MPC Energy Solutions N.V. (MPCES) Earnings Call Transcript & Summary

[Presentation]

Yes. Again, dear guests, here in Oslo and also online, very warm welcome to our first Capital Markets Day. We are very excited to engage with all of you today. It's about 2 years ago since we were listing our company here at the Oslo Euronext growth segment. Since then, really a lot has happened. We have matured our projects from development to construction. And now, as you saw with the recent news, more and more of our projects going into operations. And with that, we really feel that it's a good move in time to provide the capital markets and our shareholders and other stakeholders with a comprehensive update on our road map and where we see the company strategically moving towards our goals in the next 5 years. So today, we will focus on our business model for these upcoming years in Latin America and the Caribbean. We will go into operational details of our markets. We describe our holistic approach to our environmental, social and governments matters, but also give you further guidance on financial performance, demand of capital and deployment of capital into our projects. As a company, we are very ambitious. We are on a very high growth path. This year, we are targeting the first time in EBITDA of USD 10 million. And we want to grow further to deploy our capital into an operating base of 1,000 megawatts by 2027. And as our team is our most valuable asset. I'm very happy to have some of my colleagues here with me today. Later today, we have Fernando Zuniga, our Managing Director; and our Panama office who is covering the Latin American and Caribbean region for us, talking more about our insights on corporate markets and business development. I have my colleague, Maite Pizarro, here from our Hamburg office, who is our Sustainability Manager, who will share more insights around our sustainability framework and Stefan Meichsner, CFO of the company, who will provide and complete the session today with a detailed financial guidance. One moment about housekeeping. You can raise questions. We will host a Q&A session at the end of the Capital Market Day. Everyone who is joining us online, you can type in your questions via the webcast. We will record those and address the questions then at the end of the session. And before we go into the operational topics, I'm really happy to give over to our Chairman, Ulf Hollander, who will address the audience next. Thank you.

Yes. Thank you, Martin, and I would like to welcome all of you, both here in the room as well as online. My name is Ulf Hollander, and I welcome you in two roles actually. One is being a Chairman of the Supervisory Board. And the second one is being a representative of one of two 20%-plus shareholders in the company. And if you are a 20%-plus shareholder in the company, I guess it's very true to say that we are also a stakeholder in this company and stakeholding means that this is very, very long term. Now being a Chairman and being a shareholder, obviously, in a situation like we are in comes with mixed feelings. You look at the stock price and you're not entirely happy. But you also look at the situation and you look at the ambition and the continued ambition of the company, of the management team, and that hasn't changed. We have encountered challenges but the ambition to become one of the leading IPPs in the region, Independent Power Producers, that has not changed. Now we listed MPCES on the Oslo Stock Exchange, which is maybe a bit of an odd place coming from Germany with a very established stock exchange, but we did that for a reason or for a number of reasons, I should say. We did that because as MPC Capital, and I'm a CEO of MPC Capital, we went through the experience with the company by the name of MPC Container ships in 2017. Time to market on the Oslo Stock Exchange is extremely competitive and leading in terms of all European stock exchanges. And this is what we are about -- this is what we are about is to MPC Capital in shipping as well as in renewables. You have to be quick, you have to be on your toes all the time to deliver to shareholders and stakeholders what you promised and you have to be able to eat your words. Now a lot of where we are with MPC Energy Solutions is actually quite comparable to how we started with MPC Container Ships, where we are also an almost 20% stakeholder actually. We raised capital. We ran into enormous challenges. We had trade war. Luckily, it was only a trade war. We ran into COVID. And over a longer period of time than anticipated, it really paid off for the shareholders. And that's not much different to MPCES, and what's also not different to MPCES is that we are there as a very, very long-term shareholder and cornerstone. We are not looking for an exit. We are looking for propelling the growth both in the company, and we are looking for a continued support by other important shareholders to get the company to where it is. And after 2 years of listing, I can honestly say that management has managed the challenges, and some of them were surprising, very, very well. We ran into COVID. COVID was actually already around when we started, but we ran into COVID with a lot of logistical challenges when it comes to supplies, material and things like this. And yes, it was a lucky punch for those of you who were involved in shipping, including ourselves, but it was certainly not a lucky punch for the management of MPCES, in fact, it was quite a pushback. And on top of that, almost in parallel, we had rising material prices, we had rising return expectations, certainly in the last 6 to 12 months, driven by the capital markets and management has to deal with it. But if you look at the situation today and management will explain that in much more detail, and I'm sure, in a much more compelling vision. If you look at it today, projects are slightly delayed, but they delivered the returns that were anticipated and planned despite those parameters in the market environment. And if you look -- and if you ask yourself, why does the stock price not represent the true and fair value of the assets, and it doesn't do that by any means. There are two major reasons for this from our point of view. Reason #1 is there's not enough trading volume in the stock. Actually, there's very little trading volume in the stock. That's because the large shareholders control a significant proportion of the stock, and they are not selling, of course, and we don't have retail investors. And the second reason is, till today, we still have a limited asset base, but the overhead of the company is geared towards growth and ambitious targets as Martin was alluding to. So there are two truly separate problems, low trading volume and this small asset base or not big enough asset base. Again, relatively speaking, compared to the overhead. But those two separate problems have one joint fix, and that's the road to the future for us as shareholders and for the management of the company, which is grow the equity base, grow the asset portfolio and you fix both problems over time. It will take a little more time than we are all hoping for, but it will fix the problem. And you can rest assured that we, as MPC Capital as, if you will, the founding sponsor as well as the other big shareholders, are completely aligned in supporting this path into the future. And there should be no doubt that we as MPC Capital will make the money available with upcoming equity raises contribute our proportion at the very least towards the next steps in the future. And it may take a little more time than we were hoping for, but we will get there. There's no doubt in our mind in the very near future with the goal to have a stock price and a market cap that does reflect, at least a much better reflection to the evaluation of the underlying assets. But I'm sure management is a much better party to deliver that compelling story. And that's why I hand back to Martin. Thank you.

