Cadeler - Earnings Call - H1 2025

Transcript

Speaker 4

Good morning and welcome to Cadeler's H1 2025 earnings presentation. Presenting today are Mikkel Gleerup, Chief Executive Officer, and Peter Brogaard Hansen, Chief Financial Officer. Please be reminded that the presenters' remarks today will include forward-looking statements. Actual results may differ materially from those contemplated. The risks and uncertainties that could cause Cadeler's results to differ materially from today's forward-looking statements include those detailed in Cadeler's annual report on Form 20-F, on file with the United States Securities and Exchange Commission. Any forward-looking statements made this morning are based on assumptions, as of today, and Cadeler undertakes no obligation to update these statements as a result of new information or future events. This morning's presentation includes both IFRS and certain non-IFRS financial measures. A reconciliation of non-IFRS financial measures to the nearest IFRS equivalent is provided in Cadeler's annual report.

The annual report and today's earnings presentation are available on Cadeler's website at cadeler.com/investor. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. As a reminder, this call is being recorded today. If you have any objections, please disconnect at this time. Mikkel Gleerup, you may begin.

Speaker 1

Thank you very much, and good morning, and good afternoon, and good evening to the people that have dialed into this presentation. Happy to present our half-year results together with Peter. What we can say around the first half-year result in 2025, our financial performance is above our expectations with the full-year guidance increased in July 2025. We maintain that guidance in this half-year report. When Peter delivered, a long-term contract with Vestas was secured, I think a process that we entered into earlier during the year where this opportunity became possible for us and where we also had a discussion with our client to come to the point where we are now. Upgrades are waiting for Peter before we will put her into commercial operation in Q1 2026. Seven investors are on hire around the world, including two in Taiwan and two in North America.

Strong and increasing demand for O&M services, especially for the larger turbines, is reinforcing our decision to establish Nextra, our service concept, where we also have seen now the first real evidence of that coming to the market with the Wind Keeper. Our Cadeler backlog continued to strengthen even with the removal of the Hornsea 4 after delay from Ørsted on that project, and we currently stand at €2.5 billion. Commercial highlights in the first half of 2025. The Wind Keeper is certainly a commercial highlight. It's a vessel that we negotiated, acquired, and took delivery of all ahead of schedule. It's the newest addition, and we have secured a long-term contract with Vestas for a three-year period with additional two and a half years of options with the same client.

The contract, as I said, commences in the early part of 2026, and we believe that the Wind Keeper will be a very versatile service vessel where the client can mainly do operations and maintenance for the vessel, but also have an ability to support transport and installation for certain projects. As I said, before we put her on work for Vestas in Q1 2026, the Wind Keeper will undergo tailored upgrades really to fit the Cadeler operating model, but also what we would like to deliver to our clients in terms of vessel and also what the vessel can do in European waters on projects there. Overall, on the fleet, we can say that the Wind Orca is continuing the installation on Hidrid. She had an O&M campaign earlier during the year, but is now installing on Hidrid.

Wind Osprey had also an O&M campaign and is installing on Baltic Power now in Poland. Still, probably a question that I will receive in the question and answer section around the Revolution Wind, but we are working on Revolution Wind for Ørsted, and the vessel is still here in the U.S. On Saratan, she's working in Taiwan on O&M. The Peak continues to install on Sophia. The Wind Maker is installing on Greater Changhua for Ørsted, and Wind Pace is also here in the U.S. working for GE-Vinova. The Wind Keeper is in transit on the way back in or close to South Africa at the moment, expecting to arrive in Northern Europe in October this year. In terms of our backlog standing at €2.5 billion, I think that what we wanted to highlight on this slide here is really because there's not a great change.

We have had another project coming in in Taiwan with the Formosa IV coming in. We announced that last week. It was part of a reservation agreement, and we signed that contract last week, and I think that it was a healthy contract economics we saw on that project, and a project that will be installed in 2028, which fits really the strategy for what we are doing at the moment, and 2028 is certainly a focus here, but more to follow on that. In terms of U.S., we are busy on three projects in the U.S.: Revolution, Sunrise, and an O&M job here. The U.S. in total constitutes less than 10% of our total backlog, and Revolution itself is the smallest part of that U.S. backlog in itself because we are almost done on that project. Next slide, please.

