Técnicas Reunidas, S.A. (TRE) Earnings Call Transcript & Summary

Hello, good afternoon. This is Joaquin Perez de Ayala. Welcome to this Full-Year 2021 Results Presentation, that will be conducted by our Chairman, Juan Llado, and Eduardo San Miguel. It will take around 20 minutes and you can pose your questions after that. And now I give the floor to Mr. Juan Llado.

Hi, everyone. Let me go through a quick summary of today's presentation. First of all, I'll do myself an overview of the scenario that we have faced over the last year and how we managed to overcome it. And then after that, secondly, Eduardo will review 2021 results, our performance in the COVID, and an update for 2022. And then I'll finalize this presentation, reviewing the pipeline, and give you some guidance for the mid-term. What are the 3 main accomplishments of this year? Obviously, it has been an extremely challenging year, it is not suited to anyone. But we have achieved 3 very important goals. The first one, which was organize those upsells and we start 2022 with a much stronger organization. We now have skilled management team that is going to drive recovery to these new growth scenarios that we'll talk afterwards. Secondly and extremely very important and it's really important, we have to strengthen our balance sheet. We have to strengthen our financial profile. And we have done so with the European funds for strategic companies, which is important now. It's also very important to have the Spanish government as part. So our balance sheet is stronger and we have the government working with us together as a partner, which is again, a very important accomplishment. And third, in the middle of an extremely difficult and challenging year, we have rebuilt the backlog with EUR 4.8 billion of near awards. It has been an extremely successful year towards the end, I have to say, where we have a more diversified and really far more de-risked backlog than the one that we had 2 years ago. And let me tell you 2 years ago at the end of '19, we had a good backlog, and we were facing 2020 before COVID with a rather optimistic guidance. We all today, have to say, we're Stronger. Let me start with how we have strengthened the organization. So let me introduce my team, and then we start with Eduardo. Many of you know him. He joined TR about 17 years ago. First of all, as Deputy CEO and now he is -- he became the CFO and today is Tecnicas Reunidas CEO. And he's the CEO, and he is managing the Executive Committee. So he's a full empowered CEO. Obviously, working with him and with me, we have Arturo Crossley. Arturo Crossley, he's been in our -- he has worked in his young years with our competitors, I'm not going to say whom, but many and very successfully. But obviously he's always been -- thank God, he came to TR about 18 years ago. He has been extremely successful on the commercial side, and today he's the deputy CEO, and at the same time he's our Chief Commercial Officer, and supporting TR, myself, and Eduardo with TR's strategy. Promoted from a Deputy CFO, Javier Diaz Hevia, has managed extremely successfully over the last years, and the last 2 years has been key. He has proven himself and to TR to be extremely successful, bright, and diligent, and today Javier is TR's CFO. So I do believe with these changes, a few changes, but extremely important changes together with the executive management team, we're going to be able to manage very successfully the recovery of operations and prepare the company for this new investment wave that is already coming, that we have already seen with the awards and move into this new low-carbon industry scenario. Yes. Very important thing that we have accomplished this year and towards the end, is strengthening TR balance sheet. We're back where we were at this time with the support of the Spanish government, this time with the support of the European funds. And to get those funds, we have to fulfill European requirements. Obviously, those requirements are and were -- that we had been heavily impacted by the COVID-19 probably more than others. That has to do how you were cut in the middle of this disaster. Obviously, to have the opportunity to get these funds, you have to be and we are a sovereign company. And very important, you have to be and we are a strategic company for the country that grants the funds. So we are strategic. And why are we strategic? Some of you may wonder. Obviously, because of the quality of our franchise and our technology. We are strategic because we happen to be strategic for our customers and for their strategic investors. We are strategic because we are strategic for traditional and for new energies, for both -- for the development and the successful development of both sources of energy that have to live together within the next few years. And we happen to be a strategic for Spain, working here from Madrid because we have the center of excellence of engineering. And from here, we do export goods and obviously, know-how. So let's move to the strategy, which is as important, probably more in a business case than the first 2, which is awards. In the middle of probably the more challenging year we have ever suffered, we have had and we have ended up the year with a rather successful award. And let's go -- I'm going to go one by one, but sector by sector. We ended up year-to-date, and let me make it clear, it's not year-end, it's year-to-date, EUR 4.8 billion of awards, out of which slightly above EUR 2 billion has to do with petrochemicals. Petrochemicals with ORLEN, petrochemicals ORLEN in Poland, SASA in Turkey, Ronesans and Sonatrach working together and working with us also in Turkey. And this demonstrates the growing importance of petrochemicals. It demonstrates that we're going to see and we're going to continue seeing and we're