Good afternoon, ladies and gentlemen. Welcome to the Meyer Burger Technology AG Conference Call . At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, CEO, Gunter Erfurt.
Thank you, operator. Ladies and gentlemen, great pleasure to guide you through our announcement that we have published this morning with our key preliminary financial figures of 2023, and also the ongoing strategic decisions we have to take in regards to our European manufacturing presence, as well as also our continued growth plan in the U.S.. So let me run you first through the key figures, and what we have achieved and are currently working on in our operations. So we have, in the last year, completed our installation and ramp-up of our 1.4 GW cell and module capacity in Germany. We have successfully ramped both lines in Thalheim and in Freiberg. That completes our project phase one.
And we have also tackled yield topics and higher voltages with our solar panels. So in essence, we are on a good trajectory from an operations point of view. We have continued the construction of our 2GW U.S. cell and module facility. We are expecting to start our production of modules first in Goodyear, Arizona, in the second quarter of this year, selling directly into our offtake agreement with the D.E. Shaw Renewable Investment. Given the current very unfair market distortions in Europe, which is, for the time being, our main market, we have not been able to meet our targets in this year, even realizing lower net sales from this year, comparing the previous period.
Our EBITDA figures are also absolutely away from our expectations of this year, with a loss of CHF 126 million, primarily related to the fact that our 1.4 GW operations is due to the market distortions and the very different market environment in Europe, not fully loaded, which ends in a situation where our fixed cost base cannot be diluted as planned, and not all costs are fully absorbed. Second, we had to impair or have to impair, numbers are preliminary, again, we are still working on the final ones. We have to impair inventory levels in Europe, so finished goods, but also some materials to produce. Cash position of around CHF 150 million as of end 2023.
We have other financial or funding options in the making. I will speak about in a minute. So what is absolutely clear and key is that the business year, fiscal year 2023 has, is even more demonstrating that we have urgent requirement for stronger policies, industry policies, to protect the European solar manufacturer in order to run a good business here, which is not possible without it. And this is also why we are, we are clearly saying that if these are not coming and creating a level playing field, then Europe is definitely not the place to produce solar modules. W hat has happened in 2023, and again,
Regarding our initial planning for the year, it came as an unexpected development, especially the pace in which these distortions took place. This is unprecedented, basically, overcapacities in China, and the combination of tougher trade restrictions in India and in the U.S., where not all product from China is allowed to enter the countries, have finally ended up in a massive oversupply into the European solar markets. There has been a new study published yesterday by Bank of America, suggesting that between 60 and 80GW of modules are still in warehouses in Europe. Comparing the 60 million to 80 million to approximately 55 GW of end- installed capacity in this year shows the order of magnitude and the problem that the European solar manufacturers are facing.
Not only Meyer Burger, it's the same for everyone who's doing this business from Europe. The result of the oversupply has ended in a real price war with prices as low as below way below $0.10 per watt peak, comparing about $0.20 per watt peak to make a product in China, even without any margin included. So this is only possible due to the massive industry policies in China and also subsequent subsidies the companies there receive to withstand such a situation, and Europe has not yet made their homework in protecting it. So the only way out is not that our company can apply any measures to further reduce costs or things like this. This is impossible if other parties are selling way below their own manufacturing costs.
So this is an unfair play, and it can only be resolved by protective policy measures, which are being debated and discussed and now are finally required to be established. So only possible to execute successful strategy in this year under this premise. And without, and that's takes me to the next slide. We have, we have luckily enough, luckily enough, already three two years ago decided to move to the U.S. by securing our Goodyear facility building in December 2021. And this is in so far remarkable as that the decision was made prior to the implementation of the Inflation Reduction Act. So we have, from day one, been strong believers in the U.S. market, also in U.S. manufacturing for various reasons. And this has proven correct.
When finally the IRA kicked in, we were already there with our offtake agreement, the first offtake agreement with D.E. Shaw. And as I said, now, with the upcoming ramp-up of our capacities in Goodyear, this is the first customer to be served. What's very interesting in the US, and also gives us more fueling the Meyer Burger case, and our future in the US, is that even post-IRA, where many observers had doubted that or had their doubts that, maybe the IRA could slow down the energy transition in the US or even the growth of the sector, it's proven incorrect, as you can see, on the left side, in this analysis by the Solar Energy Industries Association in the US, SEIA, which also shows the remarkable growth in the utility sector.
