Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

Hello, Hakan.

Hello, everybody. Hello, Hanna-Maria.

Good to see you.

Good to see you too.

Well, it's 3 o'clock, which means that it's time to start. So welcome to Wartsila strategy call. I'm Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will discuss some of our long-term opportunities. And after Hakan's key messages, there is a possibility to ask questions. As a reminder, we will host a [ presalent ] call on March 26 together with our CFO, Arjen Berends. So let's leave the questions related to recent trading and detailed financials to that presalent call. If you have a question, please use raise your hand functionality in Teams. In the case you do not have the possibility to use raise your hand functionality, you can also send an email to me. Please, Hakan. Time to start.

Yes. So, warm welcome, everybody. It's time to reflect a little bit where we are going on Wartsila. And just to start up with a snapshot from reality. So today, I'm in Vaasa, and I just stepped out of a very interesting meeting with U.S. data center developers. I know many of you have been asking questions about our data center business and how it's evolving. And I can say, I mean, it's a baseload application. We are making our first installations in Europe, and there is a lot of discussions ongoing with U.S. parties. And the fact that they take the time, which we are very grateful with to come to Vaasa which is quite a trip from the U.S. shows that there is keen interest. I will touch briefly on the logic for the data center business, but I just thought I'd start off with some exciting news, so to say. So if I sum up the situation with Wartsila and looking-forward a little bit longer term. But before we look forward, learn from history, I think 2024 was a really good year, a lot of all-time highs for Wartsila, which we are, of course, very grateful for and happy, all-time highs on order intake, all-time highs in sales, all-time highs in absolute EBIT, all-time highs in free cash flow, et cetera. Yes, we are not at 12% yet, but I reiterate the message from before that we are on a solid path to reach our financial targets. And I think we made a good step in the right direction with 10.8% last year, so improving from 2023. And if we look -- then look forward, you've seen our guidance, 12-month forward-looking guidance on demand, and we have guided that it looks better, both for Marine and for energy. And if we start with Marine, I know I get a lot of questions on our Marine outlook and how are we seeing the development. And we have a fairly positive outlook, as I mentioned. I mean, what are the major drivers for us in Marine? I would say that there are 3 major drivers. First is that our core segments in Marine, they are growing. So it's cruise, it's ferries, it's offshore specialty vessels. Even in containers with auxiliary and used ferries, quite a lot of activity still on the container side. And I also normally make the reference to Clarkson, I have the deepest respect for their data crunching capability and making the point that you cannot only translate the overall growth of marine to that's the growth because, as you know, we are strong in certain segments, and many of those segments are growing faster than the average. So that's the first driver. Our core segments are growing. Second driver is the decarbonization transformation. In the marine sector and it's new fuels, but it's not only new fuels. It's hybrid solutions, it's conversions, et cetera. And that we also have a positive outlook on. It will continue going forward. You know the starting point, IMO Regulation 2023, Carbon Intensity Index, the whole framework is triggering some real strategic thinking among our customers and how they -- how our customers are going to develop their fleets on the decarbonization journey going forward. Then thirdly, in Marine, similar manner here, but I will get back to that. Services, we continue to grow in a good way, I would say. I hope you noticed in our last quarterly report that we kind of visualize our order intake in a new way. We basically -- we look at book-to-bill for all the 4 different service disciplines that we have, spare parts, service hours, agreements, upgrades. And the positive thing is that the book-to-bill for all of these disciplines are bigger than one, and they are bigger one in Marine. They are bigger one in energy as well. So for group, they continue to be bigger one and that is a clear signal of continued growth. And then the service strategy of moving up the service value ladder, we talked about that before. It's playing out as we speak. So that's the Marine. If we then go over to energy and the outlook there. And as you know, we are about baseload, and we are about balancing. And if I start with balancing, balancing of renewables when