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FORTUM Power and heat company in the Nordic area, Russia and the Baltics Investor / Analyst material August 2015
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.
Fortum today pages 4 – 16
European and Nordic power markets pages 17 – 24 Fortum’s nuclear fleet pages 25 – 28 Russia pages 29 – 31 Fortum’s investment programme page 31 Historical achieved prices page 32 Q1 2015 (some graphs updated) pages 33 – 54 Financials and outlook pages 42 – 54
Content
3
Appr. 121,000 shareholders
• Power and heat company in the Nordic countries, Russia, Poland and the Baltics • Listed at the Helsinki Stock Exchange since 1998 • Among the most traded shares on the Nasdaq Helsinki stock exchange • Market cap ~14 billion euros
4
31 Jully 2015
Foreign investors 29.4% Finnish State 50.8%
Other Finnish investors 7.9%
Finnish households 9.6% Financial and insurance institutions 2.3%
Capital returns: 2014 EUR 1.30 per share ~ EUR 1.2 billion • Fortum’s dividend policy is based on the following preconditions:
– The dividend policy ensures that shareholders receive a fair remuneration for their entrusted capital, supported by the company’s long-term strategy that aims at increasing earnings per share and thereby the dividend.
– When proposing the dividend, the Board of Directors looks at a range of factors, including the macro environment, balance sheet strength as well as future investment plans.
5
Fortum's target is to pay a stable, sustainable and over time increasing
dividend of 50-80% of earnings per share excluding one-off items
Fortum has since 1998 annually paid dividends in total ~11,648 MEUR
2010 68%
2011 50%
2012 63%
2013 81%
2014 37%
1.0 1.0 1.0 1.1
1.3* 5 year dividend per share (EUR) history
0.2
1.1
*Dividend of EUR 1.10 per share, and in addition an extra dividend EUR 0.20 per share for 2014.
Our strategic route
6
Birka Energi 50% → 100%
Gullspång
Neste
Divestment of non-strategic heat business
2007
Skandinaviska Elverk
Länsivoima 45% → 65%
Birka Energi 50% Fortum 50% Stockholm Gullspång merged with Stockholm Energi
TGC-10 Divestment of Fingrid shares
Divestment of heat operations outside of Stockholm
Divestment of Lenenergo shares
1996
IVO Fortum
Divestment of small scale hydro
2012 2008 2015
1997
Lenenergo shares →
Stora Kraft
Länsivoima →100%
2000
Elnova 50% → 100%
Østfold
Shares in Lenenergo
Shares in Hafslund
District heating in Poland →
2003
Oil business spin-off
TGC-1 established
2005
2011
1998 2002
Divestment of electricity distribution and heat businesses
Divestment of electricity distribution business
Divestment of Grangemouth power plant
Divestment of Gasum shares
2014
2006
E.ON Finland
Divestment of electricity distribution business
Fortum’s Mission and Strategy
7
Strategy
Fortum’s purpose is to create energy that improves life for present and future generations. We provide sustainable solutions for society and deliver excellent
value to our shareholders.
Mission
Build on the strong Nordic core
Create solid earnings growth in Russia
Build a platform for future growth
Strong competence in CO2-free hydro and nuclear, efficient CHP production and energy markets
Fortum’s reporting segments and divisions
8
Russia • Power and heat generation
and sales in Russia • Includes OAO Fortum and
Fortum’s slightly over 29% holding in TGC-1
Power and Technology • Hydro, nuclear and thermal
power generation • Power Solutions with expert
services • Portfolio management and
trading • Technology and R&D functions The segment incorporates two business divisions: • Hydro Power and Technology • Nuclear and Thermal Power
Heat, Electricity Sales and Solutions • Combined heat and power
(CHP) production • District heating activities and
business to business heating solutions
• Solar business • Electricity sales and related
customer offering • Corporate Sustainability
Our current geographical presence
9
Nordic countries
Power generation 48.0 TWh
Heat sales 3.3 TWh
Electricity customers 1.3 million
Power generation
Electricity sales
Heat
OAO Fortum Power generation 23.3 TWh Heat sales 26.0 TWh
Russia
Poland Power generation 0.7 TWh Heat sales 3.4 TWh
Baltic countries Power generation 0.7 TWh Heat sales 1.2 TWh
India Power generation 9 GWh
Key figures 2014 Sales EUR 4.1 bn Comparable operating profit EUR 1.1 bn Balance sheet EUR 21 bn Personnel 8,200
10
Fortum mid-sized European power generation player; major producer in global heat
1) Formerly GDF SUEZ; 2) Veolia incl. Dalkia International and EDF incl. Dalkia's activities in France Source: Company information, Fortum analyses, 2013 figures pro forma, heat production of Beijing DH not available.
