Good day. Thank you for standing by. Welcome to the Technip Energies third quarter 2021 results conference call. At this time, all participants are in a listen- only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Phillip Lindsay, VP, Head of Investor Relations. Please go ahead, sir.
Thank you, Leanne. Hello to everyone, welcome to Technip Energies' results for the first nine months of 2021. Today on the call, our CEO, Arnaud Piéton, and our CFO, Bruno Vibert, will present our business and financial highlights as well as the outlook. This will be followed by Q&A. Before we start, I would urge you to take note of the disclaimer and language on forward-looking statements on slide two. I'll now pass over the call to Arnaud.
Thank you, Phil, and welcome everyone to our financial results presentation for the first nine months of 2021. Looking at the highlights, operationally, our execution remained strong against a challenging backdrop. We continued to achieve key milestones across our portfolio. In particular, we successfully loaded, shipped, and delivered the first modules to Russia for the Arctic LNG 2 project, a notable achievement with modules shipped in a record time despite the COVID difficulties. We continue to deliver on today's energy market needs while positioning for the future. We established several partnerships to advance our technology and regional positioning for the energy transition. Our shareholder register continues to develop well post-spin . We are delighted to welcome HAL as a major shareholder of Technip Energies, a reputable investor with a long-term strategy for value creation. Bruno will elaborate on this later.
In terms of headline adjusted numbers for the first nine months, we generated revenues of EUR 4.9 billion, demonstrating double-digit year-over-year growth. Recurring EBIT margin was 6.3%, up 70 basis points on the prior year, reflecting strong operational performance. Backlog at the end of the period stood at EUR 16.5 billion, up about 40% year-on-year, providing us with excellent multiyear visibility. Turning to our execution, I will focus on accomplishments in the third quarter, where we delivered revenue growth of nearly 20% year-over-year as activity ramped up following the growth in backlog. In project delivery, beyond the already mentioned Arctic LNG 2, our LNG portfolio is at different maturities, but overall, making good progress. For Qatar LNG, which was awarded in Q1, we have begun early works and have signed a subcontract for the construction of the process trains.
On Coral Sul FLNG for Eni, the mooring system is now in place offshore Mozambique, and the sail- away operation from Korea to Mozambique is planned for next month. In the downstream, despite challenges around labor restrictions in Bahrain, key milestones were achieved on the Bapco refinery expansion, with over 75% of the equipment installed and construction progress close to 50%. In technology, products, and services, or TPS, we reached performance guarantees on the Bora LyondellBasell ethylene plant, where we provided the process technology as well as process design. We mobilized our teams for the latest FEED for KOC, building on a long-term PMC relationship that has yielded over 3 million man-hours to Technip Energies to date. In summary, as evidenced by our revenue and margin performance year to date, our teams are overcoming challenges and continue to execute well.
I have often stated our belief that cooperation across industries is needed to achieve the world's climate goals. Technip Energies is a trusted partner for technology development, scale-up, and integration, and we collaborate with clients and industrial partners to deliver decarbonization and help achieve their net- zero goals. In the third quarter, we established several strategic partnerships to develop technology for low-carbon solutions to drive energy transition in strategic regions for the company and to diversify our offering into adjacent markets. For example, we have joined forces with TotalEnergies to advance the decarbonization agenda for LNG, offshore facilities, and other areas. We will work intimately with TotalEnergies to co-develop IP and decarbonization solutions at scale for existing and future projects and jointly promote the solutions that we will develop.
In many regions where we operate, there is a strong push for local content to bring in-country value around the energy transition theme. In this spirit, I would like to highlight two important partnerships. At the Gastech conference in September, we signed an agreement to create a joint venture with Abu Dhabi-based NPCC, a company we know extremely well through three decades of collaboration, including work on several mega projects. This partnership brings together complementary skills around technology know-how and integration expertise with important project management and EPC capability, and we are already actively positioning for concrete opportunities in the country, including carbon capture as well as hydrogen and ammonia, both blue and green. In addition, earlier this year in Russia, we announced the creation of Nova Energies , a joint venture with NIPIGAS, with the intent to generate a best-in-class engineering and technology company in Russia dedicated to decarbonization.
Nova Energies has now been awarded concept studies to decarbonize the largest petrochemical complex in Russia and the main production asset of SIBUR. Finally, as part of our strategy to grow and diversify our service offerings, we have signed a five-year strategic alliance with TÜV Rheinland, one of the world's leading testing service providers, to expand our project management consultancy, or PMC, into new markets. This includes infrastructure, chemicals, and the mining and metals industries. In summary, what we have announced not only reinforces our position as a partner of choice to deliver low- carbon solutions but will also deliver business opportunities in the coming years. As I discussed with our half- year results, we have a vast array of creativity and innovation at Technip Energies, and we have a proven track record in developing first-of-a-kind process technologies and commercializing new technologies.
