Results presentation. Shortly, Catherine and Pierre-François will walk you through our first half results, and following which we will open the lines to Q&A. With my usual polite request, if you could please limit your questions to one or two only. With that, over to Catherine. Thank you.
Thank you, Aarti, and good morning, everyone. Very pleased to present another good performance for ENGIE. With a favorable price environment, we continue to benefit from the strength of our integrated business model. A business model that includes a growing renewables portfolio, large regulated network business, and our flexible generation asset fleet. This H1 performance positions us very well for the remainder of the year. Importantly, we have significantly reduced our direct exposure to Russian gas with new contracts for both pipeline gas and LNG and using the flexibility within our gas portfolio. On the financial side, the residual risk is also minimized, as Pierre-François is going to explain later. In Belgium, we have co-signed with the Belgian state a non-binding letter of intent.
That is an important first milestone, as we are working constructively to assess the feasibility of a potential extension of two nuclear units under a clear risk-reward framework. Our teams are maintaining the sharp focus on execution of the strategic plan. My strong conviction is that the recent developments in the energy sector and the surge in extreme climatic conditions are calling for a much faster energy transition. Our strategy is fully aligned to that, and this is the only way forward to support energy security, affordability, and the long-term decarbonization of the sector. Turning now to our actions on energy security. We have been diversifying and increasing sources of gas supply. Our infrastructure teams in gas transport, in gas distribution, LNG terminals, storage, are all playing a critical role with a really strong operational performance in the backdrop of higher utilization rates.
For example, gas volumes that are transported by GRTgaz are up 10% versus last year. LNG is supporting a record ship unloadings up 54% from last year. We have now completed our LNG capacity increase by adding another 11 TWh. The storage levels at Storengy in France are now close to 76%, and of course, that is well above this time last year. In addition to these short-term actions, we continue to be focused on the long term to unlock the potential of renewable gases. In France to date, 425 biomethane units are connected to our grids. That represent a total yearly production capacity of 7.2 TWh. We continue to drive forward other projects. For example, the Jupiter, which started producing e-methane from hydrogen in the south of France.
With the inauguration of the world's largest hydrogen-powered mining truck in South Africa. Again, future production of biomethane in partnership with CMA CGM. From managing physical volumes, I'm going to turn to our actions to support affordability, where we have significantly stepped up our efforts. In France, we have nearly 70% of our B2C gas and power contracts who have benefited from some sort of protections against price increase through the tariff shield or fixed price over the lifetime of the contract. Our customers are also supported in Belgium by social tariffs or in Romania through, again, a price cap mechanism. We are working with customers on energy efficiency to help reduce their bill. For example, we're helping them through boiler maintenance contract and installation of very high performance equipment to reduce consumption.
We're obviously involved in launching marketing campaigns on energy management and the development of software apps on consumption management, which helps leverage the more than 10 million smart meters installed in France. We are also providing support through payment facilities with working capital of more than EUR 1 billion to enable price protection tools. We also contributed for EUR 467 million in the first semester through well-established profit-sharing mechanism, such as taxes specific to nuclear units in Belgium and to the CNR hydro concession in France. We are engaging on the recent purchasing power law in France, through which we are expected to provide further working capital to support gas storage levels. Finally, this morning we have announced that we are deploying two additional measures in France that will be implemented in the fall to help support purchasing power.
We have proposed a top-up of the energy voucher to just under 1 million vulnerable B2C customers for a total of EUR 90 million cost to ENGIE, and by setting up a fund to help SME in contracting energy. This is global across our operations that our teams are working days in, days out to better support our customers. Quick update on Belgium. The signature of this letter of intent does mark the start of negotiations under a clear framework, which is designed to achieve a fair risk-reward balance.
It comprises a number of inseparable conditions that include extension for 10 years of two of our units, the setup of a legal entity to manage the two units with the participation of the Belgian state, as well as our affiliate Electrabel, and a cap on future liabilities and costs for the management of nuclear waste and spent fuel related to all our seven units that will be in the form of a fixed amount that still needs to be determined. Subject to the progress we make, the goal is to sign a binding deal which would define all of the above conditions by the end of this year. In the short term, our priorities in Belgium are to maintain high operational availability, to prepare the upcoming shutdowns, and to finalize the process of the triennial renew-review of the nuclear provisions in H2.