Largest global producers, 2013 TWh
Largest producers in Europe and Russia, 2013 TWh
Power generation Heat production Electricity customers in EU, 2013
Millions
Customers
Gazprom
DEI
EuroSibEnergo Iberdrola
Fortum EnBW
Vattenfall
CEZ
RWE
IES
DTEK
PGE
Rosenergoatom
NNEGC Energoat.
Enel E.ON EDF
1) ENGIE
Statkraft
Inter RAO UES RusHydro
EDP
0 100 200 300 400 500 600
1) ENGIE
DEI CEZ
Enel
Centrica EDP
Iberdrola
SSE EnBW
Fortum
EDF E.ON RWE
Gas Natural Fenosa
PGE Tauron
Hafslund Dong Energy
0 20 40 10 30
Vattenfall
0 20 40 60 80 100 120 140
KDHC
Quadra
Tatenergo
Minskenergo
DTEK
EuroSibEnergo
TGC-2
Fortum
Dong Energy
Enel
Lukoil
Sibgenco
IES
Vattenfall
PGNiG
Inter RAO UES
2) EDF
RusHydro 2 ) Veolia
Gazprom
Fortum Värme
Biggest nuclear and hydro generators in Europe and Russia
11
Figures 2012 pro forma * incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9
TWh
Total generation
050
100150200250300350400450500550600
EDF
Ros
ener
goat
om
NN
EG
C E
nerg
oato
m
Rus
Hyd
ro
Vatte
nfal
l
E.O
N
Enel
Euro
SibE
nerg
o
GD
F SU
EZ
Stat
kraf
t
Fortu
m
Iber
drol
a
RW
E
EnBW CE
Z
Axpo
Verb
und
Gaz
prom
Hid
roel
ectri
ca
Cen
trica
Alpi
q
E-C
O E
nerg
i
Ukr
hydr
oene
rgo
Nor
sk H
ydro
EPS,
Ser
bia
BKK
Agde
r Ene
rgi
EDP
Gas
Nat
ural
Fen
osa
DE
I
SSE
Inte
r RAO
UE
S
PGE
DTE
K
IES
Other
Nuclear
Hydro
*
***
**
12
Fortum in the Nordic electricity value chain
Power generation Nordic wholesale market
Power exchange and bilateral agreements
Large customers
Retail customers
Private customers, small businesses
Fortum's power and heat production by source
13
Natural gas 31%
Nuclear power 33%
Coal 5% Biomass 1%
Total generation 73.4 TWh (Generation capacity 14,624 MW)
Hydro power 30%
Fortum's power generation in 2014
Total production 34.6 TWh (Production capacity 17,402 MW)
Fortum's heat production in 2014
Peat 1% Waste 1%
Biomass 6%
Natural gas 77%
Coal 15%
Nuclear power 48%
Coal 4%
Hydro power 44%
Natural gas 2%
European generation 50.1TWh (Generation capacity 9,851 MW)
Fortum's European power generation in 2014
Biomass 2%
Natural gas 29%
Fortum's European heat production in 2014
Peat 3%
Oil 1%
Waste 3%
Biomass 25%
Heat pumps, electricity 1%
Coal 38%
European production 8.2 TWh (Production capacity 3,936 MW)
Fortum's European power and heat production
14
Fortum a forerunner in sustainability
We are highly committed to sustainability. Our purpose is to create energy that improves life for present and future generations.
We provide sustainable solutions for society while delivering excellent value to our shareholders. We want to act responsibly, both in the short term and long term.
Fortum is listed in several sustainability indexes:
• Nordic Climate Disclosure Leadership Index (CDLI) • STOXX® Global ESG Leaders indices • oekom • OMX GES Sustainability Finland Index • ECPI® Indices
15
Emissions-free production is Fortum’s strategic choice
0
200
400
600
800
1 000
1 200
DE
I
RW
E
Dra
x
SS
E
CE
Z
E.O
N
Vat
tenf
all
ED
P
Ene
l
Edi
pow
er
EnB
W
Gas
Nat
ural
Fen
osa
GD
F S
UE
Z
Don
g E
nerg
y
Fortu
m to
tal
Iber
drol
a
PV
O
ED
F
Ver
bund
Fortu
m E
U
Sta
tkra
ft
64
g CO2/kWh electricity, 2013
2014 64% of Fortum's total power generation CO2-free 94% of Fortum’s power generation in the EU CO2-free
Close to 100% of the ongoing investment programme in the EU is CO2-free.
Average 328 g/kWh
200
Fortum's carbon exposure among the lowest in Europe
16
Note: : Fortum’s specific emissions of the power generation in 2014 in the EU were 39 g/kWh and in total 177 g/kWh. Only European generation except “Fortum total“ which includes Russia.
