Técnicas Reunidas, S.A.

Hello. Good afternoon.

This is Eduardo San Miguel. Welcome to the first quarter 2021 results presentation.

It will be conducted as always by our Juan Llado, our Chairman. It will take something like 20 minutes and you can pose questions after the speech.

Now I give the floor to Mr. Juan Llado.

Hi. Hello everyone.

We established a big picture and this picture because the one that I will show you afterwards is not very good. This happens to be the Al Zour refinery.

It is the largest refinery ever built from start. They are the largest ones but this is the one where we are in the process of finalizing commissioning of TR's main process units.

So I wasn't going to say that in my presentation but I was looking at the picture and I thought that it was relevant. Okay.

This presentation, it is going to be different. It's organized in two parts.

The first part that we call challenging environment. Actually, you know, this section is going to very much focus in this environment, challenging environment, what our first quarter results and what has been the impact, the good and bad in this first three months.

And how management has reacted to COVID. The second one is more positive.

The second section is most positives which has to do with awards. Awards that had ready taken place and very strong signs of a positive market, the market recovery.

Okay. Let's move to the first part of the presentation.

And when I said here, delivering projects, I have a slide here with three main projects. And this is just an example.

Three main project through this year because let's talk of what has happened over this full year, as last May was the first time that I have made a presentation to you under COVID involvement and today 12 months later, May again, I making a presentation also under COVID environment, but with a tremendous effort on execution, delivery and definitely a very different market. Over this year, we have delivered and fully delivered, this is Fadhili, the largest, well at least one of the largest, gas processing plant in Saudi Arabia.

It has not been easy. The contract value was close to €30 million.

It has not been easy. I mean have we suffered COVID?

Yes. Have we suffered problems?

Of course. But together with the customer, we have been extremely successful and today we have a plan that is up and working.

So this is a success story. And now we move to Al Zour, which is the big picture that I show you before.

It is the picture of the largest refinery built at once, 600,000 barrels. The outflow is contract, the full contact is likely above €4 billion where TR takes the lead at 50%, leads and manages the project over this year.

It has truly has not been an easy year, neither for customer not for us in Kuwait but we have successfully finished, preserved and now recommissioning this huge refinery. And within this year, we have received the Gold Award of Health and Safety and Environmental projects, which is very important in Kuwait and is very important in this huge Gulf.

Again, a success story, delivery of large strategic jobs. And now I like to move to Ras Tanura.

Ras Tanura is not finished. We like to finish.

It was planned to be finished but it is not finished. Obviously, we have been impacted by COVID.

Ras Tanura is one of the most problematic refineries in Saudi Arabia. We are doing both revamping, working with inside the refinery and new units and successfully, I have to say successfully because probably where we have had more problems and issues and difficulties and inspections within this horrendous pandemic.

But with a good customer, with good contractors, with very good subcontractors, we are very close today to deliver the job which probably would be delivered within weeks. And this would allow the customer again, Saudi Aramco, to startup and produce clean fuel under the most stringent specifications and sell to the market.

So there are more examples of that. We have been successful in Malaysia, extremely successful.

In Peru, where pandemic has been awful and still having problems but we are managing with customer and subcontractors. So it's been a year of delivery and it's been an year of very strong and active management activity within our site in constant dialogue with the customers.

And obviously, we didn't have the same level of success with our client or customer, MGT. MGT Teesside in the UK.

Very much against our expectation. As I talked to you last February when I presented end of the year of accounts, the customer has finally terminated the contract this month of May.

And I like to express here my high level of frustration because as I illustrated in my previous slide, it is in our DNA to make anything and everything within our reach to deliver projects to our customer's satisfaction and very often exceeding our performance to the best of their expectations. And always, we work and solve our issues in a very constant and open dialogue.

Here, it is obvious it has not been the case. I am extremely unhappy and frustrated about this outcome.

But we have not been able to reach an agreement. And agreement that I really think we have been working very hard to reach.

I am unhappy and frustrated after TR's efforts to work and execute the project under most difficult environment, under the Brexit and COVID. Obviously, I am unhappy and frustrated after incurred cost and losses and reaching agreements with subcontractors and suppliers and not reaching an agreement with our customer.

