Welcome to the OMV Group's Conference Call. You should have received a presentation by e mail. However, if you do not have a copy of the presentation, the slides and the speech can be downloaded at www.omv.com. Simultaneous to this conference call, a live audio web At this time, I would like to refer you to the disclaimer, which includes our position on forward looking statements. These forward looking statements are based on beliefs, estimates and assumptions currently held by and information currently available to OMV.
By their nature, forward looking statements are subject to risks and uncertainties that will or may occur in the future and are outside the control of OMV. Therefore, recipients are cautioned not to place undue reliance on these forward looking statements. OMV disclaims any obligation and does not intend to update these forward looking statements to reflect actual results, This presentation does not contain any recommendation I would now like to hand the conference over to Mr. Florian Carrega, Head of Investor Relations. Please go ahead Mr.
Greager.
Thank you very much. Good morning, ladies and gentlemen, and welcome to OMV's earnings call for the Q2 of 2021. With me on the call are Rainer Seele, OMV's Chairman and CEO and Reinhard Florey, our CFO. Steiner Sele will walk you through the highlights of the quarter and will discuss OMV's financial performance. This is Rainer's last call as CEO of OMV.
He will say a few farewell words before we are happy to answer your questions. And with this, I'll hand it over to Rainer. Yes. Thank you very much, Florian. Ladies and gentlemen, good morning and Thank you for joining us.
The Q2 of 2021 showed a broad macro recovery. Although the COVID-nineteen pandemic still impacted demand in certain areas, oil and natural gas prices rallied And European polyolefin margins reached historical heights. Refining margins, however, remained weak. The strong macro environment coupled with our expansion into the Chemicals business led to our highest quarterly earnings and cash flows The Q2 of 2021 was the 4th consecutive quarter of sequential Brent price improvement. At $69 per barrel, Brent was 13% higher quarter on quarter and 133% higher year on year.
Prices reached $76 per barrel, the highest level since the Q4 of 2018. This upward momentum was driven by demand optimism on the back of the first signs of an economic restart as well as a strong OPEC plus quota compliance. European gas prices continued to rally. At €25 per megawatt hour, Central European gas prices were up 37% quarter on quarter and almost four With prices increasing to beyond €33 per megawatt hour already €37 I have seen in July, At the end of June, it was 33. The European gas market reached peaks not seen since 2,008.
The biggest driver of the price surge was the unusually low storage level in Europe combined with cold weather in April May. In addition, some global LNG restrictions, heavy maintenance and limited Russian supply further supported this strong development. At $2.2 per barrel, the refining indicator margin Europe was still quite weak. It improved by 32% compared to the Q1 and remained relatively stable year on year. The quarter on quarter increase was driven by higher gasoline cracks following the easing of travel restrictions.
The diesel and jet markets improved slightly, but remained fairly weak. Higher feedstock costs limited to the upsides to the refining margins. Ethylene and propylene indicator margins in Europe were above the previous quarter previous year's quarter. This was mainly attributable to a strong demand from packaging and hygiene, increased spending on home improvement projects And the recovery of the automotive sector in Europe. Supply remained constrained due to the low inventory levels, unplanned Record shutdowns and plant maintenance.
European polyolefin margins doubled compared to the Q2 of 2020, Prices were further supported by the absence of import pressure. The exceptionally high cost of marine transportation driven by a shortage of containers restrained the attractiveness of Europe as an At €1,300,000,000 our clean CCS operating result reached an all time high. It was almost 8 times higher than the same quarter of last year and almost 50% higher than the Q1 of 2021. This was attributable to the exceptionally strong performance of Chemicals and Materials and a substantially improved exploration production business. The contribution of the new Chemicals and Materials segments again represented about half of our earnings, reflecting the importance and weight of this business in our portfolio.
For the Q2 in a row, we were able to deliver cash flow from operating activities excluding net working capital effects of €1,700,000,000 Our clean CCS earnings per share surged to €1.97 up almost 9 fold year on year. Looking at operations, our E and P production was 6% higher compared with the Q2 of last year, primarily due to increased production in Libya and the commissioning of new natural gas fields in Malaysia and Tunisia. The production cost remains below $7 per barrel. The utilization rate of our refineries in Europe increased to 85%. In Chemicals and Materials, Borealis delivered excellent performance, driven by a very strong margin environment, especially in polyolefins.
