Koninklijke Vopak NV

AEX:VPK

Earnings Call Transcript 2019-Q1

[Operator]

Hello, and welcome to the Royal Vopak Q1 2019 Interim Update Call. [Operator Instructions] Today, I'm pleased to present CFO, Mr. Gerard Paulides. Please begin your meeting.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Thank you, and good morning, everybody, and welcome to the Q1 2019 update for Vopak.In the next 20 minutes, I will update you on the developments for the first quarter, and my prepared remarks will refer to the analyst presentation that you have seen on our website this morning. After the presentation, there will be time for questions. And before we start, I would like to refer you to the disclaimer content of the forward-looking statement, which you are very familiar with. The clarification and the statements should be taken into account with respect to any looking-ahead comments or guidance provided.With that, I would like to turn to Slide 3 for the key messages of this quarter. Q1 was an important quarter for Vopak, where we see the delivery of the short-term performance of the growth agenda and the portfolio shift in execution. This is also the first quarter where we report operating leases as per the new standard known as IFRS 16. We've provided 2019 results both on an actual basis or including IFRS 16 and pro forma to allow comparisons to the 2018 numbers that are unchanged.Vopak delivered a strong financial performance in the first quarter with an EBITDA of EUR 215 million. This excludes exceptional items, but there were hardly any exceptional items anyway this quarter. The pro forma EBITDA excluding IFRS 16 effects was EUR 202 million, an increase of EUR 13 million compared to the prior year. Main support came from contributions from joint ventures partly offset by some costs and a positive currency translation effect of EUR 5 million.In terms of growth, we commissioned the second phase of our industrial terminal in Malaysia, Pengerang, adding another 718,000 cubic meters. The remaining part of that terminal, which is a small part, will be commissioned gradually over the coming 2 quarters.Next to Malaysia, in Panama, we have started the operations of our terminal there and commissioned the initial capacity of 120,000 cubic meters. And the remaining 240,000 cubic meters for Panama will be commissioned before the end of the year.At the end of the first quarter, we've delivered 1.9 million cubic meters of the gross total of 3.2 million cubic meters towards the end of the year. Therefore, another 1.3 million cubic meters is remaining and expected to be delivered in the next 3 quarters.Furthermore, we've taken the next step in the delivery of our strategy and aligning our portfolio with long-term market developments. The strategic review we announced in August 2018 was successfully completed with the announcement of our deal for the 3 terminals, Algeciras, Amsterdam and Hamburg. And we also indicated that we've completed the sale of our Estonian assets in Tallinn in April. The transactions are accretive to shareholder value and return on capital employed as these assets were yielding below the average for Vopak. We will consider the use of the proceeds upon completion, which is expected in the second half of the year.Priorities for cash and our view on the balance sheet are, however, unchanged from the view we presented at the Capital Markets Day in Houston late 2018.Turning to Slide 4, moving to the quarterly developments of our key figures. As of the 1st of January 2019, as I already mentioned, we started applying IFRS 16. We carry about 600 contracts classified as lease and at a sizable portfolio of long-term land leases that concern IFRS 16. At the end of Q1, we've already seen a shift in the reported lease liabilities as a result of the terminals in Algeciras, Amsterdam and Hamburg being booked as held for sale. So from the position that we started with at the beginning, we see a shift of EUR 100 million related to the liabilities concerning Algeciras, Amsterdam and Hamburg on account of lease accounting. Important to note is that the new accounting standards does not change the way we do the business and has no impact on our net cash position.In 2019, we will continue to provide pro forma numbers for the year 2019 that exclude IFRS 16 to allow comparison with the results of previous years. Financial performance in Q1 2019 was strong despite the low occupancy rate for Vopak as a whole. That reflects our market conditions at hub locations but also, and in particular in Q1, reflects the effect of out-of-service capacity in Europoort for IMO 2020 as per plan.Other product segments; chemicals, gas, industrial terminals showed continued strong demand for tank storage services. And also, you see that in the regional distribution of occupancy, which was good except for Europe, which comes back to the Europoort out-of-service capacity.Pro forma EBITDA, therefore excluding the IFRS 16 effects, reflects strong contributions from joint ventures. And our return on capital employed improved to 12.6% in the first quarter. Note that we have replied -- applied the consistent methodology in calculating ROCE over the periods, therefore, we are not adjusting that metric for IFRS 16 but continue