Uniper SE (UN0) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the Analyst and Investor Conference Call of Uniper. At our customers' request this conference will be recorded. [Operator Instructions] May I now hand you over to Stefan Jost, who will start today's meeting. Please go ahead.

Good morning, dear analysts and investors. Welcome to the Uniper Interim Results Call for the first 9 months of fiscal year 2021. Thank you for participating in our conference call today. This time, our CFO, Tiina Tuomela, will guide you through the interim results presentation and answer all your questions. Tiina will start with a brief wrap-up of the key highlights and then focus on the financial data. Tiina, please?

Thank you very much, Stefan. Good morning, everyone, also from my side, a warm welcome. Before I will go into the details of our financials, I would like to start briefly with the key highlights and shed some light on recent developments relating to our portfolio and strategy execution. Uniper's business performance in the third quarter again exceeded our expectations, which led ultimately to the ad hoc announcement 2 weeks ago. Accordingly, our financials should not come as a surprise to you today. Adjusted EBIT increased more than 50% year-on-year to EUR 614 million in the first 9 months of the fiscal year 2021. Adjusted net income increased by approximately 60% to EUR 487 million in the same period. We have increased the outlook for our adjusted EBIT by EUR 250 million, now with the range of EUR 1,050 million to EUR 1,300 million. For adjusted net income, the guidance has been increased by EUR 200 million to a range of EUR 850 million to EUR 1,050 million. Turning now towards our strategy and portfolio development. Today, I will focus on the key events since our half year reporting in August. There have been 2 dominant themes in the recent months. First, the development of the international commodity markets; and second, the federal election in Germany and possible effects on the energy policy. Ultimately, both are linked on the topic of security of supply, which is back on the agenda. With its portfolio, Uniper contributes significantly to security of supply in Europe. With our considerably high gas storage filling levels, we are ensuring reliable gas supply to our customers. I will go more in detail on our role in the gas commodity markets in a bit. When it comes to our power generation, we've delivered significantly higher volumes in the U.K. and German markets from our phosphate assets this year. Based on the improved commercial prospects for [indiscernible] power in Germany, we are now looking at repairing and bringing back online a 160-megawatt pump storage plant, namely the Happurg facility in Bavaria. In the U.K. electricity market, we serve demand big during the recent shortage period in September. The increase in load factors was particularly strong for the efficiency units, one of them being accounted for. At present, there are ongoing discussions between the potential coalition parties of accelerating the German coal phase outcome 2038 up to 2030. As you know, Klaus-Dieter, our CEO, has announced our willingness to talk about how Datteln 4 could fit into a new concept. When it comes to the legal dispute with respect of Datteln 4, in August, the higher administrative court of North Rhine-Westphalia ruled against the defendant, the City of Datteln, declaring the development plan invalid and not allowing an appeal. By now, Uniper and the City of Datteln have filed a complaint against the nonadmission of a net fee. In our view, the issue raised by the court in its ruling require clarification by the highest court, the Federal Administrative Court. Uniper continues to assume that the permit granted to the power plant and the underlying development and regional planning lawful. Despite the currently higher demand for fossil-based energy, we'll continue to drive the decarbonization of our portfolio and to focus on green customer solutions in parallel. Uniper has ended its chapter of lignite-fired power generation in Europe, and handed over its stake in the copper power plant to the minority owner [indiscernible] on October 1. Moreover, as announced some weeks ago, Uniper's engineering service business with around 1,100 employees will be streamlined and repositioned. Engineering competencies will, in the future, focus on Uniper on power plants as well as customers' business in the areas of hydrogen, renewable energy, industrial customer solution and net zero solutions. We are also making progress on our growth investment plans. In the renewable business, our first essential projects are taking shape, even though today, I cannot be more concrete yet. There have been a number of recent news items relating to the development of our hydrogen activities. In Germany, the joint venture [indiscernible] launched it with an integrated value chain, including a 30-megawatt electrolyzer and estimated CapEx at up to EUR 140 million, received funding of EUR 43 million from the German Ministry of Economics in September. Another example is the memorandum of understanding on joint hydrogen projects between [indiscernible] Erste and Uniper. The main aim here is to establish a hydrogen production facility at our coastal site in Wilhelmshaven that is powered by offshore wind farms in the North Sea. Finally, Uniper and Fortum are continuing to work on the expansion of the joint One Team platforms with the 3 key