LNDNF - Orrön Energy AB (publ) (LNDNF) Q1 2023 Earnings Call Transcript
2023-05-16 10:50:02 ET
Orrön Energy AB (publ) (LNDNF)
Q1 2023 Earnings Conference Call
May 16, 2023, 08:00 AM ET
Company Participants
Robert Eriksson - Director Corporate Affairs and Investor Relations
Daniel Fitzgerald - Chief Executive Officer
Espen Hennie - Chief Financial Officer
Presentation
Robert Eriksson
[Starts Abruptly] First Quarter 2023 Results.
With me today, I have Daniel Fitzgerald, CEO; and Espen Hennie, CFO, who will present the company and the first quarter results, and we'll then open up for questions and answers. My name is Robert Eriksson. I'm the Director Corporate Affairs and Investor Relations for Orrön Energy.
And the way to ask questions here is to use the Q&A function at the very bottom of the screen, so not the Chat function, but the Q&A function, and we will then have a moderated Q&A session after the presentation.
So with that, I would like to hand the floor over to Daniel.
Daniel Fitzgerald
Thank you, Robert, and glad to have everyone joining us for our Q1 presentation.
It's been a fantastic start to the year in terms of the growth in the business and the foundation that we've established. And I think where we established in 2022, we established the core of the Nordic business through M&A and acquired a range of brownfield operating assets. Q1, the real focus has been establishing a pipeline and forming some ventures with individuals and competent teams to go and take the business to a new level in terms of scale, and we'll share a little bit more of that today alongside the highlights from the Q1 results.
If we spend one minute just looking at the Orrön Energy strategy, this remains largely unchanged since inception back in the summer of last year. And Orrön Energy in the summer transformed from an oil and gas player into a pure play renewables company as we completed the sale of our legacy business. And looking forwards, we will remain a pure play renewable energy company focused primarily on the onshore technologies with the lowest levelized cost of energy, and that that remains unchanged today compared to when we launched.
We'll have 1.1 terawatt hours of production from the end of this year with our final project online, and it's been a fantastic growth story over the nine months up until now from the summer of last year where we started at 300 gigawatt hours and have grown through M&A and ultimately through project execution to 1.1 terawatt hours.
We started with an acquisition-led strategy, and that continues today where M&A was a large focus for us at the end of last year. Still again this year, M&A has been a large focus, but on top of that, the organic growth has factored more and more heavily into our business where we take that platform that we've established through M&A, and going and working each of these assets to add further value and optionality is enhancing the return framework that we can get from these assets. So, we'll touch a little bit on that today in terms of the platforms we've built.
And as we sit here at the end of Q1, we're a lot more diverse in terms of technology than where we were at the end of last year, where last year we were 90% wind and 10% hydro across our entire asset base. As we ended Q1, we have a range of large scale opportunities in solar battery technologies alongside the wind and hydro. So, it gives us access to a lot more of the renewable energy platform in the onshore domain. So, it's a fantastic place to be here sitting at the end of Q1 with not only the cash generative assets that we have from the end of last year, but now a growth platform that can allow us to deliver scale looking forward into the coming years.
If we have a quick look at the Q1 results, I think a strong delivery on all fronts in Q1. And whether that's on production, financials, but also on the growth platforms, organic growth and project pipeline, I think there's many avenues where we've delivered in Q1.
If we start with production, we delivered 214 gigawatt hours of generation in Q1, ahead of our expectations and sets us up fantastically for delivering in line with our guidance on production for the full year, which is around 800 gigawatt hours on a full year basis. We saw a strong performance from MLK in our Swedish portfolio, which makes up a bulk of the power generation assets within the business.
Safe to say the power price had declined from the end of last year into the early part of this year, notwithstanding that decline, we still achieved €66 per megawatt hour across our portfolio. And that's generated EBITDA of €7 million. And Espen is going to touch a little bit more on the financials in the latest slides.
And the company ended the quarter with €20 million of net debt. And that sets us up with over €250 million of debt capacity, sets us up with all of the financing we need to grow this business significantly into the future. So it's a fantastic platform to start from.
