Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

So it's [indiscernible], so I guess it's time to start. Welcome to this Wärtsilä mid-quarter call. Normally, our CEO, Hakan Agnevall, has been driving this, but today, Hakan is in a customer meeting. So that's why Arjen is driving this today, when Hakan will join these calls as well. Just double-checking that you can hear us. That's good. And thank you, Johan. So then Arjen will start with a short wrap-up and then we can continue -- I kindly ask all of you to mute yourself. There was some kind of background noise. Please mute yourself, everybody. Thank you.

Okay. Good. All right. Sorry that you need to do with my disappointing face here now. But hopefully okay. If I start a little bit of, let's say, generic views on, let's say, how we see the quarter developing. I would say services as before, let's say, goes well, [ that should ] show good progress there. Also, the pipeline of, let's say, new equipment orders is developing actually in line with expectations. Of course, timing is here quite critical, let's say, having one in or out might still mean a difference, but we are satisfied with the development of the pipeline as well. Also good to remember that last year, Q4 was a record high quarter. So please keep that in mind. I said the service business goes well. Let's say, our installed base shows good utilization, which, of course, let's say, clear correlation with, let's say, our [indiscernible], let's say, service and transactional business. Performance-based agreements, we saw the growth already in previous quarter numbers, and I think that also goes in line with expectations so far in this quarter. Also good to remember that renewal rates, both on Energy and Marine agreements, is over 90%, which is a good proof point for customer value creation. And agreement is important for us because it drives, let's say, a higher share of wallet. So clearly an area of focus, and we are happy with the development there. The integration of Voyage into, let's say, Marine Power, it's a work that has started. Of course, there can be, let's say, many outcomes of this, but we are looking at all dimensions from cost savings to, let's say, when you combine, let's say, you might need, let's say, less overhead structures in certain places. So cost savings, for sure, is a focus area, but also looking at the portfolio, should we continue with everything we have or should we slim it down or perhaps even extend it in certain places. What we aim for, of course, with the Voyage integration is to combine engine efficiency with propulsion efficiency and Voyage efficiency in one business, which is then Marine Power. The decarbonization in Marine market makes good progress. As you know, we are doing a lot of work on, let's say, multi-fuel development and a lot of testing is ongoing there. But also already today, let's say, we do a lot of activities in these areas. And the one thing that I really want to highlight is, again, the marine hybrid installations. We have more than 80 vessels out there with hybrid installations from Wärtsilä, and our market share is about 25% if you measure it in megawatt hour battery capacity. Also good to mention on the Marine decarbonization that just recently -- actually last week, we signed the first carbon capture enabled scrubber sale, which is also a good milestone for us. Decarbonization energy also progressing. One thing that I want to highlight here as an example is the order that we announced in Japan some weeks ago, where we replaced the combined cycle turbine and flexible engines [ with 34SG ]. So that's about the market. Of course, we are all the time looking at our, let's say, cost structures and continuous improvement is a standard part of Wärtsilä, you could say, daily way of working. Closures, as we have mentioned before, let's say, joint venture in China is now closed in Zhenjiang, the propulsion joint venture. Of course, what you also have for sure seen the announcement on Trieste. It's also clearly part of this continuous improvement. Divestments as well, let's say, Santander foundry divestments, but also, let's say, what we are doing in the portfolio business, making steps, although sometimes you wish it goes faster, but it's not so easy. That's it in short from what I wanted to give as introductionary comments.

Thank you, Arjen. So now we will continue with the Q&A. Daniela, you were the first raising your thumb up. So please go ahead.

Can you hear me?

Yes.

