NHOA S.A. (NHOA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the investor call on the ENGIE Eps 2020 financial results. [Operator Instructions] This conference call is recorded and the transcript will be available on the corporate website, www.engie-eps.com, in the Investors section. We shall now ask [ Ciara Thierry ] from the Communication and the Investor Relations team, led by Cristina Cremonesi, to address the meeting. Please go ahead.

Welcome, everyone, and thank you for joining us today for the investor call on the ENGIE Eps 2020 results and 2021 highlights. It will be hosted by our Chief Executive Officer and General Manager, Carlalberto Guglielminotti; and Giuseppe Artizzu, Executive Director in charge of Global Energy Markets and Business Development. Also present today, Ilaria Scarinci, Chief Financial Officer; and Giovanni Ravina, Chief Innovation Officer in charge of Strategy, Innovation and Global Mobility. The press release on the ENGIE Eps 2020 results and 2021 highlights have been broadcasted earlier today and sent to all participants to this investor call via newsletter. The presentation for today's call has been posted on the ENGIE Eps website, and you can find it in the dedicated pop-up appearing on the homepage of our corporate website, engie-eps.com. After their presentation, both Carlalberto and Giuseppe, together with Ilaria and Giovanni, will be available to answer your questions. [Operator Instructions] Before we begin, I just want to point out that any forward-looking statements made during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement, which is included on Page 2 of today's presentation. This also includes the risks that the transactions discussed today during the call remain subject to standard conditions for these type of transactions as well as any other risks and uncertainties associated with the execution of transactions of this type. And as customary, the call will be governed by that language. So with that, I'm going to turn the call over to Carlalberto Guglielminotti.

