Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (May 2022)
59 slides from Fortum Oyj's investor presentation, May 2022
Slide 1: Equity story of FORTUM – For a cleaner world
Equity story of FORTUM – For a cleaner world Investor / Analyst material May 2022
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. Any references to the fut
Slide 3: Content
Content Fortum in brief 4 – 12 Fortum’s strategy 13 – 20 Energy market transition 21 – 25 Interim report Q1 2022 26 – 46 Appendices 47 European and Nordic power markets 48 – 54 Fortum’s Nordic power generation in detail 55 Fortum’s evolution and strategic route 56 Historical achieved prices 57 Divid
Slide 4: Fortum in brief
Fortum in brief Fortum in brief Power generation assets Key figures 2021 Sales EUR ~112 bn Comparable EBITDA EUR 3.8 bn Total assets EUR ~150 bn Personnel 19,140 Main businesses Sales (€) Volume1 Capacity India Power 34.3 bn 188 TWh 47.1 GW Gas 60.0 bn 370 TWh 7.4 bcm Heat 1.2 bn 33 TWh 16.9 GW 1) F
Slide 5: Strong position to drive the energy transition in Europe
Fortum in brief Strong position to drive the energy transition in Europe 3rd largest 3rd largest 3rd largest 4th largest power generator CO2-free power generator nuclear generator gas storage operator in Europe and Russia in Europe in Europe in Europe
Slide 6: Fortum is the third largest CO2-free power generator in Europe
6 100 200 0 300 500 400 TWh EDF Rosenergoatom RusHydro Vattenfall NNEGC Energoatom Fortum incl. Uniper. EPH incl. LEAG En+ Fortum Enel Iberdrola Statkraft ENGIE RWE Source: Company information, Fortum analyses, 2020 figures pro forma. CEZ Verbund E.ON EnBW Axpo EDP Hafslund Eco Slovenské elektrárne
Slide 7: Renewables and CO2-free power generation capacity of Fortum
Fortum in brief Renewables and CO2-free power generation capacity of Fortum 16.6 GW Hydro Wind & Solar Nuclear 8.4 GW 3.6 GW 4.6 GW 7
Slide 8: Fortum is well positioned for the energy transition
Fortum in brief Fortum is well positioned for the energy transition Indicative EBITDA split Third largest CO2-free power generator in Europe with growing portfolio of wind and solar CO2-free Significant provider of flexible hydro and gas-fired power generation Major provider and trader of gas for Eu
Slide 9: Fortum’s CO2-free power generation increased by ~60% as Uniper was consolidated
Fortum in brief Fortum’s CO2-free power generation increased by ~60% as Uniper was consolidated as a subsidiary Fortum*: • CO2-free generation 40% • Gas-fired power generation 47% • Share of coal-fired generation 13% • Share of coal of sales revenue below 1% * based on 2021 reported figures Fortum a
Slide 10: Fortum is a forerunner in sustainability
Fortum is a forerunner in sustainability Fortum is listed in several sustainability indices and ratings: Our purpose is to drive the change for a cleaner world. We are securing a fast and reliable transition to a carbon-neutral economy by providing customers and societies with clean energy and susta
Slide 11: Fortum's power generation and heat production by source
Fortum in brief Fortum's power generation and heat production by source Fortum’s power generation in 2021 Fortum's heat production in 2021 Natural gas 47% Natural gas 59% Total Total Waste <1% power generation Oil 2% heat production Wind, solar <1% Heat pumps, Bio 1% 188.1 TWh Nuclear power 19% elec
Slide 12: Fortum key profitability drivers
Fortum in brief Fortum key profitability drivers Key market drivers: Fortum profitability drivers: Fortum Group’s indicative EBITDA by business and market exposure Power market European power generation Indicative EBITDA split • EU coal/nuclear capacity closures • CO2-free generation: prices and vol
Slide 13: Our strategy – Driving the clean energy transition and delivering sustainable financial performance
Fortum’s strategy Our strategy – Driving the clean energy transition and delivering sustainable financial performance For a cleaner world Strengthen and grow in CO2-free Leverage strong position in gas Transform own operations to power generation to enable the energy transition Partner with industri
Slide 14: Measuring success for Fortum
Fortum’s strategy Measuring success for Fortum Climate and environmental targets: • Group carbon neutral latest by 2050 (Scope 1, 2, 3) • European generation carbon neutral latest by 2035 (Scope 1, 2) • CO2 emission reduction of at least 50% by 2030 in European generation (Scope 1, 2) • Scope 3 GHG
Slide 15: Strategic steps going forward
Fortum’s strategy Strategic steps going forward 2014-2020 2021-2022 2023-2025 Major transformation Balance sheet focus Growth in clean power and gas Active portfolio rotation with Step up in Group EBITDA Growth in strategic areas focus on assets essential in the Secure strong balance sheet Sustainab
