Koninklijke Vopak Uns/Adr

Hello and welcome to the Royal WAPAC full year 2023 update. Throughout the call, all participants will be in a listen-only mode. And afterward, there will be a Q&A session. This call is being recorded. I'm pleased to present Patjona Topciu, Head of Investor Relations. Please go ahead with your meeting.

Good morning, everyone, and welcome to our full year 2023 results call. My name is Patjona Topciu, Head of IAC. Today, our CEO, Dick Richelle, and CFO, Mikhail Yeltsin, will guide you through our latest results. Our CEO, Fritz Eldring, is here as well and will be available for questions during the Q&A session. We will refer to the full year 2023 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for the Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer to the disclaimer content of the forward-looking statement, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to the question during the Q&A. With that, I would like to turn over the call to Dick.

Thank you very much, Fatjana, and a very good morning to all of you joining us in the call. First of all, I'd like to share a few words on Frits, Frits Ullering. Frits has been a familiar face for many of you in the call, and therefore I'd like to take a moment to share our utmost appreciation for his valuable and significant contributions in the many areas of OPAC in the past 14 years. As announced in late December, Frits will step down as ED member per April of this year, and we will miss Frits as a colleague, but most of all as a friend of OPAC. Now moving on to slide number four and the key highlights for 23. Throughout the year, the need for our services was strong across the portfolio, and we continued to serve our customers well. We delivered on a strategy to improve our financial and sustainability performance, to grow our base in industrial and gas terminals, and to accelerate towards new energies and sustainable feedstocks. We reported improved financial results by growing our EBITDA by 77 million to 964 million, which is a record result for VOPAC. Also, our operating cash return improved significantly, from 11.4% last year to 14% at the end of 2023. Next to financial improvements, also on sustainability, we reported strong performance. On safety, our first priority, we continued to further improve our performance on personal and process safety. In 2023, we executed some key divestments in line with our strategy to rationalize the portfolio. The three chemical terminals in the Netherlands and the Savannah terminal in the U.S. were successfully divested. Our strong business performance and divestment proceeds led us to increase our shareholder return with a share buyback program of up to €300 million and a proposed dividend of €1.50 per share, a 15% increase compared to last year. Now let's take a look at growth. We're solidifying a leading position with investments in Singapore, China and the US, while at the same time expanding our footprint in gas with LPG and LNG. In the Netherlands, we've acquired 50% of the shares in Eames Energy Terminal, the north of the Netherlands. Also, Gate in Rotterdam keeps fulfilling an important role in the energy security of Northwest Europe and started construction of the fourth tank in 2023. Now let's move to accelerating towards new energies and sustainable feedstocks. We've commissioned repurposed infrastructure in the Port of LA related to low-carbon transportation fuels. Also in Singapore, infrastructure was repurposed for blending biofuels into marine fuels. In Brazil, a market with strong growth in low-carbon fuels, we are repurposing capacity for feedstock for low-carbon transportation fuels. And lastly, we entered the electricity storage sector in the U.S. We will own and operate two standalone battery energy storage systems close to Houston, which I will explain more later. Moving on to some of the dynamics in the key markets in which we operate and how they impact the demand for our infrastructure services. Starting with gas, mild winter and high storage inventories has led to lower LNG demand in Europe and Asia. However, long-term impact for us is limited due to the take-or-pay contract structure. While LPG markets were positive as residential and petrochemical demand continues to increase in the main end markets, the other LNG and LPG terminals showed a stable performance. Now move on to new energies and sustainable feedstocks. Increasing demand for low-carbon fuels and feedstock solutions is seen as companies strive to lower their emissions. We see growing momentum for low-carbon hydrogen, CCS, and renewables, driven by government policies. We will continue to invest in repurposing our infrastructure to cater for low-carbon fuels and feedstock, as we did in the US, the Netherlands, and Singapore last year. Move on to the energy markets. We served through oil terminals. The fundamentals of the market remain healthy, with high demand for oil products driven mainly by non-OECD demand, while geopolitical tension drove price volatility. These market dynamics support favorable demand for our storage services. All distribution terminals serving local growing markets had a stable performance. Looking at the manufacturing markets, we served through our industrial and chemical terminals. Chemical production continued to be weak in 2023, as soft demand and elevated interest rates prompted destocking. This is expected to lead to some pressure on occupancy in distribution terminals in China, Singapore and Belgium. On the industrial side, we see lower activity levels. However, it has limited impact due to the long-term stable nature of our contracts. Let me take you through the different elements of our business performance in more detail. Full year 2022 with an EBITDA of €887 million as a starting point. We experienced a negative currency translation effect compared to last year of €23 million. The divestment of a Savannah terminal and the three chemical terminals in Rotterdam had a positive EBITDA impact of 6 million euros. That's mainly as a result of the relatively strong performance of the three chemical terminals in Rotterdam compared to 22. The oil markets have been favorable in 23. High occupancy rates and contract renewals drove growth in EBITDA from an oil portfolio across the globe, especially in Rotterdam and Singapore. In regards to chemical markets, during 2023, we have seen an overall growing storage demand across the portfolio. Next to the increased need for import of chemicals, mainly in Europe, indexation of contracts is partially compensating the rising cost and has supported the revenue increase. In gas markets, we see the LNG market is back to normalized levels, as the available capacity is meeting the market demand and our LNG and LPG terminals are performing their role in local energy systems. So positive market trends led to a solid proportional occupancy of 91%, mainly due to the positive demand in the business units Asia and Middle East, Singapore and the Netherlands. When comparing our cost base to last year, we see an increase of 50 million, mainly driven by high personnel costs and other operating expenses. Finally, we've delivered on our growth investments, Both projects and acquisitions have contributed €11 million in 2023. This all results in a 9% EBITDA growth to €964 million year over year, supported by, as I said, high occupancy rates and good commercial capabilities to pass on indexation. As mentioned before, next to improving our financial portfolio, we kept focus on improving our sustainability