Norbert: Our story began a long time ago. I have been interested in renewable energy and climate change since high school. In my case, it started when, as a child, I saw how much snow there was in winter in fairy tales, and when I didn’t see any snow standing in the yard in January, I became curious about why there was no snow. This motivated me to get involved in this topic. I know that neither I nor our company will solve climate change, but I definitely wanted to do something that doesn’t make the situation worse but improves it. So I started working on solar projects and project developments. As an electrical engineer, I was also interested in climate change, and it made sense to try to do something in the energy sector. I didn’t want to become an electrical engineer, I wanted to be a mechanical engineer, but in the end, I became an electrical engineer. Around 2005-2006, renewable energy production was primarily firewood and biomass. Hydropower has been around for hundreds of years, and wind energy was trendy at the time. I realized that building a hydroelectric power plant is not easy, and we probably wouldn’t be able to participate in it. The problem with firewood and biomass is that we cut down forests and burn them. After a quick calculation, I realized that it is not really possible to produce enough electricity and heat energy from this in a sustainable way. Wind energy in Hungary became impossible from a regulatory point of view around 2006, so solar energy remained. We started our first solar project in Berettyóújfalu in 2013. This was one of the first five to ten projects in the country, and we also won a non-refundable grant for it because solar panels were still very expensive at that time. Then came the next solar power plants. We connected the next one in 2015, then in 2018, and then we commissioned the latest batch of solar panels in 2020. Now we are at the point where we have a 2.5 MWp project that we want to implement this year, as well as another 1 MWp project in Italy, which we also want to implement this year.

The Italian project is particularly interesting, but first, tell us a bit about the structure of the solar power plant projects, the timeline, and the decision-making processes. How do you choose areas? How long does it take to get a permit?

Norbert: Choosing the area is complicated because we basically didn’t want to install a solar power plant on agricultural land. One option is to find an industrial or brownfield site (for example, one of our solar power plants is on a clay quarry site). Another possibility is to withdraw agricultural land from cultivation and then permit the power plant. An important factor in site selection is connection to the grid. This was still simple in 2013 and 2018, but by 2022-2023 it has become impossible. Now it is no longer possible to get a new connection point from the distribution companies and to connect to the grid in a way that feeds energy into it.

Is the lack of network connection opportunities due to regulatory reasons?

In 2013, solar panels were still very expensive, and it was more of a playground for enthusiasts. Since then, the price of solar panels has significantly decreased. Previously, the price was two euros/Wp, now it is 10-13 cents. The cost of labor, metals, support structures, and cables has increased, but overall, it is much cheaper to build a solar power plant now than it was ten years ago.

Did you anticipate this price drop?

I suspected it, but I didn’t expect it to be this fast. Since it was worth dealing with this even without subsidies, many economic players and investors started to engage in this field. Due to the huge demand, network connection opportunities have run out. Now a horrific amount of money has to be spent on network development to accommodate new production capacities. Network development should have been done more actively, but it was difficult to predict that the price of solar panels would fall so quickly. That’s why we are where we are now. The network is full, developments are underway, but it doesn’t happen quickly. Building a new substation or line can take up to five years. This is not like a software update that can be sent out in a few days.

Do you think this is a saturated market and that only new technology will override it, or are there still opportunities within our country, which is why you are looking regionally and abroad, and then we can move on to the Italian project?

If we only look at whether the network is saturated and whether it is possible to build a new solar power plant, I think this is a, if not permanently, but certainly temporarily saturated market. However, innovation should not be underestimated, because it is not at all certain that solar project developments will be implemented in the same way in the next few years as they have been in recent years. The emergence of batteries and the decline in the price of battery energy storage—which interestingly follows the same curve as solar panels, but perhaps even faster—can completely disrupt this. So, if we have a 1 MW solar power plant and want to build another 1 MW solar power plant next to it, it is not necessarily the right solution to spend a lot of money on network development and build new transmission lines, transformers, and everything. It may be possible to come up with a more economical solution by installing a battery storage system and using the existing connection point. So I would not at all say that there is no opportunity in the solar market for the next period, because the rise of batteries will greatly shake up the industry. Similarly, installing batteries and solar panels for electric car chargers will be a very interesting story in the near future.

