Good day, and thank you for standing by. Welcome to the Ignitis Group Nine-Month 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one, one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one, one again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link anytime during the conference. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today. Speakers, you may begin.
Good afternoon, ladies and gentlemen, and welcome to Ignitis Group earnings call for the first nine months of 2024. Thank you for joining us today. I'm Ainė Riffel-Grinkevičienė, Head of Investor Relations, and I will moderate today's presentation, during which the CEO and CFO of Ignitis Group will present the strategic and financial performance for the reporting period. This will be followed by a question-and-answer session. Before we begin, I would like to remind you that today's presentation contains forward-looking statements that are subject to risks and uncertainties. These statements are based on the management's current beliefs, expectations, and assumptions, and actual results may differ materially from those expressed or implied. With that, I would like to hand over to Darius to start with the strategic highlights.
Good afternoon, everyone. Let me start with the highlights of the first nine months of 2024. First, on our strategy delivery, we continued to expand our green capacity portfolio, in total adding around 600 MW to 7.7 GW, of which we increased both secured and installed capacity. On top of that, we achieved significant milestones when delivering the projects. The first power to the grid was supplied in the second Silesia and Kelmė wind farms, and the final investment decision on Tume Solar Farm was made. Next, on our sustainability efforts, our green share of generation amounted to 83.6%. We reduced CO2 emissions by 34.5%. Our recorded total recordable injury rate is below the target threshold, both for employees and contractors, and we maintain high rankings in ESG ratings.
And finally, on our financial performance, we increased our Adjusted EBITDA by 15% to EUR 397 million, maintained a strong balance sheet, as evidenced by S&P affirmation of our BBB plus credit rating with a stable outlook. Also, for six months of 2024, we proposed to distribute a dividend of EUR 0.663 per share . In line with our dividend policy, we have paid dividends for the first half of this year. And following the strong performance of our green capacity segment, we increased our full year 2024 Adjusted EBITDA guidance and updated investment guidance. Let me now take a closer look at each of the highlights. As just mentioned so far, this year we increased our green capacity portfolio by around 600 MW, from 7.1 gigawatt to 7.7 gigawatt.
This is mainly due to the greenfield capacity additions, as we secured land for development of hybrid projects in Latvia and secured grid connection capacity for our first BESS projects in Lithuania. We also increased our secured capacity by around 200 MW, from 2.9 GW to 3.1 GW. As Tume Solar Farm in Latvia has reached a construction phase, and compared to the end of 2023, we increased our installed capacity by around 100 MW, from 1.3 GW to 1.4 GW. And three of our projects reached commercial operation date: Silesia Wind Farm in Poland, Vilnius HP Biomass Unit, and Tauragė Solar Farm, both in Lithuania. In terms of the breakdown of our portfolio, it continues to be dominated by wind projects with a share of 4.6 GW.
Most of the projects are being developed in Lithuania, accounting for 4.5 GW, and the generation part represents the largest part of our portfolio with a capacity of 6.3 GW. Next, our progress on project execution. In addition to two projects, 300 MW Kelmė Wind Farm in Lithuania and 137 MW Silesia Wind Farm in Poland, are progressing on schedule, with construction underway and electricity already being generated, and a final investment decision made for the 174 MW Tume Solar Farm in Latvia. After the reporting period, we took decisions to participate in Lithuania's second 700 MW offshore wind tender and seek partners. Previously, the tender did not convene due to the limited number of participants. The second tender is set to begin on 18 November 2024, and the National Energy Regulatory Council should announce the winner by the end of April 2025.
Finally, on our progress towards sustainability, we increased our net electricity generated by 35% year over year to 1.89 terawatt-hours as the result of the generation of our new green capacity assets, such as Mažeikiai and first Silesia Wind Farms, as well as Vilnius HP Biomass Unit. Despite that, our green share of generation decreased by 5.3 percentage points to 83.6% due to the proportionally higher electricity generation of our reserve capacity asset, Elektrėnai Complex. On our greenhouse gas emissions, our market-based total emissions increased by 19.7% year over year, mainly due to the increase in out-of-scope biogenic emissions from Vilnius HP Biomass Unit's operations. Despite that, we reduced our CO2 emissions by 34.5% due to the use of renewable energy guarantees of origin for the share of Kruonis PSHP electricity consumption and share of electricity distribution networks.
