Hello and welcome to the Vopak Analyst Presentation Half Year 2019 call. Throughout the call, all participants will be in a listen-only mode, and afterwards there will be a question-and-answer session. I'll now hand the word over to Laurens. Please go ahead with your meeting.
Good morning, welcome to Vopak's Q2 and Half Year 2019 results. My name is Laurens de Graaf, Head of Investor Relations. Today, our CEO, Eelco Hoekstra, and CFO, Gerard Paulides, will guide you through our latest results. Our COO, Frits Eulderink, is here as well and will be available for questions during the Q&A session. We will refer to the Half Year 2019 analyst presentation, which you can follow on screen and download from our website. A replay of the call will also be made available on our website. Before we start, I would like to remind you of our safe harbor for any forward-looking statements. This disclaimer is also applicable during the Q&A and in the whole conference call. With that, I would like to hand over the word to Eelco.
Thank you, Laurens. A very good morning, everyone, and thank you very much for joining us again on this call. It's my pleasure to present to you the first half year 2019 results. I will update you on the execution of our strategy, and then I'll hand it over to Gerard, who will elaborate on the financial performance. I'm pleased to share that we delivered solid financial results and significantly increased earnings per share in the first half of 2019. Secondly, our strategy execution is well on track as we made important progress with the delivery of our strategy and the alignment of our portfolio. Now allow me to elaborate on that. We've taken significant new capacity into operations to meet new customer demand. Together with our partners, we commissioned the industrial terminal PT2SB in Malaysia and celebrated the opening of the LPG export terminal, RIPET, in Canada.
We expanded our share in the LNG import terminal in Pakistan. At present, we have delivered 2.1 million cubic meter of our existing 3.2 million cubic meter expansion program. We've reduced our fuel oil capacity and have taken capacity out of service during 2Q and Q3 for conversions for the IMO 2020 bunker regulations. The conversions are progressing to plan and will support new market requirements backed by commercial agreements starting in Q4 2019. The divestment of some of our European assets will, after completion, shift our portfolio further towards industrial, chemical, and gas terminals. We aim to grow our portfolio in line with market developments, and we expect our growth investment momentum in 2019 to continue in 2020. Looking further ahead, we explore opportunities in new energies and have today announced our first equity investment in hydrogen technology.
Our digital transformation is progressing well with the global rollout of our cloud-based digital terminal management system. Lastly, we've made excellent progress with our new business development projects. We look towards the future with confidence. In the second half of the year, we continue with our focus on performance and long-term value creation for all shareholders and stakeholders. Our global network is well positioned to capture opportunities, ensuring our relevance to society in storing vital products with care. Now let me move on to some of the key figures. EBITDA, excluding exceptional items, was EUR 423 million, an increase of EUR 52 million compared to previous year. Earnings per share significantly increased this first half year and grew by 23%.
The occupancy rate for subsidiaries was 85%, which reflects planned temporary conversion activities related to IMO 2020 projects, particularly in Q2 and Q3, whereas other market segments remained solid. Our aggregate performance on occupancy is in the range of 85%-95%, which we aim for. This year, we have already delivered 1 million cubic meters of capacity additions in Pengerang, in Panama, and the new LPG export terminal in Canada. In 2018 and 2019, a total of 2.1 million cubic meter out of our growth portfolio was commissioned. Let me recap our view on the business environment and the product markets in which we operate. Starting with chemicals. We are positive on chemicals. We see a growing global demand driven by increased industrial and consumer needs.
Despite the risk of a slowdown in the global economic growth and uncertainties caused by trade tensions, the chemical sector continues to execute sizable new investments in chemical production. U.S. chemical manufacturers continue to take advantage of cheap shale ethane feedstock, and a second wave of petrochemical projects is taking shape, providing industrial terminal opportunities for Vopak. In Asia, decelerating but robust economic growth support petrochemical projects close to growing end markets. We target to expand our portfolio with 1-3 new industrial terminal investments in the coming years. The current business storage environment results in solid occupancy rates and increased throughputs at our chemical terminals. Our operational performance is crucial to keep serving our chemical customers, and therefore, we remain focused on improving our chemicals infrastructure and daily service delivery. The oil market continues to be heavily impacted by the geopolitical climate as well as supply disruptions.
