This is Eduardo San Miguel. Welcome to this First Half twenty twenty one results presentation that will be conducted by our Chairman, Juan Jado. You can pose your questions after the speech. And now I give the floor to Mr. Juan Jado.
Hi, very good morning to you. I've been talking to all of you for 3 times a year and many years, 3 or 4 times a year and many years. This is probably not an issue one. So I'll try to put the best of myself to explain where are we and where we're going. In this First, the slide.
Okay. First of all, we're going to talk about what we're calling challenging environment. I mean, the real Challenging environment means losses, I mean, real losses because we had COVID losses on the Q1 and now we've taken extraordinary provisions of $60,000,000 challenging the environment because obviously the COVID delta variance is affecting us seriously in the progress of our jobs, More so in the Middle East, far more. But also as running the business, We've been the market is moving forward and then moving to immediate awards. On the previous presentations and I announced you that We were getting awards and in some of those awards I could not declare who the customers were.
I think now we can be far more transparent. And the market is moving forward, and Tiago is being retained for a large, Healthy and diversify Backlog of new contracts. And finally, in these situations of Which I call sensational situation of managing COVID that we've been doing over the last 2 years and new awards. Why, Evo, does it signify that we have the support of the Spanish government within dollar terms, give or take $350,000,000 for 4 years. So I'm just going to focus the presentations on those Three things.
Losses, which means that we've taken provisions that we have a health underlying business. 2nd, awards, which means that if we do have a healthy underlying business, means that we are delivering in customers awards to TR close to $3,000,000,000 year to date And strengthening our financial support to deliver what we've got and continue growing as the market is picking up. So this is the introduction with these first slides. On the second slide, Challenging environment, I think I've covered already by the presentation. And if it's okay with you, I'll move forward Because I've already covered the whole thing in my introduction.
Why are we being impacted by COVID? And maybe some other competitors not. It very much has to do with what are we doing, how is our backlog structure and where are we. It is true that COVID cases, since I talked to you at the very beginning of May, has increased in the Gulf by 70%. Everybody thought our sales, Our customers, our suppliers, our subcontractors in January February were in extremely good mood.
We know we were very much picking up a good rate of progress, and the delta variance has changed the whole picture. And it has changed the whole picture if we look into this next slide, Well, these variants really affecting the most. Everybody knows, it's not new to anyone That India and Pakistan are probably the 2 countries more hardly hit. Obviously, Indonesia and Philippines, They're having today similar problems. And the rate of dependency that Gulf countries, Middle Eastern countries, where we have The large percentage of our backlog and we are executing correctly in extremely good terms with our customers are being seriously affected.
We have to readapt again to health new health requirements. We have to readapt again to mobility. We have to agree with customers new action plans. And very important, we don't have access to the traditional workforce The Middle East depends on which most of them come from either Philippines, Pakistan and India. Obviously, we have good workers there.
Good workers there, they've been there for more than 3 years and the rate of efficiency after that Obviously, it's understandable, but it's not the same. And it's putting a lot of pressure between us, subcontractors and customers to have the correct process. If you analyze again how our backlog is structured, which very much has to do with the progress of our revenues and the progress of having less revenues or less accrued revenues that we had And that we had planned at the very beginning of the year, you realize that 54 Send over backlog, which is a good and healthy backlog has been reprogrammed and we have explained and I don't want to get into detail was reprogrammed towards the end of 2020. It was reprogrammed to the last quarter end of 2022. Well, it has the goods and the bads is we cannot accrue Sales and therefore we cannot accrue margins and the good things is that we'll have and we will have a healthier execution and we have the backlog.
We haven't lost the jobs. The good news is the market has picked up And we have 27% of the year to date backlog, which is engineering. They just started. We have what we call, which is launching the engineering right now, just right now. We're launching early works, not full engineering.
So we have the jobs, we have the backlog And we have the future that it doesn't represent neither sales nor margins in today's account. It would represent very little in 2021 accounts. And only around 20% of the backlog is project that are being executed under COVID. And they're being executed today with a very large percentage, and I'll talk to you afterwards, Have to do in the Middle East. And let me tell you Middle East is not easy place to work, but there are sound and reliable customers with whom we have the Jado.
So having worked before. And so we have to manage with them probably a crisis that is much worse today than we had Expected 6 months ago. How is If we do a further analysis of the backlog or not of the backlog, the jobs that are under execution And why we are not progressing accruing revenues? The first analysis you see that we have close to 7,000,000,000 A little more than €7,000,000,000 of projects that are being commissioned. They are being commissioned in this case Successfully, but very slowly in Talara through we're 99% Our part, the full plant is at 95%.
It's a good plant. It has been nominated as one of the best and most sophisticated Refining jobs best built in the world, Purais allow us to move very, very, very slowly. And with bits and pieces of extra costs, none of them material, but bits and pieces of extra costs. Anything that delays has extra cost. Most of the time and many times, it can be revert to customers, but not always.
And when you have many, you have to be cautious. As Zaur, obviously, is Kuwait. Kuwait has been there for a long time. We were way ahead of time of the off-site utilities, tankage and other services. But obviously, we are commissioning that it's Very difficult to commission when borders close again and we cannot get specialist to commission and approve the startup of the units.
So the relationship with customer is best. We're working surely but slowly. UT5 is exactly the same thing. It's one of the largest gas plant in Kuwait and in the world. And again, we are on commission and stage and we work in far slower than we had expected.
