Nordex SE (NDX1) Earnings Call Transcript & Summary

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

Thank you very much for the introduction. Good afternoon, ladies and gentlemen. Herewith, I would like to welcome you on behalf of Nordex to our analyst and investor call for the full year 2020 figures. Our CEO, José Luis Blanco; our new CFO, Dr. Ilya Hartmann; and our CFO, Patxi Landa, will guide you through the presentation, providing you with information about strategy, markets and financials. This presentation will be followed by as you have heard by a Q&A session. Please be so kind and limit yourself up to 3 questions. And now I would like to hand over to you, José Luis. Please go ahead.

Thank you, Felix. Good afternoon, ladies and gentlemen. Thank you for your time and participation. First time, the new management Board, Ilya Hartmann, Patxi Landa and myself. I'd like to introduce first to the new CFO, Ilya Hartmann. Ilya has been in the industry for the last 15 years and joined Nordex in -- back in 2017. He was instrumental at that time in the efficiency program. And he has been part of the executive management team ever since. Agenda for today is we will start with an introduction. I will -- Patxi will guide us about the market and order development, Ilya will share with us the financial performance of the company, and I will take, as usual, operation and technology. We'll share with you our guidance for the year. We'll share with you as well the drivers in order to meet the strategic targets, and we'll discuss as well the strategic targets for Nordex in 2022. We'll open for Q&A, and then I will conclude the meeting with our key takeaway. So going to the summary of 2020, I think Nordex successfully completed the year in line with reinstated guidance. Sales of EUR 4.651 billion; EBITDA margin 2%; working capital minus 6.3%. It's worth to remark that the order intake amounted to around 6 gigawatts in full year 2020 despite the COVID pandemic, and this is quite remarkable. The ordering momentum remains strong and the success order intake story for Nordex remains. 81% of the orders accounted from the last Delta4000 turbine series. Remarkable as well the 2.3 gigawatts order intake in Q4 2020, the strongest quarter in the year. Talking about execution, full year sales amounted to EUR 4.6 billion, an increase of 42% versus the previous year 3.3%, despite, as mentioned, the massive COVID disruptions. And this was a result of a record of installation and production. As mentioned, COVID heavily impacted, as we commented in Q3 call. We installed close to 5.5 gigawatts in a COVID year with an increase of 77% year-on-year and we had as well a record of turbine assembling close to 5.8 gigawatts, an increase of 24% year-on-year. EBITDA margin in line with the guidance. But as mentioned in Q3, affected by COVID of around EUR 240 million and additional one-off costs due to a mentioned Nordex EPC project in 2020. As we discussed previously, extensive and very successful -- financing measures successfully implemented. Combined with the sale of European project development portfolio to RWE for around EUR 400 million before cost taxes successfully completed in Q4 2020. Strategic targets for 2022 in place, sales of approximately EUR 5 billion and EBITDA margin around 8%. Before handing over to Patxi, I would like to share with you a little bit of how Nordex is positioned in the markets where we operate because it's good to put things in context. So in terms of installations, as mentioned before, close to 5.5 gigawatts were installed. Majority in Europe where Nordex always according to the Good Mackenzie Global wind power project installation database, was top 3 with a 15 -- close to 15% market share. Second geography for us was the Americas with 7% market share in the Americas, top 4. Asia Pacific, no installation and global top 4 with 9.2% market share in installations. If we talk about order intake, and as mentioned before, more than 6 gigawatts order intake for second year, and this could be taking as a proxy for revenues and installations in 2021. According to the same sources, we were top 2 in Europe with more than 31% market share which is the region worldwide with more volume expected ahead. And this is very remarkable that Nordex enjoy that position in what is expected to be the biggest region for the years to come. Remarkable as well, the order intake in America, 12.7%, top 4 player in that region. And as for the reasons that we will later explain, we decided not to sell in India. So we decided to stop sale activities there because of risk reward equation is not convenient for us. And as a global order intake, top 4, 14% market share but very close to top 3. So the message here is that despite COVID, production and installation levels are in a record high numbers and we managed to position Nordex as a top global player measure in the main KPIs. So in the right track to accomplish what we want to accomplish. And this -- with this, I will hand over to Patxi to talk about market and customers and services.

