Good morning. My name is Raymond Carlsen, and together with Mikkel, we will present the Q2 numbers along with a few comments on the product development side, the market, and so on today. We have seen over the past quarter that we have had a very strong increase in the backlog and pipeline. In terms of power production, as you can see on the curve to the right there, we have more than doubled in a year. That tells you quite a lot about the activity level over the past 12 months. In terms of the addition to the backlog and pipeline, that amounts to more than 2.6 GW in the quarter. We have also secured some extremely important contracts that I will return to a bit later in the presentation. Namely the hybrid system in South Africa and the 900 MW project that we secured in India.
We're also going to cover a new segment that we have been focusing on for the past year that we are prepared to share with you right here today, that is offshore wind in Southeast Asia. We have also connected projects that we've been working on for quite some time, both in Argentina and in Ukraine. In Ukraine, we have a total of 336 MW in operation as of today. The Ukrainian market is interesting because it's basically focused on plants that are producing from either nuclear or old coal power plants. Now, there have been some political discussions over the past week that I've seen in the press, which I think is interesting, and I'd like to share with you, that is the negotiations of the Nord Stream pipeline, where the U.S. and Germany have been negotiating to find a solution.
As a part of that solution, a fund will be set up, a billion-dollar fund, to assist Ukraine in the transformation from the current energy mix into renewables. We think that is an extremely interesting signal for the future. We have been waiting for this, and I believe now it's finally happening. For us, I believe that we will have more opportunities down the road, in addition to these 336 MW in Ukraine in the future. In Argentina, we connected the Guañizuil project. That is a project that it's almost at the level or the height or the altitude of Galdhøpiggen, the highest mountain in Norway. This is at the level of 2,000 meters. Those that know their math or electricity calculation know that the higher and the lower the temperature, which you have at higher altitudes, the more electricity production.
For us, this is going to be extremely interesting to follow when we start collecting production data. This slide I've shared with you before, at least the points to the right-hand side there. For us, in 2021, and of course it will move into 2022 as well, we are focusing very much on life cycle management. That is understanding where the equipment is coming from, how it's going to be used during operations, and where it's going to end up once it's finished its purpose. We're going to have numbers on that, and we will share that with you. We have a plan as well, like a lot of other companies, towards 2050 on the climate targets. Supply chain, again, our vendors need to deliver on the same level as we want, and that is expected. Human rights, extremely important.
The main point with this slide today is actually to share with you that annually from now on, we will share our progress, all the KPIs that we have established for the targets that this company is operating according to. I recommend for those of you that are focusing also on this part of our business to look into our quarterly report to get more data. EU taxonomy is something that has been under development.
We have over the past few months also been assessing the hydropower plants that came along with the acquisition of SN Power to see how they were fitting in. We have gotten a report, and we see that they are well below the threshold for life cycle emissions. You may call all our power plants that we have in operation today as green projects. Then I would like to hand over to Mikkel to go through the numbers and a few other things. I'll see you in a bit. Thank you.
Thanks. Let me, as usual, start with the overall proportionate financials. In second quarter, we reported the revenues of NOK 1.1 billion and an EBITDA of NOK 601 million, as well as a cash flow to equity of NOK 177 million. Solid set of numbers and a growth from last year, as you can see on the slide. If you compare to the previous quarter, the EBITDA is somewhat down, mainly driven by the power production segment, which I will revert to in a minute. If you look back over the last 12 months, revenues reached NOK 3.2 billion and EBITDA close to NOK 1.8 billion and cash flow to equity, the cash that is coming back to us as an equity holder from the operating power plants and across our segments of NOK 808 million. Moving into the segments. Power production more than doubled compared to a year ago.
Revenues reached NOK 969 million and EBITDA NOK 660 million. The new hydro assets contributed with NOK 292 million of the EBITDA in the quarter. Again, a strong growth from last year. If you compare to the previous quarter, EBITDA in this segment decreased by NOK 44 million. The main explanation for this decline is the financial performance of the hydro assets in the Philippines. In the second quarter, we saw seasonal drier weather and less water in the reservoirs and the production decline in the Philippines, as is normally the case at this time of year. The operations there also need to buy some power in the market to fulfill the obligations under the sales contracts in the market in the Philippines. That impacts then cost of sales and the gross margin for this asset.
