Good day, and thank you for standing by, and welcome to the Technip Energy's Third Quarter twenty twenty one Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, Phil Lindsay, VP, Head of Investor Relations. Please go ahead, sir.
Thank you, Leanne. Hello to everyone, and welcome to Technip Energy's results for the first September of twenty twenty one. Today on the call, our CEO, Arnaud Pieton and our CFO, Bruno Biber, will present our business and financial highlights as well as the outlook, and this will be followed by Q and A. Before we start, I would urge you to take note of the disclaimer and language on forward looking statements on Slide two.
And I'll now pass over the call to Arne. 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 the challenging backdrop and 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 two 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 €4,900,000,000 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 and backlog at the end of the period stood at €16,500,000,000 up about 40% year on year, providing us with excellent multi year 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 two, our LNG portfolio is at different maturities, but overall making good progress. For Qatar LFE, which was awarded in Q1, we have begun early works and have signed a subcontract for construction of the process trains.
And on Coral floating LNG 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 downstream, despite challenges around labor restrictions in Bahrain, key milestones were achieved on the Babco refinery expansion with over 75% of the equipment installed and construction progress close to 50%. And in Technology Products and Services or TPS. We reached performance guarantees on the Bora Lyon Basil's Epsilon plan, where we provided the process technology as well as process design. And we mobilized our teams for the latest FEED for KOC, building on a long term C relationship P that has yielded over 3,000,000 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 Energy 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 solution 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 Total Energies to advance the decarbonization agenda for LNG, offshore facilities and other areas.
We will work intimately with Total Energies to co develop IT 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 MPCC, 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 DP Gas 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 main production asset of SIBOR. And finally, as part of our strategy to grow and diversify our services offering, we have signed a five year strategic alliance with TUV Rhineland, 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 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 Technipenagi. 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 to optimize their cancer 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 the 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 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 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 sixty years, Technip Energies has been a leading provider of styrene monomer technology. Recently, we have been working under a joint development agreement with Agilix to develop a downstream purification technology, which when combined with our process technology will allow polystyrene, one of the most widely used plastic in the world, to be recycled back into its original chemical form. And finally, we were delighted to utilize our process design and technology industrialization expertise to help Karyos launch their first their 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. So turning to the highlights of our performance for the first nine months. Year to date, revenues have grown by 11% year over year to €4,900,000,000 with growth project delivery and Technology Products and Services, EPS, growing at a double digit rate. Adjusted recurring EBIT was $3.00 €8,000,000 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 and A costs.
I will reflect on how these factors contribute to our updated guidance on the next slide. Adjusted order intake was EUR8.4 billion, a significant improvement versus the EUR 1,600,000,000.0 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 2,900,000,000.0, 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 6,500,000,000.0 to €6,800,000,000 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 digit for the full year, which is testament to the operational resilience of our teams and outstanding performance given the challenges over 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 margin of at least 6% compared to the prior range of 5.8% to 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 €4,000,000,000 up 11% year over year. This growth was achieved despite a challenging backdrop relating both to the pandemic, including local restriction in jurisdictions where we are currently operating projects as well as constraints around logistics, notably shipping freight. The continued progress on Arctic LNG two, combined with the ramp up of recently awarded LNG projects, more than offset lower contributions from maturing downstream and petrochemical projects. Adjusted EBIT for the segment was EUR $255,000,000, equating to a margin of 6.4%, with the segment now demonstrating growth in profits 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 twelve 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 €910,000,000 Growth was broad based with contribution from key components within TPS, namely process technology, PMC services and loading systems.
And 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 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 twelve month book to bill for TPS was 1.1, leading to a backlog of over EUR 1,100,000,000.0, up 6% year over year.
Turning to the other key performance items across our financial statements and beginning with income statement. Corporate costs of EUR 26,000,000 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%, effective tax rate remained consistent with our full year guidance range of 30% to 35%, although towards to the upper end of it. And the major element impacting the net financial expense of €18,500,000 relates to the mark to market impact of investment we have in traded securities such as MACFEE. 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 balance sheet. Our gross debt position is stable compared to the half year. Net cash on our balance sheet at the September was €2,900,000,000 up substantially from the €2,200,000,000 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 €100,000,000 at the end of the third quarter. This has increased year to date associated with project progress and associated billings.
