Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — H1 2008 Earnings Presentation
30 slides from Fortum Oyj's earnings presentation, Jul 17, 2008
Slide 1: Interim Report January - June 2008
Interim Report January - June 2008 17 July 2008
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: Progress in power markets
Progress in power markets • The EU Member States agreed on the internal energy market at the meeting of the Energy Ministers on 6 June 2008 • Power market integration is proceeding – NorNed cable between Norway and Netherlands was taken into use in May – Market coupling between Nord Pool and EEX pla
Slide 4: Solid first half-year results
Solid first half-year results • Comparable operating profit EUR 984 (810) million, + 21% • IFRS mark-to-market effect on Q2 reported operating profit EUR -56 (+30) million • Earnings per share EUR 0.78 (0.65 excluding non-recurring gains H1/07), + 20% • Net cash from operating activities remained st
Slide 5: Comparable operating profit
Comparable operating profit M EUR II/2008 II/2007 I-II/2008 I-II/2007 2007 LTM Power Generation 384 217 779 547 1 095 1 327 Heat 27 36 148 173 290 265 Distribution 49 52 136 130 231 237 Markets -15 3 -25 -11 -1 -15 Russia -33 - -33 - - -33 Other -9 -10 -21 -29 -51 -43 Comparable operating profit 403
Slide 6: Nordic water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 1996 2000 2006 2007 2008 reference level 0 1 5 9 13 17 21 25 29 33 37 41 45 49 Source: Nord Pool 6
Slide 7: Price development
Price development • Nord Pool wholesale price in: Nord Pool power price – Q2 increased 54% to 34.6 EUR/MWh (22.5 EUR/MWh) EUR/MWh 80 70 – Q1 - Q2 increased 48% to 36.3 EUR/MWh (24.6 EUR/MWh) 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2003 2004 2005 2006 200
Slide 8: Segments
SEGMENTS 8
Slide 9: Power Generation
Power Generation Segment's power generation in the Nordic countries (TWh) 30 • Higher hydro volume, +1 TWh 25 25.5 24.4 • Very low thermal production 20 • CO2-free production of the segment 98% 15 • In Q2, exceptionally high system and area 10 price differences in Nord Pool 5 0 I-II 2008 I-II 2007 H
Slide 10: Power Generation
Power Generation • Higher achieved Nordic power price • Good generation mix MEUR I-II/2008 I-II/2007 LTM Sales 1 438 1 163 2 625 Comparable operating profit 779 547 1 327 Net Assets 5 524 5 657 Comparable RONA, % 21.3 Gross Investments 50 40 155 10
Slide 11: Heat
Heat Heat sales by area (TWh) 16 13.9 13.8 • Half-year volumes at the same level 14 12 • Investments in CHP plants ongoing: 10 8 - Suomenoja, Finland - Częstochowa, Poland 6 - Tartu and Pärnu, Estonia 4 2 0 I-II 2008 I-II 2007 Sweden Finland Poland Other countries 11
Slide 12: Heat
Heat • Higher fuel prices • Increase in CO2 and other costs • Low sales volume in Q1 MEUR I-II/2008 I-II/2007 LTM Sales 777 731 1 402 Comparable operating profit 148 173 265 Net Assets 3 599 3 333 Comparable RONA, % 7.1 Gross Investments 191 124 394 12
Slide 13: Distribution
Distribution Fortum's distributed electricity by area (TWh) 16 13.5 13.5 14 • Stable business during the first half 12 of 2008 10 • The installation of automatic 8 meters in Sweden continues, 6 581,000 meters already installed 4 2 0 I-II 2008 I-II 2007 Sweden Finland Norway Estonia 13
Slide 14: Distribution
Distribution • Slightly increased operating costs • Depreciations on automatic meter reading started in Q2 MEUR I-II/2008 I-II/2007 LTM Sales 412 397 784 Comparable operating profit 136 130 237 Net Assets 3 330 3 282 Comparable RONA, % 8.3 Gross Investments 133 78 292 14
Slide 15: Markets
Markets • A programme launched to improve profitability – management changes implemented – cost savings initiated – product offering being evaluated • Some price increases in Finland effective in August 1.3 million electricity customers - private and business - In Finland, Sweden and Norway 15
