Welcome to the Eolus Q4 2024 earnings call. For the first part of the conference call, the participants will be in listen-only mode. During the Q&A session, participants are able to ask questions by dialing #5 on their telephone keypad. Now I will hand the conference over to the Speaker CEO, Per Witalisson, and CFO, Catharina Persson. Please go ahead.
A warm welcome to this presentation of Eolus' results for the fourth quarter of 2024. Your presenters today will be myself, Per Witalisson, CEO, and Catharina Persson, CFO. Eolus is a leading pure-play developer shaping the future of renewable energy. We are positioned to take advantage of structural growth in renewable electricity demand resulting from the worldwide megatrends of electrification and decarbonization. We apply our asset-light business model to create value efficiently in every step of developing our diversified portfolio of wind, solar, and battery energy storage projects across six markets with a portfolio of 26 GW. Major energy investors trust our 35 years of proven experience delivering and optimizing market-leading energy assets. Sound financials give us the stability we need to take sensible risks in a cyclical sector. I will begin with a walkthrough of the Q4 highlights and give an update on our portfolio.
Catharina will follow with a closer look at the financials. I will then conclude the presentation with our view on the near-term outlook before we move to the Q&A session. The fourth quarter of 2024 was our second-best quarter so far in Eolus' history. The full financial year 2024 was also our second-best year to date, with SEK 851 million in net sales and SEK 155 million in net profits, just coming up behind the record-breaking year that we had in 2023. The main driver was, of course, the SEK 705 million milestone payment received for Centennial Flats, a hybrid solar and battery project in Arizona that we have developed since 2019, and where we received a significant milestone when the project now progressed to the construction stage. For me, these results really underline the fundamental strength of our diversified positioning across multiple technologies and markets.
Even in the year when the market has slowed down in Europe for both onshore and offshore wind, we leverage our solar and battery projects in the U.S. to deliver fresh capital to recycle into new projects and a solid distribution of value to our shareholders. The board has decided to propose a SEK 2.25 per share dividend for 2024 to be decided by the annual general meeting that will be held in May, and the dividend remains unchanged compared to last year. Turning to our portfolio, we now present it in a slightly different view this quarter to increase visibility about how our portfolio is split between markets and technologies and to give a better visibility on what to expect from Eolus over the coming years. During the quarter, the portfolio size decreased by 1%, equaling 371 MW.
In this slide, it's clear that our strong portfolio growth in the past strategy period from 2022 to 2024 means that our portfolio skews to the early development stage. We will focus a lot to mature the portfolio, bring it through the development stage to construction and transactions. Still, we have close to 2 GW in the late development stage and roughly 0.5 GW under construction with a good spread across technologies. In a different cut, we see that the spread across markets and stages of development. Sweden and the U.S. have most of our late development projects and are also our largest markets with about 11 GW and 6 GW, respectively. We also have some good volume under development in Finland and Poland, while we're also progressing at a good pace in Latvia and building up a presence with one good wind project in Spain.
I would like to highlight a few prioritized projects coming up in the short term. We have a solid pipeline over the 2025 to 2027 period, and the first transaction, the Pome deal, has already been signed, and I will get back to that shortly. The Swedish wind projects, Fågelås, Boarp, and Dållebo, are currently also under construction and with ongoing sales processes. Next upcoming projects are the Roccasecca battery project in Nevada, U.S., the Swedish wind project Ölme, and the Latvian project Pienava. That is our first project in that country. These projects are in active commercialization phase, and we are making good progress. We expect all these projects to be ready to reach start of construction during the second half of this year. I should mention also that the Fågelås, Dållebo, and Boarp project and the Pome projects are in quite advanced stages already of construction.
Our Finnish project, Murtomäki 2, is a good-sized onshore wind project in Finland with the possibility to add solar PV, which will likely also reach ready-to-build status during the second half of 2025. Looking a little further ahead, some selected projects, Fageråsen and Siggebohyttan, are both Swedish wind projects that are estimated to reach ready-to-build status during 2026, while Marbäck, a very good Swedish wind project, will hopefully reach the late development stage during 2026 as well. I'm very excited about this lineup, and I look forward to updating you on these projects and others as we make progress. Turning to the Pome battery project, we reached an agreement regarding the sales of the project in the beginning of January. This is Eolus' fourth sales transaction in the U.S.
