Fortum Oyj (FORTUM) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Fortum's webcasted news conference on the stabilization package that was agreed for Fortum's subsidiary Uniper. My name is Ingela Ulfves, and I'm the Head of IR at Fortum. This event is being recorded, and a replay will be available on our website later today. With me here in the studio is Fortum's CEO, Markus Rauramo; while our CFO, Bernhard Gunther, is participating with us online. The agenda for this event is the following. We have reserved a total of 1.5 hours for this call that we will then split between the international and domestic audience. Markus starts by presenting the key elements of the stabilization package as well as the next steps. After that, we will open up for questions for the international investor community through the teleconference. Please note the dial-in instructions in our today's release. And after the Q&A session, we thank the international audience, so we then switch to Finnish, and we'll take questions from the Finnish media. So with this, I now hand over to Markus to start.

Okay. Thank you very much Ingela, and thank you to everyone on this webcast for joining us this afternoon on such short notice. As you all know, we are currently living through an unprecedented geopolitical crisis. Our subsidiary, Uniper, has been particularly hard hit by the curtailments of Russian gas since mid-June and has been under extreme financial pressure due to this. Since Uniper's gas trading activities are critical for the energy supply of both Germany and Europe, it was of utmost importance to swiftly find a solution to stabilize Uniper financially and to protect European energy supply. After intense but constructive negotiations in a very short time period, I'm very pleased that, together with Uniper and the German government, we have now agreed on a comprehensive package to provide financial relief to Uniper. The terms we have agreed on immediately address Uniper's loss-making and substantial liquidity needs. The agreement also initiates measures to derisk Uniper's gas business model and to secure Uniper's credit rating to support the path to longer-term viability. For us at Fortum, it was also important that the solution will not require additional capital from Fortum nor the Finnish tax payers, and this is reflected in our agreement. Through this arrangement, Fortum remains Uniper's majority shareholder. Throughout this process, all parties involved have lived up to their responsibilities to find the best possible solution to safeguard Europe's energy security. I would, therefore, like to sincerely thank the German government and our colleagues at Uniper as well as the Finnish government for their support and hard work in the recent weeks. Now before I talk about the key elements of the package, let's take a moment to remember how and why Uniper suddenly found itself in this emergency through no fault of its own. The current challenging situation is caused by the unprecedented Russian attack against Ukraine. Before the war, Uniper and Fortum successfully delivered on our joint strategy. In 2021, the Fortum Group achieved its most profitable year on record, with Uniper contributing half of the group's comparable operating profit. As Fortum Group, we were, therefore, together well prepared for normal market risks and volatility. However, the Russian war against the Ukraine and the Russian government's decision to use energy as a weapon has appended energy markets across Europe. As one of the largest importers of Russian natural gas in Europe, Uniper has been most affected by this geopolitical crisis. You can see on the slide that the majority part of Uniper's long-term gas supply contracts originate from Russia. But since mid-June, Uniper has received only a fraction of its contracted gas volumes from Gazprom. Gas volumes fell by approximately 60% when the curtailment started, and during the past 10 days, as the Nord Stream 1 pipeline has been under its annual maintenance, no volumes have flown through. To meet its obligations towards customers and to safeguard European security and supply, Uniper was therefore required to procure the missing gas volumes at a significantly higher spot market price. This meant that it had to show that the financial losses due to the higher cost from the gas curtailments without the possibility to pass on higher costs to customers. This has had severe consequences for Uniper's liquidity, earnings and capital. It was, therefore, of utmost importance to stabilize Uniper to put an end to the significant loss-making and cash bleeding as a result of the Russian gas curtailments. The concluded stabilization measures immediately address Uniper's loss-making and substantial liquidity needs. At the same time, it initiates measures to derisk its gas business model and secure a credit rating to support the path to longer-term viability. I now want to briefly summarize the key elements of the stabilization package. As part of the equity and liquidity measures, the German State will take a 30% equity stake in Uniper. It will do so by subscribing approximately 157 million new ordinary registered shares at nominal value of EUR 1.70 per share against a cash consideration