Welcome to this news conference. I'm Hanna-Maria Heikkinen, and I'm in charge of investor relations. Wärtsilä announced today the plan to establish a joint venture for our global energy business with RCT Solutions, and discontinue energy storage as a separate reporting segment. Today, our CEO, Håkan Agnevall, will discuss the highlight of the plan, and after Håkan's key messages, there's a possibility to ask questions. As a reminder, we will host a pre-silent call next week on June 23 together with our CFO, Arjen Berends. Let's leave questions related to recent trading and detailed finances to that call. If you have a question, please use raise your hand functionality in Teams, or in the case you have challenges to use raise your hand functionality, you can always send an email. Please, Håkan, time to start.
Thank you, Hanna-Maria. It's not only me today, Arjen is also here as our CFO for the Q&A session. Let's first summarize our news release here this morning. As Hanna-Maria pointed out, we are about to establish a venture for our global energy storage operation with RCT Solutions. Also on the reporting side, discontinuing the storage as a separate report. Click. Today, we are announcing this plan to establish a joint venture together with RCT Solutions GmbH for our storage business. In the JV, we are partnering with RCT, who is an experienced player with strong capabilities in operating in an integrated energy storage business under challenging market conditions. This is certainly what we are facing right now.
RCT brings strong market know-how, execution capability, knowledge of the global supply chain, as well as also a separate opportunity for vertical integration through an existing integrated battery storage manufacturing initiative in the U.S., which evolving here near-term. RCT has the aim to develop into globally vertically integrated battery energy storage system players. As a result of forming the JV, in second quarter, energy storage will cease to be a separate reporting segment. Click. As you know, those of you who follow us, our storage business, which is now transferred to the JV, is facing headwinds on the order intake side due to changing market dynamics. It started with increased U.S. tariffs, also regulatory changes and also downstream expansion or upstream expansion of battery cell manufacturers, which now starts to compete directly with us as a system integrator.
The competitive dynamics, and we've talked consistently about this now for a time, the competitive dynamics have put significant pressures on profitability and order intake. Over time here, we've been looking at measures to improve the competitiveness of our energy storage business and competitiveness also to drive the long-term profitability. If we look at the JV that we are forming now, we expect it to be loss-making this year in 2026, driven both by the recent lower order intake and also the transformation actions that we plan. Basically, if you look at the transformation action, one big financial is the write-off of capitalized R&D. The impact for Wärtsilä for the full year of 2026 on the operating results, it's estimated to be -EUR 40 million to -EUR 50 million, depending on the exact timing of the closing of this transaction.
Teaming up with RCT, it offers an excellent opportunity for storage to strengthen its competitiveness. The JV is expected to generate positive results towards the end of 2027 based on those actions that is planned or being planned. Energy storage, just as a reference, it's our smallest reporting segment. It's 480 employees globally. Last year, it was a net sales of EUR 694 million, which is about 10% of Wärtsilä's overall net sales. Operating results was EUR 23 million, which is 2.8% of Wärtsilä's total operating results for 2025. It's clearly the smallest or the smaller piece of Wärtsilä overall we're talking about here. The plan is that the JV will generate positive operating results towards of 2027. We stopped the separate reporting of energy storage already in the second quarter, now in 2026. The ownership structure, it's 50% RCT Solutions and 50% Wärtsilä.
We also make it clear already from the beginning that we might have new investors joining later, and if and when they come in, the original owner, we will decrease our shareholding. Peter Fath, who is the CEO of RCT Solutions, he will become and focus 100% of his time on being the CEO of the new joint venture, and he will also relocate to the U.S. If we look at the financial impacts for Wärtsilä, there is no material profit and loss impact at closing expected. We will transfer net assets representing less than 5% of Wärtsilä total net assets into the joint venture. The JV is expected to generate positive results towards end of 2027. It will be loss-making in 2026, with an estimated -EUR 40 to -EUR 50 million for the full year on the Wärtsilä's impact on the Wärtsilä's P&L, so to say.
The span there depends on the timing of the closing. The separate reporting will end in the second quarter of 2026. The storage financial targets will no longer apply, and its demand guidance will also be suspended. We expect the closing in the third quarter in 2026, and that is subject to regulatory and other customary condition and approvals, as well as arranging a financing package for the independent JV. Until then, it will be reported that discontinued operations and assets held for sale. From closing and onwards, the JV will be reported under other business activities as a share of result in associated companies. Click. That was the news of today. This is an important milestone for our energy storage business.
