Pure New Energy – PNE AG

What is Pure New Energy – PNE AG ?

PNE AG – Pure New Energy is the leading developer of renewable energy projects in Germany. It is active in 12 countries across 3 continents. Traditionally, it has been focused on developing and selling wind farms. However, PNE changed its strategy last year. Its new business model consists of combining the development of its own portfolio of assets and its traditional developing business. It is expanding into PV projects.

Apart from the construction of projects and sell of energy. PNE also diversify its revenues via the operation and management of the wind farms and PPA brokerage.

Portfolio of Pure New Energy – The wind company

The portfolio of PNE is mainly concentrated in Germany, but in the last 2 years, it has started an international expansion. Nowadays, it has a considerable pipeline in several countries apart from Germany such as France, Canada, South Africa, Turkey and the US.

It is noteworthy that PNE has maintained a very high level with projects of currently approximately 681 MW in the approval phase in Germany and France.

PNE AG Wind portfolio
Source: PNE
PNE AG PV Portfolio
Source: PNE

Business Plan of Pure New Energy

PNE is focused on developing 500MW for its own portfolio in 2023.PNE’s own wind farm portfolio will be expanded by two wind farms (Boitzenhagen: 25 MW, Zahrenholz: 21.6 MW). This will increase portfolio capacity by 46.6 MW to 176.6 MW. Both wind farms are scheduled to go into operation next year.

Apart from this, it will continue doing the EPC work both in the wind and solar. Moreover, it is doing research on new technologies related to storage and Power-to-gas. It expects to be able to commercialise in the coming years. Additionally, PNE also offers consulting services related to renewable energy. It has a niche market mainly in Germany.

Traditionally, PNE’s projects have been in developed countries. However, now it is starting to focus on developing countries such as South Africa and Romania for the Wind farms and Panama for the PV energy. PNE is becoming a very strong player in Polar where it has delivered 2 wind farm so far this year. The pipeline of onshore wind energy projects was expanded to approximately 5,241 MW (Q2/20: 5,176 MW)

Operations of Pure New Energy

PNE business has been impacted by Covid-19, and it has resulted in delays for the approval procedures and project postponements. At the same time, manufacturers of wind power turbines report longer delivery times. Currently, PNE owns a portfolio of 130MW of wind parks producing an EBITDA of €13MM /year. However, the main segment is the develop and sell of projects (EPC). In this segment, PNE is building both onshore and offshore farms as well as PV projects.

The Project development segment is the biggest segment of PNE. It includes several subsegment such as Onshore wind farms (national and international), Offshore Wind farms and PV division. The total aggregate output for the first 9 months of 2020 was €85MM in sales with an EBITDA of €13.4MM

The service products segment accounts for around €4.5MM/year. These PNE services include technical and commercial operations management, construction management, transformer station services, wind planning, electricity marketing management, and similar services.

The PNE electricity generation segment includes PNE-operated wind farms with a nominal capacity of 130.1 MW. Additionally, it also includes the Silbitz biomass power plant of around 5.6 MW.

PPA brokerage as a new business for PNE since 2019. The company has recently concluded contracts with wind farm operators for electricity from wind turbines amounting to ca. 400 GWh. An additional capacity of 1.2 TWh is in the final negotiation stage.

PNE EBITDA and total output
Source:PNE

Financials

PNE AG – Pure New Energy results have varied hugely during the last years. It is because of the EPC component of the business. Whenever PNE sold a project, the results of that quarter grew a lot compared to other quarters. PNE aims to diminish this volatility by building its own portfolio of assets, as the selling of energy segment is much more stable.

Moreover, as the are financing the construction of its own portfolio, its results are impacted as PNE is allocating a considerable part of its working force and resources into this, and PNE is not monetising this so far.

PNE Sales forecast for this FY20 is €100MM with a target EBITDA OF €15MM, EBIT forecasted is €6MM which involves a margin of 6%. The EPS for 2020 is expected to be slightly negative as a consequence of the construction of its own portfolio.

PNE – Shareholder structure

As it is shown on the graph, Morgan Stanley is the main shareholder with roughly 40% of the shares. Furthermore, PNE has a free float also around 40%.

PNE AG Shareholders structure

Thoughts about PNE and conclusion

Although the share price of PNE has increased considerably in the last year. It is because of its more attractive business plan (focused on owing the assets instead of being only the EPC). If PNE is able to delivery on track its plan and it continues starting new projects in new geographies, it will continue becoming more attractive.

As this company is in our watchlist, we are still developing the complete valuation model for it. Meanwhile, this is the most recent valuation of the only firm that covers the firm.

As we talked before, at the moment we are thinking about rotating Grenergy by PNE as the business models are very similar. If we decide to include PNE AG – Pure New Energy in our portfolio, we will post the complete numerical analysis of PNE.

PNE AG Valuation
Source: First Berlin

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Article wrote on 26-December-20