Technip Energies Nv

Hello and welcome to Technip Energy's financial results for the first nine months of 2023. On the call today, our CEO Arnaud Piertan and our CFO Bruno Biber will first present our business and financial highlights, and this will be followed by the outlook. After this, we'll move to Q&A. Before we start, I would encourage you to take note of the forward-looking statements on slide two. I'll now pass the call over to Arnaud.

Thank you, Phil, and welcome everyone to our financial results presentation for the first nine months of 2023. Our solid results here today reflects our team's relentless focus on execution, and we reaffirm our full-year outlook. While the year-over-year revenue comparison is impacted by the Article NG2 project exit, Notwithstanding, we achieved 30 basis points of recurring EBIT margin accretion on revenues of €4.4 billion. Looking at the segments, the third quarter marks an inflection point for project delivery as revenues improved sequentially and margins remained high. As a result of our strategic focus, the TPS segment is delivering outstanding revenue and EBIT growth. After nine months, TPS revenue and EBIT have exceeded that of the full year 2022. Commercial momentum was sustained in TPS with orders keeping pace with a significantly improved top line, supporting the long-term growth trajectory of the segment. Finally, our business outlook remains strong and, as I will discuss later, Our early engagement and tendering levels, notably in LNG and energy transition markets, enables us to selectively add to backlog, which closed the quarter at €18 billion, up approximately 30% versus last year. Turning to operational highlights for the third quarter, where the execution of our world-class portfolio of projects, as well as TPS activities, are yielding strong financial results. This includes the provisional acceptance certificate on corral floating LNG. And in addition, while it is not on the slide, we also received the practical completion certificate on the gas FPSO for the carriage project. Overall, solid progress, which reflects our team's resolute focus on delivery and effective customer engagement. Turning to commercial successes and strategic highlights. We secured several new orders in energy transition markets, including a hydrogen production unit integrating our proprietary SMR technology for BP's Quinana biorefinery in Australia. This will be executed under an EPS commercial model encompassing engineering, procurement, and modular fabrication. In addition, notable services awards were received in sustainable fuels and green hydrogen, And we secured multiple studies for Canopy by 10, our modular carbon capture solution that, in aggregate, represents more than 12 million tons per annum of CO2 capture potential. As you know, Technip Energies is a firm believer in the power of collaboration in achieving the world's climate ambitions. In the quarter, we strengthened our global alliance with LandaJet to integrate our Hummingbird technology in their alcohol-to-jet process to produce sustainable aviation fuel. The world's first commercial plant at Freedom Pines in the U.S. is soon to be commissioned and should lead to LandaJet and TEN working together on many future SAF projects. We also recently broke ground on the pilot plan for recycled polyethylene, RPET, with our partners IBM and Under Armour. The plan, which is scheduled to come on stream in 2024, will serve to validate the technology in view of its commercialization at an industrial scale. Separately, in addition to these partner initiatives, we are investing in R&D with expenditure expected to grow this year by 30% versus 2022, to a level equivalent to 1% of company revenues. Before passing over to Bruno, I do want to make a few comments about a recent article published in the French media regarding our involvement in the Arctic LNG2 project. First, In executing an orderly exit from the Article NG2 project in H1 2023, Technip Energies complied with, in order of priority, international sanctions and its contractual obligations. Second, a contract creates rights and obligations between parties, and for as long as the Article NG2 contract remained in force, Technip Energies was obligated to carry out all contractual activities that were not prohibited by the sanctions. Third, by withdrawing completely from Russia and exiting from the Article NG2 project in an orderly manner, we have in fact gone beyond the strict application of sanctions, halting all activities in Russia

not merely dues covered by sanctions.

Finally, I would point out that throughout the project, Technip Energies has worked with external advisors and the relevant authorities to ensure strict compliance with sanctions that were introduced progressively by the EU, the US, and the UK.

So in summary, I want to reaffirm that

Technip Energies has ceased all activities in Russia. Technip Energies completed its orderly exit from the Arctic Energy 2 project in H1 2023. And, contrary to the misleading statements that appeared recently in the press, Technip Energies has, at all times, fully complied with the applicable sanctions.

I will now pass the call over to Bruno. Thank you, Arnaud, and good afternoon, everyone.

Turning to the highlights of our financial performance for the first nine months of the year. Adjusted revenues of 4.4 billion euros compared to 4.9 billion in the prior year, with a continued ramp-up on Qatar NFE and very strong TPA growth, only partly offsetting the impact of our exit from the Article NG2 contract.

Adjusted recurring EBIT margin increased by 30 basis points to 7.2% in LNG and downstream, as well as growth in TPS volumes and margins.