Thank you very much, Ciara, and good morning, ladies and gentlemen. Really, thank you for being with us today. Before presenting the 2020 financial results, let me review the EPS overall 2020 performance from the operational and also ESG perspective. I'm on Page 5 of the presentation. For ENGIE Eps, 2020 has been an extraordinary year. Despite global restrictions for COVID-19 and related delays in project development and bank execution, which impacted 2020 revenues, which are down by 45%. However, Giga Storage and Industrial Solutions set a clear trajectory towards a strong rebound in 2021 and the achievement of a 2022 target. We've seen backlog and contracts secured reach over $170 million with over 700-megawatt powers of energy storage and microgrid projects, mainly in the U.S. and Europe. Pipeline increased by 46% to over EUR 1 billion, almost exclusively outside the ENGIE Group. The industrial plant in Cosio Valtellino expanded to secure 2.5 gigawatt hours a year of capacity. And the JV with Stellantis is progressing very well. I mean governance and corporate name will be announced shortly. It may be a matter of days, if not hours. All antitrust and government clearances have already been obtained, and the JV transaction closing will be carried out by the end of April 2021. Meanwhile, we doubled the production capacity for residential charging solution from 500 easyWallbox per week achieved in 2020 to 1,000 a week starting from March 2021 and already planning to scale up to more than 1,500 easyWallbox a week by May 2021. The product launch road map has been tremendously compressed. I mean, you've seen during the technology day first deliveries for new public and business charging solution were expected by the end of this year, while we had to accelerate and easyPublic and eProWallbox will be launched in early Q3 this year. You clearly see in the Slide 5 all major events that drove such achievements. From the launch of the easyWallbox a few days before the spread of the COVID-19 pandemic to the construction of the 25-megawatt vehicle to the Greece project and largest project worldwide in the middle of the pandemic, then the award of 240-megawatt hours, availability of more than 300-megawatt hours of system in highway. Meanwhile, the launch of the FamilyWorking program again in the middle of the pandemic, and then the award of the New England contract, while September ENGIE announced the strategic review and the possible divestment of its stake in ENGIE Eps. Then we have the ability after this announcement to put even more intensity in what we were doing. And eventually, we signed the MOU with FCA, then we have been awarded with the Terna contract, ranking #1 in terms of capacity awarded in Italy. And then we signed in early January the JV agreement with Stellantis and then the Anza contract. Moving to Page 6. In the context of the results achieved in 2020, and obviously, also the joint venture, we had to reorganize also the management team. Then I'm particularly proud to announce today that Andrea Rossi, our current CFO, at closing, and so in the next coming days will -- has been appointed Chief Financial Officer of the joint venture with the Stellantis, while the current Deputy Chief Financial Officer, Ilaria Scarinci, will be appointed in the next few days Chief Financial Officer of the group. And then focusing also on eMobility, we doubled the capacity from the project management perspective and then I announced today, within the management team, the arrival of Daniele Festini, who have with us since 2020 coming from Ferrari, leading the project management for the eMobility joint venture. Then you see at Page 7, 8, our industrial plant in Cosio Valtellino, Page 7, clearly why we are here because of the electromechanical heritage, because of the proximity with our partners, and because of the 15 years of industrial know-how. But more importantly, you see the scale-up of the production that I just mentioned and the products we are launching in order to simply follow what is already secured in our project of -- secured portfolio project. We have in both eMobility and then on storage. Then let me now turn on Page 9 and our ESG performance. We usually do not communicate on ESG for at least a couple of reasons. First, our mission is to develop technologies to revolutionize the paradigm shift in the global energy system towards renewable energy sources and electric mobility. I mean, ESG is at the heart of our culture and business model. Second, we prefer to work restlessly on a daily basis to make the world more environmentally sustainable place, installing as many megawatts we can with our clean technologies and to valorize our talent fee respective of the agenda rather than communicating on how much we are ESG compliant. I mean, in other terms, ESG is a natural output of what we do rather than an input on which we focus on. Having said that, given the rising interest in the market for ESG in general and our ESG KPIs here at Page 9 and 10, you have some figures. And the most important one is certainly the diversity of our people. I mean, 136 people. They are 35 years on average, 18 nationalities, 21 academic talent programs within which we grow our talent and then also from the women's perspective and diversity perspective, obviously, excluding the technology and the industrial operations for obvious reasons because electrical engineering is not exactly the most appealing university for women, but excluding the purely technological department of the company, we have 57% of the headcount is composed by women and 40% with the men. Then from the safety perspective, you see that again, we do not monitor the output. You see in the right -- the bottom right part of the chart, the frequency rate, the fatal accident rate, the severity rate and the lost time in accident, which is obviously 0. But we are not proud of that because really monitoring such kind of KPIs is totally irrealistic for a technological company that is working in a very complex electrical system. I mean we do monitor the number of tilers we received and that we stimulate also with variable compensation towards our teams, and we monitored the time we need to close the