Uniper SE

Good morning, dear analysts and investors. A warm welcome to the Uniper Interim Results Call for the First Half of Fiscal Year 2021.

Thank you for participating in our conference call today. Our CEO, Klaus-Dieter Maubach; and our CFO, Tiina Tuomela, will lead you through the interim results presentation today and answer all of your questions.

Klaus-Dieter will start with the key highlights, and Tiina will then focus on the financial data. Klaus-Dieter, please.

Thank you very much, Stefan. Good morning, everyone, and a warm welcome also from our side.

I would like to briefly outline the key highlights of the first half of 2021 and shed some light on our major developments of the portfolio before Tiina will go into the details of our financials. What are the highlights of the first half of the fiscal year?

As you can see on the slide, the half year results are under the heading, Sound Results. Operationally, business at the half year point fully met our expectations.

Already with the Q1 call in mid-May, we had communicated that the isolated adjusted EBIT in Q2 would carry a negative sign. In the end, the well-known carbon phasing effect, which resulted from the sharp increase in CO2 prices towards end of June, was even more pronounced than anticipated.

Accordingly, adjusted group EBIT in H1 -- half year 1 2021 decreased from €691 million to €580 million compared to previous year. For the full year, we confirm our previous outlook, which we raised in the first quarter.

Turning towards our strategy and portfolio development. When I entered the office more than 100 days ago, I made clear that accelerating Uniper's decarbonization strategy would be at the top of my agenda.

Back then, I did not expect how strongly the upcoming weeks would further highlight the urgency in this regard. Governments and courts are increasing the pace with its Fit For 55 plan.

The EU Commission has set the frame to make Europe the first carbon-neutral continent. Germany itself has just increased its reduction targets for 2030 from 55% to 65%.

The recent extreme weather phenomena inside and outside of Europe make one thing very clear: whatever the costs of decarbonization are, such transitioning will lead to even higher costs for society. With regard to the recent floods in Germany, luckily, Uniper employees' activities have not been affected.

We are supporting the people who were affected both financially and directly at the locations of our customers and partners. Long term, it is our portfolio transformation that contributes the most in the fight against climate change, which brings me to the next slide.

The phaseout of coal-fired generation is the most visible sign of how we at Uniper are moving forward with our decarbonization strategy. At the beginning of 2020, we set for the first time a concrete phaseout schedule for coal-fired power generation in Europe.

As you can see on the slide, by now, we are making even faster progress than originally planned. Compared against the original plan, we saved more than 5 million tonnes of CO2 with our accelerated coal exit.

In Germany, the plan was to end coal-fired power generation at 4 of the 5 sites by the end of 2025. We have now been awarded in all of the first 3 German hard coal exit tenders.

The Heyden power plant involved in the first auction ceased commercial operation at the beginning of 2021. However, this power plant was declared system relevant by the TSO.

After approval by the Federal Network Agency, the power plant is now to be kept ready as a backup solution for 2 years until September 2022. Since going into the reserve scheme, Heyden has been requested several times by the TSO, which highlights the issue of security of supply and system stability.

The Wilhelmshaven power plant, which was successful in the second auction will cease operation in December 2021. Given its port access to the North Sea, we are working intensively on solutions to establish a commercial hydrogen hub there in the medium term.

Now in the most recent auction, Scholven power plant Unit C was selected. Accordingly, it will cease commercial operations at the end of October 2022.

We want to push ahead with the coal phaseout not only in Germany. Of course, we also fully support the ambitious national coal phaseout plan abroad and even deliver above those in the case of the U.K.

We announced just last week that we will bring forward the closure of 1 of the 4 Ratcliffe coal units to the end of September 2022, 2 years ahead of the date announced by the U.K. government for the coal phaseout.

Power generation in the remaining 3 units of the 2-gigawatt power plant is scheduled to end by the end of September 2024 at the latest after the power plant has fulfilled its obligations under the U.K. capacity market scheme.

With respect to the Ratcliffe side, Uniper is making progress in the development of an Energy Recovery Facility to be known as the East Midlands Energy Re-Generation, EMERGE, Center, an anchor project for a zero carbon technology and energy hub for the site. Datteln 4 will be the last of our European coal-fired power plants to be taken off the grid by the end of 2038 at the latest, which is in line with the German Coal Phase-Out Act.

The power plant has been -- or was completely marketed to our customers. Recently, in its new climate protection law, the German government has materially increased the greenhouse gas reduction target for 2030.

For the energy industry, this means the old reduction path from 257 million tonnes in 2020 down to 175 million tonnes in 2030 has now been decreased further, even down to 108 million tonnes in 2030. If a new German government wants to talk about the coal phaseout again in this context, then we are prepared to talk.

Of course, such talks need to cover the question of compensation as well. The second lever for decarbonization -- decarbonizing the portfolio is getting the growth projects on the road more quickly.

As you know, we have earmarked €1.5 billion to spend on growth investments over 3 years. Renewables will be a key element in improving Uniper's energy mix.

