AB Ignitis grupe (IGN1L) Earnings Call Transcript & Summary

Good afternoon, and welcome to Ignitis Group's earnings call. I'm Aine Riffel-Grinkeviciene, the Head of Investor Relations and will moderate the call today. During this presentation, the CEO and CFO of Ignitis Group will review the results for the first quarter of this year and will present the strategic plan for the next 4-year period of 2024 to 2027. This will be followed by a Q&A session. Before we begin, I would like to remind that today's presentation contains forward-looking statements that are subject to risks and uncertainties. These statements are based on the management's current views, expectations and assumptions, and actual results may differ materially from those expressed or implied. With that, I would like to hand over to the speakers.

Good afternoon, everyone. We started 2024 with strong results. First, on our strategic performance, we increased our Green Capacities portfolio by 0.3 gigawatts up to 7.4 gigawatts, grew installed capacity by 0.1 gigawatts to 1.4 gigawatts and achieved significant milestones in the development of our portfolio. Second, on sustainability initiatives, we reduced Scope 2 emissions, continued to improve the safety metrics and maintained high employee satisfaction. And finally on our financial performance, our adjusted EBITDA grew by 21.2% year-over-year and reached EUR 181.7 million. Increased investments by 73.4%, up to EUR 209.5 million. And we reiterate our adjusted EBITDA and investment guidance for 2024. Let me now take you through each of the highlights in more detail. In first quarter of 2024, we increased our portfolio by 0.3 gigawatts from 7.1 gigawatt to 7.4 gigawatts. This is a result of greenfield capacity additions as we secured land for development of hybrid projects. So to say, we will develop wind farms close to our Latvian solar projects. We also increased our installed capacity to 1.4 gigawatts as Silesia Wind Farm 1 in Poland has reached COD in March, and our secured capacity stood at 2.9 gigawatts. In terms of breakdown of our Green Capacities portfolio, it continues to be dominated by wind projects with share of 4.6 gigawatts. More of the projects are being developed -- most of the projects are being developed in Lithuania, accounting for 4.2 gigawatts. And yet, the generation part represents the largest part of our portfolio with a capacity of 6.3 gigawatts. Now to our project delivery by technology. First, we continue to make significant progress in the development of offshore wind. At Lithuanian offshore wind farm, we have successfully completed first geophysical and geotechnical campaigns, initiated an environment impact assessment and started taking wind and metallurgical measurements in the Baltic Sea. We're also proud to have built an experienced team which now consists of more than 50 experts with extensive offshore wind development experience gained globally. In addition, we submitted a bid in the tender for the second 700-megawatt Lithuanian offshore wind project. However, due to the limited number of participants, the tender did not convene, but it's expected to take place in due course following a review of the tender conditions. On the onshore wind front, as already mentioned, our 50-megawatt Silesia wind farm in Poland has reached COD. In addition, the first wind turbines have been delivered at Kelme, the largest 300-megawatt wind farm we are developing in the Baltics. We expect the wind farm to become operational in 2025. And finally, we added new technology to our portfolio after reporting period as we secured grid capacity for the first early development of BESS projects with the capacity up to 190 megawatts in Lithuania. Next, our progress towards sustainability. Firstly, on greenhouse gas emissions. Our market-based total emissions increased by 12.5% year-over-year due to the increase of out-of-the-scope emissions as the result of Vilnius CHP biomass unit operations. Despite that, we reduced our Scope 2 emissions by 60.4% due to the use of renewable energy guarantees of origin for the share of Kruonis PSHP electricity consumption and the share of electricity distribution of network losses. Second, we increased electricity generated by 39%, mainly due to the generation of new assets such as Mažeikiai Wind Farm, Silesia Wind Farm 1 and Vilnius CHP biomass unit. The growth was further supported by Elektrenai Complex, where all 3 units were operational simultaneously in commercial mode for the first time ever due to severely cold weather in the Scandinavian countries and decreased electricity production capacities in the region. This, in turn, resulted in the green share generation decrease by 15.7%, down to 79.9%. Finally, we improved our employees' total recordable injury rate to 0.99 as the number of safety incidents decreased from 3 to 2. Also no incidents occurred between contractors. And lastly, we maintained a very high employee overall experience rate at 65.5%. For now I conclude the overview of our strategic performance and pass the word to Jonas to cover the financials.

