Eurowind Energy A/S

Management ReveiwManagement Review

Strong performance anddevelopment – in a turbulent marketDear reader,The financial year of 2021/22 was marked by high growthand a further acceleration of our strategy. Our operatingportfolio of solar and wind parks benefitted from attrac-tive power prices. While we increased our developmentand construction activities, our affiliate Norlys EnergyTrading used their expertise on volatile markets.This combination allows us to report a Gross Profit of EUR127.4 million for the year, compared to EUR 69.7 million in2020/21. The profit before tax reached EUR 115.5 million,as opposed to EUR 21.1 million in the previous year, it is im-portant to note that the revenue generated was withoutthe sale of any assets in the past 12 months.Our portfolio of development projects grew from 17.9 GWto 25.5 GW, and we entered the Estonian and Latvianmarkets through partnerships with seasoned local part-ners. We expect to grow the portfolio to approximately 30GW in the coming 12 months, while we maintain our focuson only adding projects that are technically feasible andcan become commercially viable. The size and quality ofour development portfolio is the most important parame-ter for our future growth.Our EPC department (Engineering, Procurement andConstruction) had a very busy year with constructionactivities in eight markets: Poland, Italy, Finland, Sweden,the United Kingdom, Germany, Portugal and Denmark.In the spring of 2022, we inaugurated St. Soels EnergyPark and Veddum Kær Energy Park in Denmark, our firsttwo hybrid parks with a combination of solar and windutilising the same grid connection – a setup that is thefoundation for the large-scale energy centres we plan toconstruct in the years to come.This was also the first financial year with our affiliateNorlys Energy Trading in operation. Since Q3 2021,the power and gas markets have been turbulent. Theturbulence has been further amplified by the Russianinvasion of Ukraine in February 2022 and the subsequentsanctions and restrictions on natural gas from Russia.The results achieved while dealing with those volatilemarkets have been the proof point for our strategy ofhaving a subsidiary with highly skilled energy tradingexperts employed.The achievements of the past 12 months are a confir-mation of our long-term strategy. By holding on to ouroperating assets in order to benefit from reoccurringrevenue, increasing our development and constructionactivities and having a pure trading subsidiary puts us inan enviable position: strong financials combined with awell-stocked project portfolio that will allow us to acce-lerate our activities in the years to come.The results also reflect the fact that I believe we have ma-naged to gather the right group of people – a group thatwill grow even further. Looking across the company, I see agreat team with competencies, experience and a mindsetthat makes me confident of our success in the future. It isthe team who executes our strategy; without the team, thestrategy would just be a PowerPoint presentation.Previously we have avoided comparing ourselves to anycompany referred to as “Big Oil” or “Oil Majors”. However,depending on your perspective, you could compare usto “Oil Majors”. We are deeply invested in the develop-ment of projects in several markets, while the “Oil Majors”refer to their development as “Exploration”. At the sametime, we keep our operating assets in order to hold thefinancial strength to be a significant player in the energybusiness, just like the “Oil Majors”.We believe that fossil fuels are at an end-game, and withinone-two generations, the energy business will see new“Power Majors” emerge and eventually replace the “OilMajors,” as the dominant force. The “Power Majors” busi-ness will be based on renewable energy and cover a fullvalue chain from greenfield project development to ener-gy trading, just as the fossil fuel “Oil Majors” have done.One of the reasons why the "Oil Majors" for years haveheld a position with a strong impact beyond the energyindustry, is partly because of their full value chain. But toa greater extent, the fact that they have the raw material,namely the oil, was the foundation of for their success.In the future, we predict that the large renewable powerproducers will hold the key to taking a similar market po-sition. Producing the actual power will be the key to takeon the next steps of the value chain and have an impactacross and outside the industry.We are confident that we have achieved an advanta-geous position in the market that allows us to have arealistic ambition of becoming a “Power Major.” We haveassembled a great team, we have substantial reoccur-ring revenue and we have a well-balanced and growingproject development portfolio of more than 25 GW inEurope and USA.However, that is just a starting point. We need to workhard, be smart and business savvy, while we follow ourstrategy for building up our generational capacity inorder to become a “Power Major”. Nothing less.We are looking at some exciting years to come!Jens Rasmussen,Chief Executive Officer,Eurowind Energy A/S2021/22 target wasmore than achievedEurowind Energy expected a profit before tax of EUR 30.5million for the financial year 2021/22. The Group overper-formed the target by more than 250% ending with a profitbefore tax of EUR 115.5 million.The high performance is primarily due to two factors• Higher volume and sale of electricity and profit• Higher profit from associated companiesThe higher sale of electricity and profit came from all ouroperations in Europe due to the increased power pricesduring the year. Further, our investment in Norlys EnergyTrading has exceeded our expectations and delivered avery satisfactory result for the year.Projection and outlook for 2022/23Based on our growth strategy and expectations to themarket, we expect a significant growth in profit beforetax for 2022/23, In 2021/22, we saw the highestconstruction activity we have seen and looking ahead,we continue to see high construction activity in severalcountries, which will enable us to follow our growthtrajectory and increase our revenue and profit. Ourdevelopment pipeline has significantly increased andwe see high activity in all our markets, and potential newmarkets, which is a strong foundation for our continuedgrowth.The high power prices we have seen in 2021/22 is ex-pected to continue and remain at a high level. We haveincluded above normal average power prices, but stillconservative compared to the current price levels as it isvery difficult to predict and the market is very volatile. Asa further unpredictable