Technip Energies Nv

Hello to everyone, and welcome to Technip Energy's financial results for the first half of 2022. On the call today, our CEO, Arnaud Piertan, and our CFO, Bruno Biber, will present our business and financial highlights, as well as the outlook. And this will be followed by Q&A. Before we start, I would urge you to take note of the disclaimer and the forward-looking statements on slide two. I will now pass the call over to Arnaud.

Thank you, Phil. And welcome to our financial results presentation for the first half of 2022. Let's begin with a highlight. Our company's resilience is demonstrated by the strength of our financial performance in the first half of the year. Revenues of $3.3 billion included over $800 million related to Article NG2. The portfolio net of this project achieved year-over-year revenue growth of 18%. Furthermore, we are confident that revenues in the second half, excluding Arctic Energy 2, will exceed that of the first. Ebit margins have remained strong at 7.3%, excluding the Russian project, and we are raising our full-year margin outlook to at least 6.8% from at least 6.5% previously. Our energy transition portfolio continues to mature. And so far this year, we have secured more than 500 million in energy transition award, excluding LNG, with momentum particularly strong in the carbon capture market. Based on the strength of our positioning, we expect to reach around 1 billion of pure energy transition orders, therefore excluding LNG, by the end of this year.

Finally,

Orders of 1.6 billion were broadly in line with our expectations for the first half, and we continue to anticipate a stronger next 12 months for new orders with strong potential for acceleration in 2023. Article NG2 backlog has been partially removed, which I will address on the next slide.

Period N backlog, excluding Article NG2, was 12.6 billion. Turning to the situation regarding Article NG2, where we continue to implement an orderly exit.

In line with the applicable sanctions and as contractually required, we have suspended the vast majority of the work. This has resulted in the removal of approximately $2 billion of Article NG2 backlog from our total company backlog. Due to the inherent nature of such projects and contracts, the exit process will likely take several additional months. We reconfirm that, based on our contractual protections and the balance sheet position of the project, we do not, and I repeat, we do not expect a negative net financial exposure as a result of our exit from Arctic Energy 2.

Turning to the operational highlights.

Our team's resolute focus on project execution, as well as effective customer and supply chain engagement, continues to yield strong results despite the persistence of external challenges. This is really best evidence in the quarter with Coral Floating LNG in Mozambique successfully introducing natural gas, a delivery milestone that was in line with the original pre-pandemic schedule. Elsewhere, We continue to make strong progress across the portfolio, delivering project milestones, and our performance year-to-date is in line with our plan and our financial framework.

We continue to anticipate higher activity in the second half compared to the first, as key projects ramp up. Now let's take a look at recent awards.

where we have benefited from FIDs in carbon capture and renewable fuels, and where we continue to strengthen our front-end positioning in growth markets. Firstly, in the carbon capture and storage market, we booked two awards in the second quarter. The Services Award for an expansion project for ExxonMobil's LaBarge facility in the U.S. to capture an incremental 1 million metric tons of CO2 per annum. And a large EPC for the Celsius CCS project in Oslo, Norway, which I will elaborate on in my outlook section later. In renewable fuels, as part of our longstanding alliance with market leader Neste, we were awarded a services contract for the Rotterdam expansion project that will double their capacity to 2.7 million tons per year.

This order will enter our backlog in the third quarter.

Turning to LNG, where we were awarded a pre-FID engineering contract for Texas LNG in the U.S., where we are leading a joint venture to design and deliver a 4 million ton per annum LNG export terminal. Texas LNG will utilize our SNAP LNG concept. This combines a compact modular design for mid-scale trains with standardized technology and is designed for low to zero carbon liquefaction through electrification and emissions control. The SNAP-LNG solution also benefits from speed to market and greater certainty around cost and schedule, aspects which are of heightened importance to our customers. And finally, we have secured some very important studies, including a study for a green ammonia plant with Iverson eFuels, which is part of the agreement we signed with Hydrogen in the first quarter. And a feasibility study for the first lithium refining and conversion project in Europe for a plant to produce up to 100,000 tons of battery-grade lithium per year. This is the equivalent capacity to power 2 million electrical vehicles. The contract signed also gives Technip Energy's preferential rights on the construction of the first phase of the plant, as well as three potential extensions.