the sun doesn't shine, when the wind doesn't blow, you need balancing power to keep the power system stable. Our major competitor in this balancing space is the aero derivatives. We have our engines. We have our battery storage solutions. And our engines is, I would say, many times better than the aero derivatives in ramping. Fuel efficiency is better. So we do see a lot of interest. I would say U.S. clearly has been very successful for us last year, and we continue to see -- also with the new administration, we continue to see a lot of interest in renewables, especially in the, you could say, the midsection of the U.S., so all the way from Texas and up. And that is giving us business opportunities. Then energy storage, there is also strong demand. You notice the lumpiness of the business. It has been a lumpy business. It's going to be a lumpy business. You saw the Q3 order intake was low. The Q4 order intake was very high. So when you look at this business, you need to average out. You cannot look at quarter-on-quarter developments. And I think going forward, we will also see this lumpiness. So that is certainly something to note. Then if we go over from balancing to baseload, as you know, we provide baseload in many parts of the world. And there are big auctions, hopefully, scheduled at least to come out in Brazil. There is a lot of activities in Southeast Asia. And that, I would say is the traditional baseload for utility applications or for the industry verticals that we have been active in before, like mining, like cement, et cetera. But now we also have this potential opportunity on data center growth. And what is happening here, and it's a pretty recent development is that the data centers are now growing. That's -- that's been a trend for some time. But they're growing now to such a size that the dynamics of providing power to the data centers is changing a bit. So until recently, if you wanted to develop a data center, you had a power need, let's say, of 5, 10, 15 megawatts, you would go to your utility and you would ask to hook up and you would sign an agreement and then you would buy some high-speed backup power, high-speed engine backup power and that would be the model. And that was clearly not a model where we would be competing in because our engines are higher CapEx, but they are more focused on operational efficiency. But what is happening now as the data center is growing, now the data centers, they need everything from 50, 60 to several hundred, we even see gigawatt. We are not playing in the gigawatt. You've seen a lot of media on gigawatt Microsoft contracting Three Mile Island, et cetera, et cetera. But there is a lot of also interest in data centers in our sweet spot, which is, I would say, 10, 20 megawatts all the way up to 400 megawatts. Because if a data center developer goes to the local utility and say, I want to hook up, I need 100 megawatts, the utility would normally say, very happy for your interest, but now the need is so big, 100 megawatt, it's a lot. We need to put it in our planning process, and that means that you might have your power in 5 to 10 years. And obviously, that doesn't work for the data center developers. And then it becomes a baseload application, you need to -- the data centers need to provide their own energy. And the energy need is right -- a lot of it is right in our sweet spot, so to say. So that's the kind of fundamental dynamic change. Now -- we have the concrete proof points, we have so far is in Europe. We are installing hundreds of megawatts of data center power on Island. And as I said before, where I started, we have a lot of discussions with many interested parties in the U.S., but the proof points are still to be there, so we can talk about all of, so to say, but a lot of positive interest. Now on -- in energy, service continues also to be very important for both for our growth, our customer satisfaction and for the profitability. And it's the same story there about moving up the service value ladder, bringing more and more customs into agreement and also upgrading power plants from heavy fuel to gas, et cetera, et cetera. And it is the same narrative on services that we mentioned before, we have both in Marine and Energy, if you combine it, we have a 90% renewable rate of our agreements, which is, for us, the ultimate proof point that we're adding value to our customers. Otherwise, they would not renew the agreement. And we have about 30% -- 30%, 31% coverage of agreed -- some kind of agreement for our installed base. So of course, there are more growth opportunities. Theoretically, it's 100%, but we will not get to 100%. But there are growth opportunities as we go forward. I think that was a very quick summary of where we are and a little bit outlook for the future. So I suggest, Hanna-Maria, we open up for questions.

