Photon Energy N.V. (PEN) Earnings Call Transcript & Summary

Open the first half. And at the end, there will be room for questions that we will try to answer as best as possible.

Maybe you can add already if you want to have questions in-between, just put them in the chat box, and we will answer them then at the end.

So as the company, please, please send them over. So just very, very quickly, Photon Energy, we've been in the business for over soon 15 years, and we are a Dutch company headquartered in Amsterdam. As an organization, we continuously grow. So we have now exceeded 117 employees globally. We are active in over 10 countries. Obviously, we are a public company and our shares are traded on the regulated markets in Warsaw and Prague and also in the open market in Frankfurt. Last year, we obtained a sustainability rating from imug. So we are an ESG compliant company. We've now also in the first half of this year, seen 3 lease houses take up research coverage of our stock, and all 3 of them have initiated the coverage with a [ bio ] rating. And based on the results today, also 2 of them have increased the target prices. We have 2 main business lines. We have one that is solar energy, which, of course, in terms of contribution to revenues, but also the weight in the -- within our balance sheet is content, but we have a second business line, which is water, which operates through our brand Photon Water. And we also going to tell on that one. So the key headline numbers for our Solar business line is that our PV project pipeline across the CEE region and Australia has again grown a little bit to 825 megawatts peak. We have, to date, built over 120 megawatts of power plants, the vast majority of which specifically 91.9 megawatts for our own proprietary portfolio. Last year, we produced -- our portfolio produced 103 gigawatt hours. Today, we also published our monthly report for July. So for the first 7 months of this year, we generated 80.5 gigawatt hours, which means that we are well on track to exceed that level of last year quite significantly. And of course, with the additions of new power plants in the coming years, this number should continue growing dynamically in our operations and maintenance business line, we take care of over 325 megawatts of power plants. These are of course, our own power plants, but also those of external customers and that external customer base we expect to continue growing in the next quarters. In the Water business line, we have several areas of focus. One of them is that we take care of surface water bodies, which are lakes and ponds, where we're taking care of over 600 hectares. We work with mainly water utilities in managing their water wells and a very exciting area is the groundwater remediation for various contaminants, but the one where we see significant global potential is in the area of treating groundwater that is contaminated with the PFAS or some others call them forever chemicals. More than later. On our business model in our solar division is that we are fully downstream integrated. Upstream in the solar industry is the manufacturing of the various components, modules and various mounting structures. So there we are not involved. They are the customers. But everything after that and everything in relation to the development and the entire life cycle, looking financially, you could talk about the value chain of a PV project that later becomes a power plant that recovers, through starting with project development, where we develop in the markets where we operate in-house or we enter into co-development arrangements or developers in some situations. We also buy projects that have been brought to the ready-to-build stage by external developers. And then we procure -- we design the power plants, we procure the technology. We build the power plants, but most importantly, also all those power plants where our investment horizon is essentially forever. And we -- unlike some of our peers, we do not buy existing assets from other developers operating plants, but we also want to sell to our clients. The only exception to that is a market exit, which we had some 10 years ago when we left the [ data ] in at the German markets. But essentially, we built power plants from our portfolio to holder forever. Connecting a power plant is, however, only the first, very important but first step in a very long journey as the technical life of PV power plants is 30 years and with the improvement in PV technologies, probably longer when you look at the potential to repower power plants, once certain components reach the technical life also beyond that. And we see that in the industry more and more investors [ when ] those vendors start treating power plants as [ 50 ] assets. So this -- and in today's environment, we'll talk about our merchant strategy later on. The beauty of a PV plant is that it is an investment that -- or an asset that requires significant upfront investment. However, the fuel is for free, which is a major competitive advantage to many other energy forms. And secondly, the cash operating costs are very, very small. So by definition, the EBITDA margins are very high. And with a merchant approach that we've adopted and we're selling into the market, we believe that PV power plants based on the advantages I mentioned before, are a great inflation hedge. So in our Water Services division, we focus on water treatment and managing water wells and resources. Our main target group there are water utilities. So that is a business where we continue adding new customers. It's water resource management focused on surface water bodies. And here, we have a particular focus on fighting blue-green algae bloom, which has become actually worldwide a major problem, contaminating both water bodies used for recreational purposes, but at the same time, also contaminating drinking water resources. We -- and the last area, which for us is very attractive and where we see very significant potential is our patent pending nanoremediation technology, which we have been applying over the last couple of years to sites with various contaminants, but the really promising in a significant area is that our technology seems to also be effective in breaking down PFAS chemicals, which, as I mentioned before, were referred to as forever chemicals. This is a group of chemicals that is used in many products that we are using today from -- because of the water and oil-resistant properties. So we find them in textiles like [ Coretex ], we find it food contact