Hello, and welcome to the Hexicon audiocast for teleconference Q3 2021. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Today, I'm pleased to present Marcus Thor, CEO. Please begin your meeting.
Thank you, operator. Good morning to you all, and very welcome. Let's go to slide number two. The agenda for today's update is to first present a brief of Hexicon, and I'll follow that by an update on market development, our operations, and before ending with a look ahead. Let's get to it right away. Next slide, please. We'll go to slide four, that is. To start off, let me give a brief of Hexicon. Hexicon is a developer and foundation technology provider for deepwater offshore wind. We have our own IP for a dual turbine floating foundation, the TwinWind, which enables an efficient energy production in deepwaters with minimal footprint. We focus on the origination and early stage development of projects for high value creation, and we do this in partnership model with both local and industry partners.
By focusing on early stage development and sharing risk and financial burden with partners, that's a way for us to keep the capital intensity low for operations and are therefore able to scale the business model. Hexicon is currently developing projects in key offshore wind markets across Asia and Europe, and we're looking to add new markets to that list within short. Following COP26, Hexicon's offering is more relevant than ever. The phasing out of fossil fuel subsidies and reduction of coal power that will accelerate following the conference, the most mature source to serve as the renewable replacement is offshore wind, and floating wind, in particular, is the most scalable. Slide five, please. This slide is a reminder of our business model. Hexicon's business model stands on two legs. We are both a project developer and a technology provider, both for deepwater offshore wind.
These two legs are strongly synergetic. Not only is it perhaps obvious that more Project Development entails opportunities to install the technology, but we've also seen how market opportunities arise, thanks to having our own patented technology. As a project developer, we focus on the origination and early stage development of projects. We've built up a skill set and team to initiate projects, bring them to definition and onwards, and along the way, bring in investors and co-developers. We early enter partnerships with local competence and network, since any Project Development is to a large extent a local discipline. As a technology provider, it's about ensuring that the TwinWind foundation technology is kept cutting edge, protected, and adopted for project specifics. It's about maturing the technology for it to be used at large scale.
Because at the end of the day, it is only through scale that the industrial value chain can bring down the relevant risks, and thereto reach the needed cost parity of floating wind. In the short term, over the next two years, it is the value increase of the project portfolio that will contribute most to the value build of Hexicon. This will then over time change to more coming from the technology offering as it matures and is implemented in greater volume. Slide six, please. Our TwinWind foundation technology is essentially a triangular-shaped floating steel structure that carries two large wind turbines. It is moored through a turret at the front corner, which is a standard component from the oil and gas industry, and it's basically just a big bearing.
This allows the complete unit to freely rotate with the wind direction around that point, which ensures that the two turbines do not disturb one another. This is the key feature enabling the use of two turbines on the same structure. What two turbines on the same structure entails is that we can install more power in a given area when compared to the competition. This reduces cost, as well as even further increases the possibility of coexisting with other stakeholders after occupying a smaller area. Our ultimate two main design drivers for the technology is lowest possible cost of energy and lowest impact on the environment and surrounding activities. The TwinWind is completely agnostic to the supply chain, including turbines, and it's fully scalable to the largest of turbines. Slide seven, please.
The only way to reach commercial scale use of our TwinWind technology is to verify it in full scale and prove its benefits. This burden of proof lies with us. The technology roadmap for Hexicon is a two-stage approach. The proof of concept will be achieved within the TwinWay project in Norway. This project is well underway, targeting a start of operations in late 2023. In parallel and slightly behind the TwinWay project in Norway lies our TwinHub project in England. I do apologize for a potential name confusion here. There's a lot of use in the word twin. These two projects are quite different in nature and complementary in what they provide to Hexicon.
