Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

So time to start. Welcome to Wärtsilä's CEO 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 key long-term opportunities. And after Hakan's key messages, there is a possibility to ask questions. As a reminder, we will host the pre-silent call on January 13, together with our CFO, Arjen Berends. So let's leave the questions related to recent trading and detailed financials to that call. [Operator Instructions] Please, Hakan, its time to start.

Thank you, Hanna-Maria, and a warm welcome to our strategy call. It's getting close to Christmas, but we still have some interesting month ahead of us, December. It's -- we have a lot of activities in Wärtsilä to start there. And if we talk first about Marine and then we talk about Energy, what is happening. On the Marine side, I would say -- I would highlight continued service growth, moving up the service value ladder, leveraging our digital tools to grow certainly the performance-based business. Agreements, we continue the positive trajectory there, bringing more and more of our installed base into agreements. I think we are around 34% now, increasing with about percentage unit every year, really working out for us in a positive way. So continued positive sentiment on services. Then our core segments continue to grow. We made the point many times that you can just not only take Clarkson overall numbers and try to triangulate where Wärtsilä is going. You really need to look at our core segments. And it's about cruise, ferries, it's about offshore, it's about special vessels. And we continue to see good development there. We also made earlier the statement that -- and it's part of our interim report that even if you look at Clarkson forecast numbers in our core segments, it looks pretty positive, and we see that as well. Then the third element of our growth in Marine, decarb, and it continues. I would say we are a technology leader in the new fuels but not only in the new fuels, also helping our customers to improve efficiency and reduce fuel consumption. And also, we launched carbon capture, as we know. That will take longer time to evolve, but we still think over time, it can be an interesting retrofit solution. Now regulation, as we know, importance of IMO, and we are all aware of the MEPC83 vote or you could say, the postponement for 1 year to take a decision on a global carbon pricing mechanism. So what's the impact to the industry of this? And what's the impact for Wärtsilä? If we start with the industry, I would say we could go in a direction where we will see a more fragmented landscape of regulation because EU has its regulation in place. I mean, Marine is now part of the EU ETS, the carbon pricing in Europe. We have the EU fuel Mine, which is playing out. But we now also hear rumors that China is considering developing their own carbon pricing mechanism. And there could be other regions and countries developing their own. So I think that if that comes, it could be a more fragmented landscape, which doesn't make it easier for the owners and the operators to kind of operate business-wise in. What's the impact of Wärtsilä? I would say limited because if you look at our core proposition for our customers, it's about fuel flexibility and fuel efficiency. And in the future, if you build a vessel today, you need to have a 30-year time horizon. It's the lifetime of the vessel. And we still continue this discussion under the 30-year horizon, things will continue to change, regulations will evolve. Fuel prices will -- fossil prices will probably go up because of regulations. Green fuel, still too expensive, not available, but will -- insufficient amounts but will probably come available. So with that kind of backdrop, we still have this strategic discussion with many of our customers about dual fuel, multi-fuel capability journey over time and fuel efficiency, emission efficiency. I would say we -- right now, if you talk there is a lot of focus on LNG. And some of the operators, they say that's the first step and then going to bioLNG. And then the focus is on methane slip. And I would say on the 4-stroke side, we are the clear leader on methane reduction, methane slip reduction. So that's what I said, limited impact. We still have this very strategic discussions with our customers, and we continue to see that going forward. Also, and you follow the figures, container liner traffic holding up very well. Also container liners placing orders for new vessels, so strong. LNG is -- I mean, transport is down, but bunkering is up. Cruise, very strong, a lot of activities. Ferries also coming up in a good way. So good activity. And also, I would say, oil and gas is reactivating. So good development in Wärtsilä's core segment, I talked about it and also good opportunities to capture business on our decarb