In terms of the backlog, I think having increased the backlog, although slightly from the Q1 presentation, I think it is an achievement, especially with a large chunk coming out from the Hornsea 4, and we still stand at a very, very high level of final investment decisions in our backlog. 97% of the projects in our backlog have final investment decisions. We are focusing on maintaining a solid overview of the projects that we are adding to the backlog, but also ensuring that the quality of projects we are letting into the backlog is something that we do on the same basis as we have always done. Pleased that we have been able to maintain the backlog at its current level after the delay of Hornsea 4. In terms of the new builds, I'm pleased to say also that we are on Wind Ally almost complete.

We are on sea trials and jacking trials as we speak, and we are ahead of schedule. Originally, we expected to deliver the Wind Ally in November this year, but according to the current plan, we are looking to take delivery at the end of September, which is a very, very strong performance both by a site team, but also by the yard, and everybody who has supported that. The Ally then has a sequence of jobs to do in terms of mobilizing her for her first project, which will be the Hornsea 3. It is very good for us that we are delivering as we are because it also means that we are coming on the project as we expect, and everything there looks to go according to plan as we see it at the moment.

Also, on Wind Mover, we are also looking to deliver the Wind Mover in the fourth quarter of this year. At the moment, it also looks like we are slightly ahead of schedule on Wind Mover, which is also a positive. The Wind Mover has a contract also where she will depart the yard and immediately go on that contract. For us, it has been important to make sure that the yard and us have an agreement on when the vessel is delivering, and as early as possible for us was important. The Wind Ace is also in production in COSCO Qi Dong, and the Wind Apex is currently at block stage. I would say that on new builds, the four remaining new builds are on or ahead of schedule and also on budget, which is pleasing.

On the financial results, I will hand it over to Peter so he can walk you through the financial results. Yeah, thank you very much. Maybe for Q2, the three months ending, we had a revenue of €233.1 million. That is, of course, impacted by the termination fees from the affirmment of Hornsea 4. However, if you adjust for that, then it's still a substantial growth as compared to last year. Extreme rates are still at around 50%, i.e., a very solid balance sheet going forward. Utilization, adjusted utilization for the three months in Q2 was 94.1%, which is very, very solid as well. We are pleased to see that we are above 90% for the quarter. Market cap €1.7 billion. EBITDA also substantially up against last year. Again, of course, impacted by the termination fees on the Hornsea 4. We adjusted our outlook for 2025, early July.

We took the reins up with €103 million, indicative of this termination fee. Adjusting for that, it is still a substantial growth that we are showing. Cash flow from operating activities also were up €50 million in the quarter. Backlog stands, as Mikkel said, at €2.5 billion. Three months daily average turnover on the stock exchanges, €4.9 million. If we look at the P&L for Q2 2025, and still bearing in mind, of course, this termination fee, which inflates the numbers, we see very, very solid growth in Q2. Now we have eight vessels on water as compared to four last year. Wind Keeper coming in very late in the quarter and not operational yet. However, we see that our operational model is functioning very well. Cost of sales is following the increase of vessels. OpEx also even a little bit lower than compared to last year.

SDNA, which is a number that we have talked a little bit about in the past, where we have increased that number in the past to be able to operate a bigger fleet. The foundations vessels now also showing that with the base that we have, we can operate a bigger fleet and also foundations vessels and more projects. Utilization was 76% and adjusted utilization 94%. The cost of sales, of course, increasing with the delivered vessels, which is then when Peak delivered in August last year. Not in the comparable numbers with Nextra and with Pace. EBITDA also a very solid growth from €32 million to €189 million. The P&L for the first half is, of course, impacted again by the termination fees that we have received on the Hornsea 4. Adjusted utilization for six months is 89%, also a very, very good number.

Revenue increases with the termination fees, of course, but also with the more projects and more vessels. Projects we also see at a higher rate than historically. It shows the operational business model is working as planned. If we look at the quarter and the first half, it is as we have expected and planned, I think on all lines. Development under very good control, costs under very good control, revenue as expected or above. It is a really, really strong quarter. No doubt about it. The balance sheet is, of course, increasing with the delivery of vessels. CapEx for the quarter was as expected. You can find more flavor on it in the notes to the first half accounts. It is growing with the Wind Mover, installments on Wind Ally. It is on the M-class vessels of which one was delivered.