Slide 16: Indicative capital expenditure for growth investments in 2021-2025
Fortum’s strategy Indicative capital expenditure for growth investments in 2021-2025 – renewables and clean gas 1 Renewables On-shore wind and solar 2 Hydrogen and clean gas Industrial decarbonisation solutions 3 Environmental and security of supply solutions Waste-to-Energy, recycling, industrial a
Slide 17: Fortum’s gigawatt scale solar and wind power generation fleet
Fortum’s strategy Fortum’s gigawatt scale solar and wind power generation fleet PORTFOLIO STATUS CAPACITY, MW FORTUM SHARE, MW SUPPLY STARTS/STARTED Ånstadblåheia 10 MW FINLAND 470 246 (Fortum share) ● Kalax Operational 90 18 Q4 2020 Nygårdsfjellet 6 MW ● Pjelax-Böle & Under construction 380 228 Q2
Slide 18: Strong commitment to maintain rating of at least BBB
Fortum’s strategy Strong commitment to maintain rating of at least BBB Ambition is to preserve financial flexibility and good Long term leverage target: access to capital markets. Financial net debt/comparable EBITDA Fortum will carefully manage its balance sheet going forward focusing on <2x • Prof
Slide 19: Return targets for new investments
Fortum’s strategy Return targets for new investments Return targets for new investments: Group 2022 capital expenditure, including maintenance and WACC+ hurdle rate: excluding acquisitions, +100 bps for green investments is estimated to be EUR 1.5 billion +200 bps for other investments • Maintenance
Slide 20: Fortum and Uniper cooperation estimated to deliver significant financial benefits
Fortum’s strategy Fortum and Uniper cooperation estimated to deliver significant financial benefits Cooperation benefits focus on monetary, safety, and environmental actions • Positive cash impact on a consolidated group basis is estimated to be ~EUR 100 million annually • > EUR 50 million of these
Slide 21: Europe committed to be a forerunner in reducing GHG emissions across all sectors
Energy market transition Europe committed to be a forerunner in reducing GHG emissions across all sectors • EU is tightening both its 2030 and 2050 emissions targets – Requires emission reductions in all sectors, especially residential & commercial, transport, and industry • Sector coupling – clean
Slide 22: Energy transition will increase demand for electricity and hydrogen
Energy market transition Energy transition will increase demand for electricity and hydrogen Electricity Hydrogen Feedstocks Agriculture Industry Transport Residential and commercial Source: IHS Markit Net Zero Carbon Europe scenario 22
Slide 23: Nordic, Baltic, Continental and UK markets are integrating
Energy market transition Nordic, Baltic, Continental and UK markets are integrating – Interconnection capacity growing to over 13 GW by mid-2024 • Several new interconnectors have started DK1-DE maximum transmission capacity has been Current Nordic/Baltic 1 operation, and more are under construction
Slide 24: Volatility and uncertainty in the European power market increases the value of flexible assets
Energy market transition Volatility and uncertainty in the European power market increases the value of flexible assets Intermittent renewables Nuclear and coal closures Increasing role of gas Volatility and Supply-demand balance uncertainty Increased interconnection between Nordics and Continent Co
Slide 25: Own transformation – coal exit to reach carbon neutrality by 2035
Energy market transition Own transformation – coal exit to reach carbon neutrality by 2035 in European generation Carbon neutral in our European generation by European generation CO2 net emissions: 2035 at the latest Transform own 2019 2030 2035 operations to carbon • Current trajectory to reduce CO
Slide 26: Interim Report January-March 2022
Interim Report January-March 2022 Fortum Corporation 12 May 2022
Slide 27: Markus Rauramo President and CEO
Interim report Q1 2022 Markus Rauramo President and CEO 27
Slide 28: Earnings shift into later quarters of 2022 following Uniper’s gas storage optimisation
Interim report Q1 2022 Earnings shift into later quarters of 2022 following Uniper’s gas storage optimisation Comp. OP Comp. EPS OCF1 Leverage2 Q1 2022 Market volatility and increased uncertainties managed by securing sufficient liquidity headroom Announcement of the sale of • Uniper gas midstream b
Slide 29: Update on Fortum Group’s Russian businesses
Interim report Q1 2022 Update on Fortum Group’s Russian businesses Fortum prepares for a controlled exit from the Pretax impairments of EUR 2.1 bn of Russian Russian market businesses and assets • We will not make any new investments decisions or finance our Russian businesses. • We are preparing fo
Slide 30: Europe is experiencing a severe energy crisis
