Cadeler A/S Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 26, 2024

There are 7 speakers on the call.

Operator

Good morning, and welcome to Cateleur's Q3 2024 Earnings Presentation. Presenting today are Mikkel Glirrup, Chief Executive Officer and Peter Brogaard, Chief Financial Officer. Please be reminded that the presenters' remarks today will include forward looking statements. Actual results may differ materially from those contemplated. The risks and uncertainties that could cause Catalyr's results to differ materially from today's forward looking statements include those detailed in Catalyr's annual report on Form 20F on file with the United States Securities and Exchange Commission.

Operator

Any forward looking statements made this morning are based on assumptions as of today, and Catalyor undertakes no obligation to update these statements as a result of new information or future events. This morning's presentation includes both IFRS and certain non IFRS financial measures. A reconciliation of non IFRS financial measures to the nearest IFRS equivalent is provided in Catalyr's Q3 earnings release. The Q3 earnings release and today's earnings presentation are available on Catalyr's website at catalyr.com/investor. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session.

Operator

As a reminder, this call is being recorded today. If you have any objections, please disconnect at this time. Mikkel Gera, you may begin.

Speaker 1

Thank you very much, and welcome to this Q3 2024 presentation from Cadillac. And good morning to the U. S. Audience and good afternoon to the European audience and good evening to the Asian audience. So very pleased to be presenting our Q3 highlights and overall performance in Kedla.

Speaker 1

And as of Q3, we can say that our financial performance is in line with our expectation. We have increased our full year guidance to now be between €243,000,000 to €253,000,000 and our full year EBITDA guidance, we have narrowed the range to the upper end of the range. So it's now €115,000,000 to €125,000,000 Our newest vessel, the Wind Peak has arrived in Europe and is already on hire, which is very, very positive. 2 significant new projects, including our 2nd foundation projects, have been added to the backlog. And both of these projects that we have added to the backlog are multi vessel contracts.

Speaker 1

And I think that that really showcases the strength and the versatility of the Cadillac offering, but also really what the clients are buying in the market at the moment, which we have discussed before, it involves a lot around the redundancy that can be offered. We also see multiple O and M campaigns that are keeping our vessels busy between the projects and maximize our overall utilization. And that is something we believe that we will continue to see and something that will eat any available days on the fleet at least at what we see it as today. And then last but not least, we have added complementary expertise with Thomas Thun Anderson, the former Chairman of Erste amongst others that have joined our Board as an elected elected as an independent director. We believe that his skill set and what he knows from many years in the industry is something that Kettler will benefit from going forward.

Speaker 1

In terms of the commercial highlights in the quarter, I think that we can say that we have on the wind or we have completed the installation of 16, 14.7 Megawatt Offshore Wind Turbines from Siemens on the Moray West project. And this is the world's first installation of the 14.7 Megawatt platform from Siemens. And I think that we have learned a lot from that project and really also performed well and to the expectation of our clients and have completed the project on time and on budget with our client there. And I think that the good news is also that we have continued from that project on an O and M campaign that will take this vessel forward to our next installation project. On the Osprey, we continue to execute on Osprey and Bocken Riften 3 project.

Speaker 1

We have done many different things on this during this project with the client where we, amongst others, have released the vessel in between installation on this project where we have released the vessel for O and M support on a project in the Dutch zone, which really benefited both Kettler as our client, but also the client that had need for O and M services. And then has called additional 74 days on Boulden 3 and securing very strong utilization on Osprey going forward. On Zillow, we have discussed before, she continues to install in the U. S. And we are very, very happy with that contract in the U.

Speaker 1

S. And also the cooperation with both the local authorities, but also with the client and how we progress with our installation, our first installation in the U. S. Market. In terms of Saratan, she has completed her remaining 46 turbines on the Yunlin project.

Speaker 1

And I think everybody involved in that project are happy to see that that project is now completed. And we are now continuing on an O and M campaign for an undisclosed client. On the peak, we have completed the transit from China to Europe and she is currently mobilizing for her 1st job and an O and M campaign for an undisclosed client, but really happy to say that peak came directly on a contract when she came back to Europe and that we had multiple clients looking to be engaged with the Pieck before her first installation project versus the Sofia project starting next year. In terms of the backlog and what we have added to the backlog, we have added the Baltic 2 and 3 project together with Equinor and Pol Energy, a BTG installation project in 2027. As we have talked about before, 2027 was a focus year for Kettler to make sure that we had strong utilization in 2027.