going to continue developing big petrochemical investments and the TR is fully recognized as one of its players. We have been awarded on the second half of the year as well, above EUR 1 billion in natural gas for both ADNOC that we are working together and de-risking the job with target, a partner in Abu Dhabi and for Qatargas. For Qatargas, we had worked before but only doing feeds and engineering works. This is the first time that we move with Qatargas to his large investment programs. And you know that probably Qatargas is the largest LNG player in the world. Now we do work with them in these programs. So that is very continuity and repeating business with ADNOC, repeated business, but moving to this large program for Qatargas. Very important. And it's a very important award. Third, our division of power and water. Power and Water, some of you has got calls and we read that when you had these awards, we had problems with that division. But when we try to diversify when we move into the areas of know-how that are new. In fact, they're more renewable. In fact, they had to do with biomass. And then I'm not going to go into details, we could have -- we haven't done well. But I think we're one of the best and most complete players in the traditional power business. And this is the result. I mean, the 3 technologies, which is the 3 turbine fabric traders, which is GE, Siemens and Mitsubishi, call on us to partner with them because in this case, in the 3 cases, we're partnering with them to develop large combined cycles. In one case, in Poland and in the other case, for Siemens and Mitsubishi is in Mexico. So the 3 of them rely on TR because of its quality of engineering and its project management skills. Finally, Clean Fuels. When we talk about Clean Fuels, we talk about improving the quality of the fields of the refineries. So we have to -- in other times, it would have been maybe 50% of the backlog or 50% of the awards. Today, it's about 10%. But what are we doing here? Here, we're working with YPF in Argentina and Gazprom. In both cases, there are jobs without construction, the construction is managed by the clients, by the investor. But being here, and some of you may be wondering what are you doing with Gazprom? Well, Gazprom, we have worked with them, we have developed with them 2 front-end designs. And this is the EPCM on one of the front-end designs that we have done with them years ago, before pandemic. Obviously, the job with early work has started towards the very end of the summer. Contract came into force in December, and we have a contract with them, which is, at this stage, we have very little risk and very few commitments, and we have to explore within recent regulations, how we're going to continue. And so if you want to wonder how much risk do we have? Well, we have to realize that is 4% of the backlog and is no more than 2% of 2022 revenue. And finally, let's move to energy transition. Energy transitions for us, if you had to write a business case, petrochemicals and traditional energy, oil and gas in a business case would be cash down. There are going to be huge investments, and we're going to cash from that. And there are going to be huge investments within the next 5 years, and we're very good at it. But we're going to see huge investments as well, if no more, in nontraditional sources of energy, biofuels, biochemicals, green hydrogen, green ammonia. And we're following all of them. Today, it's very difficult to put it in the backlog. It's easier to put in the pipeline. So we've been called and demanded by investors, our traditional customers and others to sit down with them and develop projects. And what we have in this slide is the one solid project that was awarded to us in 2021. This is a project with GI Dynamics, asked us to design, escalate and standardize their waste to methanol plant in Amsterdam. So again, it reflects that we have the resources, the creativity and the means to profit from this great opportunity, which is these new sources of energy. So all these awards together, we move into a backlog again, year-to-date, up EUR 11.1 billion. Today we're talking and we have to manage EUR 11 billion backlog. Then we can split it in 3 parts. That is a good way to see it in terms of how risky this backlog, how risky in terms of construction, in terms of new prices, in terms of resources, in terms of diversification. 12% of the backlog is the backlog that is older and it's the last stages of delivery. It's in construction stage, and we're going to be finishing within the next 12 months, 18 months. And we have -- I have to say happy customers with good satisfaction, even we have to go through extremely difficult times over the last 2 years, fully affected by COVID. 47% of the backlog, almost half of all the jobs that have been reprogrammed, some of them that were awarded at the end of 2019 or end of 2018, and they have -- they were so affected they had to be reprogrammed or refaced or renegotiated with customers, and we're back on track. With most of our customers, we have started that negotiation. And with others, we continue on an ongoing phase, but always in extremely good terms, which, again, is an opportunity to de-risk the management of our projects. And finally, very important, 41% of the backlog are the awards that I just mentioned, which are obviously because they're new, because they have just came into force a few months ago and some of them a few days ago. Pricing obviously includes the changes of prices in today's new environment, having to do with raw materials and having to do with inflation and also reflects how well we're positioned in natural gas, petrochemical and energy transition. And after having done the split of the backlog, I'll pass the floor, in this case, it's not a floor, it's a table, to Eduardo.