performance in 2023. Our sustainability ambitions are translated into several KPIs that track our progress on environmental, social, and governance topics. The record-best personal safety performance and consistently good process safety performance are something which makes me proud, and this will remain our first priority. With regards to our emissions, we were able to further decrease our scope 1 and 2 CO2 emissions. Compared to 22, with 16%, compared to our baseline year 21, even with 25%. In Colombia, our LNG terminal spec will invest around 20 million euro to reduce the terminal CO2 emissions by around 50%. The number of women in senior management roles was stable in 23 compared to 22, and we keep our target of 25% women in senior positions by 2025. We drive value through attractive growth investments and rationalizing the existing portfolio. In 23, we executed some strategic divestments in mature and declining markets, mainly chemicals. This led to overall cash proceeds of more than 500 million for relatively low cash-generating assets. This will be allocated to our strategic ambition to invest 1 billion in growth of gas and industrial terminals and 1 billion euro in accelerating towards new energies and sustainable feedstocks by 2030. Since June 22, when we announced the strategic priorities, we have invested 480 million euro in gas and industrial and new energy infrastructure. These investments supported by a strong balance sheet, can be done at attractive multiples of anywhere between 4 to 8 times invested capital to EBITDA. Now let's move on to how we are delivering in China. Over the last 15 years, we built a strong footprint in China, a journey where we have reduced exposure to chemical and oil distribution terminals and have grown our core in industrial terminals, backed by long-term contracts. Today, almost 10% of our proportional EBITDA comes from China and North Asia, and 70% of the business unit's revenues come from contracts longer than 10 years, with mainly guaranteed revenues. Over the years, some strategic divestments were done, mainly in the oil and chemical distribution terminals, as you can see here. We started with this already years ago, and today's announcement of Lanshan is part of this portfolio transformation journey. At the same time, We invested heavily in industrial and gas terminal infrastructure, for example in Haiteng, Qingzhou and Chaojing, all industrial terminals. A total of 690,000 cubic meters of industrial storage capacity is currently under construction, planned to be commissioned later this year and early 2025. The main project in Weizhou for ExxonMobil's new chemical complex is expected to be commissioned later this year. This portfolio of terminals in China protects us relatively well against weak local chemical markets the region is facing at the moment. Next to China, we also strongly believe in India as a fast-growing market. Together with Aegis, our joint venture partner, we are growing rapidly here. Our joint venture, which was established in 22, with a capacity of 1.3 million cubic meters in five strategic locations. storing many liquid products and LPG, supporting the economic growth and making alternative, lower carbon fuels available throughout the country. Today, we announce an expansion in Mumbai, a new strategic location on the West Coast, and well connected to the hinterland. We're going to invest around 10 million euro in a 100,000 cubic meter storage, newly built facility, which is planned to come live in the fourth quarter of 2024. Together with our previously announced expansion projects in Pipavav, Mangalore and Haldia, our footprint will grow to 1.8 million cubic meters by 2025, an almost 40% increase compared to 2022. We deliver on our strategic commitment to grow our base in industrial and gas terminals in the U.S., Our joint venture with BlackRock in Freeport will invest a total amount of approximately 37 million euro to repurpose and build new capacity. This is underpinned by a long-term agreement and plan to become operational in the second half of 2025. Also on the west coast of Canada, we have a highly strategic opportunity for VOPAC, which would enhance Canada and Asian market connectivity and link LPG oversupply in Western Canada to increasing Asian demand. Site-clearing work has started, and a final investment decision is expected within the first six months of 2024. With regards to LNG, we've successfully expanded in the Netherlands by completing the acquisition of Eames Energy Terminal in the north, and we started the construction of the fourth tank at gate. These developments are supporting energy security in Northwest Europe. With regards to our third strategic pillar, accelerate towards new energy and sustainable feedstocks, we see more and more momentum. After repurposing capacity in the US, the Netherlands, and Singapore, we also announced today a project in Brazil. 30,000 cubic meters will be repurposed to support the production of renewable road and jet fuel. The capacity is underpinned by long-term commercial agreement with attractive cash return, and we are committed well positioned to be the market leader in the Brazilian renewable feedstock market. In Vlaardingen, the Netherlands, we announced today another investment of 10 million euro to repurpose an additional 30,000 cube for sustainable biofuel feedstock. Not only in the sustainable fuels and feedstock, but also in our other areas of focus of hydrogen, CO2 and long duration energy storage, we see momentum building. In Antwerp, we're making good progress in cleaning up our new strategic plot of land, to redevelop the site to support new energy infrastructure investments. And in the field of electricity storage, today we announced an investment of around 9 million euro in two battery systems, close to Houston, with a capacity of 10 and 20 MWh, which will become operational already in Q1 and Q4 of this year. This is a development we are very excited about. It fits well in our strategy to accelerate the investment for infrastructure in new energies and sustainable feedstocks. We improved our financial performance over the last two years by rationalizing our portfolio and investing in growth projects. Our focus on a healthy cash return increased our earnings per share by approximately 40% compared to last year. Furthermore, our balance sheet was robust at a net debt to EBITDA ratio of 1.99 times, while our management range is 2.5 to 3 times net debt to EBITDA. In addition to creating value through growth investments, which is our priority, we are returning meaningful value to our shareholders. Successful execution of our strategy has led to a robust financial position, which allows us to raise the dividend to €1.50 per share, a 50% increase compared to 22, and the start of a share buyback program of up to €300 million. To summarize, we delivered with a proven track record of execution. We reported strong full year 23 financial results, and actively managed our portfolio. We continue to create connections through our well-diversified global portfolio by growing our base in industrial and gas terminals with expansions in China, US, India and the Netherlands. Our well-diversified terminal portfolio is supporting energy security and energy transition. We drive progress as we capture the opportunities of the energy transition. As a result of all of the above, we create and return value to our shareholders. With that, I want to hand it over to our CFO, Michiel, who will give you more insights on the financial aspects of the year.