Speaker 1

But also, we have secured our 2nd foundation project with an A class and an O class deployment on the East Anglia 2 project with Scottish Power Renewables where we both will do the foundations and the turbines and the project is also starting in 2027. And the project that we really believe is a continuation of what we did when we announced the Hornsea 3 project. And we do continue to see very strong demand for our services both in the turbine and the foundation space and hence very positive in the outlook for these spaces. And as I already said, O and M basically vacuums the rest of the utilization we have available at the moment because there's also very strong demand there. We continue to have vessel reservation agreements that we have not put in the backlog from various discussions with clients and still ongoing contract negotiations.

Speaker 1

And as and when they are coming to a final contract, then we of course will add them to the backlog. And as I said also at the half year mark, we continue to see a a backlog that continue that consists of both work in Europe, in Asia and in U. S. And we believe that that will continue going forward. In terms of how the contract backlog now stands at just short of €2,400,000,000 So a strong addition in this quarter to the backlog compared to what we announced at the half year mark.

Speaker 1

And this is a development that we expect to continue to see at least in the coming period due to the reservation agreements we have with clients and that we believe we will be able to convert into backlog. But really what has been adding to the backlog here, as I said already, these Anglia 2 and the Board 2 and 3, but also these multiple contracts on O and M services that are between the projects. So really filling in the gaps between the installation projects, ensuring very, very tightly knit string of pearls of projects and different O and M work that will secure a very, very high utilization on our vessels. And as we have already said at the half year mark, but I will repeat it just for the sake of good order that the O class vessels were out of operation in the Q1 of this year due to new cranes. And we also had the Saratan out for maintenance work before going back to the Unland project.

Speaker 1

And that of course impacts the overall year utilization on the vessel. But I think if you look at the quarter alone, then we see very strong utilization. Yeah. In terms of the progress on the newbuilds, we continue to see very, very strong progress. So Wind Peak delivered on time and on budget on 15th August 2024, where we had the name gearing ceremony out in Qidong in China and the vessel arrived in Rotterdam in November this year.

Speaker 1

On Windmaker, we expect delivery in Q1 2025. The overall construction completion sits at 83%. Sees launched from the drydock on the 3rd June and commissioning of the vessel is in progress around 50% completed and jacking trials and main crane load test planned to commence in December 2024. So we continue to push very, very hard on the yard and also with the performance we see out there because we are eager to get the maker delivered and get her out to work. And I think that we have a good cooperation with the yard to make that happen.

Speaker 1

So confident in our plan and our progress at the moment and We track it on a weekly basis on the maker and ensure that we deliver the weekly progress we need in order to secure the delivery schedule. On the wind pace, we expect delivery Q2 2025, the overall construction completion is at 99%. And here, I might add that the way the different yards are counting this number is slightly different. So it's not an average comparison between the 83% on Mayka and the 99% on pace. But PACE was launched from the drydock on 25th June 2024.

Speaker 1

And the commission and preparation for sea trials are ongoing. And the sea trials are planned for December 2024 as with the maker. And I think that we can overall say that the performance we see from COSCO continues to be very, very strong. And we will see vessels in general delivering slightly earlier than what we originally expected from the yard. On Mover, not diving so much into the detail, but delivering Q4 2025 on Allied delivering in Q4 2025 and then on ACE delivering Q3, 2020 6 and Apex on Q2 and 2027.

Speaker 1

So overall, a very busy year in 2025 where we will see the delivery of up to 4 vessels. And that is something that of course have meant that we have been planning for that and also ensuring that we have the capabilities, the resources and everything, the systems in place to make sure that these vessels they come out and that they as soon as possible get into work and start generating revenue like we saw with peak. But I think that the lessons learned we had from the peak delivery now is something that we are baking into all these 4 vessels and believe that we are in a very, very good place on the whole CapEx program. Now we are heading into the financial highlights for Q3, 'twenty four and I will hand over to Peter. So Peter, please take it away.

