Good evening, and welcome to the Maire 's Nine Months 2026 Results Conference Call. Please note that this conference is being recorded. During the presentation, all participants will be in listen-only mode with an opportunity to ask questions at the end of the call. I will now hand over to Silvia Guidi, Head of Investor Relations, to begin today's conference. Silvia, please go ahead.
Good afternoon, everybody, and thank you for joining Maire 's Nine Months 2026 Financial Results Conference Call. My name is Silvia Guidi, and I am the Head of the Investor Relations. Today, I am joined by Alessandro Bernini, Group CEO, Mariano Avanzi, Group CFO, and Fabio Fritelli, NEXTCHEM Managing Director. They will walk you through the operating highlights of our business units, followed by an overview of our financial results. At the end of the presentation, we will be happy to take your questions. Let me now hand over to Alessandro for some introductory remarks.
Thank you. Thank you, Silvia, and good afternoon, everyone. The first nine months of 2026 further confirm the resilience of our business model. In the Middle East, the safety of our people remains our top priority. Through continuous engagement with clients and partners, we have maintained execution momentum and proactively adapt to evolving conditions. Against this backdrop and leveraging on a diversified project portfolio, we delivered EUR 5.6 billion of revenues. EBITDA margin increased to 7.4%, up 60 basis points year-on-year. This result reflects NEXTCHEM's growing contribution and the operating leverage generated by large-scale E&C projects. On the technology front, we continue to strengthen NEXTCHEM's platform through the recently announced acquisition of MEAB. This addition further expands our capabilities in critical metals and materials processing, building on the Ballestra and ETEK acquisitions completed earlier this year.
In particular, it enhances our exposure to markets with compelling long-term growth prospects, driven by the global trends of electrification and artificial intelligence. Commercial performance was also outstanding. Our integrated offering continues to support Maire's growth trajectory and contribute to our distinctive market positioning. At the same time, we are broadening our geographic reach, in particular in the Americas, and expanding into high potential segments, including the LNG. Indeed, we secured a year-to-date order intake of EUR 9 billion. We therefore reached our full year 2026 target three months in advance. Our book-to-bill ratio stands at 1.6. Group backlog reached EUR 16.4 billion, close to record levels, providing more than two years of revenue visibility. This strong commercial momentum reflects clients' growing need to secure execution capacity and advance investment decisions as energy security and industrial resilience become increasingly important strategic priorities.
Now let me leave the floor to Fabio for a detailed look at the STS operational performance.
Thank you, Sandro, and good afternoon, everyone. Over the first nine months, NEXTCHEM recorded EUR 793.7 million of new orders. This includes the contribution from Ballestra following the completion of its acquisition in June. The order intake mix was well diversified, as you can appreciate from the map on the right. Fertilizer technologies represented the largest share, also thanks to the sizable awards of Fértil Pampa in Argentina and SAN-7 in Saudi Arabia. We also secured contracts in sustainable aviation fuel, specialty chemicals, and advanced materials. These awards confirm both the breadth of our technology offering and its global market appeal. As a result, backlog increased to approximately EUR 786 million at the end of September, supported by both organic growth and the continued expansion of our technology portfolio. Among the awards secured during the period, the full urea technology package for the SAN-7 project stands out as a landmark achievement for NEXTCHEM.
SABIC's selection confirms the strength of our urea platform and reinforces our leadership position in a market where technology, reliability, and track record are key differentiators. With a value of EUR 125 million, this award will contribute to the expansion of Saudi Arabia's fertilizer production in line with Saudi Vision 2030 to strengthen its role in supporting global food security. Let me now briefly walk you through the recently announced acquisition of MEAB and explain how it strengthens NEXTCHEM's platform. Following the acquisitions of Ballestra and ETEK, both focused on inorganic chemistry, we have been working to further expand our presence in technologies for metals, minerals, and critical raw materials processing. These are strategic segments underpinned by the secular growth drivers linked to electrification and AI infrastructure. MEAB's acquisition strengthens NEXTCHEM's capabilities in the separation, purification, and recovery of critical, strategic, and precious metals, as well as rare earth elements.
