Koninklijke Vopak NV

AEX:VPK

Earnings Call Transcript 2022-Q1

[Operator]

Hello, and welcome to the Vopak Q1 2022 interim update. Please note, this conference is being recorded. [Operator Instructions]

I will now hand over to your host, Fatjona, Head of Investor Relations, to begin today's conference. Thank you.

[Fatjona Topciu, executive]

Good morning, everyone, and welcome to our first quarter 2022 results. My name is Fatjona, Head of IR. Our CEO, Dick J.M. Richelle, will guide you through our latest results. Our incoming CFO, Michiel Gilsing, is here as well and will provide an update on the first quarter results. We will refer to the Q1 2022 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for Q&A. A replay of the call will be made available on our website.

Before we start, I would like to refer to the disclaimer content of the forward-looking statement, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involves certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to questions during the Q&A.

With that, I would like to turn over the call to Dick now.

[D.J.M. Richelle, executive]

Thank you very much, Fatjona, and a very good morning to all of you joining us on the call. It's my pleasure to share with you our first quarter 2022 results.

Let's begin with Slide 4 and review the highlights. Our EBITDA performance was good and increased year-on-year, notwithstanding volatile market conditions. The Americas division performed especially well due to growth project contributions and improved autonomous performance. However, this was offset by the Europe and Africa performance, which experienced particularly challenging market conditions. Our proportional occupancy rate came in at 84% and declined compared to the fourth quarter last year. This was mainly driven by low occupancy performance in oil storage in the Netherlands as a result of continued soft storage market demand for oil. Our cost base faced upward pressure on both currency exchange effects and utility price movements. Particularly, high utility prices are impacting the performance of the Europe and Africa division.

In our portfolio, we have 2 highlights which we want to share with you. First, we signed an agreement subject to customary closing conditions for the divestments of our 4 Canadian terminals located in Hamilton, Montreal East and West and Quebec City. Proceeds of around EUR 116 million are expected and will be used for debt repayments. We decided to continue to operate our Australian terminals. The Australian market is solid and will continue to support the cash flow generation of Vopak. The positive momentum for LNG continues. For example, Gate terminal, our joint venture in Rotterdam continues to play a key role in the security of natural gas supplies in Northwest Europe.

Now let's move to the impact of the Russia-Ukraine war. The Russian invasion of Ukraine is a major humanitarian drama, and we sympathize with the people who are now suffering from the violence of the war. Vopak is monitoring the situation closely and is fully committed to adhere to relevant sanction laws and regulations. At the moment, restrictions under applicable EU sanctions are, in general, exempted in relation to the import of energy products into the EU as governments try to ensure energy security and affordability. Vopak follows applicable government regulations with regard to energy imports into -- from Russia. The Russia-Ukraine war and international sanction regimes make the market situation volatile and uncertain. Vopak's direct exposure is assessed to be limited. There is, however, an indirect exposure through factors such as utility prices, inflation, market conditions and exchange rate.

Now let me recap our view on the current business environment and product markets in which we operate. We already communicated before that we witnessed improvements in the chemicals market in the prior quarter. And in the first quarter of 2022, this trend continues. Demand for chemicals is strong and in line with economic activity. Chemical supply chains are filling up with product, and we observed an increase in both storage demand as well as chemical throughputs. We mainly see higher flows from products connected to durables end use, such as construction and automotive materials. Our industrial and distribution terminals are performing well, both due to the increased throughput and higher demand for storage. Our hub terminal performance in chemicals is healthy.

Now let's move to oil. The softness in the oil storage market persisted through the first quarter of 2022. Demand for oil products remained strong as a result of economic activity picking up, but supply is not picking up fast enough. And therefore, hub demand continues to be weak, which is caused directly by tight supply. Because of end demand for products increasing, we saw fuel distribution demand picking up and being solid, especially in the mobility sector. The gas markets were particularly impacted by the Russia-Ukraine war, leading to concerns around energy security. Gas prices have reached record highs in the first quarter of 2022, and various regions, especially Europe, are reconsidering where they source their gas from. We observed an increased interest in LNG for energy security purposes.

