Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Presentation (March 2009)
48 slides from Fortum Oyj's investor presentation, March 2009
Slide 1: A leading power and heat company in the Nordic area
FORTUM A leading power and heat company in the Nordic area Presentation for investors March 2009
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: Content
Content Fortum today European power markets Russia Financials and outlook 3
Slide 4: We intend to keep our leading position
We intend to keep our leading position 4
Slide 5: Our geographical presence today
Our geographical presence today Nr 1 Heat Nordic countries Distribution Generation 51.6 TWh Electricity sales 59.1 TWh Electricity Heat sales 20.0 TWh sales Distribution cust. 1.6 million Nr 2 Power Electricity cust. 1.3 million Russia generation TGC-1 (~25%) Power generation ~7 TWh Heat sales ~7 TW
Slide 6: Strong growth in EBITDA and in cash flow
Strong growth in EBITDA and in cash flow MEUR EBITDA MEUR Total net cash from operating activities 2 500 2 000 2 000 2 478 1 500 2 002 2 066 1 500 1 884 1 550 1 000 1 151 1 000 500 500 0 0 2006 2007 2008 2006 2007 2008 Sales gain From Lenenergo shares Additional dividend from Hafslund MEUR Net debt
Slide 7: Capital returns
Capital returns Dividend per share EUR • Dividend of EUR 1.00 per share proposed to the AGM, 1.35 in total ~EUR 0.9 billion 1.26 Total ~ 5,965 MEUR 1.12 • Dividend policy of 50 - 60% 0.58 1.00 0.53 payout of previous year's 0.54 results on the average 0.58 0.42 0.77 0.31 0.73 0.58 0.23 0.26 0.13 0.1
Slide 8: Fortum in the Nordic electricity value chain
Fortum in the Nordic electricity value chain Fortum Markets Large Nordic Nordic customers Fortum wholesale wholesale market Small Power market customers Generation Nord Pool and bilateral Other retail companies Deregulated Regulated Transmission and system Fortum services Distribution 8
Slide 9: Fortum's European production by source
Fortum's European production by source Fortum's power generation Fortum's heat production in 2008 in 2008 Hydro power 44% Biomass fuels 20% Coal 23% Other 2% Natural gas Peat 1% Biomass 2% Other 10% 16% Natural gas 2% Coal 4% Oil 4% Waste 7% Heat pumps, Nuclear power 45% Peat 7% electricity 13% Tota
Slide 10: Fortum's carbon exposure is among the lowest in Europe
Fortum's carbon exposure is among the lowest in Europe g CO 2 /kWh electricity 1200 2007 1000 800 600 Average 373 g/kWh 400 200 64 0 Union Fenosa Drax E.ON Enel Endesa Vattenfall Dong Energy Electrabel EDP Fortum Statkraft RWE CEZ Verbund Scottish&Southern Nuon Iberdrola British Energy DEI PVO EDF S
Slide 11: Fortum's investment programme
Fortum’s investment programme Nordic region, Poland and Baltic countries • Olkiluoto 3, Finland, nuclear • Swedish nuclear • Suomenoja, Finland (gas CHP) • Järvenpää, Finland (biomass CHP) • Brista, Sweden (waste CHP) • Refurbishing of existing hydro assets • Wind power, Sweden • Czestochowa, Poland
Slide 12: Decision-in-Principle application for Loviisa 3
Decision-in-Principle application for Loviisa 3 • A Decision-in-Principle application for the construction of a new 1000-1800 MW nuclear power plant unit in Loviisa • Designed service life of the unit at least 60 years • Fortum already has two nuclear power plant units in Loviisa • The power plant u
Slide 13: Planned schedule for the implementation of Loviisa 3
Planned schedule for the implementation of Loviisa 3 13
Slide 14: A leading Nordic power and heat company
