Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (April 2022)
62 slides from Fortum Oyj's investor presentation, April 2022
Slide 1: Equity story of FORTUM – For a cleaner world
Equity story of FORTUM – For a cleaner world Investor / Analyst material April 2022
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Fortum shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser. Any references to the fut
Slide 3: Content
Content Fortum in brief 4 – 12 Fortum’s strategy 13 – 20 Energy market transition 21 – 25 Financials 2021 26 – 49 Appendices 50 European and Nordic power markets 51 – 57 Fortum’s Nordic power generation in detail 58 Fortum’s evolution and strategic route 59 Historical achieved prices 60 Dividend 61
Slide 4: Fortum in brief
Fortum in brief Fortum in brief Power generation assets Key figures 2021 Sales EUR ~112 bn Comparable EBITDA EUR 3.8 bn Total assets EUR ~150 bn Personnel 19,140 Main businesses Sales (€) Volume1 Capacity India Power 34.3 bn 188 TWh 47.1 GW Gas 60.0 bn 370 TWh 7.4 bcm Heat 1.2 bn 33 TWh 16.9 GW 1) F
Slide 5: Strong position to drive the energy transition in Europe
Fortum in brief Strong position to drive the energy transition in Europe 3rd largest 3rd largest 3rd largest 4th largest power generator CO2-free power generator nuclear generator gas storage operator in Europe and Russia in Europe in Europe in Europe
Slide 6: Fortum is the third largest CO2-free power generator in Europe
6 100 200 0 300 500 400 TWh EDF Rosenergoatom RusHydro Vattenfall NNEGC Energoatom Fortum incl. Uniper. EPH incl. LEAG En+ Fortum Enel Iberdrola Statkraft ENGIE RWE Source: Company information, Fortum analyses, 2020 figures pro forma. CEZ Verbund E.ON EnBW Axpo EDP Hafslund Eco Slovenské elektrárne
Slide 7: Renewables and CO2-free power generation capacity of Fortum
Fortum in brief Renewables and CO2-free power generation capacity of Fortum 16.6 GW Hydro Wind & Solar Nuclear 8.4 GW 3.6 GW 4.6 GW 7
Slide 8: Fortum is well positioned for the energy transition
Fortum in brief Fortum is well positioned for the energy transition Indicative EBITDA split Third largest CO2-free power generator in Europe with growing portfolio of wind and solar CO2-free Significant provider of flexible hydro and gas-fired power generation Major provider and trader of gas for Eu
Slide 9: Fortum’s CO2-free power generation increased by ~60% as Uniper was consolidated
Fortum in brief Fortum’s CO2-free power generation increased by ~60% as Uniper was consolidated as a subsidiary Fortum*: • CO2-free generation 40% • Gas-fired power generation 47% • Share of coal-fired generation 13% • Share of coal of sales revenue below 1% * based on 2021 reported figures Fortum a
Slide 10: Fortum is a forerunner in sustainability
Fortum is a forerunner in sustainability Fortum is listed in several sustainability indices and ratings: Our purpose is to drive the change for a cleaner world. We are securing a fast and reliable transition to a carbon-neutral economy by providing customers and societies with clean energy and susta
Slide 11: Fortum's power generation and heat production by source
Fortum in brief Fortum's power generation and heat production by source Fortum’s power generation in 2021 Fortum's heat production in 2021 Natural gas 47% Natural gas 59% Total Total Waste <1% power generation Oil 2% heat production Wind, solar <1% Heat pumps, Bio 1% 188.1 TWh Nuclear power 19% elec
Slide 12: Fortum key profitability drivers
Fortum in brief Fortum key profitability drivers Key market drivers: Fortum profitability drivers: Fortum Group’s indicative EBITDA by business and market exposure Power market European power generation Indicative EBITDA split • EU coal/nuclear capacity closures • CO2-free generation: prices and vol
Slide 13: Our strategy – Driving the clean energy transition
Fortum’s strategy Our strategy – Driving the clean energy transition and delivering sustainable financial performance For a cleaner world Strengthen and grow in CO2-free Leverage strong position in gas Transform own operations to power generation to enable the energy transition Partner with industri