Okay. Thank you, Juan. Good afternoon, everyone. I feel very honored to be here with you in my new position, and I want to thank publicly Juan and the Board for their confidence. I am sure, working together, we will get Tecnicas Reunidas back to the level it deserves for the benefit of the shareholders and the rest of stakeholders. Let me move now to briefly explain the performance of the company in 2021 and what we see for the coming year. In the slide, you have the main figures for 2021. They are heavily affected in many different ways by COVID. Starting with sales, we see that they dropped to EUR 2.8 billion, far from our pre-COVID levels, which were around EUR 4.5 billion. This 40% fall was unavoidable since about half of our backlog was not fully active as it was posed and reprogrammed by our clients. And also on top of that, the rest of the backlog advanced quite slowly due to COVID restrictions. Missing 40% sales in any business means missing 40% of expected margins. Regarding the costs, COVID generates lower productivity and higher operational costs, as we have explained with some detail in previous webcast. And obviously, we have been hit by the Teesside project with a financial client terminating a contract with a percentage of completion of 99.3%, dismissing any COVID claims and executing our warranties despite having achieved first firing of the plant. And on that, in the middle of a huge alpha COVID wave in Northern England. And just a theory, it's a figure I like very little. But in these years, everything has been so extraordinary, I think it makes sense to analyze it. An adjusted EBIT of EUR 48 million, something like 1.7% of the sales shows we have still an underlying profitability of our business despite a 40% sales fall. And finally, the cash. For the first time, we have a negative figure at year-end, and there are 3 reasons. First, the impact of this side. Second, the low pace in project execution and milestone recognition. And third and the last, the difficulties in arriving to agreements with clients without face-to-face interaction. Before entering into what we expect from 2022, I would like to devote a minute to explain how the company has grossed 2020 and 2021, the 2 COVID years. Because here in TR, we are disappointed, very disappointed with the results we have delivered. And we also believe we need to analyze the performance of the company with some fairness. The fact is, as you can see on the left, we have missed around EUR 4 billion of revenues in 2 years. And despite that, and you can see it on the right, if we remove the impact of the site termination, EBIT in those 2 years is very close to breakeven. So as I said before, we are very disappointed. But what I can assure you is this quasi breakeven is the result of implementing many tough management actions. One of the actions we have implemented, this one without impact in our P&L is the agreement with SEPI. Most of you already know the details, but let me share with you the main terms and conditions. There are 2 tranches. The first one of EUR 175 million is a participative loan that enables us to look it as equity. Its average cost is Euribor plus 450 basis points. The second tranche is an ordinary loan for EUR 165 million with a 2% fixed cost over 4.5 years. You would agree with us that the terms are fair considering its equity theaters. And let me just make 4 specific remarks that I think are important to highlight. The disbursement was completed 4 days ago, last Friday. A potential option to convert the participated tranche into capital has not eventually being included in the final agreement. Dividends cannot be paid until loans are fully repaid. And finally, let me stress, this will be devoted to accelerate the working capital cycle and speed up project execution. Let's move now to 2022. We expect that removing the impact of COVID will progressively translate into better sales and margins more in the second half than in the first half of the year. EUR 4 billion revenues shouldn't be a challenge considering the high-growth speed in project execution once COVID restrictions soften, the restart of the reprogrammed projects already agreed with clients and the new sales coming from recent awards. And achieving a 2% EBIT margin is a reasonable target as well, given a growth of sales no less of EUR 1.2 billion, a reduction and hopefully, the ending of extraordinary COVID costs and our continuous effort in optimizing costs following our efficiency plan TRansforma. I will elaborate a bit about this plan later. With all this in our mind, we can confirm the guidance for 2022 that we provided in our last November presentation. 2 issues are critical to achieve our targets this year 2022, improve our working capital and manage properly the raw material inflation. Let's start with the cash. And again, I don't want to simplify my message, but we expect cash levels to recover because the reasons that have contributed to its deterioration in 2020 and '21 should not last for long. We do not expect losses. We anticipate new awards with some payments. And more important, we foresee and we have to work hard in improving the cycle of working capital. The generation of working capital in our business has become a trend and we should revert it by 3 ways. First, recovering the ordinary pace of execution, which allow us to achieve milestones quicker and then invoice and collect from our clients. Second, accelerating our negotiations with clients to solve change orders and claims. We are going to be as proactive as we couldn't be during the pandemic because of travel restrictions. A large part of our working capital needs has to do with 2 years without clients approvals of change orders. But in the last 3 months, we have closed more than half of all those pending issues. So we have to be confident about this trend will persist in 2022. And third, improving our payment conditions. Better payment terms will help to speed up project execution and to shorten billing cycles. And this will create a positive cycle that could end up favoring our clients and suppliers. With all this, we are sure to recover our historical positive net cash position through the first half of the year. And let me move to the impact of raw material inflation, a topic that worries all of us. My main message is that although we expect an impact, that's obvious, it is already included in our result estimates, in fact in our guidance. It is a fact that most projects that were in the backlog when the pandemic started, have almost bought all the relevant equipment during the last 2 years. And it is also true that in the recently awarded projects, our prices to clients were based on updated costs of raw materials. Moreover, we are reaching agreement with some clients that are willing to compensate us when projects were reprogrammed or a slowdown. Obviously, not every client is doing it. But we know raw materials will probably be the issue of the year. And that's why we are very focused on maximizing the impact of all the measures we implemented in our efficiency plan TRansforma. The plan was ready by the end of 2019, and the low level of activity during COVID has not allowed it to produce all its potential impacts. Some measures, to give you some example of the TRansforma plan, are: concentration of procurement in Madrid headquarters instead of procuring project by project, searching for suppliers in new markets, obtaining from clients authorization to open the list of accepted suppliers, standardization of projects to buy similar equipment for different projects produces economies of scale, engineering work focused on designing lighter structures, less intensive in raw materials, selection of purchasing windows when prices are expected to be lower. Those are some measures. In sum, we are facing this issue in a limited part of our backlog, and we are dealing with it together with customers and suppliers. I'll now hand the floor back to you.

