Quarterly Report • Nov 11, 2021
Quarterly Report
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1 Please refer to definitions in Appendix A for descriptions of alternative performance measures (APMs) presented in the report
During the third quarter of 2021 IWS completed the acquisition of the two Danish offshore wind service/consulting companies ProCon Group ApS 2 and Green Ducklings A/S 3 . In addition to this, the Company purchased an ownership of 30 % in PEAK Wind A/S with an option to increase the ownership to 49 % within three years. The three transactions are key to IWS's strategy of becoming a leading offshore wind service player by integrating service operation vessels with engineering, product and manpower services in a windfarm's installation, commissioning and operations phase.
The steel cutting for the newbuildings will begin in the first quarter of 2022 and coincides with the payment of the second instalment of 10 % of the contract price to the yard. Expected delivery of the vessels from yard is in the first and second quarter of 2023. The estimated construction period for the options IWS has for four additional CSOVs is approximately two years.
IWS Fleet has during the second and third quarter of 2021 appointed key personnel both for the commercial and technical operations who will follow up the two newbuilding contracts during the construction period at the yard and later in their ordinary operations. IWS entered prior to the IPO into a management services agreement with Awilhelmsen Management AS and a technical services agreement with Awilco Technical Services AS. Both companies are members of the Awilhelmsen group. For the Danish companies, the total number of employees and hired-in workers counted 160 at quarter end.
Integrated Wind Solutions AS was incorporated in July 2020 and had no operating activities of significance in the first three quarters of 2020. There are consequently not reported any comparative figures for these periods.
The final closing of the acquisition of Green Ducklings A/S and ProCon Group ApS took place in the third quarter of 2021. Green Ducklings and ProCon are both classified as subsidiaries and consolidated with effect from 1 July and
2 75 % of the share capital and 100 % of the voting shares
3 100 % of the voting shares
30 September respectively. No revenues and expenses are thus recognized from the investment in ProCon in the third quarter of 2021.
The investment in PEAK Wind A/S, where IWS has an ownership of 30 %, is classified as an associated company and is accounted for using the equity method of accounting. The Group's proportionate share of the net result in PEAK Wind is recognised in the consolidated accounts with effect from 1 September 2021 and constitutes NOK 0.7 million for the one month.
Administrative expenses increased from NOK 2.7 million in Q2 to NOK 9.1 million in Q3 mainly due to the increase in manning related to the two vessels under construction and from the consolidation of Green Ducklings from July 2021.
Net loss for the period ended at NOK 8.8 million compared to a net loss of NOK 2.8 million in the second quarter.
Total cash and cash equivalents amounted to NOK 411 million at quarter end, down from NOK 594 million in the previous quarter. The cash consideration paid for the two acquired subsidiaries net of cash and the payment for the acquired shareholding in PEAK Wind of 30 % constitute NOK 175 million of the total reduction of NOK 183 million in the quarter.
The carrying value of two vessels under construction of NOK 89 million includes the first yard instalments on the vessels (10 % of the contract price with CHMI) and accumulated directly attributable project costs during the construction period. Please see Note 4 – Commitments and contingencies for details on the payment structure on the newbuilding contracts.
The intangible assets of NOK 66 million include goodwill and other intangible assets recognized as part of the completion of the acquisition of ProCon and Green Ducklings in the third quarter of 2021. Please see Note 8 - Business combinations and acquisition of non-controlling interests for a specification of the fair values of the identifiable assets and liabilities recognized from the two transactions.
Other current assets totalled NOK 54 million at quarter end and consist of accounts receivables and revenue recognized on construction contracts.
Book equity on 30 September 2021 was NOK 688 million and total assets was NOK 751 million, giving an equity ratio of 92 % at quarter end.
IWS secured its first charter contract in April 2021 with commencement in the second quarter of 2023. The contract is with Dogger Bank Wind for chartering of the Group's first CSOV which will be delivered from the yard in the first quarter of 2023. The charter contract has a firm duration of 546 days in total on Dogger Bank A and B, with an option for 60 additional days. The contract also has an option covering 331 days on Dogger Bank C. IWS is working actively to secure employment for vessel number two which will be delivered from the yard in the second quarter of 2023. With the high number of final investment decision made for new offshore wind farms, IWS expects the favourable trend with early contract signing and contract renewals to continue for the CSOV market.
