FORTUMapps.fortum.fi/gallery/Fortum_investor_material_February_2014.pdf · Nr 3 Power generation...
Transcript of FORTUMapps.fortum.fi/gallery/Fortum_investor_material_February_2014.pdf · Nr 3 Power generation...
FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics
Investor / Analyst material
February 2014
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.
Content
3
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 33
Data on Fortum’s nuclear fleet, pages 34 - 38
Russia, pages 40 - 46
Data on capacity payments, pages 42 - 44
Fortum’s investment programme, page 46
Financials and outlook, pages 48 – 54
Hedges, pages 54 - 55
More than 130,000 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 OMX Helsinki stock exchange
• Market cap ~14 billion euros
4
31.1.2014
Foreign investors 26.3% Finnish State 50.8%
Other Finnish investors 9.4%
Households 10.8%
Financial and insurance institutions 2.7%
Capital returns / Dividend for 2013 EUR 1.10* ~ EUR 1.0 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
5 year dividend per share (EUR) history
• Fortum Corporation'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 ~10,493 MEUR
* Proposed dividend, AGM to be held 8 April 2014
1,00 1,00 1,00 1,00
1,10*
200968%
201068%
201150%
201263%
201380%
Fortum Executive Management as of 1st March 2014
6 Country responsibles: Timo Karttinen/Finland, Norway; Per Langer/Sweden;
Alexander Chuvaev/Russia; Markus Rauramo/Poland, Baltics, India
Business Divisions
President and CEO
Tapio Kuula
Heat, Electricity
Sales and Solutions
Executive Vice
President
Markus Rauramo
Human Resources and IT
Senior Vice President
Mikael Frisk
Finance
CFO
Timo Karttinen
Strategy and M&A
Senior Vice President
Kari Kautinen
Communications
Senior Vice President
Helena Aatinen
Corporate Relations
Senior Vice President
Esa Hyvärinen
Legal
General Counsel
Kaarina Ståhlberg
Corporate Functions
COO
Matti Ruotsala
Distribution
Executive Vice
President
Timo Karttinen
Russia
Executive Vice
President
Alexander Chuvaev
Nuclear and Thermal
Power
Executive Vice
President
Tiina Tuomela
Hydro Power and
Technology
Executive Vice
President
Per Langer
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
Our geographical presence today
8
TGC-1 (~25%)
Power generation ~7 TWh
Heat sales ~8 TWh
OAO Fortum
Power generation 20.0 TWh
Heat sales 24.2 TWh
Russia
Poland Power generation 0.6 TWh
Heat sales 4.0 TWh
Baltic countries Power generation 0.5 TWh
Heat sales 1.1 TWh
Nordic countries
Power generation 46.5 TWh
Heat sales 13.9 TWh
Distribution customers 1.6 million
Electricity customers 1.2 million
Nr 3 Power
generation
Electricity
sales
Nr 2
Nr 1 Heat
Distribution
Nr 1
Key figures 2013 Sales EUR 6.1 bn
Operating profit EUR 1.7 bn
Balance sheet EUR 24 bn
Personnel 9,900
Great Britain Power generation 1.0 TWh
Heat sales 1.8 TWh
Divisions of Fortum
9
Power Division
Fortum’s power generation,
physical operation and
trading as well as expert
services for power
producers.
Heat Division
Combined heat and power
generation, district heating
and cooling activities and
b- to-b heating solutions.
Electricity Solutions and
Distribution Division
Fortum's electricity sales and
distribution activities. Two
business areas: Distribution
and Electricity Sales.
Russia Division
Power and heat generation
and sales in Russia. It
includes OAO Fortum and
Fortum’s slightly over 25%
holding in TGC-1.
