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Uniper Se

Q22024

8/7/2024

speaker
Operator

Dear ladies and gentlemen, welcome to the Uniper Analyst Investor Conference Call, first half results 2024. At our customers' request, this conference call will be recorded. As a reminder, all participants will be in listening mode. After the presentation, there will be an opportunity to ask questions by dialing star 1 on your telephone. May now hand you over to the Executive Vice President, Investor Relations, Sebastian Feitz, who will start the meeting today. Please go ahead.

speaker
Sebastian Feitz
Executive Vice President, Investor Relations

Thank you. Thank you, operator. And good morning, everyone. I am pleased to welcome you to our first half results of fiscal year 2024. Next to me on today's call are Michael Lewis, our chief executive officer, and Jutta Dunges, our chief financial officer. Michael will start and give you an update on our key developments in the past six months of the year 2024. Jutta will then lead you through our financial performance for the first half year and the outlook for the current year. As usual, there will be a Q&A session at the end. And now, let me hand over to Michael Lewis. Please.

speaker
Michael Lewis
Chief Executive Officer

Thank you, and welcome also to you, Sebastian, as this is the first time in your new role as Executive Vice President for Investor Relations that you'll be leading us through the call today, and good luck in your new role. And good morning, everybody. A very warm welcome to this call from my side. So if I look back to August 1st, 2023, when we presented Uniper's new strategy and we proudly stated Uniper is back after having recovered very quickly from the crisis, Today, I can say we're delivering on our promises. 2024 is the year of shifting gears and executing our strategy, and I'm pleased to say that we're making very good progress. Our transformation is progressing well, and some of the key highlights being, firstly, the management board has made investment decisions of roughly 400 million euros in the first half of 2024. Having successfully restored a sound balance sheet, we've put access to credit markets and funding on a sustainable footing. And thirdly, since the stop of gas deliveries from Russia, we've adapted our gas midstream business. And by terminating our gas supply contracts with Gazprom Export two months ago, we've massively de-risked our group portfolio. And as part of our continuing de-risking strategy, we'll seek to further diversify our sources of gas supply. So all in all, we've put our efforts into strengthening Uniper's strategic and financial position and made notable progress towards capital market readiness. So looking at our group financial half-year results, after a record year in 2023, we still benefited from the tailwind of our successful hedging policy in the first half of 2024. And at 1.7 billion euros, Group adjusted EBITDA was above the pre-crisis level in challenging and volatile markets. And group adjusted net income amounted to a very strong 1.1 billion euros. And Jutta will explain shortly the detailed financial result drivers a little bit later on. So overall, our financial position is in good shape. Boosted by strong operating cash flow, the group's net cash position reached almost 6 billion euros by the end of June. Of course, we need to be aware that we still have to service our payment obligations to the German state. And for this purpose, we've recognized provisions of 3.4 billion euros in total. And given our strong half-year results, we're pleased to raise our outlook for the full year. The adjusted EBITDA range has therefore been shifted upwards by 400 million euros and now reaches 1.9 to 2.4 billion euros. while we raised the outlook for the adjusted net income to a range of 1.1 to 1.5 billion euros. So even though we were able to raise the outlook for the current year, I would like to emphasize that the tailwind on our business for our previously successful hedging strategy is fading, and this needs to be taken into account when looking at the years ahead of us. So let me now take the opportunity to give you an update on our strategic and operational highlights for the first quarter. I think the first thing to say is that we are on track to build a strong foundation for our transformation, and I'd like to highlight four key achievements in the first half of fiscal 2024. First, we made considerable progress to strengthen our financial flexibility and drive our transformation forward. We now have a sound financial position and a clear strategy. and this has been recognized by the credit rating agencies. Both Standard & Poor's and Scope reconfirmed an investment grade rating of BBB minus with a stable outlook for Uniper. And Uniper's standalone rating was raised by both agencies. The mid-year economic net cap position, net cash position of approximately 6 billion euros provides the stable financial backbone to drive our strategy forward. Second, as I mentioned in