So let's now look at cash flows. It is again a very strong quarter. Free cash flow for the first nine months reached $778,000,000. 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 EUR534 million, which relates to prior period awards as well as the achievement of key milestones on other large projects. Capital expenditure of EUR28 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 below free cash flow, there is nothing incrementally material to what was disclosed for the first half.
And we end the period with nearly EUR 3,600,000,000.0 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 high investment as a Technip Energy shareholder with a commitment to acquire a 9.9% stake from Technip FMC. When combined with the stakes already held by BPI France and IFP Energy Nouvelle, we would have around 18% of the shares registered 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 a high transaction completes, which is expected this month.
Finally, we are pleased with the trends in our global shareholder register, which is well balanced, long only orientated and well dispersed across key geographies in Europe and North America. I will 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. And recent volatility in global commodity market 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 capacity of well over 100,000,000 tons per annum or MTPA by 02/1935.
Today, together with our partners, we are responsible for nearly half of all capacity under construction, over 55 MTPA spread across Qatar NSE, Arctic LNG two, Energia Costa Azul and Coral Floating LNG. This reflects our status in the industry and excellent track record across a diverse range of projects by technology, location and scale. And 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. And 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. And while decarbonization will clearly be easier when designing 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 no longer 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 10, 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 clear technology winner, and this is why it is important that Technipenergies 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 MaxV 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 Maxi notably in Europe.
But 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 the PEM electrolyzer technology, an EPCC contract for a five megawatt plant in India for NTPC. And 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 seven fold increase in accessible market opportunities with an aggregate capacity of more than 20 gigawatts. And to date, 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. Also, we continue with the evolution of our workspace across the company globally and 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 and we welcome Hal and many other new investors into our register and 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. And we set a new floor for 2021 margin guidance and look confidently to the future, supported by strengthened backlog and an improving macro outlook. And with that, let's open the line for questions.
Thank you. And we have your first question. It's from the line of Sassikanth Kilekru from Morgan Stanley. Your line is open.
Hi, good afternoon, and 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 $534,000,000 so far this year. When you look at 4Q twenty twenty one or potentially 1Q twenty twenty two, 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 a bit in the downstream segment would be appreciated. Thanks.
Maybe Bruno will start and I'll take the second part of the question.
Yes. Thank you for the question, Sachin. So on cash flow and obviously, we won't go into the difficulty of providing quarterly guidance for cash flow that would be a bit horrendous exercise. As you point out, strong year to date performance, very, very strong quarter performance, which I had kind of flagged at the end of H1 with the ramp up of receivable. So from where we see today, this kind of strong cash flow was also from the project, but also due to cutoffs items.
So we would expect I would expect in the fourth quarter to have some reversal of this position as we close the year. But of course, still having H1 H2 sorry, as a positive free cash flow or cash flow from operations. So some reversal, but limited versus Q3. In terms of forward looking beyond 2021, early days to provide some visibility. But 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 June or that we would be at the end of the year.
Thanks, Louis. And especially on your question with related to providing more color on the opportunity set and notably in downstream, I will refrain myself from naming the opportunities, but nonetheless provide some color. In downstream in particular, I think we have we are still very active on live opportunities around around EdBen in particular, for which we are waiting for decisions and FIDs by clients. We see a significant opportunity set in within P and C in particular, but in sustainable chemistry, I want to concentrate on downstream into 2022. And this is complementing, I would say, a 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.
Then, I don't know where to fit carbon capture and pure decarbonization topics, whether it's downstream or in another category. But 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. And I think that is a clear indication of what our backlog will be made of going forward in 2023 and beyond. So, 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. And your next question comes from the line of Nick Constantine 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 what your capacity to take on mega project stands?
You're working on, as Armenk was pointing out, at least two tranches on Qatar on the FEED side. You have all of the existing projects. So can you just remind us what's happening there? And 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? Then 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. Then apologies, 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? And look, lastly, can you remind us what you have said on dividends? What are the steps you need to do to actually initiate the program? Cash flow has been above your expectations. So 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's a fireworks. Thank you for I will start. And so the I guess, the first question was about our capacity and our ability to take on more LNG projects. So if you and I know you've listened to the call.
So if you look at what is it that we are currently executing, we are executing Coral floating LNG. We're executing Qatar and EFI. We're executing in Mexico and we're executing in Russia. So that's, I would say, four sizable projects. But as you know, our portfolio, you will notice and because we shared again today that Coral floating LNG is coming to an end for us with the floating LNG selling away next month to Mozambique.
