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Tapio Kuula, President and CEOFortum Corporation
Fortum A leading power and heat companyin the Nordic area
EEI Conference, London, March 14, 2011
-
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.
-
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
-
4
• Leading power and heat company in Nordic countries• Listed at the Helsinki Stock Exchange 1998• More than 100,000 shareholders• Among the most traded shares in Helsinki stock exchange• Market cap ~20 billion euros
A leading Nordic power and heat company
Dividend per shareEUR
2005
1.12
0.58
0.54
2006
1.26
0.73
0.53
2007
1.35
0.77
0.58
2008
1.00
72% 103% 78% 58%
1.00
200968%
1.00
201068%
2005
1.12
0.58
0.54
2006
1.26
0.73
0.53
2007
1.35
0.77
0.58
2008
1.00
72% 103% 78% 58%
1.00
200968%
1.00
2010
Foreign investors 30.3%
Other Finnishinvestors 8.8%
Households 7.6% Financial and insurance institutions 2.5%
28 February 2011
Finnish State 50.8%
-
5
Divisions of Fortum
Power DivisionFortum’s power generation, physical operation and trading, operation, maintenance and development of power plants as well as expert services for power producers.
Heat DivisionCombined heat and power generation, district heating activities and business to business heating solutions.
Electricity Solutions and Distribution DivisionFortum's electricity sales, solutions and distribution activities. The division consists of two business areas: Distribution and Markets.
Russia DivisionPower and heat generation and sales in Russia. It includes OAO Fortum and Fortum’s over 25% holding in TGC-1.
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6
Our geographical presence today
TGC-1 (~25%)Power generation ~6 TWhHeat sales ~8 TWh
OAO Fortum Power generation 16.1 TWhHeat sales 26.8 TWh
Russia
PolandHeat sales 4.0 TWh Electricity sales 0.1 TWh
Baltic countriesHeat sales 1.4 TWhElectricity sales 0.3 TWhDistribution cust. ~24,000
Nordic countriesPower generation 52.3 TWhHeat sales 20.7 TWhDistribution cust. 1.6 millionElectricity cust. 1.2 million
Nr 2 Power generation
Electricity sales
Nr 2
Nr 1 Heat
DistributionNr 1
Key figures 2010Sales EUR 6.3 bnOperating profit EUR 1.7 bn Personnel 10,600
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7
Fortum's power and heat production by source
Hydro power 32%
Coal 7%
Other 2%
Nuclear power 32%
Biomass 2%
Total generation 69.8 TWh(Generation capacity 14,113 MW)
Natural gas 25%
Fortum's power generation in 2010
Total production 52.1 TWh(Production capacity 24,494 MW)
Fortum's heat production in 2010
Peat 2%
Oil 3%Heat pumps, electricity 6%
Waste 2%
Biomass fuels 11%
Natural gas 59%
Other 4%
Coal 13%
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8
Fortum mid-sized European power generation player; Global #4 in heat
* incl. TGC-5, TGC-6, TGC-7, TGC-9, ** incl. TGC-12, TGC-13. *** incl. International PowerSource Company information, Fortum analyses, 2009 figures pro forma, **** 2007
Largest global producers, 2009 TWh
Largest producers in Europe and Russia, 2009TWh
Power generation Heat productionElectricity customers in EU, 2009
millions
Customers
OneximTatenergo
Minsk EnergoKievenergo
IrkutskenergoBashkirenergo
RAO ES East
Inter RAO UESTGC-2
Fortum
DongKDHC, Korea
TGC-14
Lukoil
Gazprom
0 20 40 60 80 100 120 140ELCEN, Rom.
Dalkia****)
Vattenfall
SUEK**)
Beijing DH****)
*) IES
DEICEZ
Enel
CentricaEDP
Iberdrola
SSEEnBW
Fortum
EDFE.ONRWE
Vattenfall
Gas NaturalFenosa
PGE
Tauron
GDF SUEZ
HafslundDong
0 20 4010 30
Irkutskenergo*) IES
Iberdrola
RusHydro
FortumEnBW
Vattenfall
CEZ
RWE
DEIPGE
SSE
Statkraft
RosenergoatomGazprom
NNEGC Energoat.
