Welcome to Wärtsilä CEO Strategy Call. I'm Hanna-Maria Heikkinen, and I'm in charge of investor Welcome to Wärtsilä CEO Strategy Call. I'm Hanna-Maria Heikkinen, and I'm in charge of investor relations. Today, our CEO Håkan Agnevall will discuss some of our key long-term opportunities, and after Håkan's key messages, there is a possibility to ask questions. As a reminder, we will host a pre-salon call on June 18 together with our CFO, Arjen Berends, so let's leave the questions related to recent trading and detailed financials to that call. If you have a question, please use the raise your hand functionality in Teams. In the case you do not have the possibility to use the raise your hand functionality, you can also send an email to me. Please, Håkan, time to start. So, hello everybody, and nice to have you online again for some dialogue on a Friday on my favorite topic, Wärtsilä. I'm sure it's going to be your favorite topic as well. I just came from Nor-Shipping. As you probably know, it's one of the really big fairs and get-togethers in the marine industry in Norway, in Oslo, and collecting people for all the. I will talk a little bit about my reflections on Nor-Shipping. I'll start like I normally do by giving my kind of overview of the industry and where we are heading, so to say, and then let's see if it takes 15 minutes, and then we move into the Q&A session. If I start overall, our strategy is about shaping the decarbonization of energy in marine. We also say that this is a transformation that will take decades, not years, but decades, but it's clearly there, and I would argue it's accelerating. We also have the saying that green is not black or white. There are no single solutions. We need multiple solutions, and of course, the exciting for Wärtsilä is that we think we have some of the major solutions in the decarbonization journey going forward. It's going to be a lot about fuel flexibility and fuel efficiency, and it's going to be a lot about balancing power on the energy side. We continue also, of course, our service business. As you know, more than 50% of our revenue is services, and it's also a significant contributor to our growth and to our profitability. It's still the same narrative. You also know that we recently launched our updated financial targets, and when we separated out storage, for energy and marine combined, we are talking about 5% annual organic growth and 14% EBIT. On storage, we talk about low double-digit annual growth and organic growth and 3%-5% EBIT, so to say. That still holds. If I start with marine, to give a little bit of industry perspective and then move over to energy and energy storage. On the marine side, clearly major events that have taken place quite recently, MEPC 83, the vote was made, the U.S. stepped out, but China, Europe, India, Brazil, many countries voted for, and it is now coming for formal decision in October, so the decision has still not been made. If the decision is made, it is only a milestone in the industry. I would say for the world, because if this goes through, it will be the first time that we will have a global carbon fee, carbon emission fee for the marine industry. I would say that the marine industry will probably be one of the first industries to actually have a kind of global carbon emission regulation. Some argue that it's too little, too late, etc. Yes, it's not perfect, it's a complex framework, and because of its complexity, there is still a lot of interpretation to be made. It's clearly taking a step in the right direction when it comes to decarbonization, and it will support Wärtsilä strategy. I mean, one of the conclusions that we have been making is that, and you need to simulate a little bit, but basically the cost for operating on HFO will basically double until 2035. I mean, we said before that with the EU ETS and EU Fuel Marine, the cost will double up to 2030, but now with IMO, globally, it will double to 2035. I think that is also under the framework, you know, there will be increased interest in biofuels, but let's see how it evolves. On a disappointment side from us, we would have liked to see more formulation on carbon capture, but that's a longer-term discussion now. The next report is in 2026, and let's see how we take it onwards from there. I would say that, you know, when I talk, as I did at Nor-Shipping with many of our big customers, they are clearly thinking around this and developing their strategy, and there is not only one strategy. People, different players are going with different solutions, but it's clearly on top of many people's minds. When we look at the U.S., the tariffs, we look at Section 301. I mean, if you look at Section 301, which was this U.S. piece of taking action and imposing pretty hefty fees on Chinese-built vessels and vessels operated by the Chinese, I think that was finally watered down in the final version. I think, you know, the industry will maneuver a little bit around it. Of course, we had the currently ongoing discussions on the so-called SHIP Acts in the U.S., where this is resurfacing as a topic. Let's see how that plays out. That is still too early to have a view on, but the discussion on the fees there is still live, so to say. Of course, this regulatory tariff, it creates uncertainty. I think that's the major impact. I mean, U.S. shipping is less than 10% of global shipping. From that perspective, as we know, there are no major shipbuilders or shipowners in the U.S. From that perspective, you know, limited impact, but it does have some impact on certainties. Yes, clocks on data are coming down, but as we highlighted in our Q1, if you look at the clocks on forecast for the coming two or three years, it is still clearly above the 10-year average. You know, we still see our demand side holding