It's on the Wind Keeper that came in late June with a significant amount, but again, as planned. Other current assets are increasing, and that is, of course, again, the termination fees. They are sitting in the balance as contract assets. We issued the invoices early July. We got the termination very late in June. Hence, it's sitting as a contract asset, but it's not a reflection of it. It's less certain. It is only a reflection of that we received the termination the 30th of June, so then invoiced in early July. Termination fees are due here in Q3. We expect to have a cash inflow from other current assets in Q3. Still a solid balance sheet. Extreme rates are 50% as compared to 64%.

Of course, it goes down as the balance sheet is a little bit more leveraged, but we will not see, we will not expect the extreme rate to go below 45% around that leverage. Thanks. Hogan is expected to be fully funded. What is outstanding now is only the third A-class vessel, the Apex, coming in in the 2027. It's a bit early for us to start that. We have started, you could say, the pending threats on starting up a facility discussion on that one, but it's not being delivered until 2027. It's too early to start paying commitment fees, but there is a strong interest from banks to also support the funding of that business. We have a cash of $51 million, but of course, we are not taking in the termination fees here.

All in all, the conclusion on this slide is that we have a very, very solid financial situation with cash and available cash, substantially available cash also after payment of the CapEx program. As we have elaborated on in the past, our hedging policy is that we hedge 50% of the U.S. dollar exposure on the installments to the yards. We hedge 50% of the interest exposure. That is a strict policy that we stick to, and I think it has served us very well in the past. Financing overview, we have $2 billion, $2.1 billion of committed facilities. The Wind Apex is uncommitted as of now, but we are in dialogue with the banks to also get that financing committed. We expect to close it approximately a year before delivery.

We had the Wind Keeper bridge facility in Q2, which formed a part of a very attractive business case where we were able to buy the Wind Keeper at an attractive price, get an attractive contract on it, and fully finance it. We have signed the takeout facility of $125 million. The remaining part of purchase price and CapEx, we can finance from the operational cash flow and the already available cash we have in place. Four-year outlook, as I said, it was increased early July on the back of the termination of Hornsea 4. Project zone now, it is an outlook of revenue between €588 million to €628 million and an EBITDA €381 million to €421 million. It's, of course, the full year. That was impacted by termination fees and timely vessel deliveries and execution on projects. Wind Maker and Wind Pace, which was delivered in Q1 2025.

It's already entering Apex and U.S. There are two additional vessel deliveries coming in Q3, Q4, with Wind Ally and Wind Mover. As Mikkel said, it is on time and budget. We also start to see the revenue and cost from foundation project starts to be recognized. It's the two foundation projects that we have, Hornsea 3 and EA2. I would like to also elaborate a little bit on how we show revenue in our numbers. There's two lines. There's a line from a time charter of revenue and foundation work, installation work. That is what is coming from our vessels and the contracts on the vessels. We have another line, which is other revenue for this first half. It's €120 million. That is where the termination fees sit. The €120 million is not equal to the termination fees as there's also other services in other revenue in there.

It's what you would call sundry income. It's income from accommodation and catering on the vessels. There can also be other smaller revenue streams. You can see in the comparable numbers, there's also €13 million in for the first six months in 2024. It's not a correct conclusion to say that the termination fees from Hornsea 4 is €120 million. I will give the word to Mikkel on sustainability.

Speaker 3

Yes, just to start on sustainability update as well. We believe that that is important to update you guys as well on what is being done. I think we can say that the team has been expanded both in terms of competencies, but also raw muscle to develop what we need to develop. We have had several investors over the years asking us to be vetted and certified under different schemes. That is something that our sustainability team is also working on to make sure that we are where we need to be in terms of that, but also in terms of really raw decarbonization on what we do. We have our own targets, and we are trying to be ambitious.

The roadmap has been defined also with the larger fleet that is coming in, and the gaps that are needed to be bridged, so to speak, they are being modeled and what to do to reach our targets. We also have ongoing shore power upgrades for the O-class vessels with Wind Osprey being finalized in Q1. In terms of equipment efficiency upgrades, we are also looking at that on the O-class vessels after the energy audit we did there, and we are planning the execution for the end of Q3. In terms of biofuel, this is also a strategy we're looking at. The legacy vessels will not be able to sail on the new fuel types, and their biofuel can play a role.