We've been in the market since 2015, and now with a really proven track record that we can both do transactions and develop and sell projects within the different techniques of onshore wind, solar PV projects, and battery energy storage projects. It's a 100 MW project with 400 MWh, so four hours' duration, standalone battery energy storage projects located outside of San Diego. The enterprise value that we have announced is in the range between $230 million and $235.5 million. The reason for the range is that there is a base purchase price and that there are some potential earnouts that we can achieve. The construction is well advanced. All systems are delivered, and we are planning to energize the facility shortly and to meet the requirements to close the deal with our customer during Q1, when revenue recognition will start.
After going through the portfolio and the status of our highlighted projects, I just want to remind you about the fundamentals of our business models. We develop projects through origination and development, increasing value and decreasing risk along the way. We strive to be asset-light and sell projects with all rights, permits, plans, and tenders secured near the final investment decision at ready-to-build status. Sometimes, like with the Pome, Fågelås, Dållebo, and Boarp, we deviate from this model and proceed through construction on our own balance sheet before selling, since we think we can realize higher value by selling the assets during construction or as turnkey assets. If we sell at financial investment decision, we normally manage construction on behalf of our customers who carry the major CapEx investments during construction. At commercial operations, we start to offer our asset management services to the assets' owner.
These are services mostly appreciated by financial investors that do not want to build up their own operation departments. Please keep this model in mind as you consider our upcoming milestones and future revenues. Next, I will go through our financial goals, starting with a review of the outcome of the 2022 to 2024 period. We are doing business plans for three years ahead, so we have come to an end of this strategy period. That is why we are communicating also new financial targets in this report. We grow our portfolio significantly over the period by about 10 GW in total. We also achieved financially our two best years so far in 2023 and 2024. Nevertheless, we did not reach the target for sales volumes in megawatts.
Due to our rebalancing and shift from volume and megawatts to focus on quality and euros, the board has decided to remove the future-looking megawatt sales goal in the new period. We did, however, achieve each of our three other goals, delivering a healthy average return on equity of 19%, consistent equity-to-asset ratio of about 30%, and dividends paid out in line with the goal each year. For the 2025 to 2027 business plan period, we have a new target of achieving SEK 1.4 billion in total EBIT over the three years. We raised our return on equity target to 15% on average for the period. Our equity-to-asset ratio goal remains the same. That is our long-term dividend goal. We should always secure an efficient capital structure.
For instance, share buyback programs and other tools could also be used to achieve that and to balance our capital structure and make sure that it is efficient over time. To achieve our new goals, we will focus on prioritizing high-quality projects and drive them through development, successful sales, and construction. This is, in essence, a rebalancing of the strategy from volume to value. I will now hand over to Catharina for a walkthrough of our financials.
Thank you, Per and hi all. As Per mentioned, the fourth quarter was our second strongest to date, with a significant increase in net sales and operating profit, yielding earnings per share at SEK 1,267 and closing out the year with a 38% equity-to-asset ratio. Net sales were SEK 729 million, and that is higher compared to Q4 last year when we had net sales of SEK 155 million.
During the quarter, Eolus received a milestone payment of $64.7 million for the solar and battery storage project Centennial Flats in the U.S. The milestone has contributed with SEK 564 million to the operating profit in the quarter. We had an operating profit for the quarter of SEK 437 million compared to SEK 99 million in the same quarter last year. The main reason for the increased operating profit is the milestone payment received for Centennial Flats. Expenses for Eolus Group are SEK 17 million higher compared to the same period last year and a result of the expansion for business plan 2022 to 2024. Net from financial items for the quarter was minus SEK 4 million compared to minus SEK 5 million for the quarter last year.
Except for received and paid interest, the items have been impacted by reevaluation of positions and loans in other currencies than SEK. Net profit for the period was SEK 315 million compared to SEK 71 million same quarter 2023. The difference in net result compared to the quarter last year is mainly explained by the milestone payment. Tax related to the milestone has been reported in the quarter. The fourth quarter 2024 was particularly strong, but it is important to remember that our earnings vary widely between reporting periods, which is evident in this slide. This is due to our developer business model, where revenues mostly derive from very large project transactions. Additionally, for a project that is divested before or under started construction, we recognize revenue for the construction management based on degree of completion.