Speaker 2

Thank you, Mencken. Yes, first, the financial highlights for Q3 for the 3 months in Q3 And that reflects, of course, the ramp up in activity that we have had in this quarter as compared to first half. We now have 4 vessels on water in operation and Winpeak being delivered but not on contract yet in Q3. So revenue significantly up as compared to last year €80,600,000,000 as compared to the €23,400,000 last year. This year, of course, it includes in any financials and the vessels, whereas last year we only had the 2 O class vessels, hence the increase in revenue.

Speaker 2

Energy ratio, 62%, still a solid balance sheet we have. Utilization also picking up as planned, now 86.5%. The market cap is at €2,000,000,000 We have seen that higher, but I think there has been a negative sentiment in the market, so probably not due to company specific news. Then we have an EBITDA of €48,400,000 where we can see the magnitude of what the vessels can perform of EBITDA in the quarter as compared to €8,000,000 last year. Cash flow from operating activities €27,500,000 The backlog as explained by Mel is at a record €2,400,000,000 3 months daily average turnover €4,800,000 If we look at the P and L for the 3 months in Q3, we can see that revenue of course up due to the merger, but also due to higher utilization.

Speaker 2

With the O Class, I mean, operation and the legacy Energy Asset Center and Sarlatan, So 4 vessels operating as compared to 2 last year. Cost of sales, of course, goes up in the volume. SG and A and other expenses reflects the build up that we have done of the resources in the company in order to execute on the projects that we have now and but also to execute on the projects that we have in the future, especially on the foundations. So it is partly an investment in the future. And then, of course, due to the merger with Eneledi, We are reaping the synergies that we expected when we announced the merger.

Speaker 2

So this is really a ramp up for a bigger activity in the company. EBITDA at €48,400,000 as compared to €7,900,000 last year. We have listed here Opex per day where we have excluded project cost and fuel just to have an average comparison for the $35,927 for the quarter. If we look at year to date for 9 months, of course, the numbers are impacted what we showed at half year that Q1 was a quarter with lower activity due to crane upgrades and serotonin anyway maintenance, so somewhat lower for the 9 months as compared to what we generated in 4 months, but it is really according to plan And how we can see when we get more vessels in operations, then our results will increase accordingly. We see the same in the future for WinPEAK coming into operations in Q4 this year and then with the 4 vessels coming in next year as explained by Maybelle.

Speaker 2

Very low, but it's per day is in line with last year, so under control. We see the same ramp up on the SG and A expenses as we explained in the quarter. It is we have now a headcount of 236 onshore in average as compared to 102 last year and it is an investment in being able to operate a company with that many projects and then many vessels as we have. Balance sheet, equity goes up due to the private placement that we did. This is as compared to end of year 2023.

Speaker 2

Equity goes up with the price adjustment that we did and the non current assets is of course the vessels that goes up with the delivery of L and P, but also in investment in newbuildings. But still a healthy energy ratio of 62%. If we look at the program and the financing, Then we have secured our signed and committed financing for the P class and M class, and we have also undrawn facility on the RCF. As we have disclosed before, that is with the collateral in the legacy assets on water, the vessels on water that is signed and committed. Then the A Class facility, there we have divided into 2, 455 on the 2 first A Class vessels.

Speaker 2

And that is that deal has been launched into the syndicate recently on a term sheet basis. So we are very confident that, that can be committed first half of twenty twenty five. And then it follows with the 3rd A class basis or the 2.40 subsequently. We decided to divide it into 2 because it's a 27th delivery of the 3rd area class basis, so paying commitment fees in such a long period will not be beneficial. And then we have put on top €70,000,000 and that requires a little bit of explanation.

Speaker 2

It is not that the business has been become more expensive or there is a change in the yard price, it is simply because in the financing, we have included also financing of mission equipment on the vessels when they are delivered for the 1st project. So when you see in the earnings release the debt financing that we expect, that is including this mission agreement, but that is only related to that we are able to improve the terms in the facility. So it also covers a missing equipment improving the liquidity and the cash flow of the company. The contract bias is still the same. The financing of the installments is still the same, €1,500,000,000 in total.

Speaker 2

And then you can see what is outstanding of CapEx. It's on the second P class versus it's on the M class versus to be delivered next year and then it's on the A class versus so conclusion here is that we have the funding in place. We are not depending on issuing new shares. We can fund the CapEx program with our current and expected financing that are in advanced stages. Still we have a hedge in policy of hedging 50% of your U.

