Gaztransport&Tecnigaz Adr

Thank you for standing by. Welcome to the GTT first quarter activity update. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad. For your information, this conference is being recorded today. Now, I would like to hand the conference over to your speaker today, Philippe Berthe-Rottier, CEO. Please go ahead.

Thank you very much. Good evening, everybody. Thank you very much to have joined us for this teleconference on our Q1 activity update. I would like to introduce the persons on the table. We have Mrs. Obaniak, who is a special advisor to the chairman. and currently acting CFO while Marc Estier is on health leave. We wish him a prompt recovery. And we have also Jean-Baptiste Garnier, Investor Audition. Well, immediately, I would like to go to our key highlights. First of all, our Q1 2021 with news. We have achieved a turnover of 87.6 million euros, which is 15% below the one we achieved on the first quarter 2020. As far as our core business is concerned, we received in the first quarter two orders for LNG carriers. And in April, we received four orders for LNG carriers and two for very large ethane carriers. Well, from an important point for the beginning of the year, it's the decision from Qatar to launch the Northfield expansion, adding 33 million tons per annum to the worldwide production of LNG. Well, we will go into details about innovation and the activities of Elogen a bit later on. I would like to jump immediately to page four where we can see that currently our order book amounts to 125 units with 105 energy carriers and five very large 18 carriers. The movements in the first quarters, we received two orders for LNG carriers, and we delivered 24 vessels, 19 LNG carriers, four very large 18 carriers, and one FSRU. For new business, in our order book, we have 12 units for LNG as a fuel. We did not receive any order in the first quarters. and we delivered two ultralarge container ships. Moving to slide five, here is a slide that many of you were asking for, where we can see all the projects which are currently in construction with the startup period, the contracted capacity, the energy requirements for these projects. It means a total of 187 vessels. We've got to deduct from this number the vessels ordered or available that we assess to amount to 89, which means that we expect 98 orders to come in the coming years. So the market is still requiring about 100 LNG cars for contracted supply of LNG plants under construction. And that is a message of confidence for the year or the couple of years to come. We consider also that there should be fleet replacement which could increase that number as our latest technology are representing a very significant improvement in terms of boil-off compared to most of existing . If we want to have a particular look to the demand for energy, it remains very strong in China. In January, they reached monthly all-time high point. Of course, we know that it was very cold in Asia, and China important 8.5 million ton at that time. For the remaining of 2021, we are expecting a growth of 8.8% of the market, so a very significant increase. These data are coming from Wood Mackenzie. Innovation update, GTT conquers new technological frontiers for its client. On the membrane side, we introduced the latest version of our well-known NO96 technology. We name it Super Plus, and it allows to have a boil-off of 0.085, comparable to the Mark III Flex technology. That translates into reduction of operating costs, as the boil-off is decreased. We are keeping on working on the multi-gas version, and we received a notation for Mark III to be NH3 ready. It means ammonia ready. A lot of people are talking about ammonia, and we qualified this technology for ammonia. So, in doing so, we are offering more flexibility to owners. We keep on working on digital solutions for maintenance optimization. Thanks to an embarked tank integrity assessment system, we can offer to delay the maintenance operations for SSIUs and LNG carriers. That has to be approved by the flag authorities of the ship, but it's a very significant improvement, authorizing such longer lead time between inspection. Finally, for LNG as a fuel, we obtained an AIP for NO96 for adapting this technology to ultra-large container vessels, and we obtained an AIP for adding energy fuel going up to one bar gauge. So in doing so, we offer more flexibility to owners to select their shipyards with a wider choice of shipyards, and also more flexibility in operating the vessel, the tanks, thanks to this higher pressure level in the tank. Elogen are subsidiary producing electrolyzers. Elogen obtained a new contract. It's a very significant milestone. It has been selected by E.ON. to supply a one megawatt electrolyzer, a transformer, and a compression unit. Heliogen will also provide IND development of a hydrogen purification unit. So it's a very significant milestone, a very significant contract, and a very significant achievement. It is going to be used in the SmartQuart project, a full-scale laboratory to transform energy consumption in urban areas. It's supported and funded by the German Ministry of Economics and Energy. So now I will leave the floor to Virginie Aubagnac to detail the consolidated revenues of the company.

