Cadeler A/S (CADLR) Earnings Call Transcript & Summary

Welcome to this half year report presentation with Cadeler I'm [indiscernible], [indiscernible], and I will be the Q&A moderator in today's webcast. Cadeler is the largest turbine and foundation installation vessel company and is a key [indiscernible] to issue global capacity winning targets. Cadeler has a fleet 3 F-class vessels and are awaiting delivery of 2 new turbine installation vessels and one foundation installation vessel. The company just announced the half year results that showed continued increases on both revenues and profitability. The company will give the presentation, and then we will follow up with Q&A at end. If you have any questions, please type in the Q&A box and we'd read them out loud. With me today, I have CEO, Mikkel Gleerup, and CFO, Peter Brogaard. The floor is your guys.

Thank you, and welcome to everybody listening in Cadeler presenting to you again. Yes, let's just get on with the presentation and [indiscernible] you will flick the pages. So let's go to the agenda slide. So what we want to talk to you about today is basically the highlights during the first half of 2022. Then after that, our new CFO, Peter Brogaard, who has been with us for almost 3 months. He will be going through the financial results. Then at the end of the presentation, we will talk a little bit about how we see Cadeler going forward before we end up with Q&A with our view back then. And we look forward to a lot of questions. Yes. So next slide, please. So first, the highlights during the first half of 2022. Probably most of the people listening in have seen there has been a lot of activity in the commercial space for Cadeler in the recent months. And I think that we are in an incredibly good position on contractual coverage now having announced a lot of the very, very interesting contracts with very known clients in the industry. And I will just quickly go through what we have now. We have contractual coverage on our fleet until the end of 2026. We are starting after the current projects with the [indiscernible]. We have also closed the contract with Vestas on their new turbine models in the He Dreiht project to be closed in 25. We have closed a contract with Siemens on the Moray West project, which is the first installation of their new turbine as well. And this is both on Orca vessel. So in our view and justification of what we are doing with the new cranes on the vessels and really also ensuring that these vessels can continue to install in a tighter market as we see going forward. Then also a project that we had on our must win list, the East Anglia Hub, where we have signed an agreement with ScottishPower Renewables for East Anglia Three which is the biggest of the product out there, but also a preferred [indiscernible] for East Anglia Two and East Anglia One now. And in total, this is a contract that could be up to a [indiscernible] of 221 turbines and really one of the contracts we wanted to win at [indiscernible]. Also, we have signed with Baltic Power to install 70 WTGs on the project in Poland, and this is the first entry into the Polish market for Cadeler and something that we're also incredibly happy with and further expanding the footprint we have in Europe where a lot of things are going on at the moment, especially during -- after the Russian invasion of Ukraine. And then last but certainly not least, there are 23 foundation project where we will be installing 192 foundations for instance with our new F-Class vessel. And this project is incredibly special because what we have announced so far is the vessel time that has been booked by Orsted, but also we have a commitment with each other to further develop this into a full on T&I contract. Which is really expanding the capabilities in the company. It's something we are doing jointly together with Orsted, our partner. So we are very happy to have joined by. I think for us the strategy has been to really fill up the years with the bigger projects that are out there. And now also obviously have the focus post 2026. We are also focusing on where can we support other installation or where can we do O&M work to really ensure that the utilization is maximized during these years. And at the moment, it's something that we are very positive around and we have a lot of very interesting conversations with clients at the moment, and I'll come a little bit more back to that as we go ahead in the presentation. Next slide, please. So in the first half, we have added a new vessel for the fleet, to the growing fleet, which is the F-class vessel that is portrayed on the picture. And I think that one of the things we wanted to talk about here today was the process that we had on this vessel because from beginning of dialogue with Orsted until signings with the yard and having done a price placement, raising money to execute this project, we have a total of 6 weeks. And I think that that's really talking about how the industry is working at the moment and also the speed where things happen at. So it is really about being ready for handling these requests when they come in because the clients, they are certainly ready to move. And what would previously have taken approximately more than a year was done then in 6 weeks. We started the communication with Orsted, as we proceed that they have a project that has to be installed and we will see that there was not a lot of capacity out that we sold. So we started 30th of March, discussing this with Ørsted. And 6th of May, we did a price placement where our investors supported us to further grow the business, something we are very, very happy about. And then 4 days later we signed the [ TI ]. . So we had an extremely fast process both with Ørsted, with our investors that shows confidence in our company, but also with the yard that we're willing to build on the relation we have from the X-class vessels and that goes also for all suppliers on the vessels, both in the X-class and the F-class. The delivery stands for Q4 2025 and later in the presentation, we will give an update on where we are on other CapEx projects as well. Next slide. Yes. So what is the F-class then about -- it's diversifying the fleet because it is somewhat different than the X-class also will do the same and we want to talk about some of it here today. It's an incredibly flexible asset, and it is based on the X-class which is scheduled in terms of [indiscernible] it's a hybrid vessel that we [indiscernible] that is designed for both doing P&I foundations and for the turbine, let's say, the modification time from other turbine to foundation for foundation to turbine is the 2 to 3 weeks, and it's something we can do in port. So we don't need to go to a yard or anything like that. It's based on a smart solution we have done together with the crane manufacturer with [indiscernible] and we can transport 6 XL monopiles foundations per round-trip, which we believe is a very strong number and certainly justified by the contracts we have been in board, but also the contracts we're currently discussing with clients. What is the result, result is the largest and most capable [indiscernible] vessel in the offshore wind industry. Next slide, please. As I say, it's based on the X-class in terms of how the vessels looks. And the biggest difference here is on [indiscernible], what we are seeing at the moment is bigger than the X-class. It's significantly bigger than the X-class. For how big it is, is something that we will disclose to the market at a later stage. But we are incredibly comfortable with the XL monopile design and that monopile design where we save per monopile anywhere between 2,400 to 2,900 tonnes probably. And that's the monopile design that we believe will be used a lot over the sites in the future of projects, there will obviously be [indiscernible] with larger monopile we are talking about that. But if we look at kind of like share market, that sizing is giving us a very, very new position that there's lesson to also be competitively bidding for foundation installation on these projects. Next slide, please. Yes. And handing over to Peter for the financial results, which I think all of you are or little bit. Yes.

