OMV AG

Thank you very much. Good morning, ladies and gentlemen, and welcome to OMV's Earnings Call for the Second Quarter of 2021.

With me on the call are Rainer Seele, OMV's Chairman and CEO; and Reinhard Florey, our CFO. Rainer Seele will walk you through the highlights of the quarter and will discuss OMV's financial performance.

As this is Rainer's last call as CEO of OMV, he will say a few farewell words before we are happy to answer your questions. And with this, I'll hand it over to Rainer.

Yes, thank you very much, Florian. Ladies and gentlemen, good morning and thank you for joining us.

The second quarter of '21 showed a broad macro recovery, although the COVID-19 pandemic still impacted demand in certain areas. Oil and natural gas prices rallied and European polyolefin margins reached historical highs.

Refining margins, however, remained weak. The strong macro environment, coupled with our expansion into the chemicals business, led to our highest quarterly earnings and cash flows ever.

As usual, let me start with a brief review of the market environment. The second quarter of '21 was the fourth consecutive quarter of sequential Brent price improvement.

At $69 per barrel, Brent was 13% higher quarter-on-quarter and 133% higher year-on-year. Prices reached $76 per barrel, the highest level since the fourth quarter of 2018.

This upward momentum was driven by demand optimism on the back of the first signs of an economic restart as well as a strong OPEC+ quota compliance. European gas prices continued to rally.

At €25 per megawatt hour, Central European gas prices were up 37% quarter-on-quarter and almost 4x higher year-on-year. With prices increasing to beyond €33 per megawatt hour, already €37 I have seen in July, at the end of June, it was €33.

The European gas market reached peaks not seen since 2008. The biggest driver of the price surge was the unusually low storage level in Europe combined with cold weather in April and May.

In addition, some global LNG restrictions, heavy maintenance and limited Russian supply further supported this strong development. At $2.2 per barrel, the refining indicator margin Europe was still quite weak.

It improved by 32% compared to the first quarter and remained relatively stable year-on-year. The quarter-on-quarter increase was driven by higher gasoline cracks following the easing of travel restrictions.

The diesel and jet markets improved slightly but remained fairly weak. Higher feedstock costs limited to -- the upsides to the refining margins.

Ethylene and propylene indicator margins in Europe were above the previous year -- previous quarter and previous year's quarter. This was mainly attributable to a strong demand from packaging and hygiene, increased spending on home improvement projects and the recovery of the automotive sector in Europe.

Supply remained constrained due to the low inventory levels, unplanned cracker shutdowns and planned maintenance. European polyolefin margins doubled compared to the second quarter of 2020, reaching the highest level ever.

Healthy demand across all major segments and unusually heavy maintenance season and limited regional supply kept markets tight. Prices were further supported by the absence of import pressure.

The exceptionally high costs of marine transportation driven by a shortage of containers restrained the attractiveness of Europe as an export destination. At €1.3 billion, our clean CCS operating result reached an all-time high.

It was almost 8x higher than the same quarter of last year and almost 50% higher than the first quarter of '21. This was attributable to the exceptionally strong performance of Chemicals & Materials and a substantially improved Exploration & Production business.

The contribution of the new Chemicals & Materials segments again represented about half of our earnings, reflecting the importance and weight of this business in our portfolio. For the second quarter in a row, we were able to deliver outstanding cash flow from operating activities, excluding net working capital effects, of €1.7 billion.

Our clean CCS earnings per share surged to €1.97, up almost ninefold year-on-year. Looking at operations.

Our E&P production was 6% higher compared with the second quarter of last year primarily due to the -- to increased production in Libya and the commissioning of new natural gas fields in Malaysia and Tunisia. The production cost remained below $7 per barrel.

The utilization rate of our refineries in Europe increased to 85%. In Chemicals & Materials, Borealis delivered excellent performance driven by a very strong margin environment, especially in polyolefins.

Polyolefin sales volumes increased in Europe, while those of the JVs recorded a slight decrease due to the implementation of an advanced ERP. We also made progress with our divestment program and took further steps to develop our circular economy portfolio.

In May, we completed the divestment of our E&P assets in Kazakhstan and the divestment of our 51% interest in Gas Connect Austria. In June, we signed the divestment of our Slovenian retail and commercial business to MOL.

Circular economy is a key element of OMV's strategy. And we are pursuing various initiatives in recycling, design for recycling and renewable polyolefins.

In autumn last year, Borealis launched the Bornewables product portfolio. These are premium polyolefin products manufactured with renewable feedstock derived entirely from waste and residue streams.

