Earnings Transcript for AKCCF - Q4 Fiscal Year 2023

David Phillips: Good afternoon. And welcome to the Presentation for Aker Carbon Capture's Results for the Fourth Quarter of 2023. My name is David Phillips, Head of Capital Markets. And I'm joined today by my colleague, Egil Fagerland, our CEO; and Julie Berg, our CFO. As usual, we will start the main presentation. Then this will be followed by a Q&A with the audience. So firstly, Egil will take us through our main progress and achievements from the fourth quarter of this year, and will run through a number of topics that are important for our wider strategy. Then Julie will take us through the key Q4 financials, including some outlook commentary for the rest of this year. And finally, we will take your Q&A via the online system. Just as a reminder, you can post your questions into the system at any time. And at the end of the presentation, we will then try to work through as many of them as time allows. So Egil, over to you.

Egil Fagerland: Thank you, David. This is the agenda for our presentation today. Following a highly active and fourth quarter, we will address the highlights of the quarter, our operations and business development, our delivery models, the financial highlights and finally, the way forward, and then we will move on to Q&A. But first, before we start with the highlights for the Q4, we have a short introduction to the company. Aker Carbon Capture is a pure play carbon capture company offering modular and configurable carbon capture plants with the strength of the Aker group behind it. Today, we're already delivering seven carbon capture plants. We're making carbon capture happen. Our proprietary patented technology has been developed over 20 years and is validated through more than 60,000 operating hours and verified across a range of industries. Our technology uses a biodegradable mixture of water and organic amine solvents to absorb the CO2. Its modular cost and energy efficient and it has a market leading agency profile. Since 2020, Aker Carbon Capture has focused on the European market with Scandinavia, Benelux and the UK leading the way. Now we are entering the North America market on the back of increased policy support for CCUS, and we're already working on several engineering studies. Also, we're exploring our potential positions across the rest of Europe and Middle East. We continue to prioritize four market segments with high market activity, cement, bio and waste to energy, gas to power and blue hydrogen. And we're also seeing good engagement with a number of additional segments where our technology is well suited to capture CO2, such as refining and process industries. Our technology has been tested and verified across these segments. Now to the highlights of this quarter. In December, we signed a FEED contract with Hafslund Oslo Celsio to develop, together with Aker Solutions, carbon capture at the waste to energy facility at Klemetsrud in Oslo, Norway. In the same month, Uniper awarded us a process design package to deliver design studies for the proposed post combustion carbon capture plant at their Grain power station with a potential to capture over 10 million -- 2 million tonnes of CO2 per year. Earlier in the quarter, we signed a pre-FEED contract for a major European power company to implement carbon capture at the portfolio of power plants in mainland Europe. The plant capture capacity could reach up to 14 million tonnes of CO2 per year for the applicable sites combined. On the other side of the Atlantic, we signed a MOU with MAN Energy Solutions to accelerate CCUS in the United States, strengthening our presence in this highly promising market. Also, throughout this quarter, we saw high study activity. Looking at our major projects, we've seen good progress. At Twence, the commissioning is ongoing. At Brevik, preparation for the second heavy lift campaign is ongoing. And for Ørsted, Kalundborg Hub, the groundbreaking ceremony took place. In addition, our growing franchise of FEEDS, pre-FEEDS and process design package work in the UK is supporting a number of mega scale projects that is positioned for governments Track 1 and Track 2 processes. Our backlog remains strong at NOK2.6 billion. And I'm also happy to share we've continued our revenue growth in Q4, more than doubling our top line compared to the same period last year, all while maintaining a solid cash position at NOK1.1 billion. Now onto some of our recent highlights in more detail. Aker Carbon Capture and Aker Solutions signed a FEED contract with Celsio to develop carbon capture at its waste to energy facility at Klemetsrud in Oslo, Norway. The plant FEED delivery will be this summer with Celsio targeting FID also this summer. The FEED contract follows Celsio's cost reduction initiative and will be delivered based on Aker Carbon Capture’s modularized Just Catch 400 unit with a design capacity upto 400,000 tonnes of CO2 per year. As a part of the project's cost reduction phase, new vendors were brought in to present alternative solutions that could lower costs, and Aker Carbon Capture and Aker Solutions were selected to perform at FEED. The FEED includes a framework for a possible EPCIC contract. The waste incineration plant at Klemetsrud is the largest carbon emitter in Oslo and is responsible for 17% of the capital's fossil carbon emissions. Funding has been secured as a part of the Longship CCS value chain development, the Norwegian government's carbon capture and storage project. Longship also includes the CO2 capture at Heidelberg Materials cement plant in Brevik where carbon capture plant is delivered by Aker Carbon Capture and Aker Solutions. In December, we were awarded a process design package for Uniper's grain power Station in the UK to potentially capture over 2 million tonnes of CO2 per year. The project is a proposal to retrofit post combustion carbon capture technology on up to three of the existing combined cycle gas turbines or CCGT units at this plant. In the first phase, Aker Carbon Capture will use its proprietary technology to establish the process design for CO2 capture, conditioning, liquefaction and temporary storage, including potential heat integration solutions. The PDP has the necessary design information required by an engineering, procurement and construction company to perform a final engineering of that plant. The PDP will also allow Uniper to evaluate Aker Carbon Capture’s technology for one of the three gas turbines, helping to inform planning and permitting applications for the future construction and operation of the carbon capture plant at the existing power station. If Uniper selects Aker Carbon Capture as the technology licenser at the end of the PDP process, the next step will be to move the front end engineering and design phase ahead with a final investment decision, which is expected to be taken by Uniper in the mid-2020s. This award is an important stepping stone towards turning our existing Big Catch EPC offering into a license and key equipment model. If this project reaches final investment decision, we may have the opportunity to provide the full technology license and deliver key equipment. Uniper has the option to commission and license to install our technology on all the three CCGT units. Moving