EnelE.ONEDF
0 100 200 300 400 500 600
Inter RAO UES
GDF SUEZ***)
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9
Fortum among the biggest nuclear and hydro generators in Europe and Russia
9
ED
F
Ener
goat
om
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N
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EG
C
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Hyd
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Vatte
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Sta
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ft
Irkut
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ergo
Fortu
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Iber
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E
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o
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ya
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nerg
i
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ydro
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EPS,
Ser
bia
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hydr
o-
BKK
Agde
r
SSE DEI
Edis
on
PGE
IES
WG
C-1
OtherNuclearHydro
TWh
0
50
100
150
300
200
250
600
550
500
Con
cern
Ener
goat
om
HP
P
ener
go
Total generation
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10
Fortum's carbon exposure among the lowest in Europe
Source: PWC & Enerpresse, Novembre 2010Changement climatique et Électricité, Fortum
g CO2 /kWh electricity, 2009
Average 346 g/kWh
0
200
400
600
800
1000
1200
DE
I
Dra
x
RW
E
CE
Z
SSE
EDP
Ene
l
Vat
tenf
all
E.O
N
Don
g
Uni
on F
enos
a
GD
F S
UE
Z E
urop
e
Iber
drol
a
Fortu
m to
tal
ED
F
PVO
Ver
bund
Fortu
m E
U
Sta
tkra
ft
41155
The share of CO2 -free power generation was 69% ofFortum's total power generation.
In the EU, the share was 91% of the power generation and ~100% of the capacity of the ongoing investment programme.
Note:Fortum’s specific emission of the power generation in 2010 in the EU were 84 g/kWh and in total 189 g/kWh, 86 % (91 %) emission free in EU and 66 % (69 %) emission free overall.Figures for all other companies include only European generation.
-
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
-
1212
Global mega trends drive the industry - Updated strategy supports sustainable business development
Create solid earnings growth in Russia
Leverage the strong Nordic core
Build platform for future growth
Competence in CO2 free nuclear, hydro and energy efficient CHP production, and operating in competitive energy markets
Strategy
• Power and heat demand and supply• Degree of market liberalization and integration• Climate change response• Energy system structure• Business models and competition
-
1313
New capacity needed for increasing demand and retiring capacity replacements
Source: IEA WEO 2010 (New polices scenario)
• 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, 5 700 GW of new capacity needed by 2035
0%
50%
100%
150%
200%
250%
300%
US Europe Russia China India Other areas
World total
Growth, 2008-2035Primary energy demandElectricity generation
~20%~ 40%
~180%
~270%
531
842
506
835
156
229
180
1533
80
628
527
1606
1980
5673New capacity, total (1
Capacity changes, 2010-2035 (GW)
Retiring capacity
1) Total new capacity needed for increasing demand and retiring capacity replacements
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14
Ongoing new nuclear power projects and plans globally
USA9 (23*)
1
Russia
Canada 23
(3*)
Indonesia2 (4*)
14 (30*)
10
China
50 (110*)
27
2
12 (1*)
Japan56
South Korea
18 (40*)
6Vietnam2 (12*)
India
4 (4*)
12 (1*)
Argentina
1(4*)
Brazil
Thailand2 (5*)
4 (10*)
UAE
1(1*)
Egypt1Jordan
1 2 (2*)
Kazakhstan
Turkey
EU
6
22-28 2
2
Ukraine
BelarusArmenia
1
2 (1*)
Iran
1
2 (2*)
Pakistan
* In addition proposed projects, totally ~300Source: WNA, World Power Reactors & Uranium Requirements 6 January 2011, EU area: in addition announcements of power companies and authorities, news
Construction started / under start-up, in total ~60 reactors
Planned, in total ~160 reactors
-
15
Nordic and Continental markets are integrating – interconnection capacity could double by 2020
New interconnections could double the capacity to over
8000 MW by 2020
Additional 700 MW cable NO-NL, as well 1400 MW
NO-DE links studied
EU financial support for 700 MW DK-NL link to
connect offshore wind, too
EU support to connect Kriegers Flak offshore wind area to DK&DE; new 400 kV
AC cable SE-DK by 2017
Jutland – DE capacity to be increased by 500 MW in 2012
and by further 500 MW by 2018 LitPol Link of 1000 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
New internal Nordic grid investments provide for
increased available capacity for export to the
Continent and Baltics
EU’s European Energy Programme for Recovery to cofinance to Estlink 2
and NordBalt
1400 MW link to the UK could connect offshore wind, too; North Seas Countries’ Offshore Grid Initiative launched for supergrid development
In the EU's Second Strategic Energy Review the Commission focuses
strongly on interconnecting the Baltic states and Poland to form an electricity
market around the Baltic Sea
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Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
-
17
Fortum's nuclear power capacity in Nordics
Olkiluoto
LoviisaForsmark
Oskarshamn
• Low utilisation in two units in Sweden
• Finnish units world class
• Currently all units running – Oskarshamn 3 with old capacity and Forsmark 2 at full capacity
Source: IAEA, NordPool. Rounded numbers.