Implementation of an advanced ERP. We also made progress with our divestment program and took further steps to develop our circular economy portfolio. May, we completed the divestment of our E and P assets in Kazakhstan and the divestment of our 51% interest in Gasconet Austria. In June, we signed the divestment of our Slovenian retail and commercial business to MOL. Circular economy is a key element of OMV's strategy and we are pursuing various initiatives in recycling Designed for recycling and renewable polyolefins.
In autumn last year, Borealis launched the Boar Renewables Product portfolio. These are premium polyolefin products manufactured with renewable feedstock derived entirely from waste and residue streams. They exhibit the Same material performance as virgin polyolefins yet have a lower carbon footprint. In May, a life cycle assessment study carried out by the German based Global Institute certified that carbon emissions of more renewables are substantially reduced compared to polyolefin manufactured with fossil based feedstock. OREALIS also acquired a 10% stake in Vynasci, a provider of innovative recycling solutions and signed a supply agreement Securing 20,000 tonnes of chemically recycled output material per year.
We aim to make recycled polyolefins a significant part of our and more than tripled the volume produced to 350,000 tonnes per annum by 2025. So let's now turn to our financial performance in the Q2 of 2021. Our clean CCS operating result rose sharply to by 1 200,000,000 compared to the Q2 of 2020, which was strongly affected by the pandemic. This increase was driven by substantially better performance of Exploration and Production and Chemicals and Materials segment, partially offset by a slight decline in refining and marketing. The clean CCS tax rate increased to 33%, which was 14 percentage points higher than in the same quarter last year.
This was due to a higher contribution from high tax Countries in exploration and production, which turned from negative in the Q2 of last year to positive in the Q2 of 2021. Net income attributable to stockholders surged almost ninefold to €643,000,000 Clean CCS earnings per share amounted to €1.97 Let me now discuss the performance of our business segments. The clean operating result of exploration production rose considerably to €498,000,000 from a negative €152,000,000 in the Q2 of 2020. The drivers were higher realized oil and gas prices and improved sales volumes primarily on account of the return to full operations in Libya. OMV realized oil price increased by 134%, more or less in line with Brent.
The realized oil price in the second quarter was negatively impacted by hedging as a quarter of our oil production for the first half of twenty twenty one was hedged at around $55 per barrel. Our overall realized gas price increased by 49%, while the European gas hub prices continue to rise strongly. We have seen this quarter that only 20% of our gas portfolio was directly linked to European hemp prices. As we have explained in the past, half of our production volume in Russia are priced based on the buffer benchmark, reflecting import prices and volumes in Germany. In the Q2 of this year, the buffer benchmark unusually remained 26,000 birds per day to 490 due to a higher contribution from Libya, Malaysia and Tunisia.
This was partially offset by a natural decline in Romania, New Zealand and Austria as well as the divestment of our Kazakhstan operations at the end of May. In Russia, production was slightly lower than in the Q2 of 2020 due to the lower pipeline pressure. We plan to install a booster compressor in the 3rd quarter during annual maintenance activities. After that, we expect production to increase again to around 100,000 barrels per day. Total sales volumes increased by 25,000 barrels per day following the production volume.
The Clean CCS operating result and refining marketing decreased year on year by €51,000,000 to €181,000,000 primarily due to weaker gas performance and a lower contribution from our oil trading business, while we had benefited from the on tango market situation in the Q2 of last year. The decrease was partially offset by a stronger retail business and the positive contribution from Aetna Global Trading. Total sales volumes were a 3rd 12% above the Q2 of 2020 with a significant increase in retail and a slight uptick in jet fuels. The retail business delivered a strong performance. This was driven by the increase in sales volumes and an improved contribution from the nonfuel business, partially offset by lower margins, which came down from the very high level seen in the prior year quarter.
The contribution from ADNOC Refining and Trading came in at minus €5,000,000 still burdened by weak market environment and a 1 month outage of the FCC unit. ADNOC Global Trading, which started its activities at the end of last year provided strong support to the result. The contribution from the gas business from the very high level of 2020 to €26,000,000 The result was impacted by weaker storage and trading result, lower contribution from the power business in Romania and the divestment of Gasconic Austria. Gas sales volumes rose by 37% on account of higher sales in Germany and the Netherlands and was slightly offset by lower sales in Romania and Austria. Ladies and gentlemen, the clean operating result of Chemicals Materials increased remarkably from €78,000,000 to €647,000,000 This outstanding development was driven by improved olefin margins, record high polyolefin margins, positive inventory valuation effects and the full consolidation of Borealis.
