Good morning, ladies and gentlemen. It's my pleasure to welcome you to the Q1 and half-year results conference of Photon Energy Group. As usual, we will guide you through the presentation. To my left is our CFO, David Forth, and myself, Georg Hotar, the CEO. Just a little technical information. Some of the invitations had a link to that presenter link of our webcast. Some of you, when you log in, are presenter and not attendees. Our support team will automatically transfer those who enter as presenters to the attendee bucket, so just that you're not surprised. Not everyone, but some invitations unfortunately went out with the wrong link, just as a quick explanation. Let's move on to the presentation. I'll look at the disclaimer. We will use the usual format. I will update you about the business results in the second quarter.
David will run you through the financial results. As usual, we have space for questions and answers in the end. I will start with our most significant contributor to Group EBITDA, which is our investment/electricity generation segment. That is our IPP portfolio of operating PV plants. In the second quarter, we did not commission any new power plants. In Q1, we commissioned three power plants with over 5 megawatts of installed capacity. Over the last 12 months, the total is over 16 megawatts, which includes 10.7 megawatts peak in Romania and 5.7 in Hungary, including that also includes our behind-the-meter power plant there. At the same time, over the last 12 months, we also disposed of our two operating assets in Australia, which had a combined capacity of 14.5 megawatts peak. Year on year, we have increased our total capacity only slightly by about 2 megawatts peak.
Since the beginning of the year, we actually added 5.1, which are those three power plants connected in Q1 in Hungary. The overall electricity generation in the second quarter declined year on year. That is driven by two factors. One is the sale of our Australian assets, which, despite the fact that the second quarter in the southern hemisphere essentially represents autumn and the year-end, was still contributing significantly in terms of generated electricity a year ago. We also have a second factor, which is temporary TSO-mandated shutdowns of our power plants, or some of our power plants in Romania, which is partially part of the licensing process and partially due to certain regulatory changes. We are well on track to have all our power plants—some of them got reconnected already.
Till the beginning of the fourth quarter, we expect all our power plants to be connected to the grid and generating revenues. As we'll be seeing later, it has had an impact also on our financial results. The output decline was mainly concentrated in our merchant portfolio, as that's where we had the changes. Our two Australian power plants were running on a merchant basis, but also the new additions in Hungary and Romania are all operating on a merchant basis. Where we are seeing an outperformance, or an increase year on year, is the part of our portfolio that is running based on a support scheme. This has also helped us in compensating, to a significant degree, this decline in generation volume. The specific yield in the second quarter was also lower year on year.
Here again, it is due to the mix because the power plants in Romania that were not operating, but also our Australian power plants were built on single-axis trackers, which have a higher specific yield than all the power plants that we built until approximately 2021, all of which are fixed mounting structure power plants. This is the main driver in terms of the weather, which was not that significantly different in the second quarter of this year compared to last year. As I mentioned before, in May, we already managed to collect Aiud and Făget 3, so two of the power plants that were, in this case, partially not contributing to revenue generation in Q2. In August, we managed to reconnect Săhăteni.
We are also, as we are getting to the finishing line of getting the operating license, we may still have some temporary shutdowns of some of our power plants. As I said, by Q4, we expect all of them to be up and running. The overall revenues for the second quarter from our IPP portfolio reached €8.1 million, which represents a decline of about 5% compared to last year. Basically, going back one slide, we had a decline in generation volume of 11.6%, but in financial terms, it was below 5%. Again, thanks to the outperformance of power plants that are running on feeding tariff, which generate higher revenues than the average and the merchant portfolio. Year to date, with €12.3 million, we have essentially matched last year's performance.
Looking at the average revenues per megawatt hour, we have seen an approximately 7% increase compared to last year's, from €158 to €169. As you can see, those revenue numbers per megawatt are relatively widely spread, from €57 in Romania, which is due to a price cap of a maximum of €80 on power plants that are in the scheme before we get the operating or the generation license, all the way to the feeding tariff in the Czech Republic, which is more than 10 times that amount. Another contributing factor is that with the Australian power plants not part of the portfolio this year, and revenues in Australia were also rather on the low end.
