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Edited Transcript of UN01.DE earnings conference call or presentation 8-Aug-19 6:30am GMT

Half Year 2019 Uniper SE Earnings Call

DUESSELDORF Aug 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Uniper SE earnings conference call or presentation Thursday, August 8, 2019 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andreas Schierenbeck

Uniper SE - CEO & Member of Management Board

* Sascha Bibert

Uniper SE - CFO & Member of Management Board

* Udo Giegerich

Uniper SE - EVP of Group Finance & IR

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Conference Call Participants

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* Alberto Gandolfi

Goldman Sachs Group Inc., Research Division - Head of European Utilities Research

* Deepa Venkateswaran

Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst

* Ingo Becker

Kepler Cheuvreux, Research Division - Head of Utilities Sector Research

* James Brand

Deutsche Bank AG, Research Division - Research Analyst

* Lueder Schumacher

Societe Generale Cross Asset Research - Equity Analyst

* Peter Andrew Bisztyga

BofA Merrill Lynch, Research Division - Head of Pan-European Utilities and Renewables and Director

* Samuel James Hugo Arie

UBS Investment Bank, Research Division - MD and Research Analyst

* Sofia Savvantidou

Exane BNP Paribas, Research Division - Head of Utilities Equity Research & MD

* Vincent Jean Michel Ayral

JP Morgan Chase & Co, Research Division - Analyst

* Wanda Serwinowska

Crédit Suisse AG, Research Division - Analyst

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Presentation

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Operator [1]

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Dear ladies and gentlemen, welcome to the Uniper conference call. At our customer request, this conference will be recorded. (Operator Instructions) May I now hand you over to Udo Giegerich who will lead you through this call. Please go ahead, sir.

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Udo Giegerich, Uniper SE - EVP of Group Finance & IR [2]

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Thank you, and good morning dear analysts and investors. A warm welcome to the Uniper Interim Results Call for the First Half of Fiscal Year 2019. I'm sitting here for the first time with our new CEO, Andreas Schierenbeck; and our new CFO, Sascha Bibert, both of whom have been on presentation today and answer all your questions. Andreas starting with the general highlights of the H1 and Sascha then concentrating on the financials. Andreas, please?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [3]

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Thank you, Udo. Good morning the analysts and investors, a warm welcome from my side. Sascha and me are pleased to present the highlights of Uniper's business development for the first time. Due to the large number of topics on Uniper's agenda, onboarding is progressing fast. In order to get the current picture, we have been in dialogue with many employees at the headquarter in

Düsseldorf and at our private and national locations, such as Sweden, Russia and U.K.

What has impressed me the most over the past few weeks is the high level of expertise of the entire Uniper team and the focus with which our people drive the project and the company's strategy forward.

I'm also looking forward to meet face-to-face with you, our analysts and investors. We are planning our first meeting for the end of August starting in Frankfurt and London.

Before we dive right in to H1, I would like to address a couple of topics that are on top of our agenda. The following slides summarize our 4 key areas. The ultimate goal must be that the successful operational development of the company since its launch in 2016, does seamlessly continue. And secondly, that we set a reliable strategic and financial framework to unlock the full future growth potential.

In order to achieve that, we need to manage the transition within the Boardroom. As you know, our Chief Operating Officer, Eckhardt Rümmler; and our Chief Commercial Officer, Keith Martin informed the Chairman of the Uniper Group Advisory Board after the AGM in May that they intend to end their management board mandate at the end of November 2019.

Eckhardt and Keith remain very committed on reports. They help us to smoothly and over important business matters and political content. The succession process is ongoing, and we will be hopefully sharing some news in the foreseeable future.

Regarding our main shareholder, I understand that many of you perceive Fortum as the elephant in the room when it comes to discussing a credible future strategy. I can assure you, Fortum has been an important topic on my agenda since my first day at Uniper.

Immediately after I took office, Fortum CEO, Pekka Lundmark, and I had initial discussions. Then our Group Advisory Board Chairman invited Pekka Lundmark and Fortum Supervisory Board member, Klaus-Dieter Maubach to explain Fortum's strategy and further plan to the members of Uniper Supervisory Board and to the Management Board. We have spoke to each other several times since then. Even so there is not more to say on the topic today. We are optimistic about the future development as both sides share the interest and finally seeing some progress.

Performance. Regardless of our shareholder situation, it is essential for our future prospects that we achieve our operating and financial targets that we have communicated and then build upon them. In that context, I was impressed to see how Uniper has reduced maintenance and replacement CapEx on our generation fleet among others by using predictive analytics. This focus on cash is key to ensure the future of our company.

At the same time, we are working hard to ensure that the 2 power plant projects, Datteln 4 and Berezovskaya 3 begin to generate very attractive margins with the existing contract and capacity market payments from 2020 onwards.

Efficiency will also remain on the agenda. Uniper's Voyager program is implemented and delivered the expected benefit. The corresponding performance cards are surely something you want to continue.

Overall, the outlook on the financial targets for 2019 as well as the guided dividend payments for 2019 and 2020 remain valid, and we stand behind those just as Klaus and Christopher did. Finally, we continue to streamline and optimize our portfolio in order to have the best platform for growth in the future. We sold our Brazilian and French activities, which has not delivered on the original expectations.

Likewise, the sale of the stake in the Italian LNG regasification terminal OLT was closed recently at good [margins].

There are far more than disposals. We are committed to continue to shape the group, reducing the dependency on volatile commodity markets by our long-term contracts rearrangement and fully capitalizing on our core competencies of structuring energy solutions for corporate customers.

The upcoming construction of the specialized gas power plant Scholven and Irsching 6, the fixed long-term contracts are a good starter here. In Russia, we were successful in the first round of auctions for the modernization of gas-fired power plants. For the next month, we will now dive deeper into our business and market trends to develop a convincing perspective for the years beyond 2020.

While the strategy assessment will take a bit of time, I would like to take the opportunity to share my first observations and thoughts on Uniper's business model today. The decarbonization of power generation and technological developments are both a challenge and an opportunity for Uniper. Never before has climate protection been higher on the political agenda in Europe than today.

We welcome the trust of the future EU Commission President, Ursula von der Leyen, who has announced new ambitious CO2 reduction targets and is clearly committed to a European solution. With the European coal exit and nuclear phaseout in Germany and Belgium, European economies will, beside of renewable energies, rely more on gas.

In Phase 1, natural gas and LNG will play a larger role in the energy supply. By Phase 2, we'll see green gas making a decisive contribution to global electricity and heat supply. Green gas, as hydrogen brought from renewable electricity production and used either directly or turned into synthetic methane is one of those opportunities. Firstly, in the utility sector, with increasing participation of renewables, green hydrogen can help manage electricity, grid stability and store energy.

