In a recent earnings call, Solaria, a company specializing in renewable energy, outlined its strategic plans and financial performance for the first nine months of 2024. CEO Arturo Diaz Tejeiro Larranaga emphasized the company's focus on the data center sector in Spain and broader Europe, expecting significant electricity consumption to drive future growth.
Despite facing challenges with lower electricity prices earlier in the year, Solaria projects an EBITDA of EUR 205 million to EUR 215 million for the year and anticipates substantial demand for renewable energy solutions, particularly from data centers.
Key Takeaways
- Solaria targets data centers in Spain and Europe, expecting high electricity demand.
- Power line solution capacity stands at 1.7 gigawatts, with plans to expand wind energy portfolio.
- Financial projections show an EBITDA recovery, aiming for EUR 205-215 million.
- CapEx declines as module prices fall, with 1.7 gigawatts operational and 1.5 gigawatts under construction.
- The company is negotiating further partnerships in Europe and the U.S. and has opened a new office in the UK.
- Solaria's Generia initiative attracts long-term investors with fixed interest rates close to 8%.
- Spanish government's 7% generation tax affects EBITDA, but there's hope for its cancellation.
- Revenue from data center joint ventures expected to begin by late 2026 or 2027.
Company Outlook
- Solaria plans to maintain a strong presence in Europe, with over 20 gigawatts of diversified renewable energy projects.
- The company expects to have over 3 gigawatts in operation by the end of 2025, reinforcing its position in the Iberian region and expanding into Italy.
- Long-term cash flows are expected from a 70% to 80% PPA model.
Bearish Highlights
- Construction delays caused by smaller market players have impacted project timelines.
- Uncertainty about Q4 power prices due to geopolitical factors, including the conflict involving Russia and Ukraine.
Bullish Highlights
- Solaria's strategic focus on renewable energy infrastructure and long-term partnerships aims for sustained growth.
- The company's competitive edge is enhanced by a continuous decline in CapEx due to decreasing module prices.
Misses
- Lower electricity prices in the first half of the year presented financial challenges.
- The company reported no changes in capital gains, maintaining EUR 11.5 million from the first half without any gain in the third quarter.
Q&A Highlights
- CEO confirmed no further asset rotation beyond EUR 11.5 million included in the first half of 2023.
- Discussions about revenue from data centers are ongoing, with significant deals expected to close by early 2027.
- Solaria is negotiating a term sheet for 600 megawatts and exploring cost-saving behind-the-meter solutions for data centers.
- The company is awaiting new Spanish regulations to facilitate battery installations, with infrastructure delays affecting the Garona project's connection timeline.
Solaria (ticker not provided) continues to pursue its strategy of combining solar, wind, and data center consumption to build a robust renewable energy infrastructure across Europe. With the company's emphasis on long-term growth and partnerships, as well as its commitment to the European market, Solaria remains optimistic about its future despite some headwinds and challenges.
InvestingPro Insights
Solaria's strategic focus on data centers and renewable energy infrastructure aligns well with its current financial position and market valuation. According to InvestingPro data, Solaria (SEYMF) has a market capitalization of $1.21 billion, reflecting its significant presence in the renewable energy sector. The company's revenue growth of 19.23% over the last twelve months as of Q2 2024 supports its ambitious expansion plans and projected EBITDA of EUR 205-215 million for the year.
An InvestingPro Tip indicates that Solaria is trading at a low earnings multiple, with a P/E ratio of 11.61. This could suggest that the stock is potentially undervalued, especially considering the company's growth prospects in the data center and renewable energy markets.
However, it is worth noting that another InvestingPro Tip points out that Solaria is trading at a high P/E ratio relative to near-term earnings growth, with a PEG ratio of 4.26. This highlights the importance of considering both current valuation and future growth expectations.
The company's strong operational performance is evident in its impressive operating income margin of 70.14% for the last twelve months as of Q2 2024. This high margin aligns with Solaria's strategy to focus on high-value projects like data centers and its efficient cost management, as mentioned in the earnings call.
For investors interested in a deeper analysis, InvestingPro offers 7 additional tips for Solaria, providing a more comprehensive view of the company's financial health and market position.
