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Koninklijke Vopak NV
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Hello, and welcome to the 3Q '21 Results Call. My name is Molly, and I'll be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions] I will now hand over to your host, Fatjona Topciu, Head of Investor Relations, to begin today's conference. Thank you.
Good morning, everyone, and welcome to our 2021 Q3 results. Today, we are joined in the call by our CEO, Eelco Hoekstra; CFO, Gerard Paulides; and Dick Richelle, Global Director, Commercial and Business Development who has been nominated to take over the function of Chairman of the Executive Board and CEO as of first of January 2022. Eelco will provide an update on the CEO's succession and we'll highlight the portfolio items and market conditions. While Dick will give a brief introduction about his past experiences. As usual, Gerard will guide us through Q3 results. We will refer to the Q3 2021 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 statements, which you are familiar with. I would like to remind you that we may make forward-looking statements during today's presentation, which involve certain risks and uncertainties. Accordingly, this disclaimer is applicable to the entire call, including the answers provided to the questions during the Q&A session. With that, I would like to turn over the call to Eelco.
Thanks, Fatjona. Good morning, everyone. It's a pleasure to have you all in the call. And what I will do, I will briefly talk about the CEO succession and introduce Dick Richelle to you. And thereafter, I will provide some insights on current market conditions and our portfolio developments. As mentioned, I would like to share a few points about the recent announcement on the CEO succession of Royal Vopak. As you've read, I have decided not to seek a fourth term and hand over the company's leadership following 11 years as Chairman of the Executive Board or CEO of Royal Vopak.You'll not be surprised that it's been a huge privilege to serve Vopak for such a long time. Vopak is a great place to work, and I'm really grateful to our Board and all my colleagues, the customers, business partners, shareholders for the trust, commitment and contribution. I will remain committed to Royal Vopak by securing a smooth transition in the coming months. And I'm very pleased that my successor will be Dick Richelle, who has been working at Vopak for 25 years. We've had the pleasure to work very closely together in the past years.I will now hand over to Dick for a short introduction.
Thank you very much, Eelco. Good morning, everyone. My name is Dick Richelle, and it's a pleasure to be with you today in this call. I started my career at Vopak a little bit over 25 years ago, and I have experience serving in a variety of management roles in the company. The last 12 years, I specifically led our divisions in Americas and Asia & Middle East. And most recently, I headed the global commercial and business development activities for the company. And I have been part of the strategic committee since 2009.After many years with Vopak, it's an honor to be nominated for the position of Chairman of the Executive Board and CEO of Royal Vopak. And I'm passionate for the future of our company on the basis of who we are, what we do, and most importantly, where we have our locations across the network. The world around us at the same time is changing rapidly, and I look forward working with all stakeholders on the priorities for the period ahead.Today, I won't be in a position to take any questions related to Vopak current or future performance, but I look forward to doing that at our Capital Markets Day after the AGM in 2022. Over to you, Eelco.
Thanks, Dick, and thanks for joining us and listening in. Let's move on to the market conditions and reflect a bit on the Q3 results. As you've noticed, in the developed world, stimulus packages, high vaccination rates and the easing of lockdowns has resulted in a strong demand recovery in all product market combinations. However, pent-up demand that is reemerging after the unprecedented disruption of 2020 is putting strain on the balance of the markets. And this is reflected in exceptional price gains across almost all energy and chemical commodities.The market for chemicals remains tight as supply continues to be affected and is not able to meet growing demand. The oil markets have seen recovering consumption. Oil supply is gradually increasing as Vopak is raising output, but the increase in supply growth is not yet meeting the mount growth. And as a consequence, the tank storage industry continues to face supply tightness, leading to a lower requirement for excess storage of products. We believe that 2022 will be a year of recovery for the tank storage industry as global vaccination rates increase and supply chains rebalance.I'm pleased with the transformation of our portfolio towards more sustainable forms of energy and feedstocks. I want to highlight a few proof points of Q3. We recently announced that we are investigating the strategic options for our terminals in Australia, located in Sydney and Darwin with a total capacity of 545,000 cubic meters. Our growth momentum continue with the delivery of new industrial, chemical and gas storage capacity, reaching almost 0.5 million cubic meters year-to-date. We've successfully and timely delivered a new Vopak industrial terminal on the United States Gulf Coast with a total capacity of 144,000 cubic meters, including pipelines connecting the terminal to the petrochemical complex. The new terminal has been designed and built by Vopak to serve reputable customers such as ExxonMobil and SABIC under a 20-year long contract.Our LNG portfolio is solid with high levels of utilization in our existing assets and expansion momentum. Furthermore, our pipeline of LNG business development opportunities is aimed at capturing the growth in this particular market. Despite continuing the Vopak active participation in the German LNG project as announced in our press release, we have various other opportunities such as Hong Kong, which are progressing well. And finally, we are repurposing existing infrastructure to lighter fuels, so we're planning to invest in a conversion from fuel oil to clean petroleum products in Los Angeles terminals in the United States. And with that, I'll now hand over to Gerard Paulides, our CFO, to elaborate on our third quarter financial results.