Secondly, in the industry to reduce emissions on existing industrial processes. And thirdly, in the mobility sector, as used for light vehicle, trucks and ships.

In the area of conventional gas, we occupy a significant part of the existing value chain today. Here we see many opportunities to better commercialize the existing portfolio at our gas-fired power plants, our energy trading operations and our gas storage facilities.

We are furthermore continuing to increase our footprint via liquefied gas activities. Additionally, Uniper is always expanding its business model to include the mobility sector. We are active as our company, LIQVIS, in the area of liquefied gas filling stations for trucks in the commercial market, which has the potential to replace [dealers]. We are also involved in 3 demonstration projects in the production of hydrogen and the (inaudible) from wind energy. The aim here is to reduce the cost of technology and create opportunities for integrating hydrogen into existing infrastructure cycles. At the same time, the topic of digitalization is becoming more and more important for managing complex energy systems.

Companies like Uniper are increasing the network and data drum. Already back in 2017, Uniper moved the energy trading and risk management platform into a cloud solution. At the same time, we are offering Uniper customers various digital solutions in the tiers of energy management. For example, Uniper develops analytics platform, which monitors the condition of energy systems and offer risk and performance management for external customers.

Another example is (inaudible) platform. It is designed to improve security of supply by bundling small power generation plants more intelligently, so that we can better adjust to changes in electricity demand. Those are just a few examples that I came across during my first weeks and they showed me how exciting it will be to shape Uniper's future and that our starting base to benefit from key trends is actually very good.

But for the time being, let's focus on the first half of 2019. First and foremost, the relevant key figures are in line with our expectations. Uniper Group achieved an adjusted EBIT of EUR 308 million in the first half of the year. The reported earnings trends that was reported in Q1 continued throughout the second quarter. Adjusted for the FX that we already factored in full year guidance and some intra-year phasing effects, however, the underlying business trends improved in the second quarter.

To the plant, in particular, to the earnings contribution from gas business and Russia. Regarding the outlook for the full fiscal year 2019, we confirm Uniper's earning outlook and dividend guidance. Sascha will explain the numbers and the reasons why we are confident in our full year outlook in detail.

On the following slide, I will give you a short update on several of our projects. In July, we completed the sale of our business activities in France to the Czech Energy Holding EPH. After the French government announced the very early phase-out for coal-fired power generation in 2022, it has not succeeded in creating a reliable legal framework for power plant operators over the past 2 years. No social offer has been made to the employees by the French government. The closure of 2 coal-fired power plants long before the technical end-of-life would have affected our entire business case. And therefore, a sale was surely the better option.

Coming to the large asset project, Datteln 4 and Berezovskaya 3. They are approaching completion. Datteln 4, one of the most efficient coal-fired power plants in Europe in terms of carbon emissions is on track to go online in summer 2020.

They can hardly be an alternative to connecting Datteln 4 to the grid. If you have security of supply in mind and do not want to burden the German consumers and taxpayers annually.

By autumn, the German government wants to establish a legal framework for coal phaseout that will hopefully provide clarity for our planning. We have regular contact with responsible authorities in Berlin, and we'll try to support the federal government in this project.

Regarding Datteln 4. As long as we have no contrary fundings, and we do not have any as of to date, the team of more than 450 employees is working flat-out to put the power plant into operation. The assembly process of the steam boiler is well advanced. The next milestone will be a hydro pressure test of the boiler at the beginning of September. Commissioning of the remaining components of the power plant is almost complete.

In Russia, we revised our project plan for the recommissioning of Berezovskaya 3 as the power plant repair is slightly behind schedule. Accordingly, the recommissioning date has been updated now to Q1 2020. Now into completion, the plant has entered into the testing phase. Hydro pressure tests started in June and are expected to be completed in September 2019.

Finally, a project that fits very well into the decarbonized future I described earlier. Uniper is heavily involved in development project to make renewable energy storable. In mid-July, the Federal Ministry of Economics and Technology, told us that Uniper and its consortium partners for possible public fundings of a 35-megawatt large-scale plant for the production and storage of green hydrogen and Saxony-Anhalt. Renewable activity from a nearby wind farm is to be converted into green hydrogen by electrolysis. In a specially equipped salt cavern, the green hydrogen will be temporarily stored underground and can be fed into the hydrogen network of the chemical industry via a rededicated gas pipeline and used, for example, for urban mobility solutions.

In the Bad Lauchstädt Energiepark, all aspects of an intelligent and economically efficient integration of the energy carrier green hydrogen to be tested under real conditions and on an industrial scale.

Let's turn now to development of the daily business in the first 6 months of 2019. As usual, we start with an overview of the market environment. Despite the overall global economy environment being rather lackluster, we have been observing a positive price standard European emission trading (inaudible) prices for some time now, and we recently reached a 13-year high. Just to name a few of the drivers that supported the upward trend in carbon plant. Starting at the beginning of August, auction volumes within the European trading scheme has been halved, politicians upsetting the tone as a push for higher emissions reductions should be accompanied by further tightening.

Finally, (inaudible) Dutchman of the Court of Justice of the European Union, the so-called ExxonMobil case could significantly reduce the amount of reallocated certificates the market. Accordingly, baseload electricity prices on the Nordics and German markets are currently at the upper end of the price curve of recent years.

While we have seen new highs of CO2 prices, fuel prices, especially gas, they are lower in June than they had been for a long time due to an oversupply of gas in Europe. The European CO2 emission trading system works and send our price signals that lead to a fuel switch from coal-fired power generation to a comparatively climate-friendly gas-fired power plant. The summer gases price is recently very low. The merit order in Central Europe has significantly shifted towards low-emission sample. Even less-efficient gas-fired power plants are able to compete with modern coal-fired power plants on the market in terms of short-term operating costs, and for the first time, even (inaudible) power plant.

All of this shows the only constant on the energy market is the volatility. Uniper's portfolio is well prepared for these fluctuations, more than in fact to the power plants, global energy trading and a broad gas portfolio enable us to profit from rapidly changing market situations and opportunities. At the same time, that makes us an important player for supply security and system stability in our markets.

Now to the next slide. This slide shows how the market development and investor take that Uniper operating business in the first half of the current fiscal year. Gas spot prices in Europe and a strong pressure since the beginning of the year to a high availability of gas. This was the result of a warmer winter temperature in both Europe and Asia and global rising gas supply. As stated before, the profitability of Uniper's gas business is structurally not tied to the overall gas prices. Accordingly, Uniper global commodities was able to take advantage of the auctions arising from the portfolio in the second quarter. Given the current supply-demand balance it was economical to further fill up our storages, even though the filling levels were still high after Q1.

