Technip Energies N.V. (TE) Earnings Call Transcript & Summary

Good afternoon. This is the conference operator. Welcome, and thank you for joining the Technip Energies' Third Quarter 2023 Results and Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Phillip Lindsay, Head of Investor Relations. Please go ahead, sir.

Thank you, Alicia. Hello, and welcome to Technip Energies' Financial Results for the First 9 Months of 2023. On the call today, our CEO, Arnaud Pieton; and our CFO, Bruno Vibert, will first present our business and financial highlights, and this will be followed by the outlook. After this, we'll move to Q&A. Before we start, I would encourage you to take note of the forward-looking statements on Slide 2. I'll now pass the call over to Arnaud.

Thank you, Phil, and welcome everyone to our financial results presentation for the first 9 months of 2023. Our solid results year-to-date reflects our team's relentless focus on execution, and we reaffirm our full year outlook. While the year-over-year revenue comparison is impacted by the Artic project exit, not withstanding, we achieved 30 basis points of recurring EBIT margin accretion on revenues of EUR 4.4 billion. Looking at the segments. The third quarter marks an inflection point for project delivery as revenues improved sequentially and margins remained high. And as a result of our strategic focus, the TPS segment is delivering outstanding revenue and EBIT growth. After 9 months, TPS revenue and EBIT have exceeded that of the full year 2022. Commercial momentum was sustained in TPS with orders keeping pace with a significantly improved top line, supporting the long-term growth trajectory of the segment. Finally, our business outlook remains strong. And as I will discuss later, our early engagement and tendering levels, notably in LNG and energy transition markets enables us to selectively add to backlog, which closed the quarter at EUR 18 billion, up approximately 30% versus last year. Turning to operational highlights for the third quarter where the execution of our world-class portfolio of projects as well as TPS activities are yielding strong financial results. This includes the provisional acceptance certificate on Coral floating LNG and in addition, while it is not on the slide, we also received the practical completion certificate on the Gas FPSO for the carriage project. Overall, solid progress, which reflects our team's resolute focus on delivery and effective customer engagement. Turning to commercial successes and strategic highlights. We secured several new orders in energy transition markets, including a hydrogen production unit integrating our proprietary SMR technology for BP's Queenan biorefinery in Australia. This will be executed under an EPS commercial model, encompassing engineering, procurement and modular fabrication. In addition, notable services awards were received in sustainable fuels and green hydrogen, and we secured multiple studies for Canopy by T.EN, our modular carbon capture solution that, in aggregate, represent more than 12 million tons per annum of CO2 capture potential. As you know, Technip Energies is a firm believer in the power of collaboration in achieving the world's climate ambitions. In the quarter, we strengthened our global alliance with LanzaJet to integrate our Hummingbird technology in their alcohol-to-jet process to produce sustainable aviation fuel. The world's first commercial plant at Freedom Pines in the U.S. is soon to be commissioned and should lead to LanzaJet and T.EN working together on many future SAF projects. We also recently broke ground on a pilot plant for recycled polyethylene, rPET, with our partners IBM and Under Armour. The plant, which is scheduled to come on stream in 2024, will serve to validate the technology in view of its commercialization at an industrial scale. Separately, in addition to these partner initiatives, we are investing in R&D, with expenditure expected to grow this year by 30% versus 2022 to a level equivalent to 1% of company revenues. Before passing over to Bruno, I do want to make a few comments about a recent article published in the French media regarding our involvement in the Arctic LNG 2 project. First, in executing an orderly exit from the Artic LNG 2 project in H1 2023, Technip Energies complied with in order of priority, international sanctions and its contractual obligations. Second, a contract creates rights and obligations between parties and for as long as the ArticLNG2 contract remains in force, Technip Energies was obligated to carry out all contractual activities that we are not prohibited by the sanctions. Third, by withdrawing completely from Russia and exiting from the Artic LNG 2 project in an orderly manner, we have, in fact, gone beyond the strict application of sanctions, holding all activities in Russia, notary to covered by sanctions. Finally, I would point out that throughout the project, Technip Energies has worked with external advisers and the relevant authorities to ensure strict compliance with sanctions that were introduced progressively by the EU, the U.S. and the U.K. So in summary, I want to reaffirm that Technip Energies has seized all activities in Russia. Technip Energies completed its overly exit from the Artic LNG 2 project in H1 2023. And contrary to the misleading statements that appeared recently in the press, Technip Energies has at all times fully complied with the applicable sanctions. I will now pass the call over to Bruno.

