Good afternoon. This is the conference operator. Welcome and thank you for joining the Technip Energies Full Year 2022 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing star one on your telephone keypad. Should anyone need assistance during the conference call, they may signal an operator by pressing star zero on their telephone. At this time, I would like to turn the conference over to Phillip Lindsay, Head of Investor Relations. Please go ahead, sir.
Thank you, Judith. Hello to everyone, and welcome to Technip Energies Financial Results for Full Year 2022. On the call today, our CEO, Arnaud Pieton, 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 forward-looking statements on slide two. I will now pass the call over to Arnaud.
Thank you, Phil. Welcome everyone to our full-year results presentation. 2022 was a year where our differentiated hybrid model with its complementary long and short cycle business segments continued to yield strong results. I want to express my deep gratitude for the extraordinary commitment of our teams to deliver excellence in execution and a robust operational performance. Turning to the highlights. Our financial performance is very strong with EPS growth of nearly 30% year-over-year and notable strength in margins, which increased by 50 basis points. We also achieved sustainable commercial successes with over 60% segment backlog growth for technology, product, and services, TPS, which reinforces the growth outlook of our highest margin segment. We booked more than EUR 1 billion of awards in energy transition domains, demonstrating our emerging leadership in carbon capture, clean hydrogen, and sustainable chemistry.
Based on the strength of these results, and in line with our stated dividend policy to pay a dividend annually that is sustainable with potential for growth over time, we are pleased to announce a 16% increase in dividend to EUR 0.52 a share, which is subject to approval at our annual shareholder meeting in May. The dividend reflects both our commitment to shareholders and confidence in our business outlook. Turning to the operational highlights. As reflected in our strong fourth quarter financial performance, our teams continue to demonstrate their resolve and robust business execution. The strength in margins clearly reflects the overall quality of our projects portfolio, a good level of project closeout activity and de-risking of ongoing work, and a growing revenue contribution from TPS.
Overall, we continue to make good progress in project delivery and TPS activities, and we expect resilience in our future margin performance, as Bruno will address later in the guidance section. Before turning to the commercial highlights of the quarter, I would like to reflect on a significant achievement. During 2022, we extended our early leadership in energy transition markets with EUR 1 billion of secured orders across carbon capture, clean hydrogen, sustainable chemistry, and floating offshore wind. This is not a one-off. The five-fold increase over the prior year is a clear indication of our growing maturity in new targeted markets, and we are confident that our backlog will be increasingly populated by these domains in the future.
In fact, we believe the current energy agenda and recent government policy announcements create further incentive for our customers, and therefore for Technip Energies, to invest in new energy markets and the development of low carbon solution. This is confirmed by our very high level of front-end engagement with customers. As I will discuss later in my outlook, we are developing leading positions with differentiation through technology, products and solutions, and we are implementing our strategy towards building our future core. Let's take a look at key recent awards, front-end management engagement, and exciting partnerships that position us well for future success. We benefited from a series of awards in the Middle East, including PMC services for KOC and early works contract with ADNOC for its Hail and Ghasha project.
Momentum in ethylene markets continued as we booked an award for the Golden Triangle project in U.S., incorporating our latest emission reduction solutions. Our pertinence in the clean hydrogen market continues to be evidenced by notable successes in the fourth quarter. They include a FEED for the world's largest low carbon hydrogen project at Baytown for ExxonMobil, where the planned facility will capture seven million tons per year of associated CO2 emissions, as well as FEED awards for industrial-scale green hydrogen projects for Engie and Uniper.
Both projects are in the Netherlands and have significant expansion plans into the 2030s, well in excess of their initial 100 MW capacities. In the quarter, we announced several strategic partnerships, including one with Baker Hughes, that will see two industry leaders join hands to accelerate the delivery of modularized mid-scale LNG to enable faster time to market, respond to scarcity of construction resources, and lower emissions through electrification. In summary, a positive quarter for others, front-end positioning and partnerships across several exciting markets. Before handing over to Bruno, I will take a moment to highlight the advantages of our differentiated hybrid model. The combination of world-class execution within the long-cycle project delivery business, alongside a short-cycle margin accretive TPS segment, provides an ideal blend to deliver strong financial performance across energy cycles.
