PNE AG (PNE3) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the PNE AG Q3 2025 Results Conference Call. I'm Lorenzo, 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, sir.

Good morning, everyone, also from my side. Thank you for joining us today in this conference call regarding the results of the first 9 months of 2025. My name is Heiko Wuttke, CEO of PNE AG, and I'm 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 of the presentation. As usual, I will begin with a summary of the first 9 months 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. 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 share that we had a successful operational development in the first 9 months and that we are well on our way to achieve our targets for 2025. As expected, we successfully sold several projects in the third quarter. These sales included the wind farm Sundern-Allendorf in Germany with 34 megawatts, Clermont in France with 14.4 megawatts and 3 projects in Panama with 103 megawatts wind onshore and 140-megawatt peak PV. In October, we closed the sale of another French project, Genouillé with 11.3 megawatts. So in total, since the beginning of the year, we have sold projects with a capacity of around 302 megawatts. In addition, several other sales processes are currently ongoing, and we are optimistic to successfully close some of them in the near future. The first 9 months were also characterized by very good progress in our development and construction activities, especially in Germany and France, where we completed 5 projects with a total capacity of 76 megawatts. At the end of September '25, 10 owned wind farms with 169 megawatts plus 2 wind farms for third parties with 43 megawatts were under construction. We have already received permits for wind onshore and photovoltaic projects with a total capacity of 510 megawatts in the first 9 months of 2025. This is a remarkable figure and reflection of the steady flow of valuable projects progressing through our pipeline. The expansion of our own IPP portfolio continued to 502 megawatts as we added the 5 projects was completed -- we completed in Germany and France with a total capacity of 76 megawatts in the first 9 months of 2025. I would like to point out that the total IPP figure will change somewhat by the end of the year as project with 11.3 megawatt, which was included temporarily, has successfully been sold in October and another project with around 25 megawatts could also be sold in the remainder of the year. Power generation after the first 9 months was still burdened by the very weak wind yields in Q1. Even though the wind performance has improved since the second quarter, it was unable to compensate for the very weak first 3 months. According to BDEW, the German onshore wind market declined by 12% in the first 9 months of 2025 compared to the previous year. Our service business continued to develop well. I will comment on the developments in more detail later in the presentation. Driven mainly by the project sales completed in Q3, the financials improved significantly compared to H1 and also compared to the previous year. Total output grew to EUR 263.7 million, and EBITDA increased significantly to EUR 26.6 million. 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 of the slide, the project pipeline of 18.6 megawatts in the first 9 months of 2025 was below the 18.9 gigawatt from the year-end, but increased compared to the previous year with 17.8 gigawatts. The pipeline in our markets, Germany, France, Poland and Italy grew by 21% year-over-year to 8.6 gigawatts. Having a look at the subdivisions, wind onshore increased by 5% or 0.4 gigawatt to 9.6 gigawatts. PV increased by 7% or 0.4 gigawatt peak to 6.5 gigawatt peak, and wind offshore was stable at 2.5 gigawatt. The total project pipeline, wind onshore, which is the basis for our IPP portfolio, grew to 9.6 gigawatts coming from 9.2 at the end of Q3 2024. Our home market, Germany, which accounts for 33% of our project pipeline increased by a strong 20% to 3.1 gigawatts. The wind farms, Stuvenborn, 6 megawatts; Herbsleben, 11 megawatt; Bokel 25 megawatt; and Gnutz West 22 megawatts were completed and put into operation for our own IPP portfolio plus 2 wind farms for third parties with 88 megawatts. In addition, 10 wind farms with 169 megawatts were under construction in Germany, plus 2 wind farms with 43 megawatts for third parties. And we received permits here for another 167 megawatts in the first 9 months of 2025. With respect to France, we sold the wind farm Clermont with 14 megawatts to JPEE and have completed the wind onshore project Genouillé with 11 megawatts. As mentioned before, the latter was temporarily put into operation for our own IPP portfolio, but has meanwhile been sold to Soregies in October 2025. In Panama, we have made good progress with the planned market exit by successfully selling 2 wind farms with 103 megawatts and 1 PV project with 140-megawatt peak, where respective milestone payments are possible. Further companies are to be sold in the fourth quarter so that the exit from Panama can be completed as planned in 2025. Moving on to Slide 9. We see that the PV pipeline grew nicely to 6.5 gigawatt peak compared to 6.1 in the previous year, and development activity is picking up. This results in good progress from projects to the later project phases, resulting in a 100% growth of Phase III projects to 777 megawatt peak coming from 389 megawatts peak in the first 9 months of 2024. Especially in our core markets, Germany and Italy, we see a favorable increase of our PV project pipeline with 30% to 946 megawatt peak and 83% to 834 megawatt peak. We are also happy that we received new permits in our core markets, Germany and Poland, with 124 megawatt peak and 112-megawatt peak in the first 9 months of 2025. And finally, already -- as already mentioned above, we sold 1 PV project with 140-megawatt peak in Panama. If you look at the expansion of our own generation portfolio in the first 9 months of 2025 on Slide 10, you see that we made good progress here as well. We added 76 megawatts to the IPP portfolio in the first 9 months. And with that, temporarily increased the total megawatt in operation to 502 megawatts at the end of the first 9 months of 2025. 475 megawatts are coming from wind onshore Germany, 22 megawatts coming from wind onshore France and 6 megawatts coming from the wood-fired combined heat and power plant Silbitz. But as already mentioned, one project with 11.3 megawatts has meanwhile been sold in October and another project with around 25 megawatts could also be sold in the remainder of the year, so that the total IPP figure might still change somewhat. Further 169 megawatts in Germany were under construction at the end of the first 9 months 2025, partially intended for the IPP portfolio. Despite the low wind yields, we produced 527 gigawatt hours of green energy in the first 9 months of 2025 and saved 400 kilotons CO2 equivalents. The hidden reserves accumulated in our portfolio increased to EUR 199.6 million compared to EUR 195.3 million by the end of '24. As mentioned earlier, our services agreement is developing very well. I would therefore like to take this opportunity to give you an overview of our services portfolio and some highlights on Slide 11. As illustrated in the diagram on the left, the portfolio extends across the full life cycle of wind and PV projects from planning to financing, construction and commissioning, operation, dismantling, continued operation and repowering. In addition to the PNE brand, we offer our services under our other service brands. Energy Consult is a provider of O&M management and technical services and inspections. It also supports with repowering, grid connection, on-demand nighttime market and construction management and financing. Bitbloom covers the operational data analysis, meaning performance monitoring, condition monitoring and regulatory compliance. Pavana is responsible for planning and execution of wind measurements, including the evaluation of recorded data, wind assessments and expert opinions as well as LiDAR verification. And last but not least, Wattmate offers intermediary services for power marketing and sales as well as different marketing concepts with optional access to EEG subsidy support. As you can see in the services segment, we offer not only state-of-the-art, but also innovative services, an area where demand is continuously growing. In addition, to the services segment, we benefit from cross-selling effects in project development, such as repowering. And with this, I would now like to hand over to Harald for the financials.