Thank you, Arnaud, and good afternoon, everyone. Turning to the highlights of our financial performance for the first 9 months of the year. Adjusted revenues of EUR 4.4 billion compared to EUR 4.9 billion in the prior year, with a ramp -- with the continued ramp-up on Qatar and very strong TPL growth only partly offsetting the impact of our exit from the Artic LNG 2 contract. Adjusted recurring EBIT margin increased by 30 basis points to 7.2% in LNG and downstream as well as growth in TPS volumes and margins. Adjusted diluted EPS reduced by 8% year-over-year, impacted by a modest reduction in EBIT and nonrecurring items, partially offset by higher interest income. Adjusted order intake for the first 9 months is strong at EUR 9.5 billion, equivalent to a book-to-bill of 2.2% and benefiting from the major NFS award in Q2 and well supported by strong contribution in TPS as well. Finally, in recognition of our differentiated hybrid model and the quality of both our balance sheet and backlog, our credit rating was upgraded to BBB investment grade by S&P in September. In summary, our people continue to drive forward and execute well underpinning 2023 guidance, which we reaffirmed today. Turning to our segment reporting and starting with project delivery. While the year-over-year picture sees materially reduced revenues, principally due to the exit from RT002. As I told you last quarter, H1 revenues were expected to reflect the trough for project delivery, and I'm pleased to report sequential growth in the third quarter versus the second. The continued ramp-up of LFP in Qatar and early strange contribution from NFS will support this trajectory. Execution has remained very strong, evidenced by notable strength in margins at 7.8%, up 60 basis points year-over-year. Due to the recent contract wins and expected awards in the coming period, the mix will trend towards a more balanced blend of early and later stage projects, bringing margins to a more normalized level. Backlog is up over 35% year-over-year, equivalent to more than 3x 2022 segment revenues. This provides excellent forward visibility and support future revenue growth. We expect to reinforce this outlook through selective additions to backlog given the positive market backdrop, which Arnaud will address later on. As a reminder, we have set a medium-term framework for 2025 and beyond from project delivery to be at EUR 5 billion to EUR 6 billion of revenues. We reaffirm this outlook. Given the ramp-up of NFS and likely contribution from future awards, we expect from the current run rate of close to EUR 4 billion, a somewhat steady growth profile through 2024 with stronger growth materializing in 2025 and in 2026. Turning to TPS, Technology, Products & Services. Momentum remained strong with revenue growth of close to 50% year-over-year, boosted by the strong order momentum we achieved in the last 18 months. Driving this impressive growth is our commercial success across several areas, including technology and property equipment, notably for ethylene, where we have a leading market position, high services volumes, particularly in sustainable fuel markets and very high front-end engagement, consulting and studies across energy transition markets. As a result of these higher volumes and the mix benefit from the higher technology and product revenues, margins have improved by 50 basis points year-over-year to 9.7% and close to our medium-term target to reach double digits. Consequently, adjusted recurring EBIT for the segment has increased by 55% year-over-year. Turning to orders and backlog. We are particularly pleased that order intake has more than kept pace with the fast growth in revenues and our book-to-bill on a trailing 12-month basis remains above 1. In summary, our strategic focus to drive top line and margin accretion in TPS is yielding strong results, giving us confidence in our ability to reach and sustain our medium-term target of $2 billion plus revenues and more than 10% margin. Turning to other key performance items and beginning with the income statement. Corporate costs of EUR 51 million are in line with our projected full year outturn of EUR 60 million to EUR 65 million. The main item of note impacting the third quarter was cost close to EUR 10 million associated with the employee share offering, ESOP, which was a resounding success, as Arnaud will address later. These costs are specific to Q3 and will not be repeated in the fourth quarter. Higher global interest rates are benefiting our net financial income, which at EUR 60 million for the first 9 months is providing a tailwind to earnings. Lastly, on the P&L effective tax rate was 30.1% and consistent with the top end of the 2023 guidance range. The tax rate in the first 9 months is impacted by the P&L settlement. Excluding this, the underlying tax rate for the period is 27.7%. Moving to balance sheet where the picture is broadly unchanged from the half year view. The continued strength of this balance sheet was one of the contributors to our recent credit rating upgrade. As I mentioned in previous earnings calls, the structure of this balance sheet is sustainable. Existing projects in backlog as well as future awards will indeed continue to contribute to the differentiated capital structure. In a period when liquidity, deleveraging or refinancing can be a concern for some, Technip Energies is very much immune to these and on the contrary, can leverage on these strengths to continue to implement a long-term and balanced capital allocation strategy. Before passing back to Arnaud, let's consider our cash flows. Free cash flow on an underlying basis or excluding working capital, was EUR 356 million and consistently strong as we executed across our portfolio. Cash conversion from EBIT on the same ex working capital basis is high at more than 100% and trending above what we could consider a normalized conversion owing to the positive impact of interest income. The working capital outflow year-to-date reflects the balance of the portfolio with several projects in the later stage as well as the cash deconsolidation and transfer relating to our exit from the Arctic LNG 2 project. Working capital trends are likely to improve over the next 12 to 18 months based on the expected contribution from future awards and milestone payments on recently secured projects. Other items of note include a EUR 30 million capital increase associated with ESOP, and we end the period with more than EUR 3.5 billion of cash and cash equivalents. I'll now turn the call back to Arnaud for the outlook.

