Hello, good afternoon. This is Eduardo San Miguel. Welcome to this first quarter 2021 results presentation. It will be conducted, as always, by Juan Lladó Arburúa, our Chairman. We'll take up to 20 minutes, and you can pose your questions after the speech. Now I give the floor to Mr. Juan Lladó Arburúa.
Hi. Hello, everyone. We start with the big picture, and this picture, because the one that I'll show you afterwards is not very good. This happens to be the Az-Zour refinery, the largest refinery ever built from start. They're the largest ones. This is the one where we are in the process of finalizing commissioning of the main process units. 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 two 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 first quarter results, and what has been the impact, the good and bad, in these first three months, and how management has reacted to COVID.
The second one is more positive. The second section is most positive, which has to do with 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. When I said here delivering projects, I have a slide here with the three main projects. This is just an example, three main projects that through this year, because, let's talk over what has happened over this full year. Last May was the first time that I'd made a presentation to you under a COVID environment. Today, 12 months later, May again, I'm making a presentation also on the COVID environment, but with a tremendous effort on execution, delivery, and definitely a very different market. Over this year, we have delivered and fully delivered.
This is Fadhili, at least one of the largest gas processing plants in Saudi Arabia. It has not been easy. Its contract value was close to $3 billion. It has not been easy. Have we suffered COVID? Yes. Have we suffered problems? Of course. Together with the customer, we have been extremely successful, and today we have a plan that is up and working. This is a successful story, a successful story of TR with a successful and a customer, which is Sadara. Now we move to Az-Zour, which is the big picture that I showed you before, is the picture of the largest refinery built at once, 600,000 barrels. The Az-Zour, the full contract is slightly above $4 billion, where TR takes the lead at 50%, leads and manages the project.
Over this year, it is true that has not been an easy year, neither for our customer nor for us in Kuwait. We have successfully finished, preserved, and now we're commissioning this huge refinery. Within this year, we have received the Gold Award of Health and Safety and Environmental prize, which is very important in Kuwait and is very important in this huge job. Again, a success story, delivery of large strategic jobs. Now I like to move to Ras Tanura. Ras Tanura is not finished. We like to finish. It was planned to be finished, but it's not finished. Obviously, we have been impacted by COVID. Ras Tanura is one of the most emblematic refineries in Saudi Arabia. We're doing both revamping, working with inside the refinery, and new units.
Successfully, I have to say successfully because it's probably where we had more problems, and issues, and difficulties, and inspections, within this horrendous pandemic. 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. This would allow a customer, again, Sadara, to start up and produce clean fuels under the most stringent specifications and sell it to the market. There are more examples of that. We have been successful in Malaysia, extremely successful in Peru, where pandemic has been awful. Still, we're still having problems that we're managing with the customer and subcontractors. It's been a year of delivery, and it has been a year of a very strong and active management activity within our site in a constant dialogue with our customers.
Obviously, we didn't have the same level of success with our client, our customer, MGT. MGT site in the U.K. 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. 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 up to our customer's satisfaction. Very often exceeding in our performance tests their expectations. Always 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, that we have not been able to reach an agreement.
An agreement that I really think we have been working very hard to reach. I'm unhappy and frustrated after TR's efforts to work and execute the project under the most difficult environment, under the Brexit and COVID. I'm unhappy and frustrated after having incurred costs and losses and reaching agreements with subcontractors and suppliers, but 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 fuel. 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. As I said, it is in our DNA to complete and deliver, and it will continue to be that way. You all know that it's not correct, and it's not my style to comment on client decisions.
I will avoid answering questions about it. We had a good understanding over the last two years with this customer. We may have it in the near future. Today, this is an event that will have to be settled through the ICC arbitration procedures. Meanwhile, we have taken the hit of EUR 103 million with the intention of not having to come back with you with further bad news. With this hit and this announcement that probably most of you have read this morning, let's do an analysis of how is our first quarter result. On this first quarter result, after EUR 103 million hit, we have a real negative EBIT of EUR 50 million. We adjusted to this hit to the EUR 103 COVID U.K., let's call it.
We deduct EUR 12 million of other COVID impact, which those EUR 12 million reflect customer recoveries has taken place this first quarter. They were booked as cost on the 2020 accounts. If we add up our restructuring costs, which are not that much, only EUR 2 million. We ended up here with an adjusted EBIT of EUR 43 million. I think it shows, obviously here, the bad news at the very beginning, the contract has been terminated. The positive news will be that the underlying of the business is healthy, strong and visible. 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 accounting for this year for EUR 8 million in COVID restructuring. In a full-year activity, that would be EUR 11.
