Uniper SE (OTC:UNPRF) Q4 2021 Earnings Conference Call February 23, 2022 8:30 AM ET
Klaus Dieter Maubach – Chief Executive Officer
Tiina Tuomela – Chief Financial Officer
Stefan Jost – Executive Vice President of Group Finance & Invsetor Relations
Conference Call Participants
Deepa Venkateswaran – Bernstein
James Brand – Deutsche Bank
Sam Arie – UBS
Robin Nascar – Credit Suisse
[Operator Instructions] May I now hand you over to Stefan Jost, EVP Group Finance and Investor Relations, with that the meeting today to start.
Thank you, Operator, the analysts, and investors. I would like to welcome you to this morning’s conference call on Uniper’s 2021 results. Our CEO, Klaus-Dieter Maubach and our CFO, Tiina Tuomela are here with me today. Klaus-Dieter will start with a view on the current situation at the Russia – Ukrainian border and the implications for us, before moving to the key events in fiscal year 2021, followed by an update on our ambitions and strategic goals. Tiina will then explain the key elements of the 2021 financials and conclude with an earnings outlook for 2022. As usual there will be a Q&A session in the end. Klaus-Dieter.
Thank you, Stefan. Good morning, everyone and welcome. Thank you for joining our call today. I would have loved to dive right into the usual topics of a regular full-year results call now. However, I obviously cannot leave the events of the last days go unaddressed. Let me be open with you. The situation at the Russian – Ukrainian border leaves us at Uniper profoundly unsettled. And please note that I’m saying this as the CEO of a company, where thousands of colleagues work hard every day to contribute a significant share of profits, either in Russia or based on longstanding ties with Russian partners that go back more than 50 years. During that time, a lot has been achieved for all parties based on foresighted collaboration, mutual agreements, and trustful dialogues.
My experience is that if solutions based on those principles are not possible, this usually results in consequences with significant costs for all sides involved. Looking at Uniper now, while we are certainly hoping for a de -escalation, we need to be clear about the risks and the potential mitigation tools at our hands. The following chart summarizes the main aspects in this regard. Uniper’s key exposure to the situation at the Russian – Ukrainian border can be categorized into four areas.
The first one is familiar already. A further escalation might lead to more volatile prices and therefore, higher margining and liquidity needs. Tiina will elaborate later on the current margining situation, the liquidity headroom, and the measures that Uniper has already implemented in this context. While we cannot predict how prices will develop going forward, it is good to see that the last days went by without turbulences and that we are prepared. Moving over to Nord Stream 2. It probably did not come as a surprise that Nord Stream 2 got immediately into the focus of political counter actions. As you all know Nord Stream 2 is completed and ready for COD once the regulatory requirements are met i.e. the certification process is completed.
Yesterday, the Germany government has taken steps to put this certification process on hold until further notice. Let me remind you that Uniper is a financing partner of Nord Stream 2. The capital has been provided and we are already accruing interest income. The interest income becomes cash effective after certain milestones, out of which the commercial start is the most relevant one. We are evaluating the impact of yesterday’s decision on our claims towards Nord Stream 2, including potentially impairment implications from a delayed COD. The third section comprises possible tensions against partners of Unipro and Uniper, including financial institutions. As of today, we considered unlikely that the business of Uniper or Unipro could be significantly affected in this regard. The last category is related to possible interruptions of Russian gas supply in our portfolio. Depending on the situation, Uniper could be required to source at high market prices to ensure security of supply for our customers. Whether this would have material implications depends on the duration and the magnitude of the interruption. In less severe cases, Uniper could utilize its flexible assets to cover for the shortfall on the other side. In more severe cases, regulatory measures would become likely, which would reduce demand and hence, close the supply gap to some extent. When it comes to the likelihood of such interruptions, the recent public statements on the Russian and European side provide some comfort.
It is apparently understood that maintaining the supply into Europe is in the interest of all the sides. As we have stated in the past, throughout over our 50 years of partnerships. Gazprom has always been a reliable partner, who delivered as promised. On this positive note, I would like to conclude this topic for now. Let me assure you Uniper is closely monitoring the situation, evaluating mitigation measures. We will keep you updated going forward. However, while this situation is certainly getting our highest attention, we need also to keep our daily business and the strategy execution on track. Let’s move over to this part of today’s presentation, starting with an overview of the key highlights in 2021. For the energy sector, the year 2021, more than very clear reminder of the major challenge in our industry. Pushing decarbonisation without sacrificing security of supply. Accordingly in 2021 we saw many countries and jurisdictions taking new measures and defining new targets to hold global warming. However, at the same time, 2021 was the year in which the risks of insufficient energy supplies led to unprecedented high and volatile commodity prices around the globe. This extreme volatility has pretty much manifested itself also in Uniper’s financials. Looking back, Uniper had in total six announcement in the last 12 months. When it comes to the financial year 2021, we raised our profit guidance twice. However, we also needed to take far-reaching liquidity measures and finally, communicated the first dividend cut in Uniper’s history. I fully understand if people outside of Uniper have a hard time to grasp the overall meaning of those messages in terms of Uniper’s financial situation. Let me help you here by taking you step-by-step through the key elements.
Ultimately, we recorded an adjusted group EBIT of just under €1.2 billion for fiscal 2021, which is 19% above the already good prior year results. This positive earnings development showcases once again the ability of our portfolio to capture value in volatile times, especially in our commodity business. Tiina will go into more detail on our 2021 performance later. However, this all came at a price. The hedging positions required liquidity management on a scale previously unknown to Uniper. The financing measures we took around the end of the year involving both our major shareholder Fortum and banks expanded our liquidity framework by €12 billion. However, while our earnings performance indicators reflect actual economic value captured in 2021. That liquidity needs linked to margining up only temporary.
Accordingly, Standard and Poor’s just confirmed our BBB flat credit rating in January 2022, underlining the fact that we run a structurally secure business in markets with exceptional price fluctuations. Even though only temporary in nature, we need to properly and carefully manage those liquidity risks going forward, especially the current geopolitical situation. This involves not only our internal business doing, but also our dividend. Accordingly, Uniper’s management will propose to reduce the dividend from prior year’s €501 million to €26 million for the fiscal year 2021, which represents the minimum dividend in line of Germany Stock Corporation Act. This proposal has been aligned with our majority shareholder Fortum, and will be brought forward to the AGM on May 18th.
Ultimately, the purpose of the dividend cut is to increase the resilience of Uniper’s investment capability in a highly volatile environment. Despite turbulent energy markets and often uncertain regulatory conditions, we have a clear focus on leading Uniper into an era of decarbonized energy supply. A focal topic of the Uniper board in charge since spring 2021 has been to speed up the strategy execution. Uniper has accelerated the [Indiscernible] exit, and it’s now well ahead of the original plan. In addition, we have empowered the Uniper organization, for example, by establishing joined Uniper and Fortum teams for hydrogen and renewables in order to implement growth initiatives more quickly in the future by fully leveraging the capabilities in both companies. Even though more renewables will be the most important building block for the energy transition, the transformation cannot be achieved without maintaining security of supply. For the foreseeable future gas will play a crucial role here in 2021. We could see that this view has become more and more consensus across politicians as reflected in the German coalition agreement or the EU taxonomy discussion.