of approximately EUR 267 million. The German government has also committed to make available further capital of up to EUR 7.7 billion against mandatory convertible instruments to address potential losses as and if they are needed. To further support Uniper's liquidity needs, the German State-owned KfW Bank will provide Uniper with an additional EUR 7 billion in liquidity support by increasing its existing credit facility from the current EUR 2 billion to EUR 9 billion. In addition, the German government informs that they intend to introduce a cost-absorption mechanism that covers 90% of the losses that result from higher costs for gas replacement volumes. The government will introduce this mechanism from 1st of October. It has also been agreed that the German government stands ready to provide further support if Uniper's accumulated net operating losses due to continuing gas curtailments exceed a total aggregate amount of EUR 7 billion. If it is required, this support is intended to be implemented in a manner that avoids further economic dilution of Uniper's shareholders. It is clear that while these measures now ensure Uniper's immediate stabilization, it will require further efforts to turn around particularly Uniper's gas business. The German government will work on this together with Uniper and Fortum. The measures agreed will help Uniper and consequently also, the Fortum Group, to return to a stable footing. As Uniper's majority shareholder, we acted to share the burden with the German government knowing that Uniper's rescue was urgently needed and is in the interest of Fortum and the Finnish state. I've already mentioned, Fortum and the Finnish state do not have to contribute any new money but will indirectly incur losses due to the dilution of our stake, just like any other shareholder of Uniper. As a consequence of agreed equity and liquidity measures, Fortum's current 80% stake in Uniper will be diluted to 56% on the initial equity injection. Fortum will remain Uniper's majority shareholder and will continue to consolidate Uniper as a subsidiary. In consideration of its liquidity support, Fortum will also have the option to convert its existing loan of EUR 4 million against a portion of maximum 70% of the mandatory convertible instruments subscribed by the German state. Fortum will thus be in a position to retain its stake in Uniper above 50% and to participate in the stabilization measure at the same terms as Germany. Furthermore, Fortum's guarantee of EUR 4 billion will remain in place during the stabilization. In the sequence of repayment, the KfW loans ranked senior to Fortum's loan. The stabilization package is subject to several conditions. As part of the package, it was agreed that Uniper would waive future dividend payments and restrict the variable compensation of the members of Uniper's Board of Management for the time period when the stabilization measures are in place. In addition, the German State, as a new shareholder, will have adequate representation on Uniper's Supervisory Board. The stabilization package also requires all applicable regulatory approvals, in particular, by the European Commission. The stabilization measures are also subject to confirmation of the investment-grade rating of Uniper by Standard & Poor's global ratings, as well as approval by a Uniper Extraordinary General Meeting. As a part of the package, it was also agreed that Uniper will withdraw its lawsuit against the Netherlands under the Energy Charter Treaty. Looking at the way forward and next steps, here are more detailed but indicative timeline over the process going forward. We expect that the process to take between 1 to 4 months. Uniper will come back to a more detailed time line later on. Before we move to the Q&A very shortly, I want to reiterate that I'm very pleased that we were able to reach this agreement together with Uniper and the German government as well as the support of the Finnish government. The solution we reached not only provides stability for Uniper but also for European security of energy supply. During this challenging time of war, the agreement also demonstrates the unity of the European Union and our willingness to protect our common values. I'm convinced that following the engagement of the German state and a stabilization of the European energy markets, Uniper will retain its crucial role in the European energy transition. I will now welcome your questions with Bernhard. So over to you, Ingela.

Thank you, Markus, for your presentation. So with this, we are then ready to start the Q&A session and take your questions. [Operator Instructions]. So moderator, please begin the Q&A session.

[Operator Instructions] The next question comes from Wanda Serwinowska from Credit Suisse.

Wanda Serwinowska, Credit Suisse. One longer question on the absorption mechanism the German government wants to introduce. From what I understand, it doesn't cover the past losses and the losses that Uniper can incur by the end of September. Can you please confirm it? And if -- could you also quantify the losses incurred by Uniper year-to-date? And lastly, if you could confirm if the mechanism covers volumes sold outside Germany, I mean, it's pretty substantial.

