Earnings call transcript: Arise Windpower’s Q2 2025 shows strong growth despite market challenges

Arise Windpower AB reported robust financial performance for the second quarter of 2025, with significant increases in net sales and EBITDA. Despite these gains, the company’s stock saw a 1.14% decrease in pre-market trading to SEK 3.56. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations, with analysts setting price targets between SEK 7.50 and 8.74. The company highlighted its strategic diversification and project pipeline as key drivers for future growth, even as it navigates challenging market conditions.

Key Takeaways

• Arise Windpower’s net sales increased to SEK 164 million.
• EBITDA rose, contributing to a profit after tax of SEK 28 million.
• The stock price fell by 1.14% in pre-market trading.
• Completion of the Chernwalen wind project added significant capacity.
• The company aims to expand its project portfolio to 10 gigawatts by year-end.

Company Performance

Arise Windpower demonstrated strong performance in Q2 2025, with net sales reaching SEK 164 million and EBITDA improving to SEK 61 million. The company maintains impressive profitability with a 97.52% gross margin and healthy liquidity, evidenced by a current ratio of 1.88. The company attributed its success to its diversified market presence and robust project pipeline. Despite the positive financials, the stock’s decline suggests investor concerns over market conditions and project valuations. InvestingPro subscribers can access additional insights through comprehensive financial health scores and 6 exclusive ProTips about the company’s performance.

Financial Highlights

• Revenue: SEK 164 million, increased from previous periods.
• Earnings per share: SEK 0.11.
• EBITDA: SEK 61 million, showing growth.
• Profit after tax: SEK 28 million.

Outlook & Guidance

Arise Windpower aims to achieve a 10 gigawatt project portfolio by the end of the year and plans to divest 400-500 megawatts of projects annually from 2026 to 2028. The company is optimistic about its financial results, despite weak market conditions, and is focused on expanding its footprint in the renewable energy sector.

Executive Commentary

"We had a very strong second quarter in quite challenging markets," said Erik, the company leader, highlighting the firm’s ability to navigate market complexities. "Our diversification is starting to pay off," he added, emphasizing the strategic advantage of Arise Windpower’s varied market presence.

Risks and Challenges

• Seasonal price variations in Nordic power markets may impact revenue.
• Uncertainties in French nuclear production pose risks to power prices.
• Project valuations may be affected by broader market conditions.
• The company faces potential challenges in maintaining its growth trajectory amid macroeconomic pressures.

Q&A

During the earnings call, analysts inquired about the UK battery/solar project sales, which are expected to have a 70/30 mix. There were also questions about project valuations, with the UK market showing higher valuations compared to the Nordics. The company reiterated its focus on organic growth and strategic project portfolio expansion. With a P/E ratio of 12.59 and management actively buying back shares, InvestingPro data suggests the company offers value potential. Discover detailed valuation metrics and expert analysis in the Pro Research Report, available exclusively to subscribers.

Full transcript - Arise Windpower AB (ARISE) Q2 2025:

Erik, Company Leader/Executive, Arise: Thank you very much. I will start with a brief introduction of Arise. We have three different business segments, starting with production, our IPP business. We have some 170 megawatts installed corresponding to some 430 gigawatt hours in annual production, a normal year. Secondly, we have the development business.

Currently, we have some 9,000 megawatts in total in our project pipeline, and we have divested since inception some 1,600 megawatts. And the third leg in our business segments is the solutions business, our services business, including asset management, financial and technical management, and also construction management. We have today around 2,000 megawatts under management. And in construction, we have one project ongoing, 105 megawatt wind project under construction. With that, we can change slide.

We are a growing company, and we have now operations in six different markets. Trying to give you some some picture on current focus in different area focus areas, biographies. Starting to the left with Sweden, where we have our full scope, where you could say operations, including wind, solar, and battery storage. We do we have our own production development business. We do asset management, construction management, and we have focus on project sales as well.

We also have operations in Finland since 2023, also full scope when it comes to technologies, including wind, solar, and PV. Focus on development, quite good progress development and product sales. We already did the first transaction in Finland, and we have a focus to do more this year. And also, we have a quite decent portfolio, wind portfolio for us under management as well as asset management. In UK, we have a full scope also when it comes to technologies, wind wind solar and PV, focus on development and project sales.