paper, but they've also been added to firefighting foams, So because of the fire retardant properties. So this is a group of chemicals where the contamination is very significant, particularly in the industrialized world. Australia is one of the -- or is the market or the country that has been first and is at the forefront of regulating this -- the consolidation of PFAS strongly, continuously reducing the permit limits. And we have an ongoing project with the Australian Department of Defence on which we believe we'll be able to report results and progress in the next couple of months. Our presence is focused on 2 areas. One is Central and Eastern Europe with our core markets being the Czech Republic and Slovakia, where we started our business and then Hungary, Poland and Romania. And the second market is Australia. However, we do not limit ourselves to only these areas, we are constantly open to reviewing market opportunities elsewhere, be that adding another irrigation market to the 5 core markets in Central and Eastern Europe. And we do look at opportunities there, but also outside these areas and indeed, outside Europe. So as mentioned before, our project pipeline at the moment is over 800 megawatts focused on Australia, Hungary, Poland and Romania at this point. Our pipeline portfolio is -- the largest chunk is over 50% of our portfolio, is at the moment in Hungary. As we have announced, we plan to connect 32 megawatts in Romania by the end of this year for our own portfolio. So that composition will change. And we're also hopeful that next year, we will be adding our first assets in Poland. Moving on to our strategy and outlook. The big one and the driver that -- for our results at the moment is, of course, electricity generation. So the fuel for our business model is ratable projects. And there is, from our point of view, very important to have full control. So not to be one out of many investors at the moment who are chasing anything that looks like a buildable project, but we have built up and we continue building up our capacity to develop projects in our core markets from scratch or to be a strong partner for a junior developer to bring projects to the ready to build stage and then take them over for realization. And as we have all the engineering capabilities in-house, we are the equity investor, and we know how to secure funding for this project. We are also a very attractive and straightforward partner for such [ student ] developers. So having control of a pipeline, while still being in the market and looking for acquisition opportunities, which are emerging at times is a key element of our business model and our strategy. What we will be focusing more in the future is also providing EPC services, engineering, procurement and construction to external customers. which has not been the main driver for our growth strategy. However, given the significant demand and not only from the utility scale sector, but in particular, now from the behind the meter sectors on-site generation, we are building up capacities to address this market opportunity, which I would say at this point is definitely Europe-wide if not global, given where energy prices have developed over the last year. Another very important element of our strategy is operational maintenance. While in the our consolidated results, operational maintenance is -- represents a relatively small share. It is, first of all, from our point of view, very important to be able to effectively operate our own power plants. But operational maintenance is a very interesting business in its own right as it provides recurring revenue streams from a diversified customer base. And it's not too dissimilar to facility management in real estate. So clearly, the numbers are much bigger when you develop or build an office building than in the facility management afterwards. But on the other hand, just although when you look at transactions, when facility management companies get sold, they get sold on higher multiples because it's a very stable business. And we do see -- we are positioning ourselves, particularly in the CE region as a local player who however, has not only long-term experience, but also has the spirit of taking care of power plants properly as we ourselves are owners, so we understand how the owners of part-time things. And we see that this approach is getting picked up and gaining traction, not only with domestic investing in each of the markets in the region, but that we also -- an increasingly interest in partner for financial investors from outside the region that are buying or building assets in -- across Central and Eastern Europe. This gets us to another very important element, particularly these days is our technology business line, which essentially serves a 2-pronged purpose. One is the procurement of components for the construction of our own power plants and also for the APC activities for external customers, but particularly when we look at the contribution in the second quarter and as we believe also for the rest of the year, the distribution of mainly modules, inverters and now very dynamically growing also batteries, where we buy from the major manufacturers worldwide, which these days tend to be in China. And we distribute those, [ not only to ] installation companies but also small medium-sized DPCs and in some cases, also into specific projects where we're selling them to developers. And particularly given the supply chain disruptions, but also the logistic issues, having access targets, access to manufacturers, having a flow of product coming to our markets is very important. And in our 15-year experience in the solar industry that always tends to be an issue. So we have seen shortages of modules. We've seen shortages of inverters, same issues with the logistics. And at the moment, several of these issues are coming together. So being able to access these products efficiently, having some of their own stock is a major strategic advantage at this point in time. So it's not only about being able to buy on better terms, but maybe having the product at all. And when we look at batteries, our decision and bet on importing significant volumes this year is paying off very, very well as there's a major shortage across Europe at this point. And last but not least, water is extremely important where, I would say, in terms of global potential, clearly, if we prove that our remediation technology is capable of breaking down dangerous chemicals in C2, that means underground without having [ reroute ] the