Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (February 2016)
52 slides from Fortum Oyj's investor presentation, February 2016
Slide 1: Investor / Analyst material
FORTUM Investor / Analyst material February 2016
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: Content
Content Fortum today pages 4 – 14 European and Nordic power markets pages 15 – 24 Fortum’s nuclear fleet pages 25 – 28 Russia pages 29 – 31 Fortum’s investment programme page 31 Historical achieved prices page 32 Financial statements 2015 pages 33 – 47 Fortum’s Vision and strategy pages 48 – 51 3
Slide 4: Appr. 139,000 shareholders
Appr. 139,000 shareholders • Power and heat company in the Nordic countries, Russia, Poland and the Baltics • Listed at the Helsinki Stock Exchange since 1998 • Among the most traded shares on the Nasdaq Helsinki stock exchange • Market cap ~12 billion euros Finnish households 11.7% Financial and in
Slide 5: Capital returns: 2015 EUR 1.10 per share
Capital returns: 2015 EUR 1.10 per share ~ EUR 1 billion* • Fortum’s dividend policy is based on the following preconditions: – The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported by the company’s long-term strategy that aims at increasing
Slide 6: Our strategic route
Our strategic route Østfold Skandinaviska Birka Energi Stora Kraft Birka Energi Shares in TGC-1 Elverk 50% Fortum 50% → 100% Hafslund established 50% Stockholm Shares in Gullspång merged Lenenergo Gullspång with Stockholm Energi Länsivoima Lenenergo Länsivoima Elnova District heating Oil business E.
Slide 7: Our current geographical presence
Our current geographical presence Nordic countries Key figures 2015 Sales EUR 3.5 bn Power Comparable operating profit EUR 0.8 bn generation Power generation 48.8 TWh Balance sheet EUR 23 bn Personnel 7,800 Heat Heat sales 3.1 TWh Russia Electricity Electricity customers 1.3 million OAO Fortum sales
Slide 8: 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, 2014 Largest global producers, 2014 Electricity customers in EU, 2014 TWh TWh Millions EDF Gazprom Enel Enel T Plus EDF E.ON Inter RAO U
Slide 9: Biggest nuclear and hydro generators in Europe and Russia
9 50 0 100 200 300 400 500 550 600 150 250 350 450 TWh EDF Rosenergoatom 1) Formerly GDF SUEZ RusHydro NNEGC Energoatom Enel E.ON Vattenfall EuroSibEnergo 1) ENGIE Statkraft Fortum Source: Company information, Fortum analyses, 2013 figures pro forma Iberdrola RWE CEZ EnBW Axpo Verbund EDP Hidroelect
Slide 10: Fortum in the Nordic electricity value chain
Fortum in the Nordic electricity value chain Large customers Nordic wholesale market Retail customers Power generation Power exchange and bilateral agreements Private customers, small businesses 10
Slide 11: Fortum's power and heat production by source
Fortum's power and heat production by source Fortum's power generation Fortum's heat production in 2015 in 2015 Hydro power Natural gas 33% Natural gas 75% 32% Oil 1% Peat 1% Biomass 1% Heat pumps, electricity 1% Coal 4% Waste 1% Biomass 6% Nuclear power 30% Coal 15% Total generation 75.9 TWh Total
Slide 12: Fortum's European power and heat production
Fortum's European power and heat production Fortum's European Fortum's European power generation in 2015 heat production in 2015 Hydro power Coal 45% 50% Other 1% Others 1% Biomass 2% Oil 1% Peat 4% Biomass Coal 2% Heat pumps, 31% electricity 4% Waste 6% Nuclear power 45% Natural gas 8% European gen
Slide 13: Fortum a forerunner in sustainability
Fortum a forerunner in sustainability Emissions-free production is Fortum’s strategic choice We are highly committed to sustainability. Our purpose is to create energy that improves life for present and future generations. We provide sustainable solutions for society while delivering excellent value
Slide 14: Fortum's carbon exposure among the lowest in Europe