Michiel. Thank you, Dick, and good morning to everyone in the call from my side as well. Let me take you through our financials in a bit more detail. I would like to start with the performance delivery that we have achieved during the year 23. I will detail how we are growing our earnings to create value for our shareholders. And then I will elaborate on our strong, stable and long-term cash flows due to our portfolio transformation because our portfolio is changing over time. After that, I will focus on the disciplined capital allocation strategy. And then last but not least, I would like to also highlight the strong long-term fundamentals we have as a company. To start off with the financial performance for the full year 2023 compared to last year. Reported and proportional EBITDA grew by 9% and 8% respectively due to the favorable storage demand indicators in all markets, which more than compensated the divestment impact. This was underpinned by a solid occupancy rate of 91% compared to 88% in 2022. This results in a higher operating cash return of 14%, significantly higher than 11.4% we had last year, driven by strong business performance and high cash generating ability of our portfolio. The strong financial performance during 2023 led to increased earnings per share of €3.29, an increase of 40% year-on-year. The growth was driven by improved business performance and higher net profit. Total net debt to EBITDA ratio came down to 1.99 times. This reduced leverage was driven by the cash generation of the business as well as the cash proceeds from our divestments. Strong financial results and the solid balance sheet position led us to propose a dividend to our shareholders of €1.50 per share. which is 15% higher than 2022. This increased dividend is in line with our stable to progressive dividend policy and is underpinned by our commitment to create and distribute meaningful value to our shareholders. Now moving into our quarterly performance. Occupancy remained unchanged during Q4 23 compared to Q3 23. due to the solid occupancy in Asia and Middle East, Singapore and the Netherlands business units. An EBITDA of €229 million was €11 million lower compared to the third quarter, driven mainly by the divestment impact of the three chemical terminals in Rotterdam of €6 million and €7 million one-off cost recorded during the quarter. A closer look at the performance of the business units, which shows a continuing trend of improvement across the regions. The proportional EBITDA performance during the year was impacted by a negative currency translation of €29 million. The divestment impact had a net positive impact as the performance of the three chemical terminals in Rotterdam was much stronger during 2023 compared to 2022. During 2023, all business units showed organic growth as we captured market opportunities and storage demand indicators were positive. As of the 31st December 2023, our PT2SB joint venture in Malaysia reported a net accounts receivable balance for contractually delivered services of around €270 million on a 100% basis. In January 2024, 217 million euro was received in respect of the net accounts receivable balances. Mitigating the situation going forward is a key priority for PT2SB and its shareholders. The performance of the Netherlands was mainly driven by a strong performance of the energy markets in both oil and energy. The Singapore performance was driven mainly by positive market conditions in the oil markets. As mentioned by Dick, we are investing in growing our footprint in gas and industrial terminals. These investments are done in a majority of the cases via joint ventures. So to fully reflect their contribution to the business performance, it is important to capture growth project contribution in our proportional EBITDA. The proportional EBITDA contribution of growth projects in the full year 23 was 24 million euros. Moving on to the cash flow generation. In this slide, we are giving some more detail regarding the proportional EBITDA for the different terminal types in which we operate. We see growth across all terminal types. The market conditions were favorable during the year translated in the market opportunities we captured and the increased occupancy. Gas markets like LNG settled in 23 after the disruption caused by the Russia-Ukraine war in 22. Lower activity level in industrial terminals, however, limited impact due to long-term stable nature of contracts. Vegetable oils and biofuels not being a segment on their own and mainly part of chemical terminals is our fastest growing product in the mix. The revenues from biofuels and fetchels increased by 20% in 2023 compared to 2022. Oil markets were dominated by volatility due to geopolitical tensions, resulting in an increased need for storage to ensure security of supply. This is reflected by a 10% growth year-on-year for oil hubs and distribution terminals. Proportional EBITDA overall improved by 8%. due to increased occupancy coupled with portfolio indexation abilities and effective commercial management. Our cash flow generation continued to be strong in 23, driven by a positive business performance. We generated 900 million Euro, which is a split between joint venture dividends as well as cash generated by the group companies. After tax payments, derivatives impact and other cash flow from investing and financing, activities, we add a €715 million cash flow from operations. This is the available cash flow that the company can allocate towards operating CapEx, which is our license to operate, growth CapEx, and dividend paid to our shareholders. The cash generation of the company is solid, and as you can see, the business can sell fund it needs for operating CapEx as 28% of the cash generation goes towards it. We have distributed 22% to our shareholders in the form of dividend, which is expected to increase next year due to share buyback and dividend increase. As well, we have allocated 23% of our cash towards our growth ambition. So going forward, obviously it is very important for us to maintain this healthy cash flow overview to make sure that we are, to a large extent, self-sufficient and are not rapidly increasing our leverage. Our contract portfolio is well diversified, which leads to a stable EBITDA margin. We increased our EBITDA margin from 54% to 56%, and that's driven by good cost management. In addition, we have solid contracts that reflect the high energy prices, as well as indexation based on the inflation rates with our customers. Over the years, we have taken major steps to shift the contract duration towards long-term commercial agreements. In 2015, a quarter of our proportional revenue was coming from contracts less than a year. Now we have just 10% of our proportional revenue coming from contracts less than one year, and 35% of the contracts longer than 10 years. In addition to that, more than 70% of our revenues can be adjusted for inflation, which differs market by market. On the energy costs, we are actively in managing our energy costs. For example, in the Netherlands, 50% of the energy costs are locked in for 2024, and for the remainder, we are protected via energy surcharges