Q2 sales increased by 12% yoy to NOK 83m stemming from a 22% yoy increase of power production (143 GWh), primarily attributed to a full quarter of production from the Odin portfolio and contributions from Sundby, which compensated for last year’s sales of three hydro assets. The growth of power production offset the decreased average power price (from NOK 0.76/kWh to NOK 0.59/kWh). Total revenue, which also includes the book gains from asset sales decreased by 38% to NOK 207m.

Q2 EBITDA came in at NOK 180m, down 36% yoy due to a significantly lower book gain from asset disposals. Adjusting for book gains, the fundamentals paint a strong picture with EBITDA of NOK 71m (+NOK 49m yoy) thanks to a notably improved income from associated companies (+ NOK 30m yoy).

Value accretive capital recycling. At the end of June, Cloudberry sold three additional non-core hydro assets to Cadre AS with a combined annual production capacity of 36 GWh. The achieved valuation exceeded 2.3x the book value (NOK 320m transaction value and generating NOK 205m of free cash) with an IRR of around 28%. With this, the company increased its stake in Forte Energy by 15.99% to 49.99%. Mind you, Forte is hydropower portfolio with an annual production of 234GWh in the attractive NO2 and NO5 price areas.

The price of the 15.99% stake stood at roughly 1.1x the Q1 2024 book value of Cloudberry’ Forte shares. Most importantly, this underpins the hidden reserves of the balance sheet and the company’s ability to recycle cash in a value accretive way.

Portfolio build-out remains on track. The Sundby windfarm (32 MW) is currently undergoing test production and final construction is likely to be completed by the end of Q3. Further, Munk (19 MW wind) is developing ahead of the initial timeline and is seen to begin commercial production also by the end of Q3. On top, Cloudberry should be able to make a final investment decision regarding its 140 MW PV farm Nees as early as this year. With its 219 MW mature development backlog, Cloudberry looks set to grow its production portfolio to almost 500 MW until mid/end of 2026e.

Despite the recent ~ 40% share price increase, the company still looks attractively valued. We confirm our BUY rating with an unchanged NOK 19 PT based on SOTP.