Thank you, Hakan. That's a good...

One thing I should say, so sorry, because I know the question will come. So let's comment that practically. Storage and strategic review. So it continues. Yes, it's been more than a year now. So I fully understand the questions, when are you going to land and how are you going to land. So it's the same narrative as before. I mean, when we set out, we have a business, it's EUR 1 billion, it's profitable. We took a step back. There are ample growth opportunities. How do we grow this in the best way for our customers to create shareholder value. We are exploring different ownership alternatives, everything from keeping it like today or to divest or partially divest. And this analysis is still ongoing. We didn't set ourselves up a time frame. This clearly has taken time, but we want to turn on the stone, so to say. And we want to get to the end. We understand your questions, your eager questions, but we will get back when we have made the decision. The decision has not been made yet. Okay. Now Q&A.

Thank you, Hakan. So moving to the Q&A. Our first question comes from John-B Kim.

Two questions, if I may. First, if we talk a little bit about what you're seeing in the [ Merchant ] segment, quite a diverse set of subsegments that go into there. If you could help us understand how you see that going for 2025? And then secondly, you may have seen earlier today the industrial green deal was announced out of the EU. I'm wondering if you can help us connect the dots from the most -- the more relevant parts of the policy to your businesses. What could we expect over the next few years?

So if we start with the last one, I haven't seen the green deals and what it entails. I'm so busy now with U.S. data center developers. So I guess, Hanna-Maria, if you can help me here a little bit or otherwise, we need to pull a blank on that one because if it came out today, I haven't seen it.

Yes. I think we need a little bit time to analyze it. So I think it's too early for us to comment that.

Yes. So that was the first. Then looking at the Marine industry and the different segments. As I said, I mean, you asked about Merchant. So basically, if we start with containers, I think that there is a renewed interest in containers, building vessels. That was a boom, then there was a slowdown. But I think now with continuation of the Suez challenges and continued high transport rates, there is also a bit of renewal of interest for new build. We do see that. So that's one thing. As you know, our core -- what we do in those type of merchant is auxiliary engines, so to say. So it's not the main engines that we have there. Now if we look at other segments, LNG carriers, there is a -- it's a bit of a slowdown there. I mean there has been a lot of contracting activities and the lead times from the shipyards are getting long. However, there is new Chinese shipyard capacity coming into that segment. So that will probably have a positive impact going forward. We have a hybrid electric concept that we have launched for LNG carriers that you might be aware, where we can -- our view is that we -- over time, we can make a significant inroad coming back, bringing the 4-stroke back, 4-stroke engine, sorry, back into the LNG carrier space. So that's an exciting opportunity. If we look at offshore, I think a high level of activity, but new build is still muted. We do have a strong service business, but I think people have learned from the past with a little bit of over investment. So it takes even more time to ramp up there and for the new build business to develop. Cruise, I'm leaving merchant Cruise is very active. I would say the big operators, they are operating in clearly on levels way about pre-COVID. And that they had a strained balance sheet before, but step-by-step are getting out of that strain situation, and they are placing orders for vessels. You have seen that. And normally, I say that there is a 6 to 12-month delay in the process from when a ship is awarded until the engines are awarded. So cruise, I think we will see a positive development going forward. Ferries, there is a clear need. I mean, average age, we know it's the same story, 29, 30 years. I think that we see -- do see activities, but it's also hampered a bit about the financial strength of many of the players in the industry, so to say, but there is a clear need. Yes, that's a quick overview.

Next question comes from Daniela Costa.

Hello, Daniela.

Hello?

We can't hear you. Sorry, we can't hear you.

Yes, it looks like that you are unmuted, but we cannot hear you. Maybe the…

Yes, now, thank you.

Welcome.

It's working. Okay. Perfect and it works. I also -- I have 3 questions, if that's possible. So the first one is just regarding situation in Europe, lots of debate of Russian gas coming back and a fair amount, I think, of gas plants in Europe, particularly in Germany had been mothballed or at low utilization. I don't know how much of your installed base has been in that situation. So if you have any views on what that could do for your energy business? That would be the first question. I'll ask them 1 at a time.

Okay. So yes, I mean, we have continuously been of the opinion that gas is needed. I mean, for the world, so to say, and certainly for Europe as a transition solution and transition over decades. And gas is certainly better from a carbon emission perspective than coal. So -- and as you know, we are still very clear on our decarbonization strategy, but gas has a vital role to play in that decarbonization journey in energy, but certainly in marine as well. So that's the first starting point. And sorry, and we have continued to invest in the 4-stroke technology. We continue to invest in our gas engines, for instance, where we are bringing down methane slip, very important, especially on the marine side, but I would also on the energy side. Now, so utilization of our energy power plants overall. And I must say, I don't have the specific numbers and the specific statistics. But if I -- if you ask me to make a kind of, yes, hopefully intelligent guesstimate, I would say that our plants have actually been running on fairly high utilization. And why I say that is because they are very energy efficient. And I have -- I know for certain customers that have bought our engines and they have other gas turbine equipment, et cetera. And when they see the thermal efficiency that we are bringing, maybe the --in initial intention was running it to more like a balancing power, but they run it for baseload because of the thermal efficiency. So our plants have already -- I would say, my best guesstimate in Europe would be -- the utilization of our running installed base has already now been fairly high.

