Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Day (June 2007)
25 slides from Fortum Oyj's investor day presentation, Jun 4, 2007
Slide 1: Financial update
Financial update Juha Laaksonen Chief Financial Officer Fortum Corporation Capital Markets Day Stockholm, 4 June 2007
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: Contents
Contents • Financial update • Capital expenditure • Risk management 3
Slide 4: Financial update
• Financial update • Capital expenditure • Risk management 4
Slide 5: Key financials
Key financials MEUR (Continuing operations) LTM in Q1 2007 2006 2005 Sales 4 488 4 491 3 877 Operating profit 1 473 1 455 1 347 Cash flow from operations 1 345 1 151 1 271 Interest-bearing net debt 3 932 4 345 3 158 Balance sheet total 17 739 16 839 15 130 Net debt/EBITDA 2.1 2.3 1.8 Return on capit
Slide 6: 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 6
Slide 7: Comparable operating profit
Comparable operating profit MEUR I/2007 I/2006 2006 LTM Power Generation 328 293 985 1 020 Heat 137 126 253 264 Distribution 78 81 250 247 Markets -14 0 -4 -18 Other -17 -14 -47 -50 Comparable operating profit 512 486 1 437 1 463 Non-recurring items 1 0 61 62 Other items effecting comparability -23
Slide 8: Income statement
Income statement MEUR Q1/2007 Q1/2006 2006 Sales 1 340 1 343 4 491 Expenses -850 -871 -3 036 Operating profit 490 472 1 455 Share of profit of associates and joint ventures 202 35 69 Financial expenses, net -31 -15 -103 Profit before taxes 661 492 1 421 Income tax expense -109 -120 -301 Net profit f
Slide 9: Accounting for share of profits of Hafslund
Accounting for share of profits of Hafslund • Share of profit based on the previous quarter due to Hafslund's later publishing dates • Hafslund's accounting treatment for shareholding in Renewable Energy Corporation (REC) reclassified in Fortum in accordance with its own accounting policies – fair v
Slide 10: Cash flow statement
Cash flow statement MEUR I/2007 I/2006 2006 Operating profit before depreciations 602 570 1 884 Non-cash flow items and divesting activities 1 24 -92 Financial items and taxes -156 -110 -463 Funds from operations (FFO) 447 484 1 329 Change in working capital 50 -181 -178 Total cash from operating ac
Slide 11: Balance sheet
Balance sheet MEUR Mar 31 Dec 31 2007 2006 Non-current assets 14 958 15 103 Current assets 2 781 1 736 ASSETS 17 739 16 839 Total equity 7 594 8 161 of which minority interest 271 253 Interest-bearing liabilities 4 999 4 502 Non-interest bearing liabilities 5 146 4 176 EQUITY AND LIABILITIES 17 739
Slide 12: Strong financial position
Strong financial position ROE (%) EPS, cont. (eur) Total assets (EUR billion) 20 1.50 1.41 20.0 17.7 18.4 16.8 1.22 18 15.1 1.01 15.0 1.00 16 14.4 10.0 14 0.50 13.5 12 5.0 10 0.00 0.0 2005 2006 LTM 2005 2006 LTM 2005 2006 LTM ROCE (%) Dividend, (eur) Net debt/EBITDA 16 1.50 4 15.3 1.26 1.25 1.12 3 1
Slide 13: Capital structure
Capital structure • Fortum wants to have a prudent and efficient capital structure, which at the same time allows the implementation of its strategy • Target: Net debt / EBITDA between 3.0 - 3.5 • Capital expenditure, acquisitions and capital returns are ways to move towards the target • Dividend po
Slide 14: Maturity and structure of debts
Maturity and structure of debts Interest bearing net debt end of March 2007 1 500 • Funding and treasury risk 1 000 (MEUR 3932) management centralised on parent 500 company level 0 • Access to flexible and reliable funding -500 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 + thro
Slide 15: Increased presence in Swedish debt capital markets
Increased presence in Swedish debt capital markets • In May Fortum issued the largest corporate bond transaction ever in the Swedish debt capital market • A total of SEK 6,1bn (EUR 660 million) was raised under Fortum's EUR 5bn EMTN programme through a two tranche offering: • A five year Floating Ra
Slide 16: Capital expenditure
• Financial update • Capital expenditure • Risk management 16
Slide 17: Fortum's investment programme
Fortum's investment programme • Olkiluoto 3, Finland, nuclear • Swedish nuclear • Suomenoja, Finland (CHP) • Värtan, Sweden (bio CHP) Total • Järvenpää, Finland (bio CHP) ~ 1,300 MW • Brista, Sweden (waste CHP) • Refurbishing of existing hydro assets • Wind power, Sweden Value of the investment prog
Slide 18: Capital expenditure
Capital expenditure • Normal capital expenditure is approximately at the level of depreciation, EUR ~450 million • On top of this the capacity increase programme and some distribution investments (notably smart metering) • Value of the capacity increase programme approximately EUR 3 billion • Part o
Slide 19: Risk management
• Financial update • Capital expenditure • Risk management 19
Slide 20: Fortum's approach to Risk Management
Fortum's approach to Risk Management Area of RM Key elements • Overall framework for risk management roles and responsibilities Governance • Risk policy and governance procedures • Management commitment Organization • Skills and competences of the organization • Risk culture within the company • Ris
Slide 21: Prudent way of managing volatility to guarantee financial obligations are met
Prudent way of managing volatility in order to guarantee that financial obligations are met ILLUSTRATIVE Financial obligations Guidelines to risk management Minimum EBITDA requirements Calculate the minimum EBITDA level required to fulfill key financial obligations Uncertainty in EBIT Already secure
Slide 22: Minimum EBIT and EBIT variation
Minimum EBIT and EBIT variation ILLUSTRATIVE Expected EBIT EBIT Minimum EBIT mandate EBIT variation 2007 2008 2009 Changes in risk position are quantified and compared with existing EBIT variation 22
Slide 23: Hedging of power sales
Hedging of power sales €/MWh Year 2008 forward • Dynamic business decisions on 50 continuous basis; not static hedging 45 • Based on Fortum's view on power market at the time 40 • Implemented within corporate risk limits 35 • Target to beat alternative 30 strategies, e.g. – reference strategy 25 31
Slide 24: Hedging of Power Generation's Nordic sales
Hedging of Power Generation's Nordic sales Status at the beginning of April 2007: Hedge ratio Hedge price Rest of 2007 ~ 70% ~ EUR 40 per MWh Calendar year ~ 40% ~ EUR 42 per MWh 2008 24
Slide 25: ( Fortum
( Fortum