over to the other side of the Atlantic. We are joining forces with MAN Energy Solutions to accelerate CCUS. We've signed a memorandum of understanding, an MOU, to jointly pursue opportunities related to CCUS and CO2 compression in North America. This leverages MAN's expertise in compressor technology and system integration, as well as our proven carbon capture technology and products. The adaptation of standardized and modularized solutions will help cost efficiency and optimize energy consumption and delivery time. As an example, a compressor design jointly developed by MAN and Aker Carbon Capture can reduce overall steam demand for Big Catch facility by around 30%. Currently, we're collaborating with MAN on the delivery of the world's first carbon capture plant for the cement industry at Heidelberg material cement facility in Brevik, Norway. In the quarter, apart from the work we've won at Celsio and Uniper, we strengthened our foothold across Europe with studies in Germany, Finland and also in the Swiss market for waste to energy, biomass and power plants, all based on our standardized and modular Just Catch and with the capacity between 100,000 and 400,000 tonnes of CO2 per year, a clear sign that there is strong interest for the modular Just Catch product in the market, further supporting the momentum that we are witnessing for CCUS. Finally, not to mention -- not mentioned on the slide, R&D is important to further the development of our technology. At Elkem smelter facility in Rana, Norway, we successfully qualified our technology for the smelter industry. And now that we've analyzed all the test results, the pilot recorded high capture rates of CO2 and up to 95% capture rate combined with low amine degradation. Our technology has now been tested on 11 industrial flue gases, accumulating more than 60,000 hours of operational experience. As mentioned, we've seen clear signs that the CCUS commercial activity has accelerated the market, not only throughout the past quarter but throughout the whole financial year of 2023. Since we started as a separate company in the mid 2020, we've accumulated across all types of contracted work a pipeline covering more than 40 million tonnes of CO2 capture, a strong sign that the accelerating market momentum is that over 20 million of these tonnes came in last year in 2023. Our intake of work in 2023 covered a total of more than 30 capture units. There has been a growing interest from emitters in Europe and the US for our whole product portfolio, ranging from the modular Just Catch 100 to our recently launched Just Catch 400. Our Just Catch offshore and our bespoke Big Catch mega scale offering is also increasing in demand for studies. Now to our overall pipeline. When we launched in 2020, we set an ambitious target to secure contracts to capture 10 million tonnes of CO2 by the end of 2025. As before, we visualize the progress towards this target in four categories; secure development contracts covering supply agreements, license and key equipment agreements and carbon capture as a service agreements; secure as FEED contracts and tenders for the development contracts, pre-FEED studies, Mobile Test Unit campaigns; and finally, our prospects. Here, the 1 million tonnes represent our already contracted work with Heidelberg Materials, Twence and Ørsted. This is important progress that shows that we're able to successfully convert our pipeline of opportunities into secured work. The timing, of course, is strongly influenced by the pace of the market itself. Then our tenders FEEDs and PDPs, which now stands at 6.5 million tonnes reflects Net Zero Teesside Power, Keadby 3 and Celsio of Klemetsrud among others, and also includes a sound level of ongoing tender activity. The decrease from last quarter reflects one project where the timeline has moved out, so we've moved it back into the earlier phase in our pipeline. And we've seen a strong growth in pre-FEED studies and Mobile Test Unit campaigns growing to a total of 32.6 million tonnes, up from 18.5 million tonnes last quarter. This step up in activity reflects a broad pickup across a number of industry sectors, but in particular, we saw major contribution from power generation and waste to energy in Europe. Now we move on to look more into the details of our operations. In the Netherlands, a Twence waste to energy facility in Hengelo, the carbon capture plant is now mechanical complete. Commissioning is ongoing and this is the final step before sellable CO2 can be produced by the Just Catch 100 unit. Delivery of the modular Just Catch will translate to energy facility will pave the way for other companies in Europe planning to decarbonize their operations through CCUS. At Brevik CCUS, we're making solid progress by having successfully completed the first heavy lift campaign. The absorber, all the CO2 storage tanks and key modules have been installed on site, and preparations for the second heavy lift campaign is ongoing. When complete, the plant will be ready to capture 400,000 tonnes of CO2 per year. At Ørsted Kalundborg CCS, we will deliver five modular and configurable third generation Just Catch 100 units and additional equipment, such as liquefaction systems, temporary storage and on and offloading facilities. We see this project as a milestone for serial production of Just Catch units, which will enable us to deliver cost efficient and fast deployment of carbon capture. All critical purchase orders have been placed and we've started the container fabrication. In December, the groundbreaking event took place, marking the startup of the construction of this important climate project. The total contract value of this project is above EUR200 million and the total capacity is 0.5 million tonnes of CO2 per year. Then, the UK remains a very important market for CCS with significant policy progress in late 2023 and now into 2024. At the end of March last year, the UK government confirmed which projects will produce -- proceed into the final negotiations for Track 4 government funding. At the end of July, the UK highlighted that the Track 2 process will include the Acorn and Viking clusters with their anchor projects selection phase starting early 2024. Also, in the last few months, the UK announced that Track 1 expansion process has started for the Hynet cluster and the Northwest with the ambition to move to the final negotiations this autumn. The expansion process for the East Coast cluster will follow in due course. The UK is set out its CCUS vision for longer term growth into the 2030s, targeting the development of over 50 million tonnes per year of storage by 2035. Aker Carbon Capture has built a strong position in the UK around engineering design for decarbonized power, both waste to energy and gas to power. We are the carbon capture provider for a FEED for BP's Net Zero Teesside Power, the FEED for SSE Keadby 3, the pre-FEED for Viridor's Runcorn CCS and also the PDP process design package provider for Uniper's Grain power project, all potential mega scale carbon capture projects in the UK. These are important first steps for us to deliver our Big Catch license and key equipment business model. And now, I'll hand over to Julie, our CFO, to run through the delivery models and financials for this quarter.