I am unhappy and frustrated after 99 completion and celebrating last month the first firing with fuel. It is too last month I had to congratulate my team, I always do, my team on site.

First fining is an extremely important milestone. And as I said, it is in our DNA to complete and deliver and it will continue to be that way.

You all know that it is not correct and it is not my style to comment on client decisions and I will avoid answering questions about it. We had a good understanding over the last few years with this customer and we may have in the near future.

But today, this is an event that will have to be settled through the ICC arbitration procedures. Meanwhile, we have taken the hit of €103 million, with the intention of not having to come back to you with further bad news.

And with this hit and this announcement, we are currently probably most of you have read this morning, let's do an analysis of how was the first quarter results. On the first quarter results, after €103 million hit, we have a real negative EBIT of €50 million.

If we adjusted to this hit, the €103 million COVID UK, let's call it and then we deduct €12 million of other COVID impact, which plus €12 million reflect customer recovery has taking place this first quarter and they were booked as cost on the 2020 accounts. And if we add up our restructuring costs, which are not that much, only €2 million, we ended up here with an adjusted EBIT of €43 million, which I think it shows obviously here the bad news at the very beginning.

It's the contract that has been terminated. The positive news is that the underlying of the business is healthy, strong and visible.

And it's healthy and strong because we have a strong backlog. We have strong customers.

And we have done our homework. We have done our homework which we are counting for this year for €1 million in corporate restructuring and full year activity that would be €11 million.

We are accounting this year for €6 million in rentals reduction and full activity year we will still pay some of those rent as we moving in to smaller space would be €9 million. And we already accounting this year €26 million of what we call project execution efficiencies.

And full year activity, this will be through 2022 for sure, that would be very close, if not more if we grow and we are ready to grow, €50 million. So we have gone through this year, another this year our homework.

We have delivered and we have included in our activity great deal of efficiencies. So today our adjusted P&L or adjusted EBIT is strong adjusted EBIT is real EBIT.

And it shows the strength of the business a business that is growing. Our cash position is lower and it was expected to be lower unless we have had awards.

The evolution of the cash position, it very much has to do as we are finalizing and delivering projects. When you deliver projects, cash is never positive.

The last payment is the last payment. You don't get the last payment until you finish and we finish it.

Obviously, whenever reprogram projects come into force, second half of 2022 and the big awards that took place in year ago in 2019, cash will come back again. But we are suffering the reprogram.

Reprogram project probably, by definition, they are not cash rich. They have been reprogrammed by our customers not to be cash rich and they are not.

And obviously, we have suffered more than 12 months, almost 18 months in with practically no awards. The new awards are already coming and cash would be recovered.

So with no new awards, o down payments, we are suffering lower level of cash, which is what we are showing this first quarter. So we do again a summary of our accounts.

We have a sales figure which is a low sales figure of €763 million and it is low because our jobs have been reprogrammed. We have suffered 12 months is no longer parentheses of COVID with no awards.

We have a negative EBIT of €50 million, which adjusted as explained before, adjusted to Teesside and COVID, movies up and I have to likely say solid €43 million and a net cash, positive cash of €63 million. And here in blue, what you are seeing is to important news.

We have year-to-date an order intake of €1.9 billion and year-to-date we have a backlog of €10.2 billion. So this is very much a picture of accounting-wise where we are.

And with that, talking about order intake and backlog, we can move to the second section of the presentation, the major investment wave, what are the awards that have materialized and what is happening already within TR in the energy transition. Obviously, everyone in this sector and you have probably read more analysis than I did is positive about the macro dynamics.

I mean not here, the two examples, Saudi Aramco and Repsol, two major oil integrated companies and two energy service companies, TechnipFMC and Schlumberger. They are all positive.

They are positive because they are investing. They are positive because they sanction new investments.

And they are positive because they are benefiting from the awards. So we are positive as well as I can show you on the following slide.

I am positive because if a year ago, it stood at higher pipeline, but I had a pipeline which was there, but I had no idea for when. Today I have pipeline that is with a pent-up acceleration taking place.

