Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (February 2009)
48 slides from Fortum Oyj's investor presentation, February 2009
Slide 1: A leading power and heat company in the Nordic area
- a leading power and heat company in the Nordic area Presentation for investors 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: Agenda
• Fortum today • European power markets • Russia • Financials and outlook 3
Slide 4: We intend to keep our leading position
We intend to keep our leading position Vision To be the benchmark power and heat company excelling in sustainability "Our energy improves life for present and future Fortum focuses on the Nordic, Russian generations" and Baltic Rim markets as a platform Strategy for profitable growth Core Purpose Be
Slide 5: Our geographical presence today
Our geographical presence today Nr 1 Heat Nordic countries Distribution Generation 51.6 TWh Electricity sales 59.1 TWh Electricity Heat sales 20.0 TWh sales Distribution cust. 1.6 million Nr 2 Power Electricity cust. 1.3 million Russia generation TGC-1 (~25%) Power generation ~7 TWh Heat sales ~7 TW
Slide 6: Strong growth in EBITDA and in cash flow
Strong growth in EBITDA and in cash flow MEUR EBITDA MEUR Total net cash from operating activities 2 500 2 000 2 000 2 478 1 500 2 002 2 066 1 500 1 884 1 550 1 000 1 151 1 000 500 500 0 0 2006 2007 2008 2006 2007 2008 Sales gain From Lenenergo shares Additional dividend from Hafslund MEUR Net debt
Slide 7: Growing capital returns
Growing capital returns Dividend per share EUR • Dividend of EUR 1.00 per share proposed to the AGM, in 1.35 total ~EUR 0.9 billion 1.26 Total ~ 5,965 MEUR 1.12 • Dividend policy of 50 - 60% 0.58 1.00 0.53 payout of previous year's 0.54 results on the average 0.58 0.42 0.77 0.31 0.73 0.58 0.23 0.26
Slide 8: Fortum in the Nordic electricity value chain
Fortum in the Nordic electricity value chain Fortum Markets Large Nordic Nordic customers Fortum wholesale wholesale market Small Power market customers Generation Nord Pool and bilateral Other retail companies Deregulated Regulated Transmission and system Fortum services Distribution 8
Slide 9: Fortum's European power and heat production by source
Fortum's European power and heat production by source Fortum's power generation Fortum's heat production in 2008 in 2008 Hydro power 44% Biomass fuels 20% Coal 23% Other 2% Natural gas Peat 1% Biomass 2% Other 10% 16% Natural gas 2% Coal 4% Oil 4% Waste 7% Heat pumps, Nuclear power 45% Peat 7% elect
Slide 10: Fortum's carbon exposure is among the lowest in Europe
Fortum's carbon exposure is among the lowest in Europe g CO 2 /kWh electricity 1200 2007 1000 800 600 Average 373 g/kWh 400 200 64 0 Union Fenosa Enel Drax Dong Energy E.ON EDP Endesa Vattenfall Statkraft RWE Electrabel Fortum CEZ Scottish&Southern Verbund Iberdrola British Energy Nuon EDF DEI PVO S
Slide 11: Fortum's investment programme – Nordic region, Poland and Baltic countries
Fortum's investment programme – Nordic region, Poland and Baltic countries MW (El.) MW (Heat) • Olkiluoto 3, Finland, nuclear 400 • Swedish nuclear 300 • Suomenoja, Finland (gas CHP) 240 220 • Järvenpää, Finland (biomass CHP) 25 55 • Brista, Sweden (waste CHP) 20 60 • Refurbishing of existing hydro
Slide 12: A leading Nordic power and heat company
A leading Nordic power and heat company • Leading power and heat company in Nordic • Listed at the Helsinki Stock Exchange 1998 • More than 50,000 shareholders • Among the most traded shares in Helsinki stock exchange • Market cap ~14 billion euros Households 5.1% Financial and insurance institution
Slide 13: Agenda
• Fortum today • European power markets • Russia • Financials and outlook 13
Slide 14: Key EU objectives by 2020
Key EU objectives by 2020 • Implementation of • Minimum reduction of EU internal energy markets CO2 emissions 20% (2020) • Energy efficiency +20% • Renewables 20% (2020) (2020) Competitiveness Sustainability • Development of CO2 • Increased resources for capture and storage technology development Se
Slide 15: Huge need for new capacity
