Technip Energies Nv

Hello to everyone, and welcome to Technip Energy's first quarter 2023 financial results. On the call today, our CEO, Arnaud Piertan, and our CFO, Bruno Weber, will present our business and financial highlights, as well as the outlook. And this will be followed by a Q&A session. Before we start, I would urge you to take note of the forward-looking statements on slide two. I will now pass the call over to Arnaud.

Thank you, Phil, and welcome, everyone. Welcome to our financial results presentation for the first quarter, where we have delivered solid operational progress that puts us firmly on track to deliver our full-year objectives. Revenues of €1.4 billion are in line with our expectations and reflect continued strong momentum in TPS and lower project delivery activity resulting from the maturity of the portfolio and our ongoing exit from Russia. Our execution remained strong, and we delivered 100 basis points of margin improvement year over year. We also benefited from sustained commercial strength in technology, products, and services with awards in ethylene, renewable fuels, and carbon capture. This builds on the very strong momentum established in 2022. In addition, we are executing our strategy to prepare our future core, and I am delighted to announce the creation of Rely, a new company to drive green hydrogen industrialization through standardized and integrated solutions. I will return to this later in my presentation. Finally, orders of $713 million were broadly in line with our expectations for the quarter, leaving period and backlog at $12 billion, equivalent to approximately two times our expected revenue for 2023. Turning to our execution, I am pleased to report that we continue to make strong progress delivering important milestones, de-risking execution, and completing projects. Margins remain at robust levels, demonstrating the strength of our delivery and a favorable mix, including the growing contribution from TPS. Overall, a very solid start to 2023, and I want to express my deep gratitude to our teams that continue to drive our leading performance. Now let's take a look at recent awards, market trends, and partnerships. As previously communicated, momentum in ethylene markets has continued into 2023, and we have secured a significant contract to supply proprietary cracking furnaces for a mega plant in Qatar, as well as important technology award for a low-carbon plant in China. Also in China, we secured a reference award for low-carbon LNG with an engineering design and key equipment supply contract for a liquefaction unit to be fully electrically driven. This highlights the market trend towards modularized and electrified mid-scale LNG. Our carbon capture presence in the U.S. continues to expand with an important feed for Calpine at their Baytown Energy Center. This unit will be designed to capture two MTPA of CO2 equivalent to 95% of plant emission. And this award is further evidence of the strength of our solutions for carbon capture, which we continue to invest in. In clean fuels, we were awarded several front-end studies, including the latest with Lanzatec, for what would be the UK's largest sustainable aviation fuel production facility. This plant... will utilize our proprietary Hummingbird technology, a vital technology brick in the production of SAFs. Hummingbird is also the focus of R&D investment for us. I do look forward to talking with you in the future about the product launch based on this technology. Finally, for Blue Hydrogen, we have announced an important partnership with Casale to jointly license ATR technology as well as providing front-end services, proprietary equipment, and entire plants. With a potential carbon capture rate of up to 99%, this technology complements 10 proprietary SMR-based solutions to give us the most comprehensive suite of blue hydrogen solutions in the market today. And as I will discuss later in my outlook, this will be complemented by a leading Green H2 offering. I will now pass over to Bruno to discuss financial highlights.

Thank you, Arnaud, and good afternoon, everyone. Turning to the highlights of our financial performance for the first quarter, adjusted revenues were down 13% year-over-year to $1.4 billion, impacted by the maturity of the project delivery portfolio and the ongoing exit from the Arctic LNG2 contract, partially offset by very strong TPS growth of more than 35%. Adjusted recurring EBIT was exactly flat year-over-year, despite the lower revenues, owing to strength in margins, which increased by 100 basis points year-over-year to 7.6%, and benefiting from strong product execution and growth in TPS. Adjusted diluted EPS grew by 10% year-over-year, benefiting from the strong operational performance and higher interest income. Adjusted order intake was $713 million, slightly higher year-over-year, thanks to sustained momentum in CPS order. Net cash at Périmènes was $2.8 billion. In summary, thanks to the performance of our teams in Q1, we are firmly on track to meet full-year guidance.

Turning to our segment reporting and starting with project delivery.

