Scatec Asa · OSL:SCATC
Scatec Asa — Scatec Solar — Investor Day (May 2018)
69 slides from Scatec Asa's investor day presentation, May 30, 2018
Slide 1: Accelerating growth
Accelerating growth Capital Markets Update, 30 May 2018
Slide 2: Disclaimer
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (’relevant persons’). Any person who is not a relevant person should not rely, act or make assessment on the basis of this presentation or anything inc
Slide 3: Agenda Scatec Solar's Capital Markets Update 2018
Agenda Scatec Solar’s Capital Markets Update 2018 Accelerating growth Raymond Carlsen, CEO 09:30 - 09:50 Execution of current project portfolio Pål Helsing, EVP 09:50 - 10:10 Market perspectives and our approach Terje Pilskog, EVP 10:10 - 10:40 Break Our project pipeline Terje Pilskog, EVP 11:00 - 1
Slide 4: Speakers
Speakers Mr. Carlsen joined Scatec Solar in 2009 from Aker ASA, where he was responsible for the Raymond Carlsen, CEO development of the company’s portfolio of energy related businesses. He has more than 30 years of industrial experience from management positions. Mr. Helsing joined the Company in 2
Slide 5: Accelerating growth
Accelerating growth Raymond Carlsen, CEO 5
Slide 6: Scatec Solar – a leading emerging market player
Scatec Solar – a leading emerging market player Develops, builds, owns and operates utility-scale solar power plants UNDER PROJECT BACKLOG CAPACITY BY IN OPERATION CONSTRUCTION & PIPELINE END 2021 322 MW 1.1 GW 4.0 GW 3.5 GW 6
Slide 7: We deliver on our strategy and targets
We deliver on our strategy and targets Delivering on our promises Reaching 1.5 GW capacity by end 2018 Annual shareholder return +35% since listing 350 In operation In operation or under construction • 1.5 GW by end 2018 Target 300 1.5 GW 250 • Average 15 % gross D&C margin 200 Index • Average equit
Slide 8: Strong market growth
Strong market growth Annual global solar PV demand forecast - GW Rest of Asia Sub-Saharan Africa USA India • 2018 global demand of 107 GW and China MENA Latin America China Europe accounts for 50% 121 • Emerging markets representing a growing share 107 116 of the total market • Scatec Solar is activ
Slide 9: Solar is one of the most competitive sources of energy
Solar is one of the most competitive sources of energy Cost of alternative energy sources (LCOE, USD/MWh) • The levelized cost of solar has come down 75% since 2010 – industry scale and technology 250 • Solar is now the lowest cost source of energy 200 across the sun-rich regions globally • Storage
Slide 10: We have advanced into a top 10 global independent solar PV developer
We have advanced into a top 10 global independent solar PV developer MW, operational and under development 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Asia Pacific GCL New Energy Europe First Solar Latin America Canadian Solar Upstream Middle East and North Africa North America Total (SunPower an
Slide 11: Our success is based on our integrated business model
Our success is based on our integrated business model combined with a strong entrepreneurial culture Business model People • Fully integrated • Agile and lean • Structuring and financing • Entrepreneurial culture • Financial discipline • Passionate and empowered people • Partnerships • Strong talent
Slide 12: The integrated business model captures the full project value
The integrated business model captures the full project value Residual Total Project development & construction: value value • Provides access to attractive project pipeline Cost of • Generates D&C margins that can be capital reinvested as equity in projects Optimize performance NPV power production
Slide 13: The integrated business model is supported by our operating system
The integrated business model is supported by our operating system • Ensures consistency in way of working and scalability through all phases • Secures learning and feedback to improve quality of decision making Our project phases and decision gates Decision Decision Decision Decision Gate Gate Gate
Slide 14: Sustainability to mitigate risk and create stakeholder value