to our customers. And then obviously, we have also simplified our organizational structure, which we have already mentioned before. Going forward, there will be a continuous focusing Focus on making sure that we run a very efficient and effective organizational structure to support our business. On to the growth. The deployment of growth CapEx towards our strategic priorities is going well. We have invested €131 million to improve the performance of our portfolio since Capital Markets Day in June 2022. We have allocated 429 million euros to grow our footprint in gas and industrial terminals. In India, we announced plans to proceed with expansion projects together with our joint venture partner, Aegis, in existing locations and have also created a new location in Mumbai. This will strengthen our leading position in this fast-developing country. In the United States, we are expanding our industrial terminal, the FIAT terminal in Freeport, by repurposing and building capacity. The total investment is 37 million euro, while our share is 5 million euro due to the debt and equity financing structure in place. At the same time, we are expanding open access LNG capacity in the Netherlands to support the energy security by building gates Gates' fourth tank and completing the acquisition of our Ames energy terminal in which we presently own 50%. Accelerating towards new energies and sustainable feedstock is progressing well and in line with our expectations. We are confident in our project funnel in new energies and foresee that the material capital allocation will be after 2025 as we already indicated when the framework was presented initially. As mentioned by Dick, we are pleased to have made the first investment and marking our first entry into the electricity storage in the United States, expected to be operational in the course of 2024. Then some highlights on the stable, strong, and long-term cash flows. The focus on the cash flow has led to an operating cash return improvement of 2.6 percentage points to 14%. We are focused on healthy dividend distributions during 2023. We upstreamed 82% of our net income from joint ventures. There is often a timing difference between declaring and receiving the dividend. On our growth context, since June 2022, we have invested 480 million euro in accretive and attractive investments, and we have rationalized our portfolio by selling nine assets in the last two years. Our disciplined capital allocation strategy remains unchanged. Our first priority is a robust balance sheet with a healthy leverage ratio between 2.5 and 3 times net debt to EBITDA. We are returning meaningful value to shareholders by increasing the annual dividend by 15% in line with our stable to progressive dividend policy, as well as announcing a share buyback program of up to 300 million euros. This is underpinned by our commitment to create and return value to shareholders once the financial and balance sheet conditions are right. And then last but not least, we see good opportunities, as I mentioned, to invest in attractive and accretive growth projects between four and eight times EBITDA multiple. And given the fact that the leverage has come down Quite a bit, there is more room to grow the company going forward without compromising on the balance sheet and without compromising on our stable to progressive dividend policy. I would like to give a brief overview on what drives the Shell the return increase, which is solid earnings, business performance, and a robust balance sheet. As you can see from these graphs, over the last three years, earnings per share has increased by 38%. Proportional EBITDA has increased by 15% and proportional operating cash flow has increased by 44%, while the proportional debt has decreased by 10% over the same period. Proportional debt to EBITDA with a low ratio of three times proves that we are not pushing down debt into joint ventures for the benefit of the ratio at the holding level. And it also proves that our maximum upstream dividend policy for the joint ventures does not increase leverage in joint ventures and the low leverage in joint ventures create also ample financing room for the joint ventures to grow. As mentioned before, we are committed to create and return meaningful value to our shareholders. As for our dividend policy, we aim to maintain or grow our annual dividends subject to market conditions. For this year, we are proposing an annual dividend of €1.50, which represents a 15% increase compared to 2022. The dividend increase is based on the strong cash generation of the business and the positive outlook that we have on cash return. In addition to the dividend, we have launched today a share buyback program of up to €300 million, which we will run during 2024. Subject to market and business conditions, we constantly review the most attractive way for shareholders to return value to them. Before I share some details on the full year 24 outlook, I would like to explain the divestment impact for 24. During 23, we have material divestments that have an impact on our EBITDA and proportional EBITDA going forward. The divestment impact on reported and proportional EBITDA is 76 million euros. However, the impact on cash flow is very limited as we have positioned the portfolio towards healthy cash returns by divesting mature assets with limited contributions on cash flow. This brings me to the outlook for 2024. Subject to market conditions and currency exchange, we guide a proportional EBITDA ranging from 1.12 to 1.17 billion euros. on a consolidated basis that is equal to 880 to 920 million euro EBITDA. As you can see, we expect that the joint venture contribution will more than offset the impact of divestments in proportional EBITDA. The outlook for consolidated growth CapEx in line with our strategic commitments of investing 2 times 1 billion euro is expected to be around 300 million euro for 2024. For consolidated operating capex, this is around 230 million euro, reflecting divestments such as the three terminals in Rotterdam, leading to this lower cash out compared to 2023. On the longer term, no changes today. We remain committed to an operating cash return of above 12% on the long run, which we believe is a healthy return for our type of business. The commitment of investing one billion in both growing our core in industrial and gas terminals and accelerating towards new energies and feedstocks remains unchanged. The leverage ratio of 2.5 to three times net debt to EBITDA will be kept as a long-term guidance. Lastly, the stable to progressive dividend policy remains unchanged. Bringing this all together, we delivered on our financial performance We actively manage our portfolio and our assets generate strong, stable, and long-term cash flows. With our well-diversified portfolio in terms of the products we store and in the geographies we operate, we are able to create connections. Hence, we are driving progress by our capabilities to capture new opportunities and grow investments. These factors combined create value to our shareholders. This concludes my remarks in this presentation. and I would like to hand it back to Dick for the Q&A.