At the same time, we will leverage Uniper's existing expertise and platform in many areas of the gas value chain to offer lower carbon products and services. Green gases are, therefore, the second pillar of our transition story.

I would like to share with you a few examples of how we have been ramping up new business areas in 2021. As part of our One Team approach, we have bundled Fortum and Uniper's capabilities in the renewables area.

The joint organization with around 100 employees in the future will be developing our onshore wind and solar activities in Europe. The plan is to jointly build between 1.5 and 2 gigawatts of new capacity in the most attractive European markets by 2025.

I'm optimistic that we will be able to be more specific on first promising projects towards the end of the year. Moreover, we have expanded our renewables PPA portfolio.

On the one hand, we used our experience from the trading and optimization business and act as an enabler for development. On the other hand, we will increasingly address medium-sized and small commercial customers in order to structure long-term carbon-free energy supplies according to the individual needs of our B2B customers.

New contracts signed in Spain and the U.S.A. have recently further increased our PPA portfolio.

At the top of our agenda is also to leverage the gas business for the opportunities that arise in the transition of the energy industry. More specifically, this involves the further build-out of our already existing green gas portfolio.

From a midterm perspective, we will continue to utilize Fortum's and Uniper's joint capabilities to position ourselves as a major player in the rapidly increasing hydrogen economy. The initial focus here is on launching major pilot projects, which need to be supported by public funding, and developing concepts through cooperation agreements.

The green methanol Project AIR in Sweden is one step further towards concrete implementation. This project is being planned by the Swedish chemical group, Perstorp, together with Uniper and Fortum.

Having already qualified for the next stage of evaluation under the EU Innovation Fund, the project recently received financial support of €30 million from the Swedish Energy Agency. Moreover, further cooperation agreements were concluded to improve our market entry opportunities.

Uniper and Shell Gas & Power Developments recently signed a MOU to drive forward joint cross-border projects. The focus is on exploring future opportunities for the large volume transport of hydrogen from the ports of Rotterdam and Wilhelmshaven to Germany's core industrial region of North Rhine Westphalia.

For Uniper, as a major European gas midstream supplier, creating import channels for green hydrogen or alternative fuels such as green ammonia for Europe is a core story. A few days ago, Uniper signed a cooperation agreement with a project company, HYPORT, representing Oman's national petroleum investment company, and DEME, a world leader in the highly specialized fields of dredging and solutions for the offshore energy market.

The project foresees building both an electrolysis plant for 250 to 500 megawatts and corresponding renewable power assets by 2026. Uniper will provide technical services.

However, the main focus is on drawing an exclusive offtake agreement for green ammonia, which we intend to import via our planned Wilhelmshaven hub. And not to forget Uniper's commitment to expand mobility solutions for heavy-duty transport.

Uniper with its subsidiary, LIQVIS, has been in the process of establishing a liquefied natural gas filling station network for long-haul transport in Germany since 2017. The small LNG station network in Germany is slowly expanding and sales grew by about 75% in 2020.

Following the successful completion of a trial run of bio-LNG with a major logistic company and the truck manufacturer, IVECO, LIQVIS will now also offer a carbon-neutral product at an attractive price for the first time from 2022 onwards. The use of bio-LNG results in greenhouse gas savings of around 96% compared with conventional diesel fuel.

And now over to our key performance indicators in the first half of fiscal year 2021. Starting with the Global Commodities business, storages have been close to their peak in half year 1 2020 following a mild winter and decreased demand due to COVID-19.

Meanwhile, a colder winter with ample withdrawals from our storages was covered with the global economic recovery and supply shortages. In light of this market environment, European gas prices showed a volatile development and have more than doubled since the beginning of 2021.

These combined factors brought our storage levels to around 66%, which is still above the currently observable market average. As recently announced, the upcoming CoD of Nord Stream 2 in Q4 2021 may help to ease the current tightness on the gas markets.

Building up on our first quarter, the European Generation segment achieved again a remarkable increase in power generation volumes of 19%. Hydro volumes decreased by 9% year-on-year.

This development is mainly related to a normalization in Nordic generation volumes as we faced extraordinary high precipitation at snowmelt during the first half of 2020. In contrary, German hydro output has risen by 5% following strong precipitation.

Nuclear output declined by around 2%, which mostly resulted from the closure of the minority-owned Ringhals 1 power plant by the end of last year. Gas- and coal-fired power generation continued the Q1 trend and has risen by almost 50% year-on-year, which can be explained by several interconnected developments.

Firstly, a significant decrease in renewal supply, e.g., due to less wind as well as additional power demand due to colder weather across Central Europe and U.K. Secondly, the higher volumes are also driven by the CoD of Datteln 4, which has only been producing since June 2020, and the gas-fired power plants Irsching 4 and 5 being back in the merchant market since October 2020.

The Russian Power segment continues to deliver performance above plan with an increase of roughly 4%. This development can be mainly explained with the withdrawal of COVID-19-related restrictions for businesses, higher demand on the Russian market and also beneficial weather conditions compared to the very warm winter in 2019, 2020.