Okay. And the second question is regarding your mix. So it sounds like you've had like a fairly higher than normal aftermarket versus history. Is that something that you would expect to continue to be the mix shifts more and more or any things we need to kind of like keep in mind when we think about '25, '26?

I don't see major shifts. I mean this is -- the mix here is oscillating a little bit between 50% to 55%. And it varies -- the share varies a little bit, mostly on the new build business because both new build and services are growing. But if you have a great new build year, as we know, it provides a lot of top line and then the share will swing. But I don't see -- I mean, a structural shift. It will vary somewhere 50%, 55%.

Okay. Got it. And finally, just in terms of margins, it's been quite hard to think about the margin because of like storage seems to have been quite volatile. Can you maybe sort of divide the margin into 2 and tell us how do we -- should we think about the moving pieces for storage from here? And then on the rest, you seem to be getting close to the 12%. Is there further upside?

So first of all, I make the general disclaimer. We don't give guidance for margin. But having said that, if we start with our thermal business, so both Marine and Energy, I think we are on a journey of continued profitability. And you've seen the waterfalls in our quarterly reports where it's very, I think, very clear that we continuously improve. Yes, maybe Marine had a little bit of flat in the last quarter, but there is a movement of continuous improvement of our profit margin clearly. Then on storage, as you noted, we have step-by-step improved the profitability. So now LTM, we came out at 4.2% or 4.3%. And our intention there is also to continue our strategy as it has been selective growth. We have grown slower than some of our competitors, clearly. But on the other side, I think we have performed better on the profit margin and profitability, quite frankly. And that is the strategy that we will continue to execute.

Just on that point, sorry, as a follow-up there to make sure I was clear because it looks like when we try to back the quarters, and I understand the data is not there and maybe that's the problem that in Q4, the profitability in storage has come down, but maybe is there just volatility as you've said.

Yes, I would, I would, yes and I know I often make this comment. I think you should -- you cannot consider a Q-on-Q comparison. You need to have a little bit long because it might vary. But I would say the overall trend is the right one.

Thank you, Daniela. Next question comes from Panu Laitinmaki.

I wanted to ask about the decarbonization in Marine and basically potential impacts on that from the new U.S. administration that's a bit more critical towards it. So basically, I have 2 questions. First is about the IMO and how does IMO work? Can the U.S. kind of slow down the developments or reverse the regulator, what the IMO is planning? And then secondly, what is the sentiment among your customers? Like have you seen less sense of urgency to proceed with decarbonization and new fuels and all this because of the kind of big shift in the biggest country lately?

So IMO, I'll give you my view. I'm not claiming to have deep insights on the inner workings of IMO. I mean, as we all know, it's a UN organization and basically, all nations are represented. And that, of course, leads also that it's normally a slow-moving organization and things are taking in careful steps, okay? I think 2023 was a big year when we launched -- IMO launched the CII and EEXI index and provided the framework. Now first of all, U.S. is a great nation in many areas, but it's not a great shipbuilding nation. So most of the vessels are actually built in China, 50% of the world ship building capacity in China and they -- so Korea and Japan. Many of the owners, the big owners are there in Europe. I mean we know the big container companies. And then, of course, there are big freight companies also in the U.S., and we have the big -- all the big cruise operators there, they are U.S. Now what is the actual role of the U.S. in the IMO discussion? I don't have the insight, quite frankly, how big -- first of all, what position they are taken now. I think we can all suspect based on other communication that they will take a certain position. But how will that influence the other participants, it's -- I don't have insights to that. I personally, if you'd ask me, I think it's unlikely that they're going to reverse existing legislation or regulation. But could there be impact on the speed going forward? Maybe. So, yes, I think that's the comment I have on IMO.

