Fortum a leading power and heat company in the Nordic area

Transcription

1 Fortum a leading power and heat company in the Nordic area Tapio Kuula President and CEO Fortum Corporation Finnish Blue Chip Seminar - Enskilda August 25, 2009 Helsinki

2 Fortum is strong in the Nordic countries and Russia Nr 1 Nr 2 Heat Distribution Electricity sales Power generation Poland Heat sales 3.6 TWh Electricity sales 18 GWh Nordic countries Generation 51.6 TWh Electricity sales 59.1 TWh Heat sales 20.0 TWh Distribution cust. 1.6 million Electricity cust. 1.3 million Russia TGC-1 (~25%) Power generation ~7 TWh Heat sales ~7 TWh OAO Fortum* Power generation 16.6 TWh Heat sales 25.7 TWh *pro forma Baltic countries Heat sales 1.3 TWh Distribution cust. 24, data 2

3 Consistently delivered strategy Länsivoima 45% 65% Länsivoima 100% Elnova 50% 100% Separation of oil businesses E.ON Finland Neste IVO Gullspång Skandinaviska Elverk Birka Energi 50% Fortum 50% Stockholm Gullspång Stockholm Energi Stora Kraft Birka Energi 50% 100% Østfold Shares in Hafslund Shares in Lenenergo Starting TGC-1 District heat in Poland 2003 Divestment of Lenenergo shares TGC-10 3

4 Highlights in 2009 Russian power reform proceeding the share of wholesale power sold at a competitive price from 30% to 50% Market s turnaround programme led to a strong improvement in results Preparations for the sale of Fingrid shares initiated New organisational structure as of 1 October

5 New organisational structure as of 1 October 2009 Business Divisions President and CEO Tapio Kuula Staff Functions (Espoo) Power Division (Espoo) Executive Vice President Matti Ruotsala Heat Division (Stockholm) Executive Vice President Per Langer Russia Division (Chelyabinsk) Executive Vice President Alexander Chuvaev Finance Executive Vice President and Chief Financial Officer Juha Laaksonen Corporate Relations and Sustainability Executive Vice President Anne Brunila Corporate Human Resources Senior Vice President Mikael Frisk Electricity Solutions and Distribution Division (Espoo) Executive Vice President Timo Karttinen Corporate Strategy Senior Vice President Maria Paatero-Kaarnakari Country responsibles: Timo Karttinen / Finland, Norway; Per Langer / Sweden, Poland, Baltics; Alexander Chuvaev / Russia 5 Service units to be decided later

6 Strong results in H1/2009 MEUR LTM EBITDA Net cash flow from operations Interest-bearing net debt Equity Balance sheet total Net debt/ebitda* Return on capital employed (%)* Return on shareholders' equity (%)* *2007 adjusted for REC and Lenenergo gains in Q2 '09 6

7 Flexible, low cost and climate-benign generation portfolio in Europe Fortum's European power generation in 2008 Hydro power 44% Coal 23% Fortum's European heat production in 2008 Biomass fuels 20% Other 2% Peat 1% Biomass 2% Natural gas 2% Coal 4% Nuclear power 45% Other 10% Oil 4% Waste 7% Peat 7% Natural gas 16% Heat pumps, electricity 13% Generation 52.6 TWh (Generation capacity 10,788 MW) Production 25.0 TWh (Production capacity 10,468 MW) 7

8 Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, Average 373 g/kwh Source: PWC & Enerpresse, 2008, Changement climatique et Électricité 8 DEI Nuon RWE Drax CEZ SSE Union Fenosa Endesa Enel EDP Vattenfall Dong Energy E.ON Electrabel PVO Iberdrola EDF British Energy Verbund Fortum Statkraft

9 Capital returns Dividend per share EUR 0.13 Total ~ 5,965 MEUR Dividend 2008 EUR 1.00 per share, in total ~EUR 0.9 billion Dividend policy of 50-60% payout of previous year's results on the average % 103% 78% 58% 9

10 Nordic and Continental markets are integrating interconnection capacity could double by 2020 Additional 700 MW cable NO-NL studied New interconnections could double the capacity to over 8000 MW by MW NO-DE studied DK-NL link studied and EU financial support sought to connect offshore wind, too Jylland DE capacity to be increased by 500 MW in 2011 and by further 500 MW by 2017 Baltic Wind Link 1100 MW studied to connect SE, DK and DE through the Kriegers Flak offshore wind park In the EU's Second Strategic Energy Review the Commission focuses strongly on interconnecting the Baltic states and Poland to form an electricity market around the Baltic Sea New internal Nordic grid investments provide for increased available capacity for export to the Continent and Baltics EU s European Economic Recovery Plan promises co-financíng to Estlink 2 and NordBalt (SE-LT) LitPol Link of 1000 MW to connect the Baltic market to Poland by 2015/18. It would open a new transmission route from the Nordic market to the Continent 10

11 Market coupling milestones Market coupling between Netherlands (APX), Belgium (Belpex) and France (Powernext) since 2006 Market coupling Germany (EEX) - Nord Pool started in September 2008 but was suspended in October Restart after modifications is due during Q3/ Market coupling agreement signed in 2008 for Germany-NL/BE/FR coupling due to start in March 2010 Market coupling NL - Nord Pool planned through the NordNed cable synchronized with market coupling Nord Pool-EEX and Germany-NL/BE/FR NL-UK coupling planned trough the BritNed cable from 2011 Existing Q Baltic Energy Market Interconnection Plan (6/2009) determines the price area Estlink to be set up Q1/2010 and a full integration of the Baltic states to the Nord Pool market during Fingrid is studying possibilities to increase flexibility in electricity trade with Russia 11