leadership, I would say. So that's Marine situation. Then if we go to the Energy side, and you know the split, about 60% of Wärtsilä is Marine, about 40% is Energy. We still have the split also between new build and services. It's about 50-50 split. I would say it's even -- right now, I think services is even a bit more, maybe 55-ish. On the Energy side, as you know or many of you know, we provide 2 solutions. We provide balancing power and we provide baseload. And the balancing power is very tightly connected to the increasing share of renewables, wind and solar, and you need to make sure that the system stays stable when the sun doesn't shine and the wind doesn't blow. We continue to see a lot of activities on this in the U.S., especially in the mid-section of the U.S., I mean, Texas and all the way up. And the renewables agenda there is very much driven by affordability, affordable energy. So the baseload narrative is -- sorry, the balancing narrative is definitely playing out in the U.S. still. But also in other parts of the world, there are auctions coming in Brazil, et cetera. Then if we go to balancing, generating electric power 24/7. Of course, the -- we have our -- you could say, our core markets like Indonesia, like Malaysia, et cetera. There are actually pretty strong activities there right now, interest. But there's, of course, a lot of attention to the new baseload application for us and which is data centers. And you heard me talking about, but I think it's worth coming back to it. It has been, I would say, the overarching message is that a big share of the data center power market is moving out -- moving into our sweet spot. If you go a couple of years back, quite recently, data centers were looking for 10, 20, 30 megawatts. In the U.S., they could hook up, they can sign an agreement with the utility. And they would buy some high-speed engines from Cummins or Caterpillar as a backup if the grid collapsed, so to say. But now as the size of the data centers are growing, we are talking about hundreds of megawatts and gigawatts. And then when the data center developer goes to the utility, it becomes an interesting business opportunity for that utility, but the utility needs to build a new power line or build a power plant. And then, of course, they have the regular planning process and lead times in the U.S. are probably, I mean, normally between 7 to 10 years. So then this proposition doesn't work anymore. And therefore, data centers in many instances, are looking for off-grid power generation. And these are in the sizes of hundreds of megawatts. So it's right in our sweet spot, you could say. And we do see a lot of activities. We had our second data center order here quite recently. I think many of you noticed that. And I say, as I said before, because I know many of you will ask, how do I see it going forward. There is definitely opportunities for the future. We continue to have a pipeline of commercial opportunities in varying stage of maturity, but we do see a strong demand. And one particular point I would like to make because there are some people that are asking, is the only reason why you are receiving orders now is because gas turbine technology is sold out. And I would say that's one of the reasons, but it's not the only reason. Clearly, we have also in this segment, we have some intrinsic benefits. We talked a lot about our benefits on the balancing side. But also in data centers, we have some benefits. We don't have thermal derating above 100 degrees Fahrenheit. We don't need a lot of water. Our modular concept is from a CapEx perspective, more affordable. Our energy efficiency is good. So there are a couple of drivers. And personally -- and let's see how this plays out because now it's a buoyant market, and we do think that there will be a high level of activity also going forward. But I will make the case because we see customers coming into our space that we normally haven't done business with in the U.S. and they are formidable players, and they have been focusing on gas turbines. But now they are getting into engines. And I'm convinced that when -- because I'm convinced when they try our engines and when they see them working and operating like they normally do, they will like that. And I see this on the balancing side. We get -- we start to get repeat customers. And there are quite a few examples, our Colorado River Authority, WEC, et cetera, et cetera. And I think that will happen the same -- on the data center side. And that could actually mean that we will structurally change our market share in the U.S. going forward. This is a journey over time, but I do see opportunity because there are more and more learning -- customers learning about engines. So with that, I think that was a quick summary of Marine and Energy. And Hanna, I suggest we open up for questions.

