Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (December 2009)
48 slides from Fortum Oyj's investor presentation, December 2009
Slide 1: A leading power and heat company in the Nordic area
FORTUM A leading power and heat company in the Nordic area Presentation for investors December 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: Content
Content 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 4
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: Capital returns
Capital returns Dividend per share EUR • Dividend 2008 EUR 1.00 per share, in total ~EUR 0.9 billion 1.35 Total ~ 5,965 MEUR 1.26 • Dividend policy of 50 - 60% 1.12 payout of previous year's 0.58 1.00 0.53 results on the average 0.54 0.58 0.42 0.77 0.31 0.73 0.58 0.23 0.26 0.13 0.18 1998 1999 2000 2
Slide 7: Fortum’s strategic route
Fortum’s strategic route Separation of Länsivoima Länsivoima Elnova oil businesses 45% → 65% →100% 50% → 100% E.ON Finland 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Neste IVO Divestment of Lenenergo Birka Energi Stora Birka Energi Gullspång Østfold shares 50% Fortum Kraft 50%
Slide 8: New organisational structure as of 1 October 2009
New organisational structure as of 1 October 2009 President and CEO Business Divisions Tapio Kuula Staff functions Power (Espoo) Finance Executive Vice President Executive Vice President, CFO Matti Ruotsala Juha Laaksonen Corporate Relations Heat (Stockholm) and Sustainability Executive Vice Preside
Slide 9: 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 • Approximately 85,000 shareholders • Among the most traded shares in Helsinki stock exchange • Market cap ~15 billion euros Households 6.8% Financial and insurance institu
Slide 10: 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 10
Slide 11: Fortum's European production by source
Fortum's European 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% electricity 13% Tota
Slide 12: Fortum's carbon exposure among the lowest in Europe
Fortum's carbon exposure among the lowest in Europe g CO2/kWh electricity, 2008 1200 1000 800 600 Average 350 g/kWh 400 200 41 0 GDF Suez Europe Dong Energy Enel Union Fenosa Nuon Scottish&Southern EDP CEZ Vattenfall E.ON Statkraft British Energy Verbund RWE Fortum Iberdrola Drax EDF DEI PVO Source:
Slide 13: Fortum’s investment programme
Fortum’s investment programme Nordic region, Poland and Baltic countries • Olkiluoto 3, Finland, nuclear • Swedish nuclear • Suomenoja, Finland (gas CHP) • Refurbishing of existing hydro assets • Czestochowa, Poland (coal/biomass CHP) • Tartu, Estonia (biomass/peat CHP), completed March'09 • Pärnu,
Slide 14: 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 15: Planned schedule for the implementation of Loviisa 3
Planned schedule for the implementation of Loviisa 3 15
Slide 16: Fortum today / European power markets / Russia
Fortum today European power markets Russia Financials and outlook 16
Slide 17: Key EU objectives by 2020
Key EU objectives by 2020 • Minimum reduction of EU • Implementation of CO2 emissions 20% (2020) internal energy markets • Renewables 20% (2020) • Energy efficiency +20% • Development of CO2 (2020) Competitiveness Sustainability capture and storage • Increased resources for technology development Se
Slide 18: 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 1 December 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 19: Market coupling milestones
Market coupling milestones • Market coupling between Netherlands (APX), Belgium (Belpex) and France (Powernext) since 2006 2011 • Market coupling Germany (EEX) – Denmark (Nord Pool) started 2010 on 9 November 2009. Baltic Cable (Germany – Sweden) will possibly be included later during the winter. •
