November, we will be in commercial operation. So the plant is physically complete, and we are in the final testing mode at the moment. Egypt, 6 plant, same location, close to the Aswan Dam, huge power plant, great grid, can accept all this the energy that we're going to produce. We are approaching 50% completion on the first plant and the others are going to follow suit as we sequentially produce or build these plants, trying to utilize as much of the learning from the first plant to the last plant because you know that in our plants, when we build them, we have 85% to 90% unskilled workers. So their learning there is extremely important for us to actually take benefit of when we are completing these plans. And then South Africa, last time I told you that we are starting to build roads. Yes, we are continuing to do that. And we're going to ramp up during this quarter for full construction, starting to put steel into the ground and mount the panels. This may look quiet and nice from the air, but I have to say that when you are in construction, this is a major operation. Take Brazil or a fully project, for example. This is the largest project at one location I've ever built so far. You know how many kilometers this is not good for the environment though, but the rest is. You know how many kilometers we drove during construction, trucks and everything, 4,000,000 kilometers. Back to geography, the equator, how long is that? 40,000. And then you can work out how many times we rounded the globe to find out that this was quite a distance. We did that without any accidents. If you compare that to statistics in a few countries, you would have had a few accidents. So it's a major operational issue to control the traffic. In Egypt, we're saying we're having the same issues. In fact, we're not only there. We have a few other plants that are being built at the same time. So it's tremendous focus on traffic because of all these trucks and all the operations, just to share a bit of those things that we are dealing with every day with you all. Ukraine. We said in after the Q1 that we have spotted Ukraine as a country that are really determined to add renewable energy to their portfolio of energy sources. And we set out we actually started last year looking for opportunities. And we have previously said that how we have actually bagged a couple of plants into the backlog. The feed in tariff there is friendly. It's around €0.15 per kilowatt hour. The period of the PPA is 10 years. And sort of if you look at this from a financial point of view, it's probably a very efficient place to put your equity because you're going to get the returns back within that period. So we have right now a bit more than 2 50 megawatts in backlog. We are working with EBRD and other development banks for debt financing. That as for the first project, it is at an advanced stage, meaning that we are closing in on construction start and financial closure. We have an additional 200 plus megawatts that are we are developing, And hopefully, we are able to also transform most of that into our backlog. And all of these plants will be built during next year. It's going to be a very high activity in Ukraine for its next year. We have established an office there. We're hiring people. In fact, Ukraine has a high level of educated people. I mean those that are in the IT industry appreciate that. Also in the mechanical industry, we're going to benefit from that when we're building our plants. If you look at our sort of our map, and we are concentrating around the solar belt of the world where there are a lot of developing countries, a lot of countries that really have additional energy on their agenda, not replacing old sort of dirty energy. So for us, we have a special mandate to give them that clean new energy. And we have a very high activity within our market. We have a pipeline of around 4,000 megawatts. And although you cannot see in the 4,000 what type of activity that are happening on the ground, I can share with you that a lot of these projects are maturing and are moving slowly towards backlog. And when they reach backlog, we previously communicated that then it's 90% probability that it will be completed. In fact, in the past, everything that has become 90% has actually turned into become 100%. Yes, I will give the word to Mikael that will guide us through the numbers for the last quarter and see you in a few minutes. Thanks, Raymond. So we'll move into more on the numbers then. So as mentioned by Raymond, revenues, proportionate revenues reached SEK1.3 billion in the quarter and EBITDA, SEK257 1,000,000. And you can see on the graph that the activity level increased quite significantly over the last two quarters, and revenues are up by 40% compared to the same quarter last year. And construction is the main contributor here. $130,000,000 of the EBITDA is related to that activity. And important also to note, when you look at the Q3 last year, that we had a net gain of close to DKK400 1,000,000 dollars on the sale of the partial sale of the Aapodi project to Equinor back in the Q3 last year. So that's affecting both revenues and EBITDA in the Q2 last year. So the underlying development here is, of course, quite significant compared to last year. Also worth