Nordex SE

Thank you very much for the introduction. Good afternoon, ladies and gentlemen, a warm welcome on behalf of Nordex to our today's analyst and investor call.

We have prepared the full agenda for you today. Also given by the news we have already shared with you during the beginning of the week, our CEO, Jose Luis Blanco; our CFO, Christoph Burkhard; and our CSO, Patxi Landa will guide you through the presentation.

Afterwards where we will - as I have heard enough time for Q&A. Please limit yourself up to three questions.

And so, I will take the opportunity to hand over to Jose Luis, our CEO. Please go ahead.

Thank you, Felix. Dear, ladies and gentlemen, thank you very much for joining our Q3 2020 results presentation.

Agenda that we have prepared for today is slightly different than the normal agenda because we want to give you more details. First on the COVID impacts in 2020.

Second in how we are planning to achieve our - meet their profitability targets. So starting with the executive summary.

The Nordex has delivered in the first nine months of the year sales of EUR3.17 billion with an EBITDA margin of 2.2% and working capital minus 5.7%. It's worth to mention that the order intake amounted to 3.75 gigawatts in the first nine months with a share of 81% coming from the more profitable turbine generation Delta4000.

Patxi will comment afterwards, but a good Q4 is expected, which is good the momentum of the order intake for our industry and for Nordex continues despite COVID. Second very important thing is that sales are up 63% year-on-year, 3.2 billion versus 1.9 billion one year before and this is despite COVID.

So it means that operations despite COVID are almost ready for a 6 gigawatt plus company. Third, EBITDA of EUR71 million versus EUR60 million in the previous three quarters and despite COVID a slightly better working capital ratio with minus 5.7% compared to the 5.2% one year ago.

Of course three quarters or year-to-date results were negatively impacted by COVID as well as major non-recurring events accounting approximately EUR300 million, but we were able to countersteer [ph] in a very successful way by selling Nordex development activities in Europe to RWE for around EUR400 million. Nordex very important German market is gaining momentum and as a share of confidence in Nordex we scored 31% in the latest auction sharing top position with Vestas.

So this is very relevant because Europe has strong political support and Germany is back and we are leading position in both in Europe and in Germany. We like to share with you that we communicate and restated the new guidance for full year 2020 with sales approximately 4.4 billion an EBITDA margin of 2%.

We communicated as well a strategic target for 2022 with sales approximated 5 billion an EBITDA margin of 8%. This is very much expecting stable order intake and that margins in the marketplace is staying as they are and we are going to go more in detail later in the presentation.

And in order to support this strategic targets comprehensive company program is in implementation in order to secure the full year '21 performance and fulfilling our strategic targets. With this I would like to share with you one very important bullet point, which was the approx EUR300 million full year P&L impact that COVID and a major non-recurring event has created a cost to Nordex.

And we split it into five building blocks, the first building block is productivity impacts on production and project sites due to supply chain disruptions and very important as well restrictions to move people and goods from country to country. What we have done is that we implemented contain measures are defined and executed.

The company has been working in business continuity COVID task force since the beginning of Q2 this year. We implemented catch up measures as well and I will say that operations are back to normal despite the second wave of COVID.

We as a company learn how to operate in a COVID environment. Second building block is limited availability of people in blade factories led to delay ramp up, delay number of blades which impacted project and the utilization costs.

We decided to keep the production running in order to mitigate further project delays and LDs [ph], but this has had an impact in the profitability of the company. As of today output has increased and is stable close to the plan back on track fully expected in Q1 2021.

Thirdly, building block is due to the reduced deliveries leading to project delays and cost synergies. What we have done is upgraded and strengthening the production ensuring reliability on future deliveries and I will say that second COVID wave did not cause supply chain delays.

Again, mentioned before, we operate - close to normal in COVID environment. Next, I would say that COVID has hit us [ph] harder in the South Hemisphere mainly because that was winter and is hitting harder countries with health system not as robust as US or Spain as well as suppliers on those countries.

So, in this context, building block number four, which is very relevant. The replacement of suppliers and subcontractors was severely affected by COVID in LatAm and in South Africa.

In Argentina, the decision taking was stopped doing new business. We are finalizing the projects there in the year.

The COVID impact is including within the EUR300 million expected for the full year. We don't plan to do business going forward for the time being, and in South Africa the situation has turned around.

And additional measures were implemented in order to strengthen our reinforce on-site supervision and acceleration measures. Unless which is not directly COVID-related we had a one-off technical issue in a large Nordic EPC project leading to delays and cost overruns.

We have - we did the lesson learned. Reorganization was implemented and we are increasing the quality and the capabilities of the contracting management.

