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

Okay. Good morning, and welcome to the presentation of the 2022 Annual Report. So I'm here with Peter Brogaard, our CFO; and myself, Mikkel Gleerup from Cadeler. Happy to be here and happy to present live in Oslo for the first time. That's a milestone for us. So we will talk a little bit about the company, what has happened during 2022, and Peter will talk about the financial results. And then we will also try to look a little bit ahead in '23 and beyond and some of the decisions we have made in '22 and how that will -- that potentially could impact the future. So the necessary disclaimer. And then 2022 in highlights. So I think in highlights, a very eventful year for us 2022, where we, in May, executed a private placement on the back of a discussion we had with a major developer in the industry, around also potentially servicing the foundation side of the industry, so a horizontal expansion. We did that private placement and ordered our first F-class vessel from COSCO shipyard in China. In June, Peter joined the team, something we are really happy for a very experienced CFO. And in July, it was a very busy month for us. We signed contracts in July and across the summer which is a very normal season for this industry to sign contracts. And I think that we were pretty busy with the commercial side, especially towards the mid of the year, and we have another slide that shows actually how busy. Again, in August, we signed the agreement with Orsted for Hornsea 3 and widening the business scope also to include the T&I side for the foundation business. And for those of you that stay in the room after the presentation, there's a follow-up presentation on the T&I foundation that will not be streamed. In October, we successfully executed another private placement in what I would say was probably a pretty difficult market. But for us, we executed that private placement pretty quickly with lots of support from our investors. And that's something that we were very happy with and also to see that cooperation between us and the investors. That was really, really good. And in November, we expanded the senior management team from 4 to 7 members. So in total, we are now 7, and there's a small presentation on that a little bit later how that senior management team looks like now and who will this company forward. Again, in November, in total, a tripling of the fleet with the second F-class order. That was an option we had with COSCO shipyard, and we decided that it was the right time to execute that because the option we had on hand was very, very attractively priced, and we executed that. And I would say today, we have clients standing in line for that second F-class vessel, but we are trying to understand now what is actually the best decision for us to make with that vessel. And you can say, at the end of December, we knew what the revenue where we made an upward adjustment in November based on a delay on a project that we were executing. And in total, we were able to increase the revenue in 2022 compared to 2021 with 74%. So on current projects, actually, this is not CapEx projects. This is on our execution projects. We are ahead of our contractual obligations on both Seagreen and on Hollandse Kust. And I would say that we have built up so much in the bank at the moment on both projects that there are delays on both projects, but it's not due to the fault of Cadeler. So on both projects, there will be a degree of extra income for Cadeler. So we are very satisfied with how we have executed on the projects. And that's, of course, what's important for us because when you sell the next project, your ability to deliver that is really what matters for the client. This is, on the other hand, the CapEx project, and something that is very, very important for us to emphasize also to all our investors that this is where we have a key focus area at the moment. It is really executing these CapEx projects that we have committed to. And here you see a picture from our yard in Korea, where we are currently building the new cranes for the O-class vessels. And we have our own team out there. And I'm happy to say that we are on track with the new cranes, and we are also preparing for the first shipment of the first crane. The first shipment has actually also been booked. We have made a decision to take a geared vessel that can offload itself in the Netherlands because we wanted to mitigate all potential risks in that time line for the project. And we are planning to have the vessels ready, both of them in Q1 2024 before they hit out on projects that they already committed to. So happy to say that the cranes are on track and where we want them to be. So a few pictures from that out -- build-out there in Korea. Obviously, it's good to talk about it and also to put words on what we are doing, but the picture speaks more than a thousand words, as you say. And here is some reality on what is actually going on out there. Also on our newbuild vessels, this is the actual S-curve from the first X-class vessel. And I'm happy to say that we are ahead of schedule on the first X-class vessel, and we have already started the steel cutting for the second X-class vessel, 22nd of February as per the plan. And overall, the cooperation we have with COSCO Qidong and with us, it's better than what we expected even when we did the contract negotiation. So we are in a very, very good position at the moment in terms of delivering the vessels, and also our general discussions with the yard in terms of things that -- where we would like to see small tweaks here and there. This is something where we have a very constructive debate with the yard to ensure that the vessels that we deliver are really best-in-class. But happy to say ahead of schedule. Also some pictures from that, building the new cranes. This is massive equipment. And compared to what we are building at the moment for the O-class vessels, the X-class cranes are just fundamentally totally different and much, much, much bigger. So we are looking at really a new degree of equipment here for the