At the same time we saw that minor shifts in global supply and demand balance, rising geopolitical uncertainties, and unplanned outages have led to unprecedented gas price volatility. And the outlook for the gas market is not very promising. The European gas market remains vulnerable. Current reserves in European storage facilities have never been lower in the last 10 years. Comparatively, warm winter temperatures and significantly increased energy imports are currently slowing down and rapid decrease of reserves. According to current calculations, supply we will be sufficient to meet Europe’s gas needs in the current winter season. However, uncertainties are growing as to whether market conditions in the upcoming summer season would allow for a sufficient refill of the European gas storages for the next winter season. And the concerns about Europe’s energy supplier will prevail for the time being. In this situation, Uniper is one of Europe’s largest gas traders and gas storage operators, plays a vital role in contributing to a secure and sustainable energy supply. Uniper continued to deliver reliably in our European core markets in 2021. In contrast to many of our competitors, we started with full gas storages into this winter. The LNG business offers additional flexibility. [Indiscernible] Uniper has further expanded the number of traded LNG cargoes to over 350 in 2021. Gas will contributes to the liquidity of markets and at the same time will generate high returns. Those returns are needed to decarbonize our portfolio.
Before I elaborate on our strategic progress, let’s have a look at the broader picture in terms of sustainability where we have made significant progress in 2021. The topic of ESG has become an integral part of our daily work, let’s start with the needs, which plays a central and integrated role in our strategy. As you already know, we are in the process of transforming our portfolio to ultimately become carbon neutral in the long term. This transformation comprises of three dimensions: Exit, transform, and expand. With respect to these dimensions, we have not only accomplished a lot today, but we also have a lot planned for the upcoming years, as I will explain to you in more detail in the slides to come. Beyond, as part of the annual report we published, not only our first EU taxonomy disclosures, but also our first TCFD reports today. This again highlights the importance of environmental factors and the transformation as part of our strategy going forward. Now, over to our major achievements in the broader social area. For the second time since 2018, Uniper has received the corporate health award in the energy industry category, which is the best known and most successful initiative in the field of occupational health management in Germany. The results of the external audit reflects Uniper’s great efforts to promote and maintain the health of employees, especially during the pandemic. This is directly linked to the introduction of our new normal work style that provides our employees with maximum working flexibility for the future. It includes, among other things, providing economic working equipment for home use to our employees. Moving from health and safety to equality. Uniper’s board and management approved recently a company-wide Diversity, Equity & Inclusion strategy, which is divided into five key areas of action. Talent management, leadership, organization, marketplace, and society.
The strategy provides a concrete framework to improve our performance in those five fields. Finally, we implemented a talent development program called Evolve, that supports the development of our future talents towards leadership positions and expert roles so that they can drive the energy evolution and successfully lead our company into carbon neutrality. Moving to the last block on the slide, there have also been some changes on the governance side. Since last year, the long-term incentivization for executives is linked to certain non-financial targets. One is the successful strategy execution toward decarbonization. The other is the so-called ESG target for the 2022 [Indiscernible]. This E SG Target has been defined as the absolute CO2 reduction of the European fleet over the next three years. To make it absolutely clear, with this element, 20% of the long-term bonus [Indiscernible] for Uniper’s senior executives will be directly and quantitatively linked to CO2 emissions. Diversity and expertise is also important when it comes to our governance bodies. We see a positive development here. With Tiina as our CFO, Uniper has one female member in the board of management, which translates into a quote of 25% female members. When it comes to the supervisory board, the knowledge about climate-related topics becomes more and more important. Therefore, Uniper updated the competency profile for the supervisory board accordingly last year, and also foresees an increased interaction on climate topics in the supervisory board. Last, in 2021 a sustainable development committee was established at our Russian subsidiary, Unipro, to provide executive support to the Board of Directors in the field of sustainable development.
Let’s focus now on the part of ESG that is most important two years ago, the environment or more concrete decarbonisation. Let’s start with an overview of our CO2 reductions targets, which form the cornerstones of our transition path in line with our strategy, empower energy evolution. As you already know, our ultimate goal is to become carbon neutral by 2050 on group level. For the European generation, we are even more ambitious and committed to be carbon neutral by 2035 already. One target that is probably new to you, is our scope 3 target, which has been published in December 2021. [Indiscernible] level, we commit to reduce our scope 3 emissions until 2035 by 35% compared to the baseline 2021. While our scope 1 and 2 emissions are mainly caused by our power generation, our scope 3 emissions are primarily connected to our global commodities business. To achieve this target, we will work together with our producers and customers to reduce both upstream and downstream emissions across our value chains. Furthermore, we will gradually transfer our commodity portfolio into low end, no carbon alternative. As I already said, our transition towards carbon neutrality is built on three strategic dimensions: exit, transform and expand. Let’s have a look at the exit filler on the next slide. In January 2020, we announced our initial coal exit plan for Europe. Since then, we have been able to accelerate the phase out even further and shut down coal plants earlier than originally planned. This acceleration has secured a roughly 40% additional CO2 reduction or approximately 15 million tons in absolute terms. To provide you a bit more details, we took the following steps in 2021. In April at the second round of the German coal exits tenders, Uniper’s bid for ValidSoft was accepted. The electricity generation was seized early December 2021 instead of 2022. In July, the solvency power plant was awarded closure by the German federal network agencies and will be taken off the grid end of October 2022. In August, we announced that we will close one of the 4500 Megawatts of units over reckless. Have coal power plant already end of September 2022. And the remaining units end of September 2024. Instead of autumn 2025.
In October, we ended our lignite chapter in Europe and transferred the scope out power plant to Saale Energie GmbH in line with our initial plan. In December, it was decided the [Indiscernible] starting our five will end its commercial operations, in 2023 instead of 2025. This means that only Datteln 4 and Maasvlakte 3 remain in operation after 2024 in Europe. As stated in the past, with respect to Datteln 4 Uniper’s open for discussions with the new Germany government, that communicated its ambition to exit coal ideally by 2030 already. Finally, you’ll see the 2.4 gigawatt lignite exposure in our Russian entity Unipro. As I’ve said in the past, every part of Uniper needs to contributes to our decarbonization target. In this regard, we are actively working in close collaboration with the management of Unipro towards that goal. However, as you know, the regulatory framework for the markets are different here compared to Europe. Accordingly, we need to reflect different circumstances in our decarbonization plans and [Indiscernible] for Russia. Nonetheless, we clearly see that the dynamic is picking up here, which is fully supported by us. When it comes to decarbonisation, we must not only exit coal, but also transform and expand the other business areas. This brings us to the topic of capital allocation going forward.
