Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (January 2021)
57 slides from Fortum Oyj's investor presentation, January 2021
Slide 1: Equity story of FORTUM – For a cleaner world
Equity story of FORTUM – For a cleaner world Investor / Analyst material January 2021
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. Any references to the fut
Slide 3: Content
Content Fortum in brief 4 – 17 Fortum’s strategic route 18 – 23 Energy market transition 24 – 29 Jan-Sep Interim Report 30 – 47 Appendices 48 European and Nordic power markets 49 – 53 Fortum’s power generation 54 Historical achieved prices 55 Dividend 56 IR contact 57 3
Slide 4: Good position to drive CO2-free power generation in Europe
Fortum in brief Good position to drive CO2-free power generation in Europe ~60% 3rd largest 2nd largest 66% CO2-free generator nuclear generator of our electricity Increase in Fortum’s CO2- free power generation in Europe in Europe production in Europe was CO2-free in 2019
Slide 5: Consolidated Fortum is the third largest CO2-free generator in Europe
Fortum in brief Consolidated Fortum is the third largest CO2-free generator in Europe 5 Source: Company information, Fortum analyses, 2018 figures pro forma. EPH incl. LEAG
Slide 6: Fortum to grow and lead European energy transition
Fortum in brief Fortum to grow and lead European energy transition 2019 combined comparable EBITDA(1,2) Europe & Russia Uniper EUR 1.6 bn EUR 3.3 bn Fortum EUR 1.8 bn Combined power generation (2019)(2) India 18 % 50 % Hydro Nuclear Other ~180 TWh 19 % Coal Gas Combined power generation assets 1% 12
Slide 7: Fortum is well positioned for the energy transition
Fortum in brief Fortum is well positioned for the energy transition Third largest CO2-free power generator in Europe with growing portfolio of wind and solar Significant provider of flexible hydro and gas-fired power generation Major provider and trader of gas for Europe’s energy and industrial cust
Slide 8: Fortum's CO2-free power generation increases by ~60% as Uniper is consolidated
Fortum in brief Fortum’s CO2-free power generation increases by ~60% as Uniper is consolidated as a subsidiary Fortum's power generation, TWh 200 Fortum and Uniper 175 consolidated*: 150 • CO2-free generation +60% 125 • Gas-fired power 100 generation triples 75 • Share of coal-fired CO2-free Gas Coa
Slide 9: Fortum is a forerunner in sustainability
Fortum in brief Fortum is listed in several Fortum is a forerunner in sustainability sustainability indices and ratings: We engage our customers and society to drive the change towards a cleaner world. Our role is to accelerate this change by reshaping the energy system, improving resource efficienc
Slide 10: Fortum is growing towards gigawatt scale target in solar and wind
Fortum in brief Fortum is growing towards gigawatt scale target in solar and wind power generation Ånstadblåheia 10 MW PORTFOLIO STATUS CAPACITY, MW FORTUM SHARE, MW SUPPLY STARTS/STARTED (Fortum share) FINLAND 90 18 Nygårdsfjellet 6 ● Kalax Under construction 90 18 (20%) Q1 2021 MW (Fortum Sørfjord
Slide 11: Portfolio well positioned for energy transition – share of coal based activities
Fortum in brief Portfolio well positioned for energy transition – overall combined share of coal based activities is moderate Coal share from generation and from sales (calculated from disclosed numbers assumptions below) Fortum 2019 Uniper 2019 Combined Sales, MEUR 5,447 65,804 71,251(1) Coal and l
Slide 12: Own transformation – coal exit to reach carbon neutrality by 2035
Fortum in brief Own transformation – coal exit to reach carbon neutrality by 2035 in European generation Carbon neutral in our European generation by 2035 at the latest Transform own operations to carbon • Current trajectory to reduce CO2 emissions neutral in our European generation by at least 50%*
Slide 13: Fortum key profitability drivers
Fortum in brief Fortum key profitability drivers Key market drivers: Fortum profitability drivers: Fortum Group’s indicative EBITDA by business and market exposure Power market European power generation • EU coal/nuclear capacity closures • CO2-free generation: prices and volumes, hedging, PPAs • Gr
Slide 14: Indicative capital expenditure for growth investments in 2021-2025
Fortum in brief Indicative capital expenditure for growth investments in 2021-2025 – renewables and clean gas 1 Renewables On-shore wind and solar 2 Hydrogen and clean gas Industrial decarbonisation solutions 3 Environmental and security of supply solutions Waste-to-Energy, recycling, industrial and
Slide 15: Strong commitment to maintain rating of at least BBB
