Good morning. We're here to present the numbers and the updates for the last quarter in 2021. As usual, I will start, and then Mikkel will do the financial presentation, and I'll end up with a couple slides of summary. We have had a very high development activity over the past quarter, and that continues into 2022. As last quarter, the cash flow has been very robust. If you look at the numbers, if you look at the numbers from Q4 2020 to Q4 last year, you see that there's an increase from NOK 683 million to NOK 1,250 million. The production or power goes up to 1,047 GWh. That's 2.5 times up from the last quarter 2020.
We have added a little bit more than 800 MW to our backlog, including projects in Brazil and South Africa. I'll get a bit back to that later on. We have also decided to move the large project we're having in India from backlog to the pipeline. I'll explain that a bit later as well. I'm also happy to report that the Release concept that we have been developing over the past few years are really catching traction with several projects now in the construction phase. We have talked a bit about Power-to-X previously, and we're also seeing, you know, a large activity within the Power-to-X. Also on that point, I'll be coming back to you with some updates.
Now, the board has approved a dividend of 2.54 NOK per share, which if you add it all up, with the number of shares, it's a little bit more than NOK 400 million that we paid out in dividends. If you look at 2021, as a whole, you'll see that the production increase is very high, as I mentioned on the previous slide too. We have grid-connected 320 MW of projects, that is solar. The pipeline has gone up from a little bit less than 10 GW to almost 15 GW. Although a lot of projects have not moved into construction, the development activity continues at a very high pace.
The projects that we see in the pipeline are maturing, meaning that they're moving closer to financial closure or closer to getting into backlog. Several of these projects we expect to go into backlog during the year and start construction. Some projects, as we have informed you about previously, have been slightly delayed. That's mainly due to longer than expected approval processes and also some cost inflation. All the projects that we are talking about today have taken into account you know the present pricing that we see in the market. We see that the approval processes on several of these projects move towards conclusion. The ESG ratings are continuing to be good as should be expected.
The pipeline that we are pursuing are basically in four market areas, or at least I should say six, sorry about that. Those are South Africa. We have been very successful there in the past, and we've also secured several projects that we are about to start construction of once the financial closure is reached. Brazil, a key market for us. Interesting market in the long run, and also there, one project are moving into backlog. India, although we have taken out the 900 MW project, the market there is very robust. There will be a change in the market in terms of where modules are being sourced, you know, from China to own production being built up in India.
We are a bit uncertain about how quickly that is moving, and we're there, so we decided to take this large project into the pipeline from the backlog. Vietnam also in the long run very interesting. Philippines, an important market for us with SN Power and the hydropower projects. We are also there looking at offshore wind, but I'll not be talking about that today, but it's an interesting market that we are pursuing big opportunities. In Egypt, after South Africa, this is probably our most important market. Some of the projects, especially within Power-to-X section, are seen from our point of view, very interesting. I'll spend a bit of time on that later in the presentation.
If you look more at the backlog, Brazil, this is a project that we have been developing with Equinor. The customer there will be a couple of daughter companies of Hydro. Hydro will also go in on the owner side. We have finalized the term sheets. We are now also finalizing the agreements and we also hope to start construction during the spring of this year. South Africa, this is Round Five. We secured 273 MW. I think it's interesting to point out that our three projects were the projects with the highest tariff out of all the projects on the solar section that was awarded. We have a lot of projects there under development, both solar and wind, for the next rounds that we expect to happen over the next couple of years.
In fact, you know, the government is talking about Round Six already towards the end of this year, but we'll wait and see for that. India, as reported, we have taken that from backlog into pipeline. Of course, the pipeline is still not only consisting of this 900 MW, it's a lot of wind project, it's also a lot of solar projects, and also hydropower projects that we are pursuing. In terms of of South Africa, the RMIPPPP, that is the accelerated program for, you know, including new power to compensate for some of the the problems they've had in the energy sector in South Africa. That is also moving forward. We expect financial closure to happen within the next few months and construction start to be in the spring of 2022. This year, of course.