That being said, putting this performance in context, year-to-date, in the first half of this year, EBITDA from the Philippines were 35% above what we saw last year. It's been a very good start of the year, and we expect also the second half of the year to continue to improve in terms of EBITDA. Cash flow to equity, as you can see, NOK 252 million in the power production segment. Again, over the last year, NOK 2.8 billion of revenues, NOK 2.1 billion of EBITDA, and cash flow to equity of NOK 1.1 billion. The solar assets performed fairly stable and very similar to what we saw last year in this quarter. Moving to services. Here, the contract portfolio has been fairly stable over the last 12 months. The underlying EBITDA is fairly in line with what we saw last year.
We had a one-off catch-up effect of NOK 14 million affecting the Q2 numbers in 2020. Again, underlying, it's a fairly stable performance. On the development, the construction side. Again, numbers are affected by the fact that we have limited the construction activity. We have started to construct the 150 MW power plant in Pakistan. It generated NOK 15 million of revenues. This is set to ramp up again in the second half of the year with this project and other projects coming into construction. What's important when reading the numbers from this segment is that it's not only the construction business driving value here, it's also the development business. We have matured significant projects in this quarter, and 1,440 MW have been moved into the backlog in this quarter. Raymond will also revert to more on that development in a minute.
Let me also update you on the Ukraine portfolio. This created a few questions at the first quarter report. Commercial operations have now been achieved for the whole portfolio, 336 MW. We have also had further discussions with our lenders. This is mainly EBRD, but also FMO, for making sure we can adjust the loan agreements and base it on the revised cash flows that we see based on the tariff that was adjusted by the government last year. We have an in-principle agreement with the lenders to make these adjustments, and we expect to implement those in the second half of this year. We were also in compliance with all our loan agreement covenants at the end of the second quarter, meaning also that we have reclassified the debt related to these projects from short-term to long-term, as you would expect.
I think that's a positive development, and as we expected with the support that we have and the relationship we have with our banks. Moving on to our balance sheet. The Q2 consolidated assets stood at NOK 33.2 billion, up from NOK 26.7 billion at the end of last year. Consolidated cash in the group was NOK 4 billion, and the proportionate net debt was NOK 15.7 billion, and the group book equity was NOK 11.1 billion at the end of the second quarter. Briefly looking at the movement of the cash. We received NOK 206 million of dividends from the operating power plants, continued to generate healthy cash flow there. We invested another NOK 100 million of equity into new projects, and we also paid dividends to our shareholders of NOK 173 million now in the second quarter.
We are sitting on a cash of NOK 2.4 billion at the end of the second quarter, and we are also holding NOK 1.6 billion of undrawn credit facilities on top of that cash. We also wanted to reiterate our guidance when it comes to returns and margins, as we presented at the capital markets update in March. It's obviously very important for us to continue to stay selective and focus on capital discipline when we invest. We have established a very solid platform for growth with a strong position across a number of high-growth markets in the regions around the world, and now also with all renewable technologies available. We strongly believe and see on the ground that this enables us to differentiate ourselves and maintain good margins and good returns on the investments that we make.
So, 12%-16% return on equity is what we guide on for power production. Then on the development and construction side, 10%-12% gross margin is the guidance. Also important to reiterate back to the development and construction segment, we expect revenues here to represent somewhere between 50%-70% of the project CapEx for the projects that we are moving into. The backlog, for instance, now represents CapEx of about $2 billion. The D&C revenues will sit in the middle of that range, around 60% of that CapEx number. That will, of course, grow as we move forward. On the 2021 guidance, we expect to produce about 1,000 GWh in the third quarter. Now for the full year 3,600-3,750 GWh.
Also, as I highlighted, we wanted to also point to the Philippines here that the EBITDA there is normally 20%-30% higher in the second half of the year compared to the first half of the year. That's what you should expect also now. In the D&C segment, the remaining not booked construction contract value is NOK 490 million. This is related to the 150MW project in Pakistan. This will, as I said, increase as we move forward with the backlog. Services, NOK 260 million of revenues, a slight decrease from before. The same margin guidance as we have indicated, 30%-35%. Then corporate, NOK 110 million of negative EBITDA. I will leave it to Raymond to finish up now.
Thank you, Mikkel. Market and the market outlook. This is, I should call it an excerpt of the new Bloomberg report that came right out of the oven a couple of days back. They have been looking at what needs to happen to meet the targets that the world has towards 2050. Along with that, of course, you will see a tremendous increase in the electricity demand. You will see, and that's their prediction, that the power generation core by renewables is approaching 90%, which is necessary, but also good. Fossil fuel won't drop completely out of the equation, but there won't be a lot left. Basically, according to their view, the oil will be consumed by more chemical plants rather than for transport and other purposes. Every year, at least there will be $800 billion invested.