Thank you very much, Eduardo. So let me finish with the final midterm guidance and outlook. Let me do so talking about the pipeline. It is true that we have a strong pipeline. I think this is -- again, is one of the strongest pipelines we ever had in terms of quality of pipeline, diversification of the pipeline and the certainty of that pipeline. Obviously, the strong demand today on energies, from different source of energy is translated in very high prices, which are supporting the rising investment activity. Rise in investment activity for next year, for this year now, 2022 and beyond. We've seen it and how fast our backlog has come into force in this business from the time you get a letter of award, contract gets signed, comes into force, sometimes it takes years or a year. And now it's just an issue of there is a necessity of invest. And this translates, and let me start with transition, energy transition. Obviously, we're going to be seeing energy transition investments. Energy transition investments, they are going to become more than projects. They're going to be tangible and material investments. And we're going to benefit from that. And we already have in the pipeline some very important projects that we hope to benefit in 2022. This is our star, talking about business case, but we have also the cash cow. And the cash cow are the big opportunities, natural gas and petrochemicals. Big opportunities have come, and we have already benefited from them. And big opportunities are going to be coming in 2022 and far beyond. And today, we're extremely well positioned and we're placed to benefit from this market investment. TR franchise is best placed, is best placed and we have maintained the quality of engineering and the quality of execution. And today, we're seeing how worldwide customers come here or we go there and how the travel restrictions are over, to talk to them and present it. So now it's time to, obviously, to recover. It's also time to be selective and it's time to profit for the quality of the business we're running and profit means going back to the normal, if not better margins than we had in the past. And if you translate that into numbers, it should be in the midterm 2023, going to normal level of awards of EUR 5 billion. This year, all the sum, we ended up with EUR 4.8 billion. We have EUR 5 billion sales. We have awards that we translate in EUR 5 billion sales. Obviously, in our objective and shouldn't be a challenge. This is the margin that we have -- that we deserve, and we're going to work for it, and we're going to get it of 4%. So let me finish by recapping the initial message of this presentation. We have strengthened the organization. We have the support of the European fund, and we have a very strong pipeline, which is going to be managed within a very strong franchise. So we'll be back very soon to normal. Thank you very much. And now Eduardo and I will stay here to answer any questions that you may want to pose.

