Dear analysts and investors, welcome to our full year results presentation. Thank you for taking the time to join us in this particular market environment that we are facing at the moment. I'm here with Leo and Marc today, and we are hosting a truly hybrid event on the E.ON side as Leo is here with me personally, and Marc is joining us here with this video stream. We are starting with Leo, who will give you an overview of E.ON's positioning in the current situation together with the business highlights of 2022, and Marc will follow up with our financial performance, including the outlook for 2022. As usual, you will have enough room for questions, enough time for questions. With that, over to Leo.
Verena, thank you. Good morning, everyone, also from my side. Actually, we have delivered a very successful result for the fiscal year 2021. The numbers look good. We have performed operationally well, and that despite many challenges that we have already faced in the last year. This would actually be a perfect basis for a very satisfying results call. We have to acknowledge that these days, obviously this becomes all far less important given the tragedy that which we are observing in Ukraine. Obviously, for the sake of completeness, Marc and myself will run you through the results of 2021. We will focus on all the important items. First things first, we need to give you our assessment of what has happened. Let me first start with the current situation.
I have expected a lot, but what has happened really left me speechless. This is a war of aggression against Ukraine, which marks a break. This is not how societies should actually treat each other in the twenty-first century. This is a throwback to dark times which we thought are over. We at E.ON, we condemn the war and the violence which we are observing in the strongest possible terms, and we fully support the sanctions imposed by the EU. What we are witnessing is a catastrophe. It's the worst humanitarian catastrophe since World War II, and that in the middle of Europe. This consternation of ours is not abstract. Many of us at E.ON, we have actually Ukrainian colleagues, friends, relatives. We do not have operations in Ukraine, but we have locations in Slovakia, in Poland, in Hungary, in Romania.
Actually, some of the border areas in these countries are our supply area. Warsaw, where more than 100,000 refugees each day are arriving, is our supply area. We see what is happening directly, so it's not abstract, it's personal. The Ukraine should, can and should expect solidarity of Europe, and as a truly European company, we also want to contribute to this solidarity. In a first step, E.ON has made available EUR 2 million for relief measures. We've also set up a central donation platform for our employees, and actually, as of yesterday, more than EUR 190,000 have been donated by our employees, and we will obviously double the donation of our colleagues. On top, our operating units provide very direct assistance on the ground. Just give you some examples.
In Romania, our colleagues are building energy infrastructure for refugee accommodations. In Poland, they actually help to build camps to provide beds for kids. Half of the refugees, more than half of the refugees arriving are actually kids. In the Czech Republic, we are actually accommodating the families of colleagues in the Ukraine in premises of ours. We have taken the families of DSO operators in Ukraine and put them into homes of ours, premises of ours, whilst the colleagues are still working in Ukraine to keep the energy supply up. These days, the priority needs to be about the people of Ukraine, and that's the top priority, also for us as E.ON. On the other hand, we have to acknowledge this is also about Europe. It's about Germany, it's about our energy supply today and in the future.
We have now to make some fundamental decisions how we wanna proceed, and we have to differentiate, and that's the key point about the solutions which we have in the long term and the solutions which we have in a two to three-year short-term perspective. Let me be very clear. In the long term, we must and will terminate our energy dependency from Russia. There's absolutely no way around it, even if President Putin would end the attack in Ukraine immediately. In the long term, we need to diversify our energy imports. Also, you have seen that Germany has now decided to build two of its own LNG terminals. In the long term, these LNG terminals could also be used to import hydrogen, and Chancellor Scholz expressly mentioned this in his announcement. We also need a hydrogen infrastructure that goes far beyond these terminals.
By the way, just one side remark, our focus now must be on not having hydrogen 100% green right away from the beginning. First of all, we should make sure that we have enough energy in the system at all. In the long run, the path of the energy transition is the right one. The crisis shows now that the expansion of renewables is important for our independence in Germany and Europe. That also applies to the expansion, modernization, digitization of our power grids, because otherwise the renewable energy will not reach the customers. All in all, we have long-term answers. More diversification of supply, more energy infrastructure, more hydrogen infrastructure, more renewables, more network infrastructure. All of that is a confirmation about the underlying of our strategy which we presented to you in the Capital Markets Day.
If anything, the long term supports our journey. It's not only about the long term. These long-term solutions which I just presented will not help us to get through the next winter and through the next two tp three years. In the short term, we have to keep the consequences of the war for our energy system, for our economy, for households as limited as possible. Now, short term, the solutions are scarce. We see limited production increases in indigenous gas production in Europe, with the exception maybe of the Groningen gas field. Short term, we obviously need to attract as much destination flexible LNG as possible. However, I'm wondering that at current price levels, we are probably doing that already, so the additional relief from that lever is probably small.
Short term, we are talking about reactivating reserve assets, postponing the coal phase out, and short term, we are talking about, as a last resort, possible forced reduction in demand. Let me be crystal clear. In the case of a short-term lack of Russian gas, full lack of Russian gas, the reality is that we can go through the next winter only with drastic measures, and they will include demand curtailment in the industry. This is now all about security of supply. In the short term, we also have to consider affordability. The procurement prices on the wholesale market for electricity and gas are extremely high and will probably remain high as a result of the crisis on whatever level. Nobody really knows the level right now, so it's all speculation. It's probably safe to say it's higher than in the past.
In the short term, we need to provide relief for customers. It should be obvious that, for example, the reduction of taxes and levies on energy is the right first step, and it has been a request of E.ON already over the last years. We at E.ON welcome the early abolition of renewables surcharge as a first step, and we will obviously implement it according to the rules being put in place. Now, let me, however, talk about E.ON and our achievements in 2021. Already in the last year, the market was turbulent. It was a stress test and we can be, however, proud we have proven once again we are resilient. We are well-positioned. If I look back over the last three years, I have three messages.
Message number one, we have closed 2021 successfully and above expectations in all area, and that we have managed to do despite extraordinary difficulties. Again, the numbers came out above the guided ranges for 2021, and this despite the fact that we were in the second year of lockdowns from the pandemic. This was also great numbers despite the fact that we had successfully to manage disasters. We had severe storms in Germany, Sweden, Eastern Europe. Everybody has forgotten them already. We had a devastating flood in the Ahr Valley, which was mostly our supply area. Under the most adverse conditions, we kept the power outages to a minimum. The speed at which our colleagues have rebuilt the damaged infrastructure was really a testimonial to their commitment and capabilities.
This is an IR call, but nevertheless, let me thank my employees for their determination. It was really a great performance. Actually, we have delivered the numbers finally, despite being forced to be the safe haven for around 1 million customers that were stranded from untrustworthy providers that had stopped operating. We have absorbed them and that was not to the benefit of our numbers. Nevertheless, we came up with good numbers. We, and whilst we have done that for other people's customers, our customers were well protected from short-term price adjustment through the long term and forward-looking hedging and procurement, which we did. An unbelievable achievement by the entire organization. Again, many thanks. That was my message number one, great delivery despite big challenges.