So the current portfolio of projects under execution is phased in a way that some are towards the end of their life, I would say execution, some are early such as NFE and COSASU. And some are, I would say a teenage age, if I may say, such as Arctic LNG two, where we are well, well, well progressed. So I think this phasing is playing in our favor to take on more large size LNG projects. We have, I would say, a capacity that is around running five mega LNG projects at any point in time consecutively. But first of all, first observation, we are not at the five threshold.
And we have a portfolio, like 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 project. When it comes to Rovuma, Nick, you very rightly pointed out the fact that it never was 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. So I think Exxon 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 Roubouma in the meantime.
You know the basins were reactive. 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 development and 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. And decarbonization will take place sometime from inception during the design of 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. So, 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 upgrade. And you know, are not necessarily the equipment provider. So, for example, if you want to adapt the turbine to 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.
But 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 the decarbonization for us being really into the design of I mean, our design of the future plans. On Baltic LNG, yeah, well, we indeed executed the FEED and the EPC was awarded to someone else. I don't have much comment to make on the matter.
That happens. We are not, I would say, any weaker in Russia because of that. On the contrary, it's confirming capacity for future projects for the customer and potential more customers that we have in Russia. So absolutely not, I would say, I mean, we are we like to compete. So it's always disappointment to lose, but there is more than enough for us to fill the order book going forward in 2022 in that part of year.
On dividend, lastly, I think we had 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, but no big change compared to what we communicated in the past.
Thanks, Arnaud and Heineck. So no, as you point out, strong cash flow. So obviously, this puts us in a very good position implement the capital allocation policy. So 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 really the milestone to initiate that. Cash flow also enables us to look at the other two pillars, which would be for investments beyond the traditional R and D or CapEx and also balance sheet strengthening.
And I think these three, let's say, complementary pillars are important as we consider the future potential and growth within the transformation. And also the growth and those strong strength of technical energies, as it was outlined by SAP earlier this morning, we changed their BBB negative outlook to stable outlook this morning after our Q3 earnings. So 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 highlighting in the first question, I think will enable us to sustain this capital allocation policy over the future.
Thank you. And I'm sorry for the number of questions guys. I'll refrain myself next time.
Thank you. And 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 NFC projects. And it is known that we 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. I will start before or maybe I could I will will will handle the the the the the ones who we know, but even though I would put the ceiling myself. But on LNG Qatar NFE, so indeed, 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 Energy 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.
So that has to be understood by everyone on the call. Indeed Qatar Energy, because they renamed themselves, have already signaled an NFS, so an extension to two additional megatrends to the four that we signed in February. I mean, would not speculate on the timing of the award. All I can say is that we have I mean, the design of the NFS additional two trains is currently ongoing with Signip Energy and our partner Chioda. 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 an FS. The FID date is in their hands really and we will obviously support them throughout this process. But you're right, they do have an ambition for additional capacity there. Bruno? Thank you, Arnaud.
Thank you, Jean Luc. No, so as you rightly point out, I think we've put a floor 6%, which is basically higher than other floor was the top range of the initial guidance that we laid out in January, which was 5.5% to 6%. So of course, moving elements and some mix, so difficult to put a precise figures. But I think what 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 and A cost base to execute projects and then to have a focus on growing TPS, which is accretive basically to our bottom line. So I think we are making good progress on that.
We guided that we aimed we were targeting to go from 100 basis points or more to our initial guidance, which was 5.5% to 6%. So I'm not sure we are in the medium term to be above this 6.5%. So this may and will come later. So that's maximum feeling that we put for today. But I think year to date 6.3% quite exceptional in the current circumstances, 70 basis points upside versus last year.
So, making good progress on all the bricks and the pillars that will sustain long term growth into our margin profile.
And for us, setting a floor was actually a way to reassure everyone around the expected performance towards year end. So, it is it was done in a very positive, I would say, spirit and to signal something positive for the full year.
That's the way. It's okay. Thank you very much.
Thank you. And
your next question comes from the line of Michael Alford from Citigroup. Your line is open.
Yes. Thanks. Good afternoon. I've got a couple, please. Firstly, if
you could talk maybe 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. And then just 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. It's clearly a very much a capital light business. But I'm just wondering if you could give some sense as to the quantum or appetite maybe to pick up investment as you look to position in new end markets?
Thank you.
