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

Good morning, and welcome to Cadeler's earnings presentation for the first half of 2024. Presenting today are Mikkel Gleerup, Chief Executive Officer; and Peter Brogaard, Chief Financial Officer. Please be reminded that the remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. The risks and uncertainties that could cause Cadeler's results to differ materially from today's forward-looking statements include those detailed in Cadeler's annual report on Form 20-F on file with the United States Securities and Exchange Commission. Any forward-looking statements made this morning are based on assumptions as of today, and Cadeler undertakes no obligation to update these statements as a result of new information or future events. This morning's presentation includes both IFRS and certain non-IFRS financial measures. A reconciliation of non-IFRS financial measures to the nearest IFRS equivalent is provided in Cadeler's half year report. The half year report and today's earnings presentation are available on Cadeler's website at cadeler.com/investor. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. As a reminder, this call is being recorded today. If you have any objections, please disconnect at this time. Mikkel Gleerup, you may begin.

Thank you very much. And good morning, good afternoon, and good evening, depending on where you are in the world. Very happy to be able to present here from the New York Stock Exchange on our first half year result in 2024 which also is coherent with the strategy we have laid out that we want to visit different parts of the world with these reports that we are going to do on a quarterly basis and meet our investors where they are. And this time, it's in New York. So really happy to be here. So in terms of the half one 2024 highlights, just to briefly go through that. Financial performance is in line with our expectations. We have successfully delivered the first newbuild Wind Peak on time and on budget and as we also said in connection with that, we have delivered 5 million man hours with several LTIs on this vessel. And as it was just announced this morning, we had 3 million man-hours on Wind Pace, the following vessels without LTIs and 1 million man hours on Wind Ally, the third vessel from COSCO in Qidong also without Zero LTI. So in grand total, 9 million man hours without LTI, which I really think is something to celebrate. We had launched the Wind Maker and the Wind Pace. And Wind Apex, the third A-class has been ordered with expected delivery in the first half of 2027. All newbuilds are on track that we deliver on or in advance of scheduled project work which is also a key target for us as an organization, really delivering on our CapEx budgets, on time, on budget. Signing of the 3 VRAs, vessel reservation agreement in Q2 has marked a very important milestone for the company because we have also signed the largest vessel reservation agreement in history of the company, it's between EUR 400 million and EUR 700 million and these vessel reservation agreements are not included in the backlog. We will go more into that later how it's done. But our contract backlog now stands at a record of EUR 1.9 billion with further growth in the coming months ahead of us. We have continued progress on post-merger integration of Eneti, and we are realizing synergies actually above what we expected in -- when we did the combination of the 2 companies, especially on the financing side where we have to place the M-class facility on much improved and more attractive terms. Q2 highlight in terms of commercial. The Wind Orca continues to execute the project on -- more in West, where we currently install the world's largest ever installed serial produced offshore wind turbine, 14.7-megawatt from Siemens Gamesa. This is a project where we have started working with the new brand on Orca, and I'm happy to say that we are executing as per expectation, both from ourselves and from the client. Wind Osprey also with the new crane, we are executing on the German [indiscernible]. And we are continuing to execute on a projected as well. During the chart we mutually agreed with us to release the vessel for 27 days to go and do some O&M work on some of the projects in the Dutch zone. This was really an opportunity to help a project that needed it while the project we are working on could do with the [indiscernible]. And in connection with this, Ørsted has called additional 74 days on the Gode Wind 3 project with Cadeler. On Wind Scylla, we completed a very comprehensive drive up work, which we did in France and we believe that it was very important to really go to the bottom of the vessel here because the vessel was going to transit immediately after that to the U.S., where we are going to install first one project which is the Revolution Wind and thereafter [indiscernible] project in this region. And I'm happy to say that we are now in the U.S., we have worked closely with the American authorities, and we have been extremely pleased with the collaboration we have met here in the U.S., and this is something we did definitely want to build on. And also happy to say that we are now starting to execute on the Revolution project. For the Wind Zaratan. We continue to execute for Siemens Gamesa on the Yunlin project in Taiwan, and we are still having quite some work there to complete, but I expect definitely completion within this year. In terms of backlog and how the backlog has built up, and when we say that we have a record backlog, we have added this year the Inch Cape project, which is a project that I believe is worthwhile mentioning because it is a project where really we saw the benefit of having a client that needed the support of what we can deliver, but also having the right asset available for the client. And there, we found what we believe is a good balance in terms of project economics, but also the ability to execute to the clients' expectations. And hence, I think we demonstrate what the market currently can deliver if the things are really falling in place both with the plan the demand of our services. Also on the A-class vessel for 2027, we have -- we have closed a project where we have added to the backlog, which would both be turbine or foundation work in 2027. And focus for us has been 2027, no doubt about that because with the delayed auction round 5 sorry, where there were no bidders 2027 became a focus for us to ensure that we have strong utilization. I'm happy to say that we have very strong utilization with what we have in the backlog but also in terms of vessel reservation agreements. And on the vessel reservation agreements, we have 3 vessel reservation agreements, as I mentioned earlier, that is not included in the backlog because they are subject to look to national auctions. And we are facing 1 big national auction ahead of us, which is the auction round 6, the U.K. and coming off a missed auction round 5 -- we saw improved pricing in the auction round 6, but also just before the submission of the bids from the developers to the auction round 6, we saw the U.K. government increasing the budget in auction round 6, round about 50%. But of course, it's about betting on different horses in that auction, but we do believe that we are in a good place on the auction round 6, and are looking forward to seeing the results of the auction expected sometime in December -- sorry, September. And on top of this also together with Equinor and Polenergia on Baltyk II and III, where we also have another 2027 project that is in process at the moment. So really, the project backlog today consists of several projects in Europe. Europe remains our strongest market, but also in Asia, where we are developing the pipeline and equally in the U.S. We do see U.S. as a market that is starting to get real legs and where we can see that there's more and more activity and with the work we're doing together with Ørsted at the moment here in the U.S., I believe that we, as a company, has a first-hand experience on how it is to operate and in our first experience here has been incredibly positive. And we're working together with all stakeholders in the market because as I've said for the last years, we believe that the way you positively built in a new market is that you create value for everybody involved, and that is really what we try to do as a company. So in terms of the backlog, the backlog, as we have reported before, now stands at EUR 1.925 billion, including the auctions, and that's something that, of course, has been important for us to continue to build that backlog number. And it remains a focus as well. And we have a second column in this presentation, which is where we have added EUR 94 million on top of that number, and that's because 1 of the projects in 1 of the vessel reservation agreement is fully contracted. So we have a fully completed contract that is signed by all parties, which is now only subject to the national auctions. And we are trying to give as much transparency on the backlog and how we can do it, but we do not want to enter into any sort of backlog any number that doesn't have a term contract behind it. But of course, we are contracting on all these vessel reservation agreement, but also it's something that takes a long time, especially when it's around foundations. It's not only time-consuming, but it's also incredibly resource consuming. So I think in terms of what we have added strong utilization, both in Europe, in the U.S. and also really a new normal in the industry, I would almost say in terms of what we have seen in the Inch Cape as I said, when things they come into the optimum fit both for us and for the client, then there