May 6, 2023
Operator
Good afternoon. This is the conference operator.
Welcome, and thank you for joining the Technip Energies First Quarter 2023 Financial Results Conference Call. [Operator Instructions].
At this time, I would like to turn the conference over to Mr. Phillip Lindsay, Head of Investor Relations.
Please go ahead, sir.
Phillip Lindsay
Thank you, Judith. Hello to everyone, and welcome to Technip Energies' first quarter 2023 financial results.
On the call today are CEO, Arnaud Pieton; and our CFO, Bruno Vibert, will present our business and financial highlights as well as the outlook. And this will be followed by a Q&A session.
Before we start, I would urge you to take note of the forward-looking statements on Slide 2. I will now pass the call over to Arnaud.
Arnaud Pieton
Thank you, Phil, and welcome, everyone. Welcome to our financial results presentation for the first quarter where we have delivered solid operational progress that puts us firmly on track to deliver our full year objectives.
Revenues of EUR1.4 billion are in line with our expectations and reflect continued strong momentum in TPS, and lower project delivery activity resulting from the maturity of the portfolio and our ongoing exit from Russia. Our execution remained strong, and we delivered 100 basis points of margin improvement year-over-year.
We also benefited from sustained commercial strength in technology, products and services with awards in ethylene, renewable fuels and carbon capture. This builds on the very strong momentum established in 2022.
In addition, we are executing our strategy to prepare our future core, and I am delighted to announce the creation of Rely. A new company to drive green hydrogen industrialization through standardized and integrated solutions.
I will return to this later in my presentation. Finally, orders of EUR713 million were broadly in line with our expectations for the quarter, leaving period-end backlog at EUR12 billion, equivalent to approximately 2x our expected revenue for 2023.
Turning to our execution. I am pleased to report that we continue to make strong progress delivering important milestones, derisking execution and completing projects.
Margins remain at robust levels, demonstrating the strength of our delivery and a favorable mix, including the growing contribution from TPS. Overall, a very solid start to 2023, and I want to express my deep gratitude to our teams that continue to drive our leading performance.
Now let's take a look at recent awards, market trends and partnerships. As previously communicated, momentum in ethylene markets has continued into 2023, and we have secured a significant contract to supply proprietary cracking furnaces for a mega project -- mega plant in Qatar, as well as important technology award for a low carbon plant in China.
Also in China, we secured a reference award for low carbon LNG with an engineering design and key equipment supply contract for a liquefaction unit to be fully electrically driven. This highlights the market trend towards modularized and electrified mid-scale LNG.
Our carbon capture presence in the U.S. continues to expand with an important feed for Calpine Baytown Energy Center.
This unit will be designed to capture two Mtpa of CO2 equivalent to 95% of plant emission. And this award is further evidence of the strength of our solutions for carbon capture, which we continue to invest in.
In clean fuels, we were awarded several front-end studies, including the latest with LanzaTech for what would be the U.K.' s largest sustainable aviation fuel production facility.
This plant will utilize our proprietary Hummingbird technology, a vital technology brick in the production of that. Hummingbird is also the focus of R&D investment for us.
I do look forward to talking with you in the future about the product launch based on this technology. Finally, for blue hydrogen, we have announced an important partnership with Casale to jointly license ATR technology, as well as providing front-end services, proprietary equipment and entire plants.
With the potential carbon capture rate of up to 99%, this technology complements 10 proprietary SMR-based solutions to give us the most comprehensive suite of blue hydrogen solutions in the market today. And as I will discuss later in my outlook, this will be complemented by a leading green H2 offering.
I will now pass over to Bruno to discuss financial highlights.
Bruno Vibert
Thank you, Arnaud, and good afternoon, everyone. Turning to the highlights of our financial performance for the first quarter.
Adjusted revenues were down 13% year-over-year to EUR1.4 billion, impacted by the maturity of the project delivery portfolio and the ongoing exit from the Arctic LNG 2 contract, partially offset by very strong TPA growth of more than 35%. Adjusted recurring EBIT was exactly flat year-over-year despite the lower revenues, owing to strength in margins, which increased by 100 basis points year-over-year to 7.6%, and benefiting from strong product execution and growth in TPS.
Adjusted diluted EPS grew by 10% year-over-year, benefiting from the strong operational performance and higher interest income. Adjusted order intake was EUR713 million, slightly higher year-over-year, thanks to sustained momentum in TPS order.
Net cash at the year end was EUR2.8 billion. In summary, thanks to the performance of our teams in Q1, we are certainly on track to meet full year guidance.
Turning to our segment reporting and starting with project delivery. Revenues are materially down year-over-year, reflecting the absence of Yamal LNG and the ongoing exit from the Arctic LNG 2 contract.