Looking at the development of filling levels since the beginning of the year, we see an increase by roughly 30 terawatt hours during the first 6 months of 2019. In the year before, the development was rather flat, clear as they were empty the store of gas inventory.

By the current inventory level, it's economically beneficial for us going forward and take this time in terms of operating cash flow as Sascha will elaborate in his part.

In the European generation segment, electricity production declined 3% in the first half. The outright business showed an overall decrease in production volumes of about 2% in H1 2019. While the hydro volumes remained on the same level compared to prior year, nuclear showed slightly lower volumes to -- due to the lower availability of the minority-owned Ringhals due in Q1. Aside from this volume effect, we see a positive development in our outright portfolio due to rising achieved prices, an effect that we expect to further grow in the coming 6 months.

The fuel switch is also clearly reflected in our spread portfolio, that means our gas and coal-fired power plant. The effect was already visible in Q1 but had further accelerated in the second quarter of 2019. In the first half of 2019, the production share of gas-fired power plants in our European generation portfolio exceeded 60%. Overall, our (inaudible) power plants further bought about 4% less electricity, which was mainly driven by an unscheduled outage at Maasvlakte 3. Due to a negative carbon, the power plant is facing a prolonged outage and will not come online before end of September.

International power continued to deliver a performance above trend. Electricity production in Russia increased by 12%, mainly due to an increased demand resulting from a tightening import-export balance and the growth and regional demand from the oil industry. What came on top, a similar price dynamic in the European and Siberian pricing stock.

Now over to the key financials and some more flavor on the outlook for the rest of the year from Sascha.

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [4]

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Thank you, Andreas. Also a warm welcome from my side. It certainly feels good to be back in Düsseldorf in a business where I spent some years in different roles. Today, there are a number of familiar faces for me on both sides of the phone line.

I will follow the structure and sequence that the team has successfully put in place since the creation of Uniper. However, over time, we will also review our steering and reporting approach including key metrics used to report performance.

On Page 10, you'll see the main financial KPIs summarized. Earnings and cash flow decreased in the first half, the latter even into a negative territory. However, we are confident that we can report a better second half, and therefore, achieve our full year targets.

With respect to the full year adjusted EBIT outlook, we are confident for the following reasons. First, the negatives have largely been anticipated, and were, therefore, included in the guidance. Second, a number of negative effects will revert in the second half of '19, and hence, not burden the year-on-year development on a full year basis. And third, items that are new or at least different than expected, largely cancel each other out.

Cash flow actually ended in negative territory at EUR 322 million. Also here, we are optimistic that in the second half, we will see a better working capital compared to the cut-off at the end of June and then report a positive cash flow. Adjusted FFO decreased from just below EUR 600 million to EUR 124 million. It essentially followed the development of the operating cash flow. However, as the vast majority of working capital movements are not part of the FFO definition, the decline was significantly less pronounced.

My comments on the adjusted EBIT guidance also applies to the FFO. We stick to our full year guidance and therefore, reiterate our dividend ambition. Finally, economic net debt is significantly up from EUR 2.5 billion to now EUR 3.2 billion, driven by the same buildup in working capital that is affecting the OCF. Additionally, pension provisions increased on the back of lower rates. Our full year target for the economic net debt over adjusted EBITDA remains at 2.0, in line with my comments on the expected cash flow development.

Now to the details of earnings, cash flow and debt on the following slides, starting with adjusted EBIT development on Page 11. To give more credits to -- credit to the earnings quality and the further development for the remaining year, we split the year-on-year EBIT effects into 3 categories. The first group titled Guided includes drivers that have been already highlighted in our full year guidance. Hence, they should be familiar to you, and they were surely expected by us.

The second part is called to revert, consists of effects that were in the first half of '19 but won't be impacting the year-on-year development on a full year basis as they will revert over the next 6 months.

Finally, we have a third category called new, which reflects business developments that have not been anticipated per se or in the magnitude in the full year guidance and which will have an impact on the full year development.

Let me now walk you through this waterfall. 2018 H1 one-off effects include mainly the bookings from the sale of the iron-rich property and a net provision release on a hydro asset due to an altered dismantling plan. These effects add up to above EUR 100 million. As the title of those effect implies, the impact stems from the first half of '18; therefore, we will not see any material change in this effect until year-end, i.e., the year-on-year delta will remain roughly constant.

The Freeport LNG proxy hedge was also highlighted in our full year guidance. This one has been substantially positive in 2018 in absolute terms and turns negative this year. It will lead to more than $100 million negative year-on-year effect on a full year basis, of which about $50 million are embedded in the H1 results. The next effect in the waterfall of around $30 million covers the impact from regulation, which reflects primarily the suspension of the U.K. capacity market that we saw last year. This negative data will not grow proportionately as the suspension occurred in the fourth quarter of '18.

Generally, we have not included a potential upside from the reinstallation of the U.K. capacity market in our outlook. However, we remain optimistic that we could see some positive developments on this topic in autumn.

In a similar magnitude but with a positive pre-sign, the upward churn in electricity prices that is increasingly reflected in our hedge prices of our outright fleet. This effect starts to materialize in Q2 and will accumulate over the course of the year to end up clearly above the EUR 100 million mark year-on-year.

Another positive business driver is the improvement in the gas commodity trading. Following a weak start in Q1, we saw positive developments from the gas portfolio optimization that materialized in Q2 and which are even expected to further grow over the next 6 months.

While we had anticipated an improvement in the commodity business for the full year 2019, the expected magnitude has outgrown our expectations. Therefore, we increased our segment outlook for the global commodity segment.

Finally, there are other effects in this group, which relate mostly to FX movements.

Now over to the second category of effects that will revert on a year-on-year basis. Firstly, the somewhat famous carbon phasing effect of roughly minus EUR 50 million. This is an intra-year CO2 phasing effect in adjusted EBIT that will revert in this KPI in Q4. And even though we saw this effect in Q1 '19 and also in 2018 already, let me briefly remind you on the principle logic behind it. If carbon prices increase, so do all our provisions for carbon emissioning rights, burdening our adjusted EBIT. However, at the same time, the corresponding hedges gain in value as they get into money. The value gain of those hedges, however, are only shown in adjusted EBIT once the deal settles, which is in Q4 of each year. Until then, the positive development of those hedges is only reflected in the unrealized mark-to-market results within our nonoperating earnings.