[Operator Instructions] The first question comes from Mick Pickup from Barclays.

A couple of questions, if you may. Can I just first go back to what Eduardo said about the reprogram backlog. Clearly, those projects are starting again against inflation. Can you just talk through exactly how you are covered on those projects for margin? I know you did a lot of the procurement previously, but some of those are stalled at very, very early stages. So just give us some say, reassurance around that reprogrammed workload.

It cannot be extremely specific on what projects I'm going to talk about. I think we have 4 projects that have been reprogrammed. 2 out of those 4 projects, we have already talked to the client, and we have agreed new prices, okay, to compensate us for any extra cost due to inflation or due just to demobilizing and remobilizing the people to the sites. So those 2 projects are fully soft. There is our third project where the client recognizes it has an impact, this period of having the project sleep in. And we still have to negotiate with them what's going to be the impact. And there is a fourth one that probably we are still in the very initial phases. And we are talking with the client, but to be honest, the answer for the client is still a bit shy. But my feeling is 2 are already right, one is about to be soft and the fourth one, hopefully, we'll find to solve it. Obviously, I am concerned, but I do not believe it will have a material impact in what we expect are going to be the results of the year.

Okay. But obviously, in Project 3 and 4, you have an embedded assumption of margin in there, which could be different. Is that not the case?

Both projects, I have a certain level of protection in my contingencies. So I cannot warrant if it's enough or not, but hopefully, it should be enough.

Okay. And then next question is just on cost inflation and your bidding pipeline. I'm not sure yet has it happened, but I'm sure at some stage, you're going to present a bid and your clients are going to look at the number on the paper and think it's far too much. Your clients started showing concerns about getting projects accelerated before they get too expensive?

I cannot be very precise on it. There's some -- I mean you've seen that had an issue of weeks, we have negotiated and closed some very important jobs -- and that's obviously had to do with both. The customer needed the job in 30 months. And secondly, the longer it took them to reach the agreement, the more uncertainty we both had on the closing price. So it happens. In some of the cases, we see that customers are saying, "Okay, let's wait a few weeks, let's wait a few months." I don't know, the level of uncertainty today and instead of accelerating our delay, what it is today, what we're seeing today is a great level of concern because the investments are real. I mean they have to invest and they have to find ways to reduce the cost, value engineering, opening the vendor's list, finding ways to reduce the cost. And at the same time, concerns about -- on our side, concerns about closing at price that would put us in a difficult situation once that has been closed. So it is in the market. It is concerned. In some cases, it's translated into some delays that we have to think together how to do it. And in others, it is has translated already in accelerating in closing the price and placing the orders, which is what we have done over the last 2 months. So we see both, Mick.

The next question comes from Kevin Roger from Kepler Cheuvreux.

The first one is related to your Q4 performance. Basically, you were guiding for EUR 3 billion plus top line in '21. You arrived to EUR 2.8 billion. Is there any particular reason for this EUR 200 million gap that we have in Q4? That would be the first question that I have. And then I know it's maybe difficult for you, but looking at 2022, you have, let's say, clear guidance. But how should we think about the evolution over the upcoming quarters? With one of your slides, it seems that you expect a gradual improvement in revenue. Should we assume that the margin will follow the same dynamic? Or you expect to be at a more stable level all around the year? And on the working cap, I clearly understand that you are renegotiating a lot the payment terms, et cetera, with the client. But how should we think about the evolution for 2020? Should it be enough in a way to bring back Tecnicas to a net cash position?