Business
description
Comparable
operating
profit
Net assets
Volume
(TWh)
Drivers
EUR 858 million
Distr.: EUR 3,770 million
El. sales: EUR 39 million
EUR 3,846 million
EUR 273 million Distr.: EUR 331 million
El. sales: EUR 48 million
EUR 156 million
Distr.net. 26.1, reg.net. 16.3
El.sales: 12.1 Sales Trading 1.5
Heat sales 19.0
Power sales: 4.8 Nordic generation 43.7
EUR 6,329 million EUR 4,283 million
Fuel mix, heat and
power price
Nordic power price,
generation volumes New capacity, and price for
that, power and heat price
Power sales.: 25.6
Heat sales.: 24.1
Distr.: Regulated
El. sales: Sales margin
10
Fortum mid-sized European power generation player; major producer in global heat
* incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9, **** incl. TGC-12, TGC-13; ***** figure 2011
Source: Company information, Fortum analyses, 2012 figures pro forma, heat production of Beijing DH not available.
Largest global producers, 2012 TWh
Largest producers in Europe and Russia, 2012 TWh
Power generation Heat production
Electricity customers in EU, 2012 Millions
Customers
DEI
EuroSibEnergo Iberdrola
Fortum
EnBW
Vattenfall
CEZ
RWE
***) IES
DTEK PGE
Rosenergoatom
NNEGC Energoat.
Enel E.ON EDF
GDF SUEZ
Statkraft
Gazprom *)
RusHydro Inter RAO UES **)
0 100 200 300 400 500 600
KDHC, Korea
Quadra
Tatenergo
Minskenergo
DTEK, Ukraine
EuroSibEnergo
TGC-2
Fortum
Dong Energy
TGC-14
Lukoil
Sibgenco ****)
***) IES
Vattenfall
PGNiG
Inter RAO UES **)
ELCEN. *****)
RusHydro
Dalkia
Gazprom *)
0 20 40 60 80 100 120 140
GDF SUEZ
DEI
CEZ
Enel
Centrica
EDP
Iberdrola
SSE
EnBW
Fortum
EDF
E.ON
RWE
Gas Natural Fenosa
PGE Tauron
Hafslund
Dong Energy
Vattenfall
0 20 40 10 30
Biggest nuclear and hydro generators in Europe and Russia
11
TWh E
DF
Rosenerg
oato
m
E.O
N
NN
EG
C E
nerg
oato
m
Enel
RusH
ydro
Vattenfa
ll
GD
F S
UE
Z
Irkuts
kenerg
o
Sta
tkra
ft
RW
E
Iberd
rola
Fo
rtu
m
EnB
W
CE
Z
Verb
und
Kra
snoyars
kaya
HP
P
Axpo
Hid
roele
ctr
ica
ED
P
Gazpro
m
Alp
iq
Ukrh
ydro
energ
o
EP
S, S
erb
ia
Gas N
atu
ral F
enosa
E-C
O E
nerg
i
Nors
k H
ydro
DE
I
Agder
Energ
i
Edis
on
BK
K
Inte
r R
AO
UE
S
SS
E
PG
E
IES
0
50
100
150
200
250
300
350
400
450
500
550
600
Total generation
Other
Nuclear
Hydro
Figures 2010 pro forma
Fortum's carbon exposure among the lowest in Europe
12
Note: Only European generation except “Fortum total“ which includes Russia.
