Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (October 2016)
54 slides from Fortum Oyj's investor presentation, October 2016
Slide 1: FORTUM - Forerunner in clean energy
FORTUM - Forerunner in clean energy Investor / Analyst material October 2016
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 – 17 European and Nordic power markets pages 18 – 27 Fortum’s nuclear fleet pages 28 – 31 Russia pages 32 – 34 Fortum’s investment programme page 34 Historical achieved prices page 35 Interim report Q3 2016 pages 36 – 53 IR contacts pages 54 3
Slide 4: Appr. 135,000 shareholders
Appr. 135,000 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 ~14 billion euros Finnish households 11.2% Financial and in
Slide 5: Capital returns: 2015 EUR 1.10 per share ~ EUR 1 billion
Capital returns: 2015 EUR 1.10 per share ~ EUR 1 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
Slide 6: Fortum – Forerunner in clean energy
Fortum – Forerunner in clean energy 6
Slide 7: 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 8: Our current geographical presence
Our current geographical presence Nordic countries Key figures 2015 Sales EUR 3.5 bn Power Comparable operating profit EUR 0.8 bn generation Power generation 48.8 TWh Balance sheet EUR 23 bn Personnel 7,800 Heat Heat sales 3.1 TWh Russia Electricity Electricity customers 1.3 million OAO Fortum sales
Slide 9: 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, 2014 Largest global producers, 2014 Electricity customers in EU, 2014 TWh TWh Millions EDF Gazprom Enel Enel T Plus EDF E.ON/Uniper Inte
Slide 10: Biggest nuclear and hydro generators in Europe and Russia
10 50 0 100 200 300 400 500 550 600 150 250 350 450 TWh EDF Rosenergoatom 1) Formerly GDF SUEZ RusHydro NNEGC Energoatom Enel E.ON Vattenfall EuroSibEnergo 1) ENGIE Statkraft Fortum Source: Company information, Fortum analyses, 2013 figures pro forma Iberdrola RWE CEZ EnBW Axpo Verbund EDP Hidroelec
Slide 11: 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 11
Slide 12: 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 2015 in 2015 Hydro power Natural gas 33% Natural gas 75% 32% Oil 1% Peat 1% Biomass 1% Heat pumps, electricity 1% Coal 4% Waste 1% Biomass 6% Nuclear power 30% Coal 15% Total generation 75.9 TWh Total
Slide 13: Fortum's European power and heat production
Fortum's European power and heat production Fortum's European Fortum's European power generation in 2015 heat production in 2015 Hydro power Coal 45% 50% Other 1% Others 1% Biomass 2% Oil 1% Peat 4% Biomass Coal 2% Heat pumps, 31% electricity 4% Waste 6% Nuclear power 45% Natural gas 8% European gen
Slide 14: Fortum’s Nordic, Baltic and Polish generation capacity
Fortum’s Nordic, Baltic and Polish generation capacity Generation capacity MW Sweden Finland MW Hydro 4 623 Price areas MW SE1 Hydro 1 535 Nuclear 3 004 Nuclear 1 465 SE2 CHP 728 CHP 438 Hydro 1 550 SE2 FI Other thermal 389 Other thermal 377 Wind 30 Wind 30 Wind 0.4 Nordic, Baltic and Polish SE3 Gen
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, 2014 1 200 1 000 2015 64% of Fortum's total power generation CO2-free 800 97% of Fortum’s power generation in the EU CO2-free 600 400 Average 313 g/kWh 200 177 39 0 DEI ENGIE SSE Statkraft RWE Drax CEZ Vattenfall EDP E.ON EnB
Slide 17: Fortum’s renewables investment is already ramping up
Fortum’s renewables investment is already ramping up Bio, MW Power Heat Year Wind, MW Power Year Kivenlahti, Finland, Blaiken, Sweden 12 2016 80 2016 Pellet conversion Zabrze, Poland, waste/ coal Uljanovsk, Russia 35 2017 75 145 2018 CHP Solberg, Sweden 75 2018 Solar, India, MW Associated companies,
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 coupling started 11/2009 • Market coupling for Central Western Europe (DE, FR, NL, BE) since 11/2010 with a continued coupling with Nord Pool. N
Slide 19: Current transmission capacity from Nordic area is over 6,000 MW
Current transmission capacity from Nordic area is over 6,000 MW Countries Transmission capacity MW From Nordics To Nordics Denmark - Germany 2,225 2,100 Sweden - Germany 615 615 Sweden - Poland 600 600 Sweden - Lithuania 700 700 Norway - Netherlands 723 723 Finland - Estonia 1,016 1,016 320 Finland
Slide 20: Nordic, Baltic, Continental and UK markets are integrating
Nordic, Baltic, Continental and UK markets are integrating – interconnection capacity will double by 2023 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 water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 2000 2003 2014 2015 2016 reference level 0 Q1 Q2 Q3 Q4 Source: Nord Pool 21
Slide 22: Nordic year forwards
