Maire S.p.A. (MAIRE) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Maire Tecnimont Full Year 2019 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pierroberto Folgiero, CEO of Maire Tecnimont. Please go ahead, sir.

Good afternoon, everyone. Thank you for attending the full year 2019 financial results conference call. 2019 has been another year of solid results, with the main KPIs in line with our annual guidance. These results have been characterized by different drivers throughout the year. In the first half, we sowed the seeds in order to build solid blocks for the future. Therefore, we witnessed a significant increase in FEED projects and engineering services, a slightly lower order intake and working capital consumption as we were completing a higher number of projects. In the second half, on the other hand, we started to reap the benefits from our activity in prior months. The order intake was higher, mostly characterized by EPC projects, and we generated over EUR 230 million in cash. At the same time, we are all recognizing that our industry is starting to tackle several challenges that will transform the way we would do our business in the future. The so-called energy transition and digitalization are just 2 examples of what is happening. Our group is very well equipped to embrace these changes, and our technological DNA and passion for innovation are positioning us at the forefront of this important revolution. Our backlog, driven by a stronger order intake in 2019, will lead to solid revenues in 2020 and beyond. At the same time, the highest pipeline ever will ensure a healthy flow of new projects. Finally, our Board today has proposed a dividend payment of EUR 38.1 million or EUR 0.116 per share, in line with our dividend policy. Once approved by the shareholders meeting next month, the amount of cumulative dividends paid over the last 5 years will be EUR 162 million, for an average of EUR 32 million per year, a strong and significant shareholder value creation. We are excited about our current positioning and role, which allow us to lead the way in a changing world. Our main consolidated financial results are shown on Page 4 and will be discussed in more detail by Alessandro later on in the presentation. Before we step in, in the main sections of our presentation, I would like to give you an update concerning the recent COVID-19 outbreak and the impact set on our business. We are obviously taking this issue extremely seriously as the health and safety of our employees are our first priority. We don't want to compromise it and aid, at the same time. We want to proactively mitigate the impacts on our business. We immediately set up an HSE COVID-19 coordination team in order to constantly monitor the situation, assess the various directives issued by our government, take decisions and communicate them to our employees over the world in a timely fashion. With regards to our offices, most of our employees are successfully and efficiently working remotely, thanks to a significant investment our group has been making over the last couple of years in terms of smart working. Our projects are continuing, no major disruption have taken place so far. In addition, we set up a specific task force to monitor, coordinate and implement decisions in terms of procurement all over the world. We are constantly monitoring the situation as it evolves, and we will provide an update when necessary. But let me repeat, the most important concept, safety first. Before we discuss our operational performance, I would like to spend a few words to discuss some of the trends that are changing our industry; namely, energy transition and digitalization, and what we are doing about it. Energy transition is a pathway towards transformation of the global energy sector from fossil-based to zero carbon over the next few decades. At its core is the need to reduce energy-related CO2 emissions to limit climate change. Decarbonization is a crucial element which will be achieved through coordination and combined efforts across the globe. Our group is at the forefront of the energy transition. NextChem, our subsidiary fully dedicated to bring chemistry, has been working hard on a variety of initiatives aimed at ensuring our contribution to energy transition and decarbonization. Our efforts are driven by our technology portfolio as well as by our relentless drive towards innovation. Our efforts are carried out in 3 specific areas: Green-Green, which focuses on identifying oil substitutes to produce chemical intermediates, fuel and plastics from renewable sources; Circular Economy, based on the recycling of plastic waste to produce upcycled polymers, fuels and other valuable chemical; and Greening the Brown, aimed at mitigating the environmental effects of the technologies used for the transformation of oil and natural gas. Let's look now at the concrete steps we have been taking in each of these 3 areas in order to lead the way in energy transition. In the Green-Green area, we are working on the valorization of ethanol; today, a main raw material for the production of a second-generation technology for the production of ethanol and all other chemicals, starting from lignocellulosic biomass. Last month, we announced an alliance with U.S.-based Saola Energy to license in the international markets and technology for the production of renewable diesel, hydro-treated vegetable oil, or HVO in short, from vegetable oils and the residual fat. A successful trade roadshow started last month in the U.S., and we will continue until next June. Finally, last October, we announced a partnership with Italy-based So.G.I.S. for an EPC of a plant that will produce oleic acid from residual fats. In the Circular Economy area, we are also very busy with several projects. Our recycling and compounding plants in Bedizzole, which were incorporated into the group a year ago, are running at close to full capacity. Last year, 30,000 tons of plastic waste have been recycled, avoiding an estimated 6,400 tons of CO2 emissions. Last June, we announced a very important partnership with ENI to develop and implement the conversion technology, which uses high-temperature gasification to produce hydrogen and methanol, starting from solid urban waste and nonrecyclable plastics as feedstock with minimal environmental impact. In particular, we are working with ENI on 2 projects. The first one involves the implementation of the waste to hydrogen plant in the Porto Marghera biorefinery close to Venice, and the second one is the construction of the waste to methanol plant in the Livorno refinery in Tuscany. We are very excited about the opportunities which will result through this partnership, and we expect further developments in this area through the licensing of this technology to additional counterparties. In terms of Greening the Brown in renewable energy to chemicals and fuels, we are developing an initiative that will allow us to producing gas and liquid products, methane, methanol, et cetera, utilizing green hydrogen, biogenic CO2 and all CO2 feedstock from industrial plants. This will be realized through a partnership with an industrial company that is now developing a new generation of electrolyzers, with higher efficiency compared to the current market benchmark. The innovative electrolyzer will be inserted in our novel process architectures, specifically designed to minimize energy consumption. The next slide will go into more details on the topic of hydrogen. Since 2011, Tecnimont started research and development activities to develop a new gas purification technology to valorize natural gas field with high content of CO2 and H2S, unlocking additional valuable gas resources for the market. The DCCD technology is a patented cryogenic distillation process designed with 2 columns working at different pressures, easily integrated in all gas processing architectures. One significant advantage of this technology is the use of the recovered CO2 for enhanced oil recovery or a feedstock for petrochemical complexes to monetize the carbon recovered and transform it into valuable products. Our subsidiary KT-Kinetics Technology is more than 10 years of research and development activity has developed a proprietary catalyst and plant architecture for the conversion of H2S to hydrogen and sulphur by means of the proprietary process, which represents an innovative and more efficient way for recovering sulphur. It is based on a partial oxidative reaction that shows better performance compared to current market solutions, leading to possible CapEx and OpEx reduction of up to 30%. Hydrogen has an important role in energy