Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (February 2010)
48 slides from Fortum Oyj's investor presentation, February 2010
Slide 1: A leading power and heat company in the Nordic area
FORTUM A leading power and heat company in the Nordic area Presentation for investors February 2010
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 European power markets Russia Financials and outlook
Slide 4: We intend to keep our leading position
We intend to keep our leading position 4
Slide 5: Our geographical presence today
Our geographical presence today Nr 1 Heat Nordic countries Distribution Generation 48.1 TWh Electricity sales 54.9 TWh Electricity Heat sales 18.0 TWh sales Distribution cust. 1.6 million Nr 2 Power Electricity cust. 1.2 million Russia generation TGC-1 (~25%) Power generation ~6 TWh Heat sales ~8 TW
Slide 6: Capital returns
Capital returns Dividend per share EUR 1.35 1.26 Total ~ 6,853 MEUR 1.12 • Dividend proposal 2009 EUR 0.58 1.00 1.00* 0.53 1.00 per share, in total ~EUR 0.58 0.54 0.9 billion 0.42 • Dividend policy of 50-60% 0.77 0.31 0.73 0.58 0.23 0.26 payout of previous year's 0.13 0.18 results on the average 199
Slide 7: Fortum's strategic route
Fortum’s strategic route Separation of Länsivoima Länsivoima Elnova oil businesses 45% → 65% →100% 50% → 100% E.ON Finland 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Neste IVO Divestment of Lenenergo Birka Energi Stora Birka Energi Gullspång Østfold shares 50% Fortum Kraft 50%
Slide 8: New organisational structure as of 1 October 2009
New organisational structure as of 1 October 2009 President and CEO Staff Functions Business Divisions Tapio Kuula Power (Espoo) Finance Executive Vice President Executive Vice President and Matti Ruotsala Chief Financial Officer Juha Laaksonen Heat (Stockholm) Corporate Relations Executive Vice Pre
Slide 9: A leading Nordic power and heat company
A leading Nordic power and heat company • Leading power and heat company in Nordic countries • Listed at the Helsinki Stock Exchange 1998 • Approximately 85,000 shareholders • Among the most traded shares in Helsinki stock exchange • Market cap ~16 billion euros Households 7.0% Financial and insuran
Slide 10: Fortum in the Nordic electricity value chain
Fortum in the Nordic electricity value chain Fortum Markets Large Nordic Nordic customers wholesale wholesale Fortum market Small market Power customers Nord Pool and bilateral Other retail companies Deregulated Regulated Transmission and system Fortum services Distribution 10
Slide 11: Fortum's European power and heat production
Fortum's European power and heat production Fortum's European Fortum's European power generation in 2009 heat production in 2009 Hydro power 45% Biomass fuels 22% Coal 22% Other 2% Natural gas Peat 1% Other 7% Biomass 2% 20% Natural gas 3% Coal 4% Peat 4% Oil 5% Waste 6% Nuclear power 43% Heat pumps
Slide 12: Fortum's carbon exposure among the lowest in Europe
Fortum's carbon exposure among the lowest in Europe g CO2/kWh electricity, 2008 1200 1000 800 600 Average 350 g/kWh 400 200 41 0 GDF Suez Europe Dong Energy Enel Union Fenosa Nuon Scottish&Southern EDP CEZ Vattenfall E.ON Statkraft British Energy Verbund RWE Fortum Iberdrola Drax EDF DEI PVO Source:
Slide 13: Fortum's investment programme
Fortum’s investment programme Nordic region, Poland and Baltic countries • Olkiluoto 3, Finland, nuclear • Swedish nuclear • Refurbishing of existing hydro assets • Czestochowa, Poland (coal/biomass CHP), Q3/2010 • Pärnu, Estonia (biomass/peat CHP), end of 2010 • Wind power project development Elect
Slide 14: Decision-in-Principle application for Loviisa 3
Decision-in-Principle application for Loviisa 3 • A Decision-in-Principle application for the construction of a new 1000-1800 MW nuclear power plant unit in Loviisa • Designed service life of the unit at least 60 years • Fortum already has two nuclear power plant units in Loviisa • The power plant u
Slide 15: Planned schedule for the implementation of Loviisa 3
Planned schedule for the implementation of Loviisa 3 15
Slide 16: Fortum today / European power markets / Russia
Fortum today European power markets Russia Financials and outlook
Slide 17: Key EU objectives by 2020