We have been testing with blending biofuels into the fuel mix to also have that as an asset on the sustainability radar for us and something that we can work with our clients to procure and to deliver on projects as well. Last but certainly not least, we are also developing a roadmap for implementation of a human rights strategy. That is something we have based on the old one and to be presented to the board for final approval and then roll out across the company as well. In terms of commercial outlook, I think that our view of the market is that there is a calibration in the market, but there is also a continued momentum. We recognize that there are things that are happening in the market that are outside anyone's control at the moment. We think that there is a period of recalibration.

There have also been targets in every market, basically, that were not achievable with the supply chain we have, so things are being recalibrated. There are also companies that are recalibrating their roadmaps due to local auctions and auctions that didn't go as they planned. Denmark is an example. Germany is an example. The UK had an example of that in the round five. But also due to company-specific events, that means that companies have to recalibrate what they can do and when they can do it. I think that what we can say is that we are, you know, I think the market caution is exercised and is prudent. I think also that we think that conditions and policy improvements are expected. We have seen some of that in the markets that have redone their tenders and have gotten them right.

I think we have seen improved conditions both in Denmark, but also in the UK. As many others, we expect that the UK round seven will be a solid round. We saw also the British government coming back with the approval of even projects without permits allowed to be participating in the round. I think that that's certainly a new thing for that round for those auctions. We are seeing that the governments are also trying to play a role in achieving as much as possible by 2030. Some projects are facing delays and timelines are shifting on some projects closer to 2030, where on the other hand, we see a pretty significant pickup again in projects. As I said already, there are important auctions ahead. The AR7 is probably the most significant one. We see several new early-stage markets beginning to emerge.

Just this morning, there were news about the offshore wind in Vietnam again, where one of the larger developers is taking now a share in one of those projects. We see more of that. We see also test projects in Brazil starting to emerge and have been in contact as well with partners in these markets, although this is also again for the longer term and probably more into the next decade. We still have a positive outlook on the long term in the market. We believe that offshore wind will play a crucial role in the future energy mix for many different reasons. We are seeing that probably 2027 and 2028 are more challenging now than they were a year ago because when one of these bigger projects goes out of the market, then it's for sure that that is playing a role.

Our strategy has always been to work on projects that are our primary projects, but also always to have backup. We believe that with the strength of the fleet and the strength of the assets, we will be able to also play a strong role for our clients in the market, even in those years as well. As we see it currently, we have been developing this slide here from last time as well. We see that there is still an undersupply of vessels expected coming towards the end of the decade. It starts first on the foundation vessels, where we see an undersupply in 2029 based on the projects that need to go into the water. We also see that clients are engaging early with these projects with us and with others to ensure the right capacity for installation, but also for O&M.

One of the reasons that we announced Nextra in our last call with you guys is, of course, because we have seen that the O&M market is something where we see the clients really asking for support and supply of capacity. That is across regions, where some regions have more access to O&M supply, where other regions find it very difficult due to complex sites, deep water, complex soil conditions, and the biggest turbines out there. We do believe that Nextra and our fleet strength can play a strong role in both these spaces. If we are to look at what is really an efficient vessel, we have talked a lot about this supply, and we have shown you how we believe that the supply situation looks in the market, but more on an overall what is in there in total.

I think that here we are trying to say how we look at the situation in terms of efficiency. Efficiency in offshore wind is really days. How many days do you take to install a project? Here we have just said a theoretical project that we have evaluated and tried to program. How long time would it take for two different vessels to install this project? We have said it's 100 turbines of 15 megawatt class. It's 140 nautical miles from the site that we are installing, and it's in the North Sea. If we look at the P-class vessel that can transit with six VTGs per round trip, then we need 17 round trips and 2.14 days per turbine. If we compare that to another standard vessel in the industry, the Gusto Engine 9000, then they can transit with two turbines.

