Dear ladies and gentlemen, welcome to the Analyst and Investor Conference Call of Uniper. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I now hand you over to Stephan Juss, who will start the meeting today.
Please go ahead.
Thank you, and good morning, dear analysts and investors. Welcome to the Uniper Interim Results Call for the Q1 of fiscal year 2021. Thank you for participating in our conference call today. I would also like to welcome our new CEO, Claus Dieter Maubach and our new CFO, Tina Tuohumela, who will lead you through the presentation today. After a joint introduction, Claus Dieter will take over the main highlights of the Q1 Having said that, Claus Dieter and Tina, the floor is yours.
Thank you, Stefan. Good morning, everyone, And a warm welcome also from our side. I'm Claus Zita Maubach, the new CEO at Uniper. And with me is Tina Tormelder, Our new CFO, we are pleased to introduce ourselves to you today in our new roles. Some of you may still remember me from my E.
ON time during which I have various Board of Management positions between 20012013, the last one as E. ON Board Member responsible for technology and major projects. However, most importantly, I'm not new to the Uniper world. Having served as Uniper's Supervisory Board Chair and a Board Member of the Fortune Group, I'm familiar with both organizations. This puts me in a good position to drive strategy implementation at Uniper, while ensuring that our affiliation with the Fortune Group is clearly an asset in this context.
Before I move on, please, Tina, a few words from you.
Thank you very much, Claus Dieter. I would also like to welcome you to our Q1 results call. It's been a great start for me at Uniper, And I'm pleased to have the opportunity to introduce myself to you today. My name is Dina Tuamela. A couple of weeks ago, I must have introduced myself as Executive Vice President, Generation at Forto.
I have been able to build and develop my management experience at Forto since 1990. Within my previous role, I had the opportunity to participate in a handful of Capital Markets events. Therefore, I can say that I'm really looking forward to expanding this experience and most importantly, Getting to know you in the coming weeks months. The IR team is preparing 1st meeting before the summer break, role as the CFO has been very good so far despite the restrictions the COVID-nineteen virus has imposed on us these days. I see a lot of team spirit to drive forward topics that were initiated before my start within Uniper.
Uniper's remarkable financial performance in the past was the result of a sound strategy being very well executed. I intend to continue this track record. Our motivated finance deal will provide for 1 of the best calls needed to execute the strategy. Speaking on strategy, I would like to hand over to Claus Dieter now, who will share his views here, followed are the main highlights in Q1.
Thank you, Gina. Uniper recalibrated its core strategic course with the strategic and financial update in March 2020. Afterwards, Uniper and Fortum worked together to further align the strategies of both companies. The results were presented during Photon's Capital Market Day in December 2020. Aside from the joint value potential of up to €100,000,000 per annum for both companies, Uniper further refined its CO2 reduction targets back then.
Let me be crystal clear. I fully support Uniper's strategy, which is essentially about taking the challenge of decarbonization into our own hands. It is ambitious, but it also takes into account where Uniper is coming from and where Uniper's capabilities and competencies However, while I fully agree on the strategic direction, we need to work on the speed of strategy execution. The news flow and the political actions from leading nations and institutions to move the decarbonization process forward More quickly and with more funding is a good reminder that we need to work harder on tackling transitional risks and opportunities that we have in our portfolio. In a highly competitive landscape in the middle of the energy transition, things are moving fast.
Both Electricity and natural gas needs to be decarbonized in Europe. Above all, Sandfall Europe will be the center court when it comes to decarbonization and the corresponding changes in technologies, markets and regulations. Given Uniper's expertise and its strong presence In those markets, it is natural for Uniper to become the growth platform for the Fortune Group, especially if it comes to renewables, hydrogen and providing decarbonized flexible energy solutions, both on the generation and on the commodity side. The new Uniper management team consisting of capture the full value creation potential that lies in the joint UniperFortum Group. This includes a stronger focus on the one team approach where we create joint teams to bundle Fortum's and Uniper's capabilities in different business areas to the benefit of all stake and shareholders.
You can expect us to follow-up on this topic over the coming weeks. I would like to leave it at these headline statements in today's call. At a later date, we will be happy to share more details on projects, timelines and financial perspectives. Now over to Uniper's Q1 performance. Uniper's Q1 result is the strongest in its history since the Uniper's listing in September 2016.
As already communicated in the ad hoc announcement 2 weeks ago, adjusted EBIT reached €731,000,000 while adjusted net income ended up at €594,000,000 which is an increase by 12% and 19% year on year. If one tried to find a common theme for the positive Q1, I think the last winter has served as a good reminder of the importance of secure energy supply. Don't get me wrong. We are very clear about the path of decarbonization in the future, but it also became very clear Once again, that Uniper's mostly gas based portfolio plays an essential role in providing stability and flexibility in the LNG markets and we'll continue to do so for the foreseeable future. And this is what we did in Q1, both inside and outside of Europe.
On the back of these strong Q1 results, we raised our Earnings outlook for fiscal year 2021, I. E, for the adjusted group EBIT and the adjusted net income by EUR 100,000,000 each. Let's now turn to the development of Uniper's portfolio and its strategic evolution. Our European coal exit plan is ahead of schedule. In March 2020, we had communicated our intention to exit 4 out of our 5 German hard coal fired power stations until the end of 2025.