Key EU objectives by 2020 • Minimum reduction of EU • Implementation of CO2 emissions 20% (2020) internal energy markets • Renewables 20% (2020) • Energy efficiency +20% • Development of CO2 capture and storage (2020) Competitiveness Sustainability • Increased resources for technology development Se
Slide 18: New capacity, except nuclear, will require over 60 EUR/MWh power price
New capacity, except nuclear, will require over 60 EUR/MWh power price EUR/MWh EUR/MWh 110 110 CO2 cost 100 100 Other costs ( variation) 90 90 80 80 70 70 60 Futures 60 1 February 2010 50 50 40 40 30 30 20 20 10 10 0 0 1995 -97 -99 -01 -03 -05 -07 -09 -11 -13 -15 Coal Gas Nuclear Hydro Wind Clean co
Slide 19: Market coupling milestones
Market coupling milestones • Market coupling between Netherlands (APX), Belgium (Belpex) and France (Powernext) since 2006 2011 • Market coupling Germany (EPEX Spot) – Denmark (Nord Pool) started on 9 November 2009. Baltic Cable (Germany – Sweden) and NorNed (Norway – NL) will possibly be included l
Slide 20: Current transmission capacity from Nordic area to Continental Europe is ~4000 MW
Current transmission capacity from Nordic area to Continental Europe is ~4000 MW Transmission Countries capacity MW From Nordel To Nordel Denmark - Germany 2 100 1 550 Sweden - Germany 600 600 Sweden - Poland 600 600 Norway - Netherlands 700 700 350 Total 4 000 3 450 700 • Theoretical maximum in tra
Slide 21: Nordic and Continental markets are integrating
Nordic and Continental markets are integrating – interconnection capacity could double by 2020 1400 MW link to the UK could connect offshore New interconnections could wind, too; North Seas Countries’ Offshore Grid double the capacity to over Initiative launched for supergrid development 8000 MW by
Slide 22: Nordic water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 2003 2008 2009 2010 reference level 0 Q1 Q2 Q3 Q4 Source: Nord Pool 22
Slide 23: 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 2010 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Nord Pool 23
Slide 24: Nord Pool year forwards
Nord Pool year forwards €/MWh Year 07 Year 08 Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 1 February 2010 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2006 2007 2008 2009 2010 24
Slide 25: Wholesale prices for electricity
Wholesale prices for electricity EUR/MWh Spot prices Forward prices 110 100 90 80 Dutch 70 60 German 50 40 Nordic 30 Russian* 20 10 3 February 2010 0 2007 2008 2009 2010 2011 * Including capacity tariff estimate. E.g 2009 11 €/MWh Source: , ATS 25
Slide 26: 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 27: Nordic power generation mix
Nordic power generation mix 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: Nordel Normal annual Nordic hydro gener
Slide 28: Still a highly fragmented Nordic power market
Still a highly fragmented Nordic power market Power generation Electricity distribution Electricity retail 398 TWh 14 million customers 14 million customers >350 companies ~500 companies ~350 companies Fortum Fortum Vattenfall Others Others Others Vattenfall Vattenfall 30% Dong Energy E.ON Fortum 50
Slide 29: Signs of demand picking up towards the end of 2009
Signs of demand picking up towards the end of 2009 Chelyabinsk Urals area Denmark Tyumen Sweden Norway Finland Russia Russia Nordic 10 % 10 % 5% 5% 0% 0% -5 % -5 % -10 % -10 % -15 % -15 % Q1 2009 vs Q1 2008 Q1 2009 vs Q1 2008 Q2 2009 vs Q2 2008 Q2 2009 vs Q2 2008 -20 % -20 % Q3 2009 vs Q3 2008 Q3 20
Slide 30: Fortum today / European power markets / Russia
Fortum today European power markets Russia Financials and outlook
Slide 31: Russia is the World's 4th largest power market
Russia is the World’s 4th largest power market TWh 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 il a y ce c a a n na a S K az an di di pa si ad re U U an hi or In us Ko Br m Ja an C Fr N er R C h G ut So Data 2008 based on gross output. Source: BP Statistical Review of World Energy June 200
Slide 32: Fortum - a major player in Russia
Fortum - a major player in Russia OAO Fortum (former TGC-10) • Majority of the Russian territorial generating company OAO Fortum in the Urals region • OAO Fortum operates in the heart of Russia’s oil and gas producing region TGC -1 • OAO Fortum adds ~16 TWh/a to Fortum’s power generation and the hea
Slide 33: Russian power industry reform has progressed well
