Umicore SA (UMI) Earnings Call Transcript & Summary

Hello, and welcome to our call on the unique partnership between Umicore and PowerCo. My name is Jess, and I'll be your coordinator for today's event. [Operator Instructions]. I will now hand over to your host, Mathias Miedreich, CEO, to begin today's call. Thank you.

Thank you very much, and warm welcome also from my side. Good morning, everybody. It is a pleasure today that we can announce the successful signing of the joint venture agreement with Volkswagen through PowerCo on the creation of what we think a milestone in the European electrification targets. And I'm not only happy that we can announce this today. We have discussed this several times before. We have received many questions when will we be ready. But it was important for us to take the time for this agreement because, first of all, it's a substantial agreement that should last for a very long time. And secondly, we also have a specific requirement at Umicore to close such agreements, which is value creation. And I'm also happy today because we have also been able to agree with our partner that we can share quite considerable level of detail on those agreements and the proof points why this is value creative for us and why this is aligned with our targets that we had communicated in our Capital Market Day. So I will walk you through the presentation on the Page 2 and the following ones. And then we have enough time for all the questions and answers you might have on the subject. So first of all, I would like to go back to our Capital Markets Day. In June, we have communicated our RISE 2030 Strategy that was showing that Umicore has a unique opportunity for tremendous growth being positioned on one of the key megatrends of our century, the mobility transformation. And with our specific set of assets, portfolios, experiences and customer intimacy, we think that we are very well positioned to participate in this growth. Well, also, we have communicated is that there are significant investments needed to participate. Now the important point is that those investments we will only do if they create value for our shareholders. If they create value in terms of being significantly above the cost of capital in terms of ROCE. And we have also communicated that our goal for the business of rechargeable battery materials, the ROCE target is 12.5%. And also we have said that we will reach value-accretive territory as from 2026. And I'm very happy that with this agreement that we have signed, we are ticking all the boxes of the strategy in terms of growth, as we will see in a minute, but also in terms of value creation because what the 2 partners have agreed is that this joint venture will create value-accretive returns that are guaranteed, and I will elaborate a little bit more what it means guaranteed, and are in line with our 2030 return ambitions, as I have just laid out. So this is a milestone from my point of view, being a long time in the automotive industry, clearly a win-win situation that has been created. And I would like to explain you now in more details the setup of this joint venture. On the next page, Page 3, we will talk about the why. Why have both partners decided to come together? And history teaches us that joint ventures, partnerships, but especially joint ventures, are only long-lasting and only longevity if there is a clear balance, if there is a win-win for both partners, if both can see it as value creation. And our ambitions that we have are very big. 160 gigawatt hours by 2030 is a very substantial part of the European supply chain. So our cooperation is not only value accretive for both partners. It's also very bold. It will be the first and only large-scale, fully integrated supply chain in the automotive industry in Europe. And when I talk about fully integrated, it is truly integrated from the mines to refining that Umicore will provide into the pCAM and ultra-precision and high-purity CAM products from Umicore into the unified cell of PowerCo and finally into the electric vehicles of Volkswagen. So that's really one of its kind. It's bringing a considerable first-mover advantage to both partners and sharing the benefits of these partnerships in a very extensive way. Now in detail, what has been -- what are the value propositions for both partners? For Umicore, I think it's pretty obvious. We have access to a majority, a big portion of the European cathode active material markets through Volkswagen that is the leading player in this regard. That is the biggest European OEM, one of the largest car manufacturers in the world. And having secured -- contractually secured those volumes is very important. But probably what's even more important that these volumes are secured at guaranteed value-creative returns. And that's, I think, what's outstanding and what's also a proof point for Umicore's unique position in this industry being able to have such agreements. Now why would our partners do that? Because also we bring a significant benefit to Volkswagen and to PowerCo because we are enabling a securitization of supply for the ambitious ramp-up strategy. And as we have said before, batteries and software. These are the make or breaks in the future for the car manufacturers. And with us now opening our ecosystem and supply chain and assets and capabilities to Volkswagen, to PowerCo in this regards will give them this securitization of supply. And with that, a tremendous securitization of the overall strategy towards the end of the decade. So you can really say that this value creation for both partners that is materialized in this joint venture. Now how does the joint venture look like in detail? We go to the next page, Page 4. As we said before, it is an equal joint venture between Umicore and Volkswagen or PowerCo, Volkswagen through