In the same side, coal impairments. We already mentioned fuel switch by Andreas towards gas resulted in high stock levels at the end of H1. This put pressure on European coal prices, which triggered impairments on our coal stock at the end of Q2. However, we have mostly hedged our coal stocks going forward. Hence, over the next month, as the hedge is certain, those impairment losses will be offset. Another effect that is expected to revert on a year-on-year basis relates to the French business. In the context of the French coal exit and the strikes, the plants suffer from unavailability. In H1, this led to a significant negative year-on-year effect versus prior year, as the French business was better off in the first half of 2018. However, in the second half of '18, our business significantly deteriorated. And since we disposed our activities in France at the beginning of this July, there will be no results in the second half of '19. Hence, the negative impact from France year-on-year will broadly disappear on a full year basis.

The last bucket includes the new elements, which will persist and potentially even grow until year-end, starting with a rather negative picture on production volumes causing a EUR 20-ish million hit. In Q1, we already reflect the lower availability at the minority on Ringhals 2 power plant. This is the very same effect as it still impacts Q2. This plant is now back online since end of April. In addition, we saw an unplanned unavailability of Maasvlakte 3 in Q2 that resulted from a turbine damage. Taking into consideration this unplanned outage together with the envisaged plant maintenance, Maasvlakte 3 will not be online before end of September.

Finally, on Russia. The positive Q1 trend further strengthened despite a slight negative ruble impact year-on-year. We benefited from higher day-ahead market prices and at the same time, increased production volumes compared to the first half of '18.

So to sum it up, there is a strong decline in our earnings in the first half. However, if we look at the drivers, then those were either already anticipated in our guidance or belong to the EUR 150 million year-on-year effects that are expected to reverse until year-end.

Now on Page 12, a segmental view, and I will do that rather quickly. European generation is EUR 200 million down year-on-year. Hydro benefits from the higher achieved prices, but suffers predominantly from the lapse of the 2018 provision release, while nuclear is expected -- is impacted by the outage of Ringhals. Fossil is down based on the absence of the U.K. capacity market payments, the carbon phasing effect, France losses as well as Maasvlakte 3. But on the other side, benefits from positive carbon management effects towards global commodities, i.e., an intra-growth effect. Hence, the opposite carbon management effect sits within the power segment in global commodities, now negative. Coal, oil, freight, LNG is dominated by the settlement of the negative LNG Freeport hedges and the impairment on coal stocks. Gas is up year-on-year based on the successful Q2 portfolio optimization. Russia, as discussed, continues its positive trend from Q1.

Now over to cash flow on Page 13. The cash conversion from adjusted EBITDA to OCF in the first 6 months was negative, which is clearly not typical for a first half. To arrive at a cash effective adjusted EBITDA, we first add depreciation and amortization, which is pretty much on prior year's level. Thereafter, we correct for noncash effective adjusted EBITDA components, which predominantly include expenses for provisions. The main drivers are provision for emission rights and green certificates for the production in 2019, which accordingly reflect this year's relief in carbon prices.

The cash effect of adjusted EBITDA is, therefore, around EUR 950 million, i.e., down only 9%, which contrasts with the EBIT decline of close to 50%. We then deduct the provision utilization, which was also impacted by higher carbon prices. It reflects the provisions that were built up over the course of financial year 2018 and then utilized in Q2 2019, when the emission rights are transferred to the authorities. As the upward trend in carbon already started in '18, this utilization is also higher compared to prior year. While provision utilizations are up due to carbon, there is a corresponding positive effect in the working capital, as we have paid for the certificates already in Q4 of '18 when the famous carbon hedges settled. Hence, when we fulfill our carbon certificate obligations towards the authorities, we do it via giving away our certificates that we have already on stock.

As the adjusted FFO is on the one hand side, reflecting the full provision utilization, but on the other hand, does not account for this offsetting effect within working capital, the adjusted FFO in H1 is overly burdened. This seasonal effect will fade away in the remaining months of 2019. When moving from the adjusted FFO to the OCF, the main driver is the working capital, which shows a net buildup across all commodities of more than EUR 500 million, with gas being by far the most dominant one.

In Q1, we had already high inventory levels in our gas storages with filling levels for the entire market across European gas storages, about 3x higher than usual. This resulted from warm temperatures across the globe, leading to LNG cargoes being diverted from Asia to Europe. This oversupply drove prices down so that it was more economic to keep the gas in storage instead of withdrawing it. After Q1, gas prices declined further. German spot prices even fell below the EUR 10 per megawatt hour mark. Aside from the usual seasonal pattern, this was the result of cash inflow from Russia and LNG as well as a muted demand, given the already high filling levels. While the summer price decreased, the winter price was supported by the speculations around the Ukrainian transit situation. This led overall to summer-winter spreads about EUR 7 per megawatt hour. In such an environment, it was economic to increase the gas inventory on our balance sheet, therefore our gas inventory at the end of H1 was roughly 30 terawatt hours above prior year. Overall, this effect alone explains roughly EUR 600 million of the working capital increase since beginning of 2019. Additionally, there were some further negative effects, most notably from higher coal stocks, which were already mentioned in the context of impairments. Cash interest payments were limited based on low interest rates. So were cash tax payments with EUR 58 million.

Now over to the economic net debt. As highlighted in previous calls, we adjusted the definition of our economic net debt to include margining effects symmetrically. In order to present you a like-for-like analysis of the economic net debt development, we applied the new definition for the year-end value 2018, as this is our reference point. Based on the new definition, the economic method at year-end '18 would have amounted to EUR 2.5 billion. Starting from here, we had a supporting EUR 0.4 billion impact from the disposal of OLT and Eneva, accounting for net proceeds of EUR 330 million and EUR 76 million each. As discussed, the operating cash flow has been negative with EUR 0.3 billion, bringing the economic net debt up, as did the payment of the dividend in May.

CapEx amounted $0.2 billion and close to 2/3 of this was related to growth and 1/3 to maintenance and replacement. For maintenance and replacement CapEx, we expect for the full year again to stay below the EUR 400 million level. The growth element was, to a large extent, linked to our 2 large asset projects Datteln 4 and Berezovskaya 3. In the maintenance and replacement area, the focus was on our fossil and hydro plants. Pension liabilities went up by EUR 0.2 billion as interest rates decreased, e.g., in Germany by 0.7% since the beginning of '19, bringing the rates down from 2.3% to 1.6%. And in the U.K., they were down by 0.6%. Opposite to this, asset retirement obligations came down EUR 0.1 billion in light of FX movements in the Swedish krona, which deteriorated since beginning of '19. In the other FX category, several effects are summarized, such as the increased loan from Nord Stream 2 in a magnitude of EUR 90 million. As initially mentioned, we expect the economic method to meaningfully improve in the second half of '19, in line with the target debt ratio of 2x economic net debt over adjusted EBITDA.