Thank you, Eelco, for your introduction. However, also a special thanks, Eelco, for guiding the company over the last few years and your leadership, including your personal friendship. Thank you. Dick, welcome. We look forward to working with you and deliver the results that we aim for.Back to the results. As Eelco said, we have a portfolio that we are actively positioning for the future. This makes our investment case exciting and part of the new world. Meanwhile, we also focus on our performance today. I will update you on the financial performance of the third quarter in the following few minutes.Let's begin with Slide 7 and review the highlights. In the third quarter, financial performance was strong. EBITDA grew to EUR 619 million in soft market conditions. Adjusted for EUR 13 million negative currency translation effects, EBITDA increased by 5% or EUR 29 million. Growth project contribution of EUR 35 million and efficiency are driving positive EBITDA performance. We continue transforming our portfolio for the future and invested EUR 226 million in growth year-to-date. Cost efficiency measures are tracking well, and the cost level for the third quarter year-to-date amounted to EUR 448 million, which is including the cost for growth and business development efforts. This is in line with our cost outlook for the year of EUR 615 million. And we're confident to reach that level even in the current inflationary environment and despite higher cost for utilities that we have observed in the last quarter and will observe in the fourth quarter.Our proportional occupancy rate remains at 88%. But the occupancy move -- the occupancy rate didn't move, but the EBITDA has grown. We've made good progress on our strategy execution by successfully commissioning industrial, chemical and gas terminals, in which I -- on which I will elaborate further later in the presentation. A positive valuation effect in Vopak ventures of EUR 39 million was recorded in other comprehensive income in equity, therefore, directly in the balance sheet at the end of Q3. So not through the P&L but directly in the balance sheet.Let's move on to the next slide and look at the financial performance per division year-to-date. Strong performance in Europe & Africa, mainly driven by growth project contributions in South Africa, and partly improved occupancy in the Netherlands and Belgium. In the Americas, solid performance is driven by new capacity in Mexico. China & North Asia reflects new capacity commissioned in 2021. In LNG, soft LNG performance reflects the maintenance turnaround, which we've discussed on the previous quarters at our LNG import facility in the Netherlands in Gate. This has now successfully been completed. Weak performance in Asia & Middle East is a combination of factors. First of all, tight chemical markets and the recent COVID-19 search is impacting our Singapore terminals. Secondly, tight oil markets are having an impact on our occupancy in Fujairah and in Indonesia. Moving on to the second quarter -- third quarter versus the second quarter and continuing with our EBITDA performance. Also here, you see the EBITDA momentum, so in absolute terms. The third quarter amounted to EUR 230 million, reflecting solid performance across all regions. Overall, a strong quarter with a EUR 6 million increase.In the next slide, some details per region. The Americas division benefited from growth in the third quarter, primarily driven by our new industrial terminal in Corpus Christi. Furthermore, there's an uptick in occupancy as the U.S. economy is running at full speed, and this is reflected in several terminals across our U.S. network, Deer Park and Savannah. In Asia and the Middle East, occupancy reflects soft business conditions, as I mentioned already, in oil, showing up in Fujairah and Indonesia, but also the chemical markets, particularly impacting Singapore.China & North Asia division is relatively stable quarter-on-quarter. Performance of Europe and Africa reflects the commissioning of new capacity in Antwerp, what we call the Linkeroever, left bank and improved occupancy in the Netherlands. LNG performance is solid. However, second and third quarter were impacted by the Gate maintenance turnaround program. So year-to-date, it looks different from a year ago.Moving on. Let me take you through our financial performance year-to-date in a bit more detail. In our last calls, we highlighted various levers that have impacted our performance. Starting point is the year-to-date Q3 2020 EBITDA of EUR 603 million. Changes in business environment resulted in a net negative contribution. Market dynamics in the oil markets were positive. However, currency headwinds and tight chemical markets have reduced our performance. In response, we have delivered on our growth projects, which year-to-date have contributed EUR 35 million. Our costs were higher compared to last year, driven by higher energy and utility costs. However, we remain on track and confident in achieving our cost performance and outlook of EUR 615 million. Let's move to the cash flow. Cash flow generation was solid, an increase by 5% year-on-year to EUR 562 million, adjusted for derivatives and working capital movements. This 5% is in line with the EBITDA momentum. Our cash flow overview in 2020 was mainly driven by the cash flow inflow from the divestments and the additional gain for the 2019 divestment of the joint venture terminal in Hainan, China and the EUR 85 million repayment of our preference share capital in the industrial terminal in Malaysia. All those effects, cash flow-wise played out in 2020. Year-on-year performance was influenced by the impact of derivatives related to our intercompany loans and working capital movements. Sustaining service and IT investments were EUR 222 million, slightly higher compared to last year and include investments for maintenance and inspections of out-of-service capacity. Investment in growth projects continued and resulted in EUR 226 million investments year-to-date. As mentioned, we're investing in growth and have shown our ability to grow EBITDA and cash flow and equity at healthy rates. EBITDA has grown by 7% in the period 2004 to 2020, I mean 7% as a CAGR and capital employed and equity by 9% and 13%, respectively. This reflects our ambition to grow EBITDA over time and adjust our portfolio. Previously, we've guided the market on the growth project contribution for 2021, being at the higher end of the EUR 30 million to EUR 50 million range. Last quarter, we added to that guideline -- to that guidance and outlook to 2023. Those numbers are unchanged. The growth CapEx involved, which is EUR 110 million to EUR 125 million is in the order of EUR 1 billion.Additional projects which are not yet approved will further contribute to EBITDA and to our CapEx spend.Moving on to the portfolio. During the quarter, we announced the opening of a new Vopak industrial terminal in the U.S. Gulf Coast, as mentioned by Eelco, with a capacity of 144,000 cubic meters. And we are proud to strengthen our industrial terminal portfolio, which is a growth market for Vopak and where we are, an industry leader. Furthermore, the commissioning of our ammonia operations in the Vopak Moda Houston terminal was successful, adding to our ammonia network in the world. Vopak already operates various ammonia terminals across its network and ammonia, we believe, is a fighter product of today and of the future as green ammonia made from renewable energy can be directly used in our existing ammonia infrastructure. We believe the shift of our portfolio will support us in the acceleration of new energy and feedstock projects.Let's move to LNG. Gate LNG terminal has experienced a very high utilization in 2021 and it successfully managed its maintenance turnaround program. We are also increasing the regas capacity of gate by 12.5% as of 2024. Mexico has shown a stable commercial performance, and we have recently signed the new 10-year contract for Mexico, for the entire capacity.Colombia serves as a strategic backup facility when hydropower supply is low and is in good shape. Pakistan has received its 400th ship-to-ship LNG transfer, reflecting