factor, the price level might beinfluenced by legislation and taxation implied by authori-ties throughout EU.We expect to grid connect several project at the startof 2022/23, which will have a significant impact on ourprofit for the year. Further, we expect our affiliate NorlysEnergy Trading to still and continously deliver a satisfac-tory result due to the high volatility in the market.Based on the above, we expect that our profit before taxmight increase to a level of EUR 400-500 million. Mainassumption are•Continously high power prices• Finished projects at the end of June 2022 andQ3 2022 will generate profits within the coming year•Continously high performance by our affiliateNorlys Energy TradingPower salesThe Eurowind Energy group also expects to boost ourpower sales in the years to come in line with our strategyto develop towards being a “Power major” based on cur-rent and expected construction forecasts to increase thegenerational capacity, the Group expects to seepower sales rise on all markets.In the future, we aim to add PtX to our business model,where we now act as both a developer and an indepen-dent power producer. This will bring new possibilities toour business and increase the power usesage and effi-ciency of both solar and wind and enable the Group totake further steps up the value chain by includingvalue-added products.In the current financial year and looking ahead, our port-folio of generational capacity has reached an earningspotential that allows the Group to only farm down assetsor divest, when it makes sense from a portfolio perspec-tive such as repowering and not as a requirement forfurther growth.Norlys Energy Trading continues to increase and broadenits activities and the opportunities for Eurowind EnergyA/S will also develop, putting us in a position to increasethe earnings on power production across Europe. Therenewable-energy industry is now only dependent onsubsidies in a very few markets, and in most markets, theindustry competes on pure merchant terms. Therefore,the experience and knowledge about power trading andprice optimisation found in Norlys Energy Trading will bea benefit to the Group.Project developmentThe project development pipeline has increased signifi-cantly, from 17.9 GW in 2021 to 25.5 GW this year. TheDanish and German pipeline, our core markets, grewclose to 2 GW but Sweden and the United Kingdom alsogrew significantly. The highest growth in the pipeline isRomania of 1.9 GW, where we see great potential.This build-up of potential projects is the foundation ofour continued growth and it will be realised in the comingyears in the form of high construction activity and later,increased operational capacity.Eurowind Energy group continues to aim for entry intoone to two new markets every year. This year, we haveentered Estonia and Latvia. We have made partnershipagreements and we see big potential in these marketsfor the coming years. In 2021, the US was added whereprojects are further materialising and we expect to startconstruction within the next couple of years.The growth of the development pipeline is also expected tocontinue in the years to come. This will be supported by thefact that in several markets, we see a trend towards largerprojects and through entering new markets. The growth inthe development pipeline will also be supported to someextent by more hybrid and PtX projects being developed.World trendsThe invasion of Ukraine by Russia, has highlighted theEuropean dependence on cheap gas from Russia. Gaswas long considered a good transitional vehicle to facili-tate the exit from coal, oil and lignite for heat and powerproduction, as the CO2 emissions from gas is lower thanmost other fossil fuels.Until the war in Ukraine, most trends tracked the increasedenergy consumption compared to 2020, which also reflec-ted increased activity levels in society. For the G20 coun-tries the rebound in energy consumption saw 2020 drop4% compared to 2019, while a 5% increase was recordedin 2021. Data suggests a full rebound on activity levels.However, that changed on 24 February 2022. Since theRussian invasion there has been a rush to reduce gasconsumption and most European governments havemoved forward the end-date for the use of gas in powergeneration. As a result, the renewables industry is ex-periencing overwhelming interest from all stakeholders.Several European countries quickly passed legislationdesigned to accelerate the deployment of renewableenergy. Those measures include faster permitting pro-cesses, designated energy zones and direct connectionsbetween consumers and producers.Other alternatives to gas, such as hydrogen or biogashave seen substantial interest from policy-makers andother stakeholders.Unfortunately, currently Europe is not producing enoughrenewable energy to substitute gas as the main powersource. Denmark is an example of this. Despite beingseen as the home of wind power. Denmark consumesapproximately 38 TWh. However, solar and wind powerproduce only 22 TWh. The Danish electricity consump-tion is expected by trade association Green PowerDenmark to grow to 114 TWh by 2030, which will requirea very large build-out of renewable energy, both onshoreand offshore.At the same time, early data from Danish TransmissionSystems Operator, Energinet, shows that the averageDanish family living in a house (without electrical heating)had reduced their power consumption in August 2022 by13%, however the same trend could not yet be detectedfor families living in apartments. How much consumptionacross Europe will be reduced, remains unclear at thetime of the publication of this report. Several EU countrieshave already announced power-reduction measures,such as illumination of public buildings being switchedoff more often and thermostats being turned down inNorthern Europe. How large the reduction in consump-tion will be is difficult to predict, but it will also to a largeextent be determined by the weather during the winter.Power market – the perfect stormThe power market in Europe was hit by “a perfect storm” in2022, which has seen extreme price volatility across Europe.After the Fukushima disaster in 2011, the German Govern-ment decided to phase out nuclear power. The phase-out had to happen gradually, and in 2022 the last of theplants were scheduled to close. In 2010, the year beforeFukushima, the German nuclear power plants produced141 TWh. In 2021, they only produced 69 TWh.Due to heatwaves and maintenance tasks, nuclearproduction has been reduced in France. EDF, the ownerof the nuclear power plants expect production of 280-300 TWh in 2022. This is well below the 2005 