Source:
PWC & Enerpresse, November 2013
Climate Change and Electricity, Fortum
0
200
400
600
800
1000
1200
DE
I
Dra
x
RW
E
SS
E
ED
P
E.O
N
Vatt
en
fall
Enel
Edip
ow
er
Un
ion
Feno
sa
CE
Z
EnB
W
GD
F S
UE
Z
Do
ng
En
erg
y
Iberd
rola
Fort
um
tota
l
ED
F
Verb
und
Fort
um
EU
PV
O
Sta
tkra
ft
42
g CO2/kWh electricity, 2012
2012
68% of Fortum's total power generation CO2-free
93% of Fortum’s power generation in the EU CO2-free
Close to 100% of the ongoing investment programme
in the EU CO2-free
Average 350 g/kWh
171
Fortum’s strategic route
13
Divestment of
non-strategic
heat business
Länsivoima
→100% E.ON Finland
Separation of
oil businesses
Elnova
50%→100%
District heat
in Poland 2003 →
Østfold
Shares in
Hafslund
Shares in
Lenenergo
Starting
TGC-1
Divestment of
Lenenergo
shares
TGC-10
Divestment of
Fingrid shares
Divestment of
heat operations
outside of
Stockholm
2008 2005 2006 2007 2002 2003 2004 1999 2000 2001 1996 1998 2009 2010 2011
Länsivoima
45% → 65%
2012
Stockholm
Energi
Gullspång
Birka Energi 50% Fortum
50% Stockholm
Gullspång
Skandinaviska
Elverk
Birka Energi
50% → 100%
Stora
Kraft
Lenenergo
shares 1998→
IVO
1997
Neste
Divestment
of small
scale hydro
14
Fortum in the Nordic electricity value chain
Competitive businesses
Regulated businesses
Power generation
Nordic wholesale market
Power exchange and
bilateral agreements
Large customers
Retail customers
Private customers, small businesses
Independent transmission system
operator
Independent distribution companies
Distribution Transmission and
system services
Fortum's total power and heat production by source
15
Natural gas 29%
Nuclear power
35%
Coal 7%
Biomass 2%
Total generation 68.7 TWh
(Generation capacity 15,128 MW)
Hydro power 26%
Fortum's power generation
in 2013
Other 1%
Total production 42.8 TWh
(Production capacity 21,659 MW)
Fortum's heat production
in 2013
Oil 1%
Waste 5%
Heat pumps, electricity 7%
Peat 1%
Biomass
12%
Natural gas
61%
Coal 13%
Nuclear power
48%
Coal 7%
Other 2%
Hydro power 37%
Natural gas 3%
European generation 48.7 TWh
(Generation capacity 10,873 MW)
Fortum's European
power generation in 2013
Biomass 3%
European production 18.6 TWh
(Production capacity 8,193 MW)
Fortum's European
heat production in 2013
Peat 2% Oil 1%
Heat pumps, electricity
16%
Waste 12%
Coal
22%
Natural gas 19%
Biomass
28%
Fortum's European power and heat production
16
Fortum a forerunner in sustainability
• Carbon Disclosure Nordic Leadership Index
– Fortum no. 1, scores 100/100
• SAM Sustainability Yearbook
• STOXX® Global ESG Leaders indices
• oekom
• OMX GES Sustainability Finland Index
• Storebrand SRI
• ECPI® Indices
17
European and Nordic power markets
18
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 33
Data on Fortum’s nuclear fleet, pages 34 - 38
Russia, pages 40 - 46
Data on capacity payments, pages 42 - 44
Fortum’s investment programme, page 46
Financials and outlook, pages 48 – 54
Hedges, pages 54 - 55
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
• NorNed cable (NO-NL) included in January 2011
• Poland coupled with Nord Pool Spot since December 2010
• UK coupling started through BritNed cable in April 2011
• Czech, Slovakia and Hungary coupled since September 2012
• Estonian price area in Nord Pool Spot since April 2010, Lithuanian bidding area from 6/2012. Latvia joined in June 2013, with the whole Baltic market now in Nord Pool Spot
• A common day-ahead market coupling for the whole north-western Europe started 4 February 2014
• Most other EU regions and Switzerland are preparing to join during 2014
• In addition to day-ahead coupling, intraday market coupling and balancing market integration targeted as well