Julie Berg: Thank you, Egil. Now we’ll take us through our delivery models and financials. Just a quick recap on our range of modular products and services. We deliver the Just Catch modules on an EPC basis, or to be more accurate, due to a high level of standardization under Just Catch supply agreement. We also offer our carbon capture as a service concept where our customers simply pay per tonne of CO2 captured. This includes our Just Catch offshore units. Our review of the market shows that emitters with between 100,000 and 500,000 tonnes of CO2 per year account for around 3,000 industrial plants across Europe and North America, a great fit for our Just Catch units and a very exciting opportunity. And our big Big Catch offering is focused on bespoke mega scale capture facilities sold as license and key equipment packages. As a rough guide, you could expect a license and key equipment contract size to be around one third of the size of a full EPC delivery, but with a higher long term margin potential. And of course, we also offer aftermarket services, solvent management and supply to all our clients across all our products. Aftermarket revenue streams are expected to increase over time in line with the growth in the installed base of Just Catch and Big Catch units. Since the third quarter of 2021, we have shared regular updates of our estimated levelized costs for the full carbon capture value chain based on our modular Just Catch 100 unit and where the CapEx and OpEx figures cover the capture facility, liquefaction and temporary storage. This shows the economics for our carbon capture as a service offering but it is also equivalent to the levelized cost across a project from an emitters perspective. Overall, our levelized cost ranges have not shifted materially for Europe or North America, but we've seen certain trends develop through ’23. For our European delivery model, the full value chain range remains at EUR75 to EUR175 per tonne, and we note, reflecting what we have seen in study work and customer configurations, we see more projects towards the upper end of our CapEx range of EUR30 to EUR45 per tonne for our Just Catch unit. In the long term, we continue to see significant potential to lower this cost through optimized serial delivery of modular units. We've not changed our OpEx range of EUR15 to EUR55 per tonne. But we note that while energy costs are now seen to be lower, there is some offset from higher labor costs. And with many more projects now looking at longer distance transport and storage solutions from a wider area of Europe, we've seen costs for this segment trend towards the top end of the range of between EUR30 to EUR75 per tonne. This cost range, therefore, remains very location driven. And for the North American view, we continue to see the potential to lower costs across the value chain, mainly through lower transport and storage costs but also lower operating costs, mainly due to lower power prices. And we also now see promising signs that CapEx is trending more towards the lower end of our indicated range, giving the greater potential for pipeline CO2 transport in this region, and therefore, less need for onsite liquefaction, this gives an overall levelized cost range of $55 to $120 per tonne for this market. And now I will take you through the key financial highlights of the fourth quarter before we move on to our summary and Q&A. Bear in mind that all numbers are mentioned are in Norwegian Kroner. Let's start with the income statement. Overall, revenue for the fourth quarter was NOK573 million, which is up 139% or NOK334 million compared to the same period last year. The growth in revenues is mainly driven by Big Catch and Just Catch projects, including the Ørsted Kalundborg CCS project, which has progressed well in the quarter. Our reported fourth quarter EBITDA was negative NOK43 million, which is an improvement of NOK4 million compared to the same quarter last year. Big Catch and Just Catch projects contributed positively in the quarter. However, you should note that for the Ørsted Kalundborg CCS project, while revenue has been recognized in line with progress, no profit has been included. There is a slide later in the appendix which explains how we account for our projects and our principles for timing of profit recognition. The overall level of EBITDA continues to be driven by high commercial and tender activity, our North America entry as well as R&D activity. Our fourth quarter net current operating assets ended at negative NOK662 million, which represents a continued positive cash position on our key projects. Overall, operating assets and liabilities on net capital employed, which includes fixed and intangible assets, was negative NOK413 million, showing that both our short term and long term business activities are currently funded by our net working capital position. And we continue to have a healthy cash position at NOK1.1 billion, which covers our liabilities 1.1 times. And finally, our equity remains strong at NOK0.7 billion. We started the quarter with NOK1.3 billion in cash, and during the , we saw the overall cash outflow of NOK211 million. The main drivers were; procurement and installation activities on key projects, driving a net cash outflow of NOK144 million in net current operating assets; CapEx of NOK37 million, mainly related to product development, new office equipment and the construction of a second Mobile Test Unit; and also, a loss before tax of NOK35 million. In total, cash and cash equivalents ended this quarter at NOK1,112 million. These are the highlights of our historical financials. Now let's have a look ahead. Our financial outlook remains similar to the outlook we presented in the previous quarter. Our backlog ended the fourth quarter at around NOK2.6 billion after including the Ørsted Kalundborg CCS contract from the second quarter. By year of execution, we see this activity at around NOK1.7 billion in 2024 and another NOK0.9 billion in ‘25 and beyond. As a reminder, order intakes are only included in the backlog once a firm contract award has been announced. We expect a positive impact on gross profit margin when we commence profit recognition on Ørsted Kalundborg CCS later in 2024. And the experience gained through the series of deliveries of Just Catch units on the back of Twence and Ørsted Kalundborg is expected to drive further improved profit margins going forward. Also, we expect to see an increased conversion of tenders, FEEDs, pre-FEEDs and studies to firm Just Catch and Big Catch contracts through the illustrated backlog execution period and beyond. Salary and personnel costs is expected to increase gradually in line with our growth, whereas other operating expenses and CapEx are expected to remain around current levels through the next six to 12 months. And we continue to show a strong liquidity position ending the quarter with a net cash position of NOK1.1 billion. This position is expected to trend down below NOK1 billion in the first quarter as we progress our major projects. And please note, as usual, these comments do not include any assumptions for cash spend on M&A activity or additional investment opportunities that might arise going forward and might be subject to short term working capital fluctuations. And now I'll hand back to Egil.