Source: PWC & Enerpresse, December 2014 Climate Change and Electricity, Fortum
Carbon market gradually tightening Political decisions strengthening the EU Emissions Trading System Decision on the 2030 greenhouse gas
reduction target Backloading decision, implementation started
in 2014 Market Stability Reserve (MSR), adoption
expected during summer 2015, to be operational 2019
Upcoming review of ETS-Directive
Robust and rebalanced EU carbon market foreseen by early 2020’s Current oversupply to halve early 2020’s and
gradually cease towards 2030 Gradual appreciation of allowance price.
17
EU ETS = European Union Emissions Trading System EUA = allowance in the EU ETS
Source: Thomson Reuters Point Carbon
Market coupling milestones - cross-border power flows optimised by power exchanges • Market coupling between NL, BE and FR since 2006 • Germany – Nord Pool Spot coupling started 11/2009 • Market coupling for Central Western Europe (DE, FR, NL, BE)
since 11/2010 with a continued coupling with Nord Pool Spot • Poland coupled with Nord Pool Spot since December 2010 • NorNed (NO-NL) and BritNed (UK-NL) included in 2011 • Estonian price area in Nord Pool Spot since 2010 and
Lithuanian area since 6/2012. Latvia joined in June 2013 • Czech, Slovakia and Hungary coupled together since September
2012. Romania joined in November 2014 • A common day-ahead market coupling for the whole north-western
Europe was started in February 2014. Iberia (Spain & Portugal) joined in May 2014. Italy and Slovenia joined in February 2015
• Flow-based cross-border capacity allocation for further trade optimisation taken into use in May 2015 for the CWE region
• Lithuania-Poland (LitPol Link) coupling to start by end-2015 • CEE (Central Eastern Europe) market coupling region to join in
2017. Switzerland waiting for agreement with the EU • In addition to day-ahead coupling, intraday market coupling
and balancing market integration under development as well
18
2009
2/2015
2012-2014
2010-2013
2017
2014
Current transmission capacity from Nordic area is over 5,000 MW
19
• Theoretical maximum in transmission capacity ~40 TWh per annum
• Net export from Nordic area to Continental Europe and Estonia during year 2014 was 13 TWh
• During the dry year 2013 net export was 3 TWh • Approximately 25 TWh of net export is now reachable
Countries Transmission capacity MW
From Nordics To Nordics
Denmark - Germany 2,225 2,100
Sweden - Germany 615 600
Sweden - Poland 600 600
Norway - Netherlands 700 700
Finland - Estonia 1000 1,016
Finland - Russia 320 1,300
Total 5,460 6,316
700
2,225 615 600
1000
320
Nordic, Baltic, Continental and UK markets are integrating – interconnection capacity will double by 2021
20
Two 1400 MW NO-UK links as EU Projects of Common Interest: NSN link to England agreed to be ready in 2021, NorthConnect to Scotland still requiring Norwegian permission
First direct 1400 MW NO-DE link contracted to be built by end-2019
EU financial support for a 700 MW DK-NL link, due to be built by 2019
Jutland – DE capacity planned to grow by 860 MW by 2020, with further 500 MW increase by 2022
Svenska Kraftnät agreed 3/2014 with 50Hertz to study a new Hansa PowerBridge DC link between Sweden and Germany
The Northern Seas Offshore Grid and the Baltic Energy Market Integration Plan are included as priority electricity corridors in EU’s Infrastructure Guidelines, approved in April 2013
New interconnections will double the export capacity to over 10,000 MW by 2021
LitPol Link (500+500 MW) to connect the Baltic market to Poland by end-2015/20. It will open a new transmission route from the Nordic market to the Continent
EU’s European Energy Programme for Recovery co-financing 700 MW NordBalt (ready 12/2015)
New internal Nordic grid investments provide for increased available capacity for export to the Continent and Baltics
EU’s Connecting Europe Facility co-financing 3rd EE-LV transmission line, due to be ready by 2020
New 400 MW Zealand – DE Kriegers Flak connection by 2019
New 1000-1400 MW DK-UK Viking Link not yet decided, but planned to be built by end-2020/2022
New interconnectors New Nordic lines Existing interconnectors
Nordic year forwards
21
Source: Nasdaq Commodities
0
10
20
30
40
50
60
70
€/MWh 10 August 2015
Year15 Year17 Year19 Year10 Year11 Year12 Year13 Year14 Year16 Year18 Year20
2014
Q1
2008
Q2 Q3 Q4 Q1
2009
Q2 Q3 Q4 Q1
2010
Q2 Q3 Q4 Q1
2011
Q2 Q3 Q4 Q1
2012
Q2 Q3 Q4 Q1
2013
Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015
Q1 Q2 Q3
Wholesale prices for electricity
22
Source: Nord Pool Spot, Nasdaq Commodities, APX-ENDEX, Bloomberg Finance LP, ATS, NP “Market Council”, Fortum
* Including weighted average capacity price
Dutch
German
Nordic
Russian*
Spot prices Forward prices EUR/MWh
10
20
30
40
50
60
70
80
90
100
110
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
7 August 2015
Nordic power generation – dominated by hydro, but fossil needed
23
Source: ENTSO-E Statistical Factsheet 2014 *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh.