This has clearly been evidenced since the creation of Technip Energies, where despite facing various stress tests, including the global pandemic, supply chain inflation, and the war in Ukraine, we have continued to deliver sector leading financial performance supported by commercial astuteness, robust project execution, and a resolute focus on cash management. Furthermore, our asset light business model has enabled us to pivot towards new energy markets that are gathering momentum, and the strength of our balance sheet will allow us to invest and convert our front runner positions in exciting growth areas. All this means that Technip Energies is set to thrive in the energy transition, while we continue to generate high returns for our shareholders and a sustainable dividend. With that, I will pass on to Bruno to discuss the financial highlights.
Thanks, Arnaud. Good afternoon, everyone. Turning to the highlights of our financial performance for 2022. Adjusted revenues were slightly down year-over-year at EUR 6.4 billion. While the significantly lower activity on Arctic LNG 2 had an impact on the revenue trajectory in 2022, the underlying Project Delivery portfolio delivered significant growth supported by higher volumes in LNG and downstream projects and high single-digit growth in TPS. Profitability improved in absolute terms despite the lower revenues. Adjusted recurring EBIT margins are up 50 basis points year-over-year to 7%, benefiting from strong product execution and TPS growth. Adjusted diluted EPS grew strongly, up nearly 30% year-over-year. I will discuss the mechanics of this improvement later. Adjusted order intake was EUR 3.8 billion, significantly lower year-over-year, given the absence of major project delivery awards.
TPS achieved its strongest ever order intake, which at EUR 2.2 billion accounted for more than 55% of total orders. Carry then backlog of EUR 12.8 billion continues to provide us with excellent visibility at the equivalent of 2x 2022 revenues. Net cash at year-end was EUR 3.1 billion and stable versus the prior year. I will come back to this later. The collective performance of our teams has delivered a very strong outcome in 2022. Turning to our segment reporting and starting with project delivery, where our 2022 performance demonstrates sustained excellence in business execution. Revenues were mostly down year-over-year, impacted by lower activity on Arctic LNG 2, but largely offset by the ramp-up of major LNG and downstream projects.
Notable strength in margin at 7.9%, up 150 basis points year-over-year, benefited from a high level of later stage LNG and downstream contracts with several projects commissioned and handed over to customers, as well as the final contribution from Yamal LNG. Turning to orders, the 12 months book-to-bill of 0.3 reflects an absence of major awards. It is important to acknowledge the duration of our longer cycle project work. LNG projects, for example, can be multi-billions of euros in value and contribute to our financial performance for four, five years or even longer. Monitoring book-to-bill over a longer time horizon, as we do internally, gives a better representation of the commercial dynamics and underlying growth of the segment.
At a ratio of one, our book-to-bill for the last two years clearly demonstrates that we've been able to replace the revenue recognized by new awards. Finally, project backlog has declined 29% year-over-year to EUR 10.7 billion, reflecting the low volume of orders in 2022, as well as a significant cancellation of Arctic LNG 2 backlog. Based on the strength of our early engagement and commercial pipeline, we anticipate an improved new order trajectory in the coming quarters. Turning to technology products and servicesTPS continues to deliver strong financials with revenue growth of 8% year-over-year and EBIT improving by 9%. The growth was broad-based with higher PMC and engineering services activity, strong activity in sustainable chemistry, and growth in licensing and proprietary equipment, notably for ethylene.
EBIT margins improved slightly to 9.3% on high volumes and positive mix, despite the higher selling and tendering expenses required to deliver our ambitions in future growth market. As Arnaud mentioned earlier, we achieved significant commercial success in TPS with a book-to-bill of 1.5, driving a remarkable 63% expansion in segment backlog year-over-year. This underscores the positive momentum driving our higher margin segment. Turning to other key performance items across our financial statements and the attractive returns we are generating for our shareholders. R&D spend at EUR 50 million is 28% year-over-year and consistent with our strategy for targeted investment to enhance our energy transition positioning. In fact, well over 80% was spent on energy transition. As part of our ESG roadmap, we intend to reach 100% in 2025.
Beyond the growth in EBIT, net income and EPS benefited from several factors, including significant growth in interest income, lower effective tax rate, and the absence of the transaction costs that impacted last year's results. This drove a significant net income growth of 27% year-over-year. The strengths of our earnings in relation to our equity, which has also increased significantly since the creation of the company, is driving a 20% return on equity, which is comfortably amongst best in class. Finally, the balance sheet structure remains largely unchanged, with net cash in line with the prior year, which I will discuss in more detail on the next slide. Indeed, making now a deep dive into the cash flows.