Sustainability to mitigate risk and create stakeholder value Sustainability is an integrated part of our business • Manage and mitigate risk • Identify and manage the impact of our operations • IFC Performance Standards and the Equator Principles Further professionalizing our sustainability work • I
Slide 15: Accelerating growth: capacity above 3.5 GW by end 2021
Accelerating growth Increase installed capacity to above 3.5 GW by end 2021 Effective execution of Secure growth in Broaden commercial Optimise financing and asset current project portfolio priority regions and technology scope portfolio to enhance value • Complete 1.1 GW under • Maintain a large pr
Slide 16: Developing 4.0 GW of project pipeline across emerging markets
Developing 4.0 GW of project pipeline across emerging markets Europe and Central Asia 1,130 MW Southeast Asia Africa 760 MW 1,605 MW Latin America 469 MW 16
Slide 17: Installed capacity above 3.5 GW by end of 2021
Installed capacity above 3.5 GW by end of 2021 We will more than double installed capacity Targets and guidance Realizing D&C contribution of NOK 2.0 – 2.5 billion 3.5 GW Annual cash flow from operating solar plants capacity 2.0 GW 3.5 GW of NOK 750 – 850 million Value of NOK D&C gross margin; 12-15
Slide 18: Execution of current project portfolio
Execution of current project portfolio Pål Helsing, EVP 18
Slide 19: Our project execution model is scalable and flexible
Our project execution model is scalable and flexible … In-house core competence and local in-sourced capabilities One operating system for all projects Central organizations in Local organization Norway and South Africa at project location • Core competence • Local language and culture • Operating s
Slide 20: We work closely with our suppliers to drive down costs
… and we work closely with our suppliers to drive down costs Long term relationships with Tier 1 suppliers Scatec Solar’s cost and technology roadmap • Enhances predictable in project planning • Continued scale and technology improvements • Collaborate to improve efficiency and cost • Supplier devel
Slide 21: A benefit of our value chain integration – agility in practice
A benefit of our value chain integration – agility in practice! Recent project example – early adaption of technology Benefits by changing from monofacial to bifacial panel technology • Increasing yield up to 15% • Lower total capex by reduced installed capacity • Increased return to project sponsor
Slide 22: 1.1 GW under construction – a NOK 8.5 billion programme
1.1 GW under construction – a NOK 8.5 billion programme Plant MW SSO % 2H’17 1H’18 2H’18 1H’19 2H’19 20+ years Malaysia 197 68% Construction Operation Brazil 162 44% Construction Operation Honduras 35 70% Construction Operation Mozambique 40 52% Construction Operation Egypt 400 51% Construction Oper
Slide 23: Construction well under way in Malaysia and Brazil
Construction well under way in Malaysia and Brazil Quantum, Malaysia – 197 MW / grid connection 2H’18 Apodi, Brazil – 162 MW / grid connection 2H’18 23
Slide 24: Construction ramping up in Honduras and Mozambique
Construction ramping up in Honduras and Mozambique Los Prados, Honduras – 35 MW / grid connection 2H’18 Mocuba, Mozambique – 40 MW / grid connection 1H’19 24
Slide 25: Construction start in Egypt this week – South Africa in 2H 2018
Construction start in Egypt this week – South Africa in 2H 2018 Aswan, Egypt – 400 MW / grid connection 2H’19 Upington, South Africa – 258 MW / grid connection 2H’19 25
Slide 26: On track to deliver the 1.1 GW under construction
On track to deliver the 1.1 GW under construction … and ready for more! 26
Slide 27: Market perspectives and our project development approach
Market perspectives and our project development approach Terje Pilskog, EVP 27
Slide 28: Utility scale solar is cost competitive with base load sources
Utility scale solar is costs competitive with traditional base load energy sources Capex for utility scale fixed-axis PV system Cost of alternative energy sources (LCOE, USD/MWh) 3,5 3,24 250 3,0 200 2,5 USD/watt (DC) 2,0 1,80 150 1,49 1,5 1,14 100 0,93 1,0 0,84 0,78 0,72 50 0,5 0,0 0 2010 2012 2014
Slide 29: Demand for solar is growing across emerging markets
Demand for solar is growing significantly across emerging markets Multiple governmental drivers for solar PV demand Annual global solar PV demand forecast - GW Rest of Asia Sub-Saharan Africa USA India MENA Latin America China Europe Time-to- market Climate 121 116 treaty Cost of 107 & national ener