Our hub locations are preparing for the new market conditions for a range of fuel oil grades. Capacity conversions for IMO 2020 are as per plan and the vast majority of the fuel capacity is contracted for 2020 as bunker fuel market players have positioned themselves. We will invest in the expansion of our terminal in Sydney and will add 105,000 cubic meters for clean petroleum products and aviation fuels. The gas market fundamentals are good. What we particularly like is that we see an improved liquidity in these gas markets. This is demonstrated by the increased volume of LPG and LNG that our terminals have handled in 2019. LPG is increasingly used as chemical feedstock in PDH plants and for residential use in emerging markets.
LNG use has further grown. Imports in China have increased substantially. The gas segment shows structural growth and more infrastructure is needed to facilitate supply and demand. We target to expand our portfolio with one to three new investments in gas in the coming years. Moving on to biofuels markets. This market is very dependent, as mentioned before, on regulation. Currently we see strong imports in Europe by our terminal in the Netherlands, whereas the trade tariffs in China have pushed the U.S. ethanol export volumes towards India and other markets in Asia. To sum up our business environment, we are positive on chemicals and gas markets and continue to target investments for industrial and gas terminals, including LNG. In the oil markets, we're preparing for the few oil market changes and investing in the distribution segment.
Moving on with our strategy execution for the period 2017 and 2019. You are familiar with this slide on our strategic objectives, and I've consistently conveyed the message that we are well on track. We're making significant progress in growth, and I'm confident that we can keep our sustaining and service improvement CapEx within the EUR 750 million budget. Vopak is becoming more digital driven by our digital transformation with the rollout of the program that is currently underway. Lastly, which we expect to drive down costs and deliver on the efficiency program as promised. In short, we are confident to deliver on the 2017, 2019 strategic objectives. Let's focus shortly on the portfolio transformation. We've announced significant projects in the last years, fully in line with the focus on growing our portfolio towards industrial terminals, chemical and gas terminals.
This year, we've commissioned 1 million cubic meter Malaysia, Panama, and Canada, and expanded our share in the energy import terminal in Pakistan. The divestment of some of our European assets will shift our portfolio further towards industrial, chemical, and gas terminals. Looking further ahead, we continue to explore opportunities in new energies. As a result of studying opportunities, we decided this is the right moment to take initial steps in becoming active in hydrogen supply chains. Let me summarize our key messages before I hand over to Gerard. This half year, we delivered solid financial results, and we are on track to demonstrate growth in 2019, supported by a portfolio of expansion projects and the ongoing cost initiative.
Lastly, with our strong competitive position and global diversified portfolio, we are very well positioned for future opportunities to create long-term value for our stakeholders, not only now, but in the future as well. Moving on to the next part of the presentation, I would like to hand over to Gerard, who will explain more about our financial results.
Thank you, Eelco. A very good morning to everyone. Thanks for joining us today. I will update you further on the financial performance and financial framework. For more details, I refer you to the 2019 half year report, which we published this morning. Let's turn to the key messages of today. Our financial performance in the first half of 2019 was solid. We have momentum with our portfolio transformation. Occupancy of our assets is within range, taking into account our intervention in fuel oil. This is particularly visible now in Singapore and Rotterdam due to the out of service capacity for planned IMO 2020 conversion. Earnings measured as EBITDA came in at EUR 423 million, an increase of EUR 52 million, reflecting good performance from new assets and joint ventures, but also included revised accounting for land lease commitments under IFRS 16.