Tunisia, we had some delays on the approval processes, but that is also progressing, although at a slower pace than what we anticipated, you know, a few months back. We expect construction start, as we have said before, also to start this year. Pakistan, demarcation, meaning that where the plant is going to be built and the boundaries of the plant, there has been some discussions there because in the area, there are some tribes that have certain interest that needs to be dealt with and compensated in order for us to make sure that we're not building on the wrong sites. Of course, this is extremely important for us because this plant is gonna be producing for the next 20-25 years. Now to Release.
You can see on the photo to the right here, this is these are containers. This is actually rapid deployment of solar plants. Inside each of these containers, there is you know a lot of modules you know already pre-mounted, but put together so that it fits into container. Once you open the container, you can erect you know these plants within weeks. Normally, we spend months erecting you know plants like this. It's I think it's very interesting. Of course you know now with the confirmation in Cameroon, 36 MW and the 20-MW battery system is I think it's a good proof of concept, although we have of course delivered some of these plants in the previous years as well.
The project pipeline within Release continues to build, and I'm very hopeful that this will be, as it is looking at the moment, a very big success in areas where they need rapid deployment of power. Of course, now, you know, this concept is competing with diesel engines as in the past, and even with a lower diesel price, this was very profitable for those customers that we have. With diesel prices that are two-three times higher, of course, this makes even more sense. Egypt. We reported last year our agreement win with Fertiglobe to install a 100-MW project of electrolyzer near the Suez Canal. And that is, we are finalizing some of the agreements. We are into the final design stage of this project. The customer is Fertiglobe.
The majority shareholder is OCI, one of the largest fertilizer urea producers in the world. Of course, they, as we, see the importance of this project. Here we are providing hydrogen into their ammonia plant, and the customers at the other end could be ship owners or others, you know, fertilizer producers that need green ammonia. This is actually green ammonia. Although 100 MW for some of you doesn't sound all that much, it's a big project because the total production, as far as I'm informed, was less than 500 MW of electrolyzers last year. Of course, this is a market that goes like this. This is a big project. In fact, it's one of the largest projects in the world for the time being.
Of course, you know, it'll be dwarfed in the future by huge, you know, hydrogen project. Supporting this 100-MW green hydrogen project and the electrolyzers are renewable energy. That's why it's called green. It'll be 170 MW of wind and 60 MW of solar that will power this facility in the future. When we were in Egypt, visiting the top level there before Christmas, we also signed an agreement with the Suez Canal Economic Zone for green ammonia. This is a project that could be up to 1 million tons a year. This is in the development stage now, and we're finalizing agreements with the Suez Canal Economic Zone.
To the right here, you see that we also had the opportunity to meet with the president, President Sisi, along with his prime minister, his minister of energy, and we had a long discussion about the energy market worldwide, but in particular, you know, the importance of the Suez Canal, the position of Egypt being a low-cost, efficient producer of renewable energy. It's very clear to me when I listen to the president, that they know their position, and they will address a lot of focus towards this area, thus, you know, the economic zone and the green ammonia opportunity that we're addressing.
With our position being the largest investor in Benban and the solar facility there, with our portion around 400 MW out of the 2,000 MW installed, we really are hoping to be able to support Egypt in their ambitions going forward. There are other things that I've talked about in the past too, and that is, you know, what opportunities in addition to ammonia will low-cost power actually create. The next bullet here is actually utilizing renewable power to desalinate water. Egypt, although it has the Nile, it has also a high demand for fresh water, and they can't take it from the Nile as much as in the past. Now they have to desalinate water.
By utilizing, you know, renewable energy to drive these plants, you can actually deliver a liter of water cheaper than in the past. This is also interesting. Actually, the lower cost of energy, which is not the case around the world today if you hear what the people are talking. Renewable energy is fuel independent. It depends on the sun and the wind, and that is why Power-to-X is extremely interesting for a lot of countries where fresh water is required. With the climate changes, we see this is a big market, although I'm a bit sorry that it happens, but it happens. Why are we successful within this area? That is Scatec's integrated business model. When we talk to governments like this or to buyers, they know that when we off...
Give them an offer. It contains, you know, everything from production of renewable energy to financing, to construction, to operation and ownership for the next 20-25 years. I think that business model, as you can see some elements of here, is a reason for our success. You may say, you may question, is this something that is valid for the future? Yes, it is. Now, we started with solar, and we are applying this to wind, we are applying it to batteries, we will be applying it also to some other markets, particularly Power-to-X, where you finance these projects on a non-recourse financing, meaning that, you know, 80% from the banks, the rest is equity from us and our partners. Project development is key. A lot of value is captured there.
