Post on 30-Aug-2020
Fortum CorporationInterim ReportJanuary – June 201319 July 2013
Conference call
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.
Q2 2013 Result
Key figures (EUR) II/2013 II/2012 I-II/2013 I-II/2012 2012 LTMSales, million 1,327 1,284 3,318 3,185 6,159 6,292
Comparable EBITDA, million 467 447 1,286 1,259 2,416 2,443
Operating profit, million 438 286 1,041 1,025 1,874 1,890
Comparable operating profit, million 298 284 948 938 1,752 1,762
Profit before taxes, million 388 238 947 893 1,586 1,640
Earnings per share 0.35 0.21 0.80 0.77 1.59 1.63
Items affecting comparability 0.12 0.00 0.08 0.10 0.14 0.12
Net cash from operating activities, million 400 319 1,046 872 1,382 1,556
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Highlights of the second quarter in 2013• Good operational performance
• Good availability - Nuclear performance improved - Lower hydro volumes
• Two efficient CHP plants inaugurated in Lithuania and Finland, solar investment in India and district heating investment in Estonia
• The future of the Inkoo (Finland) coal-fired power plant under assessment
• Efficiency programme progressed according to plan
• The assessment of the electricity distribution business continued
• Customers, sustainability and the well being and safety of our personnel are top priorities
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Market conditions in the second quarterNordic countries• Power consumption in the Nordic countries on last years level (86TWh)
• Normalisation of Nordic water reservoir levels
• Nordic system spot prices approx. 35% higher compared to Q2/2012
• Volatility around CO2-emission allowance prices continued during Q2 – backloading proposal finally approved in the European Parliament in July – final agreement
still needed before it can be executed
Russia• Power consumption in both the Tyumen area and the Chelyabinsk area increased
marginally
• Spot price for power (excluding capacity price) increased by approx. 13% compared to Q2/2012
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Nordic water reservoirs – normalisation from last years highs
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Source: Nord Pool Spot
2000 2003 2010 20122011 reference level2013
Q1 Q2 Q3 Q4
20
40
60
80
100
120
rese
rvoi
r con
tent
(TW
h)
0
Wholesale price for electricity
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Source: Nord Pool Spot, NASDAQ OMX Commodities Europe
7
0
10
20
30
40
50
60
70
80
90
100
110
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
EUR/MWh Nord Pool System Price Forwards
16 July 2013
Price development in the Nordic region and Russia
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Includes capacity income
+36%+9%
+6%+3%
Q2: Comparable operating profit increased YoY
9
Comparable operating profit, EUR million
January-June: Efficiency programme gives additional support
10
Comparable operating profit, EUR million
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Source: ICE
Market prices 16 July 2013; 2013-2014 future quotations
Fuel and CO2 allowance prices
020406080
100120140160
USD
/ bb
l
Crude oil price (ICE Brent)
2006 2007 20102008 2009 20122011 2013 201405
101520253035
EUR
/ tC
O2
CO2 price (ICE ECX EUA)
2006 2007 20102008 2009 20122011 2013 2014
04080
120160200240
USD
/ t
Coal price (ICE Rotterdam)
2006 2007 20102008 2009 20122011 2013 20140
20
40
60
80
100
GB
p / t
herm
Gas price (ICE NBP)
2006 2007 20102008 2009 20122011 2013 2014
Financials
Comparable and reported operating profit
II/2013 II/2012 II/2013 II/2012 I-II/2013 I-II/2012 I-II/2013 I-II/2012
Power 210 222 337 214 513 564 600 582
Heat 11 24 8 21 181 186 183 235
Russia 20 4 21 15 61 52 61 63
Distribution 60 51 61 52 197 161 197 169
Electricity Sales 13 11 26 11 28 20 31 22
Other -16 -28 -15 -27 -32 -45 -31 -46
Total 298 284 438 286 948 938 1,041 1,025
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Comparableoperating profit
Comparableoperating profit
Reportedoperating profit
Reportedoperating profitMEUR
• Non-recurring items, IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR 140 (2) million in the second quarter, EUR 93 (87) during the first half of the year.
