Uniper SE

XETRA:UN01

Earnings Call Transcript 2020-Q3

[Operator]

Dear ladies and gentlemen, welcome to the analyst and investor conference call of Uniper. At our customer's request, this conference may be recorded. [Operator Instructions] May I now hand you over to Udo Giegerich who will lead you through this meeting today. Please go ahead.

[Udo Giegerich]

Thank you. Good morning, dear analysts and investors. Welcome to the Uniper Interim Results Call for the First 9 Months of 2020. Thank you for participating in our conference call today. Today, I'm sitting here with our CFO, Sascha Bibert, at our headquarters in Düsseldorf. Sascha will guide you through the highlights of the interim results and comments on the key figures. This presentation will conclude with the latest outlook on the full year 2020. And as usual, this is followed by a Q&A. I hand over to Sascha, please.

[Sascha Bibert, CFO & Member of Management Board]

Thank you, Udo, and good morning, everyone, and welcome also from my side. Thank you for your participation, which is very much appreciated in those turbulent times. After 9 months, Uniper is fully on track to meet its financial targets for the full year 2020. This includes the expected weak Q3 outcome in EBIT, but also a strong cash flow. As in the last 3 years, adjusted EBIT in the third quarter was negative. The isolated operating loss amounted to minus EUR 287 million. Aside from the usual seasonality pattern in our business and a temporary CO2 phasing effect, Q3 saw the well-flagged back spring effect, i.e., some part of the gas margin was already realized in prior quarters, predominantly in Q1. Looking at the cumulated 9 months results. The gas business is, nevertheless, one of the key positive drivers for the adjusted group EBIT, which ended up at EUR 405 million and therefore twice as high compared to the prior year. Accordingly, adjusted net income in the first 9 months is also significantly up against 2019, now at EUR 308 million. With regards to operating KPIs, the impact of COVID-19 remained limited. Safety and health of our employees remains on top of our agenda as we continue to apply existing safety measures and implement new ones where needed. Throughout the pandemic, our IT has provided us with the digital backbone needed to ensure business continuity. Wherever possible, we have also remained in the home office and adapted shift work in our operations. Our recent employee survey, Voice of Uniper, has documented that our employees appreciate and fully support the way Uniper's management is dealing with COVID-19 when it comes to day-to-day business. This support is key to successfully manage throughout the next weeks that will be once again challenging for most of us, both on a professional and private level. When it comes to our large projects, there are no updates on potential COVID-related delays to be announced today. However, as you can imagine, the situation is tense when it comes to our development and construction sites. Looking at the energy markets. We faced a very volatile and challenging environment over the last weeks also but not only due to COVID-19. Uniper benefited here from its hedging and optimization capabilities, which, in some areas, protected our earnings and, in others, even further enhanced the value generation from our assets as you will see in a bit. Based on the outcome of Q3 and our internal forecast for Q4, we confirm our targets for the full year 2020. I will come back to the topic at the end of my presentation. Next to our portfolio and strategic section, let's start with ESG. As we have outlined in our strategic update in March, we have introduced a new hurdle rate concept for investment decisions. Based on this approach, greener projects face lower markups to their cost of capital. To determine whether a project qualifies for the green markup, we have now incorporated the EU Taxonomy, which, alongside of our own ESG objectives, has become our main benchmark to categorize projects. We did this as we consider the EU Taxonomy framework to be a game changer in terms of ESG-related financial reporting, and therefore, an important enabler of the EU Green Deals sustainable economy reforms. Second, I would also like to emphasize our ESG transparency efforts. In the recent months, we have extended our IR website by including information on our ESG performance. It should provide you with a comprehensive overview of relevant ESG-related information. In addition, from this quarter onwards, you will find an overview of ESG KPIs in our financial statements. Aside from information on carbon emissions, both in absolute terms and specific, we report in the nonfinancial information chapter also on unavailability of our power plants as well as health and safety metrics. Looking at our business portfolio. We are working to exit from coal-fired power generation in a way that strikes the balance between speed and value protection. The first auction for hard coal-fired power stations took place on 1st of September in Germany. We have agreed socially fair solutions with our employees affected. Our aim is to give many of our employees new perspectives and are working on master plans on how we can transform our coal sites in the future. So it's not just a matter of getting out of