Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Day (September 2010)
30 slides from Fortum Oyj's investor day presentation, Sep 16, 2010
Slide 1: Capital Markets Day 2010
Capital Rye /10 2010/09/16
Slide 2: Alexander Uvaev
ALEXANDER Uvaev 2010/09/16
Slide 3: Agenda
Agenda • Market & demand • Russian power sector reform • Fortum assets in Russia • OAO Fortum investment programme • Efficiency improvement programme 3
Slide 4: Russia, the fastest growing of Fortum's market areas
Russia, the fastest growing of Fortum’s market areas 260 Index: 2000=100 240 Russia 220 Poland 200 Baltic 180 160 Sweden 140 Norway 120 Finland 100 20 F 20 F 20 F 20 F 20 F 20 F 20 F 20 F 20 F 20 F F 00 01 02 03 04 05 06 07 08 20 9 0 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 Sou
Slide 5: Economic outlook brightening
Economic outlook brightening Russian GDP expectations Annual change, % 10 8 • Russian economy has recovered briskly 6 4 due to appreciating commodity prices – 2 0 notably oil and metals -2 Consencus Economics (August'10) -4 IMF (April'10) • Growth driven by commodity exports -6 -8 Minecon optimistic
Slide 6: Russian gas prices follow regulated tariff decisions
Russian gas prices follow regulated tariff decisions €/MWh Gas Price development 40 UK Spot Natural Gas Price Ural • 95% of fuel used at Fortum 35 North-West Ural net-back power plants in Russia is gas 30 • Gas price and supply-demand North-West net-back balance are key drivers for the 25 wholesale
Slide 7: Day ahead wholesale market prices heading up
Day ahead wholesale market prices heading up • Demand back to pre- Day ahead power market prices for Urals crisis levels in the overall Russia 40 • Regulated gas price was 35 increased 24% in 2010 30 compared to the average 25 in 2009 €/MWh 20 – Expected to be unchanged for the rest 15 of 2010 10 •
Slide 8: Market & demand / Russian power sector reform / Fortum assets in Russia
• Market & demand • Russian power sector reform • Fortum assets in Russia • OAO Fortum investment programme • Efficiency improvement programme 8
Slide 9: Russian power sector reform on schedule
Russian power sector reform on schedule A Nordic/Western analogy Key steps in the reform • "Power industry law" approved Unbundling of businesses by type • Restructuring of regional energos (Power and Heat of activity companies) • Formation of new companies Competitive Regulated businesses monopolie
Slide 10: Power market liberalisation – two markets
Power market liberalisation – two markets Capacity market Day ahead (spot) wholesale market Capacity price Day ahead spot market price - Capacity auctions (next in Oct 2010) - Day ahead spot market auction - A higher, fixed capacity price for new - 100% liberalised from 1 Jan 2011 capacity (CSA* agr
Slide 11: Day ahead wholesale power market 100% liberalised in four months
Day ahead wholesale power market 100% liberalised in four months Share of liberalised trade for existing capacity • Further liberalisation of 100% 100% 100 % wholesale power market 90% 80% 80% – 100% by 1 January 2011 70% • The sales to households will 60% 60% 50% remain regulated still after 50% 20
Slide 12: Capacity prices for new capacity 3-4 times the old capacity prices
Capacity prices for new capacity 3-4 times the old capacity prices • Long term rules and price parameters approved • Both “old” and “new” capacity can participate in capacity auctions • Old capacity (pre 2007) and new capacity priced differently – Old capacity is priced by capacity auctions; first a
Slide 13: Capacity payments currently ~1/3 of total revenues for Fortum Russia
Capacity payments currently ~1/3 of total revenues for Fortum Russia Achieved total power price, Russia Division* • Last twelve months revenues EUR/MWh were almost equally split 30 between three components 25 24 25 22 22 – Liberalised power (spot) 25 21 21 21 price 18 6 20 9 8 – Regulated power pric
Slide 14: Market & demand / Russian power sector reform / Fortum assets in Russia
• Market & demand • Russian power sector reform • Fortum assets in Russia • OAO Fortum investment programme • Efficiency improvement programme 14
Slide 15: Fortum – a major player in Russia
Fortum – a major player in Russia OAO Fortum (former TGC-10) • Operates in the heart of Russia’s oil and gas producing region, fleet mainly gas fired CHP capacity • 16 TWh power generation, 26 TWh heat production TGC -1 in 2009; more than Fortum’s Nordic heat sales • Investment programme to add 85%,
Slide 16: OAO Fortum assets in brief