Second message is, not only did we deliver despite extraordinary challenges, we have on top pushed ahead with our growth strategy, which we communicated to you in the Capital Markets Day, leading to growth, more sustainability and digitization. We have ramped up our energy investments, infrastructure investments, and we will invest also more than EUR 5 billion in 2022 and as we said, around EUR 27 billion until 2026. We have integrated more renewables in the past into our power grids, but also into new customer connections like the Salzgitter battery factory, data centers in Frankfurt, and I might add, that we have also been working on getting the connection to the Intel facility, which was announced yesterday in the area of the Stadtwerke Magdeburg, which is a subsidiary of ours, a minority sub-participation, and this connection will be managed by our daughter, Avacon.
All of that further drives our targeted rev growth of at least 6% in Power Grids. We've also seen strong momentum in our Future Energy Home business as the demand for storage and photovoltaic, as well as e-mobility, is unbroken. I might add, will probably significantly increase as the economics of all of those solutions will actually become better with the current price levels. Again, I reiterate, by 2026 we want to increase our revenues in these areas by a factor of 10. We have also been the partners for decarbonization for our customers. This includes also hydrogen solutions which have an enormous potential for the European industry and will become a growth driver for us. I want to add one proof point here. Compared to last November, we made an investment in Horisont Energi.
That is an investment that fits into our plan. What it really does, it complements our decarbonization offering for industrial customers. With Horisont, we can offer European-wide carbon capture storage of CO2 and the production of clean hydrogen and ammonia. Therefore, it gives us the opportunity to offer fully decarbonized cycles to industrial customers. At the same time, we've also continued our path towards increasing sustainability. We have reduced our customers' CO2 footprint by more than 100 million tons per year now with our energy solutions and network infrastructure. We have reduced our own carbon emissions in 2021 by 7%. Actually, we have reduced Scope 1 and 2, and Scope 1, 2, and 3. In total, all of them by almost 10 million tons.
As a pioneer, and we told you that already last year, as a pioneer in ecological network management, we have also continued to create biotopes under our high voltage lines. What that means is, we're dedicating ourselves full steam towards the long-term target that I've described and the restructuring of our energy system. Great performance despite extraordinary difficulties. Great push ahead in our capital markets story. Now my third message is, on top, we are an anchor for the stability of our energy system. We, as E.ON, do our homework and we deliver. We have reached the final phase of integrating innogy. Obviously, you take that all for granted, but this year we will achieve all promised synergies by the end of the year.
We are continuing to make significant progress in digitization, especially in the context of the U.K., where we continue to deliver the turnaround, even in the current market turmoil, and you all remember what happened already in Q4 last year. By now, we have migrated around 8 million customer contracts to a digital platform. We are following suit in other markets. In Germany, we have now moved 7 million contracts to a new digital platform. The same applies to the digitization of the networks, which includes, for example, the successful launch of the smart meter rollout in Poland. In Germany, we have been always on the record, very critical about the rollout. We have at least achieved 100,000 smart meters, and even if this sounds small, it's actually significantly more than our competitors.
We have made strategic investments into the digitization of the energy system by acquiring envelio and GridX. These are two companies that strengthen our digital network solutions and will become part of our eHub of the future. eHub is the basis for a new digital ecosystem that will power the entire future energy world, including, for example, cloud-based sales platforms, charging management for electric mobility, management of grid connection services, and so forth. By integrating all of that, eHub will ensure further profitability through digital energy solutions and will be another growth area for us at E.ON. Let me summarize again the three points. We deliver our results despite external shocks. That is what we have seen in 2021. We have continued to drive the energy transition in networks and Customer Solutions, and obviously, we continue on that one.
We do our homework, are an anchor of stability. If you allow me, this makes me actually quite proud about my company, about my E.ON. Now, we have to make sure that in the decisions that are being made right now, we use our influence in the best interest of Europe, in the best interest of Germany, especially given the difficulty of the current times. What we will do is we will continue to drive the energy transition forward and to ensure a stable and, as much as possible, affordable energy supply for the benefit of our customers. It's absolutely clear that we have to do that in a market environment that will not calm down overnight. Russia's attack on Ukraine has changed the rules in Europe, also in the energy markets. Finding the right answers will actually take time.
One thing is clear. A part of the right answers is that the energy transition must and will gain further momentum, and we will benefit from that. It's clear this will be extremely demanding, but we as E.ON, we have a clear route, we have a clear growth strategy, and we are on course. Therefore, today, I wanna close with confirming our long-term ambitions to 2026, which we have communicated to you in November last year. We will propose a dividend of EUR 0.49 per share to the annual general meeting for the past financial year, and that is the seventh increase in a row. At the same time, we are also confirming our target to increase our dividend by up to 5% until 2026. Now, I will, as a CEO, stay focused on delivering the best possible outcome for you as shareholders.
We cannot exclude any short-term, especially temporary effects. I think in this current environment, nobody really can. But we are as good as one can be operationally and structurally set up, and we are confident that the current crisis will not have a sustainable impact on our financials. With that, thanks for your time and attention, and I hand over for more detailed numbers to Marc.
Thank you, Leo, and good morning/afternoon to everyone from my side. Leo has already elaborated how we as a company are meeting the challenges from the war in Ukraine. Not to mention how touched I am personally about the whole situation. To return to normality in these times, I will hence try to keep my speech crisp and focused on the main topics. Let me first address the elephant in the room. I would like to elaborate why we feel comfortable with our new 2022 guidance, even in these turbulent times. I start with the big picture per business segment before I provide more color on the detailed exposure in each of them individually. First, we experience temporarily negative earnings effects in some of our Energy Networks markets from increased costs for network losses.
However, these losses will be recovered in subsequent years on the basis of well-defined existing regulatory mechanisms. Second, we are confident about our Customer Solutions earnings outlook, mainly due to our stringent risk management and the focus on B2C and SME customers. Thirdly and finally, our non-core earnings are positively geared to higher electricity prices with almost 2 TWh of our nuclear generation not yet hedged for 2022. Overall, most of the negative effects are temporary in nature and subject to established recovery or pass-through mechanisms, and any remaining effects should largely balance themselves out. Let me now provide you more detailed color on the impact on our Energy Networks business. The price-driven increase in costs to procure energy for network losses are part of the regulatory formula for each of our Energy Networks businesses. These cost increases are hence a pass-through item.
This means either these costs are fully reflected in advance in the network tariffs, or in case there are differences between actual and those assumed in the calculated tariffs, any price-driven variation will be recovered or reimbursed in subsequent years. Let's look at the individual markets. In our biggest network operation, Germany, as well as the Czech Republic, we do not see even a temporary impact on earnings. In these markets, energy for network losses is procured in advance on the forward market, and both the German and Czech regulators allow the inclusion of these hedged forward costs into network tariff. In contrast, in several Central and Eastern European countries, current network tariffs only allow for the recognition of cost for network losses based on actual realized energy prices.