Yes. This is the financial highlights for the group for the first half of '22. Performance in the first half of '22 was good and with the guidance despite [indiscernible] project. Revenue was EUR 43 million. That is up with 33% and EBITDA was EUR 23 million and up with 48%. It is as well profit for the first half year, and it's better than the full year [indiscernible] we saw for '21. We have positive cash flow from operation financing activities and we use that proceeds for investment in the new buildings and new cranes on the old class vessel. If we look at the balance sheet, it is a strong balance sheet with an equity ratio of 80%. In July, we completed a new credit facility of EUR 150 million. And by that, we added a new liquidity of EUR 70 million to the company. I mean we've seen a little bit about the cash flow from investment activities. It's the EUR 117 million, that consists of EUR 85 million for the new buildings. Mainly the X-class vessel and then the new cranes for the O-class vessels EUR 40 million, dry box EUR 7 million and EUR 11 million in project-related CapEx. And when we come to the EUR 11 million in project [indiscernible], they are not specific for this project, what we have and hope for we to utilize it on future projects as well. Next slide, please, sir? If we look at the revenue it is reflecting a strong market. You can see that revenue has increased to EUR 11 million as compared to last year, whereas the utilization of vessel has gone down, and that is due to the fact that the Orca was on the planned maintenance for the first quarter 2022. Next slide please, sir. Yes, this is the full year guidance. We have narrowed the rates. We have now a great first half within expectations [indiscernible] often delays on the projects and execution leads to that we have to replace the revenue on the process and now it's not that the contracts are more about its risk raising and postponement of revenue into next year. Revenue is now expected in the second half to be EUR 53 million and EUR 62 million. For the full year, revenue is expected in the rate but [ EUR 5 million ] to EUR 106 million when you look at EBITDA, it is expect to be in the EUR 33 million to EUR 42 million for the second half for full year, it is now within the range of EUR 56 million to EUR 65 million. That was the financial results.