We have many acceleration plans we have not been able to come into force because of COVID and affect the revenue And not very material, but also has little impact on cost. Everything has little impact on costs. None of them are material, but it has impact, and we have to be realistic. And the same thing in Rasta Nura. We work here shoulder to shoulder in order to start up Rasta Nura.
Rasta Nura is a large plan for clean fuels. In for Saudi Aramco, we want to start. We're having issues and problems With resources, but we all we should have been finished 2, 3 months ago and we'll be finishing in the next 2 months. So this translates in very little revenue and marginal extra cost, That's good service. I mean, I think it's not we haven't got a problem with none of them.
And the remaining contributors to sales, as you see, all of them with some exceptions happen to be in the Middle East. So that our backlog is there and our backlog is under construction And being under construction in the Middle East with this new delta variant has hit us far more stronger than we could have ever expected. And therefore, We had it has forces and I think it was the healthiest thing to do for a manager to take extra provisions For provisional disputes, none of them material. We have sometimes with customers I'm not talking arbitration, I'm talking disputes and sometimes subcontractors, sometimes with a specialist that has to come and deliver and work with us in order to continue working at a faster pace that are we doing today. All of these, this backlog, this execution translates into EBIT that is obviously not too Good.
I mean, they're not too good because as a manager, using the term of adjusted As a manager and as a shareholder, you have to realize that a shareholder looks for real Transparent EBIT and not adjusted EBIT. So the fact that we have an adjusted EBIT, if We were able to do the analysis, I said, if nothing would have happened, if there had not been COVID, Obviously, and even accruing only 30% less than we had planned for, If we have an adjusted 3% EBIT that means that the underlying business is healthy. And that's the message that I want to do. The real number not adjusted is that we started with an EBIT loss of $145,000,000 To what you have to add up, the $61,000,000 provision, the UK hit, COVID hit with G site and the 25 direct Very much direct extra cost on COVID that we have it. But the message here is that he's very much focused in the Middle East and he's very much focused on Extraordinary events that has to do in this 2021 that we've already said.
It's a difficult year, far more difficult than we had expected. It is definitely a year of transition. When we close the semester, I mean, Probably one of the way to show the health of the backlog is that we have good customers and we have good customers. That means we are progressing at a slower pace that we're getting paid. And when we get paid and we progress, we have been able to ended up with a net positive cash of €94,000,000 Despite of a tea site outflow and obviously, a slower cash flow due to COVID, Slow pace of advance.
And I wanted to come out I was going to take it away, but I wanted to come out with a full row number here. Sales, EUR 1,000,000,000 for EUR 1,422,000,000,000,000,000,000,000,000,000,000,000,000, much lower than expected. Not because we're selling less, just because we are accruing less. The real EBIT of $148,000,000 negative, Adjusted, if you take away all the impact that we consider extraordinary and only having to do with $221,000,000 of dollars 44,000,000 which comes out to an adjusted EBIT of $33,100,000 and a net cash of 44,000,000 And in blue before probably the good news. And the good news is the market has picked up and it is picking up.
And we have already announced and we are announcing healthy close to EUR 3,000,000,000 of new awards. And if you're in this business, you need healthy awards that reflect that you have the resources, Human Resources, the engineers, the know how, the customers and the credibility. And we have all of that, which translates into year to date backlog of €3,100,000,000 And why do we have awards? I mean and we do have the awards Because the market is there. And the market is there and the pipeline that we've always talked about It's more real than ever.
And it's been little by little translating in a woods. Obviously, I don't want to talk about oil prices For gas prices, but yes, demand. And the market is there and it's picking up, not at the pace everybody thought 2 years ago. But the market is definitely picking up and it's picking up because the real demand is there. So that allows to look at the market quite positively for the end of the year in 2022.
And very often in some other presentations you were asking me whether I would say was able to Get order intake at the same level of sales. And I said that, yes, Last presentation, I said that I could reach EUR 4,000,000,000. And today, what I have Say that our order intake in 2021 of €4,000,000,000 is not anymore a challenge. And then let me go with you with the awards. And I think in these awards, 2 message, diversification, petrochemical And the 3rd and most important, derisk.
First of all, we have the SASSA, the SASSA investor in Turkey. An investor in Turkey awards a job to TR not because we were there and we did and we placed a very low price. This is a cost plus. Probably in Turkey, we're one of the companies that have delivered the jobs the largest And the jobs with more quality and than any of our competitors. Success have Trusted TR to develop a petrochemical plant in Europe in Turkey, it's a PTA And with the structure fast track on a cost plus basis.
So it's very much the risk. And we're working quite nicely with the customer and the customer team. That was the first award that we had at the very beginning of the year. The second award comes in Central Europe, Comes in Amsterdam by GI Dynamics. GI Dynamics trust the TR to develop under an open book basis.
Again, the risk a bioethanol plant based on industrial waste. This is very close, the process is the closest thing to energy transition, which when some of you wonder what is TR in energy transition, We know that far because at the very beginning of the year, an important investor trusted us as we're working together how to make a model of this plant and that can be replied in different parts, in different cities in Europe. And we continue. And we continue with Orlin in Poland. This was already announced without disclosing the investor, Arlin.