A leading Nordic power and heat company • Leading power and heat company in Nordic • Listed at the Helsinki Stock Exchange 1998 • More than 50,000 shareholders • Among the most traded shares in Helsinki stock exchange • Market cap ~14 billion euros Households 5.3% Financial and insurance institution
Slide 15: Fortum today / European power markets / Russia / Financials and outlook
Fortum today European power markets Russia Financials and outlook 15
Slide 16: Key EU objectives by 2020
Key EU objectives by 2020 • Minimum reduction of EU • Implementation of CO2 emissions 20% (2020) internal energy markets • Renewables 20% (2020) • Energy efficiency +20% • Development of CO2 (2020) Competitiveness Sustainability capture and storage • Increased resources for technology development Se
Slide 17: Huge need for new capacity
Huge need for new capacity Globally ... ... European wide ... ... and in Russia TWh TWh TWh 35,000 4,000 1,800 30,000 1,600 ~14,000 1,300 1,400 25,000 3,000 TWh TWh 1,200 20,000 1,000 2,000 15,000 800 600 10,000 1,000 400 5,000 200 0 0 0 2006 2015 2030 2000 2005 2010 2015 2020 2006 2010 2015 2020 Ge
Slide 18: New capacity needed in the Nordic market
New capacity needed in the Nordic market Demand and capacity development in Committed new production the Nordic market ~40 TWh TWh 500 CHP 400 other OL 3 CHP nuclear 300 bio 200 Wind Nuclear 100 Hydro upgrades 0 2000 2005 2010 2015 2020 Committed projects *) Existing capacity partly decommissioned d
Slide 19: New capacity, except nuclear, will require over 60 EUR/MWh power price
New capacity, except nuclear, will require over 60 EUR/MWh power price EUR/MWh EUR/MWh 110 110 CO2 cost 100 100 Other costs ( variation) 90 90 80 80 70 70 60 60 Futures 50 26 February 2009 50 40 40 30 30 20 20 10 10 0 0 1995 -97 -99 -01 -03 -05 -07 -09 -11 -13 Coal Gas Nuclear Hydro Wind Clean coal
Slide 20: Current transmission capacity from Nordic area to Continental Europe is ~4000 MW
Current transmission capacity from Nordic area to Continental Europe is ~4000 MW Transmission Countries capacity MW From Nordel To Nordel Denmark - Germany 2 100 1 550 Sweden - Germany 600 600 Sweden - Poland 600 600 Norway - Netherlands 700 700 350 Total 4 000 3 450 700 • Theoretical maximum in tra
Slide 21: Nordic and Continental markets are integrating
Nordic and Continental markets are integrating – interconnection capacity could double by 2020 New interconnections could double the capacity to over 8000 MW by 2020 Additional 700 MW cable NO-NL New internal Nordic grid studied investments provide for increased available 700 -1400 MW NO-DE capacity
Slide 22: Market coupling milestones
Market coupling milestones • Market coupling between Belgium (BelPEX), Netherlands (APX) and France (Powernext) since November 2006 • Market coupling EEX - Nord Pool started 29 September 2008 but was on 8th October suspended 2009 until Q2 2009 due to technical problems • Market coupling NL-Nord Pool
Slide 23: Nordic water reservoirs
Nordic water reservoirs 120 100 reservoir content (TWh) 80 60 40 20 2000 2003 2006 2007 2008 2009 reference level 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 week 23
Slide 24: Nord Pool year forwards
Nord Pool year forwards €/MWh Year 06 Year 07 Year 08 Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 26 February 2009 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 2008 2009 24
Slide 25: Wholesale prices for electricity
Wholesale prices for electricity EUR/MWh Spot prices Forward prices 110 100 90 80 70 60 Dutch 50 German 40 Nordic 30 Russian* 20 10 20 February 2009 0 2005 2006 2007 2008 2009 2010 2011 * Including capacity tariff estimate. E.g. 2009 11 €/MWh Source: , ATS 25
