Fortum Oyj · OMXHEX:FORTUM
Fortum Oyj — Investor Day (September 2010)
27 slides from Fortum Oyj's investor day presentation, Sep 16, 2010
Slide 1: Capital Markets Day 2010
Capital Rye /10 2010/09/16
Slide 2: Financial update – Capital markets day 2010
FORTUM Financial update Capital markets day 2010 16 September 2010
Slide 3: Agenda
Agenda • The key drivers of Fortum’s operating profit • Capital expenditure • Financing position, capital structure and dividends 3
Slide 4: Fortum's operating profit is (still) driven by Power
Fortum’s operating profit is (still) driven by Power Power – 2/3 of the profits, driven by the volatile Nord Pool price Comparable operating profit EUR million Heat 2200 – Stable, investment driven growth 1600 Distribution – Regulated, stable, investment 1000 driven earnings Electricity sales 400 –
Slide 5: Power – achieved power price, mix
Power – achieved power price, mix Comparable operating profit EUR million EUR/MWh 1600 60 • Achieved price 1200 45 – A change of EUR 1 in achieved 800 30 power price equals ~EUR 50 million in comparable operating 400 15 profit 0 0 – Volatility of the Nord Pool 2006 2007 2008 2009 LTM in Q2/2010 pric
Slide 6: Heat – stable, investment driven growth
Heat – stable, investment driven growth Comparable operating profit • Stable earnings EUR million 300 – Not a regulated business in Nordic countries 200 • Low volatility in pricing 100 – Fuel price variation passed on to customers with some lag 0 • Fuel management and 2006 2007 2008 2009 LTM in Q2/2
Slide 7: Distribution – regulated, stable earnings
Distribution – regulated, stable earnings Comparable operating profit EUR million 300 • Regulated, stable returns 200 – Regulation varies by country, 100 increasingly RAB based 0 – Investments and cost efficiency 2006 2007 2008 2009 LTM in incentivised by the regulation Q2/2010 Net assets at the end
Slide 8: Electricity Sales – competitive, low margins
Electricity Sales – competitive, low margins Comparable operating profit EUR million 100 • Highly competitive 0 – Low margins, also in future 2006 2007 2008 2009 LTM in Q2/2010 • Low capital intensity -100 – Potentially high returns on capital -200 • Purchasing from Nord Pool – Purchase prices vary
Slide 9: Russia – long term potential
Russia – long term potential Comparable operating profit* EUR million • Efficiency improvement programme 100 • Increased income from new capacity 50 – Starting from early 2011 – New capacity to receive 3-4x higher 0 price than old capacity, offering 12- 2006 2007 2008 2009 LTM in Q2/2010 14% ROCE**
Slide 10: The five key drivers for earnings improvement in Russia
The five key drivers for earnings improvement in Russia Development of Heat business Potential margin increase (power price vs. gas price) Increased income from new volume sold Increased income from new capacity (higher payments for new capacity) Efficiency improvement programme 10
Slide 11: Above all, availability of new capacity will drive profits
Above all, availability of new capacity will drive profits Tyumen CHP-1, 2x225 MW, 2014 Nyagan 3, 418 MW, 2013 Nyagan 2, 418 MW, 2012 Nyagan 1, 418 MW, 2012 Chelyabinsk CHP-3, 226 MW, Q2/2011 Tobolsk CHP, 200 MW, Q2/2011 Tyumen CHP-1, 231 MW, Q1/2011 16 Sep 2010 2014 11
Slide 12: Long-term financial target will be dictated by basic economic logic
Long-term financial target will be dictated by basic economic logic Invested capital Assuming, having EUR completed the investment programme, an invested capital of a a ~4 bn … and an unchanged b cost of capital b In 2009, WACC for Russia was ~12% ~2.5 bn The annual comparable operating profit in Ru
Slide 13: Fortum's financial targets
Fortum’s financial targets Return on capital employed 12% Return on shareholder's equity 14% Net debt/EBITDA ~3 13
Slide 14: Taxation – Finland and Sweden
Taxation – Finland and Sweden • Windfall tax removed from the Government agenda in Finland • Proposed fuel tax increases in Finland apply only to heat production - according to EU legislation fuels for electricity production not to be taxed – The increase would likely not materially impact margins i
