Good morning. We're 4 weeks out in the new year, 2018, and we're extremely happy to be here to present last quarter 2017 results to you all. This is the agenda. I will, as usual, take care of the highlights. Mikkel will go into the details of the financials. We have added a new agenda point, project development, because we thought it was of interest to the audience to be more introduced into the projects that we're working on at the moment. Terje Pilskog, who's in charge of project development, will give you some details about the projects that we are working on, in addition to the ones that you know about in backlog and that are under construction. Q4 '17 highlights first. I will go into the year 2017 highlights.
We had a revenue of NOK 438 million with an EBITDA of NOK 106 million. This is proportionate. We're ramping up construction at three sites for the time being, Malaysia, Brazil, and Honduras. As you have seen in the press release last quarter, we also closed financially the project financing for the 400-megawatt project in Egypt, by the Aswan Dam. This is a major construction activity and the largest renewable project in the world for the time being built. We also, in the first quarter or in the beginning of December, added 40 megawatts in Malaysia. That was a project we won in competition. That was, of course, moving directly from an opportunity into backlog. Projects can actually jump past the pipeline and backlog, or right into the backlog. We also secured a new green bond.
In fact, there was refinancing of the NOK 500 million. We added another NOK 250 million. In total, we raised NOK 750 million last quarter. We are sharing with you that the board of directors' proposal is for NOK 0.78 per share as a dividend. That's 10% up from last year. If you look at 2017 in total, you will see from Mikkel's numbers that at least we selected to state that we have strong financial results across all segments. We have started construction or actually had financial closure of almost 800 megawatts, being the three projects that we're building in Malaysia. The 162 megawatts that we are doing in cooperation with Statoil in Brazil. Honduras, 35, and then the six projects, in total 400 megawatts, in Egypt.
We have solid traction with a lot of activity, and we have added a lot of high-quality people to develop new projects. I'll leave that presentation in more detail to Terje a bit later. You know that one of our key pillars of the company and our success is our ability to, I shouldn't say attract, but at least work together with partners, because partners add value. Africa50, which is a private bank of African Development Bank, joined us in Egypt as a co-investor. They are also working with us on many other projects in Africa. It's actually owned by 50 African states. Our project, or our cooperation with Statoil for Brazil. We're also looking at some other projects in South America that we will get back to probably later on.
I'm also quite, well, I'm very actually happy to say that we are fully funded. We have new equity that we got in the first quarter last year, which is important for us. The refinancing of the bond with a more attractive interest rate. Finally, that we have with the bank group, with [Odeya] on top, with a couple other banks, with revolving facilities and other facilities that is actually reflecting our banking needs with the backlog and opportunities we have ahead of us. Going to the projects, three projects, three locations on the east coast of Malaysia, on just in from Penang, south of Phuket, for those of you who know the area, inland. Then nearby Melaka, an old Portuguese or ancient city on the west coast of Malaysia. They're all in the early stages of production.
In fact, they have also started mechanical installation of the foundation for the panels, the substations and so forth. That's moving ahead. Brazil is also moving ahead. Doing well on the schedule. We're almost finished there with the groundwork, and mechanical installation will start very soon. For the completion, Malaysia will sequentially be connected and start producing electricity during the first half of this year. In the second half of next year, Brazil will experience the same. Egypt, financial closure was reached last quarter, as I said previously. 25-year PPA. Here we have Africa50 in as a new partner, while Norfund is also there as our long-term cooperating partner. The substation is more or less completed. This is actually what you're seeing here. This is a substation that is not only going to take care of our six projects, but also a bunch of others.
I think it's about 28, 30 projects that will be built, and we are having six of those. I assess here that we are going to have construction start in the first half of 2018. I'm hoping that it will start more towards the end of this quarter, since the substation is almost ready and the general infrastructure in the area is almost complete. Okay, we'll get back to you next time with more details about that. Honduras, 35 MW, a small project. We have worked on this for quite some time. The substation is almost finished. As it says there, we have experienced some unrest in the area. Some local tribes that think that solar is threatening their society, may cause cancer, steal their water. Of course, that's not true.