Adjusted diluted EPS reduced by 8% year-over-year, impacted by a modest reduction in EBIT and non-recurring items, partially offset by higher interest income. Adjusted ordering tech for the first nine months is strong at 9.5 billion, equivalent to a book-to-bill of 2.2, and benefiting from the major NFS award in Q2, and well supported by strong contribution in TPS as well. Finally, in recognition of our differentiated hybrid model and the quality of both our balance sheets and backlogs, our credit rating was upgraded to BBB investment grade by S&P in September. In summary, our people continue to drive forward and execute well under pinning 2023 guidance, which we reaffirmed today.

Turning to our segment reporting and starting with project delivery.

While the year-over-year picture sees materially reduced revenues, principally due to the exit from Arctic Energy II. As I told you last quarter, H1 revenues were expected to reflect the trough for project delivery, and I'm pleased to report sequential growth in the third quarter versus the second. The continued ramp-up of NFE in Qatar and early stage contribution from NFS will support this trajectory. Execution has remained very strong, evidenced by notable strength in margins at 7.8%, up 60 basis points year over year. Due to the recent contract wins and expected awards in the coming period, the mix will trend towards a more balanced blend of early and later stage projects, bringing margins to a more normalized level. Backlog is up over 35% year over year, equivalent to more than three times 2022 segment revenues. This provides excellent forward visibility and supports future revenue growth. We expect to reinforce this outlook through selective additions to backlog, given the positive market backdrop, which Arnaud will address later on. As a reminder, we have set a medium-term framework for 2025 and beyond for project delivery to be at 5 to 6 billion of revenues. We reaffirm this outlook. Given the ramp-up of NFS and likely contributions from future awards, we expect, from the current run rates of close to 4 billion, a somewhat steady growth profile through 2024, with stronger growth materializing in 2025 and then 2026.

Turning to TPS, technology, products, and services.

Momentum remains strong with revenue growth of close to 50% year-over-year, boosted by the strong order momentum we achieved in the last 18 months. Driving this impressive growth is our commercial success across several areas, including technology and property equipment, notably for Ethylen, where we have a leading market position, high services volumes, particularly in sustainable fuel markets, and very high front-end engagement, consulting, and studies across energy transition markets. As a result of these higher volumes and the mixed benefit from the higher technology and product revenues, margins have improved by 50 basis points year-over-year to 9.7%, and close to our medium-term target to reach double digits. Consequently, Adjusted recurring EBIT for the segment has increased by 55% year-over-year. Turning to orders and backlog, we are particularly pleased that order intake has more than kept pace with the fast growth in revenues, and our book-to-bill on a trading 12-month basis remains above 1. In summary, our strategic focus to drive top-line and margin accretion in TPS is yielding strong results, giving us confidence in our ability to reach and sustain our medium-term targets of 2 billion plus revenues and more than 10% margin.

Turning to other key performance items and beginning with the income statement.

Corporate costs of 51 million are in line with our projected full-year outturn of 60 to 65 million. The main item of note impacting the third quarter was cost close to 10 million euros associated with the employee share offering, ESOP, which was a resounding success, as Arnaud will address later. These costs are specific to Q3 and will not be repeated in the fourth quarter. Higher global interest rates are benefiting our net financial income, which at 60 million for the first nine months is providing a tailwind to earnings. Lastly, on the P&L, effective tax rate was 30.1%, and consistent with the top end of the 2023 guidance range. The tax rate in the first nine months is impacted by the P&F settlement. Excluding this, the underlying tax rate for the period is 27.7%. Moving to balance sheet, where the picture is broadly unchanged from the half-year view. The continuous strength of this balance sheet was one of the contributors to our recent credit rating upgrade. As I mentioned in previous earnings calls, the structure of this balance sheet is sustainable. Existing projects in backlog as well as future awards will indeed continue to contribute to the differentiated capital structure. In a period when liquidity, deleveraging or refinancing can be a concern for some, Technip Energy is very much immune to these, and on the contrary, can leverage on these strengths to continue to implement a long-term and balanced capital allocation strategy.

Before passing back to Arnaud, let's consider our cash flows.

Free cash flow on an underlying basis, or excluding working capital, was $356 million, and consistently strong as we executed across our portfolio. Cash conversion from EBIT on the same ex-working capital basis is high, at more than 100%, and trending above what we could consider a normalized conversion owing to the positive impact of interest income. The working capital outflow year-to-date reflects the balance of the portfolio with several projects in the later stage, as well as the cash deconsolidation and transfer relating to our exit from the Arctic Energy 2 project. Working capital trends are likely to improve over the next 12 to 18 months, based on the expected contribution from future awards and milestone payments on recently secured projects. Other items of note include a $30 million capital increase associated with ESOP, and we end the period with more than $3.5 billion of cash and cash equivalents. I'll now turn the call back to Arnaud for the outlook.