good utilization. LNG is a growth market, and Vopak aims to grow in the regasification of LNG. Our business development activities are primarily aimed east of Suez and that is where the majority of gas and LNG demand growth will incur -- will occur over the coming periods. We are currently working on several projects, and I want to highlight a few, as I've done in the last calls as well. We are in advanced negotiations to participate jointly with MOL, Mitsui on the ownership, operation and maintenance of a floating storage and regas unit in Hong Kong. The [ unfinished ] collaboration followed from MOL's earlier announcement in 2019, whereby more or less entered into a long-term contract with the Hong Kong LNG Terminal Limited, together with Vopak's Jetty operation and maintenance support. The project will support Hong Kong's energy transition and increase the percentage of power generation with natural gas.We've written off EUR 11.1 million for our business development activities at Germany LNG. After a review, we've decided to focus on our project elsewhere as well as continued participation in Germany LNG, however, at a more passive manner.Then there are various opportunities which are currently being pursued in South Africa, Singapore and Australia, and we will update you as these projects mature.Some portfolio highlights. Through our network, we contribute to society by ensuring access to products that meet people's everyday needs. We store fighter products with care. We aim to be a sustainability leader and live up to our purpose. We care for safe, clean and efficient storage as well as for safety, health and well-being of our employees, contractors and neighbors. And we care for the capital our investors entrust us with, and ultimately, we care for a resilient and sustainable society.Our focus on environmental, social and governance ESG topics is reflected in the ESG benchmarks where we do very well. Recently, we joined first -- forces to open a 25 megawatt solar park in the Netherlands, together with Groningen Seaports and Whitehelm Capital, shown in the picture. The opening of the park marks Vopak's transition to green energy in the Netherlands actively contributing to the greening of logistics chains of our customers and our role in society. Moving on to new energy and some focus areas. We recognize the acceleration of energy transition. Our portfolio is well positioned to capture opportunities for new investments. We earmarked 4 areas in new energy, hydrogen, CO2 infrastructure, sustainable feedstocks and flow batteries. Hydrogen could play an important role in the decarbonization of our energy systems and we focus our business efforts on opportunities in hydrogen and other liquids that can store energy like green ammonia. The industrial sector is already consuming a lot of hydrogen, and we expect hydrogen consumption to grow for feedstock and as an energy source. We're part of H-vision consortium, working on infrastructure solutions in the port of Rotterdam to decarbonize and to large-scale use of blue hydrogen.Another important pilot project that we're focusing on is the first-of-a-kind liquid organic hydrogen carrier supply chain. Additionally, we are involved in CO2 infrastructure in various ports which would allow industrial clusters to store CO2 in depleted gas fields.Finally, we believe that in a changing energy market, there's more need for electricity storage to deal with flexible supply as well as higher and more flexible demand. Flow batteries are promising solution as they're scalable and nonflammable.In total, we currently pursue more than 10 infrastructure projects in new energy. We also recognize the importance of supporting and working with start-ups and scale-ups to innovate supply chains. And in that spirit, we've set up Vopak ventures to identify opportunities in new technology and emerging value chains. In our ventures, we focus on 3 areas: new energies and feedstock sustainability; second area, operational excellence and asset maintenance; and the third area, platforms, data and digital. We believe our ambitions are complementary to our Vopak portfolio, which includes investments into hydrogen, such as Hydrogenious Technologies and HyET Hydrogen. In line with the future potential, a positive valuation effect in Vopak ventures of EUR 39 million was recorded in comprehensive and income in equity in the balance sheet at the end of Q3. Turning to proportional results. Performance of joint ventures and associates is becoming more important in our portfolio and our proportional EBITDA is EUR 259 million this quarter, of which joint ventures contribute EUR 100 million. Our proportional occupancy rate was 88%. Turning to our debt profile. I would like to remind you that, debt servicing, of course, is one of our top priorities in our cash waterfall priority management. As you can see from the debt repayment schedule, our revolving credit facilities up for renewal in 2023. And we're looking into the possibility to introduce a sustainability-linked debt instrument in the coming year when we focus on the renewal of the credit facility.Let me close out with looking ahead. In 2021, reported EBITDA contributions from 2020 and '21 growth projects are expected to be at the higher end of the range of EUR 30 million to EUR 50 million. In 2023, reported EBITDA contribution from 2020 and currently approved growth projects is unchanged at EUR 110 million to EUR 125 million. Additional projects may contribute to further EBITDA growth.We continue to focus at costs and continue to aim at EUR 650 million for 2021. In 2021, we also update you on the growth investment expected, and we now estimate that to be around EUR 275 million, below our previously announced range of EUR 300 million to EUR 350 million. In the coming years, the majority of growth investments will be allocated towards industrial gas and new energy infrastructures, and we will keep looking for the best and optimal portfolio.Let me wrap up. We delivered strong financial performance with 5% EBITDA growth and CFFO growth. Growth project contribution stands at EUR 35 million, and our response to cost management and dedication is unchanged with a target of EUR 615 million with pressure on utilities in the third and fourth quarter, but the target's unchanged. And in this quarter, we've delivered strategy execution by commissioning capacity, as mentioned.With that, we will move to Q&A which Eelco will lead, and we will probably -- both of us take some of the questions. Obviously, I will concentrate on the majority of them, given that this is a Q3 update. Eelco, over to you.
Thanks, Gerard, for that elaborate update. So that concludes the presentation and our prepared remarks. And as Gerard mentioned, I would like to invite the operator to open the call for questions.
[Operator Instructions] The first question today comes from the line of David Kerstens calling from Jefferies.
It's David Kerstens from Jefferies. First of all, Eelco, I would like to thank you for your support and insights over the past 11 years, quite an impressive achievement, such in a volatile market environment. I wish you all the best in your future career at SHV. I'm looking forward to working with, Dick, again from next year onwards. Then a few questions maybe if I may. First of all, are you seeing early signs of the underlying momentum in the business improving in the third quarter? I think if you take out FX and growth projects, EBITDA was down by EUR 5 million, but I think there were some one-offs in the quarter such as further maintenance related to Gate LNG and also, I think, hurricane impacts in the U.S. Do you see an improvement in underlying momentum already?And then secondly, you talked about the potential rebalancing of supply chains in 2022. What is the potential recovery effect that you're seeing there? Is that mainly the EUR 5 million to EUR 10 million lower contribution that you highlighted for chemicals year-to-date, or is that impact much larger?Finally, the reduced expectation for growth CapEx of EUR 275 million. Does that reflect the equity that you had in mind to invest in Gate LNG -- or the LNG terminal in Germany?