OAO Fortum assets in brief • Fortum holding now is about 95%. • 8 existing power plants, district heating in 3 cities Argayash Chelyabinsk Tobolsk Tyumen CHP GRES CHP CHP-1 • Power generation capacity now 2,800 MW, to increase up to 5,100 MW • Heat capacity 15,800 MW, main heat supplier in the area
Slide 17: Fortum in Western Siberia region
Fortum in Western Siberia region Tobolsk CHP – 452 MWe Nyagan St.Petersburg Surgut Khanty-Mansijsk Tobolsk Moscow Tyumen CHP-1 – 755 MWe Tyumen Chelyabinsk Kurgan Tyumen CHP-2 – 472 MWe Tyumen and Surgut district heating: Connected heat load – 6,490 MWh 17
Slide 18: Fortum in Urals (Chelyabinsk) region
Fortum in Urals (Chelyabinsk) region Argayash CHP – 195 MWe Nyagan St.Petersburg Surgut Khanty-Mansijsk Tobolsk Chelyabinsk GRES – 82 MWe Moscow Tyumen Chelyabinsk Chelyabinsk CHP 1 – 149 MWe Kurgan Chelyabinsk CHP 2 – 320 MWe Chelyabinsk CHP 3 – 360 MWe Chelyabinsk district heating: Connected heat
Slide 19: TGC-1 in brief
TGC-1 in brief Power plant location • Fortum's holding is now slightly over 25% • TGC-1 generates electricity and supplies heat in St. Petersburg and north-west Russia • Total electricity capacity 6,347 MW of which 46% is hydro power • High share of hydro power makes TGC-1 unique among Russian terri
Slide 20: Market & demand / Russian power sector reform / Fortum assets in Russia
• Market & demand • Russian power sector reform • Fortum assets in Russia • OAO Fortum investment programme • Efficiency improvement programme 20
Slide 21: OAO Fortum investment programme
ОАО Fortum investment programme • Total amount of investments EUR 2.5 1,254 MW 200 MW 231 MW 3 units billion Greenfield – Of which EUR 1.7 billion still to be invested Nyagan Tobolsk Tobolsk CHP Tyumen Tyumen1 GRES CHP-1 • Increasing capacity by almost 85% – More than any other Russian generating co
Slide 22: 85% increase in power generation capacity by the end of 2014
85% increase in power generation capacity by the end of 2014 through the investment programme Power generation capacity (MW) Plant Supply date Fuel type Existing Planned Total Tyumen CHP-2 Gas 755 755 Tyumen CHP-1 Q1/2011; 2014 Gas 472 231; 2*225 (CHP/Condensing) 1153 Tobolsk CHP Q2/2011 Gas 452 200
Slide 23: Availability of new capacity a key driver for earnings
Availability of new capacity a key driver for earnings Tyumen CHP-1, 2x225 MW, 2014 Nyagan 3, 418 MW, 2013 Nyagan 2, 418 MW, 2012 Nyagan 1, 418 MW, 2012 Chelyabinsk CHP-3, 226 MW, Q2/2011 Tobolsk CHP, 200 MW, Q2/2011 Tyumen CHP-1, 231 MW, Q1/2011 16 Sep 2010 2014 23
Slide 24: Nyagan green field (3 units x 418 MW)
Nyagan green field (3 units x 418 MW) • The biggest green field project in the modern Russian power and heat industry (with the exception of nuclear) • State-of-the-art technologies with high production and environmental efficiency Main building • Work on equipment manufacture ongoing • Start-up boi
Slide 25: Market & demand / Russian power sector reform / Fortum assets in Russia
• Market & demand • Russian power sector reform • Fortum assets in Russia • OAO Fortum investment programme • Efficiency improvement programme 25
Slide 26: Efficiency improvement programme in Russia: ~100 M€ EBITDA improvement in 2011
Efficiency improvement programme in Russia: ~100 M€ EBITDA improvement in 2011 • Purchasing • Portfolio Management and Trading (PMT) • Heat regulation • Heat - technical and business improvements • Generation - technical improvements • Others 26
Slide 27: Key factors behind the profitability improvement
Key factors behind the profitability improvement Efficiency improvement programme – Increasing heat production profitability – Fuel efficiency improvement – Savings in purchasing process New capacity commissioning – Additional capacity 2,360 MW – Capacity is sold at CSA* contracts with guaranteed hi
Slide 28: Determined steps to gain efficiencies
Determined steps to gain efficiencies Number of employees, Fortum Russia • Fortum has taken deliberate steps to 8000 improve efficiency 7000 • The reduction in full time employees (FTEs) since the end of 2008 is 6000 ≈ 1,100 FTEs in OAO Fortum (power 5000 and heat generation) 4000 ≈ 1,400 FTEs in th
Slide 29: Key messages
Key messages • Electricity demand in Russia is back on pre-crisis level • Russian power sector reform has progressed on schedule – Wholesale power market to be fully liberal from 1 Jan 2011 • New generation capacity will receive 3-4 times the old capacity prices • Fortum’s power generation capacity
Slide 30: Capital Markets Day 2010
Capital Rye /10 2010/09/16