Good evening, everyone. So consolidated revenues for the first quarter of 2021 amounted to 88 million euros, down by 15% compared to the same period in 2020, but up 49% compared to Q1 2019. If we look at the revenues from New Build, it stood at 83 million euros, 87% of which coming from LNG carriers and its ESAN carriers, and the rest of it from new activities, notably 2 million from FSU, 3.4 million from SSRU, and increases of about 80% for GBS and LNG as a few. Revenues from services have reached 4.7 million euros, up 55% compared with the first quarter of 2020, thanks in particular to the acquisition made in 2020, and also maintenance and support services and digital services, which showed a good level of activity for the first quarter. I let Philippe And the presentation.

So for the outlook for 2021 are confirmed. I would like to recall what they are. In 2021, our consolidated revenue I estimated in a range of 285 to 315 million euros. As far as our EBITDA is concerned, we estimate it in a range of 150 to 170 million euros. And for dividends, we plan for 2021 a payout of at least 80%. So now the floor is yours. If you have any questions, Mr. Sobaniak and myself would be very glad to answer to them.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star 1 and wait for your name to be announced. If you wish to cancel your request, please press the hash key. We are taking our first question from the line of Jean-Luc Ronen from CIC Market Solution. Please go ahead.

Good evening. Jean-Luc Ronen from CIC Market Solution speaking. Thank you for taking my question. I've got two, actually. One is about Qatar. Catargas has reserved slots for 100 new builds for LNG carriers. Does it show in your slide 5 table or not? And my second question is about Elogen and its first contract. Congratulations on this. I'm not sure you will answer precisely to the question, but how does a contract for one megawatt electrolyzer plus the R&D assignments compare, for instance, in terms of size, compares with a contract for an LNG carrier?

Well, thank you very much, Jean-Luc, for your question. It's true that Qatar has booked 100 slots or something like that. On our slide on page 5, you can see Qatar with 33 million tons per annum. And that represents, in our opinion, about 35 ships. For Golden Pass, it's a project which is owned by Qatar at 75%. And they told us that they are going to lead the ship procurement process. And we see 18.1 million tons per annum. And with the shipping intensity of American energy, energy shipped from Gulf of Mexico, we consider that it represents as well at least 35 ships. So altogether you have 70 ships for these two. at least, in fact, in a fairly conservative way of computing. You could add some replacement of not of the Qmax and the Qflex, at least in the immediate future, but of old shapes, mainly mouse shapes operated by kata, so which could raise a bit this total. Well, we did not take them into consideration that the second valid point on this slide five where we expect a certain fleet replacement which could increase that number. So, reservations are reservations. They are not necessarily converted into firm orders. So, well, I cannot, we arrive with these simple masses to 70, a figure of 70 or a bit more. Well, that's the answer to your first point. To your second question, our contract for electrolyzer is comparing to a contract for energy. Well, it's significantly less. I would say it may be less, but a contract with Aon for such a project with such equipment arriving to the most efficient electrolyzer with this combination of equipment is an achievement. And that's what we wanted to highlight in talking about that. Elogen is capable of committing for such a complex system producing a very pure hydrogen. So even though it's not as large as a contract for LNG carriers, it's a major landmark and a major technological achievement. Thank you. Next question. Yeah.

Thank you. Next question comes from the line of Guillaume Delaby at Societe Generale.

Guillaume Delaby Yes, good afternoon. Three questions if I may. I took the call a little bit late. First question, could we have some news regarding Marc Estier? How is he going currently? This is my first question. My second question is regarding the Circa 35 orders which may relate to Qatar. Is it reasonable to assume that they may be spread over two years, i.e. 2021, 2022? And my third question is something basically interested me a lot in the press release regarding the E.ON contract is that your electrolyzer is going to reach an unequaled level of efficiency. So basically, I guess you discovered the philosophical stone, correct? And could you elaborate on that? Thank you.

Okay. So I said at the beginning of the speech that Marc Astier is on health leave. And I introduced Virginie Aubagnac, who is a special advisor to the chairman and currently acting CFO. We wish to mark a prompt recovery. For the 35 orders for Qatar, I don't know when they are going to be passed. You can see that the project is supposed to be operational by 2025. So you need the ships a bit in advance. And they may be ordered in 2022 and still be on time for 2025. it would be a bit more comfortable to order them in 2021. Your third question about the level of purity. Well, thanks to the system, and the system is more than an electrolyzer. It's the combination of the electrolyzer and the equipment which are accompanying the electrolyzer, that we are arriving to this level, the transformer, the compression unit, and the program for purifying the unit, that we are arriving to a very high level of purity of the hydrogen. And that is very appreciated. And as far as I know, we are the only ones, as far as we know, we are the only ones to be able to offer that now. Next question.