All right. Thanks for that presentation. We start with a brief introduction of the company for everyone who is not familiar with the MPC Energy Solutions yet and who is not following our journey in the past 2 years. MPC Energy Solutions is a true provider of sustainable energy solutions for the markets in Latin America and the Caribbean. And what does that mean for us? So that means for us, we have a very clear view on where we want to be. We have a clear view on what do our clients need from a provider of sustainable energy solutions. And we also understand and know how to convert this into financially attractive assets for the company. We participate along the full value chain and project cycle. That means we have the capacity and the team in-house to develop really projects from greenfield, bring them through our own construction management to successful completion and operate these assets on the long term in order to capture the full value along the value chain. That means also for us what are the potential for regearing, what are the potentials for cost optimization and innovation during the operational phase as well as later on in the life cycle potential repowering of these assets. What does it also mean we are local energy markets. And this is also why Fernando Zúñiga, our Managing Director is today here to tell you a bit more about the markets and for you to understand that with our approach, we are really establishing the company in the region with our main operating hubs in Panama and in Colombia. It is critical if you want to be successful to have your own people on the ground in these developing markets that we are active in. And this is why we are building out our capacities locally also in the future. And what is another material differentiator for us is we focus on our clients. We are a technology-agnostic company. That means at the end, there is a problem that local corporates, private corporates or utilities have a demand for renewable energy, for sustainable energy solutions. And it is not up to us to tell them, you have to deploy solar, you have to deploy wind. We need to find a balance about what is affordable to them, what brings reliability to them and what has the lowest carbon footprint. And therefore, when we look at the spectrum of our assets, we really look at the full scope of proven and mature technologies, solar PV, wind but also batteries in order to do the energy shifting and making the energy firmer and more flexible all the way up to combined heat and power projects that also may include other products like steam and cooling for the industrial clients that we are serving. And overall, we have ambitious return expectations also for our projects. on average above 12% that you're also seeing on this slide. But what is the world that we are in currently and Ulf pointed that out. When we developed actually the business plan in 2020, it was a different world compared to where we are now. COVID was just about to start. There was no war in the Ukraine yet, and there were certainly no major disruption in the energy market that is currently happening in all means. And as an independent power producer for us, that means we are active in a highly dynamic environment, and we need to adopt to be agile in order to reflect these opportunities. And these challenges in our approach and in our business model. Most of these external factors have actually created opportunities. Some of those are obviously challenges. Ulf pointed already out the change in interest environment, the change in the inflationary environment where a lot of capital expenditures are currently growing, but we have adopted our business plans to mitigate those impacts along the different steps in the projects. And what it also means for our region, Latin America and the Caribbean has really an excellent outlook on growth in the energy transition and renewable energy assets. And why is that? Here are two points that I would like to highlight. First of all, you saw the crisis on energy dependency that is currently ongoing. And if you are smaller nations in Central America or the Caribbean or even the larger ones like Mexico and Colombia, you are part of this global energy market, and you see major disruptions. You saw disruptions in the sense that LNG streams move away or are much more expensive because strategic partners between the European Union and America are our preferred partners as well. So when you're a local government, you really look at this and see that only renewable energy makes actually truly energy independent in the long term. So the government and the policymakers are really accelerating also the change of local regulatory environment in order to ease the way for us to deploy the technology in the country. And the other part is really the region has a broad base of industrial consumers. A lot of international corporates and domestic corporates are producing for the big consumer markets in the U.S. You see that with the projects that we have recently signed in Guatemala, but also in Puerto Rico that aren't at the end, international corporates that are producing in these markets in order to export their products to the U.S., and they all have green procurement strategies. They all are subject to weak local grids that are very expensive, that are carbon-intensive and that are unreliable. So for them, especially in an inflationary environment, they look at cost reductions. And when we implement our projects, we can usually offer 30% to 40% of cost reductions on their energy builds. And most of these companies are high energy-intensive companies. For them, the energy expenditures are really one of the major operating expenses they have. So going from the macro picture more into the renewable space and the outlook of the industry, when you're all familiar with these charts, whether you take Bloomberg numbers or you take the International Renewable Energy Agency or IRENA, I think one projection is very, very clear. The growth of renewable energy is tremendous. And it is tremendous in the sense that the industry as much as it has grown in the last decade is really still in its very, very early stage if you compare it to other established industries and the growth is significant. The growth is so significant, in particular, also in the developing markets. At the end, climate change is not stopping at national borders. You see on the right-hand side, the regional discrepancies on the carbon footprint. And while everyone is talking about how much more renewable energies we also need to deploy in Europe or the Americas, you talk about a multiple of 2 to 3. When you talk about the growth aspirations and ambitions that needs to be deployed in the developing markets, you are talking about a multiple of 7 when it comes to the deployment of installed capacity for renewable energies. So one thing is very, very clear. There is no net zero emission future without a massive shift in investments towards emerging markets and developing markets, the markets where we, as MPC Energy Solutions are already active in. 80% of the world's population are actually living in countries that are net energy importers. And 90% of these countries are developing markets. And you see here also the impact of excluding China, as most of the people always point out that emerging markets are highly driven by the demand of China only, but even if you exclude China, it doesn't really change the picture at all. So going into our region, and we have a crystal clear focus currently on Latin America and the Caribbean why, again, because we believe you have to be local energy experts in order to be a successful independent power producer. So our efforts are clearly with our two operating offices in Panama and in Colombia on the markets that we are currently serving. So in the past 2 years, and with the IPO start, we had three markets covered, El Salvador, Jamaica and in Colombia. And you can see that in the past years, we grew our assets and development activities to 9 markets in the region. Mexico, Guatemala, El Salvador, Colombia, Jamaica, Dominican Republic, Puerto Rico and the Eastern Caribbean shows already that we are successful in deploying our business model across the region and that we are successful in also finding new partners and new offtakers as we have just shared two major news on our latest PPAs in Guatemala and in Puerto Rico with international corporates. The reason why we also like the region so much is, obviously, it is very rich in natural resources, wind and sun but also primarily a U.S. dollarized region. So later on, when Stefan will talk about our financial performance, you will see that 90% of our contracted revenues are in U.S. dollars. And as a market, this region has around 30,000 megawatts of demand to be installed by 2030. And that's actually not that far out anymore. It means seven years to go for 30,000 megawatts of additional capacity that this 9 markets that we are currently in needs to grow, and that offers a tremendous opportunity for us as MPC Energy Solutions. And my colleague, Fernando, will later also speak more about the local market dynamics and what is actually the demand of the private corporates that we are usually selling our power or energy services to. So going into the operational field and being in a region that, first of all, doesn't provide any feed-in tariffs like here in Europe, it doesn't provide for the opportunity to develop and have a fixed tariff when it comes to every megawatt of installed capacity. So in our region, energy is a true commercial product and with a true commercial product, also the requirements of our clients are highly sophisticated by now. So what does it mean? It really means we need to focus on maximizing the value for each kilowatt hour that we are producing. That means for us in the beginning, we have to derisk our development phase. A lot of other IPPs are developing thousands of megawatts but have eventually no secured commercialization of this energy that is being produced, which, at the end, leads to a lot of what we call bragawatts which basically are [indiscernible] investments. So in our view and what we are driving is our business development is really ahead of our project