No spill over risk in other markets or in the future due to nature of the business. With this, I will hand over to Patxi.

Thank you, Jose Luis. Good afternoon, ladies and gentlemen, and now looking at the markets, we continue to see strong demand for our products.

We landed 3.8 gigawatts of new turbine orders in the first nine months of the year, down 21% with respect to the same period last year. We saw significant activity in North America where the expected volume came in with 0.6 gigawatts of new orders landed in Q3 and an additional 0.6 gigawatts of orders landed in early October for a total of 1.2 gigawatts of new orders in North America year-to-date.

So we are very pleased with this performance as well as with the recent political events that would make us expect some more favorable market outlook looking ahead. However it is too early to assess at this point in time the real implications for our future business in the US, but very good performance from our perspective, from the North American market.

Same goes for Europe that continues with very good performance and European orders represented two-thirds of the total orders until September and we have a leading position as Jose Luis was referring before in Europe where we ranked number two in new orders over the last year and that position is cemented in very solid routes. The first is that we have an excellent product fit for the market requirements with the Delta4000 4 and 5 megawatts being a leading selling turbine in this markets as well as globally.

Second is, that - is a presence that we have across all European markets. So we have an extremely deep presence and good reach in all main and small European markets; so very good presence.

And the third, the customer capillarity. So combining customers with markets with an excellent product fit, we do expect and based on this we do expect to continue the good performance in Europe over the next period.

So summarizing, we continue to see a strong momentum in an order pipeline despite COVID and remain confident to deliver good order volumes for the full year. ASP remained stable at EUR0.70 million per megawatt in the period and importantly 86% of Q3 orders came with Delta4000 turbines.

So it's almost all of them came with Delta4000 turbines with the consequence that this is increasing further the margin quality of the order backlog as we have been explaining over the previous calls. Next slide, please.

Service sales grew 11% to EUR318.3 million and represented 10% of group sales in the first nine months. EBIT margin was 14.8% and the fleet under contract stands at 21 gigawatts.

Next slide please. Turbine order backlogs stood at EUR5.1 billion at the end of September decreasing 9% of the previous year and service order backlog grew 12% to EUR2.8 billion for a total combined order backlog of EUR7.9 billion at the end of September.

And with this, I hand over to Christoph.

Thank you very much, Patxi, and good afternoon ladies and gentlemen. Welcome also from my side and I would like to guide you now through our Q3 2020 financials.

Starting with the income statement. Sales with EUR3.17 billion show an increase of 63%.

Jose Luis mentioned it already compared with the first nine months a year ago and this demonstrates that despite the impact of COVID-19 pandemic Nordex has been able to continue on its growth path. The EBITDA margin of 2.2% after nine months in 2020 reflects the combination of approximately EUR260 million impact due to COVID-19 related issues and one-off as explained by Jose Luis and the counterbalancing effect of EUR300 million from the sales proceeds of the Nordex development pipeline.

And just to repeat and to be precise we have talked about the EUR300 million number that was the total year number and the EUR260 million number that I'm just mentioning is the first nine-month number. The pipeline sale proceeds have been recognized as other operating income and finally our usual PPA information 19 million of PPA depreciation are included in the nine months number.

Now, looking at the balance sheet. And our cash position at the end of September amounted to EUR408 million and it is important to note for you that this number does not yet reflect the cash contribution from the pipeline sale amounting to approximately EUR400 million, which we have received on November 2nd.

Further on you see an increase in current assets mainly attributable to the transaction with RWE. This is the reason we have - that you see here we have a separation between P&L impact and cash impact over Q3 and Q4.

And then you have one more significant similar effect in our balance sheet, visible in the shifts between non-current and current liability. Here the reclassification of the EUR250 million promissory notes into a current liability due to the maturity in April 2020 is reflected and that already happened in Q2.

I just wanted to repeat that because it is simply a big number. However, in that context, as we have previously mentioned, we have already secured the refinancing of this instrument in the context of the closing of the revolving cash facility.

And now going to the working capital. In light of the third quarter being strongly impacted by COVID-19.

The working capital ratio with minus 5.7% is still at an acceptable level. The deterioration of 1.4 points compared with the level after June 30 is largely attributable to the increased trade receivables position.

And this has been caused by COVID-related project delays with corresponding shifts of payment milestones. And I do expect this effect to remain throughout the fourth quarter as you can see reflected in our guidance for 2020 where we say that we will definitely be below minus 4, but so it's rather a stable working capital maybe a little bit worsening, but fairly stable now until year-end.

And that brings me to the cash flow statement. Here again it's very important to note, when you look at negative cash flow from operating activities in Q3 that this is without the cash from the Nordex development pipeline.

