Welcome to Vattenfall and this Q2 report audio cast. I am Andreas Regnell, and as always, I have our CEO, Anna Borg, and our CFO, Kerstin Ahlfont with me. In this session, we'll cover the main events in our financial performance during the first half year of 2022. As usual, we will open up for questions after the initial discussion on the phone and on the web. Our standard slide pack for the report is available on the web. Anna, there's still a tremendous focus on the electricity markets, the prices, and the security of supply. Yes, indeed. The prices are still very high despite the fact that we're in the middle of the summer when they are normally lower. The prices have also been very volatile, and most likely this will continue because the main driver is the gas price. The questions that everybody raise right now is, what will happen the coming winter? Will there be Russian gas in Europe? How much? For how long? What will happen to the LNG flows? What kind of shortage will EU face? And all of these things is what lies behind the volatility, and all of these questions also have no immediate answers. Kerstin, volatility and high prices, is that a good place to be in? Well, our result in the first half year was actually rather flat versus the year before on underlying EBIT level. Price area differences in the Nordics continue to have a negative effect, while our wind and customer businesses are developing well. If you look at profits, it's lower, but this is almost fully explained by the German settlement on nuclear that we received last year. Thank you. We will come back to the results in more details in a moment. Anna, let's get some glimpses of our highlights. We are clearly moving on. Yes. I would say it's more important than ever to continue the transition away from fossil fuels and to increase the pace of that transition. At Vattenfall, we do continue to invest to develop projects and technologies, and you can see quite a lot of examples of that in our quarterly highlights. Yes, that's really right. One thing we need to do is to add fossil-free capacity to the system, isn't it? Yes. In the second quarter, we actually inaugurated Scandinavia's largest onshore wind farm, Blakliden Fäbodberget. We also are ready to increase the capacity by 100 MW at our nuclear power plant, Forsmark 1, starting this autumn. That's provided that we receive the permissions from the Swedish TSO, but we are counting on that. Yes. If we extend the horizon to projects that are a bit further away, Kerstin. We continue to work in the Norfolk Zone, where we secure the CfD, contracts for difference, for the first phase in July this year. Provided that we take an FID later on, construction could start next year to add renewable capacity to the UK energy system in the second half of the 2020s. We also inaugurated the pilot hydrogen storage in Luleå in Sweden. This is for our fossil-free steel partnership project HYBRIT. Andreas, you were there. Tell us about it. I'd love to. It is a rock cavern storage facility. It's the first of its kind in the world, and we will test it for two years. It is a proven technology for storing natural gas, but hydrogen molecules are smaller, which creates unique challenges. We also need to be able to use the storage actively with many compressions and decompression cycles, as the whole idea to produce fossil-free hydrogen when there is a lot of electricity and using stored hydrogen when the electricity system is under strain. The ability to create flexible demand through storage solutions like this is actually key to make fossil-free hydrogen a good way of decarbonizing industry. Yes, on that note, we announced that we're working on a project to develop the world's first hydrogen-producing offshore wind turbine in Aberdeen. That's a technology that's gonna be interesting going forward. In addition, we announced two new exciting industry partnerships on the west coast of Sweden, where we will investigate the possibility to use offshore wind power-based hydrogen. One of the partnerships is with Preem to decarbonize their petrochemical business. Another one is with St1, and they will produce sustainable aviation fuel at large scale. Things are moving forward. May I also add the start of a feasibility study for SMR at Ringhals? That one is a bit further away in time, but it does have the potential to add both baseload and flexibility to the system. The overall energy transition needs to happen, and we investigate all kinds of fossil-free electricity generation as they will be needed, and that means both short-term and long-term. That's very true. Another important announcement this quarter was that we are reviewing strategic options for district heating operations in Berlin. Anna, tell us. Yes. The heating grid in Berlin is one of the largest heat operations in Europe. It's got a lot of potential, and it will actually be a key component in decarbonizing this part of Germany. It also requires a lot of investments and management attention, of course. The background for this being on the table is that the energy transition opens so many opportunities, and we need to prioritize. With that said, Germany is and will remain one of our core markets. We have 4.6 million electricity and gas customers, a substantial renewable business, our main trading hub and much more in Germany. This will continue to be a very important market to us. Indeed. One