Solaria Energía y Medio Ambiente, S.A. (SLR) Earnings Call Transcript

Good afternoon, everyone, and welcome to Solaria 2026 First Half Results Webcast. My name is David Guengant, the Head of IR of Solaria. I am joined today by Dario Lopez, our Chief Operating Officer. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. During this presentation, we'll begin with an overview of the results and the main development during the period given by our COO, Dario. Following this, we'll move to the Q&A session. And I will also like to highlight that you have to submit all your questions via the web. Thank you very much again, and I will now hand over the word to Dario.

If we go to see the numbers of this first half of the year, we want to highlight the results we have are the best results ever of Solaria. We had the best P&L and the best balance sheet for a history of Solaria just going into the details, for example, in terms of production, we have increased 51% compared with the last year. We have reached EUR 100 million in sales in 6 months for our infra business, proving how resilient and stable it can be. EBITDA, we have reached EUR 210 million, which is a 50% increase versus the last year this also means that we have reached in the first half of this year, 64% of the target of this year, okay. In terms of the profits, we have uncreated 52%, reaching EUR 122 million and at the same time investment for more than EUR 276 million. And what is even more important, we have been able to reduce the leverage from 1.4x to 3.9x. We think that in terms of the financial situation of the company, these have very good results, and we can be all proud. But we don't settle here. We want more. That is why we have started an efficiency program. It's a cost efficiency and capital efficiency program that I will explain later. And finally, for the second half, we see an even better situation. First of all, we see very good prices of energy. We have already seen the price of Q3, and we have a very promising Q4. And finally, of course, we will have and we will give more updates about the next Capital Markets Day. Just a brief summary on what we see in Q3. Solar price has increased 75%. Our generation has increased 30%. And our merchant capability that I will call optimized merchant because today, we have mechanisms to extract more value from the energy we have in merchant. You know what I'm talking about. We are talking about the energy management that we have and the best capabilities that we are introducing, but we see a very good Q3. If we talk about the first half of the year, first I want to highlight is the relevant increase in the production of energy, 51% increase, which is relevant. We will be almost in double by the end of this year, hopefully. And what is very important, Infra. Infra, we have increased significantly. We have almost reached, as I explained before, EUR 100 million. I think this infra business that is mainly based in the power land business and on these data center technologies, we have been able to provide recurrence and stability that proves the resilience of this business line. In terms of the EBITDA, as I explained before, we have reached EUR 210 million, which is, I think, a very good number. We are today at 64% of the achievement of the yearly results. And here, I want to be very clear. I want to reaffirm the objectives that we have in terms of EBITDA that I will repeat. This year, already is EUR 331 million that we already obtained EUR 210 million. For 2027, EUR 456 million for 2028, EUR I want to reaffirm our commitment with this EBITDA of the company. At the same time, we have improved significantly the financial effect of our company. First of all, we have -- we have managed to do this with a huge investment. We have invested more than EUR 276 million during this first half of the year. But at the same time, we have improved the numbers of the company. I want to highlight, first of all, for example, the net financial debt versus EBITDA that has gone to 3.9 versus 5.4% that we had last year. I think it's -- and this number will improve in the next months, okay? Also, the project debt has improved from 84% to 91% and the fixed versus debt in this moment of uncertainty and movement of interest rates, we have increased to 84% of fixed rate versus total debt, okay? If you allow me to compare where we are today from the point where we were in the last Capital Markets Day or what we talked in the last Capital Markets Day, I would like to highlight several points and to prove that we are delivering, and we are committed to deliver. And these numbers are the best proof of that. First of all, we reached the objective for last year of '25. We promised ILS 250 million EBITDA. We reached ILS 266 million. We exceeded this number. Second, this year, we promised ILS 331 million. We are at 210 million, and we have -- and this is half of this year with 64%. We're on track, I would say, okay? In terms of the net debt versus EBITDA, as I have explained before, we have speed up the achievement of this objective where we are now at 3.9 versus 5.4 and this is very important to prove in this moment of uncertainty, the good financial health of the