I think just to also sum up on some of these things. I think if we look at what is -- what are we seeing, if we look at the utilization due to Orca being out in the first quarter of the year for maintenance and still doing more revenue, it shows the trend that we are seeing improving rates in the market, and that is also something we see in the outer years and in the years that we are contracting in at the moment has also been indicated to most refined analysts in the industry. And I think also, if we look at the last slide that Peter presented, we are experiencing repacing of revenue. But I think that with the results that we are guiding more at the moment, we also show that contractual strength that we have been pressing a lot of our investors, what happens that we are delayed. And I think that it is still -- we are delayed by others at the moment, but we are still able to oppose where we guided towards at the beginning of the year because of the contractual strength that we have on current projects. And I think both of those are positive because it is a fact that we are not able to install at the pace we could due to other upstream issue from [indiscernible] where what is important for me to say is that for Cadeler alone as a stand-alone entity, we are performing [indiscernible] and [indiscernible]. Then about how we look at what's out there in the future because it is an incredibly fast-moving market. And in a market that where changes are almost everyday -- if we just look at what happened over the summer for [indiscernible] with the contract awards, we have been fortunate and successful in completing. It is really an effect that this industry is moving incredibly fast at the moment. So if we look at the next slide, what -- why is this happening? So already, we were on a very, very strong strength for renewable energy, and I think everybody can agree on the need for this. The climate and all of this. But there is no doubt about that the whole global focus on energy security and especially the European focus on the energy security is pushing an already strong trend even further upwards. And we are also saying that all the models we pay supply demand analysis on just 6 months ago, they are not valid anymore because we -- not only do we see that there's more renewable energy being out build, but also that the curve has been shifted significantly earlier. So we are seeing a much stronger trend offwards in terms of need for installation. Obviously, this is all pending on having clumsy processes in place and have most capacity enough to do it, but we have certainly hit to our part in securing the bidding and so on. So the strategy really from the EU is something we've already seen. And in fact on now, we see projects that were expected to come later and we shifted into different years. They are now called together, and they are coming earlier instead and we were asked by clients, can you re-supply earlier to us. So that's one trend we see and also the political support we see out there to move further ahead into -- to expand on what we are doing with clients and all that, it is very, very significant. Next slide, please. So unfortunately, there's not a lot of good data showing this trend at the moment and where we are. But I want to say that if we look at the gap between supply and demand and we look back to where we started when we -- all of the X-class vessels that the gap has widened, and we do actually believe that it's widening much more than we are seeing here. It is based on term gap given between demand and supply. It is based on the miles turbine. And I think that, that is specifically an interesting vessel because if we look here and say that 15 vessels are in supply and 24 in demand, that of course is already a big gap. But if we jump to the next slide, I think an interesting fact out for on our industry because we have here on while how we see the expected size development of the WTGs in the coming years. We have shown you the [indiscernible] made a turbine that we are currently installing on HKZ in the Netherlands. So that's the turbine. We installed today on Osprey, it is the biggest ever offshore wind turbine installed commercial. But we are very, very soon coming to the 15-megawatt turbine that I think most of you have heard of, and this is where we have the supply of 14 vessels. But we also believe that we are quickly coming to the next step, which is what we call the 15 to 20 megawatt turbine. And there we go from 14 vessels and supply 29 vessels [indiscernible]. And we are also looking at the turbine that is bigger than 20 megawatts already and there we go from 9 vessels and supply to 6 vessels and supply on the turbine side alone. And I think that, that is a very, very interesting factor because that will certainly tighten the market even further. And -- we also believe that it will benefit Cadeler because we have an incredibly strong fleet where we can continue to install the turbines of the future. Next slide, please. We said last time that we wouldn't show this slide anymore, but we actually believe that the picture is so interesting that we wanted to show it again because it really shows how it came only in 3 months. In 3 months, we have gone from the dark blue to the black. And because of duty of the [indiscernible], the box's size is not exactly great. But the first 3 boxes we show there the correlation between the box size is correct. On the black, they would actually have been slightly bigger because projects are growing in size compared to the [indiscernible] but also if you look at this year number project that we're currently involved in, it is unheard of. We are all running 120% [indiscernible] the company to meet the demand of the market, the industry and our clients. One thing I wanted to say is that there has also been a very, very strong strength from when we addressed you last time in March and until today, where we see clients are looking more in a portfolio view. So where we have been very much involved in single projects for our clients. And in March, I also argue that some of these projects, they are so big now East Anglia Hub, for example. This will be [indiscernible] that. It's close to 800 vessel days. So that was last project in itself and almost what we would say would be a payment agreement, but even projects at that size are now being captured in a portfolio view, where the bigger clients in the industry, they are coming to us to secure the availability of vessels and are really willing to put years of commitment to us based on the portfolio that they will have. And I can say that we are in live negotiations with basically every big client in the industry to look at portfolios of projects and how our vessels and our capabilities can meet those portfolios. And that is something that