final item before we move on to the results. We have received the verdict in the second instance regarding the revenue frames for our Swedish electricity grids. That means that the Swedish Energy Markets Inspectorate must recalculate revenue frames. However, we have, together with the rest of the sector, appealed the verdict to the Supreme Administrative Court. How come? Wasn't this what we wanted? Well, it's a bit complex. The regulator, as you say, will have to revisit and recalculate the revenues allowed, and that is good and in line with what we expected. The verdict creates a lot of unclarity on how the calculations are to be made, and therefore we are appealing to get this clarity. Okay. Well, the process goes on then. Now, let's move on to the results. Kerstin, what were the headline numbers? Well, first, I'd like to point out that when you look at reported numbers, such as profit for the year, you must remember the impact of SEK 12.5 billion in the result from the nuclear settlement in Germany in the first half of last year, because this distorts the comparison. SEK 12.5 billion? Does that mean that excluding this, we're still down somewhat in terms of profit for the year? Yes. The major item there is the lower return from the nuclear waste fund in Sweden, because given the situation on the financial markets, the value of this fund is decreasing, and that hits our finance net directly. Okay. On the underlying level then? Well, it has been rather mixed first half of 2022. The underlying EBIT is almost unchanged compared to last year, which sounds undramatic, but it is not. Because we have the turbulent market with skyrocketing gas and electricity prices impacting different business areas. What were the results on a BA level then? Well, the picture is quite like last quarter, actually. Wind has now more than tripled its contribution due to higher electricity prices and new capacity, mainly Danish Kriegers Flak. Our customer sales business is also performing well. We see that customers choose Vattenfall because we are a stable partner in this roller coaster environment and continue to offer contracts both on electricity, heat, and gas. Anna, how about the rest of the business areas? Well, if you look at the distribution business, you need to remember that last year we sold the distribution grid in Berlin, and that affects the comparison. We also have higher costs for the transmission networks in Sweden showing up in the distribution business area. In the heat business, we continue to see negative effects from the unfavorable clean spark spreads. They have remained negative on average, mainly due to the high gas prices. Okay. We have power generation. The achieved prices is even lower this quarter than in Q1. How is this possible given the increase in power prices? Well, at Vattenfall, we hedge most of our production in advance in order to even out results between years, and the effect here is related to the large differences between price areas in Sweden, as we explained in detail in Q1, and it's the same logic now. The reason that it's lower than last quarter, though, is that the volumes are lower. That's a seasonal effect, so normally that's the case this time of the year. Our hedges are more equally distributed over the year, so they are over proportionally impacting Q2, you can say. Okay. In Q1, you mentioned that you changed the hedge strategy due to the re-decoupling of SE1 and SE2 with the SYS. Can you elaborate a bit more on that now? For sure. Let's start off with a quick reminder on the mechanism as such. Historically, the system price, which we call SYS, has been a very good proxy for the prices in the different price areas. However, due to transmission grid constraints, the relationship between SYS and prices in the North have decoupled. That creates now issues for us since we hedge in SYS because there is no liquidity for contract in the specific price areas. As we said in response to this, we updated our hedging strategy, and we have taken immediate action, but the effect of those actions will not be fully visible until we come into next year. We hedge less. Does that mean more risk? Well, it does, and that doesn't just go for us. It goes actually for all actors with assets in the north of Sweden. It makes still sense from a financial risk perspective since the hedges no longer work for our power production in the North. Okay. Finally, where do we stand on our two key financial metrics? Well, FFO over adjusted net debt was 103%, so still on quite elevated levels. Just as previous quarter, this is due to the margin calls. If we exclude those, we would have come in around 32%. Our ROCE is still affected by higher values on commodity derivatives. On a clean level, it was unchanged compared to last year on approximately 11%. Thank you. Yesterday, Nord Stream One came back online after regulated maintenance. It had been speculation that it wouldn't. What is your assessment now? Is there still risk for rationing in Europe this winter? Well, that is still a possible scenario, yes. I mean, Russia can still decide to cut off or reduce the supply at any time. The risk is particularly high in Germany since they are so dependent on Russian gas. Before the war broke out in Ukraine, approximately 50% of the gas used in Germany came from Russia. In June, it was down to 30%, and that's approximately still where it is. Although