FORTUM A leading power and heat company in the Nordic area

Transcription

1 FORTUM A leading power and heat company in the Nordic area Presentation for investors February 2010

2 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

3 Content Fortum today European power markets Russia Financials and outlook

4 4 We intend to keep our leading position

5 Our geographical presence today Nr 1 Nr 2 Heat Distribution Electricity sales Power generation Poland Heat sales 3.7 TWh Electricity sales 20 GWh Nordic countries Generation 48.1 TWh Electricity sales 54.9 TWh Heat sales 18.0 TWh Distribution cust. 1.6 million Electricity cust. 1.2 million Russia TGC-1 (~25%) Power generation ~6 TWh Heat sales ~8 TWh OAO Fortum Power generation 16.0 TWh Heat sales 25.6 TWh Baltic countries Heat sales 1.3 TWh Electricity sales 0.1 TWh Distribution cust. 24,000 5

6 Capital returns Dividend per share EUR Total ~ 6,853 MEUR * Dividend proposal 2009 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% 68% * The BoD proposal for the AGM 6

7 Fortum s strategic route 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 7

8 New organisational structure as of 1 October 2009 Business Divisions President and CEO Tapio Kuula Staff Functions Power (Espoo) Executive Vice President Matti Ruotsala Heat (Stockholm) Executive Vice President Per Langer Russia (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 (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 8 Improved efficiency, accountability, simplicity

9 A leading Nordic power and heat company Leading power and heat company in Nordic countries Listed at the Helsinki Stock Exchange 1998 Approximately 85,000 shareholders Among the most traded shares in Helsinki stock exchange Market cap ~16 billion euros Households 7.0% Financial and insurance institutions 2.8% Other Finnish investors 8.8% Finnish State 50.8% Foreign investors 30.6% 31 January

10 Fortum in the Nordic electricity value chain Fortum Markets Fortum Power Deregulated Regulated Nordic Nordic wholesale wholesale market market Nord Pool and bilateral Transmission and system services Large customers Small customers Other retail companies Fortum Distribution 10

11 Fortum's European power and heat production Fortum's European power generation in 2009 Hydro power 45% Coal 22% Fortum's European heat production in 2009 Biomass fuels 22% Other 2% Peat 1% Biomass 2% Natural gas 3% Coal 4% Nuclear power 43% Other 7% Peat 4% Oil 5% Waste 6% Natural gas 20% Heat pumps,electricity 14% European generation 49.3 TWh (Generation capacity 11,155 MW) European production 23.2 TWh (Production capacity 10,534 MW) 11

12 12 Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, Average 350 g/kwh DEI Drax RWE CEZ Nuon EDP Scottish&Southern Vattenfall Enel Union Fenosa E.ON Dong Energy GDF Suez Europe Iberdrola PVO British Energy EDF Verbund Fortum Statkraft Source: PWC & Enerpresse, 2009 Changement climatique et Électricité

13 Fortum s investment programme Nordic region, Poland and Baltic countries Olkiluoto 3, Finland, nuclear Swedish nuclear Refurbishing of existing hydro assets Czestochowa, Poland (coal/biomass CHP), Q3/2010 Pärnu, Estonia (biomass/peat CHP), end of 2010 Wind power project development Electricity capacity ~800 MW ~95% CO 2 -free 13

14 Decision-in-Principle application for Loviisa 3 A Decision-in-Principle application for the construction of a new 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 unit will be designed to allow for combined heat and power production Five reactor alternatives The investment cost of one nuclear unit is EUR 4-6 billion The plant site and its basic infrastructure ready, the basic investments in nuclear waste management have been made 14

15 15 Planned schedule for the implementation of Loviisa 3

16 Fortum today European power markets Russia Financials and outlook

17 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 17

18 New capacity, except nuclear, will require over 60 EUR/MWh power price EUR/MWh Source: Nord Pool Futures 1 February EUR/MWh 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 Market coupling milestones Market coupling between Netherlands (APX), Belgium (Belpex) and France (Powernext) since 2006 Market coupling Germany (EPEX Spot) Denmark (Nord Pool) started on 9 November Baltic Cable (Germany Sweden) and NorNed (Norway NL) will possibly be included later. Market coupling for Central Western Europe (DE, FR, BeNeLux) due to start during spring 2010 CWE and Nordic TSOs agreed in October 2009 to develop a single market coupling mechanism across their whole area NL-UK coupling planned trough the BritNed cable from 2011 Estonian price area to Nord Pool to be set up in April 2010 with full integration of the Baltic States during EU s European Target Model for cross-border power trading sets 2015 as deadline for an EU-wide market coupling Nov