PowerCo, PowerCo being 100% subsidy of Volkswagen. This joint venture will produce pCAM and CAM. But this is not the only agreement that we have made, and I will detail more on that in the later pages. So we have on top of that an agreement on refining that will be done by Umicore towards the joint venture, a contract between Umicore and PowerCo, I will detail it out, as I said, for the first 60 gigawatt hours of refining to secure the ramp-up of the first Gigafactories. And then in the next step, potentially including refining into the joint venture as well as battery recycling that, as we have previously announced, is the ambition of both partners to also include into this partnership. On top of that, Umicore and PowerCo will also collaborate on the sourcing of sustainable and responsibly acquired metals and raw materials. So we will make our over 200 years of expertise in that material available to PowerCo. And PowerCo will use this to source those metals, and those metals will then be consigned by PowerCo to the joint venture, which is, of course, very positive also for the working capital equation of the new company to be formed. Now more details on the governance and management of the joint venture setup, you can find on the Page 5. As we said, it's a joint control joint venture with governance rights and reserved matters for both partners. However, the operational management is performed by Umicore. Umicore will also appoint the CEO of the joint venture because obviously, we have the know-how and the capabilities to run such an operation in the most efficient way and also to be able to utilize the economies of scale and synergies, vice versa, with our other operations. Also, Umicore will make the necessary IP available to the joint venture. I'm saying that because it's also an important step that we are securing this IP as a key asset of Umicore. However, it will be made available. And then also then rise back to Umicore from the joint venture. We are currently anticipating in terms of accounting to use the equity accounting method. But of course, we will provide additional disclosures to reflect the significant economic interest of the joint venture to us to Umicore. And as we have said, both partners are sharing the cost investment revenues and profits on a 50-50 basis. And the underlying agreements are designed to meet both partners' profitability and return criteria, and that's also a very important point, are reflecting the shared ambition of both partners, PowerCo and Umicore to have true value creation enabled by the joint venture. Now on the next page, you will see a little bit more about the dimensions. As we have said, very bold ambitions to power 2.2 million vehicles in 2030. For that, both partners will invest EUR 3 billion in that time horizon where the magnitude of the investment, EUR 2.5 billion will be done until 2026, and it is a co-investment on a 50-50 basis, as I said before, starting with 40 gigawatt hours in 2025, '26 to supply the PowerCo Salzgitter Gigafactory in the first step and then ramping up alongside the ramp-up of the further Gigafactories that will produce the unified cell until the end of the decade in Europe. So those investments, the investments into the joint venture will be funded by a mix of equity and nonrecourse debt. And currently PowerCo and Umicore, we are striving to have a 50% debt-to-equity ratio in this regard. Now we have talked a lot about the contractual agreements, the setup, and I think it's beneficial to summarize again what are those agreements and why are they value creative. So first of all, of course, we have the joint venture. But then there is a supply agreement between the joint venture and PowerCo with an agreed ramp-up scenario, as I've just said towards the 160 gigawatt hours, 2.2 million vehicles per year that can only be changed through a mutual agreement of both partners. So it is kind of set in stone until both decide that it should be different. And there are mechanisms in place, very significant mechanisms of which, for example, a take-or-pay, a firm take-or-pay offtake commitments and others that will guarantee I repeat, will guarantee as a minimum value accretive returns in the joint venture. And this, I think, is an extraordinary achievement that will help us to further strengthen the point that what we have communicated in our 2030 ambition is a very realistic target, and we are going forward under that same assumption that we will always -- we only invest if we can get value accretive returns. But that's not the only agreement. There is also the refining agreement, as I have just said, 60 gigawatt hours refining to start support the joint venture that is supplied by Umicore. Also here, we have similar safeguarding mechanisms in place that will, on a stand-alone basis for Umicore grant the same securitization of value accretive returns. And then finally, there is the agreement between Umicore and the joint venture regarding licensings of IP and remuneration valorization of the IP back to Umicore, together with a strong set of service level agreements. So altogether, all those agreements, I want to really phrase this now specifically, are securing and guaranteeing as a minimum -- as a minimum, the ROCE target that we have communicated in our Capital Markets Day on a large portion of the investments also that we have communicated. And the consecutive revenue. So it's not only a great deal for Umicore. It is a great deal for Volkswagen in terms of securing the ambitious road map to go forward. And also, it's an achievement and the proof of concept for our RISE 2030 strategy and highlights from our point of view, the uniqueness that Umicore has with its offering in this fast-growing market. That's so much as a short introduction. And now I will be happy to answer your questions in more detail.