Full transcript - SOLARIA ENERGIA Y MEDIO AMBIENTE (SEYMF) Q3 2024:
David Guengant: Good afternoon, everyone, and welcome to Solaria 2024 First Nine Months Result Webcast. My name is, David Ganguins, the Head of IR of Solaria. I am joined today with Arturo Diaz Tejeiro Larranaga, our Chief Executive Officer. During this call, we'll discuss, our business outlook and make forward looking statements. His comments are based on our predictions and expectation 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 CEO, Arturo Diaz Tejeiro Larranaga. Following this, we'll move on the Q&A session. I will also like to highlight that, you have to submit all your question via the web. Thank you very much again, and we'll now hand over the word to Arturo.
Arturo Diaz Tejeiro Larranaga: Thank you. Thank you, David, and thank you to everyone joining this conference call. As always, I will move extremely fast over the presentation and we will pass to the Q&A season. And, of course, key highlights that we want to show in this nine month presentation. Data centers. Data centers continues -- is the center of one of the important parts of our global strategy in Europe. We think that the data center business will grow a lot especially in Spain but not only in Spain globally in all Europe, like in United States following the reading that we are seeing in United States. And, as you know, data centers will be one of the key customers for the electrical markets in the future. They are going to have strong consumption of electricity that, they theoretically, they should receive renewable electricity and for us is one of the key customers for the future. We are bidding strongly for this business unit and we are growing, increasing our consumption points in all the countries of Europe, especially focusing Spain, but not only in Spain, in Italy, Portugal, Germany. Now even United Kingdom (TADAWUL:4280) but especially focusing Spain. We have today solutions, power line solution for 1.7 gigawatts, especially allocating in Iberia region for data centers. And, today, we are negotiating with different player from Europe and United States that are involved in data center business and that wants -- they want to reserve connection points, consumer points of electricity, power and land that we say, land, options, and at the same time, PPA renewable energy electricity for the future. As you know, our data center business, we have decide to entry following two different ways. First is selling connection points and land is one of the options that we are developing and we have -- we are working with several group. We will explain during this presentation. The other way is to establish joint ventures with key players, tier 1 players, with a long track record that wants to establish long-term business in Europe, especially in Spain, but focusing all Europe, with strong experience in the data center business and that they want to establish joint ventures in the long-term with renewable energy players, infrastructure players like Solaria. And, we will try to explain during this presentation our business model of joint ventures in data center business. Of course, something new, we are entering in the United Kingdom. We have opened a branch, a new office in Birmingham in United Kingdom. We think that, as we have explained, it's not a surprise because we have advanced to the market previously. United Kingdom and the new government is extremely bullish around renewable energy expansion. We think it's a good place to be and especially focus on wind technology, onshore technologies. We think that the expansion of the data center business will be good and at the same time, renewable expansion will be good during the next years, with the intention of the government is to expand the wind capacity and some and the solar capacity in the country. Within our experience and our team is able to expand our activities there and, we have decided to enter with all of our business. And we will report information quarterly about our advancements in United Kingdom, in the country. Company situation, and where we are today. As you know, during this year we have [lived two-year] (ph) from price point of view. In the second quarter, especially price of electricity, we had a really low price of electricity. The good point today is that the price of electricity recovering, the price and is in a better situation than previously. You know that today, for example, in Spain, we have price of electricity of EUR120 per megawatt hour, it's more than we have estimated previously. Probably November, December, January, February will continue the situation with the gas price situation. You know that today we are leaving a strong pressure on prices of gas and it's something that is affecting seriously price of electricity here in Spain and globally in Europe. But our results are affected by this small price of electricity during especially first half. And we maintain really good levels of revenues, EBITDA, associate especially with strong production that we have growing more than 15%. But we have reduced our EBITDA in 14%. Hopefully, we will finish this year with an EBITDA better than previous year, better than 2023 with an estimation of EUR205 million to EUR215 million of EBITDA that we maintain our estimation for the end of this year. Of course, we are going to talk shortly about the different important points of our business strategy for this year, for the next years. No? I have explained the concept of data center and our position in the business. At the end of the day, Solaria is a Powerland partner. We supply to the data center players power, electricity, connection points, infrastructure, substation and grid, and land. Obviously, around our substation and grid, we are contracting land because it's necessary. We are in contact with data center players. And with the assumption of these guys, we are contracting and renting land that will be key for the development of the future data centers in all Europe. Today, our business model I have explained two different ways, sale and joint venture. And sale is opportunistic business, cash generation, PPA, in good