Okay. Good morning, everyone, and welcome to our fourth quarter presentation. As usual, I will run you through and give an update on our business, and then Mikkel will take us through the financials. The evidence of global warming is clear. Despite record investments in renewable energy globally in 2022, we are far from being on a path that will meet the targets of the Paris Agreement. That is to limit global warming to 1.5 degrees. The pace of the green transition will have to accelerate, and investments in renewable energy will have to increase significantly if we're going to get close to that target. This is especially true for emerging markets. Scatec is well positioned to contribute to the acceleration in our core markets.
We have the capabilities, the track record, the pipeline, and the relationships to be a key player and a key contributing factor in these markets. This was exemplified also during our COP 27 participation, where we engaged in discussions with political leaders and key stakeholders in our core markets. We also signed several agreements on potential partnerships, all of these that we're now working to firm up after the conference. In terms of 2022, it has been a year of strong operational and financial performance, and also acceleration of growth for Scatec. 2022 started obviously with Russia's war of aggression on Ukraine. This contributed to a global energy crisis and also a global food crisis, but obviously has also impacted us both financially and organizationally, and obviously also on a personal level.
For the year as a whole, we have a solid EBITDA of NOK 2.6 billion. We have moved 1.2 gigawatts of projects into construction. This represents NOK 15 billion in CapEx and equity investments of about NOK 2.5 billion. When fully operational, these projects will contribute in the power production segment of about NOK 750 million on an annual level. With these new projects, we have 4.6 gigawatts in operation and under construction. During 2022, we have updated our strategy to become even more focused, and we have adjusted the organization as well as our management team to match this strategy. On ESG, our power plants avoided 4.7 million tons of CO2 emissions during 2022 on a 100% basis.
Through the year, we have maintained top ratings at the key agencies for ESG reporting, and we have been working on establishing our net zero climate targets and our plans for achieving these. In the fourth quarter also, Scatec was recognized for its leadership in corporate transparency and performance on climate change by the Carbon Disclosure Project. Scatec achieved top score and A as one of few companies out of nearly 15,000 companies being rated by this agency. ESG for us is not only about reporting. We also commit to high standards of ESG throughout the value chain and through all the activities that we're doing.
We continue to ensure diligent environmental and social assessments for our projects, and we work closely together with the nearby communities when we are implementing our projects, ensuring that our projects are contributing to local economic growth, improving living conditions through job creation and community initiatives. In terms of the quarter, Q4 was a strong quarter with good financial results, good progress on our 1.2 gigawatts of projects under construction, and also significant achievements when it comes to funding to enable further growth. Total proportionate revenues came in at 2 billion, with a strong EBITDA of NOK 786 million. This is driven by strong performance in the Philippines and also progress on construction within the D&C segment.
In the power production segment, proportionate EBITDA increased by 7.6% from same quarter last year to NOK 821 million. Construction of our projects in Brazil, South Africa and Pakistan progressed well in the quarter with high activities on the site. We have also made good progress on ensuring that we are well capitalized and prepared for future growth. As previously communicated, we have several sources of funding for future growth. This quarter we have entered into an agreement to divest our operating plants in Upington, South Africa, of 258 megawatts, with gross proceeds of about NOK 569 million. We have also started the refinancing of our bridge-to-bond, which is standing at $193 million. The first $100 million has been converted into term loan with our relationship banks.
Moving into operations. We have had stable operations with high availability of the power plants during the quarter. Power production reached 979 gigawatt hours compared to 1,047 gigawatt hours same quarter last year. In the Philippines, the production was about 19% higher than same quarter last year, explained by strong hydrology and reallocation of some capacity from ancillary services to spot sales. Hydro, however, was down close to 30% compared to same quarter last year. This is mainly driven by low inflows to our hydropower production units in Laos. Production within solar and wind is down relative to same quarter last year. This can be explained by lower irradiation in some of our main markets.
All in all, this represents a reduction of 6% last year, since last year, and are driven by weather variations that are still within what we see as normal levels. I'm just back from visiting Philippines, and it's always great to meet up with our team and our local partners and see the good work which is going on locally. Production volumes were significantly above co-contracted sales volumes in the country, which allowed us to capture high power prices by selling excess production volumes in the spot market this quarter. Average realized spot price remained also high during the quarter, reflecting the general energy market as well as our ability to capture high prices based on the flexible generation base that we have in the country.