water for further treatment, the market opportunity is global and extremely significant. And what we've been able to see is that in Australia, regulations becoming evermore strict. It is becoming a massive topic in North America. And we also see finally Europe waking up to this issue and both at the level of individual countries, but also at the EU level. And we believe that there will be -- the regulation will become stricter and stricter. And the opportunities will be very significant over the next couple of years. Coming back to what is driving our revenues and profitability at this point in time, it's definitely the growth in energy prices to which we believe to have reacted correctly at the right time. First, a fully merchant project were the 2 projects in Leeton that we commissioned in August last year. So there from the very beginning [indiscernible] sign any long-term power purchase agreements, but to sell into the spot market. For this year, we swapped 24-hour [ charge ] portfolio [indiscernible] system, which means we still get the subsidy element, basically for [indiscernible] 2009 and 2010 power plants, but we maintain ownership of electricity, which we are selling in the day-ahead market. And we also reacted to the [ energy outage in ] Hungary that have plummeted temporarily, [ the price of course ] that may be situation. But to temporarily exit from the [ Green Bonus ] support scheme for the vast majority of our Hungarian portfolio. So instead of a feed-in tariff that everyone considers to be premature, as we are realizing the current market prices, which are actually a multiple -- a significant multiple of those [ EUR 80 ]. And as you can see from the graph, since the [ beginning of the year ] the price curve has moved up dramatically, particularly on the short end and that will be the next 2 years. Yesterday, again, all the futures [ lighting ] where -- went up quite significantly. And so in the markets where we have assets at the moment, the base load price for next year -- for the full next year is around EUR 450 and above and peaks of over EUR 600. So if you take against that our levelized cost of energy, which is that [ dual line ], which depending on the market is somewhere in the region of EUR 60, maybe if interest rates go up again on the euro. We've seen now a slight reduction in the last couple of days, and even if it moves to EUR 65 and EUR 70 for whatever reason, we are still dramatically below the market prices. And this levelized cost of energy already reflects our cost of capital and spreads the investment cost over the expected lifetime of those power plants. So this is where I'll get back to my comment about the PV plants being a very attractive hedge against inflation. And so even if energy prices come down, and then of course when we see the potential that [ astatic ] impact on the right economy, we probably a reduction is warranted and needed. We will still be able to generate returns well above our cost of capital. So coming back to project development. So as you can see, we -- in Romania, we have done the last couple of weeks, moved several projects that moved from advanced development to RTP and under construction. This is in line with what I said before and what we've announced that we want to connect 32 megawatts. Of course, that pipeline in Romania will continue maturing and projects will be moving [ with the procedures ]. In Poland, where we are developing projects from scratch and Poland is a relatively long process, you can see that is continuously growing. So there, we really go out, we look for suitable locations and go through the entire permitting process. We will see maybe going forward, we will be able to identify some acquisition opportunities to accelerate our rollout. But what is important for us is to actually own the right assets and that, in our case, means power plants that are built on single access trackers. And what we see is other developers in Poland are the [ obvious ] projects, which we don't find a that attractive, particularly as our goal is to sell electricity in [ market ] and with trackers, we are able to produce more electricity in the morning and the evening when prices are higher than midday. In Hungary, we continue developing approximately 26 megawatts in one of the regions in Hungary, in the South of Hungary. And given that the weight PV projects will be developed in Hungary has changed, particularly in relation to how grid connection can be obtained, we are now at the beginning of starting a new wave of development. So while this pipeline at the moment is relatively small, we continue believing in the Hungarian market and opportunities available there. And in Australia, we are currently -- we continue developing our first project based on the range of technology, a 300-megawatt project in Yadnarie in South Australia, where the project development is ongoing as planned, and we are -- we expect ready to build by the end of next year. This is a very, very significant project in size and -- not only in terms of generation capacity, but with the planned 3.6 gigawatt hours of storage capacity. It would actually at this point, be the largest energy storage project in the world outside from hydro. Just a quick update or an overview. So we invested in RayGen for the first time in April 2020, followed by the second round in April 2021, where AGL was one of the leading utilities in Australia, co-invested along also Schlumberger and Chevron and [ Ecuador ]. So the reason why this technology is interesting is RayGen has managed to combine PV and concentrated solar. So -- you've probably seen concentrated solar pictures of concentrated solar plans before. So essentially, a mirror field reflects some light into a focal point. When the heat gets collected and traditionally that heat gets then transferred into a medium such as oil or in some cases, also salt, which then melts. So being this conserved energy gets stored. What RayGen managed to develop is a PV cell that can be placed in that focal point but can withstand the high temperatures of about 700 degrees Celsius. So that is [ how ] concentrated sunlight gets used twice, first produce -- to instantly produce electricity through the PV cells, while the heat still gets captured. And the second part is also an innovative approach to energy storage, where the storage medium is water. So the 2 high [ penetrated ] water reservoirs that are built, one for the hot water, which is kept just below the boiling point, the electricity generated from the PV cells is