We're accounting this year for EUR 6 million in rentals reduction. In a full activity year, as we still paying some of those rents as we're moving in to smaller space, would be EUR 9 million. We are already accounting this year EUR 26 million in what we call project execution efficiencies. In a full-year activity, we would be EUR 26 million for sure. That would be very close, if not more, if we grow, and we're ready to grow EUR 50 million. We've done through this year, not an easy year, our homework. We have delivered, and we have included in our activity great deal of efficiency. Today, our adjusted P&L, our adjusted EBIT is a strong adjusted EBIT. It's a real EBIT, and it 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 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 is the last payment, and you don't get the last payment until you finish, and we finish. Obviously, when all the reprogram projects come into force second half of 2022, and the big awards that took place a year ago, in 2019, cash will come back again. We are suffering the reprogram. Reprogram projects, probably by its definition, they're not cash rich. They have been reprogrammed by our customers not to be cash rich, and they're not. Obviously, we have suffered more than 12 months, almost 18 months, in a parenthesis with practically no awards.
With no awards already coming, cash will be recovered. With no new awards, no down payments, we are suffering of a lower level of cash, which is what we are showing in this first quarter. We do, again, a summary of our accounts. We had a sales figure, which is a low sales figure of EUR 763 million, and is low because our jobs have been reprogrammed, we have suffered 12 months, if not longer, of parenthesis, of COVID, with no awards. We have a negative EBIT of EUR 50 million, which, adjusted, as explained before, adjusted to Teesside and COVID, moves up to solid EUR 43 million. A net cash, positive cash of EUR 63 million. Here in blue, what you think is two important news. We have year-to-date an order intake of EUR 1.9 billion. Year-to-date, we have a backlog of EUR 10.2 billion.
This is very much a picture of, accounting-wise, where we are. With that, talking about order intake and backlog, we can move to the second section of the presentation, the major investment wave. What are the awards that naturalized, and what is happening with the awards 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. Up here, there are two examples, Saudi Aramco and Repsol, two major oil integrated companies, and two energy service companies, Technip and Schlumberger. They're all positive. They are positive because they're investing. They're positive because they sanction new investments, and they're positive because they are benefiting from new awards. 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, which was there, but I had no idea for when. Today, I have a pipeline that is with a sense of acceleration taking place. It's a pipeline which we happen to be extremely well-positioned. This pipeline, we'll talk about that afterwards, makes me to be very confident and not worry that this year, we will book awards above EUR 4 billion. It shouldn't be very challenging. You do remember that two months ago, it was EUR 3.5. I don't want to be over-optimistic, but EUR 4 billion shouldn't be very challenging. It shouldn't be very challenging because out of these EUR 50 billion, there's EUR 7.5 billion that have already been tendered, and we happen to be the top-ranked bidder.
Doesn't mean we're going to get them all, but it means we're in the final position. If I talk about awards, and I said that we had an order intake of EUR 1.9 billion, let me review with you what are those EUR 1.9 billion. Obviously, at the very beginning of the year, we closed a contract of PTA in Turkey for SASA Polyester. This is a contract which is a cost-plus. 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 found this way of the customer to, sometimes doing expansion and improvements, sometimes doing value engineering. Let me tell you, it is a good contract. It is a good contract, it is a good contract for the customer, and it's a good contract with TR.
Very recently, we have been selected by a customer in Europe for a very large olefins plant. We have been selected, and we have won, and we do expect to sign the contract within the next weeks. Obviously, until we sign the contract, we cannot disclose the name of the customer. I thought it was important in this presentation to announce that we do have the contract. It shows that the market is on investment mood, and it shows that TR franchise has great value to our customers. Very recently as well, we signed a contract that our customer allow us to announce. Very recently, we signed the contract a few weeks ago. Global Industrial Dynamics award to us under an open-book scheme, a biofuel plant. It has going to be nice. It might be the first of many if we do well.
This is an investment of EUR 200 million. Although the amount, the EUR 50 million 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 Tuban, 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 billion. We did the basic design, and very recently, as we have announced, we move 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. Customer has already award of the technologies and basic designs to our main technology providers. It's good news.
