Nordex SE
XETRA:NDX1
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Nordex SE
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Good afternoon, ladies and gentlemen. Here, I would like to welcome you on behalf of Nordex to our presentation of the figures as of June 30 and the latest developments. This presentation will be given, as you are all familiar with, by our Board, our CEO, José Luis Blanco; our CFO, Christoph Burkhard; and our CSO, Patxi Landa. [Operator Instructions]And now I would like to hand over to our CEO, José Luis. Please go ahead, sir.
Thank you very much, Felix. We have prepared -- so first of all, on behalf of the management Board, Christoph Burkhard, CFO; myself here in Hamburg; Patxi Landa, CSO, due to COVID in Pamplona, connected, we thank you for participating in our half year 2020 results presentation. The agenda that we have prepared for you today is quite a standard executive summary. Then Patxi, markets and orders. Christoph will take over to share with you very good developments in the financials of the company. I will close with operation and technology, and then we will open for Q&A and final remark and key takeaways.So starting with the executive summary. Half year 2020, especially Q2, has been substantially affected by COVID-19, reducing installations and sales and impacting our cost to produce components as well as to deliver the projects. The final figures are shown in the slide: sales, EUR 2.048 billion; EBITDA, minus 3.5%; working capital, minus 7.1%.I would say that the remarkable aspect is the activity of the whole Nordex team and several stakeholders in order to protect Nordex from this very challenging COVID environment and prepare Nordex for a post-COVID era. In this regard, first, as we announced last week, we closed a state-guaranteed revolving credit facility of EUR 350 million, was closed on August 6, protecting Nordex group against the effects and remaining uncertainties caused by COVID-19 pandemic.In this context as well, refinancing of the Schuldscheindarlehen promissory notes of EUR 215 million due in April 2021 has been secured as well. Very important for strengthening the balance sheet, as we announced, we achieved an agreement of a potential sale of Nordex development project pipeline in Europe to RWE, amounting EUR 403 million, closing expected in Q2 (sic) [ Q4 ] and proceeds to reinforce the balance sheet and the liquidity of the company. And as you are aware as well, but nonetheless remarkable, we successfully refinanced the multicurrency guarantee facility of EUR 1.21 billion in April 2020.So a lot of activity in the financial and M&A area, which are somehow protecting the company, as mentioned, from this challenging environment as well as settling the ground for a post-COVID area.Talking specifically about the operational figures, order intake with a volume of 2.532 gigawatts in first half of the year was dominated by latest and most profitable generator -- generation Delta4000 turbines, accounting around 79% of the order intake. Strong sales despite the COVID impact and the delays in installations, we delivered sales above EUR 2 billion, EUR 2.048 billion in H1 2020, which as well give us a level of, I would say, reasonable optimism about the future growth ahead of us in installations. And as mentioned before, results in half -- first half of the year were influenced by the extraordinary costs due to COVID impact, extraordinary costs in the supply chain, extraordinary cost in the project execution. But the key takeaway of this slide is that still customers buying substantial amount of more profitable turbines, which is great visibility for Nordex in the future. And Patxi will explain later.With this, I will hand over to Patxi to talk about customers and markets.
Thank you very much, José Luis. Good afternoon. So looking at the market, we continue -- as José Luis just mentioned, we continue to see strong demand for our products. We landed 2.5 gigawatts of new turbine orders in the first half of the year, down 17% with respect to the same period last year. European markets continued to show a very, very strong performance as we sold almost double as many megawatts in the first half as we did in the same period last year, which is a combination of our deep position in most of the European markets. The support around the EU Green Deal that makes us expect a continued positive performance in the European markets over the next periods to come.In North America, the market continues to benefit from the 1-year extension of the 100% value of the B2C, and will deliver significant volume again this year. For us, the majority of the U.S. orders this year are coming in Q3 around the gigawatt of orders that we are landing as we speak, whereas last year, they came in Q2. And in fact, this single quarter shift in U.S. demand is the only reason for the temporary decline in orders that I mentioned before, the 17%, just the U.S. orders that this year they came in 1 quarter [indiscernible].Other markets worth mentioning are Brazil that despite the postponement of the 2020 auctions and the high impact of COVID in the country, continues to see a very high activity with private PPAs, and will also deliver good volumes for us in the second half of the year.So summarizing, we'll continue to see a strong momentum for our order pipeline looking into the second half of the year, and we remain confident to deliver good order volumes for the full year.ASP stood at a stable EUR 0.71 million per megawatt in the period. And importantly, as mentioned as well by José Luis, almost 80% of the first half orders came with Delta4000 turbines with the consequence, as we have explained in previous quarter calls, of increasing the margin quality of the order backlog.If we move to the next slide, please. Service sales grew 15%, EUR 209.6 million and represented 10.2% of group sales in the period. EBIT margin was 16.7%, and the fleet -- and the contract stands at 21 gigawatts at June 2020.Next slide, please. Turbine order backlog stood at EUR 5.4 billion end of June, increasing 2% versus the previous year. And service order backlog grew 18% to EUR 2.7 billion for a total combined order backlog of EUR 8.1 billion at the end of June 2020.And with this, I hand over to Christoph for the financials.
