Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Q3 2005 Earnings Presentation
27 slides from Fortum Oyj's earnings presentation, Oct 20, 2005
Slide 1: Interim Report January - September 2005
Interim Report January - September 2005 20 October 2005
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: Strong performance continues
Strong performance continues • Good third quarter performance with strong cash flow and clearly higher operating profit • EUR 874 (799) million comparable operating profit from continuing operations • Earnings per share EUR 0.65 (0.58) from continuing operations • Net cash from operating activities
Slide 4: Comparable operating profit
Comparable operating profit MEUR I-III/2005 I-III/2004 2004 LTM Power Generation 557 498 730 789 Heat 156 132 207 231 Distribution 168 183 240 225 Markets 22 24 23 21 Other -29 -38 -52 -43 Comparable operating profit 874 799 1 148 1 223 Non-recurring items 20 -11 18 49 Other items effecting comparab
Slide 5: Development of key market drivers
Development of key market drivers • 1% decrease in Nord Pool system area price to 29.7 EUR/MWh in Q3 • Fortum's achieved Nordic Generation power price increased by 6% to EUR 29.9 in Q3 • 92% (82%) of Nordic own production CO2-free in the first nine months, 96% (84%) in Q3 • CO2 price is at the momen
Slide 6: Nordic water reservoirs
Nordic water reservoirs 12 0 10 0 reservoir content (TWh) 80 60 40 20 2000 2004 2005 Reference level 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 week 6
Slide 7: Nord Pool power price
Nord Pool power price €/MWh 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2003 2004 2005 Source: Reuters 7
Slide 8: Price of EU emission allowances
Price of EU emission allowances €/tCO2 30 25 20 15 10 5 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2003 2004 2005 Source: Reuters 8
Slide 9: Key developments during the quarter
Key developments during the quarter • CO2-free production increased to 96% of Fortum's Nordic production in Q3 • Accelerated efforts to improve reliability of distribution networks – Total investment of EUR 700 million over a 5-year period • Arbitration process going on to buy E.ON Finland shares ow
Slide 10: Territorial Generation Company (TGC-1)
Territorial Generation Company 1 (TGC-1) TGC-1 Capacity TGC-1 (in North-West Russia) Kolenergo MW started its operation in October Sweden 27 500 Karelenergo Norway Finland • Fortum is an indirect owner of 23 000 13 400 TGC-1 through its ownership in Lenenergo Lenenergo • Fortum's ownership in Denmar
Slide 11: Fortum's Nordic power generation
Fortum's Nordic power generation Fortum's Nordic power generation (TWh) • 4% decrease in Group's Nordic power 45 38.8 generation, 13% (14%) share of Nordic 40 37.1 consumption 35 30 • An increase in hydro power production 25 and a clear decrease in thermal 20 production 15 10 • Nordic Generation pow
Slide 12: Power Generation
Power Generation + Better production mix and improved Nordic Generation power price MEUR I-III/2005 I-III/2004 Net sales 1,460 1,501 Comparable operating profit 557 498 Net assets 6,037 6,183 Comparable RONA, % 12.5 10.5 Business units: Generation, Portfolio Management and Trading, Service 12
Slide 13: Heat
Heat District heat and steam sales by area (TWh) • Heat sales up by 1%, 15.1 (14.9) TWh 16 15.1 14.9 14 • Volume increase through acquisitions 12 in Poland 10 • Sales of electricity produced in CHP 8 plants down by 15%, 2.8 (3.3) TWh 6 4 • Good results in Värme due to 2 improved fuel mix 0 I-III/200
Slide 14: Heat
Heat + Good results in Fortum Värme - Higher prices of fuels such as oil and coal MEUR I-III/2005 I-III/2004 Net sales 738 709 Comparable operating profit 156 132 Net assets 2,336 2,362 Comparable RONA, % 9.3 8.0 Business units: Heat, Värme 14
