Cloudberry Clean Energy ASA (CLOUD.OL) Earnings Call Transcript & Summary

Hi, and welcome to Cloudberry Clean Energy's First Half Year Report. My name is Anders Lenborg, and I'm joined here by our CFO, Ole-Kristofer Bragnes. We have a presentation for you that we would like to go through and please also use the Q&A button and send us questions, and we will try to answer as many of the questions as possible after the presentation. Before diving into the details, let's have a look at the agenda. I will go through the highlights, and then Ole-Kristofer will take you through the key financials, and I will finish up with some comments to the market. And here, you see our hydropower intake on our Tverrdalselvi project on the right-hand side. It has been a busy quarter for Cloudberry. We have had many busy quarters, but this is -- it's been a very interesting quarter where we have partnered up with Swiss Life creating one of the top 3 small-scale hydropower platforms in the Nordics. Our cooperation with Swiss Life goes back to 2020 and we have constantly developed our partnership and our portfolio. And with this new merger of our resources, we create a platform that can cover the full life cycle of our hydropower projects where the Forte team have a long track record developing new hydropower plants, and Cloudberry had more focusing on the management of the producing hydropower plants. So very pleased to see that and very happy to come back to that later in the presentation. That has been or is a game changer for Cloudberry's hydro platform. In addition to that, we have farmed down and also entered into a cooperation with OX2 on our Duvhällen project in SE-3, so that is also a new constellation for us, and we are looking forward to the cooperation with the OX2 on the wind side. And another highlight for the quarter is our FID on the Dingelsundet BESS project. It's a project that we have worked with over time with our partner, Hafslund, the utility of Oslo. And we are happy to have taken the first FID on our first BESS project. And last but not least, we are always following up our production assets and making sure that they produce as good as possible and happy to say that we have all turbines back to service on the Odal wind farm. You see here on the right-hand side that our production have increased throughout the years, almost 200 GWh the last quarter, and also the installed capacity has increased. It looks like a small decrease on the capacity side, but that's due to the Forte transaction. But if you add also the power plants under construction, it will be an increase also on installed capacity. Ole-Kristofer will come back to the numbers in more details, but we are very happy to see that we have realized the power price that is twice the system price in the Nordics. So it shows that our strategy when it comes to diversifying our portfolio on different price areas and technologies and staying merchant is an attractive one. But let's take one step back, and let's just have a couple of minutes on who we are, the Cloudberry platform. We have created a profitable Nordic IPP over the last years. We are we are covering our project from a very early green phase -- greenfield to, when they are in production and under operations. So to have a platform covering the full life cycle of our project is important for us, and this develop, own and operate strategy has also given us a lot of flexibility that together with the portfolio, we have 4 -- now 4 different technologies with different production profiles. We are in 3 different countries with different regulatory regimes, 8 different price areas, where we have the vast majority of our project in the southern price areas of Norway and the southern price areas of Sweden and in DK1 in Denmark. As you can see here on the map, we have some development projects and construction projects in the north of Norway, and that are some of the Forte projects that came into our portfolio now. But we will keep on focusing on the attractive southern price areas and we will then continue also to develop the projects in the South. So this combination of different countries, price areas, technologies and projects in different phases gives us a fantastic flexibility. And I think the flexibility of Cloudberry, the flexibility in the platform and in the portfolio has been super important for delivering good results throughout a difficult market. And it's also important to notice that our backlog with exclusive project is something that we develop in-house from greenfield and the pipeline is something that we use to make a best possible mix of project and technologies, and that is our network and through M&A activities. So we have a combination of in-house developed, but also we're using the market where we see the best opportunities. So that's Cloudberry in short, a Nordic profitable IPP platform with great flexibility. And here you see our production profile. Our production portfolio has increased over the years. And as you can see, we have also focused on diversifying it. And as you see here on the right-hand side, we will keep on diversifying it with now also batteries and BESS projects in the portfolio. We're happy to see that we have after 5 years managed to pass 1,000 GWh or 1 terawatt hour in production. And here, you have the breakdown of our production portfolio on the left-hand side. As you can see, it's an increase also in production when we're taking the project under construction into consideration. But as important is the right-hand side where you see our backlog and permitted project, and we always focus on adding new project to the backlog and looking at attractive possibilities in the pipeline