It's working. Cool. I wanted to ask on 3 things actually. So Accelleron this morning, when they reported, they were talking about like 3-year -- having good visibility on LNG for the next 3 years. I wanted to just to check if that's the case as well on your end, that you're pretty much -- are you booked up on LNG? I know you talked about the yards being booked up, but I just wanted to think about how that can impact you and specifically, if it is still true that your higher mix in terms of like ASP on those [indiscernible] on that. And then the second thing I wanted to check was regarding reopening in China. I can't think about this being very impactful for you, but am I missing something in there? Is everything on the battery or the storage business potentially comes from there, which could make it sort of easy in terms of supply chain? I don't know, just interested on your views there. And finally, just on the balance sheet. So I guess how should we think about dividends for this year? I guess, you're still hoping to generate some more cash. At Q4, you will be having very relatively low leverage. Is there any big refinancing needs for next year? Or how should we think about sort of cash to shareholders as we approach year-end?

All right. Hopefully, I can remember all the questions.

Yes. Let's take 1 question at a time. At least my memory is getting weaker when I'm getting older.

I'll remind you, no worries.

So let's start with this LNG first.

Now LNG, as mentioned earlier, is pretty much booked out at yards. That having said, let's say, there is still, of course, let's say, contracts with yards -- let's say, from yards to equipment suppliers pending. But let's say, for the short term, I think it's pretty much, let's say, booked out. And when I say short term, I would say 1, 1.5 years forward, and there can still be some changes for the period after. The second question was about the opening of China. For sure, that helps us. Let's say, it's quite cumbersome, let's say, to have engineers going into China and still having, let's say -- facing a lockdown in quarantine requirement. So yes, we are very happy with the opening up. So in that sense, it helps us. And is it a big impact? Yes. From an individual, you might say, yes, it is a big impact. From Wärtsilä, it can be a big impact. It depends a bit on, let's say, do you need a specialist for some urgency case, yes or no. I would say, in general, it's positive. But I would not hang multimillions to it, let's put it that way. Then on your question on the balance sheet, let's say, dividend. We will stick to our policy, let's say, 50% of EPS, although with all the, let's say, write-offs, items affecting comparability this year, it will be low. That discussion is finally, let's say, up to the Board of Directors to take, which will take place not far from here. So I will not further comment on that one. Cash flow, last year, we had a record cash flow. It's an all-time high operating cash flow, EUR 731 million out of my head, actually, my memory is still reasonably okay, which we got also, let's say, a lot of, let's say, big milestone payments, let's say, at the end of the year, actually in December, which, of course, leads a bit away from the cash flow from this year. For sure, this year cash flow will not be on the same record level that I can clearly already say. We are, of course, aiming for, let's say, surely making a positive cash flow in Q4. How high it will be? Again, let's say, big milestones can make a big difference. Let's see, it's difficult to exactly say where it will be. But definitely, let's say, aiming for positive.

Thank you. Next question comes from Johan Eliason.

I hope you can hear me. I was wondering, if I take them one by one, on services. Are you seeing that your prices were in line with the cost levels right now on the service business?

Yes.

Good. You talked about a good pipeline from the equipment side. And obviously, we had -- was it 2 very big orders last year? Are there more of these big orders in the pipeline as we speak today?

There are always, let's say, these bigger ones in the pipeline, but they don't happen that often. But I think the volume is quite good, actually. But again, timing is a bit of a -- yes, okay. It makes a big difference if you have EUR 100 million contract in this year or next year. And we have multiple of them in the pipeline. So some might come, all might come or nothing might come. It can just take up the year as well. But yes, there is a good pipeline with also sizable orders, but I would say EUR 400 million kind of orders, they are quite rare.

And on the energy, the storage business, you obviously hiked prices sometime this year, and it took some while for the customers to accept it. How are price levels today? Are they remaining firm?

Yes, I would say so. Let's say, I think we had one of the graphs, was it in the quarter call? I'm not sure actually if it was there. But otherwise, I think we can share that graph. But you can clearly see that from Q2 onwards, if you look at megawatt hours, then price, it's clearly, let's say, a gap, and we saw the same in Q3. So there is a, you could say, new price level in the market, which is also pretty much, let's say, accepted actually. So that's the level we've been working on right now.