The combination of high production and spot prices resulted in an EBITDA of NOK 281 million, which is up 21% from same quarter last year. For 2022 as a whole, we ended up with an EBITDA of NOK 888 million. This is also slightly up relative to 2021. Our project backlog and pipeline has increased to 16.7 gigawatts through the quarter. We continue to mature the backlog and pipeline according to our strategy. That is focusing on larger projects and also creating a more focused portfolio around our main focus markets. We now have more than 85% of the pipeline in our focus markets, and we believe that this is a reasonable level.
In terms of the market in general, we do see that PPA prices on a general basis have come up slightly over the last six months, and we also see that component prices are coming down. All of these developments are obviously positive for us and our ability to generate value going forward. The backlog has also matured in the quarter and is now at one gigawatt. Here, I would like to mention that we signed the PPAs for the 273 megawatt Round Five portfolio in South Africa. This provides more visibility on financial close for these projects. In terms of the pipeline, it has increased to 15.7 gigawatts. A key achievement this quarter was the award of a 300 megawatt wind project in the SECI auction in India.
Here we continue to push forward on our strategy in India with combination of utility scale, C&I and hydro power project opportunities. I also plan to travel to India next week to follow up on these opportunities and spend time with our team and our partners. On the green ammonia project in Oman, reaching a fully bankable project structure is taking time. We have had further discussions with ACME on how to implement this project. Our partner is considering to move forward with the phase one before financial close. We will not do that, but we will maintain an option to partner on the second phase. Let me reiterate what we also said in our Q3 presentation.
The most important for us is still to maintain discipline around our investment decisions and only move forward with projects that are meeting our hurdle rates and meeting our investment criteria. I'm happy to see that during the quarter, our construction activities continued to progress according to schedule and according to budget. Q4 D&C revenues came in at NOK 627 million, with a gross margin of 10%. This means that we recognized about 6% in our accounts, 6% progress. In South Africa, we are progressing well on substructures for the modules and on the grid interconnection works. Here we are ready to start mounting of the modules. In Brazil, we are finalizing the civil works, including leveling, clearing and foundations for the substructures. We are here ready to start piling and also substructure works.
In Pakistan, piling and substructure works have been done. Here we are starting to mount modules. In addition to these three main projects, we are having good progress also on bus installation at Magat in the Philippines. This is being done by SNAP, our JV company with the Aboitiz Group. We are also seeing good progress on installation activities by Release. Based on all of this, we will see strong activity level in the D&C segment throughout 2023. We have signed, as I've already said, an agreement to sell our 42% equity stake in the 258 MW Upington Solar Power Plant for a consideration of ZAR 979 million. That is about NOK 569 million.
The solar plant in Upington reached COD in 2020 and was awarded in the fourth bidding round under the REIPPPP program. The plant generates approximately one-third of the proportionate power production EBITDA in South Africa for Scatec. We entered South Africa back in 2010 and have since grown to become a leading renewable energy player in the country. South Africa remains a focus market for us, and we will continue to build scale through new investments, including the Kenhardt project, which is currently under construction. The Grootfontein project we secured in the fifth bidding round, which is currently in our backlog. We will continue to provide operations and maintenance and asset management service to the Upington plant. This will enable us to continue to realize the scale benefits of operation in South Africa.
The transaction is in line with our strategy to optimize our portfolio as presented at our capital markets update in September last year, and will obviously also release capital for new project investments. Towards the end, let me recap and emphasize our updated strategy. We will continue to develop, build, own, and operate renewable energy projects in emerging markets. We have built up track record and capabilities in realizing projects in these markets, and we will continue to focus here. There are three pillars to this strategy. Firstly, grow traditional renewables in selected markets to take a long-term perspective and build scale and more predictability. The second pillar is to take a leadership role in green hydrogen, focusing on securing projects in the most cost-effective regions and securing offtake.
Here we will focus on the regions where we already have a presence. Finally, number 3 is optimizing our portfolio. We will continue to implement this strategy during 2023. I will hand over to Mikkel for the financial review. This will be Mikkel's last quarterly presentation as a CFO after close to 10 years, and I believe more than 35 quarterly presentations. On behalf of the company, I would like to thank him for his great contribution as CFO, and I look forward to work together with him in his new role. Mikkel.
Thank you, Terje. Let me then go through the financials. We continue to report solid financial results, and here looking at the proportionate financials. Fourth quarter revenues reached NOK 2 billion, that was up from NOK 1.2 billion last year. Power production continues to be the main contributor for the revenues with NOK 1.3 billion, development and construction is also ramping up with the revenues of NOK 627 million. Q4 EBITDA came in at NOK 786 million, up 15% from the same quarter last year, this is then based on improved power production but also D&C contributions. For 2022 overall, we generated revenues of close to NOK 6 billion and EBITDA of NOK 2.6 billion, a slight decrease from last year.
