Sbm Offshore Nv Ord

Good morning, ladies and gentlemen. Thank you for holding, and welcome to the SBM Offshore Half Year 2020 One Results Call. At this moment, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. I would now like to hand over the conference to Mr. Bruno Chabas. Please go ahead, sir.

Thank you, Professor, and welcome to the 2021 Earnings Update Call. My name is Bruno Chabas, CEO of SBM Offshore, and I'm joined today by the Management Board with Philippe Barry, COO, Eric Lachandike, CGCO, and Douglas Wood, CFO. I will present the general update of the company, after which Douglas will talk through the financial. We will welcome any questions at the end of the prepared section of this call. So, as always, You can go through the disclaimer at your leisure. And then we're going to go to the first highlight, to the highlight of the first half of the 2021. So starting with this, SVM Offshore is going through a major growth phase with the announcement of two FPSO awards over the last six months. We now have five years of production. All the five FPSO are building on our fast-forward technology. It shows that the concept is realizing its potential to be a game-changer of our FPSO industry. This growth is shown in our financials with a record backlog of almost $30 billion today. We forecast a net cash generation for lease and operate activity of almost $9 billion today. Our contractual backlog now covers a 30-year period up to 2050. We announced today the launch of a €150 million share-buy-buy program, converting our solid performance for our clients into value to our shareholders. Finally, we are scaling up our portfolio. Key milestones achieved on offshore wind business. I need to emphasize here that our outstanding performance is the achievement of the dedicated SDM offshore teams, contractors, and integrated client teams. Their hard work, also facing the challenges of the continuing pandemic, remains highly appreciated. Now, over to our vision and strategy. At SDM Offshore, we believe the oceans will provide the world with safe, sustainable, and affordable energy for generations to come. We share our experience to make it happen. Our vision is supported by three value platforms, by which we bring value, solutions, Our strategy is to improve on each of these value platforms, and our strategy remains consistent. It is articulated around our optimize, transform, and innovate stream. I will describe in terms the main advantages per platform. Let's first start with our ocean infrastructure one. We're going through a major growth phase, with a contractual backlog providing cash flow visibility until 2050, generating net cash flow through SBM Offshore's long operating performance and track record. Secondly, the growth opportunity of our core business sustained by our transformation program, mainly Fast Forward and Emission Zero, and the lowest carbon footprint. Thirdly, the new energy opportunities, where we can leverage our ocean experience, know-how, and technology, allowing us to play a key role in the ever-changing, evolving energy world, and particularly in the renewable business, such as in the offshore wind, wave energy, as well as in the carbon capture value chain. Before going into more detail on our value platform, I would like to cover an approach on ESG. Environmental, social, and governance matters are the earth of running our business. It is based on what our stakeholders value. and where we can have a significant difference, or we can make a significant difference. As before, we report on the sustainability-related KPIs at year-end. What can be said at mid-year is that we're generally on track and are forecasting a performance that largely meets our target. Although, on some indicators, some hard work remains to be done. For reference, we included the 2021 target in the appendix of our presentation. Our teams are currently working on the final stages of our long-term ambition in sustainability. We are using a science-based methodology in order to land ambitious but also realistic targets. We will come back to this with our full-year earnings presentation. And I'd like to mention a few tangible achievements from our team. We are considered to be a sustainability leader in the industry. This is confirmed by third-party experts in their review of FBM Offshore's sustainability performance. We embedded sustainability in everything that we do, exactly in the same way we integrated environment matter and safety matter in our ways of working. Then I just wanted to highlight a nice example of how the company aims to bring social impact into the countries where we operate. We're working on an agricultural project in Guyana, whereby we aim to bring positive impact to the local farming practices, ensuring supplies of the locally grown food for teams in country, which also aims to develop This project brings healthy food with minimized carbon footprint from the significantly decreased transportation needs versus the import food. Now let's go through our different platform in turn, and let's start with the Ocean Infrastructure Value Platform. Our ocean infrastructure platform is based on our lease and operate portfolio. We currently have 15 units under operation for which we focus on maintaining a solid track record in a time for our clients. This in turn ensures stable cash flow for shareholders. The operational time was just above 99% for the first half of 2021. This is the result of the recovery of over 99%. This achievement is the result of our outstanding performance of our staff still facing the ongoing challenges from the pandemic. Taking into consideration the anticipated future contribution of the five units currently under construction, our fleet will generate until 2050 an average of around $300 million of net cash flow per year after debt servicing and tax. On this net cash flow backlog, it is important to highlight the significant potential to accelerate cash flow. The company successfully demonstrated this principle with the issuance of our first project bond in February this year. Later in this presentation, Douglas will talk about this financial presentation. Now, turning to the shareholder returns. We again like to emphasize the fact that our ocean infrastructure platform continues to generate predictable and significant net cash flow. Looking back, we have created a solid track record of returning money to our shareholders and are looking to further build on this in the future. The first element is a stable and growing dividend over time. With the share buyback, With the share buyback we started this morning, we have returned more than $1.2 billion over the last six-year period, including 2021. This represents more than 40% of the significant number. The current growth phase brings further upside through delivery of additional vessels to our offshore infrastructure platform. Now turning to our growing the core platform. On the execution side, following the award of two FPSO to date, namely Amira Tamandare and Alexandre Guzmão, previously known as Mero4, we now have five SPSO under construction, all at various stages of construction. As with our