either fully or partially used to chill water in the second tank just below the freezing point. And then when electricity is needed through an organic [ ranking cycle ] engine, which is a low-pressure gas turbine electricity is produced on demand. And this system can run as an [ island ]. It's not connected to the grid and service, for example, a remote mine or remote community, but it could, of course, also be run in a grid connected setting and beyond just electricity, it can also provide grid support services. The main advantage of the system is that the production profile, and this is one of the major disadvantages of solar on its own, that it's intermittent -- that solar is an intermittent source and electricity is produced in the sun shines. Here, it's possible to completely decouple the production profile from -- so the supply profile from the production profile. So even if you add batteries today to a PV system, economically it only makes sense if you shift the [ inner sides ] of the grid by a few hours or you stabilize the supply profile. But with the RayGen system, if it's properly designed, economically, you can completely transform the supply profile, that means we could turn the solar to generate electricity into 24-hour baseload. We could supply only at night, and we see that in many countries today that where a lot of solar has been built with the sun sets, the diesel generators still need to be switched on. So RayGen -- that's exactly where RayGen could come in and replace that dirty generation capacity but -- when PV is not operating. As one of the investors and also development partners, we are alongside AGL, which is actually planning to build a 150- to 200-megawatt RayGen power plant in the location of a coal-fired power plant in [ Adelaide ] New South Wales, which is slated for retirement in the next 2 years. We are one of the few who have access to this technology, and we've decided to, for now, develop all our large-scale projects in Australia based on the RayGen technology [ Solaris ], the first step, of course, looking further locations, but we're also looking at opportunities in other parts of the world. So we believe that there will be progress to be reported in the next couple of months and quarters. So on one hand, we believe that our investment RayGen will be a very good financial investment in its own right, but it is a door opener for us, and it puts us at the forefront of a very viable solution in many parts of the world, how to address the energy supply issue. So to conclude -- with respect to our outlook, we together with the publication of our Q2 results, we also updated our guidance for this year, where we have lifted our projection for consolidated revenues from EUR 65 million to EUR 85 million, which would more be -- more than double the number from 2021. And we've also lifted our forecast for our consolidated EBITDA, which last year stood at EUR 9.6 million. Our previous guidance was EUR 18 billion, and we have lifted that down to EUR 24 million. At this point, it's of course, very difficult to see where the market goes in terms of electricity prices, they keep going up, but this is a number that we are very confident in and being able to achieve. We also have a set of targets we communicated in relation to full year 2024. So one is that we want to grow our proprietary portfolio to at least 600 megawatts peak by 2024. The buildout this year will represent a step towards that direction. Of course, we also foresee a lot of construction activity in the next 2 years. As you can see, our pipeline with 825 megawatts is -- which continues growing is helping in this. So of course, a lot of focus now is in executing that growth. What is important here is the improvement in our financials year-to-date and also for the rest of the year is, of course, a very large degree, driven by higher energy prices but as our portfolio grows, the marginal impact will, of course, come also from megawatts, so additional megawatts. And what you can see now in our financials kicking in is operating leverage. So we have built up a lot of capacity there over the last couple of years both in terms of human resources, but also, of course, the project development pipeline. I mean, for example, our pipeline in Romania, we started developing 4 years ago at a time where nobody wanted to look at Romania. So certain things need time to mature. And in terms of transforming that pipeline into power plants, the time is coming now. Of course, at a time when PV plants -- sorry, energy prices are very high, but the important thing is that as we add megawatts and even if enterprises go down somewhat with every additional megawatt that we add as I mentioned before, PV plans have EBITDA margins of 90% plus. Our cost base is not going to grow anywhere near that number. So as we add megawatts to our portfolio, this will feed relatively straight through our P&L and continue driving our profitability. So with the 600 megawatt target in mind that effect could be very significant. We -- our goal is also by the year 2024 to, at that time, have a project pipeline of 1.5 gigawatts under development. For our O&M division, our goal by year-end '24 is 1 gigawatt, which is a combination of our then significantly increased proprietary portfolio, but also external business. So this is also a number we are very comfortable with, and we've also put out a target for our EBITDA. We said it would grow 5x over the 2020 number, which is EUR 42 million, which even 6 months ago, it looked like a very bold statement. I guess now with our guidance. We are really closing quite a significant part of that gap this year as I said, with more megawatts coming online is definitely an achievable target. And I think it's important to note when we put out this EUR 42 million target in mid-2021, energy prices were at the EUR 60 they used to be. So we are very confident with that target. And at the same time, of course, we want to and also need to maintain our equity ratio of 25%, which is also covered in our bonds that we have placed in the market. So we want to maintain our - a sound balance sheet in our industry. High leverage rates ratios are common. So -- but we definitely don't want to overdo it. And we're trying to stay comfortable about 25%, but not too high above 30%, so basically around the 30% mark. And as Clemens will walk you through the financials, you'll see that's where we are essentially at the moment. So with this, I'm handing over to Clemens to walk you through the financials in greater detail.

