Maire S.p.A.

Good afternoon. This is the Coral School Conference Operator. Welcome and thank you for joining the Maria Tecnamont 9-month 2022 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Alessandro Bernini, CEO of Myra Technimont. Please go ahead, sir.

Good afternoon, everyone, and thank you for attending the nine months of 2022 financial results conference call. The first nine months of 2022 have shown a solid and growing financial performance as revenues and EBITDA have grown at double-digit rates versus the corresponding period last year. Our green energy business continues to grow at a significant pace, with revenues of €202 million up almost four times and a record backlog of about €1.2 billion, which has increased more almost five-fold over one year. This solid financial performance has been accompanied by a very strong cash flow generation of 213.6 million euros, which has led to an adjusted net cash of 65.3 million euros. This is the 10th consecutive quarter of improvement in the net financial position. Our 8 billion euros backlog of all the Russian projects that will no longer be included from now on continues to be extremely healthy and well diversified. And the group is not dependent on any single geography. A 2.8 backlog cover makes us confident about our immediate future. At the same time, our business drivers continue to remain solid as reflected in a commercial pipeline worth almost 54 billion euros, of which almost eight in green energy. In conclusion, we are successfully executing projects while energy transition is taking off. Our main consolidated financial results and KPIs are shown on page four and will be discussed in more detail later by Fabio in the presentation. Before we discuss our operational performance, we'd like to give you an update on our Russian projects. As communicated last July, no economic contribution was recorded in Q3, as projects were suspended in the course of the second quarter. Moreover, as the premises that led to the suspension have not changed over the last few months, projects have been or are in the process of being terminated. As a consequence, Amurskyschou and Tingishechou have been taken out of the backlog as of September 30, and the Russian backlog is now close to zero. Please note that all historical figures relating to the backlog presented in this document have been adjusted in order to exclude the Russian projects in order to facilitate the comparison on a life-for-life basis. Contractual conditions related to the terminations due to sanctions will be applied as customary. And finally, we confirm that the project financial position continues to remain in equilibrium as communicated throughout the year. And now let's analyze our operational performance. Our order intake up to the end of September was 1.6 billion euros. This year's intake has been extremely diversified both in terms of geographical locations, contract type, and business. This is thanks to a healthy commercial pipeline that continues to offer a variety of interesting prospects all over the world. Our increase in success in green energy is demonstrated by the fact that half of the entire nine months order intake is in this business line, a testament of the validity of our technological leadership in the energy transition. This has continued this month with over 450 million euros of new orders, leading to the overall total to date to about 2.1 billion euros. Based on the various ongoing tenders that we have submitted, we are fully confident to further increase this year's order intake and reach a book-to-bill ratio of at least one. Let's take a look now at the Rurder Bagel project in Algeria that we just announced a few hours ago. This morning we were awarded a $380 million FTC contract by Sonatrac. The project is related to the execution of a liquefied petroleum gas extraction plant inside the already existing Rudder Bagel oil and gas treatment complex situated in the northeastern Algeria. The project's scope of work entails the implementation of a new LPG extraction plant that once completed, we will have capacity to process 10 million metric standard cubic meters per day of associated gas coming from the existing facilities. The planned completion is scheduled within 36 months from the contract's effective date. The objective is to increase the LPG and condensate production of the existing gas treatment complex. The majority of the construction is expected to be performed by local subcontractors, representing a significant contribution to the in-country value development in the area. This is a very strategic project that reaffirms our track record with Sonatrack and confirms our leading position in gas monetization. As previously commented, the Russian projects have been taken out of the backlog in the course of this year. In particular, Amursky-2 and Kingis-2 have been removed in Q3, in addition to Amursky-1, which had already been taken out. In order to have a comparison on a life-for-life basis, however, we also adjusted the backlog data at the end of June by taking out the corresponding amount for the Russian projects. The result is a slight decrease of about 250 million euros. The decrease in hydrocarbons due to these adjustments, however, is almost fully compensated by an increase in the green energy backlog, thanks to the various energy transition projects which were acquired this year. Moreover, The order intake of the last couple of years has made the backlog even more geographically diversified than ever. We feel there is a good balance between the Middle East, our strongest