As mentioned before, we have received the money on November 2nd and that of course - that effect of course you obviously also see in the free cash flow. The cash flow from financing activities of approximately EUR300 million is largely a result of the cash in from the EUR350 million from the revolving cash facility minus repay tranche under the EIB facility some smaller short-term loan repayments and leasing payments.

And we set two investments, investments during the first nine months of 2020 amounted to EUR109 million and that also implies that's already a little bit of a preview into Q4. That of course in Q4, we will still heavily invest - our guidance 170 and so investment activities are continuing without any kind of break here.

And well due to our large order book the high overall activity level and ongoing high demand for our products, we will simply continue to execute our investment program as planned. And last but not least, looking at our capital structure, we do see the leverage curve declining again from the peak after Q2, 2020.

I do expect this to continue in Q4 and anticipating your questions and making this more specific. I do expect the leverage ratio at year-end to be below 3, but not yet below 2.

And equity ratio remains almost on the same level as after Q2. And with that before handing over again to Jose Luis I would like to conclude the financials with three key messages.

Firstly, our business has been obviously significantly affected by COVID-19, but at the same time Nordex has been able to successfully counterbalance this particular situation with the comprehensive financing package - refinancing package and a very successful M&A transactions. Secondly, the growth trajectory of the company further on intact and very important in this context, despite various COVID-19 related impacts across the entire value chain, we continue to have a firm grip on our working capital management.

And last but not least, it seems to our best current knowledge that the COVID-related effects on Nordex business are gradually winding down now, which is why we have also reinstated our guidance. And with that, I'm handing back to Jose Luis.

Thank you very much, Christoph. I think this slide is self-explanatory the performance of the company in operations.

Message number one is that despite COVID we managed to increase 144% megawatt installed and we are almost at the pace to achieve the 6 plus gigawatt company that we want to be in our 2022 strategic targets. The second message is that we are already very successfully producing in India and our plan is to ramp up India to a 4-gigawatt hub of Delta4000 for delivering globally mainly for non-European markets, which is one of the key lever for profitability lift in 2022.

This is going to be in execution in 2021, but if we go to the numbers, I think we instilled 1,052 turbines in 21 countries, 43% in Europe. Very important message, we are planning to do next year, 60% in Europe.

And as I mentioned before despite COVID, we managed to operate in Europe reasonably okay. So next year it's going to be a de-risk [indiscernible] country composition 33% in North America.

Next year as well is a big market for us. 18% in Latin America and 6% of the Rest of the World.

This is going to be reduced next year. In terms of production, we increased the nacelle assembly capacity 43%, 4.4 gigawatts assembled at the pace of a 6-gigawatt company.

So that's very much achieved. 549 turbines in Germany, 332 in Spain, 154 in India.

This will be a shift to Delta4000. 64 in Brazil where we are now starting to produce moving Delta4000.

Big success will be announced in due time, but we plan to produce Delta4000 in Brazil and in Argentina as mentioned before we decided to stop temporary activities. In-house blade production more affected than nacelles for COVID.

We talked before in the building blocks of the COVID impact slide, 990 units in the nine months. Germany, Mexico getting split.

Although Mexico was heavily affected by COVID. India that we will increase a lot during 2021.

The blade production in India and 55 sets in Spain as well heavily affected in the first three quarters due to COVID now back to normal pace and outsourcing blades of 2000 units. So the message is that indeed COVID has affected blades, but situation is back to close to normal.

And the India roadmap that we plan to deliver is very much substantiated in the proving track record that we have there. With this, we move to the next slide.

It was mentioned already by Christoph, we have sufficient visibility to reinstate the guidance for the year with sales approx EUR4.4 billion, EBITDA margin 2%, working capital below 4% and CapEx is expected to ramp up in Q4 from 100 to 170 to support mainly the blade investments and the capacity expansion in India in 2021. This is ongoing; it's not the stop - it was not the stop in COVID times and this will wrap up in the next quarter.

Okay, so with this we are approaching the end of the presentation. I think we communicated last Monday as well the decision to issue any strategic targets because we see that from an order intake and sales perspective there is, as Patxi mentioned, good political momentum in Europe.

On top the new elected President in the US announced that he plans to join the Paris Accord, which eventually might even improve the market and political dynamic. We see the possibility to lift the EBITDA to an 8% level and this is going to be a consequence of mainly two factors.

One is the quality of the backlog that we have and we will see a jump in 2021 and then combined with the cost improvement of the 4 gigawatts that we are planning to - that we are executing in supply chain expansion in India and that will be the boost of the profitability. Capacity 6 gigawatt; I'm not saying that is plain vanilla, but as you saw in the previous slides, the company is already producing in that level of capacity.