Given Meyer Burger's product, we are of the strong opinion and conviction that we can approach all three segments in the U.S. with the smaller residential systems up to the larger utility installations, with the growth sector clearly in the utility. I.e., the three offtake agreements we have signed do very much de-risk the case in the U.S. because different to Europe, we have firm take-or-pay offtake agreements in place, which gives us the better ability to plan accordingly. Also once we have more proof in what we are doing, we also believe that can be even increased, and more of these type of agreements can be signed, and potential growth in the U.S. is possible.
When last year in summer, on the one hand, Europe has not moved on the opportunity to implement industry policies according to creating a level playing field for European module makers. The opposite happened in the U.S. The Department of Treasury had enhanced the ITC tax credit scheme by imposing another ITC tax credit opportunity towards installers, i.e., our customers in the U.S., if they can prove that the product they are using is not only made in America, but also the solar cells inside are made in America.
So what the U.S. government is trying to achieve is that not only module making is moving to the U.S., which wouldn't resolve the strong dependence on China for all the upstream components, such as solar cells and solar wafers, and has added the solar cell now into this ITC scheme. There are even voices suggesting that we might see something similar also for the wafer and the polysilicon, in order to make sure that the entire supply chain is established in the U.S. If you pick us on the facilities, 2 GW for the module factory, as I said, it's in the making. It's going to produce first product from Q2, 500 employees, about 10,000 solar modules per day.
Our solar cell facility was announced later and also started later when we moved the project from Germany to the U.S., in the absence of any industry policy measures in Germany. And hence, it's not running behind, but lagging behind because we had also started late. So the expectation currently is that we are going to start with first sales to be produced around year-end and into 2025. Then doing the ramp-up with 350 employees max, and 1.4 million solar cells per day. The employees won't be hired in one shot, but we would do this in stages according to how we bring our equipment online and start the ramp-up.
We have today in the ad hoc release said that in the absence of any resilience measures or other instruments which create this level playing field, we have to downsize and restructure our German operations, unfortunately. The plan contains a closure of our Freiberg module facility. The assets could be sold. The building could be sold, the manufacturing equipment assets could, for instance, be reused in a potential growth or for potential growth in the U.S. The Bitterfeld-Wolfen cell facility is continued for the time being and the foreseeable future as we need the solar cells to support the U.S. ramp up. So this is happening right now. The Bitterfeld facility is already making solar cells for the U.S.
We have converted the line even to run the improved product for the U.S., the so-called M10 wafer, larger solar cells with more power for the utility product. The third item in the downsizing plan would deal with anything that still needs to be repaid, which are subsidies that we have received for the FTE headcount , which would then have an immediate effect, very likely some EUR 3.5 million only, I would say. We are currently investigating how much of it is going to be repaid, and if at all. We have another local syndicated loan debt facility to be repaid, around EUR 70 million. And we have some severance to be paid to our workforce.
And the main takeaway here from this slide for you is that we expect that the downsizing costs will be self-funded. And how? Because we have, in the last year, piled up inventory of finished goods, and this has a value, and we expect to sell this off in the coming months. And this is a value of about CHF 100 million, which is capable of funding the downsizing costs for this effort in Germany, if we have to. If resilience is coming, we can continue with our excellent factories there. If not, we have to execute on the plan. We have furthermore today contemplated a potential transition into what we call a hybrid captive business model.
You know that Meyer Burger has, four years ago, decided to enter onto a captive model by continuing to develop technologies, equipment, but use the results only for own manufacturing. That means we are selling equipment only to ourselves in order to prevent IP from leaking and to keep the value inside Meyer Burger. What we are currently assessing together with a globally renowned investment bank is a potential transitioning into what we call the hybrid model, which is a potential partnership with industrial partners primarily in the US for the time being, but no restriction to also do this in different regions of the world. Where we would, for instance, jointly run operations, we still have skin in the game.