As can be expected from the group-wide rise in fossil generation volumes carbon emissions show a plus of about 19%. This development is in line with the overall market this year.

It highlights today's relevance of fossil fuels to ensure security of supply and the need to change that going forward. From Uniper's perspective, given the broader fossil asset base, we expect this trend to continue for the full year 2021 and even 2022 as already highlighted back in May.

Starting with this quarter, we will also report our group-wide specific carbon intensity to provide further transparency on our decarbonization progress. Our specific carbon intensity remained at prior year's level with approximately 440 grams CO2 per kilowatt hour produced after the first 6 months.

Even though the percentage of fossil volumes increased, this is mainly attributable to the high efficiency at Irsching 4 and 5. Looking forward, we will drive the emission intensity of our fleet down.

Uniper is actively attacking decarbonization across the organization and along our entire value chain. Throughout the next month, we will be more specific when it comes to providing proof points on our strategy execution.

Having said that, I'm handing over to Tiina, who will lead you through our key financials.

Thank you very much, Klaus-Dieter. Overall, looking at Uniper's financials after the first 6 months, we can see, as expected, mostly a decrease in the relevant metrics compared to prior year.

However, there are 3 key messages around those numbers that put the development in perspective. First, why we see a decrease compared to prior year, the absolute level of our metrics are healthy.

Second, the negative earnings development year-on-year is driven by phasing effect, which reflects the recent carbon price rally. The underlying business development is actually stable and solid.

Third, we are fully on track to reach our communicated full year guidance. Having said that, let's go through the KPIs on this chart.

Both adjusted EBIT and EBITDA are down by around €112 million compared to the previous year. Accordingly, economic D&A remained stable at around €320 million in the first half of the year.

In comparison, the adjusted net income decreased only by €42 million year-on-year. As taxes and minorities remained stable at about €25 million and €150 million.

The reason for the comparatively better development of the adjusted net income is the improved economic interest results. Here, we have a positive impact from revaluation of our hydro provision due to higher interest rates.

The unadjusted or reported net income shows a very strong decline compared to prior year. This results mainly from mark-to-market effects on unrealized derivatives.

The main driver here are our power hedges, i.e., short deals at the exchange that lost in value as prices increased. Economically, this is offset by a higher value of our assets.

However, those assets are not accounted for on a mark-to-market basis in the net income. This mismatch highlights the usefulness of adjusted earnings metrics to assess our actual performance.

Economic net debt increased somewhat compared to the end of last year, in line with the usual seasonal pattern. Finally, on the operating cash flow, we actually see an improvement year-on-year.

As usual, I will now get into details of those KPIs starting with the underlying earnings drivers on the next chart. This slide breaks down the year-on-year development on the adjusted EBIT into main effects.

The overall negative delta of €111 million can be fully explained by carbon phasing. This means that in the first 6 months of 2021, we had more than €100 million of additional carbon facing compared to prior year.

Like in the past, this effect will fully reverse in Q4 and we, therefore, have no impact on the full year results. It stems from the fact that we hedge our carbon exposure with products that settle at year-end.

Accordingly, in times of increasing CO2 prices, we record higher expenditure within the year for higher CO2 provisions while the offsetting gains on the hedges are not yet realized in adjusted EBIT until they settle in Q4. The magnitude of the compensation effect can be explained by the CO2 price increase of more than €20 since the beginning of 2021.

Looking at the underlying business performance, we actually see overall a flat development year-on-year. European fossil generation is up almost €100 million compared to the already strong prior year.

Here, we see additional contributions from Datteln 4 and the gas-fired Irsching power plants, all of which were not in commercial operation for the most part of the last year's half year. Additionally, we received higher U.K.

capacity payments in 2021. Our outright generation business is down by about €30 million due to the lower volumes and prices.

On the volume side, it is mostly due to the normalization from high water levels last year. Price-wise, the decrease is mainly driven by lower achieved prices for the nuclear side.

Moving over to Global Commodities, which shows a high double-digit decrease year-on-year, primarily due to the gas midstream business. As mentioned in the last call, we see here a normalization of earnings after an extraordinary result in half year last year.

This swing in gas is only partly compensated by the positive development in the international commodities portfolio, which benefited from the market environment in Q1 2021. Our Russian Power Generation business showed a decrease of roughly €10 million, mainly driven by FX development.

This is why the negative impact from Shaturskaya and Yaivinskaya moving from the CSA to the KOM scheme has been compensated by additional contribution from Berezovskaya 3. Category others sums of all remaining effects adding up to a single-digit positive number that is mostly reflecting a lapse of expenses in the outright generation area.

On Slide 8, you can follow the reconciliation from the group's adjusted EBIT to operating cash flow. Even though adjusted EBITDA decreased by €112 million compared to prior year, we see the operating cash flow before interest and taxes actually increase by roughly the same amount.

Accordingly, the cash conversion rate improved from 35% to 50% year-on-year. Then let's go to the waterfall, starting with the EBITDA on the left side and moving to the right.

The EBITDA is adjusted for noncash effective items. Those are primary additions and revaluation of provisions, in this case, mostly workforce-related provisions.