And it's a pipeline which we happen to be extremely well positioned. And this pipeline, we will talk about it afterwards, it makes me to be a very confident and not very as the year we will book awards above €4 billion, it shouldn't be very challenging.

You do remember the two months ago, it was €3.5 billion. I don't want to be over optimistic, but €4 billion shouldn't very challenging.

And it shouldn't be very challenging because out of the €50 billion, there is €7.5 billion, they have already been tendered and we happen to be the top-ranked bidder. It doesn't mean we are going to get them all, but it means we will be in the final position.

If I talk about awards and as I said, we had an order intake of €1.9 billion and review with you who are those €1.9 billion. Obviously, at the very beginning of the year, we closed a contract of a PTA in Turkey for SASA Polyester.

It is a contract which is a cost-plus. We do everything through our books with the scheme of fees and it is a contract that is doing very well.

We have already placed many orders. Engineering is moving fast.

We find this way of the customer to do sometimes doing expansion and improvement, sometimes doing value engineering. But let me tell you, it is a good contract.

It is a good contract. It is a good contact for the customer and it is a good contract to TR.

Very recently, we have been selected by a customer in Europe for a very large Olefins plant. We have been selected and we have won.

And we do expect to sign the contract within the next weeks. Obviously, until we sign the contract, we can not disclose the name of the customer.

But I thought it was important in this presentation to announce that we do have a contract. It shows that the market is in investment mood and it shows that TR franchise has good value to our customers.

And very recently as well, we signed a contract that our customer allow us to announce very recently. We signed the contract a few weeks ago.

Global Industrial Dynamics award to us under an open book scheme, a biofuel plant. It happens to be and it might be the first of many if we do well.

And this is an investment of €200 million. And this, although the amount of €50 million in engineering shows to be less important, it is not.

It really shows that in Indonesia, we have been selected to its truly large investments that we have announced. It means that in Tuban, Indonesia as well, we have been selected long ago, a year ago, to do the basic design of a very huge investment more than €10 billion.

We did the basic design. And very recently, as we have announced we are moving to the second phase, he front-end design which shows that we have to and we already doing, move out of engineering.

Most of them process engineers from 100 to peaks of 700 that shows that investments are taking place and customer has already award of the technology and basic designs to our main technology providers. It is good news.

I could not say that a year ago. Although we were starting the basic design.

And there are many other which in terms of dollar amounts they are not very important project that shows that market has changed. And the market has changed, I am going to say for good, but definitely for the next few years.

And here in this slide, which is a slide that I have never, I have to, I am not going to spend much time on it. But as I said before, that we have to €7.5 billion of immediate awards, I am not going to say they are all going to be awarded to us.

But what I am going to say here that you see on the left side in green what has already been awarded during this year. This is the pace of the awards.

All those jobs from the delayed corker unit in Europe to the power plant in Latin America with big €1 billion natural gas in the Middle East. Awards are going to be sanctioned in the few months, first half of the year.

Obviously, there are investments that's already being sanctioned. We have already bid and we are already frontrunners.

What I mean frontrunners is that there are one or two us final runners that will take the awards in the second half of the year. And we are very well positioned.

So this visibility that I am showing to you today, it would have been impossible to do a year ago. And this is a big change.

And this sense of immediacy that we saw in the market with our customer, that's why we signed SASA, that's why we singed just started an open book with our customer and that's why we are going to be signing the contract in Europe. This sense of immediacy is what makes the near future and makes me feel extremely positive.

Visibility and immediacy, probably are the two words that we have to keep in this line. And finally, energy transition.

Many, probably some of you or probably all of you don't remember what I said a year ago, but I remember all of us were saying that obviously, this is a year of energy efficient. We had seminars and some analysts and ourselves were saying it that was going to happen, is there with reality, companies like us, like TR, we have the resources to be part of it.

And today, I don't want to get into details of the different engineering agreements that we have signed and what it means to have a €3 billion pipeline in energy transition. Today, the big change is that we are already part of this transition.

A year ago, we had the resources and today we are part of that transition. And we are part in the three main technology hydrogen, carbon capture and bioenergy.