Remember, our pipeline is close to 15 gigawatts in this phase at different levels of maturity. Of course, at the same time, we move into financing, finding, you know, optimal sources of financing. It could be sometime grants or subsidized financing because we are in markets that is in desperate need for electricity, and there is a lot of funds out there. We structure this. Some of these projects, I mean, you think they are a project now. This is an opportunity or a market that will grow quite tremendously. Some of these projects, they need up to 50 agreements to put in place to secure all the stakeholders at different stages in the lifetime of the project. This is very complex.
Construction, we have a very strong group of people that is, you know, versatile, global in their thinking, and are used to handling complex projects in new environment. Keep in mind, we have delivered almost 30 projects across four continents. Adding new technologies here, we do some new competence will of course be required, but we think that we are well prepared to handle that. Then we operate the plants. For example, in South Africa, we control all our plants around the world in a central control room, optimizing the plants and helping the various locations to the best standards of operations. All the other plants, all the other technologies will have similar installations. Some will be connected to Cape Town, but we will also establish new centers of operational excellence around the world.
I believe that, you know, our strategic approach to these projects allows us to be hopefully very successful in a market that is gonna grow tremendously. Now, there are also some challenges, and I'm sure that you follow the news as much as we do. Ukraine is in a very difficult situation today. We have several plants in operation there. They are operating well. Our people are safe. But of course, we are monitoring the situation. We have a dedicated team that is a combination of people from Oslo and Kiev and the plants that are following the situation closely. But of course, it's unnecessary for me to underpin that the main focus for us is, first of all, our personnel. The plants are operating well today.
The people are reporting that they are feeling safe and taken well care of. Of course, we are waiting for this to be resolved. Mikkel, I think everybody's ready for your financial review.
Thank you. I will go a bit deeper into the numbers. We're as always starting with the proportionate financials, and we are reporting Q4 revenues now of NOK 1.3 billion and EBITDA of NOK 683 million, and a cash flow to equity of NOK 234 million for the Q4 . The EBITDA increased year-on-year, as you see here, with the addition of the SN Power assets, and that was completed a year ago now. The EBITDA decreased compared to the previous quarter, mainly driven by seasonally lower production. For the full year, revenues reached NOK 4.6 billion and EBITDA NOK 2.7 billion, and cash flow NOK 1.3 billion across our segments.
Looking at the power production segments, we saw production up 2.5 times compared to the same quarter last year. While it was down 2% from the previous quarter. Production reached slightly above 1 TWh in the quarter, and that compared to 400 GWh last year. Revenues of NOK 1.2 billion and EBITDA of NOK 763 million. Compared to the Q3 , EBITDA came down NOK 60 million. That is mainly because of seasonal lower production in Ukraine and the Czech Republic, but this was partly offset by higher production in South Africa and the Philippines. Production in the Philippines. That was in line with the five-year average that we've seen for the Q4 . Again, for the full year, revenues of NOK 4.2 billion and EBITDA NOK 2.9 billion.
Services, a smaller segment. Some seasonal variations and some non-recurring costs affecting EBITDA. Revenues of NOK 66 million, NOK 11 million of EBITDA. For the full year, NOK 260 million of revenues and NOK 75 million of EBITDA. The EBITDA margin have decreased, as you can see, from 2020- 2021. It's really reflecting the fact that we build infrastructure and we build our organization to optimize production further and also, take on new capacity in the O&M, on the O&M side. Development and construction, revenues continues to be limited. We typically recognize development revenues as we start construction on new power plants and then construction revenues based on progress on site. As Raymond have already touched upon, we've seen high activity on the project development side. That's not seen in the financials in the segment.
That is what we will harvest later. We saw limited site construction activity as well as we have guided on in the Q4 . That being said, we're also far into engineering, planning, procurement activities related to the most mature projects of our portfolio. We did an impairment of NOK 20 million related to a regular review of our pipeline, and that is a fairly moderate amount compared to the activity we have on the development side. Touching upon the balance sheet as well, our financial position are broadly unchanged from the previous quarter. Consolidated assets NOK 33 billion, up from NOK 27 billion a year ago. Proportionate net debt ended at NOK 15.3 billion.
