Good afternoon, welcome everyone to the 2023 Orrön Energy Capital Markets Day. Very excited to be able to host this first in-person capital markets day here in Stockholm. We have a venue with a lot of people, but we also have a lot of you joining online, which is fantastic to see. I think we have a very interesting program today, as you know, we came out with our year-end financials and fourth quarter report earlier today. It's now 2 o'clock. We see that this should be concluded before 4 o'clock, I believe. We have a number of slides to go through and a number of presenters. We will do this without any break. We'll go on until the end of it.
We will have a Q&A session at the end. That's a very important time I think. Normally we get very good discussions going, which we really like. Good to gather up your questions for the end of the presentation. All the four speakers will be up here and able to answer those questions. For the ones of you joining online today, you see the slides on the screen. You will see a video of the presenter, under that you will have a box where you can type in your questions. I will get them on an iPad that I can then pose the questions to the speakers. I think that's it for the practicalities. Again, very happy to have you here.
If we have a look at the program, we will start with our CEO Daniel Fitzgerald, who will speak about strategy, market outlook, 2022 results, and the outlook for this year. We will then move over to a panel discussion with Carl Sixtensson, who's our Technical Director, and Jonas Dahlström, who's our Managing Director for the Swedish business. We will follow that with a discussion on how we are fully funded for growth and the financial side of it with our CFO Espen Hennie. My name is Robert Eriksson.
I'm the director of corporate affairs and investor relations for Orrön Energy and met a lot of you here in the room before and very happy that we have so many individual shareholders that take a great interest in the company. That's amazing to see. I think we're close to 80,000 shareholders as today, and that's a very respective number. From my horizon, I would like to start with saying thank you to all of our shareholders and prospective shareholders. With that, I would like to hand over the floor to you, Daniel, for starting the presentation. Thank you.
Thank you, Robert. It's great to be here today in person to some extent and welcoming a lot of our fellow shareholders and investors online. It's a great time to be here with Orrön as well, I think. We've had a fantastic start to the company. We've only been alive for six months as a pure-play renewable vehicle, but we've achieved a hell of a lot in that time. I think when you look back and reflect on not only what we've done in the last six months, the growth of our business, our ambitions, and we're going to explore that a little bit more today, but you also reflect on the market and where the market's been over the last 12 or 24 months. Electricity prices are hugely volatile.
Moving with any slight move in the supply-demand balance, we're seeing huge spikes in electricity price both up and down. Europe is on a pathway to decarbonizing its energy systems and removing fossil fuel and CO2 from energy systems. That industry is really nascent today, and it's exploding in every single part of Europe with different technologies, different opportunities, different growth ambitions, different political landscapes. That provides a fantastic platform for Orrön. Hopefully as we, as we go through the presentation today, you'll get a bit more of a feel for where we think we can create value in this landscape and where those opportunities exist for us. I'll be joined today, as Robert said, by some of my colleagues in Orrön.
I think we've got a fantastic team, and you'll hopefully hear a little bit more than just what you hear from Espen and I and the quarterly results. You'll hear a little bit more on the technical side from the teams that are actually building the core of the business. It'll be nice to explore that a little bit more as we go through. With that backdrop, let's jump straight into our strategy and where we think we can create value. I'm going to start a little bit with Orrön and Orrön's strategy before I dive into the market and our results, because as a relatively new company, I think it's important to shape exactly where we're going to focus and why.
We are a pure-play European renewable company and we've changed from a Nordic to a European company in the first quarter of this year. It's clear that from July, we were already looking to expand our horizon beyond the Nordics. Those first few steps, we knew to get the pace and the scale that we needed, we needed to be in the Nordics because we understood that market. As we've been growing in the Nordics, and I think Jonas and Carl will touch on it, as we've been growing there's parts of the team that have been looking at other opportunities to grow more broadly across Europe. We will be entering Finland in a bigger way. We're already there today with our MLK asset and some of the assets we acquired through the second half of last year.
We're now doubling down on our expansion plans in Finland, and you'll hear a little bit more about how we think we can grow in that market. We're also stepping into France and Germany, where we'll start to look at the greenfield side of the business and really grow in an area where we haven't been able to grow yet because we've been focusing on the brownfield M&A. That brings together a full cycle renewable company. Cash generating assets with spot market exposure has been a core theme for us from day one.
I think the core of what we do will be that cash generation and hard assets that are generating power into spot markets. We'll touch on that a little bit over the next few slides. When we started the business, we had some producing assets, some development assets. As I touched on, we'll be moving more heavily into greenfield. That gives us the opportunity to see value all the way through the renewable life cycle from project origination all the way through to development projects, operations, late life extension, repowering and taking sites that have finished their usable life and taking them back into greenfield projects again. I think exposure to that whole life cycle is really key for us.
I'll touch a little bit on the finances and Espen will also deepen that discussion around our financing and the capital plans that we have and the net debt and firepower that we have for future M&A. Organic growth. I'm not gonna steal the thunder of the two gents that'll join us soon, but organic growth is something that's been core for the Lundin Group of Companies for many decades, and we'll explore that a little bit more today because that's a core thesis of how we think we can grow. The final one on this slide is an entrepreneurial team backed by Lundin family, and I think we'll touch on some of the value creation in Lundin Energy and some of our predecessor companies.
It's clear that Lundin family have had a huge hand in creating value for not only many of the Swedish retail following that have been here for the decades following the family, but also their ethos in the companies and that shapes who we are and where we come from. We're going to dive into each of these a little bit more over the next handful of slides. As of the end of this year, we'll be generating 1.1 TWh of production. We started life in July at 300 GWh. We added 500 GWh through the second half of last year through M&A, and with our Karskruv project coming online, we pushed that up to 1,100 GWh at the end of this year.
That's a fantastic platform and that's the core of our business that generates cash flow, generates opportunity through that asset base, and allows us to take other steps in other areas while not having to constantly go into fundraising or raising of capital to fund our growth. We started off in July last year with an acquisition-led strategy to create scale. It's clear that we've been ambitious and hungry to add opportunities into our asset base. That's not slowing down at all. In my mind, that now has Finland, Germany, France and some other countries to expand that strategy, which we've been successful so far in Sweden with. We're stepping into Finland, France, as I touched on, through greenfield. We'll spend a little bit of time on that later.
Organic growth is a core theme of what you'll see today as well. What I see in our business is Sweden has been the core. You see full cycle in Sweden now where we're starting greenfield projects within existing assets, brownfield opportunities, and looking to repowering and recycling some of the assets back to the start again. We don't have that built across every single country we're in. We will move into Finland, France and Germany with that same model, but it'll take time to build that. What you see on here is you see Sweden with everything from the power generation development in greenfield.
As we move into the other countries, we'll start with a seed somewhere, whether it's brownfield M&A, whether it's greenfield projects, we'll start with something and around that core team, we'll build the rest of the business. We're not finished with just these countries either. We're screening a range of other entry points into other jurisdictions across Europe at the same time. Our assets are largely cash generating and that's been something that's been really key for us and really important. There's so many renewable companies or energy transition companies that have a promise of cash generation in 20 years' time or 15 years' time with a huge hole of CapEx to get there and not a clear way to fund it.
Our ethos all the way through has been we need to be generating cash flow because that allows us the ability to go and reinvest some of that cash flow into other opportunities and assets. That really sits at the core of what we do. When we look at our asset base, 390 MW of installed capacity, we've got 70% of that in Sweden, which is great, but it's a little bit heavy in the Swedish context, we need to expand that footprint to diversify geographically and diversify across technology. Skipping one, we go to 90% wind, which is the same theme. We've started on wind power because that's where we found one of our first transformational acquisitions last year and we've deepened in wind. Strategically, that's because that's where the opportunities have sat.
When we look more broadly at what we're trying to do, we're stepping more into solar and batteries amongst the existing wind portfolio in Sweden. When we step into Germany and France, we're stepping into a solar platform where we're looking to develop solar projects. We're starting to spread out the technology diversification, which is really important for us as we continue to grow. 85% of our power as of the end of this year will be in high-priced or historically high-priced regions in Sweden and in Norway and Finland. We're seeing when we aggregate our assets together, we're seeing a premium to system price when we look at the percentage of our portfolio that's in some of the higher priced regions across the Nordics.
Then through the second half of last year, we achieved a price of just shy of EUR 120 a megawatt-hour. That's a number we would never have forecast when we put this business together back in 2021, at the end of 2021 and early 2022. I think we've seen some really strong pricing in 2022, but it feels a little bit disconnected, some of the exceptional pricing we've seen compared to where we see market fundamentals today. When we look longer term, our view hasn't changed and we'll touch on it a little bit in the market update, but our view on power pricing is that we don't sit at EUR 30 or EUR 40 a megawatt-hour, we've seen power pricing in the historical long term.
We also don't sit at EUR 200 or EUR 300, which has been abnormal for last year, but somewhere in between the two is our view on power pricing long term to allow this energy transition to really get the momentum and investment that it needs to complete. We're present in all stages of the renewable life cycle, so 1.1 TWh in terms of production at the end of this year. We've been active in the brownfield and producing asset M&A. We've completed 10 transactions since we started in July last year, seven last year, mostly in that brownfield M&A space.
We're moving as we go forward, and Jonas and Carl will touch a little bit on the optimization of our revenues, stepping more into power trading, frequency markets, et cetera, which gives us a little bit more of a revenue stream beyond just generating power into the grids. In the development world, we have our Karskruv project. We've also started off last year a range of smaller projects in and amongst our existing assets, and Carl and Jonas will dive into that and the repowering and life extension in a little while. Greenfields, something that we've focused on last year in Sweden and Finland, and now early this year we're spreading our wings a little bit more in the greenfield space, and we will chase early-stage projects in all of our countries of operation.
We're seeing a strong connection to landowners and existing owners of assets where that door is being opened already for us to come and build greenfield projects on existing sites, existing assets, but also new land positions where some of the people through our network are starting to open the door for new greenfield. We'll see that, we'll see that expand not only in Sweden and Finland, we'll see us expanding into that in France, Germany and broader in terms of technology as well. Espen will dive into the financials a little bit more, but when we look at our business, if I look forward at the three key things on the financial side that I think differentiates us somewhat from the rest of the renewable space, strong cash flow generation. Yes, some of our peers have strong cash flow generation.
Some of our peers do not. Some of our peers have technology opportunities and investment opportunities that mean that cash generation is burdened in the, in the coming five or 10 years. Next year, we'll be generating between EUR 25 million and EUR 70 million of EBITDA. That depends on power price. Our company is exposed to the underlying power prices, and as we see prices rise, we'll be generating more revenues. As they drop, we'll generate slightly less. We expect to generate somewhere between EUR 25 million and EUR 70 million. On top of that, when we move into 2024, our production will increase by 40% as we move into 2024 with Karskruv coming online, and at the same prices, we'll see a big bump in our revenues in 2024.
We have very low leverage. We ended last year at $13 million of net debt. We've got around $250 million of capacity on the financial side. For all of the investments and growth that we plan to do, we can do that under our own asset base and under our own financing, which gives us a lot of capacity, not only for M&A, but also for the growth projects that we're looking at. CapEx commitments, we have the Karskruv project this year, which will consume somewhere just shy of just over $70 million. We've got some other costs that are coming in on the CapEx side this coming year. After this year, we have no fixed CapEx commitments.
Every dollar we will spend after that will be on accretive projects that add value to our asset base and add value to our stock. We can be very, very careful about exactly what we choose to invest in or not choose to invest in. We've got the financial firepower on the debt side to go and grow the business. We've got cash-generating assets, we don't have a pipeline of committed capital beyond this year. It gives us, as we say at the bottom of this slide, it gives us a fantastic balance sheet to go and grow this business. We'll spend a bit of time with Carl and Jonas later today talking about how we actually go and build an organic growth pipeline and what that means.
The three key themes that we've kind of looked at is people, assets, and capital. I think on the people side, we're very, very lucky with the teams that we have, whether it's the Lundin family and decades of investment in the energy and commodity space, whether it's from the board, and we've got Jakob Thomasen joining us today from the board of directors and the board that we have has had, again, decades running companies, building businesses, and governing businesses to do exactly what we're trying to do. That combination of having a shareholder with a third of the stock that holds a very long-term view of value creation and a board who are able to see through some of the short-term challenges to build a fantastic business long term is just one of the people's strengths.