Thank you, Bruno. With our strategy taking hold and local energy markets maturing, we have seen a positive shift in early engagement and commercial pipeline. Compared to 2021, the volume of FEED and pre-FEED studies relating to energy transition has doubled, while the proportion of my hours dedicated to these themes is more than 40% compared to 20% 2 years ago. Our skills and capabilities are increasingly being recognized across industries. This is evidenced by new customers in industries such as power, aviation, biochemicals and hydrogen. And these prospects are as these prospects, which final investment decision. This can represent a material diversification. And in the long term, our company will be even more resilient because of this broader customer base. Looking at our opportunity set, the change is striking. While we continue to see LNG playing a prominent part of our positioning and tendering, energy transition markets, excluding LNG, have grown in volume and in value. Some of these new markets have taken longer than expected to shape up. The projects are maturing and government policy and stimulus is healthy. We now see energy transition projects of material size coming into view. By this, I mean do it with potential value in excess of EUR 500 million or even EUR 1 billion plus. We are very confident that we have the right capabilities, technologies and partnerships to capture these opportunities and deliver sustainable value for our clients, shareholders and society. Turning now to LNG, where the near-term outlook remains particularly robust. Today, Technip Energies has more than 50 million tons per annum of LNG capacity under construction across 3 projects in the Middle East and the Americas. While we are clearly in a good position, industry trends towards more standardization, modularization and even replication will enable us to do more with the same resource base. We have previously discussed our involvement in around 10 FEED studies, and this remains the case even after the award of Northfield South in Qatar. In aggregate, this pipeline of opportunities equates to more than 75 million tons per annum of new LNG capacity in either feed and/or tendering stage. This excludes any further expansion opportunities in Qatar with the majority of activities centered in 3 key regions: North America, Africa and other parts of the Middle East. In addition, approximately 20% of this pipeline is considering SnapLNG by T.EN. In summary, the LNG market remains robust, particularly in the near term. And as a leader, we are well positioned to selectively secure important contracts in the coming 12 to 24 months. And in the long term, LNG will continue to provide T.EN with a solid revenue base. Moving to plastic circularity, a market where we believe T.EN can build a truly differentiated position. Today, the world has a plastic waste problem as the volume of plastic recycled is a mere fraction of that produced. The issue is not simply due to single-use plastic bottles, but also because of apparel and textiles, where less than 1% of PET textiles waste is recycled today. The global market for recycled PET or RPD is currently around 12 million tons per annum and largely based on mechanical recycling. This technology is mature, albeit with limitations and focused primarily on plastic bottles and overused and scarce commodity. Advanced chemical recycling is therefore needed to efficiently process or to recycle pet such as garments and nonmechanically recyclable plastics. This is where we see the future growth potential. The market drivers are clearly there with vast commitments from major players and consumer preferences for sustainable brands at acceptable prices. And while regulation is in place today for parts of the industry, notably single-use plastic bottles, it looks highly likely to materialize in other areas, including textiles and other industries. Technip Energies brings relevant expertise to become an active agent of circularity through advanced chemical recycling. We have extensive knowledge of materials processing for plastics and polymers. Technology will be important, and we know how to scale them up. However, this is only part of the story. To be successful in this space requires mastery of the whole ecosystem, securing feedstock, offtake and the ability to demonstrate and certify circularity. And this is where we are now concentrating our efforts by teaming up with a diverse range of partners to develop and promote this ecosystem and deliver the promise of economical plastic and textile fiber recycling. Before closing, let me touch on ESG. We are very pleased with the successful conclusion of our first global employee share ownership program is up. The offering, which was 2x oversubscribed, has led to a substantial increase in the number of employees that are now shareholders in Technip Energies, demonstrating the confidence of our people in our strategy and long-term value creation. More broadly, our sustainability journey is increasingly being recognized by rating agencies. This includes a AAA rating with MSCI as well as notable improvements with other agencies, particularly Sustainalytics. We have an ambitious road map and remain committed to continuous improvement on our sustainability path. In closing, the strength of our results for the first 9 months allows us to reaffirm our full year outlook. Momentum in TPS remains strong commercially and strategically, reinforcing segment growth. And we are focused on selectively winning the right projects from an attractive opportunity set to secure our outlook. With that, let's open the line for questions.