Free cash flow for 2022 was EUR 86 million, including a EUR 330 million working capital outflow, which reflects the absence of major awards through 2022. As I discussed in relation to project delivery, the timing of large awards and associated upfront and milestones payments can be lumpy, and monitoring longer cycle trends is more important when analyzing this segment. In aggregate, 2021 and 2022 working capital had a positive impact of nearly EUR 300 million. Because of the specific nature of our cash flows, our preferred metrics to monitor underlying cash flow generation is to look at free cash flow net of working capital. On this basis, free cash flow was EUR 420 million in 2022, with over 90% conversion from EBIT, as we executed across our portfolio and benefited from lower tax rates.
Our future expectation for free cash conversion, net of working capital, remains very strong, and we expect to be in the 75%+ range through cycle. We end the period with EUR 3.8 billion of cash and cash equivalent in line with our 2021 year-end position. Before handing back to Arnaud to discuss the outlook, I will address financial guidance for 2023 and provide a medium-term framework. For 2023, we are confirming expectations for EBIT margins in the 6.7%-7.2% range. The low end of the range is consistent with the framework we outlined at our Capital Markets Day just prior to the creation of the company and clearly offers some upside potential. The consistency and quality of our portfolio and strength in execution fully supports our margin outlook.
For revenue, we are projecting a range of EUR 5.7 billion-EUR 6.2 billion, which is well underpinned by our backlog schedule for 2023. Regarding the effective tax rate, we see a range of 26%-30%, which is below the 2022 guided range, benefiting from a more favorable mix of earnings from lower tax jurisdictions, as well a reduction in French corporation tax. To conclude, I will present a new medium-term framework where we see a positive financial outlook based on the strength of our backlog, a rich and diverse commercial opportunity set, and the active deployment of our strategy. For project delivery, we anticipate revenues in the EUR 5 billion-EUR 6 billion range.
While customer final investment decisions are not wholly in our control, notably timing-wise, we nonetheless have confidence in improving order intake trends based on the maturity of our front-end engagement pipeline, particularly in LNG and energy transition. We also expect to sustain best-in-class profitability due to the quality of our backlog, our discipline and selectivity when targeting new awards, and our excellence in execution. Turning to TPS, which is a strategic growth segment for Technip Energies. Here, we are targeting to reach EUR 2 billion of revenues in the medium term. While the growth in segment backlog provides some natural support to our trajectory, we have additional levers to drive the growth. This includes investment, where we are targeting to spend 1% of total company revenues on R&D to expand our range of technologies and enable new commercial offerings to be launched.
Arnaud will elaborate on this in his outlook section. This will support greater penetration of fast growing energy transition markets. We are also targeting improving profitability with adjusted recurring EBIT margin of more than 10% as the revenue mix evolves towards higher value accretive activities. Overall, our medium term framework confirms the revenue growth and attractive margin potential at Technip Energies. Et voilà, I will now pass it back to Arnaud to discuss the outlook.
Thanks, Bruno. Turning now to the outlook, where I will first address the macro. As we discussed last quarter, the world requires an energy system that balances availability, affordability, and sustainability. As well as the critical need to decarbonize traditional industries, there is an urgent need for increased investment and accelerated project development, with particular emphasis on LNG and low to zero carbon solutions. The world is stepping up. Our customers are playing their role through their commitments to increase capital expenditures, grow production capacities, and decarbonize while government policies are creating the conditions for capital to be deployed in the pursuit of net zero goals. We are already seeing the benefits of these macro tailwinds, first through TPS with a 60%+ increase in segment backlog and also through a significant expansion in both front-end engagement and commercial pipeline supporting the future acceleration in project delivery orders.
The breadth of our market offering and leadership in decarbonization and low carbon energies means that today, Technip Energies is more relevant than ever to make a difference in tackling the energy dilemma. Focusing now on our positioning and early leadership in energy transition markets. We have leveraged our core expertise to position Technip Energies to capture future growth opportunities in the energy transition. These markets now form a major part of our front-end engagement and project portfolios. Firstly, on the rapidly growing market for CCUS, where Technip Energies has developed a leading position with projects and studies that seek to capture or avoid more than 30 million tons per annum of CO2. There, through collaboration, co-investing with technology partners, we are driving highly competitive levelized cost of captured CO2, low energy usage, and up to 99% CO2 recovery.