Thank you, Darius. Let me start with the financial highlights of Q1 2024. We have again delivered a strong set of results. Adjusted EBITDA grew by 21.2% year-over-year with growth across all business segments, except Reserve Capacities. Green Capacities segment remains the largest contributor to the group's adjusted EBITDA, representing 42.4% of the total. Adjusted net profit increased by 26.9% and reached EUR 112.6 million. We have continued our extensive investment program and our investments increased by 73.4% year-over-year and reached EUR 209.5 million. This reflects our progress in Green Capacities segment, where our investments have tripled. Return on capital employed decreased by 1 percentage point to 11.1%, mainly as it takes a few years until capital invested starts generating EBITDA. Our leverage metrics remain strong with FFO to net debt at 28.9% and net debt to adjusted EBITDA at 2.49x. Finally, in line with our dividend policy, we paid a dividend of EUR 0.643 per share for the second half of 2023, which is 3% higher than last year. Now let's take a closer look at each of our KPIs. Starting with adjusted EBITDA, it has increased by EUR 31.8 million year-over-year from EUR 149.9 million to EUR 181.7 million. Green Capacities EBITDA grew by EUR 7.1 million, mainly due to the launch of new assets and higher captured electricity prices due to the flexibility of our assets. Networks EBITDA grew by EUR 16.8 million, mainly due to higher RAB as a result of continued investments into our electricity network and higher regulatory WACC, which reflects a higher interest rate environment. Customers & Solutions EBITDA grew by EUR 16.5 million, driven by lower loss in electricity B2C business and better results in Latvia and Poland. The growth in the 3 mentioned segments was partly offset by a decline in Reserve Capacities segment. Next, let's deep dive into the EBITDA of each segment, starting with Green Capacities. Its EBITDA increased by 10% year-over-year from EUR 70 million to EUR 77.1 million, and it continues to remain the largest contributor to the group's adjusted EBITDA, accounting for 42% of the total. The main drivers behind growth were, firstly, the launch of new assets, Mažeikiai Wind Farm and Vilnius CHP biomass unit in Lithuania and Silesia Wind Farm 1 in Poland; and secondly, higher captured electricity prices, mainly due to the flexibility of our assets. However, the growth was offset by 2 factors: OpEx increase as a result of continued expansion and lower volumes generated in existing assets, mainly driven by Kruonis pumped storage plant. Moving on to the Networks segment. Its adjusted EBITDA grew by 35% and amounted to EUR 65.5 million. The increase was mainly due to a higher regulated asset base, which increased by 11% from EUR 1.4 billion to EUR 1.6 billion as a result of continued investments into electricity network and a higher WACC set by the regulator, which increased from 4.1% in 2023 to 5.1% in 2024, reflecting the higher interest rate environment. Worth noting that the result also includes temporary volume effect, which will level off over the year. Next, in Reserve Capacities segment, we delivered strong performance both in Q1 of 2024 and 2023 as we utilized the optionality to earn additional return in the market on top of the regulated return. However, due to extraordinary market conditions in 2023, EBITDA decreased from EUR 28.6 million to EUR 20 million. Lastly, Customers & Solutions adjusted EBITDA increased by EUR 16.5 million year-over-year and reached EUR 17.4 million, driven by several factors: firstly, lower loss in electricity B2C business; and secondly, better results in Latvia and Poland. Next, our investments. They have increased by 73% year-over-year. And the key driver behind that was our accelerated investments in Green Capacities, which we tripled to EUR 138.9 million, mainly because of the construction of new onshore wind farm projects in Lithuania, Kelme Wind Farm 1 and 2. Green Capacities segment accounted for 2/3 of the group's total investments. Networks investments, on the other hand, have decreased slightly by EUR 7.9 million, driven by lower number of new connections and upgrades in electricity networks. Turning to our net working capital figures. It has decreased by 17.6% since the end of 2023, down to EUR 144 million at the end of Q1 2024. The main drivers for lower net working capital were a decrease in inventory, mainly in Customers & Solutions segment due to the decrease in value of natural gas and storage mainly due to lower volumes stored. And the second factor was lower trade receivables due to lower energy prices and lower volumes sold. Adding it all together, our free cash flow metric was positive EUR 5 million with EBITDA and the positive change in net working capital offsetting the investments. Regarding our leverage metrics, our net debt decreased by 2.3% and stood at EUR 1.3 billion at the end of Q1 2024. FFO to net debt remained at a solid level of 28.9%, which is well above 23% threshold of S&P credit rating agency required for BBB+ credit rating, and net debt to adjusted EBITDA has improved slightly from 2.7x to 2.5x. Finally, our guidance for 2024. Following our Q1 performance, which was in line with our expectations, we reiterate our full year 2024 adjusted EBITDA guidance of EUR 440 million to EUR 470 million and investment guidance of EUR 850 million to EUR 1 billion. Directional guidance for adjusted EBITDA by segment also remains unchanged.