The following slide provides an overview about the magnitude and the areas of CapEx going forward. We expect to increase our CapEx in 2022. Maintenance and replacement CapEx will increase some what to roughly €450 million. More extensive mega measures are scheduled for some of our gas product power plants as part of the multi-year maintenance cycle.
However, looking beyond 2022, our structural guidance for maintenance and repair CapEx in normal years remains at the €400 million mark. When it comes to our growth CapEx in 2022, we expect the investments to end up above the €500 million mark. This is a considerable increase compared to prior years and underlying our ambitions to grow. In 2022, the growth CapEx will be spent, among others, on our new gas power plant, Irsching 6 and Scholven 3. Going forward, all of our CapEx will be spent within one of the three areas on the right side. Not all of that will trigger material investments in the short-term. The year 2022 is key to push those projects significantly forward in order to fill up our CapEx pipeline in future years. The first priority is to get investments in onshore wind and [Indiscernible] on the ground in Europe. The second pillar, clean thermal generation, aims to further develop our existing platform and competencies in [Indiscernible] power and heat generation towards a lower carbon offering for Green customers. And the third focus area is in gasses. Here, we want to drive market development along the value chain for sustainably produced hydrogen and bio gases. Let’s go into those topics one-by-one. The joint Fortum and Uniper team for wind and solar which is steered from Uniper’s headquarters in Dusseldorf will comprise more than 100 employees in the course of 2022. And the joint team, those colleagues develop assets that ultimately will trigger investments either by Uniper or by Fortum depending on the characteristics of the project.
An important step was the investment decision taken in December 2021 to commence the construction of a 380 MW wind farm cluster in Western Finland. The project will be powered by 56 turbines supplied by Nordics. It will generate around 1.1 TW a year and is planned to come on-stream in the second quarter of 2024, given the location and the fact that the health and key municipal utility is both an off take as well as a 40% part of this project. This first investment will be realized by Fortum. This is an important milestone and signal that the team is delivering on. The wind and solar team is currently developing a number of projects in the defined European core markets, which can be seen on the map on the right side of this slide. In Northern Europe, these are mainly further wind projects. And in Central Europe, a combination of wind and photovoltaic projects. This pipeline is the initial basis to have 1.5GW to 2GW of new renewable capacity ready by the end of 2025 within the joint one team.
And now to the second important strategic building block for future growth, thermal generation with a focus on low carbon energy use, will benefit from a rising demand for reliable capacity from decarbonized gas. In Europe, unexpected unavailability of scheduled power generation from wind and nuclear energy has sparked the discussion about sufficient dispatchable power generation capacities in the future. Thus, Uniper recorded the significant increase in utilization last year with our European gas-fired and half the coal-fired power plants. In the future, security of supply will come under pressure from two sides. Demand for electricity will develop more dynamically and further reliable base-load capacity will be shut down, especially in Central Europe. In order to ensure sufficient supply going forward, there needs to be a better environment for investments in new [Indiscernible] power plants. The short-term, those power plants will need to be still gas-based over time. Decarbonized gas solutions will take over, be it via new builds or transformation of existing assets. In 2022, Uniper will bring two major gas assets online that will already contribute to the issue of system security and [Indiscernible] energy supply in the short-term. From the fall of 2022, the 300 Megawatt Uniper gas-fired power plant, Irsching 6, will be made available to the transmission system operator in Bavaria as a stand by power plant for 10 years. This facility will be crucial to balancing the grid, which is subsequently facing more volatility from the nuclear exit and the increasing fit in of renewable energy.
By the end of 2022, the CHP gas-fired power plants [Indiscernible] three in the northern rural area is to be commenced and can generate around 130 megawatt of heat and electricity for an industrial customer and surplus energy for third-parties. By replacing an older coal-fired power plant [Indiscernible] three will effectively reduce carbon emissions while supplying energy and important products for the nearby industry [Indiscernible]. Uniper will use its own heat infrastructure at this world-class turn to use waste heat from the refineries side would be [Indiscernible] for this strategic in the Northern rural region in the future and save 60,000 ton s of CO2 annually. In the Netherlands, we are making the distributing supply of the city of The Hague more sustainable together with the Dutch energy supply and [Indiscernible] and are developing a concept to make the supply CO2 free by 2035. In Russia, our subsidiary Unipro received approval in an auction process for the modernization of a total of five gas-fired power plants units with a total capacity of around 4000 megawatt. The first of five units will come back online as early as spring 2022. And we’ll then receive increased capacity payments for 15 years. For Germany, we see a window of opportunity opening up for [Indiscernible] low carbon gas-fired power plants if the accelerated coal phase out seems to be realized by 2030. A joint study by Boston Consulting Group and the German Federation of Industries estimates that Germany will need 60 new gas-fired power plants with a total capacity of 40 gigawatts by 2030. The new German government has put this supply gap issue on its agenda and clearly positioned gas as part of the solution in the discussion. Results are to be provided by a yet-to-be established commission of experts and involved parties in the course of 2022.
The complexity of the issue is further increased by the fact that the EU with its taxonomy plans, also does not block gas as a transition fuel, but the strict requirements do not adequately take into account the heterogeneous national needs.
In Germany, we are prepared to invest around 2GW of new gas fire power plants if the framework conditions are right And this fits in with our European emissions reduction growth rate for 2030 and 2035. Uniper, as one of the multi-experienced European gas-fired power plant operators, can contribute expertise and brownfield sites here so that new builds could be implemented quickly. Another crucial building block for Uniper’s long term success is its market entry into the European and Global Green Gases business, and here in particular with sustainably produced hydrogen. Uniper has developed an extensive product pipeline that covers both the production of low carbon hydrogen in Europe, as well as the input of hydrogen and its derivatives, such as ammonia, methanol, and sustainable fuels. In the coming years, Uniper will focus on realizing this project pipeline. Key focus of Uniper along the value chain is the production of hydrogen for stationary industrial applications. In 2021, we worked to establish our [Indiscernible] in the German North Sea Coast as the hub for green hydrogen, with which we aim to meet around 15% of Germany’s hydrogen demand in 2025. A large electrolyzes plant is planned here possibly with offshore wind power supplied by our corporation partner Erste. On the downstream side of the hydrogen value chain, we have just concluded a cooperation agreement with the German steel company, Salzgitter, whose pioneering the transformation towards low CO2 tier production. In cooperation with strong partners, we have also worked on projects in important European industrial casts such as Rotterdam, the Netherlands, the Humber region, and Grain in the United Kingdom. In Sweden, Uniper, together with Fortum, intends to supply the chemical company Perstorp, with green hydrogen for the production of climate-friendly methanol. First significant investment decision is now scheduled for the second half of 2022. This is the German showcase project in a [Indiscernible] park that [Indiscernible] it with an integrated concept from wind farm over hydrogen production with 30 megawatt electrolyzer plant, up to transport, storage, and marketing. Overall, Uniper aims to build at least one gigawatt of electrolyzer capacity by 2030, which is more than covered by our project plans to date. Another focus of Uniper’s future hydrogen business will develop in the area of mobility with eFuels for ships are trucks, as well as sustainable air fuels for aviation, not to mention, our own plants to convert the company’s gas-fired power plants.
