Wärtsilä Stock

Good afternoon, ladies and gentlemen, and warm welcome to Wärtsilä Capital Markets Day 2026. My name is Hanna-Maria Heikkinen and I lead Investor Relations at Wärtsilä.

It's a great pleasure to welcome you here at our head office in Helsinki and equally to everyone joining us via the live webcast, wherever you are in the world. Thank you for investing your time with us. It has been 3 years since our last Capital Market Day analog has happened. Since then, Wärtsilä has become a more focused and more profitable company. We have completed our portfolio divestments and the energy storage joint venture and reach our financial targets we discussed in CMD 2023 and also the higher targets we set in April 2025.

Last week, we announced the new midterm targets. Today, we are here to discuss the whole part, how we will accelerate the value creation and how we will reach the new financial targets. Let me briefly walk you through the afternoon. We have four interesting presentations. We will start with our President and CEO, Hakan Agnevall, followed by Anders Lindberg, President of Wärtsilä Energy. This will be followed by our first Q&A session and a short break. After the break, Roger Holm, President of Wärtsilä Marine will continue. And after that, our CFO, Arjen Berends, will connect today's presentations to wider financial framework. We will close with a second Q&A session with all the presenters and Hakan summary of the key messages.

All presentation materials are now available on our Investor Relations web page. With that, it's my great pleasure to hand over to our President and CEO, Hakan Agnevall. Hakan, the floor is yours.

Ladies and gentlemen, it's a pleasure to see you all here. And we have a full house here today. And online, I think we have around 500 participants. So a lot of interest in vessel these days, which we are, of course, very excited about. So warm welcome also from my side. I would like to start today's session just taking a step back and reflecting it. I mean, first of all, I think we would all agree that the general economy is holding up in a surprisingly resilient way. In spite of geopolitical concerns, wars, tariffs. The economy continues to hold up. And that is the backdrop of what we see in the 2 industries that we serve in Marine and Energy. Because we are seeing more things happening in these 2 industries, the coming 10 years compared to the previous 30 or 40 years, and that makes us really excited.

On the energy side, we will see an unprecedented growth of electric -- demand for electricity. I mean, until 2030, just as 1 data point, the amount of new electrical -- demand for electrical energy will be equal to the current total demand of power in the U.S. today. We will add another us to the global power system, significant growth. Another trend is if we look at the growth and how -- what will generate the electricity to meet the demand it will be predominantly renewables combined with gas. Yes, there are other sources.

But if you look at the big things, so a lot of renewables combined with [indiscernible]. On the Marine side, the decarbonization transition is continuing. Yes, IMO did not agree on a global carbon pricing mechanism. But last year, the marine industry paying more than EUR 5 billion in fees to the European ETS systems. And we've also seen that the Chinese have introduced their emission, reducing carbon intensity with 15% until 2030. So the world is clearly moving ahead on the regulatory side. And we see that this will lead to even further focus on fuel efficiency and fuel flexibility. Now in that sale, we have a Green is not black it.

There are no single simple solutions. But as that, we have some of the major solutions that will support our customers and help our industries to make the transition in a way that is both environmentally sustainable but also financially viable. We are well positioned. And this is also why we see that our strategy focused on shaping the decarbonization of marine and energy will clearly accelerate value creation going forward. So when we see the opportunities, we see the fundamental industry dynamics. We have now raised our ambitions.

We have introduced our new midterm financial targets. And as you've seen, -- and that is based on the -- you could say, a little bit different dynamics in our 2 industries. We have now introduced separate financial targets for Marine and Energy. On the Marine side, we are looking to grow faster than the core market, our core segments. So we introduced the goals of mid-single-digit growth. We own a journey to continue to improve our profitability 14% operating margin as a target.

On the Energy side, we will clearly take an advantage from the unprecedented growth opportunities high teens in growth, annual growth and also continue to improve our profitability with a target of 18%. And -- on the group level, you could say that the growth target and profitability targets just simple math, adding marine and energy together. But then on the group target, we have a new group target, net profit to free cash flow conversion above 90%, clearly reflecting the strong cash conversion that we have in our business. And we keep our dividend target, at least 50% of EPS should be distributed as dividend.

Now this is a midterm financial targets. And we already received questions about what's the midterm, how long is it? And we said that it's 3 to 5 years. But I will also like to underline for where we are now and how we see the future. Our target is to get there sooner rather than late. So how are we going to get there? Well, we have, I would say, a fairly simple and straightforward way to achieve and reach our targets.

First, we want to capture significant growth opportunities on the equipment side. Secondly, the installed fleet, which will grow quite a lot the coming years. We will transform that into a growing life cycle business over many years to come. And finally, we're going to continue what we have been doing in the last 5-plus years and that is excel on execution and focus on execution. So when it comes to the unprecedented growth opportunities on the energy side, it's structural growth we argue. And it's about balancing power, with increasing renewables, you need the balancing power and it's data centers.

On the Marine side, it's above market growth, clearly, driven by our decarbonization of excellence, leading position and decarbonization and also the growth -- continued growth of our core segments, which is growing faster than the overall marine market. Then we have a long-term approach to our business. We want to build a customer base that is diversified, both geographically and industry wise. We will not put all our eggs in 1 basket. We will diversify our customer base. We have customers that we have been with for decades. We want to continue to evolve our relationship with them.

We have also new customers coming in. and we really appreciate the strategic relationship. And when we evaluate the business opportunity, we look both on the equipment and the service combined. On the life cycle revenues, already today, 50 -- more than 50% of our business is services. And yes, we're going to grow our installed base and generate service business well into the 2030s and beyond. But we also continue to move up our service value ladder.

We continue to increase the share of our customer service spend by more and more agreements and performance-based agreements. On the execution side, it's about price discipline and price realization. As earlier communicated, we will more than double our operational capacity and we'll do it in tandem with a resilient supply chain. That gives us also opportunity to drive operational leverage, project execution excellence. We leverage continuous improvement in AI. I will talk more about that.

And we will continue to generate strong cash flows Also, the focus clearly on organic growth, we will be very disciplined about M&A, bolt-on acquisitions and also very disciplined on capital allocation. So this is it. fantastic market opportunity. This is how we do it.

But before we go further into details of how we're going to do it, let's also reflect a little bit what has happened since we had the last CMD in 2023. And I would say that we have achieved a lot, and we are very proud about that. I mean we have positioned Vessel as an industry leader and achieved critical milestones that we set -- we are clearly a technology and thought leader in our 2 industries. We are #1 in the Marine high-value segments. We are #1 in medium speed [ediens] for energy. We have slimmed and focused vessel. I mean, we have divested in total 11 noncore business units. And now also lately, we have put our energy storage business in the JV really focus. We are on track of our 3 2030 decarbonization targets. I would say on all metrics of KPI coming on safety, customer success, employee engagement. We are going in the right direction. And 1 thing that we are really proud about, as an example, I mean, recently for the first -- for the second time, we were recognized as 1 as the world's best employers by the Forbes legacy. This is an external survey. It's 1 little testament, but we're moving in the right direction and these KPIs.

Then looking at our financial targets from before. We have achieved all of them and sometimes we have overachieved, which brings us now to a situation where we have close to EUR 10 billion of order backlog -- strong order backlog and a return on capital employed of 94%. So we have a team that has executed -- and this team, the Wärtsilä team is now taking on the new financial targets. The team is the same. It's a committed team, and we're going to execute. So it's the same team, but it's also the same strategy. It's really the Wärtsilä way and the different components around it.

Our purpose, which is really about enabling sustainable societies through innovation in technology and services, innovation and technology and service. Target position we have now raised our targets. It's the same strategic priorities as before, strong focus on execution and looking -- we are building everything on our cultures and customer success, passion and performance. So we have a solid base here to build. So it's the same team. It's the same strategy.

So what is new then the market is new. I mean we had unprecedented growth opportunities in energy, and it's a structural shift in our view. I mean, if you look at the thin tanks of the world, they're upgrading their forecast on annual electric demand growth. And statistics show that until 2030, we will add another U.S. to the power system in terms of electricity demand. And it's a broad set of drivers. It's about industry electrifying. It's about demand for cooling and heating going up, which require electricity, transport electrifying, -- of course, data centers we talk a lot about.

But I really like to underline -- it's a broad array of growth drivers. And in addition, there is 200 gigawatts of coal and turbine capacity that will be retired until 2030. So that is on top of the growth, so to say. And the other view is clearly that a lot of the -- both the demand growth, the increase in demand growth and the replacement will be provided by renewables and renewables combined with gas. And this is because this is the most sustainable and financially viable way to provide the electricity -- now the good thing is that as Wärtsilä, we are the #1 in medium speed, and it's for the energy sector, for balancing for data centers. And the good thing is also that our technology is very competitive for data centers.

Turning to Marine. We -- our goal is to go above the market equipment growth in Marine, which is predicted by Clarkson to be 5% until 2030. And it's really focused in 2 areas. It's the continued decarbonization journey. And we talked about it's clearly still in focus of the ship owners. -- lifetime of our vessel 25, 30 years. During that time period, regulation will change, fuel cost will change. and rising fuel and compliance cost that drives clearly focus on fuel efficiency.

Fuel flexibility, the future fuel that will not, in our view, 1 single fuel. There will be a number of different fuel. And there is uncertainty. And then there is clearly -- there is value for technology optionality -- and in both of these areas, fuel efficiency and fuel flexibility. We are technology leaders. We are the leaders in the industry. DCOs one. The second driver is our continued growth of our core segments. -- and the core segments, cruise, ferries, offshore. And they -- if you look on the Clarkson data, they are forecast to grow faster than the average marine market.

Now -- so new build, a lot of opportunity, both on energy and the marine side. And here comes, of course, the next every equipment sale creates 20-plus years of accrete life cycle service business. And I mean, already today, services is half of our business or more than half. In the coming 5 years, we estimate to deliver engines representing 25% of the current installed base, so a significant uptick. Now this is an important piece as well. the new fleets, they start to generate significant service business 4 to 5 years after the equipment order intake, 4 to 5 years. relate to the midterm target.

That is clearly at the end of the midterm -- or even after the midterm target period. That is of you need to consider. Now we have some interesting growth drivers in Marine and Energy. I mean 70% of our expected fleet additions, they will be in alternative fuels. And currently, if you look at our portfolio, it's about 25%. So the share of alternative fuels in our installed portfolio will grow significantly. LNG is 1 of the major drivers. And the interesting thing for the alternative fuels, we have 30% higher share of the customer service spending than on the diesel of the convention.

With the similar logic in energy, of the fleet additions will have service agreement compared to the average of the current installed base of 37% -- that's a significant uptick. And we will continue to move up the service value ladder. And we talked about that it's the same strategy as before. It's working for us. It will continue to work as for the future. And it's about bringing customers from transactional to agreements and then to performance-based agreements. And this is really working out. I think Marine and Roger will talk more about it as an example.

If you look at our agreement today, 40% of our agreements is a performance-based agreement. If you go back to 2023, I think we were at 28%. So the share of performance base is growing. So to sum it all up from a market perspective, strong opportunities in energy, driven by structural shift of energy demand driven by increasing share of renewables needing for balancing. On the marine side, the Deco journey continues. It's a transition that would take decades but it drives demand for fuel efficiency and fuel flexibility. And then for every engine we put in, it's generating a really good service business for a long time period. So demand side looks really, really strong.

Now what gives us the opportunity to win what gives us the right to win in the market. I think we are very well positioned. On the marine side, we are the leader in medium-speed main engines in marine. We are technology leader, clearly, in the high-value vessel segment. We are a leader in fuel efficiency, alternative fuels, LNG methane sleep hybrids, full electrics, we are pioneering ammonia, Clearly, a leader.

On the energy side, we are also a leader. We are a leader in the baseload and balancing power and energy -- and just to make sure not to upset anybody in the space of engines bigger than 5 megawatts. But it's not only traditional baseload and balancing, we are also clearly the medium-speed engine leader in data centers. We have the best fuel efficiency -- and we have clearly a technology that consumes very little water, which is a big topic in certain parts of the world.

The key thing here is also that the Indian technology, the medium-speed engine technology is a competitive technology in many -- I would say, all of the power system scenarios. Yes, now we talk a lot about off-grid power generation but there will be hybrid when you generate both of the data center into the grid, then you need the flexibility. And when you bring in more renewables to the mix, you need balancing. And we have a very competitive technology for all of those applications. So -- and on top of this, which is all related to equipment, services.

I mean, 57% of net sales year-to-date is services, where we are clearly continuing our strategy of moving up the service value -- and for instance, on the Marine side, as far as we know, we are the only ones providing, for instance, performance-based agreements in the marine industry. We are the lead. Now this is where we are today. We're not going to stop here. We're going to continue -- so how do we continue to evolve our competitiveness? Well, we're going to continue to invest in technology, to be a technology leader. We set the target to invest 3% to 4% of our net sales in R&D. -- you could say it's a little bit of a downtick from last period, so to say, where we were probably around 4% to 5%.

But in absolute term, it's rather stable, so to say. And it's not only investing in new fuels. It's about investing in fuel efficiency and operational efficiency, big operations in digital and AI as well. Then we are expanding our capacity, and we are more than doubling our capacity until the beginning of 2029. So all of this, as earlier communicated. And now we are giving some further meat on the bone. So we will have, going into 2029, 8 gigawatts of capacity. And that is split 6 gigawatts for SDH, and 2 gigawatts for our joint ventures.

So we are scaling up in our existing footprint with short paybacks. And of course, it's not only our scaling up. We are working a lot with our supply chain, with partnerships to ramp up and be able to meet the demand. And also, I really would like to underline. And for those of you going to Vasa, tomorrow and do take the opportunity. We have possibilities for further capacity expansion. So when you meet someone you're saying, I'm going to see if you can expand, please do and talk to our people about it. And I really appreciate that you take the time. It's a fantastic place to go. I hope you will enjoy it. And it's not only the place. It's a lot of people.

So thank you for taking the opportunity -- so we are investing in R&D. We are expanding our capacity. And then we continue what we've been doing for the last 5, 6 years. Execute, execute, execute. It's about price realization and price discipline, operational leverage, continuous improvement, excel in project execution. I mean you saw Q3, you saw energy. 17.5% EBIT. And you saw the drivers there and the third on the list was project execution excellence.

We got a question, what do you mean by that? -- is basically delivering projects with a lower cost than budgeted. And Anders and the team, they have done a fantastic job. We created a strong team and machine -- and we will continue to execute with project excellence. Then we're going to continue to be -- have a strong focus on converting our business to cash and be also very, very balanced on M&A.

Basically, the focus is on bolt-on acquisitions. And we're going to leverage digital and a -- and then you say, okay, everybody is saying in this. And I get a lot of questions. Okay. I mean you're selling so much energy generation to the data centers. But can you really make use of all this? I mean is it a hooks, I would say it's not. I see, we see so much opportunities in leveraging AI in Wärtsilä. And if we talk about that, and I'm going to talk about 3 areas.

The first area is how we develop our customer solutions. And it's really where we focus our AI efforts is on services. And the logic is very simple. You extract a lot of data, you combine it with our knowledge, you use the digital tools and AI and then you provide to the customer concrete value. uptime, reliability, reduction of fuel consumption, reduction of emissions. In this area, we are sticking out on. We want to be best in our industry.

And today, a concrete example, we have expert insight. It's about the control system, edge computing, cloud and the digital structure and the data architecture. -- and we are evolving our capabilities within that framework. But already today, this business is generating significant revenues on the performance-based side. The next too, but let me start with this one. It's more about our internal efficiency. And here, we want to leverage AI as a tool in our toolbox for continuous improvement, the lean journey. And there are many tools in the toolbox, AI is 1 of the tools.

Here, I would say I hope we will be a little bit ahead of everybody else, but of course, everybody is doing this. And I think that the key thing to be successful here is to have a strong culture around continuous improvement. It's not about having the fanciest tool. Then the third avenue that we are seeing opportunities for AI and Wärtsilä. And this is a fairly new one. is how we can use AI to reconfigure processes for competitiveness.

And it's basically taking an end-to-end perspective on certain processes within Wärtsilä and take a kind of wide -- white paper approach with how we would design certain processes today, -- so not adapting AI to existing processes using as a starting to define -- using as a starting point to define processes. And the key thing here, the aim is to reduce lead times, improve responsiveness and it's about efficiency, for sure. And we are building this on the platform of AAA Foundation, which is about data architect on which we have invested in setting up the governance for reagents, et cetera, and having the right tooling.

So is there opportunity for AI in a business like that Wärtsilä -- absolutely. And in some areas, we have started in some areas we are just early into. And AI is fine, fantastic too, but even more important, I would say, and something that I'm really proud about in the last years. is to continue to evolve our performance country. And it's about focusing on the customer, having speed in the decision-making and then work with continuous improvement. -- acknowledging that we are successful by making our customers success. It starts with the customer.

We have clearly the ship and delegated P&L. We want to give people leaders and people, the authority and responsibility to take decision, to be quick on taking the decisions and take those close to where the customer value is created. Now to build that culture, you need to care for people. People need to feel secure and trust. And I'm really happy with the feedback that we are giving in our employer -- I mean our service for our employers, where we are way ahead the global benchmark. So we have something here, and we want to continue to build on. This is also the foundation for working with continuous support.

So -- if I sum it all up, the best is yet to come. And I know this is a bold statement, but I say now, as I say before, we have a solid path to reach our financial talks. And once we reach them, we revised and we move forward. And the solid path is built on 3 very simple pillars: capturing unprecedented growth opportunities on the equipment side. growing the life cycle business that follows. Yes, there is a 4- to 5-year time lag, but it's going to come. It's accretive to Wärtsilä and then continue our strong focus on execution. And with the markets that I'm seeing with the team that we are having and then with the strategy that we continue with, I see really strong opportunities to accelerate the value creation going forward. Thank you.

And now I'm heading over the baton in the real race to Anders. And Anders and the team in energy, they have a fantastic year ahead. Go for it, Anders.

Thank you. Energy industry is experiencing a shift to significantly higher demand of electricity. And I'm confident that Wärtsilä's extremely well positioned to capture this opportunity. and to drive increased growth and improve profitability over the next years. This is true of the midterm, but also the long term because with the increased deliveries, we will also have a very positive impact on our life cycle growth. I will take you through the major drivers behind the structural growth opportunity.

Global growth in balancing, powering off-grid data centers and growing in service business as the installed base expands. Simultaneously, we will also be scaling our technology competitiveness and driving excellence in execution. We have an unprecedented opportunity ahead of us and full focus from our team to capture it. We have 3 structural drivers supporting the upgraded energy targets. The first 1 is to capture the unprecedented equipment growth. And this is to expand balancing data centers. It's also to differentiate industry-leading efficiency, reliability and also, not least, our track record as a life cycle partner. And then we will also scale up the industry-leading virtual platform.

The second driver is to grow in life cycle revenues that will happen over many years, where we'll clearly benefit from the expanding installed base, but also increase agreements and moving up the service value ladder. And the third driver is the increased value through excellence and execution, where we will continue to deliver excellence in project execution and we will capture the operating leverage with more deliveries that we have and drive continuous improvement. And then, of course, we will also leverage digitalization and AI, as Hakan mentioned. And as I said, we believe we will be able to achieve these targets sooner rather than later.

When I last stood here at the Wärtsilä CMD 3 years ago, I have been about 6 months into the company and into the role at that time. And at that time, Wärtsilä Energy had undergone a transformation with new organizational structure, new end-to-end processes and the rebalanced risk appetite. I talked about Energy's good foundation and having a stronger risk-reward profile going forward. Today, I can look back and say that we have really delivered on our targets and now have a much stronger business going forward.

And I will highlight some of the examples here, the stronger risk management, which has resulted in increased profitability of 3.4% since '23 operational leverage from growth, where we have increased the order intake with 142%, the net sales with 39% and only increased FTEs with 6%. We -- we have also increased with new build orders. We have a record equipment order book, 331% up -- we have a very strong growth in service with 39% in the order book up and a book-to-bill of 1.2 in service. And very important, going forward, we have agreement capture rates in the new build 1 deals of 80%, and that is very important for the service business going forward.

So to summarize, we set our focus areas. We execute well and we raised the bar. And as we will take the next step, we will continue to build on strong execution. Supported by significant market tailwinds, which I will talk about now. So we see a structural shift to higher levels of growth. And we would believe that this will be sustained even further than 2030. And there are 2 levers. The first is unprecedented electricity demand. So we see more than 1,000 terawatt hours annually as an increase. And this is the highest growth period in history.

The second lever is the retirement of the existing aging capacity. So we have coal and turbines being retired until 2030 of our 200 gigawatts. And together, -- these levers shape an incredible opportunity for equipment and then service revenue growth for Wärtsilä. And the new demand is not just data centers. We see here that we have electrification of industries, so steel, cement, aluminum, chemical industries being electrified -- this will be 36% of the increase.

Then we have cooling and heating where we can see air conditioning and heat pumps being added, and this clearly correlates with the growing per capita income. That's about 13% of the increase. Then we have the uptake in electric vehicles that we will see. And we will see a doubling of this until the end of the decade, 12%. Then you have a lot of other things for example, appliances and then, of course, the data centers. And if you look at the totality, data centers is 9%. Most of the electricity growth will be met to grid solutions. And of course, we know that the data center will be off-grid applications as well. But overall, this increase will be met by a mix of different technologies.

The increased growth in new electricity demand of more than 1,000 terawatt hours per year on average, will primarily be met by renewables. Renewables is clearly the cheapest form of electricity across most of the world today, and we see huge increases every year. And this we see on the middle graph here, while IEA have projected what's happening going forward. And we see that the wind and solar is what makes up the bulk of the growth. However, wind and solar they are intermittent and varies with time. So they need to be balanced by gas, and that's why also gas grows a lot. The increased need for flexibility and balancing is now understood by markets, the global energy organizations and by our customers.

This will mean a gradual shift from baseload gas technologies to more flexible assets. And this is why technologies like Wärtsilä, medium-speed engines will have a significant edge over other technologies in the next decades. The growth in balancing is global and diversified, more than 60% outside U.S. in the last 12 months. And we have also included deals in Brazil and Australia as examples.

The other big opportunity for Wärtsilä is the power of the off-grid data centers. Data center capacity is growing rapidly. So there is a lot of variation in the forecast. And 1 of the lines here, the line that you can see here is actually coming from Bloomberg New Energy Finance. Then you can also see that the off-grid share of data center is increasing and is estimated to be between 25% and 42%, again, depending on which forecast you look at. The off-grid portion is where verses main opportunities, and it will see a good amount of growth in the coming years with a proactive 50% CAGR.

Wärtsilä power plants provide off-grid baseload power to data centers today, but they are also a very attractive technology for all future grid scenarios. So we will see hybrid setups that serves the data centers, but also can sell to the grid. And then we will see more and more renewables being mixed in which means that we will move more and more to a balancing model to support the renewables in the grid. We have, from mid-2025, sold over 3 gigawatts of power plants for U.S. data centers. And we see an increasing opportunity in the U.S., but also globally.

And we have announced as you can see on this slide, a number of partnerships. In short, I would say that we are perfectly positioned for this market today. and for how it's likely to develop over the coming decade. Now I want to talk a bit about our technology. And why we are so confident that we will be a leading solution provider also when the market moves beyond lead times as the primary concern. Gas turbines are large and very well-established technology. They benefit to a certain extent from the incumbent advantage.

However, when you look at all the attributes of the different gas turbine and engine technologies that exist and look what matters to customers, you can see that engines come out on top. You have efficiency, ramp-up to full load unlimited starts, land use intensity, water usage as examples. We are not the only ones to say this also Bloomberg New Energy Finance recently came to a similar conclusion. And when they compare technologies to provide primary power for a 500-megawatt data center, they found that engines to have the most competitive levelized cost of electricity, all things considered.

At the moment, lead times are very important to customers, but competitiveness, operational flexibility and benefits like ultra low water usage are increasingly driving decision-making. And here, anions have a strong position.

To summarize, when the market moves beyond the lead times, we are strongly positioned on LSE and crucial attributes. And this is why we are so confident in the long-term growth. There are also differences among the engine technologies or high-speed versus medium speed. High-speed engines have smaller unit sizes, and this can give them a CapEx advantage in small projects and applications with very few running hours. -- like backup power. This is clearly for high speeds. But when you look at primary power for typical data center projects today, and here, we have compared to 400-megawatt example. We can see that the footprint, the fuel efficiency, reliability, makes the medium-speed engines to better choice.

And according to our analysis, high-speed needs 42% larger footprint for a 400-megawatt plant, and Wärtsilä solution needs only 1/5 of the units and has up to 5% lower. According to our own recent study of data center power, which we call unlock power and unleash growth. medium-speed engines have the lowest total cost of ownership for gas-based generation. And here, we show the comparison for U.S. data center, but we have also done the same comparisons for Australia and U.K., and it shows the same things with slightly different numbers.

This study was published yesterday and consists of 2 white papers. The first white paper is technical commercial analysis of the options available for data centers, so focusing on 1 data center. The second white paper looks at the system level and how data centers can create tomorrow's power system flexibility. In other words, how off-grid power for data centers can solve the future grid bottlenecks and enable renewables in the system. And you can access these 2 and come to our landing page and download both of these if you use this QR code.

We have a stellar technology, and we are scaling up the next platform in the 46TS, which will strengthen competitiveness even further going forward. what I showed on the last slide was based basically on our existing platform today. We continuously invest in R&D in Wärtsilä. And this is a great example how we can turn our know-how into the next-generation performance for our customers. So we have significantly increased power output -- we have world-leading efficiency. We have excellent performance in hot climates, and these hot climates exist in Texas, Australia and other places and also with high altitudes.

We have rapid response to fluctuations in the power system, and we can already operate on a number of different fuels today, both liquid and gas. And also when we get more renewables into the system, we can also provide the support and stability with our circronas condenser application.

Moving now from technology competitiveness to the here and now, meaning our lead times and our order book. We have a strong order book that gives us a very good visibility for the next few years, also including the visibility of the attractive service revenues beyond the midterm, which I will talk more about shortly. As you can see from our equipment order book on the graph here, our lead times are lengthening. We have a lot both in '27, '28 and '29. And if you come with new customers that comes to us today, we will be talking about 2030.

What is not fully visible on the graph is that this is not it. We have committed and reserved capacity for '28 and even more for '29, that is not yet in our order book. It is signed orders that may be waiting on down payment or NTP but it's also capacity held for active customer negotiations or where customers quoted to their customers. We estimate that our deliveries from now until the end of 2030 will be approximately 13 gigawatts. 6 gigawatt is already in the order book which leaves 7 gigawatt that both is noncommitted in 2030, but also that are committed in '28 and '29.

The new gigawatts that we will deliver will come with a significantly higher service agreement coverage, where you can see 80% is what we have going forward. compared to our existing installed base that have 37%. This significant addition in new deliveries coming with a high agreement coverage is 1 of our key levers for the long-term growth in services, growth that will, for the main part come after the period -- over the midterm targets period. As said, the new deliveries with high service agreement coverage is 1 of the key levers for long-term service growth. Every equipment sale creates robust life cycle for over 20 years.

A second lever is what we expect with the new deliveries to be higher on the service value ladder and have a higher share of the customer service spend. Together, these 2 levers mean that we expect more than 50% higher life cycle revenue per kilowatt for the new gigawatts to be delivered compared to the current average of our operating installed base. This combined shift in increased agreement capture with the higher on the service value ladder will boost our life cycle service business for years to come. And the main positive impact is expected after the midterm growth and profitability targets.

If we dive a little bit deeper into the second lever, increased share of service spend or as we call it, a Wärtsilä service value ladder. We offer a range of services and agreement types to our customers to meet their very varying needs for services support and guarantees. What we see with the customers higher on the ladder is that we create increased value for them, and we also received very positive customer feedback in general. But we see that on the higher levels of the staircase, we also have higher Net Promoter Scores from our customers. Moving up with the service value ladder. It's also a positive driver for our business with 3x to 5x the share of customer spend.

We also see that we have good progress with agreement coverage, which has increased to 37% today, and 50% of the increase is coming from the highest level on this staircase the outcome-based agreements. And also a testament, I think, to our customer satisfaction is also our renewal rate, which is higher than 90%. And Hakan talked about how we use AI to develop our customer solutions and support the growth of our service business.

In energy, we leverage AI and digital capabilities by predicting the maintenance needs by looking at the plant data and combining that with our expert know-how and AI to make predictive maintenance and avoid downtime. But we can also help our customer and especially the customers that are in balancing service to operate in a way that they can catch the most valuable hours because the prices on the different hours vary a lot. So if we can make sure that they can actually be up and running when they can get most money for an hour, we can plan the maintenance when the costs are much lower on the customer side.

And a great example of such an agreement we have with Ambar Energia, in Brazil, where our financial terms are linked to the plant performance. That's what we do on this performance-based agreements. So we are in an excellent position to drive both growth and profitability. And if we look at some of the highlights here on the growth side, if I start with that on the equipment side, we have already an order book that is 331% higher than we had in 2023. So a lot of growth and very good visibility from the existing order book.

On the service side, we have increased up to 37% agreements. And as I said, going forward, we see 80%. So clearly, there will be growth. On profitability, we have increased the profitability with 3.4% already. And we have also seen that on the working capital, and this is without the advances we have improved that with EUR 150 million. At the same time as our net sales have increased EUR 600 million. So this is also a testament to good project execution. And if we also look going forward, we also announced in Q2 that we have increased our order book margin with 500 basis points and the development continued to be positive

So to wrap up, I will return to our 3 structural drivers for growth and profitability, capture unprecedented equipment growth grow life cycle revenues, which will be going on for many years and also increase the value for excellence in execution. And Wärtsilä Energy is in a very strong position to deliver on our upgraded midterm targets. And I have highlighted throughout this presentation that we believe in further value creation beyond the midterm, driven by strong market position, technology competitiveness and a significant long-term service growth. Thank you. Welcome up stage again Hanna.

Thank you, Anders, and thank you, Hakan. So now we start our first Q&A session. [Operator Instructions] So let's start with the first question. Maybe Daniela.

Can I actually ask 1 clarification sort of 1 of the numbers before my real question because I didn't understand when you divided the 13 gigawatts into 6, which are already in the order book. 7 which are outside, but you said some are committed, some are not committed -- I thought you didn't take reservation slots, so I wasn't quite sure what you meant by that.

So we have 13 to minus 6, so it's 7 that remains, so to say, that is not in the order book that we have capacity for up until the end of 2030. And then I said that in 2030, most of this capacity is free. So meaning that if a new customer comes we will direct them to the 2030. For what is not in the order book and what is not free is what we still haven't booked in '28 and '29 in we have not slot reservations, but sometimes we have signed a contract, and we have not received the down payment or the NTP foresee. .

So it's not in our order book, but it's committed or we have a customer that has -- that are waiting to sign the PPA. So they have agreed with us that they have these slots, and we have, so to say, waiting for them to be able to commit to us. So it's not a lot restoration, but it is a commitment or we might be negotiating the contract, and that can sometimes take 30 to 60 days for that. So

Yes, very clear -- got it. -- my question was regarding you had the comparison between high speed and medium speed. And we've heard some of the high-speed players saying they are going to go back to medium speed. Some had 8 years ago, some don't. Can you talk a little bit like technologically, what are the barriers to entry for them. They already have the data center customer relationships, I guess? And I guess, the same goes if you wanted to go to high speed, what would prevent you from going in if you can talk about that?

I talked about the gas turbines being the natural choice and the incumbents on to say. But also the high speeds, you're absolutely right. If you look at data center segment, the high speeds they have been doing business for years with data centers because they have always done the backup, so to say, when they were a grid connector and smaller. What happens now is, of course, that the data centers are much bigger and need primary power because it's off-grid. And that's where we have an advantage with the medium-speed technology, and that might be, of course, why some of the high speeds also then take up the medium-speed technology because there is an advantage in efficiency, in maintenance. You saw on the number of units, the area that you need for installing your primary power. So there are upsides on that. .

But -- and I fully agree. And don't forget that we talked about that before. I mean, we were not -- as Wärtsilä, we were not in the data center business 2.5 years ago. because the data center business was completely different. I mean if you built in a data center in those days, you were looking for 20, 30, 50 megawatts. In the U.S., you signed a PPA with the utility. So you were hooking up to the grid, -- and then you bought some high-speed engines on counter pillar cabins as a backup if the grid failed. And our ends are too expensive. I mean, they do the best and they operate a lot. So that's why we were not in the business. So what has changed is the size of the data centers are growing with AI. And now it's very much more difficult to contract than sign a PPA for 500 megawatts.

