Welcome to Eolus' quarter three presentation 2022. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question-and-answer session. If you wish to ask a question, please press zero one on your telephone keypad. I will now hand over the word to CEO, Per Witalisson, and CFO, Catharina Persson. Please begin your meeting.
Thank you for joining Eolus' Q3 presentation. We can start on slide number two with the key takeaways. We had net sales during our third quarter amounted to SEK 111 million. We had net profit of, or net loss, you should say, of SEK 11 million. The cumulative figures for the nine months are net sales of about SEK 2 billion and a net profit of SEK 75 million. We had a growth of portfolio of 415 MW during the third quarter. Over the last nine months, we had a portfolio growth of 4 GW.
During the quarter, no new transactions were announced, and that is the main reason for the low revenues and the net loss. The majority of the revenues are stemming from milestone payments received from our American battery storage project, Cald, and increased percentage of completion from the projects Stor-Skälsjön and Öyfjellet. Other significant events during the quarter was that we secured financing of SEK 1.5 billion with Swedbank and SEB, securing the funding of our business plans also if there would be a tighter credit market going forward.
We, uh, the most important deal that we were working on during the, uh, the quarter, um, and that resulted in a transaction, uh, in, uh, mid, uh, October, was that we signed an agreement to sell a 750 MW solar and battery storage project in, um, uh, Arizona, uh, in U-U.S. Um, we are in-investing heavily in, uh, projects, uh, according to the business plan and in, uh, employees to develop and execute these, uh, these, uh, projects.
Number of employees are increasing rapidly, and we have during the quarter also strengthened the Group Management Team with Magnus Axelsson joining as COO and Michiel Messing, the Head of Construction, who has been with us for some time, and Heléne Sebrén, the HR Director, also joining the Group Management Team. We've also strengthened our Baltic organization by appointing Inga Abolina as Head of Baltics. We have a solid financial position with an equity to asset ratio of 54% and a net cash position of SEK 400 million. We can turn to next slide, number three, please.
For those who may be new to Eolus, just a short introduction of what we are doing. We're a developer of renewable energy. We've been in the business since 1990. We're coming from the onshore wind side of the business since that has been the most mature and most cost-efficient technology. We have over the years built more than 660 wind turbines. We develop projects. We take them through permitting process. We do procurement and optimization of projects, and that is the point that's ready to build where we normally want to sell projects. We take them through construction and construct them there on behalf of our customers.
We hand them over to customers. We can also provide technical and commercial asset management services. We have as of today contract signed of more than 1.5 GW for asset management services for projects that are or will come online by 2023 at the latest. We have a total development portfolio of almost 18 GW now spread across the technologies onshore wind, offshore wind, solar and storage energy storage projects and combinations of these technologies.
We're active in the Nordic countries, the Baltics, Poland that we entered into during 2021, and U.S. where we have been active in the Southwestern states of Nevada, California, Arizona since 2015, and where we now just did our third deal in the country. Okay, we can go to the next slide number number. I want to highlight the selling of the solar and battery storage project in Arizona that we co-completed in October, so after the quarter. The first result from this project will come in our Q4 report.
We have been developing this huge project containing approximately 750 MW of solar and battery energy storage in a combination and the exact relations between how large the portion of the generating capacity of the solar PV will be compared to the battery storage component. It depends on what kind of revenue streams and in what portions our customer, the investor wants to capture and how they in the end want to design the facility. Roughly around 500 MW of solar PV and 250 MW battery storage. We have sold the project. We received a initial payment of $12 million.
We will be paid as the project advances and reaches some defined milestones where the next milestone is expected to come in during the first half of 2023. If the project will be successful all the way until operation, which we expect to happen during 2025, we estimate the total purchase price for Eolus to receive to be in the range between $104 million and $190 million. No components, no goods will be recorded in the Eolus books for this project. There will be a high margin from the revenues that we receive.
We can flip to page number five. Öyfjellet in Norway, our large 400 MW project in the mid of Norway with 72 turbines and an estimated annual production of 1.3 TWh, and with a PPA that is a power purchase agreement with Alcoa, the aluminum producer. In September, all turbines were taken into operation. After the quarter in the beginning of November, our customers have taken over the turbines, all turbines from the turbine supplier, Nordex.
