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FORTUM Power and heat company in the Nordic area, Russia, Poland and the Baltics
Investor / Analyst material
December 2012
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 -16
European and Nordic power markets, pages 18 - 29
Data on Fortum’s nuclear fleet, pages 31 - 35
Russia, pages 37 - 44
Data on capacity payments, pages 40 - 41
Fortum’s investment programme, page 44
Financials and outlook, pages 46 – 55
Hedges, pages 52 - 53
More than 100,000 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 ~13 billion euros
4
30 November 2012
Foreign investors 25.1% Finnish State 50.8%
Other Finnish investors 10.6%
Households 9.8%
Financial and insurance institutions 3.7%
Capital returns
• Dividend 2011 EUR 1.00 per share, in total ~EUR 0.9 billion
• Dividend policy of 50-60% payout of previous year's results on average
5
Total ~ 8,630 MEUR
1999 2001 2003 2000 2002 2004
0.18 0.23 0.26
0.31 0.42
0.58
2005
1.12
Dividend per share EUR
0.13
1998
0.5
8
0.5
4
2006
1.26
0.7
3
0.5
3
2007
1.35
0.7
7
0.5
8
2008
1.00
72% 103% 78% 58%
1.00
2009
68%
1.00
2010
68%
1.00
2011
50%
Organisational structure
6
Business Divisions
President and CEO
Tapio Kuula
Electricity Solutions and Distribution (Espoo)
Executive Vice President Timo Karttinen
Power (Espoo) Executive Vice President
Matti Ruotsala
Heat (Stockholm) Executive Vice President
Per Langer
Russia (Chelyabinsk) Executive Vice President
Alexander Chuvaev
Finance Chief Financial Officer
Markus Rauramo
Corporate Communications Senior Vice President
Helena Aatinen
Corporate Human Resources Senior Vice President
Mikael Frisk
Staff Functions
Country responsibles: Timo Karttinen / Finland, Norway; Per Langer / Sweden, Poland, Baltics; Alexander Chuvaev / Russia
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 to the society and deliver
excellent value to our shareholders.
Mission
Build on the strong
Nordic core
Create solid earnings
growth in Russia
Build platform for
future growth
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 17.4 TWh
Heat sales 26.7 TWh
Russia
Poland Power generation 0.6 TWh
Heat sales 4.3 TWh
Baltic countries Power generation 0.4 TWh
Heat sales 1.1 TWh
Distribution cust. ~24,000*
Nordic countries
Power generation 53.1 TWh
Heat sales 17.2 TWh
Distribution customers 1.6 million
Electricity customers 1.2 million
Nr 2 Power
generation
Electricity
sales
Nr 2
Nr 1 Heat
Distribution
Nr 1
Key figures 2011 Sales EUR 6.2 bn
Operating profit EUR 2.4 bn
Balance sheet EUR 23 bn
Personnel 10,800
Great Britain Power generation 1.2 TWh
Heat sales 2.1 TWh
* Distribution business sold Jan 1, 2012
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 1,201 million
Distr.: EUR 3,589 million
El. sales: EUR 11 million
EUR 3,273 million
EUR 278 million Distr.: EUR 295 million
El. sales: EUR 27 million
EUR 74 million
Distr.net. 26.1, reg.net. 16.7
El. sales: 14.4
Heat sales 22.6
Power sales: 6.2 Nordic generation 48.1
EUR 6,247 million EUR 4,191 million
Fuel mix, heat and
power price
Nordic power price,
generation volumes New capacity, and price for
that, power and heat price
Power sales.: 20.2
Heat sales.: 26.7
Distr.: Regulated
El. sales: Sales margin
Fortum mid-sized European power generation player; Global #4 in heat
10
* incl. TGC-5, TGC-6, TGC-7, TGC-9, ** incl. TGC-12, TGC-13, *** incl. International Power
Source: Company information, Fortum analyses, 2010 figures pro forma, heat production of Beijing DH not available.
Largest global producers, 2010 TWh
Largest producers in Europe and Russia, 2010 TWh
Power generation Heat production
Electricity customers in EU, 2010 millions
Customers
DEI
Irkutskenergo
*) IES
Iberdrola
RusHydro Fortum
EnBW
Vattenfall
CEZ
RWE
PGE SSE
Statkraft
Rosenergoatom Gazprom
NNEGC Energoat.
