FORTUM - For a cleaner world - Equity story of Investor / Analyst material August 2020
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Equity story of FORTUM – For a cleaner world Investor / Analyst material August 2020
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. Any references to the future represent the management’s current best understanding. However the final outcome may differ from them. 2
Content Fortum in brief 4–6 Energy market transition 7 – 10 Fortum’s strategic route 11 – 13 Q2 2020 Half-Year Financial Report 14 – 35 Appendices 36 European and Nordic power markets 37 – 42 Fortum’s power generation 43 – 44 Historical achieved prices 45 Dividend 46 IR contacts 47 3
Fortum in brief
Consolidated Fortum is the third largest CO2 free generator in
Europe
4 Source: Company information, Fortum analyses, 2018 figures pro forma.
EPH incl. LEAG
Fortum in brief
Fortum to grow and lead European energy transition
2019 combined comparable EBITDA(1,2) Europe & Russia
Uniper
EUR 1.6 bn
EUR 3.3 bn Fortum
EUR 1.8 bn
Combined power generation (2019)(2)
India
18 %
50 %
Hydro
Nuclear
Other ~180 TWh
19 %
Coal
Gas
1% Combined power generation assets
12 %
Fortum
Uniper
1) Comparable EBITDA is based on the Fortum's Comparable EBITDA and Uniper's Adjusted EBITDA as defined in Both Fortum and Uniper
Fortum’s and Uniper's financial statements. No impacts from the assumed transaction has been included.
5 2) Based on 2019 reported generation volumes (accounting view in Uniper). Not consolidated in 2019.
Fortum in brief
Fortum’s CO2-free power generation increases by ~60% as
Uniper is consolidated as a subsidiary
Fortum's power generation, TWh
200
Fortum and Uniper
175 consolidated*:
150 • CO2-free generation
+60%
125
• Gas-fired power
100 generation triples
75
• Share of coal-fired
CO2-free Gas Coal Other generation ~12%
50
• Share of coal of sales
25 revenue ~1%
* based on 2019 reported figures
0
2020 ind.
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
INDICATIVE GENERATION FOR 2020, NOT OFFICIAL GUIDANCE.
Note: Fortum actuals 1990-2019 excluding associated company Stockholm Exergi. 2020 indicative figures adjusted for Nordic wind and Joensuu CHP assets sold in 2020. Uniper’s disclosed 2018
numbers used for indicative consolidation 2020 with the following corrections/assumptions: normal hydrological year, accounting view adjusted to pro forma, French coal assets sold, Datteln 4
approximately 2.2 TWh in 2020, no net increase in generation from Beresovskaya 3, coal-to-gas switch 2 TWh, Ringhals 2 closed on 31 Dec 2019.
6
Energy market transition
Europe needs to eliminate CO2 emissions to reach climate goals
– this requires actions from all sectors
MtCO2-eq
6 000
Greenhouse gas emissions
5 000
Coal
4 000 Power
- 40%
3 000
Oil Transport1 -50…-55% - 60%
2 000 Old climate targets
Industry2
Gas
1 000 - 80%
Buildings3
Others
Others4 - 95%
0 -100%
Source Sector
1990 2000 2010 2020 2030 2040 2050
Sources: EEA, IEA, Fortum
1 including international aviation and marine
2 iron & steel and chemicals are among the biggest contributors
7 3 residential and commercial heating & cooling
4 non-energy related emissions: industrial processes and product use, waste management, agriculture, fugitive emissions
Energy market transition
Volatility and uncertainty in the European power market
increases the value of flexible assets
Intermittent renewables
Nuclear and coal closures
Increasing role of gas
Volatility and
Supply-demand balance
uncertainty
Increased interconnection between
Nordics and Continent
Commodity and CO2 prices
Weather conditions
8
Energy market transition
The MSR introduces tightness to carbon market
Linear reduction factor (LRF) tightens the market Market stability reserve restores scarcity Abatement from coal to gas switching
by reducing future auction volumes depends on coal and gas prices, together
MtCO2
represented by a switching range
Illustrative volumes (Mton of CO2eq.)
2500 Eur/t
60
24% of cumulative surplus Need for abatement
2000 or inventory reduction Switch range CO2 price
50
57% of cap
1500
40
1000 Cap (excl. aviation) 30
43% of cap
500
EU ETS emissions (incl. call 20
on EUAs from aviation)
0 10
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
Free Auction MSR Auction Deficit Emissions 0
allocation pre- effect post-
2017 2018 2019 2020
MSR MSR
• Linear reduction factor (LRF) is the percentage of • When TNAC2 > 833 Mt, MSR deducts 24% of the • CO2 price has almost quadrupled since
baseline supply1 by which the annual supply of TNAC from the auction volume each year placing November 2017, when the final decision was
allowances (cap) is reduced every year. LRF is them into the reserve during 2019-2023 reached on the future EU ETS rules, including
set at • MSR rate is 12% during 2024-2030 the intake rate of the Market Stability Reserve,
• 1.74% for 2013-2020 (equals to a • When TNAC < 400 Mt, MSR releases 100 million which became operational in January 2019
reduction of 38 MtCO2/year) EUAs annually from the reserve adding them to • Market tightness forces the EUA market to find
• 2.2% for 2021-2030 (equals to a future auctions ways to reducing demand, including by coal-to-
reduction of 48 MtCO2/year) • 900 million back loaded allowances from 2014- gas switching, making the relative gas/coal price
• In total, emissions are set to decrease by 43% by 2016 will be transferred into the MSR in 2019-2020 an important price anchor for CO2
2030 vs. 2005 • As from 2023, allowances in MSR above the total • Political risks also continue to play a role in EUA
• Next LRF review is scheduled for 2024 number of allowances auctioned during the prices, with developments around Brexit and
• 3.03% LRF from 2030 onwards would previous year will be cancelled national coal phase-out policies in particular
deliver net zero emissions by 2050 • Next MSR review is scheduled in 2021 being closely watched
2 TNAC = total number of allowances in circulation = Efficiency assumptions in switching range;
1 Average
9 annual total quantity of allowances released in 2008-2012. supply – (demand + allowances in the MSR). According to the latest at low-end: gas 52% and coal 34%;
publication May 15, 2018 the TNAC corresponds to 1655 million at high-end: gas 45% and coal 42%. O&M
allowances. cost assumptions apply.