So in order to give you some more flavor of why we think those targets are achievable. First, how is the market and the policy environment.

So we talk about Europe, the European Union and the European countries decided that COVID could be a great opportunity to accelerate decarbonizing the economy. So the European green deal is there as a multi-year package and is real and is driving demand.

We are on our way with a net zero emissions for climate neutrality by 2050 and on top a very promising repowering business might eventually even increase demand. On top of Europe, mentioned US new elected President might change the policy in the US, but regardless what US got [ph] in terms of policy, what he announced to join Paris Accord is a great signal for our business and for our sector and for the world.

Nonetheless, our position in LatAm, Brazil. We decided to stop business in Argentina, but Brazil remains strong demand with - for 2021, 2022, 2023 good - with good conditions.

So and the company is very well positioned in all those geographies. So the message we wanted to give you is that the macro and long-term drivers support stable order intake for Nordex going forward.

If we go to the next slide, please. Then say, well, how is Nordex position in the market, because one thing is having the market and the other is the positioning of the company in the market.

And I would say and it was already mentioned before we have highly competitive product portfolio with the Delta4000 turbines. It's one of the leading 12 turbines in the 4 megawatt to 5 megawatt class worldwide.

And this turbine is very much the best-selling platform in European market and the US is shifting quickly to this platform. And as we mentioned Nordex is leading in this segment.

It's top two player in terms of order intake in Europe, which is the main market or the main geography for us going forward and Nordex has as well a good positioning in the US and leading position in Brazil with a strong customer base. From a supply chain perspective it was mentioned planning to ramp up India 4 gigawatts plan for 2022.

Delta4000 start to kick in, in the Q4 2021, and this will deliver substantial volumes at substantial better cost for Nordex that will leave the profitability meter. Last remaining on a strong order intake, part of the majority of the full year 2021 is already secured.

And as was mentioned by Patxi majority of the demand almost all the demand coming from the 5 megawatt platform and we don't see this trend to change. So we see a stability in the volume; we see a stability in the margins and with the stability in the volume, stability in the margins and a clear action plan to build best competitive country supply chain capabilities that will leave profitability.

Last slide is the company program that we mentioned before in the presentation. The main block of the company program is supply chain expansion.

This is by far the biggest contributor, but not the only. We are doing more than that.

So this is mainly setting up 4 gigawatt supply chain in India and moving foreign European partners to India. We have been producing in India very successfully in the last five years.

So for us, we don't have a country risk or a ramp-up risk. We know how to do business there.

We don't have a supplier risk because our existing European suppliers that have Indian capabilities and what we are is ramping those capacities with substantial more competitive costs landed in most of the geographies where we operate. The second block is productivity enhancement.

We want to put in place safer, stronger ramp up focusing on efficiency and productivity in order to deal better with the ramp-up risk. One very important block is increased service profitability, building a global service unit to further improve the margin profile of these very important activity for the company.

Then PM/EPC we need to use experiences of example of excellence from high-performing countries in other countries product delivery. We need to stay at the core.

We don't want to stay ahead of the core. We want to stay at the core of the market benchmark for products.

We want to continue our sales success story. Stay on top three position in onshore business as already show in the last five to six quarters in the 5 megawatt segment unless we are expanding our engineering capabilities, creating an engineering center in India to support all the supply chain expansion in India.

So, in summary, 2021 is going to be supported by eliminating the one-off effects and the execution of a better order backlog '22 on top a stable order intake and company program kicking in Q4 '21 and full effect in 2022. With this, we'll open the floor for Q&A.

Thank you very much for the presentation and operator please open the floor. Operator?

Thank you.

Good afternoon. Can you hear me?

Yes.

Super. Thank you for taking my questions.

First one is on CapEx. Just to understand how much more you need in 2021 to get to about 6 gigawatts target or is that now included within the EUR170 million guidance for 2020 and also how much of that 6 gigawatts you'd be intending to outsource in terms of blades?

The second question is on the service margin in Q3, it was low, it's below 11% EBIT margin. I'm just wondering what's caused this because it's not clear from those five items that you've highlighted on the COVID slide.

And then on the 2022 targets I mean just if I take your last 12 month order ASP around EUR0.7 per watt. I assume EUR500 million of services, to get to that EUR5 billion target I'm looking at somewhere around 6.5 gigawatts of installations, that is obviously a step up and I'm just wondering which markets are you focused on to really drive market share to get to that number?

Thank you.

Okay. So I will take may be two and then hand over to Patxi.

Regarding the CapEx within the 170 that is the guidance of the year is already the 2020 portion of the capacity expansion in India. So there are blade molds and tooling and transportation tooling so on and so forth.