[Operator Instructions] And the first question comes from the line of Ranulf Orr from Citi.

Just 2 to start from me. Firstly, on the investment in the JV, EUR 1.5 billion from you. I guess, is that included in the original EUR 5 billion CapEx program that you were talking about at the CMD? And then my second question is just on profitability, your earnings expectations from the JV. I mean, at what point does this break even for Umicore? I mean, does it follow the traditional profitability curve that your cathode materials business has followed to date, really very limited earnings in the early years, and kind of we only see the earnings coming through sort of towards 2030?

Yes, absolutely. So answering the first question, yes, it is completely in line and compliant with what we have communicated in our Capital Market Day that was included as it was agreed now. And in terms of profitability, also what is true for this joint venture, and it was already built in the curves that we have described that the RBM business, as we have said, will be entering, of course, there is a first investment, and there is a burden on the ROCE because of this investment, but will be value accretive as of 2026. And the same is valid here for this joint venture. It is the same curve because it was already at the time in June when we have communicated it completely included as it was closed now -- or as it was signed now.

Okay. So are you saying we should consider RBM and the JV as kind of one entity within your guidance? Or should we think of them separately [ in the time lines ]?

Yes. I think the targets, the mechanics and the value-creation potential that we have described being the result of our investments, they are equally valid for our business that we are doing as a stand-alone basis at Umicore as well as this joint venture. Of course, from a consolidation point of view, it is not like that. We have said it's an equity method. But we will provide -- we understand that it will be important to provide more transparency and more insight also on the proceeds of the joint venture so that we can give a kind of pro forma overall picture of our battery material business that is meaningful to the market.

The next question comes from the line of Geoff Haire from UBS.

I just wanted to ask where the location of the plants will be. Obviously, Nysa will be the one. But will there be others? or is all of this capacity going to be in Poland? And secondly, will we -- have you -- can you outline some of your thoughts around the energy costs for this plant, just given the European energy costs are significantly higher structurally probably for the next decade? And then thirdly, I was just wondering, when you talk about take-or-pay contracts, does that imply that if there's a volume drop at VW that they will pay you even if they don't take product from you up to a certain point? Is that how we should think about it?

Yes. Thank you, Geoff, 3 very relevant questions. So first of all, location. So the headquarter of the joint venture, so the holding, if you want, the management will be here in Brussels. And we will jointly decide on the plant location. So why I'm saying that? Of course, that's kind of a very strong industrial logic to co-locate this into at Nysa. But of course, we want to make sure to look at all of the options also in terms of external funding, of course. But we will, together with PowerCo, make this decision rather quickly because we will already in '23, of course, going into the ramp-up. But the other thing you have to see is that also, over the course of the decade, there will be a ramp-up of the Gigafactories of Volkswagen throughout Europe. And of course, we will make sure that the joint venture has always set up in the most economical way and the most value-creative way to deliver that based on also the locations. Now energy cost. One good argument for Nysa would be that we have been able to conclude already long-term PPAs on renewable energy. Now the aspect of renewability is very important. But in this context, also the aspect of pricing is important. And with that, it gives us also -- at the time when we closed it, probably not the intended main benefit, but now it's a very important benefit also secured -- largely secured cost situation. So we feel privileged in this regard. And now coming to take-or-pay. Yes, indeed, it's a take-or-pay industry standard while it will be either the capacities are utilized or there is a financial compensation for that. And that, as I said, is necessary because the agreement that was a requirement that we had and that was shared in the overall value creation picture was that the returns need to be secured, independent of the end market success of the electric vehicles of Volkswagen.

