Gaztransport & Technigaz SA (GTT) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the GTT Full Year 2022 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Philippe Berterottiere, Chairman of the Board and CEO. Please go ahead, sir.

[Audio Gap] Here I am today with Virginie Aubagnac, who is the group CFO; with Jean-Baptiste Boutillier, who is the VP Innovation; with Jean-Baptiste Choimet, who is the Managing Director of Elogen; and with Anouar Kiassi, who is the head of GTT Digital Activities. I'm very pleased to present to you the 2022 results of GTT. And to start with a short company overview, you know us, but I would like to say or to repeat that our conviction is that technology is the most efficient enabler for energy transition. And we assume this mission in developing cutting-edge technologies, in cutting-edge technological solutions to help building sustainable world. We do that through human capital, through intellectual property. You do that. But basically, if we could resume that in a world, it's in combining skills. And that's what we do in our core activities on LNG carriers. It's what we do at Elogen. It's what we do in our digital activities. Year 2022 has been a year of crisis in energy, a year which has been perfectly exceptional compared to what we were expecting. People have rediscovered the importance of having reliable sources of energy, of being able to store energy, the importance of having a diversified energy mix. The LNG industry has evolved very much also in 2022. We had not less than 4 new active shipyards building LNG carriers, which means that we multiplied the number of shipyards building LNG carriers by 2. We obtained 162 orders for LNG carriers, which is totally unexpected. And this exceptional flow of orders shows a very strong confidence from the market, which lies on our know-how, our zero default approach, our reliability, our reactivity, our full assistance and support to new shipyards. Well, in order to develop technologies for decarbonization, we continue to develop and to invest in our agencies. We did that for LNG as a fuel. And in 2022, we introduced improvements, technological breakthrough in that respect, which had convinced ship owners. We did that in our Digital Solution portfolio. And there as well, we convinced owners to adopt our solutions. It's true for the weather routing that we introduced or for the CII monitoring tool. So we're going to keep on -- you know that we are going to keep on to do that in the years to come. We are anticipating the coming world in, in fact, investing on net carbon structure. We do that in hydrogen with Elogen with the LH2 project. We could talk of some additional initiatives, which show OSE Engineering as a partner of very interesting R&D program some days ago. But we are looking also at how we can further decarbonize the shipping world. We've been the first to introduce ammonia-ready containment systems. We are going to have a carbon capture system onboard in 2025. And we are taking minority stakes in very innovative companies in order to keep very well informed of the innovations which may appear in our sector. On our sustainability road map, we do want to contribute to building a sustainable world also by becoming a very strong sustainability partner for our stakeholders. We have been recognized -- we have been rated B by CDP, which is very good. And we are going to detail, in 2023, our road map -- our ESG road map. As you can see, we have many initiatives in that respect and all that will be detailed for our stakeholders this year. Our Ammonite. I know that some of you are eager to see the updating of our Ammonite. In our Ammonite, our Ammonite should lead us to a zero carbon future. And you can see that our latest development in terms of carbon capture, in terms of electrolyzers, in terms of gas handling technologies with the Recycool systems that we sold already several times, are putting us on that way. It does not mean that we disregard our developments, past development, for example, on our containment system systems. And for example, the NO96 Super Plus System that we introduced in 2021 has been sold many times in 2022. And I could say the same about digital activities with new developments, as I was referring to. We have taken the decision to have a strategic venture fund in order to contribute to this strategic road map. This structure is dedicated to invest into technology startups. We will be very much aware of what they do. We will possibly imagine a cooperation, and we could help them to accelerate their development. After this short introduction, I would like to give the floor to Jean-Baptiste Boutillier for talking about our focus on R&D.