Load factor 2005 2006 2007 2008 2009 2010 Revision days in 2011Oskarshamn 1 80 51 63 85 68 77 22Oskarshamn 2 90 78 76 86 75 90 20Oskarshamn 3 85 95 88 70 17 31 31
Forsmark 1 85 76 81 81 88 93 70Forsmark 2 94 72 85 79 64 39 21Forsmark 3 95 92 88 69 86 81 42Loviisa 1 95 93 94 86 96 93 17Loviisa 2 95 88 96 93 95 89 17
Olkiluoto 1 98 94 97 94 97 92 7Olkiluoto 2 94 97 94 97 95 95 24
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18
Fortum’s investment programme – Nordic region, Poland and Baltic countries
Electricity capacity around 750 MW~100% CO2 -free
Project Electricity, MWHeat,MW Commissioned
Olkiluoto 3, Finland 400 2013Swedish nuclear upgrades 260 by 2013- Forsmark 3 upgrade (to be decided) 30 post 2013Refurbishing of hydro power 20-30 annually
Brista, Sweden 20 60 2013(waste CHP)Klaipeda, Lithuania 20 60 2012(biofuel/waste CHP)
Total by ~2013 ~750 ~120
-
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
-
2020
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• 16 TWh power generation, 26 TWh heat production in 2010,
which is more than Fortum’s Nordic heat sales• Ongoing investment programme to add 85% to Fortum’s
power generation capacity - Total investment EUR ~4 billion of which EUR 2.5 billion spent, will be completed by end of 2014
TGC-1• Slightly over 25% of territorial generating company TGC-1
operating in north-west Russia• ~6,350 MW electricity production capacity (appr. 50% hydro),
~27 TWh/a electricity, ~31 TWh/a heat
OAO Fortum
Surgut
Tyumen
TobolskMoscow
St. Petersburg
Chelyabinsk
Nyagan
TGC-1
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21
Fortum has been able to accelerate its investment programme in Russia
• Fully liberalised electricity market from 1 Jan 2011 except for volumes intended for households priced by RBA (~10% of volume)
• The ongoing investment programme will increase power capacity from 2785 MW to 5146 MW
– In 2011 +657 MW– In 2012 +836 MW– In 2013 +418 MW– In 2014 +450 MW
• Capacity prices for "new capacity" 3-4 times current "old capacity" prices
– Long term rules and price parameters approved– “Old” capacity prices will depend on auction outcomes, but likely remain relatively
low; potentially price caps could limit price– “new” capacity to receive higher guaranteed payments
-
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
-
23
Business environment improved
• Nordic power consumption up by 5% during 2010– Power consumption in the Nordic countries 396 TWh in 2010,
397 TWh in 2008 (pre-recession)– Temperature corrected power consumption in Nordic countries was still appr. 4%
(~16 TWh ) lower than in 2008– Water reservoirs at historically low levels– Nordic spot prices increased, forward prices more stable
• Russian power consumption increased by about 4% during 2010– Electricity spot price in Russia up 32% from a year ago
The overall Nordic and Russian power consumption continued to increase in 2010. Industrial activity clearly picked up in Fortum’s key market areas and the Russian
economy continued a solid path of recovery
-
24
Solid performance continued
• Comparable operating profit, EUR 1,833 (1,888) million – Lower hydro volumes in Power– Improvement in Russia, Distribution and Heat
• Earnings per share EUR 1.46 (1.48)– Negative IAS 39 accounting effect corresponding to EUR 0.18
• Net cash from operating activities EUR 1,437 (2,264) million – Decline due to SEK appreciation (roll-over of currency balance sheet hedges)
• Proposed dividend of EUR 1.00 per share
-
25
Key ratios – Strong financial position
MEUR 2010 2009EBITDA 2 271 2 292Comparable EBITDA 2 396 2 398Interest-bearing net debt 6 826 5 969Net debt/EBITDA 3.0 2.6Comparable Net debt/EBITDA 2.8 2.5
Return on capital employed (%) 11.6 12.1Return on shareholders' equity (%) 15.7 16.0Portion of floating / fixed debt 49/51% 62/38%
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26
Outlook
• Key drivers and risks– Wholesale price of electricity
• Fuel, CO2 emissions prices and water reservoirs
