Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (July 2015)
57 slides from Fortum Oyj's investor presentation, July 2015
Slide 1: Fortum Investor / Analyst material July 2015
FORTUM Power and heat company in the Nordic area, Russia and the Baltics – Highly committed to sustainability Investor / Analyst material July 2015
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: Content
Content Fortum today pages 4 – 16 European and Nordic power markets pages 17 – 24 Fortum’s nuclear fleet pages 25 – 28 Russia pages 29 – 31 Fortum’s investment programme page 31 Historical achieved prices page 32 Q1 2015 pages 33 – 56 Financials and outlook pages 44 – 56 3
Slide 4: Approx. 116,000 shareholders
Appr. 116,000 shareholders • Power and heat company in the Nordic countries, Russia, Poland and the Baltics • Listed at the Helsinki Stock Exchange since 1998 • Among the most traded shares on the Nasdaq Helsinki stock exchange • Market cap ~15 billion euros Finnish households 9.0% Financial and ins
Slide 5: Capital returns: 2014 EUR 1.30 per share
Capital returns: 2014 EUR 1.30 per share ~ EUR 1.2 billion • Fortum’s dividend policy is based on the following preconditions: – The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported by the company’s long-term strategy that aims at increasin
Slide 6: Our strategic route
Our strategic route Østfold Skandinaviska Birka Energi Stora Kraft Birka Energi Shares in TGC-1 Elverk 50% Fortum 50% → 100% Hafslund established 50% Stockholm Shares in Gullspång merged Lenenergo Gullspång with Stockholm Energi Länsivoima Lenenergo Länsivoima Elnova District heating Oil business E.
Slide 7: Fortum's Mission and Strategy
Fortum’s Mission and Strategy Mission Fortum’s purpose is to create energy that improves life for present and future generations. We provide sustainable solutions for society and deliver excellent value to our shareholders. Strategy Build on the strong Create solid earnings Build a platform for Nord
Slide 8: Fortum's reporting segments and divisions
Fortum’s reporting segments and divisions Power and Technology Heat, Electricity Sales Russia and Solutions • Hydro, nuclear and thermal • Combined heat and power • Power and heat generation power generation (CHP) production and sales in Russia • Power Solutions with expert • District heating activi
Slide 9: Our current geographical presence
Our current geographical presence Nordic countries Key figures 2014 Sales EUR 4.1 bn Power Comparable operating profit EUR 1.1 bn generation Power generation 48.0 TWh Balance sheet EUR 21 bn Personnel 8,200 Heat Heat sales 3.3 TWh Russia Electricity Electricity customers 1.3 million OAO Fortum sales
Slide 10: Fortum mid-sized European power generation player; major producer in global heat
Fortum mid-sized European power generation player; major producer in global heat Power generation Heat production Customers Largest producers in Europe and Russia, 2013 Largest global producers, 2013 Electricity customers in EU, 2013 TWh TWh Millions EDF Gazprom Enel E.ON IES EDF Enel Inter RAO UES
Slide 11: Biggest nuclear and hydro generators in Europe and Russia
11 50 0 100 150 250 300 350 400 450 500 550 600 200 TWh EDF Rosenergoatom Figures 2012 pro forma NNEGC Energoatom RusHydro Vattenfall E.ON Enel EuroSibEnergo GDF SUEZ Statkraft Fortum Iberdrola * incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9 RWE EnBW CEZ Axpo Verbund * Gaz
Slide 12: Fortum in the Nordic electricity value chain
Fortum in the Nordic electricity value chain Large customers Nordic wholesale market Retail customers Power generation Power exchange and bilateral agreements Private customers, small businesses 12
Slide 13: Fortum's power and heat production by source
Fortum's power and heat production by source Fortum's power generation Fortum's heat production in 2014 in 2014 Nuclear power Natural gas 33% Natural gas 77% 31% Biomass 1% Waste 1% Peat 1% Coal 5% Biomass 6% Hydro power 30% Coal 15% Total generation 73.4 TWh Total production 34.6 TWh (Generation ca
Slide 14: Fortum's European power and heat production
Fortum's European power and heat production Fortum's European Fortum's European power generation in 2014 heat production in 2014 Nuclear power Coal 38% 48% Natural gas Oil 1% 29% Biomass 2% Heat pumps, electricity 1% Natural gas 2% Waste 3% Coal 4% Peat 3% Hydro power 44% Biomass 25% European genera
