Koninklijke Boskalis Westminster's (KKWFF) CEO Peter Berdowski on Q4 2017 Results - Earnings Call Transcript

Koninklijke Boskalis Westminster NV (OTC:KKWFF) Q4 2017 Earnings Conference Call March 8, 2018 5:30 AM ET

Executives

Peter Berdowski - CEO

Jans Kamps - CFO

Analysts

Luuk van Beek - Petercam

Thijs Berkelder - ABN AMRO

Andre Mulder - Kepler Cheuvreux

Peter Berdowski

Welcome everybody, the financial statements for you. As usual the division of roles is also a customary one. I can give a short introduction to Mr. Kamps and I can also conclude the session, but we also are going to have the Q&A, of course, later on.

Well, you may have seen the press release by now, revenue is 10% down from 2016 at just over €2.3 billion, and the total picture is fully in line with our expectations, and also in line with what we forecast when presenting the half year figures, but that we would end up with exactly the double result was very special, twice the €75 million. That, of course, is due to circumstances, but it is in line with expectations, as stated before.

Net profit €150 million. That is a huge improvement in comparison with last year. But last year, of course, there were quite large impairments included. Of course, at EBIT level, we did decline the EBITDA, where you see - you don't see the impairments there, we went from €660 million to €436 million. That is, we still have quite a sizable cash generating potential there. We have a very healthy balance sheet as well and solvency rate of 62.9%, which is even higher than at the end of 2016 when it was 56%. The order book, I think that is good news, because we saw good growth there. We went up from €2.9 billion to €3.5 billion, so some €600 million extra.

Our dividend proposal is, we've also discussed this extensively with several of our shareholders and with a number of you, you know our payout of 40% to 50% of the profit, but in light of the strong balance sheet we have on the one hand and the sizable portion of cash we are still generating, and the trust that we want to radiate to the future, and the knowledge that a stable dividend is much appreciated by our shareholders, we've thought it would be appropriate to come up with a proposal of €1 per share as last year. This morning, I also informed our workforce firstly about the figures, but as an organization, you look back on the year in a different way. Of course, as I said this morning, I think it has been one of the most turbulent years that I've - since I've been on the Board for Boskalis for 20 years now, because we made a tremendous turnaround in the fleets. 24 vessels were laid up and also made a huge turnaround in the organization and restructured the head office very considerably.

We've been working very hard to win new contracts. You see the order book reflects that. A lot of work was also done to make sure that the result in the works is really optimal. We presented a new corporate business plan, again, showing our ambition to grow in spite of sales and divestments. We've also been able to make further steps in that front by acquiring Gardline and two DSV vessels. So, all in all, it's been quite a turbulent year with many events. In the end, of course, the net result that we thought, given the circumstances was quite reasonable. Well, those are the outlines of the year as we look back on it and Jans will fill you in, in more detail about this.

Jans Kamps

Yes, I will. We have the breakdown of the order book and I'll come back to this in the various segments and divisions, but it amounts to €3.5 billion from the portfolio, which is made up of a number of projects. You see them on the screen. I won't list all of them. We have the projects that have occurred in the past years. A few prominent for the future we're working on right now is the one in Oman. This is the JNPT project in India. We're also working on full blast. This is a contract in the line of development Nord Stream 2.

And we have a full range of other contracts and all of this brought us to an order book amounting to €3.5 billion. The main increase is in Dredging. Offshore Energy is more or less flat and about half of the portfolio will be implemented in 2018, meaning we have a solid basis for 2018 ahead. And the remaining part is spread over the forthcoming years, about one quarter to 2019 and rest beyond. Let me now move on towards the various segments. First of all the headlines, we see a decrease of the revenues, well, mainly or completely rather, related to Offshore Energy. I'll come to this in a moment. A little bit of a reduction in Towage & Salvage, but that's more an accounting issue. This is a deconsolidation effect related to the fact that in 2016 for one quarter, we had a full 100% of the North Western European Towage activities with the correction, actually it's in line. And if you look at Dredging, then you see that the revenues have slightly increased.

Now, let us look at EBIT. Here we see the same picture by and large. We have seen a significant reduction in Offshore Energy, a slight decrease in Towage & Salvage, mainly related to the joint ventures. And we could also say that there's a slight decrease more or less in line with 2017 ending up with the results you see in Dredging now. Let me take you through the revenues by region now. You see that The Netherlands, like last year, have seen amounted to 20%, also a decrease related to what I mentioned before the Towage activities in Northwestern Europe, meaning also the Netherlands. And this issue is related to projects on the North Sea and The Netherlands activities were stable in comparison with 2017 and 2016. The remaining part of Europe has gone down significantly, mainly related to the Offshore Energy and the construction of wind farms in 2016, we had a very busy year, and 2017 was quite less.

This is about the foundations, not about cable-laying. Australia/Asia, slight increase related to the project in India, JNPT, but also related to a major project under - at hand in Indonesia. Then we have to Middle East, where we have lots of producing countries. We have the gas pipeline, for instance, under Offshore Energy, but also we have a Duqm project in Oman. I just mentioned before and you see that there is a backlog of - or a reduction of revenues in Western Africa, particularly in Nigeria. Well, that's oil and gas related. And if you look at a number of countries successively dependent on oil or gas - oil and gas revenues, then you see these countries suffer from the pricing and budgets and that means coming to the year that was quite - still quite than the other regions. The Africa and North and South America remained unchanged.

Now, let me take you through segments. First of all, the Dredging & Inland Infra and I want to move on, because the first thing I want to look on is the fleet utilization. Last year, we saw an improvement vis-a-vis of the all-time low 2016. We have a significant increase in the utilization in terms of hoppers. We ended up, over the full year, at 35 weeks. And in the course of the year, this has grew - Q4 showed a much higher level of utilization. So we see a significant improvement in utilization. Also the major cutters as shown - all the major hoppers had a better utilization vis-a-vis of 2016. Same thing for the cutters, cutters had 34 in 2015, extremely high year, related mainly to Suez and some other Middle East project last year, the utilization rate was very low at nine weeks. We had 14 weeks this last year. Please bear in mind that we added Helios to the fleet last year as of July 1. It went to work relatively slowly. It had some works on the Maasvlakte, near Rotterdam. It was then mobilized towards Duqm and started working for really at the end of the year. So, it has only slightly contributed to the utilization rates of 2017.

By and large, you could see a significant improvement of the utilization rates in 2016, particularly in projects outside of Europe. And the result in the mix of better utilizations and generally lower margins from projects of work at hand in a market where we have to focus on utilization and have to make the additional step to land some jobs. Not in old jobs, we have some good margins as well, but in the total makeup, bearing in mind also the results from the settlement on old projects.