Preparations for the final takeover are ongoing, and as of the end of Q3, we have recognized 90% of the expected revenues and the costs, and thereby also margin for the entire project. Which means then that we have 10% remaining of the revenues and cost and margin to account for in that project. Of course, we're aiming to close out the final topics with the investor as soon as possible now when all turbines are in operation. We will move on to next slide, number six, please. This Skällberget project where we sold all our stakes during Q2.
We have a construction management agreement with the customers, so we're constructing the project on behalf of them, and we recognize revenues according to the percentage of completion method for the project. Construction is ongoing. Construction is going well. We expect to complete all the foundation works during November. Turbines will be delivered during the summer 2023 and erected during the summer and the beginning of the autumn 2023. We expect completion of the project late 2023. Also for this project, Eolus will provide technical and commercial management services for the wind farm for the coming 15 years.
We flip to page number, uh, seven, uh, showing our total project, uh, portfolio of almost 18 GW. Uh, we now have less than half of the, uh, total, uh, portfolio being onshore wind. We have 4,500 MW , um, offshore wind and, um, some upcoming projects, uh, that we're working with that we will, uh, take into the portfolio during, uh, Q-Q4. And of course, since offshore projects are much larger, uh, it adds to, uh, quickly to the, to the total, uh, po-portfolio. But it's also interesting to see how quick the, uh, solar PV, um, project portfolio has grown, that we have now almost 4 GW of PV projects in, um, uh, I would say all our, almost all our, uh, markets where we are active.
Of course, solar is really big in the Southwestern U.S., as I mentioned, the states of sunny California, Arizona, and Nevada. We now have also, for instance, 114 MW of permitted projects in Sweden, which are ready to construct as soon as we can have grid connection for those projects. We have 2 GW of energy storage projects. Going forward, we see an increased need and increased interest both for standalone storage projects and also that it's needed for as combinations of technologies to supply the market with more steady power and to support grid stability, for instance.
Half of our portfolio is located in Sweden, and 1/3 now is in the U.S. We go to slide number eight showing our late-stage portfolio that is projects that are with legal force permits or close to legal force permits and projects that we can start or the sales process or where sales process are ongoing. What has changed in this portfolio is, and that is of course interesting to follow to evaluate the midterm success for Eolus, I would say. The project number five, Siggebohyttan, in early November, we received final legal force permit for 12 turbines.
That figure of megawatt will double more or less in the next report. We're starting up now to see how we can realize that project. We have also, since the last report, got positive statements for the Dållebo projects number six and number seven. Late June, we acquired an increased share of the Fageråsen project number eight. We've also now added the first Swedish solar PV project, Skåramåla, as number nine. We're advancing with number 11, the Pienava project which will be the first project to be built in Latvia, where we have now applied for a grid connection.
I have already mentioned our large Arizona solar PV and battery project that we managed to do a deal on in October. I could also mention number 15, Pome, that is our next standalone battery storage project in San Diego, U.S. We flip to page number nine showing our ongoing construction projects. I have already mentioned Öyfjellet and Stor-Skälsjön. We have the small Timmele project, but the most interesting here is the number two, Skällberget-Stjärnås and Skellefteå project where the sales process is ongoing and we have started construction. We have constructed roads and most of the foundations and the turbines is expected to be in operation during the autumn or late 2023.
I hand over to our CFO Catharina Persson to comment from slide number 10.
Hi everyone, and thank you, Per. I will guide you through Eolus's third quarter financial information and highlight some of the figures. The third quarter includes from first of July to end of September, and we can start on slide 10. Net sales was SEK 111 million, and in comparison to the same period last year, the net sales decreased by SEK 580 million. The lower net sales is due to lower degree of completion in the ongoing constructions. Revenue recognition from projects under construction is included regarding Öyfjellet and Stor-Skälsjön. Öyfjellet had a current degree of completion amounting to 2% and Stor-Skälsjön 4% for the third quarter. At end of September, all 72 turbines in Öyfjellet were commissioned.
