U.S. Markets closed

Edited Transcript of PNE3.DE earnings conference call or presentation 8-Aug-19 8:00am GMT

Q2 2019 PNE AG Earnings Call

Cuxhaven Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of PNE AG earnings conference call or presentation Thursday, August 8, 2019 at 8:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jörg Klowat

PNE AG - CFO & Member of Management Board

* Markus Lesser

PNE AG - Chairman of Management Board & CEO

================================================================================

Conference Call Participants

================================================================================

* Jan Bauer

Warburg Research GmbH - Analyst

* Karsten Von Blumenthal

First Berlin Equity Research GmbH - Senior Analyst of Cleantech

* Laura Lopez Pineda

Baader-Helvea Equity Research - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, welcome to the analyst conference call of PNE AG regarding the presentation of the half year results 2019. At our customer request, this conference will be recorded. (Operator Instructions)

May now I present you Mr. Markus Lesser, CEO, who will lead you through the conference call. Sir, please go ahead.

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [2]

--------------------------------------------------------------------------------

Yes. Good morning. I would like to present you the results and the activities of the last half year of our company. To summarize it, I'm glad to say the company has been experiencing a very solid growth. The basis for this improved results were driven by growth in all areas of our businesses. In particular, it was driven by the success in project development and sales. With around 289 megawatts in this half year, it was the highest volume of sales in onshore wind in the PNE Group ever. Additionally, it must be said that this especially is related to the international projects like Malarberget in Sweden with 113 megawatts and Jasna with 132 megawatts, which, by the way, is the biggest project in Poland in the moment. Together with 41 megawatts in Germany, we are now having 332 megawatts under construction.

Also our Wind Farm Portfolio 2020 is growing. Now we added up around 95.7 megawatts, whereby 24.4 megawatts actually are under construction, and that despite delays in permitting process in Germany, et cetera.

In the area of services, we launched new products like, for example, a radar solution to minimize blinking lights during the night, which improves the acceptance of wind power. This all led to the result that the EBIT tripled and the EBITDA doubled. And our gross cash and cash position rose to EUR 148 million.

Other activities in the first half year have been PNE paid a dividend of EUR 0.04 per share. Dr. Susanna Zapreva had been appointed to the Supervisory Board. Furthermore, our program Scale Up is on track. So the evolution to energy solution provider shows first results.

Looking to the pipeline and our activities in product development, we could say that we completed projects in Germany and France. Gerdau-Repowering and Schlenzer had been completed as well as Laperrière -- project Laperrière in France. We also sold projects in Sweden with Malarberget, and our project Laxaskogen in Sweden as well was completed. We sold Malarberget to Enlight Renewable Energy, and in -- another big project we sold to Stadtwerke München, which is Jasna. You have to consider that Jasna and Barwice, the project in Poland, are the projects where we won the tender end of last year. So they are already sold and now under construction. Jasna is the biggest project in Poland, and we have to do a 70-kilometer overhaul line, and we negotiated all contracts and do the construction management for our customers as well as we do it in Malarberget. All these projects are also connected with an operation management contract. So we extend our businesses -- our business in service to Poland and to Sweden as well, which is one target of our Scale Up program.

We acquired projects in Panama, 5 projects around 352 megawatts. Burleigh, we sold to Burke Wind. This was the project which was not permitted and which we don't count in our numbers, just to add now. When we talk about 404 megawatts which we put in operation and started construction or in the sales number, it is not considered.

Our own generation portfolio grows to 89 megawatts. These are the wind farm portfolio projects in operations together with Silbitz, which is our biogas -- biomass power plant.

Looking to the project pipeline, we could see -- can see that the total number has increased to 4.952 megawatts (sic) [4,952 megawatts]. And remarkable is that the megawatts in Phase 3 in Germany and France, which are our core markets, went up to -- from -- by 139 megawatts to 488 megawatts.