As you can see, this blue line, the remaining asset that you see here with one of about €81, is a small rooftop that runs on the feeding tariff of about €180 per megawatt hour. Last year, 99% of our installed capacity were our two operating power plants, which had significantly lower revenues per megawatt peak, and they're not part of the portfolio. These are the drivers. Looking at the EBITDA for our generation portfolio, we had a decline of 4.6%, which is essentially in line with the decline in revenues on a year-to-year basis. The next segment is engineering, where we have had revenues declining by 8.5% compared to last year. The main contributing factors or areas are CNI in Australia, our project in New Zealand in Pukenui, and the beginning of works for our largest EPC project to date in Romania for Hyperion Renewables.
We have seen a very difficult first half of the year for our CNI activities here in Central Europe, where our focus is mainly the Czech and the Slovak markets. The whole market has been essentially on standstill. There is a lot of pent-up demand, and we see that materializing, as we speak. We expect a significant contribution to come from this part of our business in the second half of the year. Coming back to the project in New Zealand, we have been able to energize the power plant, in terms of getting all the permits and to export to the grid and start export to the grid before the end of June. We are now in the process of handing over the power plant to the investor. The good news is that we have managed to deliver this project essentially on time.
Works are starting on the project in Romania, and we are in discussions with multiple clients on additional EPC opportunities across the markets where we're active. I mentioned already the CNI segment in some of the markets. In Australia, we see a recovery and are also confident that in the second half of the year, we'll see an improvement compared to the first half. Looking at the EBITDA level, there is a significant year-on-year improvement where, in relation to our external revenues, we've been able to essentially turn around and go from a €1.6 million loss in the second quarter of last year to a positive EBITDA of €226,000 in the second quarter of this year. We expect that picture to continue between now and year-end. In new energy, we have had a decline in revenues from the capacity market primarily.
As you can see, looking at trading volumes, which is electricity that we all take from mostly PV plants and sell into the market, but also mainly in Hungary, we have a supply business. There you can see a significant year-on-year increase, but on the capacity market, based on the lower contracted volumes but also lower prices, we've seen a significant decline in the second half of the year. Just as a reminder, the capacity auctions in Poland are always conducted on a quarterly basis. In the first quarter, we had high revenues, and in the first quarter, we were also profitable. The second and third quarters were expected to be weaker, and in the fourth quarter, there's a recovery. This is literally a snapshot of the second quarter with the lowest prices contracted throughout the financial year 2025. The good news is that we are winning more off-take contracts.
We have been able to add additional capacity in Hungary and also in Poland. We also recently published the news that we signed an off-take plus battery optimization contract with one of the largest energy project developers in the Polish market. Going to the last point, this optimization will, as soon as we are certified, which we expect to happen still during the third quarter, latest beginning of Q4, also include ancillary services. We still believe that we will be the first, if not the first then maybe the second, provider of these services in the Polish market. We are also working on certification for ancillary services in the Czech and Hungarian markets.
This is a very important part of our offering and should also drive the appeal to be an off-taker from not only battery storage projects, which are slowly being implemented in the Polish market and also across the region, but also from PV plants, wind farms, and biogas plants, which can be used for the provision of ancillary services. Our focus, even on ancillary services, is primarily on renewable energy sources and batteries. Of course, in some cases, it may also include other assets, but the focus remains on renewables. In terms of EBITDA, as I said, on the back of the low volume and prices contracted for the second quarter, the external EBITDA in the second quarter was almost minus € 1 million, which is in stark contrast to last year's nearly € 700,000 of positive EBITDA. Which takes us to O&M.
This is an area in which, as you can see, we are driving continued growth. In terms of megawatts under management, I think one important development I would like to point out, which you can see from this bar, is that while we have added pure O&M, solar O&M contracts, and we continue providing central inverter O&M services, there is a new category that has been added, which is asset management. This is something that is developing now quite rapidly. It is something that, a service that we, where we are essentially responding to demands from our customers in markets like Hungary and Romania, where they are, based on the fact that we are an IPP and we manage our own portfolio of power plants in these countries that we are good at operating, of managing these assets.