Thank you very much, Patxi. Good afternoon, ladies and gentlemen. Welcome also from my side. And as always, I would like to guide you now through our half year 2020 financials. But before doing this, I would like to briefly lead you through the highlights of our second big financing transaction this year, which we closed just a week ago. You might remember that already last quarter, I started my presentation of the financials with a summary of another important financing transaction, the 3-year prolongation of our EUR 1.21 billion guarantee line, supporting our intake performance. And today, 1 quarter later, we are able to present the closing of the next strategically important financing milestone for Nordex. As José Luis already mentioned, we have closed last Thursday, a EUR 350 million revolving cash facility, with a final maturity in April 2022.The purpose of this facility is to support Nordex with respect to the effects and the uncertainty created by COVID-19 pandemic. And the facility is provided by a group of 9 partner banks and backed by a guarantee of the German state. And this guarantee is basically shared between the federal state level and the 2 states of Mecklenburg-Western Pomerania and Hamburg, the city state Hamburg. And together, they are jointly backing 90% of the total facility amount. And the facility was also quite significantly oversubscribed. So I think that was -- that we received really, really good support here by all stakeholders in closing that facility.A second aspect here in the context of the closing of the revolving cash facility and as an integral part of the overall financing structure, we were also able to already secure now the refinancing of the EUR 250 million of promissory notes becoming due in April 2021. So with the combination of a new revolving cash facility and the secured refinancing of the promissory notes in 2021, plus what José Luis also mentioned already the expected proceeds from the sale of the project pipeline, the Nordex group has been able, despite COVID-19, to put significant reinforcement measures for its capital structure in place.And last but not least, also the new revolving cash facility carries now an ESG rating linked component being classified as a green facility. And with this, we could further accomplish our objective to have all our debt financing instruments consisting of green instruments basically.And with this, now moving to the financials. Starting with the income statement, despite the impact of COVID-19 pandemic, sales with above EUR 2 billion, more than doubled compared to the first 6 months a year ago. And obviously, the EBITDA margin of minus 3.5% to reflect the impact of COVID-19 with various shutdowns and lockdowns affecting production and project execution. Amongst others, this is amongst others due to the fact that Nordex has significant operations in the heavily affected countries, Mexico, India and Brazil. And the full financial impact of the COVID-19 pandemic on the financial year cannot be assessed at this point in time.With this, looking at the balance sheet, a cash position of EUR 334 million at the end of June, despite COVID-19 times, clearly demonstrates the effectiveness of our short-term countermeasures before having a revolving cash facility in place. This is very important to note. And we kicked off those countermeasures immediately after we had become aware of the pandemic, and you will see also this in a minute when looking at our working capital development.Then we have one significant individual effect in our balance sheet, visible in the shifts between non-current and current liabilities. And the explanation is the reclassification of the EUR 215 million promissory notes into a current liability due to the maturity in April 2021. And however, as mentioned before, we have already secured the refinancing of this instrument in the context of the closing of the revolving cash facility.Now going to the working capital, with minus 7.1% and actually in absolute numbers of minus EUR 307 million, our working capital development continues to be very stable, looking at the environment, certainly. And I have mentioned before that we very early started working on short-term effective countermeasures. And those are most notably displayed in the prepayment numbers, reflecting successful renegotiations of payment milestones in order to soften the effects of COVID-19.This brings me to the cash flow statement. As you can see, this quarter, the cash flow from operating activities very much reflects the negative net result with -- and you have, within that number, a positive compensating effect of about EUR 20 million by VAT, successful VAT reclaims.Then we move to the total investments. Investments in the first half of 2020 amounted to EUR 79 million. And you might ask how is our plan going forward with investments, we clearly looked into that obviously. And due to our large order book, the high overall activity level and an ongoing high demand for our product, we clearly decided to continue to execute our investment program as planned.Last but not least, looking at our capital structure, we do see the leverage curve climbing up steeply as a result of the negative EBITDA in H1, and also the equity ratio has declined accordingly. But as mentioned before, the disposal proceeds from the project pipeline sale will have certainly a counterbalancing effect once it has been closed. And at that point, maybe to anticipate a potential question here, of course, all covenant levels -- we're looking at the leverage you might ask this question. Of course, all covenant levels have been adjusted accordingly and appropriately in all relevant loan documents in the context of the closing of the revolving credit facility.Now before handing back to José Luis, just one closing comment from my side. When we met last time in May, I said that Nordex would explore all means to cushion the temporary COVID-19-related uncertainties in the best interest of the company. And in the meantime, I think we have managed quite well to put the EUR 350 million cash facility in place. And we have secured the refinancing of the promissory notes. So Nordex group has put significant measures in place to manage the current uncertainty.And with that, back to José Luis.
