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Edited Transcript of GTT.PA earnings conference call or presentation 28-Feb-20 7:30am GMT

Full Year 2019 Gaztransport et Technigaz SA Earnings Call

Paris Mar 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Gaztransport et Technigaz SA earnings conference call or presentation Friday, February 28, 2020 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Marc Haestier

Gaztransport & Technigaz SA - CFO

* Philippe Berterottière

Gaztransport & Technigaz SA - Chairman & CEO

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Conference Call Participants

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* Jean-Francois Granjon

ODDO BHF Corporate & Markets, Research Division - Analyst

* Jean-Luc Romain

CIC Market Solutions, Research Division - Analyst

* Jean-Pierre Dmirdjian

MainFirst Bank AG, Research Division - Research Analyst

* Kevin Roger

Kepler Cheuvreux, Research Division - Research Analyst

* Martin Boeris

Exane BNP Paribas, Research Division - Analyst of French Mid Caps

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by.

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [2]

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Welcome, ladies and gentlemen. We are very pleased to be with you this morning. I would like to introduce to you the GTT's team with the -- our CFO, Marcus Haestier; and our Investor Relations, [Jean-Baptiste Figanni;] myself, Philippe Berterottière. Well, let's go through our presentation now for our 2019 results. GTT at a glance, as you know, we are a technology company, providing technologies for containment systems for LNG carriers. And we do that for more than 50 years. We've -- we are a public company on the Paris Stock Exchange, and we have more than 400 highly qualified people. Our figures for 2019. We've achieved a total income of EUR 288 million and a net income of EUR 143 million. We are a green stock.

GTT activities are mainly driven by environmental aspects. Our business model, it's pure technology. We -- technology and engineering activities. We have no direct emissions. We -- our technologies are improving performance from LNG carriers. We -- which translates into a reduction of the CO2 emissions from the LNG carriers. Over the past 10 years, the emissions as a result of the improvement of our technologies have been improved by 43%, not less than that.

Whenever we are working on LNG as a fuel, we are allowing ocean-going vessels to reduce their CO2 emissions as well. If they switch to LNG, they can do so by a factor of 25%.

Simultaneously, they will now have no sulfur oxide emission, no nitrogen oxide emissions and no particulates emissions. Whenever we are working on digital activities, you know that it's a main field of diversification for us. We bring to owners, the possibility to improve the efficiency of their ships. And so to reduce their emissions.

While key highlights. Key highlights for 2019. We received 57 orders for LNG carriers an all-time record. Orders for 6 very large ethane carriers, and 3 GBS, Gravity Based Systems for the very first time in our history. Have had additional successes in LNG as a fuel with containerships, new build and also a conversion, and we received 2 orders for bunker ships for delivering LNG to ocean-going vessels. We signed a license agreement with a new shipyard in China, Wison. We obtained approvals on the several technologies from classification societies, which demonstrates that our efforts to develop new technologies, to provide new technologies to the market is continuing unabated.

Just a week ago, we announced the acquisition of Marorka. And so we are continuing our digital journey with this acquisition. We proposed a dividend of EUR 3.25 per share. Which is an improvement compared to last year, and which is also above the guidance in terms of distributable result we gave you last year.

As far as our core business is concerned, we -- well, 2019 has been fairly impressive as we received 66 new orders while we delivered 30 ships. It means that we took more than twice new orders than what we delivered. So our order book as a consequence has significantly increased. So we have more than 113 LNG carriers to deliver which is giving us, we will see that later on, a fairly good view on the coming years, 6 very large ethane carriers, 6 FSRUs, 2 FLNG, 6 onshore storage/GBS.

The LNG outlook using the figures from BP. You can see that BP is very bullish about gas over the next 20 years with such a very strong increase of gas, a very strong increase of renewables. But gas is going end-to-end with renewables and we see a very strong development there.

LNG is going to increase even more significantly than gas. BP has developed different scenarios about the energy mix over the next 20 years. And whatever the scenario is, whether it's a rapid transition or what they say an evolving transition, a much slower transition, they see a very large part and an increasing part for gas. So -- and we are going to see that several times, gas is currently part of the solution as it significantly reduces the emissions. And we'll see that for shipping. For the time being, LNG is the solution, and there is no other solution in view.

