Electricity market in the. Simon-Erik Ollus Baltic Energy Forum, Vilnius 20 November 2014

Transcription

1 Electricity market in the Baltic Sea area today Simon-Erik Ollus Baltic Energy Forum, Vilnius 20 November 2014

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. 2

3 Content Fortum today Development of electricity market in the Baltic Sea area Key take-aways 3

4 Fortum s geographical presence Power generation Heat Distribution Electricity sales Great Britain (Sold in Oct 14) Power generation 1.0 TWh Heat sales 1.8 TWh Nordic countries Power generation* 46.5 TWh Heat sales* Distribution customers 13.9 TWh in Sweden 0.9 million Electricity customers 1.2 million Russia Key figures 2013* Sales EUR 6.1 bn Operating profit EUR 1.7 bn Balance sheet EUR 23 bn Personnel 9,900 OAO Fortum Power generation 20.0 TWh Heat sales 24.2 TWh In addition, ~25% share in TGC-1 Poland Power generation 0.6 TWh Heat sales 4.0 TWh Baltic countries Power generation 0.5 TWh Heat sales 1.1 TWh India Power generation ~9 GWh * incl. Fortum Värme; power generation 1.3 TWh and heat sales 8.2 TWh. 4

5 Appr. 110,000 shareholders Power and heat company in the Nordic countries, Russia, Poland and the Baltics Listed at the Helsinki Stock Exchange since 1998 Among the most traded shares on the NASDAQ OMX Helsinki stock exchange Market cap ~16 billion euros Households 8.3% Financial and insurance institutions 1.5% Other Finnish investors 7.2% Foreign investors 32.2% Finnish State 50.8% Rest of the world ~7% Rest of Europe: ~13% Germany ~5% US ~44% Luxembourg ~10% Switzerland ~6% UK ~19% 5

6 Fortum's European power generation based on hydro and nuclear power wide flexibility and local fuels in heat production Fortum's European power generation in 2013 Fortum's European heat production in 2013 Nuclear power 48% Biomass 28% Coal 22% Other 2% Natural gas 3% Biomass 3% Coal 7% Oil 1% Peat 2% Waste 12% Natural gas 19% Hydro power 37% European generation 48.7 TWh (Generation capacity 10,873 MW) Heat pumps, electricity 16% European production 18.6 TWh (Production capacity 8,193 MW) Incl. Fortum Värme; power generation 1.3 TWh (capacity 610 MW) and heat production 8.2 TWh (capacity 3,626 MW). 6

7 Fortum's carbon exposure among the lowest in Europe g CO 2 /kwh electricity, % of Fortum's total power generation CO 2 -free 88% of Fortum s power generation in the EU CO 2 -free Close to 100% of the ongoing investment programme in the EU CO 2 -free Average 350 g/kwh DEI Drax RWE SSE EDP E.ON Vattenfall Enel Edipower Union Fenosa CEZ EnBW GDF SUEZ Dong Energy Iberdrola Fortum total EDF Verbund Fortum EU PVO Statkraft Note: Fortum s specific emission of the power generation in 2013 in the EU were 70 g/kwh and in total 202 g/kwh. Only European generation except Fortum total which includes Russia. Source: PWC & Enerpresse, November 2013 Climate Change and Electricity, Fortum 7

8 Content Fortum today Development of electricity market in the Baltic Sea area Key take-aways 8

9 Power generation in the Nordic and Baltic countries Dominated by hydro and nuclear, with wind and biomass increasing - fossil fleet in the margin and Baltics become an important price anchor for Nordics TWh Total generation in 2013 Fossil fuels Nordic 383 TWh TWh % Baltics 22 TWh TWh % Nuclear Biomass Wind Hydro * Denmark Norway Sweden Finland Baltics Nordic net export in 2013: 0.4 TWh Baltic net import in 2013: 4.8 TWh *) Normal annual Nordic hydro generation 200 TWh, variation +/- 40 TWh. 9 Source: ENTSO-E Statistical Factsheet 2013, Fortum Industrial Intelligence

10 Still differences in hourly power prices in northern Europe Prices on the peak load hour (17-18 CET) of Wednesday 12 Nov 2014 ( /MWh) Nordic system price 33.48/MWh Congested commercial power flows (MW) 12 Nov at Source: Nord Pool Spot, EPEX Spot, Polish Power Exchange, Fortum Industrial Intelligence