• EU’s European Target Model for cross-border power trading sets 2014 as deadline for an EU-wide market coupling
19
2009
February
2014
2012
2010-
2013
2014
Current transmission capacity from Nordic area to Continental Europe is over 4000 MW
20
Countries Transmission capacity MW
From Nordics To Nordics
Denmark - Germany 2,365 2,100
Sweden - Germany 615 600
Sweden - Poland 600 600
Norway - Netherlands 700 700
Total 4,280 4,000
• Theoretical maximum in transmission capacity ~35 TWh
per annum
• Net export from Nordic area to Continental Europe
during the Nordic dry year 2013 was 2 TWh
• During 2012 net export was 17 TWh
• Approximately 20 TWh of net export is now reachable
700
2,365 615 600
860
Nordic and Continental markets are integrating – interconnection capacity will double by 2020
21
NO-UK link of 1,400 MW agreed to
be built by 2020; North Seas
Countries’ Offshore Grid Initiative
launched for supergrid development
First direct 1,400 MW NO-DE link
agreed to be built by 2018
EU financial support for a 700 MW
DK-NL link, due to be built by 2019
Jutland – DE capacity planned to
grow by 1,000-1,500 MW by 2018
EU support to connect Kriegers
Flak offshore wind area to DK&DE
by 2018
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 capacity to
over 8,000 MW by 2020
LitPol Link (500+500 MW) to
connect the Baltic market to
Poland in 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 Estlink 2
(2014) and NordBalt (2015)
New internal Nordic and Baltic grid
investments provide for increased
available capacity for export to the
Continent and Baltics
Svenska Kraftnät is studying an
extension of the South West DC
Link from Sweden to Germany
350 MW of export capacity from
Finland to Russia due to become
available from April 2014
Nordic water reservoirs
22
Source: Nord Pool Spot
Q1 Q2 Q3 Q4
20
40
60
80
100
120
rese
rvo
ir c
on
ten
t (T
Wh
)
0
2000 2003 2013 2012 reference level 2014
Q4 deficit turned to surplus Higher than normal precipitation and lower than normal demand during Q4 refilled reservoirs
23
25
30
35
40
45
50
55
-15
-10
-5
0
5
10
15
Q4/12 Q1/13 Q2/13 Q3/13 Q4/13
EUR
/MW
h
TWh
fro
m n
orm
al
Reservoir deficit compared to normal
Norway reservoir balance Sweden reservoir balance Finland reservoir balance System price
Fortum Q4/2013
Hydro production
3.9 TWh
Fortum Q4/2012
Hydro production
7.1 TWh
Nordic year forwards
24
Source: NASDAQ OMX Commodities Europe
Year 15 Year 17 Year 19 Year 10 Year 11 Year 12 Year 13 Year 14 Year 16 Year 18
0
10
20
30
40
50
60
70
3 February 2014 €/MWh
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
2014
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
3 February 2014
Wholesale price for electricity
25
Source: Nord Pool Spot, NASDAQ OMX Commodities Europe
25
Wholesale prices for electricity
26
Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, APX-ENDEX, Bloomberg Finance LP, ATS, NP “Market Council”, Fortum
* Including weighted average capacity price
10
20
30
40
50
60
70
80
90
100
110
2008 2009 2010 2011 2012 2013 2014 2015
Dutch
German
Nordic
Russian*
Spot prices Forward prices EUR/MWh
3 February 2014
2016 0
0
30
60
90
120
150
US
D /
bb
l
Crude oil price (ICE Brent)
2006 2007 20102008 2009 20122011 2013 2014 20150
7
14
21
28
35
EU
R /
tC
O2
CO2 price (ICE ECX EUA)
2006 2007 20102008 2009 20122011 2013 2014 2015
0
50
100
150
200
250
US
D /
t
Coal price (ICE Rotterdam)
2006 2007 20102008 2009 20122011 2013 2014 20150
20
40
60
80
100
GB
p /
th
erm
Gas price (ICE NBP)
2006 2007 20102008 2009 20122011 2013 2014 2015
27
Source: ICE
Market prices 3 February 2014; 2014-2015 future quotations
Fuel and CO2 allowance prices
Nordic power generation – dominated by hydro, but fossil needed
28