coal, but a matter of a promising transformation. The auction results are expected to be announced in December at the latest. Due to the ongoing coal-to-gas conversion with rising clean spark spreads, gas-fired power plants can be better positioned in the merchant market. Irsching 4 and 5, our 2 most efficient German gas-fired power plants, are back in the merchant market again since October 2020. When it comes to the other projects, there were ample discussions on Nord Stream 2 over the last weeks, be it in the context of the poisoning of Mr. Navalny, the ongoing U.S. sanctions debate or the decisions of the Polish antitrust regulator. The letter claims that the project would have required prior Polish merger control approval. Uniper, in line with the other financing partners, does not share this view. We have filed a legal complaint against the issued fee of EUR 6.7 million against Uniper. When it comes to the U.S. sanction risks, we are further monitoring and analyzing the situation. The risk assessment of the project has not changed in Q3. Accordingly, there is no update in the risk and chance report of the quarterly statement. Finally, in the context of Mr. Navalny, the EU and Germany have followed their principle of only taking very selective measures, thereby avoiding collateral damages when it comes to sanctions. As such, the response on the poison attack was, in the end, not linked to the Nord Stream 2 pipeline. Just like Nord Stream 2, the LNG terminal in Wilhelmshaven is also a project that aims to improve and diversify gas supply into Europe. However, as we have just announced the other day, this project cannot be implemented as originally planned. The response of the recently completed open season showed limited interest for long-term capacity bookings at this point in time. Based on this outcome, the project in its current form does not meet Uniper's investment and profitability criteria. Accordingly, we will now reconsider the project setup and evaluate alternative scenarios for import infrastructure, including both LNG and hydrogen-based solutions. Finally, coming to the shareholder sphere. In mid-August, our majority shareholder, Fortum, exceeded the threshold of 75%. Although this has no immediate legal or factual impact on our relationship, we intensified the discussions on the strategic alignment process and potential cooperation initiatives. As announced by Fortum, the outcome of the strategic alignment process will be communicated at Fortum's Capital Market Day on December 3. Now over to some operating KPIs during the first 9 months of our current business year. European and overseas gas prices has been recovering significantly from the absolute lows since mid-July. This upswing has been driven by a significant revival in gas demand from the major Asian importers of liquefied natural gas who are benefiting above all from a rapidly recovering Chinese economy. Additionally, the LNG supply was impacted by several hurricanes in the U.S. However, as inventories were already high after Q2, those events did not prevent the gas storages from reaching its maximum filling levels at the end of September. The flip side of the coin is that our flexibility in gas optimization in the last quarter was more limited than usual. Second, in Q3, electricity demand in Europe recovered after the reduction caused by the COVID-19 lockdown in the second quarter. With a ramp-up in industrial production, the trend has been moving towards the normal demand pattern of recent years. However, given the current development in Europe, when it comes to lockdowns, this recovery may be fragile even though industry this time is less impacted. Going back to our H1 call in August, we saw European power generation being down 25% compared to prior year. Today, we only see a decline of 15% year-on-year given the mentioned recovery throughout Q3, which, on an isolated basis, saw an increase of 5%. Looking at the 9 months cumulative outright power generation. Nuclear was considerably down by about 30% year-on-year, mainly driven by the closure of Ringhals 2 and extended outages at the 3 units, Oskarshamn 3, Ringhals 1 and 3. Hydro being the second pillar of our outright generation remained at previous year's levels, primarily supported by strong rainfall and water inflows, especially in central and northern regions of the Nordic markets. Gas power generation volumes were down almost 30%, mostly due to lower demand caused by the COVID pandemic in U.K. While it may seem counterintuitive, the generation volumes from coal-fired power plants actually increased by 5%, also due to the CO2 of Datteln 4 end of May and a higher contribution from the Dutch power plant Maasvlakte 3, which faced significant outages last year. The Russian Power Generation segment also developed on par compared to the prior year for the isolated Q3 as demand rose significantly, while supply was dampened by lower hydro availability. Therefore, the decline year-on-year after 9 months is now only 10% as opposed to 14% seen at the H1 stage following the hard lockdowns in the second quarter. The carbon emissions of our power plant fleet were down by 12% after 9 months, and therefore, followed Uniper's overall electricity production decline in Europe and Russia. Now let's start into the