Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

So good morning, everybody, and welcome to this investor call focusing on our Engine Power Plants business. My name is Hanna-Maria Heikkinen, and I'm in charge of the Investor Relations. And I have the pleasure to have Anders Lindberg, my colleague, who is leading our Energy business here on this call today, and Anders has delivered very well on the promises given on our last Capital Markets Day. We will start with a presentation. [Operator Instructions] But Anders, please, time to start.

Thank you, and welcome, everybody. So I'm pleased to be here to discuss the performance and how we have improved the business performance of Engine Power Plant. We will today focus on the Engine Power Plant business end-to-end, so both equipment and services. We will not discuss on the energy storage and optimization business as this is on the strategic review. Some key reflections from my side is that today, we have a stronger and more resilient engine power plant business. We have also worked on our product portfolio, and it has been improved and more future-proof today than what it was 1 year ago. And we also have a strong long-term growth prospects in our balancing and I will come back to that in the presentation today. And also, we have a culture of continuous improvement where we are working on continuously improve our business. So let's now go back 1 year in time and see what has happened since we had the CMD in 2023 and looking at what we have done. Starting on profitability. We have successfully implemented our new organization and the governance in energy already in 2023. We have also, with this improved our risk reward balance. Today, we have 80% EEQ and 20% EPC, which have derisked our portfolio. We also have had a very good growth in order intake, 14%. And we have already seen that we have started to also pick up on the sales due to that. It is about 12 to 15 months on the new build before we see that being effect on the sales side, what we have done on the order intake side. And we have continued to improve our products and service delivery with a continuous improvement program that we have. And also on the service side, we continue to move up the service value ladder. We have increased with 15% agreements and also the agreement coverage with 5% and we have more than 90% renewal rate. All of this supporting profitability. And when it comes to the growth, we have seen a 7% since 1 year ago, the service sales growth, and we have a book-to-bill ratio of 1.1 and I will come back to that in the presentation. Then we see on the balancing order intake, which we discussed already in the CMD, and we will come back to this because it is a very interesting growth prospects in this area. We have had a 260% increase in the order intake since 1 year ago. And on the hydrogen side, we launched in mid this year. We launched our 100% hydrogen engine power plant which we also have had certified by DNV. So that is also on track. Now let's look at the performance over the year financially and starting with the order intake, where you can see the order intake has grown starting already in Q4, and this is the 12 months rolling, starting already to grow in Q4 last year, but then have continued to grow. And the equipment sales, which is part of this growth, because this is also including service that you see on the screen, but the equipment sales growth is up 13% compared to 1 year ago. And on profitability, that is, of course, also very much increased the 12 months rolling, also up in Q4 already last year and then continuing in Q1, Q2 and Q3 with even slightly higher 12 months rolling profitability. So 14% in the last quarters versus 6.5% in 2023, except in the last quarter. And the profitability drivers that have really done the increase here in this year compared to 1 year ago is that we have recovered profitability in our equipment sales. And this we have done by improving the risk-reward balance and also how we select the projects and by the better governance that we have in our organization. We also had a continuous improvement and a higher operating leverage with order intake being higher on the equipment sales. And as well, of course, the growth in service sales have also contributed to the higher margin. Then let's now look a little bit more into detail on some of these. And here, I want to show our book-to-bill ratios and starting with the equipment we can see that we were below 1 all the way until the Q4 last year, and this is 12 months rolling. I want to say. And then we have continued being on a very good book-to-bill ratio of the equipment being above 1.25 both in Q1, Q2 and Q3 this year on the equipment sales. If we look on the service part and the different parts we have in service, we have the parts, the field service and service agreements, which you can see that they have all been above 1, going a little bit up and down, but basically being quite stable compared to the retrofits and upgrades, where you have a lumpy business. It's like our product business on equipment. We have the same thing on the retrofit and upgrades those vary with quarter-to-quarter. And you can see that also that there is much more ups and downs here, but still being well above 1 also on retrofits and upgrades. So in summary, we are having a good book-to-bill ratio, both on the service side and also, of course, on the equipment side, where there has been a major increase during this period we are looking at on this graph. Then I would like to talk a little bit about one of the other drivers is, of course, the improved profitability through risk management. And first of all, I want to say that the new organization and governance that we implemented last year has improved the risk management. We have a more thorough better governance on the risks in our projects. Also, of course, we have, as you can see in the graph to the left, and this is net sales, we have rebalanced between EEQ and EPC, meaning that the extended equipment supply, we are using when we can. This is the preferred offering. And you can see that we have gone from well, 50% or below if we take 2020, 2021 and '22. And I think we have all-time low there in this time period in '22 and then climbing up to the 50% or slightly above in '23. But then now we are at 80%. So this is a clear shift in our sales on EEQ and EPC. Of course, EPC, we will continue doing EPC. We have taken in a new EPC projects also this year, as part of our order intake. And we do this in selected markets where we see that we can have the right risk/reward balance with a premium, and also where we have capability and capacity to do both strong in the sales phase, but also that we have a strong project management to guarantee that we have a good execution of the project once we take them in. So we are more selective and for sure, on markets where there is a clear EEQ standard and there are very good partners to do the EEQ products with like the U.S. We will continue to do EEQ, and there is not a question of that. So it's more in markets where we have a tradition and where we also have a good position to do EPC like in South and Central America, Caribbean. We have also done Middle East and I also see in Africa, in some countries we have a good opportunity to do this. I also want to say that EPC has a higher revenue potential, obviously, per kilowatt of engines since we deliver more of the balance of plants. And we also have higher end-to-end margins in the total life cycle of the projects since we also have more revenue coming in, in the service phase where we have EPC than EEQ. And this -- here, we show the sales. But also if we look on the order book, we have also improved there. So we have more EEQ in the order book. So going forward, we will keep more to where we are today. It will vary between the years, depending on which big projects we have. And -- but we can say that we are at 80% now, and we foresee that in the future, we will be in the range of 70% to 80% of EEQ versus EPC then. Then let's now talk about the general market trends. This was very much about how we have performed and what the status is today and following also what the transition has been in the last couple of years. Now we will talk about the market trends going forward. And in general, they are very positive. We still have some uncertainties that I will touch upon here. So first of all, as the energy transition is happening. It is accelerating. It needs to accelerate if we want to reach our climate goals that we've decided upon in Paris. So it needs to accelerate, and we can see that on the graph here, in the middle of the screen. We can see that actually in 2023, we had a record year of delivering in the world on renewables, especially solar went up, but also wind continued to increase. And also, we foresee that in '24, we will go even higher than we did in '23, and then obviously, in '25 and to 2030, which we show here is the forecast based on B&F, but what we can see is that '23 is a fact and also '24, I think, is quite certain considering at the time of the year we had this presentation. And renewables