Gate LNG terminal continues to play a key role in the security of natural gas supplies in Northwest Europe, supplying the equivalent of 25% of the Netherlands' gas needs. Following last year's announcement on expansion of send-out capacity, which will become available in October 2024, it's currently also being investigated if in the short term, the send-out capacity of the Gate terminal can be expanded further. Our financial performance was stable in this segment due to the long-term take-or-pay nature of our gas business.

In new energy, we see momentum firming. Recently, Vopak announced it will work together with Gasunie and HES International to develop an import terminal for green ammonia as a hydrogen carrier. The cooperation is in response to growing global demand for the import and storage of green energy. This quarter, work will start on the basic design of the import terminal, which will operate on the Maasvlakte in Rotterdam under the name ACE Terminal and is expected to be operational from 2026. We will provide more insight on our plans related to new energies during the upcoming Capital Markets Day.

Now moving to portfolio positioning, and first, let me give you some perspective and context around what we have done. Since 2014, we have divested more than 10 oil terminals in mainly OECD countries. We've added more than 10 terminals to our network, which were mainly industrial terminals and terminals for LNG, gases and chemicals. Our contract duration has increased as our business in industrial and gas terminals is underpinned by long-term take-or-pay contracts, ranging from 5 to 20 years. We signed an agreement for the divestment of 4 Canadian terminals. And we'll continue to operate our assets in Australia following our previously announced strategic review. I will provide some more context around these decisions on the next slide.

On new energies and feedstocks, we see it as our role to develop infrastructure solutions for hydrogen, ammonia, CO2, flow batteries, biofuels and sustainable feedstocks. As an example of this and building on our experience in storing and handling ammonia at 5 other locations around the world, we commissioned ammonia operations in the new Vopak Moda Houston terminal with VLGC shipping capability. This positions us well to contribute to future flows of ammonia, which can be used as a hydrogen carrier, a shipping fuel or a feedstock.

Now let's move to portfolio highlights on Slide 8. We signed an agreement subject to customary closing conditions for the divestment of 4 Canadian terminals located in Hamilton, Montreal East and West and Quebec City. The proceeds, which will be in 2 equal tranches this year and next year, are expected to be around 1-1-6, EUR 116 million and will be used for debt repayments. The deal is expected to close in Q2 2022, and we expect a limited exceptional divestment result upon closing. This deal represents an attractive multiple in terms of cash flow metrics given the maturity profile of these assets.

Following the previously -- following the outcome of the previously announced strategic review of our assets in Australia, we have decided to continue to operate these terminals. The Australian market is solid and will continue to support the cash flow generation of Vopak. We will give more updates on our portfolio going forward during our Capital Markets Day.

And with that, I'll hand it over to Michiel, our incoming CFO, to share some updates related to the first quarter results.

[Michiel Gilsing, executive]

Thank you, Dick. Good morning, everyone. My name is Michiel Gilsing, and it's a pleasure to be today with you on this call. I'm very honored to have been nominated for the position of member of the Executive Board and CFO of Royal Vopak.

Maybe a quick introduction. I started my career at Vopak in 2004, and I have served in different management roles for the last 18 years. Most recently, I led our division in Asia and Middle East. Prior to that, I headed the global commercial and business development activities for the company and have been part of the Strategic Committee since 2017. I look forward to working with all the colleagues and serving all our stakeholders around the globe on our journey of storing vital products with care.

As the incoming CFO, I've worked closely with Gerard, our prior CFO, to ensure a smooth transition. I would like to personally thank Gerard for his support and contribution in the last years.

As you might know, we are hosting a Capital Markets Day on 12th of May. And by then, subject to shareholder approval, I'm aiming to share Vopak's priorities regarding capital structure and financial framework for the years ahead. I look forward to engaging with you in the near future.

Today, I will update you on our first quarter results and main developments during the quarter. The first quarter EBITDA was EUR 213 million, notwithstanding volatile markets. Adjusted for positive currency translation effects, EBITDA increased by EUR 5 million or 2.5% compared to the same period last year. EBITDA performance was driven by growth projects contribution and good performance in Americas that offset the impact of particularly challenging market conditions in Europe. These challenging market conditions created upward pressure on the price of utilities, leading to an increase of cost by EUR 14 million compared to last year.

Cash flow from operations, excluding derivatives, increased to EUR 169 million, driven by business performance and a receipt of dividends from joint ventures offset by working capital movements. Our net profit was EUR 75 million, resulting in an earnings per share of EUR 0.60. And our cash dividend of EUR 1.25 will be paid on 28th of April.