Huge need for new capacity Globally ... ... European wide ... ... and in Russia TWh TWh TWh 2,000 30,000 4,000 700+ TWh by 2020 1 800 25,000 1,700 1,300 ~10,000 3,000 TWh 1 600 20,000 TWh 15,000 2,000 1 400 10,000 1 200 1,000 5,000 1 000 0 0 20041 2010E 2020E 2000 2005 2010E2015E 2020E 2000 2005 201
Slide 16: Demand is growing – new capacity is needed in the Nordic market
Demand is growing – new capacity is needed in the Nordic market Demand forecasts for the Nordic • Electricity demand is expected to increase by ~35 TWh by 2020 compared to 2007 market • Estimated retiring generation approx. 35 TWh*) TWh 470 460 450 • Total need for investments roughly 70 TWh – decis
Slide 17: New capacity, except nuclear, will require over 60 EUR/MWh power price
New capacity, except nuclear, will require over 60 EUR/MWh power price EUR/MWh EUR/MWh 110 110 CO2 cost 100 100 Other costs ( variation) 90 90 80 80 70 70 60 60 Futures 50 4 February 2009 50 40 40 30 30 20 20 10 10 0 0 1995 -97 -99 -01 -03 -05 -07 -09 -11 -13 Coal Gas Nuclear Hydro Wind Clean coal S
Slide 18: Current transmission capacity from Nordic area to Continental Europe is ~4000 MW
Current transmission capacity from Nordic area to Continental Europe is ~4000 MW Transmission Countries Stations capacity MW From Nordel To Nordel Denmark - Germany 2100 1550 Sweden - Germany 600 600 Sweden - Poland 600 600 Norway - Netherlands 700 700 350 Total 4000 3450 700 • Theoretical maximum i
Slide 19: New investments could double capacity to Continent by 2020
New investments could double capacity to Continent by 2020 Present interconnections New interconnections from the Nordic market to could double the capacity the Continent have a total to over 8000 MW by 2020 capacity of abt. 4000 MW New internal Nordic Additional grid investments 700 MW cable NO-NL
Slide 20: Market coupling milestones
Market coupling milestones • Market coupling between Belgium (BelPEX), Netherlands (APX) and France (Powernext) since November 2006 • Market coupling EEX - Nord Pool started 29 September 2008 but was on 8th October suspended until Q1/'09 due to 2009 technical problems • Market coupling NL-Nord Pool
Slide 21: 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 21
Slide 22: Nord Pool year forwards
Nord Pool year forwards €/MWh Year 06 Year 07 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 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 2008 2009 22
Slide 23: 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 23
Slide 24: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (Brent) CO2 price (EUA) 160 35 140 30 120 EUR / tCO2 25 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 25: Nordic power generation mix
Nordic power generation mix 160 Total Nordic generation 397 TWh in 2007 140 TWh % 120 Fossil fuels 63 16 100 TWh/a Nuclear 87 22 80 Waste 4 1 60 Biomass 19 5 40 Wind 10 3 20 Hydro 214 54 0 Hydro variance +/- 40 TWh from Denmark Norway Sweden Finland average Net import in 2007: 3TWh Source: Nordel 25
Slide 26: Still a highly fragmented Nordic power market
Still a highly fragmented Nordic power market Power generation Electricity distribution Electricity retail 397 TWh 14 million customers 14 million customers >350 companies ~500 companies ~350 companies Fortum Fortum Vattenfall Others Others Others Vattenfall Vattenfall 30% E.ON E.ON Fortum 50% 51% H
Slide 27: Economic downturn has affected power consumption
Economic downturn has affected power consumption Power demand decreased in all Nordic countries except Norway in 2008 … 2% • Nordic paper and metal companies Norway % change (from year 2007) have announced plant closures and 1% temporary production cuts 0% - 1% Denmark • Power demand has decreased t
Slide 28: Agenda
• Fortum today • European power markets • Russia • Financials and outlook 28
Slide 29: Russia is the World's 4th largest power market – and growing rapidly
Russia is the World’s 4th largest power market – and growing rapidly Russia is the 4th largest power Demand for electricity in Russia to market in the World increase 50% by 2020 *) TWh • High scenario 2,000 TWh/a by 2020 • Base scenario: 1,700 TWh/a by 2020 4,000 3,500 3,000 2,200 Demand growth 700+
