Uniper SE (OTCPK:UNPRF) Q3 2022 Results Conference Call November 3, 2022 2:30 AM ET
Company Participants
Stefan Jost – EVP, Group Finance and IR
Tiina Tuomela – CFO
Conference Call Participants
Sam Arie – UBS
Louis Boujard – ODDO BHF
Wanda Serwinowska – Credit Suisse
Vincent Ayral – JP Morgan
Operator
Ladies and gentlemen, welcome to the analyst and investor conference call of Uniper. At our customer’s request, this conference will be recorded. [Operator Instructions]
May I now hand over to Stefan Jost, EVP, Group Finance and Investor Relations, who will start the meeting today. Please go ahead.
Stefan Jost
Thank you, and good morning, dear analysts and investors. Welcome to the Uniper Interim Results Call for the first nine months of fiscal year 2022.
Today, I am sitting here with Tiina Tuomela, our Chief Financial Officer. And today, we would like to take you through the details of our 9-month results following up on last week’s ad hoc announcement, which included preliminary headline numbers. As usual, there will be a Q&A session after the presentation. And let me hand over to Tiina, please?
Tiina Tuomela
Thank you very much for your introduction, Stefan. A warm welcome from my side as well, and thank you for participating in our conference call today. With respect to our 9 months result, we can now finally confirm the preliminary key headline numbers from last week’s ad hoc announcement. Adjusted group EBIT turned out at minus €4.8 billion compared with a positive outcome of €614 million in the prior year period. And adjusted net income is down from €487 million last year to minus €3.2 billion now. Both figures include about €10 billion of realized incremental cost for procuring replacement cash volumes due to the Russian curtailment.
When it comes to the unadjusted net income figures, the cash payment losses are significantly higher as both realized and expected future losses are included here. And the expected curtailment losses have increased quite significantly since the H1 call. As previously envisaged, gas surcharge has been canceled meanwhile. Without this surcharge, Uniper is no longer relieved from 90% of its cash flow payment losses from the 1st of October onwards. Accordingly and until it is finally clear how the tailored solution to compensate Uniper for the gas curtailment losses will look like, Uniper is now expected to bill the full Russian gas curtailment losses in its profit and loss, which is significantly driving up the overall expected cash curtailment losses reflected in unadjusted net income.
This earnings development is also directly impacting Uniper’s equity position, both under IFRS and German GAAP. In both cases, the book equity value is significantly negative, now based on 30th September valuation parameters. Accordingly, we are clearly in a situation where more than half of the company’s registered share capital has been consumed by the net loss incurred during the first 9 months of 2022.
Therefore, as communicated in last week’s ad hoc, Uniper’s Board of Management will shortly convene an extraordinary shareholders meeting in line with Section 92 of the German Stock Corporation Act in order to report on the losses and explain the situation of the company to the shareholders. This corresponding EGM will take place in the second half of December. The solution to bring Uniper back in the safe water lies in a successful implementation of the already communicated stabilization package as accreted by Uniper, Fortum and the German government. While the implementation process is still ongoing, the German government’s strong public commitment to financially support Uniper is acknowledged very positively by the rating agency S&P Global.
In mid-October, Uniper’s investment grade rating was confirmed at BBB-, outlook negative, including 6 notch governmental uplift above the stand-alone credit rating. Let us now take a look at Uniper’s current situation in terms of gas curtailment losses as well as the implementation of the stabilization package.
Uniper gas prices have declined significantly in recent days due to the very warm weather and filled up gas storages. As of last week, the TTF day-ahead price noted below €30 per megawatt hour. As daily spot price is one of the key variables determining our daily procurement losses related to the Russian gas curtailment, our daily run rate of those losses has come down materially, almost down to zero.
Accordingly, the accumulation of gas curtailment losses has almost come to a stop for the time being. While this is positive, it is unfortunately only momentarily, mainly weather-induced situation as can be observed when looking at forward prices for the next couple of months. It does therefore, in no way reduce the importance and urgency to implement the sustainable and structural stabilization measures as agreed with the German government. The German government will take a 98.6% stake in Uniper by contributing direct equity and acquiring Fortum’s current 80% shareholding.