0
20
40
60
80
100
120
140
160
Denmark Norway Sweden Finland
Fossil fuels
Nuclear
Biomass
Solar
Wind
Hydro *
TWh/a
Total Nordic generation 390 TWh in 2014
Net export in 2014: 10 TWh
23
85
TWh %
39
214
28
6
22
10
55
7
1 0
Wholesale electricity price too low to attract investments
24
NOTE: The presented figures are calculated based on data from recent public reports and do not represent Fortum’s view. Average achieved price (€/MWh) for the production type depends on availability and flexibility. There are large variations in the cost of hydro, wind and solar depending on location and conditions.
0102030405060708090
100110
Source: Nord Pool spot, Nasdaq Commodities
EUR/MWh
Futures 7 August 2015
1995 2015 2025 0
102030405060708090
100110
Onshore wind
Nuclear Utility scale Solar PV In Italy
Large hydro
Offshore wind
EUR/MWh
Average levelised costs of new electricity generation
Coal condensing
Gas
Commodity prices are forward prices as of August 2014.
Overview of Fortum’s nuclear fleet
25
LOVIISA OLKILUOTO OSKARSHAMN FORSMARK
Commercial operation started
Unit 1: 1977 Unit 2: 1981
Unit 1: 1978 Unit 2: 1980 Unit 3: (Under construction)
Unit 1: 1972 Unit 2: 1974 Unit 3: 1985
Unit 1: 1980 Unit 2: 1981 Unit 3: 1985
Generation Capacity Fortum’s share
Unit 1: 496 MW Unit 2: 496 MW Total: 992 MW
Unit 1: 880 MW Unit 2: 880 MW (Unit 3: 1,600 MW) Total: 1,760 MW (3,360) 27% 468 MW
Unit 1: 473 MW Unit 2: 638 MW Unit 3: 1,400 MW Total: 2,511 MW 43% 1,089 MW
Unit 1: 984 MW Unit 2: 1,120 MW Unit 3: 1,170 MW Total: 3,274 MW 22% 720 MW
Yearly production Fortum’s share of production
8 TWh 8 TWh
14 TWh 4 TWh
17 TWh 7 TWh
25 TWh 5.5 TWh
Share of Fortums Nordic production 18% 9% 16% 13%
Majority owner Fortum’s share
Fortum
Pohjolan Voima 26.6%
E.ON 43.4%
Vattenfall 22.2%
Operated by Fortum Teollisuuden Voima (TVO) OKG Aktiebolag Forsmarks Kraftgrupp
Responsibilities Loviisa: Fortum is the owner, licensee and operator with all the responsibilities specified in the Nuclear Energy Act, Nuclear Liability Act, and other relevant nuclear legislation Other units: Fortum is solely an owner with none of the responsibilities assigned to the licensee in the nuclear legislation. Other responsibilities are specified in the Companies Act and the Articles of Association and are mostly financial.
Olkiluoto
Loviisa Forsmark
Oskarshamn
Fortum's nuclear power in the Nordics
26
• Finnish units world class in availability • Overview of production and consumption:
www.fortum.com/investors - energy related links
Source: Fortum
Load factor (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
2014
Osakarshamn 1 80 51 63 85 68 77 72 1 13 74
Oskarshamn 2 90 78 76 86 75 90 77 81 33 0
Oskarshamn 3 85 95 88 70 17 31 75 69 77 75
Forsmarks 1 85 76 81 81 88 93 79 88 87 94
Forsmark 2 94 72 85 79 64 39 94 82 89 89
Forsmark 3 95 92 88 69 86 81 85 93 88 82
Loviisa 1 95 93 94 86 96 93 94 84 92 92
Loviisa 2 95 88 96 93 95 89 94 91 93 89
Olkiluoto 1 98 94 97 94 97 92 94 90 97 94
Olkiluoto 2 94 97 94 97 95 95 90 96 93 97
Variety of technologies and ages
27
Planned capacity increases
• Oskarshamn 2 in 2017, capacity increase 180 MW (Fortum’s share 78 MW), Fortum’s share of total capacity after increase 355 MW
• Forsmark 1 in 2017-2020, capacity increase 120 MW (Fortum’s share 27 MW), Fortum’s share of total capacity after increase 257 MW
PWR = Pressurized Water Reactor The most common reactor type in the world (e.g. all French units, most US units). Also the Loviisa units are PWRs, but based on Russian design. High pressure prevents water from boiling n the reactor. The steam rotating the turbine is generated in separate steam generators.