financials, starting with an overview of our relevant KPIs on Slide 4. The picture that you see here is comparable to the previous quarters. The adjusted EBIT, EBITDA and net income KPIs are significantly above prior year's levels. This strong increase resulted predominantly from the first quarter, and the following quarters were weaker. This should not come as a surprise as we continue to expect the full year 2020 to end up slightly above the 2019 levels. Further, we had highlighted in our previous calls that the strong gas result in Q1 would come partly at the expense of Q3 or the second half. It was a conscious decision to utilize the optionality of the gas portfolio already early in the year, and hence, limit the room to optimize in the later months as this approach did maximize the total value across all quarters. Accordingly, despite the negative Q3 contribution, the adjusted EBIT is still significantly better after 9 months of 2020 compared to the previous year. Adjusted net income developed in line with the adjusted EBIT, additionally supported by a slightly lower tax rate and lower burden on interest expense versus last year as, back then, we had negative revaluation effects related to the asset retirement obligations in the context of decreasing interest rates. Reported net income is lower compared to prior year. The reduction results mainly from lower M2M of power and FX derivatives as well as some accounting effects, e.g., IFRS 9. OCF after 9 months is at EUR 833 million, which is almost on par with the full year 2019 figure. Moving on to economic net debt. After the first 9 months 2020, END is at EUR 3.1 billion, and therefore, more than EUR 400 million higher than it was at the beginning of the year. From a credit rating perspective, this is fully in line with our key metrics for our BBB flat rating. Now let's break down the earnings drivers on the next chart. Looking at the year-on-year drivers for the adjusted EBIT, the picture is broadly in line with what you have seen in the past quarters. Please keep in mind that the group effects on this slide do not perfectly match the segmental split in the appendix as there are some further shifts in consolidation effects between the segments. As those net out on a group level, we leave them out here for the sake of a clearer view of the underlying business drivers. But before going into the group, let me still mention one segmental effect, specifically the Administration and Consolidation segment that you would find on Page 15 of the presentation. This negative EBIT looks unusual, and it is indeed. It is not driven by a change in holding costs or similar, but indeed, solely driven by consolidation. So when you project this segment into the future, continue to model with an administration cost of around EUR 200 million to EUR 220 million per annum. Now let's look at the group, starting with a well-known commodity optimization effect. This reflects, first and foremost, the successful optimization of the gas portfolio in a continuously downward trending market over the last winter. Taking into consideration negative consolidation effects in the power area, the total commodity effect at this stage is around plus EUR 100 million year-on-year. Secondly, the outright power price and volume effect, which amounts to about EUR 40 million in total and primarily reflects higher achieved prices of about EUR 4 on average. This effect is somewhat diluted by the excess hydro volumes, which were not hedged in advance, and therefore, sold at comparatively low spot prices, especially during Q2. Additionally, nuclear volumes were down due to the closure of Ringhals 2 at the end of 2019 and the extended outages in Oskarshamn 3, Ringhals 1 and 3. U.K. capacity market income amounted to roughly EUR 90 million in the first 9 months of 2020, while 2019 did not reflect those earnings yet at the end of September. The corresponding addition to operating cash flow is even a bit higher. The next one is on -- is the only new element. The European fossil fleet optimization effect is in the higher double-digit area, reflects the improved contribution from our fossil fleet this year. This includes, among others, the contribution from Datteln 4, which started its operation end of May; and higher merchant volumes, especially at Maasvlakte 3, which had prolonged outages during 2019. Overall, our teams were quite successful in their mid- and short-term optimization of the fossil assets in order to maximize the value contribution and minimize the COVID impact. Moving over to the intra-year carbon-phasing effect that impacted Q3 negatively. In times of rising carbon prices, we need to increase our provisions, while the offsetting positive hedge effect will only realize at the end of the year, i.e., December. Hence, we see a burden in the first 3 quarters that will technically revert in Q4. Last year at 9M, the carbon-phasing effect amounted to EUR 90 million in absolute terms. This year, the carbon phasing is even more pronounced, amounting to EUR 130 million, both of them negative. This explains the negative year-on-year effect of minus EUR 40 million. Given its nature, this effect will neutralize in Q4. Russia's adjusted EBIT is down EUR 50 million compared to prior year. the main reasons being significantly lower