As part of the 3 pillar stabilization package, Uniper’s short-term liquidity is fully secured by credit lines from the state-owned KFW. The credit facility line has been increased to €18 billion, of which €14 billion are utilized now beginning of November. The situation with regards to liquidity requirements is currently easening due to the recent decline in prices on the commodity markets as well as a significant part of hedges is going to be realization over the course of this winter.
Once the net cash margining paid at the end of September was still quite high with €8.8 billion, we expect a significant release going forward if the commodity market trend continues. When it comes to supporting Uniper’s equity position, it is agreed that the German government will inject €8 billion in fresh equity to newly issued shares at an issue price of €1.7 per share. Any additional need for equity will be addressed via additional tailored stabilization measures by the Federal Republic of Germany, as a third pillar of the stabilization package.
The details of these additional support measures are currently being finalized between the federal government and Uniper. The closing of the agreed transactions remain subject to various regulatory approvals, including state aid and merger control approvals from the EU Commission, followed by a subsequent approval by an extraordinary general meeting of Uniper. Our aim is to convene only 1 EGM at the end of December that will address both the previously mentioned notification regarding the equity loss on the German GAAP as well the shareholder approval of the stabilization measures. However, depending on the further implementation progress, especially with regards to the outstanding EU approvals, we might need to convene 2 separate EGMs around the year-end.
Now let’s turn to Uniper’s operating business in the first 9 months of the current fiscal year. Looking at our main operating indicators, despite the ongoing full supply curtailment of Russian natural gas, Uniper is on track to meet regulatory requirements at European and national level for its physical gas storages. At 88%, storage levels as of September 30, were in line with market average. Power generation in our European Generation segment continues to show an overall flat development in line with previous quarters. Focusing only on notable developments, most of the year-to-date production growth is attributable to Uniper’s coal-fired fleet with an increase of 7% compared to 2021.
The development can be mainly explained by increased utilization as well as 1 coal power plant returning to market, both to ensure security of supply. This even overcompensates volume shortfalls related to last year’s disposal of the Schkopau lignite power plant as well as temporary regulation limits on power production affecting our Maasvlakte 3 power plant in the Netherlands during the first half of 2022. The Swedish nuclear fleet was able to make up for an unavailability of the Oskarshamn power plant Unit 3 at the beginning of 2022, so that volumes are overall up after 9 months by 2%.
Our Russian Power Generation segment continues its positive development with a volume growth of 21%. As already highlighted in our half year results, this can be attributed to the full contribution of Berezovskaya Unit 3 as well as a beneficial domestic market environment. Meanwhile, 13% increase in group-wide carbon emission follows mainly the substantial increase in fossil-fired power generation in the Russian segment.
Subsequently, these developments are also reflected in our specific carbon intensity, which increased year-on-year from 448 grams to around 487 grams CO2 per kilowatt hour. Moving over to our main financial KPIs.
As you can see, all Uniper’s key financials are materially impacted by the gas curtailment, although not always to the same extent. The adjusted earnings numbers as well as operating cash flow and economic net debt reflect only gas curtailment losses to the extent already realized i.e., those losses relating only to delivery periods before October 2022, which amount to roughly €10 billion, as mentioned before.
Looking at adjusted EBIT and EBITDA, we see, however, only a decrease around €5 billion year-on-year due to offsetting effects in the business that I will come to on the next slide. With regards to adjusted net income, the realized curtailment losses are partly offset by a corresponding tax effect, which is determinated by the high German tax rate. This explains the year-on-year deviation in adjusted net income of roughly €3.7 billion. When it comes to the operating cash flow, aside from the gas curtailment, it is also negatively impacted by working capital buildup.
While a general increase in working capital at the 9 months stage is in line with the usual seasonal pattern, the swing is significantly intensified by the high price levels this year. Therefore, the overall OCF is down by more than €13 billion compared to prior year. Finally, the IFRS or adjusted net income, which decreased by about €36 billion year-on-year. Here, we see a significantly higher impact from the gas curtailment losses in the magnitude of around €30 billion, reflecting both realized as well as anticipated future losses. We will have a closer look at that on one of the next slides. But first, let’s dive into the key drivers of adjusted EBIT on the next slide.