Let's now have a look at the different businesses in Chemicals and Materials. The contribution of OMV's base chemicals increased due to higher sales and higher margins. Dorealis delivered excellent performance. Excluding the joint ventures, earnings grew from €24,000,000 to €430,000,000 The Borealis based Chemicals business improved due to higher margins and improved steam cracker utilization as well as positive inventory valuation effects. Polyolefin earnings rose sharply driven by significantly higher margins and recovery in automotive volumes and positive inventory valuation effects.
Polyolefin sales volumes in Europe were slightly higher and their composition changed as well. We have seen an increase in the automotive and advanced product specialty segments, while volumes in the Consumer Products segment declined. The contribution from the fertilizer business was slightly higher compared to the Q2 of 2020. The results benefited from positive inventory and valuation effects and the reclassification as an asset held for sale, partially offset by higher feedstock costs due to the increased natural gas prices. The contribution from Borealis joint ventures, Buruj and Baystar came in at €136,000,000 driven by higher polyolefin prices in Asia and the U.
S. Polyolefin sales volumes generated by the JVs declined by 15% due to the lower volumes at Borouge. The decrease was caused by the implementation of an advanced ERP system, which went live successfully end of June, but caused some delays in shipments. The sales volumes at Baystar recovered from the negative impact of the tax Our 2nd quarter operating cash flow excluding net working capital effects reached €1,700,000,000 For the Q2 in a row with around 40% contributed by Chemicals and Materials, Net working capital effects generated a cash outflow of €164,000,000 Consequently, cash flow from operating activities came in at €1,600,000,000 for the quarter, which is a new all time high. Looking at the half year picture, cash flow from operating activities excluding net working capital effects amounted to €3,400,000,000 a massive increase of almost €2,200,000,000 compared to the first half of last year.
Cash flow from operating activities increased by 57 percent to €2,600,000,000 as net working capital effects showed a big swing. While in the first half of twenty twenty, we recorded an inflow of €397,000,000 We had an outflow of €810,000,000 in the same period of this year. The organic cash outflow from investing activities amounted to around €1,500,000,000 20% higher than in the same period last year, primarily due to the investments in the PDH plant in Belgium. Despite the payment of a record dividend, the Organic free cash flow after dividends for the first half year came in at around €1,000,000,000 thus contributing to the continuous deleveraging of the company. Net debt, Excluding leases decreased by €722,000,000 to €7,100,000,000 Consequently, our gearing ratio excluding leases defined as net debt excluding leases to equity decreased by another 3 percentage points to 34% compared to the Q1 of this year.
If we consider the divestment projects already which will lead to a further net debt reduction of around €800,000,000 our gearing ratio excluding leases would be around Ladies and gentlemen, as promised, we are deleveraging fast and we are well on track to reach our target of a gearing ratio excluding leases of around 30% by the end of this year. At the end of June 2021, OMV had a cash position of €3,100,000,000 €4,300,000,000 in undrawn committed credit facility. Let me now give you an update on our divestment program. Since the announcement of the program last year in March, we have agreements resulting in a deleveraging effect of around €1,500,000,000 After the successful closing of 2 projects in the 2nd quarter, We recorded a deleveraging effect of around €700,000,000 In the second half of this year, we expect further closings with a deleveraging effect of around €500,000,000 This includes the sales agreement for the retail stations in Germany, the oil fields in Malaysia and potentially the Mari oilfield in New Zealand. The closing of the divestment of our Slovenian retail and commercial business is expected next The sales process for Borealis Nitro Business is progressing well.
The marketing phase started in the 2nd quarter And we are seeing lively interest from potential buyers. Fertilizer market environment continues to be supported for the transaction. We are very well on track and are confident that the signed divestments will overachieve the target of €2,000,000,000 by the end of this year. Let me conclude with an update on our outlook for this year. Based on the developments we have seen so far, we have updated our oil price assumptions for 2021.
And now we expect an average Brent price in the range of $65 to $70 per barrel. Our expectation for the average realized gas price is now above €12 per megawatt hour. We reconfirmed the full year Production guidance of around 480,000 barrels per day in 2021 provided that Libya contributes around 35,000 barrels per day. In the Q3, we expect production to be below that of the second quarter as the maintenance activities in Russia are now planned for the Q3. In addition, production in Norway is forecast to come down from the peak recorded in the second quarter and we expect closing of divestments in Malaysia and New Zealand.
We will also perform maintenance activities in Malaysia. For the remainder of the year, we no longer have any oil hedges in place, but we have hedged around 10% of our gas production at around €20 per megawatt hour in the 3rd quarter €0.27 per megawatt hour in the 4th quarter. We reconfirm our previous estimates for refining and marketing with the exception of the refining indicator margin. We have seen still low diesel and jet fuel cracks due to the weak international travel causing middle distill cracks to remain depressed. We expect some improvement in the second half of the year, but now assume that the 2021 refining indicator margin will be at the previous year level.
