Welcome to the Hexicon Q3 2024 report presentation. For the entire time of the presentation, participants will be in listen-only mode. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to Speaker CEO Marcus Thor. Please go ahead.
Good morning, everybody, and thank you for tuning in and listening. I'm here today to provide an update of our business in relation to us this morning releasing our Q3 report. My name is Marcus Thor, and I'm the CEO of Hexicon. Very much welcome. What I'll do today is to go through a couple of items. I will start to give an update on the floating offshore wind industry, both from a global perspective, but also touch base on Sweden, where there's a lot that has happened over the last period. I'll present a brief on Hexicon before going into the highlights over the last period, which for us has been a lot about our project over in South Korea, MunmuBaram, and then I'll end by looking ahead. So let's get to it. To start off with, floating offshore wind, an industry that has enormous potential.
To recall what I've mentioned a few times previously, the way we look at it, the basis for the enormous potential of floating offshore wind is that most offshore wind areas, from a global perspective, are in deep waters. Now, by the end of 2023, there were 270 Megawatts of floating offshore wind installed globally. Just to put that in perspective, compared to bottom-fixed offshore wind, which is around 75 gigawatt, so 75,000 Megawatt, it's a huge difference. This acceleration of deploying floating wind has been delayed over the last couple of years, and the sentiment of the industry. What we're seeing today now in forecasts is that this acceleration of the installations of offshore wind will really take off towards the end of this decade. That will be led, as we see it, by Europe and Asia.
Now, looking at Sweden in particular, a lot has happened here, so I will start to note what happened on November 4th here, when the Swedish government rejected 13 offshore wind projects in the Baltic Sea, so basically, all applications and all projects that were in the Baltic Sea south of Åland were affected. For us, that meant that two of our projects that were in Sweden developing under the brand Freya Offshore, together with Mainstream Renewable Power, were also affected. Those are the two projects, Cirrus and Dyning. Now, this was quite the drastic measure. It was a measure that none of us ourselves, nor our industry colleagues, were given a heads-up upon, and I think there's a lot of things to reflect on this.
One thing that I will conclude is that Sweden is in no way unique in needing to make sure and prioritize that our defense ability is not jeopardized. Where we are unique, however, is in taking such drastic measures like this against the entire offshore wind industry for a complete region. There's a lot of examples in a lot of other markets around the globe, both near us and further away from us, that are developing offshore wind in synergy with defense strategies. However, on the more positive note, I have to say, is that Sweden and the government approved the first-ever floating offshore wind project, which is our neighbor on the West Coast, Poseidon, which is developed by Vattenfall. That's a very good signal, because that's the first time we've seen floating offshore wind being awarded.
The whole West Coast is large areas of high electricity need with very deep waters. What also happened, which was made public by the energy minister herself, is that on November 19th, there were a number of developers, including ourselves, that were invited to discuss offshore wind with the Swedish energy minister. I was part of that meeting together with a lot of industry colleagues. I can just conclude that it was a constructive meeting. My view of the Swedish offshore wind market, although it's a longer-term market than some other markets, I remain optimistic. We have challenges, but the fundamental power need in certain regions are such that it can only be satisfied by offshore wind during the time that it's needed. Not the least, again, looking at certain regions, including the West Coast of Sweden.
What furthermore we're looking forward to in the Swedish market is that the government has sent out an inquiry. In Swedish, it was called En ordnad prövning av havsbaserad vindkraft . This was decided upon in May 2023, and it aims to analyze the regulatory framework for use of sea for offshore wind, and how that can be improved, and how permitting processes can be made more efficient. This was originally supposed to have been concluded and released already, but that's been pushed back further now. Latest I've heard is in January next year. So this is something to really look forward to as well.