Thank you very much, Christoph. A lot of activity on that front and a lot of activity as well in operations because we are growing substantially the company to a 6-plus gigawatt level in the middle of COVID pandemic that creates major uncertainties. And if you see this in 2 blocks, installations and production. In installations, we installed 662 turbines in 21 countries as compared to 242 turbines last year. Almost 200% growth in COVID times. So as mentioned, COVID creates delays and extra costs in our factories and projects. And we need to live with that. But despite that, almost 200% growth. And more important, preparing quite solid in the second half of the year, where we still expect higher level of activities in Europe, U.S. and LatAm.Geographical split have 45%, Europe; 17%, Latin America; 32%, North America; 6%, rest of the world.If we look at production, we have -- we mentioned usually turbine assembly and blade production in-house and outsource. If you see in turbine assembly, we are preparing for a very important activity in second half. We produced close to 3 gigawatts of turbines in the first half, increasing 70% the activity compared to last year. In here, we managed, I would say, quite reasonably the COVID impact in terms of output. We do have some impact in terms of cost. But summarizing, 787 units: 392, Germany; 247 in Spain, ramping-up Delta4000; 96, India; 42, Brazil; 10 remain in tail we have in Argentina. So the positive aspect here is that the operations is ready for a 6-plus gigawatt company that combined with the increased profitability of the backlog should drive the profitability improvement long term.If we talk about blades, here, we are facing more difficulties and the reasons mentioned by Christoph, we were in a steep ramp-up. And this ramp-up is needed to happen and is happening in India, Mexico, Spain. We're doing quite well in Germany, where we produced 351 units, little COVID impact in Germany. But there is a substantial impact in India, Mexico as well as reasonable impact in Spain as well as in our subcontractors where we have outsourced 1,215 units. So one of those 2 contractors are as well located in COVID impacted countries like Brazil.So in blades, we are managing in a task force mode to try to mitigate these delays and extra costs, and the whole company is doing good work, given the circumstances. And I cannot say that the situation is stable, but is making good progress to stabilize the situation in blade production, which triggers turbine installation, revenue and margin.This is what we have prepared today for you. So we will open the call for Q&A, and then I will come back for the key takeaway.
Thank you very much. And now I'd like to hand over to our operator to open the Q&A, please.
And the first question received is from Sebastian Growe of Commerzbank AG.
The first one would be around volume outlook, particularly on the order pipeline. Patxi, you mentioned, sorry for just asking that again, 1 gigawatt is what you expect from the U.S. in quarter 3. Did I get that right? So just a clarification on the more strategic angle. As you highlighted that you are absolutely on track to become a 6-gigawatt plus company. Should we also take that as a certain yardstick in terms of what you would expect for the order intake volume for the full year 2020, i.e., sort of matching what we did see in 2019?And then related to it and more diving deeper into the mix. We do see, obviously, the very, very strong pickup in Europe, in particular. And given that, obviously, your production footprint is still overall skewed to Europe, should we then also expect a slight positive impact from, generally speaking, lower logistic cost efforts going forward when it comes to the execution going into 2021 on this higher content coming from Europe?And the last question is around EBITDA and to know how difficult it is in these corona times. But would it be fair to say, a, that in the first half of the year, say, the vast majority of what we did see as the loss on the EBITDA side was driven by corona? So if we could mentally strip that out, it would have been rather a breakeven result in the first half. And related to it, how much of a spillover really in the increased logistics cost potential penalties from customers for delayed project is coming up for the second half of the year? Simply asked what would be sort of the underlying margin level that you think is doable with the volume of around EUR 2 billion to EUR 2.5 billion, eventually in revenues?