Let me compare Q1 this year with Q1 last year. Let me take you through our financial performance per division. The currency translation had a positive effect in our performance of EUR 9 million. Strong performance in Americas was mainly driven by positive contribution of growth projects and lack of one-off events related to the Texas freeze that happened last year. The division China and North Asia reflects the new capacity commissioned during 2021, especially in Qinzhou. Performance in Asia and Middle East is solid. We have a stable and well diversified portfolio there supported by, among others, new capacity in Australia. The LNG performance remains solid as Gate terminal, our joint venture with Gasunie for LNG in Rotterdam, continues to play a key role in the security of natural gas supplies in Northwest Europe. Performance in Europe and Africa division reflects the higher utility prices and particularly challenging conditions related to the oil storage market.

Let's provide a little bit more detail on the divisional performance. The Americas division benefited from growth projects, primarily driven by our new industrial terminal in Corpus Christi and an improvement in autonomous performance. The uptick in occupancy is the outcome of a strong economic activity mainly in countries such as the United States and Brazil. The division Asia and Middle East occupancy rate reflects persisting soft business conditions in especially the oil markets. The China and North Asia division performance is impacted by the withholding tax reclassification, which positively impacts the results of the joint ventures. Just to explain a bit more on this, given the increased importance of the joint ventures in our portfolio, starting from fourth quarter '21, the withholding tax previously recorded on undistributed reserves of associates and joint ventures is now recorded in the income tax line of Vopak instead of the results of the joint ventures.

Performance of Europe, Africa division reflects the higher utility prices in the first quarter and overall soft market conditions, leading to a relatively low occupancy performance in our oil storage in the Netherlands. In Europe and Africa, we are mitigating short-term impacts of the underperformance by addressing cost efficiency as well as passing inflationary and the increase in utility prices to our customers. This, of course, depends on contract structures and market circumstances. We will be able to share more about our plans in Europe and Africa during our Capital Markets Day in May. On LNG, the performance of the LNG division was solid due to the long-term take-or-pay nature of this business.

Let me move on to the proportionate results. Performance of joint ventures and associates is becoming more important with our joint venture assets and strongly reflects our underlying operational performance. Proportional EBITDA for the quarter is EUR 254 million, of which the EBITDA of proportional joint ventures is more than EUR 100 million. Our proportional occupancy rate was 84% in Q1, mainly driven by low occupancy performance in our oil storage in the Netherlands as a result of continued soft oil market conditions for storage.

Then move on to the cash flow. The cash flow from operations was solid and, corrected for derivative movements, increased by 21% year-on-year. Our gross cash flow from operating activities came in at EUR 150 million for the first quarter of 2022. Higher dividends from joint ventures, which amounted to EUR 64 million, were the main driver of improved cash flow performance next to the positive momentum on EBITDA. Cash flows from investment activities amounted to EUR 95 million and were lower versus the previous year, primarily due to lower investments in growth and sustaining service and IT projects. Free cash flow before financing was as a result of the above-mentioned developments, positive at EUR 51 million.

Looking ahead, Vopak is on track with the prior announced target of the EUR 110 million to EUR 125 million EBITDA contribution in 2023 from growth projects. Additional projects will further contribute to EBITDA. We continue our cost focus in 2022. And the cost base, including additional costs for new projects, is expected to be around EUR 645 million. Of course, this is subject to currency exchange movements and utility prices. In the first quarter, we experienced upward pressure on currency exchange effects and utilities price movements.

In 2022, growth investments is expected to be below EUR 300 million based on committed projects and current market opportunities. As priorly communicated, for the period 2020 to 2022, Vopak expects to be at the higher end of the range EUR 750 million to EUR 850 million for sustaining and service improvement CapEx. In addition, as part of the strategic direction for the period 2020 to 2022, we have indicated to invest annually up to a maximum of EUR 45 million in IT CapEx.