Yes, Michael, thank you for the two questions. So about the margin profile for new opportunities, I think when you look at Technip Energies, we have project delivery on one side and EPS on the other side. We are not obsessed I am not obsessed by growing the size of project delivery. The importance in the project delivery portfolio is the selectivity and the quality of the portfolio. So, the selectivity principles that we apply to ourselves and which are guiding us in selecting the type of ventures we are engaging to will continue to guide us in the new energy domain.
Is it going to be challenging? Yes, it could be in a sense. And but it's 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. So for us to say, yes, 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, etcetera or LNG project profitability. But therefore, 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 type of margins that we want the portfolio to return.
So, we haven't secured any large green hydrogen project at the moment. We are tendering on many of them. But the key is that if and when we embark them, they will be, I would say, compatible with the performance that we expect from the project delivery part of our business. And it will happen again through differentiation. Hence why it's important for us to get and acquire the knowledge of all the electrolyzers technologies, get to know them, work on I would say the scalability with the suppliers and the providers.
And that's key. And 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 of electrolyzer manufacturers. So 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. Hi, Michael. So 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 on these new markets, we will consider any type and we would always be good stewards of the capital. So we will make investment.
We have the room to make investments, smaller investments, any kind of investments such as in alliances, joint development. So 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. And then it has, let's say, good returns, so that our capital is well put to use.
But Michael, we are ambitious, okay? And we are going through the first year of existence of this new company, even though we have a sixty year, I would say, lifespan, but our history. But we're ambitious and quite, I would say, optimistic about the future potential of the company. And yes, so we will continue to invest into more R and D. There are technology additions that we are targeting.
And there are areas where in particular around carbon capture, it would 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 a huge potential going forward as a market, but not a single technology will be enough to address the carbon capture challenges in our industry or in all our industries like cement, for example. And 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 or be the right solution depending on the circumstances and the ecosystem that we will face when someone will call us for with a challenge to decarbonize their asset or other infrastructure. So, absolutely, we will, I would say, put the cash at use for certainly more investments in particular into technologies.
Great. Thank you very much for the color. Thanks.
Thank you. And your next question comes from the line of Vlad Chewisky from Bank of America. Your line is open.
Gentlemen, thanks very much for taking my questions. Those will be on Yamal project and its profitability contribution. Firstly, I'm wondering if you could update guidance on Yamal related contract liability reduction in 2021. So far this year, if I'm not mistaken, is about $142,000,000 You originally guided for 150,000,000 to 200 Can you comment on whether you expect an upper end or lower end of this range this year, similarly to what you did to margins? Secondly, is it fair to assume Yamal revenues to be broadly equal in Yamal related contract liability reduction?
Because I think based on your disclosure for the first half of this year, the revenue was slightly higher than that. And lastly, if I may, would it be possible to at least indicate what was the margin of the business excluding the contribution of Yamal? And maybe if you can confirm or deny whether Yamal was the biggest contributor to EBIT this quarter? I'll stop here. Thanks very much.
Thank you, Vlad. So on Yamal, as you point out, and we continue to keep the disclosure on the NCL, you're correct. So over the nine first months, the reduction in NCL had been by EUR 140,000,000, which is getting relatively close to the, let's say, low range of the full year guide of EUR 150,000,000 to EUR 200,000,000. So here and I said that all our guidance items remains unchanged. So we're not changing our guidance.
And the way we were projecting Yamal earlier this year in January still is the way we look at it today, so no change. But of course, as we are close to the low range, probably we may end up to the higher end of the range versus the lower end. Then in terms of proxy, it's not happens to happens because you have some FX conversion. So you don't have a direct one to one link of net contract liabilities to revenue, 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 that the way the accounting would work. Now in terms of contribution, as we said, 2021 would still have a Yamal contribution, very minor in terms of top line, 150,000,000 to EUR 200,000,000 out of the EUR 6,500,000,000.0 as a floor, so very minor. As you also know, we do not recognize margin on a linear basis. And Yamal, which has been a very good and performing project in this quarantine phase is yielding more margins than early stage projects. So 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 released, will be able to generate more margin.
Then going in the future and when we talk about long term projections for 2020 in the medium term, our target and our trajectory is independent on Yamal. So really the upside that we've had on the guidance this year is not due to Yamal. And the trajectory that we laid out during the Capital Market Day is independent on Yamal because at this stage, Yamal will no longer be contributing both from a top and bottom line perspective. So we are very confident that we will continue to deliver those margin 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, Tom.
Thank you. And your next question comes from the line of Bettman Hodi from Kepler.
