Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (February 2019)
65 slides from Fortum Oyj's investor presentation, February 2019
Slide 1: FORTUM – For a cleaner world
FORTUM – For a cleaner world Investor / Analyst material February 2019
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 today 4 – 20 European and Nordic power markets 21 – 30 Fortum’s nuclear fleet 31 – 34 Russia 35 – 37 Thermal capacity in Russia 37 Historical achieved prices 38 Interim Report Jan-Sep 2018 39 – 63 Debt portfolio as of 30.9.2018 64 IR contacts 65 3
Slide 4: Appr. 123,000 shareholders
Appr. 123,000 shareholders • Power and heat company in the Nordic Finnish households countries, Russia, Poland and the Baltics 9.5% Financial and • Listed at the Helsinki Stock Exchange insurance institutions 1.6% since 1998 Other Finnish • Among the most traded shares on investors 7.3% the Nasdaq H
Slide 5: Capital returns: 2018 EUR 1.10 per share
Capital returns: 2018 EUR 1.10 per share ~ EUR 1 billion* Fortum’s dividend policy is based on 5 year dividend per share (EUR) history the following preconditions: • The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported 1,4 1.3 by the compan
Slide 6: Positioning Fortum for the decade of electricity
Positioning Fortum for the decade of electricity – For a cleaner world Illustrative Profitability 4. Build options for significant new businesses 3. Drive focused growth in the power value chain Increasing uncertainty 2. Ensure value creation from investments and portfolio optimisation Competitive 1
Slide 7: Fortum's strategic priorities in a changing energy market
Fortum’s strategic priorities in a changing energy market 1. Pursue operational excellence and 2. Ensure value creation from investments increased flexibility and portfolio optimisation • Ensure benchmark performance • Increase shareholder value from Uniper • Focus on cash flow and efficient use of
Slide 8: Our strategic route
Our strategic route Skandinaviska Birka Energi Länsivoima Elnova Østfold Elverk 50% Fortum →100% 50% → 100% 50% Stockholm Gullspång merged Shares in with Stockholm Energi Hafslund Gullspång Stora Kraft Birka Energi TGC-1 E.ON Divestment 50% → 100% established Finland of Lenenergo Shares in shares Lä
Slide 9: Our current geographical presence
Our current geographical presence NORDIC COUNTRIES RUSSIA KEY FIGURES 2018 Power generation PAO Fortum Sales EUR 5.2 bn 43.5 TWh Comparable Heat sales Power generation operating profit EUR 1.0 bn 5.9 TWh 29.5 TWh Balance sheet EUR 22 bn Electricity customers Heat sales Personnel 8,300 2.4 million 20
Slide 10: Still a highly fragmented Nordic power market
Still a highly fragmented Nordic power market Fortum has largest electricity customer base in the Nordics Power generation in 2017 Electricity retail 402 TWh 15 million customers >350 companies ~350 companies Vattenfall Others Fortum Others Vattenfall 37% Statkraft 52% Ørsted E.ON BKK Fjordkraft Ørs
Slide 11: 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, 2016 Largest global producers, 2016 Electricity customers in EU, 2016 TWh TWh Millions EDF Gazprom Enel RWE T Plus Rosenergoatom Inter R
Slide 12: Biggest nuclear and hydro generators in Europe and Russia
Biggest nuclear and hydro generators in Europe and Russia 1) Formerly Natural Gas Fenosa 12 Source: Company information, Fortum analyses, 2016 figures pro forma
Slide 13: Fortum in the Nordic electricity value chain
Fortum in the Nordic electricity value chain Large customers Nordic wholesale market Power Retail generation customers Power exchange and Private customers, bilateral agreements small businesses 13
Slide 14: Fortum's power and heat production by source
Fortum's power and heat production by source Fortum's power generation in 2018 Fortum's heat production in 2018 Natural gas 38% Natural gas 64% Solar 0.5% Total Total Waste 0.5% Nuclear Others 1% generation power Peat 1% production Wind 1% Biomass 1% 74.6 TWh 30% Heat pumps, 29.8 TWh Coal 3% electri
Slide 15: Fortum's European power and heat production by source