After Uniperg was already successful in the first German hard coal tender with the Haydn station, now in April also the 757 Megawatt Wilhelmshaven power plant was awarded in the 2nd chapter and is earmarked to exit commercial operation by December 2020 As communicated before, our 900 Megawatt lignite fired power station, Skopau, Based in Eastern Germany, we'll exit our portfolio by October 2021 as well. For me, it is particularly important that we do not only exit assets, but at the same time expand into new businesses, having not only our shareholders, but also our employees in mind. Accordingly, Uniper has now issued several press releases announcing projects in which We are working to leverage our existing sites to drive our hydrogen business forward. The most recent examples are the hydrogen hubs in Phillipshaven, Grundorf. A few weeks ago, we also communicated our hydrogen plans for Maslakt.
Speaking of which, As you might have read, Uniper is now seeking for a ruling from independent courts on whether the Dutch law It's legitimate enforcing our coal fired power station Maersvlakte 3 to be taken off grid by the end of 2029 without proper compensation. To be crystal clear on this topic, Uniper does not question or challenge the Dutch decarbonization ambitions. The opposite is true. We see ourselves as part of this solution. As documented by our plans for large scale hydrogen production at the Maslachta site.
However, Unlike other countries, the Dutch Coal Phase Out Act does not provide for proper financial compensation scheme, which makes it in our view unbalanced at the expense of Unifin's share and stakeholders. For all European countries, the overarching story is not only on the stricter CO2 reduction targets for 1,030, but also on security of supply in the context of the upcoming transition. This story has not yet been conclusively addressed in our view. 1 of the positive examples in this regard is the UK capacity market mechanism.
In the
recent capacity auctions, Uniper was successful with all participating power stations. For 2024 and 2025, Juniper secured further revenues of around GBP 90,000,000 for a spare capacity of 4.2 gigawatts. Finally, The Russian Berezovskyya Bayo-three lignite fire power station, the last of Uniper's legacy growth projects is back online. In April 2021, this power plant passed the necessary performance tests and is now entitled to capacity market payments from May onwards. I would like to express my congratulations to our Russian colleagues for bringing this complex project over the finish line.
Now let's move on to our operational KPIs in the Q1 of fiscal year 2020 1 on the next slide. Let's start with global commodities business. Our storage facilities showed normal fitting levels of 38% at the end of the 2020 2021 winter season. At the same time last year, levels were unusually high after a particularly warm winter. Tina will pick this up later on as this had a positive impact on our operating cash flow compared to the previous Looking at our European generation segment, we achieved a significant overall increase in power generation of 20%.
Hydro volumes were down 11% year on year. The Nordics generation volumes were down following last year's record precipitation, but remained above the long term In Germany, generation volumes were also slightly lower. For full year 2021, we are on track for hydro volumes and slightly above historic average. Nuclear output decreased around 5%, mainly driven by the closure of Ringghaus 1 by the end of last year. Nevertheless, we see catch up potential here in the course of the year as significantly extended maintenance outages during 2020 should not be repeated again.
Gas and coal fired power generation increased by almost 50% year on year. This mainly driven by colder weather and less wind across Central Europe. Further growth in volumes resulted from the contribution of Dassault 4 power station, which has been producing since 2020 and the gas fired power plants, Yersheng 4 and 5, which have been back into the merchant market since October 2020. Generation volumes in the Russian power generation business showed an increase of 7% colder weather, fewer negative COVID-nineteen related effect of stronger electricity experts from Russia were supportive here. The strong revival in electricity generation and changes in fuel mix towards the fossil side of our portfolio ended up in 30% higher carbon emissions for the group.
Looking at the full year 2021 and even 2022, there is a high likelihood that we'll see somewhat increasing scope 1 emissions in total due to Dachshund 4, Ershing 4 and 5 and Berlio 3 being in the market. It will take some time until our new strategy materializes in the form of lower carbon emissions. We expect to be back on track on our carbon reduction path from 2022 onwards. This was something we anticipated when we set our targets, I. E.
50 percent reduction by 2,030, carbon neutrality by 2,030 5 for Scope 1 and 2 emissions within the European Generation segment and full group wide neutrality by 2,050. Now I would like to hand over to Tina for a detailed presentation of the Inflarence Financial Results.
Thank you very much, Claus Dieter. Looking at Uniper's financial performance in Q1 2021, I can hand off the things of a special point as the new Uniper CFO. 1 year ago, Uniper had recorded an adjusted EBIT of €650,000,000 for the 1st 3 months, which was considered extraordinary last year. This year, the Q1 adjusted EBIT amounts to €731,000,000 which is even 12% above the excellent results last year. EBITDA increased in parallel with depreciation and amortization being stable at EUR 100 €60,000,000 Just like last year, the strong earnings results are mainly due to the global commodity business.
However, last year is of the year ago, gas and stream business Commodity business outside of Europe benefiting from cold temperatures during the winter. I will go into the details of the earnings drivers on the next slide. As Claus Tidet explained the full winter led also to significantly lower gas inventories, which explains why the increase in operating cash flow turned out to be even higher than the increase in earnings. The adjusted net income increased also stronger than the adjusted EBIT, While minorities and economic tax rate remained the same, it was a positive effect in the economic interest rate stemming from a revaluation of our provision on the back of the higher interest rate. The unadjusted or reported net income shows the strongest increase of all.
This results mainly from mark to market effects on unrealized derivatives as well as lapse of impairments, which impacted negatively last year. Moving on to economic debt, which significantly decreased since beginning of this year. Seeing a decrease in economic net debt in Q1 is nothing special given the somewhat seasonal pattern. However, the extent by which it decreased is noteworthy. I will discuss this later on.
