FORTUM
Power and heat company
in the Nordic area, Russia, Poland and the Baltics
Investor / Analyst material
May 2015
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
Content
Fortum today
pages 4 – 17
European and Nordic power markets
Fortum’s nuclear fleet
pages 18 – 29
pages 30 – 33
Russia
pages 34 – 39
Capacity payments
pages 37 – 38
Fortum’s investment programme page 39
Financials and outlook
Hedging
Distribution business
3
pages 40 – 45
pages 46
page 47
Appr. 110,000 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 ~16 billion euros
Households 8.7%
Financial and insurance institutions 2.3%
Other Finnish investors 8.1%
Finnish State 50.8%
30 April 2015
4
Foreign investors 30.1%
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 increasing earnings per share and
thereby the dividend.
– When proposing the dividend, the Board of Directors looks at a range of factors, including the macro
environment, balance sheet strength as well as future investment plans.
5 year dividend per share (EUR) history
Fortum's target is to pay a stable,
sustainable and over time increasing
dividend of 50-80% of earnings per share
excluding one-off items
1.3*
1.1
1.0
1.0
0.2
1.0
1.1
Fortum has since 1998 annually paid dividends
in total ~11,648 MEUR
2010
68%
2011
50%
2012
63%
2013
81%
2014
37%
* A dividend of EUR 1.10 per share, and an extra dividend of EUR 0.20 per share.
5
Fortum Executive Management as of 1st February 2015
Business divisions
On 2 April 2015, Mr. Pekka Lundmark,
was appointed President and CEO of
Fortum Corporation.
He will start at Fortum at the beginning
of September 2015.
Interim President and CEO
Timo Karttinen
Corporate staff functions
Finance
Chief Financial Officer
Timo Karttinen
Human Resources and IT
Senior Vice President
Mikael Frisk
Strategy and M&A
Senior Vice President
Kari Kautinen
Communications
Senior Vice President
Helena Aatinen
Legal
General Counsel
Sirpa-Helena Sormunen
Corporate Relations
Senior Vice President
Esa Hyvärinen
Chief Operating
Officer
Matti Ruotsala
Hydro Power and
Technology
Executive Vice
President
Per Langer
6
Nuclear and Thermal
Power
Executive Vice
President
Tiina Tuomela
Heat, Electricity
Sales and Solutions
Executive Vice
President
Markus Rauramo
Russia
Executive Vice
President
Alexander Chuvaev
Country responsibles: Timo Karttinen/Finland, Norway; Per Langer/Sweden;
Alexander Chuvaev/Russia; Markus Rauramo/Poland, Baltics, India
Distribution
Executive Vice
President
Timo Karttinen
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
Nordic core
Create solid earnings
growth in Russia
Build a platform for
future growth
Strong competence in CO2-free hydro and nuclear, efficient CHP production and
energy markets
7
Our current geographical presence
Power
generation
Nordic countries
Heat
Heat sales
Electricity
sales
Distribution
Key figures 2014
Power generation
Electricity customers
48.0 TWh
3.3 TWh
1.3 million
Russia
Distribution customers
in Sweden
0.9 million
Distribution expected to be divested during Q2/2015
8
Sales
EUR 4.1 bn
Comparable operating profit EUR 1.1 bn
Balance sheet
EUR 21 bn
Personnel
8,200
OAO Fortum
Power generation
Heat sales
Poland
Baltic countries
India
Power generation 0.7 TWh
Heat sales
3.4 TWh
Power generation
Heat sales
Power generation
0.7 TWh
1.2 TWh
23.3 TWh
26.0 TWh
9 GWh
Fortum’s reporting segments and divisions
Power and Technology
Heat, Electricity Sales
and Solutions
Russia
Distribution
• Hydro, nuclear and
thermal power generation
• Power Solutions with
expert services
• Portfolio management and
trading
• Technology and R&D
functions
• Combined heat and
power (CHP) production
• District heating activities
and business to business
heating solutions
• Solar business
• Electricity sales and
related customer offering
• Corporate Sustainability
• Power and heat
generation and sales in
Russia
• Includes OAO Fortum
and Fortum’s slightly
over 29% holding in
TGC-1
• Electricity distribution
activities
• Divestment of the business
is expected to be
concluded during H1 2015.
