Siemens Energy AG (ENR) Earnings Call Transcript & Summary

[Presentation] Good morning, everybody, and welcome to the Siemens Energy Capital Markets Day 2022. As most of you know, it's our second Capital Markets Day, but it's really the first one since we started trading. Also, the first one was virtual. So I'm really happy that so many of you actually made it to Berlin. So thank you all for coming. Welcome also everybody on the web. Just briefly on the agenda. We will have a couple of sessions through until about 11:30. So Christian and Maria will talk about the outlook and the financials and also, of course, talk about the transaction that we announced on Saturday night. We will have a lunch break around 11:30 for a little bit more than an hour and in the afternoon, we have our respective Board members here to present on the business areas. Jochen Eickholt will come to talk about SGRE. And then we will also have sessions on innovation and sustainability. We should then wrap up with a Q&A around 3:30 before we finish at around 4:00. So with that, I welcome Christian Bruch, our Chief Executive Officer, to take you through our strategy, Christian?

Thank you very much, Michael, and a very good morning to all of you. It's really a pleasure to see you at least partly in person. So thank you very much for taking the effort to come to Berlin. You had -- or some of you had the opportunity already yesterday to visit one of our sites and also to see really from conventional technologies for the -- to the technologies to come really what we are doing here. Berlin is a special place for our company. It has been the place where our founder, Werner von Siemens, founded the company in 1847. So it's a lot of history also here, but it's also a lot of future. And we want to talk to you today about what we are going to do, and it's obviously the next step in terms of developing the company's company, as Michael said, we had our last and first Capital Markets Day in 2020 when we listed the company, and obviously, we have shown at that point in time, a couple of elements what we in the future are going to do. The progress that we made over the really past months and close to 2 years, which in our existing as a company here have given us a comfort to say, let's really now go the next steps and show you in the transparency, which you hopefully will appreciate what is happening next in the company and how does this fit into the energy market. So I will give you an overarching overview about Siemens Energy as a company and what we're going to do, as Michael pointed out. I will also talk thereafter about the cash tender offer which we announced on Saturday and presented briefly in a call yesterday. And Maria will walk us also then through the financial numbers, and we have the opportunity for a question-and-answer session thereafter. Let me start with a couple of key messages to set the scene really for today's presentation. Since the start of Siemens Energy in 2020, we have made substantial progress, and this gives us, as I said, the comfort really now to tackle the next level of activities to really make sure that we, as a company, shape the energy transition. Operational improvements were in the focus in the first 24 months of the company, really get the thing working, getting really the efficiency programs implemented. I will talk about this a little later. And you also have seen stepwise the portfolio changes, which we introduced to make sure we drive it to a sustainable, profitable portfolio in the company. What has happened since 2020 is also that the electricity and energy market is under substantial change. From my perspective, the electricity and energy market today looks a lot more promising than we estimated 2 years ago, but it's also coming with substantial changes and substantial investments into the market. And I want to talk today also to you about the changes in the market and how this is linked to our business developments. We are excellently positioned to benefit from the investment into the energy market. And Karim and Tim and also Vinod later will explain to you on how we tackle this in the different business areas, which we're going to show to you and also with our innovation activities. Along 5 levers, I would like to structure the way on how we want to generate value for our key stakeholders, giving you also the ability to have more transparency on the company. This has been a theme which we continuously have been discussing over the last quarterly calls, how can we make sure that you get the necessary transparency on our performance for you that you can judge on the progress we are doing in the company. And obviously, everything what we are doing is based on our strong commitment to sustainability. So let me look back to 2020 and until today on all what we have achieved. First of all, if you recall, the main targets in 2020, what we flagged up was really improving the market position, driving operational excellence and making sure that we start to shape the portfolio in a future-oriented way. So the market position has substantially improved. If you look on the last gas turbine numbers which come out, we have achieved a market share increase from 34% to 44% market share, depending also on the different areas. We came back on the large gas turbine. I'm very happy with the very sound backlog what we have achieved. So this was a fantastic achievement since 2020. We have really manifested the #1 market position in HVDC. And Tim will talk to us about the potential which sit in the HVDC market. By the way, obviously, you are sitting here in one of our test facilities for the transmission equipment. It's today not live, but this is where we test it, obviously, to give you a feeling what we are talking about, if you're talking about equipment. And you see how massive it sometimes is and how much complexity is in there, and you will have the chance today for those of you who are here at site also to see more examples for the products, what we are doing. And we have a very, very healthy and strong backlog. I mean the backlog has substantially been growing. We talk EUR 57 billion in Gas and Power, EUR 33 billion in SGRE, and this gives us a strong base really to continue to transform the company sitting on this backlog, which also reflects around EUR 52 billion of Service backlog, which is obviously a recurring profitable business. We have started a lot of things in terms of driving operational improvement. And we have in the quarterly calls continuously updated you on the progress of the efficiency program. This meant consolidation of sites. This meant also amending capacities. And good progress has been made, including also the annual productivity measures. Obviously, we all, like every company, are fighting headwinds from the supply chains and from the market. But all the programs we implemented to really the cost structure are on its way and very successfully executed. Step after step, we also shape the portfolio, with a focus on sustainability and service and really drive also on the one hand, new technologies, but also driving partnerships in terms of how do we do innovation. And Vinod will talk to you in the afternoon about our way on how to organize innovation, talk about our 4 global innovation centers, which sit in Abu Dhabi, in Shenzhen, in Berlin and Orlando, and really on what is the next things to come and how do these fit into the market drivers which drive energy transition. And I'm very proud, I have to say today, if I look on the discussions around our ESG ratings, when we started, nobody has seen us as a driver of the energy transition. If I talk today to the ESG rating agencies, show them our reports, show them our progress, they understand that we are a key driver of the energy transition and I'm very proud of what the team at Siemens Energy has achieved since the start of the company. However, and I think for those of you who have been with us yesterday evening and heard the speech of our former Vice Chancellor. We have to recognize we are acting in a continuously changing environment. Pandemic, war, climate change consequences and unprecedented request for energy transition. And that is here to stay. It is our assumption that we have to be able to run a profitable and successful company in a continuously changing environment. I will also explain to you today on how we are reorganizing our organization to make sure we have the agility and focus and accountability in the organization to be able to drive successfully our business through a continuously changing environment. And this change is opportunity. There's lots of opportunity around this if it comes to the energy and electricity market. And let me talk about the market itself that we can put it into perspective what is the field in which we are acting and what we are trying to benefit from as a company. If you look on the upper left side, you see the global electricity generation scenarios, which are currently predicted. Nobody knows where the futures at the end will be between the scenario between stated policy or net 0. So there's different scenarios, but if you look until 2030, one thing is very clear. Electricity generation going to grow, whether it's 2% or 4%. That's not 100% clear, but one thing is clear, it's going to grow. And after 2030, the only question is, does it continue to grow at the same pace? Or does it grow even faster? And if you look on the upper left -- lower left side, you see also how are the different sources of electricity generation distributed in the different scenarios? If you look on the stated policy scenario, you see that continuously, the assumption is that renewables is going to grow. That's a very clear trend which you will see. You also see that for definite, coal is going to shrink. And in the stated policy scenario, gas is going to be a stable backbone really of the electricity market. And if you look to net 0, it could be that renewable is going to grow even faster, coal even faster going to decline. And until 2030, gas going to be stable and thereafter going to shrink. We don't know where the scenario is going to be, but we know that we need to position in the market where we have to anticipate changes in our organization and be able to react on, and this is what we are setting our company up for to make sure that we can move between these different scenarios and benefit either way, either by servicing more gas turbines or selling more wind or building more HVDC. And this is the things on how we would want to tap in. And if you look on this big block of renewables and if you break it down into solar and wind, and this is on the right, up-hand side, what you do see, then you see that also once again in the different scenarios, the IEA, the comparison what it means. And as I said before, at the end, it means for solar and for us, obviously, particularly interesting for wind, does it grow? Or does it extremely fast growth? That is the major difference between the scenarios, what we have to see. But all in all, it's massive opportunities for us. So we're looking in an electricity market where until 2030, we see an increase of either roughly up to 50% or up to 100%. And this is obviously where we want to shape the portfolio, but also the resources who can convert technology and solution and products for customers. So what are the common trends along these different energy and electricity scenarios. First of all, electricity production will grow faster than GDP. The share of electricity in the energy balance will get higher, irrespective of the scenario. The capacity, the underlying production capacity will grow even faster because if you now obviously replace 1 megawatt of coal-fired power plant, you cannot replace it with 1 megawatt of renewables, you need multiple times because the run time is lower. So the production capacity addition is massive. And the intention would be today really to have the capacity expansion to be covered by renewables. And we strongly believe also that gas will continue to be a backbone of the electricity production also to ensure the grid stability in the grid, which we'll see higher amount of renewables and with this more volatility. And coal will be phased out. And as you know, in 2020, we decided to abandon the new-build coal fired power plants which I believe is absolutely the right decision. And this is obviously a trend on how we continue also to shape our future portfolio. What you're going to see also today in the afternoon, presented by Tim, is that grid investments will rise to an unprecedented level. And I still believe that it's an element, which is not recognized really in the market. The amount of money which is needed to get the infrastructure, the electrical grids fit for the future energy market. That is substantial, and we want to benefit from it. We have a supermarket position, and we will see unprecedented investments going into the grid infrastructure. And all in all, we always have to be aware, and you will see it afterwards with the numbers. A big contributor to CO2 reduction, emission reduction will be the industry. The requests are high. But now latest since the war also in Europe, we see there's another element. It's about energy security and affordability of energy and price differences between the region. So energy efficiency will be particular in all industrial applications, a competitive criteria across the industry. Because all of a sudden, take Europe as an example, you will have installations here with rising energy costs, which have to compete with peers who work out of an area with substantial differences in energy cost. So the only way you have to make these assets still valuable is really getting the energy costs down, managing a volatility of supply if you talk about renewable structures and it will be a key elements to drive energy efficiency in industrial applications. And these are the themes which we are designing our company, too. And at the end, what we want to achieve as a company, what we stand for at Siemens Energy is supporting our customers in this energy transition, helping them through this challenging but thrilling task to achieve a more sustainable future. So let us listen to one customer, and I would ask [indiscernible] please, the video.

Hi, everyone. I'm Bernard Looney from BP. And thank you, Christian, and thank you, Siemens Energy for inviting me to do this. And sorry, of course, that I can't be with you there in person. Christian asked me if I could say a few words about what BP looks for in a supplier, in a partner, and I'm very happy to do that. Why? Because -- well, because right now, Siemens Energy are doing a great job for us, and that's as good a reason as I can think of. So to Christian's question specifically, I can think of 3 reasons. First, the company has to be committed to safe, reliable, efficient operations. That's fundamental to what we do. It's a boundary condition, so to speak. And Siemens is helping us with that all over the world, and I would add that digital plays an increasingly important role in this space. Second, we want to work with suppliers who can manage the scale and complexity of what we're trying to achieve. A good example is Brazil, where we're working together on an LNG power plant, a big LNG power plant, one big enough to supply Rio with 3 gigawatts of electricity. And third, we want to build relationships for the long term. Mutually beneficial relationships where 1 in 1 doesn't just equal 2, 1 and 1 equals 11. We feel that we achieve so much more together when each of us wins. And one last thought and maybe the most important one for me. We want to work with people who are on the same page as us. Now you may know this at BP, we're transforming ourselves from an international oil company to an integrated energy company. So it fits that you talk about becoming an integrated technology company. We have a strategy for BP that is embedded in sustainability, and we have targets and aims and an ambition, and our ambition is to be a net 0 company by 2050 or sooner and to help the world get to net 0. And we're aiming to do that across our operations, production and sales. So it's hugely important to us that you want to be a sustainability leader and you have set ambitions and ESG targets. And it fits that you are aiming to be carbon-neutral across your own operations, and you have set an emissions target for your products. Christian, I hope that, that goes some way to answering your question. And I hope it explains something about the relationship between Siemens Energy and BP. Thank you for all that you do for us, and I wish you all a very successful gathering. Thank you.

Thank you very much, Bernard. And I think it's a great example on how this is interconnected and how this goes together because we, as industries, are really under a tremendous change program. And it's really finding jointly new solutions to a problem where standard solution is not available. And in this regard, as you know, and we have shown this before, we are organizing ourselves around 3 pillars in the company. Low or 0 emission power generation, transport and storage of electricity, and the reduction of energy consumption and CO2 in industrial processes. And we have established over the past a market-leading position in all these different areas. And there's a massive installed fleet out there from which we are building on and which gives us the trust of our customers also to continue to work with them in the future and to define exactly the solutions, what they require. And these are all markets along these 3 pillars, which offer substantial growth opportunities in which we, as a company, want to tap in. And I will walk you, obviously, through some of these growth opportunities, but we will also have more detailed discussion then throughout the day in the different business areas that you see what we are doing and where the growth is coming from. Let me talk a little bit about the investment which goes now into the energy market. And as I said, it's also talking about scenarios. But I think it's helpful to sometimes put gigawatts and change requests into euros, to see the tremendous amount of money, which has to flow into the energy sector to make it future-proof in terms of availability, affordability and sustainability of energy supply. And you see that more -- EUR 800 billion investment spending per year is up within this decade. Around 3,500 to 5,000 gigawatts needs to be added in terms of generation capacity by 2030. And obviously, depending on the scenario, it will be between renewables and there, obviously, we see still some additions into gas, even so it's -- our assumption, it is a flat or modestly declining market in terms of the new installations. The element which I think is continuously underestimated, and I said it before, is the investment which need to go into the electrical infrastructure like transmission. In an all scenarios, irrespective of what you look at, that's going to grow. The question is more is do we have the execution capabilities, do we have the regulations, do we have the right boundary conditions to change the electrical infrastructure as fast as need be. But the necessity to invest in this field is massive and is around more than EUR 400 billion investment into transmission and distribution annually this decade until 2030 and thereafter, we'll continue to grow going forward with higher volatility in the electrical grid, which requires more investment really into grid stability. And you also see how does Siemens Energy want to benefit from these investment buckets? And obviously, offshore and onshore wind is a key criteria for us to benefit from the renewable increase. The maintenance and upgrade of gas, power infrastructure is a key for us, and we are excellently positioned to really exploit also our decarbonization and service capabilities in the gas side, and Karim will talk about that to you today in the afternoon. And obviously, the fuel shift, coal to gas will be a key criteria globally. We gave you in the last quarterly calls, continuously examples of success cases, which we did. And we continue, obviously, to do so. And on the transmission side, it's obviously the HVDC element, an important element for us, but also generally grid connections and grid stability and grid automation will be key areas as well as storage elements. And this can be batteries and this could be molecules like hydrogen together with electrolyzers. As I said before, we not only have to look on the electricity generation. We also have to look on the industry itself. And this -- they are facing an increasingly difficult task. So how can you convert the different industry sectors, which are today highly dependent on hydrocarbons to a more sustainable, but also more affordable setup for the future. And you see the change, which is anticipated in 3 segments here, which are shown like chemicals, steel and cement, the turnaround they need to do in their existing infrastructure. It means every industry needs to touch their installed assets going forward over the next 20 to 30 years to come. And this can mean a lot of things. This can mean electrification, automation and digital. This can mean driving more efficiency. This could mean transforming heat from 1 temperature level to a higher temperature level that you can replace natural gas firing by heat, which are generated by a heat pump. And this could also be obviously usage of green molecules by producing hydrogen through electrolyzers from renewable energy. And these are the areas where we want to benefit from. And just to give you one example to give you a feeling what does it mean in the industry? Because I also sometimes believe the amount of energy which sits in the industry sectors is vastly underestimated. That's much bigger than what we -- the energy content in the electricity sector. If you take 1 million ton of green steel, and you would like to produce it based on green hydrogen, then you need roughly 50,000 tons of green hydrogen forward and with this 500-megawatt of offshore wind capacity. And this is obviously on how we want to benefit from this. We are there at the site. We've supplied the compressors to the steel mills. We know the customers. Now the next thing is coming in terms of how do you actually feed them with green hydrogen, and there's a massive opportunity coming in terms of really turning the industries around that it'd be refining, that it'd be chemicals, that it'd be steel, whatever because the amount of investment which has to go and do this transition will be substantial. And there's a benefit of being a bigger company. Bernard was talking about the integrated energy company. And when Bernard and I first met, I mean, was interesting because we both were talking about an integrated company. He was talking about the integrated energy company. I was talking about the integrated energy technology company. But why is it good to be an integrated company? It only makes sense if you generate value of being integrated and not being a pure player. Being an integrated energy technology company also means, how do we connect the dots? How do we connect offerings? And let me be crystal clear. It's not that there is a customer out there who will buy easily everything out of one hand, right? But it's a benefit -- if we built an offshore wind park, and we are the customer contract and the customer has seen us successfully executing. But at a later point in time when the HVDC decision comes, we can also come to the table and saying, this is what we have been doing and can do. And it's also a benefit if the power and the electron lens onshore and somebody needs to produce hydrogen, we can say, wait a minute, we have the technology to help you to convert your renewable power to green molecules. And by the way, if you want to convert it in your existing gas-fired power plant into a more sustainable setup, we can provide you with a service package to turn around an existing gas turbine to hydrogen co-firing. And there's also a benefit of really being early in markets in certain regions. We are a company which is present in 100 countries of the world. So if I look on the market like HVDC today, that market is really growing fast in Europe. But we already see the next wave upcoming in the U.S. So we're building the reference at the moment. We're building the experiences and also the facilities and the resources at the moment to benefit also from the next wave in the U.S. and then thereafter from the next wave upcoming in Asia Pacific. And there's a third element why it's really helpful to be an integrated company is really transferring technology from 1 application to the others. It sounds so easy, but sometimes it's not an obvious one. You need to be present in the different segments. You need to understand the different customer markets to see the opportunities, what type of technologies you can transfer. And let me take this example of the heat pump. And here in Berlin, we have introduced some time ago a district heating around the heat pump technology from Siemens Energy. Now the question is how can we apply the same technology and it's not a new technology, but how can we immense this technology to be feasible even for chemical processes to higher temperature to replace their need for natural gas. And that is a project we are doing with BASF together in terms of developing high temperature heat pumps for industrial processes to allow them to reduce their need for fossil fuels. But we also have to move in a market which offers significant challenges we were discussing in the past, obviously, the supply chain constraints, what we're having, the COVID-19 constraints, the geopolitical tensions and obviously, a lot of focus in an integrated company will go on supply chain, supply chain, supply chain. It is the core competence of a company like ours to drive successfully supply chain and logistics to be able to handle this changes, which will continue to be there in the markets. And what does it mean? Obviously, it means also, yes, high focus on the supply chain, but it also means how can we transfer it into a pricing mechanism, how can we transfer this into indexation of the bids, how can we have back-to-back agreements, how can we manage our inventory. This will be a key criteria to be successful commercially in the organization. And you see also a couple of examples what we are currently doing in this difficult environment, thousands of suppliers, which continuously get monitored and managed, bundling really supplies I will talk about this also when I talk about our cash tender offer for Siemens Gamesa that this is a massive opportunity to drive. We can do certain things today jointly already, and we do it, but there's more things to be done and more things to benefit from if we integrate the 2 companies. Let me now talk about the 5 levers to develop value, and I would like to walk you through, first of all, our new operating model, which comes also with a new way of reporting. And Maria is going to talk to you about also our new reporting scheme, what you're going to see from first of October onwards. And you will see that this logic of GP and SGRE goes away, and you will get more transparency on the different businesses, to be able to link it to the market drivers, which really determine energy transition. And I would like then to walk you through the 4 businesses very, very briefly, there will be a dedicated presentation on each of the businesses that you see also what is really in there. But that you understand is how is this company driving energy transition forward and how we're benefiting from the market trends. So let me talk about the new operating model and the new structure of the company, first of all. The company will get broader and flatter. That is roughly in a one sentence the target what we are doing. Why are we doing this? Because we have to be successful in a fast changing and continuously changing environment. So you're going to see 6 Board members. We will announce the 2 new ones before October 1. It will be an organization which is effective October 1, including the respective reporting. And you know the 4 Board members honored from today's Board, but as I said, you will have 3 reporting segments in Siemens Energy with gas service, grid technologies and transformation of industry. You have Siemens Gamesa Renewable Energy as an independent company today ran by Jochen Eickholt. And you have one dedicated function, which is called global functions which will drive the benefits of being together procurement, data structures, IT, logistics, innovation to make sure that the business gets the platform to be successful and to be really market-leading in these things. To be able to transfer technology into real things and to do this as effective as possible only if we generate value of being an integrated company, it makes sense to be an integrated company. And we do it on a strong order book. We do it on a significant improvement since 2020 in the EBITA level. Yes, we have our homework to do in SGRE. And I'm confident that, first of all, the current team does all do the right things, and the integration will also help us to accelerate that process and give all the support to the team at SGRE to turn around the company. This is now referring to the GP side, because what we're going to do with this step, we also significantly make the structures within the GP side of Siemens Energy easier. And as I said to you, we make the company broader and flatter. So from today's 11 hierarchy levels, which is quite substantial, the company will go down to 6. Very clear accountabilities, very clear business orientation, which also comes with a reduction in management position of 30%. And this has really taken all overlaps redundancies out and really focus, focus, focus on driving business and very clear accountability. We're also going to reduce the total number of profit and loss units, which we report from around 80 to 7. And these are the 7 profit and units you're going to see in a regular reporting, and Maria will talk to you about that. And that is obviously something which also makes the company a lot simpler and takes out of a lot of administration work. We harmonized our go-to-market. So we really make sure that the regional setups connect one and one to the businesses to make sure that the customers, like Bernard, are very clear who do they have to go to guide them through the company. You still have multiple people interfacing in a sales process with a customer. That's very clear. But what you want to achieve is that there's people out there, pathfinders, who make sure that the full suite of products and services from Siemens Energy gets apparent to the customer. And obviously, operational excellence will be a key element. As I said, only if we can exploit the maximum value of operational excellence, it makes sense to be as a big organization together. And innovation is something which is the blue in our company, which keeps us together. We are a technology company. We are proud of our innovation, and Vinod will talk to you about what we're doing around that. So let me talk about very briefly about the different businesses. And as I said, you will get a dedicated presentation for each of the business so that you understand where we're coming from. What we have done, and you know the reporting structures before with generation and industrial applications. We have bundled everything around gas turbines and large steams to make sure that's 1 unit. Also take out all redundancies on this and focus really on driving the gas and gas service business. And the business drivers behind it. So what we see in the market is the decarbonization of the power generation, the coal-to-gas shift, the decentralization of energy supply, but obviously also getting the existing infrastructure ready for serving in a more sustainable energy world. And this is what you're going to see as gas services. It represents roughly 30% of the total revenue of Siemens Energy. It's in 2021, a 7% EBITA margin before special items. And our target is to have this stable, maybe with modest decline type of business to benefit our service position and it's a double-digit margin business in the midterm. And obviously, with that, we have a strong base also for Siemens Energy as a company to continue to drive also new businesses forward. The second business I want to talk about is grid technologies. It roughly represents 20% of our revenue, and this is a combination of the former transmission, and we combined everything what we were doing or starting to do on the storage side, battery storage, hybrid plants into the grid technologies because we strongly believe storage, grid automation, stabilizes integrate belong really in this electrical infrastructure. And this growing electricity demand, combined with an increasing share of renewables, will drive the substantial investment I've shown to you before. And this will grow with mid-single-digit numbers, and we are confident, obviously, in midterm to drive it to an 8% to 10% margin. 2021, this was a 6.5% EBITA margin business before special items. And Tim will talk to you today in the afternoon with more details about that. And then transformation of industry. That's a combination of different businesses. And this is the area which is supposed to really help the process industries to reflect on the changes they need to do to change, first of all, their existing infrastructure, but also for future applications. So this is combining what you have seen before as a hydrogen business under NEB, right, Compression industrial steam and our business around electrification, automation and digital. And you will see in the reporting, and Maria are going to show that to you, these 4 independent businesses is being broken out to give you a feeling also what is a business which is small, but where we invest into like hydrogen, but has a substantial growth opportunity and business like EAD, which has a massive growth potential, which is also already today EUR 1 billion business or business like, for example, compression, which has massive opportunities, but it's a turnaround case. But we want to give you the visibility what we are doing and why we are doing it. That you can understand is how is it benefiting from the market and business drivers and how we are doing going forward. Depending on the different businesses, on average, this will be a mid-single-digit growth area with a 6% to 8% EBITA margin. The 6% to 8% obviously has to be put into perspective because if I look on midterm outlook, one key question will be what does hydrogen do, right? And how fast it's going to come. But just to give you a feeling, obviously, on how we're looking on these different business areas. And then as SGRE, I'm very pleased that Jochen will give us a presentation and also [ Dieter ] is here in terms of also answering the questions of you in terms of how do we drive the turnaround, how do we secure that we really can benefit from this fantastically growing market, but also get it into positive bottom line, what are the necessary things to do. It's 36% of Siemens Energy's revenue. So it's a core pillar of our company. And I will talk about, obviously, the cash tender offer, what we want to benefit from also through the integration and really joint exploitation of the opportunity there. All this is based on our dedication to sustainability. And I'm very proud of what the Siemens Energy team has achieved in the past 24 months of paving the ground for an ESG-focused company, getting reportings in place, making ourselves transparent and getting it recognized in ratings. That is a journey. We cannot do that alone. But what we can do is provide the technologies and means to implement their technologies finally into products to turn around the energy market. And we will continue to make ourselves very visible and measurable. And I'm not a big fan of these fluffy target settings, I have to say. But I'm a big fan of numbers. I'm a big fan of continuously obviously trying to report to you on how do we step after step, get it down. We do not yet have a solution yet for how do we get to net 0. There will be additional technologies required. There will be certain trends in the market be required. We cannot do it alone. It will depend on our customers. But a cross-portfolio adjustment across energy efficiency capabilities across increasing renewables, across fuel shift and further reducing greenhouse gases and emission removal technologies, we will continuously drive our Scope 1, Scope 2 and Scope 3 down. And this is obviously what we are doing jointly with our customer, which are all embarking on the vision, and we will continue to work through this. But what I want to make sure that we get tangible for you, also measurable in terms of step after, step after step. I'm extremely proud what I have seen in the past 24 months from the people in our company. And this is the base for our success for Siemens Energy people. The diversity we have in the team, the people who are here in the room, you get to know a couple of our colleagues that passion and commitment, which is in our organization, the diversity across the world, the way on how we work together, I mean, you see obviously one of our sites here but it will also be a continuous effort to make sure that we can give our people the opportunities to continuously qualify for new things to come. Because we are in a changing environment, and we want to do this with our people. And that is something, obviously, which is, for us, a key element at the end, we are a people business. As much as I love technology, we always have to be aware, we want to implement real things. And we will need people for that, and this is what we are obviously committed to. So my priorities, and this is no surprise, and you have seen it before with the repetition, with the performance portfolio, process and people, people, people. To make sure the right people sit at the right spot in the company, we do everything that in a decision-making process, we are as effective as possible and really make sure that we can successfully drive through a changing environment. And to close here, just getting back to Page 1. We want to become the most valued energy technology company. And we are per set up in the portfolio, what we're having today. We will focus to drive our levers and also to give you the transparency because we are a company in transformation as well. But we are strong believers also that the focus on sustainability gives us also the means of profitable, sustainable growth. And in this regard, I'm looking forward to give you more detailed presentations throughout the day that you can see on how we are doing now exactly the next steps. Thank you very much for your attention. That will be the overarching view on Siemens Energy. Normally, the intention would be that I leave and Maria is coming. And Maria will come, don't worry in terms of the numbers. But obviously, we had on Saturday evening the announcement on the cash tender offer to bring together Siemens Energy and Siemens Gamesa Renewable Energy. And I will very briefly also want to flag this up in a dedicated presentation, I will share this with Maria on the numbers on how we intend to bring the company forward to shape this integrated energy technology leader. For those of you who have participated in the call yesterday, these are the same slides. However, it's our intention, obviously, to make sure that everybody who is in the Capital Markets call today or here who has not seen us gets all the information required. And obviously, as already addressed in my previous presentation, wind is a key pillar for our strategy to bring the things together. However, the SGRE's current financial and operational performance created the need now for [ form factor ]. And we better tackle the challenges away jointly together with the SGRE management to really make sure they get all the support and all the means to drive the company forward. And this is really what we are trying to do with this cash tender offer because we are very convinced that we can help to stabilize SGRE's business in a more effective way than just as a majority owner. There are a lot of things what you can do also as a majority owner. That's not a question. But for me, it's also it's about speed, it's about effectiveness. It's really driving operational excellence in the market, which is continuously changing and unprecedented difficulty in terms of supply chain. We have already yesterday explained, obviously the logic of the deal in terms of the mid- and long-term outlook, but there's also a substantial amount of synergies. What we do see on the cost side seeing obviously the relatively high level of cost of goods sold, which we bring together and the opportunities really to combine the 2 different businesses. And obviously, Maria will explain it in her slides. We are fully committed to a solid investment-grade rating, and we expect the transaction to close in the second half of 2022. As I said before, SGRE current operational and financial performance created now the need to act. We had the second profit warning this year and obviously, multiple in 2020. And we also -- I'm fully aware that obviously, that is in an environment where the whole industry is staggering. And for me, it's now what can we do to give the maximum support to the operational management as SGRE to manage this challenging condition, also really on the financial side in terms of supporting this, and this is what Maria will talk about. And I'm 100% convinced it's now the right time to act and to get this together. This is a slide you might recall from Capital Markets Day 2020, right? And this was the logic which we explained at this point in time. I referred to that already in my prior presentation in terms of having a Phase I, which we called accelerated impact. Actually, the intention was to come back to the financial market in 2023. So we are 1.5 years earlier because the market is changing faster but also because a lot of the progresses we did in the overall structure was a lot faster than we expected. And it gives us now really the opportunity to enter the next phase and the integration of Siemens Gamesa is a vital part of this for us as a company. And through the integration, we generate value for a lot of different stakeholders. And obviously, we can support Siemens Gamesa in a lot of different areas because irrespective whether you build a wind turbine or build a gas turbine or build a transmission or transformer equipment, a lot of the challenges are the same: supply chain, logistics, project management, financial reporting, how do you see a risk which comes up in projects fast enough? And how can you diligently manage this and continuously qualify your people to be ready for all the challenges which are in this business. And by bringing the 2 organizations together, there's a lot of things which we can improve and do faster. As I said before, it's not that you couldn't do it as 2 separate companies. You can have bilateral agreements and everything. But for me, it's now speed is of the essence and really make it as effective and fast as possible. There's also a big benefit from my perception on the growth side, on the customer-facing side. So how can we leverage the bigger global sales footprint what Siemens Energy has for the benefit of Siemens Gamesa. We are present in a lot of countries around the world in much more countries than Siemens Gamesa. We have different customer contacts, and very often, this is very complementary of really getting together and creating new opportunities for Siemens Gamesa. Maria will talk about how important is also on the financial side. And I have to say, I mean, this was one learning what Maria and I had. It's very, very challenging also in the financial reporting, also in talking to all of you to having these 2 separate companies, and also, if you look then to rating agencies or banks or fundings to act continuously in these 2 companies. So we can take out this inefficiency and will create a better company. It was always, and it is really the target to bring together this integrated energy technology company. And as I said before, along these 3 pillars, I would skip this slide because this is obviously the logic I've explained to you the overarching presentation before. And we talked also already about the wind market growth. We value the company from a midterm growth perspective. I believe it will be a profitable, fast-growing market going forward. This is a base also on how we evaluate the company. Wind will be needed. There's no way around it. And in this regard, I also strongly convinced that wind will be a profitable business. And Siemens Gamesa is excellent position. They're #1 in offshore. They're #2 in service. They have an excellent fleet, and onshore, I think there's a clear plan on how to come back and really continue to drive it, and onshore is a key base for drive for service business. It's around a EUR 10 billion business, as you know, and obviously sitting on a substantial service backlog. So what we want to achieve with this is an improved profitability, but also an improved predictability of the company because I am not happy, we were all not happy. I think, including the management at SGRE, our challenge is to predict really the results what we're achieving. And this has to go better and this will get better really with a more integrated company and achieve at the end, growth with higher earnings stability and obviously converting this also into dividends afterwards for our shareholders. Reflected up in the announcement to level of cost synergies, around EUR 300 million cost synergies resulting from supply chain and logistics synergies, project execution synergies, but also joint R&D efforts and obviously, cost reduction through an optimized administrative setup. As I said, there is also growth synergies in there in terms of go-to-market, in terms of combined offerings with regard to wind and transmission wind and hydrogen, that is something which I rather would foresee for the end of the decade, right? So in terms of really until you see that in the revenue, but no question that also on the growth side, we see substantial opportunities. And if you look across the different stakeholders, this transaction will be beneficial for all the different stakeholder groups. Customers like [ Denhart ] will get a company which is very aligned to offer complex or multiple solutions to them. They have the same speaking partners. It's improved support. They understand on how we do things. The suppliers get access to a company with an even bigger procurement volume and deeper relationships with them. Our shareholders obviously shall benefit from the improved cost structure and obviously a robust and solid cash management. And at the end, for the employees, it's an opportunity to move from one area to the other. It's additional career opportunities really for Siemens Energy/Siemens Gamesa colleagues really to prosper and to develop themselves in our organization. And obviously, at the end, we are a company which want to energize society and wind belongs as a vital part to that. This unlocking of significant value, obviously, as I said, through the synergies and a lot of things around our simplification and the joint strategy, cost reduction. And we both have Maria and I lived through the current governance model, which is feasible but complex and not as effective as I would like it to be. So there's a lot of elements, as I said, on how we can drive and unlock significant value. So let's come to the key terms, and I would ask Maria to walk us through the pricing and the financing.