development. So we are securing first the contracts before we initiate the project development like we do now in Guatemala or as we do in Puerto Rico. So this means we have a firm view on the commercial aspects of the project, how long are we selling the energy to this client, what is the price, what will be our market exposure thereafter. And obviously, it enables us to reduce the costs of failed projects and lost megawatts. We also focus on develop, build and operate model. Again, that goes back to the point that we want to capture value along the full value cycle of a project. It drives us that we have in-house development team. We have in-house construction management team, and we are in a position to operate these assets in the long term. And as you will see on the next slide, from us as an evolution and with a growing asset base, we are also now in-sourcing our operations and maintenance services from third-party contractors to MPC Energy Solutions. But most importantly, again, the aspect of being technology-agnostic and to provide the clients with solutions that are increasing the value of each kilowatt hour. What does it mean? Historically, the sector is coming from feed-in tariffs. It comes from payers-produced tariff structures also in power purchase agreements, but now the clients which are, for us, primarily private corporates but also energy traders, they really want a product that is meeting their demand and their demand is their load curve. When do they consume energy has a material impact on their spending. And it doesn't really help them if you produce power from 6:00 to 9:00 if their peak demand is during the evening hours, right? So how do you create that value? You have to deploy and hybridize your asset base. You have to add different technologies like CHP, like batteries in order to do the energy shifting. And at the end provide a more valuable good, and the more valuable good has, for us, the opportunity to capture also better prices compared to our peers who are still on the path of producing kilowatt hours only. My colleague, Fernando, again will also talk a bit later about PPA structures that we do have in our projects that shows that we are trying to stack up different revenue streams in order to improve our income basis from these projects. Talking about an inflationary environment. Obviously, cost reduction and performance optimization is key for us as a company in order to capture the returns that we have anticipated when making the investment decisions. So driving costs down is a key point, and Ulf mentioned it already with a growing asset base, you have more opportunities to do that. you grow economies of scale, you grow the ability to in-source further services and you have more negotiation power with external contractors. So for us in our strategy going forward, which is consistent with our hands-on approach, we really want to focus on in-sourcing the O&M., the operations and maintenance, especially for solar is the largest single operating expense that the company has on asset level. And we see in the region compared to prices that, for instance, would be applicable in Europe or America, a good saving potential of 20% to up to 40% in-sourcing these services. In-sourcing these services means not just that we can reduce the costs per kilowatt hour produced, it also means that we have more control on the quality of services that we are receiving. And again, looking back at the quality and the value of each kilowatt hour produced, the more kilowatt hours we are producing at a fixed cost basis is obviously a direct hit -- direct improve of our bottom line, right? And it also creates a new income model for the company in the sense that when we look at our operating base, and we want to increase our investment capacity and we look at asset rotation and monetizing some of the value created through farm downs and partial exits. Obviously, we will serve the entire asset continuously through our O&M, so that with that, we also really have a third-party service available for us. And Stefan will guide you later through what does that mean on the financial side of in-sourcing the O&M on being very strict on the capital expenditures during construction, which for us primarily means, for instance, also the direct procurement of the most valuable equipment, which is usually the solar panels and the batteries and the inverters and what does that mean actually for our operating returns. So from the operating side and maximizing the value of each kilowatt hour and reducing the costs, it is really us expanding our development backlog in the region that we are in. As Ulf mentioned, we want to grow, we want to be the leading independent power producer in the region. We're in a very good way there. There are not many of our peers and competitors who currently have a portfolio of assets across the region in 9 countries. We are further developing and allocating around USD 12 million to USD 15 million in the coming 3 years into different development initiatives. We have divided the region in those 4 subcategories. You have the 2 large volume markets, which is Mexico and Colombia, and you have the 2, let's say, clustered niche regions, which is Central America, which is for us primarily Panama, El Salvador, Guatemala. And you have also the Caribbean Islands, which for us is primarily the larger markets, Jamaica and Dominican Republic. So going about our approach of trying to secure first our contracts, we are then subsequently deploying the capital into the project development phase. And in these markets, each of these markets, we want to create scale. We want to create at least an asset base of 100 megawatts per country. So that also, for us, it is an attractive model to in-source again, the operations and maintenance services, but also to have a scalable portfolio in each of the countries that we are actively in. And talking about value creation, if you look of investing USD 12 million, USD 15 million from 2023 to 2025 in the development of this backlog, you create at the end, a value that is a multiple of that, right? So if we look in the region of what is being paid for ready-to-build projects, you are in the range of $50,000 to $150,000. So if we just take the midpoint of that, around USD 75,000, the backlog will have an inherent value of more than USD 60 million. So we believe the company does very well in investing in our development backlog in order to grow our long-term asset base, which we are currently defining for the next 5 years horizon of 1,000 megawatts. So 1000 megawatts in operations, what does that mean? So for us, we want to focus on solar technology considering that it is a very scalable technology, but also the local resources are really in favor of solar technology. It makes it the technology of choice for most of our clients and it has most of the countries, the lowest levelized cost of energy as well. But again, you cannot continue with just deploying solar. You will need to hybridize, you will need to add other technologies in order to derive at a higher value per kilowatt hour. And that for us in the region is really based on two technologies, and that is CHP as well as batteries. Batteries primarily for the shifting of energy and to make the energy firmer and more dispatchable to our clients. Those clients obviously also include utilities and energy traders that do have the need for energy supply, not just during the sun hours. So our battery applications usually have a 3-hour time horizon to cover after the sunset. So what does that really mean in capital demand based on the latest developments in equipment costs, which, of course, were inflationary to build 1 gigawatt subsequently until 2027. It is really $1 billion of investments that needs to go into this portfolio. As you are familiar with, the usual leverage for assets in the renewable energy space, which is happening on project financing level, either nonrecourse or limited recourse is usually 70%, 75%. So at the end, on a 100% ownership basis, we really look at a $250 million of capital demand in equity that this company will have in the 2023 to 2026 horizon. Does this all have to come from equity raises? No, clearly not. We anticipate that we have farm downs. We anticipate that we have joint ventures. We anticipate that we have other co-investment partners. So always depending on what will be our ultimate ownership in each of these projects, will also increase our investment capacity. But we wanted to give you the full picture. So on a full 100% ownership basis, the capital demand would be indeed USD 250 million. How does this translate into the financial performance of the company? So once these projects are cash generating, we'll see an annual EBITDA of around USD 125 million to USD 150 million. In 2023, just as a comparison, we look at an EBITDA of USD 10 million. So you see we do have ambitious growth ahead of us, and this EBITDA will also fully dilute basically our current overhead costs that we have and also the overhead cost that will grow with the portfolio. So with that, we are basically approaching the two problems that Ulf has mentioned. First of all, we are growing the equity base of the company step-by-step over the next years, and we're also growing the asset base of the company. So that at the end, the difference between project IRR and shareholder return will be equal. We have a vision of becoming really the new and true powerhouse in the region. The last 2 years have shown that we are on a good track to do that. With 1,000 megawatt of operations, we will clearly be one of the top three leading IPPs in Latin America and the Caribbean, if you look at our core markets. But as a regional leader, we also understand our responsibility in the communities, our responsibilities to our local stakeholders. So in whatever we're doing, we strive for really excellence in ESG because we believe that good corporate governance and good local practice really goes hand-in-hand with a successful business model and is the foundation to create long-term shareholder value in the region. And with that, I'm happy to hand over to my colleague, Fernando, who will now give you a deep dive into the regional markets. Thank you.