The TwinWay project in Norway is the true proof of concept, using a single foundation and with secondhand turbines as a way to reduce time and cost. The location in Norway is in about 200 meters of water depth in harsh North Sea environment. The TwinHub project in England is what the industry likes to call a pre-commercial array. It's basically a stepping stone project towards commercial scale deployment. It's in a different set of environmental parameters when compared to Norway and will consist of two foundations, larger turbines and stand on its own commercial ground, participating in the U.K. government contracts with different subsidy schemes. Norway gets us a verified full-scale version demonstrating the performance and benefits of the technology, and the TwinHub project in England further expands our learnings of how the technology scales and operates in a wind farm scenario. Next slide, please.
Hexicon is very focused on building a pipeline of projects in attractive markets, and we're doing this for several reasons. First of all, it provides a revenue stream in itself as project value is enhanced through the development phase that can then be monetized through developer fees and project investments. This is ahead of our technology being verified and implemented in greater scale. Secondly, each project developed is an opportunity to license the technology down the line. The long lead times that offshore wind developments are all about mean that a project initiated today might not make its technology decisions until several years ahead, at a time when our TwinWind foundation is verified.
Lastly, by putting our core skill set to use of originating in early-stage development projects in core markets and with tier one partners, Hexicon builds its brand as a leading and credible floating offshore wind company. Let's remember that floating offshore wind is in its very beginning of an expected tremendous growth, and our portfolio is well-positioned to be part of this upcoming first round of commercial scale projects expecting during the course of this decade. We pride ourselves with the work done to date of having already achieved a net portfolio capacity of around 2 GW and with several solid partnerships created along the way. Next slide, please. Here's an illustration of the typical value enhancement over time for a project. I've shown this before, but I've added a bit to it now.
What I want to provide is a feel for how the industry values projects over the development phase. Now, I do wanna be very careful to stress that these numbers are to be seen as indicative only, as no project is the other alike, and it varies depending on size, environmental parameters, the market they're in, and more. The numbers are taken from recent transactions of offshore wind, which is all from bottom fixed. With that said, what it gives us is a tool to support the decision-making and forecasting within our own developments. A concrete and very recent example is the one indicated down the bottom right. Only a few weeks ago, SSE Renewables sold a 10% stake of its 1.2 GW Dogger Bank C project in the southern North Sea for around $90 million.
This project is late stage with a planned financial close by the end of the year. As a benchmark, this is quite interesting comparing it to a MunmuBaram project in South Korea, both in terms of the overall size and also the stake that was sold. Again, emphasizing that there are, of course, many differences. A key one in this benchmarking is that we still have a few years to go until financial close is reached in Korea. Next slide, please. To present what we're striving for, here is the timing four years from now in 2025. First of all, it's important to recognize that Hexicon is on a long-term journey. The lead times involved in the offshore wind are long, regardless of it being project or technology development.
What the industry offers, however, in a combination with Hexicon's position in it, is an opportunity to grow this company into something really meaningful. It will take a few years. There's no way of getting around it. My point is that Hexicon is a company that has enormous opportunity with its early position and by being exposed to the value potential in both Project Development and technology supply. It will take a few years to get there. In our vision for 2025, floating wind is an important part of the energy mix, and Hexicon has evolved from its early position to a leading player within this sector with a technology that is the obvious choice for developers. For goals 2025, we aim to, within projects, have revenue-generating operations in the three key offshore wind regions, being Europe, the U.S., and Asia.
For technology, we have gone through the technology roadmap to the point where the TwinWind is verified and tested with all benefits confirmed. On the financial front, for Hexicon AB's entire operations to be EBITDA positive. The key building blocks to get us there are to continue to work with best-in-class partners, mature, optimize, and scale the technology, getting it in position for serial fabrication, and growing the organization to be able to capture the value potential of this growing industry and extending it to the key geographies around the world where we are active. Next slide, please. We'll go on to slide twelve. As a market update, floating wind as a market is really expanding at an incredible rate right now, and the news flow is just remarkable. Here's just a few updates.