historical area, and the other regions in the world, from Europe to Africa, Asia, and North America. Let's focus now on our two business units, starting from our core business. and the AP portion of the hydrocarbons backlog has remained relatively stable at over 600 million euro. This continues to contribute to the risking of our existing business, a very relevant factor in these volatile times. The backlog cover is 2.8 times, providing a very high visibility for the future. Moving on to the commercial opportunities in our core business, our pipeline has increased to 46.1 billion euros at the end of September, up 5.5 billion euros this year. The last quarter has seen a significant increase in new initiatives about to be tendered, driven by the resilience of our core business, strongly supported by powerful business drivers. Such a positive environment bodes well for our group's growth prospects in the years ahead. All the geographies where the group is active continues to remain extremely attractive. In particular, the Middle East continues to remain an area of incredible opportunities, driven by a new wave of downstream projects. At the same time, we are witnessing an increase in activity in North America driven by an abundance of gas as a feedstock for fertilizer plants as well as renewed investment in other gas monetization plays. Asia is also an area that continues to show significant potential. Our pipeline remains extremely strong and geographically diversified, continuing to provide solid support to future awards in the short and medium term. Let's move now to the green energy business unit and our efforts in the energy transition and sustainability. We continue to grow our green energy business, offering our clients sustainable solutions to enable them to successfully face the energy transition challenges. In this respect, half of the nine months of the intake is represented by energy transition projects, as we highlighted earlier in the presentation. We have been awarded contracts not only by historical clients, but also and especially by new customers. They are all working to transform their processes and their products in order to tackle the climate change challenge. We are particularly active in the area of low-carbon fertilizers and green hydrogen with several engineering and EPC awards across the globe. Biogas, sustainable aviation fuel, and second-generation ethanol are another area that we are actively pushing. also thanks to our international partnership. Last but not least, we are increasingly playing a relevant role in circular economy thanks to our unparalleled skills and competence. In this respect, let's take a closer look at the waste to hydrogen project in Rome, which is going to benefit from a significant EU grant that was just assigned to Mexico. We are extremely proud that NexChem has been assigned a 194 million euro grant for the development of a waste-to-hydrogen plant as a part of the IPCE Hydrogen to Use EU project, especially considering that only 500 million euros have been assigned to Italian projects overall. The project sets up the Hydrogen Valley in Rome, the first industrial-scale technological hub for the development of the national supply chain for the production, transport, storage and use of hydrogen for the decarbonization of industrial processes and for sustainable mobility. Thanks to the proprietary technology developed by NexCam, the plant will use 200,000 tons per year of non-recyclable solid waste as a feedstock to produce circular ethanol and circular hydrogen, the latter at a competitive cost compared to traditional hydrogen production for fossil fuels. The project will also contribute to the optimization of the waste trade treatment cycle in Rome through a conversion process that will significantly reduce total CO2 emissions. As a matter of fact, following the life cycle assessment approach which calculates CO2 emission from the raw material to the final use of the products, our waste to ethanol and hydrogen technology produces fuel Saving beyond 70% of greenhouse gas emissions compared with traditional processes and the hydrogen produced can be considered EU taxonomy aligned. NETSCAM is acting as the promoter of this important initiative. As such, We are actively having conversations with qualified leading industrial players and strategic infrastructure funds about the future equity structure, where we may consider retaining a minority investment. In the meantime, as announced last Monday, engineering design activities have been started, also including the award of the process design contract for the Citra ethanol unit. We will keep you updated on these exciting projects as developments will take place. All these significant and diversified new projects have translated into a sizable increase in the green energy backlog, which has gone up five times over the last 12 months to almost 1.2 billion euros. Such an increase has already translated to higher revenues and EBITDA, a trend that is expected to grow in the future. The backlog is widely diversified with projects spread equally between Europe, the Americas, and Asia. The other side of the coin of the green energy expansion is given by an increasing commercial pipeline. As of the end of last June, we were pursuing opportunities worth 7.7 billion euros, up to 1.1 billion this year. While Europe remains the target geography, we are experiencing an increase in opportunities in other areas, such as in Asia and in the Americas. I now hand over the microphone to Fabio, who will discuss our financial performance in more detail.

