Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — FY2010 Earnings Presentation
31 slides from Fortum Oyj's earnings presentation, Feb 2, 2011
Slide 1: Fortum Corporation Financial year 2010
Fortum Corporation Financial year 2010 2 February 2011
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. 2
Slide 3: Highlights in 2010
Highlights in 2010 • Updated strategy, which builds on Fortum’s core competences • Performance remained firm • Demand improved both in the Nordics and Russia • Russian power market progressed – Liberalised wholesale market – Pricing principles for “old” and “new” capacity determined • Fortum’s Russi
Slide 4: Global mega trends drive the industry - Updated strategy supports sustainable business development
Global mega trends drive the industry - Updated strategy supports sustainable business development • Power and heat demand and supply • Degree of market liberalization and integration • Climate change response • Energy system structure • Business models and competition Strategy Leverage the strong C
Slide 5: Business environment improved
Business environment improved The overall Nordic and Russian power consumption continued to increase in 2010. Industrial activity clearly picked up in Fortum’s key market areas and the Russian economy continued a solid path of recovery • Nordic power consumption up by 5% during 2010 – Power consumpt
Slide 6: Solid performance continued
Solid performance continued • Comparable operating profit, EUR 1,833 (1,888) million – Lower hydro volumes in Power – Improvement in Russia, Distribution and Heat • Earnings per share EUR 1.46 (1.48) – Negative IAS 39 accounting effect corresponding to EUR 0.18 • Net cash from operating activities E
Slide 7: Comparable profit close to last years level
Comparable profit close to last years level Comparable operating profit, EUR million 1888 -156 1833 45 -11 28 -5 44 2009 Power Heat Distribution Electricity Russia Other 2010 Generation Sales 7
Slide 8: Nordic water reservoirs were historically low
Nordic water reservoirs were historically low 120 100 reservoir content (TWh) 80 60 40 20 2003 2008 2009 2010 2011 reference level 0 Q1 Q2 Q3 Q4 Source: Nord Pool Spot 8
Slide 9: Price development in the Nordic region and Russia
Price development in the Nordic region and Russia Spot price for pow er in NordPool pow er exchange Spot price for pow er (m arket price), Urals hub eur/MWh RUB/MWh 72 +69% 1 200 62,0 +18% 59,5 936 60 1 000 817 817 46,0 770 48 45,0 800 693 36,6 36 600 24 400 12 200 0 0 Q4/2009 Q1/2010 Q2/2010 Q3/201
Slide 10: Financials
eo. ~ Pew war Financials=—
Slide 11: Comparable and reported operating profit
Comparable and reported operating profit Comparable operating Reported operating Comparable operating Reported operating MEUR profit profit profit profit IV/2010 IV/2009 IV/2010 IV/2009 2010 2009 2010 2009 Power 336 391 129 327 1 298 1 454 1 132 1 363 Heat 122 104 124 109 275 231 303 252 Distributio
Slide 12: 2011 February Nordic Power Exchange forward development
2011 February Nordic Power Exchange forward development − Down by ~27 €/MWh from 2010 year end 30.12.2011 27.1.2011 90 Year high at Last price at €85.1 per MWh €58.1 per MWh 80 70 60 50 40 Change +63% Change -32% 30 30 Sept. -30 30 Dec. 2010 -27 Dec. 2010 Jan. 2011 20 10 0 2.8.2010 11.10.2010 25.10.