A final note on Sweden is, given everything that's happened, and if anything good to say about it, and it's my own personal view, is that the decision to reject 13 wind farms in the Baltic Sea makes me at least hope that it puts additional pressure on the government to expedite the remaining wind farms that are in process to be approved. Our project Mareld off the West Coast of Sweden is one of the most advanced among this category that are still not approved. So to this we look forward to being expedited and finally reaching approval for that project. A brief look at Hexicon. So we're a global offshore wind developer focused on the deep water areas. We hold a project portfolio, total pipeline of around 22 gigawatt.
As of Q3, the net holding for Hexicon, so the part of the gross portfolio that is of Hexicon's ownership, was around six and a half gigawatt. Hexicon's been around for approximately as long as the industry. So our experience is really top in this field. And what we're focusing on are markets that allow you to work and competence, rather than upfront paying for large sea areas, can get a position, secure rights, and move on with developments. Our main activities in terms of projects are in South Korea, South Africa, Italy, and Sweden. We're doing this across the globe in partnerships. Not the least, because any market you develop, the permitting, stakeholder engagements, etc., is a very local discipline. Over to some of the highlights for the quarter.
This has been a period for Hexicon with a lot of focus on MunmuBaram, which is our project over in South Korea. Just stepping back slightly, in February of this year, we entered a share and purchase agreement with Shell to take over the entire project. That's through a lot of work during the spring, got us ready by July 1st to take over the complete responsibility and operations of the project. And this is a large project. This is an over a gigawatt project, so in comparison, the size of a nuclear reactor that we're now taking over the responsibility of. In August, that same project received the approval of the environmental impact assessment. So this is several years of work assessing how the project impacts the environment and other aspects. Getting that approved is a prerequisite for participating in the upcoming auctions.
After the quarter, we entered another major milestone, which is to sign a transmission service agreement, so basically the grid connection agreement with Korea Electric Power Corporation, KEPCO. So that's the comparison to Sweden's SVK or Svenska Kraftnät . Equally so, on November 22nd, which was announced just yesterday, we got the regulatory approval to take over two out of the three licenses that the project possessed. Now, I'll come back to this specific point because this is a really important one. So I'll come back to that in just a few slides. One of the other significant events that I already mentioned was obviously Sweden and the announcement that made us put two of our projects in Sweden on hold.
So we've talked about this before, and I'm sure a lot of you are aware of the renewables industry, in general, not the least offshore wind, and in particular floating offshore wind. We are in a state of the industry that is not the best. Hexicon is, of course, also affected by the state of the industry today. One example is the declining cost that was expected for the industry over the last few years hasn't happened. It's been rather an increase. Things have been delayed, things have been pushed on. Certain companies are exiting the field, exiting projects, delaying projects. That reality is facing ourselves as well. We need to take measures to face this new reality. This does not mean that my long-term view remains extremely optimistic. It's about ensuring staying power to see through this period.
The most uncertainty that I cannot say for sure is how long it will be before the industry picks up again. So we are in need of improving our financial structure. This is something we've highlighted already last quarter. This has taken longer due to the lengthy process of getting the regulatory approval for the share transfer of our Korean project, MunmuBaram. That project is such a valuable part of our portfolio. So with this now in place and that uncertainty removed, there's a lot of parallel tracks ongoing that we can now expedite towards closing. So just given this decision just the last few days, knowing where we have MunmuBaram is something that makes me optimistic to secure the necessary financing needed and move forward. I can't say for sure when and how, but I'll get back to you as soon as I can.
What we're also doing as part of this is to focus on our core projects. So which are our most valuable projects that have significant milestones in the near term that can also create revenues for Hexicon? So we are to some extent cutting certain resources, and we're to a larger degree also ensuring that we're focusing on the few and right projects. We're not at the moment going after new markets, and we won't during next year either. We've stopped activities of a few projects and markets. Two examples is the U.S., where we've ceased our presence, and a few very early-stage developments in South Korea called Pohang. As mentioned before, we've got Cirrus and Dyning here as well due to the government's decision here in Sweden. And what we're also doing is that we are looking into a site-sharing partner for our TwinHub project in the U.K.
