Arise reported solid Q4 numbers despite facing tough y-o-y comparable figures. EBITDA amounted to SEK47m (SEK82m Q4’23) vs. our estimate of SEK40m. The development segment generated an EBITDA of SEK25m (SEK56m Q4’23) vs. our est. of SEK13m. The total portfolio grew by 750MW q-o-q, of which the late stage grew by 125MW. We consider this very positive and argue that Arise is well-positioned to reach its implicit financial target of divesting >360MW in 2025, where the UK and Finland are expected to be the main drivers (we expected Sweden before). Production amounted to 97GWh (88GWh Q4’23) vs. our est. of 109GWh. This was the main reason behind production’s EBITDA falling short of our estimate: SEK40m vs SEK47m (SEK51m Q4’23).

Arise‘s accumulated production has been 12% lower than budget since 2018. High capture price discounts in recent years combined with lower-than-expected spot prices have also had a negative impact on revenue generation in the wind power sector (although Arise has had favourable price hedges). As such, we lower our production estimates by 6%, reduce our power price forecast, and increase the capture price discount, which negatively impacts our new valuation of Arise’s wind farms by ~15%. These revisions are not related to the Q4 report itself but rather market data from last quarters.

Our updated fair value range is SEK20(22)-SEK110(112) with a base case of SEK73(79). 2025 should be exciting for Arise, where we expect 365MW to be divested - likely back-end loaded, but we think a small 25MW transaction could happen in Q2/Q3. Power prices have been relatively low in 2024, and we expect 2025 to be around the same territory. Arise enters the year with no hedges (apart from 10% of Q4 production at EUR60/MWh), and we therefore see a risk in the segment facing tough comps for FY25. Despite this, we expect Arise to generate SEK409m in EBITDA, the second highest ever, and the shares are trading at 4.1x EBITDA ’25E.