But Arlin, last year, in the middle, When we were all confined, awarded us under competitive basis, we were competing with other teams, competitive fit to develop a large olefins plant that had to be built in Poland. It's called we say block, but I think it's pronounced very differently. I don't think TL is pronounced, but I mean And well, we've won. What does it mean? That means that for 9 months, we have worked very close together Telematics with our customer, designing front end design that had to be efficient, constructible and good on OpEx and good in CapEx, and we won, which is Again, a way of when you work this way, a way of de risking the execution of the job.
And now I'm happy to say that this job was signed and came into force. On my previous Presentation also said that in Northeast Europe, a customer has selected TR for what we call Clean energy plant. I couldn't give fuel. I couldn't give very many hints. Some which letter Gazprom, which was the customer behind, which I could not announce, made public, And so we did.
That either was a wordiness, a delayed poker under a scheme that is EP plus Construction Management. Again, we de risking in Russia, the construction risk. We've done the front end design. This is the first way of derisking the job. We understand the business quite well.
We're one of the leaders of the world We've built, designed and built more copper units around the world. And here we have designed the job And now we're going to do all the engineering and procurement and support gas pump on the construction with a running the construction risk is not under our scope. Quite recently, today, we're having the kickoff meeting And here I cannot announce the customer. Customer has the right to announce this first. But we Today, we're working with Gee on the kickoff meeting.
Gee wanted to work with us, dollars 300,000,000 CSeries scope to again develop a sophisticated combined cycle in Eastern Europe. Everybody knows that with GE, We have been. We have a long life of success stories. We were successful in Holland, obviously in Spain with many combined cycles. In France, we have been extremely successful in Mexico.
We are being very successful in Emirates, And now we've been very successful in Colombia. And this is the beginning together with GE of another success. And today, the kickoff meeting and lunch of the job is taking place. And here, this is undisclosed again. It's a petrochemical plant that is a fit.
It's a fit with the customer that we have worked before, that we have worked before, not only developing fits, But also developing FEEDs and then rolling over to EPCs, one we have been able to derisk and structure the job, Very successful. He's a good customer. We know each other quite well. And now we start with Ken would announce this as obviously customers have the right to announce it first and he has not announced it yet. He has sent us the letter of award.
We're going to be working with them on their competitive fit of a new propylene plant in Europe. With a final investment budget That we'll try to improve because as I said, FEED has to focus on both OpEx and CapEx for the best job, which I'm sure we'll finalize doing with them and for them in Europe, in Northeast Europe. It has been awarded quite recently. And this is The last one, the last one, this is Middle East again. This is the only one in the Middle East, used to be many.
This is the only one in the Middle East. We have been selected as disclosed. We're negotiating the bits and pieces of the contract. We cannot disclose the customer. It has to do with the big natural gas in the Middle East that we have to put very close together now in a few months as we start the job, 150 engineers.
And probably the size of the job over the 6 months will have to increase as there are many optionals that have to be decided by the customer. So if we take into account these last awards, which we cannot been able to disclose to the customer. It adapts that year to date, we have been awarded €2,900,000,000 which shows that a definite 2021 is a year of Transition, we're having our issues and problems, UK decide, managing COVID in the Middle East, But at the same time, we're delivering successfully, slowly but successfully all the jobs and we're getting awards as I do believe We are one of the most reliable engineering and construction shops in Europe. And if you look through all of them, you see they're diversified, very much focused on petrochemical, very much focused on gas, with some color on transition energy and very important quite the risk. And when I said Before that, I didn't feel I'm comfortable of reaching this year EUR 4,000,000,000 for the intake and we are close to 3.
It is because as I said as I placed and as I said and I To you in my previous presentation and I used the slides exactly the same slides but with the different colors as Some of the transparent non colorful jobs has already been a wood. Here we have more than what I'm trying to explain to you, we have presented already tenders. We have presented offers for more than $6,000,000,000 in which in all of them we're very well positioned. In some of them we negotiate in contracts, In other, we're competing, they're very well positioned. It doesn't mean we're going to get all of them.
It'll be unlikely you don't get all of them. So the likelihood is that some of those jobs that we have already presented. There are others We're not as well positioned in these ones. We have all the offices in the market. But here, I'm just summarizing the ones that we are Either negotiating or either we have more than 50% chances of being awarded, which Somehow it strengthens my view that our award in this year awards of this year are going to be good and that the market is recover.
And this 2021 is a difficult but a transition year. And talking about transition, I think let's talk a little bit about energy transition. Everybody is focused what is TR on energy transition. I mean, a year ago, everybody was wondering that energy transition It's going to be something negative for the energy service companies. And the message is not, it is positive.
What are our natural markets? Clean fuels, petrochemicals, natural gas, Hydrogen, we have already done studies years ago on carbon capture and we've already developed bioenergies. I mean, all of those technologies, all of those markets is something that our energy services, TR and others feel comfortable about. And what and who are going to be investing in this transition? In many cases, our customers.
And our customers, what do they want? Our services. I mean, they want a task force that we're already able to put together The methodology to put together large complex investments, the methodology to innovate, The methodology to escalate, the methodology to develop technologies and ways to improve with some other bright guys and technology and license throughout developing. And there's hundreds of process engineers that know how to work together to really translate those investments and these energy transitions into a reality. So energy transition is definitely is not a challenge, it's an opportunity.
It's a big opportunity. It's an opportunity that we definitely is not going to translate into P and L this year, Marginal P and L in other P and SCs and engineering is not going to be important, but it positions ourselves Extremely well towards the end of 2022 and 2023. It's a good opportunity. It's a good opportunity that is already happening. I mean, The picture on the left is not a picture.