In the next effect reflects the provision utilization, i.e., the actual payout of provision that have been built up in the past. As usual, this considers primarily 3 categories of provisions: nuclear decommissioning, workforce and onerous contracts mostly related to our Global Commodities business.

Next, change in working capital and here is one of the main reasons why the cash conversion is significantly higher compared to last year. As Klaus-Dieter mentioned, our current cash inventory levels are significantly lower compared to prior year due to the colder winter and the current market environment.

Accordingly, our net increase in working capital is about €170 million lower compared to prior year, which explains the swing on the OCF side. The next element called others includes mainly the net effect from CO2-related provisions and working capital movements.

Here, we also see a significant positive driver due to the higher correction for noncash effective additions to CO2 provisions. Then let's go over to the development of the economic net debt on the next slide.

After hitting a lull in Q1 at €2.5 billion, the economic net debt amounted to €3.2 billion at the end of June 2021. Compared to the beginning of the year, this is an increase of approximately €100 million.

Looking at the underlying drivers from the left to right, we see that the OCF fully covers our group investments. The dividend of €501 million was paid out in May after our virtual AGM.

All else equal, this would have pushed the economic net debt significantly higher. However, on the provision side, we see a relief of more than €400 million due to higher interest rates and therefore lower pension and asset retirement obligations.

When it comes to pensions, interest rates increased for Germany from 0.8% to 1.2%; and for U.K., from 1.5% to 2%. Overall, when it comes to our credit rating, we remain in a very comfortable position.

This is further underlined by the recent S&P decision to change the outlook of our BBB rating from negative to stable. When it comes to our full year outlook on our financial KPIs, the outlook, which we raised following strong Q1 results is left unchanged.

We expect adjusted EBIT to end up between €800 million and €1,050 million at the year-end. For adjusted net income, we see a range of €650 million to €850 million on a full year basis.

While Q2 turned out somewhat lower than indicated during our first quarter analyst call, we remain fully confident in our guidance for the full year, mostly for 2 reasons. First, the lower earnings in Q2 were primarily driven by phasing effects, which the definition will reverse in Q4 and have, therefore, no impact on our full year results.

Second, looking at the business forecast over the next 6 months, we see already significant contribution materializing, especially in the Global Commodities area. Looking at the remaining 2 quarters individually, you can, as usual expect a negative adjusted EBIT in Q3 and a strong positive contribution in the last quarter.

As of today, we expect a negative isolated third quarter of better than previous year's Q3. However, please note that the earnings split between Q3 and Q4 depends on the further development of commodity prices, especially carbon and gas as just witnessed in Q2.

This brings me to the end of my presentation today. So Stefan, back to you.

Thank you, Tiina. And speaking of commodity price development, may I remind you that our IR app, Energy.Uniper, is the perfect tool to stay up-to-date on all relevant commodity prices.

This is underlined by the very positive feedback we received since its release last summer. With the recent update, it now includes the daily European utility newsletter provided by Bloomberg.

And of course, it's free of charge. We neither take your money nor your data.

And if you have any questions on this app, please go to our IR team. For questions related to today's presentation, however, I'm happy to open the Q&A right now.

So operator, please.

Two or 3 questions on my side all mainly related to gas prices. Normally, you tend to benefit in a strong environment for few commodities and Q2 has been extremely strong.

Gas optimization, there was a lot of optimizing to be done. Why can't we see this in the numbers yet you showed a negative impact there?

Were yourself positioned the wrong way? Or could you maybe explain why you, unlike other big trading houses, Vattenfall, RWE, they had an absolute storm in Q2.

Why did it not quite work in your favor? The second one is just your general view on gas prices.

We are now 25% for the TTF for a month above the previous high in 2008. There's, of course, a big squeeze.

You referred to Nord Stream 2 in your presentation. Do you think that this coming online will sort of ease the squeeze and the tightness we are seeing in European gas markets at the moment?

Or could there be a prolonged squeeze simply because gas storage can't be filled up in time for the winter with prices and supplies being like it is? And the last one is just a technical one.

When you mentioned your carbon intensity on Page 5, does this refer to all of Uniper or is it just Europe?

Thank you for your question. I think the general one on gas prices, that's one that Klaus-Dieter will answer and then Tiina will comment on the gas optimization.

On the carbon intensity, we are checking that quickly and refer to us.

Yes. Maybe I'll start with your second question on the kind of general outlook of gas prices.

Obviously, it's a little bit about kind of speculating for the future. What we see is that a number of factors I would benefit, we monitor a number of factors.

One of the factors we have mentioned in our presentation, this is the filling of the gas storage facilities across Europe. We mentioned that as far as we know, we are ahead of our competitors in terms of that with a 66% filling so far.

On average, I think it's 50-something percent, which is, again, if you compare to previous years, rather on the lower end of the averages that we have seen so far. So that is one factor clearly going forward.

The second factor, as you rightfully pointed out, is about kind of gas import infrastructure, the availability of gas import infrastructure. We received recently news on congestions due to an incident in Russia, which is still unclear how the mid to long-term effect would look like.