The segment incorporates
two business divisions:
• Hydro Power and
Technology
• Nuclear and Thermal
Power
9
Fortum mid-sized European power generation player;
major producer in global heat
Power generation
Largest producers in Europe and Russia, 2013
TWh
EDF
E.ON
Enel
RWE
Rosenergoatom
Gazprom
Vattenfall
GDF SUEZ
Inter RAO UES
RusHydro
NNEGC Energoat.
Iberdrola
EuroSibEnergo
CEZ
Fortum
EnBW
PGE
IES
Statkraft
DTEK
EDP
DEI
Heat production
Customers
Largest global producers, 2013
TWh
Electricity customers in EU, 2013
Millions
Gazprom
IES
Inter RAO UES
1 ) Veolia
RusHydro
EuroSibEnergo
Fortum
Sibgenco
Vattenfall
Quadra
1) EDF
TGC-2
Lukoil
Minskenergo
KDHC
DTEK
Dong Energy
PGNiG
Tatenergo
Enel
Fortum Värme
0
100 200 300 400 500 600
Enel
EDF
E.ON
RWE
Iberdrola
DEI
CEZ
Centrica
EDP
Vattenfall
SSE
EnBW
GDF SUEZ
Tauron
PGE
Gas Natural
Fenosa
Fortum
Hafslund
Dong Energy
0 20 40 60 80 100 120 140
1) Veolia incl. Dalkia International and EDF incl. Dalkia's activities in France
Source: Company information, Fortum analyses, 2013 figures pro forma, heat production of Beijing DH not available.
10
0
10
20
30
40
0
11
Figures 2012 pro forma
* incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9
450
Other
400
Nuclear
350
Hydro
*** IES
DTEK
PGE
** Inter RAO UES
500
SSE
550
DEI
Gas Natural Fenosa
EDP
Agder Energi
BKK
EPS, Serbia
Norsk Hydro
Ukrhydroenergo
E-CO Energi
Alpiq
Centrica
Hidroelectrica
* Gazprom
Verbund
Axpo
CEZ
EnBW
RWE
Iberdrola
Fortum
Statkraft
GDF SUEZ
EuroSibEnergo
Enel
E.ON
Vattenfall
RusHydro
NNEGC Energoatom
Rosenergoatom
EDF
Biggest nuclear an hydro generators in Europe and Russia
TWh
600
Total generation
300
250
200
150
100
50
Fortum a forerunner in sustainability
• Nordic Climate Disclosure Leadership Index (CDLI)
• STOXX® Global ESG Leaders indices
• oekom
• OMX GES Sustainability Finland Index
• ECPI® Indices
12
Fortum's carbon exposure among the lowest in Europe
g CO2/kWh electricity, 2013
1 200
2014
64% of Fortum's total power generation CO2-free
94% of Fortum’s power generation in the EU CO2-free
1 000
800
Close to 100% of the ongoing investment programme
in the EU is CO2-free.
600
Average 328 g/kWh
400
200
200
13
Statkraft
Verbund
EDF
PVO
Iberdrola
Fortum total
Dong Energy
GDF SUEZ
Gas Natural Fenosa
EnBW
Edipower
Enel
EDP
Vattenfall
E.ON
CEZ
SSE
Drax
RWE
DEI
Note: : Fortum’s specific emissions of the power generation in 2014 in the EU were 39 g/kWh and in total 177 g/kWh.
Only European generation except “Fortum total“ which includes Russia.
