Nordex SE (NDX1) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the Q3 report 2020 of Nordex SE. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Felix Zander, Head of Investor Relations, who will start the meeting today. Please go ahead.

Thank you very much for the introduction. Good afternoon, ladies and gentlemen. A warm welcome on behalf of Nordex to our today's analyst and investor call. We have prepared a full agenda for you today. Also given by the news, we have already shared with you during the beginning of the week. Our CEO, José Luis Blanco; our CFO, Christoph Burkhard; and our CSO, Patxi Landa, will guide you through the presentation. Afterwards, there will be, as you've heard, enough time for Q&A. Please limit yourself up to 3 questions. And so I would take the opportunity to hand over to José Luis, our CEO. Please go ahead.

Thank you, Felix. Dear ladies and gentlemen, thank you very much for joining our Q3 2020 results presentation. Agenda that we have prepared for today is slightly different than the normal agenda because we want to give you more details. First on the COVID impacts in 2020. Second, in how we are planning to achieve our mid-term profitability targets. So starting with executive summary. Nordex has delivered in the first 9 months of the year sales of EUR 3.17 billion, with an EBITDA margin of 2.2% and working capital minus 5.7%. It's worth to mention that the order intake amounted to 3.75 gigawatts in the first 9 months with a share of 81% coming from the more profitable turbine generation Delta4000. Patxi will comment afterwards, but good Q4 is expected, which is good. The momentum of the order intake for our industry and for Nordex continues despite COVID. Second very important thing is that sales are up 63% year-on-year, EUR 3.2 billion versus EUR 1.9 billion 1 year before, and this is despite COVID. So it means that operations despite COVID are almost ready for a 6-gigawatt-plus company. Third, EBITDA of EUR 71 million versus EUR 60 million in the previous 3 quarters. And despite COVID, a slightly better working capital ratio with minus 5.7% compared to the 5.2% 1 year ago. Of course, 3 quarters or year-to-date results were negatively impacted by COVID as well as major nonrecurring events accounting approximately EUR 300 million. But we were able to countersteer in a very successful way by selling Nordex development activities in Europe to RWE for around EUR 400 million. Nordex, very important. German market is gaining momentum, and as a share of confidence in Nordex, we scored 31% in the latest auction, sharing top position with Vestas. This is very relevant because Europe has strong political support, and Germany is back and we have leading position in both, in Europe and in Germany. We'd like to share with you that we communicate and restated the new guidance for full year 2020 with sales approximately EUR 4.4 billion and EBITDA margin of 2%. We communicated as well strategic targets for 2022 with sales approximated EUR 5 billion and EBITDA margin of 8%. This is very much expecting stable order intake, and that margins in the marketplace staying as they are, and we are going to go more in detail later in the presentation. And in order to support these strategic targets, comprehensive company program is in implementation in order to secure the full year '21 performance and fulfilling our strategic targets. With this, I would like to share with you one very important bullet point, which was the approximately EUR 300 million full year P&L impact that COVID and a major nonrecurring event has created -- has cost to Nordex. And we split it into 5 building blocks: The first building block is productivity impacts on production and project sites due to supply chain disruptions. And very important as well, restrictions to move people and goods from country to country. What we have done is that we implemented contained measures are defined and executed. The company has been working in business continuity COVID task force since the beginning of Q2 this year. We implemented catch-up measures as well, and I will say that operations are back to normal despite the second wave of COVID. We, as a company, learned how to operate in a COVID environment. Second building block is limited availability of people in blade factories led to delay ramp up, delayed number of blades, which impacted project and underutilization costs. We decided to keep the production running in order to mitigate further project delays and LDs, but this has had an impact in the profitability of the company. As of today, output has increased and is stable, close to the plan, back on track, fully expected in Q1 2021. Third building block is due to the reduced deliveries, leading to project delays and cost synergies. What we have done is upgraded and strengthened the production, ensuring reliable -- reliability on future deliveries. And I will say that second COVID wave did not cause supply chain delays. Again, I mentioned before, we operate in -- close to normal in COVID environment. Next, I will say that COVID has hit harder in the South Hemisphere, mainly because that was winter, and is hitting harder countries with health system not as robust as U.S. or Spain as well as suppliers on those countries. So in this context, building block number four, which is very relevant, the replacement of suppliers and subcontactors was severely affected by COVID in LATAM and in South Africa. In Argentina, the decision taken was stopped doing new business. We are finalizing the projects there in the year. The COVID impact is included within the EUR 300 million expected for the full year. We don't plan to do business going forward for the time being. And in South Africa, the situation is turning around. And additional measures were implemented in order to strengthen and reinforce on-site supervision and acceleration measures. Unless, which is not directly COVID related, we had a one-off geotechnical issue in a large Nordic EPC project leading to delays and cost overruns. We have -- we did -- the lesson learned, reorganization was implemented and we are increasing the quality and the capabilities of the contracting management. No spillover risk in other markets or in the future due to nature of the business. With this, I will hand over to Patxi.