They need 50 round trips, and they need 2.69 days per turbine installed. If you look at the raw numbers, the raw program, then we would need 214 days to install such a project, and they would need 269 days. On top of that comes project-related delays. The longer you take to install, and no matter where you start and where you end, you will have longer time in, let's say, a less favorable season. Waiting on weather, waiting on pilot, waiting on tide, and stuff like that, that is something that is increasing on the less capable vessel. We do believe that that is converted into money in the value calculation at the clients as well. We believe that the stronger assets will be the first ones to be taken in the market because they simply drive a better value proposition to the clients.

Trying to take that into the next slide, where we show you the slide we have shown you before, what is the total supply in the market? What is the total supply of new-built vessels since 2020, and what is the total supply of legacy vessels? This is a slide that you all should be familiar with because we have shown it before. Cadeler is on the left side here with 12 vessels and currently the market leader in terms of number of vessels. If we then try to say, okay, what is the efficient vessels that are out there? If we look at what vessels can install wind turbines, then we believe the number looks quite different. If we say what vessels can efficiently install the 15 megawatt class of turbines, then the numbers look very, very different.

At Cadeler we are discounting a number of vessels here in terms of efficient installation, but we believe that we have nine: DEME with two, Fred. Olsen Windcarrier with one, Seaway 7 with one, Jan De Nul with one, Penta-Ocean with one, Maersk with one, Shimizu with one, and Dominion with one. It is a significant reduction from the overall numbers. If we then look at the foundation installation, then it's an even more dramatic number we are looking into because in terms of efficient installation, then we're looking at seven at Cadeler. We're looking at four at DEME, and two of those are only for foundations. We're looking at two at Fred. Olsen Windcarrier, one of those only for foundations, and I would say primarily foundations in the Baltic Sea due to limited weather capability.

Three at Heerema, one at Seaway 7, two at Jan De Nul, two at Boskalis, one at Penta-Ocean, and one at Saipem. I think that that is our view on what is efficient vessels, and it changes the supply equation slightly. We do believe that especially in 2029, we see an undersupply of vessels that can do efficient foundation installation compared to the number of projects that will be installed. We have been asked for it many times. What is our view on efficient installation across the two components, turbines and foundations? This is our view. I know that if you compound the numbers, we have more than the total number of vessels, and that's because some of our vessels can be converted to both do either foundations or turbines, and hence they are counted in both spaces. Obviously, they can only work in one space.

If one is counting them for installing foundations, then one has to discount them from the turbine installation and make that space slightly tighter. If we look at the demand for O&M, the reason we entered into that market is pretty simple. We see a steady growth in the O&M market due to a larger installed fleet. We also see that our clients are asking us for more services in this space and the support on the bigger assets that can handle more complex sites because this is really where the bigger turbines are installed. We have seen situations where our clients have only had one or two vessels to select from to do a particular service for their turbines. We are here to try to help our clients and provide them with what they need to do the work.

That's why Nextra is believed to have a pretty strong demand outlook across the years ahead of us. As we said, the vessels on our side where we believe that there will be, in the beginning at least, an O&M future. We are looking at Wind Search and Wind Silla and Wind Keeper. Silla and Keeper will also have some installation scope to do. Silla in the U.S., Keeper probably primarily in Europe, and then onto a future of O&M. The installation vessels will have patches of O&M in between installation work. We believe that the market opportunity, as I said already, is growing and is growing significantly. We are working to strengthen the Nextra team.

I think with the Vestas contract that we now have, not only is that a proof of concept, but also it is really also now the point in time where we can start to build the Nextra team and make sure that we are able to deliver what our O&M clients they are requesting. We have gotten the question from a lot, why Nextra and why not just under the Cadeler umbrella? It is still under the Cadeler umbrella, but the reason that it's Nextra is really because we want someone, we want a team that can speak the same language as the O&M clients on the other side. That is something where I think that the first three months of Nextra has shown that that is something that is appreciated by the clients as well. Also, good conversations have come from that.

We believe that we are deepening the client engagement not only across the O&M, but also into the installation space by having more touch points with our clients. Of course, the strategic fleet expansion with the Wind Keeper. I think we already knew that there was a future for that as investors. We believe that both the price we could acquire, but also what we could agree with our client, was both attractive enough to make this decision. We did it, and we believe that will add value to the overall case for our investors. In terms of what the future is for Cadeler and what we are focusing on at the moment, we are really focusing on building a resilient business with a clear and consistent focus on our core competencies, also so we can handle when things don't go to plan.