So good afternoon. I'm Fernando Zuniga. I'm the Managing Director for MPC Energy Solutions for Latin America and the Caribbean. I'm actually based in the Panama office taking care of the business development activities, origination, investment opportunities and basically the local person in the region. My background, I've been in the industry for about 14 years and working in the Latin American region for the last 10 years, more or less. So as Martin already mentioned, I just want to start to show why are we in this region? And what is the potential and what is the current landscape? First of all, I want to highlight that the region, not many years ago, and we're talking about maybe 10 to 12 years ago, the existence of renewable energy was limited to nonexistence, so it is quite impressive to see in this short period of time how the region has developed to right now to an installed capacity of around 20 gigawatts. I'm speaking just between Mexico, Central America, the Caribbean and Colombia, without taking into consideration Chile, Brazil, Argentina and other developed markets in the region. And with this, it is very important to have this in mind because it gives us excellent opportunity for MPC Energy Solutions to become an active player in the energy transition of this region. As Martin already mentioned as well, the potential for the next 7, 8 years is the region wants to target 50 gigawatts. And MPC is already active there. So it's not we are starting. We've been already 2 years in the most active markets and either with local presence or with operations in Mexico, Colombia, Guatemala, Puerto Rico. And I think it's -- this is something that we need to keep in mind as the potential is there, and there are a few players with a vision of MPC Energy Solutions to gather this potential for the next years. So how are these governments or targeting this -- how are they targeting for the next years on specific opportunities. I want to just mention also what we're working at and what are we focusing on the shorter term. These markets or countries have announced publicly already energy tenders, and this is just talking about the public tenders without mentioning all the private or bilateral opportunities that MPC Energy Solutions is also looking actively. In Guatemala, we are expecting this year already, the next tender for 250 megawatts and another tender next year for 1,300 megawatts as well. Costa Rica, there has been also a market where the state utility companies have been taking care of the market. Now they have recently announced just over the weekend, a new tender for 150 megawatts. In this country, we'll mainly see wind projects in comparison to the other markets where solar has been the most active technology. Panama as well. Panama has also announced for this year, another energy tender targeted for renewal energy for around 200, 250 megawatts. The Dominican Republic, a core market for MPC also has announced a very ambitious plan for over the next 5 years. They want to target each year between 500 to 900 megawatts of renewals each year. And they have also already announced that they want to include batteries, energy storage into their tenders in order so that the grid so that we can give some great stability. Jamaica, a market that MPC group has historically been very familiar to, and a market that we already have development activities has also announced for this year, another tender. Also, they are looking into the integration of batteries into their tender programs. Puerto Rico as well, they have been pursuing also ambitious targets for the next years and with a potential for the short term of 500 megawatts of solar, wind and about 250 for energy storage. And Colombia market also where MPC has been well-established for a long time with different type of energy tenders, not only energy related, but also capacity reliabilities charge also related. Also to give you a little bit of an overview, what are the typical prices that we are seeing in this region? This is, of course, very different from what we can see in developed markets, such in Europe in terms of the pricing. However, the prices are becoming also on the lower end in order to be competitive with the alternatives solution on conventional sources of energy, especially Mexico and Colombia, you will see the -- on the lower end, the tariff because those markets are more sophisticated. The market has become very, very active. Also sponsors, international sponsors and local sponsors are targeting the market, and you'll see normally prices around USD 0.04 to USD 0.06 per kilowatt hour. And whereas in Central America and the Caribbean and especially because those regions are highly dependent of fossil fuels, you tend to see higher electricity prices, something between the $0.06 up to USD $0.18 per megawatt hour. The difference, normally, it becomes either if it's a public tender where more competition exists or bilateral negotiations between the potential offtaker and the generator. In this case, MPC Energy Solutions is trying to focus more on the private PPAs as we see greater advantage, and we can also now offer not only technically but commercially, those PPA range. So yes, so how is MPC becoming the player or the active player for the region. We -- what we have seen is that, especially industries or corporates they have the challenge that the current environment where they are located, they have issues with the grid, normally, the unstability or the weak grid infrastructure that exists becomes an issue for them, especially with blackouts outages. And also on top of that, the increasing pressure of reaching sustainability goals that makes us, for us the perfect opportunity to offer them a steady, reliable source of energy. And by that, we need to offer firm energy. So as Martin was mentioning, we want to be the player that offers a tailor-made solution, 24/7 storage of electricity. And that's by combining the tools that we are -- available that we have knowledge about either by hybridizing with energy storage or hybridizing with combined heat and power or using the market that it's available such the spot market, merchant prices in order to offer these tailor-made solutions to the off-takers. This has become more popular and popular in the region. Industries are looking at independent power producers as MPC as an alternative source of energy in order not to rely completely on their grid, but rather in their, yes, on-site generation. Also giving you an overview of the different sources of commercialization of energy, the region has also started in the earlier years 10 years ago with the typical feed-in tariff systems that we saw also in developed economies, a typical feed-in tariff that it was basically first comfit serve projects under in the Dominican Republic, for example, Honduras, we're the first market offering this to the utility companies or to the independent power producers. Then we see some advancements in order -- and including energy auctions in order to, yes, to offer more competitive processes and compete directly with the current sources of electricity. And we also see in some other sophisticated markets as in Mexico, Colombia, Panama, the availability of a spot market. So it's always a solution in case there's no specific PPAs in place or a specific off-taker, you always can have as a backup, the spot market. Also, you can see direct negotiations with distribution companies that's our case in our projects in El Salvador, where we have a direct agreement with AES, which is a distribution company and do sign a bilateral PPA without relying on the spot market. And lately -- and this is a trend that is happening also in the region, in Central America is having agreements directly with energy trading companies as the intermediary between the off-taker and the IPP such as is the case in Colombia, with one of our projects, we sell the electricity to the energy trader, and they have the availability to put that or place that energy into the market or to specific off-takers. And last, the corporate private PPAs, which is one of the main focus of MPC especially through our local presence, our network that we have built over the last years and offering this type of tailor-made solutions to our off-takers give us the opportunity to become very competitive in the market. And again, it has been seen that the corporates, not only because they need -- or they have sustainability goals, but also because they do not want to rely on the grid, on the islands that normally they are located. And also, they want to look for a more economic solution. This tends to be the new trend in the region with the corporate buyers. And that's what MPC's team has been focusing over the last months. Our first project negotiated directly was in Guatemala where we were able to give our offtaker an alternative solution, a cheaper solution as well. And now also they can meet their sustainability goals. This specific project was important because it gave us a lot of visibility in the region of MPC. After that, we've been contacted by other similar companies that they want to do the same. They -- sometimes they even didn't know that there was an option to be an alternative source of energy. So this innovation has helped us about to further develop, and we're really looking forward to apply these to other type of projects. And with that, I want to explain a little bit on the -- how our PPA origination process works. Most importantly is the local presence. In this region, it is important to be there and understand the different activities that are going normally. We identified the potential off-takers, especially we're looking for investment-grade companies that we know that they have sustainability targets -- international companies, also large consumers of electricity that normally -- we understand that they have -- or they've been already working with the PPA concepts, but with conventional sources and that we know that they have a term that is going to expire. So that's our first process to identify the potential clients. After that, we present the technical solution and specifically understand what are their typical load curves demands of energy based on historical information that they need to provide to us. With that, we create a technical solution, either selecting the suitable technology, either solar, wind, the CHP or even with batteries. We integrate the risk profile, the commercial expectations in terms of PPA pricing. And after that, we start a negotiation with the PPA and that's with a view to have everything -- to be a one-stop shop for the off-taker and they don't need to go outside and look for different sources of energy to cover their needs. We want to be the one-stop shop player for them in the region. So for our typical partners that we've been working on and we're targeting to work from private corporates such as Johnson & Johnson, Neopharma, pharmaceuticals in Puerto Rico, also university system in Mexico, LEONI, a private cable company, a sugarcane company in Guatemala, and also, we have our private utilities and energy traders, [indiscernible], well-known Colombian utility company, AES from the U.S. with the presence in El Salvador is one of our clients. and Spectrum, for example, in Colombia, who are an energy trader. And also for state-owned utility companies such as the case of [indiscernible] and where we see also normally in the public auctions, there's normally energy being built -- being bought by the local state-owned utilities. And yes. So how this works in a more technical way how are we able to offer them a solution that works not only from 6:00 a.m. to 6:00 p.m., but the whole block. Normally, first of all, we need to understand what is the typical demand on electricity. We know how solar works in what time of the day. In this case, in this type of markets, such in Colombia, where we have the spot market available in order to compensate for the time of the day where the solar plant is not able to generate. We, in the early hours of the morning, for example, we buy electricity from the spot market in order to meet the targets or the requirement from our off-taker. Normally that shouldn't be more than 10%, 20%. During the peak hours, we are able to even sell electricity to the spot market. And normally, during those days is when the spot prices are higher. So we are even able to make a return out of the spot market sales. And then after in the afternoon hours, we still need to go back to the market, acquire that electricity in order to trade that one. So with this combination, our exposure to spot markets is very limited and even we can have some returns on top because of the time of the day we are able to sell electricity that is a surplus for us. And then we can compensate that during the hours where we need to compensate with our curve. This is from a commercial perspective. In other places where there's maybe not a spot market in place, but there's an island typically, the usage of energy storage is becoming eminent and needed especially because they have the same needs in terms of the steady supply of energy throughout the day. Typically, how it works. In this case, we're talking about energy storage for 3 to 4 hours supply of electricity after the sun hours. In this case, you normally oversize your solar plant in comparison to the need of electricity from the off-taker, so that when you are in peak hours, you're able to charge your batteries. So that whereas on the after hours, you're able to discharge all this electricity that you have store during the peak hours. This is not only interesting from the technical point of view, in order to provide a tailor-made solution, but also from the revenue perspective because you're not only able to provide electricity in kilowatt hour but also firm capacity, which is normally paid on top from the typical solar and wind. This extra advantage that battery does, it comes along the extra payment on the -- on your revenue source. So by putting this into the equation and offering the hybridization with the spot market and energy storage, we're able to offer, and this is something that the target is looking in this moment. So with all of this, I think MPC is not only able to find opportunities in the region with our local presence but also to create those opportunities. And normally, that's our value added to all our customers, not just find them, participate but to create and present the opportunities that some things are not just seen in the market. And there's a journey to -- along the journey that we still can participate for the next years in order to meet our targets. So I want now to introduce to my colleague, Maite Pizarro, to talk about our ESG activities.