Therefore, network operators in these countries experience temporary earnings effects in case of material price movements on energy markets as we see them, nowadays. Of course, these price-induced earnings effects are part of the regulatory formula. We are eligible for recovery in most countries in T+2 already. Finally, to Sweden. Here the cost for our own network losses are treated quite similar to Germany or Czechia. However, the transmission system operator costs that are part of our network tariffs as well are volatile, as the TSO has to procure network losses on the spot market and passes these actual costs on to us. The positive side, though, Sweden offers a higher flexibility with regard to the timing of the recovery. There, it can actually already start in T+1. What does that mean for our financials?
In 2021, our Energy Networks segment earnings were temporarily negatively affected by roughly EUR 150 million for additional cost for network losses. Sweden accounted for roughly EUR 50 million, and Central Eastern Europe in aggregate was affected by around EUR 100 million. For 2022, given current wholesale prices, we have to assume that cost for network losses in Sweden and Central Eastern Europe will increase even further. We have already reflected higher energy price levels in our guidance range for 2022. The estimated total impact amounts to slightly more than EUR 100 million, which are incorporated into our guidance. We have also validated our outlook reflecting the most recent peaks in energy prices. This refers to the scenario two, which you see on page 11 of our presentation.
According to our analysis, this peak in energy prices would lead to an additional temporary impact of about EUR 100 million on our Energy Networks EBITDA in 2022. Even in case of sustainably high prices, we would still remain within our networks guidance for 2022, albeit then at the lower end. Again, any variation is of temporary nature, will be recovered in future years, starting in 2023, the latest. With this, onto our Customer Solutions business. Most important message first. For 2022, we have already procured the expected energy volumes for our entire portfolio. Thus, we are, from an economic point of view, fully hedged. To remind you, in the absence of specific regulated trackers, such as in the U.K., we start to procure energy up to three years in advance.
Thus, the procurement cost of our current portfolio is well below current energy market levels. As we are an energy retailer, sustainably higher energy prices have already been and will continue to be translated into higher end customer prices. Next to the topic of generally increasing energy prices, I would also like to address our direct exposure to Russian gas. We do not have any long-term contract directly with Russian gas producers. Our contracted volumes are sourced in the European wholesale markets via more than 100 active counterparties or directly via energy exchanges on the basis of standard wholesale trading arrangements such as EFET. We apply strict counterparty credit limits and focus on the most creditworthy market participants, who equally appreciate to do business with a very robust counterparty like us. Of course, we immediately stopped trading with European subsidiaries of Gazprom when the Russian-Ukrainian conflict escalated.
Still, we have a legacy position of around 16 TWh contracted under standard wholesale trading terms with Gazprom subsidiaries. These 16 TWh will roll off to a large extent already during 2022, so any remaining exposure will disappear very quickly. Let me also remind you in this context that our business focus is on B2C and SME customers. We have already significantly reduced our B2B volumes and will continue to do so. Moving on to page 11. We also see a limited impact from the current situation on our liquidity. Sourcing via exchanges generally ties up capital via margining. That's known. To reduce our exposure, though, we actively steer our sourcing position also from a liquidity point of view.
For year-end 2021, the economic net debt effect from margining was fairly limited to a positive net balance of just EUR 0.4 billion as we received variation margins that overcompensated paid initial margins. At year-end, we also experienced a working capital increase of around EUR 500 million as higher prices could not instantly be reflected in customer installments. This buildup of receivables will, however, be fully reversed once installment payments are adjusted and customers are fully invoiced. For 2022, we expect a similar negative working capital effect from further price increases, so that effectively our liquidity position should be back to normal by 2023. The EUR 500 million increase from last year will reverse most likely in 2023. The magnitude of this temporary effect is well manageable for us.
The debt levels at year-end 2021 were on prior year levels, even though energy prices already increased significantly in the second half of 2021. Would also like to remind you that we secured funding early on in the year, well ahead of the current escalation of the crisis, with the issue of EUR 1.3 billion of bonds and very attractive terms covering a major part of our guided annual funding needs of EUR 2 billion-EUR 4 billion. To conclude, even in the current extreme situation, we see ourselves well-positioned to withstand short-term headwinds and as Leo laid out, are ready to exploit the long-term opportunities. As Leo also mentioned, we have seen a very strong business performance in full year 2021. Essentially, we ticked it all off.
We not only keep our ambitious growth promises, we even exceeded them and delivered at the top end of our guidance. As promised, we were also able to significantly reduce our debt factor. Based on the strong results for full year 2021, I also confirm our dividend proposal of EUR 0.49 per share. Now let me move to the details. Year-on-year, we have significantly increased our group EBITDA by EUR 1 billion, came in at EUR 7.9 billion above the top end of our guidance. This achievement was driven by a very strong earnings momentum in our Customer Solutions business with a year-on-year EBITDA growth of 45% to EUR 1.5 billion.
Our energy retail business benefited mainly from the restructuring of our U.K. business, leading to a low triple-digit EUR million EBITDA improvement. In addition, across the markets, weather and COVID-19 related normalization of volumes was supportive. As mentioned, before, we pursue a prudent hedging approach across all our energy sales markets. That's why we weather the extreme energy market situation very well. Of course, certain negative effects couldn't be avoided, such as taking on customers due to supplier of last resort duties. However, these events stayed well in the range of our calculated risk margins. While our energy sales business has proven its resilience, our growth business within our Customer Solutions segment also performed extremely well. The Energy Infrastructure Solutions business fully delivered on its growth path and contributed an EBITDA of EUR 480 million.
Compared to 2020, this is an increase of 40%, driven by organic growth and high availability of our heating solutions. Furthermore, our B2C retail solutions business grew revenues by 25% year-over-year to EUR 900 million with an EBITDA of around EUR 65 million. Let me now turn to our Energy Networks segment. Our Energy Networks earnings were mainly driven by normalized weather conditions, the non-reoccurrence of negative effects from the pandemic, the anticipated regulatory developments in our German business and, as I elaborated on, the higher cost for network losses. Another significant earnings driver for 2021 was our non-core business, with strong operational performance on the basis of high availability of our plants and high energy prices.
In addition, you know that the business benefited from the successful solution for our nuclear production rights, which contributed to an additional EBITDA increase of approximately EUR 500 million. Our adjusted net income came in at EUR 2.5 billion for 2021, up 53% versus 2020, and EUR 100 million above the top end of our guidance range. In addition to the increase in our operating results, we are seeing the expected positive effects in the economic interest line and a lower tax rate of 23%. On to our economic net debt. Compared to full year 2020, economic net debt decreased by almost EUR 2 billion to EUR 38.8 billion. The improvement was mainly driven by the development of pension provisions, which benefited from an increase of pension discount rates and a strong plan asset performance.
