RWE Aktiengesellschaft (RWEOY) Management on Q1 2019 Results - Earnings Call Transcript

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About: RWE Aktiengesellschaft (RWEOY)
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Earning Call Audio

RWE Aktiengesellschaft (OTCPK:RWEOY) Q1 2019 Earnings Conference Call May 15, 2019 6:00 AM ET

Company Participants

Gunhild Grieve - Head, Investor Relations

Markus Krebber - Chief Financial Officer

Conference Call Participants

Martin Tessier - MainFirst

Ahmed Farman - Jefferies

Alberto Gandolfi - Goldman Sachs

Vincent Ayral - JPMorgan

Deepa Venkateswaran - Bernstein

Sam Arie - UBS

Ahmed Farman - Jefferies

Lueder Schumacher - Societe Generale

Operator

Welcome to the RWE Conference Call. Markus Krebber, CFO of RWE AG will inform you about the developments in the First Quarter of Fiscal 2019. During this call, you will be on listen-only mode. However, you have the opportunity to ask questions later on the call. [Operator Instructions]

I will now hand over to Gunhild Grieve.

Gunhild Grieve

Thank you very much. Hello, to everyone on the phone and to those who are joining us via webcast. I'm joined here by Markus Krebber for the presentation on the First Quarter of Fiscal Year 2019. As with our previous presentations, we will concentrate on RWE standalone. In order to focus on your questions, we've kept it short.

So let's hand over straight to Markus.

Markus Krebber

Yeah. Thank you, Gunhild, and welcome everyone. It has been a good start into fiscal year 2019 for RWE. On the back of an outstanding performance by Supply & Trading as well as solid earnings from Lignite & Nuclear has been a good first quarter. Even so the European Power division had a weak start into fiscal year 2019.

Distributable cash flow in Q1 was strong at €484 million supported by the expected reversal in working capital. At the end of March, our net debt stood at €4.7 billion. As expected, we saw a reversal of variation margins with the realization of the underlying contracts. In addition the development of commodity prices led to an outflow of margins.

Furthermore, we exercised the right to redeem the £700 million hybrid bond on its first call date. We now have three hybrid bonds with a total value of approximately €1.1 billion outstanding. We confirm the outlook for the RWE Group and RWE standalone as well as our targets to pay a dividend of €0.80 per share for fiscal 2019.

When it comes to our energy transaction with E.ON we continue to make good progress in the preparation for the swift integration of both renewable businesses. We recently announced further appointments to the management team of our future Renewables business. We also signed a new €5 billion syndicated credit agreement. It replaced the previous €3 billion credit agreement and will enable the smooth integration of the renewables operations of Innogy and E.ON.

While we have received clearance from the European as well as the German and U.K. Competition Authorities for our part of the transaction, the European Commission stopped the clock twice and thereby extended the deadline on its review of the planned takeover of Innogy's network and retail assets by E.ON. This kind of procedure is normal for such a complex transaction. Merger clearance is currently expected by the end of Q3 early Q4.

Operational control of the Renewables business of E.ON and Innogy is still expected by year-end. In order to conduct a thorough customer due diligence and allow the Renewables management to settle into the new company, we will hold our Capital Market Day in March next year.

Let's take a look at the development of our adjusted EBITDA. For RWE standalone, it amounted to €510 million. The increase is mainly driven by an outstanding trading performance and the strong gas and energy business. Despite lower generation volumes earnings at Lignite & Nuclear are on previous year's level due to higher realized generation margins.

Earnings of the European Power division suffered from lower production volumes and a weak commercial asset optimization as well as the suspended U.K. capacity payments. The adjusted EBITDA does not yet include the Innogy dividend, which will be accounted for in Q2.

Slide 4 provides the performance details of the Lignite & Nuclear division. Year-on-year the production volumes came down, among others driven by the restrictions at the Hambach mine and outages. However, slightly higher generation margins have been realized and led to a solid earnings contribution on the previous year's level.

