INTERVIEW - Scatec targets EUR 65m in annual gross investments by 2027

After a year marked by geopolitical uncertainty and a turbulent macroeconomic environment, Norwegian renewable power producer Scatec ASA (OSL:SCATC) achieved significant growth in 2023. The company remains optimistic about maintaining this trajectory and continuing to expand its renewables capacity, aiming for up to NOK 750 million (USD 70m/EUR 64.5m) in annual gross investments by 2027.

Scatec’s chief executive officer (CEO), Terje Pilskog, elaborated further on the company's past achievements and future prospects in an interview with Renewables Now.

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Q: Despite the challenging environment, Scatec managed to achieve significant growth last year, boasting its highest construction programme ever. Can you discuss the company's plans to sustain this momentum in 2024?

Looking at 2024, Scatec is well positioned for continued growth. Our pipeline has been optimised, with over 1 GW of new solar projects added in the final quarter of last year. Construction has started in South Africa and Botswana, representing NOK 350 million in equity investments and D&C revenues of NOK 2.5 billion. In terms of future profitable growth, we ended a successful year by securing additional projects for 2024, including the award of South Africa’s first battery project of 103 MW/412 MWh and a subsequent expansion in Botswana to 120 MW. Generally, it is evident that renewable energy has reached unprecedented levels of competitiveness. To meet the challenges of climate change and address the energy trilemma, the imperative to shift towards green energy has never been more compelling.

Q: Last year, Scatec sharpened its strategy to concentrate on solar, wind and energy storage. Will the company maintain this focus in 2024? In addition, considering the divestitures witnessed in 2023, can we anticipate a continuation of this trend in the near future and what kind of assets could go up for sale?

Towards 2027 we will continue to grow our renewables capacity, targeting NOK 500 million-750 million in annual gross investments. Solar PV, wind and battery storage will make up the largest share of our investments due to its complementary profiles and attractive fundamentals. We aim to build stronger and longer-term positions in selected emerging markets, where we see a clear green agenda and potential to build scale and apply our proven model. We are ramping up growth in South Africa, Egypt, Brazil, and the Philippines where we have a strong track record and operational portfolios, while we are building positions in markets like India and Poland.

We further seek to optimise our portfolio through capital recycling. Our capital recycling rationale is to re-invest capital into new value creating projects and also seek to reduce debt on corporate level over time. We will exit selected non-core markets to consolidate the portfolio. We might also realise selective divestments or farm-downs in our focus markets if it is value creative and does not harm our strategic position.

Q: Can we anticipate any new significant projects from the company in the fields of hydropower and green hydrogen this year?

We will continue to grow selectively in green hydrogen and hydropower. Our green hydrogen efforts are focused on Egypt where we have secured projects with excellent renewable energy resources and export hubs to Europe. Within hydropower, Scatec’s JV with Aboitiz in the Philippines and Norfund and BII in Hydro Africa are exploring selective attractive growth opportunities.

Q: Can you provide insights into the timeline and progress of the company's projects currently under construction or in its backlog?

At the end of Q4 we started enabling works for the Grootfontein 273 MW solar projects and construction activities were ramped up in Q1. In December we reached financial close for the first 60 MW of the Botswana project (Mmadinare solar complex) and construction has started. The remaining 60 MW will be developed in a second phase with financial close and construction start also expected this year.

According to the Department of Mineral Resources and Energy, commercial close of the 103 MW BESS project (Mogobe) in South Africa is expected by June 2024.

Q: Scatec typically focuses on emerging markets and is presently engaged in projects in South Africa and Botswana. Are there any intentions to set foot into new markets this year or will rather expand further within existing ones?

We aim to build stronger and longer-term positions in selected emerging markets, where we see a clear green agenda and potential to build scale and apply our proven model. We are ramping up growth in South Africa, Egypt, Brazil, and the Philippines where we have a strong track record and operational portfolios, while we are building positions in markets like India and Poland. Beyond these focus markets, we will maintain our opportunistic approach, applying strict guidelines on potential projects in terms of size and value creation.

Q: Last year, Scatec secured growth funding through various measures such as non-core asset sales, capital recycling and new partnerships. Can you elaborate on the specific financing strategies and resources the company plans to utilise in 2024 as part of its self-funded strategy?

Our business plan will be funded by a strong and growing cash flow from operating assets, enhanced capital recycling activities and alternative ownership structures with reduced equity stakes.

Q: The company is headquartered in Norway but does not operate at home. Can we expect any shifts in this approach?

Scatec was founded back in 2007 by Norwegian serial entrepreneur and founder Alf Bjørseth, a renown Norwegian businessperson in the energy sector. A lot of the competence and technology innovation started out in Norway and since Scatec has acquired extensive knowledge and experience across the complete lifecycle of solar, wind, storage solutions and hydropower. We have some 100 employees in our Oslo office, servicing and supporting our business across four continents. Our focus is on emerging economies where we see ample opportunities for renewable energy growth and we have no plans to become a developer in Norway.

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Terje Pilskog assumed the role of executive vice president of project development at Scatec in 2013. He ascended to the position of CEO in May 2022, succeeding Raymond Carlsen, who had been atop of the company for 13 years.

Before joining Scatec, Pilskog held various management roles with Renewable Energy Corporation, where he transitioned from a position as an associate principle with McKinsey & Co.

(NOK 10 = USD 0.934/EUR 0.861)