Thank you, Jonas. Before moving on to our next 4-year strategic plan, I would like to summarize the strong performance we have delivered in Q1 of 2024. In our strategic performance, we increased our Green Capacities portfolio by 0.3 gigawatts up to 7.4 gigawatts and grew installed capacity by 0.1 gigawatts to 1.4 gigawatts. Next, on our sustainability initiatives, we reduced Scope 2 emissions, continued to improve the safety metrics and maintained high employee satisfaction. And finally on our financial performance, our adjusted EBITDA grew by 21.2% year-over-year and reached EUR 181.7 million. We increased investment by 73.4%, up to EUR 209.5 million and reiterate our full year 2024 adjusted EBITDA guidance of EUR 440 million to EUR 470 million and investment guidance of EUR 850 million up to EUR 1 billion. Now let us move on to presentation of our Strategic Plan for 2024-2027 period. In 2023, we updated our strategy and defined our purpose to create a 100% green and secure energy ecosystem for current and future generations. We continue to stick to our deep purpose. We fully -- we fulfill our purpose by contributing to Europe's decarbonization as well as energy security in our region. Both are driven by external factors and are in full alignment with our strategy and strategic plans. First on the decarbonization agenda. It is supported by EU action and climate-related targets set to reduce greenhouse gas emissions by 55% in 2030, by 90% in 2040 and reach net zero emissions by 2050. Second, on our regional energy security, it became of crucial importance since the beginning of energy crisis and drives further change to replace natural gas with renewable sources of energy and to increase energy self-sufficiency. Because of that, it is forecasted that renewables capacity will increase 2.6x by 2050. Both decarbonization and energy security has 2 common denominators, energy flexibility and grid needed to enable the energy transition. Regarding green flexibility, it is forecasted that European battery capacity will increase almost 10x by 2050, and power-to-X capacity will be fully utilized by 2050. Let me note that with this strategic plan update, we updated our Green Generation segment's name to Green Capacities as it concludes both green generation and green flexibility technologies and better represents the essence of green energy transformation. To enable this energy transformation, growing investment in power grids is needed. Investments need to more than triple compared to the historical levels for successful integration of large renewable sources and to be able to transport power over long distances from offshore while considering the electrification of transport, industrial, and heating sectors, increasing connection requests and aging Europe's distribution grids. To sum up, our strategy is aligned with both enablers. We are developing green flexibility technologies and continue to invest in power grid, which is well integrated in our business model. By utilizing our integrated business model, we are maximizing our full potential. This is our backbone for strategy execution. It means that, first, we will focus on delivering 4 to 5 gigawatts of installed green generation and green flexibility capacities by 2030. Second, we will expand the resilient and efficient network that enables the electrification. Third, to enable the Green Capacities build-out, we will utilize and further expand our customer portfolio, which is currently the largest in Baltics with 1.4 million customer base in our Customers & Solutions segment. And finally, Reserve Capacities is foreseen to be mainly operating as a system reserve with strategic focus on contributing to security of the energy system. With forces behind the change and our business model wrapped up, let us now deep dive into strategic priorities of our business segments. Jonas, passing the word to you.