The increase in depreciation is mainly influenced by changes from the IFRS 16 application and interest adjustments for nuclear provisions which led to higher asset values for the operating plants. For the full year, we confirmed the outlook for an adjusted EBITDA between €300 million and €400 million. The European Power division realized an adjusted EBITDA of €63 million. Higher renewable feed-ins and the warmer weather condition led to lower generation output at our power plants, as well as weaker earnings from commercial asset optimization.

In addition, we missed €19 million of U.K. capacity payments which we received in Q1 last year. While we confirm the outlook for the full year, we now expect to be at the lower end of the provided range.

Now on to our current hedge position on slide 6. For 2019 and 2020 hedge prices stayed flat, as we are almost fully hedged. For 2021, we increased the hedge position to more than 90% and the hedge price moved from €37 to €39 per megawatt hour. The increase of approximately of €2 was driven by higher carbon prices, which means that hedge margins are unaffected.

We have now also included our hedge position for 2022. More than 50% of the outright generation is already hedged. With a hedge power price of €44 and a hedge carbon price of €14 margins also remain stable in 2022, despite the rally in carbon prices. However, we still retain upside from our implicit fuel hedge in case fuel spreads increase in the future.

Let me also remind you of our long-term carbon position which we have financially hedged through until the mid-2020s. In other words, a change in carbon price should not affect our generation margins for the coming years. As mentioned, we have seen this affect our hedge prices for 2021 and 2022.

On page 7, you can see the development of fuel spreads. Until the end of Q1 2019 which are relevant for our hedge prices you saw on the previous slide. Since the beginning of the year, we have seen a minor increase in fuel spreads. The fuel spread curve for calendar year 2022 is also included for the first time, where we still see some upside.

Now onto the earnings development of the Supply & Trading division on slide 8. The Supply & Trading business had a very good first quarter, especially compared to a negative contribution in Q1 2018. The division achieved an EBITDA of €255 million on the back of an outstanding trading performance and strong earnings from gas and LNG. We maintain our guidance for the full year, but we are optimistic that we'll end the year at the upper end of the range of €100 million to €300 million.

Ladies and gentlemen slide 9 provides the earnings drivers down to adjusted net income. Our adjusted net income amounted to €273 million in Q1 2019. Besides the typical adjustment of the non-operating result and the corresponding tax position, we have mainly corrections in the financial results resulting from IFRS 9 and changing to discount rates for long-term provisions.

Now onto our distributable cash flow on slide 10. The distributable cash flow in Q1 is also on a high level amounting to €484 million. It is dominated by two drivers, firstly, the high adjusted EBITDA, and secondly, the positive effects from changes in working capital. The latter is a timing effect from last year, which we already indicated in our 2018 result presentation in March. At the end of last year, we saw unusually high levels of gas inventories and higher-than-usual accounts receivables which have now come down.

This overcompensated the typical seasonal effect of an increase in working capital, due to the purchase of CO2 certificates. We also expect to end the year with a positive effect from change in working capital. Changes in provisions and other non-cash items are also impacted by the accounting of CO2 emissions. By the recognition and provisions run throughout the year, the utilization takes place in Q2.

For the full year 2019, we can confirm our expectation from March to reach a level of approximately minus €500 million in change in provision and other non-cash items. For our British pound hybrid, we paid the full year coupon of some €60 million in Q1. This is the last payment for this hybrid bond as we call it in March.

Details on the development of net debt are shown on slide 11. At the end of March, net debt stood at €4.7 billion which is an increase of approximately €2.4 billion compared to the reported net debt at year-end 2018. Essentially the increase is driven by an outflow variation margins, as well as realization of the underlying transactions for which we had received variation margins last year.

Furthermore, the call of the British pound hybrid increased our net debt as we did not refinance it with another hybrid and consequently lost the equity credit. The first time implementation of IFRS-16 increased net debt by €138 million.