Okay. So the support of the EUR 7.7 billion convertible, that's meant to cover all of the net losses caused by the gas curtailments. So in case of losses, then this convertible will be used to absorb those losses. The details are to be -- of the mechanism are yet to be defined by the German government, but these commitments by the German government, they basically put the framework around how the losses are calculated and what is being included in that. And Uniper will accumulate the losses until the latest 1st of October, and after that, the 90% cost cover kicks in. But all the gas curtailment-related losses will be covered then by the convertible. Bernhard, is there something you want to add?

Yes, maybe just 1 or 2 details if I understood your question correctly. If in a very extreme scenario of significantly higher curtailments and/or higher spot gas prices, the backstop of maximum losses of EUR 7 billion would be exceeded before the 1st of October. This nonetheless would kick in, yes, so only the cost recovery mechanism as such will start on the 1st of October. But this will be taken -- so the backstop is irrespective of the set in on the timeline of the cost recovery mechanism. And to your question around foreign business, these aspects have been taken into consideration when the financial modeling for this rescue package was done.

And then for the losses accrued so far, then Uniper should comment on that.

The next question comes from Iiris Theman from Carnegie.

What are the implications on Fortum's capital position and rating from breaking down the Uniper stake to current market values so then that this would cut the net equity position of Q1 by about 50%?

So we will evaluate with the Q2 closing if there are any changes to our -- or what changes there would be to our equity position. So we need to come back to that. Of course, one can calculate what was the -- what has been the acquisition cost of our stake, and what is the current market price of Uniper's share. So that gives some estimation, but too early to say. So that would be a Q2 issue. And again, I refer to Bernhard, who may want to comment on the accounting part.

Yes. Maybe just -- yes, not much to comment on the accounting part but maybe on the rating dimension, Iiris, you had in your question. Here, I think it's -- so to keep in mind that rating agencies, they mostly look at earnings or cash flow versus net debt in their rating KPIs and not so much to book value of equity. So therefore, the -- a direct impact or direct connect between a potential impairment on a book value and rating is not necessarily given. But of course, we will see the effect of the ongoing losses that Uniper has incurred since the 14th of June, also in Fortum's consolidated Q2 numbers.

Okay. And there are -- are there any implications on the capital need from other elements of the plan?

Well, the -- so actually, what Germany is doing, Germany is injecting about EUR 17 billion of debt and equity capital. So increasing the KfW loan from EUR 2 billion to EUR 9 billion, and then the EUR 7.7 billion convertibles. So I would say that we get the massive capital injection where, of course, the EUR 7.7 billion, that will be used if and when needed. So only if losses occur, then Uniper would draw on the mandatory convertible, which then gets converted at the end of the conversion period to equity unless it's then repaid before that. So -- and the -- one of the boundary conditions for the solution was that, that Fortum will not put in fresh capital, but we do take the dilution impact from the equity injection by Germany. But overall, this is a very stabilizing package, and there's a good amount of capital now available both to cover the losses and then for the liquidity needs that have been high and could be high when this turbulence on the European energy market continues. And I think this is the -- this is also a part of the very important backdrop for the whole situation. So we are now -- we have been hit by the impacts of the Russian war in Ukraine. Europe is in the middle of energy crisis, and we have to be prepared that this will not be over soon. And now, I think we're getting the types of access to liquidity and capital that may be required to weather this storm. But this really stabilizes well Uniper's and the whole Fortum Group's position. And Germany is really -- Germany took a huge step in actually absorbing losses, the 90% loss cover, and this huge amount of capital and liquidity that Germany is ready to provide. So as we call it, stabilization of Uniper.

The next question comes from Pasi Vaisanen from Nordea.

Great. This is Pasi Vaisanen from Nordea. So just to confirm, so if Uniper's losses are roughly EUR 20 billion a year, and 10% from that is EUR 2 billion and Fortum share is then about roughly EUR 1 billion a year, so is this calculation principle of formula about right? And are you still confident about to your dividend payment, roughly EUR 1 billion a year going forward?