In 2021, Uniper continued its partnership with Siemens and GE, studied the conversion potential of our gas turbines to hydrogen. The next step will be to examine test options for the coal combustion of hydrogen or other biogases. A further essential building block in the hydrogen value chain is global origination as input will be needed to meet expected future demand in Europe. Uniper and the HYPORT Consortium from Oman are already working very specifically on concluding an off take agreement for green ammonia for Europe. The gas — Russian gas major, Novatek, is aiming to supply Europe with low carbon hydrogen in the future. For this, Novatek is working with Uniper on the concept to develop a supply chain. A deep sea port of Wilhelmshaven on Germany’s North Sea Coast could play a significant role here as it offers an ideal location for a hydrogen import terminal. All-in-all, we’re confident that with a now improved and expanded origination platform and an expanded investment budget, we’ve set the right framework to accelerate the portfolio transition. A strong operational performance, like the one we have seen in 2021 provides further financial tailwind for our journey. More on that from Tiina, who will lead you through the details of our 2021 results. Over to you Tiina.
Good morning and a warm welcome also from my side today, [Indiscernible] call. Let’s begin this path with the overview of the Uniper’s main operating indicators. The [Indiscernible] gas storage levels on the left side [Indiscernible] the overall developments on the European gas market. As you might remember, at the end of Q3, we started into the winter season with nearly full storages at 95%, roughly 20% above markets average back then. Given high withdrawals in Q4, our filling levels at the end year were only about 65%, and therefore significantly below prior year as depicted on the chart. This clearly underlines our role in the system as Klaus-Dieter just said. The European generation segment followed the trend of the previous quarters and closed the year with a significant increase in power generation of roughly 21%.
Looking at the underlying developments in the individual assets classes, hydro volumes decreased by around 5% year-on-year. The lower volumes in the Swedish hydro business following a particularly high precipitation and slow months in 2020 were partly compensated by high precipitation in Germany. Improved availability in our Swedish nuclear fleet led to a production upside of 12%. As communicated before, the extended maintenance [Indiscernible] that we saw in 2020 did not occur in 2021. Gas and coal-fired power generation closed the year with a remarkable volume increase of 36% compared to 2020. Significantly higher production in our German and [Indiscernible] especially during the fourth quarter of 2021, more than overcompensate these and unavailability at our Dutch Maasvlakte 3 power plants. In 2021, we could observe a loss in further development. Historically, high gas prices confined with a healthy demand and lower renewable speed [Indiscernible] compact of coal-based innovation across Europe, which also clearly visible for Uniper. Additionally, our [Indiscernible] 4 and Irsching 4 and 5 power plants now all fully contributed to the full year figures for the first time. Also not to the same extent we can also report a significant production growth of 8% year-on-year for the Russian power generation business. A recovery of domestic gross in consumption as well as increased electricity exports to Finland and the Baltic countries were mainly supporting the stable trends throughout 2021. As already flagged before, the high utilization of our fossil fleet in 2021 resulted in an increase of carbon emission of approximately 19%. Carbon intensity remains at the previous year’s levels of 454 grams of CO2 per kilowatt hour.
When it comes to the expected CO2 emissions for 2022, we will on the other hand, benefit from our success full-coal exit. If it costs too high, then [Indiscernible] carbon, [Indiscernible], [Indiscernible] and the completed sale of [Indiscernible]. However, given the current market environment, at the same time, we expect significantly higher load factors across our phosphate fleet. Therefore, our current forecast assumed a net increase of direct CO2 emissions in 2022. Ultimately, this reflects the fact that offering security of that line still still comes at a cost with regards to the conference [Indiscernible]. Obviously, this is not the right direction and a clear reminder for the end of this system that there are still quite some challenges ahead. In order to decarbonize the [Indiscernible] going forward. And with this said, let’s move over to our key financials for 2021. Rest of all, I am very proud of the results that we have achieved in these challenging times. Those would not have been possible without the extraordinary good teamwork within Uniper as well as the effective collaboration with Fortum.
With an adjusted EBIT of almost €1.2 billion we are a bit higher than the midpoint of the increased earnings outlook. As usual I will elaborate on the underlying drivers in more detail on one of the upcoming slides. Adjusted net income followed the positive EBIT development and increased by €132 million year-on-year. Yet, the economic interest result improved as the prior year saw some negative provision revaluation effect from the lower interest rates. However, this effect was over compensated by a higher economic tax rate, which ended up a lot about 25% as more earnings shifted towards high taxed countries. Despite a strong operational set of numbers, the reported IFRS net income shows a loss of about €4.1 billion. EBIT, not as negative as at the nine-month stage. This number is still heavily influenced by the IFRS accounting mismatch effects that we mentioned in our previous calls. Higher commodity prices increased the value of our underlying assets like power plants and gas inventories. Due to IFRS accounting roles, those economic gains not realized in the net income until the corresponding gas or [Indiscernible] sales have realized. However, on the opposite side, the concluding forward hedge deal for those assets are subject to market-to-market valuation. Hence, the decrease in fair value of those [Indiscernible] is reflected in the net income already prior to realization. As highlighted before, this effect is only temporary and we’ll resolve over time as things settle.
Nevertheless, as you know, the impact of unit liquidity saturation is significant. In many cases the hedge deals are concluded via channels that are subject to margining. As commodity prices shut, those hedged bills led overall to a significant loss in value, effectively then holding net margining requirements versus prior year. This has triggered a broad set of measures on our side, which also explains the very high operational cash flow and subsequently low Economic Net Debt. Let’s have a closer look at the current margining situation and the measures involved in the next slide. [Indiscernible] get down in our nine months call at the beginning of November, the ongoing commodity price rally had already led to high margining payments as reflected in the net margining receivables of €3.1 billion. However, in end of September, commodity prices for the elevated unseen and unexpected levels. Culminating in the city is gas price of more than €180 from the [Indiscernible] just before Christmas. Even though prices came down a little in the last week of December, unit versus margining received a record high €7.5 billion at the end of the year. In light of these developments, Uniper took far ratings financial steps around new year to secure sufficient liquidity as announced in the at-home at the beginning of January. First, utilizing the existing revolving credit facilities with core banks up to the committed €1.8 billion. Second, extending the credit facility with our major shareholder, Fortum, up to €8 billion, which provides for [Indiscernible] guarantees, as well as shareholders loss. As of December 31st, these facilities was utilized with €2.5 billion in cash [Indiscernible] and €2 billion in guarantees. The current maturity date on this facility is January 2024. Finally, Uniper agreed with the German state old KfW Bank on a further credit facility of up to €2 billion. This facility was concluded on January 4 and will expire end of April. Uniper has not utilized this line so far. In total, Uniper was able to secure above €12 billion of additional financing [Indiscernible] around new year. As of 31sst of December, a bit more than 50% of the additional lines have been drawn. Aside from the external financing measures, Uniper has taken further steps. These includes on the one hand portfolio steering aspect that support these operational cash flow as a further source of liquidity.