Thank you very much, Philippe. So GTT as a technology provider company has innovation at the heart of its strategy. Innovation is a core value of GTT and thus, we are innovating in various fields in core business, but also in a zero carbon solution. With R&D and innovation at the core of GTT's strategy, we invest annually approximately 10% of the company's revenue into innovation. Within the group, more than 160 people are working for innovation, as innovation and intellectual property are the DNA of GTT. We continuously file patents. In 2022, we filed 61 new patents. And thus, we have been ranked for the third year in a row at the first position for the midsized company applying for patents in France at INPI. In our innovation road map, we have more than 60 ongoing innovation projects, and we are participating in various innovation programs. I would like now to focus on 4 main projects, 1 innovation project, of course, 1 project for the core business and 3 projects for the zero carbon solution. So for the core business, in 2022, we developed innovative design of LNG carrier. This innovative design has 3 tanks instead of 4. And with the 3 tanks, we carry the same amount of LNG. These innovative designs bring added value to all the stakeholders along the value chain. So the shipyard benefit from cost reduction and from reduction in construction time. The owner benefits also from reduction in CapEx and a shorter delivery time. And when it comes to the charterer, the benefit from an improved performance, which implies or induces reduced CO2 emission. This innovative design has been granted in 2022 with 2 approvals in principle, 1 from Det Norske Veritas and another 1 from Bureau Veritas. Beyond the core business, we prepare 2030 and beyond by developing transportation solutions for liquid hydrogen, because we are convinced and we know that hydrogen is the cornerstone of the World Energy Transition. So the purpose of the development is to enable the transportation of hydrogen in large quantity over a long distance. And we are convinced that LH2 is a proper vector to do so. In this project, we have an active and ongoing cooperation agreement with Shell, and together with them, we received 2 approvals in principle in 2022, 1 for the containment system itself, which has been designed by GTT, and a second approval in principle by DNV for the design of the LH2 carrier, it is a small vessel of 10,000 cubic meters. The second project I would like to focus on the zero carbon solution is the onboard CO2 capture. For this project, we are part of MerVent 2025 project together with [indiscernible], CWS, Ecole Centrale de Nante, and our subsidiary company, OSE Engineering. The objective of the project is to divide by 2 the CO2 emission of a vessel of a similar size propelled with standard fuel. To do so, the project team will design, build and operate, by 2025, the first commercial containership with hybrid propulsion. Hybrid propulsion because the vessel, as you can see on the picture, will be propelled with the wind, but also with synthetic fuel. GTT contributes to this project on 2 aspects. The first 1 is the design and the development of an onboard CO2 capture. So we will make a prototype. This prototype will be tested first onshore and then onboard the vessel. The second contribution of GTT is made through our subsidiary, OSE Engineering, who will develop an optimizing tool for the energy mix during the design phase, but also for the operational phase and then we'll have a real-time optimization of the energy mix. The third project for zero carbon solutions, I would like to present to you, is HyMot project. So the purpose of this project is to develop a hydrogen engine, and this is done through our subsidiary, OSE Engineering. So OSE Engineering is providing digital intelligence for engineering and is participating to this project with various companies, as you can see, Centrale de Nantes, Forvia, Bosch, Renault, Alpine and Total. So the purpose is to develop internal combustion engine with hydrogen for light transportation vehicles. If we look at the broader picture, we are convinced that hydrogen internal combustion engine can also be a good solution for the maritime industry in the future. To summarize, I would like now to give you a synthetic view of the innovation road map of GTT. It covers projects on core business, LNG as a fuel, digital solutions, and zero carbon solutions. For the core business, we work on further reducing the carbon footprint of the LNG carriers. I mentioned the 3 tank design, but we continuously improve our existing system, and we develop new systems such as GTT NEXT1. For the LNG as a fuel, in addition to the onboard CO2 capture I presented you a few minutes ago, we want to enable decarbonization of the maritime industry, and we target new vessel segments such as VLCC, Very Large Crude Carrier, and Pure Car and Truck Carriers, PCTC. For the digitalization, we developed digital solutions to improve the operational efficiency of the vessel. And Anouar will present you in more detail all our activities in digitalization. And finally, for the zero carbon solution, we prepare today the solution of tomorrow, 2030 and beyond. I now leave the floor to Philippe Berterottiere for the strategy part.