transition. As I mentioned in the previous slide, we are actively working in this area. Our focus is on both green and blue hydrogen as well as on CO2 capturing. We discussed what we are doing in terms of green hydrogen. Our view for blue hydrogen consists in the commercialization of the steam reforming technology using renewable energy as a heating medium with very competitive hydrogen production costs, combined with the drastic reduction of CO2 emissions. There are also a number of initiatives we are following in terms of CO2 capturing, and we'll provide you regular updates in the months ahead. In the last few slides, we just presented a few of the many initiatives the NextChem has been undertaking. As you can appreciate, our involvement in terms of energy transition is significant, and we are excited to play our role to help the planet become a better place. Digitalization is the other big driver of change, which has started to impact our industry. Ours is a sector that has been lagging behind in terms of productivity over the last 20 to 30 years. This means that the potential unlock value in our industry is significant and meaningful. Digitalization is one important way to improve productivity and unlock such value. Processes and systems must allow a contractor such as Maire Tecnimont to operate more efficiently and cost effectively. This, in turn, becomes a source of competitive advantage and of differentiation through the offering of new digital-driven services to vendors and clients alike. And this offering must be driven by a total cost of ownership mentality that allows clients, for example, to minimize the CapEx and OpEx of the plant. Doing so means that our group is moving towards a contractor of the future vision, where we act as a digital orchestra director within the EPC value chain. How do we do this? We have identified 4 parallel macro steps that will allow us to get to a digital future. We started by updating and upgrading our internal systems in order to create an EPC digital suite that represents the digital cornerstone of each project. At the same time, we are actively engaging with our clients in order to understand their priorities and needs, which are going to help us better tailor our digital offering to each specific case. Effective operating and communication models are being developed to better support our efforts. This also means that we need to be staffed appropriately and that our resources must be continuously trained and updated. A winning strategy relies on the entire organization acting as the factor of change each individual, in his or her own environment, pushing for the new normal. In order to do this, we have budgeted about EUR 25 million in CapEx by 2023 under the ambitious assumption of a 12 to 24 months payback, which we believe is fully realizable. We will provide you with additional updates as they become available over the next few months. Finally, and as a natural conclusion to what we just discussed, I would like to highlight our commitment to the ESG agenda and share some of the results of our efforts in 2019 with you. Much has been said about our contribution to the environmental issues that have also been acknowledged through the confirmation of the B rating by CDP. Our commitment in this area was also underlined by our first ESG-linked loan, which was successfully placed in the international markets. In terms of social issues, we launched a variety of training and awareness programs in order to advance the knowledge and skills of our employees. We are also placing a significant importance in -- to in-country value. Among our 20 main projects, over half of the goods and services, for instance, were purchased locally, and we are planning to do more in this particular area. Governance is also extremely important in our group. We should tap internal committees and boards in order to monitor and implement our sustainability policies. At the same time, we specifically link ESG targets to the top management's incentive plans and remuneration. All these results are very strong sign of our commitment to the ESG issues as we continue to develop and integrate a sustainability vision into our organization. Let's continue now with our operational performance in 2019. Our order intake in 2019 has been in line with the average of the last few years, and it represents a book-to-bill ratio of close to 1, which is our average target. We were awarded very high-quality orders across the geographies by some of the best companies in the oil and gas, petrochemical and fertilizer space. These orders have been driven by our technological leadership and unparalleled know-how; by our long-standing relationships with key clients, which allow us to win repetitive business; as well as by our proactive approach to engage with our clients at the very early stage through our project development involvement. While the first half has been characterized by higher number of service projects, the second half has seen an increase in the EPC projects, including a EUR 450 million project for ENI -- INA in Croatia, which will be discussed in more detail in the next slide. Last December, we were awarded the EPC contract by INA, a Croatian multinational oil company owned by the Republic of Croatia and Hungarian oil company, MOL, among others. The contract is for a new delayed coking complex for Rijeka Refinery in Croatia in the frame of Rijeka Refinery Upgrade Project. The overall contract value is around EUR 450 million, and its completion is planned by 2023. The scope of work relates to the execution of engineering, procurement and the whole equipment and materials, construction and direction work for a new delayed coking unit with coke handling and ship loading, sour water stripper, amine recovery units and the revamping of hydrocracker, sulphur recovery and utilities and offsites units. This project is a mix of complexity and engineering challenges, ranging from debottlenecking of existing units up to the grassroot implementation of new ones. It involves the latest solution for coke storage and sea jetty construction, and it will concern over 60% of the existing refinery. With this important achievement, Maire Tecnimont strengthens its positioning in the refining business; in particular, in the bottom of the barrel technologies, such as the delayed coking unit one, where the group is increasingly acting as a market leader. The group continues to provide the full technological cycle of crude oil processing, a key driver to meet the growing market for cleaner fuels and to ensure a higher output from high-margin products. Thanks to a book-to-bill ratio close to 2 in the fourth quarter alone, our backlog has increased by EUR 300 million in Q4. It continues to be of very high-quality and with a good diversification across various geographies around the world. Focusing on the main business units backlog. We continue to maintain a good balance between volumes, marginality and duration. Despite of the recent EPC projects awarded to us, in the last quarter, the amount of E and EP projects still amounts to close EUR 1 billion, representing a solid base to our margins. The backlog cover has slightly increased to 1.9x in the last quarter. Our commercial pipeline in our core business has reached an all-time high of EUR 47.5 billion at the end of 2019, up EUR 3 billion in the year. We still have about EUR 13 billion of tendered bids, despite of EUR 1.5 billion in awards in the last quarter, as additional work has been bid for in the meantime. The amount of tendering activity is also on the rise, as a number of tenders, which started over the previous months, have moved to a more advanced stage. As usual, the timing of the potential awards is difficult to estimate throughout the year, but such a high level of activity gives us a lot of flexibility and confidence going forward. The EUR 2,020 million in various awards that we communicated earlier today, together with our potential awards mentioned in the press last month in Malaysia and Belarus, are a testament of the resilience of our business and of our capacity to win business under difficult circumstances. We are very happy with the geographical diversification of our pipeline, which allows us to pursue a significant amount of opportunities around the world. The last quarter of the year has been several additions to the pipeline of large projects in Asia, North America and the Middle East, mainly in PetChem and oil and gas refining, driven by ongoing investments in downstream assets. I now hand over the microphone to Alessandro Bernini, who will go through our 2019 financial performance. Alessandro?