And not wanting to be too negative, but in the event this financial competition is needed, is that done on a quarterly, 6-month, annual basis?

Yes. I think this is a little bit too much of a detail that we, at least at this point in time, wouldn't want to share.

The next question comes from the line of Charlie Webb from Morgan Stanley.

Maybe just first around the guaranteed minimum value accretive returns. What are the assumptions for WACC? And what is that minimum value accretion? Is it 100 basis points higher than the WACC? Is it 200 basis points? How are you thinking about that? And just linked to that quickly, how do you think about inflation and rising rates? Is there a kind of a degree of inflation baked into that or is it a fixed return that you're looking for?

Yes. So let me describe it in the best way. So what you should take a reference of in terms of what is guaranteed on a Umicore level, what we will be able to achieve. It is in line with the ROCE target that we have communicated for the battery materials business in our CMD. And that you would say it's significantly above the WACC, which currently is at 9.5%, 10%. So that's not just a little bit more, but significantly more, but the reference would be our ROCE target that we have communicated in the CMD. And of course, this is only possible if the agreement has also a dynamic element of it that will make sure that those returns are also met if the inflation should be different than the initial assumptions. So I think that's what I can share with you.

Maybe just one other one around other customers and Umicore's independents. As you say, clearly, a big partnership, and I think partnerships are going to be important in this market. But how do you think about the -- how do you maintain Umicore's independence for your other customers and other opportunities? How are you thinking about that? And if you have any concern there?

Yes. That's actually indeed a very important strategic point. And what I have personally made sure to keep a close contact to our other customers in this whole process and to reassure them that Umicore is continuing to be an independent player in that market. And I was also a little bit positively surprised that maybe got positive feedback in a way to say, if we can guarantee and I gave this guarantee to our key other customers, that this will not deteriorate our focus on their concerns. They saw it as a positive because it will help us on the Umicore level also to use the surges, economies of scale, access to raw materials, et cetera, that we can potentially, for sure, utilize also for our other businesses. In this regard, they will benefit from that. But of course, we will not be able to make 10 of these agreements that we have just made. We are very selective in how we are further rolling out our agenda. And the prime element will always be, can we serve, can we fulfill the commitments that we have with our other customers. And in this setup, we are very confident that we can do it.

And sorry, just to get one last one in. In terms of what technology, is there any specification around what -- you talk about this being geared towards the kind of the unified power cell that Volkswagen is talking about. Does that mean that this is -- the technology is your manganese-rich technology, is that the focus here? Or is it that all technologies can be considered? Just trying to understand what's going to be going as a partnership?

Yes, absolutely. So the -- if you want, the mainstream is, of course, NMC batteries and nickel, NMC battery materials that are part of this agreement. But also explicitly including further development of that to look to other segments of the market, which are the cost -- design for cost segments. And yes, indeed, HLM is a very important technology that is also discussed in that matter.

The next question comes from the line of Chetan Udeshi from JPMorgan.

I was just looking at the Slide 6. And it says both partners to co-invest EUR 2.5 billion by end of 2026. I just wanted to understand that CapEx for 2026 because it seems way too high for a 40 gigawatt hour capacity. So can you maybe -- because if I do the calculation of like EUR 50 per ton, which is like completely off the mark compared to we typically see? So are you including some of the CapEx for the further expansion in that number as well, which is up to 160 Gigawatt?

Yes, Chetan. Yes, exactly. That's a good point to explain because first of all, the investment is, of course, kind of first of all, not for the 40 gigawatt hours, it is for the preparation of the next waves to come. So we have an agreed wave-by-wave plan that we currently have synchronized with the Gigafactory ramp-up plan of Volkswagen, of course, that we cannot share right now, but we are closely aligned. And that means, first of all, you have to put this to a much bigger capacity. You have to hold it in front of a much bigger capacity that is invested, and then we'll be going on stream consecutively. And secondly, what is also important is that this is not the investment for CAM. This is the investment for the full value chain, CAM, pCAM but also refining because that's ultimately what we want to do and we want to go forward.

