Earnings Call: Q1 2021

Jan 29, 2021

Good morning, ladies and gentlemen, and welcome to our Q1 Fiscal Year 20 1 Presentation that corresponds to the October December quarter. Before we start, let me draw your attention to our disclaimer in Page 2. The end of this presentation will be conducted by our CEO, Andreas Navan and our FO, Beatriz Puente. We will finish with a Q and A session, for which we will take your questions over the phone. And with this, let me hand over to our CEO, Andreas Navan. Andreas? Yes. Good morning to everyone, and thanks for joining our call this morning. And it's It's a little special for all reasons. The first, it's the first time that we do it together with our New CFO, Beatrice Fuente. And I'm very glad to have Beatrice on board since the 1st December. So welcome, Beatrice. And the second reason why special, we do it for the first time completely virtual. I'm in Hamburg. Beatrice is in Madrid. And the reason is, of course, our very strict COVID-nineteen protocols, which have helped us a lot so far for operations, but also for protecting our people. And therefore, we will also continue on that path, special also that we had a very good Start into the year operationally and financially. And the 4th reason why it's a little different than normal is because we already We communicated our key numbers in the ad hoc message on last Sunday. But nevertheless, we will hopefully use the next 60 minutes very productively, Explain to you how we started the year and answer all your questions. The key message is, I would like to take in the sequence of time. So how do they affect our business over time from short to long term? And you see that on Page 4. On the short term, clearly, this quarter, we had a solid start to the year. The revenue was as expected. We have a good profitability with an EBIT Of more than 5%, we have a continued strong funding position. And operationally, also especially in offshore and service, We continue to be well on track. So we clearly had a good start into the year, which brings me to point 2, our turnaround plan. We talked already about this at the CMD, where we introduced the key elements and step by step we are now implementing them Under the umbrella of the LEAP program, two examples are here already listed, and I will come to more in a few minutes. We continue to consolidate our onshore capacity. We started a while back, as you all know, in Denmark, in India. We had already a first closure in Spain and now on January 11, we announced the closure of 2 further factories. But also under the leadership of Lasz Korska, who Joined us as CEO for Onshore November 1, we continue also to simplify the Onshore organization. So the program is in place and the implementation is going well. This covers now the short term Q1 and our Turnaround plan and next future of our core business. Renewables continue to see an extremely strong momentum. And you can see that in Europe, Japan, U. K. And the U. S, you can see this everywhere. And we believe that SGRE is well positioned And the indicators why we believe that is our order backlog in total, our offshore pipeline close to 10 gigawatts, Our offshore positioning for the large and exciting auctions to come, but also the order entry for Q1 and the steep increase in the 5X orders That confirmed that also in onshore, we are on track. This shows we are also building the foundation for the future. But our current work goes beyond this. We're also building the long term future by positioning SGRE as one of the leaders in the renewable industry, By making sustainability more and more core of our activities beyond just making wind turbines and also driving the long term future by being a front runner in The hydrogen business. Just an example from last week, we generated the first green hydrogen in our test plant in Brander. So important for me is that we address the short term, but at the same time, we build the long term future of SGRE. With that introduction, I would like to come to Page 5. And we all know that the turnaround in onshore is key for a strong SGRE, and therefore, I'd like to spend a few minutes on that page. We already introduced at the CMD several focus areas, Profit over volume and the balance risk. We get the orders we want and the Q1 order entry confirms that we're on a good path. We also said that we would introduce leading technology. The prototype for the 5X is under installation. And until now, Including a recent order in Brazil, we have already achieved 2.3 gigawatts of new orders. Supply chain complexity, We have done another step by the recent announcements, but also other examples show that we are well on track, Like in the new blade factory that we have in Vargas in Portugal, we already made more than 100 blades less than 8 months after we started the production. But also project execution and the optimized organization also there we progress. But I also would like to highlight and make it Clear by no means are we done with the turnaround of Onshore. There are many more steps to follow, but at least We had a good start, good plan, and we are on track in the right direction. If we go beyond Onshore and look at sustainability, ESG, environmental, social and governance, also here just this week, we got Further confirmation that we do the right things. What I'm personally very proud of is the progress on diversity and inclusion. For the 2nd year, we have been included in the Bloomberg Gender Equality Index with an even better score than last year. So clearly, also on this on in diversity and inclusion and with our strategy, We have clear actions and progress. But also another element only this week, it was announced that we are part of a blade recycling project, which is also very important for the sustainable future of wind. If you go beyond that, also our external rating To be number 4 of 114 in the Dow Jones Sustainability Index is also a good sign for our progress. I then would like to draw your attention to Page 8, which is the commercial activity order entry this quarter. After a fantastic Q1 last year, we also had a good start, especially for onshore this year. We have a stable order entry in onshore, and offshore and service are clearly driven