industry. And also here, in terms of the block fabrication, we are actually just about to start the block assembly to mega blocks in the yard in COSCO for X1 and around summer, we will be able to really see something that looks like a ship in the dry dock also the leg fabrication. It's important to say we actually work on different locations in China, a different location for the leg fabrication, different location for the blocks and a different location for the crane and so on and so forth. But we have a team out there, a very, let's say, a big team, and we have decided to scale that up also to try to mitigate potential impact from something like coronavirus or something like that to ensure that we can continue to operate, also we have certain individuals out of the equation. And I think that has worked so far. And in terms of quality, we are very, very happy with what we see. There was, of course, in the beginning, the natural steering of what is the expectation versus what's being delivered. But I think what we see today is really very, very, very good quality and something we're very happy with. In terms of the new F-class vessel, we oftentimes get asked what is the F-class? Is it just a copy of the X-class? And I can say, no, it's not. It is based on the same haul dimensions, but from then on, there's a lot of changes. So the legs are fundamentally different. And also the crane is fundamentally different. And it is what we refer to as a hybrid vessel, so we can do both the turbine side and the foundation side. And in turbine configuration, it adds a lot of benefit to the company also because of the different legs where we get some ability to handle a different type of site, and that really gives us an opportunity to bid for different site types with our fleet. And that has been the strategy for us also to have a diversification in the fleet. Important to say is also that the crane can be shifted from foundation to [ WTG ] mode in around about a couple of weeks in port. We don't need a dry dock or something like that. We just need a small mobile crane then we can do it. At the moment, we only say that the crane is above 3,000 tonnes. We don't want to specify it further than that. And that's because that could create a degree of arms race in terms of who has the biggest crane and all of that. So we just say above 3,000 tonnes at the moment. The slide I mentioned earlier in terms of what we have been securing in 2022, I think that this shows significant picture of our commercial activity. It's fair to say that we have been winning every single project that we wanted to win. And over the summer, especially, we were very, very busy with signing contracts with our clients. And I think that in order to understand how this industry works, normally, the first month of the year, this is where you build up to it and then you start signing from Q2 and forward. And this is a little bit how it works. I cannot explain why it's like that, but that's how it's always been that in the summertime, this is where it's the most busy for signing. And I think this year will probably be similar to that as well but a very strong backlog now and very happy with these projects that we have been signing and also the agreements we have been made. There's a lot of things here that are still under negotiation with our clients. But we believe we are in a very good position with our clients to also convert this from negotiations to firm orders. A picture, how we see the world at the moment in the commercial space. I think if you start on the right side of this slide, we had an order backlog of EUR 310 million when we did the IPO back in 2020. And today, we have an order backlog of EUR 907 million, including all the options. And here, it's important to differ from the annual report we have published today because there, we only include 50% of the options and the number we gave you. But here, there's all the options included, and there we have EUR 907 million in backlog. If we then look at the left side of the slide and start to focus on the lightest colored boxes, those were the projects that we were bidding when we did the IPO. At that time, we were bidding 7 projects of various sizes. And we thought that we were actually very, very, very busy with our bidding activity. When we ordered the 2 X-class vessels in June 2021, we were bidding the green boxes here, the slightly darker green there. And at that point in time, we said that this is probably a maximum capacity of what we can bid. Fast forward to 2022 March, where we had the same presentation as we have now where we presented the 2021 accounts, we were bidding the light blue boxes and also, again, very, very busy. But where we were in February '23 is this view in that where we are bidding the dark blue boxes, and it is totally different from what we were used to just a couple of years ago. And this is 2.5 years of development from the light boxes to the dark blue boxes. An important thing to say here is that our clients, they are starting to pack these projects together. So we see that they go with a portfolio view now. So they could take these projects here and maybe 5 or 6 or 7 of these boxes and put into one and say, this is a block of projects we would like you to execute. So we are offering you [ FO ] or a 7-year contract, if you want to execute these projects for us. And this is more and more the norm in the industry and also something that sits very well with the strategy we have where we want our vessels to really be efficient out there, utilize the same equipment again and again and again, both to be efficient on the installation, but also to minimize carbon footprint when we do the installation. And I'm sure that this will continue to expand because the growth numbers we have seen in the industry have not baked in a lot of the development we see even in a region like North America, but certainly South America and some of the new countries in the Asian region as well. This is just a quick view on 2022 from an operational point of view. And here, I will hand over to Peter, who will talk about the financial results for '22.