Again, with this slide, I want to share with you a few examples of how innovation and technology approach is making a positive impact for our clients in terms of project viability and the environment. Within CO2 management, we have a joint development program with Shell to optimize their CANSOLV technology. We're strengthening our collaboration with Shell to drive continuous improvement in the affordability and efficiency of capture with the latest improvements currently being tested through a pilot at a waste- to- energy facility in Norway. Equally, we are cultivating access to other carbon capture technologies in order to deploy the most appropriate solution for any given project. Earlier this month, we announced an exclusive agreement with Siemens Energy to jointly develop and decarbonize the Rotating Olefins Cracker, or ROC technology .
ROC has everything to be a game changer in the ethylene market through employing a dynamic reactor system to eliminate conventional furnaces used for pyrolysis, providing a clear path to decarbonize. We have already validated the fundamentals of the reactor technology in laboratory testing, and we intend for the first turbomachinery prototype to enter factory testing in the first half of 2022. This technology has also been selected for a demonstration unit by the Cracker of the Future Consortium, made up of major industry players. Turning now to innovation within the plastic circularity domain. For over 60 years, Technip Energies has been a leading provider of styrene monomer technology.
Recently, we have been working under a joint development agreement with Agilyx to develop a downstream purification technology, which, when combined with their process technology, will allow polystyrene, one of the most widely used plastics in the world, to be recycled back into its original chemical form. Finally, we were delighted to utilize our process design and technology industrialization expertise to help Carbios launch its first plant , showcasing its enzymatic recycling technology. I will now turn the call over to Bruno to discuss our financial performance in more detail.
Thank you, Arnaud, and good afternoon, everyone. Turning to the highlights of our performance for the first nine months. Year- to- date, revenues have grown by 11% year-over-year to EUR 4.9 billion, with gross project delivery and technology products and services, TPS, growing at a double-digit rate. Adjusted recurring EBIT was EUR 308 million, equating to a margin of 6.3%. That's a 70 basis point improvement year-on-year, benefiting from strong execution on projects heading towards completion, as well as a reduction in SG&A costs. I will reflect on how these factors contribute to our updated guidance on the next slide. Adjusted order intake was EUR 8.4 billion, a significant improvement versus the EUR 1.6 billion in 2020. Third quarter intake benefited from a steady flow of services and studies, notably in the decarbonization domain.
Net cash at period end was EUR 2.9 billion, following a very strong cash flow performance this quarter. Turning to guidance. Two aspects to discuss here. Firstly, within the previous guidance for revenues, we are narrowing the range to EUR 6.5 billion-EUR 6.8 billion. This reflects the performance through the first nine months of the year with double-digit growth versus 2020. The financial year 2021 has provided many operational challenges to the teams to deliver projects in a world still impacted by COVID and unforeseen logistical challenges affecting the industry. The most optimistic scenario of ramp-up for new projects is now unlikely to materialize this year, and we have accordingly removed the upper end of the range.
Nonetheless, we still expect to grow at or close to double digits for the full year, which is a testament to the operational resilience of our teams and outstanding performance given the challenges of the last two years. Secondly, on margins, where the trend has been consistently strong year- to- date. We are effectively putting a floor under the full- year guide. We now expect adjusted recurring EBIT margins of at least 6% compared to the prior range of 5.8%-6.2%. The flow of 2021 is slightly above the full year 2020 EBIT, which is consistent with the trajectory we laid out during the Capital Markets Day. All other guidance items remain unchanged. Turning to our segment reporting and starting with project delivery. It achieved revenue of EUR 4 billion, up 11% year-over-year.
This growth was achieved despite a challenging backdrop relating both to the pandemic, including local restrictions in jurisdictions where we are currently operating projects, as well as constraints around logistics, notably shipping freight. The continued progress on Arctic LNG 2, combined with the ramp-up of recently ordered LNG projects, more than offset lower contributions from maturing downstream and petrochemical projects. Adjusted EBIT for the segment was EUR 255 million, equating to a margin of 6.4%, with the segment now demonstrating growth in profit year-over-year. We were able to hold margins broadly flat, driven by solid executions across the portfolio, even with the full absorption of COVID costs in the 2021 numbers. In line with our expectations, order intake in the third quarter was below the run rate achieved in the first half.
However, the year-to-date trend in backlog remains very positive with nearly 45% growth, benefiting from major awards in the prior quarters. In the last 12 months, project delivery has achieved a book-to-bill of 1.9. Turning to TPS. Building on momentum established in the first half, we delivered double-digit revenue growth in the first nine months to over EUR 910 million. Growth was broad-based with contributions from key components within TPS, namely process technology, PMC services, and loading systems. We expect to broadly sustain this level of activity in the fourth quarter. EBIT margins improved by over 100 basis points year-on-year to 8.6%, benefiting from higher activity levels overall and a favorable mix, including process technology and loading systems. The latter is also benefiting from growth in aftermarket services, including repair and revamp work.
Thanks to strong revenue and margin performance year-to-date, EBIT in absolute terms has increased by nearly 30% year-on-year. Trailing 12 months book-to-bill for TPS was 1.1, leading to a backlog of over EUR 1.1 billion, up 6% year-over-year. Turning to the other key performance items across our financial statements, and beginning with the income statement. Corporate costs of EUR 26 million represent a continuation of the year-to-date trend, and we've made significant progress on our target to reduce indirect costs by 20% versus the 2019 cost base. At 24%, the effective tax rate remained consistent with our full-year guidance range of 30%-35%, although towards the upper end of it. The major element impacting the net financial expense of EUR 18.5 million relates to the mark-to-market impact of investments we have in traded securities such as McPhy.