Thanks, Michiel. With that, I would like the operator to please open the line for Q&A.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, please press star 2. Again, please press star 1 to ask a question. We will pause for just a moment to allow you to signal. We will now take our first question from Thijs Bekelefer from IBM Ambro. Please go ahead.

Yeah, good morning. All congratulations on the results and the Outlook 2024. Just to be sure, did I understand it correctly? You received $217 million out of Malaysia in January?

Correct.

Okay. Yes.

Maybe but that's only our share of it so it's a joint venture of course but the joint venture received the money but that has been further distributed to us as a shareholder so that we have 25% in the joint venture so that so we didn't receive the 270 million but we received our part of the 270 million.

Which is then 25% of that.

Yeah.

So we received just over 5 million. Yeah. Okay. Understood. Then the second question is, well, good to see you are structurally lifting the dividends to a level which suits you. Further, good to see you make use of financial markets to do quite large share buyback. Given your expectations for 2024 on cash flow returns, CapEx, et cetera, what kind of leverage are you expecting by end of this year then?

I would expect it's a bit depending on certain developments and maybe that is related to distributions from joint ventures. On the cash side, I would expect it's going to be somewhere between 2.2 and 2.5 times. So still at the lower end of the 2.5 to 3 times. And that's also... I think still a good position to have because there's a few nice growth projects coming. For example, the Canada one, which will require quite a bit of funding from our side. But that's where we expect to land by the year end.

Okay. And that project is already part of your growth GAPEX guidance?

That project is already part of our growth project guidance indeed. and we hope to take an FID in Q2 this year. Things are progressing well, but still the final investment decision has to be taken by both joint venture partners.

Okay, clear. Yeah, further I have to think of all other questions, so I leave the floor to someone else.

Thanks, Dave. Thank you. Our next question comes from David Kerstens from Jefferies. Please go ahead.

Good morning, gentlemen. I've got two questions, please. First, one also related to the Altacast project in Canada. Can you give us an indication on what the scope is? And I read somewhere, I think in a local press, that it was around $800 million Canadian dollars. Is that still relevant, and what is your share in the equity of that terminal? And you also highlighted the good progress towards the €1 billion investment in in-gas with this terminal in Canada, and I also read about a project in South Africa. How much more is there to do in the expansion in LNG and LPG?