together, driven by our core segments, cruise, ferries, and specialty vessels and offshore, and also by the continued decarb journey, so to say. Of course, if the indirect impact of the tariffs is that the whole world economy slows down, that will impact shipping, and it will certainly impact Wärtsilä as well. So far, we see a demand side that on the marine side is holding together fairly well. Also, on the services side, developing very positively. You have seen in our reports the famous book-to-bill, which we track in all four disciplines, everything from services and agreements, spare parts to agreements, etc. It is still developing in a positive way. I think our strategy of moving up the service value ladder is still working out very well for us. That is encouraging. On the technical side, two major things, recent things is, of course, we are now having our first order for an ammonia engine with a PSV. I mean, offshore service vessel, with our Norwegian operator, and that will be taken into operation in 2026. That is big news. The other big news lately was the launch of our carbon capture. We clearly see carbon capture as one big potential retrofit solution. As we all know, there are about 100,000 big vessels out there in the world, and many of them will need to be retrofitted. We see carbon capture as one of the major retrofit solutions. What we do have now as an extension of our scrubber business, we have a carbon capture device, and we capture 70% of the carbon at a reasonable energy penalty, so to say. Of course, we can continue the rate of capturing. It is more, we start here and we see there is a customer interest for this type of capture rate. There we also have now a full commercial launch. We have had pilots with Solvang, another Norwegian customer. Now, since this pilot has been very successful, we are going to full commercial launch. Those are the latest, I would say, on the marine side. If we continue over to the energy side, and as you all know, energy by this, we now talk about the thermal power plant business. Energy storage is separate, so we talk about energy. The demand side is certainly holding together. Actually, I would say both on baseload, but also on balancing. U.S. is hot, not only from a temperature perspective, but also from a market perspective. We do see that the, you know, the move to renewables continues, especially in the mid-section of the U.S., and primarily driven by the affordability of renewables. As you know from the Wärtsilä narrative, as the share of renewables grows, you need balancing power. If you do not have it, you will have challenges. I think recent development in Europe and Spain has shown what could happen if you do not have a power system in balance. I will not go into the details of the Spanish, you know, incident or whatever you want to call it. There is no single simple explanation, and those involved do very thorough analysis. One clear factor in this complex equation is that there needs to be more balancing power in the Spanish net to keep it safe. Balancing power is here to stay, and it is here to grow as well. On the baseload side, we see activities in our, you know, strongholds, both in Asia and South America, and data centers. You know of our orders in data centers in Europe, and we are working intensively on opportunities in the U.S. So far, no concrete orders to report. We will certainly do that when we have the income paper, so to say. I can clearly say that there is a lot of activities, a lot of interest. So far, no new orders to report on data centers in the U.S. Similar on the services side, it's the four disciplines performing well. Moving up the service value ladder works well for us, also in energy, and it continues to move forward. I do think that we have a very good narrative, and the balancing opportunities will play out as we go forward here. On storage, and also tariffs on energy. Yes, we are exporting engines from Finland to the U.S., and yes, they are now under the tariffs, the general tariffs in the U.S. versus Europe. We see a pretty strong demand side in the U.S., despite we are transferring the tariffs to our customers. Despite that, we do see a continued strong market situation. Jumping to storage, I think storage is the business, the Wärtsilä business that has been affected definitely by the tariffs because the market in the U.S. is still down. The good thing is that we are not only depending on the U.S., we are strong in other countries like Australia, U.K., and others, but it is clearly impacting our business. On the order intake side, there is still, we had a very, very slow Q1. I think it is picking up a little bit on a global level, but the U.S. is still very, very slow. I mean, the underlying fundamentals for growth are still there, but it's clear that the current U.S. situation is a lot wait and see, so to say. I think that's a quick exposé of where we are. I mean, on the demand side, in last quarter, we guided positively, and we do still see our demand situation holding up. With that, I suggest we open up for questions. Thank you, Håkan. Please, time for Q&A. The first question comes from Max Yates. Please go ahead, Max. Hi. Good morning, both, or good afternoon. Thanks for doing the call. I just wanted to first ask about your capacity in Wärtsilä, because obviously there's some excitement about potential data center orders. We're seeing kind of big demand, whether people are talking about kind of 10, 15 GW a year, you would only have to win a small slice of that. How much can you actually physically do? What does your capacity utilization look like? What could actually be the upside in terms of either gigawatts or value of orders you think you could realistically take? Yeah. I mean, we are currently, I will not go into the