Thank you, José Luis, and good afternoon. So looking a bit more specifically at the markets and starting with Europe. So we continue, as José Luis was mentioning, to benefit from favorable conditions across the main European markets, as is the case with Germany where activity levels are slowly picking up with the effect of both our 2020 orders and 2021 installations in the country, doubling with respect to the '19 orders and '20 installation levels, respectively. Nordex markets continue to deliver good volumes, same as Turkey, where we are market leaders. And what is new regulation is maintaining the market momentum. Spain is also seeing very significant volumes being contracted peak, and our local manufacturing footprint makes us compete very well there. So as I said, good momentum across the main European markets, where we are capitalizing on our good market position to deliver very good results. The U.S. is expected to contract less volume than last year back to the normalized levels that we saw in the years before. The new administration is as well expected to improve the existing support regulation albeit its effect would only be felt eventually starting next year. In the rest of the world, we see very good momentum and significant volumes being contracted in Brazil as well as in Chile, fueled by its decarbonization targets. On the contrary, Mexico continues to be with investments on hold. We see good developments midterm, both in Colombia and Peru, same as in South Africa, where the accelerated round got recently awarded and a large round 5 as well was recently announced for the coming month of August. So all in all, we see a positive situation in the markets where we do operate, which is not to underestimate in the context of the effect of the pandemic to other industries demand. If you go to next slide, please. Now looking at the orders and despite COVID, as José Luis mentioned, during 2020, we were able to sell almost as many megawatts as in 2019 with 6 gigawatts of new orders, 2.3 of which in the last quarter of the year. 60% of these orders came from Europe and 40% from the Americas. Very importantly, we sold double as many Delta4000 turbines as in 2019, representing 81% of the total new orders and with the consequential effect, as we have discussed during number of calls of improving the order backlog margin quality. ASP remained stable at EUR 0.7 million per megawatt. So all in all, we are very pleased with this performance, both from a volume and a margin perspective in the middle of the pandemic. Next slide, please. Service sales amounted to 9.4% of group sales in 2020 with EUR 438 million, an EBIT margin of 15.8% in the year. The fleet on the contract stands at 21 gigawatts with an average contract duration of around 11 years. Next slide, please. And now with respect to order backlog, turbine order backlog stood at EUR 5.3 billion at the end of the year, increasing 4% with respect to the previous year. And service order backlog grew 11% to EUR 2.8 billion, for a total combined order backlog of EUR 8.1 billion at the end of 2020. And with this, I hand over to Ilya, who will take you through the financials.

Thank you, Patxi, and good afternoon. Warm welcome also from my side. This is Ilya Hartmann speaking. Thanks, José Luis, for the nice introduction at the beginning. Now on that slide and before going into our 2020 details, let me summarize again our efforts last year in strengthening our balance sheet and the debt profile. On the slide, we can see the milestones achieved last year, still under the helm of my predecessor, Christoph, as you all know. And if we quickly walk through, first, on the top left, important the -- securing the extension of the multi-currency guarantee facility in April 2020, supported by a large number of financial institutions and insurance companies. That obviously was a cornerstone to support the business and our growth path. If we continue on the top right, the so-called RCF, another important milestone of EUR 350 million revolving credit facility that was closed in August 2020 and comes on the back of guarantees by the Federal Republic of Germany and 2 federal states. To note that of the original EUR 350 million, EUR 100 million have already been returned last year. And I think I would like to use the opportunity to thank both the banks and the German authorities for their support here in this context. If we continue on the bottom left, we were in the wake of this also able to secure the repayment of the Schuldscheindarlehen, which becomes due next month. With that, our maturity profile has been reshaped and replacing loan has a tenure of 5 years. And fourth and last but not least, to speak about the equity increase by way of an accelerated book building in December last year, that was supported by the anchor shareholder and other key shareholders and the inflows from that capital increase should further support our growth again, the strategic target of 2020 and further strengthen our balance sheet. But now without going to the 2020 details on the next slide and starting with the income statement, we delivered sales of above EUR 4.6 billion in 2020, which is a 42% increase over 2019 despite the COVID-19 impact. I think this underlines that Nordex is one of the resilient and top global players, as José Luis explained in his intro in this industry. Gross margin stood at 11.8% at the year-end, and we generated a EUR 94 million in EBITDA, representing a 2% level as we had anticipated in our reinstated guidance as of November last year. The profitability was marked by the impact among others of the COVID-19 pandemic and one-offs, as mentioned by José Luis again before. Well, with that, our EBIT declined by EUR 42 million compared to fiscal year 2019. In addition to all the aforementioned factors, it was impacted by higher financing costs because of higher utilization of our guarantee facility, which, in turn, is a consequence of our increased business activities. Finally, just to round this up, we include our usual PPA information. The depreciation amounted to EUR 24 million in the full year figures. For the sake of completeness, on the next slide, we see the income statement of Q4 2020. It didn't show any unexpected deviation from our reinstated guidance and also reflects the back-ended volume as we anticipated. Now next slide and looking at the balance sheet, the solid structure of our balance sheet remains in substance unchanged compared to year-end of 2019, with around roughly EUR 780 million of liquidity, we've achieved a solid position -- a solid cash position at the year-end versus a EUR 510 million in 2019. Among other effects, here we can see the cash contribution from the project development sale that we did with RWE. And it is also strong -- that's also a result of strong order intake in Q4 of 2020. Then, as a result, our net debt in 2020 went down compared to 2019 as well. It now stands at EUR 41 million, which is plus EUR 43 million compared to our previous year when it was at EUR 84 million. The size of the balance sheet also increased versus 2019, driven by the increased activity level compared to the previous period. And then, in turn, total equity increased as well compared to 2019, basically due to the capital increase in December 2020. With that, I would go to the next slide, and I'd like to briefly comment on our working capital. Working capital ratio ended at minus 6.3, this is well below our guided figure of minus 4. The development there continued to be stable, very stable, especially if you see it against the backdrop of the COVID-19 pandemic. In the right-hand of the chart, we see that the positive development is EUR 35 million in absolute terms between end of Q3 and Q4, is largely attributable to the high activity level of our execution in Q4, and this has also led to a corresponding decrease of our inventories, which contributed EUR 295 million in the reduction of our working capital. I think that again reflects the awareness of the importance of a strict working capital management with our entire organization. That would bring me to the cash flow statement on the next slide. And to start here, on the top, the negative cash flow from operating activities. As a consequence, our net loss in 2020 is directly linked to a positive cash flow from investing activities, which, in turn, reflects the sales proceeds we received from RWE for the Nordics project development pipeline, as mentioned before just as referenced in the past that we've always shown this in operational cash flow. Overall, free cash flow is on a prior year level. Cash flow from financing activities, I think we need to stay on the other slide, thank you very much, amounts to EUR 406 million. That's mainly a result of the cash inflow from the RCF and our latest capital increase in December 2020. And with that, I would go to our CapEx slide, as we just saw moments ago. Total investment at year-end 2020 stood at roughly EUR 163 million, showing a slight decrease compared to 2019. And on the slide, we can see that the investments undertaken basically supported the production ramp-up in Mexico, but also Brazil and India also supported to the increased activity installation of new product, the Delta4000 platform, and as always, the product development. And that brings me to the next, in that case, for my -- to the last slide. Having a look at the capital structure. We had already indicated in our Q3 call that leverage ratio will further go down, and that's what we can see here now on the left side of the slide. The leverage curve declined to 0.4, which is below -- well below our long-term ambition level of 1.5. And then the equity ratio came back during the year to 17.5% at year-end. And here we can see again the effect of the capital increase as for December 2020, as mentioned while year-on-year it slightly decreased due to the prolonged balance sheet. So much for the capital structure. And before handing back to you, José Luis, also from my side, maybe 3 key takeaways. But I think that first, Nordex delivered in this environment, you mentioned it in installation and production. Also second, showed resilience in the forward-looking picture and forward-looking business. But third, that none of this is over and we will continue with our COVID working groups and monitor the situation and react immediately as needed. And that would be from my side.