They exhibit the same material performance as virgin polyolefins yet have a lower carbon footprint. In May, a life cycle assessment study carried out by the German-based global institute certified that carbon emissions of Bornewables are substantially reduced compared to polyolefins manufactured with fossil-based feedstock.

Borealis also acquired a 10% stake in Renasci, a provider of innovative recycling solutions; and signed a supply agreement securing 20,000 tonnes of chemically recycled output material per year. We aim to make recycled polyolefins a significant part of our portfolio and more than triple the volume produced to 350,000 tonnes per annum by 2025.

So let's now turn to our financial performance in the second quarter of '21. Our clean CCS operating result rose sharply to -- by €1.2 billion compared to the second quarter of 2020 which was strongly affected by the pandemic.

This increase was driven by substantially better performance of Exploration & Production and Chemicals & Materials segment partially offset by a slight decline in Refining & Marketing. The clean CCS tax rate increased to 33%, which was 14 percentage points higher than in the same quarter last year.

This was due to a higher contribution from high-tax-regime countries in Exploration & Production, which turned from negative in the second quarter of last year to positive in the second quarter of '21. Clean CCS net income attributable to stockholders surged almost ninefold to €643 million.

Clean CCS earnings per share amounted to €1.97. Let me now discuss the performance of our business segments.

The clean operating result of Exploration & Production rose considerably to €498 million from a negative €152 million in the second quarter of 2020. The drivers were higher realized oil and gas prices and improved sales volumes primarily on account of the return to full operations in Libya.

OMV realized oil price increase by 134%, more or less in line with Brent. The realized oil price in the second quarter was negatively impacted by hedging, as 1/4 of our oil production for the first half of '21 was hedged at around $55 per barrel.

Our overall realized gas price increased by 49%, while the European gas hub prices continued to rise strongly. We have seen this quarter that only 20% of our gas portfolio was directly linked to European hub prices.

As we have explained in the past, half of our production volume in Russia are priced based on the BAFA benchmark reflecting import prices and volumes in Germany. In the second quarter of this year, the BAFA benchmark unusually remained substantially below European hub prices, limiting the increase of our realized gas price.

Our production rose by 26,000 barrels per day to 490,000 due to a higher contribution from Libya, Malaysia and Tunisia. This was partially offset by a natural decline in Romania, New Zealand and Austria; as well as the divestment of our Kazakhstan operations at the end of May.

In Russia, production was slightly lower than in the second quarter of 2020 due to the lower pipeline pressure. We plan to install a booster compressor in the third quarter during annual maintenance activities.

After that, we expect production to increase again to around 100,000 barrels per day. Total sales volumes increased by 25,000 barrels per day, following the production volume.

The clean CCS operating result in Refining & Marketing decreased year-on-year by €51 million to €181 million primarily due to weaker gas performance and a lower contribution from our oil trading business, while we have benefited from the contango market situation in the second quarter of last year. The decrease was partially offset by a stronger retail business and the positive contribution from ADNOC Global Trading.

Total sales volumes were 12% above the second quarter of 2020 with a significant increase in retail and a slight uptick in jet fuels. The retail business delivered a strong performance.

This was driven by the increase in sales volumes and an improved contribution from the nonfuel business, partially offset by lower margins which came down from the very high levels seen in the prior year quarter. The contribution from ADNOC Refining and Trading came in at minus €5 million, still burdened by weak market environment and a 1-month outage of the FCC unit.

ADNOC Global Trading, which started its activities at the end of last year, provided strong support to the results. The contribution from the gas business fell from the very high level of 2020 to €26 million.

The result was impacted by weaker storage and trading results, a lower contribution from the power business in Romania and the divestment of Gas Connect Austria. Gas sales volumes rose by 37% on account of higher sales in Germany and the Netherlands and was slightly offset by lower sales in Romania and Austria.

Ladies and gentlemen, the clean operating result of Chemicals & Materials increased remarkably from €78 million to €647 million. This outstanding development was driven by improved olefin margins, record-high polyolefin margins, positive inventory valuation effects and the full consolidation of Borealis.

Let's now have a look at the different businesses in Chemicals & Materials. The contribution of OMV's base chemicals increased due to higher sales and higher margins.

Borealis delivered excellent performance. Excluding the joint ventures, earnings grew from €24 million to €430 million.

The Borealis base chemicals business improved due to higher margins and improved steam cracker utilization as well as positive inventory valuation effects. Polyolefin earnings rose sharply, driven by significantly higher margins, a recovery in automotive volumes and positive inventory valuation effects.

Polyolefin sales volumes in Europe were slightly higher and their composition changed as well. We have seen an increase in the automotive and advanced products speciality segments, while volumes in the consumer products segment declined.