Thank you, Georg. Once again, good morning from my side. I will walk you through our financials now for the second quarter and the first half year of 2022. I'm very happy to do so because those numbers are record numbers that we have presented, and that I want to give you a little more detail on. Before we go into the numbers, just to wrap up, the recent highlights and I think Georg has mentioned a few of those already. The biggest impact on the numbers is clearly that we harvest the high electricity prices that coming from switching to the Green Bonus scheme in the Czech Republic, as was said already. And since first of April, we also have changed the majority of our Hungarian portfolio to temporarily, partly, permanently exiting the feed-in tariffs and harvesting high electricity prices. On top of that, we have added in May one power plant in Hungary to bring our total installed capacity to almost 92 megawatts now. We have started construction in Romania in the second quarter as well in June actually and some preparation works already before that, but at the moment we have 5 power plants underway with 16.5 megawatts. The total goal for this year is 32 megawatts to still connect in Romania, bringing our total capacity to more than 120 megawatts. We have stepped up our bond, our green bond that we have issued last year, as you know, we have stepped it up by EUR 10 million from EUR 55 million to EUR 65 million, now also giving us more financial power to also accelerate our future growth. And what we are very proud of is that we have been covered by 3 research houses in Germany by Ulster Research, in the Czech Republic by [indiscernible] and company and by [indiscernible] in Poland, all of them have issued buy recommendations for our shares with price targets clearly above the current trading prices. Two of them have now based on our half year figures already revised them, the price target upwards. So we are quite happy about this development. The key performance indicators, which drive our financial numbers. As mentioned, we have 92 megawatts installed capacity out of that and that you can see on the graph on the right side, almost 83% are now merchant exposed. So basically, we can harvest the high electricity prices, 16.2%, which is mainly the slower portfolio and a few power plants in Hungary, still remain under a feed-in tariff scheme as we had it before. We have generated just in Q2, almost 40 gigawatt hours, Georg mentioned already, the July number here, you can see through the June number with 66 gigawatt hours for the first half year. You can see here is the proportion of merchant gigawatt hours, which have -- which are translating in the higher electricity prices a little lower than this than the megawatts. So then this 83%. That is due to the fact that the Hungarian portfolio was switched only in April, so the first quarter was still on the feed-in tariff. But going forward, that proportional will even increase, and we are keen to see that this kicking into our financials even more in the Q3 and Q4 coming ahead. On the bottom right side, you can see this market exposure a little more clear in numbers from the portfolio that has switched and also the actually realized average revenues in the Czech Republic is the Green Bonus, this combination of feeding of support mechanism and merchant model, we even could realize some EUR 760 million per megawatt hour. In Hungary, the average for the whole 6 months was EUR 197 on the merchant part compared to some EUR 96 on average on the feed-in tariff, so we more than doubled the revenues there for the same, how to say, kilowatt hours or megawatt hour produced. In Australia, prices have increased in Q2 as well quite a bit, and we can see this trend there as well now coming, even though it's up from Europe relatively independent market with EUR 113 as a comparison. So we are very happy about this development and that actually kicks in directly in our financials where we have realized in Q2, only a revenue of EUR 23.2 million, a growth of -- more than doubled 135% from EUR 9.9 million in Q2 last year. Year-to-date, with EUR 32.4 million in revenues from EUR 14.4 million, also more than doubling our revenues and almost after only 6 months, we have the same revenues as last year for the full year, where we had EUR 36.4 million in revenues. Still, majority of those revenues is electricity generation, which also delivers the highest profit margin, the highest EBITDA margin we had in Q2, EUR 11 million generation from electricity generation revenues compared to EUR 6.9 million in Q2 a year ago. A 60% increase, almost year-to-date, we are ending with EUR 15.9 million in the first 6 months only, and we also published this now in our July report, the expected revenue from electricity generation in July alone will be more than EUR 5.5 million in addition to that. So we are very well on the way to achieve our guidance there. Other revenues were mainly driven by technology sales, where we have -- where we can see also in a sheer endless -- almost endless demand for components, mainly the battery business is skyrocketing there, but also our traditional sales of modules and inverters is showing very strong demand, which also had a -- which is reflected in our financials here in the revenues and by basically shifting more and more into the battery business or adding more and more battery business, which has high margins. We also can see that the margin in the technology trading business is going up. That leads to -- and this is what you can see here very, very clearly the kick in of this kind of economies of scale, Georg mentioned before, we can see now that our EBITDA more