Thank you very much, Ilya. Precisely, this is a good introduction for the next slide. Thanks to the good work of every Nordex employee and the focus of the business continuity task force COVID-related, which is still in operation. We managed to grow installations 77% in the middle of a worst ever pandemic in the recent history. We installed 1,492 turbines in 23 countries versus 938 previous year. The geographical split, 46% in Europe, 30% North America, close to 20% Latin America, 5% rest of the world. For 2021, as we discussed before, name of the gain is not growth versus profitability, but is derisking the growth, and we plan to concentrate the majority of the installations in Europe, 60%, as well as Americas and stop temporary, at least installations in India and in Argentina, as we mentioned before. If we talk about production, remarkable achievement as well, given the impacts that COVID had for our people, for our parts, for our factories. We managed to assemble 5.7 -- close to 5.8 gigawatts of turbines. To give you an idea of the split, 1.6 gigawatt of that was legacy products, AWP which we are almost not planning to do this year and in-house blade production increased 13% to 1,545 units. So regarding output of turbines, Germany 800 units, Spain 437, all of them legacy products. Both Spanish factories are now converted in 2021 to produce Delta4000. India, 160 units as well AWP. As of today, the plant is in the final stages of the conversion to Delta4000, where we are starting to assemble Delta4000 turbines. Brazil 79 units in the process as well to transform that factory to assemble the Statkraft deal and the good perspective that we see in the Brazilian market. And Argentina, as we mentioned, we decided to close this facility. Regarding house blade production, 1,545 units, 724 Germany, Delta4000; Mexico, 369. The plant is now running full Delta4000. The existing Indian plant was producing legacy AWP products. Now this factory is already producing Delta4000 series. And in Spain that last year produced a combination of both is now running full speed in producing Delta4000. So substantial ramp-up in Delta4000 products all over the world, Germany, Spain, Turkey, India, Mexico, Brazil, a lot of challenges, managing to do that in the middle of the pandemic. As of today, the blade plants are not back to normal but close to back to normal. Outsourced plate production 2,816 units compared to the 2,556 units last year. We keep the relationship with key strategic partners in good mode, and we plan our strategies to make and buy blades in the future. With this and with the visibility we have today and having already taken into account the spillover of loss-making projects and still COVID impact in Q1, we today share with you the guidance for 2021. Sales are going to be in the range -- we expect to be in the range EUR 4.7 billion to EUR 5.2 billion. EBITDA margin 4% to 5.5%; working capital below 6%; and CapEx, EUR 180 million. As mentioned before, our strategy now is not any longer growth versus profitability, is due the rational growth and improving profitability step by step. Going forward and to give context to the strategic targets, we expect staying as market participants that win will be a prominent source of global energy production. And we see that renewables are going to jump to 70% of the cake in 2050 versus 25% of the cake today. But the size of the cake is going to increase from 26 to 40.9 terawatt hours. So we are in the right sector and we talk about major contributors. Wind plays a big role in this substantial growth. So growing the market share from 8% as of today to 20% as of 2050. So definitely, this sector has a continuous growth on onshore in the medium term. And if we go to the next slide, how is the positioning of the company in the sector. So we say we now ensure is going to grow. And Nordex has a good product and marketing position in the segment that is growing more than the market. So our position, our demand for 4-megawatt turbine is expected to be very strong, growing in a cumulative basis, 30%, '20 to '24. And as of today, the Delta4000 platform is one of the most competitive platform in the market with the second highest cumulative order intake in 2020. So it means top 2 in the fast-growing segment. Furthermore, Nordex in 2020 consists of 81% generated with, as we mentioned before, with this platform. So this commercial success and forecasted strong demand for those turbines will support the revenue and profit profile for the next 4 years. So we said market is growing to growth. The segment where we are a leader is going to grow faster than the market, and this is great for the long term. But for the midterm, we have the company transformation, out of which what we call India for global and strategic capacity expansion in India to deliver global customers is the initiative to lift profitability in 2022 versus 2021. Profitability in 2021 is a result of executing a better backlog. Profitability in 2022 assumes market behavior -- rational market behavior, so stable prices and margins. And with this initiative, we will manage to reduce our cost base to improve profitability. So these production facilities are planned for export only and will support our ambition to grow further and to gain eventually market share if the wind onshore segment globally grows. Components from these facilities are expected to create a significant cost advantage compared to other currently sources of products. The ramp-up is going to benefit from already long track record in the country, producing quality products in a competitive basis. So it's going to benefit from existing team and infrastructure. The quality of the product is secure with European suppliers delivering their components also locally from India in better and more competitive basis and well experienced management team to run the initiative, the CEO and the Head of the Purchase Department are both from India. And the CEO is a long lifer in the industry. And we have a very strong management -- local management team to run this initiative. Additionally, of the existing conversion of the nacelle facility and the existing conversion of the blade facility, we are in the final stages of building one of the biggest blade facilities that we have worldwide, and this is a real picture on the left. And this facility plans to start operation in the second half of 2021. As mentioned before, existing blade facility are already producing Delta4000 products with 2 malls. Our strategic -- one of our strategic partners, TPI, is already starting to produce place for us in India with an additional tubals. And worth to mention that all the necessary CapEx is already considered in the 2021 budget and guidance. So with all these and with the current visibility and as mentioned before, assuming rational margin and pricing behavior in the market and that we complete the latest stages of the implementation of the India for global ramp-up program and the company transformation program, we are confirming the strategic targets that we shared with you in the Q3 call, sales around EUR 5 billion, EBITDA margin 8%, capacity 6 gigawatt. As you can see here, we are not very ambitious in the growth. We better focus in profitability improvement with initiatives that the company is running. And with this, we will open the floor for Q&A.