Fortum's European power and heat production by source Fortum's European power generation in 2018 Fortum's heat European production in 2018 Nuclear power 50% Coal 28% Biomass 24% Natural gas 1% European European Wind 1% generation Others 2% production Waste 1% 44.7 TWh 9.4 TWh Biomass 2% Peat 4% Coal
Slide 16: Fortum's Nordic, Baltic and Polish generation capacity
Fortum’s Nordic, Baltic and Polish generation capacity GENERATION CAPACITY MW NORWAY MW FINLAND MW Hydro 4 672 Price areas Hydro 1 548 Nuclear 2 819 NO4 SE1 NO4, Wind 82 Nuclear 1 485 CHP 785 NO1, CHP 20 CHP 451 Other thermal 376 Generation capacity 102 Other thermal 376 SE2 Wind 159 Generation capa
Slide 17: Fortum a forerunner in sustainability
Fortum a forerunner in sustainability We engage our customers and society to drive the change towards a cleaner world. Our role is to accelerate this change by reshaping the energy system, improving resource efficiency and providing smart solutions. This way we deliver excellent shareholder value. F
Slide 18: Fortum's carbon exposure among the lowest in Europe
Fortum's carbon exposure among the lowest in Europe g CO2/kWh electricity, 2017 974 879 2018 57% of Fortum's total power generation CO2-free 96% of Fortum’s power generation in the EU CO2-free 682 525 476 456 443 411 407 362 307 307 FORTUM 286 TOTAL Average 290 181 174 166 FORTUM 151 139 78 EU 70 52
Slide 19: Growing towards gigawatt scale target in solar and wind
Fortum is growing towards gigawatt scale target in solar and wind power production PORTFOLIO TECHNOLOGY STATUS CAPACITY FORTUM SUPPLY STARTS/ Ånstadblåheia 50 MW MW SHARE, MW STARTED NORWAY 179 179 Sørfjord 97 MW Nygårdsfjellet Wind Operational 32 32 2006 and 2011 Blaiken 37 MW (Fortum share) Ånstad
Slide 20: Fortum is well positioned for decarbonisation
The decades of electricity will affect several sectors – and Fortum is well positioned for decarbonisation Global climate Electricity demand challenge (indicative) (2018-2050) Sector Future solutions, examples Fortum’s current offering, examples CO2-free generation, hydrogen, Power Nuclear, hydro, s
Slide 21: Europe needs to eliminate CO2 emissions to reach climate goals
Europe needs to eliminate CO2 emissions to reach climate goals 77,000 000 66,000 000 Greenhouse gas emissions European emissions (MtCO2 eq.) 55,000 000 Coal Power 44,000 000 - 40% (minimum targets from 1990 level) 33,000 000 Transport1 Oil - 60% Energy-related Buildings2 emissions 22,000 000 Gas Ind
Slide 22: Building the utility of the future
Building the utility of the future FUTURE UTILITY Hydrogen and methane for Power-to-Gas traffic and industrial use Sustainable materials • Sustainable hydrogen Hydrogen, methane • Recycling production and excess heat Electricity • Energy recovery • Synthetic “clean” gas production UTILITY TODAY Elec
Slide 23: Market coupling milestones – Cross-border power flows
Market coupling milestones – Cross-border power flows optimised by power exchanges • Day-ahead market coupling between NL, BE and FR since 2006 2014 • Germany – Nord Pool coupling started 11/2009 2018-2020 • Market coupling for Central Western Europe (DE, FR, NL, BE) since 11/2010 with 2015 a contin
Slide 24: 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 723 723 320 Finland - Estonia 1,016 1,016 Finland
Slide 25: Interconnection capacity will double by end-2023
Nordic, Baltic, Continental and UK markets are integrating – Interconnection capacity will double by end-2023 The Northern Seas Offshore Grid and the Baltic New interconnections will double the Energy Market Integration Plan are included as Nordic export capacity to over 12,000 MW priority electrici
Slide 26: Nordic year forwards
Nordic year forwards Year10 Year 20 Year11 Year 19 Year12 Year 10 Year13 Year 11 Year14 Year 12 Year15 Year 13 Year16 Year 14 Year17 Year 15 Year18 Year 16 Year19 Year 17 Year20 Year 18 €/MWh 29 January 2019 70 Year19 Year20 60 50 Nov Dec Jan 2018 2018 2019 40 30 20 10 0 2008 2009 2010 2011 2012 201
Slide 27: Wholesale power prices
Wholesale power prices 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 29 January 2019 00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 * Including weighted average capacity price 27 Source: Nord Pool, Bloomberg Finance
Slide 28: Power Generation in the Baltic Rim in 2017