So that's, as you call, that's our technology verification project, large enough to host two of our foundation technologies. So that we're looking now how we can site-share that with another technology to share the economic burden of that project. Now, over to MunmuBaram, and I don't intend to go through all these details, but I do want to mention and put some emphasis on MunmuBaram and the fact that this is a very late-stage project, a big project. And what I do want to mention is that with this approval of the change of control, so what that means is that our agreement with Shell to take over all the shares of the project is now approved. But the project as such contains three licenses. They're called electricity business licenses, which is basically a license to operate a wind farm at this area.
There's three, and each of them linked to a certain area and their neighboring. So far, the project has secured two of these, and this was what was announced just yesterday. That's for a total of 750 Megawatt. That's not big enough for us to push forward hard. It's big enough, it's valuable, and we're moving forward with it. So far, the EBL or license is undecided upon. To give a bit more perspective on that, why that is the case is that the whole regulatory process comes with quite strict need to demonstrate financial backing for this project. You need to really show significant amounts and the will to back the future costs of building projects like this. So far, we've been able to satisfy the authorities when it comes to two-thirds of the project, and we're working on the last one.
We don't know the outcome of that yet, but I do want to stress that regardless of the outcome of that third license, we have a project that is worthwhile to move forward with that we're owning 100% of. I did mention some of these milestones just previously, but just to reflect that this is a project we've worked on since 2018. For most of those years together with Shell, now we're taking this project over ourselves. It is not a project that we will develop ourselves going forward. So with this decision, there's three priorities. One is to determine what we can and shall do with the third EBL. Based on that, we're progressing and needing to adopt certain project plans full speed ahead, and the third is to set a new and long-term ownership structure of this project.
Again, the size and the maturity of this project is not a project that Hexicon will run forward ourselves. So this process has already started. And just a glance on the remaining portfolio. These are our five core markets. And what I want to highlight is the arrow down the bottom there displaying the development stage that the projects are in. So there's quite a range of how mature these projects are. And for us as a company, what it means is that we can really leverage the maturity and learnings of some of the projects, in particular the MunmuBaram project in South Korea, to our other more earlier stage projects that are in Italy, Sweden, and South Africa.
There also happens to be that a lot of these markets are in regions where there's actually, over the last few months, been positive developments from a political or framework perspective. Just to give you a few short examples, in South Korea, the auction process has improved for floating offshore wind for two reasons. A separate budget has been set aside for floating wind in auctions, so we're not in the same pot as bottom fixed, and the deadlines and timelines to deliver the project post auction win have been increased. In Italy, there was a decree announced a few months back for a CFD regime, so basically, an off-take auction for a CFD where projects get a fixed revenue for the lifetime of the project. All the details aren't out yet, but we're looking at a very attractive scheme.
And the only market in Europe, to my knowledge at least, that has a CFD mechanism, but without an auction scheme, where developers need to pay large amounts upfront for seabed. And lastly, just mentioned the U.K. as well, where they're continuing on an annual basis to set auctions that are increased in terms of the ceiling prices, and they have since two years back a separate pot here as well for floating offshore wind. Now, lastly, just look ahead. We are continuing to be very aware of the state of the industry, the state of Hexicon, needing to secure and improve our financial structure. So we're very aware of that. Make no mistake, that is our top priority. It is something that I look with confidence on because of now knowing where MunmuBaram is, that we now possess this being our most valuable asset.
On that note, second priority is, of course, to establish now a new ownership structure for MunmuBaram. There are additional divestments that we're looking into that we're working with today as well, hopefully to announce over the next period. The core of our business model and financing revenues in relates to divestments of projects. And lastly, of course, ensuring that our core project remains our focus, continue to build value across our portfolio, focusing on core projects for the time being. So with that said, I want to thank you all for listening, and I'll now take questions. And I'll do that in a way where we have questions that have come in. I'm here at our office at the moment, so I'll read out the question myself and then try to answer them. And I'll take them here one by one and see how many we get to.