Well, first of all, I'm going to review with a small video to start. [Presentation]

Well, First of all, as you see responsible investment is the core of our company investment. During 2021 and 2022, our company were working the development of our sustainability framework. This aims to -- also to build a guideline that allowed us to invest responsible and this also reaffirm our commitment with environmental and social responsible actions. Our sustainable value strategy, ESG, will also help us to create and to protect our business benefits by handling our business in a responsible way and also to be able to respond to the change of the requirement and of all of our different stakeholders. At MPCES, we pay attention to the environment to the social and to the government issues, especially to environment, we are in the evolution of the greenhouse emissions and also to the rigorous climate change effects. We are responsible to the environment by reducing the environmental impact of our projects operation. We also invest in Latin America and the Caribbean as our main important region to invest. And here, in this region, 13 of this country are one of the most vulnerable to the climate change effects. That means that these countries need also to increase their efforts to be able to get with mitigation and adaptation measures as soon as possible. This region also have an enormous energy transition potential. But also as well, they have an enormous social and economic challenge. We as MCPES, we wanted to also to help them to face this challenge by our investment in the region. And of course, as we invest also in solar, wind and energy efficiency projects, with our project, we help them to directly teach you climate change effects by the avoided emission of our project. Regarding to our social aspect, we positively contribute to ESG goals and also to the communities and individual well being. We are looking also for positive contribution in the societies and making positive social environmental lens with the communities and the place where the project allocated. This is how we do that possible local impacts through the high local content of economy activities and the investment of the supporting community project in addition to job creation. That is very important for us, job creation activities in all of our projects. We operate with a strong community engagement plan -- is our project also in the areas of we invest. Regarding to governance, this is also we looked for a mutually beneficial relationship with the stakeholder, but guiding by ethical and some practice. In this, we are responsible for the company by maintenance the development of first-class governance, compliance and risk management standard. And also in terms of corporate governance, we operate according to the best international practices included the human right acts, the equator principle and also IFC standards. Here, as our company, we are committed with sustainable development goals of United Nations. And here, we are mainly commitment with all their goals, but mostly with our focuses in six that are gender quality, affordable clean energy, decent work and economic growth, also industry innovation and infrastructure, sustainable cities and climate change. During our SDG align assessment, we identified some priority areas where we can create value and contribute also to this goal, mainly first to develop [indiscernible] skills training and energy efficiency project by priorities and also to develop plans to promote the technical skill and professional skill in our employees. Also by reducing the negative environmental impact of our project to avoid the biodiversity loss and also by the avoided emission that our projects can process. Also, we encourage the managing supply chain fairly. It is a very important point. We encourage our business balance to be able to act in a fairly transparency and responsible way. We also invest in education, training and capacity. We also prioritize as well the promoting and security work in health and safety here with our policies, with [indiscernible] policy, and we also established in our company to act with different international standards like ISE and also with EHS for World Bank as well. And as well, we look forward positively improving the life condition of employee and community member. That's how at first we invest socially in the communities around our project. And also, we promote. And also, we encourage the local job creation and also the include of women in these workers. In 2022 ESG highlights for this year, we are also proud to announce the publication of our second annual ESG report. This advanced development accord the GRR standard and also it shows our results for the last year. For this year, as a company, we reaffirm our commitment to meet our business and also to ensure our sustainable strategy in this case. So this year was the finalization and release of the sustainable value strategy and the environmental social management system. This will allow us as a company to be able to manage our business in a responsible way and also to be able to continue to generate value to our stakeholders. This is a very important view points to recuse environmental social management systems is the tool that we have as a company to insurance to our project and our actions to be in compliance with the environmental and social requirements. Also regarding to our materiality topics, for 2022 regarding to environment and climate, we have reported for first time, avoided emission in our projects. This is because of the operation of one of our projects in Mexico, especially Los Santos. We are reporting for the last year now 1,206 tonnes of CO2 equivalent avoided emissions. We also, last year, extended our emission accounting of [indiscernible]. This is -- specifically, we extend our accounting in two categories of this [indiscernible], waste management and upstream and downstream transportation and distribution. We also, in biodiversity, we are applying to our project. We conducted environmental and social due diligence and also environmental and social impact assessment to be able to reduce the impact in biodiversity of the areas that our projects are located. And regarding to our corporate governance as well for the next year, our company has established a code of conduct in which it was signed for all our employees for 2022. And during the year, no incidents were reported -- no incidents of corruption were reported. As well as company put great emphasis incorporating with our business partners to be able to promote a high standard of good business practice performance for them. And we established a business partner guideline that was signed also for all of our business partner. Regarding to working environment, as a company, we are providing -- we are committed to provide equal opportunities for older employee and for the last year, we are reporting that 33 of our employees were females and representing different nationality. In terms also of community impact, we take to maintain an active dialogue with our company stakeholders and we seek also to establish long-term relationship and links in the areas that we are working for. During 2022, we were able to report 687 jobs created. This is because of the projects that we have in this moment in contraction in operation in Colombia, El Salvador and Mexico. And also, we keep investment in the community with different kind of -- like infrastructure project, also cultural activities and [ reflection ] activities. And this also -- all this advance that we have for this year would just happen for the -- with the commitment of our board and also with -- we invested as a company in a dedicated ESG team for this year and for the others. Regarding to our community engagement, engagement with the community is a key element to build trust in the areas of our projects operate. We believe that good relationship will impact in a positive way to all our stakeholders. Our aim as a company also is to operate with a strong and solid social engagement plans in all of the areas of operation of our project. And these are very, very important, especially in the face of development and the contraction to be able to us to create value in the communities. Some of the activities that we do mostly in this engagement plan are local recruitment, we try and prioritize to get locals to work in our projects, this by development job fairs to be able to hire the main partisans of the people from this area. We also realize, and we also help the community with the different local initiatives and cultures that they have. We also invest in the communities. For example, as you can see in the videos in renovation of the school classroom. We also invest in -- to improve water access for the community, which is like tree plantations among others. About our ambition for 2023. Based on our result for 2022 and also as our company is increasing their operation and also is getting bigger and bigger, we are like focuses mainly in what is environment and climate. One of our challenge is to refine and extend our disclosure in Scope 3 category. We wanted to look for a very good -- in a very good way, where our emissions are impacting. Also in biodiversity, we are getting with new projects and also we are getting with new people. So we need to keep and continued training to our people and improve our procedures. And regarding all environmental tools that we had for it to reduce the impact of our projects in biodiversity. Regarding to corporate governance, one of our main challenges, we wanted to become a sustainable leader in our field. So it's better for us to have a full overview of how we can impact in our supply chain. So for the next year, one of our main challenge is the development of our responsible supply chain. Regarding to working environment, we will increase of our in force to keep impact directly in gender equity, so we are going also to implement in a gender equality action plan to be able to raise the numbers of women that we have in our projects in operation. And regarding to community impact, we will keep our efforts to ensure and to require and ensure that the local job and the creation to all of our contracts will also be able in the areas of our project. So that is mainly the -- how we are approaching ESG in our company, and I will introduce -- leave you to you with my colleague, Stefan Meichsner to give the presentation.

