Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (August 2021)
61 slides from Fortum Oyj's investor presentation, August 2021
Slide 1: Equity story of FORTUM – For a cleaner world
Equity story of FORTUM – For a cleaner world Investor / Analyst material August 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 – 12 Fortum’s strategy 13 – 21 Energy market transition 22 – 26 Half-year Financial Report 2021 27 – 45 Appendices 46 European and Nordic power markets 47 – 56 Fortum’s Nordic power generation in detail 57 Fortum’s evolution and strategic route 58 Historical achieved prices
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 14.1 GW Hydro Wind & Solar Nuclear 8.4 GW 1.2 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% with Uniper
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's power generation and heat production by source
Fortum in brief Fortum's power generation and heat production by source Fortum’s power generation in 2020 * Fortum's heat production in 2020 * Natural gas 45% Natural gas 56% Total Total Waste1% power generation Others 1% heat production Wind, solar 1% Heat pumps, Bio 1% 142.1 TWh Hydropower 23% ele
Slide 12: 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 13: 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 14: 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 15: 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 16: 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 17: Indicative capex 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 18: 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 (Fortum share) PORTFOLIO STATUS CAPACITY, MW FORTUM SHARE, MW SUPPLY STARTS/STARTED Nygårdsfjellet 6 MW (Fortum share) FINLAND 90 18 Sørfjord 20 MW ● Kalax Operational 90 18 Q4 20
Slide 19: 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 20: 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 21: Fortum and Uniper cooperation estimated to deliver financial 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 22: 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 23: 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 23
Slide 24: 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 25: Volatility in 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: Own transformation – coal exit to reach 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 27: Half-year Financial Report January-June 2021
Half-year Financial Report January-June 2021 Fortum Corporation 17 August 2021
Slide 28: Markus Rauramo, President and CEO
Markus Rauramo President and CEO 28 Fortum Interim Report January-June 2021
Slide 29: Market environment is improving
Market environment is improving • Macroeconomic outlook is improving, and global growth forecasts have been upgraded lately as vaccination efforts appear to reduce disruptive effects of new Covid-19 waves on economic activity • Strong year-on-year European demand growth reflects recovery from the ve
Slide 30: Determined execution of our strategy
Determined execution of our strategy • We deliver • We deliver • We deliver on our plans on our strategy on our way to net-zero Use of coal in Fortum's Russia Solid operational performance Divestments concluded segment to cease at the end of across segments of up to EUR 5.2 billion 2022 Financial pe
Slide 31: Good operational performance across the group
Good operational performance across the group despite phasing effects Comp. OP* Comp. EPS** OCF Leverage*** H1 1206 1.09 1002 1120 <2 2.4 1.03 0.18 Higher achieved power prices and 596 0.91 higher generation volumes H1 2020 H1 2021 H1 2020 H1 2021 H1 2020 H1 2021 Target LTM Uniper fully consolidated
Slide 32: H1, all segments improved – significant impact from Uniper profits
H1, all segments improved – significant impact from Uniper profits Comparable operating profit (EUR million) 510 -1 1206 Generation higher achieved power price Russia stronger underlying performance offsetting negative FX 39 4 55 2 596 City Solutions higher power and heat sales Consumer Solutions hi
Slide 33: Q2 – Significant phasing effects in Uniper segment
Q2 – Significant phasing effects in Uniper segment Comparable operating profit (EUR million) Generation successful physical optimisation partly offset by slightly higher costs 11 0 -201 22 0 203 Russia stronger underlying performance offsetting lower CSAs City Solutions higher power sales Consumer S
Slide 34: Determined execution of our transformation strategy continues
Determined execution of our transformation strategy continues Strengthening balance sheet Accelerated decarbonisation Balanced growth EUR 5.2 billion of divestments in 1.5 years Fortum Russia division end of coal-fired Leverage target: generation by end of 2022 Financial net debt/ • Stockholm Exergi
Slide 35: Bernhard Günther, CFO
Bernhard Giinther CFO 35
Slide 36: Key financials
Key financials MEUR II/ II/ I-II/ I-II/ FY LTM 2021 2020 2021 2020 2020 H1 strong financial performance Sales 17,128 12,330 38,621 13,687 49,015 73,950 LTM comparable EBITDA at EUR 3.2 Comparable EBITDA 348 512 1,827 1,055 2,434 3,206 billion Comparable operating profit 35 203 1,206 596 1,344 1,954
Slide 37: Generation: Higher achieved power prices
Generation: Q2 Q2'21 Q2'20 Higher achieved power prices Volumes (TWh) 5,5 5,1 5,4 5,6 0,0 0,1 Q2 2021 vs. Q2 2020 Hydro Nuclear Wind • Comparable operating profit +13% mainly due to higher achieved H1 H1'21 H1'20 Volumes power prices and slightly higher volumes (TWh) 12,2 11,5 11,8 11,9 – Higher ach
Slide 38: Hydro reservoirs
Nordic hydro reservoirs close to normal levels, strong spot prices influenced by Continental European power prices Reservoir content (TWh) 120 • High hydro power generation and below normal Hydro reservoirs precipitation led to normalisation of reservoirs 100 80 • Nordic reservoirs 3 TWh above long-