Thank you, Hakan. So we will continue with the Q&A. [Operator Instructions] So the first question comes from Antti Kansanen.

I have 2. I will start with surprisingly on the data center side. And I mean, Hakan, you've been talking about for some time that you have a pipeline in various degrees of maturity, and you have mentioned that U.S. players are perhaps more familiar with turbines as a technology. Is there a key difference in the permitting process of getting an engine-based power plant to kind of -- to get the permitting done versus a turbine because the regulators have more experience on that. Is that kind of one explanation why maybe there's been a bit of a longer time period that you have converted some of these opportunities?

No, that's not what I hear from our customers. No, I wouldn't say that I don't think.

Yes, because I was just thinking, is this kind of a pipeline of opportunities in states that you have already kind of done extensive business? I mean it's not like U.S. is a new market for you guys. You have a lot of installed base in there. And for example, in Texas, you have a lot of clients who have invested also recently. So is it kind of a similar regulatory framework and similar states that you are doing? Or is it completely kind of new areas geographically as well?

I think it's a mix. So it's both in Texas, but it's also in other states. And I would say that, yes, you have a point that we've been in the U.S. for decades. I think we've been in the U.S. for 30, 40 years. And you could say that we have had our strongholds with municipalities and the co-ops on the energy generation. And they have -- they continue to be important customer of ours. But first of all, in the smaller data -- I mean, it's 2 years ago, we were not on data centers because I described, it was a different dynamics. And of course, our competitors like Caterpillar, Jenbacher of the world, they have developed customer relations in that segment over many, many years. So I think in the beginning of this transition into bigger data centers, they have clearly captured a lot of orders. And -- but now since I'm saying a big share of the market is actually moving into our sweet spot, we are building up those customer contacts. And my key point here is that when customers try our new candy, so to say, if I may say so, of [ Fatso ] candy, they will like it. And my proof point to that is that is -- I've seen that happening on the balancing side, repeat customers in the U.S. And it's a little bit also, you could say, the -- our other side of competitive space with GE and Siemens and some of the earlier -- when the market changed for bigger data centers, there has been the gigawatt projects. And we are -- we have not been in that space, and I would not say that we are in the gigawatt space. So Siemens and GE, they have had a fantastic home run there, and I congratulate them. But now when it starts to move into our sweet spot, we are back and we are new. And we have these intrinsic benefits, no water consumption, no derating on hot temperature, no derating on high altitude, et cetera. And that's why I'm optimistic long term.

So are you giving the first pieces of candy for free or because you're building your knowledge? Or how is -- you're selling scarcity. So how is the -- anything you want to comment on the pricing environment on the data center side?

So I mean, Antti, there is no such thing as a free lunch in the world. I would say that we have a good customer dynamic, and we have strong pricing power, yes.

Okay. Then I had a second question, which is not related on the data center side, but on the power plants. I mean you already earlier got quite a sizable order from a mining project that was in Pakistan. And I mean that's also a theme that the market is quite excited about building up kind of greenfield copper mines, for example, Argentina, maybe North America as well. Is this something that could be a sizable opportunity for you going forward?

I think we are very well established with the big mining companies. They know our engines. They know our candy and they like it. You have to talk to them, but at least that's what they tell me. So as projects comes up, there will be opportunities. But they are a little bit more, you could say, opportunistic because it's like the Pakistani opportunity, they come. It can take many years, 5 years to develop, even 10 years to develop. So I would consider that as more -- we are certainly there, but it's a little bit opportunistic.

Okay. Is high altitude something that is a benefit for an engine technology versus something else?

Yes. We are -- I mean, the gas turbines, they derate. So you can -- either you have to over dimension or you have to accept the derating and our engines doesn't derate. Now of course, not all installations are at high altitude. So let's be frank. But certainly, for installations in hot temperature, I mean, 100 degrees Fahrenheit, no derating. The gas turbines, they have the same challenges there. So we have -- those are interesting strengths of technology going forward.

The next question comes from Sven Weier.

Two questions from my side, please. The first one is on the recent win on the data center side. I was just wondering, did you directly compete with turbines there because there's one of the turbine competitors who claims that they are not directly competing with the engines. They say this is just a temporary bridging until the turbine becomes available and then it moves into backup. What do you have to respond to that? That's the first one.

I don't know, as a matter of fact, which alternatives these customers are considering. But I think I can say that they were strongly considering engines and not only for this -- as I said, this argument that it's only because the gas turbines cannot deliver. I think that the market is very big. And we know that some -- I mean, the gas turbine competitors, they are running into capacity constraints. We still have capacity on 18 to 30-month kind of time horizon. And as I say, I think you're a little bit out of touch with the market if you make those type of statements. And then I would say when the market will come down, we don't see that happening. But we will see. We will see. When it comes to thermal derating, needle water, these are facts.

So basically, the project that you just won is not just temporary baseload from you, but long-term baseload. That's the plan.

I mean you don't invest in 500-megawatt power generation for temporary. If you look at the whole off-grid narrative, you could consider it in different phases. So now I'm describing a generic situation. The first phase is that you build a power plant, obviously, to feed your data center. But then a couple of years later or 10 years later, there will be a power line. And then you start to provide -- you continue to provide power to your data center, but you can also provide power to the grid. So that you could say is a second step. And so people start to talk about this as hybrid operation. And then I'm saying, our engines, they're extremely energy efficient. So -- and this is our baseload customers, they know it. And our new customers, they realize that. So good. And then you have Phase 3, so that's Phase 2. Phase 3, of course, the hyperscalers, they want to have more and more green energy. So they want to integrate wind and solar and love and behold that we go to balancing applications, and you know which is the best technology there. So that's why I say Phase 2, Phase 3, we will have a strong contribution to our customers.

And now the follow-up question I have on that is because I think you previously said your sweet spot is up until, I think, 400, 500 megawatt max because then simply becomes too many engines. But we also know that, obviously, Caterpillar had a project a few months ago, which was several gigawatts. I mean, do you think that's just very exceptional, one in kind and it never happens again? Or do you think you can push that limit higher?

