Nine Months 2017 Uniper SE Earnings Call
Nov 07, 2017 AM EST
UN01.DE - Uniper SE
Nine Months 2017 Uniper SE Earnings Call
Nov 07, 2017 / 07:30AM GMT
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Corporate Participants
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* Christopher Jost Delbrück
Uniper SE - CFO & Member of Management Board
* Udo Giegerich
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Conference Call Participants
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* Deepa Venkateswaran
Sanford C. Bernstein & Co., LLC., Research Division - Senior 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
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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's request, this conference will be recorded. (Operator Instructions)
I now hand you over to Udo Giegerich, who will lead you through this conference. Please go ahead, sir.
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Udo Giegerich, [2]
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Good morning, analysts and investors. A warm welcome to our interim results call. Today our CFO, Christopher Delbruck, will guide you through the highlights of the third quarter of the current business year and will [be commenting] on the essential numbers. As an introductionary remark, the specific takeover of Fortum, has been available to us only since this morning. Therefore, we cannot comment on this today. Ask you for your kind understanding. But we may answer general questions on that takeover topic in the Q&A. We will be able to comment on this detail once we have carefully examined the specific offer for the benefits of our shareholders and employees. Christopher will give you some granularity on the procedure in this presentation. For all [product] statements I hand over to Christopher.
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [3]
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Thanks for the introduction Udo. Warm welcome from my side. The whole Uniper management team is firstly, very much focused on driving Uniper's development forward, despite the Fortum approach. We are in delivery mode. A key element of the road map for the second half was to come up with a financial and strategic update before year-end. We can confirm this plan today. Please keep your diary free for a strategic and financial update which is scheduled for 7th of December.
Just to remind you, our prevailing strategy consists of a 2-faced approach. We have until now tightened the ship by embarking on all the well-known measures of our action plan. Now it is time to set the course for the future. This is a pre-guidance on this. We have indeed analyzed our portfolio and we feel very comfortable with the business prospects of our activities today. So please do not expect a revolution on that day, rather an evolution. This event will then be followed by a management roadshow to all major financial cities.
As highlighted by Udo, we cannot comment on the specific offer from Fortum today. Nevertheless, for your convenience and before we go into details of our 9 months results, I would like to give you a quick overview of the expected timeline of the procedure. As a next step, the management board and supervisory board will carefully examine the offer in the interest of our shareholders, company and employees. From the date of publishing the offer, the Uniper board has up to 14 days to respond. Once this process is complete, we will release a recent statement and comment therein our view in detail.
Despite all the noises related to the takeover approach, today I would like to draw your attention back on the business development of the past 9 months. I would split today's presentation into 2 sections. Firstly, I will start with a brief summary of the latest market trends and business highlights. This includes an update on our most essential project, as well as on our action plan. Secondly, I will comment on the highlights of Uniper's financial results in the first 9 months of the current financial year and not to forget, I'd like to share with you our financial outlook for the rest of the year.
To start with the highlights for Uniper in the first 9 months can be clustered in 3 buckets. Firstly let me run through the highlights of the key messages of today. European electricity markets are showing evidence of a sustained recovery. The market trend from our point of view is clear, it is getting tighter, where the positive impetus is coming from the revitalization of the European Emission Trading Scheme by a substantial reduction of certificates. The current strong spot prices in our home turf, Central Europe, are mainly the outcome of unexpectedly strong coal prices and unplanned outages. What is more essential, accelerating critical plants for an exit of coal plants adds to the trend of conventional plants to leave the Continental European market. A clear proof point for us here is the significant rally of dark and spark spreads of the recent weeks. But what I've said in the generation deep-dive last month still holds. We do not see the market tightness from closure of nuclear and lignite to be put into a climate reserve, fully priced in yet.
Second topic, our action plan; that is on track. The cost-cutting measures are on track to be delivered as envisaged. To recap, our ambitious target is to reduce controllable costs to EUR 1.9 billion from our starting point of EUR 2.3 billion in 2015. The EUR 1.9 billion will be achieved by the end of 2018.
In terms of deleveraging, the disposal of our gas field participation in Yuzhno-Russkoye received all regulatory permits. Consent of the co-owners is still pending. We remain confident that we will complete the transaction by the end of the year as stated when announcing the transaction. Our legacy growth projects are largely on track. The datteln 4 coal plant has already started with first test runs and this will be followed by a trial operation. We are confident that we will be able to commission the power plant in the second quarter of 2018.