We also agreed with the authorities to sort of stop some of the work locally to calm down the people before the election. Honduras had an election in November, and the previous president also came out as the newly elected president. I think he's going to take his new position or new seat this week or next week. We are in close cooperation with authorities, and we expect that we will ramp up manufacturing or erection of the plant very soon. With regards to the projects that are still in the backlog, but are still a part of the 1.5 GW or the 1,500 MW, well, we actually said 1,300 to 1,500 MW, that will be under construction or connected by the end of the year. All these projects are moving towards financial closure.
I'm sure that you are as impatient as I and we are by, well, when does this start? I'm going to say soon. I'll leave South Africa, in fact, to Terje to talk more about, because there are some very positive developments there. Of course, this country is our home market. We see very interesting opportunities. Mozambique, bits and pieces, a lot of things that need to be put in place. I think you should look at this as important because this is actually concentrating on securing cash flow in the long run. It's some of the permits. We are very close to financial closure. We are ready, actually, to start construction. In fact, looking at the local weather forecast, I think it's good that we delayed it by a couple of months because it's the rainy season now in Mozambique.
If we can pick up the equipment and start construction towards the end of this quarter after financial closure, I'll be very happy. Mali, very similar. We are reaching financial closure there, too. Of course, as you know, and I share that with you, patience is a virtue. We have been working with for a long time, and we're not a company that gives up, and we will not give up here either because they need the electricity, and we are ready to construct it. Financing is in place. It's some formalities left. It's time for Mikkel to perform, to share the numbers with you. Thank you.
Thanks, Raymond. We'll go a bit more into the details of the numbers and starting by, again, looking at consolidated and proportionate financials. As we've done for the last few quarters, we focus more and more on the proportionate financials, as we believe those are better reflecting really the underlying value creation across our business segments. Let's first look at the consolidated. NOK 281 million of revenues, NOK 207 million of EBITDA, and NOK 148 million of EBIT. This is really reflecting a normal power production sales. There are no specific items affecting the numbers this quarter. Last quarter, obviously, the numbers were affected by the sale of the project rights in Brazil.
Also in the Q4 2016, we had a net gain on the sale of the Utah plant that you may remember, a 100-megawatt plant in U.S. that we sold of about NOK 70 million that impacted the numbers a year ago. Underlying, fairly stable performance here. On the proportionate side, I will go into the details there in a minute, NOK 438 million of revenues and NOK 106 million of EBITDA. The fluctuations here are really reflecting the same reasons that I just touched upon. For the year as a whole, we report very solid financial results, I would say, especially when you think about the strong underlying growth that we are really experiencing these days.
This table is one that we have used before. It shows the proportionate share of Scatec Solar's proportionate share of the value of, first of all, if you look at the power production side, we own roughly 45%-50% of our power plants. In the consolidated financials and segments, we report this on a 100% basis, while we here have adjusted for our ownership share in the column called Power Production SSO Share. We are not eliminating the revenues and gross margins that we generate from Construction and O&M activities in this way of presenting the numbers. Looking at the full year 2017, we report NOK 1.7 billion of total revenues. NOK 1 billion really coming from development and construction activities, half a billion from power production. Just looking at the EBIT, there it's more balanced.
It's about half of it coming from power production, the other half from development and construction. A more moderate contribution from O&M, but still with a decent margin from that activity. Looking at this a bit over time, power production segment, here again, it's on 100% basis, not adjusting for ownership shares. Very stable. It's really been the same plants operating throughout, with the exception of Q4 2016, where we had a small contribution from this 100 MW Utah plant in the numbers. Year-on-year, we're growing steadily, 87% EBITDA margin in 2017 on revenues of NOK 1.1 billion. O&M, also relatively stable. There's a bit of more seasonality between the quarters here.
This is mainly related to a performance bonus that we have included in some of our O&M contracts, where you get better revenue and margins in the second and third quarter each year related to the performance of the plants. Looking at the full year, report NOK 69 million of revenues, EBITDA margin of 40%. If you compare 2016 and 2017 here, the numbers are impacted by the fact that we have only partial revenue recognition in Jordan while we carry the full cost of operating those plants. That will change once we have what we refer to as a taking over of those plants, that's being discussed as we speak. We will have more revenue recognition in Jordan on that basis going forward. Development and construction, a lumpy business. We've talked about that in the past.