to report it as we did before.Net profit attributable to holders of ordinary shares amounted to EUR 83 million, resulting in earnings per share of EUR 0.65.Now some words on cash flow. Q1 showed another quarter with resilient cash flow from operations. We invested about EUR 120 million of capital for growth projects, and our pro forma net debt position was EUR 1.9 billion, resulting in a net debt-to-EBITDA ratio of 2.59 at the end of Q1. Good operational cash flow and our financial flexibility provide us the position to keep investing in our project portfolio to create shareholder value. Q1 was a good start of the year with strong performance, delivering of growth and the portfolio shift being executed.Turning to the next slide, comparison of EBITDA Q1 versus Q1. EBITDA increased by EUR 25 million compared to previous year. The pro forma EBITDA increased by EUR 13 million and, as I said, included currency translation effect of EUR 5 million positive. The Europe & Africa division reduced financial performance as the occupancy rate in Rotterdam was impacted by out-of-fuel capacity for IMO as per plan. And strong performance in Asia & Middle East and China & North Asia were supported by joint venture contribution of the industrial terminal in Pengerang and Haiteng. The performance of the LNG division improved as a result of the LNG import facility in Pakistan that was acquired end 2018 in 2 steps. We first acquired 29% and then added another 15%, so we carry a total of 44% in that facility. Performance of the Americas was supported by the good business environment for chemical storage despite the very unfortunate fire incident at our neighbor, the ITC terminal in Houston. The non-division cost-related operating expenses showed an increase compared to levels in the first quarter of '18, reflecting higher activity levels mainly in new business development and IT.Turning to the next slide, where we look at Q1 versus Q4. And in our last call, when we discussed the Q4 results, I commented on net one-off nonrecurring cost items in Q4 of EUR 7 million, reflecting mainly environmental provisions. This quarter includes some net positive support for one-off items mainly related to positions in Malaysia and Indonesia offset by the negative effects of the ITC incident in Deer Park. And the total of that positive support is EUR 2 million to EUR 3 million.Pro forma EBITDA improved considerably. The main contributor was a strong performance in Asia & Middle East and the Americas. The Asia & Middle East division benefited from improved occupancy rates in Singapore, although that was mainly driven from shorter-term contract activity. Nonetheless, of course, very welcome to see that occupancy move up. In addition for the Middle East & Asia, we saw the second phase of PT2SB in Malaysia being commissioned and coming through in the numbers.The Americas division saw strong demand in the chemical segment, and our assets in Brazil also performed well. In Houston, the fire at ITC, which I mentioned already a couple of times, forced us to stop our operations at Deer Park at 17 -- on the 17th of March. And almost a month later, we are now returning back to more normal operations, although there's still quite some impact operationally from commissioning and operating the facility at normal levels. The terminal's ability to operate and generate revenues was therefore impacted as well as some costs that we incurred in the process. This was compensated and more than compensated in the Americas with performance by the new capacity in Deer Park to brownfield expansion that you've also seen when we visited Houston with a number of you in the Q4 of 2018.Next is divisional segmentation, and some of the comments I will make will now become repetitive. Occupancy rate in Europe & Africa declined as a result of the comments I made on Notre Dame report, IMO 2020 conversions. Asia & Middle East saw an uplift in occupancy due to activities in Singapore. A structural recovery of the oil markets is still trailing somewhat relative to the emerging activity we're seeing in Europoort. Singapore is following, and Fujairah is trailing. China & Northeast Asia reflect a good chemical business performance and also the extra position that we now have in our network of Ningbo, we added to our equity position, which is now consolidated terminal and therefore also contributes positively to the occupancy in China.And the occupancy rate of the LNG division, as always, is very stable, but you also see the effects of the LNG terminal in Pakistan, which is fully rented out, backed by long-term commercial contracts. The LNG segment's occupancy of 96% is not part of the reported occupancy of Vopak of 86%. The 86% relates to our consolidated position. And the LNG occupancy is relating to JVs in the LNG segment, which we keep totally separate. Our LNG projects in Germany and China are making good progress and both on the commercial side as well as the technical preparation for final investment decisions later.Going to slide on growth projects under development. We expect to invest EUR 1 billion, as you know, for the period '17 to '19. This is a combination of investment in CapEx in subsidiaries and investments through joint ventures and