Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (May 2021)
59 slides from Fortum Oyj's investor presentation, May 2021
Slide 1: Equity story of FORTUM – For a cleaner world
Equity story of FORTUM – For a cleaner world Investor / Analyst material May 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 – 11 Fortum’s strategy 12 – 20 Energy market transition 21 – 25 Interim report Q1 2021 26 – 43 Appendices 44 European and Nordic power markets 45 – 54 Fortum’s Nordic power generation in detail 55 Fortum’s history 56 Historical achieved prices 57 Dividend 58 IR contact 59 3
Slide 4: Fortum in brief
Fortum in brief Fortum in brief Power generation assets Key figures 20201 Sales EUR 49.0 bn Comparable EBITDA EUR 2.4 bn Total assets EUR 57.8 bn Personnel 19,933 Main businesses1 Sales (€) Volume2 Capacity India Power 20.8 bn 142 TWh 50.3 GW Gas 22.4 bn ~370 TWh 7.6 bcm3 Heat 0.8 bn 30 TWh 19.5 GW
Slide 5: Strong position to drive the energy transition in Europe
Fortum in brief Strong position to drive the energy transition in Europe 3rd largest 3rd largest 3rd largest 4th largest power generator CO2-free power generator nuclear generator gas storage operator in Europe and Russia in Europe in Europe in Europe 5
Slide 6: Third largest CO2-free power generator in Europe
6 100 200 0 300 500 600 400 TWh EDF Rosenergoatom EPH incl. LEAG Europe RusHydro NNEGC Energoatom Vattenfall Fortum+Uniper En+ Enel ENGIE Iberdrola Statkraft RWE Source: Company information, Fortum analyses, 2019 figures pro forma. CEZ EnBW Verbund E.ON Axpo EDP Slovenské elektrárne Hafslund E-CO Hi
Slide 7: Renewables and CO2-free power generation capacity of Fortum
Fortum in brief Renewables and CO2-free power generation capacity of Fortum 14.6 GW Hydro Wind & Solar Nuclear 8.4 GW 1.7 GW 4.5 GW 7
Slide 8: 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 9: Fortum's CO2-free power generation increases by ~60% as Uniper 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 150 Fortum*: Other Coal • CO2-free generation 120 Gas 45% CO2-free • Gas-fired power 90 generation 45% 60 • Share of coal-fired generation 9% 30 • Share of co
Slide 10: Fortum is a forerunner in sustainability
Fortum in brief Fortum is a forerunner in sustainability Fortum is listed in several sustainability indices and ratings: Our purpose is to drive the change for a cleaner world. We are securing a fast and reliable transition to a carbon-neutral economy by providing customers and societies with clean
Slide 11: 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 12: Our strategy – Driving the clean energy transition
Fortum’s strategy 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 industri
Slide 13: Measuring success for Fortum
Fortum’s strategy 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 for the i
Slide 14: Fortum – A leader in clean power and gas
Fortum’s strategy 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 generate
Slide 15: Strategic steps going forward
Fortum’s strategy 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 Sustainab
Slide 16: Indicative capital expenditure for growth investments 2021-2025
Fortum’s strategy 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 a
Slide 17: Growing towards gigawatt scale in solar and wind
Fortum’s strategy 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 MW ● Kalax Operational 90 18 Q4 2020 (Fortum share) Sørfjord 20
Slide 18: Strong commitment to maintain rating of at least BBB
Fortum’s strategy 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 • Prof
Slide 19: Return targets for new investments
Fortum’s strategy 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
Slide 20: Fortum and Uniper cooperation benefits
Fortum’s strategy 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
Slide 21: 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 22: 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 22
Slide 23: Nordic, Baltic, Continental and UK markets are integrating
Energy market transition 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 2,500 MW in J
Slide 24: Volatility increases the 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 25: Own transformation – coal exit to carbon neutrality by 2035
Energy market transition Own transformation – coal exit to reach carbon neutrality by 2035 in European generation European generation CO2 net emissions: Carbon neutral in our European generation by 2035 at the latest 2019 2030 2035 Transform own 100% -50% Carbon neutral operations to carbon • Curren
Slide 26: Interim Report January-March 2021
Interim report Q1 2021 Interim Report January-March 2021 FORTUM CORPORATION 12 May 2021
Slide 27: Markus Rauramo, President and CEO
Interim report Q1 2021 Markus Rauramo President and CEO 27
Slide 28: Q1 Highlights