This chart breaks down the major effects explaining why the overall EBIT came down from prior year’s €614 million to now €4.8 billion. As you can see, the total deviation of about minus €5.4 billion between the years can be fully explained by the gas midstream business. Accordingly, the remaining effect net almost entirely out on overall basis. Let’s start with the gas midstream business and break down the roughly €5.4 billion of earnings swing between the years in this business.
As explained on the right side, almost half of the €10 billion of realized gas curtailment losses are offset by a €4.5 billion margin shift between years. Hence, while 2022 is significantly benefiting, this upside comes at the extent of future periods, in particular, 2024 and 2025.
The reasons for this are twofold: first, Uniper has solid gas volumes to customers for delivery in 2024 and 2025. Due to a lack of gas market liquidity for those delivery periods, Uniper could not hedge the sales with the cash purchases in the same year. Instead, Uniper did a proxy hedge by buying gas in 2022. This proxy has resulted in a time spread position being long in 2022 and short in the future values. As prices increased over time, the hedges in the front gain in value, while the sale deals in the decks decrease in value.
The second reason for the margin shift is related to our gas storages. With higher prices, the value of the gas injected into our storages and hence, the value recognized on the balance sheet increase. This positive effect will revert in the future once the gas is withdrawn from the storages and the higher gas balance sheet value is reflected in the gross margin. In a simplified way, one can say that a part of the higher procurement cost today due to the gas curtailment has been drawn in the future years via our balance sheet storage valuation.
The second element in the waterfall depicts the well-known carbon intrayear phasing effect. This effect is reflecting higher cost for CO2 emission certificate in the first 9 months, which will be fully offset in Q4 while our carbon hedges settle. The absolute amount of those phasing losses that will fully revert in Q4, almost amounts to roughly €470 million. As the carbon phasing amount was also quite high last year, we see only a small effect compared against prior year in this quarter.
The underlying business in Europe and generation is overall on prior year’s level. While the overall delta year-on-year is almost flat — there have been opposite movements in the underlying portfolios. Adjusted EBIT in European fossil generation corrected for the mentioned carbon phasing effect increased by more than €100 million, primarily due to the significantly higher contribution from the dark spread fleet.
However, those gains were offset by lower contribution from our [indiscernible] portfolio, primarily our Swedish hydro business. Just like at the half year stage, we are impacted by significantly lower achieved prices, driven by deteriorating EPAD, i.e., electricity price area differentials, especially in the [indiscernible] region. The negative trend is even intensified in Q3, with the price differentials reaching negative levels of more than €320 per megawatt hour end of August.
This impact is also reflected in the achieved Nordic prices that are usually presented in the appendix of today’s presentation. In that context, please note that the disclosed achieved and hedged prices for the German hydro portfolio actually turned negative for 2022. This is related to buybacks. As you know, we had a very dry summer in Germany with low hydro availability. As a consequence, we needed to buy previously hedged volumes back at significantly higher prices. This resulted in a negative margin which again translates into negative prices once divided by the volumes.
Next, the international commodity portfolio, which is down by roughly €340 million year-on-year due to our LNG business. As already flagged in the last call, there was an explosion at Freeport liquid refraction factory in the U.S.A. As a result, no LNG uptakes were taking place in Q3, which, in our case, meant that we missed 3 LNG cargoes. As those were previously hedged, we needed to buy the volumes with significant losses. This and the fact that 2021 was an extraordinary strong year for the international commodity business explains the significantly negative year-on-year development. When it comes to our power commodity business, we see a positive development. Here, successful trading activities enabled us to increase our earnings by a mid-double-digit million amount compared with the previous year.
Finally, moving over to our Russian power generation where earnings increased by more than €160 million versus prior year. The business continues to benefit from an overall higher utilization of the fossil fleet and significantly higher day-ahead market prices in the Siberian price zone. Additionally, higher CSA capacity payments overcompensated the negative effect from Unit 7 and 8 of the power plant Surgutskaya moving from the CSA team to the lower remunerated comps. Additionally, the ruble exchange rate developed positively as well. Having said that, let’s have a closer look at the unadjusted net income on the next slide.