mentioning is that we are continuously reviewing our project pipeline, and we have decided to discontinue some development projects, and we have done an impairment of BRL17 1,000,000 dollars in the Q3 of project rights. And this is then increasing our D and A and impairment charges to $57,000,000 up from $39,000,000 in the previous quarter. So that's not something that we do often. It's actually the first time since 2016 that we are doing an impairment of project rights. So it's been at the low levels, and we are aiming, of course, to keep that at low levels also going forward. Cash flow to equity reached SEK141 1,000,000. And again, if you adjust for the sale of the Brazil project rights last year, the underlying cash flow has increased substantially over the last quarters. So if we just look at the Power Production segment, the production reached 73 gigawatt hours in the quarter, and it's basically in line with the same period last year. The mix is changing a bit though, and EBITDA increased by 7%, and that's because the Czech Republic performed really well in this quarter. It's 100% owned by us, affecting the numbers here. And the performance is basically driven by what we've seen in Norway as well. It's been some very nice sunny summer months in the Czech Republic over the last quarter. So we enjoyed that. And as you can see to the right, I mean, we've seen stable financials now over the last 2 years in the Power Production segment. And of course, we're happy to now report that the grid connected the Los Prados plant, and we'll connect other plants in the coming quarter, and we'll see growth again in the power production numbers. And that's, of course, something we're looking forward to report on. On the O and M side, again, fairly stable underlying operations. Worth mentioning that we in the previous quarter, in the second quarter, we had a catch up of NOK8 1,000,000 related to the Jordan portfolio affecting that those numbers. And furthermore, we had also a fairly good weather conditions in South Africa, also affecting the performance of O and M in this quarter. So again, fairly good results in the segment. And as we grid connect new plants, as and just to repeat our model here, the O and M business line will then get more revenues as we grid connect new plants, and that's expected to happen, as I mentioned. So that follows the power production profile of growth going forward. And then the development of construction activities, we've already talked about this. I want to mention that we report about 34% or 1 quarter progress so far at the end of the third quarter across the portfolio of construction projects. And the gross margin came in at 14.9%. So we're happy with that level. And that will, of course, vary both the margin level, but also the top line here will vary from quarter to quarter with progress. So keep that in mind when you look at our numbers also going forward. Then on the balance sheet, we maintain a solid financial position. We have now invested about NOK1.4 billion over the last 18 months into the construction portfolio. This is equity our share of the equity investments done in this portfolio. And the 3rd quarter consolidated assets stood at $11,500,000,000 and that's increased by almost $1,000,000,000 since the beginning of the year and driven by these further CapEx investments. And then we, of course, follow the cash developments. If you look at the consolidated cash, it was about $2,000,000,000 at the end of the quarter, while we had about $500,000,000 of free cash at the group level. And I will talk about the cash movements in a minute. The group level book equity increased by about $100,000,000 over the quarter to $2,900,000,000 and the equity to capitalization ratio ended at 80% at the end of the quarter. Now looking at the free cash movements again. We, 1st of all, received about $50,000,000 of dividends from operating plants. And as Raymond mentioned, we have year to date received close to $190,000,000 of distributions from operating power plants, and we expect to get slightly more also in the Q4. We'll get back to you on that number when we report in January. And then $100,000,000 or so of cash flow from D and C. This is a number that we derive from the EBITDA reported. So the working capital movements is reflected in the box to the far right of this graph, the negative €100,000,000 or so. So that's just also good to keep in mind. The large portion of cash outflow is equity investments, dollars 500,000,000 And as some of you may remember, the Malaysia projects have a structure where we invest equity last, meaning that towards the end of the project, we are deploying the equity and have done so now in Malaysia. And we have also invested now all equity into Egypt, which is a structure where we inject equity in the beginning of the project and also, of course, in Honduras. For South Africa, which is a project that we are now have now started, it will be Equity Last. So these are important elements to have in mind also when you think about the cash movements going forward. We spent about $14,000,000 on further development of the backlog and pipeline. So again, we, of course, continue to invest in new project opportunities. It's been quite a lot of focus on emerging markets risk over the last