Our cash conversion rate came in at 80% for full year 2021. This is below our expectations and was driven by technical spillovers as well as by the temporary buildup of working capital that I explained earlier. Let me remind you that we are strictly managing our leverage in line with a strong BBB rating. This translates into our debt factor target of 4.8x-5.2x. Backed by our performance in 2021, we achieved a debt factor of 4.9x. That's well within the target corridor. Let me now turn to 2022 and our group and core EBITDA outlook. We communicated at our Capital Markets Day in November last year that we targeted EUR 2 billion-EUR 4 billion portfolio optimization program until 2026.
As indicated back then, we don't plan any major transactions, but rather smaller adjustments that then add up to the targeted amount. As part of this ongoing review of our portfolio, we have now decided to assess very specific strategic options, including possible divestment of our District Heating and Cooling businesses in Norrköping and Örebro, both in Sweden. We also have initiated a process to assess the option of partnering up with a co-investor to support the growth of Westnetz, our biggest DSO broadband infrastructure business in Germany. We will update you on both assessments once they are complete. Currently, we do not include any relevant earnings impact from such portfolio optimization measures in our earnings guidance for 2022.
Please note that we will technically adjust the outlook for 2022 group and segmental guidance ranges only if any material measure with relevant earnings impact should be signed, not earlier. All in all, we expect another substantial increase of our core segment earnings in the current year to EUR 6.9 billion-EUR 7.1 billion, up from EUR 6.3 billion in full year 2021. On that basis, we expect a group EBITDA of EUR 7.6 billion-EUR 7.8 billion. This strong momentum is mainly driven by significant organic business growth, to which I will come to in a minute, and the delivery of the remaining EUR 400 million of synergies in relation to the innogy transaction. Our non-core earnings will decline substantially with only one nuclear reactor remaining in production until end of 2022.
When it comes to our energy networks business, we expect a substantial year-on-year increase in our EBITDA in 2022 to a range of EUR 5.5 billion-EUR 5.7 billion. The growth is mainly driven by the realization of synergies and additional anticipated increases in efficiency, specifically in Germany. All efficiency improvements have either been already implemented or are backed up by clearly defined measures. On the other side, as pointed out earlier, higher cost for network losses will adversely affect the segment also in 2022. If we were to see elevated energy price levels as at the beginning of March, we will finish the year rather at the lower end of the targeted guidance range. Let me also spend a few words on inflation. Our networks earnings are well protected against rising inflation.
In all of our markets, the OpEx allowances are adjusted in line with the CPI development, or sometimes even with industry-specific indices. In Germany, also the RAB-driven allowed revenues are benefiting from yearly increase in line with CPI. In regulatory systems that are based on real terms, like especially Sweden, Hungary, and partly even Germany, the respective RABs are also indexed with inflation, which leads to higher regulated asset-base driven revenues over time. In addition, high inflation will over time also be reflected in higher allowed WACC and allowed ROEs, and in the steeper increase of the regulated asset base. Turning to Customer Solutions. We expect our Energy Sales business to grow mainly due to the realization of synergies, additional benefits from the U.K. restructuring, and operational improvements across all markets.
Our Energy Infrastructure Solutions business grows organically to a range of EUR 500 million-EUR 600 million from around EUR 480 million in 2021. It thereby significantly benefits from the go live of several projects. In our Customer Solutions segment overall, we guide for a range of EUR 1.5 billion-EUR 1.7 billion. Turning to adjusted net income. Our adjusted net income mainly follows the EBITDA development. On that basis, we see a strong earnings growth from our core business also on net income level. This positive development is further supported by lower refinancing rates in 2022, partly already locked in by our successful issuances earlier this year. Tax rate is expected to be at 25% this year. Our strategic direction of travel, as Leo pointed out, is unchanged.
It's unchanged what we have presented at our Capital Markets Day last November. As promised back then, we will ramp up our CapEx to accelerate our earnings growth and remain confident about the robustness of our midterm plan. We're targeting a EUR 5.3 billion investment program for 2022, fully in line with our guidance of EUR 27 billion for the period until 2026. More than three-quarters of our 2022 CapEx will be directed towards Energy Networks. An additional double-digit percentage will go towards Energy Infrastructure Solutions to further grow E.ON's resilient infrastructure footprint. We also update our target on EU taxonomy aligned CapEx. It now stands at about 95%. Let me wrap it up with our financial framework and midterm guidance. Our five-year growth plan is fully on track.
We have full confidence in our 2026 guidance of around EUR 7.8 billion for the group. We update the growth rates based on our 2021 actuals. Until 2026, we expect to grow our Energy Networks EBITDA with a CAGR of 4% to a range of EUR 6 billion-EUR 6.2 billion. Customer Solutions will annually grow by 5%-8% to a range of EUR 1.9 billion-EUR 2.2 billion. I also again confirm our dividend proposal for 2021, EUR 0.49 per share, and also our commitment to grow the dividend annually by up to 5% until 2026 and beyond. That's all from my side today. Thank you very much for your attention, and I hand over back to Verena for the Q&A.
Many thanks to Leo and Marc for their insightful presentations. We will now start with our Q&A session. Just a couple of administrative remarks from my side before we all kick it all off. Please raise your hand if you want to place a question. Please turn on your camera, if you could, when you are speaking to us. Please mute yourself if you're not speaking, and please remind yourself of the two questions per person rule, so that everybody gets a chance to ask a question. With that, I would like to hand over to Vincent from JP Morgan for the first question. Just for your information, next on the line will be Wanda from Credit Suisse, followed by Alberto from Goldman. Keep yourself ready. With that, over to JP Morgan. Vincent, please go ahead.
Yes. Good morning. Thank you for the very clear presentation. My first question has to be again, apology for that, on the Russia and Ukraine. We can see you have no long-term contracts from Russian gas. You get your supply on the wholesale markets, but that doesn't mean you're immune, especially in case of a curtailment of Russian gas. You can be exposed to some force majeure. On the other hand, some of your B2B clients may also be curtailed. How do you look at this situation, especially reducing B2B customers? When you're doing so, credit considerations are taken into account, but do you also look at which industries would be most likely impacted, basically?
On the Russia and Ukraine, a bit more color, if we can. Sorry. Again, on the direct negative impact, potentially, and on the positive impact as well, given we have here a massive additional CapEx likely to come for the energy transition. Are you not changing your CapEx outlook? Obviously, it's probably too early, but if there is some sense you can give us on what type of acceleration we could expect, and is it something that you can do without further capital increase down the line? Thank you.
All right. Thank you, Vincent. I would like to hand over to Leo for the topic on Russia, and then maybe we can briefly move over to Marc on the CapEx side.