After 9 months of 2022, Uniper has recorded an unadjusted IFRS net income of minus €40 billion. This slide provides you some background on the main drivers of this extreme figure by reconciling the adjusted to the unadjusted net income.
As you can see here, the main effect is once again stemming from gas curtailment losses. While the adjusted earnings figures only reflect the cost of roughly €10 billion pretax, net income additionally includes anticipated future reprocurement losses related to gas curtailment of €31 billion. This figure represents expected losses for delivery periods beyond September 2022 and is based on a set of scenarios.
Accordingly, adding both realized and unrealized losses, the IFRS net income ultimately reflects in total minus €41 billion of procurement losses related to Russian gas curtailment. Furthermore, IFRS net income is also impacted by impairments of €2.4 billion, which are also directly related to Russian war and its impact on the European economy. The impairments are predominantly driven by the Nord Stream 2 loan and the goodwill related to Unipro and Global Commodities partly offset by impairment reversal on fossil generation assets.
The next element reflects the impact from fair value measurements of derivatives. In many cases, those derivatives are hedged for Uniper’s gas and power assets. While those hedges are subject to mark-to-market valuation, the underlying asset positions are usually not. Accordingly, if market prices move only one side of the hedge relationship is reflected in the IFRS net income. In order to avoid this accounting mismatch, Uniper adjusted earnings figures exclude unrealized mark-to-market valuation effects. Finally, there are also some positive elements affecting net income which are predominantly tax effects on the nonoperating losses.
Coming to the OCF, which came in at almost minus €11 billion and hence more than €13 billion below last year. This slide highlights the drivers why the operating cash flow development significantly more negative than the earnings this year. As you can see, the primary reason is a buildup of working capital of more than €5 billion since beginning of the year, mostly related to the gas midstream business and here specifically to the gas inventory.
While the inventory gas volumes have gone since beginning of the year, the working capital buildup is even strongly driven by the price effect as the average price of gas of our balance sheet increased by a mid-digit euro megawatt hour figure. While the gas business is by far the strongest driver for the working capital increase, the coal inventory also increased by roughly €500 million to ensure security of supply of our coal fleet.
Finally, the operating cash flow in 2022 continues to be burdened by liquidity optimization measures that were taken in 2021 and which effectively moved operational cash flow into 2021 at the expense of 2022. Among others, those measures included shifting payments for purchased carbon emission certificates of 2021 into the year. This effect is reflected in the other categories here. Next, the development of the economic net debt.
Uniper started the fiscal year 2022 with an economic net debt of close to zero. Now after 9 months, the economic net debt is at almost €11 billion and, therefore, very much in line with the operating cash flow development. The other drivers of the economic net debt offset each other. This applies also to the roughly €400 million and increase from investments, which is offset by lower pension provisions.
The latter mainly results from increased interest rates in context of spiking inflation and are, therefore, subject to higher discount factors. For reference, the relevant interest rates used for pension provision increased in Germany within a year from 1.2% to now 3.7%, and in U.K. from 2% to 5.1% respectively. Coming now to the last slide today. Given high uncertainties regarding the short-term developed price developments on the energy markets, and the financial burden from the curtailed Russian gas deliveries, I cannot provide a financial outlook in terms of adjusted EBIT, et cetera, as of today.
Instead, let me provide you an outlook of the management focus topic for the next months and how we call them immediately priority actions. Stabilization Uniper and derisking the business model is on top of our agenda. Once the full implementation of the stabilization package is completed, we will be working on a new target picture for Uniper that ensures a sustainable sound and future-proof business model. This includes a rebalancing of our hedging approach in light of our liquidity capabilities. This is something that we have started already back in 2021 when the liquidity deterioration deteriorated and which we will continue to work on in the context of the changing market landscape. As mentioned before, we will also reshape our gas midstream business, which, among others, includes a full derisking with regards to the Russian gas curtailment in 2024.