level of 430TWh. France, a historical net exporter of power has nowbecome an importer.Shortage of rain means that Norwegian water reser-voirs were only about 70% filled by September 2022.and Norway has aired the idea of lowering their powerexport. Norwegian hydropower plays a particular role, asit functions as a battery in Northern Europe – the hydroplants can be switched on when the sun and wind is notproducing.The drop in hydro and nuclear power generation in theEU has meant an increase in gas and coal consumption,which has created issues related to climate change, andalso seriously raised the cost of electricity. SinceFebruary, the EU has imposed a number of sanctionpackages on Russia, including on its energy industry.This has sent the prices of fossil fuels sky high.As power generated by gas has been the price-point inEurope for years, it is expected that within 2-5 years thatthe power price will most likely find a different and higherlevel than previously. In Northern European price zones itis expected that the power price will be more weather de-pendent on rain levels in Norway and Sweden, while windand solar will impact Denmark and Northern Germany.Eurowind Energy’s stake in Norlys Energy Trading hasproven valuable in a time characterised by volatile mar-kets and power prices. Long-term, the Group is confidentthat the knowledge in Norlys Energy Trading will also con-tribute and create opportunities to increase the earningson power production across Europe and the US.Technology trendsThe past 12 months have been characterised by andstrengthened by growing interest in PtX and renewables,a trend strengthened by the push to cut the dependencyon Russian gas. Eurowind Energy is very well suited totake advantage of the growing interest in hydrogen, refin-ing of hydrogen and renewables in general.The distribution in technology for Eurowind Energy’sdevelopment pipeline is 47% wind and 53% solar, withDenmark and Poland carrying the majority of the solarportfolio. However, the expected production from theseprojects will be closer to a ratio of 75/25 for wind andsolar. The initial outset of Eurowind Energy group is un-changed: Eurowind Energy group is a wind developer thatalso has the ability to develop, construct and operateother technologies. The Group believes that the compe-tences within wind development will have a competitiveadvantage in the long term.The advantage also allows the Group to have hybridpower generation solutions with both wind and solar asthe preferred technology. Eurowind Energy has, for thepast couple of years, worked on the concept of energycentres. These large centres will include wind turbines,solar, batteries, and PtX (hydrogen production). In addi-tion to this, integration of biogas and hydrogen refining ispart of the parks.The starting point is solar and wind turbines. These tech-nologies produce the green power that is used in the otherparts of the energy centre. The battery will provide balan-cing services to grid and electrolysis will produce hydrogen.There is a major need for more locally produced biogasin combination with green electricity production. Morebiogas will help to phase out the use of Russian gas andnatural gas from the North Sea. Eurowind Energy alsobelieves the soil should preserve all nutrients throughgasification instead of burning straw and other crops.Burning removes the nutrients completely. When it comesto the refining of hydrogen, it would be efficient to carryout the process near a CO2 source such as biogas.Creating large energy centres will allow for substantialsavings on infrastructure. As part of the power is con-sumed on site, large expensive connections to the powergrid can be replaced with smaller cables combined withgas pipes. The price of transporting energy in pipes isapproximately 10% compared to cables.The ability to transform the energy from power to hydro-gen, will also create the opportunity to store green power,something that is seen as crucial to the success of thegreen transition. Since the electrolysis process generatessignificant heat, there will be opportunities for the supplyof heat for district heating or to accelerate the gasifica-tion in biogas plants.Eurowind Energy is set to launch multiple large land-based energy centres in Denmark, which are to becompleted over the coming years. The initial five energycentres will have a total capacity of approximately 2.5GW. Eurowind Energy has secured agreements with thelandowners for the use of the land in all five projects.Eurowind Energy is in positive dialogues with the muni-cipalities and for two of the centres the public planningprocess is already underway.The concept of large energy centres will be exported tothe Group’s other markets with very limited modificationsto reflect local conditions.StrategyEurowind Energy's strategy is an aggressive growth strate-gy for the coming decade. The environment is exactlyright for that type of strategy. The appetite for the newgreen power generation capacity appears unlimited,while the urgency to get more capacity online increasesalmost on a month-by-month basis.The international energy industry has for the past 70-80years been dominated by a group of oil companies, oftenreferred to as “Oil Majors.” The original “Oil Majors” werea group of six companies that controlled the charteringof the majority of oil tankers worldwide: Shell, BP, Exx-onMobil, Chevron, TotalEnergies and ConocoPhillips.A more modern and less formal definition of the groupwould include fossil fuel giants Saudi Aramco, PetroChi-na, China Petroleum & Chemical Corp.As the demand for fossil fuels will decrease in the coming10-30 years, the energy industry will be open for newdominant actors, namely “Power Majors”. Those will becompanies with operating portfolios that ensure suffi-cient financial strength, while at the same time invest-ing heavily in extensive development and constructionactivities. In many ways, this is the same overall businessmodel as the “Oil Majors”. Eurowind Energy has defineda “Power Major” as a company that has a minimum ofapprox. 20 GW of generational capacity, a developmentportfolio of approx. 100 GW and annual constructionactivity of approx. 