We will come to this in a minute. However, aside from creating additional hedge grow, Uniper also took measures to effectively limit the liquidity risk exposure stemming from margining. This includes a more averse adjustments of hedging strategies in terms of speed and hedging channels. The latter involves re-calibrating our hedging activities towards OTC channels that are not subject to margining as well as altering bilateral agreements to better fit to the current market situation. Finally, Uniper is engaging in discussions with regulators to address the system level issues and consequences arising from [Indiscernible] routine on the current market circumstances. In the current fall, there might arise situation where the system might ultimately fight it’s very purpose. Destabilize and secure the energy markets. Let’s get back to the final sales results of 2021 and the development of the adjusted EBIT on the next slide. As usual, let’s have a look at the main drivers for the year-on-year development of the adjusted EBIT. Overall, adjusted EBIT increased by almost €200 million over prior-year. As we have seen already at the nine-month stage, the main reason for this positive development comes from the gas midstream and international commodity business, which together gained in about €430 million higher than previous-year. The gas midstream business continues its positive trend with another strong quarter in Q4. Once again, the team was able to successfully optimize our flexible asset as the capture value in volatile markets. Overall, the gas midstream business achieved an adjusted EBIT of more than €800 million for the full year 2021, which is the highest since 2016, and more than 200 million above the already strong prior year. However, please note that a part of the strong performance in Q4 was related to our operational measures around liquidity management. Accordingly, the last part of the Q4 gas results is effectively a sip of earnings that would have otherwise massive realized in Q1.
The international commodity business to this date, mostly our U.S. business, also came in more than €200 million better than last year. The effect here is already well known from Q1 when the business benefited from the market development in North America and Asia during the winter time. Looking at the next line, we see a negative the year-on-year effect of approximately €170 million in our power and carbon commodity business which stems primarily from a lower proper trading results. Next, European fossil generation, which is overall slightly lower compared to the strong previous year. On the one hand, we saw a positive impact from Dattlen 4 and Irsching 4 and 5 being in operations throughout the full year 2021, which was not the case back then in 2020. On the other hand, this was overcompensated by unavailability [Indiscernible], and a lot of very strong optimization results that we saw in 2020. When it comes to our [Indiscernible] business, we see underlying a positive volume and price effect of roughly €100 million year-on-year. On the volume side, we experienced significantly higher availability for our nuclear assets [Indiscernible] in 2020. However, this is partly offset by lower hydro volumes driven by the development in Sweden, where we experienced a remarkable high to balance back in 2020. When it comes to achieve prices, we see a somewhat positive effect on the hydro side being partially offset on the nuclear farms. Wind-down underlying outright business, improved year-on-year, a positive developments is overcompesating due to an increase in nuclear work provision approximately one [Indiscernible]. This increase results from higher inflation assumption, but it’s also driven by the delayed political decisions on the final [Indiscernible] [Indiscernible] in Sweden. On our Russian power generation business delivered once again a strong operational performance in 2021, which ended up above the prior guidance of Unipro.
Comparing the results against prior year, we see a slight increase. A strong underlying business was driven by high day ahead market prices in the European [Indiscernible] and the contributions from Federal [Indiscernible]. Those positive effects were partly compensated by lower earnings from supposed [Indiscernible], which all moved from the CSA capacity market team into the [Indiscernible] Finally, we also see a negative effect taking its toll here. The other category amounts to roughly €80 million minus year-on-year and reflects for the most part, unallocated consolidation effects. [Indiscernible] results from the engineering business, as well as higher administration costs. Now, over on the operating cash flow. The operating cash flow before interest and taxes amount to an extraordinary high amounts of €3.9 billion at year-end, which is three times higher than previous year’s results. As pointed out before, this is the intentional results of a business theory that focus on high operating cash flow in a time when liquidity was priority. How big is the impact from those measures and what is the underlying OCF?
Looking at our historical cash conversion rate of 80% and an adjusted EBITDA of €1.9 billion, one could have assumed a normal OCF before interest and taxes approximately €1.5 billion for this year. Accordingly, it is fair to say that our message generated more than €2 billion of additional OCF this year. The bigger part of those message sits within the OpEx category that clearly stand out on the chart. As a reminder, this other category generally summarizes all CO2 emission price related provisions and working capital effects. On the full-year basis, those effects should structurally nets off in a normal year, like they did for example for the most part last year at this point in time. Therefore those €1.7 billion in the other category represents optimization measures related to CO2 emission drive which effectively defer the pay out for the board to CO2 certificate into the future. The remaining effects from steering impulses are reflective in changes in working capital which are particularly influenced by the development of inventories, receivables, and inventories in the cash midstream business. Accordingly, the way how we utilize the different gas assets, including management of the storage withdrawals, optimization of contracts, and selections of different market channels has the strongest impact here. OCF measures usually increase the cash flow in one time frame at the expense of the other period. This is also the case here. However, you should not expect to see the full back-swing only hitting 2022. The compensating impact will rather materialize over the next year. Moving on to the Economic Net Debt. At the year end 2021, the Economic Net Debt stood at €0.3 billion, which is about €2.7 billion lower compared to the beginning of the year. The main driver for this reduction is clearly the operating cash flow of €3.6 billion from the previous slide.
However, lower pension provisions further contributed about €300 million to the positive development of the Economic Net Debt. The main reason being higher interest rates on pension provisions which was increased in Germany from 0.8% to 1.2%, and in the UK, from 1.5% to 2%. Those positive developments significantly overcompensated the impacts from investments and the dividend paid in last May. On the large remark on what is not defined here, let me remind you that margining payments do not influence our economic net dept. Margining paid results in a decrease in cash flow at the same time a margining receivables is recognized. Both positions are included unsafe for net out within our net financial position. The same applies for margining payables that gets booked when Uniper receives cash from external counter parties. Moving on to the last topic today. Uniper’s earnings outlook for 2022. After a very strong year, 2021, in terms of earnings, we revised our guidance upwards twice. We are currently expecting 2022 to turn out about equally hard. Concretely, this translates into a guidance of €1 billion to €1.3 billion for adjusted EBIT and between €800 million to €1.1 billion for adjusted net income. All under the consideration of still volatile and high commodity price environment, which is reflected in the applied bandwidth. In the middle of this slide, you find the key drivers that explained adjusted EBIT development from the 2021 to 2022. Please note that those are the underlying business drivers. Accounting segments view is further influenced by significant inter-crop consolidation effect to the high problem prices. However, as those dollars influence the [Indiscernible], we can focus on the business here.