remain the lowest cost of energy in the far majority of all countries around the world and on all markets. And that means that this is very easy to continue and is not so dependent on subsidies, et cetera, as some of the other initiatives with new fuels and other things with hydrogen and other carbon capture and other things that are being invested in, where it's still very dependent on incentives. But for solar and wind, the basic renewables and also battery storage, we basically see that this is already today makes very good commercial sense and will continue. Also, looking to the right, we had the spikes in natural gas prices with the Russia invasion of Ukraine and everything around that. So there prices went up, but they have come down again, which is improving, of course, the competitive for gas and balancers supporting and enabling the implementation of renewables. Also, we see that the regulatory changes are largest supportive of thermal balancing, and I will come back to that in my presentation. The uncertainties and headwinds that we see is, of course, the rising protectionist and using the industrial policy to secure energy and also production. And of course, we also saw in the U.S. election results that -- with that and the Trump coming into office in the beginning of the year is very often discussing about increasing trade and tariffs, and that is also causing some uncertainty what will be actually the results of the different increases in tariffs that Trump has talked about and to which countries and between which countries that we will see, and it's causing some uncertainty. But overall, we are very positive on the transition, the renewables that we show on solar and wind, which is driving the transition and also balancing where we are involved and that will enable further implementation of renewables. So moving over to the next page. Yesterday, some of you might have seen that we launched our global modeling study. We have done studies of different systems, more than 200 markets around the world. And now we did the study of the global -- world, just to show what is the impact of the whole world when it comes to balancing. And what we did was that we compared 2 scenarios to come to net zero in 2050, as was outlined in the Paris agreement. And the first scenario we use renewables and energy storage to make the energy transition and come to net zero. And in the second scenario, we also added thermal balancing, and the model basically shows that there are a number of effects if you do the scenario 2 where you add the thermal balancing versus if you only do renewables and storage. And this, in summary, is that in the time period between 2025 and 2050, we save for the world EUR 65 trillion in costs if we use balancing since we don't need to overbuild so much renewables to manage all weather conditions and all demand and supply. And in fact, we also achieved a faster reaction of CO2 if we do add the balancing, the thermal balancing. And this is by being able to take our out coal and oil much faster if we add thermal balancing even if it is in the beginning using gas as fueled because we don't need to overbuild again so much on the renewable and storage side to deal with the capacity of the coal and oil. And what is also very interesting is that since we don't need to build out so much of the renewables to have this overcapacity to deal with the weather conditions, we also use 50% less renewables in the scenario 2. And that means that we need 50% less land needed in 2050. And overall, we waste also less energy by renewable curtailments, which will happen if we build out so much renewables as we need to do in scenario 1 to cover all the different weather conditions. So a very big difference and showing very much on the global scale, how important it is to not only have 100% renewables and storage, but add a little bit of thermal balancing to what effect that has. So very important. Then looking at the growth opportunity that we then see. And here, again, we have based this on the Bloomberg new energy finance forecast build-out of wind and solar because this is what's driving, of course, the build-out of the balancing or need of the balancing, and we see here that we have a very good growth from 2023 to 2030 on the balancing side. So 17% per year during this period, where we see that the base load is basically stable, but growing a little bit. We see huge growth on the balancing side. And of course, you don't -- not only need to build out the renewables, you also need to have good conditions for adding balancing as well, and I will come back to that. And you also need gas until the new fuels, the sustainable fuels become available, you need gas as well as a transition fuel. And it's very important that, that is recognized up until 2035 or when the sustainable fuels will become available. Showing them on the right graph here, we can show our order intake in megawatts, and as you can see, this year, we're up very much compared to 2023. We were higher in 2022 than 2023. But I think that we can say that the overall trend is increasing on the balancing and this year is a very good year that we can see already in Q3, and we have no -- also when we look into the pipeline, we see a good pipeline also continuing for balancing. And clearly, on the balancing side, it is North America and Europe, which is also leading in the implementation of renewables that we see as interesting markets for us going forward, where we will see this growth. There is also some states in Australia, which is also very interesting as well. As I mentioned, the need for thermal balancing is driven by the increased renewable penetration, and as I mentioned, if we keep inflexible power plants that we have today in the system, which we have had historically with a combined cycle and also coal power plants and also turbines that are not flexible, then will lead to a lot of curtailment and therefore, also destroying the business cases for adding new renewables going forward. And we have seen increases of auctions in Chile, for example, where prices actually came in higher than they did in the previous auction and that is due to increased curtailments of course, destroying the business cases. And engines very much is very good, and I will come back to that and show how good they are in supporting both on minute, hour and daily. So they are very flexible in supporting the renewables. And we can see that we don't only need from a system point of view, the thermal balancing in the system and storage as well. We don't only need that from a system point of view, but the one investing in thermal balancing also need to get paid for that since they are not running so many hours. And traditionally, you have been paid for delivering and running many hours and delivering a lot of energy. You also need to make sure that there is good incentives to build this thermal balancing. And we can say that introducing the 5-minute intervals for dispatch, which is done in the U.S. And I think Europe is now going down to 50 minutes, and we also see in Australia, the 5 minute and U.K. So this is very important incentive for the ones that want to invest in balancing -- building balancing thermal. And also, of course, if you design markets with capacity mechanism, ancillary services, this is also helping the business cases. And I will come back to show that how that can be done. And also how big a role the different market mechanism play. Looking on the right side. And as I mentioned, we have done more than 200 markets around the world where we have studied, we can see that they always go through the same phases. And the first phase is always to add renewables. The second is then when you have added renewables, you need to start adding thermal balancing and storage in order to help the renewables perform and in order to add more renewables. And then the third phase is then to phase out the inflexible power plants that actually don't allow the renewables to make their business cases because they lead to a lot of curtailment. And then in the future, when we have done these 3 first steps, then you can also -- when this new sustainable fuels become available, then you can also convert the thermal balancing to sustainable fuels and finally then phase out all the fossil fuels. But this, we think that even though we will have our products, technical capable of doing this, the fuel will not be available until 2030s, and we think 2035 probably is a good time to see that these fuels become so much available that they will play a significant role. In this graph, I also put in some of the data. So we can see adding renewables, we added 510 gigawatt renewables additions in 2023. And in 5 -- in thermal balancing was added 5 gigawatts in the first half of 2024, and 21 gigawatts of capacity in coal was retired in 2023. So the step 1, 2 and 3 is actually very much happening. Of course, it is different in different parts of the world, some have come further in adding renewables and now work more on 2 and 3 -- step 2 and 3, while others are still on step 1 by basically starting to add renewables. So -- but