Slide 30: Corporate and industrial players are sourcing solar power
Corporate and industrials players are sourcing solar power Rationale for direct sourcing of solar energy Significant growth in renewable corporate PPA’s 6 • Energy costs reduction Americas EMEA APAC • Reliable power supply and predictable cost Annual volumes, GW 4 • Corporate commitments to sustaina
Slide 31: Demand for storage will grow as battery prices fall
Demand for storage will grow significantly as battery prices continue to fall Market forecast for batteries and storage 600 140 • Cost of batteries is expected to drop at least 50% the next 4-5 120 GW storage installed (accumulated) 500 years Li Ion Battery price - USD/Mwh 100 400 • Will enable offe
Slide 32: Hybrid plants expected to become mainstream in emerging markets
Hybrid plants is expected to become a mainstream solution in emerging markets Illustrative example Hybrid plant with 65 % solarization and constant base load of 10 MW – average per day 25 MW PV Batteries Solar power 10 MW baseload* Battery Battery Diesel charging discharging generation 6am 12am 6pm
Slide 33: The energy solution offered depends on customer need
The energy solution offered depends on customer need Fuel Saving Mixed Power Generation 24/7 Solar Power PV in % of total power consumption 20-30% 40-50% 80-90% Unstable grid / power solution and Remote locations with difficult Customer need: Saving fuel costs inefficient generator utilization fuel
Slide 34: Solarization of fossil fuel generators is a large market
«Solarization» of fossil fuel generators represents a large market potential Drivers of «solarization» Market potential Fossil fuel generators represent costly power supply • 500 GW of installed diesel and heavy fuel oil power generator • Deployed in areas with poor grid and few alternative power so
Slide 35: Broader energy solutions will be in demand
As technology and markets evolve - broader energy solutions will be in demand Public PPAs Corporate PPAs Broader Energy Solutions Key market • PPAs with state owned utilities • PPAs with industrial, commercial or • Both public or corporate customers characteristics institutional customers • FiT sche
Slide 36: Our project development approach
Our project development approach Focus Broaden Organize Originate Manage growth in technology & around through development priority commercial priority partnerships risk markets scope markets • Target scalable • Target larger industrial • Locate in-house • Source projects from • Maintain discipline
Slide 37: Prioritize high-growth markets
Prioritize high-growth markets Installed and forecasted PV capacity in selected markets (MW) 0 1 000 2 000 3 000 4 000 5 000 6 000 Argentina • Select emerging markets are expected Brazil to install large volume of solar over the Iran Pakistan next years Vietnam South Africa • Focus on larger emergin
Slide 38: Offer broader energy solutions and target corporate players
Offer broader energy solutions and target corporate players Corporate • Captive, large, long-term power consumers Our approach: (investment grade) bankable PPA • Interest in securing PPAs on competitive prices • Build on current business model and geographical presence Distance from SSO core • Large
Slide 39: Regional approach to develop new opportunities
Regional approach to develop new opportunities Criteria for establishing local development teams Markets Oslo with projects in operation/ Paris Europe and construction Central Asia Relevant Opportunity Cairo size and to play potential of Southeast Asia in new Africa solar PV segments Kuala market La
Slide 40: Partnership-based project origination
Partnership-based project origination Development Partnerships Financing Partnerships Large regional partners • Access to opportunities • Size and credibility • Financing • Access to authorities Local partners • Early development • Land and permitting • Understanding local conditions 40
Slide 41: Our operating system is designed to manage development risk
