PNE AG (PNE3) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the PNE H1 2025 Results Conference Call. I'm Vicki, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Heiko Wuttke, CEO. Please go ahead.

Good morning, everyone also from my side. Thank you for joining us today in this conference call regarding the results of the first half of 2025. My name is Heiko Wuttke, the CEO of PNE AG, and I am accompanied by Harald Wilbert, CFO. So let me first give you an overview of the presentation and the course of today's webcast on Slide 3 in the presentation. As usual, I will begin with a summary of the first half of 2025, followed by an update regarding the operating business. Then I will pass over to Harald for an update on the financials. And after that, I will conclude the presentation with the outlook for the remainder of 2025. We will then open the line for questions. And as always, our slides can be found on our Investor Relations website. Having said this, I would now like to draw your attention to Slide 5. Ladies and gentlemen, we are pleased to announce that we have already received permits for onshore wind and photovoltaic projects with a total capacity of 489 megawatts in the first half of 2025. This is a remarkable figure and one of which we are proud of. Also operationally, we had a successful first half, which was characterized by very good progress in our development activities, especially in Germany, where we completed four projects with a total capacity of 65 megawatts. At the end of the first half of 2025, 12 owned wind farms with 214 megawatts were under construction, thereof 98 megawatts new in the second quarter of 2025, plus 2 wind farms for third parties with 68 megawatts. As expected, we did not sell any projects in the first half of 2025, but we sold the projects rights for Clermont in France with 14.4 megawatts in July and the wind farm Sundern-Allendorf in Germany with 34 megawatts in August 2025. In addition, several other sales processes are currently ongoing, and we are optimistic that to successfully close some of them in the coming months. In power generation, the expansion of our own IPP portfolio continued to 491 megawatts as we added the four projects we completed in Germany with a total capacity of 65 megawatts in the first half year 2025. But one project with around 25 megawatts could be sold in the remainder of the year. So the total figure might still change somewhat. These positive developments make us optimistic for the future. However, even though the wind was in line with expectations in the second quarter 2025, it was unable to make up for the very weak first 3 months, which also affected our Power Generation segment. According to BDEW, the German onshore wind market declined by 18% in the first half of 2025 compared to the previous year. Nonetheless, our services business continued to develop well. In financial terms for the PNE Group, our total output slightly decreased to EUR 173.8 million, and our EBITDA decreased to EUR 4.7 million, mainly burdened by the weak wind yields, especially in the first quarter and due to the fact that we have not sold any projects yet. And please note that in terms of seasonality, the first half of the year is historically weaker as project sales tend to happen later in the year. With this, let's move on to the project pipeline on Slide 7. As you can see in the chart on the right-hand side on the slide, the project pipeline in the first half of 2025 was stable at 19 gigawatts, but strongly increased compared to the 30th of June 2024 with 17.9 gigawatts. The pipeline in our core markets, Germany, France, and Poland grew by 16% to 7.6 gigawatts. Having a look at the subdivisions compared to the 30th of June 2024, wind onshore increased by 6% or 0.6 gigawatts to 9.9 gigawatts. PV increased by 8% or 0.5 gigawatts to 6.6 gigawatts peak. And offshore wind was stable at 2.5 gigawatts. The total project pipeline, wind onshore, which is the basis for our IPP portfolio, grew to 9.9 gigawatts coming from 9.3 gigawatts on the 30th of June 2024. Our home market, Germany, which accounts for 33% of our project pipeline increased by a strong 25% to 3.3 gigawatts. The wind farms, Stuvenborn 1b, Herbsleben-Dachwig, Bokel, and Gnutz West Ib were completed and put into operation for our own IPP portfolio, plus 1 wind farm for third parties, which was 28 megawatts. In addition, 11 wind farms with 203 megawatts were under construction in Germany, plus 2 wind farms with 68 megawatts for third parties, and we received permits here for another 167 megawatts in the first half of 2025. With respect to other markets, we have another project with 11 megawatts under construction in France, and our project pipeline in South Africa grew by 14% to 2.8 gigawatt. Finally, we received new permits in Poland of 24 megawatts and in Turkey of 72 megawatts. Moving on to Slide 9. We see that the PV pipeline grew nicely to 6.6 gigawatt peak compared to 6.1 gigawatt peak on the 30th of June 2024, and development activity is picking up. This results in good progress from projects to the later project phases, resulting in a 70% growth of Phase 3 projects to 676 megawatt peak coming from 398 megawatt peak in the first half of 2024. Especially in our core market, Germany, we see a favorable increase of our PV project pipeline with 37% to 929 megawatt peak. We also achieved strong growth of 44% to 755-megawatt peak in Italy. And we are happy to share with you that we received new permits in our core markets, Germany with 124-megawatt peak and Poland with 102-megawatt peak in the first half of 2025. If you look at the expansion of our own generation portfolio in the first half of 2025 on Slide 10, you see that we made good progress here as well. We added 65 megawatts on the IPP portfolio in the first half and with that, increased the total megawatt in operation to 491 megawatts at the end of the first half year 2025. 475 megawatts are coming from wind onshore Germany, 11 megawatts coming from wind onshore France and 6 megawatts coming from the wood-fired combined heat and power plant Silbitz. Further, approximately 214 megawatts in Germany and France were under construction at the end of the first half of 2025, partially intended for the IPP portfolio. Burdened by the low wind yields, as already mentioned before, the German onshore wind market declined by 18% year-on-year according to BDW. We produced 366 gigawatt hours of green energy in the first half of 2025 and saved 277 kilotons CO2 expected. The hidden reserves accumulated in our portfolio increased to EUR 206.7 million and compared to EUR 195.3 million by the end of 2024. And with this, I would now like to hand over to Harald for the financials.