these are the steps to go through. Now let me take an example from Southern Australia because this gives us a very good idea of what other markets will come to in the future. This is really showcasing the future. And in the CMD, I showed Texas in the U.S., which has also come quite far. Now I show Southern Australia this time as another example. And here, we can see on the left side, what has happened since 2014 to 2023, and I think that the first thing you see in the top is, of course, the wind and solar that have been added. So we are now at 74% renewable energy in delivered energy in Southern Australia. And the coal could already then be phased out. That's the black could be phased out -- already in '16, '17, the coal was phased out completely. Of course, you see the gas and this is both flexible and inflexible gas that you see here, but basically stayed stable, maybe come down a little bit but stayed stable, and supporting, of course, new renewables to be added. And at the bottom, you can also see then imports and exports happening as well. That's why we go below the zero line is when it was exports and otherwise, it's also net imports to Southern Australia. And they are on a 5-minute electricity market, which I mentioned before, is important and they have the gap as a balancing. Then looking to the right side. balances can then tap in South Australia into different value streams. So if you want to invest in a thermal balancing that is very flexible, we have done these different value streams. So capacity revenues just to have dependable capacity available. You see in the bottom, the blue. And then you have ancillary services, which in this case is not so much but this also varies from market to market. But in this case, it's 3%. Then you, of course, have cost savings, savings from lower fuel and O&M costs, 9% and then you have energy revenues where you deliver normal, so to say, energy. And then you have the margin revenue where you catch price spikes on the spot market, which is down 12%. So this is how you can make up on the revenue if you build a new thermal balancing. And this is just an example, it can look different on other markets with other mechanisms or values on this mechanism drivers. Then let's then look at well, this is also then Southern Australia, where you can see the ICEs, actually our engines and how they work. And on the right axles, you can see the price signals. And you can see here basically that the engines are following the price signals, not completely because there are also other things that the owner of the balancing plant have to consider. So it's not only the price, but prices are very important. And you can see that basically, when the price is high, it's the engines, the thermal power plants are producing. And then when the price goes low, so during the daytime, basically, when you have a lot of the renewables with the solar, then you stop, and also, you can then start again in the evening when you need support. And you can also go up and down, so you don't just turn it on. In the night, you can also see it going up and down, depending on how the wind is performing. So you can run with different levels of the power plant. And then it continues the same thing next day where you stop it when the price signals go down and you have other renewables in the system. Then we can look at the aeroderivatives, which is also then running on gas. And then you can see that they are basically operating in an on-off pattern. So you turn them on and when they are on, they stay on. So you don't go up and down, so to say, with percentages, either they are on or off the gas turbines and you basically here show 2 levels. And also, you cannot follow them so much. So they are less used than the engine power plants because we cannot turn them on and off as quickly. So they are used much less than the engine power plants. Then showing the battery energy storage. And here you can basically see that they are loading. During the day, when the price is very low, you're loading the battery and you have a lot of sun. And then in the evening, when the sun disappears and the demand goes up and the prices go up, you basically then discharge the battery. And then the same thing happens the next day. So basically, working as it should. And then last here, down to the right, you can see combined cycle gas turbines. And basically, they continue to run. They ramp down a little bit when the price signals are very low, but they continue to run and by actually doing damage to the system because when they don't go down to zero, even if the price goes down to zero, they don't go down to zero, which means that they will curtail the wind and solar, which is not good for the system. But you cannot stop them because you need them again in the evening. So you basically continue to run them through the whole day where you don't need them. So they don't follow very well the signal -- price signal at all. So this is basically showing the advantages of engine thermal power plants and also the battery storage versus if you look on the turbine side. And as I said, the price signal is a very important signal, but it's not the only consideration, and it's also the total portfolio that the power provider has and what they want to do with that. So then talking about the different technologies that we are competing against. I would say that we have a sweet spot in size when we have between 50 and 400-megawatt plants. And the reason for that is that we can run with a very high efficiency. We have multiple units so we can also not be highly efficient only at full load or no load, so to say, but we can be very efficient also with 10%, 20%, 30%. And since we have a modular design of our engine power plants, we can be efficient at all time. We have this fast start and stop, so we can really follow what is needed by the system and adapt to the price signals, and we can do this many times a day without implication on maintenance. And we are most cost competitive with a high number of starts and stops, and we really see some of these markets are hundreds of starts and stops in the year, so it's really important. The high-speed engines and the other engine technology that we are competing against have a very low CapEx, but also low efficiency and it's basically best suited for small scale and also when only used for backup where there are very low running our applications due to the lower efficiency. And then if I look on the gas turbines, which is not a direct competition technology, but we are competing with the turbine technology and is actually our main competitor in many of the markets. If we start then with the aeroderivatives, they have a lower CapEx than engines, but it's less fuel efficient. So we earn back on the fuel when running with energy power plants. They are more flexible in the heavy-duty gas turbines, but still not as flexible as the engine power plants, as we saw also in the other example of Southern Australia. And we also saw that in the Texas example 1 year ago when we have compared to gas turbine power plants with 2 engine power plants in Texas. And then we see the open cycle gas turbines with low efficiency and not so good suited for balancing, and mainly can compete on the speaking applications when you start them and then you continue to run them, so you avoid starts and stops. And then the combined cycle gas turbines which are very good for efficiencies. They are high, high on efficiency, but they are high on capital cost, and they are not good at all for balancing. So they are basically, if you need the base load, they still are good, but only for that. So this was talking a little bit about where we see the sweet spot and why we believe that we have a very good opportunity in this range, 50 to 400 megawatts when balancing power plants are needed. Then talking a little about -- now coming back to service part of the business. Here, we can see to the left -- in the left graph, we can basically see since 2020 up until today, the last 12 months we have taken here. So 2024 plus the last quarter of '23 in order to have a comparable 4 quarters. The service sales is up 17% from 2022, and it's up 9% per annum if we look at the whole period since 2020. We can also see that service agreements have continued to increase 22% up from 2022 until the last 4 quarters that we have. And to the right, you can see that the total order book value from 2020 is up 40% until 2023. And of course, the last 12 months, still a little bit higher. You can also see that our strong book to bill all the time being well above 1 and continue to be there, varying a little bit, as I showed, basically because of the more variable on the upgrade side of the service business that varies between quarters, and we have a big order intake last year on that side so. Looking at the drivers. They remain solid. Of course, the installed base and what I just described about the important of the new builds, is also important. It takes approximately 2 years until we basically see an effect on the service side. So if it takes on the new build 12 months to 15 months to deliver the new