BWR = Boiling Water Reactor Similar to the PWR in many ways, but the steam is generated directly in the reactor. Popular reactor type e.g. in Sweden, the US and Japan.
*Generation refers to technical resemblence based on KSU classification and not to reactor design generations. All reactors are of Generation II except Olkiluoto-3 (EPR) which is of Generation III.
Unit MWe (Net) Share (%) Share (MWe) Commercial operation
Age Type/ Generation *
Supplier
Loviisa 1 Loviisa 2
496 496
100,0 100,0
496 496
1977-05-09 1981-01-05
36 33
PWR / 1 PWR / 1
AEE (Atomenergoexport) AEE (Atomenergoexport)
Olkiluoto 1 Olkiluoto 2 Olkiluoto 3
880 880
(1,600)
26,6 26,6 25,0
234 234
(400)
1979-10-10 1982-07-10
(?)
34 31
BWR / 3 BWR / 3 PWR / 3
Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval
Areva / Siemens
Oskarshamn 1 Oskarshamn 2 Oskarshamn 3
473 638
1,400
43,4 43,4 43,4
205 277 607
1972-02-06 1975-01-01 1985-08-15
42 39 28
BWR / 1 BWR / 2 BWR / 4
Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval
Forsmark 1 Forsmark 2 Forsmark 3
984 1,120 1,170
23,4 23,4 20,1
230 262 236
1980-12-10 1981-07-07 1985-08-18
33 32 28
BWR / 3 BWR / 3 BWR / 4
Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval Asea-Atom / Stal-Laval
Third party nuclear liability in case of severe accident
28
Sweden (new, not in force)
Finland, temporary legislation
Current, Sweden
700 M€
200 M€ 360 M€
500 M€ Responsibility of company (insurance or guarantee)
Unlimited company responsibility Convention parties 300 M€
State responsibility
300 M€
500 M€
700 M€
New Paris convention
700 M€
145 M€
145 M€
Old, Finland
240 M€
145 M€
In force since 1.1.2012.
Law approved by Parliament in 2010, requires separate decision from Government to come into force.
Requires ratification by 2/3 of member states to come into force. In Finland approved by Parliament in 2005
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 • 23 TWh power generation, 26 TWh heat production in 2014 • Investment programme to add 85%, almost 2,400 MW to power generation capacity
TGC-1 • 29.5% of territorial generating company TGC-1 operating in north-west Russia • ~7,200 MW electricity production capacity (more than 40% hydro),
~24 TWh electricity, ~28 TWh heat in 2014
Fortum and Gazprom Energoholding signed a protocol to start a restructuring process of TGC-1. Currently Gazprom Energoholding owns 51.8% of the TGC-1 shares and Fortum 29.5%. As part of the restructuring, Fortum will establish a joint venture together with Rosatom to own the hydro assets of TGC-1, while Gazprom Energoholding continues with the heat and thermal power businesses of TGC-1. By utilising its present stake in TGC-1, Fortum would obtain a 75-plus-percent ownership in the new hydro power company, and Rosatom a 25-minus-percent minority holding.