Next, on the safety, our employee and contractor total recordable injury rate stands at 1.18 and 0.37, respectively, both below the target threshold. Also, there are no fatal accidents we recorded. And lastly, on ESG ratings and rankings, we continue to maintain high rankings compared to our utility peers. I will now conclude the strategic performance review and hand over to Jonas for the financials.
Thank you, Darius. Let me start with the financial highlights for the first nine months of 2024. We have again delivered a strong set of results. Adjusted EBITDA increased by 15% and adjusted net profit by 10.5%, driven by better results in green capacities and network segments. Our investments remained at historically high levels and amounted to EUR 583.7 million. Return on capital employed increased to 10.3%, mainly due to the growth in adjusted EBITDA. Leverage metrics remained strong, with FFO to net debt at 34.2% and net debt to adjusted EBITDA at 2.7 times. Accordingly, S&P has reaffirmed the group's BBB+ credit rating with a stable outlook. Finally, the extraordinary general meeting held in September made a decision to distribute a dividend of EUR 0.663 per share, or EUR 48 million in total for the first half of 2024, fully in line with the dividend policy.
Now, let's take a closer look at each of our main KPIs, starting with adjusted EBITDA, which grew by 15% and reached EUR 397 million. Green capacity EBITDA grew by 17% to EUR 181 million as a result of new asset launches and higher captured electricity prices due to the flexibility of our assets. Network EBITDA grew as well and reached EUR 165.6 million, mainly due to higher RAB as a result of continued investments into our electricity network and higher regulatory WACC, which reflects a higher interest rate environment. It also includes a temporary volume effect that will reverse in the last quarter of the year. Reserve capacity generated EUR 36.7 million EBITDA, which is lower by EUR 1.6 million compared to last year. Customers and solutions EBITDA was lower by EUR 9.8 million and drops to EUR 11.1 million, driven by lower B2B natural gas supply EBITDA.
The negative impact was partly offset by lower loss from B2C electricity supply in Lithuania and better B2B electricity supply results in Latvia and Poland. Next, let's deep dive into the EBITDA of each segment, starting with green capacities. It remains the largest contributor to the group's adjusted EBITDA, accounting for 45.6% of the total. The main drivers behind 17% growth year over year were these: firstly, the launch of new assets, Mažeikiai Wind Farm and Vilnius HP Biomass Unit in Lithuania, and Silesia I Wind Farm in Poland. Secondly, higher captured electricity prices, mainly due to the flexibility of our assets. Thirdly, higher electricity volumes driven by Kruonis pumped storage plant due to higher price fluctuations in the market. However, the growth was partly offset by OpEx increase as a result of continued intensive expansion.
Moving on to the network segment, the main reasons behind Adjusted EBITDA growth in this segment were as follows: a temporary volumes effect, which will reverse during the last quarter of the year. Higher WACC set by the regulator, which increased from 4.1%-5.1% in 2023-2024, reflecting the higher interest rate environment. And a higher regulated asset base, which increased by 10.8% from EUR1.4-EUR1.6 billion as a result of continued investments into the electricity network. Worth mentioning that after the reporting period, the regulator set the allowed income levels for 2025, which includes RAB growth of 13.3% to EUR1.8 billion, reflecting a continued investment program, and WACC growth of up to 5.8%.
Next, in the reserve capacity segment, we delivered strong performance in both the first nine months of 2024 and 2023, as we utilized optionality to earn additional return in the market on top of the regulated return. However, due to extraordinary market conditions in Q1 2023, year over year, EBITDA decreased from EUR 38.3 million to EUR 36.7 million. Lastly, customers and solutions adjusted EBITDA was lower by EUR 9.8 million year over year and amounted to EUR 11.1 million, driven by several factors. The decrease was driven by lower B2B natural gas supply results, however, it was partly offset by lower loss from B2C electricity supply activities and better B2B electricity supply results in Latvia and Poland.