Now over to the outlook section on Page 15. We confirm the outlook given at the full year reporting stage. Hence, we continue to expect adjusted group EBIT to be in the range of EUR 550 million to 850 million, not incorporating around EUR 120 million of upside related to the U.K. capacity market. On a segment level, we see some changes. Global commodities is up from significantly below to now noticeably above, i.e., guiding for an earnings growth of between 5% to 10% versus prior year, based on the promising earnings development in our gas business that we see both in Q2 as well as over the next 6 months.

For International Power, practically Russia, the guidance has been already lifted in Q1 with the recovery of day-ahead market prices and improved FX rates versus our initial assumptions. This time, the ongoing higher volumes give us confidence for another increase, bringing expectations on Russia noticeably above prior year, i.e., somewhere in the range between plus 5% and 10%.

At the same time, our outlook for European generation needs to reflect the outage of Ringhals 2 and even more significant, the outage of Maasvlakte 3. Therefore, the group outlook stays unchanged. We will see whether we can specify the range alongside our 9 months reporting. For the adjusted FFO, we also confirm our outlook range between EUR 650 million and EUR 950 million. Consequently, we also hold on for our guidance for the increased dividend of EUR 390 million for the fiscal year 2019. Finally, Andreas already mentioned we also feel committed to the dividend guidance for the fiscal year 2020.

Having said that, I hand over to Udo for the Q&A session.

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Udo Giegerich, Uniper SE - EVP of Group Finance & IR [5]

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Thank you very much, Sascha. (Operator Instructions)

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have the first question from Wanda Serwinowska from Crédit Suisse.

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Wanda Serwinowska, Crédit Suisse AG, Research Division - Analyst [2]

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This is Wanda from Crédit Suisse. Two questions from me. The first one, given changes in your divisional EBIT guidance, do you still see a midpoint of the guidance range as the most likely outcome, as stated by the previous management during the Q1 call? And my second question is on your 2020 volumes in Germany. Now you are saying that you are over 70% hedged at 42-ish, I would say. But back in May, you said 85% at around EUR 36 per megawatt hour. Could you please explain? More questions there.

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [3]

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This is Sascha speaking. First of all, congrats to the initiation of coverage, and thank you for that. On your 2 questions, divisional EBIT and how that ultimately relates to group. Once again, we confirm the group, I'd say, we have a good degree of confidence. I wouldn't specify that further in the range. We'll try to do that during Q3, but again, a good degree of confidence. With respect to the 2020 hedge ratios in Germany, indeed, at first, that looks a little bit off because versus the Q1 stage, those have actually decreased. You -- So you may ask yourself, what does it mean? And what are those guys doing? I think Christopher also may have explained that in a prior call. Basically, what we are doing is for the outright, at first, we hedged that according to a certain path. And in the past, I think the management has said multiple times that on balance, we have a somewhat underlying bullish view. But on top of that, sometimes, we are trying to be a bit smarter than that. We put in additional option structures to ensure that our downside is hedged, while retaining most of the upside. And then in certain cases, we need to buyback certain options that we have sold, and that simply technically results in either increase or decrease of the hedging ratio. So net-net, I wouldn't interpret too much into that. Over the course of several quarters, you will surely see that hedge ratio increase and not decrease.

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Operator [4]

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Next question from Deepa Venkateswaran from Bernstein.

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Deepa Venkateswaran, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [5]

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Sascha, 2 questions from my side. One is could you update on your recent negotiations with the Dutch government on Maasvlakte? There were some reports that your proposals were rejected. Could you also talk about what exactly you had put forward? And secondly, on Germany with regards to Datteln, clearly given that there's a bit of uncertainty politically in Germany, would you still be confident that you would have visibility by year-end? And if there was any possible change in the government, do you then see this -- how do you see this step up?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [6]

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In regards to Maasvlakte, we have been in contact with Dutch government. We have give them our view and proposals. They are, at the moment, on the way to prepare laws, not completely final. There are may be some smaller changes possible. So we're keeping the dialogue open and probably, we will be finding a way how to give us such situation. And in regards of the coal exit in Germany, there was at this -- it is the target of the German government to have a bill passed in the fall. How the condition should be for the coal exit? How they would deal with that? At the moment, we are talking to all the stakeholders, and we are putting our same format that we're saying because it's the most modern coal-fired power plant, most efficient, the least CO2 footprint that would be very expensive to not switch it on and due compensation for that would be then negotiated. But we just compare it with you buying a new car, and you're not using it because you have 2 old timers, which are a little bit heavier in usage. But yes, you want to use them. So I think we're quite confident that we will find an agreement, and we are actually quite confident that we can switch Datteln 4 on. It will be online. So from that point of view, we will give you an update in Q3. But this political situation, of course, can always change very fast today, as you know. So from that point of view, we're just driving our project.

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Operator [7]

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Next question Vincent Ayral from JPMorgan.

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Vincent Jean Michel Ayral, JP Morgan Chase & Co, Research Division - Analyst [8]

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I'll come back on the German negotiation and Datteln 4. So you are still doing some investment there. I won't say you're not sure whether you'll reach an agreement to commission these plants. The question I have is CO2 has reached a EUR 30 per ton. What's your outlook for CO2 and up to which price, basically, can Datteln 4 be profitable? That would be the first question. And then the second one actually regarding the German negotiation. Again, coming back to that. Just wanted to get -- if it is possible, an understanding of what's their view, actually, regarding both CO2 and coal price outlook, to understand both sides at the table, at least from the commodity angle?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [9]

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So that -- to the one point that's ongoing negotiations so we cannot really comment on that. On the other point of view, Datteln 4 was planned and is planned and commissioned as a power plant, which is not at the market. It was an asset-based contract. So we have 2 customers, Deutsche Bank and RWE with long-term contracts to build our business case, and these contracts are pending and valid, and of course, based on our business plans. So from that point of view, we had acquired good situation for that point of view. We are delivering on our project that we go online and we're delivering to our customers.

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Vincent Jean Michel Ayral, JP Morgan Chase & Co, Research Division - Analyst [10]

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But isn't there any legal challenge regarding that, which have been tried by your basically off-takers?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [11]

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Of course, it was tried quite heavily from RWE, as you know, probably. So far, this is still ongoing. But so far, we were quite successful in that. So the quarter proves our case. And from that point of view, I think the asset really be continued. As you know how it is. There's always risk in life and then order for cause and the submissions, but I think we're feeling, at the moment, in a very comfortable situation.

