Gaztransport & Technigaz S.A.

Ladies and gentlemen, thank you for standing by and welcome to the GTT third quarter 2020 activity update. During the call, all participants will be on a listen-only mode. If you wish to ask a question, you will need to press star 1 on your telephone keypad. I do have to advise you that the call is being recorded today on Wednesday the 28th of October 2020. I shall now hand over to your host for today, Mark Hestiaire. Please go ahead.

Thank you and good evening, everybody. Without any further delay, I will start directly this presentation with the main highlights for the third quarter of 2020. First of all, in terms of core business, we've had a fairly good flow of orders. and also quite some diversification in the types of orders we have received. In the third quarter of such, we had 10 new orders, six for LNG carriers and four for the LEC ethane carriers, very large ethane carriers, which means that at the 30th of September, we've had a total of 28 new orders, 18 LNG carriers, one FSRU, two FSUs, four VLECs, and three on shore storage and diversified portfolio of orders I was just mentioning. Now, if we add to that the order for 10 additional LNGEC, we've just announced it year to date, it is now a total of 38 new orders. On LNG as a fuel, we've had no further orders. The order book has slightly evolved since we've had the delivery of the first CMATGM, a very huge, ultra large container ship. And we have 17 vessels in the order book. On the front of service contracts, we, in July, we've signed two additional global technical service agreements one with smithson in norway and another one with a company called fleet management in hong kong another contract we have signed in september relates to a contract with the u.s department of defense for the red hill bulk fuel storage facility in hawaii so this is a renovation of a few tanks for the supply of Pearl Harbor facility. On the acquisition front, in this quarter, we've made two further acquisitions following the acquisition of Maroc earlier this year. First one is a company called Oze Engineering, to the French company, which is specialized in smarter algorithms, artificial intelligence. And very recently, the acquisition of Areva H2Gen to the French company, specialized in electrolysis, using a specific technology called PEM, proton exchange membrane. A word about the KFPC, Korean Fair Trade Commission investigation. It's all probably our press release of last week. So in October, there was the issuance of a confidential examiner's report, but also the announcement of a hearing of the case, which took place on October 21. the decision following this hearing is pending. So that's for the highlights. Just coming back for a second on the order book. So this is at 30th of September. So it doesn't include the latest PEN orders just announced. So the order book stands at 135 units. Of course, the majority of LNG carriers, 108, 10 E10 carriers, 5 SFRUs, 2 FSUs, 1 FLNG, 6 central storage tanks, and 3 GBS, priority-based systems. So the movements in the order books were 28 new orders, as I just mentioned, and there were also 26 deliveries during the period for 23 LNG carriers, 2 FSUs, and 1 FLNG. LNG is a fuel business, 17 units. We have 13 ultra-large container ships, one cruise ship, the conversion of a container vessel for Hapag-Loid, and two bunker ships. So no new orders and two deliveries, one being the first very large container ship for CMAC-Gen and one bunker ship. Now maybe just a word on the market situation, the LNG market situation. First of all, our traditional slide on supply and demand, which hasn't evolved since our latest communication. So we're still seeing this growing gap between supply and demand, culminating to a need for 240 additional million pounds per annum by 2035. And also there's been a small slowdown in demand because of the impact of the COVID crisis. That has, if you like, moved backwards a little bit, the balance in the market to 2027. So although new production capacities will be required to bridge this gap, between supply and demand. In fact, in 2021, so far, we have not seen any new FIDs, investment decisions. We would also recall that 2019 was a record year in terms of FIDs with 27 million terms permission. But so far, no decision this year and a number of projects or decisions have been delayed probably to 2021, but will be required in any case. We have also listed a number of projects we think could be decided in the near future, one in Mexico, one in Russia, one in the U.S., Mozambique, and, of course, the famous Qatar project. If we take a slightly shorter-term view on the market, what we are seeing after the outbreak of the pandemic, we're seeing an energy market which is rebalancing. And, of course, we are looking at the short end of the market and specifically what's happening in the spot prices and charter races. What we are seeing is that charter rates are gradually improving. Of course, there is a seasonal effect, but still we are seeing less, well, a bit more tension in the stock market with charter rates picking up. You can also see on the chart that the stock prices for LNG in Asia and Europe have been increasing quite significantly, increasing quite strongly the spread between those prices and the U.S. gas price based on the Henry Hub Index. We mentioned at the half share that we were seeing some cancellations of cargoes in the U.S., This has now been decreasing, and we are expecting kind of full utilization of capacities by November of this year. So again, the market seems to be rebalancing. I focus on China, which you know is a large importer of energy. And we are seeing for the period January to August, more recent data are not yet available. But for that period, we're seeing energy imports from China increasing in 2020 compared to the same period in 2019. A lot, of course, of the energy imports in China are based on long-term contracts. So the impact of the pandemic has been less felt. And this is also translated in a 12% increase in Chinese import over the first eight months of this year. Just coming back to the acquisition of Areva H2Gen, which is very recently closed. their position Monday last week, which is, as I mentioned in the highlights, a leader in PEM electrolysis and specialized in the design and assembly of these machines for production of green hydrogen. Some details on the company was created in 2014. It's in fact the only company to actually manufacture electrolysis in France. There is another French company who manufactures these machines, but based on a different technology. But the manufacturing doesn't take place in France. It's in other countries, other European countries. The company provides, of course, engineering and services and is a technology company, so close to our DNA, with clearly a lot of research and development. The application is classically for industry, mobility, and storage of energy. The company, we believe, is well positioned to take advantage of the strong growth which is expected in the green hydrogen market. So this acquisition really confirms our commitment to the energy and environmental transition. It is clearly in line with our development strategy and our mission statement which we have published recently. And we can see a synergy through combined technological expertise, but also our knowledge of energy players and our commercial capacity, which, of course, benefits this company. And a further word on the Fair Trade Commission inquiry. So, as I said, the hearing took place, well, actually a week, last week on Wednesday. GTD has, of course, participated in this hearing with councils, and we have also, of course, prior to this hearing, responded to the preliminary conclusions of the existing who stumbled on this report. Of course, we will keep the market informed of the outcome and of the decision of the KFTC when it will be published. To end this with a few numbers, so revenues for the first quarter, So we have achieved 306 million revenues, which is an increase of 53% compared to the same period last year. Of course, this is essentially on the back of the very strong level of orders we've had in 2019 and 2018. royalties for new builds have increased by 56%. And we're also getting some other news from our new activities, energy as a fuel and GBS. The services, I guess, as was the case for the first half of this year, have suffered a bit more from the from the pandemic with a decrease of 5% of the revenues for services. And this is, of course, a contrasted picture depending on the type of services you are looking at, but clearly where services concern vessels in operations, for example, so assistance to maintenance and things like that, clearly the restrictions in travel have had an impact on that part of the activity. On the other hand, we've had higher revenues for studies. I usually explain that studies can be a bit lumpy. The small number of studies with a fairly high value So we've had a few more studies this year than we had in the first three quarters of last year. So that's it for the formal part of the presentation, except that I would still like to end by confirming our outlook for 2020. So in terms of revenue, we are looking at a range of 375 million to 405 million euros. As far as EBITDA is concerned, we are expecting a range between 235 and 255 million euros. And our dividend policy remains unchanged for 2020 and 2021 with a payout of at least 80% of consolidated net profit. So that is for this presentation, and now I will be happy, Scott, to take your questions.

Thank you very much, sir. Ladies and gentlemen, as a reminder, if you have a question, please press star 1 on your telephone keypad. Our first question is from the line of Jean-Luc Romain from CIC Market Solutions. Please go ahead. Good afternoon.