Thank you, José Luis. Good afternoon, ladies and gentlemen. And now looking at the markets, we continue to see strong demand for our products. We landed 3.8 gigawatts of new turbine orders in the first 9 months of the year, down 21% with respect to the same period last year. We saw significant activity in North America, where the expected volume came in with 0.6 gigawatts of new orders landed in Q3 and an additional 0.6 gigawatts of orders landed in early October for a total of 1.2 gigawatts of new orders in North America year-to-date. So we are very pleased with this performance as well as with the recent political events that would make us expect some more favorable market outlook looking ahead. However, it is too early to assess at this point in time, the real implications for our future business in the U.S. But very good performance from our perspective from the North American market. Same goes for Europe that continues with very good performance. And European orders represented 2/3 of the total orders until September. And we have a leading position, as José Luis was referring before, in Europe, where we ranked #2 in new orders over the last year. And that position is cemented in very solid ground. The first is that we have an excellent product feed for the market requirements with the Delta4000, 4 megawatts and 5 megawatts, being a leading selling turbine in these markets as well as globally. Second is that -- is the presence that we have across all European markets. So we have an extreme presence and good reach in all main and small European markets, so very good presence. And the third, the customer capillarity. So combining customers with markets with an excellent product fit, we do expect -- and based on this, we do expect to continue the good performance in Europe over the next periods. So summarizing, we continue to see a strong momentum in an order pipeline despite COVID, and remain confident to deliver good order volumes for the full year. ASP remained stable at EUR 0.7 million per megawatt in the period. And importantly, 86% of Q3 orders came with Delta4000 turbines. So it's almost all of them came with Delta4000 turbines with the consequence that this is increasing further the margin quality of the order backlog as we have been explaining over the previous calls. Next slide, please. Service sales grew 11% to EUR 318.3 million, and represented 10% of group sales in the first 9 months. EBIT margin was 14.8%, and the fleet under contract stands at 21 gigawatts. Next slide, please. Turbine order backlog stood at EUR 5.1 billion at the end of September, decreasing 9% over the previous year, and service order backlog grew 12% to EUR 2.8 billion, for a total combined order backlog of EUR 7.9 billion at the end of September. And with this, I hand over to Christoph.