Thank you. Thank you, Pierroberto. As we have already done for the financial results during the year, in addition to the comparison between the reported P&L items, we are also showing how the same full year 2019 P&L figures would have been without the application of the IFRS 16 principle in order to facilitate the comparison with last year's numbers. Our comments today refer to the like-for-like numbers, i.e., pre-IFRS 16. Revenues were EUR 3.3 billion, driven by a higher backlog execution of engineering, and engineering and procurement projects, in addition to a temporary phasing of certain EPC projects. G&A were EUR 78.1 million, slightly up due to the strengthening of the group presence in certain geographical areas and, to a lesser degree, to the costs associated with the implementation of the digital transformation process which, as discussed in detail by Pierroberto, is going to greatly improve the group's operations. R&D increased to EUR 6.8 million, mainly driven by our ongoing activities in Green Chemistry. EBITDA was EUR 209.9 million, absolutely in line with our guidance. Margins increased to 6.3% as a result of the change in mix of backlog execution. Net financial charges increased to EUR 16 million, impacted by EUR 5.8 million write-off related to a convertible bond issued by Siluria Technologies in the U.S. Profit before taxes was EUR 169.6 million. Our tax rate was 31.1%, down 90 basis points versus the corresponding period last year due to a changing mix of tax jurisdictions. Group net income was EUR 115.1 million, up 4.1%. Given what we stated earlier, the cash flow bridge is also presented without taking into consideration the IFRS 16 principle. This chart provides the graphic evidence of what Pierroberto stated in his opening remarks and what we have been communicating over the last few quarters. The group's cash flow performance last year was driven in the first half by a higher number -- higher than normal number of projects in their final stages and a lower amount of EPC awards. As expected, the second half saw a complete reversal, driven by the project's operating cash flow, which more than offset the outflow in the first half. The fourth quarter alone saw a cash generation of over EUR 160 million. Such a variance between one quarter and the other in terms of cash generation has become the standard in our industry and certainly for our group. This is due to a combination of factors, including the difficulty of estimating the timing of large awards and the subsequent advance payment from a client as well as the type of contracts have been awarded each quarter. Last year was a clear demonstration of this dynamic. It is reasonable to expect such a behavior of this year, too, which may be characterized by significant swings in the net financial position from one quarter to the other. Our objective is not to meet quarterly targets in terms of net financial position, but to make sure we close the fiscal year within the guidance. What happens in between is just unnecessary noise. Let's now focus on the evolution of our net working capital in 2019. This slide provides more detailed information about the various component of our adjusted trade working capital and its behavior in the second half in comparison to the first half. As a reminder, these figures have been adjusted to be comparable with the adjusted net financial position presented in the previous slide. Last July, we explained the working capital dynamic in the first 2 quarters, showing how the negative change in the networking progress took place, particularly in the first quarter, driven by a high number of projects in their final stages, and by the timing of the Amurski invoicing. The trend reversal in the networking process has continued in the third quarter, as this item has remained essentially stable after a negative change of EUR 352 million in the first half, and it has accelerated further in the last quarter, thanks to the completion of several projects and, in part, by the renegotiation of the invoice timing of the Amurski project. This effect will be more evident from the first quarter of this year going forward. At the same time, such a renegotiation has partly driven the increase in account receivable in the fourth quarter. The dynamic of the advanced payment last year is consistent to what we have been communicated over the last month, few months. Recently acquired projects have brought lower advances from clients, mainly due to the specific nature of those awarded in the first half. More engineering -- and engineering and the procurement and less EPC, while advanced to suppliers have increased significantly as the more advanced stage of certain projects has led to higher advances payment. The net result is represented by about EUR 60 million in more advances paid to suppliers than what we have received from clients. And now I hand over the microphone to Pierroberto for his final remarks.