Source: ENTSO-E Memo 2012 *) 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
Wind
Hydro *
TWh/a
Total Nordic generation
406 TWh in 2012
Net import in 2012: -14 TWh
24
83
TWh %
43
237
19
6
21
10
58
5
29
Fortum’s Nordic generation capacity
SE1
SE2
SE3
SE4
MW Finland
Wind 3
Hydro 1 499
Nuclear 1 460
CHP 703
Other thermal 1 388
5 053
Generation capacity
in Finland
1 685
4 665
Other thermal
Hydro
Nuclear
CHP
3 247
Wind 17
Nordic capacity 10 929
1 315
Nordic MW
At the end of Q3 2012
Price areas MW
SE2 1 557
Hydro 1 543
Wind 14
SE3 4 022
Hydro 1623
Nuclear 1 787
CHP 612
Other thermal 297
SE4
Sweden
5 876
Generation capacity
in Sweden
Still a highly fragmented Nordic power market
30
Power generation
406 TWh
>350 companies
Electricity distribution
15 million customers
~500 companies
Electricity retail
15 million customers
~350 companies
Vattenfall
33%
Statkraft
Dong Energy
Others
Fortum
E.ON PVO E-CO Energi
Agder Energi
Norsk Hydro
BKK
Fortum
Vattenfall
Others
E.ON
54%
SEAS-NVE
Hafslund
Helsinki
Göteborg
Syd Energi
Dong Energy
Elenia
Others
52%
E.ON
Vattenfall
Fortum
Dong Energy
Göteborg, DinEl
SEAS-NVE
Hafslund
Helsinki
Statkraft
Bixia
Source: Fortum, company data, shares of the largest actors, pro forma 2012 figures.
New power generation capacity needed for increasing demand and retiring capacity replacements
31
• 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, ~6 000 GW of new
capacity needed by 2035
Source: IEA WEO 2013 (New polices scenario) 1) Total new capacity needed for increasing demand and replacements of retiring capacity
377
234
611
530
340
870
149
73
222
205
1328
1533
68
649
717
612
1487
2099
1941
4111
6052 New capacity, total (1
Capacity changes, 2013-2035 (GW)
Retiring capacity
US Europe Russia China India Other
areas
World
total
0%
50%
100%
150%
200%
250%
16%
44%
110%
221% Growth, 2011-2035
Primary energy demand
Electricity generation
Capacity increase
New capacity will require over 60 EUR/MWh power price
32
Estimated lifetime average cost in nominal 2014 terms.
Large variations in cost of new hydro and wind due to location and conditions.
Gas Nuclear Hydro Wind Clean coal
EUR/MWh
0
10
20
30
40
50
60
70
80
90
100
110
Other costs ( variation)
CO2 cost
Coal 0
10
20
30
40
50
60
70
80
90
100
110
Source: Nord Pool spot, NASDAQ OMX Commodities Europe
EUR/MWh
Futures
3 February 2014
1995 2013 2024
Fortum’s investment programme – Nordic region and Baltic countries
33
Already commissioned in 2013
Blaiken, Sweden, wind power 30 Q1 2013
Klaipeda, Lithuania, waste CHP 20 60 Q2 2013
Järvenpää, Finland, biomass CHP 23 63 Q2 2013
Jelgava, Latvia, biomass CHP 23 45 Q2 2013
Brista, Sweden, waste CHP 20 57 Q4 2013
Additional electricity capacity around 830 MW, 100% CO2-free
Project Electricity, MW Heat, MW Commissioned
Olkiluoto 3, Finland 400
Swedish nuclear upgrades 290
Refurbishing of hydro power 10 Annually
Värtan, Sweden, biomass CHP 130 280 Q2 2016
Total ~ 830 ~ 280
Overview of Fortum’s nuclear fleet
34
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
35
• 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
Osakarshamn 1 80 51 63 85 68 77 72 1 13
Oskarshamn 2 90 78 76 86 75 90 77 81 33
Oskarshamn 3 85 95 88 70 17 31 75 69 77
Forsmarks 1 85 76 81 81 88 93 79 88 87
Forsmark 2 94 72 85 79 64 39 94 82 89
Forsmark 3 95 92 88 69 86 81 85 93 88
Loviisa 1 95 93 94 86 96 93 94 84 92
Loviisa 2 95 88 96 93 95 89 94 91 93
Olkiluoto 1 98 94 97 94 97 92 94 90 97
Olkiluoto 2 94 97 94 97 95 95 90 96 93
Variety of technologies and ages
36
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
233
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
37
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€
Has been approved by the Parliament.