operation activities, our project teams are facing challenges from the pandemic environment, through travel limitations, yard capacity, and other restrictions. Through strong dedication and collaboration from various contractors, as offshore teams continue to deliver, perform, and maintain execution plans on track. The LASA-Unity topside integration was completed and sailed away to Guyana's schedule in the third quarter of this year, with First Oil's schedule next year. The fast-forward NPF hull for Cepitiba project was successfully delivered Allowing the start of the topside lifting campaign with earth soil scheduled in 2023. Topside fabrication for SPSO Prosperity is ongoing. And the project progress is on schedule with planned delivery in 2024. Finally, SPSO Almirante Armanderes is construction is progressing with planned delivery in 2024. In most expert scenarios, oil will continue to be an important source of energy and remains important to generate economic development and human prosperity. LVM Offshore is proud that it plays a significant role in producing the energy that the world needs, while ensuring that this oil is produced responsibly and reliably. SVM Offshore is assisting clients with the goal objective of lowering emission intensity while at the same time lowering break-even prices and therefore reducing the cost. Our clients concentrate on projects with the lowest carbon intensity and the most attractive break-even prices. They are mostly large water developments. target market. Our solutions offer to the market a double resilience, allowing development with a break-even prices well below $40 per barrel and greenhouse gas emission intensity below the industry average. Emission zero, which is building on our fast forward concept, improves the carbon intensity further. ultimately aiming at a zero net carbon emission in our production. Going through the award market, we see a rebound in activity in 2021. Currently, we have identified around 30 potential awards until 2024. We continue to see opportunity worldwide. However, our key market for large projects complex units being traded on China and Australia. China and America is a stronghold market for SBM offshore. Of the 30 potential awards we have highlighted, the one with a break-even price is below $40 per barrel, which represents our target market for SPSOs are highlighted on this chart. SBM offshore retail rates that we remain selective and disciplined in the selection of the target project. The company continues to carry a capacity of winning two-plus awards per year in order to deliver projects in line with commitment to secure long-term value for our clients and to the SBM offshore stakeholders. This translates to a total phase portfolio of around six FPSO in different phases of construction at any given time. New energy value platform. Through our new energy platform, we aim to innovate, create, and develop solutions, products, or technology for developing safe, sustainable and affordable energy for the ocean. The objective is to capture the opportunity where SBM can play an active and leading role through its experience and know-how. For example, we have built around 600 floating anchor structures worldwide over the past 60 years, more than any company. We're transferring our know-how and moving technology to new energy segments including the floating offshore wind market. We are leveraging our significant experience in capturing and reaging in the growing carbon capture and storage business. Finally, our extensive operating experience and expertise that we nurture throughout the lifecycle of our products bring values, and that we can deliver this value through digitalization for all our products, but also through new digital services. So let's expand on the floating offshore wind. SVM Offshore has taken a position as a co-developer in the floating offshore wind project market. SVM Offshore, in collaboration with strategic partners, seeks to secure seabed rights and relevant permits to develop and implement state-of-the-art technology for the floating offshore wind market activity. What is done on the of two sites in the Celtic Sea for a total of 200 megawatts floating wind electricity generation. The Crown Estate has confirmed its intention to move forward with the list process, with the project award remaining subject to various assessments and consenting process. Through the further development and optimization of this technology, focusing on obtaining cost benefits from enhanced design and scale-up, the company is on the path toward a competitive levelized cost of electricity. In the execution phase, The company is making good progress in the construction of three-footers for a 25-megawatt Provence Grand Large project. We intend to play a role in the development and acceleration of technology entrance into the market. We are therefore targeting rights in various regions of the world. The current total project pipeline covers at least 6 gigawatts capacity for the next decade, which is expected to grow significantly over the next few years. The ambition is to co-develop or participate as a technology or certain provider in 2 gigawatts of these existing global pipelines of projects. Total associated co-development expenditure for SDM offshore over the next seven to eight years is estimated to be around 150 to 200 million U.S. dollars. The investment will be generally phased so that significant de-risking has occurred before the final development period, committing most of the expenditure is taken. About the strengths of our floating technology solution. In summary, the Tension Lake platform offers our clients a solution that brings high output with low occurs. This is a proven technology transferred from the oil and gas activity to the renewable market. This technology offers several benefits, and to highlight some of them now, The sea wood footprint of the sea alpine mooring is reduced compared to others. This makes an easier subsea configuration and optimize the sea bed layout. This is particularly beneficial for the overall wind farm configuration. The system is very stable with limited motion. which enable optimized turbine performance and facilitate more efficient offshore operation. And the CLP concept is scalable to accommodate almost any turbine size and almost allow installation for a wide range of water depths. Then let's turn to the carbon capture, and let's provide a few words on this dynamic market. SVM Offshore has a decades-long experience and has developed various technologies which can be applied to the carbon capture and storage value chain. It is probably not a widely known fact, but presently, SVM Offshore, SPF, rejects carbon capture capacity in the world. with 2 million tons of CO2 re-injected per year in our fleet. Currently, the company is designing a tower loading unit which would connect shore to vessel and vessel to re-injection facilities. SDM Offshore is working together with Carbon Collector, a Dutch firm, and aim to apply this technology on the first carbon capture and storage project in the Netherlands. So let's now turn to the financial. Douglas, the floor is yours.