So what is limiting the number of engines we put and how -- why do we find the sweet spot that, let's say, 20 to 400. It's based on how much space you have. So if you have more space, you can add additional and you can build gigawatt plants. There is no kind of electrical or fuel efficiency limit to this. It's more like how much space -- physical space do you have available. And I would say, and I would argue, I know there are some Caterpillar guys on the line, at least they subscribe. The key thing for us, we are more energy efficient than them. So if you're going to look at the price per kilowatt hour, you build it with medium speed. If you're going to build 1 gigawatt, you do it with medium speed, not with high speed.

And you would say that the majority of the pipeline is kind of size constrained. So that's why this will be limited to the kind of 400.

That will be -- this is how we have traditionally defined our sweet spot to be realistic. But as you see now with our second data center orders, there are people that have space. And you know if we focus on the U.S., it's a country with a lower space. So let's see how this evolves.

The next question comes from Vivek Midha.

I have one more question on data center and then one on Marine, if I may. So the question on data center is just following up on your comments around the varying sort of stages of maturity within the pipeline. I remember earlier in the year, you'd indicated you're quite confident in being able to book another data center order by year-end. That's clearly happened who knows whether maybe there's to be another one. But in terms of the sort of the potential for further orders, I mean, should we expect that this kind of trajectory of maybe every half year or so is about the right kind of indication? Do you see the conversion accelerating as we go into next year?

So it's very hard to predict. I understand the logic behind your question, I respect that. It's a little bit because one big order can move a lot. I mean we go back to the fundamentals of project business. It comes in chunks and in big chunks. So I think -- but if you -- as I said, we have a very active pipeline. We are on a growth journey. And there could be more orders this year. I'm not saying that there will be, there may be. And there will certainly be new orders next year as well.

Understood. My other question is just on Marine, following up on your comments around the MEPC and the IMO. You commented around the need to maintain a fuel flexible approach. And I fully understand and agree that if you're a customer with a 30-year horizon, if you are investing, you need to continue to care about decarbonization. In terms of the appetite to invest, on top of that, given the regulatory uncertainty, have you sensed any change in the appetite and willingness to make investment decisions when MEPC has been delayed by a year, there's this more fragmented approach and so on?

So I think it's too early to say because our customers and the whole market is still digesting this. So it's too early to say. I mean, theoretically, there could be certain postponements or certain retrofits. But we still -- and I know this because we have received a lot of questions after the interim and that book-to-bill on services is still in total, clearly above 1, but our project-related business was below 1. But I still say that -- and I reiterate that even on the project side, we have a strong pipeline going forward, so to say. So I don't see -- it's too early to comment.

The next question comes from John-B Kim.

Two questions, if I may. Sorry to beat the dead horse, but on the data center outlook.

It's not there. It's very much alone.

I know it's very left field of me. Where are you on factory loads? At what point do these kind of 500-megawatt, possibly 1 gigawatt orders start to create a supply problem for you? Or what -- how do you think about adding capacity?

Yes. So we still have capacity, but I would say that we are looking at delivery times. They are getting a bit more prolonged 18 to 36 months. So there is capacity still, but it's sliding out in time. Supply chain, I would say we have a good and solid supply chain.

Okay. And we spend a lot of time talking about the U.S. as kind of the epicenter for data centers. When you look more globally, which countries or regions do you think are logical expansion points for this market? And are you seeing Chinese competition there?

So I mean if we talk -- yes, so I mean, Europe is the obvious candidate. We have a partnership with AVK there. We have 3 installation on Ireland that is public. And we see it will come in Europe. It will take longer time because of permitting and the regulatory landscape in Europe, but it will certainly come. But it will also come in Japan, in Australia, et cetera, et cetera. So Southeast Asia is also coming. Chinese competition in this type of engines, there is no Chinese competition in these type of engines for energy applications.

Next question comes from Max Yates.

I guess my first question is just on the energy storage business. And I'm maybe a little bit surprised you're not kind of more optimistic on this because obviously, an extension of kind of what we're hearing in the data center market is kind of more solar, more energy storage. And I'm kind of curious why you don't talk about that more? Is it just because it's a more competitive market and you're not prepared to be as aggressive as you need to be to participate in that market? Are you just a bit kind of gun-shy because it's been a tough 6 months, and so you want to wait to see it. Just -- or is there a reason that you may not participate as all of that kind of that market picks up also related to data centers?