In force 1.1.2012 onwards.
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
Nuclear upgrades in Sweden
38
Reactor
OKG 1
Completion
-
Increase 100% (MW)
0
Fortum's capacity increase
(MW)
Additional generation for Fortum
(TWh/a)
Fortum's capacity
after increase
(MW)
Fortum's generation
after increase
(TWh/a)
- 205 ~2
OKG 2 2009, 2015 30 + 180 95 355 ~3
OKG 3 2011 255 110 607 ~5
FKA 1 Decision 2014 120 ~25 257 ~2
FKA 2 2013 120 25 259 ~2
FKA 3 Decision 2014 170 ~35 270 ~2
Total ~290 ~2 ~1,950* ~15
Capacity increase and completion timetable based on recent estimate (Nord Pool).
*At 31.12.2013 Fortum's share of Swedish nuclear capacity was 1,817 MW.
Russia
39
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 33
Data on Fortum’s nuclear fleet, pages 34 - 38
Russia, pages 40 - 46
Data on capacity payments, pages 42 - 44
Fortum’s investment programme, page 45
Financials and outlook, pages 48 – 54
Hedges, pages 54 - 55
Russia is the World’s 4th largest power market
40
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
TWh
5,000
Power generation in 2012 based on gross output.
Source: BP Statistical Review of World Energy June 2013
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
• 20 TWh power generation, 24 TWh heat production in 2013;
more than Fortum’s Nordic heat sales (14 TWh)
• Investment programme to add 85%, almost 2,400 MW to power
generation capacity
TGC-1
• Slightly over 25% of territorial generating company TGC-1 operating in
north-west Russia
• ~6,800 MW electricity production capacity (more than 40% hydro),
~28 TWh electricity, ~31 TWh heat in 2012
41
OAO Fortum
Tyumen
Tobolsk
Chelyabinsk
Nyagan
TGC-1
St. Petersburg
Moscow
42
Day ahead wholesale market prices – increase driven by recovering demand and gas price
2
Key electricity, capacity and gas prices in the OAO Fortum area
IV13 IV/12 2013 2012
Electricity spot price (market
price), Urals hub, RUB/MWh
1,043 973 1,021 956
Average regulated gas price,
Urals region, RUB 1000 m3
3,423 2,924 3,131 2,736
Average capacity price for
CCS ”old capacity”,
tRUB/MW/month
181 168 163 152
Average capacity price for
CSA ”new capacity”,
tRUB/MW/month
635 627 576 539
Average capacity price,
tRUB/MW/month
326 254 276 227
Achieved power price for
OAO Fortum, EUR/MWh 33.3 30.9 32.1 30.6
0
5
10
15
20
25
30
35
40
€/
MW
h
Day ahead power market prices for Urals
In addition to the power price generators receive a capacity payment.
Source: ATS
2008 2009 2010 2011 2012 2013 2014
Power market liberalisation – two markets
43
Capacity wholesale market Electricity wholesale market
Capacity prices
• Competitive capacity selection (CCS) and free bilateral
agreements (FBA)
• A higher, fixed capacity price for new
capacity (CSA* agreements, built after 2007)
• Lower capacity price for old capacity, price caps limits the price in
some areas
• Old capacity intended for households are priced by regulated
bilateral agreements (RBA)
Electricity prices
• Day ahead (spot) market, financial market, free bilateral
agreements (FBA) and regulated bilateral agreements (RBA)
• Fully liberalised from 1 Jan 2011 except for volumes intended for
households priced by RBA (~10% of volume)
* Capacity supply agreement
•CSA is the intended mechanism for earning a (reasonable) return on invested capital in new capacity
•Capacity prices are a big part of a power generator’s income
– a typical CHP plant ~35%, CCGT ~55%, of revenues
•In the day ahead (spot) market, the price mechanism is a day ahead hourly auction. Supply – demand balance and
variable cost (fuel) are the key drivers for the spot price
•Financial market for electricity started in June, 2010
44
Capacity prices for new capacity considerably higher than prices for old capacity prices
• Long term rules and price parameters approved
• Both “old” and “new” capacity can participate in capacity auctions
• Old capacity (pre 2007) and new capacity priced differently – Old capacity is priced by capacity auctions; price cap possibility
– New capacity under capacity supply agreements to receive guaranteed payments
• The payments for new capacity are based on approved pricing formulas – Vary according to plant size, fuel, geographic location, capital costs
– Allow the recovery of capital costs and include return on invested capital; the targeted ROCE level 12-14% (with current government benchmark bond yields)
– After three years (2014), the regulator will review the earnings from the electricity-only market and can revise the payments, same goes after 6 years.