As a reminder, the Arctic LNG 2 project contributed a significant proportion of revenues in first quarter of 2022. Execution remains strong and projects experienced notable strength in margins at 8.1%, up 110 basis points year-over-year.
The absence of major new awards, which are dilutive in their early phases due to conservative recognition was a benefit to margins in this period. As new awards materialize in the coming quarters, the portfolio maturity will become a more balanced blend of early and later-stage projects, bringing margins to a more normalized level.
Turning to orders. The strong commercial outlook we see ahead of us, should drive a considerable improvement in book-to-bill trends in the coming quarters, driving backlog higher.
Turning to Technology Products & Services, TPS, where our investment and commercial strategy to grow this segment is yielding very positive results. Financials are robust with revenue growth of -- 37%, sorry, year-over-year, boosted by strong order momentum, we achieved through 2022, a notable improvement in several areas, including, consultancy and engineering services, licensing and property equipment, notably for ethylene and growth in renewable fuels work.
These higher volumes combined with an improving mix of higher technology and product revenues, enabled EBIT margins to reach the double-digit threshold at 10.2%, up 100 basis points year-over-year. As a result, EBIT has improved more than 50% versus the prior year period.
Commercially, with sustained positive trend in orders as demonstrated by the trailing 12 months book-to-bill heading up to 1.6, which has driven a substantial 84% expansion in segment backlog versus Q1 last year. In summary, TPS is building strong momentum, and we continue to invest and explore growth opportunities to fuel [indiscernible] trajectory.
Turning to other key performance items across our financial statements, beginning with the income statement. Corporate costs of EUR16 million represents an increase compared to the underlying run rate for 2022, reflecting cost of strategic projects and pre-development initiatives, which will likely continue in the coming periods.
When contemplating the full year outlook for corporate, the incremental investment costs as well as the recently announced ESOP 2023 program should be taken into consideration. This program is an employee share offering with the objective of sharing long-term value creation with employees.
These two factors will likely drive corporate costs for 2023 towards a range of EUR60 million to EUR65 million. And in subsequent years, we'd expect this cost to normalize at a lower level closer to EUR50 million.
For net financial income, the Central Bank decisions and increase in global interest rate through 2022 and early 2023 are now positively impacting this slide and the EUR20 million net benefit clearly boosted our earnings per share in the period. To conclude on the P&L, we incurred a non-recurring cost of EUR11.5 million.
This represents the technical accounting and non-cash charge associated with our orderly exit from Russia, and the sale of our main Russian operating entity. Turning to balance sheet, where our structure remains solid.
Net cash and net contract liabilities trended slightly down year-on-year, reflecting portfolio maturity and the absence of awards. Before passing back to Arnaud, let's take a closer look at cash flows, where there has been a continuation of many of the trends seen in 2022.
Free cash flow on an underlying basis or excluding working capital was EUR122 million and consistently strong as we executed across our portfolio. Cash conversion from EBIT on this basis is very high with more than 100% and above what we would consider a normalized conversion owing to the positive impact of interest income.
As we have indicated with our full year results presentation, working capital was an outflow in the period, reflecting portfolio maturity in the absence of large awards in recent quarters, as well as our orderly exit of Russia. But we anticipate this trend will reverse as the order momentum improves across the balance of the year, notably in the second half.
We end the period with more than EUR3.5 billion of cash and cash equivalents. I will now turn the call back to Arnaud for the outlook.
Arnaud Pieton
Thank you, Bruno. Achieving the world's net zero targets requires significant investment to develop and scale decarbonization solutions.
Emerging stimulus packages from global policymakers will serve to break initial cost barriers. And, although, full alignment across the ecosystem is taking time, global ambitions demand that affordable solutions and sustainable products for industries and consumers alike must be developed.
Technip Energies is committed to meeting this challenge. At our full year results in March, we discussed how we would prepare our future core through positioning for leadership in fast growth markets, which are fully aligned with our net zero goals.
Creating Rely is one key component of our strategy. And today, I am really delighted to present to you a new company which will accelerate industrialization in the emerging market for green hydrogen and its derivatives such as green ammonia and eFuels.
Rely is a highly complementary partnership of Technip Energies and engineering project delivery and integration leader for the hydrogen industry and John Cockerill, the leading provider of pressurized alkaline electrolyzer technology and equipment. Rely will have robust foundations and from day one with access to over 200 hydrogen specialists and more than 50 hydrogen technology items.
Headquartered in Belgium, the company will have global reach with entities across four continents and in countries, spearheading, green hydrogen market development. The combination will create a technology and project delivery company, providing integrated green H2 and power-to-x solutions.