A solar project can be completed within a year. The implementation itself takes about one to two months, so it is a relatively quick thing to build and assemble. At the beginning, there is a significant investment requirement because you need to purchase the equipment (pay the various designers), which needs to be financed. After that, there is a relatively steady income that it will generate for the next twenty-five to thirty-five years. The operation and maintenance costs compared to the income are not significant. In electricity generation, the purchase of fuel is usually a significant item, for example, coal in a coal power plant or the cost of mining the coal, gas, and oil. In a solar power plant, of course, there is no such cost, so the largest cost component of traditional power generators is eliminated here. There are, of course, various operating and maintenance costs, but these are negligible compared to the revenue. Traditionally, these investments are realized with investment loans or project loans. Banks liked these from the perspective that, with mandatory takeover, they seemed quite predictable, and based on the established criteria, various banks financed these projects, and they still do to this day.

And after the project starts, that is, it begins to generate electricity and cash, what risks remain?

It depends on the type of project. The target company of this campaign is a power plant with a mandatory takeover resolution. What you need to know about this is that the state guarantees that the electricity will be taken over at a price of 47.04 HUF/kWh until 2041 in our case. More precisely, MAVIR, the Hungarian electricity controller, will buy it. The purchase price is adjusted by the rate of inflation, so we can consider it inflation-following. The purchase price of electricity is stable. Expected production can be well modeled with various software, as long-term measurement data is available. Therefore, I do not see significant risk on the revenue side. On the expense side, the biggest risk is if operating costs grow faster than inflation. Since maintenance is labor-intensive, and wages rising above inflation can be a risk, but these costs represent a small portion of the revenue, so this is not a major risk either.

Of course, regulation always poses a risk since energy is a heavily regulated industry. Rules set by the energy authority and other organizations can modify the conditions. If I had to highlight one risk, it would be regulatory risk, but this is present in every industry, whether it’s the banking sector or startups. For example, Uber withdrew from Hungary after a regulatory change. Besides operational and regulatory risks, there are also natural risks, but these are minimal because we install solar power plants in locations where this risk is low. Technical degradation can occur, but a solar power plant has a modular structure, so if something breaks, it can be replaced. It’s not a big piece of equipment that would stop the entire plant from working if it breaks down.

Insurance also covers damage, theft, and natural disasters. Although there are exceptions, insurance mostly covers the problems. Additionally, there is insurance for production loss, so if the power plant does not produce due to a malfunction, the insurer will compensate for the loss from the fourth day without production.

Wow. I didn’t even know this, though I tried to recognize the details. So we can say this is a utility business. Utility stocks on the stock market are held for dividend yields, not because something exciting happens every day. We can promise stable, predictable dividend payments, planned well in advance over the long term.

Of course, I want renewable sources to have a greater share in energy production, but we must see the limitations. It is not necessarily a good solution to only install solar power plants and have nothing else, because then we would either have no energy or very expensive energy when the sun isn’t shining. A mix must be created that includes solar energy, wind energy, and storage facilities. Pumped-storage hydroelectric power plants might be the best for this task, which Austria, Norway, or Italy can excellently apply since they have mountains and rivers with large falls. For us, this is quite cumbersome, and the profession hasn’t made significant progress in this area in the last 10-20 years.

We must think in terms of complex systems where many different sources are distributed in various locations, and smart incentives must be created. For example, people should charge their electric cars when the sun is shining, or set washing machines and other household consumers to use electricity when it’s cheap because there is a surplus. I believe in complex, decentralized systems for the future, and I hope they will spread and that regulation will adapt to them.

Nuclear energy is favorable from a carbon dioxide emission perspective, as it does not emit carbon dioxide. Of course, there is carbon dioxide emission during the construction of the plant, but this is negligible. However, waste management is a complex issue. In debates, there are extremes: some are very pro-nuclear, while others completely reject it. I think there are times when nuclear energy can be useful, but not everything can be solved with nuclear power plants either.