Fortum EU
64
0
Source:
PWC & Enerpresse, December 2014
Climate Change and Electricity, Fortum
Our strategic route
Skandinaviska
Elverk
Birka Energi
50% Fortum
50% Stockholm
Länsivoima
45% → 65%
Lenenergo
shares →
IVO
Länsivoima
→100%
Elnova
50% → 100%
TGC-1
established
District heating
in Poland →
Oil business
spin-off
E.ON
Finland
Fortum
1996
2007
1997
2008
TGC-10
Divestment
of Lenenergo shares
14
Birka Energi
50% → 100%
Gullspång merged
with Stockholm Energi
Gullspång
Neste
Stora Kraft
Østfold
Shares in
Hafslund
Shares in
Lenenergo
1998
2000
2011
Divestment of
Fingrid shares
Divestment of
heat operations
outside of
Stockholm
2002
2012
Divestment of
small scale
hydro
Divestment of
non-strategic
heat business
2003
2005
2014
Divestment of electricity
distribution business
Divestment of electricity
distribution and heat
businesses
Divestment of
Grangemouth power plant
2006
2015
Divestment
of Gasum
shares
Divestment of
electricity
distribution
business
(pending)
Fortum in the Nordic electricity value chain
Competitive businesses
Large customers
Nordic wholesale market
Retail customers
Power generation
Power exchange and
bilateral agreements
Private customers,
small businesses
Regulated businesses
Independent
transmission system
operator
Transmission and
system services
Distribution
Fortum has signed the binding agreement to divest
electricity distribution business.
Expected to be completed during Q2/2015
15
Independent
distribution
companies
Fortum's power and heat production by source
Fortum's power generation
in 2014
Nuclear power
33%
Natural gas
77%
Natural gas
31%
Biomass 1%
Coal 5%
Hydro power 30%
Total generation 73.4 TWh
(Generation capacity 14,624 MW)
16
Fortum's heat production
in 2014
Waste 1%
Peat 1%
Biomass 6%
Coal 15%
Total production 34.6 TWh
(Production capacity 17,402 MW)
Fortum's European power and heat production
Fortum's European
power generation in 2014
Coal 38%
Nuclear power
48%
Oil 1%
Heat pumps,
electricity 1%
Waste 3%
Peat 3%
Biomass 2%
Natural gas 2%
Coal 4%
Hydro power 44%
European generation 50.1TWh
(Generation capacity 9,851 MW)
17
Fortum's European
heat production in 2014
Natural gas
29%
Biomass 25%
European production 8.2 TWh
(Production capacity 3,936 MW)
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 Pool Spot
•
NorNed cable (NO-NL) included in January 2011.
•
Poland coupled with Nord Pool Spot since December 2010
•
UK coupling started through BritNed cable in April 2011
•
Estonian price area in Nord Pool Spot since 2010 and
Lithuanian area since 6/2012. Latvia joined in June 2013
•
Czech, Slovakia and Hungary coupled together since
September 2012. Romania joined in November 2014
•
A common day-ahead market coupling for the whole northwestern Europe was started in February 2014. Iberia (Spain &
Portugal) joined in May 2014. Italy and Slovenia joined on 24
February 2015. Switzerland waiting for agreement with EU
•
CEE market coupling region to join in 2016, with flow-based
cross-border capacity allocation for further trade optimisation
•
In addition to day-ahead coupling, intraday market coupling
and balancing market integration under development as well
18
2016
2/2015
20102013
2009
2014
2012-2014
Current transmission capacity from Nordic area is over 5,000 MW
Countries
Transmission capacity MW
From Nordics
Denmark - Germany
2,225
2,100
Sweden - Germany
615
600
Sweden - Poland
600
600
Norway - Netherlands
700
700
Finland - Estonia
1000
1,016
Finland - Russia
320
1,300
5,460
6,316
Total
•
•
•
•
19
To Nordics
Theoretical maximum in transmission capacity ~40 TWh
per annum
Net export from Nordic area to Continental Europe and
Estonia during year 2014 was 14 TWh
During the dry year 2013 net export was 3 TWh
Approximately 25 TWh of net export is now reachable
320
1,000
700
2,225 615 600
Nordic, Baltic, Continental and UK markets are integrating
– interconnection capacity will double by 2021
The Northern Seas Offshore Grid and the Baltic
Energy Market Integration Plan are included as
priority electricity corridors in EU’s Infrastructure
Guidelines, approved in April 2013
Two 1400 MW NO-UK links as EU