Yes. Thank you. Christian, I should drive now, thank you. So yes, as you all know, we described the transaction already, but let me take you through it again. So the key terms is that this is a voluntary tender offer that covers all shares outstanding of SGRE, of course, with the intention to delist. This, of course, takes into account that we already own 67.1%. As part of the transaction structure, you also need to engage an independent valuator. So the audit firm PwC was engaged to do this in order to comply with the Spanish rules on delisting. Purchase price, as Christian alluded to, is $18.05 per share. This is just shy of 28% over the SGRE's last unaffected closing price on May 17, 2022, and this offer price also exceeds the 6-month volume-weighted average price, or the VWAP, of the SGRE share price on the date of the announcement. Also a note on this, this price also takes into account the mid- and long-term attractiveness that Christian just talked about with respect to the wind market. We also provided a tentative time line. I think it's important I went through this a few times. But certainly, it is quite a process that here we are today in May. And of course, then there goes into a period of time where the regulator needs to look at the offer. Then about mid-September, that's when the public offer is actually launched. Then there's a 4- to 5-week acceptance period. And then in October, that's when we have some visibility in terms of the tender results. Hopefully, all of this will be completed in terms of the entirety of the transaction by the end of the calendar year. So funding, funding requirements. Of course, the funding requirement ultimately will be driven by the acceptance rate of the tender. So the numbers that you see here are assuming a 100% acceptance of all offers of all of the SGRE minority shareholders. If that occurs, then the transaction value amounts to $4 billion. That's at the offer price that I just mentioned at EUR 18.05. As also is very important. This is something I talk about each and every quarter, the balance sheet strength is a core part and a fundamental part of our financial policy at Siemens Energy. So Siemens Energy is, and we remain committed to a solid investment-grade credit rating. This also goes to what Christian mentioned earlier. What happens at SGRE obviously has impact on the group rating. So in terms of all of the difficulties that you've seen in the previous quarters, that has impacted our group rating. The financing package extremely important, and this is something that we will not concede on. The financing package is designed to support this very key objective of ours to have that solid investment-grade rating. In terms of the funding structure, the acquisition is fully underwritten by Bank of America and JPMorgan. Again, assuming a full acceptance of the offer, again, 100%, Siemens Energy then intends to finance up to, up to $2.5 billion of the transaction value with equity or equity-like instruments. The remainder of the transaction would be funded with a combination of debt and cash on hand. Again, thinking about the fact that we must maintain our solid investment-grade rating. As a first step, as a first step, equity may be offered without subscription rights, of course, according to market conditions. So this encapsulates the entirety of the transaction in terms of price, in terms of the funding requirements, the rating commitment that we have as a company and, of course, of the structure. So I'm going to conclude this time. So for us, as Christian mentioned, and as we've mentioned since the inception of Siemens Energy, wind is and continues to be a core part of our strategy. And it is obvious that the SGRE's financial performance is a call to action and creates the need for action. Integration will absolutely look at and address some of those challenges that we have, and it's all about generating value. And we fully believe that this will generate value for all shareholder groups. Then we can go through the stability, of course, of the team of which they've already started in terms of stabilizing the business, looking at that day-to-day operations. I think it goes back to the speed element and the ease at which to ensure that there's focus on those day-to-day elements that absolutely require attention. Of course, wind is extremely attractive. You saw the market figures, and we believe, as Bernard said, that we're truly better and stronger together. Up to $300 million cost synergies, of course, within 3 years of the -- after the full integration. And again, it goes, I must repeat it that we remain committed to a solid investment-grade rating. And I believe that sums it up.

Thanks, Maria. And with that, I would say Michael, the floor is yours.

Yes, well, first Q&A. So we're going to rearrange a little bit, so that gives me the time to tell you...

You take this real estate.

I'll take this. So this gives me the time to tell you that there are 3 ways to ask questions. So obviously, for the people on the web, you can post them on the web and then I will read them out the people. [Operator Instructions] And then, of course, big invitation to all of you in the room to ask questions. So this will be about 20 minutes and really should pertain to Christian's presentation and the transaction. There will be a separate Q&A after Maria presents before we go into the break sometime around 11:30. So who wants to ask the first question. Andre, over to you. Microphone will be coming.

Okay. Great. So the first question I have is on portfolio. You've clearly set up the new divisional structure. And I wonder how the transformation of industries is going to be run with the divisional head versus the 4 P&Ls within that. And also on portfolio, whether that kind of review of the structure, triggered maybe some thought processes around what should not be in the portfolio? Or is it the new structure that will kind of under this new structure that will be more lenient towards that kind of thinking? And the follow-up I had was just on the SGRE deal tender offer announcement. What's the reason for the gap between kind of now and the mid-September time line for the actual tender offer.

Maybe on the new division -- or let's say, new business structure. I mean, first of all, I think it's important that the business leaders sit in the Executive Board. That was one key change, which also applies to gas services and great technologies. And on transformation of industries, you're absolutely right. That is a business area where the key focus of the respective executive Board member will be to set this portfolio up future proof, which could also mean portfolio management in terms of M&A, in terms of finding new partners, shaping this. You will have the operational running of these separate businesses on the level below really as independent businesses. And this is how we also reported then that you do see what are the numbers behind that. It might be very different needs. So we are fully aware that it's a very diverse setup, which we also now need to continuously to shape going forward to say what is needed in the market because you have a business like hydrogen was just about investing over the next year's money into and building up reference cases. And then you have a very classical business as compression where it's about how do I tackle the fact that 50% of the energy consumption in industries is compression? And how do I do that, right? So these businesses, this was the intention you need to get enough freedom to shape their setup and their cost structures according to their market. And the leader on the Executive Board is supposed and to make sure that all in all together, it benefits from the trends in the energy market or to identify the opportunities what else is needed. Do we want to have a stronger position in Power-to-X? Do we want to extend our position on the digital side differently. And that is something where I was in the past 2 years, because of all the things we had in our hands, seeing that we were not fast enough to anticipate this shifting around and shaping. And this is the intention of this setup to make sure there's enough focus on that because we are very well aware, nobody knows today the solution what you're going to need to make this the most successful business area. And this is exactly the task of the person who's running that business area. On the time line, Maria do you want to take it?

You can go ahead, I can support.

On the time line of the transaction, obviously, we have now announced the deal now it will be up to the Spanish regulator also to do the approval of the pricing for the listing, that is one step to take. And obviously, depending on this, we will go after continue forward and launch in the acceptance period. We have an interest to do this as fast as possible because longer time doesn't help anybody, particularly not SGRE, because I think what we need to achieve as fast as possible, all hands on deck, focused on solving the operational issues. That is also our interest. So it could get faster, right? But we obviously not alone in control of the time schedule, and we have to see on how this moves forward and the discussion with the Spanish regulator will be a key one.

Correct.

Ben, first one to you.

I promise this will be my one and only question on SGRE for the remainder of the day. The funding requirement. Can you just talk us through the kind of qualitative thinking of how did you settle on that number? And the reason I say it is that we've gone from a very healthy EUR 1.7 billion of net cash. We buy out the minorities which doesn't recapitalize SGRE and we swing to EUR 2.3 billion of net debt. And then basically, you got EUR 2.5 billion just gets us back to a sort of cash-neutral position at the Siemens Energy level. And in the past, Siemens Energy has said, we want -- when Siemens capitalized Siemens Energy at the beginning, the idea was we would have a good cash buffer which for a EUR 29 billion late long-cycle business is important. So why is the sort of the breakeven position, if you like, on your balance sheet about right? Why don't -- why shouldn't you be raising a lot more? And also, are you implicitly assuming that underlying cash generation is actually going to turn the corner and get better in the next 12 months. Is your sort of working assumption this is as it gets from a cash generation standpoint, and/or have you got things behind the sofa, up your sleeve in terms of disposals that we could get in there as well. So how are you just thinking about that 0-ish position? Because what we wouldn't want to see is a slowdown in the market, cash exit and then we're in a very nasty position.

Maria, would you want to...

I'm going to address the ease up our sleeves comment. There is no ease up our sleeves, Ben, maybe take it right back to basics and what I said about having the solid investment-grade rating, and you're fully correct, when Siemens Energy was created, it was created with a capitalization for a balance sheet that is meant to be in a net cash position. And this continues to be our target. So we do -- and we have, and I'll show you, by the way, in my presentation, in terms of the cash generation that we've been able to achieve in the last years. We feel very -- I feel very confident with the composition that you said because you said should I do more of 1 part of the funding structure another I feel very confident with the cash element. So don't forget, there will be a cash element of the fund structure, let's say, debt and with the equity value that we have for the entirety of the transaction that we will get over, let's say, a reasonable period of time that we will get back to that net cash position because the full intention of our business is to be cash generating from operations. So I really want to make sure that, that's stressed, right? We do not -- right now, we're in a net cash position. We're going to do the transaction, and we will get back to a net cash position. That's the intention.

We're not assuming further significant cash drawdown from SGRE because if heaven forbid, that we have a $5 billion to $1 billion exit over the remainder of the year, then we're not in that cash. We're back in the hole. So are you -- do you feel that we're not going to see another significant cash exit from SGRE or could there be? The last one, I promise.

That was an easy question to end with. Thanks, Ben. In terms of could you rule out? And I always say, I mean, that question is a difficult one. You could never rule out. But what I can say is we feel confident again, with what we know that this is appropriate in terms of the funding structure, that the composition is correct, and that, of course, like I said, notwithstanding, I mean, every -- no one could tell some of the headwinds that we had to date, Ben, no one would have thought of that. Just a mere a few months ago. So we feel confident with what we know that this is the right structure for the transaction.

Gael de-Bray? Go ahead please.

Gael de-Bray from Deutsche Bank. I have two questions, please. The first one is on the decision to reduce the P&L units from 80 to 7. So why 7? I mean, I get that it will simplify the structure and you're going to have some administrative cost being taken out. But how do you find the balance between reducing complexity and actually decentralizing operations and increasing accountability for the various businesses. So that's question number one. And question number two is on the new business structure and in particular, the decision to separate the compressor business from the industrial gas turbine business. So why is that? Because I've always thought of these 2 businesses as being rather complementary with gas turbines driving compressors and the like. So does it actually means that you no longer consider the compressor business as a core business to you or is it not the case?

Thank you, Gael. And I would say a little bit to the business background on the P&L. And Maria, happy to pitch in. For me, it was from a business perspective, important that the accountable people and managers who get all these sets of numbers they do need to steer the business they can influence. But what obviously happens to me, if you define everything a P&L and you have back and forth calculating methods and I would say, cross-charging type of mechanism in the organization, you create a lot of administrative work, which does not generate value for the customer. But the question in the logic was from a business perspective for me, what do I have to give the people in the hand in terms of driving performance. And what is really the amount of administration efforts I do need report to the outside that you get the visibility also on how the different businesses are doing.

Yes. No, absolutely, Gael. And I think the 80 was our internal number, of course, because then there wouldn't be an issue with transparency externally. So the 80 was our internal number of P&Ls. And now the 7 refers exactly to what I'll go through in a moment, where you see how, on a quarterly basis, we're going to look at the new businesses and what type of information will be required. But that KPI for us is exactly what Christian said. It's trying to drive simplicity and accountability within the organization. So you don't necessarily need a P&L, which has costs allocated all the way down in order to ensure that you know how to drive your particular part of the business. So what we say, and we will continue to say to our people, it's not about diluting accountability, actually, the opposite about ensuring there's focus where it needs to be and that you have the strong KPIs and operational drivers to drive your business forward. And I think that's what we try to do and really take the complexity out of the business.

I mean just also, Gael, to underline it, then I think actually has a similar element and I said it before, right? I mean we started 2020, we should never forget in a structure, which we were given, right? And there were a lot of elements in there, which you would by design, not set up like this, which were simply historic development and nothing is bad about that, right? But I think it's time now to make sure that we shape the company in a way that is future-proof going forward with the most effective setups. And this is what we're trying to put into the design. Thank you for the question on the compression. And I tell you this was a long and really very, very active discussion also when we design the setup because you can have this view. And gas turbines will be an important driver for the compression as well as electrical drivers are, right? But a couple of comments to this. First of all, is this a setup for the intention to sell the business? The answer is no. I do believe it is an interesting business to have, and I believe it's a good base as an industrial footprint also of all what we would want to do. But I want to see also that business delivering the returns on the core units on the compression side, which I believe with the products we're doing is possible. But it is requiring, obviously, this turnaround, what we talked about also in 2020. And if I see the progress of the compression business itself from 2020 to today, it has been substantial. So they are really on a good track to develop this. They are not at the finish line yet. They will need to continue to work through this. And I wanted to make that very, very visible because once you overlay this, it's also sometimes challenging to see that. That is really about transparency. The other comment to that is absolutely the industrial gas turbines and the compressions need to continue to work together. Like the whole organization is set up to collaborate. If these say, think a little silos, it will not work when we're setting up the company wrongly, right? So you will see projects where you have a compressor and an industrial gas turbine driving it and putting that jointly together. And by the way, also the way on how you service it. And Karim will talk about this a little bit, we will make sure that this gas service part stays intact. But the way on where you put the P&L is obviously then put differently, but Karim will talk you through that. So you can honestly do it either way. What I have seen happening by having it together now over the past 2 years, it allows us certain elements to improve. But now the important move is, and I think this is always on the line, we really put new unit and service together. That is, let's say, the big opportunity for us. It's really making sure that also the service logic clicks and then the rest is really, yes, we need to actively manage very actively the collaboration across the organization. And no, it's not with the intention to sell. This is because we set it off going forward. That is not the driver behind the setup.