Rely will be asset-light with preferential rights for electrolyzer stack supply with an offering that spans the full value chain from front-end engagement through to operations and maintenance. And unlike any other commercial partnerships that have been announced in this space, what clearly differentiates Rely is T.EN and John Cockerill combined R&D platform that will deliver technology enhancements, develop new products and accelerate improvement in economics for green hydrogen projects.
Looking at Rely's scope and market positioning in more detail. Green H2 and power-to-x are highly promising markets, which could ultimately deliver decarbonization across many industries, including traditional downstream industries, steel and other hardwood-based industries as well as transport and power storage and production.
Leveraging T.EN's process technology integration and molecule transformation capabilities with John Cockerill's extensive manufacturing and aftermarket expertise, Rely will provide a highly differentiated offering to the green hydrogen market. This will cover electrolysis, optimization of balance of plant, molecule transformation and O&M.
Digital services and the intermittency management systems will, of course, also form an integral part of the Rely's offering. Currently, of course, there are cost hurdles for green hydrogen.
But in the long run, this industry, like any will need to stand on its own two feet. Today, the electricity represents about 2/3 of the cost of green hydrogen projects.
In other words, through optimization of the electrolyzer stack, balance of plant and the OpEx Rely has the ability to influence about 1/3 of the cost. But as the market matures to utility scale projects, this picture reverses and the cost components that Rely can impact will form the majority of the economics of a green hydrogen project.
Put simply, Rely's potential to positively impact projects will increase as this industry scales up. Finally, on Rely, let's consider the value proposition.
T.EN's frontrunner spirit has often seen us delivering many world's first and finding solution for the industry's most complex engineering transfers. By combining the partners' technology and engineering resources, Rely will provide integrated end-to-end solutions for plants at industrial scale and an optimized and standardized off-the-shelf blueprint offering for the green hydrogen market.
And when combined with T.EN's ability to effectively structure projects through technical and financial advisory, we can accelerate the development of our customers and their projects. This is why R&D and standardization are critical.
Rely's innovation platform will be instrumental in driving better project economics through lowering the levelized cost of hydrogen and shortening time to first molecule. Through this platform, we expect to develop technologies that we can license and proprietary products that we can sell.
We will develop the technologies of the future, not simply the electrolyzer, but everything around it. The balance of plant and the energy and molecule management system and technologies across the derivatives required to transport and transform the green hydrogen to another molecule.
In the long run, this will enable gigawatts scale projects while addressing intermittency and power-to-x innovation. We truly believe that Rely has the necessary ingredients and financial ambitions to be the market leader in green hydrogen.
We are targeting a EUR1 billion-plus revenue company by 2030, that can generate margins at least in line with our TPS trajectory, supported by proprietary technology and product development. In summary, through Rely T.EN is bridging green electrons to molecules.
Before closing, let's turn to ESG. In our sustainability report, which we published in March, we strengthened our commitments and recentered our focus on impact-driven targets to accelerate our sustainability journey.
As part of this, we revealed that we are on track to be net zero by 2030 for Scope 1 and 2 emissions. And we reported, for the first time, our Scope 3 upstream emissions, in other words, the emissions from our footprint as a project delivery company.
And in 2023, our Scope 3 downstream targets or the emissions from our clients' plant operations will be refined and published with means to decarbonize. We will also report on avoided emissions, sometimes referred to as Scope 4.
This is measuring the emission reductions of our clients achieved through our sustainable by design solutions. For Scope 4, we are targeting to avoid 15 million tons of CO2 equivalent by 2025.
As evidenced by Rely, our strategy to offer decarbonized solutions at the heart of our future core is in action. And delivering on our long-term strategy will be critical on our path to net zero by 2050.
In closing, with our solid first quarter performance, we are on track to deliver on our full year guidance. We have made a significant move in preparing our future core, Rely is one of the key initiatives that we will be launching this year.
And we are focused on securing the right project delivery prospects with strong potential for material improvement in orders in the coming quarters. And with that, let's open the line for questions.
Operator
[Operator Instructions]. The first question is from Sasikanth Chilukuru with Morgan Stanley.
Sasikanth Chilukuru
I had two, please. The first, I was just wondering if you could talk more about the strong 10.2% EBIT margin in the TPS segment.
If you could highlight what the key drivers were behind this, particularly this quarter or in 1Q? And how much of that likely be replicable in the future quarters of 2023 as well as just trying to understand the sustainability of these margins in the segments at double-digit levels.
The second was -- I was just wondering if you could provide more clarity on the EUR4.5 billion revenue backlog that is expected to be executed for the remainder of this year. Again, how much of that kind of comes from the TPS segment?
And if you could talk about the risks associated with executing this backlog, it seems like a strong backlog cover for me for 2023.