associates. In line with the timing of this EUR 1 billion, we expect to increase spending in the second half of '19 or, in fact, the remaining 3 quarters. We are increasing investment levels for the entire year to EUR 0.5 billion of growth investments. This quarter, we commissioned Panama and Pengerang, as I already mentioned. And with that, we've delivered EUR 1.9 million at the end of Q1 of the EUR 3.2 million expansion growth capacity for the end of 2019. Construction of that EUR 3.2 million as a whole is progressing well. And as we've said before, we're comfortable with the commercial coverage of that capacity and, therefore, the contribution that they will make in the remaining quarters.We expect to deliver the Lesedi project slightly later than we earlier indicated. It's not a big shift, but it's a slight shift backwards but still in the same year in 2019, and you see that in the detail of the timing of the projects that we've added to the presentation.With access to further growth opportunities, that could increase investment levels in the coming years. In 2019-2020, as you know, we target 1 to 3 FIDs in industrial and 1 to 3 FIDs in gas opportunities.Before moving on, I would also likely -- I would also briefly touch on the fuel oil segment again. Just to repeat what I think you already know, we started with a 5 million cubic meters of high-sulfur fuel capacity in our portfolio. We're addressing that through a combination of divestments and conversions and rearrangement within fuel oils or from high fuel -- sulfur fuel oil to low-sulfur fuel oil. And we will, therefore, by the end of the year, have 3.5 million cubic meters of fuel oil capacity, the bulk of that is in the low-sulfur fuel oil segment.PITSB Rotterdam is progressing conversion. As I've said, Singapore will follow in the second and third quarter, and Fujairah is also being executed. So therefore, in Singapore, you will see some capacity being taken out in the second quarter and third quarter, same as the occupancy comment I made on Europoort for the first quarter in the Netherlands.Moving on to portfolio. We successfully completed the strategic review announced 8 months ago. We divested Vopak E.O.S. in Estonia. The E.O.S. transaction will generate a net gain of EUR 17 million, which will be booked in the second quarter. So we've completed that transaction, and the net gain will be recorded in the second quarter results.The effects of the portfolio Algeciras, Amsterdam and Hamburg we expect to reflect in the second half of this year. And that will show an expected profit of EUR 200 million, transaction value of EUR 720 million and cash proceeds of EUR 670 million. And we will consider the use of the proceeds at completion. The transaction reflects the cash flow profile and a future potential of these 3 assets that are no longer strategic to Vopak but are a good addition to the buyer's portfolio, who's a big infrastructure player.Our main focus in Europe is to further strengthen our position in the major industrial clusters of Rotterdam and Antwerp. And moreover, globally, we aim to grow our portfolio with the focus on industrial, chemical and gas terminals and to maintain our strategic position in hub locations. Again, nothing changed from that point of view relative to our Capital Markets Day recently.Turning to Slide 11, on non-IFRS proportional information. The proportional EBITDA trend is not dissimilar to the IFRS reported EBITDA with proportional EBITDA excluding exceptional items for Q1 of EUR 240 million.Coming back to the key messages before we open up for Q&A in a couple of minutes, let me recap. It's an important quarter for us. We delivered financial performance, strong financial performance in this quarter at EUR 215 million EBITDA on the new reported basis including IFRS. We remain focused on performance delivery from our assets through cost and commercial management each quarter but particularly this year, of course, to the delivery of our growth in the remaining quarters, which will influence the EBITDA for the year. And we are confident about our strategic direction, therefore, in '19, reflecting growth and portfolio. And our positioning for the years beyond '19 is being de-risked as we speak with the execution of the strategy.Let me close out with the looking-ahead statements for 2019. And they're not changed from what we have said before. It concerns the expansion which is being delivered. We're confident that, that will grow as per plan. We are commissioning capacity as per plan. We have completed the sale of Algeciras, Amsterdam and Hamburg, which are assets which are now held for sale so that will influence the depreciation going forward in Q2, Q3 and Q4, depending on when we complete the transaction. And we invest about EUR 1 billion for the period '17 to '19. So all of this is unplanned. We're confident in execution, and it's a good start of the year.With that, let's open up for questions. I will be a little bit strict on time because this call is just ahead of our Annual Shareholders' Meeting, which is starting also this morning. So I hope we can answer all your questions but, at the same time, be strict on our time to complete the call.So let's open up, operator, for questions and progress.

