NYAB signs significant contract to construct Skarta Energy's solar farm in Utajärvi

Translation: Original comment published in Finnish on 12/07/2023 at 7:07 am EET

NYAB announced on Tuesday that its associated company Skarta Energy has made an investment decision to construct Finland’s largest solar farm in Utajärvi. At the same time, NYAB was selected as the contractual partner for engineering, procurement, and construction of the project. The estimated total value of the contract signed between NYAB and the project company is EUR 69 million. The first phase of the project, including purchases and preparatory work, will start without delay and it is financed by Skarta Energy’s majority owner CapMan Nordic Infrastructure II fund. The project is expected to be completed in its entirety during H1’26.

The solar farm to be constructed in Utajärvi is also a significant part of Skarta Energy’s target to build 800 MW of solar power over the next five years as the estimated capacity of the new solar farm is 102.5 MWp. The annual energy production of the solar farm is estimated to be 97 GWh. The Ministry of Economic Affairs and Employment in Finland has previously granted the project an investment aid of EUR 13.3 million and the solar farm is intended to be connected to the main grid in accordance with the connection agreement signed with Fingrid.

As a whole, we see the agreement as quite positive for NYAB from the perspective of Energy construction in Finland, and with the investment decision, the project development portfolio of its associated company Skarta Energy takes considerable step forward. The investment decision in itself did not come as a big surprise, as the original aim was to start the construction of the Utajärvi solar farm already in summer 2023. We believe the slight delay in the decision was at least caused by the rapidly rising interest rate level. The choice of NYAB as a contract partner was also quite expected, as in connection with the association agreement of the joint venture, the companies agreed that NYAB will be the primary contractor for the design, procurement and construction of the joint venture, Therefore, we expect that NYAB will probably also receive new projects as Skarta Energy’s projects progress. We have reviewed Skarta Energy’s project development in more detail in our extensive report published in the spring, which can be read here.

The agreement provides more support for growth forecasts, no immediate impact on the outlook

Roughly annualized (25-30 MEUR), the contract is significant for NYAB (revenue guidance 2023: 290-315 MEUR), although there is still uncertainty about its exact allocation. The project is also very large compared to NYAB’s average project size. In addition, it will significantly support our rapid growth forecasts for the coming years (2024e and 2025e revenue: 334 MEUR and 398 MEUR) together with the contract for the construction work of Aurora Line announced earlier in the fall. The agreement can also be considered positive, in view of the company's previous comments on postponements of investment decisions in the Finnish energy construction market (especially BoP wind power construction), as well as the uncertainty related to the timing of more comprehensive market recovery. However, the agreement has no immediate impact on our view of the company.