So I think we can't speculate on this one. And the main driver for that would be simply what kind of winter do we have to anticipate.

If it was a winter like the last one from 2020 to 2021, I think that would rather support high gas prices. If it was a warm winter, we would rather expect a lower price.

So there -- what I'm saying is there are a number of factors, obviously playing to that price development going forward when it comes to, in particular, the price developments over the next, say, I don't know, 12 months or so. So on gas optimization, maybe Tiina?

Yes.

Thank you. I continue.

So as mentioned, so of course, very significant increase in the gas prices, but in our operations I would say that there is no direct impact on our profitability as we do not have a pure long position here. I think for us, it's more a question about the volatility and summer-winter spreads, and as usual, our margins are mainly made during winter, so to say, last quarter of the year, first quarter of the year, when we withdraw from our storages.

Then when it comes to the relevant spread, so we can say that the gas have not improved so much. What comes to our, in a way, performance so however we can see that the first half year overall for gas is on the stronger side, so maybe impact a bit more than €200 million EBIT.

And we expected also to be good for the year.

On the last question – yes, last question on the carbon emissions there. That’s referring to the group, yes.

So that’s for the group on Page 5.

I wanted to ask a couple of questions, if I may. The first one is if you can share, please, your thinking regarding the gap between German power prices and Nordic power prices and if you expect the gap to widen, narrow or remain stable.

And if you maybe can tell us why, that would be great. The second question is if you can give us an update on your new businesses.

You basically are -- you eloquently explained on Slide 4 the ramp-up you expect in renewables and in green gas. I was wondering if you can give us an update as to potentially what uplift to EBIT, EBITDA you would expect from these given changes in cost of raw materials, given the change in commodities or perhaps if you can tell us maybe the invested capital and the returns that you are targeting in light of the new scenario that we are living in.

Great questions. The first one on the German and Nordic power price that goes to Tiina, and the second one on the new business will be tackled by Klaus-Dieter.

Tiina, over to you.

Okay. Thank you.

Thank you for the question. So we agree there is a massive gap in a way between the Nordic and German prices.

But in our view, it could come down over time. And the reasoning why we believe that's possible is that there are new interconnections between the different marketplaces.

So already last year, there was an NordLink between Norway, Denmark. At the end of this year, NordLink is planned to go online at the end of this year.

And then further, we can -- a link 2024 and more to come even following years. Also, what we have seen in the Nordics, so they have also some restrictions between the different areas, particularly between the Swedish area 2 and area 3, which are easening up.

At the end of the day, I think it's also a question about the supply-and-demand pattern. And as there is a strong need for decarbonization and electrification is the 1 key, so we expect the industry heavy users of electricity to use and, in a way, take the -- also the demand side up, and in a way, balancing the very big differences what we currently see.

Then over to you, Klaus-Dieter, the other question.

Yes. Thank you.

I mean, I’m building on what Tiina said. Clearly, there’s one big unknown effect that we have also seen in Continental Europe and that is obviously also something that we need to fully understand in order to see additional renewables power generation that comes onstream and how does that have an impact on kind of prices.

It’s very difficult to predict. We’ve seen that also it comes in Europe.

But back to your second question our growth ambitions, number one, I would say we have 2 areas, as we tried to highlight, renewables and green gas – hydrogen. Now if we look short term, which means 1, 2, 3 years, that I would rather expect us to spend most of the money that we have available for growth investments.

We indicated it would be €1.5 billion over the next 3 years. I would expect more money to be spent on the renewables side, not on the green gas side since we have more, I would say, tangible and large projects already in our pipeline on the renewables side, that’s number one.

Number two, difficult to predict how the returns for these investments will look like. I mean it depends on a number of factors, and I cannot kind of give you any number on our calculation on internal rates of return because obviously our return expectations expects – we expect are dependent on a number of factors.

It’s a country factor, it’s the technology, wind or solar, because wind is more volatile than solar. It’s about the maturity of the projects that we are embarking on, is it an existing or already producing wind farm that we are looking at?

Or is it a greenfield investment, which would carry then the project at higher risk. So our return expectations depend on also the projects and a number of factors that come with a certain project.

So there is no – nothing that I can – even if I wanted to disclose that number, it would be difficult to do that.

Thanks for the presentation. I have 3 -- I now have 3 questions?

Or is it -- some people have been going for 3, so I'll try for 3 and if you only want to answer 2, that's fine. So the first question is, you still haven't outlined a kind of updated dividend policy.

When should we expect one? Will we have one before year-end?

Or should we anticipate waiting until the end of the year? The second question is on hedging, which I know you don't disclose the hedging after 2023, but you obviously have a very high level of German forward hedging out to 2022 at almost 100%.

How should we -- and obviously at levels quite way below where the current forward curve is. So when we're thinking about the upside potential for your earnings from that business and thinking ahead to 2024, it's useful to get some sort of give some kind of indication as to how much you might have hedged.