Thank you. Strategy. On Energy business, there are 3 factors which are contributing to its growth. The first one, it's the growth of natural gas. And it's fueled, if I may say so, by the coal to gas switch, which has to happen in order to reduce the CO2 emissions. Lot of energy, electricity mixes are still very heavily relying on coal. And in fact, it has increased in 2022. Also because gas is a perfect fit to the renewables in order to cope with the intermittency. But LNG is growing faster than gas as there is a pipe to LNG switch. We saw that in a fairly sound manner in 2022. And also because there are new markets for LNG, as we can see, in Western Europe, but also as we can see with LNG as a fuel. LNG carriers, that's going at a pace even faster than LNG because of the acceleration of the replacement market due to environmental regulations. Let's look at that in more detail. We can see on the left-hand side part of this chart, the various expectations from BP, from Shell, from Wood Mackenzie. And we can see that the central scenarios are planning, are forecasting significant growth up to 2040. On the right-hand side part, we can see what it means in terms of million tonnes of LNG per annum. And we've given a range in terms of demand between the optimistic scenarios and the more reasonable ones. And still, we arrive to a forecast of 240 million to 325 million tonnes per annum in 2040. So a quite significant growth of the LNG demand over the next 17 years. That means that LNG supply has to increase. And in 2022, we saw 28 million tonnes per annum, which have been decided, and which have passed the FID stage. And we can see on the chart here that many projects are quite ready to be launched, to be decided. They are at a very high level of contracts, covering their future production. In fact, in 2022, there were 53 million tonnes per annum of long-term contracts signed in that year. And it's absolutely huge and decisions for new projects should be decided quite soon. I would like to draw your attention on 1 point. It's that 90% of these 53 million tonnes are for American projects. So new environmental regulations are going to accelerate the fleet renewal and we can see that on the upper left hand side part of the chart that the fleet is fairly aged and there are many ships which are quite old. It means that our propulsion systems are old, are burning a lot, are emitting a lot. Regulations are going to put these ships under pressure and are going to push to replace these ships by new ones. Ships which are classified as E in the CII regulations have to do something immediately within a year. Otherwise, they are going to be condemned to stop their activities. By 2030, there are 240 LNG carriers which are going to be classed as E in this CII regulation. But our latest technologies are not only complying with the regulations, they are also allowing charters to save a lot of money. On this chart, we can see the LNG spot price on the left-hand side, which has been very volatile in 2022. And on the right-hand side, we can see the monthly gains that ship owner is making with Mark III Flex Plus, our most efficient system currently in operation, compared to a Mark III system, the system which is equipping many LNG carriers and that we sold up to 2011. And for example, in August '22, when the spot energy price was above $50, it was allowing owners to make a saving of $5 million per month. So it's huge. Of course, the energy price was very high. But with these conditions, you can amortize a modern ship quite quickly. So these elements of analysis lead us to these long-term estimates. For LNG carriers, we are between 400 and 450 units. It means the same forecast than the one we presented in July in spite of the fact that in the second part of the year, we signed for 80 ships. So as a consequence, we did not reduce our 10-year forecast. For VLEC, FSRU, FLNG and Onshore & GBS tanks, we did not change our forecast as well. So on LNG as a fuel, now we had a record year for GTT, never ever before. We enjoyed so many orders than in 2022 with 42 container ships. For large container ships, 7,000 TEUs and more. In fact, LNG carriers fueled by LNG are representing 56% of the orders. So it's a fact, LNG is a solution. And our market share is at 44%. Orders could slow down, in fact, in 2023 as a consequence of the fact that charter prices have reduced quite significantly. And also many orders have been passed, so the market could become a bit quieter in 2023. The best way to comply with new environmental regulation is LNG. When we compare LNG with methanol, which is adopted by some shipowners for the time being, we can see that methanol is not compliant because it's generating more CO2. So people are talking about e-methanol. Capacities are not there. And so they say they will blend e-methanol with methanol, but you need a lot of e-methanol in order to beat LNG in terms of CO2 emissions. And in doing so, you have a blend which is going to be more expensive than LNG. So we expect that LNG will remain the solution of choice for the decarbonization of the maritime sector in the long term. Now I will hand over the floor to Antoine Kiassi, who is going to talk to us about our digital solutions.