Thank you, Heiko. First of all, I also would like to welcome everyone here in this call. Looking at Slide 12. The financials in the first half year were impacted by our high development and construction activities, the addition of further projects to our IPP as well as by the negative impact from the weak wind yields and the fact that have not sold any projects in the reporting period. Total output slightly decreased to EUR 173.8 million compared to EUR 174.9 million in the previous year. Cost of materials decreased while the cost of materials ratio was almost constant and personnel expenses rose due to an increase in the average number of employees of 49. Our EBITDA decreased to EUR 4.7 million compared to EUR 8.7 million in the previous year, mainly due to the lower wind yields. Adjusted for these exceptionally low wind conditions in the first quarter, EBITDA would have been above the previous year's level. Looking at the segments on Slide 13, we see a mixed picture. Total output of the segment project development increased to EUR 150.5 million compared to EUR 137.8 million in the previous year. The reasons for this were the high construction and development activities. However, total output of the segment power generation decreased to EUR 36.3 million compared to EUR 42.4 million in the previous year, mainly due to the weaker wind yields mentioned before. Total output of the segment Services increased to EUR 18.3 million compared to EUR 17.6 million in the previous year, driven by a strong order book. EBITDA-wise, the segment Power Generation had the highest contribution in the first half of 2025 with EUR 21.7 million, even if it decreased due to the weaker wind yields. EBITDA from the segment Services decreased to EUR 0.9 million and the Project Development segment contributed with minus EUR 1.3 million. However, I would like to mention in this context that a new allocation formula for the distribution of overhead costs led to personnel and other expenses by segment not being comparable with the previous year. Consolidation was driven by the elimination of project development for our IPP portfolio. On the asset side, we see on Slide 14 that most is allocated to property, plant, and equipment as well as inventories, what we see as investment in stable values. Our cash position fell to EUR 65.6 million as did our equity, which amounted to EUR 166.4 million as of 30th of June 2025. The equity ratio was 12.9%. The decline of our cash position, equity and equity ratio can be explained by the construction projects during the year and the sale of projects at the end of the year. So these KPIs recover at the end of the year. However, we continue to aim for a target equity ratio of 20% and more. Adjusted for hidden reserves, the equity ratio was at comfortable 25%. In the second quarter, we increased our existing bond by EUR 10 million tap and also liabilities to banks further increased as the buildup of our IPP portfolio continued. It is worth mentioning that the majority of these bank liabilities are non-recourse project financing. With that, I would like to hand back to Heiko for the outlook.

