Uniper Se

Ladies and gentlemen, welcome to the Unipa Analyst and Investor Conference call, nine months. At our customer's 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 by dialing star 11 on your telephone. May I now hand you over to Stefan Just, Head of Finance and Investor Relations, who will start the meeting today. Please go ahead.

Dear analysts and investors, good morning and welcome to the Uniper Interim Results Conference call on the first nine months of fiscal year 2023. I'm pleased to be here today with our CFO, Jutta Dönges, who will guide you through our Interim Results presentation. Jutta will start with a brief wrap-up of the key highlights of the quarter and provide some explanations on the upcoming EGM, the Extraordinary General Meeting that takes place in December. Then she will focus on UNIPER's nine-month financial figures and give you an update on the outlook for full year 2023. As usual, there will be a Q&A session at the end of the conference call. And with that, I'll hand the floor over to you, Jutta, please.

Thank you, Stefan. Also from my end, a warm welcome to all of you. Good morning. First of all, I would like to emphasize that Unipress recovery remains in full swing in the third quarter. I am delighted to say that the group's adjusted EBITDA and adjusted EBIT numbers are the highest ever recorded in the first nine months of our financial years. The main drivers for the exceptional results are gains from the procurement of rational replacement gas volumes, gas and power optimization, high spreads from the fossil fleet, and improved outright margins. I will provide more detail on our figures during the presentation. First of all, I would like to touch on a few other highlights from the third quarter. End of September, Scope acknowledged Uniper's accelerated financial recovery and confirmed its investment grade rating at BBB-, outlook stable. The rating affirmation reflects Uniper's one-notch improvement in standalone credit quality. which is supported by normalizing gas prices and volatilities, plus hedging of almost all risks from replacement of Russian gas supply containment. Nevertheless, this improvement was offset by a one-notch reduction in the rating uplift for governmental-related entities, as Uniper is no less likely to need extraordinary state support. Scope also positively highlights Uniper's new ambitious strategy to accelerate its transformation into a greener company. may state that a successful execution of our new strategy will likely support the company's business risk profile in the medium to long term. Beginning of August, also S&P Global published a short note to positively acknowledge Uniper's new strategy, keeping the rating unchanged at BBB- with a stable outlook. Overall, these are important steps on the way to a standalone investment grade rating that we strive for in the future again, which will be facilitated by implementing our new strategy. Coming now to the financing side, we can see a steady improvement in line with our operating business. At the end of September, we have repaid the last tranche of 2 billion euros and therefore currently no longer drawing on the KfW facility, which stands at 11.5 billion euros. While our financials continue to recover rapidly, Also, operationally, we are making good progress. In August, we celebrated the commissioning of UNEPA's new and highly flexible Irsing 6 gas-fired power plant in Bavaria. This 300 megawatt power plant serves exclusively as a lender of last resort security buffer for the energy system and will be activated when grid security is at risk. In September, the now final decommissioning of Unipass Haydn 4 coal-fired power plant has been decided, which is an important step towards our targeted coal exit by 29. Haydn 4 had already ceased commercial operation end of December 2020, but returned to the market from the grid reserve in August last year. After the end of the market return, which is scheduled for March next year, the power plant will still be available to the system operator as a grid reserve until the 30th of September 24. Before we move on to the Advancing Financial Recovery, let me say a few words to the recently announced Extraordinary General Meeting, which will be held on December 8. You will have noticed that we announced the upcoming EGM in an ad hoc release on the 18th of October. Please keep in mind that we, as the Management Board, are contractually obliged to take appropriate measures to enable, prepare and support the exit of the German government in accordance with the relevant stated requirements. As a result of the disruption of Russian gas supply deliveries in 2022, Uniper SE reported a balance sheet loss of €24.2 billion as of December 31, 2022, under German GAAP. This balance sheet loss currently blocks any potential dividend payments. However, ensuring Unifor's future ability to pay dividends is essential for an attractive future equity story and safeguards options to a successful exit of the German government in line with EU state aid obligations. Therefore, we undertake the necessary steps to