Chemicals and Materials, we increased our estimate of the European propylene margin. We now expect it to be above previous year level. Steamp cracker utilization in new KPI that we began publishing starting with this quarter is expected to stay above 90%. The construction of the 1,000,000 tonne lithium cracker at Baysar in the U. S.
Was completed and the start up process is now ongoing. The polyolefin market showed very strong performance in the 2nd quarter, but prices are expected to come down with supply beginning to normalize the maintenance shutdowns and the easing of logistic constraints. With expectations of a typical summer slowdown in demand, we assume softening in the Q3. Nevertheless, margins are anticipated to stay substantially above the level of 2020 for the remainder of 2021. The polyolefin volumes of Borealis excluding JVs are expected to be higher than in 2020.
Ladies and gentlemen, as this is my last presentation to you as CEO of OMV, I would like to spend a few minutes talking about my journey over the last 6 years. Looking back to the beginning, I can see that OMV is a very different company than the OMV in July 2015 when I took the job. Before coming on board, I always thought of OMV as a sleeping beauty. In other words, a company with a lot of potential. However, the market did not believe it.
Almost everybody had us on sale in 2015. I took over in challenging times for the industry Or so I thought back then when oil prices bottomed out at $27 per barrel. I could not imagine that I would end my tenure here in even more challenging times during a global pandemic. But despite these remarkably difficult times, OMV came out stronger than ever. From the very beginning of my journey together with my team, we put in place 3 clear priorities: cost competitiveness, cash flow management and profitability increase while maintaining an integrated business.
We have to make sure that the company would be resilient in a downturn and at the same time make plans for growth and pay attractive dividends to our shareholders. We set a clear strategy and we executed it very fast delivering on all our promises. We reduced exploration expenditures. We divested assets with high investment obligations and little production such as our U. K.
E and P position and non core assets such as the retail network in Turkey. In turn, we acquired producing assets with lower cost Find our core regions and expand it into new ones. From a company focused mostly on CEE, we expanded into hydrocarbon rich regions and important growing demand centers around the world. As a result, E and P has developed into a high quality, low cost asset base focused on gas and has become more regionally balanced. We turned around the gas business and expanded fast to NorthWest Europe.
We significantly transformed our retail network, changing it into a material contributor to our profitability. The operating result per station almost doubled in the last 5 years. We made fundamental changes to our cost structure. We reduced our capital spending from €3,600,000,000 the end of 2014 to below €2,000,000,000 without impacting the operations. We conducted several efficiency programs totaling €650,000,000 of sustainable annual savings by the end of 2020.
During my tenure, not only we have experienced a very volatile macro environment, but also a very fast turn in the industry in terms of climate change, something never seen before. We at OMV increased our efforts to reduce emissions. For example, we developed the re oil project from the lab into refinery operations. We built a photovoltaic plant in Austria and we set clear targets for emissions emission reductions by 2025 and a net zero target in operations by 2,050. But the most significant change In terms of size and importance for the future direction of our company in a low carbon world was in chemicals.
Part of our 2018 strategy was to grow petrochemical activities outside of Europe, so we explored various options. In 2019, we acquired a stake in ADNOC Refining and Trading as a platform for potential further expansion in a growing region. But a great opportunity arose in the beginning of 2020 when we acquired the majority stake in Borealis, thus significantly increasing the chemicals business in our portfolio and extending our value chain into polymers. This was our biggest acquisition ever done perhaps at the most difficult time at the beginning of a global crisis. But we were convinced that this transaction would add considerable value to OMV, while at the same time positioning us successfully for a low carbon future.
The extremely positive development of the chemicals market we have seen in the first half of twenty twenty one supports our investment decision and together with our rapidly executed divestment program helps us to deleverage rapidly. As a result of all our efforts, The Clean CCS operating result more than doubled to €3,500,000,000 in 2019 compared with 2015. And in this year, we were able to achieve some €2,200,000,000 in only 6 months. My favorite KPI in running our company, the cash flow from operating activities increased from around €3,000,000,000 in 20 15 to more than €4,000,000,000 in 2019. And in the first half of this year, we have already generated around €3,400,000,000 We transformed the company into a tremendous cash engine, while in which is able to support our growth story and at the same time our progressive dividend policy.