MEAB brings end-to-end expertise spanning from pilot activities to the design and implementation of industrial solutions, with tailor-made processes developed around the specific characteristics of primary and recycled feedstocks. Its research centers in Sweden and Germany will also become part of NEXTCHEM's innovation network, further strengthening technology development capabilities. The transaction includes an upfront consideration of EUR 4 million, plus potential amounts of up to EUR 4 million linked to future performance. Closing is expected in the fourth quarter of this year. Now I would like to highlight an important milestone in NEXTCHEM's innovation efforts. Last week, we inaugurated Rome NODE, a 6,000 sq m hub designed to accelerate the development and scale-up of new technologies.
By bringing together several laboratories and up to 15 pilot plants in a single location, Rome NODE advances solutions from testing to industrial deployment by combining AI-enabled scientific research, engineering expertise, and industrial know-how into a single platform. Initial programs will focus on green hydrogen, sustainable fuels, low-carbon energy carriers, and circular, critical, and innovative materials, supporting NEXTCHEM's long-term growth ambitions. The location is particularly meaningful, as the facilities are based where Maire's journey began 40 years ago. I will now hand the floor back to Sandro for the operational performance of the integrated E&C business unit.
Thank you. Thank you, Fabio. Talking about E&C, let me start with an update of our activities in the Middle East. At the end of September, around 2,500 of our people were deployed across the region. The main projects with ongoing on-site operations continued to progress through construction and commissioning activities. This was supported by the availability of key equipment and additional deliveries received during the period through logistics re-routing measures. Close coordination with our client and partners is also playing an important role in advancing project execution. At the same time, we continue to monitor and document both direct and indirect impacts of the mitigation measures, supporting the ongoing management and recognition of the related cost escalation. Looking more closely at Hail and Ghasha, the project has reached approximately 80% overall completion, reflecting the significant progress achieved to date.
Civil and concrete works are substantially completed, while the main steel structure installations have been finalized. Despite challenging climate conditions during the summer and the reduced operability of the Strait of Hormuz, activities continue to advance, with night shift operations implemented to sustain construction productivity. On the logistics side, around 1,300 shipments were rerouted through alternative ports, and approximately 2,800 containers were successfully delivered in the past months. In addition, several oversized and heavy-lift pieces of equipment have already been delivered to the site, with additional deliveries expected shortly, which could support an acceleration of execution activities in the coming months. Moving to commercial performance, our integrated E&C solutions delivered a strong order intake of EUR 8.2 billion in the first nine months. This performance reflects the continued strength of our core markets, while we are broadening our geographic reach and expanding into new segments.
In particular, we are strengthening our presence in Latin America and expanding into LNG, where we can leverage our expertise in the execution of large-scale gas projects. Our E&C backlog reached EUR 15.6 billion at the end of September. It includes several landmark projects in sectors that remain at the forefront of global energy investment, including gas processing, infrastructure upgrades, and petrochemicals. Looking ahead, our client continues to engage us at an earlier stage of project development, as demonstrated by the early engineering and FEED awards secured during the period. These provide us with early visibility on projects that may progress to the EPC phase later on. Let me now provide you with more details on two multi-billion awards that were included in our backlog in the first half of the year, as certain formalities between the parties have now been completed.
Starting with the Rich Gas development project in the U.A.E., a $4.3 billion EPC contract awarded to Tecnimont by ADNOC Gas. The scope includes a new NGL fractionation unit at Ruwais, with capacity of around 23,000 tons per day, enabling the recovery of higher value liquids from rich natural gas. The award further strengthens our presence in Abu Dhabi and confirms Tecnimont's recognized expertise in advanced gas processing. Another important award was the $2.3 billion Safaniya project for Saudi Aramco. Our scope covers two packages, including onshore water treatment and injection facilities, as well as associated utilities. The project is designed to support reservoir pressure maintenance and sustain the long-term production capacity of the world's largest offshore oil field, reinforcing Tecnimont's role in delivering critical infrastructure.
