Fortum a leading power and heat company in the Nordic area

Transcription

1 Fortum a leading power and heat company in the Nordic area Mikael Lilius President and CEO Fortum Corporation Finnish Blue Chip Seminar - Enskilda September 4, 2008 Helsinki

2 Strong financials and share performance Fundamentals in the European power markets still very attractive Russia will significantly grow Fortum s power generation Fortum well positioned for the future 1

3 Fortum's strategy Fortum focuses on the Nordic, Russian and Baltic Rim markets as a platform for profitable growth Become the leading power and heat company Become the energy supplier of choice Benchmark business performance 2

4 Fortum at a glance Nr 1 Nr 2 Heat Distribution Electricity sales Power generation Nordic countries Generation 51.1 TWh Electricity sales 58.5 TWh Heat sales 20.4 TWh Distribution cust. 1.6 million Electricity cust. 1.3 million Russia TGC-1 (~25%) Power generation ~6 TWh Heat production ~8 TWh Poland Heat sales 3.5 TWh Electricity sales 7 GWh Russia TGC-10 (100%) Power generation 18 TWh Heat sales 27 TWh Baltic countries Heat sales 1.2 TWh Distribution cust. 24, data 3

5 Profits mainly from low cost generation portfolio Fortum's Nordic power generation in 2007 Hydro power 39% Fortum's comparable operating profit in 2007 EUR 1,564 million Markets 0% Other 2% Natural gas 1% Peat 1% Biomass 2% Coal 6% Distribution 14% Heat 18% Power Generation 68% Nuclear power 49% Total generation 51.1 TWh (Generation capacity 10,775 MW) 4

6 Strong financial results ROE (%) EPS, (EUR) Total assets (EUR billion) 20,0 15,0 14,4 15,8 17,5 2,00 1,50 1,22 1,74 1, ,8 17,7 20,5 10,0 1, ,0 0,50 6 0, LTM 0, LTM LTM ROCE (%) Dividend, (EUR) Adjusted net debt/ebitda 18,0 13,4 14,0 13,5 1,50 1,12 1,26 1,35 3,0 2,3 2,2 2,8 12,0 1,00 2,0 6,0 0,50 1,0 0,0 0,00 0, LTM LTM LTM in Q

7 Growing capital returns Dividend per share EUR 0.13 Total ~ 5,075 MEUR ** * * 0.58 Dividend of EUR 1.35 per share, in total ~EUR 1.2 billion Mandate for repurchasing of the company s own shares; maximum EUR 300 million Dividend policy of 50-60% payout of previous year's results on the average * With 60% payout ratio ** From continuing operations 6

8 Strong share performance Index 1,100 1, Fortum's share price since September 2000 Updated 22 Aug '08 1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 Fortum DJ Utilities Total shareholder value increase EUR 30 billion Market cap EUR 3.1 billion Total EUR 33.2 billion Neste Oil shares EUR 3.3 bn Cash dividends EUR 4.8 bn Sep Aug 2008 Total dividends EUR 8.1 billion Market cap EUR 25.1 billion 7

9 Total shareholder return among the leading power utilities globally Total shareholder return %/a over a 5-year period until 22 Aug 2008 % Unified Energy System CEZ Fortum Hafslund BKW Energie Cia Energ. de Brasilia Manila Electric Co Edison Int. Reliant Energy Endesa Iberdrola Union Fenosa PPL Corp. EDP E.ON Entergy Corp. Scottish & Southern Fortis Korea Electric Power Enel EnBW American Electric Power Southern Saudi Electricity Tokyo Electric Power

10 Strong financials and share performance Fundamentals in the European power markets still very attractive Russia will significantly grow Fortum s power generation Fortum well positioned for the future 9

11 Towards a functioning European power market Today regional Nordic Tomorrow European Yesterday national Directives: Market liberalisation Strategy: Market integration Market-based development Increased competition Increased efficiency Benefiting customers and societies 10

