Wärtsilä Aktie

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.

Of course. Of course, no problem. No, the question was when you talk about clients about deliveries more in the outer years '29, 2030. And the question is, do you see more reservation of clients to go with engines and kind of them banking the grid to become available again? Or do you say the same motivation clients going for engines also longer term?

Yes. So I also mentioned that before. I don't know if you're in the call, but we don't do slot reservations. We only do firm contracts. And I know it's a bit contrary to some of what competition is doing, but that's our business approach. So when we look '29, '30, we are talking about firm contracts.

And I don't see -- I mean, as you kind of alluded to that because we know gas turbines will come into the market, I mean, I don't see our customers are going away from us to some of our gas turbine competition.

Not so far, absolutely not. Because remember, it is this -- we talked about it before, when people try the new candy, they will like it. I mean the fuel efficiency is there. The flexibility is there. No need for water, don't derate at all. Those fundamentals, they are real. So -- and are we the best solution for all customers? No, obviously not, but we will grow.

Final question I had, if I may, is just on how you've seen the competitive environment evolving since you got the first order in July. I mean, have you seen -- I mean, obviously, we see also now the Asians, Weichai, Hyundai, a few others entering the scene. So that's part of the question. Have you seen this more engine competition in the meantime?

And the second part of the question is, I mean, why are the clients still buying high-speed engines? I mean, somehow I don't get it because if your engines are much more powerful, you need less of them, you need less space. So I'm kind of struggling to understand why these operators place more than 1 gigawatt orders with much smaller engines than you do. It doesn't really -- I don't get it, to be honest.

No. No. I mean it's a very good question. But I will try to explain it. I mean your fundamental kind of reservation, I support it, as you know. But okay, I mean, right now, we don't -- there is so much demand for energy generation. And the key parameter is lead time. That's lead time. Number two is lead time.

So if high-speed engines can deliver to a certain time schedule closer into the future, they absolutely -- they are selling. I mean, right now, if you're a little bit broad stroke, you could say if you can -- if you have some device that generates energy, you can sell it right now if you can deliver it on time.

So that's the key focus. Now my proposition, which I'm fully aligned with you, Sven, is that gravity will still pull through after a while, i.e., fuel consumption, fuel efficiency, complexity, the flexibility, all those core values, it will pull through. But right now, it continues to be such a buoyant market that anybody can sell.

Thank you, Sven. Then I have received a couple of questions by e-mail. Can I ask how the content in euro per vessel or euro per megawatt varies for offshore versus other segments in Marine? If we see this segment picking up near term, will it be margin accretive for the group, so offshore versus other segments in Marine?

Yes. No. So first of all, offshore, what we see is on FSRUs and similar type of special vessels, so to say, because this is where we participate and generate engines. I mean we are not so much on oil tankers, et cetera, because, of course, there you use 2-stroke tankers instead. But this type of oil handling vessels, special vessels, I think we are seeing a bit of a pickup there. And in general, oil and gas, it's accretive to our margins.

Then a follow-up by another e-mail question. How much dilution we will see in power margins, meaning the Energy segment margins from the next few years being more equipment driven as data center aftermarket is only coming in 4 to 5 years?

Yes. So I mean the logic is right in the sense that both new build and services are growing now, but new build is growing faster than service. And as you point out, service, and we talked about that before, kicks in, in a meaningful way, 4 to 5 years later.

We also underline that data centers is a really interesting service business because, of course, they run with high uptime reliability 24/7. Then we have not -- so you will have more new build, then services is growing. So there will be a bit of margin impact on that.

Then on the other side, the margin in our order backlog for new build is also going up. So we are not guiding on the net effect, so to say. So there are some driving it down. The mix is one, but then you have increasing profit margin in our backlog. So that goes the other way.

Thank you, Hakan. Then...

I mean, just -- and overall, we are saying that you could say we are very close to reaching our financial targets of 14% for Marine and Energy combined, but we are confident that we will get there. And then we will have a discussion on what the next goals will be.

Then I see a couple of hands raised. Those are from people who have been calling by mobile in who has the phone number, which is ending by 1917. Please go ahead. So the whole number is +44-207-425-1917. I think it's Max Yates.

Can you hear me now?

Yes, we can hear you now.

Yes, we can hear you.

So look, I guess maybe the first thing, and I know we've talked a lot about the kind of different scope of orders. I guess maybe just hopefully a simple question. On your data center orders since you have started taking them, how is the pricing on a like-for-like basis of the data center orders? I assume they're not sort of totally different, but just trying to get a sense of how that pricing has evolved since you started winning those orders just qualitatively on the data center business.

I think in general, in these market situations, margins are going up. I've talked about it before. We have good opportunities for margin realization. Then of course, there is always another balancing effect that it needs to make sense for our customers in the business case. But yes, we have good opportunities for price realization.

Maybe just a sort of second question just around service contracts. So what is your latest thinking on kind of when -- if or when you would sign service contracts alongside these data center orders? Because my understanding is you sort of haven't really yet. And I was just wondering, is that just a timing effect? Is that because they plan to service these differently? Just how your thinking has evolved kind of relative to that -- on that point?

No, it's more of a timing effect. You will certainly most likely, very high likelihood see service contracts signed by us for data center this year.

Third one -- I'm sorry, I've just got 2 more sort of quick ones. So energy storage, you talked about kind of needing to win kind of orders relatively quickly. We read a lot about kind of the market in the U.S. being relatively buoyant, but just wanted to understand, I know your business has become increasingly skewed outside of the U.S. So how is that market evolving from your perspective?

We are still struggling from an order intake perspective, so to say. I do agree that especially on the data center side, there is a market there, and we are still looking into it. But I would say that we are still -- the challenges that we have talked about before about order intake remains.

And just maybe sort of last question. When -- obviously, you referenced in your Vaasa facility, we know you produce both the marine and the data center engines. Obviously, you've got some of your other competitors, Hyundai, who are moving into the data center space. I guess what would your view be on the thesis that because demand for these engines, it's driving up capitalization for all of these engine types in these factories.

Does that actually give you the ability to charge your marine customers more for the same engines? Because ultimately, the marine customers are competing with the energy engine customers for the same capacity.

So just trying to understand sort of to what extent from a pricing and a margin perspective, are they isolated? Or actually does that sort of pull-through in demand into the energy space give you a margin uplift on the new engines in marine?

There is a bit of overhearing or whatever you would call it, because obviously, when capacity is running scarce, you get that type of effect. So it is a bit of it. Then there is another element, and I think Tom, you pointed that out also -- Tom Skogman, that there, of course, operational leverage also because our volumes are going up, and that benefits only energy, but also marine.

Then the next question comes also somebody calling by mobile from Sweden plus +46 -- it looks like that -- it's Johan Eliason.

I heard that Sven Weier had a follow-up question. So maybe Sven, let's continue with you.

Yes. Can you hear me?

Yes.

Yes. Maybe to follow up on energy storage. I was just wondering, we obviously had this announcement from Siemens, Fluence and NVIDIA as a reference design for the future architecture to design in their battery storage. I mean, could you see a similar opportunity? Are you working on something similar to have such a reference? Or do you think that was more specific to Fluence and their architecture?

I think it's a little bit more specific to them. I must say -- I must also say I don't understand all the details around that announcement. But of course, those are the questions you need to ask them. So I think this is specific to Fluence.

And if I remember correctly, I think you said last call that there should be an update on what you intend to do on battery storage before the Capital Markets Day. Is that still the most likely outcome? Or should we wait until the CMD?

Yes, absolutely.

So before, yes?

Correct.

And then second question from me is just, obviously, we had another IMO meeting, also discussions around decarbonization and still seems hard to go ahead. I was just wondering how this continues to impact maybe also on the service side, refurbishment business and those type of orders that had been a bit struggling in the last couple of quarters. Did that have any impact? Or doesn't this make any impact at all?

So overall, the narrative there, I mean, if you build a new vessel today, it's going to be around for 30 years. So you need to have a strategic review. I think it's fair -- many owners are assuming that things will evolve. I mean, regulations and fuel prices, et cetera.

So the whole topic of fuel flexibility and fuel efficiency is certainly there. And that is supporting our business. Now if you look on our service side, services is growing, but we talk about these 4 different areas in services and one of them is retrofits.

And that has been on the marine side, negatively impacted by the postponements of votes and decisions in IMO. And that the same message that we [indiscernible] before.

Have you also seen clients switching back from methanol to the normal dual fuel engines because we saw Pacific Basin canceling their methanol order and switching it back to conventional fuel because [indiscernible] really going ahead.

Yes. No, I would say that the clear focus now is on LNG and gas as a fuel. I think methanol, the pendulum has certainly swing back. I mean, among the Chinese operators is still strong. But for many other operators, the focus is these days on gas.

So -- and it's a little bit -- we foresee, as when we talk -- we take the 5- to 10-year perspective, this pendulum will swing a little bit back and forth as we go. That is, of course, part of our strategy. That's why we have the broad offering, so to say. So yes. So methanol will still be there. But right now, the pendulum is swinging back to gas.

Johan Eliason, please go ahead. Johan, for me, it looks like that you are still muted. You can also send the questions for me by e-mail. And everybody else, if you have to raise your hand functionality, please send questions by e-mail to me. I have received some questions already. So continuing by the e-mail questions. Did you mention that you are largely sold out for 2028? Does this mean that you expanded capacity in 2028 is already close to fully booked from capacity utilization point of view or that you are selling 2029 start-up due to other constraining factors?