build, it takes an additional time before it basically have an impact on the service, I will say, 2 years time from order intake until it affects our service by the installed base. Increasing the agreement coverage is something we're working, the total agreement coverage. And of course, the outcome based and the carbonization agreement is very important. So continue to move up to service value ladder, and we also have the upgrade projects and sustainable fuel conversions in there, the decarbonization agreements. And what we can see is that we still have stable total running hours, and we also expect that for the next years as well. So good performance on service side and expect to continue good service performance. Then looking at the fuel flexibility in the energy transition, it is very important. If we look at our technology road map, looking at the left side of this slide here, I mean the lifetime when we deliver new engine power plants is 25, 30 years. So it's goes all the way up until 2050. And it will change during this time, the fuels available, the new sustainable fuels. So fuel flexibility is important and make our engines future proof. So we see a lot of interest in fuel flexibility. We can also say that there will not be one single solution as a global green fuel. We know that hydrogen is highly interesting, but it depends on where we are because the transportation and also the storage of the hydrogen is not so easy. So we clearly can see that there is also good prospects for ammonia and other green fuels, both carbon neutral and carbon-free fuels. We have launched this year, as I mentioned before, the 100% hydrogen ready power plant in Q2 this year, and it will be released for sales in 2025. We did the market already release this year. And already today, and we have tried this also in the U.S. with an existing plant and show that actually our gas plants can already run on 25% hydrogen more or less as they are today. So already that can be blended in if you want to increase the amount of hydrogen in the fuel consumption today. We clearly see that this sustainable fuels like hydrogen, also, of course, come with conversion losses. And with that, I mean, first, you have the losses when you have electricity with electrolyzers to make the fuel, and then, of course, when you convert back to electricity again, you have again losses in the system. So we see this fuel as a fuel for doing balancing and not for running baseload, baseload should be done with solar and wind. And we see that this fuels will be used for doing balancing. And also, of course, the hard abate sectors as well as where there is no other possibility, so to say, to use wind and solar. And we think this is actually a good case showing the advantage for balancing with these new fields. Looking to the right side, you see the order intake we have had in 2020 to 2024 in Wärtsilä. And here we can see that 91% of the engines we have sold are either natural gas only or also made for dual fuel. So 91% can take gas fuels. And we see that we have done in the period 140 fuel upgrades of engines, 140 engines have been converted to gas in 18 different countries. So there is a clear interest to convert to gas and so to say, have that option going forward. And this is an important part of our service business as well. Then we, of course, all the time, want to be close to our customers and also keeping the power plants high in performance, also by avoiding obsolescence issues, making them sustainable and also making the best performance in terms of cost over the life cycle. So we are working closely with our customers doing fuel conversions, repowering, automation upgrades, obsolescence upgrades when that is needed all the time. So I think we have a really strong offering and also a good value proposition to our customers, and also creating good revenue for our customers as well, of course. And we see that we have since 2021 to Q3 in 2024, EUR 449 million of net sales in these terms of upgrades. And we have 1.68 gigawatt of capacity that we have been upgraded to gas from liquid fuels. And as I mentioned, we have this -- sorry, I think I mentioned the DNV. It's TÜV SÜD certified H2 conversion available since mid this year as well, which is a future fuel conversion that will be possible with our engines. Then also on the baseload side, we have one segment, even though we see that the overall baseload -- traditional baseload is not growing, we see data centers as a very interesting baseload opportunity. And the reason for that is that we see that with the bigger more need, and it's a lot of more need due to AI and more digitalization. We see that there is an additional 45 gigawatt power capacity expected to be added in 2024 to 2027. And some of these gigawatts typically don't have access to a good grid in this time, and it can take up to 5 years and even longer in some rare cases, but at least up to 5 years to be connected to the grid, which basically means that in order to have this data centers and running, they need basically a baseload for at least 5 years, which is a substantial time to have the power supply. So this is clearly interesting for us and looking also a little bit of comparing what has been in the past and what we see going forward is that historically, it has been basically backup power, size has been typically 20 megawatts to 100 megawatts. Customers focus very much on CapEx and high availability, but very much on the CapEx, served by high-speed engines, therefore, since efficiency has not been a very big issue and with quite limited life cycle service opportunities since they're not running very much either. While moving forward, we see much higher demand, 50 to 300 megawatts. It's a typical power need. As I mentioned, grid connection, 5 to 7 years in some markets, which means that it is basically baseload. And that means that the customer now will focus on efficiency, OpEx, delivery time and also what the emissions are. So very much favoring our engines, medium-speed engines and gas turbines compared to what it has been in the past. And I think we have a high competitiveness in this area. It's basically what I showed before. It's the good sweet spot for the science and also with our engines fulfill the requirements that we see that these IPPs or data and data providers see needed. And also what is then important is that we have a high life cycle sales potential since it is working as baseload. We see very much U.S. and Europe. And here, some data on the U.S., which is the most interesting market. It was more than 50% of all the data centers is there in the worldwide. And we also see that more than 10% of the electricity in some of the 5 states in the U.S. is coming from electricity consumption to data centers and EUR 22 billion of investments in data centers. So it's massive. Summing up then how we see the business in Wärtsilä is, if I start on the profitability side, on the equipment margins, we see that we have very much improved the margins, as I showed in the beginning of the presentations. We are well set up for having continued good margin on the equipment. We can see that from our order backlog and also the pipeline of projects with a good risk management, we can continue, especially on the EPC side, improving. Operational leverage from growth, obviously, since we have a good order intake, we will also now see more and more operational leverage on the new build side coming from that. We are working on reducing our total installed cost. So for a whole power plant, how can we reduce the cost and we have made good progress, and we still have a good pipeline of ideas to implement. So this is also important in order to increase margins. Then we are working with continuous improvement, so making our operations even more lean and better in terms of the flow, we implemented in new organization that has already had a big effect. But of course, there are tweaks we still can do to make it even better. We continue to work with our customers on predictive maintenance and also autonomous operation, which will make it also more efficient and increase profitability both for our customers and for ourselves and cost and index and value-based pricing, of course, we continue to work with that making it better and better. Then looking on the growth side, on the equipment side, we see this very strong thermal balancing growth happening now. We see the opportunity in data centers where we still have to figure out exactly how big of an impact can that now, but it's clearly an interesting segment for the next years. And we have a future-proof portfolio with sustainable fuels, prepared for sustainable fuels, which we also can drive equipment sales. And then on the service side, we see the same drivers as have taken us where we are today also going forward, continue to grow the installed base, very much back to the equipment sales, but also continue to increase the agreement coverage and also continue to climb the service value ladder mentioning with upgrades, decarbonization, et cetera. So that was the end of the presentation. And from here, I think we can move into Q&As.