Before handing over to Mariano for the discussion of our financial results, let me give you an update on our expansion into the LNG market. In the U.S., we are supporting the FEED of the Argent LNG project in Louisiana, following the agreement announced in January. Subject to the client's final investment decision, the project is expected to progress to the EPC phase, with Tecnimont providing engineering, technology integration, and project management services. In parallel, in the U.A.E., we have been awarded a competitive FEED for ADNOC Gas' East Coast LNG facility in Fujairah, a strategic project supporting its Zero Hormuz strategy. Subject to the competitive process and final investment decision, this could potentially lead to an EPC award in the months ahead.
Together, these two awards mark an important step in our expansion into LNG and demonstrate that Tecnimont is increasingly being recognized as a credible player in this segment. I will now hand it over to Mariano.
Thank you, Alessandro, and good afternoon, everyone. In the first nine months, we delivered another period of solid growth and improved profitability. Group revenues reached EUR 5.6 billion, up 7.7% year-on-year, driven by resilient project execution. EBITDA was EUR 414.3 million, up 15.7%. EBITDA margin expanded by 60 basis points to 7.4%, reflecting both the growing contribution from higher margin technology solutions and the operating leverage from E&C projects. At the bottom line, the strong operating performance, combined with effective financial and tax management, delivered a consolidated net income of EUR 243 million, up 18.6%, and with a margin of 4.3%, up 40 basis points. Group net income was EUR 208.9 million, after EUR 34 million of results attributable to minority interests, mainly reflecting the growing contribution from NEXTCHEM and projects executed through joint ventures. Let's now analyze our financial results by business unit.
STS delivered revenues of EUR 476.3 million, up 54%, mainly driven by low carbon chemicals and fertilizers. EBITDA was EUR 113.2 million, up 41%, while its margin stood at 23.8%, reflecting the contribution of proprietary equipment in the product mix. As a reminder, NEXTCHEM's nine months results include the consolidation of Ballestra and ETEK from the 1st of July. Moving to integrated E&C, revenues were EUR 5.2 billion, up 4.8%. Growth was driven by steady project execution, including the ones in the Gulf region, as discussed earlier by Alessandro. We also recorded solid progress in other geographic areas, such as Kazakhstan and Algeria. EBITDA amounted to EUR 301.1 million, up 8.4%, while its margin improved to 5.8%, an increase of 20 basis points. Let's now analyze the cash flow dynamics. Our business continues to generate strong operating cash flows, providing firepower to fund growth, invest in technology expansion and reward shareholders.
At the end of September, the adjusted net cash position was EUR 351.8 million. CapEx amounted to EUR 218.4 million, primarily related to the acquisition of Ballestra and ETEK. The remaining portion was invested in development and scale-up of proprietary technology as well as accelerating digital innovation. At the same time, we returned EUR 194.4 million to shareholders through dividends and EUR 85.2 million to share buybacks. On a further note, IFRS 16 lease liability increased to EUR 440.3 million at the end of September from EUR 111.2 million at year-end 2025. The increase exclusively reflects the new long-term lease agreement for our headquarters at the Garibaldi complex in Milan, effective from the 1st of July. This is therefore an accounting effect associated with the new lease, which secure our presence at the site for more than 20 years. This concludes our financial review. I will now hand over to Alessandro for his closing remarks.
Thank you, Mariano. As we look ahead, we continue to see a supportive market environment. Our commercial pipeline exceeds EUR 61 billion, providing good visibility in the months ahead. We are already well-positioned on a couple of initiatives through early engagement activities, which are expected to progressively convert into full EPC contracts. In particular, in the near term, South America remains a tangible source of additional opportunities. One gas treatment initiative, for which we are already carrying out early engineering activities, is approaching the final investment decision. This could support an EPC award in early 2027. Looking further ahead, investment momentum is expected to broaden across several regions. The Middle East, useless to say, continues to offer significant opportunities with large-scale fertilizers, gas treatment, and LNG project expected to be sanctioned next year.