Yes. Thank you, Heiko. First of all, I also would like to welcome everyone here in this call. Looking at Slide 13, the financials in the first 9 months 2025 reflect the first project sales in the third quarter, our high development and construction activities, the addition of further projects to our IPP as well as the impact from the weak wind yields in Q1. Overall, total output significantly increased by 25% to EUR 263.7 million compared to EUR 210.9 million in the previous year. Cost of materials increased while the cost of materials ratio improved. Personnel expenses rose due to an increase in the average number of employees of 47. We saw now for many years an increase of the number of employees, which peaked in Q2 this year. For the near future, we do not see any further growth of our headcount. In the context of our transformation program, we want, among other aspects, optimize cost, inclusive personnel costs through many measures. The increase of other operating expenses can be explained by the higher business volume, expenses from exchange rate differences and consulting costs from the transformation program. Our EBITDA strongly increased to EUR 26.6 million compared to EUR 6.2 million in the previous year despite the lower wind yields due to the project sales and proceeds from the third-party projects. Depreciation increased due to the continued IPP buildup. Financial result improved due to valuation effects caused by subsequent measurements of the interest rate swaps and KFW loan liabilities. The increase of expenses for taxes in 2025 compared to 2024 is based approximately by 50% in deferred taxes. The remaining 50% derives from corporate and trade tax expenses. Looking at the segments on Slide 14. We see growth in project development and services after the first 9 months 2025. Total output of the segment project development increased to EUR 215.1 million compared to EUR 170.8 million in the previous year due to project sales and high construction and development activities. Total output of the segment power generation slightly decreased to EUR 54.4 million compared to EUR 55.3 million in the previous year due to the lower wind yields mentioned before. Total output of the segment Services increased to EUR 28.0 million compared to EUR 26.5 million in the previous year, driven by a strong order book. EBITDA-wise, the segment Power generation has the highest contribution in the first 9 months of 2025 with EUR 33.8 million, even if it decreased due to the weaker wind yields. EBITDA from the segment project development increased to EUR 1.9 million and the Services segment contributed EUR 1.5 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. And as always, consolidation was driven by the elimination of project development for our IPP portfolio. Balance sheet. On the asset side, we see on Slide 15 that most is allocated to property, plant and equipment as well as inventories, what we see as investment in stable values and recurring cash flow. Our cash position fell to EUR 62.1 million as did our equity, which amounted to EUR 160.2 million. The equity ratio was 12.4%. 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 will recover at the end of the year. However, we continue to aim for a target equity ratio of 20% or more. Adjusted for hidden reserves, the equity ratio was at comfortable 24.1%. In the second quarter 2025, we increased our existing bond tap 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 nonrecourse 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 17. First of all, let me assure you that we confirm our guidance for the full year 2025 with the group EBITDA in the range of EUR 70 million to EUR 110 million. Our high development activity in the first 9 months of 2025 is a prerequisite for the additional project sales in the remainder of the year and the years to come. We are currently working on several other sales processes, for example, in Germany and Poland, which we expect to close in the near future. According to our stronger focus on selected core markets, we expect the finalization of the targeted market exit for Panama before the end of this year. In expectation of a changing and increasingly challenging market environment, we have introduced a comprehensive efficiency transformation program already in the beginning of the year as a key tool to support and improve profitability. We have identified and defined more than 100 measures, which are to be finalized by the end of 2027. So far, the implementation is progressing according to plan. Be assured that we take this program very seriously because in a dynamic market and competitive environment, we want to and must be well prepared. Therefore, let me emphasize once again, we are committed to sustainable growth and value creation. With this, I would like to conclude our presentation and open the call for questions.