In terms of EBITDA, we are in line with 2016, slightly lower than 2016. EBIT is even lower and this is related to the same phenomenon I mentioned a moment ago. We have the Helios that was commissioned July 1, so we started the write downs as of July 1 and that gives us €5 million additional in write downs in comparison with the previous year. And as a result, the EBITDA or the EBIT is slightly lower, even at EBITDA.

Now, within those lines we see The Netherlands. And as I said, Infrastructure projects were stable vis-a-vis of 2016. If you look at the total revenues for 2017, you can say that 1/3 of revenues are related to The Netherlands. And like the previous years, we have a margin of somewhere 3% to 4%. So in these terms, The Netherlands show a very stable and solid contribution to the revenues and results of the company. Then we have the order book, I mentioned the increase in the order book in last year, mainly related to Dredging operations. And you'll be asking for figures, so let me give them right away. About 40% of revenues will be executed in 2018 one quarter and 2019. And a significant part of the works, as you could see, are related to a very long-term project, 35%, 1/3 of the portfolio, as expected, will be implemented as of 2020.

Now, I'll move on to Offshore Energy. As I said, we've seen reduction in revenues in offshore completely related to Offshore Energy in the company in the course of last years and that's what you see, €350 million - almost €400 million and a decrease in revenues almost completely related to the services side of our business operations. Contracting has been much more stable in its developments compared to 2016 and in the course of the past years, if you look at it, you can say that about 50% of revenues were in contracting. Well, in the previous year, this was about 1/3 to 40%, about that range, and we also see a higher contribution to the revenues. So you see that contracting activities in 2016 amounted to 1/3 of the earnings of the company, at the results of the company; and last year this amounted to 60%. Obviously, this is the result, particularly, of a reduction both in volumes and in the results, operating results in services. And this is particularly clear in heavy marine transport, the old Dockwise operations.

But before I come to those operations, I want to say a few words about contracting. As I said, contracting has remained more or less stable in comparison with 2016. The same applies to the installation activities. We've had good rock piping activities, rock dumping activities. I also mentioned a gas pipeline installation project in the Middle East that we have been working on. We've seen a positive contribution to the results of this. Also VBMS has seen good results at the end of this year, seem a very busy year, cable-laying, carrying out activities, generating positive results. There has been a drawback in comparison with 2016 in terms of wind farm construction. 2016, as I said, was a very busy year with the two VIS project, Veja Mate and Wikinger project. Well, last year, we work only on one project that is smaller in size and the two previous projects with the Aberdeen Project. And as a result, in 2017, we have seen a lower contribution to the earnings. But by and large, we are not dissatisfied about the contracting activities of the company.

If you look at marine services, that as I said, the situation has been under high pressure. Last year, as to give you an example, we had the Hansteen project, a project we implemented in the section of long-term projects acquired a long time ago with good margins. It's still not out of the order book in 2018. We still have to carry out some remaining jobs. But in the course of the year, as I said when presenting the half-year figures, we started shifting from long-term projects towards spot market project. And on the spot markets, you have to fight to get utilization, the prices are very bleak. Usually, it's more about positive cash contributions than about EBIT contributions. And this is something we saw in Q2 of the last year, you saw that we had practically flat EBIT contributions. Now the order book, as I said before, it's been stable in Offshore Energy.

Now, something we have taken onboard in these figures is Gardline. Peter mentioned it as of August, the moment we acquired Gardline. What have we been doing with Gardline in the course of the past half year? Well, mainly, we have worked on the restructuring the assets on reducing the activity profile of Gardline towards the core activities and the core region, the core region being the North Sea. And all kind of non-core activities have been divested or have been discontinued or the assets have been sold off. This is not done yet in 2018. We'll continue restructuring the organization adapting it to the amount of work available and creating a leaner organization, but significant progress nevertheless has been achieved.

If you look at the revenue contribution of Gardline and it amounts to above €24 million. And we've also carried out a purchase price allocation as it's due in acquisitions. We certainly valued the assets, the equipment and the result was a badwill gain amounting to about €24 million, but more relevant is the net amount of €15 million, because there was all kinds of restructuring costs I mentioned before incurred during the following project. These are one-off charges and as the results, the net badwill amounts to about €15 million.

And if you look at the operational results, so this is more of an accounting issue, because you have the purchasing acquisitions and then you have to one-off charges, but we also have seen a small operational profit in the second half of 2017.

Now a few words on Towage & Salvage. Revenues have slightly declined, but as I mentioned before, this is mainly related with the trencher of Towage SMIT of activities in North Western Europe. And that means that as of that moment, the only remaining revenues are related to this Salvage activities and they are in line with the activities in 2016. In the course of the year, we started very slowly, which I reported during the half year figures, but we certainly had a more lively second half year with the sprint towards the end of the year with lot of emergency response projects, meaning that the results of Salvage finally landed on their feet slightly lower than the previous year.

But as you know, this is very unpredictable from year to year, but still, if we adjust for this the performance of Towage & Salvage, it is stable and in line with the preceding year. The year results in joint ventures are lower than at the year before. They were clearly lagging behind and this is the result of several factors. Some of the joint ventures and one in particular in Singapore have suffered from the oil and gas situation. The reduced activities at the shipyards in Singapore, meaning that some of them have simply run out of work, which affects the Towage activities as well. It means that part of our business activities, they have gone down and many regions suffer from oil and gas.

Another factor particularly relevant to North Western Europe is the pressure on rates, particularly in container transportation companies. And we've had a number of one-offs in the course of the past year, among other things related to the issues of market penetration. We've seen a further penetration in the U.K. market as the SMIT and this had some initial losses that are reflected in the results. So if you look at the business operations and the volumes in the business, then you see that the dynamics are slightly lower when related to oil and gas and actually quite okay in Brazil with Agro commodities. By and large, we see a pretty stable picture.

Here as usual, you see the 100% basis of the Towage financials, but that basically is just adding up of all the figures, taking stock of the fact that many of the other joint ventures use other currencies. We have the Singapore dollar in Singapore for instance, and it's not a big factor, but certainly didn't make a positive contribution, because both the U.S. dollar and the Singapore dollar were slightly weaker in 2017 than in 2016, but you see pretty significant EBITDA and a reduced net debt position. Then Holding & Eliminations, to conclude my overview of the corporate results, 2017 certainly was a more normal year than 2016 was. And in essence, we are comparing apples and oranges, because 2016 had lots of transaction results, some of them related to VBMS. The turn from participation to a 100% consolidation and Towage was still a part of Kotug Smit and we had part of the losses in Fugro.