Some of these projects can generate opportunities for both NEXTCHEM and Tecnimont, as they combine proprietary technologies with large-scale execution. Europe continues to advance renewable and biofuel solutions with opportunities also for our technologies serving the critical minerals industry. Both North and Sub-Saharan Africa are seeing increasing activity in both nitrogen and phosphate fertilizers as well as gas infrastructures, while North America remains an attractive LNG market. Overall, this diversified opportunity set reinforces our confidence in the sustainability of our growth beyond the current backlog cycle. In conclusion, our nine months results confirm the solidity of our business and the strong commercial momentum across the group. Based on our performance to date and the planned activities for the remainder of the year, we confirm our 2026 guidance. In particular, we expect the project execution to remain resilient in the fourth quarter.
In the Middle East, the mitigation measures implemented in close coordination with clients and partners are expected to support further project progress. At the same time, the integrated E&C business is expected to benefit from the continued ramp-up of activities across other geographies, particularly Central Asia and North Africa. We expect growth to accelerate further in the fourth quarter in the Sustainable Technology Solutions business unit. Driven by backlog conversion, a favorable project mix, and the increasing contribution from Ballestra. Overall, we expect full-year Group revenues and EBITDA to be in the mid to upper end of our guidance range. Meanwhile, operating cash generation is anticipated to support an adjusted net cash position substantially in line with year-end 2025 levels. We enter the final part of the year with solid visibility and remain focused on delivering our full-year targets while maintaining commercial momentum to support further growth.
We also continue to selectively pursue additional M&A and strategic agreements in line with our priorities. In particular, we are currently actively pursuing one opportunity in Europe, which we are confident could be announced before the end of the year. This concludes our presentation, and of course, we are now ready to take your questions. Operator, please go ahead.
Thank you. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The first question comes from the line of Massimo Bonisoli from Equita. Please go ahead.
Good afternoon, everyone. Thank you for your presentation. One question on the trading environment. Could you give us some color on how you see the fourth quarter developing across the two divisions? In particular, how would you describe the current execution environment for E&C, and what kind of acceleration should we expect in NEXTCHEM in respect with the divisional guidance? The second question on order take and the pipeline. You already have reached EUR 8.9 billion over the nine months, essentially achieving your yearly target of more than EUR 9 billion. Could you give us an indication of the size of the contracts currently targeted for awarding for fourth quarter and first quarter next year, and how we should think about potential order intake over the next six months? Thank you.
Thank you, Massimo. Let me start with the first part of your first question. I would like to spend a few words about what we can expect in the fourth quarter as far as E&C business is concerned. Then I will pass the floor to Fabio for his evaluation and his remarks on the expectation on the fourth quarter for STS. There are no major information to add to what we have already mentioned in our presentation with our press release. We have confirmed our guidance, the upper side of our guidance. It means that it is easily quantifiable what we are expecting to deliver in the fourth quarter. Of course, we are committed, as far as the projects which are ongoing are concerned, to do our best, even to reinforce additionally the progress of certain projects.
In particular, we see the possibility to accelerate a little bit as far as our project in Kazakhstan is concerned. There are all the conditions now which could make it possible to progress even additionally compared to the planned contractual progress. As far as the Middle East, and Middle East, as you know, the projects based over there are the major contributors for our production, namely our revenues. Since today, we have been able to manage all the challenges which the geopolitical situation is delivering, we expect to be able to be in a position to continue with the progress that we have been able to deliver in second and third quarter as well, with the possibility to do a little bit better.
Because useless to say that, as we have already mentioned, the third quarter in particular, the months of August and September, have expressed some additional challenges because of the adverse climate conditions, which, of course, we are not expecting to face once again in the last quarter of the year. For sure, we are well positioned not only to replicate the performance of Q3, but to increase, to grow additionally what we have delivered with the projects which are currently under execution, and even considering that, of course, the projects newly awarded progressively are delivering additional volumes of revenues. For this reason, we are very confident that the end of the year will deliver the upper side of the guidance. Now I will pass the floor to Fabio, and then I will reply to your answer as far as the expected additional awards. Please, Fabio.
