Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Uniper SE (UNPRF, Financial) reported a strong financial performance for the first half of 2024, with group adjusted EBITDA at EUR1.7 billion and adjusted net income at EUR1.1 billion.
- The company has successfully restored a sound balance sheet and secured access to credit markets and funding on a sustainable footing.
- Uniper SE (UNPRF) terminated long-term gas supply contracts with Gazprom Export, significantly derisking its portfolio.
- The company made considerable progress in its transformation journey, including significant investments in green power projects and battery energy storage systems.
- Uniper SE (UNPRF) raised its full-year outlook for 2024, with adjusted EBITDA now expected to be between EUR1.9 billion and EUR2.4 billion, and adjusted net income between EUR1.1 billion and EUR1.5 billion.
Negative Points
- The tailwind from the company's previously successful hedging strategy is fading, which could impact future financial performance.
- Despite strong half-year results, Uniper SE (UNPRF) still has to service payment obligations to the German state, with recognized provisions amounting to EUR3.4 billion.
- The company's gas midstream business saw a decline in earnings due to lower one-off gains for the procurement of Russian replacement gas volumes.
- The Greener Commodities power trading business also declined, returning to more normalized levels after a particularly positive previous year.
- Uniper SE (UNPRF) faces challenges in maintaining its earnings level in the Flexible Generation segment due to the planned exit from coal and the divestment of certain assets as required by the European Commission.
Q & A Highlights
Q: Can you talk about what progress you're making on the green gases strategy and the timeline for these projects?
A: Michael Lewis, CEO: None of the CapEx in the first half related to green gases, which is a longer-term initiative. We haven't specified how much of the EUR8 billion CapEx will go towards green gases. We have a 30-megawatt project progressing, and we're in discussions with potential partners. The strategy depends on regulatory frameworks, aiming for the lowest cost green gases. Investments are currently focused on renewable and flexible projects due to strong returns.
Q: Can you provide insights into the market conditions for Flexible Generation and Greener Commodities businesses?
A: Jutta Donges, CFO: For Flexible Generation, we benefited from previous hedging activities, but this tailwind will fade in the second half of the year and beyond. Volatility helps optimize results. For Greener Commodities, we expect normalized EBITDA contributions similar to pre-crisis levels, with a mix of higher LNG-related business and commodity price volatility, but lower gas prices may reduce sales margins.
Q: If market developments don't support green gases, will the timeline to increase green gases in the midstream portfolio to 5-10% by 2030 be pushed out?
A: Michael Lewis, CEO: Investments will be made based on strict financial criteria. If market or regulatory frameworks don't support green gases, we won't invest. However, we're confident in the 2030 timeline and will update if it changes. We will only invest where we see positive returns.
Q: What is missing in the framework to trigger green gas investments, and when do you expect to have visibility?
A: Michael Lewis, CEO: We need regulatory frameworks to support customer demand for green gases. We have a broad range of investment opportunities, including hydrogen-ready plants and renewables. If green gas investments aren't feasible, we'll invest in other areas with positive returns.
Q: What is the expected earnings profile for the Flexible Generation division considering current market margins?
A: Jutta Donges, CFO: It's difficult to predict future levels due to market volatility and the fading contribution from coal assets. The divestment of certain assets, as required by the European Commission, will also impact future earnings.
Q: What are your views on the potential increase in Swedish power prices due to demand and network connections?
A: Michael Lewis, CEO: Any significant increase in Swedish power prices is a long-term development. In the near term, prices have come down since the crisis, and we will adjust our investments based on market trends.
Q: How do you see the competitive landscape for the upcoming capacity gas market auctions in Germany?
A: Michael Lewis, CEO: We are well-positioned with excellent sites and recent experience in building and operating new capacity. We believe we can deliver low-cost, high-efficiency plants and will participate in the auctions if conditions are favorable.
Q: What is the impact of the carbon phasing effect on the first half results?
A: Jutta Donges, CFO: The positive temporary carbon phasing effect was about EUR100 million for the first six months due to lower carbon prices compared to the previous year. This effect is expected to settle with a negative impact by the end of the year.
Q: What are the key milestones achieved to make Uniper capital market ready?
A: Jutta Donges, CFO: Key milestones include balance sheet restructuring, increased transparency with new financial KPIs, extended and refinanced syndicated credit line, reestablished debt issuance program, and improved standalone credit rating.
Q: What are the financial highlights for the first half of 2024?
A: Jutta Donges, CFO: Adjusted EBITDA was EUR1.7 billion, adjusted EBIT was EUR1.4 billion, and adjusted net income was EUR1.1 billion. The group's economic net cash position reached almost EUR6 billion, reflecting strong operating cash flow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