[Operator]

[Operator Instructions] And our first question comes from the line of David Kerstens from Jefferies.

[David Kerstens, Equity Analyst]

It's David Kerstens from Jefferies. Gerard, just a few questions, please.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Yes.

[David Kerstens, Equity Analyst]

First of all, on the joint venture net profit in Asia & Middle East, the EUR 10 million increase, can you provide more color on the drivers? Is it all related to the commissioning of the capacity at Pengerang? Then secondly, the timing of the divestments of the terminals in Algeciras, Amsterdam and Hamburg, what is driving that timing in the second half of '19? Can you be a bit more precise in terms of timing and what is required to close that transaction? And then you mentioned IFRS 16 is impacted by this divestment as well, and you mentioned EUR 100 million on the liability. What would be the impact on the EBITDA impact of EUR 40 million to EUR 50 million? Then maybe finally, you talked about the fire at your neighbor in Houston. I understand there was also a fire in Pengerang last week. Will that have any impact on your operation? I understand it was PETRONAS. This is your customer. Would there be any potential impact in Q2 from that fire?

[Gerard B. Paulides, CFO & Member of the Executive Board]

Okay. David, I think that you're covering a whole lot there in 1 question with 4 sub-questions, but let me try to deal with them. First of all, IFRS impact of the divestments relative to what we already stated in terms of the EBITDA multiple, which was, as we said, just over 10, so you can come to an indication of EBITDA before IFRS effects. The delta between including, excluding IFRS is, let's say, between EUR 5 million and EUR 10 million. If I would be a bit more precise, then it's about EUR 6 million, but we'll see how it plays out. That's why I'm giving a bit of a range. But if I would pinpoint a number now, it would be EUR 6 million, the IFRS effect on the 3 assets.In terms of interruptions, Houston, of course, extremely unfortunate, dramatic event to look at. Also the ITC fire, which is a next-door neighbor facility. Our response was, as we hoped in terms of supporting the neighbor and the environment to get that under control. Of course, we also look after our own assets and people and environment. In particular, we are pleased with our response. We managed to do exactly what we needed to do. We are now 1 month later, and we are starting to get back to a more normal operation. We've had an impact on revenue and on costs in Q1. And we also will have some effect in Q2 given the time lapse that I just described, a month, but we've compensated that with the brownfield expansion in Houston. So all in all, good performance in Deer Park. The fire at the PETRONAS facility in Rapid, which indeed is the facility that we service with our PT2SB terminal, is also an unfortunate event, of course. At the moment, I cannot see an impact on us. This was an incident, as I understand it, but it's really for PETRONAS to talk about it. But as I understand it, which was part of commissioning some of their equipment, and they will need to recover from that incident. But as for now, I don't see an immediate impact on our performance in the second quarter. It's still a bit early in the days for that statement, but that's the best I can do at the moment.In terms of conditions for completing the 3 assets. This is, in fact, a very favorable deal that we've done in the sense that it is one deal, so we're talking to one counterparty to execute. It also means that all the deals sort of have to complete at the same moment, and there is nothing particularly special about the conditions precedent for closing other than what we would call customary approvals. And customary approvals typically is authorities. You could think about port authorities, regulator, competition authorities. We don't foresee any issues. You just need to work your way through that. And experience shows that, that takes time, and therefore, we've positioned it in the second half of the year. So there's nothing particularly onerous in the conditions. You do need to work your way through it, and that is what we're doing. In terms of JV contributions, the contribution that we highlighted was in particular for Haiteng LNG and PT2SB. So Pengerang, as you mentioned it, PT2SB and Haiteng more or less equal and LNG Pakistan a little bit less than those 2 items. But those 3 are the main drivers for the increased JV contribution. What's also interesting is that, that, of course, goes straight into your EBITDA. There you see the composition of your EBITDA being impacted by the component part of JVs, but you're familiar with that, David. Let's move to the next question.