I think that we are talking about the expansion. We have talked about that for a long time, and I think that the Nextra expansion was an expansion that really not only is it something that is asked for by our clients, but it's also something that stabilizes the whole Cadeler fleet due to an expected utilization stream from Nextra into the installation fleet as well. As I already talked about, the latest acquisition of Wind Keeper is one where we had the opportunity to look at an attractive price for an asset and an attractive contract with a client we know. Those things together, we discussed with our board, and both we and the management team and the board agreed that that was attractive enough to go ahead with it. We are, of course, also looking at what is good growth and what is not good growth.

I would say that at the moment, we are very, very happy with where we are on fleet size and what we can do both across O&M, turbine installation, and foundation installation. We are working in all the major regions, and we are also being asked to be a partner in the emerging market, which is positive. That has been a strategy for us to be having early looks so we know what is coming, not in the near or mid-term, but really in the long term. That is a positive sign that we can see that these markets that we expected to come online, they are also coming online as expected. Focusing on strategic partnerships has always been a focus for Cadeler.

I think that the latest edition of the long-term contract with Vestas is a further substantiation of that and also enabled us to maintain our backlog despite the fact that the Hornsea 4 was delayed and hence taken out of the backlog. We really also monitor and apply new technologies. Here we are mentioning the developing and testing of biofuel and having a strategy for that to really drive down our carbon footprint. It also is something that will be very relevant for the whole Nextra entity in terms of having, let's say, more strategy on tooling and tools used for O&M to really make the O&M journey as efficient as possible for us and our clients. We already are in discussions with large clients in the industry to co-develop certain tools and assets for that.

That could, and when I say assets, I mean the things that we need on the jack-ups to efficiently do the maintenance, which can, for example, be a flexible sea fastening that can range across different turbine types, for example, so we can service different components as fast as possible and as efficient as possible. In terms of investment highlights, still sitting on the largest and most capable and versatile fleet in the industry, we believe that the complementarity on the fleet really enables the cost utilization, efficiency, and project de-risking across the three different legs that Cadeler stands on today. Very experienced team, and as Peter said, we are now where we would like to be in terms of being able to execute across different things.

I think also the team has shown its flexibility and its versatility by also enabling the onboarding of Wind Keeper at record pace and still also having it manned at record pace and getting it back to Europe, strong technical plan for the upgrades and getting it to work in the early part of next year. A resilient global platform that can handle these shifts in the market that we see. Some of them are really unfortunate, and we are trying the best possible way to support our clients with stabilizing as much as we can. That is what the Cadeler fleet can do, but also what our team can do. We can think out of the box when things go not to plan, and we are looking forward to continue to support our clients when things don't go to plan.

As I said, an undersupply of especially foundation vessels from 2029 and onwards, and we see an increasing market demand, especially to the beginning of the end of this decade and beginning of next decade. I believe in the long-term story for offshore wind and for O&M in general, also in the market with a larger need for electricity in the market. That is something that we still stand firm on. We have a strong track record in the capital markets and a record high backlog, and we believe that that creates earnings visibility for our investors, and we continue to focus on being a good custodian of capital. With those words, thank you for listening in, and now we open up for the Q&A.

Speaker 4

Thank you. At this time, we invite those analysts wishing to ask a question to click on the raise hand button, which can be found on the black bar at the bottom of your screen. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will hear your name called and receive a prompt to be promoted. Please accept, wait a moment, and once you have been promoted, you may unmute yourself and ask your question. We encourage you to turn your video on as well. We will wait one moment to allow the queue to form. We will take our first question from Jamie Franklin with Jefferies. If you could unmute your audio and ask your question.

Speaker 1

Hey guys, hope you can hear me okay.

Speaker 3

Yes, yes, we can hear you, Jamie.

Speaker 1

Hey, firstly I've got to ask on Revolution Wind. I know obviously it's only a very small part of your backlog now, but just wanted to get a bit of color on what the potential impact could be to Cadeler if this project remains halted, for example, if it stays halted for a month, or what would ultimately happen if the contract is canceled. Do you have any contractual protections in place, firstly on Revolution Wind, and then secondly on Sunrise Wind, please.