detailed numbers because that is kind of competitive information I do not want to give out. Just to give you, we have still room to scale. I think that is a key message. You know, we are at about 70% of our technical capacity, and we can expand our technical capacity as well. I do think that we have capacity. We should allocate that capacity wisely, so to say. What is it? I mean, maybe this is a bit unfair, but I'm a little bit surprised you haven't taken an order yet because the backlogs are so long at some of the large gas turbine players. Your solution is readily available. You can get it quickly. What do you see in your mind as kind of has been the holdup? Is it a kind of reticence to maybe use engine technology versus turbines, or is there something in the product, or is it just a customer-by-customer negotiation? It's more the, I mean, there are a lot of, you know, how should I put it, new players coming into this space. I think there is a learning, common learning on how to contract in this space. It's not related to demand. There's a lot of excitement and demand. At the end of the day, you need to sort out the terms and conditions and how you're going to finance it and how you're going to set up the structure, etc., etc. I think there's a lot of learning going on in this area. Of course, in the U.S., the first consideration of a data center customer is always to think about turbines. I mean, GE is a household name in the U.S., but we are eating ourselves in there. That is why I have an optimistic view on orders going forward, but I want to have income paper before we announce them. Okay. Maybe just two more. We've seen a lot of kind of pricing tailwinds in other larger kind of turbines because of shortages of capacity. I mean, in some turbines, I think we've heard they've doubled in price in the last two years. Are you starting to see any change in pricing across the industry as a whole? Because this stuff is being used for data centers, baseload, flexible power, but obviously it just increases utilization for the whole industry. How's that feeding into your business, maybe more broadly beyond just data centers? No, I think, I mean, we see a little bit of the same tendency as well. I mean, there is good, strong demand, and that is certainly good for pricing, so to say. Absolutely. Okay. Just final one. I don't know whether you've had any kind of internal discussions on this Section 899 and how potentially kind of that may affect your business from a tax perspective. I guess just any, I know it's very hard because we've tried to look at this to really understand it on a business-by-business, but from your sort of treasury department, any kind of first thoughts on how that could affect your business from what you've read and seen so far? There are so many sections these days, and they're very bad in days. The 899, which one is that helping you? That's the repatriation of dividends and the sort of unfair tax policies from sort of certain regions in the U.K. If you basically have been paying, sort of repatriating some of your profits from the U.S. and paying a lower tax rate in Europe, that's that one. I mean, on transfer pricing, I will label it under transfer pricing. We have, I mean, way before this whole recent dynamic started, we have done some structured work on internal pricing because this is, as you point out, this is an evolving area globally. I think that we have developed a framework without going into this, quite technical, and I do not foresee a major impact on us, quite frankly. Okay. I will get back in the line. Thank you very much. Thank you, Max. Next question comes from Vivek Midha. Please go ahead. Thank you very much, everyone. Good morning, good afternoon. I would like to follow up, please, on the thermal power plant business. Just in a related vein to what Max was asking, you clearly have better availability given that capacity utilization. If the customer wanted to place a new order now, would they be able to get delivery within a year? Is that the right way to think about it? I mean, what sort of lead times would you have? Thank you. No, I think you should be looking at, I do not know, do you want an order one? No, I know, I know. Yeah. No, I think you would, we will do a separate special effort for you, of course, with that. No, to be serious, we are looking at lead times for 12 months+. 12 months+ already, despite? Yeah. Okay. Yeah. Yes. Okay. Understood. Which is not too bad. Consider some of our competitors and what they are offering. Of course. I would like to follow up. Also, sorry if I may, I mean, and I said this before because sometimes this has triggered questions. As you know, sometimes when we take orders, we cannot announce them immediately. There is sometime, because we need to, of course, follow our customers on this. Some customers, they want to make certain things public, and some customers do not want it. Because sometimes I get the questions, there are no press releases from Wärtsilä, so are you actually selling anything? I want to reiterate that messaging. Understood. I'd just like to follow up on the more global picture within the thermal power plant business, because we've seen on the gas turbine side, of course, the U.S. is very hot. There has been good demand from other regions too. We've seen it in East Asia. We've seen it in the Middle East, for example. I was wondering, what are you seeing more globally in thermal? Any sort of regions you could call out, what sort of trends you're seeing? Thank you. No, clearly East Asia, Southeast Asia. We do see a little bit longer, also South America. There are big auctions coming in Brazil. The latest auction now is sliding a bit, but there are some big opportunities in Brazil. Once the situation in Argentina stabilizes, there