When we look at the evolution of the demand out to 2035, we see -- we expect that the market is going to need an additional 250 million tonnes per annum. So it's quite huge over a 15-year period of time. We can expect, as a consequence, more FIDs for new projects and additional orders.

Here, we have liquefaction projects. So in green, on the upper part of the slide, you can see the projects, which have been already decided this year and 2019 has been a record year in terms of project quantities decided. We never saw in the past 71 million tonnes decided. And -- but in things ready to be decided there are plenty of projects. And they could be decided or not this year, depending. We are going to see that. Lot of things have been decided, but many things are ready to be decided.

When we look at what it means in terms of need of vessels to transport these LNG quantities, we see that it represents 85 vessels to other. Many have been ordered, as we know, but still, for transporting these 71 million tonnes, the market is needing an additional 85 ships.

Of course, the situation on gas can be looked at. We can see that currently, the gas spot prices are very low as a result of a mild winter and also the coronavirus situation. It has nothing to do with the contracted supplies, which represents about 70% of the LNG market because that is a long-term pricing based on the oil price. But the spot price is a very volatile market, limited market in LNG and prices are low. Well, we will see what are going to be the consequences of these low prices. It may facilitate the switch from coal to gas and the adoption of LNG as an energy for the production of ocean going vessels.

The demand last year has increased. Global demand has increased by 12.5%. China now is the third largest customer and may become very soon the second one. They've increased by 14%. You know that years after years, China is increasing very significantly its imports of LNG, and it continues. South Asia is -- has increased very significantly its quantities. India, Pakistan, Bangladesh. Japan and Korea who are the first 2 customers have decreased a little bit as a consequence of the restart of some nuclear power plants. European countries have increased very significantly their imports, and it's the case for U.K., it's the case for France, it's the case for Spain, it's the case for Netherlands. So many countries have seen their imports of LNG as a consequence of facilities put in place. And also as a consequence of favorable terms for LNG on the market.

We expect that China is going to remain a dominant region. I go there quite often, not so much recently, but the efforts are continuing to improve urban air quality, and we expect a sustained long-term growth by 2030. In fact, whenever China is doing so, they are significantly reducing their CO2 emissions. You know that the electricity, the Chinese electricity mix is highly relying on coal, coal-fired power stations. And whenever China is reducing its coal consumption by 1%, and uses LNG instead, it reduces CO2 emissions by more than 60 million tonnes per year, which represent to the total Australian CO2 emissions.

So it's huge. The switch at the level of the planet, the switch from China from coal to LNG, can represent huge quantities of CO2. And it's where we see that LNG and GTT, LNG is part of the solution, and GTT with the efficiency we are bringing is very much helping this worldwide effort to reduce emissions. So we are -- and we can see that our systems, the improvements of our systems are bringing this efficiency.

On this chart, you can see a system Mark III that we introduced at the beginning of the '90s. It has been revised several times. The latest one is, it's a version that we introduced in 2017, the Mark III Flex+. And the CO2 emissions have been reduced by 43% as a result of the improvements of our technology.

So it's very significant. And if we take into account the 188 vessels that we've delivered since the beginning of the past decade, it represents a saving of more than 5 million tons of CO2 every year. So it's a very significant contribution. We know that the target from the International Maritime Organization to reduce the CO2 emission from shipping by 40% by 2030 is achievable, thanks to LNG. So it's a major contribution.

So our expectations about our long-term estimates. For LNG carriers, we see between 2 -- well in the next decade, from 2020 to 2029, we see between 285 and 305 (sic) [315] units. It takes into account the replacement market. So it's now slightly higher than last year. For very large ethane carriers, we see between 25 and 40 units. For the very first time, we guide on the potential size of the ethane carriers.