Thank you, Darius. I will cover our Green Capacities business segment. As previously, we have 2 main targets, one for the medium term and one for the long term. In the medium term, by 2027, we expect to double our installed Green Capacities and to reach between 2.4 and 2.6 gigawatts. And in the long term, by 2030, we plan to double it again and reach between 4 to 5 gigawatts. So overall, no major changes to our previously published strategic plan. While working towards our Green Capacities targets, we focus on technologies that can deliver 100% green and secure energy ecosystem. And to deliver that, we combine green generation and green flexibility technologies. In terms of green generation technologies, we focus on onshore and offshore wind. And in terms of green flexibility technologies, we focus on battery storage, hydro-pumped storage, and power-to-X technologies. Worth mentioning that part of our complementary assets such as hydro, biomass, and waste energy plants provide both generation and flexibility solutions. I will now briefly cover each of these, starting with the offshore wind. Offshore wind is one of our focused Green Generation technologies. Our target is to build at least 2 offshore wind projects in the Baltics, 1 project in Lithuania with COD around 2030, and at least 1 more project in the Baltics with COD post 2030. We currently have 2 projects in our portfolio, 1 in Lithuania and 1 in Estonia. Lithuanian 700-megawatt project has seabed and grid connection secured and is in the active development phase. Estonian project is between 1 and 1.5 gigawatts, and it has seabed secured and is in the early development phase. In terms of the long-term offshore potential in the Baltics, it is massive. There are around 8 gigawatts of auctions expected during 2024-2027, while long-term potential is more than 30 gigawatts. Moving on to onshore wind, which is another focused Green Generation technology for us. We target to reach more than 700 megawatts of onshore wind installed capacity by 2027. Our current total installed capacity stands at around 300 megawatts and capacity under construction is around 400 megawatts. The conditions in the Baltics and Poland are very much favorable for onshore wind development as there are no natural barriers such as mountains that can block wind, and it has a low population density, especially in the Baltics. In terms of market potential, there is plenty. We expect to see onshore wind installed capacity increasing almost 3x in the Baltics and almost 2x in Poland by 2030 with more than 10 gigawatts of new capacities coming online. Next, solar, hydro, biomass, and waste-to-energy are our complementary technologies. We will use solar technology where it adds value either by creating a more stable generation profile or better utilizing the existing grid infrastructure. We target 400 megawatts of installed solar capacity by 2027. And currently, we have around 300 megawatts of it under construction. In terms of other complementary technologies in our portfolio, hydro, biomass and waste energy, we are very happy to have these assets in our portfolio as they provide both green baseload generation and green flexibility solutions, meaning that they are able to capture prices which are above-average market prices. Total installed or soon-to-be installed capacity of these technologies is around 250 megawatts of electrical capacity and 350 megawatts of heat capacity. Now moving on from green generation to green flexibility technologies. First of all, hydro pumped storage. The asset which we already have in our portfolio is Kruonis Pumped Storage Hydro Plant, which has 900 megawatts of green flexibility capacity and is one of the largest energy storage facilities in Europe. On top of that, we are currently building additional 110 megawatts of even more flexible capacity, which will be launched in 2026. After the expansion, this 1-gigawatt plant will be able to run at full load for around 10 hours and provide a massive 10 gigawatt hours of storage capacity. Next, our 2 other focused technologies on the green flexibility side, batteries for the short-term flexibility and P2X for the long-term flexibility. We target to implement our first utility-scale batteries by 2027. And on the P2X side, we plan to launch a green hydrogen production and e-fuel conversion pilot project. And if successful, in the second stage, we will launch utility-scale hydrogen and e-fuel production capacity. Next, I would like to highlight one of the key elements of our operating model, which is power offtake capabilities. This is one of our key differentiators, positioning us very strongly among the competition. Our current power supply portfolio is 6x larger than our generation portfolio. Currently, we generate only around 1 terawatt hour and supply more than 6 terawatt hours. This enables us to build around 2.5 gigawatts of new green generation capacity and simply sell the electricity that we generate to our existing customer base. With this, I will pass the word back to Darius to cover our remaining business segments.