Thank you, Anders. Thank you for a great presentation. And for information, this presentation material is available on our IR website in the case somebody wants to keep it through. And now we have good time for Q&A. So it seems like that there are already quite many firms up. So we will start with Daniela Costa.

This is really helpful. Thank you for putting it together. I have 2 questions. They're somewhat related, but I guess, referring back to Slide 13, where you had the pros and cons of the various types of technology. I guess ultimately, is all in total cost of ownership, basically, you're saying it is better for engines. Can you help us sort of size through like relative magnitudes? Maybe sort of what's the -- yes, if you could put in some numbers to help us understand, especially on the technologies that are a little bit closer?

No, I think that -- I mean, what we say on the Slide 13 is, of course, that we have the sweet spot in terms of size. And obviously, we have engines with -- single engines, so to say, I would say, 10 to 20-plus megawatts, and obviously, if you have many, many engines, it gets too many engines to be, so to say, having a sweet spot. So that's why I say up to 400 megawatts, so basically, 20 engines makes a lot of sense of how many engines you have in a power plant. So that's what I tried to say with the sweet spot of 50 to 400 megawatts. And when you come to the faster startup and shutdown, it basically means that we better can follow. I don't recall the number now. But last year, I showed when we had a Capital Markets Day, the example of Texas. And I quantify that how much better -- how much more revenue we could capture than the gas turbine power plants in that. So there, we did quantify how much more revenue we can capture being better in starting and stopping so to say. If I recall correctly, it was like 1.6x or 1.7x, but we can check that number and confirm that.

Yes. I guess sort of like another way to put it, I was thinking is like for that sweet spot, the 50 to 400 megawatts so if you use an engine-based solution versus a turbine ordinary derivative, sort of what's the magnitude of cost reduction that the client has more from your customers' point of view, but I can refer back to the CMD, if you...

And I can confirm it is 1.6x higher real-time market revenue potential for engines than gas turbines in this example. And this was 2 plants -- gas turbine plants, and it was 2 engine power plants in Texas that I showed last year. So 1.6x better for the engines. But it will vary from market to market, obviously, depending on the market design.

Okay. And then my second question is related to -- you showed the mix where it was sort of the mix shifting in favor, I guess, of balancing versus baseload. Can you talk about sort of like your market share where you think it is evolved, how that's been evolving so that we can think about market share shift going forward?

Yes. So we have -- this year, we have had a very high amount of balancing, as I showed also with the 260% increase. So this year, I think we have added up until Q3, 70% have been balancing. But this is very high compared to what we have had traditionally about 70% of order intake of new build engine have been balancing up until Q3 this year.

But how is your market share on balance like versus baseload?

I think that we show only market share so to say, in total. And typically, if we look on engines only, it has varied ups and downs based on the -- that it's big projects, but typically, we have had 50% to 70% market share of engines to engines, if I compare that. And of course, if we look at market share together with turbines, it varies a lot over time, but I'd say it's more like 15% range of -- if we also include turbines while if we only do engines to engines, it's more 50% to 70%.

Next question comes from Antti Kansanen.

A couple of questions from me as well. And I'll actually follow up kind of with Daniela's questions regarding kind of the different technologies. And if you look at kind of the customer cases that are firmly what you believe is your sweet spot and you have a pretty compelling argument, is the competition more against the turbine makers or against the other engine makers? And what's kind of the counterargument for the clients who ended up going to an aeroderivative turbine or an open cycle gas turbine? Is it only about the CapEx? Or what is the reason you sometimes as well lose a case?

So overall, U.S. is very important for our order intake on new build. And I would say that a majority of cases if the competition is against gas turbines. And I think also, if you look traditionally, many of the big utilities have been used to working with gas turbines and they are not so traditional, so historically they have not so much experience of engines. So I think we always have that, so to say, uphill battle to get in. Once our customers get in and see, especially now with the energy transition and the need for flexibility, they are really happy. So I think we have a good and better opportunity to sell again to the same customer. But it is to get them over that first time, so to say, to get the experience with engines since they are -- many of them have traditionally been using gas turbines and especially now GE, very well in 30 years. So you cannot do something wrong if you take another gas turbine, so to say, where we always have to be introduced in many cases. I also think that, as you say, that there are some customers that basically say, future is uncertain. So we very much go with lowest CapEx, and we care less about the end-to-end cost, so to say. And we have other customers that very much even if there is some uncertainty in the future, there are still things that are predictable and where we have good forecasts and they basically say that even within 5 or 10 years, I can get the payback on having an engine instead of gas turbines. So therefore, I look at the end-to-end, so to say. So -- but I would say that historical, tradition and upfront CapEx is in those cases where they go with gas turbines is the main cases. And maybe also, if there are cases being outside the sweet spot, whether it's 800 megawatts, it's also -- starts to get more sense to use gas turbines.

Okay. That makes sense. And the other question I had was on kind of the future aftermarket potential in the sense that you are seeing both a shift to more balancing, which means less running hours and also doing more EEQ. And you mentioned that has a certain kind of negative impact on the lifetime earnings. So how do you kind of model the long-term aftermarket growth when you take into account that, yes, the installed base is growing, but then you have these certain kind of negative elements as well regarding use of spare parts and so forth. .