Thank you, Bruno, and good morning, everybody. So as Bruno mentioned, we're now in a major growth phase with five FTSOs under construction. And from a financial perspective, This has led to significant growth in the value of our ocean infrastructure platform. The order book we have in hand, based on firm contracts with premium clients, is now at a record level, close to $30 billion. And in turn, the net cash this order book is expected to generate has increased to almost $9 billion. During the first half, we made good progress on financing on multiple fronts. For projects under construction, we've closed the prosperity financing, and we're now in the final phase of the Sepertiba financing. We also demonstrated our ability to accelerate equity cash flow from the backlog with the FBSO Ilabela bond refinancing in Brazil. The increased outlook on cash generation plus progress on the project financings and the cash acceleration for the bond allow us to maintain the focus on shareholder returns. with the launch of the €150 million share buyback this morning. The increase in the backlog also gives further line of sight on returns potential going forward. Our core FPSO business has driven the increase in value in our infrastructure platform, with further growth and value upside anticipated in the short term. Then, as you just heard, we're now getting more visibility on the long-term value potential in the new energies platforms. But I'll come back on how we see the potential here and the investment we're making to secure this, plus further details on shareholder returns in a minute. But first, to review the key metrics for the first half on a directional basis. So a bit of a different order than usual, because we feel the key metric to focus on for SPM is the level of the order book and the long-term net cash that this will generate. So starting with this, Our backlog increased by $7.9 billion to $29.5 billion, with the impact of the awards of FBSO's Almirante Tamandere and Alexandre de Jusmao more than upsetting consumption by turnover in the period. Over the next 30 years or so, this backlog is expected to generate a net cash flow of $300 million on average per annum. And we'll look at some of the further details of this in a few slides' time. Then net debt. Now, for many company models, an increase in debt may not always be viewed positively. But in the SBM model, debt is very closely correlated to the generation of value. And this is because of the linkage of debt to specific projects. Effectively, we sell a portion of the future cash flows of our projects to debt investors. And they're investing in our projects as opposed to SBM corporately. This project investment is used to substantively finance the cost of the project, securing future cash flow, or, as we just did with the Illabella bond, to accelerate some of that cash flow. So the increase in net debt you see here to $4.6 billion is supporting the delivery of future cash flow and value. Then to the P&L metrics. Of course, also important as these allow for the monitoring of the delivery and realization of the backlogs. Underlying revenue of around $1.15 billion and underlying EBITDA of around $500 million were broadly stable compared with the prior period, with both lease and operate and turnkey segments delivering a similar performance to the year-ago period. For lease and operate, this reflects the stability in the number of vessels in the fleet. In turnkey, Despite the major growth phase, the balance of activity continues to be more weighted to projects to be transferred to the lease and operate portfolio, with then the revenues and margin to come in that phase. But, of course, the level of turnkey overhead costs, including continuous investment in R&D, remains the same. There was therefore a small decrease in revenue and EBITDA in turnkey. reflecting mainly the comparative effect from the completion of the Johan Casberg Turek EPCI project in the first half last year. And then to note for underlying, here we're adding back an impact of $75 million to revenue and EBITDA linked to the re-delivery of the DeepMove platform. And you'll recall we adjusted the underlying 2020 revenue and EBITDA last year for this, as the cash payment was to come this year. And very good to note that the client opted to pay the full amount early in the first half. Turning to cashflow on a directional basis. Cashflow operations before working capital generated during the first half was sufficient to cover debt, interest and tax, and a good portion of the dividend. This is trending in line with expectations where we expect to see some of the working capital unwind in the second half. On the investment side, you see cash inflow from borrowings exceeded cash out towards investments. That's mainly driven by the proceeds from the refinancing of Ilabella, noting also that the first drawdown on the prosperity loan occurred in July only. Now to spend a bit more time highlighting the link between debt and future growth and value. Now we've updated here a chart we've shown before where we have debt versus the backlog and then the evolution of the gearing of debt to the backlog. This is showing the clear correlation between debt and the backlog and therefore the future cash that will be generated from this. Then to take a different approach, looking at the graphic at the bottom. If we analyze the balance sheet, you see that there is a significant amount there that represents future value not yet reflected in the P&L. Zooming in on debt, you can make a connection between the non-recourse operating debt of around $3 billion we had at the end of June and the circa $1 billion annual EBITDA from lease and operate using 2020 here as a proxy. The ratio of this debt to EBITDA is around 3 to 1. This then points to a significant amount of annual EBITDA to be generated from the committed future cash flow linked to projects under construction and the associated financing in the balance sheet. So if you're wanting to apply EBITDA multiples to assess the value of SBM or benchmark debt levels, it's important to factor in and adjust for this committed feature value that's not yet reflected in the P&L. Now moving to look at some more details of the backlog and the net cash flow to be generated going forward. Again, driven by the two new awards, the backlog increased from $21.6 billion to $29.5 billion, a record level for SBMs. And the backlog here, we're assuming an initially targeted SBM ownership share of 55% in both projects. That's reported in the lease and operate bar. And then the partial divestment to partners of the corresponding 45% share, which is reported in the turnkey component. We're making good progress on bringing in partners. And obviously, this remains subject to final approvals and completion of the requisite agreements. Then to note, the Guyana projects are maintained as per original contract durations. Then if we look at the net cash to be generated, the two new awards on an after-tax basis, average expected net lease and operate cash flow has grown to $300 million per annum for the 29-year period. This compares with $260 million average over 25 years at year-end 2020. And again, This cash flow is underpinned by contracts from premium clients supporting projects with very low operating break-evens. In the appendix to the presentation, you'll also find the usual details of the revenue backlog and associated debt repayment profile and all the supporting assumptions that we've used. And on this slide, we've also made an update on the discounted per share value of the net lease and operate cash flow plus currently assumed cash from the sale of the BOT project. In orange on the chart here, at the range of discount rates we observed being used by the financial community. So you see an increase since last time, the average range increasing to 18 to 21 euros per share compared with 16 to 18 euros last time. So here you see how growth adds value with the two awards adding roughly two to three euros per share in this analysis. And as you saw in Bruno's presentation earlier, we see significant growth potential to be delivered by our growing the core and new energy platforms. The impact of the two new FPSO awards I just mentioned correlates with the broad estimates we have provided in the past of the NPV impact of the new FPSO award being between one and two euros per share per FDSO, size of FDSO and discount rate being important assumptions, and of course, assuming expected project execution and operational performance. Then on the right-hand side, some metrics around new energies, focusing on floating offshore wind. As Bruno mentioned, there's currently a pipeline of opportunities of at least six gigawatts, which is expected to increase in the next few years. Our ambition is to co-develop or participate as a technology or turnkey provider in two gigawatts of this existing global pipeline by leveraging our unique know-how. We've allocated an amount of up to $200 million in our forward planning to support our co-developer ambition. And you can look at it as a kind of internal revolving credit facility, which can be drawn to fund milestones for development projects as these are progressively matured and de-risked. Our model will then be to seek to deploy our technology and projects and to sell down the vast majority of our share before FID. Of course, not all developments will be successful, but with spend controlled by milestones and increasing only as projects are de-risked, we would expect this investment to be recovered as a minimum. Now to put all the pieces we've just discussed together in terms of model for capital allocation and shareholder returns. The foundation is the contracted in-hand net cash flow from our order book. As you just saw with the two new projects, the lease and operate portion is $300 million on average for the next 30 years or $9 billion in aggregate. In the shorter term, the average net cash from lease and operate in the next 10 years is higher at $360 million. And that's before the turnkey part, including BOT. which gives good visibility on the ability of turnkey to be at least self-sufficient. Obviously, we need to bear in mind corporate overheads and investments. It's certainly the case that we do need to invest some cash in FPSO projects, particularly given the higher ownership share of the current portfolio under construction. And then we want to preserve some flexibility for investment in new energy opportunities. However, equity cash flow acceleration through further project equity sell-down or project financing should give the flexibility to cover any investments to the extent necessary. The net cash from the backlog after overhead is the foundation for returns to shareholders. Of course, at all times, we'll ensure we've got the capacity to fund future growth in our two businesses. But there is obviously a great deal of upside. Delivery of projects as anticipated and implementation of further equity cash flow acceleration from the backlog will maximise our ability to deliver dividends and share buybacks. And new awards from growth will bring additional upside potential over and above the current in-hand backlog. Today's buyback of €150 million, which we expect to complete by the end of this year, is indicative of this upside. It's fair to say there seems to be a disconnect between the recent share price and how we and most of the financial community following us assess value, despite all our efforts to explain it. But at the very least, you can say this gives the opportunity for a good investment. Based on yesterday's closing price, we're targeting around 6.5% of the outstanding share capital with our repurchase. And assuming completion, this would increase the dividend yield to around 6.3%. Then in the meantime, what we're focusing on is continuing to deliver on all the elements of our strategy, growing the value of our Asian infrastructure platform, delivering industry-leading shareholder returns. That's it from me. Now back to Bruno for the outlook.