The contribution from the fertilizer business was slightly higher compared to the second quarter of 2020. The results benefited from positive inventory and valuation effects and the reclassification as an asset held for sale, partially offset by higher feedstock costs due to increased natural gas prices.

The contribution from Borealis' joint ventures Borouge and Baystar came in at €136 million, driven by higher polyolefin prices in Asia and the U.S. Polyolefin sales volumes generated by the JVs declined by 15% due to the lower volumes at Borouge.

The decrease was caused by the implementation of an advanced ERP system which went live successfully end of June but caused some delays in shipments. The sales volumes at Baystar recovered from the negative impact of the Texas freeze in February and were stable year-on-year.

Turning to cash flow mix fund. Our second quarter operating cash flow excluding net working capital effects reached €1.7 billion for the second quarter in a row, with around 40% contributed by Chemicals & Materials.

Net working capital effects generated a cash outflow of €164 million. Consequently, cash flow from operating activities came in at €1.6 billion for the quarter, which is a new all-time high.

Looking at the half year picture. Cash flow from operating activities excluding net working capital effects amounted to €3.4 billion, a massive increase of almost €2.2 billion compared to the first half of last year.

Cash flow from operating activities increased by 57 -- 58% to €2.6 billion, as net working capital effects showed a big swing. While in the first half of 2020 we recorded an inflow of €397 million, we had an outflow of €810 million in the same period of this year.

The organic cash outflow from investing activities amounted to around €1.1 billion, 20% higher than in the same period last year primarily due to the investments in the PDH plant in Belgium. Despite the payment of a record dividend, the organic free cash flow, after dividends, for the first half year came in at around €1 billion, thus contributing to the continuous deleveraging of the company.

Net debt excluding leases decreased by €722 million to €7.1 billion. Consequently, our gearing ratio excluding leases, defined as net debt, excluding leases, to equity, decreased by another 3 percentage points to 34% compared to the first quarter of this year.

If we consider the divestment projects already signed, which will lead to a further net debt reduction of around €800 million, our gearing ratio excluding leases would be around 30%. Ladies and gentlemen, as promised, we are deleveraging fast.

And we are well on track to reach our target of a gearing ratio, excluding leases, of around 30% by the end of this year. At the end of June 2021, OMV had a cash position of €3.1 billion, and €4.3 billion in undrawn committed credit facilities.

Let me now give you an update on our divestment program. Since the announcement of the program last year, in March, we have signed agreements resulting in a deleveraging effect of around €1.5 billion.

After the successful closing of 2 projects in the second quarter, we recorded a deleveraging effect of around €700 million. In the second half of this year, we expect further closings with a deleveraging effect of around €500 million.

This includes the sale agreement for the retail stations in Germany, the oil feeds in Malaysia and potentially the Maari oil field in New Zealand. The closing of the divestment of our Slovenian retail and commercial business is expected next year.

The sales process for Borealis' nitro business is progressing well. The marketing phase started in the second quarter, and we are seeing lively interest from potential buyers.

Fertilizer market environment continues to be supportive for the transaction. We are very well on track and are confident that the signed divestments will overachieve the target of €2 billion by the end of this year.

Let me conclude with an update on our outlook for this year. Based on the developments we have seen, so far, we have updated our oil price assumptions for 2021 and now we expect an average Brent price in the range of $65 to $70 per barrel.

Our expectation for the average realized gas price is now above €12 per megawatt hour. We reconfirmed the full year production guidance of around 480,000 barrels per day in '21, provided that Libya contributes around 35,000 barrels per day.

In the third quarter, we expect production to be below that of the second quarter, as the maintenance activities in Russia are now planned for the third quarter. In addition, production in Norway is forecast to come down from the peak recorded in the second quarter.

And we expect closing of divestments in Malaysia and New Zealand. We will also perform maintenance activities in Malaysia.

For the remainder of the year, we no longer have any oil hedges in place, but we have hedged around 10% of our gas production at around €20 per megawatt hour in the third quarter and €27 per megawatt hour in the fourth quarter. We reconfirm our previous estimates for Refining & Marketing, with the exception of the refining indicator margin.

We have seen still low diesel and jet fuel cracks due to the weak international travel causing middle distillate cracks to remain depressed. We expect some improvement in the second half of the year but now assume that the 2021 refining indicator margin will be at the previous year level.

In Chemicals & Materials, we increase our estimate of the European propylene margin. We now expect it to be above previous year level.

Steam cracker utilization, a new KPI that we began publishing starting with this quarter, is expected to stay above 90%. The construction of the 1 million tonne ethane cracker at Baystar in the U.S.

was completed and the start-up process is now ongoing. The polyolefin market showed very strong performance in the second quarter, but prices are expected to come down, with supply beginning to normalize after maintenance shutdowns and the easing of logistic constraints.