by the Volatile offshore profile, large projects last year, but for me that is not of any concern because we are well positioned in many Offshore negotiations when we expect to get the orders in the coming quarters. But if I just go beyond the current quarter, also our backlog shows that we're on a good path. Our backlog increased year on year by 7%. And important that also this growth comes from our solid performance offshore and service. You see that in the 3rd part of the graphs. And also, we have a good regional distribution. Important for this year to notice is that 90% of the midpoint guidance revenue is already Covered. And as we all know, offshore is covered, and I'm also confident that onshore and service can fill the remaining small gaps. After the SGRE order entry overview, I would like to go one devil deeper into the onshore order entry in here Shown in megawatts on Page 5. And one thing that is of major concern always is the ASP. And as you can see in the lower part of the graph, it remains stable and of course influenced by the usual ups and downs due to Scope, mix and region. Even though the order entry goes down a little, that doesn't concern me. It's Actually, confirmation is our profit over volume strategy works. APAC is down as we expected it to be due to the slow activity in India. But on the very positive side, the large turbines with more than 4 gigawatts are about 82% of all of our onshore 3. And 1.1 gigawatt of that, the 5x alone. And that is important for me and for onshore. The new direction for onshore works, And we get the orders we want and we need, and we will continue to drive our profit over volume strategy. From onshore, I would like to move on Page 10 to offshore, our major growth driver. And our future position offshore is determined by 3 market segments over time. First, of course, our order backlog. We have 6.1 gigawatts. You can see this in the chart, but also in the map. From the Netherlands, France, U. K, Denmark, Norway, Sweden, Taiwan, We are covered globally. 2nd then, our strong pipeline with a total of 9.3 gigawatts, the gray Bubbles in the map. The U. S. A. Alone with 4.4 gigawatts, then the UK, France And then ending in the Far East with Taiwan and Japan. And these 9.3, I'm very confident, will turn into firm orders over time. And then the 3rd, but by far the biggest segments are the upcoming auctions. In Q4 and in 2021, We see offshore auctions of 25 gigawatts coming up. And that is, of course, a key priority for us to best Position SGRE for all these auctions together with our clients. And finally, the commercial activity For service, a few key highlights. We see a 17% growth in our order backlog, mainly driven by EMEA, which is Again, offshore. But also the Cendyen acquisition that we concluded about 1 year ago supports that growth. Another example, we had a 10 year long term service contract in LatAm. Even though the order entry activity in Q1 was relatively low, as I mentioned already driven by The offshore ups and downs, we are on a good path as also the book to bill ratios and service shows. After describing the SJE business, I would like to go on Page 12 to the global market situation. And just in Q1, just in the last three months, we have seen extremely important steps for our industry. 1st and foremost, of course, the U. S. Election And which will have a very positive outcome for the U. S. Market, we believe, in onshore and offshore. Then in Europe, It is important to mention here clearly the offshore wind strategy that was published mid November With around 300 gigawatts by 2,040, if you do the simple math, that's in 20 years, That's 15 gigawatts every year of offshore in Europe. And also the U. K, the Green Revolution plan that was published Also in November, with the aim of 40 gigawatts in offshore by 2,040, so another 2 gigawatts in average every year. But also all the new Asian markets like Japan, South Korea, also they have big ambitions and They become more and more concrete. So clearly, offshore, but wind in total has a huge global momentum. With this look into the global market, I would like to hand over to Beatrice for the Q1 numbers. Now to you, Beatrice. Thank you, Andreas. Good morning to all of you, and thank you for joining CIMO CAMMESA Q1 results presentation today. This is Beatriz Puente speaking. As you know, on per Andrea's introduction, I joined the company as CFO at the end of last year, and it's a pleasure to And present a very solid Q1 results. This is the first time we meet virtually, and I'm certainly looking forward to meeting you personally in the coming months. Let me cover the Q1 financial highlights. And starting on Page 14, you have the consolidated group figures for the quarter that confirms that the company has started with very good numbers. Euros 2,300,000,000 in revenues, up 15% quarter on quarter, supported by offshore and services, but still impacted by the pandemic and especially in the execution of Onshore projects and impacted by currency translation in this quarter. We will get into more detail in the next slide. EBIT per BPA and before integration and restructuring cost amounted to €121,000,000 versus a loss of €136,000,000 in Q1 2020. EBIT margin of So pre BPA and before integration and restructuring cost of 5.3%, a 12 percentage Point improvement when compared to Q1 2020, thanks to a continued strong performance of offshore and in services. The quarter profitability also benefit from the final delivery of projects that also, I mean, hindered our performance last year And from service productivity gains and a higher reduction in failure rates in offshore products. As it was disclosed In our Capital Markets Day back in August, the company has an integration and restructuring program in place for the coming 3 years. Integration and restructuring costs in this quarter amounted to €47,000,000 The company has incurred in We've got €20,000,000 of restructuring costs, mainly corresponding to ongoing restructuring in India and in Europe, Both programs already started last year. On integration cost, the amount was €27,000,000 mainly IT, Corve processes and a small amount due to integration of Sembion and Bagos. I would like to highlight that as we will