In 2021 and 2022, we had progressive revenue recognition based on degree of completion for several concurrent and divested projects, as you can see. This quarter, we are presenting the balance sheet more graphically. This is to underline the size of Project Pome in relation to our balance sheet. If you look at the green sections of the bars on both asset and liability sides of 2024, you will see the volume, which is referring to Pome and will be removed off our books once the Pome transaction is closed. That is expected to happen in Q1. Total fixed assets amount to SEK 320 million, and out of those, SEK 220 million are due to specific land lease agreements for Pome and referring to future payments according to conditions in the agreements. When Pome is handed over, fixed assets will be reduced with the same amount.
On the debt side, non-current liabilities also include SEK 220 million referring to future payments for the land lease agreements and will also be reduced when handing over the project. In order to clarify the item work in progress and projects under development, we have now divided them into projects under construction and projects under development. Comparing figures have been changed. Projects in the portfolio are continuously under evaluation based on possibilities of realization, market situation, grid connections, and permitting. In this fourth quarter, we took write-downs of projects amounting to SEK 62 million. Investments in other projects in the project portfolio during the quarter have also contributed to increased project under development compared to the fourth quarter last year. We had cash of SEK 356 million end of December 2024, and that is to be compared to SEK 575 million end December 2023.
The lower cash amount is due to financing of the ongoing constructions and investments in project portfolio and overall financing the running business. Total assets amount to approximately SEK 4.5 billion, of which approximately SEK 1.1 billion in the projects under construction relates to Pome. We had total equity of SEK 1.1 billion. When it comes to interest-bearing liabilities, that amounts to nearly SEK 2.4 billion comparing to SEK 692 million end December 2023. That increase in interest-bearing liabilities is referring to loans to finance constructions. Regarding cash flow, I can point out that net cash flow from operations amounted to SEK 422 million compared to SEK 82 million last year. Cash flow from operating activities was net minus SEK 257 million due to minus SEK 679 million in adjustments of working capital as we invested proceeds into projects.
Cash flow from investing activities increased with SEK 184 million. That gives us a cash flow for the year of minus SEK 73 million compared to SEK 403 million, also a negative amount for Q4 2023. Cash equivalents end of the year amounted to SEK 356 million. Regarding projects under construction, 456 MW was under construction end December 2024. So far for now, with degree of completion of total 94%, and the remaining revenue recognition that is 6% is expected to be accounted for in Q1 2025. We still estimate that the delays will not have a negative impact on Eolus' margin. The rest of the ongoing constructions, the Boarp, Dållebo, Fågelås in Sweden, are on budget and timeplan. The recognition of revenue reported as net sales for these projects will start once the projects are divested.
I'll hand it back to Per now for a comment on the outlook.
Thanks, Catharina. Just to finish off by underlining what we are focusing on in the near term, we had the close of the Pome battery energy storage sale expected in Q1 with a $230 million-$235 million enterprise value. This will lead to a significant reduction of the balance sheet also. As Catharina mentioned, we're looking to complete the Stor-Skälsjön wind project with an agreement with both our customers and the turbine supplier. There is a final construction revenue recognition with 6% remaining. That will also trigger the start of the asset management services that we will provide to our customers for these 42 wind turbines. We have the ongoing sales process for Fågelås, Boarp and Dållebo .
The Pienava project in Latvia is progressing well, where we have started up the sales process. That is the same for the Ölme onshore wind project in Sweden and for the Roccasecca battery energy BESS project of 125 MW. Finally, before proceeding to Q&A, I want to mention that we will distribute a very short survey via email to the participants of today's call. The purpose is to improve our investor communications. Your feedback is very valuable, and we hope that you are able to take a few short minutes to respond. Thank you all for listening in, and we will now proceed to the Q&A session.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.
The next question comes from Lara Mohtadi. Please go ahead.
Hi, Lara. I'm from ABG. As you know, the offshore wind industry has been facing some headwinds recently, both in Sweden and, as you mentioned in your report, in the U.S. I just wanted to ask you a bit about your long-term view on offshore wind projects for Eolus given the recent events.
Yes. Thanks, Lara, for the question. Our long-term view is that a lot of offshore wind will be needed in most markets to face the challenges and to meet the electrification targets. In the near term, it is needed support for the project, both political support and some risk sharing. We do not have any offshore projects in the U.S. portfolio at all.
When it comes to our Swedish projects, we develop at a slower pace to preserve values in the projects and to have control over the timing.
Yes, thank you, very clear. My second one is on your onshore projects for Fågelås, Boarp and Dållebo . You mentioned that the expected COD is in the second half of the year, but when can we actually expect them to be divested?