Arnaud Pieton
So I will start and hand over to Bruno. First of all, on the TPS margins and allow me to actually insist on what we insisted during the full year earnings call and as well as last year as we were building up the TPS backlog, and TPS forming now a key part of our strategy as a company.
What you are observing here with the margin level for TPS is the realization of choices that we've been making over the past 18 months, and emphasis that we have decided to put through the commercial model through the commercial teams and through our offering towards TPS in order to accelerate this hybrid model that is, I would say, T.EN's signature in terms of the business of the company, the product delivery on cycle and the shorter-cycle TPS with higher margins. So it is, I would say, a key example of why the level of margin -- a key example of why we have decided to accelerate into TPS.
TPS, as you know, is a blend from services to products to technology. The more TNP we find into the TPS blend, the higher the margins, and we have been -- we have been fairly successful last year, in particular in the domain of ethylene, selling more products and services and more technology than services.
So it's a favorable mix. I'll hand over to Bruno, who may want to add a little bit of color, but it was important -- it is important to me to highlight the fact that this healthy level of margin is a result of choices that we've made as a company in terms of the strategic orientation to pivot towards more TPS without abandoning project delivery.
But it speaks to the strength of the choices that we've imposed to ourselves and the ability of the commercial teams to pivot together with the message.
Bruno Vibert
Sure. No, I think I'll cover most of it.
I think it's basically across the portfolio of TPS that was quite strong, reaching double-digit margin is something we had in mind, we had insight and we communicated on that at the last earnings call. Now it should have been benefited of one -- a couple of, let's say, tail-end projects, which has a bit more positive contribution this quarter.
As we continue to grow this segment, beginning from the top line growth, we are able to sustainably be close to double-digit, be beyond double-digit, and this is what we want to continue to do, continue to invest and continue to differentiate across the portfolio from technology, product, services, from PMC, advisory to engineering services, we have the capacity to [indiscernible] and then deliver high-value services to the client. If I switch now to the second part of your question around backlog.
It's true that on both segments, we have a great visibility for the year. We started the year at EUR1.4 billion, slightly on the lower side of the let's say, the product range.
We have the capacity to step up as new awards will come in. So we are not obviously -- we're confirming the guidance for the full year from EUR5.7 billion to EUR6.2 billion.
We consider as this will roll out, we will be possibly in this range. Now can -- you could have projects -- accelerating some products, shipping it to the right, it's the nature of the work.
But yes, it's, let's say, well on track versus what we were foreseeing in building blocks to get to the full year guidance we released a couple of weeks ago.
Operator
The next question is from Bertrand Hodee with Kepler Cheuvreux.
Bertrand Hodee
I have two, if I may. The first one is on Hail & Ghasha.
There was some press report that ADNOC changes, I would say, is bidding a strategy. You were awarded earlier this year a pre-agreement contract, and there was some press report that it was canceled.
So I hope if you can give us some color on that. And the second question relates to your net financial income, it was very strong this quarter, EUR20 million.
Can you provide us with the guidance for the full year?
Arnaud Pieton
Bernard, I will take the first question and give the difficult one to Bruno. Regarding Hail & Ghasha, so I will start with an important reminder.
While we have been awarded indeed, I would say, a pre-agreement. Hail & Ghasha never made it into Technip Energies' backlog, okay?
So Hail & Ghasha isn't, never was in our backlog. So there is the announcements that we've heard and that you've read about earlier this week and -- yes, earlier this week, will not translate into any cancellation of backlog for Technip Energies.
Hail & Ghasha is a very large project, there are multiple packages. Our scope was only one part of the total scope for Hail & Ghasha.
We've heard from the client that the price point for investment has not been -- or FID has not been reached, therefore, their decision to change track. I am unable to say whether it is about the combination of the packages or one package in particular.
Now this is a very good reminder of something that I've been repeating, and we have been discussing on these calls in the past. We as Technip Energies or other contractors, we can't totally influence FIDs, but we can partially -- as we do our job properly and doing our job properly is finding solution, doing value engineering, so as to make the project viable for our clients.
Our duty is obviously to be profitable on our projects and the projects that we execute. But it is also on the prospects to find solution to bring the project to a price point that is acceptable for the clients to take final investment decision.
So it looks like this has not been the case overall on Hail & Ghasha, we are in dialogue with ADNOC. So there is no breakdown in communication or in being contact with them.
We will assess what that means in -- for us in the coming weeks. But yes, the situation is what it is, but it's a very good reminder again of the importance of what we do in terms of making the projects of our clients fly.
We do exist through our clients' projects. And it's an important reminder of that, while remaining disciplined in the margin levels and the execution and the choices we make, our duty and the contractor duties are to find solution to bring the price points where it's -- the product can fly for the client.
