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Investor presentationJuly 2017
Our values
• Predictable
• Driving results
• Changemakers
• Working together
Disclaimer
The following presentation is being made only to, and is only directed at, persons to whom such presentation maylawfully be communicated (’relevant persons’). Any person who is not a relevant person should not rely, act or makeassessment on the basis of this presentation or anything included therein.
The following presentation may include information related to investments made and key commercial terms thereof,including future returns. Such information cannot be relied upon as a guide to the future performance of suchinvestments. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law,and therefore persons in such jurisdictions into which this presentation is released, published or distributed shouldinform themselves about, and observe, such restrictions.
This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to anyperson to underwrite, subscribe for or otherwise acquire securities in Scatec Solar ASA or any company within theScatec Solar Group. This presentation contains statements regarding the future in connection with the Scatec SolarGroup’s growth initiatives, profit figures, outlook, strategies and objectives as well as forward looking statements andany such information or forward-looking statements regarding the future and/or the Scatec Solar Group’s expectationsare subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviatingsubstantially from what has been expressed or implied in such statements.
2
Introduction
Fully integrated business model
tailored for emerging markets1
Strong project pipeline supporting
further growth in attractive markets5
Strong global demand for PV
accelerates growth in opportunities 2
Solid asset base and a significant
self funding capacity4
Excellent track record in capturing
value from complex PV projects3
Generating and capturing PV value in emerging markets
NYTT BILDE
4
Our focus: Large scale PV and 20+ year cash flows
5
IN OPERATION
322 MW
FY 2016
PRODUCTION
791 GWh
BACKLOG
1,143 MW
# POWER
PLANTS
12
A solid track record of developing and building PV
Czech Kalkbult LindeDreunberg ASYV Agua Fria
20 MW 75 MW 75 MW 40 MW 9 MW 60 MW 43 MW
Czech Republic South Africa South Africa South Africa Rwanda Honduras Jordan
602559
386
268
182
10558494128
20122011201020082007 201320092001-2006 20152014
322 MW in operation:
Installation track record (MW):
• 15 years of experience
• 60+ projects in 10 countries
6
Jordan
A growing and diversified asset portfolio
7(*) Projects with secured tariff and/or off take agreements
1
2
5
3 4
6 108
9
12
In operation
Czech Republic 20 MW
Kalkbult, RSA 75 MW
Linde, RSA 40 MW
Dreunberg, RSA 75 MW
ASYV, Rwanda 9 MW
Agua Fria, Honduras 60 MW
Jordan 43 MW
Total 322 MW
Projects in backlog*
Honduras 53 MW
South Africa 258 MW
Mali 33 MW
Mozambique 40 MW
Brazil 162 MW
Malaysia 197 MW
Egypt 400 MW
Pipeline &
opportunities 3.0 GW
1
2
3
4
5
6
8
9
12
10
77
13
11
11
13
14
14
Total 1,143 MW
The integrated business model
Origination Development Structuring DeliveryPower Production
O&M
• Operation• Construction• Backlog• Pipeline• Opportunity
• Operation &
Maintenance
• Asset
management
• Procurement
• Construction
Management
• Equity, debt
structuring
• Engineering
• Site control
• PPA and support
agreements
• Business case
• Regulatory
approvals/permits
• Analysis &
Intelligence
• Business
opportunity
• Partnerships
• Commercial
viability
Phases
Key activities
Scatec Solar develops, builds, owns & operates solar plants for 20 years
Integrated Independent Power Producer
9
10
Developmentmargin
Constructionmargin
O&M margin NPV powerproduction
Optimizeperformance
Cost of capital Residual value Total value
Long term asset ownership:• Generates steady long term cash flows
• Eliminates ‘friction losses’
• Active asset management to enhance
value of portfolio
Project development & construction:
• Provides access to attractive project pipeline
• Generates D&C margins that can be
reinvested as equity in projects
The integrated model captures the full project value
Norwegian and international partners key for our success
Norfund partnership:
• Project development and investment partnership
• Norfund (with KLP) are equity co-investors in South Africa, Rwanda and Honduras
IFC partnership:
• Project development and investment partner in West Africa, South Asia
GIEK partnership
• Project finance
• Guarantees and bonds
Project finance partners
• Multilateral development banks and commercial institutions
Climate finance partners
Key benefits:
• Access to lower cost of capital
• Expanded network for project origination
• Risk mitigation
11
Scatec Solar
O&M / EPC
Single Purpose
Vehicle
State owned
utility
Our business model and typical project structure
Project financing
Scatec SolarEquity co-
investors
State government
• EPC contract
• O&M contract
• Asset Management
contract
Loan agreements