We had very little activity in the first half of 2017. We started the construction work in the third quarter. We also had the sale of the project rights in Brazil affecting these numbers in the third quarter, as I mentioned. In the fourth quarter, we had about NOK 200 million of revenues from construction of the plants in Malaysia and Honduras. Just to mention that in Brazil we also have had progress, but there we consolidate on the equity method. It's not consolidated in. That is not affecting the top line to the same degree as you would expect. In addition, we closed financing in Egypt and had NOK 70 million of development revenues in the quarter from the project development activities on that portfolio. When it comes to the full year, 43% gross margin from this segment.
It's well above the 15% guidance that we provided for this segment. We continue and reiterate our guidance on a 15% level going forward. Lastly, we have NOK 2.6 billion of contract value remaining across these three sites that we're now currently constructing. There will be a significant contribution here over the next few months. Of course, also, we're expecting to start construction of Egypt and other plants in 2018, which will add to this number. Looking at the balance sheet. At the end of Q4, total assets stood at NOK 10.2 billion, up from NOK 7.1 billion at the end of last year. We've basically invested CapEx in new plants throughout the year, funded by equity and non-recourse financing. Also the balance sheet here is affected by the currency translation effects as you would normally expect.
In the table down to the left, we specify cash and net debt levels, both on a consolidated level but also our proportionate share. Adjusting really for our ownership shares in the underlying power plant companies in the middle column there. Then looking at also the cash and debt level at the group level outside of these project companies. We had cash of close to NOK 700 million at the end of the year. A net debt then of NOK 50 million, as we had now NOK 740 million of debt at the corporate level after we issued that bond that Raymond mentioned. Just to touch upon it, we issued this new bond with a four-year tenor with a margin of 4.75%, which is down from the 6.5% margin that we had on the previous bond.
We've seen also that the credit investors are seeing the development of the company and the credit enhancement that we have experienced over the last two years. This is a slide presenting the cash movements in 2017. It's a bit of a busy slide, but it's really important if you want to really understand our business model to follow here. First of all, to the left, we received NOK 150 million of distributions from the operating plants. These are dividends coming out of the single purpose vehicles for the year. We had additional cash flow from O&M of NOK 22 million, and from D&C of NOK 167 million. These are really the operating cash seen from a group perspective. Of course, we had a corporate overhead as well in there. We invested close to NOK 500 million of new project equity.
In Brazil mainly, but also in Malaysia and in Egypt. We're not done investing in these markets. We have more equity to be deployed in these markets. It's somewhere between NOK 700 million and NOK 800 million of more equity that will go into those projects. We paid dividends to our corporate shareholder last year. We spent about NOK 200 million on developing projects in backlog and pipeline. This development CapEx is also then recognized as equity contributions once we reach financial close and finance these same projects. We have had very limited impairments of projects in our balance sheet in 2017 and also historically. Knock on wood, but we invested NOK 230 million there on development. We raised a total of NOK 600 million through equity issuance and refinancing of the bond in 2017. Lastly, close to NOK 300 million of a positive movement on the working capital side.
This is mainly driven by construction activity. We had a large positive movement also in this quarter. As we have talked about in the past, we structure our EPC projects, our construction projects in a way where we at least should have a cash neutral situation, but also prefer to have some positive working capital movements in the beginning of a project. That creates more robust, of course, cash flow management for us. That is the sum of the movements for the year. In the back of the presentation, you can see the same for the quarter and the movements there. As Raymond also said, we are now fully funded for the projects that we have under construction and are sitting in a project backlog. It's close to 1.2 gigawatts.
You can also, in the back, find more details on the uses and sources of funds, and how this ties together, as we also have presented in earlier quarters. I will then leave the word to Terje to talk a bit more about the projects.
Thank you, Mikkel. With many of our projects moving from backlog into construction, we have then this time decided that it's meaningful to shed a bit more light on what we're doing in terms of development activities, both in terms of pipeline projects, but also in terms of the projects that are earlier in the development phase that we typically call opportunities. In addition to the 1.5 gigawatts that we currently have in pipeline and backlog, we are working on development of close to 3 gigawatts of projects. Obviously, given the fact that we are working in emerging markets and the inherent uncertainty in emerging markets, it's important for us to have a big set of opportunities that we're working on in terms of funneling the pipeline and the backlog towards moving those projects to financial close and construction.