The net profit for the first half year was EUR 173 million, resulting in an earnings per share of EUR 1.35, a significant increase compared to last year. Our cost efficiency program to support margin development and reduce the 2019 and future cost base is well on track. Now turning to cash. We delivered EUR 352 million cash flow from operations, demonstrating the resilience of the portfolio in the period where we have high out of service capacity over several quarters in 2019 due to the conversion of IMO. Across all segments, we will invest approximately EUR 1 billion in new capacity growth in the period 2017-2019. We will continue to invest in growth of our global terminal portfolio and expect our growth investment momentum in 2019 to continue in 2020. Turning to the half year results relative to 2018.
Let me take you through the results as shown on this slide. As of January 1st, we started to apply IFRS 16 for lease accounting and reflecting the long-term land lease commitments on our balance sheet and P&L. To make the results transparent for this year, we will provide pro forma numbers that exclude IFRS 16 effects to allow comparison to the results with previous years. You will see EBITDA excluding exceptional items of EUR 423 million and adjusted for IFRS 16, the EBITDA was EUR 27 million higher than prior year. Strong performance in Asia and Middle East and also in China and North Asia reflect the contribution from joint ventures, including the new industrial terminal, PT2SB in Malaysia and also our oil hub terminal in Fujairah that increased occupancy rate in the quarter and our industrial terminal, Haiteng in China that we started operations mid last year.
In Europe and Africa, the division shows a reduced financial performance. This is mainly driven by the high amount of capacity that was out of service due to the planned temporary conversion projects taking place in Rotterdam. Meanwhile, our assets in Algeciras, Amsterdam, and Hamburg that are held for sale contributed approximately EUR 35 million in EBITDA this year, and that performance is in line with expectations. Turning to the Americas. Performance in the Americas was supported by the good business environment in the chemical segment and the new LPG export facility in Canada. On account of our diversified portfolio across different product segments, we delivered a return on average capital employed of 12.6% in the first half year of 2019. Let's take a closer look at the divisions now.
Occupancy rate in Europe and Africa and Asia and Middle East reflect, as already mentioned several times, the IMO conversion projects in Singapore and Rotterdam. The chemicals and gas occupancy rates have been very stable, which is mainly noticeable in our numbers for the Americas and the LNG division. Turning to the second quarter relative to the first quarter of this year. EBITDA for the second quarter came in at EUR 208 million. The reduction in Asia and Middle East was explained again by the IMO conversion project that started in the second quarter and for Singapore will last into the third quarter. At the same time, the first quarter was very strong with support from some short-term contracts in the fuel oil space. In Fujairah, occupancy rate in the second quarter increased, and we saw increased activity levels for Fujairah.
The main contributor for this quarter was the strong cost performance in Europe and Africa and a good chemicals business environment in the Americas. In addition, support in the Americas came from new capacity from the Ridley Island Propane Export Terminal in Canada that was commissioned mid-April. Turning to cash flow. The first half 2019 delivered a resilient cash flow from operations. We delivered EUR 352 million cash flow from operations, which resulted in almost EUR 200 million free cash flow before growth. We have investment momentum and invested already EUR 212 million this year in growth projects. Our senior debt position, excluding IFRS 16 liabilities, grew to $2.1 billion as a result of our investment in growth. The EUR 140 million shareholder dividend in the second quarter and the repayment of a subordinated debt position, resulted in an increase of the existing revolving credit facility, all according to plan.
The senior debt to EBITDA ratio stood at 2.99 at the end of June, in line with our plans. Our cash flow from operations, combined with our strong balance sheet, provides us the position to keep investing in our project portfolio to create shareholder value. Turning to our investment phasing. We break down our investment in growth investments and other investments. In the period 2017 to 2019, we invest approximately EUR 1 billion in growth, either through CapEx in subsidiaries or through equity injections in joint ventures and associates. In line with the timing of growth projects, we expect roughly EUR half a billion of growth investment for this year. We are well-positioned to continue to invest in growth of our global terminal portfolio in the year 2020 and beyond. Let's take a closer look at the fuel oil network.