Let me recap the key messages for Q1 2022. Our EBITDA performance was good and increased year-on-year, notwithstanding volatile market conditions, mainly driven by the good performance of the Americas division. Soft storage market conditions in oil continue, particularly impacting the occupancy of our operations in the Netherlands. Our cost base faced upward pressure on both currency exchange effects and utility price movements. We see good progress in our portfolio development, and we signed an agreement subject to customary closing conditions for the divestment of the 4 Canadian terminals located in Hamilton, Montreal East and West and Quebec City, and the proceeds will be used for debt repayments. Also, we decided to continue to operate our Australian terminals. The Australian market is solid and will continue to support the cash flow generation of Vopak. We remain focused on making progress on our portfolio and growth agenda by actively positioning ourselves towards the future.

Before we conclude today's presentation, I would like to remind you of our upcoming Capital Markets Day on 12th of May in Rotterdam. Members of the Executive Board and senior management will provide an update on Vopak's priorities for the years ahead. We look forward, obviously, to welcome you on the 12th of May.

That concludes our presentations and prepared remarks. Operator, could you open up the call for some questions?

[Operator]

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

[David Kerstens, analyst]

First of all, I was wondering if you could please comment on the occupancy rate development in Europe and Africa, which I think was down from 86% in Q4 to 79% in the first quarter. I think you said that was largely attributable to oil storage in the Netherlands. What has changed since the fourth quarter? Do you see any impact on changing product flows with regards to Russian oil and gas, even though those projects are currently not yet sanctioned? And why do you not see this weakness elsewhere in the portfolio, for example, in Singapore?

The second question relates to the opportunities in LNG. You decided to pull out of the German LNG project in Hamburg, but do you now see any other potential opportunities elsewhere in Europe, for example, to add FSRUs to reduce the dependence on Russian gas?

And finally, I understand the transaction multiple on the divestment of the Canadian assets is around 8x EBITDA, which is below, I think, your previous divestments in Western Europe, which were at 10x EBITDA. And is that now a new benchmark for oil terminals? And why did you change your mind on the divestment in Australia?

[D.J.M. Richelle, executive]

Thank you, David. Maybe I'll start with the one on occupancy and LNG, and leave Michiel for the comments on Canada and on Australia, if that's okay. And maybe first on occupancy, if you look at what we've indicated at the close of '21, so on Q4, we said oil markets in general and we pointed out a few particular products, especially gas oil, that we said market dynamics and especially availability of product puts pressure on demand for storage. That's what we've indicated.

And you see that the compounded effect of that in the first quarter has led to the drop in occupancy mainly in Rotterdam. Related to the Russia flows that are coming to Rotterdam, the impact is relatively limited in the first quarter. So you don't see a lot of Russian flows that are immediately impacted. You still see product -- as it's not sanctioned, you still see product moving into Rotterdam, be it at a lower extent to a lower volume than what we've seen maybe before. But that has not been the impact. So I would categorize the drop in occupancy in Europe or in oil Rotterdam mainly as a continuation of already weaker performance observed in the second half of '21, mainly Q4.

And then to your question why do you see that happening then in Rotterdam more than you see it happening in Singapore, well, in Singapore itself, our exposure, particularly to middle distillates is quite a bit less than we see that in Rotterdam. So it's more the product portfolio mix that we see that has less impact. And therefore, also the impact of Russian flows into Singapore and other regions is obviously much less than you see that in a port like Rotterdam. So that's why the difference between occupancy drop in Rotterdam versus the impact in Asia is profoundly different as far as we can see it now.

Then maybe what we shouldn't forget about is that overall occupancy in Europe, when it gets to petrochemical demand, when it gets to gases, when it gets to vegetable oils is performing well. When it gets to our fuel distribution business in South Africa, which is part of our Europe and Africa division, is also performing well. So it's really centered for now around what we see oil in Rotterdam. I think that's a bit more color around occupancy rate development [ AF ] versus Asia and the rest.

Then maybe your second question on LNG opportunities and whether we see the potential. Indeed, as indicated before, the German LNG project has been taken over now by Gasunie together with the German government to secure energy for Germany. With everything that's happening on the Ukraine-Russia conflict, indeed, we can read that there's a lot of increased demand for LNG import infrastructure into Northwestern Europe. We are -- as I indicated, we are first looking into what we can do in existing facilities like Gate together with Gasunie. So we're looking for every opportunity to -- in the shortest period of time at additional send-out capacity to the already available capacity that we have, as I indicated. And second of all, there's more discussions ongoing, which you can read in the news as well for other locations where Gasunie is very much involved. And Vopak is in the partnership with Gasunie assisting in those developments as well. Still to be determined in what way in the end we would play a role.