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Operator [12]

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Next question from Alberto Gandolfi from Goldman Sachs.

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Alberto Gandolfi, Goldman Sachs Group Inc., Research Division - Head of European Utilities Research [13]

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I have two as well. The first one is that, I found extremely clear the explanation of earnings, but perhaps the early morning, I just want to make sure that I got the math right. So it looks like from outages, nuclear, French strike, coal impairment, carbon effectively also impairment -- well, impairment there, the mark-to-market that you booked. It feels like there's about EUR 150 million EBIT of negative profits, which are nonrecurring really in nature, but you leave it in the ordinary EBIT. Is that correct? Is there also some positive one-off in the first half that you have booked that is of this nature kind of nonrecurring? Because otherwise, I'm trying to understand if normalized EBIT is really EUR 450-million-ish for the first half, not EUR 300 million. And so that would make me more comfortable even if you were not to meet the full year guidance EBIT for this year that the underlying earnings power is strong.

The second question is a little bit bigger picture and the elephant in the room, I guess, is that the relationship between previous management and your major shareholder has not been, let's put it this way, idyllic so far. And we understand that, that's been a big issue for clarity on the long-term strategy of the company. So I guess my question is, are you open to something a little bit more radical in terms of your portfolio to cooperate with your main shareholder? I'm thinking here on different levels. I'm thinking about getting rid of some of the businesses in Russia, which would allow your main shareholder to buy more shares. I'm thinking about your focus on the carbonization in the slides. It's nice to switch from coal to gas, though gas is still polluting. So are you hinting that perhaps you might become the renewable growth subsidiary of Fortum? Or is it too much of a stretch?

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [14]

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I'll take the first one and then Andreas will surely take the second one. Now the whole discussion of underlying earnings power is obviously a good one, but quite subjective one. I tried to add another element to the discussion by also highlighting the cash effective EBITDA, and the fact that this one is down only 9% versus 30% on the normal EBITDA or 50% on the EBIT. I think that tells you something about the -- at least the cash effectiveness of the effects that we had in H1 in '18 as well as H1 in '19. Otherwise, the -- I mean the short answer is, I wouldn't see any clear one-offs, admittedly, in part of our business somewhat in the area of trading also you can always discuss which development exactly can be repeated 100 times or so. But if you accept that as our principle business, I'd say it's pretty clean and therefore, it points into the right direction.

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [15]

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Let me answer your second question. Let me answer it in the following way. Of course, we are quite flexible, of course, in certain limits, we're open for any kind of discussions, which contribute to our earnings, and which is good for our shareholders. And of course, we treat all our shareholders in the same way. We have one major shareholder at 49.99%, which means we have another 50%, which have interest too. And we -- of course, we have to balance all that. So on that point of view, we will continue the discussions with all of our shareholders what is the best for the interest of the company and the shareholder. On the other hand, we believe we have the portfolio we have, and we're optimizing that in a normal way. We have looked into renewables, we have looked into CO2 and decarbonization is definitely a trend which is going on, but it's mainly Europe-focused, we have to say, other areas in the world, probably not so much on decarbonization as we are driving it. But I believe that if you look at the European energy market, we switch off nuclear, we switch off carbon-fired power plants. You will have a guess for the foreseeable future, which can only be served with gas. Renewable energy cannot be stored. There is no technology I see on an industrial scale for the next couple of years. The only thing we see is power to gas, and that's why we are doing this. We are out of ore and these experiments and that has the effect that you could use the existing pipelines, existing storages probably to a certain extent to drive down CO2 to grid make this gas, LNG, and Russia gets more greener by just replacing part of that with H2. And I think that could be a very good bridge technology, which can have a big effect. And we will definitely elaborate as well behind that direction.

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Operator [16]

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Next question from Peter Bisztyga from Bank of America Merrill Lynch.

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Peter Andrew Bisztyga, BofA Merrill Lynch, Research Division - Head of Pan-European Utilities and Renewables and Director [17]

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So 2 questions from me, please. Firstly, on the U.K. capacity market. The French utilities NG and EDS have included capacity payments now in their guidance for 2019 because they're more confident that it will be reinstated. You guys haven't done so so I'd be keen to understand what positive developments that have been on this front? And what uncertainties still remain that prevent you from including it?

And then the second question is regarding your EUR 770 million mark-to-market on derivatives in the first half. Q1, we heard that around EUR 400 million of that was expected to sort of still remain at full year. And I was just wondering whether that guidance was still valid, please?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [18]

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Let me answer the first question in regards with U.K. capacity market. We see that in the U.K., definitely a strong support for the capacity market, of course, they postponed that. So they think we can get back into business soon. But of course, it was uncertainty, Brexit, European law and so on. I think it's better to be a little bit more conservative. We know the effect, you know the effect as well. And we probably more on the side we deliver -- we under-promise and then we over-deliver that's you know what will be the effect and said the other way around and explain you in 1 or 2 quarters, why this hasn't materialized, and then blame it on the British or on the Brexit or on whatever. So from that point of view, I think it's pretty transparent what the U.K. capacity market would do as it's coming full impact and recover all of these things and just this labor, we would include that or not and we have decided not include that just being on the safe side.

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [19]

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Yes. Thanks, Andreas. And I'll continue. I guess when it comes to the U.K. capacity market, the team has mentioned a potential upside of EUR 120 million in the past. I think if anything that's in a conservative figure, but we'll see what happens.

When it comes to the mark-to-market, splitting the EUR 770 million into EUR 400 million that was already here at Q1. My magic file says that is still correct. But the -- it is not the highest confidence that I asked, so spoilage remains.

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Operator [20]

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Next question from Sam Arie from UBS.

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Samuel James Hugo Arie, UBS Investment Bank, Research Division - MD and Research Analyst [21]

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I wanted to ask two questions. One is about your guidance, and one is about the German power market. So on the guidance, I mean I take it as very positive that you have reconfirmed your guidance, but also I think your wording says you reconfirmed the dividend path, I assume, through to 2020. And I just wanted to give you a chance to talk about that decision that you've made there, whether we should sort of interpret that as kind of a holding decision because you guys have only been there for a couple of months, or whether you feel that you've done full due diligence on the plan, and you are 100% comfortable with that dividend guidance for 2020. And therefore, I suppose risks of any change in position on that would be very low. In any case, it'd be great if you could talk a little bit about your confidence level there.