than doubled in Q2 to EUR 8.1 million from EUR 3.9 million last year and for the half year to EUR 10.1 million, up EUR 4.1 million a year ago. Here is also to mention that EBITDA is after a windfall tax that has been -- we are affected also by windfall taxes potentially at the moment in Hungary that has been introduced there. We are affected very little to that. Only very few power plants, about 10 megawatts that we have installed in Hungary are exposed to windfall tax there, where we basically have to pay the difference of the realized merchant prices to the feed-in tariff that was there on those power plants. For this, we have to pay a 65% tax. So we just get 35% of that markup. Nevertheless, and this kind of windfall taxes is not considered in IFRS reporting, as you can see here, as a tax, but as an operating cost. So it's reducing EBITDA that is already incorporated there. We have this exposure in Q2 and going forward, we also have reflected that clearly in our guidance. So we count on that happening. In other markets, we are not exposed yet to any windfall taxes. So this is what we -- what you can also see in our numbers. The positive record EBITDA goes down actually, too, and this is, I think, what makes us very proud that to the net profit after tax that turned into the [ black ] positive with EUR 2.03 million in Q2 and also year-to-date with EUR 539,000. We are very happy about this development. I mean, very often, we have been asked these calls also in the past when are you going to be profitable? So now we can happily announce we are profitable and we clearly intend with our outlook to stay there in the black numbers. Going to the very bottom line that then goes into equity, total comprehensive income that decreased a little to -- from the great result by a negative other comprehensive income. Still we are above last year's numbers. But even though we have connected our power plant and revaluated the power plant in Hungary in Pula, there was a negative effect from foreign currency translation differences, mainly driven by the Hungarian forint that was -- and is weakening compared to the euro. But still, this positive total comprehensive income is then reflected in our equity, which brings me to the balance sheet where we could grow our equity to EUR 53.9 million from EUR 51.5 million at year-end last year, so a growth of 4.7%, bringing our equity ratio, especially adjusted equity ratio, which is an important measure for us for KPI in terms of -- for our [ on ] investors to 29.3% from 28.8% to a sound equity ratio. On the [ activa ] side, the balance sheet, some basically remained stable, grew a little to EUR 202.3 million. There is a slight decrease in the fixed assets that is coming as well from the Hungarian forint weakening which was overcompensating the addition of new power plants in Hungary on the one side, plus all the development that is already visible in the balance sheet as well from Romania and from the other markets we are active in. Our other current assets increased as well a bit to -- quite a bit from EUR 14.8 million to EUR 32.1 million, that is mainly a growing trade receivables and other receivables. Trade receivables is in line with the growing revenues mainly coming from also switching the Czech portfolio to the Green Bonus scheme where basically we get a significant part, 25% only paid out quarterly instead of monthly. So that is something which is adding up then and other receivables as well have grown there. On the [ passiva ] side, I mentioned already we covered the equity. On the debt side, we have increased our noncurrent liabilities. This was mainly the bond placement where we placed another EUR 10 million, increased debt. On the other side, we had some regular repayments and some early repayment on our portfolio in Hungary that was then reducing those liabilities as well, again, bringing the number EUR [ 215.2 ] million. Coming to the cash flow. We had in Q2 alone, relatively balanced operating cash flow. So even though we have a significant growth in EBITDA and operating performance, the working capital effect is very, very negative in terms of that we have prepared a lot and by increasing the account receivables, we have reduced compared to the previous period's accounts payables, which has a negative effect on the working capital. We also have increased our stock inventories, which is then reflected there. All these are measures which are in line or which are necessary for our business growth to secure procurement of components for the technology business, to secure procurement for our own power plants to be building right now in Romania. So all that is a necessity, leading to an operating cash flow for the first half year of minus EUR 7 million or minus EUR 6.7 million, sorry, on that side. But this effect will be also balancing out over the time. On the other side, our investment cash flow has been in Q3 now with minus EUR 3.4 million overall for the first half year, minus EUR 4.3 million compared to EUR 7.7 million last year, it's a little less than there yet. Again, here, this will be changing as well going forward with the significant construction we have started in Romania already and going forward, what we intend to still build and connect this year in Romania. The financial cash flow is with minus EUR 1 million, slightly negative coming from a positive effect of EUR 10 million from the funding with -- from the placement of the green bond compensated by the repayments, as I mentioned already before and by the interest payments that we had mainly. So this is a quick view on the financials. And I think now we can go over to the Q&A session. Maybe we start out.