We have been able to win two major contracts in Hungary so far, and there's likely more coming in Romania and potentially over time in other markets. It simply adds a different dimension or a different offering to what we've been offering to date. While speaking about this, the next area where we see a lot of growth potential for our O&M division is the operations and maintenance and possibly also asset management of battery energy storage systems. The very positive development is that we've not only been able to win more volume on O&M, and here it's also important to point out that we are, in tenders that we are participating in quite successfully. We are winning, I would say, the top names of investors within, but also from outside the region that are building PV and energy storage assets in the region.
This growth dynamics is something we expect to continue and also become more visible. One of the things, this graph could actually, or this growth curve could actually already by now look more dynamic. What we are seeing in the market is that a lot of the assets where we sign up the O&M have delays in commissioning. Sometimes it's a few months, but we also have a case where it's now over a year since the projected commissioning date, which leads to a situation where we've signed a contract, but we only start booking revenues after commissioning and after we take over these power plants. The pipeline of projects is very healthy. This is definitely an area of our business that will continue growing. In terms of revenues, and this is the way we are presenting it, these are what we're presenting here, are only the external revenues.
The revenues that our O&M division charges to our own proprietary power plants is excluded. As a result, however, the cost base of our O&M division is mostly fixed. As a result, we are reporting negative EBITDA, more or less in line with last year. At the entity level or the business unit level, we actually have positive EBITDA if we increase the revenue line by those intergroup revenues. Another way of looking at it is that this negative EBITDA is essentially the cost of operating our portfolio. Another area that has developed very positively is the segment of technology trading, where we changed our approach at the beginning of the fourth quarter last year with a new team that came on board. As you can see, we have, particularly in relation to modules, seen very significant growth in terms of megawatts sold to our customers.
The one area that is not visible here, but what we're seeing now, particularly in the last two to three months, is dynamically growing demand for batteries, to which we are responding. I believe that by the time we publish the Q3 and then the end-year results, we'll also see a very positive dynamic on the volumes of batteries distributed to our customers. I think a very clear picture is visible when we look at the external revenues, which have, year on year for the second quarter, almost tripled. As a result, you can also see that our external EBITDA has again swung from minus € 460,000 to plus € 450,000, so more or less, I'd say more than € 900,000 year on year. We have all we need to be positive about the growth prospects of technology in the second half of this year. What is changing is the business mix.
We are seeing more and more of batteries contributing to the revenues. Due to the fact that we are able to achieve higher gross margins, it should also further drive the profitability. This leads us to our Photon Water segment, of which we have been talking quite a lot recently and where a lot of the effort we've put in over the last several years is coming to fruition. One, for us, quite significant milestone is that in two jurisdictions where we have filed for a patent for our in-situ remediation technology, we have been notified about a positive award, which is to our slight surprise. The first country was China, the second one, Japan. We have these patent application processes pending in Europe, in the U.S., in Canada, Australia, Korea, India, and the United Arab Emirates. We expect decisions over the next 6 to 12 months.
I would say the very important element is that two of the so-called Big Five patent offices, so next to China and Japan, that is U.S., Europe, and Korea. Two out of these Big Five have awarded us a patent, which for us is verification that our technology is novel and unique. We are in multiple discussions with potential customers and also in tender processes, both in Australia and Europe, to deploy this technology for the removal of PFAS from groundwater. We are also already very advanced in developing a technically not too dissimilar approach to this groundwater remediation for remediating soil from PFAS chemicals. That is something where we are quite confident that before year-end, we will actually have our first pilot project in Australia.