Energy market transition
Several Western European countries exiting coal over the next
decade
FI: Phase-out
• France to phase out coal from power sector at latest in 2022 Germany: Phase- by 2029
out by 2038
• United Kingdom to exclude coal condense from capacity SE: Last coal
plant closed
market by capping allowed emissions from 2025 2020
UK: Phase-out by
• Netherlands’ new government aims at exit by 2030, 2024
regulation not yet in place
• Poland: investments in new coal generation, after 2025 will NL: Phase-out by
2030
be based on CHP or other technologies, which will allow the
emission standards on the level of 450kg CO2 per MWh of
generated energy FR: Phase-out by
2022
• Germany’s coal phaseout law was agreed by the cabinet in
January and currently awaits for parliamentary approval
– By end-2022, only 15 GW of hard coal and 15 GW of lignite is allowed in the AT: Phase-out by 2020
market, compared to 21 GW and 18 GW at end-2019
• By end-2030, 8 GW of hard coal and 9 GW of lignite allowed in the market
• Full coal exit by end-2038, with an option for an early exit already in 2035 PT: Phase-out by 2023
– Compensation for hard coal operators is to based on reverse auctions set to
start already in 2020, provided the draft enters into law
– Compensation for lignite closures will be agreed on one-by-one basis and will
follow a formula based on, inter alia, expected earnings
IT: Phase-out by 2025
– The government intends to cancel European Emission Allowances in order to
neutralize the phaseout’s impact on the EU ETS
Phase-out from Phase-out from Phase-out from Phase-out commitment
power sector power sector power sector mainly via “Powering
latest by 2025 latest by 2030 latest by 2040 past coal Alliance”
10Fortum’s strategic route
Portfolio well positioned for energy transition
- overall combined share of coal based activities is moderate
Coal share from generation and from sales
(calculated from disclosed numbers assumptions below)
Fortum 2019 Uniper 2019 Combined
Sales, MEUR 5,447 65,804 71,251(1)
Coal and lignite generation based sales, MEUR 217 810 1,027(1)
Share of coal based sales 4% 1% 1%
Generation (power and heat), TWh 103 104 207
Coal and lignite based, TWh 7 20 27
Share of coal based power generation 7% 19% 13%
Note: Fortum sales data includes also heat production, Uniper sales data only power generation. For Fortum avg. coal based power sales price assumption 38 €/MWh
and for heat 28 €/MWh; for Uniper avg. coal based sales price assumption 41 €/MWh.
1. Combined sales is presented for illustrative purposes only and do not include possible impacts from aligning differences in accounting principles,
effects from co-owned power companies or eliminations of sales between the Groups.
Source: Fortum Sustainability report 2019, page 17 and Fortum Financials 2019, page 3 and Fortum Q4 2019 additional quarterly tables.
Uniper Annual Report 2019, pages 2, 110 and 132
11Fortum’s strategic route
Fortum is listed in several
Fortum is a forerunner in sustainability sustainability indices and ratings:
We engage our customers and society to drive the change towards a
cleaner world. Our role is to accelerate this change by reshaping the energy
system, improving resource efficiency, and providing smart solutions. This
way we deliver excellent shareholder value.
Increasing CO2-free power generation
Annual CO2-free power generation will increase appr. 60% from ~45 TWh to
~70 TWh when consolidating Uniper
Among the lowest specific emissions
96% of power generation in the EU and 59% of total power generation was CO2-
free in 2019. Fortum’s specific emissions from power generation in Europe were
27 gCO2/kWh in 2019, total 183 gCO2/kWh.
Growing in solar and wind
Targeting a multi-gigawatt wind and solar portfolio, which is subject to the capital
recycling business model
MSCI ESG RATINGS DISCLAIMER STATEMENT: THE USE BY FORTUM CORPORATION OF ANY MSCI ESG RESEARCH LLC OR ITS AFFILIATES (“MSCI”) DATA, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS
OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT, RECOMMENDATION, OR PROMOTION OF FORTUM CORPORATION BY MSCI. MSCI SERVICES AND DATA ARE THE PROPERTY OF MSCI
OR ITS INFORMATION PROVIDERS, AND ARE PROVIDED ‘AS-IS’ AND WITHOUT WARRANTY. MSCI NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI.
