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 EEI Conference, London, March 14, 2011

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 Global and European power markets Nordic power market Russian power market Financials and outlook

4 A leading Nordic power and heat company Leading power and heat company in Nordic countries Listed at the Helsinki Stock Exchange 1998 More than 100,000 shareholders Among the most traded shares in Helsinki stock exchange Market cap ~20 billion euros Dividend per share EUR Households 7.6% Finnish State 50.8% Financial and insurance institutions 2.5% Other Finnish investors 8.8% Foreign investors 30.3% % 103% 78% 58% 68% 68% 28 February

5 Divisions of Fortum Power Division Fortum s power generation, physical operation and trading, operation, maintenance and development of power plants as well as expert services for power producers. Heat Division Combined heat and power generation, district heating activities and business to business heating solutions. Electricity Solutions and Distribution Division Fortum's electricity sales, solutions and distribution activities. The division consists of two business areas: Distribution and Markets. Russia Division Power and heat generation and sales in Russia. It includes OAO Fortum and Fortum s over 25% holding in TGC-1. 5

6 Our geographical presence today Nr 1 Nr 1 Nr 2 Nr 2 Heat Distribution Power generation Electricity sales Poland Heat sales 4.0 TWh Electricity sales 0.1 TWh Nordic countries Power generation 52.3 TWh Heat sales 20.7 TWh Distribution cust. 1.6 million Electricity cust. 1.2 million Key figures 2010 Sales EUR 6.3 bn Operating profit EUR 1.7 bn Personnel 10,600 Russia OAO Fortum Power generation 16.1 TWh Heat sales 26.8 TWh TGC-1 (~25%) Power generation ~6 TWh Heat sales ~8 TWh Baltic countries Heat sales 1.4 TWh Electricity sales 0.3 TWh Distribution cust. ~24,000 6

7 Fortum's power and heat production by source Fortum's power generation in 2010 Fortum's heat production in 2010 Hydro power 32% Nuclear power 32% Natural gas 59% Other 2% Biomass 2% Coal 7% Natural gas 25% Other 4% Peat 2% Waste 2% Oil 3% Heat pumps, electricity 6% Biomass fuels 11% Coal 13% Total generation 69.8 TWh (Generation capacity 14,113 MW) Total production 52.1 TWh (Production capacity 24,494 MW) 7

8 Fortum mid-sized European power generation player; Global #4 in heat Power generation Largest producers in Europe and Russia, 2009 TWh Heat production Largest global producers, 2009 TWh Customers Electricity customers in EU, 2009 millions EDF *) IES E.ON Enel ***) GDF SUEZ RWE Gazprom Rosenergoatom Vattenfall Gazprom ****) Dalkia Fortum Vattenfall RAO ES East Tatenergo Onexim Iberdrola NNEGC Energoat. **) SUEK Bashkirenergo RusHydro Irkutskenergo Inter RAO UES TGC-2 EnBW Inter RAO UES Fortum Lukoil CEZ Kievenergo *) IES Minsk Energo Irkutskenergo Statkraft KDHC, Korea Dong PGE ****) Beijing DH DEI TGC-14 SSE ELCEN, Rom Enel EDF E.ON RWE Iberdrola CEZ DEI Vattenfall EDP Centrica EnBW SSE GDF SUEZ PGE Gas Natural Fenosa Tauron Fortum Dong Hafslund * incl. TGC-5, TGC-6, TGC-7, TGC-9, ** incl. TGC-12, TGC-13. *** incl. International Power Source Company information, Fortum analyses, 2009 figures pro forma, **** 2007

9 9 Fortum among the biggest nuclear and hydro generators in Europe and Russia Total generation Other Nuclear Hydro WGC-1 TWh EDF Energoatom Concern E.ON NNEGC Energoatom RusHydro Vattenfall Enel Electrabel Statkraft Irkutskenergo Fortum Iberdrola RWE EnBW CEZ Verbund Axpo Krasnoyarskaya HPP Hidroelectrica Gazprom Alpiq E-CO Energi Norsk Hydro EDP EPS, Serbia Ukrhydroenergo BKK Agder SSE DEI Edison PGE IES

10 Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, The share of CO 2 -free power generation was 69% of Fortum's total power generation. In the EU, the share was 91% of the power generation and ~100% of the capacity of the ongoing investment programme. Average 346 g/kwh DEI Drax RWE CEZ SSE Source: PWC & Enerpresse, Novembre 2010 Changement climatique et Électricité, Fortum EDP Enel Vattenfall E.ON Dong Union Fenosa GDF SUEZ Europe Iberdrola 155 Fortum total EDF PVO Verbund 41 Fortum EU Statkraft 10 Note: Fortum s specific emission of the power generation in 2010 in the EU were 84 g/kwh and in total 189 g/kwh, 86 % (91 %) emission free in EU and 66 % (69 %) emission free overall. Figures for all other companies include only European generation.

12 Global mega trends drive the industry - Updated strategy supports sustainable business development Power and heat demand and supply Degree of market liberalization and integration Climate change response Energy system structure Business models and competition Strategy Leverage the strong Nordic core Create solid earnings growth in Russia Build platform for future growth Competence in CO 2 free nuclear, hydro and energy efficient CHP production, and operating in competitive energy markets 12

13 New capacity needed for increasing demand and retiring capacity replacements Growing global energy demand will be increasingly fulfilled by electricity in the future Substantial demand growth in the emerging markets Retirements and moderate demand growth in the EU Globally, GW of new capacity needed by % 250% 200% 150% 100% 50% 0% Growth, Primary energy demand Electricity generation ~20% Capacity changes, (GW) Retiring capacity US Europe Russia China India Other areas ~ 40% 156 ~180% 180 ~270% World total 1980 New capacity, total ( ) Total new capacity needed for increasing demand and retiring capacity replacements Source: IEA WEO 2010 (New polices scenario) 13

