investor presentation - scatec · pdf filedisclaimer the following presentation is being made...

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



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



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



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


Status

• Finalising remaining conditions to close financing

• Construction preparations ongoing

18



Solid progress on projects across backlog (ii)Project backlog

Egypt, 400 MW

• 25 year PPAs with Gov of Egypt


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



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

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