Thank you, Douglas. And let's go through the outlook and let's speak about the guidance. So our guidance for 2021 remains unchanged with directional revenues of around 2.6 billion with around 1.6 billion for the lease and operate activity and around a billion for the turnkey activity. Directional ABDA of around 900 million. This includes 75 million revenues and ABDA for DPANUC receiving cash in the first half of 2021. it also consider the currently forcing COVID-19 impact on project and fleet operation, while we note the ongoing uncertainties with respect to the COVID-19 crisis. So to conclude before questions, again, we are delivering value to our stakeholders, helping our clients to transition toward lower carbon oil production at affordable cost, and providing new renewable and energy transition solutions. And we continue to focus on and generate shareholder returns. So thank you for your attention in the formal part of this presentation. Now the floor is yours for your questions.

Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. If you have a question or remark, please press star 1 on your telephone. Go ahead, please. Star 1 for questions or remarks. And the first question is coming from Luke van Beek, De Groot-Peterkamp. Please go ahead, sir.

Yes, good morning. Thank you for taking my questions. First of all, I have a question about the tightness in the supply chain. So can you talk a bit about how you see yard capacity for the construction of the top sites and also for future holes, because already you have used one but all of the holes that you have under construction. So how do you see the opportunities to construct additional holes? Then the second question is about the economies of scale, because with all the awards that you already have won for Fast Forward, I assume that you're moving up the learning curve quite fast. Do you have any metrics of how much benefit does it bring you in terms of cost and efficiency? And my third question is about wave energy. When you're co-developing a floating wind farm, does it also bring opportunities in the future to include your wave energy solution there as well?