Thank you, Bruno.

With our strategy taking hold and low-carbon energy markets maturing, we have seen a positive shift in early engagement and commercial pipeline. Compared to 2021, the volume of feed and pre-feed studies relating to energy transition has doubled, while the proportion of man-hours dedicated to these themes is more than 40% compared to 20% two years ago. Our skills and capabilities are increasingly being recognized across industries. This is evidenced by new customers in industries such as power, aviation, biochemicals, and hydrogen. And these prospects, as these prospects reach final investment decision, this can represent a material diversification, and in the long term, our company will be even more resilient because of this broader customer base. Looking at our opportunity set, the change is striking. While we continue to see LNG playing a prominent part of our positioning and tendering, energy transition markets, excluding LNG, have grown in volume and in value. Some of these new markets have taken longer than expected to shape up, but projects are maturing, and government policy and stimulus is helping. We now see energy transition projects of material size coming into view. By this, I mean those with potential value in excess of 500 million or even 1 billion euro plus. We are very confident that we have the right capabilities, technologies, and partnerships to capture these opportunities and deliver sustainable value for our clients, shareholders, and society. Turning now to LNG, where the near-term outlook remains particularly robust. Today, Technic Energy has more than 50 million tons per annum of LNG capacity under construction across three projects in the Middle East and the Americas. While we are clearly in a good position, industry trends towards more standardization, modularization, and even replication will enable us to do more with the same resource base. We have previously discussed our involvement in around 10 feed studies, and this remains the case, even after the award of Northfield South in Qatar. In aggregate, this pipeline of opportunities equates to more than 75 million tonne per annum of new LNG capacity in either feed and or tendering stage. This excludes any further expansion opportunities in Qatar with a majority of activity centered in three key regions, North America, Africa, and other parts of the Middle East. In addition, approximately 20% of this pipeline is considering SNAP LNG by 10. In summary, the LNG market remains robust, particularly in the near term, and as a leader, we are well positioned to selectively secure important contracts in the coming 12 to 24 months. And in the long term, LNG will continue to provide TEN with a solid revenue base. Moving to plastic circularity, a market where we believe TEN can build a truly differentiated position. Today, the world has a plastic waste problem as the volume of plastic recycled is a mere fraction of that produced. The issue is not simply due to single-use plastic bottles, but also because of apparel and textiles where less than 1% of PET, polyethylene textiles waste, is recycled today. The global market for recycled PET, or RPET, is currently around 12 million tons per annum and largely based on mechanical recycling. This technology is mature, albeit with limitations. and focused primarily on plastic bottles and overused and scarce commodity. Advanced chemical recycling is therefore needed to efficiently process how to recycle PET, such as garments and non-mechanically recyclable plastics. This is where we see the future growth potential. The market drivers are clearly there with vast commitments from major players and consumer preferences for sustainable brands at acceptable prices. And while regulation is in place today for parts of the industry, notably single-use plastic bottles, it looks highly likely to materialize in other areas, including textiles and other industries. Technip Energy brings relevant expertise to become an active agent of circularity through advanced chemical recycling. We have extensive knowledge of materials processing for plastics and polymers. Technology will be important, and we know how to scale them up. However, it is only part of the story. To be successful in this space requires mastery of the whole ecosystem, securing feedstock, offtake, and the ability to demonstrate and certify circularity. And this is where we are now concentrating our efforts by teaming up with a diverse range of partners to develop and promote this ecosystem and deliver the promise of economical plastic and textile fiber recycling. Before closing, let me touch on ESG. We are very pleased with the successful conclusion of our first global employee share ownership program, ESOP. The offering, which was two times oversubscribed, has led to a substantial increase in the number of employees that are now shareholders in Technip Energies, demonstrating the confidence of our people in our strategy and long-term value creation. More broadly, our sustainability journey is increasingly being recognized by ESG rating agencies. This includes a AAA rating with MSCI, as well as notable improvements with other agencies, particularly Sustainalytics. We have an ambitious roadmap and remain committed to continuous improvement on our sustainability path. In closing, the strength of our results for the first nine months allows us to reaffirm our full year outlook. Momentum in TPS remains strong. commercially and strategically, reinforcing segment growth. And we are focused on selectively winning the right projects from an attractive opportunity set to secure our outlook. With that, let's open the line for questions.

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 1 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. The first question is from Guilherme Levy with Morgan Stanley. Please go ahead.

Hi. Good afternoon, everyone. I have two questions, please. The first one related to the Russian article. I was just wondering what are the next steps now that shareholders should have in mind for the coming months? Are there any further steps that the company can take in order to provide more evidence to investors that it was in full compliance with the sanctions? And also, are you going after the newspaper and seeking any sort of compensation from them? And then, second question, if I may. In the past months, we saw a material outflow due to working capital consumption. So, I was just wondering what should we expect for the next quarters and how quickly can we see that coming back? Thank you very much.