So is the refining part different from the EUR 500 million investment you guys talked about for recycling for Umicore stand-alone? So this is going to be a separate capacity for batteries?

Yes, this is -- so just -- this is not to be mixed up. So the EUR 500 million that we have communicated was for battery recycling, which is completely different bucket. What I was talking about is the supply chain, the refining of the virgin metals that come before. So my point was only to say in terms of comparability of CapEx density, if you make the math, it's important to say that this is not CAM, but this is a CAM plus pCAM investment that we have here, which is anticipated earlier. So it's not 40 gigawatt hours. It's more towards -- nearly coming to the full extension. There's only one step left afterwards. And it's more steps in the supply chain than just CAM.

Our next question comes from the line of Sebastian Bray from Berenberg.

Congratulations on concluding the negotiations with VW. My first one is on control for this JV. The slides make reference to Umicore having 50% plus 1 share. Is that just symbolic? Or does Umicore actually have majority control to a small extent despite the fact that this JV is nominally described as 50-50? And why would it choose to consolidate at equity rather than just do a pro rata 50-50 consolidation? And my second question follows on from Chetan's on CapEx intensity. EUR 3 billion now in CapEx terms, is that figure inflation adjusted or nominal, i.e., by the time we get to '26 or '27, are we actually going to be talking about 4%, 4.5% potentially? Or has something being done to lock in that level of CapEx?

Yes. Thanks, Sebastian. Indeed, it's really true joint control. The 50 plus 1 has technical reasons that were necessary, but it's not reflecting control on the one or the other side. It's really a joint control. . And second question, in terms of CapEx inflation, et cetera. Now there are 2 elements. There is, of course, a certain assumption that we have already taken on inflation at the point in time where that was possible. Now the other thing that I have tried to allude on in the previous answer is that there is a certain flexibility in the protection mechanisms that will react also to inflation. That's -- I think you understand what I mean. So that means our measures are, of course, first of all, early enough, taking certain assumptions. Secondly, constantly working on CapEx density from technical side to have even potentials maybe beyond what we have initially planned. And thirdly, kind of there is a contractual element as well that makes us confident that we can deal with this topic.

And just to clarify, this additional project, if we go back to the CMD guidance of 400 gigawatt hours or more by 2030 gives Umicore 80 gigawatt hours of that as per your own definition or 160?

No. We have -- so in that scope, we have included it as of 160 that was the view that we had applied.

That's helpful. And last one from me. The recycling not being included within the scope of the JV, was that never on the table or was it included in discussions? Because if I think about this from a PowerCo perspective, I'm going to go through all the trouble of creating an integrated supply chain. And I know Umicore has the right technology and ambition to invest. Why not sign an agreement at this stage?

Yes, yes, indeed, no, that's true. And that's actually the next point on our road map we had decided to work on first things first because now we need to secure the ramp-up of the Volkswagen, the PowerCo Gigafactory. So -- but we have also communicated previously, but also in this release, reconfirmed the joint ambitions that the next step should be to integrate indeed the recycling of the unified cells into the joint venture because ultimately, it's the only thing that makes sense to create a truly circular supply chain, and that is also very high on the agenda of both partners. But believe me, for the time being, we are happy that we have concluded this agreement and the next one, we will tackle when the time is right.

The next question comes from the line of Alex Stewart from Barclays.

Questions -- I've got 2. Firstly, on the split of returns. Do you say that while both companies are investing half of the CapEx and taking half of the profits. So the economics on the P&L are presumably identical. You're saying that both companies, this will be a value accretive deal. My assumption is that Volkswagen has a lower cost of capital to you. So does that mean that they are making a bigger spread over their cost of capital? Or is the transfer of technology through the licensing agreement, the balancing item. So actually, although you're making the same money from the project, you will ultimately take more economic value out of it because of the transfer of licenses. I'd be interested to know how substantial that portion is? And then just secondly, the -- how will you be able to repatriate cash from the venture? Will you start paying dividends on day 1? Or perhaps only when it's fully ramped up, I'd be interested to know how you actually get the cash out of it.