So I will suggest Sebastian that Patxi takes the first one. I take the second one and Christoph, the third one, if you don't mind. So Patxi, can you start this?
So with respect to the specific question on the U.S., yes, the volume that we expect in Q3 will be around a gigawatt, which is very similar to the volume we had last year in the U.S., which was in Q2. For that, we may still have more opportunities towards the end of the year, but those are for 2021 installed. And given the situation with capacity of that specific model and the blade production, probably capacity will be -- so will not match the room to maneuver. And despite potential opportunities in the market, we might find it difficult to land significant volumes in the U.S. in Q4. But yes, Q3, the expectation is a gigawatt.And with respect to the full year, we can expect without guiding, as you know, that we do not do that. But listening to geologic, you are probably on the right side. Given the continuous good operation and expectation that we have on the European markets plus the U.S. coming back plus some Latin America countries as well that will deliver significant volumes. So it's not out of the question to have a repeat year at that level to what we did last year.
Regarding the second question, I think the big order intake in Europe is considering majority of the supply chain coming from Europe. And your assessment is -- and that's considered in the profitability expectations and in the planning phase and is considering in what Patxi mentioned, and we always mention in the 3% to 5% better profitability in Delta4000 compared to the legacy products.So in summary, yes, we are expecting a substantial growth in execution in Europe next year, resulting of a fantastic order intake of Europe this year, majority of the volume with Delta4000. So an overarching statement here is that executing in Europe with the European supply chain is, I would say, less challenging. I mean, we have the challenge of the growth because we are going to almost double the volume that we're planning to do in Europe. But we have good teams, experienced people, established organizations, established factories. So the risk profile of executing in Europe with very experienced team and with already proven track record factories and so on is substantially less than the challenges that we are facing in geographies affected by COVID, like as mentioned, Mexico or India or Brazil. So the composition shifts to a less risky execution composition next year.
Yes, Sebastian, to your third part. And actually, I can immediately pick that up what José Luis just said. I would still say for this year, we are cautious on the cost effect because, as you can see, obviously, very high activity level. At the same time, production issues that had not gone away completely, we have to catch up in various aspects. So too early to say that we will not see further incurred higher cost, particularly on the logistics side, we have still to juggle with logistics, with component delivery. We have to speed up execution plans, this all doesn't go without extra costs. Therefore, please understand our cautiousness here. With respect to H1, the majority of the costs were certainly attributable to COVID-19. And I guess this is simply the best what we can say at that point in time.
Yes. That makes sense. It leaves a big question mark still, I think, for us, but we have to deal with it as well. It's our job. Just one question around the mix, if I may. It's a bit provocative, but with corona, obviously, being much of a pain, obviously, for everybody these days. But if thing is for project businesses in particular, but it seems now with the green plants, et cetera, it might rather emerge as a much stronger industry, the wind space in Europe, and particular, eventually than was estimated before. So when you have been talking about this 3 to 5 percentage points improvement in the margin, then I would have now suspected you wouldn't have taken such a high European content as it is right now unfolding. Would that be a fair assumption?
Yes, I think it's a fair assumption that, that's considering the supply chain transformation. So the backlog is considering that supply transformation that we mentioned. So I mean we were planning and we are still planning to have substantial capacity in Europe, and we are building substantial capacity in non-European countries to serve non-European markets, mainly. So the European activity, the majority of it is going to be supplied from Europe with the cost associated and already considered and with the improvement in profitability that we always mentioned by the fact of changing composition of the mix -- of the product mix. And this -- it was not mentioned before, but the trend continues. So we see margins slightly improving month on month on month. So that's a fair assumption.
And the next question received is from George Featherstone of Bank of America.
My first one would be on the EBIT margin for the service business. Could you perhaps give a little bit of color on what was driving the decrease that we're seeing year-on-year there, please?
Patxi, can you take it, please?
Yes. It's the effect of Q2 that had a 2.5 percentage points less EBIT and mainly due to COVID impact. We -- that's a temporary effect. And the consequence of the mix means that the service EBIT has dropped to 16.7%, and that was as a consequence of Q2.