In the filed that we been called we have been awarded studies, we been awarded projects that you have seen in Europe and I do believe that in the very near future important part of our backlog will have to do with these three technologies. And having said that, let me finish what can be called guidance.

Obviously, I cannot, being in May, our sales figures cannot be much larger than €3.5 billion. We have to wait for the restructuring and backlog to come into force in second half of 2022 and we have to wait for awards to come into force.

The adjusted margin, we cannot be extremely positive this year. Still a lot of uncertainties that happened but it is going to be around 3%.

And as I said before, we do feel very comfortable replacing our sales and we do very possibly of having awards above €4 billion. And this is it.

I think with these last slide, I finished my presentation. And I am here more than happy to answer any questions that you might pose.

Hi. Good afternoon.

Thank you for your presentation. I have three questions, if I may.

The first one is on your guidance for the margin. Having 5.7% in EBIT margin this quarter, why are you so conservative for the full year?

Or is this some sale --

Francisco?

Yes.

We have a problem. We hear year but you have to speak louder because we barely hear you.

Okay. Is it much better now?

Okay. Now we hear you well.

Okay. So well, my first question is on the EBIT margin guidance.

So having 5.7% in this quarter, why are you so conservative for the full year? And if there some one-off in this quarter that won't allow you to be more conservative, sorry, more optimistic?

The second on is Teesside. It's just to confirm, you have seen already the full impact in this Q1?

And if you could give us a guidance of how much do you expect to recover and if there is any idea of the cash impact of this situation? And the last question is on this sort term order intake that you have commented, I mean the one in the next two months, how likely you see with their current position?

Okay. Francisco.

I don't know whether you hear me. Can you hear me?

Yes.

Okay. Thanks for the question, Francisco.

Let me cover the Teesside. Unfortunately, I cannot make any comments.

We are starting now arbitrage. And it's not correct and prudent to start making comments of whether we recover or not.

Obviously, we started an arbitrage because we do believe we can recover. But I cannot do any further analysis on that.

On the margin, yes, I can. Obviously, it's true that this first quarter, our margin is strong.

It's 5.7%. But I don't want to be optimistic on the year-end adjusted margin above 3%.

This first quarter, it doesn't reflect 100%. It reflect the strength of our backlog of project.

But obviously, in this first three months, we have been able to get some efficiencies in some very large projects that would not be repeated over the next three quarters. So I am going to say it's overstated but that's what our account reflects.

You manage the jobs well and some of the jobs, with the up and downs of COVID recovering and not recovering, there have been some very good efficiencies that has been applied this quarter and it shows a very strong margin. But it doesn't allow me to predict the margin over the next three quarters coming forward.

So I think our guidance has to stay with 3%. On the short term order intake, I have to say we already had order intake.

We have to sign a contract that we have been awarded. So we have order intake of €1.9 billion.

And the first ones that I show you in this slide which is on this next quarter, I mean before next month or next two months, I have to say that I am optimistic. I mean, you have to discount that I am always being optimistic.

So you have to take a discount factor there first. But I am optimistic.

We are known to the customers. I think customer like us.

We have done good offers. Customers know how we do those jobs.

It is a hard core business. It is a business that we know how to do very well and allows me to be very optimistic.

But I mean at the end of the day, we have to win and I don't know whether there were more questions. But I think that I have not fully answered the three questions but that I have answered your questions.

The only follow-up is on Teesside. If the €103 Million that we have seen this quarter is going to be the full amount of the impact that you expect?

So no further amount in Q2 results?

We have booked this first quarter although the termination has been now recently what we consider to be the full amount. That's why I said that we have taken €103 million because there is no intention to come back to the market with further losses.

Okay. Thank you very much Juan.

Sure, Francisco.

Good evening. This is Mick here.

A couple of questions, if I may. So one, thank you for that chart of the expected or potential awards going forward.

And I don't think I have ever seen something like that before. What strikes me is that there is a significant amount of that potential work in Europe.

Given with what's going on with Teesside, what went on in Finland, what went on in Belgian, can you just talk about what changes you have made to bidding on those European projects to derisk them? And secondly then, can we talk about the transition pipeline?