Finally this brings me to our RWE standalone earnings outlook for 2019 on slide 12. As already mentioned at the beginning of my presentation, we can confirm our earnings outlook for fiscal year 2019.

With this I conclude my remarks and we are now happy to take all your questions.

Gunhild Grieve

Thank you, Markus. And with this I would hand over to the operator to provide the first question.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from the line of Martin Tessier from MainFirst. Please go ahead.

Martin Tessier

Hi, good morning. Thanks for taking my two questions actually. For the first one is on the variation margins. So you recorded a €2.9 billion outflow in Q1 out of €4.4 billion in full year 2018. Given the large portion already offset. Is it fair to assume that the remaining €1.5 billion will revert in full year 2019?

And my second question is on your 25% stake in Amprion. Given that it's not pure renewable generation business, do you consider it as core, noncore or under assessment? Thank you.

Markus Krebber

Yes. Thanks Martin for the question. Let me start with the easier one, that's the second one. Our stake in Amprion is a strategic investment, so it's core. It is there to stay with RWE.

On the variation margin, the outflow in 2019, the first quarter had two elements. One was the settlement of underlying transactions. This was roughly around €1 billion and then an outflow from price movements which was the remainder. And as you might have seen especially carbon and power prices turning around in Q2, we currently have seen an inflow. So we should we not expect that the remainder of €1.5 billion will outflow this year. Actually we have seen that the number come -- the outflow came down and we have seen an inflow in Q2.

The €1.5 billion relates -- which you rightly derived from the two figures we have provided in the footnote on the slide, but the €1.5 billion is to be expected outflow of the full lifetime of the transaction and since we have also a very long-term carbon hedge in place, this is an outflow which would come over years.

But of course especially due to price movements in the first quarter, we have seen an unexpectedly high outflow from -- not from settlements but from commodity price movements.

Gunhild Grieve

Is that okay, Martin?

Martin Tessier

Very clear, yes.

Gunhild Grieve

Next question, please.

Operator

The next question comes from the line of Ahmed Farman from Jefferies. Please go ahead.

Ahmed Farman

Yes, hi. And thank you for taking my question. I just wanted to start with the Lignite & Nuclear division where you posted fairly solid set of numbers and actually a bit above consensus expectation. Although, I think when the volumes stayed there was a release it seemed a bit light versus your sort of full year targets.

So I just wanted to understand if there was any extra efforts or any new initiatives on the cost-cutting within that division that happened over the first quarter 2019? That would be helpful?

The second thing you mentioned two sort of key milestones you expect in the merger clearance in Q3 and then expect to take control of the Renewables business by the end of the year. Could you just help us understand what are the sort of steps in between that need to happen between those two milestones? That will be very helpful. Thank you.

Markus Krebber

Yeah. Ahmed thanks for the question. On Lignite & Nuclear to start with the summary, there were no extraordinary items in the results and no extraordinary efforts. You rightly pointed out that production volumes are significantly down, but I mean, out of the 5.4 terawatts hours we have produced less in the first quarter last year 1.2 terawatts hours are from Mátra. So from our Hungarian operations, which was not making any profit and 1 terawatt hour was because we moved additional capacity into the lignite reserve and that is compensated under the agreement with the government.

So also no lost net earnings here. And on the remainder, we just had approximately 3 terawatt hours partly coming from the Hambach mine restrictions. Of course, there we lose some margin but that was exactly compensated by the higher realized generation – or the higher realized power prices or spreads which compensated net loss in production volume. So more or less, it was a development as expected and this is in line with the full year guidance. So, no extra ordinaries.

On the merger clearance, the question on what needs to happen between the two steps. So, the first step is the formal merger clearance which would allow us to close the transaction with E.ON by selling the Innogy shares to E.ON. And then it takes two steps. One is, maybe one which takes one or two weeks, which we need to get operationally fully ready to take back the E.ON Renewables business so that E.ON sells their Renewables business. And the second step is that, the Innogy Renewables business needs to be moved back to RWE. That needs a bit more work, where we are currently looking into how we actually do that because E.ON cannot instruct Innogy to do so, because they have no legal integration measures achieved by that time. But we are optimistic that we achieve it, and that we have full operational control of both Renewables business by the end of the year.