So it's correct that we are -- we have already sold a big chunk of our 2028 capacity. We still have some, but we have sold quite a bit. And so we are still selling '28 and starting selling '29 as well.

Thank you. Capacity increases and step-by-step approach. What are you exactly investing in or growing in the most recent 2029 expansion? And are there any constraining factors around Vaasa factory that would limit opportunities for further step-by-step expansions? So even additional...

No, we can continue to expand if we want to in Vaasa. And I mean the investments are in -- I mean, the latest here, it's more related to the -- some extent to STH and the equipment that goes into STH, but also a large chunk is the supply chain where we buy certain machining and we put it with our suppliers. So these are the type of investments.

Then there's a request to talk a bit more about your data center-related pipeline. How has it evolved? What are your expectations in terms of conversions in near term?

Yes, near-term conversions, I mean, I can't talk about that. I mean it's the same. We have -- it's a buoyant market, strong demand side. We have a very active pipeline of opportunities, everything from early stage to very late stage where we are negotiating to close. So it's the same kind of structure as before. It's very active and dynamic. It's a positive market. And we will receive more orders for sure.

It's still, I think Johan Eliason, who has raised their hand. Johan, please go ahead. Please send me questions by e-mail. Maybe while we are still waiting for additional questions, maybe one question to Hakan. So first of all, now we have almost closed the portfolio. So all of those divestments have been done. So any thoughts about the capital allocation now?

No. I mean we do have a strong balance sheet, and we want to have a strong balance sheet. We are in a project business. We have received -- we are receiving down payments from our customers, but we need to deliver the projects. So we are well funded for R&D. I mean, 4.8% of net sales is R&D. And organic acquisition has been our focus. We haven't done that many. It's our strategy is really focusing on organic growth.

Of course, we have a radar with bigger ticket items, but it's a lot about timing. Yes, we are not involved in Netherlands, I can say. I mean, that's a normal question that comes. There are a number of PE players as we read about in media.

So our strategy is really focused on organic growth. What about dividends, et cetera, in the future? I mean that's a broad topic, so to say. And I mean, we do foresee that we will continue with the negative working capital that we've been talking about. I know that some got a little bit concerned after Q1 when it was not as strong, but this is a long-term trend with a strong working capital situation.

Johan Eliason, you can once again start.

Can you hear me now?

Yes, we can hear you. Fantastic.

Fantastic. Sorry, some technical issues on my side.

A lot of my questions have obviously been asked already, but I was just curious a little bit about the engine plant in Vaasa and the capacity expansions you talked about. You indicated you also invest with your subsuppliers. But you have these [indiscernible] engines JVs in China, in Shanghai. Isn't it possible to sort of move some capacity there? Or are they very dedicated to the local client base?

No, we can move marine and they are actually running at fairly high utilization right now. So there -- but there is some opportunities to move capacity there, clearly on the marine side.

Absolutely. But it's a smaller adjustments -- I mean, when you compare it with the steps we are taking in Vaasa. So that's -- we are not announcing all the smaller things we are doing. We are announcing the bigger things we are doing.

Excellent. And then just coming back a little bit, you obviously talked about there should be some sort of spillover effect on the marine margins as well when Vaasa capacity utilization goes up, et cetera. But will it also be obviously so that with scarce capacity that you will also be skimming the marine market and basically taking the engine orders on that side with good margins with obviously what you commented earlier that...

It's a mix. It's a mix, Johan. It certainly, for some, for some are more strategic -- so it's going to be a mix, I can say that. I mean the operational leverage is certainly there. When it comes to price realization and new build in the marine market, yes, there will be some spillover, but it's going to be a mix between different customer segments.

Good. And sorry, I also missed the first part of your presentation. Did you say anything about any segments in the marine that are looking positive right now? I think you talked about cruise and ferry for some time. Is there any other segments you highlighted earlier?

Yes. No, I talked about offshore FSRUs and similar type of vessels that we see some uptick in that, where we basically generate the energy for, you could say, the chemical plants. I mean, we are not in tankers. I mean, this is 2 stock applications. But those more special vessels in oil and gas, we see uptick in activities.

And just for everybody, so after this call, my colleague, Noora, she will send a recording of this and publish it on our website. So if somebody missed the beginning of the meeting, it will be very shortly available. But then Tom Skogman has raised his hand. Please go ahead.

Yes. This is Tom again. I would just like to understand a bit better this kind of industry habit of slot reservations. Is it so that you don't use anything like that? And what is kind of the money involved in slot reservations in this industry? Is it like one...

You will have to ask GE and Siemens and what -- how they do it and others. We don't do it. And why we don't do it, I think it's to have stability because it feels good to sell the slots, but there is always a dynamic, especially when the market turns.

So we've seen that also in the past. So that's the logic. I mean what is worth noting is that -- and this is public, you can see it that if you take GE and you look -- I don't know what term they use, but reserved or whatever capacity, it's almost 50-50 between firm orders and slot reservation. So I mean, we will be consistent on our side. We're only going to talk about firm orders.

And do you increase the advance payment anyway when delivery times stretch out further and further out into the future to make it even more vulnerable for customers to walk away?

Yes. I mean, I don't think that we have good payment terms. And even if deliveries are coming later, the down payments, which customers are paying, you still pay them at signing or shortly after signing. So that's -- even if deliveries happen later. I don't see us in a major way increasing the down payments.

But of course, once you sign a contract, if you don't take the deliveries, you have to cancel -- I mean, the customer need to cancel the contract. And of course, we have provisions in our contracts to provide -- to protect ourselves and our profitability.

And do you want to disclose any size of those compared to...

No, no. because they...

That matching what you promise to your suppliers then in that case? So how does it work?

That is too much internal, so I won't comment.

Thank you. Then one follow-up question by e-mail. Could you talk a bit more about how do you see data center opportunities within energy storage business?

I mean there is certainly -- it's a tool -- the battery storage is a tool in the toolbox that the data center builders will use in many cases, to deal with the high variability of the load. So for the really big ones, you will have -- you might have some CCGT -- I mean, closed cycle gas turbines, then you have some -- they should run completely evenly and then you will have some engines.

And then on top of that, you will have the battery storage. And because the batteries, they deal with shorter swings in the milliseconds and seconds area. There are a number of other -- those flexibility devices in that tranche, so to say, where you have the batteries. But batteries will be there, clearly. And from our side, we are looking on how and if and how we engage in this market segment for the batteries.

Still have 14 minutes time. So if somebody has a question, please use your functionality or you can also send e-mail to me. Maybe as a one more question, still waiting for the final question. So Hakan you have been meeting many of these U.S. customers who are repetitive customers for us. So what is the customer feedback typically from those?

No, I think that they appreciate our capability to deliver on the fundamentals, so to say, deliver on time and get the equipment working and the equipment is delivering on the performance that is expected. I think this is why repeat customers keeps coming back.

We are project companies, okay, we are very careful with terms and conditions. I think that some of our customers, they comment that sometimes we have to spend quite a lot of time negotiating with Wartsila. But yes, we've been around for 190 years. There's a reason for it. So -- but I think the repeat customers, they really see the value that we are providing.

And also good service network, as I have understood. That's something they appreciate.

No. Clearly, if we talk about our U.S. service setup, I mean, we have our headquarters in Houston. This is where we have a logistics center for the U.S. We have service crew all over the U.S., and we are expanding it in a very rapid pace.

I mean now we have taken and that has been announced before, our first operation and maintenance contracts in the U.S. So service -- if you go back a couple of years, and I've talked about that also, we didn't do too much service it was more the transactional.

So I mean it was the first step on the service value ladder. But now we really started to do. And I would say, yes, the last 3 or 4 years, we are clearly moving up the service value ladder with different type of agreements, sometimes even operations. And as I talked about before, the data centers, I mean, they haven't even started operating yet. But when they start to go in operation, they will also have present really good service opportunities in the U.S.

Thank you, Hakan. For me, it looks like that there are no further questions. So there seems to be -- there have been some technical challenges on this call. So like I said, my colleague, Noora, will send you shortly the recording of the whole call. And as a reminder, we will host a pre-silent call on June 23 together with our CFO, Arjen Berends. So looking forward to meet you there.

And then Q2 results will be published on July 21. So I hope you can enjoy also the summer a little bit before that. It's rainy and still quite cold in Finland. I hope that you can see the sun. But thank you for this call.

Thank you, everybody. Take care.

Bye.

Good morning, and welcome to this news conference for Wartsila Q1 2026 results. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will start with the group highlights. He will also go through business performance. And after that, our CFO, Arjen Berends, will continue with key financials. After the presentation, there is plenty of time for Q&A.

Hakan, please, time to start.

Thank you, Hanna-Maria, and a warm welcome to our Q1 report. I'm joining you today from Shanghai. So it's a pleasure to be here in China. As you know, China accounts for more than half of the world's shipbuilding capacity. So it's a highly relevant place for us to be as Wartsila. But if we start with the first quarter, I would say we have a strong start of the year, both in Marine and Energy. So we start good in 2026. So if we look at the summary, double-digit growth in order intake, all-time high order book and continuously improved operating results. So the total order intake increased by 10% to EUR 2.1 billion. And this quarter, we will also talk a lot about organic growth because you have seen or you will see that our -- both order intake and sales has been heavily affected by FX, by exchange rate and also the fact that we have divested assets in portfolio business. So some of these numbers are good, but they look even greater when you look at the organic side, so to say.