Yes, next question comes from the line of Kevin Roger from Kepler-Seguro.

Yes, good evening. Thanks for taking my questions and all the best to Mark. Hope you will be back soon. First question is related to the pipeline. I appreciate the fact that you mentioned that 100 cargoes are still needed for projects that have been sanctioned, but majority of them will come into production, let's say, from 2025, if you look at Qatar, NG Canada, Golden Pass, etc., So I was wondering if you can provide us the number of vessels that in a way in this pipe will be needed by 2024 and that will therefore contribute to your top line in the short term. That's the first question. The second question is related to halogen. Sorry for this very simple one, but can you remind me what's the capacity in terms of production of halogen for electrolyzer on a yearly basis and if you have any intention to expand it and to what if the answer is yes and the last point it's maybe not in your hands but can you let's say comment the situation with ENGIE right now because they are in a way seller on the paper so if you can comment the the discussion and the relationship with Engie currently, it would be great. Thanks a lot.

Okay. Well, on your first question, you rightly point out that there are several contracts for several projects which are for 2025, but some of those are for 2023 and 2022. So it's true that there are significant numbers for 2025. There is a certain difficulty to deliver all these vessels in all those needed for 2025 in one year time. So most probably some of them will have to be delivered in 2024. I would like to highlight that in 2023, we have Arctic LNG2, which is still needing conventional ships, which are not yet ordered. And 2023, it's in two-year time. a bit more, and you know that shipyards need a bit more than two years to build LNG carriers. So I'm not too concerned by the short term, so to speak, because here we are talking of the years to come, the short term turnover. I can see quite nice distribution of projects over the next years which are needing orders, which are needing new kinds. For capacity of Helogen, Helogen has a capacity of building something like 10 electrolyzers a year. I would say that increasing this capacity is possible. It's much more a matter of what exactly we are answering to. Do we want to do it now? Do we want to do it later? How we finance it in the current environment of policies favoring hydrogen? and what are the sweet spots we are aiming at in hydrogen. Finally, about ENGIE, I would say that ENGIE is far better placed than me to comment what they want to do with their GTT shares. Thank you.

Merci, bonne soirée.

Merci.

Next question.

Thank you. If you wish to ask a question, please press star 1 and wait for your name to be announced. If you wish to cancel your request, please press the hash key. We're taking the question from the line of Jean-Francois Grandjean from Odoo.

Yes, good evening. Just a quick question regarding the trends for the Odoo. intakes with a good level at the end of April, with this new three-year orders LNGC. Do you have any ideal trend for the next month, the next quarter in terms of Do you see a good trend? Do you see an acceleration during the second half of what's happened last year during the second half? So are you comfortable with a positive trend of new orders for the coming months?

Well, I would say that still looking at the chart on page five, we can see that the market is needing vessels, and I'm quite optimistic about the flow of orders this year. There are several projects which have to pass these orders. So when they are going to be notified, whether it's going to be notified in the second quarter, in the third quarter or in the fourth quarter, I cannot say. I used to say that it's a matter of no importance because they are going to be ordered, and whether it's this year or next year, they are going to be ordered. But I would say that for some projects, there is a certain matter of urgency.

Okay, thank you.

Thank you. If you wish to ask a question, please press star 1. If you wish to cancel your request, please press the hash key. We're taking our next question from the line of Jean-Luc Ronan from CIC Market Solutions.

Yes, I have another question on LNG as a fuel. It's been quite some time we didn't receive new orders, and it seems that there are still quite lots of LNG propelled vessels which are ordered. Do you see your offering as adapted to the needs of the market? Is it maybe too complex or too expensive compared to your competition? improve your market share or is it still too early to define what the trends will be in terms of membrane LNG carriers versus cylindrical LNG tanks?