[Operator Instructions] The first question is from Guilherme Levy with Morgan Stanley.

I have 2 questions, please. The first one related to the Russian article. I was just wondering what are the next steps now that shareholders should have in mind for the coming months. Are there any further steps that the company can take in order to provide more evidence to investors that it was in full compliance with the sanctions? And also, are you going after the newspaper and seeking any sort of compensation from them? And then second question, if I may. In the past months, we saw a material outflow due to working capital consumption. So I was just wondering what should we expect for the next quarters? And how quickly can we see that coming back?

Thank you, Guilherme. All right. Let's start with Artic LNG 2. So -- and I will start with the second part of your question. So beyond the public letter that we have sent to Le Monde, what else can Technip Energies do to respond? We have retained and based on careful consideration with and legal advice. We have issued this statement followed by a public later addressed to Le Monde CEO. We have retained a leading media law experts in France. And as we should, we are reviewing our options. So I will not comment beyond that at the moment. In terms of what the next steps might be, listen, what I can reaffirm here is that I don't want to speculate on what will happen next. We are very confident that we have at all times fully complied with the applicable sanctions. And we are basically now focusing on the business and delivering our plan for the benefit of our shareholders and stakeholders. I will reaffirm beyond the fact that we have complied at our time with the sanctions. I will reaffirm the fact that we are not and we have not been under any form of investigation, okay? This is an important point for me to make by any governmental authorities in respect to our compliance with the international sanctions. And I've restated in my script, in my comments earlier that we had at all time worked with the relevant authorities in this exit process. So we are extremely confident in our full compliance to the sanctions wherever they were coming from U.S., U.K. or the -- I'll now pass over to Bruno for your second question.

On the working capital evolution this year, year-to-date, we have a slight negative, which comes at the back of more positive in the previous period. This was to be expected, given the later stage of projects. In Q3, we had no contribution on NFS. Again, that was something which was expected. So NFS contribution, the future awards, which will come in future periods, which we outlined will help, to some extent, to reverse this trend. And working capital should be more on positive in the coming quarters. It can always be lumpy as it is working capital, but it should be more on the positive trend in the coming quarters versus where we are today.

The next question is from Kate Somerville from JPMorgan.

First one is on your pipeline. You have almost 40% in energy transition, which is obviously really significant. Just want to get an idea of when we're going to see these orders really get scale. I think orders we see announced tend to be the GBP 50 million or something like that. How big could this get? And how quickly do you think that could be? And which of the technologies do you think is the most scalable? And then could we just get an update on what you're seeing in terms of the LNG pipeline, especially into next year, which of the main projects you're looking to tender for? And how is the confidence looking in terms of winning those?

Thanks for the question. So indeed, we've observed an acceleration in quantity and value for energy transition prospects that will turn into projects eventually. And as you've pointed out and as I expressed a bit earlier, we see an increase in the value. Those projects will -- are likely to be in the $0.5 billion or north of EUR 1 billion when they come to -- when they reach FID. Obviously, FID is not something we control at Technip Energies. We are here to work alongside our clients in order to differentiate in a sense, so that they can reach an FID for those projects, and we can bring the projects prospect to a price point that is acceptable to the client. The main domains where we will see acceleration at scale and where the, I would say, the space where it's going to be, again, at large scale first, we believe it's around blue hydrogen. There's one of them out there that is public. I have in mind, obviously, the ExxonMobil Baytown blue hydrogen and ammonia in the U.S. There is further blue ammonia projects in the Middle East that are of very significant size. Also, I mean, of larger size than before are carbon capture projects. There's, of course, the BP Neurotiside opportunity, which we hope will reach FID into 2024. But again, this is not something we totally control. But there are similar sized carbon capture related projects in the U.S., in particular. The rest of the space where things are really taking off in a material manner. Our biofeed and biochemicals have spoken particularly about SAFs, so sustainable aviation fuels, where the regulation is now in place, and the pilots are coming to a point where we will have more clarity with regard to the performance of the solutions, et cetera. As we believe the pilots will perform, this will really open the tap to a much larger volume of opportunity of projects. Those could be of, I would say, a bit of a smaller size because if I remind you of it, the SAF is not so much a problem of demand. The demand is here. Airlines will want the SAF. The SAF challenge is more about the feedstock. And the feedstock will depend on the jurisdiction in which you are being from alcohol to jet or municipal waste or whatever. So the infrastructure may be of a slightly smaller size, but you will need many of it and many of them. So that's a very promising pipeline for Technip Energies, regardless of the SAF pathways, therefore, regardless of the feedstock to sustainable aviation fuels where there is definitely a high level of demand. And lastly, we are observing some more meaningful acceleration in terms of the size of the project in green hydrogen and power tox. So really, it's a very diverse pipeline of opportunities with a larger scale and the largest site being with blue hydrogen and ammonia and carbon capture, but the rest really following with probably a much greater number of projects of, I would say, a relatively smaller but still a very meaningful size because we're not in the tens of millions per unit for staff, we're obviously in the hundreds of millions, and with many of them to come. In terms of LNG, a very rich pipeline as we indicated, of a really good quality. So you will allow me to stay a little bit discrete with regard to what is it that we are actively pursuing. I think confidentiality in where our focus is always good in this matter. We like to act that way. But I just want to reiterate that the areas where we are focusing our effort on are about diversification in geographies. So it's Africa, it's the U.S. It's also other parts of the Middle East, so outside of Qatar. And we are concentrating on those projects where we can truly differentiate and which are, I would say, more mature in terms of the solutions that they've selected towards a decarbonization or a low-carbon LNG. So we are extremely active concentrated on those prospects where the electrification is involved and powered by clean sources of our look, I mean 0 carbon sources of electron electricity combined with preconversion carbon capture. So that's really where our focus is because we believe -- I mean we want Technip Energies to be part of, I would say, the highest quality pipeline in terms also of the positive impact that LNG can have on climate in the sense that LNG is needed. So let's focus our energy on those prospects where we can decarbonize upstream of the user, downstream of the well and upstream of the user. And that's where we are focusing at the moment.