It lowers the CapEx needs for us, and we may be able to generate licenses from Meyer Burger Technology and generate a second income stream, which is asset light, and pretty attractive in our opinion. So discussions in that direction are on the way. No firm result yet to be communicated, but we expect this effort to continue in the next coming weeks, and hopefully, we can communicate further on this shortly. In such a hybrid model, Meyer Burger would retain ownership of all our IP, so there is no change compared to the, let's call it, the initial captive model.
As I said, it would be very helpful also in the sense of, on terms of the funding of production facilities, which would also probably come to us via a potential partner. The mid-term EBITDA, we believe we can achieve, from the day the factory is fully loaded, which is expected to happen for an entire year in 2026. We expect an EBITDA of CHF 250 million, and this assumption includes the downsizing of Europe, so there would be no European business any longer contribute other than R&D, which continues to take place in Europe. Key takeaways. Again, number one, our revenue expectations have not been met.
We have generated more losses in 2023 than originally expected, due to these very severe and unprecedented market distortions, which are very, very critical. And the price war associated with it, which is-- which has now led to this very clear decision path. Either it's coming and we continue, or it's not coming and we are closing, and not coming means by mid-February or by the second half of February to be fully precise. On that note, what is at least interesting coincidence, while we were publishing this launch this ad hoc news, the parliament calendar of the German parliament has been published, and it says that the so-called Solar Package One, which is the law that would deal with the resilience concept for Germany is expected to pass parliament on February the twenty-first.
So we'll see what the outcome is. We'll definitely share information as soon as we have it and publish the final decision, clearly. So in light of these results and the criticality of the European market, we have, of course, to protect the viability of our business and also to make sure that we capture the growth opportunities, which for the time being, are in the US. The US plan that I have shown is a highly attractive investment in our opinion, for existing investors and of course, also new strategic partners. We or the US growth in return also would finance the R&D activities in Europe.
So this is, in our opinion, a no-brainer, that definitely works. The downsizing of Europe is a difficult decision, very clearly, but we will be ready to take this decision with immediate effect as soon as we have more knowledge, which cannot be waiting longer than by the second half of February. And more detailed number on the fiscal report or the fiscal numbers will be shared in March when we finally present the 2023 numbers. On the funding, I would also like to explain what we are anticipating on the additional funding. So we are in the need of about $450 million to complete our factory set up in the U.S.
We are working, this is not a secret, and we have communicated this also in the past. We are working on three different funding options. All three are debt-based. Number one is an export financing for the equipment that moves to the U.S. for the Goodyear facility, via an export financing covered by Euler Hermes. And the second option is a partial monetization of our 45X advanced manufacturing tax credits in the U.S., which we are working on and are currently also in very detailed discussions. And the third, same status, very advanced, and we have submitted all documents and are now in thorough exchange with the U.S. Department of Energy.
We are working on a DOE loan, which comes also with very preferred terms and interest rates of between 4% and 5% in the U.S., which is very competitive. These three options we expect to complete within this year. We have in addition the CHF 150 million cash end year. But the company is also considering additional equity financing, Rights Issue, or private placement in the near-term future. The reason behind is clearly also that whereas the funding options we are having, it's about the export financing is about CHF 100 million. The tax credit monetization could be around CHF 100 million as well.
The Department of Energy loan is about $200 million, maybe $220 million, and cash in the bank, plus also options, or additional down payments from our offtake customers, which we have partly received already. We believe that a rights issue on equity instrument is also needed here in order to make sure that we are meeting all timeline requirements, as we are currently putting a lot of equipment in the ground and in the US, and that needs the funding, and we have the most funding needs for CapEx in 2024, 2025.
And the second necessity also for such a stacked funding concept would be that, in case of teaming up with a partner, we believe there is a strong growth potential in the United States for additional capacity, which we would be able then to finance also together with a partner, ideally. And in order to be ready for this, we believe an equity measure is important as well. With this, I would like to close my remarks on the press release this morning and on the numbers, and I'm happy to take your questions. Thank you.
Ladies and gentlemen, so, we will begin with the question and answer session now. If you would like to ask your question, please press nine star on your telephone keypad. If you wish to cancel the question again, please press nine star again. So please press nine star now to say, state your question. The first question comes from Constantin Hesse of Jefferies. Please go ahead.