Slide 14: Measuring success for Fortum
Fortum’s strategy Measuring success for Fortum Climate and environmental targets: • Group carbon neutral latest by 2050 (Scope 1, 2, 3) • European generation carbon neutral latest by 2035 (Scope 1, 2) • CO2 emission reduction of at least 50% by 2030 in European generation (Scope 1, 2) • Scope 3 GHG
Slide 15: Strategic steps going forward
Fortum’s strategy Strategic steps going forward 2014-2020 2021-2022 2023-2025 Major transformation Balance sheet focus Growth in clean power and gas Active portfolio rotation with Step up in Group EBITDA Growth in strategic areas focus on assets essential in the Secure strong balance sheet Sustainab
Slide 16: Indicative capital expenditure for growth investments 2021-2025
Fortum’s strategy Indicative capital expenditure for growth investments in 2021-2025 – renewables and clean gas 1 Renewables On-shore wind and solar 2 Hydrogen and clean gas Industrial decarbonisation solutions 3 Environmental and security of supply solutions Waste-to-Energy, recycling, industrial a
Slide 17: Fortum’s gigawatt scale solar and wind power generation fleet
Fortum’s strategy Fortum’s gigawatt scale solar and wind power generation fleet PORTFOLIO STATUS CAPACITY, MW FORTUM SHARE, MW SUPPLY STARTS/STARTED FINLAND 470 246 Ånstadblåheia 10 MW ● Kalax Operational 90 18 Q4 2020 (Fortum share) ● Pjelax-Böle & Under construction 380 228 Q2 2024 latest Nygårdsf
Slide 18: Strong commitment to maintain rating of at least BBB
Fortum’s strategy Strong commitment to maintain rating of at least BBB Ambition is to preserve financial flexibility and good Long term leverage target: access to capital markets. Financial net debt/comparable EBITDA Fortum will carefully manage its balance sheet going forward focusing on <2x • Prof
Slide 19: Return targets for new investments
Fortum’s strategy Return targets for new investments Return targets for new investments: Group 2022 capital expenditure, including maintenance and WACC+ hurdle rate: excluding acquisitions, +100 bps for green investments is estimated to be EUR 1.5 billion +200 bps for other investments • Maintenance
Slide 20: Fortum and Uniper cooperation estimated to deliver significant financial benefits
Fortum’s strategy Fortum and Uniper cooperation estimated to deliver significant financial benefits Cooperation benefits focus on monetary, safety, and environmental actions • Positive cash impact on a consolidated group basis is estimated to be ~EUR 100 million annually • > EUR 50 million of these
Slide 21: Europe committed to be a forerunner in reducing GHG emissions
Energy market transition Europe committed to be a forerunner in reducing GHG emissions across all sectors • EU is tightening both its 2030 and 2050 emissions targets – Requires emission reductions in all sectors, especially residential & commercial, transport, and industry • Sector coupling – clean
Slide 22: Energy transition will increase demand for electricity and hydrogen
Energy market transition Energy transition will increase demand for electricity and hydrogen Electricity Hydrogen Feedstocks Agriculture Industry Transport Residential and commercial Source: IHS Markit Net Zero Carbon Europe scenario 22
Slide 23: Nordic, Baltic, Continental and UK markets are integrating
Energy market transition Nordic, Baltic, Continental and UK markets are integrating – Interconnection capacity growing to over 13 GW by mid-2024 • Several new interconnectors have started DK1-DE maximum transmission capacity has been Current Nordic/Baltic 1 operation, and more are under construction
Slide 24: Volatility and uncertainty increases the value of flexible assets
Energy market transition Volatility and uncertainty in the European power market increases the value of flexible assets Intermittent renewables Nuclear and coal closures Increasing role of gas Volatility and Supply-demand balance uncertainty Increased interconnection between Nordics and Continent Co