Thank you, Mikkel. Yes. 2022 was a year with the continued profitable growth. We saw a revenue of EUR 106 million as compared to EUR 61 million in '21, a healthy increase of 75%. Both revenue and EBITDA were in line with the guidance that we issued in November. And it's also testimony to the strength of our contracts because in '22, we saw a delay on our contracts, but we were able to increase our outlook in November when we saw a delay and we're able to sign variation orders on the existing projects. EBITDA is EUR 64 million against EUR 28 million last year, increases with EUR 36 million. What is worth mentioning is also the administrative expenses. They are increasing, but that is due to the investment that we do in our organization to be able to handle the future growth. If you look at the balance sheet, we can see that assets are increasing by the investments that we are doing in the new buildings, 2 F-class, the down payments on that. and the upgrade of the O-class cranes. It's a strong balance sheet with an equity ratio of 80%. Equity is increasing with the strong support that we see from our shareholders. We did 2 private placement in '22, one in May and one in October, raising in total, EUR 187 million. And further, we also secured a new credit facility of EUR 150 million in July '22. With the investments in the new vessels that are also coming, CapEx investment for Cadeler, we have, in total, as of -- this is as of end of December '22. We have total remaining CapEx in total, approximately EUR 1 billion. And hereof, is USD 816 million. In line with the hedging policy that we have in the group, we have hedged 50% of the U.S. dollar exposure. We have used forward rate agreements and zero cost collars. Further, we have hedged 50% of the interest exposure. And that is done in the way that we -- for each of the facilities, we do forward fix in 5 years from the facility is expected to start. Further, we are in dialogue with banks where we see a huge interest to fund it. The first step in this is to secure the senior debt, and we are in dialogue with a group of banks to syndicate a loan that -- on the X-class vessels that we can use also for the F-class vessels. If we look at the guidance, we guide a revenue of EUR 84 million to EUR 94 million as compared to the EUR 106 million in '22. And here, it is important to remember that we have the O-class crane upgrade in Q4. So 25% of the capacity goes out of the revenue in '23. And then if you look at the EBITDA, we guide EUR 32 million to EUR 42 million as compared to the EUR 64 million that we saw in '22. And you can see that EBITDA is decreasing more than the revenue, and that is due to 2 things. One is the organizational buildup that we have a slide on next slide, and then it's also that we are doing some planned replacement of equipment in Q4 when we are off hire and also some maintenance and post-project repair. Hence, we see some nonrecurring OpEx in '23, which also explains the decrease in the EBITDA as compared to the revenue.