is an opportunity to really make sure that we create a true win, wins, both for the company, for our investors but also for our clients. And then strong vessel reservation agreement, which we are looking forward to bring to fruition over the coming months. In terms of the progress on the newbuilds, this is, of course, something that is also a great importance to our investors. We know that. And I'm very, very happy to report that the Wind Peak was delivered on time and on budget, something that I think -- it's not exactly normal in our industry, and we have worked incredibly hard to deliver this and my thanks really goes to the teams that have been involved in this, especially the on-site team that have been working day in, day out to deliver this result. And we had a beautiful day in Qidong on the 15th of August, where we named the vessel and really are now ready to leave the shipyard to start work with this vessel. On Wind Pace, we also continue the progress. I'm actually pleased to say that we probably will deliver slightly ahead of schedule on Wind Pace if everything continues as expected. And that is really now the learnings from the first new building that is starting to come into the number of vessels we are delivering from COSCO. On Wind Maker, there's a little bit of, I think, they come slightly different the 2 yards, Wind Maker has built at Hanwha and Wind Pace and [indiscernible] built at COSCO, and they come slightly different in terms of how the construction completion is. But also there, we are a bit confident also with discussions we have had with the top management of both Hanwha Group but also Hanwha Ocean in terms of that we will deliver in time for starting the project that we have signed Wind Maker for. We continue to monitor it on a daily basis, and we have also not taken our last trip to Korea to ensure that the actions also met the reports. So we are following this incredibly closely from every single corner of the company but we are still very much on target to deliver these vessels for the projects. Same on Wind Mover, we expect we that we deliver at the end of Q4 '25 at the moment, and this could slip into Q1 '26, which for us had no importance, whether it's the end of Q4 or the beginning of Q1 '26. But this -- at the moment, we are trending towards Q4 '25, and that's why we report that year. On Wind Ally, we are also seeing a very strong performance from the yard. And here, we think that we will -- we can actually see now here that we are planning the Keel laying for September 2024, which also means that we likely are delivering as much as 2 months ahead of schedule on the Wind Ally. On Wind Ace, everything is scheduled and on Wind Apex, we will start the steel cutting in Q3 2025. A few views from the delivery of the Wind Peak. We have -- we have the vessel completing sea trials successfully doing overlook testing of the crane, of the jacking system, and you see some pictures here where we are jacked up to full jacking legs and also a fantastic base, together with the [indiscernible] of the vessel where we really made sure that it was probably celebrated this amazing milestone for the company. And also some sneak peaks from the following vessels, you can see the crane has been installed on the Wind Maker, which is, of course, a very, very big milestone, but also really the launch of both Wind Pace and Wind Maker, while we also continue the strong progress on the block assembly for the following vessels, but really, all in all, on track with all the vessels. And this chart here just confirms what we have said basically for the last quarters that we are still confident that we will deliver these vessels. And the first 1 delivered on time and on target, which, of course, should give confidence on the remaining vessels from COSCO, then there has been a lot of lessons learned in this and the learning curve has been steep, but now we are starting to benefit from that learning curve in the following vessels. In terms of the merger synergies since the closing of the merger, we have materialized around 30% of our 2026 target and these merger synergies come from SG&A savings, but also from financial savings where we have really managed to get much, much better terms on financial terms. And I'm happy to say that we are ahead of our own target in terms of the SG&A and financial synergies, where we earlier expected a slightly lower number, while we still have great confidence in both the operational and the commercial synergies that we are looking into in the years where we are fully delivering the fleet. So message from us is really that we are slightly ahead on the first milestone in terms of the synergies but we have unchanged views on the commercial and the operational synergies in the merger. And at this point, I will hand over to Peter, who will go through the financial highlights of '24.