Interim report Q1 2022 Europe is experiencing a severe energy crisis Energy commodities reaching new record highs Political push for energy independence EUR / MWh Gas price (TTF) USD / t Coal price (ICE Rotterdam) 250 500 Realised Realised • Extreme price levels and volatility in energy 200 400 Futu
Slide 31: Fortum’s strategy is synchronised with REPowerEU
Interim report Q1 2022 Fortum’s strategy is synchronised with REPowerEU Fortum Group is well positioned to reduce Europe’s energy dependence and to accelerate the green transition For a cleaner world Transform own Strengthen and grow in CO2- Leverage strong position in Partner with Industrial and op
Slide 32: Bernhard Günther CFO
Bernhard Giinther CFO @fortum For a cleaner world 32
Slide 33: Key financials
Interim report Q1 2022 Key financials Q1 affected by significant earnings shift in Uniper’s gas storage business into coming quarters Comparable LTM EPS at EUR 0.95 despite negative Q1 result Solid credit metrics with Financial net debt / Comp. EBITDA at 1.0x Net cash from operating actvities negati
Slide 34: Q1 dominated by gas storage optimisation effect shifting earnings into Q2-Q4
Interim report Q1 2022 Q1 dominated by gas storage optimisation effect shifting earnings into Q2-Q4 Reconciliation of comparable operating profit Generation (EUR million) higher achieved power price with strong physical optimisation but lower volumes Russia one-off effect in 2021 and declining CSAs
Slide 35: P&L - reported IFRS figures dominated by changes in fair values and impairments
Interim report Q1 2022 P&L - reported IFRS figures dominated by changes in fair values and impairments Items affecting comparability includes • EUR -1.1 bn changes in fair values of derivatives hedging future earnings • Items affecting comparability include impairments − EUR 0.3 bn Russia segment −
Slide 36: Balance sheet driven by increased commodity prices
Interim report Q1 2022 Balance sheet driven by increased commodity prices Financial derivatives substantially up following the strong increase in commodity prices and high portfolio churn Margin receivables down, margin liabilities up based on higher prices Liquid funds decreased by EUR 1.2 bn follo
Slide 37: Operating cash flow turn negative in Q1
Interim report Q1 2022 Operating cash flow turn negative in Q1 Change in working capital impacted by operational liquidity measures in the Uniper segment taken in Q4 2021 Sales proceeds from divestments of Baltic district heating and 50% ownership in Stockholm Exergi Margin receivables decreased Fin
Slide 38: Leverage below target, gross debt down
Interim report Q1 2022 Leverage below target, gross debt down Solid credit metrics debt 'BBB' long-term issuer credit rating, debt Credit Watch Negative netnet 'BBB' long-term issuer credit rating, Financial stable outlook Financial Target ratio: Financial net debt / Comp. EBITDA < 2x Fortum’s objec
Slide 39: Outlook
Interim report Q1 2022 Outlook Hedging 2022 Estimated annual capital Generation Nordic hedges: expenditure, including maintenance For rest of 2022: 80% hedged at EUR 35 per MWh and excluding acquisitions, of appr. EUR 1,500 million of which For 2023: 55% hedged at EUR 33 per MWh maintenance capital
Slide 40: Q&A
Interim report Q1 2022 Q&A
Slide 41: Generation: Higher achieved power prices
Interim report Q1 2022 Generation: Higher achieved power prices Q1 2022 vs. Q1 2021 • Comparable operating profit increased mainly due to – Higher achieved power prices of EUR 44.1 +EUR 6.9 per MWh – Lower hydropower volumes due to lower inflow and lower reservoir levels at the beginning of the quar
Slide 42: Water reservoirs
Interim report Q1 2022 Nord Pool system price driven to new price record Reservoir content (TWh) 120 Water reservoirs • Compared to long-term average, Nordic water reservoirs increased 100 during Q1 from -11 TWh to -6 TWh. Mild and windy winter conditions 80 led to below normal hydro generation in t
Slide 43: Russia: Solid underlying performance
Interim report Q1 2022 Russia: Solid underlying performance Q1 2022 vs. Q1 2021 • Comparable operating profit decreased by 39%, to EUR 61 million – Negative effect from the CSA expiry for Nyagan 1 – Impact of the Russian rouble exchange rate was EUR -6 million – Lower heat volumes but higher power p
Slide 44: City Solutions: Structural changes and lower volumes
Interim report Q1 2022 City Solutions: Structural changes and lower volumes Q1 2022 vs. Q1 2021 • Comparable operating suffered from structural changes including the sale of the Baltic district heating business in 2021 and the 250- MW Pavagada II and the 250-MW Rajasthan solar plants in India. • Hea
Slide 45: Consumer Solutions: Challenging market environment