Ahmed Farman

Okay. Thank you. Very clear.

Gunhild Grieve

Thank you, Ahmed. Next question, please.

Operator

Next question comes from the line of Jane Evans from Goldman Sachs. Please go ahead.

Alberto Gandolfi

Hello.

Operator

Jane, your line is un-muted now.

Alberto Gandolfi

Hello? Can you hear?

Markus Krebber

Yeah. Yeah. It's Alberto. Hi, Alberto.

Alberto Gandolfi

Hi. I see there was a mistake, so I dialed in from my phone and it said the name of a colleague of mine that has nothing to do with it, so I don't know what happened I am sitting at my desk. Anyhow. Thanks for taking the question. Apologies for the slight substance. I have two please. The first one is on again on the economic net debt. I take that there's quite a lot of items moving around here a little bit.

But just to be a little bit more precise, I would say the following. So you have a €1.5 billion of cash position in there and carbon has gone up. Can you maybe talk a little bit more about the constituents i.e. what type of swing in working capital would you expect for the remainder of the year excluding variation margins? And the moving carbon we have already seen since the end of March up, until now how much is that worth in terms of cash? And any other item we should be thinking about?

And the second question is a little bit more on your Renewables business. I mean, you talked about a gross annual addition target between two and three gigawatt. I know you technically don't own the businesses yet, but you've put in place the org chart you talked about targets. So considering the high visibility you normally have over 12 months, 24 months where you can almost name project-by-project. Could you tell us on a pro forma basis on a gross level, how much would you expect to add during 2019? And how much you are looking at adding for 2020? And maybe what type of confidence in terms of what's already coming? I guess, you contracted machine, you have civil works, which have begun connection, permits all the rest. If you can give us a bit of clarity on that it will be great? Thank you.

Markus Krebber

Thanks Alberto. On the first question there is -- in the working capital, there is no variation margin in there. So, the carbon effect in working capital is only that we buy the certificates in Q1 and we have to hand them into the regulator in Q2. So, the carbon effect on the working capital for the full year is always zero.

And the same actually if you don't assume any big price movements on the utilization of provision. So, on a year -- on a full year basis, the effect is always zero. You only have the cyclicality that you have a negative effect in carbon -- from carbon working capital in Q1 and a negative effect in Q2 and then balancing over the year that the net effect is zero. So the margining effect -- margin effect is only in our net debt figure because we have excluded it from distributable cash flow.

Now, you want to understand what the positive effect of the carbon price movement is in Q2 or up to now which I cannot give you because you know the market price movement you could easily calculate our implicit carbon positions which we are not able or not willing to disclose.

But what is right, I mean -- and partly stemming from the carbon position, but also from other commodities from end of Q1 until now, we have seen significant inflows compared to the €1.9 million net outflows purely stemming from commodity price movements. The other €1 billion was expected settlements of transaction. I think that's it on the first question.

The second one on the Renewable side, I mean whenever you talk about -- you have contracted to or you have high visibility that actually means that the Innogy guys and the E.ON guys, of course, to the extent it is allowed for competition reasons, we have transparency. But actually we need to ask the question to the Innogy and E.ON colleagues and then add up what they are willing to disclose publicly.

And of course you know from what they have communicated that especially we are definitely not falling short of the ambition to invest €1.5 billion net capital from ourselves over the next two three years. There is already high visibility from the committed CapEx they have communicated. And the target of adding two to three gigawatt was always a question. Is the pipeline so healthy that we leverage up a bit and also take on both partners that we go beyond the €1.5 billion? But for the valuation of the company, the most relevant figure is net investment of €1.5 billion of our own money.