Thank you, Luc. So on this free question, I'm going to go through the economy again. I think Philippe will complement this also through a discussion on the supply chain market and the fabrication market. So let me start with the economy of scale. We started the fast forward program in 2014. The first order of the hull was in 2016, if my recollection is correct. Today we have six hulls under fabrication. Obviously, after each project, we're learning more. We're looking at ways to improve. We're looking at ways to improve from a quality standpoint, from an economic standpoint, but we're still pretty much in the phase of the learning curve, I would say. I've been encouraged in a number of projects where we can see some of the benefits, but in my view, we're really only at the beginning of that. Now, having said that, when you look at the performance of SBM offshore, the performance of SBM offshore today is linked definitely to the dedication of our teams, to their quality, to their involvement in all aspects of the contract. But it's also linked in the fact that we can replicate a number of things and therefore be much more efficient in our ways of operating. How do you quantify this? For the time being, it's a guess, but hopefully in the coming few years, we're going to have more data in order to provide this to the market. Now, on the wave energy market, so first of all, as you know, we're developing this technology with the aim of installing it offshore in 2023. Now, what could be said is that once we have validated the technology, further development is going to be required, so it's not really a short access to the market, but we could see opportunities from the webinar with the technology. and having a combined form of floating offshore wind with wave energy in the shape of what we're doing. And this is particularly well suited with the TELPI mooring system, which really has a limited footprint to the seabed, and therefore allows to have more systems in the middle, and therefore making the farm much more productive in terms of electricity and from an economic standpoint. But again, here we're speaking about in a few years down the line, but that's some of the vision or some of the expectation we could see in the phase of growth that SDM offshore is in. Philippe, do you want to take over on the supply chain market and the yield market? Yes, absolutely. Well, Luc, you're right. A key part of our activity must be to monitor all along the tendering phase how the supply chain market from brick to long-lead equipment evolves, and likewise on construction. Coming back on COVID, surely COVID has brought a number of limitations in yards to move some of the workers. Nonetheless, I think we're quite pleased with the performance so far. Coming back to the recent awards and to the tendering phase, we look at securing capacity as early as possible and to have execution plans that allows as well flexibility during the execution. So, in short, there might be tension there and there, but this is something which is part of the business and that we are monitoring, again, from very early on from Tendery. The other thing I'd like to stress is that one of the main benefits of the transport program is not only that we have the whole place early, even sometimes earlier than we get the order, as you know, but we're doing a similar exercise with long-lead equipment suppliers and looking at bringing the benefit of the standardization. Thank you, Philippe.

Thank you. And the next question is coming from Nick Constantakis from Exane. Please go ahead, sir.

Good morning, guys, and thanks for taking my questions. I've got a few, if I may, please. Firstly, on the buyback, obviously, welcome by the market. You discussed the factors you released that informed your decision. How does the farm down of Mero and Bougios play into this decision? Following the farm downs, which are assuming the backlog, could we see additional scope for buyback in 2022? And can you just remind us as well the units that you're trying to refine from the rest of the portfolio and this extra capital? Then turning on offshore wind, thank you for the color here. Can you please discuss a little bit how you arrived at your 2 gigawatt ambition? Top-down or market share targets in the APC industry do tend to make investors a bit nervous. Your execution track record is obviously something that speaks for itself, but just want some color there if we could. And lastly, I just want to ask, when do you expect to hit the 25% completion mark on Mero and Puzios? I appreciate you just got the FPS shows. but just want to understand when does this revenue turn key start translating into profit to avoid any bad calculations there?

Okay. So three questions there. The first one on the buyback, Douglas will take this one. The one on the percentage progress on the project, Douglas and Philippe will look at this. On the offshore wind ambition, I'm going to go through the answer there. One of the strengths of SDM offshore has always been when we are focused on the market segment. We believe that we have the know-how, the experience, the project management capability, the fabrication experience, the financial strength, and the technology in order to be one of the leaders into the offshore wind market. What does it mean being one of the leaders? It means basically that you have at least a selected market segment, a 30% market share. So when you look at the offshore wind market up to the end of this decade, you're looking at a commitment for somewhere in the range of 6 gigawatts. Our ambition is really to have the positioning in this market such that we will have 30% of this market and therefore in the range of 1.8 to 2 gigawatts of market share. Now, this is really sustained by the experience that we have in building the structure. We have more than 600 floating anchor structures in the world, more than any other company. our experience in operation, our experience in fabrication, and our experience in project management. When you look at the complexity of the offshore wind project, they're beyond understanding at times. I mean, the logistic aspect, the local content aspect, the way you need to assemble everything is really quite challenging and really fairly commensurable to what we're doing on the FPSO market. So really transferring this experience into the offshore wind market makes us confident, along with the technology that we have and the know-how that we have, that we can reach this ambition. Douglas, you want to go ahead on the two other questions with Philippe?

Yep, will do. So let's start off with the buyback and maybe shareholder returns in general. What drives these? I think the key driver for this is the visibility and outlook that we have on net cash to be generated from the business. And, yep, as you saw today, we've got a record backlog going to deliver an estimated $9 billion of net cash over the period. So we looked at that. We thought about the liquidity that we have in place at the end of the first half. It was more than $2 billion. Took into account how we're doing in financing all the projects. Plus also our dividend policy stable growing over time. And based on where we are, we've concluded that it made sense to do a buyback and we have the ability to do that. Now, going forward and just turning to your question around the new units, as I mentioned, we have the ability to kind of manage this future cash flow to an extent by accelerating equity cash flow by selling down units or doing more financings. So as I mentioned, the plan is to sell down 45% of the two new units. That's in the works. And then we have a number of potential refinancing opportunities that we're considering right now. So going forward, what we're going to do is we continue to look at the cash outlook, the timing of when that cash is going to be realize how we can manage it with the cash acceleration mechanisms I just used. And then we put that all together and take a view on shareholder returns. Then if I can move to the next one, I mean, on the 25% percentage of completion for the two units, we'd expect to be there sometime next year. From P&L's perspective, then the other driver in terms of booking revenue and margin is sell-down to the partners.