Okay. Just maybe if I could follow-up then on that. What was it specifically? Was it spare parts inventory or something else?
Yes. If the disruption costs in the normal operations on the service part, accessibility to specific wind farms, disruption in spare parts and the like that have that impact in the quarter.
Okay. And then my second question would be on the remainder of the development at project pipeline. What -- how should we think about the outlook there in terms of further disposals down the road and kind of time frames for that?
I think -- José Luis speaking. I don't think we have anything planned. So we have accelerated the crystallization of value of the pipeline in Europe. It doesn't mean that we are going to exit the activities. It's an acceleration of our current activity because we -- because first was our responsibility to protect the company against a very huge disruption created by COVID. So as a consequence, we needed to somehow accelerate the cash conversion of those projects as quickly as possible. We didn't -- in line with this, speed was crucial. So we decided to segregate and focus only in Europe because there is more liquidity around those projects, they are better known for the different buyers. We still have and we still keep project activity in other geographies. And as said, we will slowly building up again the pipeline for future projects. But as of today, we are not planning to sell the non -- or to accelerate the value crystallization of the non-European projects because there is, in our view, less appetite at this moment.
And maybe one follow-up to that then. Within the European market, do you think that you would at some point re-enter that from a development standpoint? Or is that you guys done now and you own that market?
No, no, no. I think nothing prevent us to keep doing this business, which was very successful for us. We have certain exclusions in certain markets that we cannot disclose, but it's very limited to very selective markets. And we will reassess the situation in line with the planning for the budget and so on.
And the next question received is from Constantin Hesse of Jefferies.
I've got a couple. I guess you reassured us quite a bit already on whatever liquidity is concerned. But can I just ask you if you rule out completely needing any equity now that you have to help from the project development sales to RWE? And then a follow -- after that, basically, if you're quite confident on a strong margin growth at -- once COVID is over, especially for next year.
If you like I can take both questions. No equities in the planning. We think we don't need it, and we are quite confident about the profitability improvement in a post-COVID area.
That's perfect. And just maybe just one more on -- specifically on what your cash burn rate at the moment is.
Our cash burn rate. Well, I mean, if you look at the cash flow statement, which I think is pretty straightforward, almost no special effect sitting in. It's almost 1 by 1, basically driven by the current EBITDA development. So it's fairly straightforward. It's really the function of the EBITDA development in Q2.
And the next question we received is from Ajay Patel of Goldman Sachs.
Quite a couple of questions. I'm just trying to really understand -- let's assume, for example, COVID didn't exist and the original EBITDA guidance was EUR 160 million to EUR 240 million. And I think at the time you were talking about the Delta4000 being about 40% of the order backlog and now you're talking about -- next, if I heard all the questions and somehow they put together, broadly, on order backlog similar for next year. So that's broadly the similar sales. The 40% improvement, because we're talking about 80% of the order backlog maybe being Delta4000 and that has a 5% better margin than the other products, so maybe that's a 2% increase in margin year-on-year. I'm just wondering, what stops this business making EUR 150 million to EUR 350 million next year on the range? Just taking the range you gave this year and I'm just adjusting it just for the greater proportion of Delta4000.And then the second question I had is more CapEx. When I look at the other OEMs, the ratio of CapEx, the revenue seems higher. And I'm just wondering is, can you sustainably stay at this level? Or is it at some point, would you need to look to ramp up that CapEx investment further down the line? And what would be the drivers behind that?And then lastly, just on the COVID impact. I know you're not giving any information, but just even getting some broad idea or scope. We started this year, obviously, with a business plan. And I know that, that was taken away, but you would have had an expectation for Q1, Q2, Q3, Q4 performance. What would have been the split of EBITDA profit in H1on that business plan before any of this started? So that I can understand maybe what you are planning. And then obviously, the world changed and what the difference might be.