EBIT ended at NOK 469 million, up from NOK 399 million last year. We had no impairment of project development rights in the fourth quarter last year. EBIT for 2022 ended at NOK 460 million and was impacted by the NOK 770 million impairment of Ukraine assets that we did in the first quarter. Also impairment of project development rights of NOK 132 million earlier in 2022. This quarter, I also will go through the consolidated financials, as since there are some effects that I would like to explain to you. The fourth quarter revenues from our fully consolidated power plants reached NOK 773 million, which were broadly in line with the same quarter last year.
Net income from the JVs reached NOK 220 million, and this was down by NOK 56 million from the same quarter in 2021. We equity consolidate our assets in the Philippines, in Laos, Argentina, and Brazil. About half of the reduction from last year relates to lower revenues and net results in Laos, and the other half related to increased financial expenses, mainly currency effects, impacting the net profit from these four assets. The operating expense increased to NOK 304 million in the quarter, reflecting increased development and construction activities. EBITDA, as you can see, ended at NOK 689 million on a consolidated basis. The net financial expenses increased significantly compared to last year and ended at NOK 875 million. Of this, net interest expense for the quarter was NOK 404 million.
In addition, large currency movements led to non-cash currency losses of NOK 461 million. About half of this relates to our currency hedge for the RMIPPPP project in South Africa, and the other half is unrealized currency losses related to balance sheet positions across our portfolio. Net loss of NOK 433 million for the quarter. Moving to the financial position. At the end of the fourth quarter, consolidated assets stood at NOK 37 billion, up from NOK 33 billion at the end of last year. The movement here is mainly driven by the weakening of the NOK, but also construction of new power plants that we have been doing in 2022. Cash at the group level stood at NOK 1.7 billion, and proportionate net debt ended at NOK 18.4 billion.
Now we continue to see solid long-term cash flows from supporting our long-term group level debt. This is also demonstrated through the strong support that we are getting from our relationship banks. We are now refinanced $100 million of the $193 million bridge facility through a new term loan provided by the banks. The new loan comes with a margin in the low 300s. It matures almost 5 years from now and is amortizing with $10 million starting in 2024. $10 million per year, that is. Moving to the cash movements, we moved from $3.1 billion of cash to $1.7 billion of cash at the end of last year. We received $402 million of dividends from the operating power plants.
The main element of the operating cash flow is related to changes in the EPC working capital. We reported a NOK 1.5 billion net positive movement in Q3, while in Q4, reported NOK 1.44 billion negative movement. This includes EPC payments for battery systems, solar panels, and other components for our construction projects. The EPC-related working capital will fluctuate over time, and obviously we aim to match EPC incoming payments with outgoing payments, and we're expecting to generate a gross margin of close to NOK 1 billion from the construction projects, and this margin will be earned and accumulated throughout the construction period. We capitalized NOK 152 million of development expenses related to our backlog and pipeline, and we invested NOK 158 million of equity, mostly then in Brazil and Pakistan.
Total liquidity available was 3.6 billion at the end of Q4, including our undrawn credit facilities. Our cash position is further strengthened by the sale of the Upington assets, and we are well-funded for our investment plans ahead of us. Let me also touch upon the dividends and the dividend policy. The board is planning to propose a 2022 dividend in line with current policy to pay 25% of the free cash generated from the power-producing assets. We received distributions of 1.2 billion in 2022, and we therefore propose a dividend of 1.94 NOK per share or NOK 308 million to be paid in May this year.
Going forward, the board of directors will decrease the payment ratio to 15% of the free cash distributed from the producing power plants, and a new dividend policy provides further support to the growth ambitions while retaining a consistent dividend policy or dividend payments. Let me take you through the main points of the outlook. This year, we expect to produce 3.7 terawatt-hours on a proportionate basis and generate power production EBITDA of about NOK 2.85 billion, broadly in line with 2022. In addition, we expect contributions from the 150 megawatt solar plant under construction in Pakistan towards the end of the year. This EBITDA is not included in the 2022 guidance. We also include an estimated NOK 90 million contribution from Ukraine, which is in line with what we saw last year.