few months, and we thought it would be worthwhile to present this slide that we also used on the Capital Markets Day to talk a bit about how we structure our projects. And basically, all our projects are based on long term power purchase agreements, and that is a basis for long term stable cash flows. And it enables us to raise nonrecourse project finance. So it's debt at the project level that has only security in the cash flows of the power plant itself, and that's reducing equity risk. The PPAs have a fixed tariff for 20, 25 years, and there's a take or pay obligation for the off taker. So there's no power market volume or price risks involved in our portfolio. And again, that's the basis for us leveraging these power plants by 75% typically and with debt tenors of 15 to 20 years, so long tenors on the debt. And its PPAs entered typically with state owned utilities. So the counterparties are government entities. And it's typically with government guarantees backing the obligations of the utilities of the offtaker that we are selling the power to. And in some markets, we are also entering into project risk insurance from the World Bank and other institutions that is further protecting our investments. And again, when it comes to political risk, we are working with financing partners like IFC, a part of the World Bank and EBRD, an African Development Bank. And these institutions have many years of experience of funding and providing debt to government and providing funds to infrastructure investments for the last 30 or 40 years. And that means that we have seen very seldom defaults under these contracts because the governments rely on these institutions for further funding. And there's even cross default terms in these loan agreements so that if the government default on one project, they might be defaulting on debt on other projects. So it's a structure that is quite as we have experienced, quite complex and quite cumbersome to put in place. But once we have it there, the default rates and studies have been made on this, Default rates on PPAs across Africa, for instance, is really low in these structures. So just we wanted to make sure that, that is again repeated the way we structured these projects in light of that. When it comes to interest rates, that's part of the project finance structure. We hedge that interest for at least 10 years. It varies a bit how much, but typically 70%, maybe even more of the debt volume is hedged. And that is, of course, further locking in the cash flow. So our exposure to long term interest rates increase is not affecting our cash flows in the operating assets. Obviously, that will affect, to some degree, the interest rates for new projects. And when it comes to currency risk, the tariffs are typically in dollars in markets like Argentina and Egypt that we're now active in. It's dollar denominated tariff. So we are getting paid in dollar terms, and we then raised debt for these projects in dollars in the same currency as the cash flows. So again, this is representing a hedge for us on the currency side. And then in other markets like South Africa, Brazil and Malaysia, there's local currency tariffs, local currency cash flows. And then we raised debt, obviously, in the same currency as the cash flows. And then you also have inflation adjusted tariffs. So you get protection through the inflation adjustments of that tariff against the long term movements and typically a weakening of these currencies in these markets. So there's more details to be shared on how we structure projects. But at a high level, I think this is what's important to keep in mind there. So back to targets and guidance. First of all, the short term guidance. The O and M revenues guidance here of $80,000,000 to $85,000,000 for the year is slightly up from what we have guided on before. It's reflecting that we are grid connecting now new plants, as I mentioned. The D and C contract value of projects now under construction is about NOK8 1,000,000,000 and about half of that we expect to recognize in 2018. But again, keep in mind that these construction revenues will vary. We measure progress in the projects, and it's difficult to be too precise on each quarterly contributions. I think the analysts also recognize that. And then lastly, we guide on the production volumes. And we provided you with a range here because the precise date of commercial operation of some of the new plants is, of course, difficult to be to pinpoint, but it gives you the indication of where we expect to production as we connect new plants, as mentioned by Raymond. On the longer term guidance, it's we're repeating what we said in May on the Capital Markets Day. We're aiming for 3.5 gigawatts of new capacity or total capacity, I would say, by the end of 2021. That will imply that we will have a D and C contribution, after tax contribution of NOK2 1,000,000,000 to NOK2.5 billion from now until end of 2021, realizing this business plan. And the operating plans of 3.5 gigawatts is estimated to generate about $800,000,000 of cash flow every year for the next 20 years. And the gross margin level, we guided on 12% to 15 percent and equity IRRs on investments of about 15%. So with that, I leave it to you, Raymond. Thank you very much, Mikael. My voice