conditions, joint venture long-term vision. We think that it's a good idea to introduce the company in the data center business to obtain EBITDA and cash from the data center business in the long-term. We are not going to use CapEx because at the end of the day, in this joint ventures, we are going to supply the Power and land and we will give valuation for in charge for this power and land that we are going to supply to the joint venture. We have included several estimations and we will link them with the joint ventures that we are negotiating today, but approximately we have estimate revenues of EUR30 million to EUR45 million per year for 100 megawatts. It depends on the final share inside the joint venture that we are going to maintain, but it's an estimation bay based between 30% to 50% of the share. Of course, where we are today, we have several negotiations, something new that we are explaining, we are negotiating today with tire one players that they have, I have to said at the beginning of this presentation, tire 1 players from Europe and United States, especially. And, I think that we are in a good situation today to say that probably for the results -- annual results presentation, we are going to close several of these joint ventures. With a European player, we have a really good advancement. We are in a really good stage of the negotiations. And, probably for December, January, we could announce something with these guys. With United States players, I think that we need to spend more time, but we will try to do an effort, to [pay] (ph) that effort, to make an effort, and to try to sign before the results presentation of 2024. We continue with our sales or with our opportunity sales of connection points and we are advancing with these other deals. UK, as I have mentioned, I'm not going to spend a lot of time because we are at the beginning in UK. It's a promising country for us for renewable energy concept. I think that, wind especially, but solar included. We are in contact with the United Kingdom government. We think that it's a good and opportunistic market for renewables. We are going to stay there. It's our obligation. As we have explained during the last years, Europe is our -- is the center of our strategy. We are going to grow in Europe in good countries with good security, legal security, with serious countries that we call. And for us, United Kingdom absolutely is a serious country with good situation and good for renewables. And, it's the moment to attack. It's the moment to be there, and we are going to stay. And, for us in our mind, it's a good combination to stay in different countries with different level of risk of Europe, including Europe, United Kingdom. Of course, wind, wind technology. No. Solaria today, it's a mature player in the solar business. Absolutely. We could say that -- we can say that we are probably one of the platform leaders in solar, absolutely, with a lot of experience in all the countries. But wind is our key point for the future. You know that pipeline -- to develop pipeline when you have solar development to develop wind pipeline is easy, and we are doing, we are executing now. And, hopefully, in the next two, three years, we are going to construct massively wind parts. Especially, as always, we are going to start in Spain, the Iberia region. We have good really good visibility of more than 1 gigawatt of pipeline of wind in different locations. But the locations because it's [Caronia, in Trio] (ph), in place that we have established or that we are constructing solar plants, and we are going to combine with wind, hybridization process that we will complete during the next two, three years. It's exciting for us because the concept, for us is a clear strategy for the future, to combine solar, wind, batteries, and data center consumption. It's a great idea in our view for the long-term vision of Solaria, wind, solar, batteries, and, data center consumption, obviously, and traditional PPAs. But, it's a global infrastructure strategy. And, I love it. And, our projection for the future, but -- estimated is to achieve more than 3 gigawatts of wind in Europe, including Italy, Germany. In Italy, we are not extremely bullish about wind. We think that it's better for solar and wind. We think that Italy is not the place for different reasons, especially for political reasons. Germany is okay and UK, obviously, it's okay. Of course, pure infrastructure player, more than 20 gigawatts, extremely diversified. Europe, we are not going to move out of Europe, not in the short-term or medium-term. We think that Europe gives to us high level project IRR, high level of profitability, generation of cash, security and CapEx under control. That is critical for us. We think that we are probably the most powerful platform of renewables in Europe. Generia. Generia [mind] (ph), it's a good combination. It's something that, we made long time ago because, as you know, land is critical. You are seeing now, even with data center business, land is one of the key parts of, the strategy of an [interest] (ph) to put player. No? And, Generia was a good idea made few years ago that is growing. Today, it's attracting interest of some partners, but at the end of the day people that are looking for fixed interest long-term 20, 25 years and Generia offers this great opportunity to these guys. It's like they are going to warranty a good interest rate close to 8% during the next 30 years. And a lot of interest from the market. We have [contact banks] (ph), as you know. We are talking with different players, especially funds, insurance companies, but all kinds of infra funds, pension funds that want to invest in long-term business with good levels of profitability and low risk and Generia completes with this business idea. Hopefully for the full year's presentation 2024, we will give the name of the final partner that we will be with them in Generia and the combination will be probably Solaria 51, this partner 49% and he's going to stay with us with cash like financial investor and hopefully in three, four years this business will grow and we will see what we are going to do. And it's probably