Thank you very much for the presentation. And operator, at your first, we are opening the Q&A. Please go ahead.

[Operator Instructions] The first question is by George Featherstone from the Bank of America.

My first one would be, I saw last week a press release from Acciona relating to the MacIntyre wind farm in Australia. And it noted in there that around about 1 gigawatt wind farm will have 180 Nordex Delta4000 turbines. I wondered if this is in your guidance currently? I didn't see any mention of it. And if you could give us an update on that?

Thank you for your question. I think we have, I would say, quite a strict order intake recognition process. And at this point, we are still in the final negotiation of that agreement. So we are not ready to communicate it. And what is in the planning is the firm and unconditional order backlog.

Yes. So let me provide a little bit more flavor on that. This is Patxi speaking. So we have a very strict criteria, 5 criteria. We'll have to have a contract time. We'll have to have the down payment already received, all permits in place, so project financing in place and payment security. And until those criteria are fulfilled, we do not recognize orders. It is true that Acciona is one of our best customers, and they issued that press release on the MacIntyre contract. That is a usual way of behaving because we have customers that even before we recognize order intake, sometimes they provide PR to the public. What I can say you is that we are not guiding order intake. So there is no such marking that are being included into the guidance whatsoever. What I can say as well is that Acciona generally buys turbines from us and that we are doing everything we can to position ourselves to win that contract in due course.

Okay. And perhaps another one for you, Patxi. On the service margins, I saw that there had been a little bit of an increase in Q4. Can you talk about what the moving pieces here are on the service margins and then also the level that you're assuming that you'll achieve for 2021 within your guidance range?

Yes. That is -- and we discussed it in November call. We have some one-off effects that affected profitability in the previous 2 quarters. And as a consequence of that, we had some recovery in Q4 to put the full year at 15.8, slightly below the historical levels, which are set at 16, 17. This is precisely the profitability level that we would expect in 2021, between 16 and 17 and with the internal programs that we have explained as well that are in due course, we expect to even increase that further, but that will only be seen in 2022. So for 2021, we expect 16 to 17.

