Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (May 2010)
25 slides from Fortum Oyj's investor presentation, May 4, 2010
Slide 1: Fortum – a leading power and heat company in the Nordic area
Fortum – a leading power and heat company in the Nordic area - Strategy - Fortum in Russia Tapio Kuula President and CEO, Fortum Corporation 4 May 2010, London 1
Slide 2: Contents
Contents • Fortum today • Fortum’s key beliefs for the power markets • Fortum in Russia • Conclusions 2
Slide 3: Our geographical presence today
Our geographical presence today Nr 1 Heat Nordic countries Nr 1 Distribution Generation 48.1 TWh Electricity sales 54.9 TWh Nr 2 Electricity Heat sales 18.0 TWh sales Distribution cust. 1.6 million Nr 3 Power Electricity cust. 1.2 million Russia generation TGC-1 (~25%) Power generation ~6 TWh Heat s
Slide 4: Fortum mid-sized European power generation player, Global #4 in heat
Fortum mid-sized European power generation player, Global #4 in heat Power generation Heat production Largest producers in Europe and Russia, 2008 TWh Largest global producers, 2008 TWh EDF *) IES E.ON Gazprom Enel **) Dalkia RWE+Essent Fortum Gazprom Vattenfall Vattenfall+Nuon RAO ES East Rosenergo
Slide 5: Fortum's European power and heat production
Fortum's European power and heat production – A portfolio of hydro, nuclear and energy efficient CHP 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% Coa
Slide 6: 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 7: Fortum's investment programme
Fortum’s investment programme – Nordic region, Poland and Baltic countries Project Electricity, MW Heat, MW Commissioned Olkiluoto 3, Finland 400 2012 Swedish nuclear upgrades 260 by 2013 - Forsmark 3 upgrade (to be decided) 30 post 2013 Refurbishing of hydro power 20-30 annually Częstochowa, Poland
Slide 8: Organisational structure from 1 Oct 2009
Organisational structure from 1 Oct 2009 – Efficiency, Accountability, Simplicity 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) Corpor
Slide 9: Strategic agenda – for the market driven production company
Strategic agenda – for the market driven production company • Profit and cash flow Performance excellence • Benchmark performance in key areas • Risk management • Efficiency, accountability, simplicity Streamlined organisation • Market-driven development of the energy market Managing regulation • St
Slide 10: Fortum's key beliefs for the power markets
• Fortum today • Fortum’s key beliefs for the power markets • Fortum in Russia • Conclusions 10
Slide 11: Key beliefs for the power markets in Europe and the Nordic region
Key beliefs for the power markets in Europe and the Nordic region • There is still need to build new capacity in S/D tightness the Northern Europe and the Nordic region – Demand growth, a part of old capacity will be mothballed and/or decommissioned – Need for CO2-free capacity; a lot of planning on
Slide 12: Fortum in Russia
• Fortum today • Fortum’s key beliefs for the power markets • Fortum in Russia • Conclusions 12
Slide 13: OAO Fortum in brief
OAO Fortum* in brief • Fortum holding now is about 95%. • OAO Fortum operates in the heart of Russia’s oil and gas producing regions. Argayash Chelyabinsk Tobolsk Tyumen CHP GRES CHP CHP-1 • 8 existing power plants, district heating in 3 cities, 2 maintenance companies. • Electricity capacity now 2,
Slide 14: Russia is the fastest growing market area for Fortum
Russia is the fastest growing market area for Fortum Forecast GDP in Fortum’s market areas 240 GDP indexed: 2000=100 Russia 220 Pre-crisis Poland Sweden Pre-crisisGDP GDPlevels levelsinin Norway Russia Russiaand andNorway Norwayinin2011, 2011, 200 Sweden Finland Sweden 2012 and Finland2013. 2012 and
Slide 15: Power market liberalisation – two markets
Power market liberalisation – two markets Generator’s costs Fixed Variable (maintenance, servicing, (fuel) construction and upgrade of generating units) Capacity market Electricity day ahead (spot) wholesale market • Capacity payment is the intended mechanism for earning a (reasonable) return on inv
Slide 16: Power market liberalisation
Power market liberalisation – wholesale power market will be 100% liberalised in 8 months 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% • 80% in 1 July 2010 60% 50% 50% • 100% in 1 Januar
Slide 17: Day ahead wholesale market prices
Day ahead wholesale market prices – increase driven by recovering demand and gas price • Demand back to pre-crisis Day ahead market prices for Urals (weekly average) levels in the overall Russia, 30 EUR/MWh Chelyabinsk and Tyumen regions 25 • Regulated gas price 24% 20 higher than the average in 200
Slide 18: Power market liberalisation – Capacity market
Power market liberalisation – Capacity market • Long term rules and price parameters approved • All kinds of capacity participate in capacity auctions • “Old” capacity (pre 2007) and new capacity priced differently – Old capacity is priced by capacity auctions; first auction for 2011 in October 2010
Slide 19: New capacity will receive clearly higher payments than the old
New capacity will receive clearly higher payments than the old Estimated capacity price for new capacity*, RUB/MW/month Gas condensing (CCGT) Coal condensing Region >250 MW 150-250 MW <150 MW >225 MW <225 MW South 500,000 617,000 771,000 1,048,000 1,130,000 Center 524,000 647,000 810,000 1,100,000 1
Slide 20: 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, Fortum EUR/MWh 30 Russia’s revenues were 25 equally split between three 25 22 22 24 21 21 components 21 18 6 20 9 • Regulated power sales not 9 7 8 7 relevant post
Slide 21: Over 80% increase in power generation capacity by 2015
Over 80% increase in power generation capacity by 2015 through the investment programme 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
Slide 22: Efficiency improvement programme on track in Russia
Efficiency improvement programme on track in Russia: ~100 MEUR EBIT effect in 2011 • Purchasing • Portfolio Management and Trading (PMT) • Heat regulation • Heat - technical and business improvements • Generation - technical improvements • Others • The programme started in April 2008 • After two yea
Slide 23: Improvement through all key earnings drivers targeted
Improvement through all key earnings drivers targeted Development of Heat business Potential margin increase (power price vs. gas price) Increased income from new volume sold Increased income from new capacity (higher payments for new capacity) Efficiency improvement programme New capacity and volum
Slide 24: Conclusions
• Fortum today • Fortum’s key beliefs for the power markets • Fortum in Russia • Conclusions 24
Slide 25: A strong platform for future
A strong platform for future • The market driven production company – growing in Power, #4 in Heat globally • The fundamental drivers for the European power markets still in place: the need for new capacity, market integration, CO2 mitigation • Carbon exposure one of the lowest among European power