[Operator]

Our next question comes from the line of Luuk Van Beek from Degroof Petercam.

[Luuk Van Beek, Analyst]

Yes. First of all, I have a question on the -- firstly is from the divestments. You indicated that you will -- like first statements after that when they are completed, but should we expect that you will immediately announce the way you want to allocate that money? Or will you take some time to look at what investments you would do with it before you make a permanent allocation? Can you comment on that?

[Gerard B. Paulides, CFO & Member of the Executive Board]

My mindset around that is once we complete the transaction, then we will not take a lot of time to explain what we think should be done with the balance sheet, the growth and the distribution to shareholders. So it's not that we'll take another 6 months to figure that one out, but it is not my current intention.

[Luuk Van Beek, Analyst]

Okay. And my second question is on the impact of IMO 2020. There were some preparations in Europe in Q1. You mentioned Singapore for Q2 and Q3. Can you give a rough indication of how big that impact will be?

[Gerard B. Paulides, CFO & Member of the Executive Board]

In terms of occupancy, I think the current effects that you have in the -- reflected in the 86% occupancy for this quarter is about 1% or 2%. And I think for Singapore, I haven't actually figured that one out, but I would think it's not that dissimilar, perhaps a little bit more modest, I would think, than what I just said.

[Luuk Van Beek, Analyst]

Okay. And my final question is on Haiteng. Is that now fully ramped up? Or is there still a lagging impact of the shutdown?

[Gerard B. Paulides, CFO & Member of the Executive Board]

Well, it is not fully ramped up. It is still in a very extensive start-up for the 2 main customers that sit behind that, so we're working our way through that. I think there's still some mileage in that ramp-up left, so not complete, Luuk.

[Operator]

Our next question comes from the line of Juri Zanieri from Kempen & Co.

[Juri Zanieri, Analyst]

Most of my questions have been asked, so just maybe for what's on the occupancy and share. Do you think we have seen the bottom of it, and we can expect now going forward to improve? And then maybe on the -- your digitalization progress, would you expect really to benefit from this implementation this year by obtaining some further cost efficiency?

[Gerard B. Paulides, CFO & Member of the Executive Board]

Okay. Thanks, Juri. On the occupancy, when you look at the divisional breakout of the occupancy, you actually see good performance in occupancy in all the regions except for Europe. That reflects the momentum we see in the portfolio, which is mainly the -- as we said before, the other parts and the heavy part of the oil side. So we haven't seen the bounce yet. If I would say are there indications of activity, yes, there is. We've seen increased activity levels, and there's plenty of opportunity, plenty of sort of early signs, but it's not coming through yet in the numbers. IMO in Singapore, I would say, is trailing a little bit behind Europoort, and Fujairah is trailing behind Singapore. So yes, what it will be, it will be. I'm not going to predict when the market bounces back. Or if it bounces back at all, then it's just not something which is useful. I can comment on the commercial activity, which is encouraging and across the board good. If it wasn't for that IMO effect in Europoort, I think we would see a little bit more encouragement in the occupancy rate. In fact, you see that the encouragements are probably in the EBITDA performance although, admittedly, the EBITDA performance is mainly from the other segments, not from the oil segments. Okay, the other question was about digital.