Rollover the construction plan and complete our IT programs. You will see integration and restructuring cost increasing in the coming quarters in line with the guidance that we have communicated for the year. As Andrea mentioned, we already announced further capacity consolidation measures in January and the financial impact will be booked in Q2. Reported net income amounted to €11,000,000 A significant turnaround of the Q1 numbers, net loss of €174,000,000 The reported net income includes the impact, net of taxes, of the pre PPA and integration and restructuring cost amounted to €77,000,000 in total. Moving to the balance sheet and cash flow key metrics. I will highlight CapEx of €140,000,000 split between product development, roughly €39,000,000 Our manufacturing capacity tools and equipment of €101,000,000 The combined nacelle and blade manufacturing facility in France remains our main capacity investment right now. More than 50% of the total CapEx has been invested In offshore product development and manufacturing capacity to be able to tap the market growth. As Andreas mentioned earlier, Offshore prospects seems to be getting better day by day with 25 What's between what was auctioned in this quarter and what is expected in calendar 2021, for which we are closely collaborating with our clients and very well positioned. Working capital of minus €1,700,000,000 roughly 17 point negative 17.4 of the last 12 months revenues remains at a very efficient level. It also reflects a strong improvement delivered last year. The net position of the company at the end of December amounted to €476,000,000 Moving to the revenue performance on Page 15 of the presentation. Group revenues grew 15% year on year, supported by offshore and services and, as I already mentioned, impacted by currency translation. Revenues at constant rates We have amounted to EUR 2,500,000,000 up 21% quarter on quarter. Most of the currency impact comes from the depreciation of the U. S. Dollar, the Brazil real, followed by the Mexican peso, Indian rupee and Russian ruble that has impact on onshore and service revenues. Onshore revenues reached €1,100,000,000 down 5% in the period. Expected growth in the quarter was expected by the pandemic COVID-nineteen, which has delayed project execution, especially in the U. S. Market. We expect project execution to accelerate, especially during the second half of the year and more on the Q4 of this year. Offshore revenues reached €838,000,000 up 62% in this quarter. This growth was supported by the manufacturing activity that are fourfold in the period to 7 34 megawatts in the quarter from 185 megawatts in Q1 2020. It's important to highlight that this volume and revenue growth should not be extrapolated for the coming years. As you are well aware, manufacturing activity in the Q1 of last year was depressed by the ramp up of the manufacturing of our 8 megawatts turbine in Kushaven. Last, service revenues reached €396,000,000 up 8% in the period, including the integration of the acquired European service operations of Sembion that has been partially offset by FX impact. Onshore manufacturer activity volumes of 1744 Megawatts Exactly flat on the period with higher volumes in APAC up 26%, America up 5% and lower volumes in EMEA than 24% in the quarter. Moving to Slide 16. EBIT pre PPA and before integration and restructuring costs amounted to EUR 121,000,000 in the period. You have the bridge, the strong EBIT Performance in Q1 was supported by offshore and services. Our wind turbine division has moved back into profitability with the EBIT margin pre PPA and integration restructuring cost of 1%. On one hand, we have completed the projects that faced very challenging conditions last year. And on the other hand, offshore revenues has increased and also with higher contribution to the overall Wind turbine revenues. We are not seeing yet a minimal impact from the restructuring actions, but you will see more visible it will be more visible as the year progresses and mainly 2022 in 2022 and 2023. Service margin of 25.9 percent. The service margin, as I mentioned, benefits from a strong reduction in offshore turbine failure rates and productivity gains of cost efficiencies that materialized in this quarter. In Q1, we signed new contracts with some of our service suppliers, and We also performed the standard product assessment. This tailwind we experienced in this quarter, which is a Higher reduction of wind turbine failure rates is not expected to continue in the same magnitude in the coming quarters. Therefore, this margin cannot be extrapolated to the following quarters. Saying that, still, service margin is expected to end the year circa 20%, so very good margins. This is a clear sign of the strength of our offshore product platforms and supports our view of our leadership in offshore market, but also is a proof of our continuous commitment to deliver productivity gains and lower External course on a yearly basis. And finally, as a result of the performance of both wind turbine generators and also service, The group margin reached 5.3% in the period from negative 6.8% in Q1 2020. The main contributors to the positive performance, as I have mentioned, is more volume, more volume from offshore, productivity gains that has offset pricing pressure that now are included in our REIT program and also completion of 20 challenging projects. Moving to Slide 17. Our net debt position stood at €476,000,000 at the end of Q1, An increase of EUR 427,000,000 in the net debt position since the end of last year. The net debt Variation is very much related to the performance of evolution of the working capital. The profitability improvement in the quarter led to €150 €1,000,000 in gross operating cash flow and the working capital variation of €400,000,000 This is mainly driven by the lower level of commercial activity in, of course, Q1, the activity planning, which is more coming in the second half And also the normalization of the large negative working capital by year end 2020, that also with the payments, as you See in the slide of trade tables of more than €500,000,000 Then €140,000,000 in cash, as I mentioned, linked to the very large offshore potential that we