And as I said on the delivery, we closed three transactions in the first quarter of this year; one acquisition of an existing operational asset where we already had ownership, and two joint ventures where we entered into relationships with strong development teams and strong teams with a network in Finland, Germany, U.K., and France, and that allowed us to expand into Europe beyond our Nordic footprint with greenfield development projects targeting large scale opportunities, and we'll touch on those in the coming slides.
But in my view, and the company's view, a fantastic Q1 report, and the business is performing on all fronts, and not only delivering in terms of quarterly results, but also delivering on the growth platforms that are going to serve as the foundation for the next couple of years of growth within the company.
If we spend a minute on the Nordics, we started the company in the summer of last year with only three assets. We had the Leikanger hydropower plant in Norway and the MLK Finnish wind farm. They were the only two operational assets, and we had a third asset in southern Sweden, which is a Karskruv project in the construction phase. And that gave us power generation of 300 gigawatt hours.
And we didn't have a team on the ground in Sweden or the Nordics either. And so, through the end of last year, we've not only established a local team with the network and competence to operate and build this business, we've added to that team through further acquisitions and strengthening of the team. And now we've got a full renewable platform in the Nordics. We've added 500 gigawatt hours of power generation into that platform, giving us this year's production estimation of 800 gigawatt hours.
And then with that network and competence, we have access to a whole range of greenfield opportunities. Whether it's adding complimentary technology to existing assets, whether it's adding new assets into the mix or starting from scratch with land positions where we had network, we have a diversified pipeline of growth opportunities and significant potential for further M&A.
And on top of that with the operating base, we have 175 turbines across 45 sites. And every single one of those has opportunity within it, whether it's repowering life extension, utilizing existing grid connections where we can add battery and solar. We're looking at all opportunities within this business to continue that growth framework.
During the quarter, we've commenced work on a range of projects. So, in the southern end of Näsudden on Gotland, we have a pilot scale solar park that we're looking to install against one of our existing wind farms. We've identified a range of battery opportunities against existing sites. And then through the network, we have a range of larger scale greenfield opportunities.
And so what that gives us is an entire platform from late life repowering, life extension opportunities, which are very near term, very low cost and very easy, through to large scale greenfield opportunities, which will take a little bit longer time but have material upsides in them, and we can execute across that whole platform with the team that we have on the ground. So, it's been a fantastic start to the business in the Nordics, but I see so much potential for growth here. And I think over the coming quarters, we'll be able to share more and more about that pipeline of opportunities that we have in the Nordics.
Looking at the Karskruv project, Karskruv is one of the original assets we brought into Orrön Energy from our historical investments. And safe to say, the Karskruv project is delivering ahead of schedule at this stage. Today, all main components are delivered into Sweden and are making their way to site as we speak. We've installed six out of our 20 turbines already in terms of the first tower section. So on six pads, we've started commencing the construction of the towers, and we expect to be complete on this project by the end of this year.
And as we get closer to the end of the year, we'll be able to share more details about exactly when that is. But as of today, none of the upside of an early delivery lives in our estimations for this year on either the financials or on the power generation side. And so, if we're able to deliver Karskruv ahead of schedule, there'll be some more upside in terms of power generation this year. This year's guidance is 800 gigawatt hours, and Karskruv adds just shy of 300 gigawatt hours at year-end, taking out 2024 power generation to 1,100 gigawatt hours.
Looking then across our European platform, I think the European platform is a really exciting addition to the business. We entered into an agreement in February and March of this year with a very competent and experienced development team who are leading the business in these three countries, and safe to say we're off to a flying start in Q1 already. We're targeting large-scale early-stage battery and solar projects, and we're looking at in the order of hundreds of megawatts on each project. And so, it's a material size and scale. And you see on the bottom of this screen, we need to work through some of the key development steps to get ourselves to a place where we're either ready to permit or ready to build status.