The next question is from Jean-Luc Romain from CIC Market Solutions.

My question relates to your pipeline of LNG opportunities. Are some of them already the SPLNG proposal that you launched recently? And I have a more silent question regarding the minority interest just before the bottom line. It kind of tripled compared to last year. What's in there, please?

Thank you. So on the LNG pipeline, yes, as indicated, 20% of the pipeline that we are actively exploring is assuming or is on the basis of our SnapLNG product and proprietary solution. Two of them are in the U.S. Another one is outside of the U.S. So clearly, I need to remind you, SnapLNG is an investment by Technip Energies to modularize the mid-scale LNG infrastructure and SnapLNG is also designed to be encompassing, like I said, carbon capture solution precombustion, the gas coming on the well. But SnapLNG is also electrified. So it's a family of solutions with, I would say, relatively larger venues when compared to other solutions out there, but it's a family of solution for low-carbon production of LNG. So 3 active tenders on the matter. We'll see where it goes. But clearly, very active within Technip Energies at the moment. Bruno, maybe for the second question.

Yes. So minority interest, we have a couple of companies, entities where we have the full control, but we have minority partners that in the Americas, that in Europe, that was also the case for our partners in the Arctic LNG 2 project for the out of Russia scope. So all of them will contribute to this. And this year, we have a more impact coming from the exit of Artic LNG 2 and our partner sharing that. So that has partly contributed to the evolution. But all, let's say, the other companies are also to contributing to this trend.

The next question is from Victoria McCulloch with RBC.

So given the strong backlog you're currently working on and the sizable LNG pipeline, could you talk about how you balance these projects? And do you need to grow your engineering footprint materially? Or should we assume that some of the benefit of Snap LNG, as you mentioned before? And apologies if this is slightly overlapping Kate's question. But in terms of the geographical split in terms of CCUS studies that you talked about the 12 million tons per annum. Could you give us a bit of color? Are these CTS independently? Are they tied to other work and roughly do aggressively what does this look like? And finally, can I just check -- you said growth in project delivery should be higher from '25 -- sorry, from '24 to '25 than it is from '23 to '24.

So as I said, so today, the current run rate of project delivery is about EUR 4 billion, just shy of EUR 3 billion year-to-date Q3. What we've given and provided as a financial framework for what was the medium term, so you can read 2025 and beyond, with EUR 5 billion to EUR 6 billion. So given the project currently in backlog that will ramp up to be NFS, but it's a long duration project plus other awards. What I said is from the current levels and the run rate of close to EUR 4 billion, you would have a somewhat steady growth of top line up to this range where we will reach that in 2025, 2026. So that's why we do not see really coming to this range 1 year early or 18 months early. It was more the medium-term framework, and this is well supported by the backlog and the growth that will come as these projects start to be executed.