Fortum's carbon exposure among the lowest in Europe g CO2/kWh electricity, 2014 1 200 1 000 2015 64% of Fortum's total power generation CO2-free 800 97% of Fortum’s power generation in the EU CO2-free 600 400 Average 313 g/kWh 200 177 39 0 DEI ENGIE SSE Iberdrola EDP Statkraft RWE Drax CEZ Vattenfal
Slide 15: Market coupling milestones
Market coupling milestones - cross-border power flows optimised by power exchanges • Market coupling between NL, BE and FR since 2006 • Germany – Nord Pool Spot coupling started 11/2009 • Market coupling for Central Western Europe (DE, FR, NL, BE) since 11/2010 with a continued coupling with Nord Po
Slide 16: Current transmission capacity from Nordic area is over 5,000 MW
Current transmission capacity from Nordic area is over 5,000 MW Countries Transmission capacity MW From Nordics To Nordics Denmark - Germany 2,225 2,100 Sweden - Germany 615 615 Sweden - Poland 600 600 Norway - Netherlands 723 723 Finland - Estonia 1,000 1,016 320 Finland - Russia 320 1,300 Total 5,
Slide 17: Nordic, Baltic, Continental and UK markets are integrating
Nordic, Baltic, Continental and UK markets are integrating – interconnection capacity will double by 2021 The Northern Seas Offshore Grid and the Baltic New interconnections will Energy Market Integration Plan are included as double the export capacity priority electricity corridors in EU’s Infrastr
Slide 18: Nordic water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 2000 2003 2014 2015 2016 reference level 0 Q1 Q2 Q3 Q4 Source: Nord Pool 18
Slide 19: Nordic year forwards
Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 €/MWh 1 February 2016 70 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Nasda
Slide 20: 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 1 February 2016 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Source: Nord Pool, Nasdaq Commodities 20
Slide 21: Wholesale prices for electricity
Wholesale prices for electricity EUR/MWh Spot prices Forward prices 110 110 100 100 90 90 80 80 70 70 German 60 60 50 50 Nordic 40 40 Russian* 30 30 20 20 10 10 1 February 2016 00 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 * Including weighted
Slide 22: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (ICE Brent) CO2 price (ICE EUA) 150 35 120 28 EUR / tCO2 USD / bbl 90 21 60 14 30 7 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Coal price (ICE Rotterdam) Gas price (ICE NBP) 250 100 200 80 GBp
Slide 23: Nordic power generation
Nordic power generation – dominated by hydro, but fossil needed 160 Total Nordic generation 390 TWh in 2014 140 TWh % 120 Fossil fuels 39 10 100 TWh/a Nuclear 85 22 80 Biomass 23 6 60 Solar 1 0 40 Wind 28 7 20 Hydro * 214 55 0 Denmark Norway Sweden Finland Net export in 2014: 10 TWh Source: ENTSO-E
Slide 24: Wholesale electricity price too low to attract investments
Wholesale electricity price too low to attract investments EUR/MWh EUR/MWh 110 Average levelised costs of new electricity generation 100 90 80 70 60 50 Futures 1 February 2016 40 30 20 10 0 Gas Coal Solar PV Large Onshore Nuclear Offshore 1995 2015 2026 wind condensing In Spain hydro wind Source: No
Slide 25: Overview of Fortum's nuclear fleet
Overview of Fortum’s nuclear fleet LOVIISA OLKILUOTO OSKARSHAMN FORSMARK Unit 1: 1978 Unit 1: 1972 Unit 1: 1980 Commercial operation Unit 1: 1977 started Unit 2: 1980 Unit 2: 1974 (out of oper.) Unit 2: 1981 Unit 2: 1981 Unit 3: (Under construction) Unit 3: 1985 Unit 3: 1985 Generation Capacity Unit
Slide 26: Fortum's nuclear power in the Nordics
Fortum's nuclear power in the Nordics Load factor (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Oskarshamn 1 80 51 63 85 68 77 72 1 12 74 60 Oskarshamn 2 90 78 76 86 75 90 77 81 33 0 0 Oskarshamn 3 85 95 88 70 17 31 68 69 77 75 79 Forsmark 1 85 76 81 88 88 93 79 88 87 94 79 Forsmark 2 9
Slide 27: Variety of technologies and ages