Super. Nick, over to you.

Nick Green here from Bernstein. On the cash offer, please, are you concerned at all that your offer is too generous for Siemens Gamesa, their prospects are far from clear over the next couple of years in the medium term. They still have significant challenges ahead. Opportunistically, if you had made this offer in a year's time, would you have been putting in a bid maybe 30% cheaper. What are your thoughts on that, please?

Yes. I think it's an excellent question. And I mean, obviously, as Maria pointed out, our offer price is based on really believing in the mid- and long-term potential of the business, which means it has to get profitable. It means it is a continuously growing market. But I wouldn't disagree to say, if you would have waited 6 months, could you potentially have at a lower price. But for me, it's a point is [ pastry ] for me as Siemens Energy is the biggest opportunity and the biggest risk at the same time. And I need to make sure that they are successful by any means as fast as possible. That is my key driver. And yes, I absolutely believe we have put a very generous prize for the SGRE' shareholders on the table with the intention to also make this a fast transaction. Speed is of the essence. But I think it's also important to underline it because I've yesterday, seen all different comments in the market in terms of whether it's a good or bad price or whatever. This is a price which assumes that this is a mid- and long-term nicely profitable and growing business where all the market elements get fixed. That is my assumption. And why do I believe this? There is no way in energy or an electricity generation without wind. It's not possible. And the market participants, not only ourselves, the market participants need to have a position to generate a profitable business if this is market, which is supposed to stay. And this gives me the comfort, it gives us a comfort that we could put out these offers. But I tell you, we had a hard time in our Board also discussing and explaining this because, I mean, we -- the under stocked price, it was at 14, 13. And as rightly said, if interest rates will go up, and let's see what's coming rest of the year and so forth, it could have been even at a lower price. But it's not about being opportunistic here. It's being -- it's really building a company with mid- and long-term focus, and I believe really in the opportunity in the wind market, but we have to underline and hope the minority shareholders recognize that it's a very interesting offer for them at this point in time.

Thank you we're coming to the end of this Q&A session, but there will be more Q&A sessions. So there will be one for Maria and then also in the afternoon, one -- to ask all the questions that we haven't answered in the meantime. One more question I would take, and that's going from the telephone as it's the only telephone question. So Ajay Patel. Ajay, if you would like to ask your question.

More centered around the gas services business. So flat revenues, improving profitability. And I wonder if you could unpack this a little bit. And that is the expectation that the manufacturing margin sizably improves over this time frame and the service business stays flat? And what will be the driver for that manufacturing margin to improve? Would it be more rationalization of capacity as a whole for the industry or cost-cutting driving that performance? Because there wasn't much change on the cost cutting side. So I was trying to just get a bit of an idea of the building block there.

Yes. Thanks, Ajay, for the question. And I would heavily invite you to listen to the presentation of Karim later because he goes in more detail to the gas services business. But maybe let me pick up on a couple of points, what you just said. First of all, yes, it's also supported by an excellent track record on the new unit side, which has been happening over the past 1.5 years. You may recall when we were discussing in 2020, we were substantially below 20% market share in large gas turbines. We had a reasonable position in the midsized gas turbines, but we had under-absorption in some of the factories today. We are back with, let's say, really nice market share presence really across the different portfolio elements, which also means the factories are loaded. We have, in the meantime, amended capacity. We did the measures as we announce them to shift certain things from higher-cost countries to lower-cost countries, change the setup and how we do things, which improve the cost position in particular. The improvement going forward in gas services, and also this is what you're obviously going to see in the afternoon is also coming from a service share, which we is continuously obviously developing and getting this balance, but it would not work without the significant improvement we have achieved in the new units area to bring it together a very nicely profitable service business and a decent new unit's business. But as I said, Karim will share more details later today.

So that concludes the first Q&A. Thanks, everyone, for the questions. Thank you, Christian. Thanks, Maria. And now over to Maria.

Coffee break, I think?

Oh, yes, sorry. We get a coffee break. Sorry, sorry, sorry.

I think they want a coffee. Maybe stretch their legs. See you in 10 minutes. [Break]

Hi, everybody. I suggest that we gradually going back to the desks as Maria should be with us any second. Right, thank you everybody for waiting. I can see Maria, now coming back on to the stage. So, welcome back after, after the break. Maria will now come on stage and talk until about 11:15 and then we will have a 15 minute Q&A session which will then pertain hopefully a little bit more towards Maria's part. And with that over to Maria.

Wow, just in time. Hello, everybody. Hi, it's a real pleasure to be here with all of you. It's great to finally be here in person. I think we have a lovely evening last night and it's really important to have these discussion in-person. So I'm pleased to go through the key messages from my point of view in terms of how we have fared as Siemens Energy in the last 2.5 years. And what's really important is that Gas and Power and just so you know my presentation will be focus on Gas and Power today. So Gas and Power has been and continues to deliver on its targets. As Christian mentioned there is improving market trends, really our focus on customers is clear, couple that with our technology and our rising order backlog which I'm really proud to talk about in a moment of better quality. As always I talk about not only quantity but certainly the quality of our order backlog, and you'll see in a moment that's absolutely going in the right direction. Higher margins that we talked at the last CMD in 2020 about even in cash, even in cash those continue to be top priorities for us, of course, as we now inflect for sustainable for growth going forward. Also extremely happy to announce to all of you on the back of what Christian already showed you is our new reporting structure, and how that is going to provide a lot more transparency, this is where we heard you feedback and we're hopefully delivering. And also we committed in September of 2020 that Gas and Power will in the midterm have a greater or equal to 8% EBITA target but what was important about that EBITA target is that it was as reported that means all-in, that means including restructuring and so on what we deemed to be special items today and I'm pleased to report that with our new business areas, we are committed to that target. So I'm going to take you through 3 parts of my presentation: number one, is what I called the report card or the progress report' number two is really looking through that increased transparency that we'll be providing in our reporting going forward; and last but not least how are we doing that going forward our sustainable value creation continues to be also key to what we do at Siemens Energy. So order backlog, what you see here is a number of things, one is, order backlog is important to us because it provides visibility, it provides visibility into the revenue that will be forth coming as a result of that order backlog. What's also great is about 25% of our order backlog converts into revenue in 1 year, what does that mean, that means that we have about 70% certainty and visibility of our revenue for the following fiscal year. And what's really great about our backlog is you see that it's growing 17, 1-7 percent, since fiscal year '20. And what's also important is that you see the book-to-bill that is across each and every business. The book-to-bill remains greater than 1, and for the entirety of GP is shy of 1.2. I think it's not only about quantity, I love the fact that the order backlog has grown by 17% but what's really important is the bullet point there, the average margin for a backlog has gone up by a 150 bps or basis points. In both, I think this alludes to what Christian just mentioned in terms of what you'll see in the gas services and gid technologies in the afternoon, the other business areas as a cost both new units and services. And this is extremely important for that sustainable business foundation that we want to build on at Siemens Energy. What's also important is and I get question about this essentially each quarter is the legacy projects as you know we're counting on a [ bump up ever ] margin in our order backlog that underpins our ability to make our targets going forward. What I am very happy to report is we're at the tail end of those legacy projects, there is a small portion that's left but to a larger extent this has also been executed, hence the increase in the margin in our backlog. And always important indicator for us is what is the percentage of the backlog in service and you see here that 60% of Gas and Power backlog is the recurring, resilient and profitable service business. So, we delivered hopefully with respect to building that solid business foundation. So next is -- we also talked a lot about costs at the last CMD. And we launched our Accelerate Impact Program, which was our cost program for Siemens Energy. And what we indicate quarter-over-quarter is how are we faring? How are we doing with respect to that EUR 800 million? And what was important about that EUR 800 million is that, one, not only do we achieve the cost savings, but two, that hits our bottom line. And I think here, you see EUR 350 million of that target has been realized as of the half year of this fiscal year, and we've done what we said we were going to do. We've reduced headcount, painful in some areas, but we did it. We've consolidated footprint, and we've launched new initiatives to continue to see how we can better leverage best cost country approaches. I think a really great example of that is that we have now established Romania as a hub in those in that regard. And then, of course, you expect us and we do, we look at our portfolio and we continue to optimize and align that portfolio, things like divestments of the engine business and Voith Hydro for example, contribute as well. So the message here is difficult, hard work but on track, and we're seeing that this will be achieved as well for fiscal year '23 as promised. So another area that we talked about at the time was how are we going to ensure that there's a significant margin improvement in our businesses. and that had to be across the board in order to achieve the guidance that we have annually but also again, that midterm target of that greater than 8% as reported. And here, you see each of the businesses and year-over-year how they have fared with respect to the margin improvement. And across the board, we have seen improvement in all divisions, except for transmission, but I'll talk about that in a moment. But underpinning that is exactly what I just mentioned in terms of our cost savings. We have been extremely diligent and please rest assured with a new organization, those cost savings measures are being mapped accordingly. We won't lose sight of those. But cost savings has been obviously a clear objective. Looking at our execution -- and how do we ensure that we execute with excellence. I think we've proven that across all businesses. NCC reduction. NCCs are nonconformity costs. We've seen a marked improvement across the businesses in that regard and improved order quality. So again, to underpin what I talked about with respect to our orders, but it is important. It goes to the old statement. If you fail to plan, then you plan to fail. So at the onset, how do we ensure the right terms and conditions are in our orders. And unless we forget strong execution, of course, the market conditions are ripe in certain areas. We see this. We do have growth, and we expect growth and hence, productivity to continue into the future. Now one remark, just here with respect to transmission. I want to say we have indicated that Christian and I in the last few quarters that with respect to those headwinds, whether it's supply chain, whether it's COVID, for example, closures of facilities. We've indicated that our transmission business is the one that is hit by this. So please ensure that when I talk about numbers in terms of the P&L impact, that is what is hitting our transmission business today, but we feel very confident on the back of a very, very, very ripe order book of greater than 4 -- almost 40%, by the way, since 2020 in transmission that we are able to achieve those goals that we have for that business area. So on the right-hand side, you see gas and power. So how have we done overall as a segment. And you also see that we denote and we continue to commit to making our guidance for this year -- and also, we commit to the guidance for GP in those businesses because, of course, GP won't exist going forward, but 4 GP, those businesses going forward for '23 as well. So we're on track. And going back to the headwinds. I won't repeat this is essentially a repeat of what we talked about in Q2, Christian and I, regarding the war in Ukraine, the impacts that we see there, of course, supply chain in COVID-19 and rising inflation, of course, this is impacting us in gross costs. And I think we've done a really good job. And what we've tried to portray here on the right-hand side is what are we doing to ensure that we're at least addressing those headwinds wherever possible. So one of the things that we are very, very proud of is our service business. And within our business, it's resilient because we have very effective cost indexation in those contracts. So -- and of course, with over a 40% share in our revenue of service that this comes in as a main -- one of our main levers to defend our margins. It goes again to risk and project management expertise and excellence, hedging. We hedge wherever possible. This also goes forward to protecting our backlog. Supply chain management and the team has been outstanding in this period because it's not just about cost increases. It's also about how do we ensure that we don't have critical shortages. For our business, that's extremely important because if you have a shortage, then you can't progress your projects, you can't progress your production, and that's when you have, unfortunately, nonconformity costs. And of course, our favorable market momentum, we see this. This is boosting our orders and, of course, allowing in certain areas for price increases, and we're trying to exploit that wherever possible. And without saying it, I've said it over and over, base productivity. This is something that we also ensure that we focus on within the organization. This is how we continue to mitigate in certain areas and contributes to the mitigation of those headwinds on the left-hand side as well. So next, of course, was cash. And we talked a lot about cash, and we talked a lot about the optimization of our balance sheet at the last Capital Market Day. And at the time, we made a very bold target for fiscal year '23 in terms of where do we see our operating working capital? And what would the target be for in terms of a reduction? Well, lo and behold, that was achieved already. So that's great progress. And if you look at our free cash flow, this is what I said earlier as well. Gas and Power has contributed cash flow above expectations in each and every year. And the EUR 900 million, as you know, that's a half year figure for this year. So on the operating net working capital, you can say, okay, Maria, yes, it's gone down, but we also see that, of course, your net contract assets and your contract liabilities have also contributed to that. That's true. However, that's not just also by mistake. That's by design. That's driven on the back of a very strong order intake, which I just displayed and looking at each and every contract to ensure that we have favorable cash curves and cash terms. So this is, again, looking at the order from the onset. One thing that I want to highlight and I'll highlight as well in Q2 is that we do see increases in our inventory in certain cases. This is on the back of the supply chain issues that we've seen, shortage of components and products and materials in certain areas. And we're doing this on a very exceptional basis. This is being reviewed, but necessary. Why? Because at the beginning, what we said and stays true is we do what we need to, to ensure that we meet our customer commitments. And of course, payables, I mentioned this a while ago, actually, that we -- when we launched Siemens Energy, we also launched supply chain finance initiatives also looked at the time and we continue to do so at extended payment terms, and this is also bearing fruit with respect to our net working capital. So how did we do? I think we've kept our promises in all areas. I think we have improved our business foundation. You see this with the backlog, not only increasing in quantity, but again, also in margin quality. Our cost savings programs I must say here, this is hard work, especially with the headwinds that we're facing. This continues to be hard work, but it remains on track, and the team is committed to delivering those cost savings. Profitability continues to be improved, really base profitability across all businesses, and we see this as a step by step towards our midterm target and underpins our ability to confirm our midterm targets. And of course, it goes without saying we continue to have a key note on the balance sheet and make sure that there's rigorous working capital management as we go through and convert, of course, this very large order book. So next, increasing transparency. If you haven't noticed already, you will be given a data book with all the figures, all the figures that you wish, but certainly, this is the part of today's presentation that goes to our new organization and the transparency that will be given starting October 1. So our reporting structure today, you see it on the left-hand side. For Siemens Energy, we have 2 reporting segments, the big one, essentially 2/3, 1/3, rule of thumb, Gas and Power and then SGRE. Tomorrow or October 1 to be exact, you're going to see that there's 3 business areas. So gas services, grid technology, transformation of industry and, of course, SGRE. Therein, in transformation of industry, there are 4 what we call independently managed businesses. And that's why when you look at the -- how many P&Ls we have going from that internal number of 80 to 7, it's a 3 plus the 4. So additional disclosure will be within a transformation of industries that will be volume and profitability is what we will display on a quarterly basis. The other 3 will have all financial KPIs and quarterly starting October 1. So this is a busy slide, but I think it's a necessary slide because it shows you business area by business area, what's now included, and it also has, from a transparency perspective, revenue, illustrative revenue and EBITA from fiscal year '21 for those businesses. So if you look at, for example, gas services, you see that the business activities included is it's all our gas and large steam turbines and related service business from the former generation and industrial applications business. The indicative revenue is around EUR 9 billion, and the EBITDA is around 7% in fiscal year '21. Similarly, for grid technologies. This is a little easier -- it's all of the former transmission business, but -- and here's where we're clubbing and making sure that we have focus and we have one owner, all future storage activities will now be included in grid technologies going forward. So the revenue here is just shy of EUR 6 billion, EUR 5.8 billion, and 6.5%. And herein lies transformation of industries. You see the 4 boxes underneath are those 4 independently managed businesses. As I mentioned, you have sustainable energy systems. This is our electrolyzer, the former new energy business, Power-to-X, hybrid solutions is there. And of course, you see EUR 27 million. This is a growth area for us. And we also indicated that it's an investment area for us. So you see the negative EBITA margin today. In terms of EAD, Christian alluded to that about the industrial applications business. This comprises what we do from an industrial processes perspective from integrated solutions, value-added services and consultancy, about EUR 1 billion and about 4%. Then we have IST, so industrial steam turbines and generators. This is previously part. So this is a combination, previously part of generation and our industrial applications businesses and industrial steam turbines up to 250 megawatts, including the services for over 60,000 units in there and industrial generators, EUR 1.3 billion and 2% EBITA margin. And then compression. I think Christian talked about compression and we'll talk a little bit further about that in the presentation this afternoon for TI. This also was previously part of our industrial applications business. Here, you have the reciprocating and the turbo compressors, including the accompanying service and for a fleet of 25,000 units, compression trains and systems, revenue of $1.6 billion or a negative 7%. So here, we wanted to put in a 1 chart quick reference. We also have another chart in the backup that will be provided, where you see how the various parts of the business and where they move into under the new structure, again, as of October 1, 2022. So a lot to digest there, but we have, like I said, some additional information and materials in the backup for you. Now it's about looking forward. Now it's about our sustainable value creation into the future. So here, I mentioned earlier. And at the last CMD actually, we are asked a lot about revenue growth and what our thoughts were on revenue growth. And if you remember at the time, we actually didn't really provide a target for our midterm revenue growth because we talked a lot about selectivity. We talked a lot about ensuring that what we do, creates sustainable value, if you remember. So therefore, we did what we call delivered on the fundamentals at this point in time for the last 2.5 years. We stabilized the company. We reshaped. We restructured in certain areas. We optimized. We changed processes. And as a result, Gas and Power more or less, was flat with respect to revenue or growth between fiscal year '19 and fiscal year '22. But now it's about looking forward. And we do believe that we're at an inflection point for sustainable and profitable growth. And here, you see our 3 business areas. One is gas services, and you see a stable/modest decline because part of the portfolio, again, this is in the midterm for fiscal year '25. We absolutely want to have stability in part of the gas services business. And we also see maybe in the new unit signed that there might be a modest decline. With respect to grid technology and transformation of industry, we see sustainable growth in those areas at the mid-single-digit level again for the midterm target of fiscal year '25. And again, why can we say this? Because we do believe we're excellently positioned. We see the market momentum around us. As Christian said, I love that. I'm going to totally steal it. It's not how fair. It's not -- it is changing. It's just how fast will it change in terms of the necessity for energy transition. And we, here, with our portfolio, feel very, very confident that we're able to capitalize on that. In terms of our operating model, we see now we're very, very closely aligned to what the market looks like in terms of our business areas, and we see our future growth fields. And of course, as Bernard said, I do have to admit, I mean it was perfect in the sense of what our customers want from us. They want a unified solution. They want us to help them get through their energy transition needs and a unified go-to-market approach. So again, how are we going to get there? So I think the new business area, of course, supports the original Gas and Power target. I really want to underline and stress that, but we do not reneg on our promises from before. We continue to say that the gas and power businesses will have a margin target of 8% as reported in the midterm for fiscal year 2025. And what you can also see is the progress that we've made holistically again as Gas and Power. And the bars above, although very simplified because behind that was a lot, a lot of work, a lot of measures in terms of execution on our existing cost plans, execution on the accelerated impact plans, doing wherever possible portfolio optimization. And I think that continues. So that's why we said that bar should go right through the entirety, right to fiscal year '23 and beyond. In terms of operational NCC reduction, I think there was a crystal clear focus on that within the organization. And I actually say that doesn't stop. That will continue also into the future years that we continue to look at ensuring we execute as planned, and reducing costs wherever possible and ensuring that we don't have nonconformity costs. And we do see efficiencies from our new operating model. We do see efficiencies. Of course, this is much more targeted to our market, like I said, in terms of levels within the organization. We've reduced that. We've talked a little bit about the P&L structure and the reporting structure. This will continue to drive efficiencies and all the while growing. And I think this is the difference now. What we see is we are in a position to grow and we will see efficiency improvements as a result of that growth. So therefore, on the right-hand side, you see overall 8% as reported. This continues to be our midterm target for fiscal year '25, 10% to 12% for gas services; 8% to 10% for grid technologies; and 6% to 8% for transformation of industries. It would be also, again, remiss of me. This is a repeat slide. This is from Q2. No additional information there, but I wanted to make sure that I continue to stress the cash position and the strong balance sheet and liquidity status of the group. Again, nothing more to report, but just to ensure that everybody remembers, at a group level, we have over $10 billion in liquidity, which includes cash and of course, undrawn facilities, and we continue to be in an adjusted net cash position. With that goes our commitment to our prudent financial policy, and that needs to and must be consistent with a BBB credit rating. And this has -- I'm very proud, I think it's just literally on the wire that, that has just been confirmed from S&P in light of the cash tender offer. So they have affirmed our BBB solid investment-grade rating. And of course, that's extremely important to us. It's important because we need reliable access to debt and equity markets if required. It is pivotal and important for our business model that we have the solid investment-grade rating. And of course, this leads to favorable credit terms and other things, but it's extremely important on how we conduct business. These are present in our terms and conditions of our contracts. So therefore, this again is no area that we will concede upon with respect to our investment-grade rating. In terms of capital allocation, here is where I have to say we have no change, which is good. It means we continue to have that discipline in our capital allocation. We continue to shift. If you recall, at our last Capital Market Day, we talked about where we spend R&D and CapEx and how much and how committed we are to that is EUR 1 billion, EUR 1 billion at group level, by the way, rule of thumb. But what's important is where we're shifting that capital allocation to the future into the 5 growth fields, the fields of action that Christian talked about. This is where we're going to take that -- those resources and capital and ensure that we're driving growth, as I mentioned, growth through the organization. Looking at CapEx that remains stable as well. And of course, we mentioned some of the portfolio changes that we've made and we will continue to make as we streamline our portfolio. Dividend policy, no change. We remain committed to returning cash to shareholders. It's at 40% to 60%, of course, net income attributable to shareholders. And balance sheet. Again, very proud to say and very important to us that, that strong balance sheet is consistent with a BBB solid investment-grade rating. So what are the key messages? Well, the key messages is that we continue to have full focus on sustainable shareholder value creation, exactly what we talked about at the Capital Market Day in September 2020. And what's great about that is since then, Gas and Power has and continues to deliver on its targets. We absolutely see the improving market trends and the market conditions for each of our businesses, and we continue to focus, focus, focus on our customers, ensure that we're allocating resources to those technologies and innovation that really results in growth and ensuring that our backlog continues to grow profitably into the future. We have higher margins, strong cash conversion, and these continue to remain priorities for us. And I hope you can agree that the new reporting structure and the new group structure leads to a lot more transparency going forward that we will share with you, of course, starting October 1, but on a quarterly basis. And also important for us is that we remain absolutely committed to the original target of greater than 8% for Gas and Power as reported all-in for fiscal year '23. So actually, I was on time and even short of time. More time for Q&A is excellent.

So let's start in the room, Sean, if you start.

Yes, hold on 1 second. I think they need to get my table up. Shall we?

Yes. It's Sean McLoughlin at HSBC. A question around just joining the dots on -- thinking about your 2025 all-in margin target capital allocation priorities, balance focus. Do we rule out any M&A at this point?

Yes. I mean, Sean, we said we're going to continue to look at what we've already been doing, which is looking at our portfolio and optimizing in certain places. I mean in terms of large M&A, of course, that will also be in line with our financial policy. And we -- instead of doing M&A in the traditional sense, we're looking more and more on how we can do this effectively, like through partnerships, et cetera. So I would say step-by-step, we've also said it's more bolt-on in nature in terms of future M&A.