The operating activities in ProCon, Green Ducklings and PEAK Wind will continue based on the three companies' well established business models. Both ProCon and PEAK Wind expects to deliver their best quarter for the year in Q4, revenues and earnings wise. ProCon income statement, cash flow and balance sheet are consolidated in the IWS Group financials from the end of Q3. PEAK Wind earnings are included with our 30% ownership share in the IWS Group income statement from September 2021 and onwards.
We confirm, to the best of our knowledge, that the condensed set of financial statements for the third quarter of 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting and give a true and fair view of Integrated Wind Solution's consolidated assets, liabilities, financial position and income statement, and that the interim report includes a fair review of the information required under the Norwegian Securities Trading Act section 5 -6 fourth paragraph.
Oslo, November 10, 2021
Sigurd E. Thorvildsen Chairman of the Board
Cathrine Haavind Board member
Ole Christian Hvidsten Board member
Jens-Julius Ramdahl Nygaard Board member
Daniel Gold Board member Lars-Henrik Røren CEO
| 23/07-31/12 | |||||
|---|---|---|---|---|---|
| In NOK thousands | Note | Q3 2021 | Q2 2021 | YTD 2021 | 2020 |
| Operating revenue | 838 | 0 | 838 | 0 | |
| Share of net profit of associates | 699 | 0 | 699 | 0 | |
| Total revenue | 1 536 | 0 | 1 536 | 0 | |
| Operating expenses | 0 | 0 | 0 | 0 | |
| Administrative expenses | 6 | -9 070 | -2 674 | -14 234 | -24 |
| Depreciation and amortisation | -462 | 0 | -462 | 0 | |
| Earnings before interest and taxes (EBIT) | -7 995 | -2 674 | -13 159 | -24 | |
| Finance income | 16 | 0 | 16 | 0 | |
| Finance expenses | -21 | -75 | -99 | -1 | |
| Net foreign currency exchange gains/losses | -887 | 0 | -887 | 0 | |
| Net finance income/(expense) | -892 | -75 | -970 | -1 | |
| Profit/(loss) before taxes | -8 887 | -2 750 | -14 129 | -26 | |
| Income tax expense | 5 | 102 | 0 | 102 | 0 |
| Profit/(loss) for the period | -8 785 | -2 750 | -14 027 | -26 |
| 23/07-31/12 | |||||
|---|---|---|---|---|---|
| In NOK thousands | Note | Q3 2021 | Q2 2021 | YTD 2021 | 2020 |
| Profit/(loss) for the period | -8 785 | -2 750 | -14 027 | -26 | |
| Other comprehensive income | |||||
| Cash flow hedge, net of tax effect | 4 | -452 | 761 | 309 | 0 |
| Total comprehensive income/(loss) | -9 238 | -1 988 | -13 718 | -26 |
| In NOK thousands | Note | 30.09.2021 | 30.06.2021 | 31.12.2020 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Vessels under construction | 2 | 88 992 | 88 790 | 0 |
| Other fixed assets | 2 | 2 218 | 0 | 0 |
| Intangible assets | 8 | 65 910 | 0 | 0 |
| Investments accounted for using the equity method | 8 | 129 227 | 0 | 0 |
| Total non-current assets | 286 346 | 88 790 | 0 | |
| Current assets | ||||
| Cash and cash equivalents | 3 | 410 842 | 593 636 | 212 |
| Financial investments | 4 | 397 | 976 | 0 |
| Other current assets | 53 847 | 575 | 6 | |
| Total current assets | 465 086 | 595 187 | 218 | |
| Total assets | 751 432 | 683 977 | 218 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 7 | 35 201 | 35 201 | 100 |
| Share premium reserve | 7 | 647 596 | 647 596 | 8 |
| Retained earnings | -13 790 | -4 518 | -38 | |
| Non-controlling interests | 18 918 | 0 | 0 | |
| Total equity | 687 925 | 678 279 | 70 | |
| Non-current liabilities | ||||
| Deferred tax liability | 5 | 1 341 | 215 | 0 |
| Non-current interest-bearing debt | 15 689 | 0 | 0 | |