Thank you, Alessandro. In conclusion, as stated in the beginning of the presentation, 2019 has been another year of solid results, with main financial KPIs in line with our annual guidance. Our solid backlog, driven by a strong order intake in 2019, will lead to solid revenues in 2020 and beyond. In particular, the strong pickup in the last quarter order intake will provide momentum and visibility to 2020 revenues, and at the same time, the highest pipeline ever will ensure a healthy flow of new projects. Our Green Chemistry business is growing and giving us great satisfaction. We remain focused on continuing to develop it in line with our mission to be a leading player in the energy transition pathway. We confirm our shareholder remuneration policy of a payout of 1/3 of our net income. We are delivering a strong and significant shareholder value creation as the cumulative amount distributed since 2017 will be EUR 162 million or a yearly average of EUR 32 million. The coronavirus epidemic has obviously created uncertainty across several industries as our daily lives have been temporarily impacted. As the consequences of the epidemic are still unfolding throughout the world, we feel that it is prudent to wait before providing the market with an official 2020 guidance. Therefore, we are planning to communicate it on May 7, at the time of the first quarter earnings release. By that time, we will expect the situation to be more stable and less uncertain. Our business remains resilient, and we are excited to lead the way in a changing world. This concludes our presentation. As usual, Alessandro and I stand ready to answer any questions you may have. Operator, please go ahead.