Slide 30: Fortum's current holdings in Russia
Fortum's current holdings in Russia TGC-10 • Fortum holding 93.4% at the moment (income statement consolidated from 1 April 2008) • TGC-10 operates in the heart of Russia’s oil and gas producing region • EUR 2.5 billion paid of which EUR 1.3 billion remains in the company (share issue) and will be u
Slide 31: Russian power industry reform has progressed well
Russian power industry reform has progressed well Key steps in the reform Time "Power industry law" approved 2003 Establishment of Russian power exchange (ATS) 2001 Launch of the free-trade sector of the wholesale market in European & Urals 2003 in Siberia 2005 Launch of balancing power segment 2006
Slide 32: Reform – Recent and planned events for 2009
Reform – Recent and planned events for 2009 Events taken place in 2008 Planned events during 2009 • RAO UES ceased to exist in June 2008 • Increase of power market liberalisation • Market Council established to continue rate to 50% the power market development • Launch of Long Term Capacity Market •
Slide 33: Further power market liberalisation
Further power market liberalisation Share of liberalised trade (of capacity) • Further liberalisation of energy market to increase to 50% in July 2009 100 % 100 % 100 % 90 % 80 % • The rate of liberalised 80 % volume is based on 2007 70 % 60 % 60 % balance. All new capacity 50 % 50 % is sold with li
Slide 34: Currently 30% of electricity sold with liberalised prices
Currently 30% of electricity sold with liberalised prices European and Urals part power price 1) development; EUR/MWh 40 35 • Day-Ahead-Market for electricity well-functioning 30 and competitive 25 • All volume sold to Day- €/MWh 20 Ahead-Market, but market 15 based price formation for about 30% of
Slide 35: Investment programme of TGC-10
Investment programme of TGC-10 Moscow Nyagan Tyume Tobolsk Chelyabinskn Electricity capacity (MW) Kurgan Plant Fuel type Existing Planned Total Tyumen CHP-2 Gas 755 450 1,205 MW 6,000 Tyumen CHP-1 Gas 472 190 662 Tobolsk CHP Gas 452 210 662 5,000 Chelyabinsk CHP-3 Gas 360 220 580 4,000 +73% +2,270 M
Slide 36: Efficiency improvement appr. 100 MEUR in 2011
Efficiency improvement appr. 100 MEUR in 2011 • Purchasing • Portfolio Management and Trading (PMT) • Heat regulation • Heat - technical and business improvements • Generation - technical improvements • Others 36
Slide 37: Agenda
• Fortum today • European power markets • Russia • Financials and outlook 37
Slide 38: 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 39: 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 40: 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 41: Key figures and ratios
Key figures and 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 Shareholders' equity 7 954 8 359 7 908 Balance sheet total 20 278 17 674 16 839 Net debt/EBITDA* 2.5 2.2 2.3 Return on capital employed (%)* 15.
Slide 42: Current Fortum Group financial targets
Current Fortum Group financial targets Return on capital employed 12% Return on shareholder's equity 14% Net debt/EBITDA 3.0–3.5 42
Slide 43: Capital expenditures EUR 1-1.5 billion – significant flexibility
Capital expenditures EUR 1 - 1.5 billion – significant flexibility • Annual capital expenditures EUR 1–1.5 billion Esimated annual Capex 2009-2013 • Maintenance/productivity Maintenance ~ EUR 300–500 m EUR 300–500 million p.a. • Growth in Nordic and Baltic rim Growth ~ EUR 200–500 m countries EUR 20
Slide 44: 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 45: 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 46: 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) 46
Slide 47: Fortum in a stable position
Fortum in a stable position • Flexible and climate-benign • Two new CHP plants to be production portfolio commissioned in 2009 • Integration of Russian • Strong balance sheet and TGC-10 proceeding liquidity • Growth through investment • Good hedging positions programmes in Russia and Baltic Rim coun
Slide 48: © Fortum
© Fortum