Excellent. And then finally, I didn't quite get, you said hybrid installations, 25% market share. What was that? I didn't quite get you there.

Let's say, we had a -- at least our statistics calculations, let's say, the #1 in marine hybrid installation, which is, of course, a great step into, let's say, decarbonizing because you have always, let's say, an optimum RPM of the engine and then you can do the peak shaving with the battery. And let's say, we have about 80 vessels out there now with our installations. And if you calculate, let's say, installed megawatt hour battery capacity from what we know from the market, and of course, we need to combine different statistics, but it's about 25% market share that we have.

And on the energy storage business, you previously said you were sort of on par with Fluence after Tesla. Have you seen any significant changes there in your market position?

No. I think we are still, let's say, together, the top 3 in the market. So that has not really changed.

Thank you, Johan. Next question comes from Max Yates.

Can you hear me?

We can hear you. There's some background.

Okay. Sorry about that. The first question I wanted to ask was just about the situation with full shipyards and what that means for how orders actually translate into an order for Wärtsilä. So I guess if we're used to sort of the lag being relatively quick between a ship being ordered in a Wärtsilä order, does it mean that there are quite a lot of -- or there are some ships that were maybe ordered 12 months ago that haven't yet had the equipment orders come through? Or how do we actually think about how this affects your business? Or does it just mean that there's a gap in the order intake where we don't see another ship really ordered because there's no space and therefore, there's an air pocket of orders for Wärtsilä? How do we think about that for your business?

I think it's a bit of all, what you basically said. It depends, of course, very much by ship type. If you think about gas carriers, if I use that one as an example, let's say, if you go to Korea, probably '27-ish, '26, '27 is when you can get a vessel. But now, let's say, also China is, let's say, more and more active into, let's say, gas carriers. And I -- and of course, let's say, what we also hear is that there are yards that have been a little bit, let's say, call it, on the low burner in China have now been reactivated, either for repair or for new build. So I think if there is more demand and people feel that there is a business opportunity, now I'm talking -- putting myself in the shoes of the yards, I think there is capacity to also restart certain activities on yard level. Of course, it's very different per ship segment. If you go to cruise, okay, it's basically the non-yards, the Meyers, the Fincantieris, et cetera, that can only do this. But I would say there is also room for increased yard capacity, at least that's what we hear.

Okay. Okay. But I mean, just as an example, if I look at sort of gas carriers in the first 9 months, there was, say, 135 ships ordered, how many of those ships would you say have you actually received orders for? Because I'm just trying to understand whether -- yes, do you have the -- are you able to see kind of exactly how many of those 134 ships you've had orders for? I would have guessed normally, it would be you've already received orders for 80% of them. But is that number drastically different this year?

Yes, I think it's different. Let's say, the longer you're out with the delivery at the yard, let's say, if you take a gas carrier that is ordered for delivery, let's say, early '27, if you take an example, the equipment order will probably not come to us before 2025 because when they order the equipment, they want the latest technology, and a lot will happen between now and '25. So they will not, let's say, immediately say, okay, now I put that order [ in ], let's say, [indiscernible]. And the longer the order book is, the longer this drag will be.

Okay. And maybe a quick follow-up on the hybrid, so the hybrid orders that you're receiving. I mean they're obviously going up as a percentage of the backlog. How do we think about the financial impact for you, whether it's kind of value per megawatt or higher service content, more service contracts? Is there any kind of quantification you can give on any of those factors of how we should think about hybrid orders?

I would say it's a bit difficult and perhaps also early to say if there is really, let's say, super high addition or, let's say -- yes, addition, let's say, to normal margins. I would say we made good margins in the hybrid installation there, first of all. Of course, let's say, with higher technology, you get a little bit more premium, I would say, on the, call it, the new equipment sale. When it comes to the service, of course, it depends on the running hours. So let's say -- and as I said many times, let's say, service business, spare parts, et cetera, correlates with running hours. So if engine is run, let's say, more often, it's more service business. So will we get more margin on the service side for hybrid installation? No, I think it's the same margin, but it's just -- it depends on the number of running hours.

