Koninklijke Vopak NV

AEX:VPK

Earnings Call Transcript 2020-Q3

[Operator]

Hello, and welcome to the Vopak Analyst Presentation for Q3 2020. [Operator Instructions]Today, I am pleased to present Gerard Paulides, the CFO of Royal Vopak. Please go ahead with your meeting.

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

Thank you, and welcome, everybody. Good morning, and welcome to Vopak's third quarter interim results. In the next 20 minutes, I will present to you an update on the developments of this quarter, and my prepared remarks will refer to the analyst presentation as published this morning. As ever, we will ensure there's ample time for your questions and finish on time.Before we start, I would like to refer you to the disclaimer content of the forward-looking statement, which you are familiar with and which will apply to the entire call.Let's have a look at the key messages for the quarter. Vopak improved its results in a turbulent 2020 year and compared to 2019. During the third quarter, we continued the good financial performance and improved occupancy rates of our portfolio. EBITDA for the first 9 months amounted to EUR 603 million, and post divestments, this represents an increase of 6% or EUR 32 million. This reflects the positive business performance while absorbing currency translation effects of EUR 11 million. Year-to-date performance could have been better. However, it was held back by the currency headwinds and already earlier known delays in growth projects with a combined impact of EUR 25 million. That's the combination of currency and projects. EBITDA performance was supported by our cost interventions, and savings are tracking well to our ambition to finish the year below EUR 600 million.Our proportional occupancy rate for the 9 months improved to 90% and reached 92% in the third quarter. This reflects a strong oil storage market and continued good demand for our chemicals, gas and industrial assets. Year-to-date, our net profit was EUR 249 million, resulting in an earnings per share of EUR 1.96. On the return to shareholders, we completed our share buyback program of EUR 100 million, demonstrating our commitment to shareholder distribution. Our financial framework and capital allocation priorities are unchanged. We continue to invest in growth, service and our digital infrastructure and data management.This quarter, we delivered the acquisition of 3 industrial assets from Dow Chemical Companies in the U.S. This is another milestone in Vopak's industrial terminals' development. We also delivered new capacity in the Netherlands, in Indonesia and in South Africa. And after some construction delay in South Africa, our growth projects in Durban was delivered. And in Lesedi, close to Johannesburg, the first product has arrived to commission the new asset this month.Growth investments for this year are expected to increase and end in the range of EUR 500 million to EUR 600 million, in line with what we said before, but now including the Dow transaction that we expected to close -- that we expect to close early December. For 2021 our ambition is to allocate some EUR 300 million to EUR 350 million to growth investments through existing sanction projects and through new business development.Let's move to COVID-19 and give you an update on how we operate in that environment. 2020, of course, has been an exceptional year for everyone. All our lives have been touched by the global pandemic. Everybody who is in Vopak has responded very well, and all our 66 terminals have been operational to serve our customers. We've been taking effective measures and, where possible, we keep an attitude of business as usual in unusual times in order not to procrastinate decision-making. We've put extra emphasis on governance.The spread of the coronavirus has continued with different dynamics in each region. In China and North Asia, we experienced the impact of the virus first, and we've learned from their efforts and measures taken. Today, operations there are well under control, and most of our terminals are now settled into a new normal routine for running our operations.In Asia and the Middle East, countries are at various stages of restrictions and border controls. In Malaysia, for instance, measures have been increased during a new wave of infections. Countries like India and Indonesia continue to deal with containing the virus. And in Australia, where the pandemic seems to be more under control, our operational teams have gone back to working in normal shifts.In Europe, we are experiencing a resurgence of cases, and new restrictive measures were recently introduced. Only key operational staff is currently working at our terminals. Other staff, including headquarters, continue to work from home as much as possible.In South Africa, operators are back to working normal shifts. The situation in America varies between North and South America, with terminals still working in shifts in order to follow local authorities' health regulations.We continue to monitor global developments and remain alert. And I want to finish this section on the pandemic by expressing my respect and gratitude to people working in hospitals, in social services, in education and other public services for our society.Moving on to the business environment update. Our objective is to create a long-term sustainable portfolio centered around 4 terminal types: industrial terminals, gas terminals, chemical terminals and oil terminals. And of course, we have the difference between hub terminals and industrial -- sorry, hub terminals and distribution markets. Our aim is to add new energies into that mix. We have strong confidence in our portfolio as it is built on a deep understanding of the global supply-and-demand dynamics of the products we store and our long-lasting customer relationships and partnerships.Let me start with chemicals. The chemicals industry downcycle was intensified by the impact of the pandemic, as we mentioned in the second quarter. This quarter, the mixed demand patterns between durable and consumable goods continued in the chemical segment. However, we saw a slight volume improvement in key end markets like automotive and construction, also expressed by the different petrochemical companies at the end of Q3. Thanks to our portfolio, we experienced relative stable occupancy