electricity prices in the day-ahead market, driven by a slowdown in demand due to the COVID-19 pandemic and higher availability of cheap hydro generation in the first 6 months of 2020. Subsequently, stronger operational performance in Q3 was compensated by a weaker ruble, leaving the year-on-year effect unchanged compared to our H1 results. The category Other summarizes about minus EUR 15 million, mostly unallocated consolidation effects. Now over to operating cash flow on Slide 6. There you can follow the reconciliation from adjusted EBIT to operating cash flow. Let's start with big picture. First, you can take note of the fact that the cash-effective EBITDA, that is EBITDA adjusted for the noncash effective items, is EUR 211 million higher than EBITDA. Generally, a directional sign of the quality of the results. Second, over the first 2 quarters of 2020, we saw a comparatively low OCF with a cash conversion rate below 35% at the H1 stage. Back then, we guided that the cash flow would pick up towards normal over the course of the full year. Looking at the 9 months now, things changed indeed with an OCF of EUR 833 million, translating into a cash conversion rate of just above 100%. This increase is mainly driven by the development of the working capital, more specifically by the changes within gas-related inventories, operating receivables and liabilities. At the H1 stage, the OCF was reflecting a negative EUR 770 million in this area, which decreased now to only EUR 110 million, therefore, effectively releasing EUR 660 million of cash. The optimization decisions throughout Q3 resulted in a strong utilization of contracts, which has an overall positive impact on working capital, either due to favorable payment terms or due to beneficial delivery points. Looking beyond the working capital movements, which, by the way, also include the cash receipts related to the U.K. capacity market, the other effect in the EBIT OCF reconciliation follow mostly predictable patterns. Accordingly, provision utilization was slightly picking up in Q3. The overall EUR 337 million of provision utilization is almost evenly split across provisions for decommissioning, gas and LNG infrastructure and other, including pension and personnel-related provisions. Finally, there's again a rather high Other shown in our overview with plus EUR 271 million. This category primarily collects all CO2-related items are either correction for CO2-related provision buildup, the provision neutralization and the related changes in working capital when it comes to the ETS certificates. The adjusted net income developed fully in line with our expectations. Economic interest has increased from EUR 16 million in H1 to now EUR 33 million and is driven by interest income from Nord Stream 2 as well as capitalized interest from our growth projects. The applicable tax rate ended up at around 22%, and therefore, in the middle of our 20% to 25% range. Minority interests are largely driven by Unipro where minority shareholders hold 16.3%. This item decreased minus EUR 25 million in H1 to now minus EUR 34 million. Slide 8 summarizes the changes to our economic net debt. Economic net debt reached EUR 3.1 billion at 9 months 2020, EUR 450 million above the year-end '19 level. This is mostly due to higher pension obligations, which increased by more than EUR 300 million on the back of lower interest rates. Investments amounted to EUR 491 million, driven by EUR 283 million of growth and EUR 208 million of maintenance and replacement CapEx. My guess is that for the full year, we will come out around EUR 900 million, possibly even a bit below. And finally, the category, Other, which reflects an increase in financial leases, mainly related to storage contracts in our headquarter in Düsseldorf. Now over to the last slide today, addressing our outlook 2020. In our last call, we narrowed our guidance range for the adjusted EBIT and adjusted net income by moving the lower boundaries up by EUR 50 million, thereby effectively increasing the midpoint by EUR 25 million. As of today, we see no need to further change our guidance for the full year 2020. Hence, we continue to expect an adjusted EBIT in the range of EUR 800 million to EUR 1 billion with a midpoint of EUR 900 million. And for the adjusted net income, we see a range of EUR 600 million to EUR 800 million, which translates into a midpoint of EUR 700 million. In order to achieve the midpoint of EUR 900 million with regards to adjusted EBIT, the isolated Q4 needs to come in at around EUR 500 million. If you look at the past years, you will see that this is not an unrealistic expectation for our fourth quarter, given our business seasonality. In 2018, we saw Q4 contributing about EUR 480 million. One year later, the figure was even EUR 650 million, however, boosted by roughly EUR 120 million of a periodic income from the reinstated U.K. capacity market. Given the track record in our positive business outlook and particularly for the gas midstream and European Generation business, we feel confident to meet our targets. Accordingly, our dividend target for the fiscal year 2020 remains also unchanged at EUR 500 million. This brings me to the end of my presentation. Thank you very much for your attention, and I'm handing back to Udo for the Q&A session.