You step into the team that we bring from Lundin Energy into Orrön Energy. We've got people who have done multi-billion dollar deals, who have raised multi-billion dollar bonds and finances, who have structured M&A transactions and run and operated businesses all the way down to the teams, and Jonas or Carl, and Carl will touch on it, the teams that are day-to-day operating and maintaining our turbines and optimizing our production and growing our business. That skill set is really, really deep on the people side. On the asset side, we've got a fantastic group of assets that have opportunity to grow. Then on the capital side, we are fully funded. We don't need to go and tap equity markets to go and do deals.
We don't need to go and look outside of our internal means to go and grow the business. When I put those together, it gives us a fantastic platform for growth, and I think we'll dive into that in a little bit. On the sustainable side, we bring some of the heritage from Lundin Energy, where we were industry-leading in the sustainable space. Would've been one of the first companies to be carbon neutral on scope one and two emissions in the oil and gas space, and now we step into the renewable space with a completely different platform, completely different assets, but our mindset hasn't changed on sustainability. We will grow over time to build that same reputation, that same ethos from Lundin Energy in the sustainable space. All of our business is driving decarbonization of power systems.
We're increasing the share of renewable energy in society, and we're actively aiming to mitigate the effects of climate change by removing carbon from our power systems. That's core in what we do, and that's not enough, though. We will be building through the course of this year and next year, we will be building more on the sustainability side. We're already well connected with communities and stepping into helping local communities benefit from what we do in their regions. We're looking at habitats, we're looking at wildlife, we're looking at projects to enhance our position in the areas in which we operate. Safe operations are a key part of what we do as well, and we put all of that together. We'll be spending a little bit more time on carbon emissions, on EU taxonomy alignment, et cetera.
Some of the projects that take a little bit longer to build, we're focusing now on those to build our position in that frame, in that scene. The robust governance framework is a final piece on sustainability that's really Lundin family, Lundin Group are all publicly listed companies that have been doing this for decades. We step down with exactly the same control framework from Lundin Energy, a multi-billion dollar company, into Orrön Energy with exactly the same standards on governance. That's really key and core to what we do as a business. One quick slide on value creation before we move into the market and our results and forecast.
I've shown a little bit here of our history from Lundin Energy, and I think it's a good example of how Lundin family and Lundin Group have created value over many decades. Lundin Energy started back in 2001 with a single equity raise. That got the company started. There were a handful of assets in there. That company has grown over the time to deliver $17 billion back to shareholders. Whether that's through the ultimate sale of Lundin Energy to Aker BP, cash dividends along the way, at the end and progressive dividends along the way, the spin-out of IPC, the spin-out of Etrion and EnQuest, we're always looking at the portfolio to look where maximum value exists.
For shareholders, hopefully some of you here today have been a part of this journey over 20 years, this is a 350 times multiple on that initial equity raise, which is fantastic if you've been a participant in that. For those shareholders who have been with us, we've only been alive a very short while, for those that were able to get in at the early part of this journey, it's been a fantastic journey so far. Even today, when I have a look at what this business could be over the next two, three, five years, there's a fantastic roadmap of value creation that's coming for this company as well.
To participate in that journey with the backing of Lundin family, the board, and the competence and opportunities we have is a fantastic place to be in my mind. Hopefully our investment community agrees and follows us on that journey. It's not just Lundin Energy and the Lundin Group. You can see on the right here, there's $15 billion worth of companies that have similar ethos, similar backing from Lundin family. Long-term shareholders who are not looking cyclically at when is the best time to sell assets and step out of a market. They're looking with a 20 or 30-year horizon and investing cyclically as opposed to stepping out as a shareholder. That creates a fantastic opportunity to invest.
When others are leaving markets, we can double down and invest in markets, and we can create what is hopefully a roadmap for shareholders over a much longer horizon to generate value. We'll change pace a little bit. I'll spend 1 or 2 minutes on my view on the market outlook before we dive into our second half results, 2023 guidance, and then I'll pass the floor to Carl and Espen for a little bit. I wanted to touch on the renewable journey and ambition for Europe, and I think there's a multitude of slides and data we can put up here, whether it's growth in the Nordics, growth in Sweden by technology, if it's across Europe.
We've chosen just to land on the EU because I think it's a, it's a fairly simple story that sums up exactly where we're going in this space. It's clear that every single country in Europe and the EU needs to decarbonize its power system. Just looking at this here, 2022 today, if I just look at wind and solar as two technologies, over 400 GW installed today. Over the next eight years, we've got to install another 600 GW to meet the growth ambition.
What we have today is only a fraction of what we need in 2030, and only a fraction of what we need in 2050 for us to meet what the EU wants to do in terms of decarbonizing power systems, getting to climate neutral or net zero by 2050, and investing in the renewable technologies that are gonna drive that transition. Everywhere we look, every single country has a huge ambition. Every single company has its own ambition. Every single fund and investor needs to be on this journey. In my mind, this train has left the station. We are going to decarbonize our power systems.
The reality is we're at the very early stage of that, and the opportunities and landscape is still very new, it's very open, and we don't have today all of the commercial technologies we need to finish the energy transition, whether it's renewable generation, energy storage, grid expansions. Every single country has grid challenges today. For me, coming in at the very early part of an industry like this that's gonna be going for 30, 40, 50 years until we're even halfway built, and then continuing for decades and centuries thereafter, being at the very early part of that with the competence, capital, and assets we need to really start growing in this space is a fantastic place to be. One of the biggest challenges we face or the industry faces, I think, is around our ability to actually get projects built.
I think everybody would love to be in a world where we have just pure renewable energy driving our entire system. If I look in Sweden today, it takes a hell of a long time to get a permit for a new wind farm or a new renewable asset that exists across Europe. When I look at grid connections with a decade or 15 years, some of the times before we can get a grid connection for a new project, we have to overcome these challenges. As governments and societies start to open those doors, there will be more and more projects coming to fruition, and I think we'll be very well placed to take advantage of those changes as they come into the market. My view on power pricing, I think this is all looking backwards.
I'm not gonna put anything up there that looks forward on what power pricing should do or will do or may do. I think my biggest reflection on power pricing over the last little while is we're in a hugely volatile world. Any small change in either supply or demand is having a massive effect on power pricing. If we look at futures pricing from November, it was north of EUR 200 for the year ahead. November it was EUR 120 for the year ahead. December it was over EUR 200. End of December, it was back to EUR 100. January was EUR 70. This thing is moving so quickly in the market, and I have no idea where power pricing is going to be in the future.
What I do know, though, is if I look at the historical long-term average, and you see it on here from 2018, we can go back to 2012, 2015, anywhere along that journey. For the last decade or so, we've been at around EUR 30 or EUR 40 a megawatt- hour. When I look forward at all of the challenges that are coming on the, in the renewable domain to really build out the technology we need, this technology doesn't break even at EUR 30 a megawatt- hour. If our long-term price is down at that level, then the energy transition isn't going to have the pace that it needs to really decarbonize our energy systems. My view on long-term prices, it's not EUR 30 or EUR 40, it's north of that.
Now, what that number is, whether it's EUR 60, EUR 70, EUR 100, EUR 200, I have no idea. I have no idea where we're going to go. I do know that the fundamentals when we look at power pricing suggests that the long-term averages are still too low to actually allow the energy transition to happen. That feeds back into our view on power pricing, where we need to be spot market exposed, because I don't believe that the long-term PPA market is really pricing in the challenges we've got in the energy systems. My view is that we will see stronger electricity pricing for a much longer period into the future. Maybe not at these levels. I think this is a little bit unsustainable at the north of EUR 200 level. Huge issues for the economy, huge issues for society.
We're seeing a lot of, the political sphere trying to grapple with that with high price taxes and levies and Espen will touch a little bit on what that means for our business. My view on power pricing fundamentally is that we will be in a place where it is strong for the long term. Volatility is a key thing that is going to be a factor in our world. We're going to see hugely volatile prices minute to minute, hour to hour. What we can do on that side, being spot market exposed, is we have the flexibility to sell power.
We can sell frequency services, we can store power, we can blend technologies, and that gives us a lot of levers to play with that don't exist in a pure play infrastructure or renewable asset with a PPA and some of the locked up return framework. Looking at our 2022 second half results and our 2023 guidance, last year, second half, we generated 250 GWh of production. That takes into account the assets we had in July, the acquisitions we completed through the second half of last year. When we look forwards, we're going to see a much higher number than that for this year. Strong cash flow generation. We generated $21 million of EBITDA last second half last year.
All of the numbers I'm going to talk about here are proportionate numbers. Espen will touch a little bit between our consolidated financial statements and proportionate numbers. I think the consolidated numbers don't accurately reflect what our business is doing on a net basis because of some of the ownership interest between our different assets. On a proportionate basis, you can get a real sense of the underlying cash generation of our assets, the underlying net production of our assets, which will be different to some of the consolidated numbers. $21 million of EBITDA in the second half, $13 million of net debt at the end of last year. Strong cash generation, low net debt, ample capacity on the debt side for our growth ambition. Between Q3 and Q4 we doubled our production as well.
We were $168 million in the, in Q4 and we were half of that in Q3. Fantastic growth on production. That'll continue through this year. We closed seven transactions last year. We've done another three this year. We've been very, very active on the M&A side and added significant amount of production into our asset base. We've touched on Sweden and how we've consolidated that position and really grown in Sweden and now we're starting to spread our wings a little bit more to continue that growth trajectory in a few more countries. You see that by us entering Finland in a much bigger way, Germany, France, stepping into solar, stepping into batteries a little bit more and then keeping the core of the power generation assets as what we do.
It feels like a lifetime ago, we did successfully complete a $12.5 billion deal in the summer. We've got some of the same team who did that in Lundin Energy and put that whole transaction together who have joined us with Orrön and we transitioned the company completely to renewables while still maintaining all of the same financial governments, the same listing, the same reporting framework and the same standards we had as a much bigger company. We've really shrunk down the size of the business to a handful of people and then we've grown again through our M&A phase, all while maintaining that standard in terms of how we look and feel towards the external market.
Some fantastic achievements last year that seem like a lifetime ago when we're sitting here talking about entering new countries as a renewable player today. When we look forward at this year, power generation second half last year, 251 GWh. This year we're going to deliver around 800 GWh, assuming we have average weather conditions through the year. Karskruv then comes online at the end of this year, which adds just shy of 300 GWh, pushing our production up to 1.1 TWh from the end of the year. We expect to generate EBITDA, again proportionate basis between $25 million and $70 million. It really depends on what power prices are as to where we sit in that range for next year.
Three quick areas we're gonna focus, and I think I've spoken about them a little bit. Organic growth, because that's by far where we see the most value creation. I think when we look at deals in the market, we're seeing large scale greenfield transactions are trading at mid-single digit IRRs, so very low rates of return. I think it's been a long time since we've done a single digit IRR transaction. Most of the transactions we do on a reasonable long-term price are sitting in double digit rates of return. That's because we're stepping into things that don't necessarily hit the market. They don't go through a banking process. They're not of the scale and greenfield opportunity set that everybody's chasing in this market.
We can go and find opportunities that don't exist on bank radars 'cause they're either too small or they're not hitting that domain. We can look opportunistically at how to create value beyond just the production of an asset. I think when we put all that together, that's why organic growth is so key for us. Further M&A for sure. Greenfield opportunities for sure. I think on that, on that note, I'm gonna pass probably to Carl and Jonas in a second, and they're gonna talk us through a little bit more around that organic growth and platform for growth that we've established and dive in a little bit more into the people, assets and opportunities that are going to make us tick.
We've touched on most of this before already in terms of the production growth, you can see there by quarter how much we're planning to do in each quarter. With that, I'll introduce Carl and Jonas, who are going to come and join us for a bit of a discussion. I think between them, we agreed this morning there's around 40 years of renewable experience between the two of them. Carl, from an engineering and technical side, having worked in the industry for 15 years, he's touched around 200 transactions, I think across the Nordics, primarily in wind, but in a range of other technologies.
Jonas, although he looks young and sprightly today, he's got a few more years experience in the industry and has been 25 years with primarily wind power around Gotland and some of the early developments of wind power in Sweden were handled by Jonas, whether it's greenfield projects, whether it's development opportunities. You'd go to some of the sites that we have in, now sitting down on the southern tip of Gotland, and you see the evolution of wind over 20 or 30 years from old single blade. I don't think we've got a single blade, but 2-bladed turbines up to the modern technology. I think Jonas brings that depth of competence from the industry in Sweden. That coupled with Carl's background from the engineering side, is a fantastic platform for us to grow.