And then my final question would be within Europe, do you think that the Delta4000 platform has allowed you to take market share? And within that, can you give us some examples of certain regions and certain options where that might have been the case?

You have seen in the introductory figures, the Wood Mackenzie number, and that is a proxy that the Delta4000 is truly receiving, and we are 2 selling turbine within the segment and mainly the main markets have been in Europe albeit don't forget that this is a global product, and we are selling this as well in North America and South America as well. As I said in my introduction as well, we are seeing tailwinds in most of the main European markets, and that is a turbine that is selling in all of them where permit allowed, potentially some parts of France or some parts of markets that have more strict from a timing perspective, permitting requirements is difficult yet to see projects being developed with Delta4000. But despite that, which is a minor part of the market, in the rest of the addressable market, Delta4000 is competing head-to-head, and we are having really good results across the continent.

The next question is by Sean McLoughlin of HSBC.

So my first question just around this overall falling market environment. You're assuming rational behavior from all your peers. I mean, history tells us that isn't the case when we do see falling order volumes that actually does create effectively more price competitiveness. So I'm just wondering how we should square the circle on what is the macro data on one side versus your behavioral expectation on the other?

I will say -- this is José Luis speaking. I think there are several factors that are different now than in previous cycles. First is that majority of the top 4 global players are launching up -- launching 4 to 5 megawatt platform. So we are in different stages, but more or less on the same phase of product development. Second, very important, the market has rationalized a lot only for top global players, not like before too crowded players fighting for market share. As you saw in our numbers and as you heard as well from some of our competitors, looks like it's more important now for the market profitability recovery than growth. And last and very important, in the previous cycles, I would say, wind, in some cases, was not market competitive compared to now. I mean, today, wind is one of the most or the most competitive source of energy, producing kilowatt hours -- renewal kilowatt hours that society needs and wants to increase at a substantial lower cost than the spot price. So I think the industry is competitive, and we just need to transform the industry into long-lasting sustainable, and that means being reasonably profitable and cash flow generation. And I don't see anything against that behavior among the top 4 market participants so far, and this is our assumption.

Very clear. I suppose then a couple of questions more for Ilya maybe. Free cash flow, in 2021, working capital is going to stay comfortably, I suppose, where it is now 6% negative of sales. I mean, should we be expecting a decent positive cash flow in '21? What are the moving parts should we be aware of? And secondly, also, with the equity ratio of 17.5%, is there anything in the debt covenants that we should be aware of is maybe tied to equity ratio? How comfortable are you with that ratio?

Yes. Thank you, Sean. I'll take the 2. First on the free cash flow. I mean, I'd say we don't guide the free cash flow. But I believe that with the guidance we've been providing today, we should have the building blocks to do it. I mean, depending on where you put yourself on the range of both on the sales and the margin side then your equation comes to one another result. So there's really 2 bookends now granted, and I think José Luis was saying that the year ahead of us, it will always be our utmost ambition to get as free cash flow positive as possible already in '21. But I think, again, it depends on the parameters you pick. On the other question to the equity ratio, I mean, right now -- in the past, I mean, we have that leverage ratio. We're not disclosing the specifics. But to your question, no, we don't feel uncomfortable. To the contrary, we feel comfortable those ratios also under the covenants.

The next question received is from Deepak Mehta of Citi. And we go on with the next question is from Sebastian Growe of Commerzbank.

First one, I would like to talk around the fiscal '21 guidance and for the margin, in particular. You indicated that obviously, the backlog margins are much better than in the past. I think that's the figure that we're talking -- element that you've been talking about, how should we think about these mix tailwinds from the Delta4000? And then you mentioned also the improvement program that you have been, especially in the annual report, stressing quite a bit. Are there any related costs to getting this improvement program and to reality that we should be aware of? And how should we particularly think of eventually the kind of culture aspects like supply chain, logistics costs that rather are increasing as we hear from your competitors, raw material prices up? How is that reflected in that EBITDA guidance? That would be the first question.

Thank you very much, Sebastian. Very appropriate question given the times. I think as we mentioned before, in Q1, we are still facing [Technical Difficulty] this is somehow why as well the range of the guidance is brought in order to deal with eventual volatility in the market. It is true that after COVID, as I mentioned before, our great plans that were and still are, but were bottleneck and delivering substantially behind plan last year. We are almost close to nominal spill, but that was not the case in Q1. But there are new factors, as you mentioned, is commodity prices, raw material increase, logistic shortages in containers, so substantial volatility in the marketplace post-COVID. I think we have guided the year to the best of our knowledge and considering the impact that we know and the same for the strategic target. So in order to deliver the strategic targets, as mentioned, the CapEx was already forecasted in this year's P&L and it's about executing. We feel quite comfortable that we will execute on time. But if the execution is delayed, it's not do or die, because it's going to be a delay in profitability improvement materialization. So long history short, this 2021 guidance, the building block is executing a backlog with higher share of Delta4000, we say around was 80% order intake, but it's going to be around 60% in project execution. What we said before, Delta4000 3 to 5 percentage better margin is still valid. So we have a high coverage of the revenue of the year around 80%. The quality of the backlog is better. After ending Q1, things are more stable. We are executing the majority of the volume in Europe with stable things in very mature countries. So I'm not going to say that it's going to be easy, given the new risks that are threatening our sector, but to the extent, we know we have considered all the factors and the same for 2022. And all the cash flow associated was -- is already in the planning.

