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E.ON SE ( OTCQX:ENAKF ) Q1 2016 Earnings Conference Call May 11, 2016 5:00 AM ET Executives Florian Flossmann – Head, Investor Relations Michael Sen – Chief Financial Officer Analysts Deepa Venkateswaran – Bernstein Peter Bisztyga – Bank of America Andreas Thielen – MainFirst Ingo Becker – Kepler Cheuvreux Operator Dear ladies and gentlemen, welcome to the E.ON’s First Quarter Results 2016. At our customer’s request, this conference will be recorded. [Operator Instructions] May I now hand you over to Florian Flossmann who will lead you through this conference. Please go ahead, sir. Florian Flossmann Good morning, everyone and welcome to our first quarter call. Our financial information was published 7:30 this morning and the files can be downloaded from our website. I am joined in today’s call by our Chief Financial Officer, Michael Sen. Again straightforward Michael will lead you through our Q1 results, followed by a Q&A session. And with that, Michael, I would like to turn it over to you. Michael Sen Thank you, Florian. Good morning, everybody and a warm welcome also from my side and I would also like to welcome Florian on board as new Head of IR. We also like to thank Anke who is now moving to an operational role and there are high hopes from all of us when she is leading UK as the CFO. And I am very happy to have Florian in the team who also has Investor Relations background. So, good morning again to our Q1 earnings call. It was good to see all of you at the Capital Markets Day in London two weeks ago and believe me I am fully aware that we made you digest a lot of information. At the same time, I was very pleased to hear in investor meetings and to read in various reports that our message seems to have been pretty well understood by the market. As I repeatedly said, it’s all about focus, discipline and striving and exactly in that order. It implies a rigorous management of our operating costs, strong focus on a healthy balance sheet, efficient CapEx budgets and stringent capital allocation driven by a strong return and bottom line focus. Our new financial framework that was presented to you at our Capital Markets Day will ensure this. And of course, transparency is key for us as we want the market to be able to understand our thoughts and to measure our performance clearly. Having said this, I am looking forward to meet many more of our investors on the road in the following days and weeks. On the same day, we hosted the Capital Markets Day. We also send out the invitation to our AGM and the so-called spin-off report. With this, we achieved a very important milestone on our way to a successful spin of Uniper. Just a day later, the so-called KFK, the commission, as we call it, published its recommendation on the funding of nuclear waste liabilities. Naturally, this was the topic on our road shows and I will give more color on this in a few minutes. Before I do that, let me summarize the key points of the Q1 results. As a reminder, we now have to mentally switch back to the old E.ON and the existing reporting structure. This will be the last time assuming a positive vote on the AGM. With Q2, we would then start reporting into new structure as I laid out in London. EBITDA in Q1 fiscal ‘16 came in at €3.1 billion, while underlying net income came in at €1.3 billion. Both figures were thus significantly above last year’s levels. However, both line items benefited significantly by the one-off effect in relation to the agreement reached with Gazprom, which masked the effects of the ongoing challenges in our operating environment. Excluding this effect, EBITDA and underlying net income would have been below the levels of prior year. The quarter was in line with our updated full year guidance from March 29. Hence, it should not be a surprise that we confirm our outlook to-date. Please keep in mind what I have said in London, this outlook is valid for E.ON SE as it stands today. We have published an outlook for future E.ON at our Capital Markets Day, which reflects the changed company setup and the different scope of the portfolio. Post the AGM, the outlook for future E.ON will be applicable. In Q1 fiscal ‘16, we have been able to reduce economic net debt by €1 billion over Q4 fiscal ‘15 despite the €1.5 billion increase in pension provisions. This is obviously and predominantly driven by our strong operating cash flow with an exceptionally high cash conversion rate of 92%. In addition, seasonal effect such as the fact that we spent less than 20% of our full year CapEx budget in Q1 or the very fact that our dividend payment occurs later in the year contributed to the positive net debt development in the quarter. This trend should not necessarily be extrapolated for the remainder of the year. Before we look at Q1 in detail, I want to spend a few minutes on the recently published KFK recommendations. The commission recommends a clear split of responsibility between the government and the operators which we welcome. The operators should continue to be responsible for the decommissioning and dismantling of nuclear stations with all chances and risks. From our point of view, this is the process similar to a large investment project and is well controllable. Our clear aim is to industrialize the process leveraging our know-how from decommissioning two stations in the past and thus manage our resources in the most efficient possible ways. On the other hand, the commission has recommended