Revenues are materially down year-over-year, reflecting the absence of Yamal LNG and the ongoing exit from the Arctic LNG2 contract. As a reminder, the Arctic LNG2 project contributed a significant proportion of revenues in the first quarter of 2022. Execution remains strong, and projects experience notable strength in margins at 8.1%, up 110 basis points year-over-year. The absence of major new awards, which are dilutive in their early phases due to conservative recognition, was a benefit to margins in this period. As new awards materialize in the coming quarters, the portfolio maturity will become a more balanced blend of early and later stage projects, bringing margins to a more normalized level. Turning to orders, the strong commercial outlook we see ahead of us should drive a considerable improvement in book-to-bill trends in the coming quarters, driving backlog higher. Turning to technology products and services, TPS, where our investment and commercial strategy to grow this segment is yielding very positive results. Financials are robust, with revenue growth of 37% year-over-year, Boosted by strong order momentum, we achieved through 2022 a notable improvement in several areas, including consultancy and engineering services, licensing and property equipment, notably for ethylene, and growth in renewable fuels work. These higher volumes, combined with an improving mix of higher technology and product revenues, enabled EBIT margins to reach the double-digit threshold at 10.2%, up 100 basis points year-over-year. As a result, EBIT has improved more than 50% versus the prior year period. Commercially, we have sustained a positive trend in orders, as demonstrated by the trading 12-month book-to-bill heading up to 1.6, which has driven a substantial 84% expansion in segment backlog versus Q1 last year. In summary, TPS is building strong momentum, and we continue to invest and explore growth opportunities to fuel this remarkable trajectory.

Turning to other key performance items, of course, are financial statements, beginning with income statements.

Corporate costs of $16 million represents an increase compared to the underlying run rate for 2022, reflecting costs of strategic projects and pre-development initiatives, which will likely continue in the coming periods. When contemplating the full year outlook for corporate, these incremental investment costs, as well as the recently announced AESOP 2023 program, should be taken into consideration. This program is an employee share offering with the objective of sharing long-term value creation with employees. These two factors will likely drive corporate costs for 2023 towards a range of 60 to 65 million. But in subsequent years, we'd expect these costs to normalize at a lower level, closer to 50 million. For net financial income, the central bank decisions an increase in global interest rate through 2022 and early 2023, are now positively impacting this slide, and the 20 million net benefit clearly boosted our earnings per share in the period. To conclude on the PLL, we incurred a non-recurring cost of 11.5 million. This represents the technical accounting and non-cash charge associated with our orderly exit from Russia and the sale of our main Russian operating entity. Turning to balance sheet, where our structure remains solid, net cash and net contract liabilities trended slightly down year on year, reflecting portfolio maturity and the absence of rewards. Before passing back to Arnaud, let's take a closer look at cash flows, where there has been a continuation of many of the trends seen in 2022. Pre-cash flow, on an underlying basis, or excluding working capital, was 122 million, and consistently strong as we executed across our portfolio. Cash conversion from EBIT on this basis is very high, at more than 100%, and above what we would consider a normalized conversion, owing to the positive impact of interest income. As we had indicated with our full year results presentation, Working capital was an outflow in the period, reflecting portfolio maturity, the absence of large awards in recent quarters, as well as our orderly exit of Russia. But we anticipate this trend will reverse as the order momentum improves across the balance of the year, notably in the second half. We end the period with more than $3.5 billion of cash and cash equivalent.

I will now turn the call back to Arnaud for the outlook. Thank you, Renaud.