So now you need thermal generation with high uptime, higher liability often off grid. And this is why the market is moving into our sweet spot. And we know that some of the high speeds, they are moving up, revitalizing their old platforms I mean right now, and I said to you in the audience here in the predo,you can sell any technology. The market is so hot, you can provide any technology because the core decision parameter of customers right now is delivery, -- but many of these technologies are kind of revitalizing -- they are a little bit old. They are not stellar and fuel consumption, et cetera, et cetera. And that's why our message is right now, any technology because of the strong demand. But when you can sell it. But when it balances out, it will be going back to the good old parameters of fuel efficiency, water consumption, the -- and in those parameters, we have the leading technology. Also, you should recognize, if you look at the W46, they are the 20, 23 megawatts. Some of these revitalized platforms, they are 10 megawatts. So the size is much, much smaller, so to say. please.

It's Uma from Bank of America. I have a question regarding the 80% capture rate that you communicated. I was just wondering how -- how should we think about the transition from 37% to 80%? What drives that? And what are the margin opportunities associated with that? -- yes, something like there will be great.

5 So the 80% we have defined on having a service agreement before the COD. So that is the definition of the sort of operation startup of operation yes. So that's how the 80% is. And yes, it is considerably higher than what we have had in the past. And therefore, we will be able to increase our service business. And this has to do a little bit about -- 2 things, I think. One is clearly that type of customer signing this today. If you say data centers or IPPs, independent power producers, -- they don't have a big organization and tradition to run these things.

So they want to maximize the reliability and availability of the plant that is their goal to the lowest possible cost, and they don't have an organization themselves to do that. So there, it's a great opportunity for us to do this signature -- and then the other thing is that what I mentioned to you that in 2023, we had a new organization in energy where we said that let's now focus not only selling new build and then we have another part of the organization far away that is doing some service. So we said, let's now look at the end-to-end Energy is there to serve the customer end to end.

So we are working closely between the service and the new build. So we work with that from the beginning when we start the discussions with the customers. And therefore, we are also able to sell much more service agreements early than we were in the past when we came in and knocking on the door long after the plant started up. So I think it's also due to that change of how we work with the customer.

And building on -- I said Anders and the team, they've done a fantastic. I mean we have had a complete market breakthrough on services in the U.S. And as you know, we are putting in now a lot of new capacity. So that's why we are so excited. And on your question on margins, et cetera, it will be accretive to that clear. .

Akash, please?

Akash from JPMorgan. My question is more on long-term demand because like when we hear from you and your competitors, everyone is kind of sold out by 2030, and now discussions is going more -- and here, I mean, 1 fact is that you are going to deliver 13 gigawatt by 2030. And when we look at each of these large gas turbine makers, they have more than more annual capacity than what you're going to deliver over the next 4, 4.5 years. So the question I have is more like when we look at these slides on economics and I think when somebody is planning 6 years in advance, probably they can focus more on economics then.

So when it comes to, let's say, if we have to think about your market share between 2030 and 2035. Do you think there is a big potential for Wärtsilä to gain market share based on the economics based on the lower water usage and all the things that we have heard today? Or is there anything that is keeping on hold. And if you expect to gain market share, then when should we expect to hear the next announcement on capacity increase

No. So I think, as I have explained also in the presentation, that we are very well positioned when the market will not only be about lead time because of the attributes and also because of the life cycle cost. Today, I think that the life cycle cost is not the primary driver for the decision. It's -- since the value of being late with the whole data center is so much higher. So today, it's clearly on delivery time. But I think that when this change, and we can discuss when this will change, and I don't know the answer to that, but I think that there will be a change going forward since capacity is added to the market all times by us. and by our competitors as well, that will become a balance in some point in time.

And then I think that we are in a very good position to defend our market share or even increase our market share, which then will, of course, require more capacity if we increase our market share.

I mean, I think -- I think this is also why we are so excited is this is a fantastic opportunity because more and more customers that are normally very used to gastrobiles. They try the engine. And maybe we have failed in the past, it's the same message, but maybe we haven't been able to get through -- but now when people try the technology, and they see that fuel efficiency, flexibility is real. They like the new candy and they come back. And then we see that because we have repetitive orders with customers that clearly acknowledge the benefits.

Now coming back to what I perceive to be the core of your question, which is very relevant. If you're so confident on the long-term expansion, why don't you build even more capacity? And our view on capacity building has been -- we take this a step-by-step approach. And you clearly saw in my slides, we have opportunities to further expansion, but we take it step by step. And as I said before, and I know you will be going to last, I ask our people then what they say -- so we have opportunities. And as we will get confident and we get the supply chain in place, et cetera, we -- that's certainly opportunities going forward.

So maybe I'll add 1 more thing. Because 1 thing is, of course, about competitiveness and the technical attributes -- but I think that what also customers do discover and I heard that directly from 1 of our customers that are using several technologies. They said, "You are quite rare. You deliver on time. that's quite unique. He said without us even asking about that. And that is coming back to what Hakan mentioned in his opening is about execution.

So besides the technical I also think on the execution side, we want to be known for the ones that you can depend on and that delivers on time, and I think we are that in the business and the more customers that experience that or experience when it is not like that from others, the stronger we will be.

Please?

Sebastian Kuenne from RBC. I have 1 clarification question and then a proper question. On your Chart 14, you show the increased life cycle revenue per engine, I'm not sure. It says here, it's based on the higher capture rate and also more spend per engine. But if I exclude this higher capture rate going from 37% to 80% I would get a much larger number than 50% growth. So is the spending per engine then going down -- not quite. .

So first of all, -- this can be per kilowatt per engine or per plant. It doesn't matter what is the base of. It can be all 3 of them. In all those cases, it will be 50% more with new than it was historically.

But it includes the jump of the capture rate as well. It includes the capture rate going from 37% to 80% and it also includes the service ladder as well.

Okay. I will have to make some calculations there. My second question and the proper question is the service income or service potential you get from the energy side, how does it compare to a standard marine engine because the I would say the wear and tear on the Marine engine is much higher, you need more preventive maintenance. So how should we understand this service development on energy compared to Marine?

So in very simplistic. I mean, we have 2 applications on the. We have baseload and balancing. Baseload 24/7 in a year. That's very similar to Marine. I mean, marine vessels are not at sea all the time. So I would say in terms of running hours and therefore, spare parts and service is very comparable on balancing where there is no formal definition for balancing, but we say loosely define 3,000 to 5,000 hours. Of course, the running hours are less, and there are less spare parts because of that. But -- and this is also why in the previous period because there were concerns and maybe there are still concerns if you have a lot of balancing power, will your service business go down? No, because we move up to service value line, where we increased the share of the customer service spending. So I mean power plants that run 24/7. It's like -- it doesn't matter if they are on land, they run continues.

Then the other thing, of course, with the energy application is that we have the engine, but then we have a lot of critical modules around the engine that we also deliver. So there is much more than just the engine to service for us. So we can also service all the equipment around the fuel equipment, cooling equipment and all the other models that we deliver around, which is also a fundamental part of our delivery.

And also this argument, because for those of you who have followed us for a while, I think a couple of years back, we have the service for when many of you are calling in because there was a lot of balancing less hours, what we'll do to your service business. But we could also show that if you look at the average operating house in the installed fleet in still going up. And then can that be if you're balancing in this increase. Now it's going to be a lot of data centers. So Pendo has won back. But what happened though, and that's still very relevant to coming back and like this customer install running, okay, initially, we're going to run it for 3,000, 4,000, 5,000 hours. And then they started to run, and I know this in Germany, for instance, a very concrete example.

And then they say, "Wow, -- this plant is the most energy efficient in our whole fleet of gas turbines and other things. Yes, we thought it should be running like balancing. No, no. We run it as spaceload. -- we make a lot of money. So that's why people -- customers that have installed on balancing power plants, sometimes they see the good candy and they run them even more.

And not only that they run more, they are also actually able to catch the price spikes. So if you go to Texas, for example, you have a lot of variability on the prices. And if you can catch the price banks, meaning you can start up very quickly and shut down when it's over, so to say, you can catch that. And I was together with our team in the U.S. here a couple of weeks ago when we met the customer and the guy had just been on 1 of the customers' gas turbine plants and he had just changed over some months ago.

And he said, with these engines, we can really catch the most price priced minutes, so to say. And by that, we can make much more revenue. And therefore, we run much more hours than we had predicted because they are valuable.

That was a little bit -- that's the balancing narrative still there. But of course, now when we look forward, data centers, it's high uptime, high reliability, 24/7 in -- that's why we say it's a significant service business, the data center business. And in data centers, we are also moving up the service value ladder, i.e., we have high content of the service budget of the customer.

Now let's take a couple of questions from the chat. So a question regarding midterm margin target. Why does Energy's midterm margin target stop at 18% despite capacity more than doubling a strong demand and higher service attachment, what limits further

[Technical Difficulty]

Questions from the -- so question regarding Nest's midterm margin target. Why does Energy's midterm margin target stop at 18% despite capacity more than doubling a strong demand and higher service attachment, -- what limits further

[Technical Difficulty]

They are right in the middle of this. If I take a different perspective on the question. So I would say we have a lot in our own heads. We have the right products. We have the right team. We are building, we are expanding. We should be humble in the sense that expanding a supply chain and building up, it has certain risks, but I think we have a strong team on the execution side. So what are the market risks? I would say that as we try to convey our view is that the fundamentals are solid and they are structural. Now the general economy and then we can all have a view. I mean, if -- let's not hope for this that there is significant damage to energy infrastructure in the Middle East or something we get inflation rates that really but, of course, that will affect the interest rate, et cetera. I would -- I mean if you -- what are the major risks around this story around that. That's the major reason. Our own execution technology, it's -- we feel very confident -- and that's why we reiterate, we are on a solid path to reach our financial tons..

Now let's continue with the questions from Samira, please on the first row.

Hello. Thank you for presentation. My name is Oleg Marias' from Evli Fund Management. My question is regarding your midterm target of heightened growth for Energy business. Can you provide some kind of color what are these end markets which you expect to grow? Is it like data centers mainly? Is it like industry? Just to get some understanding as a current picture. .

Yes. So the overall electrification is growing as we have shown a lot. And from that, we get the balancing applications. That is 1 that will grow with 25% CAGR so clearly higher than the high teens. And then we have the data centers of grid, which we have seen in the forecast that will grow with 15% CAGR. -- depending a little bit on which forecast use, but that's what we see. So you can say that the combination of those will be the high teens that we will grow with .

And there is a little bit of a normal base load as well, which is not growing as fast. So if you mix it all up, because I know some of you would make the calculation, then it adds up to this . High teens. .

But the 2 big ones is the balancing and the data center and then we have a little bit of base load, which doesn't grow that much.

Antti Kansanen in SEB. I had a follow-up question on potential capacity increases or the curtailments today. If you like to expand your delivery capacity. How much is it due to Vasa -- and how much is it for your suppliers? And maybe more in detail, how do you work with your suppliers to incentivize them to grow the capacity, how much you invest yourself, how much is based on your kind of suppliers' willingness to expand? And do you need to provide some type of guarantees for them? .

So obviously, when we need to expand, we both need to expand our own in Vasa.And our supply chain as well. So it's both, of course, proportional. And we also, as I mentioned, have the other modules in energy around the engine, but we also need to expand which we are making a lot of them in India in copper today. It's our own factory down there as well. But talking about the supply chain, yes, so we have worked with our suppliers a long time. So I think it's a lot about trust working together a partnership. So we, of course -- the first thing we do is to tell them about how we see the market and how we see our capacity developing.

And invite them to be part of that expansion, which is, of course, interesting for them as well. So that's normally how we do it.

And if I complement. So part of the investments is clearly in Vasa. Part of the investments is with our suppliers. We don't have 1 model, each supplier is different. I mean the public example and that we announced in December last year is a strategic operation with our engine -- the big Indian book provider, simple cap. -- where we announced strategic collaboration for several years to expand the capacity. Now simple camp we made public because there was a mutual will. Those type of agreements, we are formulating with other suppliers as well. We just don't make them public.

And there are -- some of them, the suppliers financing themselves. Some we are helping cofinancing.several different models. But I would say and I give a lot of credit to our supply chain team because we have been early out there working with our core supply chain we have been stocking electric circuits. We all know that's a big topic. So -- and also remember, during COVID and when we came out of COVID, we had a very robust supply chain. And I think our supply chain team has continued to work on that. It's not easy, but we are we are doing a structured work.

And it's really, as Anders was saying, building on the long-term relationship that we have with many of our core suppliers. Anders, you wanted to say

No, I would just say that the normal is that the suppliers invest in their business and we invest in our business. It's in some specific cases where we would help suppliers to invest.

Capacity expansion now, what would be would be taking the longest time? Is it the suppliers? Or is it the square footage in Wassa? .

There are suppliers that have longer time and shorter time, and we have our own time. So I don't think it's both ourselves and the suppliers. So I don't see a big difference on that. .

Then there was a question on the back.

Just sticking with the topic of capacity expansion, I think you partly addressed this in the previous question, but I realize you want to take things step by step, but just wondering what would be the trigger that you would need to see for, I guess, the next step. Is it just a matter of going for the supply chain to ramp up? Or would you also need to see a further step-up in demand in terms of visibility, in terms of the ores commitments that you've got. And if you can also talk about if you assumed any .

No, I think I can answer generally that we will -- I mean, we, of course, see a very strong demand. And as I also mentioned to somebody asking me. I mean all our customers, we see continued strong demand. I know you can read happening and should we stop development of AI. But I can just say what we see from our customers is continued very strong demand. We don't see the hesitation on the contrary. We see very strong signals from the market. The other thing is, as you already mentioned yourself? -- is, of course, how much of the capacity do we have available?

And when we see that capacity start to go down, that's also a clear signal that we need more capacity. So I think that that's from the demand and capacity side. Then, of course, we also need to work with our own SDH and our facility also in India as well as with our suppliers to make sure that we can execute.

That is also work we need to do. So it's not just to say, yes, demand looks good. Capacity is running out let's take the decision. We also well in advance of that decision, start working with our suppliers and our own teams in Apinvasa to make sure that we actually can deliver on such a plan as well because that's key. When we go out and say that we have taken this decision, our customers will ask for these slots and then we need to be able to commit so -- and when we commit, we will deliver. So it's quite a lot of work. in front of taking such a decision, not just looking at the KPIs and say go.

So we have a strong view on the market, what we are getting formulated there, how far out can -- are you relevant depending on when you can deliver. I mean the demand is there. But if your delivery times are stretching too far out, it starts to be too long. But the underlying demand, timing of that -- and then it's ramping up our supply chain. I think these are the 2 components. Because as Anders highlighted, we want to be on DNA of executing. Towards our customer and others under promise and over deliver.

So we have time for 1 last question before the break. I think there was a question on the back earlier or then on the first line.

Will Mackie from Kepler Cheuvreux. I have a question about how you've experienced demand and how you're seeing it in the market related to your order book and how you expect it to deliver. I mean firstly, can we level set provide a bit more color on how your order backlog breaks down between the customer types that we've discussed today. And then thank you for the detail about the 500 basis point expansion in the backlog margin, but you've talked about another 7 gigawatt that is in signature in the near future. Well, medium term, how would you expect pricing or that backlog margin to develop as we go over the next couple of years?

I think we will not continue to give updates on our backlog development. We made it in Q2 as an exception that we have increased it with 500 basis points -- and I think I said already when I presented that the development continues to be good. That's what we can say.

And the future will also be a mix data centers, balancing power, baseload power. So it's a mix. As we've talked about, we are building a diversified customer base. within energy, but also between energy and marine because we are in the business for the long run, and we know that certain geographies can be stronger than they are weaker. So diversification and long-term growth and analyzing both the new build equipment and the overall life cycle. I mean, this Anders analyzed business opportunity, he looks at the holistic business.

Thank you, Hakan. Thank you, Anders, and thank you for all of the excellent questions thus far. [Operator Instructions] So before going to the break, I would like to introduce some of the Wärtsilä leading experts who are here with us today, and this will be available during the break. So please take the opportunity to meet them, ask questions and continue the discussion. We have grouped them by area of focus. So starting with our marine service team. Matto Natali, Vice President for Strategy in Marine, Andrea Morganton, Vice President, Perforce Services, Marine, Stefan Wiik. Vice President for parts and field service in Marine. So together, they can speak of how we support our marine customers from strategy to performance services, parts and field service.

Next, our Energy Services team. Marcus, Vice President, Energy Services and Sanna Silander, Business Directors, North America Energy. Marcus and Sanna are the right people to talk about our service offering for energy customers, including data center customers. And finally, the experts who can discuss the engine as the winning technology for power generation; Malin, Vice President, Strategy and Business Development in Energy. Risto Baldanios, Vice President, Americas Energy; Eric, Director Technology, Energy. So Marlin can share the insights of our strategy and business development in energy, Risto has a deep knowledge of Americas market, and I also want to highlight that Risto had good relations and knowledge about our data center customers. Eric can take you through the technology perspective.

And for online followers, we have prepared a short videos from the same experts. So now we will take a short 30-minute break. Please be back at your seats at 4:00 finish time. We will turn to the seas with Roger Holm, who is leading Wärtsilä Marine. Thank you.

[Break]

[Presentation]

So welcome back from the break. And now we are going into the exciting world of Marine. I meet frequently shipowners from different segments. And for a ship owner today, the next 1 vessel lifetime, meaning 25-plus years is increasingly about optimizing your financial performance. And as a shipowner, you are on a journey where

[Technical Difficulty]

Our upgraded targets are based on 3 structural drivers. Number one, capture above-market equipment growth. We see a positive outlook in our core high-value segments. We see a decarbonization driven demand for efficiency and fuel flexibility that plays to our technology strength. Number two, to grow life cycle revenues over many years. We see a growing installed base with increasing technology complexity.

We see expansion of service agreements moving up the service value ladder and more towards outcome-based agreements. And we see retrofits accelerating towards the end of the decade. Number three, to increase value through excellence in execution. We see an operating leverage through increased volumes, both in Marine, but also in combination with Energy. And we are continuously looking at our internal operations to see how we can improve. And we see an increasing part coming from both digitalization and AI where we can get more value through.

And in the end, of course, also through disciplined price management. This is then leading to our upgraded marine targets with a mid-single-digit annual organic net sales growth and 14% operating result post IFRS 18, that area will come back to later on as well.

Before going into the future, let's look a bit at the history, and we have had same strategy for years. And the strategy has played out very well for us. If we look at milestones achieved since last CMD in 2023, we are #1 in 4-stroke medium-speed engines. We have sold more than 400 methanol engines. The first ammonia engine has been delivered, and we have clearly the lowest mean sleep in the industry being a key value for LNG-powered vessels. We are #1 in hybrid and fuel electric vessels and also first hybrid electric concept is contracted. We have the first full-scale carbon capture installed early last year, capturing up to 70% of carbon on board a vessel, and we had the first Gara system levered. The only target that we set back then where we have not been grown as fast as we expected is on the decarbonization retrofits.

We have been growing but not as much as we expected due to still lack of global regulations. This has delivered profitable growth. Net sales with a 10% CAGR an order book that is up 53 percentage points and an agreement coverage that is up 4 percentage points, outcome-based with 12 percentage points and what we are really proud of more than 90% renewals on our agreements. And then on profitability, 3.1 percentage points up. So the past strategy wise, we have a lot of proof points, and we see that the same strategy continues and will play well into the future as well. So that's about the history.

Let's then move into the future. pricing, fuel and compliance cost increase the value of fuel efficiency. And IMO net 0 targets by or around 2050 still remains. What we are lacking is the emission cost connected to that target. Having said that, this is still leading to fragmented regulation. We have EU regulations in place, a concrete examples where we have seen $5.6 billion cost for shipping for 2025 emissions. We have also seen earlier this year, China putting a target that lowering CO2 intensity in shipping between 25 and 30 with 15%.

I was in China 2 weeks ago, -- we see clearly more and more focus on green fuel production in China. We see parts of the ecosystem coming together in a way that I'm very certain that this 15% in China will happen. Most probably, we will see it even more during this time period. So there are clear indications that this is moving in a more car direction. And this transition will accelerate during this 1 vessel lifetime. And as fuel cost increase, the value of efficiency is increasing -- and you can see an example here in the middle of the slide, where over that vessel lifetime, the cost of fuel and emissions will increase significantly.

And this is playing directly into our strength from a technology and value creation point of view. And the fuel uncertainty increases the value of technology optionality Today, we see that LNG is accounting for around 30% of the gross tonnage of the shipyards order book. And it's increasingly seen as a longer-term option in the maritime world. due to lack of availability of green methanol and green ammonia. We have the market-leading LNG main engines with 85% market share and the industry lowest verified metering sleep.

What does this mean then in practice? If you take a large vessel operating in EU waters, this mean slip benefit can be in the millions of annual savings for the customer. So it's both an emission benefit as well as a financial benefit with reduced emissions. And fuel flexibility is a key element to provide to our customers. Ship owners are looking for this fuel flexibility, and we hold a leading position in all the alternative fuels. As a shipowner, you have more or less pathways or a combination of these to move towards net zero.

You can burn less fuel, you can clean up emissions or you can use alternative energy sources. If you were less fuel, it's about vessel efficiency where we are the leader in fuel efficiency, it's operational efficiency where we are the leader in voyage and energy optimization. When you move to cleaning up emissions, it's about carbon capture, where we are a pioneer and I talked about the example already operating where you can capture up to 70% of the carbon.

Or when you move to alternative energy sources, it's about sustainable fuels, where we are the leader in LNG, methanol and ammonia or you move to electrification, where we're also the leader in hybrid or full electric installations. What makes us unique in the market is that we are the only 1 that can look at this full spectrum together with the customers, both for your existing fleets and for your new build. And it's not just about the technology solution. It's also about the timing when do you need to do the necessary investments to optimize your financial investments versus your financial performance. So the fuel transition is further strengthening our competitive position.

In our core market for stroke medium-speed main engines, we have a market share of 45%. When we talk about alternative fuels, including LNG, we have an 85% market share. If we look at then the axillary engines where we have clearly more players, it's a more commoditized market. We have a 10% market share, but also there, our market share is the double if we look at the alternative fuels. So this shows the technology strength but it also shows the value of the R&D investments that we have made in the past.

This is clearly where it's paying off. We see a positive outlook in our core market segments. If we look at the 4-stroke medium-speed main engines, we have in the past seen an 8% CAGR, while we have been growing 10% CAGR at the same time period. For the future, that same estimate is about 5% CAGR. And we hold a strong position in the key segments where we have relevance for this. So #1 in cruise ,#1 in Ferris and #1 in offshore. And this is an excellent starting point for our new build business.

Then it's not only about new build for every new build sale, we are creating about the same amount of service income during the lifetime of the vessel, which is then our time period of up to 30 or in some cases, even longer than 30 years. If you look at the graph here, you see that from order intake to until the service operations start to generate service income, it's about 5 years in average. And then you see a curve that is going a bit bumpy up. This is connected to where we see bigger overhauls during the journey of the vessel, then ending up in about the same value for the service business as we see for the new build.

And for Marine, today, we are even over 60% of our sales is connected to services. The growth of our installed base and the shift towards alternative fuels is expanding our long-term service opportunity. Our installed base today is around 60 gigawatts. And around 25% of that is alternative fuels. If we then look at estimated deliveries until 2030, we are estimating 17 gigawatts, about half of that coming from our joint ventures. Out of that 17 gigawatt are in the order book today.

If we compare that a bit with history, if I would look at the same picture in 2022, this 17 gigawatts would be about half for same time period going forward. Also interesting, when you look at the future deliveries, we estimate 70% to be in alternative fuels. And when you look at the share of customer service spend, it's usually about 30% higher on alternative fuels than diesel installations. So you have 2 benefits out of this 1 page. One is that we have a clearly accelerating installed base coming in, which is then giving service business when we are 5-plus years ahead.

On top of that, the mix is changing. We see more installation moving towards alternative fuels, which is good for our service business. The service growth is, as I said, driven by the installed base expansion, but also the agreement growth and outcome-based models. We have seen agreement coverage of the installed base growing from 33% to 37%. But at the same time, we are moving up the service value ladder. So 28% share of the agreements are outcome-based to now 40% as we are today. And these outcomes are then clearly providing more value to our customers. based on what we can help them with.

And again, the 90% agreement renewal rate. And this is a lot about the value we can create. We can sell the agreement once. But when the customer is renewing it, that's the true verification for the value they have seen of the agreement we have had with our customers. Then on the retrofit side. We can divide the retrofit opportunity in energy saving fuel conversions and carbon capture.

Today, a lot of what we see on the retrofit side is on the energy saving side, also a bit connected to the higher fuel prices as we see it today. Going forward and coming towards the end of the decade, we estimate we will start to see more on the fuel conversions, but also on the carbon capture uptake come from retrofits. Hakan talked about AI and the opportunities AI is bringing in I wanted to bring in 2 concrete examples here, how we use AI.

If I start from the customer angle and AI-enhanced customer value, so we use the powered diagnostics. So what we do is we combine real-time data with AI-powered analytics and expert know-how to detect anomalies and improve asset performance. In this example, we have a clear case where we have for a customer, saved EUR 3.5 million in saved in fuel spares, labor cost since 2025 across the fleet of 14 container ships. A clear proof point for our agreements where we use our internal know-how together with data and AI capabilities. Then if we look at AI enhanced productivity, agenetic parts quotation, we are already using today, and we are scaling more. So what this does is it automates quotation processing for spare parts. So it's shortening response time, so giving better customer service.

But through faster response time, it's also improving hit rates. -- and it's then increasing productivity internally as well. And our target is that during first half of 2027, more than 30% of our parts quotations would be touchless. So these are 2 concrete examples of what we can do using AI to optimize the customer value and then drive efficiency improvements. So looking at growth. It's starting from the positive outlook in our core segments. It's about being well positioned in the decarbonization journey. -- where customers already today demand fuel flexibility, they want to see efficiency and displays to our technology strength.

On the service side, we see a continuously growing installed base and expansion of service agreements, thanks to the value we can bring and also more to the technology complexity and then retrofits coming in towards the end of the decade with further opportunities. Then on the profitability side, it's to look at operational leverage. -- continuous improvement and more and more digitalization and AI and then pricing optimization based on the value that we provide.

The examples on execution excellence -- we have improved the engine production lead time with 33%, which is clearly providing more value and capacity through the factories. Service net sales through online portals has increased with 52%. And excluding advances, we have more than EUR 100 million decrease in working capital while net sales is still up with more than EUR 700 million. So this shows the efficiency then on the operation also in impacting the capital usage. So to summarize, the carbonization leadership really drives profitable growth in equipment and services.

We see our position to be perfect on this journey. Yes, we have less clarity on the global regulations. But the fragmentation is there. We see local regulations coming in. All shipowners today think about what do I need to do during the Van vessel lifetime. -- and we are perfectly positioned on that journey. That is driving the life cycle revenues. It's growing our installed base, and we are growing with our outcome-based agreement and climbing the service value ladder, and we are increasing value through excellence in execution. And this makes us very confident in reaching the upgraded marine targets.

Thank you. And with that, I will hand over to Arjen, our CFO.

Hello. As my colleagues, Hakan, Anderson have explained, we are on a solid path towards new, realistic midterm financial targets and sustainable value creation. This is not a new journey. This is a continuation of a journey actually at the started years ago. We committed, we delivered, and we commit again. At Wärtsilä, we have realistic targets that we are confident to achieve. Then we commit to them, we deliver upon them. And then we set new targets. And of course, as my colleagues have also referred to, we want to achieve them sooner rather than later. With these new targets, we continue our growth journey, just explained by Roger and Anders with a clear acceleration in energy. We expect profitability to improve for years to come with a net targeting reach being 14% operating result for Marine, 18% for energy and 16% for the group. Let me come back on the details later on in this presentation.

As said, we committed and we delivered. All the targets that you see on this slide have been delivered within 2 years after they were defined. I will not run you through this slide, as I'm sure you've seen it. We have shown that in earlier occasions as well. But what I do want to highlight -- is that why we were delivering on these targets, we simultaneously executed targeted actions to improve the resilience and quality of our earnings for the future. A few of these actions I would like to highlight.

First of all, the growth of the installed base covered by agreements. It moved from 2023, around 30%, okay, the exact numbers you saw earlier, 31% in Energy and 33% in Marine, to 37% today in both businesses, clearly a proof point of moving up the service value ladder. Second point I want to highlight is the EPC share in the energy order book that goes down. or went down from 30% in 2023 to 10% today. And for reference, in '22, it's 60%, clearly, lowering the risk in our order book.

Third point I want to highlight, investments in the future. We consciously decided to increase the R&D spend. Historically, for those who followed us for a long time, we have typically, let's say, 3% of net sales is R&D spend. The most recent years, it was more 4% to 5%. It was a conscious choice to be able to be the front-runner technology leader. We also invested in capacity expansions. You saw the announcement earlier this year as well as service infrastructure.

[This call length has exceeded streaming capabilities - Please refer to the preliminary transcript that will be posted shortly.]

Good morning, and welcome to this news conference for Wartsila Q3 results. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will go through the group highlights and then followed by the business performance.

After that, our CFO, Arjen Berends, will continue with the key financials. After the presentation, there is a possibility to ask questions. You may have recognized that we also announced our new financial targets this morning, but we will kindly ask you to leave the questions regarding financial targets to our Capital Market Day, which will take place next week. So all of you, you are warmly welcome to our Capital Market Day. But now starting with the results. Please, Hakan.

Thank you, Hanna-Maria, and welcome, everybody. I think we have had a really strong Q3, both from an order intake perspective, but also on our journey to continued improved profitability. So continued increasing profitability and continued strong order intake momentum. So order intake increased by 33% to EUR 2.4 billion. Actually, it's up 41% organically. Service order intake increased by 11% to EUR 950 million, and we are now at an all-time high order book of close to EUR 9.9 billion.

Service continued the rolling book-to-bill above 1. So now we are at 1.1. Net sales increased by 7% to EUR 1.5 billion. And we continue to improve our profitability. Comparable operating results increased by 19% to EUR 212 million, and that's 14.2% of net sales. Operating results increased by 4% to EUR 222 million, which corresponds to 14.9% of sales. And cash flow, we continue to have a strong cash flow from operating activities amounting to EUR 583 million. And on our ROCE journey, return on capital employed, we are now at 94%.

So let's look a little bit deeper into the numbers. And if we start with Q3, we see order intake is up 33% to EUR 2.4 billion. You can see that service order intake is up with 11% to EUR 950 million and equipment up 53% to EUR 1.4 billion. The increasing order intake is primarily driven by Energy. We now stand at an order book at EUR 9.9 billion. Net sales up 7% in the quarter from EUR 1.4 billion to EUR 1.5 billion. Services is a bit flat, EUR 850 million to EUR 802 million, so minus 2%, but I would say flat. Equipment up 19% from EUR 580 million to close to EUR 700 million. Book-to-bill continuously improving from 1.27 to 1.59.

And we are translating the sales to increased profitability. Comparable operating result up 19% from EUR 179 million to EUR 212 million, and that corresponds to 14.2% of net sales, improving from 12.8%. And on the operating results, up also 4% to EUR 222 million, which is 14.9% of net sales. If we just quickly look at some of the key numbers for the full year, so to say, we -- order intake is up 26% from EUR 5.6 billion to EUR 7.3 billion. Net sales is up 2%. Organically, it's actually up 9%. So from EUR 4.4 million to EUR 4.5 -- and then if we look at the comparable operating results, up 12% from EUR 558 million to EUR 623 million, EUR 13.9 million, also very close to the operating results, which lands at EUR 13.8 million. So good development, I would say, in all key figures.

If we look quickly on Marine and Energy, the market. On the Marine side, the market sentiment remains supportive of our key segments. And shipping has remained resilient despite the macroeconomic headwinds caused by the Middle East conflict. The number of vessels ordered increased to 2,500, up from 1,200 last year. The Middle East conflict has certainly lengthened the shipping routes continues to do so, supporting demand and improving earnings. And the market sentiment remains supportive and ordering appetite continued to be on a good level in vessels key segments. Contracting in these segments is expected to remain well above the 10-year average levels. The service market remained active and overall vessel utilization stayed at a good level. Increased fuel prices reduced short-term service spending in some segments, while higher shipping rates led to postponements of some service activities. And you've seen -- you will see that on our service Marine service order intake is impacting that. In January to September, 446 orders were for new alternative fuel capable ships, which is about 30% of the capacity of the contracted vessel. That also reflects the mix of the vessels.

On the energy side, clearly increased demand drives energy transition investments. I mean we see a structural shift here in general electricity demand and that translates into a very strong market for Wartsila. Electricity demand grows, and future projections have increased substantially, creating market opportunities for equipment providers. Two key themes have stood out in the recent macroeconomic development: load growth and increased tariff-related uncertainty. The diverse set of load growth drivers includes electrification of industry, transportation, cooling, and heating, as well as data center. We see it as a structural growth. It's not only data centers that are driving this growth. In engine power plants, market demand for equipment has been strong.

