What would you like to know about Wärtsilä as an investment? Questions from investors

December 20, 2021

Recently, we asked investors in social media to send in questions about Wärtsilä as an investment. We received many interesting questions – thank you! Here are the answers from the IR team.

Can you still grow your service business? How?

In Wärtsilä Marine Power, where roughly 80% of our marine service business lies, the retrofit business has the potential to grow 3X by 2030 (subject to green fuels’ availability) as a result of greater service opportunities related to fuel conversions and efficiency upgrades of the existing fleet. We aim to increase transactional service sales, while expanding service agreement penetration and fuel/emission savings based agreements. The renewal rate in Marine Power service agreements is currently 94%. Also in Wärtsilä Energy, we see untapped potential in our installed base and in moving up the service value ladder with performance-based agreements.

In both our end markets, green fuels create additional service business opportunities in terms of retrofit projects. Some engines may first need to be converted to natural gas, and later on to new fuels.

How well prepared are you for green ammonia as a fuel?

Ammonia is one of the potential future fuel candidates. Ammonia combusts slower than other fuels, but the combustion is still rather perfect. Wärtsilä has a leading role in developing engines for operation on future clean fuels, and we have already successfully tested an engine running with a fuel mix containing 70 percent ammonia. We anticipate to have an engine concept capable of operating with 100 percent ammonia in 2023.

In July 2021, Wärtsilä and Korean shipbuilding company Samsung Heavy Industries (SHI) signed a joint development programme (JDP) agreement aimed at developing ammonia-fuelled vessels with 4-stroke auxiliary engines.

Read the press release here: https://www.wartsila.com/media/news/22-09-2021-wartsila-and-shi-agree-to-collaborate-on-ammonia-fuelled-engines-for-future-newbuilds-2978445

Are there any development projects around the hydrogen industry?

We are developing the combustion process in our gas engines to enable them to burn 100% hydrogen fuel. We have researched hydrogen as a fuel for 20 years already. Up to 25% hydrogen blended with natural gas can already today be used in our engines. This development is part of the company’s strategy to future-proof its engine technology in line with the global trend towards decarbonisation of the energy and marine markets.

In addition to hydrogen, other potential renewable fuels are being studied. Wärtsilä engines are already capable of combusting 100% synthetic carbon-neutral methane and methanol. For the energy market, we expect to have an engine and plant concept for pure hydrogen operation ready by 2025. It is anticipated that green hydrogen will deliver 7 percent of the global energy demand by 2050.

Read more here: https://www.wartsila.com/energy/power-to-x-and-future-fuels 

Wärtsilä is not a good investment because its products are too traditional and it is not possible to decarbonise the maritime industry.

We strongly disagree! Maritime industry needs to transform. The transformation is driven both by regulatory requirements and increasing demand for green transportation. The European Commission's legislative package Fit for 55 aims for a 55% reduction in greenhouse gas emissions in the EU from 1990 levels by 2030. The proposals in Fit for 55 along with other regulations (such as EEXI, CII) highlight growth opportunities in the area of emission abatement, alternative fuels, fuel flexibility and energy efficiency. Wärtsilä is a frontrunner and market leader in these areas. In addition to regulation, we see increasing demand from our customers’ customers for green maritime transportation. Our engines are fuel flexible, which makes the transformation financially viable for our customers in the current environment where it is not certain which fuel will be used in the future.

Our technology development is moving fast. In July 2021, we shared our progress on green fuels like ammonia and hydrogen. Read the press release here: https://www.wartsila.com/media/news/14-07-2021-wartsila-launches-major-test-programme-towards-carbon-free-solutions-with-hydrogen-and-ammonia-2953362 

When do you see that you will break even with the energy storage business? Also what kind of opportunities do you see in this business in the future?

Our aim is to be break even in energy storage within a few years. The addressable energy storage market is estimated to grow by 30% p.a. from 2020 to 2030. We have three strategic focus areas: 1) maintain a leading position in power system optimisation and increase performance-based services, 2) partnerships with world-leading battery cell providers to improve cost competitiveness, and 3) scale for volume through a strong customer base and a global network.

What is the strategy of Wärtsilä Voyage? The collaboration with WNI seems strange, as they are a direct competitor to FOS; any explanation for this?

We continue to have a strong focus on Voyage turnaround and cost base optimisation. Voyage has been heavily affected by Covid-19 due to its dependence on the cruise segment, and this has delayed the outcome of the turnaround of Voyage. The current estimate is that Voyage will break even within a couple of years.

Wärtsilä Voyage and the world’s largest private weather routeing provider Weathernews Inc (WNI) signed a strategic partnership agreement earlier this year. The partnership will enable the integration of WNI’s weather forecasting data and Optimum Ship Routeing (OSR) service with Wärtsilä’s products and solutions. Wärtsilä’s Fleet Operations Solution (FOS) is a unique service that automatically optimises a ship’s route by providing the fullest and latest voyage data, at the same time keeping both the onboard and shore-based personnel informed and notified. With the addition of frequent state-of-the-art weather information, FOS can be even more effective in increasing navigational safety, reducing fuel consumption, and optimising the voyage leg.

Read more about the partnership here: https://www.wartsila.com/media/news/16-06-2021-wartsila-and-weathernews-partner-to-enhance-smart-data-solutions-designed-to-make-shipping-safer-and-greener-2933555 

Dividend policy: will you go back to the EUR 0.48 dividend?

Wärtsilä’s target is to distribute a dividend of at least 50 percent of earnings. The target has been reached now for many consecutive years. For the financial year 2020, a dividend of EUR 0.20 per share was paid, representing 88.2% of operational earnings.

My US broker does not trade Nordic or PINK stocks – how can I buy the shares?

As Wärtsilä is not involved in trading, we would recommend you to contact your own bank first for advice. There are many brokers who have access to Nasdaq Helsinki stock exchange and can assist in buying Wärtsilä’s shares.