Achieving the world's net zero target requires significant investment to develop and scale decarbonization solutions. Emerging stimulus packages from global policymakers will serve to break initial cost barriers. And although full alignment across the ecosystem is taking time, global ambitions demand that affordable solutions and sustainable products for industries and consumers alike must be developed. Technip Energies is committed to meeting this challenge. At our full year results in March, we discussed how we would prepare our future core through positioning for leadership in fast growth markets, which are fully aligned with our net zero goals. Creating rely is one key component of our strategy. And today, I am really delighted to present to you a new company which will accelerate industrialization in the emerging market for green hydrogen and its derivatives, such as green ammonia and e-fuels. Rely is a highly complementary partnership of Technip Energies, an engineering project delivery and integration leader for the hydrogen industry, and John Cockrell, the leading provider of pressurized alkaline electrolyzer technology and equipment. Rely will have robust foundations and from day one with access to over 200 hydrogen specialists and more than 50 hydrogen technology items. Headquartered in Belgium, the company will have global reach with entities across four continents and in countries spearheading green hydrogen market development. The combination will create a Technology and project delivery company providing integrated Green H2 and Power2x solutions. Rely will be asset light with preferential rights for electrolyzer stack supply with an offering that spans the full value chain from front-end engagement through to operations and maintenance. And unlike any other commercial partnerships that have been announced in this space, what clearly differentiates Rely is 10 engine coque reels combined R&D platform that will deliver technology enhancements, develop new products, and accelerate improvement in economics for green hydrogen projects. Looking at realized scope and market positioning in more detail. Green H2 and Power 2X are highly promising markets, which could ultimately deliver decarbonization across many industries, including traditional downstream industries, steel, and other hard-to-abate industries, as well as transport and power storage and production. Leveraging TENS process technology integration and molecule transformation capabilities with John Cockerell's extensive manufacturing and aftermarket expertise, RELI will provide a highly differentiated offering to the green hydrogen market. This will cover electrolysis, optimization of balance of plant, molecule transformation, and O&M. Digital services and the intermittency management systems will, of course, also form an integral part of the realized offering. Currently, of course, there are cost hurdles for green hydrogen. But in the long run, this industry like honey, will need to stand on its own two feet. Today, the electricity represents about two-thirds of the cost of green hydrogen projects. In other words, through optimization of the electrolyzer stack, balance of plant, and the OPEX, Rely has the ability to influence about one-third of the cost. But as the market matures to utility-scale projects, This picture reverses, and the cost components that RELI can impact will form the majority of the economics of a green hydrogen project. Put simply, RELI's potential to positively impact projects will increase as this industry scales up. Finally, on RELI, let's consider the value proposition. TEN's front-runner spirit has often seen us delivering many world-first and finding solutions for the industry's most complex engineering challenges. By combining the partners' technology and engineering resources, RELI will provide integrated end-to-end solutions for plants at industrial scale and an optimized and standardized off-the-shelf blueprint offering for the green hydrogen market. And when combined with TEN's ability to effectively structure projects through technical and financial advisory, we can accelerate the development of our customers and their projects. This is why R&D and standardization are critical. RELI's innovation platform will be instrumental in driving better project economics through lowering the levelized cost of hydrogen and shortening time to first molecule. Through this platform, we expect to develop technologies that we can license and proprietary products that we can sell. We will develop the technologies of the future, not simply the electrolyzer, but everything around it. The balance of plant and the energy and molecule management system and technologies across the derivatives required to transport and transform the green hydrogen to another molecule. In the long run, This will enable gigawatt-scale projects while addressing intermittency and power-to-x innovation. We truly believe that Rely has the necessary ingredients and financial ambitions to be the market leader in green hydrogen. We are targeting a $1 billion-plus revenue company by 2030 that can generate margins at least in line with our TPS trajectory, supported by proprietary technology and product development.

In summary, through RELI than is bridging green electrons to molecules. Before closing, let's turn to ESG.

In our sustainability report, which we published in March, we strengthened our commitments and recentered our focus on impact-driven targets to accelerate our sustainability journey. As part of this, we revealed that we are on track to be net zero by 2030 for Scope 1 and 2 emissions. And we reported, for the first time, our Scope 3 upstream emissions, in other words, the emissions from our footprint as a project delivery company. And in 2023, our Scope 3 downstream targets, or the emissions from our clients' plant operations, will be refined and published with means to decarbonize. We will also report on avoided emissions, sometimes referred to as Scope 4. This is measuring the emission reductions of our clients achieved through our sustainable by design solutions. For Scope 4, we are targeting to avoid 15 million tons of CO2 equivalent by 2025. As evidenced by RELI, our strategy to offer decarbonized solutions at the heart of our future core is in action. And delivering on our long-term strategy will be critical on our path to net zero by 2050. In closing, with our solid first quarter performance, we are on track to deliver on our full year guidance. We have made a significant move in preparing our future core. RELI is one of the key initiatives that we will be launching this year. And we are focused on securing the right project delivery prospects with strong potential for material improvement in orders in the coming quarters. And with that, let's open the line for questions.

Thank you. 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 touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as callers join the queue. The first question is from Sazinkant Chilukuru with Morgan Stanley. Please go ahead.

Hi. Thanks for taking my questions. I had two, please. First, I was just wondering if you could talk more about the strong 10.2% EBIT margin in the TPS segment. If you could highlight what the key drivers were behind this, particularly this quarter or in 1Q, and how much of that will likely be replicable in the future quarters of 2023 as well. I was just trying to understand. the sustainability of these margins in the segment at double digit levels. The second was I was just wondering if you could provide more clarity on the 4.5 billion euros revenue backlog that is expected to be executed for the remainder of this year. Again, how much of that kind of comes from the TPS segment and if you could talk about the risks associated with executing this backlog. It seems like a strong backlog cover for me for 2023. Thanks.

