Project Svartnäs on budget despite SEK -10m effect

Estimate revisions due to Svartnäs and price updates

Attractive FCF yields going forward

Lower EBITDA than expected due to property tax ruling
Arise reported Q2 sales of SEK 67m (ABGSCe SEK 47m) and EBITDA of SEK 9m (ABGSCe SEK 22m). EBITDA from own production came in at SEK 16m (ABGSCe SEK 17m) and Project Development EBITDA came in at SEK -1m (ABGSCe SEK 10m). The report was some SEK 13m below our EBITDA estimate of SEK 22m, which primarily was a result of a late decline in earnings of SEK 10m for project Svartnäs, as a result of a ruling by the supreme administrative court, concerning property tax – which we highlighted in our latest report. Despite the negative SEK 10m impact, the project came in at SEK 98m in relation to a budget of SEK 97m, which we find positive.

Final payment from Svartnäs lowers net debt
In Q2, Arise received the final payment for project Svartnäs, which is now fully booked into the P&L and cash flow. The final payment of SEK 80m lowers the net debt, which now stands at SEK 726m incl. IFRS 16 leasing debt. Own production was in line with Arise’s budget, but lower electricity prices, primarily in June, lowered revenue and EBITDA. We make estimate revisions on the back of updated electricity & certificate prices, in addition to the time adjusted EBITDA contribution from current projects Bröcklingeberget and Enviksberget. We monitor the ongoing sales process of project Skaftåsen, which we believe could add significantly to earnings in late 2019 & 2020.

Currently trading at SEK 237m above its own farms’ BV
With Arise’s current mkt. cap of SEK 769m, ’19e net debt of SEK 674m (incl. SEK 54m IFRS 16), and the book value of its wind farms at SEK 1,206m (SEK 1,302m applying same multiple (3.8 SEK/KWh) as Jädraåsen), we believe one pays SEK 237m (SEK 141m) for the rest of the business (project development), which is expected to add SEK 353m EBITDA in ’20e-’21e, i
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