It's Akash from JPMorgan. I have two questions, please. The first one is on the bridge for -- to get at least 8% margin by 2025. So if we look at the current margin and the pricing that you have in the backlog and EUR 500 million incremental savings that needs to come. So this current pricing and EUR 500 million savings, would that be enough to get to 8%? Or do you need any more savings or productivity to get to 8%? So that's question number one. And then the second question I have is on an investment need, both R&D and investments also to downsize your 80 P&Ls to 7. Like do you see any need for any additional investments to address IT and other infrastructure? And also, how do you see the outlook for R&D investments for GP portfolio?

I think I got all of it. Those are three questions, right Akash. So the bridge one was in terms of do we -- based on our cost-out programs, based on the initiatives that we've undertaken because remember, a lot of those actions, we actually have invested in already, and the future cost savings will come, especially for example, you saw that there was 3,700 in head count already impacted, but some of those individuals that takes time for those cost savings to actually enter because it's time for -- when they actually leave the organization. So that, plus the productivity that we have already in the organization with respect to not only our cost out programs, but our ongoing productivity and the pricing assumptions that we have included absolutely is what we require to -- step by step, get to not only the fiscal year '23 because we're fiscal year '22 today. We've confirmed '23, and that informs the basis for '25. However, if conditions change and things happen, more headwinds, I think that's why it was important in terms of how we defend our margins that we work on aspects like price escalation, ensuring that those are embedded, hedging and so on, I mean, those are things that we continue to do. So it's not anything that we lose focus on. But right now, based on what we have included in terms of assumption, that forms the basis to ensure that we get to those target levels. Investment in R&D in terms of our downsizing of our P&Ls. I would say, and I think you also alluded to in terms of IT. Those types of investments are already embedded in what we're doing. I think going back to when we were created at Siemens Energy, we knew we had a transition period in place where we had to. It was essentially a lift and drop a lot of those processes and tools and so on from Siemens AG came into Siemens Energy. We're doing a lot now to ensure that we standardize or also make them fit-for-purpose within Siemens Energy within a certain time frame. So those types of investments are already made. I don't foresee the fact that we just purely went from 80 internal P&Ls to a smaller number that, that has an investment attached to it. So if that was a perception, no, that's not correct. And the outlook for R&D. Well, I think we said that we continue to remain at the EUR 1 billion level for the group. And it's not about how much we spend, but it's where we spend it. So I would say that we're going to continue to allocate that into those fields of action, those growth areas, but also pleased because you would be so pleased to answer that question. Please ask me note later when he does have his R&D presentation to further go into details. But from my perspective in terms of financial planning, we stay at that level of more or less EUR 1 billion for the group.

Perfect. Will?

Will Mackie from Kepler. I have two questions. Could you just help us by scoping the size of global functions and how that will be treated within the organizational structure in terms of the KPIs and what level of cost burden or whether it's even a revenue center in some way. And then secondly, when we look at the bridge between where we are today and your plus 8% target at the divisional level, the largest contributor to the step-up in profitability comes from the transformation of industry segment where you're moving from the losses towards those profit targets. I mean at this stage, could you at least guide us through some of the main levers which you expect to make that bridge and the pace with which that change in profitability could occur over the next 2 to 3 years?

For sure. So let me talk about the global functions. I think in terms of size, this was something that immediate -- well, as part of our Accelerate Impact Program, we wanted to tackle the -- the G&A -- part of our SG&A. And this was something that was, again, embedded in part of the -- one of our cost-out programs. So all -- and forgive me because I didn't mention that. I think it's a really important point. So thank you for bringing it up. When we looked at the cost savings programs, it wasn't just focused on the businesses. It was actually also at all of the support functions, the global support functions were included in those cost-out programs. And they are now like the rest, ensuring that we have double-digit reductions in each in every area. And that's -- it's globally impacting all functions. I think that's important that I haven't put that up. So it's the same level of cost percentages that we need to ensure, and it builds the foundation to come to that 8%. So those assumptions are built in. In terms of the bridge 8%, I mean, the main levers, and I think you mentioned TI. And again, yes, I was -- but remember, TI is about EUR 4 billion in revenue. Yes, it has the greatest, let's say, percentage to go from the minus 7, the 7% to 6% to 8%. But it's, again, all of those businesses have different needs. And some of them are already on transformation programs, even before they started and continue to progress, for example, in areas like compression or industrial steam, I mean these are areas that have been and have been rightsizing themselves and optimizing themselves already. And then you have, of course, the invest areas and that will obviously also with the market momentum, continue to get to those margins, but remain very clear. Each of those businesses have to contribute, right? And again, this is a midterm target. They're well on their way. I think we provided '21 figures, Will. You'll see that even in this year, you'll see that there is an increase in those businesses. and that, that will continue, of course, to contribute again to the fiscal year '25.

Next question comes from -- Sebastian, you have other questions and Ben after that.

Sebastian Kuenne, RBC. I have one question regarding cost cutting and another one regarding the P&L structure. You have on your Page 13 in the presentation, you mentioned you want to joint renegotiations of Gas and Power and SGRE with 50% price reductions per ton versus spot market. And you also say you want to bundle renegotiations on sea freight with a cut of 50% on rate increases. I would like to have some more color on this. It seems too good to be true. On the P&Ls, Gael had a similar question, but I just want to confirm. You reduced the number of P&Ls by 73. Do you still internally measure all the KPIs of these 73 smaller business units? And if not, how do you ensure accountability of the performance of management there?

Yes. Let me tackle the P&L one first because I think that is creating a bit of maybe additional clarity required. So the 80 P&Ls were what we have in our organization today. But like I said, it could be a very small P&L, but we actually then allocate costs all the way down from orders revenue in certain cases, all the way down even to headcount. So what we've now done is we said, those go away, we have the 7 full P&Ls for the organization, right, where there's only 1 full, full P&L that Siemens Energy. And then we have the others for the business areas, transformation of industries have the 4 independent managed business. Those are the only P&Ls that have allocations all the way down. I'll give you an example, Sebastian. In terms of a project that we're undertaking in a certain country. In the past, it would have had to be actually a P&L developed for it with an estimate on all of the costs, including local and global and also looking at SG&A and those types of costs and actually developing them, tracking -- not only developing them, tracking them and ensuring that we're allocating cost to various parts of the business. And what we said is we don't need that anymore. Not that way. It's not that it's -- and again, it's not diluting accountability, not at all. But what we're going to work on is statistical allocations and/or what we used to call in my previous company, [ burd and rates ], and you work with that versus all of the complexity in the administration that comes behind it. But we are not lessening the accountability within the organization. We will still have for manufacturing facilities, of course, operational KPIs to ensure that we have the proper cost base, that we have the proper capacity, et cetera, unloading and so on. But with respect to the full-blown P&Ls where we have allocations and monitoring and all of that, it's monitoring, the monitoring and the monitoring are now at the 7 for the organization. And that mirrors externally. So we've reduced the complexity, but not in terms of information. We still have all of the key financial indicators where necessary to ensure we run the operations appropriately. Exactly in certain areas than exactly that. Okay.

As it pertains to the first part of the question, that was actually in Christian's presentation, if you look at the slide, that was basically a cut compared to the increase in prices versus spot. So by the fact that we're able to bundle, we were actually able to limit the increase in the raw material cost increases or logistics cost increases that we would have suffered if we would have bought spot. Yes. So that was what we have achieved.

Already achieved.

Yes. So that's not going forward. That was what we have achieved. Right. Next question, Ben, I promise it to you.

So I've got three quick ones. The transmission margin that change, you mentioned the difficulties around COVID, and I can understand that in terms of it being people-intensive. But is any part of that 2-point margin drop, what's going on with pricing? Because in the past, that has been a variable. Second thing in really simple terms because I like things simple. The gas -- what went into -- we've sort of muted industrial applications. It's gone. It's now industry transformation. What went into gas services exactly? What is left in IA as it was and why? What was the actual rationale for doing this? What is the key objective. The final comment is the compression margins. A lot of the transparency, I am shocked by the outcome. So EUR 100 million of losses in a business that when Dresser was acquired with a low-teens business, it's clearly really underperformed. I'm sure we'll get divisional data, but is this an integration problem? Is it an oil price problem? If you had to just simplify what has changed since we last saw these numbers 5 years ago, what is it?

Yes. I think if you look at the last two questions, I think it's better to post them in the afternoon. So because we've got Karim then speaking and talking about. It makes it easy.

For sure. But I think -- I mean, maybe if I just add a bit of color and please do pose all of those difficult questions to Karim. Well, no, I would say with respect to the various business areas, Ben, you're right. What we've tried to do is we've put the equipment and the services together so that makes sense. It kind of streamlines it. And that was really the rationale. With respect to new king, as you said, IA, I think it was really ensuring that the pieces of that industrial applications is either in TI appropriately with the different needs that it's there. And of course, as you said, with transparency, and this is what I mentioned last night with transparency, you'll see where we're boding well, where we're progressing, and you're also going to see where we have progressed, but we're not there yet. But I think that it's important for you to keep in mind our midterm target, right. And that we're going to ensure that those actions are in place to address that. And to be fair to the colleagues because I know that perhaps this is something that has not been visible, the amount of work that has gone into already turning around some of this with respect to the pricing environment, the market, you know this, Ben. It was a real downturn excess capacity and so on. I think some of the rightsizing that we've done, whether it was headcount or even locations was specifically to those businesses. So a lot has been done. But are we there yet? No. With respect to transmission, the pricing, I think you said the margin and the pricing aspect. So 3 things are included in there. It is supply chain headwinds. So from that perspective, you're right, in the short-cycle business, this used to be my past, it was a little harder immediately to pass on price increases. So that's something that we're working on actively. Then, of course, there was the cost increase as such. And COVID, I think transmission, as you know, their facilities based on the closures in China, they were impacted by that. We indicated that in Q2. So that's also embedded in that. And of course, don't forget, we have some of the Russia impact and that included -- it is included in the transmission business, but again, and Tim will bring you through this exciting business later because it is exciting with a very large order book. I think the market momentum there in terms of the infrastructure spend that's coming is really -- we are very well suited to capitalize on that. But you're absolutely right. Some of that is really embedded in the short-cycle business and has impacted in the half year results, the transmission margin.

Thank you. Gael?

Two questions, please. The first one is on the savings cost aspect of the business. So could you just give us an update perhaps on the restructuring cost that you expect to book over 2020 to 2025, maybe a bit of an update on the headcount reduction as well. And do you actually expect some additional savings coming from the simplification of the structure you've talked about earlier and the reduction in the management layers in particular. And then the second question is on the backlog for the business. What is the share of the backlog that is attributable to the legacy PG projects, and that is yet to be executed this year and next year.

Thanks, Gael, for the questions, especially the second one. So in terms of the savings and the costs, I think you mentioned two things. One is the restructuring costs; and two was the headcount -- the progress that we've made in headcount. Very good questions. I think if you recall, last year, the lion's share, so what we guided on in terms of restructuring costs were mid to high triple digit structuring costs. And that was meant to be spent before 2023, right? And what we said is the lion's share of those costs have been taken into consideration already last year and two reasons. Of course, we launched all of the various cost savings, the additional program as well. We also, as you know, announced at the time, so to your second point regarding headcount, we announced the reduction of headcount, just shy of 8,000 of which 3,700 headcount have been affected already from that target as of the first half of fiscal year '22 since 2020. So hopefully, that addresses that question. The backlog, the share. I know this is a question that we get often. So again, going back to last year because this was obviously part of the reason why our margin deteriorated last year, and I said, look, we're really having a larger portion of those legacy orders being converted into revenue in the last 6 months of last year. And at that point in time, I said we have between 12 and 18 months left for those legacy projects. And now I can clearly say that is a very small percentage, he wants an actual percentage, but it's a very small percentage of the order backlog. And Gael, what I can confirm is that, that will be again almost all executed by the end of this fiscal year.

Good. Next question, Nick.

Two questions, please. Firstly, on working capital and then on M&A. So on working capital, on your Slide 9, you showed that strong free cash flow has partly benefited from this negative movement of net contract assets and liabilities. Our understanding is that's been a beneficiary of large order intake at Gamesa where you get advanced payments for those contracts. Can you confirm that in the event of a slowdown in order intake at Gamesa, you'd expect a reversal of that position and you'd expect a commensurate cash outflow from that. That's my first question.

Okay. No, I will take that question. And maybe just to be very clear. So on Slide 9, and all of the slides actually, other than the Q2 slide where I showed the Siemens Energy liquidity and cash bridge, this is for GP only. Okay. So with respect to the large order intake in SGRE, I think this is something certainly you can ask Jochen later specifically to SGRE. But let me answer that question with respect to GP. You're absolutely correct. And that's why I was very open and forthcoming to say, hey, we've reduced our operating net working capital by a lot of great measures, but also because, of course, with the buildup of our order book, we have payment milestones, prepayments, advances that are associated with that. And of course, that is then in-house for us to then contribute and make sure that we execute on that order accordingly. And what we've also said is, yes, this is a high level. And that's why we want to make sure that we maintain ourselves as a net cash company because as I also said at Q2, within the next 6 months of this fiscal year, the balance sheet as we execute will act a little bit against us. So with that EUR 900 million that we have in cash as of the half year, we still stick to. Now this is group, by the way. So now I'm jumping a little bit, but this is the guidance as at group level. We still maintain that we will have mid-triple-digit cash for this year, and we will meet our guidance accordingly. But you're absolutely right. I mean this is why we have to monitor and ensure that we look at our balance sheet and remain in a net cash company ultimately because those contract assets and contract liabilities are a very large and important part of our balance sheet because that's essentially the indicator of us executing through our backlog.

Okay. So then turning to M&A and capital allocation. I guess given the cash offer, given the fact that Gamesa's working capital is relevant to your group position, if you think about doing more M&A such as in the electrolyzer business doing more bolt-on, do you think it's still appropriate to be paying a dividend? Would you rather save that cash to be investing in M&A and allow you to keep the strong balance sheet? Maybe just talk through your thoughts as to how you manage that trade-off.

No, it's a great question because I think it goes back to what we tried or what we're trying to achieve as a company from the onset. And it was always essentially that 1 Slide that it was about stabilizing ourselves, making sure we go through the transformation. So really allocating resource, if you'd like, to restructuring and taking the cost out, stabilizing ourselves. Now of course, in light of the transaction, of course, we're doing that accordingly. But even going forward, with respect to capital location from an M&A perspective, it would still have to ensure that it meets the hurdle rates that we have to maintain our solid investment-grade rating. So that's number one. Number two is, we've always said in that order, by the way, that we have to restructure, we have to make sure. And then, of course, we want to be a dividend-paying company. And so therefore, we'll always take that into consideration with how we make decisions with respect to M&A going forward.

And that's a perfect segue into the break. So we have a break of about an hour in 10 minutes. So if you're back at 12:40. There is, of course, food, which is, of course, important, but also we have a couple of pavilions out there. So you do take the opportunity to ask as many questions as you like. You're really trying to showcase our businesses and try to showcase our products. And there are hopefully a couple of cool exhibits out there. All of them are cool. So please do take the opportunity, and then I'll see you back at 12:40 in the afternoon. As I mentioned earlier, we're going to go through the business areas, with Karim, it's Tim, and then Jochen will be talking about SGRE. And then after that, it's going to be Vinod on innovation and detail on sustainability. But first, enjoy the break, and also please do enjoy the pavilions as like as well.

Thank you.

Thanks also to all of you on the web. [Break]

Welcome back, everybody, in the room. I think we're also live on the webcast. Also welcome back to everybody on the webcast. We're now going to go into the afternoon sessions with the new business areas presented. They are represented by Karim Amin and Tim Holt. As I said earlier, Jochen Eickholt will be talking about SGRE. And the first one to present is Karim Amin, who will talk about the Gas Services business. Karim?

All right. So is it working? Mic? No? Yes, it's working. All right. Very good afternoon from my side. The first session immediately after lunch. And I think we have also had the chance to interact a little bit in the booth, which I found really very good starting point for me right now. I would like to start by taking you into the Gas Services journey. But before we start into the gas service, I think you have seen from Christian and Maria a lot with regards to how did we turn around the business since the start or the beginning of Siemens Energy in 2020 until the first half of fiscal year '22, which just ended in March. And let me really put it in context of the business that we have today, which is Generation and Industrial Applications, and there has been, I think, some questions earlier, what exactly went from Generation and Industrial Applications into Gas Services. But before I answer this, I would just like to put you quickly in context of how did the Generation and Industrial Applications business perform from fiscal year '20 until first half of fiscal year '22. And if you just reconcile all the numbers that Christian and Maria showed us earlier and look at Industrial Applications business and Generation business as it is today, big improvement in our market share, but this is only a sign of how good our portfolio is, of how well this portfolio is accepted by the market because we sold around 170 units in this period of time. And the most important thing behind being able to sell these units is that we have leading portfolio products. So our products in the introduction of our HL that you have also seen some of you yesterday in the factory, but I'll talk about it more today, is really leading in the market in terms of performance, power output efficiency, also in terms of competitiveness. We also introduced new F-class. We have a leading SGT-800 in the 50-megawatt range. So this is a very important, let's say, element behind the market share. Backlog for this division Generation and Industrial Applications moved from EUR 40 billion to EUR 45 billion. So we added EUR 5 billion in this 2.5 years, which is really impressive. But the most impressive part of it is that 75% of this backlog that has been added has been added in service contracts. And service contracts are long-term contracts, of course, but there are also contracts that are well adjusted for escalations with indices and so on. Margin quality has been maintained. And I think Maria also showed that the larger content of Siemens Energy. But in this regard, we have maintained our margin quality, so this did not deteriorate. And we have a very important point that we look at, which is the Net Promoter Score, how our customers score us. If we get, on a scale from 1 to 10, a 9 or a 10 in the score, then it counts. So 50% and more of our customers gave us a score of either 9 or 10. And this is a very important element for us that tells us how well we are doing with regards to the services we provide. Productivity has improved in these 2 businesses year-on-year, around 5% plus. We reduced more than 3,000 headcounts, rightsizing the business. We consolidated or closed 50 sites. I'm talking here about manufacturing sites, repair facilities, workshops, et cetera, and we rightsized our manufacturing footprint or the capacity, technical and manpower manufacturing hours capacity in the existing footprint that we have right now by 20%. This really helps us also in the journey of cost out and margin improvement that we touched upon, and we will talk more about it right now. This all resulted in an adjusted EBITDA before special items that moved from 2%, when we started the journey in 2020, to 6% as we stand end of March 2022, all on the strong background of successful cost out, better management of NCC, project execution excellence and one very important element is the selectivity of the projects that we go behind. So this is also an element that creates, I would say, a future resilience of our backlog of our numbers. So this is how the picture is looking like. And now let me take you through the Gas Services as it will start from 1st of October. I think the first thing I want to say is this is the first time that we are providing this great deal of transparency, opening the curtains and really having a very good and close look at the business of gas turbines. Very simple, very short. And I really have the pleasure to take you today through this fascinating business of gas turbines that has played a key and critical role in the past to balance the needs of the world when it comes to sustainability, security of supply, efficiency, of course, also competitive products. And I firmly believe that it will continue to play a key role also in the future when we look at the elements of balancing renewables as well as electrification of many sectors besides the power generation. The Gas Services is having all gas turbines under one roof. So on one hand side, you have all the large gas turbines and steam turbines and generators. So this comes from generation of today. This is the first pillar you see in front of you, ranges from 100 megawatts to 600 megawatts. Industrial gas turbines irrelevant of what it drives, could drive a generator, could drive a compressor, is in there as well as the service business connected to these gas turbines. This is all in one business. If you look at, when we construct this business, our market position, we are #1 in terms of the number of units that we are selling when you look at fiscal year '21 numbers for all gas turbines above 10-megawatt. 10-megawatt is a very natural starting point because below 10-megawatt, it's pretty much the market of engines and above 10-megawatt is more the market of gas turbines, so number one. And number two, when it comes to large gas turbines above 100-megawatt. EUR 9 billion of revenue. 65% of this revenue is on service business, 35% comes from our new units business. Around 25,000 employees. The margin is around 7% when you really look at these businesses. So what is not in there, what went to transformation of industry, and that was a question earlier, is the industrial steam business. This one is the services of the industrial steam went there. Compression is in the transformation of industry. Electrification, automation, digitalization is also in the transformation of industry. So this is pure gas turbine plus large steam and generators. And we have a backlog. We start with a backlog of EUR 37 billion. Now let me first give you a bit of what is in this slides or deck that I want to share with you today. The mission of this business area is to really monetize on the existing fleet. We have a large fleet that exists out there. We want to add units to this fleet when there is a chance to add. And we want to extend the life and maximize the service potential of the units, which are already running. And there are opportunities around decarbonization, around upgrades, around better efficiency. So the messages first that puts things in context here is there is a very good resilient service business, and you've seen the percentage of this business in the backlog. The fleet is growing, and this adds more units to the service business. We have decarbonization opportunities on the existing fleet. If you look at the gas turbines market outlook, of course, there is a strong drive towards decarbonization and renewables, but the outlook of the gas market has improved significantly when you look at it in 2020 versus 2021 and even beyond. This is telling us that for the next decade, there is a strong demand when it comes to also new units for gas market, and I will show you this in more details. The topic with regards to the portfolio competitiveness, and this is a very important topic. It also connects to competitiveness. It connects to R&D. The topic we talked about R&D. It connects to the quality of the margin that we could get out of our contracts has significantly improved when you compare our position in 2019, 2020 to where we are today. We also have this portfolio equipped with what it needs to run into the future. Siemens Energy is one of the leading companies with H2 capabilities for co-firing compared to its peers. And of course, we are driving this business towards a 10% to 12% profit by 2025. So this is the story of Gas Services. And let's just spend a minute or 2 on the market. You see in front of you 2 views. The blue is how IHS looked at this market in 2020. And then again, the purple is how this market has been looked at and assessed by 2021. And we look at IHS. We look at our own project pipeline. We look at other marketing models. Message is the market has seen an upward tick, an average of 44-gigawatt per annum was the view before. Today, the view is more than 57-gigawatt per annum. Where is this market dynamics happening? Where this is coming from? There is a very strong evident growth in distributed generation. So not the big power plants where you have heavy CapEx, but the smaller sizes, 200, 300-megawatt unit sizes in the range of 40, 50 mega where CapEx is more affordable. This is growing. We've seen an increased demand on electric heat pumps, district heating, and in particular, in our business of Gas Services in district heating. Electrification of heat is a big trend. But also when you look at the central generation, the central generation has seen also an improvement in its market. And I give you a really very few examples. The acceleration of the coal-to-gas shift that happens in Asia and U.S. gives us a push. The capacity markets that is very clearly now needed in Europe to back up renewables, whether it's in the U.K. or Italy or Germany, or Belgium, these are all areas where we have very active bids running right now and contracts being executed is much more pronounced today than it used to be 3, 4 years ago. And I think it's also very clear to us that when there is no capacity. If you look at the situation in U.K. back last summer when there was not enough wind coming from the offshore or if you look at the situation in China or Brazil, when there was not enough rain coming for the hydro power, there was really a problem and the prices shot up big time. So it is very important to balance the grid to have these capacities. And of course, we are looking at a stable service business and an outlook also of our utilization is very clear. When I translate this into number of units, right? So from macro to what does it mean to us, this is the picture in front of you. In fiscal year '20, we had around 200 units in the market. In fiscal year '21, this jumped to roughly 230. We are looking at the first half of fiscal year '22 at similarly the same amount. So far, we sold 50 units out of 150 already in the first 6 months. And this is more than the #2 and #3 combined. And this is because the portfolio has been improved, improved in its power output, improved in its cost position, improved in its performance. And if you look to the right, these are what we call core revenue carriers. These are the most important segments in the large gas market. And these are our products. So the HL in fiscal year '20 did not exist. We barely sold 2 units. It was the market introduction. In fiscal year '21, we sold 5. In the first 6 months now we sold 6 -- 3, sorry. And I believe that by the end of this year, it will be 6 or even more. If you look at the F-class, also, we had a lagging portfolio in fiscal year '19, '20. '21, we sold 12. And also in fiscal year '22, we sold 6 so far. This number is also going to increase. And the SGT-800 is by far the market leader in this range. This position allows us to really add units to the market and increase our service business. Our strategy is really around 4 points. We want to have maximum benefit out of the growth in the distributed. We want to get our service business much more in our focus and get more opportunities out of it, specifically when it comes to the large fleet that we have that needs upgrades and decarbonization. The decarbonization requirement, in general, provides us an opportunity that we can capitalize on. And of course, the operational excellence, which got us from the 2% to the 6%, will get us, if we continue on this track, to the 10% to 12% with the right cash conversion ratio. This is our service business. And if you look at that, you see there is around 7,800 units, almost 1,800 in large gas, and 85% of this is covered by our penetration on service. So we serve 85% of our units. We have added 160 LTPs in the last 3 years new. We have added or we plan to add 400 units until '25 because of the portfolio enhancement that I showed you, and around 300 units will retire. So net, there is 100 units more into the fleet. And of course, the newer units, they have better service numbers, they have better quality, and they also run longer. 1/3 of our fleet today in LTP is 5 years old. So these investments will run at least 15 more years. And of course, we have a huge potential in the small gas turbines that is also growing at a faster pace in terms of fleet service. Two clear opportunities for us. We want to really capitalize on 0 or low emissions power generation. And one clear lever for us here is our high-efficiency units is our possibility to burn hydrogen. Today, we have capability to burn in some of our fleet, 75%. In our HL, we are able to burn 50%. And we have a road map to get to 100% when the hydrogen infrastructure and quantity is present. I mean the technology from our side is not the problem. The problem is how fast this infrastructure will be ready and how much hydrogen can be generated at economical prices. One example there is Keadby in the U.K., where we are having the highest -- the largest and the highest efficient combined cycle power plant in Europe right now running in Keadby 2. And we are right now on the next project, Keadby 3, where we'll repeat exactly the same and add next to it a carbon capture facility. We also have units on the SGT-800 running on 100% green hydrogen in pilot phase. But I think another important growth area for us is the decarbonization of heat, where many district heat facilities right now are either running on nonefficient units or even on coal, especially in Eastern Europe a lot, also in Asia a lot. And Siemens has a very good position when it comes to heat pumps. We have more than 50 heat pumps out there. References in the market, just across the street, there's Vattenfall where, we are also having the first example here, where we are saving more than 6,500 tons of CO2, utilizing our heat pumps to get the waste heat as a heat source and then push this for district heating. We also have other example in Mannheim. And this is a growing business. I see CAGRs of more than 65% of this district heating opportunities until 2025. I want to wrap by saying we want to monetize on this installed base. This is a resilient service base. We are adding more units to it every year, roughly 100 units per year, top-notch, state-of-the-art, high-efficiency, equipped with the fuels -- sustainable fuels capability of the future. And this strong backlog was good margin quality. And this recurring service revenues will give Siemens Energy and will be the mission of Gas Services to provide say the runway for the energy transition to happen also in connection with the other business areas that we'll cover now. Profitability drivers for us is definitely to continue on our productivity. We actually have a plan that is delivering. What Maria showed us is only half of the way. The journey will continue. We will continue to be selective on our projects what we take and what we don't take. I think our new operating model that Christian showed us will give us the speed, the lean organization, and cash, of course, is something that we have 100% of our focus because this is what drives, let's say, the rest of the decisions in the company when it comes to R&D allocation and other elements. I want to comment finally on the stable and modest decline. Stable is the service, and we see this stable. We have triangulated this several ways. And the modest decline is our selectivity of turnkey. We are not doing the same amount of turnkey like we used to do in the past. So we are getting some of these projects outside of our backlog. I think this is what you refer to as '23, end of '23. And the new projects that we are getting does not have this big turnkey ticket sizes, hence, you would see a modest decline there. I want to finish now by really reiterating again, our priorities. Operational excellence and cost-out got us from nowhere to a very strong business in 6% range. This will continue with us to take us to the 10% to 12%. Service performance, 100% is in our focus. Every decision we do related to R&D, related to investment into the market, has the service focus in the center of it. Growth in distributed, decarbonization of power and heat is real opportunities for the Gas Services business area. And of course, the fleet additions I talked about, the 400 units that are getting there by '25 will make our fleet younger and even bigger. Thank you so much for the attention and for the opportunity. I will hand over to Tim now to talk about grid technologies, and then we will have the chance to go into questions and answers after that. Thank you.