Starting with COP26, although certain criticism has been raised following the conference, not the least because of some last-minute weakening of the wording around reducing coal production, from an offshore wind perspective, there are certainly some great takeaways, both in terms of several new announcements from leading offshore wind investors increasing their investments into offshore wind and the agreement around phasing out fossil fuel subsidies and reducing coal. The deployment of renewables, I'm sure will accelerate on the back end of COP26, and the segment with the largest potential is floating offshore wind. In the U.S., the State of California and Oregon have each introduced bills to develop 3 GW of floating wind each. These first promising steps are, however, just a fraction of Biden's offshore wind ambitions, which along the West Coast needs to be predominantly floating.
Spain recently announced a target of between 1 GW and 3 GW of floating wind by 2030, and there we're expecting first auctions potentially taking place already next year. Lastly, I wanted to mention that France recently closed the world's first auction for a commercial scale floating wind farm. This future wind farm will be located off the French Atlantic coast and have a capacity of 250 MW. Two more floating projects of similar size will be auctioned during next year. Worth pointing out here is that Swedish Vattenfall is amongst the bidders and have subsequently taken steps into floating wind. On to a business update. Slide 14, please. Across the period, we've taken some important steps forward.
Some of the main ones during the period are that our project with Shell in South Korea, the MunmuBaram project, has after a year of wind measurements, filed for its first so-called Electricity Business License. Secondly, the European Patent Office has issued its intention to grant Hexicon a European patent for its dual turbine foundation technology. In addition to the issue itself, it is notable that as part of this review, the EPO received a third-party submission of similar kind as the one that the Swedish Patent and Registration Office, Svenska PRV, received just days ahead of the IPO. In line with our view then, and as described in the supplementary prospectus in June, the European Patent Office found the third-party submission to not be relevant. This is a confirmation of the robustness of the IP.
Our collaboration with Aker Offshore Wind has solidified into a 50/50 joint venture that has expanded its Board of Directors when in September appointing ex-finance minister Pär Nuder and Vattenfall executive Mikael Kramer to it. In Norway, our TwinWay demonstrator project have achieved a statement of feasibility and certification report from DNV, which is a testament of the first engineering phase being correctly executed and reaching accurate results. Slide 15, please. I'll dive a little bit deeper into our core projects. Starting off in Norway with the TwinWay demonstrator project. This is moving full steam ahead, and it is now at a point where we've reached the level of definition needed to start planning the fabrication. The ingredients in place that provide this definition for the project are very much the ones listed here.
That the engineering is sufficiently advanced with a confirmed appropriate methodology in place, as confirmed by DNV. To have locked in the type of wind turbines, which very much dictate a lot of the design, both the foundation and mooring system. That we just, as of recently, have a partner on board that can build it. This last item was just concluded recently as we've now teamed up with global contractor Worley to execute the construction phase. The project is on track to start the construction late next year and an operational start a year after that. Some of the upcoming milestones include to agree the final location within the METCentre area, finalize the turbine supply agreement, and also during the spring, expand the partner structure of the project. Slide 16, please.
In South Korea, the government has recently increased its support for floating wind by not only, as before, offering a premium within the green certificate scheme to projects further up the coast, but now also an increased premium for deeper waters. Encouraged by the government's ambitions growing stronger, the project is pushing forward hard, targeting to be the first project in the area to reach financial close. Using three different floating lidars, which is a way to measure wind using laser out at sea, the project has completed its mandatory one year of wind measurements and subsequently filed for three electricity generation business licenses. The permitting process is such that priority rights are in the first instance awarded in circular areas, each with a 5 km radius. To advance that onwards to the wind farm stage, each circle needs its own EBL license.
This is why three here have been applied for. The seabed over the complete area has been investigated through so-called geotechnical and geophysical surveys, which is a major undertaking, which, for example, includes drilling down, taking physical samples of the seabed across the entire area. This is an area approximate to the size of the entire municipality of Stockholm. Near-term milestones include the approvals of the EDB licenses filed for, with the first one expected within weeks. The project is also working towards securing a grid agreement and wrapping up the environmental impact assessment. Slide 17, please. There's been a lot of focus on offshore wind in Scotland recently, as the leasing round named ScotWind recently closed with a result of over 70 different bids having been submitted, and many of them in deep waters.