Nordic year forwards Year10 Year 10 Year11 Year 11 Year12 Year 12 Year13 Year 13 Year14 Year 14 Year15 Year 15 YearYear16 16 Year 17Year17 Year 18 Year18 Year 19 Year19 Year 20 Year20 €/MWh 25 October 2016 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
Slide 23: Wholesale price for electricity
Wholesale price for electricity EUR/MWh Nord Pool System Price Forwards 110 100 90 80 70 60 50 40 30 20 10 25 October 2016 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Source: Nord Pool, Nasdaq Commodities 23
Slide 24: Wholesale prices for electricity
Wholesale prices for electricity EUR/MWh Spot prices Forward prices 100 100 90 90 80 80 70 70 60 60 German 50 50 Nordic 40 40 Russian* 30 30 20 20 10 10 14 October 2016 00 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Nord Pool, Nasdaq Commodities, Bloomberg Finance LP, ATS, NP “Market Counci
Slide 25: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (ICE Brent) CO2 price (ICE EUA) 150 35 120 28 EUR / tCO2 USD / bbl 90 21 60 14 30 7 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Coal price (ICE Rotterdam) Gas price (ICE NBP) 250 100 200 80 GBp
Slide 26: Nordic power generation
Nordic power generation – dominated by hydro, but fossil needed TWh/a 160 Total Nordic generation 397 TWh in 2015 140 TWh % 120 Fossil fuels 32 8 100 Nuclear 77 19 80 Biomass 23 6 60 Solar 1 0.2 40 Wind 35 9 20 Hydro * 229 58 0 Denmark Norway Sweden Finland Net export in 2015: 16 TWh Source: ENTSO-E
Slide 27: 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 25 October 2016 40 40 30 30 20 20 10 10 0 0 Gas Onshore Coal Solar PV Nuclear Large Offshore 1995 2015 2026 wind cond
Slide 28: 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 (out of oper.) Unit 2: 1981 Unit 2: 1981 Unit 3: (Under construction) Unit 3: 1985 Unit 3: 1985 Generation Capacity Unit
Slide 29: 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 2015 Oskarshamn 1 80 51 63 85 68 77 72 1 12 74 60 Oskarshamn 2 90 78 76 86 75 90 77 81 33 0 0 Oskarshamn 3 85 95 88 70 17 31 68 69 77 75 79 Forsmark 1 85 76 81 88 88 93 79 88 87 94 79 Forsmark 2 9
Slide 30: Variety of technologies and ages
Variety of technologies and ages Unit MWe Share Share Commercial Age Type/ Supplier (Net) (%) (MWe) operation Generation 1) Loviisa 1 498 100,0 498 1977-05-09 38 PWR / 1 AEE (Atomenergoexport) Loviisa 2 500 100,0 500 1981-01-05 35 PWR / 1 AEE (Atomenergoexport) Olkiluoto 1 880 26,6 234 1979-10-10 37
Slide 31: 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 500 M€ 500 M€ responsibility Responsibility of c
Slide 32: 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 • 26 TWh power generation, 26 TWh heat production in 2015 • Investment programme to add 85%, almost 2,200 MW to power generation capacity
Slide 33: 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 35 III/16 III/15 I-III/16 I-III/15 2015 LTM 30 Electricity spot price (market 1,125 1,051 1,052 1,041 1,047 1,055 25 price), Urals hub, RUB/MWh € / M
Slide 34: 85% increase in power generation capacity in Russia through the investment program
85% increase in power generation capacity in Russia through the investment program Year Supply Power plant Fuel type Existing New Production type Total starts capacity investments capacity < 2011 Tyumen CHP-2 Gas 755 CHP/Condensing 755 Chelyabinsk CHP-2 Gas, coal 320 CHP/Condensing 320 Argayash CHP
Slide 35: Hedging improves stability and predictability
Hedging improves stability and predictability 2009 onwards thermal and import from Russia excluded 35
Slide 36: Interim Report January-September 2016
Interim Report January-September 2016 Fortum Corporation 25 October 2016
Slide 37: Summary of the third quarter of 2016
Summary of the third quarter of 2016 – The third quarter is always challenging due to the seasonality of our business; significantly lower hydro production volumes continued to decline the results – The achieved power price was higher – Nuclear availability was good and hence volumes were higher – T
Slide 38: Swedish proposed energy taxation
Swedish proposed energy taxation • The nuclear capacity tax will be reduced to 1,500 SEK/MW per month from 1 July 2017 and abolished on 1 January 2018 – In 2016, the estimated nuclear capacity tax on Fortum is approximately EUR 84 million – In 2017, the tax is estimated to decrease with approximatel
Slide 39: Market conditions in the third quarter of 2016
Market conditions in the third quarter of 2016 Some positive signs were seen in power market, mainly driven by commodity and emission prices; forward market prices increased at the very end of the quarter Nordic countries • The electricity consumption totalled 80 (81) TWh • The system spot price and