Thank you. So good afternoon, and I thought since the audience here was able to see some of the products that we have in Grid Technologies to start with a small movie to really give you a glimpse what Grid Technologies is about. So can you please play the movie? [Presentation]

So quite impressive. And this is actually my fourth Capital Market Day for Siemens and Siemens Energy. And some of you know me getting really excited about service, gas turbine service. But I can tell you, I'm equally excited, really equally excited about Grid Technologies. And why am I excited? This is really a market that has a lot of potential. Christian talked in the morning about the growth in demand on the electricity side. We talked about the renewables, I think Jochen will go into it. But I think what you all have to remember is you always have to bring the electron from A to B. So all these investments will trigger investments on the Grid Technologies side. I will talk a bit about the potential we have in HVDC and grid access that's really driven by offshore wind and show you how much potential we have with each gigawatt of wind we add, but so the potential having a portfolio that's sustainable. And you see it on the right-hand side, our Blue portfolio, the SF6-free GIS. And this is also an area where we as Siemens Energy Grid Technologies will benefit. And all of that will see accelerated investment that we see from governments, from customers. We're very confident and committed to get to the 8% to 10% margin range in the midterm, as Maria had shown. So I talked a bit about what do we do? We do large projects, HVDC. We do AC in order to bring the electricity efficient from A to B. We do switch gears. We do products, the transformers that sit on wind turbines, that sit in power plants, that sit in data centers. So really the potential to have the products across the whole value chain. Combine that with grid stabilization and storage, and I'll get into that in a minute, and also our drive to go into automation because that's really the next frontier on the grid to really do more automation to less metal, steel, copper and drive that business. We are in a good market position. On the products, if we look across the globe, we have a good solid #2 position. And on the projects, on the solutions, we're clear #1. And that's, by the way, where the growth also sits in the near term. You see the breakdown, EUR 5.8 billion in '28 revenue. Large majority in products. Solutions about 37%, and I think I talked last Capital Market Day about growing the service business. That's clearly an area that's underdeveloped, and you will also see that in our 4 strategic drivers to really enhance and drive the service. 6.5% last year, Maria showed you this year. We're clearly having some headwinds in terms of supply chain. And if you had been in this factory 3 months ago, you would have seen a Chinese truck parked there unloading products from our factories out of China to be used here in production. That is the shortage in containers. That's the shortage in logistics to get material from A to B. And if you have a network of feeder plants of a global supply chain, that's what is really at the moment keeping us up at night and where the teams are really driving the operational excellence. If we do a bit of a deep dive in the key KPIs that we have. I want to walk you through it, orders, order intake, you see the really nice increase from '20 to '21. If you see first half of '22, we're at EUR 3.9 billion. So the trend is continuing. And we see this really double-digit growth right now in the business, primarily driven by the project. At the same time, we also see it on the product side, a lot of buying from the U.S., from other parts of the world. And you see the other one is really adding to the order backlog. Maria showed you earlier the order backlog new unit and service. If you take that new unit piece on the GP side, over 50%, over 50% in the order backlog comes from transmission already. And our book-to-bill is well above 1. I talked a bit about the profitability, what we've seen the headwinds, fundamentally underlying we have a very good year. Factory utilization is there. Order books are there. It's just the supply chain and the Ukraine war that's at the moment not helping us. I'll give you one example we have. On these transformers, we use a special paper to wrap the insulation. That supplier moved production last year to Ukraine from Switzerland. The factory is outside Kyiv, got hit by a missile. All of a sudden, we have to find other sources, scramble. But as you can imagine, the production is not running as smoothly as it could. But it's all externally cost. It's not internally. It's really about managing the supply chain. The teams are really focused on it, working on it. And as soon as we get back to a more normal, as Maria had shown, the fundamentals are really strong. Also cash conversion. We talked about it. One of you had questions earlier. 1.7 just over the 2 years, really driven by the excellent order intake on HVDC, but we also see now the shift to the Blue portfolio. So how do we capture this growth and also the profitability increase? There's 4 levers that we are concentrating on. One is growing the solution business. I'm going to show you how the HVDC market, how the solution market is developing in a second. But traditionally, we were doing 3 to 4 projects per year, executing. We need to double that capacity within the business to really capture the full market potential. The other one is really looking at profitability. And I'm not talking about the solutions. I'm talking about the product. We've got 43 factories with a whole range of products, not all are in markets that are growing, some are also tied to what Karim just presented. We really have to look that we hit the markets and the products that are showing the growth and also the profitability. Second one, 2 focus areas on the product portfolio. I think one is focusing on the product pools, as I just talked about. Renewables on the transformer side, great potential. Normal power plants, it's similar to what Karim showed, a stable, slightly declining market, and we really have to concentrate on those products where technology plays and where we see the growth rates. And then the decarbonized portfolio. I showed you the BlueVault on the site. But also there, we see really potential to drive. Then the 2 other areas where we also put a lot of focus on. One is how do we get into the grid automation and digital side. And we're not going to become a software company, but we're bringing a lot to the table in terms of customer access, knowing how the grid operates. This is also the question on M&A and partnerships, really the focus on partnerships. And the last one on service, really focusing, if you look at North America, the investments in the next 15 years on the aging infrastructure that you have on the U.S. grid is the same amount as was spent in the last 150 years, just to give you a perspective and the potential. So in terms of market. In the middle, and I think you have seen it also from Christian, this is our addressable market, 5% CAGR, nice growth. And you will ask, okay, how sustainable is it? If you go to the left side, I think we talked about the aging infrastructure, markets like the U.S. You look at how do we connect the offshore, the renewable generation that's being built, how do I get the power from offshore into the load centers. And at the same time, how do I keep the grid resilient and stable. That's another big piece that's driving also our business. On the right-hand side, you see the support. Those are the government support you see. EU, U.S., U.K., everybody committed billions and billions in terms of grid infrastructure build-out. Now you can ask yourselves, is that money really going to come? Politicians announced it, how does that translate? Let me run you through Germany and take the customer view. So on this slide, you just see the German market until 2030. EUR 90 billion of potential in terms of grid market size. And on the bottom, you see 3 of the 4 TSOs and their announcement in terms of what are they going to spend in terms of infrastructure. You see at TenneT EUR 4 billion to EUR 5 billion per year. They spent EUR 2 billion 2 years ago. And when you talk to their CFO, he has a target. The CFO has a target to spend EUR 5 billion annually. Maria has a savings target, I believe, but it's EUR 5 billion. So if you take that market, EUR 90 billion, deduct the parts, the scope that we don't address, overhead lines, cables for the offshore parks and so on, it's still a EUR 35 billion addressable market for Grid Technologies until 2030, and that's just Germany alone. So it's a huge potential. We're really well positioned. And you've seen it all since some of the recent announcements, the wins we got. There are some big tenders out there with TenneT, with Amprion, with EnBW that you will see over the next 12 to 60 months being awarded. And I'm very confident that we're in a very, very good position there in terms of technology, execution capability, but also customer tendency because of the work we did over the last years with those customers. A lot of talk about HVDC. So why are we so excited about it? The left side, you can see the project announcements, '22, '26, so how many projects are going to be announced that they're awarded. So EUR 6 billion in '22, EUR 9 billion in '26, and I'm not sure that number is not going to grow based on all the activity we have seen over the last months and also weeks driven by the Ukraine war. And you can clearly see also a shift here. Very much European focused. That's the renewable build-out, the energy transition. Rest of the world, it's kind of spread around the world. And by the way, the numbers without China. But we also see now the first -- well, we have the first discussions in the U.S. So the whole offshore build-out in the U.S., the grid connections, HVDC across are all growing. And we keep a project list that's growing by the day, and there's about 70 projects in various stages in that list that are moving through the different stage of realization. What it also does, and I think that's also very important. In the past, there were between 2 to 6 projects awarded annually with 3 -- 2 to 3 players in the market that bid for it. You basically bid for every project, independent of scope, Ts and Cs and so on. With the growth in project announcements, it also enables us to be selective and not to bid every project in order to fill capacity. I think that's a very important part because I think the question will come, how confident are you that you can execute the project. The next big wave of projects, if you look at HVDC, currently, it's direct connection. You have an offshore wind farm, you bring it to shore. You have a shore station in the north, the converter station, you bring it to the south. It's really going to what we call DC grids. It's interconnecting between different countries and having different flows of the power. And why is that important? If you look at when you have a wind peak in the U.K., maximum wind speeds, you can do maximum production on wind. That went peak is going to be seen in Germany about 15 hours later. So if you go to a fully renewable world, you can use that peak access power that you have in the U.K., bring over to Europe when that peak comes to Europe, you bring that power back to the U.K. So that's really the driver of the DC grids. I will say there's currently probably only 2 companies who have the technology and the expertise to work on this, and we're clearly one of them. And also this is a discussion with the -- with our partners. The other big area that we see coming is electrification of industries. Christian talked about it. Karim is going to talk about it. It's the electrification of the oil and gas industry. Having these HVDC connections out to the platforms and have the compression run on the platforms without gas turbines but random motors and have the big plug out in the sea that can power the different platforms. I talked a bit about -- already about the offshore wind. And what I want to do here is really break it down and show the potential. It's not just HVDC. If you have 1 gigawatt of offshore wind that's going to get announced. I took 10-megawatt turbine size. There's 100 transformers and switch gears that sit in each turbine. And maybe some of you saw the transformer out on the truck out there. These are the ones that go into the turbines. Those are the ones that are specifically designed for those turbines. This is not a commodity. This is an engineered product that we develop with the wind OEMs. And we do that for Siemens Gamesa, we do that for Nordex, we do that for Vestas. So we're doing it for the major players in the industry. We talked about the platforms and then there's a service piece. But at the end, each gigawatt of offshore wind announced sums up to EUR 300 million to EUR 400 million per gigawatt in market potential for Grid Technologies. Storage, also a big topic and we had the discussion also outside. It's a market that shouldn't be limited to just the cells in the battery, but what's around it. At the end, it's about utilizing an asset, a solar park, a turbine over a longer time. And yes, you need expertise on battery modules, but you also need system integration, you need EPC capabilities and you need digital services. And we already have some success stories here. One is we have something that's called the BlueVault technology that we use in offshore. So those are batteries in a highly secure, highly protected environment. It's small, it's a growing market, but it's technology we can grow from. The other one, and that's also sometimes forgotten is storage is also very small storage in terms of duration. It's more about grid stabilization. How do you make sure the grid is stable? And there, we have also what's called ARESS, the rotating energy stabilizer. And I think on the picture, it could be Jochen because when he was in Gen, there's a generator attached to it. It's also a business that helps us to get into the storage market. So I hope I was able to bring across that there's multiple revenue drivers in Grid Technologies that are really well positioned. It all depends on operational and project excellence. It depends on how do we manage the profit pools in the portfolio and how do we grow the storage and the automation piece. And you see that mid-single-digit revenue growth commitment and also the 8% to 10%. And these really also are my priorities. They are the priorities of the Grid Technologies team. Maximize, really maximize the growing HVDC and grid access market. That's near term, that's midterm, that's long term. It's really how do we concentrate the portfolio, really invest in the technology for decarbonization and then look at the high-growth markets, digital grid storage through partnerships and expand there. Thank you so much. And with that, I give it back to Karim. Thank you.

