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

Hi, and welcome to Cloudberry Clean Energy's presentation of our third quarter 2025 results. My name is Anders Lenborg. I'm the CEO of Cloudberry, and I'm joined here today by our CFO, Ole-Kristofer Bragnes. We have, as always, prepared a presentation for you, and we will go through that in a few seconds. But please also use the Q&A function and send questions, and we will open up and try to answer as many of your questions after the presentation. Before we dive into the details, the agenda is also known for many of you. I will take you through the highlights. Ole-Kristofer will take you through the financial numbers. And we will also comment on the price and the market and a summary. So let's start with the highlights. Solid figures in a quarter with less production than we hoped. But we have managed to increase both revenue and also doubled the EBITDA from same quarter last year, and much thanks to a realized power price that is much higher than the system price with our realized power price of NOK 0.61. And that is, of course, a result of our merchant exposure, but also the price areas where we have our projects. As you see here on the right-hand side, you can see the power production has increased over the quarter. Last quarter, we have been busy for us. We have -- as we have informed about earlier, merged our small hydro scale platform with Swiss Life's development platform. And together, this is one of the largest small hydro platforms in the Norwegian market. And we're very happy to have reached this new milestone with Swiss Life. Our cooperation going back to before 2020. And over the years, we have seen that together, we can make new progress in this market. We have also made our first FID on a BESS project, the battery energy storage project in Sweden together with Hafslund, and the work is already started. And it's positive to see that we further diversify our portfolio with our first BESS projects. More to come, I would think, over the next years. We have also received EUR 5 million from Odal. And it's good to have all the turbines in Odal back in service and also see that we have received the first payments from the cash that is in the Odal structure. So let's take two steps back and look to Cloudberry and our business model and what we do. So Cloudberry is a Nordic independent power producer. We have developed own and operate strategy and business model, and we are very focused on the Nordic market. We believe in being in the whole value chain from early phase greenfield projects until they are in production but also to manage the assets when they are operational. In that way, we can both have the long-term cash flow from the producing assets, but we have also shown up through the years, the development gains we get from our development portfolio. So here you see on the right-hand side, we have a portfolio that is very diversified from early phase project until they are in production. We have now passed 1 terawatt hour of production, and we are currently constructing also several hydropower projects in Norway in addition to the BESS project in Sweden. When it comes to construction permits, we have a mix. We have some permits in Denmark and Sweden, where we focus on wind and solar projects. And we also have an exclusive backlog where we have new in-house developed projects that we are constantly developing until we get them into a permitting process and then into construction. In addition to the in-house developed backlog, we have a pipeline of opportunities. This is structural opportunities. There could be M&A deals. There are a lot of opportunities in the Nordic market today. And I think we see that we are perfectly positioned to make gains from having a strong balance sheet and a network and all the knowledge that we need to advance on these pipeline M&A projects. Today, we have production in 8 different price areas throughout Norway, Sweden and Denmark. And I think what we have seen here in Norway over the last month is the political risk that we find in our sector. That's why it's very important for us to diversify our portfolio. So we have diversified it on different technologies and different countries, as you can see here, as we have built production portfolio. And as you can see, we have also now our first best projects under construction, and we will further diversify the project portfolio in the coming years. Many of you know that the Norwegian government has proposed a resource rent tax on small scale hydro, that's hydro projects or hydro assets that is below 10 megawatts in installed capacity. This is a proposal that we are very negative to and the whole sector. It's a proposal from a minority government that has now also get a lot of feedback that this is not going to help the development of new renewable energy that the government actually says that they want to support. So this is -- this will affect our portfolio if it goes through. Around 15% of our portfolio is a small-scale hydro without the resource rent tax. But it's still early days, and we believe that we will -- they will not get the support needed to go through with this proposal. So we think that this can also be something we can get -- come back to at the end of this year. Yes. So over the years, we have built a portfolio of producing assets. As you can see here on the left-hand side, steadily increasing the production portfolio to get a certain level of producing assets, generating long-term cash flow to the company. So this is something that we are focusing on, and we'll continue to build a large producing portfolio. On the right-hand side, at the same time, we are also building our backlog of projects and working with the backlog to bring it to permitted projects and also take and FID. So this shows that we are both building a new cash flow generating assets, but also securing a backlog of exclusive projects. And in addition to that, always looking at good M&A opportunities, and and make efforts to use our network in the Nordic. And especially in today's market, we see a lot of opportunities, and