Thanks, Sachie, and thanks for the question. So I will start and hand over to Bruno. First of all, on the TPS margins, and allow me to actually insist on what we insisted during the full year earnings call and as well as last year as we were building up the TPS backlog and TPS forming now a key part of our strategy as a company. What you're observing here with the margin level for TPS is the realization of choices that we've been making over the past 18 months. and an emphasis that we have decided to put through the commercial models, through the commercial teams, and through our offering towards TPS in order to accelerate this hybrid model that is, I would say, then signature in terms of the business model of the company, the product delivery long cycle and the shorter cycle TPS with higher margins. So it is, I would say, you know... A key example of why the level of margin, a key example of why we have decided to accelerate into TPS TPS, as you know, is a blend from services to products to technology. The more T&P we find into the TPS blend, the higher the margins. And we have been fairly successful last year in particular in the domain of SELN, selling more products than services and more technology than services. So it's a favorable mix. I'll hand over to Bruno who may want to add a little bit of color, but it is important to me to highlight the fact that this healthy level of margin is a result of you know, choices that we've made as a company in terms of the strategic orientation to pivot towards more TPS without abandoning product delivery. But it speaks to the strength of the choices that we've imposed to ourselves and the ability of the commercial teams to pivot together with a message.

Oh, sure. Thanks, Arnaud. And hi, Sachie. No, I think Arnaud covered most of it. I think it's basically across the portfolio of TPS that was quite strong. Reaching double-digit margin is something we had in mind. We had insight and we communicated on that at the last earnings call. Now, it's true that we benefited from a couple of, let's say, tail-end projects, which has a bit more positive contribution this quarter. As we continue to grow this segment, benefiting from the top-line growth, we are able to sustainably be close to double-digit, be beyond double-digit. And this is what we want to continue to do, continue to invest, and continue to differentiate across the portfolio from technology, product, services, from PMC, advisory, to engineering services. We have the capacity to differentiate and then deliver high-value services to the client. If I switch now to the second part of your question around backlog, it's true that on both segments, we have great visibility for the year. We started the year at 1.4 billion, slightly on the lower side of the projected range. We have the capacity to step up as new awards will come in. So we are not obviously, you know, we're confirming the guidance for the full year from 5.7 to 6.2. We consider as this will roll out, we will be possibly in this range. Now, you could have projects accelerating, some projects shifting a bit to the right, It's the nature of the work, but yeah, it's well on track versus what we were forcing in building blocks to get to the full year guidance we released a couple of weeks ago.

Thank you.

The next question is from Bernard Hody with Kepler-Shubro. Please go ahead.

Hi. Thank you for taking my question. I have two, if I may. The first one is on ALM Gasha. There was some press report that AdNoc change is, I would say, is beating strategy. You were awarded earlier this year a pre-agreement contract and there was some press report that it was canceled. So I hope if you can give us some color on that. And the second question relates to your net financial income. It was very strong this quarter, 20 million. Can you provide us with a guidance for the full year?

Thank you, Bernard. I will take the first question and give the difficult one to Bruno. Regarding Hélène Gachat, I will start with an important reminder. While we have been awarded, indeed, I would say a pre-agreement, Hélène Gachat never made it into Technic Energy's backlog. Hélène Gachat isn't, never was. in our backlog. The announcements that we've heard and that you've read about earlier this week will not translate into any cancellation of backlog for Technip Energies. Elengasha is a very large project. There are multiple packages. Our scope was only one part of the total scope for Elengasha. we've heard from the client that the price point for investment or FID had not been reached, therefore their decision to change stack. I am unable to say whether it is about the combination of the packages or one package in particular. Now, this is a very good reminder of something that I've been repeating and we have been discussing on those calls in the past. We as Technip Energies or other contractors, we can't totally influence FIDs, but we can partially as we do our job properly. And doing our job properly is finding solutions, doing value engineering so as to make the projects viable for our clients. Our duty. is obviously to be profitable on our projects and the projects that we execute, but it is also on the prospects to find solutions to bring the project to a price point that is acceptable for the client to take final investment decisions. So it looks like this has not been the case overall on LNGASHA. We are in dialogue with ADNOC, so there's no breakdown in communication or in being in contact with them. We will assess what that means for us in the coming weeks. But the situation is what it is, but it's a very good reminder again, of the importance of what we do in terms of making the projects of our clients fly. We do exist through our clients' projects, and it's an important reminder of that. While remaining disciplined in the margin levels and the execution and the choices we make, our duty and the contractor's duties are to find solutions to bring the price point where the project can fly for the client. Hello?