Power Generation in the Baltic Rim in 2017 (2016) Hydro NORDICS BALTICS Nuclear Sweden 2017 TWh % TWh % Fossil fuel 159 TWh Biomass (152) Hydro *221 55 6 25 Waste Wind Finland Nuclear 85 21 - - 65 TWh Solar (66) Others Norway Fossil fuel 26 7 12 55 149 TWh (149) Biomass 24 6 2 9 Estonia 11 TWh (10)
Slide 29: Northern European conventional capacity decreasing
Northern European conventional capacity decreasing DATE CAPACITY AREA UNIT/ COMMENT Estimated annual net changes in nuclear TRANSMISSI ON and thermal capacity 1.10.2018 - 1100 MW DE Lignite reseve Niederaußem E & F and Jänschwalde F moved to lignite reserve MW 31.12.2018 - 473 MW DE Coal Lünen 6&7,
Slide 30: 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 Futures 50 29 January 2019 50 40 40 30 30 20 20 10 10 0 0 Offshore 1995 2019 2029 Solar PV Onshore Gas Large Coal Nuclear wind in S
Slide 31: Fortum's nuclear fleet
Fortum’s nuclear fleet LOVIISA OLKILUOTO OSKARSHAMN FORSMARK Commercial Unit 1: 1977 Unit 1: 1978 Unit 1: 1972* Unit 1: 1980 operation started Unit 2: 1981 Unit 2: 1980 Unit 2: 1974* Unit 2: 1981 Unit 3: (Under construction) Unit 3: 1985 Unit 3: 1985 Generation Capacity Unit 1: 507 MW Unit 1: 890 MW
Slide 32: Fortum's nuclear power in the Nordics
Fortum's nuclear power in the Nordics LOAD 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 FACTOR (%) Oskarshamn 1* 80 51 63 85 68 77 72 1 12 74 60 81 82 0 Oskarshamn 2* 90 78 76 86 75 90 77 81 33 0 0 0 0 0 Oskarshamn 3 85 95 88 70 17 31 68 69 77 75 79 83 77 87 Forsmark 1 85 76
Slide 33: Variety of technologies and ages
Variety of technologies and ages UNIT MWE (NET) SHARE (%) SHARE COMMERCIAL AGE TYPE/ SUPPLIER (MWE) OPERATION GENERATION 1) Loviisa 1 507 100,0 507 1977-05-09 41 PWR / 1 AEE (Atomenergoexport) Loviisa 2 507 100,0 507 1981-01-05 37 PWR / 1 AEE (Atomenergoexport) Olkiluoto 1 890 26,6 234 1979-10-10 39
Slide 34: Third party nuclear liability in case of severe accident
Third party nuclear liability in case of severe accident Law approved by Parliament In force since 1 January 2012 in 2010, requires separate decision from Government to come into force. Unlimited company responsibility Convention parties Company responsibility State responsibility requires 3rd party
Slide 35: Fortum - a major player in Russia
Fortum - a major player in Russia PAO Fortum (former TGC-10) • Operates in the heart of Russia’s oil and gas producing region, fleet mainly gas-fired CHP capacity TGC-1 • 26 TWh power generation, 20 TWh heat production in 2017 Investment programme to add 85%, almost 2,200 MW to power generation capa
Slide 36: Day ahead wholesale market prices in Russia
Day ahead wholesale market prices in Russia Key electricity, capacity and gas prices in the PAO Fortum area IV/18 IV/17 2018 2017 Electricity spot price (market price), Urals hub, RUB/MWh 1,099 1,038 1,043 1,041 Average regulated gas price, Urals region, RUB 1000 m3 3,883 3,755 3,801 3,685 Average c
Slide 37: Thermal power generation capacity in Russia
Thermal power generation capacity in Russia at 31.12.2017 YEAR SUPPLY POWER FUEL CCS CSA PRODUCTION TOTAL STARTS PLANT TYPE CAPACITY CAPACITY TYPE CAPACITY < 2011 Tyumen CHP-2 Gas 755 CHP/Condensing 755 Chelyabinsk CHP-2 Gas, coal 320 CHP/Condensing 320 Argayash CHP Gas, coal 195 CHP/Condensing 195
Slide 38: Hedging improves stability and predictability
Hedging improves stability and predictability - principles based on risk mitigation 38 2009 onwards thermal and import from Russia excluded
Slide 39: Financial Statements 2018
Financial Statements 2018 Fortum Corporation 1 February 2019
Slide 40: 2018 Highlights
2018 Highlights • Strategy updated – financial targets and dividend policy unchanged • Uniper as an associated company – Year-end ownership 49.99% • Higher Nordic power price in 2018 • Low hydro inflows and reservoir levels • Volatile commodity and CO2 prices – CO2 price tripled during the year • Co
Slide 41: Q4 2018 – Higher achieved price and nuclear volumes
Q4 2018 – Higher achieved price and nuclear volumes partly offset by lower hydro volumes • Nordic power price up +56% in Q4 Y/Y • Low hydro inflows and reservoir levels • Volatile commodity and CO2 prices • Comparable EBITDA at EUR 473 million, +12% • Comparable operating profit at EUR 333 million,