Bruno?
Bruno Vibert
Yes. So yes, a positive impact from the net financial income for the quarter close to EUR20 million.
Obviously, difficult for me to forecast what would be the reactions or the future steps of the European Central Bank or the Fed, it's difficult to give any firm guidance, it's not really on our hands. What can I say for the main impact, which is, okay, the deposits and what the interest we have, the amount that we've recovered or that we've been able to recognize in Q1 is probably not very different to the one we could project for the next quarters.
Now obviously, within the global mix of the net income interest revenue or expense, you have other components mark-to-market revaluation of some investments. So it's not only you have things beyond that.
But I would say if things remain the same, and we don't control that, we can continue to incur a bit of double-digit revenue items as we execute across the remainder of the year.
Operator
The next question is from Mick Pickup with Barclays.
Michael Pickup
It's Mick here. Quick question on your hydrogen Rely coming through, obviously, teams up with Cockerill now.
You previously teamed up and invested in McAfee two or three ago. So can you just talk to the difference between what those two offerings are?
I thought McAfee was going to be developed to industrial scale as well?
Arnaud Pieton
Mick, so T.EN is indeed a small minority investor in McAfee. This small minority investments that we've made, just as a reminder, we are holding to the 2%, was made to for us to learn faster about electrolyzer and electrolyzer technology.
The nature of the relationship that we have been developing with McAfee is not to be compared with what we are doing and will be doing through Rely. It's a much different ambition.
The ambition with or through the creation of Rely is to unlock something and unlock a few of the barriers to a, I would say, an affordable green hydrogen or green hydrogen derivatives. In order to get there, you need to unlock scale, and you need to think industrial scale.
It happens that John Cockerill electrolyzer solution is probably more advanced, certainly, larger per unit and per stack -- per stack units. So their base case is 5 megawatts per stack, which is significantly today higher than what McAfee is able to deliver.
And there's potential for, I would say, a lot more beyond the 5 megawatts. Hence, why we have gotten closer to John Cockerill and have decided to enter into this venture with them, it's really about accelerating scale.
The -- when I look at what -- and why sustainable aviation fuels are being adopted so easily, it's because that's easy to use. It's still expensive, but it's very easy to use.
And there's no question of how to store and to use and to transport and the rest. We have to bring -- if we believe that there is a net zero ambition for the world, we have to bring hydrogen and derivatives to a level of ease of use and price level that is similar to what is happening with by the way, for the time being, are being blended with other fuels.
But same story as a way to make the cost more acceptable for the consumers. Same story, hydrogen and derivatives may be blended tomorrow into other fuels or sources of energy, so that they -- it accelerates the adoption while ramping up the volume.
So what we are trying to achieve through Rely is really to unlock or to break down some of the barriers. Some of them will be broken down, thanks to subsidies.
But beyond that, we absolutely must accelerate the industrialization of the green hydrogen platforms and solutions. This is -- and the appetite that we found at John Cockerill and, I would say, cultural fit that we find at John Cockerill to put in common, what is an essential part of Rely.
This innovation platform is absolutely essential in order to break down barriers, accelerate technologies and invent, I would say, what will be an affordable balance of plant and balance the site. So what we found is very much -- first of all, we're trusting the technology and an appetite to put things in common and to think differently in order to accelerate scale.
And this is why we decided to team up with John Cockerill and to form this innovation platform, i.e., putting in common their innovation teams and our innovation teams in a joint company to accelerate in H2.
Michael Pickup
Okay. And can I ask a follow-up on the other partnership you announced during the quarter, Casale and on the ATR.
Now you mentioned in that potential 99% carbon capture rate on that. What does that say about the future of your SMR business?
Arnaud Pieton
It says that it is -- the ATR and the SMR will continue to be complementary. We have seen projects where our SMR technology has been selected by our clients for blue hydrogen in Australia recently.
And it's a matter of basically, I mean, being able -- we have a gap, if I may say, in our blue H2 metrics. And the very large scale blue H2, we couldn't totally tackle through our SMRs, we have to say that ATRs are more cost efficient for super large-scale blue H2, and we needed to complete the puzzle.
And now that the picture is complete through the partnership with Casale, you must not see them as contradicting one another. On the contrary, they are complementary.
And when you put SMR plus some of our solutions such as the EARTH solution technology or ATR plus -- we can really decarbonize blue H2 up to 99%. This is a very serious number.
And so yes, that's why we're very pleased, because now we basically have it -- we have the complete picture, and there is no more gap into the metrics. And we can, I would say, confidently go and tackle the medium-size, as well as the extra large size for projects for blue H2.