The base load segment remains a consistent source of demand for thermal power, while the drivers for balancing demand are also expected to continue to develop favorably. Renewable energy investments continue to shape energy markets, with investments outside of China at record levels in the first half of the year of 2026. We, as Wartsila, we continue to see a strong demand from data centers globally with a dynamic pipeline of opportunities. The resulting growth in the installed base also support, as we talked about before, a significant lifecycle services business that will extend well beyond 2030. So looking at the numbers in graphs, the organic order intake increased by 41%, order intake increased by 33, marine order intake remained stable, whereas energy order intake increased by 121%. Very strong. Equipment order intake increased by 53%, and the organic equipment order intake was up 66%.

Service order intake increased by 11%, and the organic service order intake growth was 13%. We have a strong order book development. Rolling book-to-bill continues to be well above one, and the order book is at an all-time high, driven a lot by energy, and it's the same theme as we talked about before. The order book is building further and further out in the future, and we have broken it down here on marine and energy, where the existing order book will generate sales that are distributed further and further in the future. You certainly see here to the right side for energy, later deliveries is really building up. This, we will come back to at the Capital Markets Day. You also see on marine, there is a buildup of later deliveries. Organic net sales increased by 16%. Net sales increased by 7%.

Marine net sales increased by 5%. Energy net sales increased by 52%. Equipment was up with 19%. On the organic equipment, net sales growth was 39%. Service net sales remained stable. Also, the organic service net sale remained stable. On the profitability side, we continue our journey of improving our profitability. Net sales increased, as we talked about before, by 7%, comparable operating results increased by 19%, and comparable operating margin 12-month rolling are now at 13.8%, up from 12.2%. On technology and partnerships, some interesting orders and cooperations in the latest quarter. First of all, Australia. We will deliver Australia's largest-ever engine power plant to support the country's energy transition. As you might know, Australia is on a journey of reducing coal power and building up renewables. They have invested a lot in battery storage.

We have been there with our battery storage business, but they have also realized that you need this mix that Wartsila has been talking about for many years. You need both batteries and reciprocating engines to provide the balancing power. We will see a market breakthrough in Australia here going forward for balancing power. Maybe also for data centers, but certainly for balancing power. We are talking about flexible and highly efficient 46TS engines that will be supplied to Australia's largest-ever reciprocating engine power plant. It's 300 megawatts that will provide critical grid balancing and system security in Australia. The fast-starting, flexible capacity provided by our engines will enable greater integration of renewables into the power system. It's really about balancing power, and we booked the order in the third quarter.

Now, in different parts of the world, we received an order to integrate and optimize Aruba's generating assets for reliable and sustainable energy. This is, you could say, a microgrid application where we have signed an agreement with WEB Aruba, the Caribbean island's energy provider, to advance decarbonized operations through the integration, optimization, and control of Aruba's power-generating assets. This comprehensive solution includes engineering, procurement, and construction work, as well as service agreements. We booked this order in the third quarter. The final taking over is scheduled in the second quarter of 2028. Now, looking a little bit closer on Marine and then Energy and Development. On the Marine side, comparable operating results increased. Equipment order intake declined due to periodization of orders.

You know there is lumpiness both in Energy and Marine, and we continue to see good growth opportunities, but order intake was rather flat due to the periodization of orders. While the service order intake remained stable. You see the order intake minus two, net sales continue to grow at 5%. We see the comparable operating results up to 13%. On the positive side, we certainly see better operating leverage, higher equipment sales, and better joint venture results also. Now, what is dragging us down, but I think for very good reasons, is we continue to increase our R&D efforts to continue to be the technology leader in the industry. If we look at the Marine service book-to-bill, it continues to be above one, and our Marine service order book increased by 10% compared to the third quarter in 2025.

And if we see the last 3 years, we have had 6% CAGR, and we will see continued growth going forward. You also see to the right, the graphs of the different disciplines in services. And here, we can see the big swings. We see the curve that has been deep in the red, and that's the retrofits and upgrades. It really comes back now. We talked about, it's lumpy. Many of these retrofit contracts are rather big. And when they come, they have not come, they have a big impact. And on the agreements lately, we have been down a bit. On the energy side, looking closer there, Order intake, net sales, comparable operating results all increased and the equipment order intake increased supported by strong demand, both from data centers and balancing applications.

So order intake, up 121% net sales up 52%. And you can also see the comparable operating result at 16%. And here, we have same positive driver, better operating leverage, higher equipment sales. And I would like to highlight this one, solid project execution. We have an energy today that is really world-class in executing. And solid project execution means basically we deliver our projects at lower cost than we had budgeted for, and then we can improve our profitability. So really good team work by the energy business. Overall, Energy Service book-to-bill continues to be above 1, and Energy Service order book increased by 28% compared to the third quarter. That is, as you can see to the right, very much driven by retrofits and upgrades. And here, we have had a couple of very big orders coming in, in the third quarter. So you could say that those are type of onetimers. But we also say it comes back making the point that the retrofit and upgrade business, it can swing quite a lot.

If we look at the -- to the left on the journey over 3 years, we have had 4% CAG in the Energy Service business. The bridge of the comparable operating result from Q3 last year to Q3 now, we see we are going from 12.8% to 14.2% we see Marine is down a little bit from 12.4% to 12.1%. Energy, a big step up from EUR 15.9 million to EUR 17.5 million. And then we have a bit of a -- still an impact of portfolio business, but that's the last year. We have now closed portfolio business, divested 11 business units. So comparable operating results increased by 19%. And Arjen, over to you on the key financials.

Yes. Thank you, Hakan. I'm very happy to present the other key financials. If we start with operating cash flow, after a very strong, let's say, Q2, very close to EUR 500 million. Now in the third quarter, we realized EUR 583 million. And as far as we could trace it back, this is an all-time high Q3 for Wartsila. Good support from the profitability, but also very, let's say, good development in the working capital, as you can see also here on this slide. In the working capital, I would say the main 2 positive ones are, let's say, the payments from the customers basically, so the advances as well as the receivables.

On the negative side, let's say, inventories went up, but that is logical. We are building, let's say, our deliveries for the future. So that takes money and investment and time to build. Looking at the return on capital employed, ROCE, very strong improvement. We had just over 70% at the end of last quarter. Now it's 94.1%. Also solvency clearly improving, let's say, from 38.2% to 39.4% now. As you can notice, we have 2 lines for earnings per share at the bottom here. One is, let's say, the total, you could say that's the first line, and the other one is the continued operation. The delta is basically the energy storage joint venture named Valo that is now booked as discontinued operation, and that has a $0.07 impact, as you can see on the earnings per share. If we look at the trends, let's say, both cash flow as well as working capital trends move and continue to move basically in the right direction. Working capital at the end of, let's say, Q3 ended at around EUR 1.6 billion negative.

Advances received was about EUR 2 billion. So if you exclude that, you end up positive EUR 400 million-ish about. On that level, so working capital, excluding advances, a lot of good efforts are continuously being done. Over the past 3 years, that level has decreased. So working capital, excluding advances has decreased EUR 300 million, actually, while sales went up EUR 1.3 billion. So really good developments also in other areas than just the advances, not having -- not wanted to make the comment that advances are bad, they are very good, and we should continue that. Looking at the, let's say, the 5-year average working capital to net sales ratio, 5.2% right now. So clearly, let's say, on a negative level. And we also anticipate working capital to stay negative for years to come. Then on the financial targets, and this is probably the last time we will show this as you have noticed and also commented by Hakan, we have launched our new financial targets this morning as well.

But looking at this graph and for the last time, first of all, on the left side, let's say, organic growth, 14% year-on-year for Marine and Energy combined, 6% is actually Marine and 28% is actually energy. Profitability, 14.2% now on a rolling 12-month basis, which is up, let's say, from 14.0% actually in Q2. Group gearing continues to be deep low negative, so not much to add to that. And also for the dividend, I would say also nothing new to that as well because that's already for a long time, above, let's say, the financial target of 50% of EPS. With these words, I hand it back to you, Hakan, on the outlook.

Thank you, Arjen. Cash is strong. So if we look at the outlook, and this will also be the last time we communicate outlook in this format because as you've also seen in our press release this morning, we are changing our guidance principle as we go into next year. But -- so for the last time, we are looking at the demand environment for the coming 12 months. And both in Marine and Energy, we regard them to be similar to that of the comparison period, basically 12 months before. We also highlight that following the high order intake quarters, the outlook reflects a continued strong demand environment, especially on the energy side. Okay. So that was a quick summary.

Thank you, Hakan. Thank you, Arjen. And now we are ready for the Q&A. So as a gentle reminder, this is about Q3 results, and we -- I kindly ask all of you to join our Capital Market Day next week to discuss our new financial targets. So handing over to the operator, please.

[Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs.

I have 2 quick questions. The first one, just wondering sort of on Marine services on sort of the slight delays that you mentioned. If you just see the comeback of that kind of concentrated still into if it's more likely to spread to next year, how much can you help with any quantification on how much is being kind of like held up on that pattern? And then the second question, maybe I've missed this. I'm sorry if that was the case. But I think last quarter, you commented on the gross margin backlog evolution in the backlog of the 500 basis points over the last 12 months. Just wondering how Q3 has contributed to that trend, if you could also help quantify there.

Shall I answer first let's say, on the service net sales, I would say that's not a real concern. Let's say, the key thing is, let's say, the book-to-bill ratio stays above 1. And if you look year-to-date, let's say, on service net sales, both for Energy and Marine, actually, let's say, we saw in the book-to-bill graphs that book-to-bill last year, let's say, was very down on the retrofits on the service projects. And of course, that translates into sales, let's say, typically half year to a year later, and that's what we are seeing now.

So the slowdown is really in the project services net sales. But as you could see from the graph, in particular now for, let's say, energy, let's say, the big swing up. So that will come to sales, let's say, probably half year to a year from now. So that's the big swinging item. Other revenue streams are pretty okay actually.

And on the 500 basis points on the new build order book for energy, we will not come back and guide every time how it is going. But I can say we continue to have good price realization. And you've seen the new financial targets. We can talk more about them in a week's time. I think that also indicates the direction we are going in.

The next question comes from Akash Gupta from JPMorgan.

I got 2 as well. My first one is on energy and particularly the outlook. I think you confirmed demand environment to be similar to last 12 months given the strong demand we have seen. Wondering if you can talk about what shall -- how shall we translate this demand environment into Wartsila orders? Because when I look at your last 4 quarter orders, we have $4.8 billion in orders.

And let's say, if that EUR 4.8 billion translate into revenues in a few years down the line, we are already at your medium-term target for the segment. So my question is that we have seen a big increase in lead times. So is it realistic for us to this EUR 4.8 billion-ish order intake in the next 12 months? Or maybe you could have some demand constraint and because of that, despite favorable environment just because of your capacity constraint, you might see lower order intake. So any thoughts on that one? That's the first one.

Yes. So I think it's correctly spotted. I mean we are building our order backlog that stretches further and further out in time. And we have done -- we have sold forward now quite a lot during this year. And of course, there is always a balance how far you can sell out in the future. Then in parallel, we are ramping up our capacity. But we have basically sold out or if you are a new customer that comes to Wartsila today and asking for when we can deliver, we are into the 2030s. So there is clearly a balance of how far we can stretch out the time and also the capacity that we have available.

And my second one is on your Slide #8 on your energy backlog. So when I look at energy backlog, I think at this point, you have more than EUR 600 million higher 2027 than what you had at this stage for 2026. Again, I mean, I think there is a bit of growth that we have in consensus for next year. And when we look at your production output, I think you're already at 100% in STH this year and the next production growth will come in 2028.

So I mean, I'm wondering like if you can talk about what is helping this higher revenues or higher deliveries in 2027. Is it just that some of the engines that are used in 2026 might be recognized in revenues in 2027 when you deliver it or maybe something else? So any commentary on growth in backlog despite production volumes will be likely flattish in '27 versus '26?

I think there are several reasons, not let's say, one reason, I would say. First of all, I want to mention scope. Let's say, as we have been talking a lot about, let's say, euro per kilowatt in the past, let's say, scope is a really big difference. So it's not just engines that we do. Let's say, we -- of course, we do engines, but let's say, if we deliver additional scope with the engines, that's also additional sales, and that's also in part of our order book. Secondly, let's say, there is on the EPC part, there's a percentage of completion. So that will vary by year. It depends how the project progresses.

And then, let's say, there is -- it's always linked to delivery. So on your latest comment, let's say, when we deliver the engines, that's when we take, let's say, the sales. But let's say, if other equipment comes later, then it's let's say, if that goes into '28 or actually, it can also be the other way around that certain equipment, which is not engines is delivered in '27 and the engines only come in January, for example. So this depends a bit, but it's those 3 reasons mainly.

And maybe lastly, a housekeeping question. I know Anna Maria told us not to ask about midterm, but maybe on this IFRS 18 headwind, can you quantify how big or small it can be? Because I think that has been one of the key differences on how people are interpreting this new medium-term target.

It's, of course, an estimate, but both for Energy and Marine, if you look at the last 12 months, it's an estimate now of about 0.6, 0.7 percentage points.

On EBIT...

On EBIT. Yes.

And we will talk more about that in the CMD.

Correct. Restatement...

The next question comes from Uma Samlin from Bank of America.

So first from me is a follow-up from the previous question. I guess you mentioned that the backlog is now stretching into the 2030s. So does that mean that your 2029 is now fully booked? And also, I guess, given the very tight energy market, would you potentially consider further capacity expansion on your current footprint?

So I mean, when we have something in our order backlog, there are a number of prerequisites that needs to be fulfilled. We need to have a signed contract that needs to be down payment that needs to be noticed to proceed. So what is in the backlog, those are firm orders. So for 2029, we are in advanced stages of closing, but it's not recognized into our order backlog. That's why we like to talk about if a new customer comes, what's the best delivery date you can offer me, then it's in the 2030s.

And in terms of capacity expansion, is there any some indication for you on the market that you would consider further capacity expansion?

So we have taken several, I would say, major steps. I mean we have first step coming in beginning of 2028 and second step of beginning of 2029. But we will have this step-wise approach also going forward. So we will continuously reassess the market situation, and we could expand even further. But we have to come back to that if and when we take those decisions.

Critical is the supply chain here.

Absolutely. I mean, to ramp up now, it's, of course, our facility in Vassa, and that's one element. But to ramp up a robust supply chain, that is also critical in this equation, so to say.

That's super helpful. My second question is on the life cycle service opportunities. So would you be able to give us some update on that, especially on the energy side? I remember you had previously mentioned that we could start seeing this by the end of this year. Is that still what you're expecting? And how should we expect those service agreements to roll in, in terms of orders?

Yes, let's say that's still the expectation. So the answer is a simple yes. Let's say, we expect the first orders to be taken still within this year, but they are not in yet.

The next question comes from Antti Kansanen from SEB. The next question comes from Vlad Sergievskii from Barclays.

First one, could I please ask a follow-up on energy orders? You booked 4.7 gigawatts of energy orders over the past 12 months, predominantly driven by data center-related projects. Did I understood you correctly that you might not be able to book another 5 gigawatts or so over the next 12 months due to the extended lead time? That's the first one.

Yes, I think that's clearly so because there is a limitation on how far in the future that the market is transacting, so to say. So there is a balance. We are, of course, ramping up our capacity, but there is a balance on how much new order intake that we can take in. Then I would say predominantly, we have a lot of balancing order intake as well. So I just want to adjust that. It's a combination of both data centers and balancing power. This year's order intake.

It's all a matter of acceptance of the customer. Do they accept long delivery times or not? That's the key question.

Absolutely clear. And then related to that question, please. In light of that, how competitive do you think your lead times right now are given your comments that you are not able to deliver before 2030 for your customers, but there are probably about 10 power gen engine and smaller turbine suppliers who actually can deliver significantly earlier than that. And if your lead times has become less competitive because of your success in bookings, what could you -- and what do you plan to do about that?

So I mean, first of all, I would say that the current status is kind of a proof point that we are very competitive because people are willing to wait if you compare them, you're saying that somebody else can deliver earlier. And I'm sure there are some that can, but people are still contracting with us then further. Why do they do that? Because of energy efficiency, fuel, the flexibility of our assets, no water consumption, et cetera, et cetera. And that, for me, is also my long-term reflection. I mean, we have a very competitive technology. When we talk about the sweet spot of this type of power plants, we are more fuel efficient than the high speeds. We are more fuel efficient than the industrial gas turbines and the aero derivatives.

We don't require any water. We don't derate at hot temperature. We don't date at high altitude, and you know this, Vlad. And on top of that, in the medium speed segment, we have the best fuel consumption. We have the strongest service network, and we have a team that know how to deliver projects on time and with the right quality. So therefore, I am fairly confident also long term when the market rebalance because it's about being competitive.

Correct and deliver on execution.

And the duration of your backlog is a proof point...

The next question comes from Sven Weier from UBS.

Two questions from my side, please. First of all, on the marine orders, you talked about phasing. I was just wondering in terms of where you are in terms of taking container vessel orders. Obviously, this year, we've seen a boom in feeder container vessels, which I guess should be favorable for you. I mean, have you already booked those orders? Or is there -- what kind of delay are you seeing there? That's the first question.

No, we clearly see, let's say, that feeder container bookings. Yes, we have booked those, and we have also still some in the pipeline. So the answer is yes. Yes.

We should acknowledge on the container side. For us, it's mostly about auxiliary engines. Correct. And this we do through our JVs.

And is that also for the feeder vessels, the smaller just auxiliaries?

Yes. Primarily, yes. There is also potential for hybrid electric in the future, but that is further. I mean that's an innovation in the segment. So there is -- so far not yet a commercial breakthrough. So for now, it's primarily auxiliaries, yes.

But not all is going through the joint venture. So it's also through our books. It depends on the fuel type.

The second question I had is just a technical question on Chart #7. I'm sorry if you commented on this already, but I was just wondering, you say the order book is adjusted to exclude energy storage, but does this also -- that doesn't hold true for the previous years, right? It's just for the backlog as of the end.

It has been consistently corrected.

So I don't know if my math is right, if I add up the energy and marine bars for the previous years, I get to a lower number than for the group.

It should not be.

But to me, it seems storage is still in there, but maybe...

Let's check that and I think Investor Relations can come back to you. To my knowledge, it has been corrected.

The next question comes from Max Yates from Morgan Stanley.

So a couple of questions. The first one is just around your data center customer base. And obviously, the market is taking, I think, quite a different view to the availability of financing for hyperscalers versus N clouds versus colocation companies. So I was wondering if you could give us a feel simplistically, how much of your data center orders by percentage are to going to hyperscaler customers versus some of the more kind of neo clouds like COI and Nebius. If you could give us a feel for that, please? That's my first question.

I would say that as far as I know, everything is going to hyperscalers. I think if you look at our customer base, and sorry for not being able to talk publicly about it because we talked about that before, there is a lot of secrecy in the industry and people don't want to know what the different players or competitors are doing in the industry. That's why I can't give you the names. But I mean, we have had the privilege to work with established players that have been in the data center industry for decades. And this is clearly where we have been focusing.

Okay. And just the question is, obviously, 17.5% margins, very good year-over-year increase in energy. To what extent should we view that as a kind of jumping off point into Q4 and into 2027 now that you're kind of -- or you will start delivering sort of more of these data center orders, which you sort of previously commented a better price? Or was there anything in that energy margin can't see that maybe flatten it and we should think about more kind of the 16% year-to-date margin as the jumping off point? Any framing there would be helpful.

I think the comment I can hear, we're on a journey of continuously improving profitability.

Okay. And then just the final very quick one is just, obviously, you've announced the new targets today, but you didn't announce kind of anything around buybacks. I think the market kind of honestly, largely expects you to do a buyback. So should we assume that the fact that there isn't one means one coming? Or is this something that can still potentially come and with the CMD or the full year results?

I would park this question to next week, if okay with you, Mark.

Okay. Well, then if you didn't answer that, I'll try a different one. Your JV in Japan -- sorry, not your JV, but your agreement that you've announced trying to develop data centers in Asia. When would we expect that start sort of translating into new orders? And the sort of other part of that question is, does it give you an opportunity to also move into China because that probably outside of the U.S. is going to be the fastest-growing data center market. So to what extent do you see the opportunity to access China? Or is it primarily just a Japan for Japan opportunity and partnership?

So the partnership with Tokyo Gas, which I think you're referring to is primarily to Japan. And -- but it can also be to Europe and U.S. depending on Tokyo Gas. They have a fairly broad portfolio. I don't think it will take us into China. What's the time frame? I will not go into those details because these are between the 2 parties, so to say.

The next question comes from Panu Laitinmaki from Danske Bank.

Actually, all my Q3 related questions were already asked, so I'll try on the start. So can you just specify what is the time frame for midterm in your new targets?

So those are midterm targets, and we have loosely defined as somewhere between 3 to 5 years.

The next question comes from Vivek Midha from Citi.

Hope you can hear me well. I have 2 follow-ups, if I may. The first question is around the exceptionally large retrofit orders in energy you've highlighted for the quarter. Could you maybe give us some indication as to what was driving that? Do you see scope for similar such orders? I noticed you had the gas conversion project in Brazil. Was that the main one? Were there other ones and so on?

I don't think we can be too specific. Let's say, we have been working on these orders for a very long time. And coincidently, actually, they came all, let's say, in this third quarter. I would say that's exceptional. Normally, they distribute more evenly, you would say, but now it came just coincidentally all in 1 quarter. There is nothing more to it.

Understood. That's clear. And my second follow-up, I'm not sure if you're going to be able to help, but just to understand, you booked the process EPC order for 2 Brazilian contracts in the quarter, having previously booked the equipment scope. In order for us to be able to maybe compare order values and volumes on a like-for-like basis versus prior quarters, can you give us any directional rough indication as to the value of that EPC order?

No, we cannot.

But it's also another -- sorry for coming back on this, which makes it challenging, of course, we talked about it before, the euro per kilowatt, it's very hard because, of course, we -- and why we can't disclose it is because we have agreements with the customer. But I mean, so we booked the equipment in Q2, and we are booking the EPC part in Q3. So it makes the whole -- yes, we talked about it before.

And in the euro per kilowatt calculation, the megawatts is in -- when we deliver the engines -- so it goes off.

The next question comes from Tom Skogman from DNB Carnegie.

I would like to get some kind of a guidance just for discontinued operations the next quarter, so we get it right in our models.

Let's say, for the next quarter, let's say, since the joint venture is live 1st of October, let's say, it will move from discontinued operation as it has been, let's say, from Q1 to Q3, it moves to share of results in associated companies and joint ventures. And the estimate result impact of that period of time is, as I mentioned actually in the pre-silent call, EUR 10 million to EUR 20 million negative.

Okay. And then I wonder about strategically, you have been dominating the marine industry and, let's say, close to a 50% market share and in power plants even higher. But now we see that some competitors are investing very aggressively even more than you have decided so far. So I just wonder how important is it for Batra to kind of remain dominant in your industry, even if that means that you need to take a bit of risk with expanding or announcing further expansions?

So I mean, there is more capacity coming in, clearly. I mean, we saw Himson's latest move, et cetera, et cetera. I think it's coming back a little bit to my answer earlier. We we are rather confident based on the strength of our technology in terms of fuel efficiency, in terms of the service network, et cetera, et cetera, and the digital solutions we have. So we can take increased competition. Still, I would assume with good -- not only assume, still with good profitability. Now when it comes to further opportunities for capacity expansion, as I said, this is something that we are continuously evolving. We have taken 2 big steps now, '28 and '29. Can we take more steps? Yes, we can. But we will come back if and when we have taken those decisions, so to say.

And market share stays strong...

And for both energy...

And Marine, absolutely.

And what is your increased R&D spending focusing on right now?

Fuel portfolio mainly. -- expanding the fuel portfolio.

Yes. So -- and if you talk about the fuel portfolio, just to reiterate, we have one bucket with fossil fuels. We have another bucket with carbon neutral fuels, and we have the third bucket with the zero carbon fuels. And we are basically investing in all these 3 buckets. I mean we are the market leader in methane slip. LNG is really focused on LNG in the marine side now as a big transition fuel. And we are the leader in methane slip, which brings real money to customers operating in Europe or to and through Europe because I think the industry is paying some EUR 5 billion, EUR 6 billion under the ETS scheme, so to say. And if you can bring down methane slip, you can bring down emissions, there is real value, real money for the customers to save. And we are a leader in that development.

As an example, Tom.

I'm almost starting CMD now. You will have to come back. I'm sure I hope you will come back in a week's time, we will talk more about that then.

Yes. Let's park it there.

The next question comes from Nabil Najeeb from Deutsche Bank.

I've just got one, please. I noticed that you have added public opposition and tighter regulation as risks to data center power demand in your report this morning. Just wondering if these are actually affecting the pace of projects that are moving through your pipeline today? Or are you just proactively flagging it as a risk but that has not yet materially affected decisions. Just any color you can give on the broader demand picture for data center power would be helpful, please.

Yes. So if we talk about the order backlog and the orders that we are executing, so far, no delays or impact, clearly. Increasingly, we start to get positive feedback that we are one of the equipment suppliers that delivers on time and executes. We will talk more about that on CMD. Then for the projects and for the order intake, as I said before, we are very happy and grateful to work with established players, and they have a positive view on the development going forward. They are operating in geographies and states where they feel confident, et cetera, et cetera. So -- no major negative impact so far.

You don't see a softening of the pipeline. Clearly.

Clearly not. The pipeline is very active. It's very dynamic. Like before, we still have opportunities in various stages of development, but it's -- the demand is certainly there. And as we talked about, the demand, we are starting to look in 2030 and beyond.

The next question comes from Michael Dopel from Nordea.

A couple of quick questions. Looking at the orders in Q3 in energy equipment, in particular, it was very strong. Just wondering if there was anything unannounced bigger orders that you book in the quarter, either data center related or balancing related. And my second question relates to the Marine outlook. I mean you talked about the container ships. But could you also talk a bit about your other key segments? I mean what are you seeing there and expectations for orders ahead given the contract in the past, let's call it, 6 to 12 months?

I think if you look at the energy order intake, I would say the big 2 orders, I think, is what Hakan showed on the slide earlier, let's say the data center one and the Australia one. There are, of course, more orders than that to the extent that we could announce and they are in the press releases, but more than that, we cannot say. But there are, for sure, more orders than that. But those are the 2 big ones.

And on the demand side, on the marine side, I think we still see strong demand from cruise. I mean Cruise right now, of course, with increased fuel prices, they are really putting razor sharp focus on fuel efficiency and operational efficiency, which actually makes our proposition even more attractive to them. There is still clearly a new build journey. Of course, shipyard capacity is also a bottleneck. So they are contracting also further and further out in the future. But I would say positive. On the ferry side, they have been affected a bit by the high energy prices. We had some really strong ferry order intake last year. This year, it's a little bit more flat, I would say. Then on offshore, I think that's really heating up, so to say. FPSOs LNGs, et cetera. So we see definitely opportunities there. And container side, I would say, surprisingly resilient, I would say.

The next question comes from Adrian Pehl from ODDO BHFA.

I have 2 quick ones. One is, again, on the margin in energy, quite strong actually. So I was just wondering if we should take into account that your flexibility to outsource more of your content to your suppliers is a bit higher? Or is it a bit of phasing of the ramp-up costs that will come a bit at the later stage. So I was really also surprised to see that strong margin. Any kind of explanation would be good. And the second one is on the Marine side. I mean I think the question usually comes quite often, but I phrase it again in terms of the conversion that you see from service orders into revenues going forward. I mean, how close are we to the point that vessel owners cannot further postpone the service? I mean, must be nearing at some point. Any clarity on that would be helpful.

So if I talk about -- if I take the first one. you can take the second. I mean when it comes to improving margins on the energy side, as we talked about, I mean, first, we have the last -- we talked about we have had good price realizations. We have the operational leverage since we are delivering higher volumes than ever before. And then I really would like to underline the project execution excellence that I talked about, delivering the projects at a lower cost and serving the customers in a good way. There, you have the profitability drivers. And I think also the targets that we have put, I mean, 18% for energy is also showing where we are going. And we will also recycle the language from earlier years. We have a clear path to reach our profitability targets.

I think on that note, also good to mention that, let's say, result in the quarter can vary a lot, and that depends on many different things. And let's say, the project margins are always unique. We don't have a standard flat margin for a project. If you then on top of that, let's say, have a certain projects in, call it, complicated areas where you can execute at lower cost, you have an incidental upside. So yes, the journey is positive. I think we are growing the profitability all the time. But it's project mix that also has a big project margin mix that has a big impact on a single quarter and then on top of the execution as well.

Then on the question on, okay, how far can customers postpone services? Are we reaching the point? It's very difficult to say because there is no generic answer for all the customers, let's say, management. Yes, I would say so, too. Let's say, any customer has a different profile and let's say, some are on it to the edge, and they might not be, let's say, very safe, let's say, they continue, let's say, their sailing routes, but -- and others, let's say, they are perfectly fine. Let's say, you can postpone maintenance for some time, but let's say, at some day, you need to go in and do the maintenance. Otherwise, you run your ship down. So difficult to answer the question, sorry for that. It depends on owner running profiles and segments as well, I would say. Because typically, in the ship segments where there is currently high rates, they want to harvest as long as they can, as much as they can. So they say no.

Then I will continue with a couple of questions from the chat. Will you discontinue the outlook for demand environment as you start guiding for revenue?

Simple answer is yes.

That was a very clear answer. Then Wartsila's growth prospects, particularly in energy business and in the meeting electricity needs of data centers appears strong. How much of this growth does management expect to translate into sustainable earnings and cash flow over '27, 2030? And what specific factors will determine whether the company can simultaneously improve its return on capital and create shareholder value? Maybe a question on the Capital Markets Day.

I would say so, yes. That's the place we...

I mean how -- for the financial targets. That's really the focus that CMD. Correct. I hope you have the opportunity to join us then. We can spend quite some time on that.

Exactly. So as a reminder, we will host our Capital Market Day next Tuesday. You are warmly welcome to join. A registration for the online participation is still open. So looking forward to meet you there, and thank you for the discussion today.

Thank you very much.

Thank you.

Hi, everyone, and welcome to Q3 -- Wartsila's Q3 Pre-Silent Call. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. We announced today the closing of the transaction of our joint venture for our global Energy Storage business. Our CFO, Arjen Berends, will show a couple of slides and discuss the financial impact of the transaction on a more detailed level.

Slides have already been published on our IR website, and my colleague, Noora, will share the slides on the chat. After Arjen's key messages, there is a possibility to ask questions. Arjen, please?

Yes. If somebody can bring up the slides. Like Hanna-Maria said, it was good to get the closing of the joint venture now finally done. A little bit delayed than what we originally thought, but anyhow still good, not in Q3 as we originally were planning for, but just in Q4.

It is, as you know, a 50/50 joint venture between us and RCT Solutions. We earlier stated that, okay, the impact of Wartsila 2026 operating result would be approximately EUR 40 million to EUR 50 million. With the knowledge of today, of course, balance sheet, et cetera, needs still to be concluded and completely finalized, but it will be less than that. And that is actually shown in the bottom of this page.

Also good to highlight that the joint venture or the Energy Storage result lands in different places throughout the year. So, in -- when we announced this joint venture to be set up, basically at that moment of time the whole result, you could say, moved to discontinued operations in the P&L. So out of the operating result as such.

Now, when the joint venture goes live, actually, it comes back. So share of results in associated companies is part of operating result as also our Chinese joint ventures are. So in Q4, we will see still a result, call it, operating result from the joint venture in our books. As you can see in the bottom of this page on the right side, that is estimated to be EUR 10 million to EUR 15 million.

And the part before that, which is all discontinued operations, that includes the result of the transaction itself, that's estimated -- latest best estimate is basically EUR 10 million to EUR 20 million negative. That's what we are looking at today. I don't expect that the numbers will materially change outside this range. So in your modeling, I hope this is helpful as well.

Good to also mention, if we go to the next page next year, again, the joint venture will move out of operating result again because IFRS 18 will come into force, which basically means that joint venture result is not part of operating result, but result from investing activities. In addition, also IFRS 18 has impact to hedging costs. That will actually move from financial items to operating result in the future.

So there are different changes. I would say those are the 2 main ones, cost of hedging as well as share of results in associated companies. But good to remind that actually also next year, coming back to this joint venture, the result will not be part of operating results. So keep that in mind.

Looking at all other developments now in Q3, I would say business is developing nicely. You saw some announcement already Australia, largest ever engine power plant that I think was yesterday, if I remember right, it was the day before, time flies. Also, good announcement working with Tokyo Gas on developing data centers in Japan. No concrete orders yet, but this is just a good sign of also activity starting in Japan as well on data centers. And we are working with most influential partner, I would almost say.

Looking at marine, Clarksons did an update of their forecast compared to their March forecast. They typically do that twice a year, September and March. In general, I would say the forecast is up from previous forecast. Newbuild markets actually Clarksons' own words is exceptionally busy and good potential for containerships, tankers, bulkers, car carriers, gas carriers, while other segments that are key for us like cruise and ferry, stays rather stable on a good level. So I would say, all in all positive news actually from the Clarksons update as well.

