Uniper SE ($UN0)

Ladies and gentlemen, welcome to the Uniper Analyst and Investor Conference Call First Quarter Results 2026. At our request, this conference will be recorded. [Operator Instructions] May I now hand you over to the Executive Vice President, Group Finance and Investor Relations, Sebastian Veit, who will start the meeting today. Please go ahead.

Thank you, operator, and good morning, everyone. I'm pleased to welcome you to our results call on the first quarter results 2026. Next to me on today's call are Michael Lewis, our Chief Executive Officer; and Christian Barr, our Chief Financial Officer. Michael will present company highlights followed by Christian covering financial results for Q1 2026. And as usual, we will wrap up with a Q&A session at the end. And now, let me hand over to Michael Lewis, please.

Thanks, Sebastian, and very good morning, everyone, from my side, and thanks very much for joining the call. And let me start by highlighting the results of the first quarter, and I'm pleased to say we had a very good start into the financial year of 2026. Our operational earnings in the first quarter matched our expectations as presented during our full year 2025 Investor and Analyst Call in March. Group adjusted EBITDA ended up with EUR 407 million whilst group adjusted net income reached EUR 231 million. And this performance was achieved despite the heightened geopolitical tensions. We know the conflict in the Middle East and its impact on the key global supply routes caused significant volatility in commodity prices during March and uncertainty about the length of the conflict prevails, and this continues to influence market as a peaceful resolution unfortunately, is not yet in sight. Nonetheless, Uniper's operational business has only been affected to a limited extent by the conflict in the Middle East as Uniper has no direct physical exposure to the region. Our gas portfolio is deliberately diversified and the derisking of our portfolio over the past few years bears fruit in the current environment. However, we will continue to monitor the development in the Middle East very closely. The good operating results in the first 3 months underscores what we said during our full year results call in March, namely Uniper is today more resilient than in the past, working with a diversified business model. We continue to work diligently on derisking our portfolio, and we continue to be well positioned to seize opportunities in our core markets in Europe. And with a streamlined portfolio after asset disposals 2026 marks a new baseline for Uniper. And for the remainder of the year, we fully confirm our given full year earnings outlook. Looking ahead, we remain focused on continuously strengthening our competitiveness and our profitability. Our efficiency program is on track and delivering as planned. supported by the first wave of employee departures completed at the end of March. We therefore expect the full cost saving effect to materialize from 2027 onwards. Our financial position remains strong. At the end of Q1 2026, economic net cash stood at EUR 4.4 billion, a plus of around EUR 1.6 billion compared to year-end 2025. In addition to the good operating performance, especially our strong operating cash flow, boosted by our economic net cash position, and I'll pick this up later. We also strengthened our financial position for the next years by extending our EUR 3 billion syndicated credit facility until 2029, providing continued flexibility and stability. On the next slide, I would like to outline how recent market developments have impacted our business. Over the past 2 months, investors and analysts have been looking more closely at the impact of the sharp increase in commodity prices and the resulting volatility in the energy market on Uniper's business performance. I'd like to emphasize a main point straightaway, namely, the derisking of our portfolio has been successful so far. We do not source gas from the Middle East region, and we are not directly affected by the Strait of Hormuz closure, unlike in 2021 and 2022, rising commodity and electricity prices have not impacted our financial position, and we are now even seeing cash inflows from collateral for forward contracts. At Uniper, we typically leverage our portfolio to maximize opportunities during periods of increasing spreads and price volatility. And we have been optimizing hedge positions for our gas -- in our gas midstream operations and power generation business. And new forward deals have been signed with better spreads available in certain periods of preferable price fluctuations. However, the persistent and hard to predict economic challenges in Europe coupled with a cautious approach from customers are the boundaries for the potential to create substantially increased returns and a comprehensive assessment of the Uniper Group's recent earnings trends requires consideration beyond the commodity price perspective alone. During the first quarter of 2026, earnings were positively impacted by favorable developments in electricity prices in the Nordic market driven primarily by weather-related conditions, independent of the increase in gas prices. Overall, through effective forward hedging and strategic position optimization since the beginning of the year, we have achieved improved visibility and enhanced confidence in our capacity to meet the financial outlook for 2026 even if things get bumpier. And whilst the short-term outlook for global commodity markets remains uncertain, the German government has finally offered greater clarity on measures to make the country's electricity market more resilient for the future, which is a significant milestone for the sector. This is good news for Uniper and moves us nearer to engaging in the auctions, thereby executing our main growth investments. The German Ministry of Economic Affairs is seeking final approval for a bill that includes the proposal for the establishment of a permanent capacity market commencing in autumn 2031. Currently discussed draft bill also integrates the construction of new power plants into the support scheme aiming to significantly enhance system stability. The bill demonstrates how the government plans to tackle the risk caused by diminishing electricity baseload capacities following the exit from nuclear and coal in Germany. It addresses the issue of bridging extended dunkelflauten, times when power generation from wind and solar are low as well as increased supply challenges in Southern Germany and approximately 11 gigawatts of new capacity is sought mainly consisting of gas-fired power plants that are hydrogen ready and highly reliable, especially throughout the winter. And Uniper is ready to play its part through delivering its already advanced project developments at its sites in Staudinger near Frankfurt and Scholven in the Ruhr area. Uniper plans to install 870 megawatts of hydrogen-ready CCGT units at each location. We started developing the project early and have also worked closely with the relevant authorities and local councils to advance sections of the complex approval process, successful participation in the planned auctions will allow us to achieve COD before first of November 2031. This leads me to a broader strategic perspective. A successful execution in the planned auctions would materially fill the gap of our planned EUR 5 billion spend until 2030, which about half is allocated to the flexible generation segment for new power plant construction or the extension of operating lifetimes for existing gas-fired power plants. Together with more clarity for the whole power generation portfolio, backed by a newly introduced permanent capacity market this will provide much more visibility for Uniper's earnings prospects into the 2030s. But now back from promising prospects in the present. Turning to the quarterly figures in more detail. I will hand over to Christian. Christian?