Our operating system is designed to manage development risk • Broad and cross-functional evaluation of project at each decision gate • Work with development partners with experience from local business environments • Ensure close dialogue with authorities and involve development banks early for proj
Slide 42: Our project pipeline
Our project pipeline Terje Pilskog, EVP 42
Slide 43: Developing 4.0 GW of project pipeline across emerging markets
Developing 4.0 GW of project pipeline across emerging markets Europe and Central Asia 1,130 MW Southeast Asia Africa 760 MW 1,605 MW Latin America 469 MW 43
Slide 44: Pipeline by procurement type
Pipeline is developed based on different types of procurement situations Scatec Solar’s pipeline split by procurement type • Many emerging markets have either bi-lateral or Feed- in-Tariff (FiT) opportunities Price tender • Many tenders require development of own project - 12 % sites, permits and fi
Slide 45: Latin America
Latin America Regional highlights Pipeline in Latin America • Several GW markets, e.g., Mexico, Chile, Brazil and Argentina Brazil 147 • Mostly based on tenders Argentina 200 • Deregulation of energy markets Honduras* 18 • Opportunities for corporate PPAs across region Other 104 • Strong partnership
Slide 46: Brazil – 147 MW under development
Brazil – 147 MW under development Macro environment Scatec Solar projects in Brazil • Economy is recovering with economic reforms 62 MW Corporate PPA • Industrial 15-20 year PPA awarded to Scatec Solar & partners • GDP growth at 2%, improvement of fiscal balance and stabilized inflation has improved
Slide 47: Argentina – 200 MW under development
Argentina – 200 MW under development Macro environment Scatec Solar projects in Argentina • Since election of Macri in 2015, GDP growth and international 200 MW – two projects under negotiation; financial markets have returned • A project with 20 year PPA from RenovAR • Recent interventions and init
Slide 48: Europe and Central Asia
Europe and Central Asia Regional highlights Pipeline in Europe and Central Asia • Several GW markets with FiT, some moving towards tenders Ukraine 400 • Ukraine and Kazakhstan key priority while continue to build Kazakhstan 400 longer term positions Pakistan 150 • Development in Pakistan continues O
Slide 49: Ukraine – 400 MW under development
Ukraine – 400 MW under development Macro environment Scatec Solar projects in Ukraine • Economic growth turning positive after conflict with Russia • Ukraine committed to integrate with the EU energy system with ongoing electricity market reforms • Aiming to change energy mix - replace nuclear react
Slide 50: Africa
Africa Regional highlights Pipeline in Africa • Strong market fundamentals with growing populations, strong South Africa 602 insolation, energy gap and high electricity prices Egypt 200 • Electricity demand expected to outgrow rest of the world Nigeria 100 • Fragmented markets, with both large and s
Slide 51: South Africa – 600 MW under development
South Africa – 600 MW under development Macro environment Scatec Solar projects in South Africa • With the change in President earlier in 2018, economic growth • 430 MW in outlook has improved significantly pipeline bid in • Interest rates and the currency has stabilized and the tender Round 4c comm
Slide 52: Malakal – Our first hybrid contract
Malakal – Our first hybrid contract Customer • Humanitarian hub in South Sudan, operated by an UN entity* • Customer challenge: High energy costs based on airborne fuel • Partner with low credit risk and large energy need • Potential for additional projects with the UN Project Offering • Hybrid solu
Slide 53: South East Asia
South East Asia Regional highlights Pipeline in South East Asia • Large population and growing demand for electricity Malaysia* 170 • Market models: FiTs, bilateral PPAs and tenders Bangladesh 320 • Huge potential for solarization and hybrids based on fuel oil Vietnam 200 power generation Other 70 •
Slide 54: Bangladesh – 320 MW under development
Bangladesh – 320 MW under development Macro environment Scatec Solar pipeline projects in Bangladesh • Stable economic growth of 6-8 % during recent years • 60 MW project at final approval stage by Prime Minister • 20% of the population without access to electricity • Another 60 MW submitted for pro