was actually an auction, but it was kind of canceled. South America, there are also interesting opportunities. I would highlight Asia, Southeast Asia, South America when it comes to baseload. On the balancing side, I would clearly highlight the U.S., broad stroke. Then you have on top of that, you have opportunistic comes up in the stone countries, etc., etc. Understood. Thank you very much. Just finally wrap up, you commented again, you're confident around the cruise segment. We still see pressures on the U.S. consumer. Your latest discussions with your customers, how are they thinking about this? What's your view on cruise? Thank you. No, I think when we talk to our customers, and the big ones, they are still fairly optimistic. I mean, when they look at bookings for this year, bookings for next year, it looks good still, in spite of the, clearly, what is happening in the U.S. They are rather optimistic. Brilliant. Understood. Thank you very much. Thank you, Vivek. Like I said, our salespeople will contact you if you want to buy your own plans. Next question comes from Sven Weier. Yeah. Thank you, Anna, and thanks, Håkan, for doing the call. First one is also on energy. I mean, talking a bit about Germany, I think the plan is to add 20 GW of gas power capacity. I mean, we've talked about the turbine bottlenecks, right? I'm not so sure if the delivery potential is quicker for Germany. Some of these plants are going to be built in the next few years. Do you see there a place for engines, or is this, if there are engines, they're all taken by MAN, or what's your position for the German opportunity? Thank you. No, I do think we have ample opportunities also for Germany. I don't think it's a kind of MAN captured market. I think, however, I'm also considering our history, and you remember, Sven, and others remember that we went through some tough projects in energy, and some of them were in Germany. Energy has clearly strengthened our operational excellence and capabilities through the years. We are clearly also looking at Germany. It's important to find the right setups with the, is it going to be EPC or equipment? There are many practical aspects on that. Then also the whole topic of hydrogen readiness, how is that going to be defined? As you know, we are investing in hydrogen for energy. We made launches last year. I think we are looking very closely at Germany. Sounds good. I also wanted to follow up on cruise. I mean, when I look at the May Clarkson data, it looks again very strong. It seems people always go on a cruise. I was just wondering, I mean, how quick is the translation into your order book these days? Is it rather quick? Do you see any, I mean, I know that your content per cruise vessel is already very high, but do you see scope of raising that even further? I would say normally a 12-month kind of time lag in that-ish, 12-ish, 12-ish months. I don't see any that we are introducing some, I mean, that could be a little bit on the scrub, on the carbon capture side. I think the strong core component is still engines. It could be some bridge equipment, but that has also been traditional. I do, although I see there is clearly a lot of cruise vessels being now ordered and being built, which is really, really good. If you look at the content, our content, what we are normally contracted for, I think I would say it's stable, maybe with a little bit on the upside on the scrub side. The final one from me for now is just because you talked about MEPC and the timeline and the action. Now, we obviously have some more volatility on the downside on the merchant segment in Clarkson data. I mean, do you feel when you go with the discussion with your clients on new build and retrofit, do you feel that momentum is strong enough to kind of look through the volatility here, or could that be a problem? I think you need to look at, in my view, there are different characteristics in the different segments. I think for our core, for Wärtsilä's core segments, it's still a strong sentiment, and it's not changing. If you look at merchant, I would say there is a bit more of bulkers and the lower value vessels. There is a little bit wait and see. I would say that even in LNG carriers as well, with some customers, there is a little bit wait and see. When it's ship-sacked, how will that play out if you're considering trade to the U.S.? But for Wärtsilä and our core segments, it's still holding up, so to say. Yes, thank you. I'll go back in line, come back later with another one. Thank you. Thank you, Sven. The next question comes from Panu Laitinmäki. Please go ahead. Yeah, hi. Thank you. I have one question related to data centers. What is your kind of technical competitiveness in engines compared to turbines in the data center use? Basically, it's more clear on the balancing side that the engines are more flexible, but is there like an edge in data centers, or is it only about availability that because the customers cannot get turbines, they are looking into other alternatives like engines? No, I would argue that there are more. And just to give a broader background for kind of everybody, I mean, we talked about that a couple of years back. Data centers might require 5, 6, 10, 11, 12, or 20 MW. They went to the utility, and they said, "We want to hook up." They normally got access. They bought their own high-speed engines for the backup when the grid did not work. Now we see the data centers requiring hundreds of megawatts. If they want to hook up to the grid, the utility will basically say, "We would love to serve you, but you need to get in queue and come back eight years later or five years later because we have a planning process," etc. Of course, that does not work for the data center developer. They need now to get in place their own