We have also adjusted the guidance for the now sale of the Upington asset. For D&C, we see remaining contract value for plants under construction of NOK 7.8 billion, and we guide on the gross margin of 10%-12% as earlier. For services, we expect 2023 EBITDA of NOK 80 million-NOK 90 million, and for corporate, a negative EBITDA of NOK 140 million-NOK 150 million. I will soon take on a new exciting role in Scatec, and I'm really looking forward to bringing Hans-Jacob Hegge on board as the new CFO from March 1. With this, I thank you for attention and listening this morning, and I guess we're open for questions, Terje.
Yeah. Yes. We will first take questions from the room here and then, from the web.
Hello. First, congratulations on the transaction in South Africa. I want to touch a bit upon the process leading up to the transaction. Is this transaction a result of bilateral discussions, or have there been, like, bidding rounds? If the latter, how many bidders and binding offers?
This is based on a structured process where there have been solicited many potential bidders and many offers have been received. Initially, it was a process that was run by our partner, Norfund, and we joined the process towards the end. It has been an open bidding competition for the projects.
I guess on your capital markets day, some could get the impression that you would focus on, core markets, South Africa being one of them, while you would, primarily divest in non-core markets. Can you give a bit of color on why you divest in South Africa and not, one of your non-core markets?
I think, as we said during the capital markets update, the process of consolidating our portfolio or selling down in assets is not necessarily something that will happen on a very short-term basis. We continue to work also on the non-core assets and looking at those. When it comes to South Africa, this is a transaction that makes sense for us. South Africa is still.
A core market. We have still a robust position there and we still have a good growth trajectory with the projects that are currently under construction and also the ones that we have in pipeline. From that point of view, this transaction was a good transaction. It fits with our strategy. It is value accretive and it provides significant funds for future growth. It makes a lot of sense relative to our strategy.
Okay. One last question. We're currently seeing a massive expansion of polysilicon production capacity, especially in China. Both Wacker and other forecasters like WoodMac, Bloomberg, et cetera, are forecasting lower polysilicon prices towards the end of the year, which could drive down module prices meaningfully. How do you view this and, sort of how do you work this into your project economics?
Yeah. I think we have already seen in the beginning weeks of January that there has been significant drops in polysilicon prices, in the reports that have been coming out. This will, I'm sure that this will come through the value chain and also result in lower prices on panels, modules for us. We will watch this closely and obviously when we are doing economic models for future projects, we will use our best estimates and use what is available in the market in terms of coming up with the predictions that we use into our financial models.
Okay.
Good morning. Good morning. Andreas Nygaard, Kepler Cheuvreux. Touching upon what Roar just asked about, could you say something about your current exposure to components price for your backlog and your projects under development?
Yeah. The way we structure our business is that we lock in the CapEx part of projects when we reach financial close. That's when we take the investment decision. Then we have to lock in. Until that point in time, we are working, as I just said, based on estimates in terms of where the component prices and where the CapEx will be at the time of financial close.
Okay. No major benefits from the falling silicon prices in 2023?
We have actually seen some benefits of falling module prices towards the end of 2022 in the final negotiations on the module contracts. Now, for the projects that we currently have in construction, component prices have been locked in.
Lastly, back to South Africa. I guess the sale you made, it makes sense because you got a really fair price in your view. Could you say something about what the capital cost for the seller was compared to you?
No, I cannot say anything about the capital cost of the seller. I mean, the buyer is a institutional investor in South Africa. I mean, clearly they are seeing. Still this is a good investment. I cannot comment on their capital cost.
No more questions in the audience.
Would you have made that investment based on your capital cost?
It was a value accretive deal for us. I think that answers to your question.
Okay. Now we'll take some questions from our online listeners. We have three questions from Manuel Palomo in BNP. Good morning. There's an increasing concern about the returns companies will make on assets under construction given the inflation in costs and increase in rates. Could you please remind us as how you lock in the returns of the projects after the PPA is agreed?
I have partly answered that question already. We lock in the returns of the project at financial close, when we make the investment decision. That means that we are exposed to fluctuations after the PPA is signed until we reach financial close. We also commented on this during our Q3 presentation. For instance, in Indonesia, where we had to go back and try to renegotiate PPAs when the component prices are moving in the wrong direction or interest rates are moving in the wrong direction after the PPA has been signed.
Next question from Manuel. Could you please guide to the amount of megawatts you expect to be operational and contributing to the EBITDA by full year 2023?
Yeah. Our, our indications in terms of the projects that are currently in construction is that the Pakistan project will reach COD in the second half of the year, and that the two other projects will reach COD around year-end or beginning of next year.
Third and last one from Manuel on the Philippines. Prices in the Philippines are above 50% of the average prices in 2021. To what extent is this commodity related? What is the long-term average selling price you factor in your business plan?
