Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (August 2022)
58 slides from Fortum Oyj's investor presentation, August 2022
Slide 1: Equity story of FORTUM – For a cleaner world
Equity story of FORTUM – For a cleaner world Investor / Analyst material August 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 – 11 Fortum’s strategy 12 – 17 Energy market transition 18 – 22 Half-year Financial Report 2022 23 – 45 Appendices 46 European and Nordic power markets 47 – 53 Fortum’s Nordic power generation in detail 54 Fortum’s evolution and strategic route 55 Historical achieved prices
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 5
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: 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 8: 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 9: 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 10: 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 11: 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 12: Our strategy – Driving the clean energy transition and delivering sustainable financial performance
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 13: 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 14: 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 15: Indicative capital expenditure for growth investments in 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 16: 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 17: 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 18: Europe committed to be a forerunner in reducing GHG emissions across all sectors
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 19: 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 19
Slide 20: Interconnection capacity (GW)
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 21: Volatility and uncertainty in the European power market 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 22: 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 23: Half-year Financial Report January-June 2022
Half-year Financial Report January-June 2022 Fortum Corporation 25 August 2022
Slide 24: Markus Rauramo, President and CEO
Half-year Financial Report 2022 Markus Rauramo President and CEO 24
Slide 25: The operating environment substantially impacts Fortum Group
Half-year Financial Report 2022 The operating environment substantially impacts EUR / MWh 300 Realised Gas price (TTF) Fortum Group 250 200 Futures 22 Aug 2022 Futures 9 May 2022 150 100 50 • Russia is waging a full-scale energy war against Europe, trying to sow 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 26: Uniper’s liquidity crisis also turned into a supply crisis
Half-year Financial Report 2022 Uniper’s liquidity crisis also turned into a supply crisis Fortum’s current situation is the result of events that began last summer Commodity Uniper’s Uniper in liquidity Russia starts Russia starts to Agreement on prices start to collateral needs crisis – Fortum war
Slide 27: Comprehensive stabilisation package agreed to provide financial relief to Uniper
Half-year Financial Report 2022 Comprehensive stabilisation package agreed to provide financial relief to Uniper Support measures from Fortum Rationale for Fortum • EUR 4 billion shareholder loan • EUR 4 billion parent guarantees for margin requirements Immediate stabilisation of Uniper Support meas
Slide 28: Substantial curtailments of Russian gas imports have caused dire financial difficulties
Half-year Financial Report 2022 Substantial curtailments of Russian gas imports have caused dire financial difficulties H1 Comparable operating profit • Excluding Uniper, Fortum’s result is driven by strong increase in achieved power prices in the Generation segment following the substantial uplift
Slide 29: Exchange traded futures markets not fit for today
Half-year Financial Report 2022 Exchange traded futures markets not fit for today - significant consequences The situation on Nasdaq Commodities is • Fortum follows a prudent hedging approach to reduce price risks and securing challenging for all market participants: predictable future cashflows and
Slide 30: Priorities ahead for the Group
Half-year Financial Report 2022 Priorities ahead for the Group Stop the leakage Get traction Recalibrate Secure further financial Finalisation of controlled exit Strategy review in light flexibility to weather the from Russian market of the changed commodity price storm operating environment Safe an
Slide 31: Bernhard Günther, CFO
Half-year Financial Report 2022 Bernhard Günther CFO 31
Slide 32: Key financials
Half-year Financial Report 2022 Key financials H1 comparable OP affected by EUR 403m of Russian gas curtailment losses in Uniper • In coming quarters, gas curtailment losses will burden Uniper’s segment result and consequently Fortum’s Comparable Operating Profit Comp. EPS at EUR 0.88 despite negati
Slide 33: H1 consolidated figures dominated by Uniper’s gas business
Half-year Financial Report 2022 H1 consolidated figures dominated by Uniper’s gas business Reconciliation of comparable operating profit (EUR million) Generation Higher achieved power price with strong physical optimisation but lower volumes Russia One-off effect in 2021 and declining CSAs (Nyagan 1
Slide 34: Reported income statement dominated by changes in fair values
Half-year Financial Report 2022 Reported income statement dominated by changes in fair values with gas curtailment losses of EUR 6.5bn Russia related impairment charges Divestment of Fortum Oslo Varme AS Includes EUR 6.5bn of anticipated gas curtailment losses and EUR 4.8bn fair values of derivative
Slide 35: Balance sheet driven by increased commodity prices
Half-year Financial Report 2022 Balance sheet driven by increased commodity prices Equity down by EUR 12 bn due to Uniper reported losses and paid Fortum dividend Financial derivatives substantially up following the strong increase in commodity prices Other provision increase in context of the antic