As you will see from this illustration, we are working on projects in a wide range of countries and regions around the globe. There are some common denominators that are being the criteria for where we move in. Obviously, good solar irradiation is important. We need to see that there is strong demand for clean energy, that there are frameworks supporting the growth of green energy. We need to see that we have active support from financing institutions to create the non-recourse financing structures that we need for our projects. We need to see that there are credible local partners that can support us on the ground. In terms of origination, we see that projects are coming from a number of different types of activities. In some cases, in emerging markets, we go in and we start development of projects from scratch.
In other cases, we move in a bit later and we partner up with other players that have already secured and been awarded projects. Increasingly, we also see that projects are coming to us based on our reputation in the industry. We do actually have a pretty good reputation in the industry, so we do get a lot of projects coming in our direction. We also see that when we are working on this pipeline, we are able to continue to develop projects that are meeting our hurdle rates that we have communicated to the market. Today, I will go a bit more into the situation in South Africa, what we're doing in Southeast Asia, and I will also touch upon some of the projects in our pipeline that have been in our pipeline for quite some time.
In terms of South Africa, just first, some general comments on the situation, and we do believe that there's a pretty good outlook for clean energy in South Africa. With the election of Ramaphosa as the new leader of ANC, we already now see that there are some positive effects of that. We see that the rand, the currency, is stronger than it has been for quite some time. We see the continued prosecution of the actors in state capture, and we also see that there has been elected a new board and a new CEO of Eskom that are more pro-clean energy than what we have seen of previous leaders of Eskom. That is a very good sign for us. In terms of the general outlook for clean energy in South Africa, there is a new integrated resource plan that has been developed.
It's currently still a draft. Also in that plan, we do see that there is an increased focus and increased room for renewable energy, both solar and also wind. In terms of the specifics for solar, we see that the anticipated installation or procurement of solar, in terms of annual new capacity additions, will be in the range of 1 gigawatt from 2022 and onwards, basically towards the end of that plan, which goes until 2050. The plan, as I said, is still in the draft form. We consider it to be based on conservative perspectives on demand development, as well as conservative perspectives of where the cost and the technology development is going for solar. We believe that there is an upside to that plan. The plan is then expected to be decided upon by the authorities through the first half of 2018.
In terms of our position in South Africa. Obviously, South Africa is our, as Raymond say, one of our core markets, almost like a home market for us. We have established a very strong position in South Africa. We have a strong organization with competence and with experience. We have a good track record in South Africa, and we also have a very strong pipeline of projects. Firstly, obviously, in terms of the 258 MW in Upington. As you know, we were preferred bidder there already in 2015, and we were hoping to have and to reach financial close end of last year. That didn't happen. In terms of the facts, currently, we see that Eskom now, the board of Eskom, has approved the project, and we are awaiting confirmation that the final approval has also been given by the ministry.
We anticipate that these projects will move into financial close shortly. Then obviously, we also have 430 MW in pipeline. That is five projects that were bid into round 4.5. In terms of the situation there, the focus locally is obviously on round four, but the authorities have asked us to extend the bid bond until end of March. The authorities are still keeping that round also going. I guess that's what we can say about that portfolio. In addition, in South Africa, we have also additional projects that have been developed. We have about 400 MW of additional projects that are also ready from a development point of view, meaning that they have secured the sites, these are good projects with good irradiation, and we also have secured grid capacity for those projects.
In terms of the future potential in South Africa, given sort of the integrated resource plan, we expect that there's going to be continued tenders, continued opportunities to bid in projects. In addition to that, we also see good opportunities on doing private PPAs with commercial and industrial players, either through wheeling of power based on centralized installations or installations done at the site of those companies that will need the power. That's our current perspective on South Africa. I will move into some comments on the position that we're building in Southeast Asia. On the back of the three projects that we have secured and that now have moved into construction in Malaysia, we have started to build, or we have actually built a local development team out of our office in Kuala Lumpur.
We see that we have good access to highly qualified individuals, and I now believe that we have a strong development team in the Kuala Lumpur office, and we have also already seen the results of that through the award of the 40 MW project, which we are mentioning here on the right-hand side, the Rensol project. Tariff being about MYR 35.5 per MWh, expected CapEx of around $50 million. We have term sheets on the financing, providing 75% leverage. We will provide all the equity, and we are targeting financial close of that project by the end of 2018 or towards the end of 2018. Additional opportunities that we see in the region and we are targeting in the region. Firstly, in Malaysia, we see significant additional potential. In Malaysia, it is expected that the new tender round will be announced shortly.