For creating this capacity in 2021, we are finalizing the budget, but we don't expect substantial CapEx change going forward. I think that was the question regarding the CapEx.

Regarding the margins...

I can take that.

Go ahead.

I can take that if you want. So the service margins.

So indeed there are number of factors affecting the decrease in the margin among which some ramp up costs one-off ramp up costs for some kick on contracts that entering into service right now. In some markets, we believe that this is going to remain with us for two to three quarters and then as part of the company program service has been part of - one integral part of the company program as Jose Luis was explaining.

We expect that the profitability will go back to growing figures. And then, taking your third question is true; I mean your math is right 6.5 gigawatts.

What we are focusing is incrementing our leading position in Europe. I mean Europe is a blessing as Jose Luis was explaining before.

We do see tailwinds in most of European markets if not all of the European markets, which are really relevant for us where we have a track record, where our positioning is truly excellent from every angle. And this goes to the Nordex to Sweden and Finland, the UK, France, the Netherlands, Germany, which is coming back also Southern Europe and Spain, Italy, Turkey.

All of those markets where we have leading positions are seeing tailwinds and we plan to benefit from that. So Europe will be more than half of our sales.

I mean would be 60% around 60% of our sales moving forward. North America; North America even with the change in administration right now where it's sort of sale as I was explaining before to quantify how much that and if and when a potential legislative change might alter the outlook, but even with existing outlook, we will focus and we are delivering for the six year very good results in North America and then not forget Latin American markets namely, Brazil where since for a year now and it's expected to remain for at least two to three years.

There is a significant free market PPA movement. And with this the market is booming.

At this point in time, we expect installations to go up to around 2 gigawatts if and maybe more for years '21, '22 and then potentially '23 as well. We have not announced a very large deal that we did with Nordic utility in excess of 500 megawatts because it has a very small item in order for us to recognize order intake, but it's a project that we have, that they have announced by the way and that we have done with them and we expect a lot of good positive news coming out of the Brazilian market.

Again, another market where we have a very long-standing position in the market and then there will be one-offs in different markets like South Africa that is coming back, we expect next year that the round table will be taking place and this will complement essentially the main focus that we have in European market as I said before North America and Latin America.

Australia?

Yes, and Australia; thanks for reminding and that will be as well.

That's super helpful.

So we are reducing, we are slightly growing the volume with less countries and focusing the volume in more mature countries. That's the summary.

Understood. And just in Europe where you've sold the development portfolio.

Is there a change in sales strategy you've built up a strong position because of the development side I mean how are you effectively replacing that and the growing share?

It's pretty independent I mean take into account that most of the vast majority of the development pipeline was referred to France. And in a megawatt scale probably we might be - it might be less than 10% of the total European installation in any given year.

So we are discussing even from a value creation perspective, a massive transaction from a pure turbine generation deal from a volume perspective only it will not alter materially our strategy going forward.

Thank you.

Yes, good afternoon. Thanks for taking my questions and hello again.

On the footprint I would like to start and especially for India on my counting you're less than a gigawatt currently in terms of metal production in the country and now you say you want to expand up to four times as much as 4 gigawatts. I think you only mentioned so far Argentina has the potential up that is going to be dismissed going forward.

So how should I read it then when it comes to the total capacity that you are preparing and gearing up to us all else equal. And I think we can ignore Argentina because it's so small in terms of the overall output.

That would mean you could grow into a size of 9 gigawatts. I guess it would be even for your lagging a bit on the high side, but I would like to see your thoughts around how it might affect other hubs like Germany like Spain et cetera beyond what is eventually very busy year and 2021 in Europe, that would be the first one.

Good. Thank you, Sebastian.

I think we are not planning restructuring in Europe in the horizon of the view that we have and if we have shown extra capacity eventually if the market momentum stays strong is not bad to have some extra capacity to eventually have the possibility to sell slightly more; this is what I can comment.

Okay.

But the business plan is based I mean the business plan and the strategic target are based on the 6 plus gigawatt company are not based on the potential nominal capacity that we may achieve in 2022.

Okay, fine. The next one has been more for Patxi I think on the pipeline and especially on Germany you mentioned the upcoming EGM amendment that is due.

I think it reads like roughly 20 gigawatts in total I think until 2030. So call it a good 2 or closer 2 gigawatts incremental capacity addition every year.

What would you think is really a fair assumption? I think coming from nothing as we speak 100 megawatt or so last year.

So could that go back to then 500 megawatts plus volume potful for US Nordex or how should we think about a market and your respective volume?

I think it will come. The thing is the timing of that coming back as you very well know that this industry itself [indiscernible] that when that will be in play and how that will ease some of the hurdles that actually wind developers are facing that will affect us.