I will now pass over to Bruno to discuss the financial highlights.

Thank you, Arnaud, and good afternoon, everyone. So, turning to the highlights of our financial performance for the first half of the year. Adjusted revenues were broadly flat year-over-year at 3.3 billion. This included around 800 million from Article 2, on which, as Arnaud stated, we are working towards an orderly exit. Revenues, excluding Arctic LNG2, increased by 18% year-over-year, and TPS grew at a mid-single-digit rate. Adjusted recurring EBIT was $204 million, equating to a margin of 6.3%, flat versus the first half of 2021. The dilutive impact of Arctic LNG2 was offset by strong execution on projects in completion phases as well as high activity and margin expansion in TPS. I will come back to that in more details on the next slide. Bottom line is strong, with adjusted net profit over 30% higher than the prior year, at $134 million, benefiting notably from the absence of transaction costs relating to the spinoff from Technip FMC that impacted last year's results. Adjusted order intake was $1.6 billion, significantly down year-over-year, but broadly as expected, and booked to build on a trading 12-month basis at 0.5. Net cash at period end was 3.2 billion, modestly below Q1's position. In summary, a solid first half in a very challenging environment. Turning to our financial framework for 2022, which, as a reminder, excludes any contribution from Arctic Energy 2, to give you the two different building blocks contributing to the group financials. The strength of the portfolio performance here to date provides a solid foundation, and with our good visibility, we are upwardly revising our margin outlook. We now expect adjusted recurring EBIT margins to be at least 6.8%, up from at least 6.5% previously. All other guidance items remain unchanged, including revenues, where, as indicated by our backlog scheduling, we expect a sequential ramp-up in activity in the second half compared to the first. While it's too early to provide any guidance for 2023, I would point out that for revenues, around 75% of the midpoint of the 5 to 5.5 billion range for this year is already secured for execution in 2023. So it would be difficult for any credible scenario to foresee 2023 revenues being below the projected range for 2022.

Turning to our segment reporting and starting with project delivery.

We continue to provide the transparency to enable the street to analyze the performance both with and without Arctic Energy 2 project. Overall, revenues were flat year-over-year, with a significant decline in contribution from Arctic Energy 2, completely offset by 24% year-over-year growth in the underlying portfolio. This is driven by strong execution and a continuing ramp-up of key LNG and downstream awards booked in the last 18 to 24 months. With the vast majority of the work relating to Arctic under suspension and removed from our backlog, revenue contribution from this project in the second half will clearly be substantially lower than the first half. Adjusted EBIT for the segment was $167 million, equating to a margin of 6.4%. similar to the revenue trend of Flat Picurie over here. Margins benefited from a strong contribution from LNG and downstream projects in the latter stage of completion, such as Coral FLNG offshore Mozambique. Excluding Article NG2, the margin was strong at 7.8%, which reflects the strength of our execution and the quality of the backlog. This underpins our confidence in the outlook for the remainder of the year and beyond. Trailing 12 months book-to-bill was 0.4, reflecting a steady flow of order intake in the period following the award of Qatar in the first quarter of last year. It is worth noting that this calculation includes in the denominator significant revenues from Arctic LNG2 over this period. has declined 25% year-over-year to $12.2 billion, again impacted by about $2 billion of Article NG2 backlog that has been removed. Excluding this project, backlog is down about 7% year-over-year. Orders were broadly in line with our expectation in the first half, although clearly the volatile environment did push some project FIDs to the right. Today, conversations with customers are concrete. And the pipeline of projects for awards in the coming 12 months is very strong. Regardless, we will not chase the market for top line and mere quantity. We will remain committed to preserving the quality and integrity of our backlog, and we will continue to exert discipline and selectivity. So overall, an improving underlying performance by project delivery with a very rich pipeline of opportunities ahead. Turning to technology products and services, TPS delivered a solid first half performance with revenue growth of 4% and EBIT improving by 10%. The growth was driven by process technology activity, including licensing and property equipment, notably for ethylene and biochemicals, including our epithelial technology. EBIT margins improved by 50 basis points. to 9.3%, benefiting from higher activity levels overall and in a favorable mix, including process technology and advisory services. And this expansion was achieved despite higher selling and tendering activity to deliver our ambitions in future growth markets. TPS backlog is slightly down year over year, but we anticipate strong order intake in the coming quarters, notably renewable fuels and SELN market. Supporting this, the recently announced Neste Rotterdam Renewable Fuel Expansion Award, which will be integrated in our Q3 order intake, and we anticipate SELN awards in the coming months. This will drive a step change in segment backlog, bolstering the medium-term growth outlook for our highest margin segments.

