2023-02-15 07:30

Scandinavian Biogas Year-End report 2022

SCANDINAVIAN BIOGAS BUILDS LARGE-SCALE PLANT IN MÖNSTERÅS

Significant events in the fourth quarter of 2022

• The Board took a final investment decision to build a new large-scale biogas plant in Mönsterås.
• Profitability is significantly impacted by lost revenues and increased costs mainly related to the start-up of Skogn II.
• A directed share issue totalling SEK 326 million before transaction costs was completed in November 2022.
• The Södertörn and Henriksdal facilities underwent ISCC certification in December 2022 and will hold ISCC certificates as of 1 January 2023.
• A multi-year cooperation agreement worth approximately SEK 300 million was signed for the supply of Bio-LNG to the transport sector in the Nordic region.
• The order book at the end of the quarter totalled 2.4 TWh, and contracts for the supply of raw materials totalled 2.4 TWh.
• The tribunal at the European Court of Justice rejected the EU Commission’s decision to grant Sweden’s application for tax exemption for biogas 2020-2030. The verdict increases the risk of impaired market conditions in Sweden.

FOURTH QUARTER RESULTS 2022

• Energy sold, adjusted for the natural gas business closed in 2021, decreased by 8.5% and totalled 80.0 (87.5) GWh.
• Net sales, adjusted for the natural gas business closed in 2021, decreased by 2.6%. Net sales totalled SEK 92.0 (104.8) million.
• Total revenue, including capitalised work, decreased by 13.6% and amounted to SEK 107.6 (124.6) million.
• EBITDA was SEK -2.1 (22.7) million.
• Operating EBITDA was SEK -4.1 (18.6) million.
• Operating EBITDA margin was -4.1% (16.1%).
• Profit/loss after tax was SEK -13.8 (1.1) million.
• Basic and diluted earnings per share was SEK -0.32 (0.04).
• Cash flow from operating activities was SEK 9.1 (11.3) million.
• The Group’s equity/assets ratio was 38.6% (30.2%).

Results and Events in 2022

• Energy sold decreased by 10.4% to 328.1 (366.3) GWh. Adjusted for the natural gas distribution business that closed in 2021, the decrease was 4.3%.
• Net sales totalled SEK 366.7 (393.8) million, representing a decrease of 6.9%.
• The production subsidy for biogas in Sweden was not paid for the first half of the year, only from 1 July 2022.
• EBITDA was SEK 19.7 (90.1) million.
• Operating EBITDA was SEK 16.4 (80.9) million.
• Operating EBITDA margin was 4.3% (19.2%).
• Long-term objective for 2026 and 2030 defined: 1.2 TWh and 3 TWh biogas production, respectively.
• Significant supply contract for Bio-LNG equivalent to 1 TWh was signed with the German distributor Alternoil.
• Climate Leap initiative has granted SEK 154 million in investment grants for a biogas project in Örkelljunga municipality.
• Long-term performance-based incentive program is implemented in accordance with the resolution of the 2022 AGM
• The commissioning of Skogn II in Norway began.

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD

• 15.3% of the shares in Scandinavian Biogas Mönsterås AB have been acquired by Mönsterås Biogas AB, which is jointly owned by farmers in the area around Mönsterås.

GROUP	3 months			12 months
	Oct–Dec	Oct–Dec	∆	Jan–Dec	Jan–Dec	∆
SEK million, unless otherwise stated	2022	2021		2022	2021
Sold GWh	80.0	93.3	-14.2%	328.1	366.3	-10.4%
Net sales	92.0	104.8	-12.3%	366.7	393.8	-6.9%
Other revenue	10.6	14.5	-26.8%	20.3	36.6	-44.4%
Total revenue, including capitalised work	107.6	124.6	-13.6%	407.4	451.1	-9.7%
EBITDA	-2.1	22.7	-109.3%	19.7	90.1	-78.1%
Operating EBITDA	-4.1	18.6	-122.0%	16.4	80.9	-79.7%
Operating EBITDA %	-4.1%	16.1%	-20.2pp	4.3%	19.2%	-14.9pp
Operating profit/loss	-24.0	-1.7	n/a	-65.2	5.0	n/a
Earnings per share (SEK)	-0.32	0.04	n/a	-1.95	-1.27	53.6%
Cash flow from operating activities	9.1	11.3	-19.6%	7.4	55.7	-86.8%
Equity/assets ratio	38.6%	30.2%	8.4pp	38.6%	30.2%	8.4pp

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CEO STATEMENT

Strategically stronger – continued focus on operational
challenges

Demand for biogas is driven by EU requirements for green transformation in heavy transport, shipping and industry. Russian fossil gas has been partly replaced by imports of liquid fossil gas, which is very positive for the use of Bio-LNG.

Clear political objectives have improved the conditions in Europe, but uniform guidelines still need to be created if the market is to be able to expand production capacity at the required rate.