But I'm sure you don't want to disclose an exact percentage seeing as you haven't formally disclosed that. But when we're thinking about 2024, have you hedged kind of very little or a moderate amount or you're pretty hedged for 2024 as well on German power?

And then the final question, Dr. Klaus-Dieter, you made some quite strong comments at the beginning around the green transition and that we need to kind of pursue alignment with that kind of whatever the cost, or I guess, I noted maybe you didn't quite say it in that exact way and I was wondering whether you could just elaborate a bit on that, how we should think about that.

Is it -- when you say whatever the cost, should we expect you to kind of close profitable stations or make disposals of assets below what you think they might be worth just because it kind of aligns with the green agenda? How should we think about the kind of trade-off there between pursuing that whatever the cost and maximizing shareholder value?

Well, maybe they do go hand in hand.

Thank you. And I think I didn't mention the standard 2-question rule, so I think it's perfectly fine if you asked 3 questions.

The first one on dividend, but also the last one on green transition, that would be 2 for Klaus-Dieter and then Tiina will take the hedging question afterwards.

I would like to say thank you for the third question because I felt kind of listening to your first question that I received today all the questions from the participants, which I have to kind of push back and give almost no answer to. And so hence, I'm grateful for your last question, we'll come back to that in a second.

On dividend, I have to admit that we're not ready to comment, even not ready to give any kind of outlook or when to come back to this dividend question. We're working on this.

Clearly, the number of things that we have to figure out going forward, some are kind of clearly connected to our business and the volatility of our business. Some are also connected to the growth story that we're trying to outline since there are obviously a number of things that we have in our pipeline, which could have also an impact on that one.

So no, we can't say anything on dividend today. And unfortunately, no, we cannot even do any outlook on when we are going to come back to this topic.

Your last question, the third one, on decarbonization, I think you rightfully pointed to a discussion that we do actually have internally and it's clearly a trade-off between our ambitions to decarbonize our portfolio -- our business at the very same time also maximize shareholder value. This is constantly a discussion that we have.

It's very concrete whenever we have our internal discussions and decisions, for example, to participate in German coal exit tenders because we have to submit a certain price level. That price we know the cap, the maximum cap, for example, when we kind of discuss that in the boardroom.

And then we make a decision on how to position ourselves and to do that in a way that, on one hand, we are not kind of leaving money on the table, if you like, and on the other hand, that we're also pursuing our decarbonization strategy. Ratcliffe is another good example for that.

We made a decision to earlier close 1 unit as of end of September 2022, as I mentioned. So that is 2 years earlier than originally planned.

And clearly, that again was also a discussion that we have to what extent are we not capturing maybe a remaining value with that unit and to what extent is it supporting our decarbonization strategy. And finally, we made the decision to announce this earlier closure of Unit 1.

I think it will continue to be a debate that we will internally have on this kind of trade-off between our ambitious plan to decarbonize our portfolio on one end, at the very same time, also creating shareholder value for our investors and shareholders.

Then moving to the other question about our hedging. So in overall, we could say that our portfolio is not very sensitive to the price changes for the remainder of this year, next year 2023.

And the reason being that when we look at our position at the year beginning, we were widely hit. Also, the – overall, we could say that the price level is the one thing, the other thing is that what is the liquidity in the market.

And in our view, the summer liquidity has been also fairly low, so what has also impacted our hedging possibilities. Then when it comes to the further years, so of course, the direction is very, very promising.

At the moment, we not yet disclosed our hedging levels at 2024, but we are coming later to that in the quarterly report.

Very helpful presentation, as always. Listen, I wanted to ask a question, if I may, on the bigger picture around carbon prices.

And I think the way I'd put the question is as follows, correct me if you said it differently, but a few years ago, I think it was consensus that if the carbon price went above a level of about €30, then there would start to be some fairly intense lobbying from industrial groups, consumer groups and so on because of the impact of that on power bills. But now we've seen carbon price over €50 for a while and I don't know what surprises me is that we don't seem to hear a lot of complaining so far from the people paying their power bills.

So I guess -- I suppose my question on carbon is given your position in the market and what you see, do you think carbon at this level is politically sustainable? And specifically with reference to, I guess, Germany and Sweden that you must know very well, do you pick up any discussion of potential for clawback measures similar to what we've seen in Spain this year or anything equivalent?

And then I do have a second question, if you forgive me, on Russia. But perhaps I'll let you answer on carbon and I'll come back on Russia in a moment.

Okay. Thank you, Sam.

Good question. Again, Klaus-Dieter?

Well, indeed, I mean, I agree with you that we had a total different discussion on carbon pricing a few years ago. Now we are constantly above €50 and we should acknowledge at the very same time also have very high gas and also coal prices.

We've seen pretty high prices for the wholesale market for the next winter. What I would say is that when you were kind of coming to this topic of power bills, I think my major concern that I would have is, in particular, how -- and that led to not so much the Nordics because they have different price level, obviously, these days, but in particular to kind of the power market in Continental Europe, how industrial customers can digest this price peak.