The Berezovskaya plant repair project in Russia is progressing in line with time and budget and as we have announced in the Q2 presentation. Reinforcement and debris removal are finalized. About RUB 25 billion of CapEx are still earmarked to be spent and the recommissioning is expected in Q3 2019.
The Nord Stream 2 gas pipeline is making continuous progress. The German government has recently repeatedly clarified that this additional gas pipeline is a purely private project which gets a full political support. The U.S. administration had issued a public guidance to partly sanction the act on Russian energy export lines through the U.S. Department of State. On the first look this is positive, but we are analyzing the details. At Uniper, we're still further convinced that the Nord Stream 2 project will be realized and that our own contribution to financing is an attractive investment.
Coming to our earnings. I will continue to sell overall earnings and financial situation of Uniper in the first 9 months of the fiscal year 2017 as solid. We are fully on track to reach our financial goals this year. As such, we can comfortably confirm our outlook for the full year. Group EBIT should end up within the guided range of EUR 1.0 billion to EUR 1.2 billion. This also supports an attractive free cash trend, allowing us to raise the dividend payout proposal by 25% to some EUR 250 million for fiscal year 2017 as already indicated.
Now over to energy policy and markets. Within our core markets in Continental Europe, we have had a spree of collections and the [operation] of several new governments this year. Energy policy once more is geared towards new regulations which might translate into a further change in the energy mix and are already impacting market price settings. A broad consensus seems to have been reached about revitalizing the ETS. E.U. decision makers are about to empower the Emission Trading Scheme by introducing measures for a fast reduction of the current over-supply. The current system of CO2 prices does not provide any market incentives for modern and climate-friendly plants. This does not make sense, neither economically nor ecologically. A C02 price level of around EUR 25 to EUR 30 as discussed publicly in France would finally mean that old and high-emission installations will be pushed out of the market in favor of more low emission technologies. In our view, additional measures to reduce emissions should follow an E.U.-wide logic. In these scenarios with higher CO2 price levels, our gas power plants, but even more our emissions-free German and Swedish hydro and nuclear power plants could clearly benefit. In Germany, the 4 involved parties to form a coalition are in exploratory discussions to form a government. Germany must square the circle of speeding up emission reductions and keeping costs and [securitive] energy supply under control.
Pressure is rising as Germany will likely be missing its ambitious 40% emission reduction targets set for 2020. Moreover, discussions on Germany's future policy are intensifying, since new governments in Europe are pushing forward their National Energy plants. The U.K. sticks to its coal exit date, 2025, and it is just released clean growth strategy. The Netherlands seems to go for 2030. French government announced its targets to exit from coal by 2022. Besides France, also Netherlands plants introduced a CO2 floor. This fueled speculation that a new coalition in Germany could send a clear signal to a coal exit and to come up with additional measures to meet the 2020 carbon reduction targets. While we are not in the position to comment on these different discussions, we have a clearer view regarding the implications on Continental Europe's markets and electricity prices.
Continental European power markets are tightening and Uniper will play a very important role in a successful transition of the energy markets, especially when it comes to security of supply. Wholesale prices in our home turf outright markets, Sweden, and Germany, are constantly on the way up since spring 2016. So far this has been a commodity price-driven uptrend, mainly boosted by now peaking coal prices. Uncertainties on nuclear power availability and lower hydro reserve levels in Central Europe has been an additional booster for spot prices. What is more essential for the longer-term market prices are the structural changes within the Continental European market. The looming capacity retirements of nuclear and lignite capacity in Germany are a major driving force in the next few years.
Political interventions within Europe are increasing to get a grip on the future energy mix. Deadlines on coal exit plans are heading nearer. In Germany, speculation to start its coal exit in 2020 seem to have a progressing impact on Germany's forward pricing. These rising risk on the availability of reliable conventional capacity are pouring into market prices. If you look at the 2024 prices, for the first time since many years, spreads for the price setting coal plants are widening significantly. In our opinion, further positive impetus can come from the revitalization of the European Emission Trading System, which is currently under discussion and is overdue. It is obvious and we also made this very clear at the generation deep-dive early October that we are poised to be a strong beneficiary of this power price recovery going into the next decade.
Refocusing our radar on the current trends, I will now share the essentials and details of our financial results with you. I'd like to start as usual with a condensed run-through of the key financial KPIs. Please be reminded adjusted EBIT is our key financial earnings KPI for the group. Hence my commentary will focus on explaining the EBIT development. All the detail you need in terms of EBITDA disclosure for level 1 as well as level 2, you will also find in our documents.