Projects of Common Interest: NSN
link to England agreed to be ready
in 2021, NorthConnect to Scotland
still requiring Norwegian permission
First direct 1,400 MW NO-DE link
contracted to be built by end-2019
EU financial support for a 700 MW
DK-NL link, due to be built by 2019
Jutland – DE capacity planned to
grow by 860 MW by 2020, with
further 500 MW increase by 2022
New 400 MW Zealand-DE
connection through Kriegers Flak
offshore wind area with DC station
in DE planned to be built by 2019
20
New interconnections will
double the export capacity
to over 10,000 MW by 2021
New internal Nordic grid
investments provide for increased
available capacity for export to the
Continent and Baltics
EU’s Connecting Europe Facility
co-financing 3rd EE-LV transmission
line, due to be ready by 2020
EU’s European Energy Programme
for Recovery co-financing 700 MW
NordBalt (ready 12/2015)
LitPol Link (500+500 MW) to
connect the Baltic market to
Poland by end-2015/20. It will open
a new transmission route from the
Nordic market to the Continent
Svenska Kraftnät agreed 3/2014
with 50Hertz to study a new Hansa
PowerBridge DC link between
Sweden and Germany
Nordic water reservoirs
120
reservoir content (TWh)
100
80
60
40
20
2000
2003
2013
2014
2015
reference level
0
Q1
Source: Nord Pool Spot
21
Q2
Q3
Q4
Nordic year forwards
Year10
Year11
Year12
Year13
Year14
Year15
Year16
Year17
Year18
Year19
€/MWh
Year20
4 May 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
2008
Source: Nasdaq Commodities
22
2009
2010
2011
2012
2013
2014
2015
Wholesale price for electricity
Nord Pool Spot System Price
EUR/MWh
Forwards
110
100
90
80
70
60
50
40
30
20
10
0
4 May, 2015
1995
1997
1999
2001
Source: Nord Pool Spot, Nasdaq Commodities
23
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
Wholesale prices for electricity
Spot prices
EUR/MWh
110
Forward prices
100
90
80
Dutch
70
60
German
50
40
Nordic
30
Russian*
20
10
4 May 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, Bloomberg Finance LP, ATS, NP “Market Council”, Fortum
24
Fuel and CO2 allowance prices
35
120
28
EUR / tCO2
USD / bbl
Crude oil price (ICE Brent)
150
90
60
30
21
14
7
0
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Gas price (ICE NBP)
250
100
200
80
GBp / therm
USD / t
Coal price (ICE Rotterdam)
150
100
50
60
40
20
0
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: ICE
25
CO2 price (ICE ECX EUA)
Market prices 1 May 2015; 2015-2016 future quotations
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Nordic power generation
– dominated by hydro, but fossil needed
Total Nordic generation
383 TWh in 2013
160
140
120
TWh
%
Fossil fuels
48
13
Nuclear
86
23
Biomass
23
6
Wind
23
6
203
53
100
TWh/a
80
60
40
Hydro *
20
0
Denmark
Source: ENTSO-E Statistical Factsheet 2013
26
Norway
Sweden
*) Normal
Finland
Net export in 2013: 0.4 TWh
annual Nordic hydro generation 200 TWh, variation +/- 40 TWh.
Wholesale electricity price too low to attract investments
EUR/MWh
EUR/MWh
110
110
100
100
90
90
80
80
70
70
60
60
50
50
Futures
4 May 2015
40
40
30
30
20
20
10
10
0
1995
Source: Nord Pool spot, Nasdaq Commodities
2015
Average levelised costs of new electricity generation
2025
0
Coal
Onshore
condensing
wind
Nuclear
Utility scale
Solar PV
In Italy
Large
hydro
Gas
Offshore
wind
Commodity prices are forward prices as of August 2014.
NOTE: The presented figures are calculated based on data from recent public reports and do not represent Fortum’s view. Average achieved price (€/MWh) for the production
type depends on availability and flexibility. There are large variations in the cost of hydro, wind and solar depending on location and conditions.
27
Still a highly fragmented Nordic power market
Power generation
384 TWh
>350 companies
Electricity distribution
15 million customers
~500 companies
Vattenfall
Others
Others
E.ON
Vattenfall
Electricity retail
15 million customers
~350 companies
Vattenfall
Others
Fortum
Fortum
33%
Statkraft
Helen
Agder Energi
E-CO Energi
Norsk Hydro
Dong Energy
PVO E.ON
Hafslund
Caruna
Fortum
Source: Fortum, company data, shares of the largest actors,
pro forma 2013 figures.
