Good morning, ladies and gentlemen. It's a pleasure to welcome you to the Q3 results conference of Photon Energy. Today I'm very happy to welcome next to me our new CFO, Stanislav Zeman.
Good morning.
And we will be running you through the, the, presentation. Those of you who have, been with us, for a while, know the, the structure. I will run you through the, business results for the third quarter. Stanislav will, will then run you through the, financial results for the, for the third quarter and the first, first, nine months of the year. At the end, we will have, as usual, space for, your questions, which we will try to answer as well as possible. We will start with electricity generation. You know, at IPP portfolio, in terms of size in the third quarter, there was no change in installed capacity.
Since the beginning of the year, or year-on-year, we have had a reduction of 6.2 MW peak, which is mainly driven by the disposal of our Australian power plants in the fourth quarter of last year, which had a combined installed capacity of 14.5 MW peak. Since then we have commissioned 3.2 MW peak in Romania. That was also in the fourth quarter last year. In the first quarter of this year, we added three power plants with a total installed capacity of 5.1 MW peak. In total, a reduction of 6.2 MW peak. In terms of electricity generation, we have seen a decline of 9.4% to just shy of 50 mega, 50, this is actually KWh, for the third quarter.
Of course, that is mainly driven by, well, to one extent, to some extent driven by the reduction in installed capacity, but also by the non-generation of some of our Romanian assets, which are shut down for various regulatory reasons. In the third quarter, they had a total capacity of 27.2 MW. A significant part of our portfolio. In the light of this, the decline of 9.4% is actually a good result. Of course, overall not satisfactory because we want these assets to generate, but it has at least to some extent been compensated by good generation results, mainly in Hungary. Speaking of the situation in Romania, one of the power plants that was switched off, Savulesti, received a license in October. I would not [their wish we] .
We expect to receive the license before the end of the year. Specifically, we hope that by the beginning of December. For the last remaining two power plants, [Farjit Sri] and Săhăteni, they are currently undergoing testing, and we expect them to receive the licenses in early Q1, hopefully by the end of January. That way we step into next year with all our, or January will be a relatively weak month in terms of generation. It will not be completely 100%, but essentially, we hope that the availability of our Romanian assets to deliver to the Romanian grid will be very close to 100%.
We will be in a situation where we will have left these regulatory problems in Romania behind us, and all the power plants will be able to generate. I think when we get to the financial results, you will also see the impact of this Romanian situation on our revenues, but also on our EBITDA. In short, we expect that to be behind us as we enter into 2026. Just extending what I said before, the output decline was pretty much linked to our merchant portfolio because all these power plants that have been affected, but also those training power plants that we sold, were all operating on the basis of the merchant model.
That means they were selling into the electricity market without any government support, but also not on the basis of a power purchase agreement. As I mentioned before, what helped in the third quarter was the performance of our Hungarian assets, which were 17% above their generation forecasts. The problem with other performance came from Romania for the reasons we mentioned before, with the other countries, the Czech Republic and Slovakia, performing more or less in line with forecasts in the third quarter. Looking at the prices we realized in the third quarter, we had a year-on-year decline of about 5%.
Again, the main driver there has been the situation in Romania, where not only the volume was lower, but also those power plants that were producing, but still had not received the license, were impacted by a regulatory change that limited the revenues we were getting from Transelectrica. Just as a quick reminder, when we originally connected those power plants or connected our first power plants, the PPA that we signed with Transelectrica in the period from commissioning grid connection to receiving the license, we were paid the 90-day rolling average updated daily of the day- ahead market price in Romania. In October last year, that changed into a scheme where our power plants are not paid on weekends. That is also when we switched them off. We are also not paid on public holidays.
During weekdays, when we produce and when we sell into the grid, we are subject to a maximum price of EUR 80. That means if the price is below, we get whatever that price is. If prices are above EUR 80, typically in the morning and the evening hours, we are limited to EUR 80. This regulatory change had an impact on the average price realized by the entire portfolio. In October, that means after the end of the third quarter, we have seen an increase compared to the number achieved in the third quarter. Now, in the fourth quarter, and also the first quarter, we, of course, will be benefiting from higher prices.
Once all our power plants have generation licenses, there will be no cap and, of course, full production. Looking at the revenues for the quarter from electricity generation, we achieved EUR 7.8 million, which is a decline of 14% for the reasons just explained. That represents a 14% decline compared to last year's level. I think that you'll also see that in the financial results. This is, of course, more than EUR 1 million that is missing not only in the revenue line, but also at almost one- to- one at the EBITDA line, as these revenues or the lack of them flow straight through the P&L.
For the full year, we, at the end of the third quarter, we stood at EUR 20.1 million for the full year, which represents a decline of 5.7%-7%. Looking at EBITDA, for the third quarter, we suffered a decline from EUR 7.3 million achieved last year to EUR 6.6 million, which is 9.8%. This effect, we expect not to repeat next year as all our power plants will have the generation license issued in Romania. When we look at engineering, and here we're looking at, these numbers are based, as with all the other segments, are based on purely external revenues. We had a decline in the third quarter compared to the quarter last year, to EUR 1.4 million.
That is a reflection of, on one hand, the completion of the power plant that we built as an EPC contractor in New Zealand. The majority of works and therefore also invoicing was completed already in the second quarter. Also, delay in the start of construction of the 34 MW EPC project that we're doing in Romania, where construction will only start in the first quarter of next year. A lot of revenues that we were originally expecting to book still this year, and of course, the revenue starts rolling in when construction starts, that is also delayed and therefore has not been recognized in the third quarter.