You talk about €3 billion, which is great to see. A lot of it seems to be early phase, so pre-feed, engineering services.

So what's the conversation time of that €3 billion pipeline? Is it the normal type of conversion?

Or is it going to take a bit longer before it becomes tangible projects? Thank you.

Yes. The first one is obviously, yes, it's true that you see awards in Europe but very much in line with your note, those awards are with industrial customers that they are going to keep the assets.

And when I say Europe as well, I am talking the broader Europe.

The implicit recognition --

It includes Europe and Europe includes involving Russia.

Yes. Okay.

And not the U.K. To answer the second question, it has to do with transition.

Most of them, I mean that the big value of them, is very much related to biofuels.

Okay.

I think in biofuels we are very much are very well positioned. And we do expect awards in end of 2021 to 2022.

It doesn't mean we are going to win the €3 billion. But I mean, having a pipeline and being invited and consulted and doing the studies for investment that amount €3 billion is a big change for where we were a year ago.

So a percentage of that, this is a new business and it is difficult talk when it is going to be converted. Sometimes they are still working for subsidies.

Sometimes they are working for financing. And some of them, we might win a little money doing studies in front-end design and it maybe converted in 2026.

We have no idea.

Yes. Okay.

But I think the market is moving forward and we will be seeing some awards, part of those €3 billion will be converted and hopefully we will be winning some within the next 18 months.

Okay. And can I just ask on that.

Clearly, on these transition projects, given that you are involved a lot earlier, we have always heard that the earlier you are involved in the project, the more deliverable that project is and ultimately your chunk of recording a margin that's acceptable becomes higher. Is that the case of these transition projects that you are part of the design process and therefore it should be easier to deliver if it gets that far.

I mean in all the transition projects, at least and I will say 100% of them, we are starting from the very beginning. We are starting with study.

From there to basic design. And from there an analysis of the investment.

And from there at front-end design. I don't think that the market is mature enough.

They are new technologies for work as the normal oil and gas traditional business used to be. All those projects, they need the assistance and help to be structured.

I am not going to say financially, but definitely technical. And this is the way we can step in.

Okay. Well, it looks like you got in.

Good luck with it. Thank you.

Thank you very much, Mick.

Hi. I have two questions, please.

The first one, given the rise that we have seen in steel prices and the inflation, so just wanted to know how do you plan to manage them? And does it present a headwind for margin?

And my second question is, in the provisions, the numbers have increased from €37 million to €128 million. So does that all relate to Teesside?

Or is there anything else over there? Thank you.

Nikhil, can you repeat the question because we don't have a good line with you. I don't know.

Can you repeat slowly because we barely can hear you.

Sure. So my two questions are, the first one, given the rise in steel prices that we have seen, does that present any headwinds to the margin going into 2022?

And second question is about the provision, it has risen from €37 million to €128 million. So does that relate to Teesside?

Or is there anything else in there? Did you get me?

Yes. We are on the commodity prices.

Okay. I mean, obviously, we are seeing commodity prices, steel prices moving forward.

I think this reflects in the futures market that the investments are going to take place. It is true that we have to be careful.

And we are being very careful placing the bids. But it's also very, but it is also true that the shops, our suppliers today that incredible excess capacity and the prices here have not been translating to the manufacturers and equipment suppliers.

But obviously, we have to be careful. But I don't see it today as I look at it in a positive way.

I look it as a headwind. But not only loot at it as a headwind, I look at it as a positive way.

That means that the market is really recovering. But it is true that these prices, steel prices, they are not still been affecting the shops and the suppliers.

And the second one, the provision figure. To be honest with you.

I can provide the answer. This provision is devoted to cover multiple assets.

I mean, it's not that the U.K. or any other relevant things.

I mean I think it's composed by no less of 10 to 12 different provisions. So what you see there is the net effect.

The movement of all those provision within the quarter. The main provision, honestly, has to do with the €103 million of the U.K.

Okay. That's clear.

Thank you.

Thank you Nikhil.

Hello. Hope all of you are doing all well.