12 EU targets for energy efficiency, emission reductions and renewables Competitiveness Sustainability CO 2 emissions -20% Renewables share 20% CO 2 capture and storage Accelerating the creation of common markets Energy efficiency +20% Increasing investments in technology development Security of supply Development of crossborder transmission Increase in own production Enhancement of external energy relations 11

13 Huge need for new capacity Globally European wide and in Russia TWh 30,000 25,000 20,000 15,000 ~10,000 TWh TWh 4,000 3,000 2,000 1,300 TWh TWh TWh by ,000 1,700 10,000 5, E 2020E 1, E2015E 2020E Existing/remaining production Demand Source: IEA World Energy Outlook 2006, reference scenario for generation Source: Eurprog 2006; Europe, EU27; Fortum Source: Ministry of Industry and Energy 1 Production 2004: TWh/IEA

14 New capacity needed also in the Nordic market TWh 500 Demand and capacity development in the Nordic market Electricity demand is expected to increase by ~35 TWh by 2020 compared to 2007 Estimated retiring generation approx. 35 TWh*) TWh Total need for investments roughly 70 TWh decisions for another 30 TWh still needed 200 Committed new production ~40 TWh 100 Thermal Wind Nuclear OL Committed projects CHP Existing/remaining generation Demand Hydro Nuclear upgrades *) Partly decommissioned due to increasing environmental requirements, partly replaced by more efficient new plants; may still be available as peak-load capacity. 13

15 New capacity will require a well over 60 EUR/MWh price EUR/MWh Source: Nord Pool Futures 1 September 2008 EUR/MWh CO 2 cost 30 /ton Other costs ( variation) Coal Gas Nuclear Hydro Wind Clean coal Estimated lifetime average cost in nominal 2013 terms. Large variations in cost of new hydro and wind due to location and conditions. 14

16 Fortum's Nordic investment programme will further increase CO 2 -free generation Fortum's Nordic power production TWh Olkiluoto 3, Finland, nuclear Swedish nuclear upgrades Suomenoja CHP, Finland Värtan bio-chp, Sweden Järvenpää bio-chp, Finland Brista waste-chp, Sweden Refurbishing of existing hydro assets Wind power, Sweden CO 2 -free production (nuclear power, hydro power, bio fuels) Other (peat, gas, coal, other) After the investment programme ~9 TWh increase in CO2 -free production* ~10 TWh increase in total production* Total ~1,300 MW ~ EUR 3 billion ~10 TWh increase in total production, of which 90% CO 2 -free * compared to

17 The CO 2 emissions issue is challenging Global energy based CO 2 emissions Billion tonnes % % (IEA WEO 2006) 16

18 2007 Fortum's production fleet - less emitting 1,200 1, DEI Drax RWE Scottish & Southern Edison EDP CEZ Endesa Union Fenosa Enel E.ON Essent Dong Vattenfall Electrabel PVO Iberdola Verbund British Energy Fortum EDF Statkraft gco 2 /kwh electricity, 2006 Average 372 g/kwh 107

19 Market integration advances Market coupling between Belgium (BelPEX), Netherlands (APX) and France (Powernext) since November 2006 Market coupling EEX-Nord Pool to start 29 September 2008 Market coupling NL-Nord Pool through the NorNed cable 2009 Market coupling DE-F-BeNeLux by January 2009 NL-UK 2010 through the BritNed cable Fingrid has taken an initiative for market coupling with Russia 2010 Existing 2009 Q

20 Forward quotations suggest higher prices in future EUR/MWh Spot prices Forward prices Dutch German Nordic September Source:, ATS 19

21 Strong financials and share performance Fundamentals in the European power markets still very attractive Russia will significantly grow Fortum s power generation Fortum well positioned for the future 20

22 Russia is the World s 4th largest power market and growing rapidly Russia is the 4th largest power market in the World > 4,000 Demand for electricity in Russia to increase 50% by 2020 *) High scenario 2,000 TWh/a by 2020 Base scenario: 1,700 TWh/a by 2020 TWh 2,500 2,000 1,500 1, US Source: IEA, 2005, *) Ministry of Industry and Energy 21 China Japan Russia India Canada Germany France Brazil Nordic UK 2,200 2,000 1,800 1,600 1,400 1,200 1, Demand growth 700+ TWh before year ,000 1,700