Well, actually, because for the last question related to working capital. So maybe let's start with that. So well, I would maybe expect when we expect it to stabilize. And first of all, I think it's important to stress that as we operate along the value chain, I mean, our solar segment, when you look at the various business units that are involved in this whole process of development all the way to connected power plants, except for development, all the other business units, so that's engineering, that's technology, it's operational maintenance. So they serve an internal purpose, but they also serve external customers. But when you look at these businesses, then the economics are very different. So O&M, as I mentioned before, is essentially like facility management, technology buys themselves. So stock levels are an issue. But it's also the procurement arm for our investment decision -- investment activities. So the effect -- and so of course, our idea is, the goal is to use our capital efficiently and allocate it to those activities that bring most value. So I think the key drivers in the first half of the year that led to this is, first of all, the 50 megawatts we're currently building in Romania, of course, have a significant lead time. And lead times for certain components have gone up. So it will be, for example, transformers. We have seen a lot of things have stabilized a little bit, but at the beginning of the year, we saw that lead times but also prices -- for example, mounting structures were going up very dramatically. And for us, it was very important to make sure that we can build those power plants, that the projects are ready to build before the end of this year. So in relation to Romania, a lot of particularly transformers and mounting structures, which together are EUR 7 million were procured in the first half of the year, even because we managed to get them at good prices, particularly the mounting structures at prices, material prices reflecting levels before they jumped up dramatically. So we decided to order them, lock them in even at the price of having to store them for a while. Of course, we also procured the other components like the modules inverters where we made down payments. So capital was allocated to make sure that we will have all components in place to construct the power plant, the 32 megawatts in Hungary -- in Romania, which of course, is a major priority. So there, we essentially marked several millions of euros in what is now at a entry, which, of course, needs to -- leads to a negative operating cash flow. The second effect is clearly linked to the external business in technology. And again, what is growing very dramatically. And here, I would also -- will be linked to another question, which was about the visibility of our trading business in the second half of the year. I mean, a driver of the growth, but also the profitability of our trading metrics. And there, we have secured operation with a major manufacturer in China, significant product flows, which are now peaking in the second half of the year. And again, in relation to that, where the down payments need to be made. And so that is also now in the second -- in Q2, to some extent it was in Q3, that is eating into working capital. But you can trust us that it's worthwhile. The margins are attractive, and it's a good indication of capital to secure that flow. And basically, the batteries that we are coming in that we expect to -- they're contracted until the end of the year, the demand is literally endless. And they are already prebooked by our customers 7 months in advance. So that is eating into working capital. And the third effect, which has fully hit us actually in the second quarter, in particular, is related to our generation revenues, which have gone up on a monthly basis, [ not indirect ] in July. Of course, when we take June revenues of EUR 4 million that [ were direct ] in June, we have earned those revenues, but of course, we had paid them only 3 or 4 weeks later. So it is also a receivable. So several factors have come to -- come together that led to this source. It's not -- it's in no way from our [ perspective ] a negative sign. It is just -- so we clearly allocate and work with our capital as efficiently as we can. And so there is no -- but because it is driven by several partially related, partially unrelated activities. It was not like we are targeting the operating cash flow in the given quarter number. It's about capital allocation, sometimes investment, but sometimes it's a pre-step to investment like securing components for power and that will be filled 1 or 2 quarters later. And of course, the distribution business takes in working capital as it grows. So we've been able to answer that. Those 2 questions in one go. So let me move to the first question, which is new investments in the Czech Republic and Slovakia. While both these markets have in terms of project development, not been at the center of our attention, and I'm talking utility scale projects as our focus has been on Hungary, Romania and Poland. From our point of view, these 2, the Czech and the [ Slov ] markets. The Czech market has woken up a year ago. Slovakia still has a lot of