[Operator Instructions] Our first question is from Alessandro Pozzi with Mediobanca.

My question is on the 2020 guidance. I appreciate you want to take a bit more time. But I was wondering, in a qualitative way, where do you see revenues going? Are we talking about mid-single digit or marginally up? And also potentially, if you can maybe give us an idea on the margin mix for 2020? And also on the cash flow, how should we think about the working capital throughout 2020?

Let me say that we are not giving a quantitative guidance because of a kind of respect for the current situation. As we have clearly stated, so far, we are not experiencing kind of disruptions on our operations. For the -- so in this respect, and again, qualitatively, we think of 2020, that is rather in continuity in terms of revenue, margin and net financial position. So this is the qualitative indication we can give you today. Obviously, the situation is changing every day, so we don't want to take a bold view on a world that is proving to be quite in soft lens. And the situation is very fluid, and we understand, day by day, what will be the impact for the future. But so far, we are in full control, and we are not experiencing disruptions.

Okay. And on the working capital, should we assume the same similar movement as of 2019 building in the first half? And then maybe a reversal in the second half?

Yes. You are right. As we have anticipated in our presentation a few minutes ago, we expect that the similar time that we have experienced in 2019 could be replicated all over this year. First, because we have still to monetize the latest milestones and the retention money associated with the projects which are close to the completion and the completion is expected in the first half, so the related cash flow is expected predominantly in the second half. And then of course, what can modify significantly the change in the working capital and the cash flow generation depends on the awards on the new project. Today is particularly difficult to predict when those projects will be awarded. We are pretty sure that we will experience quite a remarkable satisfaction from new projects in 2020, but we cannot allocate specifically in a specific quarter. What we are sure is that the advances from clients is due to represent a significant portion of our cash flow all over the year, and thus, affecting positively the working capital. So this is what we can anticipate so far.

Okay. And the final one for me. I was quite interested in your slides on the contractor of the future. Can you maybe talk about what the opportunity set that you see by becoming a more digital partner to your clients?

That's a very interesting point. Our view is that this is the moment for contractor to step up and take the lead of this digitalization of oil and gas industrial plants. So we believe that digitalization will be the occasion to shift the mentality of the client for a pure CapEx discipline to a CapEx plus OpEx kind of discipline because at the end of the day, the IRR of the investment is function of both CapEx and OpEx. That's what we call total cost of ownership. So digitalization is the way to think about new plants, taking care of optimization of the throughput capacity of the plant. So with this mentality, we are ready to offer, on top of our typical scope of work, that is from the machinery to the cables, to the steel structures, to the automation system and to the control systems of a plant, an additional layer of software, that is the software of the management of big data and elaboration of data in a way instrumental to optimization of plants. So we see a big possibility to change the perception of client and position ourselves as orchestrator of this expanded and extended scope of work becoming this feature, becoming kind of additional distinctive factor of our technology-driven offer that is already appreciated by our reputable clients.

Our next question is from Mick Pickup with Barclays.

A couple of questions, if I may. Firstly, just on the current coronavirus outbreak, can you just talk to the areas you are particularly worried about as we go through the year? Is it procurement? Is it availability of crews on-site? And can you talk to your contracts about EPC and execution, what does happen if you have issues on-site? How you're protected in those contracts or there's risk for your shareholders?