Power
MEUR II/2013 II/2012 I-II/2013 I-II/2012 2012 LTM
Sales 547 535 1,211 1,190 2,415 2,436
Comparable operating profit 210 222 513 564 1,146 1,095
Net assets 6,374 6,199 6,389
Comparable RONA % 18.5 17.5
Gross investments 43 36 70 60 190 200
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Q2 2013• Slight decline in comparable operating profit
‒ increased nuclear and thermal volumes‒ higher achieved power price‒ lower hydro volumes
• Good overall nuclear availability
• Assessment of Inkoo coal-fired power plantstarted
H1 2013• Lower water reservoir levels and inflow
decreased hydro generation significantly
• Higher operating costs – partly offset bysavings of the efficiency programme
Heat
MEUR II/2013 II/2012 I-II/2013 I-II/2012 2012 LTM
Sales 283 321 912 946 1,628 1,594
Comparable operating profit 11 24 181 186 271 266
Net assets 4,144 4,027 4,286
Comparable RONA % 7.0 6.8
Gross investments 96 99 170 166 474 478
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Q2 2013• Lower comparable operating profit
‒ change in fuel inventories‒ lower heat volumes in Sweden‒ less income from electricity certificates sales
• Two efficient CHP plants inaugurated
H1 2013• Comparable operating profit impacted by lower
power sales price and change in fuel inventories.
• On-going investments proceeding well
Russia
MEUR II/2013 II/2012 I-II/2013 I-II/2012 2012 LTM
Sales 251 198 595 508 1,030 1,117
Comparable operating profit 20 4 61 52 68 77
Net assets 3,793 3,439 3,848
Comparable RONA % 2.7 3.3
Gross investments 98 126 169 207 568 530
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Q2 2013• Increased comparable operating profit
‒ the positive effect from CSA capacity totalled EUR 34 (17) million
‒ includes a CSA provision reversal of EUR 10 (0) million
H1 2013• Increased comparable operating profit
‒ lower heat volumes due to exceptionally warmwinter in Chelyabinsk and the divested heatnetwork during 2012 in Surgut
• Nyagan 1 commissioned 1 April 2013
• EUR 500 million in run-rate EBIT for RussiaDivision in 2015 restated
Distribution
MEUR II/2013 II/2012 I-II/2013 I-II/2012 2012 LTMSales 230 223 572 531 1,070 1,111
Comparable operating profit 60 51 197 161 320 356
Net assets 3,774 3,678 3,889
Comparable RONA % 8.8 9.5
Gross investments 61 79 111 123 324 312
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Q2 2013• Increased comparable operating profit
‒ increased amount of relocation of cables and parts of network
‒ cost savings‒ stronger SEK‒ storm costs impacted the comparison
period negatively
H1 2013• Strong comparable profit
‒ higher volumes‒ stronger SEK‒ increased amount of relocation of cables and
parts of network
• Rollout of smart metering continued
• The strategic assessment of the electricitydistribution business started
Electricity Sales
MEUR II/2013 II/2012 I-II/2013 I-II/2012 2012 LTMSales 153 135 415 382 722 755
Comparable operating profit 13 11 28 20 39 47
Net assets 19 22 51
Comparable RONA % 203.1 157.6
Gross investments 0 0 0 0 1 1
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Q2 2013• Good comparable operating profit
‒ increased customer base ‒ favourable wholesale market conditions‒ Sales Trading
H1 2013• Increased comparable operating profit
‒ cold weather in Q1‒ increased customer base‒ favourable wholesale market conditions‒ Sales Trading
Income statementMEUR II/2013 II/2012 I-II/2013 I-II/2012 2012 LTMSales 1,327 1,284 3,318 3,185 6,159 6,292
Expenses -1,029 -1,000 -2,370 -2,247 -4,407 -4,530
Comparable operating profit 298 284 948 938 1,752 1,762
Items affecting comparability 140 2 93 87 122 128
Operating profit 438 286 1,041 1,025 1,874 1,890
Share of profit of associates and jv’s 33 26 62 19 23 66
Financial expenses, net -83 -74 -156 -151 -311 -316
Profit before taxes 388 238 947 893 1,586 1,640
Income tax expense -74 -47 -181 -166 -74 -89
Net profit for the period 314 191 766 727 1,512 1,551
Non-controlling interests 0 4 51 43 96 104