Okay. And final one quickly. Just on services in the merchant segment. We've obviously seen a lot of the container ship companies becoming quite a bit more cautious. Some of them are actually taking capacity out of the water in response to lower rates. So have you seen any impact on your own business? I mean, if it is purely linked to running hours and running hours of container ships are going down by 30%, 40%, I would be surprised if we haven't seen any impact on your merchant services. So is that something you're seeing? And is that kind of a magnitude that will be reflected, do you think?

We have not really seen it yet. And also good to remember that the merchant -- the main engine is 2-stroke. And even though, let's say, you take vessels out of operation, you would still probably like to run the auxiliary and just to keep the vessel in a certain good shape. And for container vessels, we are basically only in the auxiliary engines. If you think about engines, you can also do propulsion systems, et cetera, but from an engine perspective, [ it's ] auxiliary.

Okay. But you still have quite a large proportion of your -- I mean a disproportionately high part of your services still comes from merchants. I think it was a -- I mean, it's a sort of EUR 500-ish million, EUR 500 million business. So what exactly -- is that all to container ships? Is it all to bulker ships or a particular type? Or how do we think about the exposure to container ships within that?

But also gas carriers [indiscernible].

No, gas carrier is a separate. That's like another EUR 250 million. It's purely merchant, [ the list ] is about EUR 500 million [indiscernible].

I would say majority is auxiliary engines for bulkers, [indiscernible], container vessels, et cetera.

Okay. Okay. But you're not fundamentally -- you haven't really seen any change yet in that business?

It goes quite well, actually.

Thank you, Max. Next question comes from Sean McLoughlin. Sean, can you hear us?

Hopefully, now you can hear me.

Yes, we can.

Yes, we can hear you as well.

So just a question on cost for me. The results call, you talked about a second wave of cost increases related to wage inflation. It sounds like the services piece has kept up quite -- or has, let's say, adjusted quite quickly. What about on the equipment side? Are you able to raise prices quickly to offset those cost increases?

That's, of course, always, let's say, a challenge. Let's say, from whatever you have in the books, it's pretty much done. Let's say, we have tried renegotiation of prices before. I don't think that will work. And if [indiscernible] inflation going to happen on all the orders that are [indiscernible], it will, of course, have an impact on us. But we are -- I think we have said it before as well. What we are, of course, doing is making sure that there is a very tight link between, okay, supply management, but of course, in this case, also the HR department [indiscernible] that we can react as soon as possible. To be one to one on the ball in time, that's mission impossible. But let's say, you can react quite quick. If you know, for example, that in a certain country, the collective labor agreement says, okay, plus whatever percent, that you can already consider when you utilize engineers in your quote from that country. And that's what we do and try to actively do in our quoting system.

So if I've understood correctly, are you actively requoting for prices where -- for equipment orders where you can already clearly see that wage cost [indiscernible]?

Yes. Let's say, what we have already done in the beginning of the year when the whole cost inflation accelerated that our validity times of quotes are very short. I would say, max, a month at the moment. So in that time horizon, you can, maybe, I would say, adjust on outstanding quotes. And even the quotes that you have not yet signed as confirmed orders or outstanding quotes, if there is really a serious, let's say, hike in the cost, we have a lot of [indiscernible]. So everything that is not signed [indiscernible].

Understood. My second question is around energy storage. Just wondering about sequential demand growth after the price reset. Are you continuing to see strong sequential growth in demand in Q3 over Q2?

Yes. Yes, pipeline is very strong. Yes.

Very good. And I mean at what point do you think you'll need to invest in new storage assembly plants?