Fortum in brief Strong commitment to maintain rating of at least BBB Ambition is to preserve financial flexibility and good Long term leverage target: access to capital markets. Financial net debt/comparable EBITDA Fortum will carefully manage its balance sheet going forward focusing on <2x • Profit
Slide 16: Return targets for new investments
Fortum in brief Return targets for new investments Return targets for new investments: Group 2021 capital expenditure, including maintenance and WACC+ hurdle rate: excluding acquisitions, +100 bps for green investments is estimated to be EUR 1.4 billion +200 bps for other investments • Maintenance o
Slide 17: Fortum and Uniper cooperation estimated to deliver significant financial benefits
Fortum in brief Fortum and Uniper cooperation estimated to deliver significant financial benefits Cooperation benefits focus on monetary, safety, and environmental actions • Positive cash impact on a consolidated group basis is estimated to be ~EUR 100 million annually • > EUR 50 million of these an
Slide 18: Fortum's evolution and historical strategic route
Fortum’s strategic route Fortum’s evolution and historical strategic route Skandinaviska Birka Energi Länsivoima Elnova Østfold Elverk 50% Fortum →100% 50% → 100% 50% Stockholm Gullspång merged Shares in Divestment of with Stockholm Energi Hafslund Fingrid shares Gullspång Stora Kraft Birka Energi T
Slide 19: Our strategy – Driving the clean energy transition
Fortum’s strategic route Our strategy – Driving the clean energy transition and delivering sustainable financial performance For a cleaner world Strengthen and grow in CO2-free Leverage strong position in gas Transform own operations to power generation to enable the energy transition Partner with i
Slide 20: Fortum – A leader in clean power and gas
Fortum’s strategic route Fortum – A leader in clean power and gas Core Grow Strategic transformation Transform own operations Assets and businesses that have Businesses with potential Businesses and assets outside to carbon neutral a role in energy transition and to grow profitably strategic scope g
Slide 21: Measuring success for Fortum
Fortum’s strategic route Measuring success for Fortum Climate and environmental targets: • Group carbon neutral latest by 2050 (scope 1, 2, 3) • European generation carbon neutral latest by 2035 (1, 2) • CO2 emission reduction of at least 50% by 2030 in European generation (1, 2) • Scope 3 target fo
Slide 22: Strategic steps going forward
Fortum’s strategic route Strategic steps going forward 2014-2020 2021-2022 2023-2025 Major transformation Balance sheet focus Growth in clean power and gas Active portfolio rotation with Step up in Group EBITDA Growth in strategic areas focus on assets essential in the Secure strong balance sheet Su
Slide 23: Growing EBITDA from transformation and consolidation of Uniper
Fortum’s strategic route Growing EBITDA from transformation and consolidation of Uniper Growth investments of EUR 11 billion EV/EBITDA multiple of ~7x Divestments of EUR 12 billion EV/EBITDA multiple of ~17x 23
Slide 24: Europe committed to be a forerunner in reducing GHG emissions
Energy market transition Europe committed to be a forerunner in reducing GHG emissions across all sectors • EU is tightening both its 2030 and 2050 emissions targets – Requires emission reductions in all sectors, especially residential & commercial, transport, and industry • Sector coupling – clean
Slide 25: Volatility and uncertainty in the European power market increases value of flexible assets
Energy market transition Volatility and uncertainty in the European power market increases the value of flexible assets Intermittent renewables Nuclear and coal closures Increasing role of gas Volatility and Supply-demand balance uncertainty Increased interconnection between Nordics and Continent Co
Slide 26: Nordic, Baltic, Continental and UK markets are integrating
European and Nordic power markets Nordic, Baltic, Continental and UK markets are integrating – Interconnection capacity growing to over 13 GW by end-2023 • Several interconnectors are currently under DK1-DE maximum transmission capacity has been Current Nordic/Baltic 1 upgraded from 1,780 MW to 2,50
Slide 27: Phase IV of EU ETS starts in 2021
Energy market transition Phase IV of EU ETS starts in 2021 amid expectations for significant revisions due to new EU 2030 emissions target Linear reduction factor (LRF) tightens the market Market stability reserve (MSR) restores Abatement from coal-to-gas switching depends MtCO2 scarcity by reducing