Yes. I think just to talk about this, since we made this decision to go into the T&I for the foundation delivery as well, that does require a significant outbuild of our organization capabilities because it is much more intensive in terms of what we need to do from the office side because we will be handling a much, much bigger scope. And that is, of course, an explanation for why we are growing the headcount onshore at the moment significantly, but it's also to handle other growth that we are currently looking at where we have not talked openly to the market yet about what that potentially could be. But we have always said that we want to grow with the industry, and we want to be playing a role in the more complicated aspects of the road because we believe that that's where our capabilities best match what the industry has to offer in terms of commercial opportunities. Obviously, we are also growing the offshore-based employees, and that comes in line with the delivery of the new assets where we will be further growing the offshore crew as well in order to man these new vessels that we are taking on already from 15, 16 months from now, the first X-class will be hitting the water. And the good thing is that we see a lot of applications at the moment to Cadeler to come and work for us, and this is both onshore and offshore. So we are confident that we are also able to match this plan that we currently have in terms of delivering this because of -- in our industry, really the people is the barrier to entry, and that's also why it's important to have the right skills in both offshore and onshore. In terms of market outlook, we briefly touched on this slide here. I think it's a fact that we see incredible growth in the industry. And even when we look at slides like this, that talks about that the industry is basically doubling every fourth year or less than fourth year at the moment. We don't believe that these numbers are actually displaying the reality out there. We think that they are bigger. And that's because a lot of the growth that we see in the market has not been baked into this. So there's not a single South American project in this, for example. And if you read the Finance of Eastern in Norway, you saw that Equinor is currently developing more than 5 projects in Brazil alone, for example. So there is really a very, very steep growth in areas where it has not been baked into the numbers. So I think as a fundamental, we can say that the industry is growing very, very fast. Obviously, it's because of commitments to various climate agreements and all of that, but it is certainly also because of the whole energy security debate that especially goes on in Europe at the moment. And that's for us also an evaluation that we go through all the time because where our Cadeler present and where do we want to work. And we can say, if we only wanted to remain in Europe, we could deploy all our assets in Europe. There's enough work here to just remain in Europe with our current plans. It is very, very busy at the moment, and we do see projects coming faster, being contracted earlier and also clients having a wish to really lock in the capacity in the outer years as well. And as the turbines, they continue to grow. It's a little bit hard to see the slides. But really, the equipment continues to grow. There is this debate around where does it plateau or does it plateau? Our current view is that the turbine out here is the 11-megawatt that we currently install on Hollandse Kust. This is the biggest ever installed commercial turbine at the moment. This one here that's significantly bigger is the 15-megawatt we will be installing just after the crane upgrade in '24. This is the turbine that we're currently bidding this one here, and this is what we think will happen towards the end of the decade or maybe the beginning of the next decade. And here for reference, we have put 2 Airbus A380s in the radius of the rotor just to show you how big it is. This is good for us because all our vessels can handle this kind of equipment. And we do see that the supply of these assets that can handle equipment like the #3 and #4 is coming down very, very quickly. And then you cannot do efficient installation anymore. And this is where it starts to matter whether your asset can do that because the economical rationale in taking the most capable vessel is very, very simple when you are installing equipment like that. So you can say that for us, we believe that it will plateau at some point, but we don't believe that it will plateau at what we are looking at today. We believe that it will be 1 or 2 steps more before it will plateau. So probably towards the end of the decade, we will see that there is a degree of plateau on what we are seeing out there. And this turbine here has already been publicly announced in terms of how big it is, and GE has already said that they're working on an 18 megawatt. And so that is certainly beyond what we see here. And I can say the X-class vessels are designed for a theoretical turbine around 35 megawatt. So we're actually pretty pleased to see this growth in the equipment because it fits our strategy completely. So as we have said from the day -- the 26th of November, the day we, in 2020, when we listed the company here on the Oslo Stock Exchange and which was a very, very good decision, it has been a fantastic journey for us. And I think what we cooperation we have built up with investors. And with you guys, the analysts and the banks and all of that has really been remarkable. And we have said from the outset that Cadeler is a company that wants to grow, we want to be a significant player in the offshore wind industry. and we want to be the preferred contractor in our industry. So it is a continuing growth journey. And you can also see that with what we tell you today and the numbers we report today, we are gearing up for further growth. And I can also say that we are constantly working on between 3 and 7 different strategic opportunities because it is clear. The mandate we have been given by the Board is also we need to do sustainable growth in this industry, but we need to follow the industry. And in an industry that grows 29% year-on-year or maybe even more, it's a pretty big task to continue just following the industry. But what we have done and where we are today, we have installed more than 7 gigawatts, meaning that we have freed 7 million households from their carbon footprint. We have 6 jack-ups vessels, 4 being built at the moment. We have done 528 foundations already. So the foundation space is not new to us. We will just be now doing the T&I scope for the foundation. What you can say is new to us for the foundations. We have done it for the turbines, and I agree that it's different, but we do believe that we are approaching it in the right way in a strategic partnership with a couple of the biggest developers out there who want us to play a role in this space. We have done more than 560 turbines, and this is a number that continues to grow because we work on 2 projects at the moment where we do turbines. If you remember in the IPO, the turbine number was half of the foundation number, and now we are almost at the same level or even above. We are today 250 employees on an offshore, and we are reporting to you today revenue in 2022 of EUR 106 million and order backlog today of EUR 907 million, which will continue to grow in the coming days, weeks and months. So we believe that we are starting from a very, very solid foundation. Milestones we have achieved since the IPO. There's a legacy down here with a start-up in Denmark and an ownership from Swire. But really, the journey we look at with Cadeler started with the IPO here 2.5 years ago. And since then, it has really been solid growth with 3 private placements, 4 new vessels coming, 2 new cranes coming and really, we are -- it's almost 2 years ago, we ordered the 2 X-class vessels. So we are close to the delivery now of the first one. And that is, for us, remarkable and also something that you sometimes have to pinch yourself a little bit because it is now going very, very fast. And these vessels will come out and work. And I can also say, if you follow our pipeline of work and the delivery schedule of the vessels, you can see that X1 is going on Sofia as the first project. But we already have clients that are asking for the period before Sofia as well. But of course, we are careful not to make a mistake and just run straight into LDs with the client. So we want to do it in the right way. But I would say the demand for the vessel also from new markets are at an all-time high. As I said, we have expanded the senior management team from 4 to 7 members, and this is the team that we have running the company today. 