at our chemical terminals. However, throughputs have been low, impacting the variable component of our revenues, as we also mentioned in the second quarter.The oil market continued to be volatile. The market structure remained supportive for storage, resulting in good occupancy rates. This quarter, the contango curve flattened compared to the extreme high levels of the second quarter, at least in March, April, and interest in oil storage globally softened relative to that. Impact of COVID-19 on global fuel oil demand was relatively limited. The mix in marine fuel transport -- sorry, the mix in marine transport fuel after the IMO 2020 regulation is developing as we expected with low sulfur fuel oil as the preferred bunker fuel for ships. Our recently upgraded fuel oil portfolio has performed well in its first year, but Singapore is still experiencing maintenance delays from the lockdown and relative early contracting in the fuel oil market at the late -- and at the end of 2019.Gas markets were also impacted by the dynamic oil markets and lockdown measures. Global LNG demand witnessed its first decline in 5 years, and faced with oversupply, natural gas prices eroded in the second quarter. This provided, however, positive momentum for regasification due to price competitiveness. This quarter, global LNG imports have started to pick up at the end of the quarter. The surge in residential LPG demand due to lockdowns in the second quarter has slightly faded this quarter as some countries have eased movement restrictions. Meanwhile, LPG intake for crackers in Asia and Europe increased as naphtha prices have recovered during the third quarter. Demand for Vopak gas infrastructure has been resilient this year.Moving on to new energy. Opportunities for Vopak will emerge for storage of renewable electricity in liquids or gas. Therefore, our new energy strategy focuses on hydrogen and other liquids, such as ammonia, to store energy. We're working today on a number of early feasibility studies pre-FID. With our partners, we are, for example, studying to produce green hydrogen in Morocco, ship it to Rotterdam and then store and distribute it to end users. The outcome of this pre-feasibility study is expected somewhere in 2021, mid '21, after which we can start, hopefully, develop the pilot. Furthermore, we are exploring the viability of LNG to power infrastructure in Singapore and progressing with energy from solar, among other purposes, for our own use in Europort Rotterdam.Let me move forward to the financial performance, first, a comparison between year-to-date Q3 2020 versus 2019. EBITDA came in at EUR 603 million, an increase of EUR 32 million or 6% post divestments, reflecting positive business performance and absorbing currency translation effects of EUR 11 million. So if I correct for the currency translation effects, the increase would have been EUR 43 million. In reality, the increase was EUR 32 million, as I said, due to the negative currency translation effect.Cost efficiency measures are progressing well and outperforming our revised target of EUR 600 million for the year. Strong performance in the Americas division was supported by the good contribution of new assets in Canada, Mexico and Brazil. The Europe-Africa division, post divestments, and the Asia and Middle East division performed better than last year. Oil terminals in Rotterdam and Fujairah benefited from IMO 2020 capacity and the improved market structure. In Singapore, we experienced reduced throughput for chemicals and continued high out-of-service capacity for maintenance and inspections due to the COVID-19-related work restrictions. The performance of the LNG division reflects resilient performance of the portfolio and of the acquisition of the LNG import facility in Colombia last year. China and North Asia performed in line with last year. This includes the impact of early lockdowns in China and South Korea this year and shows how well the division has actually performed. The entire portfolio delivered a return on average capital employed of 11.8%.Turning to the divisions. The Americas division continued its strong performance in occupancy rates, although throughput for chemicals in Houston was weak. Asia and Middle East occupancy remained impacted by the out-of-service capacity in Singapore as construction was still restricted following health regulations. And we didn't see improvement, therefore, of the occupancy. The China and North Asia division continued to benefit from market opportunities driven by supply chain uncertainties. And performance of Europe and Africa reflected the new portfolio after the divestments, after operationalizing the new IMO 2020 capacity and an upswing in occupancy in the oil segment. The LNG occupancy rates have been strong and in line with the long-term take-or-pay commitments.Moving on to the third quarter compared to the second quarter. Third quarter EBITDA amounted to EUR 200 million. This was reflecting resilient business performance. However, quarter-on-quarter currency headwinds were EUR 6 million, and some phasing also held back EBITDA improvements relative to the second quarter. Revenues overall have developed well. Positive performance of the Europe and Africa division was supported by contributions from the oil and chemical terminals in Rotterdam. And South Africa is now starting to contribute and will also contribute in the fourth quarter. Performance of the Asia and Middle East division reflected currency headwinds and phasing effects but was slightly disappointing from that point of view.Going to occupancy. The occupancy rate continue to trend up in the third quarter. This quarter, we've managed maintenance out-of-service capacity further down in the oil and chemical terminals in Rotterdam. The capacity that we delivered back in operation has quickly been taken up by the markets. In Singapore, as I said already, maintenance work restrictions continued to be tough.Slide 10 then, the cash flow overview. In the first 9 months of this year, we've increased our net cash flow from operations to EUR 524 million, despite a smaller portfolio. So you see that we've grown our revenue, we've grown our EBITDA and we have grown our net cash flow. Sustaining, service and IT investments were EUR 203 million, in line with last year, and this includes investment for maintenance