Thanks, David, for your questions and remarks. I suggest that Gerard takes the question on the growth CapEx and the difference between our early remarks and the year following. I will give a bit of color on the market, David. As I made in my -- the comment in my prepared remarks is that indeed, we have seen quite an unprecedented development in commodity markets globally. We were of the opinion that this could not be sustained for a longer period of time because we know by definition that markets will fall again back into an equilibrium. What we have seen happening in the second and the third quarter, which also we guided on 2 quarters ago or last quarter as well, but we see already a normalization happening in the chemical markets. And with that, I mean is that more and more manufacturing capabilities come back. We didn't mention the winter freeze anymore because in the third quarter, we've seen in the United States manufacturing base coming back into operation. And what we've seen is that, that has led to additional sort of volume entering into the markets.We have seen a trend towards a normalized environment in chemicals in several parts of our businesses. One is the United States. As of the third quarter, if you look at the throughput levels that we are now experiencing. For instance, in Via or in our Houston terminal, they are very close to pre-COVID levels. We've seen also that the request for storage for chemicals, for instance, in Singapore, and the amount of requests that we're obtaining are increasing quarter-by-quarter. So we are not there yet, David, but I think that the trend that we envisaged is indeed happening. And I would believe, and that's what we made a comment on, is that in the -- for the year 2022 for chemicals, we should see a relatively normal environment, all things being equal, obviously.Then for oil, we see a little bit of the reverse trend happening, unfortunately, is that we haven't seen a major recovery of the oil price. We haven't seen more stocks being taken globally, particularly for middle distillates. And despite the occupancy being relatively stable in oil, also across the globe, we see that there is a bit of price erosion happening in the major hubs. So for us, it's a little bit too early to say that the market is turning into a complete normal position again. So those are the 2 factors that probably will be taken into consideration mostly for the year 2022.What I can say is that -- and that's, again, very nice to see that our long-term contracts, and I think that Gerard alluded to that, we've signed again a long-term contract for TLA in Mexico. We see that our industrial contracts are running well. Our gas contracts are running well. So in other words, we still have sort of a large part of our business, which is very stable, very supportive of our earnings. So for me, I think it underlines the results of this quarter, underlines the strength of our existing portfolio that despite relatively weak markets and 88% occupancy, we can provide such a strong earning call to support our view on Vopak. So that's my view on the market, David.
Yes. Let me pick it up from there, Eelco and David. First of all, on the CapEx. The CapEx is not related to Germany. The CapEx is related to our total growth portfolio, the assets that we are developing and the phasing thereof. The outlook for the earnings contribution is unchanged. So it's a matter of phasing of CapEx and cash rather than anything else. That's not more behind the statement than indicating the cash momentum of the CapEx involved. All the underlying themes are unchanged.For Germany, we will convert our active participation in Germany to a more passive one. We will remain a partner in the JV, together with Gasunie and Oiltanking. And the JV will continue to pursue its goal to built and operate an LNG terminal in Germany. The basis for the progress, there's been some successes in terms of the regulatory and planning progress, but we also have some mixed successes on the commercial side. All combined, we've taken this view, and as a result, we've made the statement that we've made. In terms of business momentum. I think the business momentum, all things together, give us confidence in the earnings we posted today. It's good momentum compared to last year, it's good momentum compared to the second quarter. As you point out, yes, there are a whole lot of moving parts in there, and that is typical of the last 6 or 7 quarters where we've seen such unsettled markets moving through our portfolio. If I look through that, and I look at our momentum in cash flow from ops, our portfolio transition, our business momentum, I think we're doing the right things and there's some early signs of the market, as Eelco indicated, a bit more clear in chemicals, a little bit more mixed in oil. If we throw that altogether in one statement, then what we've said is, looking at 2022, it might be that, that is a recovery of tank storage industry relative to 2020 and 2021. So with that, I think we've answered your questions.Again, you pointed out disturbing the momentum a bit of the second and third quarter. That's correct. Maintenance charges were in second and third quarter. So year-to-date, that influences, but it's not a factor between the 2 quarters. And I think that's the complete answer to your questions. So let's move to the next question. Operator?
The next question comes from the line of Amy Sergeant calling from Morgan Stanley.
Yes, I had a couple of questions, if I may. So I was hoping whether you could provide a bit more guidance on where you think that growth CapEx number could be going to in 2022? I know previously, it's been a sort of EUR 300 million to EUR 350 million range. So any guidance you can provide there would be great.And the second question is on the cost outlook for 2022. I guess, did you have any hedging in place that helps mitigate some of the utility costs for this quarter, and how does that play out next year? And then thirdly, just any update on the oil storage at the Fujairah terminal. I know you had a contract that had rolled off there. So any update there would be great.
Okay. Thank you, Amy. First, the CapEx question. The guidance for next year, we haven't really formalized yet, but I have given indications. That is correct. What I've said in the past is, in the last 3 years, we invested about EUR 1 billion. Divide that by 3, EUR 300 million to EUR 350 million is a reasonable number for us to use. This year, we're under that at the moment. For next year, we're also significantly under that, in terms of committed number of projects.There is always a bit of noise in that because you never know when you actually spend money on M&A type of activities like the India transaction that we now think is heading the right way for completion. The integration efforts are very supportive, and the teams are working together extremely well. So all the signs are positive on that. But the guidance for next year, at the moment, I would say with the committed level is below that range that you indicate. If we were to announce new projects or M&A type of activity, then we will update you on that number, yes?So below the range is what I gave you as a statement today.The cost outlook, there's always a bit of -- sort of noise in there because we bring new assets online, of course, that comes with new costs. We stay within the EUR 615 million that we guided for this year, including the high utility energy costs we have observed in Q3 and we'll see in Q4, no doubt. We do hedge part of it. We also pass through part of it to our customers. And when I say hedge, it's not really maybe literally a hedge, but it could be that we conclude fixed price agreement, so -- versus variable.However, there is certainly a part that sticks and that we will see in our numbers, and have seen in our numbers. So for 2022 on a relative basis to full year 2021, I would expect utility costs to be higher. And year-to-date, the utility cost, and I'm looking a little bit at Fatjona to correct me if I get it wrong, but I think year-to-date, we had a EUR 9 million increase in utilities. Fatjona is nodding at me, so the number is okay. And that's year-to-date number absorbed, as I said, in the EUR 615 million that we gave you earlier.Then Fujairah. Fujairah is obviously, an asset that is perhaps even more than some other assets in our portfolio, subject to the markets rather than an industrial complex, for instance. We did see in the Middle East, Asia occupancy, a drop in the occupancy reported at the end of Q3. Fujairah is part of that dynamic. And Fujairah has seen some positive contract renewals, which will kick in at the start of next year.
