Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (November 2021)
62 slides from Fortum Oyj's investor presentation, November 2021
Slide 1: Equity story of FORTUM – For a cleaner world
Equity story of FORTUM – For a cleaner world Investor / Analyst material November 2021
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 – 21 Energy market transition 22 – 26 Interim report Q3 2021 27 – 47 Appendices 48 European and Nordic power markets 49 – 57 Fortum’s Nordic power generation in detail 58 Fortum’s evolution and strategic route 59 Historical achieved prices 60 Divid
Slide 4: Fortum in brief
Fortum in brief Fortum in brief Power generation assets Key figures 20201 Sales EUR 49.0 bn Comparable EBITDA EUR 2.4 bn Total assets EUR 57.8 bn Personnel 19,933 Main businesses1 Sales (€) Volume2 Capacity India Power 20.8 bn 142 TWh 50.3 GW Gas 22.4 bn ~370 TWh 7.6 bcm3 Heat 0.8 bn 30 TWh 19.5 GW
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 5
Slide 6: Fortum is the third largest CO2-free power generator in Europe
6 100 200 0 300 500 600 400 TWh EDF Rosenergoatom EPH incl. LEAG Europe RusHydro NNEGC Energoatom Vattenfall Fortum+Uniper En+ Enel ENGIE Iberdrola Statkraft RWE Source: Company information, Fortum analyses, 2019 figures pro forma. CEZ EnBW Verbund E.ON Axpo EDP Slovenské elektrárne Hafslund E-CO Hi
Slide 7: Renewables and CO2-free power generation capacity of Fortum
Fortum in brief Renewables and CO2-free power generation capacity of Fortum 14.8 GW Hydro Wind & Solar Nuclear 8.4 GW 1.9 GW 4.5 GW 7
Slide 8: Fortum is well positioned for the energy transition
Fortum in brief Fortum is well positioned for the energy transition Third largest CO2-free power generator in Europe with growing portfolio of wind and solar Significant provider of flexible hydro and gas-fired power generation Major provider and trader of gas for Europe’s energy and industrial cust
Slide 9: Fortum's CO2-free power generation increases by ~60% with Uniper
Fortum in brief Fortum’s CO2-free power generation increases by ~60% as Uniper is consolidated as a subsidiary Fortum's power generation, TWh 150 Fortum*: Other Coal • CO2-free generation 120 Gas 45% CO2-free • Gas-fired power 90 generation 45% 60 • Share of coal-fired generation 9% 30 • Share of co
Slide 10: Fortum is a forerunner in sustainability
Fortum in brief 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
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 2020 * Fortum's heat production in 2020 * Natural gas 45% Natural gas 56% Total Total Waste1% power generation Others 1% heat production Wind, solar 1% Heat pumps, Bio 1% 142.1 TWh Hydropower 23% ele
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 • EU coal/nuclear capacity closures • CO2-free generation: prices and volumes, hedging, PPAs • Gr
Slide 13: Our strategy – Driving the clean energy transition
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 (1, 2) • CO2 emission reduction of at least 50% by 2030 in European generation (1, 2) • Scope 3 target for the i
Slide 15: Fortum – A leader in clean power and gas
Fortum’s strategy Fortum – A leader in clean power and gas Core Grow Strategic transformation Transform own operations Assets and businesses that have Businesses with potential Businesses and assets outside to carbon neutral a role in energy transition and to grow profitably strategic scope generate
Slide 16: 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 17: Indicative capital expenditure for growth investments 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 18: Growing towards gigawatt scale in solar and wind
Fortum’s strategy Fortum is growing towards gigawatt scale target in solar and wind power generation Ånstadblåheia 10 MW PORTFOLIO STATUS CAPACITY, MW FORTUM SHARE, MW SUPPLY STARTS/STARTED (Fortum share) FINLAND 90 18 Nygårdsfjellet 6 MW (Fortum share) ● Kalax Operational 90 18 Q4 2020 Sørfjord 20
Slide 19: 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 20: Return targets for new investments
Fortum’s strategy Return targets for new investments Return targets for new investments: Group 2021 capital expenditure, including maintenance and WACC+ hurdle rate: excluding acquisitions, +100 bps for green investments is estimated to be EUR 1.4 billion +200 bps for other investments • Maintenance
Slide 21: Fortum and Uniper cooperation 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 22: Europe committed to be a forerunner in reducing GHG emissions
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 23: 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 23
Slide 24: 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 end-2023 • Several interconnectors are currently under DK1-DE maximum transmission capacity has been Current Nordic/Baltic 1 upgraded from 1,780 MW to 2,500 MW in J
Slide 25: Volatility in the European power market increases 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 26: 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 European generation CO2 net emissions: Carbon neutral in our European generation by 2035 at the latest 2019 2030 2035 Transform own 100% -50% Carbon neutral operations to carbon • Curren
Slide 27: Interim Report January-September 2021
Interim Report January-September 2021 Fortum Corporation 12 November 2021