4 GW. Eurowind Energy holds the am-bition of becoming a “Power Major”.Therefore, Eurowind Energy has made the strategicdecision to hold on to operating assets in order to ensurea reoccurring revenue that can be invested in projectdevelopment and construction of new assets. That stra-tegy has been successful with 85% of the 2021/22 revenueoriginating from power sales. The recent financial yearwas marked by high power prices in Europe. However, anoperating portfolio of more than 800 MW wind and solarplants across Europe allows for an aggressive growthstrategy in the years to come, even in an environmentwith more moderate power prices.Previously, Eurowind Energy had a significant percent-age of the revenue from power sales secured throughsubsidies from the governments in core markets similarto Germany and Denmark. The remaining percentage ofthe power sales was done through relative short con-tracts and at the spot market.As wind and solar in almost all markets in recent yearsare being constructed without subsidies, corporate powerpurchase agreements (PPA) have begun to fill the roleof the long-term and secure power sales. In June 2022,Eurowind Energy entered into the company’s first PPA, a10-year agreement with the Danish dairy producer Arla,for the delivery of an estimated 137 GWh from Nørre ØkseSø Wind Farm in Denmark by 2025 and onward.Agreements similar to the Arla delivery will be a largerpart of the revenue stream going forward. As a conse-quence, Eurowind Energy has established a dedicatedteam in order to attract corporate customers, while alsodeveloping new products in a highly specialised andcompetitive market.Our stake in Norlys Energy Trading is expected to in-crease the profit of the Group, while at the same timemaximising the earnings potential of the Group’s powerproduction. The impact on the Group’s profit by the tra-ding setup is expected to gain further traction, as NorlysEnergy Trading continues to add competencies andexperience to the Company.GeographyEurowind Energy is present in 16 countries, either with sub-sidiaries or through partnerships with local developers. Itis the ambition to expand to 1-2 new markets every year.In order to minimise the currency risk, navigate in culturaldifferences and issues with time zones, Eurowind Energyhas previously seen the Eurozone as the primary area,but it has now expanded to the OECD area as the naturalgeographical boundary. In the future, this will remain thefocus for the establishment of new markets. However,should attractive opportunities arise outside these areas,they will be evaluated thoroughly. This is best exemplifiedby the entry into the US market and establishment of theEurowind Energy office in San Diego, California. In thelatest financial year, the group entered the Estonian andLatvian markets through partnerships with experiencedlocal partners. The entry into the Baltics will mainly focuson greenfield wind projects; to date a pipeline of projectsof approximately 1 GW is secured.So far, Eurowind Energy has never left a market com-pletely and there are no expectations to do so in theyears to come. In some situations, it has been prudentto focus on long-term project development, as changesto the regulatory situation have soured the market. As ageneral observation, there are often gains to be made tofocus long-term in troubled markets, while other projectdevelopers leave the market. That allows the retentionor even growth in development projects and employeecompetencies. The patient approach ensures a tangibleadvantage when the regulatory situation changes.Across markets there has been a significant ramp-upof staffing in order to realise the growth strategy of theGroup.TechnologyThe distribution in technology for the development pipelineis close to 50% wind and 50% solar PV-capacity wise, withDenmark and Poland carrying the majority of the solarportfolio. However production wise the ratio will be closerto 75% wind and 25% solar. While discussing technologies,it is important to underline that the initial outset of Euro-wind Energy group is unchangedEurowind Energy is a wind developer that also has theability to develop, construct and operate solar, batteries,electrolysers and other PtX technologies.The Group regards that the competencies within winddevelopment will provide a competitive advantage in thelong-term. The advantage also allows the Group to havesolutions with both wind, solar, storage and PtX produc-tion as the preferred technology solution.During the summer of 2022, Eurowind Energy announcedplans to construct five energy centres in Denmark. Thesewill be major centres where green energy is producedand processed on a very significant scale, having acombined power generation capacity of approximately2.5 GW.All five projects will include wind turbines, solar PV,batteries, and PtX (hydrogen production). In addition tothis, work is being done on how biogas and hydrogenrefining can become part of the centres. At the sametime, Eurowind Energy is working to include biogas as thenext step in the refining of hydrogen as part of the energycentres.The Group recognises a need for more locally producedbiogas in combination with green electricity production.The starting point is always the green power. However,more biogas will help to phase out the use of Russian gasand natural gas from the North Sea. This will also allowthe soil to preserve all nutrients through gasification in-stead of burning straw and other crops. Burning removesthe nutrients completely. When it comes to the refiningof hydrogen, it would be natural to carry out the processnear a CO2 source such as biogas.The concept of large energy centres can be exported. Inmost of the markets, including the US, Eurowind Energyexpects to be able to transfer the idea of energy centreswith very limited modifications.The hybrid parks and energy centres also provide substan-tial savings on grid connections and potential reinforce-ments of the grid, because wind and solar can share thesame grid connection, enabling a combined generationcapacity that is well above the capacity of the grid con-nection with only a small power loss as a consequence.When combining solar, wind and storage, there are otherfactors that come into play depending on the blend oflocal conditions of sun, wind, rain, clouds, etc. When thesun is strong and temperatures are high, the wind tendsto be weak. Converserly, the sunlight is limited when thewind is strong and the weather is very cloudy and rainywith high humidity.The ability to produce energy in a variety of weatherscenarios will allow the energy centres to provide morefull-load hours, which again make them very competi-tive in the fields of storage, hydrogen and the refining ofhydrogen.Power-to-XPower-to-XThe Power-to-X (PtX) section have experienced signifi-cant growth not only in Eurowind Energy but also glo-bally. We believe that PtX will play a significant role inthe future.Eurowind Energy has a strong and proven track recordin developing, constructing and operating renewableassets. By combining our knowledge in this