Arise: Kölvallen transaction a key value driver - ABG

Q2 report overshadowed by Kölvallen divestment Kölvallen to add SEK 690m to Q3 Value range at SEK 80-130 Q2 below expectations due to timing of Kölvallen
Arise had sales of SEK 53m and EBITDA of SEK 25m in Q2, which were below our forecasts of SEK 165m and SEK 100m. However, this was due to the 277 MW Kölvallen project being sold in Q3 vs. Q2. In fact, the project value was greater than expected, at EUR 90m/SEK 955m vs. our forecast of SEK 550m. The revenue recognition of EUR 65m/SEK 690m in Q3 was much larger than we expected, which raises our ‘22e EBIT significantly, while the expected revenues throughout the rest of the project (2022-24) are lower than our previous expectations. Lastly, Arise is investing EUR 17m/SEK 180m in the Kölvallen project for a 9% ownership stake, which gives the company exposure to future value creation as well. The Kölvallen transaction looks attractive and adds significantly to forecasts. Outside of Kölvallen, no changes have been made to the project portfolio, but Arise is looking for more projects with a focus on Nordics, the UK and Poland. Due to high cost inflation, Arise has stopped recognising revenues from the Ranasjö-Salsjöhöjden project, but we think the risk for this is low when it comes to Kölvallen.

Production hit by price volatility, but hedging at good prices The owned electricity production suffers from continued high price volatility, where the realised price in Q2 only reached about 50% of the average market prices. Intra-day price volatility means that the high electricity prices do not always coincide with Arise’s production. Also, the hedged volumes were below market prices. The latter should improve, with Arise able to hedge at EUR 109/MWh in 2023 vs. the Q2 hedging price of EUR 80/MWh. At the current prices, we expect the company’s own production to deliver an EBITDA of SEK 186m in ‘22e. We have raised ‘22e EBIT by 96% and lowered ’23-‘24e by 5-11%. ... Läs mer på ABG Sundal Collier

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