Looking at the major earnings drivers for 2022 compared to 2021, we’re seeing, first and foremost, a strong result from the European fossil generation, where higher load factors are overcompensating lower ducat capacity market payments, and the lapse of earnings from the disposal of the core outlook. Further positive effects are expected in our Russian power generation business, with barrier 3 contributing for the full-year as well as in our power commodities trading, where we anticipate an improvement in proper trading. When it comes to our gas midstream business, we expect a stable development year-on-year. While this is not sound impressive, it certainly is given the year’s high results. Finally, which is launched to our international commodity business, we see a significantly lower contribution as we do not expect every occurrence of the events that took place especially in North America last winter. Again, as a reminder, those extra ordinary effects massively impacted in particularly our Q1 results in 2021. Therefore, when it comes to the quarterly breakdown of earnings next year, you should expect Q1 to come insignificantly lower. Given the lapse of extraordinary effects in the international commodity business. The already mentioned shift of gas [Indiscernible] into the Q4 of this year, as well as the earnings distribution in the other parts of the business, we expect the Q1 currently to end up only into mid double digit area. However, given the overall high volatility, there is a high degree of uncertainty around this assessment. To sum it up, the year 2022 will most likely share some similarities with the last year. We will continue to optimize our business and our financing structures in order to overcome the challenges of volatile commodity markets. This will be the foundation that enables our teams once again to act in full potential of our assets in the market with high demand for flexible energy supply. Concluding the presentation part for today, thank you very much for bearing with us so far. Klaus-Dieter and myself are looking forward to taking your questions now.
Thank you, Tiina. We will start our Q&A session now, and we need to obviously be very disciplined during the remaining time. So therefore, please do not hesitate to us your questions now. As usual, please try limit yourself to two questions each. Operator please.
Ladies and gentlemen, [Operator instruction]. And the first question is from Deepa Venkateswaran in Bernstein. Your line is now open.
Yeah, hello, so sorry for that. I had a problem with the connection. So my two questions, firstly, just on Nord Stream, in case you have a loan outstanding of €950 million, in case this is not COD, I would presume you meet the right off and then DDA ignite all the interest income. Maybe could you talk about what your current assumption that [Indiscernible] or how could this happen? And my second question is on the nordic hedge prices. On a quarter-on-quarter basis, there’s a reduction from around €22 to €18 euros for ’22 and ’23. And I know the Euro offer is coming in €30. Could you explain the dynamic, particularly in the context of broader rises in power crisis. Thank you.
Deepa, hello. I think we can certainly talk a little bit about the numbers and the loan outstanding. I think we have also disclosed some numbers around Nord Stream 2. Please take into account that we are also kind of still in the situation to digest yesterday’s decision. Yesterday morning’s decision of head of Russia and also decision taken by German government to suspend and halt the certification process of Nord Stream 2. I have to admit that we are still trying to figure out what this would mean also around kind of likelihood of the project can be developed going forward. We indicated in our statement already that we will look into that going forward. I want to still be optimistic that the project can be completed. Now that the project will go — also go onstream, clearly, it’s unclear to us, maybe even to the regulator, if and how the certification process can be restarted. You were referring to a loan? I do recall that we had a loan of €700 something million and accrued interest, which will brings us to almost a billion. Meanwhile, that’s the number that I do recall. I do see thumbs up around me here, so that must be by and large the right number that we have. Maybe on Nordic —
I think the 915 was mainly — I think when the project was initially announced, that with the contribution of all the European partners including [Indiscernible] that was sort of my 915. It wasn’t quite your 700 plus accrued. But maybe the number that [Indiscernible]
Yes. I think we can confirm that. On your second question, Nordic hedge prices, maybe Tiina, you want to — as a former head of generation of Nordics.
Hello, thanks for your question. Yes. The Nordic Hedge pricing certainly now lower from this year and 2023, I would raise in a way two reasons for those ones. So first of all, we need to recall that the hedges are in a way down two, three years beforehand, and when the hedges were down, we were on the COVID. And to do the hedges, very low liquidity in the market. And therefore, we used the proxy hedging and the numbers, all those proxy positions are not involved positively at the moment. The other reason is that, they’re looking at the area prices, so particularly through this Area 2 compared with Area 3, so Areas 2 has been much, much slower, and that the balance we have quite a lot of hydro production on nearly all in Area 2, which in a way weighs in this overall number.
Okay. Thank you.
The next question is from James Brand, Deutsche Bank. Your line is now open.
Hi. Good morning. Thank for presentation. Two questions. One is just a clarification on the last questions. So just in terms of the Nord Stream loan, how much interest income that you accrue last year? I seem to recall it’s maybe a €120 million, but maybe you could just confirm that’s roughly correct. And then on the deliveries of gas that you get from Gazprom, obviously, hopefully, they continue to slow, not disrupted, at least from a from a pure availability perspective. Common on the politics though. But then if for some reason those gas deliveries were to be interrupted, Where would you stand in terms of potential compensation? Would you be entitled to compensation if you had to procure gas at higher prices, which was the fourth risk you highlighted on your Slide 3, is that an entitlement you have under the contracts or not? Thank you very much.
Maybe let me start with your second question. What if — I’m speculating about the future. There are many other questions that you may have also related to kind of potential scenarios going forward. Honestly, I don’t want to speculate. I can tell you that we are looking here on our end at so many different scenarios now that we need to kind of digest and understand, trying to figure out what this would mean with us and so forth. And I would really refrain from speculating what it would mean if and so. To your concrete point, for example, also, legal view strongly depends on who would then be the root cause for any interruption on gas supply. Is it Gazprom stopping? Is it we are not buying? Is it Germany taking action? Is it Russia taking action? Is it sanction related? So then so many questions, some could end up in a situation, which we call it a force Majeure. Some would say it’s just a business relation between Gazprom and Uniper. Honestly, I don’t want to speculate about that. What we do have to see is we have customers,and they need gas. And we need to make sure that gas has been delivered in almost every scenario and we’re working hard on this one. To your first question, that was around the Nord Stream interest income, I do — you mentioned a three digit number that I cannot confirm, I think we have disclosed over the higher double-digit number on interest income annually. That is what I can say with regard to your question.
Okay, thank you very much.
The next question is from Sam Arie, UBS. Your line is now open.
Hi. Good morning, everybody. Thanks as always for today’s presentation and a ton of very helpful information you provided. I’m just keen. I think the follow-up James’ question on the gas supply arrangements. And I — I understand your point that you have to speculate about future scenarios, but I feel like the question I wanted to ask is, could you just tell us a bit about your current gas procurement arrangements from Russia. I know it’s a very long-standing business activity for you, but I guess the details have always been a bit of a black box for us from the outside. I almost could stop my question there and just see what you’re able to say. But if I was attending the kind of things that are on our mind, I suppose. We’re wondering what share of your gas contract commitments to European customers are currently sourced from Russia, and how much of that is covered by your long-term contracts, and where are we on the long -term contracts in the minute relative to any minimum volume levels? And what are you doing? Are you taking the [Indiscernible] under the contract, so you’re not getting everything you asked for, have you reduced your purchases because price levels are high? I’ve read a few different stories in the press there. And then I suppose, what are your options to offset any future further reductions in Russian supply with other sources, given, I guess global supply is what it is in the short run. So there’s a kind of questions on my mind and I think there’s limits somewhere you can say, but if we could just get you to talk for even if it’s on habit gas procurement relationship with Russia is currently standing, I thinking that would be highly valuable. Thank you.