area andadding the possibilities to transform green energy intohydrogen or e-methanol, Eurowind Energy will cover moreof the value chain.During 2021/22, Eurowind Energy has taken a signifi-cant steps into the PtX area especially through our twocommissioned hybrid energy parks and our announce-ment this summer regarding the plans to construct fiveenergy centres in Denmark. These will be major centreswhere green energy is produced and processed on a verysignificant scale, having a combined power generationcapacity of approximately 2.5 GW.Last year, we made some significant strategic part-nerships especially through Green Hydrogen Hub andGreenlab Skive. The objective for Green Hydrogen Hub isto develop the value chain for hydrogen and energy sto-rage networks to enable the integration of renewables.The project is progressing as planned. The same appliesfor Greenlab Skive – the construction of the wind park isongoing and is expected to be finished before year-end2022 and the PV part to be operational in the first half of2023. Both at Greenlab Skive and the two hybrid energyparks at Veddum Kær and St. Soels, we see great op-portunities for further development potential to includeelectrolysis and batteries.HeatingProjects are also in progress within the district heatingsector in Denmark. In Denmark, we have projects whichcan support the supply of green heating to householdsby using heat pumps powered by green energy from ourparks to produce heated water.Our business modelNew technologies - enablersPower-to-X1. OpportunitiesSee page 20Identifying opportunities are essential for creating business.Renewable Energy is used in downstream tech-Identification and screening opportunities are done throughnologies to produce green hydrogen throughour own offices, our partnerships, joint ventures and ex-electrolysis and by adding CO2creatingternal parties. We have in-depth knowledge of screeninge-methanol,the opportunities and only execute on the best. Once thesites have been identified, a thorough resource assessmentHeatingand analysis will be performed, including wind measure-Renewable energy is used to power heatments, negotiation of land leases, access to the area withpumps which creates heated water forlandowners and grid connection, as well as assessment ofdistrict heating to households,environmental impacts.2. DevelopmentWhen an area is assessed as suitable, we carry out thenecessary steps in cooperation with the authorities, bothnational and local, e.g. concerning permits. Our close re-lationship with landowners and developers ensures thatwe have a clear view of the risks involved in the develop-ment of the projects.3. Local involvementLocal residents and stakeholder involvement is essentialas early as possible in the process. It is important to un-derstand and address any concerns that they may have.At Eurowind Energy, the importance of a broad involve-ment is vital. Typically, local involvement includes closecontact to but not limited to: close neighbours of sites,landowners, local residents and municipalities.4. ConstructionBefore construction, we secure that all necessary per-mits are available, including legal due diligence of theproject’s permits as well as a financial due diligence. Wehave a strong track record for delivering projects andinfrastructure, such as cable and road on time and onbudget. The construction takes place in cooperation withand in compliance with all involved parties in the project.After a successful and turn-key construction, the windturbines or solar plants are prepared for grid connectionand commissioning.5. Power purchase agreementAs more and more markets are moving away from subsi-dies, corporate power purchase agreements (PPA) havebegun to fill the role of the need for long-term and securepower sales. PPAs are long-term contracts with a businessto deliver renewable power at an agreed price. PPAs aretypically made before the construction phase, but canalso occur at a later project stage.6. OperationAs part of our strategy of being an independent powerproducer, we aim to keep our ownership of the projectsand assets. After construction, the management of theparks is handed over to our asset management depart-ment to optimise the parks, which includes the technical,commercial and financial aspects.Main topics of the yearRecord year – highest sale of electricity and profitThe year 2021/22 marks a new era in Eurowind Energy.Eurowind Energy reached the highest sale of electricityand profit in the history of the Company. The sale of elec-tricity increased by 111% to EUR 148 million and the profitbefore tax increased 449% to EUR 115.5 million withoutany divestment.The main driver for these results are the high powerprices, which we have seen during 2021/22 despite belowaverage winds in our core markets. Further. the Group ex-perienced growth in construction activities. growth and aa significantly strengthened and diversified pipeline.The power prices reached an all time high level duringthe second half of 2021 and throughout the financialyear. Power prices in our core market, Denmark andGermany, have increased to levels significantly aboveprevious levels and in Germany, the subsidised fixedpower price was also significantly exceeded.Our affiliated company, Norlys Energy Trading, has beenable to benefit from the volatile energy prices in the Euro-pean market and has generated a very satisfying result.The Group’s performance underlines and consolidatesour long-term strategy of being an independent powerproducer, being a significant renewable player and tobecome a “Power major” in the market.Uncertainty in the marketThe war in Ukraine has further increased the inflation onraw materials and the lead time for e.g. wind turbines.This will impact and increase the investment cost in pro-jects both in the development and construction phase.Further, the power prices have reached the highest levelsin history and Western Europe wants to phase out Rus-sian gas. These factors makes the markets very volatile,so despite being a record year, we need to stay aheadand be focused to ensure that we can execute our strate-gy and contribute to the green transition.High construction activityOur EPC-department (Engineering, Procurement andConstruction) had a very busy year with constructionactivities in eight markets. We foresee that the high con-struction activity will continue is the years to come due toour strong pipeline being further developed and realised.The net-owned MW increased during the year, throughorganic growth and the remainder through other minorstrategic acquisitions. The net-owned MW increasedfrom 696 MW to 857 MW