And here, also, we expect to to deliver more during the year or hope at least. In Ukraine, our focus in on wind and the greenfield activities, greenfield development of wind, building up our portfolio for the future. A bit the same in Norway, a low spend for for development of of wind power. And also, we have a quite big wind farm under management in Norway as well that we had in operation for a number of years. New market for us is also Germany where we’re focusing on battery storage storages development mainly.

We also we have quite ambitious targets, like I mentioned as well, to to have first projects for for ready to build transactions already next year as battery storage is quite quite quite a short short development time for for for battery storages. With that said, I think I leave the stage to to Marcus to go through the result a bit more.

Marcus, Financial Executive, Arise: Thanks a lot, Erik. Yes, net sales for the second quarter increased to 164,000,000. And this is primarily driven by the battery project that we sold in May. This is better. This trickled down, which led to EBITDA, which increased to SEK 61,000,000 and EBIT, which increased to SEK 39,000,000.

If you look at profit after tax, it came in at SEK 28,000,000. Majority of the profit in this quarter came from the not wholly owned Poyaanvojma, which explains the decrease in earnings per share to SEK 0.11. Operating cash flow was SEK 80,000,000. Cash flow after investments, minus SEK 13,000,000, bearing in mind that investment activities in the quarter also included a first milestone payment to the sellers of Poya Moima. If we look a bit into our segments, development posted EBITDA of 66,000,000, a very strong quarter, again driven by business better as mentioned previously.

We also saw continued maturation of projects across all markets and the late stage portfolio increased by a full 400 megawatts, which I will get back to on the next slide. Production posted EBITDA of SEK 15,000,000 in the quarter. We increased the production by 10 gigawatt hours compared to the same quarter in 2024. And the realized price, however, decreased to SEK $3.52 per megawatt hour as the same quarter last year had favorable price hedges. During this quarter, we also entered into a new hedge position in the short term, which is for q three twenty twenty five, about eight gigawatt hours at the price of €48 per megawatt hour.

The solutions segment, pleased to see now that Scharvalen has been taken over. And as of June, the OMA has come into force. For those who remember, last quarter was a full quarter where we didn’t have any revenue from Scharlwalden due to the CMA being kind of kept out, CMA being the construction management. And now when we enter into the operations management, we will see revenues from Shell Vanland going forward. This is a segment where we are well positioned for new assignments as well.

On the portfolio side, it was largely unchanged in size despite the removal of pisces batteries, 125 megawatts. 400 megawatt was advanced from early to late stage. Some 30 megawatt is solar and best in Lebo where we are developing that park as a hybrid park. In the in The UK, we have another 100 megawatt or so wind project in Scotland, which has been advanced to late stage as well. Also, and best portfolio of some 100 kilowatts, which is new in late stage.

Also continued maturation of finished projects, both wind and solar as well. All in all, very exciting development, I would like to say, of the late stage portfolio and the prospects to realize projects going forward. Then I’ll hand back to you, Burk, again.

Erik, Company Leader/Executive, Arise: Thank you. Market developments, power markets. If you start with looking at the graphs to the upper left, you can see the spot prices in the in Nordics. The blue line is the system price. The gray one is s e 3, and the the orange line is SE 4.

You can see a quite typical seasonal price profile over the year with with the peaks in the winter and and the lows in in summertime. And could what could be highlighted here that we have a quite big gap between summer lows and winter highs, which has been quite extreme, I would say, last year, and we had quite high prices here during this winter. And to the bottom left, you can see the former prices. You can see the gray line is SA free. Black line is the system price in North Pole area, and the orange line is s four prices.

Quite stable or sideways during the year until June. And you can see also the German prices, the blue line, which is quite much higher price, actually, if you compare system price calendar year ’26 with the with the German pricing, it’s more than double double the price in Germany. And, of course, that that could be a driver in in the long run for for higher prices if the fundamentals in The Nordics would improve in terms of hydrology. Looking at The Nordics, we see now that the forward mark market is a bit better supported as as the hydrological surplus decreased. We had quite dry weather, especially in in the Southern part of Norway that has been having an impact on the overall hydrological balance in The Nordics.