28
57%
Dong
Energy
Elenia
SEAS-NVE
Helen
Syd Energi
Fortum has signed the binding agreement to divest
electricity distribution business.
Expected to be completed during Q2/2015
Hafslund
53%
Dong
Energy
E.ON
Statkraft
Helen
SEAS-NVE
Göteborg,
Din El
Bixia
New power generation capacity needed for increasing demand
and retiring capacity replacements
250%
• Growing global energy demand will
be increasingly fulfilled by electricity
in the future
• Substantial demand growth in the
emerging markets
• Retirements and moderate
demand growth in the EU
• Globally, ~7,000 GW of new
capacity needed by 2040
Source: IEA WEO 2014 (New polices scenario)
29
225%
Growth, 2012-2040
Primary energy demand
200%
Electricity generation
150%
114%
100%
41%
50%
19%
0%
US
Europe
Russia
China
India
Other
areas
World total
Capacity changes, 2014-2040 (GW)
Retiring capacity
479
632
172
281
91
787
2,442
Capacity increase
257
354
72
1,435
814
1,833
4,765
New capacity, total (1 736
986
244
1,716
905
2,620
7,207
1) Total new capacity needed for increasing demand and replacements of retiring capacity
Overview of Fortum’s nuclear fleet
LOVIISA
Commercial operation
started
OLKILUOTO
OSKARSHAMN
FORSMARK
Unit 1: 1978
Unit 1: 1972
Unit 1: 1980
Unit 2: 1980
Unit 2: 1974
Unit 2: 1981
Unit 3: (Under construction)
Unit 3: 1985
Unit 3: 1985
Unit 1: 880 MW
Unit 1: 473 MW
Unit 1: 984 MW
Unit 1: 496 MW
Unit 2: 880 MW
Unit 2: 638 MW
Unit 2: 1,120 MW
Unit 2: 496 MW
(Unit 3: 1,600 MW)
Unit 3: 1,400 MW
Unit 3: 1,170 MW
Total: 992 MW
Total: 1,760 MW (3,360)
Total: 2,511 MW
Total: 3,274 MW
27% 468 MW
43% 1,089 MW
22% 720 MW
Unit 1: 1977
Unit 2: 1981
Generation Capacity
Fortum’s share
Yearly production
8 TWh
14 TWh
17 TWh
25 TWh
Fortum’s share of
production
8 TWh
4 TWh
7 TWh
5.5 TWh
Share of Fortums
Nordic production
18%
9%
16%
13%
Majority owner
Fortum
Pohjolan Voima
E.ON
Vattenfall
26.6%
43.4%
22.2%
Teollisuuden Voima
(TVO)
OKG Aktiebolag
Forsmarks Kraftgrupp
Fortum’s share
Operated by
Fortum
Responsibilities
Loviisa: Fortum is the owner, licensee and operator with all the responsibilities specified in the Nuclear Energy Act, Nuclear Liability Act, and other relevant nuclear legislation
Other units: Fortum is solely an owner with none of the responsibilities assigned to the licensee in the nuclear legislation. Other responsibilities are specified in the
Companies Act and the Articles of Association and are mostly financial.
30
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
39
94
82
89
89
Forsmark 3
95
92
88
69
86
81
85
93
88
82
Loviisa 1
95
93
94
86
96
93
94
84
92
92
Loviisa 2
95
88
96
93
95
89
94
91
93
89
Olkiluoto 1
98
94
97
94
97
92
94
90
97
94
Olkiluoto 2
94
97
94
97
95
95
90
96
93
97
Source: Fortum
31
Olkiluoto
Forsmark
Loviisa
•
Finnish units world class in availability
•
Overview of production and consumption:
www.fortum.com/investors - energy related links
Oskarshamn
Variety of technologies and ages
Unit
MWe (Net)
Share (%)
Share (MWe)
Commercial
operation
Age
Type/
Generation *
Supplier
496
496
100,0
100,0
496
496
1977-05-09
1981-01-05
36
33
PWR / 1
PWR / 1
AEE (Atomenergoexport)
AEE (Atomenergoexport)
880
880
(1,600)
26,6
26,6
25,0
234
234
(400)
1979-10-10
1982-07-10
(?)