I mean what we know from our customers, industrial customers, they have the input prices not only for power and gas, but also for other materials are pretty high and have increased over time. So they have -- they do face a number of kind of price increases that they have to digest and kind of turn into increased prices going forward.

So that is, in my view, something we, as an industry, should be concerned about because that basically has an impact on the competitiveness of our industrial customers. When it comes to retail customers, I mean, let's wait and see how the price development will look like mid- to long term.

That will depend on a number of factors. We should acknowledge that, for example, in Germany, higher wholesale prices would have a compensating effect on the what we call EEG, Energien zuschlage [ph], which is kind of the compensation on the renewable side.

So that's difficult to judge how the residential prices would look like. Carbon pricing, I think, obviously, is very much driven also by political agendas.

I mean that we should also expect. And I mean, you know that we have elections coming in Germany.

We have an election coming in France, which is also very important for Europe. So I don't see that there is any appetite to intervene from the political side in a way that the carbon prices are going down.

Let's wait and see whether governments will even push it into a direction in which they still rise. So that's somewhat difficult.

But in a nutshell, my main concern would be with our industrial customers that are exposed to very high power prices meanwhile.

And then, sorry, just a quick follow-up on carbon, but just on the specific point about, and we get this question all the time, if we think there's a risk that other countries might introduce some kind of clawback seen similar to the one that the Spanish government is putting through at the moment? And have you heard any discussion of that, that we should be aware of?

Or do you think we can rule that out in other countries outside of Spain.

I think I would be careful in ruling that out. But at least what I can say honestly is that I have not seen any debate that we actually had so far for the time being around that or any risk that we would have identified in that sense.

I'm not aware of that.

Okay, okay. Very clear.

So just quickly, my other question was on Russia and it's very simple, but I suppose it wouldn't be a Uniper results call if I didn't ask you guys a question on Russia. But can I just ask if the -- is there any update on your thinking about Unipro, whether this remains a core asset in your planning or if we should be thinking of the holding in Unipro is more of a financial asset now, which could be up for disposal at some point.

Now on Russia, situation is unchanged. Now first of all, I come back to what we have said earlier.

We are very happy about the fact that our Russian team has successfully put onstream Berezovskaya 3, which is an important unit also when it comes to capacity payments that we receive now starting from May 2021 onwards, obviously. So that’s very helpful, a great achievement of our Russian team.

When we look at Russia activities there, it’s more that we also kind of see this as an element or part of our portfolio. And as I said before, also Russia, we look at Russia then ask ourselves, how can also our Russian business contribute to our decarbonization strategy, which is clearly something that is very challenging also for this – for Russian power business.

But there’s nothing new from that end when it comes to Uniper or things that are speculated in the media around our kind of any future divestment or something like that.

Yes. We'll come back a bit to the beginning of the call regarding the commodity price since they have been a missed opportunity potentially.

So I'd like to understand a bit better. So you're saying like 66% of gas storage end of June, that's small in market average.

So that begs the question why do you have a high gas storage when gas prices are high? Did you have an opportunity to sell at higher price and a lot more profit in Q2?

Or you're talking about Nord Stream 2 coming in Q4, is it that you sold forward some gas volume to knock summer-winter spread towards the end of the year. So on the gas storage side of things, is it that actually you had an opportunity and you locked it and we just don't see it in Q2, but we'll see towards the end of the year.

It will be interesting for us to understand that. The second thing is on the power generation.

So I'll say, like usual, I think I speak for everyone, it's almost impossible for us to assess the trajectory because of the possibly mark to market of this year to provision and release that Uniper is the only one to do that, and it makes things very difficult for either sell-side or investors to get a clear assessment. So hopefully, one day, we'll get publications like peers in this respect.

But coming to the outright sometimes you achieve a price slightly down. You are hedged a lot out, I know that, that was a point raised by a competitor a bit earlier in Deutsche Bank, yes.

So what was the reason to be hedged that much is question number one. And question number two is when you start the year, normally, you still got 5% to usually, I would say, 10% to 20%, but maybe in this case, 5% to 10% at least for open position.

And the bulk price went up 50%. So why weren't you able to capture this opportunity?

If I were to put things, these 2 questions and rephrase it. You're saying you're not long at gas, absolutely understand, but that's physical.

You have a trading desk like competitors, so you don't have to be physically long, it's a trading position. So what is different in your trading department from peers?

I do not mind having lower volatility in profitability to be very honest, but it's something we need to understand.

If I start on your first question, the commodity and the filling in our strategy behind that and then very -- I don't know what -- hopefully Tiina get this question around CO2 trajectory also on the hedging strategy she may then kind of try to answer the questions that you had on this one. Let me start with this gas and filling.

Well, number one, I don't know why our kind of competitors do follow a different strategy on the filling of the gas storages. I don't want to speculate on that one.

So what we do see is just a fact that the average filling in our sector is lower than our gas storage filling. And clearly, we are trying to kind of -- trying to understand that and also the rationale behind that.