1st, let's have a look at the underlying earnings drivers on the Next chart. As usual, this Overview breaks down the year on year development of the adjusted EBIT into business effects. Let's start with the main reason for the successful Q1 results. The contribution from global commodities, which increased by roughly EUR 120,000,000 year on year. The underlying driver is the international commodity business, which increased by almost EUR 460 €1,000,000,000 year on year.
About half of this is related to our LNG and U. S. Gas and Power activities benefiting from market developments in Asia and the U. S. In Q1 significantly stronger than anticipated.
Looking at our LNG business, we were able to monetize the flexibility in our portfolio. Once price is spiked, it was sometimes even beneficial to unfind prior hedges in Europe and Brazil into Asia. In the U. S, we saw a comparable situation, But instead of LNG, it was especially our flexible gas portfolio that provided security of supply and help to balance the markets during this extraordinary winter season. The second half of the EUR 460,000,000 effect year on year is mainly driven by the fact that last year saw some significant inventory impairments, which negatively impacted Q1 2020 and its lag is a positive effect now.
This is more of a technical issue, but it needs to be mentioned. While the international commodity business saw a very strong increase of EUR 460,000,000, The European gas midstream, on the other hand, saw a decrease of roughly EUR 400,000,000,000 year on year. However, this negative deviation sounds more dramatic than it actually is. In absolute terms, the gas midstream contributed an adjusted EBIT of more than EUR 260,000,000. This is a remarkable result if compared to the 1st quarters in 2018 or 2019, which were both below EUR 200,000,000 However, as last year's Q1 2020 So the extraordinary result of more than SEK 600,000,000, we see technically a negative year on year effect in such a magnitude year.
Then moving over to Uniper's European Generation segment. The contribution from the European Fossil Fleet increased by roughly €50,000,000 year on year. This reflects, among others, the contribution from Dabten 4, which was not yet in operation during Q1 of last year. Further positive impacts are coming from the gas fired asset is in Form 5, which are back in the merchant market since Q4 2020. Finally, oil and capacity premiums in U.
K. Also contributed significantly to the higher fossil result in Q1. Next is outright power generation, where we see a negative effect of roughly EUR 50,000,000 On the back of the lower prices and volumes, as mentioned by Claus Sitter, the generation volumes are down both in hydro due to the lower precipitation and snow melt as well as in nuclear mainly due to the Ringhaus 1 going out of operation at the end of last year. Overall, average prices were down by 3, 4 year over megawatt hour year on year. The next effect is almost a Uniper classic, The so called carbon phasing effect, which is a pure intra year effect in adjusted EBIT, and we fully revert in Q4.
As you know, Uniper Hedges is merchants Fossil Generation by selling power and buying fuel and CO2 in advance, oftentimes more than 1 year prior to delivery. If carbon prices increase, so do the provision for carbon emission drives, burdening our adjusted EBIT within the year. However, at the same time, the corresponding carbon hedge Cheese gain in value as taken into the money. The value gains of hedges, however, are only shown in the adjusted EBIT 1.3b Sepul, which is in Q4 of each year. Until then, the positive development of those Last but not least, our Russian Power Generation business, which is down by roughly €23,000,000 versus prior year.
While the underlying electricity market earnings are more than solid, the negative deviation can be almost equally split in 2 effects. 1st, the lapse of CSA payments. 2 blocks of our generation assets, Sopturshkaya and Javynskaya, moved from the CSA scheme into the comp regulation beginning of this year, accordingly decreasing the capacity income of those assets. The other half is the FX effect following the weak Now over the operating cash flow on the next slide. On the Slide 7, you can follow the reconciliation from the group's adjusted EBIT to operating cash flow.
To make it more transparent, you'll find also prior year figures on this chart. As you can see, even though adjusted EBITDA increased only roughly $80,000,000 year on year, The increase in operating cash flow before interest and taxes is 3x as high. Accordingly, the cash conversion in Q1 increased significantly from last year's 18% to now 48%. Focusing now on Q1 2021, let's go from left To right, as already mentioned, we had roughly EUR 160,000,000 of depreciation and amortization, which brings the adjusted EBITDA to almost €890,000,000 Non cash effective EBITDA items correct for things that had an impact on the EBITDA, but were not 11, which is mostly addition and revaluation of provisions. It largely nets out with the next effect, which is the actual provision utilization, I.
E, The actual payout on provision that has been built in the past. Basically, half of it is related to our nuclear obligations. The other half is split across different categories, including our gas business and personnel related provisions. The next item reflects the change in the working capital, which is heavily driven by the gas midstream business. Despite lower physical gas inventories, we an overall negative effect here as operating receivables and liabilities and the way How the individual assets and contracts have been utilized is also reflected here.
Compared with the previous year, the picture improved significantly in this area, which is one of the main drivers for the higher cash Unifin's net debt composition, this is essentially free of borrowed money. This is also highlighted on the next slide, which covers the development of the economic net debt. Uniper's economic net debt amounting to EUR 2,500,000,000 at the end of Q1, which is almost EUR 600,000,000 lower compared to beginning of this year. Half of the reduction, I. E, about EUR 300,000,000 are attributable to the net financial position, which decreased from EUR 520,000,000 to roughly EUR 220,000,000.