The most important thing for the short term is making sure that there's sufficient FSRU and, again, LNG import facility infrastructure available between now and the end of the year. We are supporting and looking how and where we can participate in that. And then the location that is mentioned the most here is Eemshaven in the north of the Netherlands. So that's what we're involved together with Gasunie, but Gasunie is leading that development.

So it gives you, hopefully, a bit of insight on LNG and on the occupancy levels oil for Europe. So maybe to you, Michiel?

[David Kerstens, analyst]

Can I ask a quick follow-up on the Russian oil and gas flows into Rotterdam? I think the port have said that they account for around 25% of throughput, and even though they're currently not yet sanctioned, are Russian tankers still allowed to dock in Rotterdam? And could there not be a self-fulfilling prophecy that, yes, those flows will gradually dry up even if they're not being sanctioned? What's your view on that and the potential impact?

[D.J.M. Richelle, executive]

Well, I think it's not so much Russian tankers, but there is Russian product that currently is leaving Russia and is moving into other places around the world, including also Rotterdam. That is happening. We follow the strict guidelines also of the European Union and the Dutch government, which actually states that they want to facilitate and make sure that for energy security purposes and as part of the total energy mix, these products are needed, so you still see them flowing in.

The flows are slowing down because there is an element. It's harder for ships to get there because of insurance impacts. And there's more and more companies that if they find an alternative to Russian flows, they will certainly move to look and to seek for those alternatives. And we see that happening. But when it gets to, I would say, basic fuel oil that moves from Russia into Rotterdam to be used as bunker fuels in -- for all the transportation in the port of Rotterdam, those flows are still happening as we can see it now. And where possible with our existing customers, we are facilitating that.

[Michiel Gilsing, executive]

Maybe then, yes, to follow up on the third question you asked, and by the way, nice to meet you. let me put the 2 transactions a bit in -- or the 1 transaction in Canada a bit more into the right context. As you mentioned, like 8x EBITDA for these assets, the way we look at it is, especially from a free cash flow point of view, what is the free cash flow generating capability of these assets. And if you look at that, then there's quite a good multiple in terms of free cash flow for this asset because these are older assets. So there is a relatively high sustaining CapEx for these terminals.

So if you look only at the EBITDA, you may think that the multiple is lower than expected. But if you look at the free cash flow, for us, this is a very good transaction. So on the free cash flow, it will have hardly any impact for Vopak overall. So it's very hard to -- if you talk about benchmarks for oil assets, but for any terminal just to relate it only to the EBITDA multiple, certainly also have to put the free cash flow into the right perspective to get to a proper analysis of these transactions.

In Australia, we indeed tested the market. We looked at the potential of doing a transaction there compared to what is the value for us to hold on to this asset, and we came to the conclusion that the difference between our old strategy and the market is significant still. So we continue effectively to hold on to the assets and happy to be in the Australian market. It's a strong market. There is still sufficient growth. We recently expanded the capacity, which is nicely filling up. So that means we have a good position. Obviously, there is, in the long run, potentially an energy transition going on in Australia as well. But if you look at the underlying development, the market is still growing. And so as a result, we think it's good to keep these assets, and they will contribute quite strongly to the cash flow of the company.

[Operator]

The next question comes from Thijs Berkelder from ABN AMRO.

[Thijs Berkelder, analyst]

Welcome, Michiel. Glad to have you on board. First question on Slide 15 on your cash flows, you told us you received EUR 64 million of dividends in Q1 this year. Can you tell me what number you received last year in Q1? And on top of that, what can we then expect for the second quarter?

The second question is on -- I understood that you, this year, for the first time, include Vopak Ventures in the consolidated number. Can you explain what kind of impact Vopak Ventures had in Q1?

And maybe for Dick, going back on occupancy rates in oil Rotterdam, if the whole of Europe, every gas now is 79%, should I then conclude that oil is at 70% or lower already? Similar in Singapore, if Asia, Middle East is at 83%, 3 percentage points lower than the previous quarter, then Singapore's occupancy is also sharply lower, is then also occupancy rate of Singapore oil now below 80%? This is it for now. No more questions.