I'll leave it to the two gents to continue.
Thanks, Dan.
Thank you.
We're happy to be here in front of you, and I feel a little bit humble. The two other projects that Dan mentioned that I've touched, all of them, of course, Jonas have already looked at in his career. Very nice to be here with Jonas. As Dan has talked about, we will focus on the organic growth side and why we think Orrön, or we know Orrön is in a very good place to leverage our assets and resources we have in the organic growth side. I think we need the clicker. Jonas, you have that?
You're on the clicker.
We will do this in the form of panel discussion. It's not that we have a lot of slides to show you, but we will talk you through our view on this organic growth. As Dan touched upon in his intro, we see three main pillars here, the peoples, asset, and capital. What has stricken me through the tenure I've been with Orrön is when I started, we had some of these elements in our company. We, like Dan touched upon and Espen will expand on, we have a strong capital base. We had assets we come in with, and certainly people with certain experience with industrial background from building companies. We met Jonas and his team over the summer.
Yes, I mean, we will focus very much on what we do in Sweden. The platform that has been established actually via merging, I mean, we're talking about the two companies, but my background is since 2015 with the Slitevind and Slitevind acquired by Orrön, we merged in September. The beauty of this is what we think that the two organizations can do together. I think we will try to. We have people, we have assets, and we have capital. If we use that in the right way, we can achieve quite a lot. We will try to talk in organic growth and organic growth potential.
We see what we can do with existing assets, and we see what we can do with new projects. If we are lucky, if we can create more values with basis in the people we have, the assets we have, and the capital we can use, if we can do that in Sweden, it's possible that that can be done in other countries as well. Existing assets, we see what we will try to explain as to consolidate. We see competing with the financial investors accepting lower IRRs than we do. We try to avoid that via acting in the niche of small, mid-sized projects.
If we invest in existing turbines, typically operational for five years, five, six years, we love to buy 100%, but we also like to buy 40% out of, say, 10 turbines.
I think that's the beauty of this model that you have been running in Slitevind, and we have since continued on, is that, okay, every single deal, every single producing asset that we have acquired makes sense in itself as a producing asset. But it's really leveraging those I mean, we see when we buy 40% of an asset, we see the opportunities to add our ownership in kinda the consolidating part. We see that we can. It's not only an asset in terms of producing capacity. It's an asset in terms of a grid connection. It's an asset in terms of connection to landowners, land leases that we can build on to leverage that, those producing assets into something beyond the gigawatt- hours or megawatt- hours each single asset produce.
You say, buying a 40% stake, normally we have. The normal case is that we have 5, 6 owners on the other side. It's not that we have 40 and then there is a majority owner at 60. We buy 40, and we become the largest owner in that wind farm. Normally, we operate the full wind farm, and it gives us opportunity to consolidate within that asset. We buy it on the IRR we think that we can reach on the 40%. We add management and operations, and then it increases our opportunities of to consolidate within that existing asset.
I think we, correct me if I'm wrong, Jonas, and Espen will dig into the capital side and which Dan touched upon. You did this very successfully in Slitevind, of course, but I think one thing that we really demonstrated now over the fall and over the winter with the 10 transactions mentioned is the kinda that, combining that with the skills you had and now the assets we have been able to really leverage and make quick returns, quick investments and, yeah, 10 deals in roughly half a year is quite something I think.
Yeah. To buy existing assets to consolidate them via increasing ownership over time, is something we have worked with since 2015. Together with Orrön, and I think that the opportunity of really also what we called extension projects, we haven't really seen that. We have had our hands full, via buying, more into more projects and then increasing ownership. To really what I feel that with Orrön's perspective, see the opportunities in, doing more in existing grid connection, adding, solar, adding batteries to create more values. That is really the perspective I think, year growth.
On the brownfield side, I think maybe that's not typically seen as a organic growth because, okay, it's acquiring new assets for us. But we see it as organic growth as we could not really have done that without the likes of you on board with your network. Like Dan also commented on, we get access to, I mean, co-owners in a project or neighboring projects on Gotland or in Sweden. Through this network, we're able to pick up this kind of off-the-market project that typically they may not have been considering selling them, but we call them up and ask for a coffee and all of a sudden we have 1 GWh more.
It's definitely a different way of growing compared to competing in the larger auctions, in the larger M&A processes.
Then of course, we will come into that on when we talk a little bit more about the people. I think also, again, we have these three pillars with the consolidation and the brownfield and the expansion projects. Can the fourth cornerstone, if you will, I mean, you've been part of Vindkompaniet since the mid-90s, which developed greenfield projects and seen that we have that competence in-house and okay, it's not the near, very near-term generation we will see coming from greenfield, but it definitely makes sense to do it, to add the mid to long-term generation, I think.
Yeah, for us, it has been really the lack of resources. I mean, we have seen the four pillars to increase ownership in existing assets, to expand by adding solar batteries. What more can we do?
Frequency or, ye ah.
Of course, to then enter into new, we still view it as organic growth, buying into smaller, medium-sized projects, and greenfield. We have a greenfield in our DNA, but I would say that it's after the when we join forces that we really see the opportunities of using these opportunities and co-converting them into actually projects that we then in the next step can invest in.
I think one beautiful example on how all of this is also tied together is one of the acquisitions we made in winter where you could see it as a consolidation project, you could see it as a brownfield opportunity. We bought a company which had some 45 GWh of producing assets. Some of it was part of products we already have the ownership in, so we had consolidation in that. That also brought this completely new project into our portfolio. We can build, of course, on that with its new network coming with that, its new grid connections that we can utilize through expansion projects, and basically new competence in the company.
Yeah, I think that constantly growing that network is very important in order to succeed on this organic growth. It's not only I mean, it's a very vital part here in Sweden with the organization, but I think it's also fantastic to see all we're being through the kind of Lundin legacy and the Lundin Group of Companies. We have so many, I mean, Robert mentioned, we have a large shareholder base, so we're being called or getting emails from shareholders telling us that they have land that they could offer for us to build a wind or PV on, or if it makes sense from the finance point of view, but also that we have this international outreach, which brings us opportunities, I think, in that field.
Yeah, we can approach a project from a brownfield. I mean, buying a new product, we can approach it from adding a new technique to existing grid connection because the thing is that we know that solar and wind work very well together. We can via existing, as you said, existing network, the neighboring project is we find land not used, we can start a development project from scratch.
I think we saw this. I mean, you and I met quite early before we joined forces and I realized quite soon that although I'm not a long tenure with Orrön per se, but I saw the same sort of entrepreneurial match in a sense in the. You have created companies, we have bought companies or made other investments with also people that have built companies from scratch. I think that ties very well into the kinda history of the Lundin Energy's history.
Yeah, I think that in future slides, we will show how to combine the different pillars to create growth. Yes, we have in Slitevind from 2015 until 2022, when we actually merged with or when Orrön bought Slitevind in September, we started off with the 75 GWh in production capacity, and then we reached some 450 GWh, which is actually eight years, we average a 25% growth, which is with only actually using two out of the, so to speak, four opportunities. Through that process, we had other co-companies approaching us, and we weren't that interested, and the company, we weren't really for sale. When Orrön came into to the picture, we quite soon felt that it's a good match in terms of the entrepreneurial approach. Then it was fairly easy to, it has been easy to become a part of the Orrön Group or Orrön Energy.
I think on both sides also, it's almost like a childish drive to kind of do something fun and do something great.
And do more.
And do more, or everything, like my kids, more all the time. I think it's fun to see that, okay, we can do the M&As within how we have great connections to get financing, but we also have the technicians right down to the nuts and bolts, and they're kinda some of their assets are their baby or the assets they manage, it's their babies that they want to take care of and kinda brag to the other guys that my asset is producing better than yours.
That setup is needed, being able to do many small-scaled deals. We need to be very efficient in due diligence. We need to be quick. Otherwise, we would have to charge too much money to that specific investments if we were to use external consultants. So the setup we have, we need that setup being able to do a lot of smaller deals. I mean, because these are the ones we are talking about. Of course, there can be more large scale M&A as well, but this is really focused on the growth in more small scaled, the small-scale opportunities.
I think if we look at the, let's say, next pillar then, as we talked about or as Dan explained, today we have 90% of our generation capacity comes from wind. I'm quite certain that the future won't look like that. This is also where we tying back to this kinda leveraging our assets, not being only a generation capacity, but actually being a grid connection or a land lease or land leases and connection. I think we have no certain, let's say, mandate or clear boundaries where we won't go. I'm fairly sure that our focus in the near term at least is still driven by kinda where do we find the lowest cost of energy?
Probably, although we want to, w e are happy to take, let's say, adopt technology early in the, in the process. We would look at probably more commercial, commercialized technology than taking too much of the technology bets. I think it will be interesting to see how our asset base will evolve over the next years.
I think that because we see so many opportunities where we are, we can do more wind. There are more investment to be done in our niche. We can add solar within existing connections, and we can invest, of course, in standalone solar projects that we develop or that we a nd s omeone else develop. If we to that add storage, we would love to. We just want to, f rom our perspective, we just want to get the first solar plant connected within an existing grid connection. We have a very good lead on Näsudden, where we have a lot of wind turbines and where it's sunny. We also want to make a large part of our production fleet available to the frequency market.
What's fun with the frequency market at least, I mean, it's a way where we can add revenue streams to our current portfolio with almost no to little investment, where we can use, for instance, our soon to be Karskruv turbines or MLK turbines into the frequency market already now because they are equipped to deliver balancing services to the grid. But it doesn't stop with those two projects. I mean, we are in dialogue with both our turbine suppliers or turbine manufacturers and the grid companies and so forth on and see, okay, can we use this asset for frequency? Can we use this for frequency? Some are easier than others, but definitely doesn't stop with only Karskruv and MLK.
No, also I think adding more generation, that is of course our core. We want to produce a lot of energy. Investing in storage batteries, it could be other sources as well and entering the frequency market. In parallel, of course, we always want to optimize revenues. It also scale is also fairly important in that sense because we are talking about a lot of units at a normally smaller, not huge average price. I mean, we need a lot of units and then to fine-tune and to optimize revenues. It could be, as you said, it's to participate in the frequency market, but it's also things like being more active when it comes to GOs. I mean, GOs guarantees our region and things like that. Scale is important. We can do more things.
I think all of these generation, the storage frequency, power, revenue optimization, power trading is a little bit interlinked because we see if we look at some of our assets, we will not be able to do a full-on repowering with a larger turbine because they may be in very populated areas or sensitive areas for other reasons. Let's say when in due time or when time comes, it may be that we replace an old turbine, old MW turbine with one single battery, and that battery would then, let's say, prolong the lifetime of that asset, being the grid connection and the land, but kinda enable us to tap into a different revenue stream in that project.
Yes, to use our grid connections for the eternity, so to speak. We will always produce in one way or the other. We will always use the asset in one way or the other.
I guess that's maybe a good transition here because I think that's a very important thing to remember, like when we look back at maybe some of Lundin Energy's production forecast. We have a depleting resource in oil and gas. We have a reservoir where sometimes it ends, but on our assets, we have a never ending resource. We have an internal resource, and our duty is to kind of make sure that we can harvest, utilize that, if not eternal, but, as long as possible. We should never, I mean, although technologies will kind of degrade over time, we need to replace those, we need to optimize the assets, and we should never see a decline in kind of forecast on our generation side, I would say.
Organic growth from our perspective, we buy a project. That is a brownfield acquisition. If it's not 100% owned, it adds a consolidation opportunity that we can then over time exercise. For every new project, I mean, the background with Orrön, two, I would say two assets, it's maybe six, two assets, four opportunities. If we have small scale, we have more assets, it's 30 assets, it's 60 opportunities, assuming that we could add battery or we could add solar. It is a large number of assets gives us more opportunities.