foresee. And finally, €24,000,000 in uses of ADWAN provisions. This is very important that the group is back to profitability at operating level. And we see we might see some further normalization of working But for me, and you know, cash is a clear priority for the group. We will continue to monitor a very strict Cost control are focused on our working capital initiatives that we'll have and also in case liquidity. Moving to Page 18. The company is very important and is a key competitive advantage of this company, Has a very solid funding position with €4,400,000,000 in credit lines, out of which EUR 442,000,000 in short term and EUR 740,000,000 due in EUR 23,000,000 and more than EUR 2,000,000,000 [SPEAKER MARCO TRONCHETTI PROVERA:] In long term available lines until 20 6. Therefore, nearly more than 2 thirds are long term maturity. We have grown €1,300,000,000 and we have as of the end of last year, December €1,500,000,000 in cash. Therefore, the company total available liquidity amounted to €4,600,000,000 This strong liquidity, As I said, reinforces our competitive position, especially in the offshore market, allowing the group to take the required investment and commercial decisions to benefit from the market growth. After this sound set of results for the beginning of the year, as you have seen in our press release and presentation, We reiterate and confirm our guidance for this year, revenues between €10,200,000,000 €11,200,000,000 And EBIT pre BPA and integration of restructuring cost margin between 3% to 5%. So after covering the key financial metrics for the period, let me hand over to Andreas to present the company outlook and then we'll be happy to answer any questions you may have. Thank you. Yes. Thank you very much, Beatrice. And I would like to have an outlook into the long term future of wind. And as we all know, the real excitement and growth in renewables is probably still to come. You see that on Page 20, With 60 gigawatts of installations in 2019 and dependent on which scenario you use, you get either 250 Or maybe close to 300 gigawatts every year in 2,030, so doubling our whole industry 4 times And also by the mid-twenty 20s, which you can see on the right side, we see a strong increase, especially in offshore, which Doubles or triples, but also overall the wind market growth by 5%. This is, of course, driven by the huge And financial support that the wind industry and the renewables industry in generally gets at the moment, which you can also see on Page 21. The grants in Europe that total up to around €750,000,000 divided into grants and loans, of course, are a big support for our industry. And our task at SGRE is to play a vital role in driving these recovery programs and foster The new build of renewables in the future. I would like to end with an exciting example where we at SGRE prepare ourselves for that future Or might be that we even help creating it, which is our fully integrated hydrogen offshore turbine, which you see on Page 22. It's a 5 year development project, and we expect to have a full scale offshore demonstrator in the mid-2020s. It's a project that we do together with Siemens Energy, and thus we can drive the synergies between Siemens Gamesa and Siemens Energy. It will be based on a 14 megawatt turbine and instead of producing electrons, this turbine would then produce green hydrogen molecules. And this open ups completely new opportunities for Siemens Gamesa for the classical offshore business, but of course also for our service Business. That does not mean that the world will completely go into hydrogen. I'm sure there will be a mix of Electricity generation and hydrogen, but we would like to be prepared for both. Thanks for your attention. And now I hand back to you for your questions. Good morning, ladies and gentlemen. The Q and A session starts now. We kindly request that you limit your questions to one return. Please be informed that in order to assure audio quality, we recommend that all questions are asked Thank you. The first question comes from Supriya Subramanian from UBS. Please go ahead. Hi, good morning. Thank you for taking my questions. I have two questions to start with. One is on the margin Performance in the quarter itself. And you had mentioned that there were certain benefits coming through from the reversal of provisions, as well as Sort of low maintenance activity. Is there any quantification for this that you could share? And sort of related to this itself, do we occur do we expect this to record in or continue in the coming quarters? And does the 3% to 5% margin include the guidance include the one time benefits or is that sort of on a core operational basis? And my second question is related to the Five Point X platform. And if you could share any details On the traction that you are seeing with this platform, especially in the U. S. And European markets, which we have said that earlier you had the wrong platform for those markets. Are you seeing a Are you seeing a retail, let's say, interaction in these markets? And also any indication on the margins of This platform versus the previous, I know some of your peers have said that for their new platform, they could potentially make 2% to 5% higher gross margin. So any indications or that, I hope you please appreciate it. Thank you. Yes. Thank you very much for the question. Maybe I answer the second First, and Beatrice, if you could take over then the first part of the question. And the second part of the question was around the 5x. And Indeed, we see quite some progress there, especially in 2 regions. The orders that we also have announced to the market, Many of them are in Northern Europe, and this is also a confirmation of our plan because that machine, especially for the early applications, It was dedicated for the Northern European market. And therefore, you see a number of project announcements that we've done And especially in Scandinavia. Another market where we expect that machine to be quite successful is the German market That is slowly recovering on the onshore side. And also there, the interest in the 5 rigs is pretty high, even though we haven't received large orders for that machine yet, but that has for me, simply