that the government will take over all operational and financial responsibility for the storage related issues. This includes intermediate as well as long-term storage. According to KFK, the operators need to provide the funding for the face value of the waste-related provisions, which for the industry as a whole amount to €17 billion. In addition, the recommendation foresees a 35% risk premium for the industry. This is equivalent to a payment of €6 billion. With the payment of the risk premium, the waste-related liabilities would be transferred to the government and thus the operators would be completely de-risked. Overall, we believe the recommendation has positive aspects, but also contains elements which represent a large challenge to us. Firstly, it is good to see a proposal that could once and for all get this topic off our table. Also, we see the scope of the recommendation as sensible. I also want to highlight the optionality, which the commission is giving all of us. It is left to the operators to decide whether to pay the premium. This means we could opt not to pay the premium. However, only upon payment off the premium, we would be de-risked, i.e., off the hook of what is otherwise and this is very important to remember an uncapped liability over the next 100 to 150 years. However, there are also items in the proposal that we see as challenging. The premium of 35% is very high, especially considering the fact that German operators have the highest provision for decommissioning and dismantling around the globe. A fact that was also confirmed by the stress test of the government and published in many reports, for example, from rating agencies. I also want to make you aware of the following. The industry-wide figure of €17 billion stems from the stress test report and is normalized across all companies. The equivalent for E.ON is roughly €8 billion amount. In an initial assessment, we expect that premium for us could be at around €2 billion. This of course puts a severe additional burden on E.ON and our balance sheet. During the Capital Markets Day, I already presented this slide, which clearly lays out what I called mental framework on how we intend to deal with the many uncertainties of our environment. As I have already outlined at the day as sizable premium would qualify for us as being in a special situation that could require capital measures. At the time, we did not know how punitive the premium would be. Having more clarity now, I confirm my statement next to necessary OpEx and CapEx costs which will impact our growth perspectives, I cannot rule out an equity measure maybe required going forward. However and this is important, please do not expect us to act in an uncoordinated or overly hasty fashion. We need first of all to completely understand all the aspects of the KFK recommendation first and then discuss the details and open questions with the government. Only thereafter we would be in a position to thoroughly assess the impact on our financial in all details. We currently see three main aspects to consider. First, liquidity, with nearly €14 billion of cash and cash equivalents on our balance sheet at the end of Q1, we see cash as less of an immediate issue for us. On the other hand, the premium would go directly against our equity and further weaken our balance sheet. We also need to consider the impact on our credit metrics and our rating. So far, the rating agencies apply a discount to our nuclear provisions equivalent to roughly 30% when calculating the relevant credit metrics. If we were to agree to a solution with the government, there would be no reason left for a discount on the waste related provisions. How the discount for the remaining provisions would be treated is not clear at the moment and will have to be determined by the rating agencies? Of course, our remaining provisions remain pretty conservative and will be funded only over a very longer period of time that is taking duration and quite substantial duration into consideration. That being said, it is factually clear that the business profile of future E.ON is more stable, robust and has a significantly higher visibility compared to E.ON pre-spin. That together with a prudent financial policy should also be taken into consideration by the agencies. We have made our point very clear in the last couple of weeks and days vis-à-vis the agencies, it remains to be seen on how they decide on those factual issues. Lastly, there is another unknown in the nuclear equation, the outcome of our legal proceedings against the nuclear fuel tax, which has a value of roughly €3 billion pre-tax. The German Constitutional Court is expected to rule on this one over the course of this year. While there is not a direct link to the recommendation by the KFK, a positive outcome could of course be beneficial to our balance sheet and provide additional sources of funds. So, we need to completely understand all aspects of the nuclear equation before deciding on the appropriate response. So, when all facts are on the table which will be later this year, we know exactly what to do. Although the magnitude of the premium would add significant financial strain on us, we are interested in finding a solution together with the government on the basis of the KFK recommendation. Moving to a chart that should be very familiar to all of you, you can see that the Capital Markets Day on April 26 we achieved another critical milestone in our spin-off process. On the same day, we