The picture of the Zelle is the digital model of the plants that we are designing together in Amsterdam for the methanol plant. We work in there and we work in there trying to look and trying to design the most efficient and constructible plant. Obviously, we're working with Repsol how to develop the different technologies of hydrogen and decarbonization And it's a customer with whom we have worked before. We have already had a contract with Enagas. We have already had a Figures agreement that we have announced with Aperinox of how to develop and decarbonize their big We're going to start in Spain and then going to move forward to the different plans that they have around the world.
So we make over the last 12 months, we have made a big step forward. And this very important wave, which is important for Spain, but is very important for Europe. It is today, but it's definitely going to be part of TR revenue and backlog Probably sooner than later. And finally, let's talk about the 3rd term. I mean, Challenging environment with bad results, simple as that.
Let's not hide it with optimistic terms. Immediate awards, that's a reality. It has happened, I already told you. And with both together, We have the opportunity of strengthening our financial profile with the support of our government. And why do we like to have the support of our government?
We have been working with our government since we started. I mean, our government supported us To go to China with soft loans, has supported us to go to Latin America with export credit loans, has supported us to grow as we merge and bought and support them the value in Initech. We've always been very close to the government. But the government would have never been allowed to support companies the way they're doing today. And today, Europe and Spain, Europe and all the member states are putting together the mechanisms to support companies, Companies that are healthy, companies that have future, companies that are strategic, but they are being seriously impact by COVID, Well, that happens to be TR.
Obviously, we've been impacted by COVID. It's not a We haven't been had it in 2021 and it's been reflected in our accounts. It is also true that we are a strategic company for Spain. I mean, We are industrial leader. We are an exporter.
We probably have one of the most valuable Spanish technology hubs. I mean, we have 4,000 engineers here in Madrid, where I'm sitting right now. And therefore, we can become and I think we are a differentiated platform if we want together to decarbonize. I mean, the industry. And to get support from the government, It has to be a promising environment.
I mean, a promising investment. And we have a promising environment and it's a promising investment. This is not forever. This is to support us to manage the COVID. And this is to support us to manage the COVID and to put us in a situation that we can compete face to face an equal terms to some of our competitors that happen to be public or happen to have a very strong support of their governments.
So I think as a manager and as a shareholder, having the opportunity to have a Spanish government with $350,000,000 Conor, is an opportunity. It's an opportunity that is offered to you provided that you have been impacted, provided that you're strategic and provided that you're a good investment. And I think those three requirements are more than filled. And what does Support means, I've already announced it. It means that we're going to be getting $150,000,000 of a hybrid loan, which obviously strengthens our equity.
It's a hybrid equity, But banking wise, it strengthened our equity for 4 years and another $100,000,000 of extraordinary loan. We could have gone for other terms, but I think this is the healthiest way and the best way to strengthen TR and capture the market in this time. It is for year and it is expected. I mean, we are moving into August And he's suspected that this disbursement that we will get paid and we on the Q4 of the year. You have to go through the Approvals and protocols of the Spanish government, technically is moving forward extremely successful.
And obviously, to satisfy to comply with the government, we have to be a company very much Focus on sustainability and energy decision, we are obviously, We have to grow and we will grow being efficient and in a derisk backlog. And we have to be a profitable company. And we are the 3 of them. We are a profitable company despite of 2021. We've been Profitable and we'll come back to profitability in 2022 right away.
And we'll come back with value for the shareholders and obviously for the Spanish economy. So let me finish with my guidance. Sales is going to be very difficult that they'll be much higher than $3,000,000,000 It has to do we are ready in end of July and it has to do with the rest with the rhythm of accrual Of the existing backlog, out of the full backlog, only 20% has been accrued. The remaining is either new or reprogrammed to 2022, 2023. So it is very difficult.
But we've maintained an adjusted margin of 3% and very important And that's very important. I mean, we're in a business of getting awards and deliver and retaining the trust of our customers. We've got the quality and that quality is being translated in awards and is not very challenging as I said before to end up this year with awards of more than €4,000,000,000 This is the 3 big numbers that I wanted to finish my presentation with. Thank you very much.
Thank you. We are now going Question and answer session, okay. So if you have a question, you have to press 1 We have the first question from Alexandre Peguil from Investing Diada Securities. Please go ahead.
Hello, Juan. Thank you for taking my questions. I'll have 2 to start. One is about the visibility for the next quarters. You've seen that after this provision you carry out in the first half, You have enough visibility for the next quarters in terms of the profitability of the business.
I mean, it's The backlog already claimed of additional negative surprises or additional profit warnings? That will be the first question. And the second question is about the CETI financial support. The conditions, if you can give us some color about the cost Of this funding? And second, when are you expecting to replace particularly Jado.
[SPEAKER JOSE HUMBERTO ACOSTA MARTIN:] Loan, not the hybrid equity. Are you expecting at some point to issue new equity to replace this loan? Thank you.
So let me see if I can correct I can answer you. If not, Mino, come back to me, if I can answer you correctly. I think, obviously, it's not an easy decision To take a provision, but if we take a provision, it's because we have a good expectation of having more visibility On the 2nd part of the year. We've been badly hit on bits and pieces. I mean nothing serious, but bits and pieces In all the jobs, most of them in the Middle East, some disputes here, some extra costs there, Some COVID costs that we have doubt that we can get back from our customers.