Yeah. Yeah, Vincent, obviously, you're right. The fact that we have a portfolio which is not, quote-unquote, non-Russian, so European wholesale base doesn't mean that we are immune to disruptions in the market, which is actually the case for every single market participant, right? Now, three comments, which should give you some comfort. First, if we see disruptions by, you know, like liquidity crunches, and that was our first issue, we have to say that we have seen governments now acting. We see the likelihood of that actually materializing by now is low. So as long as we don't really see physical shortages, I think the situation is under control, and we are in very close exchange with the respective governments so that we do not see any chain reactions, which then eventually would also hit us. This is clear.
This liquidity-wise situation is under control. Now, if it were to come to curtailments, we would be under-proportionally hit because remember that we don't have a large B2B portfolio because we have spun most of that off actually with Uniper. In that sense, our customers are mostly B2C, small-medium enterprises, and they are less impacted by potential curtailments. If it comes to curtailment, let me be clear, this is not a decision of ours. There is a regulatory framework for that based on an EU directive, which has to be implemented in each member state. Based on that one, we are making proposals to the gas TSOs, which they then implement as the so-called market responsible entities. Now we are in exchange with customers, potentially hit customers.
To be very clear, I think this is a challenge which the market needs to resolve. All of us, the whole industry, has actually done these emergency plans to fulfill an EU directive. I personally doubt that all these plans have considered, you know, extended longer-term interruptions in supply. They were probably, you know, defined with a more short-term perspective. In that sense, there is again something to be done. As I said, we are probably under-proportionally hit. Whether force majeure actually, you know, is a fact, that is an interesting question. That's a legal question. I'm sure this will be, in the end, sorted out in front of the courts.
I'm actually pretty sure that if we would see shortages, somebody would claim force majeure, then everybody else would claim force majeure, and then we would sort out in court whether there was really force majeure. Now, it really depends on the contracts, on the legal framework in each country, and on the fact whether the market in the end has really cleared and there was a physical shortage or there was just, quote-unquote, a tight situation. No easy answer on that one. As I said, I think in hindsight, the best that we can say is we are well hedged. We have a good portfolio, we have good counterparties, very strict credit risk management, and we have a customer portfolio which will be less impacted, if at all, from curtailment.
All right. Impact on CapEx. Marc?
Okay. That's on CapEx outlook. I keep it short here. At this stage, there's no precise answer on it. Analytically, rationally, everything is cause for what Leo elaborated on, that the opportunities in our businesses will increase from further renewables, further electrification, and faster, more pronounced rollout of hydrogen. That's all positive. We are kind of the third week into the crisis, and very practically, it's not our focus right now that we plow through our business plans for more CapEx or not. It's just not the focus at this stage. We will definitely at some stage come back, and that will play out to our benefit.
Just would like to check one thing. On the force majeure, if we have curtailment, actually, would there be a case where actually the force majeure is the state and the authorities basically forcing the curtailment and all the force majeure may become void or something like that? That's something I'd be interested in having a view on this. On the CapEx, I understand it's not your core focus right now, but it is a core focus for all the European governments right now, to do something in the coming years. It may not be in your guidance, and I understand.
However, we just had like EUR 100 billion again this morning announced in Germany for defense and energy, and that's just the beginning, and it's not only in Germany. How material can this be, when you look at it? Could you give us a sense, at least?
Vincent, I give you one answer. Germany has now pledged EUR 200 million for energy transition and keeping the effect of the current situation away from customers. Now, obviously, part of that will be support, part of that will be accelerated energy transition. We would obviously absolutely have the ambition that some of that money benefits also investments into our business. But as Marc has said, this is very much at the beginning. A headline number has been raised. Nobody knows any details. We are right now focusing on managing the current crisis. Yes, I expect upsides from all of that in the short term, but we cannot quantify it yet and we'll come back when we can. On force majeure, I just repeat, it's a legal speculation. I think actually it's new territory.
This will be very interesting for lawyers to sort out. Let me now not speculate whether if government actually intervenes, that's a force majeure. It might actually not be, you know, even if the government intervenes. I don't know. It might be different in Germany from the Netherlands and from the U.K. Let's sort this out. The key point that I wanna say is we are probably as well prepared as possible for that one with the as good portfolio of customers as possible.
Fantastic. Thank you.
Thank you, Vincent. Let's now move to Wanda from Credit Suisse. Wanda, we can already see you. Great. Go ahead.
Good morning, afternoon. Hopefully, you can also hear me.
Yes. Welcome.
Two questions from me. The first one is on your stake in Nord Stream 1. I saw some headlines on Reuters today stating that you are not interested in selling the stake. You move it into your pension fund. Could you remind us what is the value of the stake in your pension trust? And basically, if things go worse and you need to make an impairment on the stake, is there any risk to your economic net debt? Or in other words, would you need to move some cash into your pension trust? And is there any annual contribution from the stake? And the second question is on your supply business. Have you seen any demand destruction since, I don't know, let's say November, December, until today?
Do you see any risk of the adverse political intervention that may affect your retail business? Thanks a lot.
Okay. Thank you, Wanda. Regarding your rather financially oriented question regarding Nord Stream 1, I would like to hand over to Marc.
Yeah, sure, Wanda. So book value of the Nord Stream 1 stake is EUR 1.2 billion, and that is part, as you rightfully say, of our plan assets, and any change in the valuation to that stake would one-to-one have an impact on our pension provisions. With that on our economic net debt as well. Nevertheless, it is not related to any funding or the liquidity need, as we do not have any funding obligation for our German CTA where that asset sits. It would be a change in the EMD, but it would not represent any trigger on liquidity.
All right. Regarding demand disruptions, Leo?
We are seeing demand disruptions, albeit not actually in our own customer portfolio. We have seen first steel mills shutting down. We have seen, due to supply chain issues, some automotive manufacturers in Germany ramping down. Some production facilities are offline right now. Yes, we have seen in the B2B area demand destruction, and probably we're continuing to see so. As I said, less so in our portfolio. All the examples that I just cited are not our customers. We are obviously seeing this as we're observing the whole marketplace. Now on the political risk, I think there are three risks. There is a direct risk of intervention on the generation side.
Yeah, so let me put it, windfall profit taxes being debated right now, also on a European level. That would hit us, you know, less so. Obviously, we're not a generator anymore. The other one is, price caps on the retail side. We have to say that we do not have indications that after what has happened in the U.K., it's like we see something like that in our most important markets like, Germany and the Netherlands. Also in the U.K., we have seen Ofgem moving very much in the right direction. The third one is, interventions into the market design. You might have seen plans to try to avoid contagion of, you know, power prices via high gas prices and so on.
I think there the danger is that something is being introduced without really understanding the unintended side consequences. You know, it's like these regulators, politicians need to be very careful, yeah. Now we have seen proposals, especially by Spain, Portugal, Italy, France, Greece, you know, pushing in that direction. I would say, if the pressure rise, if prices would rise further, the pressure will increase on that one, but the question is then how do we introduce it and how do we make sure that it actually you know is done in a way which doesn't distort markets and avoid scarcity signals?