and inspections of out-of-service capacity in Rotterdam and Singapore. We're confident with the ranges that we've set for sustaining and service CapEx and IT and expect to remain within those limits.Our cash momentum this year is mainly driven by the EUR 168 million cash flow -- cash inflow from the divestments and the EUR 85 million repayment of preference share capital in the industrial terminal in Malaysia. Investment in growth projects continued and resulted in EUR 320 million investment in the first 9 months of the year. Growth investments for 2020 are expected to be in the range of EUR 500 million to EUR 600 million and now including the Dow investment that we expect to close in the fourth quarter in December.Senior net debt-to-EBITDA ratio was 2.71 at the end of Q3, within the target leverage range of 2.5 to 3 and compared to 2.81 in June. Cash receipts from the recent debt issuance, that was more than 9x oversubscribed, are scheduled for Q4.Moving on to portfolio highlights. In September, we announced the acquisition of 3 industrial terminals from Dow for a total consideration of EUR 620 million with our joint venture partner, BlackRock. The Dow assets are located in Freeport, Texas, which is just south of Houston, and along the Mississippi River in St. Charles and Plaquemine in Louisiana. This infrastructure is critical for Dow's chemical operations, and Vopak was chosen as operator and best owner to deliver consistent, high-quality service and unlock future growth. The acquisition strengthens Vopak's leadership in industrial terminals. We are expecting to get necessary approvals and close the transaction in December.Post-acquisition and after completion of the growth projects, Vopak's capacity on the U.S. Gulf Coast will reach 2.3 million cubic meters, spread over 6 locations. This is a transformative change because, last year, our presence was only in Houston on the Gulf Coast.To emphasize the transformation of the portfolio, we set a target end of 2018 to deliver 1 to 3 industrial terminal opportunities in the period '19 to '20. In the last 12 months, we have exceeded that target with the delivery of 5 industrial terminal opportunities that includes a letter of intent with Chandra Asri for a partnership in an industrial terminal in Indonesia. So that's at a different phase, but it is included in the development of industrial terminals.Moving to a broader overview of our portfolio developments. This quarter, we commissioned capacity in the Netherlands, in our gas terminal in Vlissingen. We took capacity into operation at our fuel distribution terminal in Durban, in South Africa after a significant construction delay. And our new asset in Lesedi, also in South Africa, is progressing well, and first product has arrived to commission the terminal this month.In Asia, we've taken chemical capacity into operation in Indonesia. The capacity will be taken up gradually by the market and, obviously, is working in today's market where the chemicals demand is somewhat impacted by the pandemic conditions. In Malaysia, the customer of our terminal in Pengerang has resumed the commissioning of its industrial asset after earlier safety instance. We are concluding the final project capital allocation for the asset to set up the commercial fees going forward, following the full commissioning of the complex.On a different note but also in Malaysia, an update related to the Malaysia land claim of 2019. As you remember, a Malaysian company claimed damages arising from the acquisition of its former land by the land authorities. Vopak claimed that this lawsuit was unfounded and based on inaccurate facts and circumstances. And last month, we actually won the striking-out proceedings, meaning the lawsuit will not proceed to court. Since then, however, the plaintiff has filed an appeal, which we think is very unlikely to be successful in the circumstances of this case. But good progress so far, as I just explained.Let's move to the proportional information. Proportional results, as you remember, is a good reflection of our economic interest in the different ventures across the world, including the joint ventures. It's becoming more important with our joint venture assets in Canada, Colombia, Pakistan and Pengerang fully operational. Today, capacity under joint venture management is approximately 12.5 million cubic meters, and capacity in subsidiaries actually reduced to 18 million cubic meters after the divestments.Proportional EBITDA is EUR 241 million this quarter, of which proportional joint venture EBITDA is more than EUR 100 million. Our proportional occupancy rate was 92% in the third quarter and reflected good performance of the joint venture oil terminals and continued strong performance of our joint venture gas and industrial terminals. Divisions with strong joint venture performance are Asia and Middle East, China and North Asia and the LNG division.Let me recap the key messages for this quarter. We have proven to be able to quickly adapt to the changing business dynamics of 2020. We continued delivery of good financial performance despite significant foreign currency movements against us and despite project delays. Our response in cost management to protect our earnings is progressing well, and our cost base is tracking below our revised target of EUR 600 million for the year. This quarter, we delivered on the strategy execution with the industrial terminal acquisition from Dow. And looking ahead, we reiterate our outlook to grow EBITDA over time and replace EBITDA from the divested terminals. I think we made a good start by growing our EBITDA 6% year-to-date.Our strategy and financial framework are unchanged and have proven to be robust. And therefore, we continue to invest in 2020 and 2021 with confidence. Our growth investments for this year will be in the range of EUR 500 million to EUR 600 million and, for next year, between EUR 300 million to EUR 350 million, growing the asset base from existing sanctioned projects through new business development and through pre-FID feasibility studies in new energies, including hydrogen.This concludes my prepared remarks. Thanks for bearing with me while we're getting through that. And we will now see whether there is any Q&A. And I'll hand it over to the operator to start that process and see what comes. Back to you, operator.