Operator
The next question is from Jean-Luc Romain with CIC Market Solutions.
Jean-Luc Romain
My question relates to NFS. It appears according to the press that you have had the best of -- you have done the best proposal.
In case that couldn't participate with you to this project because of the financial difficulties, is this something you would take a lot given the big size of this project?
Arnaud Pieton
It's -- you're reading the press like we do. NFS is a very important prospect for us because LNG continues to be part of our equity story, and we continue to believe in LNG.
Considering, I would say, the nature of the prospects and where we are, I'd rather not comment further on what has been published in the press, which may or may not be accurate. We will continue as Technip Energies to tackle those large projects through partnerships that are of a quality and predictability in terms of the delivery that is compatible with the principles that we've applied to ourselves for selectivity and discipline in execution.
So, partnerships will continue to exist. They will continue to be necessary to then -- when tackling large projects, and the quality of the partnership is what truly matters.
So, I won't comment more on NFS as we don't like to comment on prospects, as you may imagine. So that's all I'll say on the matter for today.
Operator
The next question is from Nikhil Gupta with Citigroup.
Nikhil Gupta
Two questions for me, please. The first one is on the carbon capture project in Norway.
So, there were press articles that the waste-to-energy plant in Oslo was halted due to probably higher cost expectations and things like that. So, how does this impact Technip Energies and CCUS as a whole, given the negative backdrop for this project?
So that's the first one. Second one is, can you just give some more colors around the bidding pipeline by geography, especially given 2022 and 1Q has not been that great in terms of award intake.
So what should we -- what are the areas from where we can expect larger awards? Those 2 questions, please.
Arnaud Pieton
So, to start with Celsio and Carbon Capture. So, yes, we've seen the -- we've -- like you read the news, and we can confirm some delay in the Celsio carbon capture project.
It's important to look at why I would say that the client is taking the project into a cost reducing -- or cost reduction phase. And to account for the fact that it's -- it might not be because of the carbon capture solution itself.
The project was actually beyond carbon capture. I mean, it's carbon capture, but then it's also all the logistics.
I mean, it's liquefaction of the CO2, it's a port facility. It's exporting through shadows, the CO2 to Northern Lights.
So, I would say, not the landscape, but the plot plant and some of the choices that were made initially by the clients, together with the local environment, have changed. And this is not -- that has nothing to do with the carbon capture solution, or the carbon capture module themselves, but more has to do with the surroundings of the project and the carbon capture module.
So, point taken. For us, the project was -- it's not at all material for them.
We are working with the client on indeed finding, and we've embarked into this cost reduction study with them, considering the new environment that has been defined by the clients locally in Norway. So, beyond carbon capture and beyond the carbon capture module, it's very much about -- given the new constraints, the new power plant and the new options that have been selected by, I would say, the municipalities and the environment over there, how can we actually bring the cost down?
And they are all -- I mean, other factors such as an unfavorable exchange rate between to euro, et cetera, but the project was very early for us, very early phase. So, we are absolutely engaging with the client to find the solutions for cost reduction.
But it's not challenging at all the way T.EN continues to believe into the carbon capture market in Europe, in particular for waste-to-energy. It's ramping up like green hydrogen or other markets, it's not a mature market just yet.
So, we will have surprises until things settle. But we absolutely continue to believe in it.
It continues to ramp up and through -- again, the importance of the project discipline. To be able to say, yes, okay, the client is pressing the post-patent here, but there's nothing material here for T.EN is important and speaks to the discipline when we take these type of projects that can be a bit of a novelty, not so much in terms of the technology, but in terms of the environment.
So we continue to support the clients from that front to allow commercial success for their decarbonization project. Regarding the bidding pipeline by geography, and a bit earlier on the call, the question was asked regarding .
The commercial pipeline for T.EN continues to be extremely robust and vast. So, Middle East continues to be, I would say, an area of focus and for LNG and other gas projects.
So, obviously, the Middle East in its broad definition is an important area for us. If you want to continue into LNG, East Africa has potential in LNG for 2023.
Again, I say potential because I don't control, and we don't control the FID calendar. It's more in the end of our clients.
And I would say North America also continues to be attractive. And we've seen clients, I mean, getting closer to potential FID 2023 in the space of LNG.
So, we are extremely active bidding. I know it will sound a little bit virtual for you guys on the call because we have not announced anything this quarter.
But important for us is to be confident like we are about the quality of the pipeline. And I will also share with you that there's no anxiety in my voice here because what truly matters for us is the quality of the project that we would be onboarding.
We are not going to turn into a company that's going to be anxious about volume. Volume is important, and we know that.
But we want volume and quality and not just volume. And continuing to deliver strong margin performance, and by all means not destroying shareholder value is of extreme importance to us.