I don't think we need, let's say, any real assembly plants. They're really based and do most of the installation [indiscernible]. Like a flexible work [indiscernible].

Next question comes from Sven Weier.

The first one is on the battery storage business. Just wondering, I'm conscious of the fact that you don't talk about the pathway to breakeven and the margins. But I was just wondering, if you look at the breakeven budget, if the current revenue momentum that you see, which is also inspired by the IRA, on the one hand, is maybe above what you had in mind. And on the cost side, whether the reduction in freight rates, potentially battery cost is already giving you numbers that are below what you have earmarked in the breakeven plan. That's the first one.

I think, let's say, to start with the later part of your question, Sven. Yes, costs on certain raw materials have come down but they have not come down to lower levels than when the whole hike started in the whole cost structure, which is then, you could say, March this year, about that time. So as long as, let's say, the raw material prices are not significantly below that, it will not help us. What was your other question now?

The revenue trajectory.

Yes, let's say, the volumes are pretty much, let's say, developing as we have anticipated in our plan. Of course, there is always, let's say, possibility for more. I would say the opportunity is quite wide out there. I think the limitation factor in the whole market is probably battery capacity but also due to that, I think it also gives you an opportunity to do a little bit more cherry picking than you could probably normally do. So I think in that sense, we are making good progress. We are not yet out of the woods, but I would say going in the right direction.

Okay. And the second one is actually on decarbonization. I mean, I think Maersk already said that slow steaming is not really an option for next year for CII, not much additional. So where do you see the greatest momentum on the short-term measures? Is it on the air lubrication systems or propeller optimization? Where do you see most inquiries at the moment?

I would say, hybrids is a quite high, let's say, number of requests coming in, actually, average installations. But also, let's say, optimized propeller designs which, okay, 1% here and 2% there, it adds up quite nicely. Slow steaming, yes, okay. I think the opinions are very different here. Okay. Some like Maersk, I think is just one of them. They don't believe in it while others do. So -- yes, I'm not sure. I think anyhow, let's say, slow steaming, in general, is a great contributor to a CO2 reduction, clearly. So will it help in the CII? Probably not because it relates much more to the design of the ship, right? So -- but from other measurements, I think it definitely helps.

[ Most of the ] decarbonization inquiries, we have more with the midterm view, not so much about CII because maybe people just wait what happens next year and then we get a crowding again towards the end of the year maybe on measures.

No, I think the mid -- or let's say, the, call it, short to midterm, let's say, it's hybrid installations, in my view, it's propeller design. I don't hear so much about the bubbles along the hull. There are a few, let's say, that are very communicative about it. But I don't think it's massive volumes. At least flat, narrow, it's a bit of the same. I don't hear that too much either. So I think it's more about, let's say, hybrids, optimized designs, in particular, hydrodynamics for existing vessels, then we should talk existing vessels, which are the main one.

My final question is also a follow-up on the service question from Max. Basically, what, in your sense, has been driving the major uptick you saw? If it was not so sensitive to volumes or freight rates within the merchant segment, what is your sense, what has driven it up so strongly?

For sure, it's activity. Let's say, our service business, like I mentioned, correlated with activity, utilization of ships. So what we saw, of course, during this year and the beginning, we saw the return of cruise. I think we saw a lot of, let's say, sailing in container vessels. Gas carriers is also clearly, let's say, high in demand with a lot of transportation needed also going forward. So it's utilization, that's first of all. But I also do believe that, let's say, our strategy that we have been doing for a long time already, getting more agreements where you can move from a, call it, transactional share of wallet factor of 1 to, let's say, 2 to 5 when you have a life cycle agreement, I do believe that, that is really paying off. But that's really helping us. It supports the stickiness. It's also -- like I mentioned, the renewal rate is very high. It's a win-win for both us as well as for the customers. So this is the journey to go to. That is, let's say, what we call moving up the service value ladder, and we need to get more of it.