This inherently will bring some volatility into this line item, whereas the net interest on our cash balance and debt facilities will be far more consistent and predictable. Turning to the balance sheet. Our growth debt position is stable compared to the first half of the year. Net cash on our balance sheet at the end of September was EUR 2.9 billion, up substantially from the EUR 2.2 billion year-end position, supported by solid free cash flow year- to- date, which I will discuss on the next slide. Finally, net contract liability stood at EUR 3.1 billion at the end of the third quarter. This has increased year- to- date, associated with project progress and associated billings. Let's now look at cash flows. It is again a very strong quarter. Free cash flow for the first nine months reached EUR 778 million. Three main factors at play here.
Firstly, a strong operational or underlying level of cash flow generation as we execute across our portfolio. Secondly, we've seen a significant working capital inflow of EUR 534 million, which relates to prior period awards, as well as the achievement of key milestones on other large projects. CapEx of EUR 28 million, again, reflects the asset-light nature of our business model, with free cash flow equivalent to over 95% of our operating cash flow. While third- quarter cash flows were stronger than anticipated, largely due to some milestones or cutoffs, we do not expect to sustain this level of cash generation moving forward, and we see some reversal in the fourth quarter. Looking at the free cash flow below , there is nothing incrementally material to what was disclosed for the first half, and we end the period with nearly EUR 3.6 billion of cash and cash equivalents.
Before turning back to Arnaud, let's consider the progression in our shareholder structure. In September, we were delighted to welcome HAL Investments as a Technip Energies shareholder with a commitment to acquire a 9.9% stake from TechnipFMC. When combined with the stakes already held by Bpifrance and IFP Energies nouvelles, we would have around 18% of the share register with strategic or anchor shareholders. The TechnipFMC overhang has reduced substantially from 49.9% at the time of the spin transaction in February to just 12% once the HAL transaction completes, which is expected this month. Finally, we are pleased with the trend in our global shareholder register, which is well-balanced, long only oriented, and well- dispersed across key geographies in Europe and North America. We now pass back to Arnaud for the outlook.
Thanks, Bruno. Turning to the outlook, let me begin by discussing our views on the LNG market. We continue to view LNG as a key transition fuel. Recent volatility in global commodity markets only serves to highlight the need for continued investment in the lowest carbon traditional fuels while alternative energy sources are being developed and scaled. Our long-term outlook for LNG has not changed since our Capital Markets Day in January, and we continue to estimate a gap in nameplate capacity of well over 100 million tonnes per annum or MTPA by 2035. Today, together with our partners, we are responsible for nearly half of all capacity under construction. Over 55 MTPA spread across Qatar and NFE, Arctic LNG 2, Energía Costa Azul, and Coral Sul FLNG.
This reflects our status in the industry and excellent track record across a diverse range of projects by technology, location, and scale. Looking ahead, we believe future capacity will be sanctioned in regions where Technip Energies has a strong presence. Furthermore, the majority of these prospects will be modularized, an area where we bring significant expertise. Momentum towards low to zero- emitting liquefaction plants is real. Looking ahead, we would expect LNG projects to proceed with a significant decarbonization scope integrated into our design through hydrogen, carbon capture, or electrification. While decarbonization will clearly be easier when designed in from inception, we anticipate the current LNG installed base may attract investment in customized emission reduction programs. In summary, as I have stated previously, the LNG wave is not over for Technip Energies, and we believe the future market plays to our strength. Turning to hydrogen.
Last quarter, we presented our blue hydrogen offering, Blue H2 by T.EN, and outlined the market opportunity. Today, I would like to address the green hydrogen market, where momentum is also accelerating. We are leveraging our technology scale-up and integration skills and our expertise in modular solutions to develop our position in this market. The pace of technological change is rapid, with electrolyzer technologies competing for position based on stack capacity, stack efficiency, and footprint. Today, there is no one clear technology winner, and this is why it is important that Technip Energies rapidly develops its expertise and a credible offering that will remain technology agnostic while the industry matures. The strategic investment and technology development agreement with McPhy remains very important to Technip Energies and provides us with an understanding of the technical requirements of electrolyzer technology, and we are actively pursuing commercial opportunities alongside McPhy, notably in Europe.
Equally, on many other green hydrogen opportunities around the world, we are engaging with other electrolyzer suppliers. To emphasize my point, earlier this month, we announced our first award based on a PEM electrolyzer technology, an EPCC contract for a 5 MW plant in India for NTPC. We are confident that we will build on this further award in the coming quarters, deploying a variety of electrolyzer technologies. The market is moving fast, and we have observed a step change in customer engagement for green hydrogen project that has led to a 7-fold increase in accessible market opportunities with an aggregate capacity of more than 20 GW. Today, we have engaged in over 15 green hydrogen studies, some completed, some ongoing.