Looking into our Wind Farm Portfolio 2020, we are still in plan. We have now volume of 95.7 megawatts of projects, which are in operation or under construction. So 24.4 megawatts are under construction of these. The remaining projects are identified in our portfolio, in our project pipeline and develop -- in different development stages. Whereby we have to say, in Germany, we have a shift of development and there are permitting issues, nevertheless, we are still on track.

The earnings accrued in the Wind Farm Portfolio 2020, which have not been realized yet, the new amount is EUR 26 million. The power generation EBITDA grows to EUR 6 million.

Our program Scale Up is fully on track. So to become an energy solution provider, we are fully consistent with our plan. We have developed the -- we have the development of the first project pipeline in the first market with Panama. The first projects, I have to say, are in development. We -- in Romania, France and Germany, we started just right now. We provided and provide additional services and expand consulting solutions. For example, for a big German bank, we got an order for refinancing -- to prepare refinancing where we could -- which we wouldn't have gotten if we would have been only a project developer. So you see first actions and first order if we get them placed.

If you look to the financial results. The investments of international markets are paying off. I think this is a very good title, which really shows the investment of the past, think about the times several years ago where everybody expecting investment in this international market and result of international market, and now we see that. So this means, especially if you see the total output, $85.6 million opposite to the last half year result, EUR 38.2 million; sales, EUR 65.6 million opposite to EUR 28.4 million. The EBITDA, as said before, around about nearly doubled from EUR 8.7 million to EUR 18.5 million. EBIT tripled, $12.9 million instead of EUR 4.1 million.

According our announcement, we said in the past we would like to give you further overview, and that's why we established the segment reporting, which shows in the segments project development, services and electricity generation, the progress. Starting with the project development, you see that the EBIT grows to EUR 12.1 million to EUR 65.4 million -- 65.4% (sic) [by 64.4%]. The project development output grows to EUR 74.6 million.

The services grew from -- to EUR 7.8 million. This is a plus of 45.7 percentage mainly driven by the new service offering and by our acquisitions. That immediately burdened our EBIT because of the restructuring costs and the costs of the acquired companies. Nevertheless, we are in a good shape with that.

Electricity generation grows by EUR 8.3 million -- output grows to EUR 8.3 million; the EBIT, EUR 2.9 million, further grows. And so therefore, in all these areas, as I mentioned in the beginning, we had a good result and a good growth.

If you look to the balance sheet. It's rock-solid, we said, a rock-solid balance sheet. It's -- we have some effects here in this balance sheet. Just right now the total asset increased from EUR 452 million to EUR 521.9 million, which is partly driven by the first-time application of IFRS 16, which is caused by the leases and the evaluation of the leases.

This higher total -- number for total assets leads to a lower percentage of equity, whereby the equity stays nearly in the same amount, slightly improved than the year before. So this is the reason why the equity ratio is still solid, but it has been lowered from 48% to 42%.

So the book value, if you see the equity is still at EUR 217.4 million, the book value of -- I mean, the book value of EUR 2.92 per share. So always remarkable that we have the liabilities to banks at EUR 89.4 million. This and -- for the noncurrent debt, and for the current debt, liabilities were EUR 40.8 million (sic) [EUR 44.8 million], which are nonrecourse financing and liabilities and, therefore, especially to consider.

I'm very happy that the liquidity has increased to EUR 140 million coming from EUR 129 million. And I think it's a very good time. While increasing our portfolio and working on these projects, our liquidity is still growing and shows how solid this business is.

What do we want in the second quarter? Yes, we worked on the projects which we have under construction, which was within 32 megawatts (sic) [332 megawatts]. We would like to get permits out of the big project pipeline of 488 megawatts in Phase 3 in France and Germany, which also is one part to continue to build our Wind Farm Portfolio 2020. We have to save -- some sales processes ongoing, for example, in the United States. And yes, we develop our further markets, and the first new market is always the first thing which we have to consider and this is Panama. We're looking for new markets. Also, we now start the PV projects in international markets as well. So there we see a good potential. Also, we're working on additional products for the market and services and intensify our international footprint.