So clearly, it's been an exceptional development on energy storage. As you know, we concluded our strategic review just before the Liberation Day when U.S. introduced the major tariffs. And then what has played out after that in terms of a much more -- putting a wet blanket on a large chunk of the U.S. market and also increasing the competitiveness in other markets. That has been a ride for us to kind of weather through, so to say. And you've seen that the profitability of the order backlog that we have delivered, the team has executed well, done a great job and profitability is going up. But on the other hand, our order intake has clearly not been satisfied. And I would say that, that is a consequence of this latest market dynamics that I just talked about. And we are kind of regrouping and see what we're going to do going forward. There -- but I think we reiterate some of the fundamentals of our strategy, which will be to be selective and focus on customer segments and also geographies, which value our core proposition, which is very much about executional excellence, thermal safety and also understanding of power systems and how do you really integrate the battery, so to say. But clearly, the order intake so far this year has not been satisfying.

Okay. And maybe just a quick follow-up on what you said on kind of medium speed and high speed and potentially medium speed better. I appreciate we're all trying to become kind of experts in this and none of us are engineers. But my understanding was that one of the advantages of high-speed engines was that you have these very volatile AI workloads and so a high-speed engine is kind of better able to cope with that. Sorry, what's your pitch for kind of why a medium-speed engine is better? I just wanted to understand that better.

So I think the fundamentals, the energy efficiency is better. So you will have better fuel performance on the medium speed. Then I think the call is still out there. I mean we can ramp -- I mean it's true that high speed, they can ramp up faster than us. But I think the call is still out there because the loads or part of the loads we are talking about, they are in the millisecond domain. And I think the call is still out there. I would predict that we will definitely see some battery storage as a kind of system solution, and we are -- I mean, our battery storage team is working on that to deal with the millisecond and second spike, so to say.

And sorry, just a very quick follow-up. I wanted to understand a bit better what you were saying on these kind of very large kind of gigawatt orders because I guess you've always said why they don't really make sense is the space yet we are seeing kind of whether it's UNO, whether it's Caterpillar, we are seeing them win those orders. And I presume the space issue is no different for them than you. And I sort of felt like you said don't expect a gigawatt order. So I'm just curious sort of they're doing it...

The logic would be that if somebody has space to build a 1 gigawatt power plant with high speed, I think they would have space to build a 1 gigawatt with medium as well. But I think the key point why we are -- because these are exceptional orders certainly for high speed and would be also for medium speed is that normally, when you come into this amount of power, the gas turbine, they require less speed. And this is where normally people have gone, so to say. But of course, now the gas turbines are sold out.

Can I squeeze just one very, very quick one in? Just on Marine Services, there's some sort of news flow starting to come out that some of the kind of the Red Sea is opening up a bit. I'm just trying to understand, do you think your service business has had quite a big boost from ships having to go the long way around? And has that had a meaningful impact? Do you sort of think about -- do you think about that for your business?

So I mean, it has some, but not a big one. So that's one statement. It -- we have said that before. So that -- and also when I talk to some of the operators, they say that -- I mean, the container operators primarily, they say that even if -- first, there is a lot of safety concerns still. And they say that even if it opens up, -- that's my understanding. People will still try to keep their fleet in operation and simply go slower, reduce the speed with a not something like that. So when you sum it all up coming back, we don't think it will have a major impact on our business, our service business, even if the situation would stabilize.

The next question comes from Johan Eliason.

We can't hear you. We still can't hear you. I'm sorry, we can't hear you.

We cannot hear you. Maybe if we take Antti Kansanen first and then Johan, you can try after that. Antti, please go ahead.

Can you hear me?

Yes.

Yes. I just wanted to come back on the delivery times and the capacity stuff that you mentioned. Like did I understand correctly, 18 to 30 months of delivery capacity? I know you're kind of removing some of the testing bottlenecks at Vaasa right now. So is there any kind of additional plans for the next couple of years to expand it? And I just wanted to think that it's kind of interesting for your pipeline of data center clients where speed is of the essence to see that you're getting these kind of big, big orders and filling up the factory. So is it driving any urgency, what do you think?

No. I mean, of course, there is a high demand and delivery times are important in data centers. So that is for sure. And of course, we are looking at further expansion opportunities, but we will take it step by step.

Okay. But no kind of bigger expansion plans in a sense that you want.

As I said, I mean, we are considering the demand situation and see how this pans out. And then we will have to take decisions and take it step by step.

Okay. And what about your kind of main competitor on the medium-speed engine side? Are you seeing them active on the data center side? I just like thinking about it if somebody wants to find a new owner for the 4-stroke business, would that be an interesting data center player for anybody? Or are they kind of losing and not competitive with you on the power plant side?