Okay. So we can all make different kind of loss calculations with different scenarios of gas curtailment and gas prices. So we, of course, know what the prices were until today, but we wouldn't know -- we don't know. We don't have the visibility into what they will be next week and in the coming months. What this solution provides us is the visibility that up to the EUR 7.7 billion, there is a convertible instrument of equity in nature, which will cover losses. If the losses exceed EUR 7 billion, then Germany is committed to further support of non-dilutive nature vis-a-vis Fortum's shareholders. So basically, that puts a backstop already at the EUR 7 billion level where further measures would be taken. But we can all make calculations whether the gas price is X, Y or Z, and what are the curtailment volumes. So this all determines. At the same time, you have seen Uniper's earlier announcements of how it is addressing the situation. So working with its customers, working with storage, working with injections. So Uniper is pulling all levers to manage the situation, at the same time, manage its own situation, but help its customers to deal with the situation. At Q2, we will analyze then the impacts to our numbers, and we will see where we are then. And then, of course, in the coming months, we will see how the situation develops. Our dividend policy remains the same, but this is a premature time to make any conclusions of what our Board of Directors would be proposing next spring with regards to 2022 dividend. So this is then something we will come back in due course.

The next question comes from Artem Beletski from SEB.

This is Artem from SEB. I would like to ask a couple of questions relating to basically this convertible and increased loan from -- or credit facility relating to KfW. Could you maybe talk about interest on these facilities? And maybe what comes to convertible, what is the maturity there and also conversion terms, so to speak?

I think these are something where Bernhard can give you color on these 2 items.

Yes. These -- well, the interest rates will be market going, yes. So this is -- the numbers are not published, but it will be benchmarked to market both for the convertible and for the KfW support as it has been already in the past for the original EUR 2 billion of KfW line. So was there a second element to your question, I couldn't...

Interest and maturity.

Well, the KfW line will be there, that's the language as long as needed. Of course, it ranks super senior, as has been mentioned, so it has to be paid back first ahead of any other instruments. So that is only utilized to the extent that any capital or liquidity needs of Uniper cannot be satisfied by other instruments. And on the convertible, that for as long as this stabilization period will last.

And maybe just a follow-up relating to convertible. Could you talk about sort of convertible terms when this loan could be converted into Uniper equity?

Yes. So, well, it can be converted at the end of the stabilization period only, yes. So it's not an option that can be exercised any time, but only at the very end. And it's -- the logic is of conversion that for the first -- up to EUR 4 billion of the EUR 7.7 million convertible, there's a 25% discount to the then-prevailing relevant [ VWAP ] of the unit per share under the then-prevailing EU standards. And between EUR 4 billion and EUR 7.7 billion, this will linearly go up from 25% to 50% discount.

Okay. This is very clear. And maybe just a sort of a theoretical question relating to Fortum. So just like thinking about your equity situation, and of course, your monitoring situation, and we'll come back to it in accordance with Q2 results. But maybe just thinking of the scenario where your equity could turn negative. Do you think that it would be triggering? For example, equity injection, or could you basically live with it? Given the fact that, as I understand, on your loans right now, you don't have any covenants and so on and still distributable assets when it comes to the parent company?

I think one -- without gun jumping anything on the Q2, I think it's good just to look at what have been the original investments in equity, in shareholder loan, in guarantee. And where is the Uniper share price, what is the implied value for the Fortum's stake in Uniper and so on. So I think you can -- from that, you can kind of come to some kind of a rough estimate what potentially implications could be. And good to remember still that also, to our ownership structure, everything that happens in group companies does not immediately flow through to Fortum Oyj numbers. So it's the -- when we talk about dividend-paying capability, it is the Fortum Oyj Finnish gap numbers that then determine kind of certain hard lines. And then overall, of course, we look at the group numbers, and the totality vis-a-vis our long-term earnings capability and balance sheet investment capacity and dividend paying capacity. So just as before, we balance these items for the long term when we think about these 3 corners of a triangle.

The next question comes from James from Brand (sic) [ James Brand ].