What else to highlight from that update, I would say, order book of shipbuilding is actually 22% of the fleet capacity. So pretty much is now in the pipeline for newbuild. Also Clarksons updated their scenarios and their base case scenario is anticipating, which they believe is most realistic is anticipating 2,500 vessel contracts per year, actually, which is a quite higher level than what we have seen over the past decade, I would say, on average. So very good development as well.

On the regulatory framework, yes, the fragmentation, as we discussed earlier continues. Instead of having a global carbon pricing mechanism vote positively last year autumn, customers need to deal with patchwork of regulation. EU ETS is already applicable. U.K. also ETS -- has an own ETS, which entered into force now in July. Turkey ETS pilot is expected to launch also still within this year. And also China has launched an own scheme as well.

So it's not so easy for customers and that also requires more and more that they come to us actually for advice what to do now and what to do next. As Roger Holm, our Head of Marine, many times said that if you go too fast in decarbonization, it's not good for you. If you go too slow, it's not good for you either. So you need to find the right pace and you need to work with partners like Wartsila that can advise you on what to do now and later, while still moving forward in fuel efficiency and decarbonization.

So from a market perspective, I would say, all good and looking positive. That's where I want to stop and open up for questions.

Thanks, Arjen. And it seems that Hanna-Maria dropped out of the call due to network issues. So I'll lead the Q&A.

And it seems that we have quite a number of questions already, and the first one will come from Daniela Costa.

I'll just -- I'll ask 2 things. First, just wanted to see what -- how is your thinking around Trump order banning potentially power system or bulk power system imports into the U.S. Could -- would that impact you in any sense? Do you have a way to circumvent that or any clarity on that, I think we lack a lot of details on our side.

And then the second one, just interested on like the big Google announcements in Finland. How is your exposure potentially over there? What's the landscape of opportunity perhaps for orders for you from that? And those are my questions.

On the first one Trump, you never know, what it will exactly look like. I think nobody really knows. So far, we don't see any break on queries coming from the U.S. But of course, anything can happen, you never know. The rules of engagement as we put it -- yes, they can change rapidly. But so far, we are not concerned.

And I think it will also be a very big challenge if import would be stopped for whatever reason, because I think a lot of developments, which are positive to the U.S. cannot continue. So I think that is also internal -- or I would assume there is internal pressure also to -- keep going because there is a shortage of power equipment.

Then on your second question, Google and Finland. I think the Finland network and also supply of energy is quite good. I don't think they will immediately go for off-site power generation, I think there's good level of many power sources be it renewable but also nuclear. They recently installed a new nuclear plant not so long ago. So I don't see that being a huge opportunity. But yes, you never know. It depends also a bit where they want to put it in the future development.

Just a follow-up on the first part. If that order comes to fruition, would you have a way to -- would you consider like moving maybe your capacity expansion to the U.S.? Would you even have the possibility to do so? Or how much time would it take you to adapt if that order would become implemented?

I think there are too many question marks around this, Daniela. I don't know. I don't think we will put up production in the U.S., simply because it won't help us. Our supply chain is outside the U.S. You still need to import a lot of stuff.

Can it be done? Yes, I think we can if we want. Can it be done fast? I think that's a challenge. Let's say we are at the same time ramping up capacity, and we have sold already pretty much the capacity, okay, we are approaching end of 2029 already. And that is not stopped I don't think they can stop those contracts or at least that will not happen or at least that's our estimate of it. But again, with Trump, you never know. So yes, strange can happen, but, we have seen it before. And we have also seen many times that things are reversed then later on and very quickly later on when they realize, okay, this is an adverse effect.

Next question Vivek Midha.

I have 3 questions, if I may, maybe going one at a time, if that's all right. The first is following up on your announcement this morning around the collaboration with Schneider Electric and Stanley Consultants. I noted the comments around a faster approach to power -- time to power. Could you maybe elaborate how much adoption you expect of this particular solution approach? And how much of a potential reduction in time lines can this offer?

I think it's a bit too early to be honest. We just announced a joint effort to start it basically, what can we do together 1 plus 1 plus 1 is actually more than 3. That's actually the idea behind it. How can we combine knowledge of process optimization, system optimization, et cetera, together in order to accelerate in detail that still needs to be worked out. We now have launched this. Now the knowledgeable people need to sit together and work it out. So it's a bit too early to answer to that.

Understood. My second question is on the quarter and the second half in general. You had quite a bit of ups and downs when it comes to the working capital in the first half. You had some outflows in the first quarter and a very strong second quarter. Are there any things to bear in mind about the phasing of cash flow and working capital as we go into the second half?

No, no, at least not to me of course the biggest swings actually come with the advances received and the payments from customers. Okay, the payments on fixed terms and delivery terms, et cetera, that's pretty well known. But what you don't know is will you get an order now or next week or the next month or the next quarter and the advance payments that relate to it.

I think that's typically the swing. I'm not concerned about cash flow at all, frankly speaking. I think it will also be strong cash flow in the second half. I'm pretty convinced about it. And of course, it links very much to order intake.

Understood. And my final question is around the Capital Markets Day. As we think about the potential new targets or revisions to targets, more of a theoretical question that last time, you gave us a margin target, which was just general midterm margin. Now you have a lot more visibility with the growth in the backlog. Should we expect that you'll be guiding for margins, for example, by a given year, given that you have more visibility over the next few years? Or would it be still a more sort of general approach?

I will not comment on that. I will leave that you need to be patient for 1 month and a little bit more at Capital Markets Day, we will come back to this.

The next questions come from Sven Weier.

First question is regarding data center orders. You announced one for the third quarter, but Hakan was pretty upbeat about demand from data centers in general. So should we assume that this was the only one? Or did you have other ones that you just were not allowed to announce yet? That's the first one.

Good question. But let me answer by saying that I'm convinced we will get more orders. Will we all be able to book it because we only book it when the down payment is in the bank. That's for us order intake moment. That I'm not sure. But pipeline is good and signing also moves well forward.

Good. We'll see then, I guess. The second question is just on marine services. I was just wondering if you could add anything to what Hakan said in the strategy call that there's been some slowness on the back of higher fuel prices and containerships running at full steam. Is there anything you want to add from your side on this?

No, I think that's pretty much the story. There are many different reasons for a bit of a challenge on our end. First of all, rates are very good. So do you go in for maintenance while the rates are high? Or do you wait until the rates are lower and then go in for maintenance.

So there is postponement being applied by many.

Of course, you cannot forever postpone. So certain critical things need to be done. Otherwise, you destroy the equipment. But there is also for certain customers, it depends a bit by segment some rates are high and some rates are not so high that they need the money actually for the high price of the fuel. The fuel is extremely high also for shipping companies.

And you can spend the euro or the dollar only once. So you need to make choices. Again, here I would say it's a temporary blip because at some point of time, you need to go in for maintenance. You cannot postpone this too long. But at the moment, we face that a bit, yes, that's correct.

And would you say the dynamic is the same as we had it in Q2, so no worsening of this or any change?

No, I would not say it's worsening. I think it's pretty much similar.

And it's just affecting the spare part bit of the service revenues or also the entire service overall?

No, I would say mainly the spare parts. But of course, you have also a piece of overshoot to the field service, for example spare parts when they need to be mounted or used, it often also requires field service engineers, so also somewhat to the field service. But field service in general is quite busy actually because these resources are also used in agreements, for example, and also in retrofits.

Next up, we have Uma Samlin.

First is a follow-up that you mentioned that your orders are now approaching the end of 2029. The recent order you have announced was, if I remember correctly, early 2029. Can we assume then that there has been more orders after that? Or is there any reason that...

No, it's filling up, I would say, towards the end of '29. If you take -- let's say, if I look at '29, either it's booked, so the slot is gone or it is commitments in outstanding quotes. And then, of course, it's back to what we have also been communicating earlier. If customers don't decide within a certain period of time, their slot is gone, and it will go to somebody else.

But it's pretty much committed for the whole of '29 already. Then it can still be that if somebody doesn't take it, then there is room for somebody else. But if you're a totally new customer and you would like to have engines today, you end up in 2030 pretty much already.

Yes. That's super clear. My next one is that, would you be able to give us a bit more insight on the orders you booked that you announced both in Australia and Japan this quarter? How should we think about that if you compare the contract terms versus the normal or the previous data center orders? Is there any reason that -- is there any sort of shift in your thinking to sort of more shifting towards other geographies or other customers? Or is there -- how should we think about like the profitability of these orders versus the U.S. data center ones?

In general, all margins go up because all prices go up. There is more demand than supply. And that's, of course what everybody is doing, and we should be stupid if we won't do that. So it's not just for data centers that prices up. I think it's across the board basically.

I'm very happy, actually, frankly speaking, there's diversification geographically, but also diversification between balancing power and data centers and call it traditional baseload power. We don't want to put all our eggs in 1 basket being data centers. That might be a warm feeling shortly. But over time, I think it's not the best for Wartsila, and we think long term here.

Next up, we have Akash Gupta.

Maybe first one is on energy storage joint venture. I think you are now guiding for EUR 20 million to EUR 35 million total impact from EUR 40 million to EUR 50 million. Maybe if you can talk about what has changed in that calculation fundamentally? Or was it just like you were too cautious in initial guidance? So that's the first one.

I think it has a lot to do with the fixed -- I will not open it up too detailed, but the fixed transaction price versus the change in the balance sheet. I think that's the main driver.

Okay. And then maybe secondly, when you talk about capacity, I think you talked about 2019 (sic) [ 2029 ] when you look at the slots, they are either booked or in outstanding commitment. But when we look at '27, '28, are there still any slots that is still in outstanding commitments or all of the slots in '27, '28 are booked?

I would say, to be very honest with you we hardly talk about slots '28 anymore. So out of my head, I would say, yes, they are booked. If they are all firm in the order book already, I'm not sure. There might be still some pending down payment. As I said, we only book it when down payment is received. But when we also in the Board of Management talk about slots, we hardly talk about '28 anymore. It's all about '29 and beyond. So I would say pretty much booked and committed.

Yes. And then maybe if I ask another follow-up. I think a lot of people looked into average selling prices of your Korean competitor in four-stroke medium-speed engine that got some couple of orders -- data center orders in the U.S. with your ASP, and it looks like there's a quite sizable difference. Maybe just from a technical standpoint, when we compare your product offering and scope of your portfolio compared to theirs, is there anything that's worth highlighting? So maybe when we look at this number, we are not comparing apples to oranges?

I'm 100% convinced that this is apples and bananas. Even within our own orders, it's apples and bananas to compare. If you just deliver the engines and the whole generator and fuel handling equipment, filter equipment, cooling equipment, whatever, is done by somebody else compared to also doing that. We deliver equipment. So we are not doing EPC. But the equipment size can be so different.

It can be -- let's say, we have -- I cannot talk about the specific contracts because customers don't allow us to talk about it. But I can -- we have 2 exactly the same megawatt orders in our order book. But the price difference is almost double. And the only reason is scope, nothing else. And I'm pretty sure that when you compare our average to what now HiMSEN has taken, I don't think you can compare it.

That's also why we have said earlier this euro per kilowatt is not a good KPI. I understand it's the best you have and yes, that's what it is. That's also why in Q2, we said, okay, our order book is 500 basis points up basically, just to help you. But scope is a big impact item on euro per kilowatt.

I think the bigger question is more the competitiveness like because you are doing everything in Europe with European supply chain and they are doing it in Korea. So do they have any advantage when it comes to unit cost? Because when we look at their expansion that announced last month, it is way more significant than what you are doing.

I don't know. I don't know their supply chain in detail, but I'm pretty sure they have quite similar suppliers, at least for critical components than we have because there are not so many players in the world that can do it. Will they get better prices? I doubt it. Yes, it's difficult to say. It's -- you probably should ask them. But yes, I can only say that I think we are absolutely much more experienced in power equipment and delivering power plants. I don't think HiMSEN has any experience.

Now what we see happening in the market is that because of the shortage of power equipment, many customers go with players that have never done this before. Somehow, I have a deja vu of the scrubber times that when scrubbers, boosted some years ago, we were there, Alfa Laval were there. We had 2 or 3 big players, among us being one of them. And then you had a whole slew of parties that also delivered scrubbers, lifting on the momentum because there was shortage.

Now what we have seen afterwards with scrubbers is that, customers come to us and say, okay, I bought a scrubber from this company. Can you help us because it doesn't work? Yes, I don't want to say this is a one-to-one translation, but there are now many customers going with parties that have never done this before on very critical equipment, which needs a high uptime. Yes, let's see what happens in the future. But I think many will be disappointed also because one thing is to sell it, the other thing is to, execute and deliver. And there you can go really, really wrong.

I'm not saying that it won't happen to them, but the experience that we have versus what others have, especially, the ones that have never done deliveries to power plants is way different. And I can tell you that also we, in the past made mistakes. I mean you learn from your mistakes. But we are very mature. We are doing this for decades already.

And maybe if I ask...

I don't think HiMSEN has delivered many power plants actually. They are very good in marine, in particular, auxiliary engines.

And if I may ask a final one. I think when you look at your marine business, I think historically, marine has a bit higher lead times than energy, but now things are turning other way around because you have good visibility for 2029 already in energy, but I don't think you will have same in marine. So do you see any pressure among your customers to bring forward their orders because otherwise, there may be a risk that you might allocate that capacity to more profitable energy orders? And then maybe if you can also comment on the pricing that you're seeing on the marine side compared to energy side.

I would say in marine, we see also lengthening order books. If you follow our order book statistics a bit over time, you can see that the order books also in marine get longer and longer actually. Yard order books are on a record long. So it's 4.3 years now, the latest number I hear. And also for yards, they also more and more want to lock their cost. If you want to lock the cost with Wartsila, even if the ship is only due for delivery 4 years from now, you need to place the order with Wartsila and put a down payment in. So what we see more happening is also earlier orders, which also means lengthening order books in marine.

Are we sacrificing marine slots over energy slots? No. We have, of course, we can. Our factory is very flexible. But you need to plan it well in advance. And we also want to maintain our reliable reputation in marine. Then on your question, are the prices going up in marine as well? Yes, I think they are also going up. But it's a very, very different dynamic, and it's by far not similar to energy.

In energy basically, the product that you sell goes to the same party that typically operates the plant. So the benefit or the intrinsic benefits of your solution fuel efficiency, water consumption, what have you, come straight to that party. You can also then link the life cycle agreement better to it. We can even operate the whole plant for you if you want to.

While in marine you deal with operators and shipowners that need to convince yards to say, okay, I want Wartsila equipment in because that's the best total cost of ownership for me. So the dynamic is very different. And the shipyards are typically very cost conscious. So they want to have the biggest margin in between. So they are tempted to squeeze you more on price because they don't care about all this fuel consumption. For them, it's just the price.

So we want to make the owners say to the yard that this is the equipment I want. The rest of the ship, you can do whatever you want. But the mission-critical propulsion equipment, engine and whatever pushes the ship forward, that needs to be Wartsila. And that is a bit more challenging to raise prices. But overall, I would say, also in marine, we see improved pricing.

Next up, we have Antti Kansanen.

I have 3, so I'll take them one by one, and I'll start with the shortest one, which is on the storage joint venture. Do you want to say anything on the impact to net cash position from this transaction, okay?

That's a quick one indeed.

Okay. So no need to try to dig in deeper on, I guess, advanced payments.

I will not tell you.

Okay. Nice and easy. Then the second question is related to estimating your energy equipment revenues in '27. And I mean, you provide the backlog split between this year, next year and beyond. And if I look at the EUR 1.7 billion, EUR 1.8 billion that you have for next year -- if I try to calculate the service portion of it, should I just take a sort of an annual service agreement revenues out of it? Is there something else on the aftermarket side that you already have on backlog for next year's deliveries?

The order book for next year -- what we show as an order book for next year and the years after includes also the life cycle agreement part. So typically, what you have in the order book is the newbuild and the life cycle agreement part and to a certain extent, especially when you approach now the year-end more and more, you have also the transactional part coming in as well as the, call it, the overhaul and retrofit projects.

They are a bit like newbuild, but shorter time in between typically. So if you want to estimate next year, I would say, take the order book for next year and compare it to what has the change been compared to the same situation 1 year ago and see how much service came in, in addition. I think you get pretty close.

But if I understand correctly, you include the expected 2 years agreement revenues in the order book...

That's why -- so in the next 2 years that portion of the order book of that is included, yes.

Yes, yes. But I could also look at the agreement orders and revenues you've had on a quarterly basis, and I think...

Yes, ballpark you can get it there. Yes.

Okay. Because I was just thinking that your production capacity obviously doesn't grow going into next year, but revenue recognition is another thing. So would you expect next year to have much more kind of power plant start-ups versus this year, which would then mean there's an increase on the revenue portion of it?

We are aiming for continuous annual growth. So I would aim for that, definitely.

And then the last question was on something that we discussed on the mid-quarter call with Hakan regarding kind of the Brazilian capacity auction, and he kind of mentioned that more orders expected from that largely because the Brazilians weren't fast enough to reserve slots. I'm just interested in who was able to deliver kind of a faster than you because the whole industry is experiencing the same trend?

And maybe more broadly, if you look at kind of capacity auctions in the future and your traditional baseload utility clients, what are their kind of planning time lines? I mean, is it the fact that you are selling out '29 quite quickly? Will that be an issue in this type of a traditional energy business?

For us, first of all, on the Brazil case. There were many parties offering with our equipment without having even aligned it with us on the delivery times that were required. So if you then win and when you have not aligned it with Wartsila, and we have not in this buoyant market made a slot commitment or slot reservation for you, there is nothing. Where did they then eventually get their power from. Yes, you need to ask them.

But we -- for the ones that we have firm commitment alignment as well, we have booked these orders. And we had even more than that. But if they are then consequently not fast enough in their decision-making, well, there is more demand than supply. We are not going to wait for a year or half a year, while the data center market is booming, and we have good opportunity.

So -- and I think they understand that as well. Where are they now eventually getting their equipment from. Yes, I hear, HiMSEN, I hear China, I hear many different things. But yes, that you should actually ask them. It's not coming from...

And in general, the long delivery times in the industry...

Yes, of course, that's more and more a challenge. And I think more and more customers realize that speed is of essence. If you're not fast enough in this whole tendering and -- or even outside tendering in your decision-making in general, when you need power equipment, you might be left outside and not having anything. So -- and that awareness is absolutely increasing, and we see it more and more. Those decisions are coming very fast.

But that's also why we have said many times that our pipeline is very volatile, things come in and out very fast. Also because our validity time of quoting is not so long, 6, 8 weeks, perhaps that we will hold. Sometimes a little bit more depends if it's a very strategic customer for us also in the long term. But if you're not making a decision in that horizon, then the slot is gone. You're at the end of the queue. And as I said earlier, if you're now a totally new customer with a new demand requirement, you probably end up in 2030.

Yes, I was just thinking like how do you look at the cycle? I mean the data center clients is one thing. They have the time to power is very critical, and they might order just based on delivery times. But if you look at those delivery -- sorry, traditional energy clients. Are they making suboptimal decisions? Is this kind of a super cycle where anybody who has free capacity will just fill the slot? Or are those guys willing to wait the extra year, extra 1.5 years so that they would get the exact setup that they actually want to achieve in that? How do you think about it?

I think it's not one-size-fits-all answer. Of course, it varies a lot by region and what is the circumstance in particular parts of the world. I think there are many customers that need -- also because renewable is still the biggest capacity expansion on an annual basis. They are intermittent. So you need balancing power. It's not just data centers. That is, as you say, the sooner the better. That's basically the mantra there.

But also on the other side, with more and more renewables coming in with coal being switched off, you need balancing power. And if you don't have the balancing power, you also face trouble basically. So I think the urgency or the understanding of the urgency is quite high among many customers.

Okay. And just because the first question was so short, I'll squeeze in a fourth one, which is on the service agreements and the aftermarket potential on this big backlog that you have built and shipping out? And when should we expect theoretically announcements from data center service agreements or in general, how does it work? Is it at the delivery? Is it after the warranty period? When it's usually the time when you will get those? And what do you expect to be kind of the conversion ratio on -- because we know that you've moved up on kind of the agreement coverage on your installed base. But what has been kind of the incremental conversion on new orders in recent years?

I would say, currently, the conversion rates, let's call it, the attachment rate on new orders, getting eventually a service agreement on it as well, I would say it's 80% plus as we move along. Of course, it's always a timing issue. I think on the big backlog that we have now had, I think the scoring will not be very different on that one, including data centers. I think we will get orders there. Nothing booked so far. I think Hakan mentioned the same. But I'm very positive that we look at something reasonably soon.

Okay. And just I want to clarify, the 80% is for the agreement and the 20% will then be transactional parts. Otherwise, they lose the...

Yes, yes. If they don't want to have an agreement with us, that's fine. But then typically, they buy spare parts or field service whenever needed.

Next up, Mikael Vehkaoja.

You touched briefly the balancing power question. Like you said, all in all, energy consumption speed is of essence. I was thinking about the situation here in Finland. Big data centers are coming and there is a big increased demand, which leads us to this question of balancing power. Do you want to tell us anything about Wartsila's plans? How do you think you could position yourself in energy mix for the balancing power? Are there any negotiations there? How do you see the big picture playing out?

I would say long term, the major growth is probably coming from there, balancing power. We have the best solution for balancing power. We have fast [indiscernible] the intermittency needs something else. Turbines cannot do what we can do, from a start-stop times point of view for derating in high altitude or humid conditions, water consumption, it's almost zero. So I think we have a lot of intrinsic features in our equipment that clearly makes us stand out in balancing power.

And yes, we -- if you follow announcements and also what we publish on a quarterly basis, you can see how much balancing power we sell. So yes, clearly an opportunity for us. I would say if you look at the buckets in energy, I'll call it, okay, basically 3 buckets, traditional baseloads. Here, you need to think about, Africa, South America, microgrids in the Caribbean Island grids, mining, industrials, et cetera. I would say that's a pretty stable market. It has been stable for quite some time already. And we take a fair share of that.

Then you have the balancing power, which is really for intermittency of renewable energy, and that's a growing market. And then you have on top of that, you have the data centers, which is really growing at the moment. I believe it will last a long time, but there are many opinions about it. At least we don't see any slowdown there as well. So these are the buckets. And yes, I would say, definitely, data centers and balancing power are the main growth opportunities.

And if you think about the balancing power and the CO2 emissions. And can you -- what kind of impact would that have? It's still there running with fossil fuels?

That's, of course, the choice of the operator. Our engines can run on biofuels as well, if you have biofuels available, we can run on ammonia. Yes. If ammonia is available, we can even run on hydrogen if hydrogen is available. So that's the choice the operator needs to make. And that's also what we said when we, several years ago, defined our new strategy, it's around decarbonization and moving up the service value ladder from a commercial perspective.

And that's also why we consciously at that time said, okay, it starts with us. If we cannot show that these new fuels can run in our engines, nobody will invest in fuel scaling or nobody will invest in bunkering facilities in ports for those fuels. So it starts with us. So -- we have spent much more R&D in the recent years to really make that happen. Today, we can say that any fuel, we have engines available for that. Even hydrogen, they can run on hydrogen.

Yes. I'm totally aware of that, but the reality, I suppose, is that not that many machines in the present time run with those new solutions. So I mean like the present situation, what's the CO2 emission like with the fossil fuels that most of these engines run with?

Most of the engines run on LNG today.

Yes. All in all, when they're used in the balancing power, still they are just a part of the solution. So I guess in the total mix, the realism is still pretty good compared to coal, for example.

Yes. Absolutely. And many countries are switching off coal. So -- as an alternative, it's absolutely the best solution available in the market right now.

So where is the limit with these machines? How much can you produce this balancing power? You are talking about shortages in supply and like you say that the demand is through the roof everywhere. So how far can you go there because the demand is enormous?

Yes. That's also why we announced -- 2 capacity expansions earlier this year. So, we can say, okay, we want to triple the capacity. But we need to be realistic. When we say, okay, we expand our capacity, we also believe that we can do that. And it's not, per se, our own bottleneck, our own facility that is the bottleneck, can the supply chain keep up with you.

And when I say supply chain, it's hundreds of suppliers because if one part is missing, you still don't have an extra engine. So to make sure that the supply chain can follow, that's the critical part. Yes, the demand is high. But if supply chain cannot follow, you cannot expand.

And at the moment, we don't have any questions in the queue. [Operator Instructions] And yes, a follow-up from Antti.

Yes. Just a follow-up on kind of my previous question on the expected deliveries next year, Arjen. When you said compared to the situation a year prior, just remind you, were you already a year ago sold out for this year? I mean I'm just thinking that you can't add to your equipment order book anymore in the second half. I suspect that last year, you were still able to.

It's a good question. I think it was a little bit less out of my head now. But I don't -- I have so many numbers in my head, Antti, that I'm not exactly sure about this one. But I think it was a little bit less.

And then the thinking is that the backlog for next year, second half, you will add spare parts, you will add retrofits, things like that, but kind of the agreement and equipment part already is kind of there?

If you think field service and spare parts, typically, the order book is, I would say, 3 months forward. And then you can still have in that 3 months in-for-out parts, but in that horizon, you should think. Then, spare parts and field service, you should think beyond 3 months.

And then do you want to provide any color on the 500 -- more than 500 basis point improvement? How will that stretch over the upcoming years? Will we see something next year already?

Yes, I think you will see something next year already.

Let's wait for a moment if we have any other questions. It seems that there are no more questions. So I think we can start ending the call. We will publish our Q2 report on the 27...

Q3.

Yes, Q3 report on the -- thank you, Arjen, 27th of October. And then a week later on the November 3, we'll host our CMD. So we'll catch up again then. Thank you all for the good discussions and good questions today. And thank you, Arjen.

Thank you very much. Have a good day.

Okay. So, hi all. I'm Hanna-Maria Heikkinen and I'm leading Investor Relations at Wärtsilä. Well, warm welcome to the strategy call with Wärtsilä CEO, Hakan Agnevall.

The purpose of this call is to provide equal M&A -- equal Q&A opportunity with Håkan, and there will be no material new information and no slides on this call.

The purpose of this call is to focus on our long-term business opportunities. And as a reminder, we will host the pre-silent call on the 1st of October, meaning next week, together with our CFO, Arjen Berends. So let's leave the questions related to detailed financials to that call. And on next week's pre-silent call, we will also discuss the details of our energy storage joint venture.

So let's leave all the questions related to energy storage joint venture also to next week's call. Håkan, time to start.

Yes, and a warm welcome, everybody. It's time for the CEO call again. And I mean, if we continue the practice, I try to give you an overview of where we are heading and how we see the market evolving, and then we open up for Q&A.

So if I start overall, I think we continue to see a strong -- very strong demand on the markets. And if I start with energy and then go to Marine. On the energy side, yes, it's data center growth continues in a good way, I would say, high level of activities.

We have a dynamic portfolio of opportunities in different -- various maturity stages, but it's evolving. And there are new orders coming in. And when we have -- if and when we agree with the customers, we will, of course, communicate those orders.

But as you know, there is always a time lag between -- or normally, there is a time lag between when we sign and when orders are announced. But I would say that the data center demand is holding up. But it's -- and I'd like to highlight, once again, it's not only about data centers in Wärtsilä Energy. Balancing power also very strong. U.S., absolutely, a midsection of the U.S. Australia coming very high level of activities, a lot of tenders coming out, starts to come in certain countries in Europe as well.

So Finland is one example, but there are more examples to come. So the balancing narrative, it's really supporting us. And on the traditional baseload side, also good levels of activities in our traditional markets, Southeast Asia, Latin America, et cetera.

So many drivers coming together. It's the general electrification of industries. It is need for more cooling in a hotter world, air conditioning. It's data centers. It is the aging infrastructure, energy infrastructure, certainly in the U.S., but to some extent in Europe as well, and it's the balancing power.

And it's all those opportunities together that makes us optimistic. And this is also why, as you know, we have been investing for the future, expanding our capacity. Then on the Marine side, also demand is holding up in a good way. And you probably saw the latest Clarksons data and which kind of -- it's an external proof point of the story that we are conveying and that is our core segments are performing very strong.

I mean, Cruise, we are clearly not in tankers. Tankers was up a lot in Clarksons latest, and that's definitely not our core segment. But Cruise, LNG will come probably in '27. Offshore, even containers is hot, so to say.

So I think that there are good opportunities going forward. I think Hormuz is having a little bit of an impact on our service business, not huge, but there is a little bit of slowdown because the one type of category of customers, the fuel prices are up, and then they tend to postpone certain maintenance forward because you have a budget.

And if you spend the budget on fuel, you prioritize that for a while. It works for a while, but not for the long run. And there are also some of our customers on the container side, they have very favorable rates. And so they postpone maintenance for those reasons.

So the business are not lost. Definitely, it will come, but there is a little bit of slowdown on that. But in general, Marine is holding up. And on the service side in general, I mean, you saw Q2, I mean, for Marine and Energy combined, the order backlog was up double digit.

Marine was a bit flat if you look organic, but that was based on a high comparable quarter last year. And as I said, there is a little bit of the Hormuz impact in that as well. So overall, our growth narrative on the energy side is also continue to hold up going forward. What's new, so to say, and what we have made public, we have Tokyo Gas, the cooperation agreement with Tokyo Gas.

These are not orders, just to highlight that. But we have a long-standing relationship for several decades with Tokyo Gas, and we have supplied engine power plants in -- for them in Japan. And they are now identifying data center opportunities in Japan, and we will work very closely with them. And it's a fantastic partner for us to have long-term relationship and very well established in Japan.

And it also underlines a little bit what we've been saying before. But yes, there is a lot of growth in the U.S., but there will be a growth in several regions going forward. And I think this is one of the concrete proof points of that. So that's one thing. I know also that there is on the data center side, there's been a lot of discussion about how will the off-grid segment grow going forward, and there are different types of statistics.

I mean everything from 30% even to 50% of the new build for data centers in the U.S. will be off-grid or behind the meter. I don't think nobody knows the exact, but it's going to be a significant growth avenue. Also, this whole notion that 6, 7, 8 years later, there is a grid connection coming in. What does that mean for Wärtsilä? I mean -- and you can go back to our data center call earlier this year.

This is going to be good, and this will be good. And why I say that with a certain surety is that when I talk to some of our data center customers, they are envisioning this. And then they will use the power for -- or they will actually add a couple of modules to the engine power plants, and they will become an actor on the grid.

The key thing to be a competitive actor on the grid, you need fuel efficiency and you need flexibility. And as you know, these are some of our strengths of our technology. So we clearly see that. And also the other third element that we identified with the increasing share of renewables, I mean, the hyperscalers, they -- for sure, they would like to go green and renewables will come. It's a very affordable source of energy.

And then you can use the engine power plants for balancing. And so in all of these scenarios, I think we will -- we are having a strong technology. And we also come back to the Q2 notion of we are building an order backlog with good profitability. We have good opportunities for price realization. And we disclosed earlier, I mean, in Q2 that the new build order backlog in energy, I mean, if you look at the margin there, it's up 500 basis points compared to when we start in 2025. So it gives you a certain indication. I think that's a short summary, and let's open up for questions.

[Operator Instructions] So the first question comes from Sven Weier.

A few questions, if I may. The first one, Håkan, is on the Texas update we saw this week that permissions are put on hold. I was just wondering how that impacts your order pipeline. And -- but with a longer-term view, we have obviously also seen that water is going to be much more important in the decision-making going forward. So could that actually end up being a positive outcome for you? That's the first one.

So if I start with that, I mean, my understanding -- because it's a very dynamic environment, that's why I make the caveat. My understanding of the regulatory -- or the announcement that was made by the governor, that was related to if you want to hook up to ERCOT to the power system. And there is this 1-year consideration period or I don't know the right formal term.

Now it doesn't affect off-grid. And this is our major market in Texas on the data center side. We are on the utility side, but there we are on ERCOT, but more for balancing power. So when it comes to data centers, it's -- we are off-grid in Texas. So it doesn't have a major impact so far at least. And what was the second part of your question, Sven?

Yes, just on the water consumption because I think that was now featuring more prominently.

Yes. No. And that is a big advantage for ourselves clearly because we have a closed loop cooling system, and you need to top it up a little bit. But we consume like thousands of times less water than the gas turbine competition.

So this is -- I mean, as this becomes more into consideration, it gives -- it's an advantage for our technology clearly.

Another question I had was just because you said with a view to data centers, there are new orders coming in, but you haven't announced one. So should we take that as a sign that you booked orders but haven't announced them yet. So is this completely fair?

Yes. I would put it like that. I mean we continue to take in orders. And like always, like many times, there is delays between us signing orders and announcing them. So overall, the order intake side on the data center side continues to look good.

The next question comes from Antti Kansanen.