29
OAO Fortum
Tyumen
Tobolsk
Chelyabinsk
Nyagan
TGC-1
St. Petersburg
Moscow
30
Day ahead wholesale market prices in Russia Key electricity, capacity and gas prices in the OAO Fortum area
II/15 II/14 I-II/15 I-II/14 2014 LTM
Electricity spot price (market price), Urals hub, RUB/MWh
1,021 1,132 1,036 1,075 1,089 1,069
Average regulated gas price, Urals region, RUB 1000 m3
3,362 3,362 3,362 3,362 3,362 3,362
Average capacity price for CCS ”old capacity”, tRUB/MW/month
140 152 152 168 167 159
Average capacity price for CSA ”new capacity”, tRUB/MW/month
578 493 647 553 552 605
Average capacity price, tRUB/MW/month 326 271 360 303 304 333
Achieved power price for OAO Fortum, EUR/MWh 27.9 32.3 26.8 31.4 30.4 28.1
0
200
400
600
800
1 000
1 200
1 400
RU
B /
MW
h
0
5
10
15
20
25
30
35
40
€/ M
Wh
In addition to the power price generators receive a capacity payment. Source: ATS 2008 2009 2010 2011 2012 2013 2014 2015
Day ahead power market prices for Urals
2008 2009 2010 2011 2012 2013 2014 2015
85% increase in power generation capacity in Russia by 2015 through the investment programme
31
Year Supply starts
Power plant Fuel type Existing capacity
2,785 MW
New investments
2,388 MW
Production type Total capacity
5,173 MW < 2011 Tyumen CHP-2 Gas 755 CHP/Condensing 755
Chelyabinsk CHP-2 Gas, coal 320 CHP/Condensing 320
Argayash CHP Gas, coal 195 CHP/Condensing 195
Chelyabinsk CHP-1 Gas, coal 149 CHP/Condensing 149
2011 Feb/2011 Tyumen CHP-1 Gas 472 209 CHP/Condensing 681
June/2011 Chelyabinsk CHP-3 Gas 360 216 CHP/Condensing 576
Oct/2011 Tobolsk CHP Gas 452 213 CHP/Condensing 665
2013 April/2013 Nyagan 1 GRES Gas 418 Condensing 418
Dec/2013 Nyagan 2 GRES Gas 418 Condensing 418
2015 Jan/2015 Nyagan 3 GRES Gas 418 Condensing 418
2H/2015 Chelyabinsk GRES Gas 82 248 CHP/Condensing 330
2H/2015 Chelyabinsk GRES Gas 248 CHP/Condensing 248
2,785 MW 2,388 MW 5,173 MW
Hedging improves stability and predictability
32
2009 onwards thermal and import from Russia excluded
Q2 2015 Results
33
Key figures (MEUR) II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM Sales, continuing operations 794 886 1,834 2,094 4,088 3,828
Comparable EBITDA, continuing operations 228 302 624 758 1,457 1,323
Operating profit:
Continuing operations 144 233 494 599 1,296 1,191 Discontinued operations 4,314 63 4,395 2,030 2,132 4,497 Fortum total 4,458 295 4,889 2,629 3,428 5,688
Comparable operating profit:
Continuing operations 143 210 486 568 1,085 1,003 Discontinued operations 32 45 114 164 266 216 Fortum total 175 255 600 732 1,351 1,219
Profit before taxes:
Continuing operations 143 224 493 597 1,232 1,128 Discontinued operations 4,313 61 4,394 2,029 2,128 4,493 Fortum total 4,456 284 4,887 2,626 3,360 5,621
Earnings per share:
Continuing operations 0.13 0.22 0.46 0.57 1.22 1.11 Discontinued operations 4.85 0.06 4.92 2.24 2.33 5.01 Fortum total 4.98 0.28 5.38 2.81 3.55 6.12
Net cash from operating activities, continuing operations 229 394 745 799 1,406 1,352
Summary of the second quarter of 2015
• Fortum’s results continued to be pressured by low electricity prices
• The second quarter was characterised by among the highest precipitation in recent history, which resulted in high and partly must-run hydro power production
• Swedish electricity distribution business divestment completed the whole Distribution sale
• The negotiations on Russian TGC-1 restructuring did not come to conclusions
34
Market conditions in the second quarter of 2015 Nordic countries • Power consumption in the Nordic countries at the same level as in Q2 2014 • The precipitation was among the highest recorded this century in Norway and
Sweden. In addition, by the end of the second quarter, large amounts of the precipitation still remained as snow in Norway, because of the delayed snow melt
• Nordic system spot prices approximately EUR 5 per MWh lower than in Q2 2014, while Finnish and Swedish area prices EUR 9-11 per MWh lower
European business environment and carbon market • In May, a compromise was reached on the market stability reserve (MSR) of the
EU emissions trading system. In July, the Commission published a proposal to revise the Emissions Trading Directive
Russia • Power consumption in Fortum’s operating areas was on the same level as in Q2
2014 • Electricity spot price (in RUB) in the Urals hub declined 10% compared to Q2
2014
35
Nordic water reservoirs
36
Source: Nord Pool Spot
Q1 Q2 Q3 Q4
20
40
60
80
100
120
rese
rvoi
r con
tent
(TW
h)
0
2000 2003 2014 2013 reference level 2015
Wholesale price for electricity
37
Source: Nord Pool Spot, Nasdaq Commodities
0
10
20
30
40
50
60
70
80
90
100
110EUR/MWh Nord Pool Spot System Price Forwards
7 August 2015
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
0
30
60
90
120
150
USD
/ bb
l
Crude oil price (ICE Brent)
2007 2008 20112009 2010 20132012 2014 2015 20160
7
14
21
28
35
EUR
/ tC
O2
CO2 price (ICE ECX EUA)