[Udo Giegerich]

Thanks, Sascha. Let's start with the Q&A session. As usually, please limit yourself to 2 questions each. Operator, please.

[Operator]

[Operator Instructions] And the first question is from Sam Arie, UBS.

[Samuel James Hugo Arie, Managing Director and Research Analyst]

Congratulations on good results today. My 2 questions are on, I'm afraid, Nord Stream and Russia again. On Nord Stream, look, obviously, there's a bit of an increase in the reporting around sanctions risks since you -- we spoke about this at your H1 results. Can you just talk us through what would be the fallback position if you were subject to sanctions or a black list here? Would you take that on the chin? And would it have implications for your U.S. activities and financing in general? Or would you just exit the project somehow? Could you sell your participation, your loan asset to another party? Or would you just have to write it off completely? That's the first question. And then on Russia, I think I asked you a couple of times before, and I apologize for coming back to it, but whether there was any consideration of disposing or reducing your position in Unipro. I think you said in the past, there was no consideration of that. But since H1, there have been stories in the Russian press that Inter RAO was looking at making an offer for Unipro. I think Inter RAO has denied that speculation. But I just wondered if you can give us any update on whether you've been approached or if your thinking on Russia and Unipro has changed in any way.

[Sascha Bibert, CFO & Member of Management Board]

Thank you, Sam. Thank you for your questions. And obviously, you're free to repeat any question you may have asked in the past. I can't promise you necessarily a new answer, but keep on asking them. Okay. On Nord Stream 2, we're surely following that very closely. But when it comes to specific Uniper or financing partner-related events or action, there was actually no major change. And accordingly, we have also not changed our assessment. So at this point in time, according to our understanding, sanctions or sanction risks are not specific for Uniper. In general, certainly, a company like ours would also be very mindful of not getting into the sanction category. When it comes to Russia, I would guess that in the past, I have said, and I will say it again, that Unipro, which is a key part of our overall Russian exposure, makes up about 1/3 of our company and therefore is quite crucial to the overall group from many perspectives. Now for Uniper in total, and I'm sure that also our friends in Russia will have their plans, we want to decarbonize the company in line with our strategy, have put out clear targets. And surely, this will also have ramifications for our business locally, which currently is quite thermal heavy. But when it comes to specific disposals or market rumors, I wouldn't make any further comments.

[Operator]

The next question is from Alberto Gandolfi, Goldman Sachs.

[Alberto Gandolfi, Head of European Utilities Research]

I'll stick to 2 as well. The first one is can you please -- I know you don't have an official one, but can you elaborate on a sustainable medium-term leverage target, given risk profile and given volatility in commodities and these uncertainties regarding Nord Stream? I was wondering if the way of thinking about target leverage has changed for you. And the second question is along those lines. Thinking about capital structure, you seem to talk about consistently decarbonization, and let's say, energy transition requires quite a lot of capital and dividends absorb a lot of capital. And so I'm wondering, when do you think we could see a transition of moving away from dividends on to investments? Or should we perhaps envisage a more profound asset rotation? So I'm trying to see where would the capital come from to pursue, really, the energy transition you're talking about?

[Sascha Bibert, CFO & Member of Management Board]

Thank you, Alberto. I think the headline leverage target has not changed and will not change because, ultimately, it accumulates into our rating aspiration, yes? So rating aspiration was and is crystal clear, BBB flat or we call it a solid BBB rating. And whatever needs to be done to achieve or specifically to retain that will be done. Then I think almost for modeling purposes, we have done in the past translated and approximated that rating target also into a leverage factor, yes, so the 1.8 to 2.0. I think that gives you a direction, but I also would not over interpret that. So it doesn't mean if we were to come out at 2.1 or 2.2 or what have you, that this would be substantially negative with respect to the rating. Over time, we have actually done a lot behind the scenes for also the rating agencies to appreciate the details of our business, and therefore, the capital adequacy ratios have been refined. So BBB flat will not change, and for the time being, the approximation via 1.8 to 2.0 roughly. When it comes to the capital structure, I hear you. I also follow you. And I think you saw a certain directional response also with respect to our Capital Market Day communication back in March where we, I think, said 2 things, among others. First, we said we will achieve communicated targets. So there was a long-standing multiyear dividend target out there back then related both to FFO but also to a yearly CAGR that we will take off. We also said that this 25% yearly increase back then in the FFO, but in whatever KPI is certainly not a sustainable thing going forward. A, it doesn't fit to the operations. B, indeed, it doesn't fit to the company transformation. So we already did change something. Whether a whole big other changes is required going forward, we'll see. I think, first and foremost, we need to earn. We need to generate earnings, we need to generate cash and then we can decide what to do with that. Asset rotations have always been on the agenda, even though we don't put out a list of disposal candidates all the time. But when you look into the past of Uniper, we have disposed of assets and it was not just Yuzhno-Russkoye. We also disposed of France. We also continuously have smaller disposals. And you can be pretty sure that over the next years, there will be more disposals. But unless there is a very clear and quite firm process and what have you in place, I would not announce this going forward. So certainly, disposals can also play a role in the overall capital structure or usage of capital picture.