Victoria about the pipeline of LNG opportunities and how we are focusing our effort and resources. So we are concentrated in -- and I try to express that through my answer to Kate earlier. We are trying to concentrate and to dedicate our resources on those opportunities, LNG prospects and LNG opportunities that are the merit of being fully compliant, first of all, with our selectivity principles. Maybe a reminder of what they are. We must have done the feed before we -- for us to engage into, I would say, any form of EPC contracting on LNG, but also other types of projects. So have we done the fees or no. Do we own the technology? Yes. Do we know that country, yes or no? Do we have a known and reliable construction partner, yes or no? So we are concentrating on those and also the fifth one, very importantly, we -- and that was -- I think this is also the -- again, the reason why we've been able to exit Arctic LNG 2 in the way we have without any net negative impact on the company. We will engage into those contracts when we can be cash flow positive at all time during the full life cycle of the project. So those are the principles. Then Considering the richness of the pipeline as expressed to Kate a bit earlier, we are focusing our effort on those opportunities where LNG will be produced, I would say, in a cleaner manner. So that means with carbon capture precombustion plus electrification. So that certainly has our priority. We're also prioritizing where the modular approach is favored by the client. And finally, where there is replication because replication allows us to basically do more with less in terms of the resources. So in order to tackle a very rich LNG pipeline, the fact that the prospects on which we are engaged are for quite a number of them embracing the modularized solution is allowing us actually to consider doing a bit more with the same amount of resources and without having to tap into the resources we don't have or to scramble for resources. So clearly, those attributes of the prospects, so cleaner LNG with through electrification plus carbon capture, the right, I would say, attribute in terms of fitting our selectivity principle plus modulization and replication. That's really where we are prioritizing. And obviously, as I expressed a bit earlier, we are looking for diversification or geographical diversification as well. We are enjoying a very strong presence in Qatar. And for the future ones for 2024, it's about other geographies, so as to balance a little bit the level of our investment -- our involvement on those prospects. About carbon capture. And I will insist the carbon capture the number of 12 million tons per annum of potential quantities of carbon being captured. This is excluding everything we do on carbon capture on LNG plants, right? So when we deploy preconversion carbon capture solutions on NFE and NFS in Qatar, those are -- it's a massive amount of CO2 being captured. But this doesn't fall into the 12p number that we have communicated. So it's the current capture through LNG plants comes in addition to the 12 MTPA. Very interestingly, and we are deploying pilots at the moment around the world. So they are in Europe, Northern Europe and also in the Americas, interestingly. So the geographical spread for carbon capture is -- and where we see acceleration very clearly, North America and various parts of Europe.

The next question is from Mick Pickup with Barclays.

Obviously, if you look at your backlog, it's very healthy. I know you had a quiet quarter, but there's been some mega awards elsewhere to some of your competitors. So I've never seen backlog fit across the space. Can you just talk about what you're seeing in the supply chain? And if there's any areas of concern with this volume of workload that's going through the system?

Supply chain, I would say that there are pockets in particular, on rotating equipment, for example, long ileitis where there -- we might be sensing a bit of a bottleneck and there's I would say that the lead times are not getting any short term. That's a reality. For the rest of the bulge logistics, et cetera, we've seen a fair level of normalization across the board. So we might not be everywhere totally back to pre-COVID situation, but we are actually trending towards a pre-pandemic situation. So there are a few bottlenecks, but they are not across the board at this moment, certainly not across the board. One point of attention and I was mentioning my answer to Victoria, in a region like North America or the Middle East, in particular, access to construction resources is an area of attention for us. And this is why we are not going after -- we're not running crazily after every single prospect. We are being selective. We are going after what we consider the good ones for Technip Energies. And they have to demonstrate the attributes that I listed a bit earlier. And I insist on the fact that for us to engage and you have seen that on the NFS project in Qatar, we have taken a construction company as a joint venture partner. That's the reason for that. Being able to rely on a construction partner that, as I would say, the depth of resources that allows you to accelerate, mobilize more or demobilize depending on the needs for acceleration or not or keeping the pace of the work front is crucial. And that is actually one of the most critical points of attention in selecting the what and the where and with whom as we are changing some of those prospects.

Okay. And obviously, you've been selective, and I think all your peers are saying they've been selective be. Do you think your clients have realized that the market is quite tight. And what do you think you can get out of your clients given the ball seems to be in your course at the moment?

At all times, Mick, as you know, you've known us and you know the space well, we need to maintain a bit of responsible behavior because the projects, they obviously do exist through our clients wanting to develop or engage into a development, but they also exist through the likes of us making those projects variable, i.e., finding the right price point for our clients so that there's no hesitation on the final investment decision. So we need to act responsibly at all times. There is certainly a limit, I would say, to even when it's a bit less competitive and it's a more positive environment, I would say, always a limit to how far we can go. The important for us is to be able to lower our cost base through differentiation and therefore enjoy a healthier margin while giving the opportunity or not -- and enduring, I would say, the viability of the project. What is interesting to observe at the moment is that it seems that we are in a situation where our clients are able to take investment decisions at, I would say, a low breakeven, therefore, a price point that is acceptable to them while allowing for the supply chain, the likes of us and maybe our peers to make a decent living. So it's, I would say, a bit of a particularity of the space we've entered at the moment. Obviously, as far as Technip is concerned, we hope it's going to last forever. So let's -- but we will -- we must and we will continue to act responsibly because it's equally as important to be profitable than to allow for the projects to fly without the 5D, there's no projects, and therefore, we don't have much revenue to report.