4.9 of that is sitting at the group level, while NOK 10 billion, a bit more than NOK 10 billion, is non-recourse project finance at the project level. It's important when you look at the debt structure, a majority of the debt is sitting at the project level on a non-recourse basis. Group level book equity at NOK 11.2 billion. Looking at the cash movements through the quarter, cash position have been stable. We generated and received NOK 346 million of distributions from the operating power plants. We invested NOK 83 million of project equity, and we spent and capitalized NOK 71 million related to project development. Now, the board has proposed to the annual general assembly to pay a dividend for 2021.
We have a dividend policy of paying consistent and growing cash dividends, and it's based on the principle of paying a minimum of 25% of the free cash distributed to us from the producing power plants. We received 1.6 billion NOK in 2021 from the operating power plants, and one quarter of that is 400 million and 2.54 NOK per share. That is the proposal. The EU taxonomy we've talked about also in the past. We expect to be compliant with the taxonomy. I think it's important for us and our investors, we know that. The regulation there is of course being discussed as we speak. We see solar assets being taxonomy-compliant from the outset, while hydropower and wind we have done a bit more work on.
We see the threshold for greenhouse gas emissions being met, and also we're compliant with the Do No Significant Harm principle. The last step of this for us is to do a climate risk assessment for these assets in 2022, and we expect that to be completed later this year, and hence we will be compliant with the taxonomy. Now, I also wanted to use this opportunity to remind everyone about our integrated business model, and how cost inflation is impacting us. It's also an important topic for our investors and us, of course. First of all, for new investments, we are defining cost of equity based on leverage, currency, and country risk for each new project.
On that basis, all new projects needs to pass this hurdle rate, this cost of equity that we defined, with a wide margin for us to make investment decisions. We, on that basis, are guiding on a 12%-16% return on equity, looking at this from a project company perspective and not including any development or construction margins. Now, if you add the margins from development and construction and services and also refinancing as we do, as we've done in Philippines, are looking at in other markets as well, the total equity return is above 18% and in other projects, you know, several projects also above that.
It's just important for us to clarify how you should see these, different components of value together and that, the 12%-16% is the pure equity investment return, and then you have the other margins coming on top of that. When it comes to cost inflation, the operating assets have tariffs and long-term contracts that have inflation adjustments done annually for majority part of our portfolio. That's the operating assets. On new projects, new investments, we need to look at two different categories. We need to look at the project backlog. That's where we have secured the offtake agreement. The tariff is set, but we have not placed orders. That's where we can see some impact of cost inflation, obviously.
While for project pipeline, for new investment opportunities, the tariffs have not been set yet, and we're not expecting cost inflation to have an impact on those as we see the market rebalancing on the basis of the, you know, prevailing cost level, basically. Now, we're obviously assessing the expected margin from the most mature projects in our pipeline and the backlog constantly. The way we see things today is that we expect to see a D&C margin in the lower end of the 10%-12% range for our project in the backlog. It has an impact, but it's not a massive impact. It's also then important to keep in mind that this margin is an important contributor. It's to the funding of the equity that will be invested in these assets.
That's a reminder here of the business, the integrated business model, and how this is adding value to us as a developer. Now to 2022 guidance. We continue to guide on power production. We will produce somewhere between 3.9 and 4.3 terawatt-hours in 2022. We're also now guiding on EBITDA for the year, NOK 2.7 billion-NOK 3 billion. That is broadly in line with what we generated in 2021. As we highlight here as well, we see the Philippines being an important asset in this portfolio. We expect production to be below the five-year average for Q1, and that is based on hydrology, normal hydrology variations, but that is also impacting, of course, the full year guidance.
On the services and corporate segments, we expect smaller changes from 2021. I will hand it back to you, Raymond Carlsen.
Thank you, Mikkel. Although we have had a slight reduction in our growth, or I should say, you know, reduction in the increase of growth last year, we see that the growth is picking up, not only with the backlog projects that have been through for 2022, but also the pipeline that will mature and move into backlog and also construction. We have, as you've seen from Mikkel's number, a robust production or cashflow generation from operating plants. The sources that was covered by Mikkel, of course, the most important one is power production, and you have services and you have development and construction. That is an extremely important source of cash as well.