Slide 26: Fuel and CO2 allowance prices
Fuel and CO2 allowance prices Crude oil price (Brent) CO2 price 160 35 140 30 120 25 EUR / tCO2 USD / bbl 100 20 80 60 15 40 10 20 5 0 0 2005 2005 2006 2007 2006 20072008 2008 2009 2009 2010 2005 2005 2006 2007 2006 20072008 2008 2009 2009 2010 Coal price (API2) Gas price (NBP) 240 120 200 100 160 G
Slide 27: Nordic power generation mix
Nordic power generation mix 160 Total Nordic generation 397 TWh in 2007 140 TWh % 120 Fossil fuels 63 16 100 TWh/a Nuclear 87 22 80 Waste 4 1 60 Biomass 19 5 40 Wind 10 3 20 Hydro 214 54 0 Hydro variance +/- 40 TWh from Denmark Norway Sweden Finland average Net import in 2007: 3TWh Source: Nordel 27
Slide 28: Still a highly fragmented Nordic power market
Still a highly fragmented Nordic power market Power generation Electricity distribution Electricity retail 397 TWh 14 million customers 14 million customers >350 companies ~500 companies ~350 companies Fortum Fortum Vattenfall Others Others Others Vattenfall Vattenfall 30% E.ON E.ON Fortum 50% 51% H
Slide 29: Economic downturn has affected power consumption
Economic downturn has affected power consumption Power demand decreased in all Nordic countries except Norway in 2008 … 2% • Nordic paper and metal companies Norway % change (from year 2007) have announced plant closures and 1% temporary production cuts 0% • Power demand has decreased the -1% - 1% D
Slide 30: Fortum today / European power markets / Russia / Financials and outlook
Fortum today European power markets Russia Financials and outlook 30
Slide 31: Russia is the World's 4th largest power market
Russia is the World’s 4th largest power market – and growing rapidly Russia is the 4th largest power Demand for electricity market in the World in Russia TWh TWh 4,000 1,800 3,500 1,600 3,000 1,400 2,500 1,200 2,000 1,000 800 1,500 600 1,000 400 500 200 0 0 So B ce er ia C any Fr da N a c h zil a R
Slide 32: Fortum - a major player in Russia
Fortum - a major player in Russia TGC-10 • Majority of the Russian territorial generating company TGC-10 in the Urals region • TGC-10 operates in the heart of Russia’s oil and gas producing region TGC-1 • TGC-10 adds 18 TWh/a to Fortum’s power generation and the heat sales double TGC-10 Nyagan • Ann
Slide 33: Russian power industry reform has progressed well
Russian power industry reform has progressed well Key steps in the reform Time "Power industry law" approved 2003 Establishment of Russian power exchange (ATS) 2001 Launch of the free-trade sector of the wholesale market in European & Urals 2003 in Siberia 2005 Launch of balancing power segment 2006
Slide 34: Further power market liberalisation
Further power market liberalisation Share of liberalised trade for existing capacity • Further liberalisation of energy 100 % 100 % 90 % 100 % market to increase to 50% in 80 % 80 % July 2009 70 % 60 % 60 % • The rate of liberalised volume 50 % 50 % is based on 2007 balance. All 40 % new capacity is
Slide 35: Currently 30% of electricity sold with liberalised prices
Currently 30% of electricity sold with liberalised prices European and Urals part power price 1) development; EUR/MWh 40 • Day-Ahead-Market for 35 electricity well-functioning and 30 competitive 25 • All volume sold to Day-Ahead- €/MWh 20 Market, but market based 15 price formation for about 30% of
Slide 36: Investment programme of TGC-10