Our track record on dividends is unbroken for 5 years. The few companies in the energy industry that did not cut dividends in 2020. And this year, we were among the first to increase it, reflecting our confidence in the ability to generate cash despite the fact that the crisis is not yet over. Looking back, we have spent around €9,800,000,000 for Exhibitions and divested around €4,500,000,000 These figures alone can tell you the remarkable transformation that OMV undertook to a very healthy and solid company that is fit for the future. I believe that today we have a powerful investor proposition of growing sustainable cash flows and dividends while transitioning into a low carbon world.
OMV started a major transformation in the direction of chemicals And the circular economy. I am happy that the Supervisory Board appointed Eivrut Steyrn as my successor. Eivritt has extensive experience in chemicals and has been a driver for circular economy in recent years. I warmly congratulate him and wish him all the success. I would like to thank my Board colleagues and all employees.
Together we made this happen. And I would like to thank you, the analysts and investors who followed us, understood our story and entrusted us with your confidence. Thank you for your attention. Now Reinhard and I are more than happy to take your questions.
Thank you, Rainer. Let's now come to your questions. I would like to ask you to limit your questions to only 2 at a time,
The
The first question today comes from Mihdi Anapati, Bank of America Merrill Lynch.
Hi. So good afternoon all. Thanks for the presentation. So I will ask 2 questions please. First one Regarding the fertilizer unit disposal, could you update us please a little bit more And tell us if we should expect the disposal announcement And maybe can you be a little bit more precise please regarding the profitability because You said during the call that year on year the profitability of the first Jaguar unit was more or less the same, slightly better, but you also said that the current macroeconomic environment is positive for the selling of that unit.
So maybe can you just tell us if you expect higher profitability This year from last year compared to last year or is the natural gas price so high that it is negatively impacting the profitability of that unit. The second question is about the gas hedging. So you said that you hedged 10% of your gas production. So are you talking about your total gas production, your global gas production And can you please tell us what portion of your European gas production So if you can answer these two questions that would be great. And I will finish by Saying to you Reiner that I wish you the best for your next steps in your productional life.
It has been a real pleasure and quite exciting in fact to cover 1D with you as a CEO. And sincerely, I wish you all the success that you desire
Thank you very much, maybe for your personal wishes, To your first question, fertilizer disposal, disposal of the fertilizer business, yes, We are according to plan and we would like to sign a deal if satisfying Offers will be received in the second half of this year, so until year end. Yes, so there's no reason to change our time line. The process has started. And I think we are now moving into a phase that first non binding offers are coming in. But it's now too early to give you any kind of an indication.
All I can say is, maybe the Time line is set and we are according to plan. When we talk about the market environment, yes, If you look into fertilizer business, you have seen some price increases and margin improvements. We have to wait and see how this will Further develop in the second half because what I have explained is that especially the feedstock prices Fertilizers went up enormously. As a gas producer, I, of course, enjoy the €36, €37 per megawatt hour. But as a fertilizer producer, I really have to take a deep breath to pass this feedstock price increase to the customers.
So we have to wait and see. So far, I would say, The business environment for fertilizers in the first half has been improved if we compare it with last year. Gas hedging, absolutely correct. 10% of the global gas production of OMV has been hedged. It's the entire global production as a reference to this 10%.
And European gas production, please forgive me. Don't want to add too much into details. It's because I have looked around the table already and nobody can hand over a number to me. So maybe please forgive me. Nobody is giving me any number, so I can't tell you and answer your question.
I beg your pardon.
No problem. I will follow-up with the IR. Thanks very much, China. All the best.
Maybe we are happy to provide you that information The next question is coming from Rafael Dubois, Societe Generale.
Hello. Can you hear me? Yes. Hello. Hello.
Well, first off, let me tell you right now how much I enjoyed our interactions over the years, 1st as an investor and then as a sell side analyst. So, And now maybe back to my questions. The first one is very down to us. You had some temporary Aging effects negative ones in 2Q €92,000,000 if I'm not mistaken. It would be great if you could Tell us a bit more what happened there and why is it booked into the special item category and not into business as usual?
And my second question is on the Chemical business. Your guidance for the rest of the year in terms of margins It's pretty wide. Can you maybe at least tell us a bit more about the Q3 for which you should have Good visibility. You talk about margins reverting to a more normal pattern. How fast is this normalization happening?
And what sort of margins you think could be achieved for the commodity part of your business. And still related to Chemicals, The non specialty sorry, the specialty part of your business, I guess there will be some reset At contract, could we expect rebasing at a higher margin to somewhat reflect
Yes. Rafael, it's Reinhard. Maybe taking on the first question regarding your hedging questions. First of all, I think we have to differentiate between the realized and the non realized part of our hedging that we have in our accounting. In terms of the realized hedges, we have in the second quarter Some €72,000,000 Most part of that is coming still from the oil part, So there is no oil hedge in the group For the second half.