• Sovereign guarantee
• Concession agreement
PPA
agreement
Land lease
agreements
Land ownersShareholders agreement
Simplified illustration of company structure and main contracts in place
World Bank/others
• Political risk insurance
(when relevant)
100% 39%-100%
12
Copyright: Scatec Solar ASA
www.scatecsolar.com • [email protected]
A business model enabling “self funded” growth
• The D&C gross margin provides a large part of the
Scatec Solar’s equity contribution in the project
• Projects are financed by non-recourse debt, allowing
Scatec Solar to operate with high financial leverage at the
project level while maintaining limited risk exposure at the
parent level
• Annual self funded growth capacity of adding 300-400
MW based on average ownership of 50-60%
15
(12.5%)
15
(12.5%)
Total capex
120
(100%)
Debt Financing D&C margin
15
(12.5%)
90
(75%)
USDm
Partner’s
equity share
SSO equity
Example based on a 75 MW project
13
A truly sustainable business model
• Solar plants embedded in local communities in emerging economies for 20-25 years
• Economic activity is of vital importance to both countries and communities
• Local suppliers, local employees and good relations with local communities impact performance, cost and risks
• Environmental and Social Impact Assessments are undertaken at the start of the project phase
• Community relations, social and environmental impacts are managed as an integrated part of the business
• Specialist advisors engaged to manage CSR and Economic Development programs
14
Markets and project backlog & pipeline
Copyright: Scatec Solar ASA
www.scatecsolar.com • [email protected]
Impressive cost reductions and growth in demand
Source: Bloomberg New Energy Finance, Q4 2016 PV Market Outlook
201820122010 2016
68.6
2014
45.0
83.5
30.7
18.3
EuropeUSA
China Japan
India
Rest of world
Annual installed volume - GW
20122010 2014
1.80
1.13
1.49
3.24
2016
-70%
0.98
2018
Installation
Balance of plantOther Module
Inverter
* Utility Scale. System cost will vary from market to market depending on system size, market maturity, bankability etc.
Total system cost (USD / Watt) *
16
Copyright: Scatec Solar ASA
www.scatecsolar.com • [email protected]
400 MW added to the project backlog
Pipeline
Assessed as
having more
than 50%
likelihood of
being realized
Backlog
Assessed as having
more than 90%
likelihood of being
realized
Financial close/
Construction start
2,008MW
745MW
1,143MW
Regions
Regions
Regions
>50%
>90%
322 MW
IN OPERATION*
Project development
South Africa, Mali,
Mozambique, Honduras,
Brazil, Malaysia
South Africa, Egypt,
Pakistan, Nigeria, Kenya
and Burkina Faso
Americas, Africa, MENA
(*) Scatec Solar has entered into an agreement for sale of 100% of the sponsor equity in the 104 MW Utah Red Hills project 17
Copyright: Scatec Solar ASA
www.scatecsolar.com • [email protected]
Solid progress on projects across backlog (i)
Status
• Project finance – MYR 1000 million green Islamic
Bond – well received in the Malaysian debt market
• Certain construction activities initiated
Malaysia, 197 MW
• 21 year PPA with TNB
• Capex: MYR 1,240 million
Project backlog
Status
• Finalising remaining conditions to close financing for
first phase (35 MW)
• Certain construction activities initiated
Honduras, 53 MW
• 20 year PPA with ENEE
• Capex: USD 100 million
Mozambique, 40 MW
• 25 year PPA with EDM
• Capex: USD 80 million
Status
• Finalising remaining conditions to close financing
• Construction preparations ongoing
18
Copyright: Scatec Solar ASA
www.scatecsolar.com • [email protected]
Solid progress on projects across backlog (ii)Project backlog
Egypt, 400 MW
• 25 year PPAs with Gov of Egypt
• Capex: USD 450 million
South Africa, 258 MW
• 20 year PPA with Eskom
• Capex: ZAR 4,600 million
Brazil, 162 MW
• 20 year PPA with ANEEL
• Capex: BRL 680 million
Mali, 33 MW
• 25 year PPA with Energie du Mali
• Capex: EUR 52 million
Status
• Credit committee and board approval obtained for
project finance by bank consortium
• Financial close by end of October
Status
• Timing of financial close relies on alignment between
Eskom and the various government bodies
Status
• All permits secured for the project
• Good progress on debt and equity structuring
Status
• Board approval obtained for IFC project finance and
for Partial Risk Guarantee from the World Bank
• Awaiting final board approval by AfDB
19
Copyright: Scatec Solar ASA
www.scatecsolar.com • [email protected]
Capacity Status
SSO bid the projects in November 2015. Award of preferred bidder status
expected after closing of the round 4 Upington projects
Project
430 MW
Project pipeline
South Africa
All required development steps completed. Received grid study approval
and is applying for a “costs plus tariff” 150 MWPakistan
Signed Joint Development Agreement with Norfund and Africa50 in
November 2016.
745 MWTotal
Project pipeline status
100 MWNigeria
48 MWKenya
17 MWBurkina Faso
Re-initialed PPA with local utility Kenya Power and Lighting Company
(KPLC) in June 2017.