published the invitation to our AGM and the so-called spin-off report. With this, we achieved yet again very important milestones on our way to the spin-off of a majority stake of Uniper. In June, Uniper intends to start the prospective filing procedure with the German financial regulator, BaFin, the next milestone obviously then is the AGM on June 8. Assuming a positive vote from our shareholders, we expect Uniper’s listing for the second half of 2016. Thus the overall schedule stays unchanged and the spin-off preparation remains on track. Turning to Q1, now let me quickly run you through the core drivers behind the EBITDA development in Q1 ‘16. We anticipate that this will be the last time we report in this format as already being said at the beginning of the meeting. EBITDA Q1 came in at €3.1 billion, an increase of roughly €200 million over prior year or 11%. I want to highlight again that our Q1 performance is largely dominated by the agreement with Gazprom, the resulting significant positive one-off is masking the challenging underlying business performance. Excluding this positive one-off effect, EBITDA would have been below prior year. The single biggest driver in Q1 was the global commodities business, which will ultimately belong to Uniper. Here, EBITDA was up €600 million over Q1 ‘15 driven by the just mentioned positive one-off of roughly €400 million stemming from Gazprom. In addition, we saw positive effects from improved gas optimization profitability and reduced losses from the hedging of transfer generation volumes. We have seen incremental earnings by adding new capacities, namely our offshore wind farms, Amrumbank and Humber. Together with the COD of Maasvlakte, they contributed a total of €100 million positive year-over-year. Overall, we had another €200 million positive contributions summarized under other. Most prominent effect there is our other EU segment, which saw an increase of more than €100 million driven by a mix of things. The start of new regulatory periods in Sweden and Czechia in our distribution business, improved weather conditions in Sweden business, the absence of storm costs and in particular organic improvements across the sales businesses in various regions, all contributed to this increase. This effect amongst other factors was able to overcompensate the volume and price related decline in EBITDA from our Yuzhno Russkoye gas field reported in the E&P segment. Remember that 2016 is a makeup year, where we received less gas than normal due to higher deliveries in the past. On the negative side, a large driver weighing on EBITDA came from disposals with €300 million. This is mainly related to the disposal of our Norwegian E&P business, which we sold in Q4 as well as the conventional and renewable generation assets in Spain and Italy. As a side comment, you may have seen that we have also closed the sale of our UK E&P business at the end of April. EBITDA from our power portfolio declined by roughly €300 million as well. Prices account for roughly 70% of the decline as the achieved outright power prices for Central Europe and Nordic declined between €8 to €9 per megawatt hour versus 2015. Lower volumes obviously also played a decisive role, especially within nuclear we all know about the shutdown of Grafenrheinfeld around the mid-time of 2015. E.ON Russia recorded an EBITDA decline of €100 million during this quarter. This is due to a negative one-off effect in relation to the accident in our Beresovskaja 3 unit. As a result of the fire, we had to reduce the carrying amount of the boiler value. We booked this charge in EBITDA to be consistent with the expected insurance payment which would then also be booked in EBITDA and offset the impairments if and when it comes. As you can see on Page 6, the €200 million increase in EBITDA was amplified by lower depreciation charges and a lower tax rate in our underlying net income, which increased nearly €300 million over the prior year. Our depreciation line came down by almost €200 million driven by previously mentioned disposals on top of the sizable impairments we had to book in 2015 also less to lower depreciation. Our tax rate was 23% in Q1 fiscal ‘16 thus slightly lower than the 26% in Q1 2015. Net debt declined by €1 billion over year end despite €1.5 billion increase in our pension provision, which I alluded to already in London, which is primarily driven by a decrease in interest rates over Q4 fiscal ‘15. The seasonally driven strong operating cash flow of €2.8 billion was able to really more than offset the pension effect. The cash conversion rate in Q1 ‘16 was unusually strong with 92%. Operating cash flow came in at €2.8 billion, up €300 million vis-à-vis Q1 ‘15. Key drivers were the usual seasonality of the gas business in Q1 and in addition phasing effects from working capital. Overall, the effect was roughly €600 million. Having said this, we would expect a more normal cash conversion ratio for the remainder of the year. In particular, I want to remind all of us that the cash settlement of Gazprom is due in Q2. Actually, we already paid out the appropriate amount to Gazprom. It is also worthwhile to highlight CapEx spending, which is seasonally the lowest in Q1, with only €700 million less than 20% of our full year budget was spent in Q1, which supported the positive economic net debt development in that very quarter. This, however, means that 80% of our CapEx budget is yet to come in the remaining quarters in addition to our dividend payment