we have actually gained ourselves in -- also because we have said that our view is that we've grown a sustainable business, and that means that we will get the vessel down to work, and we want to secure the business. The foundation of the business with solid work, with a profitable work and also based on that grow the business to the company, we believe we can. Next one, please. Then one of the most important things that we are doing at the moment is we have invested a lot of money in CapEx on the X and F-class and I'm happy to say that the X and the F-class [indiscernible], we have both the detail engineering and [indiscernible] more than 91% completed. The construction activities have started out in June. In China, we have shown a few pictures there of the construction of the double bottom and also one of our 5 providers that are doing a quality [indiscernible] on one of the particular terms. And I think that we are also in a very progressed state on the tabulation of critical part components such as [indiscernible] generated engines, main cranes, jacking gear and we have already actually [indiscernible] on the first set of process and main generator. Our site team specially at 9 [indiscernible]. We are ramping that up to around about 20 [indiscernible] and we are currently on 3 locations in China and then our headquarter people they are following in Europe. Most of the equipment is coming from Europe, and then it's [indiscernible] obviously, what I just mentioned to you and this supported by group our that. And we don't have any supply chain issues so far, but we continuously monitor this during the [indiscernible] meetings and also our internal market CFOs, which we have on a 2-weekly basis. where we follow up on this. It is, of course, a focus for everybody that is buying something at the moment and you actually get it from your supplier. But currently, we don't see any delay or any challenges on that. Next slide, please. And also the new crane projects for the O-class vessels are also running to plan. We are building in Korea. We also have a few pictures for the go platform being sampled and also what is being developed. This Is the blueprint that is being produced in Germany by [indiscernible] and all it's progressing as we are gaining the detail, implementation plan we executed in starting Q4 next year. It's coming to close now, we all be almost only a year away from that. But as the detail in the [indiscernible] currently being further with supplier to ensure that when we come in and we install that we have a very, very clear plan to get the vessels down because we do have projects in '24, waiting for these vessels with new print. So that is a confident in both [indiscernible]. And also we are happy to say that we don't see any significant part delay, and the critical components are being closely monitored together with our supplier, but we see very strong partnerships, both on the crane part, but also on the new build in China, and we will continue to update you on these important capital projects because, of course, they are condiments to the development of the bundling. And we treat them as such with a very, very high degree of attention from everybody in the company. Next slide is then as we have said to you before, widening our business scope to meet the future demand is a strategic target for us as a company. And since we addressed you last time, we have widened the business growth, we are now also an active company in the foundation space, the P&I Foundation isolation. We have evolved more than 500 foundation authorities, so it's not all to build a new course, but you take the entire P&Is so -- and that is a new thing for us. And we are incredibly happy and also proud to say that we are doing this together with Orsted, one of the leading companies in the industry, and they have selected to partner with us to ensure that we are able to deliver this in a sustainable and solid manner, not only to us but to the industry. And we will further inform you about the whole development of this in the future and conversations we have with you. But for us, continuously, we are looking at both vertical and horizontal expansion. We see other areas that are using because as a company is something we would like to further address with our plan, and we are also in active negotiations with the clients on some scopes that are sitting in, let's say, the horizontal [indiscernible] in the industry. We are both looking at organic and also inorganic growth still we are hoping for that, but only the inorganic growth is only visible deal for Cadeler. So we are not still hungry. So we can grow just for the sake of growth. Also on regional expansion, we have delivered on that. So speak of being in Poland now. The sales regions going global. Now we see a lot of activities around the world but also for me, it's important to say, Europe is the hardest places at the moment, also wind due to many factors that are out of our control. And if we wanted to be -- supply the company in Europe alone, there's no need to go outside Europe. And we continuously monitor what is the best decision to make [indiscernible] company for our business and for the other stakeholders that we have in the company. Strategic partnerships are important. And as I said, on specially the CapEx budget is where we have a very, very strong strategic partnerships, but also the clients that are now supporting and using their own organization to develop Cadeler further into the company we wanted to become. We are increasing the portfolio of services. And we see also a very strong trend towards the T&I services [indiscernible]. And as I said earlier on, the contractual set of course, is strong. And that means that even if we see delays on other parts of the project, we are still able to maintain on the business. And that has been very, very important for us. But it is also affected when you are operating third-party business that you can't see some refacing our projects. I mean it is something that we are also working on to ensure that we will be captured when we communicate new but as possible. The floating wind is also a very interesting area for the business expansion for the industry, and it's something that we actually follow. We are involved in some projects, and we will also further communicate on floating wind to you when we have something more solid to us. And then lastly, I think the portfolio view, we are also adapting what the clients are testing at the moment and we are really trying to look at how can we apply the company to a client that have basically growth on a strength of projects, how can we apply as a company to ensure that both we and the client can benefit from having a very strong partner in the industry. I think of those words, we are opening up to Q&A.