You know that with shale gas in the U.S., you get a lot of associated gas and mainly ethane gas that has transformed the American petrochemical industry. And now there are so much ethane gas that they are contemplating exporting that. They did so already to India, some years ago, with the vessels we designed, and we signed for some last year for vessels to export ethane to China. And there are many projects contemplating importing ethane from America.

On FSRU, we reduced our guidance, and we see between 10 and 20 units. In fact, we think that the market could use fairly old vessels, not so much attractive in the current trading, too small, too -- consuming too much, needing too large crews. And they could use them, they can transform them into FSRUs. And it could have a dime on the FSRU market.

On FLNG, we still continue to see 5 units over the next 10 years and on onshore and GBS, we see between 5 and 20 units over the -- 15, yes, 15 and 20 units over the next 10 years.

So for new business, we -- well, that's our order book with the 8 new orders in 2019. So you can see that even though it's small, it's moving. It's moving. It's progressing, especially on the containership side. It's moving also because there are more and more bunker ship, some with our technologies, which is very important because it means that the infrastructure to deliver LNG is coming. And LNG-fueled ships are going to be able to rely on this infrastructure. So we are getting out of a chicken and egg issue on who should begin owners with ocean-going ships or energy companies with bunker ships.

LNG is a very mature solution, allowing a very comprehensive environmental compliance. In fact, LNG is in advance of existing and anticipated environmental regulations. And that, I think, is a very strong point. You know that on January 1, 2020, there was a regulation about sulfur oxide, forcing ships to have emissions lower than 0.5% on sulfur oxide.

But very soon, there are going to be regulations about nitrogen oxide. In fact, in the northern part of Europe, as soon as next January 1, and then to the rest of the world. LNG is complying with that. And soon, there are going to be emissions about CO2. And LNG is providing a significant reduction on CO2, while some solutions, which are contemplated for sulfur oxide like scrubbers are increasing CO2 emissions.

So business case. In our opinion, is right from now favorable to LNG as a fuel for large containerships. So you can see that. We can see a payback of around 3 years versus other solutions.

The conditions are on the white part of the chart. You may ask why the market is not going very quickly to that. Probably because people are still very much looking at the various prices and in particular, the price of oil, compliant oil, oil with oxide sulfur, allowing oxide sulfur, compliant with the current regulation. We think that as time is going to pass by, and as owners are going to realize that regulations on CO2 emissions are going to come, the point of switching to LNG is going to become more and more obvious.

And that's why we try to explain in this chart. When we see -- we see for large container ships, large containerships can save up to 30,000 tonnes of CO2 every year. So what it represents in terms of CO2, it represents 15,000 cars out on the road. It represents in terms of particulates 1 million cars; for nitrogen oxide it represents 2.5 million cars; and for sulfur oxide, it represents 30 million cars. So it's where you see that really LNG is part of the solution. Okay. We still have -- we reduce CO2. We still have CO2. But on all the other criteria, we are very significantly improving the emissions of ships.

On open loop scrubbers, we see that the areas where these scrubbers are banned are becoming more and more numerous. In fact, since last October, we had 4 new areas, Panama Canal, Malaysia, Suez Canal and Karachi. So that is a constraint, of course, for ship owners who have selected this solution.

So we -- our technologies are consolidating their penetration into the LNG fuel market. We -- when we look at the 90 LNG fueled ships ordered in 2019, a lot of them were very small one, and we never pretended to be able to complete them. And that's C-type cylinders, so to speak, C-type solution, which are retained there. So we always say that we are focusing on large containerships on larger ships. And we had some successes last year. Now competition, and it's something that we appreciate a lot. And there is a competition from technology named Type B, which is a prismatic tank proposed, which has some attraction. So well, we are confident that we can offer a superior offering. And it's, of course, always exciting to be in a situation of strong and tough competition.

For the LNG energy fuel market potential for GTT. We consider that the global market represent 2,400 ships per year. And what we are aiming at, it's 200 ships, big ships every year, the segment of the market we are looking at. So we expect that this market is going to take off over the next years, depending, of course, on different conditions.

Probably the most important factor for the development of this market is going to be the oil price. The gap is large enough then it's going to be a kind of no-brainer for owners to switch to LNG.