my opening, In June, we terminated our long-term contracts with Gazprom Export on the back of the successful arbitration award we received, and which also granted Uniper the right to terminate our long-term gas supply agreements with Gazprom Export. This ruling now gives us legal clarity around 18 months after the proceedings were initiated. And the Arbitration Tribunal awarded us, as you know, more than €13 billion in damages for non-delivery of gas to be paid by Gazprom export. However, as you also know, any amounts collected will flow directly to the German federal government. Third, our implementation of the EU requirements in connection with our stabilisation is proceeding according to plan. These conditions require the sale of certain non-strategic investments by the end of 2026. And we've already concluded the sale of our marine fuel trading business in the United Arab Emirates And this also applies to the sale of our 20% indirect stake in the BBL pipeline. In addition, we announced the sale of our gas-fired power plant in Ganyu, Hungary. And as already communicated earlier this year, the disposal and liquidation of our electricity business in the United States is well advanced. And fourth, and most importantly, our transformation journey to become a greener company is well on track. we made significant investment decisions to develop our future asset portfolio base in the first half of the year according to strict strategic and financial criteria. Specifically, new green power projects have been added this year with which we plan to strengthen our hydropower business and increase our footprint in battery energy storage systems amongst other strategic projects. Indeed, around €250 million alone is planned to be invested in the revitalization of the existing Hattberg pump storage power plant in our home market of Germany. And I'll share more details on this project shortly. The power plant strategy in Germany is also progressing. The German federal government recently announced a tender for the construction and modernization of 12.5 gigawatt of hydrogen-capable gas-fired power plants by the end of this year or early next year. And we are prepared to participate in those tenders. Once the framework conditions are known, we will decide which investments we want to make. And we're now contributing globally to a sustainable, more climate-friendly energy supply. Our green Wilhelmshaven electrolyser and green Wilhelmshaven terminal projects were included in the EU Commission's list of projects of common interest, or PCI for short. And with the engagement of cross-border infrastructure projects, UNIPA continues to demonstrate that we contribute to both securing the energy supply and making the energy transition happen. They are, in fact, two sides of the same coin. And with this recognition, we expect to benefit from fast-track approval procedures and funding, as well as contributing to the EU's energy and climate goals. In addition, we're further expanding our cooperation with energy-intensive companies and strategic partnerships. For example, we recently launched a collaboration with our customer SKW Pisteritz, the sustainable production of low-carbon and carbon-neutral ammonia. And now I'd like to spend a couple of minutes on our largest recent investment in Germany, namely the 160-megawatt revitalization of the Hatberg pump storage plant in Bavaria. And this is the largest investment Uniper has made in recent years, and it's a prime example of the contribution Uniper can make to flexible and green generation. And this power plant with its large storage reservoir is a perfect fit for Uniper's strategy. The plant will make its contribution to security of supply in the central European electricity market, and it's now more attractive than ever to invest in this market environment. And Hapberg provides our generation mix from carbon-free sources while at the same time allowing us to optimize the portfolio thanks to the flexibility provided by plants like Hapberg. Thus, we intend to use the power plant flexibly, provide TSO services, and benefit from price volatility in the market. And the expected lifetime of the plant is also extended into the 2070s. And with a return expectation of more than 200 basis points above WAC and an estimated annual contribution to adjusted EBITDA of around €30 million, we consider the project to be highly attractive and perfectly positioned to contribute to our transformation. Hartford Power Plant is expected to come into operation in 2028 and reach full capacity from 2029 onwards. And I hope this gives you a clear indication of how our portfolio is changing and how our strategy implementation is progressing and the contribution that Uniper can make to delivering the energy transformation. And on that note, I would like to hand over to Jutta, who will now guide you through our results for the first half year of fiscal 2024. Thank you. Jutta.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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