Yes, I understand your question. And I can tell you many people are interested now again on the business relationship about the details. And to be again very honest with you, I don’t want to disclose the — not only the details of it but I can only talk about some general numbers, because this is obviously highly confidential and this is business resulted and so forth. Number one, now what we have disclosed is that we have what we call an LTC portfolio. It’s a long-term contract portfolio, short of 400 billion Tera hours. And what I can say is the lion’s share or more than 50% would come from Russian, but that’s maybe something I can say. What I can also say is, and I can repeat what I’ve already said publicly, that Gazprom is delivering according to our contracts. We — everything that we have agreed with them on a contractual basis and we have a number of contracts that I can also say that only one contract.
Everything that is agreed in these contract is being delivered by Gazprom. And my understanding is that we’re not the only ones having long-term contracts with Gazprom, there are other competitors who have similar contracts. And also gas from deliverers the volumes according to their contracts. That is something that I can say. I would also add to that that we are at the upper limits of our contractual volumes. Because clearly, in this situation, we asked for all the volumes on maximum level. Certainly also, to provide gas to our customers and to the German gas market. In terms of where we basically — where is the delivery point for us? This is German border and we have agreed to that, that we’re not an owner any longer of the transmission system. So that is basically the handover part for the gas. And again, in general, coming back to our contraction situation. You mentioned it’s a black box for you. I very much hope that it’s a black box for you, because obviously this is highly confidential in terms of our business relationship with the Russians. I should add that we have 50 years. I mentioned that before, 50 plus years relationship with Gazprom and gas flows were not interrupted because of our Russian partners or because of Uniper. We had a crisis situation many years ago, but the root cause for that interruption was not our partner in Russia and was not Uniper or other kind of reasons for these interruptions.
That’s really helpful. If I just make quick comment, it seems like if you’re at the top end of your contracts and the contracts are being delivered, we know the Russian supply in general is heavily down on recent years, plus the shortages in the spot market basically. So does that make you wish that you had contracted more with gas from and if we could look past, I don’t know if we can, but if we could look past that kind of situation, would you be willing buyer of longer and larger contracts?
In hindsight, you might be right up, but I can also say, with other years in which we’ve — in which we were rather kind of oversupplied in similar situations. And that’s how the contracts work, we have an upper limit, we have a lower limit, we have agreed on certain volumes. And sometimes we would have wished for higher volume and sometimes we may have wished for a lower value. So that’s the contract we’re in.
Really helpful. Okay. Thank you so much for your response to that. Thank you.
The next question is from [Indiscernible]
Good morning. Two questions from my side. The first one is going back to your Nordic power hedges. Tiina, you said that’s the reason for the low prices is of a — forward sales entered into long time ago. But just going back to nine months numbers, you were €22 and €21 for the years ’22 and ’23. This has come down to €18, and this in a market environment where even SE2, the lowest price area in Sweden, had an average price in Q4 of almost €45. I still don’t understand how we can possibly manage to decrease the average achieved price in this market environment in Q4. If its all possible, if you could elaborate a bit more, that would be much appreciated. The second one is on the variation margin. Now you say that they do not impact your net debt which is interesting, that’s different to what we observe with other companies, but if you could explain the mechanics there, why variation margin outflows are not part of the working capital that is in the end reflected in the net debt and connected to this. Well, if it’s not variation margin inflows, as you exclude these variation margin flows on your carbon position, what exactly is behind these 1.7 billion you highlight under other on Slide 18?
Thank you for the questions. So first of all, let going back to the Nordic area prices. So as mentioned for the area prices was the one reasons for more than driver for the end numbers where the proxy hedges. So at the time of very, very low liquidity, so actually we sold a sample of the Continental instead of the Nordi. So effectively we had a spread position, so long Nordic, short Continental. And as we have seen lately, the spread has developed negatively. This negative development is reflected to the hedge price. So then — sorry.
No, this is very interesting. So essentially you didn’t — this has nothing to do with Nordic power prices at all. It’s just basically been caught off guard by Nordic power prices not moving in line with Continental power prices. And hence, disclosing, what do you call the proxy hedge fund, that was basically an outright position that went wrong.
Basically when the liquidity situation also in the COVID time, [Indiscernible]. So this was the asset time. Assess that [Indiscernible] prices. And when — when the area price to liquidity during every loss. So therefore we made some of the other locations [Indiscernible]. So overall, of course now, looking good in the past so we could call growth differently, but I think that securing the cash flow is of course very important and great use our outright exposure, [Indiscernible] managing. Okay. Then going back to the margining. Basically, when we pay margining — so at the same time we recognize a receivable. This is the money, what we’ll have received back when we perform our contracts and deliver. Also the rating agencies considered these persistent close to gas,
and therefore, it is excluded from the economic net debt. In our annual report in the base 45, so we open all of these items, how we will record the items.
So in turn the €1.7 billion on slide 18, if it’s not related to any kind of margin inflows. What exactly is behind that and what do you mean by cumulative Q2 effect? So basically, you know, the — in the cash flow, so we saw that we did a lot of also operative measures to improve our cash flow. And this other part in the operating cash flow, so basically, this is all the impacts from the CO2, and what we did –so actually what we shifted the payments of CO2 [Indiscernible] to the future variants. So shifting the payments in 2022 to release cash in 2021 in this liquidity situation. So that’s not related to margining. This is the operative action. What we purposely did at the year-end.
Okay. Thank you.
The next question is from Vincent [Indiscernible], JP Morgan. Your line is now open.
Good morning. With North Stream I think we’ve tried a few times and you already gave a bit of color, so thank you for that. I’ll come back again on the trading. Its not the first there is a bit of an accident there. If we look beyond the Nordics where you explained you where basically in Nordic in short continent. I understand that when we look at the continent over in Germany, the implied prices there are almost half the average trading in calendar ’22 and calendar ’23 in Q4. Could you give us a bit of color on what happened as well on the continent hedging that would be the first question. And if we have to stick to two, then I will ask regarding the gas margins which have been moved from the Q1 ’22 and Q4. So you flagged it among other things, also to explain that Q1, ‘22 maybe in the low-teens, as you said. But how much money has been shifted? It would be important for us to get any idea and any forecast. Thank you.
Thank you for the questions. So first one related to the Continental hedge prices. So the hedge prices if we convert this 2020 December numbers, so I would say that it raises pretty much the same to nearly fully hedged already the year before. So not much room to the do the new hedging and I think the slight improvements there tells us at getting some benefits of the higher prices. But as the hedge levels as mentioned during the COVID time, securing cash flow has been fairly high. Of course is a future, we have an opportunity also to capture the value highly of the higher prices. But this is of course the balance of securing the cash flow and then capturing the values. And if we look at the overall results I would say, that monitoring the market risk, liquidity risk, credit risks also the result in 2020. And 2021 is very crucial overall. Item in the balance of the things we all saw outcome. Then the marking sift is also to support our liquidity. So with many of better active measures let’s to give a rough indication, so how much of the margin was sifted from the Q1, 2022 to last quarter. So we would say around 200 million adjusted EBIT impact.