Slide 36: Operating cash flow turned negative in H1
Half-year Financial Report 2022 Operating cash flow turned negative in H1 Non-cash and other items impacted by CO2 emission allowances Sales proceeds from divestment of Fortum Oslo Varme AS closed in May 2022 Margin receivables increased due to higher prices Financing: repayments of commercial paper
Slide 37: Leverage below target, gross debt down
Half-year Financial Report 2022 Leverage below target, gross debt down (status on 30 of June 2022) th Solid credit metrics Financial net debt 'BBB' long-term issuer credit rating, Negative outlook 'BBB' long-term issuer credit rating, Negative outlook Target ratio: Financial net debt / Comp. EBITDA
Slide 38: Outlook
Half-year Financial Report 2022 Outlook Hedging Generation Nordic hedges: On 17 August 2022, Uniper announced that the company expects to record negative For rest of 2022: 80% hedged at EUR 38 per MWh earnings for 2022 and in its IFRS net result (EUR -12.3 billion) the company recorded For 2023: 60%
Slide 39: Half-year Financial Report 2022 Q&A
Half-year Financial Report 2022 Q&A
Slide 40: Generation: Higher achieved power prices
Half-year Financial Report 2022 Generation: Higher achieved power prices Q2 2022 vs. Q2 2021 • Comparable operating profit increased by 51% mainly due to – Higher achieved power prices of EUR 52.3 (+EUR 14.2 per MWh) – Lower hydropower volumes due to lower inflow and lower reservoir levels at the be
Slide 41: Nord Pool system price driven to new price record
Half-year Financial Report 2022 Nord Pool system price driven to new price record Reservoir content (TWh) 120 • Compared to long-term average, Nordic water reservoirs were Water reservoirs 100 filling up from -6 TWh to -2 TWh during Q2. 80 • Spring inflow realised above normal while hydro generation
Slide 42: Russia: Solid underlying performance
Half-year Financial Report 2022 Russia: Solid underlying performance Q2 2022 vs. Q2 2021 • Comparable operating profit increased by 54%, or by EUR 20 million. The positive effects from the EUR 12 million change in the Russian rouble exchange rate, improved bad debt collection, lower depreciation fol
Slide 43: City Solutions: Structural changes and lower volumes
Half-year Financial Report 2022 City Solutions: Structural changes and lower volumes Q2 2022 vs. Q2 2021 • Comparable operating profit decreased by EUR 32 million, due to – clearly higher fossil fuel and CO2 emission allowance prices as well as a change in fuel mix, partly offset by higher power pri
Slide 44: Consumer Solutions: Challenging market environment
Half-year Financial Report 2022 Consumer Solutions: Challenging market environment Q2 2022 vs. Q2 2021 • Comparable operating profit increased by 11%, mainly due to improved electricity and gas sales margins. • In the Nordics, the electricity sales volumes increased by 2%, mainly due to slightly col
Slide 45: Uniper: Suffering from gas curtailment losses
Half-year Financial Report 2022 Uniper: Suffering from gas curtailment losses Q2 2022 vs. Q2 2021 • Comparable operating profit increased to EUR 263 (-177) million. The result improvement was mainly driven by higher results due to the shift of up to EUR 750 million of earnings from the first quarter
Slide 46: Appendices
Appendices @fortum For a cleaner world
Slide 47: Most of Western Europe to exit coal by 2030
European and Nordic power markets Most of Western Europe to exit coal by 2030 Timetables largely undisturbed by short term additions of coal into reserves FI: Phase-out by mid-2029 DE: Phase-out SE: Last by 2038 plant closed 2020 • Sweden and Austria*) closed their last coal plants in 2020, Portugal
Slide 48: 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 to 55% vs 1990. EUA price
Slide 49: 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 50: Wholesale power prices
European and Nordic power markets Wholesale power prices EUR/MWh Spot prices Forward prices 800 700 600 500 German 400 Nordic 300 Russian* 200 100 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Rolling 7-day average spot prices Forwards 22 August 2022 * Including weight
Slide 51: Nordic year forwards
European and Nordic power markets Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22 Year23 Year24 EUR/MWh 24 August 2022 200 Year23 Year24 180 160 140 Apr May June July Aug 2022 2022 2022 2022 2022 120 100 80 60 40 20 0 2008 2009 2010 201
Slide 52: German and Nordic forward spread
European and Nordic power markets German and Nordic forward spread Spot price EUR/MWh Nordic and German daily spot prices in 2021 – 2022 • Continental spot prices have been impacted by the record high 700 commodity prices and low availability of the French nuclear fleet. 600 German Q2 2022 spot real
Slide 53: Nordic forward prices and Nordic sys spot averages
European and Nordic power markets Nordic forward prices and Nordic sys spot averages EUR/MWh 70 Year 2018 forward System spot 2018 average Year 2019 forward System spot 2019 average 60 Year 2020 forward System spot 2020 average Year 2021 forward System spot 2021 average 50 40 30 20 10 0 2013 2014 20
Slide 54: 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 55: 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 56: Hedging improves stability and predictability
Historical achieved prices Hedging improves stability and predictability – principles based on risk mitigation, (Generation segment) 56 2009 onwards thermal and import from Russia excluded
Slide 57: Fortum’s dividend policy
Dividend Fortum’s dividend policy 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 57
Slide 58: Fortum Investor Relations and Financial Communications
IR contacts For more information, Next events: January-September Interim Report 2022 on 10 November 2022 please visit www.fortum.com/investors Fortum Investor Relations and To subscribe Fortum's releases, please fill out the subscription form on our website https://www.fortum.com/about-us/media/medi