This positive development reflects the strong operational cash flow, but it also relieves to some extent a seasonal pattern. In Q1, it is usually rather low in terms of expenditures. CapEx tends to be Tier 2 of the second half of the year. Additionally, the dividend for the fiscal year 2020 has not in paid out. The ATM will decide on the proposed amount of EUR 501,000,000 on May Just like the net financial position, pensions and asset retirement Applications decreased also by roughly €300,000,000 in total.
This is mainly driven by higher interest rate on our pension provisions. Those increased for Germany from 0.8% to 1.2% and for UK from 1.5% to 2.3%. Given this low level of debt and the strong financial performance, it is clear that Uniper is in a very comfortable when it comes to relevant rating KPIs needed to sustain the solid investment grade rating of BBB. Having said that, let's Go over to the final chart for today, Uniper's updated financial outlook. As communicated in the ad hoc statements last week, Uniper has updated its full year guidance for adjusted EBIT and adjusted net income.
In both cases, the existing rate has In cities, upwards by €100,000,000 Accordingly, we now expect the adjusted EBIT to end up between €800,000,000 €10.50,000,000 at the year end. For adjusted net income, The updated full year guidance is €650,000,000 to €850,000,000 Please note that we have not narrowed down the ranges yet as we are still early in the year. The reasoning for the increased guidance is quite straightforward. Q1 adjusted EBIT turned out about €100,000,000 better than originally anticipated. Uniper expected the As the expected earnings as well as charges for the remainder of the year remain largely unchanged on the net basis.
This higher Q1 results feeds more or less directly into the updated forecast. However, even though we expect A stronger full year 2021, the upcoming Q2 will most likely be less overwhelming. Given the seasonality pattern, Q2 and Q3 are Traditionally, the weaker quarters in the year. Last year, isolated Q2 contributed only EUR 40,000,000 to the group's adjusted EBIT. This year, we expect this amount to be even negative in the mid double digit area.
Since Q3 is also usually negative, The gap to the full year target will be widening until finally Q4 brings the necessary lead forward. Thank you very much for your attention. I would like to hand over back to Stefan.
Thank you, Timna. And we are now coming to our Q and A section.
As always, The analysts and investors, please stick to the two questions.
Operator, over to you.
The first question is from Sam Arie of UBS. Your line is now open.
Thank you very much. Good morning, everybody, and welcome to the new team. Congratulations on a very good presentation. Obviously, nice set of results today. I think well, I hope you forgive me if my first question It's a bit direct, but, well, of course, we're delighted to welcome a new management team today, but I think everybody's also a bit surprised that that's what we're doing.
Certainly, if I look back at full year results, which was not too long ago, I think we all understood that cooperation between Fortum and Uniper was going well and Sacha and Andreas were kind of quite settled into what they were doing. So I think my question is, could you help us understand a little bit more clearly what has happened here that brought about the change in team and perhaps what specifically you guys and the new team will be able to do that the previous team wasn't doing? I think maybe that's naturally a question, Klaus Dieter, for your side. And then I think my second one, which is connected, maybe this is one actually for you, Gina. But last time we heard From Sasa and Andreas, they were unable to give a forward view on the dividend and they said that Discussion with Fortum was still pending, I think that was the word.
So just wondering if there's any update on those discussions and if You're able to say anything looking forward about where Uniper might go now with the dividend policy? So that's my 2 questions. Thank you very much.
Good morning to you, Sam. Thank you for your questions. I propose first Dieter will Take both questions on the management change as well as on the dividend. Close to that, please.
Good morning, Sam. Thank you for your questions. It's not a I have to say it's not a total surprise that these questions were raised. I hope this is fair to say. Now when it comes to your first question, I also understand and acknowledge that What was kind of published end of March, I think it was beginning of April that we have some changes to the management was came to us as a surprise for many people, maybe also not only outside but also inside of the organization.
What I can say is that the number one is that Back then I was on the Supervisory Board that we are grateful for the service of Andreas Schierbeck and Basar Bivart. They have managed this company for almost 2 years. They were great in kind of dealing with the challenges out of the corona crisis. I mean let's face it, this was difficult, very difficult year 2020. So we're really grateful for their service.
I'm also Grateful for the fact that we have we came to an amicable solution to an agreement on how to terminate the contract. And I think we should be respectful of that and I'm grateful that we had kind of this way of transition. I mean what was basically clear is and that was a discussion that supervisory board had to take up is The question on how will the future look like? How is the way forward? It was not so much about kind of looking back.
It was about how the future would look like and how the management board should look like. And in that respect, The supervisor board had discussed and taken the decision and you know about the decision that Tina and I had now opportunity to join the management board and Andreas and Sascha agreed to leave the management. I would like to leave it on this note. With regard to dividend, also very good question. And again, not an easy one.
Maybe you can next time select 2 more easy questions for me kind of coming into this discussion, but I'm trying to kind of answer that question as well. I understand that Uniper has been seen as a dividend stock so far. And I do also understand that it was anticipated that management is clear on how the way forward would look like. But I have to say today that we are not ready, at least not today, to talk about the dividend or the dividend policy or any dividend outlook for 2021 paid in 2022. I think what I can say though is that in particular Tina and I have to kind of understand the full situation.
You learned from the numbers that we have published that we had some tailwind from external factors referring to cold winter in Europe and also in the U. S. What we do know is that it can be the other way around as well. So the most important thing for us is protecting our business. And you know that global commodities, our business requires Certain rating, this is the most important thing that we have to defend.