Thank you, Jonas. Let me begin with the Networks segment. Networks has the largest distribution grid in the Baltics and operates under natural monopoly with regulatory framework providing more than 5% return on investment. We see the grids as one of the key elements of energy transition, and therefore, our focus is on 3 priorities: the first, resilient and efficient electricity distribution. We aim to increase network resilience, automation, and efficiency. The second: strategic priority includes electricity network expansion and facilitation of the energy market. We aim to facilitate the energy market development, including transport electrification, EV, charging and energy efficiency. It also includes industrial and heating electrification through the electricity network expansion, new connections, network capacity expansions, and smart meter rollout. Lastly, the third strategic priority includes end-to-end customer experience, improvement through standardized solutions and channels reflecting the customers' needs. Next, Customers & Solutions business segment. It has the key role of utilizing and further expanding our customer portfolio to enable the Green Capacities build-out. We target to utilize it and further expand the customer portfolio, which is currently the largest in Baltics to ensure the green capacity build-out through internal power purchase agreements and to grow the share of green electricity supplies to our customers. Additionally, we are building a leading EV charging network in Baltics, which will become a significant offtaker of green electricity in the future. We are expanding in the Baltics across public, commercial, and home charging segments and developing a public EV fast-charging network. And finally, we are optimizing our natural gas supply portfolio and proactively promoting customers to move from gas to power. As a result, our electricity supply portfolio is expected to increase to 9 to 11 terawatt hours by 2027 with cumulative average growth rate reaching around from 8% to 13% during 2023-2027. Finally, let me now move to our Reserve Capacities segment, whose key role is contributing to security of energy system. This segment primarily provides ancillary services with a load factor of just 3% in the last year by ensuring high availability of around 98%. Additionally, it has an upside potential from having an option to generate electricity in the markets during the low renewable generation or positive clean spark spread periods. Another upside potential is participation in market tenders/capacity options for the provision of ancillary services to other countries. With that, again, I give the floor to Jonas to cover our financial targets.