Moving now to the H1 financial and strategic progress. Our EBIT grew 73% organically to EUR 5.3 billion, which is leading to a significantly higher recurring net income group share of EUR 3.2 billion. This was driven by a higher contribution from most of our activities, with a particularly strong increase from GEMS, from nuclear, and from renewables. A strong operational performance indeed, that has enabled us to capture these exceptional market conditions. Our balance sheet and our liquidity remains strong and well-placed to support temporarily higher working capital requirements. On growth, we invested EUR 2.2 billion, 60% of which was in renewables. Overall, our renewable capacity has grown, now representing 36% of our centralized generation portfolio. In the context of the current environment that continues to face uncertainty, the full year 2022 guidance is unchanged.
If the prevailing market conditions and price environment continue into the second half, this would present an upside to this guidance. As I said earlier, this H1 performance positions us very well indeed to deliver strong results in 2022. In addition to our day-to-day operational activities, the teams have maintained their sharp focus on the execution of the strategic plan that we presented to you in May last year. We have indeed progressed on all four pillars of the plan. On the simplification, with the announced disposals of non-strategic assets, we have signed or completed deals totaling nearly EUR 10 billion, and that is compared to our increased target of at least EUR 11 billion. The majority of these being the sale of Equans, where closing is expected in the second half.
Our geographic footprint upon completion of signed or closed agreements will be down to 35 countries, and this compares to 70 back in 2018. On coal exit, recently we completed the closure of one additional unit of Tocopilla in Chile, and coal represents now 2.7% of our centralized power generation capacity. We are well on track for a complete coal exit by 2027 as committed. Overall, this major simplification is enabling ENGIE to allocate more capital to core activities, particularly to step up growth in renewables. Moving to increasing efficiency and disciplined allocation of capital, we are investing in line with our target of EUR 15 billion-EUR 16 billion of gross CapEx over the plan period.
In terms of organization and performance, our four global business units, which were launched at the start of last year, are well established now, and we are benefiting from the first synergies of scale and scope. We have maintained momentum on efficiency improvements with EBIT saving of EUR 163 million in the first half. These arose from the implementation of our performance plan that is focused on operational excellence, on improvement of support functions, on fixing of loss-making entities. As a reminder, we are targeting EUR 600 million of net EBIT savings over the plan period. We are doing what we said, putting our strategy into action. We are well on track to build a solid foundation for long-term growth, a sustainable dividend, and a strong balance sheet for the group. Quick update on our renewables portfolio.
We have continued to strengthen both our operating asset base and our project pipeline. We added 2.2 GW of renewable capacity in the first half, a mix of offshore wind, onshore wind and solar. We are maintaining our focused geographic approach. For example, in France, we commissioned 150 MW in solar and wind, and this is bringing our leadership position in this market to a total installed capacity of nearly 8 GW. Ocean Winds continue to make strides in its offshore program, commissioning 952 MW at the Moray East offshore wind farm. Having been awarded a CFD for the delivery of nearly 300 MW from Moray West.
As a reminder, we are targeting 50 GW of total installed capacity by 2025, with an average of 4 GW addition per year to 2025, aiming to step up to 6 GW with a return focused approach that we are maintaining. The ambition is supported by a robust pipeline of 71 GW of identified projects, which is an increase of 5 GW over the past six months. Still with a balanced mix of technology spread across our main geographies. I want to highlight that the projects that are secured or under construction remain stable at around 7 GW, meaning that the capacity entering into operations is indeed being replaced by new projects. Let me now hand over the floor to Pierre-François.
Thank you very much, Catherine, and good morning to all. Indeed, we are very pleased with the first half of the year. And the key takeaways on that page, which I will detail in the upcoming slides, are pretty simple. We posted significantly higher earnings, which are flowing consistently from EBITDA to the bottom line. The cash generation did recover from a weak Q1 with EUR 6.8 billion of CFFO in H1, up EUR 2.5 billion versus last year. We also invested EUR 3.3 billion of capital expenditures, of which EUR 2.2 billion in growth, almost exclusively 95% in our key energy transition activities and about 80% organically. Fully in line with our strategy and our commitments.
The net debt is slightly higher for both financial and economic, of course, after dividend of the year was paid earlier. Our credit ratios, as you can see, further improved. Of course we are not changing our 2022 guidance, including the risk associated to Gazprom full disruption. Let's get into the number now and start with EBIT first. Strong growth, almost entirely driven by a EUR 2.2 billion improvement, +73% in organic variation, with main contributing activities being GEMS, nuclear and renewables. Let's go straight into renewables. Here again, strong increase of the EBIT contribution, EUR 280 million, that is +54% organic growth. Let me highlight four key topics. On the positive, first, industrially, we kept on commissioning new capacities and this is translating in a visible additional EBIT contribution at about EUR 150 million.