Last time we spoke about the filtration unit for PFAS that we installed with a customer in the Czech Republic to filter PFAS out of their industrial process, which uses galvanization, a very common source of PFAS contamination. We were able to filter out PFAS and send 70% of the water back into the industrial process for reuse, saving significant costs on water and sewage charges. The second unit that you see here is a mobile unit that we have commissioned in Australia. We've also obtained an environment protection license by the Environmental Protection Agency in New South Wales, which allows us to bring this unit on-site and clean or remove PFAS from various water sources. Here we have already one pilot project starting with fire and rescue, so the firefighters of New South Wales. We believe there's going to be a lot more.
We have over 10 or 12, around 12, municipalities in Australia that need to deal with PFAS coming from landfills, so in leachate water. This is an activity that is gathering steam as we speak. In financial terms, we believe that still this year, but then particularly for 2026, we're very confident that Photon Water and remediation will start contributing materially to our financial results. This concludes the business part, and I'm handing over to David to guide you through the financial results.
Thank you, Georg. On the finances, let me just get a slide up. Our Q2 revenue performance is slightly better than in the comparable quarter of 2024. Within that, the electricity generation, as Georg just said, the revenue is slightly lower. That's come about from us having these shutdowns in Romania and, of course, selling the Australian plants. The prices have mitigated that to some extent, which has helped us. In terms of other revenues, we've got growth. That growth mostly comes from the technology area. In that area, because we've got this new team, we've really managed to expand the sales of that business and also the profitability. Sales have actually tripled, comparing the two quarters. Elsewhere in that other segment, new energy, revenues are lower, to € 5 million- € 5.2 million compared to € 6.2 million last year.
That's because of the more difficult performance within the second quarter, comparing the two periods. The revenues have increased in trading, but profitability hit. The engineering business is more or less flat. The income from that is mostly from Australia and New Zealand at the moment. We're expecting it to increase in the second half from our CNI work in Europe and also because of the Hyperion Renewables project, which we signed in May. From the point of view of profitability, the investment segment is slightly down on previous quarter at € 6 million, previous year's Q2 at € 6.3 million. The engineering sector, a small profit compared to a € 1.6 million loss in previous comparable quarter. New energy, unfortunately, a € 1 million loss at the down level, compared to € 0.7 million in the previous period. Technology, again, very good news.
It's turned around from a half a million loss in the previous year to a half a million profit. This business continues to grow, and we expect the profitability to improve because they were clearing out some old inventories during that period. EBIT is negative in this year compared to the previous period. The other comprehensive income, we've benefited from a revaluation of our Hungarian plants, but of course, it's still negative driven by the low EBITDA for the period. Aside from that, if we look at the half-year results, total revenue is higher than in 2024 half-year. Generation is about the same level, much higher revenues in the other aspects of our business. Once again, driven mostly by the technology business, but also the engineering side. That would be the financial results, in terms of revenue and profitability.
On the balance sheet side, we've increased our fixed assets, mostly by the commissioning of the Tolna projects in Hungary and the revaluation in Hungary, also of the total assets in Hungary. In terms of the current assets, that's reduced. This is mostly because we've been running down inventories, which has been very, very successful. We also had a reduction in the other receivables number. Equity is impacted by the lower EBITDA result. The equity ratio, which is very important to us, is at 25% in the standard calculation, but we benefit from the carve-out arrangement that we described in the full-year accounts we also mentioned in the last quarter. If we take account of that, we have an equity ratio of 25.9%. Obviously, we expect and hope this ratio to get stronger as the business becomes more profitable.
The long-term liability side has increased, and that's mostly due to a reclassification out of short-term relating to part of our EBRD loan. That's the main driver of that. Current liabilities, once again, moving with that reclassification. What has happened here is we've collected, on the receivable side, we collected some VAT, which was outstanding for a long time from the Romanian authorities. We had a loan supporting that. We're able to reduce that loan in the second quarter, which is also part of the current liabilities being reduced. That takes us to cash flow. It's been a difficult quarter in terms of cash. On the operating cash side, we've cleared some of the inventories. Payables have increased. The increase in payables is quite a bit due to the now waking up of our EPC business.