Thanks, Darius. Over the next 4 years, we plan to invest between EUR 3 billion to EUR 4 billion. Most of our investments or around 60% will be allocated to Green Capacities segment to achieve 2.4 gigawatts to 2.6 gigawatts of installed capacity target by 2027. Another significant part of our investments, around 35%, will be dedicated to our Networks segment, which will increase electricity network resilience and enable the electrification of other sectors, at the same time, increasing our regulated asset base by 50% to more than EUR 2 billion. Sustainability-wise, more than 85% to 90% of our investments are expected to be aligned with the EU Taxonomy. Now let's look a bit closer to our Green Capacities investments, where we will invest, as mentioned, 60% of the total group investments or between EUR 1.8 billion to EUR 2.4 billion. Out of this amount, 44% will go to assets which we plan to launch during 2024-2027 period. 53% will go to the assets which will be launched post 2027, and finally, 3% will go into maintenance. Technology-wise, the largest shares will go to our focused technologies, onshore and offshore wind, 56% and 18%, respectively. And geography-wise, around 50% of the investments will go to Lithuania. Moving on to our Networks investments. To this segment, we will dedicate around 35% of the total group's investments, which is equivalent to between EUR 1.1 billion to EUR 1.3 billion over the 2024-2027 period. 56% of this amount will be allocated to electricity network expansion, 39% to electricity network maintenance, and 5% to the gas network. Next, our target returns, which all these investments are expected to generate. Firstly, in terms of IRR-WACC spread, we target at least 100 basis points in nonregulated activities and 0 or more basis points in regulated activities. Secondly, our adjusted EBITDA is expected to reach between EUR 550 million to EUR 650 million in 2027, which represents up to 8% annual growth rate over the strategic period, mainly driven by the Green Capacities and Networks. Finally, we target our adjusted return on capital employed to be at the level of 6.5% to 7.5% in 2024-2027 period. Despite our sizable investment program, we continue our commitment to a solid investment-grade credit rating of BBB or above over the 2024-2027 period. In addition to that, we also target to keep our net debt-to-adjusted-EBITDA below 5x. Finally, in terms of shareholder returns, we will continue to grow our dividends by at least 3% every year, which represents an implied dividend yield of 7.3% to 8% over the 2024-2027 period. With this, I pass the word back to Darius.

Thank you, Jonas. Let me now to move on to the most important asset, our people, which altogether contribute to our strategy execution. We are organically building our entire renewables branch from scratch. Our renewables organization expected to grow 3.5x over the 4 years. Ignitis Group is a diverse organization with energy-smart people united by common purpose to innovate, grow and act with the sense of purpose to create 100% green and secure energy ecosystem for current and future generations. Continue to align our business goals with the fundamental ESG principles and strategic priorities on decarbonization, safety, employee experience, diversity and sustainable value creation. Our decarbonization pathway is aligned with our business ambitions. As a result of growing installed green generation and flexibility capacities, we will reduce the carbon intensity of Scope 1 and 2 greenhouse gas emissions by at least 20% to 40% compared to 2023. We also anticipate to further increase the share of green electricity supply to more than 30% by 2027 by actively encouraging our customers to use green electricity as well as expanding our electricity supply portfolio within our home markets. And finally, we aim to reducing our absolute Scope 3 greenhouse gas emissions from natural gas supply by encouraging customers to transition from gas to electricity. We will execute on these priorities to reach our net zero emissions target. Let me now sum up the key points of our Strategic Plan for 2024-2027. Our purpose is to create a 100% green and secure energy ecosystem for current and future generations. To do that, we will exploit our renewable-focused integrated business model and pursue the purpose-driven priority: green, flexible, integrated, and sustainable. Regarding our strategic goals, we target to reach 4 to 5 gigawatts of installed Green Capacities by the end of 2030 and 2.4 gigawatts to 2.6 gigawatts by the end of 2027. By 2027, we will reduce our carbon intensity of Scopes 1 and 2 greenhouse gas emissions to 215 to 289 grams of CO2 equivalent per kilowatt hour. By 2040-2050, we will reach net zero emissions. To ensure these goals, we will invest from EUR 3 billion to EUR 4 billion over the next 4-year period while maintaining BBB or higher credit rating. This should translate into EUR 550 million to EUR 650 million adjusted EBITDA in 2027 and 7.3% to 8% implied yield over the period of 2024-2027. With that, thank you for patiently listening to us today.

This concludes our presentation and opens the floor for questions. To start with, the first question. Congrats on mind-bending results. I'm honestly running out of superlatives. By my count, Q1 adjusted EBITDA of EUR 182 million is roughly 40% of the group's planned adjusted EBITDA for the year. If the midpoint of EUR 440 million to EUR 470 million is used, what prevents Ignitis from upping its guidance for the year?