We're soon gonna round up, but I think one thing to mention is that the brownfield and the consolidation that is happening and has been happening all throughout, since we met you guys, basically, or since we joined forces. We are maturing projects on the expansion side, like you mentioned, the Näsudden co-location project. The greenfield, we're also starting and looking at some real firm opportunities on that. Of course, seeing that generation capacity adding to our EBITDA in the end, that will be a little bit a few years ahead, depending on which project you look at. Batteries may have a permitting process of less than a year in Sweden, but wind, 10 years or eight, nine years. Of course, policies can influence that, hopefully to the better, all the time.
Just short, referring back to my background with Slitevind and the eight years and 25% average growth. That was only really exploring brownfield acquisitions and the consolidation opportunities. Of course, 25% is a very high number, that's not what we're saying. We will add more tools with the opportunities of expanding within existing projects and also the greenfield opportunities.
Maybe just then to round out our chat here. Dan talked about we're entering Finland in more heavy fashion and France and Germany. We see no real reason for when doing so, we will make new, we will build a new network of contacts. We will have new assets through this. Although maybe a different starting point with greenfield in France and Germany, that through that network, we will be able to hopefully adopt the same sort of growth platform, strategy on the organic side, even in new markets, I would say.
Yeah, we think that the setup that we have talked about now is actually the setup we have for Sweden. We have the people, we have the assets, we do have the capital. If we are to explore these opportunities and trying to do the same thing in other countries, then actually I think it's time then to dig deeper into the pockets and see what we can do in terms of capital, because then we need even more capital.
That's maybe the transition to you, Espen, who's gonna talk to the capital side of this. Thank you so much.
Thank you, Carl and Jonas. Yes, we need a lot of capital for the growth, and we are indeed fully funded for all our growth plans, our business plans. We will dive a bit more into that through this session. We'll look into our 2022 financials, the actuals versus guidance, and also spend, of course, more time on the outlook guides for 2023 and onwards. I'm sure you will see as we go through these slides that the company is in a very, very robust financial situation and provides us with a lot of flexibility and opportunity that we can act on going forward. Just a few highlights describing our portfolio, our company at the moment.
We have a portfolio consisting of long life assets, where the majority of these assets are positioned in the regions, where historically we have achieved the premium pricing compared to the average system price in the Nordics. Of course, that will increase even further as we get Karskruv on stream at the end of this year. As Daniel mentioned, we have full discretion when it comes to capital spend from the end of this year. The only firm capital commitment that we have left now is related to the Karskruv development, where we will have the remaining CapEx throughout this year to get that project on stream late 2023. Beyond that, we have full discretion.
No firm capital commitments, and we have full flexibility to adjust our spend according to prevailing market conditions, according to the opportunity set that we have. Obviously, the capital that we will spend on greenfield and new initiatives that we have announced today, it will be, we will only invest in projects and initiatives that we are convinced will create a significant shareholder value, but it will also be at least for the first few years, very different scale compared to the CapEx that we have for Karskruv in 2023. The sum of this, I mean, long life assets, premium price regions, full flexibility on capital commitments, no firm capital commitments from 2024 onwards, means that we will have. We are very well positioned to have a very strong long-term cash flow generation.
This is further improved by tax balances, which we'll touch upon later in the presentation. We have big tax balances, especially in Sweden, where most of our revenues are coming from, meaning that sort of the after-tax cash flow, the amount of EBITDA that we are converting into free cash flow for further growth and shareholder value, will be very high going forward. We are not expecting to be in a tax-paying position for quite a few years, especially in Sweden. Of course, all this then, when you add all this together, we have a very significant debt capacity to fund the growth, which provides the flexibility we need to follow up on initiatives that we think will create shareholder value long term.
Currently, based on our current portfolio, based on our current assets, we see a debt capacity north of $250 million. Obviously, as we go along and do acquisitions and acquire cash flow generating assets, that debt capacity will increase over time. Just wrapping up on the fourth quarter 2022 and second half, a few financial highlights. I mentioned it already. Daniel mentioned it. We had a power generation of 168 GWh during the fourth quarter. Also a significant increase compared to Q3, so a doubling versus Q3, driven by the fact that Q4 had three months of contribution from our acquisitions. Sort of full quarter, which is representative for our portfolio going forward.
168 GWh at a realized electricity price of EUR 88. Very strong price realization, sort of in a historical context. We also observed quite high sort of cannibalization and price volatility during the quarter, which we'll also touch upon a bit more in detail. All in, you know, very high and strong price realizations during the fourth quarter and second half. We had CapEx of $7 million and operating expenses of $3 million for the fourth quarter, both coming in, you know, in line with guidance or below for the second half.
We also, for the second half of 2022, looking at the period from when we pivoted into being a renewables company from end June, we've seen strong cash generation with our CFFO or cash flow from operating activities on a consolidated basis of $90 million and a proportionate EBITDA, so the EBITDA generated from our net ownership in our assets of $21 million for the second half. All this resulted in us ending the year with a very low net debt, so ending the year with very low leverage, $13 million on net debt on a proportionate basis.
As mentioned, we see, you know, a debt capacity of north of $250 million, providing the flexibility we need to follow up on, you know, further organic and inorganic growth as we see the opportunities arise. Just quickly on our 2022 outcome versus guidance and also how our outlook is for 2023. Just starting with the conclusion, we delivered ahead of guidance for 2022 on all items. We had operating costs below what we initially expected for the second half. G&A was in line. Then we also spent less on the Sudan legal costs than what we're guiding for the second half of 2022. Then also CapEx, as mentioned, $7 million below what we were expecting, mainly impacted by some phasing and currency impacts.
The corresponding outlook for 2023 is a guide operating cost of EUR 12 million-EUR 14 million. We'll touch upon that in a bit more detail later in the presentation. We see G&A of EUR 10 million, excluding non-cash items. Sudan legal cost of EUR 8 million and a CapEx of EUR 80 million, which we'll also discuss more in a separate slide. With the lion's share of those EUR 80 million being related to the Karskruv development, which I said, which is the final year of sort of Karskruv CapEx this year before it comes on stream late late this year. Here we're showing some key financial metrics, revenue and EBITDA on a proportionate basis, and then the CFFO consolidated, or as we report in our financial statements.
Firstly, on revenue from electricity generation, as we mentioned, we had a doubling of power generation from Q3 to Q4. We also saw a lower realized price of half of what we had in the preceding quarter. All in sort of flat development in revenue from electricity generation from the third quarter into the fourth quarter. $15.3 million for the fourth quarter, leading to an EBITDA of $9.7 million. Slightly lower EBITDA in Q4 versus Q3 because we had some higher costs also linked to the higher volumes. Everything was according to plan and guidance as we saw in the previous slide. A very strong cash flow generation.
We had cash from operating activities of $13.7 million for Q4, significant up from Q3, which is due to the fact that Q4, as I said. First quarter with full contribution from the acquisitions that we did since in June 2022. It was also positively impacted by working capital impact. Bit more details on our price realization for the fourth quarter of 2022. You can see the first bar to the left, that's the average system price in the Nordics for Q4. That was EUR 135 per megawatt-hour. The fact, as I mentioned, that our assets are located in regions where we enjoy a premium to the system price, lifted sort of our spot price for our assets by EUR 10 per megawatt-hour to EUR 145.
Before we have those items affecting our price and leads to the all-in realized price. The first one being hedging. We had EUR 14 per MWh of negative impacts from hedging during fourth quarter. These are hedged contracts that are linked to acquisitions. Important to note that for 2023, these hedges, they represent less than 5% of our production volume. We don't have any hedged contracts maturing after 2023. We see this as a very sort of temporary and low impact for 2023. As Daniel mentioned, sort of our current strategy and policy is to stay full merchant. That's what we'll continue to do going forward.
We'll have this hedging impact, albeit, smaller than what we see in Q4, rolling, continuing into 2023, but rolling off as we go towards the end of the year. There was a high price levy introduced in Norway, in late September last year, impacting our Leikanger hydropower assets, and reducing our all-in realized price by EUR 1. We have a capture price discount of EUR 42, which was sort of historically high actually in Q4 last year, driven by very high underlying prices and also high volatility. The capture price discount is, you know, easily explained, it's just the timing impact is the fact that the majority of our electricity in some periods are generated when the realized prices or the prices are lower than the period's average.
So the pure timing of what the price the impact of what the prices are when we produce compared to the average for the period. In Q4, as I said, abnormally high impact of EUR 42. Again, that is driven by the high underlying prices. The all-in realized price, and that's what matters at the end of the day, still really strong at EUR 88 per megawatt-hour for fourth quarter. Just no additional sort of level of detail when it comes to the capture price discount, as I mentioned. Here we have looked into the history of how that has evolved in the past. The Swedish average capture price discount for onshore wind is marked by the red circles in the chart.
You can see that especially for 2022, it has been sort of unprecedented compared to previous years. Please then keep in mind that how the prevailing price environment is. The yellow line is the system price for the same periods, before the capture price discount, and the green bars is then the realized system price if you deduct the capture price discount. Yes, we have had high capture price discount during 2022, and especially then the second half. As I said before, it's also driven by the very, very high underlying prices and high volatility. All in, we're also realizing very strong pricing. As I said, that's what driving our cash flow and our revenues at the end of the day as we are full merchant.
This slide shows our underlying cash flow generation for the fourth quarter. Due to the fact that we have a couple of assets where we are in joint ventures, we think this is the sort of most, you know, best proxy for a cash flow potential that our assets can generate during any period in time. Start off with the revenue. We had $17.3 million of revenues for the fourth quarter, including other income. We had operating costs. G&A, as previously explained or mentioned as, it was as planned or actually below guidance for the operating costs. Leading to an EBITDA of $10.5 million for Q4, when we exclude non-cash items.
Q4, we had the current tax of $0.6 million, which was significantly lower than the preceding quarter. We had a quite high current tax in Q3. This is driven by the fact that we are only in cash paying position for our Leikanger asset in Norway. That being a run-of-river hydropower plant to have high seasonality and output, typically significantly higher production in Q2 and Q3. Our Q4 current tax was very low. Leading them to an operating cash flow just shy of $10 million for Q4. That's the underlying cash flow generated to us from all the assets where we have our ownership in.
Our costs, that's funding is the net we had net interest expense, we had the CapEx. Meaning that all in operating cash flow after all our costs are paid for, and also after the CapEx that went into our Karskruv, our sort of future production was positive for the quarter at $3 million. Underlying positives are the free cash flow after also investments into new generations. A very good outcome for the fourth quarter. We have a look at how that sort of then transponds into our cash position and liquidity. We'll look into that on this slide and the following. End Q3, we had a cash position of $62 million.
We had a cash flow from operating activities, as mentioned, of $14 million during Q4, of which $5 million is related to positive working capital changes. We had investments into new generations of the Karskruv development, $7 million for Q4. We made acquisitions of $29 million. Those are acquisitions that we announced in conjunction with the Q3 release in November last year, mainly the Siral, Lilla Årås, and Näsudden, totaling $29 million. These are acquisitions that are increasing our power generation capacity significantly and will contribute, you know, in a very good manner to our cash flow the coming years, all being in our view, very, very good and value-creative transactions.
We had still having some sort of impacts from the E&P transaction that Daniel mentioned that were closed in June last year. This is sort of the last bit. It will be very limited from Q1 onwards. The $16 million of CFFO from our discontinued operations is related to sort of a ordinary settlement related to that transactions, which I said closed back in June. We don't expect any large impacts going forward. We had an increase in debt of $4 million and some small other impacts, leading to a year-end net cash position of $29 million when we ended 2022. How does that translate into net debt? We had then, as I mentioned, the cash position year-end of $29 million.
We have a debt position of $60 million, and then we have $18 million of cash in our joint ventures, which then leads to a very low total net debt position of $13 million. Compared to, as I said, the debt capacity of $250 million provides us with a lot of headroom, a lot of availability, and flexibility when it comes to liquidity. Currently, as you can see there on the chart, we currently total liquidity of more than $100 million. We are in the midst of refinancing our external debt due to the fact that they were put in place for the acquisitions initially.
We're now working to replace that with a facility of, you know, larger size and also a longer maturity, which we will conclude before summer. I mentioned tax balances earlier. This shows what they total in each country in each jurisdiction where we have operations. We have tax balances related to the CapEx that we had in each country, related to the development of the assets. We also have, for Sweden, we have, you know, the future CapEx, the CapEx that we will invest in 2023 for Karskruv. We also have a loss carry forward position in Sweden related to previous years' costs, which we can utilize for tax purposes going forward.