I could not say that a year ago, although we were starting the basic design. There are many other, which in terms of U.S. dollar amounts, they're not very important, project that shows that market has changed. The market has changed. I'm not going to say for good, but definitely for the next few years. Here in this slide, which is a slide that I'm not going to spend much time on it. If I said before that we have EUR 7.5 billion of immediate awards, I'm not going to say they're all going to be awarded to us. What I'm going to say here, that you see on the left side in green, what has already been awarded. In this here, this is the pace of the awards.
All those jobs from the delayed coker in Europe, to a power plant in Latin America, to a big $1 billion natural gas in the Middle East. Awards are going to be sanctioned in a few months, first half of the year. Obviously, there are investments that have already been sanctioned. We've already bid, and we are already front runners. When I mean front runners, is that they're one or two as final runners, that will take the award in the second half of the year. We are very well-positioned. This visibility that I'm showing to you today, it would have been possible to do a year ago. This is the big change. This sense of immediacy that we've caused in the market with our customer. That's why we signed SASA. That's why we have just started an open-book with our customer.
That's why we're going to be signing a contract in Europe. The sense of immediacy is what makes the near future and makes me feel extremely positive. Visibility and immediacy, probably are the two words that we have to keep in this slide. Finally, energy transition. Many, probably some of you, or probably all of you, don't remember what I said a year ago. I remember all of us were saying that obviously it was the year of energy transition. We had seminars, some analysts and ourselves were saying that if that was going to happen, if that was a reality, companies like us, like TR, we had the resources to be part of it. Today, I don't want to get into the details of the different engineering agreements that we have signed and what it means to have a EUR 3 billion 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. We're part of the three main technologies, hydrogen, carbon capture, and bioenergy. On the three of them, we've been called, we've been awarded studies, we've been awarded projects that you have seen in Europe. I do believe that in the very near future, important part of our backlog will have to do with these three technologies. Having said that, let me finish with what can be called guidance. Obviously, being in May, our sales figures cannot be much larger than EUR 3.5 billion. We have to wait for the restructuring and the backlog to come into force in second half of 2022, and we have to wait for awards also to come into force.
The adjusted margin cannot be extremely positive this year. Still a lot of uncertainties that may happen, it's going to be around 3%. As I said before, we do feel very comfortable replacing ourselves, and more so, we do feel very comfortable of having awards above EUR 4 billion. This is it. I think with this last slide, I finish my presentation. I'm here more than happy to answer any questions that you may pose.
Ladies and gentlemen, the Q&A session starts now. Thank you. The first question comes from Francisco Ruiz from Exane. Please go ahead.
Hi. Good afternoon, 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 net margin this quarter, why are you so conservative for the full year?
Francisco?
Yes.
Yeah, we have a problem. We hear you. You have to speak louder because we barely hear you.
Okay. It's much better now?
Okay. Now we hear you well.
My first question is on the EBIT margin guidance. Having a 5.7% in this quarter, why are you so conservative for the full year? If there is some one-off in this quarter that would allow you to be more conservative. Sorry, more optimistic. The second one is on Teesside. It is just to confirm, you have shown already the whole impact in this Q1. 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. The last question is on this short-term order intake that you have commented. I mean, the one in the next two months. How likely you see there, and what is your current position?
Okay. Francisco? I don't know whether you hear me. Do you hear me?
Yes.
Okay. Okay. Thanks for the question, Francisco. Let me start with the Teesside. Unfortunately, I cannot make any comments. We are starting an arbitration. It's not correct and prudent to start making comments of whether we recover or not. Obviously, we start an arbitration is because we do believe we can recover. I cannot do any further analysis on that. On the margin, yes, I can. Obviously, it's true that this first quarter, our margin is strong. It's 5.7%. I don't want to be optimistic on the year end and our adjusted margin above 3%. This first quarter, it doesn't reflect 100%. It reflect the strength of our backlog, of our projects. Obviously, in these first three months, we have been able to get some efficiencies, and in some very large projects, that would not be repeated over the next three quarters.