Just to recap on what you just said. So especially the 60% share of Delta4000 in fiscal '21, to what level would that compare in 2020? That's the first follow on. And the second is related to the logistics process that was covered really by contracts, et cetera or is there sort of still a certain portion of the business that you have laid out at EUR 4.7 billion to EUR 5.2 billion that is open where you have baked in some sort of price escalation eventually just to get that standing right?

Okay. Now let me be more specific. Last year, Delta4000 was less than 40, and this year is more than 60. So is transitioning with one year behind the order intake evolution. Regarding contracts and pricings and majority, we are locked with contracts, but we are still -- we still need to sell 20% of the revenue of the year, a little bit less, but let's say, around 20%. And we still have a very minor portion that is not locked with contracts. But you need to keep in mind, Sebastian, that one thing is having contracts and other thing is that in some cases, regardless having contracts, you need to deal with business continuity in your supply chain because they might be out of business. And in some cases, you need to support. So from a contractual perspective, we are reasonably okay, but this is not average free. I think if things don't stabilize surely or in the midterm, of course, we will suffer like the sector. And sometimes it's pricing and cost, but it's as important as pricing and costs and commodities and so on is capacity. I think the current COVID restrictions are decreasing substantially the shipment capacity because the protocols in the ports take longer. So as a consequence, containers have stock imports, do not return to China to ship again. So we are still, even from a health and safety perspective, looks like we see the light at the end of the tunnel. Therefore, the operations will take a little longer to further stabilize. And as I mentioned, we have guided to the best of our knowledge and already consider certain impacts that we know that are either were real or are going to be real. If there are additional, of course, we need to deal with those in due course.

The next question that I would have is around the demand and then pipeline. And so I know and Patxi said that you don't guide on orders, but obviously, you are striving, obviously for coming in the top 3 position compared on the #3 position that you have right now that would normally, I think, go along with higher than the 6 gigawatt order run rate over the last 2 years. So why can't that really go and then to what extent is the U.S. a very important cornerstone that was 30% of your shipments from 2020 and obviously, we have few expectation that it might be flat in '21 and then eventually coming down in 2022. So anything that gives us a bit more kind of confidence in where the U.S. particularly might head would be much appreciated?

Patxi, can you take this question, please?

Yes. And Sebastian, as you know, we don't generally guide orders. What I can tell you is 2 things in that respect. First is that we have good visibility in the order pipeline for the full year. And I will leave it there, but it's true that the activity that we see across the market is not to be underestimated. Having said that, and I would say another one, which is, especially in Europe, where we see really good momentum as well as some Latin American markets that I mentioned in my introductory speak. U.S. will see declining volumes, and it's going to see the dynamics [Technical Difficulty] are going to be different in the sense that PTC value is diminishing that solar TV will compete very well with respect to wind, particularly this year. And as a consequence, the dynamics in the market will be tougher than what we saw last year. Last year already we saw a decline internally. And although I don't give particular numbers, you can do the math in the building blocks in the presentation to see that with respect to the previous year, we saw less in the U.S. We had a very successful U.S. year, but the previous one has been even more successful. We can allow ourselves, given our European position and Latin American position and not so good U.S. year, if that eventually happens. I'm not saying that this will happen because we bet yet again for a good U.S. year. But if eventually it did not happen, it will not materially affect. I don't expect to materially affect the full year order intake result.

Okay. That's helpful. And then the last one is around the capacity planning in India. So I was a bit surprised to see that you only produce about 500 megawatts in terms of turbines in the Indian market, particularly the fourth quarter was rather low in terms of production output. So how do I square that obviously with [indiscernible] gigawatts to target as the capacity and is India really only then ramped up when you would receive it's lot of big, especially export orders? So where's the tipping point when you really step up the expanding capacity? And there is a question on the turbine side.

Now that's a good question. I think in India, we were last year in a ramping down scenario. So India, nacelle, we have capacity for -- currently for way more than a gigawatt. And the most critical components, which is blades, we used to have 2 production lines of Acciona Wind Power product that we converted to Delta4000. We contracted 2 lines with TPI. And the factory you saw in the presentation is going to operate with 4 lines, and that gives you 650 to 700 rotors per year that, depending if the turbine is 5 or 5.5 that will give you close to the nominal capacity. So it's -- indeed, it's a ramp-up, but it's a ramp-up leverage on existing things and on existing experience. And we feel quite comfortable -- and with the help of TPI, so we are quite comfortable that we will achieve that. And that materializes substantial cost advantage landed in the consumption point, regardless the consumption point is showing European markets or U.S. or Latin America.