to always make sure that we build a portfolio that is diversified and also with attractive production profile throughout the year, so we can deliver stable production. We have also added a slide to the presentation on the Forte transaction. As I said, we are very happy to create a new leading hydropower platform in the Nordics, top 3. And I think this just not only adds new production to our portfolio, a new project in our backlog, but it also adds a lot of knowledge and experience and capabilities on developing the project from early phase greenfield projects until they are in operation, and we have them under our management. And we have touched upon the hydro expansion. We have also talked about the Dingelsundet project. Also happy to see new partnerships coming on the wind side in Sweden. As many remember, we entered into a partnership with Holmen, one of the larger owners of land in Sweden, but now also entered into a partnership with Sveaskog, one of the largest land owners in Europe, the largest forest owner in Sweden. And we have a 100-megawatt project there to start with, and we will add new projects through that portfolio. On the Danish expansion, we have touched upon that earlier, but we have also now seen that we have managed to get a very positive overall valuation on our farm down sale of Svåheia wind farm in Norway, on equaling NOK 17 on the per share as we did when we did the acquisition in Denmark. On the future, going from -- towards 2030, we will continue to focus on profitability over growth. That has been our focus over the last couple of years, and it will continue. We have seen that some of the projects will not meet our requirements. Then we take a step back, we redesign and we use more time on it instead of trying to push things through because we have also a lot of other projects in our portfolio that meeting our return requirements. So we will continue to focus on profitability over growth. And we have always focused on being very well financed, have a strong balance sheet, and that will also continue in the future, and of course, to see the team delivering on these projects on the different technologies and redesigns and all the things we work with now is very satisfying and I'm very happy with how we have executed on these projects over the last quarter. Yes, on the ESG side, I mean I think the most important is that we have had no recordable HSE incidents or damages in the second quarter. Then I give the word to Ole-Kristofer, that will take you through the key financials, and I will come back at the end of the presentation. Thank you.

Thank you so much, Anders. My name is Ole-Kristofer Bragnes, CFO of Cloudberry. And as always, I'm very happy to take you through the financial story of this quarter. So let's start like we did last time with a bird-side view of the Cloudberry balance sheet. And this is, I call it, the flip side of our portfolio development when we see it in the numbers. When we started Cloudberry and listed it in 2020, it was very important also to showcase that we were able to get access to the projects that we are able to deliver them on time and cost and grow the portfolio in a diversified and profitable manner. So you see here in numbers, answers to some of the questions. We have seen a significant growth in our portfolio through -- you can see in the asset side. And we've also been quite cautious of debt, raising the equity as we have grown over EUR 300 now up to date at continuously increasing price levels. So that's been important to us to showcase that we are able to deliver on creating the Nordic renewable platform, and we are now in a great position in order to capitalize on this going forward, as you see in the snapshot here on the Q2 '25 financials with a strong balance sheet and a great foundation for continuous growth to capitalize on what has been built. If we dive into the balance sheet financials for Q2 '25, we can first touch upon the drop in total equity. You also saw that on the last slide. So here it's important to revert back to the transaction we announced in Q1 '25 with Skovgaard, where we acquired the majority of -- or almost all the minority positions in especially our Odin portfolio, and having him reinvest into Cloudberry at a substantial premium as we previously touched upon, supporting the values of the Cloudberry portfolio. But that reduced our noncontrolling interest in our portfolio from NOK 643 million in Q2 '24 to now NOK 71 million in Q2 '25. So the equity to controlling interest, i.e. the shareholders of Cloudberry has increased over this period, both in nominal terms, but of course, also in book value per share, which is very important to showcase our growth and our value proposition. Further, we still have a strong credit facility in place where we now have NOK 500 million currently undrawn after having repaid some debt in relation to transactions, which Anders touched upon earlier. And a strong cash position of NOK 848 million on a proportionate basis or NOK 771 million on a consolidated basis gives us great room for growth combined with our credit facility. And we have continuously hedged our debt throughout our journey and have per the end of the second quarter, around 80% of proportionate interest-bearing debt fixed at long-term agreements and at an all-in rate below 4% with a long tenure and we'll continue on doing so going forward. Going to liquidity and commitments overview. We touched upon the cash position in the earlier slide. From -- to showcase what we have in available funds, we see that we have some remaining CapEx on Sundby and Munkhyttan around EUR 2 million in final invoices, some pending grid updates, which you can read