Slide 28: Western European countries exiting coal during this decade
Energy market transition Western European countries exiting coal during this decade FI: Phase-out • Sweden and Austria closed their last coal plants during 2020 by mid-2029 DE: Phase-out SE: Last • France is committed to phase out coal by 2022 by 2038 plant closed 2020 • Portugal has 2023 as nationa
Slide 29: Energy transition will increase demand for electricity and hydrogen
Energy market transition Energy transition will increase demand for electricity and hydrogen Electricity Hydrogen Feedstocks Agriculture Industry Transport Residential and commercial Source: IHS Markit Net Zero Carbon Europe scenario 29
Slide 30: Interim Report January-September 2020
Interim Report January-September 2020 Fortum Corporation 17 November 2020
Slide 31: Seasonally weak Uniper quarter burdened Fortum's results
Seasonally weak Uniper quarter burdened Fortum’s results – Generation segment stable on good hedges • Stable power and heat consumption in the Nordics – Nordic spot price down 74% – Generation segment achieved power price up 4% – Wet hydrology continued in Q3 • Comparable EBITDA at EUR 132 (295) mil
Slide 32: Power demand has recovered close to 2019 level in most areas
Power demand has recovered close to 2019 level in most areas Change in percentages from Q3 2019 to Q3 2020 (%) Source: ENTSO-E and ATS (Russia) hourly reported power demand, 7 day moving avg 32 CWE = Central Western Europe (Germany, France, Netherlands, Belgium, Austria, Switzerland) Percentage chan
Slide 33: Nordic water reservoirs
Nordic water reservoirs Reservoir content (TWh) 120 100 80 60 40 Norway 20 Average Sweden 2000 2003 2018 2019 2020 2000-2018 Finland 0 Q1 Q2 Q3 Q4 Source: Nord Pool, 2020 by country 33
Slide 34: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices USD / t Coal price (ICE API2 2021) EUR / tCO2 CO2 price (EUA DEC 2021) 100 35 80 28 60 21 40 14 20 7 0 0 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 EUR / MWh Gas price (TTF 2021) USD / bbl Crude oil price
Slide 35: Wholesale power price
Wholesale power price EUR/MWh Nordic spot and forward prices 70 Realised system price Futures 7 January 2021 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019 2020 2021 Source: Nord Pool, Nasdaq Commodities 35
Slide 36: Nordic system and area prices decoupled
Nordic system and area prices decoupled Weekly and quarterly Nordic system and area prices in Q3 and Q4 2020 EUR/MWh 55 FI 50 SE3 45 SE2 40 SYS 35 30 25 20 15 10 5 0 July August September October November December 36 Source: Nord Pool
Slide 37: Hedging supported Fortum's achieved power price in the Nordics
Hedging supported Fortum’s achieved power price in the Nordics, Russian achieved price in roubles increased Spot price for power in Nord Pool power exchange Spot price for power (market price), Urals hub EUR/MWh RUB/MWh 42 38,6 1 500 34,7 35 1 250 1 107 1 109 1 081 1 068 1 021 28 1 000 21 750 15,4 +
Slide 38: Generation
Generation Q3 2020 Q1-Q3 2020 • Lower power generation • Higher power generation – Nuclear -0.7 TWh, – Hydro +1.5 TWh – Hydro +0.2 TWh – Nuclear -1.0 TWh – Wind -0.1 TWh – Wind unchanged • Higher achieved power price, +4% • Lower achieved power price, -5% (+1.4 EUR/MWh), good optimisation (-1.7 EUR/
Slide 39: Russia
Russia Q3 2020 Q1-Q3 2020 • FX effect of EUR -11 million • Lower power generation and heat • Lower power generation and heat production production • Lower power margins and higher heat tariffs • Lower CSA payments • Lower CSA payments • Lower bad debt provisions • FX effect of EUR -16 million • 300
Slide 40: City Solutions
City Solutions Q3 2020 Q1-Q3 2020 • Improved result in district heating • Q1 impacted negatively business in Finland and Norway – Lower heat sales volumes – Lower results in the Baltic countries – Lower power sales prices • In district heating in Norway, change – Lower Norwegian heat sales prices in
Slide 41: Consumer Solutions
Consumer Solutions Q3 2020 Q1-Q3 2020 • 12th consecutive quarter of comparable • Higher sales margins as a result of EBITDA improvement active development of the service • Competition continued to be intense in offering following the Hafslund the Nordics integration and subsequent development of the
Slide 42: Uniper
Uniper Q3 2020 Q1-Q3 2020 • Uniper’s Q1 2020 were exceptionally • In Q1, Fortum’s share of Uniper’s profits strong, shift between quarters; at the as Uniper recorded as an associated expense of the Q3 2020 company in Other Operations • Russia contributed positively • Uniper contribution to Fortum’s
Slide 43: Q3 2020 – Seasonality in Uniper segment burdened Fortum's results