In summary, we believe we have the right combination of technical know-how, modular capability, and global footprint to position us well for an extremely active and fast-growing green hydrogen market. Moving on to ESG. I am pleased to confirm that we are on track with a major deliverable for 2021, our ESG roadmap, which will be presented as planned early next year. During the third quarter, we concluded our extensive stakeholder engagement and materiality assessment. The assessment identified 12 priority topics for both our business and our stakeholders, and we have now assembled multiple working groups across the company to define our ambitions and corresponding action plan for each priority topic. At the same time, we rolled out several initiatives to promote inclusion, including a mandatory global inclusion course and manager-led talks on unconscious bias decision-making.
We continue with the evolution of our workspace across the company globally. We recently opened our new eco-responsible headquarters in Paris, providing our workforce with an environment that will boost well-being, collaboration, and performance, as well as offering improved disabled-friendly working conditions. We will continue to implement all the necessary actions needed to foster a culture of inclusion, fair representation, and diversity across the company worldwide. In summary, with our results in the first nine months, we are delivering strong year-over-year growth in revenues, margins, and free cash flows. We have seen further diversification of our shareholder base.
We welcome HAL Investments and many other new investors into our register. Thank you for the trust and support that you are showing to Technip Energies. Strategically, we continue to position Technip Energies to be able to capitalize on the huge opportunity that the energy transition represents. We set a new floor for 2021 margin guidance and look confidently to the future, supported by strengthened backlogs and an improving macro outlook. With that, let's open the line for questions.
Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone. To withdraw your question, please press the pound or hash key. Once again, that is star one on your telephone. Please stand by while we compile the Q&A roster. We have your first question. It's from the line of Sasikanth Chilukuru from Morgan Stanley. Your line is open.
Hi. Good afternoon. Thanks for taking my questions. I had two, please. The first was related to the near-term cash flow expectations, particularly working capital, which, of course, provided inflows of EUR 534 million so far this year. When you look at 4 Q 2021 or potentially 1 Q 2022, I was just wondering what your guidance was for working capital. Are we likely to see any major reversal here or otherwise, likely extension of the trend that we have seen so far? For the second, I was wondering if it was possible to provide more color on the opportunity set that you're currently looking at or negotiating in the near term, over the next six months, especially some color within the downstream segment, which would be appreciated. Thanks.
Maybe Bruno will start, and I'll take the second part of the question.
Yeah, thank you for the question, Sasikanth. On cash flow, and obviously, we won't go into the difficulty of providing quarterly guidance for cash flow. That would be a bit of a horrendous exercise. As you point out, very strong year-to-date performance, very strong quarter performance, which I had flagged at the end of H1 with the ramp-up of receivables. From what we see today, this kind of strong cash flow was also from the project, but also due to cut-off items. I would expect in the fourth quarter to have some reversal of this position as we close the year.
Of course, still having H2, sorry, as a positive free cash flow or cash flow from operations. Some reversal, but limited versus Q3. In terms of forward-looking beyond 2021, the early days provide some visibility. Again, I think I would go back to what I suggested, given the pipeline that we see in front of us, given our backlog, whether it's through cash or net contract liabilities, we do not see a cliff from the position that we were at the end of June or that we would be at the end of the year.
Thanks, Bruno. Sasikanth, on your question related to providing more color on the opportunity set and notably in the downstream, I will refrain myself from naming the opportunities, but nonetheless provide some color. In downstream in particular, I think we are still very active on live opportunities around Spain in particular, for which we are waiting for decisions and FIDs by the clients. We see a significant opportunity set within PMC in particular, but in sustainable chemistry, if I want to concentrate on downstream into 2022. This is complementing, I would say, quite a potentially rich pipeline of opportunities in LNG and low- carbon LNG for us in the basins and with the customers with whom we are already currently engaged. I don't know where to fit carbon capture and pure decarbonization topics, whether it's downstream or in another category.
From, I would say, an engineering and FEED study standpoint, there is a very large potential around carbon capture studies at scale and at large scale. I think that is a clear indication of what our backlog will be made of going forward in 2023 and beyond. All this to say that we have many very tangible building blocks to build, I would say, a successful 2022 in terms of order intake.
Thank you very much.
Thank you. Your next question comes from the line of Nick Konstantakis from Exane. Please go ahead.
Almost correct. That was good. Hey, guys. Thank you for the presentation. Clearly , a very good outlook on LNG. Can you remind us where your capacity to take on a mega project stands? You're working on, as Arnaud just pointed out, at least two trains from Qatar on the FEED side. You have all of the existing projects. Can you just remind us what's happening there? I guess if you could make a comment on, Rovuma seems to be a bit out of the picture. It was not on your guidance despite having won it. What do you think could be accelerated to fill that gap? On Russia, which I'm assuming will be part of the answer, can you give us a little more color on what happened to Baltic LNG? I think you were executing the FEED, but the EPC seems to have gone somewhere else.
Apologies, I have two more that should be quick. I was hoping you could give us a little more color on the decarbonization of LNG. How should we be thinking about the sizes of these awards? Look, lastly, can you remind us what you have said on dividends? What are the steps you need to take to actually initiate the program? Cash flow has been above your expectations. I'm just trying to understand if you could have a positive surprise for us in the coming quarter. Thank you.
