Hello. Good afternoon. This is Eduardo San Miguel. Welcome to this Q1 2021 results presentation. It will be conducted as always by Juan Lado, our Chairman, who takes Assi de Triume, time to compose your questions after the speech.
Now I give the floor to Mr. Juan Llano.
Hi, hello everyone. We have started with a big picture and this big picture because the one that I'll show you afterwards is not very good. This is happened to be the Anzaou refinery, the largest Refinery ever built from start, there are largest ones, but this is the ones where we Are in the process of finalizing commissioning of the main process units. So I was just I wasn't going to say that in my presentation, but I was looking at the picture And I thought that it was relevant. Okay.
This presentation, it is going to be different. It's organized in 2 parts. The first part that we call challenging environment, actually, This section is going to very much focus in this environment, challenging environment, what are our Q1 results And what has been the impact, the good and bad in these first 3 months and how management has reacted to COVID. The second one is more positive. The second section is more positives, which has to do with awards, awards that had already taken place and very strong signs of a positive market the market recovery.
Okay. Let's move to the first part of the presentation. And when I sit here delivering projects, I have a slide here with 3 main projects. And this is just an example, 3 main projects that through this year because let's talk, I mean, over what has happened over this full year. As Last May was the first time that I've made a presentation to you on the recovery environment.
And today, 12 months later, May again, I'm making a presentation also on the recovery environment, start up with a tremendous effort on execution, delivery and definitely a very different market. This year, we have delivered and fully delivered This is Fadili, the largest at least one of the largest gas processing plants in Saudi Arabia. It has not been easy. Its Contract value was $30,000,000 It has not been easy. I mean, have we suffered COVID?
Yes. Have we suffered problems? Of course. But together with the customer, we have been extremely successful. And today, we have a plan that is up and working.
So this is a successful story, a successful story of TR with a successful and a customer, which is Sadrana. And now we move to Alsaur, which is the big picture that I showed you before. It's a picture of the largest refinery, Bialdell Run, 600,000 barrels. Bialdell O is a contract, The full contract is slightly above $4,000,000,000 where TR that is the little 50% needs and manages the project. Over this year, it is truly has not been an easy year neither for our customer nor for us in Kuwait, but we have successfully finished, reserved and now we're commissioning this huge refinery.
And within this year, we have received We got a world of health and safety and environmental price, which is very important in Kuwait and is very important It is a huge job. Again, a success story, delivery of large strategic jobs. And now I'd like to move to Rasta Nu. Rasta Nu is not finished. We like to finish It was planned to be finished, but it's not finished.
Obviously, we have been impacted by coal. Rasta Nura is one of the most emblematic refineries in Saudi Arabia. We're doing both rebounding and are working with insider refinery and new units. And successfully, I have to say successfully because it's probably where we had more problems and issues and difficulties and infections within this horrendous pandemic. But With a good customer, with good contractors, with very good subcontractors, we are very close today to deliver the job, which probably will be delivered within weeks.
And this would allow customer against Saudi Aramco to start up and produce clean fuels under the most stringent specifications and sell it to the market. So the more examples of that, we have been successful in Malaysia, extremely successful in Peru. The pandemic has been awful and still we're still having problems that we're managing with the customer and subcontractors. So it's been a year of delivery and it's been a year of a very Strong and active management activity within our site in a constant dialogue with our customers. And obviously, we didn't have the same level of success with our client, our customer, MGT, MGT T Site in the UK.
Very much against our expectation. As I talked to you last February, when I present end of the year accounts, The customer has formally terminated the contract this month of May. And I'd like to express here my high level of frustration because as I illustrated in my previous slide, it is in our DNA to make anything and everything within our reach to deliver projects in our up to our customers' satisfaction and very often exceeding in our performance tests and expectations. In all weeks, we work and solve our issues in a very constant and open dialogue. Here, it is obvious it has not been the case.
I'm extremely unhappy and frustrated About this outcome, as we have not been able to reach an agreement that I Really think we have been working very hard to reach. I'm happy and frustrated after TIER's efforts to work and execute the project under the most difficult environment under the Brexit and cut. Obviously, I'm unhappy and frustrated after having incurred costs and losses and reaching agreements with subcontractors and suppliers and not reaching an agreement with our customer. I'm unhappy and frustrated after efforts to reach 99 completion and celebrating last month the first firing with FIO. It is true last month I had to congratulate my team, I always do, My team on-site, first firing is an extremely important milestone.