20 Current transmission capacity from Nordic area to Continental Europe is ~4000 MW Countries Transmission capacity MW From Nordel To Nordel Denmark - Germany Sweden - Germany Sweden - Poland Norway - Netherlands Total Theoretical maximum in transmission capacity ~35 TWh per annum Net export from Nordic area to Continental Europe in 2008 was ~15 TWh and in 2009 ~5 TWh Approximately 20 TWh net export fairly easily reachable

21 Nordic and Continental markets are integrating interconnection capacity could double by MW link to the UK could connect offshore wind, too; North Seas Countries Offshore Grid Initiative launched for supergrid development New interconnections could double the capacity to over 8000 MW by 2020 Additional 700 MW cable NO-NL, as well 1400 MW NO-DE links studied EU financial support for 700 MW DK-NL link to connect offshore wind, too Jylland DE capacity to be increased by 500 MW in 2012 and by further 500 MW by 2018 EU support to connect Kriegers Flak offshore wind area to DK&DE; new 400 kv AC cable SE-DK by 2017 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 Energy Programme for Recovery to cofinance to Estlink 2 and NordBalt 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 21

22 Nordic water reservoirs reservoir content (TWh) reference level Q1 Q2 Q3 Q4 Source: Nord Pool 22

23 Wholesale price for electricity EUR/MWh Nord Pool System Price Forwards February Source: Nord Pool 23

24 Nord Pool year forwards /MWh Year 07 Year 08 Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Q1 Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Year 15 1 February Q2 Q3 Q4 Q

25 Wholesale prices for electricity EUR/MWh Spot prices Forward prices Dutch German Nordic Russian* February * Including capacity tariff estimate. E.g /MWh 25 Source:, ATS

26 Fuel and CO 2 allowance prices USD / bbl Crude oil price (ICE Brent) EUR / tco CO 2 price (NP EUA) USD / t Coal price (ICE Rotterdam) GBp / therm Gas price (ICE NBP) Source: ICE, Nord Pool Market prices 1 February 2010; future quotations

27 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. 27

28 Still a highly fragmented Nordic power market Power generation 398 TWh >350 companies Electricity distribution 14 million customers ~500 companies Electricity retail 14 million customers ~350 companies Others 30% Helsinki Agder Energi Norsk Hydro E-CO Energi PVO Dong Energy E.ON Vattenfall Statkraft Fortum Others 50% Fortum Vattenfall E.ON Dong Energy Hafslund SEAS-NVE Helsinki Statkraft Syd Energi Göteborg Others 52% Fortum Vattenfall Dong Energy E.ON Hafslund Statkraft SEAS-NVE Helsinki Öresundskraft Syd Energi Current market shares based on 2008 figures. 28

29 Signs of demand picking up towards the end of 2009 Finland Sweden Norway Denmark Nordic Tyumen Chelyabinsk Russia Urals area Russia 10 % 10 % 5 % 5 % 0 % 0 % -5 % -5 % -10 % -10 % -15 % -20 % -25 % Q vs Q Q vs Q Q vs Q Q vs Q % -20 % -25 % Q vs Q Q vs Q Q vs Q Q vs Q consumption decreased ~5% in the Nordic area 372 TWh (393 TWh) Fortum currently expects Nordic power demand to recover back to the 2008 level by consumption decreased ~5% in Russia +/- 0% in Tyumen -11% in Chelyabinsk 29

30 Fortum today European power markets Russia Financials and outlook

31 Russia is the World s 4th largest power market TWh 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, US China Japan Russia India Germany Canada France South Korea Brazil Nordic UK Data 2008 based on gross output. Source: BP Statistical Review of World Energy June

32 Fortum - a major player in Russia OAO Fortum (former TGC-10) Majority of the Russian territorial generating company OAO Fortum in the Urals region OAO Fortum operates in the heart of Russia s oil and gas producing region OAO Fortum adds ~16 TWh/a to Fortum s power generation and the heat sales double Annual efficiency improvement approximately EUR 100 million in 2011 TGC-1 Slightly over 25% of territorial generating company TGC-1 operating in north-west Russia ~6,250 MW electricity production capacity (appr. 50% hydro), ~24 TWh/a electricity, ~30 TWh/a heat TGC-1 OAO TGC-10 Fortum St. Petersburg Nyagan Khanty-Mansisk Surgut Tobolsk Moscow Tyumen Chelyabinsk Kurgan 32