Yes. Thanks, Mike, and a very warm welcome to all of you also from my side. As Mike mentioned at the beginning, we started the year in a very good shape, flagging already during our full year 2025 investor and analysts call that we expect group adjusted EBITDA to exceed the EUR 400 million mark already by end of the first quarter 2026. The group's adjusted EBITDA increased by EUR 546 million year-over-year, reaching EUR 407 million. Additionally, the group's adjusted net income recorded an improvement of EUR 374 million and totaled EUR 231 million in the first quarter. This significant improvement year-over-year is primarily due to the absence of nonrecurring items that had previously diluted earnings in the gas midstream business while the greener generation and flexible generation segments recorded good and stable numbers. With that, let's now take a closer look at the reconciliation of group adjusted EBITDA from Q1 2025 to Q1 2026. The waterfall chart illustrates that the greatest year over year increase in earnings was attributable to greener commodities, which reported an adjusted EBITDA of EUR 66 million after experiencing an operating loss of nearly EUR 500 million in Q1 2025. This reflects the digestion of negative effects from earlier optimization measures and the withdrawal of high-priced inventory already absorbed in the comparable quarter in 2025 and the return of our gas midstream business to normalized levels. The Green Generation segment delivered EUR 250 million making up more than half of group's adjusted EBITDA results and matching its performance from prior year levels. As part of our prudent hedging strategy, we managed the current energy price volatility by selling a large portion of our upcoming hydro power volume in the Nordics and in Germany. Uniper's hydro and nuclear electricity generation in the Nordics benefited from the strong prices following a phase of low precipitation. We benefited from relatively better hydrological conditions in the northern part of Sweden, where most of our hydropower plants are located. Our nuclear power plants delivered lower sales volume following an unplanned outage at our nuclear plant in Oskarshamn 3, higher electricity prices compensated for the lower volumes produced. Overall, average realized prices in the first quarter of 2026 ended up markedly above last year's outcome. The increase in Nordic market prices can also be tracked in our updated overhedging. By end of March, locked-in prices were up by EUR 6 per megawatt hour for the supply period 2026 and by EUR 1 each for 2027 and 2028. The German hydro business achieved lower earnings due to lower prices and volumes after lower precipitation affected low flow rates and run of river power stations. Last year's merchant hedging at about EUR 130 per megawatt hour was not repeatable. The flexible generation segment achieved an adjusted EBITDA of EUR 156 million, which was almost on par to last year's results, even though it operated with a smaller portfolio and produced less energy overall. Higher capacity market payments in the U.K. were clearly supportive. The next slide shows adjusted EBITDA reconciled to adjusted net income. Group adjusted net income follows the adjusted EBITDA development. In the first quarter, the adjusted net income improved by EUR 376 million to EUR 231 million from the weak prior year figure. Depreciation and amortization remained at the same level as the comparable quarter. We continue to record a positive economic interest results. The company benefited from lower interest expenses due to the termination of the KfW credit facility end of 2025 and still sizable interest income in the first quarter 2026. Even though this was lower than in the comparable first quarter. The previous first quarter was impacted by