primarily driven by grid connec-ting our jointly owned Polish project Janikowo and our twohybrid energy parks at Veddum Kær and St. Soels in Den-mark. The energy parks are our first two hybrid parks witha combination of solar and wind utilising the same gridconnection – a setup that is the foundation for the largescale energy centres we plan to construct in the future.Corporate and project financingDue to the high activity level in all aspects of our business,the Group continues to have focus on securing financingon a corporate level as well as project financing.Last year, the Group strengthened the capital positionto support the strategy to build an increasing portfolioby issuing a Hybrid bond of EUR 60 million. During thecurrent year, the Group utilised the possibility of a secondtap and issued a Hybrid bond of EUR 50 million to furtherconsolidate our capital position and to further executeon our strategy to secure a significant expansion of MWownership and project development.The total Hybrid capital of EUR 110 million is being recog-nised as part of the equity, as the bondholder will step backfor other debt. The Hybrid capital is part of the equity,and the interest payment will be considered and bookedas dividend when paid. The interest amounts to 5.6% p.a.for the first tap and 5.8% p.a. for the second tap and bothtaps have a fixed interest level for 5½ years.The solvency ratio, including the minority interest and Hy-brid capital at the end of the year, is 37% compared to 32%at the beginning of the year, Including the Group’s subordi-nated loan, the solvency amounts to approximately 41%.The high activity in EPC requires a correspondingfinancing of the projects both in the construction phaseand afterwards as long-term project financing. Our Pro-ject Finance department has, during the year, secured atotal of 244 MW in six countriesOur Project Finance department has a strong knowledgeand experience in securing the financing at the right priceand the right time. Based on the current volatile market situ-ation, this knowledge and experience is key to the business.First corporate PPAPower Purchase Agreements (PPA) are becoming a moreand more integrated part of securing revenues as pro-jects on almost all markets in recent years are being con-structed without subsidies. In 2021/22, Eurowind Energyentered into the company’s first PPA, a 10-year agreementwith the Danish dairy producer Arla, for the delivery of anestimated 137 GW hours from Nørre Økse Sø Wind Farm.The construction of the project has already begun.We expect similar agreements going forward and it willbe a larger part of securing the future revenue stream.Therefore, Eurowind Energy has established a dedica-ted team to further develop this area in order to attractcorporate customers and develop new products in thishighly specialised and competitive market.PipelineThe Group has been successful in ensuring a significantincrease in the level of MW in new potential developmentprojects (pipeline). This has been done partly throughincreased focus and efforts in the development of our ownprojects, and acquisitions made in previous years, and part-ly through cooperation and partner agreements with localdevelopment companies in Denmark, the US and in Europe.Besides development of our pipeline, we have high focus onfurther development of our Power-to-X business area. Lastyear we made significant strategic partnerships especiallythrough Green Hydrogen Hub and Greenlab Skive – bothare progressing according to plan. At Greenlab Skive, wehave already started the construction of the 13 turbines andexpect the construction to be finished in the comingFurther during the summer, Eurowind Energy announcedplans to construct five energy centres in Denmark witha capacity of approximately 2.5 GW. All five projects willinclude wind turbines, solar PV, batteries, biogas, andPtX (hydrogen production). The Group recognises a needfor more locally produced biogas in combination withgreen electricity production. We see great potential inthe concept of large energy centres as the concept couldbe exported to other markets with very limited modifica-tions. The hybrid parks and energy centres also providesubstantial savings on grid connections and potentialreinforcements of the grid.Based on the above and the current market, the Groupexpects the pipeline to further increase in the comingyears.New marketsLast year, the Group reached an important milestoneby entering the US market. During this year, the positivedevelopment has continued and we can see projectsmaterialising in the US together with the establishment ofa local Eurowind Energy office in San Diego, California.This year, Eurowind Energy entered the Estonian andLatvian markets through partnerships with experiencedlocal partners. The entry into the Baltics will mainly focuson greenfield wind projects and further development ofthe existing pipeline of approximately 1 GW.Operational activitiesOwnershipAs an independent power producer, Eurowind Energy,directly or indirectly, owns approx. 103 operational windand solar parks in six countries with a total capacity of 857MW. The sale of electricity generates continuous revenueand returns. Income from the sale of electricity is thereforean important part of the business model and contributesto a significant proportion of the revenue. However, partof the revenue is also realised in associated companies orother equity investments. This part of the revenue cannotbe read under “Revenue” in the consolidated financialstatements. For these companies, only the profit after tax isincluded and is classified under the entries “Result of equi-ty investments in associates” and “Income from investmentthat are fixed assets”. However, these entries also containcompanies other than operational wind and solar projects.OperationThe result of wind and solar operations comprises EUR97.9 million (EUR 9.1 million in 2020/21), which is the highestprofit ever recorded in Eurowind Energy’s history andmore than exceeds our target. The sale of electricityincreased by 114% to EUR 169.7 million - more than doublecompared to last year and this is the highest sale of elec-tricity recorded within the Group. On top of this, the MWamount also increased during the year, mainly driven bya large Polish project and grid connection of two Da-nish hybrid energy parks. In addition to this, we acquiredthe remaining 51% of the energy park St. Soels project,effectively making Eurowind Energy the sole owner of theproject from the beginning of 2022.The main drivers behind the result of operating projectsare• High power prices throughout the financial