Number 2, As I said, we have high ambitions on growing the company into the Renewables and hydrogen space. So what are the funds that we need to have available for these kind of growth ambitions, number 2 thing. And we still do not know and have not fully understood the consequences of the corona impact in the course of 2021. So when it comes to dividend from my end, it's simply too early to tell. And I would like to ask your understanding that we're not trying to release any indication on how the dividend would look like.
Okay. So my understanding from that answer, If I may just quickly follow-up is that you're leaving it open whether the dividend might go up or might go down. Is that fair?
That's absolutely fair.
Okay. Well, look, very clear and thank you for your answer to my other question too. I apologize to be so direct, but of course, as I say, we Welcome you guys aboard and look forward to more results events with you.
Yes. Looking forward to meet you in person anytime soon.
The next question is from Wouter Schumacher of SocGen. Your line is now open.
Good morning, Karl, Dieter and Tina. All the best for your new roles also from my side. Two questions from me as well. The first one is going back to what Sam just raised, but in a slightly different way in terms of the management change. I'm not really that much interested on why it happened, but I'm interested to hear What you will be doing different?
What is the plan? I mean, Fortum's press release said that Fortum believes more benefits can be realized and achieved faster within the current setup through deeper integration. Can you maybe elaborate a bit on what this deeper integration could look like? Should we be looking at the synergy target that Fortum announced the Capital Markets Day last year as quite conservative. Could this go up?
What are you going to do different? That's the first one. The second one is you had obviously quite another extraordinary Q1. If you're not We come to expect this from you from now on. But if I understand the trends you described in driving This extraordinary performance, either cold weather, you've got few commodities.
These trends, certainly in terms of temperatures for Northern Europe, in terms of Gas prices, they are up another 23% since the end of Q1. Carbon is up another 15% since the end Q1. Could this super strong performance in Q1 also slip over into Q2, what have you seen there so far?
Good morning, Luda, and thank you for your questions. And The first one, the management change in cooperation with Fortum, that will be taken by Claus Dieter. The second one on the Q1 performance will be taken by Tina Wachowski. First over to you.
First, Lueder Superhard, we've met before, didn't we?
We certainly did, yes.
Yes, I recall that it was back in the old ER days, wasn't it? I mean, You were but you were with a different company, weren't you?
Yes. This changes from time to
time. Yes.
Very good. Well, Great to hear from you. But with your question, now what you were basically asking the question, what will be different Since Tina and I have taken over, I would say maybe a number of things that will be different. But the most important thing I would like to start with that is that the strategic direction that Uniper has decided on beginning of last year that was confirmed by end of 2020, that is clearly something that I can confirm this is our strategic direction. So in terms of strategic direction, You should not expect major changes.
When it comes to implementing the strategy and executing, Our goal is to accelerate that. And when it comes to the cooperation with Fortum, You are referring to a target that was set out at the Capital Markets Day in 2020, EUR 100,000,000 Goal for both companies that I can confirm. I think we can do more and a little quicker to kind of survive at that target, number 1. And we will definitely look into more opportunities beyond what we have already agreed. Too early to tell and put a number to that and too early to tell where we find that, but we will clearly also kind of looking again together with Fortum on how we can strengthen our collaboration And always eyeing on where we can kind of do this to the benefit of both companies and hence also to the benefit of all shareholders for Uniper.
The second thing is that we would like to look Closer into growth opportunities, I said this before that we are looking We're expecting growth opportunities in the renewable and the hydrogen space. I should also say that The renewable business is something that Uniper is responsible for and we are happy to take that role also as part of the Fortum And that is something that we are clearly targeting to find opportunities for organic and inorganic growth, in particular also in the renewable space. So this would be my kind of response your first question, what will be different? It's not about strategic direction, but it's about the speed and the depth of our corporation and also about our growth plans.
Very clear. Thank you.
Good morning and thank you for your questions and kind welcome. So first, your question related to the kind of the volatility of the market and big innovate swings. So I think this is the current target environment We more frequently see last winter very warm. This winter, it was more kind of the normal winter, but also some very extreme peaks in U. S.
And in Asia. I think the key is that we capture this in a way, moment and utilize our flexible portfolio And in a way, PEP on the nerves and in the market and PEP able to react to these changes. And I think this, in a way, is shown now previously in last Q1 and also so this year. But then if we look at the forward and then the question, could this be repeated in Q2? So At the moment, we see that Q2, Q3, those are the lowest quarters of the year.
And we once we updated our full year forecast, So we also reflected the following Q1 quarters. So of course, very happy to see If the market changes and we could in a way capture the value, but for the moment we see more kind of the regular seasonality coming on and as indicated the Q2 mostly to be a Slightly negative.
Very interesting. Just to clarify this. So despite gas going up, carbon prices going up and temperatures being unusually low for this time of the year. You Do not expect the Q1 effects to go over into Q2?
So As in normal cases, so even though the gas price is now going up, So this is usually the time when we put the gas into the storage and the demand also during the summertime is not so high. So I think there is not that big opportunity. So injections and out Khamis is more kind of the neutral. So accordingly, we don't see big upsides here.
Okay. Thank you.
The next question is from James Mund of Deutsche Bank. Your line is now open.
Hi, good morning. I also want to express my best wishes for both of you in the new roles and good luck. Two questions from me. The first, Doctor. Dieter, you gave the impression that you were happy with Uniper's strategy and it was more about the execution.
Can I ask on a slightly different note whether you're also happy with the overall Scope of the group, there's sometimes speculation around Russian business? There's been kind of Discussions in the past around whether Uniper could sell stakes in some of the pipelines. Are disposals something That's on the cards for Uniper. Is it too early to make a judgment on the kind of strategic issues like that? And then secondly, on the growth opportunities, you mentioned renewables and hydrogen.