positive effect in the economic interest result from the valuation of long-term provisions on the back of higher interest rates. In total, the economic interest result amounted to a positive figure of EUR 28 million. Now over to the operating cash flow on the next slide. This slide shows the reconciliation of the adjusted EBITDA to the operating cash flow for the first quarter of 2026. On the back of a strong business performance, the operating cash flow increased to EUR 1.6 billion. In addition, the operating cash flow was supported by positive working capital effects with a strong cash flow -- cash inflow of around EUR 1.2 billion. The latter reflects the significant reduction of gas inventory from the seasonally high withdrawals and low injections into gas storages in Q1. Together with higher seasonal cash inflows from wholesale receivables, this delivered a positive working capital contribution. And due to extraordinary strong operating cash flow during the first quarter, a front-loaded shape will occur in 2026. With that, let's move to the latest figure on Uniper's economic net debt. At the end of the first quarter of 2026, economic net debt stood at EUR 4.4 billion, reflecting the strong operating cash flow. Cash investments amounted to EUR 141 million in the first quarter. Additionally, the dividend for the financial year 2025, which is proposed to be EUR 0.72 per share or roughly EUR 300 million in total is subject to approval by the Annual General Meeting, which will be decided on May 20. The proposed payments subject to approval by the Annual General Meeting will be reflected in our second quarter financials. On the financing side, we extended the EUR 3 billion revolving credit facilities to 2029 in line to securing short-term liquidity. Uniper continues to operate with a substantial liquidity reserve consisting of cash fixed income investments and undrawn revolving credit facilities. This reserve gives us ample flexibility to drive our strategy forward and respond flexibly to market changes. Last, I would like to conclude my presentation today with a confirmation of the given outlook for fiscal year 2026 on Slide 12. We are reaffirming the financial year outlook 2026. Group adjusted EBITDA is expected to be between EUR 1 billion and EUR 1.3 billion, and adjusted net income will range from EUR 350 million to EUR 600 million. Reiterating what we said during our results presentation for the full year 2025 back in March, namely the financial year 2026 serves as a new baseline on the back of a reduced portfolio after the completion of the executed asset disposal. The results in the first quarter show that we can navigate sturdy through the impacts of the Middle East conflict and which we are and that's our derisking strategy is bearing fruit. On the back of the ongoing conflict in the Middle East, where a peace agreement is unfortunately not in sight yet. Markets remain volatile. Only the effect in the first weeks of the development in the Middle East are digested in our quarterly results. We expect a strong second quarter of 2026 around the same ballpark levels as Q2 2025. We anticipate to see some tailwinds from favorable market developments in our half year numbers. However, we expect this year's earnings shape to be rather front-loaded as we continue to further derisk our businesses, secure earnings and safeguard security of supply. Let me briefly summarize. We had a very good start into the year. Uniper is well positioned going forward, supported by a more robust and resilient portfolio. This strengthens the business model gives us confidence for the remainder of the year and beyond. This concludes our presentation for today. And with that let me hand back to Sebastian to kick off the Q&A sessions. Sebastian, over to you, please.