Next, investments. Our investments amounted to EUR 583.7 million and remained at the historically high levels, despite a year-over-year decrease of 7.9%. 57% of our investments were made in green capacities and 37% in the network segment.
Green capacity investments amounted to EUR 335.2 million and recorded a decrease of 7.4%, mainly because of the successful completion of several major projects: Silesia Wind Farm 1 and Vilnius HP Biomass Unit, while Silesia Wind Farm 2 has reached its final development stage, with COD expected in Q1 of 2025. In the network segment, we invested EUR 217.1 million, mainly in electricity network expansion and maintenance. The investments decreased year over year by 12% due to a smart meter installation project approaching completion. Turning to our net working capital numbers, it has decreased by 46.4% since September of 2023 and by 33.7% since December 2023, down to EUR 116.2 million at the end of Q3 2024. The main drivers for lower net working capital were lower trade receivables, mainly due to lower energy prices and lower volume sold, and lower other amounts receivable.
Adding it all together, our free cash flow metric was negative but better than expected and amounted to EUR 124.5 million as a result of investments made exceeding adjusted EBITDA and net working capital change. Next, our leverage metrics. Our net debt increased by 10% and stood at EUR 1.4 billion at the end of Q3 2024. FFO to net debt improved to 34.2%, well above the 23% threshold of S&P credit ratings agency required for BBB plus credit rating. Net debt to adjusted EBITDA remained stable at 2.7 times. As a result, S&P has reaffirmed our BBB plus credit rating with a stable outlook. Finally, our guidance for 2024. Following our better-than-expected performance in the first 9 months of the year, we increased our full-year adjusted EBITDA guidance to between EUR 480 and 500 million. There are no changes in the directional adjusted EBITDA guidance for business segments.
In terms of investment guidance for this year, we updated it to between EUR 750 and 900 million. This is mainly due to the timing effects of our green capacities investments. With that, I hand over the word to Darius.
Thank you, Jonas. Now, let me summarize Ignitis Group's performance in the nine months of 2024. On our strategic performance, we continued to expand our green capacities portfolio, in total adding around 600 MW to 7.7 GW, of which we increased both the secured and installed capacity. On top of that, we achieved significant milestones when delivering the projects: the first power-to-the-grid was supplied in the second Silesia and Kelmė Wind Farms, and the final investment decision on Tume Solar Farm was made. Next, on our sustainability initiatives, our green share of generation amounted to 83.6%. We reduced CO2 emissions by 34.5%, recorded a total recordable injury rate below the target threshold both for employees and contractors, and maintained high rankings in ESG ratings.
And finally, on our financial performance, we increased our adjusted EBITDA by 15% to EUR 397 million, ensured a strong balance sheet witnessed by the affirmation of BBB with a stable outlook credit rating by S&P. In line with our dividend policy, we paid dividends for the first half of this year, and following the strong performance of our green capacity segment, we increased our full-year 2024 adjusted EBITDA guidance and updated investment guidance. With that, I would like to thank you for listening to us today.
Thank you to the speakers. We will now open the floor to questions. Our first question is: In Q3, green capacity saw electricity production surge by 31% year over year and revenue growth by 13.7% year over year, while EBITDA was just up by 2.4%. Could you please provide a bit more granularity on Modus' EBITDA development during that period?
Yeah, so in short, I mean, the trend on EBITDA is positive, and on top of it, we had the explanation for this difference in growth rates lies in the OPEX, and there are two things in our OPEX. So one part is one-off expenses related mainly to our project financing exercises, which we've been running this quarter, and the second one is related to OPEX increase in relation to organizational build-out, so effectively hiring new people for projects which are currently in development.