That will be round three in Malaysia. We are working on trying to partner up with winners from previous auctions, and we're also seeing good opportunity of doing bilateral negotiations and private PPAs in the country. We believe that there is an opportunity of several hundred MW that we can develop in Malaysia. Another very interesting market that we're focusing on in the region is Vietnam. There is an urgent need for new energy power capacity in Vietnam, and it's expected that it's going to be more than 4 GW of new capacity added every year over the next coming years. In terms of the framework, there is a feed-in tariff in place. But in addition to that, we do see currently that PV is cost competitive with the most natural alternative in Vietnam, which is new coal.
That is a very interesting situation for us that is not only sort of the framework that is supporting us, PV is actually competitive relative to the natural alternative competing for the new capacity in the region. In Vietnam, we have identified and we have partnered with a local company that has been active in the power sector for many years and are operating several hydropower plants in the sector and knows the power sector very well. We are very close to securing our first 50-megawatt project. Another interesting market is Bangladesh. There, obviously, there's an urgent need for new capacity. Here, we are working with a number of local partners that have been active in the industry for quite some time. The approach here is slightly different as it is not a feed-in tariff, you have to enter into negotiations with the authorities.
Here we have submitted our first 50-megawatt project proposal, it is in the final stages of approval by the authority. Finally, a more nascent market, maybe Myanmar. We have also been active there for some time. We have developed a project together with a local partner. The project have been recommended to the authorities by an independent report funded by USTDA. We have then also, towards the end of 2017, submitted a project proposal to the authorities for that project. Moving forward to some comments in terms of the big projects that have been in our pipeline for some time. What I wanted to do here is highlight some of the triggers that we are seeing for these projects to move forward. Obviously, first, Nigeria. It's a project that is one of 14 projects that have signed a PPA with NBET, the Nigerian utility.
We have partnered up with the Norfund and Africa50, the same partner constellation that we have in Egypt for these projects. On the financing side, we are being supported by African Development Bank, OPIC, and Islamic Development Bank. The structure has already been set for this project. In addition, we will be sourcing a partial risk guarantee for the World Bank for this project. In terms of the key triggers for this moving forward, it is that the World Bank is working on a restructuring program for the power sector. It has been agreed with the federal government of Nigeria and is now being moved to final board approval by the World Bank, we are expecting this to happen during spring. With this in place, all these 14 projects can move forward.
In addition, we are also negotiating a sovereign guarantee with the federal government of Nigeria. That is very mature in terms of its negotiations, it's a fairly standard document that has also already been signed by other types of projects in the gas sector. This is not the first of a kind. It is something that has been done before. In terms of Pakistan, just also to mention a couple of points on Pakistan. Here we have been working on 150-megawatt project for some time. Due to some changes in the regulation, last year, we changed the strategy here, we submitted a application for a cost-plus tariff. This is also a process that is established in Pakistan. It has been used for projects previously, both within the wind and the gas sector. We know it's a process that works.
Based on this application, there was a public hearing on the tariff in November last year, now we are waiting on confirmation of the final award of the tariff, we expect that to come shortly. That was my update. With that, I think I will leave it to Raymond to make some concluding remarks.
We are working, as we said, with the project around 1,700 megawatts. In terms of guidance for this year, we are continuing to confirm what we have been guiding on for the past few years, that we're going to have an equity return of 15% after tax on electricity sold to utilities on our projects in backlog, but also the projects that we're looking into in the pipeline. Some projects will be above 15%, some projects will be a little bit below, but the average is still 15%. In terms of development and construction, an important source of cash that we invest into these power plants or IPPs. We are also here reconfirming the 15%. On a $100 million project that we do on EPC, we expect that we're going to get $15 million as a gross contribution.
If you look at the numbers, if you take 50% ownership, that is in a broad-brush statement, almost covering our cash level or our contribution into the project. In terms of the 2018 targets, we are guiding on the power production of 635 gigawatt hours from existing plants, but we will, throughout the year, complete plants that will be connected. Of course, the real number with the new plants there will be higher than this. O&M revenues, $70 million-$80 million, an EBITDA level of something like uniform between 40%-50% or 45%. Cash to equity, $160-$180. If you look to the right, the first three elements of this ladder is actually what is in operation, what is under construction, what is in the backlog.