With expectations of a typical summer slowdown in demand, we assume a softening in the third quarter. Nevertheless, margins are anticipated to stay substantially above the level of 2020 for the remainder of '21.

The polyolefin volumes of Borealis excluding JVs are expected to be higher than in 2020. The clean tax rate for the full year is expected to be in the mid-30s.

Ladies and gentlemen, as this is my last presentation to you as CEO of OMV, I would like to spend a few minutes talking about my journey over the last 6 years. Looking back to the beginning, I can see that OMV is a very different company than the OMV in July 2015 when I took the job.

Before coming onboard, I always thought of OMV as a sleeping beauty, in other words a company with a lot of potential. However, the markets did not believe it.

Almost everybody had us on sale in 2015 -- on sell. I took over in challenging times for the industry; or so I thought back then, when oil prices bottomed out at $27 per barrel.

I could not imagine that I would end my tenure here in even more challenging times during a global pandemic, but despite these remarkably difficult times, OMV came out stronger than ever. From the very beginning of my journey, together with my team, we put in place 3 clear priorities: cost competitiveness, cash flow management and profitability increase while maintaining an integrated business.

We have to make sure that the company would be resilient in a downturn and, at the same time, make plans for growth and pay attractive dividends to our shareholders. We set a clear strategy and we executed it very fast, delivering on all our promises.

We reduced exploration expenditures. We divested assets with high investment obligations and little production such as our U.K.

E&P position and noncore assets such as the retail network in Turkey. In turn, we acquired producing assets with lower costs such as those in Malaysia, Abu Dhabi or the stake in the Russian gas field Yuzhno Russkoye.

We had redefined our core regions and expanded into new ones. From a company focused mostly on CEE, we expanded into hydrocarbon-rich regions and important growing demand centers around the world.

As a result, E&P has developed into a high-quality, low-cost asset base focused on gas; and has become more regionally balanced. We turned-around the gas business and expanded fast to Northwest Europe.

We significantly transformed our retail network, changing it into a material contributor of -- to our profitability. The operating result per station almost doubled in the last 5 years.

We made fundamental changes to our cost structure. We reduced our capital spending from €3.6 billion at the end of 2014 to below €2 billion without impacting the operations.

We conducted several efficiency programs totaling €650 million of sustainable annual savings by the end of 2020. During my tenure, not only we have experienced a very volatile macro environment but also a very fast turn in the industry in terms of climate change, something never seen before.

We at OMV increased our efforts to reduce emissions. For example, we developed the ReOil project from the lab into refinery operations.

We built a photovoltaic plant in Austria. And we set clear targets for emissions -- emission reductions by 2025 and a net 0 target in operations by 2050, but the most significant change in terms of size and importance for the future direction of our company in a low-carbon world was in chemicals.

Part of our 2018 strategy was to grow petrochemical activities outside of Europe, so we explored various options. In 2019, we acquired a stake in ADNOC Refining and Trading as a platform for potential further expansion in a growing region, but a great opportunity arose in the beginning of 2020 when we acquired the majority stake in Borealis, thus significantly increasing the chemicals business in our portfolio and extending our value chain into polymers.

This was our biggest acquisition ever done perhaps at the most difficult time, at the beginning of a global crisis, but we were convinced that this transaction will add considerable value to OMV while at the same time positioning us successfully for a low-carbon future. The extremely positive development of the chemicals markets we have seen in the first half of '21 supports our investment decision and, together with our rapidly executed divestment program, helps us to deleverage rapidly.

As a result of all our efforts, the clean CCS operating result more than doubled to €3.5 billion in 2019 compared with 2015. And in this year, we were able to achieve some €2.2 billion in only 6 months.

My favorite KPI in running our company, the cash flow from operating activities, increased from around €3 billion in 2015 to more than €4 billion in 2019. And in the first half of this year, we have already generated around €3.4 billion.

We transformed the company into a tremendous cash engine while -- which is able to support our growth story and at the same time our progressive dividend policy. Our track record on dividends is unbroken for 5 years.

In this period, we have increased dividends at an average rate of 13% per year. We were one of the few companies in the energy industry that did not cut dividends in 2020.

And this year, we were among the first to increase it, reflecting our confidence in the ability to generate cash despite the fact that the crisis is not yet over. Looking back, we have spent around €9.8 billion for acquisitions and divested around €4.5 billion.

These figures alone can tell you the remarkable transformation that OMV undertook to a very healthy and solid company that is fit for the future. I believe that today we have a powerful investor proposition of growing sustainable cash flows and dividends while transitioning into a low-carbon world.