Okay. Makes sense. And if I may very quick last question on working capital for Ilya. I'm wondering really about very high order intake level on one side, however, only very minor improvement in terms of cash release from working capital on the other side of things, especially prepayments have really improved. So what am I getting wrong is sort of the deferral in the prepayments and when are you going to receive the structural change in the payment terms? So that will be the question there.

Yes. I think of that -- I'm getting a question if I got that is the reduction in that case or the prepayment on the Q4 is a result of execution of projects. So basically gets no doubt there.

Is there sort of any spillover of prepayment rates with the orders taken that should then come through in the quarter 1 or quarter 2 even or is this really evident?

I would have to come back on details to you, Sebastian, in that case. But when I'm speaking, top of memory, I think that is what -- that is as is and has no doubt in that last quarter.

The next question is by Vivek Midha of Citi.

So just following up on a couple of the previous questions. Firstly, in terms of the -- both the raw material price pressure and the rationality of the industry, and how confident are you that the industry will be able to pass on higher raw material prices in order intake in the quarters to come? Secondly, just confirming on the India ramp up. So do you still aim to get the full run rate production in India by around Q4 of this year? And then finally, just a bit of housekeeping question for Ilya, please. You mentioned higher financing costs due to higher utilization of facilities and higher activity, any indications on that front for 2021?

Thank you. I think taking the first question about raw materials. As mentioned, there are different contracts with your customers, different contracts with your suppliers. And to make a long history short, we are not fully hedged. So we hope that we -- that to the extent we know, we have considered the effects, and those effects are in the guidance. But if there are unexpected additional shakes, we might be affected. Regarding the -- if we plan India to have the 2 plus 2 plus 4 production lines that give nominal capacity of place by the end of this year, we are quite confident. Two lines are already in production, 2 lines with TPI are in ramp-up and 4 lines in the facility that you saw in the presentation. That facility is in the final stage of construction. We are ramping up things, training, management is in place. So we have 3 quarters to go for a ramp up. So we feel confident that Q4, all that activity is going to be operative. And I would say maybe not 100% capacity, but close to that. I can't be more specific, if I look into the details, but close to nominal capacity, yes.

Can I just quickly follow-up on the raw material question. I guess -- so you've highlighted before the assumption of stable prices, but if raw material prices stay elevated, then the industry might need to put through higher ASPs in coming quarters. So my question was more around that, not so much the hedging, but do you think the industry might see higher ASPs in coming quarters, given that it's more consolidated now?

I mean, we -- in our view, we will see a timing effect, but those extra costs will be translated to the customers and that will be translated to the energy prices that they beat to the system. We are starting to see that with the solar panels. And as I mentioned before, renewal energy doesn't have a problem of competitiveness. I think that in our humble opinion, if we do pass-through, demand will stay stable regardless cost and prices of the wind turbine across if they was increase. So of course, there are always timing effects to adapt to the new situation, but the industry is competitive enough to be able to run with a slightly higher cost base and translate that to the energy price that we generate with wind turbines. The same way it is happening as we speak with solar PV. I think maybe was slightly too much, the auction prices we saw in several markets compared to the spot price at the market and the forward price at the market is paying for the electricity.

And just quickly, Ilya, the question about financing costs?

Yes. Yes. That's one. I was -- sorry. No worries. Let me take the last one and though I'm -- and thanks for it -- we're not having the detailed number at hand and we're not giving basically a specific guidance on that one. I think it's fair to assume that we will be on similar levels in '21 as we've been on the 2020. So always, of course, it's the duty of the Senvion and its team to work on improving this. But to your question and from an expectation level that should be relatively similar.

The next question is by Constantin Hesse of Jefferies.

I only have one last one left. Basically in the service business, right, the share of fleet under contract continues to go down now at about 66% of the total installed base. I was just wondering if you can elaborate a bit on what is happening there? Is there -- do you see more intense competition potentially? And is there an internal target that you see as the ideal level?

Yes, I can take that one. Probably when you compare to an abnormally high 2019, I believe that we have, in 2019, a number of renewal contracts in the U.S. -- large renewal contracts in the U.S. that made growth in '19 abnormally high. I believe that we are back to normal growth levels. We expect the market to grow at 110%, and we expect as well to grow our service business at around a high figure. So all in all, probably the abnormality comes from earlier year rather than a situation that today is normal. And a consequence of that is, as you were asking, on the percentage of turbines on the fleet. So we are very happy and very satisfied with the renewal contracts. We see, as we have seen as well in the turbine business, a rational competition -- more rational competition and more rational behavior from players, and we expect to continue that way.

And if I can add, Patxi, we are -- generally speaking, we are not losing orders. I mean, the percentage of fleet under service is more related to the strategy of certain customers that decide to do in-house. So if you sell more to those customers, of course, your share of service fleet decreases. If you sell more to other customer profile, those usually prefer to do long O&M business with you. But not on a structural threat, I will say, because we are not losing volume against ISPs. We are losing volume because customers decide to do in-house -- some customers decide to do in-house activity.

The next question is by Rajesh Singla of Societe Generale.