New flows of organic waste also need to be developed as industrial and sewage sludge and sorted food waste are not sufficient to cover the volumes needed. In general, there is no shortage of sustainable substrates in Europe, but future facilities need to be built for the con-version of agricultural substrates. Our growth plans focus on building local biogas plants where farms with livestock create a circular system as manure is con-verted into Bio-LNG and bio-manure returned to the fields.

Liquefied biogas prices, which peaked in September, have stabilised at a significantly higher level than the average for our existing contracts. In the fourth quarter, we signed a multi-year agreement worth approximately SEK 300 million for the supply of Bio-LNG to the transport sector in the Nordic region. For 2022, we received an average of SEK 900 per MWh. In the second half of 2023, about 30% of our supply volumes will be based on new market prices for gas and green certificates.

OPERATIONAL CHALLENGES CONTINUED

The fourth quarter was unexpectedly weak, with several disruptions causing energy sales, adjusted for the closed natural gas business, to fall by 8.5 percent.

The lower sales in comparable units are mainly ex-plained by the fact that we chose not to maximise production in Södertörn, as high prices made the use of glycerine impossible also in the fourth quarter. We are working to reach full capacity utilisation by establishing other substrate streams, such as manure and slaughter-house waste. However, the new substrates require some technical adaptations.

In Skogn II, start-up problems with the liquefaction plant caused lost production when a number of GWh of Bio-LNG had to be flared, in addition to higher costs for substrates, electricity and chemicals. Skogn also faced challenges with temporarily increased costs for the post-processing of digestate.

In Korea, production remained stable with slightly higher net sales.

For the Group, net sales, adjusted for the natural gas business closed in 2021, decreased by 2.6 percent in the quarter. Other income, which mainly included biogas subsidies of SEK 7.7 (4.1) million, decreased to SEK 10.6 (14.5) million. Lower revenues combined with increased costs for the commissioning of Skogn II, as well as higher substrate and production costs for electricity and chemicals, resulted in Operating EBITDA of SEK -4.1 (18.6) million.

FOCUS ON GROWTH

We passed several strategic milestones in the fourth quarter, and I am very pleased with the company’s progress towards our growth plan. In November, we completed a directed share issue and raised SEK 326 million, before transaction costs, at a premium of 62%. We also restructured our SEK 300 million revolving credit facility, securing the financing of the Mönsterås project and enabling us to make final investment deci-sion.

Work on the expansion of the Södertörn liquefaction plant is proceeding according to plan. During the quarter, we also completed a rebuild of the dewatering plant, which significantly increased our capacity to handle and transport biofertiliser.

In parallel with ongoing new plant and expansion projects, we are actively pursuing business development to capture growth opportunities in the agricultural sector where large-scale biogas production in Northern Europe is in demand, to enable green transformation in transport, shipping, industry and food production.

NEW ORGANISATION AND SOLIDIFIED EXPERTISE

The new organisation launched in February 2022 has been a success, and we have strengthened the organisation with about ten people in 2022. We also carried out ISCC certification at Södertörn and Henriksdal, and the facilities received ISCC certificates from 1 January 2023. The certificates enable sales at higher prices on the Bio-LNG export market.

OUTLOOK

Our communicated goals for 2024 are firm. However, as in the past, a challenge remains for the operating EBITDA margin in 2023, resulting from the existing portfolio of long supply contracts with fixed prices that limit our ability to compensate for increased substrate and production costs. The situation will improve as fixed contracts expire and are replaced by market-based contracts, while we increase sales of Bio-LNG to the German market.

I would like to conclude by thanking all the staff for their great commitment. It’s not always easy to run the train while we lay the rails, but you do a fantastic job every day, despite the odd challenge along the way. Well done!

Welcome to press and analysts Teams meeting on 15 february at 10:00 CET
Investors, analysts and media are invited to a Teams presentation, where CEO Matti Vikkula and CFO Anna Budzynski will give a brief presentation of the report followed by a Q&A session.The presentation will be given in English and recorded in order to be made available online afterwards. To participate in the conference, click on this TEAMS link.

This disclosure contains information that Scandinavian Biogas Fuels International AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 15-02-2023 07:30 CET.

For further information, please contact:
Matti Vikkula CEO, Scandinavian Biogas
Mobile +46 (0) 70 597 99 38
E mail matti.vikkula(at)scandinavianbiogas.com

Scandinavian Biogas is a leading Nordic producer of biogas for vehicle fuel and fertilizer. Biogas is CO2-neutral and made from sewage and household, agriculture as well as industrial organic waste. Today Scandinavian Biogas has facilities in Sweden, Norway and Korea. In 2022, the company delivered 328 GWh of energy. Scandinavian Biogas has over 105 employees and total revenue of SEK 407 million in 2022. The head office is located in Stockholm and the company is listed on Nasdaq First North Growth Premier Market. Certified advisor is Erik Penser Bank AB, telephone: +46 (0) 8-463 80 00, certifiedadviser(at)penser.se. www.scandinavianbiogas.com

• Scandinavian Biogas Year-End 2022 and Q4 report