Slide 20: 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 capacity MW From Nordel To Nordel Denmark - Germany 2 100 1 550 Sweden - Germany 600 600 Sweden - Poland 600 600 Norway - Netherlands 700 700 350 Total 4 000 3 450 700 • Theoretical maximum in tra
Slide 21: Nordic and Continental markets are integrating
Nordic and Continental markets are integrating – interconnection capacity could double by 2020 Additional 1400 MW link to the New interconnections 700 MW cable NO- UK could possibly could double the capacity NL studied connect Norwegian to over 8000 MW by 2020 offshore wind, too New internal Nordic
Slide 22: Nordic water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 2003 2007 2008 2009 reference level 0 Q1 Q2 Q3 Q4 Source: Nord Pool 22
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 1 December 2009 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 23
Slide 24: 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 1 December 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 Q2 Q3 Q4 2005 2006 2007 2008 2009 24
Slide 25: 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 18 November 2009 0 2005 2006 2007 2008 2009 2010 2011 * Including capacity tariff estimate. E.g 2009 11 €/MWh Source: , ATS 25
Slide 26: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Grude oil price (ICE Brent) CO2 price (NP EUA) 160 35 140 120 30 25 USD / bbl EUR / tCO2 100 80 20 60 15 40 10 20 5 0 2006 2007 2008 2009 2010 2011 0 2006 2007 2008 2009 2010 2011 Coal price (ICE Rotterdam) Gas price (ICE NBP) 240 100 200 80 GBp / therm 160 USD / t 60 1
Slide 27: Nordic power generation mix
Nordic power generation mix 160 Total Nordic generation 398 TWh in 2008 140 TWh % 120 Fossil fuels 54 13 100 TWh/a Nuclear 83 21 80 Waste 4 1 60 Biomass 20 5 40 Wind 10 3 20 Hydro * 226 57 0 Denmark Norway Sweden Finland Net import in 2008: -1.5 TWh *) Normal annual Nordic hydro generation 200 TWh,
Slide 28: Still a highly fragmented Nordic power market
Still a highly fragmented Nordic power market Power generation Electricity distribution Electricity retail 398 TWh 14 million customers 14 million customers >350 companies ~500 companies ~350 companies Fortum Fortum Vattenfall Others Others Others Vattenfall Vattenfall 30% Dong Energy E.ON Fortum 50
Slide 29: Electricity demand development
Electricity demand development Chelyabinsk Urals area Denmark Russia Tyumen Sweden Norway Finland Russia Nordic 5% 5% 0% 0% -1% -5 % -5 % -10 % -10 % -8% -8% -10% -12% -15 % -15 % -20 % -20 % Q1 2009 vs Q1 2008 Q1 2009 vs Q1 2008 -25 % Q2 2009 vs Q2 2008 -25 % Q2 2009 vs Q2 2008 Q3 2009 vs Q3 2008 Q
Slide 30: Recession has affected Nordic demand
Recession has affected Nordic demand Nordic power demand development ILLUSTRATIVE 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Illustrative forecast Actual • The recession affects the electricity consumption in the Nord
Slide 31: Fortum today / European power markets / Russia
Fortum today European power markets Russia Financials and outlook 31
Slide 32: Russia is the World’s 4th largest power market
Russia is the World’s 4th largest power market TWh 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 il a y ce c a a n na a S K az an di di pa si ad re U U an hi or In us Ko Br m Ja an C Fr N er R C h G ut So Data 2008 based on gross output. Source: BP Statistical Review of World Energy June 200
Slide 33: Fortum - a major player in Russia
Fortum - a major player in Russia OAO Fortum (former TGC-10) • Majority of the Russian territorial generating company OAO Fortum in the Urals region • OAO Fortum operates in the heart of Russia’s oil and gas producing region TGC -1 • OAO Fortum adds 18 TWh/a to Fortum’s power generation and the heat