But if you adjust to all of this, then you'll see that 2017 is in line with 2016 with the remark that in 2017 we had one extraordinary item. This was the restructuring costs of about €15 million, an amount we announced in the course of the year related to the reorganization we just refer to at the head offices in Papendrecht. And well, you know about the stake in Fugro, which was sold, Q1 '17, €14.50 at book value, meaning that the full year results of Fugro no longer impact the company.

Now, what about the balance sheet? The balance sheet has changed, because on the intangible or the fixed assets, you see a significant reduction related to an issue I just mentioned, the fact that we have divested our share in Fugro, our debt position has gone down significantly. But that early last year, the USPP loan dating from 2010 has been repaid. We could redeem it early as a result of the situation with SMIT.

Something that did cost money last year is working capital. I'll come back to this in a moment. We've seen significant cash out and I'll comment on this separately. But by and large, if you look at the investments that we have done, if you look at the share buyback that we have carried out, you may conclude that we have moved from a net cash position of €200 million to begin this year to a still relatively limited debt position of €120 million. And if you relate this to the EBIT, you see that still it's an extremely modest amount and we have a solvency that grew further to 63%. So, despite all this, we still have a very solid balance sheet, I could say.

Now, what about the cash flow? €400 millions in EBITDA terms, minus the year interest charges and taxation, which amounts to about €35 million. So we have about €400 million left in terms of pure cash flow.

What about capital expenditure? The capital expenditure was higher than we indicated earlier in the year. However, if you split them up or - you see it is almost completely related to the vessel acquired during the year. We had an option with the constructor, a constructor that we had on the chart was a couple of years with the option to buy the vessel and we executed that option in the fall of the year and also by the end of the year.

One DSV was acquired and one DSV from ex-Harkand was purchased, the Atlantis that we bought and the Da Vinci which we chartered for a period of three years and with two DSVs that we bought, a Constructor and the Atlantis, about €90 million in capital expenditures was involved, and if you take this off the amount, then we end up in line with the expectations.

The major chunks are the Helios, I mentioned before, which has been commissioned halfway through the year. The construction of the sister vessel of the Helios that was started; and the Bokalift, which is also commissioned.

Now, here we see cash flow and a breakdown that many of the cost items have already been mentioned. The most striking obviously is the fact that the cash flow from operation - operating activities has been breakeven as a result mainly of something I mentioned before and this is the shift in working capital, a shift of about €300 million, why?

Well, as I said before, negative working capital must be related to revenues and our working capital moves along with the revenues, it's structurally negative. But if we have higher revenues, then it is structurally lower and as a result of this, you see the graph represented in terms of percentages over a period of 10 years. And here, at least you see the dynamics, a relative dynamics that are more important. We've seen a decrease in revenues and one of the effect is also a decrease in working capital and contrary when we have an increase in revenues, you would also have a higher level of negative working capital. And individual major projects are also a factor in this, as we have seen earlier in this decade. Looking at 2009 and 2011, then you have project like Gorgon in Australia, a large project with a very positive payout schedule for us.

In the recent past, we have seen this with some of the Dockwise long-term contract projects, I referred to them before. Fortunately, we have almost completed all of them and it's also related to a number of wind farm projects. Well currently, we don't have such projects in the portfolio, not with these kind of physical conditions, and that means in the perspective of 10 years that, in average, the working capital has been about 19% over the period. We've had periods with 12%, minus 15% and we've also been way above 20%, 28% and now we have moved to the other side this average.

And that concludes what I wanted to say, Peter.

Peter Berdowski

Alright. Well, I already told you about the dividend when I introduced this session. The policy is 40% to 50% payout but we do look at stability. It is stock unless shareholders prefer cash, experience has shown in the past few years that the proportion is almost 2 to 1; 2 stock to 1 cash. So that's 1/3 that we distribute in cash. So the dividend proposal with a view to the stability of the cash flow and the €3.5 million mentioned by Hans is a solid balance structure and the appreciation in shareholders. We propose to keep it stable at €1 per share, which is an 87% payout ratio.

Of course, the question crops up, well is that stable for 2018 and what about 2019 then? I never want to be too early in making statements about that, but we are giving a signal of stability and of strength and - so we say, all things being equal, it would be our ambition to continue that signal once it's been given. We always say, we can't anticipate the unforeseeable, so we can't say anything about that. We don't want to pin ourselves down on anything for now. I'm not making any promises about our proposal next year, but of course, it makes sense to suppose that we shall try to go for stability again next year. So maybe that question then has been answered already. Well, our outlook; we see a mixed market picture. But in fact, this is the picture that we saw and foresaw in our corporate business plan, which was launched a year ago.

I have to say, over the past year, I haven't seen much different from what we expected, and the way we look at 2018, that does not seem to differ significantly either. So we're reasonably well spot on our expectations for our - in our business plan, what's going outside and what's going on inside the company. So we are fully on track. We are even ahead of our ambitions to expand the business further and strengthen it, but the market is what it is and it's definitely not as if we suddenly see a huge change in the market, especially in offshore.

We do see some positive signals, particularly in connection with gas maybe even at an earlier stage than oil, maybe more so on the import side. Of course, so far there has been such attention to the export of gas, we were involved in prestigious projects. But as we speak, we are looking at some 10 import projects of gas, often floating if I so use. Of course, the scope there is much broader than for dredging.

There are always activities in the area of installation but also for Smit Lamnalco for instance. If you're talking about the long-term terminal activities, we just signed a contract in Bahrain which relates to the import of LNG floating in Bahrain. Well, contract with Smit Lamnalco for four vessels for existing vessels and for 50 years with four new vessels to come. And in various activities within Boskalis, we see more movement in the import side. Remarkably this is scattered across the globe.

LNG import is beginning to be vital at more locations and it's vital, of course, if you think about the dependence from Russian gas, it's not easy to find an answer to gas from pipelines in Europe. So here too, you see more attention being devoted to LNG import. Poland is looking at this, Finland is. But of course, there are more countries in Europe that are interested in this section. In the Far East as well, the Indian subcontinent, we see a quite a lot of activities in this field and we are considering a lot of tender-options.

And we try to make packages because you know from dredging up to 15-year ex-operation with Smit Lamnalco, we can cover all the aspects in the whole project. So these are very good developments. Those are not mega projects of hundreds of millions, but rather dozens of millions. But still, with the involvement of a broad scope of our - a broad section of our fleet. So for offshore, that is definitely an interesting development for us.

Well, wind farms, we see developments within Europe that we have dwelt on before. This is reasonably in line with expectations. We also see more wind developments in Taiwan. Well, at present, there are a few tenders running. We are cautiously positive about the way in which America will develop. At this moment, we are working with Gardline to survey one of these wind farms. That's the interesting bit of the addition of Gardline.