due to the time of Yes, but that has for me, simply due to the time of introduction and going to the project cycles. The other region where it's quite successful and that is confirmed also by the recent order is Brazil. Brazil is driven by local content requirements, auctions, and that machine has been quite successful in a number of projects now That we have already booked and the production for the first one will start in the course of 2021. So clearly, these are the two regions. For the U. S. Market, you addressed that. We still have to see, especially with the now new momentum that we politically see in the U. S, How we best can place this turbine in the what we call nameplate part of the market? And with regards to the margin expectation, it's clear like with all new and larger turbines that you introduced, we do this because we Expect a higher margin from that machine. And the real result of that will only be seen in 2022 when that machine gets We cut the major share of our production, but not yet in 2021. And now back to you Beatrice on the Q1 EBIT question. Yes. Thank you, Sofia, for your question. As I mentioned during my presentation and actually on the activity report on Page 1, this is Normal cost of business, with the operations of the service business, the levels of ordinary provisions has been evaluated to adjust then both To the lower failure rates of wind turbines, especially offshore and the lower service cost Resulting in those productivity improvements. We have highlighted that, as I mentioned, the 25.9% of the margin service, Of course, you cannot extrapolate for the coming quarters. And that's the reason we also have included in our guidance That we see more the service kind of normal expected annual margin circa 20%. Thank you. Sure. Thank you. And then the final is you asked whether that is included in the 3% to 5%. Yes, it is. Yes. Thank you. The next question comes from Guy Duper from Deutsche Bank. Please go ahead. Yes. Thanks very much. Good morning, everybody. Could you talk a bit more about how you Intent to mitigate the recent rise in steel cost and freight cost. How are you dealing with basically What's likely to become a scarcity in terms of transportation? Are you pushing for higher prices? And On a net basis overall, how do you see that impacting your margins going forward? And how much of this is already embedded in the margin guidance? So that's a question or a big question, number 1, I should say. The second question is about the repowering Potential, if you could talk about this and how significant it could be for you potentially in the next few years? Thank you. The effect of the commodity prices, and we see this driven by 2, I would say areas at the moment, one is, of course, logistics costs. But for 2021, we do not Expect that this has a major influence. The same we also see for the steel and copper price increases that we saw Especially the last few weeks. And I think we also have to be a little careful there and first wait whether this is a continued effect Or whether that is just a spike as we have seen it in some of the commodity markets also over the past few years. For 2021, we are relatively well protected against that because on steel, we have ordered most of our components anyway and Thus, by operational ordering hedged us against that. And in the long run, we will, of course, try to See that we pass on any increases in the material prices if they continue to be of a sustainable nature To our customers, especially when we have long leading projects like in offshore, that is an opportunity. In the shorter cycle, onshore business is slightly different. Thank you. The next Next question comes from Diedak Mathur from Citi. Please go ahead. Hi, everyone. Thanks very much Thanks for taking my question. And yes, just following on from that last one. In terms of latest color on turbine Pricing developments going forward, both onshore and offshore and what sort of development are you seeing? And secondly, on the 2021 guidance, given the Q1 beat, could you maybe talk around the Scenarios embedded in the low end of the full year margin guidance. Is it fair to say this is a precaution? It's still Far too early in the year to be thinking about anything like that. Thank you very much. Okay. I will try to answer the first question, which is around Turbine prices and PL3s, if you could then address the second part of the question, which refers to the low end of the guidance. So turbine prices, And as we have shown in our presentation, the prices for onshore turbines have stabilized Even though we have quite some effects also from introducing larger turbines, which generally should drive down the prices a little, but you can still see And for onshore, we have quite a good statistical basis. We have now again stabilized. This is clearly seen in the market and also in our order entry. So that is our view on onshore. On offshore, it's I'm not so sure whether these average prices Make that much sense in offshore, especially as they vary so much dependent on currently global region, Taiwan versus U. S. Versus Europe and also because we introduced a new generation of turbines with the 14 megawatt. And the main reason for introducing the 14 megawatt was, of course, to introduce new technology, which offers a higher margin potential. And this is clearly what we see in all the contracts that we are currently negotiating and also signing for the 14 megawatt And that this was the right step forward to be well placed in the even Now more and more competitive offshore market, but this turbine is clearly well positioned. And then Beatrice, if you could say something about the lower end of the guidance? Yes. Thank you, Vivek, for the question. Yes, I answered with Your question as well confirms that it's still early in the year to narrow the guidance. The positive thing is that We have started with a very solid Q1, which is very important, as you know, for the whole year. And as we go Per year, we'll have more visibility. There's still uncertainty of everything, COVID and but we feel comfortable with the range. And of Of course, as far as we go through the year, we might narrow that range. As per today, it's still early, But