Okay. I will start with the third question for the capital evolution for this 2022. Maybe it's a bit too early to say that, but we have a feeling that since it's changing little by little, they are changing. We see clients -- well, obviously, the oil price or the gas price is higher than 1 year ago. And in many cases, they are trying to accelerate as much as they can the construction of the plant. So they know and they understand that the only way is to put money into the system and to accelerate and to give flows of cash to the cycle. So I see clearly the working capital improvement through the years, also through the year. I also believe that some recent awards have -- not a good down payment, but a good cash in the very early stages. So we will see an improvement in the cash figure quite soon. I've said in the presentation, we will see the company going back to black numbers in terms of cash within the first half of the year. I'm almost sure about it. And I also have in mind that the money coming from SEPI will be there. So I mean, there are many reasons to believe working capital difficulties will be smaller, and we will see black figures when you have a look to our cash position very, very soon. But first, regarding the evolution of sales and margins, well, we again have to be careful, but we have the detected the willingness of the clients and that willingness please move as fast as you can, but they realize that it's very difficult to come back. If we demobilized our teams 1 year ago, and it's very, very difficult to put all the people back very quickly. But what we feel now is that we are back to normality -- we are coming back to normality. And consequently, my expectation is by half of the year, obviously, we will not be doing EUR 2 billion obviously, of revenues, half of EUR 4 billion. And we were somewhere between what we did last year by June and what we expect for year 2023. So I don't know, maybe EUR 1.8 billion should be something achievable. And regarding the fourth quarter, to be honest, it's a number, it gives the system. I mean, probably, we have been finishing a number of projects. We have devoted a lot of hours. But seeing we are in the last stages of construction, probably those projects were not delivering big volume of revenues. There is not any specific reason. I don't feel the deceleration. I mean, you have the opposite. I see how the projects are little by little speeding up. So maybe it's just 1 quarter, but it's not what we should expect for the first quarter of 2022.

[Operator Instructions] The next question comes from Alvaro Lenze from Alantra Equities.

The first would be on de-risking of the portfolio. This year, of course, you have had probably more awards of smaller size and more diversified, which in itself it implies the reason of the portfolio. But I wanted to know whether on a contract by contract, there is any lower risk than the traditional contracts that you have usually perform in the past, maybe if it is due to a different structure, maybe shifting from EPC to cost/or higher percentage of feed conversions or something that is also helping to de-risk the portfolio? That would be my first question. The second question would be on the restructuring efforts. If I look at your adjusted overhead expense, it has actually increased from EUR 91 million to EUR 113 million. So I wanted to know whether the cost cutting from the TRansforma plan is already reflected here or whether we should see an improvement going into 2022? And my third question would be on the capital structure. I understand that the financial package from the SEPI does not include an option for conversion into equity. But whether a rights issue is still potentially on the table for the future, as you indicated on the last quarterly report? And also if SEPI would still be willing to contribute and become a shareholder of the company and whether you would be okay with that?

I mean when you go through the -- and you have the list in the presentation of most of the jobs and the awards, which is obviously, some of them in smaller sites, but it's a smaller size because it hasn't got construction. If you go to the ADNOC job in gas, it would have been a job of $900 million that we share in it with the construction company. So that's why we call it the risk. Obviously, if you go to SASA it's $100 million. We don't include construction and it's a cost-plus job. It goes through a balance sheet with a fee that is very much the risk. In ORLEN, we have a partner, and it's not a construction partner, it's an engineering partner, but it's the result of a competitive bid. It is not the result of a fierce competition. It is more a technology battle than a price battle. That's why we can -- sometimes we can say it has been de-risked, and we feel comfortable with the risk. And if you go into the 3 jobs that we're doing with in power, the 3 of them we're not running the risk of the technology or the delays of the problems with the efficiency of the power plant. That risk, which sometimes is quite dangerous for an EPC contractor is being run either by GE, Siemens or Mitsubishi. So really, and if you go on the Clean Fuels, both of them having got construction risk. So it's very much the risk instead of awards. Obviously, the size of the awards, if we had to include construction in this case, it would have been closer to EUR 7 billion. So it's a good -- believe me, it's very much the risk and now it's for us to manage it, but it's very much the risk. And Eduardo will try to answer the second question. It has to do with the TRansforma.