Yes. Hello, everyone. Thank you for taking my question. I have two questions. First, congratulation on the very strong cash conversion this quarter.
But can you clarify your comment on your free cash flow in Q4? My understanding is that you would have a working capital outflow, obviously, a very strong Q3. But can you confirm that the free cash flow ex working capital in Q4 will still be positive? So that is my first question. My second question, 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.
I'll start with the hi, Bertrand. Thank you for the question. I will start with your second question and the LNG project in Oman. Obviously, and as you pointed out, fully electrified design for a mid scale or small scale LNG, which is the proof that technology can actually allow to get there for as long as you've got the supply of green electricity attached to it, which would be the case this on this project, then you have a net zero production of LNG. So at least you take care of the upstream in terms of decarbonizing the liquefaction and the production of LNG.
So I think it's obviously an opportunity of a strong interest for us. I can't your question is more for Total than for us. And yes, we remain confident around it. But it's I will not speculate on the date of an FID. We I stick with or stick to what Total Energy is communicating on the matter.
That's certainly something that is on our radar.
Hello, Bertrand. Good afternoon. So on the cash conversion, yes, I think you do see it correctly. So very strong quarter, including some working capital positive inflow. So due to cut off items, as I mentioned, we would expect to have some reversal in those aspects.
The trajectory and basically cash generation of the business remains intact. So Q4 would not be an exception. And 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.
We will now take our last question, and it comes from the line of James Thompson from JPMorgan. Your line is open.
Great. Thank you very much for squeezing me at the end there. I've got a few questions from me, if I may, please, gents. Bruno, following up on Brad's comment on Yamal, that's sort of performing in line. When I look at the JV contribution overall, revenue in the adjustments is kind of 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? And is 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 brownfields? And is that something that could really step up in 2022 or into 2023?
And then perhaps more generally, you talked a little bit about the opportunity set for 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 like activity has the potential to ramp up and deliver a pretty strong book to bill in 2022?
So maybe thanks, James. I'll start for the first one and back to Arnaud to conclude. So in terms of joint venture and operations, whether it's a joint venture, whether it's a project which is fully owned by Technip Energies or by any peers, I think all of the project when you reach in terms of some of those supply, logistics, the fact that Delta variant had a successive wave more in Asia than in Europe or in other parts of the world is impacting projects that project teams need to deal with it. So I think all the project have had to face some challenges, whether it's in JV or traditional projects that will be consolidated. So not specific one area or one contract that will be flagged.
But of course, some of the projects which are more relying on some supply chain, which are in the peak of the supply chain or that face some constraint in terms of access to site and to labor to basically make progress on some construction sites may have had some impact versus what we could have planned early on 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, I would say, are 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. So, I will nonetheless share with you the fact that I don't think there is that all customers operating LNG facilities at the moment are in a way or another contemplating, discussing, studying a way to lower the carbon intensity of their LNG production. So, it's from our standpoint at least, it's happening kind of across the board. And there is, I would say, a larger spectrum of solutions or large that there's more than one solution to address decarbonizing LNG brownfield.
And I think it's a very reassuring sign. It's a sign of our customers acting responsibly and facing a certain reality. So, all I say is that, it's always a mix of like I've mentioned, engineering, EPC, but also sometimes equipment upgrade. So, those conversations are taking place, including with the equipment providers. And I would say it is in the making and could form part of a more meaningfully of inflow of orders, I would say from 2023 onwards, because we are not the only party, I would say, in this case.
It's a I would say, it's a three way conversation between us, the client of course, and some of the equipment providers. So, the good or very positive sign is around the fact that a lot of those conversations are happening. And this was actually this form the basis for the technology or the TCA that we signed with Total Energy. It is about low carbon solution for new infrastructure, but 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, I mean, what we're observing at the moment around gas price in particular is just a reminder of the risk for shortage of investment in some of the traditional energies.
And we will advocate and I will advocate the fact that continuing to invest into 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. So, know, the hence the importance of the the low carbon solutions for LNG and carbon capture and so forth. LNG projects have a cycle and it's difficult to compress them. So, we haven't seen LNG developers calling us overnight, say, okay, I want an LNG project and please can
to me
tomorrow. We haven't seen that. Nonetheless, for those customers with who we have already concepts, I mean not concept studies, but FEED studies ongoing for the development of their future LNG capacity. So, 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 etcetera.
I would say the delivery and the completion of the studies that would 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.