is still there. Accelerating growth, that was a team that we selected for the Capital Markets Day. And indeed, we are in an accelerated mode. But to simplify this complex world of ours, we decided to try and bring this into 4 buckets or 4 pillars rather. And as you've seen now, I guess the proof of the pudding is not only in the results that Mikael shared on the contribution from the construction activities, It's also about how we conduct our business, meaning that we have to have tremendous focus on health, safety and environment. We have to have focus on quality. We have built quality plans. You should take a look around and compare it to some of our peers and you will see the difference. And one difference is that we're not only here for the project, we're here for the lifetime of the project. So for us, it's of high interest that the plants that we build and leave behind for Torsten Bernstein, who is actually running the asset management and the plants, that are high quality. That increases the efficiency. And if you look at our performance and the availability of our plants, I mean, it cannot be above 100%, you know that. It's actually at 99.6%. So that's outstanding. So that means that we are getting revenue from these operating plants more or less every time the sun is giving us some rays that we transform into electrons. What's also a bit challenging here is that we are at different locations. And these plants are not next to a big city. They're out there in the rural areas. And for us, of course, we are embarking on a new way of or new content into our business model, execution model every time. Looking at the resources in the area, making sure that we give them employment, I mean, we have actually a discussion now with communities in Uppington, South Africa on how to employ as many as possible. And we will employ as many as possible, meaning that if you look at Kalkut that I followed from South Africa, we had 91% unskilled workers, half of that from the local area. And a lot of them actually gained skill sets that are generating income from their families from today. Focus, we have been a focused company. We will continue to be on a focused company. We are not a volume company. We are looking at opportunities, understanding these opportunities, deciphering the complexities into actionable and understandable behavior and financial models. That is what we are feeding into our growth. That is what is in our 4,000 megawatts of opportunities. Of course, there are some oddballs there that we decide to take out. Like Mikael said, we took SEK 17,000,000 of project opportunities that we've been working out of our balance sheet. But last year, we took nothing out because there was nothing to take out. I said a few times too that it's very difficult to look into the future and be certain about where we are 5 years from now. And 5 years ago, I would have never guessed what we are experiencing today. So the world is moving extremely fast. And that means that our little company, we have to watch, we have to be agile, We have to look at new ways of financing, new ways, new partnerships, new technologies that we have talked about a few times. I mean, you are following the battery revolution going on at the moment, I'm sure you are. Europe is now finally deciding that they need to compete with the U. S. And Korea and China because they know that batteries are going to dominate everything. They're going to have a major influence on historical industries in Europe like the car industry. It's a threat. But when you're a threat, you always look for the opportunity and there are tremendous opportunities in this segment that we're in. And then as we said before, we're looking at maybe optimizing some of our portfolio, meaning that could find home for some of the assets that are sort of in a position that we can sell them and redeploy the capital earned somewhere else. Refinancing is, of course, also important where we look at and we have looked at that for South Africa and that could very well be that we are coming up with a financial model where we can actually book a financial gain. But I mean, I'm just sharing with you the work activity at the moment. There's nothing fixed about that. And then to my final slide, it is I mean, it captures to a certain extent the growth potential. It also captures the long cash flows down to the left, which has increased since last time you saw it up to 3.57 with Honduras involved, construction at twice that level at the moment And then the backlog that increased last night, that will continue to increase and then move into construction. Some of those $457,000,000 will move into construction through financial after financial closure this quarter. And then you see we have an overhang of more than what we need to reach the 3,500 by end of 2021. So again, very high activity. We have extremely good people. And I mean, it's amazing that sometimes we have an ad out there and there are 100, 150 applicants. That's really good to see. Conversion, I've touched on. And reducing cost is important, isn't it? I mean, this is all it's everything that's it's all about that. And it's not only about technology and reduction of cost of technology. It's also about how we conduct our business in a more efficient