TRansforma was a plan that was focused simultaneously both in overheads and operating costs. We did our work a couple of years ago. And well, regarding overheads, I think the savings were already last year in the results. This year, 2021, we have been very focused in how to be efficient in the operation. So there are some impacts, but you can see them easily because they are hidden in the global result of the operation that we have. Originally, this project was called Plan 10 and Plan 100. So that was -- the money we were targeting for at least another year, obviously, it has been impossible to achieve this kind of savings because the year, the lack of activity has not allowed us to be effective in terms of applying this planned TRansforma. But this plan will come back and this year will be clearly profitable and useful for the company. And regarding the question about our equity, well, the fact is that the policy of SEPI is to help the companies to go back to the equity they had when the COVID started. So the money they have given us, at least is purely that, the target is let's move back to late 2019. So at that time for us, that volume of equity was enough to operate. So it has to be enough now. Obviously, what is clear is that, well, if by any specific reason in the future, we detect that increase, that equity could be useful, we will have to analyze the options. But well, it's not now in our minds.

And a follow-up, if I may, on de-risking of the portfolio. I wanted to know whether the increased diversification and probably smaller average size of all the projects, which provides higher diversification, is that something that Tecnicas Reunidas has looked after? Or it's just how the pipeline and the overall industry is now working on?

It has nothing to do with the change of the strategy. Looking for ways to de-risk the awards is part of our strategy. But the fact that the size of the jobs are smaller, one part is because it hasn't got construction. I mean SASA would have been more than [ EUR 1,600 billion ]. The Ronesans, we have the partner of construction, it would have been a job, and we decided to partner. And therefore, it would have been EUR 1 billion. If you go and you take the jobs of GE, Siemens and Mitsubishi and you compare those jobs with all the combined factors we've done before, that's why we understand the risk would have been on top and the technologies regarding GE, Siemens and Mitsubishi would have been non-duress. So the jobs would have been about EUR 600 billion to EUR 700 billion each. So it's a mixture of both. The jobs came as they came, that we put a great effort in not looking for volume, but looking for quality and a de-risk award.

The next question comes from Robert Jackson from Banco Santander.

The question is related to the energy transition. is Tecnicas targeting any niche segments or markets because it considers it has something different to offer? In the traditional business, I think you have a very solid track record in the hydrocrackers, something where you are different and you can add -- maybe you're more competitive. Is there any segment which you -- in the same way you could be offer something different in the energy transition and leveraging off some of your clients in different markets?

I mean, the thing is that in energy transition, the big investments still have to come. But obviously, we have something to offer. And in some presentations, we've said, I mean, if a customer needs to work in a big green hydrogen plant, they need someone that has able to do the -- not only to do the first design, which we escalate that technology, because those technologies have to be escalated. So you need the initial process engineers. Once that technology has been proven and escalated, you need to put together a task force of engineers to do the design. I don't know whether it's going to be EPC. Let me tell you, I think EPCs on any transition is going to take a while. Customers may want. It's going to take a while because it might be EP construction management, because technologies are not fully closed. So you cannot close. None of us know how much we cost to construct them. We might close the procurement. We may close the engineering, but not the construction. The technologies that have to be escalated, they're not rocket scientist technologies. It's an issue of cost. And once that cost working together has been reduced, it's an issue of having a good team of engineers that have done similar things, and that's where we can offer. That's why we're working for GD Dynamics. That's why we're working with Repsol, developing the plant. That's why we're working and studying with [ public ], how we can decarbonize and what are the investments that they need to make first of all in Southern Spain and then all over the world. And then the capabilities on project management and execution is both. You have to be able to design and then you have to manage. And for that, you need energy services, engineering houses. And I think -- and that's why -- that's the feedback we're getting from customers, sometimes our traditional customers, sometimes our investment groups, infrastructure groups that are trying to put a lot of money into the market. And that's the feedback we're getting. And that's the feedback we're getting in the recent award with GD Dynamics.

So I guess you have a very strong potential domestic market as well, which you can leverage off as well. In terms of Spain, there's a lot of opportunities there as well.