[Operator]

[Operator Instructions] Our first question comes from the line of Thomas Adolff of Crédit Suisse.

[Thomas Yoichi Adolff]

I've got 3 questions, please. The first question on cash flow, we look at it sequentially versus the second quarter. Is the decline a function of the lack of dividends from JVs? So is there also something around working capital, for example? Maybe receivable position hasn't gone down and it has gone up. The second question is just on the growth investments in 2021 of EUR 300 million to EUR 350 million. I mean it's probably fair to assume that this does not include any potential M&A opportunities. And I guess in that regard, do you see more opportunities like the one you've recently done with Dow? And then my final question, just on the occupancy rate, specific to oil and oil products. Occupancy rates picked up, but you also said, obviously, the contango has flattened out. It steepened again a bit, but it's relatively flat. How should we think about contract coverage going into the fourth quarter?

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

Yes, Thomas, thank you. And good to hear your voice, hope you're well. Thanks for the questions. Let's first look at the growth question, growth capital. Yes, it does not include possible M&A. We never include that in the statements we make unless they have realized, then we will adjust the range accordingly. It is a combination of projects we have already sanctioned, projects that still need sanctioning and, hopefully, an allocation into the new energy segment. If you look at some of the continued investments that we will see in 2021 that have also been part of 2020, just to give you a few examples. Sydney in Australia is continuing its CapEx spend for its expansion. The Corpus Christi development that we have with ExxonMobil, the industrial complex, will continue into 2021. The chemicals expansion in Belgium in Antwerp continues into next year. And there's a whole lot of other items, smaller items, that continue into next year. But these are just a few examples of projects that are ongoing.In terms of occupancy, your last question, I don't have any concerns about the oil occupancy, also not in Q4. Yes, you're right. I did say in the speech that the contango softened a bit. You're right, it picked up a bit again after that, in the fourth quarter. I would say that throughout the start of the year, essentially, let's call March the start of the year, the favorable conditions of oil have continued. And we've benefited from that. Oil has been a positive for us and continues to be like that. As I said earlier, the occupancy in chemicals wasn't necessarily impacted but the throughput was. That has also continued, although at the end of the second -- sorry, the end of the third quarter, the chemical companies were a little bit more confident in their statements. So hopefully, at some stage, we get a bit of support again in the throughput levels in chemicals.So for occupancy, I think it's -- oil conditions continue in line with what we saw early in the year, including recontracting, et cetera. In fact, part of the reason that perhaps also Singapore or Asia is a little bit light is we contracted part of the fuel oil capacity in Singapore relatively early, at the back end of '19. So that commitment at that time was very good because it was the conversion of the fuel oil into the new market. It was ahead of the cycle of contango for that segment. So on account of that and out-of-service capacity impacted by the lockdown, you can see that Singapore actually is trailing relative to Rotterdam and to Fujairah in terms of its oil performance.Cash flow then. Cash flow, if I just first calibrate ourselves for the year, we have a good contribution on cash flow from ops, indeed, from dividends from JVs. You're right there, which is recorded in that cash flow from ops. Year-to-date, we also have a good contribution from the growth of cash flow in subsidiaries. Of course, we -- relative to last year, we divested some CFFO with the assets that we discussed many times, and you've also seen the EBITDA. And we did have some movements in the composite of derivatives in terms of treasury movements and in terms of working capital. Now working capital for us in a business sense is typically very limited. But this year, we have seen some bigger movements in the working capital element related to our various treasury instruments and the valuation thereof.So that explains it, a bit of a -- perhaps a difficult one for you to get your arms around. But the working capital point is not a trade receivable or a trade payable point. Hopefully, that clarifies.