We had, as you can see on the spot prices, quite fairly strong pricing in the Southern part of of Northern Nordics and very weak in the North, very much driven by big hydrological surplus in the in Northern Scandinavia, in the North Of Norway and Sweden. We also experienced that the balancing market’s been still are quite volatile and costly, especially in the in the Northern part of Sweden. We have seen quite high cost over time. Looking at Continental Europe, power prices in general quite stable, driven by fuel prices that been quite stable during despite quite the the the global economical turbulence. Gas prices have been supported by reinjection to to storages starting up during early early summer.

We we we see some quite year by year, we see more impact from from the solar power surplus in Continental Europe. One thing to highlight is the question marks when it comes to French nuclear. There are some question marks when it comes to corrosion problems in nuclear power plants and also if we see another heat wave come into hitting Continental Europe, there might be issues and production limitations due to cooling water as well. So some question marks on a dark horse, I would say, French nuclear that could have a quite big impact on Continental Europe prices in Continental Europe, and that will have impact in The Nordics as well, especially if if the hydrological surplus in the market will will continue to decrease. The current weather forecasts point in that direction.

With that said, we can change slide. I will say the key event this quarter was the fact that we will be able to manage to complete and achieve COD or or commercial takeover. This is our largest project so far, 42 turbines, 277 megawatts installed, corresponding to some 950 gigawatt hours a year, almost one terawatt hour a year in production. This is the best production asset that we have seen so far in Sweden, I must say, an extremely good production resource. We had a sales price of €75,000,000 that we got we got paid upfront, and now we have managed to to achieve an earn out of some €30,000,000.

So so profitable project for us as a company and really a milestone for for Arise. And on top of that, we we have also a share now in in the project of some 9% corresponding to 85 roughly 85 gigawatt hours a year. Should be mentioned that we had a quite challenging project when it comes to construction. We had a quite challenging overall time schedule. And on top of that, we really have been doing a winter installation, and and also we had quite challenging permit conditions.

So so a quite challenging project, which we now managed to to to complete by having an excellent performance by our construction team. And also, we had a very solution orientated corporations with suppliers and and also, I must say, authorities as well that being quite pragmatic and and solution oriented when when we had some issues during the during winter. We also had quite a good contribution from from our best project or battery storage project by which reduced the grid CapEx for for Sjallan, which also was had a good impact on on the pro the sales price on the earn out. I also would like to mention I think it’s worth mentioning that that we have developed three projects in this area, Skafftors and Shell Wallland, wind projects, and also PyShell and battery storage. And these three projects have financed some 500,000,000 SEK, half a billion SEK in new grid infrastructure, including a new 400 kV station into main grid.

They called the Torbayat. So so so I think this is a quite interesting side effect from the project as well. With that said, I think we move to the last slide. Looking at 2025, our expectations, we we have a clear financial targets, which we expect to deliver on when it comes to project sales and portfolio growth. We have a 10 gigawatt target on project portfolio by year end.

We have growth in all markets, and we we believe that that is a target that we will will meet. And on top of that, we have have the 400 megawatt project sales in total for 2024 and 2025 altogether. We believe that is realistic to meet as well by harvesting on our diversification, meaning that we have we have projects maturing in in the new markets. We see all in all upside potential short term in the Nordic power market. So we believe that that it will or would benefit our own production for for the second half of the year.

And if we see spot prices moving north, we also believe it will have a positive effect or positive impact on product valuations as well. So so we are a bit bullish on on on second half, but we are the beginning, we are starting from a quite low level as well, we must must say as well. We will continue to deliver profitable growth. We have a we expect to have strong financial results in the end of this year despite quite quite weak market conditions. We have an attractive late stage portfolio, and we believe that will be a good foundation for for the coming years.

We have financial targets to to to have a to divest or have a FID for four or 500 megawatts per year from the years ’26 until 2028. So so we believe that we are well positioned for that as well. With that, I think we are through the presentations, and I’ll leave the the floor for for questions.

Conference Moderator: If you wish to ask a question, please dial 5 The next question comes from Caleb Solomon from SEB. Please go ahead.