It's been a long journey making the acquisitions from Greensmith, growing it, going into strategic review, ending the strategic review, keeping it, but after that, also facing the changing market dynamics, U.S. tariffs, vertical integration by cell manufacturers, significantly increasing competition. Now it's the next step of the journey. We form the JV with RCT. They bring in strong competencies in the sourcing side, also establishing battery manufacturing. They have a separate opportunity for battery cell manufacturing in the U.S. in development. This also means for Wärtsilä, we will become even more focused as a group, focusing on marine and energy, our thermal energy business. I think this also goes in tandem with, we have now, as you know, closed the final divestments in our portfolio business. Over five, six years, we have divested 11 business units.
We also form the JV with storage. Coming out of this, we will be a more focused group going forward and well set up, and that's a discussion for another day. As we have been talking about when we look at marine and energy combined, strong demand side and also an exciting growth and profitable growth journey going forward. With that, I suggest we open up for questions.
Thank you, Håkan. We will start the questions. As a reminder, please use raise your hand functionality, or you can also send an email to me. The first question is coming from Antti Kansanen. Please go ahead, Antti.
Guys, a couple of questions from me, if I may. I'll start with the GEMS software business that you have in the storage. How does this divestment impact any potential for the GEMS on your traditional power plant business, or does it kind of relate to that at all?
GEMS, as a software, and the people around it will be included in the JV. Our energy business has the right to use the software. From that perspective, we still have the GEMS software for our thermal energy business going forward.
Then a couple of technical questions relating to the transaction. Could you comment anything on the impacts on your net cash position, taking into account any kind of a working capital or kind of funding needs that the JV will have from start of the transaction?
I can answer that. Let's say the transaction is expected to have no material impact on the P&L. In practice, that basically means that you get compensated for the net asset value that we transfer to the joint venture. The net asset value in this case includes, let's say, the cash, which is mainly coming from the advances because they need that for being successful in their operations. Yes, there will go cash out. We won't quantify it because that is of course varying over time, and for sure the amount today is a different one than the amount at close.
I think you can also talk through the EUR 40 million-EUR 50 million negative impact, the cash portion of that.
That's the operating result, the majority is related to R&D depreciation, capitalized R&D. That is non-cash. The rest is, I would say, cash.
Yeah. My last question was exactly on that item. Will you do the write-down already on Q2 when you kind of put it on a discontinued item or after?
No.
Okay.
That will happen in the joint venture, most likely.
Okay. Then just a clarification going forward, the cash flow from this JV into Wärtsilä will be annual dividends, and then you will book the annual results share of that in your EPS?
Yes. Single line consolidation. Correct.
All right. Thanks.
Remember that in the future, after January 1st, 2027, it will not be part of operating result because IFRS 18 will change the structure of the P&L, it will be result from investing activities instead.
Okay. Thank you.
That goes for all companies. Everybody needs to comply to IFRS 18, that's no different for us.
That's a separate topic to have going forward. IFRS 18 and its impact on how P&L will be reported. It's good that Arjen highlights this already now for storage.
Okay. That's very clear. Thank you.
Thank you, Antti. The next question comes from Akash Gupta. Please go ahead.
Yes. Hi, good afternoon. I have a couple of questions as well. The first one is on treatment for putting this business in discontinued ops, because I think in the past you sold three, four businesses in portfolio, and you kept reporting figures for that until you closed the deal. Here, you are putting it into discontinued ops straight away. I wanted to understand the technicalities behind why this is going straight away in discontinued ops and why you kept reporting other businesses until the deal was closed. The second one is on this EUR 40 million-EUR 50 million figure that you are giving. Is this what we should expect impact on comparable operating profit for the year, depending on when you close the deal? Is it maybe a different number? Then the third one is on RCT Solutions.
I quickly had a look at their website, they do PV solution partner, then partner of PV manufacturing photovoltaic. Is this the whole of the company you will own 50% JV with your storage, or it will be 50% in their storage and your storage business together? Just to understand which RCT Solutions GmbH, and what assets we are talking about here. Thank you.
Maybe easier if we take one question at a time.
Yeah.
Arjen has an excellent memory, but anyhow.
Let's say the second one I lost already. The discontinued operation is the way we chose for this one, and I think we have done it also in the past with portfolio businesses, at least on certain occasions. This is, of course, stopping a segment reporting completely, and between now and closing, we don't anticipate to be too long time. We expect this to happen in Q3, basically. As we stop the segment reporting, we thought that this is the best way forward. It would not make sense to give another, let's say, demand guidance, et cetera, as a normal segment would require.