Second, the market conditions remained a tailwind, especially with higher prices captured by our French hydro assets. However, we had some headwinds, and especially in Portugal and France, we faced low hydro volumes that led to some buybacks which impacted the achieved prices. In some market areas in the U.S., especially in SPP, Southwest Power Pool, we are experiencing some transmission congestion leading to revenue losses. This is what we call basis risk and it's hurting some of our projects and requires further management to be mitigated. We want to be completely transparent. It is not a walk in the park to grow a business like that, but a very good start to the year and great to see that the gigawatts are converting into good P&L.
On networks, we achieve a slightly lower contribution, minus EUR 60 million, that is minus 4% organic decrease, which is interestingly enough split in - 12% in France and + 25% outside France. As the main headwinds that we faced were caused by warmer temperature and lower French regulated revenues, and were already impacting networks in Q1, let me highlight two positive drivers. First, the inflation indexation of our revenues. This is the case not only for most of our activities in Latin America, but also for our regulated gas networks in France. The French RAB is inflated yearly, translating to higher revenues through the RAB remuneration rate. Second, we monetize the market volatility for our storage assets, the salt caverns that we operate in the U.K. These non-regulated activities are allowed to do own account trading which capture higher margins.
On energy solutions, we deliver the slightly lower contribution, EUR -15.15 million, organic decrease. The main drivers are actually very similar to Q1, so I will tackle two specific issues, EVBox and the decrease of our EBIT margin. On EVBox, we do have some positive signals coming from operations. The production is ramping up and the process enhancement is on track. The second half now of the year will be very important to get revenues to pick up. H1 was impacted by some balance sheet cleanup which mainly explain the EUR -11 million variation year-on-year. We faced some EBIT margin squeeze, and I would like to highlight that this is due to two items.
One is the higher energy prices which are embedded in the revenue, but which are attracting EBIT margin which are lower than the average portfolio. This is diluting our margin just by a mechanical effect. The second point is that we had some positive one-off in 2021. We have also in 2022, a new internal reallocation of cost, which is adverse to energy solution. That is two, these two different items which are driving EBIT margin down. I would like to say that the energy solution teams are doing a great job, both turning around parts of the business while demerging Equans activities. In thermal, the EBIT contribution is up EUR 95 million. That is +17% organic growth. Good trends of Q1, like higher spread and strong incidentals in Europe are still there persisting, and of course contributing to EBIT growth.
Let me focus on a couple of headwinds that we had actually already flagged in May, especially Italy. This extraordinary tax, which is, by the way, also impacting our GEMS activities, both for thermal and GEMS. That's about a low triple digit amount that we are talking about all booked in EBIT. We are firmly contesting this tax, as we think it is ill-designed, the basis not being profit, but the VAT base, which creates a distortion between earnings coming from financial and physical deals. Second headwinds that I want to mention, we are facing some difficult market configuration in a couple of countries, Chile and Australia. Structural supply-demand imbalance is penalizing activities based on merit order. Also very disturbed market context with gas and power prices increasing exponentially. That demonstrate that current market conditions can cause some unexpected impact.
For us, this resulted in non-significant losses in H1 that are expected to persist in H2. Don't get me wrong, this is a great performance for thermal people and assets as the numbers show. Supply EBIT. Indeed, growth of EUR 220 million, fully organic, and a big part of this increase was actually secured in Q1, and that was on the back of warm climate. The main variation in Q2 is a positive timing effect on power margins in France, and it is linked to classic ARENH mechanism. No major change in the mechanism itself, but as power prices have increased massively compared to last year, this timing effect went from non-material to visible. We expect it to partly reverse in H2. Nuclear has been posting another exceptional performance driven by the same items.
I mean higher prices despite lower volumes and higher specific Belgian nuclear tax as in Q1. Same trends. Price and volumes are on the slide. I will not elaborate on it, but let me share a couple of words on the higher nuclear tax. This profit-sharing agreement has been in place for several years now, and is based either on fixed royalties or on variable contributions depending on specific margins, with or without floor. ENGIE, of course, has always respected it, including in bad times. For example, despite our nuclear activities were making significant losses back in 2018, we had then an EUR +150 million impact from this Belgian nuclear tax due to the fixed contribution and the floor.
In H1 2022, this specific tax was EUR 312 million, +EUR 267 million versus last year, and this tax is expected to increase further in H2. Last but not least, the other part, EBIT, is again posting a very strong contribution, +EUR 1 billion, all organic growth. GEMS saw the same trends as in Q1 that are persisting with opportunities to optimize gas contract optionalities, high volumes with healthy margins on risk management and of course, monetization of market volatility. Also, it is not directly visible, thanks to the very strong performance of all activities, let me be crystal clear that the H1 earnings include the cost of the hedging actions which were required to reduce the Gazprom exposure that I'm going to detail in a minute. It is of course also impacted by the Italian extraordinary tax that I mentioned for thermal.