[Juri Zanieri, Analyst]

Yes, indeed, if you have any view on how it can renew further contribution this year, if there are any pulse there.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Yes. It's more on the commercial side, Juri, than it is on whether I can translate that in the cost savings. So on the cost saving, we are still in the middle of investing in the digital program. It's an extensive program. We'd like to lead there, so we are more than happy to invest in that digital agenda. It's gone well. We now have what we call My Service being rolled out in a very disciplined program across the assets. We are now at, I think, release 5, going to release 6 in terms of functionality. The experience at the terminals is extremely good in terms of our operations and our commercial interfaces, but I wouldn't translate that into cost savings. I would translate that into commercial ability and operational ability, not in cost savings. That -- for that, it takes longer to roll out across our entire terminal network and get the full benefits of what we call My Service functionality.

[Operator]

Our next question comes from the line of Thijs Berkelder from ABN AMRO.

[Thijs Berkelder, Equity Research Analyst]

Thijs Berkelder, ABN AMRO. Most of my questions had been answered already. Can you give an indication on OpEx? What your viewed progress is you're seeing now versus plans and whether you already are seeing more opportunities?

[Gerard B. Paulides, CFO & Member of the Executive Board]

Yes. Thank you, Thijs. What we said about managing our operating cost footprint is 2 things. One is we have a cost delivery program, where we aim to operate the company at the same cost levels but with a bigger capacity in the total footprint in '19 as we were running the company in '17. And we translated that, and this is prior to divestment. We've translated that at the cost level of EUR 686 million for 2019 at the time when we made that statement at prevailing exchange rates. So we are currently trailing within that, so our performance year-to-date and looking back to that statement, we are doing better than that statement. So we hope to deliver on that statement or better by the end of the year. I think we have full confidence that the programs are working.The second part of our statement is we are more than happy to invest in new business development and in IT. Our IT is, let's call it, boxed into [indiscernible]. The new business development activity, we see extra efforts. In particular, in the gas side, the LNG side, we've added some new business development capacity in the Americas to focus on Gulf of Mexico activity. We're working very hard in Asia and in China on new business development opportunities. And just to make that more specific, the new business development for LNG in Germany and China are going very well, spending a lot of time on that, and we are getting more confident that we can bring those to FIDs. And we also have 2 -- 1 to 3 industrial opportunities being seriously developed in Asia and in China and in the U.S. Now I'm not being specific on where they are because they are in the middle of that commercial progress of trying to get to an FID, but the momentum is good, and we are spending, yes, good, good money on that, welcome money, I would say. Cost performance is good, therefore within targets. And I think we will have a hard look at '20 to see what more we can do on the cost front.

[Thijs Berkelder, Equity Research Analyst]

Okay. And then maybe in addition, probably the LNG's terminals will be off balance and the potential industrial terminals on balance. So you are still sure you will return cash to shareholders based on the divestments in Europe. And a follow-on on your statement on Gulf of Mexico. Is the fire at ITC an additional opportunity to expand your chemical capacity in Deer Park? Or are you more looking at expanding in oil?