Yes. Hello, Bertrand. So, yeah, positive impact from the net financial income for the quarter, close to 20 million. Obviously, difficult for me to forecast what would be the reactions or the future steps of the European Central Bank or the Fed. It's difficult to give any firm guidance. It's not really on our hands. What can I say? You know, for The main impact, which is, okay, the deposits and what interest we earn, the amount that we've recovered or that we've been able to recognize in Q1 is probably not very different to the one we could project for the next quarter. Now, obviously, within the global mix of the net interest review or expense, you have other components, to market evaluation, of some investments, so it's not only you have things beyond that, but I would say if things remain the same and we don't control that, we can continue to incur double-digit revenue items as we execute across the remainder of the year.

Many thanks.

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

Hi, gents. It's Mick here. Quick question on your hydrogen rely coming through. Obviously, it teamed up with Cockrell now. You previously teamed up and invested in McPhee two or three years ago. Can you just talk to the difference between what those two offerings are? I thought McPhee was going to be developed up to industrial scale as well.

Yeah, Mick. So, turn it. is indeed a small minority investor in McPhee. This small minority investment that we've made, just as a reminder, we are holding 2%, was made for us to learn faster about electrolyzer and electrolyzer technologies. The nature of the relationship that we have been developing with MACFI is not to be compared with what we are doing and will be doing through RELI. It's a much different ambition. The ambition with or through the creation of RELI is to unlock something and unlock a few of the barriers to, I would say, an affordable green hydrogen or green hydrogen derivatives. In order to get there, you need to unlock scale, and you need to think industrial scale. It happens that John Cochrill electrolyzer solution is probably more advanced, certainly larger per unit and per stack, or per stack unit. So they are, you know, base case is 5 megawatts per stack, which is significantly today higher than what McPhee is able to deliver. And there's potential for, I would say, a lot more beyond the 5 megawatts. Hence why we have gotten closer to Joint Cochrane and have decided to enter into this venture with them. It's really about accelerating scale. When I look at what and why sustainable aviation fuels are being adopted so easily, it's because SAFs are easy to use. It's still expensive, but it's very easy to use. And there's no question of how to store and to use and to transport and the rest. We have to bring, if we believe that there is a net zero ambition for the world, we have to bring hydrogen and derivatives to a level of ease of use and price level That is similar to what is happening with the SAF, which, by the way, for the time being, are being blended with other fuels, but same story as a way to you know, make the cost more acceptable for the consumers. Same story. Hydrogen and derivatives may be blended tomorrow into other fuels or sources of energy so that it accelerates the adoption while ramping up the volume. So what we are trying to achieve through RELI is really to unlock or to break down some of the barriers. Some of them will be broken down thanks to subsidies But beyond that, we absolutely must accelerate the industrialization of the green hydrogen platforms and solutions. And the appetite that we found at John Cochrill and the, I would say, cultural fit that we found at John Cochrill to put in common what is an essential part of RELI, this innovation platform, is absolutely essential. in order to break down barriers, accelerate technologies, and invent, I would say, what will be an affordable balance of plant and balance of site. So what we found is very much, first of all, we're trusting the technology and an appetite to put things in common and to think differently in order to accelerate scale. And this is why we decided to team up with Junko Krill and to form this innovation platform, i.e. putting in common their innovation teams and our innovation teams in a joint company to accelerate 3NH2.

Okay, thank you. And can I ask a follow-up on the other partnership you announced during the quarter of Casale on the ATR? Now, you mentioned in that potential of 99% carbon capture rate on that. What does that say about the future of your SMR business?

It says that the ATR and the SMR will continue to be complementary. We have seen projects where our SMR technology has been selected by our clients for blue hydrogen in Australia recently. And it's a matter of basically being able to – we have a gap, if I may say, in our blue H2 matrix. And the very large-scale BlueH2, we couldn't totally tackle through our SMRs. We have to say that ATRs are more cost-efficient for super large-scale BlueH2, and we needed to complete the puzzle. And now that the picture is complete through the partnership with Casale, you must not see them as contradicting one another. On the contrary, They are complementary. And when you put SMR plus some of our solutions, such as the Earth solution technology or ATR plus Earth, we can really decarbonize blue H2 up to 99%. This is a very serious number. And so, yeah, that's why we're very pleased because now we basically have the complete picture and there's no more gap into the matrix. And we can, I would say, confidently decarbonize go and tackle the medium size as well as the extra large size for projects for BlueH2. Thank you very much.

The next question is from Jean-Luc Romain with CIC Market Solutions. Please go ahead.

My question relates to NSS. It appears, according to the press, that you have done the best proposal. In case Shioda couldn't participate with you to this project because of their financial difficulties, is it something you would take alone, given the big size of this project?

Thank you.