I've mentioned before that we're converting and reducing our 5 million cubic meters of fuel oil capacity, which was predominantly focused at high sulfur fuel oil and reducing that to roughly 1 million cubic meters of high sulfur fuel and 2.5 million cubic meters of low sulfur fuel oil and flexible lineups. 3.5 million in total, coming from 5. In April, 1 million cubic meters was divested when we sold our Estonia position. Conversions in Fujairah are done and conversions in Rotterdam and Singapore are at its peak these months and will be ready to support new market requirements as from the fourth quarter. Commercial progress has been good. In previous calls, I mentioned that we had good commercial traction in Rotterdam and Singapore, but that Fujairah was trailing a bit.
Currently, that has changed. Fujairah has actually picked up and we've seen good commercial contracts and position in place in all three locations for practically all fuel capacity that will be converted. Turning to our proportional information, we provide additional performance insights on a comparable basis for subsidiaries, joint ventures, and associates by means of proportional data, showing the interest on an economic basis, in our entities. The non-IFRS proportionate information provides transparency in the underlying performance and cash flow generating capacity. The pro forma proportional EBITDA, excluding exceptional items for the first half year, amounted to EUR 453 million. Let me recap the key messages. Our financial performance in the first half year was solid and we delivered an increase in EBITDA and a significant increase in net income versus 2018.
We have momentum with our portfolio transformation through investment in new capacity. We look at the future with confidence. We will maintain our focus on performance delivery and long-term value creation. Let me close out by looking ahead. Vopak continues to invest for growth. We have cumulatively in 2018 and 2019, delivered 2.1 million cubic meters of the 3.2 million cubic meters of expansion towards the end of the year 2019. Total growth investments amount EUR 1 billion over the period 2017-2019. We have good momentum in the spending of that investment. Fuel oil capacity conversions for the IMO 2020 bunker fuel regulations are progressing well with peak out of surface capacity at this moment and to continue in Q3. All planned conversions are rented out. We will be ready for new market requirements as from Q4 2019.
We are well positioned to further grow our global terminal portfolio in 2020 and beyond.
This concludes our prepared remarks, and I will now turn the microphone back to Alexandra, our host of today, our moderator of today, to facilitate the Q&A. Over to you, Alexandra.
Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw a question, you may do so by pressing 02 to cancel. There will be a brief pause while questions are being registered. Our first question is from Juri Zanieri from Kempen. Please go ahead. Your line is open.
Hi. Good morning. That's Juri Zanieri from Kempen speaking. Congratulations on the results. Couple of question on my side. I was wondering if you can provide a bit of light on the Malaysian legal case that is currently going on. Second question, if you can provide a bit of expectation on occupancy for the next quarter in Asia and Middle East, considering the ongoing political concern. Last question, would be helpful if you could guide, focus is still going to remain on growth. We do understand that, but wondering whether you can indicate what the use of the cash proceed from the latest divestment is going to be. Thank you very much.
Hey, Juri. Thank you. I'll shed some light on the Malaysia legal case. First of all, I think there's not much to mention there, Juri, apart from what we have informed you on. We received what we consider to be a frivolous and baseless case made against the joint venture in Malaysia. A party that has contested already a land dispute with the central government in Malaysia and failed in the last six years and has tried to open up a dialogue with the joint venture partners. What we'll do is we'll work through the different elements in the court system accordingly. There's nothing more to mention at this stage, apart from the fact that we consider this case to be baseless and we'll just have to work through it.
Shall I take the other questions?
You can.
Eelco, on growth and cash proceeds first? By the way, just a clarification on the Malaysia case. Eelco said, "Has engaged," of course, what we mean is has engaged through the court. We're not engaging otherwise. On the growth. What we said is we maintain momentum in our investment going into 2020. What the context is, in 2017, 2019, we had a program of EUR 1 billion. It's not equally spread over the years, as you know, but it gives a good indication of what we can do. We will carry that forward in 2020 with one to three investment decisions being progressed in LNG and industrial terminals. It gives the same expectation, I think, going forward. That expectation of investment is backed up by projects in our new business development cycle and existing approvals already in place.