As Tiina already said, we are in particular also after kind of understanding the summer-winter spreads that are a key driver for our profitability and we're trying to kind of adapt it, trying to understand that and try to benefit from that, and hence, also kind of trying to make the right decisions on our gas position. And I would add, there are a number of things in our long-term gas purchase strategy and also in our long-term contracts that I would not like to disclose honestly that have impact on the way we are trying to kind of hedge our position, but also trying to purchase and also fill our gas storages.

So that may also be different, the factor that distinguishes us and our strategy from the position that our competitors do take. Well, it's a little bit of speculation and I don't want to go so far and speculate why others do pursue different strategies in the way they are dealing with a similar challenge, yes.

If I continue about the hedging and the outright hedge percentages, so – It is very true that the percentages are high. It’s always easy to, in a way, look backwards and see that what could be the optimal position.

But I think that if we think about last year, we were in the middle of the COVID situation. We didn’t know how the demand and the economy will develop.

So I think that, okay, in hedging, we – in a way, that’s also risk management, but also securing our cash flow. So I would say that this is probably the one background reason for the – if we look at from the past – from the past and the reasons why the hedges are fairly big.

Then about our Commodity business and what – and how we are doing, so I think it’s good to, in a way, see the overall profitability of our Commodity business and just thinking about our last year’s cash results, so it was around the €600 million EBIT with a very, very difficult winter. And this year, we see more kind of the normalization.

And after 6 months, so we have already gained €200 million. So this is a significant result.

Also, I think one reason kind of the parameter is the timing when the result will realize, when we take our position, usually, we also hedge on these, how they turn to our accounts or might have some swings.

I think some of my questions have already been asked. I'm going to have a go at the Russia question again, but in a slightly different way, which is that currently, you're not dominated by Fortum.

Do you think that if Fortum were to dominate you, that is what is needed for clarity on how you would look at Russia? Or do you think that the outcome is completely independent of Fortum's ownership on what you do with Unipro?

Is that your only question? Then we -- Klaus-Dieter?

Yes, we are not dominated by Fortum. Yes, we don’t – we still don’t know how Fortum is going to kind of take any decision, if at all.

I think I cannot comment and will not – continue to not comment and speculate on what Fortum is going to do with their shareholders in Uniper. And hence, we are discussing – our Russian Power business activity is totally independent from the discussion that Fortum might have.

So I don’t see any kind of connection between kind of Fortum’s ambition or ambitions around the Russian business and our ambitions. We have to take our decisions on our strategy implementation, clearly, independent from that.

What I would stress though is, and that is important and I can kind of confirm that again, that the strategy that we have defined and that was defined in early 2020 and was confirmed by end of last year is still the strategy that we are implementing and that is still clearly supported by Fortum. That’s important to say.

So we feel absolutely comfortable with our strategy implementation path clearly supported by our main shareholder.

I have 2 maybe small ones. First, can you maybe tell us what's the impact of the CO2 hedging provisions on your cash flow cycle throughout the year?

Do you build the cash upfront and then you release it in the April? And then what's the -- based on the current carbon pricing, what's the kind of magnitude of the annual cash flow and deferred interest swing like this?

And second, I'd like to ask you about the Irsching 4 and 5, which you brought in the fourth quarter last year online and clearly the market conditions changed somewhat. So I just wanted to ask you what is the position now?

Are they in demand? And what's the margin there?

What's the kind of contribution you would expect from these 2 plants on a forward basis?

Thanks for your question. The first one on the Tier 2 provisions will be answered by Tiina and the second one on Irsching 4 and 5, that's, Klaus-Dieter, one's for you, yes.

You want first?

Yes. All right.

So when it comes to the CO2 in a way cash flow and also in accounts, so basically, we are building the provision during the year and we are hedging the -- our CO2 position and using the yearly product what's available at the year-end. And settled then, so then the cash flow impact comes, in a way, late.

Usually working capital release in May time. Then the -- what was the other question?

The second question was on the Irsching 4 and 5.

I can take that. I mean what we have disclosed, you know that because you follow also kind of the market developments.

Clean spark spreads are, in my view, positive. So we have seen a number of months in positive territory and we have clearly hedged our position on the Irsching back then.

So that was very helpful for us. Clearly, I would see for the time – the months ahead of us that Irsching 4 and 5 will obviously be key to the German power market and the Continental European power market.

I mean what we have to acknowledge that we have very, very high CO2 prices and high gas prices now, if that continues to be on that kind of level, then we have to see how prices will kind of develop over time because obviously very high gas prices, very high CO2 prices are not in favor of our gas-fired units, but rather with the coal units would then benefit from that. So recent developments have shown that, for example, dark spreads have made quite a turn and that is something that we’re trying to follow and trying to understand whether this is something that is only a short-term development or whether we should anticipate that there is a kind of a comeback for the clean dark spreads.

This is difficult to judge, and I don’t want to speculate on that one. But I think so far, looking back, I would say, the decision to bring Irsching 4 and 5 back onstream was the right decision to take and we’re kind of producing on-site, well, nicely, I would say.

Thank you very much. And yes, then thanks, everyone, for participating in today’s call.

We can close the call now, and wish you all a nice day. Thank you very much.