I mean if you talk about Everllence, I mean, they compete in certain markets. They have taken certain projects in the U.S. I'm not aware if they have taken data center project. I don't think so, but you have to ask them.

Yes, for sure.

So I mean they are certainly a competitor. But normally, and this swings a little bit back and forth because it's a project-oriented market. But if you look in the engine power plant space, we normally have like 70% market share.

Thank you, Antti. Then let's try again with Johan Eliason. I hope that we could hear you now. Johan, please go ahead. Johan, can you hear us? Okay. Let's maybe then try with Akash Gupta. Akash, we cannot hear you. Then let's continue with Sven Weier. Please go ahead.

I hope you can hear me.

Yes, we can hear you.

I'm lucky. Yes, also a question on Everllence, but more on the direction, obviously, now it seems to become serious in terms of being sold by VW. We can all see the price tags that are rumored, and we heard you talking about being interested in the past. Now obviously, there seems to be also private equity, the Porsche family being interested. I mean, how much interested are you really? And what's your value proposition in terms of making sure it becomes yours?

So -- and I think -- so I reiterate the message because it's consistent with what we have said before. So no changes from our side. Yes, if it comes out, we will certainly have a look. It's very clear we cannot buy the 4-stroke business. We would be interested in the 2-stroke for the right price, of course. And we would need to find a partner to do a transaction, so to say. That's all I can comment.

But you would be also able to buy the entire company and then selling the 4 stroke later?

That is a complex transaction, and it's also -- I don't know how the Volkswagen Group is considering. You will have to ask them, do they actually want to sell it with an immediate breakup, et cetera, et cetera. There are many different avenues and scenarios and complexities around that. I cannot comment simply.

Okay. But the partner could be private equity that keeps the 4 stroke and you take the 2 stroke.

That's one scenario, yes, absolutely.

Understood. And the second question I had is just a follow-up also on battery storage for data centers because we also Fluence reporting guiding quite optimistic for next year, also talking very positively about data centers as an opportunity. I mean you still sound a bit more reserved. I mean, is Fluence so optimistic because they keep on talking about the U.S. assembly and how that helps them? Is that making a difference in your mind? Or is that not really the case?

I mean you will have to ask Fluence about their positive outlook. I mean, from our side, we think there is an opportunity for battery storage as a component in dealing with data centers as a load, which has a very low profile. But then, of course, it's also to find the right commercial setup and the right [indiscernible], et cetera, et cetera, so to say. So it's a risk/reward balance. I mean, the traditional kind of business dynamics.

I mean is it -- would it also be interesting for you to partner with companies like NVIDIA who obviously make the new 800 architecture and run the script? I mean, is that something that you think would help you getting more built in into those architectures?

Yes. I mean I still -- and you probably followed and there are technology avenues that is adding capacitor or super caps or elements very close to the actual processor, so to say, or -- but we are, you could say, the front of the meter of big-sized batteries. So is there a trimming opportunity between the front of the meter and the data center still to be explored. And I do think there is some potential. So I think there will be different players partnering up around this space. It's a very dynamic and evolving space. And I think overall, the industry is learning a lot about the load profile of the data centers. And we know there are the learning and inference data centers, and they have different kind of load profiles.

But it's not that your engine sales guys take the battery guy with them into the meeting to cross-sell.

This is a potential opportunity for sure, absolutely.

And just as a reminder, in case you have any technical problems, please you can also send questions by e-mail to me. But then next question comes from Tom Skogman.

Continuing first on Everllence, I fully understand there will be great synergies in service. But as I'm not an engineer, I mean, would there be any direct synergies between the 2-stroke and the 4-stroke engines in terms of R&D or so?

Yes. I mean, of course, there are 2 different engine technologies. I think the major synergies are on the commercial side, sharing a common customer base. It's certainly on the services side, as you're pointing out. And then on the technology side, although the engines are different, I think that certainly in terms of idea sharing and when the deep engineers, they get together and they start to innovate, I'm sure that there will also be some opportunities there to learn from each other.

And the biggest cross-selling opportunity, what will that be in terms of product?

It's that you -- then you have a company that can offer -- has a broader offering. And you can discuss both type of solutions at the same time with the shipyard, so to say.

Okay. And then on the data centers, why is it the 50 engine? Is it just because it's the bigger one? Or what is the reason that that's the preferred engine? I mean you have perhaps more capacity in other engine types. I mean, are they much worse in terms of performance? Or is there something other -- something else we should understand?

Yes. I mean we actually sell both to data centers, but -- and it's a little bit about the redundancy strategy, but you're right in the sense that the 50s are bigger. So if you want to go for the big ones, you probably have a preference for the ships.