We have a very important thermometer in the market. It's so good to see that various projects that are coming into the market as prospects are very early indicators for us for where are things are about to happen. So from the moment when things - when there are investments in soil survey, you know that you need to start preparing things.

Very often, you first have the exploratory soil survey. Then you are really moving towards - we are now starting a soil survey, which is in preparation for infrastructure to be placed. Then a lukewarm project is slowly moving towards a hot project and that is good new market information, very useful for us at the moment.

So we do see developments here and there, along the lines indicated in the corporate business plan. But looking at 2018 concretely, we take into account a comparable market to the one in the second half of 2016. We still think that the recovery will come but it may take some time yet before this becomes a manifest across the board, within Boskalis.

So as I said, I turn this internally we are bottoming out. It's good that we have attuned our organization and the fleet to that, and we are preparing ourselves for the gradual recovery we anticipate. And we're also preparing by investing at the moment in the market when this may be attractive for us.

Towage, as Jans mentioned, surely is at stable volumes, imports, I think most of the price battles around container shipping in Northwestern Europe has taken place. Meanwhile, I see some recovery appearing and offshore, I just mentioned that, we do see, but that is really the core of our strategy that there is an attractive recovery on the top of the S-curve

But at the bottom or at the pure supply and demand of commodity market, things are not so easy and recovery will be more difficult. And in that respect, we are more critical of our positioning. We need to move up. We do want to move towards the Technips, the 67s, the McDermott's of this world up to these - not to the size of a full epic contractor but these are the kinds of projects we are looking at, along with the margin profiles that we want to move towards because then you are moving towards EBIT margins of 10% to 15%, structurally speaking.

At the bottom of the market, life is going to stay very, very difficult to end up with a positive EBIT. It is more of a cash flow than an EBIT game you're involved in. So we'll look - keep looking critically at the composition of our fleet to see if there are any consolidation opportunities at the bottom of the market and also we'll look at the further possibilities for divesting parts of our fleet, but the positive news, as Jans mentioned, for the order book is that for order contracting we see that there is work and we can win contracts.

The market doesn't have to grow that much because our market share has grown in that respect as well. It's good to see that by now 75% of that portfolio in offshore is in contracting. So there is a gradual shift towards that side more, which is our ambition.

So that is the story looking out. In the short term, reasonable - the year will be reasonably comparable to past year. There are a few lagging effects from offshore from previous years. Well, what will the result be? It's quite a challenge to match the €150 million result from 2017. And underlying, of course, there is the message, some of you may think, well, the order book has grown by that percentage, surely the result will follow suit.

Well, this is a cautious remark on my side. That kind of extrapolation will not apply this year. I'm saying the €150 million is quite a challenge and exceeding it will be a huge challenge. That's the underlying message really.

CapEx, apart from acquisitions, as usual, will amount to around €250 million. As announced in the corporate business plan, that is the message then looking back and looking at the future. We are bottoming out in the market as it is at the moment. I think our organization is well equipped for this now, well organized, well structured. Our fleet has been rationalized, last year - past few years, we strengthened ourselves in the journey up in the S-curve, especially on the offshore side.

We shall be making some further additions this year and my ambition is also to make some further additions in survey. The survey market in the North Sea, for instance, is picking up slowly. So step by step we hope to move forward to fully utilize the recovery of the market that we expect.

Now there is time for Q&A then. Here you see a beautiful picture of the Bokalift 1 in Rotterdam at the [indiscernible].

Question-and-Answer Session

Q - Luuk van Beek

Luuk van Beek from Petercam. Question about margins in dredging, you indicated that you have to be a bit sharper in margins, but if I look at H2 last year, it was above the - below the 12% you mentioned as normal. Is it representative of what we can explain - expect in years to come?

Peter Berdowski

Well, looking ahead, I think that you need to think along the lines of the past half year. It will be between 8% and 10% more than between 10% and 12%.

Luuk van Beek

And if I look at the contracting side of Offshore Energy, then there was already a downward trend in the H2. You have some transportation operations running out of the order book. Is there any opportunity to gain new works to stabilize?

Peter Berdowski

Okay, well contracting is not going back, you get [indiscernible] on a confusion, what is contracting and what isn't. Let's say at the high end, it is not declining, especially if you look at HMT the old Dockwise. At the top, there were some bigger works like Asterstein. That is declining slightly. We got a few more. We see a build up towards 2020. There is new projects coming in slowly bit by bit but for 2018 and '19, I must say, these will be challenging years in this area. But on the other hand, there is contracting in the event - on the intervention and installation side and that has grown and we see quite a lot of work this year. And the rest of the Dockwise fleet, you have to differentiate between types zero and one at the top, those are the vessels where we want to strengthen and build and expand our offshore proposition further, but there's a long tail of smaller vessels, the 2B vessels and below, where you can say that is purely transport or it is rig movements. That is the portion of the market and the segment of our fleet where we say we need - really need to reflect on what we want to do with that for the future.

Do we want to keep them within the Group or want to divest them or place them at a distance, de-consolidate perhaps. The same is true for certain other assets in transportation. So when I say we will keep looking very, very carefully at what fits in with the business plan we have, and with our ambition to go up. Well, of course, you want to go up and you need to be prepared to cut off bits of your tail if you want to move on.

Luuk van Beek

And then a question about working capital. You clearly indicated the link with the revenues and with the type of projects in the order book. At the same time, maybe customers have taken on a view on working capital.

Peter Berdowski

No, that is not a factor at all.

Luuk van Beek

So if the market comes back, you could return to the old type of activities.

Peter Berdowski

It's very much the nature of the projects as well as their scope and we still have projects where you get a substantial prepayment. There are even projects where you demand very high prepayment, otherwise you won't start. We are involved in Nord Stream, well you can imagine, you want to know in the head that the money is there because if that needs to be collected afterwards the story changes. It's always a story of the kind of projects involved, the kind of customers and the kind of payment schedule involved. But as Jans said, for Dockwise, you are moving more towards regular transports and that is not - at least they are not paid in advance. So you've got a debtors risk. And for Dockwise, the doctrine is simple. You pay before, it is offloaded. But paying before the load is loaded onto the vessel, that's a different picture in this market.

Thijs Berkelder

Thijs Berkelder, ABN AMRO. Plenty of questions. First of all, the order book Dredging & Inland Infra, what's the development of the order book in Inland Infra, also in the light of the major projects that have been earned by major competitors?