Slide 25: Own transformation – coal exit to reach carbon neutrality by 2035
Energy market transition Own transformation – coal exit to reach carbon neutrality by 2035 in European generation Carbon neutral in our European generation by European generation CO2 net emissions: 2035 at the latest Transform own 2019 2030 2035 operations to carbon • Current trajectory to reduce CO
Slide 26: Financial Statements 2021
Financial Statements 2021 Fortum Corporation 3 March 2022
Slide 27: Markus Rauramo, President and CEO
Markus Rauramo President and CEO 27
Slide 28: Fortum Group’s Russian businesses
Fortum Group’s Russian businesses CEO Statement: Fortum Group* operations in Russia Fortum Russia – business description 2021 • We are deeply concerned about the war in Ukraine. There is no justification for it. Employees 6,902 • Whilst operations continue to run as normal, Power plants 12 including
Slide 29: Strong performance enables highest comparable KPIs in Fortum’s history
Strong performance in an exceptional commodity market enables highest comparable KPIs in Fortum’s history Comp. OP1 Comp. EPS2 OCF3 Leverage4 FY Higher achieved power prices and higher generation volumes with strong physical optimisation Uniper fully consolidated since Q2 2020 with strong contributi
Slide 30: Energy commodities driving power prices
Energy commodities driving power prices Energy commodities reaching new record highs EUR/ MWh EUR / MWh GasGas price,price (TTF)TTF) (Front month USD/ t/ t USD Coalprice Coal price (ICE(ICE Rotterdam) Rotterdam) 250 500 500 Realised Realised Futures Futures 200 200 400 400 150 300 300 100 200 200 50
Slide 31: Fortum Group is well positioned to drive the energy transition
Fortum Group is well positioned to drive the energy transition and to navigate through the turbulence Political will to accelerate the energy transition Structural increase Elevated price in volatility environment Geopolitical • Global warming • Extreme weather events • Weather dependence of • Suppl
Slide 32: Fortum is executing its strategy
Fortum is executing its strategy Transform own operations to Strengthen and grow in CO2-free Leverage strong position in gas carbon neutral power generation to enable the energy transition Fortum climate targets Supply significant reliable CO2-free power Provide security of supply and flexibility •
Slide 33: Loviisa lifetime extension
Strengthen and grow in CO2-free power generation Loviisa lifetime extension Fortum’s fully-owned Loviisa nuclear power plant lifetime extension Reliable backbone of the • Extension potential of operations until 2050 offering energy transition up to 170 TWh of additional CO2 free power Competitive •
Slide 34: Bernhard Günther, CFO
Bernhard Gunther CFO — —_— __-@fortum
Slide 35: Key financials
Key financials MEUR IV/2021 IV/2020 2021 2020 Extraordinary strong financial KPIs Sales 50,079 21,279 112,400 49,015 Comparable EBITDA on record high level Comparable EBITDA 1,416 1,247 3,817 2,434 of EUR 3.8 billion Comparable operating profit 1,070 928 2,536 1,344 Comparable EPS at EUR 2.00 Compar
Slide 36: 2021, almost all segments improved – volumes and prices contributed
2021, almost all segments improved – volumes and prices contributed Reconciliation of comparable operating profit Generation (EUR million) higher volumes and achieved power price with strong physical optimisation Russia one-off effect and higher power prices offsetting negative FX and declining CSAs
Slide 37: P&L - reported IFRS figures dominated by changes in fair values
P&L - reported IFRS figures dominated by changes in fair values MEUR IV/2021 IV/2020 2021 2020 Strong increase in sales following the Sales 50,079 21,279 112,400 49,015 increase in commodity prices Materials and services -48,003 -19,127 -105,170 -44,298 Items affecting comparability includes Other -
Slide 38: Balance sheet tripled due to derivative financial instruments