Russian power industry reform has progressed well Key steps in the reform Time "Power industry law" approved 2003 Establishment of Russian power exchange (ATS) 2001 Launch of the free-trade sector of the wholesale market in European & Urals 2003 in Siberia 2005 Launch of balancing power segment 2006
Slide 34: Further power market liberalisation
Further power market liberalisation Share of liberalised trade for existing capacity • Further liberalisation of energy 100 % 100 % 90 % 100 % market increased to 60% in 80 % 80 % January 2010 70 % 60 % • The rate of liberalised volume 60 % 50 % 50 % is based on 2007 balance. All 40 % new capacity i
Slide 35: Currently 60% of electricity sold with liberalised prices
Currently 60% of electricity sold with liberalised prices Urals power price1) development Key electricity, capacity and gas prices in the OAO Fortum area 40 35 III/2009 2009 III/2008 2008 Change, % 30 Electricity spot price (market 633 672 -6 25 price), Urals hub, RUB/MWh €/MWh 20 Average regulated
Slide 36: Investment programme of OAO Fortum
Investment programme of OAO Fortum Power generation capacity (MW) Plant Fuel type Existing Planned Total MW Tyumen CHP-2 Gas 755 450 (Condensing) 1,205 6,000 Tyumen CHP-1, Q3/2010 Gas 472 190 (CHP/Condensing) 662 5,000 Tobolsk CHP, Q3/2010 Gas 452 210 (Condensing) 662 4,000 +73% Chelyabinsk CHP-3, Q
Slide 37: Efficiency improvement in Russia ~100 MEUR in 2011
Efficiency improvement in Russia ~100 MEUR in 2011 • Purchasing • Portfolio Management and Trading (PMT) • Heat regulation • Heat - technical and business improvements • Generation - technical improvements • Others 37
Slide 38: Financials and outlook
Fortum today European power markets Russia Financials and outlook
Slide 39: Income statement
Income statement MEUR IV/2009 IV/2008 2009 2008 Sales 1 563 1 602 5 435 5 636 Expenses -1 041 -991 -3 653 -3 673 Operating profit 522 611 1 782 1 963 Share of profit of associates and jv's 22 48 21 126 Financial expenses, net -39 -54 -167 -239 Profit before taxes 505 605 1 636 1 850 Income tax expen
Slide 40: Comparable and reported operating profit
Comparable and reported operating profit Operating profit IV/2009 Operating profit IV/2008 Operating profit 2009 Operating profit 2008 Comparable Reported Comparable Reported Comparable Reported Comparable Reported Power 394 330 378 470 1 469 1 335 1 528 1 599 Heat 103 108 109 155 227 248 250 307 Di
Slide 41: Cash flow statement
Cash flow statement MEUR IV/2009 IV/2008 2009 2008 Operating profit before depreciations 658 743 2 292 2 478 Non-cash flow items and divesting activities -4 -237 46 -275 Financial items and fx gains/losses -102 326 146 233 Taxes -34 -53 -239 -332 Funds from operations (FFO) 518 779 2 245 2 104 Chang
Slide 42: Key ratios
Key ratios Key ratios MEUR 2009 2008 2007 EBITDA 2 292 2 478 2 298 Net cash flow from operations 2 264 2 002 1 670 Interest-bearing net debt 5 969 6 179 4 466 Equity 8 491 8 411 8 651 Balance sheet total 19 841 20 278 17 674 Net debt/EBITDA* 2.6 2.5 2.2 Return on capital employed (%)* 12.1 15.0 14.0
Slide 43: Debt maturity profile
Debt maturity profile 1250 MEUR 2010 857 1000 2011 626 2012 499 750 2013 558 2014 1,146 500 2015 310 2016 846 2017 211 250 2018 75 2019 779 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020+ 2020+ 952 Bonds Financial institutions Other long-term debt CPs Other short-term debt per 31 December,
Slide 44: 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 44
Slide 45: Liquidity
Liquidity MEUR Available Outstanding Total amount SHORT TERM FINANCING Commercial Paper Programmes Finnish CP Programme 422 78 500 SEK 5.000 M Swedish CP Programme 316 172 488 738 250 988 LIQUID FUNDS AND COMMITTED CREDIT LINES Committed Credit Lines Short Term 211 0 211 Long Term 2 700 0 2 700 2 91
Slide 46: Hedging of Power division's Nordic sales
Hedging of Power division's Nordic sales Status at the end of December 2009 (Status at the end of Sep 2009) Hedge ratio Hedge price 2010 ~ 70% ~ EUR 44 per MWh (~65%) (~ EUR 44 per MWh) 2011 ~ 40% ~ EUR 42 per MWh (~35%) (~ EUR 42 per MWh) 46
Slide 47: Fortum in a strong position
Fortum in a strong position • Flexible, low-cost and climate-benign generation portfolio • Russian power reform proceeding and the results of OAO Fortum improving as planned • Nordic power demand recovering • Good hedging positions • Strong financial position and liquidity 47
Slide 48: Slide 48