And so we decided to do it once for all. And I think It's a management decision. It's not easy, but I think it's for the sake of the best management of the business And having more visibility for both shareholders and also the government that is going to be Somehow an indirect shareholder. So it has to be done with both. I mean, we have to show this is where we are.
We don't want surprises. We're managing a good business, but we're managing a good business that is running through problems that we cannot They were definitely very much unexpected and has happened with many other businesses. That's the first question. The second question, The conditions of the CEPI, I think in the presentation that I gave you, I don't know but I think the condition of the CEPI, I think I have Eduardo with me, and I think he's going to be definitely far more precise than I am.
Unfortunately, I cannot be that precise because conditions are not still closed. 1st, we have to go through a due diligence process that is about to be completed. In 1 month, it will be ready and then we will close the conditions. I would say there are 2 facts that are relevant. First one, There are market conditions.
I mean, you will not see a relevant impact in our financial expenses because of this financing. And second, it's smaller in the first the cost of this financing is smaller in the 1st years and it grows through the life of the loan. But as I told you, still they are not fixed and Within the next month, they will be fixed and well, market conditions as I said.
Okay. And then let me Alejandro I mean, now let's focus on the third question. Now we have to focus on 2 things. First of all, I mean, come back to profitability And grow. I mean and grow and go to the size that we were before, which is being reflected already with a number of awards.
So we have to grow to the plans that we had in 2019, which is Having a turnover closer to the $5,000,000,000 in North fleet and having a profitable backlog and a profit And healthy revenue. As in having a participant loan and having a direct loan from the government. It helped us in 2 ways. He helped us because he give us equity strength and liquidity strength for the execution. It helps us because it gives to our customers a high level of comfort.
Our government is a partner, which is very important. Why do we simply, I'm going to give you a quick example. We've awarded a job to Spanish company that was supported by a government. It's a company that we had trusted and we had worked with for many years, and we had quit working with them because of our financial situation. And once the government Supported them or gave signs of support.
We awarded a job, but not only us, our customer allow us to award the job. I mean, having the support of the government and being partnered with the government signifies far more than having $300,000,000 in cash with you. And it put us in a very similar situation than some of our competitors. So you have and that's why in the conversations that we had with the Spanish government that started very early in spring. At the very beginning, they had nothing to do with TR.
It had to do with other companies that the government was thinking of us supporting it had to do of supporting a company buying things from them from one of our activities. We have an ongoing relationship with our government. And I think progress mid May With the unfortunate events of UK and the development Of this 5th variance, we work with the government and I said we like to have you as partner. And Javier's partner is hybrid product direct loan. If we grow and we want to grow, If we come back and we will back to a real profitable Situation, when I say real because that's because I hate the term of adjustment.
When I say the term of adjustments because I like to have real EBIT and then real dividends. There is no such a thing as adjusted dividends. And then we'll see that maybe in 2020 that maybe it may very well happen that we replace it with a capital increase or it might not be even be necessary. I mean, if we grow At our planned pace, you've seen it before and you have to go back to 2010 And from 2010 to 2015, in our business, equity gets strengthened quite rapidly, It's quite rapidly, and it might not be necessary. It might be reduced, and we may negotiate with them to stay with us at a lower as Here, one of the clauses is you can repay them whenever and when you can.
So and each party is very flexible. So we can talk to the government and say, okay, let's we don't need as much as $150,000,000 because we have already Trends in our balance sheet, I will be very, very comfortable if you keep 50 with us. Why? Because I like to be in this business Competing with some other European competitors that have the real support of the government and competing with Asian Competitors that have the real support of the government is healthy and comfortable to have the support of our government. And that's it.
Okay. Thank you, Juan. Sure, Javier.
Thank you. Next question from Francisco Ruiz from Exane. Please go ahead.
Hello, good morning. I have two questions. The first one is, given the delays that you are having on sales due to the COVID in 2021, What are your expectations on 2022? I think you gave us some side guidance at the beginning of the year that There will be some recovery on that or something like around 3,600,000,000 sales in 2022. Are you still comfortable with this figure for next year?
And just second question is just the data, if you could give us the level of prepayments that you have in your net debt at the end of the first half? Thank you.
Francisco, I didn't get I have a very clear Your first question, but I missed the second one. Can you please rephrase it?
The second one is regarding the
prepayments, which are included in the net debt at
the end of first half.
Okay. First of all, delay I mean, delays in 2020 if I have a sensor recover them, Obviously, a very large a very part of the delays of the first of 2021 have to do. One of them will program. It has to do with reprogram. And most of the reprogrammed jobs will come at the end of 2022.
And their real jobs, their jobs in Singapore and their jobs in Canada and their jobs in obviously, in the Middle East. Secondly, Our delays into 2021 have very much to do with the pandemic. And everybody It's hitting very hard the Middle East. But I think all of us trust that the situation is going to be far more better on 2022. And we can and we will, Together with the reprogram jobs and the better rate of vaccination We'll come back to a normal and the new jobs, all three things together, I think The recovery of 2022, again, is not very much a challenge.
I mean, We're planning for a good recovery of 2022. And the second question, when you're talking on prepayments, you're talking Prepayments on advanced payments on customers or prepayments on debt? Yes, that's
correct. Yes, on the customers.
We haven't had any and we'll expect to have one Having to do with Orlin, that's going to be in 30 days or in 45 days, I don't know the payment terms Now by heart, because the only job we signed in May that it was on 22, if I remember well, they send us the notice to proceed. So once they send us the notice to proceed, then we can bill them the first payment. So we'll be having a prepayment Somewhere at the end of August or 1st weeks of September. That would be the only one. So we may be expecting prepayments or early payments to the Q4 of this year.