Thank you. I will take, José Luis, the first 2 questions. And eventually, we do the best to answer the third as this is difficult. I would say the first 2 questions, starting with the first one. I think -- and you see this in the order intake, and the order intake is an early indicator of the operations, which is what triggers revenue and profitability. And the Delta4000 growth for next year is substantial. You said this year, 40%, depends if the component blade myself, that is why weigh less in installation. And this flips completely next year, where we will do almost, I would say, for the sake of the argument, round about 3/4 of the volume with Delta4000, which by design and by planning, when we sell it, we sell it with this higher profitability that was mentioned before.So since being equal, COVID impact being stabilized, the company has proven to produce already, it's in the good track to prove the installation capabilities. We still need to ramp up the blades, especially the blade production, especially in those countries that are affected by COVID. Currently, as we speak, it's mainly India, Mexico, Brazil. But once this is stabilized, your assumption is right. I think we will do majority of the volume with -- as we see it today, COVID apart, substantial better profitability.If we talk about the second question about CapEx, we are very confident that with these CapEx numbers, we can run the company in 6 to 7 gigawatt per year. This might change 1 year when there is the introduction of a new product. But with the current visibility that we have in front of us, no new products coming in the next 2 or 3 years. So we expect to run the company with this CapEx level for that mentioned volume, 6 to 7 gigawatts and with improved profitability because we keep selling. We keep selling more Delta4000, which is more profitable. So the -- let's say, the remaining factor to materialize all these things that were mentioned is more stable in the COVID, which we are progressing there. And even in countries affected by COVID, we are learning how to operate and how to minimize the impacts in our activities. And the rest is operational business. I mean, producing the units and getting the units and installing the projects. As was mentioned before as well, we will see next year, very, I would say, little or no activity in Argentina, little activity in Ukraine. So majority of the activity is going to happen in the next 2 years in very stable countries with very stable teams. So the overall risk profile for the company is substantially decreasing next year.And regarding the last question...
Yes, it's not an easy one, Ajay, you know that. I mean, back bridging basically from now to a potential original business plan in this format is very difficult. However, I was thinking about it. I mean, one indication we can give is that I think it's fair enough to say that, originally, we would have planned, not with an average -- with a quarterly averaging of profitability, but following our logic that the higher the portion of Delta4000 is, the more contribution to our margin. So Q2, in the original plan, would have been less profitable than towards the end of the year. And therefore, I think that's also an influencing factor. Now looking at the impact overall or, let's say, at the absolute negative number that we are seeing. So it's a trend that, certainly, we always said that our profitability is a function of Delta4000 kicking into the P&L. And this is still true. And I think that needs to be factored in when looking at the minus EUR 70 million at H1, yes.
The next question we received is from Rajesh Singla of Societe Generale.
Hello, can you hear me?
Yes, we can hear you.
A few of them. The first question would be regarding your deal with RWE. Do you guys have any agreement with RWE for supplying turbines to this 2.6-gigawatt wind farm under development to RWE in the future? And the second question would be, has the COVID-19 impaired the prospects of margin improvement from Delta4000 platform, which you have been guiding for 3 to 5 percentage point improvement from Delta4000 platform? So has COVID-19 impaired that outlook going forward into 2021?
Yes. I'll take the 2 questions. I think regarding RWE, yes, we are planning to deliver turbines to that pipeline. We have firm commitments. I don't recall exactly 2 or 3 years. The rest, we still need to negotiate. But we expect to deliver turbines. And yes, it's a commitment. And forgive my -- for not having the precise answer, we will give it to you. I'm not sure if it's 2 or 3 years. Two or 3 years is commitment. The rest, we want to, and we will do our best to deliver the pipeline with Nordex turbines.Regarding Delta4000 and Delta4000 in 2021, again, COVID affect less in European supply chain and affect less in a European execution projects, but we still have some other geographies affected by components needed from Mexico, Brazil, India, which, if the situation doesn't stabilize full in this year, might slightly deteriorate profitability and execution next year. So the deterioration of profitability and execution is mainly a function of 2 major impacts. One is the project costs more to be executed because if you are not allowed to operate in the project or if you don't have components, you have extra costs that you cannot pass to the customer. And the second big impact is that if you are losing capacity because you have less people because they are affected either by lockdowns or by infection, your output is reduced. And as a consequence, your product has a higher cost.So we expect this situation to be improving. We see improvements already as we speak, but we don't have full certainty of how and when things are going to fully settle. And this is why after internal discussion, we say, well, we cannot guide the year. There's still many factors that are outside of our control. But definitely, we don't expect Q3 in the similar pattern as Q2 clearly. I think things are improving in the factories and in the supply chain. It's going to be Q3 and Q4 as planned before, maybe not. It's going to be 2021 as we -- with the same margins than when we sell it, maybe not. Is that going to be a big deviation? It depends how the situation evolve in the second half. But we don't expect those major deviations that we see today.