And as I said, it is in our DNA to complete and deliver, and it will continue to be that way. You all know that is not correct and it's not my style to comment on client decisions and I will avoid answering questions about it. We had a good understanding over the last few years with this customer and we may have it in the near future. But today, this is an event that will have to be settled through the ICC arbitration procedures. Meanwhile, we have taken the hit of €103,000,000 with the intention of not having to come back with you with further bad news.
And with this hit and this announcement that probably most of you have read this morning, let's do an analysis of how is our Q1 results. On this Q1 results, After $103,000,000 hit, we have a real EBIT negative EBIT of €50,000,000 We adjusted to this hit to the 103 COVID UK, let's call it. And then We deduct $12,000,000 of other COVID impact, which does $12,000,000 reflect customer recoveries has taken place This Q1 and they were booked as cost on the 2020 accounts. And if we add up our restructuring costs, which are not that much, only $2,000,000 We ended up here with an adjusted EBIT of EUR 43,000,000, which I think it shows Obviously, here the bad news at the very beginning is a contract that has been terminated. The deposit It is that the underlying of the business is healthy, strong and visible.
And it's healthy and strong because We have a strong backlog. We have strong customers and we have done our homework. We have done our homework, which we are counting for this year for $8,000,000 in corporate restructuring. Full year activity that would be $11,000,000 We're accounting this year for $6,000,000 In rate that rentals reduction in a full activity year, as we're still paying some of those Rent as we move in to smaller space would be $9,000,000 And we are already accounting this year $26,000,000 in what we call project execution efficiencies. In the full year activity, which will be $222,000,000 for sure.
That would be very close, if not more, if we grow and we're ready to grow $50,000,000 So we've done through this year, not in this year, our homework. We have delivered And we have included in our activity great deal of efficiency. So today, Our adjusted P and L, our adjusted EBIT is a strong adjusted EBIT, it's a real EBIT and shows the strength of the business, a business that is growing. Our cash position is lower and it was expected to be lower unless we had had awards. The evolution of And of the cash position, it very much has to do as we are Finalizing and delivering projects.
When you deliver projects, cash is never too positive. The last payment The last payment. You don't get the last payment until you finish, but we finish. Obviously, on Cialdek, when all the reprogram projects come into force, second half of twenty twenty two And the big awards that took place in a year ago in 2019, Cash will come back again, but we are suffering the reprogram. Reprogram projects probably by definition, they're not tax rich.
They have been reprogrammed by our customers not to be cash rich and they're not. And obviously, we have Suffer more than 12 months, almost 18 months in a parenthesis with practically new awards. The new awards are already coming and cash will be recovered. So with no new awards, no down payments, we are Suffering of a lower level of cash, which is what we're showing in this Q1. So we do, again, a summary of our accounts.
We had a sales figure, which is a low sales figure of $763,000,000 and is low because our jobs have been reprogrammed and we have suffered 12 months is no longer a parenthesis of COVID with no awards. We have a negative EBIT of $50,000,000 which adjusted as I explained before, adjusted to T site and COVID moves up to it. And I'd like to say solid EUR 43,000,000 and a net cash, Positive cash of EUR 63,000,000. And here in blue, what you think is too important news. We have year to date an order intake of EUR 1,900,000,000 And year to date, we have a backlog of €10,200,000,000 So this is very much a picture of accounting wise where we are.
And with that, talking about order intake and backlog, we can move to the 2nd section of the presentation. The major investment wave, what are the awards have naturalized And what is happening with the already within TR in the energy transition. Obviously, everyone in the sector and you've probably read More analysis that I did is positive about the macro dynamics. I mean, here are the two examples, Saudi Aramco and Repsol, 2 major oil integrated companies and 2 energy service companies, statement. They're all positive.
They're positive because they're investing. They're positive because they sanction new investments and they're positive because they are benefiting from new awards. So we are positive as well as I can show you on the following slides. I am positive because if a year ago, it's true that I had a pipeline, but I had a pipeline which was there, But I have no idea for when. Today, I have a pipeline That is with a sense of acceleration taking place.