Overall, we had a solid first 9 months in 2017, even more so when you consider the significant positive one-off effects that boosted, especially the first half of 2016. Those effects are very well known to you. Main driver for pressure on earnings was the absence of the gas business settlement one-off and the normalization of the gas optimization profitability.
The key positive in the first 9 months came from the International Power segment. Here the results reflect on the one hand, improving underlying operations but also the booking of the remaining insurance payment of RUB 20 billion related to the Berezovskaya 3 accident. Finally, the European Generation segment showed some earnings increase versus 9 months 2016 figures. Key drivers here are, on the one hand, hydro operations mainly due to the absence of negative restructuring provisions, and on the other hand, the fossil generation activities based on lower depreciation, following last year's impairments.
Operating cash flow came down significantly compared to 2016 and also compared to the first half [2017] levels, due to seasonality in the gas business. However, you should keep in mind that firstly 2016 benefited from certain one-offs, such as the Fortum-Oskarshamn settlement and the significant prepayments for gas deliveries, which we had made in Q4 2015 already. These effects clearly overcompensated the cash-outs to Gazprom in the context of the contract settlement.
Secondly, the third quarter has in general a lower cash conversion, based on the seasonality of our business as we inject into our storages in summertime. This is the reason why from a third quarter perspective, operating cash flow came down. Consequently, the net financial position is now back to levels slightly below year-end 2016. Finally, a brief word on the adjusted FFO. This went strongly up based on the, by far, lower provision utilization compared to the first 9 months of 2016.
Now let me move on to the details by segment, starting with the European Generation segment. European Generation has shown a rather strong performance on the headline KPIs, despite declining spreads, lower achieved outright prices and the worsened hydrology in Germany compared to 2016. Hence, our diversified generation portfolio has again proven to be a stable contributor. Adjusted EBIT is now up EUR 127 million versus last year. We're also benefiting from certain one-off effects.
Let me discuss the performance along the different sub segments. In our hydro operations, one-off drivers such as a contract settlement, the lapse of restructuring provisions, but also the lower hydro property tax, were able to over-compensate the price-volume complex. Keep in mind, the reduction of the hydro tax in Sweden only kicked in, in the third quarter.
In terms of the third quarter, nuclear is down now EUR 13 million versus the first 9 months 2016. At the half year stage, this was still showing earnings growth. This is not a surprise, as Oskarshamn 1 is no longer contributing and Oskarshamn 3 has been on an extended maintenance outage during Q3. This has been partly offset by higher production out of Ringhals 2 and by the nuclear capacity tax.
The fossil business benefited from reduced depreciation, especially in the first 6 months. Remember we booked a significant impairment in our coal-fired generation at the first half year in last year and fossil further benefited from some positive one-offs, as well as higher income from system operators that overcompensated lower spreads. So all in all, European Generation was robust in terms of its earnings across all segments.
Now over to the Global Commodities. Global Commodities came down by EUR 1 billion to EUR 278 million. This segment's result is driven by the lapse of the major positive one-off effects in 2016, mainly the Gazprom settlement and the extraordinary successful gas optimization activities. These could not be expected to be repeated this year and therefore, the result is back to more normalized levels.
Of the EUR 278 million, after 9 months, now what you should expect going forward at this stage of the year from our Global Commodities business, starting with the gas business. This follows the usual seasonal pattern with strong quarters in the winter period by -- followed by weaker quarters mid of the year. This year Q2 and Q3 have been especially weak. Main drivers for this is being the lapse of storage withdrawal gains in the summer season and lower summer market prices in combination with our long-term contract obligation and somewhat low volatility. For the full year, we are confident that we will deliver mid of the range of what we guided for gas midstream (inaudible) and underlying EBITDA level of EUR 350 million to EUR 500 million was the range that we indicated in our midstream -- gas midstream Deep Dive.
With regard to the Power segment, we are clearly lagging behind the prior year's performance. Hence, also for the full year, we expect the sub segment to stay substantially negative. In the fourth quarter, we will see negative value contribution due to shaping and from realization of hedges concluded for risk mitigation purposes during the rundown of commodities in early 2016. Just as a reminder, from next year onwards, the optimization results will be fully reported in the Generation segment to give you more clarity and no distortions around transfer pricing.