Well, thank you. First of all, there are not so many vessels which are ordered with dual fuel, with LNG. There are some, but there are not so many. We do not consider our solution as too expensive. In fact, we consider that our solution is very often more affordable than the competition. we consider it also as a better solution, in particular in terms of boil-off, in terms of flexibility. So maybe people can look at it as complex, but finally it works. It can be built and it can be operated. I mean, we are entering into the gossip period, the period when owners can exchange on the experience. And this return of experience is going to be absolutely key in the phases which are coming. There are bunker ships with membrane. There are container ships with membrane. And very soon there is going to be a cruise ship with membrane. So a lot of experience is going to be gathered. and we are quite confident about that. On some segments, it's true that the C-type is offering quite aggressive pricing. While we think that our offering is better And finally, this superiority will prevail.

Thank you very much. Thank you. Our next question comes from the line of Renaud Soler at Anaconda.

Hello. Just two questions. What do you think of recently the different Korean shipyards have started to try to repatriate the membrane technology within their own yards? I know that they are far behind, but is it a mean to pressure the prices for you, or is it a real threat? And secondly... For the fuel of the future, there are still some debates for IMO 2030 and 2040 about ammonia as a fuel. What do you think, and is there any opportunity for you in ammonia for membranes?

Well, the threat of the ammonia, well, first of all, I would like to say that we have always been under this threat. There was two ships built a couple of years ago with the current technology, membrane technology, named KC-1. And the first one performed two voyages to Gulf of Mexico. The second one won and did not load LNG. And then they stopped, and there were several attempts to repair them, and they are still at Quayside in Korea. It continues. I think that there is more than pressure on prices there. But I would say that our answer is to keep on doing what we do. It means delivering very good technology and detailed technology to shipyards. in order to allow them to build very well-designed ships, to do that on time and to do that in a perfect manner. That's what they appreciate, even though they try to develop their own technology. And to keep on also improving our technologies, and you can see through the level of innovations we were referring to in our presentation that we do so. Ammonia as a fuel, well, it's a very large subject. You probably remarked that we had the notation from the Classification Society on the fact that one of our technology is ammonia-ready, ammonia-compatible. So, we are already prepared for that, and that's a concern. We are already working on a multi-gas concept, such as an ethane carrier capable of transporting LPG or energy, and we are keeping on working on this multi-gas concept with ammonia. Whether it's going to happen, it's another story. I think that in order to have clean ammonia, you need to have clean hydrogen. And clean hydrogen, it's electrolyzers, and you need a lot of them or you need big ones. Well, just to say that the infrastructure for producing clean hydrogen is not there yet. Then the energy density of ammonia is one-half of energy. So it means that for the same quantity of energy, you need a tank twice bigger. You need to deal with the toxicity of ammonia, and you need to deal with the logistics of ammonia. I'm talking of energy for seven years, and while we can say that the ramp-up of energy as a fuel, talking of energy as a fuel for seven years, And I can say that the ramp-up of LNG as a fuel is maybe a bit disappointing when we consider seven years. And still, we have a very large production of LNG in the world, and we had that seven years ago, which is not the case of ammonia. The logistics is in place, the technology is in place, while plenty of milestones are in place. It's not yet the case for ammonia. So, in my opinion, it's going to take more time. And, of course, we are already playing a role in ammonia, and we do intend to do that in the future.

Thank you. There are no further questions on the line. Please continue.

So there is a written question from Mr. Deleuze. How do you see Qatar Petroleum move to back LNG mine, LNG containment system for medium and large LNG carrier? Well, I think that everybody is appreciating competition, and we are appreciating competition. Because if we don't have competition, it's very hard to say that we are the best. It's very hard to say that we are more efficient, that finally, in total cost of ownership, we are significantly better, and that possibly we are better in prices. And Qatar needs to, when they are reserving 100 slots, they need to be sure that the technology they are going to select is the best one. It's a very important decision. And in looking at the type A technology, they look at quite particular technology where they would like to make up their mind. Probably all the other ones, they have an opinion on them. Here they looked at technology which has been used, developed more than 50 years ago. and the ships were sent for scrapping immediately. There is one ship in China using this technology, which has taken seven years to build it, and I understand that there are several issues on this ship. So there are ways of improving the technology significantly. And that's what everybody, including GTT, or first of all GTT needs. No questions anymore? Thank you very much. Bye-bye.

This concludes the conference for today. Thank you for participating. You may all disconnect.