[Gerard B. Paulides, CFO & Member of the Executive Board]

First, on the cash dynamics, Thijs, I think the framework we've given is pretty clear. We have a balance sheet, which is now at 2.58 in terms of debt to EBITDA. Our investment programs are clear. Our capacity to tap into the debt market is being maintained. So when we have the proceeds coming in, in the second half of the year, we will consider the state of affair for growth, balance sheet and distribution to shareholders. And all those options are available. I don't see any particular reason to change the statements that we made earlier on that. We have optionality, so that's a good thing.On Gulf of Mexico, for ITC, it's, of course, a very unfortunate industrial event, and we wish ITC well in managing that and recovering it and taking care of whatever they need to take care of. And more generically, Gulf of Mexico, we are seeing a more dynamic, of course, industrial activity, pet chem and oil, including gases. We'd like to participate in that. We're looking at all the 3 business segments. We are relatively neutral on whether that is NBD or M&A. M&A is typically focused on asset positions, not on companies, and our teams are looking hard at what can be done. We have quite some NBD activity on the go, including our JV with Moda in Gulf of Mexico but also industrial activity. And obviously, we are looking with interest to the MLP space, which is now a different dynamic than it used to be. I think far less firepower, I would say, in the MLP space than before, so that makes it interesting for us. But we are spending time on it. But Thijs, that's my statement. Yes.

[Operator]

Our next question comes from the line of Thomas Adolff from Crédit Suisse.

[Thomas Yoichi Adolff]

Gerard, just one question from me. You mentioned that you are well positioned to grow your terminal portfolio in line with the long-term market development, and you target 1 to 3 industrial terminal and 1 to 3 gas investment opportunities this year and next year. So kind of 3 sub-questions here. Can you talk about the level of confidence on these projects? And can you perhaps also, if you can, talk about whether it's brownfield or more greenfield in nature? And if we were to take the midpoint of 2 industrial terminals and 2 gas investment opportunity, what's the sort of capacity we are talking about?

[Gerard B. Paulides, CFO & Member of the Executive Board]

Okay. Thank you, Thomas. I think we have -- just stepping back, do we see growth opportunity? How is our terminal stacking up? There's a very healthy funnel we have. In terms of industrial, we're looking at China, we're looking at Gulf of Mexico, we're looking at Far East Asia, and these are real opportunities that are at various progress level in our stage-gating. So it's not sort of very early opportunity identification. They are advanced negotiations and maturation for very specific opportunities. It is -- let me just see. It's probably 2/3 greenfield and then there's 1/3, a combination of expansion brownfield type of growth capital. And in terms of what capacity that brings, I think that I will stay away from until we've matured the opportunity. We don't want to shift yet from our 2019 delivery agenda. But in terms of investment opportunity, we're confident that, well, a lot can be done. But I'm not going to give the 2020 or 2021 capacity expansion program outlook yet.

[Operator]

[Operator Instructions] Our next question comes from the line of Quirijn Mulder from ING.

[Quirijn Mulder, Research Analyst]

This is Quirijn from ING. On the results, with regard to Asia, Singapore improvement, it is plus EUR 18 million, that is EUR 10 million for the joint venture, that's EUR 4 million for Singapore. So the rest is consolidation. Can you maybe elaborate more on the improvement there? Is that related to a failure whatsoever? So maybe you can say something more. With regard to IMO 2020, my question is it looks like that you are somewhat late on IMO 2020 with regard to the adjustments and -- of your capacity. Do you think you -- can you still deliver on time given the fact that, yes, Singapore is in the second and the third quarter, so that's on the late side, and then Fujairah's even later than that? So are you believing that you still can reap the full benefit of IMO 2020 given the fact that probably the stock levels are being rebuilt within the second half 2019? And the last question is about Hainan. So we have heard about the divestments in Hainan. It's had a lot of silence, so maybe you can elaborate on progression there.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Okay. Let's see whether I can deal with those 3 questions. One is Hainan. That continues to be worked. The status is not different. You're right from that point of view, there's not been a lot of external communication on that. We are working our way through that. And as soon as we have an update, we will communicate. But for now, there is no news on Hainan. It's the one remaining terminal that is identified that's under strategic review.In terms of fuel oil, IMO 2020, yes, it's unfortunate if you have that sentiment of perhaps suspicion that we're late. In fact, I think we are getting the timing exactly right. We've got some major contracts committed in Europoort and in Singapore for which we are converting and building and executing. It's aligned with what the customers need. We've made some further optimization choices in Singapore on what capacity and how it is being utilized across the assets. So it's dynamic. It's live. It's being committed. It's, as far as I'm concerned, exactly right in terms of timing. Thus, I don't have the sense at all that we are at the wrong end of that discussion. Fujairah, in fact, is more or less ready. There it is just a matter of the market coming to the terminal rather than having to do anything operationally still for Fujairah. And as I said, commercial momentum in Singapore and Rotterdam appears to be ahead of Fujairah. But also Fujairah, you have some early signs of activity coming through. In terms of the Asia performance, I couldn't exactly follow where your numbers were coming from. Was it Q1, Q4? Or was it Q1, Q1 that you were...