Slide 39: Higher achieved power prices
Higher achieved power prices System spot power price, Nord Pool Achieved power price, Generation segment EUR/MWh Substantially higher spot EUR/MWh 42 37,1 37,2 38,1 48 42,1 41,9 33,6 35,2 40 35 power prices in the Nordics 32 28 24 21 Increased achieved power 13,8 16 5,6 8,9 14 prices 8 7 0 0 Q2/2020
Slide 40: Russia: Solid underlying performance
Russia: Q2 Q2'21 Q2'20 Solid underlying performance Volumes (TWh) 6,1 5,4 2,4 2,5 Q2 2021 vs. Q2 2020 Power Heat • Comparable operating profit flat at EUR 37 million H1 H1'21 H1'20 Volumes – Changes in CSA* payments, lower bond yield, and higher power prices (TWh) 14,6 13,8 9,9 8,7 – Impact of the R
Slide 41: City Solutions: Performance improved
City Solutions: Q2 Q2'21 Q2'20 Performance improved Volumes (TWh) 1,8 2,0 0,8 0,6 Q2 2021 vs. Q2 2020 Power Heat • District heating with higher power prices and higher power sales H1 H1'21 H1'20 Volumes (TWh) 6,2 5,6 2,1 1,5 Power Heat H1 2021 vs. H1 2020 MEUR II/ II/ I-II/ I-II/ FY • Higher heat sa
Slide 42: Consumer Solutions: Continued profitability improvement
Consumer Solutions: Number of Continued profitability improvement customers Q2 2021 2 320 Q4 2020 2 390 Q2 2021 vs. Q2 2020 • Comparable operating profit flat MEUR II/ II/ I-II/ I-II/ FY 2021 2020 2021 2020 2020 LTM • 15th consecutive quarter of comparable EBITDA improvement Sales 424 237 1,085 661
Slide 43: Uniper: Solid underlying performance
Uniper: Q2 Q2'21 Q2'20 9,5 9,4 Solid underlying performance Volumes (TWh) 3,2 3,5 2,9 2,8 8,4 5,3 Q2 2021 vs. Q2 2020 Hydro Nuclear Thermal CE Thermal RUS • European Generation business benefitted from Irsching 4 & 5 H1 H1'21 H1'20 21,9 Volumes* and Datteln 4 contribution (TWh) 19,1 9,4* 6,6 6,5 5,3
Slide 44: Credit outlook improved
Credit outlook improved Solid credit metrics debt 'BBB' long-term issuer credit rating, debt stable outlook netnet 'BBB' long-term issuer credit rating, stable outlook Financial Target ratio: Financial < 2x Financial net debt / Comp. EBITDA Fortum’s objective: Maintain solid investment grade rating
Slide 45: Outlook
Outlook Hedging 2021 Estimated annual capital Russia Generation Nordic hedges: expenditure, including maintenance CSA changes: For the rest of 2021: 75% hedged at EUR 33 and excluding acquisitions, of Lower bond yield, bond yield 6.3% (7.6%) per MWh For 2022: 60% hedged at EUR 31 per MWh EUR 1,400 m
Slide 46: Appendices
Appendices @fortum For a cleaner world
Slide 47: 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 48: Decarbonisation requires other sectors to join
European and Nordic power markets Decarbonisation requires other sectors to join • The EU has agreed to increase the 2030 total emissions reduction target to 55% vs 1990. • In July 2021, EU Commission put forward a “Fit for 55” package, laying out the roadmap for achieving the new ambitious climate
Slide 49: 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 50: Commodity prices
European and Nordic power markets Commodity prices USD / t Coal price (ICE API2 2022) EUR / tCO2 CO2 price (EUA DEC 2021) 125 60 100 48 75 36 50 24 25 12 0 0 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 EUR / MWh
Slide 51: Wholesale power prices
European and Nordic power markets Wholesale power prices EUR/MWh Spot prices Forward prices 110 100 90 80 70 German 60 Nordic 50 40 Russian* 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Forwards 12 August 2021 Rolling 7-day average spot price * Including weighted avera
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 Year23 €/MWh 12 August 2021 Year23 70 Year22 60 50 Apr May Jun Jul 2021 2021 2021 2021 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201
Slide 53: German and Nordic forward spread
European and Nordic power markets German and Nordic forward spread Spot price EUR/MWh Nordic and German daily spot prices in 2019 – 2021 May June July • After the price recovery seen in Q1 2021, Nordic system price has 120 2021 2021 2021 remained on average close to 40 €/MWh during Q2 2021. 100 •
Slide 54: CO2 price and Nordic spot power price
European and Nordic power markets CO2 price and Nordic spot power price EUR / tCO2 CO2 price (EUA DEC 2021) & Nordic sys spot price 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 June July August 2020 2021 Until 13 August 2021 54 Sourc
Slide 55: CO2 price and Nordic forward price
European and Nordic power markets CO2 price and Nordic forward price EUR / tCO2 CO2 price (EUA DEC 2021) & Year 22 forward price 60 CO2 price (EUA DEC 2021) Nordic year 2022 forward 50 40 30 20 10 0 Oct Nov Dec Jan Feb March April May June July August 2020 2021 Until 12 August 2021 55 Source: Bloomb
Slide 56: Nordic forward prices and Nordic sys spot averages
European and Nordic power markets 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 56 Source: Bloomberg
Slide 57: 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 1,185 2,4 4492 NO1, CHP 24 CHP 375
Slide 58: Fortum's evolution and historical strategic route
Fortum’s evolution and 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 Divestment of with Hafslund Fingrid shares small scale hydro Gullspå
Slide 59: Hedging improves stability and predictability
Historical achieved prices Hedging improves stability and predictability – principles based on risk mitigation, (Generation segment) EUR/MWh Realised prices quarterly since 2000 80 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2
Slide 60: 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 60
Slide 61: Fortum Investor Relations and Financial Communications
Next events: 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.fortum.com/about-us/media/media-room/subscribe-