| Total non-current liabilities | 17 031 | 215 | 0 | |
| Current liabilities | ||||
| Trade payables | 6 961 | 5 168 | 135 | |
| Borrowings Other current liabilities |
19 480 20 035 |
0 315 |
0 13 |
|
| Total current liabilities | 46 476 | 5 482 | 147 | |
| Total equity and liabilities | 751 432 | 683 977 | 218 |
INTEGRATED WIND SOLUTIONS INTERIM FINANCIAL REPORT THIRD QUARTER 2021
| 23/07-31/12 | |||||
|---|---|---|---|---|---|
| In NOK thousands | Note | Q3 2021 | Q2 2021 | YTD 2021 | 2020 |
| Cash flow from operating activities | |||||
| Profit/(loss) before tax | -8 887 | -2 750 | -14 129 | -26 | |
| Depreciation and amortisation | 462 | 0 | 462 | 0 | |
| Finance income | -16 | 0 | -16 | 0 | |
| Finance expense | 986 | 0 | 986 | 0 | |
| (Increase)/decrease in prepayments, accruals and stock | -1 559 | -575 | -2 127 | -6 | |
| Increase/(decrease) in trade and other payables | -6 645 | -19 201 | -1 309 | 123 | |
| Net profit from associates | -699 | 0 | -699 | 0 | |
| Net cash flow from operating activities | -16 358 | -22 525 | -16 833 | 92 | |
| Cash flow from investing activities | |||||
| Purchase of property, plant and equipment | 2 | -209 | -3 679 | -88 999 | 0 |
| Purchase of subsidiaries and associates 4 | 8 | -175 059 | 0 | -175 059 | 0 |
| Net cash flow from investing activities | -175 268 | -3 679 | -264 057 | 0 | |
| Cash flow from financing activities | |||||
| Proceeds from issue of share capital | 0 | 4 028 | 704 028 | 120 | |
| Equity issue costs | 80 | 991 | -21 259 | 0 | |
| Proceeds from borrowings | 9 832 | 0 | 9 832 | 0 | |
| Net cash flow from financing activities | 9 912 | 5 019 | 692 601 | 120 | |
| Cash and cash equivalents at beginning of the period | 593 636 | 614 821 | 212 | 0 | |
| Net increase/(decrease) in cash and cash equivalents | -181 714 | -21 185 | 411 711 | 212 | |
| Exchange rate effects | -1 081 | 0 | -1 081 | 0 | |
| Cash and cash equivalents at the end of the period | 3 | 410 842 | 593 636 | 410 842 | 212 |
4 Purchase consideration for subsidiaries includes the paid cash consideration net of cash acquired
| Share | |||||||
|---|---|---|---|---|---|---|---|
| Share | premium | Translation | Retained | Total | |||
| In NOK thousands | capital | reserve | differences | earnings | OCI 5 | NCI 6 | equity |
| Equity at incorporation 23 July 2020 | 100 | 8 | 0 | 0 | 0 | 0 | 108 |
| Total comprehensive income 2020 | 0 | 0 | 0 | -38 | 0 | 0 | -38 |
| Total equity at 31.12.2020 | 100 | 8 | 0 | -38 | 0 | 0 | 70 |
| Equity issue 9 March 2021 | 9 900 | 190 100 | 0 | 0 | 0 | 0 | 200 000 |
| Equity issue 22 March 2021 | 25 000 | 475 000 | 0 | 0 | 0 | 0 | 500 000 |
| Equity issue costs | 0 | -22 330 | 0 | 0 | 0 | 0 | -22 330 |
| Total comprehensive income Q1 2021 | 0 | 0 | 0 | -2 492 | 0 | 0 | -2 492 |
| Total equity at 31.03.2021 | 35 000 | 642 778 | 0 | -2 530 | 0 | 0 | 675 248 |
| Equity issue 29 April 2021 | 201 | 3 827 | 0 | 0 | 0 | 0 | 4 028 |
| Equity issue costs | 0 | 991 | 0 | 0 | 0 | 0 | 991 |
| Total comprehensive income Q2 2021 | 0 | 0 | 0 | -2 750 | 761 | 0 | -1 989 |
| Total equity at 30.06.2021 | 35 201 | 647 596 | 0 | -5 279 | 761 | 0 | 678 279 |
| Acquisition of NCI | 0 | 0 | 0 | 0 | 0 | 18 918 | 18 918 |
| Total comprehensive income Q3 2021 | 0 | 0 | -35 | -8 785 | -452 | 0 | -9 272 |
| Total equity at 30.09.2021 | 35 201 | 647 596 | -35 | -14 065 | 309 | 18 918 | 687 925 |
Integrated Wind Solutions AS (the Company) is a public limited liability company incorporated and domiciled in Norway. The Company's registered office is Beddingen 8, 0250 Oslo, Norway.