Very robust performance of GEMS. On others, efforts on cost reduction are paying off, good to see, despite high inflation, which is creeping up. We are also helped by some internal reclassification of costs, I was mentioning it earlier, and some timing effect that will reverse in H2. Let's spend a bit of time on this Gazprom topic, which is so important for the market. Stay with me, it's a bit long. Let's take a close look how we have massively reduced our direct exposure to Gazprom and Russia, and it starts from a physical perspective. Our gas balance is now quite resilient. For this summer and next winter, that means Q2 2022- Q1 2023, what's going to happen in case of full disruption of Gazprom deliveries?
You need to start from a gross exposure from our existing long-term contracts and options with Gazprom. That's the start of the exposure. Against that, we have a significant length in our portfolio, the flexibility of our portfolio, which is the first step in reducing this gross exposure because these sales to the market can obviously be reduced since they are not committed. Secondly, as previously communicated, we have been engaging with existing and new suppliers to secure extra quantities. Finally, the potential residual physical short would be around 4% of our European gas demand, which is a level of variation, either plus or minus, that we deal with on an ongoing basis anyway because of changes of temperature, mainly driven by B2C, because of changes of economic activity, mainly driven by B2B, or of course, driven by power balance, and that's coming from CCGT.
To make it short on this very important question, physical, ENGIE is now able to almost fully compensate Russian gas volumes with a very manageable residual amount. By the way, this is without demand reduction. When we have seen over H1, demand reduction actually incurring about mid-single digit when it comes to small B2B and B2C and low double digit when it comes to industrial. Demand reduction is rolling as we speak. Second point about the exposure is the financial perspective, taking into account, of course, hedging. Here again, we have significantly reduced this exposure and increased our immunity. You may recall the max 15 TWh short-term price exposure that we have mentioned early March, which was down to 5 TWh at the end of March. It is currently just below 4 TWh. Massive reduction by about 75%, mainly through specific hedging actions.
All of the risk related in particular to geographical spreads are removed or hedged. All the related costs to this hedge adjustment have been expensed in the P&L in H1. What it means is that we are now comfortable that our value downside in a scenario of Russian gas cut is limited. On one hand, this is thanks to the way we manage our gas supply and demand by design, and in replicating indexation through the market and not linking specific supply contract to specific demand with any kind of fixed price. On the other hand, because the opportunity loss of Gazprom contractual flexibility is not significant anymore for our earnings and cash generation. This is exactly the reason why our guidance is no more qualified for downside risk on Gazprom.
In parallel to this de-risking of our gas portfolio, we also de-risk items of our balance sheet by reducing the exposure to Nord Stream by EUR 1.3 billion to bring it down to EUR 0.3 billion. On Nord Stream 1, the group has reviewed the valuation of its 9% stake, down EUR 259 million compared to last year, taken directly to equity. On Nord Stream 2, we had recognized in the first quarter a EUR 987 million credit loss for the loan and accrued interest, and this non-operating credit loss did not impact the group recurring P&L. That's it for Gazprom and Russia.
Very pleased to see that we are picking up on performance plan, and that was expected to indeed ramp up with EUR 163 million net contribution to EBIT for H1 after a contribution of EUR 85 million in full year 2021. You remember this was the year we launched the plan. The main contributors, as Catherine mentioned, remain operational excellence and support functions optimization, with very concrete actions ranging from O&M insourcing in Brazil to streamlining of our support functions in the U.S. or following the geographical refocus. In spite of some challenges ahead of us, for example, inflation, also Equans, which is staying a bit longer than expected, we remain confident in reaching the EUR 0.6 billion target over 2021-2023, of which we already achieved about 40% as of today.
Let me go to the cash generation now. Cash flow from operations is EUR 6.8 billion, up EUR 2.5 billion compared to last year. The operating cash flow is up EUR 2.1 billion, broadly in line with the EBITDA improvement upgrade. Contrary to Q1, the working capital requirement variation is actually a positive of EUR 600 million. First, of course, the gas inventory and the net receivables are still heavily impacted by higher volumes and prices, mainly in France, including an incremental effort of 10 TWh of gas stored compared to last year. I would like to highlight on the receivable side that there is no deterioration of DSO, overdues and bad debts compared to last year.