Thank you, Nick. Well, that is the fireworks.
Sorry.
I will start. I guess the first question was about our capacity and our ability to take on more LNG projects. I know that you've listened to the call. If you look at what it is that we are currently executing. We are executing Coral floating LNG. We're executing Qatar NFE. We're executing in Mexico, and we're executing in Russia. That's, I would say, four sizable projects. As you know, our portfolio, you will notice, because we shared again today that Coral floating LNG is coming to an end for us with the floating LNG sailing away next month to Mozambique. The current portfolio of projects under execution is phased in a way that some are towards the end of their life, I would say, in execution.
Some are early, such as NFE and Costa Azul, and some are, I would say, in a teenage age, if I may say, such as Arctic LNG 2, where we are well progressed. I think this phasing is playing in our favor to take on more large-scale LNG projects. We have, I would say, a capacity that is around running five mega LNG projects at any point in time consecutively. First of all, first observation, we are not at the five threshold, and we have a portfolio, as I said, that is phased in such a way that there is absolutely, I would say, no reservation on our end with regard to our capacity to handle one or two more large LNG projects. When it comes to Rovuma, Nick, you very rightly pointed out the fact that it was never part of our backlog.
It is still not part of our backlog, and it is also not part of our forecast for order intake into 2022. I think ExxonMobil had communicated that they have pushed an FID into 2023 or around that time. Well, let's wait and see, but there is more than enough out there for us, I would say, to compensate for the absence of Rovuma in the meantime. You know the basins where we are active. You know our customers, and I'm sure you read about them, and you know that they are actively preparing for the next phase of their development and the next phase of a large LNG project. A word on decarbonization, because I stated earlier that we believe that going forward, our LNG design and our LNG project will have an element of decarbonization, and it can be partially decarbonized or fully decarbonized.
Decarbonization will take place sometime from inception during the design of the FEED stage, which is happening, I would say, at the moment on 100% of the LNG facility for which we are working on early phases or concept studies and FEED work. Decarbonization is in there. I'm not going to segregate what is, I would say, the decarbonization scope from the rest of the LNG facility scope because it's really now built into, I would say, the architecture of the plant from inception. For the rest, for what might be more brownfield, well, it will be a mix of studies and equipment upgrades. We are not necessarily the equipment provider. For example, if you want to adapt a turbine for electrification or for accepting a very large quantity of hydrogen into the mix to power the turbine, then it's a question more for the equipment provider.
For us, on the brownfield, it's going to be mainly studies and, I would say, services around the retrofit and the implementation of the solutions. There could be a bit of EPC, but I would say probably a larger volume of services and studies over pure EPC work. The importance of decarbonization for us being really into our design of the future plant. On Baltic LNG, yeah. Well, we indeed executed the FEED, and the EPC was awarded to someone else. I don't have much to comment on the matter. That happens. We are not, I would say, any weaker in Russia because of that. On the contrary, it's confirming our capacity for future projects for the customer and potentially more customers that we have in Russia. Absolutely not, I would say. We like to compete, so it's always a disappointment lose.
There is more than enough for us to fill the order book going forward in 2022 in that part of the year. On dividends, lastly, I think we have already communicated on the way we would intend to allocate our capital and use our capital. Cash is available, you know that, but I will hand over to Bruno for maybe more, I would say, granularity on the matter and more information. No big change compared to what we communicated in the past.
Thanks, Arnaud, and hi, Nick. Now, as you point out, very strong cash flow. Obviously , this puts us in a very good position to implement the capital allocation policy. The first layer of dividend, which will be approved by the next shareholder assembly as part of the approval of the 2021 financial results, will be the milestone to initiate that. Cash flow also enables us to look at the other two pillars, which will be for investments beyond the traditional R&D or CapEx, and also balance sheet strengthening.
I think these three, let's say, complementary pillars are important as we consider the future potential and growth within the energy transition, and also the growth and the strength of Technip Energies, as it was outlined by S&P earlier this morning, who changed their BBB negative outlook to a stable outlook this morning after our Q3 earnings. I think it shows the importance of a well-balanced capital allocation, and for sure, our strong year-to-date cash flow and our ability to generate cash flow in the future, as I was outlining in the first question, I think will enable us to sustain this capital allocation policy over the future.
Thank you. I'm sorry for the number of questions, guys. I'll refrain myself next time.
Thank you. Your next question comes from the line of Jean-Luc Romain from CIC Market Solutions. Your line is open.
Thank you for taking my question. There are two. The first is on LNG. Qatar this year launched an NFE project, and it is known that they are studying a possible NFS. When would you expect this to be ready to be launched? Next year or maybe after that? Second question relates to your margin guidance. We no longer have a ceiling. If you had to put one, what would it be?