This means that for Finland, and in particular for Sweden, we don't expect to be in a tax-paying position for quite a few years, which means that we will have, I mean, this is a significant boost to our cash flow. As I said, a very large portion of our EBITDA generation is then converted into after-tax cash flow as we sort of have these massive tax savings year by year. In Norway, we are actually in a tax-paying position. That's more a technicality since your tax balances are depreciated over many years, over a very long period of time. That is the only region, only asset where we will be paying tax sort of short to medium term. On the CapEx side, I mentioned that we have a guidance for next year of EUR 80 million.
The majority of that is related to the Karskruv development. As I said, this is the last year of costs related to Karskruv, and we don't have any commitments then, any firm commitments from 2024 onwards, and full flexibility in terms of what we are investing in from next year and in the future. We expect a slight overweight for the first half of 2023 when it comes to CapEx, but eventually this is sort of driven by the by how the development project sort of proceeds. This is how we forecast it. Quite evenly distributed, but a small slight overweight on first half and then EUR 80 million in total, where we also allocated a portion to greenfield investments, the initiatives that we announced in the report today.
Daniel mentioned sort of the initiatives from governments across Europe. We have seen increased taxes. We've seen surtaxes. We've seen some high price levies being introduced on the back of the historical high electricity prices we've had over the last 18 months. We are sharing the details here, and also then on the same slide showing how large portion of our 2023 power generation that relates to each of the three countries where these tax changes actually have an impact on our cash flow. I think the key takeaways here is that all these measures that have been introduced are temporary. Like for Sweden, it will last from March to June in this year at the longest. It might be shorter. For Finland, it's 2023.
In Norway, the high price levy is expected to be removed before 2025. Temporary measures, compared to, you know, very long life asset base of decades of production. Secondly, most of our power generation and cash flow comes from Sweden, it's definitely Sweden which has the least impact on our cash flow if you look at these tax changes since it's a very high price cap of EUR 180, it only lasts from March to June.
Thirdly, I mean, these, the price caps, the limits where the surtaxes and the levies are actually kicking in, are at very, very high levels, you know, compared to historical prices and very high levels compared to sort of our you know, the prices we require to achieve significant returns on our investments and projects. All in all, we think this is, we see this as having minimal impact on our overall value and cash flow generation due to, as I said, the composition of our revenue and how these proposal are for the three different countries. Our operating cost guidance for 2023 is EUR 12 million-EUR 14 million.
The reason that we are providing a range is due to the fact that a portion of our operating cost base is linked to prices or volumes. As you can see in the pie chart on the right-hand side, marked in red, the components of our cost base which have a link to price and/or volumes. If we're assuming a price range on an achieved price between EUR 70 -EUR 125 per megawatt-hour for 2023, we expect to be in the EUR 12 million-EUR 14 million range on operating costs. In addition to the price link, there's also the sensitivity related to volume. Higher volumes will typically increase our operating costs.
There we see that, plus minus 10% in volumes is expected to have, EUR 1 million corresponding impact on operating costs for 2023. If you take all of this together, all sort of the components of the guidance and the outlook and bring it together into a cash flow outlook for 2023, we are expecting at achieved prices from EUR 70-EUR 125 per megawatt-hour to generate an EBITDA of between EUR 25 million and EUR 70 million for 2023, as mentioned. To bridge from EBITDA to the free cash flow, you need to deduct what we expect to have on payable tax in 2023, which is EUR 9 million, and that's related to the 2022 result from Leikanger.
We are paying, we will pay tax in 2023 based on the 2022 result and similarly for 2024 going forward. EUR 9 million is what we expect for 2023 cash outflow. We also expect to have a net finance expense in the order of EUR 6 million, including costs related to refinancing. That's taken into account there. If you then bridge from EBITDA to the free cash flow pre- CapEx, we expect at the same price range to achieve free cash flow between EUR 10 million-EUR 55 million depending on whether we realize the price of EUR 70 or EUR 125 for the full year on average. I think it's very important to note that from 2024, we will have a 40% increase in production.
We know that that production will come from Karskruv, which is in SE4, the sort of the southern price region in Sweden with premium pricing and also lower operating costs than the rest of the portfolio. As we have mentioned a few times, full discretion on capital spend from 2024 onwards, meaning that we have full flexibility, and we will adjust according to market conditions and opportunity set, and obviously only invest into projects which we, where we are convinced it will create value for our shareholders. In combining also with the tax balances as we touched upon, I mean, we have a very strong outlook in terms of long-term cash flow for decades to come.
We think, you know, we have a very, very strong basis to create a lot of shareholder value. This also gives us, you know, significant flexibility in terms of pursuing our growth strategy, both organic and inorganic. With that, I'll leave the word to Daniel for some concluding remarks.
Thanks, Espen. I think we'll move very quickly into Q&A and wrap up the session. Orrön's had a fantastic start as a company. I think rolling back to only six or seven months ago when we first started as a renewable company. We've established a platform in Sweden. We've grown production from 300 GWh to 800 GWh. We'll continue that growth to 1.1 TWh, and we've got a fantastic outlook in terms of cash generation and debt position to be able to grow. Today, we've planted a few more seeds in terms of that growth platform, so we continue doing what we're doing in Sweden. We take that model and spread it out to a few more jurisdictions, and we keep spreading our footprint across Europe. It gives us a fantastic platform for moving forwards.
We're delivering on everything we set out to achieve in the summer of last year, whether that's mergers and acquisitions, whether it's consolidation opportunities, new projects, greenfield opportunities. Finally, we are fully funded. We don't need to step into equity markets or raise financing to meet our ambition level. I think testament to us being a unique investment opportunity, the market opened today, and we traded 3 or 4 million shares within the first hour of opening. We were 20 million shares traded today, I think. I haven't checked recently, but I think we're one of the most traded stocks on the Nasdaq today. So it gives investors and shareholders the ability to step in and out of the stock. It gives you fantastic liquidity, which for the size of company we are, we don't see elsewhere in the market.
When you couple that with the backing from Lundin family, the growth outlook that we have and the capital flexibility we have, I think you do have a unique energy transition investment where you can play power prices, you can look at growth and upsides, you can look at this entrepreneurial vision stepping into the industry in a different way where we hope to create value for shareholder in the, in the years to come. With that, I think I'll pass back to Robert and invite the rest of the presenters up, and we'll move into Q&A.
Thank you very much. As Daniel said, if all the presenters come up here. Espen as well. Fantastic. Thank you for listening to that presentation. Now we get into the interesting part here with the Q&A. I hope we'll have a lot of good questions, certainly some coming in from the webcast attendants. We have a microphone that we'll be passing through the room. Wait for the microphone to arrive so everyone can hear the question, also the ones participating online. I think it's nice if you could state your name and the institution or if you're a private investor, so we know who's asking the question from the room at least. With that, hands up. Any questions? Yeah. I think we start with Naish in front here. There's a microphone coming.
Hey, everyone. Can you hear me? Yeah. Naisheng Cui from Barclays. I'm an equity research analyst. Thank you, Dan and team, for the detailed presentation. I have a long list of questions, but let me start with three, if that's okay. The first one is on your organic growth strategy. I just want to understand what triggered that because there are some very big players with stronger balance sheet, with large economical skills. There are some local players with decades of experience. I just want to understand what's your comparative advantage there. The second question is around your pricing strategy because your net debt will grow with capacity growth, but you don't know the power price in two to three years. Will you consider PPA price? That's part one.
Part B is just going to slide 8 of your presentation, your EBITDA guidance for 2023. For that EUR 25 million-EUR 70 million guidance there, you assume a power price of EUR 70-EUR 125 per megawatt-hour achieved. I look at the power price spot is around EUR 80 , forward curve around EUR 60 . I just wonder how you feel about that. What's your discount rate you applied over there? That's second question. The third question, just wonder if we can get an update on the Sudan legal case. Thank you.
No problem. I'll start with some of those. I've had to jot them down, Naish, 'cause there's a few questions in there. No problem. I think organic growth, kind of this model's been worked for decades in the Lundin Group, is to step into assets where you potentially see more value than other players in the market. If I step into some of the assets, we bought Lundin Energy, for instance. We stepped into five or six people who had an exploration portfolio and turned it into a multi-billion dollar company. Why can't Shell do that? Why can't Exxon do that? Why can't others do that? They absolutely can. There's other players in the market who can follow that same journey.
I think we're bringing a team, and you saw a bit of the competence we have in the team today from operating the assets all the way through to financing and doing deals and looking at these assets critically to find avenues where we can put more value through them. I look at a grid connection, why are we not using that grid connection to its maximum capacity? Why are we not adding new technologies there? When I look at developers can't easily own a producing asset. Financial players can't own assets that don't necessarily have PPA and full structured finance behind them, yet we can step into all of those things. Distressed assets, sometimes they don't fit within the balance sheet of a major financial player.
I think our advantage is we come in with a different mindset into this industry with a very entrepreneurial view to go and create value where others potentially don't see value. I think there's been decades of doing that within the Lundin Group, which adds to our competitive advantage, I think, in that domain. I think I'll deal with PPA, and then I'll pass to Espen for debt and pricing. My view on PPAs, I don't think we will step into PPAs today. If I look at the long term or our long-term outlook for power pricing, I still don't necessarily see PPAs trading at where we see the fundamentals on power price. When that gets to the same level, maybe we will step into PPAs.
If you look at some of the major transactions we look at, if we put our balance sheet under stress, we potentially need from a risk-reducing measure, we need to lock up some of the pricing to ensure the company stays healthy and sound throughout that. We're not in that place today. Actually, what you've seen on the slides today is we're not. Although we're looking at large-scale M&A, actually what we're doing is value creation from its grassroots level, where we're building portfolios, we're building opportunities with smaller bites. At this stage, we don't have a balance sheet that's under stress, which means we don't need the hedging to go and lock up the power price.
If we look back through the last two years, had we placed a hedge in place at the end of 2020, we'd be out of the money hugely in 2021. Had we done it on the record pricing that was there at the end of 2021, we'd been out of the money in 2022. I have no idea where power price is going to go in the future. From a risk perspective, we need to manage our balance sheet at the right level to make sure we don't put the company under stress. Debt levels, pricing, discount rates.
When it comes to debt, and you're right, Naish. I mean, we expect our net debt to increase in 2023 obviously because of the cost of CapEx. We have a CapEx guidance, as you see, of EUR 80 million. Comparing that to the cash flow generation that our portfolio has the potential to produce, and especially taking into account that we're increasing from 800 GWh to 1.1 TWh at the end of this year, I mean, we will also delever very, very quickly. The CapEx, the cost of CapEx in itself is a very, very small component compared to our debt capacity, the debt capacity our portfolio has today.
Of course, when it comes to debt levels, I mean, it's a bit related to Dan's comment that we are managing and we need and we will manage our balance sheet in a conservative way because we have also a strategy and policy of being full merchant. Also means that we need to withstand periods of lower prices as well to be able to capture the periods of super profits when the prices are high. Yeah, when it comes to price assumptions, I mean, yes, we are fully aware that, I mean, there's been extreme volatility lately and of course, the future curves are moving, can move 20%, 30%, 40% within a day or two or a week.
That's also why we are providing a range, so it's easier for you to sort of see how the, how the sensitivity plays. Of course, we monitor this, you know, very closely and we look at all scenarios when we do our internal financial planning to ensure that we have the liquidity headroom that we need and which we are very comfortable with.
Looking at pricing, SE4 pricing today, for instance, was 100 EUR a MWh for the full year going forward. I have no idea where we're going to land through the course of the year. We'll be higher likely in the winter than some of the summer, but we're still seeing strong pricing on the futures market today.
Just wondering, what's your assumption on the capture price discount for 2023?
Well, when we refer to the EUR 70-EUR 125, that's an achieved price. All-in achieved. in there you have blend, then you have the regional differentials, and you have the capture price discount already. it's sort of irrelevant for the, for the cash flow range that we are providing since everything is already reflected in there. As I said, we expect sort of periods of very high capture price discount. We also expect to go partly hand in hand with very high underlying prices. I mean, we're already seeing throughout January, lower capture price discount compared to the extremes of Q4. But for the guidance that we have provided today, the spread of cashflow outlook for 2023, the capture price is kinda sort of irrelevant because it's an all-in achieved price.
Very clear. Thank you.
Thank you. I think, Dan, there was also a question an update for the Sudan legal case.