Thank you, Harald. Ladies and gentlemen, this leads me to the outlook on Slide 16. We confirm our guidance for the full year 2025 with a group EBITDA in the range of EUR 70 million to EUR 110 million. Our high development activity in the first half of 2025 is the prerequisite for targeted project sales in the remainder of the year. As already said before, we just completed the sales of the project rights in Clermont and of the wind farm Sundern-Allendorf and are currently working on several other sales processes in Germany, Poland, and France, which we expect to close in the coming months. According to our stronger focus on selected core markets, we are still targeting market exits for Panama and Turkey. All these measures are in line with our strategy. Let me therefore assure you once again, we are committed to sustainable growth and value creation. And with this, I would now like to conclude our presentation and open the call for questions.

The first question is from Guido Hoymann, Metzler.

Maybe the same question as I think last time regarding margins. As we can see and have seen and you can hear also from other developers, there's a lot of projects coming to the market. We have seen all the approvals. And consequently, the supply situation should improve. And the question is, do you still see sufficient demand? And how are potential customers behaving? And do you notice any sort of margin pressure? That's my question.

Okay. Well, thank you for your question. If I got it right, you point out to possible margins that may change due to higher demand or more projects coming online. According to what we see, we have -- first focusing on onshore wind, we have seen that there is quite relatively stable volume of newly permitted wind farms, which was around 4.7 gigawatts per quarter. So this is rather stable looking backwards. This, of course, looked or led to slightly oversubscription in the auctions. That's one part. On the other hand, the demand is for us at this stage, not really a problem. And we don't see -- looking at our sales projects, we don't see that we are affected in a way that the margins are going down, at least not at this stage. On the material cost side and the turbine price side, I think with this higher demand and diversity of turbines, this may change somewhat. But currently, we don't see the effect. This is on the wind onshore side. I don't know if you refer also to PV. There -- well, it's not very clear the volume because there is no central register for new PV being registered. But what we have seen in the last auction rounds that I think the indicator is that for the new permitting, we see also a stable figure of some 4 gigawatts per round. And the prices just recently changed up again. I think the last market price is still on a not too low level. So overall, currently, we don't see less or lower margins. And if pressure comes up, of course, pressure is somewhat given further as well to the supply chain as it has been the case in the markets or in the previous years in the past.

The next question from Karsten Von Blumenthal, First Berlin Equity Research.

My first question is regarding photovoltaics. We have this year seen strong cannibalization effects, low market values for PV, and it gets more difficult to conclude PPAs. We had a lot of hours with negative pricing in the market. And I have now seen that you have received the permit for a 124-megawatt PV project in Germany. Congratulations. That's really a large project. But I would like to know how you see the situation for this project and in general, for doing PV on a large scale given the market environment.

Yes. Thank you, Karsten, for your question. Well, yes, PV is -- if you look at it stand-alone, of course, it looks like it is, let's say, following its success on one hand, but of course, meeting the constraints on some points looking to what you just mentioned, capture prices and grid connection. But still, we see that PV will be part and really significantly part of the electricity generation and especially the renewable electricity generation in Germany. And PV will remain one part on the German government side and on the P&E side of that strategy. And I think it was at least foreseeable that there are two measures that are to be met. One measure is that, of course, the regional grid build-out is necessary, which has begun and the other is adding flexibility to the grid. And that means we will see and see, let's say, business cases that will be in a better range. If we plan PV with options for BES, for battery energy storage to counterbalance these market developments on one hand and to have even hybrid projects combined with wind. So yes, PV is, let's say, getting more under pressure. But as always, in the past, you have to look into new developments and flexibility is, I think, one answer that every developer has to find. And with our new projects that we have now permitted, we expect at least on the sales side that this will be taken into consideration as well.