Thank you, Jean-Luc. Maybe I will hand over the tricky one to Bruno, even though I would put a ceiling myself. On LNG Qatar NFE, indeed Qatar is very active on growing its LNG production capacity. NFE was signed, as you know, in February. By the way, to your question and Nick's question earlier, it has to be understood that when Technip Energies is engaging going forward on LNG projects, it will be because they have a low carbon agenda to them and a decarbonization agenda to the facility. That has to be understood by everyone on the call. Indeed, QatarEnergy, because they renamed themselves, have already signaled an NFS, an extension to t wo additional mega trains to the that we signed in February this year. I will not speculate on the timing of the award.
All I can say is that the design of the NFS's additional two trains is currently ongoing with Technip Energies and our partner Chiyoda. The work is progressing well. There's an appetite for making sure that the pace of the delivery of the study and the pricing of this facility is actually high, confirming the interest by Qatar to proceed with NFS. The FID date is in their hands, really, and we will obviously support them throughout this process. You're right, they do have an ambition for additional capacity there. Bruno, Celine-
Thank you, Arnaud.
On the margin guidance.
Thank you, Jean-Luc. As you rightly point out, I think we've put a floor of 6%, which is basically higher. The floor was the top range of the initial guidance that we laid out in January, which was 5.5%-6%. Of course, some moving elements and some mix, so difficult to put precise figures. I think for us, what's more important is we are on the trajectory that we laid out during Capital Market Day to have a low SG&A cost base to execute projects, and then to have a focus on growing TPS, which is accretive, basically, to our bottom line. I think we are making good progress on that. We guided that we were targeting to go from 100 basis point s or more to our initial guidance, which was 5.5%-6%.
I'm not sure we are in the medium term to be above this 6.5%. This may and will come later. That's the maximum ceiling that I would put for today. I think year- to- date, 6.3%, is quite exceptional in the current circumstances. 75 basis points upside versus last year. Making good progress on all the bricks and the pillars that will sustain long-term growth into our margin profile.
For us, setting a floor was actually a way to reassure everyone around the expected performance towards the year-end. It was done in a very positive, I would say, spirit, and then to signal something positive for the full year to come.
That's the way to keep. Thank you very much.
Thank you.
Your next question comes from the line of Michael Alsford from Citigroup. Your line is open.
Yeah, thanks. Good afternoon. I've got a couple, please. Firstly, could you talk a little bit about the margin profile of some of the new opportunities? I know you talked a bit about the opportunity in hydrogen, but I was wondering whether you could talk a little bit about where you see the margins on those projects relative to your existing core base. Secondly, if I could, I was just wondering if you could talk a little bit about the fact that you mentioned, Bruno, on the use of cash, and it's clearly a very much capital-like business. I'm just wondering if you could give some sense as to the quantum or appetite to pick up investment as you look to position in new end markets. Thank you.
Yeah, Michael, thank you for the two questions. About the margin profile for new opportunities, I think when you look at Technip Energies, we have project delivery on one side and TPS on the other side. We are not obsessed. I am not obsessed with growing the size of project delivery. The importance in the project delivery portfolio is the selectivity and the quality of the portfolio. The selectivity principles that we apply to ourselves and which are guiding us in selecting the type of ventures we engage in will continue to guide us in the new energy domain. Is it going to be challenging? Yes, it could be, in a sense.
I take it as a very good challenge and equation to solve, because at the end of the day, in order to be profitable in any market, and it's true in today's market as well, we have to find ways to differentiate. For us to say, yeah, there is a fantastic opportunity set and growing visibility in green hydrogen or blue hydrogen, even though blue hydrogen is probably closer to, I would say, what we know with LNG size, LNG profitability, et cetera, or LNG project profitability.
For what is more in the green hydrogen space, it is down to us and together with the rest of the teams, obviously, to find a way to differentiate so that when we embark a project into our project delivery portfolio, it is compatible with, one, the quality that we are looking for in this portfolio and the type of margins that we want the portfolio to return. We haven't secured any large green hydrogen project at the moment. We are tendering on many of them. The key is that if and when we embark on them, they will be, I would say, compatible with the performance that we expect from the project delivery part of our business. It will happen, again, through differentiation.
Hence, why it's important for us to get and acquire the knowledge of all the electrolyzer technologies, get to know them, work on, I would say, the scalability with the suppliers and the providers, and that's key. I think we are well-positioned because we are doing that very early in the game, through the project that we have already signed, all the commitments and the investments that we've made into some electrolyzer manufacturers. I think we're well-positioned. There's a challenge around differentiation, but it's a challenge that we've had to overcome for other opportunities like LNG in the past, and I see no reason why we wouldn't be able to overcome that challenge around differentiation for hydrogen potential projects going forward. Bruno, on the use of cash?
Sure. Yeah. Hi, Michael. On the use of cash, as you say, very strong cash flow positioning, which leaves us some opportunity to invest. The way, and we've seen it, and it was developed by Arnaud as part of our positioning and our alliances. For us to position ourselves in this new market, we will consider any type, and we will always be good stewards of the capital. We will make an investment. We have the room to make an investment, a smaller investment, any kind of investment, such as in alliances, joint development.
We have a spectrum of avenues to invest and develop, and some of them may be a bit more capital- intensive, but as we are selective and we apply very strict selectivity principles for projects, for what we endeavor, we will apply the same selectivity for any investment we will consider to make sure that it fits within our portfolio. That it has, let's say, a good return, so that our capital is well put to use.