Oh, yeah. The, the Sudan legal case, I think the first thing to note on the Sudan case is that in our view, the, and our legal team's view is that once we get the case into a court in front of a reasonable set of judges, I think we will prevail in that. The individuals that have been accused have done nothing wrong. We've gone through all of the 70,000 odd pages of evidence with a range of legal teams, our strong position is that in the fullness of time, in front of a reasonable set of judges, we will prevail. Notwithstanding that, we will end up in trial in September of this year, 5th of September, in the district courts, and we need to let this process happen within the Swedish court system.
The guidance we've shown here takes into account that, ultimately, once we finish in the district court, assuming we're successful and the case stops, then our exposure to the legal case will disappear. Important to note that the company is defending the individuals. The company's not actually on trial. Once the individuals are acquitted, the entire case will disappear for company and individuals, so.
Thank you. I think we continue with more questions here. Saw some hands up. Niclas is next up, I believe.
Hi. Yes. Niclas Wahlstrom , Pareto Securities, covering Orrön here. Just to start off, I want to talk a bit, maybe specifically Daniel, about your shift towards looking at greenfield projects. When you started Orrön, there was a lot of focus on looking at brownfield investments and the potential gain in re-returns from looking at that. Could you maybe talk a bit about why specifically you are focusing more now on the near term on greenfield?
I think when we started, you're absolutely right. We looked at brownfield M&A to increase the scale of power generation, which is the core of what we want to do. It became very relevant very quickly, and I think Jonas and Carl touched on it, that every single owner we were speaking to then wanted to open the door for additional land, additional turbines, additional opportunities. We've got connections through the Lundin Group to landowners in the Nordics as well that have opened the door for greenfield projects. Naturally, not even changing our view on greenfield, we're already seeing greenfield opportunities coming into the mix at the end of last year.
We're starting to explore that because there's a, If I look at some of the value created in the developer space, OX 2 being a fantastic example, there's a lot of value to be created in that space through following some certain strategies in the greenfield domain. We spent a lot of time last year. We looked at a whole range of things on M&A last year, brownfield, greenfield, portfolios, smaller opportunities, and we found that the value expectation for some of the greenfield developers with a platform was significantly higher than we were willing to pay given the return frame, the all-in return framework.
When I look at the multiples that they've made on the invested capital versus where they've got to over a very short period of time, it's clear that we have the skills and ability through the teams that we have to go and explore that part of the market. Through that phase, end of last year, we've managed to sign a few deals with small development teams to help us go and grow that business. Whether it was greenfield, brownfield, our view is our business model has to be everything from project origination all the way through to repowering life extension, and there's value to be created all the way along that framework. As we move into France and Germany, the initial step is greenfield because that's the opportunity that we've found to start.
Very quickly, we'll bolt on, like Jonas and the team have been doing in Sweden, we'll bolt on the rest of the, the organic growth model into that seed that we've planted.
Okay, great. excellent. As a follow-up question on these greenfield opportunities, you talked a bit about permitting and tying in different types of operations. How does it look like for the lead times in permitting, for example, adding on a solar park or adding on a battery storage for an existing wind park? Could you maybe talk a bit more about that?
Shorter. We do see much shorter lead times on solar. I mean, one thing is the grid connection, and the grid connection we already have, and then it's the permitting left, so to speak. Depending on if we start off from scratch then. We are, I would say, more 12-24 months when it comes to processes like that. Wind is longer. Now it's the Swedish perspective primarily.
I guess it's also a point on looking at adding solar to already our existing assets where the regional area is already kinda industrialized through the wind turbines. Obviously, it's a lower threshold for those sort of expansion projects than a completely new greenfield in a high-value agricultural landscape. Looking at kinda, w e look at some opportunities that are completely greenfield but in already industrialized areas and there, the willingness from the authorities is much, let's say, higher or they're more keen to develop those sorts of projects than going into a more high-value agricultural land, for instance. So it depends. Also with the jurisdictions, like we talked about in wind, for instance, in just seeing Finland compared to Sweden, it's almost half the time in Finland on greenfields, so.
As a follow-up question on that, how much do you potentially reduce upfront investments for one of these projects compared to as if you had to build it from scratch without an existing grid, without an existing infrastructure in place already? How much value is there to be gained? Something you can maybe give some flavor on, try to understand that.
I guess we have to look at that from many different perspectives. When we do the expansion projects, we have a certain gain, of course, in that we have infrastructure already established and, like grid connection, transformer stations already built. We may need to expand it, but, certainly lower, let's say, upfront investment. I mean, in short, the development expenditures on especially solar and battery is much less than on wind, and even on wind, the development expenditures is quite limited. Okay, we need to do a wind resource campaign if we're diligent on the wind side, but on solar, it's not that complicated. On battery, we see that you can go from origination of a project to permit in less than 12 months, basically. Obviously, that influences the DevEx.
It's quite low capital in, kind of capital commitments in the development phase until you reach a certain, step and, then we only proceed if it makes sense from a-.
We also see some benefit regarding OpEx as well. I mean, yes, lower DevEx, if we have the grid connection. If we can use an existing grid connection, it is a substantial part of the CapEx. We see some upside also on the OpEx side to use to combine solar and wind or batteries and wind.
Okay, great. Thank you. I have a barrage of questions. I can keep on going, so if anyone wants to interrupt me, please raise your hand. Otherwise, I'll maybe take a couple of key questions and maybe hand over to someone else. I just am really excited about the idea of repowering, maybe just focus on that question first. What opportunities exactly are you seeing with repowering on your existing assets and how do you see that playing out?
I mean, it's well, there are a wide range of opportunities. Like I said, we have some assets today, in more close vicinity to where people live, where it will be certainly more difficult if we want to pursue the avenue of replacing it with a 1 MW turbine or 0.5 MW turbine with the likes of the one, the full scale size of the ones we have on the table. There it may be more interesting for us to go with battery or solar, where maybe a higher acceptance for that. Certainly, I mean, Näsudden is a perfect example of. That's Sweden's largest repowering project to date. For those of you who join the site visit tomorrow, you'll learn more about it then.
That's a really beautiful example where it's a project which was developed in the '70s, '80s. Basically, I can't remember how many turbines it was, but I think it was close to 60 that has turned to roughly 30 turbines and power generation from half as many turbines is four times the original amount. I mean, in areas where it makes sense to change old small turbines with larger, we see a great leverage in that if we're able to replace them with something bigger. If we're not, we can find battery applications, storage arbitrage, we can find PV applications or other storage solutions.
We will do a lot of repowering, but I think the main thing is that we present a toolbox actually, which means that we can create a lot of value, and we can use the site for a very long period of time. If that is via life extension, via more large-scale repowering, or via adding other technologies, that is a different thing I think. It also has to do with timing. I mean, repowering is great, but the gear should be worn out before you actually conduct the repowering so that we use the each asset as long as we can. Also in terms of permitting that, it's also a timing question. Yes, we can do some. We have some potential in repowering, and we have more tools to create value.
Maybe a short on that life extension, because let's differentiate between life extension and repowering.
Yeah.
We also do initiatives where in order to prolong the lifetime of an asset, you can do a rotor change. You don't change the characteristics of the turbine, so it won't necessarily produce more, but you can run it for a longer period. We can take since we have 175 turbines or something in our portfolio, we can take components from a worn out turbine, replace it in a new one, and that competence we also possess in the company to do that, so.
When you look at brownfield M&A, we're buying the lifetime of the asset and all of this comes for free on the back. Some of the best returns are going to be extending the lifetime of an asset which you haven't paid for or extending the power generation out of an existing turbine by putting bigger blades on the existing turbine and not touching the environmental permit or pulling the whole site down and repowering with either the same technology or others.
Just a final follow-on question before I let other people speak as well. How do up-front investments compare between extending lifetime and between upgrading, for example, for a higher megawatt rating for a turbine? How do those two compare?
Permitting is one thing. I mean, it's lifetime extension could be easier if you don't have to upgrade. As soon as you want a bigger rotor or a higher tower, you need more time to apply for new permits. But otherwise, I mean, it's we add all the conditions and then we decide if it could also be, I mean, a very realistic scenario is that we start with a lifetime extension and then we, 10 years later, it's time for repowering. It's a long-term view on each asset.
Different conditions on each one. You don't know exactly where you're going to go on permits, on extension. I think economics, simply on a spreadsheet, the best economics are probably to repower the thing. To step out of all of the turbines, put large-scale brand new turbines up there. We may have constraints on either wind conditions or permitting or other things, which may mean that that site's better suited, like Jonas said, to a different technology. It depends on every single site. I think you can rest assured that we'll pick the most economic option that's possible within the constraints we have.
Yeah. The key is that we have the competence and knowledge to choose. I think that is key.
Great. Excellent. I will hand over maybe to someone else if, check other questions, otherwise we can come back to me.
Thank you, Niclas, for a very thorough set of questions. Appreciate that. I think we have a question here. Okay, here we have. Yeah. Thank you.
Thomas here from SpareBank 1 Markets . Good afternoon, and thanks for a great presentation. Talking about greenfield projects, do you see any reliefs on the CapEx side moving forward?
Hard to say. If I look at the political landscape that's changed over the last 12 months, price caps coming in, IRA coming in in the U.S., the EU trying to match that same position, I have no idea where we're going to go in terms of the political landscape and reliefs on CapEx, et cetera. I think it's clear to see inflation on CapEx is coming, that's for sure. We've seen that. Maybe we're tailing off a little bit now in terms of inflation interest rates, so we won't see the costs going through the roof beyond here. The ambition of the EU, U.S. globally to build out this renewable framework means there's going to be support to ensure that this moves forward. In terms of reliefs on CapEx, I have no idea where this is gonna go.
I think we just, w e will test every investment when we get to that point to see what makes sense, and if it makes sense, depending on the framework in front of us, we'll invest.
Would you consider Chinese turbines?
We have looked at some brownfield Chinese turbines. We've looked at other opportunities. I think you've got to balance in any procurement decision around this, you've got to balance the cost, quality, and guarantees versus the economic returns. I think there's opportunity to look at it all. Where we've tended to focus is probably on the tier one suppliers. There's not so many of those around.
No. Seeing Ming Yang list in London, they're probably coming, more of them. Will you consider farm downs as an option if the price is good enough? I mean we see
Absolutely
... some pretty high multiple transactions lately.
Absolutely. Cloudberry stepped into a portfolio on Friday last week at multiples twice what we're picking up some things for because it was a large enough scale. You look at MLK and Karskruv, some of the biggest assets in Finland, MLK being the third-largest asset, wind asset in Finland. Absolutely, farm downs are an option, and everything's for sale at the right price. I think we have to look at the portfolio, we have to look at our appetite for investment and how we raise capital to fund that. Stepping into farm downs on assets, starting greenfield opportunities where we potentially farm down 50% or a portion of that, absolutely all those options are on the table.
Okay, thanks a lot.
Thank you. I think we have the next question from Shane here. Have a question? Yes.
Shane Chaplin, from Swedbank Robur. I'm sustainability analyst, there. Just wondering about when you get into renewable energy space, you're essentially in a business which is to do with the weather, and that's super exciting. There we start to talk about climate scenarios and the changing climate, and I'm just wondering where sort of that knowledge sits in the company and how you sort of plan in the future to take account of those sorts of risks. Too much wind, too little wind, ice storms, too much heat, fires, so on and so forth. There's a whole range of different things now which are gonna be different in the future. Companies need to stay on top of this. Have you had discussions about that, and how are you thinking there?
Yeah. Maybe we take it in two parts. Maybe I take the risk piece, and then I'll pass to Carl for the weather forecast. At least the weather, the weather management side of things. I think absolutely we're looking at this when we put together a production guidance, for instance, in an, in a, in other industries, you can get a feel for what your production guidance should be. All we can do is set what the capacity is of the turbines, for instance, if we focus on wind, and look at historical averages to forecast what the future should be. From quarter to quarter, we're gonna see the weather changing massively. Who knows exactly what's gonna change? If the Gulf Stream changes direction, we may see completely different conditions across Europe.