It's time on the Transformation of Industries. We'll talk now about the Transformation of Industries, and I want to connect it a little bit with what we talked about in the Gas Services because the business of Transformation of Industries is put together, configured based on what we believe are the key portfolio elements that are needed for the industry and how can we connect the dots and offer something that is unique and helps this decarbonization story. Let me start here by just painting a picture together with you. If we look at this CO2 emissions, per annum roughly depending on what we read, there is 40-plus gigaton of CO2 goes every year. And of course, 1/3 of that is the power generation, comes from the generation side. And of course, Jochen will talk a lot about how the renewable energy will solve this 1/3. I explained also a little bit to you how we do with regards to our fleet, existing fleet. But the majority of it, if you put this power generation aside, comes actually from industry and transportation. Industry is responsible for roughly 25% of the CO2 emission. And it also consumes around 40% of the electricity that we generate goes into industry, which adds another indirect CO2 emission. And transportation is also another 20% or something. So industry and transportation by far, combined, are in the focus and in the center of the decarbonization of energy transition. And transportation is also another 20% or something, so industry and transportation by far combined are in the focus and in the center of the decarbonization of energy transition. So it's super important that as much as we are looking at renewable energy and 0 or low CO2 emission strategy that Christian talked about, it's also super important to look at how do we decarbonize the industry, hence, the transformation of industry business area. If you look into the center, we have compression. Many industries, they need compression, compress air, they compress gas, they need process heat and steam. So our industrials steam and generators sits in the middle. There is an element of hydrogen, and with the decarbonization, this hydrogen needs to be green. So the electrolyzer business that we talked about earlier, and we also saw yesterday and we saw outside. And then there is the electrification, automation, digitalization of the industrial processes. So this is the 4 portfolio elements that we look at. And we say, if we manage to connect the dots, if we manage to get the optimization out of a system and not out of an individual product or application then we are making a real step towards decarbonization of industry. And I will show you some examples, and you can connect this to what has been said earlier and what will be said later. Of course, we always have to put in mind that there is a need for renewable energy. So the Siemens Gamesa renewable energy in the back is -- comes to the picture that I wanted to draw with you. And of course, there needs to be elements that comes from gas services like the heat. We talked about the heat pumps or like the service deployment that we have, as well as, of course, the grid technologies that Tim just talked about. If you take all that and you look at what the industry is trying to achieve, it's either something around production of green steel or other metals, aluminum with less CO2 footprint, sustainable fuels, all the discussions around eMethanol and e-kerosene and e-gasoline and so on. Of course, sustainable industries are on pulp and paper and fertilizer business. A lot will benefit from this transformation of industry value proposition that this picture is trying to paint for you. So what are we trying to do with the transformation of industry? We are trying to really lead and provide a one-stop shop for the energy transition in the industrial verticals by understanding what are the drivers of these industrial verticals and trying to connect how can we construct an offer with these portfolio elements I showed you in the first slide. This market has significant growth. There is 9 or even more CAGR until 2030. We really believe we are significantly in this heart of this transition because we have a very strong industrial customer base. We have more than 5,000 industrial customers. In all the businesses that we are dealing in right now, we have a global network. We have all these technologies or portfolio elements I showed you. And the most important thing is we have the capabilities of an integrated technology company. We have the capability to deliver and execute large projects. We have the capability to be in each and every market when it comes to business development and constructing a proposal or a bit or localization or service or supply chain. Our target is to have mid-single-digit revenue growth by fiscal year '25, really centered around the potential coming from H2, from hydrogen, green hydrogen and from the electrification, automation and digitalization. And we are looking at the 6% to 8% by 2025. I think when Maria showed you therein, you were a little bit looking at some business and say, the 7% negative, what is this, but we will show you now how we are tackling these elements so that together, we go to the 6% to 8%. We look at these 4 elements, 4 portfolio elements in 2 dimensions. There is business that is around growth. And this is the, what we call sustainable energy systems. You need to connect sustainable energy systems in your mind with electrolyzer business, hydrogen business. And the EAD, these are businesses that will grow and we will invest in them to grow. And there are 2 other businesses that needs to be stabilized and turned around. Very similar picture like gas services. This is a topic around operational excellence, cost out, footprint adjustment, rightsizing, as well as managing selectivity and LCCs. This is the industrial steam business and generators, and this is the compression business. So 2 dimensions here that we are looking at. We have a good market position. If you look at the businesses for turnaround, we are clearly #1 in industrial steam, we are clearly #2 in compression. And in electrification, automation, digitalization, we also have a very strong position in the markets that we deal in, in the verticals that we work in. And I think in the electrolyzer, we have great potential because we are pioneers, and you will see some of the examples what we are doing in a minute. Market is growing, as I said, you see all the investments. We read about it every day. Also countries, and I think if you connect this also with the geopolitical discussion yesterday from Zigma Gabriel, you see countries are really trying to put themselves in a new dimension. Gulf countries, for example, really see that the era of oil and gas needs to help them to propel themselves into being a real player in green hydrogen and sustainable fuels. China is investing. Europe is leading the decarbonization. You see the CAGRs. The blue part is the growing business, electrolyzer business, EAD. And the purple part is the business that we need to really turn around when it comes to compression and when it comes to industrial steam and gas. Let's have a look at where the opportunities are. If I look at it today with our team, we see right now more than 900 opportunities at various stages of development. Around 25 gigawatt is on our pipeline. If I just click 1 more, you start to see some colors around that. These are real projects that we work on. I will pick a few of them to go into more details so that we see also the application. We see the scope of Siemens Energy, what Siemens Energy could deliver. And we could also imagine what will happen when this scales up, right? And then how the integrated energy company could really play a role here when the scale up comes because pilot is something and then when you want to manage it on a bigger scale, of course, it's a different story. Hydrogen for industry, the green, a number of projects in Wunsiedel in Germany, with BASF in Ludwigshafen. We'll talk about that. If you look at eMethanol coming, we see a lot of these activities happening, e-ammonia, e-fuel, Haru Oni is 1 project I will talk about in Chile, UAE is also looking right now at sustainable aviation fuel and they are using the competitiveness of having very cheap, I would say, solar power to use it for generating H2 at cheaper rates. Let's just. Take 1 or 2 examples just to understand what does this mean for us for our business. I want to pick an eMethanol for shipping, for example. This project we are working on right now. in Sweden, it's called Liquid Wind is the project. And there is a 50,000-tonne per annum eMethanol production that will be used for shipping, but also for a chemical industry, as an input for chemical industry. Clear improvement in CO2 reduction. There's -- I mean, no brainer about that. And Siemens Energy comes with the portfolio, comes with the electrolyzers, comes with the compression. You need to compress certain processes the electrification of the balance of plant around it, high voltage and low voltage and medium voltage engineering, as well as creating the digital twins that will help us to optimize operation but also help us into the service. And you see also what our customers are saying. If you look at the note, you can connect it immediately with the video of Bernard Looney. It's pretty much the same statements but in a different way. 72-megawatt, 80 million projects. Of course, it's not going to move the needle in the billions you saw in Siemens Energy, but that's the start. Another project, which is also very important for us right now, and it has the chance to really scale up quickly because there's a Phase 2 and a Phase 3 connected to it is green hydrogen as a feedstock for decarbonizing the chemical industry. And in this case, it's a project with BASF in Germany. We are right now in the first phase of it. It's a 50-megawatt of PEM. The electrolyzer that you saw yesterday, 40-megawatt of high temperature heat pump, another portfolio element that we bring. And the project has the potential or the plan to go to up to 2 gigawatts of electrification. So that's what Siemens Energy could do to an industry. And this is a customer, like BP, like others, that looks at us and say we want to work with you because of the 3 topics we talked about. We are on the same page. We have the capability to deliver these kinds of projects. And we also have the potential to scale in the same pace as these projects needs to scale. Production of a 1 tonne per hour of green hydrogen via electrolyzers, it's a pretty much, I would say, straightforward but very important project. This is one of the first projects we started in Chile, Haru Oni, where you also have a wider spectrum of what Siemens Energy could do. Starts from wind turbines that generates renewable energy, and then you take that into production of hydrogen, and then you get the hydrogen, we burn some of the biomass and get some -- with our steam turbines get some CO2. Then we take the CO2 and the hydrogen and create with the synthesis process a sustainable fuel. So huge potential. We did Phase 0, which was just a pilot, 1 megawatt. Right now, we are looking at Phase 1, which is the 200 megawatt -- 250 megawatt. And then there is further phases. And if you look at also customer feedback there, that's the CEO of the company, same message, right? It's the capability of a company like ours that could look at this portfolio, I would say, breadth, and put it together in a meaningful way. And this is what I wanted to summarize out of these 3 examples. We have a customer base and a customer access in this industrial transformation that, is in my view, is super advanced because of our history and our existing assets and fleets that has been gained over decades and decades. Customer base, more than 5,000, as I said, globally, and I talked about the NPS. This is really important to see how the customer are valuing our services. If you look at our project execution, proven track record of really working on very big projects, and the project management of big projects, whether it's a combined cycle power plant or an LNG or a big electrolyzer wind, whatever, is not very different. It's -- the skill set is not very different. Procurement, supplier base, logistics. I think we also have a unique industry expertise because we have references in all the major industries. We know what drives them. We know how they make money. We know what matters to them. A chemical plant is completely different than a power plant, it's completely different than an industry around data centers or something in this direction. And I think on the service side, and I did service for many years in my career, we have a deployment in every major country or city. I was talking yesterday to my colleague who runs the electrolyzer business, and if we are putting an electrolyzer in Australia and something happens in Australia, we can quickly tag along our gas services people in Australia, our service facility in Australia, our project management people in Australia, train them and get it fixed. If next day, it happens in Brazil, we can do it in Brazil with very little investment and very little time needed for that. So transformation of industry, is targeting to grow in line with this market growth that I showed you. We are focusing in these 2 dimensions, growth dimension and turnaround I mentioned. Fiscal year '21 as a base is around EUR 4 billion, negative 2.5%. Fiscal year '25 will grow 6% to 8% profitability. It's a long way, clearly. But if I look at where this profitability is coming from, it's definitely going to come from the turnaround businesses, one on the -- on my right, the purple. And I think we have -- I think, Ben, you asked the question of the 7 and so on. I mean this has improved. We improved by -- we halved our, let's say, negative numbers in the last 2 years. We halved it, right? So I believe that there is a good track until '25. Let me focus a little bit on the sustainable energy systems because this is a very important pillar of growth. I think we've secured the first projects, roughly 100 megawatt. But this, as I said, not moving the needle, but this market could be up to 30 gigawatt by 2025 -- or 2030, sorry, by 2030. So it's also a huge growth in front of us. And we really see right now that the projects are scaling from the 1 mega, 5 mega to 50, 60, even more. We really are in the middle of preparing our organization to manage these projects. So there is a solution and engineering team already put in place, energy system design capability that are capable of doing this H2 and Power-to-X projects. Sales workforce has been trained. Manufacturing capacity is being expanded Yesterday, we showed some of you what we are doing in Berlin, and that's not the end of it. We have 750 megawatts right now. I think by '23, we will go to 1 giga, and in the next slide, I will show you our plans further. And there are development funds that we are accessing from different institutions and entities, as well as spending also our own R&D in this area, and Vinod will share more about this topic with us in a while. 750 megawatts is where we have our capacity right now. By '23, this will go up to 1 giga and then we intend to expand until '25 up to 3 gigawatts, getting really ready for this growth in the market Meanwhile, the pilot projects that I showed you give us also the learning curve so that we are optimizing our performance, our shoot cost curves and are getting all the lessons learned also in terms of execution, service models, et cetera. We deployed our go-to-market. And the good thing is that Christian talked about this unified go-to-market in all the regions right now, we will not have -- people go to our customer and says, I am the one who will do the electrolyzer for you and next day comes the other guys, and I'm the one who will do, let's say, the gas turbine or the HVDC or the transformer. It's going to be 1 phase to the customer that represents the portfolio of Siemens Energy, and this will give us a very, very fast scaling up capability to cover the entire scope very quickly. Expanding of partnerships is very important. We will not do everything alone. We will partner where we need to partner, whether it's a geography or a packaging or technology. Delivery model, I talked about the gigafactories, I talked about our capability also to do large projects, but there's also a very important element about recycling and refurbishing. These electrolyzers needs to be after a while, maintained, maybe parts of it needs to be replaced to improve its efficiency, upgraded, recycled to have the sustainability element in the supply chain as well. And also, our portfolio development will continue with us when it comes to, as I said, improvement of cost, modularization, standardization, scalability, et cetera. And I think a very important element of this digital software and solution, because you really need to look at that from a connected picture. We have to connect the electrolyzer together with the wind turbines, together with the gas turbine if you are putting the hydrogen into electrification. And this is what gives the system the capability to provide more out of the sum of its parts. If I take you to the next element of growth, which is the electrification, automation and digitalization, we also there are in a good market position. We need to expand this more. We need to take this 2 different industrial sectors. But we have already seen certain key successes, more than 8% order entry growth we have seen in the last year. We are really looking at scaling up in certain markets. Asia Pacific is offering real opportunities for us; Americas as well. I think the topic around this digital value-added services and solutions, how you really provide an industrial vertical with a complete digital twin of its industrial process and optimization of this industrial process as well as operation and maintenance of this asset is a very important element that is more and more needed by our customers and our partners. I think we also heard it from BP. They touched on it as well, the elements of digitalization. And I think also in the time of, I would say, supply chain disruption pandemic that we went through, this becomes even more and more prominent. So summary of transformation of industry is the growth in H2 is for us to capture. This Power-to-X business is a business beyond the product of the electrolyzer that you just saw. It's not a business of selling this stack. Nobody asks us for the stack only. There is always an element of a wrap, there's always an element of I need the product, which is the hydrogen, how fast could you get me that, so the schedule, what is the performance, what is the degradation, what is the maintenance, how fast can you deploy people if I need to fix something or upgrade something. So it's really the business model around it, which is very important. The growth in EAD business is also 100% in our focus, and we are looking at the potential of the service business out of these new deployed assets. Similar to how we created a good service business around the core business that we have around the compression, industry steam, gas services, gas turbines, Also, we want to have a service model that is resilient, that is adding value around the electrolyzer business or around the digital offerings that we put. If you look at the profit drivers, it's really the turnaround of the 2 businesses, compression and industrial steam. And let me give you a few examples of what we did. If you look at the compression business because it was let's say, one of the transparency slides of Maria that puts a lot of focus on that, compression business improved its new unit profitability. And you need to always remember when we put the compression business, we put new units and service together. This gives us a different level of business numbers and also gives us synergies, a lot of synergies that we tap upon. So from fiscal year '20 to '21, we improved the new unit profitability by 8 percentage points. So I mean, the 7% is, I would say, we have jumped this bridge before. Three out of 9 manufacturing sites have been closed. And this helps us to rightsize the business to reduce our under-absorption and to consolidate 8 -- 900 headcounts has been reduced. Productivity higher than 8% year-on-year has been achieved and 40% of non-conformal costs went down. This is the story of the compression business in the last 18 months, and this is the story of the compression business for the next 18 months because by 2025, the compression business will be positive. And when you put it together with its service business, it will reach the target range of 6% to 8%. And that's one of the main focus areas that we have. I think all my colleagues can also add to this later, but it's actually a topic that we are proud of, that we made a positive impact on the compression business. If you look at the industrial steam and generator, it's not in the same, I would say, deep level, but it was also a turnaround story. We are the market leader in industrial steam. Industrial steam for us is also a part of our sustainability. We are not going into coal-fired applications for industrial steam, so we also limit our market potential there because we have our sustainability targets in focus. But we also improved our productivity 5% plus year-on-year. We have improved our LCC. We are very selective in where we go for the projects. And nevertheless, we are a 28% market share. And I believe that this market share could also go up to 30% before 2025, but we will see how this business will go. I have to tell you, this business is also pretty much investments from industries and industries are looking at the situation of COVID and the situation of inflation and interest rates and make decisions, of course, based on that. So it suffered a little bit in COVID, but it's really picking up right now. So mid-single digit, 6% to 8%. Not an easy journey, of course, but we came from, I would say, a much more difficult point, and we believe that we can push it to this level by 2025. In summary, transformation of industry is the heart of the energy transition in industries, compression processes, the process heat, process steam, electrification in general and green hydrogen. Our elements and ingredients that are needed by most of the industries, if not all of them, we put them in 1 business area, and we support this business area with everything we've got. We support it with our project entity capability, more than 2,500 people that executed the likes of Egypt mega deal and so on, will be the people who are behind this transformation of industry execution. Service I explained logistics and these global functions that Christian talked about will serve all the business areas, so we will give the transformation of industry a very strong head start. We will drive the growth potential in the decarbonization processes through this EAD business. Compression and industrial steam, we will continue our journey of operational excellence and creating value, specifically now that we also have the opportunity when we put the units and service together and when we are putting our new operating model, which will make us faster in decision-making more lean. There is -- and I think it was a question about -- I think it was a question to Christian about the strategic portfolio management. Of course, I mean, this is a business area where there will be a constant assessment of where are the portfolio gaps that we need to fill and how do we position ourselves for the future. And also these market trends are changing, right? So we need to anticipate what will be the next trend and then take the portfolio decisions accordingly. And we will leverage our strength, as I explained in detail. That was the story of transformation of industry. I hope I could give you a bit more clarity of why we put these businesses together, why they are separately managed and how Siemens Energy would take this into its integrated technology, energy company story. I think with this, I stop, and it's time for questions and answers -- oh it's time for Jochen.

Welcome to the world of wind. I want to share with you that it's extremely exciting to work in this world. I'm now there for a little more than 10 weeks, 11 weeks. And I've never really worked in a business environment with such positive prospects. Of course, there are some, how should I say, rather short-term challenges. And I think on some of these, we're going to have a little bit of a discussion a little later on. SGRE in numbers, we are a kind of EUR 10 billion revenue business per today. We have an order backlog of slightly above EUR 30 billion, which is a little bit more than 50% of what GP has as an order backlog. So it's a 26,000-employee operation. So I think a rather significant part, obviously, of the portfolio. Perhaps also remarkable, we've got installations of 118 gigawatts per end of last year in around 80 countries. So the business is becoming more and more global and the installed base is getting more and more substantial. I wanted to talk a little bit around the market. I wanted to speak a little bit about the challenges which we face in red now, and then since we discussed challenges, it's perhaps also appropriate that we discuss a little bit our response to the challenges, and that perhaps also finds your interest. So regarding the market, there are of course various studies around studies which explain always slightly differently in the situation. In the end, I believe it's fair to say that going up to '25, we have a rather stable development of the market, which then a forecasted development, which is massively around growth. It's such that also per today, many of the authors of the studies find it rather difficult to quantify more in detail what is going to happen. Please remember that there is also ongoing, for instance, political endeavors to actually support wind, to support the political approach towards it. Just to mention a couple of days ago, we had this convention of 4 European countries talking about the North Sea as the future, if you wish, power plant in wind for Europe. So long-term massive growth, and I believe there's very little to say on top of that. If we now distinguish between onshore, offshore and service, you would see that onshore is showing a rather stable development going forward. Again, this is also subject to further discussions, of course, and there's also different studies. This is a slightly more conservative one. But I think in total, the market continues to be attractive. Offshore is showing the massive growth and service also is showing substantial and extremely important growth for us. Over the years, I think there is very few markets globally where growth perspective as such, can be seen as more attractive. Now we spoke about challenges, and we typically distinguish between so-called external and internal challenges. And when we look about the external challenges, we have to see that, of course, there is an ongoing price pressure over the last really decades. And looking back at the statistics we showed here, we've seen also that decline of price measured in the average sales price per megawatt. We've seen that until '22 actually most recently, and that has to do with the challenges we see an opposite trend. So going forward, we expect to be in the onshore business, again, at the price level of 2017 and perhaps even go beyond that a little. So in that sense, the trend towards lower prices perhaps can be seen as being conversed. On the cost side, we see the things which sometimes were mentioned around the supply chain in total. I mean, there's various factors. Many of them have been analyzed. But what we do observe is that on some of the commodity prices which we have to factor in, we've seen really massive cost development, and that has a massive effect on what we are doing. Although a turbine as such does not consist only of raw materials. As you can imagine, the effects of that are significant. And this is one of the reasons why we right now find ourselves in ongoing discussions on a partnership basis with our customer base in order to compensate for those effects because you can imagine that if you have signed a contract, let's say, in the second half of 2020. And then from the second half of '21 onwards are confronted with price developments, which by now have not ended yet so in the year '23, we will continue to see increasing prices, then this is a concern, and we need to find an answer to that. The answer to that typically is not consisting of 1 or 2 measures alone. It's quite a bundle of measures how we try to compensate for it. Of course, we look at possibilities around hedging, where that is applicable, we have agreements with Siemens Energy to, for instance, bundle our activities when it comes to procurement. So for instance, on the transportation side, this is the case. We have, of course, set up for more long-term supply agreements. The typical behavior in the industry is that you sort of negotiate until the middle of the year or so, the price level then for the next calendar year. This is the phase we are right in now. But of course, you can imagine that more long-term contracts would be more beneficial in this context. You can also do what we do, in other words, have a collaboration on the set of product development. At the end of the day, our portfolio needs to be standardized more, which sort of provides additional simplicity to what we are offering. We have, on the side of the customers now achieved to some extent, back-to-back agreements. We have had also closest around the pathway of raw materials. We do have regulations in place for the cost indexations. But in the end of the day, as I said, the effects which we did observe are not fully compensated yet, and we continue to work on those. Now external is one thing. We cannot deny that also internal challenges is what we are facing. And on the internal challenges side, we see mostly then delays in the product development that, again, mostly around the so-called 5x turbine, which is an onshore turbine, typically in the range of 6.6 megawatts. This is a delay, which is a little tricky, a little difficult to hammer with some of you. I had the pleasure to talk about this already because it's really about the non-adherence to workmanship standards on operative levels, which then led to a situation where the assumption was that the progress was there, but the progress as such wasn't there. So you did not have qualified components. You did not have qualified materials as such. If you have a Bill of Material, a BOM consisting of 4,000 positions. And if then 35 of those are not qualified, this leads to trouble, this leads to difficulties. And if these difficulties are then meeting the supply chain difficulties with prolonged order times, you can imagine that this is in the end of the day, a whole delay discussion. And this is what it is about. On the 5x, we said we wanted to be kind of better off by the end of the calendar year, perhaps even faster. That remains to be seen because we constantly, whether it's on a daily and weekly basis, also monitor the progress. Still, I think we can say that we have also solid foundations in the organization. We have a growing service business, a permanently growing service business. We've seen an increasing awareness on the customer side to share the effects of what's being discussed. The 5x as such, although per today, a little bit my trouble child, is something which I think can be seen as really the success product if it's out there and if it's then ready for delivery. And of course, we have many really highly talented colleagues amongst us. We've done, as you can imagine, over the last weeks, a couple of mitigating actions. We've set up a couple of short-term task forces, mostly around 5x, and then the procurement side for that, we also mobilized some of our best colleagues, and I'm very happy to see that we do make progress there. However, we did also apply some other things, and that is a thing which you will see around the order intake figures in onshore specifically. We'll be much more selective in what we wanted to take on board. We've reinforced the new project approval process so that was not entirely clear to my understanding in the first place. And we've also introduced cross-functional teams to make sure that we have a closer interlink between different parts of the organization. And what the target of course is, is that we regain control, if you wish, over the processes -- of our business processes and that we are also able to pursue our priorities really in the right sense. We would like to make sure that really process adherence is going to be one of the mottos of these days. And also there, we observe progress. But of course, that is a continued construction site. For the more midterm perspective, we tried to formulate that into a kind of program, if you wish. So we've, in the past, had a so-called program LEAP that was mostly around productivity improvements and base productivity improvements. That turned out to be quite successful also with the other elements in there like the India turnaround. But going forward, we would like to make sure that we are slightly more wind-oriented here in this context. So with our program Mistral, we are focusing on the headwinds. We've identified a couple of transformation measures, which in my view are needed. We look at the portfolio and its complexity. Our portfolio by far is too complex in my view. And we will look at technology harmonization, for instance, across the blades, the drivetrains and the electrical systems. Also there, I believe, simplicity matters. And we will also continue to review the footprint. The footprint in my view, is by far too large. Of course, we have the complication here that in this business, many customers ask for something like local content, and then local content in its easiest form may be seen to be a manufacturing site somewhere. But the question is really how many local content discussions can we afford. I think, unfortunately, the situation is that we have to really be careful here. So with the help of Mistral, we're going to continue to look at the short-term issues. We're going to look at the mid-term issues around the turnaround and onshore because that's in the end of the day where it really is, the turnaround in onshore. On the offshore side, it's not so much the turnaround situation, but you've seen the growth perspective. So we've given ourselves, obviously, the targets to participate a little bit in the market development, and that means we have to find recipes to manage the growth, and that growth is really substantial. And as far as service is concerned, of course, the topic is that this is now an extremely profitable part as many of you know, and therefore, we would like to make sure that this continues to be the basis for our success in that sense, yes. And then there's also some further portfolio considerations more in the long-term view which we are going to look at. So for instance, the value-add structure on our side is something which we need to consider in principle. So what are we doing internally, what not, and that may then lead to additional and other effects as well. In the end of the day, it's a quite comprehensive program still designed to be a focused program, rather. So not everything we can imagine, we want to put into the program. Indeed, it's the opposite. We would like to put into this program with a clear focus as few things as possible. Other things perhaps can be dealt with elsewhere because obviously, some other things are important as well, but not everything can be done at the same time. So what does this mean now for the businesses? For onshore, we would like to make sure that we really continue with our focused approach to the market. There are also price-wise, but also portfolio-wise, substantial differences between the different markets. We need to make sure that we are not doing everything everywhere. We need to apply the price discipline we recently set up. We wanted to make sure that the portfolio as such is probably going to be streamlined, but continue to be perhaps even more successful and also technology wise more attractive. And when it comes to the so-called LCOE, we want to like to make sure that we are amongst the market leaders if not the market leader. We have the levelized cost of energy, this is probably at the end of the day, one of the most important drivers in this business. operational excellence, also mentioned by Karim, is something we continue to address here because there is a lack of it. We would like to make sure that we continue with our complexity reduction. Non-conformance cost is something which is a little -- our concern these days and they spoke about the optimization of footprint. On the offshore side, we would like to maintain the market leadership. Please remember that so far, we are having a European market share of 67%, in some countries, even higher. Please remember that so far, we are having a European market share of 67% in some countries, even higher. So that is quite something, and, in my view, not so easy to maintain, but we would like to be really part of the game. We would like to prepare also for the future technologies like floating offshore wind. I believe there is quite a lot of potential behind that. And we have also -- how shall I say, we've also extremely promising technological studies and cooperations with our customers. So we put high hopes into this development. And of course, in the end of the day, we would like to benefit a little bit from the partnership with Siemens Energy, which then is around, for instance, the combined activities around hydrogen and how is that now possible to combine it with, for instance, offshore technologies. We would like to make sure that on the development side, we are not too, how should I say, revolutionary. We rather like to be evolutionary. The big technology steps typically have quite a considerable risk, and we need to make sure that this risk can be managed. And that's what we are intending to have. Technological innovation still continues to be, of course, a driver for the competitiveness in this field as well. And there are new technologies, other technologies coming up, for instance, fluid-based bearings for the main shaft and so on. I mean, quite a different approach. On the footprint side, we reckon that we want to be extremely careful with expanding the existing footprint. We would like to make sure that we focus our investments rather into the differentiating side of the product, the scaling up. In other words, just taking 2 or 3 more sites or having them prepared for the same product. This is perhaps something we can better do with partners. On the service side, we continue to see that this is, for us, extremely attractive, but also for our customer base. Indeed, we see that the complexity of the product itself is developing. And therefore, it's also required to provide preparations or know-how for this increased level of sophistication. So the whole service activity as such is getting more complex, and this is why we feel we are better positioned than perhaps others, certainly, then the sales performance in this business. So there is additional arguments for us to really go perhaps even beyond the market development that remains to be seen. We want to be, of course, selective there as well. We wanted to be technology agnostic in some of the developments because foreign fleet, foreign fleet as such, coming from other vendors definitely is part of our scope as well and profitably so. So therefore, we would like to continue with this. And we would like to develop also advanced solutions on the service arena. Perhaps the most prominent. The most recent one is this what I mentioned here, the revenue-based availability of the turbine. So where we actually do the operation and maintenance around those time slots where the output is most precious in the sense of the cyclical market developments. This is something we clearly have on our radar, and I think we are quite advanced on that. So concluding, there are some rather challenging market conditions, short term, certainly, but in my view, we have now defined quite a number of actions. We found a lot of recipes to go forward and to successfully go forward. We see a structural growth long term driven by everything which was set today. So renewables will be part of the answer of the future. There is basically no way around growth for us. And this is really a fantastic situation to be in, as I said, at the beginning, I've never been to a business with such prospects. The SGRE organization, that I can tell you, is determined to turn around the company, there is a clear will to do it right this time. And we will continue to drive this spirit. And as I said, sometimes focus is the key, and I think the whole management team is now increasingly focused on those priorities. We define those priorities because priorities are the priorities, and this is what we need to focus on. In that sense, I believe we are extremely positive going forward, going to the future. I'm sure that the short-term challenges will be overcome. Thank you very much.

Thank you, Jochen. So we're now going to go into Q&A. So Jochen, Tim and Karim will be here to answer your questions. So we will have about 20 minutes for Q&A. Just an odd topic. So just in case you are intending to take the bus to the airport, it will be leaving at about 4:30. After this Q&A, we will have a short break before we go then into the sessions with Vinod and Dieter on innovation and sustainability.

Who has the first question? Sean, you were the first...

A number of questions. Firstly, for Karim. Thinking about SES, what are your assumptions around where that gets to by 2025? How tightly related is it to that capacity ramp? At what point are you assuming breakeven?

Yes. I think it's -- of course, it's a very dynamic situation. We've seen recently after also the situation that happened with regards to the Ukraine war that there is a faster, accelerating demand on having, let's say, alternative fuels to connect sustainability and security of supply as 2 faces of the same coin. I think this gave us right now an accelerated factor that was not there before this event. So this a little bit remains to be seen where it will take us. I think it will be faster, I think, by 2025. Before this, I would say, we're looking at the decade, at the end of the decade by 2030 that we'd see this really reaching this point. But with the latest impacts, I believe we would see this. When exactly, I don't know, but we are preparing, as you saw, by 2025 that we will have 3 gigawatts of capacity. And if we need more, we will adjust as we go.