• Nordic Markets– Market continues to recover – 2008 level reached by 2012-2014– Electricity continues to gain share of total energy consumption
• Russia– Wholesale market fully liberalised– Achieved efficiency improvements compared to the time of the acquisition to
be approximately EUR 100 million in 2011– Profits from Russia builds up in pace with the capacity increase
-
27
Outlook
• Capex (excluding potential acquisitions)– 2011-2012 around EUR 1.6 to 1.8 billion (mainly due to Russian investment
programme)– 2013-2014 around EUR 1.1 to 1.4 billion– Preliminary divestments agreed: total approximately EUR 0.5 billion in 2011
• Hedging– 2011 approximately 70% hedge ratio at approximately EUR 45/MWh– 2012 approximately 40% hedge ratio at approximately EUR 44/MWh
-
282828
Key strategic actions going forward
Focus on performance– Organisational efficiency– Nuclear availability– Value creation from Russian investments
Prepare for growth– Prioritized value enhancing acquisitions while maintaining strong balance sheet– Investigating high growth Asian markets
Create strategic partnerships for new innovative solutions, market entries and R&D– Partnerships in nuclear and bio energy– Electricity Sales and Distribution: services, solutions and partnerships
Continuous development of competences
Readiness for change– Leadership and organisational culture enabling readiness for change
-
Slide Number 1DisclaimerSlide Number 3A leading Nordic power and heat companyDivisions of FortumSlide Number 6Fortum's power and heat production by sourceFortum mid-sized European power generation player; �Global #4 in heatFortum among the biggest nuclear and hydro generators in Europe and RussiaFortum's carbon exposure among the lowest in EuropeSlide Number 11Global mega trends drive the industry - Updated strategy supports sustainable business developmentNew capacity needed for increasing demand and retiring capacity replacementsOngoing new nuclear power projects and plans globallyNordic and Continental markets are integrating – interconnection capacity could double by 2020Slide Number 16Fortum's nuclear power capacity in NordicsFortum’s investment programme �– Nordic region, Poland and Baltic countriesSlide Number 19Slide Number 20Fortum has been able to accelerate its investment programme in RussiaSlide Number 22Business environment improvedSolid performance continuedKey ratios – Strong financial positionOutlook OutlookKey strategic actions going forwardSlide Number 29
Tapio Kuula, President and CEO
Fortum Corporation
Fortum
A leading power and heat company
in the Nordic area
EEI Conference, London, March 14, 2011
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.
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
A leading Nordic power and heat company
Leading power and heat company in Nordic countries
Listed at the Helsinki Stock Exchange 1998
More than 100,000 shareholders
Among the most traded shares in Helsinki stock exchange
Market cap ~20 billion euros
Dividend per share
EUR
68%
68%
68%
2005
1.12
0.58
0.54
2006
1.26
0.73
0.53
2007
1.35
0.77
0.58
2008
1.00
72%
103%
78%
58%
1.00
2009
1.00
2010
2005
1.12
0.58
0.54
2006
1.26
0.73
0.53
2007
1.35
0.77
0.58
2008
1.00
72%
103%
78%
58%
1.00
2009
1.00
2010
Foreign investors 30.3%
Other Finnish
investors 8.8%
Households 7.6%
Financial and insurance institutions 2.5%
28 February 2011
Finnish State 50.8%
Divisions of Fortum
Power Division
Fortum’s power generation, physical operation and trading, operation, maintenance and development of power plants as well as expert services for power producers.
Heat Division
Combined heat and power generation, district heating activities and business to business heating solutions.
Electricity Solutions and Distribution Division
Fortum's electricity sales, solutions and distribution activities. The division consists of two business areas: Distribution and Markets.
Russia Division
Power and heat generation and sales in Russia. It includes OAO Fortum and Fortum’s over 25% holding in TGC-1.