I'm not going to say it's overstated, but that's what account reflects. You manage the jobs well. Some of the jobs, with the ups and downs of COVID, recovering and not recovering, there have been some very good efficiencies that have been applied this quarter, and it shows a very strong margin, but it doesn't allow me to predict the margin over the next three quarters coming forward. I think our guidance has to stay with that 3%. On the short-term order intake, I have to say, we already had order intake. We have to sign the contract that we've been awarded, so we have order intake of EUR 1.9 billion. The first ones that I show you in the slide, which is on this next quarter, I mean, before next month or next two months, I have to say that I'm optimistic.
You have to discount that I'm always being optimistic. You have to take a discount factor there.
Sure.
I'm optimistic. We're known to the customers. I think customers like us. We've done good offers. Customers know 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. I mean, at the end of the day, we have to win. I don't know whether there are more questions. I think I've not fully answered the three questions, but I've answered the three questions.
The only, probably, is on Teesside, if the EUR 103 million that we have seen this quarter is going to be the full amount of the impact that you expect. No further amounts I think through to results.
We have booked this first quarter, although the arbitration has been now recently, what we consider to be the full amount. That's why I said that we have taken EUR 103 million because there is no intention to come back to the market with further losses.
Okay. Thank you very much.
Sure, Francisco.
Thank you. The next question comes from Mick Pickup from Barclays. Please go ahead.
Good evening, everybody. Mick here. A couple of questions, if I may. 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. Given what's gone on at Teesside, 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 de-risk them? Secondly then, can we talk about the transition pipeline? You talk about EUR 3 billion, which is great to see. A lot of it seems to be early phase, so pre-FEED engineering services. What's the conversion time of that EUR 3 billion pipeline?
Is it the normal type of conversion, or is this going to take a bit longer before it becomes tangible projects? Thank you.
Yeah. The first one is obviously, yes, it is true that you see awards in Europe that are very much in line with your note. Those awards are with industrial customers that they are going to keep the asset.
Okay.
When I say Europe as well, I'm talking the broad Europe.
Europe.
Europe includes Turkey, Europe evolving includes Russia.
Okay.
Not the U.K. Yeah. Well, the second question has to do with transition. Most of them, I mean, the big value of them is very much related to biofuels.
Okay.
I think in biofuels, we are very much very well positioned. We do expect awards in end of 2021 to 2022. It doesn't mean we're going to win the EUR 3 billion, having a pipeline and being invited and being consulted and doing studies for investments that amount to EUR 3 billion is a big change from where we were one year ago. In percentages of that, this is a new business. It's difficult for me to forecast when is it going to be converted. Sometimes we're still working for subsidies, sometimes we're working for financing. Some of them we might win a little money doing studies and front-end designs, it may be converted into 2026, I have no idea.
Okay.
I think the market is moving forward, and we will be seeing some awards. Part of those EUR 3 billion will be converted, and hopefully we'll be winning some within the next 18 months.
Okay. 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 a 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?
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, 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 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 technically. This is the way we can step in.
Okay. Yeah. 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, just wanted to know how do you plan to manage them, does it present a headwind for margin? My second question is, in the provisions, the numbers has increased from EUR 37 million- EUR 128 million. Does that all relate to Teesside, or is there anything else over there? Thank you.
Nikhil, can you repeat the questions? We don't have a good line with you. I don't know. Can you repeat them as slowly?
Yeah.
We barely can hear you.
Sure. 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? Second question is about the provisions. It has risen from EUR 37 million to EUR 128 million. Does that relate to Teesside, or is there anything else in there? Did you get me?
Yes. We are. Juan, about the steel prices?
Okay. Obviously, we have seen commodity prices, steel prices moving forward. I think this is reflected in the futures market that the investments are going to take place. It is true that we have to be careful, that we're being very careful placing the bids. It's also true that the shops or suppliers today, they have incredible excess capacity, and those prices still have not been translating to the manufacturers and equipment suppliers. Obviously, we have to be careful. I don't see it today. I look at it in a positive way. I look at it as a headwind. 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. It is true that these steel prices, they're not still being affecting the shops and the suppliers.
The second one, the provision figure, to be honest with you.
I can provide you the answer. This provision is devoted to cover multiple assets. It's not just the U.K. or any other relevant things. I think it's composed by no less of 10 to 12 different provisions. What you see there is the net effect, the movement of all those provisions within the quarter. The main variation obviously has to do with the EUR 103 million of the U.K.
Oh, okay. That's clear. Thank you.
Thank you, Nikhil.
Thank you. The next question comes from Alejandro Vigil from Bestinver Securities. Please go ahead.