Enel
E.ON EDF
0 100 200 300 400 500 600
Inter RAO UES
GDF SUEZ ***)
Onexim
Tatenergo
Minsk Energo Kievenergo
Irkutskenergo Bashkirenergo
RAO ES East Inter RAO UES
TGC-2
Fortum
Dong Energy KDHC, Korea
TGC-14
Lukoil
Gazprom
0 20 40 60 80 100 120 140
ELCEN, Rom.
Dalkia
SUEK **)
*) IES
Vattenfall
PGNiG
0 20 40 10 30
DEI
CEZ
Enel
Centrica
EDP
Iberdrola
SSE
EnBW
Fortum
EDF
E.ON
RWE
Gas Natural Fenosa
PGE
Tauron
GDF SUEZ
Hafslund
Dong Energy
Vattenfall
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
Source:
PWC & Enerpresse, Novembre 2012
Changement climatique et Électricité, Fortum
Note: * includes Scottish Power
Figures for all other companies include only European generation.
0
200
400
600
800
1000
1200
DE
I
Dra
x
RW
E
CE
Z
SS
E
Edip
ow
er
Vatt
en
fall
Enel
ED
P
E.O
N
GdF
Suez E
uro
pe
Do
ng
Un
ion
Feno
sa
EnB
W
*Iberd
rola
Fort
um
tota
l
Verb
und
PV
O
Fort
um
EU
ED
F
Sta
tkra
ft
88
g CO2/kWh electricity, 2011
2011
65% of Fortum's total power generation CO2-free
85% of Fortum’s power generation in the EU CO2-free
Close to 100% of the ongoing investment programme
in the EU CO2-free
Average 338 g/kWh
192
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
Nuclear power
45%
Coal 9%
Other 1%
Hydro power 38%
Biomass 3%
European generation 55.3 TWh
(Generation capacity 11,422 MW)
Fortum's European
power generation in 2011
Natural gas 4%
European production 22.0 TWh
(Production capacity 10,625 MW)
Fortum's European
heat production in 2011
Waste 4%
Peat 3%
Heat pumps, electricity
12%
Oil 5%
Biomass fuels
24%
Natural gas
22%
Other 4%
Coal 26%
Fortum's European power and heat production
15
Fortum a forerunner in sustainability
• Dow Jones Sustainability World Index
– Included for ten consecutive years
– Fortum the only Nordic power and heat company
• Carbon Disclosure Leadership Index
– Fortum globally third best company in the utility
sector 2012
– Fortum the only Nordic power and heat company
• SAM Sustainability Yearbook
• STOXX® Global ESG Leaders indices
• oekom
• OMX GES Sustainability Finland Index
• Storebrand SRI
16
European and Nordic power markets
17
Fortum today, pages 4 -16
European and Nordic power markets, pages 18 - 29
Data on Fortum’s nuclear fleet, pages 31 - 35
Russia, pages 37 - 44
Data on capacity payments, pages 40 - 41
Fortum’s investment programme, page 44
Financials and outlook, pages 46 – 55
Hedges, pages 52 - 53
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, BeNeLux) since 11/2010 with a continued coupling mechanism 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
• The TSOs and power exchanges are developing a single market coupling for the whole western Europe by summer 2013
• In addition to day-ahead coupling, intraday market coupling and balancing market integration targetted as well
• Estonian price area in Nord Pool Spot since April 2010, Lithuanian bidding area from 6/2012, Latvia to follow in 2013
• EU’s European Target Model for cross-border power trading sets 2014 as deadline for an EU-wide market coupling
18
2009
2013
2012
2010-
2013
Current transmission capacity from Nordic area to Continental Europe is over 4000 MW
19
Countries Transmission capacity MW
From Nordics To Nordics
Denmark - Germany 2,365 2,100
Sweden - Germany 610 600
Sweden - Poland 600 600
Norway - Netherlands 700 700
Total 4,275 4,000
• Theoretical maximum in transmission capacity ~35 TWh
per annum
• Net export from Nordic area to Continental Europe in
2011 was ~6 TWh
• During Nordic dry year 2010 net import was ~8 TWh
• Approximately 20 TWh net export fairly easily reachable
700
2,365 610 600
350
Nordic and Continental markets are integrating – interconnection capacity could double by 2020
20
Both TSO and merchant projects for
links to the UK 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 700 MW
DK-NL link to connect offshore
wind, too
Jutland – DE capacity planned to
grow by 1,000-1,500 MW by 2017
EU support to connect Kriegers
Flak offshore wind area to DK&DE
by 2020
European Commission included the Northern
Seas Offshore Grid and the Baltic Energy Market
Integration Plan as priority electricity corridors in
its 2011 Infrastructure Package proposal
New interconnections
could double the capacity
to over 8,000 MW by 2020
LitPol Link of 1,000 MW to
connect the Baltic market to
Poland by 2015/20. It would open a
new transmission route from the
Nordic market to the Continent
EU’s European Energy Programme
for Recovery cofinancing Estlink 2
and NordBalt
New internal Nordic grid
investments provide for increased
available capacity for export to the
Continent and Baltics
Nordic water reservoirs
21
Source: Nord Pool Spot
rese
rvo
ir c
on
ten
t (T
Wh
)
0
20
40
60
80
100
120
2000 2003 2010 2012 2011 reference level
Q1 Q2 Q3 Q4
Nordic year forwards
22
Source: NASDAQ OMX Commodities Europe
Year 15 Year 17 Year 09 Year 10 Year 11 Year 12 Year 13 Year 14 Year 16 €/MWh
0
10
20
30
40
50
60
70
2007
Q1 Q2 Q3 Q4 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
3 December 2012
Wholesale price for electricity
23
Source: Nord Pool Spot, NASDAQ OMX Commodities Europe
0
10
20
30
40
50
60
70
80
90
100
110
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
EUR/MWh Nord Pool System Price Forwards
3 December 2012
Wholesale prices for electricity
24
Source: Nord Pool Spot, NASDAQ OMX Commodities Europe, EEX, APX-ENDEX, Bloomberg Finance LP, ATS, Fortum
Dutch
German
Nordic
Russian*
Spot prices Forward prices EUR/MWh
10
20
30
40
50
60
70
80
90
100
110
* including capacity tariff estimate.
E.g 9.4 €/MWh for 2010, 6.8 for 2011 and 5.9 for 2012.
3 December 2012
2007 2008 2009 2010 2011 2012 2013 2014 0
25
Fuel and CO2 allowance prices
Source: ICE
Market prices 3 December 2012; 2012-2014 future quotations
Crude oil price (ICE Brent)
020406080
100120140160
US
D /
bb
l
2006 2007 20102008 2009 20122011 2013 2014
CO2 price (ICE ECX EUA)
0
5
10
15
20
25
30
35
EU
R /
tC
O2
2006 2007 20102008 2009 20122011 2013 2014
Coal price (ICE Rotterdam)
0
40
80
120
160
200
240
US
D /
t
2006 2007 20102008 2009 20122011 2013 2014
Gas price (ICE NBP)
0
20
40
60
80
100
GB
p /
th
erm
2006 2007 20102008 2009 20122011 2013 2014
Nordic power generation – dominated by hydro, but fossil needed
26
Source: ENTSO-E Memo 2011 *) 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
378 TWh in 2011
Net import in 2011: 3 TWh
24
80
TWh %
57
200
17
6
21
15
53
5
Still a highly fragmented Nordic power market
27
30%
Fortum
Vattenfall
Dong Energy
Others
Statkraft
E.ON PVO
E - CO Energi
Agder Energi
Norsk Hydro Helsinki
Others
52%
Dong Energy
Vattenfall
Fortum
E.ON
G ö teborg
Helsinki
Hafslund
SEAS - NVE
Statkraft
Bixia
Others
53%
Fortum
Vattenfall
E.ON
SEAS-NVE
Hafslund
Helsinki
Göteborg
Syd Energi
Dong Energy
Elenia
Power generation
382 TWh
>350 companies
Electricity distribution
15 million customers
~500 companies
Electricity retail
15 million customers
~350 companies
Source: Fortum, company data, shares of the largest actors, pro forma 2010 figures.
New capacity needed for increasing demand and retiring capacity replacements
• 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, 5,900 GW of new
capacity needed by 2035
28
1) Total new capacity needed for increasing demand and retiring capacity replacements Source: IEA WEO 2012 (New polices scenario)
384
606
548
923
153
245
190
1,487
70
666
631
1,964
1,976
5,891 New capacity,
total (1
Capacity changes, 2012-2035 (GW)
Retiring capacity
US Europe Russia China India Other
areas
World
total
0 %
50 %
100 %
150 %
200 %
250 %
~20%
~ 40%
~130%
~240%
Growth, 2010-2035
Primary energy demand
Electricity generation
New capacity, except nuclear, will require over 60 EUR/MWh power price
29
0
10
20
30
40
50
60
70
80
90
100
110
Source: Nord Pool spot, NASDAQ OMX Commodities Europe
EUR/MWh
Futures
3 December 2012
1995 -97 -99 -01 -05 -07 -09 -11 -13 -03 -15 -17 Coal Gas Nuclear Hydro Wind Clean coal
EUR/MWh
0
10
20
30
40
50
60
70
80
90
100
110
Estimated lifetime average cost in nominal 2014 terms.
Large variations in cost of new hydro and wind due to location and conditions.
Other costs ( variation)
CO2 cost
Fortum’s investment programme – Nordic region, Poland and Baltic countries
30
Additional electricity capacity around 800 MW
100% CO2-free
Project Electricity, MW Heat, MW Commissioned
Olkiluoto 3, Finland 400
Swedish nuclear upgrades 290
Refurbishing of hydro power 10 annually
Brista, Sweden 20 57 Q4 2013
(waste CHP)
Klaipeda, Lithuania 20 60 Q1 2013
(waste CHP)
Total ~800 ~225
Jelgava, Latvia 23 45 Q3 2013
(biomass CHP)
Järvenpää, Finland 23 63 Q2 2013
(biomass CHP)
Overview of Fortum’s nuclear fleet
31
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: 996 MW
Unit 3: 1,170 MW
Total: 3,150 MW
22% 699 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
32
• Finnish units world class in availability
• Overview of production and consumption: www.fortum.com/investors - energy related links
Source: IAEA, NordPool. Rounded numbers.
Situation on 8 October 2012
Load factor (%) 2005 2006 2007 2008 2009 2010 2011
Oskarshamn 1 80 51 63 85 68 77 72
Oskarshamn 2 90 78 76 86 75 90 77
Oskarshamn 3 85 95 88 70 17 31 75
Forsmark 1 85 76 81 81 88 93 79
Forsmark 2 94 72 85 79 64 39 94
Forsmark 3 95 92 88 69 86 81 85
Loviisa 1 95 93 94 86 96 93 94
Loviisa 2 95 88 96 93 95 89 94
Olkiluoto 1 98 94 97 94 97 92 94
Olkiluoto 2 94 97 94 97 95 95 90
Variety of technologies and ages
33
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
34
30
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
(?)
32
29
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
39
36
26
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
996
1,170
23,4
23,4
20,1
230
233
236
1980-12-10
1981-07-07
1985-08-18
31
30
26
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
34
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
35
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 2013 120 ~25 257 ~2
FKA 2 2012 120 25 259 ~2
FKA 3 Decision 2013 170 ~35 270 ~2
Total ~290 ~2 ~1,950* ~15
Capacity increase and completion timetable based on recent estimate (Nord Pool). At 31.12.2011
Fortum's share of Swedish nuclear capacity was 1,787 MW.
Russia
36
Fortum today, pages 4 -16
European and Nordic power markets, pages 18 - 29
Data on Fortum’s nuclear fleet, pages 30 - 36
Russia, pages 37 - 44
Data on capacity payments, pages 40 - 41
Fortum’s investment programme, page 44
Financials and outlook, pages 46 – 55
Hedges, pages 52 - 53
Russia is the World’s 4th largest power market
37
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
TWh
5,000
Power generation in 2011 based on gross output.
Source: BP Statistical Review of World Energy June 2012
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
• 17 TWh power generation, 27 TWh heat production in 2011;
more than Fortum’s Nordic heat sales
• Investment programme to add 85%, almost 2,400 MW to power
generation capacity
• Annual efficiency improvement reached
EUR 100 million in Q2 2011 (compared to 2008 level)
TGC-1
• Slightly over 25% of territorial generating company TGC-1
operating in north-west Russia
• ~6,400 MW electricity production capacity (appr. 50% hydro),
~26 TWh/a electricity, ~30 TWh/a heat
38
OAO Fortum
Tyumen
Tobolsk
Chelyabinsk
Nyagan
TGC-1
St. Petersburg
Moscow
39
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
0
5
10
15
20
25
30
35
40
€ / M
Wh
Day ahead power market prices for Urals
In addition to the power price generators receive a capacity payment.
2007 2008 2009 2010 2011 2012
Source: ATS
III/12 III/11 I-III/12 I-III/11 2011 LTM
Electricity spot price
(market price), Urals hub,
RUB/MWh
1,114 939 951 948 925 928
Average regulated gas
price, Urals region, RUB
1000 m3
2,924 2,548 2,673 2,548 2,548 2,642
Average capacity price
for CCS ”old capacity”,
tRUB/MW/month
138 140 147 155 160 153
Average capacity price
for CSA ”new capacity”,
tRUB/MW/month
485 568 510 580 560 516
Average capacity price,
tRUB/MW/month
207 198 218 195 209 225
Achieved power price for
OAO Fortum, EUR/MWh 33.1 30.0 30.5 29.4 29.2 30.1
Power market liberalisation – two markets
40
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
41
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
Long-term financial target will be dictated by basic economic logic
42
Assuming, having completed the investment programme, an invested capital of
~EUR 100 million improvement in
EBITDA through the efficiency
improvement programme
Invested capital
EUR
~2.5 bn
~4 bn
2011 ~2014
In 2009, WACC for Russia was ~12%
a
b
a
… and an unchanged
cost of capital b
The annual comparable
operating profit in Russia
needs to be ~EUR 500
million in order to beat the
cost of capital (WACC) after
the completion of the
investment programme
Key factors behind the profitability improvement in Russia
43
Efficiency improvement programme 2008-2011
– Increasing heat production profitability
– Fuel efficiency improvement
– Cost savings
New CSA capacity commissioning 2011-2014
– 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 - 1,254 MW
2014 - 496 MW
Total - 2,388 MW
85% increase in power generation capacity by the end of 2014 through the investment programme
44
85% increase in power generation capacity in Russia by the
end of 2014 through the investment programme
Total 2,785 2,388 5,173
Plant Fuel type Existing (MW) Planned (MW) Total
Tyumen CHP-2 Gas 755 755
Tyumen CHP-1 Gas 472 209 681
Tobolsk CHP Gas 452 213 665
Chelyabinsk CHP-3 Gas 360 216 576
Chelyabinsk CHP-2 Gas, coal 320 320
Argayash CHP Gas, coal 195 195
Chelyabinsk CHP-1 Gas, coal 149 149
Chelyabinsk GRES Gas 82 578
Nyagan GRES Gas 3 x 418 1,254
Boilers -
(CHP/Condensing)
(CHP/Condensing)
(Condensing)
(Condensing)
Supply date
2013
June/2011
Feb/2011; 2014
Oct/2011
2014 2 x 248 (CHP/Condensing)
Represents over 50%
of new capacity
Financials and outlook
45
Fortum today, pages 4 -16
European and Nordic power markets, pages 18 - 29
Data on Fortum’s nuclear fleet, pages 30 - 36
Russia, pages 38 - 45
Data on capacity payments, pages 41 - 42
Fortum’s investment programme, page 45
Financials and outlook, pages 47 – 57
Hedges, pages 53 - 54
Income statement
46
MEUR III/2012 III/2011 I-III/2012 I-III/2011 2011 LTM
Sales 1 140 1 144 4 325 4 494 6 161 5 992
Expenses -920 -847 -3 173 -3 200 -4 359 -4 332
Comparable operating profit 220 297 1 152 1 294 1 802 1 660
Items affecting comparability 3 17 90 529 600 161
Operating profit 223 314 1 242 1 823 2 402 1 821
Share of profit of associates and jv's 7 -2 26 72 91 45
Financial expenses, net -82 -72 -231 -199 -265 -297
Profit before taxes 148 240 1 037 1 696 2 228 1 569
Income tax expense -30 -46 -195 -278 -366 -283
Net profit for the period 118 194 842 1 418 1 862 1 286
Non-controlling interests -7 -4 36 70 93 59
EPS, basic (EUR) 0.14 0.23 0.91 1.52 1.99 1.38
EPS, diluted (EUR) 0.14 0.23 0.91 1.52 1.99 1.38
Comparable and reported operating profit
47
Fortum today, pages 4 -16
European and Nordic power markets, pages 18 - 29
Data on Fortum’s nuclear fleet, pages 30 - 36
Russia, pages 38 - 45
Data on capacity payments, pages 41 - 42
Fortum’s investment programme, page 45
Financials and outlook, pages 47 – 57
Hedges, pages 53 - 54
MEUR
III/2012 III/2011 III/2012 III/2011 I-III/2012 I-III/2011 I-III/2012 I-III/2011
Power 201 268 205 273 764 850 786 1 033
Heat -11 -14 -12 -10 173 182 221 280
Russia -12 -16 -12 -16 40 39 51 39
Distribution 57 62 58 60 216 246 225 437
Electricity Sales 9 4 11 6 29 25 33 9
Other -24 -7 -27 1 -70 -48 -74 25
Total 220 297 223 314 1 152 1 294 1 242 1 823
Comparable operating
profit
Reported operating
profit
Comparable operating
profit
Reported operating
profit
• Non-recurring items, IFRS accounting treatment (IAS 39) of derivatives and nuclear fund adjustments had an impact on the reported operating profit EUR 3 (17) million or earnings per share EUR 0.01 (0.02) in the third quarter, and EUR 90 (529) million or earnings per share EUR 0.11 (0.49) for January-September.
Cash flow statement
48
MEUR III/2012 III/2011 I-III/2012 I-III/2011 2011 LTM
Operating profit before depreciations 391 461 1 731 2 274 3 008 2 465
Non-cash flow items and divesting activities -35 -31 -150 -600 -726 -276
Financial items and fx gains/losses -162 0 -435 -290 -376 -521
Taxes -85 -104 -252 -362 -394 -284
Funds from operations (FFO) 109 326 894 1 022 1 512 1 384
Change in working capital 2 -49 89 119 101 71
Total net cash from operating activities 111 277 983 1 141 1 613 1 455
Paid capital expenditures -342 -361 -919 -864 -1 285 -1 340
Acquisition of shares 0 -24 -3 -44 -62 -21
Other investing activities -3 19 284 560 522 246
Cash flow before financing activities -234 -89 345 793 788 340
Key ratios
49
MEUR LTM 2011 2010Q3'12
EBITDA 2 465 3 008 2 271
Comparable EBITDA 2 292 2 374 2 396
Interest-bearing net debt 7 764* 7 023 6 826
Comparable Net debt/EBITDA 3.4 3.0 2.8
*) as of 30 September 2012
Return on capital employed (%) 10.4 14.8 11.6
Return on shareholders' equity (%) 13.1 19.7 15.7
Good liquidity – committed credit lines total EUR 2.7 billion
Debt Maturity Profile
50
0
250
500
750
1000
1250
1500
1750
2000
2250
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022+
Bonds Financial institutions Other long-term debt CPs Other short-term debt
MEUR
2012 506
2013 646
2014 1,282
2015 1,132
2016 868
2017 611
2018 201
2019 904
2020 76
2021 589
2022+
TOTAL
2,066
8,881
per 30 Sep, 2012 per 31 Dec, 2011
Average Interest Rate (incl. swaps and forwards) 4.9% 4.4%
Portion of floating / fixed debt 45 / 55% 47 / 53%
Outlook
• Key drivers and risks
– Wholesale price of electricity and volumes
• Demand and supply • Fuels
• Hydrological situation • Power plant availability
• CO2 emissions allowance prices
• 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 of about EUR 500 million and to create positive economic value added after completing the ongoing investment programme
51
Outlook
• Updated annual capex excluding potential acquisitions
– 2012 around EUR 1.5 (previously 1.6 to 1.8) billion
– 2013 EUR 1.1 to 1.4 (previously 1.1 to 1.4) billion
– 2014 EUR 0.9 to 1.1 (previously 1.1 to 1.4) billion
• Hedging
– rest of 2012 approximately 70% hedge ratio at approximately EUR 48/MWh
(Q2: 65% at EUR 49/MWh)
– 2013 approximately 60% hedge ratio at approximately EUR 45/MWh
(Q2: 55% at EUR 45/MWh)
– 2014 approximately 30% hedge ratio at approximately EUR 43/MWh
(Q2: n/a)
52
53
Hedging improves stability and predictability
0
10
20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
EUR/MWh
Realised prices quarterly since 2000
Power's Nordic power price Spot price, SE&FI avg.
2009 onwards thermal and import from Russia excluded
2009 onwards new definition
Efficiency programme launched to maintain and strengthen the strategic flexibility and competitiveness
54
"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"
Short term - Fortum's efficiency programme 2013-2014
55
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
For more information, please visit www.fortum.com/investors
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