Let's take the second question.
The second one I don't remember. Can you repeat it, please?
Yeah. It was this EUR 40 million-EUR 50 million loss that you are guiding for the year, depending on exact time of closing. I can see consensus has EUR 9 million positive for the whole year in comparable operating result. Does that number needs to go to somewhere between EUR 40 million-EUR 50 million? Is that the message?
That's the comparable number, yes. Correct.
On RCT.
The third one was on RCT.
Yeah, RCT Solutions. They are taking a 50% ownership in this JV. We are not taking any ownership in RCT Solutions, just to clarify that. Maybe I misunderstood your question.
In the JV, it will be your battery storage business and their battery storage business, not the whole of the company?
No. It will be our battery storage business only. They will not bring their battery storage business. RCT Solutions, the major portion of that, it's, you could say, engineering firm. Their speciality is to set up factories both for solar manufacturing, but also for battery manufacturing. They have done 40 factories all over the world. They know, clearly, the battery industry very well. They know the supply chain very well. They are not moving any battery business into the JV. The JV will be the Wärtsilä battery business. What RCT is bringing is that knowledge. In addition, they have a separate parallel initiative, which we are not investing in as Wärtsilä, and it's not included in the JV.
RCT Solutions has a separate initiative where they are currently in the role of financing and setting up battery module and later battery cell manufacturing in the U.S. That will, our understanding, be FEOC compliant.
Okay, that is a separate business, and you wouldn't be required to put any money for CapEx in that?
No.
Okay. Thank you. That's what I needed. Thank you.
It's a completely separate business. Of course, there are plans of cooperation and offtake, et cetera. From a legal perspective, it's a separate business. We will not invest in that separate business. We will put our ESS into the JV. This is how we contribute to the JV.
Thank you.
Thank you, Akash. Next question comes from Sebastian Kuenne. Please go ahead.
Thank you for taking my question. Can you hear me?
Yes, we can hear you. Thanks.
Yeah. One question is regarding the operations that you give into the joint venture. I would assume that there might be some staff reductions needed or some other restructuring, and I was wondering if this is already included in the losses, in the EUR 40 million-EUR 50 million losses that you predict for this year, or whether there could be more one-off charges further down the line that the JV has to bear itself that will ultimately go into your EPS. That would be my first question.
Now, all the transitional activities as we foreseen them to happen, they are included in the numbers presented, in the EUR 40 million-EUR 50 million.
By year-end, this is a lean business, basically?
Should be, yes.
I just try to understand the incentive for RCT to go into this joint venture. Is there any contractual agreement between Wärtsilä and the joint venture further down the line that basically guarantees business that is done between the two companies? Or is there any funding guarantees further down the line that the JV could basically execute and where Wärtsilä is the liability partner in that deal? I just try to understand whether this is a very clean cut without any future guarantees on business or whether there's further liabilities.
All the guarantees on the existing order book, they will stay with Wärtsilä. That's clear. For any new business that the joint venture enters into, they need to take care of their own, let's say, guarantee facilities.
Can you explain it a little bit more in detail, the guarantees that stay with Wärtsilä for the existing order book?
Let's say, for example, you have a parent company guarantee. Let's say that is not transferable. I don't think that customers preferably don't like that. This is very customary in energy storage business to have parent company guarantees to secure the performance. We have done it for years. We have never got any claims. These are typically staying with Wärtsilä. For new, let's say, business, they need to provide similar guarantees themselves. Same for, let's say, advance payment guarantees for, let's say, guarantees for advance payments or bank guarantees for advance payments, same story. For existing business, it stays with Wärtsilä until it's out of the books, basically. For new activities, they need to take care of it themselves.
You also signed service contracts for the existing installed batteries, I would assume. The liabilities out of these service contracts that can run for more than 10 years, is this also still staying with Wärtsilä?
Yes, but the risk is very small.
Thank you so much.
Thank you. The next question comes from Vlad Sergievskii. Please go ahead, Vlad.
Yes. Thank you very much for taking my question. I'm just trying to understand how did you arrive to 50/50 split in the JV ownership structure. I assume some valuation of assets should have happened. Will you be able to disclose what were your internal valuation of your energy storage business for this transaction? Maybe how did you value the contribution of RCT? Is it just the knowledge they are bringing? Is it the case this knowledge is worth at least a few hundred million euros? That's the question.
Will you answer?
No, in terms of how we value and the different parties value the business, we will not go into those details. No. It's very clear that what RCT is bringing in is competence, execution capabilities, sourcing capabilities, and also the parallel opportunities for vertical integration.