as well as the settlement with Gazprom, which is due in Q2. This will all have its weighing effects on the economic net debt as we move forward in fiscal ‘16. Q1 results were in line with the guidance for fiscal ‘16 which we updated in March 29 following the agreement with Gazprom. We confirmed this guidance for E.ON growing concern today. However, please bear in mind that this is the guidance for E.ON in its current structure, which we have reported in its current structure hopefully for the last time today. Assuming a positive vote at the AGM on June 8, we will report future E.ON for Q2 in its new setup. Thus the guidance confirmed today will no longer be applicable to the changed scope, but the guidance we have given for future E.ON at our Capital Markets Day will from then on apply. However, given the fact that the guidance of future E.ON reflects solely the change in scope of the business portfolio, it should be considered consistent with also guidance for E.ON as going concept. Thus we also confirm the guidance for future E.ON to-date. With that I would like to hand it over to Florian and we open up the Q&A. Florian Flossmann Thank you very much, Michael. And let’s now start with the Q&A session. So just everybody has fair chance, I would like to ask you to limit yourself to two questions each. Operator let’s start first question please. Question-and-Answer Session Operator Thank you. Now we will begin our question-and-answer session. [Operator Instructions] Your first question is from the line of Deepa Venkateswaran of Bernstein. Please go ahead. Deepa Venkateswaran Thank you so much. Two questions, firstly just to clarify the number that you gave on what you would expect to transfer to the commission the €10 billion number, which is €8 billion plus €2 billion premium. I was just wondering the €2 billion doesn’t exactly square to the 35%, so I am wondering if I am missing anything in the rounding. Secondly on the sort of an equity raise which you sort of talked about, I was wondering if the amount of equity raise that you might consider in the event that you don’t win the nuclear fuel tax is it roughly equal to the amount of premium and are you considering hybrids or any other asset sales as part of this package or would you jump directly to the last bucket in your priority of orders before kind of maybe tackling more easy thing such as hybrids? Thank you. Michael Sen Yes. Hi Deepa, warm welcome from my side. First of all, you are absolutely right with your first question that it doesn’t square to the 35%. And this is important to understand what the commission has published our industry average numbers, industry average numbers based on 2014 accounts. So now each and every company has to find out what it really means for the individual company itself. We are doing that exercise and that’s why I already shared with you the first sort of ballpark numbers. And the very reason why that does not as you say square to 35% is that we conservatively account for our accruals or provision. If you – remember that whole debate on the real interest rate we had a couple of months ago, European peers having 1.1, 1.2, we are pretty conservative here we are at 0.9. And this is still conservative we were even at that point in time 0.7 and that is the reason why it doesn’t square to 35%, right. But this is what needs to be done now that you exactly find out what it means for you not only based on what the commission recommended, but if that process goes further along the line then it is obviously important what the government makes out of it because there are many parts which are still not clear yet. Only if they are clear, then we know what the real number is. I just shared with you ballpark numbers and on top of it and Johannes mentioned that during the road show we not only want the government to make a law, we also want to have a contract because that gives more certainty for us going forward. On the equity, well, you had it right that we need to wait what are other sources of funds. We took the first step that we now know how punitive the premium is. And I think it is pretty punitive, that’s why we have to tap other sources. Once source could be the nuclear fuel tax, but that is not in our hand, so we have not taken that into our planning. And then capital measures would also include all measures, but I explicitly also didn’t want to rule out equity measures. What sort of or the amount would then be highly dependent on what we see the final premium actually to be and then also how rating agencies are going to treat us because that also determines how much we would retrieve and that then determines whether you would go down the line to do an ABB or something like that. But we won’t do anything rushing in the next couple of months. As we have started the journey, I will be very transparent to you guys and update you regularly when we reach the next milestone, so that you clearly know what we are doing. Hybrid is of course a topic, but it remains to be seen as alluded to in London that the hybrid capacity and I think Deepa, it was you actually asked the question might also be limited given the IFRS equity at least for one agency, which does not mean that you can go down that route. Obviously, I am also currently penciling out what the capacity is on that issue. And we reached the stage of having a special situation and that’s why we were very transparent. And OpEx and CapEx is done anyways. Okay? Deepa Venkateswaran Okay, thank you. Operator