Thank you, Sven. Next question comes from Johan Eliason.

Yes. Just a follow-up, talking about services again. In the Marine side, I mean, we all understand that power or the engine drives a lot of service business for you over the years [ after the sales ]. But if you compare with your different product areas, propulsion, power and systems, which one is really the key for your service growth, going forward?

I would say the majority comes from engines. Let's say it's wear and tear and combustion heat, et cetera. So I think that's the main -- that's where the main comes from. But of course, you have other areas of, let's say, high service. Propulsion is definitely also one. Let's say, thrusters, for example, was also -- it's a lot of rotating parts and wear and tear. And seals and bearings is another one. So there are other areas as well. But engine is clearly, in my view, the biggest, yes.

The most important one to get on to the ships sort of for your service opportunity afterwards.

Yes.

Yes. And then if you look at the storage business, I think you previously alluded to, it won't have the sort of service opportunity that the engines obviously have. But there seems to be some sort of service opportunity in there. What does it relate to? Is just replacing battery cells? Or what's [indiscernible]?

That could be one, but let's say also, let's say, uptime guarantees so that we, let's say, closely monitor the plants and make sure that there is no downtime and have that in some kind of life cycle agreement embedded.

And is that related to sort of software upgrades and software management part of the storage?

But also looking at the hardware all the time. Because, let's say, with our GEMS software, you don't only optimize, let's say, based on weather, for example, but you also optimize, call it, the lifetime of the battery. Because if you go really random charging, discharging, wrong pattern, kind of -- I'm not expert enough to, let's say, say what's the right pattern, but I clearly have the message from our team that you can do it really, really wrong. But let's say, optimizing, let's say, by when to charge, when to discharge and what speed you do these things as well, you can lengthen, let's say, the battery lifetime in an optimized way. And there, you can, of course, also link, let's say, a certain life cycle agreement with uptime and lifetime guarantees.

Thank you, Johan. Next question comes from Max Yates.

I just wanted to follow up on, you mentioned you received your first order for carbon capture and the scrubbers. So I just wanted to understand kind of maybe if you could give us a feel for how many -- or how much that order was and for how many ships maybe just to give us some sort of ship set value. And also, I assume you've thought about the addressable market potential here. You obviously gave us quite a lot of helpful numbers around the time of the SOx scrubber boom. So would you help us at all with kind of what you see as the addressable market here and some sort of time line to getting there?

Sorry, but I cannot open too much. Let's say, this carbon capture, it's not a carbon capture solution yet. It's a carbon capture-enabled scrubber, which means that there are certain fixtures already in the scrubber design that enables, let's say, a fast conversion to also capture carbon, let's say, when the technology is tested and mature, which we anticipate within a few years to be there. This order was actually only from -- was signed last Friday, so very fresh. And I will not yet open up, let's say, what that means in money.

Okay. And maybe just a quick follow-up just on sort of industry pricing and capacity in ship engines. I think kind of one of the challenges you've faced over the past few years has been overcapacity in ship engines, some competition from Asia. I just wanted to understand, given we've seen sort of shipyard capacity coming out of the market, I wonder whether that has been replicated at all on the equipment side. So when you look at kind of your competitors, the competitive landscape, do you still see that overcapacity in the market on the engine side for ships? Or has that kind of come down alongside some of the shipyard capacity being produced?

[ I hope they are improving ]. They, first of all -- there are a few examples. Let's say, us closing, for example, a factory for engine manufacturing in Trieste, that's one. But also, let's say, earlier, MAN -- sorry, where Caterpillar said that, okay, they will not produce any more, let's say, new MaK engine. So that capacity is clearly disappearing from the market. When it comes to yards, typically, the yards are license build engines. And okay, probably today, it might still happen, that they have engines in. But the further we go down the line of, let's say, multi-fuel engines, I think the less opportunity yards have to utilize their, call it, license build engines because they are typically not the highest level of technology at any point of time. So I would say, in general, being with -- forward-looking is looking better than what we had historic [indiscernible].