Slide 15: Agenda: Capital expenditure
• The key drivers of Fortum’s operating profit • Capital expenditure • Financing position, capital structure and dividends 15
Slide 16: Capital expenditures lifted by Russia…
Capital expenditures lifted by Russia… EUR million 1600 • 2009 capex EUR 862 million • 2010 capex is expected to 1400 Capex 300 planned for be around EUR 1.4 billion 1200 2009 – shifting from 2009 Planned 300 for 1000 – driven mainly by Russian 2009, not realised investments 800 414 215 • 2011 capex
Slide 17: …also in medium term future, 2011-2013
…also in medium term future, 2011-2013 EUR million Capital expenditures by business EUR million 450 1800 400 1600 350 1400 300 1200 250 1000 200 800 150 600 100 400 50 200 0 0 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 2008 2009 2010 2011 2012 2013 Forecast Power Distribution Heat R
Slide 18: Agenda: Financing position, capital structure and dividends
• The key drivers of Fortum’s operating profit • Capital expenditure • Financing position, capital structure and dividends 18
Slide 19: Debt maturity profile – refinancing needs in 2014
Debt maturity profile – refinancing needs in 2014 1250 MEUR 2010 891 1000 2011 303 2012 537 2013 562 750 2014 1,185 2015 1,055 500 2016 858 2017 223 2018 79 250 2019 826 2020+ 998 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020+ Bonds Financial institutions Other long-term debt CPs Other sh
Slide 20: Very strong liquidity
Very strong liquidity EUR million Available Outstanding Total amount SHORT TERM FINANCING Commercial Paper Programmes (CPP) Finnish CPP 431 69 500 SEK 5.000 million Swedish CPP 261 264 525 693 332 1 025 LIQUID FUNDS AND COMMITTED CREDIT LINES Committed credit lines Short term 215 0 215 Long term 2 7
Slide 21: Outstanding bonds under EUR 6 billion EMTN programme
Outstanding bonds under EUR 6 billion EMTN programme Curr. Amount In EUR 6.9.2010 Int. Rate Maturity EUR 500 000 000 500 000 000 4,625% 19.11.2010 EUR 500 000 000 500 000 000 5,000% 19.01.2013 EUR 750 000 000 750 000 000 4,500% 20.06.2016 EUR 750 000 000 750 000 000 4,625% 20.03.2014 EUR 750 000 000
Slide 22: SEK 6.2 billion issued under the EMTN programme
SEK 6.2 billion¹ issued under the EMTN programme – the largest corporate bond transaction ever in the Swedish Krona market Summary of terms Distribution of order book (~50 investors, mainly Swedish) Issuer Fortum Oyj Private Wealth 12% Tranches FIXED SEK 3,100 million Pension fund 19% FRN SEK 3,100
Slide 23: Fortum is trading tighter than utilities on average
Fortum is trading tighter than utilities on average Fortum CDS performance compared to Fortum bond performance compared low beta peers to IBoxx Utility Index 120 110 Spread over Mid Swaps (bp) Spread over Mid Swaps (bp) 100 90 80 70 60 50 40 30 Sep -09 Nov -09 Jan -10 Mar -10 May-10 -10 Jul -10 Sep-
Slide 24: Strong balance sheet, flexibility in the capital structure to be maintained
Strong balance sheet, flexibility in the capital structure to be maintained Capex and gross investments in shares EUR million 3000 • Investments are expected to realise 2500 above recent history in 2010-2013 2000 1500 – Accelerated capital expenditure in 2624 1000 Russia… 1395 500 972 929 1030 – …bu
Slide 25: Dividend – not a residual
Dividend – not a residual Dividend per share 1.35 1.26 EUR 1.12 1.00 1.00 0.58 0.53 0.54 0.58 0.42 0.77 0.31 0.73 0.58 0.23 0.26 0.13 0.18 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Payout ratio, Dividend/EPS, % 72% 103% 78% 58% 68% Dividend policy of 50-60% payout of previous year'
Slide 26: Key CFO messages
Key CFO messages • (Nordic) Power and its achieved price still the main driver for earnings – The importance of hedging and trading competence • Russia has great potential – EUR 100 million improvement in EBITDA in 2011 – The availability of new capacity a key driver to earnings – Long term, post th
Slide 27: 2010/09/16
2010/09/16