Okay. A follow-up question on the first question. So when you said you have direct commitment for 2 to 3 years. So when we can expect these orders to come in? So should we expect these orders start kicking in from 2021 onward or it might go into '22, '23?
José Luis, let me jump in. It's 3 years and not 2, and it's up until end of 2022. And it's subscribed to a certain number of projects of the ones that were sold in the pipeline. Having said that, we have a very healthy relationship with RWE as customer and has one of the deals that are coming now from the U.S. is with RWE. So it's a customer that we have been having dealings with over the past years, and we continue to have such thing definitely.
Again, this is not additional volume. I mean, it was already volume that was in the business plan. It's accelerating the cash. No, there is no exiting activity. There is no anything. It's current business that we decided to accelerate.
Okay. If I understood correctly, so this 2.6-gigawatt is not there in your order book, right? So you can still sell turbines to RWE, and that would basically get added up in your order book in coming years?
This part of this -- yes.
With the exception of the ones that are already committed.
[Operator Instructions] And the next question received is from Sean McLoughlin of HSBC.
I just wanted to build on your previous comments. You're sounding a note of caution on 2021 margins despite you're saying there's a less risky execution composition in '21, you're saying that, well, we still have dependence on extra European supply. Could you just say what do you need to happen in order to not have any negative impact on your internal margin expectations for 2021?
Two things. In the project site, not having the projects, having the availability to work and to install on the projects as planned. On the factory site, it's -- regardless it's our factories of our suppliers, having people to work. So that's the biggest driver. People working in our factories, especially in blade factories.
Understood. And second question around debt and the cost of debt. I mean, we've had refinancing, you've got the new German government loan. I mean, how should we think about your overall cost of debt over the next 12 to 24 months?
It will increase. Yes, it will. On the other hand, you have to appreciate that the cost of the COVID facility due to the fact that it is a state-supported facility is for our standards extremely attractive. So we are talking here about an interest of up to 2%, which is, I think, a very favorable rate.
[Operator Instructions] And the next question received is from the Virginia Sanz de Madrid from Santander.
I wanted to understand -- and sorry, if you, Christoph, already mentioned it in your comments, what do you expect in terms of working capital evolution towards year-end from the levels we have seen in this first half of the year.
Well, let's put it like that. I take some confidence for the remainder of the year from Q2 because Q2, as we have been discussing, was a quarter full of uncertainties. And still, we managed a fairly -- or we kept the continuity of our working capital development. And yes, José Luis mentioned it, I mean, we have mentioned it, the stressing of cost by COVID has not yet gone away. But I'm fairly confident that we can continue with our working capital management as we have been doing so far. I think Q2 was -- yes, demonstrated our ability to counter steer, if necessary.
And we received a follow-up question of Sebastian Growe of Commerzbank.
The first one is also on working capital. And I think you implicitly gave the answer, but nonetheless, so just really have it saying you loud and clear. Is there any difference between the regions when it comes to the payment terms, et cetera? Or would it really make a difference? That's the background of the question, if you were to take in more orders from the U.S. on the working capital overall? That's the first one.The second one is on VAT. You, I think, said in your prepared remarks, you cashed in about EUR 20 million. On my records. I think you had an outflow to the tune of EUR 90 million, 9-0 million, in fiscal '19. So I don't know if that is possible at this point. But do you have sort of at least a yardstick for us, what would be eventually a fair assumption, what you might recover simply in the year 2020 as a whole?And then the last one is one for you, Patxi. It's more really on the high-level thoughts around the wind market outlook. So if one looks at analyst estimates, also Bloomberg New Energy Finance, everybody has a cliff event baked in, I think, for 2020. So upon the phase out of the extended PTC cycle in the U.S., what is your take really when one looks at green energy deals, when one looks at what is currently happening simply in Europe? What is happening also in Latin America? It's improving big time. And you are obviously making the comment 6- to 7-gigawatts company over time compared to the 5 gigawatts now. So would you think we should really be prepared for cliff '21/'22 at this point?
Thank you, Sebastian. Let me start with the first 2. Actually, the already relatively small differences between the regions have even narrowed more, I would say, now because we -- particularly during now, our implementation phase of countermeasures, we have put even more focus on having homogeneous payment milestones. So I would almost say there is -- it's almost insignificant, the regional difference. It has been bigger in previous years, but this has almost managed. So there is not really a significant data anymore in between the regions.Number two, VAT. To be frank, VAT forecast is -- yes, I told you in the past, it's difficult. But we are confident that we continue now to be on the positive side, hence, to further have a positive balance here. And last year was the year of net outflows, so to say. I would say, this year is the year of net inflows. Yes.