So this is that part. Only a quite small part is coming from gas here. Now for the special item booking, This is the non realized hedges. And there, of course, as we don't have any Of the oil in there. There is just from oil the effect that part of that which was booked already as realized is reversed into special as a positive one.
We have in total a special item of some close to €90,000,000 as special in there from hedging. And that is more or less the effect of Our hedges for Q3, Q4 and partly Q1 of next year that we have in gas that Rainer has described already. However, that is, of course, only the accounting effect because we have to take it as a mark to market valuation From exactly the forward level by the end of the second quarter. So this will then
Rafael, I'm now delighted to talk about chemicals. Well, first of all, What we I will talk about 2 different margins. The polymer margins more or less reflecting the main business of Borealis And let me call it the basic chemicals margins, which is reflecting more or less the monomers Ethylene and propylene. So what we see is that in polymers, we have seen the peak of high margins in the second quarter. We don't expect to see the same margins in the 3rd quarter.
If I look into the pricing in July, so beginning of the 3rd quarter as an indication. We do see already price reductions, especially in ethylene. The effect on In polyethylene, sorry, in polyethylene, the effect on polypropylene is less, a bit less. So that's why I think We have to prepare for a 3rd quarter where the polymer margins Decreased, but I have to say not brutally decreased. So It will be a smile on the face for Alphalete to present the Q3 numbers in polymers as well, Yes.
So therefore, don't be too drastic in your expectations. The polymer margins, The PPP Polymer margins were twice as high in the second quarter. So there's 100% room left to come back to what you have said the normal level of margins. And I wouldn't expect that the margins We'll have from Q2 into Q3. When we talk about the basic chemicals margins, It's more depending on the development of the feedstock prices.
So far, we have seen naphtha prices coming up to a level we haven't expected. I think we have seen $6.90 per tonne. So, naphtha increase was pretty high. On the one hand side, you enjoyed as a refiner. On the other hand side, you are starting to have not a smile on the face as a chemicals producer.
So this was the effect. So it's depending how naphtha prices will move into the 3rd What we have seen is that increasing laptop prices could be handover at least partially to the Customers also in July. So that my indication is the basic chemicals margins, If we talk mainly about ethylene propylene, also the margins are not heavily So all in all, I would say, Alfred and The OMV Board will also enjoy having fun in chemicals in second half of twenty twenty one. That's what I'm saying.
And on the specialty part of your business maybe?
I thought you might forget it. No. No, no, no. What I would say in specialties, what I can advise you, yes, there is a premium, yes? But I would Advise you to see that premium more as a constant number and not as an increasing number Thanks.
Thanks, Rafael. The next question comes from
Josh Stone, Barclays.
Thanks, Florian. Hi, and thank you, Rainer. All the best to you as well. And I'm sure we'll miss you on these conference calls. Just two questions from me.
So firstly on the Born Renewables products you've launched. Are you up to say how much more expensive it is to source this renewable feed And I think you mentioned a premium product. So are you getting price premiums on these more green polyolefins? In other words, are these margin enhancing or are they margin diluting? And then secondly, on the downstream gas business, It had lower earnings.
You mentioned storage was particularly weak. I wonder if you could maybe just give a bit more information on why and
Okay. Thanks, Josh. All the best to you as well. Well, renewables Come with a premium in the price, yes? How much it is, we would like to keep as a secret.
But all I can confirm is, it is not Margin dilution what we have in our plans, yes? It adds value to and contributes value to the overall performance. When we talk about the gas business, well, we have 2 main effects. On the one hand side, I think a major part from the storage business is not in 2021 as a contribution to the overall performance. There is not a summer winter spread existing.
Just look into the numbers. Nowadays, you are paying €36 per megawatt hour and the forward price, if you are lucky, you can get a €30, Yes. So that what kind of business is it? So you better keep the gas in the storage. And I'm not very much optimistic for the summer winter spread, Because you have to load your storage with high priced gas in summer, yeah?
You have to bring in the €36 per megawatt hour And you have to pray that the 36 is coming back in the winter quarters. So that's more or less what I have to Give as a farewell message to the storage operators. It's not big fun in storages. This is the transformation what I have said. The second part is that the tower business in Romania was contributing less.