year• Added capacity during the year• Average wind index in our core market was lowerthan normalThe power prices reached an all time high level duringthe second half of 2021 and continued to be at a highlevel during the first half of 2022. The high power pricescharacterised our core markets, Denmark and Germany,as well as Poland. Partly offsetting the high power priceswas the lower wind and lower production than expected inour core markets. The overall wind index for Denmark forthe period was 97% and for Germany 92%. Both Denmarkand Germany were characterised by lighter winds in thesecond half of 2021 and an above average for the first halfof 2022.A satisfactory overall return on the portfolio is also ex-pected in the future.No divestment has been made during the year and thestrategy is to build up our portfolio of our own developedassets, which is also reflected over the past five years.The sale-of-electricity share of EBITDA comprises morethan the full EBITDA amount due to no divestments wasmade. The long-term objective is still that the EBITDAfrom the sale of electricity continues to be the significantdriver for our total EBITDA. This has also been realisedboth in percentage and nominal terms for the past fiveyears. The result for the current year confirms the under-lying strong earnings from operating assets.The banks’ interest in project financing is unchanged,which ensures the possibility for refinancing as well asfinancing of our projects. The current events in the mar-ket in 2021/22 in relation to increased energy prices anduncertainties due to the war in Ukraine have increasedthe inflation and also the interest levels. A substantialpart of our operational parks have a fixed interest rate.The Group owns a net total of 809 MW wind turbines and48 MW solar projects at the end of the financial year. Ourcore markets are still Germany and Denmark and this willcontinue to be the case. During the year, we have seen asignificant increase in our Polish portfolio, and expect thistrend to continue in the coming years. Further, we expectto see an increase in the share of solar in our portfolio,which will also tend to equal out the revenue streamduring the year. Our own total portfolio will produce 1,973GWh. which corresponds to the consumption of close to500.000 households.Asset managementTechnical and commercial managementThe asset management team delivers a 360-degreesview and analysis of each park. The team is structured,dedicated and delivers optimal services optimising theindividual parks across Europe.The asset management team is continuously workingon creating a strong and efficient system for handlingthe operating companies. for the purpose of optimisingthe operation and management of each turbine andsolar park. Understanding our customers' expectations ishighly prioritised and our work is centralised around thisto ensure the best possible and most effective executionof the processes in the management of wind and solarprojects. The asset management team monitors andanalyses the performance of the parks with the view ofimproving the strategy for production and cost structureincluding refinancing and repowering. The asset manage-ment team strives to identify risks and other factors earlyto reduce any impact of the assets and performance.The growth in technical and commercial managementcontinues. The increase is mainly due to organic growthwithin our portfolio, based on our own projects that wehave developed and built. However, new customers havealso been added. Currently, the Company has 1.616 MWunder management. Our portfolio under asset manage-ment will produce a total of 3.623 GWh. which corre-sponds to more than 900.000 households being suppliedwith green energy.The asset management portfolio increased by 13%. Withinthe strategy to become a “Power major” we also havea goal to significantly increase the MW under manage-ment in the coming years. The asset management willcontinue to expand both organically through strongconstruction activities and by adding new customers.Projects in development and constructionDevelopmentDuring the year, the Group has continued to grow ourproject development pipeline activities by 42% to 25.5GW.The pipeline includes projects starting from greenfield,acquisition of ready-to-build projects and partnering.Within the year and going forward, we expect thepipeline to include more PtX projects. In June 2022, weannounced plans to construct five energy centres inDenmark with a capacity of approximately 2.5 GW. Allfive projects will include wind turbines, solar PV, batteries,biogas, and PtX (hydrogen production).We are currently active in 16 countries globally and haveestablished local offices in almost all countries. It is im-portant to have a broad geographical presence and tohave local presence for the projects to succeed and forsecuring new projects. This is in line with our long-termstrategy to build a strong pipeline, which can ensurea significant increase of the ownership of MW and thedevelopment of projects. The continuous increase in thepipeline has been created by means of a high focus onthe development of our own projects both organic andfrom prior years' acquisitions, including strategic partner-ships in Europe and the US.The dominant countries in the pipeline continue to beDenmark and Poland, but we see other countries such asRomania building a substantial pipeline. Our distributionin technologies are close to a 50/50 split between windand solar. Eurowind Energy are always seeking to opti-mise our projects by looking at e.g. access to grid con-nection points and where is it possible to combine bothwind and solar to create a hybrid park or lookingat the possibility of creating Power-to-X.With a strong pipeline and knowhow, we believe theGroup has a strong standpoint for the coming years,where we will see more changes in settlement systemsand auction offerings in several countries to beimplemented.ConstructionOur EPC department (Engineering, Procurement andConstruction) had a very busy year as the Groups, con-struction activity in 2020/21 reached 631.5 MW in eightcountries. To handle last years, increase in constructionactivity and the expected high activity in the future, ourEPC department has significantly increased the numberof people.During 2021/22, many of the projects were grid con-nected and started producing green energy. The maingrid connected projects in 2021/22 are in Denmark andPolandGrid connections in 2021/22The projects were added to our asset managementportfolio. With the continued high construction activity,we expect to see a significant increase both in our ownportfolio