We are particularly excited about the traction we are seeing in CO2 capture to decarbonize gas to power and waste to power sectors. We are also making considerable progress in other exciting areas. For example, in clean hydrogen and Power-to-X, our portfolio now exceeds 3 GW, where with several industrial scale projects in Europe and beyond. In sustainable fuels, we are partnering with market leaders and have proprietary technologies with applications in sustainable aviation fuels. In the nascent floating offshore wind market, our solutions are achieving a high level of adoption, having been chosen for over 4 GW of future potential projects in South Korea and Europe. In summary, as our active portfolio of secured work confirms, Technip Energies is leading from the front in the growth markets of the future.
Before turning to ESG, I would like to address the key components of our strategy for 2023, which we are actively deploying to be ready for the future. We expect global gas and energy markets to remain strong in 2023 and beyond, supported by further demand growth in Europe and recovering demand from China. Our very active early engagement portfolio, consisting of close to 10 FEEDs across the Middle East, the Americas, and Africa, confirms our leadership position, and we will retain our discipline and selectivity as we look to secure the right prospects in the coming quarters. We are strengthening our leadership through the development of mid-scale offerings, including SnapLNG, as well as the solution on the development with Baker Hughes.
These solutions will enable accelerated time to market and decarbonized production and are totally relevant, as we expect mid-scale LNG to account for as much as 30%-40% of the future LNG market. Secondly, we intend to sustain growth in our accretive TPS business segment. While the substantial growth in backlog through 2022 provides natural support to our trajectory, we will reinforce our ambition by expanding our labs and investing into new technology centers. Deploying ethylene of the future and piloting new circularity technologies, and expanding our range of services through digital advisory and consultancy. Finally, this increased investment and development is enabling us to prepare our future core. In the next few quarters, we will introduce a proprietary range of solutions and products for CCUS from pilot to large scale.
In the Power-to-X market, we are developing more integrated solutions to overcome some of the challenges related to green hydrogen, green ammonia, and e-fuel markets. As we look ahead, we believe that T.EN is uniquely positioned to be the bridge between electron and molecule. Now turning to ESG, where our roadmap and scorecard have evolved towards impact-driven targets. During 2022, we delivered strong progress in our sustainability ambition. This includes diversity and inclusion, with notable increase in women in leadership position, and we continue to achieve equality in new graduate intake. By consistently maintaining entry-level equality and providing learning and development opportunities, we will retain our talent and succeed in our ambition to have 35% of women in the permanent workforce by 2030. We reduced our carbon footprint while making huge progress enabling our customers to avoid CO2 emissions through our blueprints, technologies and solutions.
We have also invested in our people through upskilling, ensuring fair salary inflation adjustments, and through the award of an exceptional bonus to all employees, excluding senior levels of management. Finally, we are thankful that our progress to date is being recognized through improved ESG ratings, including a AAA MSCI rating, and we are committed to continuous improvement on our sustainability path. In closing, the strength of our hybrid model is clearly demonstrated by our robust performance in 2022, with significant earnings growth supporting an attractive 16% dividend raise. We set 2023 guidance and provide a medium-term framework that confirm our growth potential and sustainable margin trajectory. The strength of our energy transition portfolio confirms our emerging leadership in fast-growing markets, and we continue to invest and innovate to prepare our future core.
With that, let's open the call for questions.
Thank you. This is the conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Bertrand Hodee with Kepler Cheuvreux. Please go ahead.
Hi, thank you for taking my question and congratulations for the very strong Q4 delivery and robust outlook. Two questions, if I may. The first one, regarding LNG. You are involved in multiple FEED studies. How do you see those studies evolving and maturing in 2023? Can you give us an update on where you see the strongest possible conversion into EPC for Technip Energies in 2023? The second question is on the carbon capture opportunities. You mentioned 30 million tons of potential studies ongoing. It looks to me that the, obviously the Inflation Reduction Act is a no-brainer and should support massive investment, in particular in blue hydrogen.
Can you update us on your thoughts on these carbon capture opportunities? Also trying to convert how the 30 million ton per annum of carbon capture could translate into revenues or other intake going forward? Thank you very much.
Thank you, Bertrand. Let's start with your first question on LNG. Indeed we have about 10 active FEEDs on LNG, which is a very rich pipeline. When I say active FEED, it's FEEDs for which work for which we are being paid by our various clients. Across, I would say, three main geographies, the Middle East, Africa and the Americas. I will start with a bit of a disclaimer. Obviously, we don't control, as you know, we don't fully control, I would say, the FID, the timing of the FID by our customers.