EPS, basic (EUR) 0.35 0.21 0.80 0.77 1.59 1.63
EPS, diluted (euroa) 0.35 0.21 0.80 0.77 1.59 1.63
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Cash flow statementMEUR II/2013 II/2012 I-II/2013 I-II/2012 2012 LTM
Operating profit before depreciations 617 449 1 389 1 346 2 538 2 581
Non-cash flow items and divesting activities -188 -18 -161 -119 -192 -234
Financial items and fx gains/losses -131 -132 -347 -274 -522 -595
Taxes -58 -89 -82 -167 -269 -184
Funds from operations (FFO) 240 210 799 786 1 555 1 568
Change in working capital 160 109 247 86 -173 -12
Total net cash from operating activities 400 319 1 046 872 1 382 1 556
Paid capital expenditures -260 -305 -547 -577 -1 422 -1 392
Acquisition of shares -11 -3 -12 -3 -14 -23
Other investing activities -10 32 33 287 308 54
Cash flow before financing activities 119 43 520 579 254 195
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Key ratios
MEUR LTM 2012 2011EBITDA 2,581 2,538 3,008Comparable EBITDA 2,443 2,416 2,374Interest-bearing net debt *8,035 7,814 7,023Comparable net debt/EBITDA 3.3 3.2 3.0
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Return on capital employed, ROCE (%) 10.5 10.2 14.8Return on shareholders’ equity, ROE (%) 15.4 14.6 19.7
Good liquidity – committed credit lines total EUR 2.2 billion
*30.6.2013
Fortum's efficiency programme 2013-2014
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SPEED - Cash flow improved by EUR 1 billion - FLEXIBILITY
CAPEXEUR 250-350 million
DIVESTMENTSEUR 500 million
WORKING CAPITALReduction
FIXED COSTS Reduce EUR 150 million compared to 2012
WHY WHAT WHEN2013-2014
• Efficiency programme proceeding well according to plan• Cost savings• Divestments
0
250
500
750
1000
1250
1500
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023+
Bonds Financial institutions Other long-term debt CPs Other short-term debt
MEUR
2013 760
2014 1.274
2015 1.095
2016 881
2017 584
2018 667
2019 841
2020 74
2021 576
2022 971
2023+
TOTAL
1.340
9.063
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per 30 Jun, 2013 per 31 Dec, 2012Average Interest Rate (incl. swaps and forwards) 3.9 % 4.5 %Portion of floating / fixed debt 54 / 46 % 45 / 55 %
Debt Maturity Profile
Outlook
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Outlook
Nordic markets‒ Annual electricity demand growth estimated to be on average 0.5%‒ Electricity continues to gain share of total energy consumption
Russia‒ Fortum’s goal is to achieve an operating profit level (EBIT) of about EUR 500 million run-
rate in its Russia Division during 2015
Key drivers and risks‒ Wholesale price of electricity and volumes
• demand and supply • fuels • hydrological situation • power plant availability• CO2 emissions allowance prices
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OutlookAnnual capex estimate excluding potential acquisitions
– 2013 EUR 1.1 to 1.4 billion– 2014 EUR 0.9 to 1.1 billion
Hedging– Rest of 2013 approximately 75% hedge ratio at approximately EUR 45/MWh
(Q1: 80% at EUR 45/MWh)– 2014 approximately 50% hedge ratio at approximately EUR 42/MWh
(Q1: 45% at EUR 42/MWh)
Target for efficiency programme is to improve cash flow by EUR 1 billion during 2013-2014
Taxation– Effective tax rate for the Group 19-21%
• In Finland, corporate tax rate to be reduced from 24.5% to 20% starting 1 January 2014. The decrease would cause a one-time positive effect that would be booked in the fourth quarter 2013.
– Update of real estate taxation values is ongoing in Sweden and is expected to be finalised during the third quarter 2013. The proposal would increase Fortum’s costs by approximately EUR 40 million in 2013 compared to 2012.
– The Finnish Government have announced that a so-called windfall tax, to be introduced in 2014, will be cut to EUR 50 million from EUR 170 million.
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For more informationwww.fortum.com/investors
Q & AConference call19.7.2013