Thank you very much, Patxi. And good afternoon, ladies and gentlemen. Welcome also from my side. And I would like to guide you now through our Q3 2020 financials. Starting with the income statement. Sales with EUR 3.17 billion show an increase of 63%, José Luis mentioned that already, compared to -- with the first 9 months a year ago. And this demonstrates that despite the impact of COVID-19 pandemic, Nordex has been able to continue on its growth path. The EBITDA margin of 2.2% after 9 months in 2020 reflects the combination of approximately EUR 260 million impact due to COVID-19 related issues and one-offs, as explained by José Luis, and the counterbalancing effect of EUR 300 million from the sales proceeds of the Nordex development pipeline. And just to repeat and to be precise, we have talked about the EUR 300 million number that was the total year number and the EUR 260 million number that I am just mentioning is the first 9-month number. The pipeline sale proceeds have been recognized as other operating income. And finally, our usual PPA information. EUR 19 million of PPA depreciation are included in the 9-month number. Now looking at the balance sheet. Our cash position at the end of September amounted to EUR 408 million. It is important to note for you that this number does not yet reflect the cash contribution from the pipeline sale amounting to approximately EUR 400 million, which we have received on November 2. Further on, you see an increase in current assets, mainly attributable to the transaction with RWE. This is the reason we have -- that you see here, we have a separation between P&L impact and cash impact over Q3 and Q4. And then we have one more significant single effect in our balance sheet, visible in the sheets between noncurrent and current liability. Here, the reclassification of the EUR 250 million promissory notes into a current liability due to the maturity in April 2021 is reflected, and that already happened in Q2. I just wanted to repeat that because it is simply a big number. However, in that context, as we have previously mentioned, we have already secured the refinancing of this instrument in the context of the closing of the revolving cash facility. And now going to the working capital. In light of the third part -- quarter being strongly impacted by COVID-19, the working capital ratio with minus 5.7% is still at an acceptable level. The deterioration of 1.4 points compared with the level after June 30 is largely attributable to the increased trade receivables position. And this has been caused by COVID-related project delays with corresponding shifts of payment milestones. And I do expect this effect to remain throughout the fourth quarter, as you can see, reflected in our guidance for 2020, where we say that we will definitely be below minus 4%. But -- so it's rather a stable working capital, maybe a little bit worsening, but fairly stable now until year-end. And that brings me to the cash flow statement. Here, again, it's very important to note when you look at the negative cash flow from operating activities in Q3 that this is without the cash from the Nordex development pipeline sale. As mentioned before, we have received the money on November 2. And that, of course -- that effect, of course, you obviously also see in the free cash flow. The cash flow from financing activities of approximately EUR 300 million is largely a result of the cash in from the EUR 350 million from the revolving cash facility, minus repaid tranche under the EIB facility, some smaller short-term loan repayments and leasing payments. With that to investments. Investments during the first 9 months of 2020 amounted to EUR 109 million. That also implies that's already a little bit of a preview into Q4, that of course, in Q4, we will still heavily invest on -- to our guidance, EUR 170 million. And so investment activities are continuing without any kind of break here. And well, due to our large order book, the high overall activity level and ongoing high demand for our products, we will simply continue to execute our investment program as planned. And last, but not least, looking at our capital structure. We do see the leverage curve declining again from the peak after Q2 2020. I do expect this to continue in Q4 and anticipating your question and making this more specific, I do expect the leverage ratio at year-end to be below 3, but not yet below 2. And equity ratio remains almost on the same level as after Q2. And with that, before handing over again to José Luis, I would like to conclude the financials with 3 key messages: Firstly, our business has been obviously significantly affected by COVID-19. But at the same time, Nordex has been able to successfully counterbalance this particular situation with a comprehensive financing package -- refinancing package and a very successful M&A transaction. Secondly, the growth trajectory of the company further on intact and very important in this context, despite various COVID-19-related impacts across the entire value chain, we continue to have a firm grip on our working capital management. And last but not least, it seems to our best current knowledge that the COVID-related effects on Nordex business are gradually winding down now, which is why we have also reinstated our guidance. And with that, I am handing back to José Luis.