Let's have a look to our service activities. We have our larger offering of service activities. It's very helpful for LNG as a fuel for helping owners to go to LNG for their propulsion. We -- what I can say is our digital offering is keeping on improving, and we keep on developing new digital solutions. That's what we did in 2019.

So we acquired Marorka. We announced that last week. It's a new step in our digital road map. It's a leading provider of energy management and operational performance solutions to the shipping industry. They have more than 600 vessels where their systems are in operations. They fit with Ascenz, an acquisition we made in that sector in 2017 is quite perfect. Both geographically, one is based in Singapore and is very much looking at Asia, Africa and Middle East. The other one is based in Iceland and is very much looking at Europe and the U.S. and a good fit in terms of technology, so we are expecting -- well, we have no overlap there. And we are expecting to be able to conduct the integration quite quickly and quite easily.

If we look now at our strategic road map. Well, we present you something a bit different from the past years. But basically, we still stick to our strategy. From our core technologies, we developed in proposing new things. We apply our technologies to new objects. And now the new phase of our development is very much – well, keeping our position on existing technology, but also looking at what we can do in 2 fields, smarter shipping, as I was just saying and gas-handling technologies. And we think that in order to go towards lower emission maritime world, which is an absolute necessity in the years to come, this strategy is quite appropriate. So we expect to be able to provide very attractive solutions and technologies in the years to come, thanks to this strategic roadmap. Marc?

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Marc Haestier, Gaztransport & Technigaz SA - CFO [3]

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Thank you, Philippe. Good morning. I will take you through our customary guided tour of the financials for 2019. Starting with the order book, which is now standing at 133 units. In euro terms, we're talking of over EUR 700 million at 31st December, 2019. And you see how that spreads over in terms of expected revenues over time with already EUR 375 million of revenues under our belt, I should say, for this year and more than EUR 230 million for next year. So good visibility there on revenues. And this is, as usual, core business only. So it doesn't include services nor LNG as a fuel.

Now a few numbers. I mean, obviously, the strong level of orders we've had in 2018 and 2019 is feeding now through our revenue numbers with total revenue standing at EUR 280 million (sic) [EUR 288.2 million], an increase of 17% compared to the previous year. In terms of EBITDA, we have an EBITDA of EUR 174 million, up 3.3%, like on like, but you will remember that last year, we had a number of one-off effects. And in particular, at EBITDA level, we had the reversal of a EUR 15 million provision. So if we exclude that, the impact of this one-off item, the progression of the -- of EBITDA is 13.6%. The same applies actually for net profit which is at EUR 143 million, again re-treated or corrected for one-off impacts in 2018. The progression of net profit is 12.6%.

We have also impact on change in working capital. I mean, basically, growth in activity has an impact on working capital. More accounts receivable, more deferred income. And also, as always, with working capital, you can have cutoff effects. At the end of 2018, we had a lot of payments prior to year-end, which obviously had a very positive effect. In December 2019, you will remember that we had 8 orders, which were announced, in fact, in the beginning of this year, but were pertaining to really the end of 2019. And of course, the down payments of those orders were only received in the beginning of this year. So if you include these cutoff effects that explains the variation in the variation of working capital.

A word on CapEx. Although the numbers are quite similar, there are different impacts. In 2018, we had the impact of the acquisition of Ascenz, as you will remember. But this year, we have higher CapEx because we are spending some money on our new projects, notably the new buildings. Our staff is increasing. Our subcontractors are increasing. So we need to accommodate these people. So that generates a subcost. We also made special efforts on R&D. And so that implies also some capital expenditure for testing equipment. So we have these types of elements in CapEx.

A word on the cost base. And clearly, again, this is a story of controlled growth, so to speak. The increase in activity has obviously had an impact, a strong impact on subcontracted test and studies. So this is really all the engineers we need to produce all the design and engineering of our system. So an increase of 50%, reflecting the increase in numbers of orders. We've also had higher external cost. This is linked in particular to patent filings. So again, linked to R&D efforts, but also some fees from external advisers.