And it's a pipeline, which we happen to be extremely well positioned. And this pipeline, We'll talk about that afterwards. It makes me to be very confident and not very as that this year We will book awards above €4,000,000,000 It shouldn't be very challenging. You do remember that 2 months ago, it was $3,500,000,000 I don't want to be over optimistic, but $4,000,000,000 shouldn't be very challenging. It shouldn't be very challenging because out of this $50,000,000,000 there's 7.5 1,000,000,000, they have already been tender and we happen to be the top ranked bidder.
Doesn't mean we're going to get them all, It means we win the final season. If I talk about awards and I said that we had an order intake of €1,900,000,000 Let me review with you EUR 1,900,000,000 Obviously, at the very beginning of the year, we closed contract of PTA in Turkey for SASSA polyester. This is a contract which is a cost plus. We do everything comes through our books with a scheme of fees and it's a contract that is doing very well. We've already placed many orders.
Engineering is moving fast. We find this way of the customer to do the sometimes doing expansion and improvements, sometimes doing value engineering. But let me tell you, it is a good contract. It is a good contract. It is a good contract the customer and it's a good contract with TR.
There recently, we have been selected by a customer in Europe for a very large other things plant. We have been selected and we have won and we do expect to sign the contract within the next weeks. Obviously, until we signed the contract, we cannot disclose the name of the customer. But I thought it was important in this presentation to announce that we do have the contracts. It shows that the market is on investment mood and it shows The TR franchise has great value to our customers.
And very recently as well, We signed a contract that our customer allows us to announce very recently. We signed a contract a few Weeks ago, in our Global Industry Dynamics award to us under an open book scheme, the biofuel plant. It has going to be in us and it might be the first of many if we do well. And this is an investment of $200,000,000 And this although the amount, the $50,000,000 in engineering shows To be less important, it is not. It really shows that in Indonesia, we have been selected to extremely large investments that we have announced.
It means that in To Ban, Indonesia as well, we have been selected Long ago, a year ago, to do the basic design of a very huge investment more than EUR 10,000,000,000 We did the best design. And very recently, as we have announced, we moved into the second phase, The front end design, which shows that we have to and we are ready to move up our engineering, most of them process engineers from 100 to peaks of 700 that shows that investments are taking place and customer has already award of the technologies and basic designs to our main technology providers. That's good news. I could not say that a year ago, although we were starting the basic design. And there are many other, which in terms of dollar amounts that are very important project that shows The market has changed and the market has changed, I'm not going to say for good, but definitely for the next few years.
And here in this slide, which is a slide that I've never I have to I'm not going to spend much time on it. But as I said before that we have €7,500,000,000 of immediate awards, I'm not going to say they're all going to be awards. But what I'm going to say here that you see on the left side in green what has already been awarded. And in this is here, this is the pace of the awards. All those jobs from the delayed coker unit in Europe to a power plant in Latin America to a big $1,000,000,000 natural gas in the Middle East.
Awards are going to be sanctioned in the few months, first half of the year. I believe there are investments that have already Been sanctioned, we've already bid and we are ready front runners. When I mean front runners, it's got the 1 or 2 as final runners We take the award in the second half of the year and we are very well positioned. So this visibility that I'm showing to you today, it would have been possible to do a year ago, and this is the big change. And this sense of immediacy that we've paused in the market with our customer, That's why we signed Cessna.
That's why we have just started an open book with our customer. And that's why we're going to be signing a contract in Europe. The sense of immediacy is which makes a new feature and makes me feel extremely positive. Visibility and immediacy probably are the towards that we have to keep in this slide. And finally, energy transition.
Many probably some of you or probably all of you don't remember what I said a year ago. But I remember all of us were saying that obviously with the year of energy transition, we had seminars And some analysts and ourselves were saying that if that was going to happen, if that was a reality, companies like us, Slide TR, we had the resources to be part of it. And today, I don't want to get into the details of the different engineering agreement that we have signed and what it means to have a EUR 3,000,000,000 pipeline in energy transition. Today, the big change is that we are already part of the transition. A year ago, we had the resources and today we're part of that transition.
And we partnered in the 3 main technologies, hydrogen, carbon capture and bioenergy. On the field then we've been called, We've been awarded studies. We've been awarded projects as you have seen in Europe. And I do believe that in the very near future, important part of backlog will have to do with these 3 technologies. And having Said that, let me finish with what can we call guidance.