But we haven't got anything to do right now.
Okay. Thanks.
Thank you. Next question from Robert Jackson from Bank of Stander. Please go ahead.
Hi, good morning, gentlemen. First question is related to the renegotiations you've carried out. Do you I guess, have you considered the extraordinary cost of materials over the last 6 to 9 months. Have those been priced in, in these The negotiations, or is that still pending? Can you give us a bit of visibility on regarding those issues?
That will be my first question.
Yes. Let me let me yes. I mean, definitely raw materials is an issue. It's an issue. I don't know if it's going to last forever, but we're treating them as if they were going to last forever.
I mean, we don't want Speculate with raw materials. I mean that's a must. I personally believe that they're not going to last as high as they are for a very long time, but we're managing the business as if they were. And how we're doing First of all, if you realize a very large percentage of the backlog is the new fresh backlog that is being awarded and is coming to force right now and it's being priced and translated into the contract. So that's a way of taking the risk or managing the risk.
That's one part. Some others, the jobs, they're under construction already and it's already we have a really unbalanced I mean, for this case, we're fortunate because we have a re unbalanced backlog. On the second part, we have A very large part of the backlog, which is under construction. So all the materials are bought and they're on the site. And in some of the cases, For instance, SASSA is fully derisked because it's cost plus.
So extra cost, material cost, equipment cost is 100% translated to the customer. We're running some risk, Ed, it's true in some of the reprogrammed jobs. So some of the reprogrammed jobs, some of the equipment has been bought, which Material and equipment goes together. Some other equipment is not. Main equipment we spot, that's for sure.
That some other raccoon is bought. And there, we have to find a way either to negotiate with the customer, But at the same time, it's been somehow offset because the construction terms that we're getting in the reprogram jobs As we are agreeing and we have agreed with the customer to construct In a different way, model by model in this lower case, with lower construction and we have lower construction fees, lower construction contract, which somehow offset some of the risk of the material, which is not a big part, It's a small part that we have not already bought and we obviously need to be shifting with the customer. But there in a very small percentage, we do have a risk. I mean, it's a risk that we face in it.
Okay. Thank you. And the second question is related to The energy transition, are you finding a lot of competition in looking at projects? I guess you have a lot on of opportunities in Spain, so competition is lower. But elsewhere, I guess there's a lot of competition.
How is the gas going to differentiate itself Outside, for example, in Latin America in the energy transition projects?
We're not to be honest with you, we're not right now, what we have to What we have to do is organize ourselves because we're getting Demands from small companies, big companies do this, do that, do study together with this for very little money, try to develop this With that, to be on the review, we've been driven a bit crazy. It's not I mean, They're not join us because let's see if we together, that's another company in Latin America, we can have access to the government funds for this hydrogen plant. So we have to organize ourselves. I mean, it's We have a team. We have a team that is managing both in coordination with commercial And production of the energy, centralizing of the energy transition, say, projects initiated an agreement that you have seen.
We have agreement with Repsol, with Enagas, With Amine Amsterdam, with Atherinot recently. And what we're doing is we're sitting with customers, helping them to put together real jobs. As I have Yes, impression that some of them, they want to do things. They're in big industrial companies. They have the money.
They want to have access to the funds. They have to do something, but they don't know how. And we have to find a way to make that profitable For them, obviously, because they have to do it, but also for us. And quite often, they come to us and for Practically very little money, sellers work together and develop this and develop that and do this and do that. So sometimes they drive a bit crazy.
The good thing is that the market of many of our customers realize that they're working together with us. We can put together projects The real. The world is a bit unorganized with this. And let's face it. I mean, It is the ambition to develop it.
There is the budget to develop it. There is the commitment of our governments to develop it. And together, service companies and investors will have to find a way out. But there is not enough competition, very little competition.
Okay. And my final question is related to the CEPI resources. Looking ahead, could you leverage off their financial support Helping other potential clients to develop projects, could that be a source of or incentive for new projects in the future.
I mean, in this business, I mean, another one to name competitors. So this business, the many of our competitors, Some of them are in Asia, in different countries. They have gone through extremely difficult situations, much worse. I mean, the worst that you can imagine is they've always had support of the governments. They have been refinanced by the governments And they have continued the business as nothing have happened.
I've been having the support of the Spanish government, Obviously, it gives us the cash, which is very important. It also gives us the credibility that we are Because it's a must to have the support of the government and it's a must of Europe that we are a strategic company for the Spanish Government. And being strategic, having the resources that we do, the human resources that we do And having the know how, it would definitely strengthen our capacity to get new jobs. I mean, and that's one of the reasons That when I was stuck into the government and we're starting to explore, Because nobody was using it. Only companies that were in a terrible situation were going to them and they were not very happy.
If I thought that it'd be very good for TR, for TR employees, for shareholders, And it would give a high level of certainty and comfort to our customers.
Do Do you have any peers or any companies related in the sector also negotiating with the CEPI do you know of, which could collaborate a bit your negotiations and your position with SEBI rather than considering yourselves as a distressed company such as couple of other companies which have asked for access to several resources.