Interim report Q1 2022 Consumer Solutions: Challenging market environment Q1 2022 vs. Q1 2021 • Comparable operating profit broadly unchanged on the quarter. • Higher temperatures in the Nordics compared to clearly colder weather in the first quarter of 2021 and slightly lower customer base had a ne
Slide 46: Uniper: Intra-year earnings shift
Interim report Q1 2022 Uniper: Intra-year earnings shift Q1 2022 vs. Q1 2021 • Comparable operating profit turned substantially negative mainly due to gas storage optimisation that deferred earnings to later quarters in 2022. • The generation business was mainly affected by negative price developmen
Slide 47: Appendices
Appendices @fortum For a cleaner world
Slide 48: Most West European countries to exit coal by 2030
European and Nordic power markets Most West European countries to exit coal by 2030 FI: Phase-out by mid-2029 • Sweden and Austria closed their last coal plants in 2020, DE: Phase-out SE: Last by 2038 plant closed Portugal in 2021 2020 DK: Phase-out • France is committed to a phase out by 2022*) UK:
Slide 49: Decarbonisation requires other sectors to join
European and Nordic power markets Decarbonisation requires other sectors to join CO2 abatement cost ranges for different sectors Proposed rebasing Proposed target for 2030 Coal-to-gas switching range • The EU has agreed to increase the 2030 total emissions reduction target EUA price Abatement cost r
Slide 50: Fortum major player in power, gas and heat
European and Nordic power markets Fortum major player in power, gas and heat Power generation Gas Heat production Largest generators in Europe and Russia, 2020 Largest European gas storage operators, 2021 Largest global producers, 2020 TWh TWh TWh EDF STOGIT Gazprom Rosenergoatom T Plus Fortum Store
Slide 51: Wholesale power prices
European and Nordic power markets Wholesale power prices EUR/MWh Spot prices Forward prices 400 350 300 250 German 200 Nordic 150 Russian* 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Rolling 7-day average spot prices Forwards 9 May 2022 * Including weighted average
Slide 52: Nordic year forwards
European and Nordic power markets Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22 Year23 Year24 €/MWh 9 May 2022 90 Year23 Year24 80 70 60 Feb 2022 Mar 2022 Apr 2022 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201
Slide 53: German and Nordic forward spread
European and Nordic power markets German and Nordic forward spread Spot price Feb Mar Apr EUR/MWh Nordic and German daily spot prices in 2020 – 2022 Continental spot prices have been impacted by the record high 2022 2022 2022 • 500 commodity prices since Q4 2021. Following the record high delivery 4
Slide 54: Nordic forward prices and Nordic sys spot averages
European and Nordic power markets Nordic forward prices and Nordic sys spot averages EUR/MWh 70 Year 2018 forward System spot 2018 average Year 2019 forward System spot 2019 average 60 Year 2020 forward System spot 2020 average Year 2021 forward System spot 2021 average 50 40 30 20 10 0 2013 2014 20
Slide 55: Fortum’s Nordic and Polish generation capacity
Fortum’s Nordic power generation in detail Fortum’s Nordic and Polish generation capacity Of which GENERATION CAPACITY Fortum Uniper NORWAY MW FINLAND MW Hydro 6,424 1,772 Generation capacity Hydro 1,553 Nuclear 4,560 1,737 Price area NO1, CHP 241 Nuclear 1,487 NO4 SE1 CHP 559 1 - CHP 375 Other ther
Slide 56: Fortum’s evolution and historical strategic route
Fortum’s evolution and strategic route Fortum’s evolution and historical strategic route Skandinaviska Birka Energi Länsivoima Elnova Østfold Elverk 50% Fortum →100% 50% → 100% 50% Stockholm Gullspång merged Shares in Divestment of Divestment of with Hafslund Fingrid shares small scale hydro Gullspå
Slide 57: Hedging improves stability and predictability
Historical achieved prices Hedging improves stability and predictability – principles based on risk mitigation, (Generation segment) 57 2009 onwards thermal and import from Russia excluded
Slide 58: Fortum’s dividend policy aiming at increasing dividend
Dividend Fortum’s dividend policy aiming at increasing dividend Fortum dividends EUR/share 1.20 1.14 1.10 1.10 1.10 1.12 1.00 Dividend policy: 0.80 “Fortum’s dividend policy is to pay a stable, 0.60 sustainable, and over time increasing dividend.” 0.40 0.20 0.00 2017 2018 2019 2020 2021 58
Slide 59: Fortum Investor Relations and Financial Communications
IR contacts Next events: For more information, January-June Half-Year Report 2022 on 12 August 2022 please visit www.fortum.com/investors January-September Interim Report 2022 on 10 November 2022 Fortum Investor Relations and Financial Communications To subscribe Fortum's releases, please fill out t