It's always helpful when we give them a price that they like, and it's an encouragement for them to take a faster FID. Having said that, I would say there is a high level of likelihood that LNG will convert from FEED to project delivery orders within 2023. I would say, you know, we have about 100 MTPA worth of sorry, 50, 60 MTPA worth of LNG under preparation through the TEN FEED. I see, I think that we will see in this year, we should see in this year about 20 MTPA worth of LNG reaching FID. I think it should be a reasonable target. Now, or a reasonable assumption.
Having said so, once again, I repeat, we don't control the timing of it. The, you know, it's, it's no secret, we are actively bidding in Qatar. The offers are in the hands of our clients now. You know, it's, we're now depending on their, the celerity and the pace at which they will review and challenge us for sure, and the time of the negotiation and then reaching FID by them. I mean, all the building blocks are there for, you know, multiple awards. The number of awards will obviously depend on, I would say, the volume of, the number of MTPA per award.
If, you know, very large projects are being sanctioned and reach FID, the number of awards may be smaller, even though the number of MTPAs is higher. Let's see how this will develop, but that's, as you know, the reality of our market. All the building blocks are here, and for conversion in 2023. It remains competitive, so we're not alone in this market and it's a competition. This is why you will always hear that we are a little bit cautious when it comes to disclosing anything on FID and chances of success.
When it comes to CCUS, carbon capture, we've identified north of 30 million tons per annum of CO2 to be captured through the various FEEDs that we are currently executing. So the front-end engineering studies or pre-FEEDs, the concept studies. It ranges from FEED to project execution because we have one very large project ongoing, the Celsio project in Norway. Indeed, we've had successes in the past few weeks through being selected by ExxonMobil for the Baytown facility. You're right to say that the IRA is going to provide to act as an accelerator towards blue hydrogen in particular as, you know, blue has its advantages.
For as long as you have the CO2 sequestration infrastructure, you're, you know, simply depending on gas, which gas is available, less dependence on rare earth, less water consumption, et cetera. Blue hydrogen will see its own market clearly in the US initially. As always, clearly for people who know what to do with the hydrogen. Where there's no question about the market or the offtake, which is the case when it is for the likes of ExxonMobil, who are going to use the clean hydrogen to decarbonize their own asset base. It's also the case for other players around the world.
The pertinence of blue, I would say, is a very natural, a natural fit for us and a natural solution for decarbonization. About the, I would say, how to convert number of millions of tons of CO2 being captured into revenue, a little bit difficult for me to give an answer because, Bertrand, you know, we will not all the projects will be through lump sum EPC. We will decide that it's probably better for us to tackle some of those projects through open book or EPCM, partly reimbursable, et cetera. It will be. Once again, there will be different types of trunk contracts for carbon capture.
The Celsio project, when we announced it, I believe I stated that we were not in the micro size of project, but you know, in the multiple hundreds of millions. That's for half a million ton of CO2. It all depends on the environment, and it all depends on the type of contracting model we decide to select for one or the other opportunity. Not all of them will be full EPC. We may go through EPCM, like it's the case for the projects, for example, not related to carbon capture, but for Neste on biofuels. For the client, it's a multi-billion investment. For us, because it's a service contract, it's about 10%-15% of their CapEx.
It will depend. If the conditions are right, as always, we will go for more, i.e., more EPC and more top line. Always we'll remain very safe, even prudent.
Thank you very much.
The next question is from James Thompson with JPMorgan. Please go ahead.
Hey, good morning. Good afternoon, I should say even. James, thanks very much for taking my questions. Firstly, Arnaud, you know, in terms of that sort of medium-term guidance, you know, you're obviously being quite a bit more constructive or bullish on the on the TPS business in terms of the scale and the margin potential in that business. You obviously talked about double digit previously. Could you kind of help us understand maybe a little bit about where the kind of backlog needs to get to?
I mean, it's been a, very much a kind of book and turn business, but, you know, targeting EUR 2 billion of revenues, does that mean it's gonna get slightly longer cycle, and we should expect it to, you know, the backlog needs to Actually be sort of more like a 1.4x, 1.5x, to deliver that sort of revenue number? That'd be the first question.
Thanks, James, hi. The in terms of TPS, I mean the reason for providing a medium term guidance is also, I mean, to set an achievable ambition. To clearly signal that our level of investment and the focus of our commercial teams will be towards growing the TPS part of our business, the TPS segment. The TPS, it's technology, product and services. Services usually smaller orders, very short book and turn.