Thank you, Alessandro. Our nine-month revenues grew 22.6% to 2.5 billion euros. Such an increase is mainly due to last year's acquisitions starting to provide a positive contribution to our top line. Business profit was 214.3 million euros, up 14.2% thanks to the revenue increase. where 56.6 million euros, a decrease of about a million or 1.4%. This remarkable achievement is due to our continuous attention to cost improvements across our organization. As a result, the percentage of these expenses of the revenues has decreased from 2.8 to 2.2% over the last year. RMBs have increased by over 3% mainly driven by our green energy expansion. EBITDA was 151.5 million euros, up 22%, with a profitability of 6%, in line with the previous quarters and with this year's guidance. Net financial charges were 26.4 million euros and were mainly impacted by a higher derivative mark-to-market valuation, also related to the tools in place for the buyback of our own shares and by a marginal increase of the gross debt. Such a positive operating performance has led to a consolidated net income of 61.4 million euros, up 7.2%, and the group net income of 61 million euros, up about 1%. Moving on to the balance sheet, let's analyze the cash flow dynamics. our adjusted net financial position has improved for the 10th consecutive quarter and now stands at 65.3 million euros. Such an improvement has been driven by a significantly healthy cash flow generation of 213.6 million in the nine months as projects started to shift gears in the second quarter and delivered over 180 million euros of cash flows in the last two quarters. This positive cash generation more than compensated $60 million in dividends and $97 million in additional outflows due to taxes, net financial charges, capex, and acquisition of treasury shares. We expect this virtuous trend to continue in line with the guidance provided at the end of February. Let us now take a look at the working capital analysis. Working capital has improved by about 132 million euros to negative 137.8 million. Such an improvement has been mainly driven by the positive effects of projects' advancements on accounts receivables and payables and advances to suppliers. This graph is further proof of the ability of our projects to generate cash as well as the effectiveness of our working capital management. Please remember that our net working capital was positive 288.8 million euros at the end of March 2020. This implies an improvement of over 420 million euros in two and a half years. I now hand over the microphone to Alessandro for his concluding remarks. Alessandro.

Thank you, Fabio. But before moving on, To our final remarks, let me provide you with an anticipation about how we are modifying our market approach. Our group has always been very fast at responding to the ever-changing external environment, and our business structure has evolved over time to adapt to these transformations. Our core business has always been in energy services, serving our clients in the downstream business. Our leadership position in the petrochemical, fertilizer, and oil and gas refining is undisputed. Our competitive advantage has always relied on a comprehensive and significant proprietary technological platform driven by almost 2,000 patents. For this reason, following the implementation of a new strategic approach in 2014, we put technologies at the center of our organization as the key and clear differentiating factor vis-a-vis our competitors. Clients were choosing Myra Technimont for its technological DNA and the value added that we would bring in delivering energy services solutions. By the end of 2018, the launch of NETSCAM represented an important disruption event, whereby we grouped our existing energy transition activities and competencies under the Green Energy Business Unit, which started to represent our main platform to develop our energy transition efforts. We were the absolute first among our peers to make this move, which was supported by our existing in-house capabilities and anticipated a trend that would become more obvious a few years later. The move towards a world defined by energy transition is now clear and evident, and the green acceleration is taking place right now. For this reason, our clients are increasingly demanding ENC solutions that are more and more integrated, helping them to successfully face and anticipate these energy transition trends. The synthesis of these market trends and demands is that the key to win will be the ability to apply and integrate these different E.N.C. and technological solution across a wide variety of industries and geographies, each of them with their own peculiarities and characteristics. And the combination of a technological DNA coupled with expertise and the proactive problem solving culture is already giving us the chance to compete in the Premier League, if you allow me a social analogy. Only those who can master different technology and know how to efficiently apply them will be able to stay on top. We have been dealing with these issues for the last few years as we started to develop and integrate our energy transition expertise into our traditional business. Developing successful ENC solutions means putting together our projects and risk managing capabilities, which will result in superior project execution and integrated solution. Being a leading technology solution providers means building together all the value added activities centered around the development and deployment of proprietary and third-party technologies as well as proprietary equipment to offer our clients the best sustainable technological solutions. As we move forward towards an energy transition world, we are enhancing our competence which, while being very focused, are strictly interrelated among each other in order to leverage cross-fertilization of ideas and synergies under the same group. As a consequence of what we have just explained and to better represent business evolution towards energy transition, we will adjust our reporting system to reflect on one side sustainable integrated ENC solutions that carry higher volumes and margins. And the EMC on the other side, sustainable technology solution characterized by lower volumes but higher margins and higher growth rates. This change will be implemented starting with the full year 2022 financial results. More details will be provided to all of you in due course. Moving now to the final remarks, and having said that, the nine-month financial results have confirmed the pickup in pace, which is showing a double-digit growth. Our energy transition business continues to develop significantly as new projects have been awarded and started, leading to a more than four-fold increase in the backlog over the last 12 months. Overall, our total backlog is providing a solid foundation to 2023 revenues and beyond, both in the traditional and in the energy transition business. At the same time, our strong and growing commercial pipeline, supported by our leading technology portfolio, will continue to deliver new projects. As such, we expect the full-year order intake to grow over the next couple of months, leading to a book-to-bill ratio of at least one and backing a further growth for the IRS. As a result, we reconfirm our 2022 guidance that was communicated to the market on February 25, namely revenues in the range of 3.4 to 3.6 billion euros and EBITDA profitability in line with the last few quarters and an improving net cash position. We will continue to consolidate our overall growth while expanding our existing energy transition business to higher levels. And this concludes our presentation, and Fabio and I stand ready to answer any questions you may have.