Just a couple of questions on the performance in this quarter.

Alejandro?

Yes?

Alejandro, it is very difficult. We have a bad line.

It's very difficult to hear you.

Okay. So I will try.

It's better now?

Now it's perfect.

Okay. Perfect.

Sorry for the line. We are always with these headsets and things like that.

Well, the first question is about your balance sheet and the cash position. Is this situation a challenge in terms of the bidding process and the new awards?

I mean your clients are giving you some feedback about the current position if it's solid enough in this process? That will be the first question.

And the second is about the energy transition. Do you see a company, I don't know, with the level of 20% or 30% of revenues from energy position in the medium-term?

Or do you some potential waiting of this activity in the future in your company? Thank you.

Alejandro, the first question. I mean, for the time being, we are talking to all the customers.

We are presenting bids. And have a lower net cash position is still a net cash position.

And it has not been affecting our pre-qualifications in bidding and the quality of the franchise at all. Nevertheless, obviously, we are working hard to improve it.

The second one has to do with energy transition. And you are asking me, if potential waiting of energy transition.

Very difficult, Alejandro. As I said before, a year ago, we had zero probably and no requests.

All we were saying that we were the type of companies that can put together 100 process engineers and develop together with an investor a big hydrogen as green as possible to provide supply of energy plant. And there not that many companies that can do that and has the know-how to do it.

And today, we are doing it. But still, we are doing it.

And we start in the basic design. So it's early for me to pose whether it's going to be what part of the energy work out of the revenues in the immediate term is going to be that.

I do expect it is going to be faster than expected. I do believe that it is going to be, I do believe it is a reality and it is going to happen.

We have an idea. There is the money.

The public funds and the government commitment to make it happen. And we have the investors and the know-how to make it happen as well.

So it is going to happen. But it is very difficult for me to pose how much.

All I can tell you, we are very much focused. We are extremely focused with our customers and potential investors.

And I think we can create value. And we are already creating value to some of those potential investors.

But it's very difficult to say what percentage of the business.

Okay. Thank you very much.

Sure, Alejandro.

Yes. Good evening.

Thanks for taking my question. I have a kind of follow-up on the one from Mick and on submitted bids on the energy transition.

If I understood you, you say that you on almost 100% of those projects you were engaged since the very beginning with assistance et cetera. So I was wondering, should we understand that basically the competition may be limited on those projects and that maybe you are almost alone working on the feed, et cetera?

Or the competition environment is different? So that's the first question.

The second one is related to the margin. Sorry to come back on that.

But I was wondering also, why are you so conservative to come back on the first question, because I understand that you remain prudent but if we look at your guidance for revenues, basically you should have a nice uptick in terms of revenue in Q2, Q3, Q4. And so I guess that the coverage of your fixed cost will be easier or so, so that the margins should not significantly decline if you did not benefit from any exceptional event in Q1.

that will be my two questions, please.

Okay. The first question, Kevin, if there are limited competition, I mean it will be beautiful to have a world without competition and it will be very good to have a world and a business with limited competition.

For the time being, it is very difficult, again to pose where the competition is going to be. It is true that in all the projects that we are working on and we have listed, we are there from the very beginning.

So if we were there from the very beginning, we have to build and Bill and then turning to real investments, some of them will, some others will not. But on the jobs that we start from the very beginning, we have to build the trust on the customer that we are competitive.

And we will be competitive because if we are not competitive working with them from the very beginning, there is going to be, we will have always the same level of competition that we always had. So competition is going to be there.

Our competitors in the traditional energy market and other competitors as well today in the energy transition. It is true that when you start the job from the very beginning and you start with a player and from day zero, the probability of winning the job and learning through the very beginning through that job allows us to perform better for the customer and to improve margins.

That has been the case in the traditional energy business and probably will be very much the case, probably more as we talk sometimes in new projects in new technologies in the energy transition. But we have to think and we have to plan the business with the same level of competition that we always had.

The second one is, it would be imprudent. I don't think we are being prudent.

I am talking percentage wise. It is true that our revenue will increase and we are maintaining our 3% adjusted margins.