Now, some of you remember that we have shared the Bloomberg report, some main data previously, last year, for example. Of course, we are very much out there in the market. We are feeling the pulse of the market. We said last year that maybe the report that was published and the data wasn't aggressive enough, meaning towards reaching the Paris goals. I think we see the results now. More companies, in addition to Greenberg, that are looking at the future, actually confirming that the world needs to invest much, much more into renewables to actually keep the planet where it needs to be without actually melting away ice caps and increasing the sea temperature. We had a strategy process in Scatec last year where we saw that the natural move for us was to look at new technologies.
We started actually almost two years ago looking at wind. Last year, we looked at hydropower, we saw that hydropower has a fantastic potential. It has to a certain extent been a bit of a forgotten opportunity or technology. Of course, when we then read the new IEA report confirming in a very professional way some of the things that we were collecting that was actually driving the decision to acquire SN Power. We think this is something that the world needs to pay attention to. There is a tremendous opportunity within hydropower. Some of the numbers that you see in the report we have repeated here. 75% of new capacity is going to come from our basic markets, frankly speaking, Africa and Asia. There is a tremendous opportunity if you look at old plants. They've been running for 10, 20, 30 years.
New technologies, new turbines, new ways of calculating, optimizing these plants are there to get more kilowatt hours out of these plants. For us, we will focus on new plants, but also upgrading older plants. Also combining them with solar, with wind, so that you have a more system approach across all our technologies. We feel that we are extremely well-positioned and going forward, we will be extremely happy to share with you some of the opportunities that we are working on at the moment. Technology is important.
I've just explained why we went from solar into wind, batteries, hydropower. In the future, the market is going to ask for solutions. They're not going to say, "I want solar. I only want wind." They're going to say, "Give me a stable set of kilowatt hours at any time of day." To do that, we have to understand the needs of the customers, and we do that. We have built up aggressively very competent people that are understanding these markets. Firm renewable power, very important, independent on variations in wind speed or clouds passing by the sun during the day. Hybridization, I've just talked about. Release is something that we started working on couple years back.
This is actually a new concept, trying to understand our customers better. Some of them do not want to enter into long-term contracts. They would like to have a lease concept, three to five years. I'm also happy to report now that we have several projects that have been signed, projects, contracts. We see more coming down the line.
Finally, this is really picking up. To some extremely interesting market segment, and that is Power to X. We have been seeing the cost per kilowatt hour produced from the renewables coming down in the past decade, and I expect that to continue. When you're down to $0.02 in some places per kilowatt hour, that is cheap. That is actually half of the cost of just sending or transporting a kilowatt hour in Norway. Before you pay, actually, for the kilowatt hour price, this is actually grid cost. We can produce then a product based on low-cost electricity. Hydrogen is one element. Another one is actually using this electricity by applying it to desalination of water. The water balance, the freshwater balance across the world is changing. You see droughts popping up, storms coming in.
More water is required in some parts of the world, particularly in some of our key markets, Africa being one. We are working on some extremely interesting opportunities in this segment. I'll also be happy to share more of that once we have developed these projects further. In terms of our backlog and pipeline, which stands now at 14 GW, it has had a tremendous development over the past quarter, which means that our development teams are entertaining selectively, as Mikkel said, opportunities that fall into our way of thinking and the criteria that we have for all these projects. Latin America, up almost 700 MW, 1,600 MW Africa, Southeast Asia, 418 MW, and a bit stable in South Asia.
There are several projects we're working on here too that aren't mature enough to say that we include you in the pipeline, but that is going to happen over the next few weeks and months. This is a project we publicized during the quarter, and that is a PV and a battery project in South Africa. This was won in competition with a lot of different companies, and it was technology-agnostic, meaning that the authorities in South Africa says, "We don't really care the type of technology that you're using to come up with the most competitive price per kilowatt-hour." Of course, we won in competition with diesel, with gas turbines, and we are the only project that is completely renewable. What is this? Well, this is actually a capacity contract.
We have to provide fixed capacity based on 150 MW from 5:00A.M. in the morning until 9:30P.M. in the evening. To be able to achieve that, we have to install 540 MW of PV, 225 MW of storage. When you combine that, we are guaranteeing that the capacity will be available from early in the morning to late at night. We will be paid, as I said, by the capacity that is actually provided. I like to point out as well is that this project actually fits our business model to the point. We will here be compensated for all the efforts we have made to develop the projects. This is not just straightforward. This is fairly advanced technology-wise. Securing the land, having the environmental impact assessments done, all that put together, understanding the grid, that we will be compensated for as a development premium.