Thank you for the relevant questions. So I would try to answer maybe for the cash details. At this point in time, we don't feel ready to communicate about that -- about this kind of detail. Now -- and also, I don't feel in the position to comment about Volkswagen's cost of capital, so we will not. But I can confirm that, of course, the IP license agreement is an additional positive contribution to the value creation for Umicore.

So I suppose maybe for the JV, you don't want to comment on Volkswagen's financials. But if I look at the total value to Umicore shareholders, could you give us some sense of how important the profit from the venture is versus the licensing income contributing to your technology? Just some sense of how important the technology business is?

No. Obviously, I think the main value creation is coming obviously from the joint venture. So the joint venture is in itself a value creative. It has a strong industrial logic and it's set up as a successful entity in itself. All the other elements are, of course, increasing the value creation for Umicore. But the core of it is the joint venture in itself.

The next question comes from the line of Riya Kotecha from Bank of America.

And I'll take them one by one. So my first one is whether the CapEx is EUR 3 billion covers all different chemistries? So Volkswagen is exclusively mentioned the HLM or manganese in its road map and that's something that you aim to commercialize as well from mid-decade. Does the EUR 3 billion means that you will be able to produce either high nickel or HLM? Or should we expect some say brownfield CapEx, in the case that you need to retrofit your plants?

Yes, the Umicore production system that we have developed meanwhile and that we have rolled out in our plant in Nysa and we operated last week is actually capable to on the same CapEx on the same lines to produce mid-nickel, high nickel, HLM and also solid-state battery materials. Yes, of course, between all of those chemistries, there is a certain difference also in terms of machinery or process, but it's very small in terms of dimension versus the main CapEx. So my point is that the CapEx that has been announced this EUR 3 billion will be -- would put the joint venture in a position to play along all those lines, except of course, LFP. LFP is not compatible as we have said before, with the set up.

Right. That's clear. And then with regards to the take-or-pay contracts, can you confirm that the volume is sort of fixed to the 100% of the 160 gigawatt hour by 2030 or is it more a minimum proportion of that?

No, it's not 100% fixed, but it is fixed to a very large portion, of course, as usual in the industry. There is a certain room to breathe, right, of volume fluctuations. But my comment on guaranteed value accretive returns was already taking into account a situation where we would be in a situation of volume shortfall. So all these mechanisms together are securing that. So short answer, no, it's not 100%. It's a percentage below 100%, but it's a significantly high percentage.

Okay. And another one just on how you've sort of negotiated the pricing of the contract. Is that something that's been locked in? And if that, say a change in chemistry, do you expect to achieve the same pricing? So that's one part of the pricing question. The second part is how should we think about sort of the pricing for a large Volkswagen contract in comparison to say your ACC contracts?

Okay. Clear. 2 questions. So the pricing model, of course, is a fixed pricing with annual agreed price downs on a fixed chemistry. This is important because that's what Volkswagen, of course, needs to get out of this deal, security of planning and security of supply. But I say it's based on a specific road map of chemistries. If there is a deviation to the plan, of course, then there is also a deviation to the pricing, which is usual in the industry. Now your question, do we -- what is the difference in price levels between different customers? We don't comment on this. But I can tell you that overall, there is a certain market price that you can see out there. And all of our contracts are in line around this market pricing, there is no one that is significantly sticking out in a negative way.

Okay. That's clear. And the last one is just on terms of how you're sort of allocating resources and focusing on different expansion programs. So obviously, you have the North America plant, that you're running a plant in Canada, and with the U.S. IRA, there's a big focus on the U.S. So how are you sort of dividing your resources among both regions and making sure maybe not focusing too much on one large contract and given sort of due attention to both?