The next question is from the line of Peter Bisztyga of Bank of America. Peter Bisztyga Hi. Yes, good morning. So, first question just on this 30% equity credit you get from the rating agencies, I guess that’s about €3 billion on the €8 billion of waste provisions. Does that €3 billion fall into your sort of special situation bucket as well? So, if we are looking €3 billion loss of equity credit and €2 billion risk premium, are you basically saying that your capital shortfall is €5 billion? That’s my sort of first question. Michael Sen Go ahead, Peter. Peter Bisztyga Yes. And then sorry, my second question is simply would you consider delaying the payments of your risk premium? Michael Sen Yes, hi, Peter. First of all, I think it’s not advisable to add up the things. These are totally different levels, right. If an equity premium or the 30% is roughly a ballpark number, actually, they are very different methodologies how you get to the equity premium between the two agencies. Yet, it is an issue. And then that determines as to how much the gap would be, but it is not advisable to add up the two things. It is rather isolated topics, right. The discount will be gone for the part which we are going to transfer. Now, the big question is how are the agencies going to treat their remainder? If there was a credit or if there was to be a recognition of us having a prudent financial policy being conservative there and doing the needful, then there could be other ways. But I have made it very clear that the business profile from future E.ON is a totally different one, but we will see how the agencies will react and then I will comment, but don’t add up those things. I mean, this is not saying we are going to go to €5 billion, €6 billion, €7 billion what have you gap, but a gap which you are alluding to is always referring to what is your target rating, which I have been handing out in London and then at least it is more than €2 billion which you see as the premium. Right, there you are correct, but only adding them up is a little too easy. Then delaying, right, I think it is important to understand that we made two messages to the market, Johannes starting last night and then myself today. The first one is that there are a lot of positive elements in that recommendation. Because what in essence you see is that you can get that topic of your table for good. And that is a political risk, especially if you think about the final storage. Governments going forward could change their stance, their procedures on that one whenever they want. So, in essence today, we have an uncapped liability in our books there. Getting rid of that one for good, I’d say, would probably be a good argument than to pay even if it’s punitive premium. Therefore, we are having this intense dialogue and I shared my thinking with you also on the road shows saying how do you, as shareholders view this if you get this big, big risk, which is hanging over you off the table. Yes, it’s punitive, but if it’s gone for good, then I think it’s more prudent to pay it, because other than that, I don’t win anything. I transfer the liability. I transfer the respective liquidity and I am still liable for that one. That’s basically an off balance sheet liability. It’s the same as we have today that is even worse, because I don’t have the liquidity anymore. Peter Bisztyga Yes. Okay, thanks very much. Operator The next question is from the line of [indiscernible] of Societe Generale. Please go ahead. Unidentified Analyst Hi, good morning. Well, on the searching of balance sheet and credit metrics, are you a bit disappointed by the BBB- rating by S&P for Uniper. It’s not really what I think most people would associate with a comfortable investment grade rating. That’s first question. And the second one is I think this whole language on the nuclear provision debate seems to have changed from saying that if the premium is too punitive, we just won’t accept it, because the stress test quite clearly showed that the existing level is correct, a small premium that’s acceptable, but 35% certainly doesn’t really fit it. I seem to read in between the lines that now a big premium has become acceptable and I want to know what exactly has changed there over the last few months? Michael Sen Yes. First of all, if you think – taking about the Uniper rating, I mean, I think it is obvious and if you have listened to what we have been saying in the earlier calls during the course of the year, I think the tone also on the intended rating changed a little bit that what you are referring to, I think was the initial statement when we left the station in December 2014. So, I am actually not unsatisfied at all with the rating, because BBB- and stable outlook. And the Uniper management actually presented a very, very stringent plan to the rating agencies, which they shared with you guys at the Capital Markets Day, where it’s all about execution on the restructuring front and asset disposals, which should also give them the opportunity to climb up the ladder if and when they wanted and they needed. So, from that point of view, I am actually very satisfied with it, because it was a science and an art to split our balance sheet into the two companies and giving everybody the appropriate capital structure. Now, coming to the commission and the language, I mean I think it is obvious that during the whole process of negotiation, you hold your cards to your chest and it is clear and it’s still clear that our accruals