nonconformity to close the FAT [indiscernible] and how much time is between the [ event ] and the filing. And then how long does it take for our teams to issue a new procedure in order to cope with the safety alert that will be filed by our people. I mean we do strictly monitor the time of reaction we have in order to manage fastly. So we do not have the regulated approach to safety and then counting the output, but we do have a fully managed approach to safety, which is, from my perspective a necessity in 2020, then in 2021. Then on Page 10, you see our revolutionary program, FamilyWorking, has been -- I mean broadcasted on a worldwide basis. Again, the fundamental principle of this program is that going to the office to work is a right and not more duty. When the natural workplace that is the home of our employees because working is not remote working as generally conceived, but simply the official recognition of fine right and a positively combined working family, right to technology, to flexibility, to family, to wellness and to parenting. Also, we have a dedicated product for them, all such rights are secured within Eps. Those are not just slogans, but those are part of dedicated programs, including pedagogical support for our employees, technologies at home and the ability to really plan your day. This was fundamental to award all contracts we've been awarded with during the pandemic, having all our employees working or at least the nonindustrial part of our employees working from home. And we do monitor constantly also the level of engagement and trust of our people with dedicated AI technologies and with a level of adoption, which is 85%. So essentially, with daily questions to our employees, we strictly monitored the level of balance between the skills and the challenges they have, the level of trust, the level up of approach to the clarity of objectives and so on. I mean we never disclose to the market such kind of details, but this is just to say that standard way of working. If it's state of the art or not, I don't know. But certainly, we typically are 1 to 2 years ahead of general and traditional companies on such aspect because it's a prerequisite to retain talent and to attract talent into our company. On Page 11, you see the Technology Revolution Day we launched on February 18. Just a few figures, 18 R&D projects, well balanced between storage and mobility; 21 new products will be launched; EUR 25 million investment; and more importantly, 167,000 hours equivalent to 95 years of R&D will be spent in order to launch the new products and the new technologies. On Page 12 and 13, you have some details we may deep dive during the Q&A session. Then let me now turn on financial performance, I'm on Page 15. I mean you see clearly revenues amounting to EUR 11 million, down 45% compared to 2019, but mainly as a consequence of the global restriction for COVID-19 and the related strong delays in both project execution and project development. I mean construction schedules were dramatically affected by COVID-19-related logistic restrictions. But nonetheless, we have been able to complete the construction of the the Sol De Insurgentes Solar-plus-Storage project in Mexico, which is currently in test run and achieved the commercial operation of the Agkistro hydrogen system in Greece, the storage system in Leini connected the 400-megawatt terminal power plant in Northern Italy and the microgrids is in California and Comoros. Having said that, despite the decrease in revenues today, backlog and contracts secured sum up to more than $170 million and 700-megawatt hours in the U.S., Europe and Africa. $39 million is backlog, up 12% compared to 2019 with over 50 megawatts between California, Massachusetts, Comoros and Italy. And 133 million contracts secured are approximately 650-megawatt hours of projects between Guam, New England and Hawaii. Pipeline increased by 46% in the same period, reaching more than EUR 1 billion. And this is thanks to the rapid market acceleration we are obviously experiencing across all several -- all key geographies. I mean, particularly in North America, Europe and Australia, with an increasing flow of requests for proposals receiving from both existing and potential clients. But more importantly, it has to be noted that approximately 50% of the EUR 686 million pipeline announced with the full year 2019 results was represented by project under development with ENGIE in U.S. and Europe. And 1/3, you see clearly in the right bottom part of the chart and 1/3 of such projects have eventually converted into the current backlog and contracts secured. Then you immediately realize from this chart at the bottom of Page 15 that in short, we ended over EUR 600 million to the pipeline developed almost entirely outside the ENGIE Group. And if you want to compare to the H1 results, when we -- when ENGIE announced its strategic review and potential divestment on September 23, the pipeline stood at EUR 806 million with a strong majority of our projects under development with ENGIE and just 2% of it represented by eMobility. While as of today, pipeline stands at over EUR 1 billion with a strong majority of our projects outside the ENGIE Group and eMobility representing 21% at the time of the JV with Stellantis. Then moving to Page 16 very quickly. You see the geographical spread of our capacity online of our backlog and contracts secured. You see clearly the weight of Americans. While in the time line, this is certainly important, but sets off also with the fact of the raising trend, market trend in Australia and Asia Pacific generally. And then you see the, obviously, without the details for obvious confidentiality, the weight, the rounded weight of our capacity under development between Europe and U.S. Then moving to Page 17. We have the figures we just discussed, maybe few details might be interesting. Gross margin, plus 8%. I mean this is an accounting effect because of the mix between having lowered dramatically revenues. Obviously, the revenue mix is less telling, and therefore, the increase, but we're certainly not telling our trend. While the minus 47% in EBITDA is simply natural cost, so the revenues dropped. So we are