2007 2008 20112009 2010 20132012 2014 2015 2016
0
50
100
150
200
250
USD
/ t
Coal price (ICE Rotterdam)
2007 2008 20112009 2010 20132012 2014 2015 20160
20
40
60
80
100
GB
p / t
herm
Gas price (ICE NBP)
2007 2008 20112009 2010 20132012 2014 2015 2016
38
Source: ICE
Market prices 5 August 2015; 2015-2016 future quotations
Fuel and CO2 allowance prices
Price development in the Nordic region and Russia
39
Includes capacity income
-19%
-23% -14%
-10%
Q2: Low electricity prices continued to impact results negatively – somewhat compensated by hydro volumes
40
Comparable operating profit, EUR million
January - June: Clearly lower achieved power price
41
Comparable operating profit, EUR million
Financials
Comparable and reported operating profit
II/2015 II/2014 II/2015 II/2014 I-II/2015 I-II/2014 I-II/2015 I-II/2014
Power and Technology 114 183 117 151 317 434 320 413 Heat, Electricity Sales and Solutions 11 11 9 67 68 59 73 112
Russia 35 28 36 28 132 102 133 101
Other -17 -13 -17 -13 -32 -27 -32 -28 Total, continuing operations 143 210 144 233 486 568 494 599
Discontinued operations 32 45 4,314 63 114 164 4,395 2,030
Total, Fortum 175 255 4,458 295 600 732 4,889 2,629
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Comparable operating profit
Reported operating profit MEUR
Non-recurring items including approximately EUR -15 million effect from the cancellation of Olkiluoto 4 nuclear power project, as well as an IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments for continuing operations amounted to EUR 1 (23) million in the second quarter and EUR 8 (30) million in January-June 2015.
Reported operating profit
Comparable operating profit
Power and Technology
MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM
Sales 404 487 904 1,072 2,156 1,988
Comparable EBITDA 143 213 375 496 998 877
Comparable operating profit 114 183 317 434 877 760
Net assets 6,093 6,113 6,001
Comparable RONA % 14.2 12.6
Gross investments 42 37 70 72 198 196
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Q2 2015 • Clearly higher precipitation had a positive
impact on the hydro volumes, but put pressure on the electricity spot price
• EUR -15 million effect of the cancelled Olkiluoto 4 nuclear power project in Finland
H1 2015 • Clearly lower achieved power price
• First quarter was exceptionally mild • Second quarter characterised by among
the highest precipitation in recent history
Heat, Electricity Sales and Solutions
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Q2 2015 • Comparable operating profit on same level as
in comparison period -The lower electricity power price was partly compensated by lower fuel costs.
MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM
Sales 244 269 650 715 1,332 1,267
Comparable EBITDA 35 36 117 109 204 212
Comparable operating profit 11 11 68 59 104 113
Net assets 2,073 2,176 2,112
Comparable RONA % 8.7 8.3
Gross investments 22 14 33 27 124 130
H1 2015 • Comparable operating profit improved mainly
due lower fuel costs and higher heat prices during the period
• In retail electricity sales, the customer base continued to grow and the sales margin improved
Russia Q2 2015 • Improved result partly offset by lower electricity
prices, as well as bad debt provisions for heat trade receivables
• Russian rouble affected the result negatively by EUR 3 million
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MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM
Sales 211 234 474 567 1,055 962
Comparable EBITDA* 65 64 159 177 304 286
Comparable operating profit 35 28 132 102 161 191
Net assets 3,159 3,870 2,597
Comparable RONA % 5.6 6.8
Gross investments 69 97 114 156 367 325
H1 2015 • Comparable operating profit improved due to
positive effect from new units • Russian rouble affected the result negatively
by EUR 50 million • Result includes CSA provision release of EUR
32 million
* Excluding the net release of CSA provision
Discontinued operations (Distribution)
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Q2 and H1 2015 • On 1 June 2015, Fortum completed the divestment of its Swedish electricity distribution
business. Fortum booked a one-time sales gain of approximately EUR 4.3 billion, corresponding to EUR 4.82 per share
Table below includes January-March 2014 results for the Finnish, January-May 2014 results for the Norwegian and full year 2014 results as well as January-May 2015 for the Swedish distribution business
MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM
Sales 95 148 275 449 751 577
Comparable EBITDA 52 80 164 251 416 329
Comparable operating profit 32 45 114 164 266 216
Net assets 2,642 2,615
Gross investments 25 35 44 60 147 131
Income statement MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM Sales 794 886 1,834 2,094 4,088 3,828 Other income and expenses -651 -676 -1,348 -1,526 -3,003 2,825