Yes. Thank you very much. The finance is very much a function of the merger of the [indiscernible] as compared to last year. Now we have both companies and it will be consolidated with focus instead of 2. And of course, in long-term first half and Q2 partly also was impacted by the O-class operating on the [indiscernible] vessel. Revenue was EUR 63 million as compared to, this is Q2 number. So that is for 3 months ending 30th of June. Revenue was EUR 63 million as compared to EUR 41 million last year. Equity ratio was still a very, very strong balance sheet that we have more on that later. Utilization was 76% as compared to 100% last year. That was -- it's a tough comparison also because, obviously, there will be a full utilization of all this in 1 quarter, which is we cannot [indiscernible] still impacted a little bit by crane upgrades and [indiscernible]. Market capitalization is now EUR 2.1 billion. EBITDA EUR 32 million a little bit less from last year. Cash flow from operating activities is EUR 4.2 million as compared to EUR 14 million. The backlog expected by mid has increased to EUR 500 million. This is again in the 3 months in the year 30th of June in Q2 numbers. As you can see revenue is higher than last year because of the port vessels in our operations whereas cost of sales go down, it's a simple function of having more vessels in the water. The same with SG&A and other expenses is EUR 14 million as compared to EUR 8 million last year. That is supposed because we have now merged with [indiscernible] we have the 2 organizations, and we are also building up for the future. So this is very much financials where we have to invest before we can reap the benefits from the contracts on the foundation, especially. So -- so in order to be able to deliver in the future, we are building of the organizations to be able to do to that. The EBITDA is in line with last year. There's a little bit of still we see that there is some integration costs were not very -- more amount, but we are not adjusted [indiscernible] so we just reported of EUR 32 million. Half year, its entirely, of course, you could see cost of sales [ toggled ]. The same goes for the SG&A in which [indiscernible]. And with EBITDA of EUR 32 million as compared to EUR 42 million last year. Headcount in the average for first half of 6 months is a 222 and then last year was 197 so this is a consequence of the ramp-up that we are doing in how to be able to deliver on the future. Balance sheet, equity ratio of [ 60% ] it's a very solid balance sheet with EUR 1.2 billion -- EUR 1.2 billion in equity as compared to total assets of EUR 1.6 billion. We should look at the half year accounts, you can see that the movement from the main merger is still at 16 -- EUR 17 million. That means that we have not seen any negative surprises -- in the first half, and when it comes to IFRS, there were some surprises, negative or positive and then we need to adjust this goodwill for the 12 months. But there has been no surprises in first half so far. We are also not to stress that the interest we created anything [indiscernible], so there's no overhanging [indiscernible] from transaction cost any change of control and so forth. If we look at the CapEx program, it is expected to be fully funded. And when we're saying that, then you have to bear in mind that some of it is already signed and committed that is EUR 1.1 billion that you can see to the left that is the RCF and the P-class facility, M-class facility and the Holdco facility where we have [indiscernible]. And then there is A-class facility that has not been committed yet. So when we say that our CapEx program is fully funded. It means, of course, we've funded the equity part of, but also [indiscernible] this is what we need to [indiscernible] as we meet them. So we need to finalize financing on the P-class and the refinancing of the M-class and the Holdco facility, and now we are starting on financing the A-class facility, and that is on a term sheet basis and we expect to probably place from the P-class, but we have nothing indicates that we will not be able to do this financing. So that is something we need to understand when it says half year report that they need to finance the A-class and that was simply because of [indiscernible] 4 facilities at the same time with the same [indiscernible]. I will really also like to thank for the huge support received from the banks as you can see by the upsize of the Holdco facility, which is an unsecured facility in the first phase was in [indiscernible] and now we have upsized in to EUR 155 million total [indiscernible] completed. facility has also gone in first half which is also a fantastic job, I think, done by banks and aim to support in this way it was signed late in the '23 before the merger and now it has been refinanced with Cadeler terms and conditions. So we only have one set of chosen business same pricing, utilizing the bigger balance sheet and a bit of contract backlog and that is what maybe also mentioned [indiscernible] of the synergies on the financing side. So all in all, we have EUR 1.8 billion in the financing, and then we have tests 30th of June, and EUR 1.9 million. That was in EUR 1.9 billion, and then you can see is a small payment outstanding on the O-class cranes, P-class, drawdown at delivery [indiscernible] for the M-class and the A-class. But again, we have the equity portion in place for also the similar impact that was the capital increase that we did in February this year. Recently, we have extended the RCF-B facility that we have, and it was a quite [indiscernible] facility we have to ensure that we could go through the merger of [indiscernible] originally had 18 months and now really has been prolonged in 12 months, and that's simply to be able to capture a possibility -- the opportunities in the market that we see and to ensure that we have sufficient advantage to go through [indiscernible] delivering for our 4 vessels. So [indiscernible] and of course, we will also generate operational cash flow in this period and hence, our firm view that we have the financing that we needed we are fully funded with the current banks. We have done hedging as we also have communicated in the past year. We are not experts on how [indiscernible] delivered. So we have [indiscernible] the approach of 50% of the U.S. dollars after FX and 50% of the interest exposure. And that is to protect a little bit of the interest rate increase and also with an outside [indiscernible] decreases, and that has been to very well also some time at these to obviously going forward. Financial overview section. Strong again. We have the existing fleet on water O-class [indiscernible]. and Zaratan. We have committed financing of EUR 450 million utilizes EUR 260 million. So we still have something around the RCF-B and we have [indiscernible] on the RCF-B. P-class is for [indiscernible] and finance, M-class for [indiscernible] and finance, then this Holdco facility, which is unsecured facility of EUR 125 million, and there we have utilized EUR 80 million. And then we are in the process of securing the financing on the A-class, and that is, as said on an alternative basis, I would expect to be able to close this before the end of '24. In addition, we also have increased the amount of [indiscernible] guarantees that we had available [indiscernible] EUR 400 million. I gave to our brands in relation to our performance. That is now EUR 200 billion to ensure that we have also that available for the contracts we are signing. Full year outlook for '24. The outlook remains unchanged. The first half has pretty much been exactly as expected. So we will see -- we have [indiscernible] assumptions behind the '24 was -- and is on time deliveries and execution on projects. We have executed on O-class operation [indiscernible]. And then it's a successful delivery of the Peak and assume some contracts finally on the Peak in Q4 '24. There are few synergies in SG&A, which we are very comfortable with. And then last point, that is really only [indiscernible], of course, impacted by the buildup of the resources that need to do, impacted the short-term, the SG&A but would be a better fit the [indiscernible] that we are looking in a couple of years.