So in sum, we can say we can confirm our guidance of EUR 25 million to EUR 30 million in EBITDA and EUR 15 million to EUR 20 million in EBIT.

Thank you very much.

--------------------------------------------------------------------------------

Jörg Klowat, PNE AG - CFO & Member of Management Board [3]

--------------------------------------------------------------------------------

Can we have the questions, Andes?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We have one first question from Mr. Karsten Von Blumenthal from First Berlin Equity.

--------------------------------------------------------------------------------

Karsten Von Blumenthal, First Berlin Equity Research GmbH - Senior Analyst of Cleantech [2]

--------------------------------------------------------------------------------

This was a pretty strong EBIT in H2, and your H1 -- sorry, Q2 and Q1, H1 EBIT amounted to EUR 12.9 million. So you have already almost reached the lower end of your guidance. Do you feel that at the end of the year this is more likely to be at the upper or in the lower end? Or to say it another way, is it a reasonable assumption that the second half, you will not have so large projects to sell so we should rather expect a slightly lower H2 EBIT?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [3]

--------------------------------------------------------------------------------

Yes. Thank you for the question. It is -- the result we did -- we got -- came from the sales. And we have now to do some works, yes. That means we have to construct the projects and finalize our projects. And then we get another milestones. So therefore, these are results which I cannot say that we have to extend our guidance or something that is. In the moment, we think it will be more on the higher level of the EBIT guidance that what we estimate, and the rest is ongoing business, we have to -- depends on wind because our portfolio relates -- our earnings relates to wind performance and -- et cetera. So these are points which have to be considered. So therefore, we have always to consider a range. Just right now we think it's on the high end.

--------------------------------------------------------------------------------

Karsten Von Blumenthal, First Berlin Equity Research GmbH - Senior Analyst of Cleantech [4]

--------------------------------------------------------------------------------

All right. We have seen a very, very weak market in the first half of the year with just 287 megawatt installed and Wind Association has reduced the overall installation for the year to 1.5 gigawatt. You, as far as I can see, had a quite satisfactory H1 in Germany. And so you don't seem to be too much burdened by this very weak market. Nevertheless, this is, of course, a general problem for all the companies, and we will see after the [Summer Power] meeting in Berlin with our Minister Altmaier. And do you expect any regulatory improvements this year because this lack of approvals is, of course, a serious issue for the whole sector?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [5]

--------------------------------------------------------------------------------

Yes. To be honest, also we have an impact on these delays. This is caused by a change in the permitting procedures, so everybody is hit by that. So -- but nevertheless, because of having a bigger pipeline, we always have something where we can say, okay, if this project is not coming, then the next one is coming. So therefore -- but nevertheless, also we have an impact on that. And we also push the politics to change the EEG and especially the permitting procedure. And so from that point of view, we expect that the politics has to do -- will do something because just right now, there is a big pressure on the politics to do something in terms of the climatic change and to meet our own targets as well.

--------------------------------------------------------------------------------

Karsten Von Blumenthal, First Berlin Equity Research GmbH - Senior Analyst of Cleantech [6]

--------------------------------------------------------------------------------

All right. Good luck for that. Could you tell me how many approvals in Germany you have at hand but have not yet been in the tender in megawatt?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [7]

--------------------------------------------------------------------------------

We have -- we won that right now, at the moment, 28.7 megawatts we've brought successful in tender. The other projects, as I mentioned, 260.2 megawatts, it's around -- all of them, yes, with exception of this 28.7 megawatts are in permitting procedures where we also filed the application to the authorities.

--------------------------------------------------------------------------------

Karsten Von Blumenthal, First Berlin Equity Research GmbH - Senior Analyst of Cleantech [8]

--------------------------------------------------------------------------------

All right. When I look into your Q2 figures, what's striking is a very high interest expenses of minus EUR 4.8 million. It was much higher than last quarter. Is that one-off in? I mean, the part of the effect is, of course, the IFRS 16, but that's just EUR 0.5 million. So could you explain this rather high interest expenses in Q2?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [9]

--------------------------------------------------------------------------------

It's related to swaps. That is the main reason, due to the fact that this is considered.