Thank you very much, Christoph. I think this slide is self-explanatory. The performance of the company in operations. Message number one is that despite COVID, we managed to increase 144% the megawatt installed. And we are almost at the pace to achieve the 6-plus-gigawatt company that we want to be in our 2022 strategic targets. The second message is that we are already very successfully producing in India, and our plan is to ramp up India to a 4-gigawatt up of Delta4000 for delivering globally, mainly for non-European markets, which is one of the key lever for profitability lift in 2022. This is going to be in execution in 2021. But if we go to the numbers, I think we installed 1,052 turbines, 21 countries, 43% in Europe, very important message. We are planning to do next year, 60% in Europe. And as I mentioned before, despite COVID, we managed to operate in Europe reasonably okay. So next year, it's going to be a derisk. From a country composition, 33% in North America, next year as well, it's a big market for us; 18% in Latin America and 6% in the rest of the world. This is going to be reduced next year. In terms of production, we increased nacelle assembly capacity 43%, 4.4 gigawatts assembled, at the pace of a 6-gigawatt company, so that -- that's very much achieved. 549 turbines in Germany; 332 in Spain; 154 in India, this will be a shift to Delta4000; 64 in Brazil, where we are now starting to produce moving Delta4000, big success will be announced in due time, but we plan to produce Delta4000 in Brazil. And in Argentina, as mentioned before, we decided to stop temporary activities. In-house blade production more affected than nacelles for COVID. We talked before in the building blocks of the COVID impact slide, 990 units in the 9 months, Germany, Mexico getting split, although Mexico was heavily affected by COVID. India that we will increase a lot during 2021, the blade production in India. And 55 sets in Spain as well, heavily affected in the first 3 quarters due to COVID, now back to normal pace and outsourced blades of 2,000 units. So the message is that indeed, COVID has affected blades, but the situation is back to close to normal. And the India road map that we plan to deliver is very much substantiated in the proving track record that we have there. With this, if we move to the next slide, it was mentioned already by Christoph. We have sufficient visibility to reinstated guidance for the year, with sales approximately EUR 4.4 billion; EBITDA margin 2%; working capital below 4%; and CapEx expected to ramp-up in Q4 from EUR 100 million to EUR 170 million to support mainly the late investments and the capacity expansion in India in 2021. This is ongoing. It's not stop -- was not stopped in COVID times, and this will ramp-up in the next quarter. Okay. So with this, we are approaching the end of the presentation. I think we communicated last Monday as well the decision to issue strategic targets because we see that from an order intake and sales perspective, there is, as Patxi mentioned, good political momentum in Europe. On top, the new elected President in the U.S. announced that he plans to join the Paris Accord, which eventually might even improve the market and political dynamics. We see the possibility to lift the EBITDA to an 8% level, and this is going to be a consequence of mainly 2 factors: One is the quality of the backlog that we have, and we will see a jump in 2021; and then combined with the cost improvement of the 4 gigawatts that we are planning to -- that we are executing in supply chain expansion in India, and that will be the boost of the profitability. Capacity 6-gigawatt, I'm not saying that is plain vanilla. But as you saw in the previous slides, the company is already producing in that level of capacity. So in order to give you some more flavor of why we think those targets are achievable, first, how is the market and the policy environment? So we talk about Europe. The European Union and the European countries decided that COVID could be a great opportunity to accelerate decarbonizing the economy. So the European Green Deal is there as a multiyear package and is real and is driving demand. We are on our way with net zero emissions for climate neutrality by 2050. And on top, a very promising repowering business might eventually even increase demand. On top of Europe, mentioned U.S. new elected President might change policy in the U.S. But regardless what U.S. does in terms of policy, what he announced to join Paris Accord is a great signal for our business and for our sector and for the world. Nonetheless, our position in LATAM, Brazil -- we decided to stop business in Argentina. But Brazil remains a strong demand with -- for 2021, 2022, 2023 with good conditions. So -- and the company is very well positioned in all those geographies. So the message we wanted to give you is that the macro and long-term drivers support a stable order intake for Nordex going forward. If we go to the next slide, please. Then say, well, how is Nordex positioned in the market? Because one thing is having the market and the other is the positioning of the company in the market. And I will say, and it was already mentioned before, we have high competitive product portfolio with Delta4000 turbines. It's one of the leading sold turbines in the 4- to 5-megawatt class worldwide. And this turbine is very much the best-selling platform in European market and the U.S. is shifting quickly to this platform. And as we mentioned, Nordex is leading in this segment. It's top 2 player in terms of order intake in Europe, which is the main market or the main geography for us going forward. And Nordex has as well a good positioning in the U.S. and leading position in Brazil with a strong customer base. From a supply chain perspective, it was mentioned, planning to ramp up India 4 gigawatts planned for 2022. Delta4000 start to kick in the in Q4 2021. And this will deliver substantial volumes at substantial better cost for Nordex that will leave the profitability midterm. Last, remaining on a strong order intake, vast of the majority of the full year 2021 is already secured. And as was mentioned by Patxi, majority of the demand, almost all the demand coming from the 5-megawatt platform, and we don't see this trend to change. So we see a stability in the volume. We see a stability in the margins. And with the stability in the volume, stability in the margins and a clear action plan to build best competitive country, supply chain capabilities that will leave profitability. Last slide is the company program that we mentioned before in the presentation. The main block of the company program is supply chain expansion. This is by far the biggest contributor, but not the only. We are doing more than that. So this is mainly setting up 4 gigawatt supply chain in India and moving foreign European partners to India. We have been producing in India very successfully the last 5 years. So for us, we don't have a country risk or a team risk. We know how to do business there. We don't have a suppliers risk because our existing European suppliers have Indian capabilities and what we are is ramping those capacities with substantial, more competitive costs landed in most of the geographies where we operate. The second block is productivity enhancement. We want to put in place safer, stronger ramp up, focusing on efficiency and productivity in order to deal better with the ramp-up risk. One very important block is increased service profitability, building a global service unit to further improve the margin profile of this very important activity for the company. Then PM/EPC, we need to use experiences of example of excellence from high-performing countries in other countries. Product delivery, we need to stay at the curve. We don't want to stay ahead of the curve. We want to stay at the curve of the market benchmark for products. We want to continue our sales success story. Stay on top 3 position in onshore business, as already shown in the last 5 to 6 quarters in the 5-megawatt segment. And last, we are expanding our engineering capabilities, creating an engineering center in India to support all the supply chain expansion in India. So in summary, 2021 is going to be supported by eliminating the one-off effects and the execution of a better order out of a better backlog; '22 on top, stable order intake and company program kicking in Q4 '21 and full effect in 2022. With this, we open the floor for Q&A.