Thanks, David, and good morning. Maybe to the first West Canada question. So the scope of the project is marine infrastructure, so that's a big export jetty in the waters of Prince Rupert, and it's the facilities to receive LPGs by rail, and then store them at the facility so we have storage capacity at the site and then the ability to export that through the jetties for exports to Asia. So that's in terms of scope. Land clearing, as we said, has already started by the end of 2023. Total amount is still subject to engineering that we are doing at the moment. That's the reason that we're also not taking FID yet. The number that has floated in the local press is indeed that's about the number. But again, we are finalizing and fine-tuning the final investment amount as we speak. Before we can take an FID, our share in that project is a 50% share. Altergas is the other 50% shareholder, and Altergas will be our customer in the first phase. So, yes, there is relevance, obviously, for the investment at the same time. Alpagas as a customer we have an agreement with them that given the FID that we would be taking there's a pre-agreed arrangement on how the return would be settled for the joint venture so I think yes it is very relevant for the total competitiveness of the terminal and that's what we are looking at now and again hopefully we take FID by the end of the second quarter of this year I think that's on Canada Then maybe on LNG, you mentioned South Africa. We're happy that we were selected in a process together with a local partner called Transnet to work together on the potential to import LNG from Richards Bay through an FSAU solution and connect it directly to Africa. The gas pipeline, that is still – so we've been selected, and now the phase for preparation will start. That will take some time before we expect to take any meaningful FID over there. With all of the investments that we've committed for on the industrial and the gas side, we are close to – well, we expect – that the $1 billion is to be reached between now and 2026, 2027. And that's the same as what we shared with you at the analyst presentation back in November. But we see still healthy and good prospects to continue to allocate growth capital in that area. So we'll see how that develops over time, but confident with progress so far.

Yes, understood. Thank you very much. And then maybe a comment on the reporting structure. You have now moved fully towards the new reporting structure, I understand, based on a new geographical breakdown. Is it possible to update the model still based on the old reporting structure? And I also noticed the proportion of EBITDA by market segment. Is that all? Will you provide that consistently now on a quarterly basis? And then do you also have occupancy rates and revenue by market segment on a quarterly basis?

Maybe to your first question, we will not go back to the original reporting structure because we changed it and we will make sure that everyone has also the historical numbers based on the BU's and we will provide, well, maybe not all the details you just asked for, We will definitely give sufficient proportional information to make clear, let's say, what the performance of the company is from a proportional point of view because that makes a lot of sense with all the joint ventures. And maybe for more details, I would maybe, Faciona, you want to add something here?

Yeah, indeed, David. We can chat on that after, but we aim to have a full five-year history in a few weeks based on the new structure soon on our website. So I really hope that this could help you.

Okay, great. Thank you very much.

Thank you, David. Iran Mulder, ING. Please go ahead.

Yeah, good morning, everyone. Happy Valentine's Day. Okay, fine. I have two questions. My first question is about China and the second about India. On China, the only 100% owned terminal is Shangyagang. And as I remember, 2022 was already quite weak with a 70% utilization rate or even below that. So if you are looking for solutions in China, shouldn't be Zhang Yagang also not on that list, given the weak performance for a long period now, and probably not recovering if I look at the Chinese local market. And the second question is on India. Can you say something about the returns you are expecting from the joint venture? Because it looks to me that the returns... Yeah, this has just started up, so we are waiting for some positive story there. Outside, let me say, only the story of the expansion.

Okay. Well, good morning, Kirijn. Happy Valentine's Day to you, obviously. Shang-Chi Gang may be the first one on China. It's indeed 100% terminal from a strategic point of view. We like that facility. It's the largest facility. chemical hub slash distribution facility we have in China. It is therefore subject, it's close to Shanghai. It's therefore subject to a bit more volatility in the portfolio for China operations. For now, no specific ideas to look to divest because the occupancy rates are coming down. It is a bit of a competitive market on the distribution side, but long-term our position on the Yangtze River, the infrastructure that we have and the fact that we serve as 100% entity, our customers over there, makes us relatively comfortable with that position, especially if you put it into the context of the rest of our portfolio, which is moving more and more to the industrial terminal. The combination of both has no reason for us to change our view on the Zhangjiagang terminal. I hope that provides you some overview. And if you will tell a bit... Yeah, go ahead.

Any view on the utilization rate you expect for 2024?

Yeah, I don't think that that will materially differ from what we've seen in 2023. The market is still... It is competitive. There's pressure from a local demand perspective, but also an oversupply from some of the production that is there in China. So we still expect it for 23 to be – or for 24 to be relatively aligned with 23. No big improvement. Okay. Thank you.

And maybe on India, so we don't disclose individual returns of countries like India, but I can tell you that if you look at the multiple we stepped in, which was one and a half year ago, it was around 10 times, so that's approximately the number you can lock in your mind. But then if you look at expansions, expansions are taking place at the lower end of the bracket, 4 to 8, so more closer to the 4. So that means, let's say, these expansions are actually quite attractive to do, and also with the long-term growth profile of this country, it makes us rather attractive, and ultimately these expansions will be accretive for our cash return.