12Fortum’s strategic route
Fortum’s evolution and historical strategic route
Skandinaviska Birka Energi Länsivoima Elnova Østfold
Elverk 50% Fortum →100% 50% → 100%
50% Stockholm
Gullspång merged Shares in Divestment of
with Stockholm Energi Hafslund Fingrid shares
Gullspång Stora Kraft Birka Energi TGC-1 E.ON Divestment
50% → 100% established Finland of Lenenergo
Shares in shares
Divestment of
Länsivoima Lenenergo shares → Lenenergo Oil business heat operations
45% → District heating spin-off TGC-10 outside of
65% in Poland → Stockholm
IVO FORTUM
NESTE 1996 1997 1998 2000 2002 2003 2005 2006 2007 2008 2011
2012 2014 2015 2016 2017 2018 2020
Divestment of Divestment of electricity Divestment of DUON Nordkraft wind power Investment in Uniper Divestment of district
non-strategic distribution business electricity distribution heating business in
heat business business Joensuu
Ekokem Restructuring of Divestment of
Divestment of electricity ownership in Hafslund ownership in
distribution and heat businesses Hafslund Produksjon Majority owner in
Uniper
Divestment of Turebergs Russian wind power JV
small scale hydro Divestment of Grangemouth Recycling
power plant Nordic wind capital
recycling (80%)
Divestment of Gasum shares
13Half-year Financial Report January-June 2020 Fortum Corporation 19 August 2020
Priorities for the new CEO
Create a joint Maintain the Foster a strong
strategy for the Group’s leadership
Fortum-Uniper financial culture based
Group strength on openness
15Q2 2020 – Exceptionally low Nordic spot
prices largely offset by solid hedges
• Power and heat consumption stable in the Nordics
– Nordic spot price down 84%
– Wet hydrology in Q2
– Volatile commodity and CO2 prices
• Limited impact of Covid-19 on Fortum group
– adverse effects on the Russian operations
• Comparable EBITDA at EUR 512 (372) million
• Comparable operating profit at EUR 207 (232) million
• Fortum’s share of profits from associates of EUR 37 (461) million
• EPS at EUR 0.35 (0.69)
– Items affecting comparability EUR 0.20 (-0.05)
• Net cash from operating activities before change in net margin liabilities
negatively affected by change in working capital
16Q2 2020 highlights
Disclosed
divestments
Limited impact from totalling
Covid-19, Russian EUR 1.2 billion
operations affected
Ownership in
Stockholm
Exergi under
Focus on short term strategic review
actions to maintain
financial flexibility
Strategic review
of district heating
assets in Poland
and Baltics
Joint strategy continues
process during 2020
1718
GW GW
40
45
50
55
60
65
30
35
40
45
50
55
60
65
01/01 01/01
01/18 01/20
02/04
0%
02/08
-10%
02/21 02/27
03/09
03/17
03/26
04/12 04/05
04/29 04/24
05/16 05/13
06/02 06/01
06/19 06/20
07/06 07/09
Nordics
07/23 07/28
Germany
08/09
08/16
08/26
09/04
09/12
09/29 09/23
10/16 10/12
11/02 10/31
11/19 11/19
12/06
Percentage change in Q2 2020 compared to Q2 2019
12/08
12/23 12/27
GW GW
30
35
40
45
50
55
60
65
70
75
80
100
110
120
130
140
150
160
170
180
190
Source: ENTSO-E hourly reported power demand, 7 day moving avg
01/01 01/01
01/18 01/19
CWE = Central Western Europe (Germany, France, Netherlands, Belgium)
02/04 02/06
02/21 02/24
-13%
-10%
03/09
03/13
03/26
03/31
04/12
04/29 04/18
05/16 05/06
06/02 05/24
2019
06/19 06/11
07/06 06/29
CWE
France
07/23 07/17
08/09 08/04
08/26
2020
08/22
09/12 09/09
09/29
09/27
10/16
11/02 10/15
11/19 11/02
12/06 11/20
12/23 12/08
12/26
GW
Power demand development in different areas
20
25
30
35
40
45
100
105
110
70
75
80
85
90
95
01/01 01/01
01/18 01/17
02/04 02/02
-6%
02/21 02/18
-17%
03/10 03/05
03/27 03/21
04/13 04/06
04/30 04/22
05/17 05/08
06/03 05/24
06/20 06/09
Italy
07/07 06/25
07/24 07/11
08/10 07/27
Nordic power demand at 2019 level, demand in other regions affected by Covid-19
08/27 08/12
09/13 08/28
09/30 09/13
Russia (First price zone)
10/17 09/29
11/03 10/15
11/20 10/31
12/07 11/16
12/24 12/02
12/18Risk assessment of Covid-19 impact on Fortum
So far very limited effect from Covid-19 on Group level, adverse effects in Russia
Not directly Covid-19 related
Directly (also) Covid-19 related
• Power price – hedging supports result • Power and heat price – CSA and CCS
• Power demand – impacted by weather capacity payments provides stability and
predictability
conditions and seasonality
• Power and heat demand – impacted by
• Power demand – affected by industrial weather conditions and seasonality
demand in the Nordics • Power and heat demand – affected by
• Planning of annual overhauls of nuclear industrial demand
plants and regular maintenance of power GENERATION RUSSIA • Negative EUR translation effect - weaker RUB
plants • Potential bad debts – affected by customers’
financial situation and solvency
• Heat and power prices – resilience as • Sales price and gross margin – impacted by
heating is contracted, power prices power price
hedged
• Potential credit losses - affected by
• Heat demand – impacted by weather customers’ financial situation and solvency
CONSUMER
conditions and seasonality CITY SOLUTIONS • Negative EUR translation effect – weaker
SOLUTIONS
• Power and heat demand – affected by NOK, SEK and PLN
industrial demand
• Recycling and waste business – affected
by industrial demand and smoothness in
supply chain logistics
19After delayed spring, the Nordic hydro reservoirs climbed high
in Q2
Reservoir content (TWh)
120 • Rainy and mild winter led to a
rapid strengthening of the
100 Nordic water reservoirs in Q1.
• In addition to high water
80 reservoir levels, the overall
snow pack was estimated to be
significantly above normal.