23 Fortum's current holdings in Russia TGC-10 Fortum holding over 90% at the moment (including mandatory offer) Income statement consolidated from April 1, 2008 TGC-10 operates in the heart of Russia s oil and gas producing region EUR 2.1 billion paid of which EUR 1.3 billion remains in the company (share issue) and will be used for planned EUR 2.2 billion investment program of TGC-10 The acquisition adds appr. 18 TWh/a electricity and appr. 27 TWh/a heat Value creation based on power price development, volume growth and annual efficiency improvement of at least EUR 30 million TGC-1 Fortum holding 25.7% at the moment (associated company) ~6,250 MW electricity production capacity (appr.50% hydro), ~24 TWh/a electricity, ~30 TWh/a heat TGC-1 St. Petersburg Moscow Nyagan Khanty-Mansisk Chelyabinsk TGC-10 Kurgan Surgut Tobolsk Tyumen 22

24 TGC-10 EUR 2.2 billion investment programme MW 6,000 5,000 4,000 3,000 2,000 1,000 0 A portfolio of 3,020 MW installed electricity capacity The highest load factor of all TGCs High demand growth Electricity 18 TWh, Heat 27 TWh Committed investment programme of an additional 2,270 MW of electricity capacity TGC-10 owns a 925 km heat distribution network and operates a total network of 2,175 km +73% +2,270 MW 3,020 5, Moscow Total boiler heat capacity 910 MW Tyumen Tobolsk Chelyabinsk Kurgan Chelyabinsk region Power capacity 1,106 MW Heat capacity 7,299 MW Nyagan Tyumen region Power capacity 1,679 MW Heat capacity 6,386 MW Electricity capacity (MW) Heat capacity (MW) Plant Fuel type Existing Planned Total Existing Planned Total Tyumenskaya CHP-2 Gas ,205 1, ,039 Tyumenskaya CHP-1 Gas , ,938 Tobolskaya CHP Gas ,105 3,105 Chelyabinskaya CHP-3 Gas , ,440 Chelyabinskaya CHP-2 Coal, gas ,112 1,112 Argayanskaya CHP Coal, gas Chelyabinskaya CHP-1 Coal, gas ,560 1,560 Chelyabinskaya GRES Gas ,491 2,491 Nyaganskaya GRES Gas 1,200 1, Boilers Kurgan Generation (49%) Gas ,149 1,149 TGC-10 3,020 2,270 5,290 15,744 1,145 16,889 23

25 Significant growth in Fortum s power generation Power generation, TWh Fortum 52 Fortum Capacity, GW 10.9 Fortum 70 Fortum + TGC Fortum + TGC Fortum + TGC-10 with new investments 17.5 Fortum + TGC-10 with new investments EDF E.ON + WGC 4 Enel + Endesa + WGC-5 RWE Vattenfall Electrabel Rosenergoatom Iberdrola Fortum+TGC-10 Hydro WGC EnBW Irkutskenergo British Energy CEZ TGC 3 DEI WGC 2 WGC 1 Statkraft Committed TGC-10 investments Fortum s Nordic capacity investment programme 24 Annual power generation by largest producers TWh/a

26 Strong financials and share performance Fundamentals in the European power markets still very attractive Russia will significantly grow Fortum s power generation Fortum well positioned for the future 25

27 Increasing hedge prices Status at the beginning of July 2008 (Status at the beginning of April 2008) Hedge ratio Hedge price Rest of 2008 ~ 70% ~ EUR 46 per MWh (~60%) (~ EUR 45 per MWh) 2009 ~ 45% ~ EUR 51 per MWh (~35%) (~ EUR 48 per MWh) Achieved power price in 2007 were 39.7 EUR/MWh 26

28 Fortum well positioned for the future Flexible and climate-benign production portfolio Nordic capacity investment programme proceeding Opportunity in the Russian TGC-10 Strong balance sheet Good hedging positions Good financial outlook 27

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