And there we don't see -- we hardly don't see any limitations to be able to invest that on an annual basis over the next three years because that must come from the already existing business of E.ON and Innogy because we have a higher lead-time to develop projects. And I'm optimistic that we can go on a gross basis beyond that.

But I currently cannot give you any more details because what I don't have is what Innogy and E.ON have already disclosed and I don't want to mix up what they have disclosed and what I know.

Gunhild Grieve

I can maybe just add to -- I mean I can add because I don't have the insights which Markus has so I just comment on a public number knowledge and you can find actually the numbers in our company presentation.

So far, what the two companies have publicly announced, the additions are annually roughly 0.7 gigawatts although that was end -- their announcement for end of 2018 and I believe that both companies have meanwhile announced the one or the other project on top of that. So, yes that's as far what we can say.

Alberto Gandolfi

Right. And sorry just to be super clear because I didn't hear a number. On the working capital -- because you've both issued two certificates in Q1, can you give us a number on that? You said not on the variation margins or the entire hedge position, but can we know a million-euro number which is supposed to revert in Q2? So, at least we can forecast the debt?

Markus Krebber

In order to forecast the debt what you need to assume is what will be the net effect on distributable cash flow and what I said in my speech is that for the working capital item on the -- in the distributable cash flow composition, we expect at the end of the year a positive effect on working capital.

Alberto Gandolfi

Got it. Thank you.

Markus Krebber

That's a couple -- I mean €100 million to €200 million positive.

Alberto Gandolfi

Thank you.

Gunhild Grieve

Thanks, Alberto. Next question, please.

Operator

Next question comes from the line of Vincent Ayral from JPMorgan. Please go ahead.

Vincent Ayral

Good afternoon. So, most of my question were actually on the net debt. So, I think we've gone through that in detail. But I would -- just would like to check one or two things when we look at the change of hedging and the outright and the implied price would be about €55. I know there's quite a narrow margin given the rounding in the numbers you gave. But is it for you something, which makes sense as an estimate I know we see the flock of around €50 at the moment. So that seems a bit high.

The second, I would like to ask is just to get a bit more clarity on the comment you made regarding -- or more detail we'll call it regarding the nuclear discount rate and the impact on the pensions -- on the liabilities provisions, sorry, on nuclear in Q1. A bit more color there would be appreciated. Thank you.

Markus Krebber

I don't know whether I got the first question correct. It was the implied hedge price of the closed position in Q1 right?

Vincent Ayral

Yes. Yes indeed.

Markus Krebber

Yeah, I mean you should expect that that was around the average market price of Q1. So your assumption I mean slightly below or around €50 is not bad. I think that is what -- where it was.

Of course you have overlying effects when we sometimes deviate the hedge passes especially on the fuel legs, which is also going into the average hedge price, but yeah I think in Q1 we achieved on average for the additional hedge volumes, the average price for -- which we have seen in Q1 for that specific year.

On the nuclear provision side, the discount rate, the real discount rate was lower by 20 basis points and that -- by that the provisions increased by around €100 million.

Vincent Ayral

Thank you.

Markus Krebber

And maybe also interesting on the pension provision side, we also saw 20 basis points drop in the discount rate, but that was overcompensated by a positive performance of the assets. So we saw a slight release or reduction in pension provisions of also close to €100 million in the other direction, so a reduction.

Vincent Ayral

Thank you.

Gunhild Grieve

Okay. Thank you. Next question.

Operator

Next question comes from the line of Deepa Venkateswaran from Bernstein. Please go ahead.

Deepa Venkateswaran

Thank you. I have two questions as well. First one is on the lignite discussions with the government. Would you be able to provide an update on what's happening and where you expect the timeline particularly with reference to what you've previously stated?

And secondly on the European Power Generation, I understand that the commercial asset optimization opportunities were lower than the quarter. Do you think that this is seasonal? Or is this something structural? Anything we need to read through for future years given that you've revised your guidance for the entire year to the lower end of the guidance on that one? Thank you.