Thank you, Guilherme. All right, let's start with Article Energy 2. And I will start with the second part of your question. So beyond the public letter that we have sent to Le Monde, what else can Technip Energy do to respond? We have retained, and based on careful consideration and legal advice, we have issued this statement, followed by a public letter addressed to Le Monde's CEO. We have retained a leading media law expert in France, and as we should, we are reviewing our options. So I will not comment beyond that at the moment. In terms of what the next steps might be, listen, what I can reaffirm here is that I don't want to speculate on what will happen next. We are very confident that we have at all times fully complied with the applicable sanctions. And we are basically now focusing on the business and delivering our plan for the benefit of our shareholders and stakeholders. I will reaffirm beyond the fact that we have complied at all times with the sanctions. I will reaffirm the fact that, you know, we... are not and we have not been under any form of investigation, okay? This is an important point for me to make, by any governmental authorities in respect to our compliance with the international sanctions. And I've restated in my script, in my comment earlier, that we have at all times worked with the relevant authorities in this exit process, so we are extremely confident in our full compliance to the sanctions, wherever they were coming from, U.S., U.K., or the EU. And now I'll pass over to Bruno for your second question.

Thanks, Arnaud. Good afternoon, Guilherme. So on the working capital evolutions this year, year-to-date, we have a slight negative, which comes at the back of more positive in the previous period. This was to be expected given the later stage of projects. In 2003, we had no contribution from NFS. Again, that was something which was expected. So NFS contribution, the future awards which will come in future periods, which we outlined, will help to some extent to reverse this trend. And working capital should be more on in the coming quarters. It can always be lumpy as it is working capital, but it should be more on the positive trend in the coming quarters versus where we are today.

Perfect. Thank you. Operator will tell the next question, please.

The next question is from Kate Somerville from JP Morgan. Please go ahead.

Good afternoon. Thank you for taking my questions. First one is on your pipeline. You have almost 40% in energy transition, which is obviously really significant. Just want to get an idea of when we're going to see these orders really get scale. I think a lot of the orders that we see announced tend to be to 50 million or something like that. How big could this get? And how quickly do you think that could be? And which of the technologies do you think is the most scalable? And then can we just get an update on what you're seeing in terms of the LNG pipeline, especially into next year? Which of the main projects are you looking to tender for? And how is your confidence looking in terms of winning those? Thanks.

Hi, good afternoon, and thanks for the question. So, indeed, we've observed an acceleration in quantity and value for energy transition prospects that will turn into projects eventually. And as you've pointed out, and as I expressed a bit earlier, we see an increase in the value of those projects are likely to be in the half billion or north of a billion. when they reach FID. Obviously, FID is not something we control at Technip Energies. We are here to work alongside our clients in order to differentiate, in a sense, so that they can reach an FID for those projects, and we can bring the projects or the prospect to a price point that is acceptable to the client. The main domains where we will see acceleration at scale and where the space where it's going to be, again, at large scale first, we believe it's around blue hydrogen. There's one of them out there that is public. I have in mind, obviously, the ExxonMobil Baytown blue hydrogen and ammonia in the U.S., There's further blue ammonia projects in the Middle East that are of very significant size. Also, I mean, of larger size than before are carbon capture projects. There's, of course, the BP Net Zero Decide opportunity, which we hope, you know, will reach FID in 2024. But again, this is not something we totally control. But there are similar size carbon capture-related projects in the U.S. in particular. The rest of the space where things are really taking off in a material manner are biofuels and biochemicals. I've spoken particularly about SAFs, Sustainable Aviation Fuels, where the regulation is now in place. The pilots are coming to a point where we will have more clarity with regard to the performance of the solutions, et cetera. As we believe the pilots will perform, this will really open the tab to a much larger volume of opportunity of projects. Those could be of, I would say, a bit of a smaller size, because if I remind you of it, the SAF is not so much a problem of demand. The demand is here. Airlines will want the SAF. The SAF challenge is more about the feedstock, and the feedstock will depend on the jurisdiction in which you are, being from alcohol to jet or municipal waste or whatever. So the infrastructure may be of a slightly smaller size, but you will need many of it and many of them. So that's a very promising pipeline for Technip Energies. regardless of the SAF pathways, therefore, regardless of the feedstock to sustainable aviation fuels where there is definitely a high level of demand. And lastly, we are observing some more meaningful acceleration in terms of the size of the project in green, hydrogen, and power to X. So really, it's a very diverse pipeline of opportunities with a larger scale and the largest size being with blue hydrogen and ammonia and carbon capture, but the rest really following with probably a much greater number of projects of, I would say, a relatively smaller but still very meaningful size because we're not in the tens of millions per unit. For SAF, we are obviously in the hundreds of millions but with many of them to come. In terms of LNG, very rich pipeline, as we indicated, of a really good quality. So you will allow me to stay a little bit discreet with regard to what is it that we are actively pursuing. I think confidentiality in where our focus is is always good in this matter. We like to act that way. But I just want to reiterate that the areas where we are focusing our effort on are about diversification in geography. So it's Africa. It's the US. It's also other parts of the Middle East, so outside of Qatar. And we are concentrating on those projects where we can truly differentiate and which are, I would say, more mature in terms of the solutions that they've selected towards a decarbonization or a low-carbon LNG. So we are extremely active and concentrated on those prospects where the electrification is involved and powered by clean sources of zero-carbon sources of electron electricity. combined with pre-combustion carbon capture. So that's really where our focus is, because we want Technip Energies to be part of, I would say, the highest quality pipeline in terms also of the positive impact that LNG can have on climate, in the sense that LNG is needed So let's focus our energy on those prospects where we can decarbonize upstream of the user, downstream of the well, and upstream of the user. And that's where we are focusing at the moment.