The Exit Russia objective will be completed once we can successfully conclude the Unipro disposal. Contributing to security of supply for Germany and Europe is a second management objective, which is high on our priority list. This includes initially expanding LNG infrastructure and supply relationship as well in the longer term, contributing to the entry into the European hydrogen economy on a broader front. And finally, we are looking forward to work with our new shareholder on the future of Uniper business.
With our adjusted strategic plans in the drawer, we hope for a quick alignment in order to enter a realization phase as quickly as possible. It is particularly important to achieve clarity on Uniper’s future path as soon as possible in order to keep the motivation of the Uniper’s employees high. As Uniper’s organization has been exposed to extraordinary stress levels now for quite some time, we need to achieve that clarity as soon as possible. This brings me to the end of my presentation today. Now I’m looking forward to taking your questions. Stefan, please?
Stefan Jost
Thank you, Tiina. We can begin our Q&A session now. And operator, I’m handing over to you to check if there are already first questions, please?
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from Sam Arie from UBS.
Sam Arie
Before I jump into any questions, I want to begin by just acknowledging what a difficult this must have been for everyone at Uniper and congratulations on to the finding and navigating our way through all of this. I’m sure it’s been very stressful for everybody.
Having said that, let me jump into my questions. I think lots of interest probably on the — not just the gas at a losses that you posted today, but the provision that you make for the future even though, as you say, there’s been some temporary relief on prices. So it would be great if you could talk a little bit more about how you get to that sort of €30 billion additional provision. And is that consistent with maybe like another year of €100 million a day type rate? Or just wondering how you think about that. And then second important question, if I can. You talked about needing another tailored instrument, which is under negotiation with the government on the equity side, I just wonder if you could give any more color on sort of what that might be. How that impacts a few minorities that are still left? And I suppose, I guess, the question at some point becomes if any of these scenarios would kind of come with mandatory squeeze out of any of the last minorities or not really sure what is the point of having kind of 1% out there in the float. So would be great to hear your thoughts on those 2 questions. Thank you.
Tiina Tuomela
Thank you, Sam, and thanks also for your very good words at the beginning. I start with the cash curtailment questions. So as we communicated, so the realized losses at the end of September, with €10 billion. And then we had to make the provision for the future costs, which we estimated to be €31 billion. So now I think it is good to recognize that this €31 billion, first of all, is the based on the 100% of the curtailment — and now, in a way, surcharge or levy included as this is not yet virtually certain, and therefore, not possible to recognize at the moment.
Then according to IFRS, we have provided in a way different kind of scenarios for the future and then taking the weighted average of these different scenarios, most of the scenarios are based on the forward prices at the end of September. So of course, then depending how the prices will move out particularly in the longer term.
Now we see that the gas curtailment losses, they have been paid on the spot price fairly small. But in general, of course, the longer-term forwards are still fairly, fairly high. But these scenarios, of course, we will update once we’ll go further, and then part of that will move to the realized losses and then the future losses will be reflected based on the prices, what is the volume and then potential mechanism to replace the surcharges.
Then other question about the tailored instrument. So this is something that we have intensively worked with German government. And the main target is to replace the withdrawal of the gas surcharge. The size of the instrument, of course, is under discussion. But basically, it should reflect the economic losses incurred from the gas curtailment. And the mechanism on the discussion [indiscernible] surcharge instrument put in place while the — while we know that what are the actual losses or the losses in the near period. So basically, amount roughly now is looking. So the future €30 billion, but we start with shorter-term outlook for this year and coming quarters, so roughly €12 billion.
We will communicate more once we are further defining the mechanism. But basically, key element is to replace the surcharge and of course, then secure our equity position.
Sam Arie
Sorry, Tiina, can I just quickly follow up on that one and a very short answer is fine. But I suppose what we’re just trying to think about is when that instrument is agreed, is that likely to be a positive for the remaining shareholders or a negative. So I suppose the gas levy would have been a positive because we’re bringing more money back to Uniper from the rest of the German industry, where there is more money from the government that comes with more dilution than will probably be negative. I’m just trying to think whether this instrument is positive or negative for shareholders. You see what I mean?