Interim report Q1 2021 Q1 Highlights Strong performance • Good performance across all segments securing supply to our customers during the colder winter quarter compared to previous year • Good level of outright volumes while at the same time clearly increased spot Active portfolio optimisation pric
Slide 29: Strong start for 2021
Interim report Q1 2021 Strong start for 2021 Comp. OP Comp. EPS OCF Leverage* Strong headline numbers First-quarter summary Improved results in all segments • Results supported by improved operational performance across all segments • Material impact from full Uniper consolidation – Uniper result ou
Slide 30: Higher achieved power prices
Interim report Q1 2021 Higher achieved power prices System spot power price, Nord Pool Fortum Generation's Nordic power price EUR/MWh EUR/MWh 42,1 Substantially higher spot 37,1 37,2 34,0 33,6 35,2 power prices in the Nordics 15,4 13,8 Increased achieved power 5,6 8,9 prices Q1/2020 Q2/2020 Q3/2020
Slide 31: All segments improved – significant impact of Uniper profits
Interim report Q1 2021 All segments improved – significant impact of Uniper profits Comparable operating profit (EUR million) Generation higher achieved power price Russia stronger underlying performance City Solutions higher heat sales volumes and improvement in recycling and waste solutions Consum
Slide 32: Executing our strategy – decarbonisation is key
Interim report Q1 2021 Executing our strategy – decarbonisation is key Accelerated execution on strategic priorities • Coal-exit proceeding ahead of plan with the early closure of another coal- fired plant, Wilhelmshaven, following the early closure of Heyden Transform operations to carbon • Steps f
Slide 33: Fortum fleet broadly taxonomy aligned
Interim report Q1 2021 Fortum fleet broadly taxonomy aligned Fortum assets Fortum growth CAPEX Hydro Nuclear Wind Waste to Solar (on/offshore) energy Hydrogen CCS Gas Portfolio transformation to further Hazardous increase taxonomy alignment Biomass Coal waste 33
Slide 34: Bernhard Günther, CFO
Interim report Q1 2021 Bernhard Günther CFO 34
Slide 35: Key financials
Interim report Q1 2021 Key financials MEUR Q1 2021 Q1 2020 2020 LTM Q1 strong financial performance Sales 21,493 1,357 49,015 69,152 Comparable EBITDA 1,479 543 2,434 3,370 Introduction of Comparable Net Profit and Comparable EPS as new Comparable operating profit 1,171 393 1,344 2,122 APM’s Compara
Slide 36: Generation: Higher volumes and prices
Interim report Q1 2021 Generation: Higher volumes and prices Volumes 6,7 6,4 6,3 Q1'21 Q1'20 6,3 (TWh) 0,2 Q1 2021 vs. Q1 2020 Hydro Nuclear 0,0 Wind • Comparable operating profit up 14% mainly due to higher achieved power prices Comp. Q1 2021 315 – Higher achieved power price +3.2€/MWh, +9% EBITDA
Slide 37: Hydro reservoirs
Interim report Q1 2021 Nordic hydro reservoirs towards normal levels while spot prices are catching up Reservoir content (TWh) • Cold winter with below normal wind generation and higher 120 Hydro reservoirs availability of export capacity led to strong hydro 100 generation in Q1 80 • This can be see
Slide 38: Russia: Solid underlying performance
Interim report Q1 2021 Russia: Solid underlying performance 8,4 8,4 Volumes 7,5 6,2 Q1'21 (TWh) Q1'20 Q1 2021 vs. Q1 2020 Power Heat • Comparable operating profit increased by 1% – Russian RUB FX effect of EUR -21 million Q1 2021 134 Comp. – Sale of the 116-MW CSA-backed solar power project to JV co
Slide 39: City Solutions: Clearly improved performance
Interim report Q1 2021 City Solutions: Clearly improved performance 4,4 Volumes 3,6 Q1'21 (TWh) 1,3 0,9 Q1'20 Q1 2021 vs. Q1 2020 Power Heat • Comparable operating profit increased close to 50% Q1 2021 132 – Clearly higher heat sales volumes in all heating areas Comp. – Higher Norwegian heat prices
Slide 40: Consumer Solutions: Continued improvement
Interim report Q1 2021 Consumer Solutions: Continued improvement Amount of Q1 2021 2 360 customers Q1 2021 vs. Q1 2020 (´000) Q4 2020 2 390 • Comparable operating profit continued to improve, +12% – Higher margins from power sales Q1 2021 53 Comp. – Higher prices in the Nordics compared EBITDA Q1 20
Slide 41: Uniper: Very strong Q1 results
Interim report Q1 2021 Uniper: Very strong Q1 results Power generation Q1'21 12.3 10.7 volumes 3.3 3.6 Q1 2021 vs. Q1 2020 (TWh) Hydro Nuclear Thermal CE Thermal RU • Consolidation: Q1 2021 868 – Until Q1 2020: Uniper as an associated company Comp. – From Q2 2020: Uniper as a subsidiary EBITDA Q1 20
Slide 42: Improved financial net debt and maturity profile
Interim report Q1 2021 Improved financial net debt Solid credit metrics 'BBB' long-term issuer credit rating, debt netdebt negative outlook Financialnet Target ratio: Financial < 2x Financial net debt/ Comp. EBITDA Fortum’s objective: Maintain solid investment grade rating of at least Financial net