12 Wholesale prices for electricity EUR/MWh Spot prices Forward prices Dutch German Nordic Russian* August * Including capacity tariff estimate. E.g /MWh Source:, ATS 12

13 Key EU objectives by 2020 Implementation of internal energy markets Energy efficiency +20% (2020) Increased resources for technology development Competitiveness Sustainability Minimum reduction of EU CO 2 emissions 20% (2020) Renewables 20% (2020) Development of CO 2 capture and storage Security of supply Development of cross-border transmission Increase in own production Enhancement of external energy relations 13

14 Nordic power generation mix Total Nordic generation 398 TWh in 2008 TWh/a Fossil fuels Nuclear Waste TWh % Biomass Wind Hydro Denmark Norway Sweden Finland Net import in 2008: -1.5 TWh Source: Nordel *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh. 14

15 Commodity prices USD / bbl Crude oil price (ICE Brent) EUR / tco CO 2 price (NP EUA) Coal price (ICE Rotterdam) 100 Gas price (ICE NBP) USD / t GBp / therm Source: ICE, Nord Pool Market prices 20 August 2009; future quotations 15

16 Decrease in electricity demand due to financial crisis 5 % Change: Dec 2008 compared to Dec 2007 Luxembourg Slovenia Hungary Montenegro Bulgaria Belgium Slovak Republic Romania Czech Republic Italy Poland Croatia Greece Austria Germany Bosnia-Herzegovina Spain Serbia Switzerland Portugal France Netherlands Finland Sweden Nordic Denmark Norway Russia 0 % -5 % -10 % -15 % -20 % -25 % Electricity demand has decreased basically in all European countries Decrease in heavy industry production is one of the main drivers in electricity demand decrease Electricity demand likely to increase when global economic situation will normalise (normalisation of paper, steel etc demand) Source: UCTE and Nordel 16

17 Recession has affected Nordic demand Illustrative picture of the Nordic power demand development Illustrative forecast Actual The recession impacts the electricity consumption in the Nordic countries and Russia Fortum expects the electricity consumption to return to a grow path after the recession 17

18 New capacity, except nuclear, will require over 60 EUR/MWh power price EUR/MWh EUR/MWh Source: Nord Pool Futures 20 August CO 2 cost Other costs ( variation) Coal Gas Nuclear Hydro Wind Clean coal Estimated lifetime average cost in nominal 2014 terms. Large variations in cost of new hydro and wind due to location and conditions. 18

19 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 (coal/biomass CHP) Tartu, Estonia (biomass/peat CHP), completed March'09 Pärnu, Estonia (biomass/peat CHP) Electricity capacity ~1,200 MW ~80% CO2-free 19

20 We are consistently growing our CO 2 -free capacity Fortum's Nordic power production TWh Current investment programme (Nordic, Baltics, Poland) worth of million annually until 2013 Additional electricity capacity ~1200 MW Out of this 80% CO 2 -free CO 2 free production (nuclear power, hydropower, bio fuels) Other (peat, gas, coal, other) 20

21 Russia is the World s 4th largest power market TWh 4,000 3,500 3,000 2,500 2,000 1,500 1, US China Japan Russia India Germany Canada France Brazil South Korea Nordic UK Source: IEA, 2008, data

22 Power market liberalisation in Russia proceeding Share of liberalised trade for existing capacity The share of wholesale power sold at a competitive price from 30% to 50% in July The rate of liberalised volume is based on 2007 balance. All new capacity is sold with liberal prices The sales to households will remain regulated still after % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % 5 % 10 % 15 % 25 % 30 % 50 % 60 % 80 % 100 % 1/1/2007 7/1/2007 1/1/2008 7/1/2008 1/1/2009 7/1/2009 1/1/2010 7/1/2010 1/1/

23 Fortum's investment programme The Russian Government is currently reviewing the investments programmes of the generating companies in light of the decreased power demand Moscow Nyagan Tyume Tobolsk Chelyabinskn Kurgan Plant Power generation capacity (MW) Fuel type Existing Planned Total MW 6,000 5,000 4,000 3,000 2,000 1, % +2,270 MW 3,020 5, Tyumen CHP-2 Gas ,205 Tyumen CHP-1 Gas Tobolsk CHP Gas Chelyabinsk CHP-3 Gas Chelyabinsk CHP-2 Coal, gas Argayash CHP Coal, gas Chelyabinsk CHP-1 Coal, gas Chelyabinsk GRES Gas Nyagan GRES Gas 1,200 1,200 Boilers - Kurgan Generation (49%) Gas Total 3,020 2,270 5,290 23

24 Annual efficiency improvements are expected to be approximately EUR 100 million by 2011 Purchasing Portfolio Management and Trading (PMT) Heat regulation Heat - technical and business improvements Generation - technical improvements Others 24

25 Hedging of Power Generation's Nordic sales Status at the end of June 2009 (Status at mid-april 2009) Hedge ratio Hedge price rest of 2009 ~ 80% ~ EUR 50 per MWh (~75%) (~ EUR 51 per MWh) 2010 ~ 65% (~65%) ~ EUR 43 per MWh (~ EUR 43 per MWh) 2011 ~ 30% (~30%) ~ EUR 42 per MWh (~ EUR 42 per MWh) 25

26 Fortum in a strong position Flexible, low cost and climate-benign production portfolio Russian power reform and the integration of OAO Fortum proceeding as planned Good hedging positions Strong balance sheet and liquidity 26

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