So order intake increased in Energy and Marine. Energy order intake increased by 56%. But if you exclude FX, organic growth is up 66%. Marine order intake increased by 9%. But once again, organic was even higher, 13% All-time high order book of EUR 8.9 billion and service, we know how important it is for Wartsila. So the order intake on organic side was up with 9%, strong number. Then, of course, we had FX impacts, and we also had impacts of our divestment, but organically up 9%. And that also leads to our -- that our service 12-month rolling book-to-bill continues to be above 1.

Net sales remained stable at about EUR 1.6 billion, and we continue to improve our profitability comparable operating to EUR 199 million, and that corresponds to 12.8% of net sales. Operating results increased by 18% to EUR 194 million, which is 12.5% of net sales. Cash flow from operating activities amounted to EUR 7 million. It's a bit lower than we normally see, but that's because we are building up basically engines for deliveries. So we -- and Arjen will talk more about cash flow going forward, but we remain calm, composed and optimistic also on the cash flow side going forward. And we continue to have, I would say, a very attractive return on capital employed at 64%.

So that's the highlight, strong performance, both on the Marine and Energy side. Let's dig a little bit further into the numbers. So order intake, up 10%, EUR 2.1 billion; of services, you see it's minus 1%. But once again, if you look on the organic growth, it's 9%. Equipment is up 23%, very strong on the energy side. And we have also seen that the start -- the first weeks of the second quarter has really started good for energy with 2 additional big data center orders in the U.S. Order book now is at a very good and solid level, EUR 8.9 billion. We continue to highlight the message that we are building up an order backlog for deliveries further and further into the future. And that is very important when you model the sales recognition.

Net sales, flat EUR 1.5 billion the whole theme of FX and divestments we have done. Services, EUR 800 million, down 9%. Equipment up 11% to EUR 750 million. Book-to-bill continuously well above 1, at 1.35. Comparable operating results increasing 16% to EUR 199 million, 12.8% mentioned before, and operating results up 18% to EUR 194 million at 12.5% of net sales. We also continue to follow Marine and Energy combined and Energy Storage. And you can see that if you look at Marine and Energy combined, the order intake and the sales metrics is even stronger. I mean, order intake up 28%. Organically, it's 34% up. And you could also see that the order book is up 27% in Marine and Energy combined to EUR 7.5 billion. Net sales, the organic growth, 7% and services is down, but equipment is up 22% to EUR 504 million.

Book-to-bill in Marine and Energy combined at 1.55 and comparable operating results also continue to improve clearly in Marine and Energy combined 7% up at EUR 175 million and at 13.6%. As you know, we have our financial targets for Marine and Energy combined at 14%. So we are not quite there yet, but we are on a solid path to reach our financial targets, I would say, as I have said many times before, and we have proven ourselves by step-by-step improving the financial results as well.

On storage, we have a challenge. There is no doubt. And the challenge is order intake. I mean we basically had no new order intake on the equipment side in storage. So that's why you see the minus 53% down is basically services. The sales is down 14% at EUR 110 million. The good thing, though, on the storage side, you've seen the EBIT here, 5%. The team is delivering the existing order backlog with a solid execution at 5%, which is on the higher end of the span of our financial targets. But clearly, we have a challenge on the order intake side, and we've also been very clear that we need immediate order intake. Otherwise, we will have a loss-making second half of the year in energy storage.

Okay. Then some industry perspective, starting with Marine. We do see in the first quarter, healthier demand and also earnings for our customers, supported by the market sentiment in the first quarter. The conflict in the Middle East has only had a minor impact on Wartsila in Q1. We have about 500 colleagues in the area there, safety, taking care about our people, so they can take care about our customers. And I think our team, our safety team working with our colleagues in the area has done a great work. So we continue to support customers in terms of revenues, et cetera, it has minor impact because -- as you know, our strengths, our focus is on 4 strokes. Many of the vessels, the majority are having 2 strokes. So the limited impact on Wartsila, short term so far on the financial side.

The number of vessels ordered in the review period increased to 549, so compared to 235 previous year. So 2026 is clearly stronger than 2025, which was, as we all know, a rather weak year. The market sentiment in Q1 was supported by healthy demand and earnings. But obviously, the start of the conflict in the Middle East caused disruption and uncertainty in the shipping markets. But once again, we have not -- I mean, our core segments, we have not been impacted so far in a major way. Ordering appetite also continued to be on a good level in our key segments. As you know, when we look at the graph to right here, our core segments, even in Clarksons are trending clearly higher than the 10-year average, and we do see that also going forward. Also good to note is that the shipyards order book are at the highest level since 2009 with shipbuilding capacity expanding primarily in China.

In January to March, 100 new orders for alternative fuel capable ships were reported. So that's about 26% of the capacity of the vessels. That's down from same period last year. And the major driver there for the decline is on the mix of vessels, tankers, more tankers means less alternative fuel. The underlying trend on decarb is clearly continuing, driven by the strategic approach by many of the shipowners and also by the fact these are long-time assets, 30 years, and you need to make sure that you have a fleet of vessels that you can be profitable with and operate in a relevant way the coming 30 years. And then you need the core proposition for Wartsila, fuel flexibility and fuel efficiency. So it's -- the narrative still holds.

Then on the energy side, we do see a buoyant market. There is an increased demand driven by energy transition investments. Electricity demand growth is certainly there. Future projections have increased substantially. And clearly, there are very strong and good market opportunities for equipment providers. Two key themes have stood out in the macroeconomic development, low growth and increased tariff-related uncertainty. In energy power plants, market demand for equipment and services has been strong, very strong. The baseload segment remains a consistent source of demand for thermal power and clearly, with further growth opportunities in data centers. And we continue our, I would say, successful journey in the U.S. data center market, still with a very active pipeline and with 2 important and big captures just at the beginning of the second quarter.

And also on the balancing side, we continue to see a very strong demand going forward. Before arriving here in Shanghai, I've spent a couple of days in Australia, clearly seeing the narrative playing out there. Australia over the years gradually moving from coal to renewables. And then you need the balancing power, battery storage, thermal generation and engines is a very -- is now getting in as one of the major technologies there. So it's happening in many places of the world, I would say.

In battery storage, the demand is closely linked to the increased share of intermittent renewable energy systems, clearly, which continues to progress in a good way. The U.S. market is clearly facing headwinds from tariffs and regulatory changes. Though many of the drivers, especially in the midsection of the U.S. remain solid. I mean, affordable power is always attractive. And then on top of this, we are now also for our storage team have data centers as a potential new opportunity that we are looking at, so to say. We haven't stepped in fully yet, but we are looking at it.

And if we look at renewables growth, I mean, after significant growth driven by solar in the mid-2020s, I think now the renewable capacity addition globally is expected to decrease a little bit in 2026. But I mean, we see long-term growth on the renewable side driving the need for balancing power. And there is more and more understanding and demand for balancing power because in many power systems, clearly, this narrative that we've been talking about for several years of needing more balancing power when the share of renewables is growing, it's definitely playing out. And here, you could see some of the International Energy Agency numbers, how they project the average -- I mean, the annual electricity demand growth in terawatt hours, and we can see the significant shift here. And there are plenty of drivers, electrification of industries, the need for cooling. I mean the world is getting warmer, certainly here in Asia. It's a big theme, data centers, but also aging energy infrastructure in the States and to a certain extent, also Europe. So there are several growth drivers, I would say, in the energy market.

Now let's get back to the numbers and let's look at the visualization. So organic order intake increased 22%, quite considerable. That's the organic. If we look on the nonorganic, so to say, the order intake increased by 10%. And if we look at Marine, it's up with 9%. Energy is up with 56%. Energy storage, though, is down significantly with 53%. If we look at equipment versus service, so equipment order intake increased by 23%. Service order intake remained stable. If we look at the order book, strong order book development, rolling book-to-bill continues to be above 1. I think now it's consecutive 24 consecutive that we have remained with a book-to-bill -- larger than 1.

And also well worth noting is that the order book is growing despite that we have eliminated close to EUR 900 million related to divestments. So it is a strong achievement. And -- but we also note, we really highlight this now as you could see, we have a very attractive order intake. We are taking orders for deliveries further into the future. And we have also talked about the fact that we do less of EPC, which has percentage of completion normally as revenue recognition to more equipment of EEQ, which means that the sales recognition also comes a little bit later when we deliver the engine basically. And we try to help you also by -- and I think we introduced this slide last quarter to get a little bit more concrete numbers on how the order backlog is developing over time. And it's clearly so that the order back -- order book will generate sales distributed further into the future. And you see particularly here in energy, how the order backlog is building up for sales and deliveries further ahead, I mean, beyond 2026.

Organic net sales increased by 8%. Net sales, if we take the nonorganic, the complete, so to say, the whole, it was stable. Marine net sales remained stable. Energy net sales increased by 12%. Energy Storage net sales decreased by 14%. Equipment service or equipment net sales increased by 11% and service net sales decreased by 9%. Profitability continued to improve in a positive way step-by-step on our goal to -- on our path to reach our financial targets. So under the backdrop of a stable net sales, the comparable operating results increased by 16% and comparable operating margin on 12-month rolling is also up from 10.9% to 12.4%.

Hanna, I need help. Arjen, can you flip to the next page because I can't see it.

Which page should we flip to? You cannot -- we are now looking at the Marine overall service book-to-bill above 1. Do you see the same, Hakan?

No, I don't see anything right now. If you see it, maybe you can continue, Arjen, where I left off.

All right. Which slide should we start then with?

The one that I left off, yes.

Yes. You don't see the slides now, Hakan, right?

No, I don't see the slide.