So, if I may, to expand a little on the progress on the project and to illustrate. Ameren Tamandari is executed out of the SCADAM office. We are fully mobilized there. Obviously, the HAL is progressing. What I would like to say is we've already placed some of the construction contracts. We've placed a meaningful part of the long lead item. So that's where we are. But I think we'll discuss even better on Mero 4, which we'll be executing in continuity out of Kuala Lumpur, coming back to some part of the discipline to use teams that have the experience. We already placed POs yesterday because we had done that pre-investment to clarify with some of the suppliers. Thank you, guys. Thank you very much.

And the next question is coming from . Please go ahead.

Yeah, good morning, everyone. I understand your frustration about the share price. but I would like to ask a couple of things. First of all, about Sepetiba, it reached a somewhat delay in the delivery end of 2022, but it's not exactly clear to me because it was first delivered in 2022, and now it's the first commissioning with the first oil in 2023. So maybe you can elaborate on that. And then to Quoron in Brazil, If I look at the press release of the 3rd of August about the Guzmao and compare that with the Sepetiba story, first of all, is that Miro 4? In fact, a copycat of Miro 2. I'm missing some more details there in the press release of the 3rd of August compared to the 11th of June of 2019. So I'm interested in that. Or are there other, let me say, other equipment on board related to Petrobras demands, et cetera, CO2 catching, et cetera? So maybe you can give me some details there to get some view on them, maybe on the final construction costs, et cetera. That's my question for this moment.

Thank you very much for that. Thank you for your support also. Philippe, you want to go through some of the details? Obviously, we cannot provide you all the details, but we will try to share some of the details. Coming back to your earlier question, I can understand you're getting confused on Sepetiba, because in fact, we are indicating the first oil, but before the first oil, there is a delivery of the unit, and the delivery of the unit Basically, it requires further towing, mooring, and as well connection, which is not within our scope. So there's a lot of time there. Nonetheless, and I have to somehow cover that, what I mentioned that COVID had its impact on the art, where we saw restrictions from movement of personnel. And so, yes, there have been some delays, which is represented in those indicates in the first all in 2023. To follow on your question between Mero 4 and Mero 2, this is not exactly a copycat because there are a number of changes, but there are some commonalities. And that's why somehow I've indicated that we already placed some POs. And here, going back to the same suppliers, because we talked about the same equipment, and then there will be hopefully some benefits, not just in the APC delivery, but in the OPEX phase, because I want to remind you that we are contracted for 22 years and a half.

Okay, so is there any financial consequence of the CPTIA, or is that all reimbursed to, and let me say, discuss with Petrobras, and let me say that that's okay for, and COVID accepted?

I think we are basically talking about an extension of time. Okay.

And the next question is coming from Andre Mulder-Kepler. Please go ahead, sir.

A number of questions. First, you elaborated on the offshore wind market and any statement on what the market for wave energy could look like and what kind of market share you're thinking there. Secondly, a question on the mirrors. First, on the mirror two, I believe the financing has not been completed yet. Any news on that? On the number four, it's taken quite some time before the, between the tendering and the actual award. Of course, you cannot hedge in that period. Has there been any negative influence on pricing on that? Next question is on the lease expiries. Any news of the lease expiries that's going to come in 2022? Further, a question on the sale of the leasehouse. Any indication, any talks that you had with ExxonMobil on that? And last, on the offshore wind market, you're talking about six gigawatts. I don't know where you got that number from, but if I add all the plans in the website of 4C Offshore, I'm arriving at levels of around 40 gigawatts, 4.0. If I look at the development zone, there's another 40 gigawatts coming. So these numbers are way higher than the six that you mentioned. So I'm curious to hear how that six gigawatt is composed.

Sure. So it's a lot of questions. Hopefully, I'm going to be able to go through all of those. So the first one on wave energy, I will take the one on the renewable on wave energy. and on the market for the floating offshore wind. And I propose that Douglas goes through the Mero 2 financing and goes also through your question on Mero 4. And I think that was all. So wave energy, the market, it's too early to say. I mean, at the end of the day, the market potential for this could be large. to the technology used on the solar panel in the sense that it could be manufactured at the large scale. You could get huge economy of scale. And then 70% of the world population lives near the ocean. A lot of those ocean could provide energy through the wave system. So the market could be extremely big. Now, we're not discussing about the market for tomorrow morning, nor even in the coming five or ten years, but we'll see how things are going to develop. We believe that the technology that we're putting in place is rather innovative. It's the only technology which is not using any mechanical component, and therefore has quite a potential for upscaling quickly. But making an assessment on the market, you know, it's extremely difficult. Wave Energy, you can read everything and anything on this market. Some of the publications that you're reading, this market is going to be huge by tomorrow morning. Yet, when you look at the reality of the market, time to tender, time to develop the application and so on, it's taking time. And those projects are big. They're massive. They need to have a logistic aspect, a technological aspect, a project management aspect, which is often underestimated. Therefore, the 6 gigawatts commitment that we see by 2030, so from now until 2030, is what we believe is a realistic market rather than the pipe dream that some people can have. Now, I'm actually optimistic on this market after that. I really believe that this market could grow significantly for a variety of reasons. But like everything, you know, it's time for... before the logistics, the supply chain, the know-how is established, and before the permitting also is allowed. So, yes, 6 gigawatts is rather conservative, but as you know, we have always been more on the conservative side of things in order to deliver and not to disappoint rather than selling a pipe dream. Douglas?