And just a little bit on the commercial outlook for the company. We continue to look into a very, very strong growth in the industry, and we can certainly see that in particular with the tendering activity that we currently are undergoing, we are, as we have said several quarters in a row now we have record high activity. But what especially is growing resources at the moment is tenders on foundation projects, where also the clients have a totally different expectation in terms of our deliveries to the [ budgets ] and where we have to document much clearer our ability to deliver, which is, of course, very fair because we are a very, very important stone on the journey to build this wind farm. And hence, we do see a lot of expectations and documentation requirements on our ability to build out the organization to deliver on these projects, not only in the tendering phase but also in the execution phase. And especially with these national tenders where there's clear deadlines on our tendering activity, it requires a lot of resource commitment into these projects. And one really is to bet on the right horses here. What we also see is that we do see a continued growth in turbines that has been discussed and not whether the industry will cap at 1,000 feet or 15 megawatt and so on and so forth. We think that the 15 megawatt-ish turbine sites will have longer time in the industry, but we do believe still that there will come something that is bigger than that and we can also already see that. And we are certainly working on projects at the moment where the turbine is bigger than 15 megawatts. For Cadeler, this is good because we have vessels that can deliver on these projects, both in terms of the payload require, delivery [indiscernible], the lifting capacity, but also the water depths of these turbines. So all in all, I would say that industry continues to develop as per our expectations with a slightly more positive outlook on the U.S. market compared to what we have had in the past. In terms of the supply and demand balance, we have based slightly off [indiscernible] data and let's say, it is publicly available data. Our own personal view might be slightly less aggressive than what we see here. But we are showing it because I think that's an important point in the slide here, which is that it's continued to grow, both in terms of the size of the foundations and the size of the turbines and also that there is certainly a need for the services that we deliver. In particular, on the foundation side, we do see that some of the floaters that have been delivered have less capacity to install in particular, monopile foundations due to the dynamic lifting of these foundations and also the limitations of the motion from logos. And hence, we do believe that our bet on jack-ups and the ability of the jack-ups, especially the A-class vessels when they come to the market will prove itself as a correct choice when they are delivered because we believe that we can definitely match the logos in terms of both tonnes and in particular, on the monopiles size that we can handle on the projects. And hence, we remain very, very positive in this market, especially in the period from 2016 and 4 where we are starting to execute our first project, the Hornsea 3 and with what comes after that. We are in still ongoing project work on several foundation projects. In terms of fleet buildout, we are at 11 vessels now. So last time we presented there was an LOI on the vessel, the fifth vessel from COSCO that has now been contract. We completed that in May, and we completed the contract within what we told the market that we would do. So also very positive on that. And I think that we can say that we have a very, very strong relationship with COSCO and there is a sense that we want to continue to work together because we have been building a very strong relation. And as COSCO said to us, when we delivered the Wind Peak with Cadeler one starts with having trust and then you can destroy it with others, you have to build trust. And I think that, that has been one of the key lessons for us, it's really to give our partners trust from the beginning and then make sure that they deliver on it. And that is where a very good working environment. So I think with our fleet size we are able to really benefit from favorable on demand balances and also the fact that we have said before, our clients are looking for redundancy more and more. And clients are tending to book more time for the same projects compared to what we have seen in the past. And we do see that exercise of auctions is something that is more a normal now, and it's happening earlier. And I think it's also been communicated by developers on their earnings part that they will execute on auctions earlier. So I think that, that is really something that we also continue to see in our business. The global footprint of the company is becoming clear right because we are working in all 3 major regions. We are looking at other regions as well, not that we are going to be an early mover into any market, but we are looking to follow our clients when there is work as we have done for the other regions. We said no to the U.S. in the beginning, but we are here now on that work to execute on a long-term basis. And that is really the whole idea of what we want to do in Cadeler when there is long-term work that is not considered to be R&D or test projects and all of that, then we are here to support. Then I also think that the fleet diversity in the Cadeler is also something that the clients really like. And we do see that it's typically a combination of, let's say, a newbuild asset and a legacy asset that the clients are going for because it adds a certain flexibility to the client as well, and that really ensures fleet wise strong utilization. So in terms of -- we have showed this slightly before, and it just continues to be true that we do see that the clients are -- clients projects are moving into deeper water and they are moving further away from shore. And again, it really talks about the ability of the asset, especially in the water depth capability. We do see projects where very few vessels can compete and the payload becomes a very, very important number because it's really around efficiency. And offshore wind, as I've said many times before, it is all about efficiency. So when you can deliver a more efficient solution, it almost [indiscernible] right at the best solution. So we continue to monitor this, but it will really continue to be the truth almost everywhere we live. In terms of empowering the green horizon, it's something that we will be communicating more and more about going forward. And one of the items is green fuels. And we believe that at the moment, alternative fuels are really one of the only levers that can take us all the way to net zero and as we have as a target in 2025. And for that, green fuels are the only available option in the near-term, although the vessels are prepared for the low-class [indiscernible] fuel types as well. And we have prepared our operations and Cadeler will begin testing bio fuels on board our vessels in Q4 '24, together with our clients, and we are looking