areas: renewable development, hydrogen and nordic hydro and physical trading optimization. The nordic hydro and physical trading optimization area on take shape under Fortum's responsibility. It includes a joint organization for the hydro asset management and operation in Sweden as well as its difficult trading operations. The entity with 400 employees with start operations during the first quarter of 2022. Furthermore, the nuclear dismantling and decommissioning cooperation between Uniper and Fortum is operational since October. The initial focus will be on the technical execution of the ongoing decommissioning program in Sweden, followed by a rollout of services for nuclear generators in Europe. At present, around 1,000 colleagues from Uniper and Fortum are working on over 80 business cooperation projects. Now over to the next slide. One of the key questions this year has been what is and what will be happening in the gas market. The global gas markets are showing a number of signs of a perfect storm this winter season. China, in particularly, but also unexpectedly other markets such as Brazil or Turkey and also Europe have significantly increase in demand this year. Also -- supply is also increasing. It has so far fallen short of expectations. As you can see on the slide to the left, in Europe, rising demand in meeting falling European production, limited pipeline gas supply and significantly fewer LNG cargoes. To the revised supply and even record prices on the spot and forward markets, Europe and Germany are heading into a winter 2021, 2022 with very low gas storages filling levels. Accordingly, the way how temperature develops will have an even bigger impact on the market this time around. Gazprom has ramped up its own production by over 10% so far in 2021, thus above pre-corona 2019 levels. Nevertheless, Russia was criticized for not doing more to improve the supply situation in Europe. Accordingly, there was some relief around Russia from recent statement that it would be able to deliver more gas into the German and Austrian authorities once it has built up its own Russian authorities from the next week on. Nevertheless, it remains unclear where the gas from will be able to deliver significant additional gas volumes to Europe this winter, especially during [indiscernible] and whether Gazprom will then be able to use the Nord Stream 2 pipeline. The 55 billion cubic meters pipeline, representing more than 10% of gas consumption in the EU, with 2 pipes has been completed. One of the 2 pipes is filled with gas and would be ready for commercial operations. In September, Nord Stream 2 AG applied to the German regulator for certification. As publicly stated, it is expected that this process takes us into the year 2022. As a reminder, Uniper is only a financial partner in Nord Stream 2. Accordingly, Uniper's gas midstream portfolio is not directly linked to the availability of the North Stream 2 pipeline. Our gas midstream business positioned itself early on successfully in this market, ensuring sufficient supply volumes for our customers and strong optimization position for our assets. This business only leads to higher earnings in Q3 and ultimately trigger the ad hoc announcement, but it also is the perfect starting point going forward into site and potentially volatile winter season like this. It is quite reflecting in the storage filling levels at the end of the third quarter. While the European average was only at about 75%, Uniper storage levels were significantly higher as shown on the next slide. As usual, you find the main operating indicators summarized on this slide. Starting with our physical storage levels on the next slide. At the end of September, and despite the challenging environment, Uniper storage filling levels were at 95%, and therefore, close to prior year's levels and around 20 percentage points above market levels. Next to the storage filling levels, you'll find a breakdown of the generation volumes in our European generation fleet. Overall, and in line with trends in the previous quarters, we see an increase in power generation of about 16% for the first 9 months in the current financial year. Looking at the underlying movements. Hydro volumes decreased by about 10% year-on-year, mainly caused by a normalization in the Nordics compared to previous year's extraordinary precipitation and snow melt. Prior weather in 2021 led to significantly decreases in inflows and thus limited hydro supply, which will also most likely extend to the upcoming winter period. This development was offset to some extent by facilitization-related 11% increase in German hydro outfit. Water production increased by 6% as a result of better availability compared to 2020, where we faced extended RPGs at the Ringhals and Oskarshamn plant. Gas and coal-fired power up by 34% on a year-to-year basis despite extended availability at our Dutch Maasvlakte 3 power plant. This is the result of consistently low wind power generation, healthy demand, coupled to the economics recovery, but also interconnection authorities influencing our U.K. business. In addition, unlike last year, the Datteln 4 and Irsching 4 and 5 power plants are now fully contribute to the 9-months figures. Our Russian Power segment also is showing an increase in generation volumes, however, to a smaller degree. The 6% increase year-on-year is driven by the recovery of domestic consumption and the growth of electricity exports to Finland and the