14 Ongoing new nuclear power projects and plans globally Canada 2 3 USA (3*) 1 9 (23*) Brazil 6 EU Russia (30*) Belarus Kazakhstan 2 Armenia Ukraine (2*) Turkey Jordan Egypt 4 (4*) (1*) UAE Iran 2 (1*) 4 (10*) Pakistan 1 2 (2*) 6 India 18 (40*) China 50 (110*) South Korea 5 Thailand 2 (5*) 2 (12*) 6 2 Indonesia 2 (4*) 12 (1*) Vietnam Japan 1 (4*) Argentina 1 2 (1*) Construction started / under start-up, in total ~60 reactors Planned, in total ~160 reactors 14 * In addition proposed projects, totally ~300 Source: WNA, World Power Reactors & Uranium Requirements 6 January 2011, EU area: in addition announcements of power companies and authorities, news

15 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 Jutland 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 2015/20. It would open a new transmission route from the Nordic market to the Continent 15

17 Fortum's nuclear power capacity in Nordics Load factor Revision days in 2011 Oskarshamn Oskarshamn Oskarshamn Forsmark Forsmark Forsmark Loviisa Loviisa Olkiluoto Olkiluoto Source: IAEA, NordPool. Rounded numbers. Low utilisation in two units in Sweden Finnish units world class Currently all units running Oskarshamn 3 with old capacity and Forsmark 2 at full capacity Forsmark Oskarshamn Olkiluoto Loviisa 17

18 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 Brista, Sweden (waste CHP) Klaipeda, Lithuania (biofuel/waste CHP) Total by ~2013 ~750 ~120 Electricity capacity around 750 MW ~100% CO 2 -free 18

20 Fortum - a major player in Russia OAO Fortum (former TGC-10) Operates in the heart of Russia s oil and gas producing region, fleet mainly gas-fired CHP capacity 16 TWh power generation, 26 TWh heat production in 2010, which is more than Fortum s Nordic heat sales Ongoing investment programme to add 85% to Fortum s power generation capacity - Total investment EUR ~4 billion of which EUR 2.5 billion spent, will be completed by end of 2014 TGC-1 Slightly over 25% of territorial generating company TGC-1 operating in north-west Russia ~6,350 MW electricity production capacity (appr. 50% hydro), ~27 TWh/a electricity, ~31 TWh/a heat TGC-1 St. Petersburg Nyagan Moscow Chelyabinsk OAO Fortum Surgut Tobolsk Tyumen 20

21 Fortum has been able to accelerate its investment programme in Russia Fully liberalised electricity market from 1 Jan 2011 except for volumes intended for households priced by RBA (~10% of volume) The ongoing investment programme will increase power capacity from 2785 MW to 5146 MW In MW In MW In MW In MW Capacity prices for "new capacity" 3-4 times current "old capacity" prices Long term rules and price parameters approved Old capacity prices will depend on auction outcomes, but likely remain relatively low; potentially price caps could limit price new capacity to receive higher guaranteed payments 21

23 Business environment improved The overall Nordic and Russian power consumption continued to increase in Industrial activity clearly picked up in Fortum s key market areas and the Russian economy continued a solid path of recovery Nordic power consumption up by 5% during 2010 Power consumption in the Nordic countries 396 TWh in 2010, 397 TWh in 2008 (pre-recession) Temperature corrected power consumption in Nordic countries was still appr. 4% (~16 TWh ) lower than in 2008 Water reservoirs at historically low levels Nordic spot prices increased, forward prices more stable Russian power consumption increased by about 4% during 2010 Electricity spot price in Russia up 32% from a year ago 23

24 Solid performance continued Comparable operating profit, EUR 1,833 (1,888) million Lower hydro volumes in Power Improvement in Russia, Distribution and Heat Earnings per share EUR 1.46 (1.48) Negative IAS 39 accounting effect corresponding to EUR 0.18 Net cash from operating activities EUR 1,437 (2,264) million Decline due to SEK appreciation (roll-over of currency balance sheet hedges) Proposed dividend of EUR 1.00 per share 24

25 Key ratios Strong financial position MEUR EBITDA Comparable EBITDA Interest-bearing net debt Net debt/ebitda Comparable Net debt/ebitda Return on capital employed (%) Return on shareholders' equity (%) Portion of floating / fixed debt 49/51% 62/38% 25

26 Outlook Key drivers and risks Wholesale price of electricity Fuel, CO 2 emissions prices and water reservoirs Nordic Markets Market continues to recover 2008 level reached by Electricity continues to gain share of total energy consumption Russia Wholesale market fully liberalised Achieved efficiency improvements compared to the time of the acquisition to be approximately EUR 100 million in 2011 Profits from Russia builds up in pace with the capacity increase 26

27 Outlook Capex (excluding potential acquisitions) around EUR 1.6 to 1.8 billion (mainly due to Russian investment programme) around EUR 1.1 to 1.4 billion Preliminary divestments agreed: total approximately EUR 0.5 billion in 2011 Hedging 2011 approximately 70% hedge ratio at approximately EUR 45/MWh 2012 approximately 40% hedge ratio at approximately EUR 44/MWh 27

28 Key strategic actions going forward Focus on performance Organisational efficiency Nuclear availability Value creation from Russian investments Prepare for growth Prioritized value enhancing acquisitions while maintaining strong balance sheet Investigating high growth Asian markets Create strategic partnerships for new innovative solutions, market entries and R&D Partnerships in nuclear and bio energy Electricity Sales and Distribution: services, solutions and partnerships Continuous development of competences Readiness for change Leadership and organisational culture enabling readiness for change 28

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