7 members in the senior team. And we believe that represent a diversity both in terms of experience and what we have done and knowledge and capabilities and feel really positive and good about this team delivering what the future of the company will require. On top of this, of course, there's a team in the company that is doing all the execution. And that's, of course, the fundamental part of running this company to have the right skills. And as I've said several times, the real barrier to entry in this industry, that is the people. So that is the people on this slide here because without these people, the assets are just big pieces of steel that can do nothing. Updates on the vessels. We have already touched upon it, but crane upgrades starting in Q3 -- Q4 of this year, sorry. So we are taking 1 quarter out this year on the vessels and most of the first quarter next year, but that is really to fit them for the future. And it's not randomly selected this period where we've taken them out. We're also taking them out where the industry had the least to offer. If we have delayed a year, you can say the opportunity cost would have been much, much higher because it's a different reality, just a year further out. So we selected this period very, very diligently and believe that this is where we will have the lowest cost of doing this in terms of lost opportunity. The 2 X-class vessels, they have already been awarded. They are making contracts, and we are looking forward to deliver them in first vessel, 15, 16 months out. And then the 2 F-class vessels, which is really a new reality. And as you know, the first F-class already has 5 years of commitment. The second F-class, I think it's fair to say that clients are really taking numbers in the line at the moment to make themselves attractive for the second F-class. It is a very, very attractive product. And we are, at the moment, evaluating what is the best opportunity for Cadeler. Also, we are in an industry where we see a lot of new clients that we haven't met before and haven't negotiated with before, so it is a bit of a new reality. New markets, new products, new clients. So we have to make the right decisions. We say we are specialized in transportation and installation of BTG and foundations. We support our clients with project development to get the most efficient installation. Our helicopter target in the company is really to install as much renewable energy on time and on budget because this industry needs successes and not failures. And that is also why this is really our target. So we integrate deeply with our clients early on to ensure that we have the best project execution possibly. This is also one of the reasons why we are manning up significantly now because we need to interact with our clients 3, 4 years before a project goes into execution, but it will make the profits when we execute them better and more profitable because we have already done a lot of the planning in terms of how we will do the project and the efficient way of doing it. Operations and maintenance will also be an integral part of the company. We believe it's important to keep the turbines out there spinning and not just installing the equipment. So as we move forward as a company, there will be a clear focus also on operations and maintenance side. Decommissioning, we are happy to engage in that. But at the moment, it's not for us because it starts from the bottom of the food chain with the smallest equipment and the lowest water depths and all of that. But as and when, then we are ready to play a role. We talk about this ecosystem down here at the bottom a lot. We have a lot of good stories about how that has also meant a lot for us, both on clients, on business enablers and component suppliers. But it is an ecosystem that we see ourselves in, and it's an ecosystem where we take care of both the people that pay us money, but also the people that we pay money to ensure that we are able to get the best deals out there. That's also one of the fundamental part of being a leader in an industry. So as you know, headquartered in Copenhagen, we have an office in Vejle close to the turbine OEMs. We are currently planning an office in Gdansk in Poland as well, and that is also partly because of some of the technical competences that we require at a greater scale than what we have today in terms of delivering some of the projects we see out in the future. We have a sales office in Taipei in Taiwan, and we are also planning an operational presence in the Asian region. And then we are very intensively at the moment, evaluating the South American region. We believe that there are certain attraction factors to the South American region, that for us, makes it an attractive place to be. And then I think it's -- we also see that the clients are asking us to come and work with them in this region at attractive conditions, I would say. Also, we have booked our new headquarter in Copenhagen, and that we will be moving into that in February 2024. And that is also a sign of the expansion we have. We are currently having to utilize hot desks and all of that in our office because we are cramping together on too little space at the moment. But it's a sign of the growth, and it's a good sign in our view because it means that we're executing on the plan we laid out even when we talked the IPO before we did the exit IPO. Where we want to play a role? We want to play a role in where we have the red dotted line around the value chain in the offshore wind industry. We want to play a role in transport and installation and operations and maintenance. And in those boxes, we are happy to engage in everything that has a certain complication factor into it. So you will not be seeing us announcing that we will be doing crude transfer vessels, for example. That's not our game. The barrier to entry is too low. But we are evaluating across the board, other things. And I can say that cable link, for example, that fits the bill for us, and that's something that we potentially could be evaluating. And also, as we have done moving horizontally into the T&I foundation, that was clear decision and it fitted with the bill of what we wanted to do as a company, high barriers to entry, complicated and really fitting the asset landscape that we have in the company. And going forward, what we can say to you guys, the analysts, but also to our investors, is, we are open to both vertical and horizontal expansion. So really opening up where we are more and take more scope for our clients there but also to do the horizontal areas that are meeting these barrier to entry requirements and also the yield in these areas, so to speak. We are open to both organic and nonorganic growth, so M&A opportunities are certainly something that we will consider. Regional expansion is evident with what I just told you, we are looking both at Asia and South America at the moment. And then also strategic partnerships like what we have done for the T&I foundations because these are true strategic partnerships with some of the biggest developers in the industry where we cooperate, we sit together and we execute these projects together to really ensure that we build up the capabilities. And I think when we announced our first T&I project for foundations, I think that it will also be evident for everybody how solid that strategic partnership actually is with how we have been handling costs and stuff like that, for example, on these projects, which is a new normal for the industry. In general, an increased portfolio of services, and then also floating wind, we are oftentimes asked about is a floating wind a threat or it's an opportunity? We see it as an opportunity. We want to play a role in the offshore floating wind space. We think it's the same client. It's the same equipment, and it happens offshore. It's on the different foundations. But we are already involved in 2 different projects in floating wind and it's something where we are aiming to play a significant role as well and also an area where we are willing to invest when and say -- when the industry is right to take a floating wind to utility scale. At the moment, it's still too much test and trial, but when we are ready to take it to commercial scale and utility scale, that's also the point where Cadeler will be ready to play a real role in that industry. So with that said, we are happy to open up to questions from both the audience here in Oslo, but also from online. And I promise our marketing department to shift to this slide as well. So any inquiries can come to us. But with that said, happy to take questions if there are any. Yes.