I just want to clarify something. So you've got the liquidity facility, which has gone up EUR 7 billion, you've got the mandatory convertible instruments of slightly over EUR 7 billion. Are they separate or are they linked? So if you draw on the credit facility, does that ultimately later turn into the convertible, or you can draw on the liquidity facility and the convertible? And if it's the latter, and they're both options for raising cash. What determines whether you draw on the liquidity facility or the convertible, convertibles linked to explicit losses and the credit facility is linked to trading? Or it works differently from that? So it would be useful to just clarify those 2 points just split in terms of how the mechanism works? And then your ability, kind of second question or maybe it's a third question. The second question is your ability to convert part of your EUR 4 billion loan into equity to avoid further dilution. Obviously, I presume that decision won't be made at the time of having to make it. But do you have any kind of initial preference on whether you would like to avoid further dilution or not?

Okay. So good question, and it is like you described the latter, your latter version. So the origin of the liquidity facilities that, with this volatile and increasing power prices, we have to -- we've been -- we have had to post higher margins. You know what we did in the autumn and what we did during the turn of the year, we set up the EUR 8 billion Fortum facilities and EUR 2 billion KfW facilities. So this liquidity, the key driver for it is that we may -- we don't know how this war and this energy crisis will go. So now when we put together a package to stabilize, we need visibility that, for the volatile and potentially very high liquidity needs, we want to have a stable footing where we know that there is enough liquidity for margining and working capital and other purposes. So that's the idea there. Then for the convertible, its purpose is to address the gas curtailment-related losses and it will be used, if needed, to cover the losses. And then it has the mandatory element of it, it gets converted at the end of the conversion period if it's not repaid. So of course, if everything goes well. And of course, we all hope that we would need as little of the convertible as possible, and there would be as little losses as possible. So we're doing everything to manage the situation. But this is also, let's say that we have seen how big the curtailments can be and how high the gas prices can be, meaning that the delta between the procurement cost that we have to do and between the contracted sales price at the moment, it can be very large. So now, we prepare for scenarios that we do not want to see, but we don't know if we will see. So these are the 2 sides of that coin. Then the ability to convert our EUR 4 billion shareholder loan at the terms as described by Bernhard at the time of the then at the maturity of the convertible. So then it's our choice to do it, to use that conversion or not. And that gives us the possibility with the terms agreed now. It gives us a possibility to retain our stake over 50%, but it also added terms ensure that the German government doesn't go under 30%. So these are the conditions and the logic how it has been set up. And we haven't predefined what we would be doing, but at the terms that it is set for us, it's a valuable option to have and it gives us also strategic optionality going forward.

[Operator Instructions]

It's Peter Testa from One Investments. I wanted to understand about the right of maintaining a majority ownership, and in conjunction to the right of converting the EUR 4 billion loan. Is there something about providing the loan and the guarantee that needs Fortum to consolidate Uniper to avoid a different accounting treatment? Or are there some implications for Fortum's equity position because of maintaining a majority position? And then related to that, I'm assuming that the unit losses will be considerable in the quarter. I'm wondering at what point this stabilization period would be requiring some form of conversion of equity out of this convertible or other means to manage the gap up until October 1?

Okay. So these are basically -- this is a right to us, but this is not something that we have thought of being accounting driven. But it's rather, for us, a strategic possibility to maintain, if we so choose, the majority. And then for the conversion, the conversion would happen at the end of the -- at the maturity of the convertible instrument. So -- and again, just recapping. So the Uniper would draw on the convertible, if and as losses would occur. So it would -- likely, this would happen in tranches. And then once we get to the maturity of the conversion period, then the German government either converts the instrument into equity. And then before that, Fortum has the possibility to take part of that. The idea with the mandatory convertible is that, again, it gives optionality to Uniper and Fortum Group, so it can be paid back before it matures. Or then we know that if not, then it will convert into equity. So from a rating point of view, this is an instrument which target is to then have equity treatment. So this gives the -- this protects Uniper from the losses, basically insulates Uniper and stabilizes Uniper's situation from the potential losses that would continue to be incurred.