as well as in the asset management portfolio.Some projects have experienced various delays duringthe year, but at the end of the financial year many of theprojects were either completely finished or close to beingfinalised and only awaiting grid connection. The delaysmainly accounted for delivery delays due to freight issuesand delays in grid connection works from Utilities. There-fore, during the first six month of 2022/23 several projectsof more than 100 MW will be grid connected.At the end of the fiscal year, we had construction acti-vities at 31 sites totalling 481 MW still in eight countries.Denmark and Sweden consist primarily of few largerprojects totalling 202 MW in contrast to Poland where is itprimarily smaller projects totalling 170 MW. We expect tosee countries, particularly Romania and the US, bringingprojects into the construction phase over the next coupleof years. We foresee that the high construction activitywill continue in the years to come due to our strong pipe-line being further developed and brought to the ready-to-build stage. Main focus is still on wind projects as, ingeneral, they have two to three times higher productioncapacity, per installed MW than solar, but we still expectto see more solar projects in the future.During the year we have seen several disruption fac-tors such as the shipping market being challenged andcurrently the war in Ukraine. These factors have furtherincreased the inflation on raw materials and the leadtime for e.g. wind turbines, which might impact the timingof construction and increase the investment cost inprojects.The development in energy prices is very uncertain andvolatile, so despite being a record year in many aspectswe need to stay ahead and focused to ensure that wecan execute our strategy and contribute to the greentransition to deliver affordable green energy. Our EPChas great knowledge and through effective procurementwe aim to mitigate these risks to ensure feasible con-struction and viable projects.Financial performance'Income statement'RevenueEurowind Energy's revenue increased 30% to EUR 173million. Revenue reached the highest levels in the historyof the Company. The main driver is the high power prices,which were maintained throughout the year. The highpower prices were partly offset by the lighter winds andlower production than expected in our core markets Den-mark and Germany. The overall wind index for Denmarkfor the period was 97% and for Germany 92%. Both Den-mark and Germany were characterised by lighter windsin the second half of 2021 and an above average for thefirst half of 2022.The revenue was obtained through our reoccurring activi-ties; sale of electricity and asset management, whichaccounted for 88% of the total sales as no divestment ofoperating parks were made in 2021/22. This is in line withour strategy to increase our reoccurring revenue.The Group’s share of the sale of electricity from our opera-tional wind and solar parks continues to be a significantpart of the total profits, which creates a strong basis forthe Group. The share will vary, based on the performanceof the operating portfolio and on the number of divest-ments made during the year.'Gross profitThe gross profit amounted to EUR 127 million and a grossmargin of 73%. The gross margin increased compared tolast year as sale of electricity has a high margin and nodivestment was made during 2021/22.'Profit before taxThe realised profit before tax is EUR 115.5 million, which ismore than 5 times larger than last year.The main components are• High reoccuring revenue from operational parks• High profit from Norlys Energy TradingOur reoccuring revenue was high leading to an increasedprofit. Staff costs increased due to increased activity andgrowth in general. Results from associated companiesincreased significantly primarily due to Norlys EnergyTrading, which delivered a very satisfactory result.Further, our large jointly owned Polish wind park Janikowo,was commissioned in December 2021 and produced agreat result. Lastly, Management changed the depreci-ation period for our operational wind- and PV parks from20-25 years to 25-30 year, positively affecting the profitbefore tax by EUR 10.5 million.'Balance sheetWTG/PV projectsDuring the year, we increased our WTG/PV projects byEUR 56 million and our assets under construction byEUR 99 million, which constitutes our strategy of beingan independent power producer. The increase in ouroperational assets was primarily due to the commission-ing of Overgaard part two and our two hybrid energyparks at St. Soels and Veddum Kær. Our assets underconstruction also grew in line with expectations and weexpect most of the assets under construction to becomeoperational within the coming year. Further, we have sev-eral construction projects where we own 50%, which areexpected to bring value to the Group in the coming years.'Equity investments in associatesOur investments in associates have increased significantly.This is primarily due to our share in Norlys Energy Tradingas they delivered a very strong result for the period.'Equity and capital positionEquity, including minority interests and the Hybrid capi-tal, amounts to EUR 416.8 million (EUR 280.6 million in2020/21).The increase is the result of mainly two factors• Realised earnings in 2021/22• An additional tap of our existing Hybrid bond ofEUR 50 millionThe Group’s capital position and solvency are significant-ly strengthened, and support the strategy to build anincreasing portfolio. The tap on our existing Hybrid bondof EUR 50 million is to further consolidate our capital posi-tion and be strengthened for the future.The equity ratio of the Group including the Hybrid capitaland minority interests, is 37% (32% in 2020/21). The solven-cy in the Group, incl. the subordinated loan, is 41%.'Cash flowThe cash flows from operating assets comprise EUR 85.2million for the Group (EUR 35.5 million in 2020/21). Theoperating activities are positively affected by our highearnings during the year.Cash flow from investing activities amounts to EUR -199.2million due to our high construction activity, as we haveincreased our operational and construction capacity.Cash flow from financing activities amounting to EUR120.2 million are positively affected by the issued Hybridbond of EUR 50 million. Further, the long-term borrowinghave increased due to our high activity and operationallevels.The Group prepares monthly cash forecasts for aminimum of 12 months ahead. Among other things, theforecast is used as a key management tool in connectionwith decisions to start new projects "ready-to-build" andpurchase of projects.