All right. A couple of questions from me as well. And I'll start with the cooperation with Tokyo Gas that you Håkan highlighted. And I mean, you said that you have worked with them for a number of years already.

So what's really different with this cooperation? And would you be able to talk any kind of market opportunities or the Japanese kind of data center power situation in general? Are they suffering from the same issues with the grid? Are they getting baseload off grid solutions from you? Or how does it look like?

So basically, our long-term relationship with Tokyo Gas is to provide baseload, but actually balancing power to -- I mean, if you look at the most recent orders, the last, let's say, 5 years, I mean, we have a relationship with them for, I think, 30 years.

And in those -- if you go about 20, 30 years, it was smaller power plants for baseload in different parts of the Japanese energy system. But the last 5 years, it has been balancing power plants. The latest one is Sodegaura, and it's a 100 megawatt -- 100, 120-megawatt balancing power plant in the Japanese system because why Japan? Because they have actually created capacity market.

And they have also decreased the granularity where you evaluate the power swing. So I think they have a 5-minute time consideration when they see how the power is moving. So that's why we are so established with Tokyo Gas in the Japanese power mix.

Now what is new here is that Tokyo Gas and you could talk to them, they are -- they see the demand for data centers in Japan. There will be data centers coming in. So there will be need for power. And I think there will be a mix between both on-grid power and off-grid power, so to say.

Here, we need to see and how it evolves. I think people are getting formulated. But I think for me, what I'm exciting about, I mean, Tokyo Gas is a very well-reputed player in the Japanese system, and we have worked with them for decades. And when they do something, they do it seriously.

So I cannot go into details of how many megawatts, et cetera, or gigawatts it will be. That's too early to say. But there is certainly potential in the Japanese market because, of course, Japan is also -- I mean, we also know the general narrative in the world is the national sovereignty. And of course, Japan wants to have data centers on their own soil.

Okay. And then the second question was more broadly on the timing and deliveries on the data center side. And I guess you're almost fully sold out for '28 and filling up '29 right now. So could you talk about a little bit about what the clients are asking. Is there a fear that at some point when you are filling up '29, the delivery schedule is too far out and that might cause some type of plateau? How do you stack up versus your engine competitors in terms of delivery schedules?

So I mean, first of all, I can confirm that we are sold out for 2028, and we are selling '29 and start to sell 2030 now as we speak.

Yes, I mean, if somebody can bring a very short delivery time in 12 months, they certainly have a competitive advantage. But I cannot comment competition. I can just comment on our own pipeline and what we see. And we see a trend that continues.

So right now, I mean, as we are moving towards the end of this year, and now we start to sell end of '29, beginning of 2030. So there is a window moving forward. Now you cannot sell in -- we have not been able to sell in 2034 yet. My key point here is that this moving window, I mean, let's say, I mean, you talk about 3 years delivery time or however you want to position it. It continues to move forward in time, so to say.

So I mean it's not an issue if you are talking about, let's say, ability to deliver '30, '31, '32, there are still other constraints on the projects that you are kind of still well in line with the customers are?

Today, we are not selling for 2031. We are selling for '29 and '30. But my key point when we talked 6, 7 months earlier here is that then we were selling end of '28, beginning of '29. And now 6 months later, that's why I say this window keeps...

Yes, yes.

It's not stopping. It's not that all of a sudden, "Oh, we cannot sell anything because we have too long delivery time." No, that's not the case. The market is digesting the delivery time, and we continue to have good strong order intake.

And then the last question was on the service contracts for these data center power plants. At what point of time in the delivery schedule or the start-up schedule would you expect to get those service agreements, if you expect to get them? Is it before the warranty period? Or do they -- is there kind of a 2-year warranty already baked in? So kind of after the start-up, you will start to then discuss on the longer term. So how should we think about phasing of those announcements?

I think that we -- and there is not one story fits all customer. But if I talk about the clear majority of our customers, it will be very early. I mean we are in discussions on service contracts with certain number of customers that have placed the new build orders that we have announced.

So the service contract, they are in a very close future, so to say. It's not going to happen. I mean it's not going to be that we -- this will wait for 2 years or something. It's going to happen. But now -- right now, I think many of our customers, they are so busy signing new build contracts. So that's why we -- they haven't signed immediate service contracts. But there are clearly negotiations ongoing. So there will be orders, absolutely.

The next question comes from Uma Samlin.

So my first question is you mentioned that you're starting to see also very strong demand on balancing power in the U.S. Just wondering, is that also data center related? How do you see a market for balancing power for the data center space? And if so, how big is that market? Do you anticipate that to be?

So the general narrative on balancing, especially in the midsection of the U.S. is not new. So it's been with us for a couple of years already. I just want to underline that, that continues, and it continues to be a very interesting market.

And the major driver for that market is cheap energy. I mean, at the end of the day, wind and solar provides very competitive power, but you need to balance it. And that proposition, I mean, balanced renewables. So you combine, let's say, wind farm with some batteries with thermal balancing.

If you look at the LCOE -- I mean, the levelized cost of electricity of that, you can say, system, it is very competitive. That's the key driver. Now on top of that comes now the data centers.

And of course, we know there is a lot of data centers in Texas. And that is on top. But I would say in data centers, and you know it, it's everything about delivery time. And right now, in general, there is not so much focus on renewables. So -- but as I said, over time, clearly, the hyperscalers would like to have renewable power.

But right now, it's the rush to power. So the balancing narrative so far from our side has been more the traditional balancing, the traditional utility balancing power narrative.

Yes. That's super clear. My second question is on pricing. You mentioned during the Q2 results that you saw like 500 bps of margin increase. How should we think about that going forward? Do you see continued increase there? Like have you started to see customers pushing back on prices? Just any update on that would be great.

I mean -- and I've been also, I think, I hope consistent in this message. We have good opportunities for price realization. But at the end of the day, the business cases needs to make sense for our customers, and it's always a balance.

So we have had good price realization. We have had happy customers and exciting about the projects that can get the businesses together. I continue to see good opportunities for price realization for us.

The next question comes from Anders Idborg.

Just wanted to ask a bit about -- it was good to see the divestments of the final portfolio of businesses come through in June. I was just wondering if you could open up a bit more about the structure of those deals.

I saw there was a -- in terms of cash flow, there was a negative in Q2. So have you provided for contingencies in existing projects? Can we be certain that there are not other project risks remaining in the sold assets? That's I just wanted that clarification.

No, I think without going into all the super details, then I will have to refer you to Arjen next week. Sorry about that. But I mean, overall, to what I understand is the core of your questions. Will there be negative surprises from those divestments that we have made? I mean the reason -- no. They are closed.

Okay. Okay. That's good to hear. The other question, just it's easy -- sorry, it's early in the ramp-up of Vaasa. And of course, as we have looked at the delivery schedule, the idea is that it will accelerate in 2028 rather than in 2027.

So in terms of phasing of the cost of the ramp-up, do you think that will be matched pretty much with deliveries? Or do you see a period where costs increase before those deliveries take place?

No. So basically, just to clarify and then come to your core of your question. So yes, because I know that there's a lot of interest. So just the data that we have provided. So 2025, we were running at 75% of technical capacity.

This year, we will be running at 100% of technical capacity. I'm talking about Vaasa now. And then we will -- 2027, primarily running on 100%. '28, we have kicking in the first up 30%, 35% and then beginning of 2029, the second 30%, 35%.

So that's -- you could say that's the ramp-up. Then when it comes to the investments, et cetera, we capitalize some, it's not going to hit the cost in one major blow, so to say. So you could say it's spread out over the revenues and over time.

The next question comes from Sven Weier.

I was just coming back, Håkan, to your comments on the Marine Services side, where you talked about a bit of a softening. I was just wondering, I mean, in the first half, Marine Services was down 4% on retrofits. So is this now more going into the spare part bit? And is that a new phenomenon that you've seen in Q3?

Yes. So I mean, Q2, I have to point it out, I think we were up 1% organic in Marine. So then we were down on -- if you consider the FX effect, et cetera. So -- but it was a little bit slower growth.

And we highlighted that one thing was -- the major thing there was actually a high comparable quarter last year. So -- but then we also -- and as I said, now Hormuz have had some impact in postponed maintenance.

And so you already started to see that in Q2. And I think we will see this postponement for a while because you can postpone certain maintenance, but then you need to do it. So we will probably see this in this quarter as well.

But it's not like a sudden thing that happened in Q3. It's more a continuation of what you saw in Q2 already.

Right. Correct. And I think -- I mean, I hope it's an understandable logic. When some of our customers, because, for instance, the container rates, they are very high now. Then of course, they take the opportunity to really operate and make a lot of money.

And then they postpone the maintenance. And then you have other customers that where the fuel and the increased cost of the fuel, it's a significant impact on their operating budget, so to say. And then they reallocate the budget and put more money on fuel and on maintenance, and they had to postpone the maintenance. Then, of course, when knowing that they've taken additional risk by not maintaining. And at a certain stage, they will need to maintain because otherwise, there might be serious things happening so.

Next question comes from Antti Kansanen.

No, I guess -- yes, I wanted to come back to the capacity expansion plans on the longer term. And obviously, there's a bit more concerns now that everybody is building up an overcapacity in the market as the short-term kind of a data center demand is driving a lot of excitement and you are doubling your delivery capabilities and your competitors are doing the same.

So how do you kind of address these concerns over the long term? If you think about kind of the magnitude that you decided to do in Vaasa and also with your suppliers, how much are you doing yourselves? How much are you adding to suppliers? And when you kind of made those plans, how did you look at the long-term kind of prospects, especially on the energy side beyond the data center side, how much was driven by all of these factors that you are already discussing regarding electrification and coolings and things like that? So how are you kind of addressing the concerns that industry is overinvesting right now?

Yes. So first of all, I mean, if we look on the demand side, and I tried to highlight, this is a broader demand cycle than just data center. I mean, clearly, data centers are contributing.

But the balancing power narrative is, it's really strong. And what I'm excited and encouraged with, it's in the U.S., but now it's coming also in other countries. I mean Australia, now for the first time, there are engine tenders coming out for balancing power because there's an acceleration of the shift from coal to renewables in Australia, and it's in several parts of the country.

And they have -- I mean, Australia have been one of the pioneers in batteries, and that is good. But they have also understand that it naturally happens to be that's message as well that you cannot only do balancing with batteries.

You need thermal also. So now as a result of this journey, there are concrete tenders coming out for engines, not for gas turbines or engines. And that is new. So that's a very -- and as I said, I mean, a couple of countries in Europe, it starts to happen. And I take Finland as an example, which is fairly new.

I mean we delivered our first balancing power plant in Finland ever. We have just delivered it and it's operating. And I think the operating experience there is triggering a lot of excitement and people are making money, et cetera. Now we see it's -- there are also new tenders opportunities coming up, very concrete.

So there are those kind of proof points on the whole balancing narrative. And then on top, as I said, we have our traditional markets like Southeast Asia. Electricity demand is growing, electrification of industries, et cetera, et cetera. So it's -- I mean, quite frankly, this -- our expansion is clearly not only driven by data centers in the U.S. clearly not because then you could -- you would probably have a different kind of risk reward assessment, so to say. It's driven by this broader narrative.

And we do -- I mean, we have visibility. I mean we're sold out for '28. I think we have fairly okay visibility for '30. So it's really what's going to happen I mean, until 2030. And so what's really going to happen in '31 to '35 and beyond. And we think that the fundamental trends will still be there.

And that's, I would say, [indiscernible] fairly unique perspective that you can have this long term. Now on the supply side, if we go there, I mean, clearly, I mean, gas turbines are ramping up. We are ramping up.

I mean, we saw the HiMSEN announcement. We've seen the MaK announcement by CAT, et cetera, et cetera. Now -- so there will be capacity coming in. And let's see when demand meets capacity. I mean that we can have a long discussion.

I don't think anybody knows. Now what makes me excited about the future, I mean, then I'm talking beyond 2030 is a couple of things. One is this notion I've been talking about before, and I say this a little bit colored by the U.S. situation. When customers have tried the new candy, i.e., medium speed, not high speed, medium speed reciprocating engines with high fuel efficiency and high flexibility, they like that candy, and they will come back.

So I think that structurally, this is a great opportunity for us to grow our market share because more customers will be acquainted and familiar with our technology. So that's a great opportunity for us because the fundamentals are there, the fuel efficiency and the flexibility. So -- and that's why I see that as -- I like to keep the gas turbine guys in the leg, and we will continue to do so.

And because we have in our sweet spot, and we talked about it, the 20 to 600, 700, 800 megawatts, we have a very competitive technology. Yes, combined cycle gas turbines, we will not be able to compete with them, but the industrial and the aero derivatives, ladies and gentlemen, we have a winning technology. That's one thing.

So the other thing -- and then on top of that, we talked fuel efficiency, but now we have water coming in as an increasing issue. We have thermal derating in a hotter world, et cetera, et cetera. So there are a number of those parameters. It's nothing new. Then, of course, you could say, okay, Håkan, we believe that reciprocating medium-speed engines actually has a vital role to play in the mix going forward.

So what about your medium speed reciprocating engine competitors? Then I say we have the most -- we are a technology leader. We have the most energy-efficient medium-speed engines with the best flexibility. And I dare say we have the best service network in the world. And we have been in the U.S. for decades.

We have been in the U.S. for more than half a century -- that's fairly unique among our other competitors. So there are a couple of those strengths. But let's see how Antti. We will follow our -- hopefully, the coming years, and we will see how this plays out.

But I think we have -- and that's why I like this. We have fundamental concrete competitive advantage. And if we play this right, and we grow in a sensible way in a robust way where we deliver, we serve our customers with uptime reliability and fuel efficiency, we have something really good here.

I want to follow up on one thing. And let's assume that you have the best medium speed recipe technology there for fuel efficiency and uptime and all of that, and you have clients who agree.

And if we talk about balancing in Australia or in the U.S. or baseload in Southeast Asia, what are those guys kind of investment horizons or delivery times currently? If there would be somebody who is maybe not as good as you, but close, but they can deliver 6 months, 9 months earlier.

Does it matter for those guys? Or is it only the DC guys where the time to power is so critical? I mean, how do you balance on being on board with those maybe more traditional guys who follow their own schedules versus maybe taking those kind of high-margin DC deals right now?

So I think -- I mean, a customer, regardless if they are DC, if they're utility, they will always appreciate a shorter delivery time compared to what it is right now clearly.

So I think there is not one answer to your question. I mean it's like a balanced decision for customers where they take -- do I take a penalty in the life cycle economy of the plant because I will pay more fuel? How do I weigh that towards having a delivery earlier? I mean, right now, our medium speed, they are -- I'm not aware that they have significantly better delivery time than us.

But let's say if they would, it's -- there is not one answer to that. It's how different customers evaluate life cycle economics versus time. On the data center side, that valuation is clearly skewed to delivery time. On the utility side, I would say it's more balanced.

And I mean also, I got some question on this about HiMSEN. And of course, you should ask them. My understanding that they're going to put up a house. I mean, in a year, 1.5 years, but it's going to take them to 2030 to ramp up the capacity. So yes, let's see. But you should ask them.

We'll do, thank you.

Then the next question comes from Adrian Pehl.

So just a question on the ramp-up that you're doing at your Vaasa site. I was just wondering if you can elaborate a little bit on the flexibility that you have at this site over the next couple of years and how you do it in terms of -- will you have some flexibility in terms of temporary staff on lines you can put on, put off depending on the demand and how it evolves over the next couple of years, which is actually a question contributing to what has been asked before about if the demand at the longer end is getting a bit more difficult. That's the first one.

The second one is coming back to Tokyo Gas, obviously. I mean they must be aware of the scarcity of your production slots. You're saying it's not directly coming any orders or so. But what would be the next step, how to evolve this partnership then eventually leading to orders? What would be your wish list on how that progresses? That's it.

So if I start on the flexibility, and this also comes back to Antti's earlier question on competitiveness and how do we build that? So it ties to that because, I mean, we have an industry system that is -- where we build a lot on the suppliers.

So you could say it's a little bit automotive style, but of course, with much, much less volume. We do R&D, we do engineering and we do final assembly and testing, but we buy a lot from our supply chain.

And of course, we do certain in-house machining, but a lot is done on the supply chain. And of course, that gives a certain flexibility because you share the volume swings with the supply chain. The other area where we are clearly -- and that's nothing unique with the exception now of HiMSEN, nobody has been building new factories.

I mean if you look at the gas turbine players and also if you look at the other reciprocating players, they have all been extending or rejuvenating or revitalizing their existing or former facilities. And our strategy is the same. We -- because that is one way to deal with -- to create flexibility because obviously, if you set up a new factory, you introduce new fixed costs.

So it increased your general fixed cost level, so to say, in a different way than you scale up an existing plant. I mean using consultants or template, it's part of our normal mix, so to say, like it would be like in automotive, whatever, you have a certain share. We have always had that, and it's one way to deal with flexibility.

Then I would also highlight, clearly, we have a very good strong relationship with our units. I mean, Scandinavian unions, I commend them for their maturity. Of course, you always have the battle of terms, so to say. But overall, when it comes to structural measures, I think if you follow the Scandinavian environment, I think we have a very favorable union because we have unions that think about and clearly realize how do we secure the most number of jobs over time.

And then sometimes you need to take structural measures. So yes, I'm very happy of that. And I think it's a little bit different maybe from some other parts of Europe or I know it's different from other parts of Europe. So actually, that is part of the whole equation, so to say. Then Tokyo Gas, coming to that.

Now let's see how fast it will turn up to orders. I think you should ask Tokyo Gas. But I mean, they are seriously looking into building power for data centers. And they -- I mean, I've said before, and I hold to that statement that how do we allocate our capacity because in this very favorable market situation, it's a little bit how you allocate. And we said that we do not put all our eggs in the data center basket.

And we have also said we want to be -- we want to diversify our geographical presence. We have strategic customers, both in Marine and Energy, and we will honor those relations. And Tokyo Gas, I would say it's one very strategic customer for us where we have decades long -- or 3 decades long relationship. So clearly, when we talk about where do we put what, Tokyo Gas is high on the list.

What I took it right that you're not working with any kind of slot reservations, and that is also a topic for Tokyo Gas they won't get a reservation in that sense, right?

We are not working with any customers on [indiscernible] reservation. I think we have been consistent with that, and we continue to be consistent with them.

The next question comes from William Mackie.

A couple of follow-ups really. The first one relates to the emissions and permitting backdrop for the U.S. power market for data centers.

I mean we've seen tightening, I think, at the Strait of Hormuz level and maybe loosening at some of the federal levels with particular technologies. I wonder -- I mean -- and there's also a debate when we look at prime power and the number of hours that prime power is expected to run that some of that creates delays to permitting.

So there's clearly no problem in demand. But I think when you build your order book and when you look at your order book for data centers in the U.S.A., how do you think about time lines and the risk of slippage? And to what extent could permitting or emissions-related slippage impact your profile around that business?

So I would say, I mean, we don't take risk on our customers' project execution. And included in that bucket of our customers' project risk is they are responsible for the permitting.

And so we don't take risk on that because we sell our engines. So you need to sign up for an order. So if a customer, in our case, and sorry to be a bit black and white, but here, if the customer gets problems with the permitting, they still need to buy the engines.

And if they need to terminate -- they need to terminate the contract and there are provisions for termination and there are of course, compensation, et cetera, et cetera. So it doesn't have direct impact.

Now the other thing that we've been trying to do is -- and that is also putting our eggs in different baskets. We -- on the data center customer side, there is also a vast array of different type of customers with different level of experience, everything from the very experienced to the newcomers.

And we try to work with some of the well-established players that have experience and also, in many cases, have global ambitions or actually global footprint, so to say. So yes, so customers running into permit problems, it's their problems. We have, of course, obligations on our side, delivery time and quality, et cetera, but permitting is not in our scope.

That's very clear. And coming back to an earlier question about attachment of service. To what extent do your customers agree in principle to attach a service contract to your engine sale? And to what extent do they have an alternative? What I mean is actually the service contract will come. Is it just a matter of time? Or do they have an alternative? And is there a risk your attachment rates fall below one 100%?

So over time, so basically, for the vast majority of services, we are the only ones that can provide it because we are the only ones that really know in-depth technology.

And I mean, let's look at our service offering. So I want to give you a little bit more granularity and expand here. But the general answer is the high level of stickiness. We talk about our service value ladder. I mean if I sum up our strategy, it's moving up the service value ladder. And there are 4 steps in this service value ladder.

The first step is the transactional spare part business. The second step is the agreement business. And we have a fairly broad array of different type of service agreements we adapt them to customer need. The third step is the retrofit project. So these are upgrading existing engines to new fuels or making them more energy efficient. And the fourth step is the performance-based.

And this is where we make long-term agreements, 5 to 10 years, and we have bonus-malus, clauses, et cetera. And moving up the service value ladder is that we want to make -- we want to move all customers up this ladder because there is more stickiness, there is more revenue, and it's a way to grow our business.

So now coming to your question, we will always have the spare part business, clearly. But that's not sufficient for us and normally not for the customers as well because they need more help. So on the data center agreement, there is certainly going to be agreements, and they're going to be with us. Now some customers want full operation and maintenance agreement, then we don't even operate the plant for them. But some customers say, no, I'm going to use somebody else to operate the plant, but I still need Wärtsilä to service and maintain the technology, so to say.

And then they are all -- and since this is very early stage, but I would envision that we will have also data centers that will go to performance-based contracts. So answering your question, there's a high level of stickiness there. I mean on the first step, there is nobody else that can do the job.

On the agreement side, if you look at operation and maintenance, yes, you can contract with somebody else. But the technical more regular service and agreements, basically, it's Wärtsilä because we have the technical knowledge. And on the performance base, there will only be Wärtsilä.

The next question comes from Anders Idborg.

A follow-up. But on the Marine side, I agree. I mean, looking at the contracting, it has increased further. So normally, when we look at this, it should lead to sequentially higher equipment orders for Marine.

But given the tightness in the engine market, is there anything that is different now? Are customers placing engine orders earlier perhaps to secure a slot? How are the lead times working out in regards to Marine customers here?

And it's in line with what we have said before, and that is also on the Marine side, the lead times are getting longer and longer because maybe not so much so far for engine, but more for slots with the shipyards. So -- and especially if you go into cruise, I mean, you're way into the 2030s if you want to order a new cruise vessel.

And then, of course, once you ordered it, you want to lock up the equipment and it's a very important equipment, so early. So also in -- on the Marine side, the lead times are getting longer.

Yes. And are customers ordering engines earlier than usually, or.

Yes. I mean if you -- earlier clearly then.

It's in relation to delivery date of the vessel, obviously.

The next question comes from Tom Skogman.

You seem very positive about the Marine prospects and you don't really have as overheated orders as in the Energy side. So I just wonder what would it take for you to upgrade the demand outlook for Marine? We already know that vessel orders are strong, shipyards are expanding faster than expected. So what is the kind of missing piece to say that demand really will improve for you in Marine?

So I think there, it's -- and we kind of alluded to it. We are already on an all-time high level. So I mean, when we have issued our demand guidance and we guided similar to your point, both in Marine and Energy, we also said clearly, you need to see that we are running at all-time high level.

And for our order intake, of course, now, I mean, Vaasa is running at 100%, but it will take us some time to ramp it up. And we are already sold out for 2028. So if I had more capacity than we are currently having and have announced, I could sell it.

Then another question about AI in service. I've noticed some engineering companies are now more kind of outspoken about how they aim to use AI in pricing and resource utilization in service. Can you open up what you are doing and when we could start to see some benefits from that?

And Tom, I appreciate you a lot. Now I'm going to make a little joke here, so forgive me. You can see it already in our annual report for 2025. It's there, concrete. It's nothing new.

I mean, we are -- there is so much going on, on the AI side already. So for us, this is -- I mean, not being arrogant, but this is nothing new. When we talk about AI in Wärtsilä, we've been talking about 2 focus areas.

One is how we use AI as a tool in our toolbox for continuous improvement. And this is happening all over the company. And we are not unique here, I would argue. I mean any industrial business, they are trying to do. And there, it's very concrete. I mean it used to take us a day to compile documentation for the classification societies that needs to approve certain things.

Now with the help of AI, we do it in minutes. These are very concrete examples. Here, I would argue in this -- the most important to be successful in AI and continuous improvement is the continuous improvement culture.

And this is something we are working on in Wärtsilä and evolving. But the AI tool itself, it's not the latest Claude version or whatever. It's the mundane AI, so to say, but very valuable.

And it does create value. There is no doubt. The second focus area that we have been talking about when it comes to what we are doing in AI in Wärtsilä is exactly what you mentioned, Tom.

And that is how the strategic bets that we are making to support our service business because service is more than half of Wärtsilä revenues, as you know, and it's a good source of customer interaction and profitability also.

And what we are doing there, what we are concretely doing there is that we are creating an edge platform. I mean computer platform several stages and the data architecture, so you can have data flowing -- usable data flowing in a good way because we are in remote areas, so we are at sea, et cetera.

So there's a lot of investments. I mean we're talking hundreds of millions of euros going into that. You have the WISE program in Finland, EUR 200 million over 5 years. So investing in this edge platform, data architecture and then combining that with the knowledge of our people.

We have so many knowledgeable people, so they can use the right tool and have the right data-driven support. And what do we provide? -- uptime, reliability, and reduction of fuel consumption and reduction of emissions. This is kind of customer proposition. And this is what we are integrating in our service business. This is one of the fundamental pillars for moving up the service value ladder that we talked about earlier. So it's very well integrated into our strategy. And it's ongoing. We have a lot of potential here, and -- but we have started clearly.

But I guess there must be a lot of potential in kind of trying with pricing and pricing power in certain products and areas and stuff like that as well. Or I mean, are you doing that already in a sophisticated way? Or will it be very different a couple of years from today or?

So I cannot comment on the level of sophistication, but we are clearly using, you could say, data-driven pricing, leveraging a lot of data that we have. I'm sure we can evolve it going forward.

But as I said, and I'm really excited because we are really -- of course, we are providing power to AI. So we benefit from that, and we're excited about that. But I am and we are really excited about the potential of AI to drive efficiency and develop the customer offering and making sure that we get paid with pricing, et cetera. There is a lot of potential. What I'm happy with is that there is curiosity in Wärtsilä. We want to adapt.

There is much more curiosity than negativity because we also know in the current overall discussion in society, there is a lot of concern and rightful concerns about AI and what will it do and will people lose their jobs and will -- could it even kill humanity, all those big questions.

But from how Wärtsilä is -- how AI is perceived in Wärtsilä, it is a positive. We see it as an opportunity. And the concrete proof points are the good things that there's so many good things going on in continuous improvement. And then it's hundreds of millions of euros investment into AI for our service business.

And there evolving the Expert Insight platform and the customer offering, the performance-based contracts, you know them. We are evolving them. There are more customers coming in. So I think we have good proof points and there is a lot of more opportunity to come, and we are investing. It's one of the areas where we are really investing.

Like we are investing in engines and the fuel efficiency and fuel flexibility. AI is a second major area where Wärtsilä is investing.

And finally -- sorry, and of course, not to develop large language models. I mean that's clearly out of our competence and scope. But how do we apply those to create value for our customers in the -- in our 2 industries.

And on the second -- sorry, in the second area, this is how to leverage AI for service business. We want to be best in our industries, not in the world, we will never be afford to do that. But we want to be leading in our industries. Like we are leading in fuel flexibility and fuel efficiency in our industries. We want to be leading in how we apply AI in our service business in our industry.

Then finally, on Brazil, there was, I mean, 19 gigawatts of power that companies committed to installing before 2031, whereof 10 gigawatts is gas. And to my understanding, this is balancing power. So it's either aero derivatives or your solution. And you have only announced one order so far. So what am I missing here? I mean they should be in a brutal hurry? Or is it so that there will not be any sanctions if you are late or what happens?

So I think we have some orders. But I mean, also to be frank, I don't think there will be so much more coming because we are sold out. So we have sold our capacity, and we could sell more in Brazil.

But I mean, unless -- I mean, if there are some new auctions coming out, we cannot meet the delivery times because we are already sold out. So that's the -- so to your point, could we have sold more in Brazil? Yes, but we didn't have the capacity.

Now the last question comes from [ Sara Jamila ].

Just a follow-up on your various comments about running at all-time high demand and capacity. Would you hypothetically have the actual physical ability to increase capacity further than you've already announced? So for example, do you have the physical space in Vaasa and would the supply chain physically be able to do that? And if so, what would you need to see in order to justify it?

So the first question is -- I mean, the answer to the first question is yes, we could expand further. Second, what do we need to see? I mean, I'm sure you noticed that we have had a kind of staggered approach on making announcement of new capacity investments.

And that's one of the kind of derisking strategies from our side that we form a certain view and then we invest and then we go and we get even more confident and then we invest even more. So what is the key decision criteria is that we -- for further investment is that we continue to see this trend extending even further out in the future. And then we can -- I mean, I'm talking well beyond 2030, as [indiscernible].

And then we can certainly take more steps. Yes, there is more supply, we talked about that coming in. So of course, we need to consider that. We need to be disciplined. However, I'm still coming back on this. Our technology, the medium-sized reciprocating technology has in our sweet spot, very competitive features.

And that sweet spot in terms of the overall market is growing. So that's good. And then within the medium-speed reciprocating engine population of suppliers, we are a technology leader and have a very strong service offering. So we look probably more on the demand side than the supply side.

Thank you. I'm afraid that we are running out of time. So as a reminder, we are hosting pre-silent call together with our CFO, Arjen Berends next week on October 1. And then please remember to register to our CMD. There are only a couple of seats left for the face-to-face event. Luckily, there's always plenty of seats on the online event. Thank you.

Thank you, everybody.

Thank you.

Good morning, and welcome to this news conference for Wartsila results for Q2 2026. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will go through the group highlights, business performance. And after that, our CFO, Arjen Berends, will continue with the key financials. After the presentation, there's a possibility to ask questions.

Hakan time to start.

Thank you, Hanna-Maria, and welcome, everybody, to Q2 report, Q2, which was a strong quarter, I must say, and I'm very happy to say. So all-time high order intake and improved operating results. We continue our journey. So total order intake increased by 33% to EUR 2.8 billion, and that is an all-time high quarter in the history of Wartsila. And we recorded all-time highs, both in Energy and Marine. So all-time high quarterly order intake for energy, close to EUR 1.7 billion, all-time high also order intake for Marine at EUR 1.2 billion. And that brings us to an all-time high. It's a lot of all-time highs today, all-time high order book of close to EUR 9 billion.

And here, we have a very interesting also piece of information, and I know many of you have been asking about this. So we are providing some clarity now on margin content in order backlog. So -- but first, since the start of 2025, energy order book has more than doubled. While the gross margin of the energy equipment order book has improved by more than 500 basis points. This is what you have been asking us a lot. What has been the margin development in Energy's equipment order book. And now we have it, plus 500 basis points since the start of 2025. Marine and Energy combined service order book increased by 11%, ending up at an all-time high of EUR 2.6 billion. Service 12-month rolling book-to-bill continues to be above 1 now at 1.07.

Net sales remained stable at EUR 1.6 billion. But if we look at the organic net sales, it's actually up with 5% and we will talk a lot about reported and organic today. And you will see we have quite a lot of difference, and that is driving by 2 things. We have divested. You've seen made divestments in our portfolio business, and we have FX impact also. So in general, both order intake and sales are higher organically than they are reported, but I will come back to that.

Our journey of improving profitability continues. So our comparable operating results increased by 7% to EUR 218 million, and that's 14% of net sales. So now we are at 14%. Operating results increased by 14% to EUR 209 million, and that's 13.4% of net sales. Cash flow. Cash flow, very strong in this quarter. up to EUR 497 million, close to EUR 0.5 billion. And we continue to develop positively, and I would say, with a very attractive ROCE of 73%.

So let's look a little bit closer to the numbers. So record high orders drive a strong quarter. We have also restated the comparative figures following the energy storage classification as discontinued operations. So the numbers you see here, we have taken that reclassification into consideration. So if we start with the Q-on-Q numbers, I mean, comparing with Q2 last year. We see order intake is up 33% in general. You see that service order intake is down 4% from EUR 920 million to EUR 882 million. But here comes the first organic comment. So if you look at the organic order intake in service, it's actually up with 1%. So it's not negative. It's positive. It's growing. Equipment is up 61%. Of course, we have a very strong order intake, particularly on the equipment side, from EUR 1.2 billion, close to EUR 2 billion.

Net sales, it's down from EUR 1.6 billion to -- EUR 1.594 billion to EUR 1.559 billion, but also a similar story here. The organic net sales actually grew with 5%. Services is down reported from EUR 900 million to EUR 845 million. So it's minus 6%. Organically, it's about flat. It's minus 1%. Equipment sales, up 3% from EUR 694 million to EUR 714 million. We continue to see a book-to-bill way above 1, so going from 1.3 to 1.8. And as we talked about, we continue to see the journey of improving profitability. So comparable operating results up with 7% from EUR 203 million to EUR 218 million, which corresponds to 14% of net sales. And the operating results also improved 14% from EUR 183 million to EUR 209 million, and we are now at 13.4% of net sales.