Really helpful. Thank you so much.

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

And good morning. My question relates to your pipeline of LNG opportunities. Are some of them already the SNAP LNG proposal that you launched recently? And I have a question regarding the minority interest just before the bottom line. It's kind of tripled compared to last year. What's in their place?

Thank you. So on the LNG pipeline, yes, as indicated, 20% of the pipeline that we are actively exploring is assuming or is on the basis of our SNAP LNG product and proprietary solution. Two of them are in the U.S. Another one is outside of the U.S., So, clearly, I need to remind you, you know, SNAP-LNG is an investment by Technip Energies to modularize the mid-scale LNG infrastructure. And SNAP-LNG is also designed to be encompassing, like I said, you know, carbon capture solution pre-combustion, so the, you know, on the gas coming out of the well. But SNAP-LNG is also electrified, yeah. So it's a family of solutions with, I would say, relatively larger modules when compared to other solutions out there. But it's a family of solutions for a low-carbon, low-carbon production of energy. So three active tenders on the matter. We'll see where it goes, but clearly very active within Technip Energies at the moment. Bruno, maybe for the second question?

Yes, good afternoon, Jean-Luc. So minority interest, we have a couple of companies, entities, where we have the full control, but we have minority partners, that's in the Americas, that's in Europe. That was also the case for our partners in the late Arctic LNG2 project for the Out of Russia scope. So all of them would contribute to this. And this year, we have more impact coming from the exit of Arctic Energy 2 and our partner sharing that. So that has partly contributed to the evolution, but all the other companies are also contributing to this trend.

Thank you very much.

The next question is from Victoria McCulloch with RBC. Please go ahead.

Good afternoon. Thanks very much for taking questions. So given the strong backlog you're currently working on and the sizeable LNG pipeline, could you talk about how you balance these projects and do you need to grow your engineering footprint materially or should we assume that that's some of the benefit of SNAP LNG as you mentioned before? And apologies if this is slightly overlapping Kate's question, but in terms of the geographical split in terms of the CCUS studies that you talk about, the 12 million tons per annum, could you give us a bit of color? Are these CCUS independently? Are they tied to other work? And roughly, geographically, what does this look like? And finally, can I just check, you said growth in project delivery should be higher from 24 to 25 than it is from 23 to 24. Thanks very much. Thanks, Victoria.

Bruno will take your question number two.

I'll take your last question. I'll do the three questions. So as I said, so today the current run rate of project delivery is about 4 billion, just shy of 3 billion year-to-date Q3. What we've given and provided as a financial framework for what was a medium term, so you can read 2025 and beyond, was 5 to 6 billion. So given the project currently in backlog, that will ramp up notably NFS. But it's a long duration project plus other rewards. What I said is from the current levels and the run rate of close to 4 billion, you would have a somewhat steady growth of top line up to this range where we will reach that in 2025, 2026. That's why we do not see really coming to this range one year early or 18 months early. It was more the medium-term framework, and it is well supported by the backlog and the growth that will come as these projects start to be executed.