All right. I will take over. So order intake and comparable operating result in Marine. So order intake in Marine, let's say, had a good growth, 9%. Net sales was down, let's say, minus 1%. But as Hakan mentioned, let's say, organically, it was still up. Comparable operating results, better operating leverage, clearly, let's say, contributing positively. One could ask, okay, why with more or less equal sales. It's operating leverage better. We are running our STH facility at close to maximum technical capacity. And that, of course, generates, let's say, operating leverage in the absorption of hours, while the deliveries take place later on, turning it into sales.

On the negative side, let's say, lower service volumes that we clearly could see comparing quarter-on-quarter and increased R&D cost. Comparable operating result continues to trend upwards. Overall, Marine service book-to-bill above 1. Good development. You can see also the lines on retrofits and upgrades as well as, let's say, service agreements turning to the upper direction again, which has been going down for some quarters. So that's good. All together, I would say, a good development ongoing here and also 7% CAGR year-on-year is a good number.

If we look at Energy, Order intake, first of all, plus 56%. So really a strong step-up actually in sales also, I would say 12% is also a strong step-up in sales. If we look at the result, also here, better operating leverage, let's say, factory also contributes to energy. So it's the same equation here. And also on energy, we had lower service volumes and increased R&D cost as the, call it, the negative impact on the profitability. All together, let's say, it went up. Comparable operating result, slight dip down on a rolling 12-month basis, but we are confident on this going forward.

And if I continue on the services side, so a favorite topic of mine. The overall energy service book-to-bill continued above 1. So strong growth in service agreements and retrofits and upgrades. We see a 2% CAGR on the net sales. And you know that we like to talk about the different components of our service business. And here, you see a couple of things that are really interesting. You see the strong continued book-to-bill on agreements, and it's really, really good. You also see and you want to say field service is down, so it's less than 1.0. But I think that's development, it will go a little bit over time. I don't -- I'm not concerned about that as a trend.

We see spare parts is down, but we should know that when agreements go up, there is, of course, spare parts under the agreement header as well. It's classified in the agreements business. So overall, I would say the strong growth of agreements is really, really good. And it's clearly in line with our strategy of moving up the service value ladder as we've been talking about many times.

Then on the retrofit side, I think here, you see the -- clearly what we've been talking about in the past because it went down quite deep in the red, but now it's coming back, still not crossing the 1 again, but this is a project business. And therefore, it is -- can be very lumpy. And so we have had some good progress here in the first quarter. And I've said before that I think the retrofit business will certainly be there and will be interesting. I think on the Marine side, you could also see that the retrofit business is still down. And there, we have a little bit of a challenge because certain projects get postponed for the moment, so to say. But also on the Marine side, I think we will see a positive outlook on service growth in general going forward.

Now on storage, I think that if we should start with the first thing. And today, we also announced that Tamara de Gruyter, who is leading storage, she will be leaving Wartsila after a long and very successful career, 30 years in the company. She has found a great new challenge outside of Wartsila and we congratulate her to that. We are very sad of seeing her leaving. She's done a great job with storage, which is, of course, in a very challenging situation as we've been talking about, but she will still be with us and lead the business to end of August, and we have started the recruitment for a successor. So thank you for Tamara for all your years in Wartsila. And you will still be with us for months here going forward. So we will have a planned transition.

The challenge on storage is, of course, the order intake, which was very weak. So basically zero on the newbuild side. Order intake down minus 53%. Net sales also down. The positive side, if you see on the EBIT going into positive and a solid 5% EBIT margin with solid project execution and also we are taking -- have taken measures to reduce our cost to increase our competitiveness. But clearly, the lower equipment volumes is a challenge to the whole business. And we need -- we do need orders -- order intake in the near future. Otherwise, we will be loss-making for the second half of 2026 in storage.

So here, you have the waterfall on the Q-on-Q development on the EBIT side. So we go from 11% to 12.8% in our continuous journey. And Marine is going up from 12% to 13%. Energy, a bit down from 15.2% to 14.7%. Energy storage, as I said, significant improvement. And portfolio also a significant improvement from 6.9% to 11.4%. So the comparable operating results increased with 16%.

Now other key financials. Over to you, Arjen.

Thank you, Hakan. If we look at the other key financials, first of all, cash flow, it was mentioned already by Hakan, let's say, EUR 7 million in the quarter 1, which is fairly low compared to 1 year ago. But again, let's say, we are mainly -- the main underlying reason is working capital and the main underlying reason of that is the increased project execution activity. This is not something that is unexpected. This is something that we have foreseen. As said, STH runs at close to technical capacity. We need to produce engines now already for delivery in batches later on. So that's the consequence of that. At the same time, let's say, we have payables, of course, going down. Let's say, we buy components from suppliers. That's also clearly impacting and also receivables went up because we have invoiced customers for something that is not due yet, but still to be paid. At the same time, also in Q1, we saw a lower level of advances received than what we had in, for example, the previous quarter, that was a record high.

Net interest-bearing debt, let's say, still very strong, nothing to comment on EBITDA, very good compared to previous year. Return on capital employed, ROCE, a very strong level, still going very strong, and that keeps going also for a while, I would definitely believe. And gearing also, let's say, nothing to comment on. We have a gearing target of positive, below minus 0.5%, and we are clearly in the negative. Solvency went a little bit, let's say, worse now in Q1, and that's happening every year in Q1. At the end of last year, we had 40.5%. Now we have 35%. Every year in Q1, you book the -- sorry, the dividend against equity, and that has an impact on the solvency ratio. Earnings per share, much better than previous year at the same quarter.

If we look at the trend lines, cash flow and operating working capital, as you can see, and I don't want to repeat myself, but let's say, the working capital is the main driver for the reversal trend also in the cash flow. Reasons are known. This is not unexpected. So nothing to further comment on that. If we look at the financial targets, First of all, Marine and Energy combined, left top graph, organic growth, 13%. Marine was 12% actually on this horizon and Energy was 14%. We are also approaching closer and closer, let's say, our 14% target. Now we are at a rolling 12-month basis at 13.9%, which was a notch up basically from end of last year, and then it was 13.8%.

If you look at Energy storage, of course, organic growth is a challenge. Let's say, Hakan has commented that also already. But profitability is very strong. We have a good margin in order book, and we have a good execution, very good execution actually. So on a rolling 12-month basis, this is now 4.8% on the upper range of the financial target versus 3.3% at the end of last year. Gearing, I mentioned already, not much to comment on deeply negative -- and also actually, the same goes for dividend distribution. It's very well in line with our policy of paying 50% out of EPS a dividend. Last year, it was 100% if you take the regular dividend and the extraordinary dividend together.

With these words, I give it back to you, Hakan, on the guidance. Can you hear us, Hakan?

Thank you. So on the Marine side, we expect the demand environment for the next 12 months to be similar to that of the comparison period. And I would say we are still trending on a high level, but it's going to be similar. On the energy side, we expect the demand environment for the coming 12 months to be better than in the comparison period. In storage, we also expect the demand situation to be better than the coming 12 months. But we also underline specifically in storage that the current geopolitical uncertainty particularly impact this business and may certainly affect the growth.

And in general, we have a geopolitical situation, which -- where we underline that the current high external uncertainties makes forward-looking statements challenging. Due to this high geopolitical uncertainty, the changing landscape for global trade and the lack of clarity related to tariffs, we have seen that they have very dynamic these days in the U.S. There are risks of postponements in investment decisions and also of global economic activity slowing down.

So that's our presentation and summary of the first quarter, a strong quarter for Marine and Energy. We are moving forward towards our financial targets. And we have a challenge in order intake clearly in storage, but the team is executing in a very good way, but we need to address the challenge on the order intake. Overall, a good quarter. Thank you.

So Hanna-Maria, let's go over to the Q&A.

Thank you, Hakan. Thank you, Arjen. Now continuing with the Q&A. So handing over to the operator.

[Operator Instructions]

The next question comes from Daniela Costa.

I just wanted to ask 2 related questions regarding the energy. So I think this was debated a bit last quarter, but I think when we look at sort of equipment order intake per megawatt, we haven't sort of seen the increasing evolution like we see in some of the turbine players. Can you maybe comment on why that is the case? And now that you sort of pass the reporting period have got some really large data center orders, will we start to see that accretion coming through on order per megawatt and also sort of on margin from data center orders? And maybe just linking to that, you mentioned that you still have some capacity available from here to '29. How many large orders like the one you took last week, do you think you still have capacity to take?

So if I start with the latter part, how many orders, et cetera, we will not go into those details because that is highly, you could say, confidential information in the current market situation. So I won't go and disclose that. I mean, I would say that it's not a lot of capacity. It clearly depends on the type of energy and the size of the order, et cetera. So -- but I don't want to make more explicit statements because of the competitiveness in the market. Then coming back to your questions on this famous, I would say, oversimplistic metric of just dividing U.S. dollar per kilowatt.

As we talked about before, it's the scope of our deliveries actually varies. And it varies with the engine is in the core, but it's also how much of auxiliaries, where do you transport in the world. U.S. is a pretty big country with different transport costs, et cetera, et cetera. So I've said it in the past, and I'm saying it before, we have good price realization on data centers. We will -- I mean, from a sales perspective, we will start to see that kicking in at the end of this -- I mean, during Q4 this year, and then it will gradually build up over the years to come. I don't know, Arjen, do you want to comment?

No, I think that's exactly what it is. Let's say, if you look at the order intake, energy for Q1, it's basically all EEQ, and it's very geographically spread as well. And there are different scopes, as you rightfully say, let's say, you have basic EEQ, you have extended EEQ. And if transport is part of your scope or not your scope because there are also differences, it makes a big difference in the euro per kilowatt. So I think it is a matrix, but I would not use it too much. We have good realization of margins. That's what we are focused on.