Slide 34: 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 35: Further power market liberalisation
Further power market liberalisation Share of liberalised trade for existing capacity • Further liberalisation of energy 100 % 100 % 90 % 100 % market increased to 50% in 80 % 80 % July 2009 70 % 60 % • The rate of liberalised volume 60 % 50 % 50 % is based on 2007 balance. All 40 % new capacity is s
Slide 36: Currently 50% of electricity sold with liberalised prices
Currently 50% of electricity sold with liberalised prices Urals power price1) development Key electricity, capacity and gas prices in the OAO Fortum area 40 35 III/2009 III/2008 Change, % 30 Electricity spot price (market 700 809 -13 25 price), Urals hub, RUB/MWh €/MWh 20 Average regulated electrici
Slide 37: Investment programme of OAO Fortum
Investment programme of OAO Fortum Moscow Nyagan Tyume Tobolsk Chelyabinskn Kurgan Power generation capacity (MW) 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%
Slide 38: Efficiency improvement in Russia ~100 MEUR in 2011
Efficiency improvement in Russia ~100 MEUR in 2011 • Purchasing • Portfolio Management and Trading (PMT) • Heat regulation • Heat - technical and business improvements • Generation - technical improvements • Others 38
Slide 39: Fortum today / European power markets / Russia
Fortum today European power markets Russia Financials and outlook 39
Slide 40: Income statement
Income statement MEUR III/2009 III/2008 I-III/2009 I-III/2008 2008 LTM Sales 1 046 1 272 3 872 4 034 5 636 5 474 Expenses -760 -877 -2 612 -2 682 -3 673 -3 603 Operating profit 286 395 1 260 1 352 1 963 1 871 Share of profit of associates and jv's 3 8 -1 78 126 47 Financial expenses, net -47 -66 -12
Slide 41: Cash flow statement
Cash flow statement MEUR III/2009 III/2008 I-III/2009 I-III/2008 2008 LTM Operating profit before depreciations 414 532 1 634 1 735 2 478 2 377 Non-cash flow items and divesting activities 31 -56 50 -38 -275 -187 Financial items and fx gains/losses -51 -13 248 -93 233 574 Taxes -74 -79 -205 -279 -33
Slide 42: Key ratios
Key ratios Key ratios MEUR LTM 2008 2007 in Q3 '09 EBITDA 2 377 2 478 2 298 Net cash flow from operations 2 430 2 002 1 670 Interest-bearing net debt 6 041 6 179 4 466 Equity 8 328 8 411 8 651 Balance sheet total 19 559 20 278 17 674 Net debt/EBITDA* 2.5 2.5 2.2 Return on capital employed (%)* 13.2
Slide 43: Debt maturity profile
Debt maturity profile MEUR MEUR 2009: 193 2000 2010: 650 2011: 625 1500 2012: 500 2013: 558 1000 2014: 1.145 2015: 310 500 2016: 844 0 2017: 210 Y2009 2011 2013 2015 2017 2019+ 2018: 75 Bonds Financial institutions Other long-term debt CPs Other short-term debt 2019+: 1.746 30 September, 2009 31 Dec
Slide 44: 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 44
Slide 45: Liquidity
Liquidity MEUR Available Outstanding Total amount SHORT TERM FINANCING Commercial Paper Programmes Finnish CP Programme 429 71 500 SEK 5.000 M Swedish CP Programme 325 164 489 754 235 989 LIQUID FUNDS AND COMMITTED CREDIT LINES Committed Credit Lines Short Term 205 5 210 Long Term 2 700 0 2 700 2 90
Slide 46: Hedging of Power Generation's Nordic sales
Hedging of Power Generation's Nordic sales Status at the end of September 2009 (Status at the end of June 2009) Hedge ratio Hedge price rest of 2009 ~ 75% ~ EUR 50 per MWh (~80%) (~ EUR 50 per MWh) 2010 ~ 65% ~ EUR 44 per MWh (~65%) (~ EUR 43 per MWh) 2011 ~ 35% ~ EUR 42 per MWh (~30%) (~ EUR 42 per
Slide 47: Fortum in a strong position
Fortum in a strong position • Flexible, low cost and climate-benign generation portfolio • Russian power reform and the integration of OAO Fortum proceeding as planned • Good hedging positions • Strong financial position and liquidity • Investments for the future 47
Slide 48: @Fortum
@Fortum