Yep. So, morning, Andre. To start with your question on Sepitiba, as I mentioned, we're pretty happy with the progress that we've made on Sepitiba financing, and we are now in the final phase of the financing. Fair to say it's been complex financing involving a very large number of lenders, export credit agencies, working across multiple time zones and there you get some of the challenges of the virtual world which we're facing but as I said we're nearing the end now and I think the good thing is that we now have a set of documentation that we can use for the future financing so if you will could help us with a faster forward approach on the financing to come Then you were asking about MERO 4 and, you know, the period between tendering and LOI and the risks that come from that. As you'd expect in our tendering process, we very carefully consider the exposures that we have on financing or supply chain. And there we seek to make the appropriate level of tendering as we see the potential evolution in the respective parts of the market. So we seek to take that into account in the pricing.

There was these two questions on the lease expiries in 2022. Any news? And also on the sale of the lease funds.

So on the lease extension, there is basically no news. We're obviously in contact with clients. We're seeing what the opportunities are. When this and if this materialize, obviously, we will inform the market. And the same answer could apply to your second question. Okay. Thank you.

And the next question is coming from Thijs Berkelder, ABN Emerald Auto. Please go ahead, sir.

Yeah, good morning, gentlemen. Thanks again for explaining in slides 26, 27 how conservative the financing of SDM offshore still is. So it's three times EBITDA for the very long-term operational contracts and just 70% debt on assets under concentration. But taking a closer look at slide 26, net debt to backlog is back down to 15% versus the historical range of 16 to 20%. The 5% of backlog range implies there's a potential and maybe a maximum potential to return 1.5 billion cash to shareholders right away. not just $118 million. Can you maybe explain the drivers for not returning more cash to shareholders via share buybacks, especially now that the share price is still at these very low levels?

Douglas, you want to take this?

Yes, sure. Okay, so when we look at shareholder returns, we're looking at the overall kind of equation of the cash flow of the company. So for sure, you know, with the increase of the backlog, that we now have more potential. You talked about the debt situation. being relatively low. Obviously, you know, we just booked those two new projects. So you can expect that the debt to backlog will increase relative to those going forward. So, you know, we need to think about managing the period until we get the project financing in place. We need to think about the growth investment that we need to make in the projects, you know, where we have quite a high ownership share. So, yeah, we're trying to balance all of these factors. Also thinking about the capacity of the market and liquidity to absorb buybacks. I think the way that we're pacing it is appropriate given all of the factors that we're seeking to manage. Okay. Sorry, Tyson. I think we're targeting, based on yesterday's closing price, 6.5%. That's quite a meaningful amount of our shares. I fully agree. I fully agree there. I'm just wondering how rapidly you want to deliver on the buyback and when looking at expecting, let's say, financing of vessels to materialize in the second half. Might this already trigger maybe new buybacks before the end of the year, or should we be patiently waiting for the, let's say, the full year results released? Yeah, so I think we make good progress with the financing of the vessels that we're constructing, where we're really in the thick of the construction, so Prosperity, Sepitiba. Financing for the new one will take some time. Obviously, we'll be getting started with that straight away. I think our model for shareholder returns we can phase in relation to the evolution of the business and we'll take another look at the end of the year and let you know then where we stand. Okay. Then follow-up questions on hills and the construction. Am I right that there's only one hill at this moment free for clients to contract?

Shouldn't that be maybe become a three soon or so?

So, Tyson, you're right in your assumption that there is one help. I can confirm there's multiple interest from question left, but I think that's where we stand and that's where we think we should be.

Okay. Then can you clarify your what the status is of the contract negotiations in Indiana right now. Has they been halted for now? What is the waiting for?

That's what I mentioned in the previous question, and on the knowing which contracts are going to remain under these and operate the and transfer or whatever. is something which is an ongoing discussion with the clients, and really we don't have anything to comment at this stage.

Okay, clear. Then looking at the low share price, your frustration about the low share price, you are indicating refinancing of vessels, selling down to minority equity shareholders. Are you looking at other options to force the market to re-rate your stock?

Maybe a Singapore listen for the equity?

At the end of the day, the stock market is a bit like fashion. When you look at fashion, miniskirts were something in fashion in the 60s, then came back in fashion in the 80s, and then later on. The same applies to stock market. Today, we're not in fashion. You know, that's what it is. What we're doing is returning cash to our shareholders. We're doing this, and we have done this over the past six years with $1.2 billion, including 2021. Then when the fashion is going to come back and common sense is going to come back, then we're going to get the proper valuation of our stock. But we're not there to manage the stock price. We don't have any control on that. However, what we could do is to wear mini skirts, and we're going to send you a picture of it.

Okay. Thanks.

Ladies and gentlemen, if there are any additional questions or remarks, please press star 1. And there is a follow-up question from Karijn Mulder, ING. Please go ahead, sir.

Yes, Karijn. Let me say about the wind, let me say you're looking at development costs for the next seven to eight years of about $150 million, $200 million. Is that being activated in accounting terms, or is that being seen as operating expenses? How do you handle that? And then in the first half of 2021, the word bribery again popped up, I think, in some newspapers. Is there something to mention on the developments there? And also, is there any impact, you think, from the release of Mr. John Taylor? So please give me – I hope that you get some answers on these questions.