very confident with the guidance. Thanks very much. Thank you. The next question comes from Akash Gupta from JPMorgan. Please go ahead. Thank you. Yes. Hi, good morning, everybody. I have two questions, please. My first question is on energy storage, which is a hot topic in the market these things. I think Siemens Wind Power in the past was working on a thermal storage technology for past many, many years and I think you have some Pilot project, which is which was under operation in Germany. The question I have for you is that can you tell us where do you stand in commercializing this technology And given the need for thermal or steam turbines, if this could be another area to jointly market with your parent Siemens Energy? And the second question I have is on offshore. I mean, clearly, we see you are implementing more positive on offshore and we can also see Increasing offshore activity in the market. The question I have is on the U. S. Market where you have 4 gigawatt plus in pipeline And given the new administration is talking about local jobs, shall we expect you to invest in the U. S. Footprint in the coming years? And maybe on the same topic, how are you like would this be similar to what you're investing in France? And maybe to complete the full circle, Will that additional CapEx for U. S. Footprint is embedded on your medium term outlook? Will you expect CapEx to fall to 5% by 2023. Thank you, Akash, and good morning. Nice to hear your voice. It's first you asked about energy storage. And indeed, we developed Siemens Gamesa an energy storage technology that we are testing here quite successfully in Hamburg. And after Quite successfully in Hamburg. And after the usual technical ramp up difficulties when you test that new technology, That test plan is working technically very nice. And now we come to the second part of the real part of your question, which is the commercialization of that Technology. Clearly, we all see that energy storage is needed if you want to run whole electrical grids on renewables. But what we've not seen so far is especially for this technology, a commercial application. We had several projects, which we looked at here in Europe. And in the end, at least under the current regimes, it's commercially a very difficult call. Then that does not mean that it will never fly, but clearly under the current conditions, it's not easy to apply. The second thing is also That it would fit very well with fossil power stations. It's normally to connect it directly to a wind turbine is not The Media Technical Solution. So a combination with existing fossil power stations might be of interest. And this is what we are currently exploring ourselves and we have quite some requests from customers that are interested in the technology and also Akash you addressed it There might also be a potential that we do something together with Siemens Energy. But clearly, our first step was first, let's make it work. It works now. And now we have to find the right route to commercialization, still too early to say. Then Akash, you asked me about the offshore U. S. Market, clearly, we had a good start there with the 4.4 gigawatt and more and more auctions are, of course, Coming and we are participating in them together with our clients. There is already now a Huge expectation on local jobs, and we all know that. It's unfortunately, I would say, not U. S. Jobs, but it's Even in many cases state by state drops and therefore we start part of our project that we do with Dominion in Virginia Will also be the creation of local economic benefit. And at the same time, other states are also looking at it And there, we are currently exploring how can we best localize certain equipment because in the end, we have to strike the balance with being Very competitive and at the same time creating local jobs. And it remains, of course, to be seen with the additional momentum that The new administration will put into that. How will that play out? Until now, we focus on a blade facility in Virginia And then potentially equipment like towers that we don't produce ourselves where we then would could localize together with partners. That is at the moment the direction we drive our U. S. Offshore business with regards to localization. I hope that answers your question. Thank you. The next question comes from Sean McLoughlin from HSBC. Please go ahead. Thank you and good morning. First, a question on COVID. If you could quantify the impact of COVID, I mean, you say it's still slowing down movement People and good, it's impacting onshore project execution. Just a number and maybe how that compares to previous quarters And what view you have into the current quarter on disruption? Secondly, on the onshore restructuring process, it looks like you've made good progress. There have been a number of factory shutdowns. I'm just wondering How far down that process you are and what are the next steps in your mind along this journey? Yes. Thank you, Sean, for the question. Maybe first I address the question that I unfortunately forgot to answer or missed to answer in one of the previous Collars, that was about the repowering potential. Honestly speaking, we don't Differentiate anymore between repowering and newbuild. It used to be a very separated and dedicated market, But in light of the large opportunities that are there, we at the moment don't separate out the repowering market neither in Europe nor in the U. S. Of course, there are then special projects, but I don't have a number at hand to say What of our market expectation on our own order entry is exactly repowering and what is completely new build from scratch? I simply don't know and I don't think the market is that large. With regards to COVID, maybe Beatrice, if you want to answer then The question on the number impact, operationally, we have some effect Also when we have the balance of plants, sometimes to be done by our customers or on the logistics side, But it was clearly far, far less than last year, where in the middle of the year, Q2 and Q3, 3, we had a huge impact, and we explained that in various previous calls, in countries like India and from China, first with the supply chain And then later also in Mexico. But