Slide 40: Price development in the Nordic region and Russia
Price development in the Nordic region and Russia +7% +89% +10% +10% NOTE: Achieved power price in roubles also increased 11% Includes capacity income 40
Slide 41: Q3/2016: Low hydro production volumes affected seasonally weak quarter
Q3/2016: Low hydro production volumes affected seasonally weak quarter Key figures (MEUR), continuing operations III/2016 III/2015 I-III/2016 I-III/2015 2015 LTM Sales 732 661 2,489 2,495 3,459 3,453 Comparable EBITDA 151 163 717 787 1,102 1,033 Operating profit -6 -682 430 -188 -150 468 Comparable
Slide 42: Generation
Generation • Hydro volumes somewhat lower than average – volumes historically high in comparison period • Market prices started to increase at the end of the quarter • Positive taxation decision in Sweden – different forms of CO2-free production now treated more equally MEUR III/16 III/15 I-III/16 I
Slide 43: City Solutions
City Solutions • Acquisition of Ekokem finalised and the company has been consolidated into Fortum as of end of August • Higher sales and marketing costs burdened electricity sales business MEUR III/16 III/15 I-III/16 I-III/15 2015 LTM Sales 237 185 894 835 1,187 1,246 Comparable EBITDA 15 12 133 12
Slide 44: Russia
Russia • The new capacity has been the key driver for earnings growth, as the investment program in Russia has been completed • Comparable EBITDA for the last 12 months approximately EUR 300 million MEUR III/16 III/15 I-III/16 I-III/15 2015 LTM Sales 175 154 606 627 893 872 Comparable EBITDA* 43 27
Slide 45: Q3: Result was burdened by lower hydro volumes
Q3: Result was burdened by lower hydro volumes Comparable operating profit, EUR million • 2.3 TWh lower hydro volumes • 2.9 EUR/MWh higher achieved price • Higher CSA income; new CSA capacity • Strengthened Russian rouble EUR +4 million 45
Slide 46: I-III/2016: Result was burdened by lower achieved price and low hydro volumes
I-III/2016: Result was burdened by lower achieved price and low hydro volumes Comparable operating profit, EUR million • 1.7 EUR/MWh lower achieved price • 2.7 TWh lower hydro volumes • EUR 32 million higher CSA provision release in 2015 • Russian rouble EUR -15 million 46
Slide 47: Financials
Financials
Slide 48: Comparable and reported operating profit
Comparable and reported operating profit Comparable Reported Comparable Reported MEUR operating profit operating profit operating profit operating profit III/2016 III/2015 III/2016 III/2015 I-III/2016 I-III/2015 I-III/2016 I-III/2015 Generation 77 102 18 -651 330 419 261 -332 City Solutions -16 -13
Slide 49: Income statement
Income statement MEUR III/2016 III/2015 I-III/2016 I-III/2015 2015 LTM Sales 732 661 2,489 2,495 3,459 3,453 Other income and expenses -674 -582 -2,034 -1,930 -2,651 -2,755 Comparable operating profit 58 79 455 565 808 698 Items affecting comparability -65 -761 -25 -752 -958 -231 Operating profit -6
Slide 50: Cash flow statement
Cash flow statement MEUR III/2016 III/2015 I-III/2016 I-III/2015 2015 LTM Cash from operating activities: Realised FX gains/losses -16 46 112 249 292 155 Other funds from operations 91 115 325 587 907 645 Change in working capital 26 -10 34 60 29 3 Cash from operating activities, cont. operations 10
Slide 51: Debt portfolio and average interest rate on the balance sheet date
Debt portfolio and average interest rate on the balance sheet date 30 September 2016 Maturity profile • Total interest-bearing debt EUR 5,185 million 1 500 – Average interest 3.4% 1 250 (2015: 3.7%) 1 000 – Portfolio mainly in EUR and 750 SEK with average interest cost 2.0% (2015: 2.6%) 500 – EUR 73
Slide 52: Fortum has a strong financial position
Fortum has a strong financial position MEUR LTM 2015 Target Comparable EBITDA, continuing operations 1,033 1,102 Comparable EBITDA, total Fortum 1,033 1,265 Interest-bearing net debt, total Fortum -137 -2,195 Comparable net debt/EBITDA, total Fortum -0.1 -1.7 Around 2.5 ROCE % Return on capital empl
Slide 53: Outlook
Outlook Nordic markets • Fortum continues to expect that the annual electricity demand growth will be approximately 0.5% on average • Electricity is expected to continue to gain share of total energy consumption Russia • The targeted operating profit level (EBIT) for the Russia segment, RUB 18.2 bil
Slide 54: Fortum Investor Relations and Financial Communications
Fortum Investor Relations and Financial Communications For more information, please visit www.fortum.com/investors Sophie Jolly Vice President Next events: +358 (0)10 453 2552 CMD 2016 on 16 November 2016 sophie.jolly@fortum.com Full year 2016 results on 2 February 2017 Rauno Tiihonen Manager +358 (