Speaker 2

S. Dollar exposure and 50% of the interest rate and we follow that guideline continuously. Financing overview shows what is committed at €1,400,000,000 and what we have utilized as of end of September. And then you can see the oncommitted financing that is A class where we are in a very progressed stage with the lenders. If we look at the full year outlook, we have now the EBITDA guidance to the overall level of the veins and increased the revenue as compared to previously communicated and it is due to it's a recent threefold and it is that

Speaker 3

we have

Speaker 2

seen customers calling for more options. We have seen that we are able to fill these gaps between projects with the O and M contracts as we have been communicating throughout the year. We see a very strong market for that and that is what we can do now filling in the gaps, which is the foundation for this whole board now. And then we have a termination fee from a terminated legacy contract. That was the update on the financials.

Speaker 2

So Bert, do you Thank you, Peter.

Speaker 1

Just a little bit of commercial outlook for how we see the year ending and but also how kind of like what we are seeing going forward in general. In terms of this slide here, we have received a lot of questions since the elections in the U. S. So what is the impact of the election result in the U. S?

Speaker 1

And I think that the left side of this slide here shows that at least our view and maybe we are even more, let's say, conservative on our view on the U. S. Market. But the light blue color here on top of the graph on the left side is really how the U. S.

Speaker 1

Market is seen by the people that collect market data and the ones that we use. So it's really the U. S. Market for a long time has been the peel on the orange smaller than anything else. And it's a market that we still believe that that will grow over time.

Speaker 1

But also a market where we have said from a long time back that we are more positive on it, but we are still taking an approach where we are looking at the projects in the U. S. On a case by case basis. So it's not just saying that we are just diving full into the U. S.

Speaker 1

Market just because we are executing a project there. We take a balanced approach and we are looking at it whether it's the right thing for Kepler to do. At the same time where you have 2 other markets that are growing significantly faster and that is of course the European market that is growing very, very fast and where we also see the commitments, especially in the U. K. Being very significant, but also in countries like Denmark, Germany, Poland, very, very strong commitment as well.

Speaker 1

But also in Asia, where we have also signed a reservation agreement, we see very strong commitment to the market and to the general outbuild of the industry. And I would say that at the moment, we are trying to balance, let's say, our focus, but we still have a focus on the U. S. Market because we believe that there are projects in the U. S.

Speaker 1

That can be very accretive to what we do. But when we sign up to a project in the U. S, we have also said that before, both to investors, to analysts and to our clients, if you want capital to work on a project in the U. S. Then it has to be a very strong, let's say, risk mitigation on the projects because we need to make sure that the vessels are working when they are booked to work.

Speaker 1

And that is really how we approach that market. We still see that the turbines, they continue to grow in size. And we have seen first project in Europe now with an 18.5 megabat turbine. So that is at least validated by that. It supports the overall catalysts because our vessels are really designed to do the bigger equipment.

Speaker 1

And hence, we feel comfortable around these fundamentals in the market where we see projects going further offshore and deeper waters with bigger equipment. And then something we see across different markets and we see different complexities in different markets where probably we can say that Asia is governed by soil complexity, U. S. By water depth and Europe by a mixture of all of the components at the moment. But really, we feel well prepared for that and in a very, very good place.

Speaker 1

And I think that recent market developments have confirmed that to us and we will also be pushing out these news to the market as and when we are at a firm contract stage. In terms of the overall picture in the industry, how that looks like, we continue to be the largest contractor in the industry with 11 vessels at fully delivered states. And in terms of presence we have been asked in the past, will there be more consolidation and all of that or potentially newbuild orders, we have not seen any of that. And in general, we see that there's not a lot of that going on at the moment. Of course, can some of that happens?

Speaker 1

We still believe that the consolidation in the industry makes sense. So can that happen? Of course, it can. But at the moment, we haven't seen anything. I think that we in general with our fleet can say that we are being approached a lot by clients for our free spaces in the fleet and to support clients on various practice.