Concession agreement to be signed with Ministry of Energy. Awaiting
final sign-off from Ministry of Finance before PPA can be signed.
Financials
22
Consolidated & proportionate financials
Consolidated financials (NOK million) SSO proportionate financials (NOK million)
279276
363
281
213 217222
294
222
153 151160
210
154
93
Q4 16 Q1 17Q3 16Q2 16 Q2 17
Revenues EBITEBITDA
165143153
209
437
1008783
111100
5847
-11
6356
Q2 17Q316 Q1 17Q4 16Q2 16
EBITDARevenues EBIT
Proportionate financials improve earnings visibility
Second quarter 2017
(NOK million)
Power
Production100% basis
Power
ProductionSSO share*
Operation &
MaintenanceSSO share*
Development &
ConstructionSSO share*
CorporateSSO share*
Total
Revenues and other income 279.0 142.8 19.7 -0.1 2.7 165.1
EBITDA 238.1 120.7 10.2 -17.5 -13.8 99.7
Operating profit (EBIT) 155.4 79.8 9.9 -18.1 -14.1 57.5
23
• Financial results presented based on proportionate method without eliminations
• In line with segment reporting while adjusting for Scatec Solar’s ownership in Power Production
Second quarter 2016
(NOK million)
Power
Production100% basis
Power
ProductionSSO share*
Operation &
MaintenanceSSO share*
Development &
ConstructionSSO share*
CorporateSSO share*
Total
Revenues and other income 213.9 115.9 15.8 303.5 2.0 437.3
EBITDA 176.3 94.2 8.8 11.8 -14.9 99.9
Operating profit (EBIT) 106.6 55.1 8.2 7.3 -15.0 55.5
(*) SSO share adjusted based on Scatec Solar’s ownership in the subsidiaries
24
SSO’s share of cash flow to equity
Last twelve months (NOKm)SSO proportionate share of cash flow to equity*
(*) Cash flow to equity is defined as EBITDA less normalised (i.e. average over each calendar year) loan and net interest repayments, less
normalised income tax payments. The definition implies changes in net working capital and investing activities are excluded from the figure.
-37 -46
109
160
40 25
129
23
96
Q2 17Q2 15 Q2 16
19
-62
Interest paid on corporate bond
46 4429
4132
810
7
Q2 16
4
4
Q3 16 Q2 17Q4 16 Q1 17
Corporate
Development & Construction
Power production
Operation & Maintenance
Total 31 29 23 7 20 186 148 78
-43
25
Solid financial position – NOK 427 million free cash
Financial position
*) Total interest bearing liabilities does not include shareholder loans to project companies
(**) As per definitions of “Recourse Group” in senior unsecured bond agreement
NOKm
Consolidated SSO prop.
share
Group
level**
Cash 1,309 910 427
Interest bearing
liabilities*-5,022 -2,691 -497
Net debt -3,713 -1,781 -70
Financial position (NOKm)
As of 31.12.2016 As of 30.06.2017
7,075 7,075 7,246 7,246
5 253 5 226
509 473
1 313 1 548
5 591 5 671
1 484 1 575
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
Assets Equity & Liabilities Assets Equity & Liabilities
Non-current liabilities Current liabilities Equity Non-current assets Current assets
• Cash position of NOK 1,309 million of which NOK
766 million in project companies
• New guarantee facilities supporting execution of backlog with Nordea and GIEK as well as ABN Amroand Swedbank as new members in the consortium
Outlook
Fully funded for investments in project backlog
In operation
Capacity MW 322
Annual Production GWh ~640
Annual Revenues MNOK ~1,100
Total Capex MNOK 5,639*
Total Equity MNOK 1,382*
27(*) Based on PP&E and Project Equity in project companies as of year-end 2016
• Scatec Solar’s share of equity investments NOK 1,700 – 2,000 million in project backlog
• SSO targets average equity IRR of 15% nominal after tax on these investments
• Free cash position of NOK 427 million
• Project backlog’s D&C contract value representing NOK ~11,000 million
• Scatec Solar targets 15% gross margin from Development & Construction
1,131
~2,352
~1,750
~13,000
~2,800
Backlog Total
1,453
~2,992
~2,850
~18,639
~4,182
Summary
• Technology innovation and cost reductions make solar the lowest cost source of electricity
• Emerging economies are taking advantage of renewables – low cost, clean and rapidly deployed
• Scatec Solar is set to grow and strengthen its position as an emerging market focused IPP
• Partnerships and new business models are being explored for additional growth opportunities
28
Growth target (MWs)
322
In operation
and under
construction
by end 2018
In operation
745
Backlog Pipeline
1,300 – 1,500
1,143
Our values
• Predictable
• Driving results
• Changemakers
• Working together
Thank you