Of course, we are responsible for construction. We will construct together with partners, subcontractors, the plants, and that construction is expected to start in the second half of this year. Of course, we will maintain once up and running, we will maintain the project, and we will do asset management. We will have partners too, on the electricity production and the sale of electricity. For us, this fits our model exactly, and there are projects out there that are actually, and this one is being the perfect one, that fits our business model very well. Being picky and being selective is extremely important, and I can also confirm that the guidance that Mikkel shared with you earlier, that is actually our guidance going forward. This project fits that very well. India.
India is an extremely important market. We have been monitoring India for a very long time, looking at how we can participate. When we go into a market, we're not there only for one project and leaving the country to itself and then go back in. India for us is going to be extremely important. As a curiosity, in 2010 and 2011, we actually had 28 villages in India connected to electricity and batteries. They had no electricity. On that, I think it was very interesting. We have since then monitored the market in detail. Now we see that we need to go big in. This is our first investment there. We are going in with a good partner that have delivered 2,000 MW previously, ACME. We are not only there for solar.
We are developing wind projects for the time being, and we are pursuing some extremely interesting, both greenfield and brownfield hydropower opportunities in the northern part of India. The operation, by the way, is up and running. We have some very good people working for us. This sort of gives me a bit of a kick because it's offshore. I'm an old offshore guy having been in offshore oil and gas for a long time. For us, we have also been looking at the offshore wind opportunity for a long time. Finding the right resources is key. We have been spending a couple of years looking at the opportunities, and we're now giving you the status of the development here today. We are focusing on Vietnam and the Philippines mainly for the time being. They have some very attractive offshore wind conditions.
They have predictable, aggressive, long-term renewable energy growth plans. Of course, Philippines is our home market to a certain extent now with the acquisition of SN Power. They have been in the Philippines for a long time. Aboitiz, our partner there, are also a very prominent powerhouse, so to speak, or power generation house, energy company in the Philippines. For us, we have targeted 4 GW of offshore wind to develop these projects. In the Philippines, we have right now secured 750 MW for exclusive development of offshore wind at a very nice spot with high yield, meaning the wind conditions are perfect for offshore wind. There is another 1 GW in the pipeline, or not in the pipeline, but on the way to enter the pipeline in the Philippines.
In Vietnam, for the past 12 months, we have been looking at many sites there, and we are in the process of developing 2 GW. Also, as you can see from these locations on the map here, the circles, the oval circles, the darker it is, the better the wind conditions are. This is from very high up, but we have selected some very good resources. Now, this is the final slide. We are delivering on our 2021 targets as we speak. In the second half of this year, we will be seeing around 2,000 MW that will move into construction. That's a lot. That's why Mikkel said that we are ramping up at the moment the construction activities. In fact, we are at the very detailed planning level, both in India and in South Africa. Pre-construction planning is there. All inquiries for procurement is out there.
We are very active on the construction side, although it doesn't really show in the numbers. That is going to trickle in and be ramped up as activity and procurement and construction continues. I hope that you share my view of the market. We are extremely positive about it. It's going to continue not only for the next five years, next 10 years, for the next 25 years. Of course, it will change all along, and I think the way that we are operating, we have proven that we are adaptable to new markets to really deploy our business model in a very good way. That is driven by the broad technology platform that we have established in the company.
We know that we have a very solid basis for the 15 GW growth plan that we shared with you during our capital markets update a few months back. Thank you very much. Well, I know we're open for questions. Mikkel. They've been given some spots to stand as well.
Yeah.
Yeah.
Yeah, we have some questions from the webcast audience. I will start with John Olaisen from ABG. What is the status for the Ukrainian PPA issues and indications that the government will revert its 2020 decision to lower the power prices below the agreed PPAs?
There's no new updates from the government in Ukraine. There's certainly us and other stakeholders being vocal about our view on the situation. We have said before that we are prepared to contest this also legally at the right time. We are continuing that process. Yeah.
Also a question on cost inflation. Do you see an effect of cost inflation for your business?
Just to give an example, the project I covered in South Africa, the hybrid project, in that model, of course, we have put in the latest pricing. Most our projects now are reflecting the price that we see in the market. There has been volatility in the markets previously. It's probably a bit steep now because it's not only the modules that are moving a bit up. You see iron ore, iron products, shipping costs going a bit up. As a responsible company, we have to implement into the prices or into the project costing, the current pricing. Of course, we are also trying to have a view about the future, how this is going to look. Broadly speaking, we have taken into account the sort of inflation that we have seen, the latest inflation that we've seen in the market.