When it's about products like it's the case for ethylene, when we sell a license plus the associated proprietary equipment, well, the time for fabrication of the equipment, et cetera, it's a slightly longer cycle, so you're more into the 18-month cycle than into the six months. The product component of TPS indeed provides somewhat of a longer cycle color to this short cycle segment. You know, we're setting an ambition also because in the areas of, I mean beyond ethylene, in the areas of carbon capture and also Power-to-X, the secret would be and remains with the, I mean, in the ability to integrate technologies.
In Power-to-X, for example, if we want to solve for the challenges related to green hydrogen or ammonia and or methane and, you know, e-natural gas and whatnot, you need to consider that electrolyzer is a key component, but you need to look on other periphery of the electrolyzer. There's a lot to be optimized and a lot to be developed in terms of, you know, potentially proprietary equipment that will make a difference in turning Power-to-X and green molecules into something more competitive, in addition, of course, to benefiting from low cost electricity or green electricity.
If we exclude the cost of electricity, there's a lot to be achieved in designing products and solutions that I think we've naturally, you know, we will naturally put on the market and hopefully will be selected going forward, so 2025 and beyond, hence the medium term framework. It's really, in all spaces, you know, TPS, it's at the end of course, because ethylene is not over, it's carbon capture, it's pet chem, it's circularity. It includes for services, I'll tell you, we have services related to floating LNG as well. It's, you know, pure studies. It's a very vast array of scopes that you find within TPS.
That's, that's very helpful. Just, I mean, maybe I missed this, there's been quite a lot of information flying around today, but, you know, Arctic had about 800 to go last quarter. How much have you kind of processed there, and what's left to work through in the first half of 2023?
Yes, thanks, James. I will take that. Yeah, we had disclosed at the end of Q3, the remaining backlog on Arctic, progressing on the exit framework agreement. Obviously, as you know, we fully demobilized all the operational teams over the summer, and now all the work is about handing over and exiting from the projects. This is ongoing. Obviously, this backlog has decreased, is decreasing as we execute our exit framework agreement. We said that, you know, we contemplated, we thought that the exit framework agreement would be completed by the first half of 2023. This is still very much the case and ongoing. This backlog will be decreasing as we execute that.
Okay. Thanks very much. I'll hand over there. Cheers.
The next question is from Guillaume Delaby with Société Générale. Please go ahead.
Yes, good afternoon. Two questions, if I may. I'm going to try to push a little bit more on the LNG front. Congratulations for your partnership with Baker Hughes. When I listen to Baker Hughes, I have the impression that basically, LNG sanctioning, notably in North America, might be pushed a little bit to the right, i.e., rather end of 2023 to beginning 2024. I know you don't want to comment, but could you maybe elaborate a little bit again on that? Second point is about Abu Dhabi. You have a big contract for the island gas project. It's a massive project for ADNOC. Could we expect some more packages to be awarded by Technip Energies over the next two to three years on that one? Thank you.
Thank you, Guillaume. And thank you for pressing us on LNG. We don't like to talk about FIDs because we don't control them. Now, I will try to characterize LNG in the Americas. LNG Americas, and that's where we, you know, Baker Hughes and I converge. For us, for Technip Energies, certainly, we are tackling this market through our modularized option design. So the Snap concept, or the one we are co-developing with Baker Hughes
This, because we will not take the construction risk in the U.S. I think that the again, the pace of FID in the Americas could be indeed more towards the back end of 2023. You know, in my remarks, we're mentioning very clearly that it is about, you know, the next 12 to 24 months. LNG, there's a lot to be awarded, over 100 MTPA, and it's not going to be all awarded into 2023. Once again, the number of the awards may depend on the actual volume that is being awarded.
If the Middle East are the first out of the block awarding very large quantities of or very large trains, we may see a bit of a slowdown for the smaller ones, because, you know, they might not come on stream any sooner than the than the large volumes from Qatar, which would be awarded in 2023, and therefore starting producing in 2028 and 2029. This could indeed somewhat affect the pace of the award in some geographies.
The variety of the feeds and the geographies from land to floating, by the way, is such that, you know, there's plenty to be awarded out there, hence, I would say a reasonable level of confidence in our ability to secure and grasp some of that out there. In terms of Hail and Ghasha project, massive project indeed, we have been awarded a FEED. We have a team mobilized in UAE. We're working with our client. It's, you know, it's a reimbursable scope. It's open book. We are working alongside with ADNOC on the design and on the pricing of the infrastructure.
I think it's only the beginning of the road for Hail and Ghasha. Now the importance, and I will put a caveat there, the importance is to be able to reach, again, a design and a solution that has a cost base that is compatible with the one that the client and its partners can sustain. This is the work that is currently being undertaken. We don't have the conclusion of that. It's live and it's active. We'll need to be a little bit patient before finding out whether we have the right solutions at the right price point for the project.