Slide 42: Q4 2018 Highlights
Q4 2018 Highlights Strategy Fortum and Lidl updated - signed Financial agreement to targets utilise excess unchanged heat 50 MW wind Operation of Decision to Valo commissioned 50 MW wind at install Nordic’s Ventures with in Ulyanovsk site biggest battery Google Capital Ånstadblåheia, (JV in Russia)
Slide 43: Nordic water reservoirs in Q4 below reference and 2017 levels
Nordic water reservoirs in Q4 below reference and 2017 levels – some improvement since the historically low levels in Q3 Reservoir content (TWh) Q4 2018 by country • Year 2018 was characterised by 120 very dry first half and high precipitation during the fall 100 • Earlier and more rapid than normal
Slide 44: Volatile coal and gas prices
Volatile coal and gas prices USD / t Coal price (ICE Rotterdam) 250 The global coal market was supported by continued strong demand growth in China in the first half of the year, requiring strong import volumes from the 200 international market 150 • However, China’s macroeconomic outlook began to w
Slide 45: CO2 price tripled in 2018
CO2 price tripled in 2018 EUR / tCO2 CO2 price (ICE EUA) 35 The EU ETS experienced a major upheaval as the market digested the effects of the Market Stability Reserve, started in 2019 to virtually eliminate the surplus of 28 allowances by 2023 21 • The EUA price tripled during 2018 anchored in the E
Slide 46: The MSR introduces tightness to carbon market
The MSR introduces tightness to carbon market – in 2018 coal-to-gas switching was modest due to high gas price Linear reduction factor (LRF) tightens the market Market stability reserve restores scarcity Abatement from coal to gas switching by reducing future auction volumes depends on coal and gas
Slide 47: Regulatory update
Regulatory update • COP24 agreed on the operational rules for the Paris Agreement – Rules on market mechanisms and global carbon markets still pending • The EU 2050 climate strategy sets the long-term framework – Targets and policy measures for 2030-2050 to follow • The German Coal Commission report
Slide 48: German Coal Commission hands over its proposal to the government
German Coal Commission hands over its proposal to the government - Coal to be phased out in 2038 at the latest • Holistic and responsible approach to phasing out coal- fired generation – government now to enforce ”We welcome the Coal Commission’s • Roadmap for capacity closures agreed proposal and h
Slide 49: Nordic power price recovery continued
Nordic power price recovery continued EUR/MWh Nordic spot and forward prices 90 • In 2018, the average system spot price in the Nord Pool System Price 80 Nord Pool was 44.0 EUR/MWh (29.4), the Futures average area price in Finland was 46.8 EUR/MWh 70 (33.2) and in Sweden (SE3, Stockholm) 44.5 EUR/MW
Slide 50: German – Nordic price spread
German – Nordic price spread SPOT PRICE EUR/MWh Nordic and German daily spot prices in Jan 2018 – Jan 2019 100 • In 2018, the spread was 0.5 EUR/MWh with the Nordic system price at 44.0 EUR/MWh and German price at 44.5 EUR/MWh 80 • During 2012-2018, the average realised German-Nordic spot spread 60
Slide 51: Nordic power prices on a rising trend in 2018
Nordic power prices on a rising trend in 2018 – Fortum price up 16% on Q4, price in Russia impacted by weaker rouble +56% +6% +16% -4% Changes refer to year-on-year difference (Q4 2018 versus Q4 2017) NOTE: Achieved power price (includes capacity payments) in roubles increased by 7% 51
Slide 52: Generation
Generation • Higher comparable operating profit in Q4, +18% – Higher nuclear, but lower hydro generation – Higher achieved power prices and lower taxes in Sweden • Higher comparable operating profit in 2018, +32% – Higher achieved power prices and lower taxes in Sweden partly offset by lower hydro a
Slide 53: City Solutions
City Solutions • Higher comparable operating profit in Q4, +11% – Higher power sales volumes and price, positive impact of change to seasonal heat pricing in Finland – Partly offset by the weaker result in recycling and waste business • Improved comparable operating profit in 2018 +15% – Positive im