The next question is from Katherine O'Sullivan with Citi.

Just a couple left. On downstream, I guess, we've seen Chemicals margins have been very weak this year. Could you provide some color on when you see this starting to turn and maybe pick-up in activity, any potential awards in downstream in your pipeline? And just a follow-up to the last question. I mean you've said differently this time on Northfield South, you've obviously got a construction company as a JV partner and you've started purchasing your equipment. Is there any other ways that you're approaching this in a different way to previous LNG projects, particularly in the Middle East?

Starting with your question number two, so that we can continue on that stream of topic. at the moment, very clearly, the prospects we are pursuing or for all the prospects we are pursuing, we are considering ways to derisk the construction part of it in the sense of access or securing access to construction resources. So if you see us engage into a prospect, you must assume that we are doing so while having secured the construction partner. We are securing the construction partner is not something that we will worry about post award. It's something that we worry about preaward and actually during the early engagement phase. And I'm talking firm commitments. Another way to obviously limit the risk around access to construction resources is to increase the amount of modularization that we can propose. I mentioned the BP project for Quinn in Australia. And I want to stay away from the acronym, but when you -- in the future, we read about EPS, so engineering, procurement and fabrication at Technip Energies, it means that the construction and the modularization, the building -- I mean the erection of the modules, the fabrication of the modules will take place away from its country of destination where you might be facing a scarcity of construction resources, North America, the U.K., parts of Europe, et cetera. And potentially, the Middle East, when you look at the potential of the number of prospects in the Middle East between, of course, Qatar, but also UAE, the Kingdom of Saudi Arabia, et cetera. You're talking hundreds and thousands of workers and construction workers a being needed. This obviously will have an impact on the ability to -- the likes of us and our peers to mobilize. This is why the approach we're taking is always to have the construction resources secured preaward or pre-FID. That's a condition for us to be involved in a prospect. And if that means bringing the construction partner for as long as that partner has the financial strength and surface to sustain that to bring them at the JV level, then why not. And that's what we've done with Qatar. And I think it's so far very successful. And we see that when we press the pedal, the partner is responding really well. And to be able to stand on solving ground and to know that there is actually a juice coming when we need to press on the pedal. It's one reassuring, but two, absolutely necessary in order to be able to have this conversation with you guys on a quarterly basis and with our clients on the predictability on the outcome and sustained progress in the projects, which we are enjoying at the moment in Qatar, for example. Moving on to downstream. A bit of a slow year this year on downstream. I saw a very strong year on ethylene last year. So the potential for ethylene will again come in 2024. We have very strong building blocks through licensing, but also equipment and projects for more ATM prospects, 2024 and ammonia as well. So clearly, 2 topics to watch. But I think we have very strong building blocks for potential awards at scale in 2024 on upfront. And maybe of smaller scale but not lesser importance, and I'm going to classify that as being downstream is everything we will do in biofuels, SAF and biochemicals. Because clearly, we will see the world needed, like I said, the demand for SAF is there. And we will see an acceleration as the, I would say, full scale miles are coming to operation and completion, and it will just validate the path forward on SAF, and that will fall, if I may say, in the form of a downstream in a position to upstream part of the business and the potential there is vast.

[Operator Instructions] The next question is from Daniel Thomson with BNP Paribas.

Maybe just a follow-up on the low-carbon opportunity set. I know you don't control the timing of your clients' FID, but I was just wondering, are you seeing any significant delays from clients in the time from pre-feed and feed to FID on some of the projects in your low-carbon pipeline because of higher interest rates or stress in certain areas of the supply chain? And could you remind us what the typical lead time is from feed to FID on a larger sort of $500 million to $1 billion low-carbon project like you referenced. I'm just trying to understand when to expect some of these larger known feed studies to turn into projects and if the macro environment has changed these time lines at all?