certainly not worried because of the EBITDA. Then Page 18, you see the P&L waterfall, just a mention on the R&D and industrial operation. You will progressively not see this margin, this item, this accounting item because this was related to the project awarded before March 2021. Then I'm on Page 19, you see the revenues and backlog breakdown. What is interesting is the difference in revenues and project backlog in terms of geographical spread. I mean, revenues today are essentially concentrated between Europe and Americas, while the backlog is almost entirely concentrated in Americas. And then on the right part of the slide, you see clearly the impact of eMobility, which might surprise me, because you see in revenues, we have today 24% of our revenue is coming from eMobility. And then in backlog, you just see 5%. This is a deliberate choice that we have made because we have conservatively inserted all the results of -- future results of the joint venture, even if we have a business plan agreed with Stellantis. And the past documents we signed provided by them, but we decided to not put anything in the backlog. So just the monthly orders are put in the backlog, and we conservatively put just a fraction of this plan into the pie. We will think about it after closing that will occur in the next few days, but we opted for a very conservative approach, also suggested by the special situation in which we are today, which is in the middle of the strategic review of ENGIE. So you might easily imagine why. I'm on Page 20 now. You see the cost personnel evolution. 21% is in line with the plan, to be honest. But then you see clearly why the third column, the top left easily because 15% of the newly hired people are in eMobility. And therefore, a 21% increase in cost of personnel was a natural effect, even before talking about the natural expansion in storage to manage and to cover with the natural growth we will have in the next 2 years, thanks to our secured project portfolio. Then operating expense is plus 13%. This is the natural growth according to our long-term strategic plan. On Page 21, you see the breakdown of nonrecurring expenses that are decreasing and decreasing on a yearly basis and also some details on the impairment, maybe we can deep dive during the Q&A session with Ilaria about that. Part of the nonrecurring expenses was the FamilyWorking program. A crucial part of this FamilyWorking program was the partnership with Ospedale San Raffaele, part of the San Donato Group, which is the largest medical research center in Italy, with which we replaced and we refurbished entirely all the areas in place of work in our offices and in the factory. We continuously update the COVID protocols and we support the organization. And they supported the organization for the organizational vaccination campaign, I guess, coming in our premises. I mean I give you an example, we had several colleagues that tested positives. I also want them very close to part of my staff. But during the 5 visits, essentially, we had a COVID colleague in the middle of a site visit with tens of people, but nobody, nobody. As a consequence of this colleague tested positive mean that the protocols that we follow are stringent but are extremely effective. And therefore, I do not consider such cost as an extraordinary expenses. But irrespective of accounting principle, I, frankly, consider any euro invested as one of the most important investments we have made for the health of our people. Then on Page 22, you see some breakdown. You see clearly while in equipment and services, the investments are concentrated in Move and Drosso, so essential eMobility. While from the personnel perspective, the investments are more concentrated in Control, Store and Convert & Connect. And therefore, the energy storage wins, if I may. This is natural. I mean, energy storage, we have invested approximately EUR 15 million in the last 5 years mainly and essentially in equipment. And then in this phase of the R&D investment, we will invest more in personnel while in eMobility. We are at the beginning of this curve. And as a result, the investment in equipment is higher than the investment in people. Then from the net book value evolution perspective, the right part of Page 22, it's interesting to note the slightly over EUR 9 million of intangible we currently have, which is really modest, to be honest, compared to the number of patents and trade secrets that we have that we file on a yearly basis that the technological level we have and the current capitalization of our company is certainly a really modest amount. Then last point on the next financial position, you see the evolution of Page 23. It is worth mentioning also that we just agreed with Société Générale an additional EUR 10 million credit line before. Certainly, we are not running out of cash. Meanwhile, we are moving out of the COVID-19 pandemic. Then last slide before moving to the Q&A session, joint venture with Stellantis. Again, it might be a matter of hours, the communication of the brand name and the governance of the joint venture. My apologies for that, but you might easily imagine the complexity of working with one of the largest carmakers in the world, not because they are complex but simply because they are a giant and act like a giant. Certainly, the level of flexibility we might expect there is different from the one that we have being a company of 150 people and not 400 and 1,000 people worldwide. But having said that, we are making things happening, certainly. You see in July, we started the process. In July, we started the process. In November, we signed the MoU with FCA. Then eventually, FCA merged with Stellantis. We have been able to sign with Stellantis. Then in March, we got all government clearances and on 100% of the antitrust authorities received, and therefore, you clearly see how the joint venture will be certainly closed by April 2021. And by the way, my team might confirm during the Q&A session that the press release has been issued. So I might tell you more during the Q&A session. Then thank you very much for your attention, and I would like to now turn back the line to the operator for the Q&A session.