Obviously, I cannot being in May, our sales figures cannot be much larger than $3,500,000,000 We have to wait for the restructuring and backlog to come into force in second half of to 2022, and we have to wait for awards also to come into force. The adjusted margin will kind of be extremely positive this year. Still a lot of uncertainties that may happen, but it's going to be around 3%. And as I said before, We do feel very comfortable replacing ourselves and also we do very comfortable of having awards above €4,000,000,000 And this is it. I think with this last slide, I finished my presentation and I'm here more than happy to answer any questions that you may
Thank you. The first question comes from Francisco Ruiz from Exane. Please go ahead.
Hi, good afternoon and thank you, Juan, for the presentation. I have three questions, if I may. The first one is in your guidance for the margin. Having 5.7% in EBIT margin this quarter, why are you so Conservative for the full year? Or is this something I know of something
That's Hitco? Yes. Yes, we have a problem. We don't we hear you. You have to speak louder because we barely hear you.
Okay. It's much better than Marc.
Okay. Now we hear you well, Feroz.
Okay. So my first question is on the EBIT margin guidance. So having a 5.7% in this quarter, why are you so conservative for the full year? And if there is some one off in this quarter that Won't you allow you to be more conservative? Sorry, more optimistic.
The second one is on tea side. It's just to confirm, you have shown already The holding party in this Q1. And if you could give us a guidance of how much you expect to recover and if there is any idea of the cash impact of this situation. And the last question is on the on the short term order intake that you have commented, I mean, The one in the next 2 months. How likely you see there and what's your current position?
Okay. Francisco, I don't know whether you hear me. Yes. Okay. Thanks for the question, Francisco.
Let me start with VSE side. Unfortunately, I cannot make any comments. We are starting now with flash and it's not correct And prudent to start making comments of whether we recover or not. Obviously, we started now the trash is because we do believe we can recover, but I cannot do any further analysis on that. On the margin, yes, I can.
Obviously, it's true that this Q1, our margin is strong, it's 5.7%. But I don't want to be optimistic on the year end And our adjusted margin above 3%. This first quarter, I don't it doesn't reflect 100%. It reflects the strength of our backlog of our project. But obviously, in the first and these first three months, we have been able to get some efficiencies.
And in some very large projects that would be will not kind of will not be repeated over the next 3 quarters. So I'm not going to say it's overstated, but that's what account reflects. You've managed the jobs well And some of the jobs, with the ups and downs of COVID recovering and not recovering, there have been some very good efficiencies that has been applied this quarter and it shows a very strong margin, but it doesn't allow me to project the margin over the next three quarters coming forward. So I think Our guidance has to stay with up 3%. On the short term order intake, I have to say, we already had order intake.
We have to send the contract that we've been awarded. So we have order intake of EUR 1,900,000,000 And the first ones that I show you in this slide, which is on this next quarter, I mean, before on next month or next 2 months. I have to say that I'm optimistic. I mean, you have to discount that I'm always been optimistic. Yes.
You have to take a discount factor there. I don't. But I'm optimistic. We're known to the customers. We have we are I think customer like us.
We've done good offers. Customers knows how we do those jobs. It is a hardcore business. It's a business that we know how to do very well and allows me to be very optimistic. So, I mean, at the end of the day, we have to win.
And I don't know whether there are more questions. I think I've not fully answered the 3 questions, but I've answered the 3 questions.
The only follow-up is on T side, if the €103,000,000 that we have seen this quarter is going to be the full amount of the impact that you expect, So no further amount in Q2 results?
We have booked this first quarter, Although the determination has been now recently what we consider to be the full amount. That's why I That we have taken $103,000,000 because there is no intention to come back to the market with further losses. Okay. Thank you very much, Juan. Sure, Francisco.
Thank you. The next question comes from Mick Thijka from Barclays. Please go ahead.
Good evening, everybody. Mick here. Couple of questions, if I may. So one, thank you for that chart of the expected or potential awards coming forward. I don't think I've ever seen something like that before.