Hello.
Alejandro.
Yes.
Alejandro , it's very difficult. We have a bad line. It's very difficult to hear you.
Okay. I'll try. It's better now?
Oh, now it is perfect.
Okay. Perfect. Okay. Sorry for the line. We are always with these headsets and things like that. Well, 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? Your clients are giving you some feedback about the current position, if it's solid enough in this process? That would be the first question. The second is about the energy transition. Do you see a company, I don't know, with a level of 20%, 30% 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.
Alejandro, the first question. For the time being, we're 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 pre-qualifications in 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. You're asking me if potential weighting of energy transition? Very difficult, Alejandro. As I said before, a year ago, we had zero, probably, and no requests.
No, I know.
All we were saying is that we were type of companies that can put together 100 process engineers and develop together with an investor, a big hydrogen, as green as possible, provide a supply of energy plant, and there are not that many companies can do that and have the know-how to do it. Today we're doing it. Still, we're doing it, and we're starting the basic design. It's early for me to pulse whether 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's a reality and it is going to happen. There 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. It is going to happen.
It is very difficult for me to pulse 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. It's very difficult to say what percentage of it is.
Okay. Thank you very much.
Sure, Alejandro.
Thank you. The next question comes from Kévin 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 understood, you said that on almost 100% of those projects, you were engaged since the very beginning, with assistance, et cetera. I was wondering, should we understand that basically the competition is maybe limited on those projects, and that maybe you are almost alone, working on the FEED, et cetera, or the competition environment is different? 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 present, if we look at your guidance for revenues, basically you should have a nice uptick in terms of revenue in Q2, Q3, Q4. I guess that the coverage of your fixed costs would be easier also, so that the margins will not significantly decline if you did not benefit from any exceptional event in Q1. That would be my two question, please.
Okay, the first question, Kévin. If there are limited competition, it'll be beautiful to have a world without competition. It'll be very good to have a world and a business with limited competition. For the time being, it's very difficult, again, to pulse 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. If we're there from the very beginning, we have to build, and they turn into real investments. Some of them will, some others will not. In the jobs that we start from the very beginning, we have to build the trust on the customer that we are competitive.
We will be competitive, because if we're not competitive working with them from the very beginning, we'll have always the same level of competition that we always had. Competition is going to be there. Our competitors in the traditional energy market are going to be competitors as well today in the energy transition. It is true that when we start a job from the very beginning, and you start with a player from day zero, the probability of winning the job and learning through the very beginning through that job allows us to perform better for the customer and to improve margins. That has been the case in the traditional energy business, probably will be very much the case, probably more, as we talk sometimes in new projects and new technologies in the energy transition.
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're being prudent. I'm talking percentage-wise. This is true that our revenue will increase, and we're maintaining 3% adjusted margins. We're still going to be facing uncertainties. Let's not all be positive. Uncertainties. One of the uncertainties have to do with India. Some of the jobs 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. Nobody would have expected a month ago that what is happening today in India. A lot of uncertainties. We have to be ready for uncertainties.
It is also true that over the last 12 months, we've learned how to manage those in a better way with our customers and with our teams. Are we not being 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. The next question comes from James Thompson from JP Morgan. Please go ahead.
All right. Thank you. Thank you very much for taking my questions. I've got a couple of them, Juan. First one sort of carries on from the last answer there, actually. I was just interested to understand whether you are seeing a sort of material reduction now in the impacts on site from COVID, and if not, whether your customers are still tolerating some of the sort of schedule delays from the pandemic. It'd just be interesting to see how that is evolving. 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. Is that a sort of similar trend that we're seeing in the pipeline going forward? 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? How should we think about your cash balance evolving into the second half of the year? Thanks.
COVID issues, obviously, we have an open dialogue with customers. In most of the cases, a very large percentage of the cases, they're tolerating delays. In many of the cases, the industrial customers, they have to tolerate it 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 on the welders itself. It's the law. It is not only our health and safety measures, which they are. We have to comply with the law, and customers have to 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. In 90% of the cases, and probably 100% of the industrial customers, they look for ways to improve their job and look for efficiencies, managing health, safety, and therefore COVID, in the most top safety way. Obviously, there is an impact, there is a delay, and we work for them how to minimize that. Obviously, many of the cases there is an impact in money, there is an impact, obviously, in schedule. As we move down, that impact sometimes is also involved with the subcontractors. They don't like it. We don't like it. I think we're managing it rather successfully.