The negative effect is the second part of the margin calls that we had seen over the last quarter did actually recover with a EUR 4 billion positive contribution to CFFO. Part of this reversal is actually due to active management using standby letter of credit, being smarter on the liquidity swaps, also the better functioning of the clearing house. Part is timing, and is expected to reverse in H2. Next point, last but not least, the impact of the French tariff shield did significantly decrease following the monetization for EUR 0.7 billion we recently executed for the five winter months, 2021, 2022. This is a clear testimony of the value of the accruals that we are booking since last November and shows the robustness of the French tariff shield. Regarding the future evolution of CFFO, looking forward is not easy.
In the current environment, with margin calls still exposed to price level and volatility, also possibly new regulation, for example, on gas storage filling in France, it is definitely challenging to commit on precise numbers. However, this potential volatility is clearly not an issue in terms of value because, as you have seen, all the schemes so far have been protecting, protective in terms of value for ENGIE. Also not an issue with the balance sheet, which is enabling us to cope with potential adverse evolutions. Indeed, the balance sheet is quite strong, as shown on this slide. Despite a slightly increasing debt levels, we maintain a liquidity well above our EUR 20 billion and the cash at around EUR 15 billion.
This has been done improving also our leverage ratios, which are now standing at 2x for net financial debt to EBITDA and 3x for economic net debt to EBITDA. The evolution of the financial net debt is of course supported by the strong CFFO and some disposals, like the finalization of Suez and the 9% additional partial sale of GTT. It is, on the opposite, impacted by our investments, the accelerated nuclear provision funding, as expected, ENGIE dividend that was paid in April, and some new leases, mainly following the renewal of the CNR Hydro concession. Effects were also adverse, especially coming from Brazil. The economic net debt is broadly flat, and it is supported by, one, the evolution of our discount rates, which are lowering the post-employment provision, and two, the nuclear provision funding.
It is worth mentioning that these figures do not include the impact on both financial and economic net debt from the Equans disposal, which is on track for completion in H2. With that, we can come to our 2022 guidance. Given the current environment that continues to face uncertainties, we do not change our 2022 guidance. Net recurring income group share is expected to be in the range of EUR 3.8 billion-EUR 4.4 billion, and this is based on indicative EBITDA range of EUR 11.7 billion-EUR 12.7 billion, and EBIT range of EUR 7 billion-EUR 8 billion. Let me share with you some colors on this unchanged range. First, this range takes into account H1 actuals, which benefited from some positive timing effects that are expected to reverse in H2.
Second, unlike in May, the guidance is now largely immune to direct impact of total Russian gas deliveries disruption. Our guidance is not qualified for gas from disruption. Third, due to the increasing interest rates, as well as the Brazilian real appreciation, we factor in net income EUR 0.3 billion higher recurring net financial cost from EUR 1.517 billion- EUR 1.82 billion. Four, in H1, we managed to monetize a great part of the unprecedented market conditions, whether it is prices, spreads, volatility, but never 100% sure for the future, as current market conditions can cause some unexpected impact. Five, as announced yesterday night, this guidance is of course consistent with the proactive support action for the purchasing power of some of our customers in France.
A very important point is that on top of this confirmed guidance, should the prevailing market conditions and price environment as at June end 2022 continuing to the second half, this would present a normative upside to this guidance of about EUR 700 million of net income. Of course, ENGIE remains committed to a strong investment-grade credit rating and continues to target a ratio below or equal to four economic net debt to EBITDA over the long term. The group is also reaffirming its dividend policy with a 65%-75% payout ratio based on net recurring income and a floor of EUR 0.65 per share for 2021 to 2023. Catherine, back to you for the conclusion.
Thank you very much, Pierre-François. Let me now conclude with the key messages. A performance in H1 that indeed positions us very well to deliver strong results for the remainder of the year, and this is despite the uncertainties that the energy market currently faces. We have significantly de-risked our exposure to Russian gas. In Belgium, we have been working constructively with the state under this clear risk-reward framework to operate the nuclear units in the future. The recent development in energy markets, as well as the surge in extreme climate conditions, are only confirming the need that we have to accelerate the energy transition to which our strategy is fully aligned. Our teams have been doing an incredible job.
They've been working relentlessly to execute our strategic plan while managing, at the same time, the crisis with this unprecedented volatility of the energy prices and attending to our customers. Thank you very much for listening, and we are going to open now the lines for the Q&A.
As a reminder, please press star and one for questions. One moment while participants join the queue. The first question is from Ajay Patel of Goldman Sachs. Please go ahead.