The coal and freight LNG sub segment came down in (inaudible) Q3, driven by our coal trading activities. The latest price spikes had a negative impact on our performance. The performance of our LNG activities could not fully compensate this. And finally, Yuzhno-Russkoye. As you know, the increase stems from the fact that volumes were higher than last year, being a make-up year.
With that, let me move to International Power. Here we've also seen a significant earning swing. However, contrary to Global Commodities with a positive pre-sign. International Power EBIT increased by over EUR 0.5 billion. This impressive increase is based on 2 well-known effects. Firstly, last year's earnings were negatively impacted by the write-off of parts of the Berezovskaya III boiler, producing a loss at the EBIT level. Secondly, in May this year, we booked the insurance payment related to the action a further RUB 20 billion. Roughly another RUB 6 billion were already received in Q4 2016.
Looking at the underlying business, Uniper also performed well. It benefited from increased capacity payments out of the CSA regime. This results from a change in the calculation formula, which applies to all CSA capacity, which has started the 7th year of operation. This effect is relevant for 1.6 gigawatt of our capacity. And additionally, the ruble exchange rate was of course supportive.
So much for the earnings discussion, now over to cash flow. Operating cash flow, as I said before, it has come down notably compared to first half year, due to the seasonality of our business, but still is a solid number for a third quarter. Let me start the reconciliation with a non-cash affected EBITDA items. These predominantly consist of recurring items such as the CO2 and green certificate provisions that we set up every year and then utilize the following year. Here we see roughly a similar amount of provision creation and utilization every year, hence, it generally does not really impact cash conversion. This also applies to pension and personnel-related provision buildup, again, normal course of business. Those recurring items (inaudible) currently all the non-cash items and almost half of the utilization. The nonrecurring items are provisions for decommissioning, real estate transfer tax, restructuring provisions and provision utilization related to our gas business.
In terms of putting this into the full year contract, especially with regard to the real estate transfer tax and the [wider] provision, we are expecting over-proportionally high utilization in the isolated fourth quarter. The second block, highlighted in green are the changes out of the working capital. We have seen quite some working capital deterioration in the isolated third quarter. This is essentially related to the refilling of the gas storages. Therefore, it is a clear seasonal development and has come totally as expected.
Next to the seasonality. There is 1 special item still related to the separation of E.ON. We have now finally also fully separated the support function and settled a larger bill that had accumulated over the year with E.ON Business Services. In the fourth quarter, we expect working capital to improve again slightly.
Now over to economic debt. Economic debt had consequently come down significantly during the first 6 months, but now it's back to slightly below full year 2016 levels. The driver is the operating cash flow with its seasonal pattern as just described. Let me just run you briefly through the details of the overall development. As already described, we had an operating cash flow in the first 9 months of EUR 1 billion and a CapEx of slightly above EUR 500 million. Of this CapEx, EUR 300 million were related to growth and EUR 200 million to maintenance and replacement. The growth element was to a large extent linked to our 2 large asset projects, datteln 4 and Berezovskaya 3. In maintenance and replacement, 2/3 were spent in the European Generation segment and another roughly 20% in International Power.
Provision for pensions decreased slightly, mainly due to higher discount rates in Germany. Then we obviously paid our first dividend as independent company. Finally, in the Other category, several effects are summarized. Most prominently, this includes a cash-out for the junior debt facility of the Nord Stream 2 project. The cash-out to Nord Stream 2 is not part of our investment definition, but of course it is part of our cash flow calculation. Towards year-end, we expect to improve the cash balance slightly, even excluding the cash-in from the Yuzhno-Russkoye deal closing. The closing of Yuzhno-Russkoye itself would of course improve our economic net debt significantly.
So finally, let me come to the group outlook. As I said initially, we can comfortably confirm the outlook we gave in August. Remember, already at Q2 stage, we felt sufficiently confident to lift the lower end of the guidance range for EBIT to EUR 1 billion. Based on the overall solid performance in the first 9 months, we have basically achieved the lower boundary of this outlook today. This also holds true for our dividend guidance, which we increased at the 6-month reporting stage. We continue to expect that the 2017 FFO will be significantly above the 2016 levels. So we can comfortably confirm a 25% increase of the EUR 200 million dividend paid for 2016 to EUR 250 million for fiscal year 2017 to be proposed.
Now let me close today's presentation with a brief run-through of 2017 management priorities and what's next for the remainder of this year.