If you add those all together, we are actually at about 1.5 or 1,500 megawatts, which we have been guiding on for the past two years. Those projects will either be in operation or under construction by the end of the year. Of course, it's not our plan to stop here and go do something else. We continue our work. We have a pipeline of 745, which is beyond the 1.5 or 1,500 megawatts, almost 3,000 megawatts in opportunities. Right now we are working quite hard to go through all these projects, you have been given an insight in Terje's presentation on sort of where we are.
What will precipitate from this review will be a new target that we will share with you later during the spring or at the Capital Markets Day that we will give you a date on the next slide. What will be our focus down the road or this year? Of course, it is absolutely essential for us to complete the plants. We have a huge backlog of orders. Some of them are in the middle of construction right now, and new will be added. That is going to be, of course, Brazil, Malaysia, Brazil, and Honduras that are in operation, as you have seen. Then we will have Egypt, South Africa, Mozambique, and Mali on top of that.
We have strengthened our organization quite a lot by adding more development people, high-quality people, and they are from all parts of the world and have been experienced in actually developing projects that have come to a conclusion, which we are actually benefiting from. We will remain very focused on this in addition to development both this year and next year. The gross revenue of the projects in the backlog that will be constructed is in between NOK 10 billion-NOK 12 billion. It is massive. We will then have the Capital Markets Day at the end of May, where we will go into detail, much more detail on the development side, but also on the construction side. We are looking forward to that. With that, I will finish my presentation, and we are very pleased to answer any questions from the audience or from the net.
Thank you.
Andreas Parteisen, Kepler Cheuvreux. Just a few questions from me. You obviously had a very impressive 2017, starting a lot of construction work. In terms of your internal capacity to handle this amount of megawatts being installed, are you sort of at a limit, or could you possibly take on more construction activity in 2018?
I'm not sure if you all know the question. The question is, do we have the sufficient capacity to add more projects that will go into construction during 2018? The answer to that is yes. We have, of course, been working extremely hard to build our organization over the past years to match the backlog. Already last year, we added even more people. We have also been updating our operating system that is being rolled out around the world for execution. We don't need many of our own people on the project. We rely on partners and subcontractors, and they are being pre-qualified. We certify all these companies, either when it's a module supplier, an inverter supplier, or a construction partner or construction activity.
As you well know, a lot of us have oil and gas background, and that has been the name of the game for the past 4 years there. We're benefiting actually from other industries when we're building teams and execution models to deliver these projects.
Thanks. This week we saw a 50 MW project in Mali being approved by the West African Development Bank. Is this a positive trigger for you? Do you see the bottlenecks now being resolved in terms of risk guarantees and expect to have the Mali project ready quite soon?
I'm afraid of repeating myself, we have been very positive for Mali for a long time. There were some adjustments to the financial model that had to go to the board of the African Development Bank. That board has had their meeting, as far as I know. Also we see some impatience by the authorities in Mali that we really need to get this project off the ground because they are in desperate need of new electricity. Yes, as also we alluded to before, very positive about Mali being finally off the ground and being built.
Speaking of that, Mali and Mozambique, the experience from Honduras when there's a deadline on the PPA and you're sort of forced to start construction before financial close. Is there any risk of that happening in Mali and Mozambique or perhaps any other pipeline projects?
Well, I can't talk about all pipeline projects from the top of my head now, but to address the specifics of the two you mentioned. In Mozambique, a part shareholder is actually the utility, the Mozambican utility. We are there working together, and the timeline has been adjusted to match some of these issues that we have had to deal with in Mozambique. The same situation, although their utility is not the shareholder, the same situation is in Mali that has been adjusted. IFC is a part, I mean, that's a private branch of the World Bank. They are a part shareholder. They are also on the financing side, so sitting a bit on both sides of the table and have common interest.
Thanks. Two more questions, if I may. On Malaysia, the Rensol project, do you expect to have any partners on that?
We have partners already.
Okay.
It was actually developed by another company. We were offered to go in, and we have taken that role, and we will, as on the three projects we have, finance 100% of the equity.
Okay, the same model as
Same model as the previous three projects.
Great. Finally, on South Africa, the timeline indicated in the long-term plan was first installations of new solar 2022. Do you still expect to, given that you are receiving the PPAs and the government approvals
Yes
that you will start construction on Upington in 2018?