[Operator Instructions] The first question comes from Belanger Jean-Michel of Societe Generale.

Congratulations to the world team for these very nice prospects. Yes. I had a few questions. Let us start with this one in terms of guidances. A few time ago, i.e. before the JV with Stellantis, you were mentioning that you were targeting revenues of about EUR 100 million in 2022. Have you upgraded or not your guidances given the JV with Stellantis?

Thank you very much, Jean-Michel, for this very interesting question. So let me make a [ rest go ]. You can easily imagine the complexity of financial communication in the middle of the strategic review arrangement, okay? And then we have to be obviously extremely careful in the middle of the process in discussing about our guidance because of the response, if you will, to our investors, simply because of that. So we feel this responsibility. And there's the result, we will be extremely careful. Having said that, I confirm that, obviously, our guidance that was EUR 100 million before the JV with Stellantis. To be honest, that was before the JV with FCA. And then we signed with Stellantis and we -- everybody was wondering the level of commitment that the Stellantis group might have had in the context of this joint venture. And I can -- I just received confirmation right now from my team that I can officially say that it should be published in a matter of minutes a press release, a joint press release between Stellantis and then GPS, announcing the new name of the JV. That will not be something linked to FCA or PSA, but is the Stellantis brand for services, which is Free2Move. So essentially, the Free2Move eSolutions, obviously, will be the name of the joint venture with myself appointed as Chairman; and Roberto Di Stefano of the Global Head of eMobility will be appointed Chief Executive Officer. So I cannot, as I said, for the reasons I mentioned, reply is not confirmed. Certainly, there is nothing in the guidance, okay, about eMobility. But what I can say is that, certainly, what will be beyond the guidance in terms of eMobility is certainly beyond our expectations because it was already beyond our expectations. And then given some color to the market, we expect this business to be at least equivalent to energy storage. So in the mind of everybody, everybody was this doubling this -- potentially doubling this EUR 100 million guidance. But today, I think more than ever, you might realize the level of engagement we have with the carmaker, which is only 25% of the market share in Europe. So we are talking about another order of magnitude that leads in terms of potential. Therefore, apologies, Jean-Michel, to not precisely answer to your question for the reason I mentioned. But I think that looking at the press release we were releasing a few minutes on our website confirming the name and the governance of the joint venture, you might immediately realize that the potential is well beyond our 2022 guidance expectations.

Okay. That's very clear. So I understand that negotiations are working well concerning the evolution of your shareholders or with possible evolution of your shareholders. If I can add to this question, you would be more in favor of a car manufacturer of a utility company, of an electrical car company?