Yes. [ Roel Hardison ] Clarkson Securities. I want to start by asking you how you think about the risk of time and cost overruns on crane upgrades. Where do you see the biggest risk? And how are you working to mitigate those?

Yes. That's a good question because whenever you execute a project, there's a risk for both cost and time overrun. But we have tried to mitigate. Let's say, the biggest risk is, of course, the whole taking off all cranes and putting on new cranes. That is the biggest risk because that's really the big 2 milestones you have to execute. We are doing as much preparatory work as we can on the vessels before we even arrive in the Netherlands. But one of the mitigations we have done, for example, as I told you in the presentation, we have booked geared vessels. So the vessels that arrive in the Netherlands with the new cranes are not depending on the ringer crane being ready for offloading. They can offload the new cranes themselves. And that is a mitigation for us, so we don't need to sit and wait for the ringer crane because we have booked a massive ringer crane to put on -- to take off the old cranes and put on the new cranes. And that's also why we do it back-to-back because that ringer crane, I think there are 4 or 5 of them available in the world today. So to have that for an extended period of time is actually very, very difficult. But that's another mitigation for us. We have gone through many, many different iterations of how to take off the old cranes and put on the new cranes because one of the real complexities is we have 105-meter long legs where the crane has to come over. And that either requires a very, very high lift or a crane on the deck of the vessel where you jack the vessel out of the water completely. So you don't have to lift over the legs. So that is very complicated. But our mitigation to that was to simply book one of the biggest cranes in the world to lift over the leg. Some of our competitors have even chopped off a leg to -- so in order to handle the challenge. So there are many different ways, but that's 2 examples of mitigation. And of course, we have a very big team working on this to make it a success. We have also clearly communicated it has to be a success. We know that a lot of people are cheering for us to make it a success, and we certainly also want to make a success ourselves.