Caleb Solomon, Analyst, SEB: Hi, guys. Just a few questions from my side. Let’s see. You mentioned that you’re expecting to sell early stage battery and solar projects in The UK. Is it fair to assume that’s going to be a fifty fifty mix?

Erik, Company Leader/Executive, Arise: Yeah. Yeah. I think the my my priority will be PV. So I would say perhaps seventy, thirty ish.

Caleb Solomon, Analyst, SEB: K. And we’ve previous previously talked about the kind of 1,000,000 per megawatt being some sort of blended average over time. Is it fair to say it’s this means it’s going to be quite a bit below that this year?

Erik, Company Leader/Executive, Arise: Yes. As we are planning to divest portfolio in in a bit earlier stage than we normally do, we expect to have milestone payments as well. We we haven’t seen a transaction yet, but but most likely, it will be with some kind of milestone payments, meaning that this year, we will have revenues this year, but it will not be on the 1,000,000 level.

Caleb Solomon, Analyst, SEB: And kind of as a follow-up to that, can you just comment a bit on the valuation of battery projects in The UK as opposed to The Nordics and how we should kind of think pricing wise?

Erik, Company Leader/Executive, Arise: It’s a quite tricky question. So it’s a bit of moving targets, and it depends on investor appetite and a a lot of those things, I would say. But but in general, we we are looking at The UK market, higher power prices, quite strong government ambitions, valuations, or on general on a higher level versus the Nordics, obviously, and also, I would say, Continental Europe as well. So but it’s difficult really to have a clear opinion at this stage where it will end. I think looking at battery storage, you have seen the transactions we done just recently in Finland, €6,700,000 for about 20 a 125 megawatt battery storage.

Might be that it will be a bit above that in The UK, but difficult to say when it comes to solar. Definitely, if you look at The Nordics, it’s quite challenging to do transactions on solar PV in current market. In in The UK, definitely, I would say. I it’s I I kinda don’t dare to say, actually, that I hope we will present some numbers from reality quite during the second half this year.

Caleb Solomon, Analyst, SEB: Okay. That’s clear. And just one question related to the Finnish battery project you closed this quarter. Did you receive the entire payment in Q2? Or will there be some spillover in Q3?

Marcus, Financial Executive, Arise: No. Everything was received in Q2.

Caleb Solomon, Analyst, SEB: Okay. And you also mentioned that you signed some hedges for for q three. Have you signed anything else for q four this year and q one next year?

Marcus, Financial Executive, Arise: Nothing nothing nothing except what’s stated in the report. So we have some hedges for Q3, some for Q4 and some for Q1 twenty six.

Erik, Company Leader/Executive, Arise: Yeah. All quite attractive levels as well. Okay.

Caleb Solomon, Analyst, SEB: And just one last one for me. After this quarter, you have roughly 9,000 megawatts in the development portfolio, and you’re maintaining the kind of 10,000 target by the end of this year. Can you achieve that organically? Or does that sort of imply you’re going to make some acquisitions during the second half this year?

Erik, Company Leader/Executive, Arise: No. It’s organically.

Conference Moderator: The next question comes from Orjan Rodian from Carnegie Investigment Bank. Ahead.

Orjan Rodian, Analyst, Carnegie Investment Bank: Hello, everyone. This is from D and B Carnegie. First question, I realized your your central costs were quite high in the quarter. Can you, explain what that what is driving that?

Marcus, Financial Executive, Arise: Hi, Orian. Yeah. In the in Q2, we had we took some extraordinary costs, which is related to in general. It was some SEK 10,000,000 ish for the sake of kind of accelerating the project and avoid delays over summer and way into the autumn. And the benefit of that is obviously to that we get the asset man asset management agreement kicking in, and it also definitely optimized or maximized the earn out payment to avoid those kind of delays.

Orjan Rodian, Analyst, Carnegie Investment Bank: Okay. Now when Cialdvalen is in production, how will you report the the the production revenues? Will that come as a full p and l, or will you report it as a as a associated income below the EBITDA level?