That means that we have increased the activities, which means that we owe contractors more money, and that results in a higher number. In terms of the investment cash flow, we've completed the Hungarian projects, so we've spent money on those, and we've put money into our growing EPC projects. In terms of financial cash flow, we have had quite a considerable reduction in borrowing, and that's come about partly from the standard second half repayments and also €3 million from reducing those VAT loans. This is really beneficial because the VAT loans are effectively overdrafts and carry a higher interest charge from our standard financing loans. At the end of this, it means that we closed the end of June with cash down €4 million from the end of last year.
Since the end of June, we've completed the sale transaction of the Yadnarie, and we've received some of the sales proceeds there. We've refinanced. We've topped up our funding for the Hungarian power plants, which also brings in cash. We will see improvements. We have seen improvements during the current quarter. That's really run through the financial situation. I'll hand back to Georg and we'll close the sessions, I think.
I think maybe I'd just like to add to the last two points. The Yadnarie transaction, which coincided also with obtaining the development approval for the Yadnarie project, was actually a coincidence. It looks like it was linked, but it was actually a coincidence with the signing of the sale of that project to AGL, the largest energy producer in Australia and a fellow shareholder in the region. That transaction was signed in only the beginning of July, so in the third quarter. Therefore, the P&L impact of this transaction is not reflected in the Q2 and half-year figures. We expect obviously that there will be a positive impact from this transaction. Secondly, we published information about this financing top up for part of our Hungarian portfolio in our monthly. This transaction brought €5 million of liquidity into the group.
What we did there is that with our finance and bank, K&H Bank, we amalgamated two credit lines from the past and basically reset, extended the maturity and essentially a standard re-leveraging transaction, which is happening regularly, to basically have them properly leverage. As a result, we got €5 million, almost €5.1 million in total cash, of which around €3.5 million were an increase in financial debt. The balance is more or less evenly split between gains from unwinding and hedging transactions, so they should also have a positive impact on our results in the second half, and actually a release of a reserve account, which was essentially our cash, just could not use it. There's an increase in financial debt, which I would assume by the end of the third quarter may be neutralized by the repayments, the regular repayments of project financing across our portfolio.
There's a positive P&L impact that should be visible in Q3. I think this concludes our presentation. Of course, we are open to your questions.
Yeah. In terms of 2025 guidance at the moment, because there's a lot of movement going on, we would expect revenue to be higher than last year, probably in the area of €110 million. In terms of EBITDA, it's going to be pretty much at the same level as last year. That would bring it in at about €9 million.
Our goal is to...
Go higher.
...improve that. Yes, I think that's the...
There are many moving items, including when our Romanian power plants are back to the grid and start generating. Of course, it's also a question of when we can book revenues from our digital scale EPC project in Romania, and how much of the pent-up demand of CNI here in the CE region we can realize. The next question is, are we going to address our bond buyback, but in two years? They're actually maturing at the end of November 2027, which we are, of course, fully aware of. It is something that we have on the radar, and we are aware of this timeline. At this point in time, while we are starting to look at the various options, it is clear that the number one priority is to improve our financial performance, and in particular, in 2026.
We are currently focusing on setting the stage for a significant improvement in our financial performance. As you've seen in some of our business lines, this is already becoming visible. Of course, it has to be more and actually a lot more. This is what we're working towards, as much as we can. Over the next couple of quarters, the main focus is to improve our financial performance. We're not taking this lightly, because we fully understand the situation. The starting point is a significantly improved financial performance. The question is when we're expecting earnings before tax to be positive. That is something that, this is a form of guidance we cannot give at this point. The motivation is as soon as possible.
The next question is on the new energy division, which has been loss-making in the first half at the EBITDA level, due to the capacity market, whether it's something we could have expected during the takeover of Lerta and whether the unit could become EBITDA profitable for the full year. This is definitely the goal, to end in positive EBITDA territory. The capacity market for this year is set. Everything is contracted, so the additional revenue streams that growth can come from still this year is electricity off-take and supply, where we have, for example, signed a major off-take agreement in Hungary, starting July 1st. That is not in the first year, half-year and Q2 numbers. There's probably also more going to be, more coming, in Hungary itself and Poland mostly. It's in the reserves as well.