Baltic countries. The overall growth in fossil-based generation volume translates into a 21% increase in carbon emissions year-on-year. Looking at the full year 2021, we expect this trend to continue. Our specific carbon intensity slightly decreased approximately 435 from CO2 per kilowatt hour. Although we could observe a further production increase, the more or less constant level can be mostly explained with the highly efficient units 4 and 5 at the Irsching power plant site. Moving over to the financial section, starting with a summary of our main KPIs on the next slide. The overall picture after 9 months is first and foremost a positive one. In a volatile and extreme commodity market environment, Uniper managed to significantly increase operating performance. However, looking at the magnitude of some of the presented matrix, it is also fair to conclude that Uniper's financials pretty much captured the level of externality that we saw in the commodity market. Let's go through the metrics from left to right. Both adjusted EBIT and adjusted EBITDA increased by about EUR 200 million compared to previous year. Consequently, economic depreciation and amortization turned out flat year-on-year with EUR 486 million. The adjusted net income followed this positive development and increased by EUR 179 million year-on-year, benefiting also from a stronger economic interest result due to a revaluation of our hydro provision in light of the higher interest rates. While minorities remained stable at EUR 40 million, the economic tax rate increased towards 25% as more earnings shifted towards higher tax countries. Despite a long operational set of numbers, the reported IFRS net income shows a loss of almost EUR 5 billion. As explained in the ad hoc announcement, this metric suffers from a mismatch in IFRS accounting. The deals that Uniper uses to hedge its portfolio are subject to mark-to-market accounting. As commodity prices have judged, the hedge deals have significantly decreased in value. The total nonoperating loss from hedged instrument valuation amounts to roughly EUR 7 billion, and is reflected in this net income figure. However, the corresponding values gains on Uniper's underlying assets like power plants or inventories are not reflected here as their book values are capped at historic costs under IFRS. This mismatch is only temporary and will resolve over time as the position settle. While the impact on the net income is, therefore, of limited relevance, the valuation losses on the derivatives side did have a very tangible impact on Uniper's financial situation. In many cases, the mentioned hedge deals are concluded via commodity exchanges and filter agreements and are subject to hearings. Accordingly, with prices hitting unchartered territory and increasingly out of the money, hedges faces significant various in margin costs over the last week. The finance team worked very intensively and closely with our business as well as financing partners to make sure that those calls and the resulting liquidity risks were properly managed. In order to achieve this in the most efficient way, Uniper relied on the broad set of tools, including commercial papers, bank loans, intergroup loans and ultimately also operational measures within our commodities portfolio. The very high operating cash flow reflects, to some extent, those measures. When it comes to the economic net debt, marketing payments do not have an impact here. With every marketing payments made or received, Uniper recognizes a corresponding margin receivable or liability, which are all included in Uniper's economic definition. Therefore, not being impacted by margining, the net debt developed in line with the very high operating cash flow. As usual, I will now get into the details of the KPIs, starting with the underlying earnings drivers on the next chart. This slide breaks down the year-on-year development of adjusted EBIT into the main effect. The overall positive debt of EUR 209 million after 9 months is primarily driven by our international and gas midstream commodity business, which together showed an increase of more than EUR 460 million. Roughly 2/3 of this increase is related to the international commodity business. In this case, our U.S. and LNG business that benefited from the market development in North America and Asia already during Q1. Uniper's European gas midstream results came in more than EUR 100 million higher year-on-year compared to the already strong previous year. This is reflecting the successful optimization of our flexible asset portfolio and our good positioning in times of volatile and driving gas prices. Usually, in this business, the earnings are materializing rapid in the winter, i.e., Q1 and Q4. This year, however, the gain -- the gas midstream business has already made a strong contribution to the third quarter due to the way the entire portfolio has been managed in this exceptional market environment. Next, European fossil generation is up by almost EUR 70 million compared to all of the strong previous year. Now we can see the full 9 months contribution from Datteln 4 and the gas-fired using power plants, all of which went in commercial operation during the last year. Additionally, increased prices from capacity auctions resulted in higher capacity payments in U.K. for 2021. The positive drivers were partly offset by lower availability of Maasvlakte 3 this year. Our outright generation business is on par with last