60
• Spring was cold, delaying start
of the spring flood.
40
• Nordic water reservoirs at the
Norway
end of Q2 were 9 TWh above
20
long term average. In mid-
Sweden Average
2000 2003 2018 2019 2020
2000-2018 August the surplus was 16 TWh.
Finland
0
Q1 Q2 Q3 Q4
20 Source: Nord Pool, 2019 by countryWeak coal and gas prices showed signs of recovery in late Q2
USD / t Coal price (ICE API2 2021)
120 • Coal prices have declined on cheap natural gas and more
100 expensive CO2, and Covid-19 exacerbated coal demand weakness.
80 • During Q2, API2 2021 continued losing its value through April (-
4.2% MoM) and May (-2.1% MoM), but rebounded in June (+11.9%
60
MoM) finishing the quarter at 58 USD/t.
40
• Despite slow demand recovery, coal prices have improved on
20 tighter supply, higher freight rates, bullish trends in other energy
0 commodity markets, and optimistic expectations around Asian
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20
demand for H2.
EUR / MWh Gas price (TTF 2021)
30 • Global gas markets started 2020 on expectation of lower prices due
25 to ample LNG supply, and mild winter and Covid-19 further slowed
down demand.
20
• During Q2, European gas front-year prices stayed around the lows
15
reached in Q1. Front-month prices experienced significant volatility.
10
• While the role of storage has been indispensable since the beginning
5 of this year, supply response helped stabilize European gas market
0 in Q2: US LNG cargo cancellations and lower LNG send-out, lower
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20
Russian and North African pipeline flows in supporting gas prices.
Source: Bloomberg
21 14 August 2020CO2 trended upward as Q2 progressed
EUR / tCO2 CO2 price (EUA DEC 2020)
36 • After touching a two-year low at 15 EUR/t in March 2020, CO2 price
30 recovered quickly, averaging 21 EUR/t for Q2 and above 23 EUR/t in
June.
24
18
• CO2 price is pushed down by high auction supply and low gas prices.
At the same time, the prospect of economic recovery and tightened
12 2030 climate target provide support for the CO2 price. These opposing
6 forces create high volatility in the carbon market.
0 • Although many countries started easing Covid-19 lockdown measures
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20
in Q2, EUA demand in the power sector has not seen a significant
upside. With emissions down by 9%, or 150Mt, in 2019, lower demand
USD / bbl Crude oil price (ICE Brent) could cause an even bigger drop this year.
120
• Crude oil benchmarks plummeted in April on collapsing global
100 demand and OPEC+ failure to agree on supply cuts. WTI front-month
80 contract traded in negative territory for the first time in history, while
Brent front-month touched 21-year lows.
60
40
• But oil prices have been on a recovery trend for the rest of Q2,
climbing to about 35 USD/bbl in late May and 41 USD/bbl by end of
20 June.
0
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20
Source: Bloomberg
22 14 August 2020Rainy and mild weather combined with weak commodities
• During Q2, the average Nord Pool system spot price
EUR/MWh Nordic spot and forward prices declined exceptionally to 5.6 EUR/MWh (35.6)
70
Realised system price
• The FI & SE3 area prices declined, but clearly less:
Futures 12 May 2020
60
Futures 14 August 2020 – 22.5 EUR/MWh (37.4) in Finland
50 – 15.1 EUR/MWh (33.0) in Sweden-SE3 (Stockholm)
– 8.2 EUR/MWh (33.0) in Sweden-SE2 (Sundsvall)
40
• Nordic spot prices declined heavily during Q1 2020
30 caused by exceptionally rainy and mild weather. This
development was supported by low spot prices in
20 Continental Europe, driven especially by declining gas
prices.
10
• The Nordic spot prices have continued to fall in Q2
with strongest decline in hydro dominated price areas,
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Norway and Northern Sweden. The Q2 price drop in
2018 2019 2020 2021 Finland and Southern Sweden have been quite
Source: Nord Pool, Nasdaq Commodities modest compared to hydro dominated regions.