Merci, Arnaud. I turn it over.
The next question is from Daniel Thomson with BNP Paribas Exane. Please go ahead.
Hi, good afternoon, gentlemen. Two for me, please. Firstly, maybe one to Bruno. I mean, is there any risk of margins dipping below, kind of the lower end of your medium term guide, 6.5%, in the event of unexpectedly high order intake in project delivery, you know, just given the kind of sanctioning environment we're expecting over the next year? Or has this kind of been factored into the guided range already? Secondly, margins in project delivery in the fourth quarter were obviously quite elevated versus expectations, with a few sort of non-repeating items in there. Could you quantify the impact of these or point us to what the sort of ballpark underlying margin was in project delivery in the fourth quarter? Thanks.
Hi, Dan. Yeah, you're right. We gave in the medium-term framework the range for EBIT margins for project delivery. We also gave a range for revenues. You know, your question is correct because you know that in the early phase of projects, we do not account for margins on a linear basis. Overall, if we were having a conjunction, a huge spike of orders, to some extent, if we were stepping out on the higher end, to some extent of this revenue range, to some extent, yeah, maybe from a relative terms, we would see in the very early phase, if we could be lower.
you know, with a range of EUR 5 billion-EUR 6 billion or in this vicinity, in a portfolio which is much more blended versus the historical part of the, you know, some of the history when we looked at back, you know, 2017, 2018, and 2019. Today we feel quite confident with the medium term outlook. It's really the quality of the backlog, what we have on hand, what is being executed kind of more mid-phase, what we are pricing today, and what we see unfolding in the next 24 months. This gives us this visibility, kind of a bit of a full cycle. This gives us the ability to see that new orders will help to sustain increased revenues in project delivery.
The new project, yes, will be slightly dilutive or will be dilutive at first, but you will have the contribution from the more mature projects in our portfolio. Then you will have the sequence. As long as you remain in this vicinity of revenues, through cycle, we think, we are quite comfortable with the margin trajectory 6.5%-7.5%. Now, in terms of contribution, in the latter part of the year, first obviously, you know, we've always said that it would be the final contribution from Yamal. We've received the final acceptance certificate. We've had some contribution on that. Obviously 2023 and beyond, no contribution at all to be expected.
It's the rest also beyond that, obviously some progress on Arctic, but also the rest of the portfolio.
You know, a start of production on Coral, progress on Long Son, where we've, we're close to 95% progress. Handed over HURL Fertilizer Project in India. Quite a good progress on quite a few of the project in the portfolio that also helped sustain this good level of activity.
Okay. Thanks. Thanks, Bruno.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Jean-Luc Romain, with CIC Market Solutions. Please go ahead.
Good afternoon. My question also relates to LNG. One of your competitors noted that it was kind of preparing to remobilize in Mozambique in case the situation was getting better and was renegotiating the price of the contract to take inflation into account. What would be the order of magnitude in for inflation between when the projects were postponed and today?
Hi, Jean-Luc, Good afternoon. Thanks. That's really a question for the company who's made the statement. We are not ourselves in a position or we're not facing a situation whereby we're having to remobilize from on a project that has been stopped or interrupted. Now maybe I can help, you know, provide some color on the situation with regard to inflation and the evolution of the cost base that may be helpful. Again, I don't have, and we don't have the details of what orders and what POs have been placed on this Mozambique LNG project, we're not the right company to ask. Now it's inflation is out there.
It's not everywhere, but for sure it's impacting some of, I would say the, some of the chapters, when you look at the cost base on the project. Some of the lines clearly are being affected, in particular around construction, for example, when we've seen, you know, wages growing around the world, you know, in all countries much. You know, you just need to pay your workers and the construction crew more than you would have maybe some, you know, three, two to three, four years ago. That's definitely true. Some custom materials have also still haven't, you know, come back to the pre-war level.
We've seen also some normalization in some areas, for example, for bulk material and steel. Shipping is coming back to, I would say, more reasonable levels. It deserves to be looked into in detail. It's difficult to give a blended aggregate, you know, percentage of increase for a typical LNG project. We will not be doing that, and certainly not for Mozambique LNG, which I don't know how much has been procured already, and that's really a question for the company in question or their client.
Thank you. Actually, I thought you might also be concerned, even I was thinking Total Energies might be willing at some time to restart its project there. That's why I was asking the question. Thank you very much.