[Thomas Yoichi Adolff]

The 3Q decline is just a function of no dividends from JVs, right?

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

There is a dividend effect, for sure, correct. And then there is -- as I said, the more difficult one for you to to see and understand is the point I just made, but the dividend is the easy example, yes. There's no hesitation on the cash flow as such. It's been very positive for us this year. Revenue, EBITDA and cash flow have been building momentum throughout the year.

[Operator]

Our next question comes from the line of Quirijn Mulder of ING.

[Quirijn Mulder, Research Analyst]

A couple of questions, I'll limit myself to 3. Can you give me -- let me say, outside to the effect on your -- let me say, the business partner in chemicals and oil, on the direct effect of COVID in 2020, with regard to impact on utilization or, let me say, throughputs in the -- let me say due to -- let me say purely to COVID. Maybe somewhat a complicated question, but I hope you can give me some idea about it. And with regard to the outlook, can you give me an update on the situation in Singapore with regard to the maintenance and somewhat lagging behind, especially in the chemicals business? And finally, on the Dow transaction, can you give me an idea about the leverage you are willing to accept in that acquisition? Given the fact that you, let me say, raised your guidance for CapEx in 2020 from below 500 to -- between EUR 500 million and EUR 600 million, it seems to me that the only adjustment there is related to the Dow transaction. So please tell me whether it is correct.

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

Okay. Quirijn, the last one on Dow, let's start there. We have a 50-50 JV with BlackRock and ourselves. We have an acquisition of about EUR 620 million. We expect to complete in December, as I said. So you will see the cash movement there if all goes to plan. The gearing, if you take 60-40 as an indication, it may be a bit more, it may be a little bit less, but we could go 70-30, it could be 50-50. But we're in the middle of structuring that. So if you then take the end result, you're correct, most of the debt movement is related to simply to Dow. The rest is in line with what I said earlier, which is that if I -- if we hadn't had Dow, we said we would be -- at the beginning of the year, I said between EUR 300 million and EUR 500 million. We had an ambition to be at the high end of that. At the second quarter, I increased the number to the top end of the range. That is still the case. And now we have added Dow to it, and then it becomes EUR 500 million to EUR 600 million.On the COVID impact, I think you were trying to isolate the effect a bit, I think, from other market movements, but purely on COVID, operationally, i.e., literally being available for our customers, we've not lost anything. On cost, actually, it's been, on balance, a positive contribution to being able to manage our cost this year, i.e., we've been, as any company this year, trying to deal with a negative scenario of revenue development. Now in fact, we had a positive development in revenue. But we've emphasized the fact that you could have different scenarios in the world play out. So we wanted to be ahead of that. So we managed our cost down more than perhaps we would otherwise have been able to achieve and emphasize. So that's been positive. The main effect has been, by the way, not on IMO 2020 volumes and movements. That market has not been significantly impacted by COVID 2020 -- sorry, COVID-19 -- has not been impacted in 2020. The main impact, as I said before, has been on throughput, Quirijn, on the chemical side, not so much on the oil side. On the chemicals, what you see is you see the companies move less product in and out of the tank. So they have the tank, the product is being stored. And -- but there's less variable income, there's less surfaces, there's less throughput. And that has been the main effect on our numbers, plus -- and I think that is a bigger effect than the throughput point, the delay in commissioning of new projects. And I've given you the examples before, South Africa, Mexico, Indonesia, in particular. But you've seen it. In maintenance activities there, you see a negative contribution. And year-to-date, the project delay has been significant. Including foreign exchange, it has been about EUR 25 million.The throughput point on revenue is a lower number than that but still relevant. Oil, positive for the year, exceeds that and the cost exceeds that. So in aggregate, the year, including COVID, is positive for us on cash flow from ops, on revenue and in EBITDA and, in fact, in CapEx allocation as well, not related to COVID but related to our new business development efforts. Does that cover the ground, Quirijn?

[Quirijn Mulder, Research Analyst]

But the balance, let me say, of COVID in total, including business climate, is negative led by the delay of commissioning of projects. That is the balance then.