forward to further report on that and how that reduces our carbon footprint. Because as we have said before, we really want to have our own agreement in this space here, and we don't just want to piggyback of other skilling wind bonds. So I expect that Cadeler will deliver on these targets as well. In terms of energy efficiency and digitization, we are also using equipment to maximizing the energy efficiency on board, and we believe that, that offers a lot of opportunity for us. And we have signed an agreement to develop energy management dashboards and our vessels. And also, we have conducted energy survey on board our vessels to identify the improvement opportunities, but also more where do we get more bank or dollars invested, so to speak. And that is something that we will continue to report on. There's also some collaborations in the making at the moment with some larger operations in Europe in terms of sharing knowledge on these various measures that will help us on this journey, which is, of course, very, very important. In terms of the organization, Peter has delivered some words on it in his financial presentation, but I think that it's, of course, obvious that we are saving up the team to delivering on the scope that we have are committing to the clients. We are still working with the same notion that we want to have a team that is lean and mean, so to speak, but also we need to create a certain degree of organizational effect, especially for the ability to take an extra foundation tenders. And this is something that we have worked hard on delivering on and especially with the order of the 3 A-class vessel this creates even more tightness in the whole tendering and it moves on to the project and then to the execution after that. And that is also why we are trying to demonstrate here that the growth of the team, of course, was impacted strongly by the merger, where we took on a lot of people, a lot of good colleagues from the U.K. and from Asia and from the U.S. We are very happy to see them on board and also in terms of how it's been integrated in an absolute joy to follow and everybody just delivers. But from here on onwards, -- it is a function of the increased the foundation T&I tendering activity. It's an increased project activity, it's a growth in the fleet and then its international expansion. And as we've said for many quarters also, we are a growth company. And then hence, we are showing it more as [indiscernible] but what we can say is that it's something that Peter and I -- we go through on a monthly basis, where are we in terms of this to ensure also that it doesn't, in any way, go out of control. But we certainly believe that we are managing this very properly as well. In terms of continued growth, we have discussed this a lot in the past, and the slide has changed a little bit since the last one, but really, we are focusing on the transforming installation spokes within the industry and within the whole ecosystem of building an offshore wind farm, but also the operations and maintenance part because I think you can see on the bar chart on the left side here, that there's a lot of value in the operations and management. And Cadeler will have a presence in the operations and maintenance space over time. For us, it's a matter of how do we do this at best and in the Cadeler way where we ensure that is value immediately from entrants into the space. And then that is an ongoing strategy as well we have with the Board and also where we are looking at various opportunities. But again, we're open to both vertical and horizontal expansion, organic and nonorganic growth, but also regional expansion, I've already talked about that a little bit. We are now in the U.S. and in APAC, so really present in all 3 main markets. But also, we are looking at the next frontier markets. And there are some markets out there that has lots and lots of potential. But in terms of maturity, they are not there yet. So nothing that we're going to invest in tomorrow or in the coming quarters at all. Strategic partnerships remain one of the foundations of the company, and we continue to really build strong relationships with our clients. We are supporting them a lot, and we can also see that from a national auction to national auction. Our involvement with the client becomes greater and greater. And that really also demonstrates the importance we have for the clients that the developers in these bids. And I'm pleased to say that that's the development we wanted to see, and we are seeing it and realized as we are speaking. And then really around monitoring and applying new technologies and ensuring that we are ready to help our clients in all different parts of offshore wind, both in terms of being more efficient on current types of projects, but also maintenance of operations of wind farms and then, of course, floating wind, which is still somewhat out and has definitely been pushed out more than we expected just a few years ago. In terms of investment highlights on the company, largest and most capable most versatile fleet in the industry. And I believe that a lot of complementarity that enables cost utilization, efficiency and derisking for the clients, and that is something that we definitely see that the clients are also very much in agreement with us about. Very strong team, proven track record and critical know-how and long-standing and deep commercial relationships and contracts with the industry's leading developers. And I think that, that is really what one should look at because there will always be different opinions about this industry and how should be done. But I think that the trust on the biggest clients is something that one has to earn it's not something that is easily given. We have a global growth platform, and we are now present in all major offshore wind markets, which is important for us and something we will build on. And there is an anticipated need for our -- both turbine and foundation vessels. And we see that already today. And we continue to see that especially in the years after 2027, where it becomes even more apparent. I would say that with the new turbine types actually. Today, there is this hope for [indiscernible] industry that the OEMs in many cases, only have one set of tools for their new turbines. And hence, any maintenance on the turbines are pending on that you have this tool set almost on your vessel for installation. And this is, of course, something that the industry has to work its way out of, but that's almost like an in-build [indiscernible] at the moment for especially the newer turbines. And then really a long track record, thanks to all our investors that we would like to send a big thank you to for the commitment and for the support, but really strong track record in the capital markets. We have delivered on the backlog and we will continue to deliver on the backlog. We still believe there's a lot of fire and power in the backlog, which provides the earnings visibility that our investors expect and write this so. And then we continue with a key focus on being a good custodian of capital. And that really concludes our presentation. And Leila you can now please open the Q&A.