Thank you. This is the Coruscant Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 under touch-tone telephone. To remove your staff from the question queue, please press star and two. We kindly ask that you hand sets when asking questions. Anyone who has a question may press star and one at this time. The first question is from James Winchester with Bank of America. Please go ahead.

Good afternoon, gents. Thank you for that. I just wanted to talk about contract assets again. In your annual report, you wrote that you expected the trend of growing unbilled receivables to turn around in the coming quarters, but there was only one quarter of decline. So can you provide a bit of colour as what didn't materialise that you expected at the beginning of the year? And then secondly, in parallel to that, trade payables are now at about €2 billion. And I know previously you mentioned that this is because you're waiting to get paid. But can I just confirm that you basically agreed with every subcontractor that they won't get paid unless you do? And then the final one is, could you provide a bit of detail on the use of factoring and reverse factoring for Myri Technomont? Thank you.

Let me start with the last question you made on factoring and reverse factoring. I understand your second question was on trade payables. And if you can rephrase the second question you made for a second. Let me start and then maybe you can rephrase. Factoring and reverse factoring have been in use since quite recently. sometimes at my technical. It's the proper tool in a way to really discount receivables from clients and be able to grant a steady flow of cash flows that you see in our reporting. As you know very well, our business is not a business where you can predict The steady growth over time because you have sometimes certain cash in or cash out which can make a huge difference from quarter to quarter. So we have always been using working capital tools, trade finance tools to smoothen the curve. And this is the case with factoring which allows us to anticipate cash flows due in other periods just again to be able to provide a smooth growth of the cash in, as well as reverse factoring to our suppliers, which are able to, as trade finance tools, to give us two advantages. First of all, we can delay the payment to suppliers in case of delays in the cash in. Second, we give our suppliers base certainty of payment. So in a way, when you give a supplier certainty of payment through reverse factoring, you are also able to negotiate better conditions. So it's also a tool to become more efficient in the supply management. The other question was on .

Let me provide you with an answer with respect in particular to the value of the contrapasses which has been and I am realizing is still of a lot of interest of everybody. As you have appreciated, we have maintained more or less the same amount which we have experienced by the end of June despite the significant increase in the volumes of our operations because in the third quarter we have generated more than 900 million in terms of production which represent an important milestone for the growth of our group. And of course, you know, the possibility to manage and to reduce The contract assets depends on the contractual conditions defined with the client in terms of possibility to invoice the various milestones. Now since we have ongoing different packages, different projects, giant projects in particular in Nigeria, in particular in Middle East, in particular in Europe as well as in U.S., of course before being in a position to release the invoicing it is necessary to reach the milestone agreed with the client which you know depends on and since the contract asset represent the photogram at a certain standpoint, in this case 30 of September, it means that in some circumstances it was not yet possible to build the client with the work that we have done. But having maintained the same amount that we have experienced three months ago when the level of volumes was absolutely lower than what we are experiencing and delivering so far. It's a great result because it means that we are managing properly all the work that we are providing to the client as well as the billing facilities. I don't know if there is something else that we have lost.