You know, you're reading the press like we do. NFS is a very important prospect for us because LNG continues to be part of our equity story and we continue to believe in LNG. Considering, I would say, the nature of the prospect and where we are, I'd rather not comment further on what has been published in the press, which may or may not be accurate. We will continue as Technip Energies to tackle those large projects through partnerships that are of a quality and predictability in terms of the delivery that is compatible with the principles that we've applied to ourselves for selectivity and discipline in execution. So, partnerships will continue to exist. They will continue to be necessary to then when tackling large projects. and the quality of the partnership is what truly matters. So I won't comment more on NFS, as we don't like to comment on prospects, as you may imagine. So that's all I say on the matter for today.

Thank you very much.

The next question is from Nikhil Gupta with Citigroup. Please go ahead.

Hi, good afternoon. Two questions for me, please. The first one is on the carbon capture project in Norway. So there were press articles that the waste-to-energy plant in Oslo was halted due to probably higher cost expectations and things like that. So how does this impact Technip Energies and CCUS as a whole, given the negative backdrop for this project? So that's the first one. Second one is can you just give some more colors around the bidding pipeline by geography, especially given 2022 and 1Q has not been that great in terms of award intake. So what are the areas from where we can expect larger awards? Those two questions, please. Thank you.

Thank you, Nikhil. To start with Celsius and carbon capture. So, yeah, we've seen the – like you, we've read the news, and we can confirm some delay in the Celsius carbon capture project. It's important to look at why I would say that the client is – taking the project into a cost reducing or cost reduction phase. And to account for the fact that it might not be because of the carbon capture solution itself, the project was actually beyond carbon capture. I mean, it's carbon capture, but then it's also all the logistics. I mean, it's liquefaction of the CO2. It's a port facility. It's exporting through shuttles the CO2 to Northern Lights. So I would say not the landscape, but the plot plant and some of the choices that were made initially by the clients together with the local environment have changed. And this has nothing to do with the carbon capture solution or the carbon capture module themselves, but more has to do with the surroundings of the project and the carbon capture module. So, point taken. For us, the project was, you know, it's not at all... material for 10. We are working with the client on indeed finding and we've embarked into this cost reduction study with them considering the new environment that has been defined by the clients locally in Norway. So beyond carbon capture and beyond the carbon capture module, it's very much about given the new constraints and the new plot plans and the new options that have been selected by, I would say, the municipalities and the environment over there, how can we actually bring the cost down? And there are other factors, such as an unfavorable exchange rate between the euro, et cetera. But the project was very early for us, very early phase. absolutely engaging with the client to find the solutions for cost reduction. But it's not... challenging at all the wave then continues to believe into the current capture market in europe in particular for waste to energy it's ramping up um like green hydrogen or other markets you know the uh it's not a mature market just yet so we will have surprises until things settle but we absolutely continue to believe in it it continues to ramp up and uh through, again, the importance of the project discipline, you know, to be able to say, yeah, okay, the client is pressing the pause button here, but there's nothing material here for 10 is important and speaks to the discipline when we take these type of projects that can be a bit of a novelty, not so much in terms of the technology, but in terms of the environment. So we continue to support the clients from that front to allow commercial success for their decarbonization project. Regarding the building pipeline by geography, and a bit earlier on the call, a question was asked regarding Elengasha. The commercial pipeline for TEN continues to be extremely robust and vast. So Middle East continues to be, I would say, an area of focus for LNG and other gas projects. Obviously, the Middle East, in its broad definition, is an important area for us. If we want to continue into LNG, East Africa as potential in LNG for 2023. Again, I say potential because I don't control and we don't control the FID calendar. It's more in the hands of our clients. And I would say North America also continues to be attractive. And we've seen clients, I mean, getting closer to a potential FID 2023 in the space of LNG. So we are extremely active bidding. I know it will sound a little bit virtual for you guys, you know, on the call because we have not announced anything this quarter. But the important for us is to be confident like we are about the quality of the pipeline. And I will also, you know, share with you that there's no anxiety in my voice here because what truly matters for us is the quality of the project that we would be onboarding. We are not going to turn into a company that's going to be anxious about volume. Volume is important, and we know that. But we want volume and quality, and not just volume. And continuing to deliver strong margin performance and, by all means, not destroying shareholder value is of extreme importance to us. So being able to announce a project, we want to be able to be happy to announce it and truly happy. It has to be good news for us and for our shareholders because it means that we would have been happy with the The conditions under which we are signing the contract. We don't want to be signing a contract for the sake of a piece of good news in the short term and live with a very difficult situation or having to live potentially with a difficult situation in the long run. No. We want the project to be announced as a good news in the short term and the long term so as to preserve and generate shareholder value. That's why we are always insisting on this principle. We want quantity maybe, but overall quality.