we could sign an option to sell the company to this guy or other options, but it's still too early to talk. Probably in the full year presentation we will give all the visibility. Of course, CapEx continues, it's incredible, but not a surprise. CapEx falls all quarters. Module price is suffering an awful evolution for module manufacturing companies, because the reduction is crazy per quarter and continues. Not only module, inverters, all the components of the installation. And in my mind it's going to continue, it's not something opportunistic, it's a continuous line that we are going to see during the next 10 years. It's incredible the development of the technology. And we are the leader from CapEx perspective in Europe and especially in Spain, obviously. And we continue decreasing our CapEx. Of course, where we are now from construction point of view, we have 1.7 gigawatts already functioning and under construction close to 1.5 gigawatts. Hopefully during the next year we are going to connect progressively a lot of installations and we will finish 2025 with more than 3 gigawatts, being the leader in Iberia region and probably one of the leader platforms in Europe. And hopefully we will add some construction associated with Italy, that we have a good state of development and probably we will start construction in Italy. And we haven't included here, but I think that following an optimistic view, probably during 2025, we will add a good volume under construction in Italy. But we continue constructing, not complicate construction. I think that progressively we will connect. Of course, PPA, where we are, is something that always we receive questions about the PPA market. During the last month, price of electricity suffered a lot. Solar price, but not only solar global price of electricity is talking about the Spain especially suffer a lot, today recovering price. We are in a better situation and I think that PPA price is in a better situation. Today we have three term-seat agreements signed. We have three term-seat agreements signed with Tier 1 players. Oil and utilities, like always, new partners. Some of them are new and it will be a good new. We have thought to include even in this presentation, but probably will be announced in the next weeks. Good prices and especially the schedule, because they are thinking to start the contract after 2026. That gives to us a lot of time, is comfortable to us and mid-30s. That is good price, good conditions, good long-term view for us. Today we are negotiating 0.6 gigawatts but probably we could increase if we want. But we are booking some power for our data center business. Why? Because we think that the data center customer will be better. Better is not a correct word to use. All the customers are great. But in our view, data center business could pay more. Why? Because they are going, because they use connection points, demand connection points, it's self-consumption concept. They are going to save some regulated cost, they are going to save taxes and retail margins. At the end of the day, they are going to save around EUR20 per megawatt that utility or oil company should pay. Obviously, at the end of the day, they are able to pay more PPA prices. And it's an enormous advantage of these guys. At the same time, They need electricity as soon as possible and they have some advantage. I think that PPA price that we could sign is much better than the traditional prices that we are announcing to the market. But we will see. We will see, especially with the joint venture, because probably it will be a combination. We are going to obtain shares inside the joint venture based on power -- land and power and PPA is combined. We will report information. Of course results as I have mentioned, we increase production, we reduce sales according with price of electricity. This quarter goes good because price of electricity is growing a lot, especially in November. We will see December probably will follow the same way because I have [talked] (ph) gas situation and gas prices -- of gas in Europe that in my mind is not going to change, especially with Russia situation that we will see the evolution of the war, but I think that is not positive from gas prices point of view. And you know that Gazprom (MCX:GAZP) has cut the supply of gas. It's not a surprise to Austria, but it's something that increases the inflation over prices. But we will see. Of course we continue with our EBITDA. It's impacted seriously by tax. The government of Spain approved the Spanish 7% generation tax, it was approved at the beginning of this year. Hopefully, and I think I'm positive here, I think that at the end of this year, we will finish. It’s my view, after a lot conversation with Spanish government in my mind and in my view the tax is going to be cancel at the end of this year, but we will see if it's true or not but it's significant for us because it's something that is affecting seriously our EBITDA. Of course, cash recuperation, we have advanced in the previous results presentation. We are operating cash -- and we are receiving payments from project finance players, suppliers and banks. I think that our construction reading continues we are investing enormous amount of money, and we continue maintaining our cash. We are improving our pipeline. We are improving in countries, quality of our pipeline, more wind, more solar, more countries data centers. And at the same time, we maintain our cash and the discipline inside the company to maintain the cost. No? It's good. As you know, all of our debt is [project] (ph) debt, and the average cost of debt is not bad 3.7%, probably with a reduction on interest rate, we will improve this average cost of debt that we will see in the next quarters. Of course, as I have mentioned at the beginning, we reiterate our EBITDA targets and we haven't included here, nothing special associated with Generia. We haven't included here nothing especially associated with data centers, it is like the standard business, we will see the evolution, but we think that probably will be better than we have estimated, especially associated with price of electricity.