we have a lot of incoming possibilities in Cloudberry. Yes. This is also a slide you have seen before, but now we have gone through with the process of merging the Swiss Life portfolio and the Cloudberry portfolio. Now we have a small-scale hydro power platform that's covering development projects, projects under construction. We have a producing assets, and we have also a team that will manage to both develop a new project and also manage the project when they are operational. So all in all, we are very happy with this cooperation and looking forward to further develop it. And as you can see here, our Cloudberry assets that we put into this platform, we gained 1.9x the book value. So that's in line with the earlier divestments we have done on the hydro side, which we have achieved around 2x book value on our hydro assets. In addition to what we have been touching upon, we focus, as I said, on developing partnerships with large landowners in Sweden and also in Norway. Developing these more strategic cooperations are important for us. Large landowners make it easier to handle all the local stakeholders, and it could also be that with the large -- our partners, it's easier to also work with the local stakeholder and the management of local stakeholders. Same we see in Denmark, we have a portfolio there. We have people on the ground, both on the asset management side but also on the development side. And it's a big focus now on land and securing capacity in the grid. And we have taken some of our projects and redesigned them, so we can meet the requirements from data center developers or developers, where we can offer powered land. So it's just more than a standard stand-alone renewable project, but it's more of a capacity in the grid-powered land and also our production in Denmark and our development portfolio. So this goes hand in hand. Strategy is, of course, to continue to do what we have done over the last couple of years. We will look at the strategy now again, as we do every 6 months and see if we should do some adjustments to the strategy when it comes to all these opportunities that we see in the Nordic market and position ourselves also for the new demand from the power-intensive industry both from the classic industry but also from the new industry driven by the data center projects in the Nordics. Yes. ESG update for last quarter, no incidents. We're happy to see that. That's important for us that we we can keep on delivering 0 incidents and 0 whistleblowing. And we are also very happy to see that we got the highest rating from DNB Carnegie's portfolio. We got the highest ESG rating in the energy and utility sector last quarter, and we are very happy to see our work that our work on both the sustainable business model, but also on the reporting is recognized in the market. Thank you so much. Then I'll hand over to Ole-Kristofer, and he will take you through the numbers.

Thank you so much, Anders. My name is Ole-Kristofer Bragnes, and I'm the CFO of Cloudberry and we'll be happy to take you through the financials for this quarter. So first of all, capital discipline really is a foundation for continuous growth for us. And that, Anders said, on the strategy, has been important for Cloudberry and will continue to be important for Cloudberry going forward. So that in the past has enabled us to act on a lot of opportunities, either bolt-on acquisitions enter into Denmark while being capitalized and have the flexibility through our debt structure. And we see that also now in what can be characterized as a bit of a tricky market. It's important to have capital discipline which can enable us to come out of this a bit challenging market at a much stronger state that we were going into it. So capital discipline and on the back of capital recycling will be important, and we'll be opportunistic on that going forward. Moving into the Q3 consolidated balance sheet. There's a couple of effects through the Forte transaction, which has greatly impacted our financials. So I'll try to walk you quickly through some of them, and there is more information in the quarterly report. So we see a strong growth in our balance sheet on pretty much all metrics compared to the same quarter last year. So what happened in the Forte transaction is that we had two separate portfolios. Let's start out with the Forte Energy Norway portfolio, which is the producing hydropower portfolio where we own 49.99% of that prior to the transaction. What happens is that we acquired the remain -- acquired 5% approximately of those shares, reaching 55% and then having to consolidate that portfolio in accordance with IFRS. When that happens, you need to deconsolidate associated company and then consolidate the full financials at fair market value, which has a P&L effect, which you can see -- which we'll get back to when we go through the P&L. But that will increase the balance sheet and the same happened with Forte Vannkraft. We injected our 100% on hydropower assets into Forte Vannkraft portfolio. The book values will remain intact as those are -- will continue to be consolidated, but the whole of Forte Vannkraft portfolio will be consolidated going forward. That includes producing hydropower asset Haran but also the projects that are under construction on a 100% basis. So those two effects greatly explain why we have such an increase in the balance sheet. But again, important to see that we have still sufficient strong equity and total asset side in relation to our debt and we report an equity ratio of 58%. That same growth -- we see the same growth in our proportionate financials, which are coming from the same explanation, the consolidation of these two larger portfolios. And further, we are and have continued to hedge our interest rate exposure, and we now have 70% hedged at all in rate below 4%, a weighted average tenure of 10. That's a slight drop compared to the previous quarter, Q2 of where we report around 80%, and that's due to debt in Forte Vannkraft not being hedged at present, but we'll look into that. It's important to remain hedged on the interest rate as we