Balance sheet tripled due to derivative financial instruments MEUR 31-Dec-21 31-Dec-20 MEUR 31-Dec-21 31-Dec-20 Financial derivatives substantially up following the strong increase in Property, plant and commodity prices and high portfolio equipment and right-of-use 19,049 19,367 Total equity 13,665
Slide 39: Strong cash flow management to secure financial flexibility
Strong cash flow management to secure financial flexibility EUR million IV/2021 IV/2020 2021 2020 Comparable EBITDA 1,416 1,247 3,817 2,434 Non-cash and other items 940 282 1,506 394 Interest received 27 14 75 46 Change in non-cash /other items Interest paid -39 -51 -202 -208 and working capital was
Slide 40: Leverage below target and good access to debt capital market
Leverage below target and good access to debt capital market -6,234 Solid credit metrics debt debt 'BBB' long-term issuer credit rating, stable outlook netnet 'BBB' long-term issuer credit rating, Financial stable outlook , Financial Target ratio: < 2x Financial net debt / Comp. EBITDA Fortum’s obje
Slide 41: Outlook
Outlook Hedging 2022 Estimated annual capital Generation Nordic hedges: expenditure, including maintenance For 2022: 75% hedged at EUR 34 per MWh and excluding acquisitions, of appr. (Q3: 65% at EUR 32) For 2023: 50% hedged at EUR 31 per MWh EUR 1,500 million of which (Q3: 40% at EUR 31) maintenance
Slide 42: For a cleaner world
~. @fortum For a cleaner world
Slide 43: Higher power prices
Higher power prices System spot power price, Nord Pool Achieved power price, Generation segment Significantly higher spot power prices in the Nordics Higher achieved power prices Spot power price, Urals hub Achieved power price, Russia segment* Russian power demand recovering with increasing electri
Slide 44: Nordic water reservoirs and wholesale power price
Nordic water reservoirs and wholesale power price Hydro reservoirs Power price Reservoir content (TWh) EUR/MWh 120 120 350 350 Realised daily system price 300 300 100 100 Futures 31 March 2022 250 250 80 80 200 200 60 60 150 150 40 40 Norway 100 100 20 20 50 50 Sweden 2003 2020 2021 2022 Average 00
Slide 45: Generation: Higher achieved power prices
Generation: Higher achieved power prices Q4 2021 vs. Q4 2020 • Comparable operating profit more than doubled mainly due to – Higher achieved power prices of EUR 51.9, +16.7 per MWh – Significantly increased nuclear volumes due to higher availability • Higher achieved power price – Higher spot prices
Slide 46: Russia: Solid underlying performance
Russia: Solid underlying performance Q4 2021 vs. Q4 2020 • Comparable operating profit up by 5% to EUR 80 million – Slight negative effect of changes in CSA payments, lower bond yield, and higher power prices – Impact of the Russian rouble exchange rate was EUR 6 million – Russian power demand recov
Slide 47: City Solutions: Performance improved
City Solutions: Performance improved Q4 2021 vs. Q4 2020 • Comparable operating profit improved as a result of clearly higher heat sales volumes and higher prices in all heating areas • This excludes the Baltics due to the divestment (EUR –15 million) • Almost all business areas improved its result
Slide 48: Consumer Solutions: Challenging market environment
Consumer Solutions: Challenging market environment Q4 2021 vs. Q4 2020 • Negative impacted by higher electricity purchase costs. • The cold weather in the Nordics during December resulted in higher than expected electricity consumption requiring additional electricity volumes at prices that were cle
Slide 49: Uniper: Solid underlying performance
Uniper: Solid underlying performance Q4 2021 vs. Q4 2020 • The Global Commodities business’ result slightly down. • Negative effects in Global Commodities’ the trading of power and carbon business and rescheduled LNG deliveries shifting earnings into 2022 were almost compensated by an intra-year CO2
Slide 50: Appendices
Appendices @fortum For a cleaner world
Slide 51: Most West European countries to exit coal by 2030