Investment programme of TGC-10 Moscow Nyagan Tyume Tobolsk Chelyabinskn Kurgan Power generation capacity (MW) Plant Fuel type Existing Planned Total Tyumen CHP-2 Gas 755 450 1,205 MW 6,000 Tyumen CHP-1 Gas 472 190 662 Tobolsk CHP Gas 452 210 662 5,000 Chelyabinsk CHP-3 Gas 360 220 580 4,000 +73% +2,
Slide 37: Efficiency improvement appr. 100 MEUR in 2011
Efficiency improvement appr. 100 MEUR in 2011 • Purchasing • Portfolio Management and Trading (PMT) • Heat regulation • Heat - technical and business improvements • Generation - technical improvements • Others 37
Slide 38: Fortum today / European power markets / Russia / Financials and outlook
Fortum today European power markets Russia Financials and outlook 38
Slide 39: Income statement, 2008
Income statement, 2008 MEUR 2008 2007 Sales 5 636 4 479 Expenses -3 673 -2 632 Operating profit 1 963 1 847 Share of profit of associates and jv’s 126 241 Financial expenses, net -239 -154 Profit before taxes 1 850 1 934 Income tax expense -254 -326 Net profit for the period 1 596 1 608 Minority int
Slide 40: Cash flow statement, 2008
Cash flow statement, 2008 MEUR 2008 2007 Operating profit before depreciations 2 478 2 298 Non-cash flow items and divesting activities -275 -286 Financial items and taxes -99 -393 Funds from operations (FFO) 2 104 1 619 Change in working capital -102 51 Total net cash from operating activities 2 00
Slide 41: Key ratios
Key ratios MEUR 2008 2007 2006 EBITDA 2 478 2 298 1 884 Cash flow from operations 2 002 1 670 1 151 Interest-bearing net debt 6 179 4 466 4 345 Shareholders' equity 7 954 8 359 7 908 Balance sheet total 20 278 17 674 16 839 Net debt/EBITDA* 2.5 2.2 2.3 Return on capital employed (%)* 15.0 14.0 13.4
Slide 42: Current Fortum Group financial targets
Current Fortum Group financial targets Return on capital employed 12% Return on shareholder's equity 14% Net debt/EBITDA 3.0–3.5 42
Slide 43: Capital expenditures EUR 1-1.5 billion – significant flexibility
Capital expenditures EUR 1 - 1.5 billion – significant flexibility Esimated annual Capex 2009-2013 Annual capital expenditures EUR 1–1.5 billion Maintenance/productivity EUR 300–500 Maintenance ~ EUR 300–500 m million p.a. Growth in Nordic and Baltic rim countries EUR Growth ~ EUR 200–500 m 200-500
Slide 44: Good liquidity
Good liquidity MEUR Available Outstanding Total amount SHORT TERM FINANCING Commercial Paper Programmes Finnish CP Programme 328 172 500 SEK 5.000 M Swedish CP Programme 175 285 460 503 457 960 LIQUID FUNDS AND COMMITTED CREDIT LINES Committed Credit Lines Short Term 206 0 206 Long Term 2 100 600 2
Slide 45: Debt maturity profile
Debt maturity profile MEUR MEUR 2500 2009: 980 2010: 543 2000 2011: 2.242 2012: 445 1500 2013: 1.104 1000 2014: 246 2015: 225 500 2016: 759 2017: 74 0 2018: 1 Y2009 2011 2013 2015 2017 2019+ 2019+: 881 Bonds Financial institutions Other long-term debt CPs Other short-term debt 31 Dec, 2008 31 Dec, 2
Slide 46: Hedging of Power Generation's Nordic sales
Hedging of Power Generation's Nordic sales Status at the end of January 2009 (Status at the beginning of October 2008) Hedge ratio Hedge price rest of 2009 ~ 65% ~ EUR 53 per MWh (~55%) (~ EUR 53 per MWh) 2010 ~ 50% ~ EUR 46 per MWh (~20%) (~ EUR 55 per MWh) 46
Slide 47: Fortum in a stable position
Fortum in a stable position • Flexible and climate-benign • Two new CHP plants to be production portfolio commissioned in 2009 • Integration of Russian • Strong balance sheet and TGC-10 proceeding liquidity • Growth through investment • Good hedging positions programmes in Russia and Baltic Rim coun
Slide 48: @Fortum
@Fortum