No, I mean, just in terms of the contract assets, I mean, the point that I was trying to make was, you know, you kind of knew what your revenue was going to look like for the full year, but you were kind of highlighting that you were expecting it to decline over the following quarters when you set the guidance, but we've only had one quarter. So it was just more a question of what didn't materialise versus, you know, what's actually happened. But can I also add one other question is, The closure of the Eurochem, the project in Russia, did it have much of an impact on the CFFO in the third quarter?

Let me take this one and then we go back to the view on contract taxes. The termination of King Egypt II, as you are rightly reminding us, has been closed on August 8. The overall impact in terms of the financials, if this is what you're asking, is with a positive sign in the sense that from a pure accounting perspective, we are balance in terms of assets. One thing that needs to be reminded is that the client tried to call our bonds. This is known to the financial community. And clearly these bonds were not frozen just because banks are are not allowed to make any payments to a sanctioned subject. So in a way, the financial situation with Kingi S.p.A. is balanced and will bring on discussing with the client and negotiating the program.

As far as the question relating to the controlled assets, let me say that everything is in line with the contractual framework that we have agreed with the various clients. There are no particular events. Simply, of course, What was ongoing in the past has been transferred into, let me say, receivable, cached, and now we have the new work which is going to be delivered to the client, which, I repeat, if it has not reached the contractual milestone, it is not possible to build it. But there are no particular phenomenon behind There are no, let me say, pathological factors. It is simply linked to the contractual structure that we have in place and the type of work that we are executing on behalf of our client. Nothing particular behind the value of this amount, which, by the way, of course, we are trying, and I believe that we have all the way to try to reduce this amount within the end of the year since, you know, In particular, in the last quarter, there are different type of efforts in trying to convince the client that we have achieved the various milestones. So I am expecting that within the year-end, the amount of the contract assets that we have experienced by the end of September could be reduced within the year-end.

That's very clear. Thank you.

The next question is from Mick Pickup with Barclays. Please go ahead.

Good afternoon, gents. It's Mick here. Just looking ahead, Sandra, you obviously talked about 2023 being a year of growth for me. And I think if I'm writing your calculations, you're saying that you're going to end up with a backlog at least 8.4 billion. And to my type of math, that would say you're probably... You are right, Nick. We are enjoying a very high level of backlog.

Even without, after having taken out the Russian project, we have remained at an amount which is well in excess of $8 billion. And a significant portion of this backlog is due to be realized in particular in 2023 and the year after, of course. But on top of that, as we have already stated, we are more than confident S.p.A. S.p.A. S.p.A. S.p.A. S.p.A. even in excess of the turnover that we expected to deliver for the entire year. So it means that by the end of 2022, based on our expectation, but let me say that our more than expectation, our final backlog will be higher than the backlog that we have enjoyed by the end of September. So as you have correctly stated, 2023 is already backed by orders that are already on board. So now we have quite a good visibility of what we have to do in 2023 and even in the year after. But in terms of economics, let me say that we are used, of course, and you know very well that we are used to provide S.p.A. S.p.A. S.p.A. S.p.A. S.p.A. the orders, the business, the contracts that we expect to transform and into production in 2023 as generated by the green business, the energy transition business, it is useless to say that the growth that we are foreseeing for the next year will remain in the double-digit space. So this is what I can anticipate confirming the visibility that we have, but I prefer before providing additional details as far as, let me say, the margins are concerned and all the other financial elements that we are used to provide when we deliver the year-end results.

Okay, and can I just ask you about that? Obviously, you're pretty confident on winning new awards, and you talk about the traditional market. I know I can see a refinery somewhere in the Middle East region that you're well placed on, but what is it that's driving that shorter-term backlog expectations? Is it that Middle East downstream? Are we starting to see the first of the fertilizers projects coming through yet, given pricing dislocations in gas?