Slide 55: A solid pipeline is supporting our ambition to accelerate growth
A solid pipeline is supporting our ambition to accelerate growth • Total pipeline of 4.0 GW with robust project economics • Origination continues across all regions with long term potential • New customer segments and business propositions to include hybrids, storage and other technologies 55
Slide 56: Financials and funding
Financials and funding Mikkel Tørud, CFO 56
Slide 57: Our principles for investments and financing stay firm
Our principles for investments and financing stay firm Transactional and operational control - SSO the lead developer and investor D&C margins - key contribution to equity positions Working capital - managed through project structuring Moderate debt at group level - reflecting debt capacity of long
Slide 58: Value is created across several business segments
In our business model value is created across several business segments A typical 100 MW solar power plant (USDm)* D&C margin financing parts of SSO’s project equity 20-25 years cash flows from power production and O&M Capex and funding D&C - development and construction Power Production O&M USD mil
Slide 59: Stable project cash flows based on PPAs – non-recourse debt structure
Stable project cash flows based on PPAs - allowing for a non-recourse debt structure Managing financial risk Power price & Counterparty Interest rate Currency volume • Tariffs fixed for 20-25 • PPAs with state owned • Project finance debt with • Structuring of project debt in years utilities with go
Slide 60: Value of project pipeline: NOK 1.5 million per MW
Value of project pipeline: NOK 1.5 million per MW 1.1 GW 4.0 GW under construction in backlog and pipeline Key assumptions and targets Capex (USD/Watt) 1.2 – 1.4 0.8 – 1.1 Tariff (USDcent/kWh) 6 – 12 4–8 Average equity IRR 15% 15% Development & Construction gross margin 15% 12% - 15% Equity value –
Slide 61: Solid equity value across our project portfolio
Solid equity value across our project portfolio PP & OM D&C Equity value NOKm/MW Average NOK 1.5 mill. 1.5 1.0 0.5 0 1 GW 2 GW 3 GW 4 GW 61
Slide 62: New investments generate significant value from D&C and power production
New investments generate significant value from D&C and power production In operation New capacity New capacity Total for 1.5 GW for 3.5 GW Capacity (MW), 100% 322 1,183 2,000 3,500 Capex (NOKm), 100% 5,100 12,900 14,000 – 17,000 32,000 – 35,000 Key figures - SSO proportionate: SSO’s economic intere
Slide 63: Our business plan will lift the financial results significantly
Our business plan will lift the financial results significantly Power Production (proportionate), NOKm Development & Construction (proportionate), NOKm Revenues EBITDA Revenues Gross margin 12,000 – 14,000 2,400 – 2,600 10,000 2,000 -2,200 1,400 1,150 1,054 498 544 404 454 604 1,500 1,500 - 2,000 44
Slide 64: Fully funded to reach 1.5 GW in operation by end of 2019
Fully funded to reach 1.5 GW in operation by end of 2019 Scatec Solar is funded for investments in projects to reach 1.5 GW the next 18 months Uses (NOKm) Sources (NOKm) 950-1050 Investments in 1.2 GW to reach 1.5 GW: NOKm 1,650-1,800 Capex 12,900 350-400 1,400-1,500 330-370 -700 - Project debt 9,65
Slide 65: Capturing further value through portfolio optimisation
Capturing further value through portfolio optimisation Debt refinancing Asset rotation • Debt margin declines as markets • Secondary market for renewable Drivers: mature assets are maturing • Cash reserves reduced as power • Potentially attractive pricing as long plants ‘prove’ performance term capi
Slide 66: Concluding remarks
Concluding remarks CEO Raymond Carlsen 66
Slide 67: Accelerating growth
Accelerating growth Effective execution of Secure growth in Broaden commercial Optimise financing and asset current project portfolio priority regions and technology scope portfolio to enhance value 67
Slide 68: Installed capacity above 3.5 GW by end of 2021
Installed capacity above 3.5 GW by end of 2021 We will more than double installed capacity Targets and guidance 2.0 GW 3.5 GW 1.2 GW 0.3 GW In operation Under Near-term Target end ’21: construction growth in operation / backlog and under construction 68
Slide 69: Q&A
Q&A Scatec Solar Improving our future™