Yes. Thank you very much for the presentation. And operator, please open the floor for Q&A. Thank you.

[Operator Instructions] The first question is from Sean McLoughlin, HSBC.

Can you hear me?

Yes.

Yes, we can.

Super. First one is on CapEx. Just to understand how much more you need in 2021 to get to that 6-gigawatt target? Or is that now included within the EUR 170 million guidance for 2020? And also, how much of that 6 gigawatts you'd be intending to outsource in terms of blades? The second question is on the service margin in Q3, it was low. It's below 11% EBIT margin. I'm just wondering what's caused this because it's not clear from those 5 items that you've highlighted on the COVID slide. And then on the 2022 targets, I mean, just if I take your last 12-month order ASP around EUR 0.7 per watt, I assume EUR 500 million of services. To get to that EUR 5 billion target, I'm looking at somewhere around 6.5 gigawatts of installations. That is obviously a step up. And I'm just wondering, which markets are you focused on to really drive market share to get to that number?

Okay. So I would take maybe 2 and then hand over to Patxi. Regarding the CapEx, we think the EUR 170 million that is the guidance of the year, is already the 2020 portion of the capacity expansion in India. So there are blade moulds and tooling and transportation tooling so on and so forth. For creating this capacity in 2021, we are finalizing the budget, but we don't expect substantial CapEx change going forward. I think that was the question regarding the CapEx. Regarding the margins -- go ahead.