Okay. But second part of the question was that have you seen kind of change in the sentiment of your customers like are they having less urgency to proceed with this?

So no, the general answer is no. But I do see shifts in different approaches to fuels, et cetera. Because, I mean, if you go back beginning of last year, there was a lot of attention to methanol. I mean we have sold more than 200 methanol, which is quite a lot during a short time. But now because of the lack of availability of methanol, the pendulum is swinging back to gas. And so we will see -- and that we will see those swings back and forth from different fuels and different solutions. The good thing is that we are a provider of all those, and I would argue that we are a technology leader on most of these. And like LNG, we are clearly a technology leader. So for us, we -- for us, it will be a good situation overall, so to say, anyway. So there is -- the decarb is certainly still on the agenda. I mean if you need to develop a fleet strategy for your CII strategy, the carbon intensity index strategy, and that triggers definitely actions. But the choice of fuel will change a little bit over time. The choice of different solutions will vary a little bit over time.

Thank you, Panu. The next question comes from Tomi Railo.

It's Tomi from DNB. Coming back to the data centers. So you mentioned that you are delivering hundreds of megawatts in Europe as of now or I assume during this year. In terms of orders, those must have been booked last year. Can you comment kind of are we talking about 300 megawatts or 900 megawatts? And second point, just in terms of getting a picture of the values, how does the pricing reference kind of look like? Should we compare those to the typical kind of thermal plant type of deals, baseload megawatts and the price of what you report as orders?

Yes. So first of all, it's hundreds of megawatts. I cannot be more specific than that because we have confidentiality, we have signed confidentiality agreements with our customers, that is hundreds of megawatts. And what's the price realization? I would say it's a price realization that we normally find in our thermal power plant business. I would say that going forward, I mean, since this will be running as baseload application, the service business will be according to baseload, which is 8,000 hours a year, which is good.

So these orders were booked last year?

Yes.

And they are in the numbers, so we can kind of calculate a little bit how much of orders. Would you dare to comment anything about pipeline for you kind of -- is the business in megawatts is enough kind of in Europe, in the U.S. You haven't booked presumably orders yet from the U.S.?

No, that I've been clear. We have not booked orders in the U.S. What I'm a little bit cautious is that this is a project business. So you get a big couple of 2, 3 big orders, that's great. And then it can be silent for a quarter or 2 and then you get it again. So as you know, this is not -- it's project business. So I would say underlying sentiment is positive. But of course, we want to provide more proof points. So we'll come back when we have the proof points.

But one follow-up I had on this. When you mentioned project business, are you taking these orders as EPC? Or is it still no EPC even on data center side?

It's -- I mean, our EPCQ approach overall, it's -- we are still doing EPC, but we are doing it in a much more selective approach. We do it in certain countries. We do it with certain customers. But I would say, in general, the data center will be equipment, not EPC.

And finally, just to check, energy outlook as well as marine better next 12 month. Is there a tilt kind of which is better or kind of even does better imply worse year-on-year in storage?

Timo (sic) [ Tomi ], I appreciate your question. Better is better. I will not go -- I mean I will turn the question around. So just to make a point. Timo, can you please predict the future in the current geopolitical situation? I think we are seeing -- and to be more -- I mean, a more serious note, I mean, we see increased level of uncertainty, clearly. I think the current U.S. administration has a very broad agenda and making bold statements and is creating a lot of uncertainty. And that uncertainty is, of course, not good for the overall decision-making. So that's why -- and we made -- you noted the caveat that we put in relation to our guidance that we said that this is a environment that has more uncertainty than normally, so to say. And therefore, it's hard to make forward-looking outlooks.

Thank you, Tomi. The next question comes from Anders Roslund.

Yes, hello. I had a follow-up on the data center business again. And given the fact that Mr. Trump is sort of less interested in renewables, could this be a revival for the LNG part of baseload in the U.S.? That's why people are coming to us and look at your engines. And then the follow-up is then, could you really export the engines from Europe to the U.S.? Or what sort of tariffs could you confront?