Egil Fagerland: Now let me share with you a short summary on our way forward. We've set a clear direction to position for the huge market ahead of us. We're here to accelerate, plan and positive through carbon reduction and removal. We've prioritized the European market and four market segments, cement, bio and waste to energy, gas to power and blue hydrogen. Now we also see opportunities emerging in other industry segments, such as refining and process industries. We have a strategic ambition to successfully grow North America and we are exploring our position in the rest of Europe and the Middle East. Our proven technology is market leading. We will further improve energy efficiency and increase our focus on new technologies. Through standardization, modularization and digitalization, we're expanding our cost efficient product portfolio. Cost reduction through serial production and working together with strategic suppliers is an important part of this journey. We'll offer Just Catch on supply agreements, license models with key equipment for Big Catch, followed by long term service and solvent agreements. As a part of our aftermarket services, we will also offer the supply of solvent, performance optimization, digital operations and maintenance. We're also bringing up the full CCUS value chain through the carbon capture as a service business model. To meet the expected high growth in the market, we'll continue to build strong partnerships. And finally, we're building this company through devoted people who are making carbon capture happen now. By delivering our ongoing projects and setting an ambitious carbon capture target, we are in a strong position to make a positive impact on our planet and help our clients move toward a more sustainable future. Thank you. And now we can move on to the Q&A section of our meeting.

A - David Phillips: Okay. I hope you enjoyed the run through the presentation slides. We now move to Q&A. And Egil, Julia and myself, will run through as many as we have. Well, we're probably finishing about the hour, so it gives us just a little bit over half an hour to run through your questions. And thank you so much for everyone who's already put things in the system. We have already have a very good list of questions [Operator Instructions]. So let's get things moving. First up, we have Sasi from Morgan Stanley, asking about our project pipeline. We've seen the classified piece under tenders, FEEDs and PDPs decrease to 6.5 million tonnes per year from 7.9 million previously. Can we talk about where this has come from, particularly given we've also announced the Celsio FEED and also the PDP for Uniper in Q4. Egil, maybe one for you there.

Egil Fagerland: Yes, I think the main answer there is that we've had some projects in tender phase, where the timeline for the project has moved out in time. So we move that tender over to the less mature bucket of the pipeline and in the studies, pre-FEEDs and MTU bucket. So that's the main driver for the decrease.

David Phillips: Yes, absolutely. I mean, that list is very dynamic. If there's a project that drops out that is frozen or is canceled or something, we will take it out. If it's delayed a bit, we move it to the appropriate piece of the pipeline. Next up, Victoria from RBC. Quite a good list of questions. It looks like waste to energy projects make quite a large proportion of our pipeline versus other markets. Is this the correct comment and what's the reason for this?

Egil Fagerland: It's true that the waste to energy is a big piece of our pipeline. It's an important segment and we see across Europe, Norway and the UK that these waste to energy providers and plants have clear decarbonization targets. They're often known one municipalities who have their own net zero targets. And in some instances they're also covered by separate tax regimes that will be beneficial when they select or look at selecting CCS.

David Phillips: And also the waste to energy sector, not in every country is yet under the umbrella of, let's say, our carbon pricing regime, but it's very obvious when they are joining that. So there's certainly a push, if you like, to have a decarbonization plan set up. There's also, and particularly on very good example, of course [indiscernible] contract with Ørsted and Microsoft as a partner with a negative removal angle, if there's an angle to have biogenic materials in the waste to energy process. There's also an angle to potentially generate negative removals, which gives an additional slice of economics. I think also maybe also the modularity side. I mean, by definition, I think a lots of waste to energy plants are medium sized versus let's say big sectors like a blue hydrogen cement and so on. And therefore, I think for our modular offering, we think it’s a very good fit in terms of the size there. Maybe I want for you, Julie, looking at the levelized costs, are we seeing inflationary pressure on that whole -- on that dynamic?

Julie Berg: Yes, I think it's correct to say that we are seeing inflationary pressure and that is built into the model. But as we said in the presentation, we're keeping at the top end of the range to sort of account for that pressure that we see driving that.

David Phillips: Yes, absolutely. I think also, I mean, the comments that you made about some of the cost being towards the upper end of the range, it's also maybe reflecting the inquiries we have. And we have a lot more inquiries now than we had year ago, two years ago. And it's almost like the option's being chosen on more at that end plus also we're seeing a much more diverse geographical or location mix, and people are looking to join up with storage projects from further away. So by definition, higher shipping costs are towards the top end. Moving on to the US, and maybe Egil. What stage are we at in terms of the more advanced US projects, and do we think we could see any US FIDs in 2024?

Egil Fagerland: So if you look at our pipeline chart and also the overview of the projects that we've been involved in both in the study phase and the pre-FEED and FEED phase, we have quite a few studies now ongoing in the US. I would say that some of those customers are pretty mature. They are part of consortiums or groups that are tying up with transport and storage, and could take their FIDs within the next one to two years. I think within 2024 it’s probably unlikely to see FID for a construction project, but you could see a FEED or a mobile test unit campaign come.

David Phillips: And one more from Victoria around carbon capture as a service. Are we seeing demand for this offering and are these more for early stage inquiries or more advanced projects?

Egil Fagerland: I would say for many of the studies that we do, we look at the carbon capture as a service offering option for the client. Many of them are extremely interested in this. However, given the availability of transport and storage right now in the market, which is quite limited, it's not very easy to set up the full value chain for those customers. But I do think once we see more transportation and storage projects being sanctioned, we will be able to deliver on that business model as well.

David Phillips: So moving on. Next up, James Carmichael from Berenberg, and thank you for such a comprehensive list of questions. You've literally gone off the screen, so thanks for the very good interest. Asking about Celsio. And am I right, so James asks, am I right in thinking also Celsio was previously going to be using someone else's aiming technology and can we conclude from that that Just Catch 400 is a lower cost solution than the competition?

Egil Fagerland: I think, just to reiterate what we've said before, Celsio has been through a cost cutting phase. They have looked at other options to see whether or not they can make the overall project profitable. The project, of course, consists of the capture plant and the liquefaction and the temporary storage, all the surrounding civil activities that will have to be done and the [Indiscernible] facility. So they are looking at the totality of their project. And in that work, they've done a study with us looking at the Just Catch 400. in our view, that's a competitive solution, it’s standardized and modularized, so it's quicker to build and also cheaper to build in our view.

David Phillips: Jumping back to North America, our recent MOU with MAN. Is that -- can we talk a little bit about what's driving that, is it driven by increased interest? How is this market developing versus Europe and so on?

Egil Fagerland: We see an extremely high activity level in North America. And our collaboration with MAN has been going on for several years, and we now reinforced it by also including North America into the mix together with them. We think the joint efforts that we can provide to carbon capture projects and storage projects where we bring in the Big Catch solution, in particular with MAN’s technology, we can decrease the energy needs quite a bit and that will be a competitive offering in North America as well.

David Phillips: And the last question from James also about the size, I think [Indiscernible] talked about 200 million tonnes per year by 2030, that's from a [restart] study and came from…

Egil Fagerland: The reference to those numbers are from external study we did…

David Phillips: The other one, again about the FEEDs and tenders, we think we covered that one already. Also, asking about Twence, what slowed the handover versus the previous guidance or previous comments about the end of 2023?

Egil Fagerland: So we've said for a long while planned delivery end of 2023, we've done the mechanical completion by end of 2023 as planned. And now we are in the really the heart of the start up, which is the commissioning phase. So within the next months or quarter you will see startup activities going on in Twence, and we're expecting that to be online when the customer is ready to sell their CO2. But of course, this is the final stage now before sellable CO2 is available from the plant.

David Phillips: And how long do you think it'll be in terms of -- from it’s starting up to when we know it's working, it's becoming even…

Egil Fagerland: I think you'll know pretty soon once the CO2 starts to be sold, then we know it's working.

David Phillips: CapEx, this sounds definitely like a Julie question. Where is -- where are we talking about for -- or where do we see CapEx going in 2024, and is the second MTU almost complete?

Julie Berg: So we definitely see our CapEx then continuing along similar levels as we've had in ‘23. Our focus in ‘24 is on technology and product development and finalizing the MTU 2, which we expect to be finalized during Q1.

David Phillips: And also back to the levelized cost question, the numbers we talked about. Does that include some estimates around, for instance, the 30% reduction in steam demand we've achieved with MAN?

Julie Berg: Yes…

David Phillips: Egil, BP FEED, when would we expect to see the results of this?

Egil Fagerland: This is a question we often refer to you, David. We're a little bit subject to the negotiations that BP has with the government and in the UK, and we typically also refer to the client in terms of when they will announce. However, what we do know is that the Track 1, which BP is part of, is now in its very final stages of negotiating support. We also know that there will be a Track 1 expansion phase coming this fall and then a Track 2 next year. So I don’t know if you have anything you want to add there, David?

David Phillips: No, I think that's fine. I mean, for -- BP is one of the -- if you like, the fortune of projects is in that first slice in that chosen eight projects that moved ahead with Track 1. It is little bit late versus, let's say, the view we had two years ago. But then I think you can see many policy processes have been slower than expected. But very much looking towards this autumn, I think, is the idea as for one for an FID, but let's see. Also a last question from James about carbon pricing. If costs are towards the top end of our range on CapEx and OpEx, how are companies taking FID with a carbon price at just over EUR60 a tonne? Maybe if I can kick off with that one. And yes, you're correct. I mean, the carbon price has been weak also in the UK with quite a big spread down from the European price as well. So it's a bigger question to ask, in this environment, why would you want to decarbonize? Well, obviously, if you're investing in something now to arrive in two or three years time to impact yourself late to 2020s towards 2030 and beyond, it's not about today's carbon price, it's about where it'll be when your system starts up. So if you look at the most recent -- I mean, there are a number of angles of this. You can look at carbon pulse, for instance, or you can look on the other services that provide average forecasts over the markets. But Carbon Pulse, they had a recent survey out, and I think maybe for the next couple of years, they see the ETS or the average number for the ETS forecast is between sort of 70-80 and moving up towards a 100. But certainly by the time you get to ‘29 and 2030 is EUR130, EUR140 a tonne. And actually, versus maybe when we looked at this six months ago, I think the long end actually has gone up by maybe EUR10 a tonne. And behind that you have additional demand for the allowances that coming from an industry like shipping, joining the market in Europe, and also you have the continuous linear reduction factor. I mean, what's hitting it now apart from various aspects of global uncertainty and demand and so on is all sort of front loading from the -- for 55 where there's a 20 billion target to the -- that's going to be used to fund decarbonization. So that's really what's also maybe keeping the price a little bit depressed right now. But certainly, the long end looks to be a little bit safer.

Egil Fagerland: It's probably also worth mentioning that in Europe, many of the projects that move forward are also part of government support schemes. So you can look at Norway and Longship and the two projects there, you can look at Denmark and the project with Ørsted, you can look to Sweden where they're thinking about doing some programs, you can look to Netherlands and the UK. All of these projects get additional support typically in the form of contractual difference to cover that spread until the [UETS] increases to the right level.

David Phillips: And last one for James, can we talk about anything to do with phasing of backlog recognition through 2024? Short answer is no. I mean, we have given some think for a while now, we've given that backlog over an annual basis, but we're not going to be going into a more quarterly breakdown of that just yet. General question from [Christopher Strandin] asking about our main income streams. What are our main income streams in the coming years? Very general question. Maybe if I could kick off I guess with that one. I guess we had this -- I think on -- Julie, in your part of the presentation, there was a -- one slide around business models and products that really is what drives us. So we have those modular products. We also have key equipment that goes into much larger contracts and we have aftermarket. So we supply the kits, which we will deliver to you, the customer, over two or three years. And then after that, we have aftermarket services that over time accumulate, and that's really what drives our model over the medium term.

Egil Fagerland: And if you look at the backlog facing slide, the majority of that work and that revenue is from the Just Catch projects we have with Ørsted and also Big Catch with Heidelberg Materials.

David Phillips: Jumping onto the US market. Which industrial sector represents the greatest opportunity for us in the US market at the moment?

Egil Fagerland: We are focusing on the same sectors that we have in our European market, but there are also others that where we are engaged. For example, you've seen that we've been working with minerals production, we are engaged also in the refining industry and we are focusing on the bioenergy sites. So anyone with a bioenergy facility similar to what we're doing with Ørsted is quite interesting and seems to be an area where we -- our standard modules can fit pretty well.

David Phillips: I mean, I have a question on the financial side around payables. And this is looking just at our balance sheet structure, and there's an increase in payables over recent quarters. And how -- what's driving that, what’s behind those movements in the balance sheet?

Julie Berg: So the movements in the net current operating assets are very much tied to our project portfolio. So fluctuations in payables and receivables are directly related to customer payments, supplier payments, et cetera, on our larger projects.

David Phillips: Because we've had -- so far had a very fortunate structure in our contracts where we don't go cash flow negative during the month. So we have milestone payments, advanced payments and so on. So we don't go over our skis in terms of cash during the work. And more a general one. When are we projecting to breakeven, question we've been asked many times before?

Egil Fagerland: Yes, that's a question we've been asked many times before, and we normally refrain from answering exactly when. But you'll also see from the presentation that we are indicating quite strongly that we are not taking profit on the Ørsted project at the moment, and you should expect an improvement when that happens.

David Phillips: Back to one more from -- follow up from Sasi, actually it's a great -- very good follow on from that topic actually. So can you please remind us of the magnitude of the uplift in gross profit margin EBITDA we might expect when projects recognized for Ørsted CCS?

Egil Fagerland: If we remind you of the specific magnitude then we also give away the margin on the projects, which we also refrain from going into detail on. But you're going to see an improvement.

David Phillips: I think -- and also, as we said before -- and this is purely qualitative, it's a different type of project and that it's a serial delivery of a number of modular units rather than one large EPC. So a bit of a different shape in that. Also Sasi, with 1 million secured contracts so far, only two years to go, how confident are we in meeting in ‘25?

Egil Fagerland: So we're holding onto our target. I think it's quite important that we are fighting to achieve those tonnes, it's important for us and it's important for the environment. But what we've said earlier as well is that we see a higher momentum now than we expected back in 2020 for our modular solutions. And some of the Big Catch solutions, the license and key equipment offerings have been taking more time, especially if you look at the UK, their award process has been slower than what we expected. So there's of course a higher risk that the 10 million tonnes will come a little bit like later. But on the other side, we have the same or higher amount of revenue expectations due to the Just Catch projects being much more popular and faster to implement and get through to the market. So in terms of activity for Aker Carbon Capture, that's looking the same or higher and a higher likelihood for that.

David Phillips: And very general question. A project like Twence or Brevik, what is a typical project lifespan maybe -- I mean, this is a very general one. It's a -- what we deliver is a big piece of process plant. So typically 25, 30 years is that..

Egil Fagerland: So that's correct.

David Phillips: Kate from Citigroup. We've already talked a little bit about Twence. We covered that one. Celsio FEED, what can we say? Now this is, of course -- it’s a little bit talking about the past, which wasn't us, so we probably can't talk about this in too much detail. What can we say about what was responsible cost overruns before and have we seen any risks from that story that we can identify to help us as we work on the project?

Egil Fagerland: I think, in general, when we go into projects, we see that our modular solutions, if they have -- if the site has the possibility to fit them in on the footprint side, we typically see that it's a big derisking factor. In terms of what the customer has experienced in prior processes, I think we'll have to refer to sales for themselves if you want to ask those questions.

David Phillips: We have two questions left [Operator Instructions]. So just jumping on. In studies, there's been quite a jump in our studies around Just Catch offshore over the recent past, but we haven't announced anything. Can we give a bit more color around this, is it North Sea or something else or so on?

Egil Fagerland: We've seen good activity in the Just Catch offshore and good interest. And in that segment, you know it's a very small niche segment, we are a little bit more conservative in sharing the specific details of the projects that we are involved in for competition reasons also. So we're not going to go into the specific details of the regions. But in general, these are newbuild or Greenfield FPSOs with gas turbines or power hub projects that are being contemplated in the market right now.

David Phillips: So if you look across into the upstream oil and gas sector, there's quite a lot of noise around the level of offshore CapEx, which seems to be on similar growth cycle. So I guess in some respects we are a bit of a derivative to that, I suppose. Victoria, one question around -- from RBC, asking about the US. What would we need to materially increase our headcount over there to execute a project?

Egil Fagerland: So if I understand the question correctly, it's a little bit about how many people will we need or how much will we need to grow. So we have a quite an ambitious growth plan through 2024. Specific headcounts, I'm not going to share with you, but we are ramping up to be able to deliver Just Catch projects over there in 2025 and FEEDs already this year, including Mobile Test Unit campaigns.

David Phillips: Yes, absolutely. So that is actually the end of the questions. So if you don't put one in the system while I say a quick wrap up comment, then that's it. Then we are out of time. But thank you so much for your interest. It's been really good to talk about our Q4 story, a lot going on. And also, very good to have such a good lot of questions to run through as well. And you know where we all are. You know on our Web site you can find my email directly, so you can directly email me if you have any more follow up questions. I'm sure you will see many of you over the next one or two months around various investor events and so on. And yes, and we thank you very much for your interest again and look forward to seeing you if not in the next one or two months when we report Q1 in a few months time. All right, thank you.

Egil Fagerland: Thank you.