What strikes me is that there is a significant amount of that potential work in Europe. And given what's going on in the tea side, what went on in Finland, what went on in Belgium, can you just talk about what changes you have made to bidding on those European projects to derisk then. And secondly then, can we talk about the transition pipeline? You talked about €3,000,000,000 which is great to see. A lot of it seems to be early phase, so pre FEED, engineering services.
So what's the conversion time of that $3,000,000,000 pipeline, is it the normal type of conversion? Or is this going to take a bit longer before it becomes tangible projects? Thank you.
The first one is, obviously, yes, it's true that you see awards in Europe sort of Very much in line with your note, those awards are with industrial Customers that they are going to keep the asset. So it's and when I say Europe as well, I'm talking the broader Europe. Europe
includes the key
And Europe includes evolving includes Russia.
Okay.
And the UK. Yes. The second question has to do with transition. Most of them, I mean, the big value of them is very much related to biofuels. I think in biofuels, we are very much very well positioned.
And we do expect awards in end of 2021 to 2022. It doesn't mean we're going to win the EUR 3,000,000,000 So I mean, having a pipeline and being invited and being consulted and doing the studies for investments that amount $3,000,000,000 is a big change for what it was from where we were a year ago. So a percentage of that this is a new business and it's Difficult for me to pause when is it going to be converted. Sometimes they're still working for subsidies, Sometimes we're working for financing and some of them we might win a little money doing studies In front end designs, and it may be converted into 26, but I have no idea. But I think the market is moving forward, And we will be seeing some awards.
Part of those $3,000,000,000 would be converting and hopefully would be winning some within the next 18 months.
Okay. And can I just ask on that? Clearly, On these transition projects, given that you are involved a lot earlier, we've always heard that the earlier you're involved in the project, The more deliverable that project is and ultimately your chance of recording a margin that's acceptable becomes higher. Is that the case of these transition projects that you are part of the design process and therefore it should be easier to deliver if it gets that far?
I mean, in all the transition projects, at least I'll say 100% of them, we're starting from the very beginning. We're starting with study. From there, a basic design and from there, an analysis of the investment and from there, a front end design. I don't think that the market is mature enough as their new technologies for To keynote, to work as the normal oil and gas traditional business used to be. All those projects, they need the assistance and help to be structured.
I'm not going to say financially, but definitely technical. And this is the way we can step in.
Okay. Yes. Well, it looks exciting. Good luck with it. Thank you.
Thank you. Thank you very much.
Thank you. The next question comes from Nikhil Gupta from Citigroup. Please go ahead.
Hi. I have two questions, please. The first one is given the rise that we have seen in steel prices and The inflation. So just wanted to know how do you plan to manage them? And does it present the headwinds for margin.
And my second question is, in the provisions, The numbers have increased from $37,000,000 to $128,000,000 So does that all relate to Teaside or any is there anything else over there? Thank you.
Nikhil, can you repeat the questions because we We don't have a good line with you. I don't know. Can you repeat them slowly because we barely can't hear you.
Sure. Sure. So my two questions are the first one, given the rise in steel prices that we have seen, Does that present any headwinds to the margin going into 2022? And Second question is about the provisions. It has risen from $37,000,000 to $128,000,000 So does that relate to Teaside?
Or is there anything else Did you catch me?
Yes. We are fine. The repeat prices. Okay.
I mean, obviously, we have seen commodity prices, The prices moving forward, I think this is reflects in the futures market that the investments are going to take place. It is true that we have to be careful that we've been very careful placing the bid. But it's also very it is also true that the shops or suppliers today that incredible excess capacity and the prices that not just Sales have been translating to the manufacturers and equipment suppliers. But obviously, we have to be careful. But I don't see it today as I'll look at it in a positive way.
I look at it as a headwind, but I and I don't look at it as a headwind, I look at it as a positive way. That means that The market is really recovering. But it is true that these prices, Steel prices, they're not still being affecting the shops and the suppliers. And the second one, the provision figure, to be honest Thank you. I can provide you
the answer. This provision is devoted to cover multiple assets. I mean, it's not just the UK or any other relevant things. I mean, I think it's composed by no less of 10 to 12 different provisions. So what you see there is the net effect, the movement of all those provisions within the quarter.
The main variation honestly has to do with €103,000,000 of the UK.
Okay, that's clear. Thank you. Thank you, Mitchel.
Thank you. Your next question comes from Alejandro Vigil from Westinver Securities. Please go ahead.