[Quirijn Mulder, Research Analyst]

No, it's a year-on-year. Year-on-year. You have [indiscernible] from EUR 64 million to EUR 82 million, so this part is the IFRS effect, part of Singapore and part of the joint ventures.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Yes...

[Quirijn Mulder, Research Analyst]

What does it mean is that they're somewhat less there, but maybe I'm wrong.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Yes, I think across the board in Singapore, we see actually good performance across a number of assets, so it's a bit difficult to pinpoint one. You're absolutely right, PT2SB is the majority of the improvement. There is a little bit of extra income out of Fujairah; also PITSB, which is sort of the neighboring terminal next to PT2SB, which is a JV you're referring to; and then some extra contribution. And then there is, yes, a bit of support from foreign exchange in the numbers. And the occupancy numbers are also kicking up. So it's a mix of, I would say, more modest, smaller contributions across the bench rather than anything else. I think the only one that is a little bit less or negative but small is Jubail, which is a slight negative, the Saudi Arabia, which happens to sit in the division of Asia. There you see a small negative. But in Jubail, we're actually doing very well in the sense of that activity, which is across 2 entities is now being operationally aligned across the 2 terminals, and we see for 2019 a better performance as a whole from Jubail than we would see in 2018. So the Jubail activity are expected to come together quite well and nicely in 2019.

[Quirijn Mulder, Research Analyst]

Okay. So -- but the improvement in Singapore is probably only in the first quarter. In the second and the third quarter, you expect somewhat downturn there because of the IMO 2020 preparations?

[Gerard B. Paulides, CFO & Member of the Executive Board]

Well, on the occupancy, Quirijn, not so much on the EBITDA. So it's a bit like the comment on Europoort. So the occupancy in Q1 is impacted by the out of service in Europoort for IMO. But the relative impact on EBITDA of that occupancy point is not really seen in the EBITDA performance. The EBITDA performance is -- hard to express it -- compensating the low occupancy of the out of service as a whole for the total company. So it influences occupancy, but it influences EBITDA much less than what you read out of that occupancy.Is there any other question? We should be heading towards the final question if we want to finish on time, but I want to treat you all with proper respect because you're making the effort to dial in, which we greatly appreciate. But is there anyone else, operator, that is lined up?

[Operator]

No. There are no more questions registered at this point, so I will hand back the word to you, Gerard.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Okay. Well, thank you, and thank you all for dialing in. It's -- you can see also from the questions that there are the same recurring themes, which is how do we de-risk 2019? I think we had started de-risking it with the strong performance in Q1. Then how do we look at the future? You've seen the portfolio moves. We will now execute those, and we will discuss how we deal with the proceeds. And we have a healthy growth portfolio, which is, I think, also coming through this year, and we see good opportunity next year, and I've given some examples.So thank you for your time. I will now change my attention to discuss 2018 again at the Annual Shareholder Meeting, which is about to start in Rotterdam. And thank you all for allowing me to finish on time. Thank you for your attention.

[Operator]

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.