Our key focus since our start as Uniper has been to tighten the ship. We took a rigorous action plan to increase our competitiveness and our financial headroom with a commitment to cost [excellence] and cash flow optimization by reducing our cost base and maintenance CapEx to a minimum needed to responsibly run this enormous portfolio. We committed to a EUR 2 billion disposal volume to repair our balance sheet and to fund our remaining growth projects. The closing of the Yuzhno-Russkoye deal is expected for the fourth quarter. We are on the right track to increase transparency towards the capital market, for example, giving ongoing details on our provision utilization, or the 2 deep-dives on major business activities as regards midstream and the European Generation portfolio.
What is next? For the beginning of December, we will invite you to our strategic and financial update to give you our road map on how we want to bring this company forward as a strong independent conventional energy company and what the financial framework for the mid-term looks like. Clearly, this will not be a revolution, but a distinctive evolution of our core capabilities in a changing energy world to extract the value out of our portfolio.
Following this Klaus Schaefer and I will be on road show in Europe and on the East Coast of the U.S. I believe that there are also several reverse road shows scheduled for January which you can make use of. And we will be present at several conferences early January as well. Thanks for your attention. And before we come to questions, I will briefly hand over to Udo .
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Udo Giegerich, [4]
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Thank you, Christopher. May I ask you for your questions and may you please limit yourself to 2 questions. Thank you and the floor is open for you.
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Questions and Answers
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Operator [1]
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[Operator Instructions] The first question is from Deepa Venkateswaran of Bernstein.
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Deepa Venkateswaran, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [2]
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I have 2 questions. One is in the fossil fuel division. You talking about spread still coming under pressure, how does that square with the outlook you shared earlier in the presentation, where you thought that the spreads were actually improving? And second question on the M&A. I understand that you've been placing a number of ads in Finland, arguing that your fossil fuel portfolio is not a good fit for Fortum. I was wondering why are you giving contradictory messages to shareholders and whoever is your intended audience in Finland? Thank you.
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [3]
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Thank you, Deepa. Let me start with the first question, I think on the fossil fuel. Obviously, we have seen spreads just widening just recently, i.e. especially if you look at the development of the spreads probably since mid of this year. Obviously, with some of the hedging we do, there is obviously already locked in certain parts of the portfolio at significantly lower spreads than what we currently see. Again we will be benefiting from that going forward depending on how much we have respectively secured already. But again, out there in 2020, definitely that would benefit for the portfolio that we never hedged the spread portfolio that far out. I think that general on the M&A front, I think in the phase, which we had until -- now finally an offer is on the table, we have simply tried to make clear that strategically, contrary to what has been stated, we do not really see a perfect fit between the 2 companies and that's why we've been just indicating on where we are heading and what our activities are and why we believe there is not a strategic match. Therefore, in that sense it's contradictory messages. I think our shareholders know very well how we are developing the conventional energy business and what our plans for the way forward are.
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Operator [4]
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The next question is from [Mahfosier] of Credit Suisse.
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Unidentified Analyst, [5]
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Two non-deal related questions. On slide 23, the financial result, plus EUR 26 million in 9 months ' 17, obviously you got EUR 4 billion of debt, so how do we get from a EUR 4 billion debt to a positive EUR 26 million of financial results, maybe a bit of a breakdown would help? And the second question is, could you give us a breakdown of the non-cash EBITDA in terms -- you went through them very quickly, but it's always interesting to check that we have a good grip on that? Thank you.
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [6]
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Let me start with the first one, I think the overall matches the same as we also discussed in the half-year results. Out of the financial result, obviously is not interest payments, which is the main driver. The main driver is that we have changes in interest rates, which then leads to accretion of provisions for retirement of the provision and there is any effect on the nuclear. With this nuclear fund, there is changes in the construction period interests. So there's a number of interest rate changes, which impact positively the financial results and thereby overcompensate our interest payments.
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Unidentified Analyst, [7]
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I understand that. But can you give us a breakdown or maybe the breakdown is available in 1 of your documents, because it's very, very hard from outside to reconcile the numbers?