Hello. I hope you are all well. And just a couple of questions On the performance in this Q1. Alejandro.
Yes. Alejandro, it's very difficult. We have a bad line. It's very difficult to hear you. Okay.
So I'll try it. It's better now?
Now it's perfect.
Okay. Perfect, perfect. Okay, sorry for the line. We are always without these headsets and things like that. Well, I have The first question is about your balance sheet and the cash position.
Is this situation a challenge in terms of the Bidding process and the new awards. I mean, your clients are giving you some feedback about the current position if it's solid enough in this process. That will be the first question. And the second is about the energy transition. Do you see a company, I don't know, with a level of 20%, 3% of revenues from energy transition in the medium term?
Or do you have Some potential weighting of this activity in the future in your company. Thank you.
I
handled the first question. I mean, for the time being, we were talking to all the customers We present in bids and have a lower net cash position. It's Still a net cash position and it has not been affecting our prequalifications and bidding and the quality of the franchise at all. Nevertheless, obviously, we're working hard to improve it. The second one has to do with the energy transition.
And you're asking me if potential weighting of energy transition, Very difficult, Alejandro. I mean, as I said before, a year ago, we had 0, probably and no requests. All we were saying is that we were type of companies that can put together 100 process engineers and developed together with an investor a big hydrogen As green as possible provide a supply of energy plant and then not that many companies can do that and have the know how to do it. And today, we're doing it. So but it's still we're doing it and we start in the basic design.
I mean, we've not so it's early for me to pause whether it's going to be what part of the energy, what part of the revenue in the medium term is going to be that. I do expect it's going to be faster than expected. I do believe it is going to be I do believe it's a reality and it is going to happen. We're going to the idea that is The money, the public funds and the government commitment to make it happen And we have the investors and the know how to make it happen as well. So it is going to happen.
But I'll tell you, it's very difficult for me to pause How much? All I can tell you, we're very much focused. We're extremely focused with our customers and potential investors. And I think we can create value and we are already creating value to some of those potential investors. But it's very difficult to say what percentage of the business.
Okay. Thank you very much.
Sure, Hamir.
Thank you. The next question comes from Kevin Roger from Kepler Cheuvreux. Please go ahead.
Yes, good evening. Thanks for taking my question. I have a kind of follow-up on the one from Mick and the answer that you did On the energy transition, if I wanted to say that you on almost 100% of those projects, You were engaged since the very beginning with assistance, etcetera. So I was wondering, should we understand that basically the competition is may be limited on those projects and that maybe you are almost alone working on the FEED, etcetera or the Competition environment is different. So that's the first question.
The second one is related to the margin, sorry, to come back on that. But I was thinking also why are you so conservative to come back on the first question because I understand that you remain prudent. But if we look at your guidance for revenues. Basically, you should have a nice uptick in terms of revenue in Q2, Q3, Q4. And so I guess that The coverage of your fixed cost would be easier also so that the margin should not significantly decline if you did not benefit from any exceptional event in Q1.
That will be my two questions, please.
Okay. The first question, Kevin, If there are limited competition, I mean, it'll be beautiful to have a world without competition. And it will be very good to have a world and a business with limited competition. For the time being, it's very difficult again to pause where the competition is going to be. It is true that in all the projects that we're working on and we have listed, We're there from the very beginning.
So if we're there from the very beginning, we have to build and that turn into real investments. Some of them will, some others will not. But in the jobs that we start from the very beginning, we have to build the trust On the customer that we are competitive and we will be competitive because we're not competitive working with them from the very beginning. There is going to be we'll have always the same level of competition that we always have. So competition is going to be there.
In our competitors in the traditional energy market and with our competitors as well today in the energy transition. It is true that when we start the job from the very beginning and you start with a player From day 0, the probability of winning the job and learning through the very beginning through that job allows us to perform better with the customer and to improve margins. That has been the case in the traditional energy business and probably will be very much the case, probably more at return and sometimes in new projects and new technologies in the energy transition. But we have to think and we have to plan the business with the same level of competition that we always had. The second one is if we're being prudent.
I don't think we've been prudent. I'm talking percentage wise. This is true that our revenue will increase. We're maintaining 3% adjusted margins. We're still going to be facing uncertainties.
