Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — FY2008 Earnings Presentation
35 slides from Fortum Oyj's earnings presentation, Feb 5, 2009
Slide 1: Financial year 2008
Financial year 2008 5 February 2009
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: A good year
A good year • Good results – A challenging environment – huge swings in power and commodity prices during the year • Significant presence in the growing power markets of Russia through the acquisition of TGC-10 • 92% (89%) of the generated power in the EU was CO2-free • 65% of Fortum’s Nordic power
Slide 4: Good results
Good results • Comparable operating profit EUR 1,845 (1,564) million, +18% • Earnings per share EUR 1.74 (1.74) • Net cash from operating activities remained strong at EUR 2,002 (1,670) million • Good performance in Power Generation • Proposed dividend of EUR 1.00 per share Comparison: 2007 financia
Slide 5: Decision-in-Principle application for Loviisa 3
Decision-in-Principle application for Loviisa 3 • A Decision-in-Principle application for the construction of a new 1000-1800 MW nuclear power plant unit in Loviisa • Designed service life of the unit at least 60 years • Fortum already has two nuclear power plant units in Loviisa • The power plant u
Slide 6: Planned schedule for the implementation of Loviisa 3
Planned schedule for the implementation of Loviisa 3 6
Slide 7: Nord Pool year forwards
Nord Pool year forwards €/MWh Year 08 Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 3 February 2009 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 2007 2008 2009 7
Slide 8: Operational performance improved by 18%
Operational performance improved by 18% Comparable operating profit MEUR Higher achieved price 433 -40 -32 and higher hydro 17 -92 -5 1845 power production in Power Generation 1564 Higher fuel and CO2 costs in Heat Distribution – one-time costs in 2007 Low sales margin in Markets The first year of i
Slide 9: Nordic water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 1996 2007 2008 2009 reference level 0 1 5 9 13 17 21 25 29 33 37 41 45 49 week Source: Nord Pool 9
Slide 10: Price development
Price development • Nord Pool wholesale price in: Nord Pool power price – Q4 increased 19% to 50.8 EUR/MWh (42.7 EUR/MWh) EUR/MWh 80 – 2008 increased 60% to 44.7 EUR/MWh (27.9 EUR/MWh) 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 2003 2004 2005 2006
Slide 11: Segments
SEGMENTS 11
Slide 12: Power Generation
Power Generation Segment's power generation in the Nordic countries (TWh) • Higher hydro volume, +2.9 TWh 50 45 46.9 46.1 • Lower nuclear volume, -1.2 TWh 40 35 • Very low thermal production 30 25 • CO2-free production of the segment 97% 20 15 • Malfunctions in transmission lines; 10 remarkable area
Slide 13: Power Generation
Power Generation • Higher achieved Nordic power price • High hydro volume MEUR 2008 2007 Sales 2 892 2 350 Comparable operating profit 1 528 1 095 Net Assets 5 331 5 599 Comparable RONA, % 28.0 18.9 Gross Investments 134 145 13
Slide 14: Heat
Heat Heat sales by area (TWh) 30 • Investments in CHP plants ongoing: 25 24.9 25.1 - Suomenoja, Finland (2009) 20 - Częstochowa, Poland (2010) - Tartu, Estonia (2009) 15 - Pärnu, Estonia (2010) 10 • Warm weather during heating seasons 5 affected demand 0 2008 2007 Finland Sweden Poland Other countri
Slide 15: Heat
Heat • Higher fuel prices • Increase in CO2 and other costs MEUR 2008 2007 Sales 1 466 1 356 Comparable operating profit 250 290 Net Assets 3 468 3 507 Comparable RONA, % 7.3 9.2 Gross Investments 431 327 15
Slide 16: Distribution
Distribution Fortum's distributed electricity by area (TWh) 30 25.8 26.0 25 • Stable business 20 • The installation of automatic 15 meters in Sweden continues, ~800,000 meters already installed 10 5 0 2008 2007 Sweden Finland Norway Estonia 16
Slide 17: Distribution
Distribution • Stable results • One-time items lowered 2007 results MEUR 2008 2007 Sales 789 769 Comparable operating profit 248 231 Net Assets 3 032 3 239 Comparable RONA, % 8.2 7.6 Gross Investments 296 237 17
Slide 18: Markets
Markets • Markets’ turnaround programme • New organisation from the beginning of 2009 1.3 million electricity customers - private and business - In Finland, Sweden and Norway 18
Slide 19: Markets