Victoria, about the pipeline of LNG opportunities and how we are focusing our effort and resources. So we are concentrating, and I tried to express that through my answer to Kate earlier. We are trying to concentrate and to dedicate our resources on those opportunities, LNG prospects and LNG opportunities that have the merit of being fully compliant, first of all, with our selectivity principles. maybe a reminder of what they are. We must have done the feed before we, for us to engage into, I would say, any form of EPC contracting on LNG, but also other types of projects. So have we done the feed? Yes or no. Do we know, or do we own the technology? Yes or no. Do we know the country? Yes or no. Do we have a known and reliable construction partner? Yes or no. So we are concentrating on those. And also the fifth one, very importantly, you know, and that was, I think this is also, again, the reason why we've been able to exit Article NG2 in the way we have without any net negative impact on the company. We will engage into those contracts when we can be cash flow positive at all time during the full lifecycle of the project. So those are the principles. Then, considering the richness of the pipeline, as expressed to Kate a bit earlier, we are focusing our effort on those opportunities where LNG will be produced, I would say, in a cleaner manner. So that means with carbon capture pre-combustion plus electrification. So that certainly has our priority. We're also prioritizing where the modular approach is favored by the client. And finally, where there is replication, because replication allows us to basically do more with less in terms of the resources. So in order to tackle a very rich LNG pipeline, the fact that the prospects on which we are engaged are for quite a number of them embracing the modularized solution is allowing us actually to consider doing a bit more with the same amount of resources and without having to tap into resources we don't have or to scramble for resources. So clearly, those attributes of the prospect, so cleaner LNG through electrification plus carbon capture, the right, I would say, attributes in terms of fitting our selectivity principle, plus modularization and replication. That's really where we are prioritizing. And obviously, as I expressed a bit earlier, we are looking for diversification or geographical diversification as well. We are enjoying a very strong presence in Qatar and for the future ones, for 2024. it's about other geographies so as to balance a little bit the level of our investment or involvement on those prospects. About carbon capture, and I will insist, the carbon capture, the number of 12 million tons per annum of potential quantities of carbon being captured, this is excluding everything we do on carbon capture on LNG plants. So when We deploy pre-combustion carbon capture solutions on NFE and NFS in Qatar. It's a massive amount of CO2 being captured, but this doesn't fall into the 12 MTPA number that I've communicated. So the carbon capture through LNG plants comes in addition to the 12 MTPA. Very interestingly, and we are deploying pilots at the moment around the world, so they are in Europe, northern Europe, and also in the Americas, interestingly. So the geographical spread for carbon capture is, and where we see acceleration, very clearly North America and various parts of Europe.

Thanks very much. That's really helpful.

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

Good afternoon, everyone. Mick here. Obviously, look at your backlog. It's very healthy. I know you had a quiet quarter, but there's been some mega rewards elsewhere to some of your competitors. So I've never seen backlogs like it across the space. Can you just talk about what you're seeing in the supply chain, if there's any areas of concern with this volume of workload that's going through the system? Hi, Mick. Yeah, good afternoon.

Supply chain, I would say that there are pockets in particular on rotating equipment, for example, long lead items where we might be sensing a bit of a bottleneck and I would say the lead times are not getting any shorter. That's a reality. For the rest, on the bulk, logistics, et cetera, we've seen a fair level of normalization across the board. So we might not be everywhere totally back to pre-COVID situation, but we are actually trending towards a pre-pandemic situation. So there are a few bottlenecks, but they are not across the board at this moment, certainly not across the board. One point of attention, and I was mentioning that in my answer to Victoria, in a region like North America or the Middle East in particular, access to construction resources is an area of attention for us. This is why we are not running crazily after every single prospect. We are being selective. We are going after what we consider the good ones for Technip Energies. And they have to demonstrate the attributes that I listed a bit earlier. And I'll insist on the fact that for us to engage, and you have seen that on the NFS project in Qatar, we have taken a construction company as a joint venture partner. There's a reason to that. Being able to rely on a construction partner that has, I would say, the depth of resources that allows you to accelerate, mobilize more, or demobilize depending on the needs for acceleration or not, or keeping the pace of the workfront is crucial. And that is actually one of the most critical points of attention in selecting the what and the where and with whom. as we are chasing some of those prospects.

Okay, thank you. Obviously, you're being selective, and I think all your peers are saying they're being selective at the moment. Do you think your clients have realized that the market is quite tight, and what do you think you can get out of your clients, given the ball seems to be in your court at the moment?

At all time, Mick, as you know, you've known us and you know the space so well. We need to maintain a bit of, you know, responsible behavior. Because the projects, they obviously do exist through our clients wanting to, you know, develop or engage into a development. But they also exist through the likes of us making those projects viable, i.e., finding the right price point. for our clients so that there's no hesitation on the final investment decision. So we need to act responsibly at all time. There are certainly a limit, I would say, to even when it's a bit less competitive and it's a more positive environment, there's, I would say, always a limit to how far we can go. The important for us is to be able to lower our cost base through differentiation. and therefore enjoy a healthier margin while giving the opportunity or not endangering, I would say, the viability of the project. What is interesting to observe at the moment is that it seems that we are in a situation where our clients are able to take investment decisions at, I would say, a low breakeven, therefore a price point that is acceptable to them, while allowing for the supply chain, the likes of us, and maybe our peers to make a decent living. So it's, I would say, a bit of a particularity of the space we've entered at the moment. Obviously, as far as our technique is concerned, we hope it's going to last forever. But we must and we will continue to act responsibly because it's equally as important to be profitable than to allow for the projects to fly. Without FID, there's no projects, and therefore, we don't have much revenue to report.