Hi there. Thank you very much for taking my question once again, after this morning's call. I think there's been a bit of a confusion since this morning around timing and funding, and now regarding the equity raise as well, Gunter. So when you say the word funding in the press release, so that's related to the five hundred and fifty that you mentioned last year. So that's basically you've already spent a hundred, there's four hundred and fifty missing to finish CapEx, to finish the U.S. construction. Is that correct?
Correct.
Okay, fine. W ith the 450, included in that, so you have the $150 million cash in the bank. That's one thing. Then you have the export financing at $100 million, so that's $250 million. You said the 45X credits would only be used as a later, as a last resort, more kind of. So the DOE loan would be $200 million, which puts us at $450 million already in cash. And you have prepayments from your off-takers over the summer, so that would take you north of CHF 450 million. However, so first of all, is that correct what I'm saying?
This is the right map.
So you wouldn't necessarily need to monetize the 45X credits, assuming that all of these debt facilities come to play?
Well, I mean, what you also should not forget about is that we have still a business in Germany, even though we are, we are considering to downsize it according to the announcement, but it's still there. So there, there's also cash needs for this.
Okay. So the question is, this morning, t he way that I understood the equity raise was that the equity raise was going to be completely associated with the signing of a potential partnership with some partner to drive growth via this new business model. However, now you're saying that the Rights Issue is needed in order to meet the timeline requirements of the U.S. CapEx. So is the private placement to fund future growth with this partner, or is this Rights Issue needed to fund, or basically as an emergency to fund this CapEx, the 2 GW?
So we have, again, to look into the timing here. So we have these funding needs, uh, spread over the next couple of months, primarily with most of the needs in H2 2024 and H1 2025, so kind of fade in, fade out. And we are, we have the funding requirements for in order to complete the entire build out to be secured. It would theoretically be possible to go with the debt tools only, but in order to make sure that we are not having any issue here in time, in terms of the completion of these debt tools, an equity funding would definitely secure the plans. Let me put it this way.
But of course, since we are on talks with strategic partners or industrial partners, the likelihood that this goes along with additional growth is also there. Because what we are trying to do here is that we turn the model into the business model into more of, in the future, an asset-light model, where funding of additional CapEx is also coming directly from these partners. And so therefore, it's for both, I would say, for securing the current plan, but also to be ready for any additional opportunity in the U.S.
Okay, understood. So in terms of timing then, you said that the export financing, you're in very final conversation, so we could see that coming at some point, Q1, Q2. Rights Issue would be next. You said it would be relatively, the last call you said a few weeks, then the DOE loan is expected in the second half, right?
Correct. The monetization, the 45X, that's also in the making. Again, if we need it, it's expensive, but it's definitely possible. The better way of using the tax credits is once the product has been produced, and then you sell the tax credit, for instance, then you can achieve what First Solar recently communicated to get $0.96 for the dollar, which is definitely the would be the better deal. But we keep that option available for us.
Okay, and then just lastly, just to be totally sure that I understand this, $450 million for the U.S., the need, why you need so much cash, is $450 million. You have to pay back the loan in Germany, EUR 70 million. You said that closing Germany would be another EUR 50 million to 70 million, so that's another EUR 100.
So the closing of Germany is not EUR 50 million to 70 million. The EUR 50 million to 70 million, what I said, relates to a potential transfer of the equipment to the U.S.
Oh, okay.
The closing of Germany is less. It's about if we have to fully repay the subsidies we received, it would be in the range of, you know, EUR 30 million +.
Okay. So that plus basically the losses that you still have to cover for continued operations in Germany, if the decision from the German comes. If the decision comes do you still go ahead with the private placement?
I would probably think . .
Thank you very much, Gunter.
Thanks a lot. The next question comes from Tobias Schulte, UBS. Please go ahead.
Hi, a lso here, a better understanding of the short-term cash position. You had around CHF 200 million cash burn over the second half, 2023, I just made a simple calculation, you had around CHF 350 million net cash first half and CHF 150 million end of second half. I assume that the cash burn will not change dramatically now in the first half of 2024. Y ou're running out of cash quite fast, I would say. Do you know the timelines of when the credit really can come?