The interim consolidated financial statements (the Statements) of the Company comprise the Parent Company and its subsidiaries, together referred to as the Group or IWS.
The Statements for the nine months ended 30 September 2021 are prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The interim consolidated financial statements are unaudited. The consolidated financial statements are presented in NOK rounded off to the nearest thousands, except as otherwise indicated.
The accounting policies adopted in the preparation of the Statements are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2020. The Statements do however not include all of the information and disclosures required by International Financial Reporting Standards (IFRS) for a complete set of financial statements, and the Statements should be read in conjunction with the
5 Other comprehensive income
6 Non-controlling interests
Group's annual consolidated financial statements for the period ended 31 December 2020, which includes a detailed description of the applied accounting policies.
| Vessels under | Other | ||
|---|---|---|---|
| In NOK thousands | construction | fixed assets | Total |
| Acquisition cost at 1 Jan 2021 | 0 | 0 | 0 |
| Acquisitions/instalments in the period | 88 992 | 2 218 | 91 209 |
| Disposals in the period | 0 | 0 | 0 |
| Acquisition cost at 30 Sep 2021 | 88 992 | 2 218 | 91 209 |
| Accumulated depreciations at 30 Sep 2021 | 0 | 0 | 0 |
| Net carrying amount at 30 Sep 2021 | 88 992 | 2 218 | 91 209 |
IWS signed in February 2021 new-building contracts for two Construction Service Operation Vessels (CSOVs) with scheduled delivery in the first and second quarter of 2023. In the construction period, the carrying value includes yard instalments, other directly attributable project costs, capitalized borrowing costs and guarantee fees. Depreciation commences when the vessels are available for intended use.
| In NOK thousands | 30.09.2021 | 30.06.2021 | 31.12.2020 |
|---|---|---|---|
| Bank deposits denominated in NOK | 345 008 | 579 526 | 212 |
| Bank deposits denominated in NOK, restricted | 11 160 | 10 156 | 0 |
| Bank deposits denominated in DKK | 54 674 | 3 954 | 0 |
| Total cash and cash equivalents | 410 842 | 593 636 | 212 |
IWS entered in February 2021 into new-building contracts for two CSOVs with scheduled delivery in the first and second quarter of 2023. The contracts are entered into with the yard China Merchants Industries Holdings Co Ltd and are based on a payment schedule where 10 % is payable following signing of contract, 10 % at steel cutting, 10 % at launching and 70 % at delivery of the vessels. IWS has an option contract with the yard for potential calling of four additional vessels.
IWS has entered into two EUR-NOK FX contracts for the second instalment on the shipbuilding contracts payable in first quarter 2022. Market value of the two contracts 30 September 2021 was NOK 0.4 million, which is reported net of tax effect under "Other comprehensive income".
The Company's ship-owning subsidiaries will be subject to tonnage tax. Companies subject to tonnage tax regime are exempt from ordinary tax on their shipping income. In lieu of ordinary taxation, tonnage taxed companies are taxed on a notional basis based on the net tonnage of the companies' vessels. Income not derived from the operation of the vessels in international waters, such as financial income, is usually taxed according to the ordinary taxation rules applicable in the resident country of each respective company.
Awilco AS, which is the major shareholder in Integrated Wind Solutions AS, has issued a Parent Company Guarantee (PCG) in favour of the shipyard China Merchants Industries Holding Co Ltd (CMIH) related to the shipbuilding contracts signed by the two subsidiaries Awind 4 AS and Awind 5 AS. This agreement provides a guarantee which is limited to 50 % of the total price of the firm units delivered from the yard, which is to be adjusted for any change orders that may arise up until delivery. The PCG will be reduced by a pro rata amount according to the instalments to the yard, which will be paid in three tranches of 10 % each prior to delivery of the vessels.