33 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 Launch of new wholesale market model 2006 Restructuring of regional "energos" (P&H companies) complete Formation of new companies complete Capacity market transitional model 2008 Long term capacity market model 2010 Competitive market of ancillary services 2010 Financial derivatives market 2010 Full liberalisation of the wholesale market 2011 onwards 33

34 Further power market liberalisation Share of liberalised trade for existing capacity Further liberalisation of energy market increased to 60% in January 2010 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 % Jan % 15 % July 2007 Jan % 30 % July 2008 Jan % July % Jan % July % 100 % Jan

35 Currently 60% of electricity sold with liberalised prices Urals power price 1) development Key electricity, capacity and gas prices in the OAO Fortum area /MWh III/2009 III/2008 Change, % Electricity spot price (market price), Urals hub, RUB/MWh Average regulated electricity price for OAO Fortum, RUB/MWh Average regulated capacity price,trub/mw/month Average limit gas price in 1,782 1, Urals region, RUB/1000 m 3 1) In addition generators currently receive on average about 11 EUR/MWh capacity payment. Used EUR/RUB daily exchange rate 35

36 Investment programme of OAO Fortum Power generation capacity (MW) Plant 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 (Condensing) 1,205 Tyumen CHP-1, Q3/2010 Gas (CHP/Condensing) 662 Tobolsk CHP, Q3/2010 Gas (Condensing) 662 Chelyabinsk CHP-3, Q4/2010 Gas (CHP/Condensing) 580 Chelyabinsk CHP-2 Coal, gas Argayash CHP Coal, gas Chelyabinsk CHP-1 Coal, gas Chelyabinsk GRES Gas Nyagan GRES Gas 3x400 (Condensing) 1,200 Boilers - (Kurgan Generation (49%) Gas ) Total 3,020 2,270 5,290 36

37 Efficiency improvement in Russia ~100 MEUR in 2011 Purchasing Portfolio Management and Trading (PMT) Heat regulation Heat - technical and business improvements Generation - technical improvements Others 37

38 Fortum today European power markets Russia Financials and outlook

39 Income statement MEUR IV/2009 IV/ Sales Expenses Operating profit Share of profit of associates and jv's Financial expenses, net Profit before taxes Income tax expense Net profit for the period Non-controlling interests EPS, basic (EUR) EPS, diluted (EUR)

40 Comparable and reported operating profit Operating profit IV/2009 Operating profit IV/2008 Operating profit 2009 Operating profit 2008 Comparable Reported Comparable Reported Comparable Reported Comparable Reported Power Heat Distribution Markets Russia Other Total The decline in the net profit is also explained by: Share of profit of associates and joint ventures EUR 105 million lower than in 2008 One-time tax booking in 2008 (changes in a corporate tax rate in Sweden and in Russia) 40

41 Cash flow statement MEUR IV/2009 IV/ Operating profit before depreciations Non-cash flow items and divesting activities Financial items and fx gains/losses Taxes Funds from operations (FFO) Change in working capital Total net cash from operating activities Paid capital expenditures Acquisition of shares Other investing activities Cash flow before financing activities

42 Key ratios Key ratios MEUR 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 42

43 Debt maturity profile MEUR , Bonds Financial institutions Other long-term debt CPs Other short-term debt per 31 December, 2009 per 31 December, 2008 Duration (years) Average interest rate (incl. swaps and forwards) 3.4 % 4.7 % Portion of floating / fixed debt 62 / 38 % 64 / 36 % 43

44 Current Fortum Group financial targets Return on capital employed 12% Return on shareholder's equity 14% Net debt/ebitda

45 Liquidity MEUR Available Outstanding Total amount SHORT TERM FINANCING Commercial Paper Programmes Finnish CP Programme SEK M Swedish CP Programme LIQUID FUNDS AND COMMITTED CREDIT LINES Committed Credit Lines Short Term Long Term Liquid Funds Cash and cash equivalents 493 Bank Deposits over 3 months of which in Russia 632 Total Available Cash and Committed Financing

46 Hedging of Power division's Nordic sales Status at the end of December 2009 (Status at the end of Sep 2009) Hedge ratio Hedge price 2010 ~ 70% ~ EUR 44 per MWh (~65%) (~ EUR 44 per MWh) 2011 ~ 40% ~ EUR 42 per MWh (~35%) (~ EUR 42 per MWh) 46

47 Fortum in a strong position Flexible, low-cost and climate-benign generation portfolio Russian power reform proceeding and the results of OAO Fortum improving as planned Nordic power demand recovering Good hedging positions Strong financial position and liquidity 47

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