Slide 43: Outlook
Interim report Q1 2021 Outlook Hedging 2021 Estimated annual capital Russia Generation Nordic hedges: expenditure, including maintenance CSA changes: For the rest of 2021: 80% hedged at EUR 32 and excluding acquisitions, of Lower bond yield, bond yield 6.3% (7.6%) per MWh For 2022: 55% hedged at EUR
Slide 44: Appendices
Appendices @fortum For a cleaner world
Slide 45: Western European countries exiting coal during this decade
European and Nordic power markets Western European countries exiting coal during this decade • Sweden and Austria closed their last coal plants during 2020 FI: Phase-out by mid-2029 • France is committed to phase out coal by 2022 DE: Phase-out SE: Last by 2038 plant closed • Portugal has 2023 as nat
Slide 46: Decarbonisation requires other sectors to join
European and Nordic power markets Decarbonisation requires other sectors to join The new 2030 emissions target will tighten the EU ETS CO2 abatement cost ranges for different sectors MtCO2 Eur/t Eur/t 2000 400 400 Abatement cost range 1000 300 300 -55%...-63% 0 200 EUA price 200 • The EU has agreed
Slide 47: Fortum major player in power, gas and heat
European and Nordic power markets Fortum major player in power, gas and heat Power generation Gas Heat production Largest generators in Europe and Russia, 2019 Largest European gas storage operators, 2018 Largest global producers, 2019 TWh TWh TWh EDF STOGIT Gazprom Rosenergoatom T Plus Fortum+Unipe
Slide 48: Commodity prices
European and Nordic power markets Commodity prices USD / t Coal price (ICE API2 2022) EUR / tCO2 CO2 price (EUA DEC 2021) 100 60 80 48 60 36 40 24 20 12 0 0 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 EUR / MWh Gas price (TT
Slide 49: 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 2022 6 May 2021 Rolling 7-day average spot price * Including weighted average capacity price
Slide 50: Nordic year forwards
European and Nordic power markets Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22 Year23 €/MWh 6 May 2021 Year23 70 Year22 60 50 Jan Feb Mar Apr 2021 2021 2021 2021 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20
Slide 51: German and Nordic forward spread
European and Nordic power markets German and Nordic forward spread Spot price • Nordic system price remained exceptionally depressed by the strong EUR/MWh Nordic and German daily spot prices in 2019 – 2021 Feb Mar Apr 2021 2021 2021 hydrological surplus for most of 2020. The German-Nordic spread for
Slide 52: CO2 price and Nordic spot price
CO2 price and Nordic spot price EUR / tCO2 CO2 price (EUA DEC 2021) & Nordic sys spot 80 CO2 price (EUA DEC 2021) 70 Nordic system spot price 60 50 40 30 20 10 0 Oct Nov Dec Jan Feb March April May 2020 2021 52 Source: Bloomberg
Slide 53: CO2 price and Nordic forward price
CO2 price and Nordic forward price EUR / tCO2 CO2 price (EUA DEC 2021) & Year 22 forward 60 CO2 price (EUA DEC 2021) Nordic year 2022 forward 50 40 30 20 10 0 Oct Nov Dec Jan Feb March April May 2020 2021 53 Source: Bloomberg
Slide 54: Nordic forward prices and Nordic sys spot averages
Nordic forward prices and Nordic sys spot averages EUR/MWh 50 Year 2018 forward System spot 2018 average Year 2019 forward System spot 2019 average Year 2020 forward System spot 2020 average 40 30 20 10 0 2013 2014 2015 2016 2017 2018 2019 2020 54 Source: Bloomberg
Slide 55: Fortum's Nordic, Baltic and Polish generation capacity
Fortum’s Nordic power generation in detail Fortum’s Nordic, Baltic and Polish generation capacity Of which GENERATION CAPACITY Fortum Uniper NORWAY MW FINLAND MW Hydro 6,448 1,771 Price areas Hydro 1,553 Nuclear 4,8181 1,9961 NO4, Wind 993 Nuclear 1,487 NO4 SE1 CHP 1,1852 4492 NO1, CHP 24 CHP 375 Ot
Slide 56: Fortum's evolution and historical strategic route
Fortum’s history 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 TGC-1 E.O
Slide 57: Hedging improves stability and predictability
Historical achieved prices Hedging improves stability and predictability – principles based on risk mitigation, (Generation segment) 57 2009 onwards thermal and import from Russia excluded
Slide 58: Fortum's dividend policy aiming at increasing dividend
Dividend Fortum’s dividend policy aiming at increasing dividend Fortum dividends EUR/share 1,20 1.12 1.10 1.10 1.10 1.10 1,00 Dividend policy: 0,80 “Fortum’s dividend policy is to pay a stable, 0,60 sustainable, and over time increasing dividend.” 0,40 0,20 0,00 2016 2017 2018 2019 2020 58
Slide 59: Fortum Investor Relations and Financial Communications
Next events: January-June Interim Report on 17 August 2021 January-September Interim Report on 12 November 2021 For more information, please visit www.fortum.com/investors To subscribe Fortum's releases, please fill out the subscription form on our website Fortum Investor Relations and https://www.f