34
31
BWR / 3
BWR / 3
PWR / 3
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Areva / Siemens
Oskarshamn 1
Oskarshamn 2
Oskarshamn 3
473
638
1,400
43,4
43,4
43,4
205
277
607
1972-02-06
1975-01-01
1985-08-15
42
39
28
BWR / 1
BWR / 2
BWR / 4
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Forsmark 1
Forsmark 2
Forsmark 3
984
1,120
1,170
23,4
23,4
20,1
230
233
236
1980-12-10
1981-07-07
1985-08-18
33
32
28
BWR / 3
BWR / 3
BWR / 4
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Asea-Atom / Stal-Laval
Loviisa 1
Loviisa 2
Olkiluoto 1
Olkiluoto 2
Olkiluoto 3
*Generation refers to technical resemblence based on KSU classification and not to reactor design generations. All reactors are of Generation II except Olkiluoto-3 (EPR) which is of Generation III.
Planned capacity increases
• Oskarshamn 2 in 2017, capacity increase 180 MW (Fortum’s share 78 MW), Fortum’s share of total capacity after increase 355 MW
• Forsmark 1 in 2017-2020, capacity increase 120 MW (Fortum’s share 27 MW), Fortum’s share of total capacity after increase 257 MW
PWR = Pressurized Water Reactor
The most common reactor type in the world (e.g. all French units, most US units). Also the Loviisa units are PWRs, but based on Russian design. High pressure
prevents water from boiling n the reactor. The steam rotating the turbine is generated in separate steam generators.
BWR = Boiling Water Reactor
Similar to the PWR in many ways, but the steam is generated directly in the reactor. Popular reactor type e.g. in Sweden, the US and Japan.
32
Third party nuclear liability in case of severe accident
In force since 1.1.2012.
Law approved by Parliament
in 2010, requires separate
decision from Government to
come into force.
Unlimited
company
responsibility
300 M€
500 M€
300 M€
Convention
parties
500 M€
State
responsibility
Responsibility of company
(insurance or guarantee)
145 M€
145 M€
145 M€
240 M€
Old,
Finland
33
700 M€
360 M€
Current,
Sweden
700 M€
700 M€
200 M€
Sweden
(new, not
in force)
Finland,
temporary
legislation
New Paris
convention
Requires ratification by 2/3
of member states to come
into force. In Finland
approved by Parliament in
2005
Russia is the World’s 5th largest power market
TWh
6,000
5,000
4,000
3,000
2,000
1,000
0
Power generation in 2013 based on gross output.
Source: BP Statistical Review of World Energy June 2014
34
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
TGC-1
OAO Fortum
St. Petersburg
TGC-1
• 29.5% of territorial generating company TGC-1 operating in northwest Russia
• ~7,200 MW electricity production capacity (more than 40% hydro),
~24 TWh electricity, ~28 TWh heat in 2014
35
Nyagan
Tobolsk
Moscow
Tyumen
Chelyabinsk
Day ahead wholesale market prices in Russia
– increase driven by recovering demand and gas price
Key electricity, capacity and gas prices in the OAO Fortum area
Day ahead power market prices for Urals
40
35
Electricity spot price (market price),
Urals hub, RUB/MWh
Average regulated gas price,
Urals region, RUB 1000 m3
1,051
3,362
I/14
1,018
3,362
2014
1,089
3,362
LTM
1,097
30
€ / MWh
I/15
3,362
25
20
15
10
5
Average capacity price for CCS
”old capacity”, tRUB/MW/month
163
183
167
162
0
2008 2009 2010 2011 2012 2013
2014 2015
2008 2009 2010 2011 2012 2013
2014 2015
1 400
Average capacity price for CSA
”new capacity”, tRUB/MW/month
715
609
552
589
Average capacity price,
tRUB/MW/month
394
335
304
321
Achieved power price for
OAO Fortum, EUR/MWh
26.0
1 200
30.7
30.4
29.0
RUB / MWh
1 000
800
600
400
200
0
In addition to the power price generators receive a capacity payment.
