Arise: Solid start to 2022 - ABG

Q1’22 EBITDA in line with our expectation
We leave ’22e-’23e EBITDA roughly unchanged
Maintain SEK 60-120 fair value range

Strong electricity production in Q1
Arise had a good start to the year, with group EBITDA of SEK 61m, in line with our forecast. Development and Solutions had a small contribution of SEK 2m, slightly below our estimate of SEK 7m. On the other hand, own electricity production was stronger than expected at 100 GWh (ABGSCe 86 GWh) with an average realised price of SEK 748/MWh (ABGSCe SEK 822/MWh). The average realised price is still negatively affected by the intra-day volatility of electricity prices. Still, the segment EBITDA was SEK 65m, better than our forecast of SEK 59m and offsetting the miss in development. Net profit came in at SEK 37m, slightly below ABGSCe at SEK 39m. The company is starting construction of the Lebo project on its own books, targeting commissioning in Q1’24, at which time a decision whether to keep it or to sell it will be made.

Kölvallen sale the next big event
The project portfolio was unchanged at >2.6 GW, of which ~600 MW is in late-stage. Of this, the Kölvallen project, comprising of 277 MW, is expected to be sold around mid-year ’22. We estimate a late Q2 transaction, but it might slip into Q3. Management commented on cost inflation having some impact on project margins but added that contractual agreements with suppliers limit the exposure. The long-term outlook remains strong, supported by a positive outlook for electricity prices as well as strong demand for renewable energy projects.

Maintain SEK 60-120 value range
The stock trades at ~5.5x and ~4x EV/EBITDA for ’22e and ’23e. In our view, the reason for the low multiples is the perceived earnings risk, with a high volatility depending on the timing of projects in the development business. However, high electricity prices have changed this significantly, with own production expected to generate an EBITDA of SEK 194m in ’22e, which should provide stability ...
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