Thank you, Sandro. Yes. On STS, and the question was on backlog conversion mix and increasing contribution from Ballestra. I would say that what is probably contributing most in the fourth quarter in terms of backlog will be the fertilizer business line. 2026 has been a very good year for, I would say, nitrogen fertilizers driven by a couple of elements. The first one is that we got to the conclusion of and the award of projects which we had working on for a long time, like SAN-7 in Saudi Arabia. It was also an acceleration of awards of fertilizer projects elsewhere from the Middle East, and I am referring primarily to Fértil Pampa in Argentina and also to a couple of acquisitions we made in China.
Probably if I have to name the most relevant contribution of the fourth quarter, it will come from fertilizers, but also from other business lines. As far as Ballestra is considered, don't forget that Ballestra's backlog is slightly different from what we have in NEXTCHEM. It has a longer delivery time than the usual backlog of NEXTCHEM projects. It contains some elements of E&P business in the current backlog. This is more or less the situation. Ballestra will be a contributor, clearly, of the fourth quarter, but probably the best contributor will be the fertilizer business line. Clearly, we are confident that we will be able to manage and achieve the results we have announced.
Trying to complete the answer to your question, Massimo, talking about order intake. I truly believe that all of you have appreciated what we have been able to deliver in the first nine months of the year. Very successful period, commercially speaking. We have been able to secure EUR 9 billion, which represent, in particular in this challenging environment, an outstanding performance. Also because we have been able to widen the operational area for our project and being successful in expanding our presence in Latin America, Argentina, Trinidad and Tobago, and then also in other traditional countries. But we were not there since a few years, for example, in Turkey. Now, it was the story of the last nine months. Now we are at the end of October. What else within the end of the year?
Considering the satisfactory commercial pipeline of EUR 61 billion and considering that our commercial department, both E&C business unit and the commercial department of NEXTCHEM, the STS business unit, both of them, they are working on real prospects. But we do not expect to secure other projects of billions within the end of the year. We have some targets, quite hot, located in particular in Europe, middle size projects from an EPC project standpoint. You can imagine that I'm talking about something ranging between EUR 400 million, EUR 500 million, EUR 600 million equivalent. For one of them, I am considering where we are now with the commercial discussions. I am confident that it will be possible to have secured this project within the end of the year.
On top of it, of course, we are targeting those type of projects, detailed engineering FEED, which represent the first step of the process for having secured them in 2027, other giant projects. I am talking about, once again, gas treatments, fertilizers, ammonia projects. All of them are real targets on which we are already working on hard. What we expected to have in the first part of 2027, then I don't know. The final decision belongs to the client. Of course, we are not the master of their decision process.
Based on what they have anticipated, I truly believe that it could be possible to have recognized, to have assigned one project which we have mentioned in our presentation, for which presently we are going to deliver the FEED, the detailed engineering, and it is due then to be transformed automatically into an EPC contract, only to the extent, of course, the result of the FEED, the quantification of the investment will satisfy the expectation of the client. But we do not expect any particular surprise because we have already discussed, we have already delivered some portion of those activities. For sure, in the first part of 2027, one or two EPC projects of the traditional size of an EPC for any fertilizer or an ammonia project, so exceeding $1 billion could be awarded.
In the second half of the year, there will be the conclusion of the commercial process for those other FEED on which we are working on so far, but will not be possible for them to have the conclusion before summer 2027. So not possible in the first part of the year. In the second half, we are talking about the super giants projects. When I say super giants, we are talking about project ranging between $8 billion - $12 billion each. On top of that, there is the LNG market. LNG market is a quite a new segment for our group, either for NEXTCHEM and as well as for Tecnimont.
Due to the successful award of the project that we are presently executing on behalf of Argent LNG in Louisiana, now we are delivering the FEED and all the activities able to get the authorization from the U.S. federal authorities. This has launched our group into the small group of companies which are used to work in the LNG space. This has made possible to have awarded the FEED for the Fujairah LNG. Of course, we are doing our best in order then to be in a position to have converted the FEED into the EPC. Also there are other prospects in the LNG space for which we have already received the invitation to participate to their tender.