Thank you, Jean-Michel. I can reply very easily to the first part of your question. Certainly not a car manufacturer because we already have a car manufacturer in our shareholding, even if at a lower level, which is Stellantis. So certainly, we don't need another one, first, because they are representing 25% of the European market share with sounds quite like enough, if I may. But more importantly, because the joint venture is born in order to address worldwide. And again, I invite you to refresh our news release on our website, but you will obviously receive via e-mail in a few minutes. But I invite you to refresh just simply to understand also to say the title. What you will clearly see is that the ambition of the joint venture of Free2Move eSolutions, let me call it, right now since now in the right way with the right name, is the ambition to become the worldwide leader in eMobility services, first point. And second one, to play in the market, certainly not in a captive way. And therefore, the real ambition is to expand our services and our products well beyond the Stellantis group, okay? That's the reality. So again, certainly, cannot be a car manufacturer because we have, first, as I said, one of the largest one into our shareholding, even if in a different customer. And secondly, we do not have any need for an additional one because in our strategy, we already have a clear strategy to tap all other carmakers without having them in our shareholdings. Then on the second part of your question, frankly speaking, we do not have straight preference between an oil and gas related company or oil and gas technology related company or electrical one or any other type of industrial players. Frankly speaking, if our new partner, assuming we will have a new one, obviously, will be a provider of oil services or a technology provider in the oil and gas industry or a manufacturer of any other thing, let's say, from electrical equipment to cement really is totally irrelevant. What is really relevant, at least from our perspective, like the management team, is that we shall have a global ambition in the global play because the market is booming and the problem we have today is the prioritization within our things. And when -- at same time prioritize, we select, we decide on what opportunity to tap. Really, we realize how much we are missing and how much we are living on the [indiscernible]. And therefore, having a shareholder, a partner that believes in us, that believes into our global projects, which is not just American or Asian, but it's European, Asian and American really, but believing both ideally, eMobility and the energy storage, that belief really in what we are doing, that's the priority. Because market -- you are following us since the very beginning, Jean-Michel. You remember when in 2016, we were discussing about the market that was not existing at the time, right? So right now, the market is there. It is clearly billion size at the global scale. So we are there. We have hundreds of megawatts under development, hundreds of megawatt of installed base. We are #4, #5, #6 as discussed in the world, but certainly, we are a top-tier player in the energy storage space. And certainly, we are a top-tier player in the eMobility space. We want to serve and ride this wave. This is the only thing we want to do. We want to install megawatt hours, we want to install projects, and we want to install eMobility products all over the world. This is what we want to do. Then if our shareholder will be our equipment manufacturer or an EPC or a semiconductor producer in Asia, really, we don't care. What we care about is the level of ambition that the new partner will have because our ambition is very, very high and having a partner that believes in us and that will give us the fuel to serve this wave and to really transform what was the dream and now is the reality into a global player. I mean this is what we want.

The next question comes from Theveneau, Fabrice of Lyxor Asset Management.

I had many questions, and I'm not sure I'll be asking all of them. But the first question relates to the requirements for storage. We've seen a very big jump in the need for storage of electricity with the ramp-up of renewable energy. I'm thinking it should be about Spain, where the tenders did not include a storage option roughly a couple of months ago. And now it seems that most of them would include some storage requirements. What's the impact for you? And when can we expect you to obtain contracts on the basis of these tenders? Second question relates to the share of your sales in the next 2 years that will be in the U.S. Does it mean that you need to relocate partly to be closer to your end market? Can you remind us also the difference between backlog and contracts secured and when we could expect the EUR 112 million you have on Slide 17 to move into backlog? And I had a few -- 1 or 2 more on the financials, notably on breakeven. Could we still anticipate 2022 for the year breakeven?

Thank you very much. I will leave to Giuseppe the replies on the first 2, so the impact of the market boomer and the potential of relocation of part of our teams to the U.S. I just take the last 2. So very easily. And then again, Giuseppe might give you more color, but the revenue recognition of these backlog and secured contracts is obviously in the next 2 years. We may have a small portion in Q1 or, let me say, beginning of 2023, but almost -- we expect strong majority of backlog and secured contracts obviously converted in the next weeks. We have almost 1/3 to 1/3 ratio between 2021 and 2022. Then this is the conversion to which you have to sum up. Obviously, the eMobility protection. By the way, sorry to interrupt, but I can confirm, and again, apologies, I hate real-time things. But you might easily imagine the period in which we are. It's on our website and in the Stellantis website. So if you go on our press release section, you will see the new press release we just broadcasted, so Free2Move eSolutions is the name of the joint venture between Stellantis and ENGIE Eps to create a new world-leading provider of eMobility product and services. So this is the title of the joint venture just launched by Stellantis, and you will see also the logo of the Free2Move eSolutions brand. Then having said that, I take the last one in terms -- just to clarify the difference between revenue backlog and secured contracts. Obviously, in our space, it's quite usual. Typically, when we are awarded with a tender, the contract is secured, but then typically being a project financing, you have several complexities and several papers to be signed from the EPC. So the notice to proceed and so on and blind information and before the contract is secured, but then before becoming backlog typically becomes backlog and the notice to proceed, then from notice to proceed you recognize the revenues very quickly thereafter. So that's the traditional way used to clarify what we secured for our business. And what this backlog before is a secured contract that has already been executed in all steps in terms of documentation and planning provision. But I leave to Giuseppe a detailed answer on the first and second question. Giuseppe, the floor is yours.