On the renewable side, Should we be thinking about a particular niche of renewables that you're going to be targeting? Or Yes. Is it really just a case of building up a big pan European renewables business? Because obviously, you're quite a late player to renewables game in a kind of subsector where, particularly this year, there's increasing competition. Just wondering where you felt you could be adding the most value from a renewable development pipeline?
Thank you.
Thank you, James. Great questions. I proposed Claus Dieter to take the complement and the question on the Uniper portfolio, but as well on the Renewables?
Yes. Thank you for your question. I mean, again, you rightfully referred to the fact that There is from our perspective, Karl, you don't need to revisit the strategic direction of the company, Very clear on this one. Now when it comes to executing the strategy and kind of Looking at what we could do and should do in future, the big headline for everything is decarbonization. I made that hopefully made that point clear in my initial remarks.
And Looking at the opportunities and growth opportunities in future, we'll come back in a second to your point on growth and renewables. That means the very same time that if we have the intention to decarbonize our portfolio, it will mean that we also look at our existing portfolio. And I would not go that far to talk specifically about specific assets that we have in mind. But what I can say is that if we're talking about decarbonization, we will look into every business of our portfolio. I think there's room to look at that and also take action in every part of our business and making sure that we live up to the expectation, our goals to decarbonize our But I would refrain from talking about specific assets for the time being.
When it comes to your renewables question, to be very honest, I mean, We are newcomers almost to this business. We are, if at all, the new kid on the block. We have as a group including now also activities from Fortum, a number of things developed over time, but there is You can hardly see any portfolio that is on our balance sheet when it comes to onshore wind or solar. We are A strong renewables power generator when it comes to hydro, but with regard to onshore wind and solar, We're not playing a role. This is what we are targeting.
It's more the, I would say, conventional part of the renewable sector. I think you can also expect us to look in particular, first of all, to countries in which we are already present, Also providing opportunities in not only countries, but also with regard to Sites on which we are active maybe have an opportunity not only turn some of the sites into hydrogen sites, but also looking for opportunities to develop renewables on these sites. So it will be an approach looking into that space carefully but not moving outside of Europe or doing something that goes beyond the, I would say almost conventional renewable activities. So you should expect us to look for opportunities organically and inorganically in Europe and also with regard to onshore wind and solar. That's what we're what our aim is.
And I should also say that we know that we would start with these activities in a way that we're trying to develop, build and then also sell projects that we have hopefully successfully developed and then at a later stage make consider to keep those assets then on our balance sheet. So it will be a cautious and we have ambitious targets, but it will be a cautious step by step approach that we want to take on renewables.
Great. Thank you very much.
The next question is from Ejhan Mamadov of Bloomberg. Your line is now open.
Hi there. Thanks for taking my questions. I have 2, please. The first one is on the Carbon and decarbonization, you talked quite a lot about it. We've seen some headlines from Germany's more ambitious emission reduction target, the carbon prices are keep going up.
What does it mean for Uniper in the longer term? Does it create more opportunities or threat? And the second question is on the borrowing costs. I mean, we've seen an uptick in Bond yields and inflation, if that continues, what does it mean for Uniper's borrowing cost in next, I don't know, 3 to 5 years? Thank you.
Thank you for your questions. And I think the first one on the decarbonization is one for COSITA. The boring cost we can Tina will first take it out. Jose, maybe give it a start.
I think when it comes to carbon pricing, well, we all know that with our outright positions that we have in our portfolio when it comes to our nuclear production, also to our hydro production in the Nordics and also in Germany, Clearly, every increase of carbon prices is helpful from SA so because that is usually something that It's been reflected by wholesale prices and since we have a strong outbound position, it is helpful and we'll benefit from that. When it comes to our Spreads to the stock spreads, dark spreads, it's more or less neutral The other aspect that you mentioned when it comes to carbon pricing and the way It's the entire political debate has been that developed. I mean it's in particular of interest to us to see how the decisions are political decisions are being taken in Brussels on EU level, but also in Berlin. And there are obviously a lot of moving parts that are difficult to assess from our end. But what I can say though is that it's a pretty dynamic development.
You can see almost every day, politicians and governments coming together and trying to understand what they can do next. Particularly in Germany, we have federal elections coming up. It's also clear that Climate protection, CO2 reduction issue is one of the key topics for the upcoming election and thereafter. So it's really difficult for us to judge, to make a final judgment on how this will impact our portfolio. What I did say though in a number of presentations and invitation for conferences is That if European Union or in particular German government would have any Ask us to come to the table, talk about an acceleration of coal exit.
We are ready to talk. We are ready to speak. Was also referring to the situation in the Netherlands on Maersvlakte. We are ready at any point in time to discuss with Dutch government on the way forward when it comes to Translakta-three. We understand that Action needs to be taken and we will not be a roadblock, we want to be part of the solution.
Maybe that is what I can say to your carbon question.
Thank you.
Good morning, and thank you for your questions. So coming back to our net position and the impact of the interest rate of bond rates increases. So firstly, I would like to mention that actually our net financial position is very small. So at the end of Q1, So EUR 218,000,000, so practically nearly debt free. Also, if we look at that what is the impact of our cash flow, the interest payments for Q1 was minus €5,000,000 so basically very, very small impact.