Where we see, where we've also had so far a difficult year is in the C&I segment, where we are active, particularly in the Czech and Slovak markets, here in Europe and the Australian market. Here we've had another difficult year in the Czech Republic. This market has been behind our plans. However, we do see now a significant pickup in activity. I think one of the main changes in the type of projects that we're seeing is that essentially today almost all C&I projects include batteries. Projects where we only install rooftop behind the meter and sometimes also ground mounted behind the meter installations is becoming a very small minority. Here we are actually quite satisfied with the pipeline development for 2026.
Our expectation is that this segment will show very dynamic growth and of course can also improve the picture. Looking at EBITDA, again, year-on-year, we have had this segment has slipped into a loss. The main driver here, besides the lower revenues, has been cost overruns and also delay penalties that we were subject to in relation to the project in New Zealand. We have largely paid the price for building a project in a market that is at its early stage of development.
This has, so a significant part of this loss is, about 50% is attributable to these cost overruns and the liquidated damages we had to pay to the customer, the contractual penalties for a delayed connection. In the new energy segment, we've had a year-on-year strong quarter with external revenues actually growing 38% to EUR 8.9 million. That has happened despite the fact that the contracted volume from the auctions with PSE has been significantly lower. We only had 1/3 of the MW contracted with PSE.
However, we have been able to use the contracted capacity with our DSR clients in the additional auction, which was held in the second quarter and started as of July 1st, which has allowed us to cover a significant part of the gap in terms of revenues year-on-year from the Polish capacity market. The issue that we have had, and that we referred to in our half year presentation, of delayed revenues from PSE in relation to this additional auction have been resolved in the meantime. All the revenues that we were due to receive have been received from PSE. In terms of energy trading volumes, you can also see a very dynamic development year-on-year. We more than doubled the volume of electricity that we have traded in the markets, sold into the markets.
These markets are Poland, the Czech Republic, and Hungary, where we offtake electricity from, in some cases, our own DB power plants, but also from a growing number of external customers. As you can also see, as a result, year-on-year, the EBITDA based on external revenues has improved very significantly from less than EUR 200,000 a year ago to over EUR 1.4 million. We are also making strides in launching ancillary services. We have completed our connection to the so-called LFC nodes, which are the communication channels with the transmission system operators both in Poland and the Czech Republic. We are working now on completing the last tasks. We will start with the work of certifying our first assets that we will want to trade in the ancillary services market in both countries.
Operational maintenance has had another very, very strong quarter where we have been, and you can see that, on a year-on-year comparison, but also through Q3 alone, we've also had, we've also been able to add additional capacity. On a year-on-year basis, you can see that we have increased the volume of contracted capacity to which we provide technical operational maintenance, asset management, but also [Cardio], which is a service targeted on the maintenance of inverters. We've been able to grow that by 34% to just shy of 1.2 GW peak. On the next paragraph, you can see which of how much of the capacity is active, which means where we are invoicing and which are non-active.
That non-active part means that we have signed agreements, but we are still in the process of taking over or awaiting to take over those assets, under our own name or in some cases asset management. Typically these contracts get signed somewhere between one and three-four months before commissioning of the power plants. We have some assets or some power plants that have incurred longer delays than that. There we are essentially in the standby mode. The important thing is these 319 MW are contracted and will start generating revenues once we take them over. What I can say is that this positive trend is also continuing in the fourth quarter. Looking at our pipeline, we see a lot of potential for further dynamic growth in [XD] and beyond.
What I would like to highlight is that, when we talk about O&M and asset under management or asset management services, which we currently provide to customers in Hungary, this relates to PV at this point in time. We now see the first utility scale, large scale utility scale batteries coming on grid. This is also a very strong focus of our attention. We are expanding our scope to also servicing batteries of all types. Of course, in terms of numbers and volume, utility scale batteries are much smaller, much larger.
At this point, we expect to sign our first O&M and asset management agreement for a large-scale utility-scale battery in one of the markets where we are active, which we then expect to open the door and put us on the map as a provider of these services. It is essentially a completely new energy asset type, further increasing the potential for growth in our O&M segment. From a technical point of view, we have our own teams in all five markets where we operate. Of course, there is some training required, but we are perfectly capable of also servicing batteries, which in many aspects are simpler than PV plants.
In addition, what also helps us a lot is that, so far in Hungary and Romania, but over time we may extend it to other countries, we are also certified to maintain high voltage equipment. Very often for large batteries, large PV plants, substations get built and we can also service those. That is one of the competitive advantages we have over some of our PV O&M competitors, that they do not have this certification. We can essentially provide a full package to very large energy assets, whether they are PV or batteries.
In terms of external revenues, the growth year-on-year has been 7.7%, which is to some extent driven by the fact that in Q3 last year we had some one-off revenues that have boosted the EUR 1 million revenue last year. Stripping that out, the growth would have been more dynamic. Talking about the EBITDA of the segment, it is very important, looking at this, to point out that these numbers are misleading to the extent that as we strip out the revenues that the O&M segment generates from providing O&M services to our own portfolio, all the operating costs remain in these numbers. Another way of looking at it is that in the third quarter of 2025, EUR 432,000 was the cost of maintaining our power plant portfolio in the entire region.