Markus Krebber

Yeah. Thanks, Deepa the questions. So, first one on the discussions with government. We are on working level in discussions with the government. The timeline, which we have communicated earlier, has not changed. So we expect it to take some time. The government is firstly addressing the topic of how to find agreement on the support for the affected regions especially since we expect now state elections over the year.

And the question of how to exactly find agreement and put a law around it on the coal exit that should be expected for the second half or maybe even the end of this year. So it will take some more time before we can communicate any news on it.

On European Power, maybe let me take the opportunity to explain a bit more in detail what are the drivers of the weak results in Q1. Starting with the summary, we don't see any structural cross-read into other quarters. So it was specific development in this first quarter. And the drop compared to the first quarter last year was so significant because we also had extraordinary positive effect in Q1 last year. Not extraordinary but the strong result from the circumstance.

I mean if you may potentially remember in the first quarter last year, we had the so-called east from the beast -- no the beast from the east. So the beast from the east with -- I mean the specific situation in the U.K. with very high power prices very high gas prices, gas shortages and this resulted in very, very healthy DAX spreads for our Dutch fleet because I mean, we were exporting power to the U.K. at maximum capacity to interconnectors.

And this year in the Q1, we had exactly opposite, a very mild winter and very flat merit order which doesn't give you lots of opportunities to optimize and also given that there was not much need for flexibility very low prices for flexibility in the system and that is over -- and also lower production volumes because we had higher wind feed-ins.

So this was an artificially low Q1 or very difficult environment for the existing conventional fleet while the first quarter last year was a very favorable quarter for this fleet.

So overall our expectation is that for the rest of the year we will more or less earn with this fleet what we earned last year. We of course lose the capacity payment in the rest of the year, but we have ramped up our biomass production in the Netherlands where we -- from the agreement with the government we have seen a pickup there. We see higher profitability from that and this will be an offset.

So for the rest of the year we expect to earn in European Power what we earned in Q2 through Q4 last year. And that brings you exactly at the lower end of the range.

Deepa Venkateswaran

Okay. Thank you. Very helpful.

Gunhild Grieve

Thanks, Deepa. Next question, please.

Operator

Next question comes from the line of Sam Arie from UBS. Please go ahead.

Sam Arie

Hi, thank you. Good morning, good afternoon. And thanks for the presentation as always. My question was going to be -- actually just coming back to what I think was the big news this morning which was your strong results from the trading division.

It looks like you beat expectations there by a factor of 5, but your comments in your presentation were quite high level. So I just wondered if you could tell us a bit more about what was really going on there. How did you get to that result?

And then I suppose in terms of your guidance for the high end of the range at the end of the year I suppose you're assuming the rest of the year is normal, but is there anything you been doing in Q1 that repeats or that could cause us to do more positive longer term about what the trading division can deliver? I'll start with just -- that one.

Markus Krebber

Yes. Thanks Sam. Maybe disappointing because I cannot highlight anything specifically in the trading division. I mean as you know and we experienced that in the past, we typically run arbitration strategies and sometimes it takes longer to -- that they pay off sometimes faster.

And we had a situation that more or less, all desks across all regions were making good money in the first quarter. So there's definitely no read across. There were also no extraordinary items which will revert in the remainder of the year. So that is why our expectation is for the remainder of the year, we should expect normal results.

And, of course, even with normal results for the rest of the year, the statement to expect to end up around €300 million is very conservative, yes? But you know that the business is volatile. Maybe we are a bit on the conservative side here, but there is nothing -- there has nothing happens in the end of Q2 -- Q1 which needs to make us more conservative.

Gunhild Grieve

And those are nothing which kind of structurally in the longer term would kind of need us to increase our kind of average for the longer term.

Sam Arie

Okay no very helpful. And I mean if you don't mind a quick follow-up. I suppose it would be helpful, if you could put the rest of the question I had coming in this morning which was whether this performance reflects some increased risk that you took in Q1 and obviously people have SSE trading events of last year in mind. But you didn't kind of take a punt on any commodity directions or anything unusual like that?