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [8]
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I think 1 of the details -- happily we'll go back to the IR department, especially on some of the details of the nuclear fund to give you essentially what we pay on our debt is close to 0. Therefore I think the interest cost of that is very limited. If you see, around [EUR 1 million] of interest from the financial liabilities. And then basically there is some additional parts on provision for pension or similar provisions, roughly EUR 15 million. Again, there is a breakdown of about 25 items, I do not really think we should be going through. But I think the general message should be clear that the effect from interest rate changes on provisions has been bigger than any financial expense we had on our -- financing our debt. I think I would -- then for more details, I think Mark is going to -- happy going to give you a run-down of the details. Now let me look at the cash flow statements here. The non-cash effect of EBITDA components, which are here stated with EUR 319 million, that is in addition of provisions of roughly EUR 350 million from emission rights and [Green] -- so emission rights and [Green strip], because roughly [EUR 160 million], pension obligations roughly EUR 120 million, and then regular personnel expenses and there is then the release of provisions, which we talked about on Voyager, the EUR 13 million, which is negative against that. So overall, that should give you the non-cash effective components of our earnings.
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Operator [9]
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The next question is from Peter Bisztyga of 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 [10]
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Two questions from me please. Firstly on the gas storage business. I was just wondering if you could give us a flavor of how you see that developing into 2018, and I'm sort of wondering whether the midpoint of your EUR 350 million to EUR 500 million guidance for midstream gas is sustainable next year as well. And then the second one is, I'd just be interested in your views on what's happening with the coal price at the moment. It seems to be on a sort of one-way upward trajectory, and I'm just wondering if you've got any views as to what's driving that and again, whether you think that too is sustainable longer term?
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Udo Giegerich, [11]
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Let me start with the gas storage business. I think the underlying driver for the gas storage business is the summer-winter spread, and principal is roughly flat versus where we are this year. So I think there is now a significantly additional positive contribution at that level, as we also said, in the gas Deep Dive, there will be very little earnings or cash contribution coming purely out of the gas storage business. Again, a further outlook on the business segment we'll give you beginning of December, but that should give you at least a guidance for the gas storage business. Now on the coal price, you're right, the coal price and coal price increases seem bit peculiar. To our understanding, it has a bit to do also with the index itself. The index API2 is based on a certain specification of the coal, and that specific coal quality which easily match that API index specification is relatively scarce at the moment. So there's simply is an index-driven effect in there. Is that sustainable? I mean if you look at the forward curve itself, you see that -- we are in backwardation, so that for the coming years there is a decline in coal prices forecast on the forward basis. I think the main drivers then going forward will be, as we all understand, China is calling the shots on what's happening on the coal business. The question simply on how China is developing its balance between affordable energy, power and climate, so if they basically stop or reduce coal import significantly that will put pressure on coal prices. If they maintain a stable flow, then the decrease will not be as pronounced.
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Operator [12]
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The next question is from Sam Arie of UBS.
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Samuel James Hugo Arie, UBS Investment Bank, Research Division - MD and Research Analyst [13]
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Two questions from; 1 the high level, and 1 maybe more on the detail. The high level question is, just coming back to the coalition negotiations that you mentioned at the beginning of the presentation and the sort of wide range of targets being discussed, it would just be helpful to understand if you know anything more about what that big policy battlegrounds are that are being debated and how you could be affected too, little bit more on that be very helpful. And then secondly just on the data point. On Page 20, I think I'm right that this is the first time you're giving us your 2020 hedge position. On the Nordic side it still looks like quite a low level of hedges. So I'm just wondering if you can explain a bit more about what the approach is there and also if you also have hedges already on the book for 2021 that we haven't seen and what that might be?
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [14]
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In terms of your first question, unfortunately I have to pass. I mean, obviously there is -- right now there is sounding discussions to see whether actually coalition agreement negotiations could be started. So we are really in a very early period. I think we take it probably roughly as you do from the news where they are. The groups, obviously in this point, are very closed, so it's difficult to get additional insights. So I can't really give you any further insight on that one, although we would love to know of course some more. On the second question, on the hedge side, you're right, I think if you compare the hedge -- prices on that basis compared to where the recent rally of forward prices have taken us, it seems that we have relatively low achieved price. Obviously there are still significant positions opened and therefore, we have executed a certain percentage on it. It doesn't mean that necessarily we have to keep all of that, we might be rewinding some of that. For 2021, there should be extremely limited, if any, hedges out there that would be really very much too early. And obviously, as we said, we do have the view of the market tightening, so any hedges for '21 would be far too early.