Thanks, Dan. I think I will categorize the opportunity set in 2 buckets or 2 different categories. You will have some of the very mature players, our traditional customers, IOCs, not to name them, wanting to invest in order to decarbonize their asset base and to progress with their ESG road map and decarbonization agenda. Those guys, when they decide to engage into a feed, pre-feed then the feed and typically, to answer your question between the start of a feed to FID you -- it's 18 to 24 months. It's a bit the same as for LNG, maybe a bit shorter because some of the projects might be a bit smaller, but just still in the space of 18 to 24 months. So what it is for an established player that is determined to deliver on this decarbonization and low carbon agenda or net 0 trajectory. There are not that many delays. It's actually -- the hesitation is more, if I mess if there's a delay, it's okay, when do we launch the feed or the prefeed of the feed. But once the feed is launched, I would say, we don't have any indication at the moment to suggest that there would be delays to an FID with this breed of player. And that space actually provides a very vast opportunity set alone blue hydrogen to decarbonize is needed in multiple geographies. Ammonia, which as a reminder, is also fertilizers is needed from the U.S. to the Middle East to India at large scale. So with the more mature players, once the feed is awarded, usually, the FID follows in the, I would say, traditional time frame, 18 to 24 months. Now if you are dealing with a player that is a bit new in the space that is the -- if you take aviation or other type of industries where the molecule handling is not so much their core business. They may be doing more -- they may be taking more time for prefeed and feed, scout-to-scout and understand to use that in order to understand better. And that's where we -- I mean the ecosystem and the -- I understand the cost of operation, the OpEx afterwards, the dos and don'ts and navigate, I would say, also the subsidies and the rest. And that's where we work with them and alongside with them to assist them with maturing their understanding. There, it may take a bit -- the dynamic is different because they would jump quicker into prefeed or feed because they need to understand and scout and I mean, try to grow and mature their knowledge, if I may say. So unlike the IOCs, who might hesitate a bit longer, but once the feed is launched, then there's less uncertainty towards the FID with the other type of players that might jump quicker into proceed in order to scout and to understand, and it might take a bit longer than to reach FID because they need to grab or gather, I would say, a more mature understanding of the dose and ones and the subsidies and the true cost and also how to operate the plant forward. So that's where we're here to assist.

The final question is from Bertrand Hodee with Kepler Cheuvreux.

Two, if I may. The first one is coming back on early remarks by Bruno on project delivery revenue phasing. Given your backlog and opportunities, in my view, will likely get ECD to the EUR 5.5 billion in 2025. But when Bruno, you mentioned a steady growth in project delivery from the for EUR 4 billion run rate in 2023. Should we understand project delivery, I would say, early guidance into 2024 at around EUR 4.7 billion, EUR 4.8 billion. That was my first question. My second question is the other way around on TPS. EUR 2 billion was your aspiration in 2025, you will get very, very close to -- with an above EUR 1.9 billion in as early as in 2023. How should we think about 2025 or '24 for TPS?

Okay. I'll take the first one and maybe hand off to Arnaud for the second one on TPS and the broader outlook. It's a bit early for 2024 guidance, although we've provided the financial framework. So I won't go into the 3-digit details post 4, post 5 on when we would be looking at it. So if I take a step [Audio Gap] range of 5 to 6. We clearly see the venue there. So that's, let's say, a good growth profile from where we stand today to 2025, 2026 now. How we get there, it depends on the sequence. I'm always mentioning some of the long-lead items. So a few moving parts there, which is difficult for where today to put an exact figure. But yes, very confident on the growth profile for projects and where we stand today. Very confident on T.EN capacity to be sustainable in this 5% to 6% range from some period post 2025. Now how we get there, we'll see a few moving parts, and we'll obviously provide more update as we release the guidance early next year.

About your question related to TPS. So indeed, we are extremely pleased to see TPS accelerating the way it has. And this is -- and we're getting closer to the EUR 2 billion revenue mark that we had set for ourselves as part of the framework that we communicated some months ago. Yes, it looks like we are trying to be a mark a bit quicker than we had imagined, which is extremely good and which is a tribute to, I would say, the organization and the team. We gave a very -- we define the strategy, we gave a direction to the organization. They are delivering. Everyone is understanding, and it takes quite a bit of effort to see an organization that has a very, very strong project history and to demonstrate that with what we have as Technip Energies, there are multiple ways of making business and multiple business models possible, product delivery and others, which are within TPS. But they are basically delivering and that's extremely positive. And I think I just want to thank the teams here because really, they are demonstrating that they are open-minded, and they are able to embrace and promote different type of solutions than the traditional, I would say, lump-sum EPC model. So great. The important will be to sustain that revenue level at EUR 2 billion because we don't want it to be just a spike and then a crush. No, we want to be sustained there. So first of all, we -- that's the first objective, be reached and sustain it. And then the acceleration beyond that will be, I think, through the success that is yet to be proven of some of the new offerings that we've released. I shall remind you of what will populate TPS, it's more technologies and more products as well in addition to the consultancy [Audio Gap]