The value of that is, is significant. When we look at it only within the segment, leave the intergroup revenues in the P&L, this business line is actually profitable and that profitability is also growing and will continue growing. The next segment is Photon Energy Technology where we wholesale key components, which are mainly modules, inverters, and batteries. At this point in time, these batteries are mainly residential, but more and more also for C&I applications. While residential is typically 10 KWh-20 KWh maximum, sometimes a little bit bigger, C&I, we're in the hundreds of KWh and sometimes even below, even above, 1 MWh.
As you can see year-on-year, we have, and here I'd like to just remind that as of October 1st last year, this division is under, this business line is under new management. We are comparing the Q3 results from last year under previous management with the results under new management. In Q3, you can see that there's been a very significant increase in revenues, by nearly 150%. As you can also see, that growth has been driven primarily by the volume of modules that we have distributed. From a few MW, we reached almost 40 MW in the third quarter. It's an almost 10-fold increase. In the next couple of quarters, we do expect batteries to start playing a more significant role.
In terms of prices, because one thing is volume and prices here, we've seen a more or less stable situation in the third quarter. Now the fourth quarter, we are seeing a little bit of a decline. Our understanding is that the module prices for next year may start edging up around the second quarter of next year. In terms of profitability, in the third quarter, we have booked a negative EBITDA of EUR 200,000. It is important to point out that the vast majority of this is related to the disposal, the final disposal of stock that we have had in our inventory for one and a half years- two years, and which of course today we had to sell at a book loss.
Stripping that out, we would have been more or less around the zero mark, breaking even in the third quarter. In terms of the fourth quarter, we do expect a strong finish. Typically, the fourth quarter is strong in the segment, and there are still a few weeks to go, but we are quite confident that we will see revenues that would be at least at the level and most likely higher than what we have recorded in the third quarter, with a positive effect on profitability in Q4. Good. With this, I am happy to hand over to Stanislav to walk you through the financial results.
Thank you, Georg. Let's go through the first slide. It is financial results.
As you can see on this slide, consolidated revenues reached EUR 24.2 million in third quarter 2025, marking a 6.2% year-on-year increase. Revenues from electricity generation totaled EUR 7.7 million, down by 13.8% year-on-year following weaker capacity generation and slightly weaker average revenues. Other revenues increased by 19.3% year-on-year to EUR 16.4 million in the third quarter 2025. The most significant growth was recorded in the technology trading business and the new energy division. Under other income, the group recorded profits from the sale of the Yadnarie Project amounting to EUR 3.6 million. The net impact of the Yadnarie sale on EBITDA was EUR 1.4 million in third quarter 2025. EBITDA of EUR 4.4 million in third quarter 2025 compared to EUR 0.8 million in third quarter 2024, up by 18.1% year-on-year, thanks to a positive impact of the Yadnarie Project sale.
Below EBITDA, the group recognized an impairment charge in the EUR 1.6 million. This impairment relates primarily to the right of intangible assets in amount of EUR 1.2 million associated with the software development for the new energy division and additional EUR 0.4 million impairment related to the right of the projects from the development pipeline. Financial expenditure amounted to EUR 2.2 million in third quarter 2025, representing a 20.2% decline year-on-year related to the underwriting of Hengin position in Hungary. The total comprehensive income came at -EUR 2.2 million in third quarter 2025 compared to a EUR +1 million in third quarter 2024. Now I'm going to showcase the balance sheet. As you can see, fixed assets amounted to EUR 220 million compared to EUR 216 million at the end of 2024.
This increase of the assets can be primarily explained by the commissioning of the 5.1 MW peak in Hungary and the revaluation of the Hungarian assets. Current assets declined to EUR 48.1 million, down by approximately EUR 7.8 million compared to the year end of 2024 due to reduction in inventories by EUR 2.5 million, other receivables by EUR 5.4 million, and assets held for sale by amount of EUR 2 million. These trends were partially offset by higher contracted assets by EUR 1.4 million and higher trade receivables by EUR 3 million. Equity of EUR 55 million has declined by EUR 4.9 million compared to the level recorded at year end 2024 due to the negative result in this period. Adjusted equity ratios stood at 25.6% excluding Hungarian and Romanian regulatory changes and 24.2% as a result of a carve-out effect.
Long-term liabilities stood at EUR 171 million, up to EUR 173 million compared to year end 2024. This increase was driven primarily by a reclassification of EUR 5 million EBRD loan and increase of deferred tax liabilities up to EUR 1.6 million. Current liabilities amounted to roughly EUR 41 million, down by EUR 3.4 million compared to year end 2024. This is partly due to the above-mentioned reclassification of EBRD loan back to long-term liabilities, which was partially offset by higher contracted liabilities by EUR 2.3 million. Okay, cash flow now. Operating cash flow of EUR 2.2 million compared to EUR 6.8 million. Weaker operating cash flow can be partially attributed to the high non-cash items, which were booked into the third quarter results. FX transaction, transaction difference and other non-cash items.
Investment cash flow of zero -EUR 0.4 million as net difference between the acquisition of assets in the amount of EUR 1.2 million and the proceed from the sale of Yadnarie project in the amount of EUR 0.8 million. Financial cash flow of EUR 1.9 million related to interest cost payment while outstanding amount of debt remained stable. Net cash position decreased to EUR 3.7 million. It's all about the cash flow. The last is guidance to guidance 2025. In the first nine months of 2025, the reported consolidated revenues amounted to EUR 72 million, which represents about 72% of the lower end of the guidance range. In the same period, EBITDA amounted to EUR 8.5 million, approximately 94% of the right level.