year's results. On the volume side, hydro is down mostly due to the inflation in Sweden being very high last year, which came down to below normal level this year. However, this is partly compensated by a stronger generation of the lower LPCs for most of the local assets during last year. Price-wise, given increased spot prices and not fully hedged position on our hydro assets, we see a positive price effect here. While on the nuclear side, the achieved price came down. The next driver is so-called carbon-facing impact that we had already flagged in previous calls, including the last one at the half year stage. As you know, this is temporary intra-year effect that will fully reverse in Q4. As CO2 prices increase, so do our CO2 provision during the year, leading to higher expenditures in the first 9 quarter. The offsetting gains on our govern hedges, however, are not recognized within adjusted EBIT until the hedge deal settles, which is in Q4. Given the increase prices and the high total generation volume of the 9 months, the CO2 phasing effect reached almost minus EUR 450 million in absolute terms, which is about EUR 320 million more than in the previous year. The contribution from the Russian power generation business developed in line with last year's results. Here, a negative effect offset the positive performance in the underlying Russian business. The additional contribution from Ringhals 3 and higher day ahead market prices in Europe compensated for lower earnings from Shaturskaya, Yaivinskaya plants, which all moved from the CSA capacity market team into the comps team. Now over to the operating cash flow. The operating cash flow after interest and taxes amounted to roughly EUR 2.2 billion at the 9-month date, which is extraordinarily high. Looking at the waterfall that derived the operating cash flow from the adjusted EBIT on the left, there are around 2 elements that stands out in the terms of magnitude. The first one is the so-called other category, which amounts to EUR 927 million. This category summarizes all CO2-related provisions and working capital movement. As already mentioned, we had quite high CO2 provision based up in the first 9 months. Accordingly, our stores are burdening the EBIT but are not as effective. This leads to a significantly positive effect here. In principle, at some point, there would be an offsetting effect in these categories once the actual CO2 emission certificates are delivered into our balance sheet. However, as you know, this doesn't happen before Q4. Accordingly, we see a very positive effect here that should largely balance out at the full year stage. Let's have a look at the second large driver on the operating cash flow. The net movement in the working capital amounting to EUR 615 million. This figure reflects ultimately the way how the individual gas assets, including authorities and contracts as well as market channels have been utilized over the last 9 months and particularly in Q3. Given the extreme and [indiscernible] commodity market development, the optionality in the portfolio was set in a way that emphasized prudence and liquidity. Yet the business contributed to meeting its funding requirements before but also after the 30th of September. Next, the development of the economic net debt. After 9 months, the economic net debt came in at EUR 1.4 billion, which is about EUR 1.6 billion lower compared to beginning of the year. Obviously, the main driver here is the high operating cash flow. This is by far overcompensating the payout for dividends and investments. Lower pension provision and asset retirement obligation further contributed about EUR 450 million to the positive development of the economic net debt. In both cases, this was due to the rising interest rates. With regards to the pension provision, the underlying interest rate increased from 0.8% to 1.3% in Germany and from 1.5% to 2.1% in the U.K. For the sake of clarity, please note that the category drivers includes proceeds from the sale of our last Europe and [indiscernible] asset, Opal, that took place end of September. Given the positive earnings outlook for the remainder of the year, we expect the economic net debt to end up at a more than comfortable level at the year-end as well. Admittedly, not as current record low levels. Having said that, let's have a look at the updated earnings outlook on the last slide today. As communicated in our asset announcement, we've raised our full year outlook for 2021 adjusted EBIT and adjusted net income by EUR 250 million and EUR 200 million, respectively. Hence, we now expect an adjusted EBIT between EUR 1,050 million and EUR 1,300 million. And adjusted net income in the range of EUR 850 million to EUR 1,050 million. The reasons for the higher outlook are both a stronger than anticipated Q3 and higher expectation for the rest of the year. Aside from the revision of the carbon phasing effects, we expect Q4 to turn out better on the back of our gas midstream and fossil generation business. One final remark on the bandwidth of our outlook. Depending on how prices move until year-end, earnings could shift between 2021 and 2022. Given the current tightness in the commodity market, those movements would be quite material. Therefore, even though we feel generally very comfortable with the new outlook, we did not narrow down the bandwidth of our guiding range at this point of time. That brings me to the end of my presentation today, Stefan, back to you.