company. In terms of production capacity, we have reached 3.1 gigawatts. We will reach more 3.6 at the end of this year. And I want to be very clear here. We have to be profitable. We -- our growth has to be profitable. Just making megawatts for making megawatts doesn't make any sense. We make money. We do not make only megawatts. I want to be very clear about this. In terms of the development of long-term contracts and PPAs, we have signed PPAs for more than 400 megawatts, also based agreements. well, I think we have more than delivered here. In terms of the batteries, which is a relevant point, we had installed 45 megawatts. Today, we are above 120 megawatts hour. And this capacity will be multiplied significantly, will be increased significantly in the next months. This provides what they have called the optimized merchant and provides much higher value than any other technology at this moment. And not less important, expansion into Europe. We obtained the environmental approval of the largest project in Italy. It's Spinatsola. It's one of the large -- in fact, the largest project is in Italy right now. And it's the next flagship project. We completed successfully Trig, completed successfully Carona and now a Spin Sola. We provide very good values of Solaria. We said before, for us, this is not enough. We want more. That is why we have started a capital efficiency and cost efficiency program, where we expect to obtain another EUR 7 million of savings of additional savings. This is a 12-year program. We have already completed roughly 50%, and this will allow us to improve significantly the results. In terms of cost efficiency, for us, there is a significant cost reduction in terms of personnel, it's very simple. We have all the products and mega is that it's common in the market. But in addition, we have now -- our growth now is leveraged. It can be based on existing capabilities and existing assets. This allows us to be more efficient in terms of the cost and in terms of the and the people and the thing that we need to do it. I mean this allows us to be more efficient and to make more money. And not only that, I mean, in a moment where the capital -- the cost of the capital, the cost of the interest rates is increasing. What we are doing right now, we are improving the quality of our debt. We are removing expensive debt, to be clear, and we are focusing on having a good debt and which is very important, the investment discipline, I think this is critical. This is something that we have been our character. The origin salary has always been this point. We had to be the most efficient. And we will be the same. I mean, making megawatts is not the business. It's making money. I will be very clear on this. So why we maintain our objective to develop all the projects which provide at least minimum 12% IRR, and we have them. And the best part is that we have them, we have very good projects providing these very good results, okay? If we talk a little bit about the future prices, what we see or what we have seen in the first half of the year, we saw similar pass to last year Q3 explained, we have seen a significant increase in the net prices, and we see also a relevant increase of the price of the energy, solar energy in fact for the future. Also don't forget, and we have said that we have what we call the optimized merchant with all these mechanisms, this dispatch of energy, these batteries that will allow us to optimize even more the energy. The price of the energy that we see okay? Well, in terms of the assets, we have already developed a huge asset base. I don't know how many companies can say that that have created the base of assets has been PB. Now it's a lot of batteries, which is quite innovative, and this will allow and provide much more value in the very short term. Well, just to summarize, we think that the first half has been really good in terms of EBITDA. That is our main target and is our objective we have provided only in the first 6 months, 64% of the objective. The balance sheet of the company is much stronger than 1 year ago. We are prepared also to keep growing with profitable growth. And second, we see a very good perspective for the second half of the year just based only on these numbers that we have explained before of the prices and what we see in the markets. Okay. And finally, we will provide more details, more strategic insight, more projections. We will not disappoint. Last year, we made -- we had a very interesting Capital Market's Day. Many of you were there. This year, will be even better, okay? So Bookenda, closure agendas right now, 7 November, London, 18th November, New York.

Thank you, Dario. I will now open for a Q&A session. And once again, thank you for all the time. Just test us 1 minute. First question comes from Fernando Garcia from RBC. First question is regarding DC data center. Have we collected all money in infra revenue from DC in H1 2026. The second question from Fernando and from other analysts are related to if we have any comment on Spanish data center regulatory proposal, any feedback from this consultation and if we have stopped conversation about this agreed because of this drag on DC.