Today, in the U.K., we've secured grid connections for our first projects. And so they are secured grid connections where national grid have a binding requirement to deliver us a grid connection on those projects for a certain date and time. And we've commenced more applications to expand that grid connection network, and that gives us access to the one of the first three things we need to have already to build project.
We have land teams in place at the moment looking at acquisition of land. And as part of our initial screening, we've identified opportunities where we need only a fraction of the available land to meet our ambition in terms of these large scale projects. And so that work is ongoing with a view to hopefully by the end of the year, securing the required land that we need for some of these large projects. And that allows us to move into the permit application and pre permitting stage.
And so, you'll see a constant evolution I think of this business where in the U.K., we'll focus land -- focus on grid first, into land, and then we have the ability to move these projects forwards. In Germany, we're going to focus on land first, given that's constraint, a bigger constraint than grid, and we'll move into the grid side of things next. And so that work will set us up for an exciting platform that over the next number of years, we'll be able to mature projects through into ready-to-permit where they're monetizable, ready-to-build where they're monetizable, or we carry those through into the construction phase and development phase.
So really exciting addition to the company in Q1. I think there's fantastic upsides in this business and definitely room for value creation as we've seen in a lot of development platforms over the years. But I think we'll have to wait until subsequent quarters to see that coming through into fruition, and we'll give more details on how this pipeline develops over the coming quarters.
And so, if we roll all of that together in terms of the company growth, we started, as I said earlier, with 300 gigawatt hours of production through M&A alone in the second half of last year, and primarily in Sweden, we've increased that to 800 gigawatt hours this year. And with Karskruv online at the end of the year, we'll move to 1,100 gigawatt hours for 2024 onwards. And that's what we know today.
We're in a number of exclusivity or exclusive negotiations with players for large scale greenfield projects through to late life acquisitions of assets through to corporate transactions. So, we're always active in the M&A front. And today, all that you see here is the known opportunities that we have either acquired or are building out.
And so, when you look at the platforms that we've built in the Nordics and in Europe, those platforms for growth will yield results over the coming quarters and years. And that's going to allow us to continue to grow this business into something of large scale or a much larger scale with opportunities from very early stage greenfield projects all the way through to late life repowering and operating assets. And so, our view is to continue that growth mode. We're fully financed to do it, and we'll be able to share in the coming quarters what that looks like.
I'm going to pass over to Espen now. He's going to touch on the financial results for Q1.
Espen Hennie
Okay. Thank you, Daniel, and good afternoon, everyone.
We are starting with some financial highlights for the first quarter this year. Our power generation was 214 gigawatt hours for the quarter, as mentioned by Daniel already. So indeed, a solid operational performance across our portfolio. We had a realized price of €66 per megawatt hour, and we will touch upon some further details regarding that in a later slide.
The quarter saw strong cash generation. We have CFFO of €17 million and EBITDA of €7 million, which then leads to us ending the quarter with very low leverage net debt on a proportionate basis of €20 million and we still see significant debt capacities supported by our portfolio cash generative assets.
We are delivering in line with guidance on all the parameters that we communicated at our CMD back in February. Operating expenses at the low end of the guidance in this quarter at €3 million, also in line with what we communicated, as a portion of our cost base is linked to prices and volumes. G&A expenses and legal costs came in at €2 million each, again according to our plans and guidance for the full year. And CapEx of €13 million for Q1, and this is -- this relates to the Karskruv development, which we'll continue to invest in to -- throughout the year before it is completed and ready to produce by year-end this year.
Comparing some financial metrics to the previous quarter, if you start off with power generation, we see that we had a 27% increase quarter-on-quarter, leading to the 214 gigawatt hours, as I mentioned. Our realized price of €66 per megawatt hour is 25% reduction compared to the €88 that we had in Q4. So the net impact on revenues is a 5% reduction resulting in €14 million of revenues in Q1, compared to €14.8 million in Q4 last year.
If we then focus on EBITDA, we had €6.7 million in Q1, and the variance to our Q4 figure of €9.3 million is explained by the slightly lower revenues as we touched upon and also the fact that in our Q4 figures, we had liquidated damages or at least included in our EBITDA, which we don't have in the current quarter.