Scotland's ambition with this lease round is to get 10 GW of new offshore wind deployed. This 100 MW Pentland floating wind farm project that we're working on together with Copenhagen Infrastructure Partners is adjacent to one of the larger areas of the [complete permitting] process, but well ahead in time. Recent milestones within the project includes having deployed the floating lidar to measure the wind for at least a year, having received the scoping opinion from the authorities, which is a confirmation from the government of the permitting work and the plan throughout the complete permitting process. We've also recently completed seabed surveys, again, similar to South Korea, the so-called geotechnical surveys. Looking ahead, this project is working towards permit applications for both the offshore and onshore components of the project, and to wrap up the environmental impact assessment. Next slide, please.
In Sweden, the debate is hot right now around offshore wind, and the arguments against offshore wind are starting to look a lot like it is with onshore wind. Not the least of one related to the turbines disturbing the visual landscape. This is where floating wind really makes a difference. The floating wind farms are not constrained by water depth and can be placed further offshore so that you don't have to see them from the coast. The government recently directed the Swedish TSO, Svenska kraftnät, to expand the transmission grid offshore. This is in order to neutralize the connection cost with onshore winds and other power sources. This really opens the offshore wind market. Our partnership with Aker Offshore Wind has during the period solidified into a 50/50 joint venture to which new board members have been appointed, as previously mentioned.
The public consultations for these three sites, Mareld on the West Coast and Dyning and Kultje on the East Coast, have been concluded, having engaged nearly 100 different stakeholders. Looking ahead, this project will evaluate this consultation, and on the back end of that, ramp up towards the start of the environmental impact assessment process, as well as prepare for additional surveys. Next slide, please. In the U.K., The Crown Estate recently announced new leasing rounds of 4 GW of floating wind in the Celtic Sea, which is just around the corner from our TwinHub project. This was a very welcome piece of news, as part of the reasoning when investing in the site was its location. We knew there were plans for the area, but not this big and this soon.
The longer-term ambition is to use the knowledge and regional network that we gained through TwinHub to build the pipeline over time of additional prospects in the Celtic Sea. Additionally, the U.K. government recently announced its draft budget for upcoming subsidy auction, the so-called CfD, or Contracts for Difference, which for the first time includes an earmarked amount for floating wind. The project now prepares for this upcoming auction, which opens towards the end of the year. On the technical development front, the first engineering phase, so-called pre-FEED, was recently completed and public consultations closed. In addition to the upcoming auction, we do expect to be awarded the marine license shortly, which is the final permit needed to execute the project, and also a prerequisite for participating in this upcoming CfD auction. Slide 20, please.
Together with our joint venture, CoensHexicon, we have for over a year developed new opportunities in South Korea. This has very recently led to four additional seabed rights having been secured, three on the West Coast and one on the East Coast, with a total gross capacity of over 1.5 GW. This is a very promising development and an increase in our potential in Korea compared to earlier communications. South Korea is definitely one of the most attractive markets for floating wind right now, and we're seeing most of the international utilities, developers, and oil majors permanently establishing themselves in the country. These projects will now be taken forward with strategic partners and planned wind measurement campaigns. I'll be back very shortly with more news on how these projects develop. We'll go to slide 21 as an outlook, go to slide 22 as the final slide.
Looking ahead near term, we'll continue to focus on maturing the technology and developing a project portfolio. With regards to the technology design for the TwinWay demonstrator project will be prepared for construction start next year, now in partnership with Worley. Significant focus is placed on developing current projects and prospects to enhance them and to enhance the portfolio value and provide the long-term pipeline of opportunities to ultimately also license the technology. We'll continue to originate and develop new opportunities in attractive markets and aim to further ramp up our organization and capacity, both locally here in Sweden but also abroad. With that, I would like to thank everyone for listening and now welcome any questions there may be. Also want to say that I am accompanied here for the Q&A session with our CFO, Sebastian Robson. Thank you very much.