Total degree, as Per said, amounts to 90% of the project, and preparations for handing over the project to the customers as a final step are ongoing. When it comes to Stor-Skälsjön, that has contributed with degree of completion of 4% and is referring to the construction of the roads, hard stands and foundations. This part of the construction is on time and will be ready before end this year. We're now planning for receiving the turbine components to site, and that will start during the second quarter 2023. Total degree of the completion amounts to 22% of the project end of September. Eolus and Hydro Rein are jointly constructing the wind farm on behalf of the customer. However, Eolus only recognize revenues and profits for our part of the construction management agreement of 51%.
The wind farm is expected to be completed late 2023. Revenue from the development service agreement for the battery storage project Halland, related to its achieved predefined milestones, has also contributed to the net sales and result for the quarter. Eolus's operating profit during the quarter was -SEK 8 million and almost in line with the same period last year when the operating profit was lower. Other external costs for Eolus are increasing and expenses for employees are also higher, but that's in line with our expectation for this function. The average number of full-time employees for the quarter was 72, compared with 52 for the same period last year.
Net for financial items for the third quarter was - SEK 3 million, and the same period last year, the financial items net of that was - SEK 5 million. These items are mostly referring to interest and other financial costs. During the quarter, Eolus has entered into new credit facilities with Swedbank of total SEK 1.2 billion, and also increased the credit facilities with SEB to SEK 300 million. These agreements, Eolus has secured financing for the expansion for the next four years. It includes financing under construction phase where Eolus is responsible and financing growth of the project portfolio and also secure good liquidity in the daily operation.
Net profit or net loss for the period was SEK -11 million, whereof all net loss of the SEK 11 million is related to Eolus shareholders. That could be compared to SEK 3 million for same period last year as well as profit. We can go to slide 11 where you have a balance sheet for Eolus Group. Total fixed assets amount to SEK 135 million end of September, and that's to be compared with SEK 70 million September 2021. Increased amount is referring to the expanded interest in Fageråsen, which we announced during the second quarter and also deferred tax assets. We have inventories and work in progress of SEK 656 million and advanced payments to suppliers SEK 171 million.
These items are depending on project development and at what stage the projects under construction are in. We have cash amounts SEK 723 million end of September, and that was almost the same as last end of September 2021, when the cash amount was SEK 726 million. The cash amount of course, is affected by ongoing construction and project development. Total assets amount SEK 1,880,000,000 , and that is almost the same as end of September 2021. If we go to equity, we have total equity of SEK 1 billion, whereof equity of SEK 59 million is related to minority stakeholders. We have interest-bearing liabilities of SEK 322 million, compared with SEK 194 million the same time last year.
The new facility agreement with Swedbank and Sjätte AP-fonden for coming four years means that interest-bearing liabilities have been moved from short-term to long-term liabilities. If we go to the next slide, number 12, there we have divided the net sale into the two segments that Eolus is reporting. The first one is project development, and the net sales is SEK 105 million, and operating loss of SEK 11 million. Net sales for the second segment, asset management, was SEK 7 million and an operating profit of SEK 2 million. As we go on, we have the profit per share for the third quarter that was SEK -0.35 related to the shareholders. We have equity per share of SEK 38 compared to SEK 40 in the third quarter last year.
We still have a strong cash position with net cash of SEK 401 million. We are continuously ramping up the number of employees to match the targets set out in the business plan for 2022-2024, and average number of employees for this quarter was 72. We have order backlog of SEK 682 million, and the sum for the order backlog is lower, and that depends on that the contracts with Stor-Skälsjön Wind Farm are signed directly by the project company that we have handed over. I want to highlight that this kind of structure of this construction means that no cost of goods will be recognized in Eolus's income statement. The remainder of Eolus's estimated revenues from Stor-Skälsjön is related to the construction management agreement.
And we have asset management assignments of 882 million in megawatts. And Eolus has a strong balance sheet with an equity ratio of 54% , and this means that we have a strong foundation for the future. On next slide, number 13, we have the projects under construction. You have the degree of completed on the right side. Uh, we have total 786 MW , uh, including 100% of [Stilhavsen], uh, were under construction end of September, and only project Ävelsö and [Stilhavsen] had a degree of completion. Uh, revenue recognition for the rest of the projects under construction will start, uh, when the agreement with customers are signed and when pre-defined construction milestones are achieved. And then I hand over to Per again.