A - David Guengant: Thank you, Arturo. I will now open for Q&A session. And once again, thank you for your time. So the first question from -- comes from Fernando Garcia from RBC. First question is when the revenue will start in our JV DC deals? Second question is, if we can provide some timing to sign the agreement with data section. And third, if we can explain the delay of the capacity under construction from summer 2025 to most of it in the second half of 2025?
Arturo Diaz Tejeiro Larranaga: About when we are going to have revenues of data centers, it's a good question probably at the end of 2026 before it's difficult. Why? Because we are going to announce joint ventures probably before the February's presentation, results presentation, at least one to probably two, but at least one, and we will define all the terms of the joint venture with exactly the participation in shares of Solaria, the power and the land that we are going to supply all the details. The key point is that we will start with the construction physically of the data center. It's not easy, and probably will spend time. Spend time is 1.5 years. It's something reasonable, at least. We are not extremely focused on the revenues and EBITDA of this business. It is not the key point for us. It's the global valuation because we are going to enter in a new business with key players with partnership of key Tier 1 players that are going to give to us important knowledge about this business. Solaria is going to be energy partner that works in technology, and I love it because it's -- like -- we are changing globally our strategy easily, not easily. It sounds easy, but it's not easy, but easily. It's like we will introduce a company in a new world with new enormous customers, exciting customers with an enormous capacity. It's a new business that needs a lot of things, not only power and land, need services. And we will enter with partnership with the key players in the world. I'm extremely excited. From valuation, in my mind, it's a limit valuation. I'm extremely comfortable today because in my mind, is what does it mean? I can't say. I think it is a new business. It's a new company. We are going to change completely our face and the valuation is -- I understand the concept of revenues and EBITDA. And after 20 years, believe me, I understand perfectly concept of EBITDA and revenues. But it's a new company, and it's going to transform completely Solaria. It's the energy partner of the technology world, and I'm excited with this. In Europe it is something new, not in United States. You know that in United States, it's not new because there are a lot of energy players that are supporting the growth of these key guys -- enormous guys -- country guys because they are larger than countries. But here in Europe is something new. We still -- we are still -- we don't understand. We don't understand because we are not following the market, in my view. But we will be the key player. We will be one of the partners of these guys. And I'm extremely excited with this. But in order to answer your question, probably in the second part of 2026, it reasonable 2027. The same data section you have mentioned is the same. We are working on it, and I'm -- it's a difficult deals that needs to do due diligence. They need to understand perfectly the situation of the connection points, the regulation connection points or regulation in Spain. I think that as I have mentioned before, the results presentation of February, we will report deals closed and all the details. Under construction summer 2025 second half, where we -- why we have delayed. It's not -- sometimes people ask to myself, why you delay your construction process? The answer is not because Solaria is delaying because for any reason. We are ready to construct tomorrow all the capacity. We have permitting on site. We have all on site, and we have the financing terms. We have the money. We have the module, so it's why you delay sometimes. Unfortunately, in Spain, we are living in a strange situation, not strange. It was something predicted by ourselves a long time ago. A lot of small players that share infrastructure with us. And unfortunately, they are in an extremely difficult situation. They are not answering to the ministry or to the -- about the installation that they should construct and they should start with the construction. Some of them share position with ourselves and -- unfortunately, they have delayed sometimes projects of Solaria, not significant delay, but a few months. Some of them are being eliminated by the market because they don't have money. They don't have project finance capacity. They are not serious in the Spanish market and globally in the renewable energy market you have a lot of speculators but serious companies only a few, not significant serious players. It's our life, [power] (ph) effect of renewable energy, but that's something that we knew in the past. And they are delaying some of our projects. The good point is that it's not significant, a few months, but it's something that has happened.