Douglas, you want to take the first one, or maybe we start with Eric on the second question. Eric? Thank you.

Indeed, every now and then there is some media attention for things that happened a long, long time ago. We have the procedure in Switzerland on which there is no news, but that indeed concerns methods that we have been dealing with in various locations already. On Mr. Taylor, we have really nothing to say. And yeah, I mean, let's not forget, I mean, we have a history where occasionally there will be some news popping up from long, long times ago. The company today is in a completely different space, different management or commitment to do our business almost as well. recognized by our clients and our stakeholders. So we're not getting excited by these occasional messages.

But you don't see a risk, let me say, that Angola is taking some action, or let me say, because you have paid for it to the Dutch authorities, but that's not the same as Angola, in my view.

We have always been open about our past, and it could be that at some point some countries may ask some questions, but there's no reason for us to speculate on it. We're factual. There are no investigations other than the one in Switzerland that we have been open about, and again, we have dealt with the matters in various locations, and that's where we stand.

Okay, thank you.

And if I take the one on the development expenditure, so far it's pretty limited, only a few millions in the P&L. Obviously, we hope that we get more opportunities. We'll see that increasing in the seven or eight-year period.

So you're not putting development costs materially on the balance sheet?

No, you can't do that.

No, no. Okay. Okay. I understand. As long as it is not very concrete, I understand. Yeah. Okay. Thank you. And my final question is about, let me say, the market developments and your position in it. It looks like that West Africa is still existing for you, but how relevant is that still given, let me say, that you're fast forward, especially strong in Latin America, and the opportunities are there, both for Brazil, for Guyana, and even maybe for Suriname.

As we mentioned in the introduction, in the presentation, we will be extremely disciplined in the project we're going to target and the project we're going to go after. And part of the discipline is really to look at the project which has the best economic profile, and they're usually large units, and the lowest impact to the environment, and also is our internal capacity. So when we look at the opportunities in the market and the selection of those opportunities, that's our way of selecting this. If they happen to be in Western Africa, so be it. If they happen to be in Latin America, so be it. The majority of what we have seen so far is in Latin America.

Yeah. Thank you very much.

And the next question is coming from Hank Slotbaum, DID. Please go ahead, sir.

Good morning, and thanks for taking my questions. I've got two. First of all, you have ordered six holes for the fast-forward program. One is still not earmarked for a specific project. You highlighted that you see a potential for up to eight FPSOs per annum in the next few years. When should you take a decision on ordering any new holes? Is that something we can expect in the foreseeable future? The other one is we've had the shell ruling a couple of weeks ago, months ago or so, in Rotterdam. which caused a lot of commotion in the sector. I believe that that's perhaps one of the reasons why your share price has been under pressure as well. Has the ruling done something to the attitude of the parties you're speaking with, either to refinance projects like Prosperity and Sepatiba, And in the talks with potential partners for the last two FDSOs, you just signed the Amarante and the Narrow 4. Those were my questions. Thanks.

Okay. Thank you very much. So Eric would go through the answer related to the share ruling. With regard to the NPS, our practice in the past has always been to make announcements once we make commitment. So obviously we're looking at the potential in the market. We're looking at our capacity. We're looking at still being disciplined. So when and if we make the choice to build additional health in anticipation, we will notify the market like we have done in the past. But there is really nothing to say at this stage. Eric, do you want to go ahead with the second question?

Yeah, sure, obviously the ruling on Shell was a remarkable one. We have obviously also looked at that. I see this really as a sign of the time where there is a lot of concern, especially in some parts of the world, on climate change and the impact on the environment. And this is obviously where we feel also an obligation to contribute. We're offering solutions to our clients, including Shell, to meet the expectations that are there in society. Today, we have our Mission Zero program. Our position is, in that sense, very different. We're not an oil company. We're a construction company and a contractor to the industry, and we're there to offer solutions to our clients. Other than that, it's for Shell to comment, but you have seen They appeal the decision, but again, it's a sign of the time where we all need to be mindful that the impact on the environment is extremely important. It's the same discussion we're having with our banks and shareholders, and there also, again, we see positive feedback on the various programs and initiatives that we are developing. We have an open mind to all of that, and we will continue on that trajectory.

So summarizing, you have not seen a major impact on the behavior of potential financiers or co-investors in certain projects?

No, not directly. But again, let's face it. I mean, for some banks, investing in fossil fuels is becoming more difficult and even more important for us to demonstrate that where we stand in this whole development, we're not in that sense directly exposed to it, but it's something that is meaningful for us and other stimulus go in the emission zero and lower emissions for our clients where we can.

Okay, thank you.

And the last question is coming from Andre Mulder-Kepler. Please go ahead, sir.

Yeah, good morning. One question maybe a bit related to the last one. a group of countries has decided that there should be sort of a general tax level of around 15% for international companies. If you are an international company and you see a victim, your tax rate is quite low. Do you see any implications of that decision? How will it affect you?

The question goes through this.

Yeah, I mean, so we've just seen the kind of the headlines of what the people are trying to work on there. The sort of the final form of that is yet to be sent out. So really, we need to wait to see what that is before we can make any kind of an assessment.

Great. Thank you. There are no further questions. Please continue.

Okay. So thank you, operator. Thank you, all of you, for being tuned to our conference call and asking questions. Now stay safe, keep your spirits up, and you can now resume a normal activity. Thank you.