Thank you, Catharina. We turn to slide 14, other highlights. It's obvious we have the COP27 conference ongoing in Egypt. It's obvious that needs for renewable power at affordable prices are really huge, and we are ready and well-positioned to do whatever we can to support the transition. We have a new government in Sweden. Energy is one of the government's top priority topics. We note that the government is addressing a planning target for Swedish electricity production of 300 TWh until 2045. That means that electricity production should double until then.
We also need to consider that about 80 TWh of yearly production also will be taken out of operation during that time until 2045. That means that we have to add 10 TWh per year each year from 2023 to 2045 to reach that target. The government is stating that they want to introduce a fast track for new nuclear, but we really need fast track for all new fossil-free production to support industries and consumers with carbon-free electricity to affordable prices. The government is also stating that they intend to give an updated instruction to the TSO, Svenska kraftnät, regarding financing of the grid connections for offshore wind farms.
Most of our Swedish offshore projects, they are already planned with onshore grid connections since they are located quite close to the shore, and we have all the way calculated that the project itself would bear the cost for grid connections. We don't expect that them to be that affected if the government would change the directive to Svenska kraftnät regarding that. Of course, it could affect some of the larger offshore projects located further out to the sea, but it's too early to draw any conclusions about that yet. We're moving on with the development of all our projects.
We're pleased to note that we have got permits for our first three solar PV projects in Sweden, and that our first solar project have moved into late development in Poland of just 1.5 year after we entered into the market. We're moving on now to co-construct and sell that project as soon as possible to have our first footprint in Poland. We also have received positive development notices for our early-stage offshore projects, Wellamo and Tuulia, in Finland, so we expect to add them to the offshore portfolio in Q4.
I mentioned already that the sales process for the projects, Skällberget/ Utterberget, Tjärnäs and Rosenskog are ongoing and that we are investing heavily in people and projects. We have reached a number of 93 employees by the end of the third quarter, and we expect to be around 100 employees at the year-end. I also mentioned the project Siggebohyttan, which will be almost double this capacity when we're adding the additional turbines that got permitted. Finally, we are also pleased to see that our focus on sustainability is recognized, and we note a significant improvement of the Sustainalytics ESG ranking of Eolus just have been published. With that, we turn to final slide number 15.
I want to thank you all for listening in, and we're opening up for questions. Thank you.
Thank you. If you wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from Hanna Forsgren from ABG. Please go ahead. Your line is now open.
Hello, Per Witalisson. Hanna Forsgren from ABG. My first question is about Öyfjellet. Can you tell us a bit more about the completion of Öyfjellet?
The turbines is under the customer's control, but it's still just 90% completed. I'm wondering what is left to do before completion. Could you tell us a bit about the risk that could lead to a completion later than next quarter?
Yes, that's correct what you state, Hanna. The contract regarding the turbines has always been between our customer and the turbine supplier, and the customer has taken over all turbines and all are in operation. We always have quite cautious degree of completion because it's at the end where you really know how the project will turn out. All turbines are in operation. Some remaining snags need to be fixed and regarding both the turbines and the roads and et cetera. We expect to close it as soon as possible.
We haven't given any guidance. We don't expect any major financial impacts from that closing of the project.
All right, thank you. You have 5.8 GW of 7.9 GW in the U.S. Could you tell us a bit more about the market in the U.S. and a bit about the long-term strategy?
Yes. We've been in the U.S. since 2015. We've done three deals. So far we're building up the portfolio, and the market is really booming, especially now since the summer when the Inflation Reduction Act was introduced, meaning that almost $400 billion will be invested into renewables by federal money, so to speak, mainly as tax credits. Our idea is to focus on both wind, solar projects and energy storage and combinations, whatever serves the market the best, and to develop projects and sell at ready-to-build status, not to take on construction risks ourselves, but to manage construction on behalf of investor.
The main revenues would then come from selling of projects and normally we get paid in milestones of how the project and the construction of the project develops. It's a really important market for us over the coming years, and it's really important for us to realize our goals both in the current business plan and in the long term.
Thank you. My final question is, maybe I missed it, but I'm wondering when will you start construction of Skällberget/ Utterberget, and Tjärnäs? When could we expect to see revenue recognition from this?