It is a real recognition that our group, Maire Tecnimont as a whole could be and will be one of the most critical players in the LNG space moving forward. Just to say that I am, of course, not relaxed, but I am really satisfied about what we have already achieved and what we can really deliver in 2027. I do not know if I have answered to your question with this, my long answer, but I truly believe that I have provided you with all the necessary information which provide the confidence or the comfort that the future can deserve only best situations, the better situation even compared to what we have already awarded.
Very clear. Many thank you, Alessandro, Fabio. That is all from me.
The next question comes from the line of Kate O'Sullivan from Citi. Please go ahead.
Hello, good evening. Thanks for taking my questions. Firstly, in your prepared remarks, you highlighted several upcoming deliveries in the Middle East that could accelerate activity. How much visibility do you have on their timing and how material could their contribution be to revenue and EBITDA? More broadly on that one, how should we think about the impact of the Middle East situation on growth in 2027? Secondly, one for Mariano, maybe. Could you help me bridge the softer operating cash flow this quarter, particularly some color around the higher cash tax and also on the working capital? Thanks.
Let me provide you with some additional information about what we are doing in the Middle East. I am convinced that as far as Hail and Ghasha, which is the main contributor of the Middle East project, I have already provided some color about what we are doing. We have achieved 80% completion. We are progressing. We have already all the relevant materials on site which is able to feed the progress of the incoming months. So far so good. Of course, when you say what we can expect in 2027. Of course, 2027, even if detailed information will be provided only when we will communicate year-end results at our Capital Markets Day, I can anticipate, of course, it is quite easy to understand that the most significant portion of the activities expected in 2027 are already backed by project which are in our current portfolio.
So far as Maire is concerned, we have no particular pressure. A lot will depend on how the present geopolitical situation will evolve moving forward. If the situation should remain as it is right now, we do not see any particular constraint to deliver the same progress or even accelerating a little bit compared to what we have delivered so far, based on the condition that we have already all the necessary materials at the site, and we have been able to mobilize all the resources which are able to deliver even an additional progress on a monthly basis.
There we have already organized all the conditions to do better compared to what we have delivered so far, considering, I repeat once again, that we are not expecting to manage the same adverse climate condition that we have been obliged to manage in August and September, reducing the activities during the day and just enhancing the activities during the night shift. Now, we are in a position to maintain the traditional level of efficiency, and for this reason, we are even in a possibility to accelerate a little bit. This is the basis which has confirmed the possibility to achieve the upper end of the guidance that we have targeted for 2026. This is as far as the performance in particular affecting Middle East project. I have concentrated a lot on U.A.E., but of course, we have also other projects in the area.
Qatar is almost completed. Other project in U.A.E . are under commissioning, so it is not necessary to rely on materials or thousands of people. Saudi Arabia, one project is just started, and accordingly, the engineering activities are presently run in Milan or in Mumbai. These activities are not affected by the Middle East region challenges. While another one, which is the Amiral project, also this project has already benefited all the deliveries of materials in the previous month. Everything is progressing in accordance with the contract. For this reason, I said before, so far so good, and I repeat, if the situation does not get worse, we are well prepared to perform even better compared to the previous quarters.
Considering the trend of cash flow, it mainly depends on the project executed in the various part of the world quarter by quarter. You could have different trend between a quarter and another one, but it is mainly due to the activity we perform, so in Middle East, in Kazakhstan and in North Africa. Also, the tax, they depends on the payment we made in the specific area where we are operating, and they are mainly linked to the cash flow of the single part of the country in we are paying them.
Okay. Thank you very much.
The next question comes from the line of Marco Cristofori from Intesa. Please go ahead.
Good evening, everyone. Congratulations for the result. Two very short questions from my side. The first one is on the pipeline. Did you consider also the potential order for the repairs for the disruption in the Middle East in your pipeline, or is something that comes on top? My second question is for Mariano. Following the impact of the more or less EUR 300 million for the rentals of 20 years, would this translate into higher D&A cost in 2027 and the following year? If I did my calculation in the right way, it should be an increase of around EUR 15 million per annum. Can you confirm this? Thank you.
