Magnora ASA ($MGN)

Good morning and welcome to Magnora's Q1 presentation 2026. How are you? So highlights for the quarter and subsequent events. We reached our 10 gigawatt portfolio in the first week of January. We've advanced multiple sales processes during the quarter as we mentioned end of last year and in February. So we have very positive development on that side. We have grown the data center portfolio to 410 megawatt gross, net 290 megawatt to Magnora. We expect that Finnish and Swedish project may be for sale already this year. And our Finnish project received its building permit last week and we're very happy about that. We launched our DC origination business also in Magnora Italy and South Africa. We have signed a project in Italy, I'll get back to that. We have seen a noticeable pickup in interest for renewable projects, in particular, in April. We didn't really see it in Europe in March, but we have seen strong incoming interest, in particular, in Germany and the U.K. and Norway. In addition, we're pleased to say that we have engaged Arctic Securities to explore a potential 2026 listing of Magnora's data center business reflecting the strong market interest we've seen in our organization as a developer, but also from the financial community. We're delivering on our strategy and returning over NOK 1 billion to our shareholders. For new readers and listeners, we've had 20% return on equity since 2020 and returned over NOK 1 billion to our shareholders. 28% annual average shareholder return over these years. And we're now ready to grow into the data center space, providing better margins and higher growth, in particular, in the Nordics going forward. Market update. We've seen a significant increase in gas prices and 75% of the population in the world are dependent on fossil prices for their total energy consumption and this has a noticeable impact on consumers and businesses also in Europe. We see that EU have estimated additional cost of EUR 24 billion alone. So the geopolitical uncertainty comes back as it did in Russia invasion of Ukraine. So we think we are at a step shift on the demand side for green energy projects in Europe. EU has established a EUR 2 billion fund to reinforce the European energy transition. We've seen very fluctuating prices with plenty of negative prices due to the increasing amount of renewable energy and that is mitigated and taken care of by BESS, which has seen the strongest growth in history in Q1. I'll get back to that. European Utility Index listed stocks is up 16% year-to-date. We've seen continued acceleration of green energy. Wind and solar together now is the largest portion of new generation in EU for the first time and we think it's going to grow further. We see rapid growth in BESS and you see the demand in Q1 is almost the same as the whole of 2024 at 46 gigawatt hours. We've seen record hours of negative prices as well in Q1 until April this year. And in Spain alone, I think it was above 300 hours of negative prices year-to-date. Taking into consideration that most of that happens at daytime, it has a very significant impact on how electricity is delivered, consumed and the prices you pay. We see that the FLAP-D; Frankfurt, London, Amsterdam, Paris and Dublin; the largest data center markets in Europe are short of capacity. Vacancy rates are at record low and that means data center operators and sovereign cloud drives demand to new areas in Europe. Sweden, Norway, Finland are prime spots; also Iberia and Italy and it's quite challenging on Continental Europe to get good sites. Business update. Data center origination grows rapidly from less than 96 megawatts last year to 290 megawatts as of yesterday. We expect to sign new projects in short and also midterm. Solar portfolio quite stable, actually a little down in South Africa as we took some projects out and battery systems growing slowly. And we have a high focus on onshore wind, in particular, in South Africa. I'll get back to that. And then we have our earn-out assets in Evolar and Helios. So above 10,000 megawatts. We've had a very high focus on data center origination in the quarter and had slower growth, but we expect growth on renewable, in particular, in South Africa to pick up for the remainder of the year. So a shift toward more selective growth; data center origination, BESS in Europe and onshore wind in South Africa and we'll have selective DC growth outside the Nordic as well. Here you see the distribution. I'm very pleased to say that we've signed 30 megawatts in Italy with the team there. We have a fabulous team with a very good track record on real estate and BESS origination and they have looked during the quarter for good sites and they recently found a very good site which we signed up. The team in Sweden has found a brownfield site at 60 megawatts, which we think we can grow further. The Finnish project, Hameenlinna, is developing really, really well and we had a building permit last week. We've signed up new projects in Norway and I'll get back to those. Finnish project on industrial land zones for data center activity close to district heating, gas network, a lot of fiber in the area and we're working on the final grid agreement. Strong local support. The municipality really finds this project appealing. They say it's a significant step forward in advancing technological development and economic growth in our community. 