So I would say that there was already a fairly strong LNG sentiment in the U.S. even before the current administration. And I think the sentiment has even further strengthened, so to say. So yes. Now tariffs, so we export our engines from Vaasa to the U.S. So if there would be a tariff that would affect -- we will pass that on to our customers, clearly. We will not eat this. But one should also acknowledge, there is a lot of uncertainties around tariffs, when will they be applied? Sorry, there's some noise in the background. Somebody is having fun in the background.

Anders, can you please mute yourself?

So, there's a lot of unclarity on potential tariffs. Would they be -- how broad would they be, how would they apply? And I would also -- another thing to look at it is, of course, how the U.S. dollar-euro is developing because there you've seen a very strong dollar. So those 2 combined, what will be the net effect, very hard to predict.

Thank you, Anders. Next question comes from Sean McLoughlin.

Just a question on the portfolio business. I guess, if there's been anything strategically that's changed, obviously, given the order intake strength last year, given this very strong bounce to positive margins, is this actually an acceleration of a sale at a good multiple? Or is this actually, I don't know, changing the way that you're thinking about some of the businesses within that portfolio?

Yes. No, I can confirm that these businesses will still be divested. So no change of that direction. I think what we said before is that some of these businesses we needed to turn around before we divest. And I think you're now seeing that we are turning the businesses around and then we are divesting. I mean we signed for ANCS last year, and we will continue the journey with the other business units in portfolio to divest.

Is it fair to assume then that we might see divestment of this business pretty quickly?

Well, I won't get into the time elements, sooner the better, but we want to make sure we get a good value realization and therefore, turn the businesses around and then divest them. It will -- it's over time. We will not finish this year. But -- so we continue year-by-year.

Next question comes from Antti Kansanen.

I want to continue with the theme of today, so data centers and a question on Europe versus U.S.A. And I mean, you've had a good traction in Europe with these projects that you were referring. Are these all coming from the collaboration that you have with AVK? And could you maybe talk about their role in that as well? And then maybe a follow-up on the U.S. market. I guess you are -- you have a little bit of a different market strategy there going straight to the end clients. Are there any kind of scale differences or cultural differences that the engines have not been as favored as turbine so far? Or is it just you're early in the game of penetrating that market? So these topics, please?

No. So I mean, if we go to Europe, we have a partnership with AVK and these first orders have been with AVK, I can confirm that. And then we are also -- I mean, in the U.S., it's more the latter option that you put. It's early stage. It's not a significantly different approach or it is just early stage because this development, like I kind of sketched before, where it becomes a baseload application, you cannot get access to utilities. This is evolving as we speak, basically. So that's why there is still a bit of a learning curve. But there are, as I said, a lot of positive discussions on that.

I wanted to challenge that a little bit, I'm not an engineer by any means. But if you think about the baseload power for data centers, is it kind of -- do you need that much kind of dynamic kind of fluctuation on the supply that the energy would be a beneficial compared to a turbine?

No, but you need thermal efficiency.

Okay.

For your operating costs. I mean, it normally, we have a thermal efficiency about 49%, 50%. And the average derivatives on a good day, they have maybe 40%, 42%. And that differential makes a hell of a difference in fuel costs.

Okay.

So that's the key thing in baseload.

Thank you, Antti. The next question comes from Tom Skogman.

I was also wondering a bit on the same topic now when you have these American visitors there. So what is kind of the promise that you say to them and they are used to buying gas turbines. We have all heard about these kind of -- these benefits. But if I would buy something for hundreds of millions of dollars, we would like to have numbers. And now you provided one number, but are there other numbers that you can present?

I mean I would love to go through -- we can go through our technical specification, but I'm not sure that the investor collective will be very excited when we go through. I bring out the major one, and that is the fuel efficiency. We don't need water. We need very little water. I mean gas turbines for cooling needs much more water. We are much -- our lead times are much shorter because, as you know, that, I mean, if you look at some of the big gas turbine players, they -- the order backlog is significant, primarily, if I understand it correctly, on the big turbines, but that also has a repercussion on the delivery times of the aero derivatives, so to say. So there are some of the critical factors.