And then I want to touch a bit more upon the current bidding environment, obviously, a very hard a lot of activity, and we have seen developers looking to secure demand for routing time and even beyond specific projects. Or any other such trends we should be aware of or any other material observations that you have made that you would like to share with us?

Yes. I think that what we have said throughout 2023, so far is that we see, in general, an improving market environment for us both in terms of terms and conditions. So we also see that, for example, the foundation T&I contracts, they are working on new terms and conditions. So the terms and conditions are not as onerous as they used to be for the contractors. That's, of course, a benefit. The pricing is going up as well, I would say. We know already now that we will be announcing contracts in the not-so-distant future with new normals on rates. And I think also in terms of utilization, both for O- and X- and F-class, we are looking into a picture where we think the challenge will be not to have overlaps rather than 2 big gaps, so to speak. So I think higher utilization and expected better rates than expected and better terms and conditions than expected. I would also like to say that I think that our guidance today reflects that 2023 is actually a slightly complicated year because there's a lot of things happening, and there are things that are not signed yet. But I would also say that there are probably more upside potential than downside risk in our guidance.

Then we also have a question online that actually lines up with us very well. So here's the question. Obviously, you're tendering some projects at the moment. I'm just curious, how do you see the payback on these contracts and still upwards trends? And how can we potentially see below 4 to 5 years in payback on these contracts?

On the vessels or...

Yes, on the vessels.