23Hedging supported Fortum’s achieved power price as power
prices fell in the Nordics, Russia power prices declined
Spot price for power in Nord Pool power exchange Spot price for power (market price), Urals hub
EUR/MWh RUB/MWh
42 38,6 1 500
35,6 34,7
35 1 250 1 151 1 107 1 081 1 068 1 021
28 1 000
21 750
15,4 -11%
14 500
5,6 250
7
-84%
0 0
Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020 Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020
EUR/MWh Generation's Nordic power price Achieved power price for PAO Fortum
EUR/MWh
42 37,6 30 27,2 27,5 28,2
35,0 35,7
34,0 33,6 24,5 24,5
35 25
28 20
-4% -10%
21 15
14 10
7 5
0 0
Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020 Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020
Changes refer to year-on-year difference (Q2 2020 versus Q2 2019)
NOTE: Achieved power price (includes capacity payments) in rubles decreased by 5%
24Generation
Q2 2020 H1 2020
• Lower power generation • Higher power generation
– hydro -0.2 TWh, – hydro +1.3 TWh
– nuclear -0.3 TWh – nuclear -0.3 TWh
• Lower achieved power price, -4% – wind +0.1 TWh
(1.4 EUR/MWh), supported by • Lower achieved power price, -8%
high hedge levels, spot power (2.9 EUR/MWh) supported by
price high hedge levels, spot price -75%
-84%
MEUR II/2020 II/2019 I-II/2020 I-II/2019 2019 LTM
Sales 450 500 1,024 1,101 2,141 2,064
Comparable EBITDA 212 225 485 484 939 940
Comparable operating profit 173 191 409 414 794 789
Comparable net assets 5,790 6,147
Comparable RONA % 12.8 12.4
Gross investments 34 63 68 101 260 227 Imatra, Finland
25Russia
Q2 2020 H1 2020
• Lower power margin and generation • Lower power margin and generation
• Lower CSA payments • Lower CSA payments
• Higher heat tariffs • Higher heat tariffs
• Q2 2019: Positive one-time effect • FX effect of EUR -4 million
related to credit losses
• FX effect of EUR -7 million
MEUR II/2020 II/2019 I-II/2020 I-II/2019 2019 LTM
Sales 202 239 519 537 1,071 1,053
Comparable EBITDA 74 107 213 242 469 440
Comparable operating profit 37 69 135 168 316 283
Comparable net assets 2,807 3,205
Comparable RONA % 12.3 11.0
Gross investments 47 14 51 19 133 165 Kalmykia, Russia
CSA=Capacity Supply Agreements
26City Solutions
Q2 2020 H1 2020
• Lower result in Norwegian district • Lower heat sales volumes
heating business
• Lower power sales prices
• Improved profit in the recycling and
• Lower Norwegian heat sales prices
waste business
• Pavagada 2 solar plant contributed
• Positive result contribution from positively
Pavagada 2 solar plant
MEUR II/2020 II/2019 I-II/2020 I-II/2019 2019 LTM
Sales 212 228 554 633 1,200 1,121
Comparable EBITDA 32 31 138 168 309 279
Comparable operating profit -15 -15 43 77 121 87
Comparable net assets 3,577 3,892
Comparable RONA % 4.7 3.8
Gross investments 30 136 69 207 322 184 Stockholm Exergi, Värtaverket, Sweden
27Consumer Solutions
Q2 2020 H1 2020
• Competition continued to be intense • Higher sales margins as a result of
with high customer churn active development of the service
offering following the Hafslund
• 11th consecutive quarter of EBITDA
integration and subsequent
improvement
development of the business
• Accelerated Covid-19 pandemic
increased uncertainty especially in the
small and medium size enterprise
segment – no impact of credit losses
MEUR II/2020 II/2019 I-II/2020 I-II/2019 2019 LTM
Sales 237 346 661 1,015 1,835 1,481
Comparable EBITDA 35 34 82 75 141 148
Comparable operating profit 19 19 51 44 79 86
Comparable net assets 540 512 640
Customer base, million 2.36 2.43 2.38 Göta Energi branded electricity
Gross investments 13 13 28 27 55 56 related insurance service
28Uniper
Q2 2020 H1 2020
• Uniper income statement • In Q1, Fortum’s share of Uniper’s
consolidated as of Q2 as a profits as Uniper recorded as an
subsidiary associated company in Other
Operations
• Sales figure inflated by commodity
trading business • Uniper contribution to Fortum’s
EPS 0.65 (0.50)
• Normal seasonality; Q1 and Q4
strong quarters, while Q2 and Q3
are weak quarters
MEUR II/2020 II/2019 I-II/2020 I-II/2019 2019 LTM
Sales 11,365 - 11,365 - - 11,365
Comparable EBITDA 184 - 184 - - 184
Comparable operating profit 27 - 27 - - 27
Comparable net assets - 7,035 - -
Gross investments 145 - 145 - - 145
Moforsen, Sweden
29Q2 2020 – Lower power prices and volumes
Comparable operating profit
EUR
million
• 0.5 TWh lower
volumes
• 1.4 EUR/MWh • Lower power
lower achieved margin and • Uniper
price volumes consolidated as
• Higher heat tariffs a subsidiary
• No increase in
credit losses
(Q2 2019: positive
one-time effect)
• FX- effect
EUR -7 million
30H1 2020 – Lower power and heat prices, higher hydro volume
Comparable operating profit
EUR
million
• 1.0 TWh higher • Lower power
volumes margin and
• 2.9 EUR/MWh volumes • Lower heat sales • Uniper
lower achieved • Lower CSA volume • Higher sales consolidated as
price payments • Lower power margins as a a subsidiary
• Higher heat prices result of active from Q2 2020
tariffs • Lower Norwegian development of
• FX- effect heat prices the service
EUR -4 • Divestment of offering
million Joensuu following the
• Pavagada 2 Hafslund
contributed integration and
positively subsequent
development of
the business
31Income statement
II/2020 II/2019 I-II/2020 I-II/2019 2019 LTM
MEUR
• Uniper’s income statement consolidated as
of Q2 2020
Sales 12,330 1,144 13,687 2,834 5,447 16,300 • Uniper’s sales of EUR 11.4 bn mainly
related to energy trading and optimisation
Other income 2,134 23 2,157 44 110 2,223
business
Materials and services -11,424 -526 -12,000 -1,443 -2,721 -13,278 Q2 2020
• Items affecting comparability includes
Employee benefits -353 -123 -477 -245 -480 -712 • EUR 154 million changes in fair
Depreciations and amortisation -306 -141 -456 -278 -575 -753 values of derivatives hedging future
cash flow
Other expenses -2,174 -146 -2,312 -273 -591 -2,630 • EUR 69 million capital gains (mainly
Fortum Recharge AS)
Comparable operating profit 207 232 600 640 1,191 1,151 • EUR 71 million of impairment
Items affecting comparability 328 -48 527 -98 -81 544 charges and reversals
• Net finance costs impacted by Uniper’s
Operating profit 534 184 1,126 542 1,110 1,694
finance income
Share of profits/loss of associates
37 461 516 572 744 688
and joint ventures H1 2020
Finance costs - net -2 7 -59 -38 -125 -146 • The comparable effective income tax rate
was 21.6%
Profit before income tax 570 652 1,583 1,076 1,728 2,235
Income tax expense -191 -45 -266 -109 -221 -378
Profit for the period 379 607 1,317 967 1,507 1,857
32Cash flow and change in financial net debt in H1 2020
+1,090
7 772
147 6
790 977
6 682
1 770
1 020
1 849
4 833
Financial net Acquired Including CF from Investments Divestments Dividends paid Dividends paid FX and other Financial net
debt Q4/19 financial debt acquired debt operating paid to minorities debt Q2/20
activities
before net
33 margin liabFocus remains on optimising of cash flow and maintaining of
financial flexibility
Fortum targets to have a solid investment grade rating of at least BBB to maintain its financial strength, preserve
financial flexibility and good access to capital markets for the enlarged group. Focus on cash flow - profitability,
optimizing of cash flow and tight prioritising of capital expenditure in the current market and business environment.