We have a question from the line of Johan Spetz from Pareto Securities. Please go ahead.
Thank you, and good morning, Marcus, and thank you for the presentation. A few questions on my end. Starting off in South Korea was exciting to see the new projects that you've added to the project portfolio there. Would you be able to say, you know, roughly compared to MunmuBaram, how the new projects would sort of be ramped up in terms of timing over the coming years?
Yes, certainly. They are obviously behind in terms of compared to MunmuBaram. In MunmuBaram, we've recently completed one year of wind measurements and filed for these EBL licenses, and that's probably a year and a half or so away for these new projects. The potential is of similar size. What we'll do in a similar fashion is over the near term now look at how we develop these, with what strategic partners, and at what pace. It is a mode where the seabed is secured, and now it's about packaging it and the business model and moving it forward.
Right. Then also you've mentioned the new markets in the past. I believe the U.S. has been highlighted as a highly interesting market for you in the future. Any updates on that front?
We are making some steps. The U.S. is definitely one of them. It's one of these really long-term, very big markets. It is quite different to some of the other markets that we're engaged in. It is heavily regulated with auction schemes and similar, but it is a very important market. I can't be much more specific, but we are making some steps ahead, and we'll be able to make some announcements over the next few months.
Okay. A final one from me, perhaps for Sebastian. Looking at the revenue numbers for Q3, there is a clear pickup relative to Q2. Could you perhaps comment briefly on what's behind that and also how we should think about obviously there will likely be some fluctuations between quarters also going forward, right?
Hi, Johan. As you mentioned, there are fluctuations between the quarters. We had quite a lot of revenue stemming from sale down in Scotland in Q1. Now in Q3, we had Project Development fees picking up mainly related to Swedish markets.
Can I maybe just add to that as well from perhaps a typical CEO answer? It is quite important to mention that the results of an individual quarter in this stage of our long-term journey doesn't say that much about how our operations are going. We do get revenue from Project Development, which is one of our revenue streams, and did raise money, you know, as you know, in conjunction with the IPO, and these are now put into use according to that plan. That's why we have a negative result, and that's what it will look like as we, for a period of time, as we grow this company.
Great. That's it from me. Thank you.
As there are no further audio questions, I'll hand it back to you, Marcus.
Okay. I'll have a few here on email that I'll read out as a question and then answer. The first question is, can you expand on your technology licensing model? Yes. Myself, I have a background in oil and gas, and what we're seeing as a licensing model that obviously we haven't realized yet, but certainly have tested in both dialogues and agreements or it's a small portion percentage of the build cost of whatever is within our IP. So typically what we're expecting and targeting is to gain that license fee over the construction period of a project when using our IP. The second question is, can you speak to the competitive landscape in the market?
Yes, I mean, it's very different, but floating wind is very much growing, and some markets are extremely hot and highly competitive. Even Sweden over the last six months have become quite competitive. It very much varies across markets. I would say that our Project Development part of the business is competitive in some markets and is very much on a market by market basis, while from the technology front, it's more a global competition, where the only way for us to pierce through that is to get the demonstrator installed as quickly as possible. The last question I have here as well is, will your strategic partnerships be developed regionally or for the global market going forward? That's a very good question.
Most of our partnerships to date are struck regionally with a wider long-term intent is the short answer. Those are the questions that we had received here, operator.
We have no further audio questions.
If that's the case, then I would like to again thank everyone so much for listening and look forward to continue the journey and keep the communication open. We'll be back with more updates along the way. Thank you very much.
This concludes the conference call. Thank you all for attending. You may now disconnect your lines.