Speaker 3

Yep. I think what we can say is that contractually we are as well protected as you can be. That has been discussed before because the fact that the market here is difficult at the moment is not a surprise, I guess, for anybody. The contract we have on both Sunrise and Revolution are contracts where I would say there's a lot of protection in them. At the moment, what we can say about Revolution Wind is that we are in dialogue with our client. The only reference point we have is Empire that was halted for around about a month or so, and then it was restarted again. The question is, will the same happen here? Nobody knows at the moment.

I think that we are here, and we have said to our client that we are looking to support them to the degree we can with the installation of the project. That's the only logical outcome of this. This is that Revolution is completed and providing clean energy to the citizens of the U.S. I think that nobody really knows today what is happening. We have been told that we should stop working on Revolution Wind and comply with the stop order and that we will hear more. That is what we know today.

Speaker 1

Okay, got it. Thank you. That's helpful. Secondly, I just wanted to talk about Wind Keeper. You gave a bit of commentary on your CapEx in the first half of the year, which included various construction payments for the new builds. Talking about 2Q specifically, is it fair to assume that the majority of that CapEx related to Wind Keeper and there's no sort of other major construction payments? The second part on Wind Keeper is if you can just give us a bit of color on the upgrades that you're expecting to make on the vessels, not just in terms of the value, but if you can give us a sort of picture of what the physical upgrades are likely to be. Thanks. Let me.

Speaker 3

Thank you, Jamie. Let me answer the first part of the question, and then maybe you can answer the second part of the question. Yes, it's fair to assume that Q2 CapEx is with Keeper. There's no unplanned CapEx in Q2 or first half. It is really the installments that are in the contracts with the yards. Wind Keeper, of course, came in with a big number in Q2. Your assumption is correct. In terms of the upgrades, the upgrades we are doing on Keeper are upgrades that will enable the Wind Keeper to work in European waters like what we see on other vessels. The Wind Keeper has been built by a company in China that had an ambition of working in Chinese water and also in international waters.

There are things that they have done in the design that we would have done differently if we had started the design, so to speak. We are trying to rectify some of those. I cannot give you all the details, but some of the things that we are doing is that we are, for example, putting a new auxiliary crane on the vessel because the current auxiliary crane is in the way of the way we do a deck layout for efficient O&M, but also for potentially installation work. We are also adding a new bow thruster to improve the DP plot for North Sea operation. We are also working on the leg guides to get more capacity out of the very nicely long legs that this vessel has that enables her to work on very, very deep water depths and very complicated soil conditions.

We are also recertifying the main crane under an international classification society, which means that we can do a better lifting curve with the crane. A general accommodation upgrade will make her similar to our other vessel standards and also to what our clients can fairly expect from a Cadeler vessel. In highlight, those are the upgrades we are looking at.

Speaker 1

That's great. Thanks. Final question then. With regards to Wind Keeper, were you actually sort of actively looking for an O&M vessel, or was this basically just an opportunity that came up at a good price and you went for it? Have you seen sort of other similar vessels in the market in Asia? Thanks.

Speaker 3

Last question first. We don't see similar vessels. I think the Wind Keeper is pretty unique in terms of how it's been built. It's been built with a lot of international components, so there's a lot of, let's say, read across to other spare parts in the Cadeler fleet, for example, on the Huisman crane and so on and so forth. We have looked at other Chinese assets, but mainly due to the fact that we got the questions from investors a lot. What if these Chinese vessels are coming to Europe, suddenly starting to compete? That actually made us look into all these vessels. What is out there? How can it be done? How would it look if they came? What would need to happen to them if they had to be upgraded? The conclusion was clear.

It's very, very hard to upgrade the vessels that have been built particularly for the domestic market in China because they have been built for a different installation methodology that almost would make it easier just to build a new vessel rather than to try to retrofit to Europe with one of these assets. The exception was Keeper, but it has been offered to us for a long while, more than two years, but the price started in a different area. I think that our interest in Keeper started really when we were contacted by the lenders of the vessel, and we could see that we could acquire the vessel at a price point where we believe that we could also build an O&M business case on the vessel.

At the same time, we had a dialogue with a couple of clients that were in need of that O&M supply already starting next year. Since there's very, very limited availability this year and next year in the market, we had a dialogue with some of these clients and said, "This could be an option. Is that something you would go for? If you wanted to go for it, how would you do it?" That is what led to the decision. That is very transparently sharing how the decision was made.