way, how we finance more efficient, reducing the margins for the banks, reducing the fees that any lawyers here? I mean reducing the lawyer fees. So I apologize to you all the lawyers, but I mean that's an expensive bit. But if you can sort of copy, copy and be a copycat, you can reduce some of those costs. They are expensive, particularly in Africa. And I also like to commend the Norwegian government, even though they're not here, we have a tremendous cooperation with the Ministry of Foreign Affairs and they're helping us. Nourad is helping us, taking some of the risk out of our projects because they're giving contribution to us when we are in early phases of development. So that's tremendous and that's good for us. The cost of a plant this year have probably been reduced by 10%. The cost of modules due to the shrinkage or partial or maybe yes, the shrinkage of the market in China has reduced the price considerably. So of course, we are enjoying that because we happen to be on the receiving end, but everybody that's upstream are suffering and they have to become more and more efficient. So that's think that's good news for industry. I don't think I know it's good news because it makes power from the renewable industry even more competitive. This will continue. And then again, as I said before, you add batteries to this and you have a winning team. So I think that concludes our presentation this quarter. I'm really happy to see you all here, and we'll see if we have some questions from you or from the web. So feel free to ask questions. Mikael, do you want to go on? Going back to the projects you announced in Ukraine last night, Could you say something about the CapEx on the projects relative to the previous project you announced in Ukraine? To me, it looks like it's a slightly higher CapEx per megawatt. Is it something project specific that helps you offset that higher CapEx and receive similar returns as the first project you announced in Ukraine? I mean you can add them, Mikael. But if you you can't really compare them like that because some of these projects are and there are different locations. There is are different soil conditions. There are different yields. So they will all sort of have their individual outputs in the financial models and the total cost. I mean, some costs are more or less the same because I mean, the financing and everything else is more the technical side that you will see a variation. You want to add something? No, I think that's true. I think it's, as you say, irrigation and the total economics of the project is also, to some extent, affecting the CapEx levels. Okay. So there's really no sort of source of deviation on the return profile between the 3 projects you announced in Ukraine? No, there will be some variations between the different projects, and that's mainly driven by ideation because as you saw on the map, it's varying from the north to the south of Ukraine. So there's a bit of difference there, of course. But I mean, broad terms, similar economics. Okay. And just another question. So we talked about asset rotation on the CMD. And I asked about it on Q2, and I'll ask again. So have you seen any sort of dialogue starting up in terms of assetrations? Have you seen any incoming requests for discussing potential transactions? And then sort of how is the momentum and how is the time line on that program? Well, I think when it comes to potential buyers of assets, I think there is several potentials there. I mean, a number of potential buyers, obviously. And we are, of course, receiving requests or questions around that. But that being said, I mean, we have a strategy of being a long term owner. So we are not really seen as a company that are selling assets. So I think we need to be active in that dialogue to sort of have a process to put it that way. And that's, of course, what we will then initiate. And this will take such a process will take time. So just manage your expectations on when this list can happen now. Thank you very much. A couple of questions, if I may. First of all, you mentioned the drop in module prices and this, of course, helping on all component prices and it's helping the long term outlooks for you. In the short term, however, are you seeing any request for renegotiations on the existing pipeline that the offtakers are seeing that the price is coming down and want to revisit the PPA levels? I have to think now. No. I mean, everything that we have started building, I mean, that they are contractually committed. So and there are a lot of stakeholders. So like South Africa, Egypt, there are no signs of that whatsoever. In situations where the PPA has not been signed, there could be a temptation to revisit the pricing. And we have seen some signs of that, but not many. Okay. On the Ukraine project, you are, of course, closing in on financial close and getting an equity partner. But are you considering starting the build before everything is in place to capture more of the feed in tariff value? I mean, it's to match that increased profit with the risk that you're taking by starting early. I mean, we have done a bit of both in the past, but mostly, we would like to see money on the account before we start. But it could be that we are exposed maybe if there is a long