Yes. There are many things to consider, as you mentioned, you mentioned a few of them. So of course, most important is the installed base, as I mentioned, as a driver that, that is increasing and not going down. So that's the most important. We have worked a lot this year due to the increase in balancing to develop a very good proposal for our customers when it comes to balancing power plants as well. So by having an agreement with our customers, we can, of course, also making sure that we have a good -- still a good business with balancing. So we have developed that this year. And we've also seen a lot of interest of new customers on actually signing agreements directly when we sell the new builds, which traditionally have not been in the case also. So that is actually positive. But you are right. Of course, we see that, that balancing have fewer running hours than baseload. Now we should also say that baseload is also not like constant over 25 years. We can see that -- if we go to older baseload plants, of course, they also run much less hours than new baseload power plants are doing. So if the plant is 20 or 25 years old, maybe they don't run so many hours, even if it was sold and have been used as a baseload power plant for many years. And the opposite, we also see many customers saying, yes, this will be a balancing plant. But due to [indiscernible] on the market, they run many, many hours and many more hours than they predicted. And obviously, you know that we have a definition where we say 3,000 hours and below is balancing and above its baseload. But there is no such -- it's our definition. There is no black and white here. We have a gray scale, some balancing around 500 hours, other ones around 2,000 hours. And we have the same thing on the baseload side, we have 7,000 hours, but we also have those that may be only around 3,000 hours then. So we continue to make sure we sell agreements and also that we climb the service value ladder that is important drivers. And by doing that, we think we still can have a good future also for our life cycle services even if the basic of balancing is reducing the number of hours. And when it comes to EPC, obviously an EEQ, obviously also there, we are, of course, trying to capture even if we have EEQ, we are trying to capture with a good agreement, also the balance of plant and supporting our customer on that even if it's more difficult than if you sell the whole thing with EPC from the beginning. So we are doing and using the drivers we can to make sure we keep up. And so far, we have shown that we can continue to grow. And also, actually, if we look at the hours they have remained stable, but they have gone down, so to say. And we have seen that, and we also believe that going forward with these drivers can continue to making sure that we have growth in our service business.

Then the next question comes from Sven Weier.

Yes. I hope you can hear me. The question I have, the first one is on the -- when we look at the energy business since before the pandemic, the business is down 50% roughly still in terms of order intake. I guess most of that is probably due to base load and the shift to EEQ from EPC, I mean when I look at your Bloomberg forecast, then it seems like baseload is not really going to come back. Is that also your expectations that it has come down and it won't come back? Or what's your view on baseload from here?

Basically, if you go back before 2020, and you're absolutely right. I mean, it's a total different situation today with the energy transition, with the introduction of renewables. And I also showed in one of the slides, the increase of renewables. So yes, it's a very different situation, and we don't see that the baseload is going to come back, so to say, how it used to be. And we see a very moderate increase of baseload going forward. We have the opportunities with the data centers. So let's see what that is doing. But as you rightly point out, we have a pretty slow growth of the baseload, while we see a very high increase in balancing, so absolutely that's how we see it.

And why is it not coming back? Because I remember most of the baseload was emerging markets. countries like Indonesia, Brazil, Bangladesh, I mean they still have power needs, also baseload power needs. Are they going for something else? No longer are the engines or what's changing there?

No, no. I think that, yes, there is a lot of power needs in many of the emerging markets. But I think the question is what can be financed, so to say, of building this out. And also when you then have the money, to build out, you basically -- you invest in renewables for that baseload. Also in those countries, it's quite clear that also in emerging markets, we see baseload being the cheapest form of energy. So why would you build your baseload with other forms if the cheapest form of energy is still solar and wind.

Second question I had was just on balancing power because we know that you have a good business in the U.S. We've always been talking about the potential in Europe, right? But it doesn't really seem to happen. I mean is that still because of the legacy installed base of coal and turbines or are you seeing more momentum in the markets outside the U.S.?

Yes. So clearly, U.S. is our highest momentum market, if you look at the size also. We see in some parts of Europe, also interest for balancing like U.K. I mentioned also parts of Australia, like Southern Australia, where I had the example from. So we also see the momentum in other countries with balancing. I was also in Chile and Brazil a month ago. And also there, there is a big need from a system point of view for balancing. But as I tried to say, one thing is that the system needs the balancing. That is not enough. It also needs to pay off to make the investment in a balancing -- thermal balancing power plant with engines. So in order for that to happen, you also need the right financial incentives and not only that it's good from a system point of view, it doesn't help me as an investor in the thermal balancing power plant, if I don't -- cannot make revenue. I showed in here an example of different revenue streams. And we see that this is the important thing happening now is that a lot of the countries are reducing the window of energy, so to say, how they buy energy to 5 minutes markets like in the U.S., like in U.S., Australia, also in Europe, going down to 15 minutes is still better than what has been in the past. And the more of this that we have and also with capacity markets where -- then there trying to reallocate money from the system, so to say, since the system needs it to the one that provides this capacity. But also there, of course, the capacity market -- there are different capacity. You can say you have a dispatchable capacity, but you cannot start and stop. That's not very good for the balancing. So it will still lead to curtailment of renewables since it's not good for renewables. So you need the right incentives. This is happening more and more. We can see also on capacity. You have the SPP market in the U.S. where we also have kind of capacity market. We see that there are countries in Europe now discussing capacity markets, and we already have some ancillary services, et cetera. So we see this happening. But it takes time. It takes time to change the market mechanism, but we can see that happening also outside the U.S.

The next question comes from Uma Samlin.

It's been very, very helpful. I guess my first question is on the EEQ and EPC transition. Would you be able to perhaps quantify a bit of the margin difference that's the project business versus the EEQ? And how should we think about? Also going forward, how do you balance keeping your market share on that market versus having better margins? Do you risk losing some of the projects that you could have got for the better profitability? And also, just following up on the previous question, would you be able to perhaps quantify a bit on the impact on the service -- service revenue post the project as well?

Yes. So starting on the margin side, I did show the total portfolio, so to say, that we have a higher margin now in 2024 than we have had in '23. I showed the increase in margin. This is, to a large extent, the recovered profitability in equipment sales. And we have had a higher margin on the EEQ side than we have had on the EPC side. I will not quantify how much. But clearly, we have seen now the improvement and also the improvement of the business when we moved over to more EEQ. But we, of course, have a plan also, and we are working on improving also the margin on the EPC side because it should have as high margin as the EEQ side considering our value, so to say, that we provide to the customers, we should have the same margin. So we are working on improving the margin on EPC side as well. So going forward, we should have both a good profitability on the EPC and EEQ side. That was the first part of your question. And then you had one on the service side. What does it mean? And as I said, profitability in terms of margin is actually not different between EEQ and EPC in the life cycle services, but the volume of profit is obviously a little bit higher with EPC in the life cycle services due to our higher scope also affecting the life cycle services. So that is what is the difference. It's not the margin, but it's the volume due to having more scope delivered from us in the EPC when we do EPC than EEQ. The third part of your question, which I must admit, I forgot. So what was that?

Yes, sorry, I was asking that how do you balance between your market share versus the need to have better margins?

