Wärtsilä (WRT1V) investor relations material

Market opportunity and trends

• Rapid growth in data center power demand, especially in the U.S., driven by AI and compute needs, with off-grid solutions gaining importance due to long grid connection lead times.

• Orders for nearly 800 MW in 2023 and a strong start in 2024 with a 430 MW utility order, reflecting robust pipeline growth and high activity in off-grid data center segments.

• Market estimates for U.S. data center power needs range widely from 40 GW to 110 GW, with significant growth expected and a 50% pipeline increase in the last six months.

• Revenue recognition from these projects will ramp up from 2026, with service business contributions expected to pick up around 2030.

• Europe and Asia are developing more slowly than the U.S., but opportunities are emerging, especially as grid access challenges persist globally.

Technology and competitive positioning

• Medium-speed engine technology offers strong efficiency, modularity, scalability, and flexibility, with advantages in heat and altitude tolerance, low water usage, and rapid ramp-up.

• Compared to gas turbines and high-speed engines, medium-speed engines require less redundant capacity, resulting in lower CapEx and OpEx, especially as fuel prices rise.

• Closed-loop cooling systems minimize water consumption, a growing concern for data center operators and communities.

• Shorter delivery times (as low as 30 months) compared to turbines (up to 54 months) provide a competitive edge, though lead times are lengthening for some engine types.

• A robust global service network supports high availability and reliability, which is critical for data center customers.

Customer and market dynamics

• Main customers are developers and utilities, with growing engagement from larger utilities and developers with strong project pipelines.

• Technical conservatism and established relationships with turbine suppliers are barriers, but repeat customers and successful projects are helping to build credibility.

• Each project is highly site-specific, with factors like space, emissions, and local regulations influencing technology choice.

• Fuel flexibility and future alternative fuels are less important currently than modularity, lead time, and water usage, but balancing capability is a key long-term differentiator.

• Service business is expected to grow as installed base increases, with high running hours in baseload applications driving aftermarket opportunities.