The next question comes from Vivek Midha from Citi.

My question is on working capital. Thank you for the color on the quarter. We've had very healthy order intake and book-to-bill in the quarter, but nonetheless, your working capital was a drag. And given your announcement, the second quarter is likely to be another good quarter on the order intake. But nonetheless, you mentioned that the fourth quarter level on working capital was exceptional. Would you be able to give us some color as to how you expect the working capital to evolve over the coming quarter and over the coming year?

We will not guide on cash flow and not on working capital either. I'm expecting, let's say, negative working capital to sustain. And yes, you will have fluctuations. Imagine if you have to deliver, let's say, 20 engines in one batch, let's say, 3, 4 months from now. You need to buy the components now. You need to do the assembly. You need to put them in front of the test beds, and they need to go one by one through the test beds. So it's obvious that you need to, let's say, pre-produce, make cost upfront before you can deliver the batch, which will generate the sales later on. Yes, then you have, of course, the new orders. They have typically advanced payments, always have advanced payments, I would say, down payments as well. Timing of that is always difficult to say. And okay, like I said, in Q1, it was on the lower end of, let's say, advances, but that can change certainly, let's say, in Q2. That timing is very difficult to predict. But I expect, let's say, negative working capital to sustain.

Okay. So just to be clear, so we shouldn't read your comments about the exceptional working capital mean that you see a return to that level from Q4 is unlikely in the coming quarters?

No, I would say that was a really extraordinary level in Q4, and that was also driven by really high advances received. So that I would not expect it to go back to that level. But it will stay, let's say, good negative, let's put it that way.

The next question comes from Sebastian Kuenne from RBC Capital Markets.

My first relates to energy storage. I'm wondering what needs to happen for [indiscernible] besides that you need a strategic decision for the energy storage business. So you mentioned you immediately need order intake now to prevent it from being loss-making. But at the same time, it's a low-margin business as is. Chinese competition is not decreasing going forward. So what needs to happen for you to make the decision there.

So as we all know, we did a strategic review, which was quite extensive, and we concluded that, yes, a little bit more than a year ago. And we made the conclusion before the liberation date tariffs and also before, I would say the -- you could say, the slowdown of the electric car industry really impacted the battery cell market. So you could say that there has been some macro shifts after we made our strategic review. I mean, we have also said also when we concluded the strategic review that we will continuously evaluate all business units in Wartsila based on how they contribute to the group. And from that perspective, I mean, we will evaluate storage like we evaluate other parts of our business. Right now, our focus is really to get orders in. I think there are some opportunities in some of our core markets and also to work with cost. That is our focus right here right now.

Understood. I have one question regarding capacity for your engine production as well. In your chart, you show that the end markets -- marine end markets that are relevant for Wartsila, you expect some 30%, 40%, 50% growth in contracting going forward. So really strong marine demand. At the same time, you indicate a good pipeline also for the data center baseload power business. So I'm wondering the plans that you have to increase your capacity, I think it was 35%. Do you already now look beyond that and think, okay, actually, if end markets evolve as we think they will in the next 2, 3 years, we need further expansion of capacity. Are you already now like planning or discussing further expansion? Or do you think this is still too early and it's more like, let's see how business evolves and then go from there?

So a highly relevant question. Just so we get the numbers right. We talked about that you're fully right, we said that by beginning of 2028, we have expanded our technical capacity with 35%. However, just to put it in contrast, in 2025, we were at 75% of our technical capacity. So if you look at the increase of our manufacturing capability, it's going from 75% to 135%. That's an expansion with 80%. Now we need to be cautious just to translate that to sales immediately because manufacturing engines does not translate to sales immediately. But -- so just to calibrate the magnitude of the increase that we are doing. Then coming back to your core question, can we expand further and we can certainly expand further.

We need to grow in tandem with our supply chain. So it's not -- it's, of course, our own manufacturing and testing capability, but it's also our capability to ramp up our supply chain. There is a structure of work ongoing. In Q4 last year, we announced this -- just to give an example, we announced our strategic partner with Siempelkamp, who is a key supplier of big castings. So to your question, can we expand further? Yes, we can expand further, but let's take it step by step. We do see a very strong demand situation going forward.

The next question comes from Antti Kansanen from SEB.

I have 2 and I'll start with the kind of the capacity or situation on the power plant side. And when you talk with your clients, obviously, especially the U.S. data center ones, but generally as well, do you think that your ability to deliver is aligned with the overall kind of project time lines in the sense that there are other bottlenecks as well on building the power plants, the permitting stuff and the EPC components and so on. So do you think kind of the ability to, let's say, deliver '28, '29, 2030 commissioning is not actually a bottleneck in terms of your engines that the bottlenecks are elsewhere?

In my view, there are 2 major bottlenecks. One is data ships and the other one is power. So if we had the capability to deliver with shorter delivery times or with more capacity, we could sell more. So we are part of the -- it's not only one bottleneck, but we are certainly part of being a bottleneck.

And then the second question is a little bit about the phasing of capacity or free capacity and revenue recognition in a sense that now looking at Q2, 2 very sizable data center deals with kind of the deliveries '28, '29 or commissioning '28, '29. Over kind of how long time period does this spread in your production? I mean, the 40-plus engines, hundreds of megawatts in a sense, but how kind of a long time will that kind of burden your capacity? And how should we model that one?

Arjen, do you want to comment on that?

Yes. Of course, you need to, let's say, do this in, let's say, also within such a big order, you deliver typically in batches. So it's not that all the 40-plus engines go in one go, you typically deliver in batches. And of course, you need to, let's say, plan that well in advance. If you need to deliver a batch of, let's say, 10 or 15, like I said already with my example on cash flow, you need to pre-produce and that needs to be planned. So you need probably for these orders to be delivered in '28 fully, I would assume that we already end of this year need to at least make sure that the supply chain delivers certain critical components that we are not short of that, and then it goes on into 2027.

And sorry, Antti, if I may add, I really would take a very careful look on the prioritization of our order backlog because we are clearly signaling that sales recognition will be further out in the future. We have a great order intake and -- but sales recognition will clearly go further into the future.

No, I appreciate that. And actually, the follow-up was on what Arjen, you mentioned that you're delivering batches, but would the revenue recognition still be tilted towards the commissioning of the plant, the earnings contribution.

No. In these bigger orders, it's the batches basically that drives it.

The next question comes from Max Yates from Morgan Stanley.

Can I just ask firstly about Section 232. We've obviously had some changes with tariffs. I think there were some adjustments to anything with sort of percentage of metal over 15%. There were some specifics around, obviously, gas engines up to certain sizes. So quite a lot of moving parts. Could you just give us your take on how this will affect your business potentially in terms of ordering and cost and whether we should think about any impact going forward?

So I would say we have done a careful analysis. It's a complex framework and dynamic framework. When we make the assessment of the overall situation, different rates, different custom codes, et cetera, et cetera, I think net-net, it has a very limited impact on the type of tariffs that our customers will pay. It will be approximately on the same level as before the change. So from a customer perspective, it's about the same.

Okay. And maybe just a quick follow-up on the -- so if I look at your orders this quarter, you had roughly gigawatts of energy orders, round numbers, I think the data center one was like 429 megawatts. So you had a much better quarter in terms of kind of non-data center orders. Could you just talk a little bit around what regions those were coming from? What was driving it and maybe kind of how the pipeline for those non-data center orders? I guess what I'm trying to understand is we know from the second quarter, there's going to be a lot of data center orders. How do we think about that non-data center order piece going forward? And is some of your kind of more cautious commentary around geopolitical headwinds, uncertainty, is that targeted maybe at these non-data center customers? So a little bit of color there would be great.

So I would say there is some in North America, some in South America, some in Asia, so to say. So it's -- to your point, it's not only data center orders.

Okay. Given that was quick, can I just ask one very quick sort of, I guess, conceptual question. So we've basically seen this morning your energy margins have gone down year-over-year because your share of energy new equipment has gone up. So your share of new equipment this morning in Q1 is about 41% of your Energy division. If I look at what's going to happen over the next 3 years, your energy share or your new equipment share of revenues is going to go from about 40% to about 60% of your overall division. And I guess what I'm trying to understand is we've all been used to for Wartsila when equipment goes up, margins tend to go down.

And I guess, is there a danger here that we all start looking at margins, I think many in the market would say your margins could go to 20% plus in energy. Is there a danger that actually as that mix increases, the revenues grow, the absolute EBIT grows, but actually the margin expansion stays relatively constant because of that mix. Just conceptually, how should we think about that so we don't get overexcited or so we don't get caught out as the energy share or the new equipment share of revenue grows over the next 2, 3 years?

So I think newbuild will grow, service will grow, but we are certainly in a time period where newbuild will grow faster. That's a high likelihood considering the buoyant market. I mean the profitability on newbuild is generally lower than services. However, I would say we talked about it, we have good price realization on the newbuild that we are taking in now. So -- and then -- and I know you're a long-term investor, there will be a fantastic service business generated by all that newbuild capacity that we are taking in now because the newbuild that we are taking in now, there is a lot we talked about that. It's a lot of 24/7 baseload operation.

The next question comes from Vladimir Sergievskii.

Could you talk about service order growth rates, including and excluding agreements? How much materially the difference is between the 2? Also, any particular reason for decline in service sales this quarter? And when realistically do you think we can expect service business for us to return to growth?