Thank you, Philippe. Good morning. So we provide digital solutions to our customers to help them reduce the cost of operations, reduce their emissions, and improve the safety of their vessels. And to do so, we combine our organic R&D and the targeted acquisition that we have done in the past. So as far as GTT is concerned, of course, GTT provides all the expertise about LNG, about naval architecture, and also the industrial standards GTT has been operating for almost 6 years now. And the acquisition that we have done introduced or helped us acquire capabilities and skills in all this digital domain. Marorka, for example, is providing all the modeling and the optimization of the vessel performance and Ascenz is providing the measurement and the sensoring technology. So all this was combined together to create what we call GTT Digital as an entity or as a brand. Our ambitions are to be 1 of the main players in this domain and develop synergies, of course, with the group to also strengthen the core business, but also to develop this activity as a stand-alone activity, generating revenue for diversification. So to illustrate what we are doing, these are a couple of, let's say, technical achievements or innovations that we introduced last year. The first one is the approval by one of the major players in this domain, ExxonMobil. So ExxonMobil operates hundreds of vessels and being approved by this company is quite actually an achievement that will open many opportunities for us. So it's not the end of the story here. Actually, it's just the beginning of something, as we will be able to deploy our solutions with this company all around the world, especially in the offshore business, but also in the shipping business. What we call Power is a solution that helps the charters to receive more cargo and deliver more gas to the shore. So it's really focused on increasing the revenue or the uptime of the assets. So this is something new, and we expect also this to bring a lot of value to our customers in the LNG domain, especially in the offshore, since here we are talking about offshore LNG, and we are in the upstream with regards to the value chain of LNG. And the latest innovation that we introduced in the LNG domain is the predictive maintenance of the membrane. So besides, let's say, the value that we provide, of course, to the customer, because they need to maintain or to conduct less maintenance for their tank, it increases the value of the GTT technology, because it reduces the OpEx to operate our technology and reduces the total cost of ownership for our customers. This is a very, let's say, clear contribution of the digital technologies to the improvement of the perception of the core business by our customers. And the last innovation that we have just launched, and we expect to announce even further innovation in this domain, is the weather routing or voyage optimization. The main benefit is to reduce the cost and improve the safety of the vessel by avoiding bad weather. But the strategic fit here is that we can kind of combine all our innovations into 1 tool that helps the captain operate the vessel. So instead of having different tools that the crew must look at, we have concentrated all our -- we would be able to concentrate all our innovations into this tool that gives advices on how to navigate and then take benefits from all the innovations that we introduced before. From a commercial standpoint, these are a few examples actually that shows our focus in terms of commercial strategy. We focus on 2 things: covering new territories. Here, we have examples in the Americas, where it's almost an intact market for our digital products, where we have to develop our commercial network. And these are the first successes that we have there, like in Mexico or in Chile, and we have many other countries to explore there. And also the second focus is to win more and more what we call fleet contracts, not only 1 or 2 vessels per, let's say, shipowner, but have the whole fleet under 1 contract. And this is 1 example with this gas carrier owner, which awarded us 30 vessels, and we expect more coming from the same owner and many other, let's say, similar contracts in the future. So I'll leave the floor to Jean-Baptiste Choimet to talk about Elogen and our electrolyzers activity.