Comparable operating profit 143 210 486 568 1,085 1,003 Items affecting comparability 1 23 8 30 211 189
Operating profit 144 233 494 599 1,296 1,191 Share of profit of associates and jv’s 22 37 80 107 146 119
Financial expenses, net -23 -46 -81 -109 -210 -182
Profit before taxes 143 224 493 597 1,232 1,128 Income tax expense -25 -27 -80 -89 -143 -134
Net profit, continuing operations 118 196 413 508 1,089 994 Net profit, discontinued operations 4,306 51 4,369 1,994 2,073 4,448 Net profit, Fortum total 4,424 247 4,782 2,502 3,161 5,441
EPS, basic (EUR), continuing operations 0.13 0.22 0.46 0.57 1.22 1.11
EPS, basic (EUR), discontinued operations 4.85 0.06 4.92 2.24 2.33 5.01
EPS, basic (EUR), Fortum Total 4.98 0.28 5.38 2.81 3.55 6.12
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Cash flow statement MEUR II/2015 II/2014 I-II/2015 I-II/2014 2014 LTM Cash from operating activities:
Realised FX gains/losses 35 81 203 155 352 400 Other funds from operations (FFO) 158 176 472 547 1,096 1,021 Change in working capital 36 137 70 97 -42 -69
Cash from operating activities, cont. operations 229 394 745 799 1,406 1,352 Cash from operating activities, discontinued operations 66 61 154 222 356 288
Cash from operating activities, total Fortum 296 455 899 1,022 1,762 1,639
Cash used in investing activities: Paid capital expenditures -107 -135 -209 -257 -622 -574 Proceeds from divestments 1 103 37 107 499 429 Other investment activities 222 164 241 209 364 416
Total investing activities, continuing operations 116 132 69 59 241 251
Total investing activities, discontinued operations
6,345 187 6,303 2,648 2,574 6,229
Cash used in investing activities, total Fortum
6,461 319 6,372 2,706 2,816 6,482
Cash flow before financing activities, total Fortum 6,757 774 7,272 3,727 4,578 8,123
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Key ratios
MEUR LTM 2014
Comparable EBITDA, continuing operations 1,323 1,457
Comparable EBITDA, total Fortum 1,652 1,873
Interest-bearing net debt, total Fortum -1,846 4,217
Comparable net debt/EBITDA, total Fortum -1.1 2.3
excluding Värme financing -1.3 2.0
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ROCE % Return on capital employed, total Fortum 29.0 19.5
Liquid funds totalled EUR 8.6 billion Committed credit lines total EUR 2.2 billion
Debt portfolio and average interest rate at the balance sheet date 30 June 2015 (31 December 2014)
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• Total interest-bearing debt EUR 6,765 million – Average interest 4.2% (3.7%) – Portfolio mainly in EUR and
SEK with average interest cost 2.9% (2.9%)
– EUR 786 (681) million swapped to RUB, average interest cost including cost for hedging 14.3% (11.3%)
0
250
500
750
1000
1250
1500
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+Bonds Financial institutions Other long-term debt Other short-term debt
Maturity profile
Outlook
Outlook Nordic markets
• Fortum continues to expect that the average annual electricity demand growth will be on average approximately 0.5% in the coming years
• Electricity is expected to continue to gain share of total energy consumption Russia
• The run-rate operating profit (EBIT) level for the Russia Segment, RUB 18.2 billion, is targeted to be reached during 2015, but the euro result level will be volatile, due to the translation effect
Key drivers and risks
• Economic • Political • Currency • Wholesale price of electricity and volumes
• demand and supply • fuels • hydrological situation • power plant availability • CO2 emissions allowance prices
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Outlook Annual capex estimate, excluding potential acquisitions
• 2015 approximately EUR 0.8 billion
Hedging • Rest of 2015 approx. 45% hedge ratio at approx. EUR 41/MWh • 2016 approx. 25% hedge ratio at approx. EUR 35/MWh
Taxation
• Effective tax rate for 2015 for the Group 19-21% • The Swedish Parliament decided to approve the proposed tax increase
of 17% on installed nuclear capacity. The tax will be implemented as of 1 August 2015. The estimated impact on Fortum is approximately EUR 15 million annually, albeit corporate tax-deductable
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Fortum Investor Relations For more information, please visit www.fortum.com/investors
Follow us on: Free IR app for iPhone and iPad (App Store) and Android (Google Play)
www.twitter.com/Fortum www.linkedin.com/company/fortum
Fortum ForEnergy blog at http://fortumforenergyblog.wordpress.com www.youtube.com/user/fortum
Sophie Jolly Vice President +358 (0)10 453 2552 [email protected] Rauno Tiihonen Manager +358 (0)10 453 6150 [email protected] Marja Mäkinen Manager (SRI) +358 (0)10 452 3338 [email protected] Meeting requests:
Arja-Tuula Tiainen Executive Assistant +358 (0)10 453 4487 [email protected]
Next result publication: Q2/2015 on 17 July 2015
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