Our geographical presence today
Poland
Heat sales 4.0 TWh Electricity sales 0.1 TWh
Baltic countries
Heat sales 1.4 TWh
Electricity sales 0.3 TWh
Distribution cust. ~24,000
Nr 2
Power generation
Electricity
sales
Nr 2
Nr 1
Heat
Distribution
Nr 1
Nordic countries
Power generation 52.3 TWh
Heat sales 20.7 TWh
Distribution cust. 1.6 million
Electricity cust. 1.2 million
Key figures 2010
Sales EUR 6.3 bn
Operating profit EUR 1.7 bn Personnel 10,600
TGC-1 (~25%)
Power generation ~6 TWh
Heat sales ~8 TWh
OAO Fortum
Power generation 16.1 TWh
Heat sales 26.8 TWh
Russia
Fortum's power and heat production by source
Hydro power
32%
Coal 7%
Other 2%
Nuclear power 32%
Biomass 2%
Total generation 69.8 TWh
(Generation capacity 14,113 MW)
Natural gas 25%
Fortum's power generation
in 2010
Total production 52.1 TWh
(Production capacity 24,494 MW)
Fortum's heat production
in 2010
Peat 2%
Oil 3%
Heat pumps,
electricity 6%
Waste 2%
Biomass fuels 11%
Natural gas
59%
Other 4%
Coal 13%
Fortum mid-sized European power generation player;
Global #4 in heat
* incl. TGC-5, TGC-6, TGC-7, TGC-9, ** incl. TGC-12, TGC-13. *** incl. International Power
Source Company information, Fortum analyses, 2009 figures pro forma, **** 2007
Dalkia
****)
SUEK
**)
Beijing DH
****)
*)
IES
Onexim
Tatenergo
Minsk Energo
Kievenergo
Irkutskenergo
Bashkirenergo
RAO ES East
Inter RAO UES
TGC-2
Fortum
Dong
KDHC, Korea
TGC-14
Lukoil
Gazprom
0
20
40
60
80
100
120
140
ELCEN, Rom.
Vattenfall
DEI
CEZ
Enel
Centrica
EDP
Iberdrola
SSE
EnBW
Fortum
EDF
E.ON
RWE
Vattenfall
Gas Natural
Fenosa
PGE
Tauron
GDF SUEZ
Hafslund
Dong
0
20
40
10
30
*)
IES
GDF SUEZ
***)
Irkutskenergo
Iberdrola
RusHydro
Fortum
EnBW
Vattenfall
CEZ
RWE
DEI
PGE
SSE
Statkraft
Rosenergoatom
Gazprom
NNEGC Energoat.
Enel
E.ON
EDF
0
100
200
300
400
500
600
Inter RAO UES
Largest global producers, 2009
TWh
Largest producers in Europe and Russia, 2009
TWh
Power generation
Heat production
Electricity customers in EU, 2009
millions
Customers
Fortum among the biggest nuclear and hydro generators in Europe and Russia
*
TWh
0
50
100
150
300
200
250
600
550
500
Concern
Energoatom
HPP
energo
Total generation
*
Fortum's carbon exposure among the lowest in Europe
Source:
PWC & Enerpresse, Novembre 2010
Changement climatique et Électricité, Fortum
The share of CO2-free power generation was 69% of
Fortum's total power generation.
In the EU, the share was 91% of the power generation and
~100% of the capacity of the ongoing investment programme.
Note:
Fortum’s specific emission of the power generation in 2010 in the EU were 84 g/kWh and in total 189 g/kWh,
86 % (91 %) emission free in EU and 66 % (69 %) emission free overall.
Figures for all other companies include only European generation.