Over everything, sorry, above all quality. Thanks, that's clear.

The next question is from Guillaume Delaby with Societe Generale. Please go ahead.

Yes, good afternoon. To be honest, all my questions have been answered, so I leave the floor to someone else. See you soon. Thank you, Guillaume.

The next question is from James Winchester with Bank of America. Please go ahead.

Thank you. Good afternoon, guys, and thanks for the presentation. Just a quick two from me. Firstly, could you provide an update on Arctic Energy 2? Is everything on track to be closed out this quarter? And secondly, should we expect a similar working capital outflow in the second quarter, i.e. around the ballpark of €250 million? Thank you.

Thank you, James. So on RTKMG2, yes, we are on track to execute the full exit as we had previously communicated within H1 2023, therefore within this quarter. Everything's on track. A lot of hard work by all the teams, but happy to report that so far everything looks favorable for delivering as per what we had indicated previously. The next question, Bruno, will answer.

Yes. Hello. Good afternoon, James. So on working capital, as you know, it's not linear. So the impact of the first quarter, which was largely within a bit of the same trend or pattern versus 2022, without major new awards, you have the impact of the Thailand projects, which are providing some negative working capital outflow. Plus, obviously, the exit of Arctic Energy 2, which has, let's say, communicated day one, was no net exposure, but some potential cash out and associated working capital. So this is what has largely, you know, the evolution, maturity of the portfolio, and obviously orderly exit on Russia ongoing. This is what has mainly driven the Q1 2023 working capital. So as we look forward, no quarter will be exactly the same. You would have always different kind of patterns. When basically the new awards or larger awards will come, this will tend to replenish the working capital. So up to the point we get these larger awards, we have some negative and then some replenishment when these larger awards come in. So is this Q2, is this Q3, is this Q4? Obviously then the timing and the sequence and the cutoff may have a lot of impact, but the trend is there, and basically from this kind of low point of working capital, New World backlog increase will replenish the working capital position to where we were probably earlier this year.

Very clear. Thank you, guys.

The next question is from Baptiste Lebac with Otto. Please go ahead.

yes hi good morning every good afternoon sorry everybody just one quick question trying to better understand why you keep your guidance whereas if you are doing some math aiding q1 plus what is already in your backlog we are already in the middle of the of the range and at the same time you said that you were expecting an improvement in order, significant improvement in order intakes. So clearly, should we estimate that you are cautious at this stage regarding, let's say, the guidance for top line?

Good afternoon, Baptiste. I will take this one. So as always, you know, we'd like to be prudent. We'd like to under-promise and over-deliver. And we, as Arnaud mentioned earlier, we are not obsessed by top line. So being in Q1, having a lot of moving parts, obviously we found that it's early to change the guidance, whether it's from the top line or the bottom line perspective. What I was mentioning earlier, the obviously increase in order intake and this momentum, here we'll be talking more about project delivery. which we obviously longer term, longer cycle, and the contribution maybe in the given year would be a bit less significant versus an order intake in TPS, which would be shorter cycle. But, you know, if I take this aside, the order book is there to be delivered, let's say fully within the guidance. We can see, you know, calendarization, some progress. We see, you know, Arnold was mentioning Celsius in Norway, so you can have some acceleration, you can have some rebaseline. So obviously, being just in April or early May, we have a lot of road to go before the end of the year, so we can adjust and we can, you know, get to this end point. Today, we feel that, yeah, keeping the guidance. We are on track to be there. Now we will adjust accordingly depending on the news in the flow, order intake, timing, and obviously what happens on the project.

Thank you, Bruno. On the topic of being a little bit maybe conservative or prudent in the in our communication. Maybe that's how we like to be. And coming back to Rely, for which we are signaling that the company would be or will be a 1 billion revenue company by 2030, honestly, there might be a bit of conservatism. If we believe that the world has a net zero ambition 2050, and we can argue the date, but if that ambition is there, and actually I think we have to believe considering all we are experiencing and seeing, and I was in Ostland last week at the North Sea Summit, when we look at the commitment that the European countries are making towards tenfold production of green electricity from wind in the North Sea, whether it's 300 gigawatts or even only half of that, there's a massive amount of investment that goes into renewable electricity and renewable power, and hydrogen and its derivatives, whether they are mainstream to the public or only dedicated to industries. For industries only, there's a massive need, and if people are serious about decarbonization, hydrogen and derivatives are pretty much the only way for some industries to reach net zero. We have taken the stand that we believe that there is an ambition to be delivered to be net zero to the world by 2050. And therefore, I don't see any reason why Rely wouldn't be at least a $1 billion euro company by 2030. So back to the conservatism, if I may say, or the prudence we like to apply to ourselves. This is a little bit of our trade, probably for the better, and that's our opinion, but... yeah, there's probably a little bit of prudence always in the way we communicate.