There are some questions from Jørgen Bruaset in Nordea. First, is there any update on the project with Norsk Hydro in Brazil, and when do you expect final investment decision on this project?
We are discussing, which is normal, both with Hydro, Equinor being together with the other part and the joint venture partners with Hydro in Brazil. That is moving along, and we are expecting That's a part of our 4.5 target, and it remains there as we speak.
On D&C numbers, they look weaker than consensus expected. Can you provide some color on the cost elements in D&C and what we should expect in terms of catch-up effects in second half of the year?
Yeah. We have had another quarter of, I would say, moderate revenue recognition. When we do construction, we account for revenues based on progress, basically. The progress is typically following an S curve, where you have a slow start and then you get steeper when you move forward with the project. I think that's what we will see also in the second half of this year. It's difficult for us to provide very exact guidance on revenues in the D&C segment. It's quite clear that we will see higher revenues as we move forward with the construction of more power plants, as we have covered today.
There are a few questions on offshore wind. Eivind Garvik from Carnegie. How will you be able to secure 4 GW of offshore development rights considering the competition in offshore wind?
The competition is global, so to speak. We are very well known to be looking for opportunities in the various markets. We have been screening the markets for offshore wind, looking at the resources across the globe, and also something that fits sort of our overall strategy. When I'm talking about these projects, that means that we are ahead of the pack. When you're securing the rights, we have those rights, and we develop it. What's going to happen on these projects, we will put up met masts, meteorological collection points close to these sites so that we're getting exact data. Once that is collected, then of course, we will move into the next phase by financing the projects and then start construction. These are exclusive rights once we reach that stage.
The 750 MW that I share with you in the Philippines is an exclusive right to develop these projects, which will be similar in the Philippines once you get the central planning approval for these projects.
There's a follow-up on this, on what is the realistic timing of development start for the first offshore wind project?
The first one is starting right now, the 750 MW is starting now. The rest will follow once the approvals are given. It starts as we speak.
The development process, yeah.
Yeah, development process. I can also share with you that another Norwegian company, DNV, they are extremely sophisticated and clever and understand the markets. They have been holding our hand selecting the best sites. This is not only about the wind resources. You have to look at the local infrastructure. For example, in the Philippines, where are the shipping lanes? Are there any other potential threats that you can see there? Could there be airports nearby? Could there be environmental impact situations where there is a, as we had in India, looking at that, a special condition connected to bird migration. There's a lot of things that you have to do to make sure that you're actually meeting the environmental conditions of the permit and that you secure the investments down the road in a very proper manner.
Another follow-up on the offshore wind. Can you please explain the partnership structure that you are looking at for the offshore wind projects?
In the Philippines, we are on our own, so we'll have all the development rights. We have a partnership approach, 50% to 60% we control ourselves. Normally we farm out the rest. That could be the case, but we'll see how that develops. Similar situation in Vietnam. I think it's an advantage to have all the rights to begin with. It gives you a very strong position going forward.
Also on offshore wind, given the higher installation cost in offshore, how do you plan to finance those projects?
Well, they will be financed the same way. In fact, I got sort of déjà vu, how I should put it, when I started talking to some of the wind providers. We looked at the project last year. I'm not going to mention names here. I was actually involved in delivering a $2 billion project to Reliance on the oil and gas side. We had 160 vessels involved. When I start talking, I sort of sense that the wind industry, as it is today, has a great potential for further cost reductions, becoming more effective. We see now that there are tailor-made vessels that are being constructed by Norwegian owners. We think that is going to reduce the cost in general, not only what I've seen in the past few years, reduction in turbine cost, the installation cost is going down.
I am very comfortable with the way that the contracts are put together because I see there are similarities to the oil and gas business that Norwegian companies and companies around the world have been exposed to. There's a professional group of companies out there that needs to recalibrate their business profile actually to install these big turbines. Installing equipment at 2,000, 3,000 meters, as I've experienced, that's challenging too. Installing a floating platform. Wind turbines, they are fairly complicated, but maybe not as difficult as some of the projects that you have seen in the oil and gas business. I think the world should look forward to how the oil and gas companies are transforming into being very professional players in the offshore wind business.
The final question on this topic. Do you see these assets as part of the assets to be delivered in 2021-2025?
Some of them. We expect that, yes.
Yeah, I think that was all.
Very good. That was all? Okay, on behalf of Scatec, enjoy the rest of your summer. We are certainly going to enjoy the rest of the summer. Thank you very much.
Thank you.