We have faced delays, but we expect them to start contributing to our top line and also margin contribution between now and the end of the year. A lot will depend on that contribution. I'll swiftly go, and because it is connected, I will move on to the question whether we can explain the dispute and regulatory issues in the capacity business. Mentioned the port and risk associated. We have two topics. I'll start with the one that's EU-related. The Polish capacity market and mechanism is considered by the EU Commission as state aid. When Poland introduced this mechanism a couple of years ago, it had to be notified to the EU Commission, and the EU Commission had to approve it.
The main driver why Poland, it is important to say, it was the first country in Europe, not to say EU in Europe, at the time, probably it was still before Brexit, that introduced such a mechanism in the market was the UK. Then Poland followed suit. The main motivation for the Polish government to set essentially the last year we copied this mechanism from the UK was to find an additional revenue stream for the coal-fired power plants. A couple of years ago, when it was set up, it was approved by the EU Commission. As of this year, there was a plan by the Polish government to introduce additional auctions. For PSE, the Polish transmission system operator, to run, to contract more capacity in almost ad hoc auctions.
That means auctions that would be more flexible in whether they can cover on a quarterly basis for certain quarters, and lack of flexibility in the grid. The auction bit, so the first auction by PSE was held in April this year, where we participated with 120 megawatts, but we're also cooperating with another player in the market who has assets to provide flexibility, but essentially for the third quarter needed someone to buy that obligation to provide capacity, which was us. We, in total, contracted 95 megawatts of DSR capacity. This additional auction also needed to be notified and approved by the EU Commission. The first submission by the Polish government was in February this year, essentially in time given the starting date of providing these services from July 1.
It seems like there have been several rounds of requests for additional information by the EU Commission to the Polish government. As a result, this additional auction and this scheme was approved only on August 11, so essentially nine days ago, after the starting date. This auction was conducted, the winners were announced, and we actually assumed 75 out of those 95 megawatts we bought in a secondary market transaction. We can essentially buy this obligation, and then we would be getting directly paid by PSE. Because that notification came later, there is now a question mark hanging over whether we, us and a lot of other players in the market that have participated and won in this additional auction, are entitled to this compensation.
It appears from the decision of the EU Commission that they are essentially fine that it's applied retroactively to July 1, but there are certain provisions in the Polish capacity market law which will blur that picture a little bit. Essentially, this is now a discussion happening in Poland as we speak. We believe our legal opinion, and those of several law firms and also other market players, is that we should get this compensation paid out for July and ultimately for all of August. In a worst-case scenario, we could lose this capacity. The second case is linked to emissions limits in relation to providing demand-side response capacity or services in this capacity market. While the coal-fired power plants or their owners in Poland provide capacity by letting coal-fired power plants run ready to ramp up, we are actually providing the exact opposite service, demand-side response.
We aggregate the flexibility to reduce demand, and this demand, this flexibility, can be achieved, or this demand-side response, this consumption reduction, can be achieved by our customers, which are companies from relatively small to steel producers. This can be achieved either by reducing, by switching off certain equipment. It could be achieved by basically taking less from the grid and covering the energy needs from a battery or an additional source. These additional sources can include also diesel generation, diesel gen sets. There's a limit by the EU, which is 550 grams of CO2 per kilowatt-hour produced. There's an exception for those commissioned before 2019, but they have to adhere to this if they're commissioned after that. It's quite complicated. Essentially, if this equipment is not used in the test calls by PSE, then it's also covered.
We have a situation where in one of our units, unfortunately, it's a relatively large unit, we have one customer who has a gen set, where we have to essentially get the statements from the customers that they have not been using it in this DSR responses. The regulations are such that if there is a violation by any of the units that are used in this aggregation block, then that leads to a return of the regulation for the entire block. We have had basically a difference of opinion with PSE. We have filed a complaint with the regulatory office in Poland, so that is still pending. It is important to say we have had disputes with PSE in the past. Typically, and so far, we have succeeded with the Polish regulator with argumentation. There's no guarantee that this is the case here.