Let me -- if you allow me here to add a few words to that and a bit of color, Amy, is that in Fujairah, the occupancy drop that we've seen this year was related to crude oil contract that expired on this term. That was a 5-year deal that we had previously that came off this summer. We've invested in crude oil in Fujairah because we always believe that Fujairah would be an excellent collection point for crude in the Middle East. And that was supported by the introduction of the Intercontinental Exchange, or the ICE, which delivers a future contract for Abu Dhabi crude, it's the IFAD. And this is a Murban crude future that has been started to trade. So the United Arab Emirates has an interest to develop that pricing point for crude over the coming years. I'm very pleased to inform you that at least the crude tanks that we then have developed and came off will be rented out again next year. And, again, a commitment basically tied into that future contracts for crude. So yes, we had an occupancy let's say, a lower occupancy in Fujairah, but I would expect that at least for crude, we have that covered as of next year.
Okay. Fantastic. Thank you very much for the extra detail on all of those. Very helpful.
Thank you, Amy. Operator, if we could move to the next question.
The next question comes from the line of Thijs Berkelder calling from ANB (sic) [ ABN ] AMRO.
First word for Eelco, I really want to thank you for the cooperation in the past 11 years. There was much fun traveling around the lines. I wish you good luck at SHV. As for new CEO, Dick, welcome in the spotlight. Perhaps you can indeed take us back through this challenging energy transition.I have 3 topics, many more topics, but let's focus on 3 topics: Australia strategic review. Can you give us the EBITDA level of Australia, let's say, this year roughly and 2022 roughly. My calculation is for '22, around EUR 35 million. So that means in 2022, you will start with minus EUR 35 million of EBITDA if you decide to sell the entity. Then related to Australia, occupancy in Asia & Middle East is down to 85% in this quarter. What is the occupancy ex Australia, if you have that? Then second topic, Malaysia, I understood you increased your stake in Pengerang in the industrial terminal. Can you explain the financial dynamics.And secondly, I understood from dialogue that there was a new court case plans related to the huge claim against your JV. Is there an update on that court case because that was planned for end of October according to my understanding?Then third topic, new energy, good and great to see that you were able to do with EUR 39 million valuation. I presume it's primarily related to LOHC. My understanding is you had a 10% stake. So rough annuity, should I assume a value for the 100% LOHC of about EUR 500 million?
Thank you, Thijs, for those questions. I suggest that we start with Gerard who gives a guidance on the Australia question and on the new energy one, and then I'll dive into PT2SB.
Yes. And let me start with the court case. I think the court case is progressing in the final stages. We've not changed our opinion on that whole dynamic and don't expect anything to come out of that. So it will be hopefully neutralized at the final stages of this discussion with the courts. On the EUR 39 million, I can confirm that the majority of that valuation update is in the sustainability energy fund of the Vopak ventures activities. That's where the main movement is. And Indeed, the main movement is related to Hydrogenious. But there are other small moving parts in the portfolio. We are extremely, yes, happy and proud with that movement. And you're right, our holding in Hydrogenious is about 10%. On Australia, we're not going to break out the numbers, Thijs. I understand the question. I understand the appetite, but we will not break out the numbers. Occupancy has always been good in Australia, that I can say. We've also recently started an expansion in Australia, in Sydney. So the assets are in good shape. And I will refrain from giving you the financial breakout of the numbers. So sorry for that, Thijs. Eelco, will you ask -- explain a bit PT2SB...
Yes. Well, first of all, Thijs, let's make a correction. It's not PT2SB, it's PITSB. So -- and as you can recall, we have 2 terminals there or actually, we have 3 in Malaysia. That's KTSB, but that's not part of this, that's industrial terminal. Now with PT2SB, which is the industrial terminal, with Petronas and Dialog to serve refinery chemical complex. And we have PITSB. PITSB is our independent terminal for fuel storage in Malaysia, located next to PT2SB. So I hope I have not confused you in the introduction.But PITSB, which has been the first terminal we constructed in Pengerang, there are, let's say, the primary partners are Dialog and Vopak. And there's also a small percentage held by the Malaysian government, the local government, the province. There was a 10% economic ownership, which was, let's say, set up early on, and it has now been distributed economically to the partners. So we just increased our economic ownership by 10% or that was -- that 10% was divided, and it's nothing more than that, that we executed on agreements made previously.The second thing I can tell you about the court case against the joint venture, that is a court case against PT2SB. That court case is ongoing. We have had a strike out already. Let's say, concluded, but it has been gone to a higher echelon in the judiciary. It has been postponed. So we just need to wait for next year to get further outcome of that. But nothing has changed from the content. We very much still think, as we said in our press release, that it's a way for us to pursuit against the joint venture partners. So we still need to wait for that to be resolved.
Yes. Just to clarify that, sorry to interrupt, Eelco. Strikeout is, therefore, in our favor, right? The case was...
Unbiased. And therefore, we said we should not even hear this case in court. And the court actually agreed with the statements of the joint venture saying that plaintiff had 2 week cases actually to bring into court. So it has not served in court yet. We are still hopeful that we can keep it outside of the court and let's wait for that to continue.