Upon the publication of the third quarter 2025 results, management maintains its view that the forecast EBITDA at the lower end of the revenue range remains achievable and at this stage sees no basis for revising the full year announcement. That's it.
Thank you. This concludes our formal presentation. We are open to your questions and we will, while you use the chatbot to type your questions, we have received some questions beforehand. I will start with those and we'll then address those that are coming through the chatbox afterwards.
The first question is, what exactly will the group's liquidity situation, how exactly will the group's liquidity situation be stabilized in the short to medium term?
I mean, as you can see for the numbers, liquidity of course has been an issue for us. The action that we are taking is at multiple levels. One is the sale of assets that for us are non-core and non-strategic, and that mostly relates to some of our development projects. I've seen the first question in the chatbox relates to the Domaňov Project in Poland, a 20.4 MW project, which we are in the process of selling to Uniper. This project has reached the ready to build stage and we are currently in the closing process with the buyer.
The net impact of the sale to our EBITDA in the fourth quarter is going to be somewhere in the region of EUR 600,000-EUR 700,000. Because of the delay of the project, of getting the project to the ready to build stage, which are due to the complexities of developing a PV project or essentially any project in Poland, we have had higher costs, but we also had to reflect the development of prices in the market for PV projects in the Polish market. That also, the revenues have been adjusted downward. It is, on one end, the success that we got into the final stage, but the economics are somewhat worse than what we were anticipating.
The important thing is we got it across the line and we are in the process of closing this disposal. Of course, this is only one aspect, one of the projects. The other one that we have already spoken about before is the plan to dispose of our project Copăceni in Romania. Here we are at a very advanced stage of negotiations with a potential buyer. At this stage, we expect to sign a sale agreement before the end of this year. The closing of that is targeted for the end of the first quarter next year, partially because some permits still need to be updated. Secondly, in Romania, this transaction will be subject to regulatory approval, which takes about two months.
Of course, this is only one side of the action taken. We are also taking a very, very close look at all our business lines and trying to cut costs and streamline our operations as much as possible. They're looking at, and this is a tiny forward-looking statement, by the end of this year. I think you'll see that the headcount of the group will have gone down somewhere between 10%-15% compared to the beginning of the year. We're trying to take costs out where we see that the impact on our revenues or the potential to grow our business is the lowest. Headcount is one area, but there are other areas and other cost categories that we are taking a very, very close look at.
For 2026, and for our outlook, it's important that first we want to grow in the business lines we have, and that, of course, is not only related to energy.
Here I would maybe go to the second question that we received beforehand, which is what specific reasons do you see for the possibility of a turnaround?
While we see growth opportunities in the energy segment, we believe very strongly that we have now reached a stage in our water business and in particular in relation to PFAS and PFAS technologies that we have developed and continue developing, to grow the business in 2026 and beyond, in a way that will become a material contributor to our revenue, but also profitability.
Here, one important element is that our in- situ non-remediation technology, which can be applied to PFAS successfully, has been, we've received the patents for that technology in China and Japan. We've also been notified that we will receive the patent in Europe. Still waiting for response from patent offices in the other jurisdictions where we applied. We've also made significant improvements in relation to our filter technology to remove PFAS. I think we spoke before already about the implementation of a PFAS filtration unit with an industrial customer in the Czech Republic at the beginning of this year. That system works perfectly. The same customer actually has ordered for another PFAS issue. They have a second container. We are also further improving the capabilities of this filtration unit.
At this point, I would like to say that there may be some public news coming shortly on what we are able to do with our filtration unit. We see a lot of potential and also the right conditions to grow this business very dynamically.
The next question is how we intend to prevent the equity ratio from falling below the covenant threshold, which will trigger a right of termination for the bond.
Of course, a key question. Here, of course, it is important to point out that in the ratio that we published, you can also see it, we have in the covenant a carve-out just for the impact of regulatory changes on our business.
These situations have materialized both in Hungary to a lesser extent and to a more severe extent in Romania. Adjusting for the impact, and the impact is double. We have generated fewer revenues this year, but of course also has an impact on the value of, on the carrying value of our portfolio in that given country. Adding that back, we are still above the 25% threshold. However, of course we are uncomfortably close. There are several, several, first of all, we are trying to, of course, get the best possible fourth quarter in our operating businesses. We will have a positive impact from the Domaňov Project transaction. As I said before, we expect to sign one other disposal before the end of the quarter, which would also have a positive impact.
But we're also looking at some other measures to, well, another area, important area is of course the valuation of our assets, the carrying value, which is established on the basis of a discounted cash flow. Where of course the interest rate level and the energy price futures play an important role here. We have seen a downward trend in interest rates, which have a positive impact on the discount rate. We also see a strong outlook for next year and beyond for energy prices. We believe that there may be a positive impact from the valuation of our power plants, but we're also looking at some other options, which at this point we cannot be more specific on. Needless to say, we are fully aware that this equity ratio is a key metric.
We understand what the consequences would be if we fall short of staying within the conditions of the covenant. The management attention is directed at making sure this is not going to materialize.