And the question is what is going to be the spark spread. The spark spread between running our gas fired power plant It's also pretty difficult because now we are talking about the price delta of natural gas to power. But the message is not the same like in storages. I think that the spark spread has a good chance to come back in the second quarter
We now come to Sassy Shiroku from Morgan Stanley.
Hi. Thanks for taking my questions. And first of all, congratulations, Rainer, for your successful tenure at OMV and wish you all the best for the future. I had two questions, please. The first was related to the dividend payments to minority shareholders for Borealis.
You have highlighted dividend payments of €38,000,000 for the first half of this year. If you could remind us what the dividend policy of Borealis is and what payments can we expect in the second half of twenty twenty one that The second question is related to the net working capital build of €810,000,000 in The first half, do you expect this or part of this to reverse over
the second half? Thank you.
Sathy, let me explain to you a little bit how the dividend policy works. So we normally have a policy that we pay dividends once a year. There were some periods where there has been a split of the dividend with an anticipation of part of the dividend already in the quarter before. But if we are talking about 2020 2021 that will be paid out in one tranche. So it is not expected that there will be additional dividends to be payout in the rest of the year.
Whereas I wouldn't feel too sorry for Mubadala there. They got a very rich dividend from OMV for their 24.9 percent share in OMV. The second question, could you please remind me?
The working capital build now?
Net working capital, yes. The net working capital increase in the second in the first half Was more or less attributable to the very high price increases that we have seen That came in both in inventories as well also in the ratio between payables and receivables. We are expecting that this eases out for the second half of the year. I would be too bold to say it reverses. So as we are seeing that some of the prices are, I would say, weakening a little bit in the chemicals part.
But on the other side, also on the olefin part, we are seeing still quite high prices. I would expect that there might be a little bit of a positive net working capital contribution when it comes to cash, but not very high. So think of it as being rather stable for the second half of the year.
Thank you very much.
Thanks, Sophie. We now come to Ori Patricot, UBS.
Yes. Hello, everyone. And right now, I wish you all the best as well. It's been an impressive transformation indeed for MB And a couple of questions. First one just on Chemicals, I wanted to follow-up on the comments on Evolution in the second half.
And I wanted to have a better sense of the magnitude of the inventory gains in the second quarter And whether we should expect these to reverse in the Q3, just based on the latest prices that you're seeing? And secondly, a couple of quick questions on ADNOC refining. Noted the issue, the outage with the RSCC unit. Must that been Fully fixed now? And secondly, with kind of a typical quarter in terms of the contribution from Trading in the second quarter or are you still kind of roughly up these operations?
Thank you.
Regarding the magnitude of inventory effect in Chemicals, It's around €50,000,000 for this quarter and we are expecting that more or less to reverse. It's very much also In context with the question before from Sassy, we are expecting that the level of inventories will not be higher both in terms of valuation as well as in terms of volume. And therefore, we would not see Such effect coming in the Q3 or in the Q4 again.
Thanks also to you and all the best. Talking about Aetna Refining, The FCC plant is back in operation. We have problems this time not to restart the plant And problems with the catalyst like the first time, this time we only had to fight against corrosion. So therefore, I don't want to say it wasn't more easier done, but it was not the same kind of problem we had to solve like the first time. I do hope that this FCC plant will now reliably run into the second half with the contribution.
As we speak about the trading activities positively Contributing to the overall performance of Enel Refining, I clearly have to say this can't be the future model. We need to see an improving margin in ADNOC Refining to come up with more convincing numbers. And the question is, of course, how do we see the refining margins in the second half of this year and then this will be more or less the main factor determining the quarterly contribution from ADNOC Refining.
Got it. Thank you.
Thanks, Henri. The next questions come
Great. Thanks for taking the questions guys. Congrats on a super strong quarter. I think, Ryan, record numbers are very well deserved as a sign off. Wishing you well.
I had two questions please. And Ryan, I mean, first, I think as you referenced in your opening remarks, it was in sort of significant macro volatility through your tenure at OMV and also significant company transformation. The same time clearly the whole industry is having to adapt to the transition. So I wonder if you could share some thoughts on What some of the most challenging elements of the transformation of the company today have been and perhaps sort of forward learnings from that? And then 2nd gas probably appropriate to ask you about gas.
You sort of flagged some of the drivers behind European price earlier on. Can you talk a bit about the outlook as you see it for the next sort of 6 to 12 months and scope within that for Further gas realization upside OMV versus I think sort of low 11s per megawatt on the sort of the first half of the year given the lag Mechanism in terms of the pricing regimes. Thanks.