Thank you, Max. Next question comes from Anders Roslund.

Yes. What is your unique selling point in the battery storage business versus your top 3 competitors?

We are the best. No, I think the key lies in energy management software. I think that's really the most crucial differentiator. And at least to what we hear in the market is that our GEMS software, which we acquired some years ago with Greensmith acquisition, is really, let's say, the top of the market. So that's where you make the difference. Let's say, the batteries, I think we are flexible. Let's say, there would be a new, better technology on the batteries, we can also combine with that. We have no battery manufacturing in our house. Let's say, we combine the battery cells into modules and whether it's a sodium ion or lithium ion or anything else for the future, I think that's very well doable. So I think the difference -- and batteries, [ they may not ] generate a little bit, a battery is a battery, then it's about how you utilize that battery in the system, which is then determined by the energy management software, where you make the difference. Because the energy management software determines the economic model of the customer, optimizing with weather, okay, I mentioned lifetime of the batteries as well, when to charge, when to discharge, when to use the engine or the balancing power engine, et cetera. So that's the differentiator.

Okay. And finally, what is the key for improving margins? Is it just volumes coming? Or is it your investments coming down and volumes coming up? Or how should we look at the path forward for margin development?

Yes, it's cost scaling and cost leverage, for sure. Also, let's say, when you scale, you have a better and stronger negotiation position towards your suppliers. With higher volumes, you can typically get better prices. So also product cost, we translate it to that, is clearly a contributor. And then, of course, we need to, like I mentioned already a little bit in the beginning, also be a little bit selective in, let's say, where do we want to play. Do we want to play in all the markets with all the margins, sometimes slow? Or do we not want to play there?

Okay. Final one question regarding Voyage. What sort of difference will it make when you merge this with Marine Power now?

I would say the customer discussions today, and this is straight feedback from our sales organization, there is no discussion anymore with customers where fuel efficiency, if you want to call it like that, is not a topic. It's always a topic. And it's even more topical going forward because the new fuels of the future, being it ammonia, methanol or anything else, they are definitely more expensive than, let's say, the fuels of today, call it the fossil fuels. So with a shift from, let's say, call it, fossil fuels to new fuels and the cost of fuel going up, the efficiency discussion is getting more and more intense in customer negotiation. So what we are now aiming to do -- and there, I think we are pretty unique as Wärtsilä that we can combine engine efficiency with propulsion efficiency and voyage efficiency. There is no competitor that has that same capability. And I think that's a really key benefit of now integrating Voyage into Marine Power.

Thank you, Anders. Next question comes from Antti Kansanen.

Yes. Just one follow-up regarding kind of the cost inflation and pricing theme. I guess a couple of week -- months back, you mentioned that you're seeing a bit of a new acceleration among some of your European suppliers and their pricing becoming kind of more dynamic as well with kind of a shorter quotation period. So how has -- how have you seen this evolving kind of lately? And are you kind of being able to push those forward once the client kind of acceptance to price increases that you are pushing through?

Yes, especially on the energy-intensive production processes like forgings and castings, we clearly see that pressure. Of course, it's very different per supplier, depending on what kind of energy contract do they have and then what region you could say, in particular, in Europe, they are, although it's not totally European unique either. But most of our, let's say, call it, key components come from Europe. Yes, we see pressure. And that's also why I said in the earlier question, there needs to be a very short and tight link between supply management and accordingly, [indiscernible]. When even you have a smell of an increase, you already adjust your quotation system accordingly. And I will say, so far, that works quite well. I would say we have gotten major hits out of that energy price increase.

Okay. And kind of the price realization is still solid that you don't see kind of, I mean, referencing to the competitive dynamics, I mean, you're still getting that price increases through and so forth.