Well, the timing of the market coming back, but what I can tell you is that there is momentum. I see that there is momentum, still we are far away from the volumes that we once had three, four years ago, but as Jose Luis said the auction in October not just that we clinched number one together Vestas with very good 31% market share, but the volume was already significantly higher than earlier auctions.

So we see momentum in discussions with customers. We see tailwinds as well that the administration with this law that I just mentioned is going to ease developer bottlenecks.

The thing is, when this will come back, we have burnt our fingers so many times in trying to guess when Germany would be coming back. I'm cautious, but I do see momentum.

Certainly, I would say 2022 we could see a much healthier German market.

Okay, that is helpful. And then the last question I would have is on the net debt side.

Christoph, you mentioned that you would be comfortable with a net debt ratio, leverage ratio of below three times at year-end, not yet at below two times. So implicitly you're saying more than EUR200 million, less than EUR300 million of net debt you're getting from the EUR500 million roughly that we are talking about right now end of quarter three EUR400 million obviously from RWE.

Question really is what is the other moving parts that are here on the slide CapEx step up at the same time. I think the guidance would imply not much of a cash burn from operations as such.

So what else is sort of the moving bits and pieces here. How should we think about the VAT receivables?

Is there any overdue receivables on the balance sheet? You mentioned the amended payment terms anything to get some more color would be appreciated?

Thanks.

Yes, sure, Sebastian. I make it explicitly very simple.

And I think that should help you here. I would start with the gross debt here.

If you look at Q3 as you can see on our slide the starting point is EUR900 million gross debt and then the cash position obviously. And what will happen in Q4 this is - this we can already say.

So you will see the gross debt coming down by EUR100 million. It has already happened because out of the cash that we received from RWE we will have an immediate EUR100 million repayment under the revolving cash facility.

So, then your starting base is EUR800 million cash sorry EUR800 million gross debt sorry. And then in order to come to the net debt, of course, you are asking me now how should I think about the cash position?

Well, let me give you the following building blocks we had, end of Q3, we had EUR400 million cash roughly end of Q4. We will have most likely we will have a significantly higher cash position of course triggered by two effects.

First of all it's end of year. Secondly, there will be excess cash from RWE debt then we'll bring you in the interval between two and three.

If you counted with our guidance and otherwise, to be honest, I don't see many other moving parts here don't expect a bit a lot of tailwinds here coming from the VAT receivables. We are doing our best, but that will not move the needle outside of the two to three corridors.

That's my fairly simple view on it, but I think there is not a lot more to that, if that helps.

It does. just final question on the proceeds from RWE, that is really net of taxes, etc.

So the EUR400 million is really what you are going to receive?

Yes. We have it already received, 2nd of November.

Yes, right. Thanks.

Hi, there. Thanks very much for taking my questions.

My first one is on the phasing of the benefits in the Indian expansion over 2021 and 2022. I wonder if you could give us some color on that, kind of on the incremental savings you expect to get, as new cost base over those periods?

Well, this is, very - I mean the somehow the building blocks from the profitability we have today, to the strategic targets, is removing the one-off effects of this year. Improve in 2021 with better execution of a better quality backlog and on kicking in India Q4 2021 full-year 2022 to deliver the 8% profitability.

So, the breakdown between the backlog and the India, I don't think I can give you today, because I mean [indiscernible].

No, you go ahead.

You will - You will know it once we issue the guidance for 2021. So, the remaining portion from the 2021 guidance, to the 2022 profitability, is going to be the Indian contribution.

Okay, fine. And then, maybe on the costs, will there be - will there be any additional restructuring charges that you expect to take, as a result shuffling the supply chain around a bit?

No, I think we don't - we, as I mentioned before, we don't plan restructuring costs, we plan - we haven't communicated more in the strategic target, but we want to have shown a spare capacity, to be in a position if the momentum continues, to be in a position to increase the volume, slightly.

Okay, thank you. And then in terms of your future spending requirements, I'm guessing in the coming years, you will need to invest in technology to maintain market leadership in the 4 megawatt to 5 megawatt space.

But taking on maybe into the 6 megawatt and beyond, what kind of outlook do you have regarding that? And should we expect to ramp up in R&D spend in the coming years?

I would say the overall CapEx we are in the final rounds of budget approval, don't expect to - we don't expect many substantial changes in the overall CapEx, not in the research and development CapEx. We think that with that level of CapEx, we can achieve, staying adequate, we don't want to stay ahead of the course, because this is three getting right to the bottom, and it's a lose-lose for everybody, but staying at the course with, because wind energy is very competitive.