Thank you, Mikkel and Peter. We have received a few questions and you can see questions in the Q&A box on your screen. I will start with a couple of questions myself. So the first one, you continue to add backlog left, right and center. But on our estimates, you still have some white space left mainly around '24, '25. Do you agree with that? And do you expect to fill it with back-to-back contracts? Or should we expect you to leave some opening to handle new potential projects delayed.

The first and foremost, not agree with that I think that that's not correct. But I think that where we have an opening at the moment is from the delivery of the first extra and also the first project. And that's a gap we have intended to have because we have seen others that have also had delays on they were building. We don't have that at the moment. But also, we don't want to put a contract up for the vessel. That the yard that funds the vessel leaves the yard because we don't think that's a prudent way to run the business. We are more, let's say, open to that on delayed delivery because there we will have to repeat that is being built, and we believe that then we will be into more overflow. But the first one there is always a certain degree of target risk in the timing of that. What we are doing on the other hand is we are discussing the time projects that aren't being installed for all the business basically is coming out of the yard because also that is not activity in Asia at the moment. And when you have a vessel leaving the yard in Asia you could potentially do something in Asia well. But we are keeping it as a potential and a potential upside but not something that will be closed tomorrow or the day after tomorrow because we do not want to take the company directly into [indiscernible] on a project just by being too aggressive on whole timing of this. On fleet on the bar is book new fleet that we are being slightly conservative on how we apply it. But I'm sure that with the demand we see out there, there will be a lot of work for those vessels when they come on.

One more question for me. You recently ordered the foundation installation. What are your thoughts on the demand in supply gap going forward? And do you think the fan-based market looks tighter and more profitable than the wind turbine installation market? And could you share some light on the differences in the economics between Foundation and turbine installation programs.

Yes. I think it depends a little bit on how you look at it. It's very hard to comparative. Just in a simply year because this can change quickly. Because if we look at the WTG space, if we say that we believe that the turbine will not be 15 megawatts for the next, let's say, 7 years or whatever. If that turbine talking is 19 megawatts, then the WTG phase will be incredibly tight as well. So I think they have similarities and I think that they are probably equally tied at the moment, maybe the foundation phase is slightly tighter than the WTG phases. But it is new [indiscernible]. But in terms of difference of profit economics, I think important thing in the foundation part is if you say that you have a rental component and then you have the C&I performance. Then as the rule of thumb, 30% to 40% of the project value for us is the vessel. And 60% to 70% is C&I components. So everything else that's around the vessel. And that's of course -- that means that if you do a full on C&I budget for a year, then your potential revenue is significantly higher than on a turbine project. And you also have to take more scope to open, but it is also so play to profit from offerings that go and then obviously, installing the foundation is sort of time [indiscernible] and installing a turbine. So you can also advance faster through the foundation is erected and what I think is particularly interesting at the moment is that there's, of course, been a lot of ways for the floater to it the water to see how they will perform. And with firm performance of the builders, we believe that we are able to match that completely with the backup and even despite the gating factor we have to go through. It's not similar there to install [indiscernible] foundation with the flow down requirements and [indiscernible] compensate pile river. And that's not a simple game of kid, and I think it will have also that there can be challenges on that piece of equipment certainly. And we do not need that on the back office we need more -- we need to more specify the motor but not most comes for the [indiscernible] So we believe at the moment that we are -- we will be incredibly competitive and in a sweet spot with the [indiscernible] and then having the benefit that we can shift that include [indiscernible] installing turbines with the benefit that is there.