We feel it's a very strong case. As a last resort, we can also take this to court if necessary, which again has an open outcome. We feel very strongly about our case. If we have to take this route, then that would mean that that worst-case scenario that we were describing in the quarterly would probably only materialize beyond the end of this year.
Still on DSR.
is the DSR business going? What cash flow does it generate? How many customers do you have currently? Is it possible to monitor it somehow being a shareholder? What are our expectations? The new energy or the acquisition of Lerta, and now it is the new energy division, has extended our business model and taken us into new business lines. I think there can be no dispute. I think it's very obvious that as more renewable energy sources enter the grid, flexibility is a topic. It's not only flexibility, but now after the blackouts in Spain and there was a blackout in the Czech Republic recently, it's actually more than that. It's even probably going forward, even inertia will be a problem. Kickstarting the grid once most of the coal-fired generation will be switched off, restarting the grid, you cannot do with batteries. You need a spinning device.
It's a huge topic, and I think we are just at the beginning of this. We are not looking at it only from the point of view of the capacity market in Poland, which is a little bit of an artificial animal. As I explained before, it was set up for a reason. The legislation currently covers the timeframe until 2030. It may get extended, maybe not. We know that there is a silent life to this. We look at flexibility in a wider context. Actually, the prize to go after is the aggregation of flexibility to provide ancillary services, generate profit in the balancing market and across other possibilities. We look at flexibility in a much wider context.
While the Polish capacity market has definitely been for the last two, two and a half years, the main revenue EBITDA driver, it is the platform on the basis of which we build and bundle additional services, mainly around the topic of flexibility. That applies to Poland and, I would say at the moment, also the Czech Republic and Hungary. Over time, we may also be looking at other markets. Grid flexibility is definitely a topic, and this is what we want to focus on. We also want to, of course, aggregate as many, through off-take arrangements, as many renewable sources that we can. Over time, develop in certain segments of the respective markets where we're active, also get into the supply business. This whole area is moving very, very fast, and things are changing very fast.
You know, a five-year plan, where we would is, of course, can be done. I think the structure of the market is changing extremely fast. I think in a year from now, it would be completely outdated. However, one important trend that I think is worth mentioning here is the capacity market, but also ancillary services in the markets where we operate. Primarily Poland, Czech Republic, and Hungary is a service procured and rather provided through the transmission system operator. What we're seeing actually across the market, and interestingly enough, we saw it for the first time, or at least two, three years ago in Australia, and it came to Europe faster than we thought, is that actually now the DSOs, so the distribution network operators, are solving their specific flexibility needs.
We are in discussion with essentially all the DSOs in Poland, but also now in the other countries where we're active, to meet their needs. This can lead, this ranges from the invitation to place batteries next to substations to, for example, extend the need for significant investment into an upgrade of the substation. We've seen now certain concepts of providing liquidity either within a certain DSO network or even around certain nodes. The provision of flexibility to the grid, going forward, will be a lot more. The space is growing very, very fast and moving away from just having one centralized off-take, if you wish, of these flexibility services in the form of the transmission system operator. It's actually going one level down. This is literally developing very dynamically as we speak, and this is something where we also believe that we can play a role.
It is a fast-moving area. I think we're in the right space, and the level, the spectrum of possibilities just in the markets where you operate is widening in a very positive way. Again, the capacity market has been important. We'll continue playing a role. It's only available in one market in which we operate, being Poland. We don't have this in the Czech Republic or in Hungary. We definitely plan to remain involved for as long as it exists, but the growth and profitability will come elsewhere.
Oh, there's a RayGen question.
Okay. There's a RayGen question. Next question. The question is whether we can tell something about our cooperation with RayGen, and whether there have been any measurable benefits during the last quarter. Our exit from Yadnarie only happened in July, and we're actually still in the process of transferring the project rights to AGL. This is, at the end of the day, a transaction where we expect to make a profit. This has definitely been a long journey. We've been developing this for a very long time. I think we've also mentioned that we are working on or developing a project that will include RayGen's technology in South Africa. We are, as we speak, looking at additional possible locations in South Africa. We are looking in some of the surrounding countries.