Okay. Sounds good. And with respect to the crystal balling, my take is in European markets, we see underlying strong support from the politics side. So as you know, even yesterday in Germany, there was -- the cabinet passed the -- so in German, [Foreign Language], which is going to ease significantly the work for developers and eliminate some of the hurdles that they were facing and will certainly impulse the German market. If we see that across Europe, that is going to be superb. I think the big 3 is going to be happening in the U.S., which is the main driver for the decline in the markets post '21 and '22. And we have elections there now. And clearly, right or left is going to make a very, very significant difference towards our industry. And that is going to be, to me, the key element in order to assess in the next 3 years, whether we're going to be facing a downturn or not in the markets.
And Latin America would be still not a straight-line up, but further continued growth from your thinking.
I think -- I mean, if the Americans vote right, I believe, I mean, rightly, not right, rightly. I believe that there might be elements to think that there is going to be a change in policy. If there is a change in policy and sort of a similar trend that we are seeing in Europe at the other side of the Atlantic, we would see a shift in demand. If not, we will certainly see a decline in '22.
And the last question for today is from Markus Schmitt of ODDO BHF.
Just one on the high-yield bond. I mean, you -- the bond carries a relatively high coupon. And I'm wondering -- I mean, I see that the promissory notes are due earlier than the bond. But was there no option for you before managing the cost of debt more effectively to close a bond for which you opted, obviously not?
Not really because in terms of maturities falling now into place, we really had to address now the April maturity, obviously. And we can't -- it was -- I think it was already a lot at the same time. But you can be sure after we -- having taken that step now and put the short, mid-term refinancing in place will certainly have a very close eye on that. And then once the window is right, we will do something. But for the time being, I think we have wrapped up the structure, but we will certainly have a close look at that.
I mean the bond rates [indiscernible]. So I think you would pay much more. If you issue new paper, maybe also longer paper, well, it would make sense. So would you say within the next, let's say, until end of the year, beginning next year when the right window is there, then it could happen? Is that a fair assumption, considering the oil price, which goes down at some point?
It's real speculation at that point in time, I have to say. I can fully follow your rationale here, and you can be reassured that we are very closely looking at that. But I think we need now to take one step after the other, and it's too early to send clear signals here. For the time being, it's still a very stable instrument. But we will now revise that over the months to come. Yes.
As we received no further questions, I hand back to Mr. Zander for closing remarks.
Thank you very much. Thank you for all your questions and discussions. And I'd like to say good bye from my side, but I want to pass it over to José Luis for his final remarks. José Luis, please.
Thank you, Felix. I think from our side, the key takeaways of the presentation today, first and very important, is that the order momentum for Nordex expected to remain strong in the second half of the year with continuously high share of the new turbines and with better margins, as mentioned during the presentation. Second, COVID impacts in future -- on further business performance in full year 2020 cannot be precisely assessed at this point in time. The message that we want to give you is that things are stabilizing, but remain uncertainties. Third, very important, and before going to that, I think the business plan went through a thorough review from the lenders that participate in the revolving cash facility. Even before we were announcing the accelerate crystallization of project pipeline.So thanks to this thorough business plan review and the good word on and the support from key stakeholders. We accomplished a comprehensive financial structure in order to protect the company against the effects and the remaining uncertainties caused by COVID. So we don't see roadblocks in the horizon in that front for us. And everything is narrow to the operation and everything is narrow to project execution and blade ramp up.Last, the potential sale of 2.7 gigawatts of project development, accelerated crystallization of that pipeline to RWE, will strengthen Nordex' capital structure and support the growth trajectory and the profitability recovery.In summary, the management Board and the whole Nordex team and key stakeholders have worked very hard in the last quarter to stabilize Nordex in a very challenging situation. And thanks to the very good outcome, we are quite sure that our business plan, once execute, will transform Nordex into a top global long-lasting profitable player of the industry. And we don't expect this to be in 3 years from now. We see stabilization going on. We see, eventually, some deterioration minor to be in 2021. So we really are on the right track despite the massive shock that COVID has created.Thank you very much for your time, your questions, your interest and looking forward to keep working with you. Thank you.
Thank you. Bye-bye.