Maturity profile
3 250 Total loans of EUR 9,251 million:
3 000
2 750 • Average interest rate of 1.7% (2019: 2.3%)
2 500 for Fortum Group loan portfolio including
2 250 derivatives hedging financial net.
2 000
1 750 • EUR 721 million (2019: 787) was swapped
1 500 to RUB with average interest 7.0% (2019:
1 250 7.8%) including cost for hedging.
1 000
750 1) • Average interest for EUR loans 0.9% (2019:
0.9%).
500
250
0
Liquid funds of EUR 2,403 million
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+
Undrawn credit facilities of EUR 5,400 million
Bonds Financial institutions Other long-term debt Short-term debt
1) In addition, Fortum has received EUR 217 million based on collateral agreements with several counterparties.
This amount has been booked as a short-term liability.
34Outlook
Hedging 2020 Estimated annual capital Income taxation
expenditure, including maintenance
Generation Nordic hedges: In 2020, the comparable effective
and excluding acquisitions
corporate income tax rate for
For the remainder of 2020: Fortum is estimated to be in the
85% hedged at EUR 34 per MWh EUR 700 million
range 20-25%, as Uniper is
Note: capital expenditure guidance does not consolidated into Fortum’s results
For 2021: include capital expenditure for the Uniper
65% hedged at EUR 33 per MWh segment
from the end of the first quarter.
(Q1: 50% at EUR 34) The wider range is mainly a
consequence of volatility in the
Uniper Nordic hedges: Fortum and Uniper share the view of taxation of Uniper’s operations.
For the remainder of 2020: the importance of credit rating and take
90% hedged at EUR 29 per MWh it into account when making new
For 2021: capex decisions
80% hedged at EUR 27 per MWh
(Q1: 70% at EUR 28)
For 2022:
40% hedged at EUR 24 per MWh
(Q1: 15% at EUR 23)
35Appendices
European and Nordic power markets
Still a highly fragmented Nordic power market
Fortum has the largest electricity customer base in the Nordics
Power generation in 2018 Electricity retail
400 TWh 16 million customers
>350 companies ~350 companies
Vattenfall
Others Fortum
Others
Vattenfall
36% Statkraft 50%
49%
E.ON
Ørsted
BKK
Ørsted Fortum Norlys
Agder Energi Fjordkraft
Norsk Hydro Uniper Helen
PVO Hafslund E-CO
Oomi
SEAS-NVE
Din El, Göteborg
Source: Fortum, company data, shares of the largest actors, pro forma 2018 figures
37 Norlys was formed through the merger of the companies SE and Eniig in Denmark
Oomi was formed through the merger of the retail businesses of Oulun Seudun Sähkö, Lahti Energia, Vantaan Energia, Pori Energia and Oulun Sähkönmyynti Oy and its stakeholders
Oulun Energia, Tornion Energia, Haukiputaan Sähköosuuskunta, Raahen Energia, Rantakairan Sähkö and Tenergia in FinlandEuropean and Nordic power markets
Fortum mid-sized European power generation player
– major producer in global heat
Power generation Heat production Customers
Largest producers in Europe and Russia, 2018 Largest global producers, 2018 Electricity customers in Europe, 2018
TWh TWh Millions
EDF Gazprom Enel
Rosenergoatom T Plus
RWE Sibgenco EDF
Enel Inter RAO UES
Gazprom E.ON
RusHydro Veolia
Inter RAO UES RusHydro Iberdrola
Uniper En+ ENGIE
Vattenfall EDF
ENGIE Fortum DEI
EPH Quadra
NNEGC Energoat. CEZ
Fortum TGC-2
En+ KDHC Vattenfall
PGE Minskenergo
Iberdrola Vattenfall EDP
CEZ PGE Centrica
Statkraft Lukoil
T Plus Tatenergo EnBW
EnBW
Sibgengo PGNiG Tauron
EDP Kyivteploenergo
EPS Ørsted PGE
DTEK EPH SSE
Verbund Stockholm Exergi
Axpo Naturgy
E.ON
SSE
E.ON CEZ Fortum
Naturgy Helen
DEI TGC-14 Ørsted
0 100 200 300 400 500 600 0 20 40 60 80 100 120 140 0 10 20 30 40
Source: Company information, Fortum analyses, 2018 figures pro forma.