As I said, very strong cash flow generation for this quarter. CFFO was €16.6 million, more than 20% increase from the €13.4 million in Q4. Out of the €16.6 million, just shy of €10 million relates to dividends received from joint ventures during the quarter, so namely Leikanger and MLK assets.
Taking then a closer look at our realized price for Q1, the average Nordic system price for the quarter was €85 per megawatt hour. And the average regional spot price based on our first quarter production mix was €73, so a 15% reduction. And it is important to keep in mind that this is a very unusual outcome.
And if you look at the four years preceding this quarter, so 16 quarters in total, and if you then look at our 2023 expected production mix, it has actually only happened two times before that we have a significant discount to the average Nordic system price. So, almost 90% of the time over those 16 quarters, our regional spot price would have been at or above the average system price.
And there is indeed an average premium pricing in our regional spot price compared to the Nordic system pricing. And this average premium will strengthen even further as we get Karskruv volumes online by year-end this year, which will then add 300 gigawatt hours of production in SE4, which is highly -- the region in Sweden which historically has enjoyed the highest prices.
Our hedge contracts had a positive contribution of €2 per megawatt hour during Q1, and out of that realized price guarantees of origin represents €4 per megawatt hour. And since all our electricity generation is coming from renewable sources, we are receiving guarantees of origin for all our production volumes, which we then in turn sell on the market.
The capture price discount was €13 per megawatt hour, which then represents 18% compared to our regional spot price, which is a normalization compared to the elevated capture price discounts that we observed during the second half of last year, also in line with what was -- sort of what we expected and communicated at our CMD. So, all-in, an average realized price of €66 per megawatt hour during Q1.
Moving to the underlying cash flow generation of our portfolio. And since a significant portion of our volumes is coming from joint ventures, we argue that this metric based on proportionate numbers provides a relevant picture of the cash flow performance and capacity of our portfolio.
Starting off with revenues, that came in at €14.1 million in Q1, including €0.1 million of other income. Operating costs of €3.1 million, again according to plan and guidance. And then, G&A of €3.8 million, including legal costs. And then, this is €3.8 million after we have excluded certain non-cash items from the G&A cost base. So, EBITDA then of €7.2 million on a cash basis after deducting these G&A non-cash items. And we had positive -- small positive current tax impact in Q1 related to our Leikanger hydropower plant.
So, the total operating cash flow for Q1 sort of an underlying proportionate basis was €7.3 million. And then, against these €7.3 million, we had interest expense related to our external debt of €0.8 million and the €13 million of investment into Karskruv, which is already mentioned. So, all-in operating cash flow, after interest and after CapEx, of minus €6.5 million for the quarter. And this is -- I mean, this figure is expected to stay negative for the coming quarters until year-end as long as we invest into Karskruv development, which as I mentioned, will be ready to produce and come online by year-end this year and which will lead to a significant improvement and uptick in our cash flow generation and from early 2024 onwards.
Looking at our reported consolidated cash flow and corresponding net debt, proportionate net debt. We started the quarter with a net debt position of €12 million. Then, we had organic cash flow from operating activities of €15 million, including the €9.9 million of received dividends. We also had a positive working capital impact of €2 million during Q1, and then we spent €13 million on CapEx. And we also had acquisition costs of €4 million in Q1, and the majority of this is related to the purchase of the remaining outstanding shares of Slitevind, which brought us to 100% ownership of Slitevind during Q1.
We had a reduction in our proportionate ownership of joint venture cash of €7 million during Q1, and this is then partly driven by the mentioned dividends paid out, which is included in our organic CFFO. This means that we are ending -- end of the quarter with a closing net debt of €20 million, which is a very low leverage and a comfortable liquidity situation, and coupled then with a significant debt capacity that provides us with a lot of flexibility and opportunities for both organic and inorganic growth going forward.
So with that, I'll hand over back to Daniel for some concluding remarks.