I can take this if you want. So the service margins, so indeed, there are a number of factors affecting the decrease in the margin, among which is some ramp-up costs, one-off ramp-up costs for some key account contracts that are entering into service right now in some markets. We believe that this is going to remain with us for 2 to 3 quarters. And then as part of the company programs, service being part -- one integral part of the company program that José Luis was explaining, we expect that the profitability will go back to growing figures. And then taking your third question, it's true. I mean, your math is right, 6.5 gigawatts. What we are focusing is incrementing our leading position in Europe. I mean, Europe is a blessing, as José Luis was explaining before. We do see tailwinds in most of European markets, if not all of the European markets, which are really relevant for us, where we have a track record, where our positioning is truly excellent from every angle. And this goes to the Nordics to Sweden and Finland, the U.K., France, the Netherlands, Germany, which is coming back, also Southern Europe, and Spain, Italy, Turkey, all of those markets where we have leading positions, are seeing tailwinds, and we plan to benefit from that. So Europe will be more than half of our sales. I mean, it would be 60%, around 60% of our over sales moving forward. North America, North America even with the change in administration right now, it's solid sales, as I was explaining before, to quantify how much that and if and when a potential legislative change might alter the outlook. But even with existing outlook, we will focus, and we are delivering already for the shift of 6 years, very good results in North America. And then not forget Latin American markets, namely Brazil, where since for a year now, and it's expected to remain for least 2 or 3 years, there is a significant free market PPA movement. And with this, the market is booming. At the point in time, we expect installations to go up to around 2 gigawatts and maybe more for years '21, '22 and then potentially '23 as well. We have not announced a very large deal that we did with a Nordic utility in excess of 500 megawatts because it has a very small item in order for us to recognize order intake, but it's a project that we have -- that they have announced, by the way, and that we have done with them. And we expect a lot of good positive news coming out of the Brazilian market; again, another market where we have a very longstanding position in the market. And then there will be one-offs in different markets, like South Africa, that is coming back. We expect next year that the Round 5 will be taking place. And this will complement essentially the main focus that we have in European markets, as I said before, North America and Latin America.

Australia.

And yes, and Australia, thanks for reminding. And that will be as well.

That's super helpful. Just one...

So we are producing, we are slightly growing the volume with less countries. And focusing the volume in more mature countries. That's the summary.

Understood. And just in Europe, where you've sold the development portfolio. Is there a change in sales strategy? You've built up a strong position because of the development side. I mean, how are you effectively replacing that undergoing share?

It's pretty independent. I mean taking into account that most of the -- the vast majority of the development pipeline was referred to France. And in a megawatt scale, probably we might be -- it might be less than 10% of the total European installation in any given year. So we are discussing, even from a value creation perspective, a massive transaction. From a pure turbine orders deal, from a volume perspective only, it will not alter materially our strategy going forward.

The next question is from Sebastian Growe, Commerzbank.

On the footprint, I would like start, and especially for India, on my counting, you're less than 1-gigawatt currently in terms of entire production in the country, and now you say you want to expand up to 4x as much as 4 gigawatts. I think you only mentioned so far Argentina as the potential hub that is going to be dismissed going forward. So how should I read it then when it comes to the total capacity that you are preparing and gearing up to, so all else equal, and I think we can almost ignore Argentina because it's so small in terms of the overall output, that wouldn't mean you could grow into a size of 9 gigawatts. I guess it would be even for your lagging a bit on the high side, but I would like to see your thoughts around how it might affect other hubs like Germany, like Spain, et cetera, beyond what is eventually a very busy year in 2021 in Europe? That would be the first one.

Good. Thank you, Sebastian. I think we are not planning restructuring in Europe in the horizon of the view that we have. And if we have some extra capacity, eventually, if the market momentum stays strong, it's not bad to have some extra capacity to eventually have the possibility to sell slightly more. This is what I can comment. But the business plan is based -- I mean, the business plan and the strategic targets are based on the 6-plus-gigawatt company, are not based on the potential nominal capacity that we might achieve in 2022.

Okay. Fine. The next one is then more for Patxi, I think, on the pipeline, and especially on Germany. You mentioned the upcoming EEG amendment that is due. I think it reads like roughly 20 gigawatts in total, I think, until 2030. So call it a good 2 or close to 2 gigawatts incremental capacity addition every year. What would you think is really a fair assumption? I think you're coming from nothing as we speak, 100-megawatt or so last year. So could it go back to then a 500-megawatts-plus volume put for U.S. Nordex? Or how should we think about a market and then your respective volume?