Speaker 1

As we also hinted to in our backlog slide, we are seeing that these in between gaps that we have between projects, they are being vacuumed at the moment by the clients. And in many cases, there are several clients taking a position for these periods and trying to talk to Kettler about how can we get particularly the DARE project executed in one of those gaps. We work with our clients. All of them, we are still very, very relationship driven as a company and we try to create value both for our clients and for our industry and that's really how we balance this off when we have several clients asking for the same period of time together with, of course, the value we want to return to our investors. The strategy on having vessels that are similar, we see that that is also something that is working for us because we are now more and more in a situation where we're offering clients a capable vessel and not a specific vessel.

Speaker 1

And that really also means that we can drive the utilization slightly stronger. And that is one of the benefits of having a bigger fleet compared to where we were just a few years back where we were operating 2 vessels. We already see now with the 5 vessels we have on the water that that is giving us certain advantages in terms of how we can drive the utilization. And then we continue to say that the overall market outlook and what we see from the end of this decade and the beginning of the next, so we can basically say from the mid to the end of the decade and so in the beginning of the next, at least the first half of the next decade, we do see a very, very strong demand for our services. And in a market where the shipyard capacity is very, very short and also time to delivery, if you order a vessel, is significantly extended compared to what would be normal.

Speaker 1

We believe that we have ordered the vessels at the right price at the right time and are ready to launch them into the market to the benefits of both us, our investors and our clients. And we believe that that is really a win win. We will continue to work on our global footprint and work in the regions where it makes sense for Kedla. And we believe that this model of offering our services to the clients in many different ways with several vessels on a project or let's say the commitment to deliver a speed up vessel if needed, That is something that will continue to drive more value. And in an industry where there's other supply chain issues than just the vessels, we also believe that there will be further win win scenarios where a catalog can help our clients and in return have stronger utilization and stronger financial fundamentals in the company to the benefit of our investors.

Speaker 1

So in terms of investment highlights, we have been through some of it in the past. But just reiterating really in catalog, we have the largest and most capable, most versatile fleet in the industry. And it's very strong in terms of its complementarity. And that really enables us to do cost utilization, more efficiency and derisking of projects, both for Cadillac and for our clients. We have a very, very strong team.

Speaker 1

And as Peter said, we are growing the team as expected and also as we explained at the midyear mark where we have different scenarios for what we are doing. And with the strong, let's say, demand we see at the moment for the foundation projects on all 3 A class vessels, we are in a situation also where continuous strengthening of the team is really a focus for us. And I'm happy to say that we are seeing very, very strong willingness from the market to work for Catalya both on and offshore. And that is, of course, making us confident that we are able to deliver what we are also planning to deliver here. And it really has means that we also have the critical know how, but also these commercial relationships with our clients that are super important in our industry.

Speaker 1

We believe that we have a global growth platform and our presence in all major wind markets is something I'm confident we continue. So even today with the election in the U. S, I do see still a demand from the American market, for example, for the services that we are delivering. And at the moment, we are collecting knowledge in the U. S.

Speaker 1

On what I would call a very low risk contract. And that will be beneficial to CATALA and CATALA's investors in the future. We still anticipate an undersupply of capable turbine and foundation vessels from 2027 and onwards. And we see also that the way we work with clients is shifting slightly and also driving the whole case as we have expected and also as we have explained on previous occasions and overall still very, very positive on how we see the market developing. So on track record in the capital markets as well.

Speaker 1

And I think that our backlog that we continue to increase and grow at very, very accretive rates is something that we that is both liked by the investors, but also by the banks where we secure our financing. That is also why we are still confident in the overall plan in terms of our capital allocation policy and strategy. And we remain to have a focus of being a good custodian of capital and really delivering what we promised to you guys when you listen to us. That is the end of our presentation. And from here, we are very, very happy to take questions from the audience.

Operator

Thank you. Wait a moment and once you have been promoted, you may unmute yourself and ask your question. We encourage you to turn your video on as well. Written questions can also be submitted by any viewer using the Ask a Question tab at the top right of your screen. Our first question will come from Ben Nolan from Stifel.

Operator

Please go ahead.

Speaker 4

Great. Thank you and good afternoon. I wanted to ask a little bit on the multi vessel business that you're doing. Obviously, the last number of contracts that you won have been multi vessel. Do you and I think very clearly, there's the synergies associated with that and perhaps CU is the largest operator, have a competitive advantage there.