OMV started a major transformation in the direction of chemicals and a circular economy. I am happy that the Supervisory Board appointed Alfred Stern as my successor.

Alfred has extensive experience in chemicals and has been a driver for circular economy in recent years. I warmly congratulate him and wish him all the success.

I would like to thank my Board colleagues and all employees. Together, we made this happen.

And I would like to thank you, the analysts and investors who followed us, understood our story and entrusted us with your confidence. Thank you for your attention.

Now Reinhard and I are more than happy to take your questions.

Thank you, Rainer. Let's now come to your questions.

[Operator Instructions]. You're, of course, always welcome to rejoin the queue for a follow-up question.

The first question today comes from Mehdi Ennebati, Bank of America Merrill Lynch.

So I will ask two questions, please. First one, regarding the fertilizer unit disposal, could you update us, please, a little bit more and tell us if we should expect the disposal announcement in the second half of this year?

And maybe, can you be a little bit more precise, please, regarding the profitability? Because you said during the call that year-on-year the profitability of the fertilizer unit was more or less the same, slightly better, but you also said that the current macroeconomic environment is positive for the selling of that unit.

So maybe, can you just tell us if you expect higher profitability this year from that unit compared to last year? Or is the natural oil, gas price are so high that it is negatively impacting the profitability of that unit.

The second question is about the gas hedging. So you said that you hedged 10% of your gas production.

So are you talking about your total gas production, your global gas production for the second half of 2021? And can you please tell us, what portion of your European gas production did you hedge?

So if you can answer those two questions, that will be great. And I will finish by saying to you, Rainer, that I wish you the best for your next steps in your professional life.

It has been a real pleasure and quite exciting, in fact, to cover OMV with you as the CEO. And sincerely, I wish you all the success that should be there in your next positions.

Thank you very much, Mehdi, for your personal wishes, which I will also revert to you. All the best to you.

Enjoy the further development of OMV. To your first question, fertilizer disposal -- disposal of the fertilizer business: Yes, we are according to plan.

And we would like to sign a deal, if satisfying offers will be received, in the second half of this year, so until year-end, yes. So there is no reason to change our time line.

The process has started. And I think we are now moving into a phase that, first, nonbinding offers are coming in, but it's now too early to give you any kind of an indication.

All I can say is mainly the time line is set and we are according to plan. When we talk about the market environment, yes, if you look into fertilizer business, you have seen some price increases and margin improvement.

We have to wait and see how this will further develop in the second half because what I have explained is that especially the feedstock prices for fertilizers went up enormously. As a gas producer, I of course enjoy the €36, €37 per megawatt hour, but as a fertilizer producer, I really have to take a deep breath to pass this feedstock price increase to the customers.

So we have to wait and see. So far, I would say the business environment for fertilizers in the first half has been improved, if we compare it with last year.

Gas hedging, absolutely correct. 10% of the global gas production of OMV have been hedged.

It's the entire global production as a reference to this 10%. And European gas production: Please forgive me.

I don't want to add -- too much into details. It's because I have looked around the table already and nobody can hand over a number to me.

So Mehdi, please forgive me. Nobody is giving me any number, so I can't tell you and answer your question, yes.

I beg your pardon.

No problem. I will follow up with the IR.

Yes. Maybe -- we are happy to provide you that information afterwards.

So the next question is coming from Raphael DuBois, Societe Generale.

Can you hear me?

Yes, loud and clear.

Yes. Well, first off, let me tell you, Rainer, how much I enjoyed our interactions over the years, first as an investor and then as a sell-side analyst.

So [Foreign Language]. And now maybe back to my questions: The first one is very down to earth.

You had some temporary hedging effects, negative ones, in 2Q, €92 million, if I'm not mistaken. It will be great if you could tell us a bit more what happened there.

And why is it booked into the special item category and not into business as usual? And my second question is on the chemical business.

Your guidance for the rest of the year in terms of margins is pretty wide. Can you maybe at least tell us a bit more about the third quarter, for which you should have good visibility?

You talk about margins reverting to a more normal pattern. How fast is this normalization happening?

And what sort of margins, you think, could be achieved for the commodity part of your business? And still related to chemicals, the non-specialty -- sorry, the specialty part of your business: I guess there will be some resets at contracts.

Could we expect a rebasing at a higher margin to somewhat reflect the strong environment we are in?

Yes. Raphael, it's Reinhard.

Maybe taking on the first question regarding your hedging questions. First of all, I think we have to differentiate between the realized and the nonrealized part of our hedging that we have in our accounting.

In terms of the realized hedges, we have in the second quarter some €72 million. Most part of that is coming still from the oil part, which has ended by end of June.