With respect to the divestment progress, we are working our way through the closing conditions. Of course, this is in three jurisdictions, it's quite some work involved to work our way through. What we will do next, when we complete, if and when we complete is, we will then update you further on the use of the cash proceeds as we indicated before. Meanwhile, the contribution from the three assets, Amsterdam, Algeciras, and Hamburg, is as per plan in the first half of the year, EUR 35 million EBITDA contribution. There's nothing more at the moment to say about that process. Terms of your second question on expectations in Asia, I think there's two points I think to be made. One is specifically on IMO, the bit that we control, if you wish.
At the moment, across Rotterdam, Singapore, the total conversion capacity being shut in is about 1 million cubic meters, so that is about 2%-3% on the reported occupancy rate. That will last into the third quarter. In terms of general conditions, trade sanctions, business activity, GDP momentum, et cetera, we do see some changing patterns in flows. For instance, the exports of ethane from the U.S. into India versus perhaps China. We also see high activity levels on chemicals in Singapore and the same activity levels from chemicals in the U.S. Also, what we report in our Asia numbers is the Fujairah position, although that is in the joint ventures and not in the subsidiary occupancy. The activity levels in Fujairah are, as I indicated, satisfactory and much improved relative to what we saw before.
What we do have to do is take specific care in Fujairah, of course, with the compliance sanctions. That means that we need to exercise our processes and checks and balances with professional care, which we are doing, of course, and manage our operations accordingly. I think that gives a flavor of the business activity levels in Asia as per your question. I think we can probably move to the next question if there is one.
Our next question is from David Kerstens from Jefferies International. Please go ahead. Your line is open.
Hi. Good morning, everybody. First question on the Asia Middle East occupancy rate. It fell from 92% in Q1 to 80% in the second quarter. Is that all related to IMO 2020 conversions? Do also other factors play a role such as, for example, increased competition with new competitive capacity opening up? Second question related to this is how quickly do you expect that occupancy rate of 80% will come back in the fourth quarter? In Rotterdam you have this contract with Maersk. What about the contract coverage in Singapore? Second question related to Fujairah. You highlighted the increased activity levels. What is the impact or what will be the impact of the increased political tension in the region? I think some container liners, they have said that they will bypass Fujairah for bunkering out of safety concerns.
Will that have any impact on the IMO recovery that you anticipate for Fujairah going forward? Thank you very much.
Okay, David, this is Eelco. I can answer your first question on Asia Middle East, since this is a number about the subsidiaries. It has the effect of Singapore is the largest on that number. I can indeed confirm that most of it is related to IMO 2020 conversion. Actually, it's really driving this. Significant effect is the IMO 2020. If you look at the conversion for Singapore, it will be heavily executed during the, let's say, the latter part of Q2, but particularly throughout Q3. Similar to Rotterdam, we have been able to secure contracts in Q4. What we expect is that we'll see low occupancy in Q3 and a limited contribution from fuel capacity in Q3. We expect a full recovery and a rebound from the levels that we have seen historically in Singapore. I hope that addresses your question.
The contract in Rotterdam, is that as of the fourth quarter? Does that kick in from October 1st or later?
There we've said the fourth quarter. It's a similar timing. Full work, it already started in Q2. Full work in Q3 to get it organized. Then the rebound in Q4 back to historic levels. I think it's the reality we have to work through. Again, there the contracts have been secured for Q4, which makes us comfortable to make that statement.
Yeah.
Yeah. There's also a question on Fujairah on the geopolitical situation. I think it's a good question, David. I think roughly a quarter of the oil that is produced globally moves through the Straits and roughly a third of the gas. It's an important part of the geopolitical, let's say, agenda. Most of that product is moved, as you might know, to Asia momentarily, about 60% of that. We have seen in Fujairah, and that's the reason why we've always supported that location and started it in the '90s. Since the location of Fujairah is just outside the Strait of Hormuz. It has already been seen historically as a relatively safe position to store fuels, due to the easy access to global seas.