Let me say that there are 2 areas. One area is the home office. So the way we work in our report units and, in same respect, the real remedy is the smart working. There is a lot of rhetoric about smart working. As smart working is not about giving a tablet to all employees and full stop. Smart working is the capability of an organization to continue to deliver and to continue to produce engineering deliverables from remote. So that's the big investment we made. So it's not about a tablet, but it's about a new operational model that is permitting engineers to develop drawings from remote. So as far as the home office services in this respect, I believe that smart working is very effective if it is a real smart working. So if it is a productive, fully-fledged smart working, this is a real remedy. Then there is a second area, that is the operations at the job sites. And obviously, the operations of the job sites are very much impacted by the difficulty in the business trips and the difficulties in traveling. In same respect, our most effective remedy is proving to be our big company in India. So you know that in India, we have a company that is a full proxy of what we have in Italy, accustomed to work with Italy as an extended desk. So at the end of the day, our Indian colleagues are a very good substitute of our Milanese colleagues. So as of now, we are leveraging them in order to go all over the world and do and take care of activities that cannot be substituted with smart working. Then there is -- again, in the, I would say, operational area, the other big issue is about logistics. So you know that our business has a very important step, very important phase. It is the publication, procurement, shipment and delivery at site of very complicated materials. Also in this respect, we are doing very well because we are teaming up with external inspectors, specialized agencies that can substitute our people at the moment of inspecting the fabrication situation and the publication progress of the relevant equipment. So in this respect, we are experiencing that this remedy is proving to be very effective. So this is, to me, the best plan B in the case the current situation becomes longer than expected. Then there is another dimension that is the commercial dimension. So the question mark is what will be the impact in the final investment decisions of clients depending on the development of the virus. In this respect, I would divide the prospects we have into 2 different categories. The first and most important category is the projects in which the clients have already performed the Phase 1. And the Phase 1, without the Phase 2, is a big issue for them. So we have certain, very clear examples of this category, and we believe that in this -- in those cases, there will be limited, if even, no impact in the decision-making. I'm thinking, for example, of the Phase 2 of Amur in which our client has already awarded the cracker to a general contractor and there are very strict windows for the logistics on the river that are pushing everyone into a very strict discipline in the schedule. So I believe that, for example, Amur 2 is a very good example of a project that will never afford and not to continue with the awarding of the polyolefins in the very short term. So this is the first category of potential good commercial development. Then there is, for sure, a second category, that is the category of commercial prospects that are greenfield and not associated with the Phase 1. And in this respect, for sure, there could be the case that the decision-making is -- could be postponed at a later stage as soon as the situation will be more stable. But in our case, in 2019, as we have repeatedly explained, in 2019, we have paved the way for a lot of Phase 2 kind of potential commercial prospects, and we are very positive. I believe that 2020, apart from this virus question mark, it's a very, very interesting year for us because we are tendering, and tendered already, about EUR 10 billion projects, and most of them are very, very, very close to the finalization.

Okay. And I don't think I got that. So if you have a site where you're responsible for EPC and it gets hit by illness and shut down, who is responsible for that? Do you have terms and conditions that protect you?

Absolutely. I believe that the virus itself is one of the most evident example of the application of the force majeure. So how can we be reliable of an event like that?

Okay. And then if I switch. Obviously, you're very keen on the Green Energy side. And obviously, thank you for the presentation. But if I look at results, still, you made EUR 1.5 million of EBITDA. And if my math is right, I think you actually lost a bit of money in the fourth quarter. So backlog is up 50% year-on-year. How long before that business starts contributing significantly?

I mean this is a very good point. Let me say that Green Chemistry today is about positioning ourselves on the technological side. So today is not a business of volumes, it's a business of occupying a space, becoming the frontrunner of this new kind of plants. So the scale-up of it, we have to start from small projects in which we demonstrate that our ideas are doable. For example, we are working on a lot of basic engineering. Basic engineering will pave the way to the front-end engineering. And then as usual, once the investment decision is taken, you will see gradually the backlog and then the runoff of such backlog. So 2020 will be the year in which this basic engineering and these feasibility studies will pave the way to the wave of EPC going forward. Obviously, the other characteristics of Green Chemistry is that it's not a business of very large plants. But, for example, what we are doing on waste to chemical is a very good example of a Green Chemistry plant with a kind of an interesting magnitude because the waste to chemical plant is something in the region of EUR 200 million, EUR 250 million kind of investments. So for example, I would take into consideration waste to chemical as one of the most, I would say, fastest scale-up exercise. Obviously, also the Circular Economy, in terms of recycling of plastic, is very interesting. We are very keen. The demonstration plant is there. The magnitude of those kinds of plants is different. So it's more an exercise of selling several projects in order to achieve a kind of magnitude similar to what we are accustomed in the PetChem, I would say, world. But believe me, whatever is Circular Economy, waste to chemical and gradually, also HVO, so hydro-treated vegetable oil will gain pace and gradually will become more visible. Obviously, if you compare this dynamic with the dynamic of an established 100-year, with a history of 100 year, PetChem player, you will consider it marginal at the beginning. But this is not the case because the strategic value of this positioning will, from time to time, will become truly a kind of second leg that will become stronger and more and more solid in the last decade -- in the next decade.