Q3 2020 – Seasonality in Uniper segment burdened Fortum’s results, Uniper’s full year guidance unchanged Comparable operating profit EUR million • 0.4 TWh lower • Lower CSAs volumes • Lower bad debt • 1.4 EUR/MWh provisions higher • FX- effect achieved price EUR -11 million • Uniper consolidated as
Slide 44: Highlights in income statement
Highlights in income statement MEUR III/2020 III/2019 I-III/2020 I-III/2019 2019 LTM Uniper: • In 2019 as an associated company Comparable operating profit -176 153 424 793 1,191 822 • From Q2 2020 onwards as a subsidiary Items affecting comparability 236 -29 763 -127 -81 809 Operating profit 60 124
Slide 45: Cash flow and change in financial net debt Q1-Q3 2020
Cash flow and change in financial net debt Q1-Q3 2020 CF from operating activities 45 before net margin liab
Slide 46: Focus remains on optimising of cash flow and maintaining financial flexibility
Focus remains on optimising of cash flow and maintaining of financial flexibility • Fortum’s objective is to have a solid investment grade rating of at least BBB to maintain its financial strength, preserve financial flexibility and good access to capital. • Focus is on profitability, optimising of
Slide 47: Outlook
Outlook Hedging 2020 Estimated annual capital Income taxation Generation Nordic hedges: expenditure, including maintenance For the remainder of 2020: 85% hedged at In 2020, the comparable effective and excluding acquisitions, of EUR 34 per MWh corporate income tax rate for For 2021: 75% hedged at EU
Slide 48: Appendices
Appendices @fortum For a cleaner world
Slide 49: Still a highly fragmented Nordic power market
European and Nordic power markets Still a highly fragmented Nordic power market Power generation in 2019 Electricity retail 394 TWh 16 million customers >350 companies ~350 companies Vattenfall Others Fortum Others Vattenfall 35% 46% Fortum+ Andel Uniper BKK Fjordkraft Helen Ørsted Statkraft E.ON Ag
Slide 50: Fortum mid-sized European power generation player – major producer in global heat
European and Nordic power markets Fortum mid-sized European power generation player – major producer in global heat Power generation Heat production Customers Largest producers in Europe and Russia, 2018 Largest global producers, 2018 Electricity customers in Europe, 2018 TWh TWh Millions EDF Gazpro
Slide 51: Wholesale power prices
European and Nordic power markets Wholesale power prices EUR/MWh Spot prices Forward prices 100 90 80 70 60 German 50 Nordic 40 Russian* 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 7 January 2021 * Including weighted average capacity price 51 Source: Nord Pool, Bloomberg F
Slide 52: Nordic year forwards
European and Nordic power markets Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22 €/MWh 7 January 2021 Year22 70 Year21 28 26 24 22 60 20 18 16 14 12 50 10 Oct Nov Dec 2020 2020 2020 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015
Slide 53: German and Nordic forward spread
European and Nordic power markets German and Nordic forward spread Spot price • Nordic system price depressed by the strong hydrological surplus since EUR/MWh Nordic and German daily spot prices in Jan 2019 – Dec 2020 100 the beginning of the year. 80 • Continental European spot prices were pushed d
Slide 54: Fortum's Nordic, Baltic and Polish generation capacity
Fortum’s power generation Fortum’s Nordic, Baltic and Polish generation capacity GENERATION CAPACITY MW NORWAY MW FINLAND MW Hydro 4,677 Price areas Hydro 1,553 NO4, Wind 82 Nuclear 1,487 Nuclear 2,821 NO4 SE1 NO1, CHP 20 CHP 452 CHP 831 Generation capacity 102 Other thermal 565 Other thermal 565 Ge
Slide 55: Hedging improves stability and predictability
Historical achieved prices Hedging improves stability and predictability – principles based on risk mitigation 55 2009 onwards thermal and import from Russia excluded
Slide 56: Revised dividend policy aiming at increasing dividend
Revised dividend policy aiming at increasing dividend Dividend policy: “Fortum’s dividend policy is to pay a stable, sustainable, and over time increasing dividend.” Fortum’s Board of Directors aims to propose a dividend for the year 2020 of EUR 1.12/share with the aim to increase the dividend going
Slide 57: Fortum Investor Relations and Financial Communications
Next events: Fortum Corporation’s Financial Statements Bulletin for the year 2020 will be published on 12 March 2021 January-March Interim Report on 12 May 2021 January-June Interim Report on 17 August 2021 January-September Interim Report on 12 November 2021 For more information, please visit www.f