But is it a lower cost or better fuel efficiency in these applications in that engine type or some tech spec?

Yes. I mean it's a total life cycle consideration, and you optimize that, and that is a little bit dependent on that. There is not one simple explanation to this. It's a total life cycle consideration.

Okay. Then finally, about capacity. I think if I don't remember wrong, I have a bad memory. I think you said you used 70% of your capacity last year, and now it's 75% after strong growth. So it's just a moving target. And you have mentioned earlier these test beds, but that's, of course, a very easy thing to fix and you are not worried about the supply chain. So I mean, when I go to the factory in Vaasa, it doesn't look like a Father Christmas workshop. I mean it's not like really fast speed or so. So I would just imagine that you could just have more people there and add -- I don't know how many shifts you work today. Do you have 3 shifts, for instance? Or I mean, what is really kind of the bottlenecks to scale up?

So I think it's a good question. And I'm sure our competition and our colleagues from Caterpillar, they would be very interested in knowing all our internal things. So I will not go into the details of that, Tom, you need to appreciate that. I think the fact that we are now indicating 18 to 36 is saying something that we are getting more loaded. We are not completely full, but we are getting more loaded and therefore, our delivery times are getting longer.

Do you work in like 3 shifts as an example? Or what do you...

I will not go into that, Tom. I would like to know if -- how hard my competitors because then I can start make calculations on what they are doing. So sorry, I will not go into those details.

You don't feel you have to kind of buy some suppliers to open up bottlenecks or something like that. You're happy with that.

We have a strong supply chain, and so far, it's following us in a very good way.

The next question comes from William Mackie.

A couple of questions, again, staying with data centers. I mean, it's a very fast-evolving market. It's arrived only recently. But is there any way that you might be brave enough to frame how you see this in terms of a market size opportunity over perhaps a 3- or 5-year period? And if we think really long term, do you see this more as a transitory phase as grid bottlenecks clear beyond 5- and 10-year profiles, do you think your customers probably revert back to grid connections as a preferred solution? That's the first question. And then I've got a couple of more.

Okay. So I mean, if you -- first of all, when I talk to our customers, data center customers, and I ask them, how do you see growth going forward? And how do you see the market evolving? I think the key message there is that the investments we are doing and the infrastructure we are building is not about ChatGPT. It's not about the B2C business. It's about the B2B. I mean corporate AI is at a very early stage. What do I mean by corporate AI? I mean it's companies like Wärtsilä, like the banks, industrial that we really start to use AI in our daily operations to drive efficiency or transform our commercial offering. And I think that I can resonate -- I can relate with that. We are at the early phase, and this will only grow. So I think that's the underlying. Now what are the market estimates? I get that question a lot. And we have talked to the experts of the world. And if you compile what others are saying, and if you make this -- I'm just going to make this example, how much additional power generation will be added in the U.S. to cater for the U.S. data center market growth from here until 2030. And if you look at the span of those numbers, it's everything from 20 gigawatt to 100 gigawatts. I don't think anybody knows, quite frankly. I think one thing we can agree upon, it will grow. And as I said, it's fueled by the increasing use of AI on the corporate in the B2B business.

Okay. I think that nicely dovetails into the second question, which comes to pricing and how your customers weigh off the benefits of GT versus ICE, notwithstanding the duration question on delivery and availability of power. So I mean, I think it's reported on a number of sources or certainly talked about in the industry that GT costs in the U.S. driven by the DC customer base have doubled in the space of about 3 or 4 years. So I'm just sort of thinking, is it only that doubling that really brings ICE into a cost competitive point? If GT capital costs were lower back where they were perhaps in '19 or '22, do you think you'd still be taking these sort of shares from the competing technology?

So I would say that -- as I said, the gas turbine suppliers are sold out. And clearly, that is driving new customers our way because they don't know the engine technology. But -- and they learn to know it. And I can see with the repeat customers that we have in the U.S. that when they try us, they see that we deliver on our promises on fuel efficiency. We have a very robust technology that is not sensitive to heat and altitude, et cetera. We have a good concept. And that's why I'm saying, I think that over time, this will structurally improve our market share because you could say where we have failed in the past is, of course, to promote our intrinsic benefits in a way that people have really believed in them. And certainly, on the municipality side and the co-op sides, they have bought into it. But many IPPs, they have really focused on the gas turbines. Now they are starting to try out the engines. And let's see when they start to run them. I think that they will see similar benefits that some of our repeat traditional customers are having, and that's why I'm optimistic.