Next question we have is: Did Ignitis have to purchase more substantial than usual amounts of electricity from the market to fulfill its PPA commitments in Q3?
So in general, the rule we apply is to secure around 60% or between 60% and 70% of wind or solar plant generation with base load offtake agreements, which means that there is quite a substantial buffer included in there. And in this quarter, we haven't seen any deviations from the historical levels of buying additional power in the market.
Next question: Did Ignitis get hurt by deepened wind profile discounts in the market when selling electricity in the core markets, merchant exposure?
Yeah, so in short, we are seeing bigger capture discounts in the Baltic markets, but that was expected by us, so it's not a surprise to us. However, what was a positive surprise was on the Polish side. There actually, especially for the projects with CFD tariffs, we are seeing quite low capture rate discounts. So overall, when we look at the portfolio level, capture discounts have been even lower than we expected, mainly due to the Polish market.
Next question we received is as follows: Could you please indicate what average prices you are signing new PPAs at?
Yeah, so in terms of new PPAs, so this quarter we had one sizable external PPA signed, and we can't disclose the exact level due to conditions of that agreement, but we continue to sign them at the levels which meet our return requirements.
Next question: Given that bond yields trend down and power prices seem to stabilize, do you register high interest in asset rotation deals from potential investors when one can reasonably expect more news?
So I will answer this one shortly. We don't have any updates on our asset rotation plans, and as usual, we will communicate to the market only when we sign binding agreements.
The following question: Considering the revised and narrowed investment CapEx to between EUR 750 to 900 million for next year, for this year, can we expect a higher dividend growth rate than the anticipated 3% per year?
Regarding the dividend policy, what we can say is that we remain fully committed to our dividend policy, which means at least 3% growth rate every year, and that's what we intend to stick to.
Next question again on the investment: Could you provide any guidance on the potential investment range for 2025?
For 2025, we'll be communicating our guidance together with the annual results, so beginning of next year. The best guidance as it stands right now is our most recent strategic plan, which indicates the level of investments for the four-year period, from which you can expect more or less similar investment level as in 2024.
Our next question: Given the negative free cash flow for 2023 and 2024, do you expect to reach neutral or positive free cash flow by the time of the plan for gigawatt of green energy in 2030?
So in terms of free cash flow, so 2030 is probably a reasonable year to expect free cash flow to be positive. That being said, we don't have such a target per se to have free cash flow positive. So we approach it in a way that we want to balance our investment program, our dividend policy, and our credit metrics. So as long as these are balanced and ensure our shareholders happy, creditors happy, and investment plans in place, we are okay to proceed in that format. And if we find projects, we continue to find projects with positive value creation to our shareholders, we will continue doing them. If we don't find those projects, we will not do them and return cash to the shareholders.
Next question: How did testing phase before commercial production works? Does Silesia II and Kelmė projects produce at market price during testing phase? Are during the testing all the turbines working?
Yeah, so yes, they produce at the market rate, and the testing usually works, that there is a ramp-up, so we start with the first turbine, then the second gets connected, the third one, fourth one, etc., so it is a gradual increase in the testing revenues, so when we start, the first power usually is produced with one turbine and then gradually until COD reaches full capacity.
Following question: The decrease on investments made, is that temporary?
Yeah, so the investment guidance update is a result of timing effect. So there were no changes in the projects which we decided to do. The change is just that some of the payments will take place later. So it is a timing effect. That's why we updated the investment guidance for this year.
Our next question: Tume Solar Farm is planned with solar tracking system. Is it one-axis or two-axis tracking? What is the planned yearly production from one kW?
Yes, so the production, the load factor which we expect from Tume ranges between 13% and 14%. And whether it's single-axis or two, I would need to check with my technical team. So we can get back to you on this one.
That concludes today's earnings call. If you have any follow-up questions, please don't hesitate to reach out to our investor relations team. Thank you all again for joining us today, and we look forward to speaking to you at our next earnings call.
This concludes today's conference call. Thank you for participating. You may now disconnect.