So there is no oil hedge in the group for the second half. So this is that part -- only a quite small part is coming from gas here.

Now for the special item booking, this is the nonrealized hedges. And there, of course, as we don't have any of the oil in there, there is just from oil the effect that part of that which was booked already as realized is reversed in the special as a positive one.

We have in total a special item of some close to €90 million as especially in there from hedging. And that is more or less the effect of our hedges for Q3, Q4 and partly Q1 of next year that we have in gas that Rainer has described already.

However, that is, of course, only the accounting effect because we have to take it as a mark-to-market valuation from exactly the forward level by the end of the second quarter. So this will then be revised and calibrated into the realized hedging results that you see -- will see quarter by quarter.

I hope that was clear.

Very clear.

Raphael, I'm now delighted to talk about chemicals. Well, first of all, what we -- I will talk about two different margins: the polymer margins more or less reflecting the main business of Borealis; and let me call it, the basic chemicals margins, which is reflecting more or less the monomers ethylene and propylene.

So what we see is that in polymers we have seen the peak of high margins in the second quarter. We don't expect to see the same margins in the third quarter.

If I look into the pricing in July, so beginning of the third quarter, as an indication, we do see already price reductions, especially in ethylene. The effect on -- in polyethylene, sorry, in polyethylene.

The effect on polypropylene is less, a bit less. So that's why I think we have to prepare for a third quarter where the polymer margins are decreased but, I have to say, not brutally decreased.

So it will be a smile on the face for Alfred to present the Q3 numbers in polymers as well, yes. So therefore, don't be too drastic in your expectations.

The polymer margins, the PPP polymer margins, were twice as high in the second quarter, so there is 100% room left to come back to what you have said, the normal level of margins. And I wouldn't expect that the margins will halve from Q2 into Q3.

When we talk about the basic chemicals margins, it's more depending on the development of the feedstock prices. So far, we have seen naphtha prices coming up to a level we haven't expected.

I think we have seen $690 per tonne. So naphtha increase was pretty high.

On the one hand side, you enjoy it as a refiner. On the other hand side, you are starting to have not a smile in the face as a chemicals producer.

So this was the effect. So it's depending how naphtha prices will move into the third quarter, more or less determining the margin performance in ethylene and propylene.

What we have seen is that increasing naphtha prices could be hand over at least partially to the customers also in July. So that my indication is the basic chemicals margins, if we talk mainly about ethylene and propylene, also the margins are not heavily reduced in the third quarter, so far.

So all in all, I would say Alfred and the OMV Board will also enjoy having fun in chemicals in second half of '21. That's what I'm saying.

And on the specialty part of your business maybe...

I thought you might forget it -- no, no, no. What I would say in specialties, what I can advise you, yes, there is a premium, yes, but I would advise you to see that premium more as a constant number and not as an increasing number as we speak about looking down the road.

Excellent. Rainer, all the best.

Thanks.

The next question comes from Josh Stone, Barclays.

Thank you, Rainer. All the best to you as well.

And I'm sure we'll miss you on these conference calls. Just two questions from me.

So firstly, on the Bornewables products you've launched, are you able to say how much more expensive it is to source this renewable feedstock versus traditional feedstock? And I think you mentioned premium products.

Are you getting price premiums on these more green polyolefins? In other words, are these margin enhancing, or are they margin diluting?

And then secondly, on the Downstream Gas business had lower earnings, you mentioned storage was particularly weak. I wonder if you can maybe just give a bit more information on why and to what extent you think things can recover in the second half of the year.

Okay. Thanks, Josh.

All the best to you as well. Well, Bornewables come with a premium in the price, yes.

How much it is, we would like to keep as a secret, but all I can confirm is it is not margin dilution what we have in our plans, yes. It adds value to and contributes value to the overall performance.

When we talk about the gas business, well, we have 2 main effects. On the one hand side, I think a major part from the storage business is not, in '21, in -- as a contribution to the overall performance.

There is not a summer-winter spread existing, yes. Just look into the numbers.

Nowadays, you are paying €36 per megawatt hour. And the forward price, if you are lucky, you can get a €30, yes.

So what kind of business is it? So you better keep the gas and the storage.

And I'm not very much optimistic for the summer-winter spread because you have to load your storage with high-priced gas in the summer, yes. You have to bring in the €36 per megawatt hour, and you have to pray that the €36 is coming back in the winter quarters.

So that's more or less what I have to give as a farewell message to the storage operators. It's not big fun in storages.

This is the translation, what I have said. The second part is that the power business in Romania was contributing less.