However, what we have is the provisions, so both when it comes to asset Retirement obligations and pensions. So there, of course, the interest rates will impact. And as we saw in this Q1 that when the interest rates came down, so discounting with the higher discount rates, so the actual Pension and other provisions went down, for example, pensions by SEK 232,000,000. So impact is coming from that end and going down.
So the net impact from higher bond yields is actually positive. Thank you.
Yes, that's correct.
The next question is from Vincent Ayral of JPMorgan. Your line is now open.
Yes. Good morning and best wishes in your respective new roles. My questions were beginning of the call already. So I'd like to take a slightly different angle. On the dividend, We're saying that
it could go up, it
could go down, depends on the decision on the investment front, assessment of the COVID impact. I would say this is true for most, if not all of the companies in the space. Ultimately, here we have a special situation and it's clear there is a disagreement between Munich And Fortum. So maybe we can look at it this way. Who could you help us understand who of Unica or Fortum is asking for a higher dividend than the other.
If you were considering the same dividend, there wouldn't be a disagreement to start with. So That would help us understand the dynamics there. Hopefully, you can help shed some light for investors and analysts like on this topic. Thank you very much for that answer, Jens.
Thank you.
Vincent, great to have you on the call. And as always, Any questions is appreciated. The dividend question obviously is one for Klos Dieter.
Yes, I understand that Our answers with regard to the dividends is not fully satisfying obviously for everybody around. I do fully understand that, but I would also be for your understanding that we don't want to go deeper into that topic today. And The question that you made, who would be interested in kind of a higher or lower dividend, would it be Fortum For Uniper, again, I think part of the question you need to ask our fellow colleagues in Helsinki What their views are? So it's a wrong place, if I may say so. And when it comes To our view with regard to dividend, I try to outline and describe how we look It's simply really too early to tell.
I don't want to reiterate and repeat what I said before. We understand that this is an important topic to investors. We have to make up our mind Gilead on this topic, but it's really too early to tell. I don't want to commit to any kind of outlook when it comes to dividends today.
All right. Thank you. At least we tried. I will leave for further questions.
The next question is from Pucharini Ghosh of Bernstein. Your line is now open.
Hi. Thanks for taking my question. And Congratulations again from my side for a very successful 3 months. So my question again is somewhat on the Strategy Acceleration. So could you possibly give us some more color on maybe some specific initiatives that you're taking, especially in terms of inorganic opportunities that you might have already identified in Europe?
And my second question is on the trading division. So you mentioned that a lot of the outperformance came from cold temperatures and especially in the U. S. So does this relate to the Texas fees earlier in this year? So basically what was the sources Of the outperformance?
And do you expect this to be repeatable in future? Thank you.
Thank you very much, Guzzarini, and thanks for joining the call. The question on the strategic acceleration, that's one And then on the trading business in particular the U. S. Impact that will be taken by Tina afterwards.
Strategy acceleration. Decarbonization leads the way in every aspect. So you can expect from our end that we are looking at our portfolio whether we can kind of accelerate for example also some of our Coal exits ambitions that we do have, number 1, we are in terms of Acceleration, we will look at synergies and corporate fields of cooperation with Fortune going beyond what we've already disclosed. And lastly, also this element that you asked for, Clearly, we are not only looking for organic growth opportunities, but also for inorganic growth opportunities, but would not really like to disclose And in specific targets that we have when it comes to inorganic opportunities, and I'm sure that you will understand that.
Good morning and thank you for your questions. So I said our trading division, so very good excellent performance capturing during the kind of the opportunities in the market. And one part was also the Sextant in a way called spell event. So from our overall, in a way, International Commodity Business also increased the result year on year EUR 460,000,000 and roughly Half of that is related to U. S.
Gas and Power and LNG, we could say, weather or winter impact. Of that number, roughly twothree is related to the Texas spell. So what actually happened is that market conditions in Q1 were very, very exceptional. So in February, as you know, there were roughly 10 extremely cold days. And it meant that unfortunately conventional power plants as well as wind and solar Plant went offline.
Also some gas production fell more than 30%, and this impacted that Power and gas prices went to unseen very, very high levels. I think Uniper was able to utilize its flexibility. So we had gas in the storage. So we could sell that to the market in a way advanced. And we could also utilize our gas to power optionality to bring the gas and power to the market and bring the security of supply.
So I think this kind of cost, Bill, I really, really hope it will not happen because a very difficult situation for the people, also our employees, everyone. So Hopefully, we can fight against the climate change and have more stable situations. So flexibility, yes, we trying to utilize, but we can't say that, that would be repeatable.
Okay. Thank you.
The next question is from Deepav Venkateswaran of Bernstein. Your line is now open.
Thank you. Sorry, I joined the call slightly late, so apologies for asking another question from the same firm. My question is on the speeding up of execution. So obviously, one of the big aspects of the carbon footprint is your Russian division. So apologies if the question has already been asked.
So I was just wondering whether as part of speeding up your decarbonization plan An exit from Russia is on the cards. I think the previous management team always looked at it. I think they called it the per leg of the Uniper strategy from memory. So was just wondering whether you have a different view of how you see the Russian division? Thank you.
Yes. Thank you, Siefer, for your question. Good to have the full Bernstein team on. And the question on Russia is for Claus Peter.
I think it's fair as I said before, every business segments that we are running need to contribute to our decarbonization strategy and that includes Russia. How this will look like and what we can do, that is something that we need to discuss in particular with our Russian colleagues. Too early to tell how it will definitely look like, but we also expect from our Russian business that they will contribute to our decarbonization. That is what I can say. Everything else would fairly go beyond I don't want to speculate on how the outcome would precisely look like, But I expect also Russia to contribute.