Thank you. Yes, -- of course, we sign content and we have milestones to collect money. Of course, yes, does it make sense if not. Royal Decree yes, I mean, there has been a lot of noise about this range. This royal decree for us is really good. It puts the value in what we think it should be. You know energy is critical, not only connection potential energy is critical for data center. And this Royal Decree gives value to the energy and the quality of the synergy. And for very really good because it allows us to provide. We are able to deliver on the requirements of this real decree. And in fact, we have been approached by different groups, different more data center players that have approached us in the recent weeks after the Italia decree to work with us to be able to deliver to fulfill the requirements of this trial degree.

Next question come from Christian Salis from Cantor. I'm sorry about that, but I cannot take all your questions. So I will try to do my best. First question from Christian is related to Power and project. On the -- of the 3.4 gigawatts power lend project, only once 12 gigawatts are located in Spain. Can we provide any update on the current progress on the remaining 2 gigawatts out of Spain? And second question from Christian is on BES. You have now 120-megawatt hour operating and want to reach another 1.2 gigawatts over by year-end. This looks ambitious and is out of that.

Regarding the first question, yes, we have a good portfolio of projects. Yes, we have been able to close very nice deals here in Spain. We will continue closing deals in Spain. -- so with the support of the offer here and also these new regulations. But as outside, okay, for example, I want to highlight the project that we have in the south of Italy. We have one of the largest projects. We have 400 megawatts secured in the South Italy with the connection with the land and with very advanced permitting. It's a pit that we are receiving a lot of interest because of the size, because of the quality of the development well it's yes, we are developing, and we will have more projects in different places as so to diversify our portfolio. In terms of the batteries, yes, we have now relevant development in batteries. As we said in the past, our main limitation was always the permitting. Now the permitting, let's say, is not in the equation. It's not on the table because it's easier. We have the cable lines. We have the infra -- it's in our hands. So that is why I feel extremely comfortable with the development of batteries.

Next question is coming from Alex and from Bank of America. Can we effectively capture the higher price power prices in Q3 and Q4 during solar hours, -- would you be able to hedge this in advance -- are we planning to reduce the merchant exposure below 35%.

Yes, I mean, of course, we are able with this situation of prices, the poison that I have highlighted here is a solar prices, solar energy prices that as you can see are really good. But in addition, I have talked before about the optimized merchant. This Times merchant is possible as long as you manage your energy, that is something that Solaria do not everyone can do. But in our case, we have been developing our capabilities, our dispatch of energy, we have our own trading unit for energy and with batteries, we cannot only capture this, but we can capture even more value because here is but as we say, my merchant energy is not solar anymore. It's something more than solar. Well, regarding the plan exposure, I mean if I do this, I reduced my business. So I wouldn't make any sense for me. I mean this merchant exposure, as long as I'm first I have very good prices. And also, I can even optimize them much more with batteries. So I mean for me, with the machines has now to close. I mean, hopefully, I will have more.

Next question comes from Flora from Caixa Bank. First question is regarding the Infrastructure segment. Can we have to understand if the EUR 100 million EBITDA counting in the H1 means effective cash in. Second question, are we maintaining the full year 2026 EBITDA guidance and the result of that? And it would mean a limited contribution from the infra segment in the second half.

Yes. I mean, of course, it before, if we close contracts and we have milestones, we have to cash in the contract yes, obviously. And second, yes, I have also mentioned before, in terms of EBITDA targets, I reiterate the EUR 331 million EBITDA tariff for 2026. I think you have enough information to see how close we are but also for the next year, 2028 and reiterate all the EBITDA auditors of the company.

Next question is coming from Victor Peiro from GVC Gaesco. Can we provide some color on the wind hybridization plan?

Yes, of course. As you know, we have received recently our first environmental authorization for one of the largest projects in-- which for us is an important milestone. And we have Solaria, as we have many times, is not anymore only a company. We have best, we have win, we will have in very soon. In terms of this milestone, I mean this is also in this very special project of Caronia, where we have batteries, we have wind, we have data centers. We have many things will approve what we can really -- and yes, and more will come in the very short term in terms of all the authorization for wind energy.