Thank you, Tiina, and it's now time for our Q&A session. Therefore, happy to take your questions. [Operator Instructions] Operator, please.

[Operator Instructions] And the first question is from [indiscernible] with [indiscernible].

Yes. Two questions on my side. The first one is on your economic net debt. I was just wondering how clean is this operating cash flow number of EUR 2.2 billion, i.e., how sustainable is it? And how much of this do you expect to revert in Q4? I mean just now, Tiina, you just, I think, hinted that full year net debt will not be at the level it is now. If you could give us an idea where you see full year net debt that will be quite interesting. The second is a more general question on the European gas market. I mean, obviously, quite extraordinary times there. I believe one of your traders has described the market as not functioning properly anymore given the extent of variation margin flows that are there that was certainly Bloomberg headline that picked up. Do you believe that if Nord Stream II work to get its operating license earlier than currently anticipated? And I believe additional Russian gas flows have always been linked to receiving this operating license. Would that be enough to bring the European gas market into balance even if we were to get a cold winter? Or would even this be insufficient if we are in for a cold winter? So your general view on the supply-demand balance in the European gas market that will be very interesting.

Hello, and good to have you today in this call. I'll take your first question about the economic net debt. And the question was that how in a way sustainable the numbers are, if we look at the full year forecast? As you know, we don't provide any forecast for the specific economic net debt numbers. But clearly, we can see that the current market is very exceptional. And therefore, we could see that the also -- our measures to provide the liquidity to meet all the margin cost. So has been, in a way, exceptional. So in that sense, we would anticipate the cash flow be kind of more normalized level. And maybe one way to look at this, if we look at our EBIT guidance range, our depreciation levels are roughly [ EUR 700 million ] by contacts, giving us EBITDA and then quite good cash conversion rate. So that is in a way with the normal level. But as I said, a very big volatility still in the market. So we need to see how that goes. But clearly, would emphasize that this has been a special quarter. Then I think the other question about market and the functioning. So I think it is fair to say that the movement -- first of all, the increase in the prices have been very, very exceptional. So power and gas prices increased by 5 to 6 folded if compared to the previous year. So putting much pressure to the companies, not only the producers but particularly to the retailers. So the margin calls surely, I think, has, in a way, limited how the players could act in the market and what we see is that also the liquidity in the market started to be fairly small. So it is -- it has been, in a way, hopefully, not continuing. Then, of course, what comes to the Nord Stream II, so if that would go into the operation, so it would take a few more supply and take the market to the right direction. But I think it is still questionable whether it will fully change the picture. And that, of course, depends also that what kind of winter, how the demands supply overall will develop.