Daniel Fitzgerald
Thanks, Espen.
And I think the first quarter just further underpins the platforms that were built in on Orrön Energy and the growth ambition that we have going forwards. We will be delivering from the end of the year 1.1 terawatt hours of power generation, and that underpins the long-term cash generation of our business. It's clear that we're continuing to deliver on the M&A strategy and completing 10 transactions since inception, growing the production base and operating base of the company significantly and adding in some really strong growth platforms for the future.
Organic growth has kicked off very, very well in Sweden, and we're seeing the fruits of that coming through already in terms of new projects and new opportunities to invest in. The European expansion has given us a whole new opportunity set with large scale, greenfield, solar and battery projects alongside our predominantly wind business in the Nordics. And as Espen touched on, we remain fully funded for growth.
So, I think today -- the value of the company today is barely our generation times our price, and I think there's huge upside once we put some of that growth and financial flexibility to work together. And that, in my mind, still remains a unique investment with growth and upsides in Orrön Energy. I think we're undervalued as a stock today. And as we move into the future with that funding already behind us, no need to raise equity. We can fund all of these opportunities through our own means and building that pipeline for growth sets us up in a fantastic position for our performance in the coming years.
And so, with that, I'll pass back to Robert, and I think we move into Q&A.
Question-and-Answer Session
A - Robert Eriksson
Absolutely. Thank you, Daniel. Thank you, Espen. And I'm glad to say that we do have some questions, and please keep them coming. Use the Q&A function at the bottom of the screen.
And let's start with the first question, which is about electricity prices. They have come down considerably from all-time highs from last year. Do you still feel comfortable being exposed to spot prices? And also how would you like to protect against further reduction in electricity prices if it were to materialize?
Daniel Fitzgerald
Yes, and I think it's a fact that the prices have come down considerably since the end of last year. Q1 results, we still achieved the €66 per megawatt hour, which is proportionately bigger than where the long-term averages have been. Hedging is something we've always looked into from inception until now. And so, I think opportunistically, we will continue to look into that market. But as it stands today, our view long term is the prices we're seeing today in the market do not reflect where our view long term is on electricity price.
And I think Europe hasn't fundamentally solved some of the challenges from last winter. So although now we're seeing hydro balances coming back online and seeing some of the issues around the energy crisis have abated for this quarter, I think we're still going to see volatility coming back into the winter months, and I think that exposure is right for us at this point in time.
In terms of protection, we have very little net debt on the balance sheet, and so we remain in a very, very strong position, generating cash down to very low electricity prices. So, I think at this point in time, with our low operating cost base, we are able to withstand periods of very, very low pricing, and our view long term is that pricing will recover to either more normalized levels or outperform against long-term averages given the challenges of the energy transition.
Robert Eriksson
Thank you, Daniel. And I think it's fair to say that the next question also relates to prices, because it's on the EBITDA range that we provided at the Capital Markets Day, the full year EBITDA range. So, could you provide an update on that range?
Daniel Fitzgerald
Yeah, I think maybe I'll take the first bit and then you can come in, Espen. The EBITDA was an indicative level based on a range of prices where our EBITDA generation would be. I think there's no change to our cost base. There's no change to our generation. And so people should read in to that where they expect energy prices to be for the remainder of the year as to where that EBITDA is going to sit. Espen?
Espen Hennie
Yes, I agree. Just to reiterate that, I mean, we had an outlook on our CMD based on sort of the market prices prevailing going into the CMD, but sort of our guidance is linked to our cost items, so operating cost, G&A, legal costs and CapEx. So -- and indeed, when it comes to our costs, I mean, that, as we said, we delivered at Q1, we delivered in line with our cost outlook and guidance, and we don't see any reasons to change that at the prevailing moment. So, we are all sort of in line with guidance and plans on all our cost parameters.
Robert Eriksson
Thank you, Espen. And the next question is actually on costs. And now you have already touched upon that. But costs appear to be low in the first quarter, driven by lower energy prices below, 25% of full year guidance, however, the full year guidance remains unchanged. So, would like to see if you could provide a bit more color here. Are we expecting OpEx and G&A cost to go up?