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Samuel James Hugo Arie, UBS Investment Bank, Research Division - MD and Research Analyst [15]
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Okay. And the third -- I think on the coalition there is no much more we can learn then. And on the hedges, I guess -- [of course] I understand that on 2019 it looks like you've increased the hedge position since the mid-year, but not the achieved price, which is a bit surprising, because overall the coal price has been very strong since we last saw this chart. And then on 2020 it's over [1/3] hedged in the Nordics below [25]. So just, all these hedges you put on a long time ago or (inaudible)?
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [16]
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I think some of those hedges were put in place probably already in the end of '16, but prices were still fairly low and wanted to secure a certain amount of cash flow, being not quite sure when and how coal prices will develop. But again, I think as we go forward, we expect [the achieved] prices to improve. And as I said, also we might unwind some positions if we believe it's a good place and good time do so to realize afterwards higher one -- higher prices.
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Operator [17]
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The next question is from [Mohammed Tajer] of Citigroup.
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Unidentified Analyst, [18]
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Two related questions. One, would you be able to give us the impact on Uniper's earnings or volumes if the Netherlands go ahead with the policy of closing coal and taxing CO2? And secondly, related, would you be able to give us the total earnings today from coal plants that will be closed by the U.K., France and Netherlands governments?
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [19]
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I think, overall, these are specific only for the coal segment, we have not made public. So I can't give you the detail on that one. If you get the feel for it, #1, in the Netherlands, obviously, we have 1 plant [Marflect] that is a low to mid double-digit million euro EBITDA number. Keep in mind that in our impairments last year, we obviously took a certain view of what's happening and what is potentially happening, and I think we're not -- in terms of those assumptions not too far away from what is being discussed right now. The second thing you should keep in mind that in the Netherlands, the discussion is also on what is the amount of compensation to be received if you close the assets. Those numbers are estimates, and have not been included in our impairment test last year. So could be a positive versus whatever happens. If I take France, obviously France is -- our coal-fired plants do not make significant earnings, so therefore we don't have to discount anything. And if I were to look at Ratcliffe, I think the main part on Ratcliffe is 2025. I mean given where the dark spreads are at the moment in the U.K. that [there was a] little energy income coming from that plant, but the capacity market income is an income, which would then after 2025 would disappear. That level, currently we have [22 pounds] per kilowatt on that reactor and I think you can do the math on that one.
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Operator [20]
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The next question is from Sofia Savvantidou of Exane BNP Paribas.
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Sofia Savvantidou, Exane BNP Paribas, Research Division - Head of Utilities Equity Research & MD [21]
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Staying with your thermal fleet as well, 1 question from me. I believe you've decided to mothball for these 3 following summers, Staudinger 5 in Germany. Again trying to sort of reconcile that with the positive comments you're making about the outlook for tightening in the German market and improving cash spreads?
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [22]
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Yes, I think right now, Sofia, on that one -- this will be a single -- if we somewhat multiple, given where the plant is positioned, we would have a single-million euro number of positive improvements versus where we are currently. If spreads then change and we would then re-nominate -- we would go back and potentially then re-nominate for summer as well. But as we see it right now, the summer spreads also are a different thing than winter spreads. So the summer period obviously is significantly less attractive than the winter period, even if overall -- average spreads improve. The summer mothballing is a smart thing to do in any case.
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Sofia Savvantidou, Exane BNP Paribas, Research Division - Head of Utilities Equity Research & MD [23]
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So in that case, just a follow-up if I can, since I have 1 more question. Then do you think it is more relevant that instead of just looking at clean dark spreads in the forward market, we need to be looking more on sort of the winter and summer spreads in order to be able to get a feeling for the load factor, because the way that you describe it is, yes the clean dark spreads are higher, but they are only really attractive in the winter. So your plants will be running more in the winter and less than before in the summer. So there is a positive price effect, but a negative volume effect. Is my understanding from what you said, is that how we should think about it or did I understand it wrongly?
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [24]
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(inaudible) I mean you'll find probably again then there's a bit peculiarities, you have the shorter months which are particularly needed, like a September, it depends -- that obviously we would have to call already into the winter months, because September is particularly -- we have less solar intensity. May, on the other hand, is usually a stronger solar month and therefore its spreads are less. So you're right, you should take -- rather look at the seasonal development of the spreads rather than on the average values.
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Operator [25]
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The next question is a follow-up of (inaudible).