So, it was a different environment few years ago, when we needed to do massive investments in order to improve the competitiveness of our solution. But today, our technology is sufficiently competitive.

So, I think is better business case to squeeze existing assets, than trying to stay ahead of the curve. For sure we will stay at the curve.

Okay, thanks. My very final question would be around the assumptions that you've made in terms of revenue and EBITDA for 2021 and also on the service margin assumptions you have for 2021, can you provide us with a little bit of color on that please?

I mean unfortunately is too early. Give us a couple of weeks and we will issue the 2021 guidance early next year.

Okay, thank you.

Yes, hi there, good afternoon everyone and thank you very much for taking my questions. So, just the first one is a bit on the pricing environment, now from previous conversations, I think it's pretty fair to assume that in Q4, we will probably see a very strong order intake in megawatt terms.

So, I'm just wondering if you can provide us some comments with regards to the pricing environment. Do you still expect ASP for the full year to remain at the EUR0.70 million per megawatt?

Any comments here would be great. Appreciate it.

Thanks.

Yes. We don't guide pricing there.

As you know, pricing is very much dependent on geography, product mix, scope. So, it doesn't say that much in absolute terms, the EUR0.7 million.

Now, we do not guide. What I can say and what I can state is that, the pricing environment is totally different with respect to the present environment.

We've suffered a year, year and a half back, and it's pretty stable and we see a much more rational behavior from all players.

Okay, that's exactly the question. So purely price, right.

Excluding mix, excluding all of that, purely on price, you see a more rational behavior.

Yes, I do.

Okay, that's great. Thanks.

And then just secondly, just really a follow-up on the service profitability levels. So once this one-off impact around COVID is gone in the next two to three quarters, do you expect margins to return to the historical 17% levels or potentially ready above that, as you gain more scale?

That will be part of the Company program. What I can expect is to recover back to the 16% - 17% historical levels and I expect even greater than that, but that will be only happen in 2022, once the program is bearing fruit.

That's perfect. Thank you very much.

And just my last one, bit more of a broader question, just really know with the Biden Presidency, I mean he's talking about potentially installing 60,000 onshore wind turbines over the next five years. He says that they will be a little bit smaller in size, but he is also saying that he is going to prioritize US manufacturers.

So, I'm just wondering, do you benefit of this at all?

I think we have I - you know, we wish that to happen. Yes.

We will. Yes, we have a facility in West Branch Iowa, ready to be restarted, if that is required.

Today it's not required. So we prefer to export from, today from India and Europe.

In the future, mostly from India. But if that is a requirement in the US, we are ready to react very quickly.

That's perfect. Thank you very much.

Good afternoon. So a couple of things.

I guess a really simple question. Next year, do you expect to be free cash flow positive?

Just trying to understand in the context of the leverage guidance has been given at the end of the year, how that picture evolves going into next year. Does it get worse?

Does it get better, before we move into 2022 and we attain this guidance? And then just on the assumptions that drive the 2022 target, I guess, I said this too, I think this question earlier in the week, but it's more like, I look at what Vestas and seen them communicate and it seems to indicate 2022, 2023 should be a smaller market than we are in this year on this.

Both companies have launched new turbines on the onshore side, they spend broadly 75% more on CapEx in their onshore businesses and when we deliver this plan today, we are seeing Nordex has a great product, it's going to expand market share, keep CapEx flat and see margins improve. And I completely see the picture on the Indian production and how that could improve margins.

I'm just wondering is that, how does that picture all fit together. Is it because you expect the market to be in growing in size or flat, so you run operating this target on the basis of where GWAC and would not commence McKenzie put out, in regards to a shrinking market at least for the next three years?

I think first, the second question and then Christoph for the cash flow. So we are, our assumption is based on our visibility in the markets that we operate.

So, on top of what you all - what you mentioned, which makes a lot of sense, on top, we are planning to stop doing business in several countries with high risk profile, because we have sufficient success in low risk countries and this is a factor of having the right product at the right time. So some of our competitors are launching those products, but one team is launching another is prototyping, another is how many turbines have you sold and how many turbines are you producing and our Delta 4,000 is the top two best-selling product worldwide and we have the ramp up already prepared for volumes that one of our competitors in the same range are not.

So there is a timing effect, that in this case, we are ahead of churn of our competitors. The second thing that you need to consider, is that and we have been doing this in the last quarters, growing more than the churn of our competitors.

The second thing is, that the European, momentum and maybe there are some players that might lose market share. But from that point of view, we don't see - we see strong momentum for our products, stable gross margins and - and I think that the reason should be available capacity for this products in the marketplace, compared to other competitors.