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

Yes, I can, of course, not isolate business environment, demand, supply of products, pricing of those products, contango effects and COVID. But at a certain moment, it becomes one and the same discussion, including lockdowns. But let me repeat. Oil is a positive, and that can be attributed to contango and to the movement of products of oil in the world. Whether it's COVID related or not, I'm sure there is a COVID element to it as well. On that, a positive. Chemicals is a negative. That is mainly in throughput in terms of the chemical performance. Cost is a positive, and project is a negative. And foreign exchange is a significant negative as well. On balance, if I take those 5 factors, we are positive. We are performing better than expected. And we have grown our EBITDA by 6% this year or by EUR 32 million. If I eliminate foreign exchange, we've grown our EBITDA by EUR 43 million, so EUR 11 million more. If I tell you what we have left on the table relative to what we hoped to realize in project delivery, you would add another number, which, of course, doesn't exist because we didn't deliver the number to the EUR 43 million.

[Quirijn Mulder, Research Analyst]

Okay. Not on a -- but you tell me that the FX is minus EUR 11 million, and the total is EUR 25 million. So that makes it EUR 14 million.

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

Yes. So there's EUR 14 million left for projects. So yes, theoretically, that is -- well, it's not in the number and could have been in the number if the world was perfect. And the world is never perfect, but...

[Quirijn Mulder, Research Analyst]

But on my first question then?

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

Sorry. Is there another question that I didn't deal with?

[Quirijn Mulder, Research Analyst]

No. I asked about the situation in Singapore, whether you see some, let me say, lesser impact of the maintenance, et cetera, in the fourth quarter or going forward.

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

Singapore is still in the same position in Q3 as it has been in Q2. And if you just look at the work conditions in Singapore right now, I think it continues to be the one that is trailing Europe and other locations. And from that point of view, well, you see it in the performance, it's not the asset that has accelerated and has contributed, to the same extent, to the growth of our EBITDA as the other assets. So I'm cautious on that as you hear, yes.

[Operator]

Our next question comes from the line of David Kerstens of Jefferies.

[David Kerstens, Equity Analyst]

Also 3 questions from my side, please. First of all, I was wondering if you could quantify the headwinds from lower chemical throughput a bit further. I think you said in your earlier comments, it was less than the EUR 25 million for project delays and FX, but some further detail would be great. And is this weaker than expected? Because I think, in your conference call after Q2, you said that you already saw early signs of recovery, and you've seen a broad-based recovery in economic development during the third quarter. So why do you still have such a big headwind from lower chemical throughput?Then the second question about fuel oil. You said the marine fuel mix is developing as expected. Can you give an indication what your breakdown is currently between high sulfur and low sulfur fuel oil storage? And I didn't really get the comment on Singapore. The capacity in Singapore was actually delayed. The fuel oil capacity was actually later than the capacity in Rotterdam and Fujairah last year. I think you highlighted now that you had a difficult comparison there with an early contract. And then finally, maybe on the joint venture income in the Middle East. What happened there? What explains the decrease? I think you said Singapore suffered from lower chemical throughput and maintenance but also your joint venture income was down quite considerably quarter-on-quarter.

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

Okay. Let me try to see whether I can remember them all. Otherwise, you have to help me. First of all, the fuel oil question on Singapore, we contracted early, but we -- the development of the asset was later than Rotterdam and Fujairah. So we had, let's call it, earlier commercial commitments relative to the availability of the assets and the movements that we show early in Fujairah and Rotterdam. So the Rotterdam, Fujairah capacity started to contribute earlier because of availability. And secondly, they contracted a little bit later, which was more favorable than what Singapore contracted at because they were relatively early in the cycle. So the comment I made is completely consistent. But one is on the availability of the asset, when does it start to contribute. And the other comment is what contracts do you bring in that commissioned capacity. Now it's not a big deal in the sense of they were very good contracts in their own right. But because we are now starting to analyze the small moving details between different assets, it is a point that explains why Singapore is perhaps less strong than what Rotterdam and Fujairah are showing in this accelerated market.Then the point about Asia performance and Middle East. And I think you're referring specifically to the movement between Q2 and Q3, probably. What you see is, indeed, you see moving parts between the quarters where we did have some more positive various settlements in the second quarter than in the third quarter. So in aggregate, a number of smaller items perhaps contributed to Q2. And a number of items contributed negative or were not there in Q3, but it's certainly spread between Singapore and the joint ventures.The other one is foreign exchange, which is a factor also for Singapore, which doesn't help us either in the relative performance. But it is the moving parts between Singapore, as I explained already a number of times, and also the phasing and the attribution of revenue and cost to the Malaysian asset, which has been commissioned over a long period. As you remember, they had the petrochemicals complex that was developed by the sponsors of the industrial complex. Had some setbacks in the fact on how they commissioned their assets so they had some incidents there that has resulted in a somewhat prolonged start-up phase of the whole asset. And during that start-up phase, you just do not have that stability in your earnings that you would otherwise have. And that is still playing out in the numbers, and that was a negative in the third quarter relative -- versus the second quarter. So part of it is what I said in Malaysia. It has nothing to do with Fujairah that you mentioned. It's Malaysia, and part of it is Singapore itself, which I also explained.