Thank you. The next question is from Kate of Sullivan with CT. Please go ahead. Hi.

Thanks for taking my questions. Just a couple left. On downstream, I guess we've seen chemicals margins have been very weak this year. Could you provide some color on when you see this starting to turn and maybe pick up an activity, any potential awards downstream in your pipeline? And just to follow up to the last question, I mean, you've said differently this time on Northfield South. You've obviously got a construction company as a JV partner, and you've started purchasing your equipment. Is there any other ways that you're approaching this in a different way to previous LNG projects, particularly in the Middle East. Thanks.

Hi, Kate. Good afternoon. Starting with your question number two so that we can continue on that stream of topic. At the moment, very clearly, the prospects we are pursuing are or for all the prospects we are pursuing, we are considering ways to de-risk the construction part of it in the sense of access or securing access to construction resources. So if you see us engage into a prospect, you must assume that we are doing so while having secured the construction pattern. we are securing the construction partner is not something that we will worry about post-award. It's something that we worry about pre-award and actually during the early engagement phase. And I'm talking firm commitments. Another way to obviously limit the risk around access to construction resources is to increase the amount of modularization that we can propose. I mentioned the BP project for Quinana in Australia. And I want to stay away from the acronym, but when you, in the future, will read about EPF, so Engineering Procurement and Fabrication at Technip Energies, it means that the construction and the modularization, the building, I mean, the erection of the modules, the fabrication of the modules will take place away from It's a country of destination where you might be facing scarcity of construction resources. North America, the UK, parts of Europe, etc. And potentially the Middle East. When you look at the potential of the number of prospects in the Middle East, between, of course, Qatar, but also UAE, the Kingdom of Saudi Arabia, et cetera. You're talking hundreds and thousands of workers and construction workers being needed. This, obviously, will have an impact on the ability to, you know, the likes of us and our peers to mobilize. This is why the approach we're taking is always to have the construction resources secured pre-award or pre-FID. That's a condition for us to be involved in a prospect. If that means bringing the construction partner for as long as that partner has the financial strength and surface to sustain that, to bring them at the JV level, then why not? And that's what we've done with Qatar, and I think it's so far very successful, and we see that when we press the pedal, the partner is responding really well. And to be able to stand on solid ground and to know that there is actually a juice coming when we need to press on the pedal, it's one, reassuring, but two, absolutely necessary in order to be able to have this conversation with you guys on a quarterly basis and with our clients on the predictability on the outcome and sustained progress in the projects, which we are enjoying at the moment in Qatar, for example. Moving on to downstream, a bit of a slow year this year on downstream after a very strong year on ethylene last year. So the potential for ethylene will again come in 2024. We have very strong building blocks through licensing, but also equipment and projects for more ethylene prospects 2024 and ammonia as well. So clearly two topics to watch. I think we have very strong building blocks for potential awards at scale in 2024 on that front. And maybe of smaller scale but not lesser importance, and I'm going to classify that as being downstream, is everything we will do in biofuels, SAFs, and biochemicals. because clearly we will see the world needs it. Like I said, the demand for SAF is there, and we will see an acceleration as the, I would say, full-scale pilots are coming to operation and completion, and it will just validate the path forward on SAF, and that will fall, if I may say, in the form of the downstream in opposition to upstream part of the business, and the potential there is vast.

Great, thank you. For any further questions, please press star N1 on your telephone. The next question is from Daniel Thompson with BNP Paribas. Please go ahead.

Hi, good afternoon. Maybe just a follow-up on the low-carbon opportunity set. Arno, I know you don't control the timing of your clients' FID, but I was just wondering are you seeing any significant delays from clients in the time from pre-feed and feed to FID on some of the projects in your low-carbon pipeline because of higher interest rates or stress in certain areas of the supply chain? And could you remind us what the typical lead time is from feed to FID on a larger sort of 500 million to 1 billion low-carbon project like you referenced? I'm just trying to understand when to expect some of these larger known feed studies to turn into projects and if the macro environment has changed these timelines at all. Thank you.

Thanks, Dan.