The thing is, in this sector, we never compete with Spanish companies. I mean, for better or worse, our competitors, There are European, Japanese, sometimes American and very often Korean. And some of the European companies, I don't want to get into details, they already have the support of the Spanish government of the Spanish Or their own governments. Some others, they happen to be public. And all the Asian companies, one way or another, they can go belly up 3 or 4 times, they will always come back with the support of the government.
That's the way because they happen to be strategic for the industry. And that's the way this industry works. But here in Spain, we're the only one. We've been unique. We've been by ourselves with a good relationship with our government because you know very well that we have when we needed The support of export finance, we've already had the support of export finance of our government.
When we had needed the support of A special line of finance, small for our customer, we have got it. And today, we just got the approval, Small one for a customer that is developing. We've always been very close to a government and we've been quite strategic for the Spanish industry. But we don't know where anyone close to us Actually, those funds just because there is none.
Okay. Thank you very much for your relative answers. Thank you.
Thank you. Next question from Kevin Roger from Kepler Cheuvreux. Please go ahead.
Yes. Good morning. Thanks for taking my questions. The first one is related basically to your cash flow expectations. If you can give us a bit of information on what you expect for the coming quarters because for PI do not understand the fact that you need such deep support from the government.
And on that side, sorry for the stupid question, but can you explain me the impact of the Loan on the Board, on the number of shares, if there is any things like that, if you will have the diluted number of shares, Sorry for this one. Questions related to the recent contract in the Middle East. In your contract presentation In your Q1 presentation, you underlined as an opportunity, a contract in the Middle East related to gas. It was That's right. And with the contract value above €1,000,000,000 You say today that you have secured a contract in the Middle East, Gas related, so I guess this is the one, but the contract value is at €550,000,000 plus.
So am I mistaken when I'm saying that is the same or can you explain us the change in scope of this contract? What happened and why the contract value is, let's say, half of you expected? And the last question is related to the Power division revenue from the Power division. So revenue are negative In H1, so you have basically removed more than €50,000,000 revenue this quarter. But can you explain me what happened on that side?
If you look at the cost side, now we have cancellation of revenues. So what's happened on the Power division this quarter?
Okay, Kevin. Thank you very much. I have 4 questions. Let me see if I got them right. And let me start telling you, please, there's no such thing as stupid questions because You mean and please, if I answer you not correctly, don't think I'm giving you stupid answers.
Here, let's I'm going to try my best to answer 1 by 1. Let me start with the last one. I mean, the Power division revenue are negative, negative because we took the wrong strategic decision [SPEAKER JOSE MARIA ALVAREZ PALLETE:] To move into businesses that were not power. I mean, we took the initiative to move with investors to businesses that were new and that were very close And with the ambition to become the leaders in biomass and energy transition. And with the technology ambition, the ambition was purely technological.
We had had extremely bad experience. The traditional power division, the power division that we're doing with GE, the power division, the power business we're doing with The power business, it has been and it's a profitable business. So the hits that we've got, they're very serious and it should have never happened. It is my fault. It is my fault as I do thought that with the Power Division, we could move forward into the new renewable biomass clean fuels, whatever business.
And yet we have not been successful. So that's history. Tough history, a lost battle, that is that history. The third question, let's start by the 4th question. Obviously, I mean, if you can't disclose, it's undisclosed.
I mean, I cannot tell What it is the undisclosed that you want to know whether it is disclosed or not. All I can tell you is that we are being selected and we cannot disclose the name. That are the final number from now to 6 months once we make it public is going to be more than €500,000,000 because there are many options that has to be added. I can tell you there is gas and I can tell you there is in the Middle East that if customer He's not allowing us to disclose anything. I cannot disclose it.
So I'll have to wait to disclose it and dying to do it. And you're going to have to wait to get it. The impact of the participative loan On your accounts, I think Eduardo, which is sitting right by me, can answer that. He knows far more about balance sheet and accounting than I do.
Hi, Kevin. Well, the participative loan cannot be booked as a pure equity. I mean, you won't see that's a part of the equity, it's financing. But obviously, it's not an ordinary, it's not a subordinated ordinary financing. It will be separated Because if the company is liquidated at the end, the participative loan is considered as an equity.
I mean, that's the point from a legal standpoint. But you won't see it as an equity, you will see it as an external financing. Regarding the expectation of the forthcoming quarters, I mean, We are living in stress in terms of cash, but the new wave of awards are coming. I mean, the Act has a lot to do with how good the evolution of the awards arrive. I mean, if we are successful collecting these Down payments from clients early in the Q4, I think we will have an easy quarter.
If not, we'll still be stressed as we have been throughout the year. Think that's the answer.
Once it's Kevin, Kevin, because now I haven't taken doubts on the question you're asking me on the Middle East. We are being selected in the Middle East. I cannot disclose the customer. The number that is there It is What we are signing now, it doesn't mean that we are down pricing anything. And within the next 6 months, as this is the utility part, tanks and whatever, of the Investment customer has to include in the contract, which has to decide and has very much to do with how develop the process units, 300, 400 Of different units, which are the optional set that is up to the customer And the development of the process units.
So this is the award of, let's say, the first tranche and then all the additions will come up to It has nothing to do with crazy down pricing. Don't get that impression.
Okay, okay.
I understand. Thanks. But sorry for that, but I struggle to understand the magnitude of the financial support that you're asking if you, let's say, I'm not, let's say, so worried about the cash expectations because you are an asset light company, So CapEx requirements are limited. So I struggle to understand the magnitude of the financing that you are asking to the co governments.