David Guengant: Next (LON:NXT) question comes from Fernando Garcia from RBC. How many megawatts of DC with grid connection you have at the moment and how many megawatt pending answer? As we updated in the last quarters, we had at this moment, 270 megawatts secured and 730-megawatt pending answer. As you can see, pending answer, we have much more than this 730-megawatt. But today, we won't update the market. Next question is coming from Philippe Ourpatian from ODDO. Good morning. May we have the amount of capital gain included in the EBITDA? Is there any change versus H1 '24? No change. As you say, Philippe, we have included EUR11.5 million of capital gain in the first half in our EBITDA. And in the third quarter, we don't have any capital gain. Next questions are coming from Enrico Bartoli from Mediobanca (OTC:MDIBY). Can we provide more color on the cash flow generation of the data center business? Then as this revenue recurring every year? Then next question is coming from Generia. And can we provide any update on discussion with potential investor in Generia? And maybe your last one from Enrico. What is the amount of capacity currently under constructions that Solaria plans to secure through PPA contract?
Arturo Diaz Tejeiro Larranaga: Of course, about the revenues on the data center business, cash flow is still too early to talk about the cash flow. So I think that -- let me talk about all of this in the results -- annual results presentation with the joint venture sign and with the guys, our partners agreed and with all the details of the joint venture, including the contract and the long-term contract and all the details. I think that it's still too early to talk about the cash flows. It will be recurrent obviously. If we entry like a joint venture player, we are going to reside recurrent cash flow all year during 30 years. It's the concept of the joint venture, and our intention is to enter in this business, with a good business opportunity. I don't know if we will be in the long-term or we will stay a few years and then to sell, we will see. At the beginning, our vision is that we are going to obtain a recurrent cash flow. Investors in Generia, we are talking with several investors. As I have explained, we haven't talked about amount of money. It's something that obviously is significant because we are not going to increase in -- Generia capital for getting small amount of money. We still are under negotiation with them. The base -- and the concept of Generia to give a value of close to EUR300 million, but it's still too earlier or I think that we need to move with our partners, future partners, with our investors, and we need to see the final evolution of this deal. And the PPA contracts and the concept is the same as always. We think that it's a good idea to maintain 70%, 30%, approximately 70% PPA, 30% merchant concept that could grow to 80% or that could stay between 70% to 80% is reasonable. At the end of the day, we are an infrastructure player. We want to secure cash flows, and it's smart to close PPAs. But today and not today because we have announced previously, the key point is that PPA is not only focused on oil or utilities and the traditional retail distribution company. We are opening the door to new players like data centers that they could pay more, and it's more interesting probably for us to sign contracts with them.
David Guengant: Next question is coming from Fernando Lafuente from Alantra. Three questions. First, what explains the 60% fall in prices in Portugal and Greece. I will answer. As you know, Portugal is today merchant. It was merchant -- sorry, and today's PPA. Remember that we have at income also revenue coming from merchant from Portugal in the last year. But from summer, all these plants, the 63-megawatt plant are going to the PPA. Remember that the PPA Portugal was around EUR22, EUR23. So for that reason, revenue going down in Portugal from merchant to this EUR22, EUR23 PPA. Second question, the 2024 EBITDA target, what does it improve from infra? As we mentioned, we estimated around EUR24 million, EUR25 million of infra without asset rotation for 2024. And then the next question are coming from Manuel Palomo from BNP Paribas (OTC:BNPQY). More questions regarding DC business. Have we already closed a deal, can we share our plan to grow in the UK wind field or through acquisition? And can we please help to build the revenue bridge from the total EUR157 million total revenue to energy sales? I will maybe answer to the last question. Energy sales is in nine months, EUR104 million to make the bridge with sales of EUR157 million. You have to rest the asset rotation of EUR11.5 million of asset rotation in the first half. And on top of that, in infra revenue, you have to add around EUR21 million. We have recognized EUR14 million of infra revenue in the first half and only EUR7 million in the third quarter. So in the third quarter, no asset rotation and only EUR7 million of infra revenue.