Thank you, Anouar. Good morning. I will now share with you the main outcomes of 2022 for Elogen as well as our views on the outlook for green hydrogen. So in 2022, we achieved 2 key milestones for the development of Elogen. First, we joined the first wave of the hydrogen IPCEI, Important Project of Common European Interest, thereby securing a subsidy of maximum EUR 86 million, which enables us to support our R&D effort and to develop our stacks gigafactory project in France. Second, our commercial efforts paid off as our order intake was multiplied by nearly 3 with, in particular, flagship orders of electrolyzers, which I will present in a few moments. In terms of KPIs, 2022 revenues were relatively stable at EUR 5.3 million. And our order intake grew by 148% to EUR 15.4 million. At the end of the year, we were more than 70 employees as we managed to attract senior staff in all key functions of the company. In the last 2 months, we announced 2 very important orders, of which we are very proud. One order because it corresponds to the largest electrolyzer ordered from us so far. And the second order because its application represents a very exciting potential for green hydrogen. So first order, we signed our first 10-megawatt electrolyzer order with Enertrag, a German leader in renewable power supply. Under this order, we will deliver, in 2024, a unit able to produce up to 4 tonnes of hydrogen per day for various applications from heavy industry decarbonization to storage for electricity production. A few weeks ago, we announced an order from a joint venture between Shell and Eneco called Crosswind, and they interested us with an order for a 2.5-megawatt electrolyzer that will be installed in 2025 off the coast of Netherlands, and that will be coupled with an offshore wind farm. We are delighted with this order because it's the results of the efforts of the Elogen team, but also the result of GTT's knowledge of the offshore environment. As we already explained in other instances, our ultimate goal is to deliver to our clients electrolysis solutions that are as efficient as possible, leveraging the potential of the PEM technology. Already today, our in-house benchmark shows that our systems are very well positioned in terms of efficiency in comparison with our peers in PEM technology. And we keep working to maintain this leadership. This will be achieved thanks to the efforts we are currently putting on R&D, working both on the stack and the full electrolyzer itself. This current investment on R&D is critical to fully benefit from the market potential of green hydrogen. Indeed, this potential is considerable as up to 300 gigawatts of electrolyzers might be required by the end of this decade and between 1,000 and 4,000 gigawatts by 2050. This is to be compared first with the electrolysis capacity that is installed as of today throughout the world. As per the data from IEA, this was slightly more than 600 megawatts a few months ago. And this is also to be compared with the current estimated production capacity throughout the world as well, 15 gigawatt per annum. Therefore, additional production capacity will definitely be required. This is why Elogen is working on scaling up its industrial capabilities. First, creating a Center of Excellence for industrialization in our current premises near Paris, and developing our Gigafactory in Vendôme in France that will have a production capacity of at least 1 gigawatt per annum from 2025. Data from the IEA show that PEM is the preferred technology for incoming projects. We see 4 reasons for this. One, a PEM electrolyzer can be highly responsive to load variations, which makes it the ideal partner for direct connection to intermittent renewable power. Second, the innovation potential of this technology is high, which will enable us to reduce both CapEx and electricity consumption of our electrolyzers. Three, the footprint is limited, which, for instance, can be critical for offshore applications. And last but not least, there is only water flowing through the main circuit of the electrolyzer, which makes this solution significantly safer. So for the time being, however, the hydrogen economy is still in its early stage and more specifically, the electrolysis market is still in an investment phase. As such, all players deliver negative EBITDAs. Elogen aims at EBITDA breakeven by the middle of this decade. Meanwhile, we work to limit our cash consumption mainly through selecting our contracts, which we want to win because they bring value to our development and not growing our order intake at any cost; and second, managing our costs via a recent growth. Every day, Elogen experts do the necessary groundwork with passion so that when the required very large electrolytes projects are eventually sanctioned, we can be efficient, be reliable and be ready. Thank you for your attention. And now Virginie will present the financials.