Absolutely no. Absolutely we are not seeing any reduction in any level of business and in any business space, Nick. Nor in the, let me say, traditional, and traditional I'm saying, as you have correctly stated, refining, petrochemical, fertilizer, all of them, are expressing a lot of opportunities. As you have seen, our commercial pipeline, which has grown more than 5 billion this year, is almost entirely covered by this type of project. All over the world, a lot of, for example, in the refining business space, a lot of refining units must be updated, must be, let's say, revamped. in order to be able to produce type of fuels which are more aligned with the prevailing international rules, Euro 5, diesel with the low level of emissions, and something like that. And in particular, in West Africa, North Africa, East Europe, there are a lot of units which must be revamped, as you know, One of them is one of the projects that we are presently executing in Nigeria, which represent one of the most remarkable projects that we are doing so far. But at the same time, let me say that on top of the project in the traditional space, a lot of clients, regardless the regions, regardless the geographies, they are accompanying it. projects, investments in the traditional type of project with, let me say, new solutions in order to achieve the decarbonization path. So in many situations, we have been requested by potential clients, potential because, of course, we are talking about offers that we have already submitted to those entities, submitting proposals to, for example, to decarbonize their industrial infrastructure with the CO2 capture, but then the CO2 which has been sequestrated, not simply inflated into an exhausted well, but to be utilized as a raw material for another in the industrial process. So it means that what we are seeing and what right now prevails in the market are requests for investments, requests for projects whereby almost every time the client requests an efficient solution for a traditional type of plant but more or less always accompanied by the submitters of a technological solution in order to reduce the emission of the CO2 or to introduce a new industrial process which leverage on, for example, renewable energy sources or similar type of products. So it means that The energy transition process is something which more or less in a very short period of time will affect all our business. It's not a matter of maintaining a complete difference between traditional projects and green projects. Almost all of them will represent an integration between technological solution for, let me say, traditional products, but almost always, I repeat, accompanied by technological solution in the green space. This is what we have in front. Of course, we are extremely well equipped. because our technological portfolio can deliver solution in both space, but in particular thanks to the investments and the effort that we have dedicated in enhancing our green portfolio over the last couple of years, three, four, five years, now we are ready to cope with the market request with the most efficient and state-of-the-art solution in the green space. So this is what we have in front of us, and for this reason we are extremely positive about our future. Thank you.

The next question is from Kevin Rodger with Kepler-Chevreux. Please go ahead.

Yes, good evening. Questions have been already asked, but I have just an additional one for you, please. Related to the Forex impact that you see on the balance sheet and the weight on the net cash position, Do you have any view where basically you would see the forex turning back into the cash flow? Would you say it's probably for Q4 or more for next year? Is there any idea in terms of timing on that subject, please?

Yeah, sure, sure.

Well, first of all, we're talking mostly about of dollars going forward due to the nature of our business. And I would say that it's relatively shorter than it used to be with roughly 30% by the end of 2022, 60% in the first half of 2023, and the last portion in the second half of next year till the beginning of 2024.

Okay, exactly, but just to be sure that I well understand, it means that on the paper, you should have a positive cash contribution from those forex effects of something like 40 to 50, 40 million in Q4.

It's going to be roughly 30 to 40 million by the end of the year.

But Kevin, if you allow me, first of all, it is quite difficult to identify how much and when there will take place the reversal. For sure, if we assume that the present, the prevailing exchange rate will remain the same all over the residual period, whereby The underlying transaction, which has been covered, hedged with the hedging contract, will materialize. But, you know, who knows? Who knows what will be the prevailing exchange rate when the client will pay the invoices and I will cash the money. So, unfortunately, unfortunately, we have to prepare our accounts based on the international standards which imply, of course, obliged to evaluate our hedging contract and with the mark-to-market criteria when we close the numbers at each quarter. But it is, let me say, a simple exercise because what we are now reflecting in our net financial position will be covered by a similar flow of money when the underlying transaction will take place. So you have to consider that this amount is close to zero from a substantial point of view. It is simply a pure accounting issue. Because from a pure financial standpoint, the effect is close to zero. What we have now considered in the net financial position as lowering the net cash, which has lowered the net cash, will be covered by a higher cash flow as soon as the money will be recognized by the client. And as already stated by Fabio, If we consider that there will be no movement in the exchange rate EURUSD, half of this amount will be recovered in the first half of 2023 and the remaining portion more or less in the following months.