it's lower, it's still substantial. If there would be rationing, when would it be introduced? Well, the gas storages in Europe are reasonably well filled up by now compared to what is usually the case this time of the year. It is likely only in the later year or later in this year that such a decision would be necessary. Right. Because that would only be done in a very extreme situation, much more extreme than we are in today. What would happen to price volatility if it happened, if there was rationing? Well, as you say, rationing is an extreme measure, and if we would come to that point, prices and volatility will have increased even more prior to that. Rationing should bring prices down since it is a forced reduction of demand. What would the financial impact be on Vattenfall? Well, in the case of rationing, the TSO would decide who gets gas, and then we should be allowed to pass on any costs related to this to the customers. If this is the case, the liabilities or direct exposure's impact on Vattenfall's financials is limited. You have other effects, of course, businesses that are forced to shut down as a result and those kinds of things that still might impact us. Okay. We have talked a lot about Germany, but how is the situation in the Netherlands? Gas is important for heating there as well. It definitely is. In the Netherlands, less than 10% of the gas comes from Russia, and there is also infrastructure in place for liquid natural gas, which makes it possible to increase imports. The risk of rationing is lower in the Netherlands than it is in Germany. Finally, how about the Nordics then? Well, gas is not used for heating in the Nordics to any large extent, so the impact is mainly on industries using gas. Also, since the markets are interlinked, there is an impact on prices, especially in Denmark and the southern parts of Norway and Sweden. The power prices between the Nordics and Germany are not fully interlinked, so the prices will most likely not be as high as they are in continental Europe. Having said that, I would like to say that the winter will be a challenging one. The uncertainty will still be high, and the prices will be volatile. It is tough for many of our customers, and we will do what we can to support with contracts, advice, but also, first and foremost, stable deliveries of gas, heat, and electricity. Thank you. With those words, we open up for questions on the phone or via the web. You are now welcome with your questions. Samu Wilhelmsson, how are you? Yeah, I'm good. You can hear me? Now I can hear you, yes. Okay, great. Good. First of all, thank you for the good presentation I have only two short questions. First of all, concerning the ruling of the Swedish Administrative Court of Appeal to the electricity grid companies for regulatory period 2020-2023. I know that you have appealed the decision to the Supreme Administrative Court, but just in general, that can you further elaborate or give more details on how it would affect if the decision would end negatively on your behalf, on the profitability in the distribution segment? The other question, just shortly on your achieved prices, 'cause your hedging decreased by 6% compared to the previous quarter. For that, is it expected that the hedging ratio will be also further in the future be decreased? Does that mean that you are more willing to decrease your hedging in order to benefit from the higher energy prices, or is it just for the price area differentials in Sweden? Those are my questions. Thank you. Maybe I can start with the appeal regarding the distribution business. You're right, we have appealed. Actually, the verdict said that the regulator will have to re-evaluate and recalculate the revenue frame, the revenues that are allowed. That actually will have a positive impact to us compared to what was the case in the sort of previous revenue frame that they presented. How much is very difficult to say since we have this unclarity on how the calculations are to be made, and the unclarity is mainly regarding the WACC. We will simply have to wait and see what this means in reality. In general, this verdict that we have received is positive for us from a financial perspective. Maybe to add to that, because you are fully right there, Anna. If you look at it, sort of one percentage point change in WACC would mean roughly SEK 0.5 billion per annum throughout the revenue period. We had the second question. Yes, the fact that we have reduced our hedge ratio, which is true, but that doesn't show in our numbers until next year. That means that we are lowering the hedge ratio. We will have a slightly increased risk and also be exposed to the market prices more directly than what has been the case previously. The effect of that will, of course, depend on the prices then. Just as a clarification for the motive, is it more, you know, to get the exposure to the spot market, or is it just adjusting for the, let's say, the major price differentials in Sweden? Like, as a clarification, are we talking about evening out the differentials or benefiting from the spot price in general? Like, what's your strategy behind this winding down of the hedging? Well, the reason is mainly that the hedge is simply not working anymore. It's not possible to hedge the production we have in the northern part of Sweden when there is a decoupling between the price areas. It's not possible to hedge