Just some quick remarks on the first half year. We see similar development, order intake up 23% to EUR 4.9 billion. Services, similar here, the reported is down a bit, but equipment certainly grew. And you see the order book -- order backlog. We came in just short of EUR 9 billion, up 13% from last year. Net sales, also, I would say, flattish. But if you look at EUR 3 billion, also there, if you look at the organic, it's up 5%. Book-to-bill half year also increasing from 1.3 to 1.6. And the operating results, if we go down there, up 13% on the first half year from EUR 354 million to EUR 399 million at 13.3% of net sales. So overall, a good quarter. And if you look at the order intake, it is certainly growing even on the service side organically and on net sales, the organic is up 5%.

Looking at our industry. So how is Marine developing? We still see a market sentiment that remain supportive of our key segments. Shipping markets remained resilient despite the macroeconomic headwinds caused by the Middle East conflict. If we look at the number of vessels ordered in Q2, it increased to 1,483 last -- same period last year, 644 (sic) [ 647 ]. So clear, we see there is activity clearly. The Middle East conflict has disrupted energy markets and supply chains, but shipping markets have remained resilient despite the disruption and the macroeconomic headwinds.

The market sentiment remains supportive and ordering also continue at a good level for our key segments for Wartsila key segments. The story that our core segments will grow faster than Marine in general, still holds true. In Marine, in general, we also observed that the contracting of -- is expected to remain in line with or above the average and for Wartsila's core segments, well above the 10-year average level. China introduced separate greenhouse gas targets for international shipping by requiring vessels to cut CO2 intensity by at least 15% by 2030 compared to the 2025 levels.

And this will drive demand for emission reduction solutions while on the negative side, adding to regulatory fragmentation. And that is also in line with the comments that we made after IMO, the postponement of the votes last autumn, it's likely that we will see also going forward a more fragmented landscape, different regions like Europe or countries like China, introducing their own regulation, and it doesn't make it easier for the marine industry, of course, to comply with all this regulation. For Wartsila still, it's about fuel flexibility and fuel efficiency, and that will be needed more than ever in this environment of fragmented regulation.

Now looking at January to June, 245 orders were for alternative fuel capable ships. So that's about 70% (sic) [ 17% ] of all contracted vessels and 24% of the capacity. And one might say that's fairly low percentage, but it's primarily driven by the mix of vessels. So it's not a kind of trend shift this percentage of alternative fuel. It will vary depending on what type of ships that are ordered.

Looking at the energy macro perspective, I mean, clearly, increased demand drives energy transition investments. The electricity demand growth and future projections have increased substantially, and that certainly creates market opportunities for equipment providers like Wartsila. And 2 key themes have stood out in the recent energy-related macroeconomic development. One is load growth. And the one is increased tariff-related uncertainty. And if we look at load growth, it is about electrifications of the world or industries in general to make them more energy efficient. It's about electrification of transport as an example. But it's also continued development of -- and growth of air conditioning. We have seen the world is getting warmer. It drives more use of air conditioning, it drives electricity. International Energy Agency predicts that the growth that we will see from air conditioning could actually be in the same or even bigger magnitude than data centers.

Let's see. Then we have U.S. aging infrastructure that needs to be upgraded. And then we have the balancing power narrative. It's all those factors combined that drives this, you could say, buoyant demand side. In engine power plants, market demand for equipment has been strong, and it continues to be strong. The baseload segment remains a consistent source of demand for thermal power plants, while our balancing demand also is expected to continue to develop favorably. After significant growth driven by solar up to the mid-2020s, renewable capacity addition are expected to decrease slightly in 2026. So that's a downtick. But if you look longer term, the growth prospects looks very solid. The speed of the data center build-out is creating unprecedented demand for off-grid data center where reliable on-site power is essential. And here, actually we are clearly playing a role. And we continue to see a strong demand for data centers with a very dynamic pipeline of opportunities.

And the resulting growth in our installed base, that, of course, will trigger and support a significant life cycle service potential in 2030 and beyond. It takes time until we get into those years where the installed base starts to generate significant service business. And we see here the predictions from the International Energy Agency on average annual electricity demand growth. They have basically upgraded their forecast for 2025 with 45%. It's a significant upgrade.

Now another external report that we like to highlight is the latest -- a very recent piece from Bloomberg New Energy Finance. And according to them, not -- well, they are reiterating what we have been saying. But of course, this is independent third party. So I guess it comes with some additional credibility when it comes to advocating reciprocating engines. And basically, they have concluded that reciprocating engines offer the strongest economics for data centers. If you look at the dollar per megawatt hour, engines comes out as currently as the most favorable solution. So recent analysis by Bloomberg has identified reciprocating engines as the most cost-competitive technology option for data centers.

The competitive life cycle economics support attractive long-term project returns. The benefits, low heat rate, efficient use of fuel and operating performance. Low site level emissions and negligible water consumption supports sustainability objectives. So engines are well positioned for the rapidly growing market where cost performance and resource efficiency are increasingly critical. And I think this is a long-term comment also. As the market dynamics is evolving, the engines delivers on the efficiency fundamentals and also on the fundamentals of not derating at high temperature and very little water consumption.

Now back to the numbers. So organic order increase -- sorry, organic order intake increased by 43%. The order intake, the reported, as we call it, increased by 33%. Marine order intake increased by 12%. Energy order intake increased by 82%. Equipment order intake increased by 61% and the organic equipment order intake growth was 74%. Service order intake, as we talked about before, the reported decreased by 4% due to portfolio business divestments and negative FX impact. So the organic service order intake growth was actually 1%. Marine and Energy combined service order book increased by 11%, ending up at an all-time high. So our service order backlog is at an all-time high.

Strong order book development. Rolling book-to-bill continues to be above 1. I think it's now the 21st consecutive quarter that we continue to have a book-to-bill above 1. And the order book has been growing despite the removal of the portfolio businesses. I mean, by now, we have divested 11 of them. So we have been able to fully compensate for this. Another trend that we talked about a lot is that, of course, we are capturing orders for deliveries further and further into the future. And we do see here that trend continuing. And we do continue to come back to these data points where the existing order book will generate sales that are distributed further into the future. And you can see how clearly on the order book end of June here, you see later deliveries, very significant growth. And that, of course, it's very important to take that into consideration when we translate the order intake to sales and EBIT. It will be further out in the future.

Organic net sales increased by 5%. The reported net sales remained stable. We saw that before. Marine net sales remained stable, whereas the energy net sales increased by 10%. Equipment net sales increased by 3% and the organic equipment net sales growth was 12%. Then service net sales decreased by 6% and the organic service net sales were stable at minus 1%. Profitability continued to improve. So with net sales that remained stable, the comparable operating results increased by 7%. And it's now the 12-month rolling comparable operating margin is now 13.5%, which is up from 11.6% last year.

Technology and partnership highlights. We continue to drive the decarbonization of our industry and work with our customers, both the existing ones and the new ones. So if we start with the data center narrative, we continue to expand our data center footprint with 2 new major orders announced in the second quarter. So we will supply an off-grid energy power solution for a new data center facility in Texas. It's a 790-megawatt power plant that will operate with 42, Wartsila 50SG engines running on natural gas. And you see we talked about our sweet spot being somewhere 20 to 500. But these days, we make or provide power plants well above that. And we provide thermal efficiency. Of course, you need the space to host our machines, but we have a very interesting power solution. So we do see this trend of bigger power plants continue.

Then we had the second one. It's a 412-megawatt engine power plant to support major new hyperscale data center project in Ohio and Texas, and it's built on 40, 34SG engines. So that was the first introduction of the 34SG. And both of these orders were booked as order intake in the second quarter.

Now coming back to one of the arguments, yes, data centers are important for us and for our growth, but we have multiple growth avenues. And balancing power, we talked about it for many years. It continues to be a major growth opportunity for us going forward. So in the second quarter, we booked more than 0.5 gigawatt of balancing power in various locations. And one of the orders that we had in the second quarter was Origem Energia in Brazil, so following the first contract we had with them in the first quarter. And it's the 185-megawatt power solution to support deliverable of reliable and flexible capacity to the Brazilian power grid. And it's follow as a consequence of the reserve capacity auction 2026. That was the largest capacity auction ever held in Brazil. And Origem has emerged as one of the auctions leading winners, and we are supporting them and they plan to start commercial operation in 2028 and 2029.

So energy growing in data centers, but also balancing power in several disciplines. Now on the technology side, we have 2 interesting items to report here. I mean, first, we had another Wartsila world's first -- it's the world's first large-scale 100% hydrogen engine tested at Wartsila's Bermeo laboratory and working on providing energy to the Spanish grid. So we have now successfully operated a new 100% hydrogen engine supplying power to Spain's national electricity grid in Bermeo. And this is the world's first demonstration of a large-scale hydrogen engine running on 100% pure hydrogen. And it's the Wartsila -- W31 that also can support energy-intensive sectors such as AI data center and industry in the future.

So that was hydrogen. But we also continue our journey on ammonia. In ammonia, we actually further because we are having commercial deliveries now. So we have 2 new gas carriers that want to stay ahead of environmental standards with a Wartsila 25 Ammonia engine. So we will supply Wartsila 25 Ammonia auxiliary engine together with NOx Reducer SCR and a gas valve unit for 2 new midsized LPG ammonia carrier vessels. And the ships are being built at the shipyard in Shanghai and will be owned by a joint venture between Navigator Gas and Amon Maritime Navigator Amon Shipping AS. And the order for the engines, the SCR and the GVU was booked by us in the second quarter of 2026. So we are certainly continuing to be a technology leader in future alternative fuels.

We also announced to expand our capacity as a result of the buoyant market that we see and the great opportunities that we see for the future. We are expanding our capacity. And basically, with the latest announcement we did in the quarter, by 2029, we will have increased our operational capacity 2.2x, so more than doubling our capacity compared to the 2025 operational levels. So during Q2, we announced investment of additional EUR 90 million to further expand our production capacity by 30% in STH in Vaasa. And that followed the earlier announcement by -- to expand by 35%. So once -- if you put that all together, by the first quarter of 2029, that actually means that we are expanding 2.2x compared to 2025. And that, of course, also is a proof point of our long-term favorable outlook of demand side in energy certainly, but also in Marine.

Now let's look quickly on Marine and Energy and what -- how those have developed. So Marine, all-time high quarterly order intake in Wartsila Marine in our history. And then order intake and comparable operating results both improved. So order intake up with 12%, net sales up with 2%. And if you look at the EBIT bridge from EUR 114 million to EUR 124 million, we benefit clearly from better operating leverage, but we also had lower service volumes in the second quarter, which is a bit of a drag. But of course, a continued journey and now at an LTM last 12-month result of 13.1%.

Services in Marine. Overall, the Marine service book-to-bill was above 1. And if you look at our Marine Service order book, it actually increased by 8% compared to a year ago. So we do see continued growth. You also -- by now, you know our different areas in services. And you can see that agreement came down a little bit on the book-to-bill side. Agreement came in -- order intake came from a relatively high comparison quarter last year. So that's one of the things. And then we have also seen on the service side because of high fuel prices and also because of some very favorable business, some of our customers, they are postponing some maintenance, but that's postponing, not canceling.

So we have a positive outlook there also for agreements going forward. And you see -- we talked about it many times on the project side, it can swing quite a lot. And now you saw a bit of an uptick. We have said, though, that the IMO decision not to make a decision has had some impact on the order intake on the retrofit side because people are postponing retrofits. But overall, you can see book-to-bill above 1, and we will continue to grow our Marine Service business.

Now Energy, all-time high quarterly order intake also for energy. And now since the start of 2025, the gross margin of our energy equipment order book has improved by plus 500 basis points. Order intake is up 82%. Net sales is up 10%. And then you see something very unique here. The only way is up 76% to 90%, driven by both better operating leverage and service net sales has increased. So really contributing to better operating results and an LTM EBIT of 15.5%.

Services on the energy side, also book-to-bill above 1 and the Energy Service order book increased by 16% compared to second quarter of 2025. And here, we see on the right side, how things can fluctuate. And here, for instance, if you look at the project business, yes, it went down deep in the red, but now it came back up in the green. And we will see the swings going forward. I think the important thing here is the thick black line, which is the sum of it all, and it's well above 1. We will continue to grow our service business also on the energy side.

Now that brings us to the bridge for the Q-on-Q bridge. So where we went basically from 12.7% to 14%. And it's good to see Marine going from 13.2% to 14.0% and energy going from 14.3% to 15.5%. Then we had a bit of a downtick in portfolio. But as I said, by the end of this quarter, we have divested all the portfolio business units. And our comparable operating results increased by 7%.

Now over to Arjen and other key financials.

Yes. Thank you, Hakan, and very happy to present positive other key financials. But before doing that, 2, let's say, structural items I would like to highlight. First of all, portfolio business. In Q2, we closed the divestment of Water and Waste, selling it to Solix as well as the closure of the divestment of Gas Solutions, selling it to Mutares. And this actually closes a journey of about 6 years in which we -- about 11 business units divested under the umbrella of portfolio business. With the completion of these last 2, Wartsila portfolio business will have no remaining business activities and basically, let's say, making Wartsila more focused company and also more profitable because these business units that we divested were typically dilutive to Wartsila result.

Second point I want to highlight here is energy storage joint venture. Not so long ago, 15th of June, we announced to establish a joint venture, 50-50 joint venture with RCT Solutions from Germany to strengthen its long-term competitiveness of the storage business. The closing, still the expectation to close in Q3, of course, subject to customary approvals and financing arrangements. And the joint venture is expected to have a EUR 40 million to EUR 50 million negative impact on Wartsila's 2026 operating results. And that is basically 50-50 between -- you will see it once the closing is done, you will see probably 50% of it on the line share of results in associated companies and 50% on the line items affecting comparability. And items affecting comparability is, of course, related to the transformation-related costs.

Then going to the numbers. First of all, cash flow. It was again an all-time high second quarter of all the second quarters that we could check historically, we never found a bigger one. So EUR 497 million is really an absolutely good number. And that's also, let's say, good to remind that it was a low number in Q1, only EUR 7 million. Now we are really, let's say, back on a big number. Support really coming from the profitability, but certainly also from the working capital. In the working capital, I would say, the main contribution came from customer payments, not just advances, but also, let's say, milestone payments. As you remember, in Q1, we talked a lot about, let's say, building, let's say, equipment actually for batch deliveries, many batch deliveries went out. you get the milestone payment at that point of time.

Also good to reflect here that, let's say, the capacity utilization of our factory is still at about maximum. So really, let's say, we are producing all we can. Net interest-bearing debt, of course, let's say, going further down, driven by, of course, a very good cash flow. Profitability, I think Hakan talked about that already a lot as well, and let's say, very happy to see positive trends here. Return on capital employed, good profitability, further negative working capital clearly contributing here. Gearing, not so much to comment. It's on a very deep negative level, which is, of course, extremely good. Solvency also bouncing back from Q1 because typically, in Q1, you booked the whole dividend against equity. And now that is, of course, now with the profitability improvement, less severe, you could say, or less impacting. And earnings per share clearly up from, let's say, last year, both on quarter and year-to-date. So all in all, I would say, very good, let's say, other key financials.

Looking at the trends. Cash flow from operating activities as well as working capital to net sales ratio, clearly trending in the right direction. If we look at working capital to sales ratio, the dotted line basically, blue dotted line around 4% over a 5-year average period. So really, let's say, good result. It's actually 3.8% to be precise. And it's actually all the quarters coming down. Last quarter, this was 2.4%. EUR 1.257 billion negative working capital is heavily supported by advances. And I think you can see that from the report as well. We have about EUR 1.8 billion advances. But if you strip it out, let's say, you would have a positive working capital of EUR 500 million, about EUR 0.5 billion. But also that has been improving a lot over the past 3 years.

If you look at, let's say, 3-year horizon, for example, on that number, so working capital, excluding advances, clearly several hundreds of millions down, while sales is actually going up. So we are really doing a real good effort on continuously working with working capital and make it better going forward. Final slide from my side is the financial targets. You don't see the energy storage anymore. They don't no longer apply after, let's say, booking it as asset held for sale and discontinued operations. Looking at the left side of the slide, first of all, growth on Marine and Energy combined 9%. Actually, if you break it down into what is Marine and what is energy, it's actually 9% on all. So very easy to remember. A key milestone I want to highlight here is the 14% that you see on the orange line.

Let's say, we are now on a rolling 12-month basis, operating result as a percentage of net sales at 14%, which is our financial target. So really happy with this milestone. It was 13.9% at the end of last quarter. Group gearing, I mentioned already, deeply negative, not too much to add. And also the dividend distribution basically in all the years, well above, let's say, the financial target of at least 50% of EPS. So really happy with what we can report here on the key financials.

Back to you, Hakan, on the outlook.

Yes. Thank you, Arjen. So on the outlook, for Marine, we expect the demand environment to be similar as in the comparison period. And for Energy, we also expect the demand environment for the next 12 months to be similar to the comparison period. But we also highlight the following because, of course, on energy, we have put it at similar now. But we -- this is actually a fairly -- it is a very solid demand situation that we see. So following 2 consecutive record order intake quarters in Energy and the record high order intake in Marine in the second quarter. The outlook reflects a continued strong demand environment, especially on the energy side. And the strong demand environment is clearly underscored by our decision also in the second quarter to further expand our capacity. So we are on a very good level, and we have a great opportunity going forward.

With that, we go to the questions and answers.

Thank you, Hakan. Thank you, Arjen. So now moving on to the Q&A. So I know that there are more than 10 analysts on the queue already. So we will take one question per analyst first. And so please leave the follow-up questions to the second round. There's also a possibility to ask questions by chat. Handing over to the operator, please.

[Operator Instructions]

The next question comes from Daniela Costa from Goldman Sachs.

I'll stick to the one per analyst. On the comment regarding sort of the energy equipment gross margin moving up 500 basis points, that's a very big number. And I just wondered if you could help us reconcile with the topic that we discuss frequently on this call about sort of like ASP and euro per megawatts and because the trend there seems the opposite, but maybe you can help us reconcile both and what has driven this big gross margin expansion.

And thank you, Daniela. And for those of us who follow us regularly, I would say this is what we have said all the time. We have said that there are good opportunities to expand prices, but we have also worked with operational efficiency, et cetera, et cetera. Now I know there has been a lot of focus on euro per kilowatt, but we have also been very clear that, that is not the right KPI to try to assess the margin content of the backlog. We have said that several times. I know some have listened and some have still clung under the euro per kilowatt. So we thought let's now give out this piece of information because we understand that we need to be a bit more clear than we have been in the past. So -- and you have been -- thank you for giving us that feedback. And this is where we are. So it's plus 500 basis points compared to the -- of the equipment order backlog in Energy comparing beginning of 2025 to going out of second quarter of 2026.

It's fair to say that it's mostly your execution then rather than the market pricing that is making the difference here.

It's a combination of pricing, execution, everything together.

The next question comes from Vivek Midha from Citi.

My one question is on the demand guidance, particularly in energy. Clearly, with the strong orders in Q2, the bar is higher, and I appreciate that you're still guiding for a strong level of demand. But I was wondering if you could expand, please, on how we should think about the scope for upside or downside to this guidance? Was this motivated by desire to be prudent given that you hit this new record? Or is there anything else that we should bear in mind?

Basically, let's say, it's based on -- first of all, let's say, the demand is very strong, as Hakan also explained earlier. We also in the coming quarters, see, let's say, strong activity. The pipeline is good. Let's say, the AI pipeline is also very strong, though volatile. But it's not just, let's say, the data center, it's also, let's say, the balancing power, which is really also getting a lot of traction. Going forward, of course, there is, at some point of time, a bit of limitation because your capacity is limited. Let's say, you can sell and sell until a certain point. And as you can see from the order intake, we booked record order intakes right now.

Let's say, there is a big jump, so you book really long forward. At some point of time, this will level out. It doesn't mean that the activity in the market is less. It's just that our limitations are getting into the capacity range basically. That's also why we, for example, expanded our capacity. We made, again, a decision now in Q2 to further expand the capacity to facilitate that. Will we do more? Let's see. But this is the trajectory that we see. But the main message is the market is still very strong. There's lots of opportunities, and we are doing really well.

And as we try to give a bit more meat in our guidance. I mean do note that we are making significant investments in basically more than doubling our manufacturing capacity. But of course, that kicks in only in the beginning of 2029. But that is a clear evidence fact point that we believe in long-term growth.

The next question comes from Max Yates from Morgan Stanley.

So I just wanted to pick up on the 500 or more than 500 basis points of gross margin expansion in the backlog. So I guess the first part of the question is, would you be able to kind of share with us how much of the total order backlog was Energy New equipment at the start of 2025 and how much it is today? And then I guess the second sort of part of this question is, how would you best suggest we actually use that number? Would you think of it in terms of if we take your new equipment margin today, we should sort of add that on and that comes through by 2028, I guess, actually, what's coming into the backlog is probably even higher than 500 basis points. So now that you've kind of helpfully disclosed that, how would you best suggest we as analysts, so we don't get into kind of confusion around price per megawatt? How do we use that number in your view?

So I mean, first of all, we also communicated that we have more than doubled Energy's order backlog, I mean, from 2025, beginning of 2025 until second quarter of 2026. So that gives you kind of a feeling for the magnitude of the increase of the total order backlog. Then for the new build upgrade of plus 500 basis points, I mean, we know it will take time for that to translate into EBIT and because of '28 and beyond. Definitely '28 and beyond. So because -- and to -- we have a certain delivery time and there is a certain delay. So that's another fact. It will take time for this order backlog to translate both to sales and EBIT and it's 2028 and beyond.

Then another thing, and it's also based on questions that we have received from the analysts, okay, but your mix of new build and services, the new build will grow faster than services. And we all know that the margins in general are lower on new build and services. That still holds true. But the other message here is that the net effect of this will still imply that the EBIT -- total EBIT of energy will continue to develop positively. So those are the additional cues we can give.

The next question comes from Vaspaan Avari from Barclays.

It's [ Lotz ] from Barclays. On the demand outlook for energy, you now see it stable in the next 12 months. Is it stable versus extraordinary strong Q2 or stable versus average level over the past 12 months? The reason I ask is that order intake in megawatts in Q2 was about 100% higher than an average order intake over the past 12 months. So getting the base for us right is very important here.

I would say you need to aggregate the megawatts or gigawatts over 12-month period and compare it with the aggregate for the coming 12.

It's the forward 12 months versus the past 12 months.

Aggregate.

Aggregated, correct.

The next question comes from Akash Gupta from JPMorgan.

I have a question on ASP, and it's more of a conceptual question for us to understand, given the debate on this number that often looks to me as a tip of an iceberg. So I mean, can you elaborate on some of the factors that are driving this significant volatility in quarter-on-quarter average selling price in energy? I think previously, you highlighted scope as a big effect. But then outside of scope, when we look at different types of engines, how does the ASP compare? Like is there any thumb rule that we should be aware of that if you announce certain types of engine orders, then we have to think about ASP in a different way? And also, if you can talk about geographical mix because covering some of the other equipment names, we have seen some variance in ASPs based on geographies. And then lastly, on the same topic, when you book an order in the U.S., I think you have said it's customers that pay the tariff. So I wanted to ask when it comes to your booking, what are the amount that you are booking and what you are not booking?

Do you want to?

I can start with the last one. Let's say, yes, tariff risk is passed on to customers. We are not paying for any tariffs. Yes, on certain cases, let's say, we might need to pay the tariffs, let's say, as we are the importing party, but then we charge it on to the customers. But now with the recent decision of the Supreme Court, basically, that has been reversed. So no impact. But of course, when you do tariffs, we typically use change orders for that. So let's say, it's a change order when the tariff is charged to us. We also send that invoice then to the customer, which is then actually, let's say, adding to the sales, but it's then reversed when we, let's say, pay it back. It's a credit basically.

And then when it comes to how should we think about profitability of different markets and different engine types, et cetera, et cetera. I'm sorry, there are no simple rules of thumbs. I mean we have good price realization in many areas. So in many application segments and in many geographies. So it's not that one segment or one market -- geographical market has a higher profitability than the other. It's actually a mix. It's much more catered to the situation and the customer.

So my question was more about the pricing in kilowatt hours per -- in euro term rather than margins as such.

Yes. I mean, as you -- I understand and I respect your question. But as you understand from our hesitation and our earlier discussions, frustrating as it is, we don't focus so much on that KPI, quite frankly, because it says very little about reality for the reasons that we have mentioned, so to say. I know it's frustrating, but that's a matter of fact.

The next question comes from Uma Samlin from Bank of America.

I just have a follow-up on the energy margins. I really appreciate I gave the 500 bps today. I was wondering, do you see any -- given you have a very strong pipeline on the data center side, do you see any further potential to increase beyond the 500 bps that you have given going forward?

Well, it's a very hot market and the demand side is very, very strong. And therefore, as we said before, there are good opportunities for price realization in, as I said before, in all different segments and in all different geographical markets. It's a hot market globally.

So do you mean that you will be able to continue to have some pricing potential beyond what you had achieved in the last year?

Yes.

The next question comes from John Kim from Deutsche Bank.

Congrats on the numbers. Just wanted to speak a little bit about supply-demand dynamics around baseload and data centers. You may have seen some competitors have gone public and spoke to adding capacity over the next 5 years. Do you have a sense on where engines as a category could stabilize as a percentage of market share demand. When you think about the positive aspects of engines over turbines, any sense on what percentage of applications or installs that would be applicable or attractive to? And could you comment at all on your market share within engines itself as it relates to DCs?

So if we start with the first one, our market share related to DCs, I would say we don't know it. I would argue that nobody knows what the market share is because there are so much secrecy. We talk about that in the industry. I mean you have noted before that some of the releases that we have made, we are not even allowed to mention the customer names, et cetera. So I know that there are attempts from independent players to compile market statistics. It's very, very challenging. So -- sorry, I wish I could tell you, but I can't. And the facts are simply not there because of the secrets in the market.

Coming to your other question, what's the potential market share of engine versus gas turbine. It's very, very hard to predict. I mean I have seen data points, but we struggle actually to compile them. The only thing we can see, we are growing.

And the Bloomberg New Energy.

And also coming to that Bloom Energy makes one point. I mean it's one piece of study, et cetera, but it shows that engines are for real in this segment, and it has some advantages. Now I would also argue that if you look at medium-speed engines, we are coming back to the fundamentals because to your point, there will be a lot of -- competition is adding capacity, the gas turbine competitors, but also the engine competitors. So of course, right now, the supply is a bit less than demand, but it will balance out at a certain stage. Now then it's going to be a focus. That's our hypothesis and be a focus on the fundamentals, fuel efficiency, no thermal derating, no water usage. And here, we come out in a very good way. Now our disadvantage, we are not the quick and dirty solution if you want to ship in a container and get power fast, which is really a strong focus now. But we are strong on the fundamentals.

And also, we talked about that in our data center call, if you stretch it out even further, what will happen? There will be transmission networks being built. There might be renewables. What do you want? You want flexible power generation that is energy efficient because then you can balance the renewables and you can also be a player on the network. And if you want to be a player on the network, you need to have fuel efficient, good heat rates basically. Otherwise, you won't be competitive. So that's why we are optimistic also about the long-term future because we have a good competitive technology.

The next question comes from Sven Weier from UBS.

Just a follow-up again on the 500 basis points. I was just wondering how much of the improvement is actually coming from your shift away from EPC, which I guess also happened during that time? And what have you actually seen happening to energy service margin given that it is obviously an important part of the energy sales?

Yes. So first of all, this is new build. So service is out. So this is the new build margins, just to clarify that. And then I would say the shift from EPC, very little impact because we have made this shift -- the major part of the shift has been made before 2025.

Correct.

So I would say the major driver is things like price realization, efficiency, et cetera. It's not the shift from EPC to EQ during this time.

On the service, that was clear that it's not part of it. That's why I was asking what happened to service. Was service stable in the last 1.5 years or...

I mean the order backlog for services is up significantly. It's up 18%. And the margin on services, they also developed favorably.

And can I just ask because you had this nice chart on the cost comparison between engines and turbines and fuel cells. I mean, why do you recognize -- I mean, it's no longer a lack of information in the market about the qualities of engines. Why do you think that those other technologies are still winning on turbines but also fuel cells increasingly? Why are people still placing orders for those then?

I mean right now, I would say, and this is -- if I take the U.S., it's so focused on lead time. I mean you can basically sell any technology if you have a short lead time. So that's why right now, everybody is selling. But as I said, longer term, as more capacity is added to the market, I think it will be more focused on the fundamentals. We talked about that before. And then another element, I would say, also in the U.S. context is, you could say, a bit of technical conservatism because to your point, Sven, I mean, the engine has been around for quite some time. But I can say that we -- I have dialogues with many U.S. customers. For them, it's still a new technology, it's something new. And that's a great opportunity for us.

And coming back to what I said before, when our new customers U.S. customers, they try our new candy, so to say, and they see that the heat rates working. I mean, they are good and they see that we are delivering on our core value proposition. They came back. So we have repeat customers coming back. And that's why I'm optimistic about the long-term future because people are -- more and more customers are seeing the benefit of engines. But seeing is believing. It's one thing to try to convince somebody with PowerPoints and logic, seeing is believing.

The next question comes from Antti Kansanen from SEB.

Another follow-up on the 500 basis point improvement. So if we look at kind of the deliveries, the energy equipment deliveries that you have done on the first half of this year, when were these orders booked? Just trying to get that is that kind of a run rate profitability that you are now achieving on the energy side? Is the 500 improvement potential? Is it a good proxy from the level where you are today on the P&L? Or has some of that improvement already been visible on first half of this year?

No, I don't think we have seen it in the first half of this year. Let's say, the orders that we delivered for energy in the first half of this year, I think they were booked a year plus ago, most of them.

And then maybe a follow-up on the phasing of it. If you look at kind of what you are selling now, have you already sold out the '28 capacity expansion and are now booking the '29, just on what you said that the capacity is a little bit constraining the demand outlook as well. So just like as a theoretical, if you would decide to further still expand your capacity, would you believe that, that would open up a more demand growth for you potentially?

So basically, I mean, 2028, we are sold out to your point. I mean there might be smaller things, but in general, we are sold out. And the orders that we are negotiating now is for 2029. And we have started to sell out. You remember the latest capacity expansion we talked about. We said that, that will come into operation in the beginning of 2029 and we are starting to sell that now. I mean we have already sold some of it, so to say. But we are booking orders in 2029 right now and also 2030.

Then I will take a couple of questions.

And I would also say, I mean, sometimes I get the question, can you expand even further? Yes, we can. But it's a step-by-step journey, and we have taken important steps, which underlines our positive outlook. Could we take further steps? Yes, but we take it step by step.

And the key thing is to keep the supply chain aligned.

Yes.

Then I will take one question from the chat. Can you explain in more detail how the Data Center segment sales of hardware will bring life cycle services cash flow after 2030?

Yes. So basically -- so what's the time frame here? So let's say we get a data center order. I would say it will -- it's about 2 years until it's up and running. And then, of course, you have some maintenance, et cetera, in the beginning. But it's approximately another 2 years until we have the real big service kicking in and then it runs. So that's why we talk about approximately a 4-year delay from new build order intake to until you start to see a significant impact on the service business.

Thank you, Hakan. Thank you, Arjen. Then we have one more slide related to our Capital Market Day. So please remember, we will host our Capital Market Day here in Helsinki online on November 3. And on October 27, we will publish our Q3 results. I hope you can enjoy a little bit summer in the coming weeks. I hope that at least we all will start a well-deserved holiday. Thank you.

Thank you, everybody. Have a nice summer.

Thank you.

Okay. Hello, everyone, and welcome to Wartsila's Q2 pre-pilot Call. My name is Maija Hongas, and I'm from Wartsila's Investor Relations team, and I'll be hosting you today as Hanna-Maria is today on a well-deserved holiday. And today, our CFO, Arjen Berends, will start with some key messages, and we will also show you 2 slides, which are available on our IR website as well.

And after the key messages, we have reserved time for Q&A. [Operator Instructions] If you can send your question to me [email protected]@wartsila.com. [Operator Instructions] And after the first round, we can then continue with followups. [Operator Instructions] I think it's time to start. Please go ahead, Arjen.

Thank you, Maija, and hello to everybody. A few highlights to cover. Of course, first of all, order intake. I'm pretty happy with, let's say, order intake and how it develops both on Energy and Marine side, let's say, we have good traction.

Data center orders announced earlier, and I think you have seen also in the press releases. So not more to comment there. Pipeline is strong. Pipeline also continues to be on a good level, both actually for Energy and Marine. So looking good, let's say, at least the last couple of or it's actually 1 week to go in this quarter.