Slide 16: Markets
Markets • High procurement costs • Low sales margin in Finnish consumer business MEUR I-II/2008 I-II/2007 LTM Sales 930 870 1 743 Comparable operating profit -25 -11 -15 Net Assets 236 149 Comparable RONA, % -10.0 Gross Investments 3 2 4 16
Slide 17: Russia
Russia Segment's power and heat generation • Power generation 3.8 TWh in Q2 (TWh) 9 • Heat production 4.4 TWh in Q2 8 • Nyagan CHP plant greenfield project 7 started in June 6 • Capacity market launched in July 5 4 • The mandatory public tender offer to 3 TGC-10’s minorities filed 2 – The offer peri
Slide 18: Russia
Russia • TGC-10 operational result, surplus value depreciation and integration costs • Consolidated from 1 April MEUR I-II/2008 I-II/2007 LTM Sales 152 - 152 Comparable operating profit -33 - -33 Net Assets 2 329 305 Comparable RONA, % -1.4 Gross Investments 1 074 - 1 319 18
Slide 19: Financials
FINANCIALS 19
Slide 20: Income statement
Income statement MEUR II/2008 II/2007 I-II/2008 I-II/2007 2007 LTM Sales 1 322 959 2 762 2 299 4 479 4 942 Expenses -974 -632 -1 805 -1 482 -2 632 -2 955 Operating profit 348 327 957 817 1 847 1 987 Share of profit of associates and jv 36 15 70 217 241 94 Financial expenses, net -74 -41 -119 -72 -15
Slide 21: Cash flow statement
Cash flow statement MEUR II/2008 II/2007 I-II/2008 I-II/2007 2007 LTM Operating profit before depreciations 483 438 1 203 1 040 2 298 2 461 Non-cash flow items and divesting activities 55 -6 18 -5 -286 -263 Financial items and taxes -158 14 -280 -142 -393 -531 Funds from operations (FFO) 380 446 941
Slide 22: Comparable and reported operating profit
Comparable and reported operating profit • IFRS mark-to-market effect decreased reported operating profit by 56 million in the second quarter Operating profit II/2008 Operating profit II/2007 Operating profit I-II/2008 Operating profit I-II/2007 Comparable Reported Comparable Reported Comparable Rep
Slide 23: Key ratios
Key ratios MEUR LTM 2007 2006 in Q2 '08 Sales 4 942 4 479 4 491 Operating profit 1 987 1 847 1 455 Cash flow from operations 1 639 1 670 1 151 Interest-bearing net debt 6 254 4 466 4 345 Balance sheet total 20 531 17 674 16 839 Net debt/EBITDA* 2.8 2.2 2.3 Return on capital employed (%)* 13.8 14.0 1
Slide 24: Outlook
OUTLOOK 24
Slide 25: Market fundamentals
Market fundamentals • Nordic water reservoirs about 6 TWh above the long-term average in early-July 2008 • Forward power prices in mid-July 2008: – rest of 2008 ~ 60-63 EUR/MWh – 2009 ~ 61-63 EUR/MWh • CO2 prices in mid-July 2008: – for 2008 ~ EUR 26-28 per tonne – for 2008 ~ EUR 26-28 per tonne • I
Slide 26: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (Brent) CO2 price 160 35 140 30 120 EUR / tCO2 25 USD / bbl 100 20 80 60 15 40 10 20 5 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Coal price (API2) Gas price (NBP) 240 120 200 100 GBp / therm 160 80 USD / t 120 60 80 40 40 20 0 0 2005 2006 200
Slide 27: 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 14 July 2008 0 2005 2006 2007 2008 2009 2010 * Including capacity tariff estimate. E.g 2008 10 €/MWh Source: , ATS 27
Slide 28: Hedging of Power Generation's Nordic sales
Hedging of Power Generation's Nordic sales Status at the beginning of July 2008 (Status at the beginning of April 2008) Hedge ratio Hedge price Rest of 2008 ~ 70% ~ EUR 46 per MWh (~60%) (~ EUR 45 per MWh) 2009 ~ 45% ~ EUR 51 per MWh (~35%) (~ EUR 48 per MWh) 28
Slide 29: Fortum well positioned for the future
Fortum well positioned for the future • Flexible and climate-benign production portfolio • Nordic capacity investment programme proceeding • Opportunity in the Russian TGC-10 • Growth in Poland and the Baltic countries • Strong balance sheet • Good hedging positions • Good financial outlook 29
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