We've actually seen an increased and very quick take-up of tankage in Fujairah, I think partially because of the tension in the Straits of Hormuz, where people want to secure oil outside the Straits today. It is something that we need to look at closely. So far it has supported our position in Fujairah instead of diminish the importance as such.
Understood. Thank you very much, Eelco.
Just as a reminder, if you do wish to ask a question, please press zero one. Our next question is from Andre Mulder from Kepler Cheuvreux. Please go ahead. Your line is open.
Good morning. Two questions. Firstly, you talked about changing patterns. Have we seen any change in quantities? Secondly, looking at the drawdown from the 5 million capacity to 3.5 million, that includes, of course, the two terminals for sale. I'm still missing something like half a million cubic meters. Where has that gone?
Thank you, Andre, for the question. For the EUR 5 million, where we started, there is EUR 1 billion being divested from AOS.
Yep.
There is some capacity which is taken out of the equation because we're converting it to other purposes. It's not only conversion within fuel oil from high sulfur fuel oil to low sulfur fuel oil and mixing and matching those positions. We're also converting some capacity either into perhaps distillates or into crude. That is probably what is not visible to you. There is limited in that 5 million fuel oil capacity. There's also a limited contribution in that from Algeciras in Spain, and there's a limited contribution from Hamburg in that position. I would say that is not the bulk of the moving parts. The bulk of the moving parts is AOS and conversions. Then we are left with 3.5 million, which is mainly Rotterdam.
It is Singapore, Fujairah, and then we have Panama, which is being progressed, which is on the Atlantic side of Panama. As you know, traditional bunkering in Panama is on the Pacific Ocean side, not on the Atlantic side. The Atlantic side is particularly attractive because the fundamental advantage of the Gulf of Mexico, abundance of resources and exports, and of course, a short distance between that major supply point and the eastern side of Panama. We have Los Angeles, which also has a bunkering position. I think you've got a good picture of the moving parts in fuel oil.
Okay. This first question, you're talking about the changing pattern from the U.S. to India instead of China. Any change in quantities there?
Maybe my quick response, and maybe Eelco wants to add to that. I don't think we've seen a pickup in volumes that is noticeable to me. We do see shifting patterns, either because of trade sanctions or because of abundance of supply from the U.S. We've seen our first cargoes, for instance, on crude as well in the Rotterdam port. You see the ethane changing patterns from the U.S. into India. I'm not aware of significant uptick or downtick in commercial activity in aggregate. Perhaps Eelco can give some more nuances and.
Okay
total oversight.
I can say a few words on that. I will concentrate on chemicals and petroleum products, so not particularly on crude and LNG, because I think that's a smaller part of our portfolio, and that's not where we've seen the major changes. First, on petroleum products, I think the most noticeable thing is the, this is nothing to do with sanctions, but more the general environment, is the importance of the U.S. refining basin for what I would call Latin America, and the importance of the Middle Eastern buildup of refining. You see that China has built up refining. What you see is that we see, let's say, buildup of that product, for instance, moving into Mexico, moving towards Latin America countries out of the U.S. That's very clear where you see a change happening.
We've seen also more Chinese refining excess capacity coming into Singapore and wanting to sell in global markets, adding to liquidity that was already there, mostly sold and into countries like Indonesia or Australia. That's an effect of the petroleum sector. We've seen distribution terminals where we are already active. For instance, Mexico is a good example. South Africa, Australia, a stronger demand and also a forward-looking stronger demand there because of that. If you look at the chemical products, again, I think it's a bit of similar pattern. You see a buildup in the major, either consuming countries that's either China or in the Middle East and the United States pushing products into global markets.