And the question is what is going to be the spark spread. The spark spread between running our gas-fired power plant is also pretty difficult because now we are talking about the price delta of natural gas to power, but the message is not the same like in storages.

I think that the spark spread has a good chance to come back in the second quarter -- in the second half of this year.

We now come to Sasi Chilukuru, Morgan Stanley.

First of all, congratulations, Rainer for your successful tenure at OMV. And wish you all the best for the future.

I had 2 questions, please. The first was related to the dividend payments to minority shareholders for Borealis.

You have highlighted dividend payments of €38 million for the first half of this year. If you could remind us what the dividend policy of Borealis is and what payments can we expect in the second half of 2021, that would be helpful.

The second question is related to the net working capital build of €810 million in the first half. Do you expect this or a part of this to reverse over the second half?

Sasi, let me explain to you a little bit how the dividend policy works. So we normally have a policy that we pay dividends once a year.

There were some periods where there has been a split of the dividend, with an anticipation of part of the dividend already in the quarter before, but if we are talking about 2020 and 2021, that will be paid out in one tranche. So it is not expected that there will be additional dividends to be pay out in the rest of the year, whereas I wouldn't feel too sorry for Mubadala there.

They got a very rich dividend from OMV for that 24.9% share in OMV. The second question, could you please remind me?

The working capital build...

Net working capital, yes. The net working capital increase in the second -- in the first half was more or less attributable to the very high price increases that we have seen that came in both in inventories as well also in the ratio between payables and receivables.

We are expecting that this eases out for the second half of the year. I would be too bold to say it reverses.

So as we are seeing that some of the prices are, I would say, weakening a little bit in the chemicals part but, on the other side, also on the olefin part we are seeing still quite high prices, I would expect that there might be a little bit of a positive net working capital contribution when it comes to cash but not very high. So think of it as being rather stable for the second half of the year.

We now come to our Henri Patricot, UBS.

Yes. And Rainer, I wish you all the best as well.

It's been an impressive transformation indeed for OMV under your tenure. And then a couple of questions: The first one, just on chemicals, I wanted to follow up on the comments on the evolution in the second half.

And I wanted to have a better sense of sort of the magnitude of the inventory gains in the second quarter and whether we should expect these to reverse in the third quarter just based on latest prices that you're seeing. And secondly, a couple of quick questions on ADNOC Refining.

I noted the issue, the outage with the RFCC unit. Has that been fully fixed now?

And secondly, [indiscernible] typical quarter in terms of the contribution from trading in the second quarter, or are you still kind of ramping up these operations?

Henri, regarding the magnitude of the inventory effect in chemicals. It's around 50 million for this quarter, and we are expecting that more or less to reverse.

It's very much also in context with the question before from Sasi. We are expecting that the level of inventories will not be higher both in terms of valuation as well as in terms of volume, and therefore we would not see such effect coming in the third quarter or in the fourth quarter again.

Henri, well, I'll start with thanks also to you, and all the best. Talking about ADNOC Refining: The FCC plant is back in operation.

We have problems this time not to restart the plant and problems with the catalysts like the first time. This time, we only had to fight against corrosion.

So therefore, I don't want to say it wasn't more -- easier then, but it was not the same kind of problem we have to solve like the first time. I do hope that this FCC plant will now reliably run into the second half with a contribution.

As we speak about the trading activities positively contributing to the overall performance of ADNOC Refining, I clearly have to say this can't be the future model, yes. We need to see an improving margin in ADNOC Refining to come up with more convincing numbers.

And the question is, of course, how do we see the refining margins in the second half of this year. And then this will be more or less the main factor determining the quarterly contribution from ADNOC Refining.

The next questions come from Matt Lofting, JPMorgan.

Great. Congrats on a super strong quarter.

I think, Rainer, record numbers are very well deserved as a sign-off, wishing you well. I had two questions, please.

And Rainer, I mean, first, I think, as you referenced in your opening remarks, we've seen sort of significant macro volatility through your tenure at OMV, and also significant company transformation. At the same time, clearly the whole industry is having to adapt to the transition, so I wonder if you could share some thoughts on what some of the most challenging elements of the transformation of the company today have been and perhaps sort of forward learnings from that.

And then second, gas, probably appropriate to ask you about gas. You sort of flagged some of the drivers behind European price strength earlier on.

Can you talk a bit about the outlook as you see it for the next sort of 6, 12 months; and scope within that for further gas realization upside OMV versus, I think, sort of low 11s per megawatt on the sort of the first half of the year given the lagged mechanism in some of the pricing regimes?

All right, thanks, Matt. Let me start with the topic of the transition.

I think -- the most challenging part, especially as we speak about transition into a low-carbon world, is I think timing. The expectation in the political arena and in the financial markets is let's do it yesterday because we have to save our planet and do it as quickly as possible.