Speaker 1

Okay, that's great. Thank you very much. Well done on the strong results. I'll hand it over. Thank you.

Speaker 3

Thank you. Can we force stop the presentation so we can see the speaker, please?

Speaker 4

Our next question will come from Roald Hartvigsen with Clarksons Platou Securities AS. Please go ahead and ask your question.

Speaker 2

Sorry, Dana, can you?

Speaker 3

Thank you.

Speaker 2

Thank you.

Speaker 0

Hi, Mikkel. Hi, Peter. Congratulations on another strong quarter. First, just to follow up a bit on the first question that came in on Revolution and Shilla. I know it's still early, so probably no firm plans yet, as you alluded to, but do you see the potential for alternative work scopes for the MESQ vessel amid the stop order? I guess more specifically, Sunrise Awareness in the same area is still progressing. Do you think there is a scenario where Shilla moves over to help out with work there while awaiting clarity on the stop order, or are there roadblocks making that prohibitively challenging?

Speaker 3

I think first and foremost, our clients don't wish that. The vessel is mobilized for the installation of Revolution and Sunrise, and if we work on something else, we have to demobilize from these projects because we are working with a Jones-compliant barge that is landing the equipment on the jack-up, and then we install from the jack-up. It is not so easy to just go and work somewhere else. I think it's fair to say that our clients don't wish us to go and work somewhere else now. That is certainly something we would have considered if it was possible also to minimize the impact for our client.

I can say that after this news came out on Friday, we have been called up by some clients that are interested to hear whether that vessel then becomes available because there is at the moment today a shortage in the market on capacity in projects also in Europe that is already in installation. I believe that if the vessel comes free, which I don't believe or hope today, I would like to make that clear, it could be repurposed to another project.

Speaker 0

Thank you for the color. Furthermore, we have over the last year or so seen a number of contract terminations for turbine installation vessels where the turbine installation vessel operator has benefited significantly from large termination fees. I guess many would also place you in that category. My question is, in that context, do you see more pushback from developers to sort of lower termination fees on the contracts being signed and negotiated now and in the time ahead? Are you still of the impression that the levels for termination fees in the contracts remain fairly stable from the contracts that were signed one, two, three years ago?

Speaker 3

I don't see that at the moment, but I would also say that the backdrop is very short still. If it's coming, it's probably not, we have not seen it yet. I think that the flip side to that coin is also that for us as a vessel provider, to lock in the vessel and not being able to do anything else with the vessel, it comes with a cost. It's an option, and an option has a price, right? It's something that you can calculate the value of an option. I think that that is how we are looking at it as well because we can also say to our clients that projects have been delayed, and hence we need to protect ourselves if that happens. We cannot just sit with nothing if it happens because then we become the losers in the grand play, so to speak.

I think that we still have very fruitful dialogues on this, but it's a two-sided sword almost, you can say, because one thing is, of course, to have the protection and the termination fee. The other side to that is also to try to really bet on the projects you believe in as well. There is work on our side to be rightly placed for the right projects, and then, of course, also to not always look for the last dollar, but also look for the right conditions and the contracts, I would say. I think that that's something that is still working fairly well for all parties in the industry. I would like to say that termination fees as a contractor, you're happy they are there, but you really don't want to have them. You would like to do the project instead. The same goes for Hornsea 4.

We would have loved to do Hornsea 4. We would still love to do Hornsea 4 when it comes back.

Speaker 0

Yeah, makes sense. Thanks for your time, guys. That's it from my side. I'll leave the floor to the next one.

Speaker 3

Thanks everyone.

Speaker 4

We have no further questions at this time. Thank you for your participation. I will now hand the floor back to Mikkel Gleerup for any closing remarks.

Speaker 3

Thank you for everybody listening in. Good to speak to you again, and reach out to us separately, Alexander, Peter, and myself if there's any additional questions. I'm sorry we cannot give more detail on Revolution, but I think everybody can understand that it's very new for everyone and that we are working with our client as much as we can in this sad situation that our client is currently in. We will update you as soon as we know something that we can share. Thanks for listening in now, and have a good day.