Slide 28: Markus Rauramo, President and CEO
Markus Rauramo President and CEO 28
Slide 29: Strong performance in an exceptional commodity market
Strong performance in an exceptional commodity market Comp. OP1 Comp. EPS2 OCF3 Leverage4 Q3 Performance affected by extraordinary market fundamentals 9M Higher achieved power prices and higher generation volumes with Comp. OP Comp. EPS OCF3 strong physical optimisation Uniper fully consolidated sin
Slide 30: Extraordinary high energy commodities driving power prices
Extraordinary high energy commodities driving power prices Energy commodities reaching new record highs EUR / MWh USD/ t/ t CoalCoal EUR / MWh Gas Gas price (TTF Front-Month) price (TTF) USD price price (ICE API2 Front-Month) (ICE Rotterdam) 125 125 300 300 • Global commodity prices have 100 100 240
Slide 31: Gas market driven by economic recovery and supply constraints
Gas market driven by economic recovery and supply constraints Tight market conditions drive global European gas supply decreased vs European gas storages are gas prices 2019 below average levels Monthly avg. prices • Market tightness is a result of: • Majority of European supply sources • European g
Slide 32: Q3, normally weak – now supported by strong market fundamentals
Q3, normally weak – now supported by strong market fundamentals Reconciliation of comparable operating profit (EUR million) Generation higher volumes and higher achieved prices with successful physical optimisation Russia improved underlying performance offsetting lower contribution from CSAs City S
Slide 33: Q1-Q3, almost all segments improved
Q1-Q3, almost all segments improved – significant impact from Uniper results Reconciliation of comparable operating profit (EUR million) Generation higher achieved power price Russia one-off effect and higher power prices offsetting negative FX City Solutions higher power and heat sales Consumer Sol
Slide 34: Determined execution of our strategy continues
Determined execution of our strategy continues Decarbonisation progressing Renewables growth ramping Balance sheet strengthened • Discontinuing the use of coal in • Fortum and its wind JV in Russia wins • Closing of 3.6 billion of divestments in Fortum Russia by the end of 2022 is wind auction with
Slide 35: Fortum and Uniper cooperation gearing up
Fortum and Uniper cooperation gearing up • Cooperation is moving ahead – A joint organisation established at Fortum for the Nordic Hydro and Physical Trading Optimisation with 400 employees, operations starting in Q1 2022 – Uniper developing for renewables and hydrogen business – Cooperation in nucl
Slide 36: Bernhard Günther, CFO
hn ro) = Ww c t=] © me] © < c in wo a (°) re 1S) @fortum ©. For a.elaaner world
Slide 37: Key financials
Key financials MEUR III/ III/ I-III/ I-III/ FY LTM 2021 2020 2021 2020 2020 9M strong financial KPIs Sales 23,700 14,049 62,322 27,736 49,015 83,601 LTM comparable EBITDA at Comparable EBITDA 574 132 2,401 1,187 2,434 3,648 EUR 3.65 billion Comparable operating profit 260 -179 1,466 416 1,344 2,394
Slide 38: Reported income statement dominated by changes in fair values
Reported income statement dominated by changes in fair values Divestment of Stockholm Exergi and Baltic district heating business Hedge accounting is not applied, mainly in Uniper Impacted by interest income Tax impact from fair value losses 38
Slide 39: Strong cash flow management to secure financial flexibility
Strong cash flow management to secure financial flexibility MEUR III/ III/ I-III/ I-III/ FY LTM 2021 2020 2021 2020 2020 Comparable EBITDA 574 132 2,401 1,187 2,434 3,648 Non-cash and other items 533 178 914 374 293 833 Paid net financial costs, income taxes and dividends -33 -38 -342 -267 -308 -383
Slide 40: Generation: Higher achieved power prices
Generation: Higher achieved power prices Q3 2021 vs. Q3 2020 • Comparable operating profit +80% mainly due to – Higher achieved power prices of EUR 43.7, +6.6 per MWh – Increased nuclear and hydro volumes • Higher achieved power price – Higher spot prices and successful physical optimisation 9M 2021
Slide 41: Nordic hydro reservoirs below average levels
Nordic hydro reservoirs below average levels in Q3, high spot prices influenced by Continental European power prices Reservoir content (TWh) • Low precipitation from the summer continued in Q3 2021 Hydro reservoirs 120 120 and led to a significant deficit in water reservoirs. 100 100 80 80 • At the
Slide 42: Russia: Solid underlying performance
Russia: Solid underlying performance Q3 2021 vs. Q3 2020 • Comparable operating profit up by 13% to EUR 45 million – Slight negative effect of changes in CSA payments, lower bond yield, and higher power prices – Impact of the Russian rouble exchange rate was EUR 4 million – Russian power demand reco
Slide 43: City Solutions: Performance improved
City Solutions: Performance improved Q3 2021 vs. Q3 2020 • District heating with higher power prices and higher power sales • Almost all business areas improved its result from the previous year, especially in the areas of waste and metals recycling business • Recorded tax-exempt capital gains of EU
Slide 44: Consumer Solutions: Challenging market environment