That's a bit worrying me because, I'm not so sure if it's still some governments which are giving you money here, and how fast this can be grabbed on. That's the first question. The second question, are you going to do a placement or are you going to do an ABB placement of the shares? And do you need to go via the rights issue, and do you need to ask shareholder for it or you, or you have limited capital for doing that?
So we have to go to the shareholders to get approval on creating the capital first, so there's nothing left. So that would be a prerequisite. In terms of the equity instrument, there is options, but no final decision yet made. It depends also a bit on where we end up in this current strategy process we are running together with the investment bank to find the right partner or partners and what their appetite would be. So that's a bit contingent upon. As far as the funding is related, the math that you run is obviously correct.
Nevertheless, the majority of the cash needs, that's why I usually don't call it a cash burn, because we invest a lot in assets, primarily in the US. So that's the majority, and this is clearly also in terms of the cash flow, what requires currently the biggest amounts of cash to continue the expansion in the US. In terms of how the sort of funding options on the debt side are falling into place, I think I explained this, how we are expecting this to happen with the potential export financing coming first and a potential equity instrument next.
Then we have the option of the 45x, and finally, we expect in H2 to achieve the Department of Energy loan.
Okay. I assume you will, you will do this, these measurements, potentially also independently of what happens with the German support for the solar industry at the end. I know that you have disclosed the needs of the cash to build up the U.S. This is potentially a bit independent, or you will, you will have to do a capital increase anyway, and to get this funding. Okay, on the European export credit or German export credit facility, you have any idea on the timelines? I mean, are you able to get this money quite fast, or is it something which you cannot, let's say, clearly say?
Exact timelines, I don't want to disclose here, but clearly, this is a very high priority to achieve this as soon as possible. And, you know, discussions on that instrument have not started yesterday, but we are working on it for a couple of times now, which is true for all the other instruments as well.
That's right. But you get this money only if you decide to close European facilities?
That's correct.
This is, this is entirely independent. So this is, this is, not to move, equipment that we shut down in Germany to move to the U.S. This was always meant to, finance the, equipment we would, have sent anyways, to, Goodyear, Arizona, for instance, for the module facility we're currently building up. So this is, this is, this instrument also in the future, potentially for, for the Colorado Springs site.
Okay. And on the CHF 200 million I thought it's more a cash burn, because in this morning call, I thought you said that the majority of the- of this cash deduction was used, was due to the underutilization, not that much of CapEx expansion plans. Did I get it wrong or?
T his was my comment on the EBITDA. So I did w hat I did say is that as a large part t he loss f rom the loss, on the loss side, this was to come with it.
Okay. Can you give an indication on how much just the operation are burning cash, let's say? Or is, how difficult is it? Because you probably have inventory swings and so on, but t o have an idea, to have an idea of this CHF 200 million, maybe, or maybe let's phrase it differently. How much was related to CapEx expense?
It's in the range of CHF 100 million, about.
About CHF 100 million.
The second half.
That's it. Thanks.
Thank you very much. And there we have, Mr. Constantin Hesse from Jefferies again. Please go ahead, Mr. Hesse.
Thanks for the follow-up. Just a quick one. Gunter, so I think words are extremely important here. So you either need a capital increase or you don't. You're saying potential capital increase. I'm trying to really understand, because obviously, the dilution would be huge, so I'm trying to understand the risk of a capital increase. So you have the debt facility, which seems to be going quite well. You have the working capital assistance, the OE loan also seems to be going in the right direction. But you keep on saying potential capital increase. So is that something that you really need or not? Or is it going to depend completely on you signing a partnership with this future partner?
When I'm saying potential is, what I mean is that we, of course, need approval to do it, and, before we have the approval, it's nothing we can simply do. But, there is a requirement to do it. That's correct.
In order to de-risk the investment and the entire funding stack.
If you don't get the approval, you have a problem, basically?
That's true.
Okay. Understood. Thank you.
As there are no further questions, I would close the Q&A session now and hand back over to the speaker.
Thank you very much for the interest and whenever there are more questions, then please reach out to our IR and we can schedule you another call on a one-on-one basis. Thank you very much.
The conference is no longer being recorded.