Slide 15: Fortum a forerunner in sustainability
Fortum a forerunner in sustainability Emissions-free production is Fortum’s strategic choice We are highly committed to sustainability. Our purpose is to create energy that improves life for present and future generations. We provide sustainable solutions for society while delivering excellent value
Slide 16: Fortum's carbon exposure among the lowest in Europe
Fortum's carbon exposure among the lowest in Europe g CO2/kWh electricity, 2013 1 200 2014 1 000 64% of Fortum's total power generation CO2-free 94% of Fortum’s power generation in the EU CO2-free 800 Close to 100% of the ongoing investment programme 600 in the EU is CO2-free. 400 Average 328 g/kWh
Slide 17: Carbon market gradually tightening
Carbon market gradually tightening Political decisions strengthening the EU Emissions Trading System Decision on the 2030 greenhouse gas reduction target Backloading decision, implementation started in 2014 Market Stability Reserve (MSR), adoption expected during summer 2015, to be operational
Slide 18: Market coupling milestones
Market coupling milestones - cross-border power flows optimised by power exchanges • Market coupling between NL, BE and FR since 2006 • Germany – Nord Pool Spot coupling started 11/2009 • Market coupling for Central Western Europe (DE, FR, NL, BE) since 11/2010 with a continued coupling with Nord Po
Slide 19: Current transmission capacity from Nordic area is over 5,000 MW
Current transmission capacity from Nordic area is over 5,000 MW Countries Transmission capacity MW From Nordics To Nordics Denmark - Germany 2,225 2,100 Sweden - Germany 615 600 Sweden - Poland 600 600 Norway - Netherlands 700 700 Finland - Estonia 1000 1,016 320 Finland - Russia 320 1,300 Total 5,4
Slide 20: Nordic, Baltic, Continental and UK markets are integrating
Nordic, Baltic, Continental and UK markets are integrating – interconnection capacity will double by 2021 The Northern Seas Offshore Grid and the Baltic New interconnections will Energy Market Integration Plan are included as double the export capacity priority electricity corridors in EU’s Infrastr
Slide 21: Nordic year forwards
Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 €/MWh 15 July 2015 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 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2010 2011 2012 2013 2014 2015 Source: Nasdaq Commodities
Slide 22: Wholesale prices for electricity
Wholesale prices for electricity EUR/MWh Spot prices Forward prices 110 100 90 80 70 Dutch 60 German 50 40 Nordic 30 Russian* 20 10 15 July 2015 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * Including weighted average capacity price Source: Nord Pool Spot, Nasdaq Commodities, APX-ENDEX, Bloo
Slide 23: Nordic power generation
Nordic power generation – dominated by hydro, but fossil needed 160 Total Nordic generation 390 TWh in 2014 140 TWh % 120 Fossil fuels 39 10 100 TWh/a Nuclear 85 22 80 Biomass 23 6 60 Solar 1 0 40 Wind 28 7 20 Hydro * 214 55 0 Denmark Norway Sweden Finland Net export in 2014: 10 TWh Source: ENTSO-E
Slide 24: Wholesale electricity price too low to attract investments
Wholesale electricity price too low to attract investments EUR/MWh EUR/MWh 110 110 Average levelised costs of new electricity generation 100 100 90 90 80 80 70 70 60 60 50 Futures 50 15 July 2015 40 40 30 30 20 20 10 10 0 0 Coal Onshore Nuclear Utility scale Large Gas Offshore 1995 2015 2025 wind co
Slide 25: Overview of Fortum's nuclear fleet
Overview of Fortum’s nuclear fleet LOVIISA OLKILUOTO OSKARSHAMN FORSMARK Unit 1: 1978 Unit 1: 1972 Unit 1: 1980 Commercial operation Unit 1: 1977 started Unit 2: 1980 Unit 2: 1974 Unit 2: 1981 Unit 2: 1981 Unit 3: (Under construction) Unit 3: 1985 Unit 3: 1985 Generation Capacity Unit 1: 880 MW Unit
Slide 26: Fortum's nuclear power in the Nordics
Fortum's nuclear power in the Nordics Load factor (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Osakarshamn 1 80 51 63 85 68 77 72 1 13 74 Oskarshamn 2 90 78 76 86 75 90 77 81 33 0 Oskarshamn 3 85 95 88 70 17 31 75 69 77 75 Forsmarks 1 85 76 81 81 88 93 79 88 87 94 Forsmark 2 94 72 85 79 64
Slide 27: Variety of technologies and ages
