Data Center Power Demand Will Drive Long-Term Nordic Renewable Earnings Stability

Catalysts

About Cloudberry Clean Energy

Cloudberry Clean Energy is a Nordic independent power producer that develops, owns and operates renewable energy assets across hydropower, wind, solar and battery storage.

What are the underlying business or industry changes driving this perspective?

• Accelerating demand from data centers and other power intensive industries in Southern Scandinavia, where Cloudberry already has merchant exposed assets and attractive PPAs, should support structurally higher realized power prices and drive sustained revenue growth.
• The steadily expanding base of producing assets, now above 1 terawatt hour of annual production, combined with a deep backlog of exclusive projects and M&A pipeline, provides visibility on volume growth that can scale EBITDA and earnings over the medium term.
• Grid constrained regions in Denmark and the wider Nordics are increasing the value of integrated solutions, and Cloudberry’s strategy of offering power plus land tailored to data center and power to X developers should unlock premium pricing and support net margin expansion.
• Diversification across eight price areas, multiple technologies and three Scandinavian countries reduces regulatory and resource risk, enabling more stable cash flows and supporting a strong equity ratio that can underpin disciplined leverage and earnings resilience.
• Capital discipline and proven capital recycling, highlighted by repeated hydropower divestments at roughly twice book value and the Forte transactions, position Cloudberry to reinvest at attractive returns, enhancing long term earnings growth and return on equity.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Cloudberry Clean Energy's revenue will grow by 20.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.3% today to 15.3% in 3 years time.
• Analysts expect earnings to reach NOK 116.6 million (and earnings per share of NOK 0.37) by about December 2028, up from NOK 49.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 54.8x on those 2028 earnings, down from 83.0x today. This future PE is greater than the current PE for the NO Renewable Energy industry at 50.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.05%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The proposed Norwegian resource rent tax on small scale hydro could still be implemented or partially implemented despite current opposition, permanently reducing the profitability of roughly 15% of Cloudberry Clean Energy's portfolio and weighing on earnings and net margins over the long term.
• Management has already paused one hydro project and earlier stage projects due to tax uncertainty. A prolonged or recurring pattern of regulatory shocks could delay new investments and slow the conversion of the development backlog into producing assets, limiting future revenue and EBITDA growth.
• Power price curves for Southern Scandinavia are expected to rise meaningfully as data centers and other power intensive industries expand in grid constrained areas. Cloudberry's strong merchant exposure and positioning in high price regions could translate into sustained realized prices above system averages, lifting revenue and earnings beyond what a flat share price would imply.
• The company continues to identify a wide range of distressed or attractively valued M&A opportunities in the Nordic market. Disciplined capital recycling at around twice book value, combined with acquisitions at favorable terms, could compound returns from the existing asset base and drive faster growth in earnings and return on equity than a static share price suggests.
• Diversification into new technologies such as battery energy storage systems, combined with a steadily growing portfolio now exceeding 1 terawatt hour of annual production and high ESG recognition, may attract more long term capital and strategic partners. This could improve funding conditions and support structurally higher revenue, EBITDA and equity value over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of NOK13.0 for Cloudberry Clean Energy based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be NOK762.7 million, earnings will come to NOK116.6 million, and it would be trading on a PE ratio of 54.8x, assuming you use a discount rate of 8.0%.
  
• Given the current share price of NOK12.78, the analyst price target of NOK13.0 is 1.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.