Turning to other key performance items across our financial statements and beginning with the income statement.

Corporate costs of 23 million reflect more of a normalized run rate compared to the first half of the year where the company was created in the middle of the first quarter. And we have also strengthened the organization to better address new markets and growth opportunities from a business and a strategic perspective. we are anticipating a normalized run rate of 40 to 50 million for the year. R&D investments at 22 million are materially higher versus the last year, consistent with our plans to increase R&D spending aligned with our energy transition strategy. For the full year, R&D spending is likely to increase by 30 to 40% versus 2021. At 30.7%, the effective tax rate is in line with our financial framework for the year. Turning now to balance sheets. With gross debt largely unchanged on prior quarters, strong free cash flow has enabled our gross cash balance to grow to 3.9 billion, despite a small working capital outflow year-to-date. Interest rates and cost of debt have been a key discussion theme in recent months. I would like to point out that our financial debt is not impacted by rising interest rates. And even more importantly, the 2028 maturity gives us a great visibility. Moreover, a rising rate environment does create potential to generate positive interest income on our deposits for the periods to come. Net contract liability is down approximately 200 million versus the year-end position, reflecting evolution of backlog and project execution. So let's now review cash flow performance, where the first half shows continued strong free cash flow conversion from operational profit. Free cash flow for the period was 110 million, including a 51 million working capital outflow. net of working capital, free cash flow was 161 million and consistently strong as we executed across our portfolio. Cash conversion from EBIT X working capital remains high at close to 80% in the first half of the year. We continue to expect to be able to deliver a consistently high free cash conversion net of working capital in a 70% plus range in the medium to long term. As we continue to exit Article G2 of the coming month, we will experience some cash outflows as we close out purchase order and subcontracts. But obviously, we expect that working capital will also reduce in tandem. And I reiterate what Arnaud stated earlier, we do not expect any negative net financial exposure. Below free cash flow, the key items include Our median dividend of $0.45 a share, which was approved and paid in May for a cash cost of $79 million, and $41 million related to the share buyback, including share repurchase from Technip FMC.

We end the period with $3.9 billion of cash and cash equivalent.

Before turning back to Arnaud, let me update you on the progression of our shareholder structure You may recall, at the time of the spin transaction, Technip FMC had 49.9% of our equity. And as of April 2022, Technip FMC had fully closed out its remaining position. With this overhang eliminated, we have established a more stable shareholder structure, which is well-balanced and loan-only orientated, with just over 20% of the shares outstanding with strategic long-term holders, and over 50% with loan-only institutions. It is also well dispersed across key geographies in France, continental Europe, UK, and North America. And we thank all our existing and new entrants into the stock for their trust and backing of our company and our strategy.

I will now pass back to Arnaud for the outlook. Thank you, Bruno.