There we've seen at least, and that was the comment Gerard made temporarily, Singapore being more active in creating opportunities for products that are not allowed to enter into China, and seeking its way in other geographies. That has supported us in that part of the world. By and large, it's interesting to see that, and this is again, not from a sanction perspective or not per se, but we see for the first time, for instance, crude from the U.S. and substantially more LNG, possibly from the U.S. coming into Europe, since they're not allowed to get rid of their products into China. Those are the predominant movements which we've seen in the last quarter, Andre.
Okay, thanks.
Just as a final reminder, if you do wish to ask a question, please press zero one. Our next question is from David Kerstens from Jefferies International. Please go ahead. Your line is open.
Thank you. Hi. Just a follow-up question on the bunker fuel mix that you showed in the presentation. I think it's unchanged compared to what you presented at the Capital Markets Day back in November. I was just wondering if you do see any potential changes in the bunker mix going forward. I understand the scrubber manufacturers recently called out a very disappointing order intake for scrubber installations post 2020 suggesting that the use of high sulfur fuel might only be for a temporary period. Will it have any impact on any future conversions you might have to do post 2020, and how much CapEx would be related to that?
Not at this stage, David. We don't see need to change our strategy.
No, the other point is the lineups that we're doing, and the interactions with our customers also focus on flexibility. People anticipate that you don't know the exact mix yet. Therefore, flexibility is a optionality, which is valuable to all suppliers and end customers, and therefore, our facilities need to accommodate that. We are preparing for that. It's not boxed into single use. You can mix and match.
Right. All right. Thank you very much.
Our next question is from Juri Zanieri from Kempen. Please go ahead. Your line is open.
Hi. Sorry, just a follow-up question. I had some issue with the line, I might have missed it. I was wondering again, about the divestment of the terminals. Are you still comfortable that they will be executed by year-end? Maybe if you can give a bit of guidance whether you would expect by end of Q3 or Q4. Thank you very much.
Thank you, Juri. I think I did indeed already answer the question, but apologies if the line fell away or maybe the line at your end fell away. We are working our way through the closing conditions. We are working through three assets in three different set of circumstances, and we just need our time to do all of that work. We will update the market at the time when we complete or when we have news to share. We will be consistent with our earlier message that we will only discuss any distribution or investment of that capital into our funnel at the time when the funds are actually available and not before that. Meanwhile, on the business itself, the three assets that are in play here, which is Amsterdam, Algeciras, and Hamburg, are performing as they should.
Combined, they make a contribution of EUR 35 million EBITDA in the first half of the year.
The assets remain quality assets. They remain to do what they're supposed to do, and there's no distraction from that point of view in making a contribution to the bottom line. Juri, that's the update. Apologies for repeating the same response as I gave earlier, but hopefully this time the line was open and clear.
Brilliant. Thanks a lot.
Our next question is from Quirijn Mulder from ING. Please go ahead. Your line is open.
Yeah. Good morning, everyone. My question is especially with regard to the Deer Park. Can you maybe elaborate or update us with regard to the situation there? Have you already started some negotiations or discussions with ITC about maybe their considerations about the situation there and the safety, et cetera, records?
Just an update on Deer Park. I think we have had an interruption of one month of operations at Deer Park, in which we were not capable of loading or discharging ships predominantly, and very limited trucks and no trains. It took us about a month out of operation. In the meantime, we've started up our operations as per normal. We are in full operation again in Deer Park. You've seen that we've taken a decision also to expand our terminal again, Caojing, which was announced today. In addition to the expansion we announced last year, we see another moderate opportunity in size, but an important opportunity, again, to serve several important customers in Deer Park. Everything is going in that sense according to plan.
ITC. I think that you need to ask ITC how they are going to inform the market on their continuation of business. I cannot comment on that, nor have we engaged in any major dialogue on that subject. Also they have to work through their issue on the course of this year, next year, no doubt. There's not much there to inform you on at this stage.