Okay. And by staying in the majority position, that means that the $4 billion loan and $4 billion guarantee can be continued, be considered as consolidated, not marked, to any kind of market? Or is that -- are they also subject to some form of test because of the loss of seniority?

That's not been a driving consideration in our thinking here. So like said, we are taking part in the burden sharing. German government has come in massively with the massive liquidity and equity support. Fortum is carrying its responsibility for the European security of supply by taking a dilutive impact from the German government coming in, but also maintaining our shareholder loan as part of the solution. So German government comes in with EUR 9 billion of liquidity and EUR 8 billion in total of equity or equity-type instruments, Fortum keeps its EUR 4 billion shareholder loan and EUR 4 billion guarantees. So everybody is carrying their responsibility. And again, I think I just want -- and it's not relevant for the instruments as such. But I think the important thing is that us being such an important part of German, Nordic and European security of supply, we are all carrying our responsibility of maintaining that and making sure that our suppliers and our customers and societies who are relying on us can rest assured that we continue to deliver the security of supply they will need or they have needed and will need also even more going forward. So we have been facing challenging times, and we need to be prepared. We need to be strong in face of potentially continuing volatility and continuing turbulence in the energy market, which is now taking place. Looks like Bernhard would add...

Yes. I just wanted to add to one effect which you had asked on the -- and I think it had been implicitly mentioned in one of the earlier questions as well. So what happens until October, yes? And this relates to the dual use of the KfW line now. Obviously, it's there for margining purposes. But both the equity injection, the straight equity injection of the German state and the mandatory convertible can only be injected as capital into Uniper after an EGM, which can only happen after EU approval, and this can be before or after October. If until then, in order to cover ongoing losses due to curtailment and loss-making gas repurchases, further support for Uniper is needed. This would be also drawn from the KfW line. And then once the equity is in, it is injected, as Markus said. And in relation or in compensation for the losses incurred and from that liquidity contribution, then the KfW line would be reduced as it -- or replaced by equity and mandatory convertible.

Good clarification, Bernhard.

[Operator Instructions]

Alberto Gandolfi, Goldman Sachs. Apologies, I joined the call a bit later, so questions specifically on the profitability of Uniper and the extent of losses the company may still have to endure. So the release said October 1, the date up until which the company would have to face losses, but there are certain conditions they understand. [indiscernible] was saying that could actually reduce this timeline to September 1. So can you maybe elaborate in what scenario the company would have to face losses until September 1 and what scenario until October 1? And why in your understanding hasn't Article 24, 26 been triggered yet? And should we just expect a full pass-through starting on October 1? Trying to gauge here the equity value, clearly, of Uniper.

Germany has indeed amended its energy security laws, and new provisions have now been approved. And Germany could indeed do the full cost pass-through. I think -- and this is, of course, something that the German government should opine on, but they're balancing between how to deal with the societal impacts of the cost pass-through how to use the tools they have available right now. And this is then the 1st of September, 1st of October is -- that's what they have to decide what kind of instruments Germany puts in place and what kind of processes they need for the approval of those. So I think this is something where this is really up to the German government to opine on. But I think we have a lot of understanding and sympathy for that not only are -- not only is it happening, what we say here on the instrument side, but this 90% cost pass-through means that the huge amount actually of additional burden will be put on the German consumer and industry through the increased prices. Then for the question on Uniper's profitability and losses, that is something that Uniper will then specify obviously in the Q2, what is the situation with the company's profitability until the end of June. And to comment on what is then the outlook for the year, if it's possible to give such. And then how the -- again, I don't know at which point you joined, but we have obviously the details in the materials. But to cover the losses, eventually, the losses will be covered by the equity type instrument of the mandatory convertible. And like Bernhard just said, in the meantime, we have the -- we will then have the EUR 9 billion total liquidity facility which can be drawn upon just to cover the cash impact. But eventually, the losses will be then covered by an equity-like instrument. And again, I would emphasize that it is in everybody's interest to minimize these losses. I mean, the burden is going to be taken by somebody. And this is -- these are not normal market conditions. Normally, we would have supplies, and we would have deliveries and they would be hedged back to back. And now, in a situation of disruption and war. So the society as a whole, some parts of it have to carry this additional burden, which means that now the German government is carrying part of it and German consumer will carry part of it. We will, as Fortum Group, we will cover part of it. It's in everybody's interest to minimize the impact, and that's why we are working with BNetzA. That's why we, of course, German government is working with its energy security laws, working with the storage, and EU has come up with its proposals for the winter how to reduce -- how to really now cope and deal with this turbulence in the energy market and energy crisis that we are in. So I think there are a lot of forces that are working to solve the situation in the best possible way. Therefore, for me, it would be very premature to start estimating what the losses may or may not be. But again, I emphasize that taking our responsibility, we tell about the issues openly. And we have now, with the German government, with the good support of the Finnish government in spirit of good partnership, we have put in place these tools that enable us to go through even higher turbulence than there is in the market today.