more about in the report. And we're also happy, of course, to see that we're taking the FID on the Dingelsundet BESS project. We have around EUR 3 million in committed CapEx there, which has been injected into our mutual SPV with Hafslund subsequent to this quarter. The Forte transaction has been an important transaction that we did subsequent to the quarter here again, and we paid around EUR 5 million for the shares in Forte Energy Norway portfolio, getting into control in that portfolio of 55% ownership. We had NOK 62 million in undrawn debt in Kvemma, which we've seen in the last quarter. So that's been realized, offsetting some of that. And then we also have some commitments in the Forte Vannkraft portfolio where we have assets under construction. So all in all, great liquidity combined with our available room on our debt facility of around NOK 1.2 billion, including that. And that gives some very interesting value proposition for growth in the portfolio where we see a lot of interesting opportunities evolving in the Nordics. So here, you have the other side of our, call it, of the balance sheet, the P&L history. And what you haven't -- thank you. What we didn't see from the financial and the balance sheet development is that we also have done a lot of capital recycling over this journey. So in both '22, '23 and '24, we have done realizations in our portfolio, '23 and '24, some hydro transactions and also in '22 and '24, showcasing development gains in our portfolio of assets we have had and built under the Cloudberry platform. The underlying financials over this period has increased, and it's these gains, which, of course, has been important for Cloudberry that explains the drop in the financials from '24 to the LTM figures. So if we go into the financials on Q2, we see also the same drop, but that's also explained by exactly the same reasons as I touched upon on the previous slide. So in Q2 -- to exemplify, in Q2 '24, we have a gain of NOK 109 million related to the sale of 3 hydropower assets sold at about 2x book values. In addition, we received a large settlement from Siemens Gamesa in Q2 '24 related to 12-month availability warranty. That's an abnormal large income in Q2 '24. So when we adjust for this, underlying financial has increased. And again, it's important to note that the Forte transaction, which was closed subsequent to the quarter, greatly shifting the portfolio on the hydro side around a little bit, where now we are controlling shareholder. That does not affect the Q2 financials and will be recorded in Q3 and going forward. Going into the commercial segment, still the value or the income driver for the Cloudberry platform supporting the platform and so we're able to capitalize on that. The power production has increased compared to the same quarter last year, a 30-something percent increase on the back of higher wind production and the flat hydro production compared to the same quarter last year. More explanations on that in the quarterly report. We also have increased our average net power price to NOK 0.62 per share, and this explains the majority. So those 2 increases showcase how the underlying financials in the commercial segment has increased compared to the same quarter last year. And again, the favorable realized price compared to the system price of NOK 0.31 per kilowatt hour showcases the attractiveness in our portfolio and that we're located in the higher price regions. So -- and you see the same in the LTM figures on the right-hand side, the drop is explained by the same reasons that we touched upon and underlying financial has increased. We also recorded a gain of NOK 7 million in Svåheia -- related to the Svåheia transaction. We divested that asset on the same price as we acquired it for -- from Skovgaard. It's good to showcase the value of that asset as it also is valued on the same principle as the underlying or the overall Skovgaard transaction supporting the valuation of that transaction where the majority was reinvested into Cloudberry at NOK 17 per share. Looking at our other segments, we can start out with the project segments. We have some increase in revenues. We have done the divestment of the farm down of Duvhällen, which Anders touched upon. And in Q2 '24, we also had some revenues and financials from Sundby before it was completed and transferred over to the commercial segment, realizing a gain of around NOK 2 million per megawatt. The backlog has increased, almost doubled compared to the same quarter last year. And like we touched upon in the previous quarter, expanding the backlog and advancing projects is a significant value driver for this segment as the financial outcome will fluctuate as the realizations will be lumpy in nature, and that's when you first record anything on the P&L. The asset management -- from the asset management side, the Forte transaction is of importance, which Anders touched upon, greatly increasing the small-scale hydropower under management and also creating a strong platform for growth in that segment. And importantly, automated price curtailments by the BRP has been implemented in the Swedish wind assets and the paving way for future participation in the balancing market, which can be a great value driver for an income generator for assets that the balancing prices are increasing and as the more renewable energy is in the mix. The corporate segment is more or less in line with the previous quarter, a decrease, so that's good. And it also has a noncash item related to the warrant cost of NOK 2 million, which was booked over the quarter. So with that, Anders, I leave the word over to you for market and summary before we dive into Q&A. So thank you.

