Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orron Energy AB (LNDNF, Financial) has a strong focus on low-cost onshore power generation, including wind, solar, and battery technologies, across the Nordics and Europe.
- The company has a significant project pipeline of around 40 gigawatts, with monetization expected in the next 6 to 12 months.
- Orron Energy AB maintains significant liquidity headroom, with cash of EUR40 million and more than EUR100 million of undrawn capacity on their RCF, providing resilience and growth opportunities.
- The company is on track to reach the 'ready to permit' milestone on several projects, particularly in the UK and Germany, indicating progress in their growth strategy.
- Orron Energy AB has achieved a reduction in net debt from EUR92 million to EUR56 million year-to-date, showcasing effective financial management.
Negative Points
- Power generation for Q3 was 20% below expectations due to low wind speeds and voluntary curtailment, impacting financial performance.
- The average system price for Q3 was the lowest since 2020, leading to reduced revenues and EBITDA.
- The company is facing challenges with low energy prices, which could impact cash generation and profitability if they persist long-term.
- Orron Energy AB's share price is significantly undervalued compared to its NAV, which is a concern for management and shareholders.
- The company has not engaged in price hedging, which could lead to loss-making quarters during periods of low energy prices.
Q & A Highlights
Q: There's been talk about monetizing some of Orron Energy's Greenfield projects. Can you provide updates on progress and timelines?
A: Daniel Fitzgerald, CEO: In the UK, our first project is around one gigawatt of solar with half a gigawatt of battery capacity. We've secured most of the land and grid, and expect to move into the market soon. In Germany, we're finalizing public consultations and expect to reach the ready-to-permit milestone shortly, after which we'll begin the sales process.
Q: Why not diversify current assets and invest in producing assets in the UK, Germany, or France where prices and margins are better?
A: Daniel Fitzgerald, CEO: While prices are higher in Germany and the UK, the expected IRR for acquiring assets there is too low compared to our cost of capital. We continue to see double-digit returns in the Nordics, making it more viable for us to grow accretively there.
Q: Are you considering price hedging given the low prices in Q2 and Q3?
A: Daniel Fitzgerald, CEO: Hedging is an ongoing discussion. We don't need to hedge from a balance sheet perspective and expect higher returns in Q4 and Q1. We will consider hedging when prices are higher than expected.
Q: Can you provide details on the valuation multiples for recent acquisitions?
A: Daniel Fitzgerald, CEO: We're acquiring assets at 0.6 to 0.7 million EUR per megawatt installed capacity, which is significantly below the cost of building new capacity. This allows us to achieve double-digit rates of return.
Q: How would Orron Energy tackle prolonged low energy prices to remain profitable?
A: Daniel Fitzgerald, CEO: Long-term, EUR30 per megawatt hour is unsustainable. We believe in a EUR50 per megawatt hour price, which supports growth and cash flow. We have sufficient liquidity to withstand low prices and will adjust future CapEx as needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