In total, actually, the latter would be also a bigger problem again for players that are more on the generation side, which we are not, you know. Obviously being downstream players, for now we see the risk as manageable. It's clearly a point to watch that nobody at this point in time can say, "I'm absolutely fine. Nothing will happen. Don't you worry." It's like, this is something to have an eye on because the situation is obviously very dynamic.
A very, very quickly follow-up, if I may. You mentioned the intervention in Spain, Portugal, which are not your market, but how about Germany, which is basically your largest market for the supply business? Do you see any risk there?
No, I don't see on the supply side, the German government has been extremely clear. No price caps being considered, period. Now, windfall taxes, I cannot exclude, but that would be on the generation side. Actually, I think we are fine in Germany. From all the discussions I had with the government, it looks actually very decent. I have to say, I applaud the actions of the German government. They have done most of the things right, and this is probably the best that you can say about anybody in such a crisis.
Thanks a lot.
Thank you, Wanda. Let's move on to Alberto.
Thank you very much.
Its you next .
Thank you.
Hi.
Thank you. Thanks for taking my questions. The presentation was extremely clear, and you have achieved a lot, and the outlook looks also bright. Apologies for keeping asking questions that sound negative, but given what's going on, I think trying to assess the tail risk here.
I wanted to go back maybe again to something we may not be thinking about, but can you talk about a little bit counterparty risk? You know, it's been a bit more in-depth. It's great that you have a relatively contained exposure, this 1/16 of our gas, maybe let's say 1/5 of our gas a year. But what about risk that some of the gas suppliers, maybe not systemic, but some of the weak ones cannot fulfill their obligations? What happens in that case? Is it force majeure, or do you have to step in and buy expensive gas in the market? Secondly, on regulatory evolution and affordability, I think it's very reassuring, Leo, what you just said about the German government.
May I ask you if there is debate on the table about something that is not a price cap on retail, but could be potentially a tariff deferral or perhaps the introduction of a social tariff? I mean, tariff deferral is money you will get eventually. A social tariff may be small. I was just wondering if maybe the debate is going into that direction. Thank you so much.
All right. Thank you, Alberto. Maybe with more on counterparty risk from Marc and then affordability to Leo.
Leo, you wanna start or shall I chip in on the counterparty first?
Say the counterparty. Come on.
Good.
Let's get off.
Alberto, obviously, counterparty exposure is something which we need to closely monitor and manage, but the comforting message for any of our investor is we are doing that. I have to say that actually now running into the second crisis within the last three years, the robustness of our risk management and procurement functions, you know, it gives a lot of confidence. When it comes to counterparty, it's obviously an optimization which you need to do between liquidity, margin, and direct credit risk, and the remaining price risk which you're taking on your own books.
It is that delicate triangle which you need to optimize, and where I actually am quite proud that we are optimizing it in a way that it works out really well. That does not mean that we are shielded from the possible event of a default of one of our suppliers, but we are concentrating our exposure on those who are, for example, in the current price environment, benefiting extremely midterm from rising prices. Short-term risks is basically with them focused on liquidity, but actually we see their high awareness also among politicians to prepare for should there be any crisis in terms of market liquidity to step in and save the markets. There are also from time to time, some smaller suppliers.
Actually, that's something which we consciously include, again, when we are calculating our risk margins, how we set tariffs for customers and so on and so forth. In fact, if you look at our last year's results, they have actually two minor insolvencies being included. Guess what? You almost hardly notice that from the outside, because this is something which we take care of in the way how we manage our risks. From that sense, the last three years actually confirmed to me very much the way how we're managing our counterparty portfolio, and that's proved to be successful.
Yeah. On just tariff deficit, social tariffs. Obviously, social tariffs depend what governments wanna do. Yes, there is a debate around something like reminding us of the tariff deficit in Spain, yeah, that you defer some of the bills, say, for later years. I think the important thing is then that this is being implemented not on the balance sheet of the suppliers, because that will lead to all the, you know, negative side effects which we had observed in the past. If this happens, we have been already in discussion that then this needs to happen via the balance sheet of the states. Yes, there is some debate on this one right now, but actually, I have to say it's premature.
Right now, governments are focusing on kind of like managing the crisis. They are not yet really arriving at the solution mode. It's at the beginning.
Thank you so much. Very clear.
Thank you, Alberto. Next one is, Rob from Morgan Stanley, followed by Peter from Bank of America. Rob? Yes.
Hey, thank you. Thank you for the presentation again. Just a couple of follow-ups, please, because lots of questions have already been asked. Firstly, as it relates to the network losses and then the impact, could I just clarify within that guidance whether this includes one winter or two, i.e. is this assuming the existing commodity environment for 2021- 2022 winter or also 2022-2023 winter? The second question, I join one of the other analysts in saying apologies for the negative flavor of this, but there's so many uncertainty about the situation.
Is the Gazprom subsidiaries you highlighted obviously are different legal entities to Gazprom itself, but what happens sort of hypothetically if Gazprom does not deliver gas to its own subsidiaries and those subsidiaries, for whatever reason, do not honor their contract to yourselves? That's it. Thank you very much.
All right. Thanks a lot, Rob. Network losses, maybe Marc, you wanna elaborate?
Yeah. Rob, I guess I can't answer your question directly. Tariffs are being set by calendar years. Naturally, the impacts which we are referring to cover two halves of the winters. It's the first half, that's the winter 2021-2022, and then the second one is the first part of the winter 2022-2023. 2023, part of the winter is not relevant because for 2023, tariffs will then be reset on the basis of high prices during 2022. Every year, there's kind of a cutoff and a normalization, you know, no impact, and only if prices then further rise, you have for the subsequent calendar year an effect.
The effects, the low three-digit million EUR is an impact, an effect for the calendar year 2022, and if prices stay on the levels where they are right now, there wouldn't be any effect in 2023 further because then tariffs would be reset on the higher level. Hope that helps.
Very clear. Thank you.
Yeah.
Again, so as long as. Oh, so Marc, will you?
Yeah. Again. On Gazprom, look, again, I just wanna stress what Leo said. We need to be careful here, to be wiser than at the end it will be when it comes to stress-testing also legal systems. Quite technically, as I laid out, that it's not a long-term contract, it's a standard EFET agreements under which we are trading with these Gazprom subsidiaries. So basically they would run into technical default, would be subject to recovery themselves in the market if they went bust in that extreme event. Technically, in the first place, we would have to procure them in the markets on our own.
We have a legal title towards them, and the question is, you know, what are the assets that Gazprom has in Europe to which you can get hold of, and so on and so forth. That's all speculation. Again, what should create comfort is that the positions we are talking about are very small. It's about 5% of our portfolio, and those contracts largely roll off during the course of 2022. With basically every day, that risk is further going down.