Turning now to the outlook where our energy transition portfolio is maturing and benefiting from increased conversion. As we discussed in our full year results outlook, we are leveraging our core expertise to position TechnifEnergies to capture future growth opportunities in the energy transition, which now forms a significant portion of our total commercial pipeline. The inflection in FIDs that we anticipated at that time is now materializing. with notable awards in the first half that collectively generate more than $500 million in order impact. With the energy agenda creating further incentive for our customers to invest, we believe our portfolio will increasingly be populated with work in the areas of carbon capture, renewable fuels, clean hydrogen, and other new energy markets. As such, we are very confident that we will achieve around 1 billion of energy transition orders, excluding LNG, within 2022. Furthermore, the role that we are playing in the energy transition is different to our EPC past, as we look to generate and return more value from what we bring to future energy developments. As such, while project delivery will naturally benefit from this trend, Many future awards in these domains will serve to increase our backlog in technology, products, and services, bolstering the medium-term growth outlook for our highest margin segment. Starting now to the rapidly growing market for CO2 management, where Technip Energies is developing a leading market position. The market is extremely active today, and we see a total installed capacity of 550 million tons per annum by 2030. This is equivalent to around 80 billion of capital investment. The post-combustion market represents approximately half of the total carbon capture market, with a majority of activity centered on the power generation market, with significant prospects within CCS hubs and clusters. Geographically speaking, the market today is concentrated in the UK and Norway, Northwest Europe, and North America, but we are seeing clear signals of activity in several other regions as CCS globalizes. Technip Energy is a natural fit across the value chain, and we have developed leading offering which leverages multi-technology solutions, innovative CO2 management approaches such as sequestration via offshore sea hubs, and investments in dedicated R&D and pilot plans for deployment in targeted infrastructures and municipalities. Our leadership is perhaps best demonstrated by the sheer breadth and depth of our current portfolio of projects in backlog, which aim to capture more than 15 million tons of CO2 per year. This includes projects in the pre- and post-combustion transportation, as well as capture facilities that are integrated onto LNG developments to decarbonize the production of LNG. It also includes our largest standalone carbon capture project to date. You may recall that in Q3 last year, we referenced a modularized pilot plant at a waste-to-energy facility in Norway utilizing Shell CanSolve technology. Following the success of the pilot phase, the CELCIO project in Oslo has matured to FID, and we are delighted to confirm this award for the CCS facilities. This award follows early engagement through concept pre-feed, and as I said, a pilot. The project will be the world's largest full-scale waste-to-energy plant with CO2 capture, and will reduce the city of Oslo's emissions by 17%, by capturing 400,000 tons per year of CO2. And the CO2 captured will be liquefied and exported to the Northern Lights project, where we will also be delivering the world's first liquefied CO2 loading house. In summary, a fast-moving and maturing market with projects of size materializing and a market where Technip Energies is leading from the front.

Turning to ESG, this quarter, I would like to focus on the fourth pillar of our roadmap, which is collaborate to impact.

Technic Energies continues to be recognized as a trusted partner for technology development, scale-up, and integration, and we collaborate with industrial partners and our customers to deliver decarbonization and help achieve their net zero goals. In the second quarter, we established several strategic partnerships to develop technology for carbon capture, plastic circularity, and advanced biofuels, and to drive energy transition in strategic regions for the company. For example, in carbon capture, we continue to strengthen our strategic alliance with Shell and their accounts of CO2 capture technology, with a now co-located joint delivery team that has moved into Shell's energy transition campus in Amsterdam. Delivering affordable carbon capture solution is critical to unlock the CCUS market. And through continuous technology and delivery improvement, this partnership is already delivering tangible and proven results with substantial cost reduction, including up to 20% savings in capital investment and 30% in OPEX. This is what is making the projects possible.

Technip Energies plans to replicate this success with other capture technologies.

Beyond Shell, we have also strengthened our partnership with Abu Dhabi-based NPCC through the formation of a joint venture we have named NT Energies. We know NPCC extremely well through three decades of collaboration, including work on several mega projects. NT Energies brings together complementary skills, and we are already actively positioning for concrete opportunities in the UAE and the broader MENA region, including carbon capture, as well as clean hydrogen and ammonia. In closing, with our strong first half performance, we are confirming our financial framework for revenue and raising margin expectations. Our energy transition pipeline is maturing and seeing increased conversion that will benefit both our reporting segments, TPS and project delivery.