[Michiel Gilsing, executive]

Nice to meet you. On the dividend distributions, indeed, this quarter, a strong performance with EUR 64 million. Last year, we had during the same quarter, we had EUR 22 million as dividend distributions. Our strategy overall is to really have obviously maximum payout of our joint ventures and make sure that the leverage of joint ventures is solid. We still have a few opportunities, I would say, on releveraging certain of the joint ventures. So we're busy with that. We expect quite a strong year in terms of dividend distributions for the rest of the year. I can't give you an exact number on Q2. But overall, I think the strategy is really to upstream these dividends going forward. So that's the focus of the management.

I think on the Vopak Ventures, well, this is still relatively small in our cash outflow. So we have made certain investments in smaller ventures which are adjacent to our business, can be either investments in digital, can be investments in operational technologies or can be investments in new energy. And the overall portfolio at the moment is around EUR 40 million. So the cash impact of that is relatively small. We don't expect immediately recirculation of capital in Vopak Ventures, so the strategy is still to hold on to most of the investments we have made there. But going forward, yes, obviously, we hope that certain of the investments we will be able to convert into cash again, depending on, let's say, opportunities for disposal. But the strategy so far is to build up the portfolio and make it even a bit larger than what it is today. But I think the overall impact on our cash outflow is relatively limited so far.

[D.J.M. Richelle, executive]

And then maybe on occupancy, Thijs, indeed, the way you look at probably Europe, Africa with the proportionate number that we've indicated of 79% of occupancy, you clearly see that oil Rotterdam is on the lower end of that. And the other facilities that I mentioned are on the higher end of that spectrum, South Africa being on the top end; Flushing; Vlaardingen being well filled up. So indeed, on the oil side, you see that the occupancy being lower than that 79%, somewhere between the 70% and the 79%, I would indicate. That's, I think, on Europe and Africa.

If we then go specifically to your comparison with Asia, I think the complexity of comparing it with Asia is the overall proportionate occupancy number for Asia includes quite a high number of industrial facilities. They have almost by definition really high occupancy, really high commercial occupancy rate. So if you dissect through that and say, well, what is actually happening in Singapore, then within Singapore, you see the mix of chemical distribution, industrial terminal and chemical facilities, and then there's a portion of oil. So it's a bit of a mixed composition where, indeed, on the oil side, you see some pressure, but it's being compensated in the entity in Singapore directly by increased demand for chemicals. So that's a bit of a mixed bag.

And as I indicated earlier, the drop in demand for oil storage in Singapore particularly has been less severe than we've seen it in Rotterdam, and that's mainly product mix-related, contract structure-related that you have to think about. I would say in the greater straits area, so then you look at the Malaysia part, there, we only have the participation through the joint venture. There, we see a bit more pressure on oil occupancy because there, our exposure to middle distillates is slightly higher. So it's a bit of a -- you're definitely on the right path to say, well, those oil occupancies are lower in those composed numbers, and that is true. And I hope at least with this answer, I give you a bit of an indication of how the buildup has come together.

[Thijs Berkelder, analyst]

Yes. Then maybe one add-on question on, let's say, what Michiel told us on leveraging up JVs and associates. In your annual report, I've found for the, let's say, for the first time, I think, announcements on [ later on ] entering finance lease contract for [ HES ] and the finance lease contracts on Corpus Christi and Altamira, and to be honest, it's not really clear to me what kind of impact that is having on the results you are presenting, on the leverage you are presenting. And I was surprised to read that Corpus Christi in 20 years will no longer be your terminal. So can you maybe shortly explain whether we can see more finance lease agreements in the coming year and why and where?

[Michiel Gilsing, executive]

Yes. I think good question. Definitely, this is a challenge for the whole industry, yes. So if you look at Corpus Christi, it is a dedicated facility for one of the cracker complexes there, as ExxonMobil-SABIC venture. Because it's a dedicated contract, long term, it turns out that according to IFRS, it has to be a finance lease contract, 20-year contract. Indeed, at the end, there is an opportunity for ExxonMobil to effectively buy back the facility at a very low price. So this is a fixed contract. It's a lease contract.

Are we going to see this more often? Like you have also noted, it's happening in Altamira, which is also a long-term contract with one dedicated party. As soon as it's an industrial terminal long-term contract, indeed, these leases are applicable. It might also happen in other locations. If it's a very dedicated infrastructure, it could be part of a facility, which then turns out to be a lease. But in most of the locations, if you have multi-customers and different types of infrastructure, it still doesn't qualify as a lease. So it's a bit of a mix.