We are in the sales process in some quite advanced negotiations, it is definitely a slower market currently. We definitely expect to sell them before COD.
Thank you very much. My final one, I just wanted to ask a Roccasecca. It is quite a similar project to Pome. Are you planning on constructing the project for the customer similarly to Pome, or what is the plan?
We prefer to stick to the asset-light model of selling the project rights and potentially construct on behalf of the investor, then financed and have the construction financed by the investor. We must see a clear upside when it comes to profitability to take on that construction risk.
Okay, great. That was all from my end. Thank you very much. Thanks.
The next question comes from Örjan Rödén from Carnegie Investment Bank. Please go ahead.
Yes, hello everyone. I'll continue with Roccasecca. I know it's very hard to have a very strong view on the political landscape, but in your view, is there anything that is indicating that it could be harder today relative to what we expected, let's say, three months ago, or do you really think that the sales process should be as smooth as you expected before?
Of course, the geopolitical risk has increased across the globe. I would say, if we take it more generally to start with, we have still a positive view on the American market and our portfolio there. We see a large interest for both this project, the Roccasecca project, and others as well, and an interest from banks and investors to participate in the projects. This is also a purely grid project since it is a standalone battery project. We sometimes hear the president doing speeches against renewables, especially wind, and certainly about offshore wind. What has happened is that there has been a pause in leasing out federal land to renewable projects, but that does not affect a project like Roccasecca. We have a lot of projects on privately owned land and also land that is owned by the different states.
Okay. Okay, thank you.
Some of my questions have been answered. If you look at Pienava, how do you view the market for renewable projects in the Baltic states right now relative to, let's say, Sweden?
They are small countries, the Baltic states, with quite low consumption. Both Pienava and our upcoming next project, Valpene, they are large projects compared to the size of the countries, which affects what investors can invest in those countries. There is definitely a higher risk compensation needed to invest in those countries. There is also, on the other hand, they have decoupled from the Russian electricity system, also now physically. There are strong incentives to connect the grid and the market through Finland, the Baltic states, and to Poland.
Okay. Thank you very much.
Thanks.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
Thanks for those questions. We will now turn to the written questions in the chat. Harald Cavalli- Björkman, Investor Relations Manager, will read the questions and will try to answer them as good as we can. There are several questions, and if we cannot answer all of them in this call, we will get back to you in writing.
Thank you, Per. Hello, everyone. First of all, there are a couple of written questions that have come in that I'll summarize in one. Have you considered launching a share buyback program during 2025? What is the board's view on buybacks compared to dividends or keeping money in the company?
Yes, there is an existing mandate for the board to launch a share buyback program. That hasn't been used so far during the year. It's, of course, up to the board, but I would say it's reasonable to think that the board will ask the general meeting for a similar mandate for this year as well. We have the dividend policy saying that distribution should be first-hand through dividends and that in the range of 20%-50% of profits. That means also then that we are willing to invest 50%-80% in growth and in projects if it makes sense in a way that it supports our return on equity targets. It's, of course, always a balance.
The reason for the current share buyback mandate not being used is, I would say, mainly related to the capital deployed into the construction projects and the currently quite high net debt position that will shift a lot when the Pome transaction has been completed.
Thank you, Per. One more question now relating to Pome. Can you please provide more details? This is asked by Jerker Danielsson. Can you please provide more details on what kind of requirements that remain to be fulfilled before you can close the Pome deal?
It's to reach a certain level on the construction of the project, and then it's related to more normal closing conditions. It's quite a lot of detailed regulatory approvals for the incoming investor that needs to come in place. Also for the tax equity investor to have all conditions met.
Thank you. One question from Axel Lindberg.
Does it make sense to build wind power in SE2 and SE1 at all going forward? It seems like the profitability might be much, much better in the Baltics or SE3 or SE4 for that matter.
Yes, we currently have significantly lower power prices in the north of Sweden in price areas SE1 and SE2. It's all dependent on how the consumption will grow when the large industrial electrification projects will be carried out. We have therefore focused a lot in the recent years in project development in the south of Sweden and the other markets that were mentioned. For projects in SE1 and SE2 currently, I would say that they must be combined then with an offtake agreement for electricity long-term, probably by bilateral agreements with a large electricity consumer.
Thank you. I believe we've covered all the written questions at this point. Handing it back to you.