Okay. Thanks. Thanks for asking the questions. And again, apologies for not being willing to give the Australia detail.
Who's Next?
The next question comes from the line of Quirijn Mulder calling from ING.
Yes. Good morning, everyone. First, I would like to thank Eelco for his 11 years as the CEO. Nice to speak to you, not only on the business but also on, let me say, family matters and other things like the future of the society. So I like the discussions, even at the breakfast as I remember. So thank you, thanks a lot for all these interesting discussions. And of course, welcome to Dick. We have spoken quite often, I think, 2000 -- 2004, 2005 and thereafter. So that's okay, I think, that Dick is picking up here. With regard to my questions, first about the CapEx. So the CapEx is, let me see, below the range of EUR 300 million, EUR 350 million but that does not include India probably. Is that a correct assumption? That's my first question.And then 2 subjects, that's Americas, and that is about the about LNG. About Americas, can you maybe update us with regard to Dow developments there? What you're seeing there? And how is the business going? And maybe to elaborate more on the impact of Ida on the third quarter? And then finally, on the on the conversion in Los Angeles taking place and how long it will take and what the CapEx you think is? And is it expansion or is it maintenance? And then on LNG, I'm still flabbergasted about Germany because in my view, it's a question of -- it's not a question of clients, but it's a question of environmental permits and maybe it takes a long time, but it will come. And given all the political -- the geopolitical things we are seeing now it's, yes, it cannot allow a delay there, I think, in my view. So maybe stepping out and have a passive role, it's very unclear to me who is picking up? Then is that -- are you not happy with Oiltanking so all that sort of things.And then finally, about your presentation, you said about Singapore, Hong Kong, LNG, but I missed Zhangjiagang. Is there maybe some -- is that also removed from the list? That were my questions.
Okay. Let me open up, Eelco. And then see how far we get. And then you pick up Dow, I think and 1 or 2 other points, yes?
Yes.
First of all, Ida, we did take some charges in terms of cost in the Gulf of Mexico network for -- which wouldn't be covered by insurance. So delta there in -- that we saw in the year-to-date number. Not material, but there was a negative charge of -- I think about EUR 2 million. There's other positives, by the way, in the numbers. So it's a mix of -- not on Ida, but on the total numbers of Vopak, but Ida, specific, was a charge of EUR 2 million. From a damage point of view, there's nothing to highlight, which is remarkable. The conversion in LA, it's a relative low CapEx conversion. We will label it as probably -- as growth CapEx, it goes into Jet. The multiple, in terms of debt-to-EBITDA is as we indicated before, this type of brownfield expansion can be very attractive, and that is reflected in the numbers. So it's consistent with how we guide on that. Hong Kong and progress, et cetera. And then you say, what about China, Zhangjiagang. Zhangjiagang, is, as I said in the last, I think, 2 quarters already has come to slowdown, I think we'll not see a lot of progress on that in the foreseeable future. And, therefore, as a business development opportunity, it's no longer on the list of very active. We do have other NBD activities, which are active as I already highlighted. I think in the context of the LNG portfolio because then the logical question is, okay, how about the total? I think the momentum is actually very positive. You always have a whole lot of opportunities and then eventually, you lend a number of them. The one we are lending is Hong Kong. We've done the Gate expansion, as I said, 12.5%, the contract renewal in Mexico. So we're actually quite happy about the LNG portfolio relative to our plan of developing the portfolio. So we are on track, but not all of them are winners all the time. That is true. Then Eelco, will you pick up Via and Germany again, The LNG point?
Happy to do so. Thanks for your remarks, Quirijn. It tells me how well ING and Vopak invest in relation, the fact that you have already met Dick in 2004. So that's a nice story. Let me start off with the Via insight. I think as you can imagine, there are 3 distinctive phases that we have to go through. So the first phase is to get the deal. Well, we announced that already a year ago. Second phase is to integrate Via into the Vopak network and to obtain control of the assets. To run it as we run all our other terminals and obviously, being a carve-out. And the first one on this industrial scale, I think it took a lot of effort and a lot of support from the network to get that organized. And the third phase is a phase of growth and further developments of that location -- of those 3 locations. If I first turn the attention to the second phase, because I think that we are sort of ending that period. I think if you look at since the time that we started to run it and it's coming close to a year. I think I have to complement the Via team and the management team there wholeheartedly, because I think they've done an absolutely fantastic job in integrating Via into Vopak. If you look at the -- I had a discussion with Dow, only recently, in which senior management said that throughout the whole year, not a single safety or service incident was reported to the higher echelons and the C-suite of Dow. Meaning that we have been able to create grip and control to the levels that we expect and set ourselves a standard to, but also was recognized by Dow. In addition to that, if you look at the integration of obviously, the financial systems, the IT systems, safety systems, I think that is all behind us or mostly behind us. I think we run it now as a fully integrated terminal. And that resonates a great deal of comfort. Particularly, if you look at the fact that we've seen also Ida rage over Louisiana, in which, again, several months of uncertainty from a manufacturing perspective had to be managed. So that phase has gone very well.And I think I'm happy to say that also listening to the conversations with Dow, I think we had some recent meetings is that the attention of Dow is turning towards growth. So I'm very excited about the sort of the future prospects of how Dow wants to manage those manufacturing sites in the next 20 years, and that we are in a very strong position to jointly see how we can further develop those sites, both in the traditional vital products but also look at new feedstocks and new opportunities that might come up there. So I'm excited about Via. I'll actually be there next week, Quirijn. Borders are opening up to have, again, a on-hand look together with Dick and see what's going on there.So I hope that gives you a sense of how we've managed our -- Then the -- then on German LNG, I think that Gerard had already elaborated quite well on that. I would like to say that we very much like the site. We see a line of sight on how to turn that particular location into an energy storage facility. But I'd like to also turn your attention not only to the, I would say, the licensing and permitting part, we also see that the momentum, commercially is not in full swing today. So I just wanted to bring that as well to your attention is that, we said now there are many good attributes to the project. We will support it, but we do that in a more passive manner until conditions might change for the better.