Yes. I mean this is always a balance. And as I said, we have strengthened the governance and we have a good discussion. And of course, we look end to end also what does it mean for our end-to-end business. So these are the things we consider when we make that judgment and also the competitive situation, of course. What I can say is that we will not, so to say, sacrifice margin, making unprofitable business just to get volume, so to say, that we will not do. But of course, there is a trade-off clearly, how much margin do you want to have versus what is your chances of winning, but we will not significantly drop margins just to get a lot of order intake now.

That's super helpful. My second question is on the data centers. I guess it's a relatively new market for Wärtsilä. And I think it seems like for the past year, most of the data center engine orders are on the smaller, higher speed engine side. So would you be able to give us a bit more color on how does your data center pipeline looking into the next -- perhaps next year, next 2 years? How should we think about what are the magnitude of orders you're expecting? Yes.

No. I think we have established a cooperation which we also announced in the mid of this year in Europe with data center provider AVK UK. And we have also got order intake -- 3 orders on data centers already in our backlog, so to say. We, of course, now see also opportunities in the U.S., and we have not, so to say, selected. We are working with several different opportunities with different customers in this field, and we see a huge appetite and opportunities in this area. But we have not, so to say, selected one single or a few. We are working with several different customers in this field, and we see a lot of interest and really a good fit for our products where we can offer good value to the customers based on this baseload application, at least for the first 5 years and also being able to do backup and balancing after grid connections are coming. So that's what I can say. I mean, let's see how big we can make this opportunity what we can take out of it in the U.S.

Just following up on that, sorry, would you be able to tell us a bit more on who are the competitors that you beat against for the larger data center base load projects or typically the competitor?

So what I see as competitors is gas turbines. I also see competitors other engine suppliers, also medium speed engine suppliers. And to some extent, you -- again to history and tradition, I also see the high speed, at least for the -- a little bit smaller size of the big data centers because also there, you have a range, I mentioned 50 to 300 megawatts. So of course, if you go down to the 50 megawatt, I still see the high speed as a potential competitor basically because of historical ties.

Roughly 10 minutes time left. So I would like to give an equal opportunity for all of the analysts to raise questions. So let's take one question per analyst going forward. Next question comes from John-B Kim.

Can we stay on data centers for a second. When we look at your orders last 4 years, it feels very gas-heavy in a baseload application or do you see what would need to be true to be using a selection of engines versus a smaller turbine? And if you think about the data center opportunity, call it the next 5 years, how much of that is baseload versus balancing given the shape of the market today?

As I mentioned, we are still, so to say, very early in the data center buildup. So I'm very careful in giving numbers for the data centers. I think we have a good opportunity. I show the overall demand, how much of that we will be able to capture versus high speed versus the other medium speed versus gas turbines, I think it's simply too early to give numbers on that. I see we have a good opportunity. It is very well in line with our sweet spot. So that's what I can say on that. Obviously, if we capture a big part of that -- a bigger part of that. It will be favorable for our baseload versus balancing overall ratio. You're absolutely right in that. And if we capture less, of course, we will have more balancing applications going forward based on the data center part. Then obviously, there is also a difference, as I mentioned in the world. So if we continue to do a lot of business as we have done this year with market in U.S., it is going to be heavy on balancing if we do a lot with other markets in the world, in Middle East or in Africa or in the Caribbean or we are going to see also more baseload. So also, it's not only with data centers, but also what parts of the world do we say investments in. And depending on that, it will also change between balancing and baseload. One segment that we haven't talked so much about, which is very important also to us is the C&I segment. We provide already today, to mining, cement, textile and other C&I providers, and they typically have required baseload probably will require baseloads for some time, but we also there see a lot of interest in moving to balancing because they invest in renewables as well since it is the cheapest form of energy. However, when they do that, they typically come to us and ask us to help with the decarbonization and managing these different assets. So we also see opportunities with decarbonization there. So I think with all of this, we see typically a threat based on what you say that we lower number of running hours and balancing versus baseload, but we also have opportunities with data centers and also when they go to balancing, we also have decarbonization especially with the C&I customers. So there are many pluses and minuses. And we did run a year ago a little bit what happen with the energy transition, what is the speed of energy transition, what happens if we see more and more protective and we don't see so much build-out or lower scale build-out of renewables. And we see that we are really well placed also then with our baseload and our type of customers. So we actually see that independently what happens in the world, we have a good position with our capabilities and our products. I think that's important to say.

You should clarify what C&I is.

Sorry, C&I. Yes. So basically, industrial customers, like I mentioned, cement, could be mining. And these are, in many cases, far away or have a very weak grid. So there we have typically done baseload in the past, but also they will increase with renewables as well. And there, we have a good chance with decarbonization. Just like we have with the islands around the world, which also typically want to increase the amount of renewables in order to become greener. We see this with the customers in Caribbean, in the Pacific Ocean. And we also have a very good opportunity to do decarbonization projects.

The next question comes from Akash Gupta.

So I have a question regarding book-to-bill in the equipment side of power plant business. So when I strip out -- and again, the background here is that last couple of years for fossil fuel engine provider or not just engine but equipment provider has been pretty good or maybe golden -- golden year, so to speak. But when I look at your book-to-bill and if I take cumulative orders since first quarter of '22 and then divided by revenues, I get a book-to-bill of like 0.94. Again, this was a period when you were shifting your focus on orders from EPC to EPQ (sic) [ EEQ ]. So I can imagine there would be any -- there would be some potential headwind coming from the scope effect. But basically, the 2 questions I have. The first one is that why you haven't been able to have a strong book-to-bill, if you look at the last 2.5 years in equipment side of business in power plant, what is keeping you like not capitalizing on some of the opportunities? And secondly, if you can quantify the drag which is coming from your focus on equipment order from EPC order like, let's say, if the scope in EPC order is 100, what is the typical scope do you get in EPQ (sic) [ EEQ ] order, is it 50, 60 or 70, so to speak?