this has clearly stabilized. We have stabilized our operations. We know how to deal with it And also how to move people across the countries. Of course, it's not as easy as it used to be with quarantine rules, But generally, we have stabilized the operation pretty well. Beatrice, if you Yes. Regarding the impact of per se, COVID-nineteen is low single digit in euro terms in Q1. But also as Andrea said, it's also affecting the TBT, therefore, because lowering our margins due to the low absorption, but the team is working hard to mitigate those impacts. And then, Sean, you had a third question, which was on onshore restructuring and what comes next. First, we have to complete The activities that we just started, we decided to close one of the factories in India. And this is Due simply due to the local regulations not easily done. It's progressing well, but still it's not complete. And the same is currently ongoing for the 2 Spanish factors. We announced it only a few weeks ago. We're currently negotiating with the unions and the workers' Representatives, and that is clearly the next step that we first complete what we just announced. I indicated also in my introduction, I called it the onshore organizational simplification. And last quarter, clearly decided to Reorganized onshore with much more dedication to the regions. And this is then the next step that we We changed the onshore organization into the future design that Smith just released, And that was also communicated to our organization early January. So these are clearly the first or the next steps that are there to come And to get completed first. Thank you. Thank you. The next question comes from Sebastien Ruggiere from Commerzbank. Please go ahead. Yes, good morning and thanks for taking my questions. The first one is around the pipeline in offshore sorry for that. And on the 9 gigawatts you mentioned on the pipeline as such and the 25 gigawatts for the Auctions for 2021. Can you give us a sense about the expected timing around the 9 gigawatts, roughly speaking, for the auctions? How should we Think about the regional distribution behind the 25 gigawatts and also with regard to the time span of those projects and the expected hit rate on these very projects. The second scenario would be around the onshore business and here on the 5X platform. You said that you are with the prototype up and running. When would you expect to start serial production on the turbine? And what is the expected contribution from the platform in eventually 2021, if there's any? And how would that compare 222, when I look at the 50% share roughly in order intake in quarter 1, then that might be a good yardstick. If I may chip in a very quick one for the CFO, Beatrice. Hi, good morning. You are now about 60, 70 days in office. In which areas would you see the greatest room for improvement when looking at the company with a fresh eye and especially When it comes to working capital, there's one target as you said. Thanks. Good. Sebastian, that was I try my best and I try To note down all the questions, I start with the pipeline for the 9 gigawatts and when we do expect them. Of course, we expect them, as I mentioned, also in Reduction, we expect the orders to come in 2021 2022. Maybe there's an outlier. I don't have the list Completely in my head, but clearly in 2021 2022. And but not all projects will come in these 2 years. And the regional distribution you see in the map. Then you asked about the auction, the 25 gigawatts. And clearly, the largest and most important one is the upcoming CFD auction in the UK. And Our current expectation that this alone is around 10 gigawatts. And The time spent for these 10 gigawatts in the UK, the very earliest chance for a project would be an installation in 2024, But that would already be a very ambitious time schedule. So the major chunk of that would come in 2025 and onwards. The other options that we would really need to go then into detail there in the Netherlands, That's the Danish project. We have a Taiwanese auction that is in the mid-20s and we have France coming up with a gigawatt. In general, All of these projects that are currently auctioned out will be for 25 and onwards, I would say. Maybe there's an outlier that I don't know at the moment, but You can assume most of them will be 'twenty five and onwards, not earlier. Then you asked me about the serial production of the 5X. And first, just a small correction, maybe I didn't say that clearly. The 5x is currently under installation, and we expect that we It starts to operate in the next few weeks, so it's not under operation yet, but it's progressing well. The serial production for our first Project will start in the in this quarter. We have a Swedish project called Skartrosen, which was the one of the earliest Project that we signed and we expect the steel we are really ramping up of the steel production of that project in the Q1. And we also have then a second project that will also come right after Skaftosn, also a northern project. But of course, as you also indicated, the major chunk of the 20 of the 5x and the importance of the And I think it would be 22. This year, also due to the normal ramp up that you have, it will not Contributed big time to our profitability, simply due to the very innovative nature and ramp up. And then I think Beatrice, there was one question for you. Yes. Thank you, Sebastian. I'm very happy to say that we have the Key ingredients for success, we have a great sector, great company, very high talented management team, and I have to say that With my team very high skilled and talented finance team. So with those ingredients, what do I see? As you said, maybe improvement of Of course, there is always improvement in any single company. I will focus, as I said, now we have a new organization within the finance team. So all the finance functions are reported to me, also the CFOs of the company. So we cannot work as one single team, which is key on the finance function. We're focusing on, of course, homogeneous processes, strengthen the internal control and very important, as you said, cash. Achais is a priority for every company. For us, it's a key competitive advantage. And we have room also