Markets • Weak sales margin – high procurement costs MEUR 2008 2007 Sales 1 922 1 683 Comparable operating profit -33 -1 Net Assets 188 247 Comparable RONA, % -15.3 -0.6 Gross Investments 3 3 19
Slide 20: Russia
Russia Segment's power and heat generation* (TWh) • Power sector reform proceeding; 30 competitive market 30% from 1 Jan 2009 25 • Investment programme proceeding • Consumption declined in the last quarter 20 15 10 5 0 2008 2007 Power Heat * 9 months; consolidated from 1.4.2008 onwards 20
Slide 21: Russia
Russia • TGC-10 comparable stand-alone loss EUR 33 million MEUR 2008* 2007 Sales 489 - Comparable operating profit -92 - Net Assets 2 205 456 Comparable RONA, % -3.8 0.0 Gross Investments 1 748 245 * 9 months; consolidated from 1.4.2008 onwards 21
Slide 22: Financials
FINANCIALS 22
Slide 23: Income statement
Income statement MEUR IV/2008 IV/2007 2008 2007 Sales 1 602 1 320 5 636 4 479 Expenses -991 -800 -3 673 -2 632 Operating profit 611 520 1 963 1 847 Share of profit of associates and jv's 48 18 126 241 Financial expenses, net -54 -37 -239 -154 Profit before taxes 605 501 1 850 1 934 Income tax expens
Slide 24: Cash flow statement
Cash flow statement MEUR IV/2008 IV/2007 2008 2007 Operating profit before depreciations 743 635 2 478 2 298 Non-cash flow items and divesting activities -237 -18 -275 -286 Financial items and taxes 273 -162 -99 -393 Funds from operations (FFO) 779 455 2 104 1 619 Change in working capital -217 -110
Slide 25: Comparable and reported operating profit
Comparable and reported operating profit Operating profit IV/2008 Operating profit IV/2007 Operating profit 2008 Operating profit 2007 Comparable Reported Comparable Reported Comparable Reported Comparable Reported Power Generation 378 470 363 351 1 528 1 599 1 095 1 115 Heat 109 155 120 121 250 307
Slide 26: Key ratios
Key ratios MEUR 2008 2007 2006 EBITDA 2 478 2 298 1 884 Cash flow from operations 2 002 1 670 1 151 Interest-bearing net debt 6 179 4 466 4 345 Equity 8 411 8 651 8 161 Balance sheet total 20 278 17 674 16 839 Net debt/EBITDA* 2.5 2.2 2.3 Return on capital employed (%)* 15.0 14.0 13.4 Return on shar
Slide 27: Good liquidity
Good liquidity MEUR Available Outstanding Total amount SHORT TERM FINANCING Commercial Paper Programmes Finnish CP Programme 328 172 500 SEK 5.000 M Swedish CP Programme 175 285 460 503 457 960 LIQUID FUNDS AND COMMITTED CREDIT LINES Committed Credit Lines Short Term 206 0 206 Long Term 2 100 600 2
Slide 28: Debt maturity profile
Debt maturity profile MEUR MEUR 2500 2009: 980 2010: 543 2000 2011: 2.242 2012: 445 1500 2013: 1.104 1000 2014: 246 2015: 225 500 2016: 759 2017: 74 0 Y2009 2011 2013 2015 2017 2019+ 2018: 1 2019+: 881 Bonds Financial institutions Other long-term debt CPs Other short-term debt 31 Dec, 2008 31 Dec, 2
Slide 29: Outlook
OUTLOOK 29
Slide 30: Market fundamentals
Market fundamentals • Nordic water reservoirs about 4 TWh below the long-term average in late January 2009 • Forward power prices in late January 2009: – rest of 2009 ~ 38-39 EUR/MWh – 2010 ~ 34-36 EUR/MWh • CO2 prices in late January 2009: – for 2009 and 2010 ~ EUR 12 per tonne 30
Slide 31: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (Brent) CO2 price (EUA) 160 35 140 30 120 25 EUR / tCO2 USD / bbl 100 20 80 60 15 40 10 20 5 0 0 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Coal price (API2) Gas price (NBP) 240 120 200 100 GBp / therm 160 80 USD / t 120 60 80 40 40 20 0
Slide 32: Wholesale prices for electricity
Wholesale prices for electricity EUR/MWh Spot prices Forward prices 110 100 90 80 Dutch 70 60 German 50 40 Nordic 30 Russian* 20 10 30 January 2009 0 2005 2006 2007 2008 2009 2010 2011 * Including capacity tariff estimate. E.g 2009 11 €/MWh Source: , ATS 32
Slide 33: Hedging of Power Generation's Nordic sales
Hedging of Power Generation's Nordic sales Status at the end of January 2009 (Status at the beginning of October 2008) Hedge ratio Hedge price rest of 2009 ~ 65% ~ EUR 53 per MWh (~55%) (~ EUR 53 per MWh) 2010 ~ 50% ~ EUR 46 per MWh (~20%) (~ EUR 55 per MWh) 33
Slide 34: Fortum in a stable position
Fortum in a stable position • Flexible and climate-benign production portfolio • Integration of Russian TGC-10 proceeding • Growth through investment programmes in Russia and Baltic Rim countries • Two new CHP plants to be commissioned in 2009 • Strong balance sheet and liquidity • Good hedging posi
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