Both in Brazil and South Africa, these projects are large projects. They will move into, as we expect, into construction during the spring of this year. You should expect, you know, EBITDA contribution from these projects in the next few quarters and into 2023. The construction level in general this year is gonna be very high. I mean, not only because the activity last year was low. It's in general, it's gonna be very high, and that will continue into 2023. We see growth in all markets. We see particular growth in Power-to-X. There are some very big projects that I hope to report back to you within the next few months that we are pursuing.
It's a bit early to be exact about them right now, but it's very interesting to observe, as I mentioned before, that the lower cost of energy will actually produce new markets where our business model fits very well. That, when that is being said, we have an organization that has been very active during last year, although, as everybody else, we have been suffering a bit from COVID, but that has not stopped our ability to develop projects. A lot of the meetings happens on Teams. In fact, some of the people that we have secured projects from and companies we haven't met in person. It's an interesting observation.
I think in some of our markets you need to meet people physically to sort of, you know, bond, but of course, that will happen more in the future. During the past few years, we have had a strong growth in the market, in spite of the situation that we've been in. We have a great talent pool in this company. We have people from 50 different nationalities and we see that our ability to operate efficiently in the market is actually linked to insight and experience that these people have. That's very comforting for a company that right now doesn't have a home market. Our total market is outside of Norway, and then we're very happy about the position that we have.
That concludes Mikkel and my's presentation for Q4 2021. Of course, we are looking forward to see you on the next quarter. Before that, let's take a few questions from the audience.
On the web. Yes, we have received a couple of questions. We can start with Jørgen Bruseth from Nordea. Since the SN Power acquisition asset in the Philippines has given us some headache. Looking back, how happy are you with adding these type of assets to your portfolio when we see the level of volatility and variation versus the rest of your portfolio?
I can start. I mean, hydropower is by nature more volatile than solar. We knew that, of course, and I think that is. When it comes to, you know, that investment, that is a long-term investment. We need to look at performance of these assets over the next 40, 50 years, obviously. There are seasonal variations, we've spoken about that. You know, I think we need to be prepared for some more volatility on those assets. Overall, they are generating very good and healthy cash flow, and we're happy with the investment.
I just wanna repeat something I've said in the past. I mean, as Mikkel says, this is a very good investment. I think it's also important to understand the strategic position that hydropower has. I mean, it's been described as a floating battery, I mean, with those that have reservoirs. IEA in August last year confirmed that in order to meet the 1.5-degree Celsius target, hydropower is gonna be a key part of that success, and that is why we see a tremendous growth as well. Yes, there will be volatility, but there will also be other opportunities where you will be utilizing more renewable energy by enjoying the stable production and the variable production that you can match those variations, taking that from hydropower.
For us, you know, this is an important strategic move and something that is gonna really benefit our business model going into the future.
Another question from Jørgen. If you were to extrapolate the current market situation regarding raw material prices and value chains, what would be the impact to your NOK 100 billion CapEx plan for 2025?
I think Mikkel answered that very well. Our backlog now, where we have not started construction, has had a slight impact on the margins, but it's above 10% within sort of the range that we have been guiding on. All new projects have taken into account the price situation, prices of turbines, prices of solar modules. That's reflected. I think that has also been reported by others that are in the same industry as us. We expect the market to absorb cost variations. When that is said, you also see that the prices are coming down. We expect that, for example, module prices will be moving not exactly back to where they were, but on the way down in the
Starting in the Q2 this year, but even further into Q3 and Q4 . We also see reports. I mean, we're getting the same reports as some of you, that logistics cost, shipping cost is also stabilizing and is expected to come down.
Yes. Some question from Eivind Garvik from Carnegie. You state that all backlog projects are expected to start construction in 2022. What is the main drivers behind this confidence?
Well, again, I mean, we understand, of course, that questions are being raised about our confidence on these timelines based on the history and the recent history, right? Obviously, we need to use our best judgment and when we guide the market on timelines. This is obviously based on the specific assessment of where we are on each of those projects. We haven't gone into the details of the permitting process or approval processes, for instance, in South Africa or in Brazil or in other markets today. Based on what we see today, we are confident that that is the timeline we will see.
