Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor-Analyst breakfast, London (May 2010)
25 slides from Fortum Oyj's conference presentation, May 4, 2010
Slide 1: Nordic power market update
Nordic power market update Pirja Heiskanen Head of Trading and Industrial Intelligence 4 May 2010, London 1
Slide 2: Contents
Contents • TII – Trading and Industrial Intelligence • Nordic power market – Key drivers – Recent development • Conclusions 2
Slide 3: Trading and Industrial Intelligence (TII) – centralised portfolio management and trading
Trading and Industrial Intelligence (TII) – centralised portfolio management and trading Role: Divisions: TII – One market view covering all time horizons Power – Hedging of group level result (not only electricity price) Heat – proposal for mandates and references – development of hedging strategy
Slide 4: The right big picture – Achieved power price is the prime goal
The right big picture – Achieved power price is the prime goal Realised prices quarterly since 2000 Prices since 1998, annual level EUR/MWh EUR/MWh 80 60 70 50 60 40 50 40 30 30 20 20 10 10 0 0 98 99 00 01 02 03 04 05 06 07 08 09 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 19 19 20 20 20
Slide 5: Contents: Nordic power market – Key drivers
• TII – Trading and Industrial Intelligence • Nordic power market – Key drivers – Recent development • Conclusions 5
Slide 6: Nordic power generation – dominated by hydro, but fossil needed
Nordic power generation – dominated by hydro, but fossil needed 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 *) Source: Nor
Slide 7: 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 28 April 2010 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Nord Pool 7
Slide 8: Hydro balance affects the spot
Hydro balance affects the spot Water + Snow compared to normal [TWh] 80 80 70 Nordic spot price [EUR/MWh] 60 60 40 50 20 40 0 30 -20 20 -40 10 -60 0 1/2000 1/2001 1/2002 1/2003 1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 8
Slide 9: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (ICE Brent) CO2 price (NP EUA) 160 35 140 30 120 EUR / tCO2 25 USD / bbl 100 20 80 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 10: Nord Pool forwards have followed the (clean) SRMC for coal condensing power
Nord Pool forwards have followed the (clean) SRMC for coal condensing power €/MWh €/MWh 80 10 NP 1year forward forward 8 clean dark forward marginal 70 spread cost for coal fired 6 condensing, 60 4 including CO2 50 2 0 40 -2 30 -4 -6 20 -8 10 -10 0 -12 1/08 5/08 9/08 1/09 5/09 9/09 1/10 4/10 Note: T
Slide 11: Nordic spot price deviates from SRMC for coal mainly due to hydrological situation
Nordic spot price deviates from SRMC for coal mainly due to changes in hydrological situation 100 System (spot) price Spot SRMC for coal 80 Price [EUR/MWh] 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 11
Slide 12: Cold and dry winter, more "normal" since mid-March
Cold and dry winter, more "normal" since mid-March 7 Nor+Swe Precipitation, TWh 250 6 Coldest winter since 200 1987, until mid-March Accum prec TWh 5 Prec/week TWh 4 150 Nordic winter (weeks 50-14) temperature, 2 month averages 3 100 2 warmest508-week period 1 6 average of 8-week periods 0 4 coldest
Slide 13: Modernisation projects lowered Swedish nuclear availability in 2009 and Q1/2010
Modernisation projects lowered Swedish nuclear availability in 2009 and Q1/ 2010 • Swedish nuclear production 2009: 50 TWh • With an availability* of 85 % current capacity would give ~70 TWh • Installed capacity in the end of 2009 was 9 300 MW • If all upgrading projects are approved and realized th
Slide 14: Nordic hydro balance decreased by ~20 TWh in Q1/2010
Nordic hydro balance decreased by ~20 TWh in Q1/2010 * Estimated Nordic hydro balance, water and snow included 14
Slide 15: Exceptionally cold weather and nuclear unavailability led to price spikes
Exceptionally cold weather combined with nuclear unavailability led to price spikes in December, January and February Daily average spot prices 550 500 450 400 350 SYS €/MWh 300 SE 250 FI 200 150 100 50 0 dec-09 jan-10 feb-10 mar-10 apr-10 15
Slide 16: Nord Pool and German EEX forward year spread decreased since October
Nord Pool and German EEX forward year spread decreased constantly since October 25 20 15 EUR/MWh 10 5 0 jan-09 mar-09 maj-09 jul-09 sep-09 nov-09 jan-10 mar-10 Yer 10 GER-NP Yer 11 GER-NP 16
Slide 17: Nordic CDS normally follows EEX off-peak but lately EEX peak
Nordic CDS normally follows EEX off-peak (night time imports) but has lately followed EEX peak (day time imports) Weekly Clean Dark Spread EEX and Nord Pool 100 80 60 40 €/MWh 20 0 -20 -40 2006 2007 2008 2009 2010 CDS EEX base CDS EEX peak CDS EEX off-peak CDS Nordic Note: Assumes thermal efficienci
Slide 18: Market expects Nordic spot to exceed the German price till 2011
Market expects Nordic spot to exceed the German price till 2011 Actual NP Spot NP Futures 15.4.2010 NP Futures 19.2.2010 Actual EEX Phelix Base EEX Futures 15.4.2010 EEX Futures 19.2.2010 100 90 80 70 60 EUR/MWh 50 40 30 20 10 0 2008 2009 2010 2011 18
Slide 19: Next year forward has increased along with coal and CO2 price
Next year forward has increased recently along with increasing coal and CO2 price 19
Slide 20: Demand will continue to grow
Demand will continue to grow – Pre-crisis level to be reached in 2012-2014 • Industry growth (+) – Growth sectors: mining, metal, manufacturing – Stagnant sector: forest industry. New products e.g. bio fuels will mean some growth 460 450 • Population growth (+) Illustrative – Nordic countries grow.
Slide 21: Renewables – the Finnish targets
Renewables – the Finnish targets • Under the EU Renewables Directive, Finland has to raise the share of renewables in the final energy use from 28.5% in 2005 to 38% by 2020 • In April 2010, the Finnish Government agreed in principle on a support package to reach the target mainly through the followi
Slide 22: Needed new renewable power generation for reaching national RES-E targets
Needed new renewable power generation for reaching the national RES-E targets Targeted RES-E production by 2020 compared to 2008 • Certificate scheme in Sweden aiming for 25 20 TWh RES-E additions 2002-2020 16 • Norway plans to join the TWh/a 12 Swedish certificate 8 system in 2012, with equal ambit
Slide 23: Export capacity to Continental Europe will at least double by 2020
Export capacity to Continental Europe will at least double by 2020 Export capacity by exporting country Export capacity by importing country 12,000 60 12,000 60 Export capacity in practice Export capacity in practice (right axis) (right axis) 10,000 50 10,000 50 Finland 8,000 40 8,000 40 Norway LT T
Slide 24: Contents: Recent development
• TII – Trading and Industrial Intelligence • Nordic power market – Key drivers – Recent development • Conclusions 24
Slide 25: Conclusions
Conclusions • Seasonally hydrology and temperature continue to have a significant impact in Nord Pool pricing • Commodity prices have a big role especially in forward but also in spot pricing – coal, CO2 and gas • Demand for electricity still growing • Investments in new generation capacity needed –
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