Research: Industrials
Orrön Energy’s capital markets day reinforced its operational achievements and its strong growth pipeline. Since July 2022 Orrön has continued to deliver on its growth ambitions, by increasing its production capacity fourfold to 400MW. It also has a 40GW pipeline of organic greenfield development projects across five countries, positioning Orrön to capitalise from growing renewable targets and regulatory support. It has a strong balance sheet with €92m net debt at year-end 2023 and a revolving credit facility of €190m (€78m undrawn Q423). This is supported by forecasted long-term cash flows, with management guiding annual revenues of €35–75m and EBITDA of €10–50m at an achieved price of €30–70/MWh, having achieved an average price of €47/MWh in FY23.
Orrön Energy |
Capitalising on renewable ambitions
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Renewable energy |
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22 March 2024 |
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Orrön Energy’s capital markets day reinforced its operational achievements and its strong growth pipeline. Since July 2022 Orrön has continued to deliver on its growth ambitions, by increasing its production capacity fourfold to 400MW. It also has a 40GW pipeline of organic greenfield development projects across five countries, positioning Orrön to capitalise from growing renewable targets and regulatory support. It has a strong balance sheet with €92m net debt at year-end 2023 and a revolving credit facility of €190m (€78m undrawn Q423). This is supported by forecasted long-term cash flows, with management guiding annual revenues of €35–75m and EBITDA of €10–50m at an achieved price of €30–70/MWh, having achieved an average price of €47/MWh in FY23.
2024 outlook: 40% growth in energy production
Management expects annual energy production for 2024 to increase by 40% y-o-y to 1,100GWh. Unit operating costs are forecast to fall by 20% to €15/MWh and capex is forecast to decrease by 80% to €14m, with this fully funded by cash flow (decrease due to completion of the Karskruv development project). EBITDA is forecast at €22m (at an achieved price of €50/MWh), up 175% from FY23. Key steps for growth throughout 2024 include securing additional land, maturing first projects to ready to permit stages and exploring monetisation of large-scale projects to recycle capital.
Strategically positioned pipeline for long-term growth
Orrön’s total combined installed solar capacity across the UK, Germany and France in 2023 was 119GW and the aim is to increase this fourfold by 2035 to 479GW. The company has strategically positioned its 40GW development pipeline, primarily consisting of large-scale solar and battery projects (36GW UK, 3.9GW Germany) to best capture this upside in stable jurisdictions with high renewable energy ambitions, ensuring it will receive strong regulatory support. As Orrön brings its pipeline online, it aims to add additional value to shareholders through the optimisation of its existing operational asset base via life extensions and technical upgrades to improve efficiency, and to increase production with reduced capex.
Valuation: High discount to NAV
According to management, at 9 February 2023, Orrön was trading at a 60% discount to NAV. This discount may not fully reflect its current operating portfolio, which has strong cash generation ability, long asset life durations (the Nordic wind portfolio has an estimated operational life of 30 years prior to extensions), the 40GW growth pipeline, organic growth and potential value accretion via acquisitions.
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Consensus estimates
Source: LSEG. |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Industrials
ACWA Power achieved record results for FY23 (year end 31 December 2023). Net profit attributed to equity shareholders stood at SAR1,662m, up 8% y-o-y, while operating income of SAR2,984m grew 14% y-o-y. ACWA added 10.7GW of power generation capacity to its portfolio throughout 2023, with 66% exclusively renewable energy. The company achieved a record 12 financial closes in FY23, with a total funding raise of approximately SAR60bn. It continues to progress its growth ambition of tripling its assets under management by 2030, sufficiently supported by long-term financing and funding facilities.