delivery time on the transformer that you put in an electro intent and then this and with a cancellation clause if some something should happen. We have done that to reduce the risk and to finish earlier. So we would focus on the long lead items, but there are not that many long lead items. It's mostly the transformers. Okay. So your base case is not to That's the base case, not to start before we have the money in the bank. Great. And final question on the opportunities in the corporate PPAs. Yes. It's definitely something it's a great opportunity given the pricing levels we're seeing compared to what global filters are operating at the moment? And can we expect to see any corporate PPAs in 2019 from Skatek? Okay. If I were you, I would hope so. I do. No, I mean, no, jokes aside, I mean, we are as I said previously, we are working on many opportunities on the corporate PPA side. What we have also noticed is that we have also a learning process because the structure of these PPAs are different from the structure of the PPAs that we are entering into with our governments and utilities involved. I mean, you have to really focus on the balance sheet of the buyer, right? There could be tax issues. I mean, are you producing behind the meter or the other side of the meter? That's important. So we are looking at a host of different things to make sure that we're getting a structure that we're comfortable with. And but of course, COVID PPAs aren't always available or to be applied in every country. You have to have a regulatory or an adjusted regulatory system that allows you to produce like that. Brazil has that. Not every country has it. So it's very interesting because the power, as you know, that we are producing at the moment are sometimes below the cost of base power in these countries. And the companies that may have their PPA or agreement with the utility up for revision, they come and say, we should do it differently this time because the regulatory regime allows it. So we have discussions like that with a lot of different partners at the moment. Two questions. First, Ukraine, what is the market price, the relevant market price for electricity in Ukraine right now comparing with feed and tariffs you receive? That's a good question. It's a high market price. I have to get back to you where it is at the moment. The €0.15 is the high price. But and the power in Ukraine is priced fairly at a fairly high level due to the Russian situation. And then of course, there is commitment to have a high level of renewables within 2025. And just to add to that, I mean, of course, the tender of the PPA is shorter, obviously, than what we see normally. So if you had a 20 year PPA, you could roughly say that, well, the tariff is should be half of the level that we're doing on 10 years, right? So that's also something to keep in mind, and that's what the government have they know what they're doing there because they see that to omit for 10 years makes sense for them, and then they can get the benefits of a lower price after that. Yes, I went down to Kiev in late June because I wanted to meet the officials to get the first hand feeling for where they were. Are they aware that this tariff is reasonably high And for the reason that you guys say it's 10 years, and they were. And there were several reasons for that. I mean, number 1, they want renewables. Number 2, they are in great need for foreign investments. Number 3, they have a value that we have, predictability. They would like to be predictable. And they know that this is going to have a window. This is why we're focusing a lot on it. This feed in tariff will be revised by end of next year. It may be an auction system after that or they may be have a transitional period. We will participate in the transitional period, of course, and maybe also auctions because then we're all set. We understand the risk. We can take contingencies out and we'll add megawatts to what's already what's in production. And then to the impairments for the development projects. Could you give us some more detail on is it a specific market you're pulling out of or some different kind of projects? Well, there are, I would say, a handful of smaller projects behind that number. It's some in Africa. There's also some in Latin America. I don't think we should want to go into the specific countries. But this is, of course and we discussed it as well. I mean, as we say, we do a review of this every quarter and every month really and discuss the maturity, the likelihoods of these projects being realized. And it's, of course, also a certain degree of judgment around that. But so I'm also saying that, well, it does not necessarily mean that we have given up the project opportunity, but we say that, well, we're not able to capitalize the spending on this anymore. So that's also just worth mentioning that a couple of these projects we will keep our we're not spending money on them really as we speak, but they can be there for the future. We have this is a part of our business actually. I mean sometimes you have to make adjustments like that on the balance sheet and projects that we feel are not mature enough to bring forward or it could be other reasons. It could be solid reasons. It could be property reasons. It