[Operator Instructions] Our first question will come from Daniel Haugland who will be joining us as a panelist in a moment.

Yes. Good day, everyone. Mike Peter. My first question is on the A-class funding package. Maybe you could clarify that a syndicated debt funding package is still the go-to solution here? And maybe also say something about how this is developing. I see you expect to sign it by year-end. The reason I'm asking is that in the duty report you now explicitly right that you're exploring numerous options for funding needs towards Q4 2025. So maybe you can clarify a bit on that?

Yes. I also try to do a little bit in your presentation, but the rationale behind the A-class financing and covering it of the B-class is, of course, price. And in terms of conditions, we find those very attractive with this [indiscernible] with the 11 banks in the syndicate on the B-class. So I think it's very, very efficient way to that finance is to go with the same syndicate again and with the ECA backed loan because of, again, the pricing and the terms of [indiscernible], we can't get that from other sources. And that's really, really in the [indiscernible], and we would like to participate and get the [indiscernible] on an ongoing basis. And -- and they are really interested to be in a [indiscernible] have available funding for all the states that we sell out term sheet, which is negotiating right now. And that is negotiating on the basis of the B-class or [indiscernible] deliver in to the bank, it is 11 banks. There is no indication that any of the banks will not participate. So we are quite confident of getting this financing on the A-class versus it will be the 2 first A-class vessels. And then the third in another facility because that will be delivered in '27 and then we have to be in commitment fees for a long period of time and we don't want to do that. So we are in starting phases. But we are very, very confident that we would be able to do this and that we have paid off available [indiscernible] without having to issue any new capital and yes, so that is the answer.

Okay. So maybe my follow-up would then just be to be clear. So your plan does not include any more equity funding based on the current fleet on order. Is that correct?

Yes. To be very, very clear and thank you for also the advice for the -- we can be very, very clear. We do not expect any further chance of increases to [indiscernible].

Next question comes from Ben Nolan from Stifel.

So I guess -- well, I'll start with my first question. I was curious about the Zaratan, which I believe is operating in Asia. Any updated thoughts on -- obviously, that asset is a little bit smaller, but any updated thoughts on employment post its current contract and how you see that fitting in with the rest of the fleet going forward?