Is it also a selling point that these plan to connect the data centers to renewables in the future somehow that and you can present some numbers for that and I mean, how is this fuel efficiency, you gave this 42% compared to 49% to 50%, but how does it change 5, 10 years down the road when they have connected it to windmills?

So I mean, right now, and you should talk to the people in the data center, there is a rush for data center capacity. And certainly in the U.S., thermal is many times the way considered forward. Then, of course, the hyperscalers, so the customers' customers, they certainly have an agenda to have as green energy as possible. But I would say, is that the primary focus? No, no. But to your point, this is an additional benefit on our side because, as you know, we have experience to integrate renewables with our thermal, and we are better at balancing than the gas turbines. So that is a secondary kind of positive. But I would say that during this rush that we are -- the rush in the market, that is not on the top of the agenda yet.

And for these orders you have booked in Europe, are the end customers behind these American tech companies?

I don't think I can disclose that actually. So sorry about that. We have signed some confidential agreements.

And just then on other type of power plant orders from the U.S. Have you seen that some orders are slipping already because of these tariff fears?

No, not yet. But I think on the storage side, we start to see some hesitation on orders because of the whole geopolitical agenda and discussions on tariffs. Now how that translates going forward, it remains to be seen. But as I said, this uncertainty is not good.

Thank you, Tom. Then I have received a couple of questions by e-mail. So continuing with the storage. What is your read on Fluence warning? What is different in what you see?

So I mean, you have to talk to Fluence about how they see their reality and the way forward. I mean I can say that we have chosen a bit different strategy than them. They have grown faster than us, but we have been more selective in our growth. And we have grown slower, but we have also achieved a higher profitability. I would say -- I would argue we have had a more focused, both geographical approach, but also customer segment approach. We have been talking about and which we still stand behind where our capability to execute, deliver on time with the right quality. This is where we should excel. Our thermal stability, still, we haven't had any fires in our installations, and that is by design, of course, by luck as well. But there is -- I would say we have an industry-leading thermal design. And then this capability of us to integrate -- we are power system companies to integrate it with other assets for overall uptime reliability and lowest energy cost. Now there are -- we talked about this before, there is a huge energy storage market. Some customer are much more focused on CapEx. We are not as competitive there, let's be frank. But there are certainly customers that value our key attributes. And there, we grow.

Then another question regarding Navy business. You have not mentioned Navy activity in Marine. Do you see something in the long-term project pipeline?

So our Navy business is less than 5% of our overall revenues. And of course, there is a lot of attention on this. And it's growing, I mean, considering everything, how defense is evolving in general, that is growing as well. When it comes to M&A, we've talked about that before. We will focus more on bolt-on acquisitions than big strategic bet, so to say.

The next question comes from Panu Laitinmaki.

I just wanted to clarify, so I understood that you booked several hundreds of megawatts of our data center orders last year. So if that is correct, it means that out of the power plant orders, it was like 25%, 30%, of that...

I will give you the numbers.

Yes. But, I mean...

[indiscernible].

Yes, but, maybe, sorry in your report, so the question is that how much was balanced out of...

I will tell you, I will not tell you. I said that already.

But maybe it's final, I mean the traditional baseload then was fairly small last year, right?

No, it was [ a little ].

Okay.

I'm not telling. What we have been communicating is that, that balancing overall was about 70% of our order intake last year.

Overall, including storage or in power plants?

In power plants.

The next question comes from Mikael Doepel. Mikael Doepel, please proceed.

Yes. Can you hear me now?

Yes.

Yes.

A couple of questions. So first, coming back to Hakan, your comment on M&A. So you said that you're focusing on bolt-ons. And I was thinking more broadly about how you think about capital allocation because, I mean, looking at your balance sheet, it's super strong. You had a net cash position at the end of the year. You have previously said that you are -- you don't see any bigger investment needs in Vaasa, you have plenty of capacity to grow. So just wondering what you're going to do with the cash? And I mean, why are not extra payouts or buybacks topical already now? And even on top of that, you have the portfolio business, which we talked about earlier, which you're likely going to divest over time. Just curious about your thinking around that, especially with regards to the payouts and that part of the equation.