I mean, let's not all be positive. Uncertainties, I mean, one of the uncertainties have to do with India.
Some of
the jobs that we're working today in good dialogue with our customers, we have to stop one part of the construction and continue with the others because some of the construction companies in the Middle East, they happen to be from India. So and nobody would have expected a month ago that what is happening today in India. So a lot of uncertainties, we have to be ready for uncertainties. It is also true over the last 12 months, we've learned Had to manage those in a better way with our customers and with our teams. But we're not being Yes, stingy with the margins.
I think I'm being realistic and 3% is a realistic adjusted margin.
Okay. Thanks for that. Have a good day.
Thank you. Your next question comes from James Thompson from JPMorgan. Please go ahead.
All right. Thank you you very much for taking my questions. I've got a couple of my, Juan. So first one sort of carries on from the last answer there actually. I was just interested to understand whether You're seeing a sort of material reduction now in the impacts on-site from COVID.
And whether your customers If not, whether your customers are still tolerating some of the sort of schedule delays from the pandemic. So it would just be interesting to see how that It's evolving. And the second question really, obviously, good to see the pipeline laid out there. In terms of the stuff you've won year to date, It's either open book or reimbursable. Does that is that a sort of similar trend that we're seeing in the pipeline going forward?
And could you perhaps Kind of characterize sort of T's and C's as it were. Is there kind of good cash advances in these projects? And how should
we think about your cash balance evolving into the second half of the year? Thanks. I mean, On COVID issues, obviously, customers, I mean, we have been up in dialogue with customers. And in most of the cases, a very large percentage of the cases, the tolerating delays. In many of the cases, the industrial customers, they have decelerated because those delays is to follow the law.
That has been the case in many of the countries we work in. We had to stop or partially stop or put measures having to do with distances, social distances in the buses, social distances in the on the wonders itself and it's the law. It is not only our health and safety measures, which they are. So we have to comply the law and customers have to be now, who work together with us And that's what we're doing, to find ways to be efficient and find ways to increase productivity and find ways to reduce the impact. It is true that there is an impact.
It is true that customers, nobody is happy to tolerate the impact. So in 90% of the cases and probably 100% of the industrial customers, They look for ways to improve the job and look for efficiencies, managing health, safety and therefore COVID in the most safety way. And It is obviously, there is an impact. There is a delay and we work for them how to minimize that. And obviously, many of the cases, There is an impact in money, there is an impact obviously in schedule.
And as we move down, That impact sometimes is also involved in the subcut factors. They don't like it. We don't like it, but I think we're managing it rather successfully.
Okay. Okay. And in terms of the pipeline?
And
the second question, Maybe you can repeat it again because we're starting
to understand basically Ts and Cs in the project pipeline. Cash advances, I think pretty good. Just thinking about the in fact, you think about the margins that you're bidding on. I mean, obviously, some of this is competitive, but just to sort of generalize, give us a feel for it, just because I noted that the first couple of awards of the year, you got Reimbursable and open book type awards. So just trying to understand that pipeline and how it can potentially help that cash position recover through
the rest of the year. Okay. The first we're not bidding all the jobs we're bidding today, I think the market Well, we've been in all the jobs with a net positive cash balance. Obviously, it makes very little sense in this market. And obviously, in this positive market that we in the new jobs, We've got good bids in the market with a negative net cash position.
It is true that we do expect that the market coming forward And it's a market with a decent level of margins. It is a positive market. Whenever it's a positive market, Margins are better. I mean, it's that's the way it goes. And you were wondering that the first jobs that we have been awarded and it was on a cost loss basis.
And it is a mix. It was not because we wanted to derisk As it is in Turkey, we've always been very successful. It was a way that we proved together with the customer to launch the project in the most fast and efficient way. And if the project if the investor wants to have a job fast and efficient, it had to be cost plus. He couldn't wait to develop a detailed seat and to get into another competition.
In this the essence in this job was the schedule. And that's why we put together a scheme by which we were working on a costless basis with fees in an extremely transparent way. And for the last 5 months, It's been working beautifully.
Okay.
Thank you. Okay.