Peter Berdowski

I don't know how long your list is. Things are declining. Well, the order book, as regards the buildup and scope of Inland Infra, Inland Infra in The Netherlands, to be specific, what we strive for there is to gain a position where we - where we can have €400 million to €500 million revenue per year aiming at an EBIT of say 3% to 4%. Historically speaking, we were always active, we are closely related to many of the dredging activities. There is a lot of dry land involved as well. We've been able to contract the Duqm project because we knew our - we had our soil expertise from The Netherlands. For the same reason we can say we want to develop more jetty and key structures. So there must be a very strong link to our core activity, not only in The Netherlands, but also outside it. But it's not our ambition to stuff ourselves with infrastructural works in The Netherlands. We also carefully look at the risk profile and the margins that can be obtained there.

Within that context, we've got an order book that has one year revenue in The Netherlands. So 2018 has been largely filled already and we don't have a very aggressive need to stuff ourselves with work in The Netherlands. Recently, we've had a number of DBFM projects. If there is no 15% margin on those, we don't find them interesting enough; that is a rough figure. Of course, it maybe 14% or 16% or 17% depending on the risk profile involved. But DBFM work, we carried them out together with Volker. We are reasonably well aware of the way things work also because you're your own customer. For other works, you can say the customer has not given me all the information, but DBFM is a different story. You're your own customer in a way. But you are in this zip of the milestones of the project versus those of the financing. All of that has to merge smoothly. So we know from experience how much is involved in a DBFM contract and the responsible sound execution of that. No matter how many geniuses you have in your company, but given the complexity of these projects, there are uncertainty margins of 10% to 15% included.

So internally, you don't need to give us a margin of less than 15% [Technical Difficulty] so as against costs, so plus profit, plus risk. So the standard definition of our assumption, the 15%. Well, and then you see that there are parties you cannot distinguish in costs. There are parties that find 7% to 8% responsible. They deal with the DBFM contract like a standard one. That may be a lack of experience with those kinds of contracts so that there is some underestimation, but we don't go in for it below that level. If there are other people getting into that submarine, well we say, so be it, that's not our core activities. We don't need to keep a whole factory operational in The Netherlands with people. So it really needs to pay the costs and contribute to our core activity and the margin must be attractive enough. So that's where we draw the line. And our order book is well in order.

So we are also well filled with the civil engineering works. We do a lot of work in dikes and riverbank protection. We are stricter there because it links up more closely with our own activities and we can deploy our own equipment there, because in works like these, there is hardly any own equipment involved. All of the cash flow needs to be in the margin of the work. In Dredging, you've always got the cushion; if the margins are poor then you still have the cash flow. Then sometimes, across the whole work, you can have a 25% cash flow, which maybe 10% for the margin, but you still have 15% cash flow. Well, in infrastructural works in The Netherlands that is not possible, unlike a lot of the civil engineering. So we are looking very, very cautiously at this game. We say this is the line where we stop or where we start. There are other parties that are more aggressive.

We also look at risks very, very carefully. We are very much involved in the tender of the open A and the C sluice in high mountain originally we were going to tender together with Volker, integrated - originally BAM would offer with - tender with Van Oord, together, sorry but looking at this more carefully I said, this is a project that cannot be calculated anymore. There is such complexity involved, particularly in the portion that we do not control, we don't have concrete knowledge, knowledge about concrete. There is a big dredging scope and excavation scope, but the decisive scope is the concrete and the building of those doors. Well, we are not going to be involved. Well, that may be annoying towards Volker but at the end Volker sought for cooperation with BAM and solution was in the end that we and Van Oord left the consortium and we are simply a supplier to the consortium.

I've had many discussions about this up to high levels at Volker, why we're not involved. I told them, this is a project in the category where the risks are not surveyable - cannot be overseen, so cannot be calculated. It is a huge proposition in the markets to put that into a DBFM funnel I think is incorrect. It's not proper. If in The Netherlands in 1960 where we were then - if you had then put all the delta works on the agenda in DBFM contracts, then within five years you wouldn't have had any companies left within The Netherlands. Not one of the delta works was carried out according to such procedure. All of those were carried out in consortiums, because in the - it was clear at that moment that it is possible - that it was impossible with all the technology involved to limit the risks and simply to place all the risks with the contractor, because you wouldn't have had any contractor limited, which was not in the interest of our government either. But there you had people who could really think properly about things.

The contracts that are in the market now are insane, but you will always get people who think that they can calculate this properly and that they can escape unscathed. But of all the DBFMs we've seen in the Netherlands, there has never been a company that has really made good money and a lot of money is being burnt in all the tender activity that has to be - has to go on in advance. Sometimes there are five parties investing €8 million to €10 million on the tender, but there is no €50 million of EBIT coming out. So there is a terrible imbalance there. So that is our answer to the question, how do we compete in The Netherlands? Yes, we are interested in The Netherlands. We've got a fine position here, especially in water works, but we do see it as an additional activity to our international activities and we're interested in the right projects with the right risk profile at the right margins.

Thijs Berkelder

A follow-up question. What's you're doing in Inland Infra right now, I think this is something your Belgian colleagues will be asking the same questions about in terms of you Dredging pricing.

Peter Berdowski

Who is that, our Belgium friends, you know some people I don't know. I have no friends in Belgium.

Thijs Berkelder

Well, you just signed a joint venture contract I think in South America with you Belgian friends to carry out joint projects on some kind of canal. Anyway, my question is this, if you look at EBIT margins in Dredging, 8% to 10% for the coming year. Well does it mean that you are reducing margins in the sense that you accept the Dredging market as it is, meaning, we'll be moving toward 2019, 2020 accepting dredge contracts with a lower margin profile than in the past, given the reality of the margin profile?

Peter Berdowski

Yes, the market is what it is, you can't avoid that. It's true in The Netherlands as well as in Belgium. The question asked just now, are the margins that we've seen over the past half year, which are around 10%, what is their proportion to the market you expect for 2018? My answer there would be, in 2018 we are taking the same margins to appear. Looking at the 50% we have in hand for now, the margin profile, well that is about that margin profile. I'm not extrapolating here to say this will be the level for the next few years, but the only thing I'm saying is, those are about the levels where we were successful. It's more about what you have in the order books and what will be the challenge for the next few years.

Thijs Berkelder

Then we have the beautiful picture of the Bokalift 1, what kind of contracts have you signed for the Bokalift 1 at this point in time?

Peter Berdowski

Well, the Bokalift 1 will next Monday be sailing to its first job and it is the placing of jackets for a wind farm in - well that's off the East Coast of England and it's expected that it will be involved with that until September. Well contiguous to that, we expect to do some decommissioning activities. At the moment, we've got some tenders out. There are some possibilities and there is priorities being shifted among other assets. But looking over at this - looking at this year's; first the wind and then decommissioning and then the ship is deployed for the whole year.