Yes. that's actually a very good topic because with the IRA, we were very happy to hear that all the consequences and all the kind of reshuffling of the -- what was already thought to be fixed supply chains now create additional opportunities for us that we will also harvest. But the same thing is true, as we said before, we will only do that, first of all, if we can create value creation for our shareholders. So in terms of the agreements that we will do have to be value accretive. But also only if we can fulfill, if we are sure that we will fulfill the commitments we give to our customers. And that means that I think, first of all, this is a market, especially in North America, where companies like Umicore can be selective. And secondly, what we are benefiting from is that -- and all of you that have maybe followed the releases around our Gigafactory in Nysa, we have now developed standardized set of modules in terms of manufacturing. So that means when we are expanding capacities or setting up a greenfield, we don't have to reinvent the wheel. We kind of -- it sounds, of course, more easy than it is, duplicate standard modules into another location. Of course, there's still a lot of hard work behind. But with that, we can also reduce the workload of the individual projects in this regard. So that makes me and the whole team of RBM confident that this is an absolutely doable task in front of us.

The next question comes from the line of Gunther Zechmann from Bernstein.

Just one from my side, please. How exclusive are the volumes to Volkswagen? Say, for example, they hit the take-or-pay levels. Could you sell the volumes to different customers like it's the norm in other industries that have take-or-pay contracts like industrial gases?

Yes. So there is -- of course, there is an exclusivity and non-exclusivity, let me explain. The volumes that are in that contract, of course, they are exclusive for in both ways. So we cannot use the joint venture now to supply to other parties without the consent of Volkswagen. Of course, that wouldn't make sense because it is built to support the ramp-up strategy of Volkswagen. But in the other way around as well, there is a binding commitment to take these volumes to the 160 gigawatt hours. So that makes us comfortable. Then outside of that, it's, of course, not exclusive because we are allowed to work with any other customers. And also Volkswagen is allowed outside of this commitment to further add other sources of supply to their battery strategy for Europe. So in this regard, that is potentially the best setup that we think we could fund.

Next question comes from the line of Charlie Webb from Morgan Stanley.

A quick follow-up. Just on the technology roadmap, you've kind of mentioned it a few times. I mean, how does that fold into the terms of the JV? How are you benchmarking your technology versus what is out there from competitors? And also perhaps -- also may be difficult to define. But when you think about PowerCo putting its batteries together, again, how is that benchmarking versus others? Is there any risk that there are delays or things can take longer in terms of that customers ramp up on the battery side based on kind of, I guess, the technical know-how and their kind of learning process?

Yes, indeed, so you would say, why do you not let the battery make us -- make the batteries and the car manufacturers produce cars. It's -- everybody knows what they're doing, why to go into that now. We have got to learn Volkswagen and PowerCo over the last month, and we have to say we are very impressed about the progress they have made, the talent, the teams they have, the partnerships they have put together. And I think Volkswagen is probably one of the few car manufacturers that will be able to ramp up that strategy going forward. Of course, it is a road like every major ramp-up in an industry that will be tough on both sides. But by combining the power of Volkswagen and PowerCo on the one side, with the experience of Umicore on the other side, we are both mutually confident that this ramp-up will go into the right way. And in terms of chemistry, I think it's -- you couldn't have a better setup because with that now, we are closely linked to the R&D teams of PowerCo and Volkswagen to understand exactly their specification, their needs and translate this into battery material formulation and vice versa. So for both parties, it's a great opportunity to have nearly no -- zero time lag between the requirement and the execution. So I think you will not find a more robust setup in the industry in this regard.

That is all the time we have for questions. So I will now hand back to Umicore to conclude today's call.

Very good. Thank you for, as usual, the very deep, constructive and high-quality questions. We are, again, very happy that we have been able to conclude that milestone agreement for us. But also for our partner, PowerCo, we both feel very confident that this is of high value creative value for our individual strategies. And as we said, that's not the end of the story. At Umicore, we will continue to work on other contracts in a similar or different matter, but it will never change. We will never give up the value creation threshold that we have before investing into further expansions, and I would be very hand to share this journey in the following months and years together with you. Thank you very much. Have a great continued week.

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