Power generation
Transcription
Power generation
FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics Investor / Analyst material May 2015 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 Content Fortum today pages 4 – 17 European and Nordic power markets Fortum’s nuclear fleet pages 18 – 29 pages 30 – 33 Russia pages 34 – 39 Capacity payments pages 37 – 38 Fortum’s investment programme page 39 Financials and outlook Hedging Distribution business 3 pages 40 – 45 pages 46 page 47 Appr. 110,000 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 ~16 billion euros Households 8.7% Financial and insurance institutions 2.3% Other Finnish investors 8.1% Finnish State 50.8% 30 April 2015 4 Foreign investors 30.1% 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 year dividend per share (EUR) history 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 1.3* 1.1 1.0 1.0 0.2 1.0 1.1 Fortum has since 1998 annually paid dividends in total ~11,648 MEUR 2010 68% 2011 50% 2012 63% 2013 81% 2014 37% * A dividend of EUR 1.10 per share, and an extra dividend of EUR 0.20 per share. 5 Fortum Executive Management as of 1st February 2015 Business divisions On 2 April 2015, Mr. Pekka Lundmark, was appointed President and CEO of Fortum Corporation. He will start at Fortum at the beginning of September 2015. Interim President and CEO Timo Karttinen Corporate staff functions Finance Chief Financial Officer Timo Karttinen Human Resources and IT Senior Vice President Mikael Frisk Strategy and M&A Senior Vice President Kari Kautinen Communications Senior Vice President Helena Aatinen Legal General Counsel Sirpa-Helena Sormunen Corporate Relations Senior Vice President Esa Hyvärinen Chief Operating Officer Matti Ruotsala Hydro Power and Technology Executive Vice President Per Langer 6 Nuclear and Thermal Power Executive Vice President Tiina Tuomela Heat, Electricity Sales and Solutions Executive Vice President Markus Rauramo Russia Executive Vice President Alexander Chuvaev Country responsibles: Timo Karttinen/Finland, Norway; Per Langer/Sweden; Alexander Chuvaev/Russia; Markus Rauramo/Poland, Baltics, India Distribution Executive Vice President Timo Karttinen Fortum’s Mission and Strategy Mission 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. Strategy 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 7 Our current geographical presence Power generation Nordic countries Heat Heat sales Electricity sales Distribution Key figures 2014 Power generation Electricity customers 48.0 TWh 3.3 TWh 1.3 million Russia Distribution customers in Sweden 0.9 million Distribution expected to be divested during Q2/2015 8 Sales EUR 4.1 bn Comparable operating profit EUR 1.1 bn Balance sheet EUR 21 bn Personnel 8,200 OAO Fortum Power generation Heat sales Poland Baltic countries India Power generation 0.7 TWh Heat sales 3.4 TWh Power generation Heat sales Power generation 0.7 TWh 1.2 TWh 23.3 TWh 26.0 TWh 9 GWh Fortum’s reporting segments and divisions Power and Technology Heat, Electricity Sales and Solutions Russia Distribution • Hydro, nuclear and thermal power generation • Power Solutions with expert services • Portfolio management and trading • Technology and R&D functions • 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 • Power and heat generation and sales in Russia • Includes OAO Fortum and Fortum’s slightly over 29% holding in TGC-1 • Electricity distribution activities • Divestment of the business is expected to be concluded during H1 2015. The segment incorporates two business divisions: • Hydro Power and Technology • Nuclear and Thermal Power 9 Fortum mid-sized European power generation player; major producer in global heat Power generation Largest producers in Europe and Russia, 2013 TWh EDF E.ON Enel RWE Rosenergoatom Gazprom Vattenfall GDF SUEZ Inter RAO UES RusHydro NNEGC Energoat. Iberdrola EuroSibEnergo CEZ Fortum EnBW PGE IES Statkraft DTEK EDP DEI Heat production Customers Largest global producers, 2013 TWh Electricity customers in EU, 2013 Millions Gazprom IES Inter RAO UES 1 ) Veolia RusHydro EuroSibEnergo Fortum Sibgenco Vattenfall Quadra 1) EDF TGC-2 Lukoil Minskenergo KDHC DTEK Dong Energy PGNiG Tatenergo Enel Fortum Värme 0 100 200 300 400 500 600 Enel EDF E.ON RWE Iberdrola DEI CEZ Centrica EDP Vattenfall SSE EnBW GDF SUEZ Tauron PGE Gas Natural Fenosa Fortum Hafslund Dong Energy 0 20 40 60 80 100 120 140 1) 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. 10 0 10 20 30 40 0 11 Figures 2012 pro forma * incl. MOEK, ** incl. Bashkirenergo, *** incl. TGC-5, TGC-6, TGC-7, TGC-9 450 Other 400 Nuclear 350 Hydro *** IES DTEK PGE ** Inter RAO UES 500 SSE 550 DEI Gas Natural Fenosa EDP Agder Energi BKK EPS, Serbia Norsk Hydro Ukrhydroenergo E-CO Energi Alpiq Centrica Hidroelectrica * Gazprom Verbund Axpo CEZ EnBW RWE Iberdrola Fortum Statkraft GDF SUEZ EuroSibEnergo Enel E.ON Vattenfall RusHydro NNEGC Energoatom Rosenergoatom EDF Biggest nuclear an hydro generators in Europe and Russia TWh 600 Total generation 300 250 200 150 100 50 Fortum a forerunner in sustainability • Nordic Climate Disclosure Leadership Index (CDLI) • STOXX® Global ESG Leaders indices • oekom • OMX GES Sustainability Finland Index • ECPI® Indices 12 Fortum's carbon exposure among the lowest in Europe g CO2/kWh electricity, 2013 1 200 2014 64% of Fortum's total power generation CO2-free 94% of Fortum’s power generation in the EU CO2-free 1 000 800 Close to 100% of the ongoing investment programme in the EU is CO2-free. 600 Average 328 g/kWh 400 200 200 13 Statkraft Verbund EDF PVO Iberdrola Fortum total Dong Energy GDF SUEZ Gas Natural Fenosa EnBW Edipower Enel EDP Vattenfall E.ON CEZ SSE Drax RWE DEI 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. Fortum EU 64 0 Source: PWC & Enerpresse, December 2014 Climate Change and Electricity, Fortum Our strategic route Skandinaviska Elverk Birka Energi 50% Fortum 50% Stockholm Länsivoima 45% → 65% Lenenergo shares → IVO Länsivoima →100% Elnova 50% → 100% TGC-1 established District heating in Poland → Oil business spin-off E.ON Finland Fortum 1996 2007 1997 2008 TGC-10 Divestment of Lenenergo shares 14 Birka Energi 50% → 100% Gullspång merged with Stockholm Energi Gullspång Neste Stora Kraft Østfold Shares in Hafslund Shares in Lenenergo 1998 2000 2011 Divestment of Fingrid shares Divestment of heat operations outside of Stockholm 2002 2012 Divestment of small scale hydro Divestment of non-strategic heat business 2003 2005 2014 Divestment of electricity distribution business Divestment of electricity distribution and heat businesses Divestment of Grangemouth power plant 2006 2015 Divestment of Gasum shares Divestment of electricity distribution business (pending) Fortum in the Nordic electricity value chain Competitive businesses Large customers Nordic wholesale market Retail customers Power generation Power exchange and bilateral agreements Private customers, small businesses Regulated businesses Independent transmission system operator Transmission and system services Distribution Fortum has signed the binding agreement to divest electricity distribution business. Expected to be completed during Q2/2015 15 Independent distribution companies Fortum's power and heat production by source Fortum's power generation in 2014 Nuclear power 33% Natural gas 77% Natural gas 31% Biomass 1% Coal 5% Hydro power 30% Total generation 73.4 TWh (Generation capacity 14,624 MW) 16 Fortum's heat production in 2014 Waste 1% Peat 1% Biomass 6% Coal 15% Total production 34.6 TWh (Production capacity 17,402 MW) Fortum's European power and heat production Fortum's European power generation in 2014 Coal 38% Nuclear power 48% Oil 1% Heat pumps, electricity 1% Waste 3% Peat 3% Biomass 2% Natural gas 2% Coal 4% Hydro power 44% European generation 50.1TWh (Generation capacity 9,851 MW) 17 Fortum's European heat production in 2014 Natural gas 29% Biomass 25% European production 8.2 TWh (Production capacity 3,936 MW) 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 • 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 northwestern Europe was started in February 2014. Iberia (Spain & Portugal) joined in May 2014. Italy and Slovenia joined on 24 February 2015. Switzerland waiting for agreement with EU • CEE market coupling region to join in 2016, with flow-based cross-border capacity allocation for further trade optimisation • In addition to day-ahead coupling, intraday market coupling and balancing market integration under development as well 18 2016 2/2015 20102013 2009 2014 2012-2014 Current transmission capacity from Nordic area is over 5,000 MW Countries Transmission capacity MW From 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 5,460 6,316 Total • • • • 19 To Nordics Theoretical maximum in transmission capacity ~40 TWh per annum Net export from Nordic area to Continental Europe and Estonia during year 2014 was 14 TWh During the dry year 2013 net export was 3 TWh Approximately 25 TWh of net export is now reachable 320 1,000 700 2,225 615 600 Nordic, Baltic, Continental and UK markets are integrating – interconnection capacity will double by 2021 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 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 1,400 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 New 400 MW Zealand-DE connection through Kriegers Flak offshore wind area with DC station in DE planned to be built by 2019 20 New interconnections will double the export capacity to over 10,000 MW by 2021 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 EU’s European Energy Programme for Recovery co-financing 700 MW NordBalt (ready 12/2015) 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 Svenska Kraftnät agreed 3/2014 with 50Hertz to study a new Hansa PowerBridge DC link between Sweden and Germany Nordic water reservoirs 120 reservoir content (TWh) 100 80 60 40 20 2000 2003 2013 2014 2015 reference level 0 Q1 Source: Nord Pool Spot 21 Q2 Q3 Q4 Nordic year forwards Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 €/MWh Year20 4 May 2015 70 60 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 Source: Nasdaq Commodities 22 2009 2010 2011 2012 2013 2014 2015 Wholesale price for electricity Nord Pool Spot System Price EUR/MWh Forwards 110 100 90 80 70 60 50 40 30 20 10 0 4 May, 2015 1995 1997 1999 2001 Source: Nord Pool Spot, Nasdaq Commodities 23 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Wholesale prices for electricity Spot prices EUR/MWh 110 Forward prices 100 90 80 Dutch 70 60 German 50 40 Nordic 30 Russian* 20 10 4 May 2015 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * Including weighted average capacity price Source: Nord Pool Spot, Nasdaq Commodities, APX-ENDEX, Bloomberg Finance LP, ATS, NP “Market Council”, Fortum 24 Fuel and CO2 allowance prices 35 120 28 EUR / tCO2 USD / bbl Crude oil price (ICE Brent) 150 90 60 30 21 14 7 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Gas price (ICE NBP) 250 100 200 80 GBp / therm USD / t Coal price (ICE Rotterdam) 150 100 50 60 40 20 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: ICE 25 CO2 price (ICE ECX EUA) Market prices 1 May 2015; 2015-2016 future quotations 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Nordic power generation – dominated by hydro, but fossil needed Total Nordic generation 383 TWh in 2013 160 140 120 TWh % Fossil fuels 48 13 Nuclear 86 23 Biomass 23 6 Wind 23 6 203 53 100 TWh/a 80 60 40 Hydro * 20 0 Denmark Source: ENTSO-E Statistical Factsheet 2013 26 Norway Sweden *) Normal Finland Net export in 2013: 0.4 TWh annual Nordic hydro generation 200 TWh, variation +/- 40 TWh. Wholesale electricity price too low to attract investments EUR/MWh EUR/MWh 110 110 100 100 90 90 80 80 70 70 60 60 50 50 Futures 4 May 2015 40 40 30 30 20 20 10 10 0 1995 Source: Nord Pool spot, Nasdaq Commodities 2015 Average levelised costs of new electricity generation 2025 0 Coal Onshore condensing wind Nuclear Utility scale Solar PV In Italy Large hydro Gas Offshore wind Commodity prices are forward prices as of August 2014. 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. 27 Still a highly fragmented Nordic power market Power generation 384 TWh >350 companies Electricity distribution 15 million customers ~500 companies Vattenfall Others Others E.ON Vattenfall Electricity retail 15 million customers ~350 companies Vattenfall Others Fortum Fortum 33% Statkraft Helen Agder Energi E-CO Energi Norsk Hydro Dong Energy PVO E.ON Hafslund Caruna Fortum Source: Fortum, company data, shares of the largest actors, pro forma 2013 figures. 28 57% Dong Energy Elenia SEAS-NVE Helen Syd Energi Fortum has signed the binding agreement to divest electricity distribution business. Expected to be completed during Q2/2015 Hafslund 53% Dong Energy E.ON Statkraft Helen SEAS-NVE Göteborg, Din El Bixia New power generation capacity needed for increasing demand and retiring capacity replacements 250% • 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, ~7,000 GW of new capacity needed by 2040 Source: IEA WEO 2014 (New polices scenario) 29 225% Growth, 2012-2040 Primary energy demand 200% Electricity generation 150% 114% 100% 41% 50% 19% 0% US Europe Russia China India Other areas World total Capacity changes, 2014-2040 (GW) Retiring capacity 479 632 172 281 91 787 2,442 Capacity increase 257 354 72 1,435 814 1,833 4,765 New capacity, total (1 736 986 244 1,716 905 2,620 7,207 1) Total new capacity needed for increasing demand and replacements of retiring capacity Overview of Fortum’s nuclear fleet LOVIISA Commercial operation started OLKILUOTO OSKARSHAMN FORSMARK Unit 1: 1978 Unit 1: 1972 Unit 1: 1980 Unit 2: 1980 Unit 2: 1974 Unit 2: 1981 Unit 3: (Under construction) Unit 3: 1985 Unit 3: 1985 Unit 1: 880 MW Unit 1: 473 MW Unit 1: 984 MW Unit 1: 496 MW Unit 2: 880 MW Unit 2: 638 MW Unit 2: 1,120 MW Unit 2: 496 MW (Unit 3: 1,600 MW) Unit 3: 1,400 MW Unit 3: 1,170 MW Total: 992 MW Total: 1,760 MW (3,360) Total: 2,511 MW Total: 3,274 MW 27% 468 MW 43% 1,089 MW 22% 720 MW Unit 1: 1977 Unit 2: 1981 Generation Capacity Fortum’s share Yearly production 8 TWh 14 TWh 17 TWh 25 TWh Fortum’s share of production 8 TWh 4 TWh 7 TWh 5.5 TWh Share of Fortums Nordic production 18% 9% 16% 13% Majority owner Fortum Pohjolan Voima E.ON Vattenfall 26.6% 43.4% 22.2% Teollisuuden Voima (TVO) OKG Aktiebolag Forsmarks Kraftgrupp Fortum’s share Operated by Fortum 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. 30 Fortum's nuclear power in the Nordics 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 Source: Fortum 31 Olkiluoto Forsmark Loviisa • Finnish units world class in availability • Overview of production and consumption: www.fortum.com/investors - energy related links Oskarshamn Variety of technologies and ages Unit MWe (Net) Share (%) Share (MWe) Commercial operation Age Type/ Generation * Supplier 496 496 100,0 100,0 496 496 1977-05-09 1981-01-05 36 33 PWR / 1 PWR / 1 AEE (Atomenergoexport) AEE (Atomenergoexport) 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 Loviisa 1 Loviisa 2 Olkiluoto 1 Olkiluoto 2 Olkiluoto 3 *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. 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. 32 Third party nuclear liability in case of severe accident In force since 1.1.2012. Law approved by Parliament in 2010, requires separate decision from Government to come into force. Unlimited company responsibility 300 M€ 500 M€ 300 M€ Convention parties 500 M€ State responsibility Responsibility of company (insurance or guarantee) 145 M€ 145 M€ 145 M€ 240 M€ Old, Finland 33 700 M€ 360 M€ Current, Sweden 700 M€ 700 M€ 200 M€ Sweden (new, not in force) Finland, temporary legislation New Paris convention Requires ratification by 2/3 of member states to come into force. In Finland approved by Parliament in 2005 Russia is the World’s 5th largest power market TWh 6,000 5,000 4,000 3,000 2,000 1,000 0 Power generation in 2013 based on gross output. Source: BP Statistical Review of World Energy June 2014 34 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 OAO Fortum St. Petersburg TGC-1 • 29.5% of territorial generating company TGC-1 operating in northwest Russia • ~7,200 MW electricity production capacity (more than 40% hydro), ~24 TWh electricity, ~28 TWh heat in 2014 35 Nyagan Tobolsk Moscow Tyumen Chelyabinsk Day ahead wholesale market prices in Russia – increase driven by recovering demand and gas price Key electricity, capacity and gas prices in the OAO Fortum area Day ahead power market prices for Urals 40 35 Electricity spot price (market price), Urals hub, RUB/MWh Average regulated gas price, Urals region, RUB 1000 m3 1,051 3,362 I/14 1,018 3,362 2014 1,089 3,362 LTM 1,097 30 € / MWh I/15 3,362 25 20 15 10 5 Average capacity price for CCS ”old capacity”, tRUB/MW/month 163 183 167 162 0 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013 2014 2015 1 400 Average capacity price for CSA ”new capacity”, tRUB/MW/month 715 609 552 589 Average capacity price, tRUB/MW/month 394 335 304 321 Achieved power price for OAO Fortum, EUR/MWh 26.0 1 200 30.7 30.4 29.0 RUB / MWh 1 000 800 600 400 200 0 In addition to the power price generators receive a capacity payment. 36 Source: ATS Power market liberalisation – two markets Capacity wholesale market Electricity wholesale market Capacity prices Electricity prices • Competitive capacity selection (CCS) and free bilateral agreements (FBA) • Day ahead (spot) market, financial market, free bilateral agreements (FBA) and regulated bilateral agreements (RBA) • A higher, fixed capacity price for new capacity (CSA* agreements, built after 2007) • Fully liberalised from 1 Jan 2011 except for volumes intended for households priced by RBA (~10% of volume) • 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) •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 * Capacity supply agreement 37 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 1214% (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 38 85% increase in power generation capacity in Russia by 2015 through the investment programme Year Supply starts Power plant Fuel type 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 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 April/2013 Nyagan 1 GRES Gas 418 Condensing 418 Dec/2013 Nyagan 2 GRES Gas 418 Condensing 418 Jan/2015 Nyagan 3 GRES Gas 418 Condensing 418 2H/2015 Chelyabinsk GRES Gas 248 CHP/Condensing 330 2H/2015 Chelyabinsk GRES Gas 248 CHP/Condensing 248 < 2011 2011 2013 2015 Existing capacity 2,785 MW 82 2,785 MW 39 New investments 2,388 MW 2,388 MW Production type Total capacity 5,173 MW 5,173 MW Income statement MEUR Sales I/2014 2014 LTM 1,040 1,208 4,088 3,920 Other income and expenses -697 -850 -3,003 -2,850 Comparable operating profit 343 358 1,085 1,070 7 8 211 210 350 366 1,296 1,280 58 69 146 135 -57 -62 -210 -205 350 374 1,232 1,208 -55 -62 -143 -136 295 312 1,089 1,072 63 1,943 2,073 193 Net profit, Fortum total 358 2,255 3,161 1,264 EPS, basic (EUR), continuing operations 0.33 0.35 1.22 1.20 EPS, basic (EUR), discontinued operations 0.07 2.18 2.33 0.22 EPS, basic (EUR), Fortum Total 0.40 2.53 3.55 1.42 Items affecting comparability Operating profit Share of profit of associates and jv’s Financial expenses, net Profit before taxes Income tax expense Net profit, continuing operations Net profit, discontinued operations 40 I/2015 Cash flow statement MEUR I/2015 I/2014 2014 LTM Cash from operating activities: 168 74 352 446 314 34 371 -40 1,096 -42 1,039 32 516 405 1,406 1,517 87 161 356 282 603 566 1,762 1,799 -101 36 19 -123 3 46 -622 499 364 -600 532 337 Total investing activities, continuing operations -46 -74 241 269 Total investing activities, discontinued operations -43 2,461 2,574 70 Cash used in investing activities, total Fortum -89 2,387 2,816 340 Cash flow before financing activities, total Fortum 514 2,953 4,578 2,139 Realised FX gains/losses Other funds from operations (FFO) Change in working capital Cash from operating activities, continuing operations Cash from operating activities, discontinued operations Cash from operating activities, total Fortum Cash used in investing activities: Paid capital expenditures Proceeds from divestments Other investment activities 41 Key ratios MEUR LTM 2014 Comparable EBITDA, continuing operations 1,397 1,457 Comparable EBITDA, total Fortum 1,754 1,873 Interest-bearing net debt, total Fortum 3,714 4,217 2.1 2.3 1.8 2.0 9.0 19.5 Comparable net debt/EBITDA, total Fortum excluding Värme financing ROCE % Return on capital employed, total Fortum Good liquidity – committed credit lines total EUR 2.2 billion 42 Debt Maturity Profile 31 March 2015 1500 MEUR 1250 1000 750 500 250 0 2015 2016 Bonds 2017 2018 Financial institutions Average Interest Rate Portion of floating / fixed debt 43 2019 2020 2021 Other long-term debt 2022 2023 2024 2025+ 2015 1,036 2016 863 2017 538 2018 621 2019 821 2020 75 2021 549 2022 1,087 2023 110 2024 3 2025+ 1,279 TOTAL 6,982 Other short-term debt per 31 March 2015 4.3% 47 / 53% per 31 Dec, 2014 3.7% 46 / 54% 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 44 Outlook Annual capex estimate, excluding potential acquisitions • 2015 approximately EUR 0.8 billion Hedging • Rest of 2015 approx. 50% hedge ratio at approx. EUR 41/MWh • 2016 approx. 20% hedge ratio at approx. EUR 37/MWh Taxation 45 • Effective tax rate for 2015 for the Group 19-21% • The Swedish Government decided to re-propose an increase of 17% on the tax on installed nuclear capacity to the spring budget Hedging improves stability and predictability 2009 onwards thermal and import from Russia excluded 46 Facts of Fortum’s Distribution business MEUR Fortum’s Swedish distribution operations in 2014 Operating profit 236 Comparable operating profit 235 Comparable EBITDA 366 Capital expenditure 134 Number of employees 390 Volume of distr. Electricity, TWh 26.9 Number of el. Distr. Custom. (‘000) 906 January 2013: Strategic assessment commenced December 2013: Assessment has been completed, divestment the best alternative – Evaluation of divestment opportunities country by country Closed by the end of Q1/2014: Divestment of Distribution Finland Closed by the end of Q2/2014: Divestment of Distribution Norway Q1/2015: Disclosed signed the binding agreement to divest Distribution Sweden (Q1/2015 reported as a discontinued business) Ongoing: Fortum expects to complete the divestment process during Q2/2015 47 For more information, please visit www.fortum.com/investors