Marco, just trying to answer your first question. First, I would like to transfer to you what the result of the dialogues that we have with our clients based in the Middle East. Based on their statement and what we are now appreciating already, they are trying to repair their infrastructures, which have suffered damages due to the consequences of the geopolitical situation, directly by engaging local construction companies, leveraging on the design and engineering, which was originally made available as part of the deliverables when the infrastructure was originally realized. So most of them, they are trying to do this activity alone. If necessary, they request the support of limited, specialized technical people which could provide and help to their technical team in identifying which type of activities, which type of repairs are feasible.
Of course, I am not talking about, for example, the LNG train of Ras Laffan, which for sure, considering the level of damages that they have suffered, it will be a complete different story. But of course, this doesn't affect our expectation. Just to say that in our commercial pipeline, in our current backlog, and also even more in our shortly expectation of additional awards in the short time, we do not expect to be engaged, to be involved in the repair activities of damaged infrastructures.
Thank you.
The next question comes from the line of-
Yes. No, wait. A moment.
Mariano.
Yes. Considering the actual lease payment is EUR 16 million and it lasts till 2028. After, the lease payment will be EUR 19.5 million. We will have an increase of EUR 3.5 million.
Yes, but let me complete a little bit. Of course, in the meantime, the cost will increase just because the ultimate owner, the real owner of the infrastructure will intervene with improvements, in particular addressed to improve the energy efficiency. At the end, yes, there will be a direct increase of annual rental cost, but at the same time, due to the improvement which will be made and will be suffered, will be made by the owner, we expect to enjoy a significant reduction in the OpEx. For example, electricity, the power, which is one another important cost element for our Milan-based headquarter. All in all, I do not expect that the total cost, apart from the rental, will be extremely different compared to what we are suffering so far.
Thank you.
Okay, the next question comes from the line of Kévin Roger from Kepler Cheuvreux. Your line is open. Please go ahead.
Yeah, good evening. Thanks for the time. Maybe just one question on Hail and Ghasha. Because during the present, I think you said that now you get all the equipment on the ground for the sound execution of the project. I think that you mentioned that you could even accelerate the execution of the project in 2027. What does it mean exactly? Because the project is already 80% completed. So when you talk about potential acceleration, what does it mean exactly, please, on that one?
Acceleration means, Kévin , excuse me, that means that we could express an additional progress compared to what the baseline agreed upon with the client expects in the future months. Of course, also the client, ADNOC, is eager to have completed the infrastructure. So it is, of course, supporting the possibility. Also from economical standpoint is, of course, ready to recognize the effort from economical standpoint. Since we have, as I was saying before, all the appropriate resources on site. Presently, Hail and Ghasha enjoy something close to 57,000 people operating on this specific site. So having so huge organization already present at the site and having all the materials already available, with the exception of some oversize heavy lift equipment that we expect with the concurrence of ADNOC logistic, having them delivered shortly in ways. We could arrange also the activities in order to express an additional progress.
Of course, we are ready, well-equipped, but we will not do it until when we will not have finalized with the client the appropriate compensation for this effort. Just to say that we could be in a position to do it, but before, of course, we have to share with the client what does it mean to activate an acceleration process.
Okay, very clear. Thanks. Just remind me, sorry, the supposed initial completion date, it is mid-2028, right?
Right, indeed.
Okay.
This represented the original deadline. Of course, we were targeting an early deadline, but just internally in order to have the possibility, of course, to manage uncertainties or something which normally could happen during the execution phase. But just to answer to your question, yes, exactly. This is the completion date contractually defined between the parties.
Thanks a lot. Have a nice evening. Thanks.
The next question comes from the line of Isacco Brambilla from Mediobanca. Your line is open. Please go ahead.
Hi. Good afternoon, everybody. Thanks for taking my question. Actually, it had already been asked, so just two quick follow-ups from my side. First one is on Ballestra. If you please disclose the perimeter effect within the STS turnover recorded in the third quarter. Second point, during the last call, we discussed a lot about the strong confidence on reimbursement of mitigation measures put into place to ensure project execution is advancing properly. Could you give us an update on how these discussions with your clients are proceeding, and which is the time we should keep in mind to have impacts reflected in your P&L, even qualitative?