Thank you, Maite and everyone else for those who do not know me yet, my name is Stefan. I'm the CFO of MPC Energy Solutions and together with Martin, one of the two members of the Supervisory Board. Today, we've heard a lot about the growth that we anticipate and the ambitions that we have. I would like to take a more short-term view and tell you what you as shareholders and interested parties can expect from the investments that we've already done and the investments that we can continue to do from the resources available to us. We just closed our financial year 2022, and we ended it for the first time in our company's history with revenues and operating returns from our projects. Revenues were $3.6 million last year and project EBITDA was $2.1 million. And if you've been following the news, then you saw that in the first quarter alone, we connected three more assets to the grid projects in Colombia, Puerto Rico and El Salvador. And we expect one more project in Colombia to be connected later this year. And this alone will see our revenues and operating profits from projects go up significantly to $10 million in revenues and $7 million in EBITDA. And I'm talking about our economic share in these numbers. And not all of these projects do we own 100%. So naturally, we want to show you here how much you can expect from MPC Energy Solutions. This is not all that we can do. We still have funding available. As Martin mentioned, we can farm down certain assets. We have several assets that currently have no project debt on them and are all equity financed. So we do have an execution road map that sees not only the projects that I just mentioned go into operation this year, but that also funds construction of other projects, namely in Saint Kitts and Puerto Rico and that will allow us to develop and build pipelines in Guatemala and other countries as well. And I think it is important to note that in our business, construction, of course, follows development, but you cannot build a power plant within a month or two. When we invest money, it takes 9 to 18 months for this project to become operational. So between the time that we make an investment and the time that we see cash flow is coming back to us, we usually do calculate with a year to 1.5 year. And I think this is also very important for investors to note that this is not a quick return on investment business. It just takes time to build power plants and to return these cash flows based on the investments that we have made. Now what would that translate into? And again, I'm speaking about the investments that we've already made today and that we can still make from the resources we have available we see -- we will see installed capacity grow from the 66 megawatts that we expect at the end of this year to nearly 180 megawatts by 2025, still clearly very much solar dominated because this is the core business that we're currently in the region. And of course, energy output will grow accordingly to over 400 gigawatt hours by 2025. And based on the capacity and the output that we have, we will also see revenues project-related EBITDA and ultimately also the free cash flows that we can take out of these projects grow significantly by 2025. Martin and Ulf have also alluded to this, said that we built the organization that we have today to support this growth and the growth beyond this. But what you can already see is even based on what we have been investing today, latest in 2025, the free cash flows to equity from these projects will cover our overhead expenses. And it's quite natural that this takes some time because in the beginning of projects, you pay down interest, you pay down project debt quite significantly, so free cash flow to equity always follows free cash flows to the bank, if you will. And this is purely based on the project cash flows that we see. We still have options to farm down some of these assets, which are currently included in this projection to free up additional cash which we can then recycle further, but I think it's very important to note that based on what we've done, the scalability that Ulf mentioned is already visible today. In the first quarter of 2023, it will become more visible towards the end of the year. In 2024 and 2025, we will actually see the numbers to be at the level where we want them to be based on the investments that we have made. How can I be so sure about this? Well, the answer is actually quite simple. We have power purchase agreements in place, long-term offtake agreements with -- well, companies buying the energy that we produce. And based on the contracts we have signed today, wet ink, we have an average lifetime of these contracts of 16 years. As Martin mentioned, they are mostly U.S. dollar-denominated, not exposing us to any risk of, let's say, local currencies. And the total value and revenue of these project -- contracts is USD 430 million, which unless our plants fail, we will generate from these contracts. And $430 million in revenues over the lifetime of these contracts also means between $300 million and $320 million in operating profits or operating cash flows from these assets. So when we look at our predictions, they are all based on the contracts that we actually have, and this is what we have today. And that's why I can be sure what will happen over the next 2 to 3 years even without the additional growth that Martin outlined that we will be working on by enhancing and building our development backlog and ultimately growing to the 1 gigawatt installed capacity that Martin outlined in the next 5 years. I want to speak a little bit about debt financing and other very important instrument that we have available, not only to recycle cash but also to boost returns. When I joined the company as CFO, it was May 2021, a few months after the IPO and interest rates were basically at 0%, including the sulfur rate that governs the LIBOR rates for our project loans because LIBOR has now been phased out. And then following COVID inflation, the war in Ukraine, we saw interest rates and everybody knows this go up significantly to almost 5%. And of course, that was an environment where Martin and I did not feel very comfortable to put a lot of debt on our projects. So we selected to fund some of them through all equity because locking in high interest rates might sound like a good idea, but we truly believe that the turn downward trend would continue at 1 point. And luckily, we are now in a position where our projects are starting operations, and we are expecting the downward trend of the LIBOR rates. And that should put us in a comfortable position that we can benefit from this downward trend. Why benefit? Because compared to the peer companies that we have in our industry, we are still significantly under-levered meaning that the debt ratio in our projects and on a corporate level is significantly below where we think it should be. At the end of 2022, proportionate debt was 50% of the investments that we made, it should be 75% to 80% like what our peers do. So now with the downward trend expected in interest rates with the potential that we have to put additional debt on these projects, we can maintain selective, we can remain conservative in the choices that we make, but we want to harvest this downward trend, and we want to use it to recycle the cash that we currently deployed into projects to put them, let's say, on a normal leverage level, as you can expect in the renewable industry. Why is this so important? Because for two things. First, recycling the cash by putting on additional leverage. It kicks starts a cycle, a cycle of recycling cash, which then can be redeployed into projects with high returns. This allows us to scale up more quickly. This diversifies our portfolio more quickly, and that, in turn, derisks the overall company more quickly, which then leads to better debt turns from the banks. That's number one. It's purely helpful for our future investment road map. The second thing is that leverage is by far the most important factor to bring return levels to where we want them to be. A standard IPP IRR un-levered in the region that we operate with is between 8% and 9%. The moment you take a project from 0% project debt to 75, you add 400 basis points on returns for us. And then with the O&M in-sourcing that Martin mentioned, once the asset base is large enough that we start saving costs, operating these assets and with the direct purchasing to bring down our CapEx because we have the capabilities to buy large equipment ourselves and we don't need to rely on third parties who claim a margin to do this, we can boost the returns from the 12.5% on a levered basis that we believe are necessary today to 14% and higher depending on which company -- country we invest in. And of course, ultimately, this is the goal that we have, and these are the options that we have to further increase the return on equity and thereby the shareholder value from our investments. Just adding leverage is not the only thing that we want to do on the debt side. It is also about the question where do we load on that debt. And at the moment, it's very clear cut. Usually, you go project by project, you enter debt on a project level. And then you just see the project operate and repaying that debt. The downside here is that it is, compared to other possibilities, more expensive meaning that the margins that lenders put on project debt are higher than if we were to do it on the holding level or a top co level where several projects can collateralize the same loans. So what we want to do over time is take -- walk away from SPV level project finance, you're creating loan facilities for a larger group of projects, and we can very nicely do this if we have a good installed asset base in one country or in one small region or, let's say, across a region like the Caribbean, where it is possible to put five, six projects under one loan facility and thereby gaining efficiency and also getting a better pricing. And then ultimately, of course, on our listed company level, we have been contemplating the idea of issuing green bonds in the future. And of course, pricing is then determined by market participants, but we also truly believe and we are willing to put, let's say, our money where our mouth is. We are more than happy to tie the pricing of a loan or a bond to ESG-related KPIs and covenants because this is at the heart of what we do. And it allows us to secure better pricing, a greenium, as some people call it, then we are more than willing to do this because this is what our company is about and if it helps us to finance our project on a top co level and securing the best rates possible, then we will certainly try to do so. Now last but not least, I would like to leave you with a number. As I said, we just concluded the year 2022, which also means we had a very intensive phase where we underwent an audit. And since we account following the principles of IFRS, everything on our balance sheet is at fair value, conservative fair value. And just looking at this, and we will publish our report on Friday, and everybody can then check the details for him or herself. Just based on this fair value, the net asset value of our company of what we've done to date is NOK 35 per share and certainly not 12 or 13 where the stock is trading today. Ulf mentioned it in his introduction that we believe the company to be severely undervalued that the market is not correctly pricing the stock and there are reasons for this. But I also truly believe that the small team that we have, if we continue to work very hard and we stay lean and we stay focused and we continue to execute well, like we have, then the projections shared to you today and the value that we see in our company will become actual results over the next few months and years. And with that, I would like to hand over to my colleague Heike, who will lead the Q&A session. For those of you who are joining us virtually, please stay tuned. And for those here present today, give us a few moments to set up for this and then we're more than happy to take your questions. Thank you very much.