--------------------------------------------------------------------------------

Karsten Von Blumenthal, First Berlin Equity Research GmbH - Senior Analyst of Cleantech [10]

--------------------------------------------------------------------------------

So that means that it's a one-off. We won't see this -- probably not again in the next quarters.

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [11]

--------------------------------------------------------------------------------

Exactly.

--------------------------------------------------------------------------------

Karsten Von Blumenthal, First Berlin Equity Research GmbH - Senior Analyst of Cleantech [12]

--------------------------------------------------------------------------------

Okay. You certainly have seen that the German government has supported 20 so-called real laboratories for CO2-poor gases, especially hydrogen for the next 2 years. And PNE also has plans regarding power to gas and hydrogen. Do you see that PNE directly or indirectly benefits from these plans?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [13]

--------------------------------------------------------------------------------

Yes. In any case, we think this is a good step forward. Having in mind that 2 years -- 2.5 years, 3 years ago when we stepped in with our strategy, hydrogen was a very weak issue and nobody discussed about it. And now the government is working and is giving EUR 100 million subsidies to support this whole issue. I think there is a good progress and shows how the dynamic grows in this particular area. And so, therefore, we are still working on offshore solutions, and we are prepared to invest if there is something where we can get now how odd or get results out, yes. So it must be economically feasible.

--------------------------------------------------------------------------------

Karsten Von Blumenthal, First Berlin Equity Research GmbH - Senior Analyst of Cleantech [14]

--------------------------------------------------------------------------------

All right. One last question from my side. According to the Bundesnetzagentur, the plans for installation in Northern Germany are to be kept further. So only 786 megawatt versus 902 megawatt previously. And furthermore, Lower Saxony as a whole is to be declared so-called grid extension territory or netzausbaugebiet. Given that Lower Saxony is kind of your natural home market, do you think this will negatively impact your project development in that area?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [15]

--------------------------------------------------------------------------------

So I think when I look to our projects, we see a project in the near future. And if they are still on this lower level in this permitting situation, we don't see effects for us. But nevertheless, we will also -- there is a big pressure against this regulation. So therefore, I don't think that this will stay.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

We have another question from Mr. Jan Bauer from Warburg Research.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [17]

--------------------------------------------------------------------------------

This is Jan from Warburg Research. Just a few questions regarding your pipeline. So you somehow sold off your pipeline in Poland and Sweden. Do you see any more projects coming up from the Sweden side?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [18]

--------------------------------------------------------------------------------

Yes. In both countries, we are -- as you can imagine, if you -- for example, Poland, if you have 20% market share of all projects there, around about close to 20%, then we are a natural partner for a lot of project developers. So we are just right now in discussions whereby we have -- on a greenfield area, we have some projects in the pipeline. Sweden is nearly the same. So just right now, we're working on several projects in Sweden as well. One project is far advanced. So we think we -- that the story goes on.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [19]

--------------------------------------------------------------------------------

All right. Regarding your Panama pipeline. So you expect first projects to be sold in 2020. Do you have any updates for us on those projects, whether they're in advanced development stage? Or don't you have anything to add on that?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [20]

--------------------------------------------------------------------------------

Yes. We have one project in the further development stage. And for assets issued just right now, we try to figure out how -- where it can give us the best pricing for PPA. We are in the last stages to take over the projects in the right manner. So we have to do something to create the quality we would like to have and where we think we get the best margin out of the market. So yes, we are working on -- especially on these things, and so we are in plan.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [21]

--------------------------------------------------------------------------------

Okay. Regarding your France project. So you shift a lot of projects from stage 2 or 1 to stage 3. When do you expect those projects to come down in your sales? Or is it -- could it be this year? Or do you more expect it to be in 2020?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [22]

--------------------------------------------------------------------------------

No. In France, you have longer times after the permission, which means 1 to 2 years usually where you have to wait -- or where you usually get a -- lawsuit is filed. So it's -- nearly 90% of all French projects get its lawsuit against this wind farm. So -- and so we see the first projects coming up maybe in 2021 but don't see that all projects are ready in 2021. Yes.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [23]

--------------------------------------------------------------------------------

Okay. So you don't expect to put some France projects into your 2020 portfolio.