Thank you, Christian, and we can start the Q&A session now. Operator, I'm handing it over back to you, please.

[Operator Instructions] Your first question comes from the line of Louis Boujard from ODDO BHF.

I would have 2 questions to start with, maybe on my side. You reaffirmed today the full year '26 guidance despite the elevated volatility in gas markets and the escalation in the Middle East conflict. What are the key assumptions behind this unchanged outlook and particularly regarding the gas prices and the storage refilling and also the cost and availability of LNG going forward? And maybe the second question would be more regarding your capital allocation. Economic net cash increased to EUR 4.4 billion, how are you currently thinking about capital allocation in the priorities between growth CapEx, shareholder distribution or eventually any M&A? And also considering your liquidity position that remains very strong under what condition could Uniper consider to be with a more progressive dividend framework after reprivatization process?

Okay. Shall I pick up the first question, and then I hand over the second question to you, Christian. Thanks for the questions, Louis. So on the first question, what are our assumptions? Basically, all of our assumptions in terms of gas prices are built on the market curves. So that's all clear and transparent and all of our forecasts are based on those. As far as gas storage is concerned, clearly, we keep a close eye on what's happening there and the summer/winter spread is critical. But at the moment, all of our assumptions there are built into -- are based on exactly what you see in the forward curves in the market. Christian, do you want to pick up the second question?

Yes, happy to do so, Mike. In terms of the second question and with regard to our very strong net cash position of EUR 4.4 billion, which is clearly driven at the moment by the high cash inflow of EUR 1.6 billion in the first quarter, which is quite front-loaded. As we said, this will revert to a certain extent by end of the year. We will -- we do not expect to significantly further increase the cash flow as we also have to refill storages and also hope to see usage of our cash position for the CapEx. I think as we said earlier in terms of the allocation of our CapEx program, until 2030, approximately 50% of the CapEx program, EUR 5 billion is earmarked for flexible generation, which are -- which is represented by the new build of our gas-fired power plants, which are hydrogen ready, Mike, which you mentioned a couple of times. This is the most important topic, and this CapEx is fully funded until 2030, given the strong financial position we have. I think this is mainly is it. Anything I missed?

I would only add, I mentioned in my speech that the German CapEx strategy is now coming to first auction, 1st of September. And clearly, we have 2 major projects, which we will bid in there. So visibility on our CapEx plans is becoming increasingly better as we move forward. And that's a very big chunk of our liquidity that is planned for investment in those plans.

Maybe just a quick follow-up, if I may, since I asked, but regarding the dividend policy, do you think that you have room to be maybe a bit more generous with the shareholders going forward?

Maybe I'll take that one. I mean, at the moment, as you know, the Bundesministerium der Finanzen, the Finance Ministry is assessing options, as I said 1.5 years ago for our reprivatization. And when it comes to reprivatization, we will have more to say about the dividend. But all I can do today is confirm that we will be recommending a dividend to the AGM of EUR 300 million.

Any decision on any future dividends, as you said, Mike, not been decided yet.

Your next question comes from Anna Webb from UBS.

A couple from me. Firstly, on the new CCGTs, can you give any more detail on what you expect the support to look like? Obviously, I'm sure it's difficult for you to give kind of like exact guidance on what kind of level of support you need, but anything you know about what that might look like, how it might be structured, et cetera? And then kind of related to that, assuming that this is some way above where we see kind of long-term power prices, how you think the government is thinking about affordability of power prices in Germany and in the context of the support scheme. That's kind of the first question. Second question on the trading or kind of current market volatility. Obviously, you've shown in the past, you have a portfolio which is able to optimize the kind of volatility we've seen in the markets, and you talked about the ability to kind of optimize your positions. Just wondering kind of to what extent keeping the guidance the same, which was obviously issued before the current situation. Is that kind of your -- is that baking in uncertainty on the volatility for the rest of the year? Or is there not a -- is it not significant the amount of benefit you can capture from the volatility in market conditions? Basically, just trying to get a sense of how much you can benefit from volatility in the market that we're seeing currently.

Thanks, Anna. Let me come to your first question on the new CCGTs. Obviously, the draft law was recently published, and it's very long and very detailed, and we are still digesting it. What I can say is -- and so it's too early to give any details. What I can say is elements will be rewarded through a capacity payment and elements will be rewarded through market payments. And our bid into that market will reflect our view of the market going forward and what size of capacity payment we require to run the plant. But at this stage, it's too early to say any more than that. On the second question, yes, other things being equal, you can look to optimize and trade in a volatile market. But I should just caution that this market is extremely volatile at the moment, and we are seeing very big price shifts in very short amounts of time based on announcements from the U.S. government and other players. So it's very unpredictable and very large amounts of volatility. So we are not assuming at the moment that we are building in any assumptions about how we might benefit from that volatility. We are managing it. We are, first and foremost, managing the risks that arise from it and ensuring that we deliver our forecasted numbers.

[Operator Instructions] Your next question comes from Ingo Becker from Kepler Cheuvreux.

Also a question on your guidance, please. Are you -- I mean, you say you are guiding alongside the curves in energy markets, which quite clearly have changed dramatically since you first issued the guidance and actually already into that week. Is this also a matter of being perhaps hedged? And if so, should we expect a greater effect in both your Flex Gen and your Greener Commodities segment perhaps later the year or into next year? So is it perhaps just delayed and you can't just really put this into your guidance or indicate that? And my second question would be on the Greener Commodities EBITDA, which was EUR 66 million in Q1. I know trading usually doesn't work that way, but still just asking, should we take this as a quarterly run rate for the remainder of the year?