Another one from Eivind. Are you considering divesting some capacity to recycle capital, but also crystallize value for shareholders?
Now we've you know we have discussed that topic in the past and we continue, I would say, to monitor the market and to assess you know whether that is a path to pursue when it comes to you know divestment or divestments of assets or farm downs. We have no specific plans today to do that, but obviously we are monitoring the market and that could be a potential to look into that going forward.
Okay. I have a couple questions from Manuel Palomo from BNP Paribas. Good morning. Could you please provide some additional detail about why the 900-megawatt project in India has been put out of backlog and back to pipeline? What will be needed for the project to go back to backlog? Thank you.
Yeah. The main reason that we have done that is the realization or confirmation that import duty was not gonna be lifted for some of the projects that was in that category. There is a gap in between, you know, the price level that we have seen from China and the expected price level in India for modules. We expect that over time, you know, the Indian production lines for modules will approach the same cost level as what you have in China. That needs to be confirmed and, in order to be prudent, and not to be sort of moving ahead without knowing that, we have decided to put that project back into the pipeline and not call it backlog anymore for the time being.
Okay. I have a couple more from Manuel. Could you please provide with more detail about the quarterly committed production volumes in your Philippine contract?
Yeah. I mean, we're not going into the details of the specific. I assume he's referring to the co-sales commitments on the contracts in the Philippines. We're obviously monitoring that and again, the sale of electricity is also done there on a profile-dependent basis, you know, based on the expected production through the seasons in the Philippines. We are comfortable with that profile and those commitments versus what we expect to produce.
A follow-up from Manuel on that. Is your assumption that the production in the Philippines will normalize from the Q2 ?
Well, again, hydropower is about hydrology, and hydrology is by definition more volatile. The standard deviations of production on hydropower is higher than with what we see in solar. We can only plan based on P50 estimates of production, and around that, there is of course an outcome, and we are not able to, you know, predict weather patterns for the Q2 today.
One about hedging policy. Could you please explain in deeper detail your hedging policy for the assets that have been awarded PPAs but are yet to begin construction or are under construction?
I assume he's referring to hedging of costs and related to the construction of those plants. As we referred to today, for solar, which is now the most mature projects we have, we are basically not committing or hedging, and it's not possible to hedge, I would claim, at least when it comes to solar panels or some of the key components that goes into solar power plants in the future. We are basically looking to commit and secure those contracts for delivery of components as we start construction of those plants.
Of course, we monitor the price levels. I mean, we have predictions of pricing towards the end of the year, but it's not necessarily always predictions hit the development in the market. The prediction, as I mentioned now on the solar side, looks like, you know, the cost is going down. For the time being, it's the current pricing that is in the financial models.
Yes. Another one from Michel Sznajer from Ecofin Invest. Are IRR on projects going down due to equipment cost inflation or PPA prices are adjusting up? Will you include escalators, inflation adjustment in contracts going forward? Thank you.
Yeah. That's I mean, we expect to see and have started to see that the market adapts to a new cost level when it comes to new contracts. I'm again referring mostly to solar, which are the most mature part of our pipeline. The question is of course, whether you will enter into contracts where you have a adjustment mechanism reflecting the cost. I think that remains to be seen. There is obviously cost inflation adjustment mechanisms in the tariff, on the 20-year tariff or the 20-year contracts, but that is not that is to reflect the general inflation over that time period, but not the cost inflation for the CapEx that goes into the project. That's two different things.
Yes. We have one from Magnus Solheim, Fearnley. Can you give some details on the lower production in Ukraine and Czech Republic during the quarter? Was this quarter a one-off, or should we expect lower production going forward?
Well, if you look at the map, we are in the Northern Hemisphere, so winter is affecting both Ukraine and the Czech Republic. If you look back at the historical quarterly results, you will find the answer. We have seasonally lower production in the Q4 and the Q1 in Ukraine and in Czech Republic, and most of the production there is during the summer months, so Q2 and Q3 .
Okay.
Okay? I think maybe we should wrap it up there, and we can take further questions, of course, offline as well.
Yes. Thank you.
Okay. Thank you.
Thank you.