Tiina Tuomela
Yes, I fully understand. So unfortunately, it is too early to discuss, and I don’t want to speculate on that one. So we will come back once we know more. But your concerns and points are very relevant and also discussed with the German government.
Operator
The next question comes from Louis Boujard from ODDO BHF.
Louis Boujard
I have 2 there maybe to try to understand a little bit more eventually to provide guidance, what could be the expectation for ‘22 and eventually a bit later on. When I look at your per slide, Page 3, I understand that eventually, it could be expected considering the short-term gas prices. Does the fourth quarter could be a bit better than initially anticipated, taking profit of low spot gas prices and being able to sell them at a better price, that would eventually offset a little bit to the potential loss that would have been expected in 2022. But at the same time, you referred that you have some significant shift in margin in the longer term meaning ‘23, ‘25 for €4 billion or something like that, that are already recorded and booked there. So what does that mean for your target where you mentioned I think it was the last quarter that by 2024, you should be breakeven because it means that you will have higher losses maybe later on and maybe fewer than any — could you confirm that this is the correct way to see the move, considering the current spot gas prices. This would be my first question. And the second question regarding the total liability that needs to be expected.
We are talking about €31 billion that you compute in potential losses on IFRS level plus, of course, the €10 billion that is now seen. So you have reached a level at which it was supposed that you trigger the potential offsetting measures. So shall we consider that on the €31 billion, the more likely scenario is that 90% of it is going to be absorbed? Or it is also still to be discussed and to be negotiated with the government at this stage?
Tiina Tuomela
Thank you for the questions. So starting with the guidance for 2022 — and what is our, in a way, provision, which is, in a way, anticipated for the future losses. So quite right, this €31 billion is only a snapshot of the current situation on that day’s prices. And what we can see that in the near term, the prices really they have had increased. But already now, the day plus 1 has already come up from €30 to €60. So this is really something which is volatile, and we clearly measure that very carefully.
Then the outlook for 2023 and 2024. So clearly it will depend to the overall market development and also what is the final stabilization package and how it will work? The earnings shift clearly plays a role how we have placed our hedges and how the earnings will land to the different years. So unfortunately, I cannot give the precise numbers. However, our ambition still remains unchanged.
So we aim to be EBIT positive during the year 2024. And the — was it also the €31 billion, so is it — that is in a way that roughly the size of the — in a way, the curtailment losses and then how much is compensated. So this is really under the discussion. And of course, it will depend the performance of the other part of the businesses the final amount. I think the important thing is to — that we have the liquidity and then that the equity position is secured. But we will come back hopefully soon how this tailored instrument will work.
Operator
[Operator Instructions] We have another question from Sam Arie from UBS.
Sam Arie
Well, if there aren’t too many questions, I thought I would come back on and perhaps ask you guys a sort of wider question about the European gas outlook. I think you have obviously a pretty unique perspective on that. And I guess there are 2 questions that we’re hearing a lot. One is about this winter and it relates to I suppose, what’s the risk that we actually run out of gas and storage in the later part of the winter. And I know obviously, we’ve benefited from warmer weather in a better situation in the last month or so. But I’m wondering if you could just share your sort of traders or commodity teams view on the risk through to the end of this winter?
And then secondly, the other big question is about next winter. And I do think there’s a little bit of debate in the market about where the winter ‘23 ‘24 will be worse or better than the current winter. And I suppose the concern is that we have to refill storage next year without access to the Russian pipelines that we had this year where we were filling storage. But on the other hand, the LNG market looks a bit more supportive. The demand — company demand is adjusting, whether it’s been helpful. So I just wonder if it would be the sort of Uniper team’s view that next winter is worse? Is it worse risk for Europe than this coming winter or whether it might be actually slightly better? I’d love to get your perspective on those questions.
Tiina Tuomela
Thank you, Sam. Really, the gas outlook also in our radar in careful look. So basically, what comes to this winter, so we can say that the storages are in good level. So of course, that gives in somehow the comfort. However, it is all about the weather. So what is — what is the weather, how much is needed for the heating so that will play out the key role. Then clearly, when it comes to the next winter, 2023, 2024. So the storages will be quite empty after this winter. And then the question is that how do we refill the storages. So as you said, low gas anticipated from Russia. But then Asia LNG it is really the key. And this is the part where we are also working heavily with the FSRU terminals and getting the supplies. So this is the focus to really be prepared and do this transformation in the swift manner.