Jochen, the stable environment, I mean, we're looking at it on the figures you showed a 16% decrease in onshore '21 versus '25. So I'm just wondering, firstly, looking into 2023, should we be concerned that there actually isn't any growth in '23 that this is a little bit more back-end loaded towards '25? Is the market already maybe too optimistic? And secondly, I mean, slightly longer term, how do you balance this decline in onshore? I get that there's a restructuring angle and optimization. But at the same time, you have to expand to keep up with offshore. Just wondering about kind of priorities there.

Well, I mean it's -- so first of all, the decline in the market in onshore, that remains to be seen if it really comes. Please look at many of the current political initiatives in Europe alone. I think that you could say perhaps the picture is going to end up differently. So we are not so concerned about that market development. Going forward, I think we have the benefits of having both parts of the business. So for instance, it would be probably easier to compensate for the growth needs in offshore with the help of onshore if that is around additional capacities, for instance, on the personnel side. And that's clearly the intention that we have. These entities brought together much more closely. I mean there's also much more rigor behind for instance, a standard process framework and this is of business processes. So the exchangeability of resources there should be supported going forward much more than that was the case in the past.

On 2023?

2023, on the market size, market volume, I'm not so concerned about that.

Next question. Ben?

I've got 3. But I'm going to try and keep them brief. First one is for Tim. On the transmission side on the business, can you just talk about pricing, price conditions. There have been periods in the past where this has gone from an oversight supplied market to a tight market very, very quickly. And what you're seeing in HVDC at the moment, in the past, people have had to book slots in the factory, et cetera. So how would you characterize that pricing environment right now?

If you look at HVDC, we're getting there. We have discussion -- I mean, we're now having discussions with customers that were not imaginable 2 years ago, talking frame contract, direct awards, feed studies, exclusivity. So we see that happening. You also see the customers who are more strategic and see what's happening. They're realizing it faster. Others are a bit more -- and also, to be fair, it depends how much of a global market you see. And if you're at the forefront or more in markets that haven't seen a lot of HVDC activity, but we see it going to tight.

Second one is for Karim. There's lots of good detail on the fixed going compression, I get it. What I really want to just understand big picture step back 10,000 feet down, what kind of went wrong? So we took a very profitable business actually in Dresser-Rand with a big aftermarket, teens margins. It vanished from public view for a while. We mixed it in with oil and gas and the rolls business, et cetera. And now it's loss-making. If you would say the one thing that wasn't done right, was it the integration? Is it simply the oil price? Is it a volume problem, which is going to change? What would -- how would you characterize it?

Ben, I can't really comment too much into the past, but I can tell you what we are doing right now is on the grounds of there has been of course, deferred investments for big -- for quite a period of time. It was no investment in oil and gas. I mean let's remember, like 2, 3 years ago, all the oil and gas companies, including the large ones were just not investing. And this is one of the areas where you also put your big part of your compression business, I think there is definitely a topic with regards to consolidation of the footprint, the oversizing, and I mentioned a little bit what we did there, for reason, right? We were oversized compared to the market. And I think also a third element is really the very clear focus on how to manage projects and manage risks. Where do you really step in and where you don't step in. That's another element. So the losses are not necessarily just coming from, I would say, the Dresser-Rand side or the Siemens side. It's really coming from which projects you are managing.

And the final one for Jochen, I couldn't resist. But if you had to compare what you're trying to do now, what your tasks were doing on SGRE with what you did very successfully in mobility a few years ago and I remember the Velaro trains and all the [ hygienes ]. How would you compare the 2 for you? What -- are they similar in terms of challenge, what's the same and what's different for you as a manager?

Well, I think -- well, perhaps it's fair to say that the train is not determined. But beyond that, of course, they are both rather complex technical installations, technical equipment, if you wish. They're both, business process-wise, handled in projects, in large projects and oftentimes under political influence. So in that sense, there are many similarities. And therefore, I'm rather optimistic that the toolbox we have at our disposal really is also the right one to take this business into the expected sense of future. I'm more than optimistic there. Of course, the product is different.

Any more questions? Gael?

For Karim. Two questions, please. So the first one is the 9% growth for the addressable market of TI compares to your own expectation of 5% for the business. So I guess there is an element of selectivity within the compressor business but is there a risk that you're going to miss on the growth opportunities as well in the Electrical and Automation business as well as electrolyzers. And the second question was around the profitability of the compressors business, so minus 7% in fiscal '21. So how much was it in H1 '22?

Okay. I think on the 9% CAGR versus our aspiration on the revenue growth, we, on purpose, did not really put a number, we said mid-single digit or in line with the market because I think this is still -- I mean, this is a business area that we put together recently, and I think we are still going through what is the right level to go there. But we really look at on this growth business. We want to be in line with the market on this turnaround business, we want to be selective and really make sure that we are taking the projects that really adds value to us. I don't know the number in the first half of fiscal year '22 on compression, but I can tell you that what I told Ben, that if I look at last year compared to where we see ourselves going to end up in this year, there has been a significant improvement like we also mentioned, the 8%. There's been a significant improvement. And the improvement are grounded with plans. There are plans with regards to shutting down capacity or reducing certain headcounts or some of the projects that has negative gross margins are going out of the backlog. We know these things. And when you really overlay it over time, you could see where the number was in fiscal year '21, where it should land in fiscal year '22 and where we see in end of '25 planning period. So I think our plan, our clear plan is that the compression business as a stand-alone business, combined with service by the end of '25, the new units alone will be profitable. And by the end of '25, the combination will be in the target range of the bandwidth we give.

Right. Shall we take 2 questions from the webcast. For Karim, actually. So if you look at Gas Services, 85% of the installed base is covered by service contracts. How much of that is actually long-term service contract?

Around 60%, 65% -- 60% to 65% is long-term service agreements.

Okay. And one question for Jochen, it's about '23 even though you don't give an outlook for '23, the caller is asking if you're comfortable with the current consensus forecast?

I would like to come back to the point that we said we're now looking -- we are now looking at the year '22. And once that is done, we also provide insight for '23.

Back to the room. Will?

Will Mackie. One question for you, Tim, and coming back to pricing. You gave an expectation of growth around 5% but within your assumptions looking forward. What contribution are you thinking about with respect to pricing given the inflation clauses and the importance of pricing up the commodity effect.

So I think it depends a bit because you saw the portfolio. I think HVDC has a different pricing power that we're already seeing. I mean, this was revenue, right? So what we're doing now, it's going to trickle down to revenue because some of these longer-term projects. I think on the product side, what we're going to see is a rebalancing. I think there's parts where it's very hard to have pricing power because there's competition from Chinese competitors, Korean competitors. I think it's much more -- and if you look at the revenue growth, some might come out. Some might go in much more. So it's a bit -- it's not purely current portfolio, you look at pricing and margin expansion where you grow. So it's -- I think it's a mix.

And the second question for Jochen. I appreciate it may be challenging. But when you look at your offshore backlog, I think you have about 6.6 billion of orders. You got about 720 or 30 million of contract provisions against orders, which is largely in offshore. To what extent can you say you're confident that at least where you are financially you sufficiently covered the contract-related risk within the backlog of the business.

Well, I mean, we introduced various mechanisms to make sure that in principle, the provisions are kind of adequate. Obviously, we have a couple of projects, not so much in offshore, but in onshore rather, which right now I have a not so good margin quality. This is why they are called onerous. So in principle, we think we can steer around that target, but there are still variables in that game, and this is why we would like to follow the path, which was proposed. That is a more detailed view perhaps can be shared beginning of August. We have to see that, for instance, for those projects, which are the onerous ones. We continue to have material price negotiations per today, which if the trend continues, that we continue -- that we see another further price increase, that also that would have an impact then on '22.

Two more questions from the web and they all go to Jochen. So the question is how interchangeable are the manufacturing processes for offshore and onshore, and it also pertains to the technology. So how interchangeable is it? And does it help that offshore is growing whilst onshore is not growing from the capacity loading?

Well, I think we have a tradition of coming from different companies, not only Siemens and Gamesa, but then also [ Advent ] or Senvion. So not all the technologies are such a compatible. I believe there is a big potential in driving further standardization in these elements. Once the standardization is driven further, then of course, this will be beneficial for them also a potential swap of resources if helpful and needed.

And then the second question is then about the 8% margin target if it's still there and if it's still there, what would be the levers in terms of price, cost and technology.

Well, we put it under review and therefore, we're looking at where that's -- where and how we can achieve that. Right now, this is part of the ongoing investigations. However, I have to tell you, as I said, I've not -- I've never worked in an environment with such prospects. So I honestly do believe that this is only a question of time, and I believe the 8% can be achieved.

We've got time for one more question from the audience. Phil?

Phil from Berenberg. I've got 2 quick questions, if I may. Actually, we can stick with one, it's for Tim, and it's in terms of this accelerating investment in grid infrastructure. I appreciate there's a need for this to happen. But it's at a time when we're talking about many tens of billions of dollars of incremental investment at a time when consumers are struggling to pay their current energy bills. So I'm just trying to figure out how we square that circle. And if that investment is to continue near term, who would shoulder that pain? Is it utilities? Is it consumers or governments?

Really good question. I think always keep in mind what I said at the beginning of my presentation, you cannot do all the wind build out if you don't build the transmission. So I mean it all sits together. The second is look through the whole value chain. It starts at the beginning copper goes up, all the raw materials go up, it's going to trickle through the whole value chain. My opinion, there needs to be a serious discussion in terms of how much are we willing to pay as a society for clean energy and do this. So I wouldn't exclude also higher prices at least until costs come down, technology advances. But for now, I think that's a discussion that will need to happen. How it ends, I don't know, but I think it's a discussion that needs to be put on the table.

Okay. So you get your second.

Yes. So my second topic, different one for Karim on the topic of heat pumps. You talked about a 65% growth rate CAGR, which sounds pretty attractive. I'm just trying to clarify, is that your view on the growth rate for district heating, i.e., products or market, which is within your scope? Or does that include stuff that's out of scope for you and also of the market size that you referenced, what's your current market share please in district heating?

Yes. We are referring to the market of district heating in this regard. Of course, there's also Christian talked about that, the connection of what we gain as an experience from, district heating and then turn it into the industry with higher temperature heat pumps and so on. But we are right now in -- the discussion is in the district heating. I mean the market is small so far on the heat pumps. Most of the district heating happens either with gas-fired boilers or even coal. So on the heat pumps, the market is small, but we are in this market very, very well positioned. I think our product is really gaining a lot of traction. And that's why you see a very strong CAGR because we start from -- I don't know, it's EUR 300 million, EUR 400 million right now. So it's small, right? But we see that it will increase very much. The average size right now is between 10 megawatts, but we are also seeing that this is increasing that goes up to 50% as well. But the projects in our pipeline is in the range of 10-megawatt each.

Good. Super. So another 10 minutes break. Take the time to get some sunshine. And then Vinod will be talking about innovation and detail about sustainability. There will be another Q&A with Vinod and Dieter after that and then a wrap up, as I said, ends about 4:00 and the bus at about 4:30. So see you in 10 minutes. [Break]

Right, everybody. We've got about 2 minutes to the grand finale. So all recharged and re-caffeinated. Now at the desk in 2 minutes. So everybody on the web. I think we need 1 more minute for everybody to return. So welcome back, everybody. As I mentioned earlier, we have 2 sessions, 1 on innovation and 1 on sustainability. So we are starting with Vinod Philip talking about innovation. Vinod, over to you.

Thank you, Michael. So good afternoon, and this is almost the final lap, and I have the privilege to be sharing what we are talking about, the innovation with all of you at the end of a long day, and first of all, thank you once again for listening across the course of the day, so intently. And what I want to do in the next 20 minutes or so is talk about how we are approaching innovation and from my perspective, innovation is not just about product innovation, but it's also process and business models. So what you will see in the course of my presentation are elements that you already heard from my colleagues earlier today who were talking about areas of growth, areas of transformation. Karim talked about heat pumps, Tim talked about how the HVDC market is developing. So what you will hear in the course of my presentation is how all these dots are being connected. And I think the place to start is why do we innovate? And from our perspective, our job in the innovation community is to provide the businesses, the business areas in Siemens Energy with the offerings, with the options so that they can be successful in the market that is dynamic and fast changing. In the course of my presentation, I want to make sure that I get across these 5 messages to you. The first is that we are going to be dramatically shifting more and more of our innovation resources towards service and what we call fields of action. Fields of action are areas that we have identified which are going to be key for an energy transition with a net 0 future in mind. And these fields of action are cross-company task forces. These are groups of people who have different backgrounds, different expertise areas coming together to develop new products, new processes and new business models, that then our sales teams can take into the market. The second key message to get across is that we have established and will continue driving a very active portfolio management approach for our R&D investments. We will have clear KPIs, and you will see them in a minute, that we will not just look at what sort of projects to continue. But as important, rigorously and quickly stopping projects that may not be giving us the returns we expect. The third is having for our investments in R&D and innovation, a clear business case, a structured business case that is looking at customer paybacks. The fourth, and Christian talked about this in the morning in his opening presentation, is we also want to change how we innovate. Today, we have an innovation community that is quite distributed, and we believe that we can create more focus, more speed when we start to bundle them in the right ways in the right parts of the world. So we will talk about how we are consolidating our innovation competencies in 4 global innovation centers that are also going to be much more closer to the markets, the regions and the customers. And last but not least, also something that I hope you also carried away from all the presentations that my colleagues made where partnerships are going to be key to our innovation strategy because we believe partners will help us reduce our own R&D expenditures, will help us derisk what we do and also reduce time-to-market. All of which for us are essential elements of a fast, effective innovation process. Some of these key facts and figures are known to all of you, but I would just draw your attention to 3 areas. One is we have a tremendously capable workforce around the world that has got a lot of experience, passion for innovation. And our job is to tap into this and leverage it. We also want to make sure that as we look at our R&D investments going forward, they are all accretive in the margin band that Maria and Christian talked about today. Also to make sure that those innovations that are service relevant, of course, are at a much higher margin level in line with the service expectations. We are already in a good way in terms of how we innovate with partners. We are working with 22 startups around the world. We are working with 10 of the top 25 universities. And together with all of this, we are also getting some positive feedback from the industry and from customers. So this is a good base for us to start from, but we recognize that this is not enough and we have to continue developing from the strong base. I talked a bit about KPIs, and for me, KPIs are really important. Coming into this innovation role as the CTO, having run the service business for a few years, for me, customer proximity, customer focus in the innovation practices is really important. And also what's important is to drive bottom line impact. So we have defined these set of KPIs, and I would draw your attention to 3 of them. The first is, as you can see, we are dramatically increasing the amount of innovation we want to put towards service. And this dovetails perfectly into what my colleague, Karim, presented so well about how the service opportunity that lies out there for us is something that we can maximize and monetize. The second, as you can see here, is how we are shifting our R&D more to the fields of action, and I will come to that in the next slide. What do I mean by these fields of action. In 2020, the amount of investment we were putting into these new emerging areas, as you can see, was quite low. We will dramatically ramp this up. In fiscal '23, our aspiration is to have over 25% of our R&D in the GP, the Gas and Power R&D, going towards these fields of action, and we will continue to ramp it up. Because we believe that these fields of action, the innovations we do in these fields of action open up new revenue streams that can help complement some of the market challenges we face in some of the core businesses as the world continues to decarbonize. The other thing I would like to draw your attention to is the on-time delivery for sales. For me, innovation is about customer impact. I specifically differentiate innovating from inventing. So for me, what is important for an innovation community that is effective is a close connection to sales, making sure that we are able to codevelop offerings together with strong input from our sales and marketing colleagues around the world and then making sure that we understand what makes sense for them to take to the customers and set targets based on sales release dates. Because this is what gives the real focus to innovation because now we are orienting around the customers. We already have a pretty decent starting point, where we are in terms of key projects, and we want to continue raising the bar when it comes to on-time delivery for sales releases. And we want to do all this by also reducing our own R&D as a percentage of revenue, but this does not mean that we will do less innovation. What this means is 2 things. One is we will innovate more effectively. And secondly, we will partner up, and you will see that in one of my following slides where through partnerships, we can also get co-funding. We will also very aggressively from the innovation strategic perspective, look at the public funding programs out there around the world that are incentivizing R&D. We also will work with start-ups to make sure that we are leveraging their access to capital and using our ability to scale and manufacture and take it to market. So this is how we want to have a comprehensive set of KPIs that are also looking at what we do, how we do it and how much we spend doing it. I talked about the 5 fields of action. But before I do that, I want to maybe frame the landscape a bit. When I look at the energy landscape, there are 3 different time horizons and 3 different ways to cluster it. The first is what you see on the left. That is what we have today in the energy market, established technologies. We at Siemens Energy are, of course, not playing in all of these, but these are technologies that are established today. Many of them forming part of our core businesses. So one part of innovation is to make sure that we continue to incrementally improve the competitiveness of our core products, and Karim and Tim talked about that. Then the other end of the spectrum is what we call early stage development. These are technologies that are today probably 5, 10 years out. We believe will play a role in the next decade, but it's important for us as an integrated energy technology company to start monitoring these, looking at these and seeing how we can get certain early moving advantages in some of these areas. But the core focus of our transformational innovation is going to be in the middle section, which is what we call the fields of action. We have defined 5 fields of action. We believe that these are areas that are going to be extremely dynamic and extremely needing innovations from companies such as Siemens Energy. The first is decarbonized heat and industrial processes. The second is Power-to-X. The third is resilient grids and reliability. Given what's happening in renewables, the ability of the grid to be flexible, to be resilient, is going to increase. Service will remain a backbone for our company. And this focus is not so much on the core service business. But what else can we bring in terms of digital capabilities like digital twins, for example, to improve our ability to intervene at the right time, to provide customer value. So condition-based interventions, not just time and periodicity based interventions, which was the old model. And last but not least, in an energy matrix that has got 40%, 50%, 60% renewables. It cannot be reliable without storage. So we do see storage as an area that is going to be dramatically critical, but at the same time, what's important for us, and you will see that in the next slide, where we play in the storage market and how we play in the storage market is going to be really important because not every part of the storage market is of interest to us simply because of the complementarity to our strengths and the ability to be profitable. And also, Karim talked about it, for example, in heat pumps, which is one of the topics under Decarb. heat, the CAGRs are pretty high, 65%, so forth. For us, all of these areas, we have taken a very deep look at seeing how do we drive in specific technology elements in each of these 5 fields of action, what is the overall target. And we believe that this is an opportunity for us that very few companies can satisfy. One of the biggest challenges I believe in the energy landscape is focus because there are so many different technologies out there, so many different options out there. And the risk is you go after everything and you dilute your efforts. So one of the things that we talk about a lot within Siemens Energy in our Technology Innovation Council. And Christian really makes this a point to say, we need to be super clear as much on what not to do as we want to focus on what to do because very often, it's the other stuff that we chase after that dilutes everything else that might be good. So what we have done is we have looked at these 5 fields of action and underneath these 5 fields of action, defined a subset of topics. These subset of topics is what you see on this chart. We are not trying to do everything, but we do believe in certain areas like high temperature heat pumps, that Karim presented. We do believe we have certain capabilities, certain strengths that give us a unique advantage in that area and gives us a chance to differentiate from the competition. Similarly, when we talk about energy storage, we are not going to become a battery manufacturer, but we do believe that we can procure cells from suppliers, package them in effective ways, integrate them together with our battery management solutions and then provide an offering to a customer either for an onshore or marine application, which is differentiated. These markets are rapidly growing, and you will see that in a minute, we have also made some estimates about these markets. But one of the things to be very clear about is the estimates we make today are probably going to be in 2 years' time revised because these markets are emerging so fast. In each of these areas, one of the key things we look at is, do we partner up with somebody? How quickly can we get a pilot done? Because the real learning happens in pilots. And then how quickly can we engage with customers? One of the things I want to highlight over here is, for me, these technologies are also a bit fluid, which means that today, I stand in front of you and I talk about these technologies. Maybe 12 months from now, given the pace of innovation, maybe 10%, 20% of these will be stopped, and then we will look at others. But at this point in time, topics such as high temperature heat pumps, fuel cells, solutions for industrial waste heat recovery, offshore hydrogen, direct air capture and so forth, we believe that these are areas that there is a lot of good potential, and we will continue to drive this moving forward. The other thing I would like to highlight, and maybe also just to frame this, so that all of you understand, not every topic on that slide before is at the same level of maturity. And what we have done is we have defined 3 time horizons: the short term, the midterm and the long term, where, in addition to the time horizon, there are 2 very important dimensions we look at. One is, what is the readiness of the technology. We have a stage gate process called TRL, Technology Readiness Levels, from TRL 1 through TRL 9. And depending on certain milestones, these technologies have to pass, they mature in the technology readiness level. The second and probably even more important dimension from an innovation perspective is business model and market readiness. Very often, and one of the best examples of this in my experience was carbon capture. As a technology, carbon capture was developed 20 years ago and was also on a pilot level pretty much ready for application 10 -- 12 years ago. But the market wasn't ready. Even today, there are some areas where carbon capture works. But in terms of global scale, probably it will be towards the end of the decade where carbon capture becomes really an attractive market. So looking at technology readiness and market/business model readiness are 2 dimensions that we take into account. When you look at these selected technologies, as an example, industrial heat pumps, Karim talked about it in the context of district heating. When you look at industrial heat pumps in the context of district heating plus efficiency improvement in industrial processes, this market could be as big as $5 billion global market, as big as $5 billion over the next 5 to 7 years. One of the things we want to also do is, as we get into these markets, aim to be a significant market share. Now that will depend a lot also on how the market evolves, but market share development, market share growth is also going to be something that we will be carefully tracking. Another technology that I'm really excited about, because it was a great example of innovation from within the company, and this is a technology that's in the bottom left called ARES, the asynchronous, rotating energy system stabilizers. The great thing about this example was that it was a bottom-up, grassroots level development. It was a group of engineers in one of the factories in Mulheim, who felt that the know-how we have around generators can also be used for grid stabilization. And they worked hand-in-hand with the colleagues from transmission, tomorrow's grid technologies, and came up with offerings that are helping customers proactively stabilize the grid. And this has been a business model that's been picking up really fast. And between 2021 and 2022, there has been a step improvement in how this has been accepted in the market. So we clearly focus on short-term technology impacts because this is what we believe is going to provide the fuel, the wins that we can then focus on for the mid and long term. We take this sort of a portfolio approach. So we are not putting all our eggs in one basket. At the same time, we are not going after every basket, and we are making sure that we have the right mix. So in general, the way we are looking at allocating our R&D in the future, it's about 50% to 60% will be still focused on our core business. because we do believe that the profitability and the cash generated from there is essential for the future. But the remaining 40% or so will be distributed between these fields of action for the midterm impact and then maybe 5% to 10% looking at some of these long-term bets that may or may not pan out, but we do believe is important for a company that wants to be a transition leader for sustainability. We are also now looking together with the teams working together with sales, marketing and also the cross-functional cross-company task forces of putting some numbers behind it. And on the left side, you see our projections on how we believe the addressable market can evolve. I want to be super clear, this addressable market is based on the topics of the technologies you saw 2 slides before. So this is not the entire market on transitions. It's about what do we believe are the markets we can address based on these technologies that we've identified under these fields of action. Now I would have loved to have put a lot more granularity in the revenue numbers. But of course, at this point in time, these are still quite early. But I can tell you, when I look at where we were back in 2020 and what we are seeing coming up in the pipeline, Karim mentioned that, the way the heat pump pipeline is growing, it's almost exponential. So we see a potential, which, of course, now has to be taken by the businesses, validated by sales, put into our sales pipeline to see what can be the revenues that we can start showing in the business plans and so forth. The potential for growth here is tremendous. Of course, also the caveat that we are starting from a small base. But we do believe that over the course of the next 7 years, these 5 fields of action can become a tremendous opportunity for the company as we continue to shape our future. We also will correspondingly start shifting R&D dramatically. As I mentioned earlier, just from this year to the next, we will start shifting our R&D where over 25% of GP R&D will be going into these 5 fields of action. And we will continue to drive this as we look into the future. It's going to be almost a fivefold increase that we will have to drive over the next years. But the important thing to highlight here is it is made as a business decision. We have a technology and innovation council that makes these decisions. The council consists of the Managing Board of Siemens Energy plus a few experts, myself, and then we sit down every quarter, look at what needs to be invested in. We bring all the different perspectives, and we have this sort of a business-oriented innovation approach, which we believe is the most effective way to shape our future. The aspect about the innovation centers is really important. Because one of my learnings have been in this space for 25 years now, most of it in R&D, product development and innovation is the faster you get to a pilot, the faster you get to a prototype that a customer can work with, the faster you will learn. So for us, these 4 global innovation centers, the one in Shenzhen was established last year, and the ones in Orlando, Berlin and Abu Dhabi will be inaugurated over the course of Q4 and Q1 of next year. And these innovation centers are going to be responsible for shaping the activities around these 5 fields of action. There will be spaces where we can co-create with customers, we can bring in startups, we can work with partners and make sure that we are going into a rapid prototyping approach. Also, these innovation centers will have a clear focus to bring external funding because that external funding is a great way for us to augment our investments. And of course, it's going to be a place to communicate, to show the power of -- the innovation power of Siemens Energy and also become a place that can attract talent and, in the future, also have people transitioning through the innovation center. When they come in new, spend time in innovation center, learn about the offerings of the company before moving into the business or a region and to drive the business from that angle. So these 4 innovation centers are going to become the cornerstones of our future innovation approach. We also have partnership setup. And the way I look at it, we have 4 different reasons why from an innovation perspective, we need partners. And the cool thing is, as you heard from Mr. [indiscernible] this morning, our partners see the value we can bring, either in terms of go-to-market access, in terms of industrial know-how, in terms of scaling capabilities. So we are also an attractive partner to them. And we look at 4 different dimensions for innovation. One is partners who can help us accelerate what we do. The second is partners who can help us get either access to a market or help us localize. We also look at partners in areas where we believe, strategically, we need supply chain resilience. And the fourth is partners who can help us close gaps in our technology or portfolio. Because one thing is clear, we don't want to invent it all by ourselves. We do believe the market is so dynamic and there is so much innovation power out there. If we can find ways to complement each other, then we also become much more effective as an innovation organization. I will start transitioning to a close now with a few examples. Because -- I want to also highlight that these are not just words on a slide. These are real specific cases that are creating impact. We talked about high temperature heat pumps. One of the things that is cool over here is it is a complementarity that builds on our core competence. We have deep knowledge in compression technology, system design and integration. This allows us to go to the market as a first mover because today, there is no other OEM who can produce heat pumps at the temperatures we can operate them at because of the refrigerant technology we use. Our heat pumps conceptually and also in early stages can go up to 150 degrees centigrade and also up to 70 megawatts thermal. This is something that is unique. And we also start to see some early customer traction. And with these pilot projects, for example, the one in [indiscernible] plots in Berlin, we will learn from it and build on it. I don't need to say too much about gas turbines and gas turbine upgrades, because I think Karim talked a lot about that very effectively in the sense that at the end of the day, gas turbines are not a sunset technology. They are a very clear transition technology. And as these gas turbines become more fuel flexible, either hydrogen or green fuels, they also become a key lever of decarbonization. So finding ways to help our customers who have these turbines not become stranded assets by upgrading them, improving their efficiency makes it not a liability for them anymore, but an opportunity. Similarly, when we look into the midterm, we know that the hydrogen economy will come and whether it comes in the middle of this decade or towards the end of the decade remains to be seen. But having the technologies ready, having the systems ready is really important for us from a midterm perspective. And over here, I think, I've already mentioned earlier today, one key thing that we bring to the table is our ability to scale, design integrated systems. We already have very strong IP in this area. And now with the Gigafactory in Berlin, we will be able to also show how quickly we can scale up at a level which I believe is quite unique. As digitalization grows in the market, the amount of data centers and the amount of emissions from these data centers is going to become increasingly relevant and we are seeing that today. We are getting a lot of interest from the big 5 digital companies who want us to work with them in bringing our large megawatt-sized fuel cells as a way to displace or replace their diesel gensets for reliable power for data centers. This is an opportunity, which we believe is going to be key in continuing to drive our adjacent markets and really make Siemens Energy this integrated energy technology company that, as Christian and Tim showed, connects the dots across the chain. So with this, I want to wrap up. I want to recap the 5 messages. The first is we will be driving innovation and service and these new fields of action. We will have a very clear KPI framework that assesses progress, both good and bad, and make the appropriate decisions in a timely manner. We will be making these investments based on clear payback. We will consolidate into these 4 global innovation centers that become the cornerstones of our innovation structure and strategy going forward. And last but not least, it is all about setting up the right partnerships to make sure that we save costs, we de-risk and we drive shorter time to market. Thank you for your attention, and I'm looking forward to the Q&A after Dieter's presentation. Thank you.