Espen Hennie
Yes. No, so if we touch upon operating costs first, we provided our guidance range of €12 million to €14 million at our CMD. And then, we also informed about sort of the portion that is linked to prices and/or volumes. So, I would say that the Q1 outcome is as expected given also where the prices have been during Q1 compared to sort of the outlook or the range embedded in our outlook in February. So, I think all else equal, we would expect them to end up at a low end of the range if we also stay around the same price levels throughout the year from where we are now.
On G&A, we are reiterating our full year forecast of €10 million. This quarter was €2 million, so that also implies that we expect sort of some ramp up throughout the year, also as we will have some growth throughout the year, but still it is indeed €10 million for the full year, which is our guidance. So, we don't -- we're not making any changes to that, although Q1 also at the lower end.
Then on the legal cost, that was €2 million for the quarter, full -- in line with the full year guidance of €8 million.
So, I think, the short answer is that we believe that the outcome for Q1 also on operating cost was in line with what we provided for guidance and outlook in February.
Robert Eriksson
Thank you, Espen. Orrön Energy is trading at a discount versus book value. Is there any possibility that you may be considering share buybacks as a result of this?
Daniel Fitzgerald
Yes, I think it's a good point. If we look at trading, the last time we were at this share price was back in July of last year when we just had the three assets and hadn't completed any of the M&A or raised any of the external financing. So, when you look like-for-like to the share -- where the share is trading today versus book value to where it was last year, at book value, we're significantly discounted on that metric.
Possibility on share buybacks, it is something we discuss very regularly. So, at the AGM, our shareholders approved that the Board has the ability to buy back up to 10% of the stock throughout the year. At these price levels, it's absolutely something that is on our minds. I think, we will continue to explore that as the year goes on, but certainly at this share price and at this discount, it's a very attractive proposition.
Robert Eriksson
Thank you, Daniel. And then, we have a question on power price discounts after the end of the first quarter. What kind of discounts have we been seeing for April and May?
Espen Hennie
I think it's fair to say that I think sort of the normalization compared to second half '22 where we had very elevated price discounts at 18% in Q1. I think so far into Q2, we're seeing sort of that more normalized levels continuing.
Robert Eriksson
Thank you, Espen. And then a question on the construction in countries outside of the Nordics. When are you expecting to enter that construction phase?
Daniel Fitzgerald
I think it'll be a gradual ramp up over those projects. So some of the projects, we'll have earlier grid connection dates, some of them will have later grid connection dates. Today, it's too early to talk about construction phase. We need to secure the land access and permits for these early projects. And I think in a number of years, they'll move into the construction phase. And we'll constantly have a look at how best to create value in that portfolio. It may make sense to farm down a portion or all of these projects and may make sense to carry them all the way through construction on the balance sheet. We'll be opportunistic around the best way to create value out of that portfolio, but it's a number of years before we move into the construction phase.
Robert Eriksson
And the next question is on the guarantees of origin. What was -- what were the guarantees of origin in the last quarter in 2022? And how should one think about forecasting that number going forward?
Espen Hennie
Yeah. No, so I think the prices have increased slightly from the last quarter of '22, so slightly higher in Q1. In terms of forecasting, I mean, it's -- we sell most of the volumes there spot, so it's a spot market. So, I mean, unfortunately, we don't have any better prediction regarding that than to electricity market in general. But it has been, I would say, at a very underlying strong demand trends, and I'm underlying very strong demand for guarantees of origin, which very many market participants expect to continue for upcoming years.
Daniel Fitzgerald
I think there's a lot of pressure on corporates to demonstrate that their product are generated with the green credentials and the guarantee of origin in the Nordics is one way of companies to say that all the power they consume in developing their projects or products is green. And so, as Espen said, we've seen more and more demand on these guarantees of origin. And if you look at the percentage on the electricity price, it's a significant increase to the base electricity price that we're achieving. So, we'll continue to market those guarantees of origin. And as Espen said, I think there's strong demand for those going forward.