36
Source: ATS
Power market liberalisation – two markets
Capacity wholesale market
Electricity wholesale market
Capacity prices
Electricity prices
•
Competitive capacity selection (CCS) and free bilateral
agreements (FBA)
•
Day ahead (spot) market, financial market, free bilateral
agreements (FBA) and regulated bilateral agreements (RBA)
•
A higher, fixed capacity price for new
capacity (CSA* agreements, built after 2007)
•
Fully liberalised from 1 Jan 2011 except for volumes intended for
households priced by RBA (~10% of volume)
•
Lower capacity price for old capacity, price caps limits the price in
some areas
•
Old capacity intended for households are priced by regulated
bilateral agreements (RBA)
•CSA is the intended mechanism for earning a (reasonable) return on invested capital in new capacity
•Capacity prices are a big part of a power generator’s income
– a typical CHP plant ~35%, CCGT ~55%, of revenues
•In the day ahead (spot) market, the price mechanism is a day ahead hourly auction. Supply – demand balance and
variable cost (fuel) are the key drivers for the spot price
•Financial market for electricity started in June, 2010
* Capacity supply agreement
37
Capacity prices for new capacity considerably higher than prices
for old capacity prices
• Long term rules and price parameters approved
• Both “old” and “new” capacity can participate in capacity auctions
• Old capacity (pre 2007) and new capacity priced differently
– Old capacity is priced by capacity auctions; price cap possibility
– New capacity under capacity supply agreements to receive guaranteed payments
• The payments for new capacity are based on approved pricing formulas
– Vary according to plant size, fuel, geographic location, capital costs
– Allow the recovery of capital costs and include return on invested capital; the targeted ROCE level 1214% (with current government benchmark bond yields)
– After three years (2014), the regulator will review the earnings from the electricity-only market and can
revise the payments, same goes after 6 years.
“Old” capacity prices will depend on auction outcomes, but will likely remain
relatively low; potentially price caps could limit the price
38
85% increase in power generation capacity in Russia by 2015
through the investment programme
Year
Supply
starts
Power plant
Fuel type
Tyumen CHP-2
Gas
755
CHP/Condensing
755
Chelyabinsk CHP-2
Gas, coal
320
CHP/Condensing
320
Argayash CHP
Gas, coal
195
CHP/Condensing
195
Chelyabinsk CHP-1
Gas, coal
149
CHP/Condensing
149
Feb/2011
Tyumen CHP-1
Gas
472
209
CHP/Condensing
681
June/2011
Chelyabinsk CHP-3
Gas
360
216
CHP/Condensing
576
Oct/2011
Tobolsk CHP
Gas
452
213
CHP/Condensing
665
April/2013
Nyagan 1 GRES
Gas
418
Condensing
418
Dec/2013
Nyagan 2 GRES
Gas
418
Condensing
418
Jan/2015
Nyagan 3 GRES
Gas
418
Condensing
418
2H/2015
Chelyabinsk GRES
Gas
248
CHP/Condensing
330
2H/2015
Chelyabinsk GRES
Gas
248
CHP/Condensing
248
< 2011
2011
2013
2015
Existing
capacity
2,785 MW
82
2,785 MW
39
New
investments
2,388 MW
2,388 MW
Production type
Total
capacity
5,173 MW
5,173 MW
Income statement
MEUR
Sales
I/2014
2014
LTM
1,040
1,208
4,088
3,920
Other income and expenses
-697
-850
-3,003
-2,850
Comparable operating profit
343
358
1,085
1,070
7
8
211
210
350
366
1,296
1,280
58
69
146
135
-57
-62
-210
-205
350
374
1,232
1,208
-55
-62
-143
-136
295
312
1,089
1,072
63
1,943
2,073
193
Net profit, Fortum total
358
2,255
3,161
1,264
EPS, basic (EUR), continuing operations
0.33
0.35
1.22
1.20
EPS, basic (EUR), discontinued operations
0.07
2.18
2.33
0.22
EPS, basic (EUR), Fortum Total
0.40
2.53
3.55
1.42
Items affecting comparability
Operating profit