Operator
The next question comes from Wanda Serwinowska from Credit Suisse.
Wanda Serwinowska
Wanda Serwinowska, Credit Suisse. A very quick question. Can you update us on the process of disposal of Unipro? Is there any new development? Any comments would be much more appreciated.
Tiina Tuomela
So the situation is pretty much the same as we reported during the Q2. We mentioned we made the strategic review at the end of last year where the direction was to exit Unipro. While the situation is very challenging in the Russian market, so, we have continued evaluation. The topics — but as you can understand, we are not commenting any individual discussions. Of course, the great performance of our Uniper assets increased in interest from different parties. So in that sense, gives a good basis to take that forward.
Wanda Serwinowska
As a very quick follow-up, assuming that you are successful in selling Unipro either later this year or next year, are you confident of making a transfer of money outside Russia, given all the functions?
Tiina Tuomela
Well, the current regulation in a way prohibits the money transfer. So this is something what we need to then work out how to do and what kind of permits or arrangements could be done. But currently, the sanctions in a way is not allowing that.
Operator
The next question comes from Vincent Ayral from JP Morgan.
Vincent Ayral
Apologies, I missed the beginning as we had hosted as well this morning. Just a very quick question. We can see that you’ve increased the provisions for future losses and the estimate is around €40 billion. Clearly, that has an petitions in terms of super package. Is it fair to assume that you will need a very material capital increase beyond the €8 billion, which has been agreed in your second round of bailout. So could we have a beta 2.1 is actually a capital increase getting closer to €30-plus billion, how does that work in terms of a balance sheet and need for equity injections. Thank you.
Tiina Tuomela
So €40 billion curtailment losses now are recognized in accounts, €10 billion asset realized and then the €30 billion for the future based on the €snapshot prices as of 30th of September. So this value clearly then will move based on the curtailed volumes and then the prices. As stated previously, so the full package and particularly the tailored instrument is under discussion and it is too early to speculate exactly the value. I think it is — what is important is that the German government has committed to provide the funding as we have seen the KFW credit facility lines increased — and then also if more equity is needed and clearly, at least replace the surcharge, so something — some instrument is needed. So that as we will come back later on, but the full package in a way securing the going concern and could, in a way, basis to continue the transformation.
Vincent Ayral
I may rephrase the question. Uniper is still listed company with minority shareholders has been put in a position basically forced into losses, not being able to [indiscernible] or to pass through by the government. And the government say, okay, we have a bailout, one. And there will be no more economic dilution for shareholders, but then bailout 2 came in September, and there was a massive dilution with the massive capital increase. But this was supposed to be kind of the end of the story as the governing was coming and then the overall thing was sized for the expected loss of Uniper forward.
Now the government got canceled and ongoing losses are [indiscernible] by 10. So there will be a need for further support. If there is an comfort you can bring for minority shareholders in terms of them not being economically diluted further is — have you heard from the government that somehow they felt bad for what they did for minority shareholders, is there any protection for shareholders other than [indiscernible].
Tiina Tuomela
Thanks for the very good question. So clearly, I think we live in unprecedented times and fast-changing environment. So therefore, I think it has been good that the stabilization package has been adjusted. I clearly understand your concern, what is the outcome of the stabilization package. But that is really dependent on our discussions but also by the German government and EU commission discussion about the state aid and merger control. So I would keep that the current instrument, so €8 billion equity confirmed also the KFW line confirmed and very well executed with a high amount — and then the tailored instrument is under working, which should replace the surcharge mechanism.
Operator
Thank you. Ladies and gentlemen, there are no further questions. I will now give back the floor to our speakers. Thank you.
Stefan Jost
Thank you very much for attending today our call and speak soon at different occasions and latest at our full year release next February. But thanks for attending today. Thank you all. .
Operator
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect.
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