[Operator Instructions] If there are any questions from the audience here. I'd like to start with these.

[indiscernible] We consider selling any of the projects soon have shown that you have created value.

Yes, I think we have clearly outlined the possibility of capturing value that we have created through development and construction of assets. At the end, value is being created an increase and improves our shareholder return and the investment capacity. We'll certainly consider these options. I think asset rotation strategies and the way to recycle capital for new developments are the usual way in our industry, which is so capital intensive. So yes, we do consider those options.

This year or...

We will see.

I have a technical question, I'm not sure if you should answer or maybe you should answer it. Is it related to the payers contracted than export customers, where you now are saying that you are actually gaining profit mid-days because you get a higher realized electricity prices, but I guess that's due to low renewable penetration in the region so that you kind of have a marginal price setting, which is in solar PV. But if you go into like 10-, 20-year contracts, how do you avoid that being kind of -- most in the future?

So we hope that by then, the energy storage batteries will be well-developed. So at the moment, we're just levering our demand -- well, actually, the supply of electricity in the spot market. In any case, the exposure is very, very low. And at this moment, it is an advantage. And -- but in the longer term, it is right. So such in Chile, I guess, the spot prices went down when the renewal energy penetration came strong. But by then, yes, we will have other technical solutions to compensate for this, but the idea is to offer a firm capacity without relying on spot market. This is just like a specific situation, tailormade for what is available in the market.

And just to add to that because there was a specific case for Colombia, where we are registered agent at the [indiscernible], which is something similar to the EX in Germany. It's commodity markets where also electricity packages and futures are being traded. When you look at those risks, we assess the market very carefully compared to Chile, for instance, which is a very small market that does have this exceptional solar resources. The market in Colombia is very different. It's largely hydro driven. And there actually these tendencies play in our favor because climate change is causing longer and extensive -- more extensive draw periods. So usually, if you look at the Colombian market, you'd rather see power price upward trend. And for an economy with 50 million people the, let's say, cannibalization effect of solar PV and the potential for that is at a very different scale than what we would see in some of these markets where it happened in Latin America actually. So we are very aware of these trends. And during our projections with also a lot of external consultants and my advisers that do run various scenarios on deployment of different mixes of technologies, we look very carefully also at which hours we do have these exposures in the market.

Thank you. Maybe we'll take one of the questions that came through online. The first question that came in is targeted at the M&A market. How efficient would you say the M&A market is in the regions where you operate? It was mentioned earlier that your share price currently is not reflective of your underlying assets. Would you say that private market transactions either comprising producing assets or development portfolios typically are agreed at what you find to be a fair value or DCF pricing?

Yes. First of all, there's a lot of competition for operating assets in the region. Again, also why we prefer the root of developing our projects in-house or together with joint venture partners that we do, for instance, with Leclanche, with Soventix or with Internet in the different markets that we are active in because buying operational projects or buying at the end, ready-to-build projects means also that another third party has captured a big part of the value that we believe it is more suitable for us to create it. And the M&A opportunities are clearly there. As Fernando elaborated, there's more than 20,000 megawatts of installed capacity of financial investors, institutional investors, strategic investors. And as previously mentioned, there is a usual life cycle rotation of different investors that have different risk appetites. We see a lot of M&A, and obviously, DCF is the way to go on valuing these assets. We have to say that there is a big difference, I think, in perceived risks and applying of discount factors. There is a lot of institutional investors in the region itself that clearly applies a different risk pricing grid to these projects that, for instance, a Dutch pension fund would do if they look at a Mexican solar portfolio. And I think this is the biggest challenge in M&A markets is to match your risks with, yes, the most realistic scenario, not potential bias that you bring on as a nonlocal investor.

One of the questions that came in was directed to the expected equity raise. So at what point will the company expect to raise further equity?

I think we have outlined very clearly our road map. There's a capital demand of up to $ 250 million in order to reach our business plan that foresees an operating portfolio of 1 gigawatt by 2027. We have mentioned this to be $250 million over the period of 2023 to 2026. And when the right time is there and our Supervisory Board and the Management Board decides it's the way to market, then we will certainly approach our shareholders.

But we should maybe also highlight again that it's not a necessity per se to fund our growth because there's different options available for clients. I'm speaking about co-investors that Martin has also mentioned going with joint ventures farming down some of the assets, levering some of the unlevered assets. So there is still -- resources are still available to deploy cash and to grow the portfolio without necessarily having to ask shareholders or new investors for additional funding.

Sure. And we have actually two questions on the Saint Kitts project. I mean I think they both address more or less the same points. Can you comment on the Saint Kitts hybrid project and the current expected time line for this project? And then another question, didn't you plan the commissioning of the project in 2023? So perhaps you could provide a short update on the project?

Yes. So the project in Saint Kitts is undergoing the early works agreement at the moment. There is indeed caused some delays in the project considering supply chain and local input for the project needed. I think Stefan has shared in his outlook, the time line that we see which is considering now a completion of the project by, I think, mid 2024.

Okay. and becoming a little bit more operational, could you provide some more detail into the in-sourcing of the O&M activities. How will this be structured? And will this increase the overhead on the corporate level? Also, will you see an increased cost base during the start-up phase of this business segment?

So what we see on the O&M side, and we had that in mind for a long time. So when we have built our projects, you will see already that we did the direct procurement. So that has the benefit that when we purchased the equipment directly, also the warranty and guarantee obligations are with the SPV, which is usually a structural problem when you do a full EPC contract that usually this warranties and guarantees are with that contractor. So we have structured generally for contract with our current provider so that we can slowly transition into taking these projects into our own organization. The first step of this will be a hybrid organization where we take on the planning and the warehousing of spare parts, et cetera, internally, but by basically applying a hybrid model where the field services are subcontracted to local electrical firms or supplier of services that are needed in order to main the assets until we are fully in-sourcing these services as well, which you could expect by the growing portfolio to happen from now to 2026, maybe. So it's a step-up plan in order to prepare and implement this organizational change. Usually, how you would structure that is that the O&M staff is contracted locally by the SPV, as we do this already with other of our hot assets.

