FORTUM Experiences in district heating and CHP business operations. EPHA 15: District Heating For the Cleaner Future 12th of May 2010

Transcription

1 FORTUM Experiences in district heating and CHP business operations EPHA 15: District Heating For the Cleaner Future 12th of May 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 Baltic Rim Heat service at competitive conditions What makes investors to invest:... legal framework, credibility of the local policy, price regulations, subsidies, EU targets, market conditions,...?

4 Our geographical presence today Nr 1 Nr 1 Nr 2 Nr 3 Poland Heat Heat sales Electricity sales Distribution Electricity sales Power generation 3.7 TWh 20 GWh Nordic countries Generation Electricity sales Heat sales Distribution cust. Electricity cust TWh 54.9 TWh 18.0 TWh 1.6 million 1.2 million Total Electricity 77 TWh/a Heat 53 TWh/a Russia TGC-1 (~25%) Power generation Heat sales ~6 TWh ~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. 24,100 4

5 A power and heat company Listed at the Helsinki Stock Exchange 1998 Approximately 90,000 shareholders Among the most traded shares in Helsinki stock exchange Market cap ~17 billion euros Households 7.1% Financial and insurance institutions 2.7% Other Finnish investors 8.9% Finnish State 50.8% Foreign investors 30.5% 28 February

6 Climate change is the most imminent challenge of our planet We, at Fortum, don't want to be part of the problem, but part of the solution 6

7 Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, Average 350 g/kwh 41 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 7

8 Fortum s investment programme Nordic region, Poland and Baltic countries Project Electricity, MW Heat, MW Commissioned Olkiluoto 3, Finland Swedish nuclear upgrades 260 by Forsmark 3 upgrade (to be decided) 30 post 2013 Refurbishing of hydro power annually Częstochowa, Poland Q3/2010 (coal/biomass CHP) Pärnu, Estonia Q4/2010 (coal/biomass CHP) Brista, Sweden (to be decided) ? (waste CHP) Klaipeda, Lithuania (biofuel/waste CHP) Total by ~2013 >900 ~300 Electricity capacity over 900 MW ~95% CO 2 -free 8

9 Fortum today European power markets Russia Baltic Rim Heat service at competitive conditions

10 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 10

11 New capacity, except nuclear, will require over 60 EUR/MWh power price EUR/MWh Source: Nord Pool Futures 28 April 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. 11

12 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 12

13 Fortum today European power markets Russia Baltic Rim Heat service at competitive conditions

14 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 14

15 Power market liberalisation wholesale power market will be 100% liberalised in 8 months Further liberalisation of energy market increased to 60% in January % in 1 July % in 1 January 2011 The sales to households will remain regulated still after % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % Share of liberalised trade for existing capacity 5 % Jan % 15 % July 2007 Jan % 30 % July 2008 Jan % July % Jan % July % 100 % Jan

16 ... major foreign investments in Russia as a result Fortum in Russia OAO Fortum (former TGC-10) OAO Fortum operates in the heart of Russia s oil and gas producing region OAO Fortum s power generation ~16 TWh/a and heat generation ~26 TWh/a 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 16

17 Over 80% increase in power generation capacity by 2015 through the investment programme 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 2,785 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 - Total 2,785 2,270 5,055 17

18 Fortum today European power markets Russia Baltic Rim Heat service at competitive conditions

19 Fortum's heat business in the Baltic countries Outsourced energy service (BtoB) and district heating Customers industry services and commerce public buildings real estates Energy sales in Estonia heat 1.1 TWh/a electricity 140 GWh/a gas 200 GWh/a Energy sales in Lithuania heat 64 GWh/a fuels 50 GWh/a Energy sales in Latvia heat 210 GWh/a electricity 32 GWh/a Personnel: 400 Production capacity 144 heating plants Fuels: natural gas, oil, biomass, peat CHP power plant of 25 MWel/ 50 MWth in operation in Tartu, Estonia, by peat and bio fuels CHP power plant of 4 MWel/ 4,8 MWth in operation in Jelgava, Latvia, by natural gas CHP power plant under construction in Pärnu, Estonia, 23 MWel/45 MWth by bio fuels and peat CHP power plant under construction in Klaipeda, Lithuania, 20 MWel/50 MWth by municipal and industrial wastes CHP development in Jelgava, Latvia, 23 MWel/ 45 MWth by bio fuels and peat CHP development... 19

