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Nordic Electricity Retail MarketChristian Lundberg
President, Fortum Markets
Capital Markets DayJune 17, 2004
2
Become the energy supplier of choice
Fortum focuses on the Nordic energy market as a platform for long-term profitable growth
Excel in business performance
Create the leading
power and heat company
Become the energy supplier
of choice
Strengthen position as the leading clean fuels refining
companyTargetsTo be Nordic # 1• Customer base• Customer
satisfaction and loyalty
• Business performance
3
Fragmented Nordic electricity retail market2003
14 million electricity customers~ 1 million B2B customers
2,5 million115 TWh+17 TWh*
5,2 million145 TWh+7 TWh*
3,0 million85 TWh+7 TWh*
3 million35 TWh+3 TWh*
Demand ~ 380 TWhGrowth 03-2010 ~+34 TWh*
Fortum 1.2 million ( 9%)
Vattenfall**
Hafslund
others
Nesa68%
E.ON
** in addition Vattenfall owns 50% of Plusenergi (~400 000 customers)
*Source: Eurprog 2003; Nordel, Company reports
4
Fortum Markets - energy solutions and services
BusinessIdea
• For trust, convenience and effectiveness, with environmental awareness, we offer a wide range of energy solutions and services
• Second largest electricity sales company in the Nordic area –Operations Sweden, Finland and Norway – 1.2 million electricity retail customers– Electricity purchases through Nord Pool
• Largest heating oil supplier in Finland– 0.1 million customers
1.2 million electricity customers
0.70.4
0.1
5
2003 was a year of turnaround for Markets
Turnaround from•better risk management• improved business processes •cost reductions
Delivering major improvements in results
Net sales Operating profit TurnoverEURMillion1,6
1,2801,540
EURMillion
-20-10
01020304050
-11
43Heating oilElectricity
33.2 33.535TWh
00,20,40,60,8
11,21,41,61,8
2
2002 2003
Mt
1.3 1.2
0
0,4
0,8
1,2
2002 200305
1015202530
2003 20032002 2002
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First to create a pan-Nordic and efficient operation
• Nordic streamlined organisation― Truly Nordic organisation and governance covering three countries
―Nordic wide quality management system, ISO9001 and ISO14001
• Enhanced customer interfaces and offerings―Uniform Nordic brand
―Common set of energy products and services
― Significant improvement in service levels
• Development of operational excellence― Significant improvement in cost efficiency
―Harmonised operational processes
―Nordic portfolio structure and hedging process with tools for real time execution
7
Fortum has developed a deep customer insight as basis for further growth
Coordinated and focused actions
*Signifi-cance
Behavior*
1 2 3
4 5
86 79s
9b
Acquire new external customers.Targets group:"Twins" of segment 1,2 and 34
2
3
1
5
4
•Behaviour•Significance
Not relevant
B2C:
B2B:
Common languageCustomer knowledge
Growth strategy
Segment and valuechain analysis
Customer segmentation
8
Platform for further growth in place
• Efficient internal processes
• Streamlined organisation
• In-depth understanding of customers
• Financial strength
9
Customers are learning and getting more active• Industry credibility is questioned
– Basic customer services not fulfilling expectations– Perceived high prices
• Consumer prices peaked winter 2003
• Uncertainty drives activity and customer churn– Customers are more actively choosing fixed price contracts or supply
solutions– Mixed expectations on price development
• Small customers sign short term contracts• Large industrial users have the tendency to ask for contracts
covering several years
10
For active players like Fortum the market offers a great opportunity for growth
• Active positioning among the players to restore credibility
• The industry (Sweden) is defining a joint agenda for improving the service levels towards the customers
• Increased market activity
11
Fortum leverages the full corporate capability
• Development of Customer Value Management in each part of Fortum
―Customer segmentation and prioritization
―Offering innovation
―Relationship building and value-based selling
12
Our focus forward is customer orientation for organic growthAddressing customer needs whilst understanding the importance of the basics
Competitive Differentiators
BusinessHygiene Factors
Industry Credibility Factors
Customer
Organic growth
Assurance of hygiene factors
Joint industry initiatives
13
Actions for improving customer services
• Convenient customer entry– One customer service!
– Improved Web-interface
– Customer Care Team
– Certified Customer Service Technicians
• Improved services– New simplified bill
– Post-debiting based on actual consumption
– "Learn with Fortum"
– Service levels and availability
• Supporting infrastructure– New Customer Care and Billing system
14
Enforced market activity
• Extended marketing and sales activity
― Value based solutions in B2B segments
― Launch of offerings developed for segment specific needs
― Attractive new product features
15
16
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.