And then my second question on the German power market. Well, look, we had some very extreme events in Germany in June, and I'm hearing from the regulator that TSOs have doubled their balancing contracts, and that there were some near misses in terms of outages in the market. On the other hand, you're saying that your coal down -- coal load factors are down. And in general, we hear that hard coal is struggling at the current carbon price. Without -- on Page 7, your clean dark spreads look pretty healthy, actually healthier than we get when we calculate them. So I'm just trying to understand exactly what's going with the coal? Can you talk first about the reaction hard coal in Germany for the current market environment and sort of what sort of value there might still be in any of the coal?

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [22]

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Sam, I'll take the first one on guidance. Well, we surely reviewed the entire financial framework that we have, including the various targets that have been put out both for the year 2019 and 2020. We ran the numbers internally. Once again, based on the information that we have today, but acknowledging that end of 2020 is still 1.5 years away. But based on the information that we have today, we did consciously confirm the targets both for '19 as well as for 2020. And for 2020, the dividend. So we have the confidence that we can possibly have at this point in time.

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [23]

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To your second question, that's becoming a very technically, but exactly these trends which we are seeing and where we are passing on, the electricity system in Germany is coming under pressure, not only by financial means, but by technical and technology means as well. So that the situation was becoming more tricky is known and that probably it will become a little bit more tricky in the foreseeable future. If you take more capacity out or as the nuclear is going offline as scheduled to do so in the next couple of years. So all that covers is the effect that already, a lot of power plants are becoming reserve power plants because they are not allowed to be shut down based on the effect that actually in Germany are 2 big areas, North and South Germany, which are not very well connected, which are creating a lot of issues with that because we have renewables mostly on the north. You have big consumers on the south. The connections are not there, and they will not be there in the next couple of months or probably year. So I think there's enough generation capacity there to fix that problem and to solve it. But of course, we had discussion with the regulator and the cities as well how we can do that. And you have seen with Irsching 6 one of the first measures they are taking to stabilize the whole situation, which is -- was very positive for us, and we hopefully winning another of these projects as well.

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Operator [24]

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Next question from Sofia Savvantidou from Exane.

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Sofia Savvantidou, Exane BNP Paribas, Research Division - Head of Utilities Equity Research & MD [25]

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And welcome to your first call. Two questions for me. One, on the -- on your gas exposure, it's a 2-part, if I may. One is you've mentioned about the improving summer gas spreads and how you made the decision to keep more gas into storage. Just wondering if you've actually locked in this spread. So you already have visibility about the money you'll earn on that this coming winter? Or we have to wait and see where actual firm winter prices will be for that?

And the second thing is on whether you have any color on how your Freeport LNG business is going to contribute in 2020? Obviously, for 2019, you were spot on with what you've told us or what the previous management told us last year. If you can give us any color already on what you expect from that in 2020?

And the second thing is tying it into a bit also in your relationship with Fortum, if I can. I understand in Russia, there are more auctions coming up on refurbishment of some of the old plants. I think there is one coming up this autumn or winter as well. It could be substantial investments that could be acquired if you are successful on that. How are you thinking about that in terms of how much money you are -- how much capital you're willing to commit in Russia, given also what your biggest shareholder might be thinking about the future relationship with you?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [26]

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Maybe I'll start with the second question first in regards of Fortum and Russian investments. We're checking what are these projects, which are coming up for bid now. And we are looking at it in the normal way we have done it always. It is a financial investment, we have some hurdle rates for our investments, of course, as in every good company, there's always a side about capital allocation. And of course, these projects have to file and come into the money with that. And yes, we know if you want to invest there, we would probably increase our exposure to the Russian business. And we are checking that as well. So far we have done a very good experience in Russia. You have seen the numbers, they are quite promising. We have increased them twice this year as far as I remember. And this is part of our strategy. That is the normal process. We are not discussing with single shareholders, our specific strategies for single countries that have to be fit to our overall strategy. And so from that point of view, I don't see really the connections there.

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [27]

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Taking actually the first question, which had 2 legs. First one was on gas prices, gas optimization. So we are -- overall, we are taking a very measured approach towards direct spread to our price risks. And you can generally think that we hedged this out about a year in advance, we may retain some upside, but we're not fully exposed to developments there.

Second, on the Freeport hedge. I think here I'm simply repeating what Christopher has said over the past, i.e. over the long run obviously the whole structure, underlying an hedge does need to make money, whether 2020 is now already the highlight here. I'm not so sure, we'll see that. But it does need to come into the money.

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Operator [28]

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Next question from Lueder Schumacher from Societe Generale.

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Lueder Schumacher, Societe Generale Cross Asset Research - Equity Analyst [29]

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Welcome, Andreas, and welcome back, Sascha. I briefly sort of lost connection during Alberto's question. So apologies if my questions have already been asked. So two questions on my side. The first one is on the EUR 700 million of provision utilization, you mentioned on Page 13. Could you break this down into separate components? And also what you expect this number to be in -- at the end of December, i.e., once the carbon impact has come out of that?

And the second question, perhaps a bit more tricky, but I believe that 73% of your share capital view the Russian water business as quite unnecessary. Is there any reason why you shouldn't sell or outsource this business?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [30]

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Let me start with the second question. I think the Russian complexity regarding the strategic businesses in regards of water testing and water provision are a little bit more complicated, than is probably most publicly reported. We have water testing license, which is probably you could outsource it if you find outsourcing partner in that area. You're still responsible for that, even if you are outsourcing it (inaudible). The other side of it which is an even bigger complication or bigger issue is that all our assets in Russia are providing drinking water and heating as well coming out of our plants and distribution for that. This is considered a natural monopoly, and the water supply -- the natural monopoly is considered strategic and it cannot be decoupled from the energy-generating process easily or there's very high cost. So with that point of view, it's not just outsourcing of water testing license. And that means that it's not that easy. And, from my point of view, it's not something which can be done overnight, if it can be done anyway. So from that point of view, I think we can continue that discussion, but this is rather complicated because the political thing is Russian law but all that was known from -- for all participants from the beginning.

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [31]

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All right. And I'll try with the first one, that was on provision utilization. Obviously, that number ultimately reflects, at some point in time, all kinds of provisions that we have built up, most notably for green certificates, pensions, decommissioning, but it can also include other provisions. The $700 million is surely dominated by green certificates, say, some EUR 400 million. But how that number looks at year-end, I'd almost say maybe you want to do some kind of backwards calculation of the cash flow. If you rather than now going into the individual components of provision utilization or changes in working capital, I think that may be difficult. But I think if you take our -- if you take the confirmation of our debt factor, if you take our EBIT guidance, and obviously, then you can build an EBITDA expectation from that. I think you have some kind of idea where we want to end up when it comes to debt. And then the difference between your year-end debt and the H1 debt is probably predominantly driven by changes in cash.