38
EPH incl. LEAG, E.ON incl. Innogy customers. No data from China.European and Nordic power markets
Wholesale power prices
EUR/MWh Spot prices Forward prices
100
90
80
70
60
German
50 Nordic
40
Russian*
30
20
10
14 August 2020
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
* Including weighted average capacity price
39 Source: Nord Pool, Bloomberg Finance LP, ATS, NP “Market Council”, FortumEuropean and Nordic power markets
Nordic year forwards
Year10 Year11 Year12 Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22
€/MWh 14 August 2020
Year22
70 Year21
28
26
60 24
22
20
18
50 May June July Aug
2020 2020 2020 2020
40
30
20
10
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
40 Source: Nasdaq Commodities, BloombergEuropean and Nordic power markets
German and Nordic forward spread at all time high
Spot price
• Nordic system price depressed by the strong hydrological surplus EUR/MWh Nordic and German daily spot prices in Jan 2019 –August 2020
since the beginning of the year. 100
• Continental European spot prices pushed down by dampening gas 80
price and lowered demand by Covid-19 measures especially in April 60
and May. 40
• Supported by lower French nuclear production, low winds and 20
booming EUA price, the Continental spot prices started recovering 0
again in June. -20
Q1 Q2 Q3 Q4 Q1 Q2
• German-Nordic spread for Q2 realized at 14 €/MWh, a few euros 2019 2020
more than in Q1. Nordic Germany
Forward price EUR/MWh Nordic and German year 2021 forwards in Jan 2019 – August 2020
• The German contract for 2021 delivery is trading close to 40 €/MWh, 60
while corresponding Nordic SYS contract is close to 20 €/MWh. 50
• The German-Nordic spread for 2021 delivery has increased from 11 40
EUR/MWh in the beginning of the year to close to 20 EUR/MWh in 30
July. 20
• German contract is tracking the changes in short-run marginal costs 10
for gas and coal fired condensing units, reflecting the stronger 0
exposure to fossil fuel and CO2 prices. Q1 Q2 Q3 Q4 Q1 Q2
2019 2020
• The Nordic contract has become more influenced by continuing Nordic Germany
strong hydrological surplus and weak system spot price. Including 14 August 2020
41 Source: Nord Pool, BloombergEuropean and Nordic power markets
Nordic, Baltic, Continental and UK markets are integrating
– Interconnection capacity growing to over 13 GW by end-2023
• Several interconnectors are currently 1
700 MW COBRAcable from DK to NL has been
under construction or decided to be built Current Nordic/Baltic taken into operation in September 2019
interconnector New 400 MW Zealand – DE connection via Kriegers
2
• New interconnections will increase the projects Flak offshore wind area due in September 2020
Nordic export capacity from the current 3
EU’s Connecting Europe Facility co-financing 3rd EE-
C LV transmission line, due to be ready by end-2020
7.8 GW to over 13 GW by end of 2023
4 DK1-DE capacity has grown to 2500 MW in July
+94% 2020, with further 1,000 MW increase by end-2023
13.4 1,400 MW NordLink as first direct NO-DE link is
B 5
Interconnection capacity (GW)
due to start commercial operation in March 2021
11.0 11.0 Norway - UK 1,400 MW North Sea Link (NSL)
6
6 is due to be ready by end-2021
3 1,400 MW DK-UK Viking Link has been
5 A 7 contracted to be built by end-2023
8.2
6.9 7 8 700 MW LT-PL Harmony Link to be built by 2025
1 9
6.2 as a part of the Baltic synchronisation project
8
4 2 700 MW Hansa PowerBridge DC link between
9
Sweden and Germany by 2026/2027
New interconnectors New Nordic lines
A 1200 MW SE3-SE4 South West Link ready Oct 2020
B 800 MW with first measures on SE2-SE3 by 2023
Existing interconnectors
C 800 MW 3rd 400 kV line SE1-FI ready in 2025
2019 2020 2021 2022 2023 2024 Russia Poland Germany
42 Estonia Netherlands
Years in the chart above refer to a snapshot of 1st of January each year.
Source: Fortum Market Intelligence Lithuania United KingdomFortum’s power generation
Fortum’s Nordic, Baltic and Polish generation capacity
GENERATION CAPACITY MW NORWAY MW FINLAND MW
Hydro 4,677 Price areas Hydro 1,553
NO4, Wind 82 Nuclear 1,487
Nuclear 2,821 NO4 SE1
NO1, CHP 20 CHP 452
CHP 831
Generation capacity 102 Other thermal 565
Other thermal 565
Generation capacity 4,057
Wind 159 SE2 FI
NO3
Nordic, Baltic and Polish
generation capacity 9,053 NO5 SWEDEN MW BALTICS AND
NO1
Figures 31 December 2019 POLAND MW
Price areas
NO2 SE3 SE2, Hydro 1,550 Generation capacity, CHP
EE
The capacity includes the 52 MW Joensuu CHP plant SE2, Wind 75 in Estonia 49
in Finland, which has been sold in January 2020.