11 Interconnection capacity in Nordics and Baltics will double by 2020 EstLink, NordBalt, LitPol and EE-LV key enablers for Baltics The Baltic Energy Market Integration Plan and the Northern Seas Offshore Grid are included as priority electricity corridors in EU s Infrastructure Guidelines, approved in April 2013 Two 1400 MW NO-UK links as EU Projects of Common Interest: NSN link to England agreed to be built by 2020, NorthConnect to Scotland still requiring Norwegian permission First direct 1,400 MW NO-DE link agreed to be built by 2018 EU financial support for a 700 MW DK-NL link, due to be built by 2019 Jutland DE capacity planned to grow by 720 MW by 2019, with further 500 MW increase by 2022 Hansa PowerBridge by 2025 between Sweden and Germany Phase-shifting transformers to DE-PL interconnectors enabling more commercial power trade New internal Nordic grid investments provide for increased available capacity for exports to the Continent and Baltics 350 MW of export capacity from Finland to Russia becoming available in December 2014 EstLink 1 (350 MW) in use since 2007, EstLink 2 (650 MW) since winter 2013/14, resulting in EE & FI power price convergence EU s Connecting Europe Facility co-financing 3 rd EE-LV transmission line, due to be ready by 2020 EU s European Energy Programme for Recovery co-financing 700 MW NordBalt (ready 12/2015) LitPol Link ( MW) to connect the Baltic market to Poland by end-2015/20. It will open a new transmission route from the Nordic market to the Continent 11 Source: ENTSO-E ten year network plan, Fortum Industrial Intelligence

12 Wholesale electricity prices are too low to attract investments: Nearly all new investments in Europe are based on subsidies Disclaimer: Figures above are calculated based on data from recent public reports and do not represent Fortum s view on levelized costs of new capacity 12 Sources: Sähkön tuotantokustannusvertailu. Vakkilainen Esa, Kivistö Aija, Tarjanne Risto. Lappeenrannan teknillinen yliopisto Projected Costs of Generating Electricity: 2010 Edition. International Energy Agency IEA World Energy Investment Outlook Lazard's Levelized Cost of Energy Analysis - Version Nord Pool Spot, EEX, Nasdaq OMX

13 EU 2030 targets gave clarity and direction to improve overall investment climate CO2 reduction target to drive energy policy and investments Target year Greenhouse gas emissions Renewable energy % binding (ref.1990) 20% binding Likely to be met ETS -21% (ref.2005) -1.74%/a Non-ETS -10% (ref. 2005) Shared to member states share in final consumption. Shared to members states. Energy efficiency 20% indicative from BAU 2030 (* At least 40% (** At least 27% binding At least 27% indicative share in final consumption. Not to be shared to binding (ref. 1990) Not to be shared to member states. members states. ETS -43% (ref. 2005) -2.2%/a Non-ETS -30% (ref. 2005) To be shared to member states Also targets for electricity interconnections agreed: - a minimum target of 10% of existing interconnections by an objective of arriving at a 15% target by (*Target set by European Council in October 2014 (** domestic only, no international offsets In addition a Market Stability Reserve (MSR) system is proposed from 2021 onwards Carbon markets are today heavily oversupplied and will not immediately give a price signal without an early implementation of MSR from 2017 onwards MSR as such will lower price volatility and long-term decarbonization costs In addition European industrial competitiveness and carbon leakage need to be addressed 13

14 Content Fortum today Development of electricity market in the Baltic Sea area Key take-aways 14

15 Electricity market in the Baltic Sea area: Market integration key enabler for power market efficiency and new investments Nordic and Baltic countries market integration will enable efficient capacity use and align power prices in the Nordic-Baltic region EstLink, NordBalt, LitPol and EE-LV links and Nordic power exchanges are key enablers of the development In Europe as a whole, the poor power demand development and strong growth of subsided power production has pressed wholesale power prices to levels, which today are not sufficient to attract new commercial investments. Market based integration of renewable energy, further power market integration and a reasonable CO2 target are enablers for commercial generation investments to meet environmental targets without compromising Europe s economic competitiveness. 15

16 16 Next generation energy company