Variety of technologies and ages Unit MWe (Net) Share (%) Share (MWe) Commercial Age Type/ Supplier operation Generation * Loviisa 1 496 100,0 496 1977-05-09 36 PWR / 1 AEE (Atomenergoexport) Loviisa 2 496 100,0 496 1981-01-05 33 PWR / 1 AEE (Atomenergoexport) Olkiluoto 1 880 26,6 234 1979-10-10 34
Slide 28: Third party nuclear liability in case of severe accident
Third party nuclear liability in case of severe accident In force since 1.1.2012. Law approved by Parliament in 2010, requires separate Unlimited decision from Government to company come into force. responsibility Convention 300 M€ 300 M€ parties State responsibility 500 M€ 500 M€ Responsibility of
Slide 29: Fortum - a major player in Russia
Fortum - a major player in Russia OAO Fortum (former TGC-10) • Operates in the heart of Russia’s oil and gas producing region, fleet mainly gas-fired CHP capacity • 23 TWh power generation, 26 TWh heat production in 2014 • Investment programme to add 85%, almost 2,400 MW to power generation capacity
Slide 30: Day ahead wholesale market prices in Russia
Day ahead wholesale market prices in Russia Key electricity, capacity and gas prices in the OAO Fortum area Day ahead power market prices for Urals 40 II/15 II/14 I-II/15 I-II/14 2014 LTM 35 30 Electricity spot price (market price), Urals hub, 1,021 1,132 1,036 1,075 1,089 1,069 25 € / MWh RUB/MWh 2
Slide 31: 85% increase in power generation capacity in Russia by 2015
85% increase in power generation capacity in Russia by 2015 through the investment programme Year Supply Power plant Fuel type Existing New Production type Total starts capacity investments capacity 2,785 MW 2,388 MW 5,173 MW < 2011 Tyumen CHP-2 Gas 755 CHP/Condensing 755 Chelyabinsk CHP-2 Gas, coal
Slide 32: Hedging improves stability and predictability
Hedging improves stability and predictability 2009 onwards thermal and import from Russia excluded 32
Slide 33: Interim report January–June 2015
Interim report January–June 2015 Fortum Corporation 17 July 2015
Slide 34: IFRS restatement relating to discontinued operations
IFRS restatement relating to discontinued operations Distribution segment has been reclassified as discontinued operations in Q1/2015. As a result, continuing operations and discontinued operations are presented separately for Fortum Group. Comparative period information for 2014 has been restated a
Slide 35: Q2 2015 Results
Q2 2015 Results Key figures (MEUR) II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM Sales, continuing operations 794 886 1,834 2,094 4,088 3,828 Comparable EBITDA, continuing operations 228 302 624 758 1,457 1,323 Operating profit: Continuing operations 144 233 494 599 1,296 1,191 Discontinued operation
Slide 36: Summary of the second quarter of 2015
Summary of the second quarter of 2015 • Fortum’s results continued to be pressured by low electricity prices • The second quarter was characterised by among the highest precipitation in recent history, which resulted in high and partly must-run hydro power production • Swedish electricity distributi
Slide 37: Market conditions in the second quarter of 2015
Market conditions in the second quarter of 2015 Nordic countries • Power consumption in the Nordic countries at the same level as in Q2 2014 • The precipitation was among the highest recorded this century in Norway and Sweden. In addition, by the end of the second quarter, large amounts of the preci
Slide 38: Nordic water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 2000 2003 2013 2014 2015 reference level 0 Q1 Q2 Q3 Q4 Source: Nord Pool Spot 38
Slide 39: Wholesale price for electricity
Wholesale price for electricity EUR/MWh Nord Pool Spot System Price Forwards 110 100 90 80 70 60 50 40 30 20 10 14 July 2015 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Source: Nord Pool Spot, Nasdaq Commodities 39
Slide 40: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (ICE Brent) CO2 price (ICE ECX EUA) 150 35 120 28 EUR / tCO2 USD / bbl 90 21 60 14 30 7 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Coal price (ICE Rotterdam) Gas price (ICE NBP) 250 100 200 80
Slide 41: Price development in the Nordic region and Russia
Price development in the Nordic region and Russia -19% -10% -23% -14% Includes capacity income 41
Slide 42: Q2: Low electricity prices continued to impact results negatively
Q2: Low electricity prices continued to impact results negatively – somewhat compensated by hydro volumes Comparable operating profit, EUR million 42