could be other reasons. We are budgeting for this internally for a certain write off. In the past, we have been very fortunate that we had I've had very, very few write offs like that. But we're not exiting markets. It looks like we're completely getting out of that market. That's not the reason. Per Bartlett, Infranorvik. Raymond, you illustrated the size of the operations. I think it was in Malaysia where we had 4,000,000 kilometers of driving. That's amazing. Yes, Malaysia. And Brazil. No, Brazil. Yes. So the size of these operations, I mean, to what extent you rely on external contractors? You buy the machinery. You only use your own employees. Where do you draw the line on that? I mean, one of our other values is working together, collaboration, partnerships. We have about 300 people working in our organization, including Blue Collar and the operators. So everything we do for us is based on a high quality relationship with contractors that have the equipment. For example, now on Michonne, the rainy season is just around the corner for those that have lived there. We have 100 machines on-site. So it wouldn't make sense for us to actually invest into machines. We are relying on subcontractors to carry out that work. They are local. They have access to people and they know the environment. So it's very much a local business, which is has both its advantages and its challenges. Lars Korpen Pareto. We see the development in the lifetime of a wind park going from 20 to 25, maybe 30 years. What's your view on the current situation when it comes to solar parks? Somebody told me, I think it was Alp Borstett, he says, if you sort of if you look at the chemistry in the solar panel, it's actually sand. So sand doesn't disappear unless, I mean, it's sort of friction is making it disappear. So in terms of the material in the solar panels, they can last a very long time. When we're buying panels, we have a guarantee of 25 to 30 years for performance. And that, of course, conservatively, there will be some degradation and that's put into the financial model. Normally, it's 0.3% per year. So you can work it out yourself, that's maybe 12% for 20 years. It will continue. So as a consequence of that, I mean, we know the panels are going to hang around for a while. It's not going to sort of rotten or disappear. Or our lease arrangements or most are not only for 20 years, it's also for the period after 20 years up to 30 years. And then, of course, they will be operating in a more emerging market. And in fact, when we sold the Utah plant, a part of the price was attributed to the market that the buyer anticipated and how that would actually deliver after 20 years. So we will see that when our portfolio matures now, like Czech has been operating for 7 or 8 years, you'll see when it moves closer to the 20 years or maybe not far from that, you will start seeing a value enhancement. It's like for those of you that work in the oil and gas business, you have a tail end production. I mean, you're lifting the tail and you produce more. And then you have written everything off, of course. So you can be very competitive if you are actually there in the merchant market and still make good returns. There's a question from the web from Peter Nystrom in ABG. You are now guiding for NOK 8,000,000,000 in contract value for D and C, and this is down from NOK 8,500,000,000 in the 2nd quarter. What is the key reason for this? Well, the reason for that adjustment is that we have completed the Los Prados plant that we talked about today. So that's the reason for that change. I think also just to mention it, I think implied in our guidance, we have also then taken down revenues expectation for the year somewhat from what we communicated earlier in the year, and that's back to the phasing of construction and back to what we just mentioned I mentioned earlier today. And just to keep in mind that, of course, phasing is one thing, it's not really impacting the total value of the contracts, obviously. I think that's extremely important to underline. I mean, if we have a lower revenue 1 quarter or a higher revenue 1 quarter, but to focus on the lower one, if it's lower, it doesn't mean that, that revenue has sort of disappeared. It shows up a bit later. Of course, we always say that, well, I mean, you should always deliver on time, and I agree with that. But sometimes, you reduce the risk and you, in fact, increase the profit margins if you make an adjustment to the schedule. So we do our best to have schedules that is actually manifesting itself into the revenues and the profits. But sometimes, that's the nature of the business, as Mikael said many times, sometimes you have to make adjustments. But then you know that these are orders. It's not like you're selling hotdogs or anything like that. You have a certain volume that day. This is being spread out over the quarters, and you will see that continue, and we'll probably have the same questions in the future as well. But also, I always take the opportunity to mention that once the plants are finished, they start on a 20 year journey, earning revenues from electricity production for the next 20 years. Okay. I suggest that we end it there if there are no further questions. Thank you all. Thank you all. Thank you.