And we expect to reach around 1 billion of energy transition orders, excluding LNG by year end.

Fundamentals remain robust, notably for natural gas, LNG, and renewables, which clearly support our strategic offering and medium-term commercial outlook. The transition to a low-carbon energy system is requiring innovation, technology, and technical expertise. And it's opening a new golden age for engineering and technical energies will continue to play a leading role.

With that, let's open the call for questions.

Excuse me, this is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question comes from Bertrand Hody of Kepler.

Hello. Thank you for taking my question. I've got three quick questions, if I may. The first one is you've removed €2 billion of Arctic II LNG backlog, but there are still 800 million euros inside your backlog as of end of H1. How should we think about this remaining backlog and associated revenues and margin going forward on Arctic 2? The second question is, as expected, H1 order intake was soft at around 1.6 billion. Can you give us a flavor on the order intake momentum in H2, you expect, and also was also curious on Bruno's bold remark on a possible step change in order intake for TPS division. And last one, your margin excluding Arctic 2 is now running at 7.2%. There is still Yamal contributing. How confident are you that those kind of margin can be sustained in 2023 without the contribution of Yamal. I know it's always the same question, but it's always good that you can reiterate our view beyond 2022 and ex-Yamal contribution. Thank you.

Thank you Bertrand. I will probably, I mean I will start with the first two questions and initiate the third answer, I mean the answer to the third question and then pass on to Bruno who is always delighted to talk about Yamal. So, first part of your question was about, you know, the 2 billion of backlog that we removed and why and, you know, the 800 or so that are remaining in our backlog for Arctic Energy 2. You know, the vast majority, as I said, of the work has been suspended on the project in Russia, and we have removed $2 billion from the backlog. Those $2 billion represent the scope specifically under sanction and the scope for which we have reached, I would say, an agreement with the customer as part of what we are calling our orderly exit. It is very important for everyone on the call to understand that this ongoing exit process is taking a bit of time, and it's, I would say, very natural considering the nature of the project, and that we continue to work with the client on this very exit plan. The remaining Article NG2 scope that is in the backlog really consists of closeout and exit activities. So it's not necessarily physical work happening on site, And this remaining backlog will be further adjusted as we progress with the closeout and as we progress through the agreement with the client. As you can tell, we've already made a lot of progress, I would say, because 2 billion out of the 2.8 are now out. There's 800 million that are still under discussion. on reaching the closeout, and I would say it's part of the orderly exit, nothing extraordinary. I think it's the gymnastic we have to go through when we exit this type of project. So that's how we characterize the situation on the backlog for Arctic Energy 2. On order intake for the first half, 1.6. billion indeed. And yeah, we're happy to signal a, I would say, a stronger momentum for order intake in the second half. There are, you know, this momentum will be in several areas. It will be in the areas of clean fuels, in the areas of ethylene, in the areas of gas, and also some hydrogen opportunities, or actually clean hydrogen opportunities. And what is important is that as we are navigating, I would say, you know, the transition from, I would say, a world pre-war where we had strong prospects in the Russian region or Russia area to a world with a war where we are having to refocus on other areas of the world. This naturally takes a bit of time, it's a transition, but we are very optimistic about the pipeline of opportunities. And frankly speaking, I can say with a high level of confidence that the building blocks are all in place for a book to build above one for the next, for the coming 12 months. Why am I confident? I'm confident because of, like I said, what we know is coming in terms of, you know, clean fuels, ethylene, and so forth, but also because of what is coming around gas and LNG, where, you know, there's clearly, you know, extra capacity that is needed around LNG. There's probably a 100, 150 mTPA supply gap by 2030, right? If you want the projects to be operational by 2030, that implies a large amount of increased capacity. We'll have to reach FID within the coming 12 to 24 months. And knowing our position around LNG in particular and gas projects in general and the prospects we're having and the engagements we're having and the early engagements and the feeds we are running, This is allowing me to say that we are feeling very confident about the building blocks and the fundamentals for the coming 12 months for a book to build above one. On the third question about margin in TPS, I'll hand over to Bruno, but yes, certainly we feel extremely confident about the TPS performance in H2.