[David Kerstens, Equity Analyst]

Okay. On chemical throughput?

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

Chemicals throughput, what was your question there, remind me?

[David Kerstens, Equity Analyst]

If you could quantify the headwinds. I think you said it was less than EUR 25 million. And is it not weaker-than-expected because you said that you saw throughput bottoming out in Q2 already.

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

Yes. It's just continued. What we said in Q2 is we saw early signs of more confidence that, I think, has been -- has not materialized with the chemicals markets and the conditions in the world. And I think we only heard the petrochemical companies talk about it at the end of Q3 rather than throughout the quarter. So I think the world got delayed in that. And therefore, yes, it is what it is. As I said, again, if you look at the total effects, oil chemicals projects, foreign exchange and costs, we do very well, but not on all counts. Chemicals has not done very well. If I would guess a number of it because I don't have it in front of me, to be honest, I think it's more like -- something like EUR 10 million, EUR 15 million thereabouts on the year. And we'll see how that plays out.

[Operator]

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

[Thijs Berkelder, Equity Research Analyst]

An add-on question on Malaysia, can we conclude that since the accident, that the client site is now behind you, that in Q4, results in Malaysia will be more normal again? Second question, on your occupancy, overall occupancy rates now finally back above 90% again. Can we expect pricing effects to come in again next year when you renegotiate contracts? And if so, in what segments, particularly? And thirdly, can you give us an update on your new LNG projects you're working on in Germany and China?

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

Sorry, the last one you broke up, Thijs. It was the Germany, China on what?

[Thijs Berkelder, Equity Research Analyst]

LNG projects in Germany and China.

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

Yes, okay. First of all, Malaysia, is that stable in the fourth quarter? No, it's not. We've seen ups and downs throughout the year. And if you see how that whole complex is being commissioned and recommissioned or restarted across the patch and finalizing all the things that need to follow from that, there's still work left in that. So it goes up, it goes down regretfully. And that is unfortunate, but it is a fact, in terms of the quarterly effects of that. It's, in many ways, a bit of a distraction because the asset itself is a tremendous asset. If you look over the year, Malaysia is a really good asset. There's no hesitation. It's a fantastic industrial terminal. And it doesn't influence the Asia/Middle East division negatively, it makes a massive positive contribution. What's holding back Asia/Middle East is the Singapore complex, as I explained. So I think that is important to remember. But Malaysia does cause some ups and downs in the numbers.LNG, Germany is continuing its discussions on permitting and everything related to that. That is taking quite some time. And it's an intense process. And we're working our way through that diligently. But it is, yes, relative to what you would hope. It's pretty steady, but it is slow. China, I think, is probably going a little bit faster than that. We're developing the LNG jetty, and the next step would be the permitting and commercial processes for the asset on our existing terminal. And in itself, that's going well and progressing as we would hope. So that should deliver us a timely FID. Hong Kong, where we are developing an LNG position for, is also progressing well, and we, I think, can probably take a commercial view on that in the course of next year. And then Singapore, Australia and 1 or 2 others are just in the development funnel.So if you step back and say, okay, what's your confidence in LNG? Then we said 1 to 3 FIDS. We delivered those, and we continue to work on the same premise for the next 2 years that we can still take several FIDs over the next 2 years. At the moment, we have more momentum in the industrial terminals, as you've seen also in the presentation. We also presented that as 1 to 3 investment decisions. We've exceeded that. LNG is more in line with the existing ambition and working its ways.

[Thijs Berkelder, Equity Research Analyst]

In your growth CapEx for 2021, are Germany LNG and China LNG and Hong Kong LNG included?

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

We don't specify the numbers for that, Thijs, we only give an aggregate. And also because these have not taken FID yet, we will -- we prefer to firm those numbers up and be more clear to you about that when we take FID, and those FID moments are not yet clear. So that is how it will work. On oil pricing, yes, it's -- as I said, the year is positive for us in aggregate, across our entire portfolio. I think if this year, in an industrial setting, you can claim and demonstrate you're showing EBITDA, cash flow and revenue growing, that's an achievement. That's, to a large extent, as a result of the oil conditions. Well, I'm now starting to repeat myself: oil, positive; chemicals, negative; cost, positive; projects, delayed but they will come in; and foreign exchange, negative. Oil pricing conditions are still good for us. We have our renewal discussions, commercial dynamic in 2020 has been much more favorable to us than 2019 or '18.