baseload, so to say, their own base generation for the baseload. This is where we come in because now we're talking hundreds of megawatts, which is our sweet spot. That's really good. What is our edge compared to the aeroderivative gas turbines, which we will be and we are competing with? Energy efficiency. I mean, this is a baseload application, and our energy efficiency is better. We normally have a 48%, 49%, close to 50% energy efficiency. The aeroderivatives, they are normally at 43%, 44%, something like that. Those percentages make quite a lot of difference in operating cost. The other area where we also have an advantage, the engines, they are modular, and they are smaller in megawatts than the gas turbines. For instance, if you want a certain power plant, you would have either five engines or two gas turbines. With data centers, you need a very high availability. I mean, they are talking about the five nines, the 99.999. Normally, to provide that redundancy, you need to add an additional unit. You need to add an extra gas turbine, or you need to add an extra engine. It goes, of course, without saying that three out of two is a much bigger number than six out of five, so to say. I hope I made it clear. Otherwise, push me back. The redundancy is actually favorable because of our modularity and that we actually deliver less power per engine, so to say. The energy efficiency and a competitive redundancy concept, those two things I would put forward as some competitive advantages for engines. Okay. Thanks. Maybe a follow-up. Is this in this size that you have defined, like was it 50 to 400? That's where you have the technical edge. Correct. Thank you. That's what we are targeting. You will read also, of course, in media about the gigawatts storage. They are there, and they will go for open-cycle gas turbines or even for nuclear. We are not competitive there. In our sweet spots, there are clearly ample opportunities. All right. Thanks. Thank you, Panu. The next question comes from Mikael Döppel. Please go ahead. Yes. Thank you very much, and thank you for hosting the call and taking the time. Let me just continue briefly on the, since we're talking about the data centers here and the kind of technicalities and the competition there. Just to understand it correctly, I mean, the way you see it, when you think about your engines and you think about your sweet spot, which is the 50 MW - 400 MW, you talk about the turbines only, but isn't it fair to say that, I mean, MAN and Cummins also do engines in that range? Aren't you competing against them as well? If that is the case, then how would you say that you are positioned against those particular engines? Just to understand. Just to calibrate, so MAN is suddenly a competitor. They just changed name. The name is Evelance. They had a fantastic strategy of bringing big things to zero. Okay, you have to talk to them. They are a competitor. Yeah, I see you're smiling. That's a little way. And then Cummins, and they are a formidable company. The engines they provide, they are smaller, so they are more high-speed engines. We compete with MAN, clearly. We are clearly the market leader in engine power plants. If you look on the installed base, we have the other big monkey on that block, so to say. Certainly in the U.S., we are clearly the dominant player. We are very well established in the U.S., not only from installation, but also from a service perspective. Here, if I compare Wärtsilä and MAN on the energy side, we develop projects. We have by far the strongest service. MAN is there certainly, but they are definitely a smaller player. We will be competing with them in data centers. Absolutely. Okay. That is clear because that was kind of my question. Also, I think you have mentioned that, I mean, that you actually, the biggest opportunity you see within the data centers is actually to provide baseload to data centers that might not necessarily connect to the grid at any point in time, given that, as you mentioned, it's a scarcity of supply, essentially. Just as a curiosity, I mean, do we have any such opportunity, I mean, such examples out there already in the market where you would have, for example, an engine or a turbine not connected or planning even to be connected to the grid? Also, I mean, if you think about that being your kind of focus area, how big would you say the opportunity really is? I mean, is it one or two or three or 20 or 100 opportunities? I mean, just to get a sense of what the opportunity really is there and if you actually have any concrete examples of this actually happening already. If we take a step back, and I come to data centers, but if you, as you know, you probably know we are serving several industries with power solutions. It is big mines, cement factories, etc. This is a very typical situation. They are located right in the middle of nowhere. There is no power. The application, the baseload application for an industry, we have done that for decades, and I think we know it fairly well. Now, it happens to be data centers. We have a lot of application examples from other industries. Now, if we look at data centers, our first hundreds of megawatts of data center powers are being installed in Ireland right now as we speak. As I said, there is a lot of activities and contracting for this type of data center power in the U.S., but we have not reported any orders yet, as I said. What are the future opportunities? I do not know how to put it, but it is not the ones and twos and tens. It is more. It is also, of course, a market that will evolve over time, so to say. It is a significant opportunity. It is. We want to, it has been a kind of common theme for us in Wärtsilä the recent years, also when it comes to financial targets. You could say that we set