We expect to start the construction of South Africa in 2018. That is in the plan. These dates have also been negotiated with Eskom, which is actually reflecting the grid capacity and their needs.
Thanks.
Preben Aaskousen, Carnegie. Following up on Upington, there's been a bit back and forth when it comes to the PPA you will receive. Have you any update on that?
In terms of the tariff?
Yeah.
Yeah. The previous minister of energy was working on a tariff ceiling of ZAR 0.77. We have been informed is that ceiling is not there. They're going to stick to what was actually the tariff that was bid in 2014. We'll have to wait and see. I mean, there are no indications now that that ceiling that was stated by the previous minister is going to remain.
On the production guidance for 2018, can we give some sort of a range when you include the plants that are being developed?
Oh, you're trying to trick me into an answer now, huh? It's very much dependent on when we will grid connect. It wouldn't be right of me. It's going to happen. It will be above this 635 level, and it will happen throughout the year. Honduras, Malaysia, not Egypt, I think that's going to happen next year. Well, and of course, as I've said many times, once these plants start producing electricity, they don't stop next year. They're going to continue for the next 20 years.
Hello. Per Vatle from Infra Nordic. You mentioned that you have a partner in Vietnam.
Yes.
Which has experience within hydro.
Correct.
We've seen other listed companies emerge into other mature technologies like hydro and wind. How far would that be from Scatec to do the same? It's a matter of strategy, of course. Do you have any thoughts on that, or is it not discussed?
We established a new division called New Ventures last summer. I think we have shared that with you. In that area we have some very good people. Of course, we have good people elsewhere, too, but they're tasked with something that allow them to look at new opportunities. I talked about batteries before. We are working on hybrid projects where we have solar and batteries. We are looking at projects where you're going to have, I'm not necessarily saying floating solar on top of your hydropower plant, but yes, that's happening. It's a lot of space on top of there. We are looking at hybrid solutions. We're looking at new business ventures.
If you look at those opportunities and compare that to the competence that our organization has, I believe that we have our people and the competence in the level of between 80%-85% can be applied to any technology independent. It's a lot about project development, it's a lot about financing, and it's a lot about general project execution. Of course, what we have to add is expertise within your area, hydropower, if we're going to go in that direction or rather work with somebody that has that experience, that will make us move a bit faster, and that goes for wind as well. We are looking at some of those opportunities, but it's at the very early stage. It's a natural move for us.
Thank you.
Fredrik Staalsoen from Pareto Securities. Interesting segment on project development and the work you're doing there. What can you say about the development that you see in terms of the competitiveness of attaining new projects? I would assume that you have competitors in several processes that would have significantly lower equity IRR hurdles than you. How comfortable are you that you'll be able to attain new projects as at the equity IRR hurdle that you have?
I think actually we should, since Terje is here, we should give you the opportunity to answer. You don't necessarily have to have my standard answer to this. You can hear it from the horse's mouth.
Is this one on now? I think if you look at the global market, there are many different segments in the global market, obviously if you go in head-to-head competition on the biggest tenders with the biggest utilities, that is going to be difficult for us to achieve our hurdle rates. There are, as we've discussed also in the development segment, there are many different segments and many different countries where we see that there's still good opportunities to achieve our hurdle rates. Where the competition is maybe not as tough as it is in the biggest markets and related to a lot of the announcements that are being made out there in the industry in terms of who is able to offer the lowest tariff. For us, it's not about the competition to offer the lowest tariff.
In general, we don't want to set the world record in terms of the lowest tariff. We want to seek out opportunities where we can create value. There are many opportunities to do that.
When we're talking about the returns on 1515, we are looking at our portfolio of 3,000 megawatts. That's quite a lot in addition to the 1.5 that we're talking about, or 1,500 megawatts. There are many opportunities like that around. I have to say also that I think why we are successful in these areas is because of the competence profile we have of the company. We develop projects together with the authorities. We help them to establish a program. For that, they pay a higher return. They invest into the future by actually establishing a program. We did this in South Africa. We actually did it in Egypt together with the Egyptian authorities, we're doing that in many other countries.
Well, of course, once you have done this once, you understand the risk picture more, you are able to actually reduce the cushion that you put in at every level. Price a bit sharper, still retain the returns.
Great. Thanks.
Thank you very much. A lot of good questions. See you next time. Thanks.