Yes. But I think we are there already. So I think we are there. And I think even in some cases, we are beyond that as well. So I think that we are there. And I think that one of the challenges that we see is that it's a little bit a generalist view when it's reported in the analyst report, what is the day rate because most analysts, they just divide by 3 days per turbine. And that's probably too generalistic for every project because different products have different conditions. And that's also why we don't like so much to operate in day rates because you cannot really use that. Some projects, it's less. Some projects, it's more. So that day rate can be faulty if you don't have the right input conditions.

If I can just continue on that with the pace of installation that you're talking about. So over the last 10 years or so, the average time of installing a turbine has dropped by like 40% I believe. So how much further do you think installation time can drop? And could that learning rate we've seen the last 10 years sort of be offset by more complexity surrounding larger turbines and larger foundations? How do you see that?

You can say just because the turbine growth, it doesn't take more time per se because it's still the same amount of lift you have to execute. So actually, we will see that continue to drop, especially with the efficiency of new vessels. If you compare an X-class vessel to a vessel that can do 2 15-megawatt turbine per load out, then on a project like Sofia where you have 200 kilometers to site, the X-class is just incredibly much more efficient because you don't have to do the transit again and again and again. On a 100 turbine project, they have to do 50 transits. We have to do 15 right. So it's -- and you have this massive transit. You have to wait for title restrictions and [indiscernible] and weather and all of that. And that will all be baked into the number of days you use for installation. And that's also why I'm cautioning that 3 days per turbine. I know we have talked about it ourselves to give something at least, right, but it is probably too generalistic, projects that we see currently in the Netherlands. It's less because you're basically just out of the port and you're installing incentive conditions, very simple jacking conditions. On the other hand, a market like Korea, where you are looking at 30 meters soil penetration in mud, that will be very challenging on time because you need a lot of pre-loading on the vessel and all of that. So it's different markets, different conditions. But I do believe that the efficiency for some will continue to improve. And that's a selling factor. And for us, we have looked at projects with 100 turbines where we are as much as 70 to 80 days faster to legacy assets.

Andre Mulder from Kepler Cheuvreux. I just wonder a bit about prices for your vessels. Could you give some flavor on where we are today if you were to order a new vessel?

It's actually a question where we don't know the answer, but we hear the speculation. And I can say that I think an X-class today would be between $400 million and $450 million, and I think an F-class would be between $425 million and $475 million. But I don't know the exact -- so that -- it's with all the disclaimers that we don't have a current price. The way it works is when we quote for a vessel, we need first all the components suppliers, the big component suppliers like jacking system crane and engine package and electrical package and all that, they need to quote first. Then it's mixed into the yard offer. And then the yard takes the EPCI delivery. But we're also careful of not asking pricing because it could indicate that we're ordering. And so we don't go out without a real mission because that can be challenging to get the best price.

Okay. That's clear, and the second one on your contracts further out in time. There will always be some discussions and people wondering what happens if a contract gets canceled or delayed or anything. Could you give some flavor on where we are on that? What would happen for you guys if the contracts get canceled?

Yes. That's a very real example. I'm happy actually you mentioned that because there was some talks around or Hornsea 3 right and whether that's canceled. And the Danish media said that yes, now it's canceled and it's hanging on a very thin thread that project. And then rest of the contract at half -- for half of the turbines, right? And it was like, okay, that's either you would believe that Orsted like to pay termination fees or actually that the project is still on track. I will leave it up to you what you believe, but I think that the termination fees are following the lines of that the terms and conditions are improving. So it is expensive for developers to cancel projects because we do not allow reservations on our vessels at the moment. It has to come with a penalty if you cancel. And I would go so far to say that in certain years, if clients were to terminate, it would be a benefit for us as a company. I hope that's clear enough. Okay. Are there other questions in the room? I think there are no other questions online. That must mean that we came basically around every question that is out there. But obviously, we have the e-mail address here, and also we are available at any time for anybody who is interested in the company. That's important for us to say we want to integrate, but everybody who has something they want to learn about Cadeler. So please reach out to us if there are any questions that you want to do bilaterally. And obviously, we're also in the room after we switch off the online presentation. But with that said, thank you.

Thank you.