to even improve it despite, Of course, significant improvement that you see have seen in the last 2 years. Our focus will be on, of course, cash collection or Having higher visibility on cash flow generation of the company and the businesses, working on Extension of payment terms for the company, a reduction of inventories that also can have a significant impact on our working capital. And last but not least, also asset management initiatives that we can generate also cash. And last but not least, Key priority for me is also, of course, investment grade of the company and also enhanced liquidity. So that will be the priority for the finance team. Thank you. Thank you very much. Thank you. The next question comes from Marc Froschner from Credit Suisse. Please go ahead. Thank you for taking my questions. Firstly, on the GE Patent claim, I mean, this is a strategy pursued by GE to protect its markets over many years. What is the risk to the ability for you to install your projects? Are we likely to see That patent claim in the U. K. High Court delayed any New Zealand's GMSO projects? And secondly, a question for Beatrice. Just to be clear about the one off items that you mentioned in the preannouncements on Sunday, it is solely These releases of provisions, which meant that the services margin was at 26% 25.9 rather than 20. I'm just looking to check that there's nothing that there's no other one time credits Running through the EBIT line this year? Thank you or this quarter. Thank you. Good, Marc. Happy to answer the GE Patent question. Even probably I can't quite live without it, But it's there. But it doesn't bother us that much. You asked especially about Whether it could delay any installations in the UK, and our position is clearly no, it cannot and it will not delay anything. We feel that we are very well protected against this claim. And of course, we do the You expected defense actions, but for the time being, we clearly do not see that it has any Effect on our operations or installations in the UK. And then I think Beatrice back to you on the EBIT. Yes. Thank you for the question. We confirm that Ordinary cost of business, we do as you know, as every other company, I need to improve the maintenance cost of the company and we continue to focus On that improvement, therefore, it's a very good sign that the company lowered the failure rates on our wind turbines and nothing else You know, it has been in Q1 numbers affecting the profitability of the company. Perfect. Thank you very much, Beatrice. Thank you. I think we are coming to an end. Is there any final question that you would like to Please. Yes. We have a question from Hernando La Fuente from Alantra Equity. Please go ahead. Hello. Good morning. Just two quick ones. Well, first of all, Beatriz, welcome. Thank you, Carlos. Just two quick ones, as I was saying. The first one is on the performance of the revenues of the service division. Q1 last year was still a quarter without the impact Senvion, and compared with the rest of the previous year, the rate of growth of services has Decreased from over around 20% on average to 8%. What is the reason here for this reduction in growth considering that Q1 last year Was not affected by Cemphion. And the second one is on the turbines margin. Basically, this quarter, The turbines division is making a margin of 1%. Is this sustainable going forward? I mean, will turbines end the year with positive margin, EBIT margin? Thank you. Thank you, Fernando. I will take the first question regarding services revenues, Why when we have on Q1 the contribution of Senvion, the underlying is true, is Lower revenue growth, the main reason for that is the FX impact that I mentioned before. The Q1 numbers of services has been impacted mainly for FX translation on the revenue side, mainly U. S. And So we foresee that, that will have an impact on the yearly basis. CEMBIAN is on track, Even better as per our expectations. So it's only the impact of maybe that FX impact on the U. S. But we foresee that it's going to have a very good year. And then I think the second question is turbine margins, Fernando, clearly, first, let's talk about offshore. We have a very solid plan for this Here in offshore, we know exactly which turbines we will produce, and this is now the 8 megawatt Irvine that we are producing for about a year more or less quite stable. So there we expect it to be stable. And Then the key question is, of course, how we how the onshore business now develops. I think the last Here, we all know we were suffering quite a lot from these specials and negative effects on the Northern Pipeline. And this is where we put our focus at the moment That we get the Onshore business stable and avoid such negative effects. And I think if that continues, We also expect a good margin from the turbine side. Overall, and that is where it all ends up in, Is that from all what we see at the moment, we can confirm that we will end up in the 3% 3% to 5% range of the guidance. Okay, thank you so much. Hernan, just two follow ups in that one and to give you comfort on the Service revenue, if we Ismail also when I mentioned U. S. Is also the lack in the square of a big repower contract that we have in Q1 last year. But if you do the kind of carve out of taking out that FX impact still is single digit growth On Q1, so good performance of the service in our business. Q1, sorry, the loss in the digit should be the like for like, Excluding all the impacts, Senvion, FX, etcetera. Yes, Senvion FX. Okay. I think that gets us to around the exactly 10 o'clock. And I would like to thank everyone For listening in, especially, of course, thanks to you, Beatrice, and joining me for the first time. And I think concluding it, we are, of course, glad that we had a solid start into the year. Clearly, we have still 9 months to go and a lot of challenges, especially in the onshore business still to tackle. But on the other hand, it's good to have that good Start into the year, and we look forward to the next talks with you, and many thanks for your questions. So I wish you all a good and Stay healthy, Dave. Thank you to everyone. Thanks, Andrea. I'm looking forward to next Q2 results. Stay safe. Thank you.