Variety of technologies and ages Unit MWe Share Share Commercial Age Type/ Supplier (Net) (%) (MWe) operation Generation 1) Loviisa 1 498 100,0 498 1977-05-09 38 PWR / 1 AEE (Atomenergoexport) Loviisa 2 500 100,0 500 1981-01-05 35 PWR / 1 AEE (Atomenergoexport) Olkiluoto 1 880 26,6 234 1979-10-10 37
Slide 28: Third party nuclear liability in case of severe accident
Third party nuclear liability in case of severe accident In force since 1.1.2012 Law approved by Parliament in 2010, requires separate Unlimited decision from Government to company come into force. responsibility Convention 300 M€ 300 M€ parties State 500 M€ 500 M€ responsibility Responsibility of c
Slide 29: 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 • 26 TWh power generation, 26 TWh heat production in 2015 • Investment programme to add 85%, almost 2,400 MW to power generation capacity
Slide 30: Day ahead wholesale market prices in Russia
Day ahead wholesale market prices in Russia Key electricity, capacity and gas prices in the OAO Fortum area Day ahead power market prices for Urals 40 IV15 IV/14 2015 2014 35 30 Electricity spot price (market 1,064 1,041 1,047 1,089 25 price), Urals hub, RUB/MWh € / MWh Average regulated gas price,
Slide 31: 85% increase in power generation capacity in Russia through the investment programme
85% increase in power generation capacity in Russia through the investment programme Year Supply Power plant Fuel type Existing New Production type Total starts capacity investments capacity 2,785 MW 2,388 MW 5,173 MW < 2011 Tyumen CHP-2 Gas 755 CHP/Condensing 755 Chelyabinsk CHP-2 Gas, coal 320 CHP
Slide 32: Hedging improves stability and predictability
Hedging improves stability and predictability 2009 onwards thermal and import from Russia excluded 32
Slide 33: Financial Statements 2015
Financial Statements 2015 Fortum Corporation 3 February 2016
Slide 34: IFRS restatement relating to discontinued operations
IFRS restatement relating to discontinued operations Distribution segment has been reclassified as discontinued operations in Q1/2015. As a result, continuing operations and discontinued operations are presented separately for Fortum Group. Comparative period information for 2014 has been restated a
Slide 35: Q4 and FY 2015 Results
Q4 and FY 2015 Results Key figures (MEUR) IV/2015 IV/2014 2015 2014 Sales, continuing operations 964 1,133 3,459 4,088 Comparable EBITDA, continuing operations 315 458 1,102 1,457 Operating profit: Continuing operations 38 584 -150 1,296 Discontinued operations - 66 4,395 2,132 Fortum total 38 650 4
Slide 36: Fortum's performance in 2015
Fortum’s performance in 2015 – Distribution divestment completed in June 2015, EPS effect 4.82 for the year – Low electricity prices due to exceptionally 1) high inflow and high hydro power production 2) mild weather 3) increased wind power production 4) low commodity prices – Increased cost burden,
Slide 37: Market conditions 2015
Market conditions 2015 Nordic countries • Power consumption in the Nordic countries slightly higher than in 2014 • Nordic system spot prices approximately EUR 9 per MWh lower than in 2014; area prices in Finland EUR 6 per MWh lower and in Sweden (SE3) EUR 10 per MWh lower European business environme
Slide 38: Comparable and reported operating profit
Comparable and reported operating profit Comparable Reported Comparable Reported MEUR operating profit operating profit operating profit operating profit IV/2015 IV/2014 IV/2015 IV/2014 2015 2014 2015 2014 Power and Technology 142 276 -65 318 561 877 -396 855 Heat, Electricity Sales 53 49 54 221 108
Slide 39: Q4: Lower electricity prices and volumes burdened result
Q4: Lower electricity prices and volumes burdened result Comparable operating profit, EUR million • 7.8 EUR/MWh lower achieved price • 1 TWh lower volumes (mainly nuclear) • More accurate consumption estimates in Electricity Sales (+7 MEUR) • Lower power prices • Positive effect from new units • EUR