Thijs Berkelder

Now talking about CapEx on the HELIOS II, you're constructing the vessel as part of the CapEx. Are we talking about a Bokalift II well or is that something you put on ice for the time being?

Peter Berdowski

The CapEx commitment for this moment is €120 million. That is the hard commitment we have, that is it. And we're also looking at opportunities all the time within the context of our corporate business plan. A copy of Bokalift 1 is not in the offing, but we are looking at alternatives. We are looking very much at penetration into the market of crane vessels. Of course, practice makes perfect, other parties get to know us as well. For the first time, we are getting requests, also requests for scopes that exceed the Bokalift 1. So at present, we are studying very much what should the profile of a second crane vessel be? What could it be? How do you add something to the buildup of the whole fleet because we are convinced that having a copy is not a necessity as such, not in the profile of customers who want to be certain that the ship is there. No, that's not an issue there. So yes, we are studying, but not a copy of the Bokalift 1. Any other questions? Well, I was very clear.

Unidentified Analyst

You plan €30 million, and for cost wise, what do you want to achieve in 2018?

Peter Berdowski

Of the €30 million, about €25 million has already been realized. So the last €5 million will be realized over - in the course of this year. And most of the restructuring costs, the €15 million that Hans mentioned were made last year.

Unidentified Analyst

Well. Maybe I missed this point, you are paying out €1 in dividends and there is a selection. So the part that is issued as stocks, will it be brought back?

Peter Berdowski

No, we'll not. We did so last year, but with today's knowledge I would have said no, we won't do that because the experience is that you have to explain five times why and whatnot. There is hardly any appreciation for this. So we learn while going on about this. It's our conviction that the appreciation of this will be considerably higher than what we did before. Of course, we also look at the balance sheet, what is the strength of our balance sheet. You know what are our plans? If it is simply becoming fatter, then it would be obvious. But we think there are quite some opportunities in this market for which we want to use the cash.

Unidentified Analyst

Like every year you have financial settlements, could you please indicate about a vision, whether they were much higher or lower than last year per projects or at least per division, because you do indicate them for Towage & Salvage?

Peter Berdowski

It is not substantially different from the years before. It's a story you know. Everybody always says, you know what was the end result? But they never ask what did you put in? Because the things that - the profits that come out have been invested somewhere or we take a provision because we want to buffer - be buffered for setbacks. Well you can assume from me that we've put a lot of caution into this, but at the certain moment, it is manifested. At a certain moment, you can let go of careful under the influence of IFRS and accountants who look at things much more sharply. They see that this is a sound balance sheet underpinned by the same starting points, but the dynamics of what's going in and what's going out was not different - that were not different in the past year than the years before.

Unidentified Analyst

And then about the working capital, given the fact that you will be working more on the spot markets, can we expect once again that a working capital ratio below than last year?

Peter Berdowski

No, because the underlying message is that we want to be less active on the spot market. My ambition is to end with 100% contracting, but that will take some time yet I'm sure. But gradually we will be less active on the spot market.

Thijs Berkelder

Thijs Berkelder, ABN AMRO. Three additional questions. Can you give us some guidance on your expectations for the Dockwise EBIT for 2018? In the past, you were steering for breakeven EBIT for Dockwise. It's now clear that you have become or you're steering for cash positive?

Peter Berdowski

Well, you need to distinguish, Dockwise has two portions type 1 and 2. The top of the Dockwise vessels, there we go for EBIT zero. We aim for a positive EBIT and that can be attained with those vessels. The big price pressure and the dependence on the spot market is at the bottom, at the tail end, not at the head-end and there we aim for - that we aim for EBIT zero is illusory even down to the level where we say, if you don't get the cash we would lay up a ship preferably. You know you don't have any risks. You don't need to maintain it any - at all. So it's that portion of the fleet of which we say, if we were to see a structure to put them more at arm's length, we would seriously consider that. But at the top, at the high-end of the market, especially a vessel like the Vanguard is still a very unique vessel which is capable of performing very unique work and the market is willing to pay a reasonably good compensation.

Thijs Berkelder

But then combines, you end up with a negative EBIT?

Peter Berdowski

No, I don't think we would end up with a negative EBIT.

Thijs Berkelder

Then a question about guidance in terms of corporate costs in 2018, what should we expect by and large?

Peter Berdowski

The same direction, the hardcore would be in the range of €30 million. This may differ from one year to the next, but there no essential change there.

Thijs Berkelder

Clear. Then the project portfolio, you're already mentioned the gas importation projects, the potential for such projects. So can you give us some broad outline of the expectations for Singapore? Have you earned a projects? Have you landed projects? Have you - other major dredging projects in the closing phase of the tender?

Peter Berdowski

Yes, as for our order book, we've always got the largest contracting activities for dredging. We won Finger Pier 3 in Singapore. Now we've got the tender for the Tekong polders. There too, I think we have presented a good proposition, maybe not the sharpest one, but the one with the greatest quality, I think. Well the MV score is released then, so we will have to wait and see how that develops, but these are called polders that will be used by the Ministry of Defense for the next 10 years. So they do look at who is going to carry out those works. Well, our ambitions for Jakarta Bay in Indonesia are still there, but due to various political turmoil and new Governor in Indonesia, it's still on hold, but we do expect that to be started up at some point, but that will take some time yet. In Philippines, Manila Bay seems to be gaining more attention at this moment.

I'm a bit skeptical about this because we've been told that before there do seem to be some developments. India in general, of course, we're involved in JNPT. But in India, there is a lot of activity in connection with ports. Fortunately, not only state projects but also private projects, so we are quite positive about India. Australia is relatively calm. We've got some smaller tenders running there. New Zealand, at present, we are very concretely involved in Lyttelton, in a project for probably the fairway, which has a revenue of €30 million. That would be a nice utilization for fairway in the second half of this year, very welcome. Duqm, Oman; there may be some more work involved for us. We are looking - they are looking at a Navy port and a fishing port. Of course it's going to be exciting to see whether it can be combined with the existing works, even though we are well positioned. But if there is a gap between, we can link-up with the rest of the group again.

In Dubai, we're carrying out some reclamation work for the Expo. Abu Dhabi is making substantial investments in islands for petrochemical industry. Qatar has become somewhat isolated, of course, in that part of the world, and it has to look at its own infrastructure. So a container terminal maybe very much a topical issue there, three port projects are pending there. Bahrain; we have - we are close to work for Causeway. Saudi offshore is very busy. There we are looking very carefully with our offshore division and long-term agreements. The Saudi Aram has taken place there. Major investments are involved in offshore and first connotation of many people is that surely that is about oil. Well, remarkably, most of those projects involve gas, not gas for export, but gas for import. Saudi itself needs a huge amount of gas over the next few decades, both for power and also for desalination, because its gas supplies are running out. You may say there is a big gas bubble, just out of the coast.