Slide 54: Consumer Solutions
Consumer Solutions • Higher sales in Q4 driven by higher spot prices – Continued tough competition and customer churn in the Nordics • Marginally lower comparable operating profit in Q4 • Increased comparable operating profit in 2018, +29% – Hafslund positive contribution of EUR 18 million – Profita
Slide 55: Russia
Russia • Increased comparable operating profit in Q4, +6% – Positive impact from higher CSA payments (Nyagan 1&2), contribution from new production units and compensation for the relocation of heat pipeline in Tyumen – Offset by weaker rouble EUR -10 million and bad debt provisions • Lower comparabl
Slide 56: Q4 2018 – Higher achieved power price in Generation
Q4 2018 – Higher achieved power price in Generation Comparable operating profit EUR million • Increased power sales • Higher CSA payments volumes and price • New production units • Seasonal heat pricing • Compensation for the • 0.8 TWh lower hydro in Finland relocation of the heat volumes • Weaker r
Slide 57: Year 2018 – Clear improvement in the Generation segment
Year 2018 – Clear improvement in the Generation segment Comparable operating profit EUR million • Consolidation of • Profit from • Consolidation of • FX- effect MEUR -32 Hafslund selling a Fortum Oslo • Lower electricity • Lower sales 54% share Varme margin margin of Fortum’s • Weaker result in • Ne
Slide 58: Key financials
Key financials MEUR Q4 Q4 2018 2017 • Higher comparable operating 2018 2017 profit due to higher power prices and acquisitions Sales 1,599 1,432 5,242 4,520 • Share of profits from associates Comparable EBITDA 473 424 1,523 1,275 impacted by co-owned nuclear- Comparable operating profit 333 295 987
Slide 59: Income statement
Income statement Q4 Q4 2018 2017 MEUR 2018 2017 • Sales and comparable operating profit Sales 1,599 1,432 5,242 4,520 increased due to higher power prices and Hafslund acquisition Other income 41 29 130 55 Materials and services -870 -747 -2,795 -2,301 • Share of profits from associates Employee ben
Slide 60: Cash flow statement
Cash flow statement MEUR Q4 2018 Q4 2017 2018 2017 Comparable EBITDA 473 424 1,523 1,275 • Increased net cash from operating activities due to improved EBITDA Realised FX gains/losses 26 -12 231 -83 Paid net financial costs, income taxes and other -55 -72 -280 -281 • Positive impact of EUR 314 milli
Slide 61: Ongoing actions to deleverage and maintain financial flexibility
Ongoing actions to deleverage with aim to optimise cash flow and maintain financial flexibility 2018 2017 TARGET Higher debt and lower cash due to payment of the Uniper investment in Comparable EBITDA, MEUR 1,523 1,275 Q2 2018 Interest-bearing net debt, MEUR 5,509 988 Liquid funds EUR 0.6 billion Co
Slide 62: Outlook
Outlook Demand growth Hedging 2019 Estimated Targeted cost Taxation annual capital synergies of Hafslund Electricity demand in For 2019: ~75% hedged Effective tax rate for the Nordics is at EUR 31 per MWh expenditure, transaction 2019 for the Group expected to grow by (Q3: 65% at EUR 30) including m
Slide 63: Annual General Meeting 2019 and dividend distribution proposal
Annual General Meeting 2019 and dividend distribution proposal • Fortum's Annual General Meeting 2019 will take place on 26 March 2019 at 11:00 am EET – At the Finlandia Hall in Helsinki • The Board of Directors proposes a dividend of EUR 1.10 per share, unchanged • Dividend-related dates planned fo
Slide 64: Debt portfolio and average interest rate
Debt portfolio and average interest rate December 31, 2018 Maturity profile 2 500 • Total interest-bearing debt 2 250 EUR 6,093 million 2 000 – Average interest 2.4% 1 750 (2017: 3.6%) 1 500 – Portfolio mainly in EUR and 1 250 1) SEK with average interest 1 000 cost 1.7% (2017: 2.4%) 750 – EUR 686 m
Slide 65: Fortum Investor Relations and Financial Communications
Next events: The AGM on 26 March 2019 Q1/2019 results on 26 April 2019 Q2/2019 results on 19 July 2019 Q3/2019 results on 24 October 2019 For more information, To subscribe Fortum's releases, please fill out the subscribtion form on our website https://www.fortum.com/about-us/media/media-room/subscr