Thank you very much.

The next question is from James Thompson with JP Morgan. Please go ahead.

Great, thanks. Good afternoon, Anna, Bruno. So thanks so much for your presentation so far. Just wanted to follow on, really, on the guidance point, first of all. I mean, obviously, very strong margin performance in the first quarter. When I think about the projects, business, you know, limited order intake for a little while now, suggests to me that you should have a similar sort of outturn over the next couple of quarters in, you know, sort of lower revenues, more completion margins, more milestones being hitting. Obviously, TPS, very strong margin start of the year. You know, is the reason for not upgrading EBIT guidance in terms of for the full year 2023 Really, because we sort of very early in the year or should actually be thinking that, you know, when we come to to Q3 Q, there's perhaps less in terms of Some sort of major project milestones, it will be hit over the next couple of quarters. So, you know, could stay more kind of normalized as we as we sort of progress in terms of projects delivery. would be the sort of very first rather long-winded question. Secondly, just in terms of kind of renewables backlog, there's also been some discussion around projects, et cetera, on this call. But, you know, last year you talked about a very confident kind of 1 billion type order intake number for renewables. Just interested in your or low carbon, I should say, as well. I'm interested in your thoughts on how it may well progress into 2023 or into the end of 2023. Arnaud, do you think you can grow it to 1.5 billion by the end of the year, 2 billion? Are you prepared to put a number there yet? That would be great.

Thanks. I'll start with question number two before handing over to Bruno. So on the renewable or low-carbon solution, we continue to see a strong momentum in the order intake for feed, for example, in particular. What we're observing nonetheless at the moment is a little bit of a slowdown or slowing down when compared to 2022. I've used the expression, the train has left the station. We are yet to find out whether it's a high-speed train with no stop or a slower train with a few stops here and there as the market is shaping up and people understand and can properly navigate this environment around the clean fuels investment decision, carbon capture, and the rest. I'm not going to call it a pause. I don't think that, and we're not guiding on the specific number for order intake on low carbon solutions. We continue to see momentum. I told you as well, you know, we need times five from 2021 to 2022, from 200 million to 1 billion. I told you that we are certainly not planning on a times five or a times three from 22 to 23. We're observing that we could be in the same ballpark, but it's kind of, you know, a bit of, maybe not opposed, but, you know, people are, I mean, we are doing a lot of feeds for our clients, and the FID may be more into 2024 for some of those projects. as they continue to navigate and basically also, I must say, to discover this new world, there is uncertainty around sometimes what is considered as being a you know, green or not green. Some of the delegated acts by the EU have, you know, caused some of the clients to say, okay, well, I'm going to wait for clarification before I decide to invest further. So that's what we're experiencing. So it's not, there's no lack of interest, but maybe there would be a A bit of a pause in the acceleration in terms of new orders, but it would only be for me, I would say, an interim pause. The momentum is here, so it may resume into 2024, but we don't see a massive influx or beating $1 billion massively in 2023.

So I'll take the first one.

So good afternoon, James. So in terms of guidance, as I said, I think it's early to revise. We still need just one, three quarters left to go to complete the year. As you know as well, as potentially new projects will come in project delivery, they will be dilutive because we are not recognizing the full margin early on. the increment in project delivery revenue will be slightly dilutive as these projects will come and will start to contribute. As we do also close out projects with a non-mature portfolio, it's not exactly linear, so the performance maybe from one quarter cannot exactly be extrapolated to the next quarter. So that's why being in release of Q1, We are very happy to confirm the guidance. We've obviously printed a very robust Q1, which puts us on track to deliver this guidance, notably in terms of bottom line. We have the way, clearly, the potential to increase revenues, and these dilutive revenues will be able to bring down what I said in my preferred remarks. the margins of project delivery business, notably to a more normative level, which is what I guided, basically, in the mid-term outlook at the end of Q4. So this is, I think, the building blocks for the year are shaping up nicely, but it's too early to really revise guidance at this stage.

Thanks very much, and thanks, Samuel, as well, for your answers. Very helpful. Thank you.

Thank you.

Mr. Arlinte, that was the final question. I turn the conference back to you for the closing remarks.

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