[Operator]

[Operator Instructions] And our next question comes from the line of Andre Mulder of Kepler Cheuvreux.

[Andre F. M. Mulder, Analyst]

Three questions, I'll limit myself. Firstly, on the cost base, the EUR 600 million, you said it's tracking now below that. Can you give us kind of feel what the delta might be? Secondly, on the Dow acquisition, these are, of course, what you would say, secondhand terminals compared to your own standards. Would you say that those require extra investments? What kind of transfer do you see there? Maybe that's delayed because of the investment. So can you help give us a feel of what's happening there? And last one in new energies, can you mention any sites that you will, for example, invest in hydrogen?

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

Yes. Andre, these are probably 3 questions that are a little bit ahead of the curve in many ways, but let me try to answer it anyway. So what we said is that we would operate the portfolio at EUR 600 million. Last year, we set -- what was the number we gave for this year? Was it EUR 620 million?

[Laurens de Graaf, Head of Investor Relations]

Rounded.

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

Okay, the step change we did from the original expectation -- sorry, last year, it was EUR 633 million, Laurens just tells me, so not EUR 620 million but EUR 633 million. So without going into the moving parts, if we operate the network this year at EUR 600 million, that's a significant contribution. However, of course, there is divestments and other moving parts in that number, so it's not like-for-like, but still. We're not going to specify what the number is. I'm only staying with below EUR 600 million. So we'll see how it plays out at the end of the year.The Dow state of affairs, Dow, of course, it's a very good company. I think it's a bit unfair to classify the assets as sort of second hand. I understand what you mean, but it's not that we have bought into an old system, it's an operational system. And from that point of view, I think we will gradually move it to our business model. We, of course, run these terminals as a business, whereas Dow runs them or used to run them as a captive facility to support their manufacturing. So we do think we can get more value out of it. And I don't see that we should highlight any specific additional investments required. If there are additional investments required, we'll come back to it, but -- or whether we need that for establishing growth, then we'll come back to that. But I don't feel the need to highlight any numbers there at this moment. There's no add-on to it.New energy. The new energy at the moment is pre-feasibility or pre-FID, early feasibility. Then the numbers typically are relatively small, could be EUR 10 million, could be EUR 20 million, that order of magnitude. It could also be less than that, but it's a bit that order of magnitude. Once you start scaling up, then it would be a more normal level of investment. And depending on how successfully you can go from feasibility to pilot scale to full scale, you're talking more like EUR 50 million, EUR 100 million, EUR 200 million that you could allocate to an investment and then again depends a bit on how much of that value chain do you invest in. Do you invest in the export point and the import point? But that is the order of magnitude, I would say, early money is typically limited, low double digit. Once you can make the next step, you're talking bigger numbers. But it's too early to identify how big they might be. And I would say between EUR 50 million and EUR 200 million. Now you say that's a big range but that is because these projects have not reached that stage yet where I can be more specific.

[Andre F. M. Mulder, Analyst]

Would you say that you'll arrive at such a range in, let's say, 2 or 3 years? Or does it take longer?

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

No, I would hope that we can make a more meaningful demonstration of our capabilities in the next 1 to 2 to 3 years. So I'm absolutely hoping that the early money we are already placing, and the people we are dedicating to it, we've established a full new business development activity for it. We have about 10 to 15 projects in the funnel, so I hope we can be successful and take some first FIDs. Maybe it's pilot scale, hopefully, it's a reasonable pilot scale, but more commercial scale in the period '21, '22 already.

[Operator]

And we have no further questions at this time. So I'll hand the call back to our speaker for closing comments.

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

Okay. Well, thank you for bearing with us. There's a lot of news in the world, of course, at this moment, so that you make some time to listen to Vopak is highly appreciated. Thanks for that.What I want to conclude with is where I started. We have grown revenue. We've grown cash flow from ops. We've grown EBITDA in a market which is, on balance, positive for us. It's hard work for everyone, also for us, but we are focused and staying with executing our strategy. We have the means and the people to do so. Our cash flow is healthy. We're keeping up our distributions to shareholders. We're investing, and we are working through our portfolio to increase our occupancy and benefit from that.Thank you for your time, and we'll speak again. Thank you.

[Operator]

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