Our view in terms of a risk profile is we need to be spread geographically, and we need to be spread technology-wise. If I look at wind, solar, batteries as three key technologies across a range of jurisdictions, then we should be out of a local weather impact. If, if globally across Europe, the wind speed drops by 10% or 15%, well, that's going to impact our business. The same if the sun irradiation drops by a significant percent, it's going to impact our business. I think from a business risk perspective, we're overweight in wind, and we're overweight in Sweden today in terms of the portfolio, which is why you see us spreading out a little bit more in both technology and geography. Maybe weather, looking at weather.
There are so many elements to this. You could look, you could look from different perspectives, but, of course, turbines that I mean, we have 90% wind turbines and 10% hydropower turbines at the moment. The wind turbines are, of course, designed and certified according to IEC rules, according to extreme and ultimate loads, of course, over time with if climate is changing or if not, climate, depending on how climate is changing, that kind of the thresholds for what the turbines have been certified for maybe the, those occurrences will occur more frequently, of course. That's something that it takes time to fully understand the impact of this, of course.
I think what's clear is that we see these bigger extremes year to year on this and, kind of what we can do to try to save, keep what we have, of course, is to operate them as, make sure we assess the technical integrity of the turbine as good as possible. If you look at from a flip side, if should the wind, average wind over time reduce with 10%, then it's like your car, it will run 10% less mileage, right? Then you can actually operate them for longer. There are so many elements on this that you kinda, you know, simplified of course, but there are absolutely a safety element to keeping the turbines technically sound and safe.
Luckily, they are not manned turbines except for when we do turbine and service and maintenance. Of course it's something to consider when developing new projects and managing our current assets.
We need to monitor so that we can adjust because, I mean, different makes shut down at 25 meter per second, another 23 meter, and we have some 27 meter per second. That can be adjusted if we have more extreme winds. We need to monitor, we can adjust. It's also important to take into account when we're talking about lifetime extensions, because if the turbine is designed for some extreme parameters and they 25, 20 years later, we see that they have had the outcome is different compared to the design, of course we that will make an impact on what we have to do when it comes to life extension as well.
Thanks very much. I have a couple more if that's okay. In terms of other constraints like electricity grid build out, for example, where there's so much talk about that in Sweden at the moment, and other countries are in, you know, can be in similar positions as well. That's one thing to be able to put up the generating infrastructure, but it has to get connected and this is coming in now, this whole sort of, you know, critical minerals sort of debate and copper availability and so on. An awful lot of, you know, cabling and so on that's required. Also other material supply constraints. The winners in this sort of game tend to be the ones that can secure those supply chains in the best possible way. Do you have any comments on those aspects?
Yeah. If we start with copper, it's lucky that Lundin family and Lundin Group have got some of the best copper deposits in the world in the group. They're invested for the long term in the transition. I think grid's a fantastic question 'cause that's one of the biggest challenges beyond permitting that we see today. When we apply for a grid connection date for a large scale project, in some countries it could be five or 10 years before we even see the ability to connect a new project. It's absolutely that, and permitting is absolutely something that's putting huge constraint on our ability to build out this renewable journey. I think the grid operators are under huge pressure to put that infrastructure in place to allow the energy transition to continue.
We focused initially on the brownfield acquisition because they already have grid connections, they're already feeding in, and you're feeding into a market where it's not today oversaturated with renewable energy. That's why we started where we started and we've taken a slightly different view to say, if I've got a grid connection, how do I use it to its maximum potential? Which is why Näsudden we're hopefully sanctioning sooner solar project where if I look at the wind, and Carl and Johan has touched on it, if I look at the wind profile, I'm less windy during the day and I'm less windy during the summer, which is the exact opposite for solar. Putting small scale solar against some of our existing wind means I don't need new grid, I don't need new capacity. I'm just using the existing at its potential.
We're looking at that across our portfolio. As we step into greenfield, absolutely some of the constraints we're gonna find on permitting and grid will mean that piece of work for us to build a greenfield project pipeline may take longer than what we see in the market today.
On the grid side also, I mean, we see definitely that constraint, but we see also innovation coming into that sector with better monitoring tools for the grid donors to understand at any given moment how much the grid is utilized. If they can, let's say, push the limits further, when with the help of those technologies, it would be even bigger opportunity to be able to utilize our existing grid assets, which, that has, like we talked about, it has become evident that that's a clear asset in itself, that grid connection, that grid capacity we have reserved in our assets, basically.
Supply chain for sure is an issue. If I roll back the last two years just focusing on wind again, Vestas, Siemens, all of the major players have had either profit warnings, provisions for some of the warranty claims or delays to installation. That coupled with CapEx increases means the supply chain, I think for renewable assets is under pressure. I think we have to remember with Orrön, we're not a massive offshore wind putting multi-gigawatts of offshore wind to bear like some of the major players. A lot of what we see in the news is around the large scale kind of renewable projects absolutely supply chain issues are there. For us, we're just shy of 400 MW in store capacity.
A gigawatt already more than doubles the size of the company. We don't need a lot of projects to double or triple the size of the company today. As we get bigger and bigger, I think scale is an issue where you start to face up against some of these challenges. That's why I think we need to spread our footprint, not only in just power generation and brand new projects, but into acquiring and developing brownfield and repowering, but also stepping into storage and frequency services where you step into another part of the market, which is going to evolve over the next five or 10 years. From a pure Orrön perspective, I think we're relatively small compared to where the large scale and supply chain issues are.
If we can spread our footprint a little bit more, then we diversify against some of those risks.
Excellent. Okay, last one, then I'll hand the mic over. I'm gonna attempt as a sustainability analyst here to ask a finance-oriented question, so it should be an easy one for you to answer. What's, y ou can tell I'm an old risk consultant here as well, but what's the risk of power price decoupling from gas prices? 'Cause that's currently what's keeping power prices high in Europe, and you could even argue the world. There's been some discussion in governments and certainly a push from consumers to say, "Well, look, renewable energy isn't sort of got this high cost of generation or, you know, raw material costs like gas has, for example.
Why should these prices be coupled and what can we do to decouple them to sort of give some relief to consumers?" Is that a risk in your space, and how do you see that playing out over time?
Yeah. I think whether it's the decoupling or the structural changes in power markets, for sure it's a risk for every renewable player that's merchant exposed. I think that's a risk. I think every government has struggled with that in 2022 when we've seen the ballooning prices. Every government's tried to do something to deal with that. If I take some confidence from where the EU set the power price cap for inframarginal generators, they set it at a level of EUR 180 per megawatt- hour. You're still at a level where there's decent returns to be made and at that level you can still invest in offshore wind, you can still invest in some of the kind of new storage technologies, so batteries work at that level.
Hydrogen, maybe hydrogen ammonia and some of the alternate fuels maybe get closer to break even at that level. If the EU is only setting inframarginal at EUR 180, it still has a lot of headroom compared to where we're seeing the break even of our assets today. In my mind, I don't ever see the EU or the decoupling forcing pricing down to EUR 20 or EUR 30 a megawatt hour. It probably still needs some gap to allow the capital to flow into the market and develop the technology that we need.
Thanks very much.
Thank you, Shane. I think we have a question up in front here from Rutger.
Rutger Smith, I'm a private investor. Now Lundin family and Norway has been a good match in history. From what I understand, there's been effectively a sort of moratorium on wind power in Norway. Is that going to end anytime soon?
I don't know. I might let my Norwegian colleague talk about the political and societal landscape in Norway. It's clear today that Norway is relatively shut to onshore wind. I think they're looking at offshore wind in a much bigger way, that's a lot more acceptable. The space to go and invest in onshore wind from a permitting perspective is very, very difficult. Secondly, with some of the tax rates in Norway, if we look at pricing above EUR 70 a megawatt-hour, we're actually taxed more in the renewable domain with a marginal tax rate of 90% compared to the oil and gas domain, which is lower. For me, the landscape in Norway isn't really that favorable for renewable investment today in what we're trying to do.
Yeah, I think that, I mean, that's a good summary. I think you're right. It was a de facto moratorium for a few years. I think it started accelerating and moving again in 2022. These tax changes that were proposed in the fall of 2022 was a major setback. I think sort of taking a few steps back. Could be opportunities. I mean, there's now a period of sort of a pause and sort of a period of repricing, taking into account the new policy, the new tax environment, and there might be opportunities going forward.
I think we're positioned to move in Norway, but I think our focus is more towards Finland and some of the southern states at this stage because the opportunity is much greater there.
There was some positive signs, so to speak, coming quite recently from the Energy Commission, I think it was called, and talking a little bit about the opportunity to develop wind energy then in more industrialized or already used areas, roadside wind energy, more small scale, which may be perhaps a way forward to unlock some of some new onshore wind development in Norway.
Okay. I think we have a follow-up question from Naish.
Yeah, I have two follow-up questions, if that's okay. Dan, just wonder if you can talk about your 2023 acquisition target. Do you have a capacity target you want to do? How much money you want to spend on acquisition?
No.
Perfect. Number two, probably for Espen, EBITDA margin. I did a calculation. I think EBITDA margin is around 65%, even excluding the Sudan legal case. I appreciate that there's a lot of M&A transactions going on, probably EBITDA margin is a bit lower. What do you see is a long-term EBITDA margin or what do you want to achieve?
Maybe I'll elaborate a bit more on the M&A piece and the targets for growth. I think from inception, we've purposely not established a target for growth and instead set a target based on shareholder return. I think we have to invest in projects where we see strong return, a strong return framework, and that means we need to be a bit more agile and opportunistic around which sectors of the market we step into and which sizes and what pace we invest at. You can easily blow all of our financial firepower at 4% or 5% or 6% rate of return and get some fantastic scale, but make no money for shareholders in the meantime. We should be judged on the rates of return on the individual projects we invest in.
Sometimes that's gonna move really quickly 'cause there's a lot of opportunity, and sometimes it's going to be a bit slower. For me, there is no growth target. We have to get bigger. We have to broaden our footprint geographically, technology-wise, scale-wise. It's going to be different in each market depending on returns.
Yeah. No, thanks, Naish, and good question on the EBITDA margin. I think, if you exclude the Sudan legal cost and all else equal, our EBITDA margin should improve in 2024 as Karskruv comes on stream. As I mentioned, that has lower OpEx than the rest of the portfolio and also adds even more capacity in a high-price region. Secondly, over time, with our organic and inorganic growth strategy, I mean, our growth will outpace our growth in G&A. Those two elements should bode for increasing EBITDA margins going forward, you know, at a, at a certain electricity price.
Very clear. Thank you.
Thank you. I realize that I made a promise here in the beginning that I won't be able to hold, that we could conclude this in under 2 hours, but it's thanks to all the great questions that keep coming in. I think we keep going and we have some more questions in the room, and we have some questions from the audience online as well. Did we have a, another question here? Niclas, follow up.
Yes. Just a little bit of the near-term focus and specifically investing to greenfield. How far away are potential projects you're looking at? Do you put like a cap on the timeline when it comes to greenfield? For next year, you said there was no CapEx allocated towards greenfield specifically, if I remember correctly. What's the sort of timeline we can expect for both 2023 in terms of brownfielding and also in terms of greenfield and how long, far away, in the future those projects are?
I'll maybe touch the greenfield strategy. You can touch on the CapEx.
Yeah.
Maybe brownfield with our experts over here. I think greenfield, we have to be patient on the greenfield side. Projects, we can't just suddenly go and say in six months' time we're going to start a greenfield, large-scale greenfield project and get it online. When I look at the greenfield pipeline, we have the ability to sell projects when we have land and grid, we can monetize a project. We can take it all the way from that stage to ready to build, where we've got land, we've got grid, we've got permits, we've got design, et cetera, get to ready to build. We can take it all the way through to FID. We can take it all the way through to production. There's different value to be created along that entire pathway.
Maybe we monetize some projects early and see a very quick return on our capital invested. Other projects will take all the way through to development and online, which is gonna take a much longer period. I think we should be a little bit patient with the greenfield side. That said, the mix of projects we have when we look at greenfield within existing assets, some of those we're hoping to be online already next year. Some of the greenfield that we're looking on industrial sites and through other connections, the permitting landscape shouldn't be kind of five years or so that we see in onshore wind. It should be much shorter because we've already used some of that land industrially.
Our view on the greenfield is to have a spread of activities where we have both small scale and large scale, and we have a spread of timing such that some projects are coming on sooner, some are coming on later. For a pure greenfield strategy, I think we have to be a little bit patient to see that return coming through. CapEx?