Okay. Thanks, Kieran. We'll now move to our next question from Jeremy Kincaid from VLK. Please go ahead.

Good morning, all. Just a quick one from me. You provided a very helpful update on the demand for each of your end markets. I was just hoping if you could also talk about the supply situation, especially from your competitors and what you're expecting into 2024, particularly as we might see interest rates starting to fall and maybe it makes more sense to build new capacity.

Hi, Jeremy. Good morning. I think what we have seen on the supply side, so on the competitor front, is indeed over the past few years not a lot of very active expansions that are happening in our field, and that's... predominantly because the capacity that was available was available for the demand and sufficient for demand that we saw in the global markets. And I mean, it's obviously a very generic answer and a very general answer. You have to kind of like look in and zoom in almost market by market. But generically speaking, that's what we've seen, not large expansions, also on the back of high interest rates. I don't expect that with interest rates potentially coming down, they're not expected to go down to the same levels as what we've seen a few years back. So I don't immediately expect a massive opportunity for people to all of a sudden start constructing capacity. And therefore, I think there's not a lot of specific activity expected out of the ordinary of what we've seen over and what we expect to see then in 2024.

Great.

Thank you very much. Thank you.

Stice, Circleware, IBM Android, please go ahead.

Yeah, Stice again. Meanwhile, I already modeled based on the new structure. Good luck. It will take you something like four weeks or so. A question on the new reporting structure. In OPEX in the Netherlands, I see in Q4 clearly higher OPEX in Q4 than in Q3. And this while you... divested out of the chemical terminals in Rotterdam. Is there a special OPEX effect there in Q4? Maybe, and then more in general on the corporate cost line, also looking at your research in action, what kind of normal corporate costs should we foresee for OPEX? 2024 what is sort of the target level and then further on Spain can you again explain why Spain or the Spanish terminals are not part of they are I think in global or in other why they are there and whether that's a signal that they might come up for disposal as well. And on the question on India, well, looking at the share price ongoing for Aegis Logistics, I presume the returns are brighter.

Yeah, indeed, Aegis has made quite a step in their share price over the last month, indeed. But yeah, obviously, they also have other business than only AVTL, which is our joint venture with them, because they're also in the distribution and trade. On the one-offs, indeed, we had a few one-offs in the Netherlands. We had some... some costs on renting some mobile incinerators in Europort because we're commissioning a large project there. We had some incremental IT costs and we had some small asset write-offs in the Netherlands as well. So indeed we had somewhat one-off costs in the Netherlands. So that's absolutely right. So let's hope that we don't see these additional costs in 2024. On the corporate costs, yeah, we never give a target on corporate costs. But definitely with the whole restructuring which has taken place, the reorganization, we aim for lower costs. And we have given an indication before that there will be a payback of between one and two years on the total costs we have made for this reorganization. So you may expect that costs will come down as a result of it. Although sometimes it might be also hard to see that because at the same time, let's say, labor cost is still rapidly increasing as well due to salary increases and inflation components. But, yeah, if we wouldn't have taken those measures, then obviously that bill would have been larger than what you will see in 2024. So that's on the corporate costs. And on Spain, yeah, it's a smaller joint venture. And we said, yeah, it hardly fits into any of the BU's. And we said, yeah, maybe this is without any guidance on whether this is going to be disposed or anything else. it's actually a good thing to just have it in global because to make it a separate business unit, it's too small to add it to another business unit. It doesn't make a lot of sense, and we can manage it from a global point of view. So we have two board members from our global office who look after the joint venture there in Spain. So that has been the reason. It's a more practical reason than anything else, Thijs.

Okay. Just to get a kind of reconformation publicly, I've been getting questions from clients asking whether all pre-agreed to participate in the share buyback, whether that is being discussed or not, et cetera, et cetera.

The only thing I can say is that none of the shareholders have made any arrangement with us. We don't have any agreement with any of our shareholders on the execution of the share buyback program. So that's basically what it is. So also no agreement with HALP.

Okay. And then maybe a final small one. Venezuela is starting to come back in business more or less. What does it mean for your terminals?

Yeah, I think the tensions that the US had imposed on Venezuela were temporarily halted or lifted. So you see that some activity indeed slowly is moving back to Venezuela. Still way too early to see and to tell what that's going to mean. As a result of recent discussions on local elections, I think on some parts the U.S. has also imposed some of the sanctions back again, so not continued with lifting them. So it remains a bit of a volatile situation in terms of how the effectiveness of Venezuela for imports is going to look, and we will monitor that situation and continue to run the site in line with our values, in line with being cash positive. That's how we look at it.

Okay, thanks. Great.

Andrea Muller, Kepler-Schiphol. Please go ahead.

Hi. Two questions for me, small ones. First, on the understeer terminals, if I compare the proportional EBITDA for year-to-date and the full year, growth is slower in gas, It's slower in chemicals and also slower in oil, but higher in industrial. But strangely enough, the statement on the industrial is more negative than what I see for the other parts. What's happening there? You're saying that there will be lower activity levels, but still higher growth for the full year. What's the difference there?

