Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ignitis Group AB (FRA:IGV0, Financial) increased its adjusted EBITDA by 14.3% year over year, reaching EUR289.7 million.
- The company grew its green capacities portfolio by 0.6 gigawatts to 7.7 gigawatts and increased installed capacity by 0.1 gigawatts to 1.4 gigawatts.
- S&P Global Ratings reaffirmed Ignitis Group AB (FRA:IGV0)'s BBB+ credit rating with a stable outlook.
- The company proposed a dividend of EUR0.663 per share, which is 3% higher than last year.
- Ignitis Group AB (FRA:IGV0) improved its ESG ratings, with Sustainalytics upgrading the group's ESG risk rating from medium to low.
Negative Points
- Return on capital employed decreased by 0.9-percentage-points to 10.4%, mainly due to the lag between the deployment of capital investments and subsequent realization of returns.
- The total recordable injury rate for employees increased to 1.00 as the number of safety incidents rose from three to four.
- Adjusted EBITDA in the Customers & Solutions segment was negative EUR5.6 million in Q2, primarily due to negative results on the B2C electricity side.
- Free cash flow was negative, amounting to minus EUR105 million as a result of investments exceeding adjusted EBITDA and net working capital changes.
- The company expects some deterioration in results in H2 2024 due to factors such as reserve capacities having stronger than expected results in H1 and a positive temporary volume effect in the network business reversing in H2.
Q & A Highlights
Q: Could you please elaborate on the asset rotation program and the current market environment for selling non-controlling stakes in renewables projects?
A: Jonas Rimavicius, CFO: We stick to our policy of commenting on progress only after binding agreements are signed. Generally, interest remains strong for our well-developed and contracted assets with bankable long-term PPAs.
Q: Could you elaborate on the PPA pricing trend and the average length of new PPA agreements?
A: Darius Maikstenas, CEO: We don't see any meaningful changes compared to the last quarter. Wind PPAs are being signed at similar levels, while solar PPAs show a downward trend in price levels. Overall, no significant changes for now.
Q: Could you quantify the negative effect on adjusted EBITDA in the Customers & Solutions segment from normalized costs in B2B natural gas supply in Q2 2024?
A: Darius Maikstenas, CEO: This year's result reflects a normalized view. Last year, we had a positive impact from an inventory write-down reversal, which distorted the results. This year, the natural gas result is more or less in the normal range.
Q: Why do you anticipate a deterioration in results in H2 2024 compared to H1?
A: Jonas Rimavicius, CFO: We expect some deterioration due to stronger than expected reserve capacities results in H1, which we don't expect in H2, and a positive temporary volume effect in the network business in H1 that will reverse in H2.
Q: When should we expect the first electricity production from the 105 MW Kelme WF 1 project?
A: Jonas Rimavicius, CFO: We hope to have first power this year, but the main goal is to complete the project fully next year.
Q: What is the status of the Lithuania offshore wind second tender, and will Ignitis participate?
A: Jonas Rimavicius, CFO: The tender is expected to start this year. We are currently in the analysis phase regarding our participation and partnership approach, so no decisions have been made yet.
Q: When should we expect the first commercial battery projects and any steps towards hydrogen projects?
A: Jonas Rimavicius, CFO: We expect the first commercial scale batteries by 2027. We are working on multiple projects but haven't made any final investment decisions. For hydrogen projects, we are in the analysis stage exploring various options.
Q: What are the reasons for adjusted EBITDA being negative EUR5.6 million from the Customers & Solutions segment in Q2?
A: Jonas Rimavicius, CFO: The main reason is the negative result on the B2C electricity side.
Q: How will the remaining EUR400 million in CapEx for projects under construction be financed?
A: Darius Maikstenas, CEO: Typically, projects are financed 60%-70% by debt and the remaining by equity. We are in active financing processes, and we have a sizable liquidity buffer of EUR700-800 million.
Q: Are you considering share buybacks?
A: Darius Maikstenas, CEO: Currently, we are not considering buybacks. Our method for returning cash to shareholders is through dividends, and we have a clear dividend policy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