Marcus, Financial Executive, Arise: It’s it will not it’s not consolidated into the P and L. It’s it will be a financial asset, which would be reevaluated over time and the kind of effect it might get on the P and L would be from dividends.

Orjan Rodian, Analyst, Carnegie Investment Bank: Okay. So it’s only dividends. Thank you very much. Relative to last quarter, how would you say that prices and time lines for your late stage project on a like for like basis, how how do you feel that that this is going right now? Is it improving or deteriorating or or staying the same?

Erik, Company Leader/Executive, Arise: Do you mean how maybe the the portfolio has developed during this quarter or yeah.

Orjan Rodian, Analyst, Carnegie Investment Bank: Yeah. Yeah. Not in many regards, but rather in in other terms.

Erik, Company Leader/Executive, Arise: Yeah. Yeah. I think when it comes to we had a very good development when when it is quarter when it comes to to progressing projects from early to to late stage, which means that we are closer to transactions. And as we have guided before, we are talking about two to three years when when we have projects in late stage. Two to three years, I think we have them ready to build.

And so so I think we are quite well positioned now to to start delivering in ’26 on the targets, ’26 on product sales. When it comes to different markets, yeah, I think diversification is has been the keyword for us until now, and I think that that has helped us very much. And we are harvesting right now and expect to continue to do that for the coming years.

Orjan Rodian, Analyst, Carnegie Investment Bank: The detail more detailed question on Orlyab or the the project you have there for solar and battery. What is the best case timeline for for finalizing this project?

Erik, Company Leader/Executive, Arise: Yeah. We we have we have an ambition to have the solar PV part Oh, sorry. Have that permit in place. Yeah.

Basically, ready to bill during this autumn. So so for for, I would say yeah. Let let’s say, quarter four or beginning quarter four. So so we are quite well advanced in that development phase. And then the next question is if it’s optimal to build it now or later, then that’s a decision we take at that that time.

But looking at that level projects, if solar PV is not financially viable in level, it’s very difficult to see any any projects that are feasible in in The Nordic or in Sweden at the moment. It’s a really good it’s a good location for both solar and wind, and we have quite we we can use the same grid connections. So so it’s really favorable favorable for that. And we are talking about the invoice 33 megawatts installed now, and we could add some twenty, twenty five megawatts solar PV. And the next question is if battery storage would add value as well.

Orjan Rodian, Analyst, Carnegie Investment Bank: Okay. Thank you. And final question from from me. There have been some talks about penalties for overproduction relative to the forecast on the new pricing and volume system from the TSO. Has that had any impact on your financial performance in Q2?

And going forward? Do you expect this to be mine, or is it something that is a concern for you?

Erik, Company Leader/Executive, Arise: Yeah. It has I I would say, for the market overall in in The Nordics, it had a quite great impact and a quite we had some some extremes. Looking at the rise, we didn’t as we are in Southern Sweden, the the impact has been we didn’t have the same level of events in Southern Sweden as we had in nor Northern Sweden. I would say that we have so far quite limited impact on our rice operations. Obviously, we will see most likely see that balancing cost will be higher in the future.

We will not come back to the level we had the the previous years. Looking on a in a bigger context, I would say that the market price developments has is more important than the increased balancing cost. So so, okay, it’s yeah. Some percentage of the total cost is balancing, but, of course, the the the the overall power prices are more important. But but it has a negative impact, definitely.

We also see that all operators now are looking into or already implemented a new way of operating wind farms that that you are you you have the possibility to close down, and you do close down when you see negative prices. So so the market will adjust this as well. But, obviously, having a change into to to to to with changing the the way they operate the the the grid with this new algorithm. Well, it wasn’t perfect to do it in a quite soft market. Okay.

Orjan Rodian, Analyst, Carnegie Investment Bank: Thank you very much. That was all for me.

Conference Moderator: There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions.

Erik, Company Leader/Executive, Arise: Okay. I think we are through. And just to sum up, we had a very strong I think we had a strong second quarter in a quite challenging in quite challenging markets. Really happy to see that our diversification start to pay off with battery storage transaction in Finland. And, of course, very satisfying that we managed to complete Chernwalen with a very good result.

So with that said, I would say, all good for our coming summer break. Thank you very much.

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