European and Nordic power markets Most West European countries to exit coal by 2030 FI: Phase-out by mid-2029 • Sweden and Austria closed their last coal plants in 2020, DE: Phase-out SE: Last by 2038 plant closed Portugal in 2021 2020 DK: Phase-out • France is committed to a phase out by 2022*) UK:
Slide 52: Decarbonisation requires other sectors to join
European and Nordic power markets Decarbonisation requires other sectors to join CO2 abatement cost ranges for different sectors Proposed rebasing Proposed target for 2030 Coal-to-gas switching range • The EU has agreed to increase the 2030 total emissions reduction target EUA price Abatement cost r
Slide 53: Fortum major player in power, gas and heat
European and Nordic power markets Fortum major player in power, gas and heat Power generation Gas Heat production Largest generators in Europe and Russia, 2020 Largest European gas storage operators, 2021 Largest global producers, 2020 TWh TWh TWh EDF STOGIT Gazprom Rosenergoatom T Plus Fortum Store
Slide 54: Wholesale power prices
European and Nordic power markets Wholesale power prices EUR/MWh Spot prices Forward prices 400 400 350 350 300 300 250 250 German 200 200 Nordic 150 150 Russian* 100 100 5050 00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Forwards 30 March 2022 Rolling 7-day average spot p
Slide 55: Nordic year forwards
European and Nordic power markets Nordic year forwards Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 forward Year 19 forward Year 20 forward Year 21 Year 22 Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year 23Year20 Year 24 Year21 Year22 Year23 Year
Slide 56: German and Nordic forward spread
European and Nordic power markets German and Nordic forward spread Nordic and German daily spot prices in 2020 – 2022 Nordic and German year 2023 forwards in 2020 – 2022 Jan Feb Mar 2022 2022 2022 EUR/MWh EUR/MWh 500 500 200 200 400 400 160 160 300 300 120 120 200 200 80 80 100 100 40 40 00 00 Q101/
Slide 57: Nordic forward prices and Nordic sys spot averages
European and Nordic power markets Nordic forward prices and Nordic sys spot averages Year 18 forward Year 19 forward Year 20 forward Year 21 forward Sys spot average 2018 Sys spot average 2019 Sys spot average 2020 Sys spot average 2021 EUR/MWh 70 Year 2018 forward System spot 2018 average Year 2019
Slide 58: Fortum’s Nordic and Polish generation capacity
Fortum’s Nordic power generation in detail Fortum’s Nordic and Polish generation capacity Of which GENERATION CAPACITY Fortum Uniper NORWAY MW FINLAND MW Hydro 6,424 1,772 Generation capacity Hydro 1,553 Nuclear 4,560 1,737 Price area NO1, CHP 241 Nuclear 1,487 NO4 SE1 CHP 559 1 - CHP 375 Other ther
Slide 59: Fortum’s evolution and historical strategic route
Fortum’s evolution and strategic route Fortum’s evolution and historical strategic route Skandinaviska Birka Energi Länsivoima Elnova Østfold Elverk 50% Fortum →100% 50% → 100% 50% Stockholm Gullspång merged Shares in Divestment of Divestment of with Hafslund Fingrid shares small scale hydro Gullspå
Slide 60: Hedging improves stability and predictability
Historical achieved prices Hedging improves stability and predictability – principles based on risk mitigation, (Generation segment) 60 2009 onwards thermal and import from Russia excluded
Slide 61: Fortum’s dividend policy aiming at increasing dividend
Dividend Fortum’s dividend policy aiming at increasing dividend Fortum dividends EUR/share 1,20 1.14 1.10 1.10 1.10 1.12 1,00 Dividend policy: 0,80 “Fortum’s dividend policy is to pay a stable, 0,60 sustainable, and over time increasing dividend.” 0,40 0,20 0,00 2017 2018 2019 2020 2021 61
Slide 62: Fortum Investor Relations and Financial Communications
IR contacts Next events: The dividend payment date, 6 April 2022 January-March Interim Report 2022 on 12 May 2022 January-June Half-Year Report 2022 on 12 August 2022 January-September Interim Report 2022 on 10 November 2022 For more information, please visit www.fortum.com/investors To subscribe Fo