The Company has provided a counter guarantee and indemnification on behalf of Awind 4 AS and Awind 5 AS in favour of Awilco AS for the PCG from Awilco AS towards CMIH which is identical to the terms in the PCG.
Awilhelmsen Management AS (AWM) provides the Group with administrative and general services including accounting, payroll, legal, secretary function and IT. The Group pays AWM a yearly management fee based on AWM's costs plus a margin of 5 %. The fee is subject to semi-annual evaluation and is regulated according to the consumer price index in Norway. The agreement can be terminated by both parties with three months' notice. AWM is 100 % owned by Awilhelmsen AS, which owns 100 % of Awilco AS.
| In NOK thousands, unless stated otherwise | Number of shares |
Par value per share |
Share capital |
Paid-in premium |
Total paid in capital |
|---|---|---|---|---|---|
| Share capital at incorporation 23 July 2020 | 100 000 | 100 | 20 | 120 | |
| Share capital increase 9 March 2021 | 0 | 9 900 | 190 100 | 200 000 | |
| Share split 9 March 2021 | 4 900 000 | ||||
| Share capital increase 22 March 2021 | 12 500 000 | NOK 2.00 | 25 000 | 475 000 | 500 000 |
| Share capital increase 29 April 2021 | 100 698 | NOK 2.00 | 201 | 3 827 | 4 028 |
| Equity issue costs | 0 | -21 351 | -21 351 | ||
| Share capital at 30 September 2021 | 17 600 698 | NOK 2.00 | 35 201 | 647 596 | 682 797 |
All issued shares have a par value of NOK 0.20 and are of equal rights. Integrated Wind Solutions AS is incorporated in Norway and the share capital is denominated in NOK.
In July 2021, IWS acquired 75 % of the voting shares of ProCon Group ApS, a non-listed engineering, construction and service solution provider company based in Denmark and specialized in electrical and technical solutions to the global renewable industry with focus on offshore and onshore wind as well as solar power. IWS has elected to measure the non-controlling interests in the acquiree at fair value. Final closing of the transaction took place on 17 September 2021.
In July 2021, IWS acquired 100 % of the voting shares of Green Ducklings A/S, a Danish non-listed specialist advisory company to the global renewable industry with sole focus on offshore wind power. Final closing of the transaction took place on 15 July 2021.
In September 2021 IWS acquired 30% of the shares in PEAK Wind A/S, a Danish non-listed company providing operations and asset management advisory and services for offshore wind globally. Final closing of the transaction took place on 3 September 2021. IWS has an option to increase its ownership to 49% within three years.
The fair values of the identifiable assets and liabilities of the two subsidiaries ProCon and Green Ducklings as at the date of acquisition are summarized in the table below. Retrospectively adjustments in accordance with IFRS 3.45 of the amounts recognised at the acquisition date may occur in order to reflect new information obtained about facts and circumstances that existed as of the acquisition date.
| In DKK thousands | Green Ducklings | ProCon |
|---|---|---|
| Fixed assets | 0 | 1 515 |
| Goodwill | 8 292 | 27 803 |
| Other intangible assets | 931 | 13 949 |
| Cash and cash equivalents | 1 759 | 71 029 |
| Other current assets | 0 | 2 390 |
| Total assets | 10 982 | 116 686 |
| Deferred tax | 205 | 3 069 |
| Interest-bearing debt | 0 | 25 727 |
| Other liabilities | 277 | 10 624 |
The cash consideration paid for the two acquired subsidiaries net of cash and the payment for the acquired shareholding in PEAK Wind of 30 % constitute NOK 175 million.
Alternative performance measures (APMs), i.e. financial performance measures not within the applicable financial reporting framework, are used by the Group to provide supplemental information to the stakeholders. Financial APMs are intended to enhance comparability of the results and cash flows from period to period, and it is the Group's experience that these are frequently used by analysts and investors.
The APMs are adjusted IFRS measures which are defined, calculated and used consistently over time. Operational measures such as, but not limited to, volumes and utilization are not defined as financial APMs. Financial APMs should not be considered as a substitute for measures of performance in accordance with IFRS. Disclosures of APMs are subject to established internal control procedures.
The Group's financial APMs are:
The reconciliation of Total revenue, EBIT and EBITDA with IFRS figures can be derived directly from the Group's consolidated Income Statement.
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