Slide 13: Power
Power • Comparable operating profit decreased – Higher costs in Swedish associated nuclear companies – Production mix; increased thermal power production during peak hours • Nordic achieved power price at same level as in 2009 – Lower hedge prices – Higher prices in thermal during peak hours MEUR 20
Slide 14: Heat
Heat • Comparable operating profit increased due to higher volumes and power prices • CHP *) plants in Częstochowa, Poland and Pärnu, Estonia inaugurated; commercial operation began during Q4/2010 MEUR 2010 2009 Sales 1 770 1 399 Comparable operating profit 275 231 Net Assets 4 182 3 787 Comparable
Slide 15: Distribution
Distribution • Comparable operating profit increased due to higher sales and strong SEK • Smart metering pilot rollout to network customers in Finland started in Q4/2010 MEUR 2010 2009 Sales 963 800 Comparable operating profit 307 262 Net Assets 3 683 3 299 Comparable RONA, % 9.3 8.6 Gross Investmen
Slide 16: Electricity Sales
Electricity Sales • Comparable operating profit decreased – Price peaks in Q1 and Q4 • Restructuring of the business market segment continued MEUR 2010 2009 Sales 1 798 1 449 Comparable operating profit 11 22 Net Assets 210 125 Comparable RONA, % 9.3 18.6 Gross Investments 0 1 16
Slide 17: Russia
Russia • Comparable operating profit turned positive • Wholesale power market liberalised as of January 2011 • Pricing principles for “old” and “new” capacity determined • Accelerated investment programme MEUR 2010 2009 Sales 804 632 Comparable operating profit 8 -20 Net Assets 2 817 2 260 Comparabl
Slide 18: Income statement
Income statement MEUR IV/2010 IV/2009 2010 2009 Sales 1 902 1 563 6 296 5 435 Expenses -1 361 -993 -4 463 -3 547 Comparable operating profit 541 570 1 833 1 888 Other items affecting comparability -220 -48 -125 -106 Operating profit 321 522 1 708 1 782 Share of profit of associates and jv's 21 22 62
Slide 19: Cash flow statement
Cash flow statement MEUR IV/2010 IV/2009 2010 2009 Operating profit before depreciations 468 658 2 271 2 292 Non-cash flow items and divesting activities 222 -4 124 46 Financial items and fx gains/losses -192 -102 -641 146 Taxes -107 -34 -355 -239 Funds from operations (FFO) 391 518 1 399 2 245 Chan
Slide 20: Key ratios
Key ratios MEUR 2010 2009 EBITDA 2 271 2 292 Comparable EBITDA 2 396 2 398 Interest-bearing net debt 6 826 5 969 Net debt/EBITDA 3.0 2.6 Comparable Net debt/EBITDA 2.8 2.5 Return on capital employed (%) 11.6 12.1 Return on shareholders' equity (%) 15.7 16.0 20
Slide 21: Debt maturity profile
Debt maturity profile 1500 MEUR 2011 862 1250 2012 624 2013 636 1000 2014 1,191 2015 1,042 750 2016 870 2017 243 500 2018 93 2019 819 250 2020 43 0 2021+ 959 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021+ Bonds Financial institutions Other long-term debt CPs per 31 Dec, 2010 per 31 Dec, 200
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Slide 23: Summary on 2010
Summary on 2010 • Strategy updated to support business actions – Sustainable solutions at the core of the strategy • Solid performance continued • Russia – Power reform proceeding, fully liberalised from January 2011 – Demand improved – Fortum’s investment programme accelerated • Nordic countries –
Slide 24: Key strategic actions going forward
Key strategic actions going forward Focus on performance – Organisational efficiency – Nuclear availability – Value creation from Russian investments Prepare for growth – Prioritized value enhancing acquisitions while maintaining strong balance sheet – Investigating high growth Asian markets Create
Slide 25: Outlook
Outlook • Key drivers and risks – Wholesale price of electricity • Fuel, CO2 emissions prices and water reservoirs • Nordic Markets – Market continues to recover – 2008 level reached by 2012-2014 – Electricity continues to gain share of total energy consumption • Russia – Wholesale market fully libe
Slide 26: Outlook
Outlook • Capex (excluding potential acquisitions) – 2011-2012 around EUR 1.6 to 1.8 billion (mainly due to Russian investment programme) – 2013-2014 around EUR 1.1 to 1.4 billion – Preliminary divestments agreed: total approximately EUR 0.5 billion in 2011 • Hedging – 2011 approximately 70% hedge r
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Slide 28: Appendices
28 Appendices @Fortum
Slide 29: Increased power consumption
Increased power consumption 15 % 15 % Q1 2010 vs Q1 2009 Q1 2010 vs Q1 2009 Q2 2010 vs Q2 2009 Q2 2010 vs Q2 2009 Q3 2010 vs Q3 2009 Q3 2010 vs Q3 2009 Q4 2010 vs Q4 2009 11 % Q4 2010 vs Q4 2009 10 % 7% 5% 3% 0% -1 % Finland Sweden Norway Denmark Nordic Tyumen Chelyabinsk Russia Urals Russia area Fo
Slide 30: Nordic year forwards
Nordic year forwards €/MWh Year 08 Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 31 January 2011 70 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 2011 Source: NASDAQ OMX Commodities Europe 30
Slide 31: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (ICE Brent) CO2 price (NP EUA) 160 35 2010 average: 2010 average: 140 80 (63) 30 14 (13) 120 25 EUR / tCO2 100 USD / bbl 20 80 15 60 40 10 20 5 0 0 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012 Coal price (ICE Rotterdam) Gas price