And clearly this feature should change. Should we get additional contracts which should require additional coverage? So in a way we're talking of the existing stock. And again, the purpose of any hedging policy is to cover from risk and increase the contract's margins at the day of inception. So irrespective of what the market, of how the market performs, we have done our duty. And that number is always going to be netted by the actual flows when they happen. So this is a quite important point to be remarked.

Okay. Okay. Thanks a lot.

The next question is from Massimo Bonisoli with Equita. Please go ahead.

Good evening, Alessandro and Fabio. Two clarifications from me and one question. Sorry to ask it again, but if I got correctly, you mentioned that you expect book to bill of at least one time in 2022. If my calculations are correct, in four quarters you expect at least an order intake of $1.8 billion, out of which you already announced in October half a billion from the two projects already announced. Is that correct? And the second clarification I did not catch, sorry, but for bad line, your statement on volume regarding 2023. You were mentioning a double-digit growth in volumes there. If you can help me there, that would be...

You have well understood both of them. And let me say, as far as the first clarification is concerned, let me reconfirm once again that in particular in the fourth quarter, fourth quarter, considering that 400 million has been already awarded so far, and I am referring to the contract in Algeria, On top of that, we are extremely close to the finalization of another contract, very important contract, which will contribute to achieve, and let me say, I am confident that we will be able even to move on top of the ratio one compared to the revenues. So you are completely right. In the fourth quarter, we expected to get new orders well in excess of the amount that you have mentioned. Well in excess, let me say.

First.

Second, it was with reference to the 2023 expectations, I have stated that even if we prefer, of course, to provide the details as far as the financial expectations are concerned, when we will deliver the year-end accounts, the year-end results, which means middle of February, end of February 2023, but thanks to the backlog that we have already on board and what we expect to get in the fourth quarter, All these orders must be transferred into production already in 2023. This provides us the confidence that in 2023 volumes of activity will be higher than 2022 with a double digit raise.

Very clear, Alessandro. And just the question is regarding your hydrogen project in Rome, in Lazio. Could you elaborate more on the return profile of the project for your clients once they decide to invest, considering the contribution you will receive from the European Union? And what's the time horizon to get to break even for that project, more or less?

I start to provide you with some information, and then for additional detail, I leave the floor to Fabio. But first of all, of course, we are talking about a project which is first of a kind, and as usual happens in such circumstances, it is necessary to act as a promoter. And Max Chem, which is the promoter of this project, has played this role efficiently, let me say, because has been able to propose a very, very efficient solution. The European institution has analyzed in a very in-depth way our proposal. and finally has resolved that out of the 500 million dedicated to Italy, 200 million should be dedicated to our own proposal. So, which means that this is the starting point of the project. Then, as I stated before, is a project whereby NexChem plays the role of the promoter. But, of course, we don't want to remain producers. It's not, of course, our soul. We are a technologist. We are, of course, a technology-driven contractor and technologist, but we are not producers. But, as we already did in the recent past, when there are projects, capable to deliver a very attractive return and in order to make them happen it is necessary to invest money, of course we are ready to do it. Of course our role in this project has been promoted at the beginning and then While the project will be executed with the benefit of the IPCE grants, in the meantime, we will define with other investors, strategic partners, industrial partners, financial institutions. We will discuss with them because we have already received a lot of demonstration of interest from many of these entities. that they are willing to participate to the equity of this project. So at the end, but in the short term, the role of NextChem slash MyRetechLimont will be of the minority investor. But we will decide. willing to retain a minority stake or not? Possibly yes, because the project, based on our analysis and our projections, the project is due to deliver a very interesting high return, and for this reason, we could retain a minority stake in the legal vehicle which will realize the project. But it will be an opportunity. Not necessarily, but since the project is extremely positive, we will evaluate in the meanwhile. What is important is that I can confirm you that we have received tent of demonstration of interest to be with us with this project. So, I don't know, Fabio, if you want to add something else?