Regarding CapEx for the next years, we are comfortable with the CapEx level that we set in the targets and what was the kind, you do? What was the other question that you have?

I guess I guess maybe to put it in a different way, that last part is that, when you say that you want to be at the cost curve and not ahead of it.

Yes, yes.

To some extent the other players. You're compete against, the Siemens and Vestas of this world are bigger.

So they have bigger economies of scale, may be less than Siemens Gamesa's case, but, so I'm wondering do you have to be ahead of the cost curve to because of those economies of scale differences or you're happy that you're already where you are and then I guess with the technology point, I completely take that your product has been amazing. And it has been for the last few years, your order intake shows that, but if those low and new products are coming, is this a really good [indiscernible] 2022 but then greater competition beyond that, as these other products hit the market, just help us with that dynamic?

Yes, that's a very good question. I think in regarding new platforms, there is a physical limitation.

There is a - we are stretching the onshore capabilities to the limit. So this continuous space of delivering bigger, longer is very much approaching the physical limit capabilities.

When I say, stay at the core, I mean if the market leaders have a plan to enhance the platform to certain performance, we need to be at the costs. What I am saying is that, I don't think is a good strategy for us to be ahead of the curve, igniting a race to the bottom again, we need to stay rational and if everybody stays rational, we should make money all the players.

If we do irrational things everything can happen, but we don't see irrational things in the marketplace and the market really want us to succeed, the customers want us to stay there. And this is the biggest I would say safety net that we have because one of the top four global players has a bigger presence in one geography, but not that big presence in other geographies.

So you know customers nor authorities want duopolies. So and my last comment is that with the size that we have, we are not that different.

And for sure in the 5 megawatt segment we are way bigger than shown of the top four players of the industry. So the economies of scale is true that we don't have the same economies of scale as Vestas, but we don't have the same overhead as well.

So I think the size we have is sufficiently sizable the company to be efficient in this to stay in this business. It was not the case when we were 3 gigawatt company.

And on the cash flow?

Yes, Ajay. Hi, it's Christoph.

Hi, Christoph.

Just to share my thoughts with you here. Obviously, I cannot advance now a working capital guidance for 2021 or free cash flow, but nevertheless, to give you a flavor of our thinking here.

Assuming that we will, on the cash flow from operating activities, everything will develop as we of course anticipated to develop on our way to the 8% in 2022. Then from my point of view, from our point of view, the single most important ingredient for getting to a positive free cash flow number will be we need support from working capital from where we are today.

Is that impossible? No, it's not impossible.

Can I already give you in a precise number around our working capital target for 2021? No, but what I want to say is without further support from working capital no, we need basically tailwind from working capital and again this is not impossible, but we need to see once we are moving closer to the guidance 2021 that's fine, if that's all right.

Christoph, can I just maybe get a clarification. I just missed what you said.

Just one thing is that are you saying effectively no need for acquisitions any further asset sales, any sort of further outside - sort of non-operational support will be needed to the balance sheet and the business as it stands now, we'll able to improve working capital improvement. The improvement of EBITDA margins, greater installations sold and we'll able to drive towards that 2022 guidance and from what's implied given the CapEx numbers that were said and the EBITDA and the - '22 guidance be cash flow positive?

That's absolutely correct. Ajay, that's correct.

But again as I mentioned I mean we need support from working capital, but I think you made it, you made the right interpretation here.

Fantastic. Thank you for that.

Very exciting.

Thank you.

Okay. Thank you very much.

We have seen that there aren't any questions anymore and we thank you very much for the discussion. And so I'd like to close the Q&A.

And from my side I would like to say goodbye. Before leaving the call, I would like to hand over to Jose Luis for the final remarks.

Thank you very much for your participation and for your questions. I would say key takeaways is not any different that we have - that one we have been discussing.

First the business performance 2020 significantly affected by COVID. However, the main impacts are already reflected in the current financial figures.

Second very important solid order backlog of nearly 8 gigawatt growing at one of the strongest pace in the onshore wind industry primarily coming from Europe or North America and primarily coming from the more profitable Delta4000 product. Financial year 2021 shows materially better risk and margin profile compared to 2020 execution book.

Installations plan in 2021, 60% Europe, 20% US increase substantially the business and the activity in Europe. As mentioned, comprehensive company program in place is starting to yield upsides from mid-financial year 2021 and strategic targets around 6 plus gigawatt company approximately 5 billion in sales approximately 8% EBITDA margin by financial year 2022.

And more details will follow in 2021 where we plan to go in detail with you in our Capital Market Day expected to happen in spring 2021. So thank you very much and wish you a wonderful weekend.

Thank you. Bye, bye.

Thank you. Bye, bye.

All right.