Thanks, Marc. That's great. I'll turn it over.
Thank you, Rob. Now over to Peter from Bank of America.
Yeah. Thank you for taking my questions. First one's on how you manage your hedging in your retail supply business. I presume you've got more customers, for example, in the U.K., rolling off onto standard variable tariffs than you might have anticipated, you know, during the hedging window. You're acquiring many customers from bankrupt suppliers, presumably that are unhedged. I'm just curious to understand a little bit better how you've managed it so that you're basically avoiding any negative impact from that at all. I guess credit to your trading team. Could you just give us a little bit more insight into how you sort of foresee and manage those risks? A question on rooftop solar.
The REPowerEU plan is going for a big push on rooftop solar in 2022. You know, presumably that's quite a big opportunity for your client solutions business. I'm interested in how easily you can ramp up and deliver that from a supply chain perspective, please.
Okay. I think first question goes to Marc on the hedging side and maybe Leo then on the REPowerEU topic.
Peter, just it's a number of questions are focusing on that. Let me just point that out very clearly again. This is a risk which you can't avoid. The question is not, you know, is this a risk we can avoid? It's indeed a question of how well are we managing it. That's why I like your question or the way I address it, because indeed, it's a testimonial to the quality of our risk management procurement in these times. How do you do that? Of course, it all starts with the customer. You need to have a very clear eye on how is your customer behavior developing over time due to a number of factors, one important, of course, of them being price levels, but there are also others.
Then you need to articulate a very clear view on, also with regard to activities, acquisition prices, sales channels, and so on and so forth, where will your portfolio at any given state of the future end up in terms of volume? Yeah. That's actually it's an extremely important part. You can keep a very close eye on your customers, your customer behavior, and where your demand for your portfolio will actually end up. On that basis then, it is all about early on adjusting your portfolio before basically the rest of the market does it. In that respect, we have been very, very successful in early on adjusting our procurement where that was indicated by what we saw. That means that overall the impact is limited.
Let me finally just stress again, it's not that we went through last year without any negative effect, yeah? I referred to earlier to the impact from Supplier of Last Resort activities, where we had to take on across Europe about 1 million customers. That stands because that we had to, you know, you don't foresee that at that magnitude and precisely the timing when that happens. That cost us a low three-digit million EUR amount. Now, on the flip side, if you take EUR 100 million divided by 1 million, that makes an acquisition cost for a customer of about EUR 100 . Even in that sense, it's actually fair pricing to get a customer at that price. Economically, that's, although short-term earnings impact, it's actually value accretive.
Peter and Marc, if I may add, the hedging is actually not only happening on the hedging side, it's also happening in your business processes. For example, you know, thinking about your acquisition strategy, because if you combine the commercial processes in retail, you know, with what you're doing in, and seeing in the wholesale market, then you can further optimize. It's not that, you know, like, we run through the market with an unhedged, with an unchanged acquisition strategy, no matter what happens, and then the hedging guys sort it out in a smart way. We actually connect the dots end to end, also including changes in customer behavior, and then reflection, what does this mean, for example, for our channel strategy? It's I think there's more flavor to that term.
As I said, we can, I think, in total, be quite proud. We got more right than wrong. I think that is the conclusion. Now, on rooftop solar, yes, there should be a push. Yes, we're well-positioned to set it up. We have actually already in the last years, really two years ago, we have started to build a supply chain towards tier one suppliers, especially in China, to have, you know, rooftop solar, PV modules on stock so that we can really deliver, yeah. As long as we don't see major supply chain disruptions to China, we are actually extremely well-positioned. In the case, actually, we would see supply chain disruptions to China, then we would have a PV issue anyway, given that that is the largest supplier of PV modules to Europe.
Obviously the European plants would be in shambles, yeah. Now we are well-positioned.
Right. Thanks very much.
Thanks, Peter. Next one is Louis, followed by Deepa. Louis, go ahead.
Yes, thank you. Thank you very much. Good afternoon to everyone. Maybe firstly to come back, because it's of course a key topic here on the regulatory risk of risk of regulatory intervention. You provided some elements in your recent answers regarding the tariff commitment in Germany that you would be able to remain market-oriented, that you could pass through to the final customers, eventual rising bills, et cetera, going forward. At the same time, for the time being, I understand that in 2022, it's still pretty okay in terms of impact on the final bill. Do you feel that this commitment can be strong enough as well in 2023 and 2024, when actually you will have to quite significantly increase the power bill of the final customers?
Maybe this question could be on the different geographies on which you are. Where do you feel more or less comfortable, if possible, on this specific aspect? My second question would be regarding the disposal strategy. You talk about maybe on the district heating first. I'm not going to say the names, but on Sweden, for the heating, district heating, that you mentioned, could you please provide us with an idea of the EBITDA and the EPS impact that it would represent in case of disposals? Also, if possible, could you tell us why it's specifically these ones that are spotted? Do you have already spotted any buyer on this specific company? More specifically, more broadly, is it part of your EUR 2 billion-EUR 4 billion disposal plan that you have announced?
Thank you.
Okay. Maybe Leo, you start with-
Very short.
regulatory intervention.
No. First, it's speculation. It's very hard to answer. Second, however, we are seeing the politicians are prepared to actually go quite a long way. If you just look at the increase in the price cap in the U.K., in the order of magnitude of 50%, that was remarkable. I think it has been understood that the price caps are detrimental. I am actually, for the time being, confident that the answer that I've given to you now will not change next year. Obviously, it depends how the whole things really evolve and continue. On the EBITDA of the business, the two businesses combined have a mid- to high -double-digit million EUR EBITDA.
Does that answer your questions?
Yes, thank you. Could you just, on the follow-up on this one, confirm, why specifically only this one District Heating Business? Is it because you have already spotted any buyer?
No, actually, I think we have developed them to an extent that they are mature assets, which are providing a very stable cash flow, but they have limited growth potential. In that sense, it makes sense for us to do asset rotation with these assets and put them into the marketplace and redeploy the capital in assets where we can actually leverage the capital and again for growth options.
Okay, thank you very much.
Thank you, Louis. Next one is Deepa. Deepa, please go ahead.
Thank you.
We can also see you.
Yeah, can you hear me as well?
Yes. Wonderful. Thank you.
Yeah.
Hi.
Thank you. We've been discussing a few questions on retail. I had a maybe an impact that won't be apparent immediately, but what about things like bad debts given these unprecedented rises in commodity prices with a time gap of, I don't know, six months to 18 months. What is your view on that, and have you baked anything about bad debts in your guidance? Is your assumption that the pass-through that you need to put through this year is largely there? I mean, could you quantify maybe what your assumption is, you know, what's the extent they are not able to pass through, so we can just get a sense of that.