Staff costs are up 13%. And this is due, you have a tax -- a volume effect linked to the increase in the workforce, which is around 10%, and the rest being, I would say, normal salary increases. The balance, of course, by nature, you see this chart is almost unchanged from year-to-year with the staff costs representing about 46%. Of course, external cost 48% and a bit of cost of sales.

Finally, dividend. So we are -- the board will be proposing for the next AGM a dividend of EUR 3.25 per share which represents a payout of 84% of the consolidated net profit. So this ends my part, and I hand back to Philippe. Thank you.

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [4]

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Thank you, Marc. So our outlook, as far as the revenues are concerned for 2020. We're expecting revenues in the range of EUR 375 million to EUR 405 million. And an EBITDA in the range of EUR 235 million to EUR 255 million. And in 2020 and 2021, a payout of at least 80% of our distributable results.

Before leaving the floor to you for questions, I would like to say some words about the situation in Asia, but now everywhere in the world, about virus. We know that we are facing this situation in China for more than a month now, and we are facing this situation now in Korea. Now it's going most probably to be everywhere in the world.

Up to now, we did not suffer any delays in the various construction programs, we are having in the 2 countries where ships with our technologies are built currently, China and Korea. And of course, we are monitoring that. And if we have something which may impact our guidance, we will keep you aware of that immediately.

Thank you. Questions, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

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Unidentified Analyst, [2]

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I have a couple of questions, the first one is, just to know a little bit better, how is the ecosystem for digital players in the maritime industry? I mean after the 2 acquisitions that you have done, is the ecosystem really fragmented and there’s consolidation going on? The second question is about the engineers, what is the percentage of engineers in-house and the percentage that you have subcontracted? And that's all.

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [3]

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Okay. Well on the first question, yes, the maritime software industry is fragmented. We are not aiming at global consolidation there. We are just timing at picking things which are really making sense for what we want to build. So it may be a very small acquisition. It has to make sense. We don't think that we have the resources, for example, the human resources to conduct a major consolidation there. Nor that it's making sense, maybe a lot of them will disappear. What is key there is to be able to develop cutting edge solutions. That's what we are aiming at. Marc?

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Marc Haestier, Gaztransport & Technigaz SA - CFO [4]

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Yes, on your question. Well, we are an engineers' house. So we have, in our own staff, probably slightly more than 85% engineers. And in terms of subcontractors, the proportion is even higher than that. It's probably above 90%, if not 95%.

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Jean-Pierre Dmirdjian, MainFirst Bank AG, Research Division - Research Analyst [5]

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Jean-Pierre Dmirdjian, MainFirst. Two questions from me. First one regarding this new 10-year estimate regarding the very large ethane carriers. Can you talk about the capacity of those vessels. I believe it's increased quite substantially over the past last couple of years. Do you think there's room for those vessels to continue to grow in terms of the size of their tank? And second question regarding your recent acquisition of Marorka. Is it possible to have an idea about the acquisition price? Are we talking about single or double digit price?

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [6]

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Nice one. On very large ethane carriers, the first 1 we signed for in 2014 were of capacity of 92,000 cubic meters. The 1 we signed for last year was of capacity of 98,000 cubic meters. So an evolution, an increase. We are working on designs for larger quantities. There are some issues there, the facilities in the U.S. for exporting these ethane has to be large enough to accommodate large vessels. And the terminals in China mainly, have to be adapted also to large vessels. Anyway, we are ahead of these infrastructure decisions in developing designs for very, very large ethane carriers. Well, on the second question, Marc?

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Marc Haestier, Gaztransport & Technigaz SA - CFO [7]

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I think we can comfortably say it's single digit.

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Jean-Luc Romain, CIC Market Solutions, Research Division - Analyst [8]

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Jean-Luc Romain, CIC. A question about LNG as a fuel, you are mentioning a target of 260 vessels to markets that you will be looking after. Depending on the market share you get on these vessels, what could be the share of LNG as a fuel in your turnover in say 5 to 6 years, the time for the markets to take off?