• “Old” capacity prices will depend on auction outcomes, but will likely
remain relatively low; potentially price caps could limit the price
Key factors behind the profitability improvement in Russia
45
Efficiency improvement programme 2008-2011
– Increasing heat production profitability
– Fuel efficiency improvement
– Cost savings
New CSA capacity commissioning 2011-2015
– Additional capacity 2,388 MW; +85%
– Capacity is sold at CSA (Capacity Supply
Agreement) contracts with guaranteed higher price
Pace of new capacity increase of Fortum investment programme in Russia
2011 - 638 MW
2012 - 0 MW
2013 - 836 MW
2014 - 418 MW
2015 - 496 MW
Total - 2,388 MW
85% increase in power generation capacity in Russia by 2015 through the investment programme
46
Financials and outlook
47
Fortum today, pages 4 -17
European and Nordic power markets, pages 19 - 33
Data on Fortum’s nuclear fleet, pages 34 - 38
Russia, pages 40 - 46
Data on capacity payments, pages 42 - 44
Fortum’s investment programme, page 46
Financials and outlook, pages 48 – 54
Hedges, pages 54 - 55
Income statement
MEUR IV/2013 IV/2012 2013 2012
Sales 1,590 1,834 6,056 6,159
Other income and expenses -1,097 -1,243 -4,449 -4,407
Comparable operating profit 493 591 1,607 1,752
Items affecting comparability 81 32 105 122
Operating profit 574 623 1,712 1,874
Share of profit of associates and jv’s 39 -3 105 23
Financial expenses, net -84 -77 -318 -311
Profit before taxes 529 543 1,499 1,586
Income tax expense -43 122 -220 -74
Net profit for the period 486 665 1,279 1,512
Non-controlling interests 28 59 75 96
EPS, basic (EUR) 0.52 0.68 1.36 1.59
EPS, diluted (EUR) 0.52 0.68 1.36 1.59
48
Comparable and reported operating profit
IV/2013 IV/2012 IV/2013 IV/2012 2013 2012 2013 2012
Power 207 381 278 388 858 1,146 921 1,175
Heat 106 94 108 119 273 271 288 344
Russia 110 28 110 28 156 68 156 79
Distribution 77 102 76 104 331 320 348 331
Electricity Sales 7 10 11 6 48 39 56 39
Other -14 -24 -9 -22 -59 -92 -57 -94
Total 493 591 574 623 1,607 1,752 1,712 1,874
49
Comparable
operating profit
Comparable
operating profit
Reported
operating profit
Reported
operating profit MEUR
• Non-recurring items, IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR 81 (32) million in the fourth quarter, EUR 105 (122) during 2013.