Yes, so you are right. Q1 results were very strong indeed, probably towards upper end of the guidance. However, there are several factors why we are not upgrading the guidance. So first of them is the seasonality, right? So Q1 is usually a stronger quarter for us. So that's one thing. And the second thing is that we had some better performance in Reserve Capacities and in Customers & Solutions, which we don't expect to continue throughout the year. And we also had some temporary effect in the Networks segment due to a higher share of volumes being distributed in Q1, and this effect will level off over the year as well. So those are the reasons why we are not upgrading the guidance.

Next question is, in Ignitis' Strategic Plan 2024-2027, estimated CapEx of EUR 3 billion to EUR 4 billion represents an increase of around EUR 1 billion compared to the previous strategic period. Could you please indicate which factors contributed the most to the increase, timing of capacity expansion, more expensive CapEx, else?

Yes. So regarding the CapEx, again, there are multiple aspects to this. So first of all, on the Green Capacities side, it includes the year 2027, which is already the first year where we will start to see more significant offshore investments. So that's one factor. The second factor is the change in the mix between onshore wind and solar, which we now see that we will do more megawatts on the wind side and less on solar. And the third factor is actually on the Networks segment, where we also see an increase in investments as the network is critical for successful energy transition. And due to the improvement in the regulatory framework which took place at the end of last year, now it allows us to actually accommodate all those investments needed to the network without breaching healthy leverage levels.

Next question. In Ignitis' Strategic Plan 2023-2026, Ignitis targeted EBITDA of EUR 470 million to EUR 550 million for 2026. Now Ignitis aims to earn adjusted EBITDA of EUR 550 million to EUR 650 million in 2027. Could you please indicate if the previous target for 2026 is still in place?

Yes. So the way we approach these strategic plans so we are not updating the old ones, so the relevant guidance is only the 2027 numbers, which is the most fresh one.

The next question, is asset rotation still a viable option? If some assets get eventually farmed down, what premium over CapEx can Ignitis reasonably earn on average?

So to answer the first part, yes, asset rotation is part of our strategy. It's part of our funding strategy. So it's done for 2 reasons. One is to recycle capital, so get back the capital from assets which are built and to reinvest it into new assets. And the second part of the target is to earn that additional premium over CapEx. How big that CapEx premium can be, we will see once we complete the transaction.

The following question. Could you please elaborate on CapEx prices for wind off/onshore and solar? What are the averages now and what dynamics have been observed lately? Any signs of easing, getting cheaper?

Yes. So I mean, we -- since last year, we are not seeing any significant movements in the CapEx per megawatt. They have stabilized and we are seeing solar at EUR 0.5 million, EUR 0.6 million per megawatt, while for onshore wind, it's around EUR 1.5 million. For offshore wind, since we haven't done any contracting yet, it's yet to be seen.

Next question. What power price assumption is factored into the long-term guidance?

Regarding the long-term power price assumptions, so it naturally differs across different geographies. But to give you a very rough guidance, it's around EUR 80 to EUR 90.

The following question. Can you enlight us more about Lithuania's second offshore wind project? Why did you choose to participate in it? When should we expect the next auction? Should Ignitis participate with a partner?

The decision to participate in second tender was driven by the change in the project's implementation schedule. As the project was set to be implemented within 8 years, around 2032, it will potentially not coincide with the implementation of the first 700 megawatts of Lithuanian onshore wind farm. This made it financially feasible to successfully implement both projects in the event of successful tender. As currently, we do not know when the tender will be relaunched. We do not discuss our participation in that tender. After conditions will be clear, we will make a decision and we will announce it.

The following question, battery projects. Do you already see a possibility to operate it purely on market conditions without subsidy?

You're right, we made the first step of making reservations of grid capacities for large-scale battery systems. While doing so, we still do not expect to operate those entirely on the market conditions, and it will require some level of subsidies.

One more question. Both Silesia wind second and Taurage solar projects are already built. When should we expect first electricity produced there?

Yes. So both projects are currently nearing the completion. We are finalizing the testing procedures and working with the grid operators both on Lithuania and Polish side to finally connect them. And hopefully, next quarter, we will start seeing generation or even this quarter from both of them.