Thank you, Ole-Kristofer. And hi, everyone, let's have a look on the price curve. New this time is that we have added our realized power price over the last years from 2022. So you can see that we have historically been delivering prices above the price curve. We find it's a strong demand for new renewable power. We think maybe the market has underestimated the power demand. And we feel and we get a lot of incoming questions for securing more new renewable and especially driven by the electrification of the industry, but also the transport and logistic sectors. And of course, we have also focused on some of the larger powered land projects in our portfolio where we can see very attractive returns. Going forward, I think we will continue to deliver above the system price and well above the system price and also on the power curve we see here. So summing up before we open up for questions. I think we over the last years have showcased that our platform, our strategy developing a flexible portfolio and a solid Nordic platform IPP has proved to be right. I think we are looking to the future, we'll see more of the same. We will stay focused, stay with proven technologies and stay also well financed and be kind of a little bit boring on that side. It's good to be in this market today with cash and also unused facilities and gives us also the opportunity to move on attractive possibilities. So the strategy is in line with the firm. And what we have seen over the last quarters is that we have developed -- we delivered on our platform on our projects. And I think looking to the future, the focus will be to always try to focus on where we see the best returns. And as I said, I think new renewable power is a high demand, and we will continue to deliver on adding new renewable power to the portfolio. So thank you so much. And now we will take some of your questions.

I can open up with one question. We're asked about how the Forte transaction will impact the financial accounts going forward. So that is closed at the very beginning of Q3, and we don't expect to do any changes in principles or anything like that. So it will have an effect on consolidated financial as we have now -- will consolidate the Forte Energy Norway portfolio and also the entire of Forte Vannkraft portfolio. The proportionate reporting will be, call it, on the same principles, taking into our share of the ownership and will best reflect the financials of this portfolio going forward. So we will drop down in ownership of the assets that we have, the hydro assets that we have contributed and increase it with the asset that is producing now add on and the projects under construction will be reported as we normally do and have that will do the commercial segment as they are complete. So that was that question. Do we have any other question coming in, Anders?

We have a question, I can comment on. There's a question here concerning Nees Hede. Just a short recap, Nees Hede is the large solar project we have in DK1, where we have a permit for 232 megawatts of solar and developed as a stand-alone solar project, we decided to not push that forward, but to take a step back and look at how we can redesign Nees Hede to be a much more profitable project for Cloudberry and our shareholders. So we are currently working on securing. We will continue to have a solar in that project, but to also add BESS and hopefully also wind to that project. And we have also looked at the offtake side there. So we could be looking at the hybrid project where we possibly also have an option for making a powered land and in that way, also increasing the returns. So we will continue to develop it and get back to that in a later stage, but it will not be any FID on that project now in 2025. Thank you so much, and thank you for listening in, and have a very nice day. Bye.