Our next question is from Kevin Roger with Kepler Cheuvreux.

It's basically some follow-up. The first one is a follow-up on the Green question from Mick. Back at the initial target, basically, when you presented your plan on the Green side, you said that you were targeting something like EUR 50 million EBITDA by 2023. Would you say that it's still a clear target or it will take more time than what you initially expected in terms of energy transition? And the first question is related to the fact that you mentioned the fact that the project, that the Phase 2, Phase 3, et cetera, are more likely to be sanctioned. Just one question on your commentary to Amurski Phase 2. Would say that the FID would be in 2020 or 2021? And on the second big project, which [ has been agreed a ] Phase 4 Borouge. You signed the FEED contract last year, supposed to be something like 12 months, I guess. So would you say also that what the update on that side on Borouge? Would you say also that the Phase 4 will move ahead in 2020?

Let me say that on Amur 2, all the engineering is complete. So let me say that Amur 2 is at a more mature phase. And again, the polyolefins are the way you make profitable your investment in the cracker. So let me say that we have a strong expectation that Amurski 2 will take place in 2020. And we believe that the client as -- like Gazprom and SIBUR, and Russia, in general, are very credible when they put the target and when they decide to move forward. At the same way, ADNOC, it's very reliable, very solid, very strong in terms of strategy kind of client. So also Borouge, it's a very, very good opportunity. Obviously, the project, it's a giant one because, as you may remember, we are in the process of producing the engineering, the front-end engineering, and also the configuration of the plant is under analysis, so it will be a very huge and transformational investment for all the, I would say, Abu Dhabi as a hub for the world PetChem. So I believe that also this project, has a very good opportunity to be finalized within 2020. Even if I believe that Amurski 2 is, in itself, more mature in terms of all the previous activity that need to be finalized and confirmed before the final investment decision. But let me also mention some information that we're floating on the market about Belarus, for example. So Belarus is a country in which there are very good opportunities to monetize the available gas, and we are in a very, I would say, advanced stage in the negotiation with a client. And I believe that also that project, it's a project with very good credentials even in the short term. And please consider also the other information that we're floating on the market on what we have been developing in the Singapore area, in the Malaysia area. So in Southeast Asia, where we are developing in Johor Island a possible aromatics plant in big synergies with a huge, rapid complex already developed. That is an area in which we have been working since the last 4, 5 years. We have developed a very strong understanding of the industrial system and also that project for me is very promising, very interesting and very, I would say, remarkable in terms of value and in terms of interest to us. So this is, to me, a good list of very interesting prospects that already -- it's not confidential, it's already information on the market, and this is for me an opportunity to confirm our strong momentum with respect to those projects.

Okay. And just for the follow-up. If you have completed the FEED, the engineering on Amurski, what will be the size of the opportunity compared to the Phase 1? And then so what will be potentially the opportunity?

You know that I'm not in the condition to make such a disclosure. This is a source of respect to the commitments we have with the client. But I believe that it's a big polyolefins plant, fully fledged. It is the monetization of what has been already awarded in term of gas cracker to a German contractor. So I think it's not a big difficult exercise to understand which is the magnitude of it. So I don't want to go beyond the confidentiality of the matter, but you can imagine what's the value of a large polypropylene, polyethylene and fully-fledged PetChem gas monetization investment.

Okay. And regarding the question on the Green EUR 50 million EBITDA target in 2023, please?

Let me say that we gave a guidance that is -- it's a kind of indication that is the sum of 2, I would say, streams. One stream is what we are doing in the renewable sector. We know that as any other contractor, we are also taking care of the, I would say, large wind and solar kind of renewable energy plants on the onshore. As we told in the past, we believe that the market is more and more shifting to large-scale kind of utility-scale investments. So this is a market that we are targeting from a very early stage. So we are occupying also that space, that is a space that has nothing to do with our hydrocarbons business. So this is -- also this stream is contributing to the number we have given as a 5-year target. The other part is what we call Green Chemistry. So it's nothing to do with the renewable energy, utility scale kind of plants, but more about brand-new technologies and therefore, brand-new plants. The sum of the 2 is contributing to our target in 5 years to achieve EUR 50 million EBITDA, which is confirmed.