I think it will come. The thing is the timing of that coming back. As you very well know, there is this -- in the special Erneuerbare-Energien-Gesetzt that -- when that will be in play, and how that will leave, and some of the hurdles that actually, well, developers are facing, that will affect as well the timing of the market coming back. But what I can tell you is that there is momentum. I see that there is momentum. Still, we are far away from the volumes that we once had 3, 4 years ago. But as José Luis said, the auction in October, not just that we clinched #1 together with rest as we have very good 31% market share, but the volume was already significantly higher than earlier auctions. So we see momentum, we see momentum in discussions with customers. We see tailwinds as well that the administration with this law that I just mentioned is going to ease a developer bottlenecks. The thing is when this will come back? We have burnt our fingers so many times in trying to guess when Germany would be coming back. So I'm cautious, but I do see momentum. Certainly, I would say 2022, we should see a much healthier German market.

Okay. That is helpful. And then the last question I would have is on the net debt side. Christoph, you mentioned that you would be comfortable with a net debt ratio -- leverage ratio of below 3x at the end, not yet below 2x. So implicitly, you're saying more than EUR 200 million, less than EUR 300 million of net debt. You're getting from the EUR 500 million roughly that we are talking about right now end of quarter 3, EUR 400 million in, obviously, from RWE. Question really is what is the other moving parts here on a slight CapEx step up? At the same time, I think the guidance would imply not much of a cash burn from operations as such. So what else is sort of the moving bits and pieces here? How should we think about the VAT receivables? Is there any overdue receivables on the balance sheet? You mentioned the amended payment terms, anything to give -- get some more color would be appreciated.

Yes, sure, Sebastian. I make it explicitly very simple, and I think that should help you here. I would start with the gross debt here. If you look at Q3, as you can see on our slide, the starting point is the EUR 900 million gross debt and then the cash position, obviously. What will happen in Q4? This is -- this we can already say. So you will see the gross debt coming down by EUR 100 million, it has already happened, because out of the cash that we received from RWE, we will have an immediate EUR 100 million repayment under the revolving cash facility. So then you're starting basis EUR 800 million cash -- sorry, EUR 800 million gross debt, sorry. And then in order to come to the net debt, of course, you're asking me now how should I think about the cash position. Well, let me give you the following building blocks. We had end of Q3, we had EUR 400 million cash roughly; end of Q4, we will have -- most likely, we will have a significantly higher cash position, of course, triggered by 2 effects: First of all, it's end of year; secondly, there will be excess cash from RWE. That then will bring you in the interval between 2 and 3, yes, if you count it with our guidance. And otherwise, to be honest, I don't see many other moving parts here. Don't expect a bit -- a lot of tailwind here coming from the VAT receivables. We are doing our best, but that will not move the needle outside of the 2 to 3 corridor. That's my fairly simple view on it, but I think there's not a lot more to that, if that helps.

Yes, it does. Just final question around the proceeds from RWE, that is really net of taxes, et cetera. So the EUR 400 million is really what you are going to receive?

Yes, we have it already received, 2nd of November.

Next question is from George Featherstone, Bank of America.

My first one is on the phasing of the benefits from the Indian expansion over 2021 and 2022. I wondered if you could give us some color on that kind of on the incremental savings you expect to get from your cost base over those periods?

Well, this is very -- I mean the -- somehow, the building blocks from the profitability we have today to the strategic targets is removing the one-off effects of this year, improving 2021 with a better execution of a better quality backlog. And kicking in India, Q4 2021, full year 2022 to deliver the 8% profitability. So the breakdown between the backlog and the India, I don't think I can give you today. Because I mean -- you will know it once we issue the guidance for 2021. So the remaining portion from the 2021 guidance to the 2022 profitability is going to be the Indian contribution.