So I would argue, I mean, as I said, service is growing quite considerably on the organic side. So it's 9% for the whole group. But then we have had an FX impact that's primarily U.S. dollar to euro. And we also had an impact of the divestments. And I would say it's about 50-50 split on those 2 drivers. So we will see growth going forward. I'm not sure you need to help me here, but I'm not sure we are breaking down the growth percentages of each of the disciplines, so to say.

No, let's say, organic growth out of my head, I think for Marine was actually 9% and for service, 6%, if my memory serves me well here now. Q-on-Q. So let's say, yes, we are growing, and we are not breaking down, let's say, the growth ratio per revenue stream. Of course, let's say, it depends a bit on what type of agreement there is. There is a piece of parts in there as a piece of field service in there. So it's not just black and white parts versus agreements. There is also, let's say, mixes in particular on the agreement side.

Okay. And the question is on profitability as well. Your portfolio business was a clear highlight this quarter. Did you manage to improve the business by that much so that new owners will be getting a double-digit profitability business going forward from here? Or there were something specific coinciding in this quarter to support double-digit profitability in portfolio?

Sorry, I missed the first part of the question.

I heard it a little bit. Sorry, Vlad, can you repeat because we -- I think both me and I and we are sitting in different parts of the world, we didn't hear you quite.

No problem at all, if I can try to do it again. So your portfolio business has delivered an exceptionally strong margin in Q1. The question is, is that you've been able to improve this portfolio business so much that this double-digit margin will be maintained for the customers who are vital for this new owners of this business? Or there was something specific in this quarter that drove margin to that high level?

No, I can answer that. It's purely, let's say, commercially driven. So yes, let's say, you might remember, let's say, a long time ago when the current 2 business units that we still have there Gas Solutions and Water & Waste were put into this portfolio business unit, they were loss-making. And we have been able to convert that to a profit-making in order to be able to, let's say, also divest them in a better way. And this is purely, let's say, commercial work, commercially driven, let's put it that way. There is no special items in Q1.

And to add to that, and also Vlad, we continue to have the same message that like before that we are planning to close Gas Solutions in Q2 and Water and Waste latest in Q3.

The next question comes from Sven Weier from UBS.

First one is to follow up on the Texas order, which obviously is quite a bit above your sweet spot range that you mentioned before. I mean, if you consider also the capacity that you have left to be booked, I mean, is this order going to remain like an exception? Or do you see yourself even getting closer to the gigawatt range? And what was the kind of maybe the market feedback from you winning that order? Did it resonate very well with other projects that haven't made a decision yet?

Yes. So to give a little bit more color, we talk about that we have a pipeline, a data center pipeline. We talked about that it's buoyant and it's growing. If I look in that -- and we also talked about that it's very dynamic. We have clearly seen -- looking at the last -- now you could see the 5 orders that in the U.S. that they are getting bigger and bigger. I wouldn't say that each new order in data centers related to the U.S. will be of the same size. That will be smaller, but there will be big ones as well. I mean there are gigawatt potential orders in that very dynamic pipeline that comes and goes. So I mean, it's not completely off the wall of getting gigawatt even within our engines. But we will have a mix of big ones and smaller ones. But if you look on the average, I would say the trend is slowly increasing in the U.S.

And what is your expectation on the Brazil pipeline in terms of the power auction we had? I mean, should we see those orders in Q2 already or later?

So the auction has taken place. I think we -- and I cannot comment because we are sitting and having talks with customers as we speak, but there are clear opportunities, yes.

And then just finally, if I may, just coming back on the situation on marine retrofits and regulation. I was just wondering what your clients tell you on the methanol engine order book because we just recently saw Pacific Basin canceling a methanol order and converting it into conventional fuel, and they basically cited regulatory uncertainty, but also the like 15% cost saving on the overall vessel order. I mean that's probably on the 2-stroke side. I mean, are you seeing similar thoughts among your clients to make a change?

So far, we sold about 350. I mean, we have orders for about 350 methanol engines. We haven't had any cancellations that I'm aware of so far. I mean, also, of course, we have our dual fuel approach. So many -- I would say, clear vast majority there of those that we have delivered out of the 350, all the 350 has not been delivered yet. But of the ones that have been delivered, the vast majority is running on traditional fuels. And because the challenges that customers have faced is to find the methanol. It's not readily available. But because of this multi-fuel capability, we haven't had any cancellations so far.

The content per vessel you have on the methanol think it's bigger than if you just have kind of traditional dual fuel?

Well, I would say that methanol-enabled dual fuel engine is the technology diffusion curve. We have better price realization on new technology than our standard traditional technology. But I mean, the methanol -- so just clarify, the methanol engines that we have delivered, they are dual fuel. They are not single fuel engine.

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

So my first one is a follow-up on the energy margin. So you talked about we will start to see the price realization of the newbuild and also the service potential to kick in to help your margin going forward. So just looking at your -- already the existing order, will we start to see that coming into the margins?

I think if you look at data center deliveries, they are starting to ramp up in Q4 and then well into 2027. So that's the time frame.

Yes. And for service?

Service, I would say, in general, it takes 4 to 5 years. So because you need to -- you install, you operate under warranty and you go in. So I mean, the good thing -- the great thing today, we sign service agreements very almost when we contract -- when we have the newbuild, we normally contract services as well, either at the same time or just a couple of months later. But then, of course, when the revenues kicks in and therefore starts to generate top line and EBIT, that's normally a 4- to 5-year time frame. So that's why I'm saying also commenting on Max, you will see the major impact on the service side with a 4- to 5-year time line.

Unless we agree an operational maintenance contract because then it starts at commissioning.

That's correct.

That's super helpful. So on the -- so just on that point, for the data center order you book, for example, the Texas order you booked, when will we expect to see the service contract kicking in? Is that like just in like a couple of months already?

So I can't go into that because we are in negotiation with customers. So I will have to come back on that.

And just last one for me. We have seen the order from Hyundai Heavy refill to supply data centers. Just wondering, is there any change in competitive landscape on the data center engine side? Also, do you see any pricing potential perhaps outside the data center space like spilling into the marine service, marine engine supply chain?

I haven't seen that so far. I think right now, it's a very buoyant market. And as I said, we have good price realization both in Energy and Marine. I mean we are an established supplier. We have years and years of references. We have the industry-leading service network, both on the energy and marine. In the U.S., we've been for decades. I think we have a very strong brand. And we have proven that we can execute and that our plants are running with very high uptime and reliability. So we have a strong market position. And I'd rather talk about that this is an opportunity for engine technology to actually, over time, expand its market share because there are some intrinsic benefits with the engine technology compared to the gas turbines. And especially when we talk about derivatives and industrial, better fuel efficiency, no water consumption. Water is a big topic in the U.S. and also for -- in the future for potential balancing better at handling fluctuating loads. So I see that much more of an important competitive dynamic than that we have new entrants coming in on the engine.

Thank you. Before closing this news conference, I would like to remind you that Capital Markets Day invitation has been published today. So the event will take place on November 3 in Helsinki or via live webcast. And on the following day on November 4, there's also a great opportunity to visit our sustainable technology hub in Vaasa. Before Capital Market Day, we will also host many smaller events, including CEO Strategy call on June 9; CFO pre-silent call on June 23, and then Q2 report will be published on July 21. Thank you.

Hi all, and welcome to Wartsila Q1 Pre-silent Call and greetings from Helsinki. We have some signs of spring here. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations.

Today, our CFO, Arjen Berends, will start with key messages. We will also show 2 slides, which are already available on our IR website. After the key messages we have time for Q&A. [Operator Instructions] Please, Arjen time to start.

Thank you, Anna Maria.

And life is always more fun when the sun shines. So nice weather here. Let's start, first of all, with 2 slides. First of all, let's say, about order book and portfolio. So if we start with portfolio business, let's say, we -- as you know and remember, but just to mention it once more as a refresher, we have basically sold all businesses under portfolio business.

There are 2 businesses still there to be closed in the coming months, you could say, or quarters, which is Gas Solutions. We expect that to be completed in Q2 and water and waste, we expect that to be completed in Q3. So from Q4 onwards, there will be no businesses anymore left in portfolio business, just as a reminder.

If we go to the next slide, which is about order book. Order book, if you look at Wartsila's order book 2026, at the start versus, let's say, 1 year ago in 2025, it was a little bit lower. There are clear reasons for that. I would say, first of all, keep in mind that order book has been reduced for the divestments done.

ANCS, Automation, Navigation and Control Systems as well as Marine Electrical Systems was divested in 2025, and that took about, let's say, EUR 900 million out of the order book. So clearly, let's say, having an impact on -- if you make a year-on-year comparison on order book level.

Secondly, it's good to remember that, let's say, the order book is more longer in time, as you can also clearly see from this graph that we showed for the first time at the end of last quarter and which we will show every quarter going forward. The distribution of our order book gets longer.

Thirdly, as you can see on the left -- sorry, right side of this slide, Energy Storage has been lower on order intake, which has clearly an impact on the order book. I will come back to that later on. And finally, let's say, also good to remember that one reason for a lower order book is also our shift over time from EPC to EEQ. But keep a good eye on this order book development. I'm looking positive to order book in general, not for Energy Storage at the moment, but let's say, for Energy and Marine, it looks good.

If we then look at, let's say, some other comments that I want to make. First of all, the impact of the Middle East conflict and the closure of the Strait of Hormuz. If you look at the direct impact, so far, it's limited. But of course, let's say, it will be impacting our customers, let's say, ships might not be able to sail and in particular, let's say, the ships that are, let's say, of our customers in the region.