No. So I mean, overall, as you probably know, we have a target to give out more than 50% of our profit. So I think this with what has been proposed by the Board to the AGM, it's 52%. You're fully right, we have a strong balance sheet. We are well funded for our R&D because, I mean, we are running higher R&D than ever. I think it's 4.6% of overall sales last year. We continue to invest in plants and equipment. I would say we are investing in a similar rate that we do the depreciation and amortization, so to say. So we have a balance sheet where we could clearly make major strategic moves. That's for sure. I mean -- and we talked about before what are the obvious big strategic moves [ at my end ] et cetera, et cetera, if it comes out, when it comes out and there are many ifs and buts. Then I would say on the other side, we are going into a situation -- this overall geopolitical business situations, which has a lot of uncertainty. So it's also good to go into this, I would say, era of uncertainty with a strong balance sheet.

Okay. And just a follow-up on that. You mentioned MAN, and I think you mentioned it before. Could you just briefly recap the strategic rationale for you to be interested in those assets?

No. So I mean, MAN is a very strong player in 2-stroke. They're also in 4-stroke, but the strategic rationale would be around the 2-stroke business because today, we don't have 2-stroke in that, so to say. We used to have, we divested it because it was the smaller player in the 2-stroke space. MAN is clearly the bigger player in the 2-stroke space.

Okay. Good. And then finally on another topic. So carbon capture systems, we talked about this. I think you said that you've done some pilot projects last year, the commercial business this year. Just wondering where are we on that one? I mean, what does the pipeline, for example, potential order look like right here and now? What's the uptake been among the customers and so on?

So you're right. I mean -- sorry, we are running pilots as we speak and the intention is to do a commercial release this year. I think we should also acknowledge that this is an ecosystem that needs to evolve. I mean we are providing our parts to the puzzle, basically, we extract the CO2 and you can store it on a vessel. But then we have many other important steps of the puzzle, okay, once you bring it to shore, what do you do with it? Do you pump it back in a well? Do you use it as a raw material for synthetic fuel or something else. And this is a very dynamic and evolving space. So we provide one important piece of the puzzle, but we don't solve the whole puzzle. Now what we have said that, we identified this to be a EUR 10 billion business opportunity over 10 years. So you hear the kind of time frame 10 years. So it's -- there is a lot of interest, I would say, from different customers. I will not go into the customer list, so to say. But I would -- this -- considering the ecosystem approach, this business will take time to grow, so to say. And it's also clearly dependent on the regulatory development, both, I would say, in IMO, but also in the European context.

Right, right. Okay. So I guess, commercialization later this year, perhaps or is it fair to assume that there's not going to be much action or orders on this business still this year? Is it more of a kind of a midterm story from your point of view?

I would say that the growth of carbon capture, significant contribution to that to the top line is more a mid-term.

Thank you, Mikael. The next question comes from Sean McLoughlin.

I think this is a question that you've already been asked before, but it's regarding Suez and the impact that is the beneficial impact that it's had on your service business on service growth. I mean, as you look back on '24, are you able to give us some kind of a steer of how much of that 15% year-on-year growth it actually contributed to?

It's -- I won't give the numbers, but it's a minor portion, so to say. So I mean, it's clearly so -- I mean, the logic is, of course, that Suez is closed, people travel longer and therefore, it generates more service hours. It also keeping more vessels operating because you need more ships to provide the same type of capacity. So those are the fundamental drivers. But I would not say that this is a major driver to our growth during 2024.

Fair enough. And I guess we should assume that it will be an even smaller contribution this year, given that it's almost kind of annualized through '24.

Yes. I think that's a fair assumption.

Now, I don't see any raised hands. So we have still 8 minutes time left. So in the case you have question, please use raise your hand functionality in Themes or if you have any written, you can also send me an e-mail. Well, it looks like that there are no further questions. So thank you, Hakan, and thank you for all of the good questions. So as a reminder, please note that we are hosting a site visit to Kampen, the Netherlands at the end of March. So I hope to see many of you there. Thank you.

And Kampen is our global logistics center for those of you who don't know where Kampen is.

[indiscernible].

Welcome and thank you for your questions, and thank you for the call today.

Thank you. Bye.