It started, I think, around 7, 8 years ago with the first lease. So we have now more and more leases because we have also more and more long-term contracts. So it may still happen going forward if we sign more long-term contracts for industrial terminals or potentially sign long-term contracts for our gas business. But for the other business, which if you would qualify it, let's say, the more commercial or market exposed contracts, there's no expectation that these will turn out to be leases anytime soon. But indeed, it's a mixed bag in terms of reporting our numbers because some of it run as normal revenue and costs through our P&L, and some of the contracts now run through, let's say, the financial lease components.

For some, you don't see it because it's a joint venture, and then we only report the net result. But for Corpus Christi, because it's not a joint venture, it's a 100% company, it runs through our consolidated numbers. So I hope that provides a bit of light on how this works with the financial leases and that you may going forward expect maybe even more financial leases than you have seen today.

[Operator]

[Operator Instructions] The next question comes from the Andre Mulder of Kepler.

[Andre Mulder, analyst]

Yes. Two questions. Firstly, on the cost base, the EUR 645 million that you mentioned, are we a bit on the same level as what we have seen in Q1? Would that mean that the EUR 645 million also already takes into account the performance that we had in Q1 in terms of the currency rates and the increase in costs there? Or should we add a few millions looking at the, let's say, the today's state of affairs? I assume that the EUR 165 million may be trending up because the full impact is not visible there.

Next question is on ammonia. You said there are 6 terminals storing this material. Can you mention any amount in total for ammonia storage in your portfolio? Those would be my questions.

[Michiel Gilsing, executive]

Yes, let me start with the first question, and nice to meet you, Rene (sic) [ Andre ]. I hope to see you soon somewhere. But on the cost base, indeed, the overall target is EUR 645 million. If you take the first quarter into account, obviously, the cost increase, especially on energy and utilities has been quite significant, and also, the currency exchange movements were quite significant. So if you look at the rest of the year, if currency exchange remains where it is and taking into account, let's say, energy and utilities seasonality, because obviously, during winter, we spend more on our energy than we will do during the summer period. But if it continues at the same price levels and the currency exchange remains at the same level, then you can certainly expect that we will -- we end up higher than the EUR 645 million, which we have targeted.

Because certain of the costs we can compensate, some of the cost we can pass on to our customers, especially those contracts where we have inflation clauses or energy parcel principles. But overall, I think the cost base of EUR 645 million is at the lower end, and then a lot of things have to effectively reduce in cost, like I said, on the currency exchange and on the energy and utilities.

[D.J.M. Richelle, executive]

And maybe, Andre, on the ammonia question, I don't have the overall number for you of what the total capacity is. We can get that to you. I think the most important ones to mention here is what we have in Banyan in Singapore, what we have in Saudi Arabia, and what we have in Caojing in China. Those are all the, I would say, the bigger facilities. Then we have Kertih in Malaysia. And as I said, we just opened Houston, so Vopak Moda Houston. And then in the acquisition of our Via terminals from Dow, we also have an operation in one of the locations there for a small facility in -- along the Mississippi River. So those are the main locations. We'll get you the exact capacities.

I think the importance for us, and that's what you see also in the announcement together with HES and Gasunie, is the capability of handling this product in different parts of the world. And the fact that we do it in all those locations, although the molecules today may be gray ammonia molecules, it's infrastructure and obviously in the future can be used and turned around into green molecules for -- into those industrial centers. So that's why we're excited for capability and for location purposes.

[Andre Mulder, analyst]

Can you give any guestimate of what that ACE Terminal would cost?

[D.J.M. Richelle, executive]

No, it really is at the start. We don't know that yet. It's not a matter of whether we want to disclose it or not. We don't know it yet. What we felt was important is that together with Gasunie and HES, we at least made the announcement so that we can start also the discussion. We can start the design work ourselves, and we can start the discussion with interested customers because there's a clear indication where the location actually sits and what we can do over there. So that process will start. There's a team that is being formed as we speak. And then more to follow, I think, in the upcoming updates. But again, from a location point of view, we're excited to see that Rotterdam can develop such a potential large ammonia import facility. And I think the sheer strength of the 3 parties that we bring together makes us very excited for the opportunity going forward.