certain targets, and when we do, we want to make sure we achieve them on margins and growth, etc. Similar on data centers. Before, we see, we've been very clear. We see interesting opportunities. Let's take it step by step and prove in action that we bring in the orders. Then before we go out and make too optimistic forecasts. There is a very interesting opportunity in data centers. Okay. No, that's very helpful. Thank you. Maybe just one more before I get back in the queue. Maybe as a clarification, really. In your opening remarks, you talked about storage and the challenges you see there in the U.S. Just to be clear, how big of a share is U.S. currently out of your total storage business? Then just a clarification, really. I think you said that demand is somewhat picking up on a global level. Are you referring to really the global level, or were you actually referring to the U.S.? I mean, just to be clear on that comment. Thanks. The demand is picking up on a global level, excluding the U.S. I would say the U.S. right now is at hold, basically. I am talking about countries outside of the U.S. I am also talking with strategically a little bit longer timeframe, not in the next quarter or the next year, but overall, very suddenly, it is the balancing power narrative. Battery storage will be needed. Thermal will be needed. Under that header, yes, it will grow. Right now, though, in the U.S., it is very, very slow because of the tariffs. How important is the U.S. for us? That varies year by year. I will not give any exact figures, but we are not dependent on the U.S. It is not like we have 90% of our business in the U.S. It is important for us, but we have other markets, Australia, U.K., others where we are strong. Okay. Clear. Thank you very much. Thank you. The next question comes from Sven Weier. Please go ahead. Yeah. A few more follow-ups, please. Maybe I will just follow up on Michael's question on storage because it sounded to me like, yes, globally, it is picking up, but it is not enough to compensate the U.S. lumpiness. Is that a fair reception on my side? Yeah, overall, I think you are—I mean, in terms of us, first of all, first statement, this is a project business, said it before. The projects are getting bigger and bigger. Therefore, the lumpiness of the business is increasing. Therefore, when we make certain statements, it can—and if you look one quarter or the next quarter, it can vary quite a lot. In general, of course, U.S. is an important storage market. If it falls away, generally, it's hard for us to compensate. However, if we all of a suddenly get the big project somewhere else in the world, it will compensate. I'm just describing a dynamic, and I'm not saying that this is what's going to happen. That's why it's a little bit difficult to make these general statements. U.S. is an important market for us, but we are not depending on the U.S. markets. For instance, Australia is also a very important market. You said it impacts the order intake, but you didn't say it impacts the backlog phasing. So you're not having any issues in actually generating the revenues out of the backlog. That is not causing you—yeah. No, so far, I think we announced, we indicated one cancellation in Q1. That is it so far, so to say. The other question I had was just following up on MAN or Evelance, I think, because one of the statements they also made is that it is a core business for VW, so they are seemingly not going to get out of it. I know it is one of your M&A preferred ones, let's say. What other opportunities do you see in general, or do you always keep a certain amount of powder dry to be ready just in case VW changes its mind? I mean, first of all, this is the obvious M&A opportunity if it will happen. It is not a big secret. If this would start to happen, we will take a look at it. Of course, we'll have to consider, etc., etc. It is the obvious one. Yes, we do have a rather strong balance sheet, and that is by intention. I think also it serves us well in this era of uncertainties. I think, and we highlighted several times that, yes, we have had a very strong cash flow, which is encouraging, but it's not sustainable. Structurally, we've improved our capital efficiency. There is no doubt. Right now, it's exceptionally strong. Maybe a very final one for me today is just on Navy. I mean, we saw TKMS record backlog, but mostly driven by submarines so far. What's your exposure to below the surface? Is Navy for you more above surface vessels, or is it also on submarines? No, we are both above and under the surface. Navy overall is less than 4% of our business, but there are growth opportunities here. Thank you. Thank you, Sven. The next question comes from Luis Roman. Please go ahead. Hi. Thank you very much for taking my questions. I have two. First, on the energy division in the U.S., if you already have answered the question, I'm sorry for repeating it. Can you please give more colors on the production capacity in the U.S., and especially on the lead time that you have compared to your main competitors, MAN Energy Solutions? It will be my first question. As I said, we are at 70%-75% of technical capacity. We do have capacity. I mean, the lead times we are looking at right now are 12 months+. Also for the U.S., because I thought it was a global statement. Hang on. Just to clarify also, so there is no lie. We do not have production of engines in the U.S. We deliver from Finland to the U.S. market. Okay. Got it. The other question is more, if you try to project for the data center segment, you mentioned that you are benefiting because the utilities cannot connect to the grid. For you, in the future, do you think the utilities will be able to do so? Should we think about your solution as temporary or one they should diminish? I