Yes, thank you, Arnaud. Hello, Bertrand, and thanks for your question. So, yeah, we do see, you know, as Arnaud said, you know, nice building blocks for additions, significant additions to our TPS backlog, which will generate more revenues to this high lately performing segment in terms of margin. In terms of a global outlook for margin, and obviously it's a bit too early to provide any guidance for 2023, but I would point out to the following items. As we I have always said that 2022 still has some contribution from Yamal, a declining contribution. But more importantly, the step up and the performance in H1 and the upward revision that we've just done is not due to Yamal. It's really due to the rest of the portfolio, which is ramping up as expected and actually quite nicely, such as the contribution of Coralis Energy. So clearly, we are on track to see stay and to be on track on the medium-term outlook and the long-term margin projections, we are saying, we have more contribution from GPS. We have a good contribution from the rest of the project delivery portfolio, which are ramping up. And this puts us into a good perspective beyond 2022, in 2023, where we won't have any YAML contribution, but we are on track. Of course, we all know and have read reports where we could contemplate, I don't know, 3% or 4% in EBIT. Well, if you ask me, this is a ludicrous scenario. We are not contemplating this. We are on track from a TPS perspective, from the project delivery perspective, which are progressing. So we remain focused on delivering this long-term margin outlook.

Thank you, Bruno. I think it is very important for us, for Bruno and I, to insist on the fact that We communicated to everyone at the creation of the company a trajectory, a margin trajectory for the organization, for Technip Energies. And we have stayed true to our principles around selectivity, around a high-quality backlog. And the performance of the company today is no longer relying on a single project over-performing. The performance of the company today is a result of its portfolio. which is broad, and the trajectory that we set for the company, what we said was true last year, it's true this year, and it's true for 2023 as well. So no change to the type of, I would say, performance or financial performance and profitability to be expected in 2023 compared to this year.

Many thanks. Very clear.

The next question is from James Thompson of JP Morgan.

Great. Thank you very much. Good afternoon, Jasmine. Thanks for the presentation so far. A couple of questions for me, really. Firstly, you know, interesting to see you're spreading out kind of pure energy transition order intake now. I think that was pretty useful. But maybe could you give us a sense in terms of, you know, pricing margin expectations in These contracts, should we just assume that they are fairly similar to what you're targeting in the rest of the business? And along that line, we've seen that demand is picking up through a number of verticals, I would say, in the oil and gas space, given the tight market. Could you maybe comment at all about your own pricing expectations in terms of the tenders that you're heading into? Do you see some pricing power from your side? So that would be the sort of first part of the question. Secondly, just I was interested in, obviously, Coral's gone very well. I was wondering if you could just give us an update in terms of discussions around Mozambique, what may or may not happen there as we think about going into sort of 2023 from that project. Thanks.

Hi, James. Thank you for the question.