So, being able to announce a project, we want to be able to be happy to announce it and truly happy. It has to be good news for us and for our shareholders because it means that we would have been happy with the conditions under which we are signing the contract.
We don't want to be signing a contract for the sake of a piece of good news in the short term and leave with a very difficult situation or having to leave potentially with a difficult situation in the long run. No, we want the project to be announced as a good news in the short term and the long term so as to preserve and generate shareholder value.
That's why we are always insisting on this, we want quantity maybe, but overall quality -- overall everything, sorry, above all quality.
Operator
The next question is from Guillaume Delaby with Societe Generale.
Guillaume Delaby
Yes. To be honest, all my questions have been answered.
So, I leave the floor to someone else.
Operator
The next question is from James Winchester with Bank of America.
James Winchester
Just a quick two from me. Firstly, could you just provide an update on Arctic LNG 2?
Is everything on track to be closed out this quarter? And then, secondly, should we expect a similar working capital outflow in the second quarter, kind of i.e., around the ballpark of EUR250 million?
Arnaud Pieton
So, on Arctic LNG 2, yes, we are on track to execute the full exit as we had previously communicated within H1 2023. Therefore, within this quarter, everything is on track.
A lot of hard work by all the teams, but happy to report that so far everything looks favorable for delivering as per what we had indicated previously. The next question, Bruno will answer.
Bruno Vibert
So, on working capital, as you know, it's not linear. So, the impact of the first quarter, which was largely within a bit of the same trend or pattern versus 2022.
Without major new awards, you have the impact of the Thailand projects, which are providing some negative working capital outflow, plus obviously the exit of Arctic LNG 2, which has, let's say, communicated day 1 was no net exposure, but sometimes they shall cash out and associated working capital. So, this is what has largely the evolution majority of the portfolio, and obviously orderly exit on Russia ongoing.
This is what has mainly driven the Q1 2023 working capital. So, as we look forward, no quarter will be exactly the same.
You would have always different kind of patterns. When basically the new award or larger awards will come, this will tend to replenish the working capital.
So, up to the point, we get large awards, we have some negative and then some replenishment when these large awards come in. So, in this Q3, in this Q4, obviously, then the timing and the sequence and the cut-off may have a lot of impact, but the trend is there.
And basically from this kind of low point of working capital, new awards, backlog increase will replenish the working capital position to where we were probably earlier this year.
Operator
The next question is from Baptiste Lebacq with ODDO.
Baptiste Lebacq
Just one quick question, trying to better understand why you keep your guidance, whereas you are doing some math aiding Q1 plus what is already in your backlog? We are already in the middle of the range.
And at the same time, you say that you were expecting an improvement in order -- significant improvement in order intake. So, clearly, should we estimate that you are cautious at this stage regarding, let's say, the guidance for top line?
Bruno Vibert
So, I will take this 1. So, as always, you would like to be prudent.
We'd like to underpromise and overdeliver. And we, as Arnaud mentioned earlier, we are not obsessed by top line.
So, being in Q1, having a lot of moving parts obviously, and we find that it's early to change the guidance, whether it's from the top line or the bottom line perspective. What I was mentioning earlier, obviously increase in order intake and this momentum.
Here, we will be talking more about project delivery, which we obviously longer term, longer cycle, and the contribution maybe in the given year would be a bit less significant versus an order intake in TPS, which would be shorter cycle. But if I take this aside, the order book is there to be delivered, let's say, free within the guidance.
We can see the calendar [indiscernible], some progress we see, Arnaud was mentioning, Celsio in Norway. So, you can have some acceleration, you can have some rebaseline.
So, obviously, just in April or early May, we have a lot of role to go before the end of the year. So we can adjust and we can get to this endpoint.
Today, we feel that keeping the guidance, we are on track to be there. Now we will adjust accordingly depending on the new inflow order intake timing and obviously what happens on the project.
Arnaud Pieton
On the topic of being a little bit maybe conservative, but prudent in our communication. Maybe that's how we like to be.
And coming back to Rely for which we are signaling that the company would be or will be EUR1 billion revenue company by 2030. Honestly, they are also -- there might be a bit of conservatism if we believe that the world has a net 0 ambition in 2050, and we can argue the date, but if that ambition is there.
And actually, I think, we have to believe, considering all we are experiencing and seeing, and I was in Ostend last week at the North Sea Summit. When we look at the commitment that the European countries are making towards a tenfold production of green electricity from wind in the North Sea, whether it's 300 gigawatts or even only half of that, there is a massive amount of investment that goes into renewable electricity and renewable power and hydrogen and , whether they are mainstream to the public or only dedicated to industries, for industries only, there's a massive need.