Okay, given the authorities and the strictness, et cetera, in the U.S., especially in that area, and the consequences of this fire, is there any thought from your side about the position of ITC, so clear as ITC in that part of the U.S.? Secondly, are you going to reclaim some cost to ITC or Mitsubishi?
I think if you want to know the position of ITC and what their thought is on how to progress, I think you should ask them. I think it's a bit unfair to comment from our perspective, since simply we do not know the content of their dialogue or the situation that they're in. That would be just speculating. Secondly, I think we also do not make any reference to claims or any litigation that we start against other parties. I decline to comment on that.
Okay. Then with regard to LNG terminal in China and in Germany, can you maybe elaborate on that, maybe, or to update on that development there?
Yeah, I think we can.
Morning, yes.
This is Frits Eulderink speaking.
Yeah.
I think we are progressing to plan, I would say with both of them. In China, we are awaiting basically the federal decision on the priorities for the various LNG terminals, and expect that we will hear before the end of the year what the priority of our location is in that regard. In Germany, we have noticed strong customer interest, and we are just progressing with the project as per plan.
Okay, thank you.
Our next question is from Andre Mulder from Kepler Cheuvreux. Please go ahead. Your line is open.
Hi. Yes, two remaining questions. Firstly, on the size of the high sulfur fuel oil, 30%, and then also a piece in the flexible part. To what extent have you taken non-compliance into account? Because that seems to be quite an item in this respect. Secondly, normally you would deconsolidate terminals if you have the idea that you're going to round off an acquisition, a deconsolidation, a sale within 12 months. What's the reason that the terminals are still in there?
Let's take the second one first. The held for sale status is as per the accounting guidelines. What the consequence of that is that we stop the depreciation, as you know, on those assets. You see that in your EBIT number. Otherwise, it is normal process when we
Complete a sale, then you true up the numbers in the sales proceeds accounting, and you show the numbers accordingly. I don't think there's anything not transparent in that part. I've given you the EBITDA numbers of the three terminals as extra information so that you have a feel for what's going on there. In terms of the compliance expectations of the new bunker fuel market conditions and regulations, I think the regulators, authorities, and whomever is involved in this continuously signal and send and confirm the same message, that compliance will be enforced or monitored and enforced. From that point of view, I think it will be a feature of the market. There's also been noise earlier. I've not heard that recently of could it be delayed, could it be pushed back again. I don't think there's any signal on that.
In terms of scrubber activity, that was mentioned earlier in the call as well. I think the level of scrubbers in its own right doesn't change, I think, any of the dynamics of the lineup of our capacity. It does make a difference into what type of system a ship might install, whether it's a closed loop or a different scrubber system. In terms of how they are allowed and complete their entry into port and their exits, and under what conditions they can operate the vessel. I think all of that is being played out, Andre. I don't think there's an expectation on compliance that impacts our thinking particularly. Perhaps Frits can supplement even more.
I think maybe one key factor, Andre, to keep in mind is that there's also alternative use of fuel oil besides bunkering. Industrial use in some areas is still allowed even with high sulfur. I think we anticipate there will be strong enforcement. Like everybody else, we will have to see how that is practically done in the mid-ocean. Together with our customers, we are prepared for, I would say, the variance that that may entail, depending on how that pans out, more or less of the high sulfur fuel oil will end up into industrial uses.
Okay, thanks.
As there are no further questions, I will now hand the word back to Eelco for finishing comments.
Thank you very much, Alexandra. First of all, I would like to thank you all again for listening in to our call. I'm very much aware that these are busy times. I have several colleagues on holiday and multiple companies that are releasing their results today. I'd like to thank you for spending time listening to our call and show interest in the results that we've shown. You can expect the executive board to put in full effort in the second half of the year, again, in the execution of our strategy. Again, it will all come down to delivering the results in the next quarters and changing and shifting our portfolio for future use. Once again, thank you very much, and I wish you a very good summer.
This now concludes our conference call. Thank you all for attending. You may now disconnect your line.