Good morning, everyone. So thank you, Jean-Baptiste. And let's move on to the financials. Order book. 2022 was marked by an exceptional momentum in LNGC orders. Throughout the year, GTT has booked a total of 162 LNGC orders, of which 74 in the second half of the year. In 2022, we also booked an FSRU order as well as 2 VLECs. At the end of 2022, GTT's core business order book totaled 274 units. As a reminder, this figure excludes the projects in Russia, that means 15 ice-breaking LNGCs with Zvezda and 3 gravity-based structures with Saren. In 2022, GTT also booked 42 orders for LNG-powered vessels compared to 27 in 2021, representing a new record for the business. LNG as a fuel order book stands at 70 units at the end of 2022. At December 31, 2022, GTT's core business order book reached an all-time high level with a total value of EUR 1.6 billion. Again, this is excluding the projects in Russia. It's interesting to note that 21.5% of this EUR 1.6 billion will be built in the coming months and years by Chinese shipyards. This order book will contribute EUR 335 million to 2023 revenues, which represents a 23% increase versus 2022 level. This amount excludes EUR 35 million revenue from projects in Russia initially planned for 2023' EUR 504 million to 2024 revenues, which represents a 50% increase versus 2023, and an 80% increase versus 2022 with 72 deliveries. In 2025, contribution to revenues remains at a very high level of EUR 475 million with 84 deliveries. These figures confirm the increase of shipyard capacity. In 2026, and beyond the revenue contribution stands at EUR 280 million. It corresponds historically to an unprecedented visibility. A few comments on GTT's 2022 consolidated revenues. 2022 revenues stood at EUR 307 million, close to the 2021 level and in line with our expectations. Royalties regularly increased throughout 2022, quarter after quarter, with an H2 2021 strong order flow or inflow starting to materialize, notably in Q4 2022, which was up 14% versus Q4 2021. As mentioned by Jean-Baptiste Choimet earlier, GTT total revenues amounted to EUR 5.3 million in 2022, including EUR 0.6 million of subsidies. Services revenues rose sharply, up 33% versus 2021, mainly thanks to our digital activities as well as engineering studies related to the conversion of LNGC into FSRUs. Quick word on our cost base. Thanks to a lean and fit approach, GTT's cost base was stable in 2022 despite the impact of Elogen. Total external costs slightly increased in 2022, mainly due to the resumption of travel expenses, and staff costs also rose slightly due to share-based charges, but salaries and social costs remained stable. 2022 EBITDA stood at EUR 161 million, a slight decrease of 6% versus 2021, in line with our expectations. This performance reflects the mechanical and temporary decrease in GTT's core business revenues, the impact of Elogen being compensated by lean and fit cost approach of GTT SA. 2022 EBITDA margin stood at a high level at 52.4%, and net income amounted to EUR 128 million, translating into a net margin of 42%. And at the end of 2022, GTT's net cash position reached EUR 212 million, which takes into account EUR 8.9 million increase in working capital requirement due to year-end receivable mostly paid in January 2023. Taking into account the 2022 financial performance and guidance, GTT proposes a dividend of EUR 3.1 per share, corresponding to a payout ratio of 89%. Outlook. As mentioned earlier, GTT benefits from a very strong visibility on its core business with accumulated revenue of EUR 1.6 billion over the next 4 to 5 years. For the current year, taking into account the distribution of the time of our order book, we estimate that consolidated revenue for 2023 should be in the range of EUR 385 million to EUR 430 million. Consolidated EBITDA should be in the range of EUR 190 million to EUR 235 million. And in line with our long-term dividend policy, we aim at distributing a minimum of 80% of our net income for 2023. I will now let Philippe conclude this presentation.

Thank you very much. Now we would be very pleased to answer your questions. So please.

It is Kevin Roger from Kepler Cheuvreux. A few questions on my side, if I may. The first 1 is related to the Russian ice-breakers that have been removed from the backlog. The construction of Arctic 2 has restarted. So what is your view in terms of what will be done on those vessels? Can they continue to be built finally in South Korea and transferred to China? Because basically, if the LNG capacity will be built, we will need the vessel. So that would be the first question. The second question is related to Elogen. You mentioned the outlook in terms of commercial opportunities, et cetera. But can you give us some color on what you are targeting in the short term in terms of volumes. For example, what's the pipeline in terms of potential orders for 2023? And the third question relates to that on the 2023 guidance for the EBITDA, can you give us more color of what kind of losses on completion you embarked in the 2023 guidance due to Elogen, please?