I think what is very important to point out here is that SMB, formerly known as Schlumberger, which has invested in the previous rounds and very significantly in the last financing round of RayGen, is very much behind this technology and also actively looking for very specific uses of either the whole system, but also certain parts of the system. One application, for example, where they're working on the project is to use the heat not for storage and energy generation, but use the heat to provide cooling to data centers. Given that there are several elements here, it appears that there are a lot of use cases that can be developed and also opening up possibilities for us.
We are also looking at possibly combining RayGen and its solar thermal storage in hot and cold water with PV and BESS, where we would kind of benefit from the advantages of both. Today, probably PV plus batteries is more cost-effective for relatively short-term storage, so maybe up to four hours. Whereas the RayGen system can provide, simply by increasing the size of the pool, what is referred to as deep storage. We can configure it, at relatively small marginal investment, into 24 or even more hours of energy supply. Coming back to what I said earlier, the big advantage of the RayGen system is that there is this organic ranking cycle engine. It means a turbine, which provides inertia to the grid. In a country like South Africa, which also has recurring issues with blackouts, such an asset has its significant advantages.
We are also looking at combining these two elements, if you wish, PV plus batteries and RayGen to provide an optimal mix concept to support the grid. We are really encouraged by the support of SMB, which is one of the largest engineering firms in the company. They're already involved in and supporting our project development effort in South Africa and probably beyond. I hope that answers the question. The next question is how to measure progress of the new energy division and the assumption that the more clients, you know, DSR service, the better for the company, and whether these customers pay us for the services, and whether there's a risk that we lose money. Detailed numbers about DSR, this is something we, of course, cannot divulge to the public, which customers we have contracts with and what the terms are.
The important thing here is for us to be as, you know, demand-side response for the capacity market is the basis for additional flexibility services. Wherever we see potential, we are talking to these customers to get them, for example, by installing a battery, or turn them into customers for incident services. Some of them are potential target customers. Those batteries, for example, we could also install and operate. Our interest is to, and to the O&M, but this is definitely to monetize such a battery system. It is a stepping stone, and the total impact to the group will go way beyond the revenue stream from the capacity market. The next question is whether we can tell something about the agreement with R. Power. The question is, I think what we can say is that this contract is a pilot in the sense that it's the first contract.
It's for a one-megawatt PV plant and a one-megacapacity battery. I think it's a pilot for our customer and for us. These revenues should be visible this year. Of course, they will probably not be tremendously significant, but I mean, this customer, but also other energy investors and developers in Poland we are talking to. Clearly, this is a model. A lot of time has been spent on defining the product, defining the customers, sorry, defining the contracts because these ancillary services are a new topic. Even at the regulatory level, there's still certain learning by doing or rather only now that aggregators like us and investors are asking questions. They're formulating, in some cases, crucial opinions on how to apply the legislation and regulations. This contract is something that our colleagues have been working on for quite a long time, also with the customer.
Clearly, you have to look at it as a first stepping stone, which we want to scale up. I think the scale-up potential, given the asset base, but also pipeline of our power, but again, also some other potential customers in the Polish market is significant. This is the first part. I think this one contract, given the size of the asset, is not material. What hopefully will be material is us replicating that as many times as possible in the Polish market and other countries as well. Maybe last, maybe what we can look into is that maybe going forward, we provide a bit more of a breakdown on the revenues in the new energy division. Let's clear what kind of which revenues come from which type of service. Okay. Thank you. We don't see any additional questions. Okay, someone is typing. Okay. Thank you.
If there are no additional questions, then we would like to thank you very much for taking the time to participate in our call today. We are looking forward to our next call in three months' time. Rest assured that we're doing our utmost to be able to present strong numbers for the third quarter and the first nine months of 2025. Thank you very much. I wish you, or we wish you, a great rest of the day. Thank you very much.