So far, as I said, no major impact to Wartsila. But of course, if the conflicts last longer, I would believe everybody will see the impact through cost inflation. Fuel consumption, also what we have on test beds, so far, we are fine. But let's say, of course, with a longer conflict, prices will go up and also, let's say, for components most likely. But we have long-term agreements with suppliers. So short term and midterm, even I would not be too concerned about it.

Let's hope this worries soon, but it's not good to anybody. If we look at the market and the outlook in general, we have guided, let's say, our demand environment, meaning 12 months forward versus 12 months back, better for Energy and Energy Storage and then Marine is expected to be on a similar level. If we look a little bit deeper into Marine, our key segments, they are doing very well.

And then also, if you look at, let's say, the estimated CAGR by Clarksons between now and 2030 on our key segments, it's 6%. So that's a good level. In addition, let's say, I think we have a lot of opportunities on the service side as well. Decarbonization despite IMO decision in October will continue. We clearly see it in our customers', let's say, discussions and decision-making as well because the decarbonization will happen in the lifetime of a vessel that you order today. So you need to be ready to convert, when so needed.

Like I said, opportunities in service remains good. Our service business correlates with running hours, running hours on many of the vessel types that we are serving is really good. Of course, there might be some issues with ships being stranded in the Strait of Hormuz. But also keep in mind that the majority of the ships there have a 2-stroke main engine, and that is not our business, and that's also not where we make the most service revenues on.

If we look at Energy, Energy consumption is anticipated to grow. And I think as time progresses, I think also the estimates of, let's say, how fast, let's say, growth in Energy will be or electrification, it's just going faster and faster, it seems. Electrification expands, industries expand and the need for data center capacity and electricity demand comes on top of that.

Also, renewables will continue, which require balancing power. I think 2025 was another record year. So really also good opportunities there. Data centers, clear opportunity for Wartsila. We saw in the last 6 months, a 50% growth in the pipeline. Having said that, it is good to remind and which we have said also before that it is a volatile pipeline.

Projects easily come and go. Let's say, typically, call it, classic before data centers, Energy projects between first contacts and discussions and final contract could be several years. Now it's more like months, and it can happen even in a few weeks. And that is unseen in all my time in Wartsila.

What is also good, let's say, now with the data center boom is that by, you could say, force, Wartsila gets more and more known. Let's say, we have been fighting the unknown, in particular in the U.S. People in the U.S. when they think power, they think GE and turbine as a standard option in the first thought.

But of course, now, let's say, first of all, being driven by, let's say, long delivery times of turbines, being forced to look around for other alternative technologies that we get very, very fast now. And that's good not only for the data center market and the opportunity that we have here, but also definitely for example, imbalancing power in the U.S.

Also an increased number of customers understand our intrinsic benefits of the engines, let's say, not just the modularity and the high efficiency, but also clearly, let's say, low water consumption, less derating in humid and high altitudes. So really well recognized. Sweet spot, we have said before is between 50 and 400 megawatt. That's not an exact sweet spot, but it's, I would say, indicative.

As you might have seen and known and remember, let's say, many of the projects that we have announced in the megawatt-wise are more in the direction of 500. So yes, we can also do bigger. But it depends very much case by case, what does the customer value.

Energy storage, the market is still challenging, and that has not changed in Q1. Let's say it's a very disruptive market. After liberation day with the tariffs, let's say, came to a standstill in the U.S., let's say, all active players moved to the more active markets.

Later also the battery cell producers entered the market because they had produced a lot of batteries for EVs, which did not accelerate as originally anticipated. So this was another way for them to get rid of the batteries. So yes, this whole disruptive market caused that in the first 3 quarters of last year, we had basically 0 order intake. It was a good, let's say, Q4.

Let's see how Q1 ends, but let's say, the market is still disrupted. So I'm not so hopeful there at the short term. So far, we are not running losses, but it's clear that we need more orders to cover the cost for this year. Of course, the situation is carefully monitored, and we will definitely take, as Wartsila always has done, necessary actions if so required. It will remain for a while, an area of concern and focus.

I think that -- sorry, one more comment I would like to make. Decision to expand the capacity in STH, the investment decision that we announced a couple of months ago, well on track. That's the capacity should be available in the beginning of 2028. And so far, no obstacles that we cannot overcome. So we are moving well forward there. That's it from my side.

Thank you, Arjen. Then we will continue with the Q&A. [Operator Instructions] First question comes from Akash Gupta.

My one question is on phasing of OE backlog in Energy business. If you look at last year, we had a big volatility between the quarter with Q1 and Q3 were very weak. Q2 was good and Q4 was very strong. So when we look at this year, anything that you would like to flag on seasonality in new equipment?

I will not open that up, but let's say, fact is that, let's say, things can change quite a bit. Let's say, when you book an order, typically, let's say, with -- let's say, now we book an Energy order with delivery, let's say, '28, for example '27, yes, you estimate at this point of time, it will be in that quarter. But typically, when you are then at that time in '27 or '28, it might have changed already over time.

Often, it's also at the request of the customer, let's say, that the construction is not already yet in the state that it is, let's say, good to receive basically our equipment. So there is still, let's say, volatility and shifts between quarters. Typically, if your delivery time is in, let's say, the mid-month of a quarter, May, yes, it doesn't move out of the quarter. But if it is a June delivery, yes, it can jump to July and then you have it in another quarter. So volatility per quarter, I don't think that will ever, let's say, really change. It's driven by customer requirement as we originally agreed to contract with.

Next question comes from Vivek Midha.

Hope you can hear me well. I had a follow-up question regarding cost inflation. Just wanting to get an update here. Thanks for your comments so far. So in 2022, this has been, I guess, quite challenging for many companies, including yourself. There are several things which have changed. You've reduced your exposure to EPC, that's reduced some risk. You've also reduced some of the gaps between your supply chain management and the sales.

Demand is in a better place, but also at the same time, your lead times have been increasing. So could you just walk us through what sort of hedging or cost pass-through mechanisms you have, how extensive the coverage is? And maybe if you could quantify, if possible, what proportion of your cost of goods sold are covered by those long-term supply agreements you mentioned earlier, that would be really helpful.

Yes. I cannot answer all the questions in detail, but I'll try my best. You're fully right, Vivek, that in 2022, we got hardly hit. And then where you got mostly hit is actually on the EPC part or on businesses, where you have a lot of integration, where you basically an integrator.

For example, Gas Solutions is a good example. Let's say, we got quite some hits on Gas Solutions because we basically buy everything and it's in big pieces, and we don't have a factory to assemble it. If you think about engines, let's say, it's thousands of components in an engine. And actually, also in 2022, 2023, yes, we got some cost inflation, but by far not to the extent that we saw in the other parts, let's say, the integration business as well as, let's say, the EPC part. So that is much better in control. We have also, let's say, for all the components, long-term agreements.

Of course, I cannot give you one answer that, okay, this is covered for 3 years out or 4 years out, et cetera, because simply, let's say, it's not all the same, let's say, validity dates for all these agreements, and they are all the time renewed. What is really good, and that is clearly, let's say, a learning from, call it, the previous cost inflation cycle is that the connections between our supply management organization and the, call it, quoting department that makes all the quotes and the tenders and what have you is really, really short.

So if somebody in supply management, the category management or strategic sourcer smells that, hey, this component might, let's say, in '27 or '28, see more cost inflation than what we normally standardly assume, immediately, let's say, that's being adjusted in pricing. So the lines are much shorter. And I would say that really mitigates as best as we possibly can.

I'm not so concerned about, let's say, the engines and the components. Of course, there are, let's say, clearly Energy-intensive components like blocks, castings, et cetera, forgings that we clearly, let's say, have a bit more attention in these days than the other components. But I would say, overall, so far, so good.

The next question comes from Sven Weier.

Also regarding the topic just discussed more from a supplier perspective because, I mean, as you just alluded to, castings, obviously very Energy-intensive part on the supply side. I mean you seem to be in a relatively good place, but how do you make sure that your suppliers can actually deliver and don't declare force majeure or something else on you because they get into trouble?

Yes, the best way to do that is -- which we are actually, let's say, in a very frequent contract with suppliers. We want to have partnerships, which means that you're open about issues and challenges as well as you want to, let's say, do business and make profit on both ends basically. Yes, that's the best way to help them. And let's say, the sooner, let's say, we get to know these things, the better we can also support them.

And I guess that was also an issue then 4 years ago, right, on the casting side?

Yes. I think then it was also, I think, more a surprise. I think now we are also from the learning, which is not so long ago from 2022. I think everybody is a lot wiser in what to do and what not to do.

But are you dependent on -- I mean, I think on the casting side, there's probably not so much choice between the suppliers. Is that right?

That's true. Let's say, there are -- let's say, for many components in an engine, there are not so many suppliers in the world. If you take turbochargers or big engine block castings, it's quite limited. So you need to make sure that your suppliers survive. You can squeeze them, but it's also risky. You need to find the right balance. And that's part of...

That was -- but that was basically not the issue 3 years ago, 4 years ago that suppliers couldn't deliver and we're getting into trouble.

No.

Next question comes from Antti Kansanen.

It is on the power plant demand and the Brazilian auction that we got the results last week. So Arjen, do you want to comment anything on the business opportunity regarding size, your position? Or how long does it typically take for you to kind of get orders after the auction results come in?

Let's say, first of all, I think it was a good outcome for Wartsila. Of course, let's say, this is towards, let's say, the ones that quoted with our equipment in the tender. In general, we can say, okay, we are happy with the outcome. Then, of course, it depends a bit on, yes, which one will negotiate how quick with us.