SE3, Hydro 1,574 in Latvia 34
The capacity includes the 157 MW wind portfolio in LV SE3, Nuclear 1,334 in Lithuania 18
Norway and Sweden, of which a majority 80% DK1 SE4
ownership has been sold in May 2020. SE3, CHP 9 in Poland 233
LT
DK2 Generation capacity 4,542
in Latvia, Wind 2
PL
Associated companies’ plants
(not included in the MWs) Stockholm DENMARK, DK1 MW
Exergi (Former Fortum Värme),
Stockholm; TSE, Naantali Generation capacity, CHP 16
43Fortum’s power generation
Fortum is growing towards gigawatt scale target in
solar and wind power generation
Ånstadblåheia 10 MW PORTFOLIO STATUS CAPACITY, MW FORTUM SHARE, MW SUPPLY STARTS/STARTED
(Fortum share) FINLAND 90 18
Nygårdsfjellet ● Kalax Under construction 90 18 (20%) Q1 2021
6 MW (Fortum Sørfjord 97 MW NORWAY 179 113
share) ● Nygårdsfjellet Operational 32 6 (20%) 2006 and 2011
● Ånstadblåheia Operational 50 10 (20%) 2018
Solberg 15 MW ● Sørfjord Under construction 97 97 Q4 2019-Q3 2020
(Fortum share) Kalax 18 MW Ulyanovsk-2 25 MW SWEDEN 76 15
(Fortum share) (Fortum share) ● Solberg Operational 76 15 (20%) 2018
RUSSIA 2,009 1,098
35 MW solar
Ulyanovsk ● Bugulchansk Operational 15 15 2016-2017
power plants
35 MW ● Pleshanovsk Operational 10 10 2017
● Grachevsk Operational 10 10 2017
Astrakhan 88 MW Under development 110+6 110+6 2021-2022
Rostov 150+50 MW (Fortum share) ● Ulyanovsk Operational 35 35 2018
(Fortum share) ● Ulyanovsk 2 Operational 50 25 (50%) 1.1.2019
Operational/Under
Kalmykia 100 MW Bhadla 31 MW (Fortum share) ● Rostov 300+100 150+50 (50%) Q1 2020-Q4 2021
construction
(Fortum share) Amrit 2 MW (Fortum share) ● Kalmykia Under construction 200 100 (50%) Q4 2020
Rajasthan 250 MW ● Astrakhan Under construction 176 88 (50%) Q4 2021
(Fortum share) Kapeli 4 MW (Fortum share) ● Rusnano JV Under development 997 499 (50%) 2021-2023
INDIA 685 581
● Amrit Operational 5 2 (44%) 2012
● Kapeli Operational 10 4 (44%) 2014
Pavagada 250+44 MW ● Bhadla Operational 70 31 (44%) 2017
First focus markets ● Pavagada
(Fortum share) Operational 100 44 (44%) 2017
Wind power plants ● Pavagada 2 Operational 250 250 Q3 2019
● Rajasthan Under construction 250 250 Q4 2020
Solar power plants
TOTAL 3,039 1,825
Under development 1,113 615
Under construction 913 603
*) NOTE: Table numbers not accounting; tells the size of renewables projects. All not consolidated to Fortum capacities. Operational 1,013 607
All figures in MW and rounded to nearest megawatt. Additionally, target to invest 200 – 400 million euros in India solar and
create partnership for operating assets. Under construction includes investment decisions made.
44Historical achieved prices
Hedging improves stability and predictability
– principles based on risk mitigation
45
2009 onwards thermal and import from Russia excludedDividend
Capital returns: 2019 EUR 1.10 per share ~ EUR 1 billion
Five year history of dividend per share
Fortum's target is to pay a stable, sustainable,
and over time increasing dividend of 50-80% of EUR
earnings per share excluding one-off items 1,2 1.10 1.10 1.10 1.10 1.10
1,0
Fortum’s dividend policy is based on the
following preconditions: 0,8
• The dividend policy ensures that shareholders receive
a fair remuneration for their entrusted capital, supported 0,6
by the company’s long-term strategy that aims at
0,4
increasing earnings per share and thereby the dividend.
• When proposing the dividend, the Board of Directors 0,2
looks at a range of factors, including the macro
environment, balance sheet strength as well as 0,0
2015 2016 2017 2018 2019
future investment plans.
Since 1998 Fortum has paid dividends totaling 24% 196% 112% 116% 66%
EUR 16.5 billion
46Next events:
January-June Half-year Financial Report on 19 August
January-September Interim Report on 17 November
The CMD planned for 3 December 2020
For more information,
please visit www.fortum.com/investors
To subscribe Fortum's releases, please fill out the subscription form on our website
Fortum Investor Relations and https://www.fortum.com/about-us/media/media-room/subscribe-press-releases
Financial Communications
Ingela Ulfves Rauno Tiihonen Måns Holmberg Pirjo Lifländer Meeting requests:
Vice President, Manager Manager IR Specialist Anna-Elina Perttula
Investor Relations and IR coordinator
Financial Communication
+358 (0)40 515 1531 +358 (0)10 453 6150 +358 (0)44 518 1518 +358 (0)40 643 3317 +358 (0)40 664 0240
ingela.ulfves@fortum.com rauno.tiihonen@fortum.com mans.holmberg@fortum.com pirjo.liflander@fortum.com anna-elina.perttula@partners.fortum.com
Follow us on:
Fortum ForEnergy blog at
www.twitter.com/Fortum www.linkedin.com/company/fortum www.youtube.com/user/fortum
fortumforenergyblog.wordpress.comYou can also read