Our next question is from Massimo Bonisoli with Equita.

The first question on fertilizers. If you can give us some details on the new order from EuroChem that was awarded in Q4, if I got correctly. And also on fertilizer, if you can share with us some feedback from your clients on the project in this industry since the margins looks very strong today. And the second, if you can shed some light on the evolution of first quarter 2020 in terms of revenues, EBITDA and free cash flow. I understand your contracts are well beyond the duration of a single quarter and the question makes limited sense. But just to add some more visibility on the beginning of the year.

So on the fertilizer market, the fertilizer market is picking up again. So it's -- as any CapEx business, it's quite cyclical. So it was very fashionable, I would say, 3, 4 years ago. We have extensively taken advantage of that big wave, either in term of technologists. So as a licensor of urea technology, you may appreciate that in the past, during the big first wave of fertilizer investment in U.S., we have taken mostly 100% of the market in U.S. So during the big wave of investment in fertilizer in U.S., Stamicarbon was the licensor of choice in any fertilizer plant of that region. So it tells you a lot how much we are inside the industry and how much we are well positioned to detect the first pick-up signals of the market, which was not necessarily U.S., it's worldwide, but the U.S. is a good example of our responsiveness when the market is pulling and pushing us. So this is the scenario. Stamicarbon is very active. And therefore, all in all, it means that the fertilizer market is there again. Why? But because, first of all, it's a cyclical market, as I told you; and secondly, because it's the other classical way to monetize your gas. When you have cheap gas and when you have a location, that is from a logistic standpoint, very close to end markets and end users. So we did the demography that is growing and with the middle class that is growing, all the food chain is moving accordingly, and therefore, we are experiencing a pickup in the demand. Obviously, there are windows. Windows are also driven by the ups and down on the commodities. But apart from this kind of typical tactics, the strategy is clear. So fertilizer is a no-brainer when you need to monetize the gas and when the world is asking for more food. So let me say that we are very positive because we see Stamicarbon. I would say, with the kind of backlog that is highest ever, not only because the market is demanding again, but also because we have expanded our offer, not only on urea, but also to other [ adjacencies ]. So with this new wave, expected wave, we can take advantage not only of urea, but also of other technologies that are very close and very connected with urea. I'm thinking, for example, of nitric acid. I'm thinking of ammonium nitrate. These are all technologies that we have developed under the name of Stamicarbon, and therefore, with a lot of attractiveness. Considered we are active also in the specialties market, so every wave the market gets more sophisticated. So for example, we are ready also on the licensing the -- what we call coated urea, either with, I would say, traditional material as a coating but also with innovative material, biodegradable material in order to procure the coated urea is fully-fledged and future-proof in term of this increasing environmental demands. So fertilizer will be around again, and we are very hot. As I mentioned the Belarus, that is a fertilizer plant, but we are also targeting opportunities in Qatar that are already on the market. And in general, Russia is always ready to invest in this field, taking advantage of this increasing commercial development with China, since Russia is proving to become more and more a kind of partner of choice for derivatives, whatever they are, polyolefins, but also fertilizers, whatever can be produced from gas, whatever derivative of gas, including fertilizer, are typical opportunity in Russia to be exported in China.

And regarding EuroChem, sorry?

Regarding EuroChem, it's a very good story. We started a lot of time ago with EuroChem, with the intention to become a long-term technical partner of a very, very strong franchise like EuroChem, with a lot of ideas in terms of expansion, either in Russia and abroad. So thanks to Kingisepp 1, we have developed more and more the relationship because at the end of the day, our business is a business of doers. So it is not about signing contract, it's about arriving to performance test and hitting the target in terms of label capacity. And in EuroChem, not only we have achieved the expected performance of the plant, but we have even exceeded it. So we have demonstrated to our client that we are very reliable and that we deliver value and extra value to them. So I would say that this good first big cooperation paved the way to Kingisepp 2, that is an ammonia urea plant, so it's a duplication of the Kingisepp 1 ammonia, plus a urea plant that is proceeding. And we are, at this stage, finalizing the early works. And we are impressed by the credibility and by the vision of EuroChem to continue to become one of the most player, not only in Russia, but one of the most important player worldwide.

[Operator Instructions] Gentlemen, there are no further questions registered at this time.

Thank you. Thank you very much. Goodbye. Thank you for attending.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones. Thank you.