mean, the planning cycle for utilities, they are normally longer. You are looking at five, six, seven, eight, maybe even ten years. It would take quite some time for the utilities to come there, so to say. Some may be interested, and some may not be interested. Is that a solution, a temporary one or not? No, because I do think it's long-term. We do see customers that are even thinking about, "I generate power for my data center, but I will also, in the future, I will export to the grid. I will become a power producer to the grid. I will deliver also power to the grid." There are many different business models in this, different models for different customers. In that case, if one of your customers wants to become a power producer, does that change the type of product that you are offering because the utilization of your engines is effectively very different? Yeah. It depends. It's entirely up to the customer. I mean, and also how quickly the customer can get hooked up. I mean, there are some customers that they want to generate their power with the right reliability. They are surrounded by a weak grid. Immediately from the beginning, they see a business opportunity exporting. It is very hard. There are so many different variants. There is not one—the only general trend is there is a lot of data center customers that are looking for the hundreds of megawatts to get them into business. Okay. Thank you very much. I will be back in the queue. Thank you. The next question comes from Tom Skogman. Please go ahead, Tom. Yes. Hello. This is Tom Skogman. It is Friday afternoon. I think it is time for a bit of a stupid question, but I just wonder why you have so low equipment margins given a high kind of R&D spending to sales, very modern product, and great market positions. Now I can note that you even say that customers just accept price hikes in the U.S. in power plants despite the dollar being much weaker, and they accept tariff risks. It just feels like your kind of pricing policies, etc., is perhaps not state of the art, if I may say so. I mean, how should I see this? Customers suddenly just accept these big risks and price hikes, and then you, over the years, have very low margins on equipment. Yeah. I do not think, first of all, we separate out our margins on equipment and services. I know you have been asking for many, many years to talk about our service margins, and we will still not disclose them. I think if you look at the overall holistic business, you see that we are improving our profit margin in the end of the year. I think we are going in the right direction. Also, as I said on the questions, do we have opportunities for price realization under the current market circumstances? I think the answer to that is yes. This time, I did not try to drill on the service margin. It was more on the equipment margin. You have such a—if customers accept big price hikes, it suggests that perhaps you, over the years, can be a bit more aggressive in pricing. Or is it so that you have had so weak markets that you have been forced to use pricing, and you see that you go out of that period somehow, that it will be different the next time? I think that we certainly have that a couple of years back, but we are out of that for quite some time, I would say. A different, perhaps more serious question, service contracts. How long can they be, and how long are you happy to sign? I just wonder about all these kind of clauses to get customers to sign something where you have loads of clauses, might be tricky, and it is also difficult to have clauses for everything. The world is such an uncertain place. How should we think about this? Can you have some kind of open, if things happen, like force majeure in these clauses as well, or how do you protect you? Yes. On service agreements, referring back to the service value ladder, we have the spare parts on service agreements. We have a broad array of service agreements. We have the retrofit projects, and the first is the performance-based agreements. If we start with agreements, the second step of the ladder, we have quite a few different types of agreements, and they can be yearly or a couple of years. Normally, there are price adjustment mechanisms for inflation and other things. I think from that risk perspective, we are rather well covered. The performance-based contracts, the fourth step of the value ladder, are normally 5 to 10 years, and there are certainly mechanisms for inflation and currency fluctuations, etc. I understand that, but to have a general CPI, for instance, 10 years ahead, your own cost in a certain city or for certain steel grades or whatever can be something very different from what you write into a CPI agreement, basically. Yeah. Yes. I think so far, I mean, you're right. I'm not challenging on that. I think what we have seen with some of our long-term agreements that we have run now for quite some years, they serve our customers. They're happy about them. They prolong them. And we make good money. I mean, we share some of the value with our customers. So it's really working out. It worked out through the high inflation period, we all remember, two or three years back. We have several indices in this type of agreements, and so we are rather well covered. Also, do you have any kind of force majeure clauses so you can walk out of it if it really turns into a loss-making contract somehow? There is not one type. I mean, some of the contracts, like the performance, we have skin in the game. So we make commitments, and if we don't make those commitments, we have downside. It's part of the setup. So far, we have been successful in managing those contracts to the benefit from the customer and also the benefit from us. From that perspective, the service, certainly the performance-based