have a strong merchant exposure on the power sales. So moving on to the P&L side. This is the, call it, the flip side of the increase in producing portfolio base, which Anders talked about a little bit earlier. And we've had a strong growth here in underlying financials and profitability due to the increase in our producing asset base combined with strong realized average price over the period. In addition to that, capital recycling has been very important for Cloudberry and it's a great value driver, which will continue to utilize going forward as well. And we've had in '22 to '24, some both external and internal sales, divested hydropower assets 2x at over -- around 2x book value, realizing strong IRRs in addition to showcasing development premium once we've internally sold wind assets that have been complete at strong values based on third-party valuations. So those effects explains -- we have these effects in '22, '23 and '24, which explains why it's a drop to Q3 '25, but the underlying profitability from power sales has increased as we now have a much larger producing portfolio base in Q3 '25 of above 1 terawatt hours of producing assets, which is much larger than what we started with. Diving into the Q3 P&L, the first we can note is that here we see the P&L effect from the consolidation of the Forte Energy portfolio, which I talked about a bit earlier. So we have a gain in the consolidated financials due to IFRS of NOK 110 million, which is a step-up to fair value compared to the book values we have on that portfolio. So this is a bit technical. But when you consolidate this portfolio, you need to take it in a fair market value, and the difference is either a gain or a loss. In this situation, we have a gain which showcases the excess values we've had on our hydropower assets and that's evident in the consolidated financials. But again, we have some more explanation about this in the report for those of you who want to dive into it. The consolidation for Forte Vannkraft portfolio does not have the same P&L effects. Portfolio -- no, the proportionate and consolidated revenues and EBITDA have increased compared to the same quarter last year, when you look at the underlying financials, primarily due to increased power production and average realized price. Also important to note that there's a catch-up effect of NOK 7 million in operating expenses, which we charged to the quarter, and that relates to prior quarters in '25. So the year-to-date costs are correct, but some of that cost that have been taken in the previous quarters. We also have some transaction costs, which both effects are lowering the EBITDA for this quarter, but are then treated as one-offs. If you look about the segments, we can start with the commercial segment, and that segment continues to be the strongest P&L driver for Cloudberry. We've had a strong growth in our portfolio power production for 145 GWh to 177 GWh but that's despite having very low wind speeds or wind resources in this quarter. And for wind, remember, we talked about it earlier quarters that the wind cost base are much more fixed. So the revenues there scale a lot better or the operating expense at scale. Meaning that when there's lower wind resources, we have -- we will have lower EBITDA margins. And that's on the flip side. If you have more natural or neutral production or higher power prices, you have a much more better achieved EBITDA margin than you do at hydro. So that's evident in this quarter, very long wind resources. We have a growth in our portfolio that despite -- or have growth in the power production, but that's despite having a very much larger portfolio now than we did the same quarter last year. On the other side, we achieved a very strong net power price of 0.61 per quarter per kilowatt hour, like Anders also mentioned, compared to a system price of 0.43 for this quarter. And again, this show gives us the favorable portfolio composition relatively -- from the higher Southern price areas compared to the theoretical average. So that's good to see. On the right-hand side here of the chart, the LTM figures showcase a drop, but that's due to a very accretive hydro sale in Q2 '24 where we have NOK 109 million of a gain that we recorded from capital recycling and also a large warranty settlement in in Q2 '24. So despite that, when you look at the underlying production, that's been growing from 618 to 783 on an LTM basis and also with on realized prices. So underlying growth, but then the capital recycling effects are causing what seems like a job. Moving on to the other segments. We can start with projects. The revenue increase is mainly due to Norhard, which is a construction or drilling company that those drilling for some of our projects, but also external projects. And that has a positive EBITDA effect of NOK 3 million for this quarter. And again, like we talked about previously, driving projects and the backlog and the project forward is a great value driver for the project segments and you only see P&L effects once we realize a project for this segment, either internally or externally. So -- and then you'll have -- should have large gains more than make up for the costs associated with this quarter, but that's the first one we actually do a sale. For the asset management side, we have increased volumes. And even though the revenue looks like there's a very small drop Q2 '24 had around NOK 8 million of gain in Q3 '24. And when you adjust for that, there's a strong growth from the asset management side, which is very good to see. -- reaching positive EBITDA. On the corporate side, there is -- it seems like there's a little larger cost base there, but that's driven by 4 million in transaction costs relating to the transaction we have done in the previous months and also there is a noncash warrant cost of NOK 6 million compared to SEK 4 million in the same quarter last year. And those two effects explain the difference there. So underlying cost base is intact. So that's it for the financial side. I'll leave it over to Anders for market and summary before we move over to Q&A. Thank you.