One last question from me before we come to the questions from the audience. In our mind, the OpEx for more complex wind farms should increase to higher project-related costs. And in general, we tend to model a specific project-related margins of the day rate to be project-specific assets. What are the parts of the project specific expenses and integrated services on more complex wind farms? And how should we think about project-related costs on your recent announced contracts.

So it depends on -- so we think it's very simple on the Hornsea 3 project that we announced, this is the raw vessel at the moment. So I think that's very easy to zero project related cost on that. because it's the vessel we're looking there, but it will become a C&I contract. And then obviously, that will be particulate cost. But since we are not done with that yet. I can't tell you what it will be. On the turbine installation project related costs, I agree there is a project related in cost. But of course, if you are able to lock in more work with similar turbine [indiscernible] then your project related cost that has also reduced significantly on the single project level. And I think that, that has been pretty important fact on -- specially for you guys are getting out outside the company and enlighting us because if we are able to lock in a lot of projects with same turbines or similar turbines have even our project related cost comes down significantly. And that means that a lot of the project related costs on a project-by-project basis becomes bottom line profitable.

Thank you. Then we will start with some questions from the audience. So the first question is how do you foresee to finance the investments in the years ahead? Do you want to find it with new equity or new loans or...

I think for all current plans -- so what we have announced the jack-ups, we are not contemplating for any current plans to come back to the market. But it could be a different range of financing. So what I want to say in general and financing and then Peter, let me [indiscernible], if there's anything you want to add this. But we have an enormous interest from the whole financing community to be part of the journey we are on at the moment. And that means that we are also being approached by banks that we don't have a relationship with at the moment. But lastly, international banks who want to offer us different times of financing for the new builds and based on having kind of like a share of the, let's say, the marketing almost on the vessel. So we have had international bank approach to say, could we brands that along our bank's name if we give you the financing for the vessels. So there are different opportunities out there for us at the moment, and I think that we are currently, for the bigger portion of the new business, we are in a phase where we are evaluating together with our board, what is the best option for Cadeler this network. But I think it's important to say that we saw how quick it can go and the Orsted project with the F-class took 6 weeks. So we probably can be very, very quickly. And I think that in -- we are a growth company. And with what we see out in the market at the moment, the demand we see and the gap between supply and demand we see, we also believe that if the opportunity is good enough, the company should continue to grow.

Thank you. Another question. You mentioned that clients are now looking at the chartering in the form of project portfolios. This is something we have been waiting to hear. And it is good to see that clients are finally waking up. This year's change being a regional specific or across regions.

It's the fourth region, we are -- I can say completely openly to you that yesterday, I've had 2 conversations on very, let's say, extensive contracts based on portfolio view with 2 of the biggest clients in the industry that all -- both have fought constant to expedite these processes. Normally, this would be something. And I think everybody who knows this industry would not be shocked if I tell them normally, this would be a 12- to 18-month process. But here, we are looking at -- expedited this between us, I would say, 2 to 5 months, we will see the market moving in this direction. We also had an opportunity with the client back in April, where we told the client, if you come to us any later than the 1st of July we can't offer the time line that we need. They didn't believe it and they came back to us [indiscernible] sorry about can you deliver on [indiscernible] and they have gone back to the drawing board at they have also come back to us with a new plan, and it is what it is. But also, we are not keeping the asset paying out there for long. We have told clients that it is the first come first serve market. It's incredibly busy, and we want to ensure that we use the company and our investors at and having the best position we can.

And the last question from the audience. Can you talk about how you are managing currency risk given that much of the CapEx is in USD and most of the revenues are in euros. And also the [indiscernible] euros.

Yes. We are closely monitoring the development. And we are looking into both hedging. But also natural hedging, we see also projects where we can have a revenue stream in U.S. dollars. So that is -- that's what hedged that we could do [indiscernible].

Yes. And I think that -- as you said, Peter, on the natural hedge, this is something that we have been actually discussed with our clients and also that something we see the clients are happy to engage in. So we have the 2 options, and we are following both.

I see now that we have some more questions. Could you talk a little about the recent developments in day rates, please?