Yeah, you're right. For the first time, we've segregated what we're calling pure energy transition orders versus LNG, even though we, as you know, as a company, continue to include LNG as part of our energy transition play. And I think that the current environment is just proving that we were right to include LNG as part of Technip Energy's roadmap and strategic roadmap at the creation of the company. I will probably repeat what I've said in the past. In the energy transition area, as well as in a more traditional one, what remains, I would say, a driving force for us as a company is the selectivity principles that we've set for ourselves. So, and I would like to thank you for that question because around, you know, what could be the, maybe the complexity or the profitability of the energy transition projects versus others. It's important to understand that if we have secured a project like the Celsius ECS project, and if this project is now finding its way into our portfolio, it is absolutely because the project's profile and the project's performance and the expected margins and the project risk profile is fitting squarely with our selectivity matrix and with, I would say, you know, it's not an outlier in our portfolio. It will fit nicely with the rest of the family, demonstrating the same type of traits in terms of the margins expectations. And that's very important that we continue to be driven by the selectivity principles, the early engagements, the crucial fact of entering into the right contract that reflects the right level of risk for the company and the right level of margin. So this will continue to animate us and you can trust that those are true for the traditional part of the market as well as the energy transition orders. They fit very nicely with the rest of the portfolio in terms of profitability level. As for pricing power, yeah, I would say that for some areas, indeed, there's a bit of, I would say, pricing power to be regained, that can be regained in light of the likely, I would say, flow of FFIDs in some spaces. I mentioned that there's a golden age for engineering. It's true considering the type of technologies that have to be deployed, and it's also true in terms of the availability of resources and the demand for what Technip Energies has to offer. In terms of Coral, I'm super happy, obviously, about the performance on the project so far. And, you know, to be able to introduce First Gas into the facility on schedule is an extraordinary performance, and there's a lot of pride in the organization and on the project team. And it's also, I would say, the reflection of how well we worked with our clients. It's never only a one-party game when there's such successes. It's always because the whole machine is well-oiled and things are working well. So now, you know, I've read in the press that there were talks about or contemplation of maybe more LNG in Mozambique or more floating LNG in Mozambique. As you may imagine, we have our eyes on that ball, and if it was to materialize, we would absolutely be ready to go in the starting blocks. I would say from a technology standpoint, the benefit to go in particular if you have the discipline to basically duplicate an existing and successful infrastructure and to go for design one, build two, or build money, this yields huge benefits. for the clients, in particular when we speak about time to market, which is obviously very, I mean, which is a big trend and a very trendy topic at the moment on how to bring more gas faster onto the market. So you would shave a significant amount of the original contract duration if you were to go into a repeat of a facility like Coral One.

Great. Thank you very much for the answer there. Just one point of clarification on one of your earlier answers, Bruno, first of all. Just in terms of Russia, is the statement made there that we may well see more of that kind of remaining 800 million backlog sort of being negotiated out, or should we consider it as kind of revenue that will be earned over the coming several quarters? Just how should we think about that?

Yes. Thanks, James. So, as Arnaud mentioned, we've got a significant component. We are working with the client on an orderly exit. Discussions are ongoing. So, as Arnaud was saying, we will adjust if needed. But today, this really comprises of costs to close out, to exit. So, some will undoubtedly fall as revenues drop. with some costs associated. Some may be adjusted depending on the outcome of discussions, but it will be a bit of the two. Obviously, with less revenue contribution versus what we've had in H1.

That's great. Thank you.

As a reminder, if you'd like to register for a question, please press star and one on your touchtone telephone. The next question is from Kate O'Sullivan of Citi.

Hi, thanks for taking my questions and for the presentation. Firstly, just in light of your CCS project towards this quarter in Norway and the US, maybe you could provide some color on your preference industries for CCS projects. You now have a large waste energy contract, a major feed in the UK for gas power. And also, with Senator Manchin today coming out, potentially backing Biden's climate bill, just if you had any comments on current preference for geographies when you're expanding the CPS from Europe versus the US. Just a follow-up on Arctic and on G2, but I can come back to that.

Kate, sorry, would you mind repeating your second question, please?

Okay, I hadn't actually said the second yet, but I will now. So Article NG2, apologies if I missed it, but if you could provide any further comments on the current path for exit. For example, some news reports have mentioned the option of a Russian contractor taking over, but understand that we can't get any more on that. Thank you.