agreement, there is operational risk, clearly. This is for us to manage and make money from. So far, we have been successful in doing so. Just finally on this topic, how large a share of service sales comes from contracts that are more than one year, basically? I would say the vast majority. Okay. All right. Thank you. Thank you. Thank you, Tom. The next question comes from Max Yates. Thank you. Just one quick final one. Just when you talk about the new regulations coming in, the MEPC 83, could you just walk through kind of how you sort of initially expected to affect your business? Because I guess we've had kind of other regulations come in where I think the response to the ships was just to slow down a bit, invest a little bit in the hulls, and there was no real obvious benefit for your business. Just if we think about maybe the sort of one-year, three-year, five-year of what customers are likely to do in response to this, how do you think they will behave and kind of which bits within that process are the biggest opportunities for Wärtsilä? Yeah. Let's talk about new build, and then let's talk about retrofit. Now, and I've said this many times, I mean, when you look at the two industries, quarter on quarter or even year- on- year, it's a rather short time. You need to look at this on a five-year time horizon, five, even ten-year time horizon. Now, if the decision is taken, the new regulation will kick in and get teeth in 2028. We might think that this is far away in the future, but in marine, the lifetime of a vessel is 25 years. That is the kind of time frame. That also triggers action right here, right now, because if you're building a vessel today, it's going to be around for 25, 30 years. During that time period, a lot in this area will happen. Owners recognize that. I think many owners, and I'm not saying all owners, but many owners, they are thinking about fuel flexibility because you can basically buy an insurance. What you do not want to have is stranded assets. That is why, and we talked about it before, in 2023, IMO introduced the carbon intensity index and others. We already then saw how that changed the strategic thinking of many of our customers, so to say. That will be even further emphasized with whatever comes in place now in October. It will not shift from one year to the other, clearly. If you look at this from a five to ten-year perspective, there are going to be some major changes. It will be so different. Could I push you on that? Just so in five years' time, I do not know, what% is ordered as dual fuel today? Do you think it will be a case where almost all ships in 2028 are suddenly using dual fuel in five years? Or how do you think that evolves? I would say from our side, the vast majority of the engines ordered today are dual fuel. I do not know what the exact percentage is, but it is the vast majority. It is not 100%, but it is the vast majority. What will change a little bit over time, people will start to add ammonia. Right now, we have sold one ammonia unit. There will be new fuels coming in under this multi-fuel umbrella, so to say. How that will evolve and how quickly, I do not think anybody knows. We do not know. That it will happen, it will happen, absolutely. For us, as you know, even for the customers, let us say that chose a more conservative route, they are going to go with LNG. They will go with one of the fossil fuels, and it will likely be LNG. We are very strong on LNG engine as well. We are a little bit hedged from that perspective. Sorry? No. I said, even if we certainly have, I mean, in the technology diffusion curve, the technical one, when you have forerunners and you hit the big mass and laggards, even with those conservative laggards, they will still be looking at fossil fuels, and they will be looking at LNG. We are very strong on LNG. From that perspective, we are strong in the future green fuels. We are strong on the current fossil fuels. We continue to develop our engines to reduce methane slip, etc., etc. From that perspective, we are a bit hedged technology-wise. Okay. Fantastic. Thank you very much. Thank you, Max. Currently, I do not see any hands up. If you have still questions, we have time for one question. Michael Doepel, please go ahead. Yeah. Very briefly, actually, on the same topic and maybe more specifically, I was thinking about biofuels and biodiesel in particular. What is your view on the potential there? I mean, how easy are they to be applied? I think for LNG, it basically can just be as a drop-in. What about the heavy fuel oil engines? What is kind of the potential there? What does that mean for your kind of retrofit opportunity? Do you see capacity constraints in biodiesel as well? Basically, you can run the current engines on biofuels because the engine does not know to make a difference between a biological carbon atom or synthetic carbon atom. That is, biofuels is a blending fuel already today. If you look at the MEPC 83, as I said, it is complex, it is a step in the right direction. Our early analysis, looking at the fee structure, it will make it even more beneficial in the earlier phases to focus on biofuels. Now, the key challenge for biofuels, and I would say for all the green fuels, is availability because both marine and energy consume a lot of fuels. I think we will see a renewed interest for biofuels considering MEPC 83 because it is pretty favorable under MEPC 83. For us, our engines are ready. It is not a. We are ready to go. Good. Thank you. Thank you. Precall and call will be hosted on June 18. We will publish Q2 results on July 18. I wish that the summer will be warm and sunny, and we all have some time to enjoy it. Thank you. Thank you. Have a nice weekend. Thank you. And you? Thank you very much. Thank you very much. Bye.