We still are going to facing uncertainties. I mean, let's not all be positive.

Uncertainties, I mean one of the uncertainties have to do with India. Some of the jobs that we are working today in good dialogue with our customers, we have to stop one part of the construction and continue with the others because some of the construction companies in the Middle East, they happen to be from India.

And nobody would have expected months ago what is happening today in India. So while a lot of uncertainties, we have to be ready for uncertainties.

It is also true that over the last 12 months, we have learned how to manage those in a better way with our customers and with our teams. But we are not being stingy with the margins.

I think I am being realistic. And 3% is realistic adjusted margin.

Okay. Thanks for that.

Have a good day.

All right. Thank you very much for taking my questions.

I have got a couple of them, right, Juan. So first one sort of carries on from the last answer there, right.

I was just interested to understand whether you are seeing a sort of material reduction now in the impacts on-site from COVID? And if not, whether your customers are still tolerating some of the sort of scheduled delays from the pandemic?

So just would be interested to see how that is evolving. And the second question, really, obviously, good to see the pipeline laid out there.

In terms of the stuff you have won year-to-date, it's either open book or reimbursable, is that a sort of similar trend that we are seeing in the pipeline going forward? And could you perhaps kind of characterize sort of T&Cs, as it were?

Is there kind of good cash advances in these projects? And how should we think about your cash balance evolving into the second half of the year?

Thanks.

I mean, on COVID issues, obviously, customers, we have an open dialogue with customers and in most of the cases a very large percentage of the cases they are tolerating delays. In many of the cases, they are industrial customers and they have to tolerate it because those delays is to follow the law.

That has been the case in many of the countries we work in. We had to stop or partially stop or put measures having to do with distances, social businesses in the buses, social distances on the welders itself and it's the law.

It is not only our health and safety measures which they are. So we have to go by the law and customers have to work together with us and that's what we are doing to find ways to be efficient and find ways to increase productivity and find ways to reduce the impact.

But it is true that there is an impact. It is true that customers, nobody is happy to tolerate a impact, but in 90% of the cases and probably 100% of the industrial customers, they look for ways to improve the job and look for efficiencies, managing health, safety and therefore COVID in the most safety way.

And obviously, there is an impact. There is a delay.

And we work for them, how to minimize that. Obviously, many of the cases, there is an impact in money, there is an impact obviously in schedule and as we move down that impact sometimes it's also involved in the subcontractors.

But they don't like it. We don't like it.

But I think we are managing it rather successfully.

Okay. And then in terms of the pipeline?

And the second question maybe you can repeat it again because reception --

Yes. I am just trying to understand basically T&Cs in the project pipeline.

Cash advances, are they pretty good. Just thinking about, in fact, thinking about the margins that you are bidding on.

I mean obviously, some of this is competitive but just to sort of generalize, give us a feel for it, just because I noted the first couple of awards of the year, you got reimbursable and open-book type awards. So just trying to understand that pipeline?

And how it would potentially help that cash position recover through the rest of the year?

Okay. First, we are not bidding all the jobs we are bidding today, I think the market as well, we are bidding all the jobs with a net positive cash balance.

Obviously, it makes very little sense in this market and obviously in this positive market that we, in the new jobs, we predicting a market with a negative net cash position. It is true that we do expect that the market coming forward and if the market is different level of margins, it is a positive market.

Whenever it is a positive market, margins are better. I mean that's the way it goes.

And you were wondering that the first jobs that we have been awarded, it was on a cost-plus basis and it is a mix. It is not because we wanted to derisk as it is in Turkey we always been very successful.

It was a way that we put together with the customer to launch a project in the most fast and efficient way. And is the project, if the investor wants to have the job fast and efficient, it had to be cost-plus.

You couldn't wait to develop a detailed fee and to get into an open competition. The essence in this job was the schedule.

And that's why to put together a scheme by which we were working on cost-plus basis with fees in an extremely transparent way. And for the last five months, it has been working beautifully.

Okay.

Okay.

All right. Just one final, a different one from me, actually.

I can appreciate and I can hear your sort of frustration in terms of Teesside and I appreciate if you don't say too much about it. But obviously, it's a real surprise that a contract can be canceled when it's 99% complete.