Good morning, thank you for the presentation. I have two questions, please. Firstly, on the reduction of exposure to Russian gas. Could you give us a little bit more detail here on how you've reduced the exposure from 15 TWh - 4 TWh ? To what extent does that carry on to next year? Are all these more mitigations more short-term and for this year only? Just so that we can have a better idea of how the risk evolves, if at all. Secondly, I may have missed the justification, but could you explain why financial costs are up EUR 300 million on the guidance?
Yeah. On the gas exposure, I think that what is key in the size of the exposure, you remember that we gave you the reason of the 15 TWh . That was a 30 days notice. It's clear that we are definitely supported by the lower volumes. Given the volumes that we have today, which are actually very low, the exposure is actually very low. Of course, if volumes were going to start again, that's another story. With current volumes, we are very comfortable that this 4 TWh are max, and we are in full control of this 4 TWh because it is our decision to hedge or not.
Given the current volumes, very comfortable that we can keep that, including for next year, unless, of course, there was a massive gas delivery that was coming from Gazprom ahead of us that would of course be changing the game. For current volumes, we are quite structural, and this is not going to go up again. On the financial cost, the main item on the EUR 300 million is definitely the increase of interest rates in Brazil and the conversion. The financial costs that we incur in Brazil are actually with the newer rates impacting us. As you can imagine, we have a positive effect in EBIT as well, so the hedge is working pretty well. The main item is just a couple of fair value adjustment.
Thank you very much.
The next question is from Vincent Sorel of JPMorgan.
Yes. Good morning, and thank you for this presentation. Coming back on the Russian gas, apologies for that, but that will be a key topic today, I suspect. 30 days' notice, and if you have full Russian curtailment. We've seen at Uniper that you can end up in a medium-term type of situation where basically you have lower pain, but that lasts longer. How can we be sure that, if we have further gas supply demand tightness in the winter, that within 30 days, you do not have any more commitment and you're not forced to deliver to end users? I clearly see you have less exposure than Uniper by a mile.
Is it really true that within one month your exposure and your commitments to supply has fully disappeared? That would be the question number one. Because we need to stop at two, I think that's absolutely fair. The number two will be on the Belgium. No, it won't be on the Belgium nukes. Congratulate you on that one. Things seems to be going well. It will be on the gas tariff freeze. You managed to to basically monetize the tariff deficit.
Now we have had an extension of the tariff freeze, and could you reassure us on the fact that legally speaking, it's exactly as robust and you should be able to keep monetizing it, that basically you got full government backing, and if for some reason this tariff deficit keeps swelling up with gas prices, basically you're off risk? Thank you.
Okay. I think what is important, Vincent, is that we don't mix up our financial exposure, short-term exposure, which is the 4 TWh that Pierre-François has described, and physical exposure that we face to serve our customers. What we have said all along, and which was re-explained today by Pierre-François, is that we are long gas. Now, there's a certain amount of gas that naturally we sell to the market, which is not committed. The commitment we have to our customers, which are B2C, B2B, and also our own new CCGTs, are much lower. Today, we have to a very large extent, secured the volume corresponding to these customers, both physically but also financially, because remember, we hedge at inception, so we do not have any risk exposure on those volume.
The remaining flexibility that we continue to have, which is the 4% on the physical volume, is something that we know how to manage. We have a wide enough portfolio, and, we don't have any, we don't anticipate any issues whatsoever to fulfill this flexibility, especially given the fact, as Pierre-François reminded us, that we're starting to see.
Demand inflection, both because of what has happened in the market, but also, and we can expect through some of the measures that governments are taking, the messages, the campaign, that we have to be much, much better at saving energy ahead of what's happening. Therefore, you know, the demand is going to support the fact that we have what we need to fulfill the requirements of our customers.
Thank you, Catherine. On the gas tariff shield, it's exactly the same low provisions, no change, and there is absolutely no reason to believe that we could not do the same when needed in H2.
Okay. Thank you very much. On the Russian gas question, I'd just like to verify. Can this be changed by basically, we've seen that Germany and France have agreed for a molecule for electron type of swap. You know, we give you gas, you give us electricity, potentially. Does that change anything for ENGIE here? Because ultimately your gas balance is pretty much the French gas balance, if I simplify. So giving away gas to Germany when they need it, how would that work versus your self-commitment, and how would you remain immune in a situation like that? Just to understand how it'd be structured. Thank you.
No, it doesn't change anything for ENGIE. You know, we have a view of our customers' needs, and of course, we deliver, remember, across Europe, and we actually deliver quite a lot of gas in Germany as well. No change for ENGIE at this stage.
Fantastic. Thank you.
The next question is from James Brand of Deutsche Bank.