The Philippines is impacted by the global energy market as many other countries and have been impacted by the global energy crisis that we've seen. It's a country that is heavily dependent on coal for their power generation and coal prices have been going up and therefore also energy prices in the Philippines have been going up. We're not going to share our internal price forecast for the Philippines, but obviously that will follow also commodity prices and the global energy market going forward.
We have two question from Nash in Barclays. "Good morning. With the dividend payment ratio cut, should we assume that the NOK 2 billion-3 billion additional funding needs will be reduced accordingly?
This quarter we have communicated two initiatives to improve our funding situation for future growth. One is the sale of the Upington assets in South Africa, and the other one is the reduction of the dividend policy for the years from 2024 and going forward. Both of those will improve our funding requirements for this period.
Another one from Nash. "Could you please provide a bit more guidance on how we should think about the D&C revenue, EBIT, EBITDA and cash flow for the first quarter of 2023?
Yeah. I think Mikkel has already tried to give some indications on that. I mean, we have guided on EBITDA for power production. When it comes to the D&C segment, we have indicated the level of remaining contract value that we have in the current three projects, and then they will follow an S-curve in terms of moving through the construction phase of those projects. Obviously we are, after we now have been talking about this for a couple quarters, we are getting closer to the steeper part of that S-curve.
One question from Ola Ekanger. "Given the competitiveness in the REIPPPP tender rounds in South Africa, how do you assess your chances of securing grid connection in South Africa for future projects? Are there any other ways of securing grid connections in South Africa other than partaking in REIPPPP that you are considering?
Yeah. First of all, in terms of the last REIPPPP round in South Africa, we actually saw increasing prices relative to what we've seen historically on the PPA level. There was a certain hiccup in terms of the grid connection queue moving into that tender round, which resulted in only about 800 megawatts, 800-900 megawatts being awarded relative to the target of 4 gigawatts. Going forward, South Africa will sort of look at how the grid connection queue is being managed. For us, we can continue to secure grid connection for our projects independent of the REIPPPP rounds. In South Africa it is now opened up for also doing corporate PPAs and selling into the market.
You can also develop projects and realize projects on other basis than only through the REIPPPP in South Africa going forward.
Okay. We have two questions from Magnus Solheim Fearnley. "Do you see STANLIB as a potential equity investor for the South Africa pipeline?
Absolutely. STANLIB is a, is a good partner and we definitely see them as a potential investor also in the, in the future.
Maybe just to add, Terje. STANLIB is already a co-investor with us on the other part of our South African portfolio.
Yes. Another question from Magnus. "Can you comment on the CPI adjustments in your contracts and how this impacts revenues in 2023? Is it a specific date inflation adjustments kicks in?
Yeah.
Yeah. Maybe I should.
Okay
... the, there is different dates depending on the different PPAs. It all depends on the asset and, yeah, and country and the scheme that we are under. That will vary across the portfolio.
2 questions from Helene Bøhn Brønbo . "Do you see potential for canceling the entire dividend for increasing, for increasing the liquidity available for growth?
Yeah, I mean, this is a discussion that we're having with the board and we as well as the board, we think it makes sense to continue with the underlying rationale that we have for our dividend policy, which is about showing discipline and transparency in our ability to bring dividends back from our operating assets up to the Norwegian level and linking a dividend to that. We think that makes sense and the board also think that we should continue with that policy. Obviously we have now reduced it to support funding for future growth.
Another one from Helene. "What is the status on the negotiations in Tunisia?
Yeah, the negotiations on Tunisia are continuing, but we don't have a conclusion on those yet.
We have one from Rajan Vig. "Does your full year 2023 guidance exclude Upington sale?" I guess I can answer that. Yes. That's, it's excluded. One last one from Pascal. "Why is the consolidated depreciation and amortization in full year 2022 so much higher than in full year 2021?
That's mainly because we have grown the portfolio in that timeframe. Currency effects are also impacting that level. I think that's the main elements. We also saw some higher level of impairments on the development projects in 2022 versus 2021.
Okay. That was all from the web.
Well, there's Anders.
There are $93 million left on the bridge to bridge financing. How do you plan on addressing it? Will it be paid down or will it be refinanced and what could we expect there?
Well, we obviously have a few options there. I think it's difficult to be very precise in how we comment on it. We, you know, we will address that in due time. It's still, you know, some time until it matures, the $93 million. We will continue to evaluate our options there.
No more questions? I guess we end the presentation.
Okay.
Thank you.
Thank you all for attending.
Thank you.