Cash flow statement
MEUR IV/2013 IV/2012 2013 2012
Operating profit before depreciations 768 799 2,452 2,538
Non-cash flow items and divesting activities -156 -36 -260 -192
Financial items and fx gains/losses 33 -87 -250 -522
Taxes -71 -17 -229 -269
Funds from operations (FFO) 574 659 1,713 1,555
Change in working capital -198 -260 123 -173
Total net cash from operating activities 376 399 1,836 1,382
Paid capital expenditures -394 -503 -1,271 -1,422
Acquisition of shares -3 -11 -15 -14
Other investing activities -23 24 76 308
Cash flow before financing activities -44 -91 626 254
50
Key ratios
MEUR 2013 2012
EBITDA 2,452 2,538
Comparable EBITDA 2,299 2,416
Interest-bearing net debt 7,849 7,814
Comparable net debt/EBITDA 3.4 3.2
51
Return on capital employed, ROCE (%) 9.2 10.2
Return on shareholders’ equity, ROE (%) 12.0 14.6
Good liquidity – committed credit lines total EUR 2.2 billion
Debt Maturity Profile
0
250
500
750
1000
1250
1500
1750
2000
2250
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024+
Bonds Financial institutions Other long-term debt CPs Other short-term debt
MEUR
2014 2,142
2015 1,088
2016 884
2017 580
2018 668
2019 833
2020 77
2021 551
2022 971
2023 116
2024+
TOTAL
1,208
9,118
52
per 31 Dec, 2013 per 31 Dec, 2012
Average Interest Rate (incl. swaps and forwards) 3.6 % 4.5 %
Portion of floating / fixed debt 51 / 49 % 45 / 55 %
Outlook
• Nordic markets
‒ Fortum continues to expect that the annual electricity demand growth will average 0.5% in the coming years
‒ 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
53
Outlook
• Annual capex estimate excluding potential acquisitions – 2014 EUR 0.9 to 1.1 billion (incl. Finnish distribution Q1/2014, excluding Värme)
• Hedging – Year 2014 approximately 60% hedge ratio at approximately EUR 43/MWh
(Q3: 65% at EUR 42/MWh)
– 2015 approximately 20% hedge ratio at approximately EUR 41/MWh
(Q3: 20% at EUR 41/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, the corporate tax rate to be reduced from 24.5% to 20% starting 1 January 2014
– A power plant tax was approved in December 2013. The tax will be enacted later and it will be applied from the beginning of 2014, provided that the EU Commission approves it. Fortum has filed a complaint. If implemented, the estimated impact on Fortum would be approximately EUR 25 million annually.
54
Hedging improves stability and predictability
55
0
10
20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Achieved power price Spot price, SE&FI avg.
EUR/MWh
2009 onwards thermal and import from Russia excluded
Efficiency programme launched to maintain and strengthen the strategic flexibility and competitiveness
56
"The core of our activities is to fulfill our strategy of long-term
business operations, the aim of which is to strengthen our Nordic
core business, create solid earnings growth in Russia and build a
platform for future growth"
• Efficiency programme half way through
• proceeding according to plan
• Total annual cost savings visible in all divisions
• Improved working capital efficiency
• Divestments of non-core assets totalling approximately EUR 300
million
Fortum's efficiency programme 2013-2014
57
SPEED - Cash flow improved by EUR 1 billion – FLEXIBILITY
CAPEX EUR 250-350 million
DIVESTMENTS EUR 500 million
WORKING CAPITAL
Reduction
FIXED COSTS
Reduce EUR 150 million compared to 2012
WHY WHAT WHEN
2013-2014
Facts of Distribution
MEUR Fortum’s distribution
segment 2013 without
Finnish operations
Operating profit 271
Comparable operating profit 258
Comparable EBITDA 410
Net assets (at period-end) 2,950
Comparable RONA % 8.7
Capital expenditure 134
Number of employees 515
58
Fortum Distribution (2013) • Customers: 1.6 million
• Length of network: ~156,000 km
• Nr of employees: ~ 850
• Sales: 1,075 MEUR
• Comparable operating profit: 331 MEUR
• Comparable EBITDA: 550 MEUR
• Net assets: 3,770 MEUR
January 2013:
Strategic assessment
commenced
December 2013:
Assessment has been
completed, divestment the
best alternative
– Evaluation of divestment
opportunities country by
country
Closing by the end of
Q1/2014:
Divestment of Distribution
Finland
Ongoing:
Evaluation of divestment
opportunities country by
country