Thanks, Ingo. I'll pick up the first question. I think you're absolutely right. We are significantly hedged, which is one reason why we are still forecasting that we come within our full year range of EUR 1 billion to EUR 1.3 billion. The price forecast, we do update them regularly. And if there are any major movements, we will obviously incorporate them into our next guidance. But for the time being, based on what we've seen in the market so far, we are confident in our EUR 1 billion to EUR 1.3 billion guidance. Christian, do you want to pick up the second question?

Yeah, absolutely. Happy to do so. Michael, the question Ingo was regarding Greener Commodities. If I've got you correctly, the EUR 66 million is now the quarter of -- the signal for the rest of the year. Point here is, in the first quarter, we saw a very volatile market with the beginning of the Middle East conflict and, therefore, also a change in the curve, as Mike said. Here we see, as I said in my speech, a very front-loaded earnings profile, which we now can oversee in Q1, of course, and also Q2 for the remainder of the year, Q3, Q4. We still have some usual uncertainties. We are broadly hedged, as you know, in terms of our Green Generation and also other topics. But the positions cannot be simply, let's say, multiplied by 4 and then get to the full year's numbers. This is nothing which I would do now, as we still see some uncertainties for the remainder of the year. I hope this answers a little bit of your question.

Your next question comes from Louis Boujard from ODDO BHF.

Maybe 2 follow-ups on my side. One, if you could eventually update us on your medium-term strategy regarding the hedging notably in view of the evolution of the Nordic prices and the power market prices. I understand it was a tailwind in Q1. Most likely it might remain so in the relatively short term. But if we look beyond 2026, maybe '27, '28, I have a little bit of the feeling that you may be a little bit under hedged compared to maybe a normal situation. Is it actually the case? And do you forecast any increase into the Nordic prices going forward? Or should we consider that we are in a normalization environment for this topic? And maybe another one a bit more general, given the focus in the decarbonization flexibility, where do you see the best risk reward for you regarding the renewable, the battery, the hydrogen and the flexible thermal generation, where would be for you the best risk reward for your investment plan going forward? I understand, of course, a large part in flexible thermal generation, but maybe I would like to have a bit more granularity on what you think regarding renewables, batteries and hydrogen.

Thanks, Louis. I'll maybe pick up the second question first. As you know, as we've just said, the lion's share of our investment is in the flexible generation in the forthcoming auctions for German power plants. But we do have significant developments in renewable energy, which is solar, onshore wind, and we classify battery storage in there as well because we do those as colocation projects rather than stand-alone projects. And we have a number of projects in the area of hydrogen. And those are both in hydrogen production and electrolyzer projects, plus we've done pilot projects in storage. And what we're trying to do there is build a portfolio of options. We said right at the very beginning when we launched our strategy 3 years ago, our aim was to rebuild our power generation portfolio and decarbonize simultaneously, and that's exactly what we're doing with hydrogen-ready flexible power generation, closure of coal and rebuilding renewables. And of course, all those are organic investments, so it takes time. Nonetheless, that is happening, and we have a large number of renewable projects currently under construction. We also built the portfolio of greener molecules projects because we want to gradually decarbonize our gas portfolio, but that will take a much longer period given the fact that the incentive systems are less well developed and the fact that the cost of hydrogen is still expensive compared to natural gas in spite of the current inflated price of natural gas. So we will build those options, and we will respond as market incentives come into play and as the market builds. But I should say the lion's share in the short to midterm is in the flexible generation space. Then come on to our hedging, your first question. We are around 80% hedged for 2026, 45% for 2027 and 25% for 2028. That's specifically in the Nordic area. That is in line with our normal hedging strategy. And we believe that's the right hedging strategy for that market given the liquidity in the market. And that does mean we will be able to take advantage of any price developments, positive price developments in the Nordic market beyond this year and especially in 2028.

There are no further questions. I'll turn the call back over to Sebastian.

Thank you. And this would conclude our call today. Thanks, analysts and investors for dialing in, for asking your questions also for Christian and Mike to take us through the call. We will hear each other back on the 11th of August, and then our first half year results. And until then, I wish you a very, very good remainder of the day and a good week. Thanks, all, and bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.