Okay. In terms of the pipeline?
The second question, maybe you can repeat it again.
Yeah, I just want to understand, basically T's and C's in the project pipeline, cash advances, are they pretty good? Just thinking about in fact, you think about the margins that you're bidding on. Obviously, some of this is competitive, but just to generalize, give us a feel for it. Just because I noted that, the first couple awards of the year, you got reimbursable and open-book type awards. Just trying to understand that pipeline and how it can potentially help that cash position recover through the rest of the year.
We're not bidding all the jobs we're bidding today. I think the market as well, we're bidding 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 put 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. That's the way it goes. You were wondering that the first jobs that we have been awarded, it was on a cost-plus basis. It is a mix. It was not because we wanted to de-risk, as it is in Turkey, that we've always been very successful.
It was a way that we put together with the customer to launch a project in the most fast and efficient way. 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 FEED and to get into an open competition. The essence in this job was the schedule. That's why we put together a scheme by which we were working a cost-plus basis with fees in an extremely transparent way. For the last five months, it's been working beautifully.
Okay. Thank you.
Okay.
Just one final, different one from me, actually. I know I can appreciate, and I can hear your sort of frustration in terms of Teesside, 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 a customer not wanting to go forward with a project in the very early stages if market conditions change or whatnot. Late in the day, and as you say, kind of first fire already happened. I'm still struggling to get my head around that it was even possible. Maybe you could sort of just help me to understand how that's come to pass and whether that risk exists on other jobs.
Yes. Obviously, as puzzled as you are, I am. It probably has nothing to do with that, never happened. It's a different type of customer. We're working for a project finance customer. We're working for a vehicle. It is probably to his interest to terminate at this time. We are, as I said before, in our business, in the traditional business, when you're working for industrial customer. It happened to us very recently in the Middle East. First firing is a very important event. I have the pictures that are now, a few weeks ago, we also did the First firing together with GE in a power plant in the Middle East. Customer, GE, and ourselves were celebrating. First firing at the end shows that the plant is reliable. First firing shows that all the systems around the plant has been operated.
First firing means then the main boiler works. First 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. That's it. Obviously, I cannot get in more details. It's in our parcel, we'll see how it goes.
Okay. Yeah. I can understand your frustration. Very strange. Thanks so much for your answers.
Thank you. The last question comes from Álvaro Lenze from Alantra Equities. Please go ahead.
Hi. Thanks for taking my questions. Going back to Teesside, I wanted to know what the EUR 103 million 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 account receivable in the balance sheet. Also, looking at the pipeline, my second question would be, from today to year-end, you have EUR 7.5 billion in potential awards in which you are in the best place, and the guidance for above EUR 4 billion would imply getting about EUR 2 billion out of this EUR 7.5, 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. Also, my third question would be, maybe looking into 2022 and the pipeline. The way I see this is that the pipeline had been increasing over the last few years because no projects were canceled, but they were just being postponed and postponed. If most of the pipeline is now concentrating in 2021, as per the slide number 18, it seems like the pipeline for 2022 is a bit small. I don't know, what do you expect for order intake for 2022 and going forward? Thanks.
Okay. Thanks for the questions, Álvaro. The first question, unfortunately, I cannot answer. I'm not going to make a breakdown of the EUR 103 million. You have to understand that that's part of the arbitration material. Second question, if I'm being conservative. When I show to you that we have EUR 7.5 billion, I'm not going to say we're first. I'm saying we are front runners. We still have, in some of the cases, competition. It could very well happen to some of those, we lose and some other gets postponed to first quarter next year. 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 EUR 4 billion plus is not very challenging. I'm not going to change that number. It's not very challenging. You can keep it that way.
If you set up the 2022 pipeline, that 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 didn't answer the phone, and didn't cancel anything. Now they've gone back and made public, very public, they're back in the game, and they're already selecting us in some of the cases for the jobs, again, for the jobs that were in the pipeline. What I can say that the pipeline that we have today has grown. It's a pipeline with far more visibility and short-term to be converted than it was a year ago, obviously. Also it is a pipeline on which we are already doing some of those FEEDs. It gives us a good opportunity to convert those FEEDs eventually into EPC or EPCM jobs.
It's probably one of the strongest pipeline that we've had over the last four 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. 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.