All right. Thanks, Matt. Let me start with the topic of transition. I think the most challenging part, especially as we speak About transition into low carbon world is I think timing. The expectation In the political arena and in the financial markets is let's do it yesterday, because we have to save our planet What I have learned is transformation takes time.
It really takes time. What I can see in OMV, we have been, I think, more an exemption for a fast transformation. If you look what happened and just see the first half year results, 50% of our overall Earnings performance is attributable to chemicals. And what I have learned is, if you would like to go for quick For a quick transition, nothing goes quicker than M and A and you have to be bold. And the most challenging part is you have to give up what you love, yes?
It's Like a wedding problem I'm starting to talk about, but that's more or less what's happening, yeah? You can't imagine if you grew up successfully in oil and gas and if you tell the people, hey, Kumar, in the long run, we would like to Transition into a totally business and into a totally business company. It takes time to convince people in the company and you have to give companies and management the time to work on their job. Yes. Don't make too much pressure that you would love to see a transition happening from one day to another.
It's impossible. Yes. But be impressed if a company is explaining your strategy that via M and A They are ready to reduce that traditional business and they would like to fast grow into the new world of business. What I have learned is when you are going to invest into Wind Park, you are 5 years busy to build that And then you will enjoy hopefully having it into your numbers. A transition via investments is taking you have to take a very, very long breath.
So that's my experience. Transition is not an easy task for management to be executed. The second gas, what is my outlook for the next months to come? I think, Matt, we are going to see continue to see high prices in the natural gas market during the summer months. The demand for storage gas is absolutely high.
The compressor capacities at the storage sites are limiting as to refill The storage, if the withdrawal season will start early. For example, if you have scenario that in October, We see first snowflakes coming. Then we will have a very high gas price scenario for the winter quarters. So an early arrival of the winter temperatures would Yes. Then we might see summer gas prices being topped also in the winter quarter and it's depending on the on an early arrival of the winter.
But if you look into the forward curve, You will see that you have something around €25,000,000 to €30,000,000 per megawatt hour. So as a gas producer in Europe, I would say a very healthy business is waiting you. So you will make good money as a gas producer in the next quarters. I don't see that there will be a drop of gas prices to a level we have seen last year, for example, in the low 10th. So more or less, my basic scenario is telling me we have to live also in the next month is more with higher than lower gas prices.
Not higher than we are seeing right now, But higher compared to the quarters we have seen last year.
Great. Very clear as always. Thanks, Rainer. Wish you all the best.
Thanks a lot, Matt. We now come to Michael Alsford, Citi.
Hi, there. Good morning. Ryan, I also echo others by saying I wish you the best in the future. But I couldn't let you go without asking a question about Nord Stream 2. So given the recent developments, I was just wondering whether you could remind us How and the timing of when OMV will get the financing back that they've provided for the project?
If I remember correctly, it was just over €700,000,000 So maybe you could explain that would be great. And then just secondly, just on the Upstream maintenance in 3Q. Could you just maybe give a little bit more granularity as to how sort of long the maintenance will be in Russia And therefore what sort of the kind of targeted production in 3Q from that region? Thank you.
Michael, thanks for the best wishes. The same to you. And I'm delighted to talk about Nord Stream 2, of course. Well, when we talk about the timing, I make reference to the CEO, Matthias Vanik, explaining us that he is expecting that construction So beginning of September, I think the procedure of certifying the pipeline to be ready for gas in. We are going to see first gas running into the pipe hopefully in the second half of this year.
Reinhard explained already in a press conference today that he is expecting that we are going to get first cash payments from Nord Stream 2 Company in the second half of this year. So we are going to tell you that cash is coming back starting already with the second half of this year. And I would say It's not only the €729,000,000 which I would like to have back, Michael. It's also the interest rate on top of the €729,000,000 So it's really more than €729,000,000 So I can see Reinhard smiling, Justin, on the opposite of the table here, because he has an idea how much it is. So it's more than this.
So let's talk about upstream business now maintenance season. I think it will be a few weeks of interruption of gas production In Russia, a few is 2 to 3 weeks we have planned for the maintenance shutdown. And then as you might remember, I have said that we are going to upgrade also the compressor station and therefore we are back to a higher pressure in the gas system so that after the maintenance season we are back to 100,000 barrels per day contribution in Q3. So just to make the math a bit easier, yes? So If you take Q3 and the maintenance will happen, let's say round numbers is 1 month, then you have to calculate in this quarter 2 months gas production from Eushnal will a little bit drop on top as good vodka, okay?
So that's the way I would do it.
Great. Many thanks. Have a good one. Thanks.
Thanks a lot, Michael. We are