eliminate the balance sheet loss. How to achieve this goal? It is proposed to reduce the capital stock from currently 14.2 billion to 416 million euros. As a first step, the par value of Unipass shares is reduced from 1.70 to 1 euro. This will lower the capital stock and simultaneously increase the additional paid-in capital. And the secondary necessary step, we have proposed a 1 for 20 reverse stock split. This will reduce the number of shares from 8.3 billion to 416 million and ultimately increase the currently existing additional patent capital from 10.8 billion euros by the end of 2022 to 24.6 billion euros. With the next Juniper SE statutory financial statements for full year 23, the new total of additional paid-in capital together with any net income for 23 will be used to fully eliminate the current balance sheet loss under German GAAP. And following the capital restructuring, any future net income generated from 24 onwards can in principle and with a legal framework be distributed to Juniper's shareholders. While no concrete guidance can currently be given regarding a future dividend policy, the steps proposed in the upcoming EGM provide the first important step to ensure that this is possible in the future. Concrete plans on the conditions and timetable for how the German state will sell its stake in Uniper are not associated with the proposed measures. This decision lies exclusively with the German government. We will inform you about any updates in due course. Let's dive into the numbers now and move over to our key financials for the first nine months of the 23 fiscal year. After nine months of the current fiscal year, Uniper's performance has remained exceptionally strong. Uniper has successfully operated in a weakening environment for commodities and energies in Europe. we were able to weather negative sales and volume effects thanks to our robust business model. We benefited from volatile commodity markets and strong support from closed forward deals as well as hedged volumes in the gas and power business. This strong operating performance is reflected in our Q3 23 numbers. However, the third quarter results indicate the first signs that Unipa will return to a more normal profit development in the future, as we indicated earlier, due to lower commodity prices and declining margins. Overall, adjusted group EBIT in the nine months of the current fiscal year reached around 5.5 billion euros. 1.8 billion euros stem from third quarter contribution, another unique figure. As you may recall that Q3 is normally not the strongest quarter for Unica in terms of the seasonality. The financial impact from Russian gas curtailment has massively amplified the recorded earnings swing and this year to a positive. And even if one excludes the financial impact of the replacement procurement for Russian gas, the underlying figures are excellent. Operating cash flow in the first nine months of 23 followed the strong development of operating earnings and additional positive working capital effects. Adjusted net income turned around from a significant loss into unprecedented positive territory. At 9.8 billion euros, reported IFRS net result was significantly higher than the adjusted net income and also showed a significantly higher earnings swing. As you probably recall, at the peak of the commodity price spikes, high provisions for expected gas replacement procurement costs were recognized at the end of Q3 22. This year, the IFRS net results benefited from the reversal of provisions no longer required, as already reported after the first half of this year, and from the mark-to-market of derivatives in a commodity market environment with falling prices. On the next slide, I will highlight the main drivers for UNIFER's outstanding operating earnings development. The main earnings drivers to date continued to deliver pleasing performance in the third quarter of 23. In gas optimization within the global commodity segment, earnings were significantly driven by extraordinary gains for the procurement of Russian replacement gas volumes of around 2 billion euros, compared to a loss of about 9.6 billion euros reported for the comparable prior year period. Gas optimization recorded another excellent operating result in Q3 2023 from portfolio optimization as well as storage management, ending up at 1.3 billion euros in the first nine months of the current fiscal year. The global commodity subsegment international made a high contribution to earnings, which was mainly attributable to successful LNG trading activities. The commodity power business with optimization and power trading benefited from the volatile market environment. Also, the European generation segment was a strong earnings contributor to group results. The fossil power plants logged in high spreads through successful hedging and optimization transactions. The significant and market-related decline in fossil power production volumes has so far left only minor financial traces on the back of previously hedged positions. The most significant contributors here were the UK CCGT power plants as well as the