[Operator]

The next question is from John Musk, RBC.

[John Musk, MD of European Utilities Research & Analyst]

Yes. Just one question from me, really. And going back to Nord Stream, just to clarify the financial position there. Can you just put some numbers on the level of your investment? And then the financial income that you received, I think the financial income is in the sort of EUR 20 million to EUR 30 million per annum. But can you just confirm those numbers, please?

[Sascha Bibert, CFO & Member of Management Board]

I'll start with the second component of the question because I believe on that component, I have been clearer in the past than on the first, even though if you relate the second to the first, you may almost get an answer. So on the second component, the yearly contribution to the economic interest result is higher than what you have said, i.e., it is on the higher double-digit million amount. So that is accrued interest, and that will then turn into cash once the pipeline is operating. When it comes to the specific loan amount as well as accrued interest on the balance sheet, I don't think we have mentioned a number recently. However, if you relate that interest income and think about almost like a historic hybrid return, somewhere between equity and debt, you probably come up with a loan amount not too far off the EUR 700 million and then you may still have capitalized interest on the balance sheet in addition.

[Operator]

The next question is from James Brand, Deutsche Bank.

[James Brand, Research Analyst]

I also had 2 questions, also one of them on Nord Stream, but lots of questions on the financial exposure. But I was wondering whether you could just give us an update on what the actual progress is there in completing the pipeline. Is it still frozen or has it started up again? Is there more pipeline being laid at the moment? And if not, what are the key hurdles that need to be passed for the final 6 months or so of construction to kick off? And then secondly, on nuclear production, maybe it doesn't matter too much now if we've got a vaccine and things start to improve. But a lot of European countries have had very poor nuclear production this year, including in Q3 as well as the -- as well as Q2 when we had the acute lockdowns. I was wondering whether you could just explain from your perspective. Obviously, there's been some closures as well in Sweden. The Swedish nuclear production even, I suppose, was very, very weak in Q3, and you mentioned extended assets. So I wondered if you could just explain to us what's driving that. Is it at all crisis related or maybe it was all planned or maybe there are other things that are going on? But be interested to just understand your experience.

[Sascha Bibert, CFO & Member of Management Board]

Yes, James. Nord Stream 2 actual development, I could now try to summarize what I read in the press, but there's a high risk that I'll make a mistake or that I'm even not fully up to date. So I would leave that operational question to Nord Stream. Pipeline isn't finished yet, but it is close to completion, and what the specific operational movement is in the CI, I don't want to comment on. Again, we are just a financing partner. I understand that the exposure for Uniper is relevant also from a capital markets perspective, but I think the operational communication shouldn't come from our side. Nuclear, I mean a good point and maybe I can take that in a slightly bigger context. If you were to ask me about COVID-related impacts, I think we could spend quite some time together talking about negatives but also talking about positives, i.e., certain market developments, probably COVID-related, that have also allowed us for some extraordinary optimization opportunities. The one area where certainly COVID is more visible and more on the negative side is certainly in the wider project development and project execution area. I mean just think about it. Whenever a lot of people come together, work together, you have to follow very strict measures. Nevertheless, it may be that you have infections. You may have to quarantine. You may have to change the shift. You may have an issue with a supplier wherever that comes from. So that is certainly not making it anything easier. That said, specifically for the nuclear production related to Uniper or Uniper-affiliated plants, a good part of the outages have been planned. I'm also inclined to say that the outages have been a bit longer than originally planned, but nevertheless, I wouldn't make a too big thing out of that. So I think we are currently doing okay, and I'm optimistic regarding the volumes in the future. Nevertheless, COVID on larger projects is one of the challenges.