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Udo Giegerich, Uniper SE - EVP of Group Finance & IR [32]

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We have 3 questions outstanding, and we might close then the questions please.

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [33]

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Sorry, but Lueder, you have still another question?

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Operator [34]

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The next question from James Brand -- sorry.

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Lueder Schumacher, Societe Generale Cross Asset Research - Equity Analyst [35]

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Just on the Russian issue, my understanding is that the water business is very, very small scale. So I'm not quite sure I understand the complications that will be involved in splitting this out, bearing in mind it is such a major (inaudible) for such a big part of the capital structure.

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [36]

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First of all, I'd like to remind you that the calls with us, so we can't go very much into technical detail, but then maybe you find time to maybe discuss it on one of the roadshows. But what I think is not a small part, it's an integral part of all our assets there. The water provision of drinking water is not small, it's not just before the testing license there are other strategic businesses in connection with that. One is registered because it's the water supplier for whole area. There's heating connected with that as well. So I could spend a little bit more technical detail. But probably, this not the right place to do that. And I'm happy to take another call or doing it on the roadshow and discussing it in details -- all the details you want to have.

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Operator [37]

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Next question from James Brand from Deutsche Bank.

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James Brand, Deutsche Bank AG, Research Division - Research Analyst [38]

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I had two questions. One was coming back to the German power market and the improvement in spreads that you were signaling in one of your charts at least for 2020. When we look across the forward curve, it looks like there's a bit of a deterioration in spreads in 2021 and then maybe a bit of an improvement once we have the coal closures coming through. And you also have some degree of hedging, fuel spread generation and I'm also conscious that you didn't highlight spread improvements as one of the elements in your waterfall. So I was just wondering whether you could maybe give us a bit of color in terms of how sustainable you think this improvement in spreads is? And maybe some guidance on the timing as to whether we should expect to see that starting to feed through into higher profitability over the next year or 2 or maybe wait a bit more for the coal closures and the tightening in the power markets come through?

And then the second question, you've answered it to some degree because you've given some guidance net debt. The second question was just on economic net debt. You've made a comment in the call that you're expecting economic net debt about 2x EBITDA, consensus EBITDA for the full year is about EUR 1.4 billion. So just wondering whether something around EUR 2.8 billion or as least sub 3 is the right ballpark to be in for economic net debt, the full year?

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [39]

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Hey, James. I'll take the second one, I guess, if you follow the logic that I have proposed, mathematically you come to the number that you just mentioned.

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [40]

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So could you repeat the first question, please?

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James Brand, Deutsche Bank AG, Research Division - Research Analyst [41]

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The first question was on -- it was on spreads. Particularly for German spreads for gas and coal plant, you highlighted on Slide 7 on the figure on the right, that you've seen an improvement in quite meaningfully, and particularly for gas, improvement in spreads over the last year, although that's specifically a chart for 2020. And obviously there's a tariff structure deteriorates a little bit when you look across into 2021. And then forecast is not very liquid after the coal closures come through, but it seems to be suggesting a bit of improvement. And also you have hedging. So I was just wondering whether should we be looking at that chart and getting enthusiastic about seeing some meaningful improvements in the gas and the coal profitability coming through in Germany? And what's the timing around that?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [42]

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So hard for me to say, I have to admit. I think if you're looking at that would be exactly, if you will sit and wait and look at the development, it seems to be quite volatile from the past. So we're looking at it carefully and observing it and hopefully we can leverage it and see what the future brings. But if you really asked me the volatility is still there. This is the only certainty we have.

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Sascha Bibert, Uniper SE - CFO & Member of Management Board [43]

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Maybe I can just add a word on that. I think you know that just financially, the biggest exposure that we have is on the outdrive and the particular, I'd say Nordic given the hedge ratios. We do have some spread exposure, probably more in the outer years, but also keep in mind that at least as of today, quite a few of our stations are somewhat contracted or they are in a special reserve. And I think depending on then the spread development, we may reconsider how to actually position them. But generally, the spread up or downside is not one of our biggest drivers right now.

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [44]

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But adding to that, we are, of course, looking out into it as it makes sense based on that development, and if it makes sense to take a few of the reserve bank from the reserve to put them into the market again that we can be doing a yearly, and we are just checking if it makes sense to be making these moves or not.

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Operator [45]

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Next question from Ingo Becker from Kepler Cheuvreux.

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Ingo Becker, Kepler Cheuvreux, Research Division - Head of Utilities Sector Research [46]

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I have 2 questions. First, on emissions, you said that fuel switching is accelerating. Could you possibly provide us with a few numbers or at least a trend maybe in your main markets of Germany, U.K. and the Benelux? I think you had 60 million tons of emissions last year. Do you have a number that you would expect to result from your switching activity this year? Presumably, that 60 million would go down? And maybe you can adjust that figure for frozen, if that is possible?

The other question is on your license, Andreas. I think the way you talked about it, I guess, it changes the perception of the situation of many of us. It seems like rather than only a technical issue, as you explain, it's more complex and some technical issues here involved as well. Do the discussions with Fortum include solving that rather complex issue? Or do they -- given that the situation, as you explained it, doesn't look to be resolved or resumable in the nearer term, focus on different aspects of possible cooperation between the 2 groups?

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Andreas Schierenbeck, Uniper SE - CEO & Member of Management Board [47]

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To your first question, we have a specific target for CO2 of 500 grams. That will cover that.

So second question. Well, technically, it's more tricky than we thought. It's not just the water testing license work. Just to give you a technical example in one of the areas we provide in drinking water and hot water to the household, it takes to the hot water tube that the heat exchange on every house to heat the houses because there's only one tube. So if you want to separate that strategic part from a nonstrategic part, you have to do quick major investment. This is an integral part of the whole generation process because using it for cooling for -- at the power plant. So it's not just a small thing to say, outsourcing a testing license will do the trick. So from that point of view, it's a more greater technical issue. On the other hand, as you all know, Fortum has asked the administrator to look into that and come to ruling if that can be sold or not and we just wait for the outcome what is happening there.

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Udo Giegerich, Uniper SE - EVP of Group Finance & IR [48]

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Thank you very much for all your questions. Giving the time, we have now to close the call. And thank you very much for your participation and all your questions. We hope to get all the questions, then individually on the roadshow in the next weeks and then see you finally next time on November 12 for the Q3 call. Thank you very much.

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Operator [49]

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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect.