Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Day (November 2005)
33 slides from Fortum Oyj's investor day presentation, Nov 29, 2005
Slide 1: Electricity retail and distribution
Electricity retail and distribution Christian Lundberg Senior Vice President, Fortum Corporation Capital Markets Day 29 November 2005
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: Contents
Contents • Becoming an energy supplier of choice • The Nordic retail business • Leader in the Nordic distribution business • Benchmark efficiency in customer processes • Summary 3
Slide 4: Becoming an energy supplier of choice
• Becoming an energy supplier of choice • The Nordic retail business • Leader in the Nordic distribution business • Benchmark efficiency in customer processes • Summary 4
Slide 5: Fortum aims for a supplier of choice position
Fortum aims for a supplier of choice position Fortum focuses on the Nordic and Baltic Rim markets as a platform for profitable growth Become the Become the leading energy supplier power and heat of choice company Benchmark business performance 5
Slide 6: Becoming the energy supplier of choice
Becoming the energy supplier of choice • Driving customer focus and sales culture • Creating best experience in all customer interfaces Forerunner in • Competitive offers • Excellent reliability in electricity delivery • Commitment to sustainability 6
Slide 7: Leading position in the Nordic market
Leading position in the Nordic market • Leader in distribution and second largest 1.4 million distribution in electricity sales in the Nordic electricity customers market 1.2 million electricity sales – market presence Sweden, Finland, customers Norway and Estonia – active on the Nordic electricity
Slide 8: Key figures
Key figures Last twelve-month figures in Q3/2005 Markets Distribution Sales, EUR million 1,352 705 Comparable operating profit, EUR million 21 225 Net assets, EUR million 143 3,033 Sales, TWh 41.4 Distributed electricity, TWh 22.8 (distribution networks) Distributed electricity, TWh 17.5 (regional n
Slide 9: Efficient organisation focusing on key processes
Efficient organisation focusing on key processes Markets Distribution • Offerings - • Reliable and safe customer solutions distribution of power development • Operational and • Efficient power investment efficiency procurement and of the grid risk management Customer Services • Excellent customer se
Slide 10: How to become the energy supplier of choice
How to become the energy supplier of choice Automatic Meter Management Customer Ombudsman Benchmark offerings Environmental labelling Customer guarantees Focus on marketing and customer service Improved reliability in the grid 10
Slide 11: The Nordic retail business
• Becoming an energy supplier of choice • The Nordic retail business • Leader in the Nordic distribution business • Benchmark efficiency in customer processes • Summary 11
Slide 12: The Nordic electricity retail markets
The Nordic electricity retail markets Demand ~390 TWh Growth 2004 - 2010 ~+29 TWh* 2.5 million 122 TWh +11 TWh* 3.0 million 87 TWh +10 TWh* 5.2 million 3.0 million 146 TWh 35 TWh +6 TWh* +2 TWh* *Source: Eurprog 2005; Nordel 2004 figures 12
Slide 13: Strong position today in Finland and Sweden
Strong position today in Finland and Sweden • Finland – around 11% market share Nordic total 14 million customers – approx. 350,000 retail Fortum customers others Vattenfall • Sweden E.ON – around 14% market share 55% Hafslund – approx. 720,000 retail Nesa Plusenergi Copenhagen customers Helsinki Fj
Slide 14: Customer churn is an opportunity
Customer churn is an opportunity Power supplier switches since the liberalisation of the retail markets: • Finland ~420,000 consumers (14%) • Sweden ~1,500,000 consumers (29%) • Norway ~1,600,000 consumers (64%) Source: NordREG, Supplier switching in the Nordic countries; Fortum estimates 14
Slide 15: Customer inflow has been positive since Dec 2004
Customer inflow has been positive since Dec 2004 May May Mar Mar Nov Sep Sep Jan Jan Jul Jul Note: Net change in the Nordic customer base 15
Slide 16: Significantly increased number of new offerings
Significantly increased number of new offerings Number of new offerings • Product development process 35 implemented 30 • Strong focus on understanding customer 25 needs 20 • Cross-functional approach to project 15 management 10 • Decentralized decision-making has 5 decreased time-to-market 0 • Idea
Slide 17: The wholesale market is liquid and Nordic, but retail markets are local
The wholesale market is liquid and Nordic, but retail markets are local Supply wholesale price Demand Industry Nordic wholesale Local Retail Generation Retail retail customers market (Nordpool) markets Supply retail price Demand 17
Slide 18: What would a Nordic retail market mean to the different stakeholders?
What would a Nordic retail market mean to the different stakeholders? Benefits for… … the customers … society … the industry • Increased freedom • Enhanced • Development of choice competition towards a modern • Active participation • Transparent market and innovative in the market industry • Environ
Slide 19: Positive development, but need for closer cooperation
Positive development, but need for closer cooperation The road to a common Nordic retail market Shared vision Practical setup & Common retail – a common implementation market Nordic retail market Within 1-2 years 2-4 years 5 years • Shared vision - Nordel Harmonisation of • Improved market and the N
Slide 20: Retail – key issues going forward
Retail – key issues going forward • Promote development of a pan-Nordic retail market – Automatic Meter Management (AMM) key enabler • Drive growth – organic growth through leveraging customer churn opportunities – value creation in acquisition-based growth • Continue to build the competitive platfo
Slide 21: Leader in the Nordic distribution business
• Becoming an energy supplier of choice • The Nordic retail business • Leader in the Nordic distribution business • Benchmark efficiency in customer processes • Summary 21
Slide 22: Fortum is the largest Nordic distribution company
Fortum is the largest Nordic distribution company Number of customers thousand 1 400 Denmark 1 200 Norway 1 000 Sweden Finland 800 600 400 200 0 nd K g m N sa ki t en l af al or BK O in rtu lu Ne nf ag kr E. eb ls fs tte Fo at nh He öt Ha St Va pe G Co Number of customers in 2004 22
Slide 23: Strong presence in the Baltic Rim
Strong presence in the Baltic Rim Finland Norway • Fortum #1, around • Fortum #7, around 4% 14% market share market share • approx. 405,000 • approx. 93,000 customers customers Sweden Estonia • Fortum #3, around 17% • Fortum #3, around market share 4% market share • approx. 860,000 customers • appro
Slide 24: Distribution regulation differ country by country
Distribution regulation differ country by country Finland Sweden Norway New model for period New regulatory model is The regulator has proposed a Status 2005 - 2007 being applied to 2003 model for the next 5-year period and 2004 tariffs starting in 2007. Regulation Rate of return, Yardstick, ex-post
Slide 25: Tighter reliability requirements in distribution
Tighter reliability requirements in distribution Legislation & customer compensation Annual interruption time average per customer Sweden • Functional demands in proposed legislation, no customer without 20 electricity more than 24 hours 15 • Customer compensation from 12 hours hours 10 • Regulation
Slide 26: Reliability must be secured
Reliability must be secured Objectives for Distribution • no customer shall have an outage • The Fortum reliability programme longer than 24 h was kicked off in September • SAIDI* shall be less than 1 hour from 2012. • The programme is pan-Nordic and spans a 5-year period • Total investment of the D
Slide 27: Fortum invests in improved metering and two-way communication - AMM
Fortum invests in improved metering and two-way communication - Automatic Meter Management (AMM) • Remote and automatic meter reading implemented for all distribution customers in Fortum network area, first in Sweden before 2009 • Improved business performance #2 #2 – billing based on actual consump
Slide 28: Distribution – key issues going forward
Distribution – key issues going forward • Promote distribution regulation enabling reasonable returns and incentives for new investments • Improve reliability in the grid to increase customer satisfaction • Promote Nordic retail market – AMM • Drive restructuring of the industry • Continue to focus
Slide 29: Benchmark efficiency in customer processes
• Becoming an energy supplier of choice • The Nordic retail business • Leader in the Nordic distribution business • Benchmark efficiency in customer processes • Summary 32
Slide 30: Customer Services – a joint unit for Markets and Distribution
Customer Services – a joint unit for Markets and Distribution • Established in mid-2004 – serves Markets' 1.2 million and Distribution's 1.4 million customers • Fortum's shared platform for sales, customer service, billing and measurements • Provides excellent customer services efficiently to Fortum
Slide 31: Customer complaints have clearly declined
Customer complaints have clearly declined 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 2004 2005 34
Slide 32: Summary
• Becoming an energy supplier of choice • The Nordic retail business • Leader in the Nordic distribution business • Benchmark efficiency in customer processes • Summary 35
Slide 33: Summary
Summary • Fortum is leader in Nordic distribution and the second largest in electricity sales • Fortum's strategy aims at becoming the energy supplier of choice • The Swedish regulatory model is now being applied to 2003 and 2004 tariffs – all decisions so far have been appealed to court • Fortum's