Slide 43: January - June: Clearly lower achieved power price
January - June: Clearly lower achieved power price Comparable operating profit, EUR million 43
Slide 44: Financials
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Slide 45: Comparable and reported operating profit
Comparable and reported operating profit Comparable Reported Comparable Reported MEUR operating profit operating profit operating profit operating profit II/2015 II/2014 II/2015 II/2014 I-II/2015 I-II/2014 I-II/2015 I-II/2014 Power and Technology 114 183 117 151 317 434 320 413 Heat, Electricity Sal
Slide 46: Power and Technology
Power and Technology Q2 2015 H1 2015 • Clearly higher precipitation had a positive • Clearly lower achieved power price impact on the hydro volumes, but put • First quarter was exceptionally mild pressure on the electricity spot price • Second quarter characterised by among • EUR -15 million effect
Slide 47: Heat, Electricity Sales and Solutions
Heat, Electricity Sales and Solutions Q2 2015 H1 2015 • Comparable operating profit on same level as • Comparable operating profit improved mainly in comparison period -The lower electricity due lower fuel costs and higher heat prices power price was partly compensated by lower during the period fue
Slide 48: Russia
Russia Q2 2015 H1 2015 • Improved result partly offset by lower electricity • Comparable operating profit improved due to prices, as well as bad debt provisions for heat positive effect from new units trade receivables • Russian rouble affected the result negatively • Russian rouble affected the res
Slide 49: Discontinued operations (Distribution)
Discontinued operations (Distribution) Q2 and H1 2015 • On 1 June 2015, Fortum completed the divestment of its Swedish electricity distribution business. Fortum booked a one-time sales gain of approximately EUR 4.3 billion, corresponding to EUR 4.82 per share Table below includes January-March 2014
Slide 50: Income statement
Income statement MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM Sales 794 886 1,834 2,094 4,088 3,828 Other income and expenses -651 -676 -1,348 -1,526 -3,003 2,825 Comparable operating profit 143 210 486 568 1,085 1,003 Items affecting comparability 1 23 8 30 211 189 Operating profit 144 233 494
Slide 51: Cash flow statement
Cash flow statement MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM Cash from operating activities: Realised FX gains/losses 35 81 203 155 352 400 Other funds from operations (FFO) 158 176 472 547 1,096 1,021 Change in working capital 36 137 70 97 -42 -69 Cash from operating activities, cont. oper
Slide 52: Key ratios
Key ratios MEUR LTM 2014 Comparable EBITDA, continuing operations 1,323 1,457 Comparable EBITDA, total Fortum 1,652 1,873 Interest-bearing net debt, total Fortum -1,846 4,217 Comparable net debt/EBITDA, total Fortum -1.1 2.3 excluding Värme financing -1.3 2.0 ROCE % Return on capital employed, total
Slide 53: Debt portfolio and average interest rate
Debt portfolio and average interest rate at the balance sheet date 30 June 2015 (31 December 2014) Total interest-bearing debt EUR Maturity profile 6,765 million 1500 – Average interest 4.2% (3.7%) 1250 – Portfolio mainly in EUR and 1000 SEK with average interest cost 2.9% (2.9%) 750 – EUR 786 (681)
Slide 54: Outlook
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Slide 55: Outlook
Outlook Nordic markets • Fortum continues to expect that the average annual electricity demand growth will be on average approximately 0.5% in the coming years • Electricity is expected to continue to gain share of total energy consumption Russia • The run-rate operating profit (EBIT) level for the
Slide 56: Outlook
Outlook Annual capex estimate, excluding potential acquisitions • 2015 approximately EUR 0.8 billion Hedging • Rest of 2015 approx. 45% hedge ratio at approx. EUR 41/MWh • 2016 approx. 25% hedge ratio at approx. EUR 35/MWh Taxation • Effective tax rate for 2015 for the Group 19-21% • The Swedish Par
Slide 57: Fortum Investor Relations
Fortum Investor Relations For more information, please visit www.fortum.com/investors Sophie Jolly Vice President Next result publication: +358 (0)10 453 2552 Q3/2015 on 22 October 2015 [email protected] Rauno Tiihonen Manager +358 (0)10 453 6150 [email protected] Marja Mäkinen Manager