Maybe a couple of them. So first would be like what percentage of share will Delta4000 would have in 2022 and '23, if you can share that number? And also, the order inflow so far this year seems to be a bit slow after a blockbuster December 2020. So any insight into that like why that has been the case? And maybe the third question would be on like how much of the capacity is still there with Nordex in your project development portfolio? And what are your plans to grow that business?

Patxi, can you take the 3 questions?

Sure. Yes, I was on mute, sorry. I was talking a bit. From a P&L perspective, Ilya was explaining before, south of 40% in 2020, north of 60% in 21. We don't guide '22 and '23. We will do that in due course. But the indication that order intake this year was 81% Delta4000 should provide you an indication towards what the mix will be both in '22 and '23. With respect to order intake, it's true that the industry, I believe, that we have had a slow beginning of the year, January, February. And believe that this is industry-wide, if I measure this by announcements that have been abnormally low although this is an indication, I don't have evidence of that. What I can tell you is that March has picked up significantly, and we will end up Q1 with a normal -- around 1 gigawatt orders, which is pretty normal for us. And then as I said before, to Sebastian's question, without guiding the year, but we do see very good visibility in the order pipeline. And with respect to product development, if this is an activity that we do continue, it is true that we divested significantly in the RWE transaction. But in selective markets, we continue to provide both projects and turbines to customers.

Maybe a follow-up on that project development. So how much of the capacity we still have with us, like, you sold, I think, more than 2 gigawatt to RWE? And so how much of that capacity is still there with us? And what kind of growth plans we have, like any -- do you have any target to grow that capacity maybe from, say, 400 megawatt to, say, 1 gigawatt or 2 gigawatt in the next few years' time?

We sold all of our European capacity to RWE. We still have some capacity in markets outside of Europe, but we are not guiding project development activity whatsoever now. But what I tell you is that we will continue with those activities to offer both projects and turbines to customers.

The next question is by Kulwinder Rajpal of AlphaValue.

Sorry, I was on mute. I just wanted to ask you regarding decommissioning. So in your order intake and order pipeline, do we also see some orders which are coming from decommissioning area of the onshore wind power projects?

Patxi, can you take it?

If I understand your question, are you referring to repowering? I didn't fully understand your question, sorry.

Yes, repowering. Yes.

Okay. A very minor share, I would say, as we speak. This is true that some markets is becoming more prominent in the U.S. in Germany, and some specific markets that we see that this is coming up. But as I would say, today, very minor.

Okay. And the second question is that you are guiding that the onshore markets will probably decline going forward from end of 2020 -- onshore market will probably decline going forward from end of 2021 to 2024. So do we expect Nordex to grow in FY '23 and '24, in line with the market? Or do you expect you will be able to overperform it in a qualitative manner purely, not quantitatively?

I would say, you have heard before from José Luis that growth per se is not going to be the strategic target, but profitability recovery. Having said that, if you go by building blocks, you will see that the decline is happening actually in North America, but not in the rest of the geography. In fact, in Europe, we are plateauing at a very high activity level, coming from 12 gigawatts to 17, 18 over the last couple of years and plateauing at that level will generate significant business opportunities, same as in Latin America. So with the exception of the U.S., which has a very particular dynamic, the rest will see healthy market situation, as I was explaining in the beginning. And how market share will evolve, it's too early to say, of course, but we are not desperate for market share growth, but we are -- what we are doing is focusing very much in behaving very rational in the markets in order to sustain a profitable growth.

Okay. This was last question for today. Thank you very much for participating. Okay. I understand. I'm just listening there as there is one question in addition. So we take that one as a very last question. So operator, please connect.

The last question is by Anis Zgaya of ODDO BHF.

I have only one question left. It's regarding PPA depreciation, it was EUR 24 million in 2020, what should we expect for 2021?

Thanks, that was for me. Ilya speaking here. I also -- I would have to get back on a detailed number with that, but I think the trend here is a slight decline of that also in 2021.

Thank you. And so now this was the last question for today. Thank you very much for all the questions and participating in our conference call. And I would like to say goodbye. But before that, I would hand over to José Luis for your final remarks, please. José Luis?

Thank you very much for your participation and for your questions. The key takeaways for today is: first, that business transforming in Q1 2021, still impacted by the ongoing COVID pandemic and the volatility that we know in the market, and we expect a recovery in Q2 '21 onwards. Demand, as mentioned by Patxi for the new Delta4000 platform remains on a promising level with a strong focus on Europe and the Americas, eventually Australia. Comprehensive company program on track. You saw the picture and we share extensively the status of the India for global project that is going to be operating during the course of the year. And this is the profitability lever that is going to bring us where we wanted to be in 2022. And as a conclusion, we confirm the strategic targets of around 6 gigawatts, approximately EUR 5 billion with 8% EBITDA margin by the end of '22. Again, assumptions, order intake, stable margin, rational pricing margin behavior in the market, plus the execution of the company program, plus India for global. We are more confident about the last 2 because depend on us, rational pricing behavior, we are quite confident, but it's somehow out of our control. So with this, thank you very much and wish you a wonderful day. Thank you very much.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.