0
200
400
600
800
1000
1200
DEI
Drax
RWE
CEZ
SSE
EDP
Enel
Vattenfall
E.ON
Dong
Union Fenosa
GDF SUEZ Europe
Iberdrola
Fortum total
EDF
PVO
Verbund
Fortum EU
Statkraft
41
155
g CO2/kWh electricity, 2009
Average 346 g/kWh
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
*
Global mega trends drive the industry - Updated strategy supports sustainable business development
Create solid earnings
growth in Russia
Leverage the strong
Nordic core
Build platform for
future growth
Competence in CO2 free nuclear, hydro and energy efficient CHP production, and
operating in competitive energy markets
Strategy
Power and heat demand and supply
Degree of market liberalization and integration
Climate change response
Energy system structure
Business models and competition
*
*
New capacity needed for increasing demand and retiring capacity replacements
Source: IEA WEO 2010 (New polices scenario)
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, 5 700 GW of new capacity needed by 2035
1)Total new capacity needed for increasing demand and retiring capacity replacements
0%
50%
100%
150%
200%
250%
300%
US
Europe
Russia
China
India
Other
areas
World
total
Growth, 2008-2035
Primary energy demand
Electricity generation
~20%
~ 40%
~180%
~270%
531
842
506
835
156
229
180
1533
80
628
527
1606
1980
5673
New capacity,
total (1
Capacity changes, 2010-2035 (GW)
Retiring capacity
Ongoing new nuclear power projects and plans globally
* In addition proposed projects, totally ~300
Source: WNA, World Power Reactors & Uranium Requirements 6 January 2011, EU area: in addition announcements of power companies and authorities, news
Indonesia
2 (4*)
Vietnam
2 (12*)
Thailand
2 (5*)
4 (10*)
UAE
1
Jordan
2 (2*)
Kazakhstan
2
2
1
2 (1*)
Iran
1
2 (2*)
Pakistan
USA
9 (23*)
1
Russia
Canada
2
3
(3*)
14 (30*)
10
China
50 (110*)
27
2
12 (1*)
Japan
5
6
South Korea
18 (40*)
6
India
4 (4*)
1
2 (1*)
Argentina
1
(4*)
Brazil
1
(1*)
Egypt
1
Turkey
EU
6
22-28
Ukraine
Belarus
Armenia
Construction started / under start-up, in total ~60 reactors
Planned, in total ~160 reactors
Nordic and Continental markets are integrating – interconnection capacity could double by 2020
New interconnections could double the capacity to over 8000 MW by 2020
Additional 700 MW cable NO-NL, as well 1400 MW NO-DE links studied
EU financial support for 700 MW DK-NL link to connect offshore wind, too
EU support to connect Kriegers Flak offshore wind area to DK&DE; new 400 kV AC cable SE-DK by 2017
Jutland – DE capacity to be increased by 500 MW in 2012 and by further 500 MW by 2018
LitPol Link of 1000 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
New internal Nordic grid investments provide for increased available capacity for export to the Continent and Baltics
EU’s European Energy Programme for Recovery to cofinance to Estlink 2 and NordBalt
1400 MW link to the UK could connect offshore wind, too; North Seas Countries’ Offshore Grid Initiative launched for supergrid development
In the EU's Second Strategic Energy Review the Commission focuses strongly on interconnecting the Baltic states and Poland to form an electricity market around the Baltic Sea
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
Fortum's nuclear power capacity in Nordics
Low utilisation in two units in Sweden
Finnish units world class
Currently all units running – Oskarshamn 3
with old capacity and Forsmark 2 at full capacity
Source: IAEA, NordPool. Rounded numbers.
Olkiluoto
Loviisa
Forsmark
Oskarshamn
*
*
Fortum’s investment programme
– Nordic region, Poland and Baltic countries
Electricity capacity around 750 MW
~100% CO2-free
Project
Electricity, MW
Heat,MW
Commissioned
Olkiluoto 3, Finland
400
2013
Swedish nuclear upgrades
260
by 2013
- Forsmark 3 upgrade (to be decided)
30
post 2013
Refurbishing of hydro power
20-30
annually
Brista, Sweden
20
60
2013
(waste CHP)
Klaipeda, Lithuania
20
60
2012
(biofuel/waste CHP)
Total by ~2013
~750
~120
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
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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
16 TWh power generation, 26 TWh heat production in 2010, which is more than Fortum’s Nordic heat sales
Ongoing investment programme to add 85% to Fortum’s
power generation capacity - Total investment EUR ~4 billion
of which EUR 2.5 billion spent, will be completed
by end of 2014
TGC-1
Slightly over 25% of territorial generating company TGC-1 operating in north-west Russia
~6,350 MW electricity production capacity (appr. 50% hydro), ~27 TWh/a electricity, ~31 TWh/a heat
Surgut
Tyumen
Tobolsk
Moscow
St. Petersburg
Chelyabinsk
Nyagan
OAO Fortum
TGC-1
Fortum has been able to accelerate its investment programme in Russia
Fully liberalised electricity market from 1 Jan 2011 except for volumes intended for households priced by RBA (~10% of volume)
The ongoing investment programme will increase power capacity
from 2785 MW to 5146 MW
In 2011 +657 MW
In 2012 +836 MW
In 2013 +418 MW
In 2014 +450 MW
Capacity prices for "new capacity" 3-4 times current "old capacity" prices
Long term rules and price parameters approved
“Old” capacity prices will depend on auction outcomes, but likely remain relatively low; potentially price caps could limit price
“new” capacity to receive higher guaranteed payments
Fortum today
Global and European power markets
Nordic power market
Russian power market
Financials and outlook
Content
Business environment improved
Nordic power consumption up by 5% during 2010
Power consumption in the Nordic countries 396 TWh in 2010,
397 TWh in 2008 (pre-recession)
Temperature corrected power consumption in Nordic countries was still appr. 4%
(~16 TWh ) lower than in 2008
Water reservoirs at historically low levels
Nordic spot prices increased, forward prices more stable
Russian power consumption increased by about 4% during 2010
Electricity spot price in Russia up 32% from a year ago
The overall Nordic and Russian power consumption continued to increase in 2010.