Michael, we're ambitious. Okay? We are going through the first year of existence of this new company, even though we have a 60 year, I would say, lifespan, but our history. We're ambitious, and quite, I would say, optimistic about the future potential of the company. Yes, we will continue to invest in more R&D. There are technology additions that we are targeting. There are areas where, in particular around carbon capture, it will be important for us to continue to invest so that we have access to, I would say, a very credible range of technologies so that those technologies can be deployed, I would say, in the environment that is the most appropriate. I think carbon capture has huge potential going forward as a market.
Not a single technology will be enough to address the carbon capture challenges in our industry or in other industries like cement, for example. It will be extremely key for us to have, I would say, in the bank or in the store, access to this range or spectrum of technologies that can be deployed, depending on the right solution, depending on the circumstances, and the ecosystem that we will face, when someone calls us with a challenge to decarbonize their asset or their infrastructure. Absolutely, we will, I would say, put the cash to use, for certainly more investment, in particular into technologies.
Great. No, thank you very much for the color. Thanks.
Thank you. Your next question comes from the line of Vlad Sergievskiy from Bank of America. Your line is open.
Gentlemen, thanks very much for taking my questions. Those will be on the Yamal project and its profitability contribution. Firstly, I'm wondering if you could update guidance on the Yamal- related contract liability reduction in 2021. So far this year, if I'm not mistaken, it's about EUR 142 million. You originally guided for EUR 150 million-EUR 200 million. Can you comment on whether you expect an upper end or lower end of this range this year, similarly to what you did with margins?
Secondly, is it fair to assume Yamal revenues to be broadly equaling Yamal related contract liability reduction? I think, based on your disclosure for the first half of this year, the revenue was slightly higher than that. Lastly, if I may. Would it be possible to at least indicate what was the margin of the business excluding the contribution of Yamal? Maybe if you can confirm or deny whether Yamal was the biggest contributor to EBIT this quarter. I will stop here. Thanks so much.
Thank you, Vlad. On Yamal, as you point out, and we'll continue to keep this disclosure on the NCL. You're correct. Over the first nine months, the reduction in NCL has been by EUR 140 million, which is getting relatively close to the, let's say, low range of the full year guide of EUR 150 million-EUR 200 million. Here, I said that we know all guidance items remain unchanged, so we're not changing our guidance. The way we were projecting Yamal earlier this year, in January, is still the way we look at it today, so no change.
Of course, as we are close to the low range, we may end up at the higher end of the range versus the lower end. In terms of proxy, it's not apples to apples because you have some FX conversion, so you don't have a direct one-to-one link of net contract liabilities to revenues. It is still relatively good as a proxy, so that's why we have used it and flagged it, and that's a reasonable assumption, although it's not exactly the way the accounting would work. In terms of contribution, as we said, 2021 would still have a Yamal contribution, very minor in terms of top line, EUR 150 million- EUR 200 million out of the EUR 6.5 billion as a floor, so very minor. As you also know, we do not recognize margin on a linear basis.
Yamal, which has been a very good and performing project in this warranty phase, is yielding more margins than early- stage projects. In this case, the profile or the margin profile of Yamal is higher than the projects in their very early stage, which would be for Arctic, Qatar, and all the projects in their early phase of execution, which, of course, as they are de-risked, will be able to generate more margin. Going into the future, and when we talk about long-term projections in the medium term, our target and our trajectory are independent of Yamal. Really, the upside that we've had on the guidance this year is not due to Yamal.
The trajectory that we laid out during the Capital Markets Day is independent of Yamal, because at this stage Yamal will no longer be contributing from both a top and bottom line perspective. We are very confident that we will continue to deliver those margins as we are able to deliver those projects, and this will be achieved without Yamal, as Yamal goes beyond, let's say, the warranty phase of execution.
All clear. Thank you very much, Bruno.
Thank you. Your next question comes from the line of Bertrand Hodée from Kepler.
Yes. Hello, everyone. Thank you for taking my question. I have two questions. First, congratulations on the very strong cash conversion this quarter. Can you clarify your comment on your free cash flow in Q4? My understanding is that you will have a working capital outflow, obviously, after a very strong Q3. Can you confirm that the free cash flow X working capital in Q4 will still be positive? That is my first question. My second question is, you are talking about a fully electrified LNG train. There is potentially a project in Oman, LNG bunkering, with that concept. Do you expect this project to be sanctioned in 2022? Thank you.
Hi, Bertrand. Thank you for the question. I will start with your second question and the LNG project in Oman. As you pointed out, a fully electrified design for a mid-scale or small- scale LNG, which is the proof that technology can actually allow us to get there, for as long as you've got the supply of green electricity attached to it, which would be the case on this project, then you have a net- zero production of LNG. At least you take care of the upstream in terms of decarbonizing the liquefaction and the production of LNG. Your question is more for TotalEnergies than for us. Yeah, we remain confident around it, but I will not speculate on the date of an FID. I will stick to what TotalEnergies is communicating on the matter, but certainly something that is on our radar.