Thank you. The next question is from Piotr Szynofsky of Citi. Your line is now open.
Good morning, everybody. Thank you for the presentation and also from my side, best wishes in your new roles. I have two questions, please. So the first one would be On the renewable targets, we actually learned the targets of Fortum Group, which are consolidated targets, which are $3,000,000,000 CapEx spend by $25,000,000,000 and delivering of up to 2 gigawatt. How much of this Renewable target would be attributable to Uniper and can you achieve it organically or M and A of pipelines It's not avoidable.
So that's the first question. And second on the mass flakta arbitration, what is your expectations regarding the timing of this process? And what are you looking to achieve? Is it just a simple plan compensation? Or that could be other solutions?
I don't know what that would be, like extension of the pipeline or anything like this. Thank you.
Thank you, Piotr. And I think that maybe we start with a second question on mass factor cost detail and then take the
Thank you, Stefan. Yes, on your last factor question, I mean, We don't know how the how an outcome could look like. We are ready to talk. We are ready to negotiate with Dutch government. What we're not willing to accept is the situation we are in that we have a Dutch coal exit law in place, which is not compensating us for an early retirement of MPP3.
I think we are ready to talk about kind of competition in all kind of forms. There is some flexibility from our end and hopefully also from the Dutch government with regard to that. Could be also that we are developing Something on-site that is a certain aspect maybe supported by Dutch government. There are a number of other topics that we need to kind of address as well about security of supply and so forth. So Maybe we need to be creative, but the first thing that we need to accept or they need to accepted from both sides is that the current situation is unacceptable to us and we have to see and hopefully we'll see that also Dutch government The second question on CapEx.
I think we have also described what we're aiming for. Until 2025, I think our goal was 1 gigawatt capacity that we're targeting. Clearly, this can be not only achieved by organic growth, but most likely also by inorganic growth, finding something that we can acquire kind of platform, let's see. As I said before, the starting point, we are coming almost from 0 from that one. And we have also said that we are targeting a higher number beyond 2025 That is really beyond the next 3 years.
In the next 3 years, we have said that we want to spend $2,700,000,000 on CapEx and they are of $1,500,000,000 for growth. That is basically generally what our framework looks like.
Okay. Thank you
very much.
The next question is from Iris Timman of Carnegie. Your line is now open.
Yes. Hello. This is Iris Tema from Carnegie Helsinki. I have two questions, please. So firstly, Just a follow-up question on Germany's plan to achieve carbon neutrality by 2,045.
Would it be possible for you to decarbonize your cash portfolio by 2,045? Or does it require more time? And then secondly, this year, we will have more power cable capacity coming between the Nordics and Central Europe and the U. K. So what do you think how this will impact Nordic and German power prices, is it going to be positive for both prices?
Or do you expect that the German price So we decreased because of increased capacity. Thanks.
Thank you, Iris, for your question. On the first question, the decarbonization, the 2,035, that's probably one for growth data. And the second one, the correlation between the German and the Nordic market, that's for Tina. And maybe that's
Good morning and thanks for your questions. So quite rightly, so if we currently look at the prices in the Nordic and in the Continental Europe, so there has been, in a way, pretty big gap. So prices In the Nordics, €25,000,000 to €30,000,000 were in Germany or Continental Europe much, much higher to €50 to €60 per megawatt hour. I think it is very essential to get this new interconnection in line and even get 2 more. There was one important link already, which went online last December, Nordliq from Norway to Denmark.
We also expect this year this North Sea Link from Norway to UK This is coming on the line. And then a bit later, 2024, the link between Denmark and U. K. So very important to get the different marketplaces connected. However, how this gap will decline or what will happen, so will depend on the progress of the building of the interconnections, but also how the future supply and Demand will develop in both markets, particularly in the Nordic.
So we know there is a lot of building up of renewables in the Nordic. But then on the other hand, a lot of electrification is going on, decarbonization, industries using more and more power. So all these, in a way, different elements will impact And it remains the foresee that what is the space?
So I'll take the first question on carbon. Now we have set out a net zero carbon target by 2,035 for our European generation. I can confirm that. And I can confirm that this would include also our Gas fleet. Clearly, this would mean that we have to take action on a number of things, in particular also looking opportunities to feed not only natural gas but also hydrogen in some of our generation units.
That's still a way to go. You know that we're working on a number of initiatives together with our OEM manufacturers of gas turbines to see what we can do and what we should do in order to get them converted from natural gas to hydrogen. But I would like to stress at this point that gas, I'm absolutely convinced that will become pretty clear in the next years to come for Germany in particular, but also for Continental Europe, how important gas will be as the key transitional energy form that we need in order to run systems, the power supply systems and energy supply systems in Europe with a very high and increasing share of volatile renewable power generation. And we feel absolutely best positioned to provide solutions when it comes to Transitioning natural gas to hydrogen and hence, helping power supply systems to provide security of supply. Do we have all the answers today already?
No. Is there still a number of things that we need to do? Yes. But our target, our goal is pretty clear. We want to be net zero carbon target for 2,035 5, I'm convinced that we can achieve that goal.
That's maybe to your question.
Thank you very much.
Thank you, Iris. Operator, to our understanding, there
are no more questions. Is that correct?
Yes, there are no more questions.
Thank you all very much for participating in today's call. Thank you very much. Have a nice day.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.