Thanks a lot, Vinod. And actually, I mean, innovation and sustainability is brothers and sisters at the same time. I mean we are talking about the future of technologies and how we save the world through sustainability. Thanks a lot for giving me the opportunity to shed some light on our sustainability agenda. And as sustainability is so much at the core of our strategy, some of the messages you might have already heard today, but I tried to give it a little different angle and shed some light on why sustainability is so important and is such a great business opportunity for us. So first, the electricity sector needs to decarbonize first, and we will benefit from that. Our technologies help already today in decarbonizing the entire value chain. Third, we act already now to decarbonize the value chain. And last but not least, we are super transparent in our ESG performance. And to start with, and we had it a couple of times, the energy trilemma. Energy needs to be sustainable, secure and affordable. And of course, being the head of sustainability, I have a slight bias towards sustainability. And if you look at what IPCC is writing in their latest report, climate change. Given the geopolitical situation we are currently in, climate change still is a defining issue. And there's 2 quotes I would like to give. We need immediate action across all sectors to keep the 1.5-degree scenario in reach. So this is the, let's say, the call for action. The good news is there are options available to half the emissions by 2030. And honestly, after having heard all these excellent examples today, I ask myself for the IPCC has already had the slides of our Capital Market Day today because it's really, the technologies are there, they just need to be implemented. The good news is also, if you look at the world map, what countries do already have a net zero target, we see that 83 countries have a net zero target, and this covers 74% of global emissions. The color coding talks about the degree of implementation. And of course, some of the countries do have it in law, others have it as a, let's say, political pledge, but 74% of global emissions. That's the good news. Even better news is the electricity sector needs to decarbonize first. Electrification is one of the key pillars. Maybe it's even a precondition for deep decarbonization. And if you electrify, of course, you need a good grid mix, low CO2 emissions in the grid so that you really can deeply decarbonize. And that's why a couple of countries have laid out dedicated net zero targets for the electricity sector, which are way before their country net zero target. So we talk about the [ searches ] where in these countries, the electricity sector needs to be decarbonized. And what happens is, of course, that the companies are taking care of that. And we see today 5,000 -- more than 5,000 companies do already have a net zero target. Many of them, our customers, BP is one of them. Bernard mentioned it this morning. And actually, this is where we come into place, because we help those customers in decarbonization. We help with new products and new solutions, which are low or zero emissions. And maybe even more important, we help to decarbonize existing assets with the customers. So huge business potential here. And I think these examples show how important decarbonization is in our overall strategy. And that's why we, of course, have made our inventory of our emissions. And you can see easily in the upper line on the emissions, which are connected with Siemens Energy. It matters most to take care of the emissions at customer side because that is by far where we and our total inventory have the highest impact and the highest emissions. Still, I want to briefly mention and touch the climate neutral program, which we have. It was incorporated very early even before the carve-out. We said we will be climate neutral in our own operations 2030. And I think this is super important to have this target because it has also an impact on employee engagement. So when we talk to our employees, they are eager to contribute and come up with idea how we decarbonize. And by the way, if you think 2030 is maybe not ambitious enough, there is sub targets. So it's 2023, we want to be at 100% green electricity. And you can see this little icon here, we have a site-based agreed target for our own operations as well, and they ask us to reduce our footprint by 46%. And actually, they ask us to do that by 2030. And we are more ambitious. We want to achieve that by 2025 for our own operations. So there's really focus on that one. And I think this is super important. We talk to our suppliers, and actually, there was done by the end of last year. We talk to our suppliers also to find a target, which is ambitious but realistic to reduce our supply footprint. So we came up with this 30% in our supply chain emissions. And last but not least, the 28%, as I said, it is aligned with site-based target. So it's in line with the 2-degree scenario. So we will reduce our footprint by 28% by the end of 2030. And I think it is extremely important to have these kind of -- yes, for me, it's a midterm target. You probably think midterm in 10 years is long term, but in sustainability, things are sometimes a bit slower. So 2030, it really is important to have these midterm targets to make sure that we act accordingly and that we steer our business towards this target. But our aspiration, of course, is to go beyond that. So at one point in time, we will reach net zero across the entire value chain, and that is our aspiration, to strive for that. In the next slide, and I would call it a kind of a scenario because we went through a discussion and run through a, let's say, scenario, how would it be possible to reach net zero. And you see from '19 to '21, we already achieved 9% reduction in our emissions. This is actually ahead of the trajectory we are asked for from SPTI. And the next one, and I want to draw your attention to the portfolio adjustment and growth. This one is a very small box, but it has a very important message in it. Because our business growth, of course, is connected with additional emissions, but we will balance that through the portfolio adjustments you are aware of. So that means on the way forward, our business growth is in terms of CO2 emissions neutral, which I think is a very strong message that we can convey. We have another -- a couple of other levers, energy efficiency and digitalization will also bring down our CO2 footprint. We have the element of electrification. And we talked about that, how important electrification is. And how the grid mix will change our CO2 footprint. So this is also an important element. We talked about the fuel shift. So green fuels and -- is maybe the covering word for that. It could be hydrogen, it could be e-fuels, it could be biofuels. So that will also have an impact. And Blue portfolio, Tim was touching on that one without the F gases with a huge impact on climate. And last but not least, carbon capture, and it could be post [ completion. ]. So directly connected to the gas turbine. It could be in the industry, but that also will have a huge effect on our footprint. And as you see in the color coding, and this connects very well with what we now showed to you in terms of readiness and maturity of these technologies and the markets, clearly, the focus in this decade will be on the electrification element. That will have the biggest impact. There is some insecurity towards the green fuels and the carbon capture, which we see having a bigger impact towards -- we are starting from the 30s in the next decade. So that is what we expect. And this is -- I think, it's a nice bridge because I mean Christian was also mentioning this morning, he wants to have clear figures and topics we work towards. This gives us a basis on the discussion and how to manage our CO2 footprint. And the next slide actually gives additional concrete actions what we are doing to manage our footprint. Asset. The ambition is decarbonize the entire value chain. So we have regular discussions. We have a Sustainability Council, which is consistent of Christian heading that as our CSO, the division heads and the region heads, because it's also important to have all the regions in these kind of discussions. So we have a regular process review and are taking care of our footprint. Senior management is, to a certain part, incentivized on greenhouse gas emissions. So this is part of the senior management incentives, which also, of course, creates awareness. We want to integrate greenhouse gas emissions in business decisions. And here are a couple of examples. We already have today a transparency of our huge projects in the sales pipeline regarding their CO2 footprint. And we are piloting in one of our businesses, a kind of a CO2 budget where we say, okay, you have this amount of CO2, which is allowed for this area of business. And then please calculate your sales projects and see how you fill up this budget but make sure that over time, of course, this budget is decreasing, and we need to shift the business towards lower carbon emissions, which is, of course, also very important in managing towards our targets. We are currently developing ESG criteria, which we want to also apply in our R&D and portfolio strategy, also to make sure that not only decarbonization but also the social and the governance aspects are reflected. And last but not least, we implemented a EUR 100 CO2 shadow price in our infrastructural investments, which is also helping us steering towards low-carbon technology in our own operations. And last but not least, we are transparent in our annual sustainability report and also CDP, we adhere to CDP framework, which gives a lot of details around carbon topic. So you are invited to also go through that. I very much alluded now on decarbonization, because it's at the core. But of course, I at least want to briefly mention sustainability is much more than decarbonization. And we have our sustainability program more or less built on 2 pillars. It's decarbonization and it is what we call responsible operations. And responsible operations, I mean, there's clearly topics with no compromise on, like health and safety, no compromise on health and safety, no compromise on compliance. And as Christian mentioned this morning, we are a people company. So also the question of inclusion and diversity, people development and employee engagement, super important that we take care and want to have engaged employees because, in the end, it will lead to better results. And this program nicely fits between our company purpose on the one side and on the UN SDGs, and we selected 5 of those SDGs, which are at the core and where we have the biggest impact. The targets you also saw which we communicated. So I think that is okay. As said, we are very transparent. So if you have the chance, have a quick look in our sustainability report, it's quite comprehensive. It is about decarbonization. It is about the other elements of our sustainability program. And it consists also, which is, I think, very important for the investors. It also has a TCFD section talking about this framework, which is more and more relevant. And on the left side, you see the ratings, which we receive from the rating agencies. But also on the right side, CDP as said, is a questionnaire. We adhere to that and report on that one. And EcoVadis, and this is an interesting observation. EcoVadis is a customer platform where customers ask us to provide sustainability data. And we saw this year more than 50 inquiries and requests from customers to clearly check our sustainability performance. And for some of them, this is a pre-concession to stay in contact and in business with them. So also a very important element to be transparent here. So to conclude here, we will benefit from the early decarbonization of the electricity sector. We have all the technologies at hand, which are needed. Our technologies help to decarbonize where it matters most. We act now, and we know how to decarbonize our value chain, and we are transparent on our ESG performance. Thanks a lot for your attention. And now moving into the Q&A with Vinod.

Yes. Thank you, Dieter. Thank you, Vinod. So we've got about 20 minutes for Q&A on the subject, and then we have a wrap up later by Christian. So who wants to raise the first question? Nick? Go ahead.

It's a question on -- for Vinod, mainly. We've heard digital twins mentioned twice in the presentation so far, once with yourself and once earlier. Can you remind us of your software capabilities and whether these digital twins you're developing yourself or whether you are subcontracting that part of the business?

These are twins that we develop ourselves. And we have a digital software team that is actually part of our -- in the future, the global function setup that is going to be developing products and software for the business areas. And this is something that we do ourselves in terms of the capability building. In some cases, we do work with partners if you want to have access to certain computational capabilities, but the code of this is something we develop ourselves.

Thank you. Any questions in the room? This is core to our strategy. So there must be some questions. Phil?

I've got a question on SF6 gas-free portfolio. This is something that we're hearing a lot about from competition as well. From the outside, it's hard to get any indication of market share evolution in SF6-free gas products. So I'm wondering if you can comment on customer adoption of these kinds of products at this stage and also how market shares are progressing.

Yes, I think, it's a really good question. And we are starting to see customer interest coming in. I think we see this picking up in Europe a bit. But this is still, I think, some ways to go before we start to see the full scale adoption. Because as of now, still from a customer perspective, they don't feel the pain of having to go with a technology that is -- that requires them to invest a bit more. And also in terms of a pricing point of view, would be something that's a bit higher. So we are seeing early adoption, but this is still in early stages.

And just in terms of market share evolution, is it too early to get any...

Yes. I think at this point in time, what we can safely say is that we are one of the leaders. So clearly, from a market leadership point of view, we are well ahead. But in terms of how the market share develops, I think, it's a bit too early right now.

Any more questions. Sean?

Vinod, just thinking about your midterm opportunities. I mean we've got some selected examples in the slides. I mean -- but if you had to put your money on one.

I think the one thing to realize is this road to net zero is not going to be a single technology play, right? So from my point of view, I think, it is as much about how we package our offerings today and take it to market. It's going to be as important as the technology itself. That being said, I would really believe that one important element that is going to be part of this innovation strategy, which is a highly, highly under-addressed market, is the decarbonization of process industries. So technologies from our portfolio that are really going to help electrify and automate and decarbonize process industries will probably be after our core businesses, the next big area from an innovation point of view where we feel that we can have a lot of impact. So I think that's the space which also, I think, Christian talked about, Karim talked about. There is a massive opportunity which we believe today is underserved. And I think that's where we should focus on is not just about developing the next fancy, shiny tool, but really how do we get the technologies that we have, how do we package it, how do we understand the industrial processes. How do we bring heat pumps, how do we bring electrification solutions into process industries. I think that's going to be the place where the bang for the buck will be the highest.

Can I also ask on your partners, how that works in terms of IP?

Yes. It's a pretty open spectrum. So in some cases, we bring our IP and they bring theirs and they actually do not co-mingle. In other cases, we do decide to do a joint development. And over there, we would have the option of co-owning IP. And in other cases, we would not have anything like that. So we actually keep a pretty open range. In some cases, it's purely a service agreement. So I think we also keep the options open on how we want to use the IP. Because I think, very often, we get too hung up in the IP game too early. And in my view, sometimes the IP discussion can be too premature. So let's get into working together, understand what each party brings to the table, understand what each party gets from the other party and then get into a go-to-market discussion faster. But we have the full range.

[ Rahul? ]

Another question for you, Vinod, please. When I look at Slide 7, where you've laid out your set of key technologies, when you look across that sort of sweeping range of areas to invest, where do you think you can build up the most sustainable competitive advantages through the partnership networks and the IP? And perhaps on the other side of that mirror, what would you say are the areas where there's the greatest, if you like, race to the forefront of technology where there's perhaps most risk because of competition from the U.S.A. or from China, for example?

I think if I look at the -- for me, I look at the fields of action because I think that's where I would say we have the greatest opportunity to play a competitive space, right? So any area where we can bring our integration capabilities, so systems design, systems packaging, being able to model multi-technologies, hybrid technologies like a gas turbine with a battery or a marine fuel cell fit into a certain marine operation or bringing in certain remote monitoring into process industries. I think these areas where we can either bring in our technology or acquire technology, but package it in an effective way, I think that's where we have our biggest differentiator. Our ability to package and integrate on a system level is quite unique. I think in terms of risk, I would say, some of the technologies that you saw in the long term, right? When you talk about batteries. So I think that when you talk about long duration utility-scale batteries, lithium ion is not going to cut it. So we have to look at an alternative. We can go down the thermal storage path, we can go down the heat storage path, but an area that is interesting but I'm not convinced yet might pay out, but we are looking into it, is redox flow batteries. Because flow batteries have the potential to be at large-scale long durations, but there are some fundamental materials issues that have to be overcome. So I think it's a combination. But for us, it is okay to take that sort of a portfolio approach because you do want -- because sometimes with these long bets, you learn something along the way, which you don't expect, and that then comes back and feeds into another area that gives you an unexpected benefit. So this is how I would play that whole portfolio approach.

Nick?

Another 2 for me, please. On your R&D strategy, you show your R&D intensity metrics, 4.5% of sales dropping down to below 4%. There's quite an unusual direction to go in. Most of your peer group are increasing R&D as a percentage of sales, most of the whole group has seen it increase over the last decade. Why are you reducing investments in R&D?

I think the important thing, at least from my perspective, is it's the effectiveness of the R&D that we should really look at. It's not just the volume of money, right? So I think that there are 3 things we will do to make the R&D more effective. One is the approach how we use the resources we have, right? In terms of agile methods, in terms of task forces, in terms of MVP based approaches will make us more effective in the R&D we do spend. The second is we will augment the R&D we invest with external funding. There is a huge opportunity for us to get external funding, which is not our own expenditures. So that is the second. And the third is co-development. When you start codeveloping your partners, you don't necessarily need to invest everything to develop everything from scratch. So these 3 things for me say that we should be able to reduce the absolute internal spend with no compromise on effectiveness.

Thank you. And a question for Dieter. I'm looking at Slide 6 and 7 from your presentation. Forgive me, I just got slightly confused. At 2030, what is the emissions -- Scope 1 and 2 emissions reduction you're committing to?

To 2030? So it's 28% in our Scope 3 downstream, 30% Scope 3 upstream, and net zero Scope 1 and 2.

So it's a net zero commitment by 2030 on Scope 1 and 2?

Correct.

Any -- Phil?

Yes, just another topic on the ESG theme really. I guess the question about ESG has been around for several years, and I guess we've been in a pretty good macroeconomic and geopolitical environment, and that's changed quite a lot in recent months. Do we see any signs of ESG topics and customers potentially being a nice to have historically increasingly focused, but perhaps that might ESG topics, if there's a premium associated with that go on the back burner? And I ask because there appears to have been an article on Bloomberg today about Germany planning to bring back coal and oil burning in the event that Russia switches off gas. So no one wants ESG to go backwards, but I guess there's a geopolitical and macroeconomic reality that we need to face near-term.

I mean the question is really what happens short term. I'm perfectly convinced that the overall geopolitical situation does not change anything regarding the attention on climate change and how to decarbonize. It might be the case that there might be short term, a different focus. To be honest, at least on my desk, there has not been any customer request saying, "Hey, we change our behavior." Exactly the opposite, actually. If you look, for example, the announcement Allianz gave 2 or 3 weeks ago, it seems like despite the geopolitical situation, topics continue and focus on climate change. And of course, the mitigation of climate change.

If there are no more questions, I would say thank you to Vinod and Dieter. And ask Christian back on to the stage to wrap up. Christian?

Thank you very much, Mike. And first of all, thank you very much to everybody at home on the screen and everybody here in the room for your patience. You work with us through a very busy and dense day. So many thanks for staying with us throughout the day and absorbing all this information. For all the good questions and discussion, highly appreciate. Thank you very much for that. Second, thanks for all the preparation to the team and the people behind the scenes who have prepared all the slides, all the content, all the venues, hosted you yesterday and today. So thank you very much for everybody in my team who has made this happen. It was a great work. And thank you very much for everybody at Siemens Energy for their passion for detail, for their passion for performance, for their passion for energy to really drive this company forward. I hope we could give you today a glimpse on how the company has come together, also creating more transparency from October onwards in terms of reporting. We will share first information with you in the next quarterly call, be ready to get used to it. But really also showing you on how this company is benefiting from all the changes which is happening in the energy industry and in the electricity world and also hopefully making clear how much the world needs a company like Siemens Energy, which helps customers in this transitioning through a new energy world through a more sustainable future. If not, you know Michael always says when we close the quarterly calls, we are very approachable and we have a fantastic Investor Relations team and also the Board is always very approachable for your questions. It's important for us that you understand where we are taking the company. And in this regard, once again, many thanks for those of you who came to Berlin and spent the day with us. Many thanks for the people on the screen for all the attention throughout the day. Travel home safely, and I look forward to continue this discussion on how we turn around the company, but also on how we turn around the energy world of tomorrow and tap into massive opportunities which are out there. Many thanks. Get home safely and see you soon. Thank you.

So Christian stole my punchline. Because I always end on the most approachable team. So please do reach out. If you don't reach out, we're going to have one of those events every quarter. So please do stay in touch and do reach out. Thanks also from my side, and it's to all of you that listened, all of you that came. And as Christian said, we have fantastic support. So thank you, everybody, for helping us and have a safe journey home, and everybody else who is listening on the webcast, have a nice rest of the day. Thanks, everybody.