So if we're going to get a cold winter, then Nord Stream II will not be able to balance the market. Is that what you're saying?

Well, I would say that it is still questionable because there are also some other impacts in the market. So how the demand -- demand and supply, how much we get LNG. So as we saw in Q3, very little LNG coming to the Europe. Now lately, I think the prices are supporting, and we can see that also LNG coming to the market. So I think we need to look at overall. Clearly, it would help, but the situation and the picture is more complex.

The next question is from James Brand, Deutsche Bank.

Well done on the good performance and for having some gaps, hopefully, keeping us all warm over the winter. Two questions from me. Firstly, I'm just going to try a different angle on the net debt question. I can understand it's all very uncertain. So maybe you won't be able to give a precise number, but you seem to suggest in your comments earlier that of the EUR 900 million of other, most of that was going to -- most, if not all, of that was going to reverse. I was wondering whether I could also perhaps ask about the working capital improvement of EUR 600 million. You don't normally see that in the 9-month stage. I think you might have slightly changed your definition in terms of how you present net debt, dealing with margins. So maybe that made the difference. But that EUR 600 million working capital move that we've seen in the 9-month stage, maybe you could comment on how much of that do you think might be sustainable? That's the first question. And then secondly, you obviously give a very precise guidance on your hedging for the outrights. But spreads, as you showed, spot price dark spreads as you showed in your charts have increased very substantially, particularly for the year ahead. And so I was wondering whether you could maybe give us a bit of color on the extent, I guess, to which you might have capacity that you can be putting into the markets benefit from that? I presume that not all of your capacity is hedged for the whole year or maybe you have some open positions anyway. But if you could just give us some color on how much capacity might not be fully hedged for next year, that would be really interesting.

Hello, James, and thank you. Thank you for your questions. So if I got it right, your first question relates to cash flow and items what we have in other, this EUR 900 million. So...

Sorry, the first question, other I think you were clear, the question is more around the EUR 600 million of working capital.

Okay, okay. Very good. So clearly, as mentioned, the working capital measures were bigger in this quarter. I would say that normally, what we'll do is that these kind of measures are taking in the last quarter. Clearly, the working capital measures will support to our liquidity situation when we got this additional margin call. I would say that the main in a way action, what we did actually was on the funding side. So we increased our funding with bank loans, commercial paper, intergroup loans. But also then we did some operative measures to close the part of the remaining gap and also improve our additional cash situation. I think the operating measures or working capital measures were mostly related to our gas business. So there, we have a certain, in a way, contract where we use the flexibility when it comes to the timing of the payments of our supply and sales. And also, we have some assets and inventory. So it could be, in a way, converted in easy way to the cash in a way to reduce the balances and improve the cash. Then the question about hedges. So I think the hedges is to secure our cash flow and earnings for the future. And usually, as you know, we will start to build the hedges for a couple of years beforehand. But also based on what is the liquidity in the market, how we could, in a way, build that. And in general, the hedge levels we recall last year, it was COVID. So also have relatively high hedge levels. In the spread side, so we see in general, the better spreads. So -- but to recall that they are not directly to the volume related. So for example, last year, so we, in a way, do the deals and put the hedge all the different legs to power, the fuel and the CO2 in a way locked. But then, of course, we use the optionality. So whether we will produce or whether we will buy from the market. And for example, last year, we made very good results by using this optionality. So the spreads in general, they are not directly linked to the -- our generation volumes. I think going forward, we see the spreads, and we have capacity now coming from authorities. So it's, in a way, available, but we'll probably don't give, in more detail, in a way, numbers on that. Of course, very important to keep our power plants in [ Benelux ], if needed. And then we can capture any possible additional pipes or give the security of supply to the market.

The next question is from Sam Arie, UBS.