But I would not say this is more than a quarter out. I think in the coming quarter, we should see or might be a little bit, but I think in this coming quarter, I think we should see something of it. I will not quantify it.

And then next question comes from Daniela Costa.

Hope that works. I just wanted to ask a little bit more color on the JVs you have in Asia, sort of to what extent -- when you talk about like 75% of the technical capacity that was mentioned at the Q4 call that you were working on and then the 30% increase going forward. Can you help us contextualize how you use the Asian JVs? Are they in that 75%? And when you talk about capacity or how much flexibility do you have to ramp up and down capacity from those JVs if you need to supply to higher demand in the -- before the 2028 expansion?

Thank you, Daniela for the question. And let's say the 75% is always related to STH. So that's our [indiscernible]. We are not considering the joint venture because we are not the only party that decides upon that. Let's say, it's also the joint venture partner, which has a say in there. I would say the joint venture actually at the moment are pretty loaded. I would not say they are less than STH, might be even a little bit higher loaded.

Flexibility-wise, yes, there is flexibility. Let's say, typically, only on the Marine side, I would say, practically. Of course, we can also make Energy engines in the joint venture, depends on engine type and configurations. But if you think about data center market serving them from a joint venture in China, I don't think that will fly in the U.S.

So typically, it's Marine engines being made. I don't know -- at least I don't recall any Energy engine ever being made there because one joint venture makes more of the smaller bore, one makes, let's say, medium and large bore and the smaller ones are definitely not used in Energy and the rest is only Marine. And basically, it's Marine engines for Asian market. In order to, let's have short transport routes.

We can, of course, lift over volume if the capacity in the joint ventures allows it so that you lift Marine volume to the JVs. Of course, you need the permission of the customer that, okay, instead of produced in Finland, it will be produced in China. But yes, technically, it's doable. But you need to plan it well in advance.

And just 2 things, I guess, on that. So how relevant for your Marine business is it? Are we talking it's like the majority of the business is run through the JVs? And then how does it work on the actual -- how do you the accounting on how you just book -- on how you book them?

No, it's a minority share of interest. So it's online P&L impact.

But they will do a full engine for you? And how do you do -- what percentage or what is just -- maybe if you can give the percentage and show us how relevant?

If I simplify, you make a P&L as you normally make a P&L. And our share of the P&L, let's say, profit comes to our P&L. There is this online consolidation. So we are not doing a full consolidation of the joint ventures because we have a minority share or a 50-50 joint venture. And you don't have a stake. Only if you have a controlling stake, you can fully consolidate.

Maybe I'll follow-up to not -- the call with questions on that.

The next question comes from Johan Eliason.

I just wanted to follow-up on this capacity, but maybe the numbers were put forward. So it's a 30% expansion you foresee in STH by 2028.

35%.

35%, okay. But you're actually running at 75% capacity. So it's sort of 40%, 45% from current levels. But would you ever run anything on 100%?

I think the fluctuations in your production schedules make that hard, let's say, to run exactly. It would, of course, from a production and efficiency point of view, be most optimal if you can just run it all the time on an equal level, being 95% or 90% or 100%. You can run 100. You can even run a little bit over. But it never comes linear. It's always, let's say, fluctuations up and down.

So yes, we try, of course, to optimize as much as possible, but it's the customers' delivery time that basically is the most decisive item when you produce unless you can produce in advance, then you can smoothen it out. For Marine engines, that's more difficult because engines are always classified. So components that you buy, box, crank shafts, [indiscernible] et cetera, also need to be classified.

For Energy, it's more easy because it's a standardized engine doesn't require classification and you can shift engines also between projects much easier. So for Energy, it's much easier to smooth and basically production volumes. For Marine, sorry, it's more complicated.

And the mix in STH today between Energy and Marine volumes?

Today, I don't know. I think -- I would not think it's far away from 50-50 now. But to be honest, the exact numbers.

Next question comes from Tom Skogman.

I would just like to ask a bit about data centers. I mean the size of them might grow to several gigawatts in the future. No one really knows. I mean I just wonder what your view is on this and whether there's a risk that your time in the sweet spot becomes very short as they grow on a bigger and bigger base.

Yes, it's a good question, Tom. And I don't think anybody has the crystal ball where this will go. Like I said, let's say, we can do a gigawatt. We can also do 2 gigawatts. It's just more engines. But let's say, is that the smartest solution for the customer. Let's say, if you do a 1 gigawatt power plant, and you have, for sure, seen our, let's say, nice table with all the colors, the traffic lights.

If you do 1 gigawatt data center, most likely the best option for you is a turbine. But if water consumption is a problem in the area or water availability is a problem in the area, you want to build your data center, don't go with the turbine because it will not run. You cannot cool it or if, let's say, the gas pressure in the pipe is not good or if it's high humidity or high temperatures, then an engine is a much better solution.

So it depends case by case on customers, let's say, what are they after and where are they situated and what is for them, the key features that are minimum to comply to. Of course, there are still data center operators or developers that I just want power and I don't care. But we have seen also many times like that, that they are very far in negotiations, but then suddenly they run into a problem with the permit or let's say, the offtake is not coming and then it disappears. That's what I mean with, let's say, the volatility of the pipeline. It comes and goes very fast. And yes, normally, what was done in years in, call it, classic Energy projects now is months and sometimes even weeks.

I saw in Brazil that in the auctions, I think there were like 19 gigawatts that were auctioned and it's for year '28 to '31 and comparing that with your orders of 2.6 gigawatts last year. It looks like a very large opportunity, especially as it's really about balancing power. But I guess we cannot get too excited about this.

I mean there must be some drawback that there's a lot of coal, hydro and other types of power plants. So can you give just some more numbers what you have seen, how large share was for Gas out of the 19 gigawatts, for instance?

No, I cannot and I will not. Like I said, let's say, I think the scoring of the ones that quoted with our equipment was good. So in that sense, I'm happy. I think we will see impact of that already in the coming months. Yes, that's what I can say. But I also believe, and you're right, Tom, that, let's say, it was a lot of gigawatts. I think at the end of the day, some will not happen because there is simply no equipment available.

But basically, they have made a commitment to generate this power basically or this capacity at least to have it available, if there's a drop in hydropower, et cetera.

And I think also some have gambled, let's say, to have equipment and they have not, let's say, confirmed that with the suppliers of the equipment. So then you have a challenge.

And can you give like you seem to have a lot of data, what is the split between engines and the turbines in the Gas market there?

I don't know. And let's say, it's also not a given, let's say, you need to provide power, Gas, if I take Gas as an example, you can have offered with engines or you can have offered with turbines. But then you cannot get the turbine, you go with the engines, but you have a commitment for the power or the other way around, it can also be. So it's impossible to say how much of each it will eventually be.

Then finally, when you raised the market outlook for Energy in Q4, of course, you have the strong data center market, and you have this Brazilian opportunity. But are there other markets that you also kind of referred to when you raised that? Are there other markets that are better this year than last?

No, let's say, we see quite good activities in many places. Brazil is one, let's say, Indonesia, Malaysia. So there are clearly, let's say, more countries than just, let's say, Brazil in addition. But we base our guidance on the total, of course, and data centers is a big piece. That alone, I think, would drive it already. But clearly, we see also activities in other places and good activity.

The next question comes from Akash Gupta.

I have 2 follow-ups, if I may. The first one is on -- a follow-up on data centers. So I think you announced in January, end of January, maybe early-Feb on this capacity expansion. And I was after, have you seen any increase incoming from customers in data centers after that announcement? I appreciate you commented on 6 months, 50% increase in pipeline.

But because I guess for a lot of customers, when they see your total power gen capacity and their need, probably you may fit well now with higher capacity than before. And then when you look at this increased talk with customers, what's the prospect of further increasing capacity beyond 35% that you have announced if you have a good pipeline with customers?

Of course, let's say, it's difficult to say. We see a growing pipeline, first of all, on data centers, but it's difficult to say, okay, is that growing pipeline now recently due to the fact that we announced, let's say, capacity extension or not, I cannot say.

It's just, let's say, overall, there is much more demand for power production basically. So anybody that can provide equipment to produce power, I think, has a good piece of the market or has a good opportunity in the market. So linking it to exactly this announcement, it's impossible for me to say. Now I lost the second part of your question.

I mean do you see any further capacity increasing further than 35%.

Yes. Yes, let's first -- let's say, our view is that, let's say, whatever we say, we need to be able to make happen. That's, I would say, very strong in Wartsila. If we do demand guidance, if we do financial targets, we believe we can do it. And the same goes for capacity expansion. We believe that we can do the announced capacity expansion by 2028. And I'm truly convinced we will make that happen.

What is critical in capacity expansion is your supply chain. We could have said, okay, let's go 50% up. Yes, we can build a factory for, let's say, 50%. But if the supply chain cannot follow, there is still not coming any more engines out of the factory. So it's useless. You overinvest basically. You spend a lot of money for -- which nobody can follow.

I'm pretty convinced that, let's say, if this market, let's say, continues to be what it is, I'm pretty sure which we all the time do, of course, with volume planning and long-term volume planning. We'll talk again about capacity.

And second one I have is on your first slide. So you said Gas Solution and Water and Waste, both of them will be out from Q4 '26 onwards. Can you give an indication on proceeds for both of them together or in any form so that it will help us to model because if we have to take out these businesses, then we also want to add in the model what could be approximate proceeds at a high level?

No, I will not give any input on that. We have never done that, and we will never do that.

Is this significant versus your market cap or not really significant versus market cap?

[indiscernible].