Thank you, Eelco. Quirijn, I forgot to answer your India question. The India number will very likely fall in 2022. However, it doesn't change anything to the statements I already made. So CapEx this year, EUR 275 million and next year, our committed numbers are below the range that you asked about and Amy earlier asked about. So it's absorbed in the numbers that I gave you. It also -- I want to repeat it, it doesn't change the growth statements that we made on the EBITDA. It's all a matter of phasing and where it will fall and cash flow-wise, this year, EUR 275 million next year at the moment currently approved below the range, including India.
Last comment. Great, I can't help it. I can't stress enough the strength of our network where we are located. I think Gerard made that comment on Los Angeles. You see that we can turn fuel oil into jet fuel tanks. And if you look at LAX, that needs to be given -- needs to be supplied with jet fuel for a longer period of time, or if you look at flighting where we convert tanks into biodiesel, or if you look at other industrial sites where we have new energy opportunities. I cannot stress enough the excitement that at least I feel in the existing locations and where the industry is heading towards. So thanks for the question.
The next question, please.
The next question comes from the line of Andre Mulder from Kepler.
Yes. First of all, I'm the last in a row to thank Eelco for the corporation and your very friendly management style. Wish you success in your next career step. Dick, after all those years we're meeting in. Obviously, you're great a bit, I've lost a few hairs, but I'm looking forward to talk to you again after such a long period. Yes, a couple of questions from my side. First question, Gerard, you mentioned this impact of the energy cost, the EUR 9 million, is that a gross or a net amount? The...
Sorry, finish your question, apologies. I will answer it in a second, yes.
Yes. Okay. On Gate, the refurb has now been finalized. Can you remind us about what the total cost has been? On the contribution of growth projects, can you remind us what the 2020 contribution was? And can you give us a bit more detail on how you see the split for '22 and '23? Looking at the columns that you provided in the presentation in H1 and Q3, it seems like most of the impact of a positive effect of the oil markets, negative effect on chemicals occurred in the first half. Any big changes there that you saw in Q3? It looks like that situation has been about flat. Then the numbers question. You are mentioning a ForEx effect. In the first half, it was EUR 15 million and the -- in the 9 months number, I see EUR 13 million. So that means it should be EUR 2 million. But in the presentation, I see only EUR 0.2 million. So I'm missing EUR 2 million there. The last question on the reduced CapEx. Can you give us a bit more detail on where that occurred?
Okay. A whole lot of questions. I hope I can remember them all. The gross utility or net utility, this is a growth number. So this is as recorded in the cost. In terms of ForEx, I think you are correct that the second to third quarter was 1.5% to 2%. So Fatjona is going to check whether the slide doesn't state that or whether we showed something different. But intuitively, I think you're right on that. The momentum of chemicals and oil between Q2 and Q3, you're right. I don't think there's a lot of difference a bit of picking up. As Eelco earlier said on the evidence points, a bit of more confidence in chemicals and throughputs. In oil, a lot of inquiry, but very high volatility on the rates. So you can see extremely low rates. And then occasionally, you see a higher rate, but lot of volatility on that.Between, I think the quarters, as I said, a bit more momentum on chemicals. Between the years 2020 and 2021, year-to-date, the whole same statement as we've made several times, still holds, which is soft market conditions, if you combine it all. So the momentum in the company has been from growth and cost management rather than from market sort of kicking in. And the growth element could have been bigger if the markets, of course, were stronger at the moment as the growth comes in. So that about -- then about Gates, you said how much approximately, I think, in terms of cost about a number somewhere below 5 spread over the 2 quarters. Q2 and Q3 in terms of cost in the LNG portfolio. Then I think you asked one more, but I have forgotten.
Yes. 2 [Technical Difficulty] First is on the growth contribution. So can you remind us the number for 2020 and possibly some details on the split between '22 and '23. And then last question was indeed the CapEx.
Yes. The growth momentum is 35 year-to-date. It's relatively built up evenly over the quarters so far. And we have seen a bit of an acceleration in Q3, but that is what it is. In terms of -- now I've forgotten the fourth question again or the last question, that was on the CapEx.
First of all, this is a question on growth. Can you give a bit more detail on how you see it developing in '22 and '23? Any statements on the split?
No, we don't split that out. We have EUR 30 million to -- EUR 35 million to EUR 50 million -- or EUR 30 million to EUR 50 million this year, top end of the range, and we have -- in '23, we have the EUR 110 million to EUR 125 million. We don't split that out to not get overly focused on the year in between. It is a proper buildup in the year in between. So it's not exactly proportional, but I'm not going to break out the number in 2022.
And growth CapEx, the question was on the EUR 275 million.
Yes. Why is it? It's phasing. It's just phasing of projects and momentum of the number of projects that are making up the totality. So we're adding a few. We always make a bit of accommodation of new FIDs in our outlook for 2022. That's why I said EUR 300 million to EUR 350 million on previous occasions might be possible. At the moment, we don't have that portfolio that qualifies for our investment criteria.However, it's not less than what we said before. So the growth momentum is the same, the EUR 110 million to EUR 125 million is kept hold. It is just the additions that we might see and will, and may still see I'm not yet in the number. So there's nothing mysterious behind it, but it's difficult to explain something that's not mysterious. It's a routine update, as far as I'm concerned, yes. It's phasing of CapEx and spend.
Moderator, is there another question? Or have we reached the end of the queue?
We do have one follow-up question, if you're happy to take it.
We can take one more question, yes.
The final question comes from the line of Thijs Berkelder, calling from ANB (sic) [ ABN ] AMRO. Please go ahead. Thijs, please ensure that your line is a unmuted locally, and go ahead with your question.