70,000 people live in the city and around 5 million people in the vicinity of the Hameenlinna area between Tampere and Helsinki, 120 megawatts and very, very happy with the development of that project. Another example brownfield site adjacent. We think we can connect maybe to the grid faster than anticipated. Peter Nygren and the team are working really well with the origination. We think we get more sites close by and in Sweden over the coming months. Selective positioning. For new readers, we entered a space last year. We made an acquisition, StoreSpeed. Worked in a JV partnership with Blix Solution on that site together with the founder. And we're looking for more metro sites similar to StoreSpeed to combine with the network of Blix and StoreSpeed Magnora. So very interesting development. We refurbished the site and spent some money there to make it nice place for the customers to come. Italy, we signed 30 megawatts in Northern Italy, Milan area. That's one of the hottest data center areas in Europe. We have a structured sales process ongoing for 175 megawatts. We are dependent on final permits for those projects before they're completely sellable and we have auctions coming up later this year, another in 2027. So very interesting capacity market in Italy. South Africa, we've grown the onshore portfolio to 360 megawatts. We took out 1 project due to avifauna risk, that's a large bird risk. But in general, we have very good origination. We have very good dialog with the customers. The customers, they expect to roll out 100,000 new megawatts of renewable in South Africa by 2040. We have one of the largest independent platform. We've had an international bank present in South Africa look at that portfolio and I think it's worth multiple times of Magnora. So it's a very, very good team; very, very good projects; very good sites and we think this has many legs to grow on; onshore wind, solar and also data center; which we expect to be perhaps up to 2,000 megawatts by 2030. So some selective data center focus in South Africa as well. Germany, adviser was engaged last year working on closing a larger transaction. That's a very good dialog with multiple customers. Good interest for early-stage projects. We think the negative prices in first quarter and also the geopolitical situation in the Persian Gulf will impact the demand going forward. So they changed the regulatory regime; first come, first serve. Magnora's approach is to work with local stakeholders and municipalities and it seems like this is a good value proposition for the clients we're discussing with. Other markets, we've seen a noticeable uptick in interest for renewables. Our adviser in U.K. is called up by customers to ask for available projects. As you know, the regional grid company, National Grid, are struggling to sort of allocate exactly time slots. But we have from the regional grid company a possibility to connect in 2028 for these projects. They're fully permitted. In Norway, we had clients visit our sites and find the projects in Norway very interesting from a regulatory perspective and certainty around grid and actually the quality of the site. So that's also a change. So we hope this development, the pickup we've seen in April will follow through the year and that European politicians and utilities will take growth more seriously going forward than they have done in the last 2 years where everything has been quite slow. Our business model, it's quite similar across solar, wind, BESS and data center. We have had people who developed large data center sites historically, but it all starts with a good site, site evaluation, geotechnical issues, maybe you have to do drilling, connectivity issues, environmental risk maybe the most important in that stage and the ability to connect with fiber and redundancy on grid and fiber. Project development, the core of what we do or the local teams do very, very important. Then it's the construction. We have people who can assist the client in construction management. And then the last phase is operations. We're an operator within the data center space with StoreSpeed. Then quite important to have the relationship with the vendors for our data center site, but we also get a lot of incoming on bids for volumes in the data center space. StoreSpeed is not able to develop -- to deliver 10 megawatts to 50, 100 megawatts, but we're starting to develop very good relationship with multiple customers after the partnership with Blix and our acquisition of StoreSpeed. So very happy about that part in our rally change that change over the last 6 months. We established our data center strategy early 2025. Focus in Norway, Sweden and Finland. We have a portfolio strategy to avoid political risk. We have different sizes. We look at different vintages timing. And our value proposition we think can save international clients, but also Nordic clients 2 to 3 years on the development since we're a very experienced developer of nonzoned land. We've done this many, many times. We've sold over 30 projects over the last 7 years. We're now harvesting our role as a data center operator with the StoreSpeed. We're developing the customer network, concept designs and technical in-house competence. We see that a lot of landowners like to do partnership with a company like Magnora, real estate companies and industrial companies where we have sort of a risk-sharing model on the development expenses and then profit split. So it's a good, well-established model we've used within the renewable space for many, many years. So we executed on the strategy. We launched first the Swedish team in September last year, acquired StoreSpeed, partnership with Blix, first large-scale project last year in Norway. We have a pipeline of above 1,500 megawatts across many countries in Europe. We have a portfolio now of above 400 megawatts. So why work with Magnora? We have very long experience as land developer. We're really good on grid connection, analyze the possibility to get to the grid before zoning. We have a good relationship with the vendors. We