And if people are serious about decarbonization, hydrogen and derivatives are pretty much the only way for some industries to reach net 0. We have taken understand that we believe that there is an ambition to be delivered to be net 0 to the world by 2050.
And therefore, I don't see any reason why Rely wouldn't be at least a EUR1 billion company by 2050. So, back to the conservatism, if I may say, the prudence we like to apply to ourselves.
This is a little bit of our trade probably for the better, and that's our opinion. But yes, that's probably a little bit of prudence always in the way we communicate.
Operator
The next question is from James Thompson with JPMorgan.
James Thompson
I just wanted to follow-on really on the guidance point, first of all, I mean, obviously, very strong margin performance in the first quarter. When I think about the projects business, limited order intake for a little while now suggests to me that you should have a similar sort of outturn over the next couple of quarters in sort of lower revenues, more completion margins, more milestones been hitting.
Obviously, TPS, very strong margin to start of the year. Is the reason for not upgrading EBIT guidance in terms of -- for the full year '23 really because we're sort of very early in the year?
Or should I actually be thinking that when we come to 2Q, 3Q, there's perhaps less in terms of some sort of major project milestones that will be hit over the next couple of quarters? So, it could stay more kind of normalized as we sort of progress in terms of project delivery, would be the sort of very first rather long-winded question.
Secondly, just in terms of kind of renewables backlog, there's always been some discussion around projects, et cetera, on this call. But last year, you talked about a very confident kind of $1 billion type order intake number for renewables.
Just interested in your or low carbon, I should say, as well. Interested in your thoughts on how it may well progress into 2023 or into the end of 2023.
I know, do you think you can grow at sort of EUR1.5 billion by the end of the year, EUR2 billion? Are you prepared to sort of put a number there yet?
That would be great.
Arnaud Pieton
So I'll start with question #2 before handing over to Bruno. So, on the renewable or low carbon solutions, we continue to see strong momentum in the order intake for FEED, for example, in particular.
What I will, nonetheless -- what we're observing, nonetheless, at the moment, so it's a little bit of a slowdown or slowing down when compared to 2022. I've used the expression, the train has left the station.
We are yet to find out whether it's a high-speed train with no stock or a slower train with a few stops here and there as the market is shaping up and people understand and can probably navigate this environment around clean fuels, investment decision, carbon capture and the rest. So, I'm not going to call it a pause.
I don't think that -- and we're not guiding on this -- on a specific number around for order intake on low carbon solutions. We continue to see momentum.
I told you as well, indeed times fly from 2021 to 2022 from EUR200 million to EUR1 billion. I told you that we are certainly not planning on a time or a or time tree from '22 to '23.
We're observing that we could be in the same ballpark, but it's kind of a bit of -- maybe not opposed, but people are -- I mean, we are doing a lot of feeds for our clients. And the FID might be more into 2024 for some of those projects as they continue to navigate and basically also, I must say, to discover this new world.
There is uncertainty around sometimes what is considered as being green are not green. Some of the delegated acts by the EU have courses on the clients say, okay, well, I'm going to wait for clarification before I decide to invest further.
So that's what we're experiencing. So, it's not -- there's no lack of interest, but maybe there would be a bit of a pause in the acceleration in terms of new orders.
But it would only be for me, I would say, an interim pose -- the momentum is here, so it may resume into 2024. But we don't see a massive influx or beating EUR1 billion massively in 2023.
Bruno Vibert
So I'll take the second -- the first one. So, in terms of guidance, as I said, I think it's early to revise -- we're still in just Q1, 3 quarters left to go to complete the year.
As you know as well as potentially new projects will come in project delivery, they will be dilutive because we are not recognizing the full margin early on. So, overall, the increment in project delivery revenue will be slightly dilutive as this project will come and will start to contribute.
When you also close out, it's a project with a non-mature portfolio. It's not exactly linear.
So, the performance may be from one quarter, it cannot exactly be extrapolated to the next quarter. So that's why being in release of Q1, we are very happy to confirm the guidance.
We've obviously printed a very robust Q1, which puts us on track to deliver this guidance, notably in terms of bottom line. We have the way clearly the potential to increase revenues and these dilutive revenues will be able to bring down what I said in my prepared remarks, the margins of project delivery business, notably to a more normative level, which is what I guided basically in the midterm outlook at the end of Q4.
So, this is, I think, the building blocks for the year are shaping up nicely, but it's too early to really revise guidance at this stage.
Operator
That was the final question. I turn the conference back to you for the closing remarks.
Arnaud Pieton
That concludes today's call. Please contact the IR team with any follow-up questions.
Thank you, and goodbye.
Operator
Thank you for joining. The conference is now over, and you may disconnect your telephones.