Robert Eriksson
Thank you. The next question is on the average regional price, which we have partly discussed, but I think it is good to touch upon that again. Why was the average regional price lower than the system price this quarter? And what do you think the relation will be in the coming quarters?
Espen Hennie
Yes. Well, so first of all, as I said in my presentation, I mean, we only -- if you look at the 16 quarters proceeding to Q1, that we only observed that two times before for our portfolio based on our 2023 production volumes. So, very unusual outcome. What has been a bit peculiar for Q1 is that the southern price regions in Norway, the three southern price regions in Norway have -- there we have seen a significant premium to the system price, whereas most of Sweden and also Finland has been at a discount. So, it's been a different sort of pricing picture across the regions compared to what we have observed for two previous or four previous years actually.
So I mean, our best guess is that over time, we expect sort of the future quarters to better reflect what we have seen over the last three to four years than what we saw for the current quarter, but albeit, I mean, this sort of a bit unusual situation might well also last for the next couple of quarters, but let's see again. Overall long term, we are very comfortable with the with the production mix of our portfolio, which should enjoy a premium to system price, and I also said, that will increase further when we get the Karskruv volumes on line year-end this year.
Robert Eriksson
Thank you, Espen. There's a question also on these joint ventures, and if you can give any more color on the kind of dividend ratios we can expect from the JVs moving forward?
Espen Hennie
Yes. So, we are -- so in general, we are paying out as much dividends as we can through -- from our joint ventures. It will be a bit bulky from quarter-to-quarter depending a bit on timing from when the dividends occur. As you can see in our financial report, when we ended the quarter, we had slightly more than €10 million in a proportion of cash related to JVs, which is a bit on the high side of what sort of -- what we require to keep in those JV. So there's some additional potential just there.
And then going forward, I mean, our cash flow from operations sort of long term should mirror sort of our underlying cash flow -- underlying operating cash flow, which we have shown on one of the slides. So, I mean, going forward, we expect to -- expect an aim to pay out essentially all of the cash flow generation from our JVs. But the timing might be a bit lumpy, so you might see some swings from quarter-to-quarter.
Robert Eriksson
Thank you, Espen. So there is a lot of talk about high profile costs on solar and wind production. Are you afraid that the profile cost will increase the coming years, and, therefore, the value of your assets?
Daniel Fitzgerald
I think profile cost is something we need to be conscious of and we share that every quarter. We share what that profile cost is for our assets. We will continue to monitor that. As we get a single technology into any market, we should expect to see some impact. But given that our assets are normally in historically high priced regions, and our view on long-term prices is that we're going to see higher price over the long term, I think this impact is just a part of our business and doesn't have a huge material impact on things.
If we roll back to Q4 of last year, although we saw record high profile costs or capture price discounts, we also saw record high achieved pricing from all of our assets. So they do go hand in hand. When we see higher pricing, we tend to see higher captured price discount, and in lower pricing, we see lower discounts. So something to be mindful of in our future business, and we forecast that in our guidance going forward.
Robert Eriksson
Thank you, Daniel. And the next question is a natural one, knowing that we have made 10 acquisitions since last summer, so are you planning to make any further acquisitions or businesses in Sweden in the near term?
Daniel Fitzgerald
Absolutely. So, we'll share the details when we get there, but we're active in a number of processes at any point in time both exclusive discussions -- into discussions with owners of assets where we already have a [staker] (ph) into brand new greenfield or brownfield opportunity, pipelines of projects in batteries, solar and wind. So a core part of our strategy is growth through M&A. And I would expect that over the course of this year, we move further and further in that M&A front.
Robert Eriksson
Thank you. And the next question is about the potential for solar and storage in -- specifically in the U.K. Can you put some more color on that?