Speaker 4

Do you think that that's the way of the industry going forward? And do you think that it might make it more challenging for those companies that might have only 1 or 2 or a limited number of assets available to be able to compete on that basis?

Speaker 1

So yes, we do believe that that will be the model that is going forward, especially for the bigger projects and the more complicated projects. And that I think that the answer to the second question is also yes, it will make it more complicated because if you have 2 vessels and that is what you asked to deliver, then that is really what you're delivering, right? And it means also that you have to either you need, let's say, a lot more confidence in your own project completion capability or you need to take risk on the next project and or simply to open up gaps between your projects and hope for the best. And I think that that is the benefit for a multi vessel strategy that is and having more of a fleet so to speak. That is that we are basically able to cover that risk internally ourselves compared to a 2 vessel company.

Speaker 1

And that's why I've also argued in the past that it becomes more binary if you have 2 vessels because you are either working or you're not. And this is where we can flex around a little bit. And the various models, they overlap differently, meaning also that if we are speeding up, for example, on one project, then we can release a vessel. It's not necessarily that these 2 vessels will work at the exact same period for the exact same duration on a project. It can be that one of them can release earlier at our discretion and then we can put it on another project to speed up or to support or to do a multi vessel on a different project.

Speaker 1

And I think that that flexibility is something that can generate a lot of value and a lot of utilization.

Speaker 4

Sort of sticking with that theme a little bit, obviously, I would imagine that it speeds the process a bit to have 2 vessels and working. But is there any risk of creating supply chain challenges both in terms of the equipment or maybe the land side of the business?

Speaker 1

Yes. If you don't do this in the right way, then you can for sure. But I think that that is one of the things that we're also trying to mitigate because we also don't have an interest in kind of like creating an increase let's say almost how should I phrase this, let's say a bigger bottleneck than there actually is by giving more capacity to our client, that that's not something we're interested in. So I think we're also trying to play this in a mature way and say, because a client in the past wanted to only book 85% of their requirements and now they want to book 130% of their requirements, doesn't mean that they're getting 130% of their requirements. It might be that they get 112% of their requirements.

Speaker 1

And that's a little bit the let's say the tension that can be between us and the client in that contract negotiation phase, how much actually do we allow them to take. But we definitely see a trend where clients, they would like to take much more than in the past, that's for sure.

Speaker 4

Great. Thank you so much.

Speaker 1

Thank you, Ben.

Operator

Our next question will come from Mark Wilson with Jefferies.

Speaker 3

New narrowed guidance range for 2024 of EBITDA, the $115,000,000 to $125,000,000 Could you speak to what needs to happen to reach the top end of that? What are the moving parts? Is it further spot work for Wind Peak to come? I'd be interested to know the variables there.

Speaker 1

There is very little, let's say, gaps available, of course. But if we have every single gap filled out and the costs are at the bottom end of the expectation, then of course, we can be towards the upper end of that range. But at the moment, we say that this is the range and we will work incredibly hard to make it as good as possible within that range.

Speaker 3

Okay. Very good. We did notice also there's I think termination fee was mentioned in terms of some of the guidance increases. Is there any color you can give on termination fee that is included?

Speaker 1

We are not allowed to give guidance on the size of the termination fee unfortunately. But what I can say is that it's a legacy net project that has been terminated because the project execution has shifted 1 year. It's a Korean project that has shifted 1 year and that is what happens. I think it's also fair to say that we are not out of that project necessarily, but there's a potential to still execute that project. But this is how the termination fees works as well that if the client are not able to execute in the year that they said they would and they shift the project 1 year.

Speaker 1

We had this question many times from investors because I think there has been a concern that the clients cannot can just shift as they want. And I think we're demonstrating here they cannot and it will cost them money if they are shifting the execution here. And we are basically then in a situation where we can say, okay, now again we are in the open market and we can decide as the conditions changed also because I can say that at the moment things are changing rapidly also on the contract fundamentals from year to year due to the tightness in the market especially towards the end of the decade. And that's also why we there's an understanding even amongst the clients as well that we need to play this pretty strict and cannot just give favors away when there is these termination clauses there. I think it's also fair to say that in today's world, we would probably, let's say, sign up to this in a different way.

Speaker 1

And if we are being involved in this project again going forward, then we would probably sign up to it in a different way.