Yes. So maybe I'll start with the last part. I mean, again, sorry to say, but also here, it's not black and white. We talk about EPC and EEQ, but it's like balancing and baseload example I gave that it's actually a gray scale, and we happen to draw a line between 3,000 hours between balancing and baseload. It's the same thing with EPC and EEQ. So we have EEQ where we basically do the engines and the most important modules around the engine. But then we have what we call extended EEQ where we also do quite a lot of the equipment around the engine. And then on the EPC side, we have full EPC -- we have process EPC where we actually don't do -- for example, we don't do below zero, what we say, what the ground works, et cetera. We don't do that. So it's different types of EPC and EEQ products. But if I should give you some number, but you have to be very careful using that number. It's like 70% EEQ versus an EPC project on average. But again, there are varying EEQ products, and there are varying EPC projects. So it's not something can be used always. So I hope I answered that part of the question. Then looking at the book-to-bill, I'm confident. And again, it varies between quarter-on-quarter. And actually, if you look at '23, we have 40% of our order intake of new build in the last quarter, while this year in '24, we have had a very steady order intake with approximately EUR 200 million per quarter this year. So a very steady order intake like you want it to be. But this is not something we are fully in control over because this is single projects and projects are lumpy, so it can very easily be that we have 1 quarter more orders than 1 quarter less, but it's been very steady this year, actually Q1, Q2, Q3. Now we are up against a big quarter last year in quarter 4 because, as I mentioned, we had 40% of the new build order intake in Q4 last year. But I think we will have -- it's looking good the order intake for Q4. So we have a good pipeline going forward, again, lumpy with big orders, but when I say good, I mean I think we should be able to continue having EUR 200 million on average. It can vary quarter-by-quarter, but we look good on order intake pipeline for new builds.

Next question comes from Sebastian Kuenne. .

Yes. Thank you for question here. My question is on China. China totally dominated the build-out of renewables in the past 2 years, totally dwarfing whatever happens in Europe and the U.S. So my question is, how does China currently balance their renewable power given that Wärtsilä doesn't have any big business there. And what is your strategy to get more attractive to Chinese customers?

So clearly, we are interested in China. China is a huge market, and they are building out renewables a lot and storage a lot. They're also building out the coal and fossil fuel power plants as well. They are doing a lot of everything due to the build-out of the system. But we see China as an interesting market, but we don't see at the moment, opportunity short term for the type of balancing power that we would like to provide in building out. So basically, they have bigger power plants. They keep the coal power plants, they keep the newer coal power plants active. They even give them capacity payments the new coal power plants. So as long as they do that, it's very difficult to compete. I think they will face more and more difficulty with curtailing of all the renewables that they are also putting in if they keep their coal power plants and give them capacity payments. So I think that they will start seeing more and more problems on the build-out the renewables and therefore, will become a time when they will become interested in having more flexible balancing than traditional coal power plants have been.

So no competitor really additional competitor or me too player that takes the business away from you at the moment?

We don't see any competitor doing this fast start and stop the technology in the sweet spot where we are.

We are already over time, but can we continue still for a while, so we could take the last 3 questions.

Yes, a few minutes more.

Okay. Our next question comes from Vivek Midha.

I just had a follow-up on the data center opportunity. We've heard from GE last night, for example, that they have some slot reservation agreements for potential order intake in 2025, '26. In terms of the timing of when this opportunity could materialize for you? Could we be thinking a similar kind of time frame? Or could it potentially take longer given that it's still at an early stage?

No. I think we can see potential order intakes already next year. I think we also have capability. We still have slots as well. So we can see delivery already -- from our production point of view, so to say, we can take slots already in the second half of next year.

The next question comes from Johan Eliason.

I attended Wärtsilä Capital Markets Day a decade ago or so when you were pushing the backup power story quite strongly and nothing happened, and you were downplaying the battery storage deal as well, obviously, not you personally. Today, we are sort of seeing seemingly that the balancing power is taking off together with the battery part. One reason I've learned over these years is that the headwind from coal was basically the reason for the renewable backup the thermal solutions you have not really taking off beforehand. And you mentioned coal being closed down last year as well here. Are we sort of at an inflection point now that coal will sort of be tailwind rather than a headwind you think going forward, not in China seemingly but elsewhere? And then looking at the composition and renewables, does it matter for you if it's wind or solar. And finally, I mean, battery storage today, I mean that has a price per megawatt hour going down. I guess the price per your thermal megawatt is not going down in the same pace. Is there a risk that storage can sort of take away some of your opportunities in the years ahead?

Yes. Thank you very much. Starting with the last question. I see steel storage and engine power plants has very complementary businesses. One is not competing really with other. They offer a very different. Yes, with storage, we have now gone from 1 hour systems to 2 hour systems to 4 hour systems. But if we look at seasonal variations, but also -- you could see on the markets where we have shown these examples, both Texas and Southern Australia, you have significant storage there as well. So there is still very much room for engine power plants. They are not really doing exactly the same thing. So I don't see that competition being a problem at all. Going back to the question about coal being a tailwind, I think coal is already a tailwind on some markets, meaning that's closing down coal power plants basically opens up for our opportunity of delivering flexible thermal power plants that fits much better with the renewables. This we already see on the markets that have matured and gone very far. I still think it will take some time before all markets are there. So obviously, we will see, so to I say, fixed inflexible coal power plants still being in other markets where it will take longer time. So it's a market by market, but I think we can say that there is already a tailwind on some markets today that closes down coal power plants. .

And in the solar, is it -- any difference?

Yes, of course, solar is, I would say, in a way, in many cases, more predictable because you know when the sun is shining during the day, and you know for sure that is not shining in the evening when demand is normally going up when people come on from and turn air condition on, start cooking and putting other household appliances on. So typically, you know that you have that issue. And therefore, I think battery fits very well covering that part, so to say, on the tail end of the demand in the day. While wind is, of course, varying more with low pressures, high pressures, day and night, but it actually we know certainly in the Nordics that we can have 2 weeks of no wind at all and very cold temperatures when high pressure comes in the winter. And there, storage can not do anything to help on that. That's purely a flexible engine power plants that can help with that. And so -- and we also see that another component that is important is, of course, hydro, but also there we see a very different hydro. We see hydro like you have in the Nordics, where you always have hydro available more or less while we see other countries where Brazil have now had droughts. So yes, you have hydros, which should normally be able to help with the balancing of wind and solar. But due to the droughts that you have there, you actually don't have hydro always. So that is an important component with wind and solar as well.

Then the last question comes from Anders Roslund.

You may have answered that already. My question is simply, is there a risk of better battery technology will reduce the need for balancing power, that's a storage technology sort of increases performance so much that you don't need the balancing technology that much.

No, I don't foresee that. It's a simple and short answer. I think we will see improvements in battery storage. And as I said, we will be able to then do more 4 hour systems than 1 hour systems and things like that. But it will not fundamentally take away the need for storage because if you do the calculation, especially if you start talking about days and weeks and seasonable, we are far, far, far, far away with batteries to cover that. That is other long-term storage like pumped hydro, et cetera, help with that, and that will not change our competitive situation with our balancing engines.

Thank you, everybody for very active dialogue. The next large IR call that Wärtsilä's pre-silent call on January together with our CFO, Arjen Berends. Before that, I hope that you will have a Merry Christmas and happy New Year. Thank you.

Thank you.