are conservative. That is one of the main reasons why it doesn’t triangulate to 35%. It is conservative and they are right and rightfully reflected in the books. Yet view this as an M&A deal and a M&A transaction. If I were to tell you today and I said that by the way on road shows time and again, if I were to discuss with you, are you willing to take over my liabilities which basically have a duration, they go more than 100 years and have an unlimited liability risk on the political side, you would probably say give me a risk premium. Now, do we say the risk premium of 35% is too high? Yes, it is high, it is too high. But if it’s still the price to get it off for good, really for good and then have a clean slate if you so wish, then I think it’s worth considering it and I will be on the road again and I am getting investor feedback. The first feedback I have actually received from investors during the London road show was actually just be open and transparent on what you do and then you take it from there. So, from that point of view, this is why I mentioned capital measures are not being ruled out. Unidentified Analyst Okay, thank you. Operator The next question is from the line of [indiscernible]. Please go ahead. Unidentified Analyst Good morning, everyone. I have two questions please. The first one is on pensions, now your pension liabilities are significant, I believe they stand at €5.8 billion, you are economically under pressure. Is it time for you to go back to the unions and try to renegotiate the commitments that you have made on previous pension plans to try to do liability management on that front as well? My second question it comes back to that capital measure that you may have to do if you decided to opt-in into the premium for nuclear liability, now in the event that you decide to pay the premium and in the event that you have to do capital measures to do so, would you limit yourself to do capital measures to pay the premium or would you seize the opportunity to say you know what, we may need up to €2 billion let’s do €4 billion or €5 billion to prop up the balance sheet once and for all, would that be something you would do? Thank you. Michael Sen Yes. I mean the first one, it’s actually going by the numbers on the pension liabilities, you are correct. Second one, I think that is a little bit too overhasty, believe me we do everything on the asset liability management as such in general that’s why I told you we by the way bought Nord Stream I from Uniper to then ultimately put into the CTA, the pension trust because it bears a nice sort of a return profile going forward. But I would not deem that as one of the priority and biggest levers to go to the unions and negotiate that side of the liability. By the way I also have to say with doing the entire process of the spin they have been very cooperative. Without them we would not have gone that far. So our plans on the pension side are clear. And we are not going into the old system where we promised people fixed return so define benefit and define contribution I think it’s very clear on that one. Now, in the event we would do so, I think we need to – on the capital measures, we need to take one step at a time and then determine what is really needed. And the same with hybrid, by the way, what is the capacity which allows us to tap the market and what is the mix of measures, because obviously people also expect that we do our home works on costs, on CapEx and the like. And therefore that one determines and currently I would rule out that currently that it goes into the ballpark you have been mentioning because therefore you need totally different preconditions going through AGM again and then it gets also timing issue. Unidentified Analyst Thank you very much. Operator The next question is from the line of Andreas Thielen of MainFirst. Please go ahead. Andreas Thielen Yes. Good morning, one simple question again on the nuclear issues, you mentioned already that the nuclear fuel tax depending on the outcome could play a role in the over considerations, on that one, do you have gained any new insights on a view of – on your view regarding the possibility likelihood of a positive ruling. And secondly, how do the compensation for the nuclear exit come into play in the overall picture? Thank you. Michael Sen Yes. I can make that one short. Thanks. No, we don’t have no insight, the court said that they want to release something during this calendar year, probably from today’s point of view more late summerish. But we don’t know more. And content wise there is no logical link between first of all nuclear fuel tax, but also other court cases and what the commission has recommended how to finance the waste related liabilities. By the way the commission also had no mandate on that one because they were only dealing with how to finance the waste related liabilities. So from that point of view we are waiting and seeing what the court says on nuclear fuel tax, as I said not baked into the plan if it were to come, that obviously would then maybe limit capital measures. Andreas Thielen Alright. Thank you. Operator The next question is from the line of [indiscernible] of Jefferies. Unidentified Analyst Hi, good morning everyone. Two questions. First, can I just clarify if the final outcome of the nuclear deal is touched at there is no premium, so you only have to transfer €8 billion, in that situation, can you rule out the need for the capital measure, that’s my first