[Operator]

The next question is from Lueder Schumacher, Soc Gen.

[Lueder Schumacher, Equity Analyst]

Two questions on my side. One is on the summer-winter spread. I guess you were never before able to fill gas storage as cheaply as you could this summer. So should we get excited about the improvement of the summer-winter spread going forward? That's the first question. And the second question is on Irsching 4 and 5. It's good to see them back in the market. There has been some -- well, we had some spikes in September during the mini heatwave in the U.K. and in Germany. What's your outlook? I mean I guess you would not have brought those plants back into the market if you wouldn't believe that the market is going to get quite tight.

[Sascha Bibert, CFO & Member of Management Board]

Yes. Thank you, Lueder. I think the -- when it comes to the summer-winter spread, it does depend a little bit on which year or period one is looking at. The short end has been a bit weaker, but I think the longer elements have held up well. So I wouldn't say get excited, but reasonably optimistic. Irsching 4 and 5 and markets, indeed, I also found the price spikes that we have seen in September. I think on multiple days, we saw triple-digit prices. I found those interesting. I equally found it interesting to read statistics that in 2020, we apparently had the highest number of days with negative prices. So apparently, volatility is picking up. Volatility can't be such a bad thing for us. Irsching 4 and 5 specifically, I think we put them back into the market starting October. So anything that has happened back in September, obviously, needs to put into context. When we put those plants into the market or when we generally run our spread assets, you also know, and maybe you have seen part of that also in the spread-optimization effect when it comes to the full year 9 months results, that we are -- once we see interesting market situations, we will hedge them quite quickly also in the years out. However, we may then open those hedges again, buy back components or the entire spreads once the spot prices come down, and therefore, then generate even more profits. So I think Irsching 4 and 5 is well placed in that respect, and we're looking forward to some more interesting spikes in the periods to come.

[Operator]

The next question is from Deepa Venkateswaran, Bernstein.

[Deepa Venkateswaran, Senior Analyst]

My 2 questions. First one is you have the CMD of Fortum coming up and your CEO will be presenting. I know you can't go into the details, but maybe if you could give us a purview of the sort of topics that Uniper might communicate and maybe what could be different actually versus what you have already said.And the second question is on decarbonizing your gas fields. I know you've talked about converting it into hydrogen rather than CCS. Could you maybe talk about what kind of time lines we're looking at? Is it 10 years, 5 years? And then maybe what kind of incentives you need?

[Sascha Bibert, CFO & Member of Management Board]

Yes. Thank you for your questions. Indeed, the, call it, the status quo or the outcome of some of the works that Fortum and Uniper have been conducting over the last months, quite intensive discussions around strategic alignment and also operational cooperation will be communicated at the Fortum Capital Market Day at 3rd of December, if I'm not mistaken. And indeed, our CEO, Andreas, he will have a slot there and he will put that into the perspective of the Uniper strategy. When it comes to details, I'd say I'm not going to take away the excitement that you should have for that day or for that presentation. Now gas and greening the gas, transforming the gas business, I think we can -- well, you asked about time lines, which is a good one. And I'd say anything from yesterday to admittedly a few years out. Why do I say yesterday? Because I mean we have had certain projects. You may call them pilot, but we had them for quite some years and it is increasingly clear that the technology is there. It's moving. It certainly will be expanded and will be improved over the next years, but the technology in principle is there. I think we are now seeing more and more discussions from all kind of stakeholders, investors to politicians and also from customers. So I would like to think that there is also an increasing market also related to firmer and firmer decarbonization targets. The piece that is still underdeveloped is the whole commercial aspect, i.e., it is not yet clear enough how to transform that into a profitable business case that is working for all 5. So I guess, indeed, it will take a few years until we have sizable, scalable and commercially attractive projects. But I can tell you, at least for Uniper, we are not resting on those pilot experiences, but we have shaped up the organization. We have the people in place. We have the right contacts. We are talking to customers. We're talking to suppliers. And I'd like to be positively surprised when it then comes to the speed of actually making that meaningful also for the results.

[Operator]

The next question is from Piotr Dzieciolowski, Citibank.