The next question relates to our dividend payout policy, and where we have been consistent in communicating that we do not plan to pay our dividends in the medium term. Here the question by the investors is what the definition of medium term is.
I think it is obvious that at this point in time paying out the dividend is not really possible. First of all, based on our financial results, also the covenant that we have in our bond.
At this point in time, we need to redirect all the cash that we generate from our operating business and the disposal of non-core assets to build our business. If some is left then at this point in time, we'll definitely use it to reduce our leverage.
Here, we get to the last question we received beforehand, which is how we plan to refinance our bonds and whether we are planning to repurchase bonds in the market.
That relates to the last statement I made, that any free cash would be used to reduce our financial leverage and, clearly, given current market prices, repurchasing bonds is the best option to do so.
As those who are following us know, we have done so over the last 24 months. We have bought back around EUR 1 million of nominal. When the cash situation allows it, we will, of course, continue doing so. The purchase and retirement of our bonds also at below par also has a positive impact, initially on our financial result and then, of course, also directly on our equity, and it reduces our interest payments going forward. Depending on the liquidity situation, this is, of course, on our cards and we'll execute on that.
In relation to the first part of the question, which is how we plan to refinance our bonds, the first part of that strategy is for sure to have a significantly better financial performance in 2026, then continue with that trend for 2027. We will start, let's say, a more formal and more focused process on deep diving on the options that we have across public, private markets, but also of course bank financing, after the audit of the 2025 results of the group. Actually, this weekend will be exactly essentially two years away from maturity, which is and is not a lot of time. We understand everything will take time to organize, but the most important thing now is to improve the financial position and financial performance of the company.
Of course not just a little bit, but drastically. All efforts are now focused on laying the foundations for an excellent 2026. I will now address the questions that came from you through the chatbot.
The first question related to the capital gain or the positive impact of the sale of the Domaňov project, which I think I answered already.
The second question is why did the need arise to write down new energy software?
In our business, we are using a lot of software and a lot of that has been developed in-house. You know, some of these applications are targeted at specific aspects of our business and not all of them are fully functional.
When we see that there is a better solution or not, when I say fully functional, when we find that there are software that are better that have been developed externally, we sometimes decide to switch. Of course, we have to write off those capitalized development costs. We have done a deep dive during this year on all the development projects that we have had. Sometimes it also comes from the discontinuation of some development work. We have what I would call, and we are talking about tens of projects that are separately tracked, that have their budgets, have the targets. I think it is not completely uncommon in software development that not all the efforts work out.
We have done a very detailed deep dive on this during this year and have essentially what you, I would refer to as cleaned house and made sure that we only carry, and of course auditors would force us anyway, but we have done this exercise very thoroughly this year to identify those softwares that we will continue carrying on our balance sheet and which need to be written down. It is of course a relatively significant number. It is a one-off. At this point in time, we do not expect any further need to write off additional software at the end of the year.
We just basically made sure that we are essentially compliant with the rules and the logic of carrying capitalized intangibles on the balance sheet.
The next question is that we have reached the covenant before the carve-out. How will we address that?
Before the carve-out, on the effect of the carve-out, that is correct. I think I would repeat myself. First of all, we expect operationally a good fourth quarter. We have for sure one, most likely two transactions. The second one, which will be Copăceni, would have a more significant impact than in Domaňov on our financial results. There most likely it will be a capital gain and not contribute to EBITDA, but of course have the same effect on our equity position.
Of course, buying back some of our bonds is also an option that we are evaluating. If that is possible, then we will do that. As I said before, there are some other options that we are evaluating, but we cannot disclose at this point in time.
The next question is, what is your liquid assets, financial or hard assets? How easy can they be materialized?
What we refer to as liquid assets are cash or their equivalents. I think when you look at our balance sheet, what you will see is that we have available cash and also restricted cash.
Restricted cash is essentially all of it, or most of it is, is, we have about EUR 1 million as collateral for bank guarantees, but the rest is our reserve accounts that we have set up, and, and, and filled as part of our project financing. And over time, we are able to unlock some of that, which is actually what happened in the transaction with K&H Bank, the financing that happened in the third quarter where out of the EUR 5 million cash proceeds, EUR 750,000 were actually the unlocking of our reserve account. When you look at the cash position, it is much bigger. Restricted cash of course is what it means, is what it says. All the rest is essentially holdings in financial institutions.
The money, money on the accounts and therefore available.
The next question is whether the impairment of intangibles indicate the potential decline of the new energy segment as such and potentially implies the write-off of other intangibles including goodwill.
In the audit, just as we have done since we acquired Lerta, of course every year there is a, one of the key discussion points with auditors is impairment testing of intangibles, which partially relates to our portfolio of generating path plans, but of course also the goodwill that has arisen from the acquisition of Lerta. Here an important element is the value of the business based on its opportunities going forward.
At this point in time, we feel confident that we will be able to sustain and, if you wish, defend the valuation and the goodwill that relates to the acquisition of Lerta. The impairment as such relates to software. As I mentioned before, it is an impairment within the business division. We have tried very hard to adhere to the guiding principles that any software or any project that has not been completed and, for example, does not make sense to complete or there are better options available either in-house or so even if we replace a software with a new or different software, the old one needs to be impaired.
In some cases, of course, as the market develops, sometimes external software is better than what we have developed, let's say two or three years ago. If it's not amortized yet, then it needs to be written off. This is what we did and I think we did it thoroughly.