I can say that we obviously update the market with new contracts as we sign them. So when we sign something with Zaratan, we will update the market. But I think that as we have said before, we expect that Zaratan gradual would slip into a more operations and maintenance-related role in the industry, but also potentially a role around secondary steel on foundation projects. A scope that is in many times in our decision, so to speak, which kind of solution we use for that. And it sounds as a simple score, but actually it forms a relatively big part of the project. And on Hornsea 3, we can definitely see how big a part of this just on let's less than 200 foundation budget. So it is something that we are actively evaluating as well. We'll see over time potentially need an upgrade on the leg and stuff like that, potentially, but that's not something that we see at the moment.

Okay. That's helpful. I appreciate it. And then as my follow-up question, just for modeling purposes, how should we think about taxes and the tax rate for the business going forward?

Yes. On the short-term, you should think that it is zero tax expense. We have a small tax expense that is related to [indiscernible] Taiwan and that is basically the only tax we are paying. So you just think it will not be higher than what we see in new accounts now. So it is not depending on how much we earn because we are under terms in Denmark, and we will also [indiscernible] in the U.K. So that is how you think about it. If you look longer-term, you all know some of these are [indiscernible] and don't know how that will detail [indiscernible], but they will not be relevant for Cadeler before [indiscernible] and there are some extensions for shipping that we can utilize. And there will be some [indiscernible] here to come to be wiser, I think, for everybody. And that will probably also be some change or that we can learn from what will not be tax should [indiscernible] significant longer or something like probable income tax [indiscernible] of the projects. But what we need to see how the 2 would carries out and you will, of course, come under the 2 because of the [indiscernible] but what we are not only concerned that it will be over a impactors to be seen how, but nobody knows now.

Our next question comes from Ola Eikanger from SEB.

Good to see you guys -- could you please help us understand why we are not seeing any more newbuild orders coming through. The market is evidently tight. The rates are very attractive. So why are we not seeing any more newbuild orders? And has the newbuild order price moved in any direction over the past months? And what is the current lead time when ordering a new vessel?

I think in terms of why there's no or low orders coming in, that's a small question for our competitors because I think we have ordered this year and have followed our plan, so to speak, -- we believe that we are where we should be. But why others are not ordering, this is really, really difficult to speculate around. What I can say is that it's not easy to order new vessel. Several of the yards out there that was available to build these types of vessels in 2021, they are today projecting to build this kind of vessel. And I would expect that, for example, if you go to Hanwha today to order a similar vessel of what we are building in China, it would either be difficult or incredibly expensive. So your pricing question is also pretty difficult to answer because as we are seeing brands coming up and we have been benefited from, let's say, capacity agreements we have made with the yard in China, we do expect that still that it's more expensive compared to what we are ordering at, at the moment. But if you want to convert one of these yards that currently are saying no to saying, yes, and it will require a lot of capital. So the reason is probably that it's very expensive. It's very hard to get a slot and delivery times are a bit long. And I will expect that few orders today, you are probably looking at late '28 if not early '29 delivery. But that's a little bit a guess because I don't have the full view on the market, but it is a very, very difficult market at the moment with the yards. And I would go as far to say that one of the game changers at Cadeler has been our relationship with COSCO in Qidong.

Our next question comes from Rod Harvison from Clarkson.

Congratulations on another solid quarter. Just building up on all those questions on growth opportunities. I know cable installation vessels have previously been highlighted as a call it, potential next step in terms of growth and vertical integration. Do you still see a potential path for acquiring or building such vessels? And if so, what will need to be in place for a move in that direction to be on the table and be realized?

I think, yes, very much so. It continues to be an area of interest for Cadeler. So yes, we could do that. What it requires is utilization guarantee from the clients. We are not going to build a cable business based on one project. We've been very clear with the clients on this if they want Cadeler to be paying a role in cables, they need to give us more utilization than just one project. So it has to be significant what we do with the first vessel. So we can build up in a measured way because one of the last sentence I said in the presentation is we want to be good custodians of capital, just because one has the opportunity to do something one should not always do that. And for cable laying so far, that has been our conclusion. But we are still open to doing it. And we think that clients are still interested in working with us, but it has to come with a lot of commitment.

This concludes today's conference call. Thank you for your participation. You may now disconnect.