I think you said it all from a point of view of the interest of the market. We received calls even from China to understand how they could contribute. But in general, The time table in front of us right now is that we will have approximately 12 months of engineering works, the very good part of which will be financed by the same grant. So we have the luxury to define as developers the best structure for this project, which means, first of all, find the right feedstock provider, which is essential in this type of project. When you talk about waste, feedstock providers are probably the most important pillar upon which to build. In terms of off-take providers, we have full flexibility. These plants are modular. They can produce ethanol, methanol, hydrogen, depending on the market demand. So we will see. when the plans will be up and running, what will be the fit of strategy most appropriate to the current market conditions. We know that methanol is already there. Demand for methanol is already there. Ethylene can be mixed with current fuels even now. And hydrogen is always something we can shift to when the hydrogen economy will be ready to receive it. So in a way, We are, I think, in the most favorable conditions to deliver a landmark project for a region and the city that I am from there deserves it. Let me put it this way. Very clear. Thank you very much.

The next question is from Emanuele Negri with Mediobanca. Please go ahead.

Yes, good evening, everyone, and thanks for taking my question. Just a quick two questions. The first one is about your profitability. Do you think that the declining margin in the petrochemical market of petrochemical producers may somehow affect negatively your ability to pass through increased cost to customers? And the second one is just a quick follow-up on the previous question regarding the Eurochem cash which is being disputed. I know you cannot give many updates, but can you just give some flavor if there was any impact in the cash flow in the second or in the third quarter from the Eurochem cash? Thank you.

I don't know, frankly speaking, why you are so convinced that the petrochemical business is due to deliver lower margin. Really. Let me say almost astonished because everybody knows, everybody knows, let me underline, everybody knows that the huge request of projects in this market, of course, is a clear sign that there are no decline at all in the demand, first of all, of the commodity, which is, of course, the real origin of those investments, which, of course, is sustaining a wave of investment in the petrochemical business, which is absolutely huge. And you get, let me say, is something which is reducing the size of the investment. Everybody, everywhere, in particular in the Middle East, in particular in U.S., all those countries which has a spare capacity of gas production on top of the production which is due to satisfy energy consumption, and there are a lot of gas production in excess of the requirements for energy. All of them are investing money in downstream, in the transformation of gas into the commodities. First of all, fertilizers. Secondly, polyethylene, polypropylene, the traditional commodities of the petrochemical business. All of them are delivering. It's a volatile market, for sure. But even in a volatile market, the price of the commodities on average has remained at a very high level which all the clients never experienced in their life. So for sure, of course, in this market environment, the spending for this type of plant remains very high. The attitude of the client in recognizing, let me say, proper contractual conditions to the various contractors is quite positive. Not easy, for sure, but remains positive. Even comprising in this positive attitude also the availability to recognize the cost increase. All of them are accepting, at least as far as our own experience is concerned, they are accepting contractual conditions which makes possible to have recognized by the client the cost escalation to the extent that the escalation is in excess of the normal threshold which the contractor has to manage itself. So to the extent S.p.A. S.p.A. S.p.A. S.p.A. S.p.A. This event doesn't affect the margins. The competition whereby there is a downstream project which implies having the technology behind is quite limited, and most of the competitors are based in the western part of the world, considering so that the cost structure of the various contractors are similar to the cost structure of my own group. So it means that is a very same competition. There are no Chinese, there are no Koreans, with all the respect that I have for them. But when there is a downstream project, only Western-based contractors have to play because they retain the technology. And for this reason, margins which are delivered by, in particular, petrochemical projects, they do not, let me say, deliver any downsizing compared to what we have experienced over the last four or five years.

Let me rephrase better what I probably said in an unclear way before. On this project, we are using determination for force majeure. And in all our contracts, determination for force majeure has the same effects of determination for convenience, i.e. things will remain as they are at this point in time. So I think this is the same question which was raised at the beginning.

No, I was just wondering if there was some effect in Q3 in the cash flow.

Excuse me, can you repeat the question?

Yeah, yeah, yeah. Did you have any impact from this situation in Q3 in the cash flow?

No, no impact in Q3.

Okay, okay. Thank you so much. Thank you.

Gentlemen, Mr. Bernini, there are no more questions registered at this time. I turn the conference back to you for the closing remarks.

Thank you. Thank you to everybody.