Oh, hi. You've touched upon the areas I was gonna ask about a little bit already, so maybe just a couple of clarifications. That sounds very positive. Firstly, that sounds very positive on the securitizations you've achieved for the French tariff shield. Maybe you could tell us how much you haven't securitized at the end of the half. I guess just applies to Q4. Then secondly, just wanted to clarify on the 4 TWh , the comment that you're naturally kind of long gas, and the exposure there. You say you're naturally long gas.
Should we therefore think about you having a long position of, you know, I'm not sure what, but you know, maybe you could clarify what your long position currently is, and then that drops down to - 4 TWh the lower the deliveries you get from Russia. If that's the case, where are you at now? Because obviously you're not getting your full deliveries from Russia. Then also just probably a third question, but just clarification in terms of the pricing exposure for that 4 TWh. Is that kind of a three month lag or a 12-month lag? Just if we're trying to work out what implicit gas price you may have in that 4 TWh. Thank you.
I start with the easy one. The H1. At the end, we monetize, as I mentioned, the five winter months, at the end of June, so north of 700. We are left with a couple of months, which is about EUR 150 million. And then of course this position will rebuild through the second half, and when it come to the right time in December, we will go for another Cession Dailly for those who know, but the way we securitize this asset. Now we are definitely in control of the flow, which is great news.
I mean, this long position that we are mentioning, you know, it's pretty simple, is that we have a very robust, and historically we had a very robust long-term contract portfolio and that has been allowing us to be long in the market. This is creating a flexibility for us. Of course, if we lose the Gazprom quantities, and we have lost Gazprom quantities for most of it actually already, then we can cut on this. This long position is reduced, and we reduce our sales to the market. That is as simple as that. Then on the 4 TWh , I think that the bulk of it is this 30 days notice that I mentioned.
There are a couple of contracts which are a bit longer. Just guys, I mean, keep things very simple. I mean, we are guiding with the gas price risk. We are guiding with the 4 TWh. We have made a simulation. Whatever happens, this is, we're talking about a few hundred million EUR, and this few hundred million EUR, we manage that. We handle that in the guidance. Don't try to build scenarios and try to monetize. We've done that, and you're gonna have to believe us that this is something we can manage in the range of the guidance.
Thank you, and good job on the de-risking.
The next question is from Peter Bisztyga of Bank of America.
Yeah. Thank you. Two questions from me, please. I get that you've got very limited exposure to Russian gas, but I was just wondering what the earnings effects could be from domestic demand destruction and curtailment of gas power generation in the event of an emergency situation when there is no surplus gas available. For example, can you quantify what the underlying loss of gross margin has been from the lower B2B, B2C gas supply you mentioned, if you exclude the revenue from surplus gas sales? And, could your CCGTs, for example, be exposed to power buyback risk if those were forced to stop operating, in an emergency?
My second question is on a different topic. You know, power prices and spreads are today well above where they were at the end of June, so you could really see much higher profits than you're guiding to. I'm wondering, could you consider doing a share buyback in this scenario, you know, some of the big oil companies have done? Or do you plan to religiously stick to your dividend payout ratio commitment, even if the resulting dividend per share could be unsustainable beyond the next year or two? Thank you.
Okay, on the dividend, as you know, we've reaffirmed and the board has reaffirmed our dividend policy, so not much more, you know, to comment on that. In terms of share buyback, we have, as you know, a capital allocation policy which is quite well-defined, returning to shareholders through our dividend policy and investing, obviously, in our business, in our growth avenues, which are many, actually growing in energy transition need to accelerate as you see everywhere. A lot of really good investment opportunities for us, and we're gonna be very focused on that. Then, of course, maintaining a sound balance sheet, which is really important in the context and the market of super high volatility prices, et cetera.
At this stage, no change in that balance in terms of capital allocation principles. Dividend policy reaffirmed and, that's, I will leave it to that. You want to comment a little bit on the earnings effects on demand destruction, Pierre-François?
Yeah. I mean, of course it is a work in progress. As you know, you've noticed that I was very clear the demand destruction has happened already in H1, but you've seen that the earnings so far have been rather resilient. I think you have some proof point there. On the retail part, I mean, you know that curtailment is unlikely to hit a lot the retail part for all kind of reasons. I'm not going to elaborate. B2B, there is indeed less volumes coming in.
You have noticed that there is also a request from our customers, B2B customers, for more service in the contract, risk management, stability, and that's something that we are good at, and as you have seen with GEMS performance, it is something that we manage pretty well. When it comes to specific question of CCGT, you may have read that there is indeed a decree that was passed, which is putting CCGT, of course, in the merit order, and they should get curtailed, unless they are needed for power supply. Given where we are in the market, power market in France today, we are not worried that the CCGTs would be called off.