[Operator]

The final question comes from the line of Thijs Berkelder of ABN AMRO.

[Thijs Berkelder, analyst]

Yes. It's me again, Thijs from ABN AMRO, ODDO BHF. I have two additional questions. What are we waiting for when looking at acquisition of LPG in India? And why do we see such a limited growth portfolio in your presentation pack?

And the second question is on LNG. I thought we saw quite strong progress at the Gate terminal, for instance. Why is the LNG results down so sharply year-on-year? Is that affected by energy and utility price as well?

[D.J.M. Richelle, executive]

Maybe on India and on the growth side, Thijs. India, we are going through the -- we always said we would look at closure in the first half of '22. It's a complex process to get to final closure. We're making very good progress, not there yet to get the final announcement on closing, but I expect that in Q2, we will come with further updates there. But so far, it's looking to be trending in the right direction. That's on India.

I think the growth portfolio, as we've indicated, is in line with our expectation, in line with the guidance that we've given that it would be less than the EUR 300 million in terms of total growth capital to be spent in this year. Happy with the shift that we are making to allocate more resourcing and capability building into the buildup of new energy business development project, growth projects, and that's why I think the quality of the growth portfolio is in line with where we want to see it moving to. So less oil, less on the expansion of existing chemical facilities with more into industrial LNG and especially new energies. So no surprises there.

[Thijs Berkelder, analyst]

Sorry, is there any kind of indication that we structurally should expect, see lower growth projects going forward? Or on May 12, you certainly come out with, we have plan A, B, C and D?

[D.J.M. Richelle, executive]

Well, on May 12, you think we are kind of like preparing and holding back. We announce what we obviously have to announce, Thijs. So whenever there's news that we will share because we reached certain milestones, we will obviously announce that as you can expect from us. On May 12, we will give you an update on where we see the long-term strategic priorities of the company moving towards and gives you an indication of how that growth capital, how we would allocate that over the different terminal types and why we think that makes sense. So I think that's -- and then there's more to come, obviously, on May 12 on why we really see that and how we're going to do that. So hold your horses a bit for May 12. But don't expect that we come there with project A, B, C or D that we have upon our sleeve at the moment.

[Michiel Gilsing, executive]

Yes. And maybe, Thijs, on the LNG question, well if you look at LNG, the performance also due to the contract structures of take-or-pay is very stable. If I compare it to last quarter -- or not last quarter but previous quarter 2022 and same quarter '21, then the result is actually the same. Indeed, there is a deviation from the result in Q4, but Q4 was positively impacted by 2 one-offs. One one-off was related to the TLA Terminal in Mexico, and the other one was related to Gate. But overall, if you look at the portfolio of LNG assets, as I said, relatively stable results but also very stable cash flows, which are attractive for our business.

So going forward, you may expect that the stability of the cash flows will remain. The results, hopefully, with the development of the Gate terminal slightly positive in the second half of the year compared to the first half. the year. And while you've also seen that we announced that we signed up 1 additional customer for the Gate terminal, Uniper for an extra 1 billion cubic meters of throughput, so that's going to help the result going forward as well.

[D.J.M. Richelle, executive]

Any other questions, operator?

[Operator]

We have no further questions on the line.

[D.J.M. Richelle, executive]

Maybe just one final comment, given that so many questions were about the occupancy rates in both Asia and Europe, I think what we -- what I wanted to add to the discussion, but that's more of a generic remark, I think the results in the first quarter show very clearly the value and the resilience of a global balanced portfolio of assets. And I think that's very clearly shown in the Q1 results. If you look at it from a geographical point of view, we said we clearly indicated the pressure in Europe, but good performance in America, stable and solid performance in Asia, China and LNG. If you look at it from a product point of view, pressure on oil, but that's being compensated by a good performance on the chemical side and solid performance on the LNG side. So we are very happy to look at the quality of -- and the balance in the total portfolio of assets. I thought that was important to mention at the end of the call, so we put that in the right frame.

And with that, I thank you all very much for the call, for your interest and look forward to seeing you on the 12th of May in Capital Markets Day, and I wish you all a great day today. Bye-bye.

[Operator]

Thank you for joining today's call. You may now disconnect.