That's very clear. The last perhaps just follow-on relates to questions regarding capacity at Vaasa and other locations. I mean, when you are faced with the opportunity between a marine or a power order, how do you typically prioritize the slot allocations within that very wide 18- to 36-month time frame?

So that is -- I would say, it's a complex equation. So it's not a simple formula because we, of course, consider some of our long-term customers. We have strong partnerships, both in Energy and Marine. That certainly weighs in, in the prioritization. We also look at which are the strong players of the future that have a global outreach, et cetera, et cetera. So it's a complex equation. But it's -- this is very, very strategic. I mean, now you are in this boom situation. And now you need to show to your customers, your core customers and your partners that you're serious with partnership. And that's what we will try to do. Sometimes I'm afraid we will probably disappoint some of our customers, but we really try to be very well formulated on prioritization going forward.

Thank you, William. Then we will continue a couple of questions I have received by e-mail. So the first one related to technology. I wanted to dig in more on the technology side of your engines. Historically, engines were a small part of overall power equipment market. But now when we hear merit of engines from you, it gives an impression that engines are good and could be superior for several customers. I wanted to ask if there has been any structural change in the technologies of your engines in the last few years, which makes them more attractive than before? Or this was always the case, but awareness wasn't there.

I would say that there is certainly an awareness element. I think if you ask some of the big U.S. IPPs, and I would certainly encourage you to do so, they have a very strong tradition of gas turbines. I mean -- and that is perfectly understandable. So -- and of course, we've been knocking on those doors and trying to sell our technology and people have been listening, but then they went to gas turbines anyway. Now some of these are starting to come over and they try our technology. And as I said, I'm very optimistic on what our technology will deliver, so to say. So that's one element. Now recent -- the last couple of years, technology development, we have steadily introduced new platform, the 46TS platform that we started with Marine. We are bringing it into Energy, where we are increasing the fuel efficiency even more. We are reducing the emissions. We are -- and certainly methane slip. So that is also helping to a certain extent. But I would say it's -- and I think a third element and especially for our repeat customers is our service offering. How -- and we talked about moving up the service value ladder, where we have everything from transaction, but also the performance-based agreements. People are seeing that we do have a very strong service network, and we are delivering on our promises and providing the uptime and reliability. So there is also a third element to the story.

Thank you. Then another question regarding the offering for data center customers. Are the scope of your offering to data center customers any different than other customers? I mean your engines can last very long and data center demand might change in that period. So our customers asking for modular solutions where they can dismantle the plant and move it to a new location if there is any change in demand.

So our solutions are modular in the sense. And you see that because some of the data centers, it's not like they install the whole data center in just one run. And many of them, they talk about scaling up over several years, and they want to do with the same with the power generation. So there, we have a modular solution. Also, when the data center developers, they design the data centers. They are going for very high uptime reliability. They talk about the five 9s, so 99.999, three 9s decimals of availability. And there, because of that, they are building redundancy concepts. So they add additional either engines or gas turbines. And since because of the sizes that we have, especially compared to some of the bigger gas turbines, it's more affordable to add an additional engine compared to add an additional gas turbine. So there, we have a benefit. The disadvantage we have because we have one disadvantage, and that is it's not -- you can certainly relocate an engine. But I would say that some of the, you could say, mobile gas turbines, they are certainly more mobile than us. So it's not like you -- from 1 half year to another half a year, you move one of these big engines. You need a fairly solid concrete path to put our engines on. So there, I would say, for some of those applications, the gas turbines, they have an advantage compared to our technology.

Thank you, Hakan. Then we can still try with Johan Eliason. Can we -- hopefully, we can hear you now.

Can you hear me now?

Yes, we can hear you.

Good. So I'm on the cell phone now instead. Excellent. I just had a brief question. Listening to you here, you have a positive view on the development in your core segments in Marine. And obviously, we've heard very positive talks about the opportunity in Energy, balancing power and then also the data centers. But you're sort of guiding for unchanged demand on the Energy side. What is expected to drop away? Or is this data center just so uncertain that you are not sort of willing to see a growing overall market demand there?

I think what we pointed out, LTM, we had all-time high order intake on the Energy side. So that's why guiding similar in our view, is rather positive.

But I mean, this 500-megawatt order you announced, I think I can't remember the last time you had the 500-megawatt order. It's a pretty big one, isn't it?

That's correct. But that was also awarded after the latest guidance.

Thank you, Johan. So it's time to close the call. As a reminder, please join our pre-silent call on January 13. Thank you.

Thank you very much.

Bye.

Bye-bye. Thank you.