Thank you, Ole-Kristofer, and thank you for all the questions you have sent in. We will get back to that. Yes, on the market development side, as you can see, we have realized power price well above our long-term power price. And this is something that we have done over the last years and is as a result of the combination of our merchant exposure, our PPAs on attractive levels and of course, the price regions that we are having our projects. As you can see, we used the Thema Nordic price curve together with vault and it is increasing over the next couple of years. What we see is also that especially the data centers are looking to the Nordics to expand and get more capacity. It is favorable in part of the of Europe. So we see that most of the growth in the data center capacity will come in the Nordics throughout the Nordics, but especially then in our our three Scandinavian countries and in the right price areas where we have our projects. So this is positive, and we are talking to several other players to follow up on these opportunities. So all in all, I think we have -- we are very well positioned for the future. We have our Nordic focus. We have our platform. We have the knowledge and not least the network in the Nordic, and we see now how much that means when it comes to positioning ourselves in the Nordic markets. That, in combination with a strong balance sheet, we have cash, we have debt facilities that we haven't used. We have also our share that you have seen -- we have used over the last years. So all in all, we are very well positioned in today's market and also for the future. So thank you so much. Then I think our presentation is finished. We have received a lot of questions. So that's always nice to see. And I will try to answer some of these questions that you have sent us in connection to M&A opportunities. Also when it comes to the proposed ground rent -- or sorry, the resource rent tax. And also when it comes to questions regarding the power price and also the Cloudberry share.

So to start out, we have received some questions about market in general, the M&A opportunities, what are you seeing in the market. What we see is a market that is partly distressed with the everything from larger IPP, larger platforms, portfolios of projects but also brownfield assets that is producing and down to smaller stand-alone projects or operating assets. So we have the whole specter. Unfortunately, we see that some of the players have already gone into bankruptcy and are very distressed, but Other alters are just looking to also yes, develop their portfolio together with Cloudberry. What we do is to focus on where we see the most attractive opportunities and try to work on these opportunities. But I think being active in today's market is a core for Cloudberry and to take advantage of our knowledge and of our position going forward with expanding our footprint in the three Scandinavian countries, but also looking towards opportunities in Finland, like we have done over the last couple of years. So in that sense, very attractive and interesting M&A opportunities in the market as we speak. On the tax proposal, yes, we have posted our -- one of our construction projects. We have started to develop it, but it's early days. So we have found out that it's the right thing to do now to pause it to see what the outcome of the resource rent tax proposal will be. So that is one project under construction. We have another project under construction that have come along far and it's kind of too late to do something there. But we are also looking on the earlier project in the portfolio where we have not taken an FID, and we will pause all of those process also. And we will not use any CapEx on the one project that we have paused and also we will not use any devex on those other projects for the time being. What we see is that this proposal has met a lot of opposition, and we don't think there will be a support for the proposal. We have also seen now that the whole industry has been very clear that this will just do the opposite of what the government has said that they want to do, mainly to develop new renewable and sustainable power. Now they will have the opposite -- we will see the opposite effect. All the larger players in the small-scale hydro sector is now stopping their projects and it also affects, of course, the whole value chain in this sector. So that is something that we -- I hope we can come back to the market with more information end of November or in December. We have also questions here on the power price going forward. And of course, we see that, as you also saw from the Thema power price, the price curve is increasing. We see larger demand from industry than new industry. Also, when you look at the supply side, there is almost no new projects coming on grid not only in Norway but also in Denmark and Sweden. So in the South, where we are in the south regions of Sweden and Norway, the demand is increasing and there is very little new production. And over time, this will, of course, affect the power price. And we also see that from the price curves that they are increasing. And how that will affect our share price is too early to say. But I mean doing the right things, developing the right project, having the right focus will also, of course, affect our share price over the -- over time. So that was some of the questions that we have received, and you're happy. Thank you so much, and thank you for your time, and have a nice day.