question. Second, in the scenario where you do have to pay a €2 billion premium, how do we square that with your ample liquidity the point that it may have to be paid over several years and that you are planning to repay €6 billion or so of debt, I mean in that scenario would you not consider just refinancing that far than repaying and using the liquidity to pay the premium? Thank you. Michael Sen Yes. First of all that your first question, I from today’s point of view from what we know today, again we all have to remind ourselves, we just have a drafted proposal there. There is no law, there is no contract, there is nothing, it’s just a proposal. So, from where we started, we wait one further step in getting to a solution of that one. We do not deem it very prudent to say we are going to transfer the €8 billion. With that one transfer, the corresponding liquidity and then maybe not pay the premium, because then I have gained nothing, from a risk, from a rating, from what have you a X perspective, this is the same or even worse than having it today, because the liquidity is gone. I am still fully liable for that one. So, only getting out of the liability can only be done by paying the premium. Therefore, we would rather go for the premium, because let’s not forget you get it off the table for good then. That is one of the reasons why we want to have a contract next to a law. You get it off for good, which today is an unlimited liability. This is what you have to consider. If the government decided next year that they are going to kick start the next process of finding a final destination for final storage and that cost another couple of billions then we would have to carry that one. If it’s gone, it’s gone. Then you are out of it. That’s clear. The second question was so on the bonds and everything, I mean, yes, I said in London that there is the possibility to make something out of the outstanding maturities in the next couple of years, which would then drive EPS. But if I were to enhance it, I mean, this is the matter of just shifting the balance sheet on the left hand side from asset to liquidity. So, that doesn’t help me any further. So, I need in order to cover for the $2 billion, I need fresh capital or sources of founds either by selling stuff or tapping markets. Unidentified Analyst Okay, thank you. Operator The next question is from the line of [indiscernible] of Morgan Stanley. Please go ahead. Unidentified Analyst Hi, thank you. Two questions. First of all, just to clarify, how is the Nord Stream stake and the purchase price for that being transferred already in the first quarter or will we only see that in the second or third quarter financials? And then second question relates to nuclear, but from a different angle really, the KFK proposals talk about the government should simplify the process for decommissioning in order to allow savings and speaking this morning with people from government, they clearly see significant opportunity for the industry to benefit if the process can be simplified? In your opening remarks, you talked about running it as a sort of – as an investment project, what visibility do you have at this stage that you should be able to run the decommissioning at a cost, which is below what you have provisioned for? I mean, how does anyone the KFK, the government or you have visibility on that kind of topic? Michael Sen Yes, hi, Bovi [ph]. So, Nord Stream I since it was a transaction embedded into this whole one to two topic and it was determined that the main reason was to provide Uniper with the appropriate capital structure in order for them to then get the rating they got, right. So, it already took place. It already took place as in a transaction. By that Uniper received €1 billion, roughly €1 billion in liquidity. And E.ON received the asset, right and that was based on legal assessments and CTA assessments and so on and so forth. And then finally and it will become visible in Q2 when we separate ourselves, right, then you will see it. And ultimately, I said I want to put this one then into the CTA in order to then also close funding gaps over there, because it has a nice return profile. Now to your second question, I mean, it’s probably difficult at this stage to talk about visibility in terms of attaching a number, i.e., saying we have the provisions that the less provisions in the book and now I am attaching a, I don’t know what, 5% or 10% or what have you efficiency rate to that one. That is probably not advisable, because that is not known. Yes, you are absolutely right and this is what we said all along, this needs to be run like an industrial process. And this is what we can do. This is about engineering. This is about project controlling. This is about the learning curve, right. We have already done this two or three times, the more you do it you get more knowledge. The team it’s always the same team or not probably the same, but the core of the team it’s about knowledge transfer and then the clear aim obviously would to be the provisions, right. The provisions as such have to be accounted probably in the right fashion according to accounting standards and as I said we are also conservative. And the basis for that one all the technical assessments and know-how documents we have, this is how you come up with the provision. When you then go into real life, then obviously it is all about how can you beat them by ensuring safety and health, that’s important. But if you have done that apart a couple