[Piotr Dzieciolowski, Vice President]

I have 2 questions, please. So the first one is on the gas optimization. This year, it brought really the results improvement. How is the market situation different now, given that we all know market is well oversupplied? Is the positioning of the customers different? And how do you see it from the financial perspective? How it could play out for you the whole winter season? And second, can you help me understand where your final year-end net debt can come at?

[Sascha Bibert, CFO & Member of Management Board]

Yes. I was hoping I can think a little bit before I answer, but I guess that doesn't work in the format. I just need to answer somehow. Now gas optimization, I'd like to come back to a concept that I think we have explained quite some time ago. And for me, that concept has 2 components. So there is a level of profitability that I think you can think of as normalized over the cycle, if you want. I'm inclined to say that this normalized level of profitability should actually be looked at quite positively because it has relatively limited downside, i.e., if you think about our LTCs, for example, the LTCs that we have today are not the LTCs that we had 10 years ago. There, I really have sleepless nights. They have the oil linkages and similar. That is not the case. So I think there is a normalized level of profitability, which admittedly is not the level that we have seen and will see in 2020, but somewhat below. And then there are somewhat extraordinary circumstances when we can earn more, and those extraordinary circumstances where we match supply and demand we had in -- starting in Q4 last year that then extended into Q1. So 2020 will be a really good year for the gas team. And on a prospective basis, you cannot simply assume that we repeat the same level also in '21. It may be possible. It's an option, but I can't tell you that. When it comes to the net debt, now there are probably a couple of ways how to think about that. The easiest is probably if you take our EBIT guidance, the range, and then say you position yourself at the midpoint, you then assume that D&A is actually quite linearly distributed over the quarters. So then you have the full year D&A charge. Adding it to EBITDA -- to EBIT gives you EBITDA. And then you multiply that, say, with 2x from our debt factor guidance range and then you end up at a number. By the way, you probably end up around EUR 3 billion. Or you can do it differently. You develop net debt from the 9-month stage into the full year, taking account of the CapEx guidance that I've just given you, think about normalized cash conversion, probably assuming not too much on the provision side, which is unknown. And maybe you get into a similar space. So I guess I'm dropping the figure of around EUR 3 billion.

[Operator]

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

[Samuel James Hugo Arie, Managing Director and Research Analyst]

I was just sticking to the 2-question rule. And my third one was actually about the Opal participation that you have. And I think it's been reported again since we spoke with you that you are looking to dispose that asset. And I just wondered if you could talk us through some numbers on that particular asset and also the rationale for looking for a buyer now rather than in the past when I think you were quite happy to hang on to those pipeline participations.

[Sascha Bibert, CFO & Member of Management Board]

Sam, pleasure to have you back. I think you're turning into an M&A banker. Nevertheless, as I said, any question is appreciated. I think you're practically highlighting the obvious, I'd say, parts of optionality in our portfolio. I think we had participations also related to gas infrastructures for quite a while. I think they are definitely interesting to provide stability to our portfolio. Is that necessarily assets or asset areas that we crucially need when it comes to our strategic development? That can always be discussed. But once again, I think there are certain assets or areas that are sometimes mentioned in the press as potential disposal candidates. I wouldn't comment on them specifically, but I would confirm that our portfolio has optionality that we can use once appropriate, i.e., once we get a decent price and not just sell low and buy high, but the opposite, once we get a decent price and once we also have attractive reinvestment opportunities to then really drive a different portfolio over the years to come.

[Samuel James Hugo Arie, Managing Director and Research Analyst]

Okay. I appreciate your comments. I think anyone who knows me knows that I would be the worst M&A banker in the universe. So that's definitely not where I'm coming from. But look, maybe just a quick follow-up. But is there any connection between the Opal participation and the Nord Stream sanctions issues? I think Opal connects Nord Stream 1. I'm not so sure with Nord Stream 2. But is there any exposure through your Opal ownership to some of the sanctions risk conversation?

[Sascha Bibert, CFO & Member of Management Board]

Not one that I can think of, Sam.

[Udo Giegerich]

Thank you very much for participating in this quarter's call, and looking forward to hear you then on the full year call in March. Thank you very much. Have a nice day.

[Sascha Bibert, CFO & Member of Management Board]

Thanks, guys.

[Operator]

Ladies and gentlemen, thank you for your attendance. This conference has been concluded.