Hello, Bertrand. Good afternoon. On the cash conversion, yeah, I think you do see it correctly. Very strong quarter, including some working capital positive inflow. Due to cut-off items, as I mentioned, we would expect to have some reversal in those aspects. The trajectory and the basic cash generation of the business remain intact. Q4 would not be an exception. As we are able to continue to deliver and execute the project, although we may have some negative in working capital to reverse some of the position, the rest of the cash generation from the business would basically remain constant.
Okay. Thank you very much. Very clear.
Thank you, Bertrand.
Thank you. We will now take our last question. It comes from the line of James Thompson from JPMorgan. Your line is open.
Oh, great. Thank you very much. Excuse me at the end there. Got a few questions from me, if I may please, gents. Bruno, following up on Vlad's comment on Yamal, that's sort of performing in line. When I look at the JV contribution overall, revenue in the adjustments is running a little bit behind where I thought it was going to be. Is it within the JVs where it's the main driver, effectively, of the reduction in the upper end of your revenue guidance? Are there any projects specifically? Secondly, you obviously flagged a number of opportunities in terms of decarbonizing LNG in the presentation there.
It'd be great to get a little bit more color about within the kind of installed base, how many customers are engaging with you at the moment of potential projects in the brownfield, and is that something that could really step up in 2022 or into 2023? Perhaps more generally, you talked a little bit about the opportunity set for 4 Q and into 2022 for the business. Obviously, it's a much, much stronger commodity backdrop, whether it's gas, oil, whatever. How is that sort of changing discussions with a number of your customers? Do you think activity has the potential to ramp up and deliver a pretty strong book-to-bill in 2022?
Maybe, thanks, James. I'll start with the first one and go back to Arnaud to conclude. In terms of joint venture and operations, whether it's a joint venture, whether it's a project which is fully run by Technip Energies or by any peers, I think all of the projects, when you reach in terms of some of those supply logistics, the fact that Delta variant had successive waves more in Asia than in Europe or in other parts of the world, is impacting projects that project teams need to deal with it. I think all the project have had to face some challenges, and whether it's in JV or a traditional project that will be consolidated. Not a specific area or one contract that would be flagged.
Of course, some of the projects that rely more on a supply chain, which are in the peak of the supply chain, or that face some constraints in terms of access to the site and to labor, to basically make progress on some construction sites, may have had some impact versus what we could have planned early in the year in January, when we set the guidance.
James, thanks for the questions on the, I would say, the pipeline of opportunities in decarbonizing existing LNG infrastructure. I will refrain myself from giving you a list of opportunities because some of them are obviously, I would say, the conversations can be intimate with some of the customers that are ours, where we operate in the basins, in the countries that you know. I will nonetheless share with you the fact that I don't think there is. Well, all customers operating LNG facilities at the moment are, in one way or another, contemplating, discussing, studying a way to lower the carbon intensity of their LNG production. From our standpoint at least, it's happening kind of across the board. There is, I would say, a large spectrum of solutions; there's more than one solution to address decarbonizing LNG brownfield.
I think it's a very reassuring sign. It's a sign of our customers acting responsibly and facing a certain reality. All I say is that it's always a mix of, like I've mentioned, engineering, EPC, but also sometimes equipment upgrade. Those conversations are taking place, including with the equipment providers. I would say it is in the making and could form part of a more meaningful inflow of orders, I would say, from 2023 onwards. We are not the only party, I would say, in this case. I would say it's a three-way conversation between us, the client, of course, and some of the equipment providers. The good or very positive sign is around the fact that a lot of those conversations are happening, and this formed the basis for the technology or the TCA that we've signed with TotalEnergies.
It is about low- carbon solutions for new infrastructure. It is also about studying, I would say, master plans around specific existing infrastructure and deciding on what solution to deploy and/or on developing solutions and IP that comes with it, because it can be a combination of solutions. When it comes to commodity prices and volatility, what we are observing at the moment, around gas price s in particular, is just a reminder of the risk for a shortage of investment in some of the traditional energies. We will advocate, and I will advocate the fact that continuing to invest in the lowest carbon traditional energy sources for some time is quite important to prevent the type of situation that we are in at the moment with the gas in particular. Hence, the importance of the low- carbon solutions for LNG and carbon capture, and so forth.
LNG projects have a cycle, and it's difficult to compress them. We haven't seen LNG developers calling us overnight saying, "Okay, I want an LNG project, and please, can you give it to me tomorrow?" We haven't seen that. Nonetheless, for those customers with whom we have not already conducted concept studies, FEED studies are ongoing for the development of their future LNG capacity. Where we were already in the making. Yes, the conversations are taking place to look at whether there is a possibility to accelerate by assigning more resources, et cetera. I would say the delivery and the completion of the studies that will lead to FID.
Okay. Thank you very much, both.
Thank you, James.
There are no more questions from the phone lines, sir.
Thank you, Leanne. That concludes today's call. For any follow-up, please contact the IR team. Thank you very much, and goodbye.
This concludes today's conference call. Thank you all for participating. You may now disconnect.