Yeah. In our 2023 guidance of EUR 80, we have allocated a portion to greenfield, a small portion, a single digit. I guess that's also a bit of the beauty with the greenfield, that we have a lot of optionality, and we can scale it up and down according to sort of market environment and the opportunities that we have. It is we expect to be sort of in the EUR 5 million-EUR 7 million range for 2023.
Is that maybe potentially looking at a smaller sort of solar park addition to your portfolio? What kind of investment in greenfield is it specifically that you think you could get a good return on from a smaller investment?
It depends. We're looking at some smaller investments, which are strong economics, much lower CapEx, all the way through to gigawatt projects. When we're talking very early stage gigawatt projects, you're talking about man-hour rates for a period of time. It's mostly G&A cost with a small amount on solar, with a small amount of technical costs, whether it's feasibility or grid studies or whatever else. There's a mix of things in that $5 million-$7 million range from the small scale projects we're looking at in Sweden, all the way through to large scale gigawatt projects. Mixed range of things.
Okay, great. Just a final clarifying question. When it comes to the OpEx that you've sort of allocated in the guidance for 2023, is there any of Karskruv that's included into that? Karskruv should reflect anything in 2023 at this stage?
No. In our operating guidance and also in our production guidance, there's no contribution from Karskruv. That starts January 2024.
We're ahead at the moment on Karskruv. There's a potential that it comes into 2023. That'll be upside compared to the guidance we've put forward here.
That's relating back to the supply chain issue. Actually we will see turbines being delivered to Karskruv already in April. They start to roll in and start to erect in May. We don't expect-
Significantly ahead of schedule.
Yeah. We don't expect any supply chain crunch on Karskruv, which is very satisfying given the today's environment.
Okay, great. I think that's all from me. Thank you.
Thank you, Niclas. If no further questions from the audience here. We have one question a little bit back here. Microphone is coming. Mattias.
Okay, excellent. Thank you. Mattias Ehrenborg from Redeye. I'm curious, I think that Daniel ended up saying that you, Jonas, have nearly 25 years of experience from wind power here in Sweden, and also from-.
Did he say that?
Around the figure.
Yeah.
Maybe it was 15. I don't remember.
That's correct. No, it's actually 25+ , yes, it's correct.
Yeah. That includes Slitevind, where you acquired wind assets, producing electricity and selling it.
Yeah.
Prior to that, if I'm not completely mistaken, I think you used to develop projects as well from greenfield.
Yes.
With the Gotland being one of the windiest sites in Sweden, I think it's fair to say you have some good market insights. Having all this background, what opportunities are you most excited about going forward?
It's a different environment for me. It is the mixture that we have presented, people, assets and capital. It is actually to continue where we are to optimize existing assets and to do more greenfield. I mean, we are in it for the long run. As long as today to add when we talking greenfield to add solar and batteries with shorter lead times, that is exciting.
One could hope that the processes for wind can ease up over time, so that we don't need to spend seven to 10 years when it comes to greenfield development on wind. Actually what we talked about creating values out from the assets we have. A 1 TWh, I mean, with the Slitevind perspective, it's like 0.5 GWh , sorry, 500 GWh that we have acquired over time, and that is our platform. Things can be done also with the Karskruv and MLK assets. It's a really exciting platform we have for future growth.
Also, what were the main reasons that you decided to come along on this journey with Orrön? I suppose you could have just stopped working for Slitevind and thanking no this journey because I suppose I mean, the pace that Orrön is moving is quite high. Maybe not as high as in Slitevind, but you seem really energetic and excited about this opportunity.
Yeah. No, I'm really excited. The reason is that these are nice people to work with.
I mean, I think it was so fun when we met you. I mean, Jonas is a deal maker. While we were driving around, two deals were being made with local people on Gotland. I think that's-
We were doing due diligence. We went to the sites for due diligence, and he's speaking to farmers and plumbers to buy assets, so.
Yeah. Yeah, that is actually one of the. Yeah, that's true. That's true. I can confirm that.
I think.
We closed the deal.
We take away some of the constraints you had. To do a deal, you had to raise capital, you had to raise equity, and then you had to go and convince the deal to happen and then go and operate it and finance it. Now you can just do deals. Espen does the financing. The legal work is done by Henrika.
Yeah, actually, I don't have time to be here. I would like to get to work.
Okay, thank you.
Thank you.
Thank you very much.
I can stand here for
Yeah . One question here from Mikael in the back of the room. Microphone is coming. Hold on.
Yes, no problem. Thanks. Very good presentation. Thank you very much. Daniel, you said 10 acquisitions. I know about seven. Yes. Tell me.
Långås was the eighth. Eight asset transactions. Starting or asset and portfolio company transactions. The seven you know about last year. The report today, Långås was the eighth, which was done a number of weeks ago, but in Q1. Then we've signed two agreements with one to enter into Finland with a, an experienced individual who's going to work with us to build the portfolio in Finland alongside Jonas and the team. Another one with the greenfield development teams that are going to be running in France and Germany. They're the additional two deals that we signed is to bring that portfolio together outside of Sweden to go and look at some additional competence, some additional strong teams who can help us build the business outside of the Swedish business that we've built. Eight inside Jonas' regime and Swedish empire, then, within Finland, France, and Germany, two more.
Great answer. Thank you.
Thank you, Mikael. I think with that, we should take some questions from our, the webcast attendance as well. Fortunately, a lot of them have already been answered, so that's good. Let's kick off with a question that comes from Eivind Garvik at Carnegie. He would like to, you to talk a little bit about the new investigation from the Swedish government into onshore wind and that could lead to an increased cost for asset owners, which basically deals with increased contribution to local communities.
Yeah. Maybe, maybe it's two parts, so maybe I'll pass to Jonas for the, for the local piece. I think anything that gets the community more engaged with the renewable assets is a good thing. When we look at the constraints we have on permitting and the vetoes that come from the local municipalities because of a lack of benefit or engagement from the community side into the renewable generators that are being put in, I think I welcome some of those changes, and the landscape probably needs to shift a little bit. Cost base, again, I don't know where power prices are gonna go and cost bases are going to go, but the debate from Sweden does put a little bit more cost and land lease or kind of benefit to society on the back of the producer. That needs to be taken into account in the economics of the decision at the time.
In terms of local contribution, that is in our DNA, that's the way we've been operating from the beginning. We do offset. It's not a, it's not huge amount, but over time, it becomes substantial amounts. Actually, Näsudden is a good example because we have on top of the land lease, we do offset money to the local community. After 10 years, the local community use the funds to invest in wind power. The local community is actually a part owner in two of the wind farms at Näsudden, besides us. We work on those bases already.
Thank you, Jonas. Yeah, I think as a general comment, we welcome a common framework for contribution to the local society. That's something that we see as very positive. The next question also comes from Eivind Garvik at Carnegie. How can you achieve double-digit IRR on renewable investments? I assume that this only take into account in-house greenfield development. What kind of long-term power prices do you use when calculating your IRRs?
Yeah. I think double digits, we're seeing that in some of the brownfield investments we're making. Certainly greenfield, if we start from scratch, we can probably see double-digit unlevered IRRs all the way through. Pricing-wise, we use a range of long-term pricing between, say, EUR 40 and EUR 80 a megawatt-hour long-term, average around EUR 60. In that range, we can still see fantastic double-digit returns from brownfield acquisitions.
I think just to add to that, we're not talking double digits IRR, taking into account the additionality of consolidation or expanding the projects or any of the organic growth. We are talking about that standalone on the acquisitions we make.
Large scale, I think the question probably comes from large scale greenfield, you're never gonna see double-digit IRRs in this market.
Right.
We haven't done any of those type of transactions because we can't see the value creation, so we're focusing on the parts of the industry where we think we can create value.
Thank you. We have a couple of questions on dividends. Will Orrön pay a dividend, and when will we pay a dividend?
I'd love to pay a dividend. I think we've got too many opportunities in front of us to create more value. I think the dividend question is something for the future, not for today. I don't see a mandate in the short term to start paying dividends from this vehicle.
Thank you. We also have quite a few questions on the capture price discount. Do you see that increasing over time? I mean, we have dealt with it, but may be worth saying a few more words on capture price discount and the way we see the development going forward.
No, I, it's a complex matter of course, and have several sort of variables impacting it. I think the very high, the extremely high, the unprecedented capture price discount that we saw during Q4 and Q3 of 2022 also needs to be looked upon in the context of record high prices, record high underlying prices and volatility, which clearly drives the capture price discount as well, and also then on the flip side, leads to higher realized prices for us. Of course, I mean, the capture price discount, there will always be a capture price discount as long as you have intermittent supply in the energy mix. That's here to stay.
We think the sort of the unprecedented levels of the second half of last year is, was mostly driven by the high prices and high volatility. We've seen, as I said, we've seen it easing into January already.
It's something we take into account in all of our forecasts. We'll look at where the market is, where pricing is, and the numbers that we present, both short term and long term. We'll take a view on capture price discount into the mix.
Also the diversification of our asset base, I think will help with that, with adding solar to the wind base. We see our hydropower plant had a positive profile cost in a given month, right? It illustrates a little bit the different characteristics in a certain scenario, right? The more diversified portfolio we have, the better hopefully we can optimize that definitely.
Thank you. We've also had a few questions on financing. We've spoken about financing, but there are specific questions if we see any reasons why we would do a rights issue in the near or mid-term future. I think Espen is well placed to answer that.
Yeah. No, I guess a very short question is no. I mean, we don't have any plans, and we don't have any need to tap into equity at all. I mean, as we mentioned, we don't see access to capital. When I say access to capital, I mean debt capital. We don't see that as a limiting factor for our growth plans going forward. No is the answer. Yeah.
We have a few questions around the guided price, the price used for our assumption of EUR 70-EUR 125 per megawatt- hour. The spot price is now in the lower end of that. We have spoken about that, but maybe worth talking a few words more about this since we get quite a few questions on it.
Yeah. Maybe I'll touch market. You can touch on the guidance. I think if we roll back to December last year, that same forecast was over EUR 200 a megawatt-hour for the coming year. We've seen it come off a little bit in January, we're seeing Nordic system price maybe around that EUR 70-EUR 80 level. If we look at SE4, for instance, we're up over $100 today for the next year. What we've tried to do is give an indication of a range of outcomes with a range of pricing. I don't know where we're going to land, but that range should give investors and shareholders a view on where we're going to generate cash at different pricing.
Yeah. Just to follow up, I mean, I guess we have been quite transparent around sort of the variables impacting 2023 cash flow. Given the range and how that sensitivity or how that range impacts the low and the high case, on our cash flows, I think you can sort of extrapolate that in case of other assumptions. As I mentioned also in my presentation, you also need to keep in mind that the majority of our production is in high price regions, which of course also plays positively into our realized prices.
Thank you, Espen. One more question here from the webcast audience, I see we have one more in the room. This is, you need to look into your crystal ball now. When could Orrön Energy achieve an EBITDA of EUR 100 million on a full year basis?
Over to you to power price.
No, I mean, well, our strategy is growth, both inorganically and organic. I mean, we are adding, We will be keep on adding production capacity, high margin, assets. Of course, I mean, it's definitely within reach, shortly given, and also strong pricing of course. I mean, just on the growth piece, I mean, our parameter, what we are chasing, when we are talking about growth is of course value. I mean, that's what we are, value is sort of the number one criteria, not sort of gigawatt-hour growth in itself.
Thank you. I think we have one final question here that comes from the room in Stockholm, and it's from Rutger. He's, t he microphone is on the other side there. Thank you.
Rutger Smith. The word has not been mentioned, but I take it hedges are not on the horizon. Is that it?
At the moment, no. We're always looking. We're always looking each month, each week at where pricing settles. If we see the opportunity to hedge long-term significantly higher than where we see the market, we may step into it. At this stage, there's absolutely no need, and we don't know exactly where the market's gonna be. While those conditions exist and our balance sheet and debt levels remain strong, then there's no kind of intention to hedge for the company just now.
Thank you, Rutger. I don't think we have any more questions now, but as you know, we're always available. It's not just this Q&A, don't hesitate to reach out to myself or to my colleagues and we will try to answer any questions you have. I think this has been very useful. Sorry for running over time a little bit. We'll do better next year maybe. We will certainly come back and meet you again. Plenty of opportunities during the year in the new capital markets in day in 2024. Thank you very much.
Thank you.
Thank you.
Thank you.
Thank you.