The next question is what is our minimum liquidity level to operate?
It is probably a slightly different question to answer. I assume it probably relates to the cash level that is in the cash flow statement and representation. I would put it this way, of course, a cash balance that would be twice as high would be a lot more comfortable.
The disposal of the projects that we mentioned and actually what we have not referred to yet in terms of cash in, we are still working on the refinancing of our five Romanian power plants. Linked to that, also the project financing of another 42 MW that we have ready to build in the Romanian market. This is something we are also working hard towards to close, still, before the end of the fourth quarter. There we have a lot of own funds trapped or tied up. We expect, as things stand today, with that refinancing of approximately 20 MW of operating plants in Romania, to be able to repay external financing that relates to that.
We expect to generate about EUR 3.5 million of free cash, usable for our general purposes. That alone should get us to the point that I was referring to before, about double the level of the cash that you have seen in the presentation.
The next question is, current trade payables significantly exceed current trade receivables. Considering those are regular bank loans repayments and low balance of cash and lower revenues, how do you want to repay all the upcoming short-term liabilities?
Our businesses are, some of them are, or most of them are generating cash. Firstly, secondly, we expect some cash from the refinancing. I was just referring to the sale of the sale of projects.
It is a situation that is definitely more complicated than in the past. At this point in time, we are confident that we have been able to manage and that we will continue to manage the working capital management of our group across all business lines.
The next question is, should we be buying bonds from the market since their prices are low?
I do not think that it is a good idea for us to provide investment advice. This question, we cannot answer.
The next question is, is the current share valuation correct? It is very low.
Yes, we are of course aware of it.
It's probably where a significant share of the company and therefore absolutely motivated to make sure that this picture changes as quickly as possible.
The next question is, is that if we wrote off EUR 1.6 million from intangibles and the balance of intangibles at the end of Q3 compared to the end of 2024 has not changed that much, what else is included in that? Have we, have you activated anything else which compensated the write-off?
The short answer to this is yes. Of course we continue developing and upgrading the systems we are using mostly in the new energy division. Yes, we continue spending on the development of software that we use in our business.
One area, for example, is the software, but also the systems required to provide ancillary services to the TSOs. Here we're working on this simultaneously in Poland and the Czech Republic, and Hungary. There, for example, we have to establish physical connections, server connections, and that is actually also included in what we capitalize. Then what amortizes over time as we use the software, in the case where we discontinue using the software, we write it off. Yes, that write-off has been more or less compensated by further capitalized development of software slash solutions.
The next question is, what is the current status of the project in South Africa?
Here what we can say is that we continue developing the project. We have commenced the EIA process.
We are currently fine-tuning the final setup of the project. I think what we can say at this point is that it will also include traditional PV and battery systems. We are currently fine-tuning the final setup so that we can also update our grid connection conditions with the DSO and proceed with the development to get it to build. I guess here we will, at the appropriate time, then make an official announcement or update you, either through our monthly reports or the quarterly reports. The project is progressing and we still work on the assumption that the project will be ready to build next year. It means obtain all permits.
I think we have clearly stated in the past that this is a project that, where the lead role in executing it will be someone else. We see our role here as that of a developer and we expect to basically make money on this project from the sale of this project to a final investor.
The next question is, it is more like a wish that, please remember that many people have invested and believe that the company will eventually overcome the impasse.
I see that as a wish of support for that, which I thank. All I can say is that we are highly motivated to do exactly that.
I believe that, over the last six to nine months, we've put a lot of thought into how to, how to reorganize ourselves, refocus, streamline processes. That is something ongoing. As I mentioned at the beginning, we have looked into many, many areas where to cut costs. Of course it's an ongoing and never-ending process. That is something. We are really putting a lot of effort into being ready for a much stronger 2026.
The next question is, after the sale of Yadnarie, what is the support for valuation of the RayGen investment in the balance sheet?
Actually, I'm very happy that this question was asked in this form.
Our investment in RayGen as a company, and also the option agreement we have for bringing additional projects in the future, is unrelated to or loosely related to the project that we developed in Yadnarie and have sold to AGL, which is also a shareholder. In RayGen itself, our shareholding is currently slightly above 5%. There are much bigger or larger investors, both in terms of their shareholding in the company, but also their own size. After the last financing round, the largest, the most important investor is SLB, formerly known as Schlumberger, the oil and gas services firm, which has also entered into a strategic technology development agreement with RayGen and is looking at making the system more efficient, but also focusing on finding new applications to the technology.
What we have been developing in Yadnarie, also known as South Africa, and what we've mostly been talking about is essentially the full scale of a utility scale RayGen plant, which has the generation part and the storage part. There are potential applications only for the development part. We know that there are projects being developed which focus on only capturing the heat, of course producing electricity, but capturing the heat from the modules and using that, supplying that to an industrial offtaker or even using the heat to generate cold and cool data centers. One further not specified project, which of course then only uses one part of the overall package that RayGen has developed. It does not include the storage part.
From our point of view, we are an investor in the company, definitely not the most important one at this point. SLB and AGL as the investor into the RayGen plant, of course, now are much more important for the further development of RayGen. On the other hand, the Yadnarie project has been, or is, extremely important for RayGen as a company because it is much bigger than the pilot plant that was commissioned in Carwarp, and it also shows that a major energy producer, AGL, is the largest energy producer in Australia, is willing to invest into this asset because they are convinced that the advantages of this technical setup are worth the investment.