Just one final, different one for me actually. I mean, I know I can appreciate and I can hear your sort of frustration in terms of Teaside and I appreciate you probably don't want to Say too much about it, but obviously it's a real surprise that a contract can be canceled when it's 99% complete. And I'm sort of struggling to get my head around that. I could Maybe understand that a customer not wanting to go forward with the project in the early very early stages if market condition change or whatnot, But so late in the day and then you say kind of first fire already happened. I'm so struggling to get my head around that, that it was even possible.
And so maybe you could sort of just help me to understand how that's come to pass and whether that risk exists on other jobs?
Obviously, as possible as you are, I am. So it probably has nothing to do with that, never happened. I mean, It's a different type of customer. We're working for a project finance customer. We're working for a vehicle And it is probably to its interest to terminate as it's time.
We are, as I said before, in our business, in the traditional business, when you're working for industrial customer. And it happened to us very recently in the Middle East. First firing is a very important event. I have the pictures that I've known 3 weeks ago, we also did the first firing together with the GE in the power plant in the Middle East. And customer GE and ourselves were celebrating.
I mean, 1st firing at the end Shows the plant is reliable. I mean, first firing shows that all the systems around the plant has been operated. 1st firing means then the main boiler works. And 1st firing means That the main and most important relevant touch items that has been fixed, otherwise you couldn't do it because you would be putting the operation at risk. So and that's it.
Obviously, I cannot get in more details in our parcel, and we'll see how it goes.
Okay. Yes. I can understand your frustration. Very strange. Thanks very much for your answers.
Thank you. The last question comes from Alvaro Lensi from Alantra Equities. Please go ahead.
Hi, thanks for taking my questions. Going back to T side, I wanted to know what the €103,000,000 provision includes. I don't know whether this is just provision for the legal costs or for potential legal claims or whether this includes also The recognition of maybe write down of accounts receivable that you had with the client or whether there are still any Outstanding balances with the client in the accounts receivable in the balance sheet? And also looking at the pipeline, second question would be from today to year end, you have €7,500,000,000 in potential awards In which you have been in the during that what best placed and the guidance for above €4,000,000,000 would imply Getting about €2,000,000,000 out of this €7,500,000,000 which seems like a low percentage of just 30% for the projects in which you are especially well placed. I don't know whether this is due to you being conservative on your success rate or whether you think that many or some of these projects can be delayed?
And also My third question would be, maybe looking into 2022 and the pipeline. The way I see this is that the pipeline has been increasing over the last few years because no projects were canceled, but they were just being postponed and postponed. And if most of the pipeline is now concentrating in 2020 Sorry, in 2021 as per the Slide number 18, it seems like the pipeline for 2022 is a bit small. So I don't know what can you expect What do you expect for order intake for 2022 and going forward? Thanks.
Okay. Thanks for the questions. Alvaro, the first question, unfortunately, I cannot answer. I'm not going to make a breakdown of the $103,000,000 You have to understand That's part of the arbitrage material. 2nd question, if I'm being conservative, When I showed to you that we have $7,500,000,000 I'm not going to say we're 1st.
I'm saying we are front runners. So we still have some of the cases of competition. So it could very well happen that some of those We lose and some other get debt postponed to Q1 next year. But I'll show you when we're going to be awarded. It could be some delays.
But it is true that as what I've said that reaching €4,000,000,000 plus is not very challenging. But I'm never going to change that number. But It's not very challenging. So you can keep it that way. And if you set up the 2022 pipeline, The pipeline has been moved forward.
It is true that we've moved forward because Customers for the last 12 months have stopped and sometimes didn't say anything, often denied over the phone and didn't cancel anything. But now they've gone back and made public, very public, They're back in the game, and they're already selecting and selecting us in some of the cases for the jobs, again, for the pipeline. So it's what I can say that the pipeline that we have today It has grown this pipeline with far more visibility and Short term reconverted than it was a year ago, obviously. And also, it is A pipeline that shows that on which we are already doing some of those fits. So it gives us a good opportunity to convert those fleets eventually into EPC or EP jobs.
So it's probably one of the strongest pipeline that we've had over the last 4 years.
Okay. Thank you very much.
Thank you. There are no further questions in the conference. Dear speaker, back to you for the conclusion.
Okay. Thank you. Thank you very much. Thank you very much for listening to me and thank you very much for being so diligent and So good with the questions, which I think add a lot of transparency and sometimes even color to this presentation. Thanks a lot.