Isacco, let me take the first question first and then hand it over to Sandro. On Ballestra, as you know, we do not usually disclose numbers on single entities within the group. One thing that I mentioned in a previous answer is that Ballestra has a backlog, which also contains elements of job that we would normally do under the EPC side of the business. So going forward, Ballestra will focus more on the licensing, engineering, softer part of the job and leverage upon the competencies of Maire Group whenever EPC contracts will be needed. As a matter of fact, the contribution in the current backlog, as I was saying before, will deploy in a relatively longer period of time than you normally see under the NEXTCHEM or the STS type of business.
I would not be able to disclose the specific number, but it is going to be a substantial contribution to N EXTCHEM business going forward. More than that, let me share, after a few months of full integration, the potential in terms of cross-selling that Ballestra is bringing, not only in the inorganic chemistry sector, but also as cross-selling opportunities to the E&C side of the business are becoming relevant, and we expect to be able to benefit from those in the years to come. Sandro?
Yes. Talking about your second question, I do not remember if we spent a few words about how the clients based in the area have already organized the process. But since I wanted to be clear, it is better to repeat. First of all the clients based in that part of the world, they are recognizing that what is due to happen for the contractors is something which is beyond their control, and it is due to extraordinary events. Namely, they must be ready to cover the cost, the extra cost that the contractors, including, of course, ourself, are incurring. Basically, they have shared the problem into three different streams. First stream, having the discussion is focused on what they define the unavoidable costs.
Unavoidable costs are, for example, the logistical cost, transportation insurances, which due to the consequences of the geopolitical situation, everybody has been obliged to reroute some cargoes to the destination using different approaches, different routes, and normally much longer compared to what originally estimated. This easily can be demonstrated quite easily because you can, of course, demonstrate and document what you are going to incur for this. Logistic is one of them, but it is the easiest element. We are working, of course, and discussing with the clients in order to have recognized what has been incurred. For the time being, the table, which have been organized, contemplate the cost incurred up to the end of August. But of course, everybody knows that the situation must be updated also moving forward, depending on when all the project join the completion, or because the situation get back to normality.
Second stream relates to the indirect cost. So the extra cost deriving from the inflation effect, the escalation cost, which has been caused by the geopolitical consequences. Fuel, for sure, is mostly more expensive compared to before. Labor costs are higher. So all these elements which cannot documented with an invoice, but must require an additional level of discussion. Also, this stream has already started in July. We are working with the various clients. The discussion are already ongoing, and for the situation up to the end of August, it is reasonable to expect that a common solution will be agreed upon quite soon. The third stream relates to the date of completion. Of course, everybody, not only ourselves, but also the other contractors, are concentrated in order to maintain the original completion date for the project.
But sometime means that in order to maintain the completion date, the original contractual completion date, it is necessary to put in place additional measures, having additional people on the site. Because sometime it is not possible to work because of the consequences of the geopolitical situation. So it means additional cost, yes, indirect. But if not possible, the client must be ready to recognize a postponement of the completion, because of course, you know very well that if you fail to complete the project within the contractual date, then you are liable, you are subject to liquidated damages. So in order to avoid the application of liquidated damages, there is also another stream, which relates, is it possible to maintain the original contractual date?
Or considering what is going to happen so far and what reasonably could we have to expect to manage moving forward, is it still possible or yes, no? This is another table of discussion with the various clients. This is the process. What we are doing, we are negotiating, of course. We have already submitted our situation, the situation pertaining our projects up to the end of August, of course, with the commitment of both parties to update moving forward. But considering that we are negotiating and it is a very sensible issue, let me say that I cannot disclose too much in addition to what I have said before, because I don't want to create a compromise to my negotiation.
Many thanks for the answer.
There are no more questions at this time. Therefore, I hand the conference back to Silvia Guidi for any closing remarks.
Thank you very much to everyone for participating in today's call. For any follow-up, please feel free to reach out to our investor relations team. Our next appointment together will be our 2027 Capital Markets Day at the beginning of March next year. The exact date will be announced soon. You can also find details on investor conferences we'll be attending on our website. Thank you again, and have a great evening.