Thank you very much, Kevin. Well, on the first question, we gave figures without activities in Russia. And we stopped our activities on many projects in Russia on the LNG carriers. We continue on the GBS, but we continue our activities on 2 LNG carriers built in Russia, as we said in our press release, which are not included in our forecast, because the situation there is volatile. The sanctions may come. So in order for you and for investors to have a proper and transparent view on 2023 figures, we've decided not to take them into account. The activities in Korea, for Russia, building LNG carriers for Russia, whether they are ice-breaking LNG carriers or normal LNG carriers, are taken into account in our 2023 guidance. For your second question about volume and so on, we did not detail that. I would say that we gave a guidance on the total turnover of the company and the EBITDA of the company. And of course, we took into consideration figures for 2023 from Elogen. That's something which is, of course, going to be monitored in 2023. And you can see from what Jean-Baptiste Choimet has shown you, in 2022, we selected very meaningful contracts. We had a contract for an electrolyzer for maritime windmills. That's the first one, first 1 in the world, and that has a lot of potential, because you can generate hydrogen from these windmills, it means you can store the energy, which is the main rollback of windmills and renewable energies. And you can save the cost of copper lines for transporting electricity to the land. So it has many advantages, and it's very much looked at. And we did the same with another very large developer of windmill farms in Germany, Enertrag, which is very well known in Germany, and with a very large electrolyzer, 10-megawatt electrolyzer. And in fact, if you look at who is really signing for something, reorder something existing in terms of electrolyzers, there are projects talking of about 200 megawatts to 500 megawatt, but really signing 10 megawatts, it's already in the league of the largest electrolyzers contracted today. So it shows you several things. Elogen is in the league of the Tier 1 companies, the companies which are trusted for larger systems, and also the company trusted by very large developers such as Shell or Enertrag. And that means a lot. And that means also that our strategy at Elogen is very much under control. And we look very much at the timing of our contract and at the time of acceleration in this business. Another question?

I have a question on Elogen. You mentioned you are very selective in the contracts you're competing for. You gained EUR 15 million of orders in 2023. What was the kind of success rate? How much did you win compared to how much did you bid?

Well, I will leave the floor to Jean-Baptiste Choimet for this difficult question. We'll see whether he will reveal secrets.

Well, I think, like Philippe said, like I said earlier, we really choose where we want to go. So that means we do not fight after all contracts. That's the first element. Second element is that it takes a long time between the moment where we first are in contact with the client and the moment where the order is signed. Electrolysis projects are very difficult to structure for our clients. They need to find the funding, they need to overcome technical issues, they need to secure the offtake. Therefore, it's a matter of patience to go through all this process. So I'm quite pleased with the performance of the commercial team last year because what we wanted, we generally got.

Another question? Yes. So Ed, you were the first.

A few questions on my side. So the first 1 would be, if we compare your revenue outlook for 2023 on the core backlog to the sort of the backlog split you gave by year and also the guidance you gave for 2023, there's a difference of over EUR 70 million on the noncore revenues. So LNG as a fuel, Elogen and services. And that's more than double the EUR 34 million you did in 2022. So I was wondering if you could give us an idea of which of those 3 legs of the noncore part are driving and more than doubling. Is it all Elogen? Is it LNG as a fuel performing very well? Is it services too? Could you give some kind of color there, please?

Yes, you're right. You still have other activities within GTT that are not core business, and we're working on developing them. So indeed, we expect Elogen to grow its business, and so its revenues. And as you can see, you have EUR 15.4 million order intake in 2022. That means that you'll have a strong increase in revenues between 2022 to 2023 on that subject. And also, as you mentioned very well, LNG as a fuel, we have 70 units in our order book, which is a record. And in 2022, this order book has not materialized yet really in our revenues. So you can expect indeed quite a strong increase in that. And then in addition to that, you have digital activities and also all our services in operation and studies that can add revenues quite strongly as well.

And then, I guess, historically, looking at the financials, you've shown some form of operating leverage. So when revenues have gone up, typically, margins have gone up that year as well to an extent. So if we look at -- looking at 2023, you're expecting roughly 33% revenue growth, but margins to be roughly flat at 52% or so, if we look at the midpoint of the guidance. Could you give us an idea on why that margin improvement maybe isn't coming through in 2023?

Yes. In terms of margins, the businesses that I just mentioned, of course, deliver lower margins, dilutive to our iconic margin in our core business. It's very hard to develop a manufacturer with such margins. Manufacturers have a different business model and so different margins, but nonetheless, delivering value added. And Elogen, as you can imagine, today is in a phase where it's making loss, as every competitors in the market. Although, as we said, we are selective. So we are monitoring it. We are among the best in this area in terms of losses compared to revenues. So we are really taking care not to do too much and be selective in the orders that we take. Although it has an impact in 2023. So that does explain it. And maybe also in 2023, we saw that consensus maybe didn't take the whole part of Russia. So that's why we mentioned that Russia had an impact of EUR 35 million in 2023 EBITDA margin.