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [24]

--------------------------------------------------------------------------------

Just right now, we don't see it yet. So to be honest, some of these projects have been -- we don't need. And on the other side, we have the German projects, so it makes sense to have a pure German project pipeline just right now. But nevertheless, maybe someday, we put some French projects. And just right now, we don't -- cannot confirm that.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [25]

--------------------------------------------------------------------------------

Okay. And you mentioned milestone payments from your project sales as soon as they are finished. So you get some -- you expect milestone payments on your onshore projects this year?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [26]

--------------------------------------------------------------------------------

Yes. I summarize this to milestone payment. In general, we have several contracts. Let me -- for example, Sweden and Poland, yes, we have a construction management contract, for example. And afterwards, we have the service contract. So the management -- the construction management contract is finalized, and we will get paid for that when the construction is finished, yes. So that's what I summarize with milestone payments, yes. So it's not really -- milestone payment is a part, it's something like that.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [27]

--------------------------------------------------------------------------------

Okay. Regarding your service business. So we don't -- you don't have that high -- or that long reported history on services. So regarding consulting and other services in O&M, can you give us some light on how high your margins are in this business? Or what do you expect to have on -- like EBIT margin on this business?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [28]

--------------------------------------------------------------------------------

Yes. Our target -- according our strategy 2023, we said our target is a volume of 25% of our increased number. And this was a number around EUR 45 million, we said and -- around EUR 45 million. And we said 1/4 or 25% of this EBIT, which we expect 2023 should come out of services. So this is what we like to have in the future. So that's why we have to really speed up here. But we do. And just right now, the EBITDA is like it is in the moment because we have to invest in the companies, yes. So this is in personnel, in companies, and that's what we relate to the services for itself. So in sum, we will have at a special moment much better results, but just right now, they have to pay their investment out of this segment, yes.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [29]

--------------------------------------------------------------------------------

Okay. And regarding your O&M business, can you give us a figure at what level your, I call it, volume under service currently stands?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [30]

--------------------------------------------------------------------------------

Yes. We are at around about -- we are about 1,500 megawatts, which we have in operational management. And we extended our services by financial services, so support, civilian power, wind power plant or other plants, and also we do the management of the trading of energy like PPAs also for us, also for third parties. So there are solutions in. So this is the business -- we will do the construction management for third parties. And that is slowly but steadily, we launch these products into the market. And so this is the package we now -- where we file products in the moment and launch it into the market.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [31]

--------------------------------------------------------------------------------

Regarding your capacity under service. So now you have something around 1,500 megawatts. So you expect the 200-megawatt portfolio to be added to this services? Or...

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [32]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [33]

--------------------------------------------------------------------------------

Yes? Okay.

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [34]

--------------------------------------------------------------------------------

As you can imagine -- and we would like to have Jasna and Malarberget, the 2 projects, we would like to add as well because there we have contracts just right now. So when we start operation, we start and then servicing.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [35]

--------------------------------------------------------------------------------

Okay. So you should reach somewhere around 2,000 megawatts under service as soon as those projects are finished. Do you have any...

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [36]

--------------------------------------------------------------------------------

Exactly.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [37]

--------------------------------------------------------------------------------

Yes. So do you have any intent to increase your targets on O&M management? Because currently you talk about 2,200 megawatts under management in 2023. So I would say this is likely to be reached in the next 2 years.