Consumer Solutions: Challenging market environment Q3 2021 vs. Q3 2020 • Both gas and electricity volumes increased • Comparable operating profit slightly down due to negative customer development combined with tough competition in the Nordic market 9M 2021 vs. 9M 2020 • Challenging market environme
Slide 45: Uniper: Solid underlying performance
Uniper: Solid underlying performance Q3 2021 vs. Q3 2020 • Global Commodities business was significantly above previous year due to higher result in the gas midstream business • European Generation business benefitted from higher nuclear and thermal production • Russian Power Generation’s Berezovska
Slide 46: Leverage below target and good access to debt capital market
Leverage below target and good access to debt capital market Solid credit metrics debt debt 'BBB' long-term issuer credit rating, stable outlook netnet 'BBB' long-term issuer credit rating, Financial stable outlook Financial Target ratio: < 2x Financial net debt / Comp. EBITDA Fortum’s objective: Ma
Slide 47: Outlook
Outlook Hedging 2021 Estimated annual capital Russia Generation Nordic hedges: expenditure, including maintenance CSA changes: For the rest of 2021: 75% hedged at EUR 34 and excluding acquisitions, of Lower bond yield, 6.3% (7.6%) per MWh For 2022: 65% hedged at EUR 32 per MWh EUR 1,400 million Chan
Slide 48: Appendices
Appendices @fortum For a cleaner world
Slide 49: Western European countries exiting coal during this decade
European and Nordic power markets Western European countries exiting coal during this decade • Sweden and Austria closed their last coal plants during 2020 FI: Phase-out • France is committed to phase out coal by 2022 DE: Phase-out SE: Last by mid-2029 by 2038 plant closed • Portugal has 2023 as nat
Slide 50: Decarbonisation requires other sectors to join
European and Nordic power markets Decarbonisation requires other sectors to join The new 2030 emissions target will tighten the EU ETS CO2 abatement cost ranges for different sectors Abatement cost range Proposed rebasing Proposed target for 2030 Coal-to-gas switching range • The EU has agreed to in
Slide 51: 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, 2019 Largest European gas storage operators, 2018 Largest global producers, 2019 TWh TWh TWh EDF STOGIT Gazprom Rosenergoatom T Plus Fortum+Unipe
Slide 52: Wholesale power prices
Wholesale power prices EUR/MWh Spot prices Forward prices 200 200 175 175 150 150 125 125 German 100 100 Nordic 7575 Russian* 5050 2525 00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Forwards 9 November 2021 Rolling 7-day average spot price * Including weighted average capa
Slide 53: Nordic year forwards
European and Nordic power markets Nordic year forwards Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 forward Year 19 forward Year 20 forward Year 21 Year 22 Year 23 Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22 Year23 €/MWh 9 Nov
Slide 54: German and Nordic forward spread
European and Nordic power markets German and Nordic forward spread Spot price Aug Sep Oct EUR/MWh Nordic and German daily spot prices in 2020 – 2021 • Exceptional levels in European gas, coal and carbon prices led to very 325 325 2021 2021 2021 strong power price development in the Continental Europ
Slide 55: CO2 price and Nordic spot power price
European and Nordic power markets CO2 price and Nordic spot power price EUR / tCO2 CO2 price (EUA DEC 2021) & Nordic sys spot price EUR / MWh 120 120 CO2 price (EUA DEC 2021) Nordic system spot price 100 100 80 80 60 60 40 40 20 20 0 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2020 2021 Sp
Slide 56: CO2 price and Nordic forward price
European and Nordic power markets CO2 price and Nordic forward price EUR / tCO2 CO2 price (EUA DEC 2021) & Year 22 forward price EUR / MWh 70 70 CO2 price (EUA DEC 2021) Nordic year 2022 forward 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2020 2021 Unt
Slide 57: Nordic forward prices and Nordic sys spot averages
European and Nordic power markets Nordic forward prices and Nordic sys spot averages Year 18 forward Year 19 forward Year 20 forward Sys spot average 2018 Sys spot average 2019 Sys spot average 2020 EUR/MWh 50 Year 2018 forward System spot 2018 average Year 2019 forward System spot 2019 average Year
Slide 58: 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 6,448 1,771 Price areas Hydro 1,553 Nuclear 4,8181 1,9961 NO4, Wind 993 Nuclear 1,487 NO4 SE1 CHP 1,185 2,4 4492 NO1, CHP 24 CHP 375 Other t
Slide 59: 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 60: Hedging improves stability and predictability
Historical achieved prices Hedging improves stability and predictability – principles based on risk mitigation, (Generation segment) 60 2009 onwards thermal and import from Russia excluded
Slide 61: Fortum's dividend policy aiming at increasing dividend
Dividend Fortum’s dividend policy aiming at increasing dividend Fortum dividends EUR/share 1,20 1.12 1.10 1.10 1.10 1.10 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 2016 2017 2018 2019 2020 61
Slide 62: Fortum Investor Relations and Financial Communications
Next events: Fortum Corporation’s Financial Statements Bulletin for the year 2021 will be published on 3 March 2022 Fortum's Annual General Meeting 2022 is planned to be held on 5 April 2022 The ex-dividend date, 6 April 2022 The dividend payment date, 14 April 2022 January-March Interim Report 2022