issues related to grid capacity. It is, of course, a very small market where, I put it, incumbent players have -- more local players than us have a strategic advantage in securing the little bit of capacity that is made available. So we are keeping an open mind. However, and that also applies to the Czech Republic, any project in the Czech Republic, [ even ] capital allocation into your capacity has -- is competing opportunities in Hungary, in Romania, Poland and elsewhere. And we found this that in the Czech Republic, in particular, land is offered to us or projects, including the land, are very expensive. So while in Romania we can buy a square meter for EUR 2, people in the Czech Republic are [ charging for ] projects EUR 120 or EUR 130. And electricity prices essentially [ deselling ] production is 15%, 20% higher in Romania and the land cost 10%. So an internal competition for location of capital, typically Romanian and Hungarian projects have an advantage over Czech projects, which does not mean that we're not interested, but it is probably not such a priority as growing our portfolio in these other countries. I would assume 3 years from now, there will -- our portfolio will have some new power plants in the Czech Republic and Slovakia potentially, but it is definitely not at the center of our strategy. The situation is different in -- behind the meter, where we also expect to allocate capital and build power plants will be sales based on parts agreements to the behind-the-meter offtakers. And there, of course, the Czech and Slovak markets, Czech at the moment more than the Slovak, will be a role alongside opportunities we're pursuing in Poland, Hungary and Romania and potentially other markets as well. So there will be more activity in the Czech and Slovak markets behind the meter [ to litigate ]. However, it will not be a driving factor.

The next question is about windfall taxes. I think we went into that. Where we are exposed in Hungary, as I said, this is reflected in our EBITDA and also in our guidance already.

I would add that this windfall tax is mainly aimed at projects that have been receiving support in the past and exited those support schemes, which, of course, we did. However, it does not apply to the vast majority of our portfolio. So the differentiator here was -- it applies to partners that have a generation license, which is necessarily above 500 kilowatts of grid capacity in the -- most of our projects in Hungary are just below, so they're unlicensed, so they're not affected by this. But also going forward, the important thing is that this tax, and of course, things can change. But the moment that the tax is applied -- at the moment, it does not affect merchant projects. So when we now add another megawatt of -- say 25 megawatts we have under development and sell into the market and these projects have never been receiving support. They are not subject to it. So that is the situation at the moment.

Next question about ...

Situation is component material costs.

And inflation or increase in component costs, maybe touch a little bit of it.

As I mentioned before, well, on the module and inverter side, the cost increases have been modest. So actually, the biggest driver with respect to these components has been the weakening euro towards the dollar and also towards the [ yuan ]. But on top of that, logistics costs. So disruptions in logistics -- of course, a lot of it is also linked to the COVID lockdown in China. So any increase in prices -- so the prices of modules and inverters from China are not changing much. And if there's change, that's driven by the exchange rate movements. But the terms a small number of -- a few percentage points. The logistics costs are having an effect, clearly, but that has already been the case a year ago. And so the other factors were mainly raw material costs, whatever goes into marketing structures. So there has been an increase, but that has also not come to a stop. So where energy prices have gone, if modules or even the total power plant, if investment comes to up 10%, if the electricity we're selling is -- we're selling for 3x as much than we did a year ago, it almost doesn't matter. So the way we look at it as mainly -- I come back to what I said about the procurement of key components for Romania already at the beginning of the year is actually component availability. So if anything, if we are concerned about anything, it's not so much whether the investment cost has gone up by 3%, 4%, 5%, it's actually that we have all material on the on-site in time to be able to commission the power plants as early as possible and particularly given the current level of cash on cash returns. So just to give you an example, the 2 power plants we connected in Hungary at the end of last year in May, each of them in total were about EUR 1 million of investment. And in July, each of those generated over EUR 110,000, which you can find in our monthly report. So the cash, cash return is so significant. So in the next 3 months, is much more significant than if models just cost you 5% more than what you had in your original plan. So it's about speed to market, speed to provisioning, and that's what we're focused on.