Thank you. I will actually start with your question number two on Article NG2. I think it's more a question for our customer than a question for Technip Energies at this stage. We are very concentrated on executing this orderly exit that is obviously of importance for us. The importance being that we are also not only focusing on that, but we are also focusing on the future and we are retaining and redeploying our teams to many new LNG opportunities that have materialized in the recent months for us. So the question about the potential completion and whatnot is really a question for our client. And I'm sure he will do everything he can to protect his investment as any good company or good businessman would do. The important for us remains to complete this orderly exit and the fact that we've been able to retain and redeploy our team. So that's really what is important for us and for Technip Energies as we focus on the future. And then on your carbon capture question, and thank you for that. Obviously, the pipeline of opportunities, I mean, if I look at the macro outlook, and to tackle the world's climate challenges that is opening, I would say, this golden era for engineering, there's a lot of activity to be expected in gas and low carbon energy, a lot around sustainable fuels, chemicals, and circularity, because there's a strong and increasing focus on sustainable fuels in particular, and for circular solutions. And on carbon-free solutions and CO2 management, the CELCIO project in Oslo is obviously for us the first of its kind on the waste-to-power. And we are, I would say, monitoring the situation. And also, as you know, there are many waste-to-power plants around the world. And what we have done in Oslo is is triggering a lot of interest in other areas of the world, from Middle East to the rest of Europe, because I think the model that was about the early engagement, the deployment of a pilot, which was our investment, so it's good to see our investment yielding results, and the pilot is a way to test really the efficiency and the adequacy of the solution to the main infrastructure, which is the waste-to-power plant, And to be able to verify all that and then to convert into a project was, you know, we were obviously very happy. But we're also pretty happy about the breadth of the potential for similar solutions. And we have more pilots under construction at the moment for deployment in various areas of the world. Clearly, I would say the post-combustion market using this technology that we are sharing with Shell or co-developing with Shell is going to yield other opportunities beyond the Celsius one in Oslo. But I think you have to think about it as the same type of process for early engagement, pilot for testing. It's very important to test the viability of the solution. and the cost competitiveness of the solution within the environment of where the plant is situated. And that really is key, and it's super encouraging to demonstrate that we've been able to bring those solutions, I would say, at a cost point that is of interest to the client in this case, and it's going to yield significant results. Less carbon emission for a single city, it's massive. But it will be the source of a lot more opportunities in light of the number of waste-to-power plants in the world.

Great, thank you.

Gentlemen, do you have time for another question?

Sure, we'll take one last question.

Okay, we have Sassi Kanz, Kilokuro of Morgan Stanley.

Hi, thanks for taking my question. I had one on shareholder distributions. Given the strengthening of the balance sheet in the first half and also taking into account the outlook that you kind of provided and the guidance, I was just wondering if it was possible to expect a ramp-up of shareholder distribution either through higher buybacks or dividends before the year end. I just wanted to understand your position and view there. Thanks.

Okay, I will start and then maybe hand over to Bruno. It's an interesting question. I would nonetheless start by saying that, and Bruno stated earlier today, earlier in the address, that we are raising our R&D spend as a company. We are a technology company. The future of what the portfolio is going to be made of will be a function of the type of technologies and a number of, I would say, promising technologies that we can onboard and to scale them up at a scale that is making a difference and an impact to the world and to our customers. And the more we do so, the more we will actually populate this TPS part of the business that is, you know, accretive to the financial performance of the company. So at all time, we will want and I will want to retain the capacity for this, I would say, stronger or I would say trend around targeted, pointed R&D spend. It's very important that we retain that capacity at all time. And with that, I will pass on to Bruno.

Thanks, Arnaud, and good afternoon, Sassi. No, so nothing really to add on top of Arnaud. Obviously, we've been through the distribution through the current shares buyback, generating kind of 120 million for the shareholders. The share buyback program is continuing in A2 because the program that we initiated obviously will drive into H2. As Arnaud was mentioning, I think from our location, which really we are delivering, there is also an important part part which is investment we will continue and ramp up the investment in R&D new technologies and this will also be the building block for the future so it's really important for our strategic development and outlook again when we said at the end of Q1 you know Russia was we need to shift our focus nothing in Russia or from the consequences of the war was jeopardizing the deployment of our strategy it's still the case we are generating cash which enables to have shareholder distribution as we are performing, which will also enable us to make some investments.

Great. Thank you.

Gentlemen, there are no more questions at this time.

Thank you. That concludes today's call. Please contact the IR team with any follow-up questions. Thank you and goodbye.