Okay. Thank you very much. I would just lecture for a bit more precision when you say liquidity was low and you’ve done some proxy hedging. What do you mean by that? Are you doing hedging electricity with gas? Could you give enough color on this so we better understanding of what’s been happening.
Well, I think that there — what I was referring is the general market liquidity of our liquidity situation. So how much there is in the COVID time there was available through the hedges and so forth. So more generally, the overall — particularly, I think in the Nordic, if we look at the liquidity in price area too. It has been fairly low and the congestion with the different areas have fairly limited [Indiscernible]
The next question is from Robin Nascar Credit Suisse, your line is now open.
Hi, good morning hopefully you can hear me, two questions from me if I may. The first one is on a base of skier free in Russia. You said that you’re working in a closed. You are working with the management of Unipro. But yesterday, management of Unipro stated that they have no plans whatsoever to dispose the plan given the profitability and the cash flow generation. So how should we read it? And the second question is a question about an update on to power plants. One is in U.K. the Grain. Can you give us some update or any numbers around the damage that was done recently in the U.K. and the second one is that one for where are we on the court case? Thanks a lot.
Let me start with the Datteln 4. There’s nothing new that we can say on Datteln 4 for the court case. Still waiting for decisions to be taken. And I can add that we don’t expect a decision by the court to be taken very soon. I would rather expect second half of 2022, a decision to be taken up in the first half of 2022. On [Indiscernible], yes, we — there were — there was an action. Do we have already numbers? I’ll check that here. I’ll pursue the numbers [Indiscernible] it’s still ongoing, but we don’t have precise numbers on this financial impact this would have. It would not exceed — that latest estimates should not exceed lower to mid double-digit figure as the financial impact that would possibly have. Apart from that, we are trying to understand the root causes for this incident. And eventually, you were talking about value. Look, I mean, clearly value and not only referring to vary with three because that is only in your end up the unit number three, it’s in total at 2.4 gigawatt lignite power station. So three units with 800 megawatt home install capacity each.
Certainly, this is something that we have to figure out going forward, how to deal with it, how does this fit to our decarbonisation strategy? But let me be honest with you. I mean, recent developments around the geopolitical situation we are in, is clearly also having an impact now on how we see the businesses to be developed going forward. I would understand. I was not in that call that you mentioned on the Uniper side, but clearly, also our Uniper for colleagues. And we have to be extremely cautious now. But anything that we think that we can possibly do on our portfolio going forward, because obviously, we first need to understand the impact of what we have seen or what is still developing in these days [Indiscernible] the Russian – Ukrainian border and so forth. So I would be also very cautious now on saying something on value or any other activity in Russia going forward. We have to be cautious and understand the situation before we can make any kind of announcement. How to tackle the comp-footprint that we have in general, but also specifically in a very large scale.
Thank you very much. Just a quick follow up if I may on the green power plant, can you explain how you hedge your scrap position because if you cannot run power plans, I would assume you had some volumes, so I’m trying to understand what the potential risk is or your earnings coming from the outside that you didn’t — that didn’t meet what was expected?
Maybe consider [Indiscernible]. So current assessment [Indiscernible] there’s only limited impact on the commercial side to buyback the hedges. I think we have two units at the moment. They are all offline, the Unit 7, so the repair will take longer. But hopefully, we’ll can bring back the two units in operation.
And would you be able to give us some color how you had your — sorry. Okay. I can follow up with the IR.
Yes, please. Thank you.
The next — the next question is from [Indiscernible], Citibank. Your line is now open.
Good morning. Two questions from my side, please. So the first one I wanted to understand a little bit, how you benefit from your gas procurement other than from Russia from sort of MPO LNG contract? Then color, you can give us on the current gas price [Indiscernible], how it helps you? And then is the profitability outlook for the commodity trading business improving into the next year and 2023 just taking the cost? And second question I have on the dividend because you cancel it to the minimum. At what point you will revisit this dividend policy or come up with something precise? You need more earnings visibility, more balance sheets [Indiscernible], the commodity volatility will have to go down. Can you reinstate it? What other conditions for it?
Let me start with your second question. I don’t want to look at the dividend and the opportunities that are ahead of us. I would certainly believe that we as a board of management will look at not only dividend, but also the ability to finance once we feel more comfortable with the liquidity situation in general. And since we do not know when this will be somehow different, it’s really difficult also to predict when exactly point in time we can look at the dividend, but I would [Indiscernible] that to our liquidity situation. When it comes to your first question, I mean, the activities that — you know that we’re not on the active with our Russian gas partners. We also have additional long-term contracts I mentioned that before, referring to the numbers that I was talking about. We have additional long-term contracts that are also helpful and improve our business and we have an LNG business. Also part of that LNG business is again some long-term contracts that we do have.
And some of the contracts are linked to prices on certain gas hubs. We have, for example, contracts that are linked to price spreads between TTF and Henry Hub. And as you can imagine and derive from those price developments, that this is a spread that is open and positive and helps us obviously to contribute to our earnings. To what extent we can, in the situation, hedge already part of the profit positions is again something that we have to closely follow and watch. Also, again taking into account on liquidity situation and the high price volatility, but you’re right saying we’re kind of benefiting not only from gas procurement, from Russia, but also from other long-term contracts that we have signed in Europe but also beyond and particularly related to our urge business activities.
You cannot attach and volume numbers lighted programs to your LNG portfolio, then margin numbers. How much could the — you’d be reluctant to provide any incite because in the past few the guidance was low triple digits you get for the commodity contribution on EBIT line, but now it clearly last year’s have shown that you can benefit much more. So I just maybe you can say for the next — if you look at the forward, it’s the next two years could be as good as the last two years so any caller would be helpful.
Look, when it comes to our LNG business, I think it’s fair to say I think we are also disclosed that we have quite expanded that business. I think we’ve discussed also number that we’ve traded 350 plus cargoes last year, which is I think 40% or something more than the year before. So that’s substantial volume. We’re not — I cannot — in a position to predict any additional any, number for 2022. That’s maybe one thing I can add responding to your question. And on the position that we have in free port, that is a deal that is by and large does have a volume of 14 terawatt hours per — on it — per annually. And again, this is an exposure — a spread exposure [Indiscernible] versus TTF. If that was of help to you.
Yes. Thank you very much. Thank you.
Ladies and gentlemen, this concludes our Q&A session. I hand back to Mr. Maubach for some closing remarks.
Well, we are over time. Thanks for your interest. I want to cut this short. I hope to see you soon in person and I understand that you-all have many questions in particular around the energy supply situation in our gas business. And you can come back to our team on multiple discussions certainly. Its going to be an exciting year 2022, that should be my final remarks. Thank you again for joining, thanks.
Ladies and gentleman thank you for the attendance this conference has been concluded. You may disconnect.