To be honest, it will be very nice. We do think in Spain, but I don't feel very, you know -- been in Madrid and having 99% of the business outside, it's a lot of fun. But I would prefer to have a big chunk in the backyard. And I'm looking forward for that. And I do believe there are great opportunities.

The next question comes from James Thompson from JPMorgan.

I was wondering maybe if you could just talk a little bit about the near term. Obviously, there's a lot clearly happening in geopolitically today, I mean, situation. Is that sort of changing discussions around potential timing of contracts? Are clients looking to sort of wait and see? Are they sort of looking to deploy capital sooner rather than later, given everything that's happening? And secondly, obviously, you've got a very small relative percentage exposure of your backlog to Russia at this point. But it'd be good to sort of hear your thoughts about project work in country and whether you're sort of going to stop working there?

James, to be honest, I cannot be very precise because we believe, especially today and the last weeks, the level of uncertainty is great. And the level of prices is uncertainty. We've seen both. We have seen, as I said, to make a while ago, we have seen scenarios that are -- we have signed right away and placed the order and saved the order. It has to do with power. Because prices would escalate and the investment needs there. And in the middle of this turmoil, we're having the feedback on some customers lift, which -- we're working on contracts, we're working on and just wait a little bit. But all of them, they're waiting with urgency. I mean, we are feeling some sort of level of urgency in the market to invest, because, well, they have money, they have made a lot of money, they're making a lot of money and the market is there. So I mean the investment mood that we post in market has nothing to do with the one we had in 2016 and '17. It start to be -- and its far better than the one we saw at the end of 2019 when the market was fully recovered. Now they have the market and they have to invest. Obviously, uncertainty sometimes accelerates, which has been the case with us. In some other cases, there's a bit of wait and see or less -- more than rethinking the investment and see whether I can restructure if it's too expensive. Exposure and backlog to Russia, I said it before, the only job we've got is the -- and we just started. We just started in the last quarter of the year, which is the job which is ENAP for Gazprom Neft is EUR 240 million, which represents about 4% of the backlog and 2% of our 2022 sales. That's on the -- and it's at a very initial stage. We're having -- we're not very much engaged in the job. We have very little risk.

And just going back to actually what Mick asked about and start in terms of the Q&A and the reprogram backlog. These were for pure fixed price contracts to begin with. I mean, I'm just quite interested to understand how you've been able to renegotiate price through that contracting structure? Because I guess it was the view that the customers would be quite happy probably to allow more time, but probably less happy for it to cost them more money. So I guess just to confirm, those are all full fixed, pure kind of lump sum turnkey projects rather than any other structure?

I think it's a balance. Clients have willingness to accelerate now because it makes sense. And simultaneously, they know that they need to pay for it. I mean there are some extra costs. And if you want me to move faster, you have to help me. It's unfortunately, probably the contract does not cover specifically the situation, but probably nobody in his mind has when signed contract, the idea of a potential COVID coming. So in the end, this is a win-win. I mean, both the client and us need to solve these problems to force us to move fast.

The next question comes from Mick Pickup from Barclays.

Juan, can I just go back to the comment you made on energy transition and the size of the projects. Obviously, a lot of energy transition projects to date seem to be somewhat smaller. So what is it that you're seeing, think the size of those energy transition projects can become meaningful in the shorter term?

Mick, good to have you back. And I do believe -- I mean, as I said before, for us, energy transition portfolio is this story, is we'll have to bolt new opportunities. Some of the jobs might be smaller and some others might be quite big. But even if it's smaller, I mean, restructuring of sales to capture them, because they're going to need new technologies with the need to be escalated, not complicated technologies but new technologies. And I think we have a lot to bring. And let me tell you, we're engineering house. We made money. We make a lot of good money developing engineering. So it shouldn't be an issue of size. It should be an issue of putting together a profitable business. And I think we're going to be seeing a profitable business quite soon.

Thank you. Ladies and gentlemen, there are no further questions. I will now give back the floor to the company. Thank you.

Okay. Thank you very much. I think we are done because it was year-end, and we were 2 and a lot of questions you have taken a bit more than an hour. So thank you for staying with us, and thank you for supporting us, and we'll be talking to you in, I understand, May. Thanks a lot.