Industrial activity clearly picked up in Fortum’s key market areas and the Russian
economy continued a solid path of recovery
Solid performance continued
Comparable operating profit, EUR 1,833 (1,888) million
Lower hydro volumes in Power
Improvement in Russia, Distribution and Heat
Earnings per share EUR 1.46 (1.48)
Negative IAS 39 accounting effect corresponding to EUR 0.18
Net cash from operating activities EUR 1,437 (2,264) million
Decline due to SEK appreciation (roll-over of currency balance sheet hedges)
Proposed dividend of EUR 1.00 per share
Key ratios – Strong financial position
Portion of floating / fixed debt 49/51% 62/38%
Outlook
Key drivers and risks
Wholesale price of electricity
Fuel, CO2 emissions prices and water reservoirs
Nordic Markets
Market continues to recover – 2008 level reached by 2012-2014
Electricity continues to gain share of total energy consumption
Russia
Wholesale market fully liberalised
Achieved efficiency improvements compared to the time of the acquisition to be approximately EUR 100 million in 2011
Profits from Russia builds up in pace with the capacity increase
Outlook
Capex (excluding potential acquisitions)
2011-2012 around EUR 1.6 to 1.8 billion (mainly due to Russian investment programme)
2013-2014 around EUR 1.1 to 1.4 billion
Preliminary divestments agreed: total approximately EUR 0.5 billion in 2011
Hedging
2011 approximately 70% hedge ratio at approximately EUR 45/MWh
2012 approximately 40% hedge ratio at approximately EUR 44/MWh
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Key strategic actions going forward
Focus on performance
Organisational efficiency
Nuclear availability
Value creation from Russian investments
Prepare for growth
Prioritized value enhancing acquisitions while maintaining strong balance sheet
Investigating high growth Asian markets
Create strategic partnerships for new innovative solutions, market entries and R&D
Partnerships in nuclear and bio energy
Electricity Sales and Distribution: services, solutions and partnerships
Continuous development of competences
Readiness for change
Leadership and organisational culture enabling readiness for change
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EDF
Energoatom
E.ON
NNEGC
RusHydro
Vattenfall
Enel
Electrabel
Statkraft
Irkutskenergo
Fortum
Iberdrola
RWE
EnBW
CEZ
Verbund
Axpo
Krasnoyarskaya
Hidroelectrica
Gazprom
Alpiq
E-CO Energi
Norsk Hydro
EDP
EPS, Serbia
Ukrhydro-
BKK
Agder
SSE
DEI
Edison
PGE
IES
WGC-1
Other
Nuclear
Hydro
MEUR20102009
EBITDA2 2712 292
Comparable EBITDA2 3962 398
Interest-bearing net debt6 8265 969
Net debt/EBITDA3.02.6
Comparable Net debt/EBITDA2.82.5
Return on capital employed (%)11.612.1
Return on shareholders' equity (%)15.716.0
Load factor200520062007200820092010Revision days in 2011
Oskarshamn 180516385687722
Oskarshamn 290787686759020
Oskarshamn 385958870173131
Forsmark 185768181889370
Forsmark 294728579643921
Forsmark 395928869868142
Loviisa 195939486969317
Loviisa 295889693958917
Olkiluoto 19894979497927
Olkiluoto 294979497959524
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