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [38]

--------------------------------------------------------------------------------

Yes. So we just right now finished the contracts. And to be honest, let me finish, let us go on the road and then let's talk about your targets. We have to support the people. We have to train the people. We have to make additional efforts to get acquisitions. So therefore, that is a complete package. So just right now, yes, we can increase the target at one day, but let's finalize this at first.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [39]

--------------------------------------------------------------------------------

Okay. Regarding your PV project, do you have already some insights to what point we can expect certain PV projects to be sold?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [40]

--------------------------------------------------------------------------------

Yes. We have it in our plan next year. We would like to finalize the development of the first project, and then the sales should be close -- nearby, yes. So next year.

--------------------------------------------------------------------------------

Jan Bauer, Warburg Research GmbH - Analyst [41]

--------------------------------------------------------------------------------

Okay. What size do you expect for this PV -- first PV project?

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [42]

--------------------------------------------------------------------------------

We have a first project in -- close to the Dutch border in Western Germany, which is around 10 megawatts.

--------------------------------------------------------------------------------

Operator [43]

--------------------------------------------------------------------------------

We have another question from Madam Laura Lopez from Baader Bank.

--------------------------------------------------------------------------------

Laura Lopez Pineda, Baader-Helvea Equity Research - Analyst [44]

--------------------------------------------------------------------------------

It's my first time on that call. I have a couple of questions. You signed at the first PPA contract in the second quarter. So can you maybe give us a little bit of details how this will work and how long is this PPA contract for? And is the level similar to the previous EEG submission that the wind farm had? Secondly, the tax credits are expiring soon in the U.S., so how do you see the industry adapting to these changes? And what are the impacts that you expect for 2020 and onwards? So market dynamics changing now potentially in the U.S. Then I will do another one. Maybe these 2 first.

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [45]

--------------------------------------------------------------------------------

Okay. Related to the PPA, we did with LichtBlick. This was one of the first PPAs in Germany, maybe the first. We got a big market attendance because of that. This was related to our wind farm -- it's related to our wind farm Papenrode, which took over this wind farm, which is around 21 megawatts with machines which are now for 17 years in operation. And we said, okay -- for 20 years in operation. And we said for the next 3 years, we need a contract for PPA because we want to prepare them for repowering. We need it for the permitting phase. And so it was not clear how we can report it in the last detail. So we have to get this under control, which is the usual work. For that, we need time, and therefore, we need the best pricing for our energy. And we have to go to the energy market because the EEG subsidies is not anymore paid for this. So -- has not been anymore paid for this.

So this is the situation, which showed a very good result and which gives us the big support in the market that others would like to do it as well in this manner. So even if Papenrode -- if this is now only in operation, we make earnings. So if we go for repowering, we make earnings. So therefore, it's a win-win situation for us with these conditions we negotiated in the PPA. So just right now, it's limited to 3 years because then we would like to repower.

So related to the United States, United States is a very special figure. Just right now, gas and coal power plants are still working. They should have shut down. Trump and others -- in some countries, they don't want to do this. So on the other side, you have the wind farms, which are increasing because of the PTC of 100 percentage, just right now have to catch this PTC 100 until the next year. So there is a big increasing market in the moment, which leads to lower energy pricing. So the energy pricing goes very, very dramatic down. And there is no security in that just right now in some areas. So depending on the area, so California has other routes than Oklahoma, for example, and that means we have to differentiate it. But in general, this is the picture.

So we will -- we see there's a -- after this -- after the next year that the numbers of construction projects will go down. And just right now, a little bit, and we see -- because this will be the top of it, but we will still be on a higher level in the United States in terms of construction projects but with the pressure on the margins for all participants.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

We have no further questions. (Operator Instructions) We have no other questions, sir.

--------------------------------------------------------------------------------

Markus Lesser, PNE AG - Chairman of Management Board & CEO [47]

--------------------------------------------------------------------------------

Yes. Then thank you very much, and have a good day.

--------------------------------------------------------------------------------

Operator [48]

--------------------------------------------------------------------------------

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.