[Operator Instructions] The first question comes from the line of Guido Hoymann from Metzler.

Two questions, please. First one is one of your competitors has reported recently margin pressure on ready-to-build projects in Germany. And they also mentioned higher equity requirements from banks for project financing. Have you noticed this too would be one question. And is that a problem for you, i.e., more rigid investment or financing requirements from banks? The second one, again, on your cost cutting or cost reduction plans, can you provide maybe a little more details on that? For example, the targeted cost savings or any other details, if possible.

Thank you very much for your question. Coming to the first one, the competitiveness in the market and effects on margin or equity requirement. Actually, currently, we don't see that so far. I think this is always in conjunction with how I would call it the quality of projects. And I think we have been able to provide to the banks and especially then to the market, very competitive projects. So up to now, we don't see that. But of course, we are monitoring this very closely. Coming to your second question, I would like to emphasize it's a transformation program. It's not just a cost-cutting program. So it refers to efficiencies and many more things to be organized much more efficiently. At this moment, we are not disclosing any figures of the outcome. But I can assure you we will follow this very thoroughly and expect, of course, quite some benefits of that.

The next question comes from the line of Holger Steffen from SMC Research.

I have some additional questions. First of all, about Panama. The company sold the rights of 2 wind farm projects and 1 PV project. That was more than we previously saw in the pipeline. How did that happen?

Thanks for your question. Actually, the Panamanian sale, we -- when we decided to exit the market, we looked into, let's say, everything on projects available that might be of interest for the market. And since we don't report, let's say, very early stage projects always, we have included all those projects. So there, the difference might come from. At the end of the day, we are happy that we found a buyer who thinks who can develop those projects further.

Okay. Fine. One follow-up about this. Can you tell us anything about the terms and conditions, including for the planned further sale in Q4? Are there any write-downs?

Actually. So this is not referring to Panama now, but in general, is that the question?

No, only Panama. If you have any write-downs in connection with the sold projects or with the coming projects, which you will sell in Q4?

Yes. Well, I can, first of all, say, okay, we are finalizing not just only on the projects, but of course, the company levels that are to be exited and then sold. But for the, let's say, financial impact on that, I hand over to Harald in this case.

Yes, we have to liquidate some legal entities there, and then we will deconsolidate Panama and will have a smaller impact, maybe EUR 2 million, EUR 3 million -- minus EUR 2 million, EUR 3 million. We do not have the exact numbers now, but it's not a big impact what we see now.

Okay. That's perfect. Okay. One question about your PV pipeline. You revised your pipeline for Spain and South Africa downwards slightly in the third quarter. Can you tell us a few words about the background to this?