Slide 40: 2015: Clearly lower achieved power price
2015: Clearly lower achieved power price Comparable operating profit, EUR million • 8.4 EUR/MWh lower achieved price (33 EUR/MWh compared to 41.4) • 1 TWh higher volume • More accurate consumption estimates in Electricity Sales • Lower fuel costs • Positive impact from new capacity • EUR +52 million
Slide 41: Outlook
Outlook Nordic markets • Fortum continues to expect that the annual electricity demand growth will be approximately 0.5% on average in the coming years • Electricity is expected to continue to gain share of total energy consumption Russia • The targeted operating profit (EBIT) level of RUB 18.2 bill
Slide 42: Annual General Meeting 2016 and dividend distribution proposal
Annual General Meeting 2016 and dividend distribution proposal • Fortum’s Annual General Meeting will be held at 14:00 on Tuesday, 5 April 2016, at the Finlandia Hall, Mannerheimintie 13, in Helsinki, Finland • The Board of Directors’ dividend proposal EUR 1.10 per share for 2015 • Dividend-related
Slide 43: Long-term financial targets
Long-term financial targets The updated financial targets give guidance of Fortum's view on the company's long-term value creation potential, its new growth strategy and business activities. The updated, long-term over-the-cycle financial targets are: Return on capital employed (ROCE) at least 10% C
Slide 44: Fortum has a strong financial position
Fortum has a strong financial position MEUR 2015 2014 Target Comparable EBITDA, continuing operations 1,102 1,457 Comparable EBITDA, total Fortum 1,265 1,873 Interest-bearing net debt, total Fortum -2,195 4,217 Comparable net debt/EBITDA, total -1.7 2.3 ~2.5 Fortum ROCE % Return on capital employed,
Slide 45: Cash flow statement
Cash flow statement MEUR IV/2015 IV/2014 2015 2014 Cash from operating activities: Realised FX gains/losses 43 136 292 352 Other funds from operations 320 399 907 1,096 Change in working capital -31 -141 29 -42 Cash from operating activities, cont. operations 332 394 1,228 1,406 Cash from operating
Slide 46: Debt portfolio and average interest rate at the balance sheet date
Debt portfolio and average interest rate at the balance sheet date 31 December 2015 • Total interest-bearing debt Maturity profile EUR 6,007 million 1500 – Average interest 3.7% 1250 (2014: 3.7%) 1000 – Portfolio mainly in EUR and SEK with average interest 750 cost 2.6% (2014: 2.9%) 500 – EUR 641 mi
Slide 47: Fortum targets to lower the fixed cost base by EUR 100 million
Fortum targets to lower the fixed cost base of existing operations by EUR 100 million • Target is to reduce the fixed cost base by EUR 100 million in current operations by the end of 2017. This is a natural continuation to the cost savings completed in 2013-14 • Our industry is facing significant pr
Slide 48: Fortum's vision and strategy
Fortum’s vision and strategy 48
Slide 49: Global megatrends shaping the energy sector
Global megatrends shaping the energy sector Climate change and Digitalisation, new technologies resource efficiency • Competitive solar and wind • Decarbonisation • New digitally-enabled solutions • Renewables • Storage • Circular economy Urbanisation Active customers • Growth of cities – especially
Slide 50: Transition towards Solar Economy is ongoing
Transition towards Solar Economy is ongoing 50
Slide 51: Fortum – Forerunner in clean energy
Fortum – Forerunner in clean energy 51
Slide 52: Fortum Investor Relations
Fortum Investor Relations For more information, please visit www.fortum.com/investors Sophie Jolly Vice President Next events: +358 (0)10 453 2552 AGM on 5 April 2016 sophie.jolly@fortum.com Q1/2016 results on 28 April 2016 Rauno Tiihonen Manager +358 (0)10 453 6150 rauno.tiihonen@fortum.com Marja M