All right. Thank you very much.
Thank you, Vlad. Next question comes from Panu Laitinmäki. Please go ahead, Panu.
Hi. Thanks for taking my question. I just wanted to clarify on the EUR 40 million-EUR 50 million loss. Do you expect to make EUR 40 million-EUR 50 million loss on a reported basis, so it consists of whatever the operational EBIT is and then the write-down of R&D? Do you expect to do that on a comparable EBIT basis?
No, it's the operating results, so not a comparable one.
Okay. Thank you.
Thank you, Panu. The next question comes from Antti Kansanen. Please go ahead.
Yeah. Hi. I just wanted to follow up a little bit on the kind of guarantees for the JVs. I understand that the advanced payment portion of the cash is moved to the JV, but let's assume that 2027 would be still a very challenging year, and they are not themselves cash positive. Do you have some kind of commitments to fund the JV further, inject cash flow into it, assuming kind of they are not self-sufficient in terms of cash generation going forward?
No, we believe that we don't need to do any, let's say, further capital actions. Of course, one of the pre-closing conditions is the financing package, so that needs to be, let's say, worked out. So far, we see it doable. For now, we don't see any need for that.
Do you want to provide any further comment on how much cash you will insert into the JV from Wärtsilä's balance sheet, excluding the working capital advanced payment side of things?
No
Okay. Thank you.
Thank you, Antti. The next question comes from Uma Samlin. Please go ahead.
Hi. Good afternoon, everyone. Just a question from me. I was wondering, given you guided that this business unit will likely to turn more profitable in 2027, what gives you that confidence? Is that backed by the current order backlog? How do you see that market evolving?
Now, the comeback to profitability that is hinging on one side on continuing to drive down the cost and work with supply management and new initiatives there. The other element is, of course, this possibility for vertical integration. The team is executing on the current order backlog in a good way, and you've seen Q1 5% EBIT. The challenge is that we are not taking an order, we need to rebuild the order backlog to be successful.
That's very clear. Thank you very much.
Thank you, Uma. I don't see any hands up, if you have a question, please use raise your hand functionality, if you cannot use it, you can also send an email to me. Johan Eliason, please go ahead.
Hanna, can you hear me?
Yes.
Okay. Sorry. It's finally here. Sorry.
Johan, please go ahead.
Okay. Let's try. Technology works better today for me. You mentioned the financial targets. You have targets for energy and then marine. Will you automatically take those as group targets, or will you announce some new group financial targets now in Q2 or at the Capital Markets Day?
No. What we said there is no new financial targets coming in Q2. At CMD, we for sure will discuss the financial targets, I'm not saying we're going to revise them or whatever. You have to wait until then. We will not revise the Marine and Energy combined financial targets for Q2, certainly not. They are still relevant.
Okay. Great. Thanks.
Thank you, Johan. The next question comes from Daniela Costa. Please go ahead.
Hi. Good morning. Just following up, I think, on some of the things you mentioned yesterday, but to make sure I understood. In terms of the I guess we are hearing more and more about storage and data centers and the opportunity there while you're doing this and potentially even getting other investors into the JV, I guess diluting your potential stake and the ability that you use that future for commercial links. Just wondering what was really the trigger there, given you had done a strategic review not so long ago, and you had concluded to not.
Was it initiated by RCT and you saw an opportunity there, or really you just took an assessment of the technology and thought this wouldn't be really something good to complement offer a more integrated solution in terms of what you can offer for data centers, for example, just on that.
Yeah. Give a little bit of the history there, and I know you know it, Daniela, but for the benefit of everybody. We grew the business to break even at EUR 1 billion, we initiated the strategic review, which we ran quite for some time. We also said very explicitly that during that time, we also looked at different ownership alternatives. The logic was that this is a growth business, but it's clearly diluted to group margins. Now, we ended the strategic review. We basically, when we had assessed all the alternatives, we said that the best way to create shareholder value is to keep the business. Now, after that conclusion, two things happened that has impacted the competitive situation quite significantly.
One is the Liberation Day and the tariffs in the U.S., which has highly impacted the U.S. market, and two is this, which I would say it's a consequence of EV sales not developing. There is a lot of capacity for battery cell manufacturing on the market, and they are looking into new industries and clearly identifying energy as one, and where you basically have suppliers, battery cell suppliers starting to compete. For both of those reasons, it's becoming a more competitive space, and that happened after the strategic review. We have now been working on this. The team has been executing and done it in a good way. Of course, still, if we were to achieve the group margins of 5% as we put in the financial targets, it's still dilutive, and it's getting more and more challenging space to work in.