Markus Krebber

No, I mean, there is -- the utilization of our risk limits we have in place and we have different kind of limits. We have delta limits of course. We have value-at-risk limits but what we have also stress test limits. They were all in the normal range and even above -- even below the 50% level. So risk utilization was not higher than usual.

Sam Arie

Very helpful.

Gunhild Grieve

Thank you, Sam. Next question, please.

Operator

Yes we have one more question. [Operator Instructions] The next question comes from the line of Ahmed Farman from Jefferies. Please go ahead.

Ahmed Farman

Yes. Hi. Thank you for taking my follow up question. I just though I could sort of draw you back to the net debt and get your expectation for where you see the standalone net debt for the full year? And maybe -- I mean, you've already touched on a couple of moving parts, but maybe if you can go through a little bit of the bridge starting from the Q1 number that would be very helpful. Thank you.

Markus Krebber

Ahmed, thanks again. I know it is very difficult to get the head around our net debt now. It is also difficult under the current definition for us to predict it, because we need to foresee commodity price movement. I mean, we said at the end of last year or when we gave our guidance for the full year in March, that we expect net debt to be significant higher.

The three things we knew about the development when we gave the expectation was that we called the British pound hybrid, which increases debt around €400 million. What we knew was the IFRS 16 effect of around €140 million. And what we knew were the settlement of transactions which result in an outflow or reversion of €1 billion of the variation margins we got in over the last years.

Everything else then depends on commodity price movements and there we have seen the first quarter minus €1.9 billion. And as I indicated, a significant reversal of that outflow already in Q2, that remains to be seen. I mean, what you see from the presentation is that we also tell you now what is, maybe, the remainder, which will revert over the next couple of years, which now stood at around €1.5 billion if you deduct the two numbers €4.4 billion and €2.9 billion, but that this what we can currently say.

Ahmed Farman

Okay. No. Thank you. That’s very helpful.

Gunhild Grieve

Thank you, Ahmed. I think there was an additional question coming up?

Operator

Yes. So the next question comes from the line of Lueder Schumacher from Societe Generale. Please go ahead.

Lueder Schumacher

Good afternoon. Yes. Two questions from my side. The first one, Markus, is going back to movement in the variation margin. When you're broke it down earlier, you said that about €1 billion of that swing was from the unwind of your commodity positions. Now that used to be the guidance for the full year. Has that all now happened in Q1 and you're done for the year? Or do you expect more to come in the remaining nine months from the unwind of your positions? That's the first question.

And the second one, asking more in hope, I guess. But on European generation, you mentioned the commercial asset optimization costs were less. It would be great if you could give us the actual numbers, but failing that, what was the swing, the delta, between your EBITDA from that in Q1, 2018, and Q1, 2019?

Markus Krebber

Yes. Lueder, thanks for the question. I mean, the unwind of €1 billion which we're expected to the settlement of position, the majority always comes in Q1 because it is related to our CO2 buying, because we need to buy it in the market, because if we then buy it at much higher prices than what we have hedged for, but the money was already in the bank from the positive mark-to-market movements.

And that is the majority of it, you can say, I mean, plus/minus €100 million, €200 million. The €1 billion which we expect is already accounted for in Q1. The rest which comes over the year is very, very minor. On European Power, the commercial asset optimization, so the delta between Q1 2018 and 2019 is a mid -- a two-digit -- mid-two-digit-million number across our model.

Lueder Schumacher

That is great. Very clear. Thank you.

Gunhild Grieve

Thank you, Lueder. Are there any more question?

Operator

No, there's no more questions. So I hand back over to your host.

Gunhild Grieve

Then, thank you very much. Thank you for joining us. And if you have any follow-up questions, do not hesitate to call us this afternoon or the coming days and probably we'll see a lot of you on the upcoming conferences or reverse road shows. Have a good rest of your day. Bye.

Operator

Thank you for joining today's call. You may now replace your handsets.