My second question is the Easter Package that is expected to come out in Germany, you know, are you expecting any sort of Easter eggs? I don't know whether that's planning, you know, it speeding up or any other measures, or would you say that it's maybe less relevant for you? Thank you.
Thank you, Deepa. Bad debt and assumptions to Mark, and maybe the Easter Package for Leo.
Chocolate.
Yeah, hi, Deepa. Bad debt, first of all, affordability is obviously topic. Politicians are well aware of it. Actually in the German market, politicians have a toolbox. Leo referred to that on price caps, so we do not actually see a major risk at this stage. The question of affordability and relating to bad debt, I think we just see very widespread high awareness and a toolkit around that, which we think will have to deal with it. Bad debt levels on our balance sheet and our portfolio, they haven't increased.
Actually, haven't increased throughout the last three years, not due to the pandemic, and we do not expect now in these circumstances to see high exposure. By the way, final comment, we also didn't see any major movement. If you think about back in 2008-2009, when we had the last significant peak in commodity prices, also that didn't change the bad debt topic materially.
Yeah, on the chocolate and the Easter eggs, it's actually really hard to say. There should be some chocolate, so to say, some positive Easter eggs because the government wants to deploy large amounts of money into new infrastructure, so that could have an upside for us. Even though one has to say everything that has been announced so far is extremely unspecific. It's really. I really can't tell you now where exactly, how much and whatever and how to. We would need to see where the discussion is. So far, it has been only earmarked a large amount, but then given that we're such a large player, something should be in there. That's point number one.
Point number two, on the Easter Package, there will be stuff in there like acceleration of procedures and so on. Now obviously, this is not in that sense a surprise, yeah, because it has been long announced anyway, so it will be a positive, but nothing that really I assume will change the picture for us. In that sense, I would say yes, there should be some positive in it, but I can't make it specific.
All right. Thank you, Deepa. Next two questions come from Piotr from Citi and followed by Lueder. Piotr, we can already see you. Hi.
Hi, yes. Good afternoon, everybody. Few questions asked already, I have two from my side. I firstly wanted to ask you about you as a counterpart for a PPA transaction. How much have you done as a receiver or taker of the PPAs, and are you trying to develop this given that you have all the customer base? Second question I wanted to ask you about, maybe a question to Marc about the first quarter development on the pension provisions and the kind of value of an asset plan. Is there any significant changes given what the market has done and the impact on the first quarter that we could expect?
Yeah. Marc.
Thanks, Piotr. I would like to hand that over to Marc, please.
Yeah. Pensions, Piotr, it's a mark-to-market, and I'm not sure whether it really helps to look at even quarters. Generally, we feel very comfortable with the exposure. It carries a lot of self-built-in protection, natural hedging. If I look at the first two months of this year, we've seen discount rates going further up, while again, the asset valuations have gone slightly down, as you can imagine. Net-net, this doesn't make us now extremely exposed to what's currently going on. I would rather expect in such an environment that our pension provisions would continue to improve, so go down.
On the PPA, we are looking at such actions, but too early to say.
Okay, thank you very much.
Thanks, Piotr. Last but not least, looking at the time, Lueder. Afterwards, I would like to conclude this call.
Okay, I try to hurry up. Two questions on my side. First one is going back to something Leo mentioned earlier, that in the long run Europe has the answers to replace Russian gas volumes, but in the short one clearly we don't. Now this sounds like there isn't great confidence in the EU statement that two-thirds of Russian gas can be replaced by the end of the year, and leading on to the sort of what if scenario, what if these Russian gas flows were to stop completely? Leo mentioned the
An EU directive that would come into force. I believe Uniper, in their press release, mentioned that Germany has a separate law, the Energy Security Act from 1975, that would be applied. Either way, if you believe that in an extreme scenario where these flows stop, that governments would take over for the procurement and delivery of gas, and that utilities would be relieved of their delivery obligations. Just a bit of a what if scenario analysis. The second question is on your slide 11, that's the first slide 11 in your presentation. You explain the recovery mechanisms for network losses. In 2021, it was EUR 100 million from Eastern Europe. Now, how solid is this recovery mechanism in the countries where you have exposure?
Because especially in Eastern Europe, there sometimes can be a bit of a gap between regulation as it is on paper and how it is applied in practice.
Okay, I take the first question. Now EU has actually suggested two-thirds can be reduced. The German Association of Energy and Water Industries, BDEW, has actually suggested that it's rather one-third. I'm part of the BDEW, yeah? I would be rather skeptical, also looking through the EU plan. Now, obviously, the question, the big question is, what is your basis here that you're taking, yeah? The second one is, what demand destruction are you assuming, driven by prices beforehand? Obviously, depending on those assumptions, you can come to different conclusion. I would be in the cautious camp. Now, would government take over? I think government would protect those if, you know, those entities that might fall and trigger a chain reaction in the market and take over their obligation.
I would not expect, you know, governments to take over all the obligations in case of a severe disruption. They would take over probably initial players, and then we would see the curtailment which needs to happen no matter what the legal framework is which drives that one, yeah? Again, this is one of the topics which is being sorted out right now. Sincerely, we are okay-ish prepared for that scenario. In reality, there are many details that we still need to sort out together with the government. Without a legal framework, they also, the governments would really struggle. This is what we're currently working on in most markets to detail actually the emergency plans which we have and to figure out kinda like how compensation happens in these places.
Again, we as E.ON are not directly impacted, because we are not directly tied to import contracts, which would really expose us in such a situation. Therefore, I think we will be shielded from immediate consequences because chain reactions will be prevented by governments.
Network losses, over to Marc, briefly.
Yeah. Lueder, the recovery mechanisms have been extremely robust in the past. Looking forward, the recovery will start T+2 and then be spread over a couple of years. If I look at the backwardation in the forward curve, I actually expect the recovery then in those markets to begin when actually commodity prices should come back. At least that's, I think, what you would have to rationally assume, that more time will bring more options to substitute and bring prices down again.
Can I give one hopeful comment and positive at the end? Yeah, the, you know, many of you actually said, sorry, despite the presentation for asking something negative. I'll just give you a positive in this crisis. Actually, what happens is also we are seeing adaptation of regulators to the new environment faster than we have ever seen. You know, a positive example is Slovakia, where the regulator actually improved the mechanism from a T+1 to a better regime in the future, just acknowledging that they hadn't foreseen the type of volatility which we had in. We might actually see some adaptation at a speed which we would not have believed possible. In a crisis, sometimes people just perform better.
Thank you. Very clear.
Thanks, Lueder. Thanks, everybody, for your interest. Many thanks for Leo and Marc for taking the time for the questions. If there are any questions that are still not answered, obviously the IR team is available for everything that still comes to your mind. I'm very much looking forward to see you all soon in person. Stay healthy, and goodbye from Essen.
Thank you. Goodbye.
Bye-bye.