I think I will categorize the opportunity set into two buckets or two different categories. You will have some of the very mature players, our traditional customers, IOCs, not to name them, wanting to invest in order to decarbonize their asset base and to progress with their ESG roadmap and decarbonization agenda. Those guys, when they decide to engage into a feed, a pre-feed and then a feed, and typically, to answer your question, between the start of a feed to FID, it's 18 to 24 months. It's a bit the same as for LNG, maybe a bit shorter because some of the projects might be a bit smaller, but you're still in the space of 18 to 24 months. So when it is for an established player, that is determined to deliver on these decarbonization and low carbon agenda or net zero trajectory, there are not that many delays. It's actually the hesitation is more, if I may say, if there's a delay, it's okay. When do we launch the feed or the pre-feed or the feed? But once the feed is launched, I would say we don't have any indication at the moment to suggest that there would be delays to an FID with this breed of players. And that space actually provides a very vast opportunity set alone. Blue hydrogen to decarbonize is needed in multiple geographies. Harmonia, which, you know, as a reminder, is also fertilizers, is needed from the U.S. to the Middle East to India at large scale. So, you know, with the more mature players, once the feed is awarded, Usually, the FID follows in the, I would say, traditional timeframe, 18 to 24 months. Now, if you are dealing with a player that is a bit new in the space that is, if you take aviation or other type of industries where the molecule handling is not so much their core business, they may be taking more time for pre-feed and feed, scout to scout, and understand to use that in order to understand better. And that's where we, I mean, the ecosystem and understand the cost of operation, the OPEX afterwards, the do's and don'ts, and navigate, I would say, also the subsidies and the rest. And that's where we work with them and alongside with them to assist them with maturing their understanding. There it may take a bit, the dynamic is different because they would jump quicker into pre-feed or feed because they need to understand and scout and try to grow and mature their knowledge, if I may say. So unlike the IOCs who might hesitate a bit longer, but once the feed is launched, then there's less uncertainty towards the FID. with the other type of players that might jump quicker into pre-feed in order to scout and to understand, and it might take a bit longer then to reach FID because they need to grab or gather, I would say, a more mature understanding of the do's and don'ts and the subsidies and the true cost and also how to operate the plant afterwards. So that's where we're here to assist.

Okay, that's clear. Thanks, René.

The final question is from Bertrand Hody with Kepler Shiver. Please go ahead.

Yes, thank you for taking my question too, if I may. The first one is coming back on early remarks by Bruno on project delivery revenues phasing. Given your backlog and opportunities, in my view, you will likely get ECD to the 5.5 billion euro in 2025, but When, Bruno, you mentioned a steady growth in project delivery from the 4 billion euro run rate in 2023, should we understand project delivery, I would say, early guidance into 2024 at around 4.7, 4.8 billion? That was my first question. My second question, This is the other way around on TPS. 2 billion euro was your aspiration in 2025. You will get very, very close to even above 1.9 billion as early as in 2023. How should we think about 2025 or 2024 for TPS? Thank you.

Okay, good afternoon, Bertrand. I'll take the first one and maybe end off to Arnaud for the second on TPS and the broader outlook. It's a bit early for 2024 guidance, although we've provided the financial framework, so I won't go into the three-digit details for post-5 on when we would be looking at it.

So if I take a step back, you know, today,

Range of five to six. We clearly see the venue there. So that's, let's say, a good ghost profile from where we stand today to 2025, 2026 now. How we get there depends on the sequence. Arnaud was mentioning some of the long lead items. So a few moving parts there. which is, you know, difficult for where we stand today to put an exact figure. But yes, very confident on the growth profile for project from where we stand today. Very confident on the capacity to be sustainable in this 5 to 6 range from some period, you know, post 2025. Now, how we get there, we'll see a few moving parts and we'll obviously provide more updates as we release the guidance early next year.

So, Bertrand, about your question related to TPS. So, indeed, we are extremely pleased to see TPS accelerating the way it has. And we're getting closer to the 2 billion euro revenue mark that we had set for ourselves as part of the framework. that we communicated some months ago. Yes, it looks like we are trying to be on mark a bit quicker than we had imagined, which is extremely good and which is a tribute to, I would say, the organization and the team. We defined a strategy, we gave a direction to the organization, they are delivering. Everyone is understanding, and it takes quite a bit of effort to steer an organization that has a very, very strong project history and to demonstrate that with what we have as Technip Energies, there are multiple ways of making business and multiple business models possible, project delivery and others which are within TPS. So, but they are basically delivering and that's extremely positive. And I think I just want to thank the teams here because really they are demonstrating that they are open-minded and they are able to embrace and promote different type of solutions than the traditional, I would say, lump sum EPC model. So great. The important will be to sustain that revenue level at 2 billion. because we don't want it to be just a spike and then a crash. No, we want to be sustained there. So first of all, that's the first objective, be rigid and sustained. And then the acceleration beyond that will be, I think, through the success that is yet to be proven of some of the new offerings that we've released. I shall remind you of what will populate TPS more technologies and more products as well in addition to the consultant