of times our clear aim is to say do everything you can in order to write the learning curve, get if you so with scale effect there and beat the provisions. Unidentified Analyst Can I ask a follow-up? Michael Sen Yes. Unidentified Analyst Are there – is it clear what you would like simplified in order to help you in this process? Michael Sen Yes. Simplify, I mean there are few regulatory topics. Now, if you want to dismantle you have to apply, you have to hand in certain forms, this is a lot of also mix of the whole technical work, that’s why said project management work that’s also administrative work embedded in there. Then you have some times you have to go to municipality, then to the government and to the federal and so on and so forth. And if there is any lever on that one to get that one straight and simpler that obviously would help. Unidentified Analyst Great. Thank you. Operator The next question is from Ingo Becker of Kepler Cheuvreux. Please go ahead. Ingo Becker Yes. Thank you. Good afternoon. You said – you promised to be transparent and of course we can all make our upper minds on how the ATG case and the NFT case would work out and how this can be offset or not against the premium, I am not sure you can answer this Michael, but let me try if you assume that the premium would be equal to the – to winning the NFT case, so you take those two out and let’s assume you leave the ATG case out as well, let’s say that takes many years and the government does not include that in any agreement now, would you in that situation premium equals NFT case outcome, so zero net payment at the ATG case is out of consideration would you still consider E.ON to be in a special situation category as regards to capital need. Second question would be, if so when would you time a capital increase, will that be before or after the plant spin-off. Lastly, sorry if you answered that maybe already, the government direction to the commission recommendations what’s the process now by when can we maybe expect to hear something what are next steps here? Michael Sen Yes. Hi Ingo. Yes. I am not quite sure that I can answer everything, but I will try. Let’s first of all start with the offsetting yes, no and so on and so forth. I mean I said it already we are in the special situation. We are already in there, because the report came out and there is a premium and it’s punitive. And if – and we obviously also said that we want to further pursue the dialogue in order to get it off our table for good, so we are already in that one. Now it is too early, too premature then to say if this comes I am going to do that and then and this I want to just be transparent, if it comes then I will let you know how we are going to progress on that one. Obviously, this is then an additional source of fund, which we today have not baked in and it might lead us to take other measures or limit the size or not do anything or something like that. But that remains to be seen. This is also the main reason and that is your other question why we will not jump to conclusion, nothing will happen before the spin. Nothing will happen in the next couple of months or next one or two or what have you quarters, we first of all have to get Uniper on the stock exchange that is our – my primary goal that you guys value the asset appropriately and that the management team which has successfully laid out their plan gets appreciated by the market and then everybody can run on their own. This is the main goal. Before that one don’t expect us to do anything overnight. We will give you ample time if and when needed. And therefore you see already by the timing if the nuclear fuel tax, if it is decided late summer if they again say it’s going to take us another year then things are what they, then we have to deal with the uncertainty and then we may do it or not do it we will see then. But if the timeline holds and then they come on late summer then I already know and as I have said up until then I wouldn’t rule out – I would rule out completely that we go out overnight and do something that is clear. Florian Flossmann What was the other question? Ingo Becker On the government maybe any progress…? Michael Sen Look the government it’s now – it’s in their court. We – there is a reason for us and Johannes is giving the interview last night signaling to the public that we are open for the dialogue on the basis of the recommendation that already is a signal obviously that we want to start to talk. And I think all parties involved although it is a complicated process because many ministries have to be involved. You need to orchestrate many, many ministries, it’s economics maybe the Office of Chancellor and then the environmental guys, because many legal documents, laws have to be touched if you want to go up-down that route. By the same token our feeling is that people also want to move on with that one also want to get to a solution, because remember election time and you know it by hard election time it’s also coming up soon in Germany and it would be ideal if you solve it until then at least get it as a draft for the cabinet. Ingo Becker Thank you. Florian Flossmann Okay, good. Thank you very much and with that I would like to close the call. If you have further questions, please don’t hesitate to give us a call, the IR team. So with that, thank you and see you soon. Michael Sen Bye-bye. Operator Ladies and gentlemen, thank you for your attendance. 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