Arturo Diaz Tejeiro Larranaga: About UK and the expansion that we have thought obviously, will be greenfield, not acquisitions. Our intention is to develop large projects like following the concept of hub projects of large volume of megawatts that could combine solar and wind in specific locations of United Kingdom, not massively around all the country, in some specific places, we are going to develop large projects that combine solar and wind. This is our intention, especially in two places.
David Guengant: Next question are coming from Arthur Sitbon from Morgan Stanley (NYSE:MS). Given we are now considering two business model for data centers, are we still committing to generate EUR670 million of cash from the data center business over 2024, 2028 as indicated in first half results?
Arturo Diaz Tejeiro Larranaga: In our mind is -- if these guys pay in shares, it’s like to pay in cash. For me, it is reasonable to obtain cash. It's extremely important, but if these guys recognize our cash with shares of a business that will generate recurrent cash flow is, at the end of the day for me is even better. I think that we will combine both, as I have explained. Tier 1 players, serious playing long-term vision that could change completely the face of the company, the face of Solaria joint ventures, global agreements and we want to stay with them in the long-term. Like always, in our strategy, good customers, good profiles, long-term view is our understanding of this business. And for me, if they pay in charge of the joint venture and they allocate all the CapEx for constructing and they allocate their knowledge. It's a great deal for Solaria. And the other way, as I have explained in other presentation, is opportunistic deal to obtain cash.
David Guengant: Next question is coming from Daniel Rodriguez from Bestinver. First question is, can we give the capacity under construction today? And second question is regarding the share buyback. Have we taken a decision on the possibility of a share buyback already mentioned in the first half?
Arturo Diaz Tejeiro Larranaga: Always it’s in my mind to execute a sharp buyback and to acquire shares. But life in Solaria is extremely complicated. A lot of things happen at the same time. and honestly, it's complicated to explain all. But share buyback is always on my mind. And who knows, it's complicated because share buyback is on my mind.
David Guengant: Just to answer to first question, our capacity today under construction is 1.4 gigawatts, and we expect to have this capacity under construction and fully operational at the end of 2025. Next question is coming from Henry Tarr from Berenberg. In our 2024 guidance for EBITDA, what we assume regarding capital gains, or data center revenue versus energy business? In line with what say Arturo and what we say in the past, this year, we don't expect more asset rotation. We already included EUR11.5 million of asset rotation in the first half. And we may include some data center revenue, this for 2024. Next question is coming from Nashik Ho from Barclays (LON:BARC). If we keep our 2024 guidance, which -- are we implying that the Japanese data center deal will go through? First question. And second question, if we can give any time line for the UK.
Arturo Diaz Tejeiro Larranaga: Of course, to execute cash deal is on track, and we want to execute for this year, as we have explained, and we are negotiating and we continue negotiating, closing details. And hopefully, for this year, we could report a cash deal that you are mentioning. And of course, the UK, when we expect the first operational project, this is still too early to say, but we will move fast. But I think that during 2026, 2027, we could report projects under construction and operational projects for 2027.
David Guengant: Next question is coming from -- two questions more coming from Daniel Rodriguez from Bestinver. First one is, are we going to sign PPA for the capacity under construction, 1.4 gigawatt? And second question is, are we providing power behind the meter to data center?
Arturo Diaz Tejeiro Larranaga: Of course PPA, yes, we are going to sign. As I have explained, we have today a term sheet signed for close to 600 megawatts that we have thought to include even in this presentation, the name of the guys and the term sheet, all the details of the term sheet agreements, but probably we will do in the full year report that we are going to include all the information. But honestly, I think that is not a big deal to sign today, the term sheet and to sign the contract. I think it was done. And today, I could say that 600 megawatts is contracted with PPA and data center is the same. Obviously, with the joint venture of with a cash operation that we have explained. Obviously, we will go with PPAs contract sign. And sorry, behind--.