I would say for the, what you would otherwise call bankability or the Yadnarie project has definitely been or is extremely important for RayGen as a company. Our role going forward can and will be to identify suitable locations, find permits, obviously go through the permitting process and create projects that will be using the RayGen technology, which then again will help RayGen in commercializing its technology. Of course, we're not the only developer that is trying to develop projects for the RayGen technology. RayGen has, I would say, its sites and projects across the world working with different partners, also in very close cooperation with some of its key shareholders. I think what we've done is with Yadnarie, we have provided an important anchor project for the next stage of development.
Going forward, we will probably bring more, more, more projects to the table, but there will be hopefully many, many more, which then should underpin the value of our investment in RayGen. These are again two separate things, and therefore the value of our investment in RayGen is loosely linked to Yadnarie because it was an important milestone. Longer term, it will be a function of how many Yadnarie- type projects there will be in the world that will be using the RayGen technology. We will try to contribute to that, but others will have to do so as well.
The next question is whether we have considered using Chinese suppliers for our projects to reduce CapEx, also in terms of transformers, switch gears, best power generation equipment. If so, what is your experience?
I think since we have started our business 18 years ago, we have not used any in our own projects, not used any non-Chinese modules. Even back then already, Chinese were dominating the, maybe there have been some Taiwanese, but, essentially already at that time, module manufacturing in Europe was insignificant. What has changed since then is that the Chinese have also become dominant in inverters. We still remember the time when SMA was the gold standard. Now it is a small, comparatively small, struggling competitor to Huawei and Sungrow and some of the other names. I think the same applies to batteries. I would say for these three categories, there is essentially no, no alternative, no viable alternative to Chinese products. With switch gear and transformers, it is a different story.
There we have so far relied on European producers. We are talking about the whole transformers, the whole switch gear. Of course, components, I'm sure, are coming, have been coming from China for a while now. What we do see, and I think it's a matter of the last year or two, is that some of these Chinese manufacturers are also now trying to gain, I would say for now, market share. I don't want to say gain control, but gain market share in relation to transformers and switch gear. Here, I mean, here it becomes a lot more sensitive because, you know, modules and inverters and batteries are more or less standardized products. Transformers and switch gear have to be compliant with local regulations as we are building in several countries. Those regulations, even if they're EU members, they still differ.
Of course, transformers and switch gear are not necessarily the same type of commodity product as modules, batteries, and inverters are. Here we definitely take a cautious approach. I mean, we do see that the offers we are getting are below what we would have to pay from a local supplier. Here, that's an area we just cannot make a mistake. You cannot, I mean, ordering a transformer that is not compliant and then you have to order another one or have to have it redone, you know, can cause a lot of damage. If only it delays, for example, the commissioning of a power plant, whether it's ours or that of a client, and that leads to contractual penalties, almost does not matter.
Just in other words, just to save, I don't know, 10%-15% on a transformer, we have to be 100% sure that that equipment is usable and compliant and will not lead to these kind of troubles, which then the consequences are a huge multiple of what we expected to save. I hope that was a good answer to that question. Let's see whatever there's, I believe that this was the last question.
Oh, the last question. What are the financial effects of the Pukenui project for the company?
I think we, in a month, in a quarter report, you see, you see, we've made a description. In short, it has been below our expectations. We have had cost overruns.
The margin, the gross margin on the project was materially lower than what we expected. Unfortunately, we have incurred a delay, which led to liquidated damages. Overall, the project has been loss-making for us. A rather painful experience. I would say a relatively long list of lessons learned, some of them related to how the project has been managed. In the light of this, this project has been executed in a market that is still at the very beginning. We have also signed up to provide O&M services to this power plant for the next two years. In New Zealand, the Pukenui project is, I think, the fourth or the fifth utility scale PV plant in the country. Now a lot more is getting built. The pipelines are quite significant.
It also means that the whole ecosystem in New Zealand is still on a relatively steep learning curve. I mean, in some cases, I would say know-how could be imported from Australia, which of course is a mature solar market. But, you know, for the DSOs, it was for the first time and some of the equipment manufacturers. Some of the cost overruns and delays are also attributable to the fact that the whole market is still learning. You know, in a perfect world, you have time, cost and time buffers to absorb that, which essentially we ran out of on the specific project.
The next, the last, the next question is how many, how the company is going to address the green bond issue in two years from now.
I think I addressed it already, but I'm happy to repeat. The number one priority short term is to set the stage, and that's what we're working on, set the stage for a significantly improved performance next year. That includes cost savings, some of them HR, but also other types of costs, a strong focus on winning more business, executing the business, also in business lines that so far have not been that active, and that can bring a lot more to the table. That includes water and remediation, which will play a more significant role next year.
There's definitely more business we will be able to do in EPC, whether that's utility scale or behind the meter, doesn't matter. We hope for growth from those areas. Operations and maintenance is a business that can, as it grows, start performing very strongly because the operating leverage in this business is very strong. I also mentioned that we have a completely new category of assets to take care of in the form of battery systems. Improving business and financial performance is the basis. We will, once we have passed the audit and published our audit results, the due date for that is the 30th of April next year.
We will deep dive on our options and strategic possibilities to refinance the bond and develop a, I would say, multi-pronged strategy, which we'll start executing on. That will cover, as I mentioned before, bank financing, capital markets, of course, with our current bond price performance. The bond market, at least in Germany, will be rather difficult. We believe that there are multiple pathways available, and we will start working on developing a clear strategy. I think as we make progress in this, we will also make the corresponding announcements to the market.