When you're working I mean, we are a business, obviously, we haven't got fixed assets, but we have bills to receive and bills to pay. And after having recognized a loss of $150,000,000 the picture of our balance sheet is weaker. It's as simple as that. It is weaker. We've been managing and we've been growing very successfully with very little This is not a business that is equity intensive.
We haven't got we don't have to invest In yards, in vessels or in big assets. I mean everything that we've got and that's our strategy, It has to be the closest thing to variable cost. But also we have to give this we have to give the image to our customers And also shareholders that we are strong. We are in a competitive environment. So having a support, serious cash support from your government, it allows us, first of all, To manage the business better, we have to treat well our suppliers And give comfort to our customers.
And that's what the support The size of the support is as big as it is.
Okay. Okay. Thanks a lot for that. Have a good day, Vincent.
Thank you. And last question from Alejandro de Mikaelis from Nao Securities. Please go ahead.
Yes. Good morning, gentlemen. Thank you very much for taking my questions. So a couple of questions just to follow-up. The first one is on the SEPI support and the strengthening of the balance sheet.
So probably for Eduardo, I guess. Could you please tell us how the covenants of your performance bonds are being impacted by this. So the question is, would you need additional equity in order to Keep kind of getting the awards in the Middle East that you are talking about, putting the performance bond on top of that. So how you're seeing that evolution? And probably the second question, Juan, is just to follow-up on what you were saying that you're actually being paid by your customers and you're seeing this as positive and so on.
But When I actually look at your receivables since the beginning of the year, they have gone up by almost €100,000,000 But your revenues have come down as you have been pointing out. So there seems to be A lengthening of the days of payments. So the question there is, Are all of these kind of increases in the receivables just because of COVID? Or are there some kind of disputed Amount that we have to take into consideration and then those could come into a provision later on.
Let me Alejandro, good talking to you. I haven't talked to you in a long time. You were one of our preferred analysts for many years. Good having you back. And let me ask you the second question.
The first one is for Eduardo to answer. How easy receivable has as we have not been able to And we have not been able to grow and accrue and deliver and have revenues at the agreed pace. And the agreed pace that we had agreed with our customers. And our contracts are based on milestones, a
very large
percentage. So we are accruing, we are Spending money, we're accruing slowly, but we're not reaching those milestones and that translates in receivables. It could be in some of the cases, smaller amounts of our disputes, but most of it, it has to do with the milestones that have not been reached. And you have to realize that the size of the jobs that are under execution are very big.
Alejandro, regarding the first question, first, well, Yes, there is a there are covenants regarding the size of the equity compared to the volume of assets. So There are 2 elements, assets and equity. The size of the assets today, it's as you have mentioned in your question is probably a bit big. I mean, we expect it to see it smaller in the future, in the short future. Hopefully, by the end of the year, we will see a different figure.
So that's first. 2nd, it's a fact that for the last 2 years, our equity is not that big. So By definition, year after year, I'm asking the banks to provide me a waiver. And for the time being, I have not seen any difficulty to obtain it. So I do not foresee the need to increase the equity because of that fact.
So Yes. And obviously, still I have room to negotiate with banks because we are still to see how CEPI affects this equity. It's a fact, as I told you, that accounting wise, it's not equity. But in the end, it provides a good comfort. So we are adding at least EUR 150,000,000, which is not pure financing.
It's something different. It's per equity, I would say. So well, hopefully assets will reduce. So I don't have that problem with the covenants. 2nd, the equity we will see with the banks, how we consider this SEPI loan hybrid loan.
And 3rd, if I have a problem, I have obtained waivers during the last 2 years. So it's not an issue.
Okay. And the waiver you are comfortable to get that even if, say, you go into negative equity or If you cannot kind of recover the tax credit that you're talking about, yes, because now also the tax credit have gone up, You're kind of still losing money, so that those tax credits look kind of difficult to be recovered, yes?
And the tax credit has to do with my capacity to my ability to recover This does create in the future, in the next years, I mean, in the next in the forthcoming 10 years. And when I analyze What is the impact of my capacity? I cannot consider what's happening in this very extraordinary and specific year, 20 in 2021. I mean, I have to see if my backlog produces profits enough in the future to compensate my tax credits, but it has no impact what happens this year 20 21. As you say, it's a fact that I am missing the opportunity to compensate partially this tax credit this year 2021 because of the specific situation.
But come on, what we do is to analyze in the future produces profit enough to compensate the existing tax credit. And the numbers we are doing today gives us some comfort. Obviously, by the end of the year, we will do a more accurate analysis about the situation because we will have full comfort about the forthcoming backlog, about the pipeline and then we will redo the analysis. But while we've been audited, as you know, in June. And one of the main facts or main elements that the auditors cover is the recovery of the tax credit.
And for the time being, they are not telling us there is any specific role in regarding this tax grade. When you talk about future, it's always have been open, but we feel comfortable with this asset today. So I do not foresee to be going back to the question in a negative equity because of the removal of this tax credit. That's not what we are it's not in my mind today.
Okay. That's great. Thank you.
Thank you. We don't have any more questions. Back to you for the conclusion.
Thank you. Thank you all. This time it has taken a bit longer than expected probably because it took me longer To make the presentation then but I think the occasion was important. So it took me longer to present results than that I did all the times that I did it in 20 minutes. But I do really appreciate you being here.
I do appreciate your questions. And I'm looking forward to talking to you in November, I do believe, at the end of next quarter. Thank you very much all of you.