Yes. I think as we have said, in the last couple of meetings. We see a very strong day rate trend. I think also it's been communicated about by analysts on our [indiscernible] award where we are seeing the rate going. I can say that we are obviously, what we are contracting currently on the X-class, they have not been working before. So everything is new with them but currently, we are seeing the highest ever day rate on the O-class. Also compared to the best historic rate we have seen. So we are certainly trending upwards significantly. And also at the same time, we are able to get the set of certain conditions in our contracts and stronger utilization. I think one of these the things that we have currently seen and which is a brand new thing in the industry is also that to [indiscernible] clients have had a collapsing window towards the start date of the project. We have now also had the same on a contract where we have we've also collapsed the window. And that's because we want to ensure the best utilization of the fleet and potentially, it's another vessel has been installed in that project. And that's why we have a collapsing window. And so the client also do not know when we are delivering. So we also have a period of time where we can deliver for the partner. And that's something that has been accepted. There is a very, very strong demand for not only the existing investments that we have now contracted a lot of new projects on, also with the basic equipment out there, but also for the X and the F-class. They are in fact behind demand because the real thing here is that if you were to install the turbine of the future with one of the legacy assets, you would have to split the tower. And you potentially would have to change the location of the jack-up wireless tolling as well. And that will cost so much time that is a complete no-brainer to go with the biggest assets in the industry. So we see very, very strong demand for the bigger jack-up.

So I guess you answer it. But another question is you narrowed revenue and EBITDA guidance ranges with midpoints coming down a bit. Is this primarily an issue volume or margins.

That is the consequence of how the contract is starting for some work we get a lower rate for some higher. And when we have since enough time on better rates. That means a little bit lower margin on those rates. So it is due to [indiscernible]. But when we look at the total [indiscernible], it is still the same revenue even higher revenue that we have but it's only that there is all part of the contract comes into play, and that has been significant for first half of '22.

And a good example of this is that we originally [indiscernible] to complete for Cadeler in 2 months' time. So mid-October, we were estimating too that project should complete with our international schedule. And that means that we would have made the entire revenue in 2022 for all the installation of that project. We could see at the beginning of the year that, that would not happen but to the degree that we have now, let's say, been delayed by upstream issue. That is certainly something that we have [indiscernible] we expect when we gave the original guidance in March. I think that when we then look at where the numbers have changed too, with the narrowing of the guidance, it really shows also the strength of the contractual setup that we have that still are used maintain these levels despite the fact that now actually a lot of this target related revenue for the installation will be shifted in [indiscernible].

Another question related to the funding needs for the CapEx program. So what leverage level do you believe is achievable or the higher for the new builds?

Yes. We have said from the outset that we are targeting somewhere between 50% and 60%. Sorry, between 40% and 45%. So we are looking at -- sorry, we're looking at 55% to 60% on the leverage under that. Sorry. So we believe that we have said that before also that to get upwards, so to speak, and also to get to the unexpected and that's why we do not want to push it. But because there's no doubt about with these longer frame agreements and with these portfolio views, as the bank would likely offer us more debt on the vessel with more visibility on projects. But for now, we maintain the view that we would like to run prudently and not make the mistakes of the past.

Then the next question, you mentioned that you are open to inorganic growth on this subject when industry is highly fragmented with a number of players. How do you see it in 5 to 6 years down the road? Will there be 1 to 2 larger players? Or will it still be a large number of smaller players?

It's a good question. My first will be with -- I do believe that there will be some degree of consolidation -- and at the moment, everybody out there believe that they can improve. I think that's probably how it is. And I think that at the moment, nobody really wants to consolidate here now because I believe that it will improve going forward with the market being tight on all of this. And there is also benefit in having other companies out there to compare with. So we are open to consolidation. But as I said, it has to be good consolidation. It has to be a strong deal to pay an inflated price for something -- if not something that we [indiscernible] in. So we are, I think, very disciplined when we look at consolidation. And also, we are always evaluating what could we do with the equity we need to do, we need to inject something like that. What could we do with that equity ourselves. Coming back to my comment around the demand we see, especially on the new business and how incredibly [indiscernible] that is.

[indiscernible] but with the gas increasing, how does the competitive landscape dynamic move with it? And what are the priorities of the next year [indiscernible]?

I couldn't get the last part of the question.

The primary bottlenecks to see the growth going forward.