Yes, it was still on mute. Well, thanks for the time spent in this call, Eelco and Dick as well. Small follow-up questions. First, on other operating income, especially in the U.S., quite high. Can you explain where that other operating income is coming from? And secondly, Mexico, the new 10-year contract in terms, are the rates higher or lower than the previous rates? Maybe then for Gerard on the question of Andre, I would say, look at Slide 13. You gave a quite clear guidance for growth EBITDA 2022 being, let's say, EUR 30 million. And maybe finally, Gerard, with strategic view, Australia now ongoing, does it mean that you stopped the depreciation of Australia in reporting?
No, we've not stopped depreciating Australia. It's early stage report, so it's not stopped. I'm just looking at your point on Slide 13, what did that mean? Well, we didn't give an intermediate for it. We shared something, that is absolutely correct. But we didn't bridge it to give you a sort of sense of trying to measure that. So maybe we shouldn't have shared that.What we indicated is, yes, there is a contribution but don't start measuring it and then recalculating it because it's just a holding -- coloring. Not an indication of the size. So apologies if that is read differently. I'm a bit poor at remembering the question...
Mexico 10-year contract.
Mexico. I can tell you it's -- we're very pleased with it, that's for sure. It's an extremely important renewal where we can please the shareholder and the customer, which is always excellent. All the stakeholders are extremely happy about it. Everybody satisfied from their strategic and financial perspective. It's fair to say that I think it's arguably a critical renewal in the market that needs that gas. And I think they are at fair prices to everybody concerned. We're not commenting on whether it's better or worse than previous contracts, Thijs, I'm afraid.
The last one, Thijs, the other operating income.
The other operating company -- income, I have to come back on, because I don't know that off the top of my head. But, Thijs, we'll take that separately, apologies for that.
Okay, no problem.
I think -- but we'll look into it. I think it has to do with the way that the Corpus Christi income is recorded, which is the new asset that has come on stream. And I think that's the majority of it, but we'll come back to it. It's the accounting treatment of the Corpus Christi.
Okay. Thanks, Thijs. And Molly, is this the last question, or one more? The last one, the last one.
We have no further questions in the queue at the moment. But I do understand that Juri Zanieri from Kempen does have a question. So unmute your line. Please go ahead.
Yes. Thanks. I tried to submit the question already a couple of times, but apparently was not being taken. Well, of course, most of the questions were already answered. I just had a very quick follow-up. But before that, I want to congrats to Eelco for being such a solid pillar at Vopak for so many years. And of course, I'm wishing you all the best for your future adventure. One of the followup, with it being on the strategic option for the Australian terminal. What would you consider also to divest even more of the other minor terminals you have across your network? And specifically for oil? And I was wondering if you also can give a bit of color on why the Sydney and Deer Park terminals have been postponed commissioning and whether you're comfortable to reach -- to commission it within by year-end and Q1. Any colors in general would be much appreciated. Thank you.
Okay. Thanks, Juri. Let me take Australia and the Gerard will take the Deer Park question. Let me put Australia in a wider context. I think that already strategically, we've taken the choice several years ago that we would move the network of Vopak more towards chemicals, gas and industrial. And the reason why we had that view is that we think that chemicals has a long longevity because it's used in so many manufacturing applications that we think -- it will have a long future ahead, particularly if you look at the energy -- sorry, the chemical density per capita in different growing markets.I think second of all, we wanted to invest more in gas because if you look at where the energy transition is heading, you see that the heavier hydrocarbons are replaced by lighter hydrocarbon change. But most importantly, I think if you look at new energy and you look at products like hydrogen or you look at CO2 or you take ammonia is that a lot of the new energy applications are in a gaseous form. So it means that if you have gas capabilities and gas opportunities, it plays very well into that new energy mindset.And the same holds for industrial terminals. I think if you look at how the energy transition will take place, it is our humble opinion that it's most likely not first in the transport sector, but more in the industrial sector because the hard-to-abate sectors need to move first and have the balance sheet to invest against that idea. So us being in those industrial sites, globally puts us at the forefront of the transition. So that has always been our thinking in the last few years. With the oil terminals, and obviously, the question is how do you deal with those. I think -- and there are 2 ways of looking at that. I think first of all, we still believe that oil has a role to play and that there is -- and with the increased volatility in the refining sector, we expect that the oil opportunities will be quite interesting. It will be a more volatile environment. And therefore, companies like Vopak will be an essential part of trading outfits and refiners to balance out their positions. So I think we want to still have an opportunity in oil. But obviously, you need to take also a long-term view on what type of oil assets you have. So we've taken a decision, first of all, to -- if you look at that to sell oil assets, which are in OECD countries, whereby the change in the energy balance will be the quickest. So that's why we sold U.K., we sold Sweden, we sold Estonia, Hamburg, Spain. And our view is that we need to be mindful of the position of our distribution terminals in OECD countries. And I think Australia plays just into that fold. It's a well-run asset. We're even expanding it. It has, let's say, an exceptional good position in Australia, but we just like to test sort of what is the long-term strategic value of Australia and the network of Vopak, looking at where we're heading. So that is -- that gives a little bit of color to Australia and there's not much more to say than that at this stage.
Okay. And Juri, apologies if you didn't manage to get in the queue for the question, but you're in now. So I think that makes that good. In terms of Deer Park, there's not a lot more than that, it is a partial commissioning. Part of Deer Park is now live and from the 33,000 cubic meters, that is 23,000. So it's a partial commissioning, which is operationally driven.
Thanks, Gerard. And with your permission, Molly, I expect that there's no questions that are on the register. So with that, I would like to take this opportunity to close off the call. First of all, my gratitude and thanks to everyone in the call. It's been 11 great years in which we had an opportunity to exchange ideas and thoughts, not only indeed, as Quirijn was mentioning, within the setting of video calls or Capital Market Days, but also I fully enjoyed all of your presence during the different trips that we had or the lunches that we enjoyed. So I just wanted to thank you for that. I feel very grateful having the opportunity to work and meet you all. And this is also a good opportunity just to wish, Dick, a great deal of success and a great deal of opportunities, again, to elevate Vopak to a higher level. Because I'm sure that with his background, his energy and dedication, Vopak is again in exceptionally good hands. So thanks again, and we'll see each other, no doubt in another time and in another place. Until then, goodbye.
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