The first one we have here is, "Your financial situation seems to be quite strained. From what I can read, your credit facility is due on December 31st. Does this mean that you will run out of money soon?" I partially touched base on it, but I will say that yes, liquidity is constrained. However, where we are confident is that there are several workstreams running parallel to address this, including discussions with the credit facility. We have matured them, but we have not been able to finalize either of them due to the uncertainty of where the MunmuBaram project has been. With this, again, with this now in place, I do look with confidence upon the future being to solve these issues short term to start with. Longer term, the MunmuBaram project is part of the longer term solution.
And we'll get back to you as soon as we have news on this. Second here, you mentioned that you have received the approval to take over two out of three EBLs. So that's these licenses in Korea. What will happen with the third, and why didn't you get approval for that? I guess this was partially addressed as well, but there's quite a strict requirement to take over licenses like this. We've been able to demonstrate the significant financial backing needed for two-thirds of the project so far. We have not given up on the third yet, but at least we have secured two, which is a big project in itself. So now we have the minimum needed to close the agreement with Shell. We have the minimum needed to progress this very valuable project. Here reading a third question. "The share price has gone down the bottom.
What is your plan?" A very good question, although I will not comment and assess the share price itself. What I can say and will say is that we are working to establish a long-term profitable business. It's long-term we're continuing to have our eyes on. Now, we are in a state of the industry that is rather weak. I definitely believe it will not stay here forever. How long? I cannot say. But the long-term build of our business is our key focus. Sooner or later, I'm sure that reality will catch up from other perspectives as well. But I'm not first and foremost focused and looking at the share price, and I won't comment on the exact level of that. Another question here. "What will happen to all the work that went into the two Swedish projects that the Swedish government rejected?
Will you be able to reapply?" For the time being, no. I think the government's ruling was pretty clear. So we will not be able to reapply as of now. We're not investing any more amounts or resources into these two projects. With that said, we're, of course, keeping on to all the background data and value that we've built up on these projects. Who knows what the future holds? That's probably all I can say about that. Another question here. "Do you plan to participate in next year's auction in South Korea, and by when do you expect to have a new owner in place for the project?" Well, we're right now replanning certain aspects of this based on the new reality, knowing we have it. So far, only two or three EBLs. What that means in terms of auction, I cannot say yet.
Next auction is in Q2 next year. Whether we will participate or that or not, I don't know yet. And there's two reasons for it. One is that there's a lot of prerequisites and work needed before you go into an auction to make sure that you participate on the right level and don't expose yourself of any unnecessary risks. And the second is that you also need to be advanced enough to ensure that you can fulfill the timeline requirements post auction. So after the auction, you have requirements to reach completion of the project within a certain amount of time. So these two aspects we need to consider carefully before we go into that auction. Continue here to look at some questions. "Can you elaborate which of the EBLs of MunmuBaram that is still undetermined?" Yes.
What we can probably do is, and I'm not sure how to illustrate it, we've got numbers on them, but I don't think that tells you anything. So they're basically the three circular areas that are adjacent to one another. And what we could probably do is to present that on the part of our web page, which one that is undetermined still and which that are secured. So let me illustrate that and visualize it on our web page afterwards. Let's see if we have one more. "In your press release from February, you state that Shell will receive a profit share arrangement of up to $50 million. Can you comment on that? Will there be anything left for Hexicon?" Yes, there certainly will.
I can't go into all details of that, but I do want to note that we did take over the project at a very reasonable sum at the time in February, and it is a profit share. It is only when Hexicon makes a profit that a share goes to Shell. It's a small part, and it goes down over time in tranches during the three years that the profit share is valid, starting from February last year. With that said, hope we've addressed some of the questions at least. Happy to continue and receive questions and answer them in writing as well, where we did not get to all of them. I do want to thank everyone for listening and look forward to get back to you with new announcements in the near term. Thank you very much for your attention.