Speaker 3

Okay. And if I may have one more. Obviously, congratulations on Wind Peak joining the fleet. And as regards tight market immediately being deployed on ops and maintenance work. Is there any kind of view you can give us to the market of that O and M?

Speaker 3

I have this idea that there must be a percentage of turbines that at any one time are just not working out there requiring maintenance. I mean is it do you think we could get to the stage where you may have one of your vessels deployed purely on that basis?

Speaker 1

Yes. I think that could be the case. I think that we are seeing that the O and M market is really shaping. Every time we install a turbine, the installed base grows, right? And so the logic is also that the whole O and M market grows rapidly.

Speaker 1

There are certain reasons behind that. We can say very limited about these O and M jobs because O and M is a wide range of different things. It could also be support the completion of a project, but where it's not actual installation, but where it's even fixing something before it's handed over to the client. That's why it's commercially very, very sensitive for our clients, what we are doing. And that's why we cannot say much about it.

Speaker 1

But what I can say for sure is that at the moment we see several clients lining up for every piece of available capacity we have at the moment. And I have even been pretty shocked by the demand that we have seen in these some of these smaller periods of time that we have available, especially on the more capable assets, where the client sees this as a great opportunity to get a lot fixed in one go and just take the capacity when it's there. And I think it's also going forward, we would likely also see potentially some of the smaller installation projects being tied together with O and M to make them in overall a bigger project because the client and the OEM in partnership is happy to take that risk basically to say, we know we will have some O and M, let's say, need at the end of the project. And we are happy to sign up to maybe instead of 4 months of installation to a year of installation, but we can use the remainder for O and M. But then really it's a mix.

Speaker 1

And we do see that the O and M rates today, they are exactly the same as the installation rates. And that is certainly a new normal. We have talked about in the past that the O and M rates have gone up significantly and they're continuing to do that.

Speaker 3

Excellent. Thank you very much. I'll hand it over.

Speaker 1

Thank you, Mark.

Operator

Our next question will come from Roald Hardwissen from Clarkson. Please go ahead.

Speaker 5

Good afternoon, Mikkel and Peter. Congratulations on another strong report.

Speaker 1

Thank you, Roald.

Speaker 5

Both you and peers like Harfron have over the last quarter or so announced preferred supplier agreements or reservations with commencements first in 2029, which highlights, at least in our opinion, the longevity of the supply demand tightness that we're seeing in the market. And I guess you briefly hinted at it, Mikkel, but in that context, maybe you can give some more comments on what kind of delivery times you would be looking at if you went to yards for incremental new builds today, and how would your established relationship with the yards play in to say how long it would take from placing a new build order to delivery?

Speaker 1

I think any answer to that question, I'm happy to give it a try later. But let's say, I think any answer to that question will be measuring the length of elastics in meters as we say in Denmark, because it depends so much on which yard are you asking. Are you able to get a yard slot? And where are you trying to deliver from and all of that? There are so many variables in the question.

Speaker 1

But let's say if you can get a yard slot and if you have completed design of a vessel, so basically drawings ready, detailed engineering done and all of that, which very, very few companies have today in the draw, then I think you are lucky if you can deliver in 4 to 5 years. But I think that the complexity starts before that because I think getting a yard slot today is incredibly difficult. And to the second part of your question, does relationship help there? Yes, it does. And I think that we have said before that we have been working on a model with the shipyard where we are in a position where we would be able to, let's say, do more with that shipyard on different conditions.

Speaker 1

And I think that, that is a deal that we did back in 2022. And I think that, that deal still works in Kepler's favor very, very strongly and something that we are very, very happy with.

Speaker 5

Perfect. That's it from my side today.

Speaker 1

Thank you, Juan.

Operator

Our next question comes from Andreas Nibanouco from Nordea. Please go ahead. Your line is open, Andreas. Feel free to unmute and ask your question. Okay.

Operator

We can see you, sir. We're not able to hear you just yet. If you'd like to perhaps try a meeting or a different microphone input.

Speaker 1

We cannot hear you, Andreas. We can see you. You look good, but we cannot hear you.

Operator

So you might try clicking the up arrow next to your audio button and selecting a different microphone input.

Speaker 6

Okay. Can you hear me now? We can't hear you. Here we are. Here we are.