First question, in the contract in Korea for Russian projects. This represents EUR 44 million and you included that in your backlog. Do you see any risk for the coming quarter? What do you think about this business, this contract? The second question concerning the guidance. What are the main risks to explain the range of the guidance for the EBITDA to reach the low end range, for example? What you include to explain that? And the last question, I'll come back on the Elogen. So you mentioned some impact, but you're well positioned compared to the other competitors. Do you see more losses in '23, '24 for Elogen due to investments or not? Would you expect the same magnitude, so the same level of EBITDA margin for all the group?

Maybe for your question on the guidance range, indeed we broadened it a little bit. As we diversify, and also our figures are growing, we need to broaden this range. And indeed, you know that Elogen, when it signs a contract, we have to take into account loss on completion. So it depends if you sign it on December 31 or January 1st, this has an impact. So we need just a little bit of flexibility on that aspect. And also you might have, as we saw shipyard also reorganizing their planning to be able to take other orders. So this can have a small impact, which is just maybe a couple of days or things like that. But nonetheless, that has an impact in 2023. So we need to broaden the target to be able to manage this. No more than that.

So about Russia, what we can say is that we can see that Korea is continuing to build these ships. In fact, there are ice-breaking LNG carriers, which are built in Russia. And if there are sanctions on that, probably it will be hard to find other usages for these LNG carriers. And they are also building normal LNG carriers, which, if all of a sudden they are becoming available, will be of very high interest for shipowners as that will be very modern ships all of a sudden available. Ed, you wanted to ask another question?

Just 1 last 1 on Elogen. Could you give us any indication on exactly how much that might be losing at the EBITDA level in 2023? And in the other way, could you maybe tell us what the margin would have been in the core business or in the group, excluding the Elogen impact on losses and revenues?

So what I can tell you is that core business hasn't changed. So meaning that it has still delivered its iconic margin level. Now we do not disclose Elogen's EBITDA. Again, it's making loss. But when you check competitors and you look at revenues versus EBITDA, we are among the good ones. So that means that we are selective. We do invest. We do develop this company, but we take care not to go too much away. So we think it's a very good investment though, and that this result, this loss is going to be absorbed by development. So that we are still targeting a breakeven mid-decade and so positively end of the decade. So it's a temporary investment.

[Operator Instructions]

Yes, Philippe, I would have a follow-up on a topic that you mentioned during the presentation, the replacement market, because it seems that there is a pickup in the replacement activity for LNGC. Is it possible for you to quantify the number of units in your backlog that are related to replacement? And then on the outlook that you gave for the 400 plus units over the next 10 years, can you tell us what kind of replacement volumes you have embarked, because on the paper you show that you have more than 200 ST units that basically are nonefficient compared to the MEGI vessels. So did you embark everything, or you took an assumption of 25%, 50%? Can you give us some color on that, please?

Yes. Well, in our existing backlog, we consider that the share of replacement ships is probably not that big, between 20 and 1/3. And in our assumptions for our forecast over the next 10 years, it's 50-50, one-half is going to be for replacement, one-half for growth. It's about that. Another question?

Maybe a question on Korea, the competition, Supreme Court, etc. It took 2 years for the High Court to make its decision on the merits of the case and you contested. From maybe lawyers experience specialized in the Supreme Court in Korea, do you expect the Supreme Court to take as long as it took the High Court? Or could it be faster or longer or...

The answer may not be very helpful. It can take several years. So hard to say whether it's going to take 2 years or more. So I'm sorry not to be more accurate on that. But it seems that as in some other countries, the Supreme Court is very much congested and it's hard to predict when they are going to deal with the case. Any other questions? So thank you very much. We are very pleased to have been with you today. And let's continue. Thank you. Bye.