Yes, I would say so because we are not the only one facing it. If you think critical engine components like blocks and crankshafts and fuel equipment, et cetera, there are not so many suppliers in the world. So if one supplier faces this, then other suppliers face this as well. And they have -- because they mainly have our competitors as customer as well. So I don't think it's unique for us.

Okay. I mean, if I remember, you kind of mentioned that and also reported that you had perhaps EUR 1 billion of backlog to be delivered next year that was kind of booked before you started to raise prices. So that's first half of next year, then we should be kind of out of the woods when it comes to the margin pressure on the new equipment side. So there's no reason to assume otherwise with this kind of a new wave of inflation.

So far, I would say not. No.

Okay. And I guess that goes also with kind of the battery storage deliveries that, I guess, you mentioned 12 months being a pretty basic delivery times and the prices started to -- okay. All right. That's all for me.

Thank you, Antti. Then Max Yates.

Sorry, actually I forgot to put my hand down. Sorry. Apologies.

No worries. No worries. Happens for everybody. And Anders Roslund, you also have your hand up. Is it also old thumb, or do you have follow-up questions?

Sorry, I take it down.

Okay. No worries. Thank you. Anybody else? We still have time. So if you have any further questions, please use Raise Your Hand functionality. Just double checking whether somebody has sent any...

Johan [indiscernible].

Okay. Johan, please go ahead.

For taking the opportunity here then. If we go back to the situation before the pandemic, you had a number of issues both on the Power side and on the Marine side. Would you say that all of those issues are now cleared out? Or is there still something in your profitability lingering from those issues today?

I would say most of these projects that we had, we call them distressed projects, but most of these distressed projects from those days, they are delivered. So they are out of the way, except for, let's say, nuclear, because that's typically longer path. So there, I think we will still have at least 2 years to go.

And how big roughly is that?

Let's say, we made a EUR 70 million, out of my head now, extra provision in 2018. And I think it was in the later part of 2018. It was one of the first things I had to do as a CFO, I remember. So that was for nuclear.

And that's basically EUR 70 million of revenues at 0 profits or...

I will not open up exactly, let's say, revenues, but let's say that was the extra provision that we made. And the lead time of that -- those projects, you could say, was not just one, it was more. The last one is delivery 2 years from now, '24, end of '24.

And pricing, I think, was also a bit of an issue on the Power side, the power plant side in the years running up to this. And now we have pricing but more related to this rapid cost inflation. But in general, the pricing picture from a competitive point of view, is it better or worse today?

Compared to, let's say, 2019, you mean?

Yes.

I would say it's still pretty tough. But I think the opportunities that we have are, in a way, better because I think balancing power today is much more kicking off than, let's say, what it was in 2019 when it was still -- yes. Okay, a lot of talk about it, but it did not really happen. Now it starts to happen with the turndown of the call. So I think the opportunities are better now. Did any of the competitors step out? Not really. Okay. MaK actually stopped. They were also some -- having some activities on the energy side, but not much. The main one that we see is MAN. And I think they also still have, let's say, capacity to fill in their factories. So pricing is [ pale ]. I wouldn't say it's easier, it's also not getting worse. I would say it's still high pressure.

Thank you, Johan. Anders, you still have your thumb up. Do you have follow-up question now?

Sorry. Sorry, I don't know where to turn it off.

Okay. But then, Tomi Railo, you have a question.

I'm Tomi from DNB. Can you comment a little bit the development of the energy storage profitability? Has the direction, in a way, improved? Are you making smaller or bigger loss in the storage this year compared to last year?

I would say we are improving.

You have been improving.

Yes. The trend is in [indiscernible].

Thank you, Tomi. I don't see any thumbs up besides Tomi and Anders. So if you have questions, please use Raise Your Hand functionality. For me, it seems like that there are no further questions. So then thank you for good questions. And thank you, Arjen.

Thank you very much.

Goodbye, all.

Thank you.

Thank you. Bye-bye.