There are many bottlenecks. I will say with the ones that we addressed the year the bottlenecks we work with are the best. We are, of course, trying with efficiencies to further give the time benefit. And this is also where we -- the portfolio view gets the benefit because we can install more by being committed on wind turbine fiber stuff like this. We don't have to do mobilization and demobilization all the time. So there's a lot of benefit in the portfolio view we get efficiency and so capacity. For the bottleneck, of course, we are looking at -- to permitting, but this is something that the politicians are addressing at the moment and are talking about this permitting highways in Europe now when we get permits in 12 months. Production of equipment and all of that could also be a bottleneck. But I'm a firm believer that, that will be ramped up to the level we need to be at. But -- what I'm -- I see already now that we are shifting the time line in the right direction, meaning that we will be installing more earlier. We are not relying as much on the [indiscernible] segment we saw just a year, 1.5 years ago. So we are moving in the right direction, and I think that we will get that, yes.

You mentioned some upside on some of the contracts ahead. Can you talk about the structure of the contract? And what do you need in order to achieve that upside? And what kind of risks do you have on the contractual upside potential?

What I think what I addressed there was more that when you have contracts with same turbine time, then you have an upside by -- that we, as a company, can structure what we do for the project setup and meaning that you can have a system that can work for an almost like a one size fits all system and the risk in that is no greater than if we took it as a one by one, it's just the engineering in it. And if you look at where we are investing a lot at the moment, it's really the resources here at the back office to ensure that we have the engineering muscle to be the best, not only in the assets, but also in -- so I think that the hardware is good. The partnership with the clients are good. The vessels being the hardware. But also now we are really strengthening the software, so ensuring that we have the best tool development, the best structure around the project-related equipment and all of that. So we can be more efficient and we can deliver a better business model for ourselves because it is an area that not many are tapping into. And we believe that they live in that area, they live a lot of potential benefits for the company if we do it right. And it's something that we have actually stopped tested without telling anybody but Seagreen where we're operating at the moment, we actually tested for the first time and is working incredibly well. And -- but I'm not going to the details obviously because we consider it a commercial thing that we will like to benefit from ourselves rather than telling us well.

How do you incorporate or access geopolitical risk management in your supply chain?

[indiscernible], it's not a secret that we're building in China, and we are following the geopolitical situation at the moment and in the Taiwan play and all of that. But we also still believe that it's the best deal for the company, if we were to build what we are building outside China, the cost would be significantly higher to the degree of hundreds of million. So we believe that it's the best deal and we believe that it will be the right solution for the company. But we are monitoring it, of course, as much as one can think that. Another geopolitical risk is of course [indiscernible] sanctions and stuff like this. But this is something that we already have included in contracts with the yard and not something we have in our performing agreements and a [indiscernible] posted already. So it's something that we are addressing, and we are incredibly active on this because we want to do the right thing.

The last question. Can you talk a bit about the O&M market. If the installed base of turbines are increasing the need for O&M we grow exponentially. Given the expect requirements for O&M being similar to turbine installation, are you seeing any interest from clients to secure investable capacity for O&M.

Yes. First of all, we see a lot of demand for O&M. If we were not working on the budget today, we could go out and do O&M. In fact, we have actually to get it to the plan of figuring because we have been waiting for a very long time. We have been waiting, I think it's close to 100 days on that project. And we have actually suggested to the plan, why don't we go out and do O&M. And there was no interest in that so when we stayed and we waited and that's what it is. We could have been busy for 100 days on O&M if we wanted to. If it comes back to the whole partnership compensation. If you know you find well enough, then you also know what the challenge is and you also know what the demand is for that. And I think that the O&M market that is something that we will see a lot of demand from. And I've said it before that we saw when we addressed you back in March, we saw that the rates for O&M have gone 300% in 18 months, and I think that they'll further increase Unfortunately, at the moment, we do not have any capacity to offer anything into that market, but it is a market that we are actively looking at over time as well and also to find the solution for that market.

Thank you. So it's another question. How is the increase in backlog from year-end is related to currency changes.

The increase in backlog. We don't have any increase in backlog due to currency.

Okay. Then the Q&A session is over. And I thank you for the presentation, Mikkel and Peter.

Thank you, Jonas. And thanks Starbanks for hosting us again, and thanks to all the good questions and all the people listening in. A pleasure and in context of that anything you would like to know in more detail, we always available.