20 Fortum's heat business in Poland District heat to 30 cities and towns Heat sales volume 3.6 TWh Heat and electricity production in 100 heating plants One gas engine CHP power plant Fuels: coal, natural gas, oil Personnel: 800 Past acquisitions: DZT, a privately owned DH company in 2004 Czestochowa, a state owned DH company in 2005 Wroclaw, a stock listed DH company in 2006 Plock, a municipal DH company in 2006 CHP plant of 65 MWel/130 MWth under construction in Czestochowa Płock Fortum DZT and Fortum Czestochowa Fortum Wrocław Fortum Płock 20

21 Fortum's heat business in Finland Energy sales heat 10.7 TWh electricity 3.2 TWh industrial cooling 0.05 TWh gas 0.9 TWh Personnel around 400 Production capacity 199 heating plants 9 CHP plants 21

22 Fortum's heat business in Sweden District heat CHP Industrial co-op. City gas District cooling Delsbo Näsviken Sörforsa Hudiksvall Idenor Iggesund Hofors 80 percent of business in the great Stockholm area Valsta Bristaverket Torsby Arvika Grums/Gruvön Säffle/NP Avesta Kopparberg/Bångbro Hällefors/Grythyttan Karlskoga Stockholm Örebro Gullspång Laxå Nynäshamn Kristinehamn Järfälla Hässelbyverket Vilunda Rotebro Sundbyberg Solna Akalla Värtaverket Lidingö Hammarbyverket Fittja HMC Högdalenverket Farsta Bollmora Skogås Igelstaverket Drevviken 22

23 Case Stockholm: District heating an environmental success story Fortum Värme's reduced emissions in Stockholm since 1980: -60% of CO 2 >95% of SO 2 >80% of NOx 23

24 Case Stockholm: Key issue is change of fuel mix Sea water 12% Waste 10% Seawater 16% Waste 12% Coal 22% Electricity 12% Industrial waste 9% Bio fuel 22% Coal 14% Fossil oil 44% Fossil oil 3% Electricity 11% Bio oil 13% Production CO GWh (4432 heat, 771 electricity) 1200 Kt Renewable 20 % (EU's goal 2020!) Production GWh ( 8565 heat, 1635 electricity ) CO Kt Renewable > 70 % 24

25 Case Stockholm: Energy efficient District Cooling is part of the sustainable development GWh The largest system in the world for district cooling with m 2 connected

26 Case Stockholm: New waste to energy CHP-plant at Brista, sister plant to Klaipeda "Waste to energy a win win solution for business and society" Bristaverket Fuel ton waste 57 MW heat 20 MW electricity 26

27 Fortum today European power markets Russia Baltic Rim Heat service at competitive conditions

28 Fortum's experiences of heat service at market conditions Market based District Heat service in Finland, Sweden and Norway No centralized price regulation Consumer protection and competition laws protect Customers against misuse of the dominant market position DH companies are in good shape; financially, technically and environmentally Profitable and able to invest for future competitiveness... in productivity improvements, growth, heat production with optimal fuel mix (bio fuels, wastes, peat, natural gas, coal), and co-generation of heat and power; Competitive service (customer service, quality, price) Profitability of investments is based on market conditions Opportunities to benefit from high efficiency of the CHP plants, optimal fuel mix, reduction of CO2 emissions priced by CO2 allowances market, green and CHP certificates priced at market Investment decisions are based on understanding the future market and competitiveness of the DH service All opportunities to improve competitiveness of the service will be utilised, for benefit of the customers and investors Price of heat is competitive towards customers' own alternatives (natural gas, electricity, heat pump, wood, pellets,...) Prices are transparent and price changes are reasoned by the DH companies to the Customers... if not competitive, no-one can help but the market is lost for alternatives!!! 28

29 Indifferent, market conditions or regulated market!! Anyway 1.) product must be competitive towards Customers' own alternatives and 2.) price must not be much lower to enable DH companies to invest in the future competitiveness SEK/MWh Price development of district heating in Stockholm Electric boiler Oil Woodchips 800 Heat pump District heating 600 Total heating cost, normal building with new installation (193 MWh) Source: Oil prices SCB, Electricity prices Nordpool, Woodchips STEM

30 Congratulations to the Estonian Power and Heat Association due to the 15th anniversary