Congratulations on more strong results. I wanted to just dig into the Global Commodities business, if I can, with a couple of questions. And the first one I think is about how much of the current strong performance is really just to do with the exception of markets this year? And how much could we think of as kind of sustainable? And then the second question is -- If we think about the Global Commodities activity, I mean, it's been a huge part of the story for Uniper in the last 5 years. I suppose it's easy to forget, but kind of the reason for the creation of Uniper was I suppose E.ON didn't like these businesses at the time. But things have changed massively, haven't they in the last 5 years? But the other thing that changed is your strategy and your strategy within the Fortum Group of focusing more on kind of clean activities going forward. So is their kind the of tension between the fact that the Global Commodities business is performing really, really well for you and producing a lot of earnings and cash flow, but kind of isn't really fitting very well with the strategy? And so my second question here is are you going to sell the Global Commodities business because I'm sure that you can't answer that question, I wouldn't answer that question. But could you talk to us a little bit about how sort of essentially integrated, the Commodity business is with the rest of your activity? How much of it is really an essential route to market for your power assets? And how much of it can we think of as a sort of stand-alone separate business that could exist within Uniper or could exist somewhere else in the future?

Hello, Sam. Good to have you today in our call. So I think your first question relates to Global Commodities and the extraordinary income, what we have made in last year and also so far this year, so whether this is sustainable. I think it is fair to say that this kind of profit levels really relate to the market conditions. I think also, in a way, reflects that the -- our ability to capture, utilize our flexibility and the optionality, what we have. So really happy how the assets and contracts are used. But I think that what comes to our guidance for longer term. So I think our old guidance what we have given roughly EUR 350 million to EUR 500 million of EBITDA per year still remains. And depending, of course, how the market develops and what is the volatility. So we assume in the longer-term more kind of normal year. Then I think in general, we are very happy to have Global Commodities in our portfolio and see a lot of synergies, how it's linked to our innovation portfolio gives really the access to the market because I think it's not only about the hedging and optimization but also looking to the future. And there, I think that what we have already done is that our customers want the green products. We are providing -- already now offering the CPA. So I think this is kind of One example and also other green products, but we are developing as an very important for our renewables and hydrogen business. So to finance and attract in a way, put the renewable project, wind project, solar project. So it is important to have the access to the market. So I think the Global Commodities is essential. Likewise, in our gas business. So we are aiming to get that more green. So our hydrogen business and so forth to be able to utilize the infrastructure, the competencies, so very important. So pitting it in very short, it is the commercial heart of our unit group operations.

Very, very helpful and very clear. So to summarize, the ongoing guidance is still valid at sort of EUR 350 million to EUR 500 million even though this year might be sort of double or triple that by the low end of the range and very much a core part of the business. Very helpful answer.

The next question is from Deepa Venkateswaran, Bernstein.

I have 2 questions, Tiina. So the first one is I'm going to come back to the net debt. So if I look at your disclosure later on in the deck, there's basically EUR 5.3 billion of margin receivables. So that roughly on a year-on-year basis, EUR 4.2 billion. So can I assume that, that's the variation margin outflow you've had in the year? And now because you show these assets, of course, that's not included in the net debt. Can I check how the ratings agencies look at this? Or would they basically be looking at your net debt differently and in your post variation margin? And what's the timing of unwind of this outflow? So that's my first question on the net debt and variation margin. And second question, what are you hearing about how the EU Commission is thinking on the green taxonomy with regards to nuclear and gas? I know the position was supposed to come out later in the end of the year, but any updates on how their thinking is developing on these 2 technologies would be great.