What I have learned is transformation takes time. It really takes time.

What I can see in OMV, we have been, I think, more an exemption for a fast transformation, if you look what happened and just see the first half year results. 50% of our overall earnings performance is attributable to chemicals.

And what I have learned is, if you would like to go for a quick transition, nothing goes quicker than M&A; and you have to be bold. And the most challenging part is you have to give up what you love, yes.

It's like a wedding problem I'm starting to talk about, but that's more or less what's happening, yes. You can't imagine.

If you grow up successfully in oil and gas, and if you'd tell the people, "Hey, come on. In the long run, we would like to transition into a totally business and to a totally business company," it takes time to convince people in the company.

And you have to give companies and management the time to work on that job, yes. Don't make too much pressure that you would love to see a transition happening from 1 day to another.

It's impossible, yes, but be impressed if a company is explaining you a strategy that, via M&A, they are ready to reduce their traditional business and they would like to fast grow into the new world of business. What I have learned is, when you are going to invest into a wind park, you are 5 years busy to build that.

And then you will enjoy, hopefully, having it into your numbers, yes. A transition via investments is taking -- you have to take a very, very long breath.

So that's my experience. Transition is not an easy task, for management, to be executed.

The second, gas. What is my outlook for the next months to come?

I think, Matt, we are going to see -- continue to see high prices in the natural gas market during the summer months. The demand for storage gas is absolutely high.

The compressor capacities at the storage sites are limiting as to refill the storage if the withdrawal season will start early. For example, if you have a scenario that in October we see first snowflakes coming, then we will have a very high-gas-price scenario for the winter quarters.

So an early arrival of the winter temperatures would feed an upside scenario. And then you are going to see also in the winter quarter spark spreads coming back, yes.

Then we might see summer gas prices being topped also in the winter quarter. And it's depending on the -- on an early arrival of the winter, but if you look into the forward curve, you will see that you have something around €25 to €30 per megawatt hour.

So as a gas producer in Europe, I would say a very healthy business is waiting you. So you will make good money as a gas producer in the next quarters.

I don't see that there will be a drop of gas prices to a level we have seen last year, for example, in the low 10s. So more or less, my basic scenario is telling me we have to live also in the next months more with higher than lower gas prices, not higher than we are seeing right now but higher compared to the quarters we have seen last year.

We now come to Michael Alsford, Citi.

Rainer, I also echo others by saying I wish you the best in the future, but I couldn't let you go without asking a question about Nord Stream 2. So given the recent developments, I was just wondering whether you could remind us of how and the timing of when OMV will get to -- the financing back that they provided for the project.

If I remember correctly, it was just over €700 million. So maybe you could explain that.

It would be great. And then just secondly, just on the Upstream maintenance in 3Q, could you just maybe give a little bit more granularity as to how sort of long the maintenance will be in Russia?

And therefore, what's sort of the kind of targeted production in 3Q from that region?

Michael, thanks for the best wishes, the same to you. And I'm delighted to talk about Nord Stream 2, of course.

Well, when we talk about the timing, I make reference to the CEO, Matthias Warnig, explaining us that he is expecting that construction will be finished end of August. So beginning of September, I think the procedure of certifying the pipeline to be ready for gas end.

We are going to see first gas running into the pipe, hopefully, in the second half of this year. Reinhard explained already in a press conference today that he is expecting that we are going to get first cash payments from Nord Stream 2 company in the second half of this year.

So we are going to tell you that cash is coming back, starting already with the second half of this year. And I would say it's not only the €729 million which I would like to have back, Michael.

It's also the interest rate on top of the €729 million, so it's really more than €729 million. So I can see Reinhard smiling just in -- on the opposite of the table here because he has an idea how much it is.

So it's more than this. So let's talk about Upstream business now, maintenance season.

I think it will be a few weeks of interruption of gas production in Russia. A few is 2, plus -- 3 -- 2 to 3 weeks we have planned for the maintenance shutdown.

And then as you might remember, I have said that we are going to upgrade also the compressor station. And therefore, we are back to a higher pressure in the gas system so that, after the maintenance season, we are back to 100,000 barrels per day contribution in Q3.

So just to make the math a bit easier, yes: So if you take Q3 and the maintenance will happen -- let's say, round numbers, it's 1 month. Then you have to calculate in this quarter two months of gas production from Yuzhno, with a little bit drop on top as a good vodka, okay?

So that's the way I would do it.

We are at the end of our conference call. Thanks a lot for joining us today.

Should you have any further questions, please reach out to the investor relations team, and we are happy to help you. Thanks a lot, and have a good day.