David Guengant: Yes. The second question from Daniel was regarding the -- behind the meter. I think it's very important for us and not only for us, for the decisions for the final customer. What we are providing in our Powerland solution is behind the meter solutions. It's very important. Why? Because as Arturo said before, there is a cost saving -- enormous cost savings for the final customer of more than EUR20 per megawatt hour. This is as self-construction -- as a self-construction solution permit to the data center to avoid to pay all the regulated cost – toll cost, transport cost also all the taxes and also retail margin. So the saving is enormous. And because of the saving, the PPA price would be higher than in the normal PPA. Next question are coming from Tomás Reis from CaixaBank. First question is, in the case that we provide the land to the DC joint venture project, will you have to invest in acquiring or renting the land? Second question is more detail on the battery pipeline. When should we expect ready to build with geography?
Arturo Diaz Tejeiro Larranaga: It depends on the project. In some projects, they want to rent. In some projects, they want to acquire the land. At the end of the day, our work is to allocate the land, to get the land and to pass through to the joint venture with a fee. It's the work of Solaria. We are not going to acquire the land with Solaria's money. We pass through to the joint venture, including a fee for our development work, develop not by Solaria. And the battery pipeline, honestly the battery, I know that the market is extremely focused in battery. I think that it's a good idea depending of the regulation, the Spanish government. You know that they want to approve a new regulation, theoretically in December. We will see if they approve, depending of what they are going to approve that we will see. We would establish batteries in all of our PV assets and power plants. We have get licensed for batteries. It's easy, it's not complicated, and it's something that could give a premium on prices. But we need to see the new regulation because today in Spain and not only in Spain, in other countries of Europe, it's not easy to include batteries, especially in Spain today, it hasn't got sense. I think that should the Spanish government should change the low at the end of this year or first quarter of next year, we will see. And with the new law, obviously, we could start with the installation massively of batteries in our installations.
David Guengant: Next question is coming from Philippe Ourpatian from ODDO. Can we detail the component of the other in the revenue versus the electricity sales. I will answer. Philippe, in-line with our last quarters and years, there is two main components in our other revenue, mainly cost activation and some penalties, mainly it depends on the year, depending on the quarter, but cost activation and penalties. Next question is coming from Henry Tarr from Berenberg. Which projects are mainly been impacted by the infrastructure delays? What is the progress on the Garona project?
Arturo Diaz Tejeiro Larranaga: Garona was one of them. And the Garona products should stay connected to the grid, probably for the summer of 2025 from the second half of 2025 approximately. Theorically, the previous plan included in the first half of 2025. But it's a complex infrastructure. We had some problems with some of our colleagues. Finally, we are alone in this connection point. And of course, we are constructing all the interest, but they have delayed a few months. And hopefully, for the summer, we are going to start with the connection of Garona. That includes three different phases, three different stages, and this progress live during the second half, we are going to connect.
David Guengant: I will take the last question. Sorry for not answering question. Last one maybe from Naish from Barclays. Any power assumption for Q4 in our guidance?
Arturo Diaz Tejeiro Larranaga: It's like the casino. The power price in Spain today is like the casino. You have a lot of analysts and people that give clear and wise opinions about price of electricity, they have probably more knowledge than myself after 20 years. But in my mind, probably you will see price of electricity in December, similar to November, because gas prices and Trump Victory, Russia, you know the situation is something that is affecting gas prices, especially in Europe. And obviously, it's something that is going to affect price of electricity. Short term, absolutely medium and long term, I don't know. We will see the evolution of the conflict that war of Ukrania with Russia and the movement of the Trump government. That is something that is going to affect seriously euro prices of electricity.
David Guengant: So thank you, Arturo. Thank you to everybody for joining today's call.
Arturo Diaz Tejeiro Larranaga: Thank you very much for being part of this conference call. And we'll be available for any additional information. I think that it's an exciting team. It's an exciting timing because we are going to growing new business, new activities. Europe is in a great position to attract data center investors that want to grow that they are obligated to grow in Europe, and they are going to be high consumers of electricity, renewable electricity. They need infrastructure and they need electricity, solar and wind electricity. And I think that Solaria will be one of the key players that are going to give solutions to these guys and especially focus, as I have mentioned, in Europe. And in our mind, is the place to be, sometimes we think that the business is out of the old Europe. But in our view, today, if you want to get good profits, good project IRRs and security, Europe is the place and especially with these new growth associated with the data center business. Thank you very much, and have a great afternoon.
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