You mentioned that Italy is your next project venue.

The idea came from Italy, where it is still possible to connect to the grid and develop solar power plants. The Italian grid is not necessarily better or worse than the Hungarian one, but the country is much larger and more diversified, as in the last five years, almost only solar power plants have been built in our country, while in Italy, new hydroelectric, wind, and solar power plants are also being built. This makes the grid more stable and able to accommodate more new connections. Italy has more sunny hours, even Northern Italy is roughly equivalent to our Southern Hungary (around Szeged, Békéscsaba). As you go further south, the expected production increases. The Italian grid does not yet seem saturated, and although there are many projects there too, it is still possible to start new solar investments in the next few years using traditional methods.

The country’s risk level does not rival the Scandinavian countries, but it offers more sunny hours. Thus, Italy can be considered a golden mean where it is worth embarking on solar investments, considering the higher number of sunny hours and the stable grid connection possibilities.

I’ve talked to many people, made connections, and bought a plot of land and an already licensed project in Central Italy. We established an Italian company for this, and construction of the power plant is expected to begin in the second half of the summer, or rather towards the end of summer, and if all goes well, it will generate electricity by the end of this year.

I thought this would be the first step. Then we will draw conclusions about what was simpler and what was more complicated in Italy compared to Hungary.

What did you say about the Italian pricing?

This is an interesting question because there is no fixed takeover price like we discussed with the existing power plant. The yield largely depends on the market price of electricity. I cannot give an exact percentage, but I hope we can achieve a return of around 8-9 percent in euros over the entire lifecycle. We must admit that we are beginners in Italy. With this first project, we are learning the local conditions, and then we will draw conclusions. Then perhaps we can make more accurate business plans and calculations for future projects.

An Italian electricity trader will buy the electricity. The contract for this is already signed, even before the power plant is built. The market structure in Italy is very similar to the Hungarian market. Fortunately, within the European Union, the energy sector is well harmonized and regulated not only on a country level but also at the EU level. An electricity trader will buy the generated energy from us, it will produce within their balancing group, and they will balance the difference between the schedule and the actual production for a fee. The difference is that they will pay the current market price.

The foreign expansion seems promising for Hungarian investors as well. Do you plan for the investors joining now to participate in the financing of further projects later?

Yes, we will wait for the result of our first Tőkeportál campaign to see how much money or capital we can raise. Based on the conclusions, if the campaign proves successful, we will consider what next development we can involve the investors in within a new campaign. We are definitely thinking about this possibility. Furthermore, we would like to provide some kind of priority opportunity or discount to those who invest now, or at least give them the opportunity to be the first to register and invest. So we are definitely considering such options.

We are also looking forward with great interest, as this is the only such development project that will be financeable through Tőkeportál. Along with this, I would like to ask whether the site, the solar power plant itself, can appreciate, and have you seen transactions where ready operational projects are bought and sold, meaning that it is possible that investors might not only receive dividends but the shares could also appreciate through an acquisition?

Yes, such transactions exist, from very small sizes to large solar parks. It is evident that these projects are being bought and sold. Many investors entered this market purely for speculative purposes, meaning their strategy was to get a project permitted, build it, and then sell it to a large asset manager who does not want to take on the realization risks. Additionally, due to network saturation, new connection points are not available or only at a very high cost, which can also contribute to appreciation. The market is concentrating, with large investors and fund managers buying such assets. It is not excluded that someone might buy it at a higher price one day, but that is not our primary goal. Our goal is to realize a long-term operational investment that pays dividends. It is possible that later we will buy a battery for the power plant, which could generate additional revenue. But we do not completely rule out the exit option.

Then we await further exciting news about new projects, which will obviously increase the interest in the campaign, which is already significant. We hope that the campaign will quickly succeed, and we will meet at investor meetings where you can answer further questions and supplement what has been said!