I think maybe on the market side, Andre, good morning. What we are referring to is generally production on the petrochemical industry. So you see that activity level in the main industrial terminals is coming down a bit. However, with a long-term contract structure, you see the financial impact of that being relatively limited. And if you then see the increase in proportionate EBITDA, that's mainly as a result of new capacity that over time is coming on stream. And that new industrial terminal capacity is adding and supporting the positive proportional EBITDA development. So fundamentally, we continue to very much like that segment for all the reasons that we've been mentioning before. But we always relate to industrial terminal segment when we talk about the petrochemical market as a whole. And as I said, activity level has hardly any impact on the financial results of our industrial terminal portfolio.

Okay, then the second question, it's a bit of a reporting issue. I see repurposing of terminals in Europe. both in the improved segment as well as in the new energies and feedstocks. Why is there a difference? Why is, let's say, Deer Park and Eurotank, and I think it also goes for Banyan, why are those under improved and not under new energies and sustainable feedstocks?

Yeah, it has to do with the type of product. So if you look at Eurotank, for example, it's basically investing in chemicals. So it's a chemical project. It doesn't really classify as a new energy project. It's still an improvement project to make sure that we get the return to a higher level of the Eurotank terminal. And some of the repurposing, then we move really from existing maybe higher carbon products to low carbon products. So that's why we put that in the bucket of accelerate because that is effectively how we look at those kind of projects is more new energy than what we do at the Eurotank. So there is indeed sometimes a different bucket in which these investments end up.

Okay, clear. Thanks.

Geraint Mulder, ING, please go ahead.

Yeah, Geraint Mulder, I have three additional questions, if I'm allowed. First, about maybe you can elaborate what's happening in Colombia, because it looks like that you have now withdrawn your divestment. Is the buyer, let me say, has withdrawn or something like that, or you put it on offer and nobody turned up, or is there a completely stunted strategy there? The second question is, with your outlook... What we have seen in the past, you guide us with something like cost level, 600 million or something like that. And I missed that in the current one, or maybe I missed something in total, but I haven't seen anything. So maybe you can elaborate on that. And my final question is about the oil markets. So is the possibility to give an idea about your outlook for the oil markets with respect to ROPAC? What's going to happen there? this year, what is the outlook? So we haven't heard anything on Pugira, for example, or maybe the situation in Rotterdam.

Okay, Kiran, maybe a few answers. So first from Colombia, we did receive offers and we found in the end that while we were going through it, our total assessment was that we are much better off if we continue to operate the facilities ourselves. and we actually are happy to do so. So Colombia was in the strategic review and we basically reinstated it as a full part of the portfolio and expected it to continue. It's too, and I always have to say that I know you know it, but also for the audience, We're talking here about the two relatively small liquid terminals in Barranquilla and Cartagena. This is nothing to do with the LNG activity in Speck. So that's related to Colombia. On the guidance for costs, I leave that to Michiel. And on the oil market in general, I think still the demand for oil storage in the main hub locations, And then I talk about Singapore, Penang, so Singapore Straits, Fujairah, and Rotterdam is still relatively healthy. Then again, if you compare that already in 23, we saw that results on the oil side were also relatively healthy. So the big jump that you saw from 22 to 23 is not what we expect, but by and large, because of some of the reasons that I mentioned in the presentation, We still expect a healthy demand for oil storage, as was explained.

And there's also upside in the price, you can ask your clients.

Yeah, but that has been materialized quite a bit in 2023, Cleo. We will obviously try to do it as much as possible, but the bigger upside we've seen in 23, and where we see opportunities in some of the markets at very high occupancy, because we see high occupancy in some of these hub locations, we will definitely try and benefit from those commercial conditions. Thank you.

Yeah, that may be on the outlook. So in the past, indeed, we had the cost level outlook. But at that time, we didn't give any EBITDA outlook. So we gave a cost outlook and contributions from growth projects. And it was very hard for people to, what we understood, to marry the numbers and to come to, let's say, a proper outlook. So we said, well, we're going to go back to the EBITDA outlook and indeed now move to also a bit more from consolidated EBITDA to proportional EBITDA. We also give more guidance on the operating capex, which for us is obviously a key cash-out item to make sure that we have a high integrity of our assets. We're not going to provide any cost-level indication. We will certainly be very strict in cost management. Because if we start giving guidance on the cost level, then the next question is, can we also have guidance on the revenue line? And I think the guidance we give on the different components hopefully should service the market in a proper manner, including the return level. So we're not going to provide any cost level indication, but obviously you will see it once it materializes.

Okay, thank you. This was the last question today. With this, I'd like to hand the call back over to Dick Rochelle, CEO, for any additional or closing remarks. Over to you, sir.

No, thank you very much. Thank you all for joining us on the call for your questions. If there's any additional questions or you want to follow up on anything, you know where to find us. You know where to connect with Faciona on the IR side. I wish you all a wonderful Valentine's Day. Bye-bye.

Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.