Daniel Fitzgerald
Yeah. And I think if we look more generally across Europe and then we can touch on the U.K. There's no doubt that every single country in the EU and the U.K. has huge ambitions to decarbonize our power systems. And one of the big focus areas today and in the coming years is solar generation for all of these economies. So, the German side of things has huge ambition over the next decade to build out solar. The same in the U.K. And the battery storage side of things gives the ability to turn these intimate and renewable generators into more of a base load generator provide the grid with much needed stability in terms of frequency regulation. So there's huge ambition in all of these countries and I think we'll see that market grow significantly over the coming years.
The opportunity set that we're looking at here and specifically in the U.K., we have secured grid applications for -- if we look at it today, Orrön Energy has 400 megawatts installed capacity. We have multiples on that in terms of the grid applications and grid connections we have today. Now as we roll through the greenfield business, we're going to see some attrition of that large volume, because we're not going to be able to skew 100% of the land and permits for everything we want to do.
But if we get to the end of that process, I think there's likely to still be multiples on the installed capacity of the company today when we look at that solar and storage division. But as time goes on, we'll share more and more detail once we have certainty on the projects. But it's something we're hugely excited about. I think there's a lot of potential in that. There's a lot of work to do. And there's a lot of uncertainty, but I think there's value creation to come out of that platform for sure in the future.
Robert Eriksson
And then we have a couple of questions linked to the share price, which is also understandable. One question is about why the share price goes down after a good report like this one. And the next question tied to that one is, if we have any thoughts around the high level of short interest in the Orrön stock?
Daniel Fitzgerald
Yes. It's hard to say exactly why markets behave as they do. And as it stands today, we are kind of undervalued compared to the book value of the assets, let alone the growth opportunities within the company. So, in my mind, we remain a very attractive investment at this price point. And I think people are going to -- because there's so much liquidity in the stock, people are going to take advantage of that liquidity to be able to buy and sell shares. And I think we see that from not only retail and institutional holders, but also hedge funds and short positions. But very hard to say exactly why markets behave as they do. All we can say is that the value of the company in our minds is significantly higher than where we're price today.
Robert Eriksson
Thank you, Daniel. There is a question then following up on the M&A ambition. It's very good to hear about the M&A ambition. So, is there any time scale you could provide? Will you be able to do more transactions in 2023, or is it in the coming years?
Daniel Fitzgerald
I think we're always active in the M&A. Well, whether it's for small working interest in existing assets, through to greenfield, large scale opportunities or companies. So, we've completed seven transactions in the second half of last year and another three in the first quarter of this year, and we're active in a number of things in Q2 as well. So, we're not going to share any time scale, but we should expect more M&A through the course of quarter two and this year as well.
Robert Eriksson
Thank you, Daniel. And we have one more question, last question, and that is detail going back to cash in joint ventures that was €8 million in the Q4 presentation. If all cash generated in these JVs are -- is to be paid out, can we expect the remaining €8 million to be received in dividends in the coming quarters?
Espen Hennie
Yes. So, I mean, the answer is yes. We expect and are aiming to pay out dividends from our JVs also in the coming quarters. It's hard -- we can't be too specific on timing and exact value, because, again, it's depending on a number of factors and it can be a bit lumpy for quarter-to-quarter. But as a normal, as a rule, a name, all cash generation in JVs is supposed to be paid out as dividends as soon as possible. And as I also mentioned is that as our JVs are, in total, slightly overcapitalized at the moment, so I think there's still some room to pay out. And I'll pay out a bit more before we start to take into account the cash generation from Q2 onwards.
Robert Eriksson
Thank you, Espen, and thank you, Daniel, for all the answers to the questions. And first and foremost, thank you to the audience for great questions and for listening into this call. We look forward to keep you updated as we go along. And you don't have to wait for these quarterly calls, of course, we're here to answer your questions whenever you want. So, we're just a phone call or an email away, so don't hesitate to reach out. And thank you very much for today.
Daniel Fitzgerald
Thank you very much.
Espen Hennie
Thank you.
For further details see:
Orrön Energy AB (publ) (LNDNF) Q1 2023 Earnings Call Transcript