Slide 15: Distribution
Distribution Fortum's distribution networks transmission • 1,385 (1,380) thousand customers 18 (TWh) 16.5 16.4 • Electricity transmitted in distribution 16 networks increased by 1% 14 12 • Fortum reliability program speeded 10 up, total investment EUR 700 8 million over a 5-year period 6 4 • New reg
Slide 16: Distribution
Distribution - Storms in Norway and Sweden in the beginning of the year MEUR I-III/2005 I-III/2004 Net sales 511 513 Comparable operating profit 168 183 Net assets 3,033 3,086 Comparable RONA, % 7.9 8.3 Business units: Distribution 16
Slide 17: Markets
Markets • Electricity sales totalled 29.5 TWh; 7% decrease • Actions to improve customer service quality have led to higher customer satisfaction, but at the same time have increased costs • Continued positive inflow of customers despite tight competition • Leading seller of environmentally 1.2 mill
Slide 18: Markets
Markets + Positive inflow of customers - Increased customer service costs MEUR I-III/2005 I-III/2004 Net sales 974 1,009 Comparable operating profit 22 24 Net assets 143 137 Comparable RONA, % 16.4 26.7 Business units: Markets 18
Slide 19: Income statement
Income statement MEUR I-III/2005 I-III/2004 Net sales 2 765 2 751 Expenses -1 892 -1 919 Operating profit 873 832 Share of profit of associates and joint ventures 28 9 Financial expenses, net -100 -167 Profit before taxes 801 674 Income tax expense -206 -163 Profit for the period from continuing ope
Slide 20: Comparable and reported operating profit
Comparable and reported operating profit Operating profit I-III/2005 Operating profit I-III/2004 Comparable Reported Diff. Comparable Reported Diff. Power Generation 557 529 28 498 522 -24 Heat 156 175 -19 132 143 -11 Distribution 168 175 -7 183 183 0 Markets 22 21 1 24 34 -10 Other -29 -27 -2 -38 -
Slide 21: Balance sheet
Balance sheet MEUR Sep 30 Dec 31 2005 2004 Non-current assets 12 942 15 213 Current assets 1 899 2 354 ASSETS 14 841 17 567 Total equity 7 039 7 650 of which minority interest 177 150 Interest bearing liabilities 4 115 5 240 Non-interest bearing liabilities 3 687 4 677 EQUITY AND LIABILITIES 14 841
Slide 22: Cash flow statement
Cash flow statement MEUR I-III/2005 I-III/2004 2004 1 206 1 123 1 595 Operating profit before depreciations continuing operations Non-cash flow items and divesting activities -41 -51 -49 Financial items and taxes -288 -187 -341 Funds form operations continuing operations (FFO) 877 885 1 205 Change i
Slide 23: Outlook
Outlook • In mid-October power forward prices for the rest of 2005 were at the level of 38-40 EUR/MWh and for the year 2006 around 37-38 EUR/MWh • Government budget proposals in Sweden and Finland include an additional cost element for nuclear and hydro power production – Fortum estimates that the a
Slide 24: Hedging of Nordic Power Generation sales
Hedging of Nordic Power Generation sales At the beginning of October, Fortum had hedged its Nordic Power Generation sales volume as follows: Hedge ratio Hedge price Calendar Approximately Slightly higher than the year 2006 two thirds achieved Nordic Generation power price during the last 12 months (
Slide 25: Market prices for electricity
Market prices for electricity € /MWh 90 80 70 60 50 40 30 Futures 18 Oct 2005 20 10 Source: Reuters 0 2002 2003 2004 2005 2006 2007 German Spot Nord Pool System UK Spot German futures Nord Pool futures UK futures 25
Slide 26: Foundations for good performance in place
Foundations for good performance in place • Continued focus on Nordic countries and Baltic rim • Solid business performance • Strong financial position • Favourable market fundamentals 26
Slide 27: Fortum
@Fortum