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [9]

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Well, I would say that we would prefer to be cautious about that. I -- as we know, we are [boring] with the LNG as a fuel market for years. We did not guide you there. And we are still thinking, and even more than before, that it's the way of the future. And so it will take off at a certain point of time. I don't know when, this market is fascinating because sometimes you think that all the planets are aligned and then nothing happens. So we don't guide you there. I would say that the 260 is not exactly a target, as you say, it's the size of the segment we're targeting. But it can be quite significant in terms of turnover if this market is really materializing in a big size.

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Kevin Roger, Kepler Cheuvreux, Research Division - Research Analyst [10]

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Kevin Roger from Kepler Cheuvreux. Just follow-up on the LNG as a fuel, please. Basically, you have signed recently a kind of exclusive partnership with CMA CGM, you signed a few years ago, a first order for 9 units. You did not mention the commercial opportunity attached to this exclusive partnerships. So in your mind, what can you get with CMA CGM in over the next 5 years in terms of orders?

And the second question is related to the LNG cargo in terms of FID that we could see in the coming months. Basically, the Qatar is said to postpone the FID on the very large trend that we have. What will be the impact on your business for the next 2 to 3 years if it's continue to be postponed, please?

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [11]

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So on the first point, I'm not sure that we use the word exclusive in any of our relationship with CMA CGM. Did we? No. Okay. We have what we -- a visionary relationship, a pioneering relationship and extremely good relationship. And CMA CGM is a fantastic company, really a pioneer in LNG in the containership. And we have decided to -- and we've agreed to help them as much as we can in providing all the services, which could make sense for them.

So I think it's much more than business. It’s business, of course, but it's much more than business. It's demonstrating to the entire world and in particular to the containership world that the switch to LNG is something easy. So it's what we were preparing for, for a decade, in fact, in developing our platform of services. And we see that it perfectly applies to this case, whenever a shipowner would like to move to LNG.

So well, what I can expect is that CMA, I guess, should get its first vessel this year. And what we could expect is that after a while, the introduction of this new ship into their fleet is a success. As far as LNG is concerned, as far as the tank is concerned, as far as the training of the people, the adaptation of the people from CMA CGM is concerned. And that the entire industry recognizes that GTT is the partner of choice for switching to LNG.

Your second question about Qatar. You will remark that we never insisted too much on Qatar. And in fact, very often, we were saying while LNG, while it's very American currently due to the low prices of gas in the U.S. So you arrive, and you can see that thanks to the chart on prices we have in the presentation, we think that there is a lot of interest for buyers to look at American LNG. And it diversifies their portfolio of contracts with low contract prices.

So we did not took too much into our expectations Qatar that, in fact, their decision, well, I will not insist too much on the political situation. You know it probably better than me, but and a local situation has always been complicated. So -- but what I would like to say is that in 2019, Qatar has been -- has taken a decision of investment for the Golden Pass project in the U.S. They own this project, they are 75% owner of this project along with ExxonMobil. And they took a decision there.

So whatever -- I don't know what they're going to do, whether it's a delay of several months. Whether they have a major investment there, and they are happy with this investment and they may consider other things of that type. I don't know. What I know is that they are going to need ships for transporting the LNG they have decided in 2019.

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Marc Haestier, Gaztransport & Technigaz SA - CFO [12]

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I think there is a question on the call.

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Operator [13]

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And your first question comes from the line of [Renaud Soulier] from [Bogan].

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Unidentified Analyst, [14]

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A couple of questions, please. There was an announcement by Air Liquide about a week ago, about a system called Turbo-Brayton to capture emission on boats. To what extent is it complementary or competitive to LNG? The second question is, a lot of shipowners are delaying orders in containers and other kind of boats, waiting for IMO 2050. Do you expect that you will be able to...

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [15]

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Are there any questions from the telecom conference? Please, could you repeat your question?

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Unidentified Analyst, [16]

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Yes. The first question was about Air Liquide’s system, Turbo-Brayton.

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [17]

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We can't hear you.