get customer contacts through also the vendors. We know how the building permit process works and what's important and how it impacts neighbors and the local community. We have long experience doing structured sales and also direct sales. As a listed company, we take regulatory compliance very seriously and we always like to have local buy-in. And we see that many international companies underestimate that. And we have learned from the renewable industry that you have to pay very, very close attention to what local stakeholders think about these large infrastructure projects. We have proposed a new Board. Torstein Sanness is stepping down. He's 80 years. It's been a true pleasure working with him. I've learned so much over the years about team spirit to build the organization and to have organic cash flow to finance your growth. He was the founder also of Lundin Petroleum in Norway. And very, very thankful for the years as Executive Chairman first and then the Chairman. John Hamilton is proposed by the Nomination Committee as the new Chair, been with the company for many, many years. Hilde will also continue and we're very pleased about that for the continuation in the Board. But we're very happy to say that Jean-Francois Berche and Lars Schedin and Hilde Hukkelberg have been proposed by Nomination Committee as new Board members in Magnora. So Jean-Francois was employee #3 I think in Amazon Web Services, worked with M&A and acquisitions in Microsoft OpenAI and is now CTO in one of the larger neocloud operators in Europe and it will be a great contribution to our organizational capabilities and competence. Lars Schedin, former Founder and CEO of EcoDataCenter, one of the largest independent Swedish data center operators for many, many years. Sold a couple of years ago to a large real estate company. Hilde Hukkelberg, she's from Innovation Norway in London as a Director. She's worked in sales in London and been quite active in the development of the larger Norwegian AI sites over the last few years. So she has a very good network. And we think the new Board will really be important to contribute to the growth going out for the next following years. So you can read about their bios on LinkedIn for further information. Strategy as simple rules. I just want to say that we always diversify. We focus on early sales to prove our business model in a new market. You may see that also in DC business. We try to have a warchest so we don't need to negotiate on weakness, but on strength. When things looks perfect, we have historically sold businesses and projects. We have a high focus on entrepreneurs with high integrity, very important for these type of projects. We remain agile grasping new opportunities like the data center business opportunity in 2025. And we try not to have expensive stuff on the balance sheet and very focused on capital allocation and farm downs. So Q1 financials. Q1 was impacted by a lack of sales. We have increased the data center portfolio quite a bit. We had some final costs for the Talisk campaign one-offs, stuff we ordered first half last year on the expectation that we'd have a farm down on that. We missed on that, but those are one-offs, a big impact actually on the OpEx. It will have some impact on cash flow in Q2 as well. And then we have stock option costs, which were vested and an execute strike in Q1 and increased legal expenses due to the data center business. So those are the numbers. Paid in capital of NOK 6.9 billion. Cash flow better than the operating income due to the reasons I mentioned just now. We have some net financing activities related to office lease payments, very small. Cash balance at NOK 130 million with a credit line around NOK 278 million cash available and 0 debt. Outlook. We have a very high focus on data center business, as you know, also on onshore wind in South Africa and BESS systems in Italy and Germany and we might look for other good BESS projects as well. But we've always tried to focus on the most attractive segments where we get the highest return. On the portfolio, we have around 2,500 megawatts sellable. You can always sell a project, but it's always important to sell at the right time. So it's important to have cash on the balance sheet and sell at the optimal time. We have increased sellable projects. You see data center is also moving up there, 225 megawatts net, which is important. BESS system, we see demand for more than that now due to the noticeable uptick I mentioned. And feel that we have a very good diversified portfolio with high interest around all our segments. Perhaps offshore wind is sort of the most uncertain segment now. I can get back to that next quarter. Focus ahead: 12 gigawatts portfolio, increased steadily year-over-year. We're prioritizing data center in Nordics, BESS. We're exploring 2026 listing of Magnora's data center business in engagement with Arctic Securities. This is work that's been ongoing for quite a bit now. We're maintaining strict project development and cost discipline and target 12 gigawatts by end of 2026. And we're going to execute on this market opportunity with higher focus on geopolitical uncertainty. The price range for our projects I think is around NOK 500,000 per megawatt to NOK 3 million. In South African solar and Norway, you might see prices south of that. But prices differ in markets and technology and depending on how mature they are. With that, I'd like to thank you for your patience and listening to our presentation. We are having a lunch presentation with Arctic Securities later today. Feel free to call your broker and meet us there. We wish you a pleasant day and thank you very much for your support and listening to Magnora's Q1 presentation. Have a great day.