Share of profit of associates and jv’s
Financial expenses, net
Profit before taxes
Income tax expense
Net profit, continuing operations
Net profit, discontinued operations
40
I/2015
Cash flow statement
MEUR
I/2015
I/2014
2014
LTM
Cash from operating activities:
168
74
352
446
314
34
371
-40
1,096
-42
1,039
32
516
405
1,406
1,517
87
161
356
282
603
566
1,762
1,799
-101
36
19
-123
3
46
-622
499
364
-600
532
337
Total investing activities, continuing operations
-46
-74
241
269
Total investing activities, discontinued operations
-43
2,461
2,574
70
Cash used in investing activities, total Fortum
-89
2,387
2,816
340
Cash flow before financing activities, total Fortum
514
2,953
4,578
2,139
Realised FX gains/losses
Other funds from operations (FFO)
Change in working capital
Cash from operating activities, continuing operations
Cash from operating activities, discontinued operations
Cash from operating activities, total Fortum
Cash used in investing activities:
Paid capital expenditures
Proceeds from divestments
Other investment activities
41
Key ratios
MEUR
LTM
2014
Comparable EBITDA, continuing operations
1,397
1,457
Comparable EBITDA, total Fortum
1,754
1,873
Interest-bearing net debt, total Fortum
3,714
4,217
2.1
2.3
1.8
2.0
9.0
19.5
Comparable net debt/EBITDA, total Fortum
excluding Värme financing
ROCE % Return on capital employed, total Fortum
Good liquidity – committed credit lines total EUR 2.2 billion
42
Debt Maturity Profile
31 March 2015
1500
MEUR
1250
1000
750
500
250
0
2015
2016
Bonds
2017
2018
Financial institutions
Average Interest Rate
Portion of floating / fixed debt
43
2019
2020
2021
Other long-term debt
2022
2023
2024 2025+
2015
1,036
2016
863
2017
538
2018
621
2019
821
2020
75
2021
549
2022
1,087
2023
110
2024
3
2025+
1,279
TOTAL
6,982
Other short-term debt
per 31 March 2015
4.3%
47 / 53%
per 31 Dec, 2014
3.7%
46 / 54%
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 Russia Segment, RUB 18.2
billion, is targeted to be reached during 2015, but the euro result level will be
volatile, due to the translation effect
Key drivers and risks
• Economic
• Political
• Currency
• Wholesale price of electricity and volumes
• demand and supply
• fuels
• hydrological situation
• power plant availability
• CO2 emissions allowance prices
44
Outlook
Annual capex estimate, excluding potential acquisitions
• 2015 approximately EUR 0.8 billion
Hedging
• Rest of 2015 approx. 50% hedge ratio at approx. EUR 41/MWh
• 2016 approx. 20% hedge ratio at approx. EUR 37/MWh
Taxation
45
•
Effective tax rate for 2015 for the Group 19-21%
•
The Swedish Government decided to re-propose an increase of 17%
on the tax on installed nuclear capacity to the spring budget
Hedging improves stability and predictability
2009 onwards thermal and import from Russia excluded
46
Facts of Fortum’s Distribution business
MEUR
Fortum’s
Swedish
distribution
operations in
2014
Operating profit
236
Comparable operating profit
235
Comparable EBITDA
366
Capital expenditure
134
Number of employees
390
Volume of distr. Electricity, TWh
26.9
Number of el. Distr. Custom. (‘000)
906
January 2013:
Strategic assessment commenced
December 2013:
Assessment has been completed,
divestment the best alternative
– Evaluation of divestment
opportunities country by country
Closed by the end of Q1/2014:
Divestment of Distribution Finland
Closed by the end of Q2/2014:
Divestment of Distribution Norway
Q1/2015:
Disclosed signed the binding
agreement to divest Distribution
Sweden (Q1/2015 reported as a
discontinued business)
Ongoing:
Fortum expects to complete the
divestment process during Q2/2015
47
For more information, please visit
www.fortum.com/investors