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Unidentified Analyst, [18]

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Hello, can you hear me? Hello.

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Unidentified Company Representative, [19]

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There is another question here.

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Unidentified Company Representative, [20]

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Can you hear me? Could you repeat your question?

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Operator [21]

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(Operator Instructions)

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [22]

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Repeat your question.

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Marc Haestier, Gaztransport & Technigaz SA - CFO [23]

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I propose that we take a question here.

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [24]

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Okay.

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Jean-Francois Granjon, ODDO BHF Corporate & Markets, Research Division - Analyst [25]

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Jean-Francois Granjon from ODDO BHF. Two questions, please. The first one, could you come back on the free cash flow generation, done great, although the decrease of the free cash flow last year? And what do you expect for 2020? And the second question, after a strong growth for the charges last year, what do you expect for 2020? If we have a look on your guidance for the EBITDA, we see an improvement of the EBITDA margin compared to 16% last year. So do you expect lower growth for charges in 2020?

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Marc Haestier, Gaztransport & Technigaz SA - CFO [26]

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So on the free cash flow for 2019, you see the main impact was the variation on working capital requirement, as I explained earlier. Also, we paid a slightly higher dividend than the year before. So that did also consume a bit of cash, but those are the 2 main indications. For 2020, I mean, we're not guiding, obviously, on that element. But clearly, we have, obviously, in 2020, it would have an impact of a stable flow of orders. So that should probably limit variations in working capital going forward, but this is just an indication at this stage.

In terms of cost, indeed, we have mentioned already last year that we were increasing our spending or our efforts, I should say, our investment in R&D. So this has been the case in 2019. It will continue to be the case in 2020. And the -- if you like, the trend of adapting our structure to the increase in size of the company is also going to continue but perhaps at a smaller pace. But in fact, in a way, we are taking advantage of the current very good business situation to adapt our structure to this new size of the company.

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Jean-Francois Granjon, ODDO BHF Corporate & Markets, Research Division - Analyst [27]

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I have another question on LNG as a fuel. But for the LNG carrier's fleet. Today, they use partly boil-off gas and partly heavy fuel. If they were to reduce considerably or to eliminate heavy fuel, what will be the technical implications in terms of the boil-off needs for your technologies? And what could be the consequences in terms of additional demand of LNG consumed by the LNG fleet?

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [28]

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There are some vessels relying only on LNG. Modern vessels are relying only on LNG. And I would say that with the current boil-off, we are proposing, let's say, 0.085 on the Mark III Flex technology. People, owners are happy with the speed of 16 to 17 knots. If you reduce the speed, you have too much boil-off. And it's why we are contemplating the 0.07% solution which is making sense with lower cruise speed.

And so we are there in this situation for the time being, you reduce the speed, you reduce the emission, you reduce the need of boil-off. So we are fairly much, I would say, a little bit in advance of the needs of the market with our current offering.

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Martin Boeris, Exane BNP Paribas, Research Division - Analyst of French Mid Caps [29]

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Martin Boeris, Exane. I have 2 questions, please. First, since IMO 2020 came into force, have you noticed any clear new trend in shipowners’ preadoption to comply with the new rules? And second question, could you give us an update on the development and the current commercial prospects of your LNG Brick?

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Philippe Berterottière, Gaztransport & Technigaz SA - Chairman & CEO [30]

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Well, it's a bit the same question, in fact, because I would say, and I would say that since January 1, 2020 was known as being a date long before this year. But there is no particular trend we can identify since. Maybe the fact that the oil price is quite low in this period is not particularly helpful for having such a trend on the market. So well, we explained that in our presentation.

We, on the Brick, the same. We continue the promotion of this solution. We think that it may apply to some cases, and we think that in order to cover the wide -- the market, you have to look at different solutions. Each time it's a different set of constraints that you have to address. So Brick can be a solution for the time being, we are promoting that as we are promoting our various solutions. But we don't have contracts to announce yet.

Any further questions? Okay. Well, thank you very much.

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Operator [31]

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That does conclude our conference for today. Thank you all for participating. You may all disconnect.