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Unidentified Analyst, [26]
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Two questions, the first one is on ETS, the second one on the Fortum bid. I just couldn't resist. On ETS, you're talking about 25 to 30 Europe metric ton, which is the sort of magic number everybody is using. But what makes you believe that the current potential reform will genuinely take us to [25 to 30 Europe metric ton] in a reasonable amount of time. If you take a look at any study done by consultants, including in the E.U., it's very hard to see carbon going significantly above the current level before the end of this decade and potentially middle of next decade. So your views here would be very welcome. The second question is on the Fortum bid. I'm a bit confused with your reaction, because it's very emotional. You clearly want to tell us that you want to be an independent company and you are doing well, but on the other hand, the traditional reaction of most companies being bid for is to say on the one hand, we are better off independent. Second, oh, by the way, we were significantly more than the big price. And you never went down the second route, giving a view on the price. Is it something that you're going to do once you've done -- you produce these documents in 14 days or are you simply not willing to entertain any discussion on the price at any stage in the next [2] months. Thank you.
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [27]
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Okay. First -- the first question on the ETS. I think we're looking the EUR 30 right now. As I said everybody, quotes that number and that is basically somewhat a number in the room. If we look at in terms of the reduction of the certificates and the mechanisms that would move us into physical abatement needs, either -- which is not enough certificates in the market for the demands and therefore CO2 prices could rise substantially above it. (inaudible) IR lead you to those studies, which actually show that we see a number of studies which go even further beyond EUR 30 per ton, which we may not take into our account, but which are out there. But I think it is about abatement and then how it's been done. Obviously that does not -- the question always is what your assumptions are afterwards on what (inaudible) force coal plant closures are there. And if you have a sustained or accelerated plant closure scheme by governments beyond what's currently out there, then obviously you would have a impact on the demand procedures on that one. But again, we'll happily guide you to those studies which show there's a substantial price increase even above the EUR 30 per ton, which we have seen. The second one, I think in the current debate, you're right, I mean if somebody offers you a takeover offer at [22] and nothing else, [Ryan] there is no urgency at this point of time before the offer is out of the true value of the company. And obviously we will be clearer about what we believe going forward we can offer to our shareholders and that is most likely going to be in our December strategic and financial update. So well ahead of the end of the acceptance period.
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Operator [28]
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The next question is a follow-up of Deepa Venkateswaran of Bernstein.
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Deepa Venkateswaran, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [29]
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I think 2 questions. First one is on Yuzhno. Given that the transaction is closing in the fourth quarter, could you just tell us how much you've assumed as the contribution to EBIT from Yuzhno, given that it's closing in the fourth quarter, rather than I assumed slightly earlier. Secondly, in terms of the strategic update that you would provide in December, can you tell us legally what are the measures that you can commit, the company's strategy or you can't, given that there is an ongoing bid? Presumably a few things like certain large asset divestitures are out of the table. So could you just help maybe set the boundaries for what you can and cannot do in your strategic update given the offer going on? Thank you.
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [30]
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I think #1 on the Yuzhno-Russkoye, I think will be guided for -- it was roughly an EBITDA multiple of 10 on the sales price of [EUR 1.8 billion] that gets it to roughly EUR 180 million on a full year basis on the EBIT side. We had originally in the full year basis, we had assumed therefore around EUR 90 million in the number. Obviously, now if we look then into Q4, you would simply have again, depending exactly when in Q4, anything between EUR 60 million and EUR 85 million additionally to what we had originally in our guidance, would be then assumed for overall. And roughly [EUR 170 million] I think was not really in the guidance was the mineral extraction tax, which is still out there and being paid. So therefore the EUR 180 million is -- therefore will be a bit less if we were to do these numbers again. Secondly on the -- now the point where we are. We obviously by law, we are -- even after the Section 10 announcement had been given, we were restricted in terms of our action that we are not allowed to do anything which frustrates the bid and there's a lot of technical things which we can or can't do, but that I think is the principal one. Talking about our strategy and how we would like to develop the company, talking about the financial implication, talking about investments which we plan to do, and which we plan based on a strategy which has been discussed with our supervisory board, is completely in line and that we are able to do. It is just frustrating actions are legally not allowed.
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Udo Giegerich, [31]
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May we please come to the last 1 or 2 questions.
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Operator [32]
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At the moment, there are no further questions. (Operator Instructions) There are no further questions.
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Udo Giegerich, [33]
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Thank you very much for your kind questions and see you then next time in the strategic and financial update beginning of December.
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Christopher Jost Delbrück, Uniper SE - CFO & Member of Management Board [34]
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Thank you from my side. Thanks bye.
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Operator [35]
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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.
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