Well, half of that is Iran, half of that is Qatar, it's not - it makes no sense to be dependent on that. So that's why Saudi Arabia said, we want to invest ourselves in gas supplies in the Gulf. And well, in the next few years, we'll see investments totaling dozens of billion, I think, and we are really looking at that very carefully. Within that context, drill islands are being developed by Saudi, the so-called Berri drill islands for Saudi Aramco involves €100 million, very interesting for us. Well Iraq, Al-Faw has harbors, that's being discussed for a long time, but we seem to be getting somewhere. The financing there is important. We are among the final to cause some consortiums and I think we stand a very good chance, but it will be exciting to see if this is going to be pulled off before the elections in Iraq. That would be a contract value of some €300 million, purely Dredging. Africa, the Tortue development of BP in West Africa, we've tended there ourselves, but we're also looking at the opportunities for tendering for others depending on the choice to be made by BP itself. In Kenya, we were active a few years ago in Mombasa.

As you may remember, the second phase of that project is coming up. It's been awarded to the Japanese partner that we work together with at the time, Toyo. So we are looking now with Toyo to see if we can do that for the next phase as well. That would be a very nice project. Mozambique, LNG was on ice for a long period. Gradually, things seem to be moving there. There is potentially a great deal of work for us with access channels and installations outside the port. Not this year or next year, but in the medium to long-term, I see quite some potential there. And in general, in East Africa, I see more work in the offering than we've seen for many decades. Turkey; well, the channel, you may say that is ludicrous; well they said that about the Suez Canal as well. So I've become more modest in defining opportunities as being ludicrous. This is really being studied very seriously, and it's very high on the political agenda of Erdogan as well.

So we are seriously looking at that and lot of that will be dry works, but given the nature of the project, a lot of it will involve civil engineering in water. So how can you pay for that? Well, the idea is that this will be largely financed with real estate development along that Canal. I don't know whether you've ever considered buying a house along the Bosphorus, but the prices involved are quite considerable and people hope for a similar development along that same canal. Of course, this is not for tomorrow. But in this respect, they do have a very political - a very ambitious political agenda in Turkey. Closer to home; Romanian beaches; there's a number of Black Sea beach depletions. All the money is in place there, partly subsidized by the EU and partly subsidized by another party. Two packages of €120 million that is straight hopper activity for us. We are looking at that very clearly. Deutschland, the River Elbe; Germany, the river Elbe, at the end of this year that may be happening, then we can transport a vessel to safer waters and we can go on to work involving €300 million. At the end of this year that may really be realized. Brazil; apart from ports developments, which are always very slow and sluggish, we see lots of people - new parties entering the market.

Shell has come up with an ambitious plan and this will involve further infrastructural developments in which we are interested as well. So along with other ports - so Rotterdam we're looking at Porto Central that Rotterdam wants to install there. So together with Van Oord, we are looking at that as well. Now and then something poops up when you say, surely this can't be true. Chile's San Antonio, a major development. They want to build the biggest port of the East Coast there - sorry the West Coast that would be. A very ambitious plan, also very large in terms of containers involving also the building of a very large breakwater. It's said that the budget is in place and that they want to start in say, 18 months; seeing is believing, but we are looking at that because it's a project that involves €1 billion. So, there we're trying to be on the map as well. Panama; new CCCP works. In Mexico, we've got elections coming up. Usually they involve a healthy impulse for work in the region.

Lazaro Cardenas; well is just among one of the projects that maybe actual there topical. LNG Canada, we'd already signed a contract and Shell is still waiting for an FID. The good news is, we were given the contract pre-FID to start there. That is a good signal, because it really means you're going to do some work. This is interesting because it involves some €100 million and maybe additions for which we are going to tender as well. So, it seems to be infectious, because Kitimat is becoming serious. So after Shell, it wants to start as well and that is a work that involves some €180 million. Well, this is just a cross-section of bigger prospects that we are looking at now. With the large number of interesting ones, we're not saying as if the pipeline is empty, we do see the opportunities, but we are not the only ones looking at these projects.

On the offshore side perhaps, because there is a lot going on there. There is a lot in the area of [indiscernible] the wind farm Brigg and Saipem. There is installation involved as well in France. There are a lot of FSO, FPSO projects that we are looking at Coral South, Bonga, Vito semi. We're also looking at various fixed installations for Woodside Pluto LNG. Decommissioning works that we are looking into in the North Sea as well. There is a lot of landfall or rockfall installation works, the Volta connection, the gas pipeline is coming up, Safaniyah is coming up, [indiscernible] is also going to come up. So all in all, there are some 20 projects and we're also looking at wind foundations, Borssele 1 and 2 on the Dutch Coast, the wind farm Friesland, the Danish near shore Kriegers Flak and one in Taiwan. So that we are fully competing, although we are very, very careful there, because we don't want to run any risks, especially the area of jackets with a scene around us what the challenge is may be maybe for yards. I don't think that you can still find one yard in Europe that gets involved with the jacket. So you have to go further away to buy jackets. We are closely involved in the East Anglia projects on four fronts.

We've got the survey and the UXO, we conducted that together with Gardline. We transport the jackets for the farm from Lamprell yard in the Middle East to the site. We lay the cables and the Bokalift will also be involved to place jackets there, but purely on a day rate basis. So we have no risk involved there at all, but there too I've seen that, that is so difficult to manufacture jackets and get them away from the yards in time. In the latest figures, some of those jackets involved losses of €80 million. So you really have to study very carefully do you want to get involved with that, as a yard. You calculate with 3% margin and in the end a project is - becomes a disaster. So people - some people say what can be more difficult than a jacket? Well it's a simple steel structure, but it's 70 meters high, terribly high. Almost every jacket is unique. It needs to be capable to buffet enormous loads underwater and above water.

So lots of parties have missed out on projects or have lost money on projects. If you want to - need to make 120 of those, then you have to find four yards worldwide to do - to build them. Well, if you see what some parties are shopping, I really wish them the best of luck because the realization of wind farms is under more and more pressure to be completed within one season. But well if you can't back from completion, you can really pray to God that your jackets will, at some point, really be there and that they are of the right quality, et cetera, et cetera. If the jackets are there, then the whole project of course, runs up a lot of delays. Sif knows how to produce mono piles by now but complex jackets are such a different thing. That's why internally we said, we want to stay away from tendering for or rather assuming responsibility for a turnkey completion and installation of jackets. But there are colleagues that have more guts than we have such as BOKA. And of course you see, the whole wind energy sector going to a cost level that is really staggering. We're all very proud is that we can do so with 0% subsidy but it has to come from somewhere.

Well Lamprell has now - found out now that it needs to make its own contribution, but the next one in the row is the installer. So that's why we're saying we'll be very reticent and very reserved in getting involved too much in projects with such high-risk profiles. VBMS is straightforward, cable laying party, of course, we have lots of experience with VBMS and their pipeline is [indiscernible] Singapore Woodlands and the Dutch export cables for tenant wind farm Friesland and before long, we'll have the financial close from Triton Knoll. We are looking at some float-overs; Mystras, Johan Castberg, P-70, Johan Sverdrup. And we're also looking together with logistical management who had a very calm year now. They're now involved in very beautiful project in the Middle East. There we are looking at new projects, lots of them in the petrochemical industry. Very interesting there, also for the benefit of America. America has very cheap gas and can use it to very good purpose. But what they can't do with that is making steel.

Well that's another discussion they'll find out yet I'm sure. But interesting developments [indiscernible] an interesting projects in [indiscernible] and the transport and of course LNG Canada has various prospects. We are positive about logistical management for Dockwise. So those of course there are many smaller ones that we're looking at as well. But this gives you a flavor of what's going on in the market for us at the moment.

Unidentified Analyst

A follow-up question, can you say something; maybe give some guidance on the general tendencies in dredging and offshore.

Peter Berdowski

Apparently in comparison with 2017, with last year, there are some [Technical Difficulty]. As we said we had about half of portfolio at the opening of the year, meaning that for H1, it's pretty easy. It will be more or less in line with the previous year. But for H2 we have to wait and see how things further develop and therefore I'm cautious. As for H1, we are more or less positive that it will be in line with the expectations of last year. No more questions, it looks so quiet.

Andre Mulder

Andre Mulder from Kepler, two questions essentially. The first question concerns the Inland Infra operations. In the past it was harder to find your position, but now we wonder whether you're satisfied, it is not a very high market-related margin. You see no real perspectives for moving into Nuka territories. Is this an activity you might divest in the future? And then a second question, what about the lower end of the Dockwise fleet? Are the values there such that you can simply divest them or should we expect any further impairments?

Peter Berdowski

Okay. As for Inland Infra that is the well-known discussion, you only get 2%, 3% or 4% margin. But you also look at the capital employed, the return on capital employed is not as high anywhere as there. So - but as for the financial performance, we are quite satisfied with that, but we have to stay disciplined and make sure we continue that, and as I said just now, the contribution that Inland Infra has internationally is not always as visible as you would wanted it. We could never have attended for a project in Duqm without the dry land capabilities of Boskalis Netherlands. There is lots of people from the Netherlands and equipment involved as well there and the same is true for a project like Tortue, which also includes a jetty. We emphatically used the knowledge and expertise from the Netherlands organization.

Those are the people that came there with Volker Offshore, but we devote - for the land soil activities and jetty side we never - we are never going to tender for jettys or keys alone, but it is an integral part of development in that port. It helps of course, if you've got that expertise and know-how in-house, you need a certain mass for this in the Netherlands. It is a combination of the two, we'd make - if we make good money on it, it's a nice return and it's a nice support in the back. That's precisely why we say with €400 million, €500 million revenue, that's fine, then we've got the critical mass and Andre you shouldn't underestimate how useful it is that for our workforce we have a home base in the execution in the Netherlands. First, you can send people abroad for 10 years they get children, they need to be sent back then you can let them work in the Netherlands for 10 years again and then post them abroad again. That is not a decisive argument, but it is so pleasant that we have a Dutch organization on setting that allow us to rotate people across the globe.

So it's a mix of benefits that we wouldn't want to miss because we are making money. As long as we're making money with that that's precisely why we'd never want to make losses, if need be I'll go down in my volume to the bottom of the fleet that is especially the closest fleet converted tanker vessels. Well, all-in-all, it's about nine vessels with a total book value of some $80 million. In the past, we looked at those very critically already it's been reduced to market conformity, and I'm not assuming that we are going to scrap 8 or 9 vessels. But for the very reason you mentioned you want to have lots of elbow room without having a book value, last year, with the big impairments we said, this is all going down to the level where my hands are free to move with that and to use it.

Andre Mulder

A question about Singapore, where does the P3 sand come from and the last question about Taiwan, the risks are pretty large, are you looking into joint venture?

Peter Berdowski

Well, I'm not saying that the risks in Taiwan are high. I assume you mean wind, no. I'm not saying they are high, but the fact that parties are looking at joint ventures is also connected with the desire from the Taiwanese government that local content should be created. And that is difficult because the assets are not there, they don't have them. Even in the area of steel before you've developed a mono pile for a wind farm, you have a - you need time. So you see parties, the mill has done that for instance looking - you see parties looking for cooperation to create as much local content as possible on the one hand. On the other hand, you don't want to increase your risk profile by doing so because if in the end you have a lame partner who is running on that critical path as well, then you're getting the wrong side of the - wrong end of the bargain. So we are looking at possible partners.

There is no Taiwanese cable supplier; there is no ship owners of the vessels you need; and there is no producer of the critical steel section. So that's difficult because then you have to start looking around it with some shrimp vessels that can do something. That's the dilemma that everybody is contending with. What we've said, you don't want to make yourself dependent on one of the - for one of the critical components on a local player, because then you are bound to be leading towards a failure. Well, as for sand, FP3 sand in Singapore. It's kind of a public secret for some time now, sand has been shipped from Malaysia. The Queen - our Queen is also transporting sand from Malaysia, we've - but that sand cannot be used for suppletion in Singapore, but can be used for supplying the strategic sand supplies in the Singapore. And well, then works are made from the strategic sand supply, but you can't sell them straight to the work, so to speak.

So to a large extent, this sand is coming from Malaysia. The first preference is make work with work; you know what there is by way of silt and clay and sand trying to use that in the project as much and stabilize it. The second thing is, trying to do so or rather you can try to do so. You can do so with a strategic sand supply. In the tenders it's described how many cubic meters you can get from that sand supply. And the third one is sand from a large business. In projects going on now, we're succeeding from the first two components to get the ground balance in order.

Andre Mulder

Can they use Hoppers much more frequently?

Peter Berdowski

Well, you don't carry out a local section with hoppers

Andre Mulder

[Indiscernible] from Malaysia?

Peter Berdowski

Besides, on the one hand, it's being done with hoppers, but also with Chinese Pelican barges on a smaller scale. Nowadays, if you look - if you go to Singapore, you think you're in Hong Kong in the old days. It's under the radar a bit more due to Singaporean players.

Peter Berdowski

Any further questions? If not, then I would like to thank you all for being here and wish you a very pleasant day.