And I would say that the impact on, let's say, short-term corporate overhead to achieve this transition that Martin mentioned is fairly minimal. And the overall idea is to reduce costs on a group level significantly. So considering from a return on investment perspective, you perhaps hire 1 expert resource now, but then you achieve 20% to 40% cost reductions in the projects in 3 or 4 years' time. And this is how we look at it.

Sure. That makes sense. Then maybe moving on to a somewhat more general question. What countries do you specifically focus on when you're seeking an expansion of your development backlog?

So this year, we will enter Panama with a new 200-megawatt project development initiative, considering that Panama is one of the countries that does have very well-established international headquarter base and base for corporate off-takers. Again, looking at the way of business development to drive project development, but clearly, Guatemala, where we made just the market entry, is a market where we want to grow to scale, which we have defined previously in the presentation to at least 100 megawatts of installed capacity per country. So also there, we are in further business development discussions with corporate off-takers and obviously, we have already the operational assets in Mexico. And we see that Mexico made great progress also growth on near-shoring opportunities towards the U.S. There are big investors growing their activities on the industrial and corporate side. You'd see that Tesla is coming in to bring in a new giga factory. So we believe the case is still there for us to grow towards corporate off-takers. Our current facility is supplying the energy to LEONI and the [indiscernible] University network, which is, in fact, 22 different PPAs to the different locations of these universities. So I would say we will clearly see in Panama and Guatemala and in Mexico, new initiatives coming in this year.

And to continue along the development plans, you set a target of USD 10 million to USD 15 million in development cost in 2023 to $25 million, do you expect this to be fairly linear? Or will it be tilted more towards a specific period or year? And then a follow-on question, what do you think is a realistic view on how many projects or megawatts you can generate with this expected development budget?

Yes. So usually, we see that per megawatts that somewhere between USD 5,000 and USD 15,000 of development costs. That always depends on the market, on the project, let's say, now in a project in Guatemala, for instance, that is a fast-track project in the sense that we built the 65-megawatt on the premises of the off-taker with an existing grid connection. So your permitting path is limited, really focusing on the environmental social impact assessment, but when it comes to grid permitting, et cetera, that all falls away. So we have a very lean structure also on the cost side. When it comes to other markets, you need to have other considerations. Usually, development is not linear and it's spending. You start with early feasibility, grid assessments, other red flag scenarios that you are testing in order to make sure that when you deploy the higher cost studies like geotechnical studies, soil assessments, pull out studies that at that moment, you're really sure that your project comes through. So I would say, if you look at the allocation of our development expenditures, we have allocated USD 3 million for this year. So I think you can clearly see a ramp up just taking some numbers now, maybe $3 million this year, $5 million to $6 million next year and then the bulk in 2025, because the more you come to already to build, the more you really need to invest heavily into these project developments.

Understood. Okay. Then we received a question. How do you see the hybridization with a portfolio of solar, wind and hydro in order to provide close to 100% of renewable energy to the customers.

So the hybridization, we have to consider two things. In the developed world, you have a very centralized good grid infrastructure. Most of the markets that we are in have already decentralized grids. That means there is no necessarily interconnection among balance cycles, so to say. So the grids are weak. And when you want to introduce intermittent renewable energy, you really need to make sure that there is enough storage facility in order to do the energy shifting so that when there are load differences and differences that are coming in from clients consuming or not consuming energy is really a key matter, right? So it's not a question of when or how it is coming. It is really a matter of how quickly can private investors and utilities invest into storage in order to allow a higher percentage and higher penetration of renewable energy in the region. And it will come in the region even faster and stronger than it will come in the developed markets also because regulators are already considering the integration of storage because at the end, the profile, how renewable energy assets work in Germany, for instance, like most other European markets is the grid connection and the grid is the problem of the grid operator. In developed markets where the grid operators are often stayed on utilities, they push that problem basically to the producer. So in order to get grid connection, the costs of that grid connection are socialized by the generator of the power and they are not socialized by the community or by the country because they simply can't afford them. So for us, it is key to quickly ramp up our battery storage capacities in the projects in order to secure our contracts.

Understood. There was a similar question towards the storage concept, do additional storage projects result from your partnership with Leclanche in the next years? Is that your expectation?

We see Leclanche as a strong partner in the very segment for the very simple reason that they are true battery technology experts. Leclanche is a company who is heavily investing in R&D, who understand the functionality of batteries very well. So we feel very comfortable with them as a partner in our projects. And the more projects coming out of this partnership, the better for both parties, they as a system integrator. I would like to clarify that Leclanche actually is more on the system integration side because we are not using their batteries. So their batteries are not suitable for application and stationary storage. So for instance, going back to the Saint Kitts project, there, we are using batteries from CATL, Chinese leading battery manufacturer as well as from SDL, Korean company. We're not using their technology, which is not suitable necessarily for the applications that we are using there for the spinning reserve balancing and the energy shifting.

Okay. And there is a question that's maybe more targeted towards the Supervisory Board. When the NAV is far above the stock price, why isn't MPC capital reinvesting in MPC Energy Solutions?

Well, I think I mean, very clear that we will add to our investments. There will be additional equity raises. MPC Capital as one of the strong shareholders is certainly equipped from a balance sheet point of view to -- and from a cash point of view to support growth, not only for the next phase, but for the phases to come. And as we understand the same is true for the other major shareholders. So to speculate on the major shareholders, not necessarily supporting the next growth steps would be a wrong speculation. There is very strong support, and there is unanimous consent between those bigger shareholders towards prospering and supporting the next growth steps to get to the target line.

Thank you. Then maybe I think, Stefan, a question addressed to your topic. Is there any difference between the risk assessment of lenders in the region compared to Europe or the U.S.?

No, I would not say that there is a difference in the risk assessment, but we certainly have different players involved. If we look at our region at the moment, you will see very few commercial banks who are already experience with project finance in the region or are necessarily exposed to renewable energies today. And this is slowly developing. What we see is strong support in these countries from the multinational development banks, FMO, DEG, the IFC also partnering up with local banks. The risk assessment, therefore, is very much determined by how the development banks are assessing risk because they're sort of educating local lenders. And local lenders then very, very quickly, let's say, are able to not only gain the experience, but also then they are more competitive in terms of loan pricing in some instances. So I think as energy transitions and renewables develop in these regions, so will the lending perspective locally. And the risk management tools or assessment tools are basically the same.

Okay. And then I think finally, last question that came in, in our webcast. How much competitive pressure do you face in the different stages, for example, in the development or when acquiring projects?

There's a lot of competition there. Obviously, some of the known European IPPs that are very, very active in the region from Scandinavia, from Continental Europe, there are a lot of local developers that in the same way as it developed here in Europe come primarily from the real estate and property development side because there are a lot of similar features on the project development side when it comes to permitting and land securement that you see in the region. So I think everyone understands that we are in an industry that sees tremendous growth ahead. So it is only natural that you will see a broad variety of local, domestic regional international players coming in, in each of the different steps in the life cycle of a project. There is, let's say, less crowded place in the market when you really look at who can provide the full cycle. And as Fernando said, the one-stop shop for corporates that can deliver a project from the technical planning side, structuring the PPAs, securing the debt and equity financing and being a long-term partner. If you look at those, we feel that we have a very strong market position because we are one of the few who understand the business in its entirety.

Excellent. Okay. I think we've covered the questions from the webcast. Are there any further questions from the audience here? If not, I believe, this closes the Q&A session. Thank you very much everyone.

Thank you, everybody, also joining virtually. Take care.