All in all, we believe that we have a reasonable setup to face this demand reduction.
Thank you. Just, your last comment on the CCGTs, does that apply to the ones in Benelux as well?
Yeah, sure. Again, this for us is in the range of what we can manage. You know, also that the gas supply in Belgium is rather well organized. It's not a market which is extremely tense. We see that as a limited risk.
Great. Very clear. Thank you.
The next question is from Rob Pulleyn of Morgan Stanley.
Hey, thank you. So, the first question, if I can ask, around the structure that you've mentioned on the Belgian nuclear extension, and very simple question, is would this structure mean that those provisions would then be off balance sheet, given you'd have a 50% stake in presumably something that's equity accounted? That's the first question. The second one, which is a bit bigger, there's a comment in the release about the 2023-2024 winter, which I appreciate is a little bit further ahead. Could you add a little bit of color as to how this is possible in terms of having adequate supply for that period without Russian flows, given once we exit this winter that's coming, presumably storage is gonna be quite empty, and that's what the European Commission has guided to.
I suppose in particular, could you talk about the magnitude of demand destruction that this might require, and of course the impacts on NG, particularly through your long gas position, but also your networks? Second one's a bit of a big one, but thank you very much.
I will start to talk a little bit about our view on the winter 2023 and 2024. Obviously what we're talking about in our press release is the NG position vis-à-vis our own customers, for whom, based on our anticipated volumes for those customers, we have secured, we have a view on where and how we are going to be securing these volumes. This is through our usual long-term contract. This is through, of course, LNG and obviously it's implied assumption is that LNG continues to fly and to come to Europe. We have a good view that we will be able to fulfill the needs of our customers.
Now, of course, it doesn't mean that the energy system in Europe, in France, is not under tension, and therefore, you know, the overall message that we need to continue to save energy and to watch the demand, et cetera, continues to be the case. Now, for NG and for our customer, the work that the teams have done is enabling us to say, indeed confirming that we are going to be able to meet the demand on our B2B, B2C and CCGT based on the, you know, normal climate and volume, et cetera. Yeah, with the usual qualification, of course. On the provision of it, no, it would continue to be on balance sheet.
I think what is really important here, it is the view that a potential cap on the provision for waste and fuel management would be agreed as part of the deal. This is really something obviously that would be important. You can think of if you were to think of an analogy, a German solution type of deal. Doesn't mean that would be the deal, but this is, you know, to give you an example of what it would look like.
Okay. Thank you very much. I'll turn it over.
The next question is from Louis Boujard of Oddo BHF.
Yes, thank you. Good morning. Good morning, everyone. Two question as well on my side. Maybe the first one regarding the B2C market and to have a focus on next year when the regulated tariff in France is going to stop. How do you see the framework to evolve on this topic? Did you start discussion with the politicians? Or do you think that the protective measures that you have implemented might be enough at this stage and there is nothing to expect on this topic next year? My second question would be on the Italian windfall tax, where you book, I think, in total EUR 308 million of cost in the first half.
I was wondering if it was for the full year or only for the first half. More specifically, what argument are you bringing to contest the decision at this stage? Thank you very much.
On the first question, we actually don't have a super good visibility on what will happen to the regulated tariff post 2023. As you know, they are due to elapse and to disappear. What is important, I think, for 2023 is indeed, you know, the extension of tariff shield in some shape or form and how, you know, that would coexist with the exit of the regulated tariff. To be honest, this is not completely finalized yet. Discussion is still ongoing there. On the windfall tax, Pierre-François?
Yeah. I could go on for an hour to explain the counter arguments because there are so many. Just bear in mind that today, the actual tax rate is 100%, swiping off all the profits because the base is actually not right. It is distorting competition in a big way because depending on your structure and depending on the structuring of the hedges, because that's a key issue, you can be penalized or not. Last but not least, it's a double tax because it's not allowable against the corporate tax. There are many good ways to contest this law, both in Italy and in the EU, and we are not going to step down in our rights. Rest assured that we do everything we can to shut it off.
That's where we are. It is EUR 308 million. That's for half year. The tax is not supposed to go on. When the tax is there, you know, the temptation to extend is always something, so we need to be careful.
Okay. Thank you very much.
At this time, there are no questions registered on the conference call. As a reminder, star and one for questions, please.
Okay. Well, then thank you very much everyone for your participation and do reach out to the team if you need anything. Thank you. Bye-bye.