I think these have been the major drivers behind, so to say. Then with RCT, they came up as a potential player, and now we are launching the JV together with them.
Sorry, I might have missed this on one of the questions. I think you addressed it slightly on one of the questions earlier, but I didn't fully get it. You will not keep a direct commercial link, or can you leverage this somewhat for competing for future data center tenders, for example, which might be integrated between your balancing and energy storage?
We can, of course, cooperate, but we will not have a strong commercial link in type of approaching, for instance, data centers. No, we will not have that. Both of these technologies, both our engine technologies and battery technologies, they need to be competitive on their own merits, otherwise we start to dilute the group margins.
Mm-hmm. Got it. Thank you very much.
They have also never been contracted in one go, so it's always separate contracts and negotiations.
Thank you, Daniela. I do not see any hands up. Just double-checking whether anybody who is calling in by mobile phone, if you have a question, you press it now. Please go ahead.
Hanna-Maria, can you hear me? It's Sven here from UBS.
Is it Sven?
Yes. Yeah. Hello, sir. Can you hear me?
Go ahead.
Please go ahead. Yes.
Thanks for taking my question. Somehow I couldn't dial in using Teams. Questions I have is just on the accounting treatment again, because I'm a little bit puzzled here. When you call something discontinued operations, does it mean that you're aiming for 100% exit eventually? Where you put this into the P&L, because the other companies I cover that normally lands at the net profit line and not in the associate results. Could you help me understand the accounting treatment first? Thank you.
It's put as discontinued operation between, let's say, signing today, basically, and closing. After that, it will move, in discontinued operation, of course, it will have the full P&L impact for the time it takes. After closing, it will move to share of result in associated companies. One single line consolidation.
To the other question. Sorry if I don't do some follow-up on it. To the other question. As we declared also, we will entertain, and we are entertaining, other investors to come in to the JV. If that happens, we will reduce our ownerships. We see this as a journey from Wärtsilä side, as a journey over several years. We could contemplate to reduce our ownership.
Did you mention this on the back of interest that you've already seen? Is that why you're mentioning it, or is that something that needs to happen from here?
Sorry, can you clarify your question, Sven? I am not sure I got the question.
In terms of additional parties to the joint venture, did you mention this, that you are happy to entertain more investors because you already had interest from others, or is that something that needs to happen from here?
No, we are having and have had discussions with several different parties.
Okay. They would be interested also to invest into the JV?
That's correct. That's the type of interest we are discussing. Sven, just to clarify, the closing is not hinging on additional parties coming in. We will certainly close with the parties we have already, but if there are more coming in, there might potentially be more coming in.
That's understood. Thank you. Just coming back on the U.S. tax credits point, because as you said, the power unit of the company is already doing battery storage. I was just wondering, but I'm not so sure, are they engineering this for other battery storage companies, or do they have an own manufacturing business for battery storage in the U.S.?
They are primarily an engineering house, basically designing battery cell factories and then helping investors also to execute the projects. They know battery cell manufacturing. It's an engineering house primarily.
Is the idea that this sister company sets up U.S. manufacturing for your business so that you can benefit from the tax credits? Is that the plan then?
It has nothing to do, as far as I know, with tax credit. It will be a sister company in a completely different legal entity, but where there is possibilities to enter into partnership for offtake. As you know, with the current focus on FEOC, Foreign Entity of Concern compliant , there are not so many fully FEOC compliant battery cell manufacturers in the U.S., and the intention that this will be one of them.
Okay. Understood. Thank you, Håkan.
Thank you, Sven. I do not see any thumbs up, but if somebody else calling in by mobile has a question now, it's good time to raise the question. Also, if anybody wants to have a follow-up question, please, now is the time. I have not received any questions by email either, so it looks like.
Yeah.
We can conclude.
To sum up, important step for our storage business. It's been a long journey, we know that, from initial acquisition to strategic review to some tough times, good execution, now we found the JV. I think it's good for our team in the storage business. I think it's also good for Wärtsilä. We are creating a more and more focused group. We have now also concluded portfolio, now it's really about marine and energy combined. You know we have a very favorable market situation, we continue to expand our capacity. Our narrative will now be even more focused on marine and energy combined, it's a positive narrative.
Thank you, Håkan. As a reminder, next week on June 23, we will host a pre-silent call together with our CFO, Arjen Berends, then Q2 result will be published on July 21st. Thank you.
Thank you.
Thank you. Thank s.