The next question is whether the impact of O&M on finance right now is negligible or neglectable. How much it would have to rise to have a meaningful impact on the finances?
Yes and no. I mean, O&M, and let's not forget, we also are now adding asset management services. It is a business that has higher operating leverage. That means, you know, you have certain systems, you have a number of technicians, which of course, you, as you take on more assets, you keep growing. The marginal profitability of new assets you take under management is actually going up. And asset management, which is a relatively new service for us, is actually particularly lucrative because it is an office job. We are also leveraging the experience we have gained from managing our own assets in the various countries. It is a business that, as it grows, we expect its profitability to go up dramatically. At the moment, our strongest market is Hungary, both in terms of megawatt under management and also profitability.
You know, if you asked me this question a year or two ago, I would have said the target achievable margin for our own O&M division is about 20%, maybe 25% EBITDA margin. We've seen in Hungary that it's possible to do more if in the right set of circumstances. I believe that there's a lot of runway for us still to grow this business strongly in the five countries that we're focusing on. Of course, I would not exclude that at some point in time, we would add other countries, you know, whether there would be a, let's call it a westward move to maybe address the German market, which of course is very mature.
There's a huge stock capacity, but also certain, quite a lot of competition or an expansion into one of the neighboring markets in Southe astern Europe. And this is just an example. I mean, for example, Bulgaria is a market where a lot gets built. It's right next to Romania. Such an expansion is definitely something that if we had, for example, an interested and an interested existing client who would ask us to take care of their assets there, it's definitely something we would very strongly consider and then use that as a basis to win additional clients and business in that country. What we'll not do is just go to, you know, any market because it looks like a good idea. It's nice to have a flag there.
It is not only the customer base that we have built and continue building in the region, as the only regional O&M player, which I think is quite impressive. It is literally the household names of institutional investors and IPPs that invest into the region from outside. Of course, you also have local customers, but I would say it is the who is who that invest in the region. With some of these customers, we take care of assets in two or even three countries now. They really seem to like the fact that there is one telephone number they call, you know, the same contact persons to discuss their Polish, Hungarian, and Romanian assets. I think that still has a lot of runway to go.
As I said, I would not exclude that we would follow the call of one of those investors into a new geography that is not too far away. To conclude my answer, I firmly believe that going forward, it will have a much more significant impact on our revenues, but mostly also EBITDA, than what we've seen so far.
The next question is that the number of projects under development seems to get smaller and smaller. Can you elaborate on that? Is there no more opportunities in investment for now, or is this caused by not enough capital to engage?
It's actually both. Clearly, we have, you know, been investing quite strongly into developing projects in the past. I think it's important to bear in mind that things have changed very fundamentally.
And, you know, the economics of a, of a PV plant, and the project is just the, the kind of the stage before, is, is different than what it was before. You know, there, there's essentially, with a few exceptions, there are no more support schemes. Any major renewable energy project, and it's not only PV, but can be wind, can be biogas, today has to rely on, on the market price of electricity, which of course can come in the form of a power purchase agreement. Definitely the revenue model is linked to the market price. Given where market prices are today, you know, the margins are slim.
I mean, investment costs on PV have come down a lot, but you have to be really, you know, to get to the return levels that you need, you have to be, you have to know what you're doing and understand also the energy markets, which I think overall we do. Even then, you know, the kind of excess returns of our kind of cost of capital or the cost of capital at the project level is very hard to do. The question is, is it actually worth the effort? Is it worth the risk? You know, when you develop projects, of course, you have also time delays. Some projects may not work out, so you have write-offs.
I think our approach that we focus more on providing services to other people's assets, at any stage of the lifetime, and that can, that would include EPC, that would include O&M, that would include asset management, offtake, is ultimately a lower risk, and significantly less capital-intensive strategy. As I mentioned before, we still have 42 MW that we want to build in Romania, for which we hope to close the project financing. I would say our appetite, and to some extent, it is driven by our limitations, but also sensibly our appetite for developing PV, but even hybrid projects is somewhat limited in Europe. We are, of course, developing the big project in South Africa. It is a country that has a lot of irradiation. It has a shortage of energy, relatively high energy prices.
Essentially all the hallmarks and all the ingredients that, that, a company like, like ourselves, would like to see. Also now we see that there are more investors coming into the market. The banks are ready to finance projects even on a relatively long-term basis, and the numbers simply stack up. I would say from that point of view and to, and, and development projects is a lot cheaper than, than here in Europe. Which does not mean that we're not going to enter 15 more countries and trying to do the same. South Africa, where we have now been on the ground for two and a half, almost three years now, is definitely a market where we will try to leverage our experience, including, including project development, and try to create value.
Coming back to Europe and particularly the CE region, development projects has become very painful. It is something that I think we should not focus our attention on. I think that is where the pivot to put ourselves in a position to provide a long list of services to investors that do create assets has been the right one. Clearly, we still need to improve the execution of that strategy. As I said, this is currently our main focus. With no more questions coming in, I would like to thank you for your attention, and wish you a great day. We will see you again in the second half of February when we are presenting our Q4 and full-year un-audited numbers. Thank you very much and have a great day. Thank you. Bye-bye. Bye-bye.