in specific price areas, but mainly in SYS. Our sort of main ambition to even out the result between the years is still there, and it's still our strategy. The reason for that is that we have large investment projects which we want to be certain that we can finance. With the markets decoupling, it's simply not an efficient hedge anymore to hedge the production we have in the north, and therefore we are reducing the overall hedge ratio. All right. Thanks for the answer. No further questions from me. I think I saw another hand from Carlos Razuri. Hi. Good morning. Can you hear me? Yes. Yeah. I have a question on the wind segment. It reported remarkable growth in the first half at a time when electricity generation only grew 21%, which doesn't really tally with the results. I want to understand if there is any farm-downs included in the profits, or perhaps there's a substantial portion of the wind output that is not contracted or not subsidized. I can start to answer that question, and then Kerstin can continue. It's a mix of higher prices for wind power that is not regulated or has a subsidy, but is exposed to the market prices. It's also additional volume. For example, we had the Danish Kriegers Flak coming online compared to last year. That's 600 MW more of offshore wind. That also has an impact. Maybe you want to add something, Kerstin. No, I think actually you said it all. It's a volume effect as this 21%, which you also referred to. It is the price impact that we see mainly on the continent in the UK, Netherlands, and also in Denmark. There are no specific farm downs or any other sort of changes in the accounting or in the reporting here. Can you give us a rough idea of what percentage of the wind portfolio is exposed to merchant prices? No, we don't disclose that number. Let me see here. I think there was a related question from Marco Matuonto. Is all wind power generation capacity linked to PPAs, CfDs type of contract is the quasi-regulator, or do you have also some wind power generation capacity linked to the spot market? I guess that question was answered already. Yeah. And then. It's a mix. Yeah. Of different parts, yeah. Yeah. Then we have a question from Alex Blackburn. Two questions. Hydro operations in Iberia and Italy have struggled with some of the worst droughts on record, recent months. Can you talk about the conditions you've seen in your market in view of EU gas rationing? This was the first question. The second question, in view of EU gas rationing this winter, are you planning to change your hydro generation strategy in any way, for example, to store more water for use later in the year? If I understand it correctly, the first question is about the drought and whether that has an impact on our operations. It has indirectly, of course, since the warm weather in Europe is causing an increased demand for cooling, which is having an impact on the demand and the prices. When it comes to our operations, we haven't had any problems with drought in relation to our hydropower or our nuclear power like they have in some other countries in Europe, if that's what you're after. When it comes to storing water, we have ability to store water short-term, but we have very limited long-term storage possibilities when it comes to hydropower. It's limited possibilities when it comes to storing between one season and another. In the Nordics, where we have our hydropower right now, we also see that the hydrological balance is slightly below normal, and that is, of course, due to precipitation, spring flood, and demand. It's mainly lower in the southern part of the Nordics, mainly southern part of Norway, and it looks slightly better in the northern part of Sweden and Norway. Good. I think we have a question from Jakob Magnussen. Yeah, hello. Just wondering if you could shed a little bit more light about your trading result. Seems like that is the one driving the lion's part of the growth for you in clean EBITDA. If you could open up that item a little bit more, that would be very helpful. Thank you. We are not disclosing the trading results as such. That is reported in the power generation segment. Of course, it is impacted by the high and volatile prices. We do see an impact, and it sort of is less high than last year. Still, if you compare to normal years, I would say on a fairly good level still. Last year was also an exceptionally good year from that perspective. Just to be clear, it's not like you're sort of speculating in where the power price is going. It is just a risk managing for your various operations. Exactly. We are not speculating. We have quite strict risk management procedures when it comes to our trading activities. We have our hedging strategies, which we have reported that we are slightly adjusting. Besides that, we also have the proprietary trading, but there is no sort of strategy change there. The risks are, of course, increasing due to the high market prices. We keep our risks at the sort of the same level from a price risk perspective. The main speculation that happens is limited, and it is in the power trading, but the mandates are unchanged. Yeah. As Kerstin said. We are not sort of increasing the mandates for trading at this point in time. Okay. Thank you. I see no further questions. I want to thank you all for attending this event, and I'll see you next time for our Q3 report. Thank you. Have a nice afternoon.