German and Dutch steam fleet. The latter benefited from the removal of a temporary fossil production cap. Also, our outright power portfolio considerably increased its contribution to earnings. Hydro power was the main earnings driver here, thanks to positive price and volume effects. Nordic hydro power operated in an environment with lower price distortions between the system price and the Swedish price zones compared to the previous year. German hydro power also benefited from improved hydrological circumstances compared to summer 22. The outlook for the outright power portfolio is fairly unchanged compared with the previous quarter. Also, high precipitation in the Nordic markets drove higher than average reservoir levels. Nordic hedge prices now stand at 45 and 47 euros per megawatt hour for 24 and 25 respectively. The item other shows a positive effect reported in the administration consolidation line, which reports the interim profit from the sale of fossil raw materials to the company's own power plants by the trading division. Now over to the group's operating cash flow. Operating cash flow even exceeded operating profit, resulting in a cash conversion of about 100%. Operating cash flow came in at 6.9 billion euros by adding 2.6 billion euros in the third quarter of financial year 23 alone. In addition to the strong operating result, the development of working capital again was very positive in Q3 23. Lower prices on the commodity markets in particular had a positive effect here compared to last year. With less capital employed in inventories, for example for stored gas volumes, F-gas filling levels were already high by mid-year. The item other mainly contains the net impact of the provisions for carbon emission allowances. The strong operating performance also translates into an improved balance sheet which is on the right track, as you can see on the next slide. By the end of Q3 23, the IFRS equity position crossed the 14 billion euro mark. Unifers liquidity position is currently comfortable. The need for cash for margining has reduced significantly as the downturn in commodity prices has eased Unifers liquidity situation. The rise at mid-year was due to a temporary effect and is primarily related to our forward hedging of the missing Russian gas volume. With the settlement of our gas supply obligations, this effect will widely reverse until the end of the upcoming winter season. Uniper's financial headroom remains very healthy with undrawn credit facilities of about 13 billion euros. Unipac currently has a revolving credit facility with banks of almost €2 billion and a KfW credit facility of €11.5 billion that has already been reduced ahead of schedule in mid-2023. Further reductions of the KfW facilities are contractually fixed until the planned final termination in 2026. And as mentioned before, since the end of September this year, Unipair has no longer drawn on a KfW line after repaying a 2 billion tranche. The financial repair and the healthy OCF generation this year is also reflected in a further increase in the net cash position at the end of September, as you will see on the next presentation slide. At year end 2022, economic net debt stood at 3 billion euros. After the net debt position, driven by a strong operating cash flow, had turned into a net cash position of 1.5 billion euros by mid-year, the waterfall graph now shows a further increased net cash position of over 4 billion euros by the end of September. Now I would like to conclude my presentation with an update on the outlook for fiscal year 2023. The third quarter is a continuation of our strong rebound in the financial performance during the year. Against this background, we now have refined our guidance given in August for fiscal year 23. As swings may still occur in Q4, we refine our guidance for full year 23 to a range for adjusted EBIT between 6 to 7 billion euros, and for adjusted net income between 4 and 5 billion euros for the Uniper Group. For European generation and for global commodity segments, we expect a continuation of the positive development through the last quarter of 2023, while the earnings growth is expected to slow. It is important to note that the expected 2023 23 results is largely based on exceptional circumstances, as mentioned. Therefore, I would like to reiterate that this result will not be repeated at this level in the years to come. Our main message remains the very good financial performance is the basis for the execution of our strategy announced in August. And at the top of our agenda for the upcoming months are specifying the greater scope for growth investments into concrete projects. Delivering on the remedy measures, in particular the sale of specified assets and adjusting our long-term gas contract portfolio. And thirdly, establishing the necessary frameworks to become again an independent company and to enable the Bund to exit from Uniper in line with the requirements from the European Commission. The announced EGM is in this regard a logical step. This brings me to the end of our presentation today. I hand back to Stefan.