Thank you, Carlalberto. As you rightly said, so the very ambitious plans and the actual physical increase in penetration of renewables across markets creates a fundamental need for storage. This is clearly reflected in the boom that the United States market had last year that installed on its own more than 1 gigawatt hour -- well more than 1 gigawatt capacity even only in the fourth quarter of the year. So overall, the market -- actually the 10 gigawatt hour of capacity installed last year. The slow announcement coming from Australia, slower announcement in coming from Europe and from some other regions, Latin America, for example. The key difference between markets that are already booming and markets that will boom over the next months and years is the pace at which the market design is adopted to reflect that. So the fact that the European market is a fully liberalized market, where in principle unless there is a specific element of capacity remuneration, independent power producer utilities are fully exposed to the vagaries of spot market is something that is slowing down the uptake in Europe. However, I mean, the fundamentals are so strong. But clearly, all the regulators are actively working around creating mechanism that can give visibility to revenue generation on storage system and to protect that listing part from the fluctuations of the pure spot market remuneration. I mean the Italian Fast Reserve tender on which we captured 1/3 of the capacity work is a case in point. So we just needed a 7-year visibility on a portion of the remuneration of the system that the tender was able to strive when the prices came out extremely low. So from a system perspective, it's a great bargain installing storage. So this is not about subsidy. It's just given this reducing the spot risk -- the spot market risk that investors staying in this system have to bear. At the moment, you mitigate that, then the market booms. And this is, again, what we are seeing in the U.S. and what we are seeing in Australia, even though in Australia, in reality, there is not that much of a mitigation, it's a lot better. The amount of solar capacity that is being installed, in particular on rooftops, so retail and storage capacity has created such an oversupply of solar energy during the daytime of the day that even on a merchant basis, the energy [indiscernible] are contracting storage, and this is what is driving the development of systems. So again, in an auction, it's a matter of market design. Spain, that is installing again, so started again to install gigawatt of solar every year. Feels that pressure stronger than some other markets. But we expect that to come in Italy. We expect that to come in Germany. We expect that to come in Portugal and Greece when we talk about only Europe. On the -- moving to your second question. However, the reason why we have the bulk of our secured contract portfolio is located in the U.S. is exactly this one because market design in the U.S. as anticipated. The -- I mean, it's followed the fundamental need of the electrical system, and therefore, the market is taking off first, and together with ENGIE, we managed to capture a material portion of that. We knew that it would take some time to finalize the project development. And -- but this is coming. So the secured contract will convert over the next 18, 24 months. And in order to do that, yes, we are -- in addition to registering electrical business in all the states where we are going to either execute projects or originate new projects, we are moving 2 people out of Europe to the U.S. We are hiring 2 or 3 people in the U.S., both for business development and origination airport service. You may -- just to remind you, apart from the secured portfolio, last year, we put into operation our microgrid in California, on which already we have a second stage that has now been contracted as it's in execution. We started the construction of our project in Massachusetts back in October and would be online later this year. So already, we have project that -- in execution, but they already required aftermarket service. So we need to cover both aspects. And of course, given the strategic -- ongoing strategic review with ENGIE, we are by default increasing our level of independence, while before we could assume that at least in certain areas, we could somehow rely on ENGIE's presence since September last year. Our working assumption is that we have today independence across spectrum. Then once we have any shareholders identified, of course in certain geographic areas you expect to have to benefit from local support from whoever is going to be the new reference shareholder. I think I covered everything. I think unless there's something else that you may -- that you want to touch upon, I'll leave it you.

That's helpful. Is there some [ Technical Difficulty ]

Sorry, we cannot -- I cannot hear you anymore.

[Operator Instructions] The next question comes from Jean-Michel Belanger of Societe Generale.