Thank you, Jean.
The next question, is from, Jamie Franklin with Jefferies. Please go ahead.
Hi, guys. Thank you for taking my questions. First question is for Bruno. Just wanted to get a sense of the working capital profile through 2023? The second question I had was a follow-up on this PCSA agreement you have with ADNOC. You talk about preparing the open book cost estimate. I think that's the first time I've seen that specifically mentioned in a award announcement. I'm just wondering, are we likely to see more of that contracting model going forward? Has clients' willingness to enter under that model increased? Thanks.
Thanks, Jamie. I'll take the first part, unless Arnaud wants to do the cash flow.
I'll do the cash flow. It might not be as good as what you'll be able to do.
On the cash flow, as you know, and as always, we will remain very disciplined so that each project have a positive cash flow profile. For some time, maybe we were not seeing the benefits from interest rates and so on. We also do it, and we mostly do it from a risk perspective. What we've seen for Russia last year is just a very good reminder as to why we should be doing it. Basically, the way it works is obviously as you have new projects, down payments, first milestones, you build up a bit of a working capital position, and then you have a more neutral or plateau period. At the tail end of the project, you have some unwind.
What you're seeing this year, in 2022, with that, and with the absence of major awards, we've seen more the impact of basically the tailor hand, plus obviously the impact of exit and unwind of Russia, which has explained some, let's say, negative, working capital, contribution.
If I look at next year, basically probably first part of the year, and when, you know, before the new awards come in, you will have this kind of continuous trend, then you will have the positive coming from the larger awards when they're booked and when they're awarded and when they come into our backlog. Basically this will re-contribute basically to the working capital position of the company. Without working capital, if you didn't... That's why, you know, we try to communicate on that. Ex working capital, our EBIT to free cash flow, is expected to remain consistently strong in the 75%+ range. The cash conversion of our business is very strong and will remain to be very strong.
Basically working capital, so within kind of a continuous small negative first part of the year, then basically positive contribution from the new award, probably something around neutral. You could have a plus or a minus, but overall, around more neutral year versus 2022. Basically if I take a bit of a step back, long term, what I've also, said previously is, you know, our balance sheet structure was sustainable, so I would not expect any major or material changes in our balance sheet structure, in the medium term.
That's great. Thanks.
Jamie, thank you. Thanks for about your question related to the model, open book or reimbursable. When you think about Technip Energies, we're really here to design and deliver our clients' projects. You know, we do exist through our clients' projects. This is why we're here, and our duty is really to manage to find the price point at which their projects can fly and are viable, and we can make money, and they can make money on a long-term basis.
Our duty is really to, one, trying to differentiate through the solutions that we can develop, make them, you know, more cost efficient, more inventive in the sense of what they bring, how much they contribute, and how less they cost versus others. That's our duty to bring the cost point to an acceptable level. A way in the context of inflation for example, beyond differentiation or once we've designed or we have a solution that is being adopted, a way for us to de-risk and for them maybe to take advantage of, let's say, the future deflationary market environment, with price going down is indeed to go into an open book mindset.
We always put it on the table by the way. Some of the clients like it and they want to, I would say, contemplate this way of contracting. Some don't like it and really want to be attached to a form of EPC. Okay, in this case, ADNOC has adopted this one. It's a way for us to de-risk but also a way for them to go probably faster because you save on the bidding phase. To play a little bit, I would say the upside from the supply chain that you may be receiving or may be benefiting from in 2024. It's always there.
As you know we have various contracting models in the portfolio. You will always find some of our projects using these models. Some don't but it's very much a matter of our preference together with our client's preference. In this case, this is what's happening and yes, we will see more of that in some other areas. It's not so different from what we currently have in the portfolio in terms of the mix, you know. It's, this is a big one-off. It's notable because it's a big one under this format but we have plenty of that already in the portfolio.
That's great. Thank you very much.
The last question is from Baptiste Lebacq with ODDO BHF. Please go ahead.
Yes. I-- Good afternoon. One quick question from my side. Regarding your 10 active FEEDs for LNG projects in the past year, is there some projects which are offshore or LNG FLNG projects in these 10 active FEEDs? Thank you.
Hi, Baptiste. Yes, there are. A bit less than half of them.
Okay, perfect. Thank you.
Thank you.
This ends our Q&A session. I turn the conference back to Mr. Lindsay for any closing remarks.
Thank you. That concludes today's call. Please contact the IR team if you have any follow-up questions. Thank you and goodbye.
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