Speaker 6

Okay. Here we are. So we always need some shows on this conference call. So sorry about that. Now a quick question from me regarding the O and M work you're signing now and you're looking to do.

Speaker 6

Could we say that 2025 is now more or less covered with O and M work in combination with the contracts you already have for vessels in 2025?

Speaker 1

I think we are in a very good place for 2025. Some of it is still on reservation basis. But I think that we 2025, if you ask me whether that keeps either Peter or me awake at night, then I would say no, it does not.

Speaker 6

Okay. I'm happy to hear that and it won't keep me awake at night either. And have you also signed contracts beyond 2025 for O network, like 2026? So we're quite far out in time also doing O and M work.

Speaker 1

So when you say signed contracts, I think we have reservations for potential O and M that stretches into 2026 as well. Yeah, I think we're actively working. We have a vessel that is delivering next year and we have discussed that in the past also that the first project for this vessel that is in the pipeline that you know of is the East Anglia 3 project that starts in 2026. But if you ask me whether I'm concerned about the period for delivery, which is now earlier than it was originally expected to be because the yacht is just performing so incredibly strongly, then we're not concerned about that. I think it's fair to say that there are several clients lining up to take that capacity.

Speaker 1

For us, we are really evaluating at the moment what is the best for CATAL and for our investors and for our clients.

Speaker 6

Okay. That sounds good. And lastly, how do you consider how do you weigh the risks on doing our network in front of a large project in terms of having the vessel available for the project and also in terms of potential incidents?

Speaker 1

That is a great question. I think that in terms of the operational risk, I think that we are fine with that. I that. That is similar to what we are doing. So that is the O and M work is, let's say, less heavy duty than installation work.

Speaker 1

So if we are happy to do installation work before another installation project, then the O and M from an operational point of view is less risky, so to speak. But I think that what one should not underestimate is what it requires from the shore based organization, especially but also for the offshore organization. O and M is different from installation because on installation you basically you do 200 turbines for example on one project. You go through a learning curve and then you basically continue same port, same location in and out, in and out, in and out, in and out. That's why we argue that efficiency is so important.

Speaker 1

O and M is slightly different because in the O and M space you have different ports, you have different sites, you have different clients, you have different equipment. And so what it requires from the onshore and the offshore organization in terms of preparing for the individual sites and ports and equipment is a lot more. But we can just see that that O and M component in between makes so much sense in terms of value creation that is also something that we need to build the organization for. So we are also on a journey where we're not only building for delivering the vessels for doing the foundation work, we're also delivering from having a slightly more flexible organization to handle these O and M jobs where you have to prepare for one site in the middle of the night between 2 different locations, so to speak.

Speaker 6

Okay. That makes perfect sense. So that's it for me. Thank you.

Speaker 1

Thank you, Hannes.

Operator

We have no further questions at this time. Thank you for your participation. I will now hand the floor back to Mikkel Glarep for any closing remarks.

Speaker 1

So just wanted to say thank you for everybody to listen in. It was a pleasure to present again to you guys. And yes, you know that we are here. If you need any more information from us, always on short notice. If there's anything, we're looking forward to close 2024 on a strong and are preparing for an incredibly strong 2025 as well.

Speaker 1

So looking forward to that and to share that with you when we are ready to do so. So thank you very much for joining us here and have a great day.

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Key Takeaways

  • Full-year guidance for 2024 raised: revenue is now expected at €243–253 million and EBITDA narrowed to €115–125 million.
  • The Wind Peak vessel has arrived in Europe and commenced an O&M campaign, helping to drive vessel utilization above 86%.
  • Catalyr won two large multi-vessel contracts—Baltic 2&3 with Equinor/Polenergia and East Anglia 2 with Scottish Power Renewables—expanding its combined turbine and foundation backlog.
  • Q3 financials: revenue jumped to €80.6 million (from €23.4 million last year), EBITDA reached €48.4 million, and backlog climbed to nearly €2.4 billion.
  • The newbuild program remains on schedule, with WindMaker (83% complete) and WindPace (99% complete) due in early 2025, plus four additional vessels by 2027.
AI Generated. May Contain Errors.
Earnings Conference Call
Cadeler A/S Q3 2024
00:00 / 00:00