Do you mind if I ask for a very brief follow-up? And I hope -- you just achieved something extremely important today. So I was not trying to minimize you with the question, but thank you for all the color you provided. Now where I was also going -- if you allow me, like follow-up, is there any visibility at this stage as to what level of profitability the global commodities business of Uniper may be allowed to operate? Is it still going to be a free market after October 1? Or is there going to be -- excluding the trade losses, let's say, from the gas procurement? Or we just don't know as yet?

So we know the conditions after 1st of October, we know the conditions after -- before 1st of October, but I think you're addressing a very important point. When we have a situation where a big supplier is curtailing its deliveries and companies cannot, for different reasons, cannot pass on these additional procurement costs to the consumers, obviously, the market is not functioning as it should. And that's why we have agreed with the German government in this term sheet that we will now work together to develop a plan for a long-term sustainable structure for the gas market. So this is a very key point that you are addressing here. We are not operating under normal circumstances. That is crystal clear. And that is what we have been addressing just in the latest weeks with the gas curtailments. But already before that, with EUR 10 billion -- I mean, for our company, EUR 10 billion liquidity package to deal with the situation. So this just shows we are dealing with extraordinary circumstances. And clearly, the way we have been used to working will not function anymore because such uncertainties have been introduced into the market. So we have to find a new way. And that work we are now committing to, and have that finished until the end of next year.

[Operator Instructions]

This is Sabina Shaqiri from Citi. I just had a couple of questions regarding Fortum's leverage and sort of like at the bottom level, where you expect your leverage ratio to land towards the end of the year? And in addition, you mentioned Uniper has a government sustaining investment grade. Does that also apply the Fortum level? What are the considerations there, especially I know there's also a couple of upcoming maturities? So how do you plan on dealing with those?

So again, we balance our growth capacity. We balance our credit rating quality and the dividend payment capability. Fortum Group had a very strong balance sheet position at the end of the year and at end of Q1. And now, we'll see how the Q2 numbers will look like. But for our business, having a solid investment grade rating is very important to provide the access to capital at an affordable cost at all market conditions. So this is what we continue to strive for and to have ability to invest in growth and to have an ability to pay a sustainable dividend. But of course, all of these have to be now assessed against what has happened in the recent weeks, actually. So it's been a rather short period, and the first thing that we tried to address with this package was to make sure that we stabilized the situation, there's solid ground under us so we can address this situation in the coming months from a position of being stronger than we have been in the last few weeks. Then we'll get to this absolutely very important questions that you raised now in the coming months and quarters to then give clarity on where do we stand and where -- how do we go forward from here. But the key thing was to stabilize, and that has been done with this massive package agreed with Germany, with the good help of the Finnish government.

Okay. And then -- sorry, just a follow-up on that. Do you know where is the majority of the shareholder loan, and all happening Fortum [indiscernible] to convert into equity?

Then the shareholder loan remains.

Okay. So thank you all for your questions. And at this point of time, I thank the international audience for your participation and wish you all a very nice rest of the day. So we will now move on to the Finnish media questions, which we will take in Finnish.

Thank you very much, everybody. [Foreign Language]

[Foreign Language]

Thank you, Bernhard. [Foreign Language]