And I am sort of struggling to get my head around that. I could maybe understand a customer not wanting to go forward with the project in the early, very early stages if market conditions change or whatnot.

But so late in the day and then you say kind of first fire already happened. I am sort of struggling to get my head around that, whether it was even possible.

And so maybe you could sort of just help me to understand how that come to pass and whether that risk exists on other jobs?

Yes. Obviously, as positive as you are, I am.

But it probably has nothing to do with that. It never happened.

I mean, it's a different type of customer. We were working for project finance customer.

We working for a vehicle. And it is probably to its interest to terminate at this time.

You know, we are, I said before, in our business, in the traditional business., when you are working for industrial customer and it happened to us very recently in the Middle East. First firing is a very important event.

I have the pictures that are now three few weeks ago. We also did the first firing together with GE in a power plant in the Middle East.

And the customer, GE and ourselves were celebrating. I mean, first firing at the end shows the plant is reliable.

I mean, first firing shows that all the systems around the plant has been operated. First firing means then the main boiler works.

And first firing means that the main and most important relevant bunch of items that have been fixed. Otherwise, you can't do it because you would be putting the operation the risk.

And that's it. Obviously, I cannot get in more details.

It's not possible and we will see how it goes.

Okay. I can understand your frustration.

Very strange. Thanks so much for your answers.

Hi. Thanks for taking my questions.

Going back to Teesside, I wanted to know what the €103 million provision includes. So I don't know whether this is just provision for the legal costs?

Or for potential legal claims? Or whether this includes also the recognition of maybe a write-down of accounts receivable that you had with the client?

Or whether there are still any outstanding balances with the client in the accounts receivable in the balance sheet? And also looking at the pipeline, my second question would be, from today to year-end, you have €7.5 billion in potential awards in which you have been enjoying the best placed and the guidance for above €4 billion would imply getting about €2 billion of this €7.5, which seems like a low percentage of just 30% for the projects in which you are especially well placed.

I don't know whether this is due to you being conservative on your success rate? Or whether you think that many or some of these projects can be delayed?

And also my third question would be, maybe looking into 2022 and the pipeline, the way I see this is that the pipeline have been increasing over the last few years because no projects were canceled but they were just being postponed and postponed and if most of the pipeline is now concentrating in 2021, as per the slide number 18, it seems like the pipeline for 2022 is a bit small. So I don't know what can you expect or what do you expect for order intake for 2022 and going forward?

Thanks.

Okay. Thanks for the questions.

Álvaro, the first question, unfortunately, I cannot answer. I am not going to make a breakdown of the €103 million.

You have to understand that that's part of the arbitrage material. Second question is on being conservative.

When I show to you that we have €7.5 billion, I am not going to say we are the first, I am saying we are frontrunners. So we still have, in some of the cases, competition.

So it could very well happen that some of those, we lose and some other gets postponed to first quarter next year. But I will show you when they are going to be awarded.

There could be some delays. But it is true that as what I had said that reaching €4 billion-plus is not very challenging.

But I am not going to change that number. But it is not very challenging.

So you can keep that away. And as you said, the 2022 pipeline, the pipeline has been moved forward.

It is true that we have move forward because customers for the last 12 months have stopped and sometimes didn't say anything, often didn't answer the phone and didn't cancel anything. But now they have gone back and made public, very public, that they are back in the game and they are already selecting and selecting us in some of the cases for the jobs, again for the jobs that were in the pipeline.

So what I can say that the pipeline that we have to-date has grown and it's a pipeline with far more visibility and short-term to be converted than it was a year ago, obviously. And also it is the pipeline that shows that on which we are already doing some of the feeds.

So it gives us a good opportunity to convert those feeds eventually into EPC or E3 jobs. So it is probably one of the strongest pipeline that we have had over the last four years.

Okay. Thank you very much.

Okay. Thank you.

Thank you very much. Thank you very much for listening to me.

And thank you very much for being so diligent and so good with the questions which I think had a lot of transparency and some times even color to this presentation. Thanks a lot.