Construction has started.
Construction has started. All right.
More or less completed the roads and most of the foundations. Revenue recognition, both as sales of the shares of the project company and from the percentage of completion during construction, will start as soon as we announce the sale of the projects. Sales process is ongoing.
All right. Thank you. That was all for me.
Thanks.
Thank you. The next question comes from Mattias Ehrenborg from Redeye. Please go ahead. Your line is now open.
Hello. Thank you. I hope you can hear me.
Yes.
Okay, excellent. Okay. I have two questions, and the first is regarding the solar PV and battery storage project of 750 MW in Arizona that you divested earlier in October. You mentioned that you have received an initial payment of $12 million and that the total consideration could amount to $104 million-$190 million in 2023-2025. I'm curious to know what the remaining hurdles or obstacles are before you can start construction. What type of costs and investments you still have in this project to get a sense of what investors and analysts can expect regarding the profit potential and the remaining cash flow of the project?
Yes. For the initial payment, we received, as you say, $12 million. From that, of course our costs for development the project up to the status where we sold it will be deducted. Going forward, we have no responsibility for the construction, for the cost or of the construction. Our costs will be quite limited going forward. We are dependent, of course, of that our customer, the investor, moves ahead, makes their investment decision that they sign, for instance, grid connection agreement, start construction of the project and final milestone is tied to the completion of the project.
If all goes according to plan, we could expect a high margin for the project.
Okay. High margin, is it possible to quantify that a bit? I mean, you have them around, historically, you have earned around 10%-12% gross margin on your onshore wind power projects. If we take all the CapEx into consideration as well, is it possible to have a comparable figure for this type of project as this is your first?
It's a completely different deal compared to the figures you're mentioning since we will have no cost of goods through our books for this project. Since the project is in quite early stage and we're dependent on the investment decisions from our customers, we haven't made any guidance for margin yet other than said that it will be high and that we will have no cost of goods through our income statement.
Okay. Understood. Thanks. My next question is regarding your offshore project portfolio here in Sweden. You pretty much already answered this question in your pre-presentation, actually, but I'm gonna ask it anyway, and hopefully you can shed some extra light on this. As you mentioned, the new government in Sweden seeks to reduce subsidies related to grid connection costs for offshore wind projects. How would you say this will affect your Swedish offshore project portfolio in terms of CapEx and profitability? Because as you touched upon and as I have previously understood it, your projects in Sweden are quite close to the shore and in relatively shallow waters as well, which is a positive. Could you elaborate a bit?
Yes. Our three most advanced Swedish projects, being Västvind, located outside of Gothenburg, Hollandsbjär in Öresund, close to Malmö, and Blekinge offshore in the southeast of Sweden, they are all quite close to the shore in shallow waters and have all the way been planned with grid connections onshore. We have always expected that these projects should pay directly for the grid connection. That is one of the main advantages by having projects close to the shore, that grid infrastructure is cheaper. The other is, of course, if it's shallow waters, it's cheaper to construct foundations. At least these projects, we do not expect that there would be any major impacts of.
Okay. Very good. Thank you. A final question from me. I'm just curious to hear your thoughts on this. I mean, the new government, which is clearly more pro-nuclear power and less pro wind power than the previous government, would you say that this has increased the political risk in Sweden, which has previously been considered quite low from investors' point of view? Because I suppose this could have an effect of cost of capital of your customers, which in turn could affect your profitability on new projects. Could you just elaborate a bit on that?
Yes. We take permitting risk normally, so it should not affect the cost of capital for our customers, I would say. Of course, changes in systems, it's such a capital-intense industry. All energy investments are, so it's very much dependent on long-term stability, regulations. We hope that all parties in the Parliament will realize the need for long and stable conditions, not only for wind, but for all production methods, if we should be able to meet the needs and demands from the industry with double electricity production until 2045.
Okay. Thank you, and thank you very much for taking all of my questions. That was all I had. Thanks.
Thank you, Mattias.
Thank you. No more questions from telephone conference. I hand over the word back to Per and Catharina.
Okay. Just we want to thank you all for listening in and for the questions, and we wish you all a nice day. Thank you. Bye.
Thank you. Bye.