Hello, Deepa. Thank you for joining our call for today. So to your first question, so the net debt in relation to EUR 5.3 million margin receivables. So that is clearly reflecting the payments which we made mostly to -- related to power and gas for the payments we have made and also put them in our receivables. I think it is also worth to mention, there are margining payables and the net amount of that is EUR 3 billion. And the -- in a way, how that will roll over, of course, it is in relation to how our hedges will roll from ON. And clearly, of course, the winter is the important time when the backlog will happen. So I would say most of that would go in the next winter, but also something going even further because, of course, hedging is done for the longer term. I think when it comes to our rating and how they look at them. So if they follow pretty much our view when it comes to our net debt definition because I think this is the money what we have paid or received and will roll over. So the swing spots are there. So they are temporary, but not impacting the net debt. Then a question about the taxonomy. So I think we are also waiting for announcements and of course, it would be very important to get the clarity as soon as possible. I think the current situation where we have had pretty high prices and also supply demand was only matching. So hopefully, that will bring -- and I believe also it will bring the importance of the gas and also nuclear so that we meet the nuclear being CO2 production form, gas, very important, particularly in the transformation form. So I think that it is important to recognize the role in this transformation and look at the broader picture. So as we know that delegated is expected later on. But very much believing that this current situation brings to security of supply and alternative in a way, all forms of production folks how to take this transformation further.

The next question is from [ Nico Helente ], Bank of America.

I wanted to ask a quick one on the Nordic hedge prices. It looks like quarter-on-quarter, they are a bit down. So I wonder if you could explain why is that?

Thank you for the question. So the question was the hedges in the Nordics and why they are the level in the way remaining as they are?

I think quarter-on-quarter, prices are down a couple of euros for '22 and '23. Yes.

Of course, one reason is that the overall hedge levels are very high. So before they roll off. So it is not that much open, what could improve the price. In addition, we have the proxy hedging impact there from the earlier years, which will burden the number. And also, if we look at the areas what we hedge in Sweden, so we are mostly the price areas 2 and 3 and particularly the price area 2, we have seen very low prices. There is unfortunately a lot of, in a way, limitation in the connections between the different areas and the areas 2 has really burdened also our hedge prices.

[Operator Instructions] And the next question is from Andrew Moulder, CreditSights.

Yes, it's Andrew Moulder at CreditSights. Yes, I understand what you're doing with the net debt. That's fine. I just want to understand more about what's actually happening with the cash flows. I'm sorry if this is a bit of a detailed question, but if I look at your cash flow statement on Page 31 of your report, particularly if I look at the working capital movements there, I can see that there's an operating receivable of EUR 94 billion and an operating liability of EUR 101 billion within the working capital. Could you perhaps just clarify for me exactly what they are. And then there's 2 items further down, which are the purchase of securities of EUR 4.8 billion and the proceeds from new financial liabilities of EUR 4.9 billion. I mean I guess that's all to do with the margining and the cash flows around the margining and the hedges. But could you please just explain to me what those items are and how it all fits together?

Thank you, Andrew. So looking at the kind of the individual numbers in the cash flow. So I think the margining is certainly one item, but I think that it also includes the derivatives. So derivatives is assets and liabilities, which are at the very high level on a gross level, but they will let out, as mentioned, this EUR 7 billion derivative loss. So therefore, I would, in a way, maybe guide you to look at the waterfall in our IR presentation that might be more helpful. So it doesn't include this mark-to-market valuation of the derivatives. So there you can see the overall operating working capital positive effect and the magnitude, which in a way gives the better picture because certainly, this quarter, the impact of the mark-to-market derivative values are related to think maybe the underlying in a way drivers.

We have a follow-up question from Sam Arie, UBS.

Just, Tiina, a follow-up question that perhaps should have asked last year. But it was reported, I think, around a year ago that Centrica was looking to sell some of its LNG activities. And I'm hearing you say that the LNG and the commodities is core and obviously U.K. is an important geography for you. I was just wondering, did you have a comment if you were interested in those types of assets? Or did you look at the Centrica assets that were for sale or any update you can give us on that particular situation would be very interesting.

Thank you. Thank you, Sam. Well, I think when we discussed about our core. So I said the Global Commodity as a whole. And as usual, we do not comment any speculation of the individual assets. So frankly, I would have expected you to ask about the other assets actually, not the LNG, but asset, we don't comment any regulation.

We have no further questions on the line. I hand back to Mr. Jost for concluding remarks.

Thank you very much, everyone, for your questions and wish you a nice day. We conclude the call here. Thank you very much.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.