Then I think also good to highlight and remember once again or remind once again, let's say, the divestment that we have done and completed basically, first of all, what we have done last year. You can see it on this slide, ANCS, Automation Navigation Control Systems last year July and Marine Electrical System last year in October.

And it had a quite significant, let's say, correction in the order book, EUR 900 million about. And annual revenue in 2025 was about EUR 225 million. So quite good to keep in mind also for your own analytics. Then also now in '26, we have 2 more. Actually, the last one was out of portfolio business, Gas Solutions that was completed on 1st of June as well as Water and Waste also completed on 1st of June.

Annual revenue for both of them, let's say, 2025 Gas Solutions, EUR 390 million and Water & Waste about EUR 50 million. And order book expected to be adjusted with about EUR 650 million now in Q2 reporting. So as I said, with the final, let's say, 2 Gas Solutions and Water & Waste going out, basically, portfolio business have no remaining activities anymore after Q2.

If we move to the next slide, which is actually the other, let's say, highlight I want to make is, of course, the announcement that we did, let's say, not so long ago, 15th of June to start a joint venture with RCT Solutions from Germany for our energy storage business.

It will be a 50-50 joint ventures. Over time, let's say, we anticipate new investors to come in, and that would reduce ownership of the initial shareholders, both RCT as well as Wartsila. Peter Fath, which is the CEO of RCT Solutions will become the CEO of the joint venture after closing.

So then he's really, let's say, committed to this financial impact at closing, no material profit and loss impact at closing. And we transfer basically assets to the joint venture, which is less -- net assets actually, which is less than 5% of Wartsila total net assets, so it's not significant in that scale.

And we expect the joint venture after, let's say, all kind of transformation-related activities to be executed, but we expect, let's say, the joint venture to generate positive results towards the end of 2027.

While in '26, we anticipate the loss for Wartsila on Wartsila result and basically total to be in the range of EUR 40 million to EUR 50 million coming from this area. With respect to reporting and timing, we will not have any separate segment reporting anymore in Q2 financials.

We will also stop, let's say, the financial targets for this business and also not provide any demand guidance as I would believe it's also quite obvious that, that will disappear. We expect the closing to happen in Q3, depending on regulatory and other customary conditions and approvals as well as arranging, let's say, financing package.

And until that, it will be reported as discontinued operations and asset held for sale. From closing onwards, the joint venture will, as any other joint venture that we have, be reported under other business activities and as share of results in associated companies.

Not all of our joint ventures are other business activities, this one will be, but all joint ventures are reported as share of results in associated companies. So one single line consolidation, which is part of, let's say, operating result. This year still next year due to IFRS 18 joint venture results will move out of operating result and we will move to results from investing activities.

Just on the size, energy storage business has been a smaller segment in Wartsila, about 480 employees globally. Net sales of about EUR 700 million in 2025 and an operating result of EUR 23 million in 2025, 2.8% of Wartsila total. So very small contributor, small positive contributor. These were my short introduction words, and I would open up for questions.

Thank you very much, Arjen. And, let's start with the Q&A. And the first question comes from John Kim.

I'm wondering if we could start off with Marine. Can you give us a bit of compare and contrast on how disruptions both on equipment yards and perhaps service looks like in Q2 versus Q1? What I'm trying to unpack is kind of time in place impact from Middle East conflict removes versus perhaps ongoing constraints in various parts of the supply chain, if there are any?

So far, we have not had any, let's say, immediate impact or direct impact. We have been already for some time, let's say, stocking a little bit extra also because we saw that the factory utilization and capacity clearly goes up.

So I don't know of any immediate urgent case that some parts are stuck in the Strait of Hormuz, not at all. It's in a way, also a bit of a dead and street. So it's more for, let's say, transport of oil and stuff than from our supply chain.

Now supply chain is typically not in that region. Most of our supply chain critical at least comes from Europe and some parts from Asia, but they don't typically go through the Strait of Hormuz. Then from a service perspective, of course, there are ships in the Strait of Hormuz sailing that we can service.

Good to remind that it's mainly merchant fleet where the main engine is a 2-stroke engine, which is not so much, let's say, impacting us because okay also on the main -- on the 2-stroke engine, let's say, the main market share is Everllence, basically 2-stroke.

And we are servicing more than, let's say, call it, the WinGD brand. So also there, let's say, I would not say the Strait of Hormuz has a significant impact either. So altogether, no major impact, I would say, not a material change compared to Q1.

Having said that, I think with unrest in the world, of course, and the longer it takes, people or businesses and shipowners and operators are also getting a little bit, let's say, nervous, let's say, how long will it take? What does it mean to fuel prices, et cetera.

So yes, there are probably new considerations coming. Should we, let's say, go for a more fuel-efficient solution in the future, do a retrofit or not, stuff like that, so but let's say, no concrete big scale impact.

I would say it's more discussions than anything else at this point of time. Of course, this can change. But at this point of time, I don't see Q2 being very different than Q1.

Next question comes from Sven Weier.

My first question is on orders. I was just wondering, you didn't have any announced orders since the 800-megawatt data center order.

I mean, should we assume that you will stop reporting every data center order now that it has become a bit more normal part of the business? Or how should we think about unannounced orders in general? Should they be at a normal level, average level in Q2?

No, let's say that our policy is to basically report as many orders as we possibly can. But of course, you need the permission of the customer to announce an order.

Then sometimes and it depends a bit on the scale, let's say, for big orders, it's more relevant than for, let's say, smaller orders.

Yes, we try then to report even anonymously as you have also seen earlier from us that, let's say, we don't mention the customer name, sometimes even not the location, but still saying that, okay, there is a big order coming.

But our policy or policy is not really a policy. We try to report as much as possible the orders that we get, preferably with the name, but if not allowed and at least for the bigger ones, we want to go anonymous.

And is there any reason to assume that unannounced orders should be at a completely different level as in the quarters before or...

Yes. Now I cannot remember by heart, let's say, how much the unannounced part was versus for all the quarters before. I would say it's a normal business, business as usual.

And sorry, can I have a follow-up? Or are we limited to one, Maija, just guide me.

Yes, please. Let's have the question a bit later.

Yes, then I follow up later.

Next question comes from Sebastian Kuenne.

I have a question on deals related to AI or energy security in Europe. I mean Europe wants to become independent ideally from U.S. AI systems and one would expect also primary power issues here.

But we haven't seen much from Wartsila in the sense that you get allocated deals for data center power here in Europe. Could you give us maybe a little update here? And also on the countrywide energy tenders that you are involved in? I think one was in Brazil a couple of weeks ago. Maybe another update there where there are big tenders that we should be aware of?

Good question. Let's say, data centers in Europe, I think Europe is late to the game. I think it will be challenged for them. At least I'm not aware of, let's say, huge data center orders in Europe on the scale of, let's say, size and scale, I would say, in number of orders.

I mean, as we see in the U.S. For sure, there is pipeline. Also we have pipeline in Europe, but nothing big has been so far, let's say, materializing. I would expect still something to happen this year, but timing with these orders is always very difficult.

What is the fact, and I think that is more and more also aware in the world among our customers is you need to be fast in decision-making because if you're not, you're without power because the capacity, not only our capacity, but also the capacity of our competitors is being sold very, very, very fast.

So decision-making is key. But it's also very difficult. And I think in Europe, it's even more difficult than in U.S., for example, to get permits and get, let's say, all your -- and then if you buy an engine without permits, yes, should you do that or not? So it's more complicated, I think, to push orders forward in Europe than it is in the U.S.

Then on your question on the Brazil, yes, the tender took place. Let's say, the award was done, what is it now, 2, 1.5 or so months ago. I think the ones that offered the Wartsila equipment, there were quite a few. We also announced, let's say, at least 2 of them.

We are negotiating with a few more, but I think time starts to run out. Let's say, if they are not concluding within weeks, I would say, the slots are gone. At least the slots are gone for the time that they require it. So then they need to find alternatives.

And other countries, other big...

Okay, not like Brazil, but let's say, we have quite good activities ongoing in Malaysia, Indonesia, Australia, also in Europe, a few locations and of course, also in the U.S., but also South America. Actually, it's quite active all over the place. I think also more and more customers realize that if we are not making decisions, we will need to wait, let's say, a couple of years before there is any capacity available, not only from us but also from others.

So I think the awareness starts to grow, which also means that pipeline and activity starts to go up or is up actually.

I have another question, but I go back...

And next question comes from Vivek Midha.

My question is actually also on Brazil. I saw from your release that you described it as an equipment supply contract. Now historically, you've obviously indicated your strategy to move away from EPC towards EEQ. Brazil historically has been quite an EPC market. I'm just curious, long term, as you think about your more emerging-market focused, emerging market-focused customers, how are you approaching those kinds of negotiations? And should we expect that, for example, if you do book Brazil orders in Q3, for example, that they will also be very equipment focused as well?

I would say it's a good question. And let's say, our first focus when we sell new equipment in energy is equipment delivery. And that's where we start with typically. Typically, let's say, we go to the customer with an equipment delivery and a life cycle offer, often in combination because that's how we believe we can generate more value for customers.

If the customer wants EPC, we are not ruling out EPC. We have always said that, okay, we are not ruling out EPC. But we take on extra risk with EPC. So that also means that we need to get premium price and get paid for the extra risk that we take on.

If the customer is not willing to do that, then there will not be an EPC contract, then it's just equipment. But that's the approach. So let's say, we are not ruling out EPC, but we need to get extra paid because we take extra risk.

Next question comes from Johan Eliason.

Just on equipment deliveries, can you sort of give us any guidance over the year, how that looks like now when you only have the energy and the marine business to worry about?

How does it look like? Let's say, the fact that we are increasing capacity says a lot of how it looks like. And in particular, I would say, energy. Energy is really, let's say, booming business and majority of the capacity expansion will go to energy by far.

Having said that, we also see good opportunities in Marine. Let's say, the ship age has been as old as it's ever been. Yards capacity is ramping up much faster than what we thought even 1 year ago and I think also something big is coming in Marine.

And we see also, let's say, good outlook for that. It's, of course, always segment based. So let's say, not all ship segments move in the same pace. And it depends on age as well. Let's say, for example, I have mentioned many times, I think ferries are very old. So there needs to be a new build cycle at some point of time. It's amazing how long it takes actually before it kicks off, but we see more and more activity. So yes, I'm very positive about Energy. I'm also actually very positive about Marine. But if you put it in perspective, more positive about Energy.

Yes. But that was sort of more thinking of your backlog delivery pace over this year. Would we have higher equipment deliveries every quarter now and then until you...

That's difficult to say, Johan, because, let's say, timing, let's say now, let's say, equipment delivery is you take revenues and delivery.

And let's say, if it slips in, let's say, in the last week of a month to the next quarter, it's certainly a totally different picture in the next quarter. But I would say, over the coming time with a fast ramp-up of capacity, and I would say, in particular, 2028 onwards when the new capacity becomes available, I think then we will see more shift towards, let's say, higher on the equipment side pro rata...

But, I mean, you actually...

We also believe in growth of services, but can it keep the same pace? That's a bit questionable. It depends very much on, in particular, I would say, retrofit projects and how is the retrofit cycle.

Yes. But you mentioned that you had 75% capacity utilization in the main [indiscernible] plant last year. And I guess you must be filling that up now this year already, I suppose.

Yes, that has an impact already. But I would say the more significant impact is later in '27 towards '28.

And the next question comes from [indiscernible] .

[indiscernible] Is it any better or not really?

No. But if you switch off the camera, it might...

Yes. Let's try that. I think we will take the next question and let's try again [indiscernible] a bit later if the connection would be better. But please, Antti, go ahead.

Can you guys hear me? I'll try with that. I think I'll try to let video as well. I have a little bit of a bad connection. But my question was on the capacity announcement that you made in May. So my question is that why did you not announce of the full capacity expansion in February when you made the original kind of '28 expansion? Why the 2-step approach, why the 2-separate announcements? And what are you actually doing in the second phase of the capacity expansion, your own factory versus your suppliers, please?

It's actually the main reason is the supply chain. Let's say, I think in the first capacity expansion, I would say the majority dependency, I would say, was very much on our own facilities.

Of course, also the supply chain, we need to make sure that, let's say, the supply chain can follow what we have in mind, let's say, to do, let's say, locally in Vaasa.

I would say, we could not say more, let's say, because at that point of time in February, we have not secured, let's say, the, call it, the next capacity expansion phase from a supply chain point of view.

So that's the main reason. And let's say, what's different, I would say that in the second one, I think you have more investments related to supply chain, machining capacity either in or, let's say, at supplier sites or in our own facility in let's say, extra machining efforts, but also, let's say, investments supporting, let's say, the supply chain itself.

So with a certain volume commitment or what have you. So there is lots of work to be done. We are not in totally safe waters. But I would say we are comfortable, let's say, that we can make this capacity come to life by the time that we have estimated it, Q1 '28 and Q1 '29.

But the main driver is something that we could in February, not have the full commitment of the supply chain.

Okay. Clear enough. And maybe referring to the comment that you earlier said about the Brazilian clients that you are kind of running out of production slots for them, what is kind of time frame that they are asking for your deliveries?

I think the majority is, let's say, '28, '29.

Okay. But you should have ample capacity for '29, if I understand correctly, the expansion plans?

Yes. Let's say, it depends a bit on the customers and then of course, what they have promised, let's say, from a capacity point of view, let's say, there are big customers and there are smaller customers.

But '28 is pretty much, let's say, locked and committed, and I would say, let's say, either booked or locked through, let's say, valid, let's say, customer quotes. '29 starts to be also, let's say, more and more committed through customer quotes.

But there we have space. But again, let's say, it's not only Brazilian customers that are looking for capacity. I think there's a lot of other customers in different places, like I mentioned, Australia, Indonesia, Malaysia, et cetera, that also, let's say, want to lock. So yes, first come, first serve. That's more or less what it is today.

Thank you, Antti. For me, it seems that [ Glad's ] picture is still frozen. So let's try to have another one. So next question comes from Daniela Costa.

My line has been on and off, so apologies if this has already been asked, but I wanted to ask sort of a 2-part question regarding how should we think about modeling advances from here.

So from one side, has your orders get bigger and bigger in the megawatts, does the rule of thumb like 20% to 25% of advances still applies? Or does it change with size? And then from another side, I guess, you've added capacity, several peers are adding capacity for those outer years that are being bid now. Is the customer acceptance of the type of levels of advance has that stayed put? Or do we see sort of the customers negotiating maybe that more actively?

No. Let's say, our aim is always to be, let's say, cash positive throughout the project. That's and I must say we have very successful in that overall.

Of course, you have here and there, you have exceptions. But overall, I would say we are very successful in that. Then, okay, is it, let's say, 10% down or 20% down or sometimes even more percent down? Yes, it varies by order. Let's say, you might have, let's say, 10% down and let's say, 30% mid-delivery.

You might also have, let's say, 20% down and 10% mid-delivery. At the end of the day, what is, for me, most important is that the down payment is at least more than 10% and that we have a cash positive, let's say, flow throughout the project and preferably the majority of the cash in the house at delivery and on your question, is it changing? No, I would not say it's changing.

Next question comes from Sven Weier.

The first one is on you obviously have a few data center orders now in the backlog, and we're hearing a lot about potential construction delays and that.

I mean, can you track the progress on these projects, whether they start in time, whether there are delays, whether there are permitting issues? Is that possible for you or also difficult for you?

Okay. It varies by case. Some are more transparent than others. In general, I think we are pretty much on top of, let's say, if there is a delay, basically, often they come to us and say, okay, we cannot have the engines right now because, let's say, if you ship, let's say, 10, 20 engines to a site, it takes a lot of space.

And if they are delayed with the building construction, they cannot have it. So often, we get pretty much early warnings if that happens. So far, I have not heard of any, let's say, major delays on, for example, the data centers, as you mentioned. So far not.

And are you -- when you pitch for the projects, I mean, compared to the one you won in July last year, the first one, are you running into more engine competitors or fuel cell competitors now when you pitch for the projects? Or is it unchanged?

At least I've not heard of any major changes. No, I would say it's the same.

And are you thinking about developing an even bigger engine because of the megawatts increase of the projects? Or are you at a physical limit where you are.

Let's say, developing a new engine takes a lot of time and effort. And by the time you have it probably mature, the market is probably totally different or not, difficult to say. We used to have a long time ago, I still remember it, and I think we have a few of them still operational, a vessel of 64.

But that is 20 years ago, I think, about. But yes, I don't think it makes a lot of sense to pull those drawings out and cover and start producing it. No.

So that wouldn't...

I don't see it realistic. It's too much work and testing and what have you to get it up and running quickly because you also need to make sure that the whole stocking supply chain, everything is geared up again. And I don't think that will happen on short notice.

That wouldn't change the project decision if you had a bigger engine even that...

No, no. Let's say, it's even now today that, let's say, for some projects, probably the large bore engine was a better fit, but simply because it was not available, they went for medium bore. That's how desperate, let's say, the market is at the moment. I need power and I need it quick.

Next question comes from Tomas Skogman.

You talk about expansion in percentages, but I think it would make a lot of sense for you then to tell what is the share of engine in marine equipment because otherwise, we might end up putting too large growth estimates for you.

No. I think we stick with what we have said earlier. The majority of the capacity expansion goes to Energy. And I think that's what you need to use in your simulations.

But then you say you will have basically 30% and 35% more capacity that is on engines and then in marine equipment, you have a lot of other products. So you cannot just add that capacity basically to that. So I mean that's why I'm thinking this would be quite crucial just to -- it's not business sensitive in any way, just to avoid that estimates are wrong in the market basically.

True and perhaps we will do that in the future. But so far, we have not, let's say, decided to do so.

Yes. Then future reporting, so is it so that you will have 2 divisions? Or are you considering to report in some different way than you no longer have the portfolio and the storage businesses?

No, it will be, let's say, 2 segments. We have a dual segment reporting, Marine and Energy and the rest is other business activities.

Yes. And this storage loss, is that booked on the discontinued line or is it day 1 on the associated line? So it's on the discontinued line, you should have the loss in the...

Until, let's say, closing, it's on the discontinued line and then after it will be share of results in associated companies.

This big one-off loss [indiscernible] the write-down.

That will be likely on share of results in associated companies when the joint venture is established.

Okay. And then finally, I would just like to -- I get so much different information about energy efficiency and so on. So is your view that mid-speed engines are always more fuel efficient than high-speed engines independent of size? And why is that?

You asked me a very technical question, Tom.

You have highlighted that the [indiscernible] percentage points better...

The answer is yes. But let's say, what's the main driver? I think it's probably, let's say, power per megawatt steel.

I would assume, let's say, I don't know the exact technical reason why a high-speed engine is less efficient than a medium-speed engine, but it has to do with power per fuel density, the fuel consumption versus power output.

Is your view then that this order boom for high-speed engines to data centers, that's because they have a supply chain that is just more easy to ramp up as they might use, let's say, components from the truck industry or so.

I think, let's say, it's the desperation for, let's say, power. Let's say, if you need one, let's say, 500-megawatt power plant and you put it with high-speed engines, you're desperate because you need power. Let's say, first of all, let's say, engines, let's say, high-speed engines, they last much less long than the medium-speed engine. Medium-speed engine can take 30 years.

We have engines running in the field for 40 years, even higher than that. But typically, high-speed engines, I think it's 15, 20 years max, and they are worn out. You need to, let's say, replace them. And also from a space point of view, it's by far not the most optimal solution. So 400, 500 megawatt, I definitely would never go with high-speed engine unless you're really desperate because there are so much disadvantages with it.

Next question comes from Sebastian Kuenne.

My first is relating your investments and developments in carbon capture, hydrogen engines, ammonia engines. Now we have this delay with the IMO with U.S. blocking further enforcement of certain rules.

And the question is then should we prepare for some capitalized R&D having to be written down? Is there any smaller business where you have put like 30, 50, 100 people that develop certain engines and that you cannot now commercialize. So is there any shift or any risk that certain units are underutilized because we have delays in this in our transition?

No, I don't think so. I don't see any reason. Let's say, if you take carbon capture as an example, it's not a dead market. Let's say, there are activities happening.

We are still selling also scrubbers, let's say, that are carbon capture enabled. And I'm pretty sure it will come. But it will take a little bit longer time than we originally had anticipated. No, I don't see any, let's say, accelerated write-downs on that area, not at all.

Very good. And then my last question is the Everllence sale by Volkswagen.

The latest news I have is that there are 3 interested parties. None of them is Wartsila. I was wondering if you are in talks with Volkswagen or with any of the buyers or if you've heard that Everllence is being broken up into pieces where you could get some of it. I mean, what can you share with us on that topic?

Actually, let's say, there is not so much known to us, let's say. But I think the case starts to be less and less appealing. Let's say, first of all, let's say, Volkswagen wants to maintain a quite big ownership, at least to our understanding, what is it 45 or something percent, just minority basically.

Then I would say that at least the price that they have in mind, at least to what we have heard is quite high. There is lots of complication with, let's say, splitting 4-stroke and 2-stroke. To be honest, I don't think it will end in our favor.

Is there other options you see in the market to complement your current portfolio? Not to, but just if there would be someone.

No, let's say, 2-stroke would be an excellent add-on, especially when you can acquire basically a market leader in that space, which is Everllence clearly on the 2-stroke side.

But let's say, there is no, let's say, second 2-stroke player except for WinGD and Mitsubishi, but those doors are, let's say, market share-wise, so small, it wouldn't make sense in my view.

Next question comes from Mikael Doepel.

Hope you can hear me. So just one question on the data center-related pipeline. Maybe you could talk a bit about that. I mean, you have previously said that you have a sweet spot there, 50 to 400 megawatts.

We are seeing quite big deals recently. So just wondering if you could talk a bit about that, what you see out there in the market and how you're positioned on that front?

No, it has not really changed. Let's say, the pipeline is still, let's say, strong and good size-wise, yes, I think our sweet spot is the [ 50 ] to 400.

I think when if you compare all the parameters, let's say, water consumption, fuel efficiency, what have you, I think we typically come out best, I think, in most of the cases.

If you go beyond, yes, we can still come our best, let's say, if you need a 1 gigawatt or 800 megawatt, whatever, let's say, power plant, but you're in an area where water consumption is a big issue or water is scarce, probably it's not so good to go with a turbine because that needs a lot more water than, let's say, what the engine is.

So there are different parameters that make or break, let's say, a decision upon equipment for a customer in different locations.

So yes, I would still say the sweet spot is what it is, 50 to 400. But certainly, let's say, we have also clear options or, let's say, good opportunities, I would say, on the bigger scale.

Okay. No, that's clear. And just as a follow-up there, I mean, how would you describe the -- where in the negotiations are you currently? Are you close to finalizing some deals? Or should -- I mean, just thinking about managing the expectations here in the market, everybody can see the boom out there.

Just wondering if you could say anything about that.

No, we have, let's say, in the whole pipeline, you have orders that are, let's say, in final stages of negotiation, you have orders that just are opportunities that just come in and that's a bit of a constant flow.

And sometimes, let's say, one that is very close to conclusion just disappears for whatever reason, they didn't get a permit or some other reason. But let's say, immediately, some other customer jumps into the slot. And basically, sometimes we have even cases that within, let's say, 4 to 6 weeks, you conclude something which is also possible.

So it's a very volatile pipeline, as we have also said before. It can change very quickly. But yes, different projects in different stages. And we have always projects in, I would say, any stage of the opportunity pipeline.

And the next question comes from Johan Eliason.

I was just wondering, you have announced the details of the CapEx for this expansion. How should we think about the total CapEx over this period until 2028? Is this sort of your normal 2% to 3% of sales and then this comes on top? Or how should we model it?

I would say it's a good question. I would say this is largely on top, you could say, because you have always, let's say, the normal, let's say, CapEx flow of replacement of workshop equipment and what have you. I would say the majority of this, I would calculate on top.

Good. And just thinking about your balance sheet, while we are at the topic, you decided to go for this extra dividend, but versus your gearing target is still very far away. Obviously, you have to have a strong balance sheet now when you are doing these investments, but still priority going forward, M&A or continuous shareholder returns. Have you communicated anything about that go?

No, we have not, let's say, communicated, let's say, shareholder returns, that's typically, let's say, Board decision at the end of the year when we talk about that. So far, no conclusion. Let's say, last year, we did an extraordinary dividend, eventually paying 100% of EPS out in dividends. Partly regular, partly extraordinary.

Will that happen again? No, there are no guarantees for that. It's a case-by-case decision. It depends on, let's say, the situation at that point of time. But from other priorities, yes, clearly, let's say, we need to spend more money on the CapEx. R&D spend will stay on a higher level, let's say, not the 3% historically, but let's say, 4% plus clearly.

And of course, with growing sales, 4% plus of sales is also an increasing absolute amount. M&A, yes, we are looking out, let's say, I don't think, like I just said, Everllence is going to happen. Will there be something else? At least no big tickets that I can see. It will be more, let's say, small bolt-ons.

And otherwise, I think it's also not a bad situation to have in a time when there is lots of things happening also geopolitically to have a solid balance sheet. So better be safe than sorry.

Yes, absolutely. And then finally, just to detail about this JV with the storage business. You talked about this EUR 40 million to EUR 50 million charge, but you mentioned it will be taken when it's part of the JV. So it's EUR 40 million to EUR 50 million, half of this charge as you own half of the JV?

Let's say our share is 50%. Of course, not all that result is from that time. Let's say, we have said that if we are not booking orders, let's say, in last quarter, we said if we are not booking order, we will be loss-making.

So okay, we start to be at the tipping point, you could say that as the orders have not yet really come in, we start to generate losses probably between now and closing. And then on top, you have, let's say, the result of the joint venture later on, and it is a joint venture. That's 50%, correct.

The next question comes from Sven Weier.

Yes. A few follow-ups left, please. First one is come back on M&A and fuel cells. I know we discussed this last time a few years ago, maybe that I think you guys ruled out to get involved. But we're seeing these guys making good progress on the data center side, for example, could be also on shipping. Do you still rule that out to kind of organically or inorganically get involved in fuel cells?

Let's say, in the past, we used to have, let's say, also a fuel cell business. I remember some, what is it, 10, 15 years ago. It was too small to survive.

So I think it was also pretty early in the time of fuel cells. I think the fuel cell technology has evolved quite well. I would not rule it out completely. I think it's definitely an area we should keep an eye on. And let's see.

Good. The other question I had was just, I mean, as you know, in the last couple of quarters, there was a great focus on this euro per megawatt number in Energy.

And I think you've explained it a few times that there is a big influence from scope, right? I mean when you look at the orders that you had in Q2, is there any reason to assume a much different scope in Q2 from Q1 so that we are prepared for another fluctuation here?

Okay, let's say, [indiscernible] difficult to say because I am not 100% having in my mind clear, let's say, what's the scope of every order that we take.

I would say, in general, the mix is pretty equal. But it makes a big difference, let's say, how much axillary equipment is freight included or not included. If you need a 300-megawatt power plant, whether we sell it with, let's say, large bore engines or medium bore engines, that's already, let's say, what is it, 10%, 15% price difference.

So there is lots of, let's say, different elements that play a role in Europe per kilowatt. But I would say, is it radically changing because of one factor? No, I don't think so.

But it can still be volatile, I assume, right?

Yes I think it will remain volatile that I'm pretty sure.

But you're not going to change the definition of it just to look at maybe the core euro per megawatt so that we have really a like-for-like number in the future.

No, that's not...

It would be too detailed, I guess, yes.

That's also very difficult to do.

The next question comes from Panu Laitinmaki.

I just wanted to clarify on the reporting of the energy storage business. So will it be in discontinued operations in the Q2 report already?

Most likely, yes.

Most likely.

And then next question comes from Tomas Skogman.

Yes, I just noticed that Hakan has said you get repeat orders in data centers. So I mean, is that customers are happy, of course. But I just wonder about customer concentration.

I mean could you open up a bit about this as you have very large single orders and if some of them go to the same customers, it would be relevant to know about that kind of a risk, I guess.

No, I will not open that up, sorry.

But it's not in any way. I mean, you have -- is it 2 or 3 orders from the same customer?

I will not tell.

Okay. And then the deliveries in the second quarter, I mean, do you want to say anything? I mean, you have a great order backlog, but we know that deliveries -- sales is booked of deliveries, but you still had a very big jump in energy equipment sales in the first quarter, of course.

But is there anything we should take into account modeling the second quarter sales estimates?

No, I think, let's say, looking at the sales volumes in particular, I think the majority of our sales volumes are actually in the second half of the year.

I think Q2 is a good quarter. I wouldn't say it's a bad quarter, but I think the majority of sales will happen in the second half of the year when you think about, let's say, energy equipment.

Next question comes from Johan Eliason.

Just coming back to your comment about R&D. I can't remember how it is in your case. Do you capitalize R&D or do you just expense it directly?

No, partly capitalized, yes. If we do a new engine platform development and also expanding it to the different cylinder configurations, that's typically capitalized R&D.

And the next question comes from Antti Kansanen.

I wanted to come back to the potential Brazilian orders and what you mentioned that they should be placing them very shortly if they want to keep kind of the delivery time.

So how does this work? I would assume that when they are quoting kind of for the auction, they already have some type of a net pricing agreement with you in order to kind of calculate how much the cost is and some type of a financing agreement as well to be included in the auction. So what is then driving this kind of a potential delay in orders?

It's a bit different than that. We have even, let's say, parties that have offered with vessel equipment that we were not even aware that they offered with vessel equipment. So yes, it varies a lot by customer.

And yes, we have typically made calls. We have also with some, we have even made commitments if you make a decision up to, let's say, this moment. But there are also clearly customers quoting with Wartsila equipment that they have not even contact with us, or very little contact with us.

So it's a mixed bag of things. But again, let's say, as I said earlier, if you have a commitment from Wartsila that, okay, you can have these slots, but you need to decide by this time, we will honor that. If you don't decide by that time, the slot is gone. And for many, the slot has gone.

And kind of the remaining opportunities, are these largely parties that you have interacted with or largely parties that...

It's, of course, always better to, let's say, sit down with Wartsila and discuss and be open about, let's say, what you need when you need it and what you want. That, of course, gives you the best possibility to get engines.

But again, let's say, it's with a fixed time. So if you don't decide, we will not keep your slots available for you forever.

Okay. Fair enough. Then I had a kind of a detailed follow-up on the R&D write-down related to the storage JV. And I mean, I would assume that that's quite a sizable portion of the EUR 40 million to EUR 50 million that you're guiding for the full year. But wouldn't 100% of that be for Wartsila? I mean isn't it Wartsila who is doing that write-down, R&D capitalization write-down rather than the JV. So could you maybe walk us through how would that kind of play in your reporting?

No, we will likely do that in the joint venture. Why would we do it in Wartsila?

Okay. So you will move kind of the balance sheet into the joint venture [indiscernible] joint venture will do it.

Maintenance for the net asset value to the joint venture and then they will take the necessary actions. These actions, okay, they are largely worked out, but let's say, all the details need to be tuned. So that's also why we give a range.

And in no cases, this will be visible on your adjusted EBIT that you report. It will be either discontinued or...

Discontinued or share of result and associated companies, correct.

Okay. And is there anything you want to kind of give more clarity on the cash impact of the JV? I mean, you will move net assets into it, which will have some advanced payments, if there is money moving to the other direction?

Which is, let's say -- which is absolutely correct. And let's say, that's the cash outflow that we will have.

And I think considering, let's say, the size of advances that we have received in this business, it's more cash going out than coming in. Because let's say, when we say, okay, the P&L impact at closing is more or less 0.

So you get compensated for the net asset value that you transfer, but the net asset value includes, let's say, the cash from advances, and that's quite sizable amount actually.

So the impact on group net cash position will be minor negative.

Altogether, it will be negative, yes.

And the next question comes from John Kim.

Arjen, I was wondering if you could help us think through factory loads as you expand capacity. I'm trying to square the circle here. You have a number of customers who are quite eager to get delivery as soon as possible. There's probably an optimal level of load in the factory itself.

But there's also, I think, conceptually the option of paying over time to deliver potentially at a rate above that optimal level. Just trying to think how you and the management team are thinking through this and how that might kind of sequence over the next 2 or 3 years. Is there a period where you're going to have extraordinarily high load because of what appears to be a fairly super normal demand? Or are you looking to load balance that and provide more of a consistent cadence on load and profit?

I think at the moment, and I think that will still stay for quite some time, we are running the factory at maximum capacity. Utilizations, you can basically say 100%. Of course, there is a little bit fluctuation. It's never flat, let's say, 100%. But in general, I would say it's 100%. And as long as I would say that given the fact that, okay, we have extra capacity coming available in 2028, most of 2028 slots have already been either sold or committed.

We are pretty confident that, let's say, at least until the end of '28 and if not longer, I think it will even be longer, we will run the factory at 100% capacity. It will not...

Understood. And how could we think about need to hire in the back of this? So you've talked about nameplate capacity, but can you help me?

Hiring new people for this extra capacity. I don't think we need a lot, actually, to be honest. Let's say, we have a factory that is capable of running 100%. So we don't need a lot of, let's say, new resources. Where we do need the resources in the future is, of course, when all these installations get installed and you need to do operation and maintenance, you run the power plant on behalf of customers. So in many places where we have sold, let's say, power plants, we are hiring people to make sure that we can run the power plant once it's commissioned.

And it seems that we don't have any more questions, and I haven't received any questions to e-mail. So I think it's time to wrap up. Our half year financial report will be published on July 21.

So hopefully, we will meet in connection with that. Many thanks, Arjen, and thanks for all the participants for a very lively discussion.

Thank you, team.

Welcome to this news conference. I'm Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Wartsila announced today the plan to establish a joint venture for our global Energy Storage business with RCT Solutions and discontinue Energy Storage as a separate reporting segment.

Today, our CEO, Hakan Agnevall, will discuss the highlights of the plan. And after Hakan's key messages, there's a possibility to ask questions. As a reminder, we will host a pre-silent call next week on June 23, together with our CFO, Arjen Berends. So let's leave questions related to recent trading and detailed financials to that call. [Operator Instructions]

Please, Hakan, time to start.

Thank you, Hanna-Maria. And it's not only me today, it's also -- Arjen is also here as our CFO. So for the Q&A session. But let's first summarize our news release here this morning. So as Hanna-Maria pointed out, we are about to establish a joint venture for a global energy storage operation with RCT Solutions. And also on the reporting side, discontinued energy storage as a separate reporting segment.

So today, we are announcing this plan to establish a joint venture together with RCT Solutions, GmbH for our storage business. We are in the JV, we are partnering with RCT, who is an experienced player with strong capabilities in operating in an energy integrated energy storage business under challenging market conditions. And this is certainly what we are facing right now. RCT brings strong market know-how, execution capability, knowledge of the global supply chain as well as also a separate opportunity for vertical integration through an existing integrated battery storage manufacturing initiative in the U.S., which are evolving here near term.

RCT has the aim to develop into globally vertically integrated battery energy storage system players. And as a result of forming the JV in second quarter, Energy Storage will cease to be a separate reporting segment. So I mean, as you know, those of you who follow us, our storage business, which is now transferred to the JV is facing headwinds on the order intake side due to changing market dynamics. I mean it started with increased U.S. tariffs, also regulatory changes and also downstream expansion or upstream expansion of battery cell manufacturers, which now starts to compete directly with us as a system integrator.

And so the competitive dynamics, and we have talked consistently about this now for a time, the competitive dynamics have put significant pressures on profitability and order intake. And we have -- during over time here, we've been looking at measures to improve the competitiveness of our energy storage business and competitors also to drive the long-term profitability. So if we look at the JV that we are forming now, we expect it to be loss-making this year in 2026, driven both by the recent lower order intake and also the transformation actions that we plan.

And basically, if you look at the transformation act, one big financial is the write-off of capitalized R&D. And the impact for Wartsila for the full year of 2026 on our operating results, it's estimated to be negative EUR 40 million to negative EUR 50 million, depending on the exact timing of the closing of this transaction. So teaming up with RCT, it offers an excellent opportunity for storage to strengthen its competitiveness. And the JV is expected to generate positive results towards the end of 2027 based on those actions that is planned or being planned.

Energy Storage, I mean, just as a reference, it's our smallest reporting segment. It's 480 employees globally. Last year, it was a net sales of EUR 694 million, which is about 10% of Wartsila's overall net sales. Operating results was EUR 23 million, which is 2.8% of Wartsila's total operating results for 2025. So it's clearly the smallest or the smaller piece of Wartsila overall we're talking about here.

So the plan is that the JV will generate positive operating results towards 2027. And -- but we stopped the separate reporting of energy storage already in the second quarter now in 2026. Now the ownership structure, it's 50% RCT Solutions and 50% Wartsila. Now we also make it clear already from the beginning that we might have new investors joining later. And if and when they come in, we will -- the original owner, we will decrease our shareholding. Now Peter Fath, who is the CEO of RCT Solutions, he will become and focus 100% of his time on the being the CEO of the new joint venture, and he will also relocate to the U.S.

If we look at the financial impacts for Wartsila, there is no material profit and loss impact at closing expected. We will transfer net assets representing less than 5% of Wartsila total net assets into the joint venture. The JV is expected to generate positive results towards end of '27. It will be loss-making in 2026 with an estimated negative EUR 40 million to negative EUR 50 million for the full year on the -- the Wartsila -- impact on the Wartsila's P&L, so to say.

And the spend that depends on the timing of the closing. The separate reporting will end in the second quarter of 2026. And energy storage financial targets will no longer apply and its demand guidance will also be suspended. Then we expect the closing in the third quarter in 2026, and that is subject to regulatory and other customary condition and approvals as well as arranging a financing package for the independent JV.

And until then, it will be reported as discontinued operations and assets held for sale. And then from closing and onwards, the JV will be reported under other business activities as a share of result in associated companies. That was the news of today. I mean, this is an important milestone for our energy storage business. It's been a long journey, making the acquisitions from Greensmith, growing it, going into strategic review, ending the strategic review, keeping it. But after that, also facing the changing market dynamics, U.S. tariffs, vertical integration by cell manufacturers significantly increasing competition. And now it's the next step of the journey. We formed the JV with RCT. They bring in strong competencies in the sourcing side and also establishing battery manufacturing.

And they have a separate opportunity for cell -- battery cell manufacturing in the U.S. in development. So -- and this also means for Wartsila, we will become even more focused as a group, focusing on marine and energy, our thermal energy business. And I think this also goes in tandem with we have now, as you know, closed the final divestments in our portfolio business.

So over 5, 6 years, we have divested 11 business units. And now we also formed a JV with storage. So coming out of this, we will be a more focused group going forward and well set up, and that's a discussion for another day. But as we have been talking about when we look at marine and energy combined, strong demand side and also an exciting growth and profitable growth journey going forward. So with that, I suggest we open up for questions.

Thank you, Hakan. So we will start the questions.

[Operator Instructions]

The first question is coming from Antti.

A couple of questions from me, if I may. I'll start with the GEMS software business that you have in the storage. How does this divestment impact any potential for the GEMS on your traditional power plant business? Or does it kind of relate to that at all?

So GEMS as a software and the people around it is included -- will be included in the JV. But our energy business has the right to use the software. So from that perspective, we still have the GEMS software for our thermal energy business going forward.

And then a couple of technical questions relating to the transaction. Could you comment anything on the impacts on your net cash position, taking into account any kind of working capital or kind of funding needs that the JV will have from start of the transaction?

I can answer that. Let's say the transaction is expected to have no material impact on the P&L. In practice, that basically means that you get compensated for the net asset value that we transfer to the joint venture. And the net asset value in this case includes, let's say, the cash, which is mainly coming from the advances because they need that for being successful in their operations. So yes, they will go cash out. We will quantify it because that is, of course, varying over time. And for sure, the amount today is a different one than the amount at closed.

And I think you can also talk through the EUR 40 million to EUR 50 million negative impact, the cash portion of that.

That's the operating result and the majority is related to R&D depreciation, capitalized R&D. So that is noncash. The rest is, I would say, cash.

And my last question was exactly on that item. Will you do the write-down already on Q2 when you kind of put it on a discontinued item or after...

That will happen in the joint venture most likely.

And then just a clarification, going forward, the cash flow from this JV into Wartsila will be annual dividends and then you will book kind of the annual results share of that in your EPS.

Single-line consolidation, correct. But remember that in the future, after 1st of January 2027, it will not be part of operating results because IFRS 18 will change the structure of the P&L. So it will be result from investing activities instead. That goes for all companies. Everybody needs to comply to IFRS 18. So there's no difference for us.

That's a separate topic to have going forward. IFRS 18 and its impact on how P&L will be reported. But it's good that Arjen highlights this already now for storage.

The next question comes from Akash Gupta.

Yes. I have a couple of questions as well. The first one is on treatment for putting this business in discontinued ops because I think in the past, you sold 3, 4 businesses in portfolio and you kept reporting figures for that until you close the deal. And here, you are putting it into discontinued ops straight away.

So I wanted to understand the technicalities behind why this is going straight away in discontinued ops and why you kept reporting other businesses until the deal was closed. The second one is on this EUR 40 million to EUR 50 million figure that you are giving. Is this what we should expect impact on comparable operating profit for the year depending on when you close the deal?

So -- or is it maybe a different number? And then the third one is on RCT Solutions. I quickly had a look at their website and they do a PV solution partner and partner of PV manufacturing, photovoltaic. So is this the company, the whole of their company, you will own 50% JV with your storage or it will be 50% in their storage and your storage business together. So just to understand which RCT Solutions, GmbH and what assets we are talking about here?

Maybe easier if we take one question at time. Arjen has an excellent memory, but anyhow.

Let's say the second one I lost already. The discontinued operations is the way we chose for this one. And I think we have done it also in the past with portfolio businesses, at least on certain occasions.

This is, of course, stopping a segment reporting completely. And between now and closing, we don't anticipate to be too long time. We expect this to happen in Q3 basically. And as we stopped the segment reporting, we thought that this is the best way forward because it would not make sense to give another, let's say, demand guidance, et cetera, as a normal segment would require.

And let's take the second question.

The second one I don't remember. Can you repeat it, please?

Yes, it was this EUR 40 million to EUR 50 million loss that you are guiding for the year depending on exact time of closing. So I can see consensus has EUR 9 million positive for the whole year in comparable operating result. So does that number needs to go to somewhere between EUR 40 million to EUR 50 million? Is that the message?

That's the comparable number, yes, correct.

And on RCT...

The one was on RCT.

Yes, RCT Solutions. So they are taking a 50% ownership in this JV. We are not taking any ownership in RCT Solutions, just to clarify that. But maybe I misunderstood your question.

In the JV, it will be your battery storage business and their battery storage business, not the whole of the company?

No. So it will be our battery storage business only. They will not bring their battery storage business. So RCT Solutions, the major portion of that, it's, you could say, engineering firm and their specialty is to set up factories for -- both for solar manufacturing, but also for battery manufacturing. And they have done 40 factories all over the world. So they know clearly the battery industry very well. They know the supply chain very well, but they are not moving any battery business into the JV.

The JV will be the Wartsila battery business. So what RCT is bringing is the knowledge and then in addition, they have a separate parallel initiative, which we are not investing in as Wartsila. It's not included in the JV. So RCT Solutions has a separate initiative where they are currently in the role of financing and setting up battery module and later battery cell manufacturing in the U.S. that will our understanding will be compliant.

So that is a separate business and you won't be required to put any money for CapEx in that...

It's completely separate business. Then, of course, there are plans of cooperation and offtake, et cetera. But from a legal perspective, it's a separate business. We will not invest in that separate business. We will put our ESP into the JV. This is how we contribute to the JV.

The next question comes from Sebastian Kuenne.

Can you hear me?

Yes, we can hear you.

Yes. One question is regarding the operations that you give to the joint venture. I would assume that there might be some staff reductions needed or some other restructuring. And I was wondering if this is already included in the losses, EUR 40 million to EUR 50 million losses that you predict for this year or whether there could be more one-off charges further down the line that the JV has to bear itself and that will ultimately go into your EPS? That would be my first question.

No, all the transitional activities as we've foreseen them to happen, they are included in the numbers presented in the EUR 40 million to EUR 50 million.

So, by year-end, this is a lean business basically?

Should be, yes.

And then secondly, I just try to understand the incentive for RCT to go into this joint venture. Is there any contractual agreement between Wartsila and the joint venture further down the line that basically guarantees business that is done between the 2 companies? Or is there any funding guarantees further down the line that the JV could basically execute and where Wartsila is a liability partner in that deal. So I just try to understand whether this is a very clean cut without any future guarantees on business or whether there's further liabilities.

The guarantees on the existing order book, they will stay with Wartsila. So that's clear. And for any new business that the joint venture enters into, they need to take care of their own, let's say, guarantee facilities.

Can you explain it a little bit more in detail, the guarantees that stay with Wartsila for the existing order book?

Let's say, for example, you have a parent company guarantee, let's say, that is not transferable. I would think that customers don't -- preferably don't like that. Now this is very customary in energy storage business to have parent company guarantees to secure the performance. We have done it for years. We have never got any claims, but these are typically staying with Wartsila. And for new, let's say, business, they need to provide similar guarantees themselves.

Same for, let's say, advanced payment guarantees for, let's say -- sorry, guarantees for advanced payments or bank guarantees for advanced payments, same story. For existing business, it stays with Wartsila until it's out of the books basically. For new activities, they need to take care of it themselves.

And you also signed service contracts for the existing installed batteries, I would assume. The liabilities out of these service contracts that can run for more than 10 years, is this also still staying with Wartsila?

Yes, but the risk is very, very, very small.

The next question comes from Vlad Sergievskii.

I'm just trying to understand how did you arrive to 50-50 split in the JV ownership structure. I assume some valuation of assets should have happened. Would you be able to disclose what were your internal valuation of your energy storage business for this transaction?

And maybe how did you value the contribution of RCT? Is it just the knowledge they are bringing? And is it the case then this knowledge is worth at least a few hundred million euros? That's the question.

No. I mean in terms of how we value and the different parties value the business, we will not go into those details. I mean -- but it's very clear that what RCT is bringing in is competence, execution capabilities, sourcing capabilities and also the parallel opportunities for vertical integration.

Then next question comes from Panu Laitinmaki.

I just wanted to clarify on the EUR 40 million to EUR 50 million loss. So do you expect to make EUR 40 million to EUR 50 million loss on a reported basis? So it consists of whatever the operational EBIT is and then the write-down of R&D? Or do you expect to do that on a comparable EBIT basis?

No, it's the operating results, so not a comparable one.

The next question comes from Antti Kansanen.

I just wanted to follow up a little bit on the kind of the guarantees for the JVs. Let's -- because I understand that the advanced payment portion of the cash is moved to the JV, but let's assume that '27 would be still a very challenging year and they are not themselves cash positive.

So do you have some kind of commitments to fund the JV further, inject cash flow into it, assuming kind of they are not self-sufficient in terms of cash generation going forward?

No, we believe that we don't need to do any, let's say, further capital actions. Of course, one of the pre-closing conditions is the financing package. So that needs to be, let's say, worked out. But so far, we see it doable. So for now, we don't see any need for that.

But do you want to provide any further comment on how much cash you will insert into the JV from Wartsila's balance sheet, excluding the working capital advanced payment side of things?

No.

The next question comes from Uma Samlin.

So just 2 questions from me. I was wondering, given you guided that this business unit will likely to turn more profitable in 2027, what gives you that confidence? Is that backed by the current order backlog? How do you see that market evolving?

No. So the comeback to profitability that is hinging on one side on continuing to drive down the cost and work with supply management and new initiatives there. And the other element is, of course, this possibility for vertical integration. I mean the team is executing on the current order backlog in a good way. And you've seen Q1 5% EBIT. The challenge is that we are not taking an order. So we need to rebuild the order backlog to be successful.

Then I don't see any hands up. [Operator Instructions]

Eliason, please go ahead.

Can you hear me?

Yes. Johan, please go ahead.

Let's try. Technology works better today for me. Just you mentioned the financial targets. You have targets for energy and marine. Will you sort of automatically take those as group targets? Or will you announce some new group financial targets now in Q2 or at the Capital Markets Day?

No. So what we said there is no new financial targets coming in Q2. I mean at CMD, we for sure, we will discuss the financial targets. And I'm not saying we're going to revise them or whatever, you have to wait until then. But I mean, we will not revise the marine combined, energy combined financial targets for Q2, certainly not. They are still relevant.

The next question comes from Daniela Costa.

Just following up, I think, on some of the things you mentioned yesterday, but to make sure I understood. In terms of sort of like -- I guess we are hearing more and more about storage and data centers and the opportunity there while you're doing this and potentially even getting other investors into the JV. So I guess, diluting your potential stake and the ability that you use that future for commercial links.

So just wondering sort of like what was really the trigger there, given you have done a strategic review not so long ago and you had concluded to not. Was it initiated by RCT and you saw an opportunity there? Or really you just took an assessment of the technology and thought this wouldn't be really something good to complement your -- offer a more integrated solution in terms of what you can offer for data centers, for example, just on that.

Yes. So give a little bit of the history there. I know you know it, Daniela, but for the benefit of everybody. So I mean, we grew the business to breakeven at EUR 1 billion, and then we initiated the strategic review, which we ran quite some time.

And we also said very explicitly that during that time, we also looked at different ownership alternatives. I mean the logic was that this is a growth business, but it's clearly dilutive to group margins. Now -- so we ended the strategic review. We basically -- when we assessed all the alternatives, we said that the best way to create shareholder value is to keep the business.

Now after that conclusion, 2 things happened that has impacted the competitive situation quite significantly. One is the Liberation Day and the tariffs in the U.S., which has highly impacted the U.S. market. And two is this -- which I would say it's a consequence of EV sales not developing. There is a lot of capacity for battery cell manufacturing on the market, and they are looking into new industries and clearly identifying energy as one and where you basically have suppliers -- battery cell suppliers starting to compete.

So it's for both of those reasons, it's becoming a more competitive space, and that happened after the strategic review. So we have now been working on this. The team has been executing and done it in a good way. And -- but of course, still, if we were to achieve the group margins of 5% as we put in the financial targets, it's still dilutive, and it's getting more and more challenging space to work in. So I think these have been the major drivers behind, so to say. Then with RCT, they came up as a potential player and now we are launching the JV together with them.

And sorry, I might have missed this on one of the questions. I think you addressed it on one of the questions earlier, but I didn't fully get it. But you will not keep a direct commercial link -- or how can you leverage this somewhat for competing for like future data center tenders, for example, which might be integrated between your balancing and storage?

We can, of course, cooperate, but we will not have a strong commercial link in type of approaching, for instance, data centers. No, we do not have that. I mean both of these technologies, both our engine technologies and battery technologies, they need to be competitive on their own merits. Otherwise, we start to dilute the group margins.

They have also never been contracted in one go. So it's all separate contracts and negotiations.

Thank you, Daniela. Then I do not see any hands. Just double checking whether anybody who is calling in by mobile phone does. If you have a question, you raise it now. Please go ahead.

Hanna, can you hear me? It's Sven Weier from UBS.

Is it Sven?

Yes, can you hear me?

Yes.

I couldn't dial in using Teams. Questions I have is just on the accounting treatment again because I'm a little bit puzzled here because when you call something discontinued operations, does it mean that you're aiming for 100% exit eventually? And also where you put this into the P&L because the other companies I cover that normally lands at the net profit line and not in the associate results. So could you help me understand the accounting treatment first?

[ It's ] put as discontinued operation between, let's say, signing today basically and closing. After that, it will move and then it will, let's say, in discontinued operation, of course, it will have the full P&L impact for the time it takes.

And after closing, it will move to share of results in associated companies on single line consolidation.

And to the other question -- sorry, if there's a follow-up on that. No, I mean, to the other question, as we declared also, we will entertain and we are entertaining others investors to come into the JV. And if that happens, we will reduce our ownerships. And we see this as a journey from Wartsila side as a journey over several years, but we could contemplate to reduce our ownership.

And did you mention this on the back of interest that you've already seen? So is that why you're mentioning it? Or is that something that needs to happen from here?

Sorry, can you clarify your question, Sven? I'm not sure I got the question.

In terms of additional parties to the joint venture, did you mention this that you're happy to entertain more investors because you already had interest from others? Or is that something that needs to happen from here?

We have had -- we are having and have had discussions with several different parties.

And so -- and they would be interested also to invest into the JV?

That's correct. I mean that's the type of interest we are discussing. But it's not hinging -- the closing -- Sven, just to clarify, the closing is not hinging on additional parties coming in. We will certainly close with the parties we have already. But if there are more coming in, there might potentially be more coming in.

That's understood. And just coming back on the U.S. tax credit point because as you said, the power unit of the company is already doing battery storage. I was just wondering where I'm not so sure, are they engineering this for other battery storage companies? Or do they have an own manufacturing business for battery storage in the U.S.?

They are primarily an engineering house. I mean, basically designing battery cell factories and then helping investors also to execute the projects. So they know battery -- but it's an engineering house primarily.

And is the idea that this sister company sets up U.S. manufacturing for your business so that you can benefit from the tax credits? Is that the plan then?

It has nothing to do as far as I know with tax credit. It's just it will be a sister company in a completely different legal entity, but -- where there is possibilities to enter into partnership for offtake. And as you know, with the current focus on FEOC, Foreign Entity of Concern, compliance there are not so many fully FEOC compliant battery cell manufacturers in the U.S. and the intention that this will be one of them.

Thank you, Sven. I do not see any thumbs up, but if somebody else calling in by mobile has a question, now it's a good time to raise the question. And also if anybody wants to have a follow-up question, please now it's the time. I have not received any questions by e-mail either. So it looks like that you can conclude it.

So to sum up, I mean, important step for our storage business, it's been a long journey. We know that from initial acquisition to strategic review to some tough times, but good execution and now we found the JV. I think it's good for our team in the storage business. I think it's also good for Wartsila.

We are creating a more and more focused group. We have now also concluded portfolio. So now it's really about marine and energy combined. And you know we have a very favorable market situation, and we continue to expand our capacity. So our narrative will now be even more focused on marine and energy combined, and it's a positive narrative.

Thank you, Hakan. So as a reminder, next week on June 23, we will host a pre-silent call together with our CFO, Arjen Berends, and then Q2 results will be published on July 21.

Thank you.

Thank you.

Thank you.

Good morning. Can you hear me?

Yes, we can hear you. So welcome to Wartsila's CEO Strategy Call. I'm Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will discuss some of our key long-term opportunities. And after Hakan's key messages, there's a possibility to ask questions.

As a reminder, we will host pre-silent call in 2 weeks on June 23, together with our CFO, Arjen Berends. So let's leave the questions related to recent trading and detailed financials to that call.

[Operator Instructions]

Hakan, please time to start.

Yes. In my time, it's good morning. I'm in the U.S. I can't tell you where because I might be doing data centers, as you know, they are secret. And as you see behind me, we go deep and we fly high. I mean this is from the big [ Technical Difficulty ] our recent safety initiative. We have that rolling all the time. And now we have a theme of data care, basically having the courage to tell your colleague that maybe you're doing something here that you should think more than twice before you do it.

And of course, we have our underwater service business, as you can see behind us the divers there. And in diving, if you dive, you know the value check, and that's the analogy we use there. And then some of you are immediately thinking of diving, is that a profitable business? It is. If you combine it with engineering, it's profitable. So it's accretive to the EBIT margin of that segment.

All right. Let's start like I normally do with a short summary on the state of the nation and the market, et cetera, from our perspective, and then let's move into the Q&A. And if we start on the demand side, I think we still see the consistency in the demand side. Strong demand, if we start on energy. Yes, we talk a lot about data centers. I'm sure you will have questions on that. It's still the same dynamic market, buoyant, but dynamic projects come and go depending on permitting and -- but we are well positioned. We will continue to grow.

But our energy storage, as I highlighted before, it's not only about data centers. It's this broader narrative. I mean, general electrification, transport industry, air conditioning, we talk about that Southeast Asia, IEA, International Energy Agency, keep on referring to their report, they actually predict that air conditioning could be even bigger growth driver than data centers going forward.

Let's see. But it's going to -- it's only a driver. Then we have the aging power generation infrastructure in the U.S. As you know, U.S. market was deregulated around 2000. And 26 years later, there is updates to be made, upgrades and replacements to be made.

There's a bit of that in Europe as well. And then the balancing narrative, as you know, it's -- we advocated this for a long time. And now it really happens. I mean, as the share of renewables is growing, I would say, in most parts of the world, you need balancing to keep the system stable. And we continue to see strong demand for balancing power in the U.S., but also Australia.

Australia is the recent example. I think I talked about that before. I was there a couple of weeks back. And Australia is moving away from coal gradually and putting in a lot of renewables, but they have clearly understood now the value of balancing, not only in batteries, it's one of our biggest battery storage market, but now also there are several tenders for thermal balancing with engines, it's engines RFP. They've seen the light. So that's on the energy side.

So it's a broad growth narrative. On the marine, and as you know, we guided 12 months going forward better than the previous one. On the marine side, it's also a good demand situation. Our core segments, cruise, ferries holding up. Yes, cruise is filling up, so to say, the shipyards, but there are still orders awarded further out in the future.

And it's not only that you see offshore coming back, a bit of awakening there. and LNG carriers probably come back, et cetera, et cetera. And then we have the decarb story, and that continues to play a role certainly as well. Yes, MEPC, the vote was postponed, but owners have a 30-year time horizon and fuel flexibility and fuel efficiency is certainly very high on the agenda.

And we are the technology leader in that area. So it's generating growth. We have guided similar, but that -- I mean, on the demand side, but that is on a fairly high level. So for us, I would say it's rather positive. On the services side, we continue to move up the service value ladder. And you know the ladder from transactional spare part business, the different type of service agreements, retrofits and then the performance based, and we are moving customer up that service value ladder, and it's continuing to fuel our growth.

I mean one area where clearly the MEPC and the vote has had an impact is on the retrofit business on the marine side. There, it's slowing down a bit. But the other disciplines of services in Marine is still growing. So that's the general outlook.

Then what have we done lately? Well, you've seen that we concluded the divestments -- the 2 remaining divestments in our portfolio business, Water and Waste and Gas Solutions. So that's now closed. So now there are no additional assets in portfolio. I think we've divested 11 business units over 5, 6 years here. So that's ticking the box. Then what more have we done? We have, of course, announced our capacity expansion, our second -- our sequel, let's see if it's going to be like Star Wars. I don't know how many are there.

But we take them one by one. And you could see it as a proof point of our confidence in the future market, so to say. We are now -- if you compare to the 2025 baseline, so to say, production capacity, by 2029, we will have expanded it with 120%, so to say. So it's quite a big step. And of course, it's not only about our own production facilities, but it's also ramping up the supply chain.

But the team is on the board, and we are moving. And we are -- we are already sold out for '28 basic. I mean you're certainly looking at the lead time for 3 years if you want to contract with us. Another key point because I know that there is a lot, of course, and that is really exciting -- attention from the community on megawatts and order backlogs, et cetera, et cetera.

I think our approach is that we announced firm orders. We are not selling slots. We don't work with slot compensation contrary to some of our competitors. And I know there are some institutes that are compiling statistics. And at least from what we see, they try to do a good job, but there's a bit of mix of firm orders and potential orders and frame agreements, et cetera, et cetera. On our side, we will try to be consistent, and that is we only announce firm orders.

And sometimes, as you know, our customers won't even allow us to do that, so to say, but that's a different topic. Another important topic before I open up for Q&A is that we once again underline we have great order intake, but we are taking further and further out in the future.

So when you look at the sales conversion and the conversion from order intake to sales, it's stretching longer and longer out in the future. I think that's a really key message. And as you know, in our quarterly reporting, we've been trying to give some additional data around that to really underline that. All right. That's my summary. So handing over you to Hanna.

Thank you, Hakan. So now we are ready to take questions. [Operator Instructions]

Everything is super clear. That's fantastic.

Tom Skogman, thank you for the help. Luckily, there are some questions coming. Please, Tom, go ahead.

This is Tom Skogman from DNB Carnegie. I was just wondering when you talk about this capacity addition, I know you have some other marine products. So I think it would just help us to do the modeling to know how large share of the marine equipment business is really engines because otherwise, we get fool here basically.

No, we don't want to fool you. Then, I'm not sure we are giving out either, so to say. So I mean, clearly, the capacity expansion that we are doing now, it's in STH in Vaasa 100% related to engines. And then the majority of that expansion is for energy, but not the only thing because, as you know, we can do both engines for marine and energy in STH in Vaasa.

But Tom, to your point, we deliver other equipment as well. I mean, propulsion systems, gearboxes, et cetera, et cetera, for marine applications and after treatment systems, et cetera. But that is the clear minority of our sales, so to say. So the dominant portion is on the [ engine side ]. I don't know, Hanna, if we are giving what we have said in the past about the split.

Yes, we haven't disclosed the split. We have just communicated that engines are the biggest product of the new build in marine.

And it's also the area that is growing. We have growth in many areas actually, but engines is clearly the dominating growth driver right now.

And can you give your view on pros and cons with your engines and Jenbacher's engines, which are also gas...

Absolutely. I mean yes. So I have deepest respect. I think they've done a great job, and we all know the listing here. I think that's good. So there will be more comparables for us. Then, of course, our engines are a bit bigger. So we have an overlap somewhere in the 10-megawatt area. But when we go above 10, they are not there. So -- and I think they highlighted quite a lot the data center growth, which makes a lot of sense. I mean, 2 years ago, you know that Tom, we've been talking about that about 2 years ago, we were not in data centers because as we know, data centers were smaller and it was the off-grid, et cetera.

I think in, they have been much longer a viable player in data centers than we have. So -- and if you look at some of the data, it's a significant portion. So I mean, they make good gas engines, so do we. Ours are a bit bigger. And as you know, the size of the data centers are growing, and we are talking about hundreds of megawatts. And I've been saying and I'm consistent with that, that the sweet spot is -- I mean, the market is moving into our sweet spot. So I think we will see some competition in the lower end of it. But as the data centers are growing, I think I'm smiling on behalf of us.

But perhaps a bit more on manufacturing footprint and sales is how it's organized and energy efficiency in engines?

So I think they have a different -- as far as I understand it, they have somewhat different sales models because they use a distributor or middleman in between at least for some of the business, you should ask them. But we only have a direct sales model, so to say.

So there is a bit of a difference there. I mean, we are not shy on our fuel efficiency clearly. And for us, it's still about the total life cycle cost. So yes, that's basically -- manufacturing footprint, I think they are more diversified than we are.

And they have announced scaling up as far as I know, and you know it better in various geographies. We focus a bit more in Vaasa, and that is because of the supply chain, and we talked about that. I mean many -- our machines are bigger. So they have somewhat different or quite a different supply chain. And that's why we are concentrating more to one place, so to say.

So them growing very quickly is not a problem in your own supply chain basically that you would share a lot of suppliers.

No, it's not a supply chain issue for us.

The next question comes from Sven Weier.

I'm sorry, I could only join a bit later because I had some teams issues. So apologies if you mentioned that already. The first question I had is just in terms of the capacity to follow-up. Maybe to ask Tom's question a little bit differently. I mean when you think about the total capacity increase that you put in now until 2029, I mean, do you allocate this equally between the 2 segments? Or are you going to allocate the vast majority of the capacity increase then to energy?

So I think the majority will go to energy. I don't know if [indiscernible] you heard it then. But if you look at our manufacturing system, it's rather flexible. We can do both -- manufacture both marine -- and we do. We manufacture both marine and energy engines in the same plant, so to say. So we have a big flexibility. But if you look on the growth and the capacity expansion, the clear majority will go to energy.

Because I remember in the past, you also said, of course, we need to do justice to the other energy applications. We need to do justice to marine. So I'd imagine if you now kind of sold out for 2028, that's because of energy. If you sold out for 2029, it's going to be of energy. I just wonder how much flexibility then you still have for any shorter lead time marine orders [indiscernible] some segments are still doing well.

Yes. No, no. So I mean what we -- when we talk about our kind of strategy for how we serve our customer and customer base. I've said it before, we're going to diversify. We will not put all our eggs in the data center basket, so to say, because we think long term, it's more viable.

And I guess as an analyst, you would agree, it's good to diversify. So we will do that. So that also means that we have long-term strategic customers that we will continue to work with both on the marine and the conventional energy side, if I may say so. And of course, we will work with the data center customers.

There is not one fixed formula. I mean this is -- of course, it's -- this is a leadership call how we allocate, but we're going to diversify. And we're not going to, all of a sudden, say to our core marine customers that engines are not available. However, with the dialogue that we are having and that we are having both with energy and marine customers that it is a very buoyant market, and it's -- the lead times for placing orders is stretching out.

And you need to take that -- as a customer, you need to take that in consideration when you plan your projects. And then we suggest let's have an open dialogue because lead times are stretching out regardless of the industry. There is, of course, a spillover effect clearly.

The next question I had is just when you think about the market concerns about the engine makers in this whole data center topic, I think one of the things you regularly hear is that I